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VIRGINIA: BEFORE THE VIRGINIA GAS AND OIL BOARD APPLICANT: RELIEF SOUGHT: CNX Gas Company LLC POOLING OF INTERESTS IN A 50 ~ 78 ACRE SQUARE DRILLIMG UNIT DESCRIBED IN EXEXBXT A HERETO LOCATED IN THE MORA COAL BED QAS FIELD AND SERVED BY WELL NO. AS-101 (herein "Subject Drilling Unit" ) PURSUANT TO VA. CODE 55 45.1-361.21 AND 45.1-361.22, FOR THE PRODUCTION OF OCCLUDED NATURAL GAS PRODUCED FROM COALBEDS AMD ROCK STRATA ASSOCIATED THEREWITH (herein "Coalbed Methane Gas" or "Qas") LEGAL DESCRIPTION: SUBJECT DRILLING UNIT SERVED BY WELL NUMBERED AE-101 (herein "Well" ) TO BE DRILLED IN THE LOCATION DEPICTED ON NEEXBXT A HERETO, BZQ A IMFSMTAXN QIIADIIANGBE MEERXCBNM MBOXSTERXAL DISTRICT IMMENSE'(MEFFY, VXRNXNXA (the "Subject Lands" are more particularly described on Exhibit A, attached hereto and made a part hereof) ) VIRGINIA GAS ) AND OIL BOARD ) ) DOCKET MO. ) 04-0120-1251 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) REPORT OF THE BOARD FINDINGS AND ORDER 1. Hearing Date and Place: This matter came on for hearing before the Virginia Qas and Oil Board (hereafter "Board" ) at 9:00 a.m. on January 20, 2004 at the Southwest Higher Education Center, Campus of Virginia Highlands Community College, Abingdon, Virginia. 2. APPearances: Mark Swartz, Esquire, of the firm Swartz 6 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 5545.1-361.1 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 meaningful search of reasonably available sources to determine the identity and whereabouts of each gas and oil owner, coal owner, or mineral owner and/or potential owner, i.e., person identified by Applicant as having (" Owner" ) or claiming (" Claimant" ) the rights to Coalbed Methane Qas in all Pennsylvania-aged coals from the top of the Raven, including all splits to the top of the green and

, it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

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Page 1: , it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

VIRGINIA:BEFORE THE VIRGINIA GAS AND OIL BOARD

APPLICANT:

RELIEF SOUGHT:

CNX Gas Company LLC

POOLING OF INTERESTS IN A 50 ~ 78ACRE SQUARE DRILLIMG UNITDESCRIBED IN EXEXBXT A HERETOLOCATED IN THE MORA COAL BED QASFIELD AND SERVED BY WELL NO.AS-101 (herein "Subject DrillingUnit" ) PURSUANT TO VA. CODE

55 45.1-361.21AND 45.1-361.22,FOR THE PRODUCTION OF OCCLUDEDNATURAL GAS PRODUCED FROM COALBEDSAMD ROCK STRATA ASSOCIATEDTHEREWITH (herein "Coalbed MethaneGas" or "Qas")

LEGAL DESCRIPTION:

SUBJECT DRILLING UNIT SERVED BY WELL NUMBEREDAE-101 (herein "Well" ) TO BE DRILLED INTHE LOCATION DEPICTED ON NEEXBXT A HERETO,BZQ A IMFSMTAXN QIIADIIANGBE

MEERXCBNM MBOXSTERXAL DISTRICTIMMENSE'(MEFFY, VXRNXNXA

(the "Subject Lands" are moreparticularly described on Exhibit A,attached hereto and made a part hereof)

) VIRGINIA GAS

) AND OIL BOARD

)

) DOCKET MO.

) 04-0120-1251)

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)

REPORT OF THE BOARD

FINDINGS AND ORDER

1. Hearing Date and Place: This matter came on for hearing beforethe Virginia Qas and Oil Board (hereafter "Board" ) at 9:00 a.m. on January20, 2004 at the Southwest Higher Education Center, Campus of VirginiaHighlands Community College, Abingdon, Virginia.

2. APPearances: Mark Swartz, Esquire, of the firm Swartz 6 Stump,L.C., appeared for the Applicant; and Sharon M. B. Pigeon, Assistant AttorneyGeneral, was present to advise the Board.

