BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA REPORT OF THE ADMINISTRATIVE LAW JUDGE

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1 BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA APPLICANT: SINGER BROS. RELIEF SOUGHT: DETERMINE ELECTION UNDER ORDER NO LEGAL DESCRIPTION: SECTION 28, TOWNSHIP 17 NORTH, RANGE 16 WEST, DEWEY COUNTY, OKLAHOMA. CAUSE CD T REPORT OF THE ADMINISTRATIVE LAW JUDGE F ILE SEP OURT CLERK'S OFFICE - TULSA CORPORATION COMMISSION OF OKLAHOMA This Cause came on for hearing before Curtis M. Johnson, Deputy Administrative Law Judge (hereinafter referred to as AU for the Corporation Commission of the State of Oklahoma (hereinafter referred to as Commission in the Commission's Courtroom, Robert S. Kerr Office Building, 440 S. Houston, Suite 114, Tulsa, Oklahoma, pursuant to notice given as required by law and rules of the Commission, for the purpose of taking testimony and reporting to the Commission. HEARING DATE: July 10, APPEARANCES: At the time of the hearing, William H. Huffman, attorney, appeared on behalf of the Applicant, Singer Bros. (hereinafter referred to as Singer; and David E. Pepper, attorney, appeared on behalf of Respondent, Continental Resources, Inc. (hereinafter referred to as Continental. CASE SUMMARY Singer filed the subject Cause CD NO T seeking the determination of election under Order No which pooled the Atoka, Big Lime, Checkerboard, Cherokee, Council Grove, Red Fork, Chester, Cleveland, Cottage Grove, Hogshooter, Kinderhook, Mississippi Lime, Springer, Sylvan, Woodford, Hunton, Mississippi Chester, Mississippi Solid, Morrow, Oswego, Simpson, Tonkawa, Viola, and Arbuckle common sources of supply in Section 28, Township 17 North, Range 16 West, Dewey County, Oklahoma. During the hearing Singer requested, and the ALJ recommended, a determination be made

2 wherein Singer elected to participate in the Well drilled pursuant to Order No However, Continental requested the ALJ determine that Singer had either elected to accept, or by failing to pay well costs within 25 days of the Order, should receive the bonus and royalty option offered in paragraph 2b. of Order No RECOMMENDATION OF THE AU After considering the arguments of counsel, testimony, and Exhibits, the AU contends the Application should be recommended and Singer should be allowed to participate in the Well. The ALJ contends Paragraph 4 of Pooling Order No requires Respondents to elect,"... in writing, within 20 days from the date of this Order. (See Exhibit #1, Order No , Page 4, Paragraph 4. The Order was issued on December 20th (See Exhibit #1, Order No Page 7. On January 5, 2013, George A. Singer ed Jerrod R. Luttrell and advised him of Singer's intent '...to participate its remaining unleased..." interest in the subject Unit. This further provides that Singer "...would like to have either a post-pooling agreement... or... sign a JOA..." and requested "...to be able to pay in portions rather than having to pay costs through completion upfront..." (See Exhibit #2 s from George A. Singer and Jerrod R. Luttrell, Landman for Continental from January of The ALJ contends this is sufficient to meet the written notice of election requirement of the Pooling Order. Respondents did argue that Singer should not be allowed to participate, because they did not tender the well cost within 25 days from the date of the Order. The ALJ disagrees with this argument, because as Mr. Singer testified, Singer had a preexisting business relationship with Continental. Their prior transitions consisted of Singer being Joint Interest Billed for well costs, and as stated above in Exhibit #2 Singer requested to "... pay in portions..." on the subject Well. There was no evidence submitted that this was not satisfactory to Continental. Paragraph 3a. of the Pooling Order No provides well costs may be provided by "...securing or furnishing security for the payment satisfactory to the Applicant..." (See Exhibit #1, Order No , Page 4, Paragraph 3a.. Therefore the ALJ recommends Singer be allowed to participate in the subject Well pursuant to the Pooling Order. EXHIBITS Exhibit #1 Commission Pooling Order No Exhibit #2 s from George A. Singer and Jerrod R. Luttrell, Landman for Continental from January of Exhibit #3 Singer's Election Letter to Continental dated January 10th

