2346_Pooling-Original.pdf - Virginia Department of Energy

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VIRGINIA: BEFORE THE VIRGINIA GAS AMD OIL BOARf) APPLICANT: RELIEF SOUGHT: CMX Gas Company LLC POOLING OF INTERESTS IN DRILLING UNIT N(-1) LOCATED IN THE OAKWOOD COALBED METHANE GAS FIELD I PURSUANT TO VA. CODE %5 45.1-361.21 AMD 45.1-361.22, FOR THE PRODUCTION OF OCCLUDED NATURAL GAS PRODUCED PROM COALBEDS AMD ROCK STRATA ASSOCIATED THEREWITH (herein Collectively referred to as "Coalbed Methane Gas" or "Gas") LEGAL DESCRIPTION: DRILLING UNIT NUMBER N(-1) (herein "Subject Drilling Unit" ) IN THE OAKWOOD COALBBD METHANE GAS FIELD I PEA%BR NAGISTERIAL DISTRICT, Pg2(FER QUADRANGLE BBCEBNBN COUNTT, VIRGINIA (the "Subject Lands" are more particularly described on Exhibit attached hereto and made a part hereof) ) VIRGINIA GAS ) AND OIL BOARD ) ) DOCKET NO. ) 08-1021-2346 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) REPORT OF THE BOARD FINDINGS AND ORDER 1. Hearing Date and Place: This matter came on for final hearing before the Virginia Gas and Oil Board (hereafter "Board" ) at 9:00 a.m. on October 21, 2008 at the Southwest Virginia Higher Education Center on the campus of Virginia Highlands Community College, Abingdon, Virginia. 2. Appearances: Nark Swartz, Esquire, of the firm Swartz Law Offices, PLLC, appeared for the Applicant; and Sharon N. B. Pigeon, Assistant Attorney General, was present to advise the Board. 3. Jurisdiction and Notice: Pursuant to Va. Code 55 45.1- 361.1 et ~se ., the Board finds that it has jurisdiction over the subject matter. Based upon the evidence presented by Applicant, the Board also finds that the Applicant has (1) exercised due diligence in conducting a search of the reasonably available sources to determine the identity and whereabouts of gas and oil owners, coal owners, mineral owners and/or potential owners, i.e., persons identified by Applicant as having (" Owner" ) or claiming (" Claimant" ) the rights to Coalbed Methane Gas in all coal seams below the Tiller Seam, including the Upper Seaboard, Greasy Creek, Middle Seaboard, Lower Seaboard, Upper Horsepen, Middle Horsepen, War Creek, Lower Horsepen, Pocahontas No. 9, Pocahontas No. 8, Pocahontas No. 7, Pocahontas No. 6, Pocahontas

Transcript of 2346_Pooling-Original.pdf - Virginia Department of Energy

VIRGINIA:BEFORE THE VIRGINIA GAS AMD OIL BOARf)

APPLICANT:

RELIEF SOUGHT:

CMX Gas Company LLC

POOLING OF INTERESTS INDRILLING UNIT N(-1) LOCATEDIN THE OAKWOOD COALBED METHANE GASFIELD I PURSUANT TO VA. CODE

%5 45.1-361.21AMD 45.1-361.22, FORTHE PRODUCTION OF OCCLUDED NATURAL

GAS PRODUCED PROM COALBEDS AMD ROCKSTRATA ASSOCIATED THEREWITH (hereinCollectively referred to as"Coalbed Methane Gas" or "Gas")

LEGAL DESCRIPTION:

DRILLING UNIT NUMBER N(-1)(herein "Subject Drilling Unit" )IN THE OAKWOOD COALBBD METHANE GAS FIELD IPEA%BR NAGISTERIAL DISTRICT,Pg2(FER QUADRANGLE

BBCEBNBN COUNTT, VIRGINIA(the "Subject Lands" are moreparticularly described on Exhibit

attached hereto and made apart hereof)

) VIRGINIA GAS

) AND OIL BOARD

)) DOCKET NO.) 08-1021-2346)

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REPORT OF THE BOARD

FINDINGS AND ORDER

1. Hearing Date and Place: This matter came on for finalhearing before the Virginia Gas and Oil Board (hereafter "Board" ) at9:00 a.m. on October 21, 2008 at the Southwest Virginia HigherEducation Center on the campus of Virginia Highlands Community College,Abingdon, Virginia.

2. Appearances: Nark Swartz, Esquire, of the firm Swartz LawOffices, PLLC, appeared for the Applicant; and Sharon N. B. Pigeon,Assistant Attorney General, was present to advise the Board.