3. Jurisdiction and Notice: Pursuant to Va. Code 5545.1-361.1 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 theApplicant has (1) exercised due diligence in conducting a meaningful searchof reasonably available sources to determine the identity and whereabouts ofeach gas and oil owner, coal owner, or mineral owner and/or potential owner,i.e., person identified by Applicant as having ("Owner" ) or claiming("Claimant" ) the rights to Coalbed Methane Qas in all Pennsylvania-aged coalsfrom the top of the Raven, including all splits to the top of the green and

Page 2: , it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

;p(ggg3%'Mit014I3

red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, WarCreek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3,2, and any other unnamed coal seams, coalbeds and rock strata associatedtherewith (hereafter "Subject Formations" ) in the Subject Drilling Unitunderlying and comprised of Subject Lands; (2) represented it has givennotice to those parties so identified (hereafter sometimes "person(s)"whether referring to individuals, corporations, partnerships, associations,companies, businesses, trusts, joint ventures or other legal entities)entitled by Va. Code 55 45.1-361.19 and 45.1-361.22, to notice of theapplication filed herein; and (3) that the persons set forth in Rchihit B-3hereto have been identified by Applicant as persons who may be Owners orClaimants of Coalbed Methane Gas interests in Subject Formations in theSubject Drilling Unit who have not heretofore agreed to lease or sell to theApplicant and/or voluntarily pool their Gas interests. Conflicting GasOwners/Claimants in Subject Drilling Unit are listed on Bxhibit B. Further,the Board has caused notice of this hearing to be published as required byVa. Code 5 45.1-361.19.B.Whereupon, the Board hereby finds that the noticesgiven herein satisfy all statutory requirements, Board rule requirements andthe minimum standards of state due process.

4. Amendments: Bxhibits B-3, E

5. Dismissals: Nancy Carol Brown, Ricky Brown, Connie Sue Brown,Norma Jean Brown Street, Amita (pattie) Belton, JoAnn Lambez't, Jemmie Martin,shame Martin and Julia Martin

6. Relief Requested: Applicant requests (1) that pursuant to Va.Code 5 45.1-361.22, including the applicable portions of 5 45.1-361.21, theBoard pool the rights, interests and estates in and to the Gas in the SubjectDrilling Unit, including those of the Applicant and of the known and unknownpersons named in Bxhibit B-3 hereto and that of their known and unknownheirs, executors, administrators, devisees, trustees, assigns and successors,both immediate and remote, for the drilling and operation, includingproduction, of Coalbed Methane Gas produced from the Subject Drilling Unitestablished for the Subject Formations underlying and comprised of theSubject Lands, (hereafter sometimes collectively identified and referred toas "well development and/or operation in the Subject Drilling Unit" ); and,(2) that the Board designate CÃX Gas Company LLC as the Unit Operator.

7. Relief Granted: The requested relief in this cause shall be andhereby is granted and: (1) pursuant to Va. Code 5 45.1-361.21.C.3, CNX GasC~any LLC (hereafter "Unit Operator" or "Operator" ) is designated as theUnit Operator authorized to drill and operate the Well in Subject DrillingUnit at the location depicted on the plat attached hereto as Bxhibit A,subject to the permit provisions contained in Va. Code 5 45.1-361.27, et~se .,; to 55 4 VAC 25-150 et ~se ., Gas and Oil Regulations; to 5 4 VAC 25-160et ~se ., Virginia Gas and Oil Board Regulations and to the Nora Coal Bed GasField Rules established by the Oil and Gas Conservation Board's Order enteredMarch 26, 1989; all as amended from time to time; and (2) all the interestsand estates in and to the Gas in Subject Drilling Unit, including that of theApplicant, the Unit Operator and of the known and unknown persons listed onExhibit B-3, attached hereto and made a part hereof, and their known andunknown heirs, executors, administrators, devisees, trustees, assigns andsuccessors, both immediate and remote, be and hereby are pooled in the

Page 3: , it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

,X(0603@r(O l 4 l

Subject Formations in the Subject Formation in the Subject Drilling Unitunderlying and comprised of the Subject Lands.

