FILED JUN BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA CHESAPEAKE OPERATING, L.L.C. AND CHESAPEAKE EXPLORATION, L.L.C.

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1 BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA APPLICANTS: CHESAPEAKE OPERATING, L.L.C. AND CHESAPEAKE EXPLORATION, L.L.C. RELIEF SOUGHT: INCREASED WELL DENSITY CAUSE CD NO LAND COVERED: SECTION 12, TOWNSHIP 18 NORTH, RANGE 6 WEST OF THE IM KINGFISHER COUNTY, OKLAHOMA FILED JUN REPORT OF THE ADMINISTRATIVE LAW JUDG pourt CLERKS OFFICE - OKC -CORPORATION COMMISSION OF OKLAHOMA This cause came on for hearing before Keith T. Thornas, Administrative Law Judge (ALJ) for the Corporation Comrnission of 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. SUMMARY OF THE CASE: In this cause Chesapeake Operating, LLC and Chesapeake Exploration, LLC (Applicants) have filed an application with the Oklahoma Corporation Commission (OCC) seeking to amend applicable OCC orders to authorize the drilling of two additional wells in Section 12, Township 18 North, Range 6 West of the IM in Kingfisher County, Oklahoma. The Applicants have drilled the two additional wells in the Oswego common source of supply. However, the Applicants have not yet initiated production from the wells. The two location exceptions obtained for the wells were not protested. Further, the Applicants believe that the failure to grant the requested increased density would result in waste. Additionally, the Applicants believe that any party protesting the application for increased density alleging that the fracture stimulation of the wells will negatively impact other wells in close proxirnity is an issue under the jurisdiction of the District Court and not under the jurisdiction of the OCC. The Protestants, Bitter Creek Services, Greg Fuksa and/or Nancy Fuksa, and Fuksa Investments. Inc. (Protestants), are the owners of the O'Llern No. 1. a well located in the NE/4 of the NE/4 of Section 12, Township 18 North, Range 6 West of the IM in Kingfisher County, Oklahoma. The Protestants are concerned that the fracture stimulation of the two additional wells will negatively impact the O'Hern No. 1 sited in Section 12. It is the belief of the Protestants that any order issued in the instant cause should contain a provision stating that the Applicants would be responsible for any increase in saltwater production in existing wells that is caused by Applicants' two additional wells. The Protestants are asking the OCC to protect their

2 Cause CD correlative rights and prevent waste. RECOMMENDATIONS: It is the recommendation of the Administrative Law Judge that the Increased Well Density Application of Chesapeake Operating, LLC and Chesapeake Exploration, LLC seeking to amend applicable OCC orders to authorize the drilling of two additional wells in Section 12, Township 18 North, Range 6 West of the IM in Kingfisher County, Oklahoma be granted. HEARING DATE: APRIL APPEARANCES: Richard K. Books, attorney, appeared on behalf of Applicants, Chesapeake Operating, LLC and Chesapeake Exploration, LLC. Freda L. Williams, attorney, appeared on behalf of Applicants, Chesapeake Operating, LLC and Chesapeake Exploration, LLC. Vincent Mesis, Jr., attorney, appeared on behalf of Protestants, Bitter Creek Services, Greg Fuksa and/or Nancy Fuksa, and Fuksa Investments, Inc. FINDINGS AND SUMMARY OF EVIDENCE: A. The following numbered exhibits were accepted into evidence: I. A nine-section production plat map centered on Section 12, Township 18 North, Range 6 West, Kingfisher County, Oklahoma, containing production data, and showing the well path of the parent well and the two proposed density wells. 2. A log section from the Haymaker No. 3 located in Section 12, Township 18 North, Range 6 West, Kingfisher County, Oklahoma, provided as a type log. 3. A nine-section 4th Oswego Net lsopach map centered on Section 12, Township 18 North, Range 6 West, Kingfisher County, Oklahoma. 4. Volumetric calculations for the 4th Oswego in Section 12, Township 18 North, Range 6 West, Kingfisher County. Oklahoma. 5. An amended Respondent List tbr the Increased Well Density application in CD Paue 2 or I I

