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REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 9:00 a.m. on July 23, 2007, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to vacate the 320-acre drilling and spacing unit established in Order No. 139-16, for the S½ of Section 32, Township 6 South, Range 94 West, 6th P.M., and establish two (2) approximate 160-acre drilling and spacing units and allow one (1) well per ten (10) acres for said lands, for the production of gas and associated hydrocarbons from the Williams Fork Formation.

FINDINGS

The Commission finds as follows:

1. Williams Production RMT Company (“Williams”), 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 April 20, 1990, the Commission issued Order No. 139-16, which among other things, established 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Mesaverde Formation, including the S½ of Section 32, Township 6 South, Range 94 West, 6th P.M.

5. On February 21, 1995, (amended April 26, 1995 and corrected February 21, 2000), the Commission issued Order No. 139-28, which among other things, allowed eight (8) wells in the established 320-acre drilling and spacing units, for certain lands including the S½ of Section 32, Township 6 South, Range 94 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group.

6. On July 10, 2006, the Commission issued Order No. 139-64, which among other things, allowed the equivalent of one (1) well per ten (10) acres in the established 320-acre drilling and spacing unit, including Section 32, Township 6 South, Range 94 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group.

7. On April 17, 2007, Williams, by its attorney, filed with the Commission a verified application for an order to vacate the 320-acre drilling and spacing unit established in Order No. 139-16, for the S½ of Section 32, Township 6 South, Range 94 West, 6th P.M., and establish two (2) approximate 160-acre drilling and spacing units and allow one (1) one well per ten (10) acres for said lands, for the production of gas and associated hydrocarbons from the Williams Fork Formation. No wells have been drilled upon these lands.

That all future Williams Fork Formation wells shall be located downhole anywhere upon such lands but no closer than one hundred (100) feet from the outside boundary of the drilling and spacing unit unless such unit boundary abuts or corners lands in respect of which the Commission has not at the time of the drilling permit application granted the right to drill 10-acre density wells, in which event the well may be drilled downhole no closer than two hundred (200) feet from that portion of the unit boundary which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Williams Fork Formation wells has not been ordered by the Commission.

That wells shall be drilled from the surface either vertically or directionally from no more than one (1) pad located on a given quarter quarter section unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission.

8. On May 29, 2007, Williams, 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.

9. Testimony and an exhibit submitted in support of the application indicated that Williams owns a substantial leasehold interest in the S½ of Section 32 and that a mineral owner owning the majority interest in the subject lands has requested that the SW¼ of said Section 32 be constituted as a separate drilling and spacing unit which would necessitate vacating the existing drilling and spacing unit.

10. That the Commission takes notice of its Order No. 139-64 which previously had established ten (10) acre density drilling for the application lands in order to approve same for the application lands now to be established as 160-acre drilling and spacing units for gas and associated hydrocarbons produced from the Williams Fork Formation.

11. The above-referenced testimony and exhibit show that the proposed spacing and density will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.

12. Williams Production RMT Company agreed to be bound by 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 vacate the 320-acre drilling and spacing unit consisting of the S½ of said Section 32 and establish two approximate 160-acre drilling and spacing units, allowing the equivalent of 10-acre density drilling upon for the production of gas and associated hydrocarbons from the Williams Fork Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that the 320-acre drilling and spacing unit established in Order No. 139-16, for the S½ of Section 32, Township 6 South, Range 94 West, 6th P.M., is hereby vacated and two (2) approximate 160-acre drilling and spacing units consisting of the SE¼ and SW¼ of said Section 32 are hereby established, allowing one (1) one well per ten (10) acres for said lands, for the production of gas and associated hydrocarbons from the Williams Fork Formation.

IT IS FURTHER ORDERED, that all future Williams Fork Formation wells shall be located downhole anywhere upon such lands but no closer than one hundred (100) feet from the outside boundary of the drilling and spacing unit unless such unit boundary abuts or corners lands in respect of which the Commission has not at the time of the drilling permit application granted the right to drill 10-acre density wells, in which event the well shall be drilled downhole no closer than two hundred (200) feet from that portion of the unit boundary which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Williams Fork Formation wells has not been ordered by the Commission.

IT IS FURTHER ORDERED, that wells shall be drilled from the surface either vertically or directionally from no more than one (1) pad located on a given quarter quarter section unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission.

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 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