BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE PROMULGATION AND                                 )                         CAUSE NO. 386

ESTABLISHMENT OF FIELD RULES TO GOVERN                             )

OPERATIONS IN THE HIGHTOWER FIELD,                                          )                         ORDER NO. 386-2

MESA COUNTY, COLORADO                                                                 )

                        This cause came on for hearing before the Commission at 9:00 a.m. on November 27, 2006 in Suite 801, the Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to allow the equivalent of one (1) well per ten (10) acres for the production of gas from the Mesaverde Formation underlying certain lands in Township 9 South, Range 92 West, 6th P.M.

                        The Commission finds as follows:

                        1. Laramie Energy, LLC ("Laramie"), 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 respect 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 June 21, 1982, the Commission issued Order No. 386-1, which among other things, established 640-acre drilling and spacing units, for the production of gas from the Mesaverde Formation, (including the Cozzette and Corcoran members), with the permitted well to be located no closer than six hundred (600) feet from the boundaries of the section for certain lands in Township 9 South, Range 92 West, 6^th P.M.

                        5. Rule 318.a. of the Rules and Regulations of the Commission requires that wells drilled in excess of two thousand five hundred (2,500) feet in depth be located not less than six hundred (600) feet from any lease line, and located not less than one thousand two hundred (1,200) feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. Sections 20 and 21, Township 9 South, Range 92 West, 6^th P.M. are subject to this rule.

                        6. On September 6, 2006, Laramie Energy, LLC, by its attorney, filed with the Commission a verified application for an order to allow the equivalent of one (1) well per 10 acres, for the production of gas from the Mesaverde Formation, including the Cozzette and Corcoran Sandstones, with the permitted well to be located no closer than one hundred (100) feet from the lease line, without exception granted by the Director. In cases where the application lands abut or corner lands where the Commission has not, at the time of the drilling permit application, granted the right to drill 10-acre density Mesaverde Formation wells, the well should be located downhole no closer than two hundred (200) feet from the boundary or boundaries of the drilling unit abutting or cornering such lands, without exception granted by the Director, for the below-listed:

                        It is not intended that more than four (4) Mesaverde Formation wells would be drilled on application lands per governmental quarter quarter section. Mesaverde Formation wells to be drilled on the application lands will be drilled from the surface either vertically or directionally from no more than one (1) pad located on any quarter quarter section unless exception is granted by the Director.

                        7. An administrative hearing was held on the matter on November 14, 2006. Testimony and exhibits presented at the administrative hearing showed that 100% of the minerals are owned by the Bureau of Land Management and 100% of the surface is owned by the U.S. Forest Service, and Laramie has all of the land leased.

                        8. Geologic testimony and exhibits presented at the administrative hearing showed that the Mesaverde Formation is composed of the Williams Fork Formation and the Iles Formation, which is further composed of the Rollins, the Cozzette, and the Corcoran Formations, is variable in thickness of the net sand, is lenticular and discontinuous in nature and that it is necessary for operators to have the ability to drill wells on a ten (10) acre density in order to fully develop and produce gas from the Mesaverde Formation.

                        9. Engineering testimony and exhibits presented at the administrative hearing showed that drilling wells on ten (10) acre density is required to recover all economically recoverable oil and gas in the application area, and that wells drilled on ten (10) acre density would be economic. Further, said testimony and exhibits showed that a required lesser density of drilling will leave gas in the reservoir that would otherwise be recovered.

                        10. Laramie has reviewed and evaluated the existing reservoir pressure data and believes the same supports increased density. Further, Laramie intends to continue to study and monitor the same in accordance with good engineering practices.

                        11. The above-referenced testimony and exhibits show that the proposed density will allow more efficient reservoir drainage, will prevent waste, will assure the greatest ultimate recovery of gas and associated hydrocarbons, and will not violate correlative rights.

                        12.  Laramie Energy, LLC agreed to be bound by oral order of the Commission.

                        13. Based on the facts stated in the verified application, having received no protests, and having been heard by the Hearing Officer who recommended approval, the Commission should enter an order to allow the equivalent of one (1) well per ten (10) acres for the production of gas from the Mesaverde Formation underlying certain lands in Township 9 South, Range 92 West, 6^th P.M.

                        NOW, THEREFORE, IT IS ORDERED, that the equivalent of one (1) well per ten (10) acres is hereby approved to be optionally drilled for the production of gas from the Mesaverde Formation (including the Cozzette-Corcoran Sandstones), for the below-described lands:

                        IT IS FURTHER ORDERED, that the permitted well shall be located downhole no closer than one hundred (100) feet from lease lines without exception granted by the Director. In cases where the lands abut or corner lands where the Commission has not, at the time of the drilling permit application, granted the right to drill ten (10) acre density Mesaverde Formation wells, the well shall be located downhole no closer than two hundred (200) feet from lease lines abutting or cornering such lands without exception granted by the Director.

                        IT IS FURTHER ORDERED that no more than four (4) Mesaverde Formation wells shall be drilled on the application lands per governmental quarter quarter section. Mesaverde Formation wells to be drilled on the application lands shall be drilled from the surface either vertically or directionally from no more than one (1) pad located on any quarter quarter section unless exception is granted by the Director.

                        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.

                        ENTERED this__________day of December, 2006, as of November 27, 2006.

                                                OIL AND GAS CONSERVATION COMMISSION

                                                By____________________________________

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

December 11, 2006