BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA MEWBOURNE OIL COMPANY DRILLING AND SPACING UNITS (HORIZONTAL UNIT)

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1 BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA APPLICANT: RELIEF SOUGHT: LAND COVERED: MEWBOURNE OIL COMPANY DRILLING AND SPACING UNITS (HORIZONTAL UNIT) SECTION 10, TOWNSHIP 19, NORTH, RANGE 26 WEST, ELLIS COUNTY, OKLAHOMA CAUSE CD NO F I L - E D AUG APPLICANT: RELIEF SOUGHT: LAND COVERED: MEWBOURNE OIL COMPANY WELL LOCATION EXCEPTION SECTION 10, TOWNSHIP 19, NORTH, RANGE 26 WEST, ELLIS COUNTY, OKLAHOMA COURT CLERKS OFFICE. OKC CORPORATION COMMISSION OF OKLAHOMA CAUSE CD NO REPORT OF THE ADMINISTRATIVE LAW JUDGE These Causes 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 causes and filed a report herein. CASE SUMMARY: 1. Cause CD No was the only contested matter. The applicant, Mewbourne Oil Company (Mewbourne) seeks to space an interval of the Marmaton in this section and the protestant, FourPoint Energy, LLC (FourPoint) contends the interval is not present or is a part of the Cleveland. The parties agreed that the location exception will be moot if the spacing application is not approved. This cause hinges on the geological issues involved in the Cleveland and Marmaton formations that are in dispute. The

2 primary issue in this spacing is the existence in this area of a shale marker that applicant proposes is an indicator of a separate common source of supply in the Marmaton containing hydrocarbons. Applicant believes this marker is immediately below the maximum flood surface indicator in this area. 2. The applicant presented substantial evidence to demonstrate proof of their contention. It included log analysis, study of samples, wells drilled and completion results as well as correlated depths across the township to substantiate its location. The protestants presented rebuttal evidence against those findings. The parties agree that this shale marker dissipates to the east. 3. This is essentially a Cleveland/Marmaton dispute over the depth of the base of the Cleveland and the top of the Marmaton and the existence of the hot shale marker. The parties also disputed the system and series of some of the formations as designated on the geologic chart. 4. The parties have different interpretations of the stratigraphy and lithology of these formations. Mewbourne contends there is a sandstone at the top of the Marmaton and FourPoint contends the sands are contained in the Cleveland. These formations have been spaced in adjoining sections in an inconsistent manner. RECOMMENDATIONS: 1. It is my recommendation that the spacing application of Mewbourne Oil Company be approved. They proved that the interval they seek to space meets the statutory and Oklahoma Corporation Commission rule requirements under the definition of a separate common source of supply or pool that can be spaced. HEARING DATE(S): February 17, 18, 19 and April 7, 8, 2016 APPEARANCES: Richard A. Grimes, Attorney, appeared for the Applicant, Mewbourne Oil Company David E. Pepper, Attorney, appeared for the Protestant, FourPoint Energy, LLC Page 2

3 Karl F. Hirsch, Attorney, appeared on behalf of Canyon Exploration. J. Fred Gist, Attorney, appeared on behalf of Walter Duncan Oil, LLC and Duncan Oil Properties, Inc. FINDINGS AND SUMMARY OF EVIDENCE 1. The following numbered exhibits were accepted into evidence: 1. Production Map 2. General Geologic Sections of Oklahoma 3. Location Exception Map 4. Log on Wessely Steinle Unit 1 5. Form 1002A Completion Report 6. Log on Staghorn Eastham CC order number CC order number CC order number CC order number CC order number Form 1002A Completion Report 13. Form 1002A Completion Report 14. Log on Hadaway Deal Roy 3-11 Page 3

4 15. Form 1002A Completion Report 16. Survey Report Brearly 1H Permit to Drill Brearly 2H Log on Brearly 2H Form 1001ABrearly2H Survey Report Brearly 2H CC order number Form 1002A Completion Report 23. Form 1002A Completion Report 24. 0CC Interim order number Form 1002A Completion Report 26. 0CC order number CC interim order Oklahoma Geological Survey Guide Book VI 29. Article by Tucker F. Hentz 30. A copy of FourPoint Energy webpage 31. Log on Apache Reisig 1-21 HD 32. Form 1002A completion report 33. Survey Report Reisig 1-21 HD Page 4

5 34. Log on Hamilton Rowland Form 1002A completion report 36. Survey report Eddy Teddy # 1H 37. Exhibit withdrawn 38. Permit to Drill Holloway Well profile data on Holloway H 40. Log on McCulloch Parker Well logs analysis 42. Well logs analysis 43. Pages from the North American Stratigraphic Code 44. Bureau of Economic Geology peer-reviewed publications on Hentz 45. FourPoint wells in section N.-25 W. 46. Roy Deal 3-11, Des Moines 47. Brearly 1H-1 1, Cleveland 48. Map of Chesapeake sections 49. Order number Order number Order number Order number Page 5

6 53. Order number Order number Order number Order number Order number Order number Order number Order number Order number Order number Order number Order number Order number Order number Order number Order number Order number FourPoint Energy production map 71. FourPoint Energy log Page 6

7 72. General Geologic Sections of Oklahoma and Northern Arkansas 73. Geographical Key to Oklahoma Geological Correlation Chart 74. Subsurface Stratigraphic Names of Oklahoma by Louise Jordan (withdrawn-duplicate) 75. North American Stratigraphic Code (withdrawn-duplicate) 76. Chesapeake montage 77. Chesapeake montage 78. Logs cross-section 2. Mr. Richard Sims, landman for Mewbourne Oil Company (Mewbourne) was the first witness. His qualifications were accepted without objection. 3. He stated there are two applications to be discussed. Those are , a spacing request and is a location exception. The pooling application will be continued. The spacing application and the location exception application both cover section 10, township 19 North, Range 26 West, Ellis County. He acknowledged that the spacing application is protested and the location exception is not protested on its merits. If the spacing is denied the location exception would be moot. FourPoint Energy, LLC (FourPoint) is not objecting to the location exception. The evidence will address primarily the spacing but also the location exception. 4. An amended application was filed in the spacing to amend some numbering issues on the respondent list from the first application. Mr. Sims believed that proper notice was given to all parties entitled to share in production from section 10 and a diligent effort was made to locate all parties with unknown addresses. He is aware that an Affidavit for Service by Publication was filed relating to those specific parties. 5. At the time the application was filed Mewbourne claimed five net acres in this section. They have now increased their acreage through a private Page 7

8 agreement. They negotiated with Walter Duncan Oil, LLC, to obtain an additional acres under a private farmout agreement. It is a well bore agreement limited to the Marmaton formation. This acreage is in addition to the five acres previously identified. 6. Mewbourne is requesting the creation of the 640 acre horizontal drilling and spacing unit for what they denominate as the Marmaton common source of supply. They note there is existing non-horizontal spacing created within section 10. Among the formation or common sources of supply that have previously been spaced is the Oswego common source of supply. The applicant has alleged that there is no existing production from the Oswego formation. If the application is granted the horizontal drilling and spacing unit would exist concurrently with the existing non--horizontal spacing for the Oswego. 7. If the spacing is recommended and the location exception as well Mewbourne will request an interim order in the location exception. The witness testified that proper notice was given. This application did not state a formal surface location. The point of entry within the Marmaton is described as no closer than 330 feet from the North or South lines and not closer than 900 feet from the East line of section The witness understood that the pooling is tracking this spacing application and the pooling has been continued. He understands that FourPoint will have objection to the pooling including designation of an operator. Therefore, they will request that the location exception designate a generic operator. 9. Upon cross-examination Mr. Sims acknowledged that FourPoint owns a significant interest in this unit. FourPoint is not named on any of the applications but Mewbourne agrees that FourPoint owns in the unit and are properly opposing the application. 10. Mr. Sims indicated that Mewbourne had 5 acres prior to the farmout agreement. It is a well bore farmout. He stated that Duncan is participating in existing wells. He stated that if another well is drilled the farmout is limited to this spacing in the Marmaton. If this spacing does not occur then Mewbourne will not own the acres. They would be back to the 5 acres. Page 8

9 11. There is an existing pooling in section 10 and it covers a lot of zones. It does cover the Oswego. He understands that there will be evidence from FourPoint that the Marmaton includes the Oswego and the Big Lime. Mewbourne did stipulate that they will contribute evidence through the next two witnesses of a depth limitation that will be described for the Marmaton. This limitation will not include the Oswego. 12. He understands that, as to the location exception, if FourPoint has the balance of the acreage over and above the 204 or 210 acres that Mewbourne owns FourPoint may want to operate. Mewbourne is not designating an operator at this time. The location exception is contingent upon the spacing and Mewbourne's ownership is contingent on the spacing. 13. On redirect examination Mr. Sims stated that Duncan had participated in the Steinle well and the E. B. King well. The Steinle well is a horizontal well and the E.B. King is a vertical well. The E.B. King was drilled first and then the Steinle well was the 2nd to be drilled. 14. Mr. Sims testified that FourPoint was not named in the application but Mewbourne has learned that FourPoint has succeeded to interest that emanated from the Chesapeake interests that were named in the application. They protested this cause and it is not a question of FourPoint not knowing about this application. 15. The pooling he described was completed prior to the drilling of the E.B. King well. That vertical well was drilled and covered intervals that include the Cleveland and the Oswego. It also included other formations as well. It included deeper formations perhaps as deep as the Morrow. Mr. Sims believes that well, the E.B. King, was drilled within the term of that pooling order. The order was perpetuated by the drilling of the well. The E.B. King is inactive but is not plugged. 16. Thereafter the Steinle well was drilled. Through a series of groups that have succeeded to each other FourPoint is claiming, he believes, through a chain of title that would connect to those parties and to Chesapeake. He believes the Steinle well was drilled as a subsequent well under the pooling he described. Page 9

10 17. The terminology utilized in the pooling described the Cleveland and the Oswego formations among others. Mewbourne believes that a primary controversy in this case will be FourPoint's assertion that Cleveland terminology as used in the conventional spacing order that exists does encompass within it the interval that Mewbourne will describe as the Marmaton common source of supply. He said that the spacing that Mewbourne seeks if recommended would exist concurrently with any existing spacing for an affected formation. 18. The spacing for the Cleveland, because it was used as a predicate for the pooling, has significance in terms of what rights were or were not relinquished by parties who did or did not participate under the terms of the pooling according to Mewbourne. He also testified that J. Walter Duncan had participated in the unit development. They did not participate with 100 percent of their interest in the Steinle well. They participated in the well with one acre. Duncan did not participate with their remaining acres. The witness believes that under the terms of the pooling Duncan would have relinquished whatever rights would be attributed to the Cleveland as well as any other listed common source of supply in that subsequent well and any well thereafter. 19. He stated that if the commission decides that the Marmaton is not included within the Cleveland then no Marmaton rights would have been impacted in that pooling. If it is found that the Cleveland terminology would incorporate the Marmaton then that will result in relinquishment of rights under the pooling. They believe that is the primary issue that will be pursued in this cause. 20. Upon cross-examination Mr. Sims stated that Duncan anticipated with 1 acre in the pooling. They participated in the Cleveland formation and any other formations that was pool. They now have a 1 acre working interest ownership. The rest of their interest went to Chesapeake and then to FourPoint. FourPoint has the balance of that 200 plus acres as a working interest. If Mewbourne's recommendation is adopted in the spacing they are pooling in some new common source of supply that is not pooled. That is why this cause is being presented. 21. Mr. Gerard J. Medina, consulting geologist for Mewbourne, was called. His qualifications as a geologist were accepted with no objection. He does the bulk Page 10

11 of the uncontested cases of this type filed by Mewbourne. He prepared to do this case as an uncontested cause. His work continued even after he learned that the case had been protested by FourPoint. 22. Mr. Medina testified that he prepared Exhibit 1 which is a three-page exhibit. The first page of the exhibit is a production map of section 10 which shows the E. B. King well which is identified as a Morrow well. He believes that well is now operated by FourPoint. There is a dry hole shown in the Southwest quarter that is described as the Wessely Energy Steinle unit He looked at the logs from both of those wells. The Chesapeake Steinle H well is shown in the West half of the West half of the section. 23. There is also a proposed location for a horizontal well called the Mewbourne Hawkeye 10 PA #1HM well in the East half of the East half of the section. This is the well that Mewbourne is requesting authority to drill by virtue of the location exception application. 24. Mr. Medina indicated that the color coding for the Steinle well is for a Cleveland completion. The 2nd page of Exhibit 1 includes the data for each well noted on page 1. The 3rd page of Exhibit 1 is described as an isopach map on the Marmaton sand. He interprets this isopach map as a hybrid target isopach map. 25. Mewbourne and Mr. Medina have prepared such maps for a number of years on wells where they target and interval that has not yet been targeted by previous drilling of horizontal wells in a unit. This hybrid methodology focuses on and interval within a package that is a target for a well to be drilled and developed in a horizontal fashion. He stated that the traditional gross map or net maps don't quite work in this type of application. They need to target an area where varying resistivity profiles and higher resistivities suggest areas of hydrocarbon content. He testified that they are dealing with a tight reservoir. Therefore, ferocity numbers in general are very low and in some cases almost nil. They have been working on refinement mapping technique for over five years. The resistivities profile is one that works very well for landing well within a package and staying in that interval. Also a bit of SP profile and some porosity, a 6 percent cut off, is utilized. This is what Mr. Medina calls a hybrid target map. This target is an interval within the Marmaton where they want to land a well and then go horizontally within it. He further stated that by tight Page 11

12 he means low permeability. Vertical wells drilled for this particular reservoir historically recovered very limited amounts of hydrocarbons, if any. With the advent of horizontal drilling these reservoirs have become the target's that are, by definition, tight zones, conventional and unconventional that set up for a horizontal drilling application. 26. Virtually all of this section is underlain by what they describe as the Marmaton sand. Production from what they call the Marmaton in this region has been primarily oil. That is what they expect if they are successful in targeting and drilling horizontal well with in the interval they seek to space. 27. Mr. Medina is aware that if they expect primarily oil and they are spacing something for the first time in a section and the statute limits the size of a conventional unit. The limitation is by depth. He stated at the top of the Marmaton is at 8,700 feet which is the base of the Cleveland. Conventional spacing would limit the application to a maximum of an 80 acre drilling and spacing unit. That is a primary reason why Mewbourne has sought to establish a horizontal unit. 28. He understands that the amendments to the statute in 2000 allow the creation of up to 640 acre drilling and spacing units for horizontal wells for oil or gas. They expect primarily oil and have requested a 640 acre horizontal unit for what they describe as the Marmaton. And 80 acre conventional unit would not be appropriate for drilling such a well. They expect this lateral to be in excess of 4,000 feet. The horizontal unit gives Mewbourne the latitude of drilling that length of lateral. It also allows flexibility in determining how many laterals may be required within the spacing unit. This helps prevent waste. 29. By commission rules the Marmaton is a conventional reservoir. A 640 acre conventional reservoir requires a location requirement not closer than 660 feet from the boundary of the unit. Because of the length of the lateral requested Mewbourne is seeking the location exception to be as close as 330 feet from the North and/or South lines of the section. Without this exception they think they might leave behind otherwise producible oil. They would not anticipate any adverse effect or drainage North or South of a 330 feet location exception. They have also requested to be 900 feet from the East line of the section. This is not an off pattern location relative to the East line of the Page 12

13 section. Mr. Medina stated there should be no penalty or allowable adjustment on the Marmaton under these circumstances. 30. Mr. Grimes then read into the record what he described as the preamble or the introductory paragraph of Title 52, Section 87. 1, of the Oklahoma Statutes. He read as follows:"whenever the production from any common source of supply of oil or natural gas in this state can be obtained only under conditions constituting waste or drainage, not compensated by counter drainage, then any person having the right to drill into and produce from such common source of supply may, except as otherwise authorized or in this section provided, take therefrom only such proportion of the oil or natural gas that may be produced therefrom without waste or without such drainage as the productive capacity of the well or wells of any such person considered with the acreage properly assignable to each such well bears to the total productive capacities of the well in such common source of supply considered with the acreage properly assignable to each well they are in." Mr. Medina stated that he heard Mr. Grimes reference on three to four different occasions within that paragraph the term common source of supply. 31. Mr. Grimes stated that the Commission has a rule which mirrors another statute that defines a common source of supply. Mr. Grimes then read from the Rules of the Commission 0AC165: He read as follows:"common source of supply means that area which is underlaid or which from the geological or other scientific data or from drilling operations or other scientific data or from drilling operations or other evidence appears to be underlaid by, an accumulation of oil and/or gas, provided that, if any such area is underlaid or appears from the geological or other scientific data or from drilling operations or other evidence, to be underlaid by more than one, the accumulation of oil or gas or both, separated from each other by strata of earth and not connected with each other, such area shall, as to each said common accumulation of oil or gas or both, shall be deemed a separate common source of supply." Mr. Grimes represented that that rule is verbatim from title 52, section 86.1(c), Oklahoma Statutes, which is a part of the Conservation Code under which the Commission has authority. 32. Mr. Grimes referenced one last rule to Mr. Medina. It is OAC 165: that rule is styled "Geological Correlation Chart". Mr. Grimes read the following into the record: "The chart and initially prepared by Phillips Page 13

14 Petroleum and maintained by the Oklahoma City Geologic Society entitled, 'Geologic Sections of Oklahoma and Northern Arkansas', along with ensuing revisions shall be used as a guideline for stratigraphic nomenclature in all oil and gas conservation applications which are submitted to the Corporation Commission." Mr. Medina acknowledged having seen this rule. He further stated that he was familiar with the chart and had seen many it times. He testified that Exhibit 2 was received in the exhibit exchange from FourPoint is titled"general Geologic Sections of Oklahoma and Northern Arkansas". He believes is a copy of the chart that is referenced in the rule. 33. Mr. Medina defined stratigraphic as a geological term which defines an interval. He also stated that nomenclature to him means it is a method of defining intervals for the sake of identification and mapping. 34. Mr. Medina noted that in the exhibit exchange Mewbourne received a multi-page document titled,"north American Stratigraphic Code", followed by,"north American Commission on Stratigraphic Nomenclature". He stated that he looked at that document. He testified that during the reading of Mr. Grimes of any statute or rules he did not hear any reference to the North American Stratigraphic Code. During his work he has never found any reference within the rules of the commission or the conservation statute reference to North American Stratigraphic Code. He testified that he read this document. He did not find anywhere in the document where the Oklahoma Corporation Commission was referenced. He is not aware of any suggestion that this code be employed by a regulatory agency for the establishment of drilling and spacing units in Oklahoma. He also does not know how this code would relate to the statute and rules defining a common source of supply. Mr. Medina considers this an academic article. 35. Mr. Medina referred to the general geologic sections of Oklahoma and Northern Arkansas guideline chart and stated that on the left-hand side of the chart, the very first column has the heading of "System". He stated that, from the geological standpoint, a system is the broadest description of a period of time correlated to the far left side of the chart. By time he is referencing a period of deposition that is marked by boundaries. So between two systems such as the Cambrian and the Ordovician there were rocks deposited then there was a hiatus and then another sequence of rocks were deposited. The Page 14

