REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on June 15, 1990 at 8:30 a.m., in Room 101, State Education Building, 201 East Colfax, Denver, Colorado, after giving a Corrected Notice of Hearing, as required by law on the verified application of Cockrell Oil Corporation for an order extending the provisions of Order No. 474-1 to include certain additional lands for the production of coalbed methane from the Mesaverde coal seams in the Craig Field of Moffat County, Colorado and to allow a second well to be drilled for an experimental dewatering project.

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 on November 20, 1989 the Commission entered Order No. 474-1 which established the Mesaverde coal seams as a common source of supply of methane gas underlying the below listed lands, that 320-acre drilling and spacing units are not smaller than the maximum area that can be efficiently drained by one well producing from said Mesaverde coal seams, and that certain additional field rules are promulgated for the protection of ground waters:

TOWNSHIP 6 NORTH, RANGE 91 WEST, 6th P.M.

Section 3: All Section 9: All Section 4: All Section 10: All

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5. That on May 21, 1990, the Commission entered Order No. 474-2 which authorized a second well to be drilled on a 320-acre drilling and spacing unit where both wells will be produced by means of gas lift process to experimentally evaluate the gas lift process as a means of dewatering the coal seams.

6. That the matter has been heard by the Hearing Officer who recommends that the application be granted to extend the field rules of Cause No. 474-1 to include the below listed lands and that a second test well be authorized for the purposes of an additional dewatering test project to be located approximately 600 feet FNL and 2280 feet FEL of Section 34 which would be at a location approximately 1320 feet west of a proposed initial well for the drilling and spacing unit consisting of the N/2 of said Section 34;

TOWNSHIP 7 NORTH, RANGE 91 WEST, 6th P.M.

Section 26: All Section 33: All Section 27: All Section 34: All Section 28: All Section 35: All

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7. That additional Notice of Hearing as required by law should be given to all interested parties and that this order should be published in the newspapers as required by law and that copies of this order should be furnished to all interested parties allowing an additional period of time until June 30, 1990 for any interested party to file with the Commission a protest to the Order, and that should no protests be received by the Commission after the ten (10) day period, the additional provisions of this order should become effective.

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

Township 7 North, Range 91 West, 6th P.M.

Section 26: All Section 33: All Section 27: All Section 34: All Section 28: All Section 35: 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

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

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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.

IT IS FURTHER ORDERED, that a well may be drilled at a location approximately 600 feet FNL and 2280 feet FEL of said Section 34 which would be at a location approximately 1320 feet west of a proposed initial well on the drilling and spacing unit consisting of the W/2 of said Section 34, and that the two wells may be used in an experimental process to increase the dewatering rate of either or both wells.

IT IS FURTHER ORDERED, that this order shall be furnished to all interested parties and shall be published in the proper newspapers as required by law allowing an additional period until June 30, 1990 for any interested party to protest the granting of this Order No. 474-3 or to intervene by filing with the Commission a written protest or a notice to intervene briefly starting the basis of the protest or intervention. Such interested party, shall, at the same time, serve a copy of the protest or notice to intervene to the person filing the application. A fee of forty-five dollars ($45.00) shall accompany each document filed with the Commission. Any protest to the granting of this Order No. 474-3 shall be heard by the Commission at the regular hearing to be held on July 16, 1990 at 8:30 a.m. in Room 101, State Education Building, 201 East Colfax, Denver, Colorado.

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 on July 1, 1990 should no protests be received.

IT IS FURTHER ORDERED, that the Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal

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any and/or all of the above orders.

ENTERED this day of ,

1990, as of June 15, 1990.

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

June 15, 1990

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