i. · drilling unit number bb-121 (herein "subject drilling unit") in the middle ridge i...

16
800K 622PAGK 258 )N". TR'„)P~ g~ pp~p)(pro p~: : l "4)~Q CAS A!W3 ()ll l", r!a~„ V I R G I N I A: BEFORE THE VIRGINIA GAS AND OIL BOARD APPLICANT: RELIEF SOUGHT: LEGAL DESCRIPTION DRILLING UNIT NUMBER BB-121 (herein "Subject Drilling Unit" ) IN THE MIDDLE RIDGE I COALBED METHANE GAS FIELD NEW GARDEN MAGISTERIAL DISTRICT HONAKER QUADRANGLE RUSSELL COUNTY, VIRGINIA (the "Subject Lands" are more particularly described on Exhibit "A", attached hereto and made a part hereof) CNX GAS COMPANY LLC ) VIRGINIA GAS ) AND OIL BOARD POOLING OF INTERESTS IN ) DRILLING UNIT NO. BB-121 LOCATED ) DOCKET NO. IN THE MIDDLE RIDGE I COALBED ) 04-0518-1288 METHANE GAS FIELD PURSUANT TO VA. ) CODE 55 45. 1-361. 21 AND 45. 1-361. 22, ) FOR THE PRODUCTION OF OCCLUDED ) NATURAL GAS PRODUCED FROM COALBEDS ) AND ROCK STRATA ASSOCIATED THEREWITH) (herein collectively referred to as ) "Coalbed Methane Gas" or "Gas") ) ) ) ) ) ) ) ) ) ) ) ) ) ) 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 May 18, 2004 at the Southwest Virginia Higher Education Center on the campus of Virginia Highlands Community College, Abingdon, Virginia. 2. Appearances: Mark Swartz, Esquire, of the firm Swartz & Stump, L. C. , appeared for the Applicant; and Sharon M. 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 sece. , 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 Jawbone 1, including Tiller, Upper Horsepen, Middle Horsepen, War Creek, Beckley, Lower Horsepen, Pocahontas No. 8, Pocahontas No. 6, Pocahontas No. 5, Pocahontas No. 4, Pocahontas No. 3, Pocahontas No. 1 and various unnamed coal seams, coalbeds and rock strata associated therewith

Upload: others

Post on 27-Oct-2019

2 views

Category:

Documents


0 download

TRANSCRIPT

800K 622PAGK 258)N". TR'„)P~ g~ pp~p)(pro p~:

: l "4)~Q CAS A!W3 ()ll l",r!a~„

V I R G I N I A:

BEFORE THE VIRGINIA GAS AND OIL BOARD

APPLICANT:

RELIEF SOUGHT:

LEGAL DESCRIPTION

DRILLING UNIT NUMBER BB-121(herein "Subject Drilling Unit" ) IN THE

MIDDLE RIDGE I COALBED METHANE GAS FIELDNEW GARDEN MAGISTERIAL DISTRICTHONAKER QUADRANGLERUSSELL COUNTY, VIRGINIA(the "Subject Lands" are moreparticularly described on Exhibit"A", attached hereto and made apart hereof)

CNX GAS COMPANY LLC ) VIRGINIA GAS

) AND OIL BOARDPOOLING OF INTERESTS IN )DRILLING UNIT NO. BB-121 LOCATED ) DOCKET NO.IN THE MIDDLE RIDGE I COALBED ) 04-0518-1288METHANE GAS FIELD PURSUANT TO VA. )CODE 55 45. 1-361.21 AND 45. 1-361.22, )

FOR THE PRODUCTION OF OCCLUDED )NATURAL GAS PRODUCED FROM COALBEDS )AND ROCK STRATA ASSOCIATED THEREWITH)(herein collectively referred to as )

"Coalbed Methane Gas" or "Gas") )

)

)

)

)

)

)

)

)

)

)

)

)

)

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 May 18, 2004 at the Southwest Virginia Higher EducationCenter on the campus of Virginia Highlands Community College, Abingdon,Virginia.

