1. Karen J. Greenwell Wyatt, Tarrant & Combs, LLP 250 West Main Street, Ste. 1600 Lexington, Kentucky 40507 (859) 233-2012 Oil and Gas Ownership and Regulation

2. Ownership of Real Property Ownership Of Real Property What Do You Own? The “Bundle Of Sticks” Analogy The Most Simple Fee Ownership – One Person Owns All The Sticks Own “From The Top Of The Sky To The Center Of The Earth.” (Cujus est solum, ejus est useque ad coelum et ad infernos.)

3. Dividing Real Property Vertical Divisions Divide A Large Tract Into Smaller Tracts Keep All The Sticks – Just Make Each Smaller

4. Dividing Real Property Horizontal Divisions Convey Different “Estates” Out Of The Fee Divide The “Bundle” And Separate The Sticks Oil &/Or Gas Coal Surface Other Minerals

5. Dividing Real Property Estates In Real Property Are Created By Grant Or Reservation Grant Of “Minerals” Leaves The Grantor With The Surface Estate The Owner Of The Minerals Can Further Divide Them Granting The Coal (Or Certain Seams) To One And The Oil And/Or Gas (Or Certain Depths) To Another

7. Severed Minerals The Terms Of The Documents By Which Minerals Are Severed Control The Nature and Extent of the Grant What Minerals Were Granted Or Reserved And How They Are Described Solid Minerals Oil and Gas Coalbed Methane

8. Surface Rights Surface Rights “Appurtenant” To Minerals Uses Of The “Servient” Surface To Remove The “Dominant” Minerals Drill Pad, Tank Area, Gathering Lines Portal, Haul Road, Fan Shaft Drill Hole Through Coal To Get To Oil Or Gas

9. Ownership of Oil & Gas Rule of Capture Owner of property acquires title to all the oil or gas produced from wells on that property, regardless of whether it migrated from adjacent lands.

10. Pierson v. Post – Ferae Naturae

14. OIL AND GAS CONSERVATION Develop the resource in the most efficient and economical manner Control Well Density Control Proximity of Wells to Adjacent Properties Assigning acreage to a well Equitable sharing of oil and gas Ability to pool or communitize acreage (voluntarily and involuntarily) Protect the resource from wasteful or harmful practices Prevention of adverse environmental impacts

17. W ELL D RILLING T ECHNOLOGY Vertical Horizontal Directional

21. Federal Regulation of Oil & Gas Development Clean Water Act Addresses Discharges Into The “Waters Of The U.S.” Handling Of Water On The Surface Control Of Runoff From Work And Storage Sites Clean Air Act Addresses Emissions OF VOCs And Methane From Wells, Pipelines And Other Facilities

22. Federal Regulation of Oil & Gas Development Safe Drinking Water Act Requires Protection of “Potable Water” by Casing and Cementing Wells In Freshwater Zones Regulations for Wastewater Injection Wells Endangered Species Act Protects endangered plants and animals and their habitat

23. Oil and Gas Ownership and Regulation Karen J. Greenwell Wyatt, Tarrant & Combs, LLP 250 West Main Street, Ste. 1600 Lexington, Kentucky 40507 (859) 233-2012