3. Jurisdiction and Notice: Pursuant to Va. Code 55 45.1-361.1 et ~se ., the Board finds that it has jurisdiction over thesubject matter. Based upon the evidence presented by Applicant, theBoard also finds that the Applicant has (1) exercised due diligence inconducting a search of the reasonably available sources to determinethe identity and whereabouts of gas and oil owners, coal owners,mineral owners and/or potential owners, i.e., persons identified byApplicant as having ("Owner" ) or claiming ("Claimant" ) the rights toCoalbed Methane Gas in all coal seams below the Tiller Seam, includingthe Upper Seaboard, Greasy Creek, Middle Seaboard, Lower Seaboard,Upper Horsepen, Middle Horsepen, War Creek, Lower Horsepen, PocahontasNo. 9, Pocahontas No. 8, Pocahontas No. 7, Pocahontas No. 6, Pocahontas

No. 5, Pocahontas No. 4, Pocahontas No. 3, Pocahontas No. 2 and variousunnamed coal seams, coalbeds and rock strata associated therewith(hereafter "Subject Pormation") in Subject Drilling Unit underlying andcomprised of Subject Lands; (2) represented it has given notice tothose parties (hereafter sometimes "person(s)" whether referring toindividuals, corporations, partnerships, associations, companies,businesses, trusts, joint venturea or other legal entities) entitled byVa. Code 55 45.1-361.19 and 45.1-361.22, to notice of the Applicationfiled herein; and (3) that the persons set forth in their Applicationand Notice of Hearing have been identified by Applicant through its duediligence as Owners or Claimants of Coalbed Methane Gas interestsunderlying Subject Drilling Unit and that the persons identified inBxhibit B-3 attached hereto are persons identified by Applicant who maybe Owners or Claimants of Coalbed Methane Gas interests in SubjectFormatiOn who have not heretofore agreed to lease or sell to theApplicant and/or voluntarily pool their Gas interests. Conflicting GaaOwners/Claimants in Subject Drilling Unit are listed on Bxkibit B.Further, the Board has caused notice of this hearing to be published asrequired by Va. Code 5 45.1-361.19.B.Whereupon, the Board hereby findethat the notices given herein satisfy all statutory requirements, Boardrule requirements and the minimum standards of due process.

4. Amendments: None

5. Dismissals: None

6. Relief Requested: Applicant requests (1) that pursuant toVa. Code 5 45.1-361.22, including the applicable portions of Va. Code 545.1-361.21, the Board pool all the rights, interests and estates inand to the Gas in Subject Drilling Unit, including the pooling of theinterests of the Applicant and of the known and unknown persons namedin Bxhijzit B-3 hereto and that of their known and unknown heirs,executors, administrators, devisees, trustees, assigns and succeseors,both immediate and remote, for the drilling and operation, includingproduction, of Coalbed Methane Gas, produced from or allocated to theSubject Drilling Unit established for the Subject Formation underlyingand comprised of the Subject Lands, (hereafter sometimes collectivelyidentified and referred to as "Well Development and/or Operation in theSubject Drilling Unit" ), and (2) that the Board designate CNZ GasCompany IJC as as Unit Operator.

7. Relief Granted: The Applicant's requested relief in thiscause be and hereby is granted: (1) Pursuant to Va. Code 5 45.1-361.21.C.3, CNX Gas Company LLC hereafter "Unit Operator" is designatedas the Unit Operator authorized to drill and operate the CoalbedMethane Gas well in the Subject Drilling Unit at the location depictedon the plat attached hereto as Nxhibit A, subject to the permitprovisions contained in Va. Code 55 45.1-361.27 et ~se .; to the OakwoodCoalbed Methane Gas Field I Order OGCB 3-90, dated May 18, 1990, asamended; to 55 4 VAC 25-150 et ~se ., Gas and Oil Regulations; and to 554 VAC 25-160 et ~se ., Virginia Gas and Oil Board Regulations, all asamended from time to time, and (2) all the interests and estates in andto the Gas in Subject Drilling Unit, including that of the Applicantand of the known and unknown persons listed on Bxhibit B-3, attachedhereto and made a part hereof, and their known and unknown heirs,executors, administrators, devisees, trustees, assigns and successors,both immediate and remote, be and hereby are pooled in the Subject

Formation in the Subject Drilling Unit underlying and comprised of theSubject Lands.

Pursuant to the Oakwood I Field Rules promulgated under theauthority of Va. Code 5 45.1-361.20, the Board has adopted thefollowing method for the calculation of production and revenue andallocation of allowable costs for the production of Coalbed NethanleGas.

For Frac Well Gas. — Gas shall be produced from and allocated toonly the $0-acre drilling unit in which the well is locatedaccording to the undivided interests of each Owner/Claimantwithin the unit, which undivided interest shall be the ratio(expressed as a percentage) that the amount of mineral acreagewithin each separate tract that is within the Subject DrillingUnit, when platted on the surface, bears to the total mineralacreage, when platted on the surface, contained within the entire$0-acre drilling unit in the manner set forth in the Oakwood IField Rules.

8. Election and Election period: In the event any owner orClaimant named in Exhibit B-3 hereto does not reach a voluntaryagreement to share in the operation of the well located in the SubjectDrilling Unit, at a rate of payment mutually agreed to by said GasOwner or Claimant and the Unit Operator, then such person named mayelect one of the options set forth in Paragraph 9 below and must givewritten notice of his election of the option selected under Paragraph 9to the designated Unit Operator at the address shown below withinthirty (30) days from the date of receipt of a copy of this Order. Atimely election shall be deemed to have been made if, on or before thelast day of said 30-day period, such electing person has delivered hiswritten election to the designated Unit operator at the address shownbelow or has duly postmarked and placed its written election in firstclass United States mail, postage prepaid, addressed to the UnitOperator at the address shown below.

9. Election Options:

9.1 option 1 - To Participate In The well Development andOperation of the Drilling Unit: Any Gas Owner or Claimantnamed in Exhibit B-3 who does not reach a voluntary agreementwith the Unit Operator may elect to participate in the WellDevelopment and Operation in the Subject Drilling Unit(hereafter "Participating Operator" ) by agreeing to pay theestimate of such Participating Operator's proportionate partof the actual and reasonable costs of the Well Developmentcontemplated by this Order for Gas produced pursuant to theOakwood I Field Rules, including a reasonable supervision fee,as more particularly set forth in Virginia Gas and Oil BoardRegulation 4 VAC 25-160-100 (herein "Completed-for-ProductionCosts" ). Further, a Participating Operator agrees to pay theestimate of such Participating Operator's proportionate partof the Completed-for-Production Cost as set forth below to theUnit Operator within forty-five (45) days from the later ofthe date of mailing or the date of recording of this Order.The Completed-for-Production Coat for the Subject DrillingUnit is as follows:

Completed-for-Production Cost: 8359,099.70

Any gas owner and/or claimants named in Exhibit 8-3, who electthis option (Option 1) understand and agree that their initialpayment under this option is for their proportionate share ofthe Applicant's estimate of actual costs and expenses. It isalso understood by all persons electing this option that theyare agreeing to pay their proportionate share of the actualcosts and expenses as determined by the Operator named in thisBoard Order.

A Participating Operator's proportionate cost hereunder shall bethe result obtained by multiplying the Participating

Operators'Interestin Unit" times the Completed-for-Production Cost setforth above. Provided, however, that in the event a ParticipatingOperator elects to participate and fails or refuses to pay theeatimate of his proportionate part of the Completed-for-Production Cost as set forth above, all within the time set forthherein and in the manner prescribed in Paragraph 8 of this Order,then such Participating Operator shall be deemed to have electednot to participate and to have elected compensation in lieu ofparticipation pursuant to Paragraph 9.2 herein.

9.2 Option 2 — To Receive A Cash Bonus Consideration: In lieuof participating in the Well Development and Operation inSubject Drilling Unit under Paragraph 9.1 above, any GaaOwner or Claimant named in Exhibit B-3 hereto who does notreach a voluntary agreement with the Unit Operator mayelect to accept a cash bonus consideration of 81.00 per netmineral acre owned by such person, commencing upon entry ofthis Order and continuing annually until commencement ofproduction from Subject Drilling Unit, and thereafter aroyalty of 1/8th of 8/Sths (twelve and one-half percent(12.5%)] of the net proceeds received by the Unit Operatorfor the sale of the Coalbed Nethane Gas produced from anyWell Development and Operation covered by this Ordermultiplied by that person's Interest in Unit orproportional share of said production [for purposes of thisOrder, net proceeds shall be actual proceeds received lesspost-production costs incurred downstream of the wellhead,including, but not limited to, gathering, compression,treating, transportation and marketing costs, whetherperformed by Unit Operator or a third person) as fair,reasonable and equitable compensation to be paid to saidGas Owner or Claimant. The initial cash bonus shall becomedue and owing when so elected and shall be tendered, paidor escrowed within one hundred twenty (120) days ofrecording of this Order. Thereafter, annual cash bonuses,if any, shall become due and owing on each anniversary ofthe date of recording of this order in the event productionfrom Subject Drilling Unit has not theretofore commenced,and once due, shall be tendered, paid or escrowed withinsixty (60) days of said anniversary date. Once the initialcash bonus and the annual cash bonuses, if any, are so paidor escrowed, subject to a final legal determination ofownership, said payment(s) shall be satisfaction in fullfor the right, interests, and claims of such electing

person in and to the Oas produced from Subject Formation inthe Subject Lands, except, however, for the I/8th royaltiesdue hereunder.

Subject to a final legal determination of ownership, theelection made under this Paragraph 9.2, when so made, shallbe satisfaction in full for the right, interests, an(dclaims of such electing person in any Well Development andOperation covered hereby and such electing person shall bedeemed to and hereby does lease and assign, its right,interests, and claims in and to the Oas produced froinSubject pormation in the Subject Drilling Unit to theApplicant.

9.3. Option 3 - To Share In The Well Development And OperationAs A Non-participating person on A Carried Basis And TDReceive Consideration In Lieu Of Cash: In lieu ofparticipating in the Well Development and Operation inSubject Drilling Unit under Paragraph 9.1 above and in lieuof receiving a Cash Bonus Consideration under Paragraph 9.2above, any Oas Owner or Claimant named in Rah4bit B-3hereto who does not reach a voluntary agreement with theUnit Operator may elect to share in the Well Developmentand Operation of Subject Drilling Unit on a carried basiS(as a "Carried Well Operator"] so that the proportionatepart of the Completed-for-Production Cost hereby allobableto such Carried Well Operator's interest is charged againstsuch Carried Well Operator's share of production fromSubject Drilling Unit. Such Carried Well Operator'Srights, interests, and claims in and to the Oas in SubjectDrilling Unit shall be deemed and hereby are assigned tcthe Applicant until the proceeds from the sale of suchCarried Well Operator's share of production from Subject'.Drilling Unit (exclusive of any royalty, excess oroverriding royalty, or other non-operating or non cost-bearing burden reserved in any lease, assignment thereof oragreement relating thereto covering such interest) equalsthree hundred percent (300%) for a leased interest or twohundred percent (2000) for an unleased interest (whicheveris applicable) of such Carried Well Operator's share of theCompleted-for-Production Cost allocable to the interest ofsuch Carried Well Operator. When the Applicant recoups and,recovers from such Carried Well Operator's assignedinterest the amounts provided for above, then, the assigned,interest of such Carried Well Operator shall automaticallyrevert back to such Carried Well Operator, and from andafter such reversion, such Carried Well Operator shall betreated as if it had participated initially under Paragraph9.1 above; and thereafter, such participating person shallbe charged with and shall pay his proportionate part of allfurther costs of such Well Development and Operation.

