BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF A REQUEST TO INCREASE THE FINANCIAL         )                     CAUSE NO. 1

ASSURANCE REQUIREMENT FOR ALLEN OIL & GAS LLC BY            )

THE COLORADO OIL AND GAS CONSERVATION COMMISSION           )                     ORDER NO. 1-81

FOR OPERATIONS IN THE BUCK PEAK FIELD,                                         )

MOFFAT COUNTY, COLORADO                                                                     )

REPORT OF THE COMMISSION

                        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 to increase the financial assurance provided by Allen Oil & Gas LLC to the Commission to ensure the company is capable of fulfilling its financial obligations imposed by the Oil and Gas Conservation Act to operate five (5) wells in the Buck Peak Field.

FINDINGS

                        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, 6th 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, 6th 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.

                        6. On May 24, 1999, Allen, by its attorney, filed with the Commission a verified application for an order to amend Order No. 1V-170 to allow production of oil and gas from certain wells in the Tow Creek Field located in the NW¼ of Section 18, Township 6 North, Range 86 West, 6th P.M. The Application stated that Allen believed that two (2) and possibly as many as five (5) of the wells in the field could be produced economically in compliance with Commission rules. The Application acknowledged that Allen could not comply with the July 1, 1999, deadline for plugging the Tow Creek Field wells.

                        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. The Commission scheduled a hearing to consider the Director’s application to the Commission to call or foreclose on Allen’s Thirty Thousand Dollar ($30,000.00) blanket bond in order to plug, abandon and reclaim all wells operated by Allen in the Tow Creek Field. If the Commission entered an order to call Allen’s bond to conduct work in Tow Creek Field, Allen would no longer be properly bonded to ensure compliance with Commission rules and regulations in Buck Peak Field. Accordingly, the Director petitioned the Commission in accordance with Rule 702.a., for an increase in the financial assurance provided by Allen to the Commission to ensure the company is capable of fulfilling its financial obligations imposed by the Oil and Gas Conservation Act to operate five (5) wells in the Buck Peak Field located in Section 25, Township 6 North, Range 90 West, 6th P.M.

                        9. 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.

                        10. 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.

                        11. At the August 19-20, 1999 hearing, after Allen and COGCC staff presented testimony and exhibits, the Commission issued Order No. 1-79 which denied Allen’s request to Amend Order No. 1V-170. The Commission 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.

                        12. At the August 20, 1999 hearing, based upon the mutual agreement by COGCC staff and Allen, the Commission issued Order No. 1-80 which authorized 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 in Tow Creek Field, 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.

                        13. Subsequent to the issuance of Order No. 1-80, based on the mutual agreement of COGCC staff and Allen, the Commission determined that Allen should post financial assurance in the amount of Thirty Thousand dollars ($30,000), within ninety (90) days of the date the order is issued, to ensure the company is capable of fulfilling its financial obligations imposed by the Oil and Gas Conservation Act to operate wells in the Buck Peak Field.

ORDER

                        NOW, THEREFORE, IT IS ORDERED that Allen Oil & Gas LLC shall provide the Commission financial assurance in the amount of Thirty Thousand dollars ($30,000), within ninety (90) days of the date this order is issued, to ensure the company is capable of fulfilling its financial obligations imposed by the Oil and Gas Conservation Act to operate five (5) wells in the Buck Peak Field located in Section 25, Township 6 North, Range 90 West, 6th P.M.

                        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