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 ORDER NO.   139-81

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 9:00 a.m. on November 5, 2007, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to pool all nonconsenting interests in the 320-acre drilling and spacing unit consisting of the W½ of Section 20, Township 6 South, Range 93 West, 6th P.M., for the development and operation of the Williams Fork Formation.

FINDINGS

The Commission finds as follows:

1.  Laramie Energy II, LLC (“Laramie”), 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 July 16, 1979, the Commission issued Order No. 139-8, which among other things, established 320-acre drilling and spacing units for production of gas and associated hydrocarbons for the Mesaverde Formation (which includes the Williams Fork and Iles Formations of the Mesaverde Group) for certain lands, including the W½ of Section 20, Township 6 South, Range 93 West, 6th P.M.  On June 20, 2005, the Commission issued Order No. 139-47 which granted rights to drill 10-acre density Williams Fork Formation wells for certain lands, including the W½ of said Section 20. 

5.  On September 13, 2007, Laramie, by its attorney, filed with the Commission a verified application for an order to pool all nonconsenting interests in the 320-acre drilling and spacing unit consisting of the W½ of Section 20, Township 6 South, Range 93 West, 6th P.M., for the development and operation of the Williams Fork and Iles Formations.  Laramie plans to drill the Overcracker Federal 20-14D Well to be located in the SE¼ SW¼ of said Section 20.  Parties which own unleased mineral interests in the subject lands have been offered the opportunity to lease their mineral interests or to participate in the drilling of the subject well.  To date, one or more of such parties have either elected not to lease their interests, not to participate in drilling of the subject well or have not responded.  As to those parties which are lessees of lands within the drilling unit, such parties also have been offered the opportunity to participate in the drilling of the subject well.  To date, one or more of such parties have either elected not to participate in drilling or have not responded.

6.  On October 10, 2007, Laramie, by its attorney, filed with the Commission a written request to amend the application such that the request for a pooling order is no longer subject to the Iles Formation, only subject to the Williams Fork Formation.

7.  On October 23, 2007, Laramie, 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.

8.  On October 23, 2007, Freddie J. and Connie Casaus filed with the Commission a letter of concern regarding Laramie’s proposed well being located close to the entrance to Rifle Village South, and the potential to cause major traffic interference, increased noise and odors, and a decrease in property values.

9.  Testimony and exhibits submitted in support of the application showed that Laramie has approximately 76% of the mineral interests leased in the application lands.

10.  Testimony and exhibits submitted in support of the application showed that offers to lease or in the alternative, offers to participate were sent to all unleased mineral owners on or around September 3, 2007.  Additional testimony and exhibits showed that the lease offers and the proposed costs for drilling and completing the Overcracker Federal 20-14D Well as described in the Authorization For Expenditure were similar to those terms and costs prevailing in the area.

11.  Testimony and exhibits submitted in support of the application showed that Laramie has made reasonable attempts to lease or seek consent to participate in the drilling of the Overcracker Federal 20-14D Well, but that there remain some unleased mineral owners that have not committed to lease or participate or who did not respond to Laramie’s offers to lease or participate in the drilling of the Overcracker Federal 20-14D Well.

12.  Laramie Energy II, LLC 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 based on the Hearing Officer review of the application under Rule 511.b., the Commission should enter an order to pool all nonconsenting interests in the 320-acre drilling and spacing unit consisting of the W½ of Section 20, Township 6 South, Range 93 West, 6th P.M., for the development and operation of the Williams Fork Formation.

ORDER

NOW, THEREFORE IT IS ORDERED that, 1.         Pursuant to the provisions of §34-60-116, C.R.S. as amended, of the Oil and Gas Conservation Act of the State of Colorado, all of the nonconsenting interests in the 320-acre drilling and spacing unit consisting of the W½ of Section 20, Township 6 South, Range 93 West, 6th P.M., are hereby pooled for the development and operation of the Williams Fork Formation.

2.  The production obtained from the drilling unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within each drilling unit; each owner of an interest in each drilling unit shall be entitled to receive his/her share of the production of the well located on each drilling unit applicable to his interest in each drilling unit.

3.  Said owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the well(s) and be subject to the penalties as provided for by §34-60-116 (7), C.R.S.

4.  Any nonconsenting unleased mineral owner within the spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of his/her record title interest, whatever that interest may be, until such time as the consenting owner recovers, only out of the nonconsenting owner's proportionate 87.5% share of production, the costs specified in §34-60-116 (7)(b), C.R.S. as amended.  After recovery of such costs, the nonconsenting mineral owner shall then own his/her proportionate 8/8ths share of the well, surface facilities and production, and then be liable for his/her proportionate share of further costs incurred in connection with the well as if he/she had originally agreed to the drilling.

5.  The operator of any well drilled on the above-described unit shall furnish all nonconsenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

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 November, 2007, as of November 5, 2007.

                                                                        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

November 9, 2007