Pursuant to the Nora Coal Field Rules promulgated under the authorityof Va. Code 5 45.1-361.20, the Board has adopted the following method for thecalculation of production and revenue and allocation of allowable costs forthe production of Coalbed Methane Gas.

For Frac Well Gas. — Gas shall be produced from and allocated to onlythe 5$ .7$-acre drilling unit in which the well is located according tothe undivided interests of each Owner/Claimant within the unit, whichundivided interest shall be the ratio (expressed as a percentage) thatthe amount of mineral acreage within each separate tract that is withinthe Subject Drilling Unit, when platted on the surface, bears to thetotal mineral acreage, when platted on the surface, contained withinthe entire 59.78-acre drilling unit in the manner set forth in the NoraField Rules.

8. Election and Election Period: In the event any Owner or Claimantnamed in Embfbit B-3 has not reached a voluntary agreement to share in theoperation of the Well to be located in Subject Drilling Unit, at a rate ofpayment mutually agreed to by said Gas Owner or Claimant and the Applicant orthe Unit Operator, then such person may elect one of the options set forth inParagraph 9 below and must give written notice of his election of the optionselected under Paragraph 9 herein to the designated Unit Operator at theaddress shown below within thirty (30) days from the date of receipt of acopy of this Order. A timely election shall be deemed to have been made if,on or before the last day of said 30-day period, such electing person hasdelivered his written election to the designated Unit Operator at the addressshown below or has duly postmarked and placed his written election in firstclass United States mail, postage prepaid, addressed to the Unit Operator atthe address shown below.

9. Election Options:

9.1 Option 1 — To Participate In The Development and Operation of theDrilling Unit: Any Gas Owner or Claimant named in Embibit $-3who has not reached a voluntary agreement with the Applicant orUnit Operator may elect to participate in the Well developmentand operation in the Subject Drilling Unit (hereafter"Participating Operator" ) by agreeing to pay the estimate of suchParticipating Operator's proportionate part of the actual andreasonable costs, including a reasonable supervision fee, of theWell development and operation in the Subject Drilling Unit, asmore 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 part ofthe Estimated, Completed-for-Production Costs as set forth belowto the Unit Operator within forty-five (45) days from the laterof the date of mailing or the date of recording of this Order.The estimated Completed-for-Production Costs for the SubjectDrilling Unit are as follows:

Page 4: , it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

lOQi]0693 PAGECI l 48Completed-for-Production Costs: 8236,289.72

A Participating Operator's proportionate cost hereunder shall bethe result obtained by multiplying the Participating Operator's"Percent of Unit" as set forth herein in the attached Exhibit B-3times the Estimated Completed-for-Production Costs set forthabove. Provided, however, that in the event a ParticipatingOperator elects to participate and fails or refuses to pay theestimate of his proportionate part of the Estimated, Completed-for-Production Costs as set forth above, all within the time setforth herein and in the manner prescribed in Paragraph 8 of thisOrder, then such Participating Operator shall be deemed to haveelected not to participate and to have elected compensation inlieu of participation pursuant to Paragraph 9.2 herein.

9.2 Option 2 — To Receive A Cash Bonus Consideration: In lieu ofparticipating in the Well development and operation in SubjectDrilling Unit under Paragraph 9.1 above, any Gas Owner orClaimant named in Exhibit 3-3 hereto who has not reached avoluntary agreement with the Unit Operator may elect to accept acash bonus consideration of 81.00 per net mineral acre owned bysuch person, commencing upon entry of this order and continuingannually until commencement of production from Subject DrillingUnit, and thereafter a royalty of 1/8th of 8/Sths [twelve andone-half percent (12.5%)] of the net proceeds received by theUnit Operator for the sale of the Gas produced from any Welldevelopment and operation covered by this Order multiplied bythat person's Interest Within Unit as set forth in Exhibit B-3[for purposes of this Order, net proceeds shall be actualproceeds received less post-production costs incurred downstreamof the wellhead, including, but not limited to, gathering,compression, treating, transportation and marketing costs,whether performed by Unit Operator or a third person] as fair,reasonable and equitable compensation to be paid to said GasOwner or Claimant. The initial cash bonus shall become due andowing when so elected and shall be tendered, paid or escrowedwithin one hundred twenty (120) days of recording of this Order.Thereafter, annual cash bonuses, if any, shall become due andowing on each anniversary of the date of recording of this orderin the event production from Subject Drilling Unit has nottheretofore commenced, and once due, shall be tendered, paid orescrowed within sixty (60) days of said anniversary date. Oncethe initial cash bonus and the annual cash bonuses, if any, areso paid or escrowed, said payment(s) shall be satisfaction infull for the right, interests, and claims of such electing personin and to the Gas produced from Subject Formation in the SubjectLands, except, however, for the 1/8th royalties due hereunder.

Subject to a final legal determination of ownership, the electionmade under this Paragraph 9.2, when so made, shall besatisfaction in full for the right, interests, and claims of suchelecting person in any well development and operation coveredhereby and such electing person shall be deemed to have andhereby does assign its right, interests, and claims in and to the

Page 5: , it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

.2M0693 BKU I 49Gas produced from Subject Formation in the Subject Drilling Unitto the Applicant.

9.3. Option 3 — To Share In The Development And Operation As A liTon-Participating Person On A Carried Basis And To ReceiveConsideration In Lieu Of Cash: In lieu of participating in theWell development and operation of Subject Drilling Uni.t underParagraph 9.1 above and in lieu of receiving a cash bonusconsideration under Paragraph 9.2 above, any Gas Owner orClaimant named in Exhibit B-3 who has not reached a voluntaryagreement with the Unit Operator may elect to share in the welldevelopment and operation in Subject Drilling Unit on a carriedbasis (as a "Carried Well Operator" ) so that the proportionatepart of the Completed-for-Production Costs hereby allocable tosuch Carried Well Operator's interest is charged against suchCarried Well Operator's share of production from Subject DrillingUnit. Such Carried Well Operator's rights, interests, and claimsin and to the Gas in Subject Drilling Unit shall be deemed andhereby are assigned to the Unit Operator until the proceeds fromthe sale of such Carried Well Operator's share of production fromSubject Drilling Unit (exclusive of any royalty, excess oroverriding royalty, or other non-operating or non cost-bearingburden reserved in any lease, assignment thereof or agreementrelating thereto covering such interest) equals three hundredpercent (300%) for a leased interest or two hundred percent(200%) for an unleased interest (whichever is applicable) of suchCarried Well Operator's share of the Completed-for-ProductionCosts allocable to the interest of such Carried Well Operator.When the Unit Operator recoups and recovers from such CarriedWell Operator's assigned interest the amounts provided for above,then, the assigned interest of such Carried Well Operator shallautomatically revert back to such Carried Well Operator, and fromand after such reversion, such Carried Well Operator shall betreated as if it had participated initially under Paragraph 9.1above; and thereafter, such participating person shall be chargedwith and shall pay his proportionate part of all further costs ofsuch well development and operation.

Subject to a final legal determination of ownership, the electionmade under this Paragraph 9.3, when so made, shall besatisfaction in full for the right, interests, and claims of suchelecting person in any Well development and operation coveredhereby and such electing person shall be deemed to have andhereby does assign his right, interests, and claims in and to theGas produced from Subject Formation in the Subject Drilling Unitto the Applicant for the period of time during which its interestis carried as above provided prior to its reversion back to suchelecting person.

10. Failure to Properlv Elect: In the event a person named inExhibit B-3 hereto has not reached a voluntary agreement with theApplicant or Unit Operator and fails to elect within the time, inthe manner, and in accordance with the terms of this Order, one ofthe alternatives set forth in Paragraph 9 above for which his

Page 6: , it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

,)llK~g 693 fi)(llf0 I 50interest qualifies, then such person shall be deemed to have electednot to participate in the proposed Well development and operation inSubject Drilling Unit and shall be deemed, subject to any finallegal determination of ownership, to have elected to accept assatisfaction in full for such person's right, interests, and claimsin and to the Gas the consideration provided in Paragraph 9.2 abovefor which its interest qualifies, and shall be deemed to have leasedand/or assigned his right, interests, and claims in and to said Gasproduced from Subject Formation in Subject Drilling Unit to the UnitOperator. Persons who fail to properly elect shall be deemed tohave accepted the compensation and terms set forth herein atParagraph 9.2 in satisfaction in full for the right, interests, andclaims of such person in and to the Gas produced from SubjectFormation underlying Subject Lands.