2. Appearances: Mark Swartz, Esquire, of the firm Swartz &Stump, L.C. , appeared for the Applicant; and Sharon M. 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 sece. , 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 Jawbone 1, includingTiller, Upper Horsepen, Middle Horsepen, War Creek, Beckley, LowerHorsepen, Pocahontas No. 8, Pocahontas No. 6, Pocahontas No. 5,Pocahontas No. 4, Pocahontas No. 3, Pocahontas No. 1 and variousunnamed coal seams, coalbeds and rock strata associated therewith

BOOK 622PABB 290(hereafter "Subject Formation" ) 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 ventures 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 are persons identified by Applicant through itsdue diligence who may be Owners or Claimants of Coalbed Methane Gasinterests underlying Subject Drilling Unit and that the personsidentified in Exhibit B-3 attached hereto are persons identified byApplicant who may be Owners or Claimants of Coalbed Methane Gasinterests in Subject Formation who have not heretofore agreed to leaseor sell to the Applicant and/or voluntarily pool their Gas interests.Conflicting Gas Owners/Claimants in Subject Drilling Unit are listed onExhibit E. Further, the Board has caused notice of this hearing to bepublished as required by Va. Code 5 45. 1-361.19.B. Whereupon, the Boardhereby finds that the notices given herein satisfy all statutoryrequirements, Board rule requirements and the minimum standards of dueprocess.

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 Exhibit B-3 hereto and that of their known and unknown heirs,executors, administrators, devisees, trustees, assigns and successors,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 CNX GasCompany LLC 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" ) isdesignated as the Unit Operator authorized to drill and operate theCoalbed Methane Gas well in the Subject Drilling Unit at the locationdepicted on the plat attached hereto as Exhibit A, subject to thepermit provisions contained in Va. Code 55 45. 1-361.27 et ~se . ; to theMiddle Ridge I Coalbed Methane Gas Field Order VGOB 00-1017-0835,effective October 17, 2000; to 55 4 VAC 25-150 et ~se . , Gas and OilRegulations; and to 55 4 VAC 25-160 et ~se . , Virginia Gas and Oil BoardRegulations, all as amended from time to time, and (2) all theinterests and estates in and to the Gas in Subject Drilling Unit,including that of the Applicant and of the known and unknown personslisted on Exhibit B-3, attached hereto and made a part hereof, andtheir known and unknown heirs, executors, administrators, devisees,trustees, assigns and successors, both immediate and remote, be and

@()(( gg2pmg 29ihereby are pooled in the Subject Formation in the Subject Drilling Unitunderlying and comprised of the Subject Lands.

Pursuant to the Middle Ridge I Field Rules, the Board has adoptedthe following method for the calculation of production and revenue andallocation of allowable costs for the production of Coalbed MethaneGas.

For Frac Well Gas. — Gas shall be produced from and allocated toonly the 58.74-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 entire58.74-acre drilling unit in the manner set forth in the MiddleRidge I Field 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. A

timely 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 theMiddle Ridge I Field Rules, including a reasonable supervisionfee, as more particularly set forth in Virginia Gas and OilBoard Regulation 4 VAC 25-160-100 (herein "Completed-for-Production Costs" ). Further, a Participating Operator agreesto pay the estimate of such Participating Operator'sproportionate part of the Completed-for-Production Cost as setforth below to the Unit Operator within forty-five (45) daysfrom the later of the date of mailing or the date of recordingof this Order. The Completed-for-Production Cost for theSubject Drilling Unit is as follows:

s()()a 822~ast 282Completed-for-Production Cost: $246, 636.82

A Participating Operator's proportionate cost hereunder shall bethe result obtained by multiplying the Participating Operators'"Interest in 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 theestimate 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 GasOwner 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 $1.00per net mineral acre owned by such person, commencing uponentry of this Order and continuing annually untilcommencement of production from Subject Drilling Unit, andthereafter a royalty of 1/8th of 8/8ths [twelve and one-half percent (12.5%)] of the net proceeds received by theUnit Operator for the sale of the Coalbed Methane Gasproduced from any Well Development and Operation covered bythis Order multiplied 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 electingperson in and to the Gas produced from Subject Formation inthe Subject Lands, except, however, for the 1/8th 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, andclaims of such electing person in any Well Development andOperation covered hereby and such electing person shall be

deemed to and herebyinterests, and claimsSubject Formation inApplicant.

8()'()g 622&As( 488does lease and assign, its right,in and to the Gas produced from

the Subject Drilling Unit to the

9.3. Option 3 — To Share In The Well Development And OperationAs A Non-Participating Person On A Carried Basis And ToReceive 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 Gas Owner or Claimant named in Exhibit 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 allocableto 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 Gas in SubjectDrilling Unit shall be deemed and hereby are assigned tothe Applicant until the proceeds from the sale of suchCarried Well Operator's share of production from SubjectDrilling 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 (200%) 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 andrecovers from such Carried Well Operator's assignedinterest the amounts provided for above, then, the assignedinterest 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 bedeemed 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 Properly Elect: In the event a person named inExhibit B-3 hereto does not reach a voluntary agreement with the Unit

(j(I0(( 622~as& 294Operator and fails to elect within the time, in the manner and inaccordance with the terms of this Order, one of the alternatives setforth in 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' sright, 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 B-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' sproportionate 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 B-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 shallbe deemed to have and shall have assigned unto Applicant such person' sright, interests, and claims in and to said well, and other share inproduction 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): CNX Gas Company LLC shall beand hereby is designated as Unit Operator authorized to drill andoperate the Coalbed Methane Well in Subject Formation in SubjectDrilling Unit, all subject to the permit provisions contained in Va.

4

coo(( 622rusa 295Code 55 45. 1-361.27 et seq. ; 55 4 VAC 25-150 et ~se . , Gas and OilRegulations; 55 4 VAC 25-160 et ~se . , Virginia Gas and Oil BoardRegulations; the Middle Ridge I Coalbed Gas Field Order VGOB 00-1017-0835, all as amended from time to time, and all elections required bythis Order shall be communicated to Unit Operator in writing at theaddress shown below:

CNX Gas Company LLCP.O. Box 947Bluefield, VA 24605Attn: Leslie K. ArringtonPhone: (276) 988-1016Fax: (276) 988-1050

14. Commencement of Operations: Unit Operator shall commence orcause to 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 theOrder and shall prosecute same with due diligence. If Unit Operatorshall not have so commenced and/or prosecuted, then this Order shallterminate, except for any cash sums then payable hereunder; otherwise,unless sooner terminated by Order of the Board, this Order shall expireat 12:00 P.M. on the date on which all wells covered by the Orderand/or all wells from which production is allocated to the SubjectDrilling Unit are permanently abandoned and plugged. However, in 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 nounknown or unlocatable claimants in the Subject Drilling Unit whosepayments are subject to the provisions of Paragraph 16.1 and the UnitOperator has represented to the Board that there are conflictingclaimants in Tract(s) 1D of the Subject Drilling Unit whose paymentsare subject to the provisions of Paragraph 16.2 hereof. Therefore, bythis Order, the Escrow Agent named herein or any successor named by theBoard, is required to establish an interest-bearing escrow account forTract(s) 1D of the Subject Drilling Unit (herein "Escrow Account" ), andto receive funds and account to the Board pursuant to its agreement forthe escrowed funds hereafter described in Paragraphs 16.1 and 16.2:

()c())( 622~a('f 296Wachovia BankCorporate Trust PA 1328123 South Broad StreetPhiladelphia, PA 19109-1199Attention: Rachel Rafferty

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 because theperson 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 on amonthly basis with each deposit to be made, by use of areport format approved by the Inspector, by a date which isno 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 useof, 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. Code

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 specially finds:

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

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

17.3. CNX Gas Company LLC is an operator in the Commonwealth ofVirginia, and has satisfied the Board's requirements foroperations in Virginia;

17.4 CNX Gas Company LLC claims ownership of gas leases, CoalbedMethane Gas leases, and/or coal leases representing83.7620 percent of the oil and gas interest/claims in and toCoalbed Methane Gas and 83.7620 percent of the coalinterest/claims in and to Coalbed Methane Gas in SubjectDrilling Unit; and, Applicant claims the right to explorefor, develop and produce Coalbed Methane Gas from SubjectFormations in Subject Drilling Unit in Russell County,Virginia, which Subject Lands are more particularly describedin Exhibit A;

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

17.6. Set forth in Exhibit 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 Methane Gas inSubject Formation in Subject Drilling 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 interests of the Respondents listed in ExhibitB-3 comprise 16.2380 percent of the oil and gas

interests/claimsin and to Coalbed Methane Gas and 16.2380 percent of the coalinterests/claims in and to Coalbed Methane Gas in SubjectDrilling 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 Exhibit B-3 hereto the opportunity torecover or receive, without unnecessary expense, such person' sjust and fair share of the production from Subject Drilling

Unit. The granting of the Application and relief requestedtherein will ensure to the extent possible the greatestultimate recovery of Coalbed Methane Gas, prevent or assist inpreventing the various types of waste prohibited by statute andprotect or assist in protecting the correlative rights of allpersons in the subject common sources of supply in the SubjectLands. Therefore, the Board is entering an Order granting therelief herein set forth.

