BEFORE THE OIL & GAS CONSERVATION COMMISSION

BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE PROMULGATION AND ) CAUSE NO. 440

ESTABLISHMENT OF FIELD RULES TO GOVERN )

OPERATIONS IN THE PARACHUTE FIELD, ) ORDER NO. 440-37

GARFIELD COUNTY, COLORADO )

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:00 a.m. on October 23, 2006, in Room 200, Las Animas County Court House, 200 East First Street, Trinidad, Colorado, for an order to pool all non-consenting interests in the 320-acre drilling and spacing unit consisting of the S½ of Section 6, Township 7 South, Range 95 West, 6^th P.M., for the development and operation of the Williams Fork Formation.

FINDINGS

The Commission finds as follows:

1. Williams Production RMT Company ("WPC"), 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. 440-12, which among other things, established 320-acre drilling and spacing units for certain lands including the S½ of Section 6, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation.

5. On August 30, 2006, WPC, 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 6, Township 7 South, Range 95 West, 6^th P.M., for the development and operation of the Williams Fork Formation. The applicant has drilled the PA 13-6 Well in the S½ of said Section 6. Offers to lease or to participate have been made to the mineral owners or the leasehold owners but as of the date the application was filed, these attempts have been unsuccessful.

6. On October 12, 2006, WPC, 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.

7. Testimony and exhibits submitted in support of the application showed that WPC intends to involuntarily pool three (3) unleased mineral owners in the S½ of said Section 6, with the unleased mineral interests consisting of 100% in an 8.30-acre tract, 7.042254% in a 39.14-acre tract, and 40% in a 14.43-acre tract within the 320-acre drilling and spacing unit.

8. Testimony and exhibits submitted in support of the application showed that on September 1, 2006, Williams attempted to lease the unleased minerals for the 8.30-acre tract referenced in Finding #7 above.

9. Testimony and exhibits submitted in support of the application showed an Operating Agreement and Authorization for Expenditure ("AFE"), indicating these documents were sent to the three (3) unleased mineral owners in the application lands on September 1, 2006. The AFE gives the locations, objective depths and the estimated drilling and completion costs; no response to participate in the wells was received from the mineral owners.

10. Testimony and exhibits submitted in support of the application showed a proposed oil and gas lease, indicating that on September 1, 2006, WPC attempted to lease the unleased minerals for the 14.43-acre tract referenced in Finding #7 above.

11. Testimony and exhibits submitted in support of the application showed a proposed oil and gas lease, indicating that in November of 2005, March of 2006, April of 2006, and June of 2006, WPC attempted to lease the unleased minerals for the 39.14-acre tract referenced in Finding #7 above.

12. Testimony and exhibits submitted in support of the application showed WPC made reasonable efforts to lease the unleased parties and alternatively to offer them the opportunity to participate in the drilling of the wells by performing the steps referenced in Findings #8 through Finding #11 above.

13. No protests to the application have been filed with the Commission or the Applicant.

14. Williams Production RMT Company agrees to be bound by oral order of the Commission.

15. 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 all non-consenting interests in the 320-acre drilling and spacing unit consisting of the S½ of Section 6, Township 7 South, Range 95 West, 6^th P.M., for the development and operation of the Williams Fork Formation.

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, the non-consenting interests in the 320-acre drilling and spacing unit consisting of the S½ of Section 6, Township 7 South, Range 95 West, 6^th P.M., are hereby pooled for the development and operation of the Williams Fork Formation.

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 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.

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 November, 2006, as of October 23, 2006.

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

November 8, 2006