REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on October 20, 1980 at 9:00 a.m.., in Room 110, State Centennial Building., Denver, Colorado, upon the application of American Resources Management Corporation, for an order recommending the Mancos "B" and Dakota-Cedar Mountain formations underlying certain lands in Garfield and Rio Blanco Counties, 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, and American Resources, having appeared in support of its application, 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 rules in Docket No. RM 79-76 of the Federal Energy Regulatory Commission, and has jurisdiction over the subject matter of American Resource's application.

3. The area of concern is adjacent to and overlaps the areas in previous requests for Mancos "B" "Tight Formation" designations in Cause No. NG-5 and NG-14, and is located in the Douglas Creek Arch area approximately 50 to 70 miles northwest of the city of Grand Junction. The area is one of rough terrain with surface elevations varying from 6500 to 9500 feet. Total acreage is approximately 264, 538 with 15.3% being fee and 84.7% federal acreage. Some F ederal Units are located within the area. There are no special field rules within the area.

4. The Mancos "B" (referred to for this purpose as a formation) is a member of the Mancos Shale of Upper Cretaceous age, occurring in the approximate middle third of the Mancos sequence. In the area of the Douglas Creek arch, the Mancos "B" consists of 400 feet to 700 feet of thinly bedded and interlaminated, very fine grained sandstone, siltstone and shale deposited in an offshore marine shelf, far from a sand source area. The laminations are very thin , highly calcareous shales, occurring at intervals of one-half inch or less, which significantly reduces vertical permeability. The interval is predominately sand with clay and siltstone comprising approximately 20% of the bulk volume. However, only a portion of the interval, 30-250 feet, develops enough porosity to be considered a potential reservoir. Average depth to the producing zone is approximately 3603 feet.

5. Engineering testimony presented at the hearing indicates that:

a. The average in-situ gas permeability throughout the pay section is not expected to exceed .1 millidarcy.

b. The stabilized production rate, against atmospheric pressure of wells completed for production from said Mancos "B" formation at an average depth of 3603 feet, without stimulation, is not expected to exceed a maximum allowable production rate of 105 MCF of gas per day.

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

6. Substantial evidence to support a determination that the Dakota-Cedar Mountain formation meets the criteria as required for "Tight Formation" designation was not available nor presented at the hearing. Therefore, the Dakota-Cedar Mountain formation should not be recommended at this time for a "Tight Formation" designation.

7. 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.

8. 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 Mancos "B" formation underlying the area below described should be designated a "Tight Formation".

ORDER

NOW, THEREFORE, IT IS ORDERED, that the Colorado Oil and Gas Conservation Commission recommends that the Mancos "B" formation underlying the following described lands in Garfield and Rio Blanco Counties, Colorado, be designated a "Tight Formation" and incorporated in the list of "Tight Formations" to be established pursuant to Rule 271. 706 of the Federal Energy Regulatory Commission:

Rio Blanco County

Township 3 South, Range 100 West, 6th P.M. Sections 25 thru 36

Township 3 South, Range 101 West, 6th P.M. Sections 25 thru 36

Township 4 South, Range 100 West, 6th P.M. Sections 1 thru 36

Township 4 South, Range 101 West, 6th P. M. Sections 1 thru 36

Garfield County

Township 5 South, Range 99 West, 6th P.M. Sections 28 thru 33

Township 5 South, Range 100 West, 6th P.M. Sections 1 thru 36

Township 5 South, Range 101 West, 6th P.M. Sections 1 thru 36

Township 5 South, Range 102 West, 6th P.M. Sections 25, 26, 35, 36 Township 6 South, Range 99 West, 6th P. M. Sections 1 thru 36 Township 6 South, Range 100 West, 6th P. M. Sections 1 thru 36

Garfield County (Cont. )

Township 6 South, Range 101 West, 6th P.M. Sections 1 thru 36

Township 6 South, Range 102 West., 6th P.M. Sections 1 thru 36

Township 7 South, Range 98 West, 6th P.M. Sections 30, 31

Township 7 South, Range 99 West, 6th P.M. Sections 1 thru 36

Township 7 South, Range 100 West, 6th P.M. Sections 1 thru 36

Township 7 South, Range 102 West, 6th P.M. Sections 1 thru 6

Township 8 South, Range 99 West, 6th P.M. Sections 1 thru 18

ENTERED this 14th day of January, 1981, as of October 20, 1980.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary