BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA BOONE OPERATING, INC. VACATION OF POOLING ORDER NO

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1 BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA APPLICANT: RELEIF SOUGHT: BOONE OPERATING, INC. VACATION OF POOLING ORDER NO CAUSE CD NO LAND COVERED: NE/4 SW/4 OF SECTION 29, TOWNSHIP 7 NORTH, RANGE 4 EAST, POTTAWATOMIE COUNTY, OKLAHOMA FILE MAY COURT CLERK'S OFFICE - OKC CORPORATION COMMISSION OF OKLAHOMA REPORT OF THE ADMINISTRATIVE LAW JUDGE This cause came on for hearing before Keith T. Thomas, Administrative Law Judge (AU) for the Corporation Commission 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 the Applicant, Boone Operating, Inc. (Boone), is seeking to have Pooling Order No vacated as to numerous Respondents due to the lack of due diligence in giving said Respondents notice of the Pooling Application and notice of the hearing on the matter before an Administrative Law Judge at the Commission. Basis Resources Group, LLC (Basis) opposes this application. Basis asserts that it did in fact exercise due diligence in its attempt to give notice to all Respondents. Further, Basis states that it obtained notice by publication on the Respondents, for which it had no address, as allowed under the rules of the Commission. The Corporation Commission previously issued Order No in Cause CD , pooling oil and gas interests in the Earisboro, Bois D'Arc, Chimney Hill, Viola, Simpson Dolomite and Wilcox common sources of supply in the 40-acre drilling and spacing unit consisting of the NE/4 of the SW/4 of Section 29, Township 7 North, Range 4 East, Pottawatomie County, Oklahoma. Boone asserted that it was able to locate numerous Respondents that Basis showed in its application in Cause CD and in Order No as not having a known address and as such were notified via a mailing in care of another party. Boone further stated that Basis had received written notice of the names and addresses of a number of the Respondents who were served notice in care of another party, and that said written notice was given prior to the

2 hearing in CD Additionally, Boone states that Order No does not contain the explicit provision required by the Oklahoma Supreme Court in Harry R. Carlile Trust vs. Cotton Petroleum Corporation, 732 P.2d 438 (Okla. 1986) concerning the inquiry required to permit the Commission to approve service by publication on those owners who could not be found for actual service. Finally, Boone alleges that Basis cannot claim that service was properly obtained by either actual notice or by publication notice on all of the enumerated Respondents. Basis states that it made a good faith effort to locate all Respondents and complied with the Commission rules by publishing notice of the hearing on the matter. Therefore, Basis believes that it exercised due diligence, thus meeting the standards of the Commission. As such, Basis does not believe that Order No should be vacated as to the parties listed in Boone's application. RECOMMENDATIONS: It is the recommendation of the Administrative Law Judge that the Application of Boone Operating, Inc. to vacate Pooling Order No as to the Respondents listed in its application be granted. HEARING DATES: FEBRUARY 19, 2015 APPEARANCES: Richard A. Grimes, attorney, appeared on behalf of applicant, Boone Operating, Inc. David F. Pepper, attorney, appeared on behalf of protestant, Basis Resources Group, LLC. FINDINGS AND SUMMARY OF EVIDENCE: A. The following numbered exhibits were accepted into evidence: 1. An assignment of oil and gas leasehold interests from Basis to a list of assignees attached to said assignment. This assignment was filed of record with the Pottawatomie County Clerk on October 16, Oklahoma Corporation Commission Order No The transcript of the April 8, 2013, hearing in Cause CD A May 30, 2013, drilling title opinion by Donaldson Law, P.L.L.C. for Basis on the SW/4 of Section 29, Township 7 North, Range 4 East, Pottawatomie County, Oklahoma. Page 2 of 13

3 5. A printout of the results of a record search conducted by Boone for records in the Pottawatomie County Clerk's office with the name "Midokia Royalty", or different variations of that name. Also part of this exhibit is a December 3, 2012, oil and gas lease with Midokia Royalty Company as the lessor and with West Star Operating Company as the lessee. 6. A copy of the February 24, 1956, court order closing out the estate of Clement Davis naming Irene W. Davis as the beneficiary of all but the sum of Ten Dollars ($10.00) from the Clement Davis estate. Also part of this exhibit is a copy of the August 13, 1990, court order closing out the estate of Irene W. Davis naming Victor R. Davis and Donna Evans as the beneficiaries of an equal share in the Irene W. Davis estate. The last document included in this exhibit is a printout of the results of a record search conducted by Boone for records in the Pottawatomie County Clerk's office with the names "Donna Sue Davis Evans" and "Victor R. Davis", or different variations of those names. 