BACKGROUND INFORMATION ON GAS WELL PERMITS GW09-58 and GW09-67

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1 BACKGROUND INFORMATION ON GAS WELL PERMITS GW09-58 and GW09-67 Permit Chronology The Railroad Commission of Texas (RRC), Oil and Gas Division, on October 6, 2009, issued Amended Permit Number for the Westpointe 1H well. On November 30, 2009, the RRC issued Permit Number for the Westpointe 5H. Both wells will be drilled from the Rocking Horse Drill Site. This drill site is located at 1300 Caplin Drive and the permits state this well site shall be completed and produced in compliance with all applicable RRC rules and regulations. Copies of the approved permits to drill and survey plans were provided as required in the City of Arlington s Gas Drilling and Production Ordinance. Gas Drilling and Production Ordinance Components Proximity to Residential/School Structures and Park The closest residential structure is approximately 447 feet to the east of the nearest wellhead. The closest school is approximately 2,800 feet southeast and the nearest park is approximately 3,100 feet east of the nearest wellhead. However, the nearest protected use is a Day Care facility located 387 feet northeast of the wellhead. It shall be unlawful to drill any well, the center of which, at the surface of the ground, is located within 600 feet from a park or within 600 feet from a protected use for which a building permit has been issued on or before the date of the application for a drilling permit; within 25 feet from any outer boundary line of the drill well site; 25 feet from any storage tank, or source of ignition; 75 feet of any public street, road, highway, or future street, right-of-way, or property line; 100 feet of any building accessory to, but not necessary to the operation of the well; or 200 feet to any fresh water well. The distance shall be calculated from the well bore, in a straight line, without regard to intervening structures or objects, to the primary structure of the protected use or park boundary. The submitted site plan illustrates that the calculated distance from the center of the well bore does not meet the minimum setback requirements for protected uses. Chesapeake Energy submitted a request for City Council s consideration to reduce the setback distance for the Rocking Horse Drill Site to a distance of 387 feet. Chesapeake obtained written consent from 60 percent of the surface property owners within a radius between 300 and 600 feet around this well. The process to reduce the setback requires a simple majority affirmative vote from City Council. With approval of gas well permits GW09-58 and GW09-67, City Council will reduce the protected use setback distance from 600 feet to 387 feet. Well Setbacks for Gas Well Permit The location of all proposed improvements and equipment, including the location of the proposed well, tanks, pipelines, compressors, separators, storage shed and trailers are depicted on the site plan and are in compliance with the setback regulations. Tank batteries, well facilities, and equipment shall be located at least 100 feet from an existing protected use or a protected use for which a building permit has been issued on the date of the application for a drilling permit is filed. The position of the well-bores, separators, meters, tanks, flow lines, and security fencing are shown in the submitted site plan and meet all distance requirements. The top of the tanks shall be no higher than eight feet above the terrain surrounding the tanks and shall be setback pursuant to the standards of the Railroad Commission and the National Fire Protection Association, but in all cases, shall be at least 25 feet from any public right-of-way or property line.

2 Page 2 of 4 Pipeline Route Proposed pipeline access to this site is not known at this time. Fencing Fences shall not be required on drill sites during initial drilling, completion or re-working operations as long as 24-hour on-site supervision is provided. A secured entrance gate containing a Knox-Box keybox or pad lock or equivalent shall be required. All gates are to be kept locked when the Operator or his employees are not within the enclosure. Within 30 days after completion of the final well, all operation sites shall be completely enclosed by a solid masonry wall and vegetation. An alternative fence with vegetation may be approved by the City Council as a condition of the gas well permit. Landscaping Landscaping and irrigation shall be provided as identified in the approved specific use permit. It shall be the responsibility of the Operator to comply with the City's landscaping ordinance including tree preservation/mitigation and maintenance. Landscaping must blend with the environment and existing surrounding area. Landscaping must be installed within 30 days from the completion of the permitted gas well. Landscaping shall be provided along all four sides on the outside of the masonry wall in accordance with the standard detail provided on the submitted SUP site plan. Landscaping provided along the Collins Street frontage will be installed prior to the commencement of drilling activities and consists of eight Cedar Elm trees. Installation of the remaining landscaping around the perimeter of the masonry wall is required within 30 days from the completion of the permitted gas well and consists of five Cedar Elm trees and 40 Eastern Red Cedar. Vehicle Routes Vehicles associated with drilling and/or production in excess of three tons associated with drilling and/or production shall be restricted to such streets designated as either truck routes or commercial delivery routes by the City Code wherever capable of being used. The vehicles shall be operated on a truck route wherever capable of being used. The vehicles shall be operated on a commercial delivery route only when it is not possible to use a truck route to fulfill the purpose for which such vehicle is then being operated. Commercial delivery route means any street or highway so designated by the City Council for the use by any commercial motor vehicle, truck-tractor, trailer, semi-trailer, or any combination thereof. The City Council may restrict the hours of operation of vehicles associated with drilling and/or production when the proposed vehicle route passes through a designated school zone. The Department of Public Works and Transportation shall review the vehicle routes to determine if a proposed route includes a designated school zone. The applicant indicated traffic to the Rocking Horse Drill Site will commence at Interstate 20 Highway (I-20) and travel south along Collins Street for approximately 0.8 miles and past the site on the left. Make a U-Turn at the existing Collins Street median opening and travel north approximately 0.05 miles to the site access road on the right. Leaving the site, traffic will travel north on Collins approximately 0.7 miles to I-20. Water Demand The applicant proposes to enter into an Agreement with the City to lease a water meter, hook it up to a nearby fire hydrant, and purchase approximately four million gallons of water per well. The approved water site plan limits the rate of withdrawal to a maximum of 1,000 gallons per minute.

