RECORD OF PROCEEDINGS

February 13, 2001

The Oil and Gas Conservation Commission met on February 13, 2001 at 8:00 a.m. at the Holiday Inn Trinidad, 3125 Toupal Drive, Trinidad, Colorado, for a hearing in Cause No. 1 (1 matter).

Those present were:

Steve Sonnenberg           Chair

Bruce Johnson                 Commissioner

Michael Klish                    Commissioner

Tom Ann Casey               Commissioner

Brian Cree                        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 January 2001 hearing.

Directorís Report: Director Griebling provided a written report and discussed the following:

Applications for Permit-to-Drill ("APDs") have dramatically increased due to high natural gas prices. Staff resources are currently being reorganized to address the increase in APDs. A short discussion took place regarding reallocating staff to process APDs and whether industry should assist in paying for additional employees to help process APDs.

The Town of Kersey is proposing new regulations for oil and gas operations in its boundaries. Deputy Director Macke made a presentation to Kersey officials to inform them of current COGCC regulations.

The Well Log Imaging Project has been started; it is expected that all logs will be scanned by the end of the current fiscal year.

Staff met with State Central Collections to discuss a more efficient and expedient way to collect unpaid penalties.

COGCC Environmental Specialist Loren Avis provided a brief overview of the Raton Basin Project and explained Phases I and V in detail.

Commissioner Cree stated he would like to see GIS information updated as soon as possible in order to assist the public. He would also like to see more operators participating in electronic levy reporting.

AGís Report: AAG Harmon discussed the following: An update on the five bills impacting the COGCC (the three DNR bills, the conflicts bill and the Leyden bill); the Colorado Oil and Gas Associationís language proposed to be added to APDs is consistent with the law and the exact wording will be drafted for review and possible adoption by the Commission at the March 2001 hearing.

Commissioner Comments: Commissioner Cree stated he finds it very helpful to have newspaper articles included in the monthly staff report. He is concerned that misinformation about the Commission is being reported - one article stated that five of the seven Commissioners are employed by the oil and gas industry when the actual number is three. Commissioner Johnson stated his concerns for increased well density in Yuma County in light of the irrigated lands and soil conditions. Chair Sonnenberg thanked Evergreen Operating Corporation for the previous dayís field tour and congratulated AAG Harmon on her recent wedding and Commissioner Casey on her Senate confirmation.

Ms. Beaver discussed the following: The reasons for holding the March 2001 hearing in Longmont; the outcome of the February 8, 2001 staff participation meeting; and Rule 508. changes to be docketed for the May 31-June 1, 2001 hearing.

Chair Sonnenberg proposed to work with AAG Harmon, Director Griebling and Ms. Beaver to draft proposed Rule 508. changes. Commissioner Johnson wants to limit staff abuse and unrelated comments at local public forums. Commissioner Phillips believes the comments made should be useful, not emotional. All Commissioners supported these guidelines.

Chair Sonnenberg suggested holding a Vice Chair election at the March 2001 hearing to fill the position Commissioner Skrabacz will be vacating upon his resignation from the Commission effective after the March hearing. Commissioner Cree announced he would be happy to assume the Vice Chair position and all Commissioners indicated their support for him.

Chair Sonnenberg invited Commissioner Cree to participate in the Rule 508. meetings and thanked the participants at the Commission reception held the previous night.

Public Comments: County Commissioner Kenneth Torres stated his concern for too high a well density in Las Animas County ("LAC") and asked if there were any proposals to increase density in the area. Mike Bessel, Madrid Canyon resident, explained the history of Evergreen Operating Corporationís operations on his lands in complimentary tones. Francis Cuckow, County Planning Commissioner, stated that LAC, with approximately 20,000 residents, benefits from oil and gas operations by the industryís employment of 400 to 500 people and royalties of approximately five million dollars ($5,000,000) a year. Commissioner Cuckow believes that if LAC can "de-Bruce" it can grow even more. Commissioner Torres mentioned that LAC will be proposing rules to further regulate the oil and gas industry in the area; these rules will be prepared by the County Attorney and then noticed for rule-making. Commissioner Johnson suggested that LAC officials work with the COGCC to foster a greater understanding of COGCC rules. Commissioner Phillips encouraged LAC to work with operators as well.

The hearing in Cause No. 254, Docket No. 0101-SP-02, request by Renegade Oil & Gas Company to re-establish 320-acre drilling and spacing units for certain lands in Township 2 South, Range 62 West, 6th P.M. and to suspend J Sand production from the Habel #A-2 Well, has been continued to the April 2001 hearing.

A hearing was held in Cause No. 1, Docket No. 0102-RM-01, rule-making to amend Rule 310A. to reduce the Conservation Mill Levy to zero in order to maintain a fund balance of one million dollars ($1,000,000). A proposal was made to not require the second two quarters of the levy to be paid and if the severance tax funding doesnít come through, then the levy may be reenacted. A motion was made and unanimously approved to adopt the changes to Rule 310A.

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

Cause No. 105, Docket No. 0102-AW-03, request by Louis Dreyfus Natural Gas Corporation for an order allowing a second well to be drilled on the 640-acre drilling unit consisting of Section 32, Township 20 South, Range 48 West, 6th P.M. for production of oil and associated hydrocarbons from the McClave Sand.

Cause No. 331, Docket No. 0101-AW-02, request by Rosewood Resources, Inc. for an order permitting an optional second well on certain 160-acre spacing units in Sections 7, 8, 9, 10, 14, 15, 22 & 23, Township 3 North, Range 46 West, 6th P.M. for production of gas from the Niobrara Formation.

Cause No. 1, Docket No. 0012-GA-08, request to approve an Administrative Order by Consent requiring K.P. Kauffman Company to provide the Commission with an additional one hundred thousand dollars ($100,000) of financial assurance due to an excessive number of non-producing and uneconomic wells, to update Commission staff every six (6) months on the status of these wells and to either reestablish production, perform mechanical integrity tests or plug and abandon fifty (50) of the inactive wells.

The meeting adjourned at 10:20 a.m. to go into Executive Session. In Executive Session, a discussion was held on Mark Martin Livelyís appeal of Order No. 521-1 and of a possible appeal of Order No. 1V-204 by Allen Oil and Gas. A decision was made to schedule Allen Oil and Gas for a Pattern of Violations Hearing in April 2001.

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The Secretary was therefore authorized to issue the following orders:

Order No. 1R-89, Statewide: Amends Rule 310A. to reduce the Conservation Mill Levy to zero in order to maintain a fund balance of one million dollars ($1,000,000).

Order No. 1V-207, Longbranch Field, Adams County: Approves the Administrative Order by Consent requiring K.P. Kauffman Company to provide the Commission with an additional one hundred thousand dollars ($100,000) of financial assurance due to an excessive number of non-producing and uneconomic wells, to update Commission staff every six (6) months on the status of these wells and to either reestablish production, perform mechanical integrity tests or plug and abandon fifty (50) of the inactive wells.

Order No. 105-41, McClave Field, Kiowa County: Approves the request for an order allowing a second well to be drilled on the 640-acre drilling unit consisting of Section 32, Township 20 South, Range 48 West, 6th P.M. for production of oil and associated hydrocarbons from the McClave Sand.

Order No. 331-6, Buckboard Field, Yuma County: Approves the request for an order permitting an optional second well on certain 160-acre spacing units in Sections 7, 8, 9, 10, 14, 15, 22 and 23, Township 3 North, Range 46 West, 6th P.M. for production of gas from the Niobrara Formation.

Signed:

Patricia C. Beaver, Secretary

 

Approved:

Stephen Sonnenberg, Chair