Order No. 479-7, 440-19, 139-34, 510-4

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE WILLIAMS FORK FORMATION OF THE MESAVERDE GROUP FOR CERTAIN LANDS IN THE PARACHUTE, GRAND VALLEY AND RULISON FIELDS, GARFIELD COUNTY, COLORADO

Cause No. 510, 139, 440, 479 Order No. 479-7, 440-19, 139-34, 510-4

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on March 14, 2000 in the Boettcher Auditorium, Colorado History Museum, 1300 Broadway, on March 15, 2000 in Suite 801, the Chancery Building, 1120 Lincoln St., Denver, Colorado, on August 21 and 22, 2000 in the Convention Space at the Ramada Inn, Glenwood Springs, Colorado, on September 25, 26 and on October 30, 2000 in Suite 801, the Chancery Building, 1120 Lincoln St., Denver, Colorado on the verifie d supplemented application of Barrett Resources Corporation requesting an order from the Commission to establish 40-acre drilling and spacing units for certain lands in the Grand Valley Field and to allow additional wells to be drilled for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, the equivalent of one (1) well per 20 acres for certain lands in the Parachute, Grand Valley and Rulison Fields.

SUMMARY OF PROCEEDINGS

The Commission finds as follows:

1. Barrett Resources Corporation ("Barrett"), 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 April 20, 1990 the Commission issued Order No. 479-2, which established 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Mesaverde Formation for certain lands in the Grand Valley Field including:

Township 7 South, Range 96 West, 6th P.M. Section 12: E1/2 NW1/4

5. On February 21, 1995 the Commission issued Order Nos. 440-16, 479-5 and 139-28, which allowed up to sixteen (16) wells to be drilled and completed on 640-acre drilling and spacing units for production from the Williams Fork Formation of the Mesaverde Group for certain lands in the Parachute, Grand Valley and Rulison Fields including:

Township 6 South, Range 94 West, 6th P.M. Section 34: W1/2 SW1/4, SW1/4 NW1/4

Township 7 South, Range 94 West, 6th P.M. Section 3: NW1/4 NW1/4 Section 4: W1/2, NE1/4

Township 7 South, Range 95 West, 6th P.M. Section 3: N1/2 Section 4: N1/2 N1/2, S1/2 NE1/4, SE1/4 NW1/4, NW1/4 SE1/4

6. On February 21, 1995 the Commission issued Order Nos. 440-16, 479-5 and 139-28, which allowed up to eight (8) wells to be drilled and completed on 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group for certain lands in the Parachute, Grand Valley and Rulison Fields including:

Township 6 South, Range 94 West, 6th P.M. Section 16: S1/2, W1/2 NE1/4, E1/2 NW1/4 Section 17: SW1/4 SW1/4 Section 18: S1/2 SE1/4, NW1/4 SE1/4 Section 21: N1/2 NE1/4, SW1/4 NE1/4 Section 22: N1/2, SE1/4 Section 27: SW1/4 SW1/4, N1/2 SE1/4, SW1/4 SE1/4, NE1/4 SW1/4 Section 28: SW1/4, S1/2 NW1/4, W1/2 SE1/4 Section 29: S1/2, S1/2 NE1/4, SE1/4 NW1/4 Section 32: N1/2 NW1/4, SE1/4 NW1/4, NE1/4, N1/2 SE1/4 Section 33: S1/2, W1/2 NE1/4, N1/2 NW1/4, SE1/4 NW1/4, SE1/4 NE1/4, Lot 2

Township 6 South, Range 95 West, 6th P.M. Section 26: S1/2 SW1/4 Section 27: S1/2 SW1/4, SW1/4 SE1/4 Section 28: S1/2 SE1/4, E1/2W1/2 Section 31: SE1/4 SE1/4 Section 32: SW1/4, N1/2 SE1/4, SW1/4 SE1/4, SE1/4 NE1/4 Section 34: All Section 35: NW1/4 NW1/4

Township 6 South, Range 96 West, 6th P.M. Section 23: SW1/4 SW1/4 Section 27: NE1/4 NE1/4, S1/2 NE1/4, N1/2 SE1/4, SW1/4 SE1/4, SE1/4 SW1/4 Section 34: NE1/4 NW1/4, NW1/4 NE1/4, SW1/4 NW1/4

Township 7 South, Range 95 West, 6th P.M. Section 5: NW1/4 NW1/4 Section 6: E1/2 NW1/4, W1/2 NE1/4, NE1/4 NE1/4

Township 7 South, Range 96 West, 6th P.M. Section 1: NW1/4 NE1/4, SE1/4 SW1/4

7. On February 21, 1995, the Commission issued Order Nos. 440-16, 479-5 and 139-28, which allowed up to four (4) wells to be drilled and completed on 160-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group for certain lands in the Parachute, Grand Valley and Rulison Fields including:

Township 6 South, Range 95 West, 6th P.M. Section 33: S1/2, NE1/4, NE1/4 NW1/4, SW1/4 NW1/4

8. On May 16, 1994, the Commission issued Order No. 510-1, which allowed the permitted wells to be located no closer than 400 feet from the boundaries of any lease line and no closer than 800 feet from any existing well drilled and completed for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group for certain lands in the Grand Valley Field including:

Township 6 South, Range 96 West, 6th P.M. Section 17: E1/2, E1/2 W1/2 Section 20: N1/2, SE1/4, E1/2 SW1/4 Section 28: S1/2 NW1/4, N1/2 SW1/4 Section 29: NE1/4, NE1/4 NW1/4, NE1/4 SE1/4 Section 31: S1/2 NE1/4, N1/2 SE1/4 Section 32: SW1/4 NW1/4, N1/2 SW1/4, NW1/4 SE1/4

9. On January 18, 2000 Barrett, by its attorney, filed with the Commission a verified application, supplemented on January 19, 2000, requesting an order from the Commission to allow additional wells to be drilled for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, the equivalent of one (1) well per 20 acres for the lands described below. The permitted well should 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 should 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 clos er than 400 feet from any existing Williams Fork Formation well.

