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Home My WebLink About20070041.tiff ASTRELLA & RICE PC ATTORNEYS AT LAW August 31, 2006 VIA FIRST-CLASS MAIL AND TELEFAX: (970) 304-6498 Mr. Chris Gathman Planner Weld County Department of Planning Services 918 10th Street Greeley, CO 80631 Re: Case No. USR-1565 Dear Mr. Gathman: This law firm represents Keirnes Land Company, LLC and its affiliates ("Keirnes") with respect to the above-referenced matter. Keirnes objects to the proposed locations of the future oil and gas wells (the "Proposed Wells") because locating the Proposed Wells where indicated in the application will violate the terms of the Surface Use Agreement dated February 23, 2006 between the Applicant, Texas American Resources Company, and Keirnes (Copy attached). Please note that the sixth sentence contained in paragraph 2.1 of the Surface Use Agreement states as follows: "There shall be no limitation hereunder on the use and development by Surface Owners of any portion of the PROPERTY which is outside of the Operation Areas so long as access roads and pipeline areas provided for herein are maintained." (Emphasis added). Recital A of the Surface Use Agreement defines the PROPERTY as of the date thereof as follows: "Surface Owners own fee title to Lots A, B, and D, in Recorded Exemption No. 0805-23-1 RE-386, located in the West '/ of the East % of Section 23, Township 6 North, Range 66 West of the 6th P.M., Weld County, Colorado (the "Property")." The two Operating Areas in which any additional wells, including the Proposed Wells, drilled on the PROPERTY are required to be located are shown on Exhibit A to the Surface Use Agreement. The Proposed Wells referenced in the Application are outside of the Operating Areas agreed to by the parties. Locating the Proposed Wells outside of the Operating Areas would constitute a breach of the Surface Use Agreement by the Applicant, would severely limit Surface Owners' use and development of the 1801 SIICRDN%VI State 1600 DEN\ER CO 80202 303 292 9021 Fix 303 296 6347 EXHIBIT http://vm astrellaln com I ` 2007-0041 ASTRELLA & RICE PC A T l O R ` I. 1 S Al L \ \\ Letter to Chris Gathman August 31, 2006 Page 2 Property and would also constitute an excessive use of the surface under Gerrity Oil and Gas Corp. v. Magness, 946 P.2d 913, 929 (Colo. 1997) • If we can provide further information, or answer any questions, please do not hesitate to contact our office. Very truly yours, l � Lance Astrella LA/etr Attachment c: Bruce Barker, Weld County Attorney Brad Keirnes Texas American Resources Company ASTRELLA & RICE PC ATTORNEYS 31 L. 4 1b November 2, 2006 • VIA E-MAIL: bbarkeraco.weld.co.us Bruce T.. Barker, Esq. County Attorney Weld County Attorney's Office P.O. Box 758 Greeley, CO 80632 Re: Case No. USR 1565 • Dear Mr.. Barker: This law firm represents Keirnes Land Company, LLC and its affiliates ("Keirnes") with respect to the above-referenced matter. The notice of hearing is defective. It lists Keirnes as the applicant. In fact, the applicant is Texas American Resources Company ("TARC"), The defect is material in that it gives potential objectors the impression that the surface owner, Keirnes, endorsed the proposed Use By Special Review, when in fact Keirnes opposes it. Moreover, reference to the lots contained in the notice is incorrect based on current filings. Keirnes also has a substantive objection to the application which Keirnes raised with the Weld County Department of Planning Services (the "Department"). On August 31, 2006, Keirnes filed a letter with the Department objecting to the location of three future oil and gas wells in the southern portion of the subject property. The basis for Keirnes' objection is that the locations for those future wells violate the terms of a Surface Use Agreement dated February 23, 2006 between Keirnes and TARC (the "SUA"). The SUA requires that all new wells be drilled from oil and gas operating areas designated therein ("Operating Areas") and not from any locations outside of those Operating Areas. A copy of the letter to the Department and a copy of the SUA are _ attached. Keirnes, in good faith and in recognition of the rights of the mineral estate, entered into the SUA setting aside the Operating Areas for oil and gas activities. TARC, in making its application, is requesting the Weld County Board of Commissioners (the "Board") to disregard its SUA with Keirnes and allow