Subject to a final legal determination of ownership, theelection made under this Paragraph 9.3, when so made, shallbe satisfaction in full for the rights, interests, andclaims of such electing person in any Well Development andOperation covered hereby and such electing person shall be

deemed to have and hereby does assign its rights,interests, and claims in and to the Gas produced fromSubject Formation in the Subject Drilling Unit to theApplicant for the period of time during which its interestis carried as above provided prior to its reversion back tosuch electing person.

10. Failure to Pronerlv Elect: In the event a person named inExhibit $-3 hereto does not reach a voluntary agreement with the Unitoperator and fails to elect within the time, in the manner and inaccordance with the terms of this Order, one of the alternatives setforth iu Paragraph 9 above for which his interest qualifies, then suchperson shall be deemed to have elected not to participate in theproposed Well Development and Operation in Subject Drilling Unit andshall be deemed, subject to a final legal determination of ownership,to have elected to accept as satisfaction in full for such person'right, interests, and claims in and to the Gas the considerationprovided in Paragraph 9.2 above for which its interest qualifies andshall be deemed to have leased and/or assigned his right, interests,and claims in and to the Gas produced from Subject Formation in theSubject Drilling Unit to the Applicant. Persons who fail to properlyelect shall be deemed, subject to a final legal determination ofownership, to have accepted the compensation and terms set forth hereinat Paragraph 9.2 in satisfaction in full for the right, interests, andclaims of such person in and to the Gas produced from the SubjectFormation underlying Subject Lands.

11. Default By Participating Person: In the event a personnamed in Exhibit 5-3 elects to participate under Paragraph 9.1, butfails or refuses to pay, to secure the payment or to make anarrangement with the Unit Operator for the payment of such person'preportionate part of the Completed-for-Production Cost as set forthherein, all within the time and in the manner as prescribed in thisOrder, then such person shall be deemed to have withdrawn his electionto participate and shall be deemed to have elected to accept assatisfaction in full for such person's right, interest, and claims inand to the Gas the consideration provided in Paragraph 9.2 above forwhich his interest qualifies depending on the excess burdens attachedto such interest. Whereupon, any cash bonus consideration due as aresult of such deemed election shall be tendered, paid or escrowed byUnit Operator within one hundred twenty (120) days after the last dayon which such defaulting person under this Order should have paid hisproportionate part of such cost or should have made satisfactoryarrangements for the payment thereof. When such cash bonusconsideration is paid or escrowed, it shall be satisfaction in full forthe right, interests, and claims of such person in and to the Gasunderlying Subject Drilling Unit in the Subject Lands covered hereby,except, however, for any royalties which would become due pursuant toParagraph 9.2 hereof.

12. Assignment of Interest: In the event a person named inExhibit 5-3 is unable to reach a voluntary agreement to share in theWell Development and Operation contemplated by this Order at a rate ofpayment agreed to mutually by said Owner or Claimant and the UnitOperator, or fails to make an election under Paragraph 9.1 above, thensubject to a final legal determination of ownership, such person shall

be dees)ed to have and shall have assigned unto Applicant such person'right, interests, and claims in and to said well, and other share inpioduction to which such person may be entitled by reason of anyelection or deemed election hereunder in accordance with the provisionsof this Order governing said election.

13. Unit Operator (or Operator): CBE Gas Company LLC shall beand hereby is designated as Unit Operator authorised to drill andoperate the Coalbed Nethane Well in Subject Formation in SubjectDrilling Unit, all subject to the permit provisions contained in Va.Cede 55 45.1-361.27 et ~se .; 55 4 VAC 25-150 et ~se ., Gas and OilRegulations; 55 4 VAC 25-160 et ~se ., Virginia Gas and Oil BoardRegulations; the Oakwood Coalbed Gas Field I Order OGCB 3-90, all asamended from time to time, and all elections required by this Ordershall be communicated to Unit operator in writing at the address shownbelow:

CBX Gas company LLC2401 John Rash Blvd.Bluef ield, WV 24701Attn< Leslie K. Arrington

14. Cosssencement of Operations: Unit Operator shall cosmmnce orcause tc commence operations for the drilling of the well(s) within theSubject Drilling Unit and/or the well(s) outside the Subject DrillingUnit but from which production is allocated to the Subject DrillingUnit within Seven Hundred and Thirty (730) days from the date of th6Order and shall prosecute same wi,th due diligence. If Unit Operatofshall not have so consnenced and/or prosecuted, then this Order shaliterminate, except for any cash sums then payable hereunder; otherwise,unless sooner terminated by Order of the Board, this Order shall expireat 12:00 P.N. on the date on which all wells covered by the Ordefand/or all wells from which production is allocated to the SubjectDrilling Unit are permanently abandoned and plugged. However, iu theevent an appeal is taken from this Order, then the time between thefiling Of the petition for appeal and the final Order of the CircuitCourt shall be excluded in calculating the two-year period referred toherein.

