BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO

IN THE MATTER OF THE APPLICATION BY XTO ENERGY, PURSUANT TO C.R.S. § 34-60-116, TO AMEND ORDER NO. 112-138 BY ADOPTING A REVISED PLAN FOR THE DEVELOPMENT AND OPERATION OF THE FRUITLAND COAL SEAM FORMATION, IGNACIO-BLANCO FIELD, LA PLATA COUNTY, COLORADO

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CAUSE NO. 1

ORDER NO. 1-182 & 112-236

DOCKET NO. 1210-GA-15

REPORT OF THE COMMISSION

The Commission heard this matter on November 15, 2012, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to approve a revised plan of development for the production of oil, gas and associated hydrocarbons from the Fruitland Coal Seam Formation, Ignacio-Blanco Field, La Plata County, and for the development and operation therein.

FINDINGS

The Commission finds as follows:

1. XTO Energy, (“XTO” or “Applicant”), 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.

4. On June 17, 1988, the Commission approved Order No. 112-60 which, among other things, approved the Fruitland Coal Seam Formation as a separate source of supply, established 320-acre drilling and spacing units, and approved one well within each unit for the production of oil, gas and associated and development of the Fruitland Coal Seam Formation.

5. On August 15, 1988, the Commission approved Order No. 112-61 which, among other things, amended Order No. 112-60 and established additional field rules for the production of coalbed methane for the Fruitland Coal Seam Formation.

6. On November 24, 1997, the Commission approved Order No. 112-138, which, among other things, approved the request of J.M. Huber Corporation, to amend Order No. 112-61 to allow, at the discretion of the operator, an additional well in certain 320-acre drilling and spacing units in Townships 34 and 35 North, Range 8 West, N.M.P.M., for production from the Fruitland Coal Seam Formation, subject to presentation and approval of a Plan of Development (“Huber Development Plan”) to address health, safety and welfare issues. At the March 30, 1998 hearing, the plan of development was presented to and approved by the Commission as an adjunct to Order 112-138.

7. On July 31, 2012, XTO, by its attorneys, filed with the Commission pursuant to § 34-60-116 C.R.S., a verified application (“Application”) for an order to amend Order No. 112-138 by adopting a revised Plan of Development (“XTO Development Plan” or “Revised Plan”) for production from the Fruitland Coal Seam Formation. The XTO Energy Development Plan is attached as Exhibit 1.

8. On September 18, 2012, XTO, by its attorneys, filed with the Commission a written request to approve the Application based on the merits of the verified Application and supporting exhibits.

9. On Tuesday, September 18, 2012, COGCC Acting Environmental Manager, Karen Spray, was notified by the La Plata County Local Government Designee (“LGD”), Courtney Roseberry, that a local resident, Mr. Tim Blake (“Protestant”), had concerns regarding the Application. According to the LGD, Mr. Blake claimed that his water well was included in the previous water sampling program and that he was not appropriately notified of the October 1, 2012 hearing and had therefore missed the Protest/Intervention date (September 17, 2012) to submit a protest to the proposed actions.

10. On Friday, September 21, 2012, an XTO representative met with Mr. Blake and agreed to test his water well, and, as provided in this order, to include his water well on Attachment 1, a list of proposed domestic water wells to be tested under the revised plan, submitted with XTO’s Application (“Sampled Wells”). XTO stated Mr. Blake’s well was inadvertently left off Attachment 1, now incorporated into the XTO Energy Development Plan attached as Attachment 1.

11. On Friday, September 21, 2012, COGCC Hearing Officer, Roger Allbrandt, received a call from Mr. Blake. He believed the published Notice of Hearing in the Durango Herald was defective, because it was published on September 16, 2012 with a Protest/Intervention date of September 17, 2012. Mr. Blake felt this was unreasonable and would prohibit potentially interested parties from filing a Protest. The Hearing Officer notified Mr. Blake that the COGCC would continue to accept his Protest or a Rule 510 Statement.

12. On Monday, September 24, 2012, a protest was filed by Mr. Tim Blake by e-mail to the Hearing Officer. The protest was accepted by Hearings Unit Staff and a copy was provided to Ken Wonstolen, attorney for XTO. A prehearing conference was scheduled for Tuesday, September 25, 2012 to address Mr. Blake’s protest. Mr. Blake summarized his protest was, “based on the lack of adequate and minimal oversight by the COGCC relative to notification, inadequate notice response windows, and responsibility for publication accuracy.” Mr. Blake did not protest the proposed updates to the Revised Plan, attached to Order No. 112-138, but wanted assurance from XTO that previously sampled wells would continue to be tested, and that testing standards would not be less stringent under the Revised Plan.

