165-2009-03aogc2.state.ar.us/hearing applications archive/2009/march/165-200… · coby w. logan l....

JERRY L . CANFIELD, P .A .

THOMAS A. DAILY, P .A .

WYMAN R. WADE, JR . , P .A .

DOUGLAS M. CARSON, P .A .

ROBERT R . BRIGGS, P.A. † *

C . MICHAEL DAILY †

COBY W. LOGAN

L. MAT THEW DAV IS

* Fayetteville Office

† Al so L icensed in Oklahoma

DAILY & WOODSA PROFESSIONAL LIMITED LIABILITY COMPANY

ATTORNEYS AT LAW

KMW BUILDING58 SOUTH SIXTH STREET

P.O. BOX 1446FORT SM ITH, AR 72902

TELEPHON E (479) 782-0361FAX (479) 782-6160

______________

3538 N. HIGHWA Y 112, SUITE 200FAYETTEV ILLE, AR 72703TELEPHON E (479) 582-0361

FAX (479) 251-8111

JAMES E. WEST

PHILLIP J . NORVELL *

DALE CARLTON *

OF COUNSEL

_______

HARRY P . DAILY (1886-1965)

JOHN P. WO ODS (1886-1976)

JOHN S. DAILY (1912-1987)

March 3, 2009

Arkansas Oil and Gas Commission301 Natural Resources Drive, Suite 102Little Rock, Arkansas 72205

Re: ORDER REFERENCE NO. 165-2009-03

Application of SEECO, Inc. for Integration of All Unleased Mineral Interests andNon-consenting Working Interests in a unit described as Section 19, Township 8North, Range 17 West, Conway County, Arkansas

Commissioners:

SEECO, Inc., 2350 N. Sam Houston Parkway E, Houston, TX 77032, hereby applies tothe Arkansas Oil and Gas Commission for the integration of all unleased mineralinterests and non-consenting working interests in its proposed drilling unit which isdescribed above.

1. The proposed drilling unit is an established unit as defined in paragraph (f) ofArkansas Oil and Gas Commission General Rule B-43. Applicant proposes to drill ahorizontal well from a non-exceptional surface location in the Northwest Quarter downto a non-exceptional bottom hole location in the Southwest Quarter of the above-described unit. The proposed well will be drilled to a total vertical depth of 5,177 feet totest the Fayetteville Shale Formation. Applicant has obtained one or more oil and gasleases covering its proposed drill site.

2. Applicant owns oil and gas leases covering a substantial part of the proposedunit. Applicant should be named as operator of the well. The person or persons to beintegrated are shown in Exhibit "A" attached hereto and made a part hereof.

3. Applicant has made diligent efforts to negotiate with the non-participatingleasehold working interest owners, each of said parties owning an oil and gas leaseholdinterest in the proposed unit, but applicant has been unable to secure an assignment ofthe leasehold interest on an equitable basis or to secure participation by said parties inthe drilling of the proposed well.

4. Applicant states that it has made repeated efforts to negotiate with the owners ofthe unleased mineral interests in order to agree on a plan of development of said drillingunit; that those owners have been offered an opportunity to participate in the proposedwell; that they have been offered a fair and reasonable bonus consideration for theexecution of an oil and gas lease covering their interests; that they have been furnishedwith a proposed oil and gas lease and a copy of the AAPL operating agreement formwhich applicant proposes to use in connection with the drilling of said well; but that all ofthe efforts of the applicant have produced no agreement by said parties.

5. Applicant states that it is in the best interest of conservation and the protection ofcorrelative rights of all interested parties that the proposed unit be developed for oil andgas production without undue delay.

6. In order that applicant may proceed with the orderly development of said unit,applicant hereby requests that the Arkansas Oil and Gas Commission issue its order, inthe alternative, that:

(a) The owners of non-consenting oil and gas leasehold workinginterests indicated above shall participate in the cost of drilling,testing and completion of the test well to be drilled by applicant onthe captioned unit, subject to the terms of an Operating Agreementwhich substantially employs the terms of the AAPL Operatingagreement, with a COPAS attached.

