REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on February 13, 1981 at 9:00 a.m.. in Boom 110, State Centennial Building, Denver, Colorado, upon the application of American Resources Management Corporation, for an order recommending the Dakota formation underlying certain lands in Garfield and Rio Blanco Counties, Colorado, 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 t hereunder, 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. EM 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 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 and surface elevation ranges from 6500 to 9500 feet. Exploratory work and drilling may be conducted for about six to seven months each year, from mid-May to mid-November which increases the cost of development. Total acreage is approximately 34,538 acres with 84.7% being federal acreage and 15.3% fee acreage. Some Federal Units are located within the area.

4. The Dakota formation underlies the entire area described herein. The formation consists of lenticular sandstones, medium to fine grain interbedded with carbonaceous shales. The gross thickness of the formation ranges between 100-200 feet with net sand thickness approximately 10 to 60 feet based on a 10% porosity cutoff. Regional dip upon the top of the Dakota formation is toward the east-southeast within the area at an average of 200 feet per mile. There is no known local structure anomaly. The lenticular nature of the sands, together with the regional dip provide the trapping mechanism for the gas deposits. Average depth to the top of the Dakota formation is at approximately 6993 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, without stimulation, from the Dakota formation at an average depth of 6993 feet is not expected to exceed the maximum allowable production rate defined by depth in Section 271. 705 (b)(ii) for any completion location in said formation.

c. Hydrocarbons usually do not exist as liquid in said Dakota 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 rules in Docket No. RM 79-76 have been met; therefore, a recommendation should be made that the Dakota 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 Dakota 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:

Block "A" - 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

Block "A" - 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

Block "B" - Garfield and Mesa Counties

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

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

Block "B" - Garfield and Mesa Counties (Cont.)

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

Township 7 South, Range 102 West, 6th P.M. Sections 1 thru 30, 33 thru 36

Township 7 South, Range 103 West, 6th P.M. Section 24

Township 8 South, Range 99 West, 6th P.M. Sections 4 thru 9, 17 thru 20, 29 thru 30

Township 8 South, Range 100 West, 6th P.M. Sections 1 thru 18, 21 thru 26

Township 8 South, Range 101 West, 6th P. M. Sections 1 thru 6, 10 thru 13

Township 8 South, Range 102 West, 6th P.M. Section 1

ENTERED this 12th day of March, 1981, as of February 13, 1981.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary