IN THE MATTER OF THE ESTABLISHMENT OF A SURFACE CAUSE NO

BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE ESTABLISHMENT OF A SURFACE ) CAUSE NO. 523

USE PLAN FOR CERTAIN LANDS COMPRISING THE )

STILLWATER PLANNED UNIT DEVELOPMENT IN ) ORDER NO. 523-1

THE TOWN OF SILT, GARFIELD COUNTY, COLORADO ) AMENDED

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on July 15, 2002 at 10:00 a.m. in Suite 801, the Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order establishing a surface use plan designating approved well site locations within the Stillwater Planned Unit Development (the “Stillwater PUD”) located in the town of Silt, covering and including 1450 acres in portions of Sections 9 through 16, Township 6 South, Range 92 West, 6^th P.M.

FINDINGS

The Commission finds as follows:

1. SWD, LLC (“SWD” or “Applicant”) as applicant herein is an interested party in the subject matter of the above-referenced hearing.

2. Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

3. The Commission has jurisdiction over the subject matter embraced in said notice and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.

4. On June 7, 2002, SWD, by its attorney, filed with the Commission a verified Application for an order establishing a Surface Use Plan designating approved well site locations within the Stillwater Planned Unit Development (the “Stillwater PUD” or the “Property”) located in the town of Silt, covering and including 1450 acres in portions of Sections 9 through 16, Township 6 South, Range 92 West, 6^th P.M. The Applicant has a contract with Valley Farms, Inc. (“Valley Farms”), the present surface owner of the Property, which provides for the Applicant’s development and purchase of the surface of Property. The Applicant has commenced the work to develop the Property into a premier residential and golf course community designed to accommodate approximately 1400 homes and two championship eighteen hole golf courses. The development process is ongoing, and construction on the Stillwater PUD is scheduled to commence in December 2002.

5. Based upon the Applicant’s mineral record examination there are no existing or effective oil and gas leases on any of the mineral interests within the Stillwater PUD. The Applicant has executed an agreement that would allow the Applicant to purchase certain mineral interests underlying the Stillwater PUD from Valley Farms. Valley Farms also has an interest in the development of the Stillwater PUD.

6. The Applicant seeks an order from the Commission approving a Surface Use Plan and implementing the Surface Use Plan to provide for future development of the minerals underlying the Stillwater PUD, including centralized location of well sites and facilities, and such additional measures as the Commission deems appropriate to provide for development of the mineral estate consistent with the protection of public health, safety and welfare. In addition, the Applicant requests that any applications approved for permits to drill wells within the Stillwater PUD conform to the approved Surface Use Plan. The Applicant further agrees that if the development of the Stillwater PUD does not commence on or before one year from the date the Commission order is entered, the order approving the Surface Use Plan may be rescinded on the Commission’s own motion.

7. On June 24, 2002, SWD filed with the Commission a supplemental application which identified eleven two and one-half acre sites within the Stillwater PUD that would be suitable for oil and gas operations during and after surface development, and including Exhibit “D”, Drilling and Facility Operations Provisions, Stillwater Ranch Planned Unit Development Surface Use Plan.

8. On July 1, 2002 Bobby Roy McPherson and Leslie Dale McPherson by their attorney filed with the Commission a protest to the application.

9. On July 4, 2002 Kenneth McPherson, Donald McPherson, Janice Mattick and Clifford McPherson filed with the Commission a protest to the application.

10. On July 8, 2002, SWD by its attorney, filed with the Commission a brief in support of the application for an order establishing a surface use plan for the Stillwater PUD.

11. On July 11, 2002, the Town of Silt filed with the Commission a letter of comment on the application.

12. On July 12, 2002, SWD filed with the Commission a response to the McPherson protest and proposed revisions to Exhibit “D”, Proposed Drilling and Facility Operation Provisions.

13. The Commission heard testimony from Edward Sutton, Senior Vice President of SWD regarding the background and plans for developing the 1450 acres of land known as the Stillwater Development. Mr. Sutton testified that his company entered into an agreement to purchase the land in 1995, the Town of Silt has annexed the lands, and that the Applicant plans to develop the land in three phases over a ten year period of time. He further testified that SWD anticipates local homebuyers, second homebuyers and retired homebuyers as the potential market. In addition, Mr. Sutton testified that plans for the development have been underway for several years, and that construction activities are scheduled to commence in November 2002. Upon completion of the three phases of development the Stillwater PUD will include a recreational facility, two schools, two eighteen hole golf courses and fourteen hundred residential units. He also testified that Valley Farms owns 100% of the surface rights along with percentages varying from 8% to 48% of the minerals underlying the Stillwater Development, and that the surface rights are presently under contract to SWD. Mr. Sutton testified that Williams Exploration had obtained leases on portions of the Property from members of the McPherson family, but that Williams Exploration had decided to relinquish their rights in the MrPherson leases based in part on the proposed surface development. Mr. Sutton testified that his company wants to provide predictability to both surface and mineral owners by establishing and permanently preserving surface drill sites for potential wells, and that one of the conditions of the requested order would provide that the surface developer would not construct a structure closer than 150 feet from any well.

14. The Commission heard expert testimony from John Obourn, an independent petroleum landman regarding mineral ownership. He testified that his company had done a thorough search of the county records as well as a search of additional mineral ownership resources to identify and locate the mineral owners within the Stillwater PUD. Mr. Obourn testified that the mineral ownership was complex because of the metes and bounds description of the lands and the degree to which the minerals had been severed from the surface. In addition, Mr. Obourn testified that the last recorded mineral lease for the Property was granted by various McPherson family members to Mobil Oil several years ago.

15. The Commission heard expert testimony from Logan MacMillan, a Certified Professional Geologist regarding the geologic development in the area, who opined that based on the regional geology and the surrounding gas fields that he believes that natural gas exists in the Williams Fork Formation under SWD’s proposed development, but its economic viability of resource development is uncertain. He further testified that there is no present production from deeper geologic formations underlying the Stillwater PUD, but that there may be potential for deeper production.

16. The Commission heard expert testimony from Walter Pearson, consulting professional engineer regarding proposed drilling pad locations and dimensions, maximum required directional drilling deviations and additional directional drilling costs. Mr. Pearson testified that the additional costs to drill directionally depend on whether the drilling is up or down dip or along strike. He further testified that costs for road construction, gathering lines and reclamation can be reduced through directional drilling. Mr. Pearson opined that it is cost-effective and technically feasible to drill directional wells from the proposed drilling pad locations on both 40-acre and 20-acre tracts. In addition, he testified that alternatives to DPL-8 (“Drilling Pad Location”) and DPL-10, identified as DPL-8A and DPL-10A, have been proposed to address concerns raised by the protestants, and these have been accepted by the protestants.

