BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE PROMULGATION AND                                     )                             CAUSE NOS. 139 & 440

ESTABLISHMENT OF FIELD RULES TO GOVERN                                 )

OPERATIONS IN THE RULISON AND PARACHUTE                                )                             ORDER NOS. 139-36 & 440-21

FIELDS, GARFIELD COUNTY, COLORADO                                              )

REPORT OF THE COMMISSION

                        This cause came on for hearing before the Commission at 8:30 a.m. on April 23, 2001, in Suite 801, the Chancery Building, 1120 Lincoln Street, Denver, Colorado after giving Notice of Hearing, as required by law on the verified application of Tom Brown, Inc., by its attorney, for an order pooling all interests in the 640-acre drilling and spacing unit consisting of Section 36, Township 7 South, Range 96 West, 6th P.M. for the development and operation of the Williams Fork Formation of the Mesaverde Formation.

FINDINGS

                        The Commission finds as follows:

                        1. Tom Brown, Inc. ("TBI"), 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.

                        4. On June 26, 1962 the Commission entered Order No.139-3 which amended Order Nos. 139-1 and 139-2 to include additional lands for which 640-acre drilling and spacing units were established for production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group. On July 1, 1997 the Commission entered Order Nos. 139-31 and 440-18 which allowed up to sixteen (16) wells to be drilled on each 640-acre drilling and spacing unit for production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group. Section 36, Township 7 South, Range 96 West, 6th P.M. was included in these orders.

                        5. On March 9, 2001, TBI, by its attorney, filed with the Commission a verified application for an order to pool all non-consenting interests in the 640-acre drilling and spacing unit consisting of Section 36, Township 7 South, Range 96 West, 6th P.M. The Applicant plans to drill the S. Parachute #36-23 Well in the SW¼ NE¼ of said Section 36 for production of gas and associated hydrocarbons from the Williams Fork Formation.

                        6. Testimony and exhibits presented at the administrative hearing indicated that reasonable offers to lease and to participate in the well were sent to all unleased mineral owners.

                        7. Testimony and exhibits presented at the administrative hearing showed that TBI controls 91.19% of the minerals in the application area, with the remainder of interests controlled by Southwestern Production Corporation, Barrett Resources, and Larry A. and Karen K. Klebold.

                        8. At the time of the hearing, Larry A. and Karen K. Klebold, Southwestern Production Corporation and Pioneer Natural Resources Company had not agreed to lease or participate.

                        9. Further testimony and exhibits indicated that all of the requirements of Rule 530. for involuntary pooling have been met by TBI.

                        10. At the time of the administrative hearing, TBI agreed to be bound by oral order of the Commission.

                        11. Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommends approval, the Commission should enter an order pooling all non-consenting interests in the 640-acre drilling and spacing unit consisting of Section 36, Township 7 South, Range 96 West, 6th P.M. for the development and operation of the Williams Fork Formation of the Mesaverde Formation.

ORDER

                        NOW, THEREFORE IT IS ORDERED, that, 1. Pursuant to the provisions of §34-60-116, C.R.S. as amended, of the Oil and Gas Conservation Act of the State of Colorado, all non-consenting interests in the 640-acre drilling and spacing unit consisting of Section 36, Township 7 South, Range 96 West, 6th P.M. for the development and operation of the Williams Fork Formation of the Mesaverde Formation.

                        2. The production obtained from said drilling units shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within said drilling unit; each owner of an interest in said drilling unit shall be entitled to receive his/her share of the production of the well located on said drilling unit applicable to his interest in said drilling unit.

                        3. Said owner is hereby deemed to have elected not to participate and shall therefore be deemed to be non-consenting as to the well(s) and be subject to the penalties as provided for by §34-60-116(7).

                        4. Any non-consenting unleased mineral owner within the spacing unit shall be treated as the owner of the landowner’s royalty to the extent of 12.5% of his/her record title interest, whatever that interest may be, until such time as the consenting owner recovers, only out of the non-consenting owner’s proportionate 87.5% share of production, the costs specified in §34-60-116(7)(b), C.R.S. as amended. After recovery of such costs, the non-consenting mineral owner shall then own his/her proportional 8/8ths share of the well, surface facilities and production, and then be liable for his/her proportionate share of further costs incurred in connection with the well as if he/she had originally agreed to the drilling.

                        5. The operator of any well drilled on the above-described unit shall furnish all non-consenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

                        6. Tom Brown, Inc. shall be designated as the operator for the 640-acre drilling and spacing unit described above for the development and operation of the Williams Fork Formation of the Mesaverde Formation.

                        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 May, as of April 23, 2001.

                                                                OIL AND GAS CONSERVATION COMMISSION

                                                                            OF THE STATE OF COLORADO

                                                                By_______________________________

                                                                            #9; Patricia C. Beaver, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

May 2, 2001