Township 6 South, Range 94 West, 6th P.M. Section 16: S1/2, W1/2 NE1/4, E1/2 NW1/4 Section 17: SW1/4 SW1/4 Section 18: S1/2 SE1/4, NW1/4 SE1/4 Section 21: N1/2 NE1/4, SW1/4 NE1/4 Section 22: N1/2, SE1/4 Section 27: SW1/4 SW1/4, N1/2 SE1/4, SW1/2 SE1/4, NE1/4 SW1/4 Section 28: SW1/4, S1/2 NW1/4, W1/2 SE1/4 Section 29: S1/2, S1/2 NE1/4, SE1/4 NW1/4 Section 32: N1/2 NW1/4, SE1/4 NW1/4 Section 33: S1/2, W1/2 NE1/4, N1/2 NW1/4, SE1/4 NW1/4, SE1/4 NE1/4, Lot 2 Section 34: W1/2 SW1/4, SW1/4 NW1/4

Township 6 South, Range 96 West, 6th P.M. Section 23: SW1/4 SW1/4 Section 27: NE1/4 NE1/4, S1/2 NE1/4, N1/2 SE1/4, SW1/4 SE1/4, SE1/4 SW1/4 Section 34: NE1/4 NW1/4, NW1/4 NE1/4, SW1/4 NW1/4

Township 7 South, Range 94 West, 6th P.M. Section 3: NW1/4 NW1/4 Section 4: W1/2, NE1/4

Township 7 South, Range 95 West, 6th P.M. Section 3: N1/2 Section 4: N1/2 N1/2, S1/2 NE1/4, SE1/4 NW1/4, NW1/4 SE1/4 Section 5: NW1/4 NW1/4 Section 6: E1/2 NW1/4, W1/2 NE1/4, NE1/4 NE1/4

Township 7 South, Range 96 West, 6th P.M. Section 1: NW1/4 NE1/4, SE1/4 SW1/4 Section 12: E1/2 NW1/4

10. In addition, Barrett requested an order establishing 40-acre drilling and spacing units for the below-listed lands previously unspaced, and requested the number of wells which can be drilled into and produced from the Williams Fork Formation to be the equivalent of one (1) well per 20 acres for the lands described below. The permitted well should be located no closer than 200 feet from the boundaries of a drilling unit and no closer than 400 feet f rom 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 should 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.

The lands described in Finding Numbers 9 and 10 are collectively the "Application Area" or the "application lands."

11. On March 2, 2000 a Local Public Forum on the application was held in Battlement Mesa, Colorado to consider potential issues related to the environment, public health, safety and welfare. A written summary and copies of the videotape from the Local Public Forum were provided to the Commissioners in advance of the March hearing.

12. Pursuant to Rule 527., the Commission staff convened a prehearing conference on March 8, 2000. Because Garfield County (the "County") intervened in the application, under Rule 508.i.(4) a Public Issues Hearing was required. The parties agreed that the technical hearing would be bifurcated from consideration of the environmental and public health, safety and welfare issues raised by the County and the intervenors to the Public Issues Hearing.

COLORADO OIL AND GAS ASSOCIATION INTERVENTION

13. On March 1, 2000, the Colorado Oil and Gas Association ("COGA") filed with the Commission a Motion to Intervene to support Barrett's application in the public interest pursuant to Rule 509. On March 10, 2000 COGA supplemented its motion by recommending the Commission consider revisions to Rules 515. and 516. At the March hearing, the Commission granted COGA's motion to intervene.

BUREAU OF LAND MANAGEMENT PROTEST

14. On March 2, 2000, the Bureau of Land Management ("BLM") filed with the Commission a letter of protest based on impact to federal lands. On March 10, 2000, the BLM filed a letter withdrawing the protest and supporting the application.

MACKLEY GROUP AND SAVAGE PROTESTS AND MOTIONS

15. On March 3, 2000, Arnold L. and Darleen E. Mackley, Paul A. and Carla R. Bernklau, Gary E. and Gloria J. Martin, Nancy Kay Force and Steven. L. and Carol L. Collins (collectively, the "Mackley Group"), surface and mineral owners, filed with the Commission a protest to the application. The filing also included a Motion for Continuance to the July 2000 hearing. At the March hearing the motion to continue was denied.

16. Arguments were made at the March hearing on the Protest, Application for Acceptance of Late Protest and Motion for Continuance on behalf of Joan Savage who owns one-half of the unleased minerals in Section 32, Township 6 South, Range 94 West, 6th P.M. Barrett withdrew the NE1/4 and the N1/2 SE1/4 of Section 32 from the application since the notice of hearing was not personally served on Ms. Savage. The Commission therefore denied protest status t o Ms. Savage for the technical hearing but granted protest status for the Public Issues Hearing.

17. At the March hearing, the Commission denied the Mackley Group's Motion to Dismiss the Application.

GRAND VALLEY CITIZENS ALLIANCE INTERVENTION

18. On March 3, 2000 the Grand Valley Citizens Alliance ("GVCA") filed with the Commission a petition to intervene in the application in the public interest pursuant to Rule 509.

GARFIELD COUNTY INTERVENTION AND CONDITIONAL MOTION FOR CONTINUANCE

19. On March 8, 2000 a Motion of Board of County Commissioners of Garfield County for Intervention under Rule 509.(a)(2)(B) and Conditional Motion for Continuance of Hearing on Application was filed with the Commission on the application, to raise issues relating to impacts on the environment and on public health, safety and welfare arising out of the application. The County intervened by right pursuant to Rule 509.a.

20. On March 8, 2000 the Motion for Continuance was mooted by the parties' agreement, stated at the Prehearing Conference, to defer all issues related to the environment, public health, safety and welfare to the Public Issues Hearing.