17. The Commission heard expert testimony from Leslie Hope, Engineering Division Manager for High Country Engineering, Inc. regarding the proposal to move DPL-1 to the east of the originally proposed location in response to concerns from the protestants of a possible wetlands at DPL-1. The McPherson protestants agreed to the changed drilling pad location and asked that the new location be submitted to the Commission prior to entry of any Commission order. Ms. Hope testified that moving DPL-1 would place the pad in a grassy area and avoid any wet areas. Ms. Hope also testified about DPL-10 and the proposed alternative location suggested by the Applicant to address the McPherson protestants’ concerns.

18. The Commission heard comments from Gene Burk, attorney for Bobby Roy McPherson and Leslie Dale McPherson regarding the McPhersons’ desire to prevent diminution in the value of their mineral estate, access issues, concerns about the Town of Silt altering SWD’s plan and possibly avoiding any order the Commission may enter. Mr. Burk also stated that the McPhersons were in agreement with the Applicant’s revisions to the Surface Use Plan drilling and facilities operational provision and the alternate drilling pad locations proposed by the Applicant to address the Protestants’ concerns related to surface operations.

19. The Commission heard testimony from Mary McPherson who described that the reason she was given by Williams Exploration for releasing the leased minerals from her family was because of the plans for development of the surface lands. She testified that the proposed surface development may limit the ability for her minerals to be leased, but she also testified that absent a mineral development plan her mineral rights may be diminished.

20. Pursuant to Rule 510., Ken Wonstolen, Senior Vice President and General Counsel for the Colorado Oil and Gas Association provided a written statement and made an oral statement in support of the concept of preserving access for oil and gas development in light of SWD’s planned surface development and commending SWD for bringing its application before the Commission prior to its surface development.

21. Pursuant to Rule 510., John Spillane, attorney, individually and representing Bob Lembke, made a statement commending SWD for bringing an application before the Commission to address mineral development prior to commencing surface development.

22. Janet Steinbach, Community Development Director for the Town of Silt read a letter submitted to the Commission on July 11, 2002 and signed by John Evans, Mayor of the Town of Silt, describing the Town’s concerns about mineral development and the belief that a surface use plan would allow for orderly development in light of the proposed surface development plan.

23. In a staff analysis, Rich Griebling, Director of the Commission stated that staff believes the application is innovative and strongly supports approval of the application.

24. Based on the verified application, the supplemental application, the testimony and exhibits presented at hearing, and pursuant to C.R.S. §34-60-102(1) and §34-60-105, the Commission finds as follows:

a. The Commission has jurisdiction over all persons and property, public and private, to do whatever is reasonably necessary to administer the Oil and Gas Conservation Act.

b. The Commission may grant variances to its rules after a hearing where the applicant has made a showing that its request will not violate the basic intent of the Oil and Gas Conservation Act, and that the Applicant has made such a showing.

c. Directional drilling is a cost-effective and technically feasible method to extract the oil and gas resources from the lands underlying the Stillwater PUD and directional drilling would preserve access to the minerals underlying the Stillwater PUD after surface development occurs.

d. Approval of the SWD application and granting of a variance to Commission rules related to surface setbacks to implement the Stillwater PUD Surface Use Plan comports with the Commission’s obligation to promote the development of oil and gas resources consistent with the protection of public health, safety and welfare.

e. The Commission’s approval of the SWD application is not intended to set precedent for other developers to come before the Commission rather than resolve private contractual issues.

25. The Commission should approve the supplemental application as modified at the time of hearing approving the eleven drilling pad locations and the amended drilling and facility operation provisions. In addition, the Commission should require SWD to provide a written report on the status of its surface development one year from the effective date of the order and every two years afterward. Further, the Commission may consider rescinding its order if surface development is not commenced within one year of the effective date of the order.

26. On July 14, 2005, Antero Resources II Corporation, (“Antero”) filed with the Director a written request for a variance pursuant to Rule 502.b. to modify Order No. 523-1 as a result of agreements executed between the mineral owner, surface owner and Antero as the mineral lessee. Effective August 23, 2004, Antero entered into an oil and gas lease with Valley Farms, Inc., the mineral owner of the lands underlying Stillwater Planned Unit Development. In contemplation of exploration and development operations, Antero has concluded a Surface Use and Development Agreement (“SUDA”) with Valley Farms, Inc. Letters in support of the variance requested by Antero were received by the Director from SWD, LLC on July 14, 2005, and from Valley Farms, Inc. on July 18, 2005. The Director determined that the SUDA and supporting documents received from the sole mineral owner and surface owner of the Stillwater PUD were sufficient to grant the requested variance. The SUDA, executed as of July 14, 2005 and incorporated herein as Amendment A, is a much more comprehensive surface use plan than the original surface use provisions adopted in Order No. 523-1, and as such, this document should supplement the surface use provisions contained in Order No. 523-1. To the extent the original provisions contained in Order No. 523-1 conflict with the provisions of Amendment A, the provisions of Amendment A should prevail.

ORDER

NOW, THEREFORE IT IS ORDERED, that the request for an order establishing a Surface Use Plan designating approved well site locations within the Stillwater Planned Unit Development located in the town of Silt, covering and including 1450 acres in portions of Sections 9 through 16, Township 6 South, Range 92 West, 6^th P.M. is hereby approved, and any well permitted within the Stillwater PUD shall comply with the provisions of this order.

IT IS FURTHER ORDERED, that the following drilling and facility operation provisions are hereby approved as part of the order to provide for the safe and orderly development of the oil and gas resources underlying the Stillwater Ranch Planned Unit Development.

1. Definitions. The terms and phrases used herein shall have the same definitions set forth in the Order, and in the 100 Series of the Rules and Regulations of the Oil and Gas Conservation Commission (the “Rules”). In addition, the terms used herein shall have the following meanings:

a. Director means the Director of the Oil and Gas Conservation Commission.

b. Drilling Pad Location means the centralized drilling and production facility designated by the Commission in the Order comprised of approximately two and one-half acres of land suitable for oil and gas operations, and conforming as near as practicable to the configurations set forth on the Drilling Pad Location Plat attached to and made a part of the Order.

c. Golf Course Operator means the organization authorized to operate and manage the West Course at Stillwater and the East Course at Stillwater Golf Courses to be located within the Stillwater Community. If more than one operator exists for the Stillwater Golf Courses the approval from Golf Course Operator as required herein shall mean approval from all designated Golf Course Operators.

d. Homeowner’s Association means the Stillwater Ranch Association, LLC, a Colorado non-profit corporation, established as the homeowner’s association for the Stillwater Community, and any subassociations thereof.

e. Metro District means the Stillwater Metropolitan District No. 1 and No. 2 established in connection with the development of the Stillwater Community to provide certain services to the Stillwater Community.

f. Mineral Developer means any Owner, as defined by the Rules, within the Stillwater Community.

g. Phase means that portion of the Stillwater Community planned for surface development in accordance with the Stillwater Ranch PUD Development Plan.

h. Preliminary Plat means the preliminary subdivision plat for surface development provided to the Town in accordance with applicable Town ordinances and rules.

i. Stillwater Community means the residents and occupants of the Stillwater PUD and the community facilities and amenities constructed and provided for the use and enjoyment of the residents and occupants.

j. Surface Developer means SWD, LLC, its successors or assigns.

k. Town means the Town of Silt, Colorado.

