BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF CHANGES TO THE RULES        )           CAUSE NO. 1R

AND REGULATIONS OF THE OIL AND GAS                )

CONSERVATION COMMISSION OF THE STATE        )           ORDER NO. 1R-110

OF COLORADO                                                                 )          

REPORT OF THE COMMISSION

TO ALL INTERESTED PARTIES AND TO WHOM IT MAY CONCERN:

Pursuant to a hearing before the Oil and Gas Conservation Commission on November 30, 2009, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver Colorado, the Oil and Gas Conservation Commission promulgated amendments to its Rules and Regulations as described below:

328.    MEASUREMENT OF OIL

g.         Sales Reconciliation.  In order to facilitate the resolution of questions regarding the payment of proceeds or sales reconciliation from a well, a payee may submit a Form 37 to the payer requesting additional information concerning the payee’s interest in the well, price of the oil sold, taxes applied to the sale of oil, differences in well production and well sales, and other information as described in § 34-60-118.5, C.R.S.  The payer shall return the completed form to the payee within sixty (60) days of receipt. Submittal of this form to the payer shall fulfill the requirement for “written request” described in § 34-60-118.5(2.5), C.R.S., and is a prerequisite to filing a complaint with the Commission.  The payer shall use its best efforts to consult in good faith with the payee to resolve disputes regarding payment of proceeds or sales reconciliation.

A Form 37 requesting information concerning payment of proceeds may be submitted by the payee at any time.  A Form 37 requesting information concerning sales volume reconciliation shall be submitted by the payee within one year of receipt of payment or the notification of a revised payment.  The Commission may act to prohibit or terminate any abuse of the reconciliation process, such as the submittal by a payee of multiple repeated requests for sales volume reconciliation regarding the same well.  Such action by the Commission may include, but is not limited to, relieving the payer from its obligation to answer the request and limiting or prohibiting the payee’s submittal of additional requests.

329.    MEASUREMENT OF GAS

e.         Sales Reconciliation.  In order to facilitate the resolution of questions regarding the payment of proceeds or sales reconciliation from a well, a payee may submit a Form 37 to the payer requesting additional information concerning the payee’s interest in the well, price of the gas sold, taxes applied to the sale of gas, differences in well production and well sales, and other information as described in § 34-60-118.5, C.R.S.  The payer shall return the completed form to the payee within sixty (60) days of receipt. Submittal of this form to the payer shall fulfill the requirement for “written request” described in § 34-60-118.5(2.5), C.R.S., and is a prerequisite to filing a complaint with the Commission.  The payer shall use its best efforts to consult in good faith with the payee to resolve disputes regarding payment of proceeds or sales reconciliation.

A Form 37 requesting information concerning payment of proceeds may be submitted by the payee at any time.  A Form 37 requesting information concerning sales volume reconciliation shall be submitted by the payee within one year of receipt of payment or the notification of a revised payment.  The Commission may act to prohibit or terminate any abuse of the reconciliation process, such as the submittal by a payee of multiple repeated requests for sales volume reconciliation regarding the same well.  Such action by the Commission may include, but is not limited to, relieving the payer from its obligation to answer the request and limiting or prohibiting the payee’s submittal of additional requests.

Exhibit A, attached and incorporated by this reference, is a statement giving the basis, statutory authority, and purpose for the revisions. 

          DONE AND PERFORMED by the Oil and Gas Conservation Commission of the State of Colorado this                        day of December, 2009.

                                                            IN THE NAME OF THE COLORADO

                                                            OIL AND GAS CONSERVATION COMMISSION

                                                            OF THE STATE OF COLORADO

                                                                        By                                                                  

                                                                                    Carol Harmon, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

December 16, 2009

Exhibit A

Statement of Basis, Specific Statutory Authority, and Purpose

Amendments to Rule 328. and Rule 329. of the

Colorado Oil and Gas Conservation Commission, 2 CCR 404-1

In 2007, the Colorado General Assembly enacted HB 07-1180 concerning accurate oil and gas measurement at the wellhead.  The Colorado Oil and Gas Conservation Commission (Commission or COGCC) amended its Rules and Regulations and Rules of Practice and Procedure (Rules) in December 2008 but deferred amendment of the Rules to carry out the mandate of HB 07-1180.  At the time of the December 2008 rulemaking, Rule 328.g. and Rule 329.e. were “reserved” in anticipation of future rulemaking.

The COGCC initiated a stakeholder process on sales reconciliation in May 2009, after adopting new rules for engineering standards as required by HB 07-1180.  Draft language of the new rules was developed as part of the stakeholder process. 

The rulemaking hearing to consider these amendments to Rules 328. and 329. was held on November 30, 2009 (testimony and deliberations).  These amendments become effective 20 days after publication in the Colorado Register.

Statutory Authority

The statutory authority for these additions to 2 CCR 404-1 is provided by §24-4-103, §34-60-105(1), §§34-60-106(1)(g), (1)(j), and (11)(b)(II), §34-60-108, and §34-60-118.5, C.R.S. (2009). 

Basis and Purpose

Pursuant to HB 07-1180, codified at C.R.S. §34-60-106(11)(b)(II), the Commission was required to promulgate rules “to ensure the accuracy of oil and gas production reporting by establishing standards for wellhead oil and gas measurement and reporting.  At a minimum, the rules shall address engineering standards, heating value, specific gravity, pressure, temperature, meter certification and calibration, and methodology for sales reconciliation to wellhead meters.” 

On April 1, 2008, effective on May 30, 2008, the COGCC adopted revisions to Rule 328., Measurement of Oil, and Rule 329., Measurement of Gas, that addressed the aspects of HB 07-1180 related to engineering standards.  The revisions on November 30, 2009 addressed the methodology for sales reconciliation required by HB 07-1180.

The additions of subpart 328.g. and subpart 329.e. meet the legislative mandate to ensure the accuracy of oil and gas production reporting by setting forth a process for sales reconciliation to wellhead meters.  By doing so, oil and gas is measured in a consistent manner, and royalty owners have a consistent system in place for calculating the amount of royalties they are due. 

These rules also provide a procedure for facilitating the resolution of questions regarding the payment of proceeds or sales reconciliation from a well. These revisions provide a standard form, Form 37, that payees can use to obtain information from payers regarding sales volume reconciliation.

Accordingly, the Commission amended Rule 328. and Rule 329. as described above.