7. A printout of the results of a record search conducted by Boone for records in the Pottawatomie County Clerk's office with the name "Orrin L. Beckner, III", or different variations of that name. Also part of this exhibit is a July 3, 1978, oil and gas lease with Orrin L. Beckner, III as the lessor and with Elmo Kelly as the lessee. Another document included in this exhibit is an August 29, 2011, oil and gas lease with Orrin L. Beckner, III as the lessor and with West Star Operating Company as the lessee. The last document included in this exhibit is a November 20, 2012, oil and gas lease with Orrin L. Beckner, III as the lessor and with West Star Operating Company as the lessee. 8. A printout of the results of a record search conducted by Boone for records in the Pottawatomie County Clerk's office with the name "Larry Schoemann", or different variations of that name. Also part of this exhibit is the Last Will and Testament of Larry Keith Schoemann dated February 9, A printout of the results of a record search conducted by Boone for records in the Pottawatomie County Clerk's office with the names "James William Beckner", "Hattie Beckner", and "Sarah Jayne Sharpton", or different variations of those names. 10. A November 11, 2013, request from Boone Operating Co. to the Pottawatomie County Clerk for documents. Also part of this exhibit is a letter from Sara Jayne Sharpton to Bill Gwin, Boone Operating Co. dated October 31, The letter is in regard to the heirs of Jesse A. and Hattie C. Beckner. Other documents in this exhibit include: the January 24, 1992, ratification by J. A. Beckner, III of an oil and gas lease with Hattie C. Beckner as the lessor and with Lyman W. Nichols, Jr. as the lessee; a December 23, 1991, oil and gas lease with Hattie C. Beckner as the lessor and with Lyman W. Nichols, Jr. as the lessee; an April 29, 1993, oil and gas lease with Mrs. J. A. Beckner as the lessor and with Zumyers, Inc. as the lessee; a refiled copy of an April 29, 1993, oil and gas lease with Mrs. J. A. Beckner as the lessor and with Zumyers, Inc. as the lessee; a November 15, 1984, oil and gas lease with J. A. Beckner and Cara Beckner as the lessors and with Texas Gas Exploration Corporation as the lessee; a July 22, 1985, oil and gas lease with Page 3 of 13

4 J. A. Beckner as the lessor and with Mujeeb Cheema as the lessee; a September 20, 1989, oil and gas lease with J. A. Beckner, Jr. as the lessor and with Lyman W. Nichols, Jr. as the lessee; an October 16, 1987, oil and gas lease with J. A. Beckner, Jr. as the lessor and with Halliburton Oil Producing Company as the lessee; a November 1, 1984, oil and gas lease with J. A. Beckner, Jr. as the lessor and with Martin I. Buchanan, Inc. as the lessee; and an August 31, 1993, oil and gas lease with Hattie Beckner as the lessor and with Zumyers, Inc. as the lessee. 11. A Mineral Deed filed in Pottawatomie County assigning all mineral rights from the estate of Hattie Cara Beckner to Sarah Jayne Sharpton. This exhibit also contained a Mineral Deed filed in Pottawatomie County assigning mineral rights from the estate of Hattie Cara Beckner to Sarah Jayne Sharpton. 12. This exhibit includes copies of six oil and gas leases filed in Pottawatomie County: a June , oil and gas lease with Emma Lee Boyt and Sallie Lynn as the lessors and with Elmo Kelly as the lessee; a June , oil and gas lease with Laura Lightfoot as the lessor and with Elmo Kelly as the lessee; a June , oil and gas lease with Mollie Carlton as the lessor and with Elmo Kelly as the lessee; a June , oil and gas lease with Vida Aloway as the lessor and with Elmo Kelly as the lessee; a July 8, 1978, oil and gas lease with John A. Butts as the lessor and with Elmo Kelly as the lessee; and a July 10, 1978, oil and gas lease with John Sidney Butts as the lessor and with Elmo Kelly as the lessee. 13. A copy of the November 5, 2013, Affidavit of Death and Heirship of Patsy Aloway Gaeddert regarding the decedent, Joseph Britt Willsie. This is a copy of the document filed with the Pottawatomie County Clerk. 14. A copy of a March 19, 2013, letter from Pat Gaeddert to Basis. 15. A Mineral Deed assigning minerals of Billy V. Lynn and Ruth Ann Lynn to Diane R. Becker. This exhibit also contained a copy of a September 12, 2012, oil and gas lease with the Billy V. Lynn Life Estate as lessor and with Texhoma Land Consultants, Inc. as the lessee. 