COMP BEFORE THE CORPORATION OF THE STATE OF OKLAHOMA RESOURCES, INC REPORT OF THE ADMINISTRATIVE LAW JUDGE

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1 FILE MAR COURT CLL,KS OFFICE - OKC COMP BEFORE THE CORPORATION OF THE STATE OF OKLAHOMA )RATION CowssioN APPLICANT: CONTINENTAL RESOURCES, INC RELIEF SOUGHT: POOLING LEGAL DESCRIPTION: SECTION 30, TOWNSHIP 17 NORTH, RANGE 15 WEST, DEWEY COUNTY OKLAHOMA CAUSE CD NO REPORT OF THE ADMINISTRATIVE LAW JUDGE This Cause came on for hearing before Michael Norris, Administrative Law Judge for the Corporation Commission for the State of Oklahoma in the Commission's Courtroom, Jim Thorpe Building, Oklahoma City, Oklahoma, pursuant to notice given as required by law and the rules of the Commission, for the purpose of taking testimony and reporting to the Commission. The Administrative Law Judge (AU) proceeded to hear the cause and filed a report herein. CASE SUMMARY: 1. Continental Resources, Inc. (Continental) is the applicant in this cause seeking to pool the captioned lands in Dewey County. JMA Energy Company, LLC (JMA) protests the fair market values. 2. Applicant established values based upon their survey of the surrounding area. They offered previous transactions, the current status of development, diminishing gas prices and the facts they ç1ievç. distinguish certain transactions as proof of these being fair market valuès JMA. demonstrated factors opposing these transactions and offering their opinion of fair market values.

2 Page 2 RECOMMENDATIONS: 1. That the application of Continental should be granted. 2. That the values stated by Continental of $1,400 per acre for a 3/16 total royalty, $1,000 per acre for a 1/5 total royalty and no cash bonus for a one fourth total royalty be established as the fair market values. 3. That the subsequent well provision should include language that the necessary regulatory orders must be approved before proposing a subsequent well. 4. That the provision for participants to receive timely well information, production information and title opinions regarding the unit should not be required in the order. HEARING DATE(S): January 5, 6, 2012 APPEARANCES: David Pepper, Attorney, appeared for the Applicant, Continental Resources, Inc. Charles Helm, Attorney, appeared for the Protestant, JMA Energy Company, LLC FINDINGS AND SUMMARY OF EVIDENCE. 1. The following numbered exhibits were accepted into evidence: 1. Authority for Expenditure 2. Order number JMA oil and gas lease 4. Order number s between Judy Gentry and John Brown 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 Page 3 3. This cause is the pooling application of Continental for the captioned section. The applicant presented Mr. Michael Booze, landman. His qualifications were accepted without objection. 4. Mr. Booze testified that the applicant complied with the prerequisites for proper notice in this cause. The applicant complied with all other criteria required in a pooling application. Mr. Booze stated that Continental owns or controls approximately 69 percent of this unit. Continental pooled one party in this application, JMA, who owns almost 40 acres in this unit. 5. He further stated that the well in this unit has been drilled and completed and he believed it is flowing back. Continental proposed this well to JMA prior to filing the application. Since then JMA and Continental could not come to a meeting of the minds on fair market value according to Mr. Booze. 6. Mr. Booze testified that Continental is currently in a transitional period in Dewey County. They are shifting the majority of remaining rigs to other areas of the Anadarko Woodford where they feel they get a better rate of return. They're mainly sending them to Grady County and an area of Blame County. He stated at one time they had 6 or 7 rigs in Dewey County. Continental is trying to get to zero to 1 rig in Dewey County by the end of March. Mr. Booze believes the variable for cutting back has been gas prices. They have been declining for some time and they are to a point where Continental does not think they can drill economic wells considering the current commodity price. 7. Mr. Booze quoted the average gas prices and stated that in January, 2010 the New York Mercantile Exchange (NYMEX) price of 1 Mcf of gas was $5.81. In June, 2010 it was $4.15. In January, 2011 the price was $4.21 and by September, 2011 it was down to $3.85. He stated that on January 4, 2012 the gas closed at $3.09. He stated that this has significantly factored into Continental's decision to pull out or reduce their presence in Dewey County. 8. Mr. Booze further testified that acquisition costs for acreage in this area also factors into the economics of a well. He stated that economics also affect the level of competition in a given play. When economics go one direction the competition tends to go the same way. When the competition is reduced the price tends to reduce. He stated he has seen a downward trend in Dewey County in the last year. 9. Mr. Booze testified that they were moving to Grady County because they have found a little bit more oil down there. He stated the gas also is a higher BTU content so there is more natural gas liquids that can be stripped out of that. They get a higher commodity price per Mcf because they are stripping those liquids out. The gas in

