REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on February 19, 1992 at 8:30 a.m., in Room 101, State Education Building, 201 East Colfax Avenue, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of J-W Operating Company, for an order recommending the Niobrara Formation, underlying certain lands in Yuma County, Colorado as a "Tight Formation", pursuant to Section 107 (b) of the Natural Gas Policy Act of 1978 (15 U.S.C. 3317) and the regulations thereunder. The Applicant, having appeared in support of the application, and no one having appeared in opposition, and the Commission having heard the testimony and evidence presented;

The Commission finds as follows:

1. J-W Operating Company, 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 is the jurisdictional agency pursuant to the interim rules in Docket No. RM 79-76 of the Federal Energy Regulatory Commission, and has jurisdiction over the subject matter of application.

4. The area is an extension of the area in which the Niobrara Formation was recommended a "Tight Formation" by Order No. NG-4-1, approved by FERC by Order No. 137 on March 31, 1981. The additional lands are located northwest of the previously approved areas and are contiguous to the previously approved areas. At the time the order was approved, these additional lands in the Waverly Field were excluded from "tight formation" designation. Order No. 137 included the statement that "the exclusion of these three fields at this time does not preclude them from future designation if economic data should demonstrate that all or part of the excluded area cannot be further developed absent the incentive price. Exploration, production and development have been limited in the Waverly Field due to the lack of economic incentives over the past eleven (11) years since Order No. 137 was approved excluding these lan ds from the "tight formation" designation.

5. Geological testimony presented at the hearing indicates that the Niobrara Formation in the additional area is of the same characteristics as those in the previously approved areas as described in Order No. NG-4-1.

6. Engineering testimony presented at the hearing indicates that: a. The average in-situ gas permeability is not expected to exceed .1 millidarcy for the formations.

b. The stabilized production rate, against atmospheric pressure of wells completed from said Niobrara Formation, at the producing depths, without stimulation, is not expected to exceed a maximum allowable production rate defined by depth in Section 271.705 (b) (ii) for any completion location in said Niobrara Formation.

c. Hydrocarbons usually do not exist as liquid in said Niobrara Formation reservoirs, and no well is expected to produce more than five (5) barrels of crude oil per day.

7. Typical casing design of wells drilled in the area protects fresh water aquifers in the area as required by the rules and regulations of the Oil and Gas Conservation Commission of the State of Colorado.

8. In view of the above findings, all the criteria required by the Federal Energy Regulatory Commission pursuant to the rules in Docket No. 79-76 have been met; therefore, a recommendation should be made that the Niobrara Formation, underlying the area below described should be designated a "tight formation".

ORDER

NOW, THEREFORE, IT IS ORDERED, that the Colorado Oil and Gas Conservation Commission recommends that the Niobrara Formation, underlying the following described lands in Yuma County, Colorado, be designated a "Tight Formation" and incorporated in the list of "Tight Formations" as described pursuant to Rule 271.706 of the Federal Energy Regulatory Commission:

Township 3 North, Range 46 West, 6th P.M. Section 6: All

Township 4 North, Range 46 West, 6th P.M. Sections 8, 16, 17, 20, 21, 29 through 32: All

ENTERED this day of , 1992, as of February 19, 1992.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary Dated at Suite 380 1580 Logan Street Denver, Colorado 80203 March 6, 1992 ORDERS\NG-4-2

March 6, 1992

Ms. Janet Ardinger Division Director, NGPA Compliance Federal Energy Regulatory Commission 825 N. Capitol St., NE Washington, DC 20426

RE: Recommendation of the Niobrara Formation, Underlying Certain Lands in Yuma County, Colorado, as a "Tight Formation", Cause No. NG-4.

Dear Ms. Ardinger:

Enclosed you will find three (3) copies of the recommendation of the Colorado Oil and Gas Commission pursuant to Section 107(b) of the Natural Gas Policy Act of 1978 regarding the Niobrara Formation, underlying certain lands in Yuma County, Colorado.

For your convenience, a copy of the FERC Order No. 137 has also been included.

Also enclosed are two (2) sets of exhibits presented at the time of hearing, along with one set of transcripts from the hearing.