16. An Affidavit of Mailing for the Notice of Hearing for the Estate of Sallie Mae Lynn filed with the Pottawatomie County District Court on February 2, This exhibit includes copies of nine oil and gas leases filed in Pottawatomie County: a November 5, 2010, oil and gas lease with Ailcie Mary Hardesty as the lessor and with West Star Operating Company as the lessee; a September 12, 2012, oil and gas lease with Billy V. Lynn Life Estate as the lessor and with Texhoma Land Consultants, Inc. as the lessee; a November 1, 2010, oil and gas lease with Vernon L. Fisher as the lessor and with West Star Operating Company as the lessee; an August 10, 2012, oil and gas lease with Troy D. Fisher, Sr. and Patricia A. Fisher as the lessors and with Texhoma Land Consultants, Inc. as the lessee; a July 30, 2012, oil and gas lease with Betty Lou Olden and Charles Leon Olden as the lessors and with Texhoma Land Consultants, Inc. as the Page 4 of 13

5 lessee; a July 30, 2012, oil and gas lease with Clyde B. Lynn and Darlene Lynn as the lessors and with Texhoma Land Consultants, Inc. as the lessee; a July 23, 2012, oil and gas lease with Billy Joe Lynn and Vickie Lynn as the lessors and with Texhoma Land Consultants, Inc. as the lessee; a May 2, 2011, oil and gas lease with Virginia A. Blakley as the lessor and with West Star Operating Company as the lessee; and an August 9, 2012, oil and gas lease with Charles D. Lynn as the lessor and with Texhoma Land Consultants, Inc. as the lessee. B. Boone called Bill Gwin to give testimony. Mr. Gwin told the Court that he is President of Boone Operating, Inc. and an oil and gas title attorney. He told the Court that he is a title attorney who has testified before the Commission on previous occasions. The Court recognized Mr. Gwin's expertise in the areas of title opinions and title research. Mr. Gwin sponsored Exhibits 1 through 17. The entirety of his testimony is contained in the transcript of the proceedings. 1. Under direct examination Mr. Gwin stated that the Applicant owns leasehold interests that give it a right to drill in the NE/4 of the SW/4 of Section 29, Township 7 North, Range 4 East, Pottawatomie County, Oklahoma. The Witness told the Court that Boone has acquired mineral deeds and oil and gas leases in the NE/4 of the SW/4 of Section 29. Mr. Gwin stated that Basis was named as Respondent in the initial application in the instant case, however, that the application was later amended to include other Respondents. Additionally, the Witness stated that Commission Order No pooled a number of common sources of supply underlying the 40 acre tract identified as the NE/4 of the SW/4 of Section 29. Mr. Gwin told the Court that Order No named Basis as operator of the unit well. The Witness stated that it is Order No that Boone is seeking to partially vacate. The Witness identified an assignment of oil and gas leasehold interest through which Basis assigned all of its interest in the Reta #1-29 well and all rights acquired by Order No in the NE/4 of the SW/4 of Section 29. Mr. Gwin stated the assignment was made to Basis and to other parties. The Witness told the Court that these additional parties were added as named Respondents in Boone's amended application. Mr. Gwin testified that all Respondents named in the instant cause received proper notice of the proceedings. Mr. Gwin testified that Order No listed Respondents to the pooling in said order and that Respondents numbered 30 through 38 did not have an address, but rather had information about the estate of a deceased person. The Witness then testified that Order No listed Respondent No. 75, Vida Aloway, with an address in care of a different person. Mr. Gwin stated that Order No showed that Vida Aloway could be contacted through Pat Gaeddert at an address in Mustang, Oklahoma. Upon questioning by Mr. Grimes the Witness told the Court that Respondents numbered as 54, 56, 57, 58, 72, 73, 74, 76, 77, 79, 82, 83 and 84 in Order No , and who are also listed in the application in the instant case, are all heirs of Vida Aloway. Mr. Gwin stated that Order No described Respondents 54, 56, 57, 58, 72, 73, 74, 76, 77, 79, 82, 83 and 84 as having an unknown address. Page of 13