15 oldest system is the first one described and the newest (youngest) is the last one described. When he stated time he also could use age. 36. The next column on the chart is labeled "Series". This relates to some sort of time change which is a type of geological/stratigraphic episode. He referenced the series of time where the Wichita Mountains, Arbuckle Mountains and the Nemaha Bridge were built. He stated the Wichita Mountains are the oldest Mountains in Oklahoma and hence, the source rock for the majority of the rocks in the Anadarko basin. 37. Mr. Medina further testified that the squiggly lines across the chart indicate unconformities. If there is some sort of episode that elevates or subjects rocks to subaerial exposure, that is an unconformity. 38. The term "Group"as utilized in this chart is a further refinement of stratigraphic intervals within the Series.. There is also a series of descriptive terms that identifies the district or areas intended to be covered by the descriptive terms that have been identified. One of those is labeled as Northwest Oklahoma. Mr. Medina believes that the area in section 10 is probably identified by the Northwest Oklahoma column. 39. He stated that if you go down from the Northwest Oklahoma column and look at the Series column you will find the Missourian Series and below it the Desmoinesian Series. If you traverse right from the Missourian Series to the Northwest Oklahoma column there is a box identified as Kansas City. Then a series of triangular connected lines that separate a whole series of terminology beginning with Dewey Limestone and progressing down to what's called the Cleveland Sand. These are all contained with in the Missourian Series. As stated, the Series immediately below the Missourian is the Desmoinesian. If you also traverse right on the chart from the Desmoinesian to the Northwest Oklahoma column there is a box with the word Marmaton written vertically. Also within the box the words Big Lime and Oswego are written. Mr. Medina would attribute the Marmaton, Big Lime and Oswego as Desmoinesian in age. He stated that the Cleveland sand would fall within the Missourian age Series. He would see Marmaton, Big Lime and Oswego as Desmoinesian Series in age. The chart does not reference anything about a common source of supply. The rule that implements this chart as a guideline also does not say anything about common sources of supply. However, there is a statute and a rule that states Page 15

16 that the Commission is to create drilling and spacing units for a common source of supply as defined by that rule and statute. Mewbourne desires to space what was described in the application as the Marmaton. They do not seek to space the entire box that would be grouped in the area discussed at the top of the Desmoinesian. They intend to limit that. They want to space the Marmaton Sand common source of supply that is with in the Desmoinesian that begins at 8,800 feet. Mr. Medina picked that depth from the log for the E. B. King well in section Mr. Medina testified that the majority of spacings simply describe a top of a common source of supply to be spaced. He agreed that the Commission wants all spacing orders to have a depth for the top of a common source of supply. He believes that can create some problems. There is a spacing order for the Cleveland common source of supply within section 10. He has looked at that spacing order. The order number is and covered many sections. This order resulted in the entire township being spaced. That was Township 19 North Range 26 West this order did not state a top for the intervals that were being extended but only for those being newly created. The Cleveland common source of supply was included in this order and a depth for the top of the Cleveland was given. It was a newly established common source of supply in that order. The top identified for the Cleveland was 9,000 feet. There was not any reference to where that depth was derived. It spaced the entire township. Mr. Medina stated that variations can occur as you move across a township. Regional dip can come into play and the variation could be gradual to extreme. This order said that the top of the Cleveland common source of supply was 9, 000 feet for the entire spaced area. Mr. Medina testified that he recommended 8,913 feet as the base of the Marmaton they seek to space. He took this depth from the same log that he utilized to establish the top. 41. According to Mr. Medina the Marmaton is not properly defined only by reference to the Oswego and the Big Lime as indicated on the chart. The Big Lime and Oswego are individual units with in the Marmaton. If you combined the Big Lime and Oswego and have them spaced it would not cover all of the Marmaton. He indicated that there is spacing created using the nomenclature Oswego. He derived the top of the Oswego from the E. B. King well log as 9,059. He also found the base of the Oswego to be 9,148. He believes that the protestants have asserted that the Marmaton, with the top and bottom as he Page 16

17 described, is already included by the Cleveland terminology in the spacing order reference for the township. 42. Mewbourne is not attempting to space everything on the chart within the Marmaton. They understand in part that the Oswego is already spaced. He has stated that the Marmaton is made up of multiple formations. It is his opinion there is something above the Big Lime and Oswego that he would identify as Marmaton. Their specific spacing is asking that an interval of the Marmaton common source of supply with a top of 8,800 feet and a base of 8,913 feet be the spaced interval. Mewbourne has been working this interval and defining it as Marmaton for a little over six years. During this period of time he has developed an opinion as to what log signatures and characteristics would be used to identify the top of that Marmaton interval. This is a regional shale marker at the base of the Cleveland that is approximately 8 to 10 feet thick. This is a marker that almost any geologist could hang a cross-section on. This particular marker is widespread in this portion of Ellis County. It also goes into the Panhandle of Texas. 43. He has seen the letters MFS referenced on exhibits that were exchanged. These letters are called maximum flood surface. He describes that as a marker bed that separates two distinct depositional packages. This occurred from a stratigraphic standpoint from an episode of deposition, in this case, in the Desmoinesian. The sand/shale type sequences were deposited in a transgressive/regressive system from some sort of a tidal situation so that Marmaton, among others, was deposited. These rocks are deposited and then there is a quiet period. The quiet period represents a time when nothing was happening. A regional black shale was deposited over a large portion of the Anadarko Basin. That is a time boundary. After that the Cleveland time began and the Cleveland Sand, wherever it sourced, was deposited above that marker. Everything above that marker is Cleveland and everything below the marker in this area is Marmaton. 44. As he stated he began working this area for Mewbourne approximately six years ago. This is the methodology that they have employed consistently in identifying that delineation between the Cleveland and the Marmaton. 45. From the E. B. King log Mr. Medina delineated the top of the Cleveland Sand would be 8,532 feet. He would interpret the base of the Cleveland to be Page 17

18 8,620 feet. He did see evidence of this marker separating the base of the Cleveland and the top of the Marmaton. For the most part this marker is 100 percent shale. Mewbourne did not pick this after learning this case was protested. They have utilized this method in a number of applications for spacings, location exceptions and poolings of the Marmaton. 46. He recalled the statute and the limitations imposed upon the commission in what it can space and how it can space and the definition of a common source of supply. He was asked to assume that Mewbourne is trying to space a common accumulation of oil or gas defined as the rule and statute says. He believes that Mewbourne's Marmaton common source of supply would fit that definition. He also believes that the Marmaton, defined in the way, Mewbourne has, conforms to the chart to be used as a guideline for stratigraphic nomenclature. He stated that if it was proposed that the Cleveland is better defined as being where he began the top of the Cleveland but progressing through to the base of what Mr. Medina gave for the Marmaton, all of that interval would not be Missourian in age. He also believes that the Cleveland that was spaced by commission order that covers that entire interval does not conform to the chart. It also does not conform to the definition of a common source of supply in his opinion. He believes if you comply with the rules and law of the state, in terms of a common source of supply, the Cleveland would be limited to the area he described as the base and top of the Cleveland. 47. Mr. Medina agreed that if you were pooled into a drilling and spacing unit you potentially relinquish all working interest rights within whatever is defined as the spacing unit. He does not think that the Cleveland common source of supply should appropriately be defined to incorporate both the Cleveland and the Marmaton especially in a horizontally spaced unit. In a horizontal drilling they must make sure that underlies the entire section. Then they are picking a target and that target is a kickoff point within a defined set of footages. They land the well at a target specific point and then go horizontally in that interval for approximately 4,000 feet. In a vertical sense, the lateral does not change much from heel to toe. It may only change 10 or 20 feet depending on the mapped interval. 48. He has studied the information generated from the drilling and surveying of the Chesapeake Steinle well. From his study he stated that the well is Page 18

19 clearly completed in the Cleveland interval. The well that Mewbourne proposes is at a depth of approximately 8,900 feet. From the definition that he has given that will place this well clearly in the Marmaton. 49. On cross-examination Mr. Medina stated that he is recommending horizontal Marmaton spacing. That is separate from the Oswego and Big Lime. He testified he has already pointed out the box were the Marmaton is located in the Northwest Oklahoma section of the chart used as a guideline. That box does not show any other formations. He admitted that on his map he defined the formation as the Marmaton Sandstone. He was not sure he could say where the Marmaton Sand was spaced anywhere in the state. In general he stated that the Big Lime is a limestone as well as the Oswego. 50. He testified that he looked at the logs characteristics as to what he picked as a top of the Marmaton there are sand characteristics there. In the E.B King well the Oswego is located at 9,059 feet. His top of the Marmaton Sand is at 8,800 feet. The operator of the E.B. King well picked the top of the Des Moines at 9,050 feet. That is about 300+ feet below where Mr. Medina picked it. 51. Mr. Medina reviewed the documents that were exchanged. He did not conclude from the document montage what their opinion was relative to the Cleveland and Marmaton. The documents were unclear to him. These were documents furnished by Chesapeake to FourPoint when the sale of the properties was consummated. There was an objection to questions concerning these documents. An exception to the ruling was noted for the record. 52. He stated that horizontal drilling has changed the way he interprets things geologically. There is definitely a target that they seek. He is suggesting that targeting of an interval, in this case, creates a common source of supply. This probably does not happen in all cases of horizontal drilling. 53. The interval on his isopach map is the target interval in this case. He stated this is the common source of supply. He made this map from the logs of the two wells in section 10. He mapped two feet of the Marmaton Sand as a target common source of supply from the Steinle Unit number one well log. From the Chesapeake E. B. King 2-10 well log he mapped seventeen feet of Marmaton Sand. The two feet had high resistivity characteristics in excess of 100 ohms. He also found high resistivity characteristics in the seventeen feet. Page 19

20 He noticed that seventeen feet from 8,870 feet to 8,887 feet. That depth is within the footages he identified for the target common source of supply. He testified that 10 feet of the 17 feet had resistivity above 100 ohms. The other 7 feet indicated porosity that exceeded 8 percent. He correlated the footages from the logs to the footages that are the stratigraphic equivalent in their area. He maps a top and a base of the unit they are trying to define. Then, within that he correlates those two units. 54. Mr. Medina and then explained how he calculated his interval. He then stated that he found the top of the Oswego at 9,059 feet. He did not agree that the Big Lime was the first thing you come to in the Marmaton. He indicated that he found three orders that suggest that there is a Marmaton and then a Big Lime and then an Oswego. These were spacing orders where they have spaced the Marmaton and then the Big Lime and then the Oswego. There was horizontal spacing for the Marmaton and there was existing vertical spacing for the Oswego and Big Lime on 640 acre conventional spacing. He could not state the top's of the Marmaton on those orders. 55. He agreed that the chart includes the Big Lime and Oswego with the Marmaton. The Big Lime and Oswego are below the Marmaton. They have established an interval that he is calling the Marmaton. It is separate from the Big Lime and the Oswego. He would say that the Big Lime and Oswego are a portion of the Marmaton. He listed the Big Lime as being below the proposed Marmaton and the Oswego below the Big Lime. Being below the Marmaton would be different than the chart. He stated the chart is just a reference. He has not advised anyone in the technical Department that this is different than the chart. He stated that he has heard of Louise Jordan. He has read a lot of the book that she has written. He looked at the diagram on page 45 that shows the Oologah Limestone (Big Lime) as the first part of the Marmaton. He agreed that in this particular well in Section 20, Township 21 North, and Range 8 East that is a correct statement. The hot shale marker he is relying on on is not present in that well. That shale marker is his delineation point between the Cleveland and the Marmaton and therefore the top of the Des Moines. That marker goes away farther to the East. The significance of the position of the reservoir that he is calling Marmaton in relationship to the hot shale is that it is extremely mapable and very consistent for many townships. When it is not present he looks for the Big Lime and Oswego as he did five or six townships to the East when he did work for J Walter Duncan. Page 20

21 56. He also mapped the Upper and Lower Cleveland in the past in that area. In some of those areas he knows the Upper Cleveland produces primarily oil and the Lower Cleveland produces primarily gas. In the four townships for this specific area in this case there is just a Cleveland. 57. Upon redirect examination Mr. Medina reexamined page 3 of Exhibit 1 entitled "Isopach Map Marmaton Sand". He stated that on direct examination he testified that the total Marmaton or gross Marmaton would not equate to what he mapped here. This was based on how he identified both the technique that he employed and the purpose. He stated that his map shows that the maximum thickness of this interval based upon the purpose and technique is 20 feet. He also testified that the Marmaton has a total thickness of 113 feet. He mapped a subset or portion of what Mewbourne seeks to space. They are targeting a portion of the common source of supply that they space to land the lateral within. This is the area where the most hydrocarbons typically appear to be. The map shows the maximum thickness being 20 feet in the East half where Mewbourne wants to drill the well. There is 20 feet of this subset that appears productive of hydrocarbons within the 113 feet. This particular map was not intended to show the entire common source of supply that Mewbourne is spacing. It shows the portion thereof that Mewbourne wants to land the lateral. They admit that they are not trying to space the entire Marmaton interval from the chart or otherwise. They intend to space the Marmaton as defined by that 113 feet section with a base and the top tied to the log. 58. Mr. Medina explained the stratigraphic equivalent and how you commence correlations of different packages to arrive at the conclusion that you can match depths as you move from one law to the other. You have topography interplays where you deal with subsurface datum. You eliminate the difference for topography as well as the structural dip. In this case the dip was southwesterly so the wells are getting deeper as you go southwest. He further noted that the top of the Des Moines that was provided in the Roy Deal 3-11 well in section 11 identified a top of the Des Moines that equates to Mr. Medina's top in section 10. It is the stratigraphic equivalent according to Mr. Medina. Page 21

22 59. Mr. Medina confirmed that he knew of at least three instances where 640 acre horizontal Marmaton spacing has been granted where there is pre-existing Oswego spacing. He was not aware of Big Lime spacing. 60. He referred to the Louise Jordan document entitled "Oklahoma Geological Survey Guide Book VI, Subsurface Stratigraphic Names of Oklahoma". He looked at page 130. He stated at the bottom of that page Ms. Jordan describes the Marmaton. He testified that she describes it as the Marmaton group. From left to right she describes it as Desmoinesian, Pennsylvanian. He stated the next thing as Jordan says is:"named as formation, raised to group by Condra et al Group contains (descending order) the Holdenville Shale, Lenepah Lime, Nowata Shale, the Oolagah Lime, the Labette formation and the Fort Scott Limestone." This work does not state the geographical area in Oklahoma that this reference alludes to. The description she gave isn't all limestone. It does not say that the first thing you find in the Marmaton is the Big Lime. He read the very next paragraph which states: "In Oklahoma Panhandle, the production is called Upper Marmaton, discovered by Carter No. 1, Hugh Dorman, Northwest Northwest of Section 29, 5 North, 22 ECM, Beaver County, below 5,510 feet, in the Floris Field." This statement does not describe what Ms. Jordan calls the Upper Marmaton. 61. Immediately below that paragraph it states: "Basal Marmaton production discovered in Carter Number 1 Sid Sharp, Southeast Southeast, Section 31, 6 North, 22 ECM, Beaver County at 5,830 to 49 feet, 3-6 of '52, in the Greenough Field (Notes by D. H. Swartz, 1955)." Mr. Medina stated that there is no reference to individual members of the Marmaton Group that she would describe. He does not believe there is anything else in her book on the Marmaton Group. There is nothing in this paper that would quote Louise Jordan as saying the first thing you find in the Marmaton is the Big Lime. 62. He did reference page 45 of this paper which referenced another interval. This is the Cleveland Sand, Missourian, Pennsylvanian. There was a reference to Hutchison that Mr. Medina did not recognize. Below that it stated: "Named for the city of Cleveland and Cleveland Field, 21 North, 8 East, Pawnee County." He stated that Pawnee County is close to Osage County. On the geographical chart Pawnee County is found under key number four. The key number for equates to an area on the geologic chart that is Northeast Oklahoma.. Page 22

23 63. Mr. Medina read what was said next in the document: "porous sandstone in the upper part of the Seminole formation, below the Checkerboard Lime, above the rocks of the Marmaton Group, divided into Upper and Lower Cleveland, at many places with Dawson coal separating the two sand zones, Upper Cleveland locally called Jones Sand, and Lower Dillard Sand." It further stated: "Name used In the Center., North Center, and Northwest Oklahoma." This was followed by an illustration that references a specific well. That well is the Sinclair number 46 J. A. Jones, Center of the Northwest Quarter of Section 20, 21 North, 8 East. That is in Pawnee County which is probably 200 miles from the area being discussed. 64. On the illustration that was used it shows what she identifies as the Checkerboard Lime. She does not state whether that is a top or a base. There is just a point on the illustration that says Checkerboard Lime. That appears to be across a sharp spike of the zone to the left on the log but he does not know what log section was used if at all. He assumed that it was referencing the Sinclair 46 well above. After that she has Cleveland Sand zone. The illustration is to the left of it and it does not tell a top or a base. She also lists the Oolagah Limestone (Big Lime). There is nothing stated about what would be below whatever she would identify as the base of the Cleveland Sand zone and the top of this Oologah Lime (Big Lime). There is nothing in that work that says she was intending to illustrate that the Big Lime is the first thing that you find in the Marmaton. 65. Upon recross examination Mr. Medina stated that during crossexamination it was a misstatement when he said that the target interval was a common source of supply. He further stated that when he was reading the paragraph about named for the city of Cleveland and Cleveland Field is talking about the Cleveland. He agreed that the next sentence stated:"porous sandstone in Upper part of Seminole F-M, below Checkerboard Limestone and above the rocks of the Marmaton Group." He agreed that the Big Lime is in parentheses. He stated that the chart also uses the Cleveland and Northwest Oklahoma. He knows that the chart in this area includes the Big Lime as part of the Marmaton. In the illustration discussed he does not see anything else designated as anything to do with the Marmaton. He does see where she tells you that the Cleveland is below the Checkerboard and above the rocks of the Page 23