3 Page 3 of 4 Road Damage Assessment Study A Road Damage Assessment Study was calculated as required, based on the submitted transportation route. The result of the calculation determined the Operator s responsibility was $ per well, which was paid on December 8, Work Hours Site development, other than drilling shall be conducted only between the hours of 6:00 a.m. and 7:00 p.m., unless otherwise stipulated by City Council during the public hearing. Noise Restrictions No well shall be drilled, redrilled or any equipment operated so as to create any noise which causes the exterior noise level, when measured at the well setback required by the Gas Drilling and Production Ordinance, to exceed the ambient noise level by more than five decibels (db) during daytime hours and more than three db during nighttime hours. Fracture stimulation (fracing) operations shall not exceed the ambient noise level by more than seven db. Backflow operations shall not exceed the ambient noise level by more than five db during nighttime hours. Production operations shall not exceed the established predrilling ambient noise level. The Operator shall be responsible for establishing and reporting to the City the pre-drilling ambient noise level prior to the issuance of a gas well permit. Once the drilling is complete, the Operator shall be required to establish a new ambient noise level prior to the installation of any new noise generation equipment. The exterior noise level generated by the drilling, redrilling, or other operations of all gas wells located within 600 feet of a protected use shall be continuously monitored to ensure compliance. The cost of such monitoring shall be borne by the Operator. Acoustical blankets, sound walls, mufflers, or other alternative methods may be used to ensure compliance. All soundproofing shall comply with accepted industry standards and subject to approval by the Inspector. The sound level meter used in conducting noise evaluations shall meet the American National Standards Institute's standard for sound meters. A 24-hour pre-drilling sound level survey was performed at the Rocking Horse Drill Site from September 8 to 9, On-site noise monitors recorded the ambient noise level and established the 24-hour average sound level at 51.8 dba. During drilling, the allowable daytime sound level is 54.8 dba and the allowable nighttime sound level is 56.8 dba. Fracing operations shall not exceed a 58.8 dba noise level. Signage A sign shall be immediately and prominently displayed at the gate on the fencing. Such sign shall be durable material, maintained in good condition and, unless otherwise required by the Railroad Commission, shall have a surface area of not less than two square feet nor more than four square feet. The required sign shall display the well name and number, the name of Operator, the emergency 911 number, and the telephone numbers of two persons responsible for the well who may be contacted in case of emergency. Permanent weatherproof signs reading DANGER NO SMOKING OR OPEN FLAME ALLOWED, PELIGRO NO FUMAR 0 INICIAR LLAMA EN ESTA AREA shall be posted immediately upon completion of the well site fencing at the entrance of each well site and tank battery or in any other location approved or designated by the Fire Chief of the City. No other signs shall be permitted on the site except as required by the Railroad Commission.

4 Page 4 of 4 Bond, Letters of Credit, Indemnity, Insurance Prior to the issuance of a Gas Well Permit the Operator shall provide the Inspector with a security instrument in the form of a bond or an irrevocable letter of credit. In addition to the bond or letter of credit, the Operator shall carry a policy of insurance. Insurance and security documents have been provided by the applicant as required. In the event such insurance policy is cancelled, the Gas Well Permit shall be suspended and Operator s right to operate under such Gas Well Permit shall immediately cease until the Operator files additional insurance. All insurance must be current prior to the Building Official issuing a Gas Well permit. Periodic Reports The Operator will be responsible for notifying the City s consulting Gas Well Inspector of any change to the name, address, and 24-hour phone number of the persons with supervisory authority over drilling operations. The Operator will also be responsible for providing a copy of any incident report or written complaints submitted to the Railroad Commission. The City s Gas Well Inspector may conduct periodic inspections to determine that the well(s) are operating in accordance within proper safety parameters as set out in the Gas Drilling and Production Ordinance. Clean up and Maintenance After the well has been completed or plugged and abandoned, the Operator shall clean the drill site or operation site, complete restoration activities, and repair all property damage caused by such operations to be completed within 60 days. After any spill, leak, or malfunction; the Operator shall remove or cause to be removed, to the satisfaction of the City Fire Chief and the Inspector, all waste materials from any public or private property affected by such spill, leak, or malfunction. Clean-up operations must begin immediately. Termination of Permit A Gas Well Permit shall automatically terminate, unless extended, if drilling is not commenced within 180 days from the date of the issuance of the Gas Well Permit. A Gas Well Permit may be extended by the Inspector for an additional 180 days upon request by the Operator and proof that the classification of the requested Gas Well Permit for such location has not changed.

