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.   112-175

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on July 12, 2004 at 9:00 a.m., in Suite 801, 1120 Lincoln Street, Denver, Colorado on the application of BP America Production Company for an order to eliminate the production caps for nine (9) wells so that each well may produce in accordance with its capability.

FINDINGS

            The Commission finds as follows:

1.   BP America Production Company (“BP”), 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 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 underlying certain lands, including certain sections in Townships 33 and 34 North, Ranges 8 and 9 West, N.M.P.M., with the permitted well to be located in the center of the NW¼ and the SE¼ of the section and no closer than 900 feet from the boundaries of the quarter section upon which it is located, nor closer than 130 feet to any interior quarter section line.

            5.  On February 21, 1989, June 16, 1989, and August 21, 1989, the Commission issued Order Nos. 112-63 through 112-67 and 112-69 through 112-72 to set production caps for the Fruitland coal seams for nine (9) wells and provided that the production cap is subject to review and redetermination in the event that the spacing unit size of 320-acres established by Order No. 112-60 was amended or changed for the Simon Land and Cattle Company 27-1 Well, the Bellino Gas Unit No.1 Well, the Simon Land & Cattle Company 22-1 No.1 Well, the Barnes Gas Unit/B/Pla-6 No.1 Well, the Turner Securities Gas Unit/A/No. 1 Well, the Clovis Gas Unit/B/No.1 Well, the Clovis Gas Unit/A/No. 1 Well, the Mason, Arthur, Gas Unit/B/No. 1 Well and the Weaselskin Gas Unit No. 1 Well.  None of these wells have yet reached the production cap established in said Orders.

            6.  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 Townships 33 and 34 North, Ranges 8 and 9 West, N.M.P.M., with 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.

            7.  On May 24, 2004, BP America Production Company (“BP”), by its attorney, filed with the Commission a verified application for an order to eliminate the production caps for the Simon Land and Cattle Company 27-1 Well, the Bellino Gas Unit No.1 Well, the Simon Land & Cattle Company 22-1 No.1 Well, the Barnes Gas Unit/B/Pla-6 No.1 Well, the Turner Securities Gas Unit/A/No. 1 Well, the Clovis Gas Unit/B/No.1 Well, the Clovis Gas Unit/A/No. 1 Well, the Mason, Arthur, Gas Unit/B/No. 1 Well and the Weaselskin Gas Unit No. 1 Well so that each well may produce in accordance with its capability.  Eliminating the production caps will allow economic and efficient drainage of the remaining Fruitland coal seam reserves and will not adversely impact the correlative rights of any parties.  The drilling of unnecessary wells will be prevented and waste will be avoided in accordance with the Colorado statutes and the rules and regulations of this Commission.

            8.   Testimony and exhibits presented at the administrative hearing showed the 2003 status of production caps for wells under COGCC restriction indicating that none of the wells has reached its production cap.  Additional testimony showed that the nine (9) wells that are subject to the production caps were exception location wells for which waivers could not be obtained to allow the wells to be located at exceptions from the permitted location established in Order No. 112-60, and as such, the production caps were established as a precautionary measure.

            9.  Testimony and exhibits presented at the administrative hearing showed the location of each of the nine (9) wells and the encroached upon drilling and spacing units offsetting each well.  Additional testimony indicated that approximately two hundred and fifty (250) royalty owners and working interest owners were noticed on this application.  Although several inquiries were made on the application, no protests were received.

            10.  Testimony and exhibits presented at the administrative hearing showed that production from the nine (9) exception location wells does not differ from the production of the parent well offsets.  Additional testimony  indicated that the percent of the COGCC gas cap recovered ranges from 15.3% to 82.2%.

11.  Testimony and exhibits presented at the administrative hearing indicated that the elimination of the gas cap for the nine (9) wells will allow for the most economic and efficient production of the gas resource, while preventing waste and without harm to correlative rights.

12.  BP America Production Company agreed to be bound by oral order of the Commission.

            13.  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 eliminating the production caps for the nine (9) wells described herein so that each well may produce in accordance with its capability.

ORDER

NOW, THEREFORE IT IS ORDERED, that Order Nos. 112-63 through 112-67 and 112-69 through 112-72 are hereby amended to eliminate the production caps for the Simon Land and Cattle Company 27-1 Well, the Bellino Gas Unit No.1 Well, the Simon Land & Cattle Company 22-1 No.1 Well, the Barnes Gas Unit/B/Pla-6 No.1 Well, the Turner Securities Gas Unit/A/No. 1 Well, the Clovis Gas Unit/B/No.1 Well, the Clovis Gas Unit/A/No. 1 Well, the Mason, Arthur, Gas Unit/B/No. 1 Well and the Weaselskin Gas Unit No. 1 Well so that each well may produce in accordance with its capability.

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 July, as of July 12, 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

July 26, 2004