13. On Tuesday, September 25, 2012 a prehearing conference (“PHC”) was held. XTO agreed: 1) to test Mr. Blake’s water well in the current round of sampling; 2) to include Mr. Blake’s domestic water well on Attachment 1, “Proposed Domestic Water Wells To Test” submitted with the Application; and 3) to include Mr. Blake as an interested party of well owners in future correspondence. Mr. Blake agreed to withdraw his Protest and have it recast as a Rule 510 Statement, to be provided to the Commission at the October 1, 2012 hearing with the XTO Application.

14. On Tuesday, September 25, 2012, Mr. Blake withdrew the Protest in this matter.

15. The above-referenced testimony and exhibits show that granting the Application will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of hydrocarbons, will not violate correlative rights, and will enhance protection of public health, safety, and welfare, including protection of the environment and wildlife resources.

16. XTO agreed to be bound by oral order of the Commission.

17. Based on the facts stated in the verified Application, having resolved all protests, and based on the Hearings Officer review of the Application under Rule 511., the Commission should enter an order to approve a revised plan of development for the production of oil, gas and associated hydrocarbons from the Fruitland Coal Seam Formation, Ignacio-Blanco Field, La Plata County, and for the development and operation therein.

ORDER

NOW, THEREFORE IT IS ORDERED, that Order No. 112-138, is hereby amended, to remove the Huber Development Plan, dated March 30, 1998.

IT IS FURTHER ORDERED, that the XTO Energy, Revised Plan of Development, dated November 15, 2012, is hereby approved by the Commission as an adjunct to Order 112-138.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective immediately.

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 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 November, 2012, as of November 15, 2012.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

Robert J. Frick, Secretary

XTO ENERGY

DEVELOPMENT PLAN

Townships 34 & 35 North,

Range 8 West,

N.M.P.M.

La Plata County, Colorado

Colorado Oil and Gas

Conservation Commission

Exhibit 1 to Order No. 1-182 & 112-236

Adjunct to Order No. 112-138

Dated: November 15, 2012

Respectfully submitted,

Kenneth A. Wonstolen

Beatty & Wozniak, P.C.

Attorney for XTO Energy

216 16th Street, Suite 1100

Denver, Colorado 80202

(303) 407-4499

kwonstolen@bwenergylaw.com

Approved November 26, 2012, as of November 15, 2012.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

Robert J. Frick, Secretary

Contents

I.......... Water Production Monitoring. 4

II......... Fruitland Coal Outcrop Monitoring in T35N, R8W... 5

III........ Domestic Water Well Monitoring. 7

IV....... Bradenhead Monitoring. 9

V........ Fruitland Coal Seam Pressure Monitoring Program.. 10

VI....... Emergency Preparedness Plan.. 11

VII...... Surface Considerations/Well Locations. 12

VIII..... Miscellaneous/General Provisions. 13

Proposed Changes to the J M HUBER DEVELOPMENT PLAN

Townships 34 & 35 North, Range 8 West, N.M.P.M.

XTO Energy (“XTO”) has submitted an application for an order revising and replacing the JM Huber Development Plan (“Development Plan”) approved by Colorado Oil and Gas Conservation Commission (“COGCC”) Order 112-138. This revision reflects the current rules promulgated by La Plata County and the COGCC (“Rules”). Each Section of the Development Plan has been updated to reflect the changes in subsequent Rules and the development of new technologies since its original adoption. This modification will enable XTO and the COGCC to be consistent in testing procedures and reporting requirements.

This Development Plan also incorporates by reference any future amendments or additions to local, State, or federal law that are applicable to the operations and activity in this Development Plan, with the intent that a new approval will not be required each time the law applicable to this plan changes.

I. Water Production Monitoring

XTO currently submits the Operators Monthly Production Report for all wells and complies with COGCC Rule 309. Gas and water production data for XTO operated wells can be found on the COGCC website.

XTO will also comply with any applicable regulations set by Colorado’s Office of the State Engineer.

