IN THE MATTER OF THE PROMULGATION AND              CAUSE NO. 519
ESTABLISHMENT OF FIELD RULES TO GOVERN
OPERATIONS IN THE PIERRE SHALE FORMATION,        ORDER NO. 519-2
JEFFERSON COUNTY, COLORADO

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 10:00 a.m. on August 13, 2001, in Suite 801, the Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of hearing as required by law, on the application of Plainview Oil and Gas, Inc. for an order to allow an extension of time to complete the drilling operations on the No. 1 MPIC 9-39 Well and requested that no fines or penalties be levied for alleged violation of Rule 319.b.(3).

FINDINGS

The Commission finds as follows:

1. Plainview Oil and Gas, Inc. (“Plainview”), 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 October 30, 2000, the Commission issued Order No. 519-1 which established a 640-acre exploratory drilling unit consisting of the SW¼ SW¼ of Section 4, SE¼ SE¼ of Section 5, E½ of Section 8, W½ W½ of Section 9, NW¼ NW¼ of Section 16 and the NE¼ NE¼ of Section 17, all in Township 2 South, Range 70 West, 6th P.M. for the production of oil, gas and associated hydrocarbons from the Pierre Shale Formation. The Order designated the No. 1 MPIC 9-39 Well (the “Well”) located in the NW¼ SW¼ of Section 9, Township 2 South, Range 70 West, 6th P.M. as the permitted well for the unit. The Well had been spudded by Plainview on August 4, 1999 with conductor pipe set to a depth of thirty-one (31) feet on August 5, 1999. Operations were then suspended pending the outcome of litigation concerning the lease.

5. In a letter dated February 7, 2001, Commission staff informed Plainview that drilling operations toward reaching total permitted depth must be initiated by July 17, 2001 and requested Plainview to keep the Commission office informed of its progress.

6. On June 15, 2001, Commission staff conducted a field inspection and found that no activity had occurred at the Well since August 1999. A Notice of Alleged Violation was issued citing violation of Rule 319.b.(3) and requiring either drilling operations to resume by July 17, 2001 or plugging and abandonment to commence by July 24, 2001.

7. On July 11, 2001, Plainview, by its representative, filed with the Commission an application for an order to allow an extension of time to complete the drilling operations on the No. 1 MPIC 9-39 Well and requested that no fines or penalties be levied for alleged violation of Rule 319.b.(3).

8. On July 31, 2001, Charles C. McKay, by his attorney, filed with the Commission a Notice of Protest and Intervention, which, among other things, requested that the application be denied.

9. Testimony and exhibits were presented at the hearing by A. J. Carter, President of Plainview indicating that on May 29, 2001 Mr. Carter sent letters to two drilling contractors in an attempt to secure a drilling rig to complete the drilling of the Well. Mr. Carter testified that he was told the earliest a rig would be available was April, 2002. Mr. Carter requested that the Commission, should it not grant the request for an extension to drill the Well, consider approving the No. 1 State 16-4 Well as a substitute designated well for the exploratory unit.

10. Testimony and exhibits were presented at the hearing on behalf of Charles McKay indicating that although not under the Commission’s jurisdiction, there may be no valid lease under which Plainview could continue to drill the No. 1 MPIC 9-39 Well.

11. A statement in accordance with Rule 510. was made by Ken Wonstolen, Colorado Oil and Gas Association, stating his belief that the issue before the Commission is whether the Well is under the provisions of Rule 319.b.(3) and if so should be plugged and abandoned.

12. After deliberation, the Commission voted to deny the request to extend the time to complete the drilling of the Well and ordered Plainview to plug, abandon and reclaim the No. 1 MPIC 9-39 Well within thirty (30) days of the date the order is entered. In addition, should the work not be completed by Plainview, the Commission directed the COGCC staff to make a claim on the bond and cause the work to be performed. Further, the Commission found that the No. 1 State 16-4 Well is not subject to the hearing since Plainview’s application did not include the request for relief made at the time of hearing.

ORDER

NOW, THEREFORE IT IS ORDERED that the request for an order to allow an extension of time to complete the drilling operations on the No. 1 MPIC 9-39 Well is hereby denied.

IT IS FURTHER ORDERED, that the No. 1 MPIC 9-39 Well shall be plugged, abandoned and reclaimed within thirty (30) days of the date the order is entered.

IT IS FURTHER ORDERED, that if Plainview Oil and Gas, Inc. does not comply with the terms of this Order, the Commission shall make a claim on the plugging bond and plug, abandon and reclaim the No. 1 MPIC 9-39 Well.

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 20th day of August, 2001, as of August 13, 2001

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 August 20, 2001

(519-2)