REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on March 18, 1996, at 8:30 a.m., in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing as required by law, on why CIS Oil & Gas, Inc., was not in violation as described in Order No. 1C-1 and for certain wells located in Sections 3 and 4, Township 34 South, Range 65 West, 6th P.M., and if appropriate, the assessment of penalties for any such violation s found.

FINDINGS

The Commission finds as follows:

1. CIS Oil & Gas, Inc., 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. A complaint was filed by Tom Goss with the Commission staff alleging violations of Rules and Regulations of the Commission by CIS Oil & Gas, Inc. Commission staff conducted inspections on February 20, 1996 and found the following alleged violations.

WELL NAME WELL LOCATION ALLEGED VIOLATION RULE(s) VIOLATED Long Canyon #10-3 NENW Sec 10-34S-65W Well drilled without approved permit 303.a. Long Canyon #3-13 SWSW Sec 3-34S-65W Well drilled within 150' of property line 603.a.(2) Well drilled without proper notice 304.b., 315.e., 802.c. Long Canyon #11-3 NESW Sec 3-34S-65W Well drilled without proper notice 304.b., 315.e., 802.c. Long Canyon #8-2 NWNE Sec 8-34S-65W Well drilled within 150' of property line 603.a.(2) Long Canyon #9-11 NESW Sec 9-34S-65W Location has unstabilized soil cut 315.r. Well drilled within 150' of property line 603.a.(2) Long Canyon #16-3 NENW Sec 16-34S-65W Well drilled within 150' of property line 603.a.(2) Well drilled without proper notice 304.b., 315.e., 802.c. Long Canyon #11-1 NESW Sec 10-34S-65W Well drilled within 150' of property line 603.a.(2) Well drilled without proper notice 304.b., 315.e., 802.c. Long Canyon #17-8 SENE Sec 17-34S-65W Location has unstabilized soil cut 315.r. Well drilled without proper notice 304.b., 315.e., 802.c. Well drilled within 150' of property line 603.a.(2) Long Canyon #27-11 NESW Sec 27-34S-65W Well drilled without proper notice 304.b., 315.e., 802.c. Long Canyon #10-4 NWNW Sec 10-34S-65W Well drilled without approved permit 303.a. Stream crossing road without culvert 315.r. Well drilled without proper notice 304.b., 315.e., 802.c. Long Canyon #9-4 NWNW Sec 9-34S-65W Stream crossing road without culvert 315.r. Well drilled within 150' of property line 603.a.(2) Long Canyon #5-10 NWSE Sec 5-34S-65W Well drilled within 150' of property line 603.a.(2)

5. On February 22, 1996, the Commission authorized the issuance of a Cease and Desist Order (Order No. 1C-1) ordering CIS Oil & Gas, Inc. to cease all operations at their wellsites. Concurrently, the Commission issued Emergency Order No. 1E-1 withholding issuance of any further permits to drill wells submitted by CIS Oil & Gas, Inc.

6. After an administrative hearing was held prior to testimony presented at the Commission hearing, the staff removed the following wells and violations from the hearing: Rule No. 303.a., failure to submit drilling permit for the Long Canyon No. 10-3 Well; Rule No. 304.b., failure to submit proper bond for the Long Canyon No. 11-3 Well, Long Canyon No. 17-8 Well, Long Canyon No. 27-11 Well; Rule No. 315.e., well drilled without proper notice for the Lo ng Canyon No. 3-13 Well, Long Canyon No. 11-3 Well, Long Canyon No. 16-3 Well, Long Canyon No. 11-1 Well, Long Canyon No. 17-8 Well, Long Canyon No. 27-11 Well, Long Canyon No. 10-4 Well; Rule No. 603.a.(2), failure to abide by proper setbacks for the Long Canyon No. 8-2 Well, Long Canyon No. 9-11 Well, Long Canyon No. 16-3 Well, Long Canyon No. 11-1 Well, Long Canyon No. 17-8 Well, Long Canyon No. 9-4 Well, Long Canyon No. 5-10 Well; and Rule No. 802.c., failure to notice proper parties for the Long Canyon No. 11-3 Well, Long Canyon No. 17-8 Well, Long Canyon No. 27-11 Well.