3 Cause CD B. At the request of the Court the attorneys made opening statements. C. Mr. Craig Bachhuber, a landrnan, was the initial witness for the Applicants. He told the Court that he is a professional petroleum landman in the employ of the Applicants who has testified before the Commission on previous occasions and has had his qualifications as an expert in the field of petroleurn land managernent accepted. His qualifications were retained without objection. Mr. Bachhuber sponsored Exhibit No. 5. The entirety of his testimony is contained in the transcript of the proceedings. 1. Under direct examination Mr. Bachhuber stated that the Applicants have the right to drill in Section 12. The Witness told the Court that he exercised a diligent search to locate the Respondents to the instant application and that all but two of the Respondents were located. Service was proper on all the Respondents and the Applicants requested service by publication for those that could not be located. This Court believes that Mr. Bachhuber conducted a diligent search to locate the Respondents to this application. 2. Mr. Mesis did not have any questions for Mr. Bachhuber. D. Mr. Books then called William Boyd to give testimony. Mr. Boyd told the Court that he is a professional geologist contracted by the Applicants. The Witness has testified before the courts of the OCC on numerous occasions. Mr. Boyd's qualifications as an expert in the field of petroleum geology were retained without objection. Mr. Boyd sponsored Exhibits 1 through 3. The entirety of his testimony is contained in the transcript of the proceedings. 1. Under direct examination by Mr. Books, the Witness indentified a nine-section production plat map centered on Section 12, Township 18 North, Range 6 West, Kingfisher County, Oklahoma. The rnap depicts the well path for the parent well and for both of the density wells. Mr. Boyd told the Court that the Applicants believe that three wells will be needed to fully develop the section. The wells will be producing from the Oswego common source of supply. The Witness stated that the Oswego is known to have excellent porosity, but has low permeability. Mr. Boyd testified that while the Oswego possesses hydrocarbons, a vertical well cannot access them. However, horizontal well bores can successfully access the hydrocarbons found in the Oswego. The Witness then identified a nine-section 4th Oswego Net Isopach rnap centered on Section 12, Township 18 North, Range 6 West, Kingfisher County, Oklahorna. Mr. Boyd stated that he believes that other portions of the Oswego are also potentially productive. Continuing his testirnony about the Oswego the Witness then identified a log section frorn the Haymaker No. 3, a well located in Section 12, Township 18 North, Range 6 West, Kingfisher County, Oklahoma. This log section was provided as a type log. Mr. Boyd told the Court that he used 5% for the porosity cutoff for the 4th Oswego. The Witness believes this figure can be used to calculate the volurnetrics projected for the proposed density wells. Mr. Boyd believes the proposed wells would be predominately productive of oil. The top of the Oswego is estimated to be at a depth of 6,300 feet. Mr. Boyd stated the allowable would Page 3 of I I

4 Cause CD be the norrnal 80 acre allowable for oil, or if it were to be a gas well there would be a shared unit gas allowable. Chesapeake is to be named the operator of the wells. The wells have been drilled. Mr. Boyd is aware that the related location exceptions have been approved and interirn orders have issued in those causes. 2. On cross examination by Mr. Mesis the Witness told the Court that he believes that the Applicants' wells are no closer than 600 feet from Protestants' well. the O'Hern. 3. Upon questioning by the Court the Witness stated that due to the nature of the Oswego. it is tough to drain. Mr. Boyd explained that the Oswego is a limestone and that it is ooids. Therefore, even though there is a substantial amount of oil in the zone, it is not easily recovered. The witness reiterated that due to the nature of the Oswego in the area of the proposed density wells, the hydrocarbons cannot be successfully captured by a vertical well bore. Mr. Boyd reviewed data from the Protestants' O'Hern well. Data shows that the O'Hern is producing from the 4th Oswego and the Meramec. The O'Hern was completed in 1964 and is still in production. Mr. Boyd then testified about the completion of the O'Hern well. The 4th Oswego was perforated at a depth between 6220 and 6236 feet; and the Meramec was perforated between 6700 to 7201 feet. Mr. Boyd told the Court that data shows the initial production from the Oswego in the O'Hern was 82.7 barrels of oil with 2 barrels of load water. The Witness estimated the gross overall thickness of the 4th Oswego to be 50 feet. Water should not flow any further than the extent of the fractures created during fracture stimulation (fracing). Mr. Boyd does not expect that the area impacted by the frac fluids would be any greater than the drainage area. E. The Applicants then called Kathy Romenesko to give testimony. She told the Court that she is a petroleum engineer. Ms. Romenesko stated that she has testified before the Commission on previous occasions and has had her qualifications as an expert in the field of petroleurn engineering accepted. Her qualifications were retained without objection. Ms. Romenesko sponsored Exhibit No. 4. The entirety of her testimony is contained in the transcript of the proceedings. 1. Under direct examination Ms. Romenesko stated that she believes that it will take at least two additional wells to adequately recover the recoverable hydrocarbons in the spacing unit. Ms. Romenesko understands that the Protestants are not convinced that additional wells are appropriate. The Witness then explained her volumetric calculations for oil recovery from the 4th Oswego in Section 12. It was this data on which Ms. Romenesko based her estimate of the drainage area. Ms. Romenesko estimated the original Oswego oil reserves in place to be 1.532,702 barrels, with a total of 1,010,051 barrels coming from the parent well and vertical wells in the section, which leaves an estimated 522,651 barrels of oil to be recovered from the Oswego in Section 12. Without the two additional Oswego wells in Section 12 being sought by the Applicants, there would be waste. Page 4 of 11

