MINUTES OF THE REGULAR HEARING OF THE ARKANSAS OIL AND GAS COMMISSION January 27, 2004 EL DORADO, ARKANSAS

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1 MINUTES OF THE REGULAR HEARING OF THE ARKANSAS OIL AND GAS COMMISSION EL DORADO, ARKANSAS On or before January 16, 2004, the Arkansas Oil and Gas Commission ordered the Director of the Commission to place the subjects designated as Docket Numbers , , and through A on the agenda for a public hearing to be held in El Dorado, Arkansas. The hearing was called to order at 9:00 A.M., with Commissioners Spence A. Leamons, Chairman; Chris Weiser, Vice-Chairman; Chad White; W. Frank Morledge; Charles Wohlford; Bill Poynter; Mike Davis; Ken Williams; and Carolyn Pollan present. William J. Wynne, Commission Hearing Officer and Contract Attorney presided. Chairman Spence A. Leamons, welcomed all parties who were present. DOCKET NO The previously continued Application of Albemarle Corporation, P.O. Box 67, Magnolia, Arkansas, , for an Order requiring strict compliance with the Brine Unit Operating Agreement for Great Lakes Chemical s West Plant Brine Unit, Union County, Arkansas, and that failure to comply with terms of the Brine Unit Operating Agreement and/or the Commission s prior Order shall constitute adequate grounds for the removal of Great Lakes Chemical Corporation (GLCC) as the designated Operator of the GLCC West Brine Unit. A discussion concerning the scheduled February 2, 2004 special hearing was held including the special Commissioners appointment status and the projected length of the hearing. DOCKET NO The previously continued Application of SEECO, Inc., 1083 Sain Street, Fayetteville, AR 72701, for an Order granting an exceptional location and integrating the unleased mineral interests and non-consenting leasehold working interests of Anadarko Petroleum Corp.; Henry Holding Corp.; William H. Dangers; Sally Dangers Scott, c/o Mr. Greer Farris; Heirs of Marjorie Cater Dunn, deceased, Mr. Thomas

2 PAGE 2 Dunn, c/o Carol C. Knops; Heir of Louie Polly English, deceased, Tommy English and Theresa Ann English; Heir of Charles Wesley Polly, deceased, Ida S. Polly; Heirs of Garland Polly, William C. Polly and Mitzi Polly; Ruth Polly Littleton Carter and George Carter; Shirley A. Polly Sossamon; Heirs of James H. Polly, deceased, Louise Polly, James H. Polly, William R. Polly, Delores Fox, Patricia A. Standridge and Mike Standridge; Heirs of Robert Polly, deceased, Patricia M. Polly and children of Robert Polly; Heirs of Charles G. Polly, Linda Polly, Charles Polly, Ronda Polly, Charlene Polly Hood and husband, Donald Polly, Vera Polly Cunningham and husband, Kenny Cunningham; Heirs of Carroll L. Polly, deceased, Doris Polly; Jimmy Polly and Tammy Polly, his wife, Theresa Polly Jones and Paul Jones, her husband, and Adelia Polly, as well as any unknown spouse, heir, devisee, personal representative, successor or assign in its proposed drilling and production unit described as Section 2, Township 9 North, Range 29 West, Crawford and Franklin Counties, Arkansas. Counsel for the Applicant requested the matter be dismissed. The request was granted. DOCKET NO The continued Application of Ross Explorations, Inc Rogers Avenue, Suite 1, Fort Smith, AR for an Order amending the field rules of Waveland Field, specifically Order No The Applicant stated they are the operator of the M.B. Foster #1-18, M.B. Foster #2-18 and M.B. Foster #3-18 wells all in the production unit consisting of all of Section 18, Township 5 North, Range 24 West, Yell County, Arkansas. Under AOGC Order Reference No , the subdivision 80 acre units in the Northwest Quarter of Section 18, Township 5 North, Range 24 West were designated as stand up units, consisting of the West Half of the Northwest Quarter (W/2 NW/4) and the East Half of the Northwest Quarter (E/2 NW/4). The M.B. Foster #1-18 was drilled and completed before the Order Reference was issued. The M.B. Foster #1-18 was drilled at a location 1,320 feet from the West Line and 1,100 feet from the North Line of said Section 18. The location was on the subdivision boundary between the East Half of the Northwest Quarter (E/2 NW/4) and the West Half of the Northwest Quarter (W/2 NW/4). On the application for Order Reference No , it was requested that the M.B. Foster #1-18 be designated as being in the subdivision unit consisting of the West Half of the