15. Operator's Lien: Unit Operator, in addition to the otherrights afforded hereunder, shall have a lien and a right of set off onthe Gas estates, rights, and interests owned by any person subjecthereto who elects to participate under Paragraph 9.1 in the SubjectDrilling Unit to the extent that costs incurred in the drilling oroperation on the Subject Drilling Unit are chargeable against suchperson's interest. Such liens and right of set off shall be separableas to each separate person and shall remain. liens until the UnitOperator drilling or operating any well covered hereby has been paidthe full amounts due under the terms of this Order.

16. Escrow Provisions:

The Applicant represented to the Board that there are no unknown orunlocatable claimants in the Subject Drilling Unit; and, the UnitOperator has represented to the Board that there are no conflictingclaimants in the Subject Drilling Unit whose payments are subject tothe provisions of Paragraph 16.2 hereof. Therefore, by this Order, theEscrow Agent named herein or any successor named by the Board, is not

required to establish an interest-bearing escrow account for theSubject Drilling Unit (herein "Escrow Account" ), and to reoeive midaccount to the Board pursuant to its agreement for the escrowed fundshereafter described in Paragraphs 16.1 and 16.2:

llmshovia Sank, N.A.VA7515P.O. Box 14061Roanoke, VA 2403$Attentionr Judy Barger

16.1. Escrow Provisions For Unknown or Unlocatable Persons~ Ifany payment of bonus, royalty payment or other payment dueand owing under this Order cannot be made becaus0 thaperson entitled thereto cannot be located or is unknown,then such cash bonus, royalty payment, or other paymentshall not be commingled with any funds of the Unit Operatorand, pursuant to Va. Code 5 45.1-361.21.D, said sums shallbe deposited by the Unit Operator into the Escrow Account,commencing within one hundred twenty (120) days ofrecording of this Order, and continuing thereafter onmonthly basis with each deposit to be made, by use ofreport format approved by the Inspector, by a date which i0no later than sixty (60) days after the last day of themonth being reported and/or for which funds are beingdeposited. Such funds shall be held for the exclusive us0of, and sole benefit of the person entitled thereto untilsuch funds can be paid to such person(s) or until theEscrow Agent relinquishes such funds as required by law orpursuant to Order of the Board in accordance with Va. Code5 45.1-361.21.D.

16.2 Escrow Provisions For Conflicting Claimants: If anypayment of bonus, royalty payment, proceeds in excess ofongoing operational expenses, or other payment due and owingunder this Order cannot be made because the person entitledthereto cannot be made certain due to conflicting claims ofownership and/or a defect or cloud on the title, then suchcash bonus, royalty payment, proceeds in excess of ongoingoperational expenses, or other payment, together withParticipating Operator's Proportionate Costs paid to UnitOperator pursuant to Paragraph 9.1 hereof, if any, (1) shallnot be commingled with any funds of the Unit Operator; and(2) shall, pursuant to Va. Code 55 45.1-361.22.A.2, 45.1-361.22.A.3 and 45.1-361.22.A.4, be deposited by the Operatorinto the Escrow Account within one hundred twenty (120) daysof recording of this Order, and continuing thereafter on amonthly basis with each deposit to be made by a date which isno later than sixty (60) days after the last day of the monthbeing reported and/or for which funds are subject to deposit.Such funds shall be held for the exclusive use of, and solebenefit of, the person entitled thereto until such funds canbe paid to such person(s) or until the Escrow Agentrelinquishes such funds as required by law or pursuant toOrder of the Board.

17. Special Findings: The Board specifically and speciallyfinds:

17.1. CNX Qas Company LLC, a Virginia limited liability companyis duly authorized and qualified to transact business in theCommonwealth of Virginia;

17.2. CSx Qas Company LLc has the authority to explore, developand maintain the properties and assets, now owned or hereafteracquired, consented to serve as Coalbed Nethane Qas UnitOperator for Subject Drilling Unit and to faithfully dischargethe duties imposed upon it as Unit Operator by statute andregulations;

17.3. CSX Qas Caaymy LLC is an operator in the Commonwealth ofVirgini.a, and has satisfied the Board's requirements fotoperations in Virginia;

17.4 CNX Qas Company LLC claims ownership of gas leases, CoalbedNethane Gas leases, and/or coal leases representing96.$456 percent of the oil and gas interest/claims in and tcCoalbed Nethane Qas and 96.$656 percent of the coalinterest/claims in and to Coalbed Nethane Gas in SuibjectDrilling Unit; and, Applicant claims the right to explore for,develop and produce Coalbed Nethane Gas from SubjectFormations in Subject Drilling Unit in BuchananCounty, Virginia, which Subject Lands are more particularlydescribed in Xmhibit A;

17.5. The estimated total production from Subject Drilling Unitis 125 lRCt to 550 HRF. The estimated amount of reservesfrom the Subject Drilling Unit is 125 lSRt to 550 lSRF;

