BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE PROMULGATION                                             )                     CAUSE NOS.139, 440, 479, 495 & 510
AND ESTABLISHMENT OF FIELD RULES TO                                        )
GOVERN OPERATIONS IN THE RULISON,                                              )                     ORDER NOS. 139-60, 440-31, 479-17,

PARACHUTE AND GRAND VALLEY FIELDS,                                         )                     ; 495-5 & 510-20

GARFIELD COUNTY, COLORADO                                                             )

REPORT OF THE COMMISSION

                        This cause came on for hearing before the Commission at 9:00 a.m. on April 24, 2006, Suite 801, in The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to allow the equivalent of one well per 10 acres, for production of gas from the Williams Fork Formation, with the permitted well to be located no closer than 100 feet from the unit boundary, for certain lands In Townships 6 and 7 South, Ranges 93 through 97 West, 6th P.M.

FINDINGS

                        The Commission finds as follows:

                        1. Williams Production RMT Company ("Williams"), 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 pursuant to the Oil and Gas Conservation Act.

                        4. On May 2, 1990, corrected November, 1990, the Commission issued Order No. 479-2, which among other things, established 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Mesaverde Formation. On February 15, 1995, corrected February 17, 2000, the Commission issued Order No. 479-5, which among other things, allowed eight (8) wells to be optionally drilled on the 320-acre drilling and spacing units, with the permitted well to be located no closer than 400 feet from the boundaries of the unit and no closer than 800 feet from any existing Williams Fork Formation wells for certain lands including Sections 12 and 13, Township 6 South, Range 94 West, 6th P.M. and Sections 26 and 27, Township 6 South, Range 96 West, 6th P.M.

                        5. On May 18, 1990, the Commission issued Order No. 440-12, which among other things, allowed wells drilled for the production of gas and associated hydrocarbons from the Mesaverde Formation to be located no closer than 600 feet from the boundaries of the 320-acre drilling and spacing units and no closer than 1200 feet from any well in the same formation. Subsequent Order No. 440-16 allowed up to eight (8) wells to be drilled on the 320-acre drilling and spacing units for production of gas from the Williams Fork Formation, with the permitted wells to be located no closer than 400 feet from the boundaries of the unit and 800 feet from any existing well including Section 20, Township 6 South, Range 95 West, 6th P.M.

                        6. On May 19, 1990, corrected November 1990, the Commission issued Order No. 139-16, which among other things, established 320-acre drilling and spacing units for the production of gas from the Mesaverde Formation, with the permitted well to be located in the NE¼ or SW¼ of the drilling unit no less that 600 feet from the unit boundaries and at least 1200 feet from the nearest well in the same formation, for the below-listed lands:

Township 6 South, Range 93 West, 6th P.M.

Sections 5 through 8: All

Township 6 South, Range 94 West, 6th P.M.

Sections 12 through 14: All

                        7. On July 2, 1991, the Commission issued Order No. 495-1 which established a 160-acre drilling and spacing unit consisting of the SE¼ of Section 28, Township 6 South, Range 96 West, 6th P.M. for the production of gas and associated hydrocarbons from the Mesaverde Formation, and designated the GV-26-28 Well located in the SW¼ SE¼ of said Section 28 as the permitted well for the unit. On May 16, 1994, the Commission issued Order No. 510-1, which among other things, established new setback rules allowing 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 Williams Fork Formation well, including the SE¼ of said Section 28.

                        8. On May 16, 1994, the Commission issued Order No. 510-1, which among other things, established new setback rules allowing 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 Williams Fork Formation well for the below-listed lands:

Township 6 South, Range 96 West, 6th P.M.

Section 22: All

Sections 28 and 29: All

Sections 30 through 33: All

Township 6 South, Range 97 West, 6th P.M.

Section 14: All

Section 23: All

Section 27: All

Township 7 South, Range 96 West, 6th P.M.

Sections 6 through 8: All

Sections 19 through 22: All

Sections 28 through 32: All

Section 34: All

Township 7 South, Range 97 West, 6th P.M.

                                                            Section 11: All

                        9. On February 21, 1995, corrected on February 17, 2000, the Commission issued Order No. 139-28, which among other things, allowed up to eight (8) Williams Fork Formation wells to be optionally drilled on 320-acre drilling and spacing units, including Section 14, Township 6 South, Range 94 West, 6th P.M., with the permitted well to be located no closer than 400 feet from the unit boundaries and no closer than 800 feet from any Williams Fork Formation well.

