REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on January 17, 1995 at 8:30 a.m. in Room 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of Union Pacific Resources Company, for an order approving a certain Unit Agreement and Unit Operating Agreement for the Speaker Unit, providing for unit operations and development of the reservoir consisting of the Morrow V-11 Sandstone Formation underlying certain lands in Kit Carson and Cheyenne Counties, Colorado.

FINDINGS

The Commission finds as follows:

1. Union Pacific Resources Company as applicant herein, is an interested party in the subject matter of the above-referenced hearing.

2. Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

3. The Commission has jurisdiction over the subject matter embraced in said Notice, and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.

4. A written protest to the application was filed by Pogo Producing Company on December 13, 1994, and subsequently withdrawn on January 12, 1995.

5. The Morrow V-11 Sandstone Formation was encountered in the stratigraphic interval between the depths of 6452 feet and 6486 feet measured from the Kelly Bushing, in the UPRC Speaker No. 5-13 Well located in the SW1/4 NW1/4 of Section 13, Township 12 South, Range 51 West, 6th P.M., Cheyenne County, Colorado, and as so encountered, is a common source of supply and has been defined and determined by drilling to be productive underlying the following desc ribed lands in Kit Carson and Cheyenne Counties, Colorado:

Township 11 South, Range 50 West, 6th P.M. Section 31: Lots 1, 2, 3 and 4 (W1/2 W1/2)

Township 11 South, Range 51 West, 6th P.M. Section 36: NE1/4 NE1/4, S1/2 NE1/4, SE1/4

Kit Carson County

Township 12 South, Range 50 West, 6th P.M. Section 6: Lots 11, 12, 19 and 20 (W1/2 W1/2) Section 18: Lot 17 (SW1/4 SW1/4) Section 19: Lot 1 (NW1/4 NW1/4)

Township 12 South, Range 51 West, 6th P.M. Section 1: Lots 1 and 2 (N1/2 NE1/4), S1/2 NE1/4, SE1/4 NW1/4, SW1/4, SW1/4, E1/2 SW1/4, SE1/4 Section 11: E1/2 E1/2 Section 12: Lots 1-8, 10-15 (N1/2, SW1/4, W1/2 SE1/4) Section 13: NW1/4 NE1/4, S1/2 NE1/4, NW1/4, SE1/4 N1/2 SW1/4, SE1/4 SW1/4 Section 14: E1/2 NE1/4, NE1/4 SE1/4 Section 24: Lots 1, 2, and 8 (N1/2 NE1/4, SE1/4 NE1/4)

Cheyenne County

6. Testimony presented at the administrative hearing indicated that the applicant proposes an enhanced recovery project in which produced gas will be injected into a well structurally located in the up-dip portion of the reservoir, and in which all produced water may be injected into a well structurally located in the down-dip portion of the reservoir.

7. The terms and conditions provided by the Speaker Unit Agreement and Unit Operating Agreement meet the requirements of the statute and are just and reasonable to all interests contained within said unit area. The plan for unit operations as presented by the Applicant, as described herein is necessary to increase the ultimate recovery of oil and gas and the value of the estimated additional recovery of oil and gas exceeds the estimated additional cost incident to conducting such operations.

8. The provisions contained in said Unit Agreement and Unit Operating Agreement are just and reasonable and include the following:

a. The description of the pool to be so operated;

b. The nature of said operation;

c. The allocation to the separately owned tracts in the Speaker Unit Area of all the oil and gas that is produced from said Unit Area and is saved;

d. The provision for the credits and charges to be made in the adjustment among the owners in the Speaker Unit Area for their respective investments in wells, tanks, pumps, machinery, materials, and equipment contributed to the unit operations;

e. The provision providing how the costs of unit operations, including capital investments, shall be determined and charged to the separately owned tracts, and how said costs shall be paid, including the provision providing when, how, and by whom the unit production allocated to an owner who does not pay the share of the cost of unit operations charged to such owner, or the interest of such owners, may be sold and the proceeds applied to the payment of such costs;

f. The provision for the supervision and conduct of the unit operations, in respect to which person shall have a vote with a value corresponding to the percentage of the costs of unit operations chargeable against the interest of such person; and

g. The time when the unit operations shall commence, and the manner in which, and the circumstances under which the unit operations shall terminate.

9. At the time of the administrative hearing before the Commission, Union Pacific Resources Company indicated that those persons having approximately ninety-nine percent (99%) of the working interests and those persons having approximately ninety-three percent (93%) of the non-cost bearing interests had approved in writing the aforementioned plan of unit operations.

10. Based on the facts stated in the verified application, having been heard by the Hearing Officer who recommends approval, the Commission should enter an order approving the Speaker Unit Agreement and Unit Operating Agreement with an effective date of February 1, 1995.

ORDER

NOW, THEREFORE, IT IS ORDERED, that:

1. The Speaker Unit Agreement and Unit Operating Agreement, covering lands in the Speaker Field, which agreements are attached to, and made a part of the original order of this Commission on file in the office of the Commission, are approved as being in the public interest for conservation.

2. The Morrow V-11 Sandstone reservoir, a common source of supply, underlies the following lands in Kit Carson and Cheyenne Counties, Colorado:

Township 11 South, Range 50 West, 6th P.M. Section 31: Lots 1, 2, 3 and 4 (W1/2 W1/2)

Township 11 South, Range 51 West, 6th P.M. Section 36: NE1/4 NE1/4, S1/2 NE1/4, SE1/4

Kit Carson County

Township 12 South, Range 50 West, 6th P.M. Section 6: Lots 11, 12, 19 and 20 (W1/2 W1/2) Section 18: Lot 17 (SW1/4 SW1/4) Section 19: Lot 1 (NW1/4 NW1/4)

Township 12 South, Range 51 West, 6th P.M. Section 1: Lots 1 and 2 (N1/2 NE1/4), S1/2 NE1/4, SE1/4 NW1/4, SW1/4, SW1/4, E1/2 SW1/4, SE1/4 Section 11: E1/2 E1/2 Section 12: Lots 1-8, 10-15 (N1/2, SW1/4, W1/2 SE1/4) Section 13: NW1/4 NE1/4, S1/2 NE1/4, NW1/4, SE1/4 N1/2 SW1/4, SE1/4 SW1/4 Section 14: E1/2 NE1/4, NE1/4 SE1/4 Section 24: Lots 1, 2, and 8 (N1/2 NE1/4, SE1/4 NE1/4)

Cheyenne County

3. The provisions contained in said Unit Agreement and Unit Operating Agreement as they pertain to C.R.S. Section 34-60-118, as amended, of the Oil and Gas Conservation Act are just and reasonable, and are incorporated herein as the Commission's plan of involuntary unit operations for such lands.

4. Any injection well to be located in the Unit Area shall be approved by the Director in accordance with the rules and regulations of the Commission.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective February 1, 1995, and that the Unit Operator shall submit all documentation required including Form 10, Certificate of Clearance, for each well, and further that the Unit Operator shall advise the Commission in writing as to the termination of the unit.

IT IS FURTHER ORDERED, that the Commission expressly reserves it rights, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

ENTERED this day of , 1995, as of January 17, 1995.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary Dated at Suite 801 1120 Lincoln Street Denver, Colorado February 9, 1995 ??

(490#4)