1. E&P STORM WATER OVERVIEW Domestic Onshore Energy E&P STORM WATER OVERVIEW Domestic Onshore Energy May 10, 2005

2. Road to Domestic Energy

3. Road to Domestic Energy: Geological & Geophysical  1 st look at subsurface  Define geologic target using surface geophysical equipment  Subsurface driven

4. The Road to Domestic Energy: Land Leasing  Leases have terms, penalties, deadlines and a expiration date that drives a project timeline  Leases have multiple surface and subsurface owners  Split Estates; surface and mineral ownership different  Multiple mineral lease agreements and requirements  Competitive situation  The lease situation drives our clock

5. The Road to Domestic Energy: Permitting  There are numerous permit considerations – Private – State – Federal  Oil & Gas Agency – Drilling – Construction – Pipeline ROW  Environmental Protection – Air – Water – Waste – Historical & Cultural – Vegetation & Wetlands – Wildlife

6. The Road to Domestic Energy: Construction  Exploration or development well – lease road – well pad  Access Right of Ways have to accommodate environmental and surface conditions  Allow for: – Surface sensitivities – Landowner requests – Surface structures – Balance surface conditions to reach subsurface target

7. The Road to Domestic Energy: Production If Successful – Well finalized – Rig moves off – Production equipment installed – O&G to sales and water to disposal – Drill site reduced and reseeded – “Foot Print” reduced If Unsuccessful – Plug & Abandon – Restore location

8. Storm Water Comparison: Real Estate vs. Oil & Gas Real Estate Development Oil & Gas Development  Static Plan  Blueprint Designed Upfront  Construction Follows Blueprint  Real Estate is All Surface  Dynamic Plan  Design As We Go  Each Well Tells a Geologic Story  Oil & Gas is Sub-Surface Dependent =

9. Storm Water Comparison: Real Estate vs. Oil & Gas Real Estate   Surface Use Driven   Land Owned   Timeline more Flexible   Planning Certainty   Metropolitan/Centralized   Single Site SW Administration Real Estate   Surface Use Driven   Land Owned   Timeline more Flexible   Planning Certainty   Metropolitan/Centralized   Single Site SW Administration Oil & Gas   Subsurface Driven   Land Leased   Timeline Is Critical   Uncertainty   Remote/Decentralized   Scattered Multi Site SW Administration Oil & Gas   Subsurface Driven   Land Leased   Timeline Is Critical   Uncertainty   Remote/Decentralized   Scattered Multi Site SW Administration Because of differences E&P needs regulatory flexibility “One Rule Does Not Fit All Industries”

10. Cost Future State *Refer to Department of Energy 2005 Cost Impact Study  US Drilling Wells: 30,000 per year  SWPPP Implementation: $5,000 to $15,000 per well  Well Construction Size: 2 to 10 acres Current State  Government – Recordkeeping – Inspection – Monitoring – Permit approvals timeline increases – Staff – Administrative burden  Industry – Increased “notice of intent” filing – Delayed NOI approval – Annual cost burden $150-$450 million* – Limited qualities resources – Lease expiration risks are real

11. Summary – Take Away  Intent of Storm water regulations are to protect surface waters from sediment and erosion runoff created by construction activities  Covered Oil & Gas Process  Comparisons/Differences between Oil & Gas and Real Estate  Stormwater Regulations Are Not Manageable For Oil & Gas

12. Conclusion – Take Away There is a better alternative than the proposed stormwater rule change:  No Storm water permit  Implementation of RAPPS for all Oil & Gas construction will control sediment and erosion runoff  Implementation of RAPPS for all Oil & Gas construction

13. E&P STORM WATER OVERVIEW May 10, 2005