Order No. 465-3

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE PARK MOUNTAIN FIELD, RIO BLANCO COUNTY, COLORADO

Cause No. 465 Order No. 465-3

REPORT OF THE COMMISSION

This cause came on before the Commission at 8:30 a.m. on September 17, 1999, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado on the application of Coastal Oil & Gas Corporation for an order to allow additional wells to be drilled and completed on the 320-acre drilling and spacing units and two (2) fractional sections in the Park Mountain Field for production of gas and associated hydrocarbons from the Dakota Formation.

FINDINGS

The Commission finds as follows:

1. Coastal Oil & Gas Corporation ("Coastal"), as applicant herein, in 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 February 21, 1989, as amended June 11, 1993, the Commission issued Order No. 465-1 which established 320-acre drilling and spacing units for certain lands in the Park Mountain Field for the production of gas and associated hydrocarbons from the Dakota Formation. Such units shall consist of the E1/2 and W1/2 or N1/2 and S1/2 of any section with the permitted well to be located no closer than 990 feet from the outer boundary of the unit. The Direc tor shall be authorized to grant topographic variances without notice or hearing. On December 20, 1993, as corrected March 31, 1994, the Commission issued Order No. 465-2 which extended the field rules for the Park Mountain Field to include the below-listed lands:

Township 2 South, Range 103 West, 6th P.M. Section 31: Lots 1, 2, 3, 4, E1/2, E1/2, W1/2 (All) Section 32: All Section 33: All

Township 3 South, Range 103 West, 6th P.M. Section 4: Lots 5, 6, 7, 8, S1/2, N1/2, S1/2 (All) Section 5: Lots 5, 6, 7, 8, S1/2, N1/2, S1/2 (All) Section 6: Lots 10, 11, 12, 13, 14, SE1/4 NW1/4 E1/2 SW1/4 (being the approximate W1/2) Lots 8, 9, S1/2 NE1/4, SE1/4 (being the approximate E1/2) (All) Section 7: Lots 5, 6, 7, 8, E1/2W1/2 (being the approximate W1/2), E1/2 (All) Section 8: All Section 9: N1/2 Section 18: Lots 5, 6, 7, 8, E1/2 W1/2 (being the approximate W1/2), E1/2 (All)

Township 3 South, Range 104 West, 6th P.M. Section 1: Lots 1, 2, 3, 4, S1/2 N1/2, S1/2 (All) Section 2: Lots 1, 2, 3, 4, S1/2 N1/2, S1/2 (All) Section 3: Lots 1, 2, 3, 4, (All) Section 10: Lots 1, 2, 3, 4, (All) Section 11: All Section 12: All Section 13: All Section 14: E1/2

5. On August 5, 1999, Coastal Oil & Gas Corporation, by its attorney, filed with the Commission a verified application for an order to allow an additional well to be drilled for the production of gas and associated hydrocarbons from the Dakota Formation in the 320-acre drilling and spacing units and in the two (2) fractional sections on the lands described above in Finding 4.

6. Evidence and testimony presented at the administrative hearing indicated that one well will not efficiently and economically drain the 320-acre drilling and spacing units described in Finding #4 and that additional wells are necessary to prevent waste and protect correlative rights and to recover gas and associated hydrocarbons from the Dakota Formation.

7. Exhibits and testimony presented at the administrative indicated drainage areas for the Dakota Formation wells range from 20 acres to 230 acres.

8. Exhibits and testimony presented at the administrative indicated favorable economics for drilling additional wells.

9. Approval of the application would provide efficient and economic incremental recovery from the Dakota Formation in Park Mountain Field, would prevent waste, would protect correlative rights, and would protect public health, safety, and welfare.

10. Rio Blanco County did not wish to have a Local Public Forum conducted on the application by COGCC staff.

11. At the time of the administrative hearing the applicant agreed to be bound by oral order of the Commission.

12. Based on the facts stated in the application, having received no protests and having been heard by the Hearing Officer who recommends approval the Commission should enter an order to allow additional wells to be drilled and completed on the 320-acre drilling and spacing units and two (2) fractional sections in the Park Mountain Field for production of gas and associated hydrocarbons from the Dakota Formation.

ORDERED

NOW, THEREFORE IT IS ORDERED that Order Nos. 465-1 and 465-2 are hereby amended to allow additional wells to be drilled and completed on the 320-acre drilling and spacing units and two (2) fractional sections in the Park Mountain Field for production of gas and associated hydrocarbons from the Dakota Formation.

Township 2 South, Range 103 West, 6th P.M. Section 31: Lots 1, 2, 3, 4, E1/2, E1/2, W1/2 (All) Section 32: All Section 33: All

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.

ORDERED this day of October, as of September 17, 1999.

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 October 1, 1999 ??

(465#3)