11. Default BY Participating Person: In the event a person named inWxhibit B-3 elects to participate under Paragraph 9.1, but fails or refusesto pay, to secure the payment or to make an arrangement with the UnitOperator for the payment of such person's proportionate part of the estimatedCompleted-for-Production costs as set forth herein, all within the time andin the manner as prescribed in this Order, then such person shall be deemedto have withdrawn his election to participate and shall be deemed to haveelected to accept as satisfaction in full for such person's right, interests,and claims in and to the Gas the consideration provided in Paragraph 9.2above for which his interest qualifies depending on the excess burdensattached to such interest. Whereupon, any cash bonus consideration due as aresult of such deemed election shall be tendered, paid or escrowed by UnitOperator within one hundred twenty (120) days after the last day on whichsuch defaulting person under this Order should have paid his proportionatepart of such cost or should have made satisfactory arrangements for thepayment thereof. When such cash bonus consideration is paid or escrowed, itshall be satisfaction in full for the right, interests, and claims of suchperson in and to the Gas underlying Subject Drilling Unit in the SubjectLands covered hereby, except, however, for any 1/8th royalties which wouldbecome due pursuant to Paragraph 9.2 hereof.

12. Assignment of Interest: In the event a person named in BxhibitB-3 is unable to reach a voluntary agreement to share in the Welldevelopment and operation in Subject Drilling Unit at a rate of paymentagreed to mutually by said Gas Owner or Claimant and the Unit Operator, andsaid person elects or fails to elect to do other than participate underParagraph 9.1 above in the Well development and operation in Subject DrillingUnit, then such person shall be deemed to have and shall have assigned untoUnit Operator such person's right, interests, and claims in and to said Well,in Subject Formations in Subject Drilling Unit, and other share in and to Gasproduction to which such person may be entitled by reason of any election ordeemed election hereunder in accordance with the provisions of this Ordergoverning said elections.

13. Unit Operator (or Operator): CNI Gas Company LLC shall be andhereby is designated as Unit Operator authorized to drill and operate thewell(s) in subject Formations in subject Drilling Unit, all subject to thepermit provisions contained in Va. Code 55 45.1-361.27 et ~se .; 55 4 VAC 25-150 et ~se ., Gas and Oil Regulations; 55 4 VAC 25-160 et ~se ., Virginia Gas

Page 7: , it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

;oax0 6 0 3 PzuE 0 I 5 I

and Oil Board Regulations; Oil and Gas Conservation Board ("OGCB") Orderestablishing the Mora Coal Bed Gas Field Rules, entered March 26, 1989; allas amended from time to time, and all elections required by this Order shallbe communicated to Unit Operator in writing at the address shown below:

CNZ Gas Company LLCP.O. Box 947Bluefield, VA 24605Attna Leslie E. ArringtonPhones (276) 9$$ -1016Fax> (276) 98$-1050

14. Commencement of Operations: Unit Operator shall commence orcause to commence operations for the drilling of the Well within SubjectDrilling Unit within seven hundred thirty (730) days from the date of thisOrder, and shall prosecute the same with due diligence. If the Unit Operatorhas not so commenced and/or prosecuted, then this order shall terminate,except for any cash sums then payable hereunder; otherwise, unless soonerterminated by Order of the Board, this Order shall expire at 12:00 p.m. onthe date on which the well covered by this Order is permanently abandoned andplugged. However, in the even at an appeal is taken from this Order, thenthe time between the filing of the Petition for Appeal and the Final Order ofthe Circuit Court shall be excluded in calculating the two-year periodreferenced herein.

15. Operator's Lien: Unit Operator, in addition to the other rightsafforded hereunder, shall have a lien and a right of set off on the Gasestates, rights, and interests owned by any person subject hereto who electsto participate under Paragraph 9.1 in the Subject Drilling Unit to the extentthat costs incurred in the drilling or operation on the Subject Drilling Unitare a charge against such person's interest. Such liens and right of set offshall be separable as to each separate person and shall remain liens untilthe Unit Operator drilling or operating the Well(s) has been paid the fullamounts due under the terms of this Order.