6 The Witness then gave testimony regarding the transcript from the hearing in Cause CD In this hearing a Commission Administrative Law Judge (AU) heard the pooling application filed by Basis for the NE/4 of the SW/4 of Section 29, and subsequently recommended the issuance of Order No Mr. Gwin read an excerpt from the transcript. The excerpt read into the record was the testimony of Carter Hines, President of Basis. Reading from the transcript Mr. Gwin quoted Mr. Hines as telling the ALJ in Cause CD that the application in that cause showed Respondents 54 through 88 were shown as not having a known address. Continuing with his reading from said transcript Mr. Gwin quoted Mr. Hines as saying that he had searched numerous sources to locate these Respondents, but that they were "strangers to title". Mr. Hines told the ALJ in Cause CD that he and people under his direction had tried to locate those Respondents with unknown addresses. The transcript from that previous cause showed that Mr. Hines asked for the ALJ to approve notice by publication for those Respondents shown as having an unknown address. Mr. Gwin told the Court that he had reviewed the transcript of the hearing in CD and that the excerpt he read into the record in the instant cause contained the only testimony regarding notice provided in that cause. The Witness stated that there was no mention of Vida Aloway or the Respondents shown as 30 through 37 in the testimony of Mr. Hines in Cause CD Mr. Gwin told the Court that it was his opinion that at the hearing in Cause CD , Mr. Hines only asked that notice by publication be approved for Respondents 54 through 88. The Witness stated that Order No did not mention service by publication at all, nor could he find an affidavit filed in Cause CD stating that Basis asked for service by publication. Mr. Gwin stated that it was his understanding that the Oklahoma Supreme Court case Harry R. Carlile Trust vs. Cotton Petroleum Corporation, 732 P.2d 438 (Okla. 1986), requires the filing of an affidavit for service by publication as a predicate to approval by the Commission of notice by publication. Mr. Grimes asked the Witness if Order No contained any of the language regarding the Commission's approval of notice by publication that the Oklahoma Supreme Court said should be included in a pooling order. When asked by Mr. Grimes if Order No contained any such language, the Witness stated that the order did not contain the language set out in Carlile. Mr. Gwin identified a title opinion dated May 30, 2013, and addressed to Basis, then gave his testimony regarding said title opinion. The Witness told the Court that the entire SW/4 of Section 29 was the subject property addressed in the title opinion. The Court's attention was drawn to the fact that the names of the Respondents listed in Boone's Application in this cause were named in the title opinion and their net mineral acres in the SW/4 of Section 29 were shown. The Witness then identified a series of documents marked as exhibits that he believed showed he was able to locate addresses for a number of the Respondents listed as either address unknown or listed without an address by Basis in its application for the pooling of parties in the NE/4 of the SW/4 of Section 29 and in Order No Mr. Gwin told the Court that he had obtained the documents from the Pottawatomie County Clerk's office. The Witness stated that he obtained documents that would aid in a search for an address. Mr. Gwin testified he was able to find documents with either the name, and/or the address, and/or the status of the following: Ailcie Mary Hardesty, Respondent No. 30; Willie Lowell Lynn. Page of 13

7 Respondent No. 31; Vernon L. Fisher, Respondent No. 32; Troy D. Fisher, Sr., Respondent No. 33; Betty Lou Olden, Respondent No. 34; Clyde B. Lynn, Respondent No. 35; Billy Joe Lynn, Respondent No. 36; Virginia A. Blakley, Respondent No. 37; Clement Davis, Respondent No. 54; Donna Evans, an heir of Respondents 54 and 79, Clement Davis and Irene W. Davis Sykes; Victor R. Davis, also an heir of Respondents 54 and 79, Clement Davis and Irene W. Davis Sykes; Orrin L. Beckner, III, Respondent No. 56; J. A. Beckner, Jr., Respondent No. 57; J. A. Beckner, III, son of Respondent No. 57, J. A. Beckner, Jr.; Sara Jayne Sharpton, daughter of Respondent No. 57, J. A. Beckner, Jr.; Hattie Beckner, wife of Respondent No. 57, J. A. Beckner, Jr.; Larry Schoemann, Respondent No. 58; Catherine Schoemann, wife of Respondent No. 58, Larry Schoemann; Teri A. Reagin, child of Respondent No. 58, Larry Schoemann; Lori M. Schoemann, child of Respondent No. 58, Larry Schoemann; Kelly F. Schoemann, child of Respondent No. 58, Larry Schoemann; John Sidney Butts, Respondent No. 72; John A. Butts, Respondent No. 73; Emma Lee Boyt, Respondent No. 74; Vida Aloway, Respondent No. 75; Mollie Carlton, Respondent No. 76; Laura Lightfoot, Respondent No. 77; Irene W. Davis Sykes, Respondent No. 79; Billy V. Lynn, Respondent No. 82; Midokla Royalty Company, Respondent No. 83; Patsy Aloway Gaeddert, daughter of Respondent No. 75, Vida Aloway, and granddaughter of Respondent No. 84, Joseph B. Wilisie; and Sallie Lynn. Mr. Gwin then testified about a March 13, 2013, letter that Basis had received from Pat Gaeddert. The letter was addressed to Carter Hines and Basis Resources Group, LLC. The Witness told the Court that in this letter Ms. Gaeddert, the daughter of Respondent No. 75, Vida