                        10. On December 16, 2005, the Commission issued Order No. 139-52 which deleted certain lands in Sections 1 through 3 and 12, Township 6 South, Range 94 West, 6th P.M. from the provisions of Order Nos. 139-14, 139-28 and 139-40 for production of gas from the Mesaverde Group and placed the lands under the provisions of the Rules and Regulations of the Commission, including Rule 318.

                        11. On March 6, 2006, Williams, by its attorney, filed with the Commission a verified application for an order to allow the equivalent of one well per 10 acres for the production of gas and associated hydrocarbons from the Williams Fork Formation, with the permitted well to be located no closer than 100 feet from the unit boundary, for the below-listed lands. For all future Williams Fork Formation wells to be drilled on these lands, where these lands abut or corner lands in respect of which the Commission has at the time of drilling permit application granted the right to drill 10-acre density Williams Fork Formation wells, the well should be located downhole no closer than 100 feet from the boundaries of the unit unless such unit abuts or corners lands in respect of which the Director of the Commission has not at the time of drilling permit application granted the right to drill Williams Fork Formation 10-acre density wells, in which event the wells should be drilled downhole no closer than 200 feet from the unit which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Williams Fork Formation wells has not been ordered by the Commission. In addition, wells drilled on the application lands will be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section unless exception is granted by the Colorado Oil and Gas Conservation Commission.

Township 6 South, Range 93 West, 6th P.M.

Section 5: SW¼ NW¼, N½ S½, SE¼ SW¼, SW¼ SE¼

Section 6: W½, NW¼ NE¼, SE¼ NE¼, SE¼

Section 7: All

Section 8: NW¼, SW¼ NE¼, W½ SW¼

Township 6 South, Range 94 West, 6th P.M.

Section 1: NW¼ NW¼, S½ N½, N½ SW¼, E½ SE¼

Section 2: N½ NW¼, NE¼, S½ SW¼, NE¼ SW¼, SW¼ SE¼

Section 3: NE¼ NE¼, NW¼ NW¼, S½ NW¼, S½

Section 12: NE¼, W½ NW¼, SE¼ NW¼, NW¼ SE¼, E½ SW¼, SE/¼ SE¼

Section 13: S½

Section 14: NW¼, N½ SW¼

Township 6 South, Range 95 West, 6th P.M.

Section 20: NW¼, NW¼ NE¼

Township 6 South, Range 96 West, 6th P.M.

Section 22: SE¼

Section 26: N½ NE¼, NW¼ NW¼, N½ SW¼, SW¼ SW¼

Section 27: NW¼, N½ SW¼, NW¼ NE¼

Section 28: N½ NW¼, S½ NE¼, N½ SE¼

Section 29: S½ NW¼, W½ SE¼, SE/¼ SW¼

Section 30: NW¼

Section 31: N½ NE¼, S½ SE¼

Section 32: NE¼ NW¼, SE¼ NE¼, NE¼ SE¼

Section 33: SW¼ NW¼, N½ SW¼

Township 6 South, Range 97 West, 6th P.M.

Section 14: N½

Section 23: NW¼

Section 27: All

Township 7 South, Range 96 West, 6th P. M.

Section 6: NW¼

Section 7: SW¼

Section 8: W½

Section 19: SE¼

Section 20: S½

Section 21: All

Section 22: NW¼

Section 28: N½, SE¼, N½ SW¼, SW¼ SW¼

Section 29: All

Section 30: SW¼ SW¼

Section 31: N½, SW¼, N½ SE¼, SW¼ SE¼

Section 32: W½ NW¼, NE¼ NW¼, NW¼ SW¼

Section 34: E½ SE¼

Township 7 South, Range 97 West, 6th P.M.

Section 11: NE¼

                        12. Testimony and exhibits presented at the administrative hearing showed that the application lands cover 16,560 acres.

                        13. Testimony and exhibits presented at the administrative hearing showed the discontinuous nature of the Williams Fork Formation sands, that the average extent of a Williams Fork Formation sand body is 682 feet, and that wells drilled on 10 acre density will penetrate different sand bodies.

                        14. Testimony and exhibits presented at the administrative hearing showed data from 10-acre well density pilot projects in the Grand Valley and Rulison Fields. Additional testimony showed that 221 pressure tests of the Williams Fork Formation sands were obtained in these areas.

