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. 510

ESTABLISHMENT OF FIELD RULES TO GOVERN )

OPERATIONS IN THE GRAND VALLEY FIELD, ) ORDER NO. 510-28

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 160-acre drilling and spacing unit consisting of the NE¼ of Section 27, Township 7 South, Range 96 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 March 22, 2005, the Commission issued Order No. 510-14, which among other things, established 160-acre drilling and spacing units for certain lands including the NE¼ of Section 27, Township 7 South, Range 96 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Williams Fork 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 160-acre drilling and spacing unit consisting of the NE¼ of Section 27, Township 7 South, Range 96 West, 6^th P.M., for the development and operation of the Williams Fork Formation. The applicant has drilled the SG 441-27, SG 341-27, and SG 41-27 Wells in the NE¼ of said Section 27. 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 two (2) unleased mineral owners in the NE¼ of said Section 27, with the unleased mineral interests consisting of 2.78% in a 2-acre tract and 33.33% in two (2) parcels containing 14.26 total acres within the 160-acre drilling and spacing unit.

8. Testimony and exhibits submitted in support of the application showed a proposed oil and gas lease, indicating that in January of 2006, Williams attempted to lease the unleased minerals for the 2-acre tract referenced in Finding #7 above.

9. Testimony and exhibits submitted in support of the application showed a well proposal letter, an Operating Agreement and Authorization for Expenditure ("AFE"), indicating that these documents were sent to the owner of the unleased minerals for the 2-acre tract 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 owner.

10. Testimony and exhibits submitted in support of the application showed a proposed oil and gas lease, indicating that on May 16, 2006, WPC attempted to lease the unleased minerals for the two (2) tracts totaling 14.26-acres referenced in Finding #7 above.

11. Testimony and exhibits submitted in support of the application showed a well proposal letter, an Operating Agreement and Authorization for Expenditure ("AFE"), indicating that these documents were sent to the owner of the unleased minerals for the two (2) tracts totaling 14.26-acres on May 16, 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 owner.

12. Testimony submitted in support of the application indicates that the lease terms offered are consistent with the terms of other leases offered in the drilling unit and surrounding area.

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

14. Williams Production RMT Company agreed 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 160-acre drilling and spacing unit consisting of the NE¼ of Section 27, Township 7 South, Range 96 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 160-acre drilling and spacing unit consisting of the NE¼ of Section 27, Township 7 South, Range 96 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