BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE BONDING REQUIREMENTS               )                    CAUSE NO. 1

OF THE RULES AND REGULATIONS FOR OIL AND GAS         )                    ORDER NO. 1-68

OPERATIONS IN LOGAN COUNTY, COLORADO                        )

                                                             REPORT OF THE COMMISSION

                        This cause came on for hearing before the Commission on April 21, 1997, 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 Argonex Company,  requesting a hearing for the purpose of waiving the bond requirements set forth pursuant to Rule No. 1001.c. for the Nelson No. 1-10 Well located in the NW¼SE¼ of Section 33, Township 11 North, Range 54 West, 6th P.M., and obtaining the release of the bond.  The well was plugged in October, 1996 and site restoration has occurred to the surface owner's satisfaction as indicated in a signed statement.

FINDINGS

                        The Commission finds as follows:

                        1.  Argonex Company (“Argonex”), 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.  Rule 1001.c. of the Rules and Regulations of the Colorado Oil and Gas Conservation Commission establish that compliance with Rules 1002., 1003., 1004.a., b., or c.(1), (2), or (3), shall not be required if the operator can demonstrate to the Director's or the Commission's satisfaction that compliance with such rules is not necessary to protect the public health, safety and welfare, including prevention of significant adverse environmental impacts, and that the operator has entered into an agreement with the surface owner regarding topsoil protection and reclamation of the land. 

                        5.  Rule 1001.c. further provides that prior to final reclamation approval as to a specific well, the operator shall either comply with the rules or obtain a variance under Rule 502.b.

                        6.  Mr. Earl Griffith appeared on behalf of Argonex pro se at the hearing and asked the Commission to release the Five Thousand Dollar ($5,000) certificate of deposit submitted to the Commission as financial assurance for Argonex’s compliance with statutory reclamation rules with respect to the Nelson No. 1-10 Well located in the NW¼SE¼ of Section 33 Township 11 North, Range 54 West, 6th P.M., Logan County, Colorado.

                        7.  At the hearing Mr. Griffith testified that Argonex plugged and abandoned the Nelson No.1-10 Well in October, 1996, and provided evidence that the COGCC approved Argonex’s Form 4 on or about January 27, 1997.  The Commission finds that the No. 1-10 Nelson Well has been plugged and abandoned. 

                        8.  At the hearing, Mr. Loren Avis, COGCC Environmental Specialist, testified that all surface equipment has been removed from the Nelson No. 1-10  Well drillsite, that the surface is nearly level, the disturbed area has not been reseeded, and no vegetation is present on the site.

                        9.  The Commission finds that on or about June 23, 1995, Jane H. Culver executed a Release of Damages Caused by Operations, in which Ms. Culver agreed to release Mr. Griffith from liability for damages associated with the “drilling and/or operating of a well known as the No. 1 Nelson located in approximately the NW/4SE/4 of 33, Township 11 North, Range 54 West, 6th P.M., Logan County, Colorado.”  (emphasis supplied).

                        10.  The Commission finds that on or about November 4, 1996, Mr. Jim Nelson executed a Memo of Statement, to advise the Commission that “Argonex Company LLC has cleaned up and restored the drillsite of the Nelson #1-10 to my satisfaction.”  (emphasis supplied).

                        11.  The Commission finds that, subject to verification as set forth below, Mr. Nelson is the brother of Jane Nelson, and further that Mr. Nelson manages the surface underlying the drillsite for the Nelson No. 1-10 Well for grazing purposes on his sister’s behalf.

                        12.  The Commission finds that different interpretations exist with respect to the requirements contained in Rule 1001.c. to obtain a surface owner’s waiver.  The Commission therefore considers Rule 1001.c., the surface agreements described above and their relationship to the financial assurance obligations under the specific circumstances of this case in order to properly dispose of the Argonex petition.

                        13.  Based on the existence of two separate agreements related to surface restoration executed by different individuals over one year apart, the Commission finds it appropriate, under the facts of this case,  to direct staff to confirm the surface owner’s concurrence with the memo executed by the surface tenant.

                        14.  Based on the various surface owner agreements and testimony presented at the hearing the Commission finds that it appropriate, under the facts of this case, to reduce the financial assurance provided for the Nelson No. 1-10 Well from Five Thousand Dollars ($5,000) to One Thousand Dollars ($1,000) while final restoration operations are conducted by Argonex.

                        15.   Based on the testimony presented and having received no protests, the Commission finds it appropriate to enter an order, upon confirmation by the actual landowner of concurrence with the Memo of Statement executed by Mr. Jim Nelson, that the existing Five Thousand Dollar ($5,000) plugging bond for the Nelson No. 1-10 Well located in the NW¼SE¼ in Section 33, Township 11 North, Range 54 West, 6th P.M., be reduced to One Thousand Dollars ($1,000) to cover costs for reseeding.  The One Thousand Dollar ($1,000) bond should remain in place until sufficient revegetation has occurred in accordance with Rule No. 1004.c.

                                                                                   ORDER

                        NOW, THEREFORE, IT IS ORDERED, that the plugging bond for the Nelson No. 1-10 Well located in the NW¼SE¼ in Section 33, Township 11 North, Range 54 West, 6th P.M. shall be released and a bond in the amount of One Thousand Dollars ($1,000) shall be posted to ensure proper reseeding of the location.

                        IT IS FURTHER ORDERED,  that the One Thousand Dollar ($1,000) bond shall remain in place until sufficient revegetation has occurred in accordance with Rule No. 1004.c.

                        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, 1997, as of April 21, 1997.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                               OF THE STATE OF COLORADO

                                                                        By                                                                         

                                                                             Patricia C. Beaver, Secretary

Dated in Suite 801

1120 Lincoln Street

Denver, Colorado 80203

May 12, 1997