5 Cause CD Ms. Romenesko told the Court that there would be no advantage for the Applicants to frac into another well. There could be monetary damages assessed for harming the well of another operator. The Witness stated that fracing into another well diminishes the effectiveness of the frac. Ms. Romenesko believes that at its closest point, the lateral in the Applicants" well is 883 feet from the O"Hern. This proves the Applicants' well is compliant with OCC rule OAC 165: (c)(2)(B), which mandates that a well cannot be drilled any closer than 600 feet from an existing well. Oklahoma Corporation Commission Rule OAC 165: (c)(2)(B) states, "Six hundred feet from any other oil or gas well completed in the same common source of supply, ihe top ofwhich is feet or more in true vertical depth." The Witness acknowledged that theoretically the Applicants' wells could affect other wells. However, Ms. Romenesko does not believe the Applicants' wells to pose any abnormal threat to other wells. The Witness stated there is data showing that a horizontal well is not likely to impact a vertical well, which is even closer than the 600 feet required by the OCC. The Applicants obtained a rule variance from the OCC and drilled a horizontal 4th Oswego well approximately 150 feet from one of the Applicants' active vertical wells. The referenced wells are sited in Section 21, Township 18 North, Range 6 West in Kingfisher County, Oklahoma. Ms. Romenesko told the Court that the fracture stimulation conducted on the horizontal well had no effect on the vertical well. The Witness then gave the Court another example of a horizontal well drilled in close proximity to a vertical well. A horizontal well in Section 30, Township 18 North, Range 6 West in Kingfisher County was drilled 510 feet from a vertical well. Like the first example given, the fracture stimulation of the horizontal well did not negatively affect the vertical well. Based upon the data reviewed the Witness does not believe that the Applicants" horizontal density wells in Section 12 will have a negative effect on the Protestants' well. Ms. Romenesko told the Court that Applicants' two density wells have been fraced and fluids are flowing back at this time. The Witness testified that the Applicants would know if the frac were impacting the Protestants" well. Currently, there is no evidence that the fracture stimulation of the Applicants" wells has negatively impacted Protestants" well. Ms. Romenesko believes that waste will occur if the OCC does not allow the drilling of additional wells in the section. 2. On cross examination by Mr. Mesis the Witness told the Court that the 4th Oswego should have a thickness of approximately 30 to 50 feet. Ms. Romenesko acknowledged that the interval encountered in the horizontal wells previously referenced is the same 4th Oswego from which the vertical wells produce. The Witness stated that the reason the Applicants monitored those wells was to determine whether existing wells were being impacted by the fracing of newly drilled horizontal wells. Ms. Romenesko testified she believed that the fracing of a horizontal well sited at 150 feet from a vertical well without any impact indicates the distance of the frac was less than 150 feet. However, the Witness added that it is not about the distance, but rather it is about **joining up" the unconnected porosity, the oomoldic porosity. Page 5 of I I

