BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF A REQUEST TO FORECLOSE ON OR                 )                         CAUSE NO. 1

INCREASE THE FINANCIAL ASSURANCE REQUIREMENT FOR       )

ALLEN OIL & GAS LLC BY THE COLORADO OIL AND GAS              )                         ORDER NO. 1-80

CONSERVATION COMMISSION FOR OPERATIONS IN THE                )

TOW CREEK FIELD, ROUTT COUNTY, COLORADO                             )

                        This cause came on for hearing before the Commission at 8:30 a.m. on August 20, 1999 in Suite 801, 1120 Lincoln Street, Denver, Colorado, on the Director’s application for an order calling or foreclosing on the Allen Oil & Gas LLC Thirty Thousand Dollar ($30,000) bond to plug, abandon and reclaim nine (9) wells located in the Tow Creek Field, Routt County, Colorado.

                        1. Allen Oil & Gas LLC ("Allen") is an interested party in the subject matter of the above-referenced hearing.

                        2. Planet Indemnity Company was provided notice of the above-referenced hearing and as the bonding company for Allen is an interested party in the subject matter.

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

                        4. 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.

                        5. On March 25,1999 the Commission issued Order No. 1V-170, finding Allen in violation of Rule 326.b., failure to pass a mechanical integrity test for the following six (6) wells located in the NW¼ of Section 18, Township 6 North, Range 86 West, 6^th P.M.: the Bradley #2, Bradley #3, Bradley #5, State #1, State #2 and the State #5; Rule Nos. 904. and 905. for the Bradley #4 Well and Rule Nos. 603.g., 906., 909.b.(2) and (5), and Rule No. 910. for the State #1 Well located in Section 18, Township 6 North, Range 86 West, 6^th P.M. ("Order No. IV-170"). Order No. IV-170 further ordered that Allen plug and abandon the Bradley #1, Bradley #2, Bradley #3, Bradley #4, Bradley #5, State #1, State #2, State #3 and the State #5 Wells no later than July 1, 1999. In addition, a fine of Twelve Thousand Dollars ($12,000.00) was assessed for the violations, payable within thirty (30) days from the date Order No. 1V-170 was issued. Order No. IV-170 further provided that the Cease and Desist Order No. 1C-2 entered by the Commission on January 21, 1999 as of January 14, 1999, shall remain in effect until Order No. IV-170 has been fully complied with by Allen Oil & Gas LLC.

                        7. As of June 10, 1999, Allen had not complied with Order No. 1V-170 to plug, abandon and reclaim all wells in the Tow Creek Field and as of May 24, 1999, Allen had acknowledged that it would not be able to comply with the July 1, 1999 deadline. In accordance with Rule 709., the Director made application to the Commission for an order calling or foreclosing on Allen Oil & Gas LLC’s Thirty Thousand dollar ($30,000.00) bond to plug, abandon and reclaim the above-described wells. COGCC staff has estimated plugging and reclamation costs in the Tow Creek Field at approximately One Hundred Thirteen Thousand Two Hundred Seventy Five dollars ($113,275.00). In the alternative, should the Commission amend Order No. 1V-170 to allow Allen to produce certain wells in the Tow Creek Field, the Director, in accordance with Rule 702.a., petitioned the Commission for an increase in the financial assurance provided by Allen to the Commission.

                        8. On July 7, 1999, pursuant to Rules 511. and 527. of the COGCC Rules and Regulations a prehearing conference was held with Allen and COGCC staff to determine the proposed order of proceedings before the Commission. A summary of the prehearing conference was prepared by Special Assistant Attorney General Bargell for the Commission and circulated for all parties’ approval on July 12, 1999.

                        9. On July 8, 1999, Allen, by its attorney, filed with the Commission a Request for Continuance to the August hearing. The continuance was granted and the hearing rescheduled for August 19-20, 1999.

                        10. At the August 19-20, 1999 hearing, after testimony and exhibits were presented by Allen and COGCC staff, the Commission issued Order No. 1-79 which denied Allen’s request to Amend Order No. 1V-170, found that Order No. 1V-170 remained a final and binding Order of the Commission. At the conclusion of the hearing on the application to amend Order No. IV-170, Allen and COGCC staff conferred to determine the status of Allen’s bonding requirements at the Tow Creek and Buck Peak Fields.

                        11. Based on the entry of Order No. IV-170 the Commission finds in accordance with Rule 709. that Allen can no longer fulfill its statutory obligation to plug, abandon and reclaim the wells located in the Tow Creek Field, and that the Commission should undertake the expenditure of funds and operations to remedy the situation.

                        12. Based upon the mutual agreement by COGCC staff and Allen, the Commission should authorize the COGCC staff to: 1) make a claim on Allen’s Thirty Thousand dollar ($30,000) bond to plug, abandon and reclaim the nine (9) wells described above, 2) use COGCC Environmental Response Funds as necessary to complete the plugging and abandonment and site reclamation for said wells where costs exceed the Thirty Thousand dollar ($30,000) bond amount, and 3) confiscate available equipment and tubulars for salvage per §34-60-124.(6).(c)., C.R.S.

                        IT IS FURTHER ORDERED, that to reduce the amount of Environmental Response Funds necessary to complete the plugging, abandonment and site reclamation for the above-listed wells, COGCC staff shall confiscate available equipment and tubulars for salvage per §34-60-124.(6).(c)., C.R.S.

                        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 September, 1999, as of August 20, 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

September 10, 1999