16. Escrow Provisions:

The Applicant represented to the Board that there are no unknownor unlocatable claimants in the Subject Drilling Unit; and, the Unit Operatorhas represented to the Board that there are no conflicting claimants in theSubject Drilling Unit whose payments are subject to the provisions ofParagraph 16.2 hereof. Therefore, by this Order, the Escrow Agent namedherein or any successor named by the Board, is not required to establish aninterest-bearing escrow account for the Subject Drilling Unit (herein "EscrowAccount" ), and to receive and account to the Board pursuant to its agreementfor the escrowed funds hereafter described in Paragraphs 16.1 and 16.2:

Wachovia BankCorporate Trust PA 1328123 South Broad StreetPhiladelphia, PA 19109-1199Attention: Rachel Rafferty

Page 8: , it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

>@<0603PP@0152

16.1. Escrow Provisions For Unknown or Unlocatable Persons: If anypayment of bonus, royalty payment or other payment due and owingunder this Order cannot be made because the person entitledthereto cannot be located or is unknown, then such cash bonus,royalty payment, or other payment shall not be commingled withany funds of the Unit Operator and, pursuant to Va. Code 5 45.1-361.21.D, said sums shall be deposited by the Unit Operator intothe Escrow Account, commencing within one hundred twenty (120)days of recording of this Order, and continuing thereafter on amonthly basis with each deposit to be made, by use of a reportformat approved by the Inspector, by a date which is no laterthan sixty (60) days after the last day of the month beingreported and/or for which funds are being deposited. Such fundsshall be held for the exclusive use of, and sole benefit of theperson entitled thereto until such funds can be paid to suchperson(s) or until the Escrow Agent relinquishes such funds asrequired by law or pursuant to Order of the Board in accordancewith Va. Code 5 45. 1-361.21.D.

16.2 Escrow Provisions For Conflicting Claimants: If any payment ofbonus, royalty payment, proceeds in excess of ongoing operationalexpenses, or other payment due and owing under this Order cannot bemade because the person entitled thereto cannot be made certain dueto conflicting claims of ownership and/or a defect or cloud on thetitle, then such cash bonus, royalty payment, proceeds in excess ofongoing operational expenses, or other payment, together withParticipating Operator's Proportionate Costs paid to Unit Operatorpursuant to Paragraph 9.1 hereof, if any, (1) shall not becommingled 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 Operator into the Escrow Accountwithin one hundred twenty (120) days of recording of this Order, andcontinuing thereafter on a monthly basis with each deposit to bemade by a date which is no later than sixty (60) days after the lastday of the month being reported and/or for which funds are sub3ectto deposit. Such funds shall be held for the exclusive use of, andsole benefit of, the person entitled thereto until such funds can bepaid to such person(s) or until the Escrow Agent relinquishes suchfunds as required by law or pursuant to Order of the Board.

17. Special Findings: The Board specifically and specially finds:

17.1. Applicant is CNX Oes CeeE)any LLC, a Virginia limited liabilitycompany, is duly authorised and qualified to transact business inthe Commonwealth of Virginia;

17.2. CNX Oas Company IIC has the authority to explore, develop andmaintain the properties and assets, now owned or hereafter acquired,consented to serve as Coalbed Methane Gas Unit Operator for SubjectDrilling Unit and to faithfully discharge the duties imposed upon itas Unit Operator by statute and regulations

17.3. CNX gas Company LLC is an operator in the Commonwealth of

Page 9: , it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

3MEO 6 0 3 PA% 0 I 5 3

Virginia, and has satisfied the Board's requirements for operationsin Virginia;

17.4 Applicant, CNX Gas Company LLC claims ownership of gas leases,Coalbed Nethane Gas leases, and/or coal leases representing 91.5617percent of the oil and gas interest/claims in and to Coalbed MethaneGas and 100.00 percent of the coal interest/claims in and toCoalbed Methane Gas in Subject Drilling Unit; and, Applicant claimsthe right to explore for, develop and produce Coalbed Methane Gasfrom subject Formations in subject Drilling Unit in BuebamenCounty, Virginia, which Subject Lands are more particularlydescribed in Bxhibit A;

