REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on October 28, 2002 at 10 a.m. in Suite 801, 1120 Lincoln Street, Denver, Colorado for an order to amend Order No. 232-3 and Order No. 499-15 to allow the 320-acre drilling and spacing unit consisting of the N1/2 of Section 31, Township 4 North, Range 63 West, 6th P.M. to be segregated into two 160-acre drilling and spacing units consisting of the NE1/4 and the NW1/4 of Section 31 for the producti on of oil, gas and associated hydrocarbons from the "J" Sand and Dakota Formations.

FINDINGS

The Commission finds as follows:

1. United States Exploration, Inc. ("USX"), 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. In Order No. 499-1, the Commission established 320-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Dakota Formation in certain lands, with the 320-acre drilling and spacing units to be identical to those previously established for the "J" Sand Formation under Cause No. 232, with the permitted wells to be located in the NW1/4 and the SE1/4 of the section and no closer than 990 feet from the boun daries of the quarter section. In Order Nos. 499-15, 232-89, 407-125, 493-22 and 496-3, the Commission, among other things, established 320-acre drilling and spacing units for certain lands previously not spaced in the lands covered by Cause No. 232, for production from the Dakota Formation, including Section 31, Township 4 North, Range 63 West, 6th P.M.

5. On November 17, 1970, the Commission issued Order No. 232-3 which established 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the "J" Sand Formation in the Wattenberg Gas Spaced Area with one well allowed for each unit to be located in the NE1/4 and SW1/4 of each governmental section and to be located no closer than 990 feet to the boundaries of the quarter section upon which it is located. On Octo ber 19, 1981, the Commission issued Order No. 232-23 which allowed a second well to be drilled on each 320-acre unit including the N1/2 of Section 31, Township 4 North, Range 63 West, 6th P.M., which has been designated as a unit. On November 6, 1992, the Commission issued Order No. 499-15 which established 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Dakota Formation for certain lands and allowed a s econd well to be drilled on each 320-acre unit including the N1/2 of Section 31, Township 4 North, Range 63 West, 6th P.M., which has been designated as a unit.

6. On September 9, 2002, USX, by its attorney, filed with the Commission a verified application for an order to amend Order No. 232-3 and Order No. 499-15 to allow the 320-acre drilling and spacing unit consisting of the N1/2 of Section 31, Township 4 North, Range 63 West, 6th P.M. to be segregated into 160-acre drilling and spacing units consisting of the NE1/4 and the NW1/4 of Section 9, for the production of oil, gas and associated hydrocarbons f rom the "J" Sand and Dakota Formations underlying said lands. No wells have been drilled and completed in the N1/2 of Section 31, Township 4 North, Range 63 West, 6th P.M. for production from the "J" Sand or Dakota Formations.

7. Testimony and exhibits presented at the administrative hearing showed that the proposed well in Section 31 is expected to be similar to the previously drilled "J" Sand wells near the application lands which have drainage areas ranging from 9 acres to 55 acres. Further testimony indicated that there are no Dakota wells near the application lands but tests on the Dakota Formation in nearby wells indicate drainage of less than 160 from the Dakota Formation.

8. Testimony and exhibits presented at the administrative hearing showed that the NW1/4 of Section 31 is leased by several parties, however, the exact ownership of all the parties is unclear due to incomplete records. Further testimony indicated that USX intends to drill its well in the NE1/4 of Section 31 where USX has the opportunity to earn the lease from mineral owner RME Land Corporation. No protests to the application have been filed with t he Commission or the applicant.

9. At the time of the administrative hearing, United States Exploration, Inc. agreed to be bound by an oral order of the Commission.

10. Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommended approval, the Commission should approve an order to amend Order No. 232-3 and Order No. 499-15 to allow the 320-acre drilling and spacing unit consisting of the N1/2 of Section 31, Township 4 North, Range 63 West, 6th P.M. to be segregated into two 160-acre drilling and spacing units consisting of the N E1/4 and the NW1/4 of Section 31 for the production of oil, gas and associated hydrocarbons from the "J" Sand and Dakota Formations.

ORDER

NOW, THEREFORE IT IS ORDERED, that Order No. 232-3 and Order No. 499-15 are hereby amended to allow the 320-acre drilling and spacing unit consisting of the N1/2 of Section 31, Township 4 North, Range 63 West, 6th P.M. to be segregated into 160-acre drilling and spacing units consisting of the NE1/4 and the NW1/4 of Section 9, for the production of oil, gas and associated hydrocarbons from the "J" Sand and Dakota Formations.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.

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.

ENTERED this day of November, 2002, as of October 28, 2002.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

Dated at Suite 801 1120 Lincoln Street Denver, Colorado 80203 November 12, 2002

(232-#236)

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