Aloway, informed Mr. Hines that she had received a letter from Counsel for Basis addressed to her mother. Mr. Gwin testified that the letter mailed to Vida Aloway was mailed to Ms. Gaeddert's address in care of Ms. Gaeddert. In this letter Ms. Gaeddert gave Mr. Hines the names and current addresses for the descendents of Vida Aloway. Additionally, Ms. Gaeddert provided the names and contact information for heirs of Respondent No. 84, Joseph B. Willsie. Mr. Gwin told the Court that he believed he identified the name, and/or the address, and/or the status, and/or the heirs of all of the Respondents listed in Boone's application in the instant case. The Witness stated that any person conducting a diligent search would have been able to locate the same information. Mr. Gwin told the Court that he did not believe that either actual service or service by publication was obtained upon the parties listed by Basis as Respondents in its application for pooling and in Order No and who are also listed in Boone's application in the instant cause. The Witness asked that Order No be vacated as to the parties listed by Boone in its application. 2. Under cross examination by Mr. Pepper the Witness told the Court that he has been hired by companies to find its Respondents in a pooling application. Mr. Gwin stated that Boone had purchased a working interest in the well that Basis drilled on the pooled acreage. The Witness told the Court that he filed the instant application to vacate the pooling order after the well on the unit had been drilled. Upon questioning by Mr. Pepper the Witness stated that the Respondents listed in the application for this cause comprised approximately 8 net mineral acres in the 40 acre tract. When asked if the Respondents named in Boone's application had marketable title, Mr. Gwin told the Court that in his opinion that not all of the Respondents had marketable title, but rather would require further inquiry. In referring to the Page 7 of 13

8 title opinion admitted into evidence, Mr. Pepper pointed out that the document showed that Sallie Mae Lynn owned no record interest in the minerals. Mr. Pepper then asked the Witness, that if Basis had this information prior to the pooling hearing, whether they would have needed to spend any more time investigating the mineral interest of Sallie Mae Lynn. Mr. Gwin cited Title S. 3. 1, Title Examination Standards, saying that if the probate proceedings for Sallie Mae Lynn addressed a mineral interest, this would have triggered further inquiry. The Witness stated that he contacted the Respondents named in Boone's application with the intent of either purchasing their minerals or leasing their mineral interest. Mr. Gwin told the Court he had not informed the Respondents that a well had been drilled. 3. On further examination by Mr. Grimes the Witness told the Court that Basis should have focused on locating the Respondents to its pooling application and not worried about the marketability of title. Additionally, Mr. Gwin stated that if Basis did not believe a party held title to a mineral interest, that party did not need to be named. The Witness testified that anyone could obtain the information he found by going to the Pottawatomie County Courthouse or going on-line and searching in the county records. In his opinion, Mr. Gwin told the Court that it would not require an inordinate amount of diligence to locate the records he presented in the instant proceeding. C. Basis called Carter Hines to give testimony. Mr. Hines told the Court that he is the managing partner and co-owner of Basis Resources Group, LLC and as such he is familiar with oil and gas operations in the State of Oklahoma. Mr. Hines stated that he has testified before the Commission on numerous occasions and has had his qualifications as an expert in the field of land work and leasing accepted by the Commission. His qualifications were retained without objection. The entirety of his testimony is contained in the transcript of the proceedings. 1. On direct examination by Mr. Pepper the Witness stated that Basis began searching records in early 2013 in conjunction with the development of the 160 acre tract identified as the SW/4 of Section 29. Mr. Hines told the Court that Basis started with the drilling of a well in the NW/4 of the SW/4 and then moved to the NE/4 of the SW/4, which is the subject of the instant cause. The Witness testified that the pooling application in Cause CD was filed, the cause was heard by a Commission AU, and Commission Order No was issued granting Basis approval of its pooling application. Mr. Hines stated that the well was drilled and completed in September of The Witness then told the AU that Basis filed an assignment in October, 2013, detailing each party's interest. According