BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE PROMULGATION AND                                 )                         CAUSE NO. 510

ESTABLISHMENT OF FIELD RULES TO GOVERN                             )

OPERATIONS IN THE, GRAND VALLEY FIELD,                                   )                         ORDER NO. 510-21

GARFIELD COUNTY, COLORADO                                                         )

                        The Commission finds as follows:

                        1. Petroleum Development Corporation ("PDC"), 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 16, 1994, the Commission issued Order No. 510-1, which amended Rule 316. (now 318.) of the Rules and Regulations of the Colorado Oil and Gas Conservation Commission and established new setback rules for production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group. The permitted wells should 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 or wells for the below-described lands:

                        5. Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that wells drilled in excess of two thousand five hundred (2,500) feet in depth be located not less than six hundred (600) feet from any lease line, and located not less than one thousand two hundred (1,200) feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. The below-described lands are subject to this rule:

                        7. At the time of the administrative hearing PDC, withdrew the below-listed lands from the application as increased density had already been approved under Order No. 510-11 for the following lands:

                        8. At the time of the administrative hearing, PDC withdrew the below-listed lands from the application as these were partial lands less than 320 acres in size and adjacent to another operator’s acreage:

                        9. Testimony and exhibits presented at the administrative hearing showed the discontinuity of the sands in the Williams Fork Formation and how gas-bearing sands in the Williams Fork may be missed unless wells are drilled on a close density pattern. Additional testimony showed an average sand width of 526 feet and an average sand thickness of 9.3 feet in the Williams Fork Formation.

                        10. Testimony and exhibits presented at the administrative hearing showed that pressure tests performed in the Grand Valley Field pilot area showed 88% of the gas produced from the 10-acre density wells was new gas not producible from older wells. Additional testimony indicated that increasing well density from twenty (20) to ten (10) acres in the Grand Valley Field pilot project area increased estimated ultimate recovery by 5.09 BCF within the project area.

                        11. Testimony and exhibits presented at the administrative hearing showed that wells drilled on 13-acre density in a nearby area show no signs of previous reservoir drainage.

                        12. Testimony and exhibits presented at the administrative hearing showed that the proposed wells within the application area would have an undiscounted payout in 5.61 years assuming production characteristics similar to the wells analyzed in Section 17, Township 6 South, Range 96 West, 6^th P.M.

                        13. 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.

                        14. Petroleum Development Corporation agreed to be bound by oral order of the Commission.

                        15. 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, with the permitted well to be located downhole anywhere upon such lands but no closer than 100 feet from the outside boundary of the lands unless such boundary abuts or corners lands in respect of which the Commission has not at the time of the drilling permit application granted the right to drill 10-acre density wells, in which event the Williams Fork Formation wells to be drilled upon the lands should be drilled downhole no closer than 200 feet from that portion of the boundary 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 for certain lands in Townships 6 and 7 South, Ranges 96 and 97 West, 6^th P.M.

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

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

                                                                        OIL AND GAS CONSERVATION COMMISSION

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

May 10, 2006