REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on January 8, 2001 at 8:30 a.m., in Suite 801, the Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Ellora Energy, LLC for an order to allow an additional well to be drilled on the 640-acre drilling and spacing unit consisting of Section 21, Township 19 South, Range 47 West, 6th P.M. for production of gas and ass ociated hydrocarbons from the Middle Morrow Sand.

FINDINGS

The Commission finds as follows:

1. Ellora Energy, LLC ("Ellora"), 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.

4. On September 13, 1982, the Commission entered Order No. 388-1, establishing 640-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Middle Morrow Sand underlying certain lands in the Nee Noshe Field, including Section 21, Township 19 South, Range 47 West, 6th P.M., and approving the State No. 1 Well in the NE1/4 SE1/4 of said Section 21 as the permitted well for the unit.

5. On November 17, 2000, Ellora filed with the Commission a verified application for an order to allow an additional well to be drilled on the 640-acre drilling and spacing unit consisting of Section 21, Township 19 South, Range 47 West, 6th P.M. for production of gas and associated hydrocarbons from the Middle Morrow Sand. The Applicant believes the existing well cannot drain recoverable gas reserves from the unit.

6. Testimony and exhibits presented at the administrative hearing showed the topography of the area, including the location of the proposed well and the access road.

7. Testimony and exhibits presented at the administrative hearing described two Middle Morrow sands, the "D" sand and the "E" sand, in the application area.

8. Testimony and exhibits presented at the administrative hearing showed two existing wells in the area of the application lands, the State #1 Well in the NE1/4 SE1/4 of said Section 21 and the #1-28 State Well in the NE1/4 SW1/4 of the adjacent Section 28. The State #1 Well has produced approximately 1.5 BCF to date from the "E" sand only and the #1-28 State Well has produced approximately 1.2 BCF to date from the "D" sand only. The proposed addition al well should intersect both the "D" and "E" sands.

9. Further testimony and exhibits presented at the administrative hearing showed an additional well will be economic and is necessary to prevent waste and recover additional reserves.

10. At the time of the administrative hearing, Ellora agreed to be bound by oral order of the Commission.

11. Based on the facts stated in the verified application, having received no protests to the application and having been heard by the Hearing Officer who recommended approval, the Commission should enter an order to an additional well to be drilled on the 640-acre drilling and spacing unit consisting of Section 21, Township 19 South, Range 47 West, 6th P.M. for production of gas and associated hydrocarbons from the Middle Morrow Sand.

ORDER

NOW, THEREFORE IT IS ORDERED that Order No. 338-1 is hereby amended to allow an additional well to be drilled for the production of gas and associated hydrocarbons from the Middle Morrow Sand on the 640-acre drilling and spacing unit in Section 21, Township 19 South, Range 47 West, 6th P.M.

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 11th day of January, as of January 8, 2001.

CORRECTED this day of January, as of January 8, 2001.

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 January 12, 2001

(388#7)