4 Page 4 Dewey County is mostly dry gas, low BTU content and the gas does not contain those liquids that can enhance the price. 10. Other than product price, Mr. Booze stated that he looks at competition in the area as well as what has been paid in the recent past to determine fair market value. Further, factors that influence the general economy are also considered. 11. Based upon these factors and transactions in the area Mr. Booze testified that he recommended $1,400 per acre and 3/ l6ths, $1,000 per acre and a 5th and zero dollars per acre and a quarter as fair market value. He testified that the $1,400 per acre and 3/16 is based on a pooling by Devon in September of 2011 in the immediate East offset. Mr. Booze stated that he had not found any transactions within the last year for $1,400 and a 3/16th. He further stated that he had not found any other transactions for $1,000 and a 5th but since Devon offered that he was offering the same. He offered the no cash and a quarter because he believes it is a fair transaction. He stated there had been no transactions for a 3/16th royalty in excess Of $1,400 in this unit or the 8th surrounding sections. 12. Mr. Booze testified that Continental pooled this section before. He stated the order came out in August, At that time it was pooled at $1,200 per acre and 3/16 royalty and no cash and a quarter. He further testified that through the exhibit exchange JMA indicated they paid $2,500 an acre and 3/16 royalty for their lease. He stated this was paid in August, He is trying to determine the fair market value today. He testified that JMA had suggested that they looked to the filing date of the application to determine the fair market value. The filing date was September 6, Mr. Booze stated he was trying to determine the fair market value as of January 5, 2012, the hearing date. He stated that JMA's lease is dated August 11, This was over a year prior to Continental's filing date. 13. Mr. Booze testified to transactions in the nine unit area. He stated in section 24 the Northwest offset a lease was taken in January of 2011 for $1,250 and a 5th. Continental is offering $1,000 and a 5th. He stated that is close to the $1, 250. In section 19, immediately to the north, there was a Chesapeake lease. The broker called Chesapeake but they did not get a response back. In section 20, the Northeast offset, Devon apparently took 3 leases for $1, 200 and 3/16 and one lease for no cash and a quarter. Devon also took four leases at $850 and a 5th and JMA took one lease for $500 and a quarter that was.9 acres. Mr. Booze testified that $850 and a 5th for.9 acres was not considered fair market value in his opinion. There were no other leases taken in the area for $500 and a quarter. He stated that the conditions have declined since that time. In section 29 there were 12 leases in the last year for $1, 000 and 3/16 which Mr. Booze believes is probably representative of the fair market value now. He stated those leases were taken after JMA's leases and were taken in March, April and May of He stated there is no new activity in section 32. This section was