3 Exhibit #4 Continental's Bonus Letter and Bonus Check to Singer dated July 30th Exhibit #5 Commission Pooling Order No Exhibit #6 Singer's Letter to Continental retuning the bonus check with check attached dated February 15, The ALJ proceeded to hear the Cause and found as follows: FINDINGS AND SUMMARY OF EVIDENCE 1. Cause CD NO T is the Application of Singer seeking to determine election under Order No which pooled the Atoka, Big Lime, Checkerboard, Cherokee, Council Grove, Red Fork, Chester, Cleveland, Cottage Grove, Hogshooter, Kinderhook, Mississippi Lime, Springer, Sylvan, Woodford, Hunton, Mississippi Chester, Mississippi Solid, Morrow, Oswego, Simpson, Tonkawa, Viola, and Arbuckle common sources of supply in Section 28, Township 17 North, Range 16 West, Dewey County, Oklahoma. 2, The Commission has jurisdiction over the subject matter and notice has been given in all respects as required by law and the rules of the Commission. 3. Mr. Huffman called his first Witness, Mr. George A. Singer, the principal of Singer. The Witness testified he manages Singer's Tulsa Office and all of Singer's mineral transactions are conducted out of this Office. The Witness stated his brother operates Singer's Oklahoma City Office. The Witness explained Singer's income is generated from oil and gas well working interest ownership. Witness testified about his dealings with Continental. The Witness stated he discussed three different tracks of minerals with Continental. The Witness advised Continental Singer would participate in all three tracks. The Witness requested Singer be billed for the drilling and completion costs of these wells, or if this was not acceptable, Singer was willing to execute a Joint Operating Agreement. The Witness explained Singer had other business dealings with Continental in the past and Continental had billed Singer for well costs via Joint Interest Billing Statements. The Witness sponsored Exhibit #2, an from the Witness to Continental showing this prior business relationship and billing practices. The Witness also sponsored Exhibit #1, Pooling Order No The Witness explained Singer sent Exhibit #3, Singer's Election Letter to Continental dated January 10th 2012, as a response to the Pooling Order.

4 The Witness testified concerning the misunderstanding regarding Singer's election in the Pooling Order. The Witness stated his daughter referenced the incorrect paragraph of the Pooling Order in which Singer wanted to participate in Exhibit #3, Singer's Election Letter to Continental, dated January 10th, This Letter provides "...Singer Bros. elects to participate in Paragraph 2b. of the Order." Paragraph 2b of the Pooling Order, Exhibit #1, provides for the payment of $1000 per acre bonus and a 3116th royalty. The Witness explained his daughter just checked the wrong box, but the Witness said he clarified the mistake with Continental. As a result of this mistake, Continental sent a Bonus letter dated July 30th 2012, and Bonus check, Exhibit #4, for $40,000 to Singer. Singer's Secretary accidentally cashed this check. The Witness explained that the check was cashed by mistake, because the Bonus Letter referred to the wrong pooling order number and the amount did not corresponded to the acreage held by Singer in the subject Unit. Therefore, Singer did not attribute this Bonus Check to a Unit in which they were going to participate. Several months later when this mistake was discovered, the Witness immediately drafted a letter to Continental and attached a refund check for the $40,000 bonus, Exhibit #6, and contacted Mr. Jerrod R. Luttrell, a Landman for Continental, to advise him of the error. The Witness stated Mr. Luttrell was not interested in discussing this issue, and would not allow Singer to participate in the Well. The Witness discussed the working relationship Singer has with Continental. The Witness explained Singer still participates in Continental wells to this very day. The Witness was not aware if the proposed Well had been commenced. The Witness did explain Singer's working relationship with Continental was such that if Singer failed to notify Continental of their election, Continental would contact Singer to notify Singer of this omission. The Witness did state Continental never responded to Singer's offer to sign a joint operating agreement or to just joint interest bill Singer for the costs of the subject Well. The Witness testified the bonus payment received by Singer was not sent within the 35 days specified by Order No , Exhibit #1, Page 4, Paragraph 3b. The Order was issued on December 20, 2011, and the Bonus Letter was dated July 30th, 2012, and the check was dated July 25, 2012, Exhibit #4. The Witness contends both these dates are substantially outside the time frame set by the Pooling Order. The Witness requested the ALJ find Singer had properly elected to participate in the proposed Well, and Singer is therefore allowed to participate in said Well. 4