to Mr. Hines this assignment listed Boone's interest as three percent. Mr. Hines then detailed the instructions given to the brokerage doing land services for Basis. The Witness listed a number of sources he instructed said broker to search to locate all parties with a mineral interest in the Pottawatomie County tract that is the subject of this application. Mr. Hines stated that for the "most part" he believed that the broker carried out his instructions. The Witness told the Court that a search as described by Mr. Gwin could be conducted, but the search could require inclusion of additional information with the name being searched. However, Mr. Hines stated that such a search would result in a number of listings of information. The Witness added that his search was focused on the forty acre tract that is described as the NE/4 of the SW/4 of Section 29. Mr. Hines stated that he did not Page 8 of 13

9 personally go to the Pottawatomie County courthouse to conduct a search for the parties with ownership of a mineral interest in the aforementioned forty acre tract. The Witness told the Court that his contracted brokers used many of the same search engines used by Mr. Gwin. When asked by Mr. Pepper about why Mr. Gwin was able to locate the Respondents listed by Basis as either address unknown or listed without an address, Mr. Hines testified that the Lynn interest and the J. B. Wilisie Estate interest were strangers to title. Mr. Hines stated that those parties did not own an interest in the title. The Witness told the ALJ that the parties located by Mr. Gwin are third and fourth generation, who only until recently have proof of ownership of a mineral interest. Upon questioning by Counsel for Basis the Witness stated that even if the parties had been designated as curative, they would still not be shown as having an interest in the tract. Mr. Pepper then asked the Witness why Boone was able to locate the parties listed as Respondents with either an address unknown or listed without an address by Basis in its pooling application in Cause CD and in Order No Mr. Hines responded saying that the brokers that did the work were charged with locating record title owners in the forty acre tract that is the subject of this application, not record title owners outside the forty acre tract in question. The Witness told the Court that the leases presented as evidence by Boone in this cause were from the nineteen seventies and the parties in question were strangers to title then, therefore, Basis decided not to pursue them because they did not own record title. Mr. Hines stated that while Boone may have located the Respondents listed in the instant application and his brokers failed to locate those parties, he believed Basis exercised due diligence in its attempt to locate the parties. The Witness told the Court that he believed it took up to thirty days for Basis to generate the Respondent list for the pooling application in CD Mr. Hines then discussed District Court litigation between Basis and Boone that involves a number of the Respondents and their mineral interest in the forty acre tract that is the subject of the instant application filed by Boone. The Witness told the Court that he would like for the Commission to deny Boone's application, or in the alternative to stay any action on the application pending a ruling from the District Court. 2. On cross examination Mr. Grimes had the Witness inform the Court as to how Basis approaches the locating of parties to a pooling. Mr. Hines testified that the effort made by Basis was the same whether a party had marketable title or not, if the party was indexed across the forty acre tract in question. Mr. Grimes then asked the Witness about notice of the pooling application in Cause CD Mr. Hines told the Court that in the hearing for Cause CD he told the Administrative Law Judge (AU) that he had attempted to locate all the Respondents to that pooling application. The Witness stated that in that pooling he knew when an address was incorrect because of the returned notice. Mr. Hines told the Court that when a mailed notice was returned, Basis continued to search for a correct address for the party. Mr. Hines testified that no mailing was made to Respondent No. 30, Ailcie Mary Hardesty, because Basis did not have an address for her. The Witness did not know what evidence was presented to the ALJ regarding the sufficiency of showing a respondent with a probate number instead of an address that would justify notice by publication. Mr. Hines testified that the transcript of the hearing in CD showed that Basis had Page of 13

