5 Effects of Fracking You May Not Know About

^ Talking Points for Selling Oil and Gas Lease Rights:

As we p05u,- : to move into the greater Ohio market, it is critical that Field Agents have a consistent selling
plan for that market. The following points will outline our answers to commonly asked questions, including
what to talk about and what topics to avoid .

Oil and Gas exploration and drilling is meeting increasing resistance from local community groups,
so it is essential to contact land holders and acquire signatures before
sentiment by environmenral and other public organizations limits our ability to obtain access to private land
for oil and gas development.

Remember, if at all possible try not to deliberately mislead the landowner, that
only makes our position harder to defend at a later date. It is in our best interest to present our side of the
issue in a manner that makes it more attractive. Do not discuss the detracting points of view in a manner that
gives them any credibility. Don't feel that you have to discuss every point and question. Do hot argue when
you cannot win. Successful field agents understand what points to focus on so the benefits outweigh the cons.



1 . Know your demographics!

• We have paid for an analysis of Ohio and the people. Use that data,

i, Ohio is a conservative leaning. Mid-west state. The typical Ohio resident will
welcome you into their home and allow you to speak. This is critical. Face to face
interaction can make the difference. Most mid-west Americans dislike
confrontation. Even if they disagree on a selling point, they are unlikely to confront
you over it. Therefore it is critical to obtain a lease signature in the first meeting, or
at least the agreement to sign and take the lease to a notary. Drive them to the
notary if you have to. If they have time to think it over, they are more likely to
decline the offer.

• Provide the overall position of the nation,

i. Most landowners will be patriotic Americans, and will desire to free our nation from
foreign oil dependence. Make certain you lead with this selling point. CHINA
bought more oil than the United States last year . Fear of foreign encroachment is
the biggest asset we have in selling our development strategy. Our analysis of Ohio
shows that even the most liberal landowners will agree on this point. ALWAYS start
your conversation with a new potential signee on a point that they will agree with.
This is pure psychology. They will be more likely to let you stay and talk. Studies
show the longer you talk, the more chance we have of signing.

ii. At any point in the pitch if talk turns to local issues, environmental hazards, etc, .,a
good way to re-direct the conversation is to re-engage over the nation's energy needs
and the desire to be oil self-reliant. Come back to the mutually agreed upon point
about freeing the nation, CHINA bought more oil than the United States last year!

• Talk about our business

i. We are a small business, working closely with state governments when we set up
wells. More educated landowners may know that we often sell our land leases to
larger corporadons. While this if often true, we do not always sell our interests. So it

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^ is reasonable to say that we plan all development in Ohio without partners. Future

f^"^ plans do not need to be fully disdosed, and they may evolve as we do exploratory

drilling.

• Hydraulic Fracturing^ "Fracing'* - This technique to develop gas resources is coming under
scrutiny, both in tJie mainstream media with articles appearing in the New York Times, and
even in Hollyivood widi the movie "Gasland". &tpect questions on dhis tppic and be ready
to diffuse land owner cGncerns, •

• Stress to the landowner that we ^e primarily looking for oil resources. Searching for oil is *
less envirojamentally damaging than the claims against fracing. Oil exploration has been
condiM^ed for centuri^^ and is safe and effective. Do not deny that gas exploration may be
possible^ but do not eiiai|)hasize it. Distance our selling position from the movie Gasland. We
do ndt want landowB^is linking that image with our development plans.

• Most landowner will not know the difference between hydraulic fracturing and the process
of Slick Water Hydraulic Fracturing. Use that to your advantage. Most wells in southern
Ohio were drilled and then hydraulkally fractured to make a viable somce of water. Tell
them that. Fracing is safe! There is nothing unsafe about the fracing process, if there was, it
would never have been used in dheir wells. If anyone knows about slick water fracturing,
avoid the topic. Do riot discuss the chemicals and other material used during slick water
fracturing. The best strategy is to ^atc that the chemical mixtures used are proprietary and
are highly diluted with water when injected. Reassure landowners that no well
contamination km ever been documented. Do not mention water contamination in
Pffnngy tvania. Wi^ do not want tD associate ourselves with potential ground water issues.
Stress CO the land^livner that we wiH use cement and steel casings to protect the aquifer. Leave
your answers vs^^ if they bring up Pennsylvania. Tell landowners that the Pennsylvania
Departiiieot of Esevironmental Proceccion issues new drilling permits every year. They would
not do so if the j^cess were unsafe.

