REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on January 8, 2001, 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 Cedar Ridge, LLC, by its attorney, for an order pooling all interests in the 160-acre drilling and spacing unit consisting of the NW1/4 of Section 5, Township 31 South, Range 66 West, 6th P.M. for the development a nd operation of the Raton and Vermejo Coal Formations.

FINDINGS

The Commission finds as follows:

1. Cedar Ridge, LLC ("Cedar Ridge"), 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 October 31, 2000 the Commission issued Order No. 517-3 which established 160-acre drilling and spacing units for certain lands in Townships 29 through 31 South, Ranges 65 and 66 West, 6th P.M. for production from the Raton and Vermejo Coal Formations. Well locations were established and certain wells were approved as exceptions to the permitted well locations.

5. On November 20, 2000, Cedar Ridge, by its attorney, filed with the Commission a verified application for an order to pool all interests in the 160-acre drilling and spacing unit consisting of the NW1/4 of Section 5, Township 31 South, Range 66 West, 6th P.M. for the development and operation of the Raton and Vermejo Coal Formations. The Applicant plans to drill the Luis Canyon #5-2 Well in the unit described above.

6. Testimony and exhibits presented at the administrative hearing indicated that in September, 2000, reasonable offers to lease and to participate in the well were sent to the unleased and nonconsenting mineral owner.

7. Additional testimony indicated that the Luis Canyon #5-2 Well has been drilled in the unit described above.

8. Further testimony and exhibits indicated that all of the requirements of Rule 530. for involuntary pooling have been met by Cedar Ridge.

9. At the time of the administrative hearing, Cedar Ridge agreed to be bound by oral order of the Commission.

9. 10. Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommends approval, the Commission should enter an order pooling all interests in the 160-acre drilling and spacing unit consisting of the NW1/4 of Section 5, Township 31 South, Range 66 West, 6th P.M. for the development and operation of the Raton and Vermejo Coal Formations.

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, all interests in the 160-acre drilling and spacing unit consisting of the NW1/4 of Section 5, Township 31 South, Range 66 West, 6th P.M. are hereby pooled for the development and operation of the Raton and Vermejo Coal Formations.

2. The production obtained from said 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 said drilling unit; each owner of an interest in said drilling unit shall be entitled to receive his/her share of the production of the well located on said drilling unit applicable to his interest in said drilling unit.

3. Said owner is hereby deemed to have elected not to participate and shall therefore be deemed to be non-consenting as to the well(s) and be subject to the penalties as provided for by 34-60-116 (7).

4. Any non-consenting 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 mi neral 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.

6. Cedar Ridge, LLC shall be designated as the operator for the 160-acre drilling and spacing units consisting of the NW1/4 of Section 5, Township 31 South, Range 66 West, 6th P.M. for the development and operation of the Raton and Vermejo Coal Formations.

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 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 11, 2001

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