The Evolution of Consents

1. The Evolution of Consents ENERGY & MINERAL LAW FOUNDATION30th Annual InstituteMay 17-19, 2009Hilton Oceanfront ResortHilton Head Island, SC Nick Carter, Natural Resource Partners L.P., Huntington, WVBruce E. Cryder, Greenebaum Doll & McDonald, Lexington, KYDavid Stetson, Managing Dir., Dome Capital Advisors, LLP, Union, KY Arthur J. Wright, Thompson & Knight, Dallas, TX Arthur.Wright@tklaw.com (999905 000003 Dallas 2488290.1)

2. Maintenance of Uniform Interests1982 JOA For the purpose of maintaining uniformity of ownership in the oil and gas leasehold interests covered by this agreement, no party shall sell, encumber, transfer or make other disposition of its interest in the leases embraced within the Contract Area and in wells, equipment and production unless such disposition covers either. • 1. the entire interest of the party in all leases and equipment and production; or

3. Maintenance of Uniform Interests1982 JOA(cont’d.) • 2. an equal undivided interest in all leases and equipment and production in the Contract Area. Every such sale, encumbrance, transfer or other disposition made by any party shall be made expressly subject to this agreement and shall be made without prejudice to the right of the other parties.

4. Assignment; Maintenance of Uniform Interest1989 JOA Every sale, encumbrance, transfer or other disposition made by any party shall be made expressly subject to this agreement and shall be made without prejudice to the right of the other parties, and any transferee of an ownership interest in any Oil and Gas Lease or Interest shall be deemed a party to this agreement as to the interest conveyed from and after the effective date of the transfer of ownership; provided, however, that the other parties shall not be required to recognize any such sale, encumbrance, transfer or other disposition for any purpose hereunder until thirty (30) days after they have received a copy of the instrument of transfer or other satisfactory evidence thereof in writing from the transferor or transferee.

5. Assignment; Maintenance of Uniform Interest1989 JOA (cont’d.) No assignment or other disposition of interest by a party shall relieve such party of obligations previously incurred by such party hereunder with respect to the interest transferred, including without limitation the obligation of a party to pay all costs attributable to an operation conducted hereunder in which such party has agreed to participate prior to making such assignment, and the lien and security interest granted by Article VII.B. shall continue to burden the interest transferred to secure payment of any such obligations.

6. Purpose • Prevents problems of multiple operators • Prevents narrowing of lien coverage • Denies benefit of non-consent penalty • Narrows rights under preferential right provisions • Avoids additional expense of multiple facilities

7. Exxon Mobil Corp. v. Valence Op. Co., 173 S.W. 2d 303 Valence Case • Farmout of Shallow Deepths • Breached MUI • No obligation to respond to notice from Farmee • Not subject to non-consent penalties Damages • Non-consent penalties • Additional cost to drill shallow wells

8. Assignment – Pennsylvania/West Virginia • Penn – Essex Coal Company v. Banker, 192 A.2d 675 (Pa. 1963) holding breach of requirement of consent upon assignment will not void assignment. Penn discourages a forfeiture. B. C. & H. Corporation v. Acme Markets, Inc., 19 Pa. D. & C.3d 419, 1980 WL 450 (Pa Com. Pl.) • Restatement of Contracts • Forfeiture restraint • Nullifying or disabling restraint • Promissory restraint • W. Va. – right to a forfeiture is disfavored and forfeiture must be clearly stated and a general forfeiture clause will not work. Also, where monetary damages are available to make a party whole, forfeiture is not generally available. See, Easley Coal Company v. Brush Creek Coal Company et al., 112 S.E. 512 (W. Va. 1922) and McKenzie v. Cherry River Coal & Coke Co. and Island Creek Coal Company, 466 S.E.2d 810 (W. Va. 1995)