5 ROAD DAMAGE FEE CALCULATION GAS WELL DRILLING AND PRODUCTION Operator Chesapeake Energy Site Address 1300 Caplin Drive Number of Wells 2 Water Source Piped Well Number Well Name Access Route Pavement Type Lane Miles Fee per Lane Mile Fee GW09-58 Westpointe 1H I-20 Exempt $ - $ - GW09-67 Westpointe 5H South Collins Street Type $ $ Rocking Horse South Collins Street Type $ $ 5.30 Drill Site South Collins Street Type $ $ $ - $ - $ - Fee per Well $ Total Fee $ Notes 1. The road damage fee is calculated based on the access lane miles for the appropriate road type, the assessment per lane mile, and the number of lane miles included in the gas well permit application 2. The fee per lane mile depends on whether the water source is piped to the site or hauled in by truck or other vehicle. 3. State-owned roadways should not be included in the calculation of the fee. A list of state-owned roadways is included on page Pavement types should be verified through Public Works & Transportation Department GW09-58 and GW09-67 Exhibit B Page 1

6 Abbott ,000 1,500 2,000 Feet Arbrook Rocking Horse - Proposed Transportation Route Embarcadero Arbrook Transportation To: From I-20 and Collins travel south on Collins for.8 miles ( just past the site on the left) and make a U-Turn at the median opening. Travel back north on Collins for.05 miles to the site on the right. Transportation From: Travel north on Collins.7 miles to I-20. Nandina Tech 20 Centre Allen HOOD WISE TARRANT JOHNSON DENTON Arlington Fort Worth Plano Carrollton Irving New York DALLAS ELLIS Dallas Garland Grand Prairie Mesquite Interstate 20 I 20 New York Osprey Eastpointe Collins Bardin Waxwing Hollow Tree Country Proposed Rocking Horse Padsite Redwater Caplin Highbank Nocona Endicott Bristlecone Rockdale Legend Wellhead Locations Site Access Routes Proposed Transportation To Proposed Transportation From Pad Site Locations Lemon Engleside Date: 8/28/2009 Projection: Texas State Plane NAD 27 North Central Zone (4202) Absolute Scale: 1:12,000 Relative Scale: 1 inch = 1,000 feet Analyst: Leslie Hernandez Collins Creek Valley Rocking Horse Padsite Proposed Transportation Route X:\GIS\Fort Worth\Permitting\Permit Exhibits\Rocking Horse 1H-5H\MXDs\Rocking Horse Transportation Routes.mxd

7 Abbott Feet 180 PARKER WISE TARRANT DENTON 635 Arlington Fort Worth Irving Plano Carrollton Grand Prairie DALLAS Dallas Garland Mesquite HOOD Grovecrest JOHNSON ELLIS 67 HILL 77 Caplin DAYCARE 600ft HOMES Collins!( Arlington Municipal FIRE STATION Airport Redwater Legend!( Wellhead Locations Well & Pad Buffers Identified Structures Endicott Date: November 20, 2009 Projection: Texas State Plane NAD 27 North Central Zone (4202) Absolute Scale: 1:3,600 Relative Scale: 1 inch = 300 feet Analyst: Westpointe 5H Structures Within 600' Lauren Webb

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12 GW09-58 and GW09-67 Exhibit E 1/1