24 Marmaton group. As Ms. Jordan interprets it there is something separating the Upper and Lower Cleveland. 66. When asked to recall page 130 of this document Mr. Medina agreed that Ms. Jordan did not list any sandstones. He still contends that the Marmaton is a sandy member. 67. Upon further redirect examination Mr. Medina was asked to refer to page 17 of the referenced Jordan document. At the top of that page references the Bennett Sand and talks about a lease in Carter County. After Bennett Sand to the right at the top it says Des Moines, Pennsylvanian. Mr. Medina was referred to the body of the document and asked to read from the third line down as follows: "it includes two or more sands, each not more than 10 feet thick, in a zone of some 50 feet thick. It includes the 'Tussy lime' (not the true Tussy lime of the Sholom Alechem and Tussy-Tatums fields, which there is applied a higher limestone between sands equivalent to Graham and Bennett sands), which is best developed in the northwest portion of the field, but characteristically appears in the Central and southeastern portion as thin (two to three feet) lime cap on one of the sands, normally second from top. This lime is correlated with one of the pair of limestones which appear in the Ardmore Basin, in sporadic outcrops only, between the Devils Kitchen and Arnold members (letter from C. W. Tomlinson, ). Also illustrations of the Graham and Sutherland sands." He understands that you can take anything out of context. They do not have context in relationship to a lot of what Louise Jordan is saying in relation to these individual descriptions that are given. They have sporadic and random references to areas of the State that are diverse and greatly separate from where this cause is located in the state. 68. Mr. Medina was reminded that he has had questions that suggest that the only thing that makes up the Marmaton is the Big Lime and Oswego. He stated that just because this chart uses phrases within it, it does not mean it is delimiting, exclusive, or all-inclusive. He stated that there are formations listed within the Cherokee Group and there are some obvious ones missing that are spaced in the area. 69. Mr. Medina was asked upon further recross examination about referencing the Bennett Sand. He also agreed that in that reference it mentions the Tussy Lime. He stated in Carter County that equivocates to the Cherokee as a group. Page 24

25 These are not even Marmaton age rocks. There were no further questions of Mr. Medina. 70. Mr. Charles Visé, geologist for Mewbourne was called as the next witness. His qualifications were accepted without objection. Mr. Vise testified that he first began working on this case in early November, He first began working in this region since the beginning of his employment at Mewbourne in November, He has been involved in a full geologic study of the area including looking it well logs and information at the Corporation Commission. Further he studied all geologic parameters in the Pennsylvanian section. He was not involved in this case at the time the application was filed. He became involved when it was a protested case. He did work and study over and above what he had accumulated during the nine-year period. 71. He investigated to show that there is Marmaton spacing outside of Mewbourne. He again looked at well logs and commission work done by Mewbourne and other operators. This included well logs, the Corporation Commission website and IHS Energy. He has reviewed the documents that were tendered in the exhibit exchange between FourPoint and Mewbourne. He also assisted in the preparation of Mewbourne documents. 72. Mr. Vise was asked to explain the format of Exhibit 4 and generally what it depicts. He stated that this is a log showing the Checkerboard marker, Cleveland top and a base of sand, top of the Desmoinesian and the top of the Marmaton Sand. This exhibit is his opinion of those circumstances or facts. 73. This exhibit is designated as the Wesley Steinle Unit 1. This well is the dry hole located in the southwest quarter of the southwest quarter of section 10. To prepare Exhibit 4 he used the resistivity log and the porosity log. The purpose was to show that there is a resistivity at this depth also known as a maximum flood surface. This is regionally known as the Checkerboard marker in the Anadarko Basin. Maximum flood surface would be a point in time when sea level is most landward. It would be the deepest water at time of deposition. A maximum flood surface is an unconformity. It is missing time. This means that the older rocks below that marker could be eroded and there are younger rocks above it. It is a time of no accumulation. Page 25

26 74. On this particular log there was a signature or indications that caused Mr. Vise to identify that as the Checkerboard marker. On the porosity log the gamma ray curve goes off scale to the right. It is significantly different than the gamma ray above and below it. That is where he picked the Checkerboard marker. This indicated to him that it's very radioactive and it's a black shale. He concluded it's a black shale because shale contains certain clay minerals that are higher in radioactivity. 75. On the resistivity log there was movement on the curve at the same spot. This indicates that it's just a tighter interval. He uses both logs to identify the Checkerboard marker. On the downiog, immediately above the Checkerboard marker it shows -5,863 and immediately below that it shows 8,452. Those are the subsea depth and measured depth for the Checkerboard marker. This is an appropriate factor to consider. 76. As he progressed down the log he depicted the top of the Cleveland Sand at -5,955 subsea depth and the measured depth at 8,544 feet. This is an appropriate place according to Mr. Vise because it is below the Checkerboard marker and the gamma ray is cleaner or reading less radioactive. That would be the top of the Cleveland Sand. Further down the log he represented the Cleveland Sand base at a subsea depth of -6,080 and the measured depth of 8,669. The gamma ray is cleaner and less radioactive right above 8,669 and below that the gamma ray is reading more radioactive. The log then shows it graded from a sand into a shale. That's typical going from a lower gamma ray to a higher gamma ray. 77. Below that on the log the top of the Desmoinesian was shown at -6,171 subsea depth and 8,760 measured depth. Mr. Vise testified that he also showed another maximum flood surface or hot shale at this point. This is the same deflection to the right and circumstance that he recognized at the Checkerboard marker. The same or similar type depositional event would have occurred here. He saw evidence of the same black shale. 78. As he progressed down the log he next showed the Marmaton Sand at -6,247 subsea depth and 8,836 measured depth. He called this the Marmaton Sand because it is a sandstone below the top of the Desmoinesian hot shale. He concluded this is a sandstone because of the PE curve that he has on other logs in the area. The PE curve shows the differences between sand, limes, Page 26

27 shales and dolomites. The Marmaton Sand reads approximately 3 here on the PE curve. The 2 1/2 to 3 is an indicator of sand on the PE curve. He used this scale to conclude that this is a sandstone. 79. Mr. Vise stated that Exhibit 5 is a combined document consisting of the completion report and final as drilled plat and survey from the Steinle H horizontal well drilled by Chesapeake in the unit. In the completion report under the category "initial test data"there is a reference to the Cleveland formation. Under the "completion and test data by producing formation"section and also refers to the Cleveland with a common source of supply code of 405 CLVD. There is also a column for spacing orders and it states spacing order number is and the unit size is 640. That spacing order describes certain common sources of supply. The deepest described is the Cleveland and the unit size is 640 acres. The order also states a top for the Cleveland at 9,000 feet. Mr. Vise does not know how the 9,000 feet was decided. This order covered all of Township 19 North, Range 26 West, Ellis County. This 1973 order spaced 36 sections for, among other formations, the Cleveland common source of supply. There was no depth established for the base of the Cleveland in said order. 80. The Chesapeake horizontal well that was drilled was reported as being in the Cleveland common source of supply spacing. The 1002A indicated what specific portion of the Cleveland, by depth, were of the lateral was drilled. It indicated that the lateral hole was drilled at a measured total depth of 13,240 feet and the true vertical depth was 8,571 feet. The end point was located 232 feet from the north line of section He further substantiated that the well was drilled in what he describes as the Cleveland Sand by looking at the survey and vertical log of the dry hole drilled in the southwest quarter of section 10. He correlated the depth of the Cleveland Sand from the vertical log to the lateral well bore to show that they are structurally on strike. Therefore, he concluded that the lateral well bore in the Chesapeake horizontal well is contained within the Cleveland Sand. This well was correctly identified as a Cleveland well. 82. Mr. Vise looked at a log (Exhibit 6) from the Staghorn Eastham 1-23 well in Section 23, Township 17 North, Range 23 West. He looked at it because the protestants filed and established a drilling and spacing unit for the Marmaton Page 27

28 common source of supply in this section. He obtained a log from the Mewbourne database. This log is formatted the same as the log in Exhibit 4. The left-hand side of the log is a resistivity log and the right-hand side is a porosity log. The interpretations that appear on Exhibit 6 aren't an accurate representation of his interpretation of the log. His interpretation shows the Checkerboard marker and is the equivalent of the same Checkerboard marker on Exhibit 4. He picked this Checkerboard marker for the same reasons described in discussing Exhibit 4. He shows the depth at -7,044 and the measured depth as 9,411. He picked the depths for the Cleveland Sand because again there was a change in the gamma ray going from shale to sand and it was below the Checkerboard. He listed those depths as -7,121 and the measured depth as 9,488. This was the same method he discussed previously. 83. His next pick was the top of the Desmoinesian. There is a shale there that is more radioactive than the rocks above and below. That is the maximum flood plane. Those depths are -7,233 and 9,600 measured depth. He then looked down to -7,305 with a measured depth of 9,672 which are the depths for the Marmaton Sand. This was picked because there is a change in the gamma ray representing a sandstone. This is the same method he previously discussed. 84. Mr. Vise referred to spacing order number (Exhibit 7) which issued from CD The applicant's in that cause the EnerVest and FourPoint entities. This application was heard on January 12, That application requested a 640 acre drilling and spacing unit for the Marmaton common source of supply in Section 22, 17 North, 23 West, Ellis County. The Staghorn Eastham 1-23 that he interpreted is the nearest control point vertical log to section 22. It is located one mile east of the spaced section. The depth given in that spacing order correlates back to a subsea datum on the identified log. At the time of the application for the spacing in section 22 there was preexisting spacing for the Cleveland for a 640 acre conventional unit. The same circumstance was presented in section 10 by Mewbourne. Order number created 640 acre horizontal spacing for the Marmaton common source of supply. This is the same as Mewbourne is requesting in this cause. The depth of the Marmaton was listed as 9,670 feet. The mapping and interpretation of the Marmaton Sand, completed by Mr. Vise, has the top at equal depth on strike from section 22 into section 23 with the depth indicated in the spacing order. The 9,670 feet falls 2 feet above his Marmaton Sand pick. Page 28

29 85. This geologist confirmed that FourPoint had alluded that 640 acre horizontal spacing for the Marmaton in section 10 is not necessary because there is Cleveland spacing that covers the interval that Mewbourne has named. He believes that is incorrect and this is the same circumstance as in section 22 just described. 86. He further testified that EnerVest and FourPoint obtained spacing in Section 21, 17 North, 23 West by order number They obtained 640 acre spacing for the Cleveland and Skinner common sources of supply by extending existing orders. They also requested the creation of 640 acre spacing for the Marmaton. The application was amended at the time of the hearing for 640 acre horizontal drilling and spacing units. This was granted for the Cleveland, Marmaton and Skinner. Mr. Vise noted that the Skinner is not listed on the geologic chart. This spacing conflicts with the proposition that the chart dictates what is or isn't available to be spaced in terms of nomenclature. This order listed a top of the Cleveland at 9,400 feet. Like other orders there is no base listed for the Cleveland. The top of the Marmaton is stated at 9,720 feet. 87. Mr. Vise confirmed that he performed the same analysis concerning those tops as he did for section 22. He utilized the same well log as before and correlated the depths on his structure map. The depth given for the Marmaton puts it below the top that he shows for the Marmaton Sand. The top of the Cleveland at 9,400 is 88 feet above his pick for the Cleveland Sand at 9,488. He concluded that the top of the Marmaton is below the Cleveland and below the maximum flood surface which he has indicated as the top of the Des Moines. This does not coincide with the idea that the Cleveland covers all the way through the area and that Mewbourne wants to space as the Marmaton. It would be above the Marmaton. Therefore, you need Cleveland and Marmaton spacing because they are two different common sources of supply, two different accumulations of oil and gas and they are separated by a shale. 88. He also examined order number which was a spacing for Section 11, Township 19 North, 26 West. This is the adjacent section to the east and was of interest because it spaced the Checkerboard and the Des Moines. That order showed a depth of 8,710 feet for the Des Moines. It was 640 acre Page 29

30 conventional spacing. Prior to this order the Cleveland had already been spaced in section The Roy Deal 3-11 well was drilled in section 11. This well was originally completed in the Morrow. It was later we completed in the Des Moines. Mr. Vise examined the log for this well and used the same methodology to analyze and correlate the depths of the formations depicted. He identified the checkerboard marker and then correlated a top for the Cleveland Sand at 8,524 feet. He picked this top in the identical manner as he did on the previous logs. From this he also identified the base of the Cleveland Sand at 8,616 feet. He further explained that he picked the top of the Desmoinesian by picking the maximum flood surface or hot shale marker. He also picked the top of the Marmaton Sand at 8,788 feet. He selected that in the same fashion as the previous logs noting the change on the gamma ray and resistivity from shale to sand. 90. Mr. Vise examined the original completion report for the Roy Deal 3-11 well and stated that the original completion interval was in the Morrow. This completion report identified the top of the Cleveland at 8,510 feet and the base at 8,600 feet. It was of significance because it is very similar and matches his interpretation of the Cleveland Sand. This well was later recompleted in the Des Moines. This report indicated the top of the Des Moines was 8,708 feet. This was of significance because Mr. Vise picked the top of the Desmoinesian from the log at 8,707 feet. Based upon the Cleveland spacing in section 11 this well would have been completed in the Cleveland. However it was reported as completed in the Desmoinesian. The Marmaton interval that Mewbourne wants to space is Desmoinesian in his opinion. 91. Mr. Vise stated that he was aware of the paper or document prepared by Louise Jordan in He was present when questions were asked about that document. He agreed that if you look at the geologic chart and the segment identified as Northwest Oklahoma and locate the box entitled Marmaton, there are also to the right of the Marmaton designations for the Big Lime and Oswego. He did not agree with any suggestion that the chart would then mean that the only rocks that make up the Marmaton would be those identified as Big Lime and Oswego. He also heard questions concerning the document prepared by Louise Jordan entitled Subsurface Stratigraphic Names of Oklahoma. He heard the questions and testimony concerning the part of this Page 30

31 document that was provided (Exhibit 28) and the information elicited that was provided or stated within that document. He looked at what Louise Jordan wrote in the document and also looked at the geologic chart in relationship to the issues that were raised. He focused on the second to last page of the document as presented. That page is numbered at the top as 17. He stated that there is language that discusses the Bennett Sand for Carter County in her paper. He referenced that just because it is a sandstone in this area. There is nothing in this part of the article that would reference this to the Marmaton Group. This is an older sand in the Des Moines Group. 92. On the preceding page that is marked at the top as 130, it does identify Marmaton Group at the bottom. Mr. Vise noted the formations listed there as a group are located in Northeast Oklahoma underneath the Cleveland Sand. There was discussion concerning the stratigraphic chart and the Louise Jordan article. Mr. Vise stated that even in Ms. Jordan's article there is evidence that the Marmaton Group would include more than just the big lime and the Oswego. You can also derive that limestone is not the only thing you would find within the Marmaton Group. She also identifies shales as a part of the formations listed. It was noted that it is conceptually difficult to accept that the stratigraphic chart is the end all for spacing because there are spaced formations that are not listed on this chart. For an example the Skinner was spaced in an area that is clearly intended to be within the Desmoinesian and there is no reference to the Skinner and Northwest Oklahoma on the chart under any part of the Desmoinesian. He does not believe that this chart can be used to say that it limits the common sources of supply that the Commission can create to only those listed on the chart. The Skinner is only one example of that. 93. He is aware of the testimony offered that Mewbourne wants to space a common source of supply by a specific definition. They are not asking to space the entire Marmaton that appears on the chart under Northwest Oklahoma. They want to space an interval above the Big Lime that they believe is Marmaton. They have described that common source of supply as the stratigraphic interval of that found at a top of 8,800 feet and a base of 8,913 feet as found in the EB King 2-10 well. This interval is a single grouping of oil and gas and referred to as the stratigraphic equivalent so that it can be correlated to other wells in the area and stay in that zone. By using the top Page 31

32 and a base as correlated they are spacing this specific common source of supply. 94. The Brearly 1H-1 1 well was drilled in section 11. The completion report indicated this horizontal well was perforated within the Cleveland. Mr. Vise utilized the final survey report to correlate this well to the vertical offsets to determine that this well was in the Cleveland Sand. He agrees this is a Cleveland well. 95. Mr. Vise made an analysis of the Brearly 2H-1 1 well in the same manner. He reviewed the permit, a spacing order and the gamma ray log for the well. The permit indicated that the formation was the Des Moines and the spacing order spaced the Desmoinesian. It was separately spaced from the Cleveland. The geologic chart would show the Desmoinesian below the Cleveland Sand. It also shows the Cleveland is in the Missourian. The chart shows the Marmaton in the Desmoinesian. 96. The log analysis he conducted was the same as the analysis completed on the other logs. He reiterated that the log for the Chesapeake Brearly 1H-1 1 well was in the Cleveland pursuant to his analysis. Based upon his analysis of the log in the Brearly 2H-1 1 and the final survey the well depths correlated to what he identifies as the Marmaton interval. It would be classified as Des Moinesian. Mewbourne believes that the interval in section 10 is Desmoinesian in age. 97. Mr. Vise also examined Order number for the spacing. (Exhibit 21) the order spaced a lot of lands but he was interested in Sections 2 and 3, Township 19 North, Range 26 West. These are the two sections north and northeast of section 10. In the order sections 2 and 3 are spaced 640 acres for the production of gas from the Des Moines formation. In this order there was also spacing implemented for the Cleveland but it did not cover any of Township 19 North, 26 West. The Cleveland was already spaced across the entire township by the previous order discussed number The completion report for the Roy Deal 4-2 well (Exhibit 22) was examined. This well was originally completed in the Morrow. There is other information provided of other formations in the report. It included reference to the Cleveland and gave a depth for the top and the bottom. It listed the top at Page 32