6 Cause (7D Ms. Romenesko stated the porosity of the 4th Oswego in Section 12 averages 14 percent, but could not recall the porosity of the zone in the existing wells. The Witness told the Court that when considering the effect of the frac, the type of porosity is more relevant than the percentage of porosity. Ms. Romenesko acknowledged that she cannot testify that the porosity of the 4th Oswego found in the Oliern is the same as the porosity of the 4th Oswego in Applicant's wells. The Witness believes the tightness of the reservoir determines how the frac behaves. Additionally. Ms. Romenesko stated the 0"Hern should have a similar tightness as the Applicant's 4th Oswego wells in the immediate area. Upon questioning by Mr. Mesis the Witness told the Court that the 30-degree phasing of the perforations in the casing would not cause the frac to impact existing wells. Ms. Romenesko acknowledged that if the Applicant's fracing of wells adversely impacted existing wells. waste would occur. 3. On redirect examination by Mr. Books the Witness reiterated that to the best of her knowledge the fracing of the two most recent wells has not adversely affected existing wells. Ms. Rornenesko is not aware of any wells that have been harmed by the Applicants" fracing of the two referenced wells. Finally, the Witness again told the Court that without the drilling of additional wells there would be waste in the amount of 500,000 barrels of oil. 4. Mr. Mesis then conducted additional cross examination of the Witness. The most recently drilled wells were &aced last week. Notice of the Applicants" ilacing operations was given to the Protestants. Ms. Romenesko stated that notice was provided so the Protestants could shut-in the 0"Hern well if that is what the Protestants desired. The Witness acknowledged that she does not know whether the Protestants are aware if the fracing of the Applicants" well impacted the OTIern. 5. Upon questioning by the Court the Witness stated that in the two previously referenced Kingfisher County horizontal wells drilled in Section 21, Township 18 North, Range 6 West, and Section 30, Township 18 North, Range 6 West: the lateral stayed in the 4th Oswego. There is a layer of shale above and below the 4th Oswego. Due to the presence of the shale above and below the 4th Oswego, if the lateral deviated from the target zone it would be easily determined. Ms. Romenesko told the Court that she reviewed data on the O'Hern available from IHS and the OCC. As to how the 01-lern was completed the Witness suggested that based upon her knowledge of the completion methods used at the time the OTIern was drilled, she postulated that most likely the well was perforated and then received an acid job. Ms. Romenesko is not aware of the 0"Hern being fraced at a later date. Further, she has not seen any records to suggest that the well has been subjected to subsequent completion rnethods. The available data shows that during the last 12 months of production, the CcHern produced an average of slightly more than 1.5 barrels of oil per day. If the well was fraced during its original completion, it is unlikely that any fractures opened at that time are still open today. The Witness stated that it would take four or perhaps five wells to effectively drain Section 12. Ms. Romenesko reiterated that at its closest point the 0"Hern is 883 feet from Paue 6 of I I

7 Report of thc Administrativ e Law Judge Cause CD the Applicants' well. In response to the Court's questioning the Witness stated that if the O'Hern was shut-in while the Applicants fraced its wells, the Protestants' well would just now be going back into production. If the O'Hern was shut-in while the Applicants fraced its wells, any impact of that frac would be known immediately following the O'Hern being returned to production. If the fracing of the Applicants' wells were to impact Protestants' well, any increase in fluid production experienced by the O'Hern following the fracing of the Applicants' wells would be frac fluids and not reservoir water. An analysis of the fluids produced by the O'Hern would determine if the Applicants' wells are the source of the increased fluid production experienced by the O'Hern. 6. Mr. Mesis then had additional questions for the witness based upon the questioning of the Court. Counsel asked why the nine-section 4th Oswego Net Isopach map admitted as Exhibit No. 3 appeared to show the trajectory of one of the laterals being no more than 680 feet from the O'Hern. Ms. Romenesko stated that the exhibit does not show the actual well path of the lateral. The actual well path of the lateral will be provided to the OCC when the Applicants file the final paperwork for the well. F. In closing, Mr. Books stated that the Applicants presented evidence that clearly showed the need for two additional wells in the drilling and spacing unit. The Protestants are not opposing the need for the two additional wells. Mr. Books stated that the Protestants are concerned that the proposed wells will damage existing wells. Counsel told the Court that the issue of darnage is not appropriately challenged in an increased density proceeding. The proposed wells are at a legal distance of 600 feet from the Protestants' well. Mr. Books postulated that the drilling of the proposed wells is an issue that should have been raised by the Protestants at the hearing on the location exception application. Further, Mr. Books stated that Mr. Mesis is seeking a declaratory judgment from the OCC on behalf of his clients. Counsel added that the relief being sought by the Protestants is a matter for the District Court and not the OCC. Mr. Books told the Court that the Applicants' wells will not damage existing wells in the spacing unit. Flowever, if existing wells were to be damaged by the Applicants' wells, the District Court would possess jurisdiction over such a matter. Counsel added that a determination by the OCC of whether the Applicants' wells caused damage to the Protestants' well would be prospective and as such would be inappropriate. Mr. Books emphasized the only issue to be decided is whether the application for two additional wells should be approved by the OCC. G. Mr. Mesis then rnade his closing statement. Counsel stated that the Protestants recognize the need for additional wells in the unit, but do not want the drilling of such wells to be detrimental to existing wells. Mr. Mesis asked this Court to find that if the Applicants' wells damage the Protestants. well, that the Applicants' would be liable for any damage caused by fluids used during the fracture stimulation of Applicants' wells. The Protestants believe that the production history of the O'Hern well would make a determination that the Applicants' wells are the cause of any such darnage possible. Mr. Mesis told the Court that the Applicants' witness testified that Pne 7 of I I

