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.   139-87

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 9:00 a.m. on March 31, 2008, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to establish an approximate 657-acre drilling and spacing unit for certain lands in Section 5, Township 8 South, Range 93 West, 6th P.M., for production of gas and associated hydrocarbons from the Williams Fork and Iles Formations and to allow the equivalent of one (1) well per 10 acres.

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.  Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply.  Certain lands in Section 5, Township 8 South, Ranges 93 West, 6^th P.M. are subject to this rule.

5.  On February 7, 2008, Laramie, by its attorney, filed with the Commission a verified application for an order to establish an approximate 657-acre drilling and spacing unit for the below-listed lands, for production of gas and associated hydrocarbons from the Williams Fork and Iles Formations and to allow the equivalent of one (1) well per 10 acres:

Township 8 South, Range 93 West, 6^th P.M.

Section 5:        Lots 5-14, S½ N½, NE¼ SE¼, Tract 39, that part of Tract 40 lying in Section 5 and Tract 41

6.  On March 18, 2008, 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.

7.  Testimony and exhibits submitted in support of the application showed that lands in the immediate vicinity of the application lands have been approved for 10-acre density for production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.

8.  Testimony and exhibits submitted in support of the application showed that the geologic model of the Williams Fork Formation in the major producing areas of the Piceance Basin is well understood and consists of extensive log, completion and reservoir engineering data from wells inside current 10-acre density areas and the extremely useful and representative nearby outcrops of producing rocks.  Additional testimony indicated that based upon outcrop studies, the majority of the discontinuous sand bodies within the Williams Fork Formation are smaller than the distance between wells drilled on a 10-acre density basis.  Further testimony indicated that 10-acre density drilling is necessary to develop the Williams Fork Formation underlying the application lands.

9.  Testimony and exhibits submitted in support of the application showed that based on gas-in-place calculations, a typical Williams Fork Formation well will drain approximately 10.7 acres, and that the estimated ultimate recovery for a typical well in the application lands is approximately 771 MMCFG.    

10.  Testimony and exhibits submitted in support of the application showed the Iles Formation cannot be economically developed by the drilling of stand alone wells but can be developed economically if drilled together with the Williams Fork Formation.   

11.  The above-referenced testimony and exhibits show that the proposed spacing and density will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.

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 establish an approximate 657-acre drilling and spacing unit for the lands described in Finding 5 above, for production of gas and associated hydrocarbons from the Williams Fork and Iles Formations and to allow the equivalent of one (1) well per 10 acres.

ORDER

NOW, THEREFORE, IT IS ORDERED, that an approximate 657-acre drilling and spacing unit is hereby established for the below-listed lands, for production of gas and associated hydrocarbons from the Williams Fork and Iles Formations and to allow the equivalent of one (1) well per 10 acres:

Township 8 South, Range 93 West, 6^th P.M.

Section 5:  Lots 5-14, S½ N½, NE¼ SE¼, Tract 39, that part of Tract 40 lying in Section 5 and Tract 41

IT IS FURTHER ORDERED, that all future Williams Fork Formation and Iles Formation wells to be drilled on the application lands shall be located downhole anywhere upon such lands but no closer than 100 feet from a lease line or the boundaries of the application lands without exception being granted by the Director of the Oil and Gas Conservation Commission.  In cases where the application lands abut or corner lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density wells, the well shall be located downhole no closer than 200 feet from the boundary or boundaries of the application lands so abutting or cornering such lands without exception being granted by the Director of the Oil and Gas Conservation Commission. 

IT IS FURTHER ORDERED, that all wells drilled to the Iles Formation shall be drilled only in connection with the drilling of Williams Fork Formation wells. 

IT IS FURTHER ORDERED, that all Williams Fork Formation and Iles Formation wells drilled upon the application lands shall be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section (or lots or parcels approximately equivalent thereto) unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission.

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 April, 2008, as of March 31, 2008.

                                                                        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

April 8, 2008