10 asked for approval of notice by publication for all parties, not just Respondents 54 through 88. Upon questioning about the vesting of title on the heirs of the deceased owner, Mr. Hines told the Court that when he knew the title owner was deceased that a search was made to locate the heirs. Mr. Hines stated that heirs would not have been named in the pooling application in CD if they were not in the title. The Witness told the Court that Basis relied upon the research of a contractor in the compilation of the Respondent list for the pooling application. Mr. Hines then told the Court that Basis had received the March 19, 2013, letter from Pat Gaeddert. The Witness stated that he also had a telephone conversation with Ms. Gaeddert on March 19, Mr. Hines testified that as a result of information received from Ms. Gaeddert the status of Respondent No. 75, Vida Aloway, was changed. The contact information for Vida Aloway was changed from address unknown to show Vida Aloway could be contacted through Ms. Gaeddert at Ms. Gaeddert's address. The Witness informed the Court that Ms. Gaeddert had also given Basis the names and addresses of other Respondents. Additionally, Mr. Hines stated that Ms. Gaeddert told Basis of the death of one of the Respondents, but supplied the names and addresses of the heirs of that Respondent. The Witness testified that the parties named by Ms. Gaeddert were not contacted because there was no proof other than the information provided by Ms. Gaeddert that those parties were in title or were direct descendents and were, therefore, strangers to title. Mr. Hines told the Court that he believed that the parties named by Ms. Gaeddert were not vested in title in the forty acre tract that was the subject of the pooling application in CD The Witness stated that at the time of the hearing in CD he did not know that the descendents of Vida Aloway were being defaulted into receiving the lowest royalty offered under Order No As to Respondent No. 83, Midokia Royalty Company (Midokia), the Witness told the Court that Midokia was not a stranger to title. Mr. Hines testified that he had several addresses for Midokia, however none were correct. The Witness stated that his son had spoken with the daughter of the principal of the company prior to the issuance of Order No , but that said order was not mailed to Midokla in care of the daughter at that time. Mr. Hines told the Court that even though Midokia was not a stranger to title they were deemed into taking an eighth royalty because they were listed as address unknown. Additionally, the Witness stated that he believed Basis exercised due diligence in its effort to locate Midokia. Mr. Hines testified that Respondents No. 30 through 38 were shown as being located through a probate case rather than as address unknown because that is how they were described in the record check. The Witness stated that Respondents No. 30 through 38 were not in title. Mr. Hines told the Court that he believed that Basis exercised due diligence in its attempt to locate all parties to the pooling of interests in the forty acre tract. D. In closing, Mr. Grimes stated that the Commission can pool the interests of parties under the police power of the State only after due process. Citing Carlile, Counsel stated that due process dictates that an applicant in a pooling must obtain either actual notice or notice by publication. Mr. Grimes stated that Basis ignored evidence that would have led to the locating of the Page 10 of 13

11 Respondents listed in the instant cause for purposes of notice. Counsel for Boone told the Court that Basis did not exercise due diligence in its attempt to locate the parties to the pooling. E. In closing, Mr. Pepper told the Court that after putting the prospect together a pooling order was obtained a few months later. Counsel stated that Basis was working toward getting the well drilled. Mr. Pepper told the Court that Boone decided six to eight months after the pooling to attempt to locate parties to the pooling, who were not notified of said pooling. Counsel stated that his client was working under the pressure of time, but that there were no such time constraints upon Boone. Mr. Pepper told the Court that Basis did in fact exercise due diligence in its efforts to locate all the parties. F. Having heard the testimony of the witnesses, reviewing the evidence presented and hearing statements of counsel, the AU took the cause under advisement and closed the record. RECOMMENDATIONS AND CONCLUSIONS: After taking into consideration all of the testimony, facts, circumstances, and evidence presented in this cause, it is the recommendation of the AU that the application of Boone be granted. It is recommended that the Respondents named in the instant application be vacated from Order No There were two issues repeated throughout the proceeding: first, whether Basis complied with the requirements for notice by