APPLICANT'S MOTIONS

21. At the March hearing, the Applicant made a Motion to Dismiss Mackley Group Protest. The Applicant argued that most of the protestants were not "owners" as defined by the Oil and Gas Conservation Act and that surface owners had no standing regarding the technical merits of the application. The Commission granted the Applicant's motion and denied the protest with respect to the technical hearing, but granted the Mackley Group intervenor status for the Public Issues Hearing.

22. At the March hearing, after the parties' seeking protestant status was denied, Barrett's Motion to Quash Subpoena of Mackley Group was declared moot.

23. On March 6, 2000 the Applicant filed Motion to Strike COGCC Director's February 10, 2000 Written Communication to the Commission and Request to Prohibit Director from Giving Testimony or Submitting Evidence at Hearing. After hearing arguments in opposition to the Motion by the County and after hearing suggestions and clarification by the Director, the Commission denied the Motion.

TECHNICAL EVIDENCE

24. The Commission heard expert testimony from Joe Barrett, Senior Vice President, Land for Barrett regarding ownership of the land in the Application Area, who testified that there are now 8821 acres included in the Application Area. In addition, Mr. Barrett testified that letters written in support of the application have been received from owners on 4605 acres of the Application Area. He further testified that all affected drilling units in the Ap plication Area are subject to pooling or unitization agreements for the Williams Fork Formation, making a change to the Application Area difficult to administer. Mr. Barrett also testified that in order to maintain year round drilling, additional well locations were needed in Barrett's inventory.

25. The Commission heard expert testimony from Robert Mueller, Chief Geologist for Barrett regarding the geologic development in the area, who opined that the Williams Fork Formation is discontinuous and compartmentalized across the Application Area and that granting the application would minimize waste and maximize production from the Williams Fork Formation.

26. The Commission heard expert testimony from Paul Branagan, Consulting Physicist and past technical manager for the Department of Energy's MWX Geologic/Geophysical Research Project located in the Rulison Field regarding the geologic development of the Williams Fork Formation who opined that additional wells were appropriate to prevent waste and maximize production.

27. The Commission heard expert testimony from Ted Brown, Manager of Engineering for Barrett regarding the drainage of the Williams Fork reservoir underlying the Application Area, who opined that additional wells would increase the productive capability of the Application Area. He further testified that based on current indicators, Barrett considered approximately eighty (80) well locations within the Application Area as economic.

28. Based on the technical testimony presented by the Applicant the Commission found that current well density does not allow drilling and spacing units previously designated by the Commission to be efficiently and economically drained, and that based on geological and engineering data presented at the hearing, additional wells are necessary to allow the gas to be produced at its maximum efficient rate, to prevent waste and protect correlative rights, and to efficiently and economically recover gas from the Williams Fork Formation of the Mesaverde Group within the Application Area. Further, the Commission found that 40-acre drilling and spacing units should be established for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group for certain previously unspaced lands in the Grand Valley Field, allowing additional wells to be drilled on said units, the equivalent of one (1) well per 20 acres.

STAFF ANALYSIS

29. At the March hearing, the Director recommended that based on a review of adjacent pilot projects, an additional well is necessary to be drilled on 20-acre drilling and spacing unit density in order to efficiently and economically recover gas from the Williams Fork Formation of the Mesaverde Group, with conditions applied in accordance with those described in his March 14, 2000 memo (Staff Exhibit 1) and his March 15, 2000 memo (Staff Exhibit 3) to the Commissioners. The Director also indicated that he intended to present additional staff analysis of the Applicant's economic analysis at the Public Issues Hearing related to directional drilling.

30. The Director recommended that any order granting the application require: 1) new subsurface well locations to be located uniformly and as close as practicable to the ideal locations in the center and corners of each quarter/quarter section as depicted in Figure 1 of Staff Exhibit 1 and 2) application lands be amended to conform to established drilling and spacing unit boundaries.

PUBLIC COMMENT/PARTICIPATION

31. Letters in opposition to the application were received from Elaine Cloninger, Paul and Carla Bernklau and the Colorado Division of Wildlife.

32. Letters in support of the application were received from Chevron Shale Oil Company, Tom Brown, Inc., Lester Langstaff, Puckett Land Company, Jack Vassar and Marilyn Heath and Carl Bernklau/Hill Top Farm.

FINDINGS

33. Based on the facts stated in the application and the testimony and exhibits presented by the Applicant at the March Hearing, the Commission finds that the request for an order establishing 40-acre drilling and spacing units for the previously unspaced lands described in Finding #10 should be approved and that additional wells should be allowed to be drilled for the production of gas and associated hydrocarbons from the Williams Fork Formation of th e Mesaverde Group, the equivalent of one (1) well per 20 acres for the lands described above in Findings #9 and #10. The permitted well should 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 applic ation lands should 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.

PUBLIC ISSUES HEARING

34. The Commission convened a Public Issues Hearing in Glenwood Springs on August 21 and 22, 2000.

35. A motion was made by Garfield County regarding the issue of presumption. The Commission unanimously denied the motion.

36. A motion was made by the Mackley/Savage Group to compel. The motion was withdrawn with respect to the AFE's and clarified that Garfield County is a party to the motion. The Commission unanimously denied the motion.

37. A motion was made by Barrett to exclude the testimony of Val Grant. Chair Sonnenberg's recommended the Commission deny the motion and consider the testimony during deliberation. The Commission unanimously denied the motion.

38. A motion was made by GVCA to include written materials into the record without presentation or discussion. The Commission unanimously denied the motion.

39. The Commission unanimously approved adopting the prehearing order setting forth the process for the Public Issues Hearing.

40. A motion was made by Barrett and seconded by COGA to strike the staff analysis. The Commission denied the motion.

41. The Commission continued the Public Issues Hearing in Denver on September 25 and 26, 2000.

42. At the September hearing, the Commission approved a modification to the prehearing order recommended by the Deputy Attorney General. In addition, the Commission approved the request by COGA to allow all parties equal time for closing statements.

43. The Commission granted the Mackley/Savage Group's request to file with the Commission a written response to Barrett's September 21, 2000 hearing brief on Tuesday, September 26.