17.6. Set forth in Bxhibit B-3, is the name and last knownaddress of each Owner or Claimant identified by the Applicantas having or claiming an interest in the Coalbed Nethane Gasin Subject Formation in Subject Drilli.ng Unit underlying andcomprised of Subject Lands, who has not, in writing, leased tothe Applicant or the Unit Operator or agreed to voluntarilypool his interests in Subject Drilling Unit for . itsdevelopment. The interezts of the Respondents lizted inBmhibit B-3 comprise 5.1566 percent of the oil and gasinterests/claims in and to Coalbed Nethane Qas and

5.1566'ercentof the coal interests/claims in and to Coalbed NethaneQas in Subject Drilling Unit;

17.7 Applicant's evidence established that the fair, reasonableand equitable compensation to be paid to any person in lieuof the right to participate in the Wells are those optionsprovided in Paragraph 9 above;

17.8 The relief requested and granted is just and reasonable, issupported by substantial evidence and will afford each personlisted and named in Xxhibit B-3 hereto the opportunity torecover or receive, without unnecessary expense, suchperson's just and fair share of the production from SubjectDrilling Unit. The granting of the Application and relief

requested therein will ensure to the extent possible thegreatest ultimate recovery of Coalbed Methane Gas, prevent orassist in preventing the various types of waste prohibited bystatute and protect or assist in protecting the correlativlerights of all persons in the subject common sources of supplyin the Subject Lands. Therefore, the Board is entering anOrder granting the relief herein set forth.

18. Mailing Of Order And Filinc Of Affidavit: Applicant or itisAttorney shall file an affidavit with the Secretary of the Board withinsixty ('60) days after the date of recording of this Order stating thata true and correct copy of said Order was mailed within seven (7) day9from the date of its receipt by Unit Operator to each Respondent namedin Exhibit $-3 pooled by this Order and whose address is known.

19. Availability of Unit Records: The Director shall providSall persons not subject to a lease with reasonable access to alj.records for Subject Drilling Unit which are submitted by the UnitOperator to said Director and/or his Inspector(s).

29. Conclusion: Therefore, the requested relief and all tezm6and provisions set forth above be and hereby are granted and IT IS SOORDERED.

21. Appeals: Appeals of this Order are governed by theprovisi.ons of va. code Ann. 5 45.1-361.9 which provides that any orderor deciaion of the Board may be appealed to the appropriate circuitcourt.

22. Effective Date: This Order shall be effective as of thedate of the Board's approval of this Application, which is set forth atparagraph 1 above.

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DONE AND EXECUTED Sus g day of October, 2009, by a majority of the Virginia Gsssnd Oil Boarti

~O. Lambert

DONE AND PERFORMED THIS~day of October, 2009, by Order of thc Board.

David E. Asbury, Jr.Principtd Executive to the StaffVirginia Gas snd Oil Board

STATE OF VIRGINIACOUNTY OF RUSSELL

Acknowledged on this day of October, 2009, personallybefore me a notary public in and for the Commonwealth of Virginia,appeared Bradley C. Lambert, being duly sworn did depose and say thathe is Chairman of the Virginia Gas and Oil Board, and appeared David E.Asbury, Jr. being duly sworn did depose and say that he is ActingPrincipal Executive toe the Staff of the Virginia Gas and Oil Boardthat they executed the same and were authorized to do so.

Diane J.Davis,4dotary174394

My commission expires: Septemlm 30, 2013

Bxhfhtt B3lfntt M(-1)

Docket St/t3ttB 88-183148MUet of Untaaeed Dwnere/Claimants

(1) F.M.F.Boyd Hake, Deviance,Succasaom or Assigns, et al.(86Acm Trac0

(1) Merlon Boyd Hake, Deviance,Sucoaan or Assi9ns

(a) Clyde $oydP.O. Bsx 403Clinchdo, VA 24226

(b) iOlby Boydc/o Clyde BoydP.O. Bcx403Chkrchco, VA 24226

(5) Marke Randue Boyd Heim, Deviance,or Assiyns

(c) Lash Vamie Bakhdn Heirs, Drnssees,uucceaaom or Ass(9ns

(c.2) D)rat MaNe Hunt117Five Forks Dive

brgankwm, WV 285084)025

(c.6) Laura Vkykrla ManierRtr2 Box 54VansanL VA 24656

(c.7) Henry Nalhan Baklwln, Jr.RL2 Box453VanaanL VA 24858

(c.11) 3emas Cu/8s Baldwin1281 Mdwln Rd.vansanL VA 24856

(e) Ada Nell 86hner Heks, Devkrerw,Sucoasan or Ass(9ns

(a.3) She6a hMer22455 WyMwad RoadAbin9don, VA 24211

5) Mruy Boyd Cook Hake, Davkxres,Successom or Asrd9ns

().2) Uoyd CookRLS Box 535Grunrly, VA 24614

9.4) Erat Cook401 Chstan Gums Yuus CLSkur)a, Guam 98926

52.15 acres

0.3548 acres1/147 of 52.15acres

0.3548 acres1/147 of 52.15acres

0.0603 acres1/854 of 52.15acres

0.0603 acres1/684 of 52.15acres

0.0503 acres1/864 of 52.15acres

0.0803 acres1/884 of 52.15acme

0.1207 acres1/432 of 52.15acres

0.1811 acres1/288 cf 52.15acres

0.1811acres1/288 of 52.15acres

65.1875%

0.4435%

0.0754%

0.0754%

0.0751%

0.0754%

0.1509%

Pa9e 1 of 4 9/11/2008

Kxhgdt B3Unit M(-1)