Should you have any questions, or desire additional data, please respond in writing. Please direct any correspondence to my attention at the above address.

Sincerely,

Patricia C. Beaver Technical Secretary

Enclosures

PCB/dah ORDERS\NG-4-2

IN THE MATTER OF DETERMINATION OF THE ) CAUSE NO. NG-4 NIOBRARA FORMATION, UNDERLYING CERTAIN ) LANDS IN YUMA COUNTY, COLORADO AS A ) ORDER NO. NG-4-2 "TIGHT FORMATION", PURSUANT TO REGULATIONS ) NGPA Section 107(b) OF THE FEDERAL ENERGY REGULATORY COMMISSION ) FERC Regulation 271.705

The Colorado Oil and Gas Conservation Commission is the designated jurisdictional agency under subpart (g) of Part 271 of Title 18, Code of Federal Regulations. Pursuant to Section 271.705 of the Federal Energy Regulatory Commission regulations, under Section 107(b) of the Natural Gas Policy Act, the jurisdictional agency herewith submits its recommendation, as per Order No. NG-4-2 that the Niobrara Formation, underlying certain lands in Yuma County, Co lorado, be designated as a "tight formation" and incorporated into the list of "Tight Formations" established under Section 271.706 of the regulations. Pursuant to the guidelines established under Section 271.705(b)(l)(i)(ii)(iii), and the contents prescribed by 271.705(c), the Colorado Oil and Gas Conservation Commission submits the following:

1. Geological and geographical description of the Niobrara Formation.

a. Commission Order No. NG-4-2.

2. Geologic and engineering data supporting the recommendation and the source of that data.

a. Transcript and exhibits from the public hearing held February 14, 1992.

3. A report to the extent to which existing state regulations will assure development of the recommended "tight formation" will not adversely affect any fresh water aquifers.

a. Colorado Oil and Gas Conservation Commission "Statement on Water Sand Protection".

b. A report from the State Engineer Water Resources Investigation section concerning water sand protection for the area has previously been submitted with NG-3-1 (Colo 1) and NG-29-1 (Colo 25).

c. State Rule No. 317.

4. Additional information.

a. Order Nos. 328-3 which established 160-acre drilling and spacing units for the Niobrara Formation in the area.

b. State Rule No. 318.

c. FERC Order No. 137

All geological and engineering testimonial evidence to support this recommendation has been received under oath. Copies of all documentary evidence received at the public hearing accompany this report. The requirements of 271.705(c) pursuant to 271.705(b)(l)(i)(ii)(iii) have now been met. The Oil and Gas Conservation Commission of the State of Colorado, therefore recommends, as per Order No. NG-4-2 that the Niobrara Formation be designated as a "Tight Formation", in the area as described in said order, and having made such recommendation concludes its responsibility in the premises has been discharged.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

BY Patricia C. Beaver, Secretary

March 6, 1992

attachments

PCB/dah ORDERS\NG-4-2

STATEMENT OF WATER SAND PROTECTION

CAUSE NO. NG-4

Typical casing design of wells drilled in the area protects fresh water aquifers in the area as required by the rules and regulations of the Oil and Gas Conservation Commission of the State of Colorado. A description of an idealized-type casing program, and/or cementing program which will be used in wells drilled for production in the Niobrara Formation, was presented at the hearing. This plan was reviewed by representatives of the Office of the State Engineer, Water Resources Investigation Branch. All aquifers above the Niobrara Formation will be behind pipe or protected by cement stage work, as required by State Rule No. 317, if these aquifers are below the shoe of the surface casing. State Rule No. 317 requires sufficient surface casing shall be run to reach a depth below all known or reasonably estimated utilizable fresh water levels. In areas where fresh water strata or zones are of such depth to make it impractical or uneconomical to set the full amount of surface casing necessary to cover or isolate all fresh water strata, the production string shall be stage cemented with a solid cement plug extending 50 feet below each fresh water strata to 50 feet above fresh water strata.

The Commission, therefore concludes that development of the recommended "tight formations" will not affect any fresh water aquifers that are, or are expected to be used as domestic, agricultural or other supplies. ??