(b) All of the non-consenting oil and gas leasehold working interestswithin the proposed unit shall be force pooled and integrated intosaid unit, and a reasonable risk factor shall be established andassessed as a penalty against said integrated interest.

7. Applicant further states that due to the risks and costs inherent in the drilling ofthe proposed well, the Commission should fix a reasonable risk factor to be assessedas a penalty against the integrated interests within the unit. The risk factor should beapplied to the proportionate cost and expense of drilling, completing and equipping thewell, which would have been borne by the interest of said parties had they participated. Applicant requests that if the integrated parties do not elect within 15 days afterissuance of the Commission's order as between alternatives (a) and (b), it shall beassumed that the integrated parties elected alternative (b) in lieu of the right toparticipate in the working interest in said unit.

8. Applicant requests that the Arkansas Oil and Gas Commission set this matter forpublic hearing, and after same, issue its order, in the alternative, that:

(a) Each of the owners of the unleased mineral interests indicatedabove execute and deliver to applicant a one year oil and gaslease, on an AAPL lease form, for a bonus consideration of

$1,000.00 per net mineral acre to be paid as fair and reasonablecompensation in lieu of the right to participate in the workinginterest in said unit, and that said oil and gas lease provide for a 1/8royalty on oil and gas.

(b) Each of the owners of the unleased mineral interests indicatedabove execute and deliver to applicant a one year oil and gaslease, on an AAPL lease form, for a bonus consideration of$350.00 per net mineral acre to be paid as fair and reasonablecompensation in lieu of the right to participate in the workinginterest in said unit, and that said oil and gas lease provide for a 1/6royalty on oil and gas.

(c) Each of the owners of unleased mineral interests indicated abovebe force pooled and integrated into the captioned unit withassessment of a reasonable risk factor penalty against theirinterest.

(d) The owners of unleased mineral interests shall participate in thecost of drilling, testing and completion of the test well to be drilledby applicant on the captioned unit, subject to the terms of anoperating agreement which substantially employs the terms of theAAPL Operating Agreement.

Applicant further requests that said mineral owners be required to elect within fifteen(15) days after issuance of the Commission's order which method will be pursued in thedevelopment of the above described unit, and, in the event no election is made, that itshall be assumed that the owner of said unleased mineral interest has elected to accepta bonus of $1,000.00 per net mineral acre as compensation in lieu of the right toparticipate in the working interest in said unit, and with the royalty to be 1/8.

9. Applicant further states that due to the risks and costs inherent in the drilling ofthe proposed well, the Commission should fix a reasonable risk factor to be assessedas a penalty against the integrated interests within the unit. The risk factor should beapplied to the proportionate cost and expenses of drilling, completing and equipping thewell, which would have been borne by the interest of said parties had they participated.

10. Applicant further requests that this Commission's order specifically provide thatany party electing either to participate or be force pooled subject to recoupment of a riskfactor penalty be bound by the terms of the attached AAPL Operating Agreement for thelife of commercial production within the unit so that all future unit operations might beproposed pursuant to the provisions of such agreement without the necessity of futureaction by this Commission.

11. Applicant also requests that said order be made applicable to any unknownspouse, heir, devisee, personal representative, successor or assign of said parties.

12. The names and addresses of parties interested in this proceeding are set forth inExhibit "A" attached hereto and made a part hereof.

13. Please note the appearance of Thomas A. Daily of Daily & Woods, P.L.L.C., P.O.Box 1446, Fort Smith, Arkansas, 72902, on behalf of applicant.

Very truly yours,

Thomas A. Dailyjmt

Green Bay Packaging 08-17 #1-19H Section 19 – T8N – R17W Conway County, Arkansas

EXHIBIT A

INTERESTED PARTIES MINERAL OWNERS

Cheek, G. W., Heirs See page 1 of Exhibit B

Laws, Ike, Jr. a/k/a Ike Allen Laws, Jr. See page 2 of Exhibit B

Leonard, William C., Heirs See page 3 of Exhibit B

Stubbs, Grady and Pauline Stubbs or their heirs See page 4 of Exhibit B

Templeton, Beth McCollum See page 1 of Exhibit B WORKING INTEREST OWNERS: BP America Production Company See page 5 of Exhibit B

