REPORT OF THE COMMISSION

This Cause came on for hearing before the Commission on April 26, 1999, at 8:30 a.m. in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing, as required by law on the application of J-W Operating Company, for an order to allow the drilling of one additional well in each 160-acre drilling and spacing unit for the lands located in Buffalo Grass Field, for production of gas and associated hydrocarbons from the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1. J-W Operating 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. On January 23, 1991, the Commission issued Order No. 489-1 which established 160-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Niobrara Formation underlying the below-listed lands in the Buffalo Grass Field, with the units to consist of a quarter section and the permitted well to be no closer than 900 feet from the boundaries of the quarter section upon which the well is located, with a tolerance of 100 feet in any direction.

Township 4 North, Range 47 West, 6th P.M. Sections 22 and 23: All Sections 26 and 27: All Sections 34 and 35: All

5. On March 8, 1999, J-W Operating Company, by its attorney, filed with the Commission a verified application for an order to allow additional wells to be drilled and completed for the production of gas and associated hydrocarbons from the Niobrara Formation, on each 160-acre drilling and spacing unit at the option of the operator. Subsequent wells shall be located no closer than 560 feet from the outer boundaries of said 160-acre drilling and spacing u nit.

6. Testimony and exhibits presented at the administrative hearing indicated the average calculated gas in place for the 160-acre units is approximately 1 BCF, with an average ultimate recovery of twenty-four percent (24%) from one well.

7. Testimony and exhibits presented at the administrative hearing indicated that selected wells drilled in Buffalo Grass Field are expected to be economically viable, with an additional well increasing the ultimate gas recovery rate to approximately forty percent (40%). Additional testimony and exhibits presented indicated that wells in Buffalo Grass Field are draining approximately sixty (60) acres and that the drilling of additional wells is necessary to prevent waste, protect correlative rights and recover additional gas reserves.

8. On April 8, 1999, a Local Public Forum on the application was held in Wray to consider potential issues related to the environment, public health, safety and welfare. No additional conditions were recommended to be placed on the application and a Public Issues Hearing on the application was not recommended.

9. At the time of the administrative hearing, J-W Operating Company agreed to be bound by oral order of the Commission.

10. Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommends approval, the Commission should enter an order allowing one additional well to be drilled on each 160-acre drilling and spacing unit at the option of the operator for the production of gas and associated hydrocarbons from the Niobrara Formation.

RECOMMENDATION

NOW, THEREFORE, IT IS ORDERED, that Order No. 489-1 shall be amended to allow one additional well to be drilled on each 160-acre drilling and spacing unit at the option of the operator for the production of gas and associated hydrocarbons from the Niobrara Formation in the Buffalo Grass Field. Subsequent wells shall be located no closer than 560 feet from the outer boundaries of said 160-acre drilling and spacing unit.

Township 4 North, Range 47 West, 6th P.M. Sections 22 and 23: All Sections 26 and 27: All Sections 34 and 35: All

IT IS FURTHER ORDERED that the provisions contained in the above order shall become effective forthwith.

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 May, 1999 as of April 26, 1999.

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 May 7, 1999