                        15. Testimony and exhibits presented at the administrative hearing showed fracture orientations in the Grand Valley and Rulison Fields indicating that wells drilled in line with exact fracture orientation will interfere with each other. Additional testimony showed that 88% of the wells in the Grand Valley Field and 94% of the wells in the Rulison Field encountered no depletion from offset wells drilled on 10 acre density.

                        16. Testimony and exhibits presented at the administrative hearing showed that wells drilled on 10 acre density produced at equivalent rates to wells drilled on 40 acre or 20 acre density, and that increased density would allow additional gas reserves to be produced that would otherwise be left in the ground.

                        17. The above-referenced testimony and exhibits show that the proposed density will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.

18. Williams Production RMT Company agreed to be bound by oral order of the Commission

                        19. Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommended approval, the Commission should enter an order to allow the equivalent of one well per 10 acres for production of gas from the Williams Fork Formation, with the permitted well to be located no closer than 100 feet from the unit boundary, for certain lands In Townships 6 and 7 South, Ranges 93 through 97 West, 6th P.M.

ORDER

                        NOW, THEREFORE IT IS ORDERED, that the equivalent of one well per 10 acres is hereby approved for the production of gas from the Williams Fork Formation for the below-listed lands:

Township 6 South, Range 93 West, 6th P.M.

Section 5: SW¼ NW¼, N½ S½, SE¼ SW¼, SW¼ SE¼

Section 6: W½, NW¼ NE¼, SE¼ NE¼, SE¼

Section 7: All

Section 8: NW¼, SW¼ NE¼, W½ SW¼

Township 6 South, Range 94 West, 6th P.M.

Section 1: NW¼ NW¼, S½ N½, N½ SW¼, E½ SE¼

Section 2: N½ NW¼, NE¼, S½ SW¼, NE¼ SW¼, SW¼ SE¼

Section 3: NE¼ NE¼, NW¼ NW¼, S½ NW¼, S½

Section 12: NE¼, W½ NW¼, SE¼ NW¼, NW¼ SE¼, E½ SW¼, SE/¼ SE¼

Section 13: S½

Section 14: NW¼, N½ SW¼

Township 6 South, Range 95 West, 6th P.M.

Section 20: NW¼, NW¼ NE¼

Township 6 South, Range 96 West, 6th P.M.

Section 22: SE¼

Section 26: N½ NE¼, NW¼ NW¼, N½ SW¼, SW¼ SW¼

Section 27: NW¼, N½ SW¼, NW¼ NE¼

Section 28: N½ NW¼, S½ NE¼, N½ SE¼

Section 29: S½ NW¼, W½ SE¼, SE/¼ SW¼

Section 30: NW¼

Section 31: N½ NE¼, S½ SE¼

Section 32: NE¼ NW¼, SE¼ NE¼, NE¼ SE¼

Section 33: SW¼ NW¼, N½ SW¼

Township 6 South, Range 97 West, 6th P.M.

Section 14: N½

Section 23: NW¼

Section 27: All

Township 7 South, Range 96 West, 6th P. M.

Section 6: NW¼

Section 7: SW¼

Section 8: W½

Section 19: SE¼

Section 20: S½

Section 21: All

Section 22: NW¼

Section 28: N½, SE¼, N½ SW¼, SW¼ SW¼

Section 29: All

Section 30: SW¼ SW¼

Section 31: N½, SW¼, N½ SE¼, SW¼ SE¼

Section 32: W½ NW¼, NE¼ NW¼, NW¼ SW¼

Section 34: E½ SE¼

                                                  Township 7 South, Range 97 West, 6th P.M.

                                                  Section 11: NE¼

                IT IS FURTHER ORDERED, that for all future Williams Fork Formation wells to be drilled on these lands, where these lands abut or corner lands in respect of which the Commission has at the time of drilling permit application granted the right to drill 10-acre density Williams Fork Formation wells, the well shall be located downhole no closer than 100 feet from the boundaries of the unit unless such unit abuts or corners lands in respect of which the Director of the Commission has not at the time of drilling permit application granted the right to drill Williams Fork Formation 10-acre density wells, in which event the wells shall be drilled downhole no closer than 200 feet from the unit which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Williams Fork Formation wells has not been ordered by the Commission.

                IT IS FURTHER ORDERED, that wells drilled on the application lands shall be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section (or lots or parcels approximately equivalent thereto) unless exception is granted by the Colorado Oil and Gas Conservation Commission.

                        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.

                        IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date this order is mailed by the Commission.

                        IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this order is not required prior to the filing for judicial review.

                        ENTERED this ______ day of May, 2006, as of April 24, 2006.

                                                                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 9, 2006