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 RULISON FIELD, GARFIELD COUNTY, COLORADO	) ) ) )	CAUSE NO.   139  &  440 ORDER NO.   139-67  &  440-38

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 9:00 a.m. on November 27, 2006, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to increase the number of wells which can be optionally drilled into and produced from the Williams Fork and Iles Formations in the E½ of Section 16, Township 7 South, Range 95 West, 6^th P.M.

FINDINGS

The Commission finds as follows:

1.  EnCana Oil & Gas (USA), Inc. ("EnCana"), 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 April 20, 1990, the Commission issued Order No. 440-12, which among other things, removed the W½ of Section 10, and all of Sections 15 and 16, Township 7 South, Range 95 West, 6th P.M., from the provisions of Cause No. 139 and established 320-acre drilling and spacing units for production of gas and associated hydrocarbons from the Mesaverde Formation, with the permitted well to be located no closer than six hundred (600) feet to the outer boundaries of the drilling and spacing unit and no closer than one thousand two hundred (1,200) feet to any well or wells producing from the same formation, for the production of gas and associated hydrocarbons from the Mesaverde Formation. Subsequent orders defined the Williams Fork Formation within the Mesaverde Group and allowed additional wells, up to eight (8) per unit, to be drilled on the 320-acre units, with the permitted well to be located no closer than 400 feet from the boundaries of the unit and no closer than eight hundred (800) feet from another Williams Fork Formation well.

5.  On July 1, 1997, the Commission issued Order Nos. 139-31 and 440-18, which among other things, allowed up to eight (8) wells per 320-acre drilling and spacing unit for certain lands, including Section 16, Township 7 South, Range 95 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group.

6.  Rule 318a. of the Rules and Regulations of this Commission requires that wells drilled in excess of two thousand five hundred (2,500) feet in depth be located not less than six hundred (600) feet from any lease line, and located not less than one thousand two hundred (1,200) feet from any other producible or drilling oil or gas well when drilling to the same common source of supply.  Section 16, Township 7 South, Range 95 West, 6^th P.M. is subject to this rule for the Iles Formation.

7.  On September 5, 2006, EnCana Oil & Gas (USA ) Inc., by its attorney, filed with the Commission a verified application for an order to allow the equivalent of one (1) well per twenty (20) acres to be drilled in the E½ of Section 16, Township 7 South, Range 95 West, 6^th P.M. for production from the Williams Fork and Iles Formations.  That as to all future Williams Fork Formation or Iles Formation wells to be drilled upon the application lands, each well may be located anywhere downhole in the established drilling and spacing unit but no closer than two hundred (200) feet from the boundaries of the unit or any lease line, without exception being granted by the Director, and four hundred (400) feet from any existing Williams Fork Formation or Iles Formation wells absent exception granted by the Director.

8.  On November 7, 2006, EnCana, by its attorney, filed with the Commission a written request to approve the application based on the merits of the verified application and the supporting exhibits.  Sworn written testimony and exhibits were submitted in support of the application.

9.  Testimony and exhibits submitted in support of the application showed that EnCana is the majority Williams Fork Formation and Iles Formation leasehold owner in the application lands.

10.  Testimony and exhibits submitted in support of the application showed that the Williams Fork and Iles Formations are subsections of the Mesaverde Group.

11.  Testimony and exhibits submitted in support of the application showed that the estimated Williams Fork Formation reserves for the application lands vary from approximately eighty (80) to ninety (90) BCF per section and that the estimated Iles Formation reserves for the application lands vary from approximately twenty-five (25) to thirty (30) BCF per section.

12.  Testimony and exhibits presented at prior administrative hearings of which the Commission took administrative notice, showed that core data indicates the average porosity of the Iles Formation is six percent (6%) and the average permeability is 0.009 millidarcies.

13.  Testimony and exhibits presented at prior administrative hearings showed that hydraulically induced fractures will propagate in a northwest-southeast orientation, creating an elliptical northwest-southeast drainage pattern in the application area.

14.  Testimony and exhibits submitted in support of the application showed that current well density will not effectively drain the Williams Fork and Iles Formations. Additional testimony indicated that an average of approximately sixteen to twenty-one (16 to 21) acres are drained by one (1) well in the application area.

15.  Testimony and exhibits submitted in support of the application showed that increasing well density from 40 to 20 acres in the application area will increase the estimated ultimate recovery from 28.1 BCF per section to 41.7 BCF per section for the Williams Fork Formation, an incremental estimated ultimate recovery increase of 13.6 BCF per section.

16.  Testimony and exhibits submitted in support of the application showed that increasing well density from 640 to 20 acres in the application area will increase the estimated ultimate recovery from 0.35 BCF per section to 11.2 BCF per section for the Iles Formation, an incremental estimated ultimate recovery increase of 10.9 BCF per section. Additional testimony indicated that Iles Formation wells could not be economically drilled as "stand alone" wells and that Williams Fork Formation wells would be deepened to the Iles Formation.

17.       No protests to the application were filed with the Commission or the Applicant.

18.  EnCana Oil & Gas (USA) Inc. agreed to be bound by oral order of the Commission.

                        19.  Based on the facts stated in the verified application, having received no protests and based on the Hearing Officer review of the application under Rule 511.b., the Commission should enter an order allowing the equivalent of one (1) Williams Fork Formation and Iles Formation well per 20-acres.

ORDER

NOW, THEREFORE, IT IS ORDERED, that additional wells are hereby allowed to be optionally drilled into and produced from the Williams Fork and Iles Formations, for the E½ of Section 16, Township 7 South, Range 95 West, 6^th P.M., the equivalent of one (1) Williams Fork Formation and Iles Formation well per twenty (20) acres, or sixteen (16) wells for each 320-acre drilling and spacing unit, with each well located no closer than two hundred (200) feet from the boundaries of the unit and no closer than four hundred (400) feet from any existing Williams Fork Formation and Iles Formation well without exception being granted by the Director of the Oil and Gas Conservation Commission.

IT IS FURTHER ORDERED, that wells shall be drilled from the surface either vertically or directionally from no more than one (1) well pad located on a given quarter quarter section unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission, and that both the Williams Fork and Iles Formations shall be reached from a single wellbore, i.e., separate wells shall not be drilled to reach each formation.       

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, 2006, as of November 27, 2006.

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 11, 2006