BEFORE THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO IN THE MATTER OF THE APPLICATION OF ENCANA OIL & GAS (USA) INC. FOR AN ORDER ESTABLISHING SPACING AND WELL LOCATION RULES FOR THE ILES FORMATION OF THE MESAVERDE GROUP FOR CERTAIN DESCRIBED LANDS IN THE RULISON AND PARACHUTE FIELD AREAS, GARFIELD COUNTY, COLORADO

) ) ) ) ) ) ) )

Cause No. _____ Docket No. ______

APPLICATION EnCana Oil & Gas (USA) Inc. (“Applicant”), by and through its attorneys, Dorsey & Whitney LLP, respectfully submits this Application to the Oil and Gas Conservation Commission of the State of Colorado (the “Commission”) for an order establishing spacing rules applicable to the drilling and producing of wells from the Iles Formation of the Mesaverde Group covering certain described lands in the Rulison and Parachute Field areas, Garfield County, Colorado and in support of its Application states and alleges as follows: 1.

Applicant is a corporation duly authorized to conduct business in the State of

Colorado. 2.

Applicant owns leasehold interests in the following described lands: Township 7 South, Range 95 West, 6th P.M. Section 30: All Section 31: All Township 7 South, Range 96 West, 6th P.M. Section 25: All Section 36: All Garfield County, Colorado.

(hereafter the “Application Lands”) 3.

That the Application Lands are subject to the Commission’s Order No. 139-16

which provides for optional drilling of one well for each 640-acre drilling and spacing unit with the permitted wells to be located no closer than 990 feet from the outer boundaries of the drilling unit. 4.

That Applicant has drilled, tested and completed multiple wells in the Iles

Formation of the Mesaverde Group upon the Application Lands and other nearby lands. 5.

That to promote efficient drainage within the Iles Formation of the Mesaverde

Group of the Application Lands, the Commission should increase the number of wells which can be optionally drilled into and produced from the Iles Formation of the Application Lands which constitute existing drilling units (or portions thereof) to the equivalent of one Iles well per 20 acres.

6.

That as to all future Iles wells to be drilled upon the Application Lands, each well

may be located downhole in the established drilling and spacing unit but no closer than 200 feet from the boundaries of the unit and no closer than 400 feet from any existing Iles well without exception being granted by the Director of the Oil and Gas Conservation Commission. 7.

Applicant commits that wells to be drilled under this Application will be drilled

from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section unless exception is granted by the Director of the Colorado Oil and Gas Conservation Commission. 8.

That the above-proposed spacing and well location rules will allow more efficient

drainage of the Iles Formation of the Mesaverde Group; will prevent waste; will not adversely effect correlative rights and will assure the greatest ultimate recovery of gas and associated hydrocarbon substances from the reservoir. 9.

That the names and addresses of the interested parties according to the

information and belief of the Applicant are set forth in Exhibit A attached hereto and made a part hereof. WHEREFORE, Applicant respectfully requests that this matter be set for hearing, that notice be given as required by law and that upon such hearing this Commission enter its order consistent with Applicant’s proposals as set forth above. Dated this

_ day of January, 2005. Respectfully submitted, ENCANA OIL & GAS (USA) INC. By: Erika Zimmer Enger Dorsey & Whitney LLP Attorneys for Applicant 370 17th Street, Suite 4700 Denver, Colorado 80202 (303) 629-3400

Applicant’s Address: 370 17th Street, Suite 1700 Denver, CO 80202

2

VERIFICATION STATE OF COLORADO CITY & COUNTY OF DENVER

) ) ss. )

Francois Goyer, Land Negotiator of EnCana Oil & Gas (USA) Inc., upon oath deposes and says that he has read the foregoing Application and that the statements contained therein are true to the best of his knowledge, information and belief. ENCANA OIL & GAS (USA) INC.