Doskat dkOOS 98488145%Ust of Urdsaaed Owaem/0%manta

(I) Antes Guy Boyd Heks, Devlsees,Succaemom or Assigns

(I.6) SsB Boyd Hake, Dmasees,~or Assigns

(1.6.1)Katherfne Boyd118Vsla LaneTaykxsvlm, NC 28881

(1.11) Robert G. BoydItl1 Box 416Vsnsant, VA 248M

(9) Lash Vkaoris Bwlon Hake, Devlsees,Successcm or Assigns

(d) Hazel Barto Heim, Deviseas,S cceesors or Assigns

(b.1) Horny M. BatonP.O. Box 165Vanaant, VA 246M

(d) Marvin Barton127 Vins DriveYorldown, VA 23692

0.0603 acres1/864 of 52.15acme

0.0803 acres1/864 of 52.15acres

0.1064 acres1/490 of 52.15acme

0.1064 acres1/490 of 52.15acres

0.0754%

0.0754%

0.1330%

0.1330%

(1) BrenI~LLC, et al.(aka Fkdsnce E.Walker, et al.)(263.47Acm Tract)

(b) Cmtis W. Humphry Heirs, Devlaeas,uccasdrm or Assh)ns

(b.1) Geol C. Week134 Little John RoadWNsmebwg, VA 23185

(b.2) hhak Wehh118 odenorth RoadWNliamsburg, VA 23185

II. OIL 8 IhaB PBS CMIKRBHIP

Tmctdll Bkf6 acme

11.31acme

1.'17815/48 of 11.31acme

1.17815/48 of 11.31acres

14.1375%

1.4727%

1.4727%

(1) F.M.F. Boyd Helm, Devlsess,Bucessom or Assigns, at al.(66 Acre Tract)

(1) Merlon tk)yd Hake, Dsvlsees,Success'r Assigns

(a) Clyde BoydR.O. Box 403Clinchoo, VA 24226

52.15 acres

0.3548 acres1/1 47 of 52.15acres

Page 2 of 4

SS.167S%

9/I 1/2008

Exhthh S3Unit M(-1)

Doctwt WGDS 89-182148KList of Untanned Owners/Ctslasnts

(b) Kgby Boydc/o Cty)fe BoydP.O. Sox 403Chinchco, VA 24226

(5) MartoniRendue Boyd Heirs, Deviance,Successors or Assigns

(G Lash Vamie Baldwin Heirs, Deviance,Suooasem or Assigns

(c.2) Opal Mstge Hunt117Five FoAs Drive~,WV 265($9025

(c.8) Laura Vagina Mack rRL2 Box 54Vansent, VA 24656

(c.7) Henry Nathan Baldwin, Jr.RL2 Box 453Vsnsant, VA 24656

(c,11) Januw GuNs Baldwin1281 Baktwtn Rd.Vwwant, VA 24656

(s) Ada Neg SNner Helm, Deviance,ucceseom or Assigns

(e.3) Bhaga MSer22455~RoadAblngdon, VA 24211

0) Mwy tkr)kt Cook Heks, Deviance,uccewwxe or Assigns

S2) Uoyd CookRL5'Sox 535Grundy, VA 24614

().4) Enact Cook401 Chahm Gums Yuus Ct.Sings, Guam 96926

(0 A/due Guy Boyd Heirs, Devkwes,Successsors or Assigns

(1.8) EsBBoyd Heka, Devisees,~or Assigns

(1.6.1)Katherine Boyd118Vgla LansTaylorsvSs, NC 28681

(l,11) Robert G. BoydRLt tk 416Vanswtt, VA 24656

0.3548 acres1/147 of 52.15acres

0.0603 sacs1/884 of 52.15sass

0.0603 acresth$4 of 52.15acres

0.0603 acres1/884 of 62.15acres

0.0603 acres1/864 of 52.15scree

0.1207 acres1/432 of 52.15acres

0.1811 acres1/288 of 52.15acres

0.1811 acres1/288 of 52.15acres

0.0603 acres1/884 cf 52.15acres

0.0503 acresth$4 of 52.15acres

0.0754%

0.0754%

0.0754%

0.0754%

0.1509%

0.0754%

0.0754%

Page 3of4 9/1 1/2008

KxMbtt N3t)n)t M(-1)

Docket BVttOS 88-18214$NUst of U)a)assed Oamers/Claimants

(9) Lash Vkarsfs Barlon Heirs, Devisess,ucoessom or Assigns

(b) Hazel Barton Heirs, Devlsses,Sucoesan or Assigns

(b.1) Henry M. BartonP.O. Box 185Vansant, VA 24656

(d) Marvin Barton127 VIne DriveYorfdorvn, VA 23892

7race83. suer m

0.1084 acres1/490 of 52.15acres

0.1084 acres1/490 of 52.15acres

0.1330%

0.1330%

(1) Bran l~, LLC, ei al.(aka Pksence E.Wasrsr, el al.)(263.47Acm Tracf)

(b) Curls W. Humphry Heirs, Devlsses,~or Assigns

(b.1) Carol C. Wekh134 UNs John RoadWiNamsburg, VA 23185

(b.2) Mark Wrack113~RoadWINamsburg, VA 23185

11.31acres

1.17815/48 of 11.31acres

1.17815/48 of 11.31acres

14.1375%

1.4727%

1.4727%

Page 4 of 4 9/1 1/2008

rr'.0)