17.5. The estimated total production from Subject Drilling Unitis 125 to 550 NNCF. The estimated amount of reserves from theSubject Drilling Unit is 135 to 550 3$9CF;

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 Methane Gas inSubject Formation in Subject Drilling Unit underlying and comprisedof Subject Lands, who has not, in writing, leased to the Applicantor the Unit Operator or agreed to voluntarily pool his interests inSubject Drilling Unit for its development. The interests of theRespondents listed in Bzhibit B-3 comprise $ .4383 percent of the oiland gas interests/claims in and to Coalbed Nethane Gasand 0.00 percent of the coal interests/claims in andto Coalbed Methane Gas in Subject Drilling Unit;

17.7 Applicant's evidence established that the fair, reasonable andequitable compensation to be paid to any person in lieu of theright to participate in the Wells are those options provided inParagraph 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 Bmhibit B-3 hereto the opportunity to recoveror receive, without unnecessary expense, such person's just andfair share of the production from Subject Drilling Unit. Thegranting of the Application and relief requested therein willensure to the extent possible the greatest ultimate recovery ofCoalbed Nethane Gas, prevent or assist in preventing the varioustypes of waste prohibited by statute and protect or assist inprotecting the correlative rights of all persons in the subjectcommon sources of supply in the subject Lands. Therefore, theBoard is entering an Order granting the relief herein set forth.

18. Nailing Of Order And Filing Of Affidavit: Applicant or itsAttorney shall file an affidavit with the Secretary of the Board within sixty(60) days after the date of recording of this Order stating that a true andcorrect copy of said Order was mailed within seven (7) days from the date ofits receipt by Unit Operator to each Respondent named in Bshibit B-3 pooledby this Order and whose address is known.

Page 10: , it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

";xl(0603 PArEO I 5419. Availability of Unit Records: The Director shall provide all

persons not subject to a lease with reasonable access to all records forSubject Drilling Unit which are submitted by the Unit Operator to saidDirector and/or his Inspector(s).

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

21. Appeals: Appeals of this Order are governed by the provisions ofVa. Code Ann. 5 45.1-361.9 which provides that any order or decision of theBoard may be appealed to the appropriate circuit court.

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

DONE AND EXECUTED this Al day of by a majorityof the Virginia Gas and Oil Board. I

Cl&irman, Ben// R. Wampler

DONE AND PERFORNED this ~ day o - —+ , 4~J~ by Order ofthis Board. /

~rm'.

R. EileenPrincipal Executive To The StaffVirginia Gas and Oil Board

STATE OF VIRGINIA )COUNTY OF

Acknowledge on this AJ day ofiJsmd~w, 2QO4personally before me a notary public in andsfor the Commonwealth of Virginia,appeared Benny Wampler, being duly sworn did depose and say that he isChairman of the Virginia Gas and Oil Board, that he executed the same and was

p~Notary Public

Ny commission expires: 9j3DJO N

STATE OF VIRGINIA )

10

Page 11: , it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

MI0603 NMO I 55COUNTY OF WASHINGTON )

Acknowledged on thief@ day of a/jM~ ~ , personallybefore me a notary public in and for tl& Commonwealth of Virginia, appearedB. R. Wilson, being duly sworn did depose and say that he is PrincipalExecutive to the Staff of the Virginia Gas and Oil Board, that he executedthe same and was authorized to do so.

r'a~ CG'~~Notary Public

Mycommission expires: QJSP+0Orde f'orded Under Cnde of

Virginia Section 45.1-861.26

11

Page 12: , it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

N 301.284.17E 970.859-3'1

/

I/

I1 L 2l

oIj l lz'B I'.Ilm ~~ 58.78 ACRE UNIT ~==== ~ ~ . N 299.684.63

E 970.800.15

14...-.~669606ev cms LAPO sssalmcss. wn. me wses Nat mshmvm. / I

N 301345.41 //'E 989.260.95

/'I

/ I

I

I

/ I /I l I I/'c/'