8 Cause CD an analysis of water produced by the O'Hern would easily determine if frac fluids used on the Applicants' wells are present. Counsel stated that 52 OS 87.1 gives the OCC the authority to make such a finding because said statute bestows on the OCC the statutory authority to protect correlative rights and prevent waste. The Protestants ask the Court to recommend that any order granting the Applicants' increased density application include a specific finding protecting correlative rights and preventing waste. Mr. Mesis stated that his clients do not want the Applicants' insistence that any claims of damage to the Protestants' well be heard by the District Court, to be changed into an argument before the District Court that jurisdiction lies in the courts of the OCC. A11 the Protestants are seeking is the protection of their rights. H. Mr. Books made an additional statement in closing. Counsel for the Applicants told the Court that they do not object to a finding in the order that any cause alleging damage lies in the District Court. In any such action in the District Court, the Applicants will not contend that the OCC has jurisdiction over the matter. The OCC cannot award damages, nor can it issue a declaratory judgment stating that the Applicants are liable for any damage to the Protestants' well. Having heard the closing staternents of the parties, the AL.I took the cause under advisement and closed the record. RECOMMENDATIONS AND CONCLUSIONS: The issue in controversy in the instant cause is not whether additional wells in the unit are needed, but rather if the granting of the density application could result in damage to existing wells by the fracture stimulation of the Applicants' density wells. Thus, at issue is whether an OCC order allowing the Applicants' density wells would prevent waste and would be protective of correlative rights. The Applicants provided substantial and reasonable evidence in support of their application for increased density. Mr. Boyd and Ms. Romenesko presented documentary and testimonial evidence establishing the need for the two requested density wells. To determine whether the Applicant presented sufficient evidence for a finding that the two requested density wells are warranted this Court relied upon case law and the Oklahorna Constitution. In its decision in Samson Re.sources Company vs. The Oklahoma Coiporation Commission and TX0 Production Cotp., 742 P.2d 1114, (Okla. 1987) the Oklahoma Suprerne Court cites Article 9, 20 of the Oklahoma Constitution. The Samson Court states that when reviewing the sufficiency of evidence to support the OCC's findings of fact, the Supreme Court's review is lirnited to whether the conclusions reached by the OCC are based upon the law and substantial evidence. The Samson Court goes on to say that in reviewing the sufticiency of evidence presented to the OCC the Court does not include the weighing of said evidence, but rather said review involves a determination of whether the evidence possessed substance and Page 8 01 I I

9 Report of the Administratise 1.as Judge Cause CD 2016(14276 relevance. This Court then reviewed Article 9, 20 of the Oklahoma Constitution. Article 9, 20 of the Oklahoma Constitution states in part, "In all other cppeals orders of the Corporation the review by the Supreme Court shall not extend jitrther than 10 determine whether the Commission has regularly pursued it.s authority, and whether the,findings and conclusions of the Commission ctre smytained by the kill' and substantial evidence. - The Oklahorna Supreme Court had previously addressed the issue of sufficiency of evidence in Hester vs. Sinclair Oil and Gas Company, 351 P.2d 751, (Okla. 1960). In Hester, the Court reversed an OCC order because the OCC did not rely on "substantial- evidence. In another attempt to define "substantial evidence" the Oklahoma Supreme Court in Union Texas Petroleum v. Corporation Commission, 651 P.2d 652 (Okla. 1981), states that substantial evidence possesses substance and is of relevant consequence. It is the opinion of this Court that the Applicants presented sufficient evidence, as defined by the Hester Court, the Union Texas Petroleum Court, and the Samson Court, supporting the need for two additional wells in the unit. The Protestants acknowledged that they are not protesting the need for additional wells in the unit, but rather the Protestants are concerned that said additional wells could damage existing wells. On cross examination of the Applicant's witness, Ms. Rornenesko. Counsel for the Protestants focused on the proximity of the Applicants' wells to the O'Hern and the likelihood of frac fluids used on the density wells reaching the O'Hern. In reaching a decision in the case at bar this Court recognized the fact that the Protestants were protesting the application because they were concerned about the potential threat to the O'Hern well. The Protestants allege that the Applicants' density wells pose a threat to the O'Hern. It is the belief of the Protestants that frac fluids used on the Applicants' wells will damage Protestants' well. This allegation raises two jurisdictional questions: whether the OCC has jurisdiction over sub-surface trespass cases; and whether the OCC has jurisdiction over a determination that any prospective damage to the Protestants' well by the Applicants' wells would result in waste and would also be violative of correlative rights. In considering whether the fracture stimulation of the Applicants' wells could result in sub-surface trespass this Court recognizes that the Oklahoma Court of Civil Appeals has held that the jurisdiction to determine whether sub-surface trespass has taken place does not lie with the Corporation Commission. In Fastar Resources, Inc. vs. Oklahoma Corporation Commission, 917 P.2d 480, (1996 OK CIV APP 35) the Oklahoma Court of Civil Appeals stated that the Commission's statutory jurisdiction is to prevent waste and protect correlative rights. The Vastar Court's decision is consistent with the decision of the Oklahoma Supreme Court in Southern Union Production Company V.S. Oklahoma Corporation Commission, 465 P.2d 454, (Okla. 1970) in which the Supreme Court cites its decision in Kingwood Oil Company vs. Hall-Jones Oil Corporation, 396 P.2d 510, (Okla. 1964). In citing Kingwood. the Southern Union Court states that 52 OS 87.1 does not confer upon the OCC jurisdiction to hear cases for Pale 9 of I I

