BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE APPLICATION OF )

ENCANA OIL & GAS (USA) INC. FOR AN ) CAUSE NO. 311

ORDER ALLOWING ADDITIONAL WELLS IN )

CERTAIN DRILLING AND SPACING UNITS ) DOCKET NO. ____

COVERING THE MORAPOS-CASTLEGATE )

FORMATION IN THE DOUGLAS CREEK - )

SOUTH FIELD, RIO BLANCO COUNTY, )

COLORADO )

VERIFIED APPLICATION

COMES NOW, the Applicant, EnCana Oil & Gas (USA) Inc., by and through its attorneys, Poulson, Odell & Peterson, LLC, and makes application to the Oil and Gas Conservation Commission of the State of Colorado for an order to permit two wells to be drilled in existing drilling and spacing units established for the production of gas and associated hydrocarbons from the Morapos-Castlegate Formation in the Douglas Creek - South Field located in Rio Blanco County, Colorado. In support thereof, EnCana Oil & Gas (USA) Inc. states as follows:

Applicant is the owner of certain oil and gas leases and the operator of wells in the Morapos-Castlegate Formation in the Douglas Creek - South Field in Rio Blanco County, Colorado described as follows:

Township 4 South, Range 101 West, 6th P.M.

Section 5: All

Section 6: All

Township 4 South, Range 102 West, 6th P.M.

Section 11: W/2

These lands are referred to as the Application Lands.

In Cause No. 311, Order No. 311-5 entered September 16, 1981 as of August 17, 1981, the Oil and Gas Conservation Commission determined that the Morapos-Castlegate Formation constitutes a common source of supply of gas and associated hydrocarbons in the Application Lands, among other lands, and established drilling and spacing units for production of gas and associated hydrocarbons from the Morapos-Castlegate Formation. The order establishes spacing units of 160-acres consisting of a quarter-section of land according to the government survey for the production of gas and associated hydrocarbons from the Morapos-Castlegate Formation. The order provides that the permitted well for each unit should be located no closer than 900 feet from the boundaries of the quarter section on which it is located. The order also states that the existing wells should be considered the permitted wells for the units on which they are located; no existing wells are identified by name and location in the order.

III

In Cause No. 311, Order No. 311-6 entered September 28, 1993 as of September 20, 1993, the Oil and Gas Conservation Commission granted an exception to drill the SDC No. 21 Well at an exception location 677 feet from the south line and 1915 feet from the east line of Section 6, Township 4 South, Range 101 West, 6th P.M. for the production of gas and associated hydrocarbons from the Morapos-Castlegate Formation; and an exception to drill the SDC No. 24 Well at an exception location 963 feet from the north line and 603 feet from the west line of Section 6, Township 4 South, Range 101 West, 6th P.M. for the production of gas and associated hydrocarbons from the Morapos-Castlegate Formation. The order also grants exceptions to drill other wells at exception locations in drilling and spacing units not subject to this application.

In Cause No. 311, Order No. 311-7, the Oil and Gas Conservation Commission for the State of Colorado ordered that the permitted well locations established in Order No. 311-5 are repealed. Instead, in Order No. 311-7, the Commission requires that the provisions of Rule 316 of the Oil and gas Conservation Commission (now Rule 318) be adopted for permitted well locations in the Application Lands.

Subsequent operation of the producing wells in the Morapos-Castlegate Formation in the Application Lands has provided geological and engineering evidence to the effect that in the Application Lands one well will not efficiently and economically drain gas and associated hydrocarbons in the Morapos-Castlegate Formation in an area of 160 acres. Applicant requests that two wells be permitted to be completed and produced for gas and associated hydrocarbons in the Morapos-Castlegate Formation in each drilling and spacing unit in the Application Lands. Applicant alleges that two wells for gas and associated hydrocarbons in each such drilling and spacing unit will efficiently and economically drain the Morapos-Castlegate Formation; that each such drilling and spacing unit is not smaller than the maximum area that can be efficiently and economically drained by two wells in the Morapos-Castlegate Formation; and that the correlative rights of all parties will be protected by allowing two wells to be completed for gas and associated hydrocarbons in the Morapos-Castlegate Formation in each such drilling and spacing unit. Applicant also alleges that the additional well in each drilling and spacing unit may be drilled in a manner consistent with the protection of public health, safety, and welfare.

