REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on March 15, 1993 at 8:30 a.m., in Room 101, State Education Building, 201 East Colfax Avenue, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Celsius Energy Company, for an order to establish the Desert Creek Stage of the Paradox Formation as a source of supply found at a depth of 5962 feet to 6062 feet in the Kissinger Federal No. 1-4 Well located i n the NE1/4 NE1/4 of Section 4, Township 38 North, Range 18 West, N.M.P.M. and further to establish standup 320-acre drilling and spacing units for the production of gas, oil and associated hydrocarbons from the Desert Creek Formation in the Grange Hall Field, Montezuma County, Colorado.

FINDINGS

The Commission finds as follows:

1. Celsius Energy 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. That evidence presented to the Hearing Officer indicates that the Desert Creek Stage of the Paradox Formation constitutes a common source of supply of gas, oil and associated hydrocarbons underlying the following described lands in Montezuma County, Colorado, to-wit:

Township 38 North, Range 18 West, N.M.P.M. Section 4: All

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 proper and efficient development and promote conservation of the oil and gas resources of the State, an order should be made establishing standup 320-acre drilling and spacing units for the production of gas, oil and associated hydrocarbons from the Desert Creek F ormation, underlying the lands defined herein; that said units should be 320-acres, more or less, and consisting of the east one half section and the west one half section according to the governmental survey thereof; and that the permitted well for each such drilling unit should be located no closer that 600 feet from any unit boundary.

6. That all available geologic and engineering data concerning said Desert Creek Formation indicates that one well will economically and efficiently drain an area of approximately 320-acres, and that drilling units the size and shape hereinabove described are not smaller than the maximum area that can efficiently be drained by one well producing from said Desert Creek Formation.

7. That no protests to the application have been filed with the Commission and that the Hearing Officer recommends that the application be approved.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall apply hereafter to wells drilled, and completed or recompleted in the Desert Creek Member of the Paradox Formation underlying the Grange Hall Field herein described, in addition to other applicable rules and regulations and orders of the Commission, if any, heretofore adopted and not in conflict herein.

Rule 1. Three Hundred Twenty (320) acre drilling and spacing units shall be and the same are hereby established for the production of gas, oil and associated hydrocarbons from the Desert Creek Member of the Paradox Formation as defined herein above underlying the following described lands in the Grange Hall Field, Montezuma County, Colorado, to-wit:

Township 38 North, Range 18 West, N.M.P.M. Section 4: Lots 5, 6, S1/2 NE1/4, SE1/4 (E1/2) Section 4: Lots 7, 8, S1/2 NW1/4, SW1/4 (W1/2)

Rule 2. Said drilling units shall consist of three hundred twenty (320) acres, and each such drilling unit shall consist of a governmental half section; and the permitted will for each such drilling unit shall be located no closer than 600 feet from the outer boundary of such a unit.

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 March, 1993, as of March 15, 1993.

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 March 25, 1993

??

(507-1)