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14 RAILROAD COMMISSION OF TEXAS OIL & GAS DIVISION PERMIT TO DRILL, DEEPEN, PLUG BACK, OR RE-ENTER ON A REGULAR OR ADMINISTRATIVE EXCEPTION LOCATION PERMIT NUMBER DATE PERMIT ISSUED OR AMENDED DISTRICT (AMENDED) Oct 06, API NUMBER FORM W-1 RECEIVED COUNTY Oct 02, 2009 TARRANT TYPE OF OPERATION OPERATOR NEW DRILL CHESAPEAKE OPERATING, INC. LEASE NAME Section, Block and/or Survey DISTANCE TO SURVEY LINES 1098 ft. S 408 ft. W FIELD(s) and LIMITATIONS: WELLBORE PROFILE(S) Horizontal FIELD NAME ACRES DEPTH WELL # DIST LEASE NAME NEAREST LEASE NEAREST WE ** NEWARK, EAST (BARNETT SHALE) ,216 1H 09 WESTPOINTE WELLBORE PROFILE(s) FOR FIELD: Horizontal RESTRICTIONS: Lateral: TH1 Penetration Point Location Lease Lines: F W L F S L Terminus Location Lease Lines: F N L F W L Survey Lines: F W L F S L ' ** ' PRECEDING FIELD NAME INDICATES RULE (R37) ACRES NOTICE This permit and any allowable assigned may be revoked if payment for fee(s) submitted to the Commission is not honored. District Office Telephone No: (903) WELL NUMBER WESTPOINTE 1H DISTANCE TO LEASE LINES 1098 ft. S (OFF LEASE) 408 ft. W (OFF LEASE) SECTION BLOCK ABSTRACT SURVEY MEP&P RR CO LOCATION TOTAL DEPTH 3.08 miles E direction from SOUTHLAND ACR 9000 DISTANCE TO NEAREST LEASE LINE 144 ft. DISTANCE TO NEAREST WELL ON LEASE See FIELD(s) Below THE FOLLOWING RESTRICTIONS APPLY TO ALL FIELDS This well shall be completed and produced in compliance with applicable special field or statewide spacing and density rules. If this well is to be used for brine mining, underground storage of liquid hydrocarbons in salt formations, or underground storage of gas in salt formations, a permit for that specific purpose must be obtained from Environmental Services prior to construction, including drilling, of the well in accordance with Statewide Rules 81, 95, and ** THIS PERMIT IS GRANTED PURSUANT TO STATEWIDE RULE 37(h)(2)(B) ** CASE NO

15 RAILROAD COMMISSION OF TEXAS OIL & GAS DIVISION PERMIT TO DRILL, DEEPEN, PLUG BACK, OR RE-ENTER ON A REGULAR OR ADMINISTRATIVE EXCEPTION LOCATION PERMIT NUMBER DATE PERMIT ISSUED OR AMENDED DISTRICT Nov 30, API NUMBER FORM W-1 RECEIVED COUNTY Nov 24, 2009 TARRANT TYPE OF OPERATION OPERATOR LOCATION NEW DRILL CHESAPEAKE OPERATING, INC. ATTN CHRISTIAN COMBS PO BOX OKLAHOMA CITY, OK LEASE NAME Section, Block and/or Survey DISTANCE TO SURVEY LINES 408 ft. W 1069 ft. S FIELD(s) and LIMITATIONS: WELLBORE PROFILE(S) Horizontal FIELD NAME ACRES DEPTH WELL # DIST LEASE NAME NEAREST LEASE NEAREST WE ** NEWARK, EAST (BARNETT SHALE) ,216 5H 09 WESTPOINTE UNIT WELLBORE PROFILE(s) FOR FIELD: Horizontal RESTRICTIONS: Lateral: TH1 Penetration Point Location Lease Lines: F N L F W L Terminus Location Lease Lines: F N L F W L Survey Lines: F W L F S L ' ** ' PRECEDING FIELD NAME INDICATES RULE (R37) ACRES NOTICE This permit and any allowable assigned may be revoked if payment for fee(s) submitted to the Commission is not honored. District Office Telephone No: (903) WELL NUMBER WESTPOINTE UNIT 5H DISTANCE TO LEASE LINES 408 ft. W (OFF LEASE) 1069 ft. S (OFF LEASE) TOTAL DEPTH 3.08 miles E direction from SOUTHLAND AC 9000 SECTION BLOCK ABSTRACT SURVEY MEP&P RR CO DISTANCE TO NEAREST LEASE LINE 194 ft. DISTANCE TO NEAREST WELL ON LEASE See FIELD(s) Below THE FOLLOWING RESTRICTIONS APPLY TO ALL FIELDS This well shall be completed and produced in compliance with applicable special field or statewide spacing and density rules. If this well is to be used for brine mining, underground storage of liquid hydrocarbons in salt formations, or underground storage of gas in salt formations, a permit for that specific purpose must be obtained from Environmental Services prior to construction, including drilling, of the well in accordance with Statewide Rules 81, 95, and ** THIS PERMIT IS GRANTED PURSUANT TO STATEWIDE RULE 37(h)(2)(B) ** CASE NO Data Validation Time Stamp: Nov 30, :28 AM( 'As Approved' Version ) Page 2 of 2