II. Fruitland Coal Outcrop Monitoring in Township 35 North, Range 8 West

XTO has contracted with LT Environmental, Inc. (“LTE”) to conduct annual monitoring of the Fruitland Formation (“Kf”) outcrop. The Kf outcrop monitoring conducted by LTE will consist of the following tasks:

1) Conduct annual detailed seep mapping at active seep areas along the Kf outcrop utilizing a portable flux meter capable of detecting methane, carbon dioxide, and hydrogen sulfide or carbon monoxide. The four active seep areas as of December 2011 include the following:

· Basin Creek to Carbon Junction (subdivided into Basin Creek, Basin Creek North, and Carbon Junction);

· Florida River;

· Vosburg Pike; and

· South Fork Texas Creek (“SFTC”) to Pine River (subdivided into West SFTC, Central SFTC, East SFTC; BP Highlands, and Pine River).

Additional annual detailed mapping will be conducted in newly identified methane seep areas through regional reconnaissance surveys (as described below in Task 2) or through visual observations of stressed/dead vegetation by LTE personnel and/or landowners.

2) Conduct regional reconnaissance surveys every three (3) years utilizing infrared (“IR”) imagery and field verification surveys. IR imagery is acquired and used to assist in the regional reconnaissance monitoring of the Kf outcrop to identify areas of stressed/dead vegetation as an indicator of potential methane seepage between detailed mapping areas. These areas, known as “suspect areas,” are defined as areas observed within the IR imagery that reflect color anomalies when compared to the surrounding areas. Field verification surveys will accompany the identification of suspect areas to verify the presence or absence of methane. In the event methane is detected in any of the suspect areas, detailed mapping of those areas will be conducted during the subsequent annual monitoring event.

3) Conduct annual detailed seep mapping surrounding abandoned production wells Baird 1-25 (API #05-067-06568) and Federal 34-1/2-34-1 (API #05-067-07514) and shut-in production well Pole Barn Monitor Well #1 (API #05-067-07969) utilizing a portable flux meter capable of detecting methane, carbon dioxide, and hydrogen sulfide or carbon monoxide. Detailed mapping will be conducted in a similar manner as the detailed seep mapping in the active seep areas.

4) Conduct annual natural spring monitoring during the spring runoff of those known and accessible natural springs within the Kf outcrop. At each accessible and flowing natural spring, LTE personnel will monitor for methane near the springs using the portable flux meter. When possible, an estimated water discharge rate will be measured using a graduated cylinder and stopwatch. Water quality measurements including pH, electrical conductivity, and temperature will be collected at each accessible and flowing natural spring. In addition to collecting field water quality measurements, water samples will be collected and submitted to an analytical laboratory for general water chemistry (major ions, total dissolved solids and pH) and dissolved methane analyses.

5) Annual Kf outcrop monitoring data will be provided to the COGCC Director and La Plata County by XTO or its contractor.

All work will be performed on behalf of and coordinated with Chevron, BP, and XTO, the majority lease holders near the Kf outcrop.

III. Domestic Water Well Monitoring

During 2012 XTO tested those wells owned by the parties listed in Attachment I. In addition XTO shall conduct the following activities:

If a conventional gas well exists within one quarter (¼) mile of a proposed additional well, then the two (2) closest water wells within a one-half (½) mile radius shall be sampled ("water quality testing wells"). Ideally, if possible, the water wells selected should be on opposite sides of the existing conventional gas well not exceeding a one-half (½) mile radius. If water wells on opposite sides of the conventional gas well cannot be identified, then the two (2) closest wells within a one-half (½) mile radius shall be sampled. If two (2) or more conventional wells are located within one quarter (¼) mile of the proposed additional well, then the conventional well closest to a proposed additional well shall be used for selecting water wells for sampling.

If no conventional gas wells are located within a one quarter (¼) mile radius of the proposed additional well, then the selected water wells shall be within one quarter (¼) mile of the proposed additional well. In areas where two (2) or more water wells exist within one quarter (¼) mile of the proposed additional well, then the two (2) closest water wells shall be sampled. Ideally, if possible, the water wells selected should be on opposite sides of the proposed additional well. If water wells on opposite sides of the proposed additional well cannot be identified, then the two (2) closest wells within a one quarter (¼) mile radius shall be sampled. If two (2) water wells do not exist within a one quarter (¼) mile radius, then the closest single water well within either a one quarter (¼) mile radius or within a one-half (½) mile radius shall be selected.

If no water well is located within a one quarter (¼) mile radius area or if access is denied, a water well within one-half (½) mile of the proposed additional well shall be selected. If there are no water quality testing wells meeting the foregoing criteria, then sampling shall not be required. If the BLM or the COGCC have already acquired data on a water well within one quarter (¼) mile of the conventional well, but it is not the closest water well, it shall be given preference in selecting a water quality testing well.