33 8,420 and the bottom at 8,600. He determined from the analysis that he has done on the logs that the interval between 8,420 and 8,600 correlates to what Mewbourne calls the Cleveland. 99. Mr. Vise also discussed the re-completion of the Roy Deal 4-2 well. He examined the re-completion report and determined that the well was recompleted in the Des Moines. The re-completion report gave a top for the Cleveland at 8,420. This is the same as the initial report. The recompletion report gave a top of the Des Moines at 8,589. That depth would be within what they identify as the Marmaton A horizontal well location exception interim order was obtained by Mewbourne that was heard November 20, The order was dated December 10, It would have expired on December 10, 2015, but it was extended by Mewbourne. Therefore, the order remains in place. The application was filed before Mewbourne would have known of any objection by FourPoint to this spacing. In the location exception Mewbourne describes the common source of supply as the Des Moines. The referenced spacing order was which spaced the Des Moines in section 2. Mewbourne identified the stratigraphic equivalent of the Marmaton zone they previously referenced in their location exception application. They were targeting the same interval that they seek to space in section 10. They are seeking to space exactly what they were asking to do in November of They targeted that interval because it is different than the Cleveland and they have been pursuing the interval in this area. Mr. Vise stated that this interval is a separate and distinct accumulation of oil and gas from the Cleveland. They have identified this interval in Ellis County, Roger Mills County and the eastern half of Lipscomb County, Texas. This area is distinguishable because there is a mapable maximum flood surface or hot shale at the base of the Cleveland which is the top of the Des Moines. This black shale separates these two common sources of supply The geologic chart is divided by, among other things, reference to Northwest Oklahoma. Mr. Vise listed the counties that fall within the Northwest Oklahoma designation. He agreed this is a much larger region than what Mewbourne describes as having the characteristics that are relative to the Cleveland- Marmaton delineation they have pursued. He explained that the counties in the area that contains the hot shale marker do not all present the same type of circumstance. In some cases the Cleveland is not present and in Page 33

34 some cases the Marmaton is not. Some zones in Northwest Oklahoma are not present in one county but may be present in another. In his opinion this is because there are several different depositional environments and many geologic changes in this area. Each particular interval in an area may have a common depositional environment. When there is a change in sea level the depositional environment can change. Also there are differences in log characteristics. You do not always see that in those areas outside of the 2 counties he talked about, Ellis and Roger Mills. You cannot generally say everything in Northwest Oklahoma could be delineated the same relative to the Cleveland Sand or the Marmaton. He does not accept that the geologic chart should be equally applied to all of northwest Oklahoma The area that Mewbourne has focused upon provides a similar geological circumstance including this application and Roger Mills County. They have similar depositional environments and similar delineations by log interpretation intervals. The information that has been supplied concerning this interval is accurate and relative to this section Mr. Vise noted that the completion report for the Knowles in section 3 does not agree with his interpretation of the formations completed. Mr. Vise noted that the report referenced information about several formations. He saw the Checkerboard marker which he correlates as the Checkerboard marker. He also saw a formation called the Cleveland shale which he interprets as the top of the Des Moines. He agreed this is an illustration of an operator who doesn't agree with Mewbourne' s interpretation The surveys were attained from the Knowles and Mr. Vise correlated them back to his correlations on offset logs. He concluded that this lateral was drilled in what Mewbourne calls the Cleveland Sand. The completion report states that the well is completed in the Cleveland but there was a depth provided in the report for the Cleveland Sand at 9,236 feet. The survey shows that the completion interval would have been shallower than that. The completion report indicated that the true vertical depth was 8,503 feet. This would coincide with what Mr. Vise has identified as the Cleveland. This report would put the Cleveland above the top of the Cleveland shale and it would certainly be above the top of the Cleveland Sand. From their tops the well would not be in the Cleveland. Page 34

35 105. Mr. Vise also noted that he previously stated that there was Des Moines spacing in section 2 and section 3. He also noted that they referenced spacing for the Cleveland in section 3. Subsequent to those actions 640 acre horizontal drilling and spacing was established for the Marmaton. (Exhibit 26) The top of the Marmaton was listed as 8,650 feet. A location exception was requested after the spacing. (Exhibit 27) An interim order was issued but no well was drilled. He testified that at the time of the hearing the application was amended to dismiss the Douglas, Tonkawa, Cottage Grove, Cleveland, Des Moines, Cherokee and Atoka common sources of supply. The Marmaton was all that remained after those dismissals. Based upon these documents, Mr. Vise discerned this interval would be the same that Mewbourne is trying to space in section 10. He stated that in a section where there was Cleveland spacing that Mewbourne calls the Marmaton and FourPoint calls it the Cleveland, the Cleveland was dismissed and they want to drill in the Marmaton. This was in the section directly north of section Mr. Vise reviewed exhibits 7 and 8 that are to spacing orders of FourPoint in sections 21, 17, 23 and 22, Township 17 North Range 23 West. He testified that in addition to obtaining copies of the orders he looked at exhibits that were tendered. He stated he found three isopach maps and three structure maps. Exhibit 7 was the order that spaced the Marmaton in section 22. He found an exhibit in that cause that was designated a Marmaton net sand isopach map. That map indicated the Blue Dolphin Lovett 1-28 well in the Southwest offset was a Marmaton producer. The completion report on the well indicated a Cleveland well. The reported completion interval indicated perforations from 9,749 feet to 9,793 feet. This would be the stratigraphic equivalent of the zone that Mewbourne is seeking to space in section 10. The completion report called it Cleveland and Mr. Vise concluded that it falls within the Marmaton that Mewbourne seeks to space In Exhibit 8 he found 2 more isopach maps and a structure map for the spacing in section 21. This application sought 640 acre horizontal spacing for the Cleveland and Skinner as well as 640 acre spacing for the Marmaton. The first map was offered in a hearing two weeks before the other two exhibits. Mr. Vise stated that the same geologist prepared all three documents. He stated that the two maps referenced for section 21 are a Cleveland net sand isopach map and a Cleveland net sand map. The map tendered for section 22 equates to the description of one of the maps for section 21. However, he noticed a Page 35

36 difference in the maps. On the map for the Cleveland spacing the Blue Dolphin Lovett 1-28 well was labeled as a Cleveland producer. In the Marmaton spacing application the Blue Dolphin Lovett 1-28 well was labeled as a Marmaton producer for the same map. He has a problem with the consistency of the map. There were two applications for relief and both sought Marmaton spacing and one sought Cleveland spacing as well. He believes the maps should have been labeled with the same production Mr. Vise then discussed the paper written by Tucker F. Hentz in the Bureau of Economic Geology, the University of Texas at Austin. (Exhibit 29) He only included the first five pages of the paper and the rest of the article is not included. The main points that he wanted to discuss are in the first few pages. The title of this article is: Chronostratigraphy and Depositional History of the Pennsylvanian Marmaton Group and Cleveland Formation on a Structurally Complex Shelf Western Anadarko Basin, Texas and Oklahoma. He accessed this paper because it discusses the maximum flood surface and the dark shale, that he calls the top of the Des Moines. Mr. Vise then discussed the difference between chronostratigraphy and lithostratigraphy. Basically, chronostratigraphy is in reference to time and lithostratigraphy is the similarities and differences in lithology or rock types Mr. Vise indicated that the significant part of the paper was on page 4 because it references the marker and the black shale. It is under a header labeled Marmaton group, Marmaton group section. It is the first paragraph under Marmaton group. He read as follows: "Hentz, who is the author of this paper, and industry workers placed the upper boundary of the Marmaton group and the top of the Desmoinesian series at the top of a regionally continuous high gamma ray shale marker, which can be seen on figure 3, extends throughout most of the west part of the Anadarko Basin, typically about 10 foot thick. The bed ranges from less than 10 to approximately 28 feet thick. A thin limestone bed commonly lies immediately below the marker bed. Analyses that were run on hole and sidewall core from the two wells in east central Ochiltree County show that the shale marker bed is dark gray to black and fossiliferous.'t 110. Mr. Vise was asked to explain fossiliferous and he stated that it means fossils of a certain age are in it. He also stated that Ochiltree County is west of Page 36

37 Lipscomb County. He was asked to explain conadants. This would be fossils that would be in this rock from the Desmoinesian age group He further read on down from the middle of the paragraph. It was read as follows: "most Cleveland operators term this bed as the top of the Desmoinesian from conadants and distinctive associated fauna within a marker bed. The interval can be correlated precisely with the exposed Nuyaka Creek black shale bed of the upper Holdenville shale of Oklahoma and the lost branch formation of Oklahoma and Kansas." He then turned to the next page which showed the referenced figure 3. Figure 3 is a cross-section of the Antares Knowles 1-3 well previously discussed. This well is directly north of section 10 and section 3. The other log in figure 3 is the Petroleum Property Bay 15-1 well and is north of the Knowles well in another township. In this depiction the author breaks down the section into Cleveland formation and then Marmaton group. He labels the stratigraphy separating the Cleveland formation and the Marmaton group by a maximum flood surface. He indicates that by "MFS 40"and that is the same black shale that the author references in the Marmaton group on the previous page. The "MFS 40"represents the top of the Desmoinesian interval in that illustration. The illustration also references "Hepler sandstone"and this is the stratigraphic equivalent of what Mewbourne is seeking to space in section 10. Mr. Vise correlated the well logs in the area to the Knowles 1-3 well in the paper and that zone is the stratigraphic equivalent of what Mewbourne is pursuing. The interpretation in the paper of the Marmaton group represents the same maximum flood surface that Mewbourne talked about as the delineation point between the base of the Missourian and the top of the Des Moines Mr. Vise briefly discussed the connection of FourPoint Energy and Cordillera. It was noted that FourPoint Energy was described as a new energy company formed from the leadership team of Cordillera. Mr. Vise does not know which Cordillera employees remain with FourPoint A true vertical depth log (Exhibit 31) was examined by Mr. Vise. He stated the true vertical depth log represents the true thickness from surface to some point in the well. He examined the gamma ray log that came from data given to Mewbourne by Cordillera. It is the Reisig 1-21 HD well. This well was drilled by Cordillera. The interpretation he used for this log is similar to that used in preparing the prior logs that have been discussed in prior exhibits. He Page 37

38 utilized the same methodology. The picks on this log were made by Mr. Vise. This well was in section 21. It is 2 miles south and 1 mile west of section 10. He examined the four-page completion report for the Reisig 1-21 HD well. The report indicates that the well was completed in the Marmaton formation. It was spaced for the Marmaton by order on a 640 acre basis. The Cleveland was already spaced. The completion report listed the top of the Cleveland at 8,578 feet and the top of the Marmaton at 8,947 feet The final survey for this well was analyzed by Mr. Vise. He reviewed the completion interval in the same manner as the other cases he interpreted. He concluded that the completion interval for this well was in the Marmaton zone. This well was not completed in the Cleveland sand as identified by Mewbourne. He stated that FourPoint identified the well as a Marmaton well and that is not in accord with what they believe is presented on behalf of FourPoint The final order for the Reisig 1-21 HD well was This final order identified the Marmaton formation as the common source of supply that the well was completed within. He stated this is not a limestone and the well was not completed in the big lime or Oswego. The well was completed in an interval of above those The log for the Hamilton Roland 1-20 (Exhibit 34) located in Section 20, Township 19 North, Range 25 West, Ellis County was examined by Mr. Vise. This well is the closest offset control point for vertical wells. He added indications on the log starting with the Checkerboard Marker and going down to the Marmaton Sand as he did in the other logs. He arrived in his opinion for this log in the same manner as the other logs that have been discussed. This well is the east offset to the Eddy Teddy well in section 19. Mr. Vise made a structure map on the maximum flood surface or top of the Des Moines. The contour for the common source of supply Mewbourne seeks to space in section 10 goes through section 20 and he was able to represent from that that the interval drilled in the Eddy Teddy well is in the same common source of supply. The completion report for the Eddy Teddy well (Exhibit 35) indicates that Chesapeake was the operator. Chesapeake is the predecessor of FourPoint in section 10. Chesapeake indicated that the well was completed in the Marmaton. Again Mr. Vise performed an analysis of the final survey to determine the common source of supply for the completion interval. That Page 38

39 interval is the same common source of supply that Mewbourne is spacing in section Mr. Vise examined a permit to drill by Chesapeake for the Holloway , 1-H (Exhibit 38). The permit indicated the formations for drilling were the Douglas, Cottage Grove, Cleveland and Marmaton. This form gave a top for the Cleveland and the Marmaton. The top of the Cleveland was 8,882 feet and the top of the Marmaton was listed at 9,077 feet. The final survey for the Holloway well (Exhibit 39) was examined in the same manner as the many other occasions previously discussed. Preceding that he interpreted where he would project the Marmaton common source of supply for section 12 by correlating offset vertical well log control to the depth given on Permit to Drill projected that the common source of supply was the same as what Mewbourne seeks to space in section 10. The McCullough Parker 1-11 was the nearest vertical control relative to the property affected by the Holloway well. The McCullough Parker 1-11 well is one mile to the west. He performed the same analysis of the log (Exhibit 40) as on all of the other log interpretations. This well was completed below the top of the Des Moines in the same common source of supply that they seek to space in section Mr. Vise referenced an exhibit that was received from FourPoint in the document exchange that he referenced as the montage. He is not sure if FourPoint compiled the data because Chesapeake is written all over it. It was represented that this montage contains a compilation of the exhibits that were generated for a protested case between EOG and Chesapeake. There were obviously to positions to be argued in that matter. The position advocated by EOG would be the same as advocated by Mewbourne in this cause and the position advocated by Chesapeake would be the same as advocated by FourPoint in this cause. He expected this montage to be presented by FourPoint in this cause Mr. Vise identified certain documents on this montage to discuss. He identified a base map on the left-hand side that included two wells. The Andrew H located in Section 7, Township 18 North, 24 West and the Holloway H well with the two wells identified. He also included the McCullough Parker well which he stated was a dry hole He utilized datum from the base map that indicated a subsea depth of Page 39

40 -6,784 for the McCullough Parker well that he assumed Chesapeake interpreted for a well log. Mr. Vise interpreted a top of the Desmoinesian at -6,782. That is a 2 feet difference in his interpretation of this marker and the pick that was made by whoever created the base map exhibit In section 12 the Holloway well lists a top of the Marmaton at 9,077 feet on the Chesapeake intent to drill form. The measured depth for the top of the Marmaton was calculated at 9,062 feet in the Parker 1-11 well and the measured depth for the top of the Marmaton in the Holloway well was 9,077 feet. Mr. Vise stated that this shows that Chesapeake was picking a zone that was below the hot shale marker Mr. Vise then discussed the log from the Andrew number 1H well. This was a part of the montage that was discussed. This log was either from a vertical well or from the vertical section of a horizontal well. On this cross-section there was an interval labeled MFS 40. This interval is the same hot shale marker that Mr. Vise identifies as the top of the Desmoinesian. This shows him that Chesapeake was mapping and interested in a zone below this maximum flood surface. Also on this exhibit there is writing to the left of the MFS 40 labeled that says: "EOG Missourian, (Cleveland)". Below that label is writing that says: "EOG Desmoinesian, (Marmaton). As you progress down the log on this exhibit there is a deeper point and a black line that says Big Lime. Next to the Big Lime it says: CHK Missourian Cleveland. Below that black line is lettering that says: CHK Desmoinesian Marmaton. He agreed that it seems to indicate that this is a view of the dispute between EOG and Chesapeake in so far as their classification of Cleveland versus Marmaton. He believes that FourPoint is taking the same position that would have been taken by Chesapeake. This depiction shows the maximum flood surface of black shale that would be the same pick as his top of the Desmoinesian A cross section from two vertical well logs was used for interpretations to stratigraphically correlate the top of the Desmoinesian. (Exhibit 41) The first log was the Wesley Steinle unit 1 and the second was the Raider The Steinle well is the one previously discussed and the greater well is located in Section 10, township 19 North range 25 West, which is a township away to the east. He utilized this cross-section to correlate the structurally different majored depth distances of the 2 wells flattened on the hot shale marker. This correlation shows that the Marmaton sand is in the same position in each well Page 40

41 log. It also shows there is a continuous separation across the two townships between the Marmaton sand and the Cleveland base which he calls the top of the Desmoinesian. This is the hot shale maximum flood surface that he has described. The Checkerboard marker is readily discernible through this six miles. These similarities are seen throughout the two counties in Oklahoma and the two in Texas that he has discussed Another cross-section was prepared using the four well logs previously made separate exhibits. (Exhibit 42) Mr. Vise took the work he conducted from the separate exhibits and integrated them into this cross-section. This crosssection was also flattened on the top of the Desmoinesian or the maximum flood surface hot shale. It is again representative of the correlation above and below the top of the Des Moines hot shale across the area represented on the cross-section Mr. Vise was present when the statutory definition and the rule definition of a common source of supply was read into the record. From those definitions he stated that he would not consider the interval from the top of the Checkerboard marker to the top of the Marmaton Sand a common source of supply. That is mainly because the hot black shale that he has identified delineates between what Mewbourne would consider the Cleveland and the Marmaton that they want to space This witness discussed documents from a presentation by FourPoint, George H. Salich, President and Chief Executive Officer, Houston Producers Forum October 2014 Luncheon. In the document there was a map titled Active Region in Multiple Pays. Mr. Vise stated that the term pay means common source of supply to him. Multiple pays would be different intervals each of which can be sourced for production but different from another according to Mr. Vise. Also, this map showed Cleveland wells in the central part of Lipscomb County trending into Ellis County. In the central part of Ellis County, which includes the area involved in this matter, there is a Marmaton pay shown. The Marmaton wells are included in the Missourian group on this document. Mr. Vise does not agree with that representation. However he pointed out that this document indicates that FourPoint considers the Marmaton to be a separate pay of the multiple pays in this area. It is separate from the Cleveland and the Marmaton and Cleveland are segregated by Page 41

42 different color coding. Mewbourne agrees that the Marmaton and Cleveland are separate common sources of pay The first topic addressed upon cross-examination was the stratigraphic nomenclature paper authored by Tucker Hentz. Mr. Vise testified that he looked at the paper, that he is a member of the AAPG and that the paper was published in the bulletin. He stated that before an article is published there are several professional and academic geologist that review it. They also make comments and changes that could possibly be made. There ensued a lengthy exchange concerning peer review and acceptance of this article Mr. Vise agreed that Mewbourne's application seeks 640 acre horizontal spacing for the Marmaton. He agreed that the chart that has been discussed designates the Marmaton as a group. There are two formations that are included in the Marmaton. They are the Big Lime and the Oswego. He agreed there are not any more formations listed. However, in Northwest Oklahoma there are more strata fan the terms Big Lime and Oswego. That strata is the stratigraphic equivalent of the depths that Mewbourne seeks to space. It has been referred to as the Marmaton Sand. He indicated that the Marmaton Sand has been spaced in several counties. It was clarified that the interval Mewbourne seeks to space is the stratigraphic equivalent, which is a separate and distinct accumulation of oil and gas that is above the Big Lime and below the maximum flood surface or hot shale. It does not have a name on the chart and it was stated that there are plenty of zones that are spaced that are not on the chart. Mewbourne reiterated that it is their position they are spacing a stratigraphic equivalent in the Marmaton. The top of the Marmaton they are seeking to space is the stratigraphic equivalent of 8,800 feet as shown in the log for the E.B. King well in section 10. The base of this zone is 8,913 feet as shown in the same log. That is their request for relief Mr. Vise understands that FourPoint's position is that what Mewbourne calls a Marmaton interval FourPoint contends it is a Cleveland Sandstone. Mewbourne claims this interval is very distinct and different and they are separated by shales. This interval is a sandstone He has looked at information regarding the Cleveland above the maximum flooding surface and he has looked at information regarding the sandstones immediately below the top of his pick for the Des Moines. There Page 42

