BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

ADMINISTRATIVE ORDER BY CONSENT

(Pursuant to Rule 522.b.(3) of the Rules and Regulations of the

Colorado Oil and Gas Conservation Commission, 2 CCR 404-1)

FINDINGS

1.    On July 11, 2007, the Colorado Oil and Gas Conservation Commission (“COGCC” or “Commission”) approved the original Application for Permit-to-Drill (“APD”), submitted by ExxonMobil Oil Corporation (“ExxonMobil”) for the Piceance Creek Unit Well #296-7A7 (API No. 05-103-10825-00) (the “Well”), located in the SE¼ NE¼ of Section 7, Township  2 South,  Range 96 West, 6^th P.M.

2.    On July 10, 2008, the original APD expired.  On June 2, 2008, prior to the expiration of the original APD, ExxonMobil re-filed an APD for the Well, which was approved by the COGCC on July 30, 2009.

3.    On July 27, 2008, between the expiration of the APD, and the approval of the refiled APD, ExxonMobil drilled the Well.  COGCC Staff became aware of the issue when the incident was self reported by ExxonMobil.

4.    On August 8, 2008, COGCC Staff issued a Notice of Alleged Violation (“NOAV”) (NOAV #200193990) to ExxonMobil for commencing operations on the Well without a valid permit. The NOAV alleged that ExxonMobil had violated Rule 303.a. and required them to explain the reason for the violation and the procedures that would be implemented to prevent future violations.   

5.    On September 8, 2008, ExxonMobil responded to the NOAV, explaining that the reason for the violation was a lack of diligence in tracking valid APDs.  They also submitted a Form 4, Sundry Notice, detailing procedures to be implemented to prevent future violations. These measures included new tracking procedures, and notification to all disciplines that a valid permit is required before commencing operations.

6.    To date, ExxonMobil has not had any additional violations of Rule 303.a. from commencing operating without a valid permit.

7.    Rule 523. specifies a base fine of One Thousand dollars ($1,000) for each day of violation of Rule 303.  Rule 523.a.(3) specifies that “the maximum penalty for any single violation shall not exceed Ten Thousand dollars ($10,000) regardless of the number of days of such violation,” unless the violation results in significant waste of oil and gas resources, damage to correlative rights, or a significant adverse impact on public health, safety or welfare or the environment.

8.    It appears that the violation here was a one-time occurrence and that it did not result in significant waste of oil and gas resources, damage to correlative rights, or a significant adverse impact to public health, safety or welfare.  Under these circumstances, the parties agree to a fine of One Thousand, Five Hundred dollars ($1,500) which takes into consideration the mitigation factor that ExxonMobil has a history of compliance with COGCC rules, regulations and orders.

9.    ExxonMobil does not admit liability for the alleged violation. Neverthless, ExxonMobil agrees to pay the fine set forth in Finding No. 8 and the COGCC Staff agrees to accept the fine set forth in Finding No. 8 in order to resolve this matter without the necessity of a contested hearing.

10.  COGCC Staff specifically reserve the right to proceed as to the alleged violation of Rule 303.a if this matter is not resolved by this AOC.  Nothing within this AOC should be construed as the COGCC Staff waiving their right to prosecute any violation set forth in this AOC in the event that this AOC is not executed by the parties and approved by the Commission.

                                                                                   ORDER

NOW, THEREFORE, IT IS ORDERED, that ExxonMobil shall be found in violation of Rule 303.a. for commencing operations on the Well without a valid permit.

IT IS FURTHER ORDERED, that ExxonMobil shall be assessed a fine of One Thousand, Five Hundred dollars ($1,500) payable within thirty (30) days of the date this Order is approved by the Commission. 

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 of this Order by the Commission is not required prior to 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.

RECOMMENDED this                day of November, 2010.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                                                                                                                                                                                  By                                                                            ____ 

                                                                                    Rob Willis, Enforcement Officer

Dated at Suite 801

1120 Lincoln St.

Denver, Colorado 80203

                        AGREED TO AND ACCEPTED this ______day of ____________, 2010.

                                    EXXONMOBIL OIL CORPORATION

                                    By __________________________________________

                                                Signature of Authorized Company Representative

                                    ____________________________________________                                                                                        Print Signatory Name

                                    ____________________________________________

                                                Title