44. The Commission granted Barrett's request to allow closing statements to be made on Tuesday, September 26.

45. The Commission continued the Public Issues Hearing in Denver on October 30, 2000 and requested the Director review the sets of conditions previously agreed to by the Intervenors and Barrett to determine whether any of the conditions should be included in the order.

46. At the October hearing, the Commission voted unanimously to not include any conditions previously agreed upon by the parties in the order.

47. Motions were made by the County, GVCA and the Mackley/Savage Group to modify the order language. The Commission unanimously denied the motions.

STAFF ANALYSIS

48. At the August hearing the Director presented and discussed the August 21, 2000 memorandum to the Commission containing staff's analysis addressing surface issues that are generally considered to be of an environmental and public health, safety and welfare nature which are the subject of the Public Issues Hearing. This document expanded upon and updated the staff analysis presented at the March 14 and 15, 2000 technical hearing.

49. At the September hearing the Director presented and discussed the September 19, 2000 and September 21, 2000 memoranda to the Commission containing staff's analysis. In addition, the Director presented draft order language to the Commission proposed to include in the order.

50. At the October hearing the Director presented and discussed the October 26, 2000 staff analysis on documents presented by the parties at the September hearing regarding conditions proposed by the parties for inclusion into the order that had agreed upon prior to the August hearing. The Director recommended language to be included in the order in four additional areas.

APPLICANT'S EVIDENCE

51. The Commission heard expert testimony from Duane Zavadil, Environmental, Health, and Safety Manager for Barrett regarding Barrett's plan to protect the environment who testified that, along with the Commission's existing rules, the proposed plan would ensure protection of the environment from increased density wells.

52. The Commission heard expert testimony from Craig Kling, Wildlife Biologist for TRC Mariah on behalf of Barrett who testified on the 2000 Operational Policy for the increased well density application area. Mr. Kling opined that the Policy would adequately protect wildlife in areas of increased well density.

53. The Commission heard expert testimony from David Chenoweth, Soil Scientist for Western States Reclamation who testified on the 2000 Reclamation Plan for the increased well density application lands. Mr. Chenoweth opined that the Plan would adequately address reclamation in the areas of increased well density.

54. The Commission heard expert testimony from Dean Brooks of Directional Petroleum Corporation who testified in support of Barrett's directional drilling plans. Mr. Brooks opined that the plans were technically feasible and cost-effective for certain lands proposed for increased well density.

55. On September 19, 2000 written rebuttal testimony was submitted by Duane Zavadil regarding reclamation and wildlife issues.

56. On September 19, 2000 written rebuttal testimony was submitted by David Chenoweth regarding reclamation issues.

57. On September 19, 2000 written rebuttal testimony was submitted by Craig Kling regarding wildlife issues.

58. On September 19, 2000 written rebuttal testimony was submitted by Robert Mueller regarding geology and methodology for prudent 40-acre/20-acre development of the Williams Fork Formation of the Mesaverde Group.

59. On September 19, 2000 written rebuttal testimony was submitted by Ted Brown regarding engineering and economics issues.

60. On September 19, 2000 written rebuttal testimony was submitted by Dean Brooks regarding feasibility and economics of directional drilling in the Rulison Field.

61. On September 19, 2000 written rebuttal testimony was submitted by A.R. Briggs, Professional Engineer regarding gas prices and economics for directional drilling in Garfield County.

62. On September 19, 2000 written rebuttal testimony was submitted by Steve Soychak, District Manager for Barrett regarding issues raised during the August 21, 2000 field tour.

63. On September 19, 2000 written rebuttal testimony was submitted by Owen Phillips, Professor of Economics at the University of Wyoming regarding economic impact estimates of Barrett's current and projected natural gas production in Garfield County.

COGA'S EVIDENCE

64. The Commission heard testimony from Greg Schnacke, Executive Vice President for COGA, who testified in support of Barrett's application and to assist the Commission to consider aspects of the application that are of general importance to the industry and the public interest, in particular, the significance of the Barrett application with respect to national and state energy needs.

65. On September 13, 2000 written supplemental testimony was submitted by COGA presenting resolutions by the COGA Board of Directors and the Club 20 Board of Directors.

66. On September 19, 2000 written rebuttal testimony was submitted by Greg Schnacke regarding issues raised by the staff analyses.

MACKLEY/SAVAGE GROUP EVIDENCE

67. The Commission heard testimony from Arnold Mackely in support of the Mackley/Savage Group's position and viewed a video showing impacts from gas operations in and adjacent to the application lands.

68. The Commission heard expert testimony from Jack McCartney regarding feasibility and economics of directional drilling for increased well density in Garfield County. Mr. McCartney opined that the drilling of directional wells for the development of the Williams Fork reservoir on the application lands is technically and economically feasible.

69. On September 13, 2000 written supplemental testimony was submitted by Jack McCartney regarding feasibility and economics of directional drilling for increased well density in Garfield County.

70. On September 19, 2000 written rebuttal testimony was submitted by Jack McCartney regarding feasibility and economics of directional drilling for increased well density in Garfield County.

GVCA EVIDENCE

71. The Commission heard expert testimony from Val Grant, Wildlife Biologist regarding impacts to wildlife from gas operations in Garfield County.

72. The Commission heard testimony from Steve Yamashita, Colorado Department of Wildlife regarding impacts to wildlife from gas operations in Garfield County.

GARFIELD COUNTY EVIDENCE

73. The Commission heard testimony from Larry McCown, Garfield County Commissioner in support of the County's position. Mr. McCown stated that the County prefers one well location on each 40-acre tract or in the alternative, would like the Commission to adopt as part of the order the terms and conditions agreed to by the County and Barrett.

74. The Commission heard testimony from Mark Bean, Garfield County Planner regarding the County's Comprehensive Plan adopted in 1981. He expressed the County's concerns associated with 20-acre well density in the Rulison Field.