it to drill in areas reserved exclusively for Keirnes' future surface development. If the situation were reversed and Keirnes made application for surface development in one of the Operating Areas, TARC would rightfully object to the Board and the Board would most certainly disallow 1801 BROao\\'l SI lie 10111) DES'ra CO 811202 303 292 9021 I,Lx 303 296(,347 http://e ally astrellalav cnm ASTRELLA & RICE PC A I i o R \ G ' s \ i L \ \\ Letter to Bruce T. Barker, Esq November 2, 2006 Page 2 development in the Operating Areas Keirnes asks for equal treatment Keirnes' rights under the SUA are no less important or valid than those of TARC. In the event that the Board is inclined to approve the proposed wellsite locations that are outside of the Operating Areas in connection with the application for Use By Special Review, please make certain that the record is clear that the Board is not taking a position as to whether the SUA has been breached.. Because a significant number of residential lots would be eliminated from future development if the future wells are drilled outside of the designated Operating Areas, litigation is certain to ensue It would be helpful for the record to be clear that the Board has not sanctioned, condoned or in any way encouraged a breach of the SUA by its actions in approving the Use By Special Review with future wells outside of the Operating Areas. Keirnes wishes to make it clear to the Board that it is not objecting to the drilling of the additional wells. However, they should be drilled where TARC agreed in writing to drill them, that being the Operating Areas. If the wells are located outside of the Operating Areas as proposed by TARC, Keirnes will incur significant economic loss and the aesthetic beauty of the area surrounding Seeley Lake will be tarnished. Very truly yours, Lance Astrella LA/etr Attachments c: Brad Keirnes Glen Droegemueller, Esq. Jeffery E. Carlson, Division Manager- Land and Legal (Texas American Resources Company) SURFACE USE AGREEMENT This Surface Use Agreement ("Agreement")is made and entered into this Zer. day of P.2,1 2006, by and between Texas American Resources Company ("TARC"),whose address is 98 San.Jacinto Boulevard, Suite 800, Austin, Texas 78701, and C. B. Keirnes Land Co. ("Keirnes") and Alta,LLC ("Alta") Both Alta and Keirnes ate collectively referred to herein as "Surface Owners." RECITALS A Surface Owners own fee title to Lots A, B, and D,in Recorded Exemption Na. 0805-23-1 RE-386, located in the West'A of the East '/2 of Section 23, Township 6 North, Range 66 West of the 6th P M, Weld County, Colorado (the"Property") • B Surface Owners warrant that they have authority to commit the surface rights in the Property to this Agreement. C. TARC represents that its parent company('IARH E&P Holdings, IT)holds a valid and subsisting oil and gas lease in the Property and as such has the tight to use the surface of the Property to explore for, develop, and produce certain of the oil, gas, and other hydrocarbons which underlie the Property. D. TARC and Ridgeview Farms, LLC, an affiliate of Surface Owners, have concurrently with the execution of this Agreement, executed a Surface Agreement involving property of Ridgeview Farms, LLC contiguous to the east of the Property providing, inter alia, that TARC will not conduct any surface exploration operations on the property owned by Ridgeview Farms, LLC. In consideration for such agreement Surface Owners have agreed to grant TARC certain rights to drill on the Property using directional or slant drilling techniques from the surface of the Property as hereinafter provided to a location on the adjacent property owned by Ridgeview Farms,LLC.. E TARC currently operates one or more producing oil and gas wells and owns other oil and gas production equipment and facilities on the Property and the adjacent Ridgeview property, which are generally depicted on the map attached hereto as Exhibit "A". TARC's facilities, equipment and operations on the Property and the adjacent property consist of,whether shown on Exhibit "A"or not: MIS �.. , r (1) Two producing gas wells known as the Eldridge #4-23 and the Eldridge #2-23 (the"Wells"); (2) Iwo Lank Batteries which services the Wells and other wells located on the Property and on adjacent lands(the"Tank Battery"); (3) A certain Compressor Site which services the Wells and other wells located on the Property and on adjacent lands (the "Compressor"); (4) Certain pipelines and flowlines that carry oil, gas and other hydrocarbons • from the Wells and other wells to the Tank Batteries and to other pipelines (the"Pipelines"); (5) Certain existing lease roads utilized by TARC which are located on and/or cross the Property(the"Lease Roads"); (6) Possible future well locations known as the Eldridge#41-23, Eldridge#5- 1-23 (fifth spot) and the Eldridge #31-23 well in the NW/4NE/4 (the "Proposed Wells") F. Subject to applicable laws and regulations, TARC may have the right to drill additional wells to produce oil and gas from the Property, including, but not limited to the Proposed Wells, from surface locations on the Property, as shown on Exhibit"A" AGREEMENT NOW THEREFORE, in consideration of the covenants and mutual promises set forth herein, including the information set forth in the recitals, the patties agree, to the extent of each of their respective interests in the Property, as follows: 1 Drilling Locations. • 1.1 Surface Owners agree that IARC may drill the Eldridge Well#5-1-23 (fifth spot) either directionally or vertically(at TARC's sole option and expense) from a surface location in Operation Area 1. Operation Area 1 shall be a 300' by 300' site as indicated on Exhibit A. 1.2 Surface Owners agree that TARC may drill the Eldridge Well#41-23 by directional or slant drilling fiom a surface location in Operation Area 2, to reach a bottom-hole location under the NE/4 NE/4 Section 23 as shown on Exhibit"A" Operations Area 2 shall be a 325' by 325' site as indicated on Exhibit"A". The Eldridge Well#31-23 (which shall be a 2 vertical well) may also be drilled by TARC at a surface location on the Property in the NW/4 NE/4 Section 23, in the NE comer of Lot D in Operation Area 2 as shown on Exhibit A. 2 Oil and Gas Operation Areas 2 1. Operation Areas As shown on Exhibit A, the proposed wells are located within a portion of the Property designated as the"Operation Areas 1 and 2." TARC shall co- locate any additional tanks in Operation Area 3, which is a 300' x 300' site that includes one of the existing Tank Batteries operated by TARC as shown on Exhibit A, and shall paint all new tanks and all new equipment on the Property Area an earth tone color,subject to the reasonable approval of Surface Owners. Surface Owners shall have the right to initially repaint existing tanks and other equipment located on the Property on the date of this Agreement at its expense Subject to the terms and restrictions contained in this Agreement, Surface Owners shall continue to own fee title to the surface of the Operation Areas subject to offset or distance setback required by governmental agencies from oil and gas facilities.. TARC will continue to have the right to the use of such areas of the surface as may be reasonably required and restricted by this Agreement within which to explore for and remove oil,gas, and other hydrocarbons and to locate its associated facilities. There shall be no limitation hereunder on the use and development by Surface Owners of any portion of the Property which is outside of the Operation Areas so long as access roads and pipeline areas provided for herein are maintained. TARC shall have the exclusive right of access to and use of the Operation Areas. the parties hereto each acknowledge and agree that the Operation Areas and the respective rights thereto as described herein satisfy the operation, access, set-back, and drilling needs of TARC and the development objectives of Surface Owners. TARC shall maintain the Operation Areas free of weeds and debris and shall maintain a graded ground surface of the Operation Areas and all access roadways thereto. the parties agree that Surface Owners shall have the right to erect perimeter fencing around the Property or any portion thereof. If any such fence crosses IARC's existing access roads, Surface Owner shall install properly 'sized gates at such crossings to accommodate drilling rigs and heavy equipment so that TARC will have continual,unimpeded access to its wells and facilities. It is agreed and understood that any fencing erected by Surface Owners shall not interfere with, reduce the size of, or impede access to the Operation Areas as so designated on Exhibit "A" 3 2 2 Landscaping The parties agree that Surface Owners shall not locate any structures or other permanent improvements within the Operation Areas; provided that Surface Owners (or