REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on January 13, 1988 at 9:00 A.M., in Room 110, State Centennial Building, 1313 Sherman Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of Lone Mountain Production Company and Co-applicants, Fuel Resources Development Company, Enron Oil and Gas Company, Termo Company of Texas, Beren Corporation, and CSX Oil & Gas Corporation for an order to amend Order Nos. 285-1, 285-4, and 285-5 to extend the 320 acre units for production of gas from the Morrison formation, delete lands that are located in federal units in the area from the spacing provisions which will leave irregular size and shape units, allow an additional well to be drilled on certain 320 acre units for the production of gas from the Dakota and Morrison formations and allow downhole commingling for the production from the Dakota and Morrison formations.

FINDINGS

The Commission finds as follows: 1. Lone Mountain Production Company, et al as applicants herein, are interested parties 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. By Order No. 285-1, dated December 20, 1973, the Commission established 320 acre drilling and spacing units for the production of gas from the Dakota formation underlying certain lands in the South Canyon Area, Garfield County, Colorado and in addition allowed an additional well to be drilled on the 640 acre unit previously established by Order No. 122-1 for the Prairie Canyon Field. Order No. 285-1 was amended by Order No. 285-4 to include production of gas from a stratigraphic zone as being from the top of the Dakota formation to the top of the Morrison formation. Order No. 285-5, 309-3 and 122-2 included the production of gas from the Morrison formation in a portion of the lands previously spaced by Order No. 285-1 and also included additional lands not previously spaced.

5. The Morrison formation underlies the lands set forth in Paragraph 1 of this Order entered herein. The Morrison formation underlying said lands is the same Morrison formation which was spaced by the Orders set forth above in Paragraph 4 of the Findings. The Commission should extend 320 acre drilling and spacing units for the production of gas from the Morrison formation for those lands described in Paragraph 1 of the Order portion hereof. Said extension of spacing is necessary for the uniform and proper development of the Morrison formation underlying said lands.

6. Evidence presented to the Director acting as Hearing Officer on January 11, 1988 indicated that one well drilled to the Morrison and Dakota formations will not drain 320 acres. Therefore an additional well should be allowed for each 320 acre unit and on the specifically designated units set forth in Paragraph 4 of this Order. An additional well is not necessary for the specifically designated units set forth in Paragraph 3 of this Order by virtue of the fact that said specifically designated units do not approach 320 acres in size and one well will be sufficient to recover the gas reserves underlying said specifically designated units.

7. Evidence presented to the Director acting as Hearing Officer on January 11, 1988 showed that it was not economical to drill separate wells for the production of gas from the Dakota formation and for the production of gas from the Morrison formation. In order to economically develop the gas reserves of the Dakota and Morrison formations, it is necessary to produce gas from both formations using only one well. For these reasons, the Commission should authorize the downhole commingling or multiple zone completions for production from the Dakota and Morrison formations in each future or previously drilled well on lands described in Paragraphs 4 and 5 of this Order entered herein.

8. Based on the facts stated in the verified application and exhibits submitted and having been heard and recommended by the Director as Hearing Officer on January 11, 1988, the Commission should enter an order amending said Order Nos. 285-1, 285-4 and 285-5 and granting the application as presented at the time of bearing before the Hearing Officer with the amendment to allow the additional permitted well to be located no closer than 500 feet to the unit boundaries with 170 feet tolerance for topographic reasons and no closer than 1620 feet from an existing well producing from the same formation. Provided, however, that exceptions may be granted administratively by the Director due to topographic or environmental reasons, or on the case of the non-standard units set forth in Paragraph 4 of the Order herein, due to the shape of the non-standard unit, provided further that the owners of the units toward which the proposed location would be moved file a waiver or consent in writing agreeing to said exceptions.

9. At the Commission Hearing held on January 13, 1988, the Bureau of Land Management expressed concerns for the shape of irregular units proposed by the Applicants. A meeting to resolve this matter was subsequently held and an agreement was reached between the Applicants, the Bureau of Land Management, and the Commission staff. The Commission accordingly finds that the agreement should be incorporated into this Order with regard to the shape of irregular units.

ORDER

NOW THEREFORE IT IS ORDERED, that Order Nos. 285-1, 285-4 and 285-5 are hereby amended to include the following:

1. 320 acre drilling and spacing units are hereby established for the production of gas from the Morrison formation underlying the following described lands in Garfield County, Colorado:

Township 6 South, Range 103 West, 6th P.M.