75. The Commission heard testimony from Edward Redente, Rangeland Ecosystem Science Department at Colorado State University regarding surface impacts from increased well density and Barrett's current reclamation practices. Mr. Redente opined that additional reclamation requirements are necessary to adequately protect the application lands.

76. The Commission heard testimony from Bonnie Carson, Science Applications International Corporation regarding an environmental review of the Commission's rules and regulations as related to the Rulison Field. Ms. Carson opined that the rules are not sufficient to address environmental impacts in the Rulison Field.

77. On September 12, 2000 written supplemental testimony was submitted by Edward Redente regarding reclamation issues.

78. On September 12, 2000 written supplemental testimony was submitted by Bonnie Carson regarding environmental and human health, safety and welfare benefits resulting from drilling multiple wells from a single wellpad in the Rulison Field south of the Colorado River.

79. On September 19, 2000 written rebuttal testimony was submitted by Bonnie Carson regarding potential adverse environmental impacts from increased well density.

80. On September 19, 2000 written rebuttal testimony was submitted by David Bauer, Geologist and Civil Engineer for Shepherd Miller, Inc. regarding geology, increased well density, directional drilling and economics issues.

PUBLIC COMMENT/PARTICIPATION

81. Pursuant to Rule 510., thirty-six (36) citizens, the majority from Garfield County, made statements at the August Public Issues Hearing regarding potential impacts to the environment, public health, safety and welfare issues from increased well density.

82. Pursuant to Rule 510., written statements were received from fifty-seven (57) citizens regarding potential impacts to the environment, public health, safety and welfare issues from increased well density.

FINDINGS

83. Based on the verified application, the field tour, and the testimony and exhibits presented at the August and September Public Issues Hearing, and pursuant to C.R.S. 34-60-106(2)(d) and Rule 508.j., the Commission finds as follows:

a. Twenty (20) acre surface well density may result in significant adverse environmental impacts on air, water, soil, and biological resources, and may adversely affect public health, safety and welfare. Evidence in the hearing record indicates that adverse impacts may include:

? excessive erosion of steep cuts and fills;

? decrease in quality of surface and ground water;

? excessive airborne dust;

? excessive noise;

? unacceptable land damage and scarring, and invasion of noxious weeds, due to insufficient or failed reclamation;

? wildlife disturbance;

? excessive fumes and odors; and

? increased traffic and road development.

b. The rules and regulations of the Commission are insufficient to completely and adequately address significant adverse impacts to the environment and public health, safety, and welfare raised by this application.

c. It is necessary to attach the certain conditions to the order on the application, to prevent and mitigate significant adverse environmental impacts and to protect public health, safety and welfare.

d. These conditions are cost-effective and technically feasible to the extent required by C.R.S. 34-60-106(2)(d) and Rule 508.j.

ORDER

NOW, THEREFORE, IT IS ORDERED, that additional wells are hereby allowed to be drilled for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, the equivalent of one (1) well per 20 acres for 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.

Township 6 South, Range 94 West, 6th P.M. Section 16: S1/2, W1/2 NE1/4, E1/2 NW1/4 Section 17: SW1/4 SW1/4 Section 18: S1/2 SE1/4, NW1/4 SE1/4 Section 21: N1/2 NE1/4, SW1/4 NE1/4 Section 22: N1/2, SE1/4 Section 27: SW1/4 SW1/4, N1/2 SE1/4, SW1/2 SE1/4, NE1/4 SW1/4 Section 28: SW1/4, S1/2 NW1/4, W1/2 SE1/4 Section 29: S1/2, S1/2 NE1/4, SE1/4 NW1/4 Section 32: N1/2 NW1/4, SE1/4 NW1/4 Section 33: S1/2, W1/2 NE1/4, N1/2 NW1/4, SE1/4 NW1/4, SE1/4 NE1/4, Lot 2 Section 34: W1/2 SW1/4, SW1/4 NW1/4

Township 6 South, Range 96 West, 6th P.M. Section 23: SW1/4 SW1/4 Section 27: NE1/4 NE1/4, S1/2 NE1/4, N1/2 SE1/4, SW1/4 SE1/4, SE1/4 SW1/4 Section 34: NE1/4 NW1/4, NW1/4 NE1/4, SW1/4 NW1/4

Township 7 South, Range 94 West, 6th P.M. Section 3: NW1/4 NW1/4 Section 4: W1/2, NE1/4

Township 7 South, Range 95 West, 6th P.M. Section 3: N1/2 Section 4: N1/2 N1/2, S1/2 NE1/4, SE1/4 NW1/4, NW1/4 SE1/4 Section 5: NW1/4 NW1/4 Section 6: E1/2 NW1/4, W1/2 NE1/4, NE1/4 NE1/4

Township 7 South, Range 96 West, 6th P.M. Section 1: NW1/4 NE1/4, SE1/4 SW1/4 Section 12: E1/2 NW1/4

IT IS FURTHER ORDERED, that 40-acre drilling and spacing units are hereby established for the below-listed lands previously unspaced, and the number of wells which can be drilled into and produced from the Williams Fork Formation shall be the equivalent of one (1) well per 20 acres for 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 existin g 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.

