BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF ALLEGED VIOLATIONS OF THE RULES ) CAUSE NO. 1V

AND REGULATIONS OF THE COLORADO OIL AND GAS )

CONSERVATION COMMISSION BY DECLAR OIL & GAS, INC., ) DOCKET NO. 0403-OV-19

WASHINGTON COUNTY, COLORADO )

NOTICE OF ADMINISTRATIVE ORDER BY CONSENT

TO ALL INTERESTED PARTIES AND TO WHOM IT MAY CONCERN:

In March of 1959, the Stites #1 Well located in the SW¼ SE¼ of Section 17, Township 1 South, Range 56 West, 6th P.M. was drilled and completed by Vaughey and Vaughey. On March 16, 1977, Colorado Oil and Gas Conservation Commission (“COGCC”) staff approved the Application for Permit to Use Earthen Pit, Form 15 submitted by Vaughey and Vaughey for the Stites #1 lease located in the NE¼ SE¼ of Section 17, Township 1 South, Range 56 West, 6th P.M.

On January 5, 1988, the COGCC approved the Certification of Clearance and/or Change of Operator, Form 10 from the Robert L. Hoss Trust to DeClar Oil & Gas, Inc. (“DeClar”) with an effective date of November 1, 1987. On June 14, 2000, the Stites #1 Well was plugged and abandoned by DeClar. On September 25, 2002, COGCC environmental staff conducted a field inspection. An open excavation and a cement base remained at the wellhead location. Concrete, piping and ancillary equipment remained at the tank battery location. A skim pit and two produced water pits were also present at the tank battery site. The skim pit contained oily fluid and oily soil was observed in both produced water pits. Additionally, an area of denuded cropland was observed east and northeast of the pits and appeared to be the result of historic discharges of produced water. Laboratory results of a representative sample from the denuded cropland indicated soil conditions that exceeded the COGCC Allowable Concentrations and Levels for Inorganics in Soils. On November 4, 2002, the COGCC received the Subsequent Report of Abandonment, Form 6 as per a request by COGCC staff. Rule 311 requires that the Form 6 be submitted within thirty (30) days after abandonment. Therefore, the Form 6 was submitted over two years after the required submittal date.

On November 11, 2002, a complaint (#200032539) was received from Mr. Jim Hett with Bittersweet Farms. Mr. Hett was concerned about the abandoned equipment at the site and reclamation requirements. On January 14, 2003, a Notice of Alleged Violation (“NOAV”) was issued to DeClar for incomplete reclamation of the location and for the produced water impacted soils. The NOAV cited Rule 324A.a., for failure to prevent significant adverse environmental impacts to air, water, soil, or biological resources and to prevent the unauthorized discharge or disposal of E&P waste; Rule 907.a.(1), for failure to ensure that E&P waste is properly stored, handled, transported, treated, recycled or disposed to prevent threatened or actual significant adverse environmental impacts; Rule 910.a., for exceeding the allowable concentrations for soil in Table 910-1; and, Rules 1004.a. and 1004.b., for failure to complete final reclamation of the location within three months on cropland. Corrective action included the removal of debris, piping and other ancillary equipment by February 15, 2003. Corrective action also included the requirement for DeClar to submit a Site Investigation and Remediation Workplan, Form 27 by February 15, 2003 for the pit closures and remediation of produced water impacted soils. Per returned receipt, the NOAV was accepted by DeClar on January 29, 2003.

On February 13, 2003, the COGCC received a Form 27 via facsimile as per the requirements of the NOAV. The workplan stated that laboratory results of collected soil samples were pending and would be submitted to the COGCC when received. On May 12, 2003, COGCC environmental staff conducted a field inspection of the subject site. Piping, concrete and ancillary equipment remained at the tank battery. The cement base and open excavation remained at the wellhead location. The skim pit and produced water pits remained open. On August 28, 2003, COGCC environmental staff sent a letter to DeClar stating that the Form 27 submitted on February 13, 2003 was inadequate and required a revised Form 27 to be submitted to the COGCC by September 30, 2003. The letter also indicated that sodium impacted soils would likely require soil amendments such as sulfur and/or gypsum.

On September 28, 2003, a revised Form 27 was received via facsimile by the COGCC. Also attached were laboratory results of two soil samples reportedly collected from the produced water pits. The soil samples were analyzed for sodium and for benzene, toluene, ethylbenzene, and xylenes (BTEX). There are no COGCC standards for sodium or BTEX in Table 910-1. Required analyses typically include Total Recoverable Petroleum Hydrocarbons (TRPH), Sodium Adsorption Ratio (SAR), Electrical Conductivity (EC) and pH. DeClar was verbally informed of the soil sampling requirements in prior telephone conversations. The workplan also stated that the pits had been previously backfilled on July 25, 2003 without prior COGCC approval. On December 30, 2003, COGCC staff conducted a field inspection of the subject location. The pits had been backfilled and the location ripped and re-graded. DeClar backfilled the pits without an approved Form 27. DeClar did not address the produced water impacted soils prior to ripping and re-grading the site. On January 16, 2004, COGCC environmental staff spoke by telephone with Jim Hett of Bittersweet Farms. According to Mr. Hett, there is little or no growth of the new wheat crop at the subject location.

On January 19, 2004, COGCC staff issued an Administrative Order by Consent (“AOC”) to DeClar Oil & Gas, Inc. for the violation of COGCC Rules 324A., 907.a., 910.a., 1004.a., and 1004.b. for failure to prevent significant adverse environmental impacts to air, water, soil, or biological resources, to prevent the unauthorized discharge or disposal of E&P waste, to ensure that E&P waste is properly stored, handled, transported, treated, recycled or disposed to prevent threatened or actual significant adverse environmental impacts, for exceeding the allowable concentrations for soil in Table 910-1 and for failure to complete final reclamation within three months for cropland at the former Stites #1 tank battery located in the NE¼ SE¼ of Section 17, Township 1 South, Range 56 West, 6th P.M. On January 30, 2004, DeClar Oil & Gas, Inc. agreed to and accepted the AOC, including the fine of One Thousand Dollars ($1,000).

NOTICE IS HEREBY GIVEN, that the Oil and Gas Conservation Commission of the State of Colorado, pursuant to the above, has scheduled the above-entitled matter for hearing on:

Date: Monday, March 15, 2004

Time: 10:00 a.m.

Place: Suite 801, The Chancery Building

1120 Lincoln Street

Denver, CO 80203

In accordance with the Americans with Disabilities Act, if any party requires special accommodations for this hearing as a result of a disability, please contact Audra Serlet at (303) 894-2100, extension 114, prior to the hearing and arrangements will be made.

Pursuant to said hearing in the above-entitled matter at the time and place aforesaid, or at any adjourned meeting, the Commission will enter such orders as it deems appropriate and necessary to protect public health, safety and welfare and to prevent the waste of oil and gas, either or both, in the operations of said field, and carry out the purposes of the statute.

In accordance with Rule 509., any interested party desiring to protest or to intervene should file with the Commission a written protest or a notice to intervene no later than March 1, 2004 briefly stating the basis of the protest or intervention. Such interested party shall, at the same time, serve a copy of the protest or notice to intervene to the person filing the application. An original and nine (9) copies shall be filed with the Commission.

IN THE NAME OF THE STATE OF COLORADO

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By_________________________________

Dated at Suite 801 Patricia C. Beaver, Secretary

1120 Lincoln Street

Denver, Colorado, 80203

February 12, 2004