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 SKINNER RIDGE FIELD, ) ORDER NO. 510-27

GARFIELD COUNTY, COLORADO ) CORRECTED

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:00 a.m. on October 23, 2006, in Room 200, Las Animas County Court House, 200 East First Street, Trinidad, Colorado, for an order amend Order No. 510-24 to include Tract 68, in Sections 14 and 15, Township 6 South, Range 98 West, 6^th P.M. under the provisions of Order No. 510-24, for production of gas and associated hydrocarbons from the Williams Fork, Iles and Sego Formations.

FINDINGS

The Commission finds as follows:

1. Chevron USA Inc., ("Chevron"), 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 August 16, 2006, the Commission issued Order No. 510-24, which among other things, allowed 10-acre density for wells drilled on certain lands in Townships 4 through 7 South, Ranges 97 through 99 West, 6^th P.M., for production of gas and associated hydrocarbons from the Williams Fork, Iles and Sego Formations. The permitted well for the Williams Fork Formation shall be located no closer than one hundred (100) feet from the outside boundary of the application 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 on the application lands shall be drilled downhole no closer than two hundred (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. The permitted wells for the Iles Formation and Sego Formation wells shall be located no closer than six hundred (600) feet from the outside boundary of the application lands. In addition, except as previously authorized by order of the Commission, wells to be drilled under this application will be drilled from the surface either vertically or directionally from no more than one (1) pad located on a given quarter quarter section unless exception is granted by the Colorado Oil and Gas Conservation Commission pursuant to application made for such exception.

5. On August 24, 2006, Chevron, by its attorney, filed with the Commission a verified application for an order to amend Order No. 510-24 to include Tract 68, in Sections 14 and 15, Township 6 South, Range 98 West, 6^th P.M. under the provisions of Order No. 510-24, for production of gas and associated hydrocarbons from the Williams Fork, Iles and Sego Formations.

6. On October 12, 2006, Chevron, 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.

7. Testimony and exhibits submitted in support of the application showed that mineral ownership within the application lands is either Chevron or Federal, and that no unleased lands are within the application area.

8. Testimony and exhibits submitted in support of the application showed the lateral extent of the formations in the application, the discontinuity of the formations, and that 10-acre well density is necessary to efficiently drain hydrocarbons from the formations.

9. Testimony and exhibits submitted in support of the application showed various analytical methods used to calculate the number of acres being drained by various wells. Additional testimony showed that by utilizing these analytical methods, the drainage varied from 7.1 acres to 9.6 acres for these wells, indicating that 10-acre well density will most efficiently drain the application lands.

10. Testimony and exhibits submitted in support of the application showed that the recovery factor for the Williams Fork Formation will be 76% for 10-acre well density versus 38% for 20-acre well density.

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

12. Chevron agreed to be bound by oral order of the Commission.

13. Based on the facts stated in the verified application, having received no protests and based on the Hearing Officer review of the application under Rule 511.b., the Commission should enter an order to amend Order No. 510-24 to include Tract 68, in Sections 14 and 15, Township 6 South, Range 98 West, 6^th P.M. under the provisions of Order No. 510-24, for production of gas and associated hydrocarbons from the Williams Fork, Iles and Sego Formations.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order No. 510-24 is hereby amended to include Tract 68, in Sections 14 and 15, Township 6 South, Range 98 West, 6^th P.M. under the provisions of Order No. 510-24, for production of gas and associated hydrocarbons from the Williams Fork, Iles and Sego Formations.

IT IS FURTHER ORDERED, that for the Williams Fork Formation wells, the permitted well shall be located no closer than one hundred (100) feet from the outside boundary of the application 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 on the application lands shall be drilled downhole no closer than two hundred (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.

IT IS FURTHER ORDERED, that for Iles Formation and Sego Formation wells, the permitted wells shall be located no closer than six hundred (600) feet from the outside boundary of the application lands.

IT IS FURTHER ORDERED, that except as previously authorized by order of the Commission, wells to be drilled under this application shall be drilled from the surface either vertically or directionally from no more than one (1) pad located on a given quarter quarter section unless exception is granted by the Colorado Oil and Gas Conservation Commission pursuant to application made for such exception.

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 8th day of November, 2006, as of October 23, 2006.

CORRECTED this ______day of March, 2007, as of October 23, 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

March 1, 2007