X Regular Inspection Re-inspect: When Necessary Re-inspection Permit Number: 0252-WG-SW-1. Field: Smackover County: Ouachita Basin: Ouachita

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1 Arkansas Dept. of Environmental Quality 3400 W. Hillsboro P.O. Box El Dorado, AR (870) Salt Water Disposal System Inspection Report AFIN: Cert. #: Type: Inspection Previous: September 29, 2003 X Regular Inspection Re-inspect: When Necessary Re-inspection Permit Number: 0252-WG-SW-1 Field: Smackover County: Ouachita Basin: Ouachita System Name: Patton-Heirs No. A-4 SWD Location: Operator: Henry Corley Properties, LLC Address: P. O Box 1103 El Dorado, AR Sec. 31, Twp. 15S, Rge. 16W N W Production Well Number Location Tank Battery Number BSWPD Henry Corley Nettie Patton No W. F. Patton Nos. 1, 2, 3 36 Patton Heirs Nos. 1, 2 23 Louis Rosen Trustee Nos. 3, 5 10 Watts No. 1 5 Fee No. 1 5 McRae Nos. 3, 5 15 Don Traylor Louis Werner Nos. T-1, T-2 30 Firewalls: See Remarks Sign Posted: Yes Total BSWPD: 367 SW Tank: O-Kay, See Remarks Injection PSI: 150 psig Photos Attached: Yes Pits: See Remarks Size/ N / A Oil Spills: See Remarks Site Appearance: Fair Inspector=s Remarks: Oil waste observed around the wellheads of multiple production well sites. Excessive oil waste & fluids observed the containment area of the saltwater tank battery site. The Patton-Heirs No. 3 production well appears to have been added to this system. Firewall berm is low at the Rosen tank battery site. Apparent siphon hoses observed at multiple tank battery sites. Two workover pits observed adjacent to the Patton-Heirs No. A-4 SWD well site. Some facilities not observed. Excessive vegetation Observed at the Smith Staples tank battery site. Drain observed unplugged at the Nettie Patton tank battery site. Inspector=s Signature: Date: September 26, 2006 Rev. May 14, 2004 kom

2 Arkansas Dept. of Environmental Quality 3400 W. Hillsboro P.O. Box El Dorado, AR (870) Production Well Number Location Tank Battery Number BSWPD Traylor Equipment Myth Nos. 1, 2, 3 8 W. A. Smith Nos. 1, 2, 3, 4, 5, 6 20 Edna Oil Company W. F. Patton Nos. 1,2,3,4,5,6,8, 10,11, Jerry & Bobby Smith Smith Staples Nos. 1, A-1 16 Rev. May 14, 2004 kom

3 September 26, 2006 Henry Corley Oil Properties, LLC P. O. Box 1103 El Dorado, AR RE: Permit No WG-SW-1, AFIN No Patton-Heirs No. A-4 SWD System Smackover Field, Ouachita County, AR Dear Sirs: On September 25, 2006, an inspection was performed on the above referenced SWD System in accordance with Department policy. It is determined that the system is not in compliance with the terms and conditions set forth in the above referenced permit. Specifically, the following was found: 1. Two workover pits observed adjacent to the Patton-Heirs No. A-4 SWD well site need to be closed. Oil waste and excessive fluids observed inside the containment area of the saltwater tank battery site. Oil waste observed around the wellheads of multiple production wells. 2. Multiple unidentified production wells observed. The Patton-Heirs No. 3 production well appears to be actively part of this system and is not listed on the current permit. Addition of production wells constitutes a permit revision. 3. What appeared to be siphon hoses were observed at multiple tank battery sites. The use of siphon hoses to discharge fluids from tank battery containment areas is not a proper method. Drain observed unplugged at the Nettie Patton tank battery site. All drains need to be plugged while unattended. Excessive vegetation observed at the Smith Staples tank battery site. 4. Some of the facilities were not observed. An updated report of the operational status of this system is necessary. This office must be notified in writing no later than October 27, 2006 with an outline of your corrective actions. In addition, please be advised that this SWD System must be constructed, operated, and maintained as permitted. Routine maintenance and remediation must be performed as needed. Annual permit fees must also be current to maintain compliance. Sincerely, Connery Salter, Inspector, State Permits Branch - El Dorado cc: encl: Keith Brown, State Permits Branch - Little Rock pictures

4 Arkansas Department of Environmental Quality Official Photograph Sheet Page 1 Subject: Henry Corley Oil Prop., LLC Patton Heirs No. A-4 SWD Permit No WG-SW Location: S. 31, T. 15S, R. 16W Smackover Field Ouachita County, AR Photographer: Connery Salter Time: 1140 The Patton-Heirs No. A-4 SWD well site. Time: 1139 System sign is properly posted. Time: 1140 The two workover pits adjacent to the Patton- Heirs No. A-4 SWD well site need to be closed.

5 Arkansas Department of Environmental Quality Official Photograph Sheet Page 2 Subject: Henry Corley Oil Prop., LLC Patton Heirs No. A-4 SWD Permit No WG-SW Location: S. 31, T. 15S, R. 16W Smackover Field Ouachita County, AR Photographer: Connery Salter Time: 1138 Excessive fluids and oil waste observed inside containment of the saltwater tank battery site. Time: 1132 The Patton-Heirs No. 3 production well observed to be active and is not on the current permit. Addition of production wells constitutes a revision to the current permit. Time: 1044 Oil waste observed around the wellhead at the Edna Oil s Patton No. 6 production well site.

6 Arkansas Department of Environmental Quality Official Photograph Sheet Page 3 Subject: Henry Corley Oil Prop., LLC Patton Heirs No. A-4 SWD Permit No WG-SW Location: S. 31, T. 15S, R. 16W Smackover Field Ouachita County, AR Photographer: Connery Salter Time: 1107 The Rosen tank battery site. Time: 1107 The use of siphon hoses (such as at the Rosen tank battery site) is an unauthorized method of discharging fluids from the containment area of tank battery sites. Time: 1107 Firewall berm is low at the Rosen tank battery site.

7 Arkansas Department of Environmental Quality Official Photograph Sheet Page 4 Subject: Henry Corley Oil Prop., LLC Patton Heirs No. A-4 SWD Permit No WG-SW Location: S. 31, T. 15S, R. 16W Smackover Field Ouachita County, AR Photographer: Connery Salter Time: 1155 The Smith Staples tank battery site observed with excessive vegetation. Time: 1151 Unidentified production well near the Smith Staples tank battery site observed. Multiple production wells unidentified or not legible. Time: 1157 Another unidentified production well near the Smith Staples tank battery site observed. Oil waste observed around the wellhead.

8 Arkansas Department of Environmental Quality Official Photograph Sheet Page 5 Subject: Henry Corley Oil Prop., LLC Patton Heirs No. A-4 SWD Permit No WG-SW Location: S. 31, T. 15S, R. 16W Smackover Field Ouachita County, AR Photographer: Connery Salter Time: 1009 Oil waste observed around the wellhead of the Edna Oil s Patton No. 11 production well site. Time: 1018 Drain observed unplugged at the Nettie Patton tank battery site. All drains need to be plugged while unattended. Time: 1020 Open ended pipes and siphon hoses need to be removed from tank battery sites.

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