BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE PROMULGATION AND                                 )                         CAUSE NO. 440

ESTABLISHMENT OF FIELD RULES TO GOVERN                             )

OPERATIONS IN THE PARACHUTE FIELD,                                         )                         ORDER NO. 440-36

GARFIELD COUNTY, COLORADO                                                         )

                        This cause came on for hearing before the Commission at 9:00 a.m. on September 18, 2006, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver Colorado, for an order to allow the equivalent of one well per 10 acres to be drilled in the S½ of Section 5, Township 7 South, Range 95 West, 6^th P.M., for production from the Mesaverde Group.

                        The Commission finds as follows:

                        1. Williams Production RMT Company ("Williams"), 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 April 20, 1990, the Commission issued Order No. 440-12, which among other things, established 320-acre drilling and spacing units for certain lands including the below-listed, for the production of gas and associated hydrocarbons from the Mesaverde Formation:

                        5. On February, 21, 1995, amended April 26, 1995, the Commission issued Order Nos. 139-28, 440-16 and 479-5, which among other things, allowed eight (8) wells to be optionally drilled on 320-acre drilling and spacing units, for certain lands, including the below-listed, for production from the Williams Fork Formation, with the permitted well to be located no closer that 400 feet from the boundaries of the unit and no closer than 800 feet from any existing Williams Fork Formation well or wells:

                        6. On October 30, 2000, the Commission issued Order Nos. 139-34, 440-19, 479-7 and 510-4, which among other things, allowed the equivalent of one (1) well per 20 acres for production from the Williams Fork Formation, for certain lands, including the lands described below. The permitted well shall be located no closer than 200 feet from the boundaries of a drilling unit and no closer than 400 feet from any existing Williams Fork Formation well or wells. In cases where the application lands constitute only a portion of an existing drilling and spacing unit, each Williams Fork Formation well upon such application lands shall be located no closer than 200 feet from the boundaries of the drilling unit, no closer than 200 feet from the boundary of the application lands and no closer than 400 feet from any existing Williams Fork Formation well.

                        7. On July 31, 2006, Williams Production RMT Company, by its attorney, filed with the Commission a verified application for an order to allow the equivalent of one well per 10 acres to be drilled on the below-listed 320-acre drilling and spacing unit, for production from the Mesaverde Group:

All future Williams Fork wells should be located downhole anywhere upon such lands but no closer than 100 feet from the outside boundary of the drilling and spacing unit unless such unit boundary abuts or corners lands in respect of which the Commission has not at the time of the drilling permit application granted the right to drill 10-acre density wells, in which event the well may be drilled downhole no closer than 200 feet from that portion of the unit boundary which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Williams Fork Formation wells has not been ordered by the Commission. Wells will be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission.

The Applicant plans to drill all 10-acre density Williams Fork Formation wells to be located downhole upon the application lands from two existing pads, one located on the application lands and one located off the applications lands with the possibility that a third pad may be needed.

                        8. On September 8, 2006, Williams, by its attorney, filed with the Commission a written request to approve the application based on the merits of the verified application and the supporting exhibits.

                        9. Testimony and exhibits submitted in support of the application showed a plat of the Rulison, Parachute and Grand Valley Field areas located in Townships 6 and 7 South, Ranges 94 through 96 West 6^th P.M. and situated in Garfield County, Colorado where Williams operates approximately 58,520 acres of land with approved Williams Fork Formation ten acre well density of which 31,780 acres are fee lands and 26,740 acres are federal lands. The subject lands were pooled in the S½ of Section 5, Township 7 South, Range 95 West, 6^th P.M. into a Mesaverde Formation unit by virtue of a Declaration of Pooling covering a number of leases and an Amendment of Declaration of Pooling.

                        10. Testimony and exhibits submitted in support of the application showed that Williams plans on drilling the ten acre density wells to bottom hole in the application lands from the existing pads of the GV 82-5 Well and the GV 80-4 Well located in the SW¼ of Section 4, Township 7 South, Range 95 West, 6^th P.M., and that Williams has an 86.4418% leasehold interest in the S½ of Section 5, Township 7 South, Range 95 West, 6^th P.M. unit. The surface of the GV 82-5 pad is owned by Battlement Mesa Partners and the surface of the GV 80-4 pad is owned by John W. Savage, Roy E. Savage, Marshall T. Savage, Daniel W. Savage and Joan L. Savage.

                        11. Testimony and exhibits submitted in support of the application showed that the Williams Fork Formation is a common source of supply underlying the application lands. The productive sandstones throughout the Williams Fork Formation are laterally discontinuous, naturally fractured, and have microdarcy permeability.

                        12. Testimony and exhibits submitted in support of the application showed outcrop studies and reservoir engineering analysis from well data indicating that the sands of the Williams Fork Formation are discontinuous and do not correlate when examined on spacing equivalent to 10-acre density, and that sands as close as 660 feet apart appearing to be in the same stratigraphic horizon are most always different sands.

                        13. Testimony and exhibits submitted in support of the application showed the data gathered from various 10-acre pilot projects in the Rulison and Grand Valley Fields indicate that new 10-acre density wells are better performers than the older 40-acre density parent wells and as good as the 20-acre density development wells.

                        14. Testimony and exhibits submitted in support of the application showed that based on various pilot tests performed, the majority of the sand bodies completed within 10-acre wells have no or limited depletion. Additional testimony indicated the potential for higher recovery factors is likely present when the bottom hole well placement for the pilot is done in consideration of the impact of fracture orientation, better recovery of the gas-in-place would be achieved with better well placement.

                        15. The above-referenced testimony and exhibits show that the proposed increased density will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.

                        16. Williams Production RMT Company agreed to be bound by oral order of the Commission.

                        17. 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 allow the equivalent of one well per 10 acres to be drilled in the S½ of Section 5, Township 7 South, Range 95 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation.

                        NOW, THEREFORE IT IS ORDERED, that the equivalent of one well per ten (10) acres is hereby approved to be drilled on a 320-acre drilling and spacing unit consisting of S½ of Section 5, Township 7 South, Range 95 West, 6^th P.M, for production from the Williams Fork Formation of the Mesaverde Group.

                        IT IS FURTHER ORDERED, that all future Williams Fork Formation wells shall be located downhole anywhere upon such lands but no closer than 100 feet from the outside boundary of the drilling and spacing unit unless such unit boundary abuts or corners lands in respect of which the Commission has not at the time of the drilling permit application granted the right to drill 10-acre density wells, in which event the well may be drilled downhole no closer than 200 feet from that portion of the unit boundary which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Williams Fork Formation wells has not been ordered by the Commission. Wells shall be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission.

                        IT IS FURTHER ORDERED, that all 10-acre density Williams Fork Formation wells shall be located downhole upon the application lands from two existing pads, one located on the application lands and one located off the applications lands with the possibility that a third pad may be needed.

                        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__________day of October, 2006, as of September 18, 2006.

                                                                        OIL AND GAS CONSERVATION COMMISSION

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

October 11, 2006