5 5. Mr. Pepper conducted cross examination of the Witness. The Witness agreed the Pooling Order, Exhibit #1, was issued on December 20, 2012, The Witness further agreed Singer's written election to Continental, Exhibit #3, was dated January 10, The Witness argued there were prior oral communications which took place before this Letter was drafted. Mr. Pepper asked the Witness if Continental already had acquired Singer's interest through the Pooling Order, then Continental would not need to enter into a joint operating agreement with Singer. The Witness responded Singer had already agreed with Continental to be joint interest billed for the Well costs. Mr. Pepper questioned the Witness regarding his earlier testimony concerning the incorrect pooling order number referenced on Exhibit #4, Continental's Bonus Letter to Singer dated July 30th The Witness agreed the Order number on the Letter was not correct, Order No However, the Letter did have the correct legal description on it. The Witness also agreed the correct Order No was on the check stub attached to the Letter. Mr. Pepper questioned the Witness regarding whether Singer had paid it's proportionate part of the Well costs, since the Pooling Order requires well costs be paid within 25 days after issuance of the Pooling Order. Failure to pay these costs within 25 days results in the party receiving bonus and royalty provided in Paragraph 3b. of the Order. The Witness admitted Singer had not paid the well costs; however, he argued Singer had an understanding with Continental that they were to be joint interest billed for these costs. Mr. Pepper asked if Singer had this understanding, how many drilling reports were received on the subject Well? The Witness stated Singer had not received any drilling reports. The Witness admitted Singer usually receives drilling reports on Wells they participate in. The Witness stated again that Singer had an agreement with Continental to be joint interest billed for these drilling costs. The Witness contends it is unfair to drill the Well then send Singer a check for their mineral interest seven-and-a- half months after the Pooling Order issued. 6. Mr. Huffman conducted redirect examination of the Witness. The Witness testified Singer received a joint interest billing for the well Continental drilled in Section 1, Township 6 North, Range 5 West. The Witness stated there was no written agreement, only an oral agreement to pay these costs. Singer and Continental had similar oral agreements on six or seven additional wells where Continental just sent Singer joint interest billing statements. The Witness stated he had never received a bonus money check from a pooling so late, and he 5

6 had never had a written agreement with Continental to be joint interest billed on any of Continental's wells which Singer participated in. 7. At this point in the proceeding, the ALJ took the cause under advisement. RECOMMENDATIONS. CONCLUSIONS AND FINDINGS After taking into consideration all the facts, evidence, Exhibits, and arguments of Counsel, it is the recommendation of the ALJ in Cause CD NO T seeking the determination of election under Order No which pooled the Atoka, Big Lime, Checkerboard, Cherokee, Council Grove, Red Fork, Chester, Cleveland, Cottage Grove, Hogshooter, Kinderhook, Mississippi Lime, Springer, Sylvan, Woodford, H unton, Mississippi Chester, Mississippi Solid, Morrow, Oswego, Simpson, Tonkawa, Viola, and Arbuckle common sources of supply in Section 28, Township 17 North, Range 16 West, Dewey County, Oklahoma, should be recommended, and Singer allowed to participate in the subject Well pursuant to Pooling Order No The Pooling Order No in Paragraph 4 of the Order requires Respondents to elect,"... in writing, within 20 days from the date of this Order. (See Exhibit #1, Order No , Page 4, Paragraph 4. Order No was issued on December 20, (See Exhibit #1, Order No , Page 7. On January 5, 2013, George A. Singer ed Jerrod R. Luttrell and advised him that "...your company has pooled us in Section 28-17N-16W, Dewey County, OK..." and Singer's "...intends to participate with its remaining unleased..." interest in the subject Unit. (Exhibit #2 s from George A. Singer to Jerrod R. Luttrell, Landman for Continental from January of The AU concludes Singer properly elected under the Pooling Order, if an constitutes an election "in writing". 3. This brings us to the issue of whether an constitutes an "in writing" election i to a pooling order. Black's Law Dictionary with Pronunciations, Sixth Edition, defines a "writing" as: "Writings" consist of letters, words, or numbers, or their equivalent, set down by handwriting, typewriting, printing, photostating, photographing, magnetic impulse, mechanical or electronic recording, or other form of data compilation. Fed. Evid.R (1 The ALJ contends that an clearly falls within the scope of this definition of a "writing".