its designee) shall have the right to install and maintain fencing, earth berms and trees around the Operation Areas and grass and other non-obstructive landscaping features within the Operation Areas at its expense After the initial installation of such landscaping, Surface Owners (or a homeowner's association, governmental body, or other entity designated by Surface Owners) shall have the tight of access to the landscaped areas within the Operation Areas for purposes of maintaining the landscaping. IARC shall not be liable for any damage to landscaping or landscaping improvements which results from its reasonable exercise of its tights hereunder 2 3 Drill and Reworking of Wells Subject to applicable laws and regulations, IARC shall continue to have the right and privilege to exercise all of its oil and gas leasehold rights to drill, operate, and produce, including, but not limited to,the deepening,directional or slant drilling, fracturing, re-drilling or re-completing of all wells with a surface location within the Operation Areas Surface Owners shall not interfere with IARC's right to drill, operate, and produce not only the existing Wells,but also those located within the Operation Areas 2.4 Surface Damages. As consideration for the damages and loss of economic value to Surface Owners of TARC 's use of the Operation Areas and drill sites, IARC agrees to pay Surface Owners the sum of$5000.00 for each individual Operation Area situated on Property within ten(10) days prior to TARC's use thereof In regard to Operation Area 3, this means that TARC will pay the agreed surface damage amount at such time as any new tanks or equipment are added to the existing battery in Operation Area 3. 3. Access to the Operation Areas, 3 1 IARC understands and agrees that Surface Owners may in the future develop a land use plan for the Property.. In connection with such plan, portions of the existing Acccss Roads may be replaced with improved public rights-of-way to be established as part of the land use plan and at Surface Owners' expense. Until such plan is approved and the public roads are installed, IARC will continue to use and maintain at its expense the existing 4 unimproved Access Roads to access the Operation Areas, wells and any other TARC equipment and facilities 3.2 Access Roads which are(or hereafter become)paved or otherwise improved by Surface Owners in connection with Surface Owners' development of the Property (the"Access Roads"), shall be constructed in such manner as to reasonably accommodate the equipment normally used by TARC for its oil and gas operations, regardless of the standard for roads or streets required by the applicable zoning requirements for the Property. Such use by I ARC shall include,but not be limited to the use of any necessary drilling or workover rigs in the Operation Areas, When Surface Owners are prepared to proceed with land planning and development, Surface Owners shall prepare and deliver to TARC the engineering plans and other specifications for the Access Roads, and TARC and Surface Owners shall work together in good faith to develop final plans and specifications which will reasonably support and accommodate the requirements for TARC and Surface Owners for their respective purposes and intended activities on the Property. Upon completion of any Access Road or pipeline relocation, Surface Owners shall deliver to TARC recordable easements for the new Lease Road or Pipeline locations in a form reasonable and acceptable to both TARC and Surface Owners. Surface Owners shall keep any Access Roads paved by Surface Owners and jointly used by both parties or the subdivision occupants in good condition and repair until the same are dedicated to and accepted by the local governing authority. TARC shall use reasonable care not to damage such paved Access Roads but shall not be responsible for any damage caused by TARC operations. Neither party shall unreasonably interfere in the use of the Access Roads by the other party. TARC shall maintain its Access Roads on the Property not used by occupants of the subdivision to the reasonable satisfaction of Surface Owners.. 