10 Cause (1) damages sounding in tort. Additionally, the Southern Union Court states that the District Court has jurisdiction over all civil or criminal cases unless otherwise dictated by the Oklahorna Constitution or by statute. The Southern Union Court goes on to find that the OCC is a "tribunal of lirnited jurisdiction". Further. the Southern Union Court cites one of its previous cases, Gibson vs. Elmore City Telephone Co., 411 P.2d 551, (Okla. 1966), stating that the OCC is without authority over disputes between private persons or entities, in which the public interest is not involved. The Vastar Court states that the Commission's statutory authority is to prevent waste and protect correlative rights. The Protestants are to be held to the sarne standard of proof as the Applicants. However. the Protestants failed to present any evidence that the wells proposed by the Applicants pose a threat to the O'Hern. This Court notes that unlike the Applicants, the Protestants failed to present sufficient evidence as defined by the Hester Court. the Union Texas Petroleum Court. and the Samson Court. Since the Protestants did not present evidence supporting their contention that the fracture stirnulation of the density wells would cause damage resulting in waste and would not be protective of correlative rights, there can be no finding that said density wells would be violative of either. Without such a finding this Court must rely on the evidence presented and upon the rules regulating the density of wells in a unit. The Applicants presented evidence that the closest point between the density wells and the O'Hern is at a location compliant with the rules of the OCC. As previously stated, rule OAC 165: (c)(2)(B) addresses the minimum distance between the completion interval of a horizontal well and another well completed in the same cornmon source of supply. Since the Applicants' wells are in compliance with the rules of the OCC, without evidence to the contrary this Court rnust find that the wells were drilled and completed in a rnanner that prevents waste and protects correlative rights. Filially. this Court agrees with Counsel for the Protestants that 52 OS 87.1 gives the OCC the authority to issue orders that protect correlative rights and prevent waste. However, the OCC cannot issue a declaratory judgment stating that one party is prospectively liable for any damage to another party's well. If the O'Hern is damaged and said darnage is deterrnined to be a result of the fracture stimulation of the Applicants' wells, then the courts of the OCC can consider whether the Applicants' wells failed to prevent waste and protect the correlative rights of the Protestants. The Protestants did not present evidence that the O'Hern has been damaged, therefore, any finding that the Applicants' wells caused waste and are not protective of the Protestants' correlative rights is premature. After taking into consideration all of the testimony, evidence, facts, circurnstances, and statements presented in this cause, it is the recommendation of the ALJ that the Increased Well Density Application of Chesapeake Operating, LLC and Chesapeake Exploration, LLC seeking to arnend applicable OCC orders to authorize the drilling of two additional wells in Section 12, Township 18 North, Range 6 West of the IM in Kingfisher County, Oklahoma be granted. l'aae I 0 of 11

11 Cause CD RESPECTFULLY submitted this 23rd day ofjune, Keith T. mas Admin trativ aw Judge xc: Richard K. Books Freda L. Williams Vincent Mesis, Jr. Michael L. Decker. OAP Director Oil Law Records Court Clerk Commission Files Page 11 all