The "initial baseline testing" described in this paragraph shall include all major cations and anions, TDS, iron and manganese, nutrients (nitrates, nitrites, selenium), dissolved methane, pH, presence of bacteria and specific conductance and field hydrogen sulfide.

If free gas or a methane concentration level greater than 2 mg/L is detected in a water quality testing well, compositional analysis and carbon isotopic analyses of methane carbon shall be performed to determine gas type (thermogenic, biogenic or an intermediate mix of both). If the testing results reveal biogenic gas, no further isotopic testing shall be done. If the carbon isotope test results in a thermogenic or intermediate mix signature, annual testing shall be performed thereafter and an action plan shall be drafted by the operator to determine the source of the gas. If the methane concentration level increases by more than 5 mg/L between sampling periods, or increases to more than 10 mg/L, an action plan shall be drafted to determine the source of the gas.

The initial baseline testing shall occur prior to the drilling of the proposed additional well. Within one (1) year after completion of the proposed additional well, a "post completion" test shall be performed for the same parameters above and repeated three (3) and six (6) years thereafter. If no significant changes from the baseline have been identified after the third test (the six year test), no further testing shall be required. Additional "post completion" test(s) may be required if changes in water quality are identified during follow-up testing. The Director may require further water well sampling at any time in response to complaints from water well owners.

Copies of all test results described above shall be provided to the COGCC, La Plata County or Archuleta County and the landowner where the water quality testing well is located within three (3) months of collecting the samples used for the test.

Plugged and Abandoned Wells. The operator shall attempt to identify all plugged and abandoned ("P&A") wells located within one quarter (¼) mile of a proposed additional well. Any P&A well within one quarter (¼) mile of a proposed additional well that is identified shall be assessed for risk taking into account cementing practices reported in the P&A. The operator shall notify the Director of the risk assessment of plugging procedures. The Director shall review the risk assessment and take appropriate action to pursue further investigation and remediation if warranted.

IV. Bradenhead Monitoring

Upon completion of any well, and on wells presently completed, the operator shall equip the bradenhead access to the annulus between the production and surface casing, as well as any intermediate casing, with approved fittings to allow safe and convenient determination of pressure and fluid flow. This rule shall apply to all wells, regardless of function, completed for CBM production or below the coal-bearing formation. All wells capable of production, injection, or observation shall be tested by the operator for pressure and flow, with results submitted to the Director on a bradenhead test report, Form 17, and to other applicable regulatory agencies. Bradenhead tests shall be performed on all wells on a biennial basis. Remedial requirements shall be determined by the appropriate regulatory agency. The bradenhead testing requirement shall not apply if the operator demonstrates to the satisfaction of the Director annular cement coverage greater than fifty (50) feet above the base of surface casing and zonal isolation is confirmed by reliable evidence such as a cement bond log or cementing ticket indicating that the height of cement coverage is fifty (50) feet above the base of the surface casing, and zonal isolation is confirmed by two consecutive bradenhead tests preceded by a minimum shut-in period of seven (7) days each.

The COGCC may direct soil gas testing on plugged and abandoned wells, if any, and on wells with bradenhead problems to be conducted by the Operator of record.

V. Fruitland Coal Seam Pressure Monitoring Program

XTO shall maintain the Marie Shields GU #A-1 (API # 05-067-06908), located at the SW/4NW/4 of Section 6, Township 34 North, Range 8 West, N.M.P.M. and the Huber Garcia #1-22 as pressure monitoring wells. There are also two additional monitoring wells that are maintained by the COGCC: the Palmer Ranch 1 (API# 05-067-09804) and the Fiddler 1, located at the NE/4NW/4 of Section 10, Township 35 North, Range 8 West, N.M.P.M. (API# 05-067-09803). Pressure monitoring data from the Marie Shields GU #A-1 and the Huber Garcia #1-22 shall be submitted to the COGCC annually.

VI. Emergency Preparedness Plan

XTO shall submit an updated Emergency Preparedness Plan to La Plata County annually as required by COGCC Order 112-156 and La Plata County Code Sections 90-51 and 90-52.

VII. Surface Considerations/Well Locations

XTO will comply with La Plata County revised oil and gas provisions (Chapter 90) adopted December 7, 2010, the terms of any applicable Memorandum of Understanding with La Plata County, COGCC Order 112-156, COGCC Rule 306 (a) and (c), as well as all other COGCC Rules effective May 1, 2009 for Federal lands, and April 1, 2009 for all other land, when submitting Applications for Permit to Drill.