43 are differences and distinctions between the Cleveland Sandstone and the one below the MFS. From samples collected from each he has noted the differences. The Cleveland Sand is a white sand and the Marmaton Sand is a light brown or khaki colored sand. The two are separated by a black shale. There are two or three intervals below the MFS that have some sand in them and they are also brown. This was from a well in Section 16, Township 19 North, Range 25 West, drilled in This was the first well that Mewbourne drilled horizontally in the common source of supply that they are seeking to space He is aware that Chesapeake performed a study of this area and provided that to FourPoint. He has looked at that study and he knows that cores were taken and Sands were analyzed. He does not know the details of what was done. He first learned of this study from the exhibit exchange for this case. He had heard about the study from Chesapeake and EOG Mr. Vise was asked to review the 1002A form for the well previously discussed in section 16 (the Tefetiller well). This form indicates the top of the Marmaton is at 8,862 feet. The true vertical depth at the bottom of the hole is indicated as 8,841 feet. That is above the top of the Marmaton. Mr. Vise disputed the contention that the lateral was not in the Marmaton. He stated that Mewbourne does not perforate intervals outside all of their common source of supply. His explanation was that the 1002A form was incorrect. His contention is that the well was not perforated outside of the interval so the depth for the top of the Marmaton is wrong. There is a vertical well in section 16, the Pratt well. He believes this well was a Morrow well. In that well the Cleveland top was shown at 8,572 feet. It appears that the perforated interval from 8,268 feet in the Tefetiller well is above the top of the Cleveland in the Pratt well in the same section. Mr. Vise stated that Mewbourne does not perforate intervals in the vertical portion of their horizontal wells. Mewbourne has no records of a recompletion in the Tefetiller well. Mr. Vise Would have been a part of any recompletion He acknowledged that Chesapeake performed a study in 2012 and gave that study to FourPoint. FourPoint received it in Mr. Vise agreed that FourPoint could change their opinions on the way they view the Marmaton and the Cleveland and all those formations after receiving the study. Page 43

44 134. Mewbourne believes the maximum flooding surface divides the Cleveland from the Marmaton or from the Des Moines. It divides the Cleveland Sandstone and the shale below it from the shale that begins the Marmaton group and the Marmaton stratigraphic equivalent common source of supply that Mewbourne seeks to space in section 10. The Cleveland and the Marmaton are in a part of what is considered a larger group. The Cleveland is in the Missourian and the Marmaton is in the Des Moines. Other maximum flooding services divide common sources of supply. He stated there are other maximum flooding services that divide major groups like the Des Moines in the Missourian. He also stated that the hot shale that sits above the Douglas is in the Virgilian series but it does not divide the Virgilian series and the Wolfcampian series. It also does not divide the Virgilian from the Missourian He explained that the maximum flooding surface is an unconformity. This means there is a limestone below the hot shale which he calls the top of the Desmoinesian. This would have been deposited in shallow water. This hot shale is a black shale. It marks the change in the Des Moines series from the Missourian series. It is below the Cleveland Sandstone and it is an erosional surface. He explained that the vertical squiggly lines across the entire Kansas City group indicates multiple unconformities that includes the Marmaton Oswego. This is an interpretation or assumption by Mr. Vise Mr. Vise agreed that on the chart the Marmaton shows two limestones. He has projected some sandstone in the Marmaton. That is the key reason he picked the top of the Des Moines at the maximum flooding surface. The prior testimony indicated that the maximum flooding surface starts going away in this county at a distance greater than a township. In the particular area where the maximum flood surface has gone the Cleveland Sand sits directly on top of the Big Lime. The Cleveland Sand cuts down across the maximum flood surface and it is gone. The maximum flood surface occurs when the sea waters rise to a certain level. Then they recede and the erosional effect occurs. The maximum flood surface 40 that Mr. Vise depicted eroded the top of the Des Moines group when it receded. This left a package of three sandstones before you get to the Big Lime. The MFS 40 did not erode the Marmaton down below where the Big Lime starts. The three sandstones have more life-type species in them than the limestone. Those sandstones were deposited in the normal course of this process. Mr. Vise explained that this was an incised fluvial Page 44

45 system that was backfihled by sand. The sea rose and created a valley and then filled with sand He did not entirely rely on the Hentz study for determining the maximum flood surface. The Hentz study supports the issue. There is a sandstone above and below the MFS Mr. Vise explained that other than his interpretation that the MFS is the top of the Des Moines is the evidence that it is older than the Cleveland and it is below the Cleveland. He stated that the sandstone below the MFS looks very similar to that above the MFS but is not 100 percent the same. They are possibly 90 percent the same. Also the Louise Jordan paper supports his interpretation that the hot shale is the top of the Des Moines. He then explained the information he utilized from the said paper. He also agreed that the vertical squiggly line he previously identified could indicate a facies change rather than an unconformity There was an explanation of his meaning of pay zone. He stated that a common source of supply is a homogenous lithology that has one accumulation of oil and gas. That's what he means by pay zone and then common source of supply is the accumulation of oil and gas He is familiar with the North American Stratigraphic Code bulletin. It is a bulletin from the AAPG. He reviewed this bulletin for his testimony. There are a series of articles with headings and categories that discuss certain stratigraphic methods. biostratigraphy, chrono stratigraphy and lithostratigraphic units were discussed 141. Mr. Vise was asked to look at page 1,566 where it described lithostratigraphic units. He read the description contained in paragraph A, basic units. He agreed with that description. He then went to paragraph (E), independence from time concepts. He stated he agreed with that general concept. He also stated that the maximum flood surface was a time element He was then asked to look at page 1,567 and to read paragraphs A, Fundamental unit, B, Content and C, Lithic characteristics. He testified that he does not utilize this book in his research in Oklahoma. He does not utilize it because it has nothing to do with spacing the oil and gas in the State of Page 45

46 Oklahoma. He agreed that geologic concepts apply everywhere and he agrees with those concepts. They are building blocks that are used. There is more in this paper than just lithostratigraphy. You can't base a decision just off lithostratigraphy. These concepts are basic geologic concepts that do apply to Oklahoma but there is more to this paper than just lithostratigraphy. He understood he would be given the opportunity to discuss other portions that he deems important Upon redirect examination Mr. Vise examined a two-page document prepared by the Bureau of Economic Geology entitled peer-reviewed publications. (Exhibit 44). This is the same group for which Mr. Hentz worked and the author of the article at issue. Immediately below the heading of the document appears: peer reviewed publications. It further states the peerreviewed publications are from 2000 to This document was obtained off the website of the Bureau of Economic Geology. The Hentz paper that was previously offered as an exhibit is described on this peer-reviewed publications list. There are nine other Hentz papers listed. The objection to this document was withdrawn based upon Exhibit Mr. Vise was asked to refer to the North American Stratigraphic Code bulletin (Exhibit 43). At page 1,555 he was asked to read the scope of this bulletin. There is nothing suggested in this paper that it should be utilized by a regulatory body for determination of what should be affected in correlative rights or waste by the creation of drilling and spacing units. There is nothing in the paper that suggest that it should be used by the Oklahoma Corporation Commission to redefine the method in which they establish drilling and spacing units in the State of Oklahoma He was then asked to read on page 1,556 he was asked to read a line at the top left-hand portion that begins with stratigraphic classification. He discerned from this paper that there is confusion between scientists in the geological area, as to terminologies, that limit their ability to communicate with each other. He was then asked to read the next paragraph(a) that starts with: stratigraphic code. One of the things it said was a code must be widely accepted and used and geologic organizations and journals may adopt its recommendations for nomenclatural procedure. It does not say that bodies responsible for the regulation of oil and gas, the protection of correlative rights Page 46

47 and prevention of waste should or may adopt its recommendations for nomenclatural procedure This paper, according to Mr. Vise, is not limited to a discussion of lithostratigraphic units. He read the four principal categories of units on page 1,557 and stated that he does not believe that the Oklahoma Corporation Commission has adopted the North American Stratigraphic Code to limit a common source of supply to those that fit the category of a lithostratigraphic unit. He stated that lithostratigraphic units are or should be independent of time concepts. If you adopted only lithostratigraphic units for spacing you would not have the different markers that separates formations. He stated that if these were removed you could have one unit thousands of feet thick Mr. Vise was asked to refer to the geologic chart and to locate the Douglas and Northwest Oklahoma. He agreed there is a time element to this chart. The left-hand side of the chart has the time element. The time element relative to the Douglas is the Virgilian series and the top half of the Pennsylvanian system. If you begin with the Douglas and go down to the Cleveland Sand he is seen wells drilled to out that interval. He has seen wells that show relatively similar sequential development of sand, shale, sand, and shale. If you disregard time markers you could call that entire interval one lithostratigraphic unit. However with in that interval there are multiple accumulations of oil and gas separated one from another. The geologic chart also has time related circumstances. It is not a simple lithostratigraphic chart. The entire system is changing age. He does not agree that the Corporation Commission has or should adopt the North American Stratigraphic Code The Louise Jordan article admitted as Exhibit 28 is not a complete compilation of Ms. Jordan's work. Mr. Vise had a complete compilation of her article. He examined more than Exhibit 28. He stated that if it was represented that the Jordan document expressly found as follows: "that the Cleveland, as a porous sandstone below the Checkerboard Lime and above the rocks of the Marmaton Group, the top of which is the Oolagah Lime or Big Lime,"that would not be a correct recitation of what Exhibit 28 would say. Ms. Jordan's work makes reference to other nomenclature and zones that are above the Big Lime and below the Cleveland Sand. He referred to page 45 of the Jordan article wherein it denotes Cleveland Sand, Missourian, Pennsylvanian. In this portion she was designating a well in Section 20, Township 21 North, Page 47

48 Range 8 East, Pawnee County. There is an illustration presented that appears to be a log. On that illustration there are 3 sets of zones labeled and the Cleveland Sand is represented. It is listed at a depth of approximately 1,700 feet. Immediately below the Cleveland sandstone she references the Oologah Limestone and in parentheses the Big Lime. In the paragraph preceding this illustration this article states: A. Porous sandstone in the upper part of the Seminole formation, below Checkerboard Limestone and above rocks of the Marmaton Group, divided into Upper Cleveland and Lower Cleveland at many places within Dawson coal, separating the two sand zones, Upper Cleveland, locally called Jones Sand and Lower Dillard Sand. There is nothing in those words that would allow anyone to conclude that the Marmaton group has as its top the Oologah Lime or Big Lime according to Mr. Vise He then referred to page 130. At the bottom of the page it states: Marmaton group, Desmoinesian, Pennsylvanian. Below that it references Keyes and states: named as formation raised to group by Condra et al., Group contains (descending order) the Holdenville sh., Lenepah Is., Nowata sh., Oolagah Is., Labette fm., And Fort Scott Is. From the entire Louise Jordan paper it is his opinion that Ms. Jordan felt that the Oologah Limestone was the equivalent of the Big Lime. The original reference of the Cleveland Sand was in Pawnee County. The geologic chart Pawnee County is in northeast Oklahoma. Another column on the geologic chart is for northwest Oklahoma which includes Ellis County On the geologic chart in the Northeast Oklahoma column Mr. Vise noted the segregating point between the base of the Missourian and the top of the Des Moines right above that line it states Seminole. Immediately below the Seminole in the Northeast Oklahoma column is Lenepah Limestone, Nowata Shale, the Wayside Sand and the Oologah Limestone. The Oologah Limestone is what Louise Jordan equates to the Big Lime. If anyone wanted to tell the Commission that the Jordan article says you have to look at the Cleveland as covering everything down to the top of the Big Lime, her work does not support that. He stated that on page 205 of Louise Jordan's book she recognizes the Wayside Sand. The Wayside Sand is above the Big Lime according to her book. The chart when combined with her work clearly shows an interval above the Big Lime in what is the equivalent of the Marmaton. If there are orders that were issued that suggest otherwise they are incorrect. Page 48

49 151. The orders that will be discussed contain a statement that says: the Checkerboard is identified area involved here and threw log correlation and by the nature of such formation obtaining limestone beds. In correlating logs, the Checkerboard is identified by two black marine condensed distal shales, with a limestone bed located immediately below each of these shales. The shales are used as subsurface marker beds. The base of the checkerboard is at the base of the limestone bed, located immediately below the deeper of the two black Marine distal shales described above. Putting aside the purpose for which those statements were made, Mr. Vise does not have any problem with that description. This statement also says: the Cleveland is identified in the area involved here in by the nature of such formation being a sandstone, and by such formation being located immediately below the base of the Checkerboard and immediately above the top of the Big Lime. He does not agree with that statement. If that would be directly from a reference to Louise Jordan then that would not be a correct statement In another part of the order it states: the Cleveland common source of supply does contain some hot shales, also referred to as a marine condensed shale, which resulted from organic material settling out during times of no active deposition or standstills. Mr. Vise has also stated that. This order, based upon testimony given, suggested that because Louise Jordan said certain things those markers must be ignored. Mr. Vise does not agree that you should ignore those markers Order was identified based upon an objection to identify an order that contained such language. In paragraph number six it says: "in 1957, the Oklahoma Geological Survey published guide book number 6, entitled Subsurface Stratigraphic Names of Oklahoma by Louise Jordan. Such publication was an attempt to establish uniform subsurface stratigraphic names in Oklahoma. Such publication identified the Cleveland as a porous sand above the Checkerboard Lime, and above the rocks of the Marmaton group the top of which is the Oologah Lime or Big Lime." Mr. Vise agreed that Louise Jordan did not say that in that fashion. She did not say the top of which is the Oologah Lime or Big Lime in terms of the rocks of the Marmaton group. In the material quoted from page 205 of Ms. Jordan's book the Oologah limestone was the fourth of those formations named, in descending order, consisting of the Marmaton group. Her work did not say the first of the Marmaton group was the Oologah Big Lime. He also does not see any evidence Page 49

50 of the multiple lobes within the Cleveland being in communication with each other In section 10 and adjacent areas Mewbourne has found evidence of the Big Lime. But also found evidence of sandstone above the Big Lime. He was asked about other areas of the State wherein he admitted that there are Sandstones above the Big Lime which would constitute the Cleveland Sand. In those areas he admitted that the sandstones touch the Cleveland Sand. That is not what he is saying in section 10. The difference is that this erosional maximum flood surface marker was not present in those areas. The Cleveland sandstone was sitting directly on top of the Big Lime. He can correlate from the place where this contact of Cleveland Sand and Big Lime takes place to where Mewbourne is talking about in section 10. In a region-specific sense there are areas were as you leave the Cleveland Sand you next enter the Big Lime. That is not the case presented in section 10. In section 10 there is sand and shale below the Cleveland and above the Big Lime separated by a maximum flood surface. Between the Big Lime and anything above it on the chart the Big Lime is older. He approximated that 600,000 years passed before you got to the base of the Cleveland Sand. That is ample time for sand to have been deposited above the top of the Big Lime Mr. Vise was asked about the Tefertiller well completion report. He admitted that he thought there is an error or a portion of the report. The error is actually in the perforated intervals. This was an open hole completion and seven inch production casing was set at 9,217 feet. This was the last cemented portion of the well bore. The first point of production in the lateral is approximately 90 degrees once the curve is landed. This occurred at 9,217 feet in this well. The completion report was in error under perforated intervals where it indicated 8,268 feet. On the survey the kickoff point was that 8,260 feet. The well was not capable of producing at that depth Upon recross examination there was extensive questioning concerning the language in the Chesapeake order. Other orders were referenced and Mr. Vise agreed that the language in paragraph 6 concerning the Louise Jordan work was accurate. Doing further questioning and discussion it was agreed that Mr. Vise believes the rest of the language in that order that interprets the Jordan article is wrong. The dispute is the interpretation of what is the top of the Marmaton Group. Page 50

51 157. Upon redirect examination Mr. Vise agreed that the first part of the orderparagraph concerning the Louise Jordan article was written to reference such publication. The 3rd full sentence of the paragraph stated: such publication identified the Cleveland as a porous sandstone below the Checkerboard Lime and above the Marmaton Group, the top of which is the Oologah Lime or Big Lime. The portion of that sentence that says "the top of which is the Oologah Lime or Big Lime"does not correctly come from the Jordan publication. The next sentence moves on to talk about the Marmaton group, as identified by Louise Jordan. The Oologah Lime or Big Lime is not the first interval in descending order mentioned in the publication. Mr. Vise stated this is not a correct representation of the Jordan article. He then referred to paragraph 9 of the order and started reading nine lines from the bottom as follows: "the Cleveland is identified in the area involved herein by the nature of such formation being a sandstone, and by such formation being located immediately below the base of the Checkerboard and immediately above the top of the Big Lime. Furthermore, the Big Lime is identified in the area involved herein by the nature of such formation, being a limestone, and by the correlation of a distinctive signature, being a doublet." This comes from the same representation in paragraph 6 of what the order suggest Louise Jordan said. Mr. Vise stated this is not what she said in her article Mr. Greg Shepherd, engineer for Mewbourne, was the next witness. His qualifications were accepted and there was no objection. He has been involved in this case since it started. He has been working in the Ellis County area since April, Some of his work has been involved in analyzing the potential for drilling wells in the interval that they seek to space. He has been looking at information related to that specific interval since he started prospecting Ellis County as stated. He has studied logs, porosity, resistivity and the interpretation of mapping the trends with Mr. Vise. He is also studied well results drilled in this area and all other Marmaton development. Before this case was protested Mewbourne had given specific attention to this interval He was present during Mr. Vise's testimony concerning the two intervals, the Cleveland and the Marmaton. He believes that FourPoint will claim that the Cleveland covers everything from the Checkerboard Lime to the Big Lime. Page 51