Chesapeake Exploration, L. L. C. See page 6 of Exhibit B David H. Arrington Oil & Gas, Inc. See page 7 of Exhibit B

Petit Jean Land Company, L. L. C. See page 8 of Exhibit B

Page 1 of 1


EXHIBIT B

RESUME OF EFFORTS TO LEASE

Page 1 of 8

G. W. Cheek, Heirs Beth McCollum Templeton January 2, 2009 Checked office for old leasing information and possible contact

information on owner. No information found. January 6, 2009 Initiated internet search and located contact information for Bill Cheek, a

possible relative. Called Bill and spoke with Char Cheek, his caretaker. She is going to talk with Bill about gathering information related to George Cheek.

January 7, 2009 Called a listing for Jimmy Cheek, a possible relative. Left a message with

his daughter to call. January 8, 2009 Spoke with Bill Cheek, grandson of owner. Obtained address and contact

information for all the heirs. Called some of the heirs. January 10, 2009 Received commitments from some of the heirs. Still gathering heirship

information to properly prepare leases. January 19, 2009 Received commitments from all heirs. Leases and related documents

being prepared. January 22, 2009 Leases and related documents mailed. February 10, 2009 Executed documents received for all heirs except Beth McCollum. February 24, 2009 Spoke with Beth McCollum. She said she mailed the executed documents

on the 23rd of February. March 3, 2009 Well proposal letter and AFE mailed to the heirs of G. W. Cheek in care

of Mary Anna Cheek Bailey. Well proposal letter and AFE mailed to Beth McCollum Templeton.


EXHIBIT B


Page 2 of 8

Ike Laws, Jr. aka Ike Allen Laws, Jr. This interest was found late upon receipt of the title opinion. The title opinion showed the interest as “undetermined pending curative”. After extensive research it was decided that owner needed to be named in the integration proceedings. A patent was found covering the NENE from the USA to the State of Arkansas for railroad purposes. No deed was found of record from the railroad. However, recorded in Book 62, Page 251, Grady Stubbs, Jr. et al (See Page 4 of Exhibit B) conveyed this interest to I. B. Bell, et ux. Said warranty deed contained the following “reserving however all the oil, gas and other minerals that may be in on or under and that maybe produced from the above lands, as previously reserved by the railroad.” Subsequently, after various other transactions, Ike Laws, Jr., the then owner of the interest conveyed the “surface only” to James Jackson, et ux. The only oil and gas lease executed by anyone covering this interest was executed by Missouri Pacific Railroad Company or its successor. The Missouri Pacific Railroad Company is currently assessed with owning the minerals in the NENE. This interest is being named for protection purposes pending resolution of title issues. February 25, 2009 Contact was made with Ike Allen Laws, Jr. He stated that he always kept

his minerals. He doesn’t remember the details of the sale, but said he keeps extensive records of all transactions. He asked that we provide him with copies of the deeds. He will research his records. If he does own the minerals, he will lease with us.

March 3, 2009 Well proposal letter and AFE mailed.


EXHIBIT B


Page 3 of 8

William C. Leonard, Heirs All the known heirs of William C. Leonard have leased their interest to SEECO, Inc. (see below). Heirship information was established by heirship affidavit and not by judicial probate. Therefore, this interest is being named for protection purposes. Cathern R. Leonard March 3, 2009 Well proposal letter and AFE mailed to the heirs of William C. Leonard in

care of Cathern R. Leonard.


EXHIBIT B


Page 4 of 8

Grady Stubbs and Pauline Stubbs, Heirs January 5, 2009 Searched local phone directories, internet and courthouse documents for

information on owner. Nothing found. January 13, 2009 Expanded internet search to the state of Arkansas. Located a listing for

Grady Stubbs. Called, left a message for owner to call. January 18, 2009 Called listing again. Spoke with a woman who said that her husband,

Grady, was deceased. He was not the Grady Stubbs we were looking for. He did not know a Grady and Pauline Stubbs.

January 27, 2009 Searched courthouse documents again for an helpful information. Last

time owners were found of record was in 1948. February 4, 2009 Expanded internet search again. It appears that owners are deceased.