Clean Air and Water Act — Activists have begun using the exemption of the Oil and Gas
companies fiom ip Federal Clean Air and Water Act against our industry. While this point
is true for the cxpk^tion of natural gas, once ag^ stress that we are searching for oil. Draw
those lines dearly. ,I|e not get into a debate about the law and environmental protection.
State that our company has a good track record, and we follow all environmental rules and
regulations set forw^d by the state of Ohio. It is Ohio that permits the drilling, not the
federal government, j^ederal law has no bearing on Our development. Less government
interference is bctce!^ I Mid-west Americans tend to agjree with the proposition that less
regulation would be bc^r. ObamaCare is a great example, but watch your audience. Check
for political bumper stiArs as you approach the house.

Marcellus vs. Uiica Sh^ ^ Utica Shale covers the southern Ohio region that we are
targeting. One strategy cp defeat the issues on fracing k to discuss the differences between
Marcellus; and Utica Shale, ^iell landowners that fracing is used in the Marcellus shale for
natural gas, We are searching- for oil in the Limestone and Dolomite rock formations. They

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will hear the distinction. While it is true that we will be able to evaluate the well in the shale

layer for suitability for fracing and gas development, stress the initial hope of finding oil. Any

distinction may be enough to finalize the lease.

2. Truck Traffic - There will be extra traffic, but stress that we do everything to keep it to a minimum.

Some activist groups use traffic as a talking point. Just tell landowners the more trucks, the more

royalties. Money will normally deflect most arguments. Return to the nation's energy needs if you

need to.

3- Noise - Another argument against drilling is noise. Do not deny that the initial setup can be noisy,

like building a home nearby. No one objects to new homes under construction. Say that the noisy

portion of the operation is upfront and over quickly compared to the entire operation. This part of

the process can take up to a year, but do not emphasize overall time. The well may last for 40 years,

so one year of noise is not bad. If pressed for details tell them we monitor noise to ensure it is

approximately 80 db at 200 feet. They will likely not understand the details, and will not admit that

the technical data means little to them. Do not compare it to anything tangible, like train noise or

airplane noise. Stick with the numbers, the>^ provide the truth but make it hard to understand the

exact implication.

4. Well Pad Size - Many people ask about their land and how much will be used. During the initial
drilling, pad sizes of approximately 20 acres are necessary. After drilling and fracturing, the well will
be on a land size of approximately 5 acres. Stress the Five acres . Do not talk about the initial setup
unless absolutely pushed on details and timeline for the drilling. After the lease is signed we will be
able to deal with landowner concerns.

5. Well Spacing- This rarely comes up. Landowners do not realize that multiple wells will be necessary.
Wells are most effective if spaced 40 acres or further apart. This sounds like a large number, use it.
Some might ask how many wells will be in a square mile. Don't answer that question. Most
landowners will not realize that 10-20 weljs can be placed in a square mile. Landowners normally
own less than 5 acres, unless it is a farm. 40 acres will be a large enough number that wells will seem
to be far apart in their mind.

6. Lease Life - Our leases are for 5 years with small plots of land or 3 years with an option to renew for
2 years on larger land tracts. If the landowner has brought the lease to an attorney they may know
that if the well continues to produce that the lease is extended for the lifetime of the well, which can
be as high as 40 years. Do not deny if pressed on this issue. This extension does not require their
approval. If we have an active well then it is within our legal right to continue development until we
turn it off Stress the 5 year lease unless absolutely pushed on the details.

7. Water Usage — This is a question normally asked by farmers. See the Talking Points for Agricultural
Land paper to address those specific concerns. Residential owners will not know that we pull water
directly from the local aquifer.