52 161. With the filing of this protest he was asked to prepare opinions concerning the zone or the interval that Mewbourne seeks to space. He also considered whether it is a separate or distinct common source of supply and is it separate from the upper interval that is above the maximum flood surface that people are calling Cleveland Mr. Shepherd agreed he used the term common source of supply. The following was then read into the record: Rule OAC 165: "common source of supply"or "pool"means "that area which is underlaid or which, from the geological or other scientific data, or from drilling operations, or other evidence, appears to be underlaid by, an accumulation of oil and/or gas provided that if any such area is underlaid, or appears from the geological or other scientific data or from drilling operations, or other evidence, to be underlaid by more than one, the accumulation of oil or gas or both, separated from each other by strata of earth and not connected with each other, then such area shall, as to each said common accumulation of oil or gas or both shall be deemed a separate common source of supply." [52.] O.S.A (c[)] Mr. Shepherd testified that when he prepared his opinions they were with regard to the statute and the rule. To arrive at his conclusion as to whether the interval to be spaced is a common source of supply as defined by that rule and the statute, he looked at the whole Marmaton play. Mewbourne distinguishes the Cleveland from the Marmaton because they believe they are separate. They believe that the Cleveland above the maximum flood surface is its own source of supply. The Marmaton is its own source of supply below it. They map the trends differently. There is not a whole lot of overlap where this big massive Cleveland trend running east to west across Ellis County doesn't map the same as the Marmaton trend that's mostly north and south through and Mewbourne has drilled an extensive number of wells in the Cleveland trend to the North. They have also drilled quite a few Marmaton wells in this area. He looked to all of those wells and tried to come up with the best way to show how they are separate and distinct. When they look at these big plays as a whole, they get a whole lot of variables. He went into section 10 where there are eight horizontal wells. There are four wells are drilled in what Mewbourne calls the Cleveland and four wells in what Mewbourne calls the Marmaton. He Page 52

53 looked at who completed them, when they were completed, how they were completed, the depths to which they were completed, the production results and the 1002As. He also used information from IHS and public production information. Some of the information was general and some is specific to this case. These wells were drilled by Chesapeake and are now operated by FourPoint. After such evaluation he is of the opinion that the Cleveland and Marmaton are separate and distinct intervals Mr. Shepherd prepared Exhibit 45 that analyzed the eight wells in this section. There are four wells in the Marmaton interval and four wells in the Cleveland interval and they are directly on top of each other. The Marmaton wells are deeper than the Cleveland. The average depth of the Cleveland wells is 8,631 feet true vertical depth and the average depth for the Marmaton wells is 8,906 feet true vertical depth. The average separation in the lateral well bores is 270-plus feet. All of these wells were completed the exact same way. He was interested in these eight wells because it is the only section of which he is aware that the situation exists where there are four deeper interval horizontals and four shallower horizontals right on top of each other. When he looked in depth into the wells there seemed to be a very drastic difference in production results. He looked at the peak month numbers for each formation. He then developed the Cleveland average and the Marmaton average. The Marmaton average is almost 12,000 barrels for a peak month while the upper zone Cleveland wells average is closer to 550 barrels for a peak month. That is a significant difference. This gave him the conclusion that if these wells were all the same common source of supply, draining the same reserves, why are the production results so night and day drastically different. They are also consistently different. The Cleveland zone wells are consistently poor and the deeper Marmaton zone wells are consistently good. Mr. Shepherd further testified that if these were all the same common source of supply, they were all communicating with one another and they weren't separated by this 300 feet shale barrier why are very so different? They were all drilled by the same operator, at about the same time, completed in about the same fashion and you have consistently night and a different production results. These results did not change his opinion. They further support his existing stance. He has always thought that the Cleveland and the Marmaton are separate and distinct. Page 53

54 166. He heard the testimony of Mr. Medina and Mr. Vise about the Cleveland and the Marmaton. From an engineering standpoint, if we call the Cleveland formation A and call the Marmaton formation B they are separate and distinct from one another. He has inspected and interpreted logs of the two formations and they are separated into different accumulations of oil and gas from that standpoint He believes there was "frac interference"in the original well in this section. This means there was a production decline in the well from the completion of the other wells in the section. The well did a nosedive around December, 2012, when all the wells within the section were completed. It took several months before this gas declined began to increase. He believes this circumstance was caused when the frac jobs were done in those eastern Marmaton wells that were drilled and completed east of the original well. These Marmaton wells were all in that same stratigraphic equivalent as the original well. He has seen such interference into other Marmaton wells that Mewbourne has drilled. This is not some unique phenomena that just occurred in section 10. Horizontally they are seeing some effect in the same common source of supply upon fracture stimulation. He does not believe any of that effect came from the Cleveland completions in section 10. He stated you cannot frac down and interfere through almost 300 feet of separation into the Marmaton. You have 100 to 150 feet of a shale above and below the very ductile hot black shale that is the maximum flood surface. You are not going to frac through that barrier. He further stated that he sees a separation by strata of earth between the Cleveland and the Marmaton as defined by Mewbourne. He believes these facts presented follow the law and the rules of the Commission for the spacing they are requesting Mr. Shepherd compared the first year cumulative average of the Cleveland wells versus the Marmaton wells. The cumulative average first-year all production from the Marmaton was approximately 16 times better recovery than the Cleveland. The total cumulative average production since the first year also has those Marmaton wells having approximately 16 times greater production than the Cleveland wells. He believes this definitely demonstrates that those wells were not producing from the same common source of supply. Mr. Shepherd further compared a Des Moines vertical well and a horizontal Cleveland well producing some 900 feet away. (Exhibits 46 and 47). He demonstrated that when the horizontal Cleveland well was fraced the vertical Page 54

55 well did not show any drastic production changes. He believes this supports the fact that these two intervals are separate and distinct common sources of supply. There is no communication between the Des Moines interval and the Cleveland lateral here. If you space them as one interval and drill a horizontal well in the Cleveland, the oil in the Marmaton would be wasted unless other wells are drilled. This is why he believes the spacing that Mewbourne is seeking is proper Cross-examination ensued and Mr. Shepherd agreed that he was supporting the geologist's opinion that the Cleveland and the Marmaton are different age groups. One is in the Des Moines and one is not. He has seen some Cleveland cores but not Marmaton He agreed that they are talking about a Marmaton sandstone for this area. He stated that the Marmaton sandstone is separated from the Oswego and the Big Lime. He identifies as the Marmaton that Mewbourne wants to prospect for below the maximum flood surface. That maximum flood surface is what Mewbourne calls the top of the Marmaton. What they are prospecting for is the sand directly below that. Below that could be a Marmaton B if that is the way Mr. Vise mapped it. There is a Big Lime and Oswego farther down and they are all separate. There was an objection to describing the requested spacing as the Marmaton. It was conceded that the testimony from Mewbourne was that they are seeking to space that interval within the Marmaton identified with a base and a top Mr. Shepherd agreed that Mr. Vise has stated that this interval in the Marmaton is a sandstone. He has looked at the chart identifying the Marmaton. He does not recall the chart ever specifying that the Marmaton is all one limestone. It was stipulated that the only words with in the box designated Marmaton are Big Lime and Oswego. There is not anything above that box that suggests there is a Marmaton Sandstone. Mewbourne nose this is a sandstone because they have drilled wells in it and they have cuttings that indicate it is clearly sand. He stated that they are specifying the interval within the Marmaton the top and a base for the spacing. Whether they are calling up the Marmaton sand, or the Marmaton or whether or not they are calling it zone B or what ever they are specifying that interval and he is saying it is a sandstone. He stated it was fine if they wanted to call it the Marmaton sandstone. Page 55

56 172. He agreed that he identified Chesapeake as the operator of the wells in the section that he used as his marker. One of the reasons he did that is to have a consistent operator that had some knowledge of how to do this. The spacing in that section that he picked is all Cleveland spacing. He knows that Chesapeake asked for increased density in the Cleveland for seven additional wells. They called all of these wells Cleveland wells on the 1002As. They knew there was some separation in the wells. They also stated all the wells were going to be economic and they were not. They asked for increased density in the Cleveland and it was granted by the Commission. Mewbourne has spaced the Marmaton in the past in this area. He does not remember if they included a top and bottom in those Marmaton spacings. He is pretty sure that they testified to there being a sandstone in a lot all those spacings. He knows that when they submit isopach maps they are isopaching the specific interval and specifying a top and a base. In those spacing orders he does not remember if they listed a top and a base of that interval. The isopach's that are submitted are specific to that interval Mr. Shepherd stated that he has reviewed cuttings and samples from the Cleveland as well as cuttings and samples from what Mewbourne calls the Marmaton. As they drill they see Thompson formations,they see the Cleveland sand, cuttings from the maximum flood surface, the hot shale, the black shale and then below that is where they see the Marmaton samples. He does not have the ability as an engineer to identify the difference in the sands. He does believe they are different because they are different aged rocks. He also knows there are production differences in the wells in which Mewbourne calls Cleveland and Chesapeake called Cleveland and what Mewbourne calls a Marmaton. He knows that they are mapped separately. One explanation could be that a better reservoir was encountered in one well than in another. Mewbourne has also drilled uneconomic wells in the past On redirect examination Mr. Shepherd was asked to look at pooling order number for the south half and the southwest quarter of section 27, Township 18 North, Range 24 West, Ellis County. The applicant was Chesapeake and the date of the hearing was April 12, The first page of the order described the common sources of supply as the Tonkawa and Upper Cleveland for a 640 acre horizontal unit. The next page indicated that section 27 was the subject of a prior pooling order, , dated August 2, 2010, as Page 56

57 corrected by order , (correcting nomenclature of Lower Cleveland to Marmaton). Mr. Shepherd was then asked to read the rest of the paragraph as follows:"wherein, the Hoover, Endicott, Oswego, Marmaton, Cherokee and Atoka separate common sources of supply were pooled at a full lease values (being per-acre bonus of $1,000 and a 1/8th, $750 and 3/16th, $400 and 1/5th, or no cash and a quarter) for a one-year term. Applicants presented evidence that the Marmaton common source of supply (a.k.a. Lower Cleveland) is the target of the proposed well." Mr. Shepherd agreed that Chesapeake's opinion supposedly influenced the opinion of FourPoint about the Cleveland and Marmaton Mr. Shepherd was then asked to look at a spacing order number dated March 4, 2014, with Chesapeake as the applicant for Section 33, Township 19 North, Range 26 West, Ellis County. The spaced common source of supply was designated as the Marmaton. The classification was gas and the depth was listed as 8,855. This depth equates to the maximum flood surface previously identified by Mr. Vise. He stated in 2014, Chesapeake spaced the Marmaton interval that Mewbourne wants to space and a well was drilled and completed in the Marmaton. The permit to drill for that well listed in the Marmaton as the deepest interval at 8,800 feet. That is the depth for the interval that Mewbourne seeks to space. Chesapeake also listed the Cleveland separately from the Marmaton on the permit He does not agree that the Marmaton is all limestone. From the logs of wells Mewbourne has drilled within the interval between the Oswego and the Big Lime there is other than limestone Upon recross examination Mr. Shepherd stated that the material between the Big Lime and the Oswego is shale. He stated there is nothing else on the geologic chart than the Big Lime and Oswego. He agreed that there are formations that are spaced that contain all sorts of subgroups and there are times when all you see spaced is the formation. For example, in the Mississippian there is the Mississippi Meramec, Mississippi less Chester, Mississippi Lime and others Mr. Shepherd clarified the Brearley and Deal wells are 900 feet apart. One is a vertical well and one is a horizontal well. The applicant did rest. Page 57

58 179. Mr. Kent Pinson, landman for FourPoint, was qualified as an expert witness as a land man. He prepared for this hearing by meeting with FourPoint, reviewing spacing orders, reviewing title information, activity in the area and a whole number of different Commission records. He became aware of the series of orders that deal with this Marmaton/Cleveland issue in discussions with FourPoint. He then did some research into those orders. They became aware of the orders through FourPoint's acquisition of Chesapeake interests in Roger Mills and Ellis Counties. FourPoint has made several major acquisitions there over the last two years. FourPoint acquired all of Chesapeake's well records, Commission records, title records, a large geological study of the formations and information on cores and well logs. They acquired approximately 200,000 acres. FourPoint owns percent of the Cleveland formation in the unit. This interest was acquired at about the time FourPoint became aware of the Mewbourne application in this cause In the Cleveland in this section FourPoint owns as stated, Walter Duncan has percent and Mewbourne acquired 1.25 acres. This unit was pooled and included the Douglas, Tonkawa, Cottage Grove, Cleveland, Brown Dolomite, Oswego, Cherokee Group, Atoka, Morrow, Springer, Chester, Meramec and the Hunton and wells were drilled. Mewbourne has further acquired a farmout of the Walter Duncan Oil interest. The only production in the section is in the Cleveland. The well was drilled deeper into the Morrow. Mewbourne participated in the Cleveland well with one acre Mewbourne has farmed out the Marmaton rights from Duncan Oil which were not subject to the original pooling order. FourPoint contends that the interval they now want to drill is part of the Cleveland age rock and therein lies the dispute. EOG and Chesapeake had a dispute a few years ago that was ultimately settled Mr. Pinson was given a series of orders by FourPoint to review. From his review he prepared a chart showing where Chesapeake acquired orders clarifying the nomenclature issues and the depth issues. These orders in general are establishing the tops and bottoms of the specific formations. They include the Cleveland, Big Lime, Oswego and also the Marmaton. He highlighted in yellow those sections were these orders were obtained and in relation to this section in this cause. These orders were entered as a result of the EOG/Chesapeake dispute. He agreed they say what ever they say. He also Page 58

59 knows that FourPoint takes the position, that what Mewbourne is calling Marmaton, FourPoint calls it Cleveland It is his belief as a land man that Mewbourne could only acquire additional acreage with which to participate by having some formation that was not pooled. The Marmaton was not pooled Mr. Pinson identified certain Chesapeake orders that he reviewed that provided a depth for the top and a base of the Cleveland and in some the Des Moines and other formations. He believes they were obtained to clarify the fact that there is some dispute as to the top of these various formations. Notice was given to all parties in the section and to him appears to be proper. These orders also talked about what is Cleveland and what is Marmaton. At least one of the applications gave notice to Mewbourne. Mr. Pinson noted that, to his knowledge, Mewbourne did not protest this application. At least one such order did cover the Pennsylvanian-Missouri series and the Pennsylvanian-Des Moines series. All of these were applications to clarify, modify and interpret prior orders. (Exhibits 48-69) 185. Mr. Pinson testified that he was involved in some of the initial spacings that FourPoint did in this area. In particular, Sections 21 and 22 of Township 17 North, Range 23 West established Marmaton spacing. These hearings were conducted in January, FourPoint acquired the Chesapeake interest in July, After the closing, Chesapeake transmitted all records on wells in the area. This included well files, geological data and cores analysis. Based upon those materials FourPoint modified their position relative to the Cleveland and the Marmaton Mr. Pinson stated that FourPoint is not actually Cordillera. Cordillera Energy III was sold in total to Apache. It no longer exists. FourPoint is a new company formed by the leadership of Cordillera III and has totally unrelated ownership He further testified that FourPoint has a letter of support from LeNorman Energy dated November 10, He stated that LeNorman, based upon its evaluation and expertise, supports the position of FourPoint in the spacing. Page 59

60 LeNorman also indicated that the sand shown in the E.B. King well at a depth of approximately 8,865 feet is a part of the Cleveland common source of supply by their interpretation He disagreed that this spacing was the same as the spacings in sections 21 and 22 he mentioned. Those two sections were new spacings where there was no production, no producing zones and just the normal drilling of wells. In this spacing wells have been drilled, funds have been paid to acquire interests and value has been allocated. They are trying to divest FourPoint of that acreage FourPoint filed in the increased density application in this section for the Cleveland common source of supply. Mewbourne has protested the application and the cause has not been heard yet. FourPoint also filed their own applications to clarify their orders such as in section 21 and 22. Mewbourne has protested those. Mr. Pinson believes that FourPoint is proceeding in a consistent manner as to their interpretation of the Cleveland/Marmaton. He believes it was based upon the Chesapeake information On cross-examination Mr. Pinson stated that FourPoint changed its opinion after receiving the Chesapeake data. He did not know the exact date the opinion changed. FourPoint received well cores, geological interpretation, well records, logs and other sorts of information. He knows the change occurred after FourPoint acquired the data and saw additional information that changed their opinion He agreed that FourPoint doesn't want to have their interests divested by virtue of Mewbourne's application. He agreed that if the Cleveland is not found to cover the Marmaton then they did not get that interest in the pooling. You would not be divested if you didn't own it He agreed that LeNorman drilled a well in section 11. It was the Brearley 1-11 drilled in the East half of the section. There was already a Cleveland well in the west half of the section. LeNorman reported this well as a Des Moines well. He agreed that is not a Cleveland well. He admitted that the section was spaced for the Cleveland and Des Moines. He does not know why LeNorman called the second horizontal well "Marmaton". Page 60

61 194. Mr. Pinson reviewed a letter from LeNorman to Mewbourne dated August 11, The letter referenced the Brearley 2-11 well which is in the adjoining section to section 10. LeNorman proposed to drill a horizontal Des Moines (Marmaton) well. He does not know why LeNorman would declare support for FourPoint's position and then drill a well in the interval Mewbourne has identified and reported it as Marmaton. FourPoint did solicit the letter from LeNorman. Mr. Pinson does not know what FourPoint stated to get the letter of support He stated that the spacings in sections 21 and 22 were the same as this spacing in that all three were spacing applications, they were presented to the Corporation Commission through an Administrative Law Judge and supported by geological testimony. He reiterated that they were different in that section 10 has production and is a developed area where the potential loss of reserves and value are at stake. He admitted that a spacing application is asking to create a drilling and spacing unit. He also agreed that if you seek to space the Cleveland and are successful you have a drilling and spacing unit for the Cleveland. He agreed that you must have spacing in place if you want to pool Mr. Pinson agreed that you are changing peoples rights when you space a unit. If all three spacings that were just discussed were approved rights would be affected. One of those effects is a communitization of the right to receive royalty proceeds in a unit. He stated that in sections 21 and 22 the rights are uniformed top to bottom and nomenclature does not have a huge effect on those rights. In this section spacing will definitely change rights particularly as to the working interests in his opinion The large group of Chesapeake orders were again discussed. Mr. Pinson confirmed that the earliest hearing date was March 12, 2012, and the latest hearing date was February 23, The remaining orders occurred at various dates between that range of dates. He also confirmed that the same geologist appeared and gave a relatively common interpretation in all of those orders There was lengthy testimony discussing interpretation of an order, amendment of an order, ambiguity, clarification, etc. concerning how those words affect an order and the proper methods you must utilize to achieve such an action. The final conclusion was that when you amend an order such Page 61