10 I iEIr'+----'t

I-

I N 299.745.70E 969,201.77

EXHIBIT A

NORA FIELDUNIT AZ-101

FORCE POOLINGVGOB-04-0120-1251

Caspany CNX Gas Connanv LLC Wel I Nose and Number UNIT AZ101

Tract No. Elevatian1" = 400% e 9 EKCOiCounty

This plat is a new plat II : an updated plat

I DDD-DD-D PVIKPDtl /~ MI0 VLicensed Professional Engineer ar Licensed Land Survey/A+

...Innnn PDDDDPnzI 01PooL.DDn IDDDD0000 000001 PDD

Page 13: , it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

;PM) 6Q 3 l'lttt.o I 5 I

CNX Gas Company LLCUnit AZ-101

Tract Idengficatlons(58.78Acre Unit)

Harrison —Wyatt. LLC (Sig Axe Tr. 4) - CoalCNX Oss Company LLC —CBM LeasedSent Enterprises —Ag Minerals except CoalCNX Oas Company LLC -Oil, Gas and CBM LeasedRhody Brown, et ux - gwface3$.$8 acres 57.$312%

1S. Harrison —Wyatt, LLC (Slg Axe Tr. 4) - CoalCNX Oas Company LLC —CSM LeasedKennetb E. Harris —Surface and Ag Minerals except CoalCNX Oas Company LLC —Oil, Gas and CBM Leased0.83 acres 0.$017%

1C. Harrison -Wyatt, LLC (tgg Axe Tr. 4) - CoalCNX Gas Company LLC —CSM LeasedVerdte Mae Martin -Surlacs and Ag Minerals except CoalCNX Oas Company LLC -Og, Gas and CSM Leased4.$8 acres 8 4382%

1D. Harrison —Wyatt, LLC (Big Axe Tr. 4) - CoalCNX Oas Company LLC —CBM LeasedVerdts Mae Martin —Surface and All Minerals except CoalCNX Oas Company LLC-Og, Oas and CSM Leased8AO acres 14~

1E. Harrison —Wyatt, LLC (Btg Axe Tr. 4) - CoalCNX Gas Company LLC —CSM LeasedTed Martin —surface and All Minerals except Coal (50%)Ted Margn, et ux —Surface and All Minerals except Coal (50%)EApdtable Production Company -0$, Oas and CSM Leased4.18acres 7.1113%

1F. Harrison —Wyatt, LLC (Sig Axe Tr. 4) - CoalCNX Oas Company LLC —CSM LeasedTed Martin —Swface and Ag Minerals except Coal (50%)Ted Msrgn, et ux —Swfacs and Ag Minerals except Coal (50%)Equitable Producgon Company -Oil, Gas and CSM Leased0.78 acres 1.3270%

Page 1 of 1

1/1 SI2004

Page 14: , it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

Dcctrat St(OUS 54OI58-1251Ust ot Urrteaeed Garners(C(Mraants

(5L78 Acre Urat)

Tiaar818 Nsa~(1) Ted Mar5n, et ux.

'C85Scx 123RawrX VA 24646

4.18 acres 7.1113%

7raer 81F-S.xa~(1) Ted Martin, et ux. *

HCSS Scx 123Rcws, VA 24646

0.78 acres

Page1 of 1 Rsv. 01/1 8(2004

Page 15: , it...;p(ggg3%'Mit014I3 red shales including, but not limited to Jawbone, Greasy Creek, C-Seam, War Creek, Beckley, Lower Horsepen, X-Seam, Pocahontas No. 9, 8, 7, 6, 5, 4, 3, 2,

tg„;(Q 6 Q 3 PiltiEQ I 59Doottat Strtgog 044120-1251

Uat or C ntgettns OwllaraCtatmanta Slat iartrllre aacrrlw<ae.ye acre un«l

AN corflfcgs are resolved- Escrosr not negfrrrred

VIRGINIA. In the Cle 'ffice o e rcuit Court of Buchanan County. The foregoing instrument

e 1th tire ceruficate of~wtedgpggpxed,admitted to reco day oDeed Book No. tW-+«aad Page N . /4' (~TB rk gahp M. Bevins, Jr., Clerk

mSmual...kml)i~ J Deputy Clerk

Paga1 ol1i 0! g tj

Rev. 01/1grgtgR