7. At the time of the March hearing, after presentations by staff, CIS Oil & Gas, Inc., and Tom Goss with Patten Corporation West, the Commission recommended that CIS Oil & Gas, Inc. be found in violation of Rule No. 303.a., failure to submit drilling permit for the Long Canyon No. 10-4 Well; Rule No. 304.b., failure to submit proper bond for the Long Canyon No. 3-13 Well, Long Canyon No. 16-3 Well, Long Canyon No. 11-1 Well and Long Canyon No. 10-4 Wel l; Rule No. 315.r, failure to stabilize soil for the Long Canyon No. 9-11 Well, Long Canyon No. 17-8 Well, Long Canyon No. 10-4 Well and Long Canyon No. 9-4 Well; Rule No. 603.a.(2), failure to abide by proper setbacks for the Long Canyon No. 3-13 Well and Long Canyon 17-8 Well; and Rule No. 802.c., failure to notice proper parties for the Long Canyon No. 3-13 Well, Long Canyon No. 16-3 Well, Long Canyon No. 11-1 Well and Long Canyon No. 10-4 Well. In ad dition, staff requested the proper surface bond be posted, that all violations be brought into compliance, and that CIS Oil & Gas, Inc. meet with staff to discuss proper revegetation and installation of culverts at wellsites. Further, staff proposed a fine of Twenty Two Thousand Dollars ($22,000) payable within thirty (30) days of the issuance of an Order.

8. After deliberation, the Commission should find CIS Oil & Gas, Inc. in violation of the above rules, reduce the recommended fine by fifty percent (50%) upon posting a proper surface bond with the Commission, and meet with staff as scheduled to discuss proper revegetation and installation of culverts at wellsites.

9. The Commission should lift the Cease and Desist Order No. 1C-1 so that CIS Oil & Gas Inc. may resume operations of their wells.

O R D E R

NOW, THEREFORE IT IS ORDERED, that CIS Oil & Gas, Inc. shall be found in violation of Rule No. 303.a., failure to submit drilling permit for the Long Canyon No. 10-4 Well; Rule No. 304.b., failure to submit proper bond for the Long Canyon No. 3-13 Well, Long Canyon No. 16-3 Well, Long Canyon No. 11-1 Well and Long Canyon No. 10-4 Well; Rule No. 315.r., failure to stabilize soil for the Long Canyon No. 9-11 Well, Long Canyon No. 17-8 Well, Long Canyon No. 10-4 Well and Long Canyon No. 9-4 Well; Rule No. 603.a.(2), failure to abide by proper setbacks for the Long Canyon No. 3-13 Well and Long Canyon 17-8 Well; and Rule No. 802.c., failure to notice proper parties for the Long Canyon No. 3-13 Well, Long Canyon No. 16-3 Well, Long Canyon No. 11-1 Well and Long Canyon No. 10-4 Well.

IT IS FURTHER ORDERED, that the Cease and Desist Order No. 1C-1 shall be lifted so CIS Oil & Gas, Inc. may resume operations of their wells.

IT IS FURTHER ORDERED, that CIS Oil & Gas, Inc. shall post the proper surface bonds for all wells.

IT IS FURTHER ORDERED, that CIS Oil & Gas, Inc. shall be assessed a total fine of Twenty Two Thousand Dollars ($22,000) for violation of the above-described rules, with said fine reduced by fifty percent (50%) to Eleven Thousand Dollars ($11,000) upon posting a proper surface bond with the Commission.

IT IS FURTHER ORDERED, that CIS Oil & Gas, Inc. shall submit payment for the Eleven Thousand Dollars ($11,000) fine assessed within thirty (30) days of the date the order is issued.

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.

ENTERED this day of , 1996, as of March 18, 1996.

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 11, 1996 ??

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