REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on July 20, 1992, 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 Elk Exploration, Inc., for an order to amend Cause Nos. 499-7, 232-77, 407-11 and 493-14 to allow a well to be located at an exception location for production from the Dakota and "J" Sand Formations and to allow the downhole commin gling of production from the Dakota Formation with production from the "J" Sand Formation.

FINDINGS

The Commission finds as follows:

1. Elk Exploration, Inc. as applicant herein, are interested parties 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, identical to the 320-acre drilling and spacing units previously established for the "J" Sand Formation required by Cause No. 232, with the permitted well located in the NW1/4 and the SE1/4 of the section and no closer than 990 feet from the boundaries of the quarter section for certa in lands in Weld County, Colorado. Order No. 499-5 established 320-acre drilling and spacing units for additional lands, with the permitted well to be located in the NW1/4, SW1/4, SE1/4 or NE1/4 of the section and no closer than 990 feet from the boundaries of the quarter section, for the production of oil, gas and associated hydrocarbons from the Dakota Formation, and allowing the multiple completion and downhole commingling of production from the Dako ta, "J" Sand, Codell, Niobrara, Shannon and Sussex Formations. Subsequent Order No. 499-7 included additional lands under the provisions of Order No. 499-5.

5. In Cause No. 232, the Commission established 320-acre drilling and spacing units for the production of gas from the "J" Sand in the Wattenberg Field with one well allowed for each unit to be located in the NE1/4 and SW1/4 and no closer than 990 feet to the boundaries of the quarter section. On August 21, 1979, the Commission issued Order No. 232-20 which allowed a second well to be drilled on each 320-acre unit, including Section 34, Township 4 Nort h, Range 66 West, 6th P.M.

6. This matter was heard by the Hearing Officer who recommends approval based upon the testimony presented at the administrative hearing that an irrigation ditch runs through the permitted well location area and that the surface owner is in agreement to the proposed location.

7. No objections to the application were received and an order of the Commission should be entered allowing a well to be drilled at an exception location 900 feet FSL and 1070 feet FEL in the SE1/4 SE1/4 of Section 34, Township 4 North, Range 66 West, 6th P.M., for production from the Dakota and "J" Sand Formations.

8. Engineering testimony presented indicated that prudent production engineering practices would allow commingled production from the Dakota and "J" Sand Formations resulting in increased recovery of reserves and no irremediable reservoir damage.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order Nos. 499-7, 232-77, 407-11 and 493-14 shall be amended to allow a well to be drilled and completed at an exception location 900 feet FSL and 1070 feet FEL in the SE1/4 SE1/4 of Section 34, Township 4 North, Range 66 West, 6th P.M., for production from the Dakota and "J" Sand Formations and further allow the downhole commingling of production from the Dakota Formation with production from the "J" Sand Formation.

IT IS FURTHER ORDERED, that should a commercial well be completed at the location set forth above, the Commission shall, upon application of any interested person, take such action as will offset any advantage which the person securing the exception may have over other procedures by reason of the drilling of the well as an exception location.

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 , 1992, as of September 21, 1992.

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 October 20, 1992 ??