Rolling Hills Neighborhood Association

Offer from Marsh

This is the offer we will be receiving from Marsh

Overview

Marsh Operating Company has made a proposal to the homeowners of lots within the Rolling Hills Estates boundaries, and 400 to 418 Washington bounding the Rolling Hills Country Club.

Marsh Operating Company has leased a well site at Rolling Hills Country Club (RHCC). The City has approved re-zoning and site-use requests for this site. The Marsh offer to our homeowners is as follows:

Signing bonus: $18,000 per net acre

Payable: After signing and once confirmation of ownership of the lot’s mineral rights, lot size, etc. has been confirmed -- but within 30 days of the signing of a lease. (It is assumed that most homeowners in this area do own their minerals.)

Royalty: 25% (the “Royalty Fraction”) of the market value at the point of sale…of the gross proceeds received by Lessee at the point of delivery or first sale of all gas… There will be no deductions for the costs of producing, gathering, storing, separating, treating, dehydrating, sompressing, processing, transporting and/or marketing the gas.

Lease Term: Primary Term is 36 months from signing. However…on or before the expiration of the eighteenth (18th) month …Lessee must file an Application …seeking a Gas Well Permit to be issued from the City…otherwise the Lease shall expire.

Favored Nation: If, within 6 months (from signing), Marsh enters into an oil and gas lease on lands located within …. (named, adjacent) subdivisions and neighborhoods located in Arlington, Texas… providing for a per acre lease bonus or royalty in an amount greater than is provided for in this Lease, then (Marsh) shall pay….as additional bonus … in an amount equal to the difference…

Warranties: There is a "no warranties" clause which will protect the Lessor (you) for certain title issues of having to repay bonus monies in the event of title failure.

Subordination: Lessee (Marsh) cannot require a subordination from a lienholder (mortgage company, etc.) as a requirement to paying royalties, unless Lessor (you) is in default of the obligation secured by the lien.

Insurance: The Lessee's (Marsh) insurance policies are to include a minimum of $5 million in coverage for comprehensive general liability, bodily injury, property damage and other losses, to include coverage for the the cost of clean up and surface remediation.

Indemnity Language: The lease contains strong indemnity language.

Environmental Matters: The lease includes strong environmental protections. (see below)

Access to Information: The Lessee is required to "open the books" if requested.

Pooling: Lessee (Marsh) can pool gas units up to 640 acres plus 10%, but they must try to continuously develop the acreage on the basis on one well per 80 acres.

Surface Waiver: Lessee will not be able to use the surface of the leased premises (your property) other than for temporary placement of geophones of similar sensor devices.

Neighborhood Bonus: Marsh has offered to donate a neighborhood bonus which may be used as homeowners collectively see fit. This benefit to our neighborhood will become payable once the majority of contiguous property owners have signed leases with Marsh. At a later time, a neighborhood committee will be formed to seek recommendations of how to best use these monies to benefit our community.

An attorney continues to represent all of us in the development of a lease agreement. Marsh representatives have been cooperative in answering most of our negotiation concerns – including agreeing to pay for the attorney’s services.

The lease agreement, or other provisions made with RHCC or the City, address neighborhood concerns such as:

1) No traffic or other activity will be on our residential streets. All traffic in and out of the site would be via Lamar or Cooper Streets.

2) No pipeline will run on or under our residential property or streets. The pipeline is projected to run, from the north, down Cooper Street.

3) There may be no surface use of our private property – except that some non-invasive sensors may be placed (lain), temporarily (a matter of hours), on the surface as needed before or during drilling.

4) Full compliance with set-back and environmental impact requirements of any federal, state or local laws, code, or other regulation.

5) Any oil or gas wells drilled by Lessee shall be drilled in compliance with the surface casing requirements imposed by the State of Texas for groundwater protection … shall install such surface casing in the required manner…to insure the protection of all fresh water bearing formations in and under the Land.

6) Lessee shall use the highest degree of care and all reasonable safeguards to prevent contamination or pollution of any environmental medium, including soil, surface waters, groundwater, sediments, and surface or subsurface strata, ambient air or any other environmental medium in, on, or under the Land or lands pooled therewith, by any waste, pollutant, or contaminant.

7) Lessee shall not bring or permit to remain on the Land or lands pooled therewith any asbestos containing materials, explosives, toxic materials, or substances regulated as hazardous wastes, hazardous materials, hazardous substances or toxic substances (as defined) under any federal, state or local law or regulation…

8) Any and all compressors, machinery and drilling equipment used in connection with any well …shall be equipped with the latest technology in noise suppression, muffling devices and pollution constraints…

9) For safety and appearance, Lessee shall construct and install fencing and other decorative materials or vegetation around each well site and related facilities in a visually appealing manner...(and)…upon lease expiration, Lessee shall remove all of Lessee’s equipment and restore the surface of the ground as nearly as is reasonably practicable to its original state.

The leadership of Rolling Hills Country Club continues to work closely with Marsh on the specifics of site management, land maintenance and restoration of the well site location, access and egress road and/or pipeline construction and, finally, restoration of the site upon completion of drilling -- it is their beautiful golf course, after all!