publication as established by Harry R. Car/lie Trust vs. Cotton Petroleum Corporation, 732 P.2d 438 (Okla. 1986); and second, whether due diligence was exercised by Basis in its attempt to locate the Respondents to its pooling application in Cause CD These are the issues, which once addressed, allowed for a decision to be made in this cause. First, this Court considered whether Basis complied with the requirements for notice by publication as established by Carlile. Service of notice by publication in a pooling is appropriate only after an operator has proven it has exercised due diligence in its attempt to locate the parties to a pooling as prescribed under Title 12 O.S. 2004(C) (3) et seq. Therefore, it must first be determined whether Basis did in fact exercise due diligence in its attempt to locate the parties named as Respondents, thus being approved to serve notice on the unlocated parties by publication. The second issue being addressed is whether Basis exercised due diligence in its attempt to locate the Respondents to its pooling application in Cause CD As stated above, a finding that notice by publication is appropriate is dependent upon a determination that due diligence was exercised in the attempt to locate the Respondents. Basis defended the methods it used to locate the Respondents in its pooling application in CD Basis did not present any evidence showing it conducted a diligent search other than the testimony of its witness, who was not the one who actually conducted the search of records in Pottawatomie County. The contracted party that conducted the record search did not Page 11 of 13

12 testify in this cause. Additionally, Basis was aided by Ms. Gaeddert, but chose not to utilize the information supplied by her to assist in the location of the Respondents it named in its pooling application. Based upon the testimony of its witness it would appear there was a sense of urgency to get the well drilled. Even with new information regarding unlocated Respondents, Basis decided not to continue the hearing on its pooling application to a future date. A delay in obtaining a pooling order would have allowed Basis to use the information supplied by Ms. Gaeddert to conduct further research. It is clear that the information received from Ms. Gaeddert put Basis on notice that it needed to conduct further inquiry. In failing to conduct further inquiry as to the location and status of these parties, Basis acted in an imprudent manner. Boone presented a step by step process by which each of the Respondents in its application was located. Further, Boone offered extensive proof of how said Respondents could be located. The evidence presented by Boone was credible, persuasive and showed that Basis had in fact not exercised due diligence in its search for the parties named in Boone's application. The testimony of Boone's witness made it apparent that with the appropriate effort, Basis could have located those Respondents listed in Boone's Application. Whether Boone had an ulterior motive in its search for those parties shown as Respondents in Basis' pooling application and Order No is irrelevant in this matter. Did Basis conduct its search for Respondents with appropriate due diligence? This is the question the Court believes is of paramount importance. This Court believes that in the pooling application in CD , that Basis did not exercise due diligence in its attempt to locate the Respondents listed by Boone in the instant cause. As to Boone's challenge of the sufficiency of proof offered by Basis in its request for notice by publication in Cause CD , this Court finds there is no need to rule on this matter since Basis failed to exercise the requisite due diligence that would allow for the granting of notice by publication. Therefore, a determination of whether Basis met the requirements delineated in Carlile is not necessary. It is, therefore, the recommendation of this Court that as to Order No , the interests of the Respondents named in the instant application and who are described as: Ailcie Mary Hardesty, Willie Lowell Lynn, Vernon L. Fisher, Troy D. Fisher, Sr., Betty Lou Olden, Clyde B. Lynn, Billy Joe Lynn, Virginia A. Blakley, Vida Aloway, Clement Davis, Dec'd, Orvin (Orrin) L. Beckner, III, J. A. Beckner, Jr., Larry Schoemann (Deceased), John Sidney Butts, John A. Butts, Emma Lee Boyt, Mollie Carlton, Laura Lightfoot, Irene W. Davis Sykes, Billy V. Lynn (Life Estate) Remainderman: Diane R. Becker, Midokla Royalty Company, and Joseph B. Willsie, Dec'd; shall be vacated as to said order. RESPECTFULLY submitted this 13 th day of May, eith Adminis ative Law Judge Page 12 of 13

13 xc: Richard A. Grimes David E. Pepper Michael L. Decker, OAP Director Oil Law Records Court Clerk Commission Files Page 13 of 13