Section 1: Lots 1, 2, S/2, S/2 NE/4, SE/4 NW/4 Sections 5 thru 9: All Section 10: N/2 N/2, SW/4 NW/4 Section 11: NW/4, N/2 SW/4, SE/4 SW/4, E/2 Sections 12 thru 14: All Section 15: SE/4 NE/4, S/2 NW/4, S/2 Section 16 thru 27: All Section 28: N/2, SE/4, E/2 SW/4 Section 29: NE/4, NW/4 SE/4, W/2 Sections 30 and 31: All Section 32: All Section 33: S/2, NE/4, E/2 NW/4, SW/4 NW/4 Sections 34 thru 36: All 2 --(285-9) Township 6 South, Range 104 West, 6th P.M.

Section 1: Lots 1, 2, 3, 4, S/2 N/2, SW/4 SW/4, SE/4 SE/4, N/2 S/2 Sections 2 and 3: All Sections 10 and 11: All Section 12: S/2, W/2 NW/4 Sections 13 thru 15: All Section 22: All Section 23: SW/4, SW/4 SE/4 Section 24: E/2, NE/4 NW/4, SE/4 SW/4 Sections 25 thru 27: All Section 34: All Section 35: W/2 Section 36: N/2 NE/4, NE/4 NW/4, S/2 NE/4, SE/4 Township 7 South, Range 103 West, 6th P.M. Section 4: All Section 6: Lots 1, 2, 3, 4, 5, 6, 7, SW/4 NE/4, SE/4 NW/4, E/2 SW/4, NW/4 SE/4 Section 7: Lots 1, 2, 3, 4 Section 8: SE/4 SW/4, SE/4, S/2 NE/4, NE/4 NE/4 Section 9: All Sections 16 thru 18: All Township 7 South, Range 104 West, 6th P.M. Section 1: Lots 1, 2, 3, 4, S/2 N/2 S/2 SW/4, NE/4 SW/4, SE/4 Section 2: Lots 3, 4, S/2 NW/4, S/2 Sections 3 and 4: All Section 10: NE/4, N/2 NW/4, NE/4 SE/4 Section 11 and 12: All

2. The following described lands are hereby deleted from the provisions of orders in Cause No. 285: ATCHEE UNIT Township 6 South, Range 103 West Section 10: S/2, SE/4 NW/4, S/2 NE/4 Section 11: SW/4 SW/4 Section 15: N/2 N/2, SW/4 NE/4 Section 28: W/2 SW/4 Section 29: S/2 SE/4, NE/4 SE/4 Section 33: NW/4 NW/4 Township 6 South, Range 104 West Section 1: SW/4 SE/4, SE/4 SW/4 Section 12: NE/4, E/2 NW/4 GANADO DE YOUNG UNIT Township 6 South, Range 104 West

Section 23: N/2, N/2 SE/4, SE/4 SE/4 Section 24: W/2 W/2, SE/4 NW/4, NE/4 SW/4 Section 36: E/2 SW/4, SE/4 NW/4 SOUTH CANYON UNIT Township 6 South, Range 104 West

Section 35:E/2 Section 36:W/2 W/2 3 --(285-9)

Township 7 South, Range 103 West

Section 5: All Section 6: SE/4 NE/4, SW/4 SE/4, E/2 SE/4 Section 7: E/2, E/2 W/2 Section 8: NW/4, NW/4 NE/4, N/2 SW/4, SW/4 SW/4 Township 7 South, Range 104 West

Section 1: NW/4 SW/4 Section 2: Lots 1 and 2, S/2 NE/4 BUTTERMILK CANYON UNIT Township 7 South, Range 104 West

Section 8: E/2 SE/4 Section 9: All Section 10: SW/4, S/2 NW/4, W/2 SE/4, SE/4 SE/4 Section 15: All Section 16: N/2, N/2 S/2, SW/4 SW/4 Section 17: SE/4, SE/4 SW/4, E/2 NE/4, SW/4 NE/4 Section 20: S/2, SW/4 NW/4, E/2 NW/4, N/2 NE/4, SW/4 NE/4

3. The following described irregular sized and shaped units are hereby established for the production of gas from the Dakota and Morrison formation with only one permitted well on each unit at a location no closer than 500 feet from the unit boundaries with a tolerance of 170 feet for topographic reasons and no closer than 1620 feet from any other existing well producing from the same formation.

(Units ranging in size from 120 - 240 acres) Township 6 South, Range 103 West, 6th P.M.

Section 1: SE/4 NW/4, SW/4 Section 10: SW/4 NW/4, N/2 N/2 Section 15: SW/4, S/2 NW/4 Section 15: SE/4, SE/4 NE/4 Section 28: SE/4, E/2 SW/4 Section 29: NE/4, NW/4 SE/4

Township 6 South, Range 104 West, 6th P.M.