By:__________________________________ Francois Goyer, Land Negotiator Subscribed and sworn to before me this _ day of ____________, 2005, by Francois Goyer, Land Negotiator of EnCana Oil & Gas (USA) Inc. Witness my hand and official seal. My commission expires:___________________ _______________________________________ Notary Public

3

EXHIBIT A INTERESTED PARTIES IN THE MATTER OF THE APPLICATION OF ENCANA OIL & GAS (USA) INC. FOR AN ORDER ESTABLISHING SPACING AND WELL LOCATION RULES FOR THE ILES FORMATION OF THE MESAVERDE GROUP FOR CERTAIN DESCRIBED LANDS IN THE RULISON AND PARACHUTE FIELD AREAS, GARFIELD COUNTY, COLORADO ABO Petroleum Corporation Myco Industries Inc Yates Drilling Company Yates Petroleum Corporation 105 S. 4th Street Artesia, NM 88210 Tom Brown, Inc. 555 17th Street #1850 Denver, CO 80202 Evergreen Resources, Inc. 1401 17th Street Suite 1200 Denver, CO 80202 Barrett Resources Corporation Barrett Resources (Pac I) Corporation 1515 Arapahoe Street, Tower 3, #1000 Denver, CO 80202

) ) ) ) ) ) ) )

Cause No. _____ Docket No. ______

Desert Resources LLC 5460 South Quebec Street #250 Greenwood Village, CO 80111 Apollo Energy LLC 1557 Ogden Street, Suite 300 Denver, CO 80218 Noble Energy, Inc. 100 Glenborough Drive, Suite 100 Houston, TX 77067 Graham Resources Inc. 3510 North Causeway Blvd Metarie, LA 70011 Joan L. Savage 5953 County Road 320 Rifle, CO 81650

Burlington Resources Oil & Gas Company LP 3300 North “A” Street, Building 6 Midland, TX 79705

Exxon Corporation P.O. Box 2567 Houston, TX 77252-256

Mobil Exploration and Producing USA, Inc. P.O. Box 650232 Dallas, TX 73265

Williams Production RMT Company 1515 Arapahoe Street, Tower 3, Suite 1000 Denver, CO 80202

ERC Industries 1675 Larimer Street #500 Denver, CO 80202

Specialty Restaurants Corporation 8191 East Kiser Boulevard Anaheim, CA 92808

Prudential-Bache Energy Income Production Partnership II P-4 Graham Royalty, Ltd, General Partner 3510 North Causeway BLVD., Suite 200 Metairie, LA 70011

William Lane Deanne McClain 1487 County Road 117 Glenwood Springs, CO 81601

Costilla Energy Inc. Costilla Petroleum Corporation c/o Costilla Trust PO Box 10369 Midland, TX 79702

The Salvation Army Intermountain Division 1930 Sherman Street Denver, CO 80203

May Energy Partners Operating Partnership c/o May Petroleum Inc. 800 One Lincoln Centre 5400 LBJ Freeway, Dallas, TX 75240

John W. Savage, Jr. Roy E. Savage Marshall T. Savage Daniel W. Savage JRMD, LLC P.O. Box 1926 Rifle, CO 81650-1926

Costilla Petroleum Corporation 511 West Texas Midland, TX 79701

Thomas & Debra Morton 1487 County Road 117 Glenwood Springs, CO 81601

Carl F. Enyart and Martha K. Enyart 1112 South Harris Street Box 3215 Breckenridge, CO 80424

Larry A. & Karen K. Klebold 301 Himalaya Ave Broomfield, CO 80020 Donald R. Throm P. O. Box 302 Parachute, CO

Federal Land Bank of Wichita 245 N. Waco Wichita, KS 67202

Mary Ann Bosley P.O.Box 26 Woody Creek, CO 81656

Fuel Resources Development Company 1250 14th Street Denver, CO 80202

Ernie Fyrwald 1265 Mountain Drive Aspen, CO 81611

Kenai Oil & Gas, Inc. Kenai Partners 1980 Drilling Fund-Series III Kenai Partners 1981 Drilling Fund-Series I 717 17th Street, Suite 2000 Denver, CO 80202

Judith L. Hayward 180 S. 2nd Street Parachute, CO 81635

Prudential-Bache Energy Income Production Partnership II P-4 3510 North Causeway Blvd, Suite 200 Metairie, LA 70011

Gilin Jones and Linda G. Jones 7256 County Road 306 Parachute, CO 81635-9441

Larry A. Klebold and Karen K. Klebold 301 Himalaya Ave Broomfield, CO 80020

William Heley and Sandy A. Heley 2257 Fawn Ridge Court Grand Junction, CO 81503

Delbarco, Inc. P.O. Box 781581 Wichita, KS 67278

Craig L. Hayward and Christy Koeneke 1650 38th Street Suite 101W Boulder, CO 80301

Alarado Corporation 215 Union Blvd, #450 Lakewood, CO 80228

5