IN THE MATTER OF ALLEGED VIOLATIONS OF THE CAUSE NO

IN THE MATTER OF ALLEGED VIOLATIONS OF THE CAUSE NO. 1
RULES AND REGULATIONS OF THE COLORADO OIL
AND GAS CONSERVATION COMMISSION BY REED ORDER NO. 1V-203
OPERATING COMPANY INC., MOFFAT COUNTY,
COLORADO

REPORT OF THE COMMISSION

This cause came on for hearing before the Colorado Oil and Gas Conservation Commission on December 4, 2000 at 8:30 a.m. at the Chancery Building, 1120 Lincoln Street, Suite 801, Denver Colorado after giving notice of hearing as required by law on why Reed Operating Company Inc. is not in violation of certain Commission rules.

FINDINGS

The Commission finds as follows:

1. Reed Operating Company Inc. (“Reed”) 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 October 28, 1999 a surface owner complaint was received alleging housekeeping and safety violations for the Shefstead-Ninker #1 Well located in the E½ SE¼ of Section 4, Township 6 North, Range 91 West, 6th P.M. On October 28, 1999 an inspection was conducted by Colorado Oil and Gas Conservation Commission (“COGCC”) staff on the well finding unnecessary equipment, thirty-eight (38) drums of waste material and junk stored on location. In addition, stairs leading to the production tank were not safely attached to the tank resulting in the potential to cause personal injury. Further, noxious weeds were present on the site and fresh water flowed freely from the bradenhead.

5. On November 22, 1999 COGCC staff issued a Notice of Alleged Violation (“NOAV”) to Reed for keeping unnecessary equipment on location and for storing thirty-eight (38) drums of waste material and junk on location. The NOAV cited violation of Rules 602.b. and 603.g. which state that potentially dangerous conditions shall be remedied as soon as practical and that all locations shall be keep free of equipment, supplies, weeds and other waste material. The NOAV had an abatement deadline of January 1, 2000.

6. On November 22, 1999, COGCC staff issued a separate NOAV to Reed for failure to protect the aquifer citing violations of Rules 317.f. and 317.g. which state the casing shall be cemented in a manner sufficient to protect all fresh water. The NOAV had an abatement deadline of March 1, 2000.

7. On May 2, 2000 COGCC staff proposed an Administrative Order by Consent (“AOC”) to Reed for violation of Rules 602.b. and 603.g., failure to remediate potentially dangerous conditions as soon as practical and that all locations shall be keep free of equipment, supplies, weeds and other waste material and Rules 317.f. and 317.g., failure to cement the casing in a manner sufficient to protect all fresh water for the Shefstead-Ninker #1 Well. Further, the AOC proposed that Reed clean up the location and protect the aquifer or plug the well within thirty (30) days of the date the AOC was approved by the Commission. In accordance with Rule 523.a., a monetary penalty of Two Thousand dollars ($2,000) was proposed to be assessed against Reed.

8. On May 17, 2000, Reed agreed to and accepted the proposed AOC and paid the Two Thousand dollar ($2,000) fine. Order No. 1V-195 was approved by the Commission at the June 6, 2000 hearing.

9. Staff inspection of the site on December 1, 2000 found some cable, junk and debris on location. The pumping unit, cement pad and rods were present. The wellhead had not been disassembled and cut off and no circulated cement residue from plugging operations was visible. A disconnected tank was also present. Although Reed verbally indicated they would complete plugging operations sometime in November 2000, they did not notify staff of the date and time plugging operations would begin so that staff could witness the plugging. No subsequent report of abandonment has been filed nor have 3rd party verification tickets been submitted to the Commission.

10. Because Reed did not commence plugging operations in accordance with Order No. 1V-195, a monetary penalty of One Thousand dollars ($1,000) should be assessed.

11. Because Reed has failed to comply with Rules 603.g. and 317.g. by completing clean up and plugging and abandonment, a monetary penalty of Two Thousand dollars ($2,000) should be assessed. Reed should be ordered to complete plugging and abandonment of the well, to remove all surface equipment and debris and to reclaim the site to the standards required in Rule 1004. no later than June 1, 2001. If Reed completes the work stated herein by June 1, 2001, the Two Thousand dollar ($2,000) fine should be waived.

ORDER

NOW, THEREFORE IT IS ORDERED, that Reed Operating Company Inc. shall be found in violation of Rules 317.g. and 603.g. and Order No. 1V-195 for the Shefstead-Ninker #1 Well located in the E½ SE¼ of Section 4, Township 6 North, Range 91 West, 6th P.M.

IT IS FURTHER ORDERED, that Reed Operating Company Inc. shall be assessed a fine of One Thousand dollars ($1,000) for failure to comply with Commission Order No. 1V-195, payable within thirty (30) days of the date this order is entered.

IT IS FURTHER ORDERED, that Reed Operating Company Inc. shall complete plugging and abandonment operations of the well and remove all equipment, trash, debris, recontour and reclaim the well site and applicable portion of the access road to the required standards no later than June 1, 2001.

IT IS FURTHER ORDERED, that Reed Operating Company Inc. shall be assessed a fine of Two Thousand dollars ($2,000) due and payable on July 1, 2001 for continued violation of Rules 317.g. and 603.g. If Reed Operating Company Inc. completes plugging and abandonment operations and removes all equipment, trash and debris, recontours and reclaims the well site and applicable portion of the access road to the required standards by June 1, 2001, the Two Thousand dollar ($2,000) fine shall be waived.

IT IS FURTHER ORDERED, that if Reed Operating Company Inc. does not comply with the order, COGCC staff shall be authorized to commence a claim on the Five Thousand dollar ($5,000) plugging bond and proceed to complete plugging, clean up and reclamation of the well site and access road.

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 18th day of December, 2000, as of December 4, 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 December 15, 2000.

(1V#203)