2. Well Locations.

a. Drilling and production operations for oil and gas development within the Stillwater Community shall occur only within the following designated drilling pads, all of which are located in Township 6 South, Range 92 West, 6^th P.M. Garfield County, Colorado:

i. Drilling Pad Location #1 9-10 Section 9: NE1/4SE1/4

ii. Drilling Pad Location #2 15-7 Section 15: SW1/4NW1/4

iii. Drilling Pad Location #3 15-3 Section 15: NE1/4NW1/4

iv. Drilling Pad Location #4 15-8 Section 15: SE1/4NE1/4

v. Drilling Pad Location #5 11-13 Section 11: SW1/4SW1/4

vi. Drilling Pad Location #6 14-3 Section 14: NE1/4NW1/4

vii. Drilling Pad Location #7 14-7 Section 14: SW1/4NE1/4

viii. Drilling Pad Location #8 13-10 Section 13: NW1/4SE1/4 or

Drilling Pad Location #8A Section 13: NW1/4NW1/4SE1/4

ix. Drilling Pad Location #9 13-12 Section 13: NW1/4SW1/4

x. Drilling Pad Location #10 12-13 Section 12: SW1/4SW1/4 or Drilling Pad Location #10A Section 12: SE1/4SW12/4SW1/4

xi. Drilling Pad Location #11 14-12 Section 14: NW1/4SW1/4

The Drilling Pad Locations are further depicted on the Drilling Pad Location Plat attached to and made part of the Order.

b. The Drilling Pad Locations designated 8A and 10A are available to replace Drilling Pad Location 8 or Drilling Pad Location 10, respectively, if a Mineral Developer determines that the alternate sites are more suitable for the Mineral Operator’s proposed operations in the Stillwater Community.

c. Drilling Pad Locations shall not exceed two and one-half acres in size without the advance written consent of the Surface Developer while surface development for the Stillwater Community is ongoing, or upon completion of surface development, without the advance written consent of the Metro District, the Homeowner’s Association and the Golf Course Developer.

d. During the planning stages for surface development for the Stillwater Community the Director may approve minor adjustments to the Drilling Pad Locations made at the request of the Surface Developer provided each Drilling Pad Location continues to provide access to the bottom hole locations depicted on the Drilling Pad Location Plat.

e. During the surface development phases for the Stillwater Community, Drilling Pad Locations may altered upon the mutual agreement of the Surface Developer and the Mineral Developer, with the approval of the Director.

f. Upon completion of development of the Stillwater Community, Drilling Pad Locations may be altered upon the mutual agreement of the Metro District, the Homeowner’s Association, the Golf Course Developer and the Mineral Developer, with the approval of the Director.

g. The Surface Developer shall not construct a dwelling unit or other structure intended for occupation closer than one hundred and fifty feet from the center of any Drilling Pad Location.

h. Any future Mineral Developer shall locate the drilling rig and associated facilities situated upon any Drilling Pad Location as far as practicable from any dwelling unit or other structure intended for occupation without violation of surface property line set-backs.

3. General Safety and Maintenance. All Oil and Gas Operations within the Stillwater PUD shall be conducted to minimize impacts to the Stillwater Community.

4. Drilling Pad Location Safety and Maintenance.

a. Fencing Requirements. Appropriate fencing for safety, security and screening shall be installed during drilling and completion operations at any Drilling Pad Location. Upon completion of the well or wells at any Drilling Pad Location, and at all times while the Stillwater Community Golf Courses are operational, appropriate fencing for screening and safety shall allow for the continued operation of and minimization of impacts on the Golf Course areas.

b. Production Equipment and Tank Batteries. Upon completion of any well at a Drilling Pad Location, the Mineral Developer may install production facilities at the Drilling Pad Location typical for the production from the completed formation(s). The Surface Developer and the Mineral Developer shall cooperate in the location of the production facilities, and the Mineral Developer shall use good faith efforts to minimize the size and the surface impact of the production facilities. No more than two tanks comprising a single tank battery shall be located at each Drilling Pad Location. All tank batteries shall be low profile and installed to minimize Stillwater Community impacts.

c. Pipeline Rights-of-way. The Surface Developer and Mineral Developer will cooperate to establish safe and reasonable rights-of-way for any production established in Stillwater Community.

d. Drilling Pad Access Rights-of-way. The Surface Developer and Mineral Developer will cooperate to establish safe and reasonable rights-of-way through the Stillwater Community as needed to access the Drilling Pad Locations.

e. Guy Line Anchors. The Mineral Developer and the Surface Developer shall cooperate to locate all guy line anchors left buried for future use to minimize surface impacts. Guy line anchors for Drilling Pad Locations within proposed Golf Course areas shall be located outside of all greens and fairways in rough areas, situated to provide for successful anchoring for well maintenance.

f. Abandonment and Reclamation. All reclamation shall be consistent with the planned surface use for the Stillwater Community.

i. Drilling Pad Locations shall be cleared of all non-essential equipment, trash and debris within thirty (30) days after a well is plugged and abandoned.

ii. Interim Reclamation of the Drilling Pad Locations shall be conducted to minimize impacts on the surface uses within the Stillwater Community subject to site specific reclamation conditions agreed to by the Surface Developer and the Mineral Developer. During interim reclamation the Drilling Pad Location shall be reduced to a size that does not exceed the acreage reasonably necessary to accommodate surface production facilities for any producing wells located thereon.

iii. Final Reclamation of Drilling Pad Locations shall be completed in accordance with the 1000 Series Rules subject to site specific reclamation conditions agreed to by the Surface Developer and the Mineral Developer.

g. Identification of plugged and abandoned wells. All permanent monuments for dry hole identification shall be buried to minimize surface impacts.

h. Limitation on Drugs, Alcohol, Firearms & Dogs. Any Mineral Developer and its agents and assigns shall adopt and enforce rules to prohibit personnel from transporting illegal drugs, alcohol, firearms or dogs into the Stillwater Community.

5. Operation Scheduling.

a. Upon the Surface Developer’s initiation of the process for approval of a Preliminary Plat for any Phase of development for the Stillwater Community, Oil and Gas Operations at any Drilling Pad Location within the Phase being platted shall occur during the months of October through April. The seasonal limitation on Oil and Gas Operations may be waived if the Developer secures a waiver as provided for herein.

b. Oil and Gas Operations at Drilling Pad Locations situated within a Phase of the Stillwater Community where the Surface Developer has not initiated the Town Preliminary Platting process may occur during any month of the year, subject to any site-specific conditions imposed by the Director, or as otherwise agreed between the Surface Developer and the Mineral Developer.

c. Workover operations and general well maintenance may be conducted during any month of the year as deemed necessary in the reasonable estimation of the Mineral Developer. Such workover and general maintenance operations shall be scheduled for and completed during daylight hours. The daylight limitation shall not apply in the event of any emergency, which in the reasonable estimation of the Mineral Developer, necessitates immediate response.