3 PAGE 3 Northwest Quarter (W/2 NW/4). Being on the subdivision boundary of the West Half of the Northwest Quarter (W/2 NW/4) and the East Half of the Northwest Quarter (E/2 NW/4), the applicants for AOGC Order Reference were able to select to which subdivision unit it would be assigned. The Applicant requested the Commission to amend Order Reference and designate the M.B. Foster #1-18 to be within the subdivision East Half of the Northwest Quarter (E/2 NW/4). The Applicant requested in writing that this matter be continued until the February hearing. The request was granted. DOCKET NO The Application of SEECO, Inc., 1083 Sain Street, P.O. Box Fayetteville, AR , for an Order integrating the unleased mineral interests of Peoples Mortgage Company; George F. Keathley; William A. Poffinbarger & Earlene Poffinbarger; David Ray Hattabaugh; Stephen Craig McGinnis; Farmers Bank of Greenwood; Jeffrey L. White & Jennifer O. White; Phillip Bruce Daley & Delpha Daley; Heirs of Joe B. Rector; Herschel W. Cleveland & Leona K. Cleveland; Gary Sowell; Charlotte Gibson; Larry G. Quick & Janet Quick; Bonnie M. Moore; Samedan Oil Corporation; Heirs of H. H. Dalhoff; Austin F. Leach, Jr.; Mary L. Little Weston Trust, First Wichita National Bank; Norah A. Little Green Trust, First Wichita National Bank; Fitzsimons Trust, C/O Wayne Collie, CPA; T. J. Waggoner, III; Heirs of M. H. & Lucille Jester; Gayne B. Veltman & Julia Catherine Seibert, Trustees; Ila, Jerry & Jack McClain; Quien Sabe Corporation; E. E. Noble, Trustee; Ann Noble Brown & David Brown; Huie H. Smith & Adeline S. Smith; Kevin Lee Robinson & Susan Renee Robinson; Linda Webb Bugeja; R. L. Robertson; Heirs of Floris Rae Warner; Heirs of Michael B. Laurie; Mary Virginia Weston; Bill W. May; Martha S. Newton; Timothy Lee Dunn; Jerry Davis; William Lutener; Wesley K. Pope; Lloyd A. Hattabaugh; Cassandra Ann Mitchener & Cheri Lynn Catlett; Norman McLamb & Nancy McLamb; Brian C. Beasley: John Beasley & Harriett Beasley; Ronnie Breeden & Beverly Breeden; Clydine Bates; Ira Ames, III; Billy J. Raggio, etal; Juanita J. Roper Trust C/O Sherri Lynne Pileggi as well as any unknown spouse, heir, devisee, personal representative, successor or assign in its proposed drilling and production unit described as Section 7, Township 5 North, Range 25 West, Waveland Field, Yell County, Arkansas. The Applicant proposed to drill a well to a depth of 6,800 feet to test the Borum

4 PAGE 4 Formation and any intervening formations at a location which is 1,980 feet from the South Unit Line and 817 feet from the West Unit Line of the above described unit. The Applicant was represented by Mr. Tom Daily, as counsel; Mr. Kim Butler, petroleum geologist and Ms. Laura Harwell, petroleum landman. The Applicant dismissed certain parties from the application prior to presenting their testimony and evidence. Commission Staff reported that they had received a complaint concerning the contacts made and data provided to the unleased parties prior to the hearing. The Applicant was asked if an AFE and JOA were provided to all unleased parties. The Applicant said they had not provided a JOA and AFE, but did summarize the options in the form of a letter. Following the discussion, Mr. Wynne suggested the Commission consider a General Rule to outline what is required by an Operator to be sent to an unleased interest owner. The Applicant stated that offers had been extended to lease for $ per net mineral acre and a 1/8 th royalty or $50.00 and a 3/16ths royalty. The Applicant cited structural risk distance to a pipeline and little control in requesting a 500% non-consent risk factor penalty. A motion by Vice-Chairman Weiser to approve the application was seconded by Commissioner Wohlford and approved by a vote of 9 for and 0 against. DOCKET NO The Application of SEECO, Inc., 1083 Sain Street, P.O. Box Fayetteville, AR , for an Order integrating the unleased mineral interests of Edward A. Nelson & Cheryl Nelson; James C. Nelson & Maureen Nelson; Clay Fitzhugh & Becky Fitzhugh; Carol Fitzhugh; Hartwell Wilson & Jess H. Wilson; Charles Witsell & Rebecca Rogers Witsell; Herman Charles Carvill, Jr. & Martha R. Carvill; Lee Tobey & Debbie Tobey; Paul Adam, Jr. & The Unknown Heirs of Paul Adam; Blumberg Family Investment Partnership, LP; Marion Fitzhugh & Elizabeth Fitzhugh; Ann Reintges & Henry Reintges; David Fitzhugh; Marjorie Hall; Texel, Inc.; Jana D. Hughes; Shirley Tobey; Panhandle Royalty Company; Kimberly Bowersock Miller, Clay Miller, Steed Bowersock and Brooke Bowersock; Richard Andrew Steed & The Steed Family Limited Partnership; The Allar Company; Wilbur C. Bradley & Mike Bradley, Trustees of