5 Page 5 pooled at the end of Continental was not paying $2,500 an acre even back in The other sections are held by production. 14. In section 36, the Southwest offset, Continental operates the Jene 1-36H well. He stated that section is held by production. He stated there was an issue with some top leases in this section. The owner of the minerals at the time objected and challenged the validity of Continental's top leases. In an effort to avoid litigation, Continental paid $2, 000 an acre and a quarter. Paying this amount got rid of the lawsuit and he does not believe it is fair market value. They paid this amount to get the working interest. 15. Mr. Booze stated that since the pooling on August 30, 2011, wherein this unit was pooled, the only thing that has changed is that gas prices have continued to decline. He stated competition started to go away. 16. In Mr. Booze's opinion, in determining fair market value you try to look at current conditions, how things have been affected and what your company's objectives are. Continental uses a broker to gather information. This broker is Jackfork Land, Inc. he stated that the broker contacted Devon and JMA about leases in the area. He stated Continental had some that reflects that. 17. He was aware that JMA wanted a provision included in the subsequent well language that stated that all regulatory work has to be completed before anyone can propose a subsequent well. In Mr. Booze's opinion he is resistant to the provision because it places another hurdle the operator has to jump through to prepare a well to drill. He believes it allows someone to slow down the process of proposing another well. Continental is not planning any subsequent wells at this time. At least for now they are moving out of Dewey County. Therefore, they are not planning on any round of increased density drilling in Dewey County. 18. The witness stated that he has dealt with JMA over the past year. JMA has been involved in many of the poolings. He believes that when gas prices were higher it seems like JMA participated more often and as gas prices softened they have participated less often. 19. Upon cross-examination by Mr. Helm, Mr. Booze admitted that in this case he relied on information submitted by the broker in formulating his opinion on fair market value. Continental acquired substantial acreage in this section in hopes of operating the well. He stated it is part of his responsibility with Continental to oversee the acquisition of acreage in an area where Continental wants to drill. This section was included in a larger area which was a part of a greater geological concept. Continental initially started leasing in section 30 around 2007.

6 Page Devon originally proposed a well in this section 30 before Continental. Ultimately Continental took the initiative and pooled section 30. Continental proposed a well on July 5, In that proposal Continental offered terms of $1,000 per acre and 3/16, $750 and a 5th and no cash and a quarter. He got his information on values from Jacklork Land, Inc. He asked the broker to check the 9 section area centered on the unit being pooled. He usually limits the time period to a one year period. At this time he would have asked the broker to do a value check from July or August of 2010 to July or August, Mr. Booze was questioned about his testimony on August 15, 2011 in cause number He stated that he did not come prepared to discuss that case. He was advised by Mr. Helm that he listened to the tape of the proceedings and told him, as an officer of the court, that Mr. Booze did not disclose the JMA transaction that he testified to today. He was asked if he was aware that JMA acquired their interest at $2,500 per acre and 3/16 in 2010 for 40 acres. Mr. Booze stated that he was not aware of that until JMA provided him with the exhibit during the exhibit exchange in this hearing. He stated JMA was not providing their fair market values to Continental at that time. He said he would have no way of knowing about those values prior to the document exchange. It was not necessarily inconsistent if that value was excluded because JMA might provide values in some sections and not others according to Mr. Booze. He stated that for this hearing he knows that JMA took leases accounting for 40 acres and paid $2,500 and 3/16 in the August 15 matter. Mr. Booze acknowledged that Exhibit 3, copy of the JMA lease, was filed of record October 15, He stated the file date was before August 15, 2011 and was within a year of his testimony on that date. He acknowledged that this instrument was off record when he testified. Mr. Booze related that he has a comment in an where they called people at different companies. He stated he did not have the information with him. 22. Mr. Booze stated that JMA was a party to the pooling heard August 15, He stated JMA was dismissed at the hearing. Continental sought to pool them they protested the case and Continental asked to dismiss them. He declared that there were other parties to this pooling that Continental wanted to pool and it's easier sometimes to pool those parties and then handle the protesting parties at another time. There were no other protesting parties. JMA was not dismissed to avoid telling the court about the values JMA had paid. He stated that was not a reason that entered his thought process. Continental is not suggesting that the lease that JMA took was not an arm's-length transaction. 23. The witness testified that he relied upon Exhibit 4 for the values that Devon paid in that pooling. Those values were utilized in his opinion of fair market value.