6. Drilling Fluid Systems.

a. Oil and Gas Operations located within any Phase of the Stillwater Community where the Surface Developer has initiated the Preliminary Platting process shall be conducted using closed drilling fluid systems.

b. Oil and Gas Operations located within any Phase of the Stillwater Community where the Surface Developer has not yet initiated the Preliminary Platting process may be conducted using closed drilling fluid systems or conventional pit drilling systems. Upon commencement of the Preliminary Platting process for any Phase of surface development where conventional pits have been used in the conduct of Oil and Gas Operations, pits and pit liners shall be removed and the surface reclaimed in accordance with the Rules, the Order and any agreement between the Surface Developer and Mineral Developer.

7. Compressors. Any compressors within the Stillwater Community shall be constructed in accordance with the Stillwater Community architectural guidelines, shall be remotely located and situated to take advantage of all natural features for screening for aesthetic impacts and noise impacts.

8. High Density Area Rules. Unless modified or waived herein, upon the Surface Developer’s initiation of the process for approval of a Preliminary Plat for any Phase of development of the Stillwater Community, Oil and Gas Operations at any Drilling Pad Location within the Phase being platted shall be conducted in accordance with the High Density Area Rules.

9. Waiver. Any limitation imposed by the Order, these Drilling Provisions or the High Density Area Rules may be waived if the Mineral Developer secures from the Surface Developer (during surface development of the Stillwater Community), or from the Metro District, the Homeowner’s Association and the Golf Course Operator (upon completion of the surface development of the Stillwater Community), a waiver of the Order, these Drilling Provisions or the High Density Area Rule, and the Director determines the waiver will not adversely affect the public health, safety or welfare or cause a significant adverse impact to the environment.

10. Site Specific Conditions. At the time any application for permit to drill (“APD”) for drilling within the Stillwater PUD is filed, the Director shall examine the permit and make a determination of site-specific drilling permit conditions of approval to prevent or mitigate public health, safety and welfare or significant adverse environmental impacts taking into consideration cost-effectiveness and technical feasibility and relevant geologic and petroleum engineering conditions as well as prevention of waste, protection or correlative rights and promotion of development:

a. Visual and aesthetic impacts – taking advantage of natural features for screening; constructing artificial features for screening.

b. Surface Impacts – taking into consideration site-specific surface impacts.

c. Noise Impacts – locating or orienting motors and compressors used in drilling, hydraulic fracturing, well completion, and production operations to reduce noise, installing sound barriers to achieve compliance with COGCC rules.

d. Road Impacts – impact minimization through appropriate road locations, travel limitations and watering operations.

e. Safety Impacts – impact minimization through appropriate security measures around wellheads and production equipment.

The Director shall take into account information provided by the Surface Developer, the Metro District, Homeowner’s Association, the Golf Course Operator and the Town when making a determination of the appropriate site-specific permit conditions.

If the Mineral Developer objects to any of the conditions of approval for the APD the Director shall suspend the APD and properly notice and set the matter for the next regularly scheduled Commission hearing at which time the Commission may determine conditions of approval for the APD.

11. Consultation and Notice Rules. Unless otherwise specifically provided for herein, neither the Order nor these Drilling Provisions shall affect the Commission Rules related to surface owner notice and consultation.

12. No Limitation on Private Party Contracts. Unless otherwise specifically addressed herein, neither the Order nor these Drilling Provisions shall affect the rights of the Surface Developer and the Mineral Developer to negotiate the terms of concurrent development of the surface and the mineral estate.

13. Recording and Disclosure Requirements.

a. The Surface Developer shall prepare a Memorandum of Colorado Oil and Gas Commission Order and Stillwater PUD Surface Use Plan which shall summarize the provisions of the Commission’s Order and describe the Property. The Memorandum shall be recorded in the real estate records of Garfield County, Colorado.

b. The Surface Developer agrees to include information related to the Commission Order and summary of the surface use plan in its disclosures and promotional materials prepared for investors and homeowners within the Stillwater Community.

IT IS FURTHER ORDERED, that the Surface Use and Development Plan executed July 14, 2005 and attached as Amendment A, shall hereby supplement all surface use provisions originally adopted in Order No. 523-1. To the extent the original provisions contained in Order No. 523-1 conflict with provisions of Amendment A, the provisions of Amendment A shall prevail.

IT IS FURTHER ORDERED, that SWD, LLC shall provide a written report to the Commission on the status of its surface development one year from the effective date of the order and every two years afterward.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.

IT IS FURTHER ORDERED, that the Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any/or all of the above orders.

IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date this order is mailed by the Commission.

IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this order is not required prior to the filing for judicial review.

ENTERED this 1st day of August 2002, as of July 15, 2002.

AMENDED this day of September 2005.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By_____________________________________

Patricia C. Beaver, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

September 8, 2005

Amendment A

SURFACE USE AND DEVELOPMENT AGREEMENT

This Surface Use and Development Agreement (“Agreement”) is entered into and made effective this 30th day of June, 2005 (“Effective Date”) by and between Valley Farms, Inc., a Colorado corporation whose address is 3141 Hood Street, Suite 600, Dallas TX 75219 hereinafter called “Owner”, and Antero Resources II Corporation, a Delaware corporation whose address is 1625 Seventeenth Street, Suite 300, Denver, Colorado 80202, hereinafter called “Operator.” Owner and Operator may be referred to individually as a “Party” and collectively as the “Parties.”

WHEREAS, the Owner owns the surface and mineral estates for a tract of land located in Sections 9, 10, 11, 12, 13, 14, 15 and 16, Township 6 South, Range 92 West, located in Garfield County, Colorado, identified as the Stillwater Project, which is referred to hereinafter as the “Property.”

WHEREAS, the Owner (as Lessor) and Operator (as Lessee) have entered into an Oil and Gas Lease dated August 23, 2004 covering certain lands in Garfield County, Colorado (the “Lease”), a memorandum of which is recorded in the real property records of Garfield County, Colorado at Book 1635, Page 630, Reception Number 662681;

WHEREAS, Operator has diligently searched the records of Garfield County, Colorado to determine the mineral ownership in the Property, and made a good faith effort to sign leases with every person that Operator has identified as owning a mineral interest underlying the Property;

WHEREAS, the Lease and its addenda govern Operator’s conduct (as Lessee) of operations relating to the surface of the Lease, and provide that any roads, easements, fences, tank batteries, compression stations, gathering lines and any power and telephone lines or transformers will be governed by a separate agreement between the Parties, and this Agreement is intended to satisfy that provision; and

WHEREAS, the Owner has entered into a purchase and sale agreement with SWD, LLC (“SWD”), in connection with which SWD has filed with the Town of Silt a Planned Unit Development (“PUD”) that will provide for the development of the surface of the Property; and

WHEREAS, SWD has requested and received Order 523-1 from the Colorado Oil & Gas Conservation Commission (“COGCC”) which approved certain exception locations, and which provides that it may be modified by SWD and the Operator with the consent of the Director of the COGCC, and

WHEREAS, the Parties desire to enter into this Agreement to set forth their understanding of the relative rights and obligations of the Parties concerning oil and gas operations on the Property and the development of the Property under the PUD as it may be amended from time to time, and to provide for the coexistence and joint development of the surface estate and the oil and gas estate and to delineate the process with which they will comply with respect to the development of the two estates.

