BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE APPLICATION OF ENCANA OIL & GAS (USA) INC. FOR AN ORDER ESTABLISHING SPACING AND WELL LOCATION RULES FOR THE ILES FORMATION OF THE MESAVERDE GROUP FOR CERTAIN DESCRIBED LANDS IN THE RULISON FIELD AREA, GARFIELD COUNTY, COLORADO

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Cause Nos. ______

Docket No. ______

APPLICATION

EnCana Oil & Gas (USA) Inc. ("Applicant"), by and through its attorneys, Dorsey & Whitney LLP, respectfully submits this Application to the Oil and Gas Conservation Commission of the State of Colorado (the "Commission") for an order establishing spacing rules applicable to the drilling and producing of wells from the Iles Formation of the Mesaverde Group covering certain described lands in the Rulison Field area, Garfield County, Colorado and in support of its Application states and alleges as follows:

1. Applicant is a corporation duly authorized to conduct business in the State of Colorado.

2. Applicant owns virtually 100% of the surface estate of the lands subject to this Application.

3. Applicant (or Williams Production RMT Company as to approximately 1907 acres), owns the majority of the leasehold interest in the following described lands:

Township 4 South, Range 95 West, 6^th P.M.

Sections 19 and 20: All

Sections 23 through 36: All

Township 4 South, Range 96 West, 6^th P.M.

Sections 22 through 27: All

Sections 28: E/2

Section 33: SE/4, S/2NE/4, NE/4NE/4

Sections 34 through 36: All

Township 5 South, Range 95 West, 6^th P.M.

Section 15: S/2, S/2N/2

Section 16: All that part lying South of the southernmost Mahogany marker a.k.a. Hoffman No. 36 Placer Mining Claim (S/2N/2 of Sec. 16, being a portion thereof)

a.k.a. Hoffman No. 35 Placer Mining Claim (N/2S/2 of Sec. 16, being a portion thereof)

a.k.a. Hoffman No. 34 Placer Mining Claim

Section 17: All that part of the N/2S/2 lying South of the southernmost Mahogany marker

a.k.a. Hoffman No. 30 Placer Mining Claim (N/2S/2 of Sec. 17),

S/2S/2 a.k.a. Hoffman No. 31 Placer Mining Claim (S/2S/2 of Sec. 17)

Sections 19 through 22: All

Sections 27 through 34: All

Township 5 South, Range 96 West, 6^th P.M.

Section 2: W/2, less and except those portions conveyed by Union Oil Company of California to Exxon Corporation by Special Warranty Deed recorded in Book 640, Page 869, Garfield County, Colorado.

Sections 3 through 5: All

Sections 8 through 10: All

Section 11: W/2, less and except those portions conveyed by Union Oil Company of California to Exxon Corporation by Special Warranty Deed recorded in Book 640, Page 869, Garfield County, Colorado.

Section 14: W/2, SE/4, W/2NE/4

Sections 15 and 16: All

Section 17: E/2

Sections 21 through 28: All

Section 33: N/2N/2, less and except the West 32 rod of the NW/4NW/4 containing 16 acres, more or less

Sections 34 through 36: All

Township 6 South, Range 96 West, 6^th P.M.

Section 1: Lots 3 to 14, inclusive

Sections 2 and 3: All

Section 4: That portion of the section east of Parachute Creek

Section 8: W/2NE/4, S/2

Sections 9 and 10: All

Section 15: W/2, W/2E/2

Section 16: All

Section 21: All

Section 22: N/2, SW/4

Garfield County, Colorado.

(hereafter the "Application Lands")

4. That the following described Application Lands are unspaced and subject to Rule 318a of this Commission’s Rules.

5. That Applicant has drilled, tested and completed multiple wells in the Iles Formation of the Mesaverde Group upon other lands near the Application Lands.

6. That to promote efficient drainage within the Iles Formation in the Application Lands, the Commission should increase the number of wells which can be optionally drilled into and produced from the Iles Formation of the Application Lands which constitute existing drilling units (or portions thereof) to the equivalent of one Iles well per 10 acres. This will enable Applicant to drill to the Iles Formation in each of its Williams Fork Wells, limit surface impacts, reduce surface facilities and maximize the economic and efficient recovery of reserves.

7. All future Iles wells should be located downhole anywhere upon the Application Lands but no closer than 100 feet from the boundaries of any lease line unless such lease line abuts or corners lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density wells in which event the wells should be drilled downhole no closer than 200 feet from the lease line which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Iles well has not been ordered by the Commission. Applicant does not intend by this Application to drill more than four (4) Iles wells downhole per governmental quarter quarter section.

8. Applicant commits that wells to be drilled under this Application will on average, if topographically feasible throughout the Application Lands, be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission.

9. That the above-proposed spacing and well location rules will allow more efficient drainage of the Iles Formation and facilitate coincident development with the Williams Fork Formation; will prevent waste; will not adversely effect correlative rights and will assure the greatest ultimate recovery of gas and associated hydrocarbon substances from the reservoir. Absent this Order, stand alone Iles wells will be unlikely to be drilled.

10. That the names and addresses of the interested parties according to the information and belief of the Applicant are set forth in Exhibit A attached hereto and made a part hereof.

WHEREFORE, Applicant respectfully requests that this matter be set for hearing, that notice be given as required by law and that upon such hearing this Commission enter its order consistent with Applicant’s proposals as set forth above.

Dated this day of November, 2004.

Respectfully submitted,

ENCANA OIL & GAS (USA) INC.

By:

Michael J. Wozniak

Dorsey & Whitney LLP

Attorneys for Applicant

370 17^th Street, Suite 4700

Denver, Colorado 80202

(303) 629-3400

Applicants' Address:

950 17th Street, Suite 2600

Denver, CO 80202

VERIFICATION

STATE OF COLORADO )

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CITY & COUNTY OF DENVER )

Michael J. Wozniak, Attorney for EnCana Oil & Gas (USA) Inc., upon oath deposes and says that he has read the foregoing Application and that the statements contained therein are true to the best of his knowledge, information and belief.

ENCANA OIL & GAS (USA) INC.

By:__________________________________

Michael J. Wozniak, Attorney

Subscribed and sworn to before me this day of November, 2004, by Michael J. Wozniak, Attorney for EnCana Oil & Gas (USA) Inc.

Witness my hand and official seal. My commission expires:___________________

_______________________________________

Notary Public

EXHIBIT A

INTERESTED PARTIES

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Cause Nos. ______

Docket No. ______

ExxonMobil Corporation

P.O. Box 4697

Houston, TX 77210-4697

Attention: Mr. Chris Dunbar

Petroleum Development Corporation

103 East Main Street

Bridgeport, West Virginia 26330

Attention: Mr. Eric R. Stearns

Williams Production RMT Company

1515 Arapahoe Street, Tower 3, Suite 1000

Denver, CO 80202

Attention: Mr. Joseph Barrett

ChevronTexaco

11111 S. Wilcrest

Houston, TX 77099

Attention: Mr. Lee W. Parker

Yates Petroleum Corporation
Yates Drilling Company
ABO Petroleum Corporation
MYCO Industries, Inc.

105 South Fourth Street

Artesia, NM 88210

Bureau of Land Management

2850 Youngfield St.

Lakewood, CO 80215

Doug Dennison

Garfield County

144 E. 3^rd

Rifle, CO 81650