Located a possible relative in California, Connie L. Stubbs. No phone listing found, only an address. Mailed lease proposal letter.

February 12, 2009 No response to lease proposal letter. Searched internet again for any new

information on owner. Nothing new found. February 24, 2009 Still no response to lease proposal letter. Mailed second lease proposal

letter. February 25, 2009 Expanded the internet search again, located a phone number for Connie

Stubbs. Contacted and spoke to Connie. She is the daughter-in-law of Grady and Pauline Stubbs. Her husband Keith is their son. She confirmed that Grady and Pauline Stubbs are deceased. She said they would be willing to sign a proof of death and heirship. Discussed the terms of the lease with Connie and she was going to check with Keith.

March 3, 2009 Well proposal letter and AFE mailed to the possible heirs, in care of

Connie L. Stubbs. Still no response to lease proposal letters.


EXHIBIT B


Page 5 of 8

BP America Production Company BP America Production Company owns a working interest in the following Oil & Gas lease recorded in Conway County, Arkansas:

1) John C. and Regina K. Sunderland dated July 25, 2006 and recorded in Oil and Gas book 135 at page 43 with a correction of the Oil and Gas Lease being recorded in Oil and Gas book 154 at page 653 with an effective date of July 25, 2006.

Chesapeake Exploration L. L. C. assigned an undivided interest to BP America Production Company. Said assignment is effective July 1, 2008 and recorded in Oil and Gas book 171 at page 610. February 20, 2009 Well proposal letter and AFE mailed.


EXHIBIT B


Page 6 of 8

Chesapeake Exploration, L. L. C. Chesapeake Exploration, L. L. C. owns a working interest in the following Oil & Gas lease recorded in Conway County, Arkansas:

1) John C. and Regina K. Sunderland dated July 25, 2006 and recorded in Oil and Gas book 135 at page 43 with a correction of the Oil and Gas Lease being recorded in Oil and Gas book 154 at page 653 with an effective date of July 25, 2006. The original lease (having an incomplete/incorrect legal description was replaced with a correction) was included in an assignment but the corrected lease still remains with David H. Arrington Oil & Gas, Inc.

Chesapeake Exploration Limited Partnership, by affidavit of Identity and Corporate Successorship, is now Chesapeake Exploration, L. L. C. effective August 6, 2007 and recorded in Oil and Gas book 151 at page 239. February 20, 2009 Well proposal letter and AFE mailed.


EXHIBIT B


Page 7 of 8

David H. Arrington Oil & Gas, Inc. David H. Arrington Oil & Gas, Inc., owns a working interest in the following Oil & Gas lease recorded in Conway County, Arkansas:

1) John C. and Regina K. Sunderland dated July 25, 2006 and recorded in Oil and Gas book 135 at page 43, on October 26, 2006, with a correction of the Oil and Gas Lease being recorded in Oil and Gas book 154 at page 653, on November 7, 2007, with an effective date of July 25, 2006.

The original lease (having an incomplete/incorrect legal description was replaced with a correction) was included in an assignment but the corrected lease still remains with David H. Arrington Oil & Gas, Inc. February 20, 2009 Well proposal letter and AFE mailed.


EXHIBIT B


Page 8 of 8

Petit Jean Land Company, L. L. C. Petit Jean Land Company, L. L. C., owns a working interest in the following Oil & Gas lease recorded in Conway County, Arkansas:

1) Mark Cambiano to Petit Jean Land Company, L. L. C., dated November 11, 2006 and recorded in Oil & Gas book 155 at page 164 on November 14, 2007.

2) Mark Cambiano to Petit Jean Land Company, L. L. C., dated June 26, 2008 and

recorded in Oil & Gas book 172 at page 646 on October 28, 2008. February 20, 2009 Well proposal letter and AFE mailed.

EXHIBIT “C”Applicant’s statement regarding Operating Agreement

The applicant requests incorporation of the Model Form Joint Operating Agreement

approved by the Arkansas Oil and Gas Commission on October 24, 2006, with Paragraph

III.1.A.(1) of the COPAS providing for a drilling well rate of $7,500.00 and a producing

well rate of $750.00 , and with the following proposed revisions, deletions and/or

insertions, if applicable:

NONE

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