BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE PROMULGATION AND                                 )                     CAUSE NOS. 250 & 407

ESTABLISHMENT OF FIELD RULES TO GOVERN                             )

OPERATIONS IN THE WATTENBERG FIELD,                                      )                     ORDER NOS. 250-44 & 407-289

                        This cause came on for hearing before the Commission at 8:30 a.m. on August 16, 2006, in the Meeker Town Hall, 345 Market Street, Meeker Colorado, for an order to confirm the 80-acre drilling and spacing units consisting of the N½ SE¼ and S½ SE¼ of Section 17, Township 2 North, Range 67 West, 6^th P.M., for production from the Sussex, Shannon, Codell and Niobrara Formations and to segregate the N½ SE¼ into two (2) 40-acre drilling and spacing units consisting of the NE¼ SE¼ and NW¼ SE¼ of said Section 17, for production from these formations.

                        The Commission finds as follows:

                        1. Machii-Ross Petroleum Company ("MRPC"), as applicant herein, 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 pursuant to the Oil and Gas Conservation Act.

                        4. On November 20, 1974, the Commission issued Order No. 250-10, which established 80-acre drilling and spacing units for the production of oil and associated hydrocarbons for the Shannon Formation underlying certain lands, including Section 17, Township 2 North, Range 67 West, 6^th P.M.

                        5. On February 17, 1976, the Commission issued Order No. 250-11, which established 80-acre drilling and spacing units for the production of oil and associated hydrocarbons for the Sussex Formation underlying certain lands, including Section 17, Township 2 North, Range 67 West, 6^th P.M.

                        6. On December 20, 1983, the Commission issued Order No. 407-1, which established 80-acre drilling and spacing units for the production of oil and/or gas and associated hydrocarbons for the Codell Formation underlying certain lands, including Section 17, Township 2 North, Range 67 West, 6^th P.M.

                        7. On October 15, 1984, the Commission issued Order No. 407-10, which established 80-acre drilling and spacing units for the production of oil and/or gas and associated hydrocarbons for the Niobrara Formation underlying certain lands, including Section 17, Township 2 North, Range 67 West, 6^th P.M.

                        8. On June 23, 2006, MRPC, by its attorney, filed with the Commission a verified application for an order to confirm the 80-acre drilling and spacing units consisting of the N½ SE¼ and S½ SE¼ of Section 17, Township 2 North, Range 67 West, 6^th P.M., for production from the Sussex, Shannon, Codell and Niobrara Formations and to segregate the N½ SE¼ into two (2) 40-acre drilling and spacing units consisting of the NE¼ SE¼ and NW¼ SE¼ of said Section 17, for production from these formations.

                        9. On August 3, 2006, MRPC, by its attorney, filed with the Commission a written request in accordance with Rule 511.b. to approve the application based on the merits of the verified application and the supporting affidavit of Howard Boigon.

                        10. Testimony submitted in support of the application showed that by Rule 318A.e., the Commission allowed up to eight (8) wells to be drilled within the SE¼ of said Section 17 to all Cretaceous Age formations.

                        11. Testimony submitted in support of the application showed that the Miller #43-17 Well located in the NE¼ SE¼ of said Section 17 produces from the Sussex and Shannon Formations. Additional testimony showed the Miller #43-17J Well has recently been drilled to the "J" Sand, also in the NE¼ SE¼ of said Section 17, and is awaiting completion in the Codell Formation pending the order requested by the Application.

                        12. Testimony submitted in support of the application showed the Pace #2 Well, owned by BH Energy, Inc. produces from the Sussex and Shannon Formations in the NW¼ SE¼ of said Section 17 and has paid only on that 40-acre unit. Additional testimony showed the Pace #1 Well in the SW¼ SE¼ and the Pace #3 Well in the SE¼ SE¼ produced from the Sussex and Shannon Formations, but have been plugged and abandoned.

                        13. Testimony submitted in support of the application showed that increasing density to 20 acres would enable the recovery of additional incremental gas and prevent the waste of reserves, that owners in the NE¼ SE¼ will be paid on production from the Sussex, Shannon, Codell and Niobrara Formations on the same 40-acre basis, and that 40-acre spacing units will assist in preventing waste.

                        14. Machii-Ross Petroleum Company agreed to be bound by oral order of the Commission.

                        15. Based on the facts stated in the verified application, having received no protests and based on the Hearing Officer review of the application under Rule 511.b., the Commission should enter an order to segregate the N½ SE¼ into two (2) 40-acre drilling and spacing units consisting of the NE¼ SE¼ and NW¼ SE¼ of said Section 17, for production from the Sussex, Shannon, Codell and Niobrara Formations.

                        NOW, THEREFORE, IT IS ORDERED, that the 80-acre drilling and spacing unit consisting of the N½ SE¼ of Section 17, Township 2 North, Range 67 West, 6^th P.M., is hereby segregated into two (2) 40-acre drilling and spacing units consisting of the NE¼ SE¼ and NW¼ SE¼ of said Section 17, for production from the Sussex, Shannon, Codell and Niobrara Formations.

                        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.

                        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.

                        ENTERED this 25^th day of August, 2006, as of August 16, 2006.

                                                                        OIL AND GAS CONSERVATION COMMISSION

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

September 5, 2006