RECORD OF PROCEEDINGS

                                                                                                                                                              August 13, 2001

The Oil and Gas Conservation Commission met on August 13^th at 10:00 a.m. in Suite 801, the Chancery Building, 1120 Lincoln Street, Denver, Colorado, for a hearing in Cause No. 1 (2 matters) and Cause No. 519 (1 matter).

Those present were:

Stephen Sonnenberg      Chair

Brian Cree                        Vice Chair

Tom Ann Casey               Commissioner

Bruce Johnson                 Commissioner

Michael Klish                    Commissioner

Abe Phillips                      Commissioner

Carol Harmon                   Assistant Attorney General

Richard Griebling             Director

Brian Macke                     Deputy Director

Patricia Beaver                Hearings Manager

The Commission unanimously approved the minutes from the July 2001 meeting.

Director’s Report: Director Griebling provided a written report and discussed the following: The number of permits approved to date has passed the number approved this time last year. The Northwest Oil and Gas Forum will be held at a different location this Thursday. The Outstanding Oil and Gas Operators Awards were presented at the COGA National Gas Conference. The COGCC appreciated having the opportunity to present the awards there. The well log imaging project is close to completion. The 2002-2003 budget requested 1 FTE and the reallocation of 1 position. The Local Government information program is now up and running. The Director granted two variances this past month. Director Griebling will follow up on Commissioner Casey’s comment to orient the GORT meetings toward education of the public, in light of industry’s request to reduce the number of meetings.

Executive Director’s Report: Ron Cattany, Deputy Director of Department of Natural Resources discussed the following: A new Assistant Director, Shane Henry, was hired last week. Previously, he was with Wayne Allard’s staff and Club 20. The Economic Report on how COGCC’s rules affect the oil & gas industry was finalized last week and executive summaries were distributed. These are also on the DNR website. The full report, about two hundred (200) pages long, will soon be available. The most significant impact is on small operators. Dept. of Energy held a field hearing in Denver last week and copies of Ron’s testimony on Strategic Review of the Dept. of Energy Oil & Gas Programs were provided to the Commissioners. Colorado’s latest economic figures including the oil and gas industry were also distributed. The state Auditor’s Office has finalized a performance audit on the COGCC that is positive. They made fourteen (14) recommendations that will be implemented. At 10 a.m., on September 11^th, Director Griebling, Deputy Director Macke and Chair Sonnenberg will join Ron to attend a meeting with the Legislative Audit Committee to discuss the report. There will be a meeting with OSPB at the end of August to discuss the final budget proposal. DNR has submitted a document proposing legislative issues for the next session to the Governor’s office and a reply is expected by the end of August as to the issues the governor’s office will support. John Marshall is the new Deputy Director of Information Systems at the Department of Natural Resources. Recently, land board articles, focusing on land sales issues, have been in the newspapers. DNR is in the process of filling the SLB Director position. Currently, DOW’s biggest issue is that of bears interacting with humans. Water levels are continually being monitored for potential flash floods. Local citizens have a major concern about sand and gravel mines along the Dolores River in southwest Colorado. Soon DNR will begin the search for a new Parks Director. The Division of Forestry report is now being translated into decision items or proposed legislation. Invitations for all Commissioners to meet with local DNR groups at the State Fair on August 24^th are forthcoming.

AAG’s Report: Assistant Attorney General Harmon distributed summaries of the Rogers v. Westerman case regarding royalty payments. Last month the Commissioners asked the AAG to review the pleading filed by COGA, Evergreen Operating and Vermejo Minerals against Las Animas County regarding conflicting rules between the federal and county regulations. AAG Harmon described specific county regulations that are also in conflict with COGCC regulations. Chair Sonnenberg asked AAG Harmon to review the timing for the filing of an amicus curie brief. At the July hearing, AAG Harmon was asked to review the Commissioners’ jurisdiction on preventing structures from encroaching on oil and gas wells. She reported that, in general, the Oil and Gas Conservation Act gives the Commissioners authority over all oil and gas operators. The AGO provided a positive opinion on the Commission’s rulemaking. At the September hearing, AAG Harmon will provide a memo on the Open Meetings Act and discuss how Executive Session meetings will be handled.

Commissioner Comments: Chair Sonnenberg thanked COGA for providing time at their conference for the presentation of the COGCC Outstanding Oil and Gas Operator Awards. Commissioners Phillips and Johnson stated that they believe getting the Commission involved in the issue of encroachment is very important.

