REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on February 21, 1986 at 9:00 a.m., in Room 110 State Centennial Building, 1313 Sherman Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of Fuel Resources Development Co. in which it contends that the additional levy and interest penalties assessed against it are inaccurate and therefore requested an order granting relief from the audit and assessment.

FINDINGS

The Commission finds as follows:

1. Fuel Resources Development Co. (FUELCO), 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 March 6, 1984, the Commission notified Fuel Resources Development Company (FUELCO) of a completion of an audit by the State Auditor and assessment of an additional conservation levy and interest penalties due for the years 1980, 1981 and 1982 affecting certain wells operated by Fuelco in Mesa and Rio Blanco Counties, Colorado. Correspondence between the Commission and Fuelco concerning this matter has continued since that time.

5. Conservation levy is due on reimbursement of ad valorem and severance tax payments.

6. Testimony at the time of hearing was insufficient to determine that the contract entered into by Fuelco for the sale of gas was below market value for the area.

7. The contract between Fuelco and the purchaser was an arms-length contract made in good faith.

8. Price ceilings as established by the FERC are not the only criteria for establishing market value of the gas unless the majority of other producers in the area are receiving the ceiling price.

O R D E R NOW, THEREFORE, IT IS ORDERED, as follows:

1. Conservation levy is due by Fuelco based on the reimbursement of ad valorem and severance tax payment.

2. Conservation levy due on production from Fuelco in the area covered by this order shall be based on the actual price at the wellhead including reimbursement received for ad valorem and severance tax.

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

ENTERED this 20th day of March, 1986, as of February 21, 1986.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary