IN THE MATTER OF THE VIOLATION OF THE RULES AND REGULATIONS OF THE OIL AND GAS CONSERVATION COMMISSION BY CAVANAUGH AND CAVANAUGH, INC. IN THE STATE OF COLORADO

Cause No. 1, 1V

Order No. 1V-48

(was 1-94)

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission o March 20, 1989 at 8:30 a.m. in Room 101, State Education Building, 201 East Colfax Denver, Colorado, after giving Notice of Hearing as required by law, of why Cavanaugh and Cavanaugh, Inc. was not in violation of the Rules and Regulations of the Commission, particularly concerning filings as required by Rules 305, 306, 307, 308, 310 and 319 for various wells within the State of Colorado and why it sho uld not be subject to the provisions of 34-60-121 C.R.S., as amended, calling for penalties. After testimony was taken, a continuance was granted to the April 17, 1989 hearing of the Commission.

FINDINGS

The Commission finds as follows:

1. Cavanaugh and Cavanaugh, 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. On January 17, 1989y the Commission directed the staff to review the activities of Cavanaugh and Cavanaugh, Inc. for compliance with the Rules and Regulations of the Commission. On February 9, 1989 notice was given to Cavanaugh and Cavanaugh, Inc. of twenty eight (28) wells which have nonexistent or delinquent filings as required by the Rules and Regulations of the Commission as shown on Exhibit C of the Notice of Hearing.

5. Testimony presented at the hearing on March 20, 1989 using Exhibit C detailed the lack of filings required for the well listed herein. The lack of filings is a violation of the Rules and Regulations of the Commission.

6. Cavanaugh and Cavanaugh, Inc. requested a continuance of the hearing on March 20, 1989 to obtain counsel prior to the assessment of any penalties. The Commission granted a continuance until the hearing of April 17, 1989.

7. At the April 17, 1989 hearing Cavanaugh and Cavanaugh, Inc. was represented by Ms. Barbara Sheldon, administrative assistant to James Cavanaugh; no legal counsel was present on behalf of Cavanaugh and Cavanaugh, Inc. Ms. Sheldon reported that James Cavanaugh was injured in an accident and was unable to be present.

8. Testimony was presented at the hearing on April 17, 1989 by the Commission staff using Exhibit 1C indicating that some filings had been received although some were incomplete leaving the following wells in violation of the rule listed:

WELL NAME RULE VIOLATION 305, 306, 307, 319

Lowe H No. 1 x Quarry No. 1 x Bucket of Beer No. 2 x Opec Survival No. 1 x Hissin' Pit No. 1 x Kinky Kincaid No. 1 x Lucky Licklog No. 1 x Let'er Rip No. 1 x Irish Luck No. 2 x Big Slammer No. 1 x Streetwalker No. 1 x Naughty Nancy No. 1 x Opec Revenge No. 1 x High Lonesome No. 1 x Anderson No. 1 x WET Farms No. R-14-3 x Hertlein No. 1-22 x Baughman No. 1 x Wear No. 2 x Wilson-Tooke No. 1 x Baughman No. 3 x Baughman No. 5 x Windsong CGF No. 4 x x Donohoe No. 4 x x Spotted Horse No. 1 x x Running Horse No. 3 x x Gillette No. 1 x

9. The violations of Rules 307 and 319 should have penalty assessed in the amount of Two Hundred Fifty Dollars ($250) for each violation; the violations of Rules 305 and 306 should have penalty assessed in the amount of Five Hundred Dollars 500 for each violation.

10. Further testimony was presented at the April 17, 1989 hearing which indicated that the well T-Wear No. 1 has actually been on production during the time period shown by Exhibit 1E and 1F which shows production reports are delinquent for 4678 days and conservation reports are delinquent for 1143 days, and an unknown amount of conservation levy is unpaid. This is a violation of Rule 307 and Rule 308 of the Rules and Regulations of the Commission.

11. A penalty in the amount of Two Dollars ($2.00) per day should be assessed for each day of delinquency for the failure to file Monthly Production Reports as required by Rule 307 and the failure to file quarterly conservation levy reports as required by Rule 308. One Dollar ($1.00) per day of the penalty should be suspended if all reports are filed and conservation levy paid by June 1, 1989, for a penalty of Five Thousand Eight Hundred Twenty One Dolla rs ($5821).

O R D E R

NOW, THEREFORE IT IS ORDERED, that Cavanaugh and Cavanaugh, Inc. is in violation of Rule 319 for 19 separate violations and that penalty in the amount of Two Hundred Fifty Dollars ($250) be assessed for each violation for a total penalty of Four Thousand Seven Hundred Fifty Dollars ($4,750) in accordance with the provisions of 34-60-121 C.R.S.,

IT IS FURTHER ORDERED that Cavanaugh and Cavanaugh, Inc. is in violation of Rule 307 for four separate violations and that a penalty in the amount of Two Hundred Fifty Dollars ($250) should be assessed for each violation for a total penalty of One Thousand Dollars ($1,000).

IT IS FURTHER ORDERED, that Cavanaugh and Cavanaugh, Inc. is in violation of Rules 305 and 306 for eight separate violations an that a penalty in the amount of Five Hundred Dollars ($500) shall be assessed for each violation for a total penalty of Four Thousand Dollars ($4 000).

IT IS FURTHER ORDERED that Cavanaugh and Cavanaugh, Inc. is in violation of Rules 307 and 308 for 5821 days and that a penalty in the amount of Two dollars ($2.00) per day should be assessed for a total of Eleven Thousand Six Hundred Forty Two Dollars ($11,642) of which On Dollar ($1.00) per day or $5,821.00 will be suspended if all filings are made and all conservation levy payments are made by June 1, 1989.

IT IS FURTHER ORDERED, that Cavanaugh and Cavanaugh, Inc. is assessed a grand total penalty in the amount of Twenty One Thousand Three Hundred Dollars ($21,300) in accordance with the provisions of 34-60-121 C.R.S. as amended, and that Five Thousand Eight Hundred Twenty One Dollars ($5,821) is suspended subject to the provisions contained in this order, and that payment in the amount of Fifteen Thousand Five Hundred Seventy One Dollars ($15,571) shall be made within thirty days of the receipt of this order.

IT IS FURTHER ORDERED that this order shall become effective forthwith.

IT IS FURTHER ORDERED that the Commission expressly reserves its rights, after notice of hearing, to alter, amend or repeal all or part of the above order.

Entered this 2nd day of May 1989 as of April 17, 1989.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dennis R. Bicknell, Secretary