3 3 In connection with TARC's efforts to obtain the permit approvals, Surface Owners will use reasonable, good faith efforts to assist TARC to obtain any consent or approval required by TARC from the local governing authorities to confirm that TARC will be permitted to use those portions of the Access Roads to be located in public rights-of-way in a manner which will reasonably accommodate TARC's operations in the Operation Area 4. Notice of Easements. r-- 5 4.1 Recording of this Agreement. A copy of this Agreement shall be recorded by Surface Owner in the books and records of the Office of the Clerk and Recorder for Weld County. 4 2 Notice to Homeowners, Builders and/or other Developers. Surface • Owners shall furnish all homeowners, builders and developers which purchase all or any portion of the Property and each person or entity who proposes to enter into a contract to purchase a lot which is adjacent to or any part of which is within 150 feet from the Operation Areas or a pipeline easement, with a plat that shows the locations of the Operation Areas, access routes, and pipeline easements. In addition, Surface Owners shall provide written notice to all such purchasers that include the following; a there may be ongoing oil and gas operations and production on the surface of the Premises within the Operation Areas, pipeline easements and access routes; b there are likely to be wells drilled and oil and gas production facilities constructed and installed (including but not limited to compressor stations and tank batteries) within the Operation Areas and flowlines and pipelines constructed and maintained on the Premises; c. heavy equipment will be used by TARC from time to time for oil and gas drilling and production operations and such operations may be conducted on a 24- hour basis; and d. homeowner associations and buyers of individual lots or homes will be subject to and burdened by all of the covenants and waivers made by Surface Owners in this Agreement, including, but not limited to those covenants and waivers; i) prohibiting the location of any building, structure, or other improvement within the oil and gas Operation Areas; and ii) waiving objections to the drilling of wells, the construction of facilities, and the conduct of oil and gas operations on the Property consistent with this Agreement 5. Successors and Assigns. This Agreement and all of the covenants in it shall be binding upon the personal representatives, heirs, successors and assigns of the parties and the benefits of this Agreement shall inure to their personal representatives, heirs, successor sand assigns of the parties. 6 6. Covenants Run with the Land. This Agreement constitutes covenants running with the land and shall be binding upon all patties who succeed to any interest that Surface Owners or IARC has or will have in the Property 7.. Governing Law;. The validity, interpretation and performance of this Agreement shall be governed and construed in accordance with the laws of the State of Colorado. 8. Severability. If any part of this Agreement is found to be in conflict with applicable laws, such part shall be inoperative, null and void insofar as it conflicts with such • laws;however, the remainder of this Agreement shall be in full force and effect 9. Notices. Any notice or communication required or permitted by this Agreement shall be given in writing to either party and their respective successors and assigns of public record either by (a) personal delivery; (b) expedited delivery service with proof of delivery; (c) United States mail, postage prepaid, and registered or certified mail with return receipt requested; or (d) prepaid telecopy or fax, the receipt of which shall be acknowledged, addressed as follows: C Keirnes Land Company, LLC and Texas American Resources Company Alta, LLC 98 San Jacinto Blvd., Suite 800 55 South Elm Avenue Suite 200, Austin, Texas 78701 Eaton, Colorado 80615 512-480-8700—office 970-356-6600- office 512-480-8732—facsimile 888.575.9254- facsimile Notice to successors or assigns of a party shall be addressed or delivered to such parties' address of public record. 10. Entire Agreement. This Agreement sets forth the entire understanding among the parties and supersedes any previous communications, representations or agreements,whether oral or written No change of any of the terms or conditions herein shall be valid or binding on any party unless in writing and signed by an authorized representative of each party. 