5 PAGE 5 the O. E. Bradley and E. L. Bradley Trust as well as any unknown spouse, heir, devisee, personal representative, successor or assign in its proposed drilling and production unit described as Section 15, Township 5 North, Range 26 West, Waveland Field, Logan County, Arkansas. The Applicant proposed to drill a well to a depth of 7,000 feet to test the Borum Formation and any intervening formations at a location which is 790 feet from the North Unit Line and 969 feet from the West Unit Line of the above described unit. The Applicant was represented by Mr. Tom Daily, as counsel; Mr. Kim Butler, petroleum geologist and Ms. Laura Harwell, petroleum landman. The Applicant dismissed certain parties from the application prior to presenting their testimony and evidence. The Applicant stated that offers had been extended to lease for $ per net mineral acre and a 1/8 th royalty or $50.00 and a 3/16ths royalty. The Applicant cited structural risk distance to a pipeline and little control in requesting a 500% non-consent risk factor penalty. A motion by Vice-Chairman Weiser to approve the application was seconded by Commissioner Wohlford and approved by a vote of 9 for and 0 against. DOCKET NO The Application of CDX Gas, LLC, 5485 Beltline Road, Suite 190, Dallas TX for an Order integrating the unleased mineral interests of Texas and Pacific Railway Company; Missouri Pacific Railroad Company; Union Pacific Railroad Company; Union Pacific Resources Corp.; Upland Industries Corporation; Anadarko Petroleum Corporation and RME Petroleum Company as well as any unknown spouse, heir, devisee, personal representative, successor or assign in its proposed Hartford Field Unit L described as: HARTFORD FIELD UNIT L" Part of Sections 17, 18 and 19, all in Township 4 North, Range 32 West of the Fifth Principal Meridian, Sebastian County, Arkansas, more particularly described as

6 PAGE 6 follows: COMMENCING at Mile Post Marker 26 at the Arkansas-Oklahoma State Line and the West line of Fractional Section 13, Township 4 North, Range 33 West; THENCE South 03 degrees 03 minutes 49 seconds East, feet along said Arkansas- Oklahoma State Line and the West line of said Section 13 from which Mile Post Marker 27 bears South 03 degrees 03 minutes 49 seconds West feet; THENCE North 63 degrees 53 minutes 47 seconds East, feet to the POINT OF BEGINNING; THENCE North 63 degrees 53 minutes 47 seconds East, feet; THENCE South 26 degrees 06 minutes 13 seconds East, feet; THENCE South 63 degrees 53 minutes 47 seconds West, feet; THENCE North 26 degrees 06 minutes 13 seconds West, feet to the Point of Beginning. Contained within said bounds, acres, more or less. The proposed drilling unit is in the Hartford Field of Sebastian County, Arkansas, and is subject to the field rules for said field. Applicant proposed to drill a horizontal pinnate well in the unit described above. The Applicant requested that this application and Docket No be combined for the purpose of presenting evidence and t estimony. The request was granted. The Applicant was represented by Mr. Tom Daily, as counsel, Mr. Dan Wilkins, petroleum landman and Mr. Mitch De Vries, petroleum geologist. The Applicant requested that the JOA be amended to reflect the State of Arkansas instead of Texas. The request was granted. The Applicant stated that offers to lease in both applications has been extended for $75.00 per net acre and a 3/16ths royalty or no bonus and a 1/5 th royalty. The Applicant cited drilling risk, faulting risk, lower gas content in the crest of the anticline and risk of staying the coal seam in asking for a 500% non-con-sent risk factor penalty A motion to approve both applications as amended was made by Commissioner White and seconded by Vice-Chairman Weiser. Both Applications were approved by a vote of 9 for and 0 against. DOCKET NO