IT IS FURTHER ORDERED, that the following shall be applied to all new surface wellsites and existing surface wellsites on which new wells are drilled that will be constructed in the application lands, in addition to any requirements of applicable existing Commission Rules and Regulations:

Site Specific Reclamation Plan Requirements The operator shall submit a site-specific reclamation plan along with each Application for Permit-to-Drill, Form 2 ("APD") for all wells in the application lands for prior approval by the Director. The Applicant's "2000 Reclamation Plan" is recognized and endorsed as a suitable guidance document for wellsite and access road design, construction, and reclamation in the application lands. The operator shall pro vide an informational copy of the APD, the Drill Site/Access Road Reclamation, Form 2A, and the site-specific reclamation plan to the surface owner and a complete informational copy of the APD and all other attachments, including the site-specific reclamation plan, to the Garfield County Local Governmental Designee ("LGD") at or before the time of filing with the Director. The Director shall provide the Garfield County LGD with formal notice of the filin g of the APD by providing a complete copy of the APD and all other attachments, including the site-specific reclamation plan, to the Garfield County LGD. The operator shall confirm that the requirement to provide the surface owner with a copy of the APD has been completed or waived before the Director approves an APD. A copy of the approved APD, including any conditions of approval, shall be provided by the Director to the Garfield County LGD and to the operator. The operator shall provide a copy of the approved APD, including any conditions of approval, to the surface owner prior to commencement of operations with heavy equipment. The provisions of the site-specific reclamation plan may be attached as conditions of approval for the Permit-to-Drill. The discretionary provisions of the plan should be structured according to the outline shown in Appendix 1. The plan shall contain the following mandato ry provisions:

Interim and Final Reclamation Goals Considering Surface Owner Input

Schedule and Milestones for Reclamation

Revegetation Reference Areas The operator shall identify the revegetation reference areas and provide a description, photographs and a location map.

Soil Horizons The operator shall conduct a high intensity soil survey by mapping, sampling, and analysis and describe methods that were used for this determination.

Wellsite Diagrams Cut and fill diagrams for construction of wellsite, including cross sections and plan views with topographic contours.

Site map showing the location of the wellbore, drilling and completion pits, access road, soil stockpiles, and layout of drilling and completion equipment.

Interim reclamation diagrams showing wellsite layout for life of well, including fencing, reclaimed and unreclaimed areas, and layout of production facilities.

Final reclamation diagrams showing the former wellsite after plugging and abandonment of the well including cross sections and plan views.

Favorable Growth Medium Requirements A minimum of twelve (12) inches of favorable growth medium shall be reapplied during interim and final reclamation of non-crop land. If this quantity of material is not available, existing soils shall be treated with amendments and fertilizer to create a favorable growth medium. Rocks greater than eight (8) inches in diameter shall not make up more than ten percent (10%) of the favorable growth medium.

Mulching Requirements All wellsites, access roads, and flowline and gathering line right-of-ways shall be mulched immediately after seeding with a weed free straw or other type of weed free mulch.

Fencing Requirements Wellsites shall be fenced to ensure success of interim and final revegetation. Once revegetation has been shown to be successful, fencing may be removed.

Site Slope and Recontouring Requirements

Steep Slope Restriction To maintain site stability and productivity, surface disturbance for oil and gas wellsites shall not be allowed on slopes greater than fifty percent (50%).

Interim Reclamation All disturbed areas not reasonably needed for production operations, including wellsites, flowline and gathering line right-of-ways and access roads, shall be recontoured by placing fill material back into cut areas to approximate original contours. Slopes shall be recontoured to minimize areas that exceed a 3:1 slope. Any areas exceeding the 3:1 slope criteria or highwalls shall be reclaimed using enhanced stabilization and erosio n prevention methods. Areas recontoured during interim reclamation shall be reseeded with the intent of establishing vegetation suitable for final reclamation.

Final Reclamation Additional disturbance of native or previously reclaimed areas shall be minimized. Recontouring shall not be required in areas that have been successfully reclaimed. Slope requirements shall be the same as those for interim reclamation.

Reclamation Success Monitoring And Revegetation Inspections The operator shall hire a third party contractor to monitor and inspect until interim and final reclamation and revegetation efforts meet or exceed ninety percent (90%) of the desirable plant cover found on the previously identified and approved reference areas and meet the 1000 Series Rule requirements.

The operator shall submit a written report on the success of the reclamation and revegetation to the Director on an annual basis by December 31st of each year. This report shall include photographs of each site and the reference areas, and discussion of any additional work required to achieve the 90 percent (90%) plant cover and other reclamation requirements.

Sanitary Facilities Requirements l operator and contract personnel are required to use self-contained sanitary facilities while conducting oil and gas operations in the application lands.

Spill Reporting To Surface Owners the event of a spill of E&P waste or any hazardous substance, the operator shall immediately notify the surface owner(s) of the land(s) where the spill occurred and any adjacent lands that may be impacted of the quantity, location, and type of substance released. Surface owners shall be notified in writing if telephone or other verbal communication is unsuccessful.

Surface Casing Setting Depth and Shoe Integrity Requirements The requirements in the COGCC staff documents "Notice to All Operators Drilling Williams Fork Formation Wells in Garfield County, Surface Casing Depth and Modification of Leakoff Test Requirements" dated July 24, 1998, and "Notice to All Operators Drilling Williams Fork Formation Wells in the Grand Valley Field, Garfield County, Surface Casing Depth Requirements" dated August 9, 1998 are hereby adopted as they apply to the application lands.

The operator shall perform a surface casing shoe integrity test on all wells drilled within the application lands. Each surface casing shoe integrity test shall be designed to test the drilled out surface casing shoe to a pressure equivalent to the hydrostatic pressure exerted by a full column of mud with the maximum mud weight anticipated during the drilling of the well plus an additional one-half (1/2) pound per gallon. The maximum mud weight anticipa ted during the drilling of the well for the purpose of the surface casing shoe integrity test shall be determined for each well by the operator. If at any depth during the drilling of the well the actual mud weight exceeds the anticipated mud weight used for the surface casing shoe integrity test, the operator shall be required to set and cement a string of either intermediate casing or production casing at that depth.

The operator shall report the results of the surface casing shoe integrity test, including the mud weight used, the pressure applied, and the total calculated mud weight equivalent, to the Director via facsimile or e-mail within twenty-four (24) hours of conducting the test. The report shall not be required if the surface casing shoe integrity test is witnessed by a COGCC representative.

Loss of Well Control Notice to Residents In the event of a surface or subsurface loss of well control, the operator shall notify all residents within one (1) mile of the well as soon as possible. The residents shall be notified in writing if telephone or other verbal communication is unsuccessful.