7 Page Mr. Booze testified that since Continental purchased their interest in section 30 gas prices have been trending down. When the well was proposed in July of 2011 the gas price was $4.35 the price in January 2010 was $5.81. The value had gone down $1.46 in that period of time. Continental proposed a well with the gas price at that amount. When they began drilling the well in September, 2011 the price of gas was $ The witness stated that the Continental pooling was held on August 15, Devon pooled the unit next to Continental on August 30, The Continental pooling had two options for value $1,200 and 3/16 and no cash and a quarter. The Devon pooling recommended fair market value as $1,400 and 3/16, $1,000 and 1/5 and no cash and a quarter. Mr. Booze affirmed that the two units side by side were heard 14 or 15 days apart and the value went from $1,200 and 3/16 to $1,400 and 3/16. Further, there was a new value of $1,000 and 1/5 and the same no cash option. There was a more recent pooling in the 9 section area for values greater than recommended in the August 15, 2011 pooling. He stated that they were not discussing the future development of section 30 because the well in section 30 has already been drilled, completed and going online. There is no question whether this well should be drilled or not Continental has already done it. 26. Mr. Booze further testified that for this hearing he retained Jackfork Land. He instructed them to do the value check in mid-november. He believes he requested an update in late December for this hearing. He believes that was conducted because Jackfork prepares a plat that has the 9 sections and a list behind that of leases that are within a year or in this case within several days of the proposed hearing date. Mr. Booze stated that the oldest date that was provided for fair market value was January 19, He also believes that it is a fair assumption that there were not any leases taken between December 1, 2010 and January 19, Mr. Booze stated as an expert landman he is trying to convince the Commission that his opinion should be what the judge uses for fair market value. He used a one-year time frame from the date of the hearing back one-year as relevant for that consideration. 27. The information Mr. Booze received from his broker did not show any leases in the 9 section area after August 30, It is his opinion that generally you should exclude from the evaluation of fair market value leases taken after a pooling is filed. That is not necessarily always the case as there are other factors and circumstances that can come to bear. 28. Upon redirect examination Mr. Booze stated that his broker would not have included a lease dated August 11, 2010 in the update. It was more than a year before this hearing date. He does not have any recollection about the amounts that were paid for the lease that JMA offered into evidence. He further stated that he makes a practice of trying to tell the court everything he knows about the transactions in the

8 Page 8 area and try to distinguish some if applicable. Before he discussed the JMA lease he discussed the $2,000 an acre and a quarter royalty Continental paid in section Mr. Booze stated that he did not rely solely on Devon to establish fair market value. He based his values on a check of leases in the area, royalties and bonuses paid and the analysis of the activity in Dewey County. This included his experience in this area since 2007, and leasing 15,000 acres. In their efforts to renew leases they have generally seen the values coming down. He stated he has never paid $2,500 an acre and 3/ 16ths for a lease anywhere in Dewey County. 30. Upon recross examination Mr. Booze stated that the JMA lease had an effective date of October 23, He stated the lease was dated August 11, 2010 and he cannot recall if the broker gave him information about this lease. At this time, the applicant rested and the witness was excused. 31. Mr. John Brown, land manager for JMA Energy Company was called as a witness for the protestant. He has been advised in hearings, even uncontested hearings, that he will offer the highest and best prices in the area or his pooling would not be recommended. He also understands that there are occasions where there are attempts to distinguish values. It is a common practice primarily in uncontested cases where you look at a range of time for the values. He generally looks at it for a year from the time you make the filing. He has also seen cases where there was an attempt to distinguish values that were paid after a pooling was filed. 32. Mr. Brown testified that JMA would request that any order that issues would allow any participating party the right to propose subsequent wells. He also would ask that any participating party have the right to share in pooled acreage. 33. The witness stated he has a position on any subsequent development concerning the requirement of approval of regulatory work. JMA's position is that before any subsequent wells can be proposed by a party, all orders should be obtained from the Commission granting authority to conduct the operation you are proposing. He believes the participating parties should know whether or not the Commission is going to let them drill a well. 34. Mr. Brown believes that the order should also include language that any participating parties that pay their share of costs should receive all well information, production information and title opinions regarding the unit. 35. Mr. Brown stated that he heard the evidence presented with regard to the recommendations of Mr. Booze on values. He reiterated that JMA is the only party being pooled. He testified that if JMA elects to participate in this well the values are not at issue.