62 change only becomes effective on the day such order issues. Based upon that conclusion any of the orders obtained by Chesapeake did not take effect until the day they were signed. Any rights that might have vested prior to that date are not going to be changed by those orders Mr. Pinson was asked about the map with the yellow color coding concerning the sections that relate to the Chesapeake orders. There are some other sections that were owned by Chesapeake in the area of this map that were never the subject of those amendments. He does not know why those were not completed. He also did not know why Chesapeake proceeded in some cases after May, 2012, to continue spacing and/or reporting wells as Marmaton. He stated that the orders are not the basis of the change by FourPoint. The Chesapeake study, the geological information contained, the cores and the logs are the basis for their change The Chesapeake orders were sent to Carol Kinney from Freda Williams of Chesapeake. He is not aware of what prompted Ms. Williams to send the information There was further discussion concerning the spacing of the Marmaton in sections 21 and 22. Mr. Pinson verified that Chesapeake received notice in both causes. Those hearings were held January 12, 2015, and did not protest either hearing. Chesapeake had undertaken a whole cavalcade of applications that took a position contrary to what FourPoint was seeking in sections 21 and 22 but did nothing in these hearings He is aware that Mewbourne is protesting the applications to clarify or modify by FourPoint in sections 21 and 22. They are basing the change of knowledge and conditions on the Chesapeake information and additional studies that FourPoint has conducted. He stated that FourPoint intends to provide additional geological information that clarifies the spacing orders. He agreed that Chesapeake amended their orders. They changed the orders. He was not aware that a change of interpretation is not a change in knowledge of conditions. There was no top and a base of the formations in the original Chesapeake orders. In some cases to terminologies were eliminated Mr. Pinson agreed that EOG's position in their dispute was virtually identical to Mewbourne's in this matter. Chesapeake's opposition to EOG in Page 62

63 their dispute was virtually identical to FourPoint. He believes that dispute was settled by agreement of the parties. He understood that the parties would go forward and present their cases upon their individual positions He testified that the percentage of FourPoint's ownership comes from leasehold interests and pooled interests. The pooled interest covers zones including the Cleveland. He agreed that if the Cleveland does not cover what is called the Marmaton, then FourPoint does not own that percentage interest in the Marmaton. He understands that pooling is by the unit and not by the well bore in Oklahoma. He agreed that makes the relinquishment of rights that occur more severe when you space and pool parties. You should ensure that spacing is not going to be used to divest parties unnecessarily of rights by virtue of terminology only Upon redirect examination Mr. Pinson agreed that FourPoint obtained a whole bunch of new information. That is why they changed their position and intend to show a lot of that information. He agreed that Chesapeake and Mewbourne did not protest the respective hearings concerning their positions. There are a myriad of reasons why they might not have protested. He testified that it appears that J. Walter Duncan is attempting to recover his lost acres and participate again 206. Upon recross examination Mr. Pinson agreed that Chesapeake and EOG were in a very pitched battle about the issue of Cleveland/Marmaton. Then Chesapeake began a series of applications to change orders based upon this issue. Mewbourne was not involved in that dispute. He doesn't know why parties did not show up Upon redirect examination he testified that Chesapeake was selling these properties at the time of the hearings. It was possible they were not going to own these properties Ms. Carol Kinney, consulting petroleum geologist, was called as the next witness. There was no objection to her qualifications as an expert witness Ms. Kinney testified that FourPoint's position in the spacing application is that they believe this zone in question, which FourPoint calls the Lower Cleveland and Mewbourne calls the Marmaton, is in the Cleveland common Page 63

64 source of supply. They believe it is Cleveland in age and therefore a part of the Missourian Series. She believes that Mewbourne is basing some of its opinions, if not all, on the existence of the black hot shale also referred to as the maximum flood surface or MFS 40 on some of the maps She has long held the position that the marker is not the separation between the Missourian and the Desmoinesian age rocks. She has worked this area for at least a decade for JMA. In the areas of Township 16 North, Range 20 West and Township 16 North, Range 19 West, JMA has called the sand below the MFS the Lower Cleveland. She has tracked the shale and it does come and go. She stated it cannot be a regional marker to break up ages such as Missourian and Desmoinesian. It does not cover anywhere near Western Oklahoma, the area they are dealing with Mr. Medina and Mr. Vise both testified that in the absence of the MFS 40 you pick the top of the Marmaton at the first limestone, which in her opinion, is equal to the top of the Des Moines at the first limestone. She believes the top of the Marmaton is the first limestone because the Marmaton consists of the Big Lime and the Oswego. They are both limestones. She also believes that the first formation beneath the hot shale is a sandstone. She believes that that everybody who has testified in this case believes it is a sandstone Ms. Kinney looked at production in the area and logs of those wells. She looked at the Chesapeake study which she had seen in 2010 and She also looked at information furnished by FourPoint which included the Chesapeake study. She has seen the pictures of the cores and looked at portions of the cores themselves. These cores were taken from Andrews well in Section 17, Township 18 North, Range 24 West. There was considerable footage of the core taken. It covered what she calls the Upper Cleveland down through the MFS zone. There was a hot shale present in that well down to what she calls the Lower Cleveland and Mewbourne calls Marmaton. What she classifies as the Upper Cleveland and Lower Cleveland looks like two finegrained, gray sandstones that look very similar to one another. She believes they are deltaic in origin. The sand is carried down by a river and is deposited. For the most part this deposition is continuous. The lower part of the Cleveland was formed first, then the shale and then the upper part of the Cleveland. Page 64

65 CDS & Mewboume 213. She reviewed a log which within the same 640 acre unit shows one part of this section has the shale and the other part does not. She stated the recommendation of Mewbourne, if the hot shale were not present, is to use the first limestone as the top of the Marmaton. She testified that you would have to space one of those wells in what she calls the Lower Cleveland because you would not have encountered the first limestone. The other well in the same section you would space a correlatable sand as Marmaton because it is below the MFS. She does not believe that makes very much sense. She does not know if this hot shale would exist in the other half of section 10. She does not believe that the Marmaton includes a sandstone in western Oklahoma because it doesn't show it on the chart She also reviewed a portion of the one-inch induction log for the E. B. King 2-10 well. (Exhibit 71) She picked the Checkerboard marker on the log. The Checkerboard is a large, hot shale that usually has a smaller, less radioactive shale below it. It extends throughout most of the basin and is readily correlatable. It generally has a resistivity peak right above the hot shale. It is in a different category than the MFS 40. That is because it is extensive and covers most of the basin. There is also a pick for the top of the Des Moines which came from the 1002A. The operator made this pick. If you believe the operator pick, the Marmaton is equal to the top of the Des Moines. She stated that is at 9,059 feet. She believes that is what the operator picked as the top of the Oswego. She also believes there is a Big Lime in the area that is above that at approximately 8,980 feet. She believes that the Cleveland exists from the Checkerboard to the top of the Big Lime She presented this exhibit to show a log in the area, and to show she believes there are two sands in the area which she calls the Upper and Lower Cleveland. She also stated that the Upper Cleveland is above the hot shale that exists in this particular well and that the Lower Cleveland is below the hot shale but above the top of the Marmaton which she believes is equivalent to the top of the Des Moines. She believes that the Cleveland exists from the Checkerboard to the top of the Big Lime. The operator's picks, in part, supports what she is saying. Ms. Kinney testified that she did not agree with the top of the Des Moines as depicted by the operator. She indicated her pick for the top of the Big Lime on the exhibit by drawing a red line on the log and initialing it. She believes the Des Moines as depicted from the 1002A is the top of the Oswego, in her opinion. The difference from Mewbourne's opinion is that Page 65

66 they would move the Des Moines of the log to the hot shale which is at approximately 8,700 feet. (Exhibit 71 was also admitted after correction and withdrawal of objection) She then discussed the Oklahoma geological chart (Exhibit 72) and the key to the chart (Exhibit 73). The key shows what areas of the State apply to the regions designated top of the chart. The area in question is numbered 12 which is northwest Oklahoma. She stated you can go down that column and find the Marmaton. The Big Lime and Oswego are contained within that Marmaton group. To her knowledge there has only been one alteration since the chart was generated Ms. Kinney referred to the Louise Jordan book and stated that she presented a portion of that where Ms. Jordan defined the Cleveland Sand as being below the checkerboard and having two sand lobes in the area where she defined it. Below it is what she called the Oologah Lime or Big Lime. She then referred to page 45 of Ms. Jordan's work and stated that the written narrative there says the Cleveland "was named for the city of Cleveland and Cleveland field in 21 North 8 East of Pawnee County. It's a porous sandstone in the upper part of the Seminole, below the checkerboard and above the rocks of the Marmaton Group. Its divided into Upper and Lower Cleveland in many places, with the Dawson Coal separating the two sand zones." Ms. Kinney stated that it also says the Upper Cleveland is locally called the Jones Sand and the lower is the Dillard Sand. She stated that the Dawson coal is a thin coal in the area that she believes was the equivalent to what is sometimes called the Niagara Shale. She noted, therefore, that Ms. Jordan did believe there is some sort of material between the two lobes of the Cleveland. She stated that Louise Jordan was an employee of the Oklahoma Geological Survey Ms. Kinney stated that Ms. Jordan believed a Marmaton Group exists. It is a part of the Desmoinesian. (At this point Exhibits 74 and 75 were withdrawn. They are duplications of Exhibits 28 and 43 respectively) 219. She referred to a portion of a bulletin from November, 2005, entitled North American Stratigraphic Code. At page 1,566 she referred to the remarks section and Basic Units. It states: "litho stratigraphic units are the basic units of general geological work and serve as the foundation for delineating strata, local and regional structure, economic resources, and geologic history in Page 66

67 regions of stratified rocks." She then referred to section E, Independence from Time Concepts on the same page. She then read: "Independence from Time Concepts. The boundaries of most lithostratigraphic units are timeindependent." She testified that this means that units can cross time barriers. She said that the Hunton Group is an example of this. If you look at the geologic chart, the Hunton Group straddles the Silurian and Devonian systems. Also, the Arbuckle Group straddles the Cambrian and Ordovician. She further stated that the paragraph E did say that most lithostratigraphic units are time independent, that some may be approximately synchronous. This means that they sometimes do fall within one time span. She further read that: "inferred time spans, however play no part in differentiating or determining the boundaries of any lithostratigraphic unit. Either relatively short or long - - relatively long intervals of time may be represented by a single unit. The accumulation of material assigned to a particular unit may have began or ended earlier in some localities than in others; also, removal of rock by erosion either with in the time span of deposition of the unit or later, may reduce the time span represented by the unit locally. The body in some places may be entirely younger than another places. On the other hand, establishment of formal units that straddle known, identifiable, regional disconformities is to be avoided, if at all possible. Although concepts of time or age play no part in defining lithostratigraphic units nor in determining their boundaries, evidence of age may aid recognition of similar lithostratigraphic units at localities far removed from the sections or areas." Ms. Kinney stated that in FourPoint's interpretation of the Cleveland they do not believe they are straddling known identifiable regional disconformities On page 1,567 of this particular paper she referred to Ranks Of Litho stratigraphic Units. It states: "a formation should possess some degree of internal lithic homogeneity or distinctive lithic features." She believes this is what they have in the Cleveland. Ms. Kinney stated this is because there are two sands that are extremely similar in nature. According to her Mewbourne agreed that the Sands were at least 90 percent similar. She believes they are probably more similar than that. When it says a unit may contain, between its upper and lower limits, rock of one lithic type it means it may contain a sandstone of one or more rock types with in its lithics. In subparagraph (c) of that same page it states: "distinctive lithic characteristics include chemical and mineralogical composition, texture, and such supplementary features as color, primary sedimentary or volcanic structures, fossils or organic content. A unit Page 67

68 CDS & Mewboume distinguishable only by taxonomy, which is of its fossils, is not a lithostratigraphic unit but a biostratigraphic unit. She stated we are not dealing with biostratigraphic units but distinctive lithic characteristics include chemical and mineralogical composition Under Nature and Boundaries in the same document at paragraph (c), Independence from Litho stratigraphic Units she noted: "Biostratigraphic units are based on criteria that differ fundamentally from those used in lithostratigraphic units. Their boundaries may or may not coincide with the boundaries of lithostratigraphic units, but they bear no inherent relation to them. She realizes they are not dealing with biostratigraphic units. She just wanted to cover other types of stratigraphic units because there was quite a bit of discussion as to whether or not this chart was time dependent and therefore probably fossils dependent or biostratigraphic dependent. Obviously the systems are time dependent, the series are time dependent and the groups may or may not be. The formations which are generally originally described by lithology, by limestone or sandstone, are lithology dependent. That is what she believes was intended to be spaced here, lithology dependent units She formed her own conclusions and opinions from lab reports she read, looking at pictures of cores, the actual cores and pictures of the formations. She relied upon the lab report that concluded the Upper Cleveland and the Lower Cleveland are very similar in nature. To Ms. Kinney this means that they are two sandstones that were deposited in more or less the same way, certainly in the same deltaic environment, similar mineralogies, very similar structures within the sands and to the naked eye are extremely similar. Ms. Kinney was asked to look at portions of the actual core from the Enders well. Mewbourne objected because the cores were not submitted in the exhibit exchange and were not proffered. The objection was sustained. Ms. Kinney stated that she looked at the pictures of the cores and portions of the actual cores. She looked at what was represented to be a part of the Upper Cleveland and part of the Lower Cleveland. The cores of the sand of the two units were extremely similar. They were the same color, they appeared to be the same grain size and they had the same sort of shale within them. Between the two sands it graded from shale to the sand to interbedded shales and sands into the MFS, which was a black shale, which they did see a portion of in that core, and then back to the same gradational shales and sands into the Upper Cleveland. Page 68

69 223. From the core she did not see any sharp change in deposition that would indicate there was an unconformity. It looks like it was continuous deposition. She did not see any erosion between the two sand layers. From her observation the two core sections looked almost identical. A limestone would look different on the core than the sand did. These both were obviously sands. She does not think anyone disagrees that they were both sands. FourPoint just believes it's part of the Cleveland agent rock She did refer to the Chesapeake montage and the different items contained on it (Exhibits 76 and 77) and they helped her form her conclusion. She believes the same type of minerals exist in the Cleveland and the Marmaton. It all occurs in both the upper and lower zones Ms. Kinney reiterated that she was only talking about certain portions of the blown up exhibit. There was an off the record discussion of Ms. Kinney's testimony concerning portions of the Chesapeake study. She has seen portions of the core itself and she has seen pictures of the full core that was a part of the Chesapeake study She has read the remarks portion in Article 22, page 1,566, from the North American Commission on Stratigraphic Nomenclature. She read that the portion entitled "basic units". She read the first half of that paragraph into the record. It included: "basic units of general geological work serve as a foundation for delineating strata, local regional structure and economic resources". In this case she interprets economic resources to be oil and gas. The basic units involved are the production of oil and gas She has looked at the orders identified by Mr. Pinson. She looked at the exhibits in each of those orders. They type log was presented by the geologic witness in each of those cases. The log consistently shows that the top of the Marmaton group, which may in some of them be called the Desmoinesian, is what she believes is equivalent to the top of the Marmaton. In some of them it might be called the Big Lime. She also believes that the Big Lime is equivalent to the top of the Marmaton and was below the sand in question. In all of those orders the geologic witness indicated that the Sand below the MFS was Cleveland rather than Marmaton. She agrees that sand is within the Cleveland. She looked at the depths in the orders and minutes then with the Page 69

70 CDS & Mewboume logs to see that it was a portion of what the geologic witness called the Cleveland. In this case she believes the applicant is contending that this hot shale divides the Missourian and the Desmoinesian. She recognized that Mr. Medina said it was a regional marker. This hot shale does not cover the entirety of western Oklahoma. Mr. Vise believes that it goes farther than what Mr. Medina indicated. Every geologist that has testified in this case believes that it does come and go. It is only present in certain areas. She has tried to follow it by cross-section and found that even within one section it may be present in one well and absent in another. That was Section 21, Township 16 North, Range 19 West She has worked this area for over a decade for one of her clients. She brought those logs because this is an area of contention of the Cleveland. In these logs Walter Duncan marked what was Cleveland and what was Marmaton. In the log where the MFS is present, below the MFS they marked that sand zone as lower Cleveland. That well is the Grayville 1-21 in the northeast quarter. In the southeast quarter the hot shale is not present in the Grand 1-21 well. Both wells are Duncan Oil Properties wells. In either well the sand below is designated as Lower Cleveland and the Marmaton top is below that sand. All parties throughout this proceeding have agreed that if the hot shale is not present you go to the first limestone. This is traditionally how she has always mapped the Marmaton. Ms. Kinney does not believe the hot shale is older than the Cleveland. She believes it is contained within the Cleveland zone. The age of the hot shale does not tell you its aerial distribution. She believes it is below the upper sand in the Cleveland when it is present She does not believe the hot shale is an unconformity primarily because she has seen the core in the area. Obviously something was deposited because the hot shale is there. Previous to the hot shale used the inner-embedded really thin sands and really thin black shales. It gradates up into completely hot shale. To be an unconformity there needs to be some cataclysmic occurrence and there was not. It's just a gradation of sedimentation. To be an unconformity there needs to be some erosion at that point. There was not enough energy to erode. It is a quiet area In her opinion it is not a division to the age group. There are small unconformities that happened all through the geologic section but it is not an unconformity. They don't necessarily divide formations and they don't divide Page 70

