BEFORE THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATION IN THE IGNACIO-BLANCO FIELD, ARCHULETA COUNTY, COLORADO	) ) ) )	CAUSE NO.   112 ORDER NO.   112-162

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on February 12, 2002, at 10:00 a.m. in the Raton Room, Holiday Inn Trinidad, 3125 Toupal Drive, Trinidad, Colorado, for an order to pool all non-consenting interests in a 320-acre drilling and spacing unit for the development and operation of the Fruitland coal seams.

FINDINGS

                        The Commission finds as follows:

                        1.  Exok, Inc. (“Exok”), 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 the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.

                        4.  On June 15, 1988, the Commission issued Order No. 112-60 which established 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Fruitland coal seams, underlying certain lands in the Ignacio-Blanco Field, with the permitted well when South of the Ute Line to be located in the NE¼ and the SW¼ of each section and when North of the Ute Line to be located in the NW¼ and SE¼ of each section, no closer than 990 feet from the boundaries of the quarter section, nor closer than 130 feet to any interior quarter section line.  Order Nos. 112-61 and 112-85 were subsequently adopted amending Order No. 112-60 to establish additional field rules for the Fruitland coal seams.

                        5.  On December 17, 2001 Exok, Inc. by its attorney filed with the Commission a verified Application for an order to pool all non-consenting interests in the 320-acre drilling and spacing unit consisting of the S½ of Section 1, Township 32 North, Range 6 West, N.M.P.M. (SUL) for the development and operation of the Fruitland coal seams.  The Applicant proposes to drill the Swanemyr 32-6 #1-1 Well at a legal location 1205 feet FSL and 1125 feet FEL in the S½ of Section 1. 

                        6.  Testimony and exhibits presented at the administrative hearing indicated that Exok owns 62½% of the minerals in the S½ of Section 1 and that 120 net acres are unleased.  Numerous offers to lease were made to Willard H. Seibel Revocable Trust and the Betty Seibel Revocable Trust with the last offer made on August 20, 2001.  Testimony indicated that the terms of the leases offered were superior to those leases prevailing in the area for bonus and royalty rates.  The Seibel’s have not agreed to lease their mineral interests.

                        7.  Testimony and exhibits presented at the administrative hearing indicated that offers to participate in the well were sent to the Willard H. Seibel Revocable Trust and the Betty Seibel Revocable Trust on November 30, 2001 via certified mail and received on December 5, 2001.  Testimony indicated that the AFE represented an accurate cost for drilling and completing the proposed well.  The Seibel’s have not agreed to participate in the well.

                        8.         At the time of the administrative hearing, Exok, Inc. agreed to be bound by oral order of the Commission. 

9.         Based on the facts stated in the verified application, having received no

protests and having been heard by the Hearing Officer who recommended approval, the Commission should enter an order to pool all non-consenting interests in the 320-acre drilling and spacing unit consisting of the S½ of Section 1, Township 32 North, Range 6 West, N.M.P.M. (SUL).

ORDER

                        NOW, THEREFORE IT IS ORDERED, that, 1.  Pursuant to the provisions of §34-60-116, C.R.S. as amended, of the Oil and Gas Conservation Act of the State of Colorado, all interests in the 320-acre drilling and spacing units consisting of S½ of Section 1, Township 32 North, Range 6 West, N.M.P.M. (SUL) are hereby pooled for the development and operation of the Fruitland coal seams.

                        2.  The production obtained from said drilling unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within said drilling unit; each owner of an interest in said drilling unit shall be entitled to receive his/her share of the production of the well located on said drilling unit applicable to his interest in said drilling unit.

                        3.  Said owner is hereby deemed to have elected not to participate and shall therefore be deemed to be non‑consenting as to the well(s) and be subject to the penalties as provided for by §34‑60‑116 (7).

                        4.  Any non‑consenting unleased mineral owner within the spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of his/her record title interest, whatever that interest may be, until such time as the consenting owner recovers, only out of the non‑consenting owner's proportionate 87.5% share of production, the costs specified in §34‑60‑116 (7)(b), C.R.S. as amended.  After recovery of such costs, the non‑consenting mineral owner shall then own his/her proportionate 8/8ths share of the well, surface facilities and production, and then be liable for his/her proportionate share of further costs incurred in connection with the well as if he/she had originally agreed to the drilling.

                        5.  The operator of any well drilled on the above-described unit shall furnish all non‑consenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

                        6.  Exok, Inc. shall be designated as the operator for the 320-acre drilling and spacing unit consisting of the S½ of Section 1, Township 32 North, Range 6 West, N.M.P.M. (SUL) for the development and operation of the Fruitland coal seams.

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 February 2002, as of February 12, 2002.

                                                            OIL AND GAS CONSERVATION COMMISSION

                                                              OF THE STATE OF COLORADO

                                                                        By                    __________________________

                                                                                      Patricia C. Beaver, Hearing Officer

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

February 25, 2002