Section 1: Lots 1, 2, S/2 NE/4, N/2 SE/4, SE/4 SE/4 Section 1: Lots 3, 4, S/2 NW/4, N/2 SW/4, SW/4 SW/4 Section 12: W/2 NW/4, SW/4 Section 12: SE/4 Section 23: SW/4, SW/4 SE/4 Section 24: NE/4, NE/4 NW/4 Section 24: SE/4, SE/4 SW/4

Township 7 South, Range 103 West, 6th P.M.

Section 6: Lots 1, 2, SW/4 NE/4, NW/4 SE/4 Section 7: Lots 1, 2, 3, 4

Township 7 South, Range 104 West, 6th P.M.

Section 2: SE/4

4. The following described irregular sized and shaped units are hereby established for the production of gas from the Dakota and Morrison formations with two permitted wells allowed on each unit at a location no closer than 500 feet from the unit boundaries with a tolerance of 170 feet for topographic reasons and no closer than 1620 feet from any other existing well producing from the same formation.

(285-9)

(Units ranging in size from 280 - 326.22 acres) Township 6 South, Range 103 West, 6th P.M.

Section 11: NW/4, N/2 SW/4, SE/4 SW/4 Section 28: N/2 Section 29: W/2 Section 33: NE/4, E/2 NW/4, SW/4 NW/4

Township 6 South, Range 104 West, 6th P.M.

Section 34: NE/4 and Section 35: NW/4 Section 34: SE/4 and Section 35: SW/4

Township 7 South, Range 103 West, 6th P.M.

Section 6: Lots 3, 4, 5, 6, 7, SE/4 NW/4, E/2 SW/4 Section 8: SE/4 SW/4, SE/4, S/2 NE/4, NE/4 NE/4 Township 7 South, Range 104 West, 6th P.M.

Section 1: SE/4, E/2 SW/4, SW/4 SW/4 Section 2: W/2 Section 10: N/2 NW/4, NE/4, NE/4 SE/4 Section 17: NW/4, N/2 SW/4, SW/4 SW/4

5. A second well is hereby allowed to be drilled, at the option of the operator, for the production of gas from the Dakota and Morrison formations on each 320 acre drilling and spacing unit underlying the following described lands in Garfield County, Colorado: Township 6 South, Range 103 West, 6th P.M. Section 1: Lots 1, 2, S/2 NE/4, SE/4 Sections 5 thru 9: All Section 11: E/2 Sections 12 thru 14: All Sections 16 thru 27: All Sections 30 thru 32: All Section 33: S/2 Section 34 thru 36: All Township 6 South, Range 104 West, 6th P.M. Sections 2 and 3: All Sections 10 and 11: All Sections 13 thru 15: All Section 22: All Sections 25 thru 27: All Section 34: W/2 Section 36: E/2 Township 7 South, Range 103 West, 6th P.M. Section 4: All Section 9: All Sections 16 thru 18: All Township 7 South, Range 104 West, 6th P.M. Section 1: Lots 1, 2, 3, 4, S/2 N/2 Section 2: Lots 3, 4, S/2 NW/4, SW/4 Sections 3 and 4: All Sections 11 thru 14: All Section 18 and 19: All Section 21 thru 36: All 5 " (285-9) Township 7 South, Range 105 West, 6th P.M.

Section 13: Lots 1, 2, 3, 4, E/2 Section 24: Lots 1, 2, 3, 4, E/2 Section 25: Lots 1, 2, 3, 4, E/2 Section 36: Lots 1, 2, 3, 4, E/2 Township 8 South, Range 104 West, 6th P.M. Sections 5 thru 8: All Sections 17 and 18: All Township 8 South, Range 105 West, 6th P.M. Section 1: Lots 1, 2, 3, 4, 5, 6, S/2 NE/4, SE/4 Section 12: Lots 1, 2, 3, 4, E/2 Section 13: Lots 1, 2, 3, 4, E/2 The permitted well location for the second well shall be at a location no closer than 500 feet from the boundaries of the unit with a tolerance of 170 feet for topographic reasons and no closer than 1620 feet from a well producing from the same formation.

6. Exceptions shall be granted administratively for the permitted well locations due to topography or environmental reasons or in the case of non-standard units due to the shape of such non-standard units, provide owners of the units toward which the proposed locations would be moved file a waiver or consent in writing agreeing to the exceptions.

7. Down hole commingling or multiple zone completions for production from the Dakota and Morrison formations in each future or previously drilled well on the lands described in 3, 4, and 5, herein above described is hereby allowed.

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

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

Entered this 19th day of February 1988, as of January 13, 1988 day

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO By Frank J. Piro, Secretary

(285-9)