REPORT OF THE COMMISSION

TO ALL INTERESTED PARTIES AND TO WHOM IT MAY CONCERN:

This cause came on for hearing before the Commission on November 18, 1991 at 8:30 a.m., 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 K. P. Kauffman Company, Inc., and Kayty Petroleum, Inc., for an order to establish 80-acre drilling and spacing units for production of oil and associated hydrocarbons from the "D" Sand and "J" Sand Formations underlying certain lands in Arapahoe County, Colorado.

FINDINGS

The Commission finds as follows:

1. K. P. Kauffman Company, Inc., and Kayty Petroleum, Inc., as applicants 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. That evidence presented at the time of the administrative hearing indicates that the "D" Sand and the "J" Sand Formations underlie the following described lands in Arapahoe County, Colorado, to-wit:

Township 4 South, Range 63 West, 6th P.M. Section 31: W/2, SE/4 Section 32: All

Township 5 South, Range 63 West, 6th P.M. Section 5: W/2, N/2 NE/4, SE/4 Section 6: NE/4, N/2 SE/4

5. 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 insure the

proper and efficient development and promote conservation of the oil and gas resources of the State, an order should be made establishing 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the "D" Sand and "J" Sand Formations, a common source of supply underlying the lands described herein; that said units should consist of the E/2 and W/2 or N/2 and S/2 of each quarter section, according to the governmental survey, with the unit designated by the operator of the first well drilled in the quarter section.

6. That the permitted well should be located in accordance with the provisions of Rule 318 of the Rules and Regulations of the Commission and wells previously drilled, currently drilling, or having an approved location exception for the "D" Sand Formation and/or the "J" Sand Formation should be established as the permitted well location for the 80-acre drilling and spacing unit. Unit designations for existing wells should be filed with the Commission within thirty (30) days of the approval of the order.

7. That engineering testimony presented indicated that prudent engineering practices would allow commingled production from the "D" Sand Formation and the "J" Sand Formation, resulting in increased recovery of reserves and no irremediable reservoir damage.

8. That all available geological and engineering data concerning said "D" Sand and "J" Sand Formations indicated that one well will efficiently and economically drain an area of approximately 80-acres and that the drilling units of the size and shape herein described are not smaller than the maximum area that can be efficiently and economically drained by one well producing from said formations.

9. Based on the facts stated in the verified application, receiving no protests and having been heard by the Director as Hearing Officer on November 15, 1991 and recommended for approval, the Commission should enter an order establishing 80-acre drilling and spacing units on the lands described in Finding 4, with permitted well locations to be in accordance with Rule 318 of the Rules and Regulations of the Colorado Oil and Gas Conservation Commission, and further to allow the downhole commingling of production from the "D" Sand and "J" Sand Formations.

O R D E R

NOW, THEREFORE IT IS ORDERED, that the following rules and regulations shall apply hereafter to a well or wells drilled, completed, or recompleted in the "D" Sand and/or "J" Sand Formations underlying the Bombing Range Field, herein described, in addition to other applicable rules and regulations and orders of the Commission, if any, heretofore adopted and not in conflict herewith:

Rule 1. Eighty (80) acre drilling and spacing units shall be and the same are hereby established for the production of oil and associated hydrocarbons from the "D" Sand and/or "J" Sand Formations underlying the following described lands in Arapahoe County, Colorado:

Township 4 South, Range 63 West, 6th P.M. Section 31: W/2, SE/4 Section 32: All

Township 5 South, Range 63 West, 6th P.M. Section 5: W/2, N/2 NE/4, SE/4 Section 6: NE/4, N/2 SE/4

Rule 2. Said drilling units shall consist of the E/2 and W/2 or N/2 and S/2 of each quarter section according to the governmental survey, with the unit designated by the operator of the first well drilled in the quarter section.

Rule 3. The permitted well shall be located in accordance with the provisions of Rule 318 of the Rules and Regulations of the Commission and wells previously drilled, currently drilling, or having an approved location exception for the "D" Sand Formation and/or the "J" Sand Formation shall be established as the permitted well location for the 80-acre drilling and spacing unit. Unit designations for existing wells shall be filed with the Commission within thirty (30) days of the approval of the order.

Rule 4. Wells drilled or to be drilled in the lands described herein, shall be allowed commingled production from the "D" Sand

Formation and the "J" Sand Formation.

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 , 1991, as of November 18, 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 December 18, 1991 1622I