9 Page He stated that if JMA does not participate he would recommend a $2,500 an acre bonus and a 3/16 royalty. He testified that this was paid in the unit being pooled on the 40 acres leased by JMA. There were 2 leases (The Oakes leases) for this amount and one was submitted as Exhibit 3. Mr. Brown believes that these were arms-length transactions between a willing buyer and willing sellers. This area was highly competitive in August, 2010 when they began their negotiations. The 40 acres is a pretty substantial interest in this unit. JMA had competition from other companies. The lessors plan was possibly playing JMA off the other parties and taking the highest and best offer. JMA took the lease because they wanted the 40 acres in the play and expected this might be a unit that would be developed. 37. The lease is dated August 11, 2010 but bears an effective date of October 23, The execution date was August 21, The lease was filed for notice on October 15, Mr. Brown said this lease falls within the purview of a review for the well that was proposed by Continental on July 5, He thinks the lease should be considered for value purposes in this unit. He believes they should have known about the leases when they filed the initial pooling and named JMA as a party. Mr. Brown testified that he listened to the tape of the initial proceeding and there was no mention of the lease or the values. 38. Mr. Brown stated that no one from Continental contacted JMA with regard to the values paid in section 30 those 2 leases they own. He stated he has not been contacted by Ms. Jessica Hatcher or anyone from Jackfork Land, Inc. to the best of his knowledge to the original pooling, or prior to this pooling no one contacted him to find out what kind of values JMA paid in this unit. He further stated he does not have any messages requesting information from Jackfork Land. He testified that he has used Jackfork Land as a broker. He stated that they have his cell phone number and they could find him. He reiterated that to the 3/16 royalty his recommendation is $2,500 and 3/16. He believes it represents the highest and best paid in the 9 sections. 39. The witness stated that he was aware that Continental was recommending $1,000 and 1/5. He is aware that JMA paid $1,250 an acre and a 1/5 royalty in the diagonal northwest offset. He knows that Continental proposed $750 and 1/5 to JMA on July 5, 2011 and that $1,000 and a 1/5 has been introduced in this matter. He would recommend $1,250 and a 1/5 royalty. 40. He has given consideration for a one quarter royalty. JMA paid $1,000 and a one quarter royalty on July 29, 2010, and section 19 for 6.66 acres. Further, JMA paid $500 and a one quarter royalty on February 25, 2011, in section 20 the northwest offset. This lease was for approximately 1 acre. He is aware of poolings having no cash and a quarter royalty. He would recommend $500 and a quarter for this pooling.

10 Page 10 He stated that the leases for $1,000 and a quarter could be considered multi-section transactions. 41. Mr. Brown testified that after JMA was dismissed at the previous hearing Continental drilled the well and carried JMA. Now they want to pool JMA after they are about to produce the well. He believes the values he has stated represent the highest and best in the 9 section area. These values should represent current fair market value for this pooling. 42. Upon cross-examination Mr. Brown reiterated, to his knowledge, no one contacted him prior to the first pooling about values. He discussed it with Michael Booze in November. That was after the first pooling. He stated that if Continental had not dismissed JMA from the first pooling, the fair market value could have very easily been $2,500 an acre. He stated that JMA protested the pooling and it would not have been heard on August 15. It would've been some time in the future whenever it was on the protest docket. 43. Mr. Brown was asked about an from Judy Gentry dated August 12, He was advised this was 3 days before the pooling hearing. Ms. Gentry's asked about bonuses paid for 2 leases in section 30. Mr. Brown stated he did not recall receiving such . He further stated he did not remember replying to Ms. Gentry's . Ms. Gentry's stated she was trying to find information about what bonuses were paid for two leases in section 30. Mr. Brown did not remember sending any reply to this . Mr. Brown admitted the reply showed 2 leases in section 29 for $2500 an acre and 3/16 he stated that was probably an error. JMA does not own in section 29. He stated that he put down to leases for $2500 and 3/16 but not in section 30. He reiterated that he does not remember these s. He stated that he answered her and might have referenced section 29 by mistake. He indicated that if Ms. gentry checked the record and it showed that JMA did not own in section 29 someone should have called him back. 44. He reiterated that he believed $2500 and 3/16 was a proper recommendation of fair market value. He understood that this amount was paid well more than a year from the date of this hearing. He understood that fair market value is trying to be established for the date of this hearing. Mr. Brown confirmed the values for 1/5 and one quarter that he recommended previously. 45 Mr. Brown testified that he did not consider the 12 leases taken for far less value subsequent to his recommended values. He was mainly looking at the 3/16 leases in the area. He did not look at those leases. There was then lengthy testimony concerning the reasonable time frames for considering values paid and what standard the witness used to determine fair market value. This exchange did not contribute additional clarity to the issues. The hearing was adjourned for the day.

