BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF CHANGES TO THE ) CAUSE NO. 1R

RULES AND REGULATIONS OF THE OIL )

AND GAS CONSERVATION COMMISSION ) ORDER NO. 1R-102

OF THE STATE OF COLORADO )

REPORT OF THE COMMISSION

Pursuant to a hearing before the Oil and Gas Conservation Commission on June 5, 2006, in the Council Chamber Room of the Ambulance Building, 304 West 3^rd Street, Wray, Colorado, the Oil and Gas Conservation Commission promulgated amendments to its Rules and Regulations as described below:

Rule No. 318B. Yuma/Phillips County Special Well Location Rule

a. This Special Well Location Rule ("WLR") governs wells drilled to and completed in the Niobrara Formation for the following lands:

Township 1 North

Range 44 West: Sections 7, 18, 19, 30 through 33

Range 45 West: Sections 7 through 36

Range 46 West: Sections 4 through 9

Range 47 West: All

Range 48 West: All

Township 2 North

Range 46 West: All

Range 47 West: All

Range 48 West: All

Township 3 North

Range 45 West: Sections 1 through 18

Range 46 West: All

Range 47 West: All

Range 48 West: All

Township 4 North

Range 45 West: All

Range 46 West: All

Range 47 West: All

Range 48 West: All

Township 5 North

Range 45 West: All

Range 46 West: All

Range 47 West: All

Range 48 West: All

Township 6 North

Range 45 West: All

Range 46 West: All

Range 47 West: All

Range 48 West: All

Township 7 North

Range 45 West: All

Range 46 West: All

Range 47 West: All

Township 8 North

Range 45 West: All

Range 46 West: All

Range 47 West: All

Township 9 North

Range 45 West: Sections 19 through 36

Range 46 West: Sections 19 through 36

Range 47 West: Sections 19 through 36

Township 1 South

Range 44 West: Sections 3 through 10, 16 through 21, 27 through 34

Range 45 West: Sections 3 through 5

Range 46 West: Sections 4 through 9, 16 through 36

Range 47 West: All

Range 48 West: All

Township 2 South

Range 44 West: Sections 3 through 6

Range 45 West: Section 7: W½, Section 18: W½, Section 19: All

Range 46 West: Sections 1 through 24

Range 47 West: All

Range 48 West: All

Township 3 South

Range 48 West: All

Township 4 South

Range 48 West: All

Within the WLR Area, operators may conduct drilling operations to the Niobrara Formation as follows:

(1) Four (4) Niobrara Formation wells may be drilled in any quarter section.

(2) No more than one (1) well may be located in any quarter quarter section.

(3) No minimum distance shall be required between wells producing from the Niobrara Formation in any quarter section.

(4) Wells shall be located at least three hundred (300) feet from the outer boundary of said quarter section, and wells located outside any drilling units already established by the Commission in the WLR Area prior to this WLR’s effective date (July 30, 2006) shall, in addition, be located at least three hundred (300) feet from any lease line. Further, wells shall be located not less than nine hundred (900) feet from any producible well drilled to the Niobrara Formation prior to this WLR’s effective date (July 30, 2006) located in a contiguous or cornering quarter section unless exception is approved by the Director.

b. Any well drilled to the Niobrara Formation in the WLR Area prior to the effective date (July 30, 2006) of this WLR which is legally located when this WLR becomes effective but is not located as listed above shall be treated as properly located for purposes of this WLR.

c. This WLR does not alter the size or configuration of any drilling units already established by the Commission in the WLR Area prior to this WLR’s effective date (July 30, 2006).

d. This WLR shall not serve to bar the granting of relief to owners who file an application alleging abuse of their correlative rights to the extent that such owners can demonstrate that their opportunity to produce from the Niobrara Formation at locations herein authorized does not provide an equal opportunity to obtain their just and equitable share of oil and gas from such formation.

e. Well exception locations to this WLR shall be subject to the provisions of Rule 318.c.

f. This WLR is a well location rule and supersedes existing Commission orders in effect at the time of its adoption only to the extent that the existing orders relate to permissible well locations and the number of wells that may be drilled in a quarter section. Commission orders in effect when this Rule 318B. is adopted nonetheless apply with respect to the size of drilling units already established by the Commission in the WLR Area. This WLR is not intended to establish well spacing. Accordingly, when an area subject to Rule 318B. is otherwise unspaced, it does not act to space the area but instead provides the permissible locations for any new Niobrara Formation wells. Similarly, Rule 318B. does not affect production allocation for existing or future wells. An operator may allocate production in accordance with the applicable lease, contract terms or established drilling and spacing units recognizing the owner’s right to apply to the COGCC to resolve any outstanding correlative rights issues.

DONE AND PERFORMED by the Oil and Gas Conservation Commission of the State of Colorado this day ______ of June, 2006.

IN THE NAME OF THE COLORADO

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

June 14, 2006