Wildlife Requirements The operator shall notify the Colorado Division of Wildlife ("CDOW") of the location of any proposed additional wellsites and advise the Director of the date such notice was provided. If the Director receives comments from the CDOW within ten (10) days of the date notice was provided, such comments may be considered in applying Rule 508.j(3)B. conditions. The Applicant's 2000 Wildlife Plan is recognized and endorsed as a suitable guidance document for wildlife.

Water Well Sampling Requirements The operator shall select for sampling six (6) water wells or springs located within or in close proximity to the area of drilling activity planned for each year. A list of the selected wells or springs shall be submitted to the COGCC by January 31st of that year. Each well or spring to be sampled shall be no further than one (1) mile from the perimeter of that year's drilling activity. If fewer than six (6) wells or s prings exist within one (1) mile of the year's drilling activity the operator shall sample all such wells and springs.

The water samples shall be tested for benzene, toluene, ethylbenzene, and xylenes, methane, major cations and anions, TDS, iron and manganese, nitrates, nitrites, pH, presence of bacteria, specific conductance, and hydrogen sulfide.

The initial baseline testing shall occur prior to the drilling of the proposed additional wells. Within one (1) year after completion of the proposed additional wells, a "post completion" test shall be performed for the same parameters above and repeated three (3) and six (6) years thereafter. If no significant changes from the baseline have been identified after the six (6) year test, then no further testing shall be required. Additional "post complet ion" test(s) may be required if changes in water quality are identified during follow-up testing. The Director may require the operator to conduct further water well sampling at any time in response to complaints from water well owners.

If free gas or a methane concentration greater than 2 mg/L is detected, then a sample of the gas shall be collected and analyzed for composition and the ratio of stable carbon isotopes in the methane to determine gas type (thermogenic, biogenic or mixture). If the testing results indicate biogenic gas, then no further isotopic testing shall be required. If the results indicate thermogenic gas or a mixture of biogenic and thermogenic gas, the operator an d the Director shall determine an investigation strategy to determine the source of the gas.

Copies of all test results described above shall be provided to the COGCC, Garfield County, and the landowner where the water quality testing well is located within three (3) months of collecting the samples used for the test.

Air Emission Requirements The operator shall install emission control equipment on production facilities located within one thousand (1,000) feet of an occupied building or in response to an odor complaint investigation that identifies an offending facility greater than one thousand (1,000) feet from an occupied building.

ADDITIONAL REQUIREMENTS

Annual Drilling Plan The operator shall provide the Director a projected calendar year drilling plan prior to December 1st of each preceding year. The operator shall not be bound by this plan which would be expected to be adjusted in response to changes in product prices, rig availability, corporate priorities and other factors.

Review of First Year Implementation of Order Provisions The Director shall prepare and present an assessment of the first year implementation of the order. The assessment report shall include a map showing the locations of new wells permitted in the application lands and information regarding the number of onsite inspections conducted, public health, safety, and welfare and environmental issues raised during the onsite inspections, site specific drillin g permit conditions of approval that have been applied, and any other relevant information. The Director shall provide, no later than December 1, 2001, a draft of the assessment report to the applicant, Colorado Oil and Gas Association, Garfield County, the Mackley/Savage Group, and the Grand Valley Citizens Alliance who shall have the opportunity to provide their comments on the report to the Director. The Director shall provide the final assessment re port to the Commission no later than December 31, 2001. The Commission may use the assessment report as a basis for discussion of the implementation of the order, and to decide if any further Commission action is necessary.

Specified Surface Wellsite Lands On certain lands within the application lands comprised of thirty-three (33) typically 40-acre quarter/quarter sections and designated "Specified Surface Wellsite Lands" there shall be no more than four (4) new surface wellsites constructed as depicted as the red-shaded areas in Figure 1. The referenced red-shaded areas are the projected approximate outlines of the allowable new surface wellsites and would be expected to vary somewhat when surveyed and constructed. New wells drilled from existing surface wellsites shall be located no more than one hundred fifty (150) feet from an existing wellhead on the site.

The Specified Surface Wellsite Lands in Township 6 South, Range 94 West include: the NE1/4 SE1/4 and the W1/2 SE1/4 of Section 27; the SW1/4, the S1/2 NW1/4, and the W1/2 SE1/4; of Section 28; the SE1/4 and the SE1/4 NE1/4 of Section 29; the E1/2 NW1/4, the NW1/4 NW1/4, Lot 2, the W1/2 NE1/4, the SE1/4 NE1/4, the NE1/4 SW1/4, the NW1/4 SE1/4 and the E1/2 SE1/4 of Section 33; and the W1/2 SW1/4 and the SW1/4 NW1/4 of Section 34.

The Specified Surface Wellsite Lands in Township 7 South, Range 94 West include: the NW1/4 NW1/4 of Section 3 and the E1/2 NE1/4 and the SW1/4 NE1/4 of Section 4.

The four allowable new surface wellsites would be located in the following typically 10-acre quarter/quarter/quarter sections: the NE1/4 SW1/4 SE1/4 of Section 29, Township 6 South, Range 94 West; the SW1/4 NW1/4 SE1/4 of Section 29, Township 6 South, Range 94 West; the SE1/4 SE1/4 NE1/4 of Section 29, Township 6 South, Range 94 West; and the NW1/4 SW1/4 NE1/4 of Section 4, Township 7 South, Range 94 West.

Any new surface wellsite other than those described above in the Specified Surface Wellsite Lands requested by the operator may be approved administratively by the Director only with the concurrence of the surface owner and Garfield County. If an alternative surface wellsite is not approved administratively by the Director, the operator may apply for a Commission hearing to request approval. The surface owner and Garfield County would be granted interve ntion by right in such a hearing.

