REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on April 26, 1999, at 8:30 a.m. in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing, as required by law on the application of Ellora Energy, LLC, for an order to allow an additional well to be drilled and completed at 1320 feet FNL and 1400 feet FEL in the NE1/4 of Section 16, Township 23 South, Range 48 West, 6th P.M., for production of gas and as sociated hydrocarbons from the Morrow Formation, for the 640-acre drilling and spacing unit consisting of said Section 16.

FINDINGS

The Commission finds as follows:

1. Ellora Energy, LLC as applicant herein, is an interested party in the subject matter of the above-referenced hearing.

2. Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

3. The Commission has jurisdiction over the subject matter embraced in said Notice, and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.

4. On August 21, 1973, the Commission authorized Order No. 271-1 to be issued, establishing 640-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Morrow Formation underlying certain lands in Wagon Trail Field, Bent County, Colorado, including Section 16, Township 23 South, Range 48 West, 6th P.M. with the units to consist of a governmental section, and the permitted well to be located no closer than 1320 feet to the boundaries of the section upon which it is located.

5. On September 8, 1998, Ellora Energy, LLC, by its attorney, filed with the Commission a verified application for an order to allow an additional well to be drilled and completed at 1320 feet FNL and 1400 feet FEL in the NE1/4 of Section 16, Township 23 South, Range 48 West, 6th P.M., for production of gas and associated hydrocarbons from the Morrow Formation, for the 640-acre drilling and spacing unit consisting of said Section 16.

6. The Sniff-Huber No. 1 Well located in center of the NW1/4 of Section 16, Township 23 South, Range 48 West, 6th P.M. currently produces from the Morrow Formation for the 640-acre drilling and spacing unit consisting of Section 16.

7. Exhibits and testimony presented at the administrative hearing indicated the possible presence of a fault in the NE1/4 of Section 16 and the likelihood of a thicker Morrow Formation second Middle Pay at the proposed location for the additional well.

8. Exhibits and testimony presented at the administrative hearing indicated that the estimated ultimate recovery for Section 16 is approximately 3.2 BCF of natural gas. The Sniff-Huber No. 1 Well has an estimated ultimate recovery of approximately 2.0 BCF of natural gas, leaving an estimated 1.2 BCF of natural gas remaining in the 640-acre unit. An additional well is necessary to recover these remaining gas reserves.

9. Exhibits and testimony presented at the administrative hearing indicated that one well would not efficiently and economically drain the 640-acres drilling and spacing unit consisting of the NE1/4 of Section 16, Township 23 South, Range 48 West, 6th P.M., and that an additional well is necessary to prevent waste, protect correlative rights, and to recover remaining gas reserves from the Morrow Formation.

10. At the time of the administrative hearing, Ellora Energy, LLC agreed to be bound by oral order of the Commission.

11. Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommends approval, the Commission should enter an order allowing an additional well to be drilled in the NE1/4 of Section 16, Township 23 South, Range 48 West, 6th P.M. for the production of gas and associated hydrocarbons in the Morrow Formation.

ORDER

NOW, THEREFORE IT IS ORDERED that Order No. 271-1 shall be amended to allow an additional well to be drilled and completed at 1320 feet FNL and 1400 feet FEL in the NE1/4 of Section 16, Township 23 South, Range 48 West 6th P.M., for production of gas and associated hydrocarbons from the Morrow Formation, for the 640-acre drilling and spacing unit consisting of said Section 16.

IT IS FURTHER ORDERED that the provisions contained in the above order shall become effective forthwith.

IT IS FURTHER ORDERED that the Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

ENTERED this day of May, as of April 26, 1999

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

Dated at Suite 801 1120 Lincoln Street Denver, Colorado 80203 May 7, 1999 ??