11 Page Upon reopening the record the next morning January 6, 2012, Mr. Brown stated that he looked in his computer to find the from Judy Gentry. He stated he found the in his computer. This was evidence that JMA had been contacted and it was in the computer. Mr. Brown stated this was an oversight. He admitted that JMA had been contacted and he responded. Mr. Brown stated that his response indicated one lease in section 29 for $150 and 3/16, and right under that he showed to leases for $2,500; but he didn't indicate section 30. He stated that was an error on his part. 47. Mr. Brown stated that in the Oakes lease the lessor wanted the money and JMA wanted the lease. He testified that JMA is an oil and gas exploration company and they bought this lease with the intent of participating with wells out here. JMA either participates or operates. When asked why JMA did not go ahead and participate in this well, Mr. Brown stated that he did not have authority from management to say participate or not. He stated that they don't have all of the options on the table. He stated that one of the options that they are arguing about is whether JMA should have a $2,500 and 3/16 option. JMA is waiting for the order to issue and then they will make a decision. 48. Mr. Brown could not offer any evidence to dispute the validity of the reasons given by Mr. Booze for Continental's decision to move from Dewey County to Grady County. He stated that JMA is trying to sell these properties in Dewey County. He said it is not unusual for companies to sell packages of acreage. He stated the package was sent to Continental but he does not know if it is still active or not. 49. Mr. Brown stated he did not have an opinion concerning Mr. Booze's statement that the economic conditions are trending downward. He stated he has not analyzed it himself. For his analysis of fair market value he stated the last lease taken by JAMA was in February, This was in section 20 and was approximately one acre. They do not have a broker in the field now leasing acreage in section 20. Mr. Brown stated it is pretty well leased up in here. 50. He stated he heard Mr. Booze's testimony going over section by section what leases had been taken in the last year. He could not remember the number of leases discussed. He was asked to assume that the number was at least 12 leases in the last year. All of those leases were for less than what JMA is recommending. He further agreed that there have been 2 poolings since August, 2011 in this section and the offsetting section. Both of those were for less than what JMA is recommending. Mr. Brown stated all he knows is what the highest and best price in the area paid was that is what he testified to. He thinks the highest and best price has always been something that the Commission has wanted to find out in the pooling hearings. What the highest and best price paid in the area is. The Commission determines what the