7 11.. Attorney's Fees. In the event either party to this Agreement brings suit to enforce or interpret any portion of this Agreement, the party prevailing in such action shall be entitled to recover all costs incurred in such action, including without limitation, reasonable attorneys fees, IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to be executed by a dul authorized representative on the day and year first above written. TEXA AME RESOURCES COMPANY By: Printed Name `J Iitle: ice (2c-.-voe.sr- LA-rab C. B. Keirnes La d LC. Alta,LL)C r•"" Printed Name. Printed Name (\ Title: Title: 8 ACKNOWLEDGMENT STATE OF TEXAS ) )ss. COUNTY OF TRAVIS ) This instrument was acknowledged before me on the ca3ra�1� day of Februar 2006,byT Gt rov esP\rrlan , VICP 1'rPSTdri*T- l.C.rY'i of Texas American Resources Company, on b half of said company. N y ublic in and for the State of Texas My commission expires: .3iY?Ws KAREN M.WHITE rNotary Public State of Texas 3-Q3 • aoo- My Commission Expires ;,.N6' March 28,2007 STATE OF COLORADO ) ) COUNTY OF ‘Well ) ^ clad This instrument was acknowledged before me on the r% day of Halt t/1 2006, byC brad\(� RZir�YIP�, rev of C. B Keirnes Land Company, LLC,on behalf f sai limited liability coo �p�any., Notary Public • My commission expires: TONI M. I a� GREEN glFOF. .o�� SIATE OF COLORADO ) ) COUNTY OF We.id ) This instrument was acknowledged before me on the day of ( blii, I 2006, by c, 17JTJ Cy Y t Vries, _DiaM GC( of Alta, LLC, on behalf of said limited liability rt.pany.r�I n � v? "(,0 AA _ • ...,‘ IN Notary Public • -Y eta,:• " " .•, id l 1 My co mission expires: 1 3OOG I TONI M. GREEN I e 'ti9``eFTF •p•'.PQQe 9 % __il • EXHIBIT "A" 1l___ Lai A !,:-..R3 C . e tiidleV;e:r Forms RiD �� - EO'Sbnt Hoia . r_,c H _. .-- Location of a` Possible Etdr'iGge tit-23 CA ICJ Lot b f.F.385f .-- --..............Location of --Possible Eldridge` _!----- (` .� — — 3141 \ � \ `` �Operation Asia 2(325 a 325) \ ( r- — and Surlact Location for ----.,„,A.... 'l Possl>le Eldridge 31-23 and / 41-13 Location of Posaikle . --Eldridge 41-23 1or U ` Bottom Ho! [.oration 3 tlyt tattoo Area! (3i0'a 310) \' \ f t E �/ of Pcutibe Eldridge 5-1 23 and Surface taxation for Possible Eldridge 5-1-72 y \ \�Pos:nble 1 f)x'lire 1itill: Dril;Window ---------\\H \ ! Luca lion of Possib!e Eldridge 51 L3 P \ .^- Lor DEE3865 L ___._ .l Access Road —'_'N1/4 \ Existing Compressor \ Site Existing,Flow riot \ _.—. lank \\ i Eldridge 4Z ... "! Operation:Area?coca1 300) \ y -. Access Road location of all Existing and Future Tasks --- \ i L 200 200 �0 800 SCALE:r Inca A 400 bet v o . _ arg. c cd .- i signs llc -, Kei.ns,s Land Company, LLC' M. 155: r H� se Exhibit A e Elm CO • .., tCala c ✓ , Phan.:7f 45 xr v a. smae.artz General Location Map Y TEXAS AMERICAN RESOURCES COMPANY'" November 6, 2006 VIA Email: lance(aastreilalaw.com And U.S. Mail Lance Astrella Astrella & Rice PC 1801 Broadway, Suite 1600 Denver, CO 80202 Re: Your November 2, 2006 Letter Case No. USR 1565 Dear Mr. Astrella: • I am in receipt of your November 2, 2006 letter sent to me by e-mail. Following receipt, I again reviewed the Surface Use Agreement ("Agreement") you contend has been violated by applying for Use By Special Review for additional locations in the EA of Section 23, Township 6 North, Range 66 West, 6th P.M. Your claim appears to be without merit. Filrst, the Agreement does not in any way address locations in the W'1AE'h of Section 23, Township 6 North, Range 66 West, 6th P.M. Rather, the plain reading of that Agreement reveals that it was entered into solely as an accommodation to Ridgeview Farms, LLC, an affiliated company of your client, to provide for locations on other lands controlled by your client and to avoid surface activities on the lands held by Ridgeview Farms, LLC. Second, I found no provision in the Agreement providing that an application for Use By Special Review in and of itself violates the Agreement. If I have overlooked such provision, please provide me with a reference. As we are both aware, your client purchased those lands currently held by Ridgeview Farms, LLC, Alta, LLC and C.B. Keirnes Land Company, LLC in the E'/ of Section 23, Township 6 North, Range 66 West, 6th P.M., specifically subject to a pooling agreement entitled the Ogilvy-Eldridge-Cache La Poudre 320 Acre Codell Pooling Agreement, dated March 22, 1983, and filed of record at LE Book 1001, Frame 1042, •Reception No. 1932832. That pooling agreement t specifically provides that the unit area will be operated for all purposes as one m lease. Thus, the above referenced Agreement was an accommodation to your = 14.4 San Jacinto Center • 98 San Jacinto