Audience Comments: Ken Wonstolen, Colorado Oil and Gas Association ("COGA") thanked the Commissioners for attending the National Gas Conference. There were over one thousand (1000) people in attendance, including over four hundred (400) golfers. Ken remarked that he is looking forward to working with DNR’s Assistant Director Shane Henry. Overall, COGA was in agreement with the results from cost analysis study. COGA believes that the highest cost items are a benefit to the state, but doesn’t believe there is any basis for the criticism levied against the COGCC for being lenient on its regulations. COGA’s comments on Rogers v. Westerman are posted on its website. One defendant has filed for a rehearing before the Supreme Court. Timing on the Las Animas County matter is not clear, however, it is likely there will be an answer filed by mid to late September and the COGCC would not have to file until later. Another injunction has been issued in Weld County on HS Resources from a surface developer. A Special Legislative Session will convene on September 20^th and there may be one (1) or more bills related to surface development conflicts.

The hearing in Cause No. 1, Docket No. 0108-EX-03, Devon Energy Production Company request for an order allowing an exception location for a proposed well to be drilled to the Mesa Verde Formation was withdrawn.

The hearing in Cause No. 112, Docket No. 0107-UP-06, John G. Clancy’s request to pool his 5 acres into the E½ of Section 9, Township 34 North, Range 9 West, N.M.P.M. was continued pending settlement.

A hearing in Cause No. 1, Docket No. 0108-GA-06, Apache Canyon Gas, LLC. request for an order for payment from Evergreen Resources, Inc. for proceeds from the W½ SE¼ and NE¼ SE¼ of Section 27, Township 33 South, Range 66 West, 6^th P.M. was continued to the October, 2001 hearing.

A hearing in Cause No. 1, Docket No. 0108-EX-04, request by Prima Oil & Gas Company for an order allowing the drilling of the Eaton Cattle No. 19-21 Well at an exception location 282.9 feet from the north line and 2765.72 feet from the east line of Section 19, Township 4 North, Range 66 West, 6^th P.M. was continued to the October, 2001 hearing.

A hearing was held in Cause 1, Docket No. 0107-EX-02, Matrix Energy, LLC request for an order granting a variance pursuant to Rules 502. and 503. as to minimum setbacks from housing in a high density area. At the July hearing, the Commission denied the request for a variance and directed Matrix to seek a waiver and negotiate a safety plan with the Sharpes. Matrix obtained the required waiver and negotiated a safety plan. The Commission acknowledged that compliance with the Notice of Alleged Violation had been obtained and required Matrix to comply with the safety plan.

A hearing in Cause No. 1, Docket No. 0108-GA-07, Plainview Oil & Gas, Inc. request for an order to allow an extension of time to complete the drilling operations on the No. 1 MPIC 9-39 Well and request that no fines or penalties be levied for alleged violation for Rule 319.b.(3). Testimony was presented by Tony Carter, President and CEO of Plainview. Testimony and exhibits were presented by Dick Scheurer, attorney for Charles McKay, mineral owner and sworn witness. A 510. statement was made by Ken Wonstolen, COGA. After Commission deliberation, all Commissioners except Commissioner Cree voted to deny the request for an extension. In addition, the Commission ordered Plainview to plug, abandon and reclaim the well within thirty (30) days of the date the order is entered. Failure to perform this work will result in a bond claim with COGCC staff performing the work.

Consent Agenda: The Commission unanimously approved the consent agenda, which included the following:

Cause No. 1, Docket No. 0107-OV-09, request to approve an Administrative Order by Consent, finding Four Star Oil and Gas Company in violation of Rule 305 and 903, failure to notify the surface owner of pending recompletion, and obtain an approved pit permit prior to construction of special use pits for the Southern Ute Wells #27 and #28, assessing a fine of Four Thousand dollars ($4000).

The meeting adjourned at 3:05 p.m.

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The Secretary was therefore authorized to issue the following orders:

Order No. 519-2, Jefferson County: Denied the request by Plainview Oil and Gas, Inc. for an order to allow an extension of time to complete the drilling operations on the No. 1 MPIC 9-39 Well and required No. 1 MPIC 9-39 Well to be plugged, abandoned and reclaimed within thirty (30) days of the date the order was entered.

Order No. 1-96, Weld County: Denied the request by Matrix Energy, LLC for a variance to complete and produce the Kuettel #14-10 Well, located in the SW¼ SW¼ of Section 10, Township 5 North, Range 65 West, 6^th P.M. as waivers to the exception location were obtained.

Order No. 1V-216, La Plata County: Found Four Star Oil and Gas Company in violation of Rule 305., failure to notify the surface owner of pending recompletion and Rule 903., failure to obtain an approved pit permit prior to construction of special use pits for the Southern Ute #27 and #28 Wells, and assessed a fine of Two Thousand Dollars ($2000) per well for a total fine of Four Thousand Dollars ($4000).

Signed:

Patricia C. Beaver, Secretary

Approved:

Stephen Sonnenberg, Chair