7 .. 4. After reviewing several cases concerning this whether an constitutes an "in writing" response to a pooling order, the ALJ could not locate any case that directly addresses this issue. Several cases from other jurisdictions touch on this issue, but none of them are directly on point. Cases addressing written notice by found this type of notice was not sufficient to constitute written notice, because the was not specific enough to put the receiving party on notice of the complaint. (See Venture Global Engineering, LLC v. Satvam Cornputer Services, Ltd., 233 Fed. Appx. 517 (Mich, The AU contends this provided Continental with specific information regarding Singer's intention "...to participate with its remaining unleased 20 net acres...'. The additionally provided the method by which they wanted to participate, either "...post-pooling agreement which affords us a casing-point election or we will sign a JOA..." The further provided the method by which Singer wanted to pay participation costs, Singer requested "...to be able to pay in portions rather than having to pay costs through completion upfront... "(See Exhibit #2 s from George A. Singer and Jerrod R. Luttrell, Landman for Continental from January of The ALJ contends the , Exhibit #2, provides Continental specific information of Singer's election to participate in the Pooling Order. 5. Other unpublished opinions concluded ed notice did not constitute written notice as a result of statutory or contractual requirements prohibiting their use as such. 0CC Rule 165: (d provides in pertinent part: "A respondent in a pooling order shall be deemed to have made a timely election if, as provided in the pooling order, the respondent has delivered his election by timely mailing as indicated by the postmark of the U.S. Postal Service on or before the last day allowed in the order, or timely delivery as otherwise provided in the pooling order...." The ALJ would note the Pooling Order No , Exhibit #1, only requires the election to be ".-in writing..." As the ALJ mentioned earlier in the decision, the ALJ does contend that an does constitute an "in writing" response. The , Exhibit 2, clearly indicates that it was sent "Thursday, January 05, :15 AM" which is within the election period provided by the Pooling Order, Exhibit #1. The ALJ also knows of no statute or Commission rule which prohibits the use of an as an election "in writing". Therefore, AU recommends Singer's , Exhibit #2, constitutes a valid election "in writing" to participate in Pooling Order No

8 6. Respondents did argue Singer should not be allowed to participate, because they did not tender the well costs within 25 days from the date of the Pooling Order. The ALJ disagrees with this argument, because as Mr. Singer testified, Singer had a preexisting business relationship with Continental. Their prior transactions consisted of oral agreements to participate with Singer being joint interest billed for well costs, and as stated above in Exhibit #2, Singer requested to "... pay in portions..." on the subject Well. The ALJ would note that Paragraph 3a. of the Order does require payment of well costs within 25 days or furnishing security therefor...". There was no evidence submitted that this was not satisfactory to Continental, and as Mr. Singer testified, this mode of payment was acceptable to Continental for other wells in which Singer participated. Therefore the ALJ recommends Singer be allowed to participate in the subject Well pursuant to the Pooling Order. 7 The final issue for consideration is Singer's Election Letter dated January 10, 2012, Exhibit #3. This Letter provides in pertinent part: "Singer Bros. elects to participate in Paragraph 2b. of the Order.' "Singer Bros. has already informed Continental Resources of this decision to participate in 20 net acres with unleased mineral interest." First, the reference to Paragraph 2b. of the Order, Exhibit #1, refers to the"[c]ash bonus of $1000 per acre plus a total royalty of 3/16". This is a fair market value provision of the Order, not the election portion of the Order. The election portion of the Order is Paragraph 3. Therefore, this is an incorrect selection of which the parties should have been aware. Second, this Letter in the very next paragraph refers to earlier correspondence, like the , Exhibit #2, which advised Continental of Singer's decision to participate. The erroneous referral to a bonus provision of the Pooling Order, and the inability to reconcile Singer's election from this Letter, should have put Continental on notice the Letter contained an error. Furthermore, the ALJ notes this Letter, Exhibit #3, was dated January 10, The Pooling Order, Exhibit #2, was issued on December 20th, Therefore, pursuant to 0CC Rule 165:5-1-6 (a Computation of Time, the 20 election period in the Order expired on January gth, 2012, so the Letter, Exhibit #3, was mailed after the election period expired. Therefore pursuant to 165: (d Election, the election was not timely. The ALJ contends this was irrelevant because Singer had previously made a valid election by , Exhibit #2. r]

9 8. Thus, the ALJ recommends the Application of Singer in Cause CD NO seeking to determine election under Order No which pooled Atoka, Big Lime, Checkerboard, Cherokee, Council Grove, Red Fork, Chester, Cleveland, Cottage Grove, Hogshooter, Kinderhook, Mississippi Lime, Springer, Sylvan, Woodford, Hunton, Mississippi Chester, Mississippi Solid, Morrow, Oswego, Simpson, Tonkawa, Viola, and Arbuckle common sources of supply in Section 28, Township 17 North, Range 16 West, Dewey County, Oklahoma, should be recommended, and Singer shall be allowed to participate in the Subject Well pursuant to Pooling Order No Respectfully submitted this l2" of September, CURTIS Deputy Administrative Law Judge

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