REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on March 15, 1993 at 8:30 a.m., in Room 101, State Education Building, 201 East Colfax Avenue, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Anadarko Petroleum Corporation for an order to establish the Cameo Coal Formation in the Williams Fork member of the Mesaverde Formation as a source of supply as found between a subsurface depth of 5,501 feet and 5,830 feet on the electrical log of the Pinyon Ridge Federal A-1 Well located in Section 30, Township 3 North, Range 96 West, 6th P.M., and further to establish 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Cameo Coal seams in the Pinyon Ridge area of Rio Blanco and Moffat Counties, Colorado.

FINDINGS

The Commission finds as follows:

1. Anadarko Petroleum Corporation, 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. That evidence presented to the Hearing Officer indicates that the Cameo Coal seams constitute a common source of supply of methane gas and associated hydrocarbons underlying the following described lands in Rio Blanco and Moffat Counties, Colorado, to-wit:

Township 3 North, Range 96 West, 6th P.M. Sections 5 through 8: All Sections 17 through 20: All Sections 29 through 32: All

Township 3 North, Range 97 West, 6th P.M. Sections 1 through 3: All Sections 10 through 15: All Sections 22 through 27: All Sections 34 through 36: All

5. That in order to prevent the waste of oil and gas, as defined by law, to protect the correlative rights of all parties concerned; to prevent the drilling of unnecessary wells, and to insure proper and efficient development and promote conservation of the oil and gas resources of the State, an order should be made establishing 320-acre drilling and spacing units for the production of methane gas and associated hydrocarbons from the Cameo Coal seams, u nderlying the lands defined herein; that said units should be 320-acres, more or less, and consisting of a half section according to the governmental survey thereof; and that the permitted well for each such drilling unit should be located no closer than 600 feet from any unit line and no closer than 1200 feet from any other well producing or producible from the same source of supply.

6. That all available geologic and engineering data concerning said Cameo Coal seams indicates that one well will economically and efficiently drain an area of approximately 320-acres, and that drilling units the size and shape hereinabove described are not smaller than the maximum area that can be efficiently drained by one well producing from said Cameo Coal seams.

7. That additional rules be established for the protection of ground waters, the cementing of production casing, production tests, reporting of production data, and procedures to process confidentiality requests.

8. That the Director, without additional notice or hearing, should be allowed to grant exceptions to well locations provided the owners of contiguous and cornering units toward which the proposed location would be moved file a waiver or consent in writing agreeing to said exception.

9. That no protests to the application were received and the Hearing Officer recommends that the application be approved.

O R D E R

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall apply hereafter to wells drilled, and completed or recompleted in the Cameo Coal seams underlying the Pinyon Ridge Area herein described, in addition to other applicable rules and regulations and orders of the Commission, if any, heretofore adopted and not in conflict herein.

Rule 1. Three Hundred Twenty (320) acre drilling and spacing units shall be and the same are hereby established for the production of methane gas and associated hydrocarbons from the Cameo Coal seams underlying the following described lands in the Pinyon Ridge Area, Rio Blanco and Moffat Counties, Colorado, to-wit:

Township 3 North, Range 96 West, 6th P.M. Sections 5 through 8: All Sections 17 through 20: All Sections 29 through 32: All

Township 3 North, Range 97 West, 6th P.M. Sections 1 through 3: All Sections 10 through 15: All Sections 22 through 27: All Sections 34 through 36: All

Rule 2. Said drilling units shall consist of three hundred twenty (320) acres, and each such drilling unit shall consist of a governmental half section; and the permitted well for each such drilling unit shall be located no closer than 600 feet from the outer boundary of such a unit, and no closer than 1200 feet from any other well producing or producible from the Cameo Coal seams.

Rule 3. All wells drilled shall have at least 300 feet of surface casing installed and cemented from setting depth to the surface by circulation methods. Blow-out preventors and kill line or lines shall be installed prior to drilling out from the surface pipe and be in good working order.

Rule 4. All production casing strings shall be cemented from the casig shoe or total depth, whichever is shallower, to at least 500 feet above the uppermost gas-productive coal seam in the Cameo Coal section. Operators shall promptly notify the Commission if they are unable to successfully place cement across the required formations and specify the depth of the coals not covered. Steps to determine the cement top, and the procedure taken to cover the c oal sections, if necessary, shall be taken prior to any attempted completion efforts.

Rule 5. An initial completion report, Form 5, and basic logs shall be submitted within thirty (30) days of reaching total depth and the setting of production casing. The Form 5 shall contain all information including geologic data except perforated interval, treatments, production test data, and any special experimental data. This initial Form 5 shall be released upon processing by the Commission and shall not be granted Confidential status in accord with Rule 306. A complete Form 5 containing the data omitted on the initial report shall be submitted within one year from the setting of production casing or within six months from the date of first production, whichever comes first. The complete Form 5 shall be released upon processing by the Commission.

Rule 6. All fluid production, including any and all water, shall be reported on a monthly basis, as required by Rule 307, and a Certificate of Clearance, Form 10, shall be submitted as required by Rule 310 of the Rules and Regulations of the Commission.

Rule 7. Any cathodic protection borehole shall be permitted and constructed as per State Division of Water Resources requirements. In addition, a Sundry Notice, Form 4, shall be submitted to the Commission indicating the location, total depth, aquifers penetrated, water quality, and borehole construction.

Rule 8. Completion practices including stimulation shall consider the construction of existing wells in the area capable of production as well as plugged and abandoned boreholes which penetrated the Cameo Coal seams and the Williams Fork member.

Rule 9. That the Director, without additional notice or hearing, shall be allowed to grant exceptions to well locations provided the owners of contiguous and cornering units toward which the proposed location would be moved, file a waiver or consent in writing agreeing to said exception.

Rule 10. That the below-listed wells have been drilled and shall be the designated well for the 320-acre drilling and spacing unit indicated:

WELL LOCATION UNIT

Pinyon Ridge Federal A-1 1449 FNL & 1122 FWL W1/2 S30-T3N-R96W

Pinyon Ridge Federal A-2 661 FSL & 807 FEL E 1/2 S30-T3N-R96W

Pinyon Ridge Federal A-3 1320 FSL & 1320 FEL E 1/2 S19-T3N-R96W

Pinyon Ridge Federal B-1 1320 FNL & 1327 FWL W 1/2 S12-T3N-R97W

Pinyon Ridge Federal D-1 1803 FSL & 2039 FEL S 1/2 S25-T3N-R97W

Pinyon Ridge Federal D-2 625 FSL & 1124 FEL E 1/2 S24-T3N-R97W

IT IS FURTHER ORDERED, that the Rules and Regulations of the Commission shall govern all other matters pertaining to the production of methane gas and associated hydrocarbons from the Cameo Coal seams until the Commission may issue further orders after giving notice and hearing.

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 day of , 1993 as of March 15, 1993.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

Dated at Suite 380 1580 Logan Street Denver, Colorado 80203 March 23, 1993

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(506-1)