THE RULES AND REGULATIONS OF THE COLORADO         )                       CAUSE NO. 1


WELD COUNTY, COLORADO                                                       )                       ORDER NO. 1-96




                        This cause came on for hearing before the Commission on July 10, 2001 at 9:00 a.m. and on August 13, 2001 at 10:00 a.m. in Suite 801, the Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of hearing as required by law, on the application of Matrix Energy, LLC., for an order granting a variance to complete and produce a well located in a high density area and drilled in violation of Rule 603.b.




                        The Commission finds as follows:


1.  Matrix Energy, LLC. (“Matrix”), as 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 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.  On September 26, 2000, Matrix filed its Application for a Permit To Drill the Kuettel #14-10 Well (the “Well”) located in the SW¼ SW¼ of Section 10, Township 5 North, Range 65 West, 6th P.M.  The Application was approved by the Colorado Oil and Gas Conservation Commission (“COGCC”) staff on November 9, 2000.  Because the Applicant believed that one house was within the 350 foot minimum setback within a high density area, it sought and obtained the waiver to the setback from the owner of that house.  It was subsequently discovered that two additional houses, owned by Vicky Holmes and by Donovan and Janel Sharpe (the Sharpes), were located within the prescribed 350 foot setback.  Applicant obtained a waiver from Vicky Holmes, but could not obtain a waiver from the Sharpes, whose house is located approximately 281 feet from the location of the well.


                        5.  The Well has been drilled to total depth in the Codell-Niobrara Formation but has not yet been completed.  COGCC staff issued a Notice of Alleged Violation (“NOAV”) on May 7, 2001, requiring that the Sharpe’s consent and waiver be obtained as the condition to satisfy the NOAV.  Good faith attempts were made by Matrix, but Mr. Sharpe has indicated he would not sign a waiver without a payment of $75,000.


                        6.  On May 18, 2001, Matrix filed with the Commission a verified application for an order granting the Applicant a variance to complete and produce its well, notwithstanding that it is within the 350 foot minimum from a building unit.  Matrix is in technical violation of Rule 603.b(2) for failing to obtain the waiver, in the event it wishes to complete the well as a producing well.  The Applicant stated that the production facility would have no adverse effect upon the party who refuses to grant a waiver and therefore requested the Commission grant a variance under Rule 502.b. because prohibiting production from the well would constitute waste.

7.  On June 20, 2001 William M. Lewis and Ann E. Carrington filed with the Commission a written protest.  On June 22, 2001 Donovan and Janel Sharpe filed with the Commission a written protest to the application.


8.  On July 10, 2001, a hearing was held on this matter.  After testimony and exhibits were presented by Matrix and the Sharpes, the Commission denied the request to grant a variance to Matrix.  The Commission suggested that the parties negotiate a waiver for an exception location and prepare a safety plan to address the Sharpe’s concerns and continued these matters to the August hearing.  Should a waiver not be obtained by that time, the Commission would consider taking appropriate action including, but not limited to, assessing a fine for rule violations.


9.  On August 9, 2001, Matrix negotiated a confidential settlement with the Sharpes resulting in a written waiver for the location of the well less than 350 feet from the Sharpe’s residence.


                        10.  At the August hearing, testimony was presented by Matrix, along with the Sharpe’s waiver, indicating agreement was reached.  Matrix agreed to a safety plan that meets or exceed the Commission’s rules.  Mr. Sharpe was not in attendance but Matrix indicated that Mr. Sharpe was not in favor of the Commission imposing fines against Matrix.


                        11.  Vicki Holmes, whose residence is located 306 feet from the Well, appeared at the August hearing to state her concern that several violations of Rule 603.b. were ongoing at the Well.  She stated her belief that the waiver letter she signed on May 3, 2001 should be set aside.  Ms. Holmes was directed by the Commission to file a complaint with the COGCC staff so that staff could investigate the alleged violations.


                        12.  After deliberation, the Commission found that the corrective action prescribed in the NOAV had been met, as a waiver from the Sharpes had been obtained.  The Commission requested that Matrix submit in writing the safety plan agreed to with the Sharpes for the COGCC staff’s review.


13.  On August 13, 2001, subsequent to the hearing, Matrix submitted a written safety plan to the COGCC staff who determined that it met or exceeded Commission rules.


14.  On August 14, 2001, subsequent to the hearing, the Sharpes submitted a letter to the Commission confirming that an agreement had been reached with Matrix and requesting that the Commission not impose any fines on Matrix.




NOW, THEREFORE IT IS ORDERED that a variance to complete and produce the Kuettel #14-10 Well located in the SW¼ SW¼ of Section 10, Township 5 North, Range 65 West, 6th P.M. is hereby denied.


                        IT IS FURTHER ORDERED, that Matrix Energy, LLC has satisfied the corrective action required in the Notice of Alleged Violation by obtaining a waiver from Donovan and Janel Sharpe.


IT IS FURTHER ORDERED, that Matrix Energy, LLC shall comply with the safety plan agreed to with Donovan and Janel Sharpe.


                        IT IS FURTHER ORDERED, that the provisions contained in the above orders 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 August, 2001, as of August 13, 2001.



                                                OIL AND GAS CONSERVATION COMMISSION

                                                            OF THE STATE OF COLORADO





                                                                                    Patricia C. Beaver, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

August 20, 2001