REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on January 19, 1994 at 8:30 a.m., in Room 318, State Centennial Building, 1313 Sherman Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the amended application of AA Production, Inc. for an order recommending the Cozzette and Corcoran Formations, underlying certain lands in Garfield County, Colorado as a "Tight Formation", pursuant to Section 107 (b) of the Natural Gas Po licy Act of 1978 (15 U.S.C. 3317) and the regulations thereunder. The Applicant, having appeared in support of the application, and no one having appeared in opposition, and the Commission having heard the testimony and evidence presented;

The Commission finds as follows:

1. AA Production, Inc., 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 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 application.

4. The area is located in northwestern Colorado, approximately thirty-five (35) miles northeast of the town of Grand Junction, Colorado. The area is in close proximity to lands previously designated as "tight formation" for the Cozzette and Corcoran Formations by FERC Order No. 151 issued June 3, 1981. Approximately 24,300.58 acres of the lands in the application area are federal lands and the remaining 23,974.20 acres are fee lands.

5. That the federal lands in the application have been heard by the BLM and recommended to the FERC 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.

6. The Cozzette and Corcoran Formations are of the same characteristics and depositional environment as that in the nearby area. Geological testimony presented at the hearing indicates that the Cozzette and Corcoran Formations consist of progradational marginal marine facies.

7. Engineering testimony presented at the hearing indicates that: a. The average in-situ gas permeability is not expected to exceed .1 millidarcy for the formation.

b. The stabilized production rate, against atmospheric pressure of wells completed from said Cozzette and Corcoran Formations, at the producing depths, without stimulation, is not expected to exceed a maximum allowable production rate defined by depth in Section 271.705 (b) (ii) for any completion location in said Cozzette and Corcoran Formations.

c. Hydrocarbons usually do not exist as liquid in said Cozzette and Corcoran Formations reservoir, and no well is expected to produce more than five (5) barrels of crude oil per day.

8. 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.

9. In view of the above findings, all the criteria required by the Federal Energy Regulatory Commission pursuant to the rules in Docket No. 79-76 have been met; therefore, a recommendation should be made that the Cozzette and Corcoran Formations, underlying the area described below should be designated a "tight formation".

ORDER

NOW, THEREFORE, IT IS ORDERED, that the Colorado Oil and Gas Conservation Commission recommends that the Cozzette and Corcoran Formations, underlying the following described lands in Garfield County, Colorado, be designated a "Tight Formation" and incorporated in the list of "Tight Formations" as described pursuant to Rule 271.706 of the Federal Energy Regulatory Commission:

Township 6 South, Range 99 West, 6th P.M. Sections 1 through 36: All

Township 6 South, Range 100 West, 6th P.M. Sections 1 through 3: All Sections 10 through 15: All Sections 22 through 27: All Sections 34 through 36: All

Township 7 South, Range 99 West, 6th P.M. Sections 1 through 18: All

Township 7 South, Range 100 West, 6th P.M. Sections 1 through 3: All Sections 10 through 15: All Sections 22 through 27: All Sections 34 through 36: All

ENTERED this day of , 1994, as of January 19, 1994.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary Dated at Suite 380 1580 Logan Street Denver, Colorado 80203 February 1, 1994

IN THE MATTER OF DETERMINATION ) CAUSE NO. NG-12 OF THE COZZETTE AND CORCORAN ) FORMATIONS UNDERLYING CERTAIN ) ORDER NO. NG-12-2 LANDS IN GARFIELD COUNTY, ) COLORADO, AS A "TIGHT ) NGPA SECTION 107 (b) FORMATION", PURSUANT TO ) REGULATIONS OF THE FEDERAL ) FERC Regulation 271.705 ENERGY REGULATORY COMMISSION )

The Colorado Oil and Gas Conservation Commission is the designated jurisdictional agency under subpart (g) of Part 271 of Title 18, Code of Federal Regulations. Pursuant to Section 271.705 of the Federal Energy Regulatory Commission regulations, under Section 107(b) of the Natural Gas Policy Act, the jurisdictional agency herewith submits its recommendation, as per Order No. NG-12-2 that the Cozzette and Corcoran Formation, underlying certain lands in G arfield County, Colorado, be designated as a "tight formation" and incorporated into the list of "Tight Formations" established under Section 271.706 of the regulations. Pursuant to the guidelines established under Section 271.705(b)(l)(i)(ii)(iii), and the contents prescribed by 271.705(c), the Colorado Oil and Gas Conservation Commission submits the following:

1. Geological and geographical description of the Cozzette and Corcoran Formation.

a. Commission Order No. NG-12-2.

2. Geologic and engineering data supporting the recommendation and the source of that data.

a. Transcript and exhibits from the public hearing held January 19, 1994.

3. A report to the extent to which existing state regulations will assure development of the recommended "tight formation" will not adversely affect any fresh water aquifers.

a. Colorado Oil and Gas Conservation Commission "Statement on Water Sand Protection".

b. A report from the State Engineer Water Resources Investigation section concerning water sand protection for the area has previously been submitted with NG-3-1 (Colo 1) and NG-29-1 (Colo 25).

c. State Rule No. 315.

4. a. State Rule No. 316.

All geological and engineering testimonial evidence to support this recommendation has been received under oath. Copies of all documentary evidence received at the public hearing accompany this report. The requirements of 271.705(c) pursuant to 271.705(b)(l)(i)(ii)(iii) have now been met. The Oil and Gas Conservation Commission of the State of Colorado, therefore recommends, as per Order No. NG-12-2 that the Cozzette and Corcorcan Formation be designa ted as a "Tight Formation", in the area as described in said order, and having made such recommendation concludes its responsibility in the premises has been discharged.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

February 1, 1994

STATEMENT OF WATER SAND PROTECTION

CAUSE NO. NG-12-2

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. A description of an idealized-type casing program, and/or cementing program which will be used in wells drilled for production in the Cozzette and Corcoran Formation was presented at the hearing. This plan was reviewed by representatives of the Office o f the State Engineer, Water Resources Investigation Branch. All aquifers above the Cozzette and Corcoran Formations will be behind pipe or protected by cement stage work, as required by State Rule No. 315, if these aquifers are below the shoe of the surface casing. State Rule No. 315 requires sufficient surface casing shall be run to reach a depth below all known or reasonably estimated utilizable fresh water levels. In areas where fresh water strata o r zones are of such depth to make it impractical or uneconomical to set the full amount of surface casing necessary to cover or isolate all fresh water strata, the production string shall be stage cemented with a solid cement plug extending 50 feet below each fresh water strata to 50 feet above fresh water strata.

The Commission, therefore concludes that development of the recommended "tight formations" will not affect any fresh water aquifers that are, or are expected to be used as domestic, agricultural or other supplies.

February 1, 1994

Ms. Janet Ardinger, Chief Well Determination Branch in Field Review Federal Energy Regulatory Commission 825 N. Capitol St., NE Washington, DC 20426

RE: Recommendation of the Cozzette and Corcoran Formations Underlying Certain Lands in Garfield County, Colorado, as a "Tight Formation", Cause No. NG-12

Dear Ms. Ardinger:

Enclosed you will find three (3) copies of the recommendation of the Colorado Oil and Gas Commission pursuant to Section 107(b) of the Natural Gas Policy Act of 1978 regarding the Cozzette and Corcoran Formations underlying certain lands in Garfield County, Colorado.

Also enclosed are two (2) sets of exhibits presented at the time of hearing, along with one set of transcripts from the hearing.

Should you have any questions, or desire additional data, please respond in writing. Please direct any correspondence to my attention at the above address.

Sincerely,

Patricia C. Beaver Technical Secretary

Enclosures ??

(NG#12-)