Cause No. 311, Order No. 311-5, as amended by Order No. 31107, provides that the permitted locations are to be determined in accordance with the provisions of Rule 316 of the Oil and Gas Conservation Commission; Rule 316 has been renumbered Rule 318. Applicant requests that any additional wells be located in accordance with the provisions of Rule 318 of the rules and regulations of the Oil and Gas Conservation Commission.

VII

The Application Lands include areas with substantial topographical relief. Applicant requests the Commission to authorize the Director, in his discretion and without further notice or hearing, to grant administrative exceptions to well locations for topographic reasons.

VIII

To prevent waste, to protect correlative rights, to insure the proper and efficient development of the Morapos-Castlegate Formation in the Application Lands, and to insure the greatest ultimate recovery of gas and associated hydrocarbon substances from the Morapos-Castlegate Formation in the Application Lands, Applicant requests that, after notice and hearing, as provided by law, the Commission issue its order providing that, at the option of the operator, two wells be allowed to be drilled and completed on each drilling and spacing unit in the Application Lands; that each existing well in the Application Lands be designated as one of the permitted wells in the spacing unit in which the well is located; that any additional wells be located in accordance with the provisions of Rule 318 of the rules and regulations of the Oil and Gas Conservation Commission; and that the Director be given the authority to grant, in his discretion and without further notice or hearing, administrative exceptions to permitted well locations for topographical reasons.

Applicant states that to the best of its information and belief Exhibit A attached hereto is the list of the names of "owners" in the Application Lands required to be notified in accordance with Commission Rule 507.

WHEREFORE, Applicant respectfully requests that this matter be set for hearing by the Commission; that notice hereof be given as required by law; and that upon hearing this Commission issue its order granting this Application as requested. Applicant further requests that the Commission in its order grant such other provisions as the Commission may find to be necessary or desirable in the cause.

DATED this 6th day of August, 2003.

Respectfully submitted,

ENCANA OIL & GAS (USA) INC.

BY:________________________________

Carleton L. Ekberg, Esq.

Poulson, Odell & Peterson, LLC

1775 Sherman Street, Suite 1400

Denver, Colorado 80203

(303) 861-4400

Applicant's Address:

EnCana Oil & Gas (USA) Inc.

950 17th Street

Suite 2600

Denver, Colorado 80202

VERIFICATION

STATE OF COLORADO )

) ss.

COUNTY OF DENVER )

_____________, ______________ of EnCana Oil & Gas (USA) Inc., upon oath, deposes and says that he has read the foregoing Verified Application before the Oil and Gas Conservation Commission of the State of Colorado, and states that the matters contained therein are true to the best of his knowledge and belief.

_________________________

Subscribed to and sworn to before me this _____ day of August, 2003 by ____________________, __________________ of EnCana Oil & Gas (USA) Inc.

My Commission expires: _________________________

Notary Public

______________________ Address__________________

_________________________

EXHIBIT A

ATTACHED TO VERIFIED APPLICATION OF

ENCANA OIL & GAS (USA) INC.

CAUSE NO. 311

Morapos-Castlegate FORMATION

RIO BLANCO COUNTY, COLORADO

Bureau of Land Management

2850 Youngfield Street

Lakewood, CO 80215

Tom Brown, Inc.

555 17th Street, Suite 1850

Denver, CO 80202-3918

Carbon Energy Corporation (USA)

1700 Broadway, Suite 1150

Denver, CO 80293

Maralex Resources, Inc.

621 17th Street, Suite 1125

Denver, CO 80293

A.J. Carter

6209 Hendrick, NE

Suite N

Albuquerque, NM 87710

National Fuel Corporation

7720 E. Belleview Avenue

Suite B-300

Englewood, CO 80111

Jeff Devere

Local Government Designee

555 Main Street

Meeker, CO 81641

Max B. Lewis

1001 Wasatch Towers

1235 E. 200 South Street

Salt Lake City, UT 84115

John R. Anderson

Carol Lee Hatch

1939 S. 300 West, Suite 200

Salt Lake City, UT 84115