112-202

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 OPERATIONS IN IGNACIO-BLANCO

FIELD, LA PLATA COUNTY, COLORADO

)

CAUSE NO. 112

ORDER NO. 112-202

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 9 a.m. on July 23, 2007, Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado for an order to pool the interests of any and all unlocated owners, if any, of royalty or other interests in the mineral estate for purposes of the joint development and operation of wells in the 320-acre drilling and spacing unit consisting of the N½ of Section 36, Township 33 North, Range 7 West, N.M.P.M. for the development and operation of the Fruitland coal seams.

FINDINGS

The Commission finds as follows:

1. Catamount Royalty Partners, Ltd. (“Catamount”), 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 pursuant to the Oil and Gas Conservation Act.

4. On June 17, 1988, the Commission issued Order No. 112-60, which established 320-acre drilling and spacing units for production of gas from the Fruitland coal seams, for certain lands, with the permitted well to be located no closer than 990 feet to any outer boundary of the unit, nor closer than 130 feet to any interior quarter section line, including the N½ of Section 36, Township 33 North, Range 7 West, N.M.P.M.

5. On April 25, 2000, the Commission issued Order No. 112-157, which authorized the drilling of an additional well in the 320-acre drilling and spacing units, for production from the Fruitland coal seams, including the N½ of Section 36, Township 33 North, Range 7 West, N.M.P.M.

6. On June 1, 2007, Catamount, by its attorney, filed with the Commission an application for an order to pool the interests of any and all unlocated owners, if any, of royalty or other interests in the mineral estate for purposes of the joint development and operation of wells in the 320-acre drilling and spacing unit consisting of the N½ of Section 36, Township 33 North, Range 7 West, N.M.P.M. for the development and operation of the Fruitland coal seams. Catamount asserts that all known lessees of existing mineral interests have consented to the drilling of the existing wells in these lands and the filing of this application.

7. On July 10, 2007, Catamount by its attorney, filed with the Commission a written request to approve the application based on the merits of the verified application and the supporting exhibits.

8. Testimony and exhibits submitted in support of the application showed the owners affected by the application whose addresses were known were sent copies of the application on June 1, 2007.

9. Testimony and exhibits submitted in support of the application showed that, McElvain, as operator, permitted, spudded and subsequently drilled and completed two Fruitland coal seams wells on the application lands in compliance with applicable Commission orders and permits issued for these wells. Additional testimony submitted indicated that Catamount, JDH Resources Limited Liability Company and McElvain are signatories to a Joint Operating Agreement.

10. Testimony and exhibits submitted in support of the application showed that diligent and reasonable efforts consistent with standard practices in the industry and the Landman profession were made to locate all persons or entities that may or may not presently own royalty or other interests in the mineral estate of the application lands. Testimony and exhibits submitted also showed that, despite these efforts, some of these potential owners could not be located and are not locatable by ordinary industry practices.

11. Testimony and exhibits submitted in support of the application showed that Catamount has complied with the requirement under §34-60-116, C.R.S. and Commission Rule 530. and that pooling the interests of any and all unlocated possible royalty or other owners, if any, of interests in the mineral estate is necessary so that joint development and operation of wells in the Fruitland coal seams on the application lands may continue.

12. Catamount Royalty Partners, Ltd., agreed to be bound by an oral order of the Commission.

13. Based on the facts stated in the verified application, having received no protests, and based on the Hearing Officer review of the application under Rule 511.b., the Commission should enter an order to pool the interests of any and all unlocated owners, if any, of royalty or other interests in the mineral estate for purposes of the joint development and operation of wells in the 320-acre drilling and spacing unit consisting of the N½ of Section 36, Township 33 North, Range 7 West, N.M.P.M., for the development and operation of the Fruitland coal seams.

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 of the interests of any and all unlocated owners, if any, of royalty or other interests in the mineral estate are hereby pooled for purposes of the joint development and operation of wells in the 320-acre drilling and spacing unit consisting of the N½ of Section 36, Township 33 North, Range 7 West, N.M.P.M., for the development and operation of the Fruitland coal seams.

2. The production obtained from each 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 each drilling unit; each owner of an interest in each drilling unit shall be entitled to receive his/her share of the production of the well located on each drilling unit applicable to his interest in each drilling unit.

3. Said owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the well(s) and be subject to the penalties as provided for by §34‑60‑116 (7), C.R.S.

4. Any nonconsenting 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 nonconsenting 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 nonconsenting 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 nonconsenting 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.

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.

IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date this order is mailed by the Commission.

IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this order is not required prior to the filing for judicial review.

ENTERED this ______ day of August, 2007, as of July 23, 2007.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By:______________________________________

Patricia C. Beaver, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

August 15, 2007