Boulevard • Suite 800 • Austin,Texas • 78701 • 512.480.8700 • Fax 512.480.8732 The 410 Building • 410 17th Street • Suite 1610 • Denver,Colorado • 80202 • 303.592.3000 • Fax 303.592.3030 Letter to Lance Astrella November 6, 2006 Page2 client that Texas American Resources Company need not have made, but did so in an effort to deal in good faith with your client and its affiliated entities. While I will not specifically address your threat of a civil action, I am unaware of any legal basis that would support your contentions under these facts your client has a claim for bad faith trespass entitling your client to either exemplary damages or an equitable remedy of title to any new wells. Finally, your letter alludes to other locations approved by C.B. Keirnes Land Company from which proposed locations can be drilled. I have yet to receive any descriptions of those alternate locations by you or your client. As in the past, we remain willing to reasonably accommodate your client, but such reasonable accommodation, under Colorado law as I understand it, does not require that Texas American Resources Company assume the additional expense of drilling at a location outside of those prescribed by the Colorado Oil and Gas Conservation Commission. As I have offered to your client in the past, Texas American Resources Company is certainly willing to consider alternate locations if your client will assume that additional expense. Texas American Resources Company ely, J;ffe son D,visiaTf a '..er and and Legal cc: Bruce T. Barker, Esq. via e-mail bbarkereco.weld.co.us County Attorney Weld County Attorney's Office P.O. Box 758 Greeley, CO 80632 ASTRELLA & RICE PC k i i o a N r: s \ 1 I. . \\ November 6, 2006 VIA E-MAIL: jcarlsonatexasarc.com Mr. Jeffery E. Carlson Division Manager— Land and Legal Texas American Resources Company 410 17th Street, Suite 1610 Denver, CO 80202 Re: Case No. USR 1565 Dear Mr. Carlson: I am confused by your letter. The Surface Use Agreement is straightforward.. It says, "There shall be no limitation hereunder on the use and development by Surface Owners of any portion of the Property which is outside of the Operation Areas so long as access roads and pipeline areas provided for herein are maintained," (Emphasis added) Texas American's proposed wells are on the "Property" and are not in the "Operation Areas The Operation Areas are defined in the map which is Exhibit A to the Surface Use Agreement. Very truly yours, Lance Astrella LA/etr c: Bruce T,. Barker, Esq,. Brad Keirnes Glen Droegemueller, Esq. 1801 BRnDW \ Sl 1TE 1600 UENA ER CO 80202 ,103 292 9021 F tx 303 296 6347 IIEXHIBIT http:/A"e e.usvcllulua cum BOARD OF COUNTY COMMISSIONERS' SIGN POSTING CERTIFICATE THE LAST DAY TO POST THE SIGN IS October 30, 2006. THE SIGN SHALL BE POSTED ADJACENT TO AND VISIBLE FROM A PUBLICALLY MAINTAINED ROAD RIGHT-OF-WAY. IN THE EVENT THE PROPERTY BEING CONSIDERED FOR A SPECIAL REVIEW IS NOT ADJACENT TO A PUBLICALLY MAINTAINED ROAD RIGHT-OF-WAY, THE DEPARTMENT OF PLANNING SERVICES SHALL POST ONE SIGN IN THE MOST PROMINENT PLACE ON THE PROPERTY AND POST A SECOND SIGN AT THE POINT AT WHICH THE DRIVEWAY (ACCESS DRIVE) INTERSECTS A PUBLICALLY MAINTAINED ROAD RIGHT-OF-WAY. I, Chris Gathman , HEREBY CERTIFY UNDER PENALTIES OF PERJURY THAT THE SIGN WAS POSTED ON THE PROPERTY AT LEAST TEN DAYS BEFORE THE BOARD OF COMMISSIONERS HEARING FOR USR-1565 IN THE AGRICULTURAL ZONE DISTRICT. Chs', c:`VL_vt-ict..� Name of Person Posting Sign AUo tit 1_ Signature of Person Posting Sign STATE OF COLORADO ) ss. COUNTY OF WELD c p The foregoing instrument was subscribed and sworn to me this I— day of t\JVAf.IYRIX I , 2006. WITNESS my hand and official seal. 41/4 &ktitt(Yibrn Notary Public ` BETHANY i i ULLMAN r_ f t i 'O My Expires: (U ��t U� N�grF ©f .. ;O@Q Commission , EXHIBIT I USR - 1565 "Property" = Lots A, B & D State Highway 392 Lot A � f LotB ew I 'ells usI • Operation New I Areas ell a j z ut a a. Inset unn Exist'g Well f Tank, attery Lot D i Disputed \ • Location• i Exisl'g i Well /� Disputed \ '\ ; r Locations I r i I I I • • I i I r / r / Seeley N Lake Lot C A - EXHIBIT --_____. Weld County Road 66 - - v SUA - Page 1 SURFACE USE AGREEMENT This Surface Use Agreement("Agreement")is made and entered into this Z3°' day of parti ,2006,by and between Texas American Resources Company("TARC"),whose address is 98 San Jacinto Boulevard,Suite 800,Austin,Texas 78701,and C.B.Keirnes Land Co.