NOW, THEREFORE, in consideration of the mutual promises contained herein, and Ten dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Owner and Operator agree as follows:

1. Wellsite Locations. Exhibit A, attached hereto and incorporated herein, depicts the location of the Owner’s planned surface development and the locations of fifteen wellsites measuring 200 feet by 300 feet (“Wellsite Locations”) to be used by the Operator to develop the oil and gas estate, together with road rights-of-way and gathering line rights-of-way necessary to provide access to them. Operator agrees to restrict its Oil and Gas Operations (as defined in Section 2) to the rights-of-way easements, Wellsite Locations and Compressor Site shown in Exhibit A. Any material deviation from the planned location of the operations as shown on Exhibit A will require Owner’s prior written approval. Subject to the provisions in paragraphs 3.a., 3.b., 3.d and 3e., “Material Deviation” is defined as any proposed permanent surface occupancy by Operator outside the boundaries of the easements, rights-of-way or Wellsite Locations identified in Exhibit A.

2. Grant of Easement and Surface Use. Owner hereby grants to Operator a right-of-way and easement for the Wellsite Locations, Compressor Site, access roads and gathering lines depicted in Exhibit A necessary to conduct Oil and Gas Operations (as hereafter defined), and to construct, operate, maintain and repair, wells and supporting facilities. Supporting facilities that may be located on Wellsite Locations include but are not limited to, closed mud systems, well-sites, tank batteries, condensate and water flowlines, tanks, dehydrators, treaters, and any other facilities related to Oil and Gas Operations and deemed necessary by Operator. Open pit mud systems shall not be used on Wellsite Locations. Any tanks installed permanently on Wellsite Locations shall be low profile. Facilities that may be located in the non-Wellsite Location easements are limited to access roads, power and data transmission lines, gas gathering or transmission pipelines, pipeline markers, pigging equipment, and valves. All equipment located in non-Wellsite Location easements shall be low-profile or otherwise unobtrusive to the extent reasonably practicable. “Oil and Gas Operations” are defined to include, but are not limited to, drilling, completion, and maintenance of wells and equipment, production operations, workovers, well recompletions and deepenings, fracturing, twinning and the drilling of replacement wells and the location of associated oil and gas production equipment.

3. Production Facility Locations.

a. The Operator shall locate, build, repair and maintain tanks, separators, treaters, dehydrators, wellhead compressors and all other associated oil and gas drilling and production equipment and facilities only within the Wellsite Locations, or on locations mutually agreed upon between Owner and Operator. The Operator shall have the right to install, operate and maintain new or replacement equipment within such locations, unless and until the Operator agrees to relocate such equipment in a separate agreement with Owner.

b. Owner previously had secured a Clean Water Act Section 404 Permit from the Army Corps of Engineers which provides that the Wellsite Location designated as “A Pad” on Exhibit A is not located within wetlands as that term is defined and used under the Clean Water Act and implementing regulations. Such permit expired by its own terms on May 1, 2005. Owner is in the process of obtaining an extension or a new permit on substantially the same terms. If Operator is delayed from using A Pad for six months or longer by the action of an administrative agency having authority, or by a court of competent jurisdiction, then Operator and Owner will consult, for up to thirty days, on the siting of an alternate location as near as reasonably practicable to the primary location of A Pad. If the Parties have not reached agreement on the siting of an alternate location within thirty days, then Operator may select an alternate location as near as reasonably practicable to the primary location of A Pad, in its sole discretion. After completion of drilling on A Pad, Operator shall cooperate with Owner to allow Owner to locate, construct and maintain a golf tee box on the northwest corner of A Pad, at Owner’s sole cost. Owner agrees to locate and orient the tee box so as to ensure that the expected direction of all golf shots from this tee will be away from, and not across, the well pad site. Prior to Operator’s drilling on A Pad, Owner, at its sole cost, shall relocate the existing irrigation ditch lateral out of the pad site, to the east and north border of the site.

c. If Operator seeks the permission of the potentially affected lot owners in Mineota Estates to use the Mineota Road for access to any of its Wellsite Locations, Owner shall have the right to consult with Operator and such potentially affected lot owners to reach agreement on the terms of access to that location. Operator will not be obligated to negotiate and consult concerning access to any Wellsite Location for more than 90 days. At Owner’s request, Operator shall not terminate negotiations during the 90 day period. If Operator commits to resurfacing the Mineota Road with “chip and seal” or comparable surface treatment as part of its agreement to use that road for access to any of its Wellsite Locations, then Owner and Operator shall share equally in the actual expense of such resurfacing, not to exceed a gross expense of $130,000 ($65,000 net to Owner). This Agreement shall not create any obligation on the part of any Party to maintain such road.

d. Operator shall locate and stake each Wellsite Location in conformance with Exhibit A and the survey information provided to it by Owner or SWD. Operator shall notify Owner of the staking of each location as it is made, and describe in its notice the proposed boundaries and corners of the location. Owner shall inspect the staked location and its boundaries to determine whether its boundaries and corners conform to the survey information for that Wellsite. Owner may object to the location on the grounds that it does not conform to the survey information, within five business days of having been notified of staking. If Owner objects, Operator shall either restake the location if it does not actually conform to the survey, or confirm that it does actually conform. If Owner does not object within five business days, then it will be deemed to have waived any objection to the staked location.

e. Owner shall allow Operator to relocate any of the Wellsite Locations for A through E Pads, inclusive, as near as reasonably practicable to the location(s) depicted on Exhibit A, in the event that unforeseen site conditions or survey errors require such a relocation. Relocation of a Wellsite Location shall not encroach on the golf facilities or add any additional permitting burdens on Operator (for example, obtaining a minimum setback waiver from a neighboring landowner). Owner and Operator shall work in good faith to accommodate any Wellsite Location that must be relocated as provided in this paragraph consistent with Owner’s plans to develop the property for residential purposes and Operator’s plans to develop oil and gas resources. Owner’s approval to relocate a Wellsite Location shall not be unreasonably withheld.

f. Without waiving its right to use the full 200 feet by 300 feet dimensions of the Wellsite Locations if necessary, Operator shall use its best efforts to site and construct A, B, C, and D Pads so as to be as small as practicable. Operator will attempt to make the completed Wellsite Location no larger than necessary to support production equipment and future workover and recompletion or redrilling activity.

