IN THE MATTER OF ALLEGED VIOLATIONS OF THE RULES          CAUSE NO. 1
AND REGULATIONS OF THE COLORADO OIL AND GAS
CONSERVATION COMMISSION BY FAITH ENERGY                       ORDER NO. IV-177
EXPLORATION, INC., RIO GRANDE COUNTY, COLORADO

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on August 19, 1999 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 Faith Energy Exploration, Inc. is not in violation of Rule 210.b., requiring a well sign be posted; Rules 308A. and 308B., requiring a Drilling Completion Report, Form 5, and a Completed Interval Report, Form 5A, to be submitted within thirty (30) days of completion; and Rule 326.b., requiring wells shut in longer than two (2) years be tested for mechanical integrity, and why it should not invoke the provisions of §34-60-121 C.R.S., as amended, providing for penalties for violations of the Rules and Regulations of the Commission.

FINDINGS

The Commission finds as follows:

1. Faith Energy Exploration, Inc. (“Faith”) 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 September 17, 1996, a Notice of Alleged Violation (“NOAV”) was issued to Faith for the Jynnifer #1 Well located in the NE¼ SE¼ of Section 9, Township 40 North, Range 5 East, N.M.P.M., alleging violations of Rule 307., requiring notice to the Director of change of plans; Rule 308., requiring a Drilling Completion Report, Form 5, to be submitted within thirty (30) days of completion; and Rule 326.b., requiring wells shut-in longer than two (2) years be tested for mechanical integrity, with an abatement date of October 18, 1996. Faith did not respond to this NOAV.

5. The Jynnifer #1 Well was inspected by COGCC staff on December 30, 1997. The inspection found the well temporarily abandoned with equipment on location. Upon inspection, staff requested that Faith submit a Sundry Notice, Form 4, describing future plans.

6. On February 13, 1998 a NOAV was issued to Faith alleging violations of Rule 210.b., requiring a well sign be posted; Rules 308A. and 308B., requiring a Drilling Completion Report, Form 5 and Completed Interval Report, Form 5A to be submitted within thirty (30) days of completion; and Rule 326.b., requiring wells shut-in longer than two (2) years to be tested for mechanical integrity, with an abatement date of February 27, 1998.

7. On February 23, 1998, Faith responded to the NOAV. Faith stated these properties had been turned over to the landowner, Mr. L. G. Mosley. On March 31, 1998, Mr. L. G. Mosley responded that he did not accept operatorship of this well and that he wanted the Jynnifer #1 Well plugged and abandoned.

9. On February 4, 1999, COGCC staff informed Faith by letter that the COGCC considered Faith to be the operator of this well and that the compliance date for the NOAV had been extended to June 30, 1999.

10. On July 6, 1999 an Administrative Order by Consent (“AOC”) was offered to Faith. On July 10, 1999 as per return receipt the AOC was received.

11. As of July 28, 1999, a mechanical integrity test (“MIT”) had not been performed on this well, no completion reports had been submitted to the COGCC, no well sign had been posted and the AOC had not been agreed to and accepted by Faith.

12. In accordance with §34-60-121(6), C.R.S., the Commission considers Faith’s failure to bring the well and lease into compliance after numerous notifications as evidence of a pattern of violation of Commission rules and orders. Faith’s failure to perform a MIT threatens to cause significant adverse environmental impact.

ORDER

NOW, THEREFORE, IT IS ORDERED that Faith Energy Exploration, Inc., shall be found in violation of Rule 210.b., requiring a well sign be posted; Rules 308A. and 308B., requiring a Drilling Completion Report, Form 5, and a Completed Interval Report, Form 5A, to be submitted within thirty (30) days of completion; and Rule 326.b., requiring wells shut-in longer than two (2) years be tested for mechanical integrity for the Jynnifer #1 Well located in the NE¼ SE¼ of Section 9, Township 40 North, Range 5 East, N.M.P.M.

IT IS FURTHER ORDERED that Faith Energy Exploration, Inc., shall post a well sign, submit a valid Drilling Completion Report, Form 5 and Completed Interval Report, Form 5A, and perform a mechanical integrity test, plug and abandon, or return to production the Jynnifer #1 Well within thirty (30) days of the date the order is entered.

IT IS FURTHER ORDERED that Faith Energy Exploration, Inc. shall be assessed a fine of Three Thousand Five Hundred dollars ($3,500), payable within thirty (30) days of the date the order is entered.

IT IS FURTHER ORDERED that if Faith Energy Exploration, Inc., does not comply with the order, COGCC staff shall be authorized to commence claim on the Five Thousand dollar ($5,000) plugging bond and proceed to plug and abandon the Jynnifer #1 Well. If plugging and reclamation costs exceed the bond amount COGCC staff shall be authorized to confiscate available equipment and tubulars for salvage per §34-60-124.(6).(c). C.R.S.

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 31st day of August, 1999, as of August 19, 1999.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dated at Suite 801 Patricia C. Beaver, Secretary 1120 Lincoln Street Denver, Colorado 80203 August 31, 1999.

(1V#177)