BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF A BOND CLAIM                                                          )                               CAUSE NO. 1V

AGAINST SIERRA OIL AND GAS COMPANY,                                           )

ALSO DBA SIERRA EXPLORATION COMPANY,                                     )                                ORDER NO. 1V-294

ALSO DBA CAPITAL ENERGY CORPORATION                                       )

ALSO DBA SIERRA OPERATING COMPANY                                            )

ARCHULETTA COUNTY, COLORADO                                                      )          

                        This cause came on for hearing before the Colorado Oil and Gas Conservation Commission ("COGCC") on January 9, 2006, at 9:00 a.m. in Suite 801, 1120 Lincoln Street, Denver, Colorado, after giving notice of hearing as required by law on why the COGCC should proceed with a bond claim against Sierra Oil and Gas Company ("Sierra"), also DBA Sierra Exploration Company, Capital Energy Corporation, and Sierra Operating Company, for violations of Rule 319.b.(3) and Rule 1004.a.

                        The Commission finds as follows:

                        #9; 1. Sierra Oil and Gas Company ("Sierra"), also DBA Sierra Exploration Company, Capital Energy Corporation, and Sierra Operating Company, is an interested party in the subject matter of the above-referenced matter.

                        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 September 3, 1980, the Binkley #2 Well located in the NE¼ SW¼ of Section 8, Township 32 North, Range 3 East, N.M.P.M. was spud by Capital Energy Corporation. Production casing was set and the well was perforated and shut-in. The last information for this well was received by the COGCC on August 17, 1984, and indicated that the well had been plugged and abandoned by Sierra Oil and Gas Company.

                        5.  On August 21, 1981, the Mizar Schick #1 Well located in the NE¼ SE¼ of Section 32, Township 36 North, Range 1 West, N.M.P.M. was spud by Sierra Oil and Gas Company. Production casing was set and the well was perforated and shut-in. The last information for this well was received by the COGCC on March 5, 1986, from Sierra Operating Company, and indicated that the well was shut-in and awaiting pipeline connection.

                        6.  On July 14, 2005, COGCC staff inspected the Binkley #2 Well. The well appeared to be plugged but site restoration was not complete and the well was in violation of Rule 1004.a.

                        7.  On October 3, 2005, COGCC staff inspected the Mizar Schick #1 Well. The well still exists in shut-in status and is in violation of Rule 319.b.(3).

                        8.  COGCC staff has no indication that Sierra or any of its entities are in existence today.

                        9.  The Commission should authorize the COGCC staff to claim Sierra’s Thirty Thousand dollar ($30,000) plugging bond and reclaim the Binkley #2 wellsite and plug and abandon the Mizar Schick #1 Well.  If the cost of performing this work exceeds the plugging bond amount then the Oil & Gas Conservation & Environmental Response Fund should be used to supplement the total cost of the work.

                        NOW, THEREFORE IT IS ORDERED, that the COGCC staff is hereby authorized to make a claim on Sierra Oil and Gas Company’s Thirty Thousand dollar ($30,000) plugging bond and reclaim the Binkley #2 wellsite and plug and abandon the Mizar Schick # 1 Well. If necessary, the OGCERF shall be used to supplement the funds required to perform this work.

                        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.

                        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                  day of February, 2006, as of January 9, 2006.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                                            OF THE STATE OF COLORADO

                                                                                                Patricia C. Beaver, Secretary

Dated at Suite 801

1120 Lincoln St.

Denver, Colorado 80203

February 6, 2006