REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on December 2, 1999, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado on the application of Rocky Mountain CO2 Supply, LLC for an order to establish 160-acre drilling and spacing units for the production of oil, gas (including CO2) and associated hydrocarbons from the Dakota and Entrada Formations underlying certain lands in Townships 28 and 29 South, Range 69 Wes t, 6th P.M.

FINDINGS

The Commission finds as follows:

1. Rocky Mountain CO2 Supply, LLC ("Rocky Mountain"), as applicant herein, is an interested party in the subject matter of the above-referenced matter.

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. Evidence presented at the administrative hearing indicated that the Dakota and Entrada Formations constitute common sources of supply underlying the following described lands:

Township 28 South, Range 69 West, 6th P.M. Section 33: All

Township 29 South, Range 69 West, 6th P.M. Section 4: All Section 5: S/2 Section 8: All Section 9: All Section 16: N/2 Section 17: NE/4

5. The Dakota Formation should be defined as the stratigraphic interval between 5248 feet and 5389 feet found on the log from the Harry Willis No. 1 Well located in the SE1/4 NE1/4 of Section 4, Township 29 South, Range 69 West, 6th P.M. The Entrada Formation should be defined as the stratigraphic interval between 5736 feet and 5840 feet found on the log from the Harry Willis No. 1 Well located in the SE1/4 NE1/4 of Section 4, Township 29 South, Range 69 West, 6th P.M.

6. In order to prevent waste of oil and gas as defined by law; to protect the correlative rights of all parties concerned; to prevent the drilling of unnecessary wells, and to insure proper and efficient development and promote conservation of the oil and gas resources, an order should be made establishing 160-acre, more or less, drilling and spacing units for the production of oil, gas (including CO2) and associated hydrocarbons from the Dakota and Ent rada Formations, common sources of supply underlying the lands described herein; that the units should consist of a governmental quarter section, with the bottom hole of the permitted well to be located no closer than 600 feet from the outer boundaries of the drilling unit.

7. All available geological and engineering data concerning said Dakota and Entrada Formations indicated that one well will efficiently and economically drain an area of approximately 160-acres, more or less, and that the drilling units of the size and shape hereinabove described are not smaller than the maximum area that can be efficiently and economically drained by one well producing from said Dakota and Entrada Formations.

8. Engineering testimony indicated that 160-acre drilling and spacing units are the most optimum size for efficient operation of the plant and will delay the need for compression.

9. On November 15, 1999 the Commission convened a Local Public Forum on the application in Walsenburg. Based on the operator's plans to address the concerns raised on the application at the Local Public Forum, the Hearing Officer found that the COGCC's rules and regulations adequately address these concerns and therefore recommended that no additional conditions be placed on the application, and that no public issues hearing be convened.

10. At the time of the administrative hearing, Rocky Mountain agreed to be bound by oral order of the Commission.

11. Based on the facts stated in the application, having received no protests and having been heard by the Hearing Officer who recommends approval, the Commission should enter an order to approving the application as submitted.

ORDER

NOW, THEREFORE IT IS ORDERED, that the following rules and regulations shall apply hereafter to a well drilled, completed, or recompleted in the Dakota and Entrada Formations underlying the Oakdale Field herein described, in addition to other applicable rules and regulations and orders of the Commission, if any heretofore adopted and not in conflict herewith.

Rule 1. The Dakota Formation shall be defined as the stratigraphic equivalent between the measured depths of 5248 feet and 5389 feet, and the Entrada Formation as the stratigraphic equivalent between the measured depths of 5736 feet and 5840 feet in the wellbore of the Harry Willis No. 1 Well located in the SE1/4 NE1/4 of Section 4, Township 29, South, Range 69 West, 6th P.M.

Rule 2. One hundred sixty (160) acre drilling and spacing units shall be and the same are hereby established for the production of oil, gas (including CO2) and associated hydrocarbons from the Dakota and Entrada Formations, common sources of supply underlying the following described lands in Huerfano County:

Township 28 South, Range 69 West, 6th P.M. Section 33: All

Township 29 South, Range 69 West, 6th P.M. Section 4: All Section 5: S1/2 Section 8: All Section 9: All Section 16: N1/2 Section 17: NE1/4

Rule 3. The units shall consist of a governmental quarter section with the bottom hole of the permitted well to be located no closer than 600 feet from the outer boundaries of the drilling unit.

Rule 4. The Director shall have the authority, based on topographic conditions, to grant exceptions to the well location requirement without prior notice or hearing, based upon an adequate showing by the operator that topography makes it unreasonable to drill a well within the 600 foot setback, and provided that bottom hole for the exception location is no closer that 350 feet from the boundary of the drilling unit. All other exception locations shall be granted in accordance with Rule 318.

IT IS FURTHER ORDERD 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 day of December, as of December 2, 1999.

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 December 17, 1999 ??

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