71 times. Furthermore, the sands are very similar. Therefore, she believes it was the same type of deposition in the upper and the lower and there was no major break in between. The interval directly below the shale is a sandstone. The area that they are seeking to space as Marmaton is definitely a sandstone. She has worked Western Oklahoma for 30+ years and she is never seen the Marmaton defined as a sandstone. There is a distinct difference between a sandstone and a limestone The original producer in what Ms. Kinney calls the JMA/Duncan area was the Lower Cleveland. This all started in vertical wells and was the primary play. With the development of horizontal drilling operators in that area have begun to drill into what is called the Upper Cleveland. It is not as well developed and is not as good a zone A cross-section was constructed by Ms. Kinney as Exhibit 78. It is done on the Checkerboard which is above the Cleveland. She correlated a line for the MFS to show where the hot shale is in these logs. All of the logs except for the E.B. King well were operated by Mewbourne. The red line on the crosssection shows where Mewbourne picked the top of the Des Moines or the Marmaton in each of the wells. The highlighted in yellow line indicates the sand in question. She is calling in the lower Cleveland. This is her correlation and it shows that in every case where Mewbourne called the Marmaton or Des Moines the equivalent is below the MFS. The Marmaton is below the Sand they are seeking to space. FourPoint believes this interval is already contained within the Cleveland spacing During cross-examination Ms. Kinney stated that she was involved in what has been described as the EOG/Chesapeake dispute. In that process she was privy to meetings, discussions and review data that was being prepared by Chesapeake. Her client supported Chesapeake. Her client had decided they were going to support Chesapeake before she saw all of the Chesapeake information. She agrees with what her clients said and that the MFS was not the top of the Cleveland. She believed that the top of the Marmaton was the top of the lime in that area. She also felt that Chesapeake believes their study. This occurred somewhere in the time frame of 2010 or Her client wanted a conclusion that the Cleveland interval would be inclusive of what EOG was calling the Marmaton. This case was settled before the protest was tried. Page 71

72 234. Chesapeake issued 22 clarifications after this dispute to establish their point. They did not do it in every area where they owned. Ms. Kinney did not think they would do them in every area they owned if they were ready to drill in those sections. She assumed that it issued them where they wanted to actually drill. Exhibit 48 included copies of the orders concerning the sections marked in yellow where Chesapeake decided to seek this amendment. It was noted that Section 19, Township 19 North, Range 25 West was not marked in yellow but the Chesapeake Eddy Teddy well is located in that section. There were other sections noticed that were not marked in yellow and had wells in them It is Ms. Kinney's opinion, based on the geologic chart, that in northwest Oklahoma the only thing that is in the Marmaton is Big Lime and Oswego. That would include the lands here. It would include Section 2, Township 18 North, Range 25 West, Ellis County and Section 12, Township 18 North, Range 25 West. She agreed that they were adopting the same position that Chesapeake takes. For example, if you have spacing for the Big Lime and Oswego then she believes you have spaced the Marmaton. Any attempt to then add Marmaton spacing wouldn't be correct. The unit is already covered. She would be opposed to that action because it would be incorrect Ms. Kinney explained that she was not familiar with the spacing application by Chesapeake entities covering Section 2, Township 18 North, Range 25 West. She was given a compilation of documents for a horizontal spacing by Chesapeake. Order issued from an optional procedure on March 27, This order established horizontal spacing for the Marmaton covering all of section 2. The spacing plat attached to that application showed that section 2 was spaced for the Big Lime, Oswego and Cleveland. There would have been no reason for Chesapeake, if they believed their study from two years before, to file Marmaton spacing. She does not know why Chesapeake did that She was also given documents for the previously mentioned section 12. Chesapeake entities were seeking 640 acre horizontal spacing for the Marmaton. The spacing order is She agreed this would be within the area of Chesapeake's study. This cause was heard April 23, As in section 2, the Big Lime, Oswego and Cleveland were already spaced in section 12 within the spacing application for the Marmaton was made. This was after Page 72

73 Chesapeake had made their study and convinced Ms. Kinney of the accuracy and truthfulness of that study. She does not know why they did that Ms. Kinney was shown two permits to drill for the Holloway well and the Velma Mae well that identified the Marmaton. She did not know why they were still describing the Marmaton formation three years after their study instead of the Big Lime and Oswego Ms. Kinney examined the AFE for a pooling in CD presented by Chesapeake. The AFE he was for the Holloway H well. The formations described in the AFE were the Cleveland sandstone and Marmaton sand. She does not believe that exists in western Oklahoma. She does not know why Chesapeake would list that formation The montage (Exhibit 77) was made by Chesapeake to illustrate the study that they had done. To her knowledge it was intended to be an exhibit in the EOG/Chesapeake dispute. Different portions of the study were put into this exhibit and that is why it's referenced as a montage. She agreed that one of the big differences in this case is that Mewbourne and FourPoint agree that the area above the flooding surface would be Cleveland. The big difference is that Mewbourne believes the interval below the flooding surface is the interval that they seek to space and is a portion of the Marmaton. FourPoint disagrees with that. One of the things discussed in supporting that disagreement are depictions from the core of the interval above the flooding surface compared to pictures of the core of the interval below the flooding surface that were included on the montage. Ms. Kinney believe they look very similar and Mewbourne believes that you can distinguish differences from the pictures. There was extensive questions and answers concerning the possible distinct color variations, differences in shale lamina, similarity of sand, difference of deposition and other different descriptions. There were also discussions about x-ray diffraction analysis which was a part of the montage. Differences were noted in the non-clay percentage of rock in the interval of above the MFS and the interval below. Also significant differences between the upper and lower intervals in the percentage of clay in the rock. The rest of the mineral content was discussed. (a.m. portion of April 8, 2016, Tr. pages 51-69) 241. Ms. Kinney identified nine logs that were all or her cross-section she presented. These nine logs cover a pretty large area which she described as Page 73

74 going from Township 22 to Township 26. On every one of these logs she found MFS miles to the East of the easternmost log on her cross-section the MFS is not present. She agreed that in all of Mr. Vise's logs that he presented MFS 40 was found Ms. Kinney testified that she disagrees with things that are in the Hentz paper. She knows that the depiction on page 2 of that paper includes Ochiltree County, Texas, Lipscomb County, Texas and Ellis County, Oklahoma. She accepted that Hentz reviewed 1,127 logs and wells to reach those conclusions. She was questioned if her criticism of the use of MFS 40 as a marker is because it is not continuous enough despite the fact that there are 24 miles in Oklahoma that possess it as well as those Texas counties mentioned. Ms. Kinney believes that once the marker crosses the Texas line it is irrelevant in Oklahoma. She is concerned that if it's established in this area as the top of the Marmaton it will then have to be dealt with in the rest of western Oklahoma. There will be issues of when it is there and when it's not there. It is irrelevant to her because it dies out to the East in Oklahoma. Ms. Kinney stated we are not spacing in Texas but agreed that geology does not and at the Oklahoma Texas border. She believes that when an MFS continues over in Texas but stops in Oklahoma the important thing is it stops in Oklahoma. She agreed this spacing is not requested where the marker stops but spacing where it exists. She also agreed that we don't have those problems in the specific area where the MFS exists. He also agreed the rights should be controlled by the facts appropriate to the particular section. She agreed that the marker exists in this section and throughout the wells in this Township Ms. Kinney believes that the North American Stratigraphic Code is relevant to spacing in Oklahoma. She stated that the code suggests that lithostratigraphic units ought to be used for economic resources. It should be a partial basis for dividing formations. There was further discussion concerning different concepts of spacing based upon lithostratigraphy, time, the geologic chart, etc. she agreed that we have a statute and a rule that says were supposed to space a common source of supply. None of the discussion concerning concepts or the previously mentioned paper addresses common source of supply. Spacing should be completed in accordance with the law. She agreed that there are two separate common accumulations of oil and gas depicted in the Andrews well core. She agreed that the Cleveland, as depicted by her, consists of two sands that are separated by a shale interval. They Page 74

75 comprise two separate common sources of supply no matter how you denominate them It was understood that in the conventional spacing you can drill either vertical or horizontal wells. In horizontal spacing you can only drill horizontal wells. Ms. Kinney agreed if you drill a vertical well through the entire Cleveland interval, you then have the opportunity to complete and perforate the upper and lower intervals. When a horizontal well is drilled you typically target intervals. The well drilled in this section to date was drilled in the upper interval. If you assume that is a separate common source of supply, the well was never designed for, nor did it target the second common source of supply which is the lower interval. She agreed that, in light of horizontal development, you should be trying to space only the area that you intend to develop. However that is not how a horizontal spacing is conducted There ensued objection to questions concerning pooling issues. Mr. Grimes was allowed an offer of proof concerning such questions Ms. Kinney agreed that there is information on the left-hand side of Exhibit 76 that includes portions of the North American Stratigraphic Code. She did not select those portions of the code that were put on this exhibit. She had specific reference to some of the highlighted portion on this exhibit. The North American Stratigraphic Code is not exclusively limited to lithostratigraphic units. Exhibit 76 only refers to lithostratigraphic units and bile stratigraphic units. Ms. Kinney elicited the many other units that are listed in the North American Stratigraphic Code. This code does not mention the Oklahoma Corporation Commission. She read a portion of Article 22, Remarks, Paragraph A. The underlined part of the exhibit was read as follows: "lithostratigraphic units are the basic units of general geological work and serve as the foundation for delineating strata, local and regional structure, economic resources and geologic history in regions of stratified rocks." 247. Immediately above Article 22 it states: "Nature of lithostratigraphic units". It reads: "a lithostratigraphic unit is defined by the sedimentary extrusive igneous, metasedimentary or metavolcanic strata that is distinguished and delimited on the basis of lithic characteristics and stratigraphic position." "A lithostratigraphic unit generally conforms to the law of superposition and commonly is stratified and tabular in form." Ms. Kinney Page 75

76 testified that the law of superposition means that older strata are below younger strata in the section. The section gets younger as it goes up Ms. Kinney was referred back to the Paragraph A that was previously identified. There was an additional portion concerning lithostratigraphic units that starts with "they"that was not read: "they are recognized and defined by observable rock characteristics. Boundaries may be placed at clearly distinguished context or drawn arbitrarily within a zone of gradation. Lithification or cementation is not a necessary property. Clay, gravel, till and other unconsolidated deposits may constitute valid lithostratigraphic units." Her interpretation is different and she would refer back to the chart and to spacing Ms. Kinney was referred to page 1,567, Paragraph C,"Lithic Characteristics." It was read as follows: "Distinctive lithic characteristics include chemical and mineralogical composition, texture and such supplementary features as color, primary sedimentary or volcanic structures, fossils (viewed as rock-forming particles), or other organic content (coal, oilshale)." Ms. Kinney believes, using those features that are described that there are sandstones, other than the Cleveland, in the Anadarko Basin which would display similar characteristics. She believes the two sands from Chesapeake's study were more similar than the normal sand She testified that there are similar lithic features in the Douglas, Tonkawa, Cottage Grove, Cleveland, Red Fork and the Morrow Sands in western Oklahoma in that they are sandstones. There also similar because there made up of some of the same mineralogical characteristics. They are different colors and different textures Ms. Kinney agreed that the Granite Wash is spaced but is not on the geologic chart. Because it is not on the geologic chart she agreed it probably should not be spaced but it has been done. The geologic chart has not been modified since the 1950s except for one time that she knows of. She also stated that from the Nemaha Ridge the Prue and the Skinner have been extended into northwest Oklahoma. It was spaced by a geologist in that area and then moved into another. She believes lithology's are used instead of huge time zones in certain spacings. Page 76

77 252. Ms. Kinney was asked to refer to the Hentz article (Exhibit 29) and referred to page 3. In the upper right-hand in bold print is "Database and Methods. It states: the database used in this study includes (1) well log suites for 1,127 wells evenly distributed to out the 2,200 miles study area and approximately 270 feet of six new whole cores and approximately 320 feet of 4 other cores described in the 1994 study. Nine of the ten cores compose parts of the Cleveland formation, and one is from the Hepler Sandstone of the Marmaton Group. Ms. Kinney confirmed this was read correctly Ms. Kinney stated she has heard of the Hepler Sandstone and believes that has been spaced in Oklahoma in two sections. She confirmed that order number covering sections 32 and 33, Township 21 North, Range 26 West, Ellis County, Oklahoma are the sections with which she is familiar. She believes that the Hepler in Texas would be an interval in the upper portion of the Marmaton She is not familiar with a well drilled called the Purdy in section 33 referenced above. She acknowledges that the completion report for this well indicated a Cleveland perforations at 7,930 feet to 7,980 feet and Hepler perforations at 8,130 feet to 8,160 feet She agreed that the Hentz article on page 4 states under Marmaton Group: Hentz and industry workers placed the upper boundary of the Marmaton group and the top of the Desmoinesian series at the top of a regionally continuous high-gr shale marker bed, referencing figure 3, extends throughout most of the West part of the Anadarko basin. The referenced exhibit 3 identifies the Knowles well which is immediately adjacent to the section and Mewbourne is seeking to space. She agreed that the author of this work found that the MFS 40 was correlated precisely with the exposed Nuyaka Creek black shale bed of the upper Holdenville shale of Oklahoma Ms. Kinney believes that the Louise Jordan book supports her opinion where she describes the Cleveland Sand as to upper and lower sands. This statement is referenced for Pawnee County in northeast Oklahoma on the geologic chart. She examined the chart for northeast Oklahoma and located the Seminole. Immediately below the Seminole is the Lenepah Limestone and if you go to columns to the left on the chart to the McAllister Basin you see the Page 77

78 Seminole again. Immediately below it is the Holdenville. Immediately to the left is the upper portion of the Marmaton on the chart Ms. Kinney and then reviewed page 151 on the Louise Jordan article and identified the portion that shows the Patchell Sand. It is identified as Desmoinesian and Pennsylvanian. She agreed that Ms. Jordan identifies the fact that the Patchell Sand sets 70 feet below the top of the Holdenville in Garvin County, Oklahoma. In the equivalent area and Northwest Oklahoma in the upper portion of the Marmaton is the Holdenville At page 210 of the Louise Jordan book Ms. Kinney noted the description of the Wimberly Sand in Garvin County, as Desmoinesian and Pennsylvanian. The Wimberly Sand would be the equivalent of the Marmaton going across the chart to northwest Oklahoma Ms. Kinney was then asked to view page 130 of the Jordan book. She noted the passage describing the Marmaton Group as previously introduced. She concurred that the Marmaton group is listed as Desmoinesian and Pennsylvanian. That passage identifies what the group contains and indicates that the very upper interval in the Marmaton group is the Holdenville shale. She acknowledged that in other parts of the book Ms. Jordan stated that there are sandstones below the Holdenville shale within the Marmaton group and parts of the state. In that description she does not suggest that the Big Lime is the top of the Marmaton group Ms. Kinney agreed that the statements in the Chesapeake orders for spacing that were previously noted do not quote Ms. Jordan's description of the Marmaton group verbatim. She was not involved in those hearings and does not know why it was quoted differently. She also does not know what testimony was offered at those hearings. It was agreed that the Chesapeake spacing orders as worded did not wholly quote the Louise Jordan definitional portions of the Marmaton group and was not totally accurate Ms. Kinney stated that the total thickness of their defined Cleveland from the top to the base is not quite 600 feet. She thinks the Upper Cleveland thickens and thins to the East. The range of thickness depicted in the Chesapeake spacing orders shows total thickness from top to base to be 1,103 feet in order to 1,011 feet total thickness from top to base in order Page 78

79 Ms. Kinney did not agree with these depictions. It was also discerned that she cannot agree with how a portion of the orders were written concerning the Cleveland and the Jordan book. She understands that these orders incorporate all of that depth within those spacing units. She understands that these orders put the sands which are below the MFS into the Cleveland and not into the Marmaton. She has made sure that Marmaton was never picked at the MFS in her focus. These orders put a greater amount of shale in the Cleveland than she probably would have done. FourPoint succeeded to the rights created by Chesapeake through these orders. She does not know if there are any plans by FourPoint to go back and correct these orders. She believes that no matter how much shale is included in the Cleveland that the sand in question in this case is Cleveland. If the base of the Cleveland were moved up she would see no difference in the sands themselves. Both the Upper and Lower Cleveland would still be contained in the Cleveland Her complaint about the use of the MFS 40 is that she does not think it is a regional marker. She also does not believe that is an unconformity. She admitted that the Hentz paper referenced MFS 40 as being easily correlatable Ms. Kinney stated that she believed the Chesapeake orders picked the Big Lime deeper than she does. She agrees there is a shale below the lower Cleveland Sand and above the Big Lime. There was again discussion concerning page 4 of the Hentz article. She agreed that, in some areas, it has already been established that Louise Jordan recognizes that the top of the Marmaton Group contains the Holdenville shale. She agreed that, if in fact, MFS 40 is the shale marker bed it can be correlated with the Nuyaka Creek black shale bed of the upper Holdenville Shale according to Hentz. If Hentz is correct then Mewbourne is right in their approach in this case. Ms. Kinney differs from Hentz in some things she has stated Upon redirect examination Ms. Kinney testified that Louise Jordan indicates that the Dawson coal comes between the upper and lower Cleveland. She stated that just because the marker correlates to the Nuyaka Creek Shale does not make it between the Des Moines and the Missourian Ms. Kinney discussed the orders that contained language concerning the Louise Jordan book. One issue was the phrase in paragraph 6 of Mr. Reeves's order"the top of which is the Oologah Lime or Big Lime. She stated that just Page 79

80 below the verbiage in the book is a diagram of a type log. The diagram shows the Cleveland sand zone and it shows the Oologah(Big Lime) next to the log. It indicates that the checkerboard is the top zone, the Cleveland Sand is in between with two lobes in it. She also shows a little bit of shale below the Cleveland and the next thing is the Oologah or Big Lime. She stated that taken in concert with the Commissions geologic chart in northwest Oklahoma, it shows the Big Lime is the top of the Marmaton. She believes what the verbiage says is true although it is not a specific quote from the book. The other orders have offered findings of fact that talk about the geological chart and its history. They also talk about the North American Stratigraphic Code and other things done in the area. She also stated that in those hearings the court had nine exhibits and extensive testimony on which to base their decision. I also contained a type log or a one or two section cross-section. This showed where they believed the top of the Cleveland and the base of the Cleveland were and the top of what was called either Marmaton or Desmoinesian or what ever it was spaced Ms. Kinney testified that all those orders are more than thirty days old. She did not see anything that indicated there was an appeal on any of them. She believes the judges had sufficient material to render a decision. Each of those orders indicated that the top and a base of the Cleveland was below the MFS 40. Her disagreement with Mr. Boyd, the geologist for those hearings, was his top of the Big Lime. He generally picks a top lower than Ms. Kinney which makes the Cleveland thicker. This had nothing to do with the relationship of the MFS, the Cleveland or the Marmaton Ms. Kinney referred to the XRD analysis that was discussed from the montage. That analysis was from the cores that were shown. There was a summary statement concerning the cores. It read: summary, sandstones from the upper and lower Cleveland Sand contained the same suite of detrital sand size grains. She stated that this means that throughout this thin section analysis the sands were similar. The same suite of grains, same composition and same mineralogy. Mr. Grimes contended that there were all sorts of dissimilarities She has looked at the actual cores and she believes that the Upper Cleveland is not as clean and good a zone as the Lower Cleveland. So there are Page 80