18. Mailing Of Order And Filing Of Affidavit: Applicant or itsAttorney 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) daysfrom the date of its receipt by Unit Operator to each Respondent named

in Exhibit B-3 pooled by this Order and whose address is known.

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

20. Conclusion: Therefore, the requested relief and all termsand provisions set forth above be and hereby are granted and IT IS SO

ORDERED.21. Appeals: Appeals of this Order are governed by the

provisions of Va. Code Ann. 5 45. 1-361.9 which provides that any orderor decision 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.

DONE AND EXECUTED this /0 day of , 340$, by amajority of the Virginia Gas and Oil Board.

Chairman, Bevy R. Wqgpler

DONE AND PERFORMED this /~ day of 2O~ +Order of this Board.

by

4. R.+Wils6nPrincipal Executive To The StaffVirginia Gas and Oil Board

10

STATE OF VIRGINIA )

COUNTY OF WISE )

Acknowledged on this /rd~ dsy of+~~~, ~di c/personally before me a notary public in and for the Commonwealth

of Virginia, appeared Benny Wampler, being duly sworn did depose andsay that he is Chairman of the Virginia Gas and Oil Board, that heexecuted the same and was authorized to do so.

Notary Public

My commission expires: gyy~y

STATE OF VIRGINIA )COUNTY OF WASHINGTON )

Acknowledged on this l9 day of p~+M, ~ personallybefore me a notary public in and for the Commonwealth of Virginia,appeared B. R. Wilson, being duly sworn did depose and say that he isPrincipal Executive to the Staff of the Virginia Gas and Oil Board,that he executed the same and was authorized to do o.

My commission expires: ggtyIQW

'Q~/'

Notary Public

11

PROPERTY LINES SHOWN WERE TAKEN FROM MAPS PROVIDED

BY CNX LAND RESOURCES, inc. AND WERE NOT SURVEYED.

I

N 296,966.96E 1,001,065.59

58. 741 ACRE UNIT

l 1B x !/

l

l

I

I

l

I

l

CBM-BB121

~P ) rIVr

I

io

I

i

l

l

II1

I

i J.---2B

N 295,568.18E 1,001,008.17

l Il

12A

N 295,510 77j)

// re )r

yy zr/

/

EXHIBIT A

MIDDLE RIDGE 1 FIELDUN I T BB-121

F ORCE POOL I NG

VGOB-OLI -051 8-1 288

Company CNX Gas Company LLC Wel I Name and Number U; .«88121

El ti n Quadran fg Honaker i ~ jTract No. E eva ion

County Russell District wD t ' t New Garden

This plat is a new plat X : an updated plat o a tinal pl gt

Rev. 9/91 Licensed Protessional Engineer or Licensed Land SurvVvypr. -,:-, ,

...1Foroe Poolingibb121POOL. dgn 04I14I2004 10:41:30AM

&&tie 622esp 302

CNX Gas Company LLCUnit BB 121

Tract Identifications(58.74 Acre Unit)

1A. Swords Creek Land Partnership Tr. 24 - FeeConsolidation Coal Company —Coal Below Tiller Seam LeasedKnox Creek Coal Corporation —Coal in Tiller and Above LeasedCNX Gas Company LLC —CBM Leased35.04 acres 59.8527'/o

1B. Swords Creek Land Partnership Tr. 24 —CoalReserve Coal Properties Company —Coal Below Tiller Seam LeasedKnox Creek Coal Corporation —Tiller and Above Coal Seams LeasedCNX Gas Company LLC —CBM l easedLouise Dye —Surface and All Minerals except CoalCNX Gas Company LLC —Oil, Gas and CBM Leased2.17 acres 3 8942o/o

1C. Swords Creek Land Partnership Tr. 24- All MineralsReserve Coal Properties Company —Coal Below Tiller Seam LeasedKnox Creek Coal Corporation —Tiller and Above Coal Seams LeasedCNX Gas Company LLC —CBM LeasedUnknown Surface Owner7.53 acres 12.8192o/o

1D. Swords Creek Land Partnership Tr. 24- CoalReserve Coal Properties Company —Coal Below Tiller Seam LeasedKnox Creek Coal Corporation —Tiller and Above Coal Seams LeasedCNX Gas Company LLC —CBM LeasedMadeline Richardson, et al —All Minerals except CoalRussell Reynolds - Surface0.51 acres 0.8683'/o

2A. Swords Creek Land Partnership Tr. 25 -All MineralsReserve Coal Properties Company —Coal Below Tiller Seam LeasedKnox Creek Coal Corporation —Tiller and Above Coal Seams LeasedCNX Gas Company LLC —CBM LeasedRalph Steele, et ux —Surface0.24 acres 0.4086/o

