IN THE MATTER OF ALLEGED VIOLATIONS OF THE          CAUSE NO. 1
RULES AND REGULATIONS OF THE COLORADO OIL
AND GAS CONSERVATION COMMISSION BY
PLENERGY DEVELOPMENT LTD., SPINDLE FIELD,             ORDER NO. 1V-193
ADAMS COUNTY, COLORADO

REPORT OF THE COMMISSION

This cause came on for hearing before the Colorado Oil and Gas Conservation Commission on February 15, 2000 at 8:30 a.m. at the Holiday Inn, Trinidad, 3125 Toupal Drive, Trinidad, Colorado after giving Notice of Hearing as required by law on why Plenergy Development Ltd. is not in violation of Rule 319.b.(3), failure to obtain Director approval for continuing shut-in status and Rule 326.b., failure to perform a mechanical integrity test within thirty (30) days of removing the surface production equipment from the Ehler #12 Well located in the NW¼ SW¼ of Section 10, Township 1 South, Range 67 West, 6th P.M.

FINDINGS

1. Plenergy Development Ltd. (“Plenergy”) 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 and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.

4. On September 25, 1998, Colorado Oil and Gas Conservation Commission (“COGCC”) staff conducted an inspection of the Ehler #12 Well located in the NW¼ SW¼ of Section 10, Township 1 South, Range 67 West, 6th P.M. The well was determined to be incapable of production as a result of insufficient tubing/casing flow pressure to overcome the sales line pressure.

5. On September 28, 1998, COGCC staff issued a Notice of Alleged Violation (“NOAV”) to Plenergy for the Ehler #12 Well. The NOAV cited violation of Rule 319.b.(3), failure to obtain Director approval for continuing shut-in status, and Rule 326.b., failure to perform a mechanical integrity test within thirty (30) days for a well incapable of production. The NOAV specified an abatement date of March 27, 1999. Per return receipt, the NOAV was accepted on September 29, 1998.

6. On June 2, 1999, COGCC staff conducted an inspection on the Ehler #12 Well and was informed that the well had been repaired and was capable of production. The operator requested an extension to allow replacement of the gas engine with an electric motor to reduce excessive noise levels. COGCC staff extended the abatement deadline to July 1, 1999. On August 11, 1999, COGCC staff met with the operator at the Ehler #12 Well. Due to a heavy rainstorm the previous night, it was agreed to postpone the start up of the well until more favorable site conditions existed.

7. On September 10, 1999, COGCC staff inspected the Ehler #12 Well and determined it was incapable of production and remained in noncompliance. On September 16, 1999, COGCC staff issued an Administrative Order by Consent (“AOC”) to Plenergy for the Ehler #12 Well. The AOC cited violation of Rule 319.b.(3), failure to obtain Director approval for continuing shut-in status and Rule 326.b., failure to perform a mechanical integrity test within thirty (30) days for a well incapable of production. The AOC proposed the assessment of a total fine amount of Two Thousand dollars ($2,000.00) and required the well to either pass a mechanical integrity pressure test, be properly plugged and reclaimed or returned to production within thirty (30) days from the date the order was entered. On October 21, 1999, the AOC issued to Plenergy Development Ltd. was returned to the COGCC as “unclaimed”. Plenergy did not execute or meet with COGCC staff to discuss the proposed AOC for the Ehler #12 Well.

8. At the time of the hearing on February 15, 2000 COGCC staff presented testimony and exhibits in support of the above findings. COGCC staff further testified that notice of the hearing was sent via certified mail to Plenergy Development Ltd. and to Planet Indemnity Company, provider of Plenergy’s financial assurance posted with the COGCC.

9. The Director requests that the Commission issue an Order Finding Violation in accordance with Rule 522.c. for the above-described alleged violations. In addition, Plenergy should be assessed a total fine of Four Thousand dollars ($4,000.00) for violation of Rules 319.b.(3) and 326.b. for the Ehler #12 Well, payable within thirty (30) days of the date the order is entered. Plenergy should be required to either: 1) perform a successful mechanical integrity pressure test; or 2) properly plug, abandon and reclaim; or 3) return to production within thirty (30) days of the date the order is entered for the Ehler #12 Well. Further, if Plenergy does not comply with the order, COGCC staff should be authorized to commence a claim on the Thirty Thousand dollar ($30,000) plugging bond and proceed to plug, abandon and reclaim the well.

ORDER

NOW, THEREFORE IT IS ORDERED, that Plenergy Development Ltd. shall be found in violation of Rule 319.b.(3), failure to obtain Director approval for continuing shut-in status, and Rule 326.b., failure to perform a mechanical integrity test within thirty (30) days for a well incapable of production on the Ehler #12 Well located in the NW¼ SW¼ of Section 10, Township 1 South, Range 67 West, 6th P.M.

IT IS FURTHER ORDERED, that Plenergy Development Ltd. shall be assessed a total fine of Four Thousand dollars ($4,000.00) for violation of Rules 319.b.(3) and 326.b. for the Ehler #12 Well, payable within thirty (30) days of the date the order is entered.

IT IS FURTHER ORDERED, that Plenergy Development Ltd. shall be required to either: 1) perform a successful mechanical integrity pressure test; or 2) properly plug, abandon and reclaim; or 3) return to production the Ehler #12 Well within thirty (30) days of the date this order is entered.

IT IS FURTHER ORDERED, that if Plenergy Development Ltd. does not comply with the order, COGCC staff shall be authorized to commence a claim on the Thirty Thousand dollar ($30,000) plugging bond and proceed to plug, abandon and reclaim the Ehler #12 Well.

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 13th day of March, as of February 15, 2000.

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 March 13, 2000.

(1V#193)