REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on May 20, 1991, in Room 101, State Education Building, 201 East Colfax, Denver, Colorado, after giving Notice of Hearing, as required by law on the verified application of Schreider & Company, Inc. to establish 40-acre drilling and spacing units for production from the "D" Sandstone formation and further to pool all interests in the SW/4 SE/4 of said Section 11 for production from the "D" Sandstone formation underlying the below-listed lands to-wit:

Township 2 South, Range 62 West, 6th P.M. Section 11: All

FINDINGS

The Commission finds as follows:

1. Schreider & Company, Inc. as applicant herein, is an interested party in the subject matter of the above-entitled 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. That in order to prevent the waste of oil and gas, as defined by law, to protect the correlative rights of all parties, concerned; to prevent the drilling of unnecessary wells, and to ensure proper and efficient development and promote conservation of the oil and gas resources of the State, an order should be made establishing 40-acre drilling and spacing units, for the production of oil, gas and associated hydrocarbons from the "D" Sandstone formation, a common source of supply, underlying the lands herein described with the units to consist of the quarter-quarter section, according to governmental survey, with the permitted well to be located no closer than 600 feet from the boundaries of the unit for the below-listed lands, to-wit:

Township 2 South, Range 62 West, 6th P.M. Section 11: All

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5. All available geologic and engineering data concerning said "D" Sandstone formation indicates that one well will economically and efficiently drain an area of approximately 40-acres, and that drilling units the size and shape hereinabove described are not smaller than the maximum area that can be efficiently drained by one well producing from said "D" Sandstone formation.

6. That the Robbins No. 24-11 Well located in the SE/4 SW/4 and the Howell No. 1 Well located in the SW/4 SE/4, both in Section 11, Township 2 South, Range 62 West, 6th P.M., be considered the permitted well for each of the 40-acre drilling and spacing units as described.

7. Efforts have been made to obtain the voluntary pooling of all interests in the SW/4 SE/4. A.F.E.'s have been furnished to non-consenting interests on or around February 14, 1991, and consent has not been given, therefore Mr. Edward Skeeters is deemed to be a non-consenting mineral owner.

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8. Based on the facts stated in the verified application, receiving no protests and having been heard by the Director as Hearing Officer on May 17, 1991 and recommended for approval, the Commission should approve the request and establish 40-acre drilling and spacing units in Section 11, Township 2 South, Range 62 West, 6th P.M. for the production of oil, gas and associated hydrocarbons from the "D" Sandstone formation and further, enter an order pooling all interests in the 40-acre drilling and spacing unit herein described in order to insure proper and efficient development of the oil and gas from the "D" Sandstone formation underlying said unit, as necessary in order to afford each owner of interest in each said drilling unit the opportunity to recover and receive his just and equitable share of the oil and/or gas from the common source of supply underlying said drilling unit.

9. Production obtained from said drilling unit should be allocated to each tract therein on the basis of the proportion that the number of acres in each tract bears to the total number of acres within said drilling unit.

10. At the time of administrative hearing the parties agreed to be bound by the verbal order of the Commission in this matter.

O R D E R

NOW, THEREFORE IT IS ORDERED, that,

1. Forty-acre drilling and spacing units, consisting of a governmental quarter-quarter section, shall be established for Section 11, Township 2 South, Range 62 West, 6th P.M. for the production of oil, gas and associated hydrocarbons from the "D" Sandstone formation and further, pursuant to the provisions of 34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act of the State of Colorado, all interests in the drilling and spacing unit consisting of the SW/4 SE/4 of said Section 11, Township 2 South, Range 62 West, 6th P.M., Adams County, Colorado, are hereby pooled for the production of oil, gas and associated hydrocarbons from the "D" Sandstone formation underlying said unit.

2. The production obtained from said drilling unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within said drilling unit; each owner of an interest in said drilling unit shall be entitled to receive his share of the production of the well located on said drilling unit applicable to his interest in said drilling unit.

3. The owner of the unleased tract should be afforded the opportunity to elect whether to participate in the drilling and operation of said well, and pay a proportionate share of the actual costs thereof, which proportionate share shall be determined by dividing the number of acres in each unleased tract to the total number of acres within said

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drilling unit.

4. Within thirty (30) days from the date of receipt of said AFE by the owner of said tract, such owner shall indicate whether he consents to the cost of the drilling of the well and agrees to participate in such costs. Such election shall be made in writing either by executing the AFE or similar document. In the event a written election to participate is not made by said owner within such time period, said owner shall be deemed to have elected not to participate and shall therefore be deemed to be non-consenting as to the well and be subject to the penalties as provided for by 34-60-116 (7).

5. Any non-consenting unleased mineral owner within the spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of his or her record title interest, whatever that interest may be, until such time as the consenting owner recovers, only out of the non-consenting owner's proportionate 87.5% share of production, the costs specified in C.R.S. 34-60-116 (7)(b), as amended. After recovery of such costs, the non-consenting mineral owner shall then own his proportionate 8/8ths share of the well, surface facilities and production, and then be liable for his proportionate share of further costs incurred in connection with the well as if he had originally agreed to the drilling. - 4 -(492-1)

6. The operator of any well drilled on the above described unit shall furnish all non-consenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

7. Mr. Edward Skeeters shall be deemed a non-consent mineral owner.

8. The Robbins No. 24-11 Well located in the SE/4 SW/4 and the Howell No. 1 Well located in the SW/4 SE/4, both in Section 11, Township 2 South, Range 62 West, 6th P.M., shall be considered the permitted well for each of the 40-acre drilling and spacing units as described.

9. At the time of administrative hearing the parties agreed to be bound by the verbal order of the Commission in this matter.

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

IT IS FURTHER ORDERED, that with the verbal consent of the interested parties at the time of hearing, this order shall become effective forthwith.

ENTERED this day of 1991 as of May 20, 1991.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

Dated at Suite 380 1580 Logan Street Denver, Colorado 80203 May 31, 1991 1236I

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