2B. Swords Creek Land Partnership Tr. 25- All MineralsReserve Coal Properties Company —Coal Below Tiller Seam LeasedKnox Creek Coal Corporation —Tiller and Above Coal Seams LeasedCNX Gas Company LLC —CBM LeasedE. P. Whited Heirs or Wayne Bostic —Surface3.49 acres 5 9414o/o

Page 1 of 2April 18, 2002

swr 622pasr 302

CNX Gas Company LLCUnit BB121

Tract Identifications(58.74 Acre Unit)

Jimmy Richardson —All Minerals (97.77%)Swords Creek Land Partnership Tr. 24- All Ilinerals (2.23%)Reserve Coal Properties —Coal Below Tiller Seam LeasedKnox Creek Coal Corporation —Tiller and Above Coal Seams LeasedCNX Gas Company LLC —CBM Leased (2.23%)Jimmy Richardson - Surface4.82 acres 8.2057%

fdward Richardson —All Minerals (97.77%)Swords Creek Land Partnership Tr. 24- All Minerals (2.23%)Reserve Coal Properties —Coal Below Tiller Seam LeasedKnox Creek Coal Corporation —Tiller and Above Coal Seams LeasedCNX Gas Company LLC —CBM Leased (2.23'I )Edward Richardson - Surface4.94 acres 8.4098I

Page 2 of 2April 16, 2002

Exhibit B4Unit BB-121

Docket ¹VGOB 044I518-1288Ust of Unieased Owners/Claltnants

(58.74 Acre Unit)

aOOII 622VII6I 303

Acres in UnitInterest in

Unit

I. COAL FEE OWNERSHIP

Tract tN. 4.82 acres

(1) Jimmy Richardson, et al.

(a) Jimmy RichardsonRR1 Box 338Swords Creek, VA 24649

4.82 acres

4.71 acres43/44 of 4.82 acres

8.2057%

8.0192'k

Tract ¹4.4.84 acres

(1) Edward Richardson, et al.

(a) Edward RichardsonRR1 Box 331Swords Creek, VA 24649

4.94 acres

4.83 acres43/44 of 4.94 acres

8.4099%

8.21884k

II. OIL 8 GAS FEE OWNERSHIP

Tract ¹8.4.82 acres

(1) Jimmy Richardson, et al.

(a) Jimmy RichardsonRR1 Box 338Swords Creek, VA 24649

4.82 acres

4.71 acres43/44 of 4.82 acres

8.20574k

8.0192'k

Tract ¹4.4.94 acres

(1) Edward Richardson, et al.

(a) Edward RichardsonRR1 Box 331Swords Creek, VA 24649

4.94 acres

4.83 acres43/44 of 4.94 acres

8.4099%

8.2188%

Page1 of1 04/15/2004

Exhibit EUnit BB-121

Docket Nfl/GOB 044518-1288List of Conflicting Owners/Claimants that require escrow

(58.74 Acre Unit)

BOON 622PIIBI 304

Acres ln Unit

Interest in

Unit

7'rict N/f 0.0.51 acres

COAL FEE OWNERSHIP

(1) Swords Creek Land Partnership, Tr.24P.O. Box 29Tazewell, VA 24651

0.51 acres 0.8682%

OIL 8 GAS FEE OWNERSHIP

(1) Arnold Richardson, et al.

(a) Madeline Richardson213 Bevins BranchPikeville, KY 41501

(b) Hubert Paul RichardsonP.O. Box 178Swords Creek, VA 24649

0.51 acres

0.170 acres1/3 of 0.51 acres

0.170 acres1/3 of 0.51 acres

0.8682%

0.2894%

0.2894%

(c) George Peery RichardsonRt.1 Box 320Swords Creek, VA 24&$

0.170 acres1/3 of 0.51 acres

0.2894%

VIRGINIA: IN THE OFFICE OF THE CLERK OF THE CIRCUIT COURT OF RUSSELL COUNTY, l~ I5,2004. This deed was this day

presented in said office, and upon the certificate of acknowledgment thereto annexed, admitted to record at A r S7 o'clock P M, after payment of

$ —tax imposed by Sec. 58.1-802. ~ TEST/: DOLLIPPI. CPMPTq)i, CLERK~ Davg BY: LUSssr l . ~MJL D. CLERKOriginal returned this date to: I ~M I 5

Page 1 of 1 04/1 4/2004