4. Access to Wellsite Locations.

a. Operator may use the roads depicted in Exhibit A to access the Wellsite Locations. Roads depicted on Exhibit A and constructed by the Surface Owner for the general use of the public and Operator within the subdivision shall be referred to herein as “Subdivision Roads.” Roads depicted on Exhibit A and used only by Operator to obtain access to Wellsite Locations, shall be referred to as “Wellsite Access Roads.” Operator shall use only the Subdivision Roads and Wellsite Access Roads identified in Exhibit A to access its facilities. Owner will construct and maintain Subdivision Roads, including curb cuts, turnouts, ditches, culverts and such other facilities as are necessary to give access from the Subdivision Roads to the Wellsite Access Roads. Operator shall construct and maintain the Wellsite Access Roads referred to above at its expense.

b. Construction and Width of Access Roads.

i. Subdivision Roads, access roads or portions of access roads that will be jointly used by the Operator and Owner shall be constructed in accordance with the requirements of the Town of Silt or Garfield County, and Owner shall construct or improve all paved or improved joint access roads so as to withstand the weight of oil and natural gas exploration and development equipment.

ii. Wellsite Access Roads that are used exclusively by the Operator shall be twenty (20) feet wide, and the Operator shall install and maintain them to applicable state and local standards for oil and gas operations.

iii. Access roads or portions of access roads that the Operator constructs to access the Wellsite Locations and which will be used by Owner for the subdivision shall be constructed by the Operator in accordance with state and local standards; after such roads are accepted by the local jurisdiction Operator shall not be obligated to maintain them.

c. If Operator causes damage to a road that is jointly used by both Operator and the subdivision occupants and that was constructed according to the standards set forth herein, Operator, as its sole cost, shall promptly repair any damage which it causes which is a direct result of its use of the road.

d. No party shall interfere with the use by the other of a Subdivision Road; provided however, that certain operations conducted by the Operator which involve the use of a drilling or service rig or other heavy equipment may require that access be restricted to local traffic during limited periods along limited portions of a Subdivision Road, and Owner and Operator agree to cooperate in obtaining approval for such restriction from the applicable local government when needed.

e. The Parties shall plan, construct and install their activities and facilities so as to reasonably minimize any interference with or delay of the ongoing operations of the other Party.

f. Operator agrees to make reasonable, good-faith efforts to obtain easements and/or access rights from the owners of Mineota Estates lots necessary to provide production operations access to E, F and G Pads from the Mineota Road. In the event that Operator obtains such rights, Operator agrees that its exclusive means of access to E, F and G Pads for production operations shall be via the Mineota Road. The cost of compensating any Mineota Estates lot owner to provide such access easements shall be borne equally by Owner and Operator, up to a maximum cost to Operator of $5,000 per easement. All formal agreements for such access shall be mutually approved by Owner and Operator.

5. Pipelines, Flowlines and Easements.

a. Operator has the right to construct, use, repair, maintain and replace flowlines, pipelines and utility lines providing service to wells and facilities.

i. Operator has identified the anticipated locations of future flowlines and pipelines to be built on the Property. Owner shall grant, and does hereby grant to Operator, its successors and assigns, a nonexclusive easement for operation and maintenance of flowlines, pipelines and appurtenant equipment at the locations shown on Exhibit A. The width of such easements shall be 40 feet during construction of flowlines or pipelines located in Phase I of the owner’s PUD plan, and 50 feet during construction of flowlines or pipelines located in Phase II or III of the PUD. Operator may request a wider construction easement in certain areas of Phase I by providing Owner with two weeks notice, and Owner will use its best efforts to accommodate Operator’s request where practicable. The Parties will consult to accommodate one another’s construction schedule and to minimize scheduling conflicts. Pipeline and flowline easements in all phases of the PUD shall contract to 20 feet after completion of construction of the applicable flowline or pipeline. Owner shall not install or construct, or allow or cause to be installed or constructed, any source of ignition within 75 feet of a flowline or pipeline, or future easement facilities. No permanent building or structure shall be constructed or installed on the surface within the boundaries of the easements affirmed or granted herein, except for roads, trails, golf facilities and landscaping areas identified in Exhibit A.

ii. All easements affirmed or granted in this Agreement shall be for the use of Operator for the installation, operation, maintenance and repair of wells, flowlines, pipelines, and appurtenant equipment that will be used to produce, gather, treat, transport or distribute oil, gas, liquid hydrocarbons, and water, whether treated or untreated. Operator, its successors, assigns, affiliated companies, parent companies, and subsidiaries, may use any of the flowlines and pipelines located in the easements to produce, gather, transport or distribute oil, gas, liquid hydrocarbons, and water for themselves or for third parties, without regard to ownership or provenance of such substances.

iii. Where any temporary, construction easement is located along the perimeter of the Property, the subsequent permanent easement shall be located in the area which comprises the closest twenty (20) feet to the perimeter. If the temporary, construction easement is not located on the perimeter of the Property, one edge of the twenty (20) foot permanent easement shall be coterminous to one edge of the temporary construction easement as the Owner and Operator may agree.

b. Gathering line and pipeline easements are or shall be at the locations identified on Exhibit A.

i. Gathering lines and pipelines shall be installed at depths of approximately forty-eight (48) inches below the surface of the ground, except in those areas where Owner and Operator agree to install them at a greater or lesser depth (hereafter “Exception Pipeline Areas”) to accommodate storm sewer lines or other similar gravity-dependent facilities. Owner agrees to provide Operator detailed drawings showing the Exception Pipeline Areas within fifteen business days following the execution of this Agreement. Operator shall review Owner’s detailed drawings and attempt to accommodate relocation of the gathering lines or pipelines at Operator’s expense. If Operator deems such relocation to be excessively burdensome, it shall consult with Owner, and the Parties will in good faith to attempt to arrive at a mutually satisfactory resolution.

ii. Operator shall compact all trenches related to any phase of drilling and/or pipeline construction to 95% SPD; provided that compaction shall be 100% SPD for all trenches which are in areas designated for public or private roads or paved trails.

c. Owner will take such measures when grading, contouring, scraping, building roads, or installing any infrastructure as are necessary to ensure that then-existing gathering lines and pipelines, if any, remain approximately forty eight inches below the ground surface, or at such other depth as the Parties may have agreed upon.

d. Locations of gathering line and pipeline easements and depth of pipeline installation may be changed by mutual agreement of the parties; provided, however, all costs and expenses of such relocations shall be borne by the party which requests the relocation. In the event that the parties agree to the relocation of a pipeline or gathering line at the Owner’s request, the Operator shall provide Owner with a written estimate of the relocation costs. Owner shall remit payment to the Operator within thirty (30) days of commencement of relocation operations. The payment shall be adjusted up or down upon completion of the work and after an itemized statement is provided to Owner.

e. Owner may cross gathering line or pipeline easements affirmed or granted herein to install, operate and maintain streets, curbs, gutters, sidewalks, utility service lines, cables or facilities, including those for water, gas, sewer, electricity, telephone, television, and fiber optics, provided that Owner shall use its best efforts to minimize interference with Operator’s use of the easements affirmed or granted herein, and provided further that 1) any such crossing shall be at substantially right angles to the easements affirmed or granted herein; 2) if any such streets, curbs, gutters, sidewalks lines, cables or facilities are laid substantially parallel to gathering lines or pipelines, they shall be located at a minimum horizontal distance of five feet from any gathering line or pipeline; 3) any lines, cables or facilities that cross gathering lines or pipelines shall be separated vertically by a minimum distance of two (2) feet center-to-center.