7 PAGE 7 The Application of CDX Gas, LLC, 5485 Beltline Road, Suite 190, Dallas TX for an Order integrating the unleased mineral interests of; Texas and Pacific Railway Company; Missouri Pacific Railroad Company; Union Pacific Railroad Company; Union Pacific Resources Corp.; Upland Industries Corporation; Anadarko Petroleum Corporation and RME Petroleum Company as well as any unknown spouse, heir, devisee, personal representative, successor or assign in its proposed Hartford Field Unit M described as: HARTFORD FIELD UNIT M" Part of Sections 17, 18, 19 and 20, all in Township 4 North, Range 32 West of the Fifth Principal Meridian, Sebastian County, Arkansas, more particularly described as follows: COMMENCING at Mile Post Marker 27 at the Arkansas-Oklahoma State Line and the West line of Fractional Section 24, Township 4 North, Range 33 West; THENCE North 03 degrees 03 minutes 49 seconds West, feet along said Arkansas- Oklahoma State Line from which Mile Post Marker 26 bears North 03 degrees 03 minutes 49 seconds East feet; THENCE North 63 degrees 53 minutes 47 seconds East, feet to the POINT OF BEGINNING; THENCE North 63 degrees 53 minutes 47 seconds East, feet; THENCE South 26 degrees 06 minutes 13 seconds East, feet; THENCE South 63 degrees 53 minutes 47 seconds West, feet; THENCE North 26 degrees 06 minutes 13 seconds West, feet to the Point of Beginning. Contained within said bounds, acres, more or less. The proposed drilling unit is in the Hartford Field of Sebastian County, Arkansas, and is subject to the field rules for said field. Applicant proposed to drill a horizontal pinnate well in the unit described above. See Docket No for the results of the determination of this application. DOCKET NO The Arkansas Oil and Gas Commission received evidence relative to each controlled pool in order to determine:

8 PAGE 8 (1) Whether or not waste of oil and/or gas is taking place or is reasonably imminent, whereas none were received. (2) The optimum equitable rate of production for each controlled source of supply, whereas none were received. (3) Whether or not any rules and regulations currently in effect should be considered for revision, or if additional rules should be considered. Director Black reported that Commission Staff had been working with industry representatives to develop possible revisions to General Rule D-16 that would possibly be submitted for review at the March 2004 hearing. DOCKET NO.A This application will be Administratively approved providing for a 50% allowable. DOCKET NO.A This application will be Administratively approved providing for a 50% allowable. DOCKET NO.A This application will be Administratively approved providing for a 55% allowable. DOCKET NO.A This application will be administratively approved providing for an allowable to be calculated based upon the mid-point perforation location as determined by a bottom hole survey. DOCKET NO. A This application will be Administratively approved providing for a 50% allowable. OTHER BUSINESS 1.) The minutes of the December hearing were submitted for review and approval. A motion to approve the minutes as submitted was made by

9 PAGE 9 Commissioner Williams and seconded by Commissioner Wohlford and approved by a vote of 9 for and 0 against 2.) Director Black recommenced the Commission issue a Notice to Show Cause to Mark Davies of Speight Oil & Gas, Inc. for failure to plug wells in the Huntsville Field. Following discussion, Commissioner Morledge made a motion to issue the Show Cause, which was seconded by Commissioner Wohlford. The motion carried by a voter of 9 for and 0 against. 3.) Director Black gave a report of the status of efforts to resolve the final matters of the Moseley audit, which was considered at the December Hearing. 4.) Director Black gave a report on Staff s efforts with Mr. Joe Owen in transferring his wells to an unnamed company for the new company to operate in the future. The hearing adjourned at 11:30 a.m. BY: Grant E. Black, Director and Ex-Officio Secretary