("Keirnes")and Alta,LLC("Alta"). Both Alta and Keimes are collectively referred to herein as"Surface Owners." RECITALS A. Surface Owners own fee title to Lots A, B, and D, in Recorded Exemption No. 0805-23-1 RE-386, located in the West '/2 of the East %s of Section 23, Township 6 North, Range 66 West of the 6th P.M., Weld County, Colorado (the "Property"). B. Surface Owners warrant that they have authority to commit the surface rights in the Property to this Agreement. C. TARC represents that its parent company(TARN E&P Holdings,LP)holds a valid and subsisting oil and gas lease in the Property and as such has the right to use the surface of the Property to explore for,develop,and produce certain of the oil,gas,and other hydrocarbons which underlie the Property. D. TARC and Ridgeview Farms,LLC,an affiliate of Surface Owners,have concurrently with the execution of this Agreement,executed a Surface Agreement involving property of Ridgeview Farms,LLC contiguous to the east of the Property providing,inter alia. that TARC will not conduct any surface exploration operations on the property owned by Ridgeview Farms,LLC. In consideration for such agreement Surface Owners have agreed to grant TARC certain rights to drill on the Property using directional or slant drilling techniques from the surface of the Property as hereinafter provided to a location on the adjacent property owned by Ridgeview Farms,LLC. E. TARC currently operates one or more producing oil and gas wells and owns other oil and gas production equipment and facilities on the Property and the adjacent Ridgeview property, which are generally depicted on the map attached hereto as Exhibit "A". TARC's facilities,equipment and operations on the Property and the adjacent property consist of,whether shown on Exhibit"A"or not: SUA - Page 3 vertical well)may also be drilled by TARC at a surface location on the Property in the NW/4 NE/4 Section 23.in the NE corner of Lot D in Operation Area 2 at shown on Exhibit A. ifyµ d y -qM 2.1. Operation Areas. As shown on Exhibit A,the proposed wells are located within a portion of the Property designated as the"Operation Areas I and 2." TARC shall co- locate any additional tanks in Operation Area 3,which is a 300'x 300'site that includes one of the existing Tank Batteries operated by TARC as shown on Exhibit A,and shall paint all new tanks and all new equipment on the Property Area an earth tone color,subject to the reasonable approval of Surface Owners. Surface Owners shall have the right to initially repaint existing tanks and other equipment located on the Property on the date of this Agreement at its expense. Subject to the terms and restrictions contained in this Agreement,Surface Owners shall continue to own fee title to the surface of the Operation Areas subject to offset or distance setback required by governmental agencies from oil and gas facilities. TARC will continue to have the right to the use of such areas of the surface as may be reasonably required and restricted by this Agreement within which to explore for and remove oil,gas,and other hydrocarbons and to locate its associated facilities. There shall be no limitation hereunder on the use and development by Surface Owners of any portion of the Property which is outside of the Operation Areito so long as access roads and pipeline areas provided for herein are maintained. TARC shall have the exclusive right of access to and use of the Operation Areas. The parties hereto each acknowledge and agree that the Operation Areas and the respective rights thereto as described herein satisfy the operation,access,set-back,and drilling needs of TARC and the development objectives of Surface Owners. TARC shall maintain the Operation.Areas free of weeds and debris and shall maintain a graded ground surface of the Operation Areas and all access roadways thereto. The parties agree that Surface Owners shall have the right to erect perimeter fencing around the Property or any portion thereof. If any such fence crosses TARC's existing access roads,Surface Owner shall install properly sized gates at such crossings to accommodate drilling rigs and heavy equipment so that TARC will have continual,unimpeded access to its wells and facilities. It is agreed and understood that any fencing erected by Surface Owners shall not interfere with,reduce the size of,or impede access to the Operation Areas as so designated on Exhibit"A". 3 Hello