/j ((/I

//'

T)TT ACRE UNIT / (/

N +

I

(l

N 346,234.74E 941,110.59 j:-----

(

<( (

PROPERTY LINES SHOWN ON THIS PLAT WERE TAKEN

FRON DEED DESCRIPTIONS AND CHAIN OF TITLE

AND DOES NOT REPRESENT A CURRENT FIELD SURVEY

I

2A I2H

I

I

I

I

I

I

[44D(( I

CBM-M(-1)

3A

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T~(I /

20

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4C LXI--- . ( E X942 907 04 .~~

'i

E 941,040.09SEANINO 6 0ISTAIKIE TO NEANEST~ELLS NITNIN 5500'NINI CNANI-I I x i/CHAL( 115 NSS'55'15 5

'ITSA,TS'NNNW

STS'AE'ES E5056.50'SNN(

11 5 5 AS'IS 5 165501'eAAN-l)A555'01'15'E 1501.AA'XHIBIT

A

OAKWOOD FIELDUNIT M( —1 )

FORCE POOLINGVGOB-08-1021-2346

fiop „Conpany CNX Gas Conoanv LLC Well NODEI and NuInber UNIT M( -1)dr~~- g >+ITract No. Elevation Quadrangle PRA~

County BUCHANAN 0istrlct PRATER Scale: 1N = 40+gate 9/If&&This plat is a new plat i on updated plat X : or a tinII[ pl ~

IAC.Na 03$N6(Aft'

Rev. 9/91 Licensed Pro~s onal Engineer c; '.',

...WONO POOENoesTPOOI. EPI RHTISooo TDSTCIO ASA '5gpNALW~S

CNX Gag Company LLCUnit M (-1)

Tract ldenticsNons

ConaoNda8on Coal Company (105.53Acre Tract) —Coallakrnd Creek Coal Company —Below TiNsr Seam Coal LeasedJawsg Smolrsless Coal CorporaNon —Above Tner Seam Coal LeasedPlum Creek Timber Company, LP —Oil and GssIsland Creak Coal Company /Consol Energy Inc. —Surface Owner0.22 Acres 0.2750%

Consolidabon Coal Company, et al Big Vein Tr. 59 (312.40 Acre Tract) —AN Minerals except Oil and GaaIabrnd Creek Coal Company/Consol Energy, Inc. —Coal below the Tiller Seam LeasedJswag Smokeless Coal Corp. —Tner and Above Coal LeasedPlum Creek Timberlands, L.P., et al —Oil, Gas and CBMCNX Gss Company LLC —CBM Leased18.32Acres 20A000%

2B.2C.2b.2E.2F.2G.2H.

Harold G. Looney, et ux - SurfaceJoe E. Desi, et ux - SUrfaceUnknoa/n Surface OwnerOne Looney - SurfaceTeny L. Owens - SurfaceGary L Desi - SurfaceHarokl M. Desi, et ux - SurfaceChs/Ne D. Bishop, et ux —Surface

Joaephins Boyd Heirs, et al (F M F Boyd Heirs, et al -86 00 Acre Tract) —Coal (Except% of WidowKennedy and Abave Coal Seams)

Rusl Fugsr/Hadonal Energy Corp. (%)cf Vldow Kennedy and Above Coal SeamsIsland Creek Coal Company/Consol Energy, Inc. —Coal Below Tgler Seam (94.44%) LeasedAlpha Land snd Reserves, LLC —(%) Coal in Blair Seam and Above LeasedJosephine Boyd Heirs, et al (F.M.F Boyd Heirs, et at) —Oil and Gas (97.88%Ownership)Chgt Gss Company LLC —Oil and Gss (2.1180%Ownership)CNX Gas Company LLC —(93A870%) Oil, Gas and CBM Leased62.16Acres 65.1875%

3B.3C.3D.3E.3F.3G.3H.31.3J.

Mary Ruth Owens, et sl - SurfacePrtnde Desi - SurfaceVNNard Desi, st ux - SurfaceUnknown Surface OwnerKsrmss Deal - SurfaceHsrokf M. Desi, et ux - SurfaosJames FuNsr, et ux - SurfaceUnknown Surface OwnerHamkl M. Desi, et ux - SurfaceRobert H. Desi - Surface

Page 1 of2

9/g/2008

4. Bran Investments, LLC, et al (283.47 Acre Tract) —Coal Bekwr Drainage, Oil and GasBran Inveslrnents, LLC, et al —Coal Above DraksageIsland Creek Coal CompanylConsol Energy Inc. —Coal Bekas Tiller Seam LeasedJeweH Smokeless Coal Corporagon —Coal Above Drainage LeasedCNX Gas Company LLC —CBM Leased11.31Acres 14.1375%

4A. Eel IC Coleman - Surface48. Beecher R. Coleman - Surface4C. Omar Coleman, et ux - Surface4D. Unknown Surface Owner

INBTRUNENT tf0900032I7RECORDED IN THE CLERK'8 OFFICE OF

BUCHANAN COUNTY ONOCTOBER 20r 2009 AT 12'28PN

BEtiERLY S. TILLERr CLERKRECORDED BY.'NE

Page I of2