12 Page 12 fair market value is. He agreed that the Commission can find out what the best prices, the highest price paid, in the area in some time period. Through the testimony they will see what it is. The Commission can consider other factors in making their determination as they have in the past according to Mr. Brown. That is their prerogative. 51. Mr. Brown stated that he had not looked at a number of these leases in the offsetting sections because he was not the applicant. He hasn't done what he would call a full value check for the nine section area in detail like if JMA was the applicant. He relies on brokers just like Continental does. He had a broker look at the offsetting sections and give him a report. It does not have all the leases on it. It was just kind of like a plat showing the highest prices. He called people to find out about leases. It was not detailed like you normally get if you were the applicant. The broker did not show how many leases have been taken in the contiguous sections. He stated they were trying to find out what has been paid in the area during that time. He was looking to see if it was anything that had been paid higher than what JMA had paid. He did not pay a lot of attention to any values that were lower than what JMA paid. 52. Upon redirect examination Mr. Brown testified that, in his experience, the highest and best price paid is to some extent a term of art that is utilized by the Oklahoma Corporation Commission in pooling cases. He believes it has a lot of significance as a standard. He stated in the Devon case, discussed herein, that the highest and best language was utilized to establish the values. He believes that he has recommended the highest and best 3/16 option and the highest and best 1/5 option. Mr. Brown stated he had given his reasoning on the value recommended for the quarter royalty. 53. Mr. Brown stated that he was aware of the values established by Devon in the pooling of August 30, He stated that evidence has been presented that JMA took an interest in the unit just west of section 29 for a higher value than $1,400 and 3/16. Further evidence was prepared that JMA took an interest in the north offset to section 29 for $500 and a quarter. That is higher than the value Devon used. Also, JMA took an interest in section 19 for $1000 and a quarter. That's also higher than Devon recommended. Mr. Brown stated that on its face Devon's representation that these values were the highest and best were contrary to the evidence presented by JMA in this hearing. 54. Upon recross examination Mr. Brown was asked if the following sentence was a fair statement: Evidence of comparable terms and prices previously paid for leases in the same area is relevant to, but not always conclusive, the fair market value. He stated as far as determining fair market value, by what the Commission determines, they can take in whatever factors they deem reasonable.

13 Page Mr. Brown further stated that the JMA lease for $2,500 and 3/16 was a competitive situation. The landowner told JMA that other people had made offers to him. The 40 acres involved would have been pertinent in this unit. It gives a significant amount of interest in the well. He stated the landowner did not disclose the competitors for this acreage. There was further testimony that was a restatement of previously offered facts. The parties did rest. RECOMMENDATIONS AND CONCLUSIONS 1. After taking into consideration all the facts, circumstances, testimony and evidence presented in this cause, it is my recommendation that the application of Continental Resources, Inc. filed in be granted. The protested issues were: 1. Fair market value 2. Language in the subsequent well provisions concerning regulatory approvals 3.Well information provided to participants. 2. The fair market values offered by the applicant are recommended as the valid fair market values for this unit. Those are $1,400 per acre and a 3/16 total royalty, $1,000 per acre and a 1/5 total royalty and zero dollars per acre and a 1/4 total royalty. The applicant supplied transactions back one year from the date of the protested hearing. The protestants provided higher transactions in its reviews oneyear back from the date of the application filing. These submissions indicate that the values have decreased from the higher values in July and August, 2010 to January, Continental demonstrated that product prices have steadily decreased, the general economy has suffered a collapse, Continental has moved from Dewey County and some companies are packaging their acreage and selling it. JMA has asserted that these factors do not directly affect fair market value. Continental presented credible evidence of the circumstances that occurred that influenced the decrease in value in this area and was the most persuasive. The factors elicited are common indicators relied upon by many businesses to forecast future operations. It is reasonable for a company to reduce activity in an area they deem to be trending downward. This usually results in a reduction in value as asserted by Continental. JMA stated that the higher value they paid for the Oakes leases was for the last forty acres in the unit, there was competition for the acreage and JMA wanted in this unit. All of these facts can definitely increase the price a party will pay and may be distinguished as being higher than fair market value. During the extended time from the JMA lease to the present hearing the downward trend happened and the prices decreased.

14 S Continental Resources Inc. Page It is a reasonable requirement that all necessary regulatory orders be obtained before a party could propose a subsequent well. The protestant presented convincing argument for the inclusion of this requirement. It gives any potential participant more information concerning future development and reduces delay in the time from the well proposal to commencement of the well. It is recommended that such language be in the order. 5. JMA proposed that the order provide that any participating parties receive timely well information, production information and title opinions regarding the unit. Parties are usually entitled to such information as participants and by agreement of the parties and such language is not included in the order. Therefore, it is not recommended that such a provision be included. RESPECTFULLY SUBMITTED THIS 30th day of March, MN:sc cc: David Pepper Charles Helm Oil-Law Records Commission File 'Vichael Administrative Law Judge