f. Owner, its agents, representatives, successors and assigns may use easements for other utilities, access and roadways as deemed necessary by the Owner; provided that utilities shall have a horizontal separation of at least five (5) feet (center to center) and a vertical separation of at least two (2) feet (center-to-center).

g. Within ninety (90) days following completion of construction of any working segment of pipeline or facility, the Operator shall provide the Owner with as-built drawings of the completed pipeline segment or facility.

h. Operator shall obtain any required approvals from the Town of Silt related to the easements for Operator’s Wellsite Locations, pipelines and access routes for its operations and facilities, at its sole expense.

i. Operator shall reclaim Wellsite Locations and easements in conformance with COGCC requirements. Operator will attempt in good faith to accommodate Surface Owner’s reasonable requests concerning berming, screening, revegetation and fencing. Any costs incurred in landscaping or berming Wellsite Locations will be apportioned as set forth in Section 8.b. below.

6. Compression. Operator may locate a centralized dehydration and compression facility or facilities on the site designated for that purpose on Exhibit A. Such facility or facilities shall be housed in a building that is constructed in accordance with the Stillwater Community Architectural Guidelines, and that is no larger than necessary for its purpose. Compressors located thereon shall be equipped with hospital-grade mufflers. Compressor fan direction shall be subject to the approval of Owner; such approval shall not be unreasonably withheld.

7. Power/Telephone/Transformers. Only powerlines, transformers and data transmission lines necessary for the operation of wells drilled on the Wellsite Locations, or production equipment ancillary thereto, may be installed on the Wellsite Locations or in the easements. No power line, data transmission line or transformers will be permitted outside of Wellsite Locations, Subdivision Road or Permanent Access Road easements shown on Exhibit A.

8. Operator’s Sole Risk; Visual Impact Mitigation; Insurance.

a. Operator shall conduct all operations on the Property at its sole risk, cost and expense. Operator assumes all risk and liability of any nature incident to, occasioned by or resulting in any manner, directly or indirectly, from Operator’s operations hereunder. Operator agrees to keep the Property free of liens arising from or connected with its operations.

b. Operator agrees to berm and landscape each Wellsite Location, or allow Owner to berm and landscape each Wellsite Location, to mitigate visual impacts, provided such activity does not interfere with operations or with safety requirements imposed by the COGCC. Operator shall reimburse Owner’s actual expense of such berming and landscaping, up to a maximum for each Wellsite Location. This maximum reimbursement amount shall be adjusted annually, beginning January 1, 2006 and each January 1 thereafter, based on the Denver /Boulder All Items Consumer Price Index, however, a change in the reimbursement limit shall be effective only for the year following and shall not create a retroactive reimbursement obligation. Owner shall furnish matched invoices and checks as evidence of the cost of work actually performed and paid, and Operator shall reimburse such documented costs within thirty days of receipt of such evidence. If Operator performs berming and landscaping on any Wellsite Locations, it shall furnish to Owner matched invoices and checks, or internal accounting documentation if the work is performed by Operator’s employees, as evidence of having performed and paid for such work, and the documented value of such work on any Wellsite Location shall be credited toward Operator’s maximum reimbursement obligation for that Wellsite Location. This reimbursement of the cost of berming and landscaping (up to a maximum per Wellsite Location) shall constitute Operator’s sole obligation to pay Owner or its successors for surface use, and shall supersede any conflicting requirement concerning payment for surface damage or surface use contained in the Lease or any exhibits to it, or any other document.

c. Operator shall carry no less than $10 million in general liability limits for any one occurrence and in the aggregate, and shall name the Owner as an additional insured with respect to the liabilities assumed hereunder.

d. While the Property remains in farm/ranch use, Owner shall carry no less than $1 million in general liability limits for any one occurrence and in the aggregate, and shall name the Operator as an additional insured with respect to the liabilities assumed hereunder. At commencement of development of the Property for residential use, such coverage shall increase to $10 million.

9. Surface Damage Payments. Owner’s compensation for any and all surface damage is set forth in the preceding paragraph and the Lease as modified by it, and is limited to the amounts set forth therein. Owner hereby waives all other surface damage payments pursuant to any COGCC rule or regulation, or local regulation, state statute, common law or prior agreement, for the Wellsite Locations, wells drilled thereon and all associated pipeline and flow line easements and access roads. This waiver is not intended to waive any right or remedies the Owner may have, including the right to damages, if it is determined that the conduct of Operator, or its agents, employees, successors or assigns exceeds the scope of the easement granted herein.

10. Utilities. To the degree that Operator requires any utility lines (i.e. communication, electric, etc) to service any of the facilities depicted on Exhibit A, Operator agrees to locate such utility lines underground at Operator’s cost, in accordance with the utility requirements of the Town of Silt as may be imposed on the Stillwater Development. Location of utility lines underground shall occur contemporaneously with Owner’s construction of street, curb, gutter and sidewalk public improvements in the area where the utility lines are located. This paragraph shall not apply pipelines or flowlines which are considered in paragraph 5 herein.

11. Effect of Order 523-1; Waiver of Certain Provisions.

a. At and following execution of this Agreement, Operator may access rights-of-ways, and drill wells on any or all of the Wellsite Locations set forth in Exhibit A, without being subject to seasonal drilling restrictions. Operator’s activities shall be conducted in conformance with this Agreement and applicable COGCC regulations. By executing this Agreement, the Parties agree that Operator will have complied with COGCC Order 523-1 as that Order applies to Exhibit A and this Agreement. Following execution of this Agreement, Operator and Owner may jointly submit a cause to the COGCC, seeking modification of Order 523-1 to conform to the terms of this Agreement; if Operator and Owner cannot agree on the form and content of such a modification within a reasonable time, Operator may unilaterally ask the Commission to modify or rescind Order 523-1. In the event Operator seeks a unilateral change or rescission of Order 523-1, Owner shall have the right to object to such modification or rescission before the COGCC.

b. Paragraph 5.a. of Order 523-1 contains a restriction limiting Oil and Gas Operations at any drilling pad location to the months of October through April for any Phase being platted by the Surface Developer. Owner hereby waives the monthly restriction on Oil and Gas Operations accordance with paragraph 9 of Order 523-1, and in lieu thereof Owner and Operator agree that Oil and Gas Operations may occur during any month of the year, provided however, that such operations do not interfere with the operation and play on the golf courses and associated golf facilities existing or under construction for the Property, including the tee boxes, fairways, greens, roughs and driving ranges, collectively the “Golf Facilities.” For the purposes of this waiver “interference” shall include any Oil and Gas Operations that would physically prohibit or otherwise unreasonably impede or interfere with participants’ use and play on the Golf Facilities, or would, because of a risk to the health, safety or welfare of the individual participants, shut-down the Golf Facilities. Interference shall include, without limitation, any Oil and Gas Operations located within the physical boundaries of the Golf Facilities if an easement for such operations is not expressly permitted under this Agreement. Interference shall not include noise, visual appearance, or harmless smell associated with Oil and Gas Operations at any drilling pad, nor shall interference include any necessary restriction of access to the tee box to be located on the A Pad when Oil and Gas Operations are being conducted thereon.

