BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF ALLEGED VIOLATIONS OF THE                                         )                     CAUSE NO. 1V

RULES AND REGULATIONS OF THE COLORADO OIL                                      )

AND GAS CONSERVATION COMMISSION BY                                                      )                     ORDER NO. 1V- 279

ENCANA OIL & GAS (USA) INC.,                                                                            )

GARFIELD COUNTY, COLORADO                                                                           )

                        1. On May 19, 2004, Colorado Oil and Gas Conservation Commission ("COGCC") staff received a complaint from Garfield County stating that EnCana Oil and Gas (USA) Inc. ("EnCana") had set conductor pipe on two (2) wells prior to obtaining an approved Application for Permit-to-Drill ("APD"), Form 2 for the two (2) wells. The wells are the Kelly 34-12C (M34NE) Well and the Kelly 34-11C (M34NE) Well (the "Wells"), both located in the SW¼ SW¼ of Section 34, Township 6 South, Range 92 West, 6th P.M. The Wells are planned to be drilled directionally from the same surface pad.

                        2. On May 21, 2004, the COGCC staff inspected the location and found that conductor pipe had been set for four (4) wells and only two (2) APDs had been approved.

                        3. On May 21, 2004, two Notices of Alleged Violation ("NOAVs") were issued for the Wells to EnCana for violation of Rule 303.a., failure to obtain an approved APD before commencement of operations with heavy equipment. The NOAVs required EnCana to submit a written explanation as to why it had not complied with Rule 303.a. The abatement date for the NOAV was June 4, 2004.

                        4. On June 3, 2004, COGCC staff received a letter from EnCana explaining its actions. The letter stated that EnCana set the conductor casing on the Wells without APD approval due to internal miscommunication between Denver engineering staff and field construction personnel. EnCana also stated that it had no intention of drilling the Wells prior to receiving the approved APD and that construction personnel have been instructed not to begin conductor work unless an approved APD is on location.

                        5. For setting the conductor pipe prior to receiving an approved APD, EnCana should be found in violation of Rule 303.a., for the Kelly 34-12C (M34NE) Well and the Kelly 34-11C (M34NE) Well.

                        6. Rule 523. specifies a base fine of One Thousand dollars ($1,000) per day for violation of Rule 303.

                       7. A total monetary penalty of Two Thousand dollars ($2,000.00) should be assessed against EnCana, in accordance with Rule 523.d., for violation of Rule 303.a.

ORDER

                        NOW, THEREFORE, IT IS ORDERED, that EnCana Oil and Gas (USA) Inc. shall be found in violation of Rule 303.a., failure to obtain an approved Application for Permit-to-Drill prior to commencement of operations with heavy equipment for the Kelly 34-12C (M34NE) Well and the Kelly 34-11C (M34NE) Well, both located in the SW¼ SW¼ of Section 34, Township 6 South, Range 92 West, 6th P.M.

                        IT IS FURTHER ORDERED, that EnCana Oil and Gas (USA) Inc. shall be assessed a total fine of Two Thousand dollars ($2,000.00) for the above violations, payable within thirty (30) days of the date the order is approved by the Commission.

                        IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.

                        and hearing, to alter, amend, or repeal any and/or all of the above orders.

                        IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date this order is mailed by the Commission.

                        IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this order is not required prior to the filing for judicial review.

                        Recommended this day of June, 2004.

                        OIL AND GAS CONSERVATION COMMISSION

By

Morris J. Bell, Hearing Officer

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

June 8, 2004

AGREED TO AND ACCEPTED THIS _________DAY OF June, 2004.

ENCANA OIL AND GAS (USA) INC.