BEFORE THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE IGNACIO-BLANCO FIELD, LA PLATA COUNTY, COLORADO	) ) ) )	CAUSE NO.   112 ORDER NO.   112-170

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on December 1, 2003 at 10:00 a.m. in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado on the application of CDX Rockies, LLC for an order to allow the drilling of the Secord 17U-34-6 #1 Well, a horizontal production well to be located in the NW¼ SW¼ of Section 17U, Township 34 North, Range 6 West, (S.U.L.), N.M.P.M. with horizontal production legs that extend no closer than 660 feet from the exterior boundaries of the section and the Secord 17U-34-6 #1X Well, a service well to also be located in the NW¼ SW¼ of Section 17U, Township 34 North, Range 6 West, (S.U.L.), N.M.P.M.

FINDINGS

            The Commission finds as follows:

1.   CDX Rockies, LLC (“CDX”), 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 pursuant to the Oil and Gas Conservation Act and the terms of the Memorandum of Understanding (“MOU”) between the Commission and the Bureau of Land Management (“BLM”).

            4.  On June 15, 1988, the Commission issued Order No. 112-60 which established 320-acre drilling and spacing units for the production of gas from the Fruitland coal seams, underlying certain lands in the Ignacio-Blanco Field, with the units to consist of a governmental half section and the permitted well when north of the north line of Township 32 North to be located in the NW¼ and the SE¼ of each section and when south of the north line of Township 32 North to be located in the NE¼ and SW¼ of each section, no closer than 990 feet from the boundaries of the quarter section, nor closer than 130 feet to any interior quarter section line.  Order Nos. 112-61 and 112-85 were subsequently adopted amending Order No. 112-60 to establish additional field rules for the Fruitland coal seams.

            5.  On October 14, 2003, CDX Rockies, LLC (“CDX”), by its attorney, filed with the Commission a verified Application for an order to allow the drilling of the Secord 17U-34-6 #1 Well, a horizontal production well to be located in the NW¼ SW¼ of Section 17U, Township 34 North, Range 6 West, (S.U.L.), N.M.P.M. with horizontal production legs that extend no closer than 660 feet from the exterior boundaries of the section and the Secord 17U-34-6 #1X Well, a service well to also be located in the NW¼ SW¼ of Section 17U, Township 34 North, Range 6 West, (S.U.L.), N.M.P.M.  The production well is expected to produce from two (2) existing 320-acre drilling and spacing units for the Fruitland coal seams and therefore CDX is also seeking an exception to allow the horizontal production legs to encroach upon the interior quarter section lines.  In addition, CDX will secure a communitization agreement covering all of Section 17U, however, if unsuccessful, CDX requests that Section 17U be designated as one 640-acre drilling and spacing unit.

            6.  Testimony and exhibits presented at the administrative hearing indicated that CDX owns 100% of the leasehold in Section 17U through a farmout from BP America, 600 acres of which are BLM lands and 40 acres where the drillsite is located which are fee lands.

            7.  Testimony and exhibits presented at the administrative hearing showed Section 17U with the drilling pattern proposed for both the service well and the producing well, indicating that both wells, which will be located 120 feet apart, will fit on the existing well pad and surface disturbance will be minimized.  Additional testimony and exhibits showed waiver letters signed by BP America and the Bureau of Land Management (“BLM”) agreeing to the proposed exception location.

            8.  Testimony and exhibits presented at the administrative hearing indicated that no additional cuts will be needed, that the wells can be drilled to protect public health, safety, welfare and the environment and that the nearest water well is one-half (½) mile away.  Additional testimony indicated that the BLM is in agreement with establishing a 640-acre communitization agreement for Section 17U and that four (4) of the five (5) signatures needed to execute the communitization agreement have been obtained, with the remaining signature forthcoming.

            9.  Testimony and exhibits presented at the administrative hearing showed current production and pressure data for the Penrose No. 1R Well both pre and post liner installation, indicating that the current production is 1800 MCFPD, with a bottom hole pressure of 900 p.s.i. and steadily decreasing water production.  Additional testimony indicated that based on data from other wells, one well located no closer than 600 feet from the boundaries of the 640-acre drilling and spacing unit could efficiently drain the Fruitland coal seams. 

            10.  Testimony and exhibits presented at the administrative hearing showed a type log from the Glaser No. 1 Well that was plugged and abandoned on the well pad proposed for the Secord wells, indicating that both the upper and lower intervals of the Fruitland coal seams are present although the lower interval is the initial target in the Secord 17U-34-6 #1 Well.

            11.  Testimony presented at the administrative hearing indicated that multilateral drilling has worked well in the Penrose and Anderson wells to drain the thin coals from the lower intervals of the Fruitland coal seams.  Additional testimony indicated that between forty percent (40%) and sixty percent (60%) of the gas in place should be recovered from the Secord 17U-34-6 #1 Well but that the well will not drain more than the 640-acre drilling and spacing unit consisting of Section 17U.

            12.  Testimony indicated that approval of the application would provide efficient and economic incremental gas recovery from the Fruitland Coal in the application lands, would prevent waste and would protect correlative rights.

13.  CDX Rockies, LLC agreed to be bound by oral order of the Commission.

            14.  Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommended approval, the Commission should enter an order allowing the drilling of the Secord 17U-34-6 #1 Well, a horizontal production well to be located in the NW¼ SW¼ of Section 17U, Township 34 North, Range 6 West, (S.U.L.), N.M.P.M. with horizontal production legs that extend no closer than 660 feet from the exterior boundaries of the section and the Secord 17U-34-6 #1X Well, a service well to also be located in the NW¼ SW¼ of Section 17U, Township 34 North, Range 6 West, (S.U.L.), N.M.P.M

ORDER

            NOW, THEREFORE IT IS ORDERED, that Order No. 112-60 is hereby amended to allow the drilling of the Secord 17U-34-6 #1 Well, a horizontal production well to be located in the NW¼ SW¼ of Section 17U, Township 34 North, Range 6 West, (S.U.L.), N.M.P.M. with horizontal production legs that extend no closer than 660 feet from the exterior boundaries of the section and the Secord 17U-34-6 #1X Well, a service well to also be located in the NW¼ SW¼ of Section 17U, Township 34 North, Range 6 West, (S.U.L.), N.M.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.

            IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date this order is mailed by the Commission.

            IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this order is not required prior to the filing for judicial review.

ENTERED this  day of December, as of December 1, 2003.

                                                    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

December 10, 2003