BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

IN THE MATTER OF PAYMENT OF PROCEEDS IN            )                                   CAUSE NO. 1

THE ROGGEN FIELD, WELD COUNTY, COLORADO        )                                   ORDER NO. 1-97

 

 REPORT OF THE COMMISSION

 

            This cause came on for hearing before the Colorado Oil and Gas Conservation Commission on January 7. 2002 at 10:00 a.m. at the Greeley Recreation Center, Room 201, 651 10th Avenue, Greeley, Colorado after giving notice of hearing as required by law on the application of Bruce D. Reed for an order to be issued to determine and award proceeds and interest due the Applicant for production attributable to the overriding royalty interests due for certain wells from DJ Production Services Inc.

 

FINDINGS

 

            The Commission finds as follows:

 

            1.  Bruce D. Reed 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 July 1, 1990, through 34-60-118.5, C.R.S., the Colorado Oil and Gas Conservation Commission was given jurisdiction to determine several matters concerning the payment of proceeds derived from the sale of oil, gas or associated products from a well in Colorado including the following:

 

                        (a)  The date on which payment of proceeds is due a payee or payor under section (2) of the section;

 

                        (b)  The existence or nonexistence of an occurrence pursuant to subsection (3) of the section which would justifiably cause a delay in payment; and

 

                        (c)  The amount of the proceeds plus interest, if any, due a payee or payor.

 

            5.  On July 1, 1998, 34-60-118.5, C.R.S. was amended to require, among other things, the following:

 

                        (a)  Every payment of proceeds shall be accompanied by certain accounting information;

 

                        (b) Upon written request by the payee, the payor shall provide within sixty (60) days a written explanation of deductions and adjustments made; and

 

                        (c) Prior to hearing, the Commission shall determine if a bona fide dispute exists regarding the interpretation of a contract.

 

            6.  On November 19, 2001, Bruce D. Reed filed with the Commission an application, pursuant to 34-60-118.5, C.R.S., for an order to be issued to determine and award proceeds and interest due the Applicant for production attributable to the royalty interests due from DJ Production Services Inc. for the below-listed wells:

 

                     Name                                                                                Location

                Sargent Farms A #1-A Well                NW SE, Section 25, Township 2 North, Range 63 West, 6th P.M.

                Sargent Farms A #2-A Well                SE SE, Section 25, Township 2 North, Range 63 West, 6th P.M.

                Sargent Farms A #1-D Well                SE SW, Section 25, Township 2 North, Range 63 West, 6th P.M.

                Sargent Farms B #2-B Well                SE NE, Section 25, Township 2 North, Range 63 West, 6th P.M.

 

            7.  No protest was filed by DJ Production Services Inc. and no one representing DJ Production Services attended the hearing.  A representative from DJ Production Services Inc. contacted the Commission Hearings Manager just prior to the start of the hearing on January 7, 2002 to state that Mr. Jay Pape, President of DJ Production Services Inc. was unable to attend due to a back injury.  The representative was advised that the Commission planned to go forward and hear Mr. Reeds application.

 

            8.  At the time of the January hearing, Bruce D. Reed presented testimony and exhibits related to the oil and gas lease and the assignments and bills of sale covering the wells listed above in Finding No. 5.  Mr. Reed testified that he purchased the land and minerals on September 6, 2000, and has a fifteen percent (15%) royalty interest in the wells.  He further testified that no contract dispute exists between himself and DJ Production Services Inc.

 

            9.  Mr. Reed testified that his interpretation of a gas statement provided by Duke Energy Field Services indicates that the total amount paid to DJ Production Services Inc. for purchase of gas from the four (4) wells ranges for the period of time between September 1, 2000 through October 31, 2001 is between One Hundred thirty-four thousand six hundred eighty-six dollars and forty-six cents ($134,686.46) and One Hundred fifty-five thousand four hundred fifty-one dollars and eighty-three cents ($155.451.83).  Mr. Reed testified that he should be paid fifteen percent (15%) of the amount paid to DJ Production Services Inc. plus simple interest on the amount of the proceeds withheld in accordance with 34-60-118.5.(4), which interest shall be calculated from the date of each sale at a rate equal to two times the discount rate at the federal reserve bank of Kansas City as such rate existed on the first day of the calendar year or years in which proceeds were withheld.

 

            10.  Mr. Reed presented a copy of an invoice for publication of the legal notice of the hearing required under 34-60-108.(4) and testified that he had paid Eighty dollars and thirty-seven cents ($80.37) for the publication.

 

            11.  After deliberation the Commission ordered DJ Production Services Inc. to pay Bruce D. Reed fifteen percent (15%) of One Hundred thirty-four thousand six hundred eighty-six dollars and forty-six cents ($134,686.46), or Twenty Thousand two hundred two and ninety-seven cents ($20,202.97) plus interest due from September 1, 2000 through October 31, 2001, calculated in accordance with 34-60-118.5.(4), payable within thirty (30) days from the date the order is issued.  A fine of Two Thousand dollars ($2000) should be assessed against DJ Production Services Inc. for failure to pay Mr. Reed royalty payments from September 1, 2000 through October 31, 2001, payable to the Commission within thirty (30) days of the date this order is entered.  Should royalty payments not be made to Mr. Reed within thirty (30) days of the date this order is entered, a fine of One Thousand dollars ($1000) per day should be assessed against DJ Production Services Inc., payable to the Commission.  The Commission further found that DJ Production Services Inc. should reimburse Mr. Reed Eighty dollars and thirty-seven cents ($80.37) for the cost to publish the notice of hearing as required by 34-60-108.(4), C.R.S.  The Commission encourages DJ Production Services Inc. to transfer the responsibility of issuing royalty payments to Duke Energy Field Services to ensure that Mr. Reed is accurately and timely paid under 34-60-118.5.

 

ORDER

 

            NOW, THEREFORE IT IS ORDERED, that under the provisions of 34-60-118.5, C.R.S. DJ Production Services Inc. is hereby ordered to pay Bruce D. Twenty Thousand two hundred two and ninety-seven cents ($20,202.97) plus interest due from September 1, 2000 through October 31, 2001, calculated in accordance with 34-60-118.5.(4), and that payment shall occur within thirty (30) days from the date the order is entered.

 

IT IS FURTHER ORDERED, that a fine of Two Thousand dollars ($2000) should be assessed against DJ Production Services Inc. for failure to pay Mr. Reed royalty payments from September 1, 2000 through October 31, 2001, payable to the Commission within thirty (30) days of the date this order is entered.

 

            IT IS FURTHER ORDERED, that if DJ Production Services does not pay Mr. Reed within thirty (30) days of the date the order is entered, a fine of One Thousand dollars ($1000) per day shall be assessed against DJ Production Services Inc., payable to the Commission.

 

            IT IS FURTHER ORDERED, that DJ Production Services Inc. is hereby ordered to pay Mr. Reed Eighty dollars and thirty-seven cents ($80.37) for reimbursement of the cost to publish the notice of hearing as required by 34-60-108.(4), C.R.S.

 

            IT IS FURTHER ORDERED, that DJ Production Services Inc. is encouraged to transfer the responsibility of issuing royalty payments to Duke Energy Field Services to ensure that payment to Mr. Reed in accordance with 34-60-118.5. is accurately and timely.

 

            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/or all of the above orders.

 

            ENTERED this _________ day of January 2002, as of January 7, 2002.

 

                         IN THE NAME OF THE STATE OF COLORADO

 

                                                                        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

January 15, 2002