IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE CRAIG FIELD FOR COALBED METHANE IN MOFFAT COUNTY COLORADO Cause No. 474 Order No. 474-1

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on November 20, 1989 at 8:30 a.m., in Room 101, State Education Building, 201 East Colfax, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Cockrell Oil Corporation for an order establishing 320-acre drilling and spacing units for the production of methane gas from the Mesaverde coal seams in an undesignated area in Moffat County, Colorado.

FINDINGS

The Commission finds as follows:

1. That Cockrell Oil Corporation, as applicant herein, is an interested party in the subject matter of the above-referenced hearing.

2. That due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

3. That 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. That evidence presented at the hearing indicates that the Mesaverde coal seams constitutes a common source of supply of methane gas underlying the following described lands in Moffat County, Colorado, to-wit:

Township 6 North, Range 91 West, 6th P.M. Section 3: All Section 9: All Section 4: All Section 10: All

5. That in order to prevent the waste of oil and gas, as defined by law, to protect the correlative rights of all parties concerned; to prevent the drilling of unnecessary wells, and to insure proper and efficient development and promote conservation of the oil and gas resources of the State, an order should be made establishing 320-acre

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drilling and spacing units for the production of methane gas from the Mesaverde coal seams, underlying the lands defined herein; that said units should be 320-acres, more or less, and consisting of either the E/2 and W/2 or the N/2 and S/2 of a section according to the governmental survey thereof; and that the permitted well for each such drilling unit should be located at any place within each unit no closer than 600 feet from the outer boundary of said unit.

6. That all available geologic and engineering data concerning said Mesaverde coal seams indicates that one well will economically and efficiently drain an area of approximately 320-acres, and that drilling units of the size and shape hereinabove described are not smaller than the maximum area that can be efficiently drained by one well producing from said Mesaverde coal seams.

7. That additional rules be established for the protection of ground waters, the cementing of production casing, production tests, reporting of production data, and procedures to process confidentiality requests.

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O R D E R

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall apply hereafter to wells drilled, and completed or recompleted in the Mesaverde coal seams underlying the Craig Field herein described, in addition to other applicable rules and regulation and orders of the Commission, if any, heretofore adopted and not in conflict herein.

Rule 1: Three Hundred Twenty (320) acre drilling and spacing units shall be and the same are hereby established for the production of methane gas and associated hydrocarbons from the Mesaverde coal seams underlying the following described lands in the Craig Field, Moffat County, Colorado, to-wit:

Township 6 North, Range 91 West, 6th P.M. Section 3: All Section 9: All Section 4: All Section 10: All

Rule 2: Said drilling units shall consist of three hundred twenty (320) acres, and each such drilling unit shall be the N/2 and S/2 or the E/2 and W/2 of a governmental section; and the permitted well for each such drilling unit shall be located no closer than 600 feet from the outer boundary of such a unit.

Rule 3: All wells drilled shall have at least 300 feet of surface casing installed and cemented from setting depth to the surface by circulation methods,

Rule 4: All production casing strings shall be cemented from the casing shoe or total depth, whichever is shallower, to at least 500 feet above the uppermost gas-productive coal seam encountered in the borehole. The coal and fresh water zones above the Lewis shale shall be cemented up into surface casing, either by stage cementing techniques or during the cementing of the production string. Operators shall promptly notify the Commission if they are unable to successfully place cement into the base of the surface casing, what steps are proposed to determine the cement top, and what steps will be taken to correct the problem if necessary prior to any attempted completion efforts.

Rule 5: An initial completion report, Form 5, and basic logs shall be submitted within thirty (30) days of reaching total depth and the setting of production casing. The Form 5 shall contain all information including geologic data except perforated interval, treatments, production test data, and any special experimental data. This initial Form 5 shall be released upon processing by the Commission and shall not be granted "Confidential" status in accord with Rule 306. A complete Form 5 containing the data omitted on the initial report shall be submitted within one year from the setting of production casing or within six months from the date of first production, whichever comes first. The

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complete Form 5 shall be released upon processing by the Commission.

Rule 6: All fluid production, including any and all water, shall be reported on a monthly basis, as required by Rule 307, and a Certificate of Clearance, Form 10, shall be submitted as requested by Rule 310 of the Rules and Regulations of the Commission.

Rule 7: Any cathodic protection borehole shall be permitted and constructed as per State Division of Water Resources requirements. In addition, a Sundry Notice, Form 4, shall be submitted to the Commission indicating the location, total depth, aquifers penetrated, water quality, and borehole construction.

Rule 8: Completion practices including stimulation shall consider the construction of existing wells in the area capable of production as well as plugged and abandoned boreholes which penetrated the Mesaverde formation.

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IT IS FURTHER ORDERED, that the Rules and Regulations of the Commission shall govern all other matters pertaining to the production of methane gas from the Mesaverde coal seams until the Commission may issue further orders after giving notice and hearing.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith as all parties present at the hearing agreed to accept the verbal order of the Commission.

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 ,

1989, as of November 20, 1989.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dennis R. Bicknell, Secretary

Dated at Suite 380 1580 Logan Street Denver, Colorado 80203

1008A

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