Legislative and Regulatory Update for the Rocky Mountain Region

1. Legislative and Regulatory Update for the Rocky Mountain Region Colorado Bar Association Energy and Natural Resources Section May 9, 2008 Presented by: Andrew Bremner Beatty & Wozniak, P.C. 216 Sixteenth Street, Suite 1100 Denver, CO 80202 (303) 407-4499 BEATTY & WOZNIAK, P.C.

2. Overview • State Legislation & Regulations • 2 States - No 2008 Legislature • North Dakota • Montana • New Mexico • Utah - Limited • Colorado – Limited on Oil & Gas • Wyoming – Budgetary Session • Federal • Legislative • Public Land

3. North Dakota(NDPC) • No 2008 Session • Growing Pains • SB 2397 – Bakken Oil Tax Holiday • HB 1279 – 24 month Shallow Gas Tax Holiday • SB 2419 – Indian Tribe & ND Gov • HB 1229 – Increased Residential Setback to 500’

4. Montana(MPA) • No Legislative Session • Emerging Issues • Wildlife • NSO for Critical Habitats (undefined) • 1 mile NSO Sage Grouse leks • 4 mile Timing Limitations • Draft Bill – Consider Wildlife on Oil & Gas Activity • Ballot Initiative – Wildlife Prioritized Over Commercial Activity

5. Montana (cont’d) • Taxes • Senior Citizen Health Care Trust • Oil & Gas Production Taxes • Likely to Come From Production Tax Holidays • 12 Month Vertical • 18 Month Horizontal • Climate • 12 Draft Bill Requests

6. Utah • 2008 Session • Nothing Significant • Lookout For: • Split Estate • Small Amount of Land • Mainly Grazing Allotments • Noxious Weeds • County Infrastructure Funding • Tax Commission

7. New Mexico • Regulatory • Pit Rule Being To Be Issued – May 9, 2008 • Waited for Legislature to Set OCD Budget • New Permit Requirements • Climate Change • Regulatory Implementation • Control GHG Emissions from Oil and Gas “Processes”

8. Colorado • Legislature – Not Too Bad • 2008 Voter Issues – Bad • Eliminates Property Tax Deduction • Increases Severance Taxes • Some Sort of Rulemaking • Maybe You’ve Heard About It? • Seriously – Significant Rewrite • Process Issues • Substantive Issues

9. Colorado (cont’d) • Rule Changes • Definitions • New Form 2 and 2A Requirements • Chemical Inventories and Reporting • Consultation with CDPHE & CDOW • Wildlife Timing Restrictions • Process • 900 Page Staff Testimony & Exhibits • 12 Hours of Industry Testimony • Confusing Process Orders

10. Wyoming • HB 111 Board of land commissioners • No Conservation Easements on State Land • HB 133 Taxation of Helium • Severance Tax • SF 3 Game and Fish Funding • Creates Separate General Fund Budget • Sensitive Species and Nongame Programs • HB 16 Special District Elections • Join Special Tax District Without Election • Could Affect Company facilities • HB 21 Commercial Vehicle Fees • Oversize Permit Fees

11. Wyoming (cont’d) • HB 54 Natural Gas Valuation – • Produced and Processed by Same Company • Creates a New Modified Netback Methodology • Replaces Proportionate Profits Methodology • HB 89 - Pore Space Ownership • Surface Owner Owns Pore Space in Subsurface • Pore Space – Subsurface space which can be used to store Carbon Dioxide • Mineral Estate Still Dominant • Judiciary Committee Interim Meetings – June 2-3

12. Federal • Climate Change Legislation • Maybe This Summer • House and Senate • Lieberman Warner • Processors Bear Cap & Trade Costs • Estimate: Adds $2.50 per mcf +/- • Who really bears the cost? • House Energy & Commerce White Papers • http://energycommerce.house.gov/Climate_Change/index.shtml

13. Federal (cont’d) • Greater Sage Grouse • Judge-Ordered FWS • Status Review & Data Collection – May 27, 2008 • Look at Old Information • New Information • Final Decision • May 2009 at Latest • Emerging Issue – Climate Change

14. Thank You! Andrew Bremner Beatty & Wozniak, P.C. 216 16th Street, Suite 1100 Denver, CO 80202 (303) 407-4476 abremner@bwenergylaw.com