Onsite Inspections The Director shall conduct an onsite inspection: for any APD any new wellsite within five hundred (500) feet of the outer edge of riparian or wetland vegetation; whenever the operator and surface owner have not entered into a surface use agreement specifically addressing the proposed wellsite and access road; whenever the surface wellsite is proposed to be located within any subdivision that has been approved by Garfield County; or whe never the LGD believes that a significant adverse environmental impact or adverse impact to public health, safety and welfare may occur and requests an onsite inspection within seven (7) days from the day the Director sends the APD to the LGD per Rule 303.d. The Director may also conduct an onsite inspection to investigate conditions that threaten to cause a significant adverse environmental impact or that threaten to adversely impact public health, safe ty and welfare. The Director shall report any onsite inspections conducted at the monthly Commission hearing following the date on which any onsite inspection was conducted.

When the Director conducts an onsite inspection, the Director shall invite representatives of the surface owner, the operator, and LGD to attend. The Director shall attempt to select a mutually acceptable time for the representatives to attend. The inspection shall be conducted within ten (10) days, or as soon as practicable thereafter, of the date on which the APD is received by the COGCC.

Site-Specific Drilling Permit Conditions of Approval Following the onsite inspection, the Director shall apply appropriate site-specific drilling permit conditions of approval, if necessary, to prevent or mitigate public health, safety and welfare or significant adverse environmental impacts taking into consideration cost-effectiveness and technical feasibility and relevant geologic and petroleum engineering conditions as well as prevention of waste, pro tection of correlative rights, and promotion of development. The Director shall carefully consider any relevant input from the surface owner and Garfield County and any conditions that have been agreed to between the surface owner, Garfield County and the operator with regard to potential conditions of approval. Surface owner damage compensation shall not be relevant to such consideration.

Examples of the types of impacts and conditions of approval that might be applied if determined necessary by the Director include (this list is not prescriptive or all inclusive):

a.) visual or aesthetic impacts - moving the proposed surface wellsite or access road to take advantage of natural features for screening; constructing artificial features for screening

b.) surface impacts - moving or reducing the size, shape, or orientation of the surface wellsite or access road to avoid disturbance of natural features or to enhance the success of future reclamation activities; using an existing surface wellsite or access road to avoid the impacts of new construction; using a closed drilling fluid system instead of reserve pits to avoid impacts to sensitive areas; directional drilling from an existing surface wellsite

c.) noise impacts - locating or orienting motors and compressors used in drilling, hydraulic fracturing, well completion, and production operations to reduce noise; installing sound barriers to achieve compliance with COGCC rules

d.) dust impacts - watering roads as necessary to control dust during drilling and completion operations

e.) ground water impacts - collecting and analyzing water and gas samples from existing water wells or springs; installing monitoring wells, collecting samples, and reporting water, gas and pressure data

f.) safety impacts - installing security fencing around wellheads and production equipment

g.) wildlife impacts - limiting drilling and completion operations during certain seasonal time periods when site-specific conditions warrant

h.) financial assurance - requiring additional financial assurance for sites with difficult reclamation conditions or if repeated reclamation attempts have been unsuccessful

If the operator objects to any of the conditions of approval for the Permit-to-Drill, the Director shall suspend the APD and properly notice and set the matter for the next regularly-scheduled Commission hearing at which time the Commission may determine conditions of approval for the Permit-to-Drill. The surface owner and Garfield County shall be granted intervention by right in such a hearing.

Hearing to Address Impacts If the Director has reasonable cause to believe that any existing or proposed oil and gas operations are causing, or are likely to cause, public health, safety and welfare or significant adverse environmental impacts within COGCC jurisdiction that may not be adequately addressed by COGCC rules or orders, the Director may properly notice and set the matter for the next regularly scheduled Commission hearing to request an order f or appropriate investigative or remedial action.

Subsurface Drilling Targets For Orderly Development To the extent practical and at the operator's discretion, bottom-hole locations for additional wells drilled in the application lands should generally be directed at two hundred (200) feet square drilling targets located at the center of each 10-acre quarter/quarter/quarter section. No more than two (2) Williams Fork Formation bottom-hole locations shall be located in any 40-acre quarter/quarter sectio n. To the extent practical and at the operator's discretion, the pattern of bottom-hole location development should generally be directed at either of the two (2) diagonal sets of two hundred (200) feet square drilling targets (NW-SE or NE-SW) in each 40-acre quarter/quarter section. Existing bottom-hole locations and surface wellsite locations will interrupt this pattern in some areas. To the extent practical and at the operator's discretion, the orie ntation pattern of diagonal sets of drilling targets should be continued across adjacent 40-acre quarter/quarter sections.

Emergency Preparedness Plan Any operator submitting an APD shall file and maintain an emergency preparedness plan related to the application lands with Garfield County. The operator shall report to the Commission on the status of such plans by December 31, 2000.

APPENDIX 1 RECLAMATION PLAN - OUTLINE OF DISCRETIONARY PROVISIONS

AFFECTED COMMUNITIES/HABITATS

PREDISTURBANCE INVENTORY AND SITE PLANNING Wellpad and Facility Site Construction, Roads, Pipelines

TOPSOIL AND SUBSOIL DETERMINATION AND SALVAGE

SOIL STOCKPILING

TEMPORARY REVEGETATION EFFORTS

SOIL AMENDMENTS AND FERTILIZERS

STABILIZATION AND INTERIM RECLAMATION

TOPSOIL AND WETLAND SOIL REPLACEMENT

FACILITY AND STRUCTURE REMOVAL

BACKFILLING, GRADING, AND RECONTOURING

SEEDBED PREPARATION/SOIL TILLAGE

SEEDING METHODS AND TIMES

SEED MIXTURES

EROSION CONTROL BLANKETS

OTHER SPECIAL PROVISIONS FOR EROSION CONTROL

WEED CONTROL PLAN

DESCRIPTION OF PROVISIONS TO MEET MANDATORY REQUIREMENTS FOR FAVORABLE GROWTH MEDIUM, MULCHING, FENCING, SLOPES AND RECONTOURING

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 November, 2000, as of October 30, 2000.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary Dated at Suite 801 1120 Lincoln Street Denver, Colorado 80203 November 29, 2000 ??

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