REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on October 15, 1990 at 8:30 a.m., in Room 101, State Education Building, 201 East Colfax Avenue, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Fuel Resources Development Company, for an order to establish the Williams Fork Coal seams as a source of supply found at a depth of 3482 feet to 6440 feet in the Fuel Resources Development Company Well No. M-30-2-96-N located in the SW/4 SW/4 of Section 30, Township 2 North, Range 96 West and further to establish 320-acre drilling and spacing units for the production of methane gas from the Williams Fork coal seams in White River Dome Field, Rio Blanco County, Colorado, with the option of an additional well on each drilling and spacing unit.

FINDINGS

The Commission finds as follows:

1. Fuel Resources Development Company, 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. That evidence presented to the Hearing Officer indicates that the Williams Fork coal seams constitutes a common source of supply of methane gas underlying the following described lands in Rio Blanco County, Colorado to-wit:

Township 1 North, Range 96 West, 6th P.M. Sections 4, 5, 6, 8, 9: All

Township 2 North, Range 96 West, 6th P.M. Sections 16 through 22, 26 through 34: All

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Township 2 North, Range 97 West, 6th P.M. Sections 25 and 36: 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 drilling and spacing units for the production of methane gas from the Williams Fork coal seams, underlying the lands defined herein; that said units should be 320-acres, more or less, and consisting of a half section according to the governmental survey thereof; and that the permitted well for each such drilling unit should be located no closer than 600 feet from any unit line and no closer than 1200 feet from any other well producing or producible from the same source of supply.

6. That the Director, without additional notice or hearing, should be empowered to grant exceptions to well locations provided the owners of contiguous and cornering units toward which the proposed location would be moved file a waiver or consent in writing, agreeing to said exception and that the Director, without additional notice or hearing should be empowered to authorize the drilling of one (1) additional well per 320-acre unit upon a showing that such a well is geologically and economically justified for the lands defined herein.

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

8. 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.

9. That no protests to the application were received and the Hearing Officer recommends that the application be approved.

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 Williams Fork coal seams underlying the White River Dome Field herein described, in addition to other applicable rules and regulations 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 Williams Fork coal seams underlying the following described lands in the White River Dome Field, Rio Blanco, Colorado, to-wit:

Township 1 North, Range 96 West, 6th P.M. Sections 4, 5, 6, 8, 9: All

Township 2 North, Range 96 West, 6th P.M. Sections 16 through 22, 26 through 34: All

Township 2 North, Range 97 West, 6th P.M. Sections 25 and 36: All

Rule 2: Said drilling units shall consist of three hundred twenty (320) acres, and each such drilling unit shall consist of a governmental half 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, and no closer than 1200 feet from any other well producing or producible from the Williams Fork coal seams.

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. Blow-out preventors and kill line or lines shall be installed prior to drilling out from the surface pipe and be in good

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working order.

Rule 4: An intermediate casing string shall be run and cemented to the surface covering the Wasatch "G" sand. All production casing strings shall be cemented from the casing shoe or total depth, whichever is shallower, to at least 700 feet above the uppermost gas-productive coal seam in the Williams Fork Coal section. Operators shall promptly notify the Commission if they are unable to successfully place cement across the required formations and specify the depth of the coals not covered. Steps to determine the cement top, and the procedure taken to cover the coal sections, if necessary, shall be taken 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 required 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.

Rule 9: That the Director, without additional notice or hearing, shall be empowered to grant exceptions to well locations provided the owners of contiguous and cornering units toward which the proposed location would be moved, file a waiver or consent in writing agreeing to said exception, and that the Director, without additional notice or hearing, shall be empowered to authorize the drilling of one (1) additional well per 320-acre unit upon a showing that such a well is geologically and economically justified for the lands described herein above.

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 Williams Fork 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 ,

1990, as of October 15, 1990.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

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Dated at Suite 380 1580 Logan Street Denver, Colorado 80203

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