REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on August 18, 1980 at 9:00 a.m., in Room 110, State Centennial Building, Denver, Colorado, upon the application of Natomas North America, Inc., for an order recommending the Sanastee member of the Mancos formation and the Dakota-Morrison formation underlying certain lands in La Plata County, Colorado, each as a "Tight Formation" pursuant to Section 107(b) of the Natural Gas Policy Act of 1978 (15 U.S.C. 3317) and the regulations thereunder. Natomas, having appeared in support of its application, which was amended at the hearing to exclude the Morrison formation from being heard as part if the Dakota-Morrison formation recommendation for "Tight Formation", and no one having appeared in opposition, and the Commission having heard the testimony and evidence presented:

The Commission finds as follows:

1. Notice of the time. place and purpose of the hearing has been given as required.

2. The Commission is the jurisdictional agency pursuant to the interim rules in Docket No. RM 79-76 of the Federal Energy Regulatory Commission, and has Jurisdiction over the subject matter of Natomas North America's application.

3. The formations to be considered are located in an area which is located on the north flank of the San Juan Basin and east of the City of Durango, Colorado. It is bounded on the north by the area which is being considered in Order No. NG-10-1. The area consists of approximately 62,867 acres of which 27 percent are Federal, 16 percent are Indian, being tribal and allotted lands of the Southern Ute Indian Reservation, 2 percent is State acreage and 55 p ercent fee.

4. The Sanastee member of the Mancos Shale formation (for the purpose of this matter to be referred to as a formation) consists of very fine grained, extremely silty, heavily clay filled, calcareous sandstone. It is approximately 105-120 feet thick. The production zone is found at intervals from 7550-7700 feet. The Dakota Formation is generalized as a series of lenticular sands, very fine grained, to medium grained, approximately 210-230 feet thick. The environmental deposition is of a marine bar at the top of the formation becoming near shore marine in the middle part of the formation and then becoming fluvial in the lower part. Depth to producing zone is approximately 7600 feet.

5. Engineering testimony presented at the hearing indicates that:

a. The average in-situ gas permeability for the Sanastee formation is .04 millidarcies and the average in-situ gas permeability for the Dakota formation is .06 millidarcies. Neither is expected to exceed .1 millidarcy.

b. The stabilized production rate, against atmospheric pressure of wells completed for production, without stimulation, from the Sanastee formation, at an average depth interval of 7550-7700 feet, is not expected to exceed the maximum allowable production rate of 336 MCF of gas per day. The production rate for the Dakota formation, at an average depth of 7600 feet, is not expected to exceed the maximum allowable production rate of 336 MCF of gas per day.

c. Hydrocarbons usually do not exist as liquid in said formation reservoirs. No well is expected to produce more than five (5) barrels of crude oil per day.

6. Typical casing design of wells drilled in the area protects fresh water aquifers in the area as required by the rules and regulations of the Oil and Gas Conservation Commission of the State of Colorado.

7. In view of the above findings, all the criteria required by the Federal Energy Regulatory Commission pursuant to the interim rules in Docket No. RM 79-76 have been met; therefore a recommendation should be made that the Sanastee formation, as defined, and the Dakota formation, underlying the area below described should each be designated a "Tight Formation"

ORDER

NOW, THEREFORE, IT IS ORDERED, that the Colorado Oil and Gas Conservation Commission recommends that the Sanastee formation, as defined, and the Dakota underlying the following described lands in La Plata County, Colorado, be designated a "Tight Formation" and be incorporated in the list of "Tight Formations" to be established pursuant to Rule 271.706 of the Federal Energy Regulatory Commission.

Township 34 North, Range 6 West (S of Ute Line) N.M.P.M. Sections 1 thru 36

Township 34 North, Range 7 West (S of Ute Line) N.M.P.M. Sections 1 thru 36

Township 34 North, Range 8 West (S of Ute Line) N.M.P.M. Sections 1 thru 24

Township 34 North, Range 9 West (S of Ute Line) N.M.P.M. Sections 1 thru 24

ENTERED this 15th day of October, 1980, as of August 18, 1980

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary