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.   112-173

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on May 24, 2004 at 1:00 p.m. in the Community Room at City Hall, 1000 10^th Street, Greeley, Colorado on the application of Four Star Oil & Gas Company, for an order amending Order Nos. 112-60 and 112-61, to allow an additional well to be drilled on the 320-acre drilling and spacing unit consisting of the S½ of Section 13, Township 33 North, Range 10 West, N.M.P.M., for the production of gas and associated hydrocarbons from the Fruitland coal seams.

FINDINGS

            The Commission finds as follows:

1.   Four Star Oil & Gas Company (“Four Star”), 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 July 11, 1988, the Commission issued Order No. 112-60, which established 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Fruitland coal seams for certain lands, including Section 13, Township 33 North, Range 10 West, N.M.P.M., with the permitted well located, when north of the north line of Township 32 North, in the NW¼ and the SE¼ of the section, and when south of the north line of Township 32 North, in the NE¼ and the SW¼ of the section and no closer than 990 feet to any outer boundary of the unit, nor closer than 130 feet to any interior quarter section line.

            5.  On May 15, 2000, the Commission issued Order No. 112-157, which allowed an optional additional well to be drilled for production of gas from the Fruitland Coal seams for certain lands, including certain sections in Township 33 North, Range 10 West, N.M.P.M., with the permitted well to be located in any undrilled quarter section, no closer than 990 feet from the boundaries of the quarter section, nor closer than 130 feet to any interior quarter section line.

            6.  On January 29, 2004, Four Star Oil & Gas Company (“Four Star”), by its attorney, filed with the Commission a verified application for an order to allow a second well to be drilled within an existing 320-acre drilling and spacing unit for the S½ of Section 13, Township 33 North, Range 10 West, N.M.P.M., for the production of gas and associated hydrocarbons from the Fruitland coal seams, with the permitted location to be in the SW¼, no closer that 990 feet to the outer boundary of the unit and no closer than 130 feet to any interior quarter section line.

            7. On March 2, 2004, Four Star, by its attorney, filed with the Commission a written request to continue this matter and the hearing was continued to the April hearing.

            8.  On April 5, 2004, the Colorado Oil and Gas Conservation Commission received a letter from the BLM on behalf of the Southern Ute Indian Tribe stating that the BLM could not support the application until other issues were resolved between the parties and the hearing was continued to May.

            9.  On May 13, 2004, the BLM submitted a letter in support of the application to the Commission, in accordance with the conditions of the Memorandum of Understanding between the BLM and the COGCC.

            10.  Testimony and exhibits presented at the administrative hearing indicated that Four Star is a jointly owned company between ChevronTexaco and Medicine Bow Energy Corporation, with ChevronTexaco acting as operator.  Additional testimony indicated that Four Star has 100% of the leasehold in the SW¼ and the W½ SE¼ and BP America Production Company has 100% of the leasehold in the E½ SE¼, all in the S½ of Section 13, and that the companies have entered into a joint operating agreement.  Further testimony and exhibits showed the location of lands previously approved for increased well density adjacent to the application lands.

            11.  Testimony and exhibits presented at the administrative hearing showed a uniform coal thickness and a gentle structure throughout the area, with no faults present.  Additional testimony and exhibits showed that the upper, intermediate and basal Fruitland coal seams are present throughout the area, including the application lands.

12.  Testimony and exhibits presented at the administrative hearing showed cumulative gas produced as of October 2003 by the parent well in the S½ of Section 13 as 11.3 BCF.  Additional testimony and exhibits showed cumulative water produced as of October 2003 by the parent well in the S½ of Section 13 as 310,000 barrels of water.

13.  Testimony and exhibits presented at the administrative hearing showed an estimated ultimate recovery from the S½ of Section 13 as of October 2003 at approximately 17.34 MCFG.  Additional testimony and exhibits showed a 17.5% decline for the parent well.  Further testimony and exhibits showed the estimated gas-in-place at approximately 20 BCF with an estimated recoverable methane gas at approximately 17.5 BCF. 

14.  Testimony and exhibits presented at the administrative hearing showed that approximately 1.9 BCFG will be recovered from an additional well in the unit that would not be recovered from the parent well, and that an additional well is economic with payout occurring in 15.1 months.  Additional 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.

15.  Four Star Oil & Gas Company agreed to be bound by oral order of the Commission.

            16.  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 amending Order Nos. 112-60 and 112-61 to allow an additional well to be drilled on the 320-acre drilling and spacing unit consisting of the S½ of Section 13, Township 33 North, Range 10 West, N.M.P.M., for the production of gas and associated hydrocarbons from the Fruitland coal seams. 

ORDER

NOW, THEREFORE IT IS ORDERED, that Order Nos. 112-60 and 112-61 are hereby amended to allow an additional well to be drilled on the 320-acre drilling and spacing unit consisting of the S½ of Section 13, Township 33 North, Range 10 West, N.M.P.M., for the production of gas and associated hydrocarbons from the Fruitland coal seams. 

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 June, as of May 24, 2004.

                                                    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

June 10, 2004