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. 510-26
GARFIELD COUNTY, COLORADO                                                          )

                        This cause came on for hearing before the Commission at 9:00 a.m. on September 18, 2006, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver Colorado, for an order to allow the equivalent of one (1) well per 10 acres for certain lands in Townships 6 and 7 South Ranges 96 and 97 West, 6^th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation.

                        The Commission finds as follows:

                        1. Oxy USA WTP LP ("Oxy"), 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. Rule 318.a. of the Rules and Regulations of the 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 listed lands are subject to this rule:

Section 27: Tract 120 A (Texas #41), Tracts 121B & C (Ransom #6 claim), Tract 122 (Texas #30), Tracts 123A & B (Ransom #5 claim), and Tract 124 A1 (Echo #6)

                                                            Section 28: Tract 124A1

                        5. On May 16, 1994, the Commission issued Order No. 510-1, which among other things established setback rules for certain lands including the below-listed, for production from the Williams Fork Formation, with 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 Williams Fork Formation well:

Section 27: Tract 120 A (Texas #41), Tracts 121B & C (Ransom #6 claim), Tract 122 (Texas #30), Tracts 123A & B (Ransom #5 claim), and Tract 124 A1 (Echo #6)

                                                            Section 28: Tract 124A1

                        7. On September 8, 2006, Oxy, by its attorney, filed with the Commission a written request to approve the application based on the merits of the verified application and the supporting exhibits.

                        8. Testimony and exhibits submitted in support of the application showed Oxy’s application lands in proximity to previously approved density orders in the immediate vicinity covering additional Oxy acreage, and showed that Oxy has 100% of either the mineral or leasehold ownership within the application boundaries.

                        9. Testimony and exhibits submitted in support of the application showed that the Williams Fork Formation consists of vertically stacked and interbedded lenticular sands, shales and coals in the Cameo section, that point bar sands are the dominant reservoir in the Williams Fork Formation, and that the point bar sands range from 400 to 800 feet wide, averaging 650 feet, and 4 to 20 feet thick, averaging 10 feet.

                        10. Testimony and exhibits submitted in support of the application showed that while it may occasionally appear in cross sections that some channel sands correlate between wells, outcrop data show that sand connectivity at 10-acre density is rare, that a reduced well density of 10 acres is necessary to effectively drain the lower Williams Fork Formation gas reservoirs, and that the nature of channel sand deposition in the Williams Fork Formation and the rock properties of those sands justify 10-acre well density.

                        11. Testimony and exhibits submitted in support of the application showed estimates of gas-in-place values from various studies of the Grand Valley and Rulison Fields by MWX, Williams, and Oxy. Oxy’s calculated gas-in-place is similar to the Grand Valley Field estimate released by Williams. Additional testimony indicated that based upon Oxy’s gas-in-place estimate and a typical 1.2 BSCF estimated ultimate recovery for Grand Valley Field Williams Fork Formation producers, the recovery factor for 40-acre density is 18.1%, the recovery factor increases to 36.2% if density is increased to 20 acres, and to 72.5% if density is increased to 10 acres.

                        12. Testimony and exhibits submitted in support of the application showed that there are numerous benefits associated with initially developing the Williams Fork Formation with 10-acre well density, as opposed to developing the reservoir using 40-acre density and infilling thereafter.

                        13. Additional testimony showed that initial development of the reservoir on 10-acre density makes bottomhole targets easier to hit, simplifies directional wellbore planning, and avoids the reuse of old pads for infill drilling, resulting in fewer disturbances of the terrain and less traffic to the location.

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

                        ENTERED this__________day of October, 2006, as of September 18, 2006.