April 20, George Sheffer, Desoto Field Manager Seeco, Inc. 23 Nabco Avenue Conway, AR RE: Ralph Parrish 1-17, State Permit # WG-P

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1 April 20, 2009 George Sheffer, Desoto Field Manager Seeco, Inc. 23 Nabco Avenue Conway, AR RE: Ralph Parrish 1-17, State Permit # WG-P Dear Mr. Sheffer: On April 17, 2009, I performed an inspection of the above referenced drilling site in accordance with the provisions of the Arkansas Water and Air Pollution Control Act and the regulations promulgated thereunder. The inspection revealed the following violation: There has been an unpermitted discharge of waste water from the no discharge waste water containment structure in violation of Part 1.6 of the gas well pit general permit. The above item requires your immediate attention. Please submit a written response to the finding to the attention of Cindy Garner, Water Division Enforcement Branch of ADEQ. This response should contain documentation describing the course of action taken to correct the permit violation noted. This corrective action should be completed as soon as possible, and the written response is due by date May 12, Your efforts to contain the discharge on site and limit the impact to waters of the state are greatly appreciated. I also appreciate your prompt reporting of the leak to ADEQ. If you have any questions or wish to discuss this matter in greater detail you may contact me at or by at morris@adeq.state.ar.us. Sincerely, Tony Morris District #2 Inspector ADEQ Water Division cc: Water Division Enforcement Branch Water Division Permits Branch

2 ADEQ O&G Pit Inspection Form Date of Inspection : 4/17/09 Inspector: Tony Morris Operator: SEECO Drilling Contractor: Coordinates:N , W Drilling Pad Name & No.: Ralph Parrish 1-17 State Permit # WG-P On Site Contact Person: Sam Lackey Phone #: DETAILS: Section 17, Township 9N, Range 13W County: Van Buren AFIN: Stage of Well Development: Construction of Pad Air Drilling Water Base Mud Drilling Oil Base Mud Drilling Well completion Well Finished SECTION A: Drilling Pad 1. Evidence of sediment runoff from the drilling pad or well site observed in waters of the state? 2. At the time of inspection, was evidence observed of Reg. 2 turbidity standards being exceeded? 3. Has the Operator implemented erosion and sediment controls in place to minimize sediment runoff from occurring? 4. Has Operator prepared a storm water erosion and sediment control plan or guidance document? 5. Does it appear that the erosion and sediment controls are being maintained in good operating condition? 6. At the time of the inspection was there evidence that the site had any oil/fluid spills? a. If so, were the spills properly contained, cleaned, and disposed of? b. Has the spill been reported to ADEQ? 7. Did any rerouting, filling, or channelization of any water of the state occur during drilling pad construction? a. If so, was proper authorization received? b. Evidence of any Reg. 2 violations due to construction of the drilling pad? 8. Does it appear that chemicals used in the drilling process are being stored on site properly? SECTION B: Pits and Drilling Fluids 1. At the time of the inspection was the pit or pits covered under an active permit? 2. At the time of the inspection did it appear the pit or pits meet the construction requirements as required in the permit Part II, Section A item 1? 3. If containers are used for circulation pits or mud pit, are they being maintained in a leak free state? 4. At the time of inspection, is there any evidence that the pit was not constructed with the appropriate liner? (i.e. 20 mil Synthetic Liner, Compacted Clay Liner, and/or Bentonite Liner) 5. Are there any evidence at the time of inspection, that the reserve pit is not structurally sound? ( i.e. cracks/holes in levees and/or tears/holes in liners) 6. Is there any indication that seepage is coming from pad or pit 7. At the time of the inspection was there any evidence that any pit fluids has been discharged onto the ground or into waters of the state from the pit or from drilling pad? a. If so, has the discharge been reported b. Has the fluid been properly contained, cleaned up, sampled, and disposed of? 8. Is a 2 ft. minimum freeboard being maintained in the pit? 9. Any evidence noted at the time of inspection, that the pit contained unapproved fluids or materials? (i.e. waste oil, hydraulic or completion fluids, trash, or any Nonhazardous Oilfield Waste) 10. According to on site contact person how and where are fluids disposed? a. Carrier : b. Destination: c. Type of Disposal: SECTION C : Closed out Water Based Drilling Fluids Pit Date well was finished: 1. Have all drilling fluids and/or solids been removed from the reserve pit? Prior to 4/17/09 2. Does it appear that the pit has been properly closed and seeded? 3. Has the Operator submitted a completed Statement of Disposition and NOT within 30 days of closure of pit? Comments: The levy of the reserve pit is leaking. Holes were noted in the liner and the earthen levy was observed to have considerable settlement and may be in danger of failure. Arkansas Department of Environmental Quality Date Report: April 21, 2009 Inspector: Tony Morris DW Arkansas Dept. Environmental Quality

3 Arkansas Department of Environmental Quality (ADEQ) Official Photograph Sheet Location: SEECO, Ralph Parrish 1-17, Van Buren County Photo # 1 Of 4 Date: 4/17/09 Time: 11:51 The signage at the well site. Photo # 2 Of 4 Date: 4/17/09 Time: 11:47 A crack in the levy with a shovel in the void for scale. A yard stick is lying next to the crack for additional scale. A flexible hose is visible from the sump.

4 Arkansas Department of Environmental Quality (ADEQ) Official Photograph Sheet Location: SEECO, Ralph Parrish 1-17, Van Buren County Photo # 3 Of 4 Date: 4/17/09 Time: 11:42 The reserve pit levy with a large burn hole visible in the center of the photo. Photo # 4 Of Date: 4/17/09 Time: 11:41 The leak collection sump built below the reserve pit with the contents being returned to the waste containment structure.

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7 May 21, 2009 George Sheffer Southwestern Energy P.O. Box 789 Conway, AR RE: Ralph Parish 1-17, Reserve Pit #00359-WG-P, AFIN Wolfe 1-29, Reserve Pit # , AFIN Response to Inspections Dear Mr. Sheffer: The Department has received your May 11, 2009 responses to the April 17, 2009 inspections of your drilling sites by our District Field Inspector, Tony Morris. Your letter appears to adequately address the discrepancies identified during the visit. The Department assumes the corrective actions taken will be maintained to ensure consistent compliance with the requirements of the permit. Acceptance of this response by the Department does not preclude any future enforcement action deemed necessary at this site or any other site. The Department will keep the inspections and responses on file. If future violations occur that require enforcement action, the Department will consider the inspections and responses as required by the Pollution Control and Ecology Commission Regulation No. 7, Civil Penalties. This regulation requires the Department to consider the past history of your company and how expeditiously the violations were addressed in determining any civil penalty that may be necessary for any future violations. If we need further information concerning this matter, we will contact you. Thank you for your attention to this matter. Should you have any questions, feel free to contact me at or you may me at Sincerely, Tracey Blake Enforcement Administrator Water Division