c. Paragraph 8 of Order 523-1 provides that unless waived or modified, upon the Surface Developer’s initiation of the process for approval of a preliminary plat for any phase of the development of the Stillwater Community, Oil and Gas Operations at any drilling pad location within the phase being platted shall be conducted in accordance with the High Density Area Rules of the COGCC. In consideration of the Parties' identification of the specific Wellsite Locations for development within the PUD, the Owner hereby waives the application of this requirement to the Wellsite Locations and Compressor Site identified on Exhibit A.

d. Owner will assist Operator by filing all necessary papers with the COGCC, and taking such other steps as are necessary, to obtain waivers of Paragraphs 5 and 8 of Order 523-1 and the High Density Area Rules of the COGCC and the Town of Silt.

e. The Wellsite Locations shown as “B, C, D, and E Pads” on Exhibit A may require a waiver and exception to comply with COGCC Rule 603.a (2) in their current locations. Owner shall assist Operator to obtain such waiver and exception, or, if Operator is unable to obtain such waiver and exception, then Owner shall cooperate with Operator by moving any affected pad or pads a distance as minimally necessary to ensure same are placed at a satisfactory location that will not require such a waiver and exception.

12. Waiver of additional notice under COGCC Rules 305 and 306; No objections. The Parties acknowledge that Operator has the right to conduct oil and gas operations on the lands covered by the Lease. Rule 305 of the Rules and Regulations of the COGCC requires that the Operator give notice to the surface owner of potential oil and gas operations, such notice to contain the following information: (1) when operations on the lands are to be commenced; (2) the name of the operator with address and contact person; (3) a legal description of the quarter quarter section within which operations will be conducted; (4) a statement that the surface owner is responsible for notifying affected tenants of the proposed operations; (5) information with regard to the consultation notice requirement set forth in COGCC Rule 306, and (6) a copy of the COGCC’s information brochure for surface owners. By executing this Agreement, Owner, for itself and on behalf of any tenant, successor or assign, hereby acknowledges that it has received adequate notice and held consultation with Operator, and waives any right to further notice or consultation under Rules 305 and 306. In consideration of the foregoing, Operator shall provide Owner with thirty days’ advance notice of the commencement of any drilling activity on the Property, and fifteen days’ advance notice of any redrilling or workover activity on the Property. Owner agrees that it will not object in any forum to the use by Operator of the surface of the Property consistent with this Agreement, except as specifically provided herein, and it will provide Operator with whatever written support it may reasonably require to obtain permits from COGCC or a local jurisdiction, provided that Operator is not in breach or default of this Agreement. Operator agrees that it will not object in any forum to the use by the Owner of the surface of the Property consistent with this Agreement, and that it will provide Owner whatever written support it may reasonably require to obtain permits from the appropriate jurisdiction, provided that Owner is not in breach or default of this Agreement.

13. Term. This Agreement will remain in effect for as long as Operator, its successors, or assigns continues to produce hydrocarbons from the lands described in the Lease, or from lands pooled or unitized with such lands. Should Operator cease using the Compressor Site, any Wellsite Location, or any right-of-way because of termination or abandonment of its rights under the Lease, then such Compressor Site, Wellsite Location or right-of-way shall be made available for use by another operator or lessee as Owner, as the owner of the mineral estate that will remain a third party beneficiary to this provision upon any conveyance of the surface estate, may decide in its sole discretion. Owner covenants that any such other operator or lessee shall use its best efforts to avoid conflicts with the operations of Operator remaining in effect under this Agreement.

14. Successors and Assigns. This Agreement is binding upon the successors, heirs and assigns of Owner and Operator. Owner, its successors or assigns, as applicable, shall provide a copy of this Agreement to builders and developers who purchase all or any portion of the Property, and to all homeowners associations governing all or any portion of the Property. Owner shall provide a copy of this Agreement and a statement to each person or entity who enters into a contract to purchase a lot from the Owner, that the surface estate and the mineral estate have been severed and that certain locations have been reserved for the Operator for existing, future, and prospective oil and gas operations.

15. Counterparts/Facsimile Signatures. The Parties may execute this Agreement in any number of counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same instrument. The Parties agree that facsimile signatures are binding.

16. Liquidated Damages. The Parties acknowledge that, in the event of a violation of this Agreement by either party, it will be difficult to determine an appropriate amount for damages. Therefore, in the event that either Party is found by a court of competent jurisdiction to be in breach of the terms or conditions of this Agreement, the breaching Party shall pay as damages (i) one hundred dollars ($100) per day for each day and for each breach which continues to exist plus (ii) any actual damages found by the finder of fact to have been caused by such breach; provided that the breaching Party shall not be liable for such damages if it is making its best, good faith efforts to remedy the breach as quickly as practicable. In any litigation related to this Agreement, the court shall award to the prevailing Party all costs and fees, including without limitation, reasonable expert fees and reasonable attorney fees.

17. Conflicts. In the event of a conflict between the provisions of this Agreement, Order 523-1 and the Lease, the terms and conditions of this Agreement will prevail, it being understood by the Parties that this Agreement applies only to the surface use and development matters specifically addressed herein and that any additional provisions contained in Order 523-1 will apply to Oil and Gas Operations on the Property.

18. This Agreement may be amended only by means of a mutually executed written letter agreement.

19. IN WITNESS WHEREOF, this instrument is executed as of the date first above written.

OWNER:		Valley Farms, Inc.

By:		Original signature on file at COGCC office
Title:		Clinton W. Josey, Jr., Chairman

OPERATOR:		Antero Resources II Corporation

By:		Original signature on file at the COGCC office
Title:		Brian A. Kuhn, Vice President

ACKNOWLEDGMENTS

STATE OF TEXAS )

)

COUNTY OF ___DALLAS__ )

This instrument was acknowledged before me on this _14th__ day of July, 2005, by Clinton W. Josey, Jr., as Chairman of Valley Farms, Inc., a Colorado corporation, on behalf of such corporation.

Witness my hand and official seal.

My Commission expires: ___11-25-08_____________________

Original signature on file at the COGCC office

Notary Public

STATE OF COLORADO )

CITY AND )

COUNTY OF DENVER )

This instrument was acknowledged before me on this __13___ day of July, 2005, by Brian A. Kuhn, as Vice President for Antero Resources II Corporation, a Delaware Corporation, on behalf of said corporation.

Witness my hand and official seal.

My Commission expires: _____11-08-08___________________

Original signature on file at the COGCC office

Notary Public