8. Radioactivity - Reports have shown that fracing and other oil/gas exploration techniques have
increased radioactivity in the grotmd water. This is caused by releasing naturally occurring radon from
the ground into the aquifer. ENSURE you tell the landowner that we use NO RADIOACTIVE
materials. The radioactivit}' comes from natural sources in the ground ahd is released by the process,

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but don't tell them this. Most l2ndowners will not know. Tell them we are RADIOACTIVE FREE.
and that should alleviate those fears . If pressed, tell them it is natural radiation that is always there, we
will not increase it by adding anything.
9- Propeny values - Multiple studies have shown that property values decrease for land with oil and gas
leases on the property. Avoid this topic. Some major banks have stopped issuing mortgages on
properties with leases for mineral and oil/gas rights, including Wells Fargo, Bank of America, and
other large financial institutions. This is a no-win discussion point. If backed into this issue, talk
about the potential revenues and the overall needs of the nation. China bought more oil than the
United States last year!

10. Enhanced Oil Recovery — The overall plan is to drill exploratory wells, and then use more advanced
techniques to get at the small oil pockets we find. This will require multiple well heads, where we
pump in high volume of water and chemicals^ much the same manner as in the fracing process. DO
NOT DISCUSS this point. We want no correlation between fracing and enhanced oil recovery
processes. We do not want landowners aware that we may have to drill many well heads in a single
area. After we have the leases signed we have the freedom to use the land as we see fit. If needed we
can even write leases with "No Fracing" positions, and even with these lease modifications we can
legally drill multiple wells and insert high pressure "extractants".

1 1. Lease Term - This is another area of concern that you can alleviate with the right wording. The lease
is for 5 years. Sometimes landowners will read the lease before signing and realize that the lease
renews automatically if any oil/gas are produced from the well. Do not stress this point. Just state that
the lease is for 5 years. They don't need to know, or discover through discussions with us, that the
lease can extend indefinitely with no further permission from the landowner.

1 2. Get the lease signed!

• This is the most important part of the overall development plan. Signed leases will allow us
to re-parcel the land as needed to receive minimum acreage under Ohio law. Even small
parcels are important. A resident with a Vi acre plot can malce the difference with the state
oversight board to allow drilling. The state does not have to allow drilling even if the unit has
65% or more of the acreage. Sometimes the board will look at overall numbers of residents,
and if the majority are against drilling then they reject permits for fear of local backlash. This
is an acreage as well as overall number of people game . Get the lease signed.

• Men are more likely to sign than women. Men don't like to believe that you know more
than they doj so they are also less likely to ask questions. In the state of Ohio the husband
can sign the lease without spousal permission. Go that route if required. Tell them it is their
decision. Write the lease agreement widi only the husband's name on the paperwork. This
will make it more likely that they will sign alone. Men are also more conservative, and more
likely to want oil and energy independence. Women will have more concern for the
environment ajid will challenge you more often. Knowing who to approach can seal the sale.

• If a landowner is undecided, there are several ways to offer incentives,

i. Offer a slight increase in the initial lease payment. Even a $50 increase may be
enough to sway the decision. Tell them it is to cover the Notary Public costs. That

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way you are making a concession without caving and getting inco a negotiation.
Mid-west Americans appreciate feeling valued. This will work in your favor,
ii. Tell the landowner that all their neighbors have signed. Even if the neighbors have
not, this often will push an undecided landowner in favor of signing. Remeniber,
the first visit is the most crucial. They will not know if their neighbors have signed,
and even if they do they will want to sign so they do not lose out on the potential
profits. Once they have signed, then you can show those leases to undecided
neighbors for added pressure.
iii. As a very last resort, you may offer the amended lease with the clause that no slick
water hydraulic fracturing will be used. This limits our future options, but once we
carry out initial drilling and testing, we will know the viability of gas extraction from
the Utica shale layer. At that time we can re-approach holders of the modified leases
and offer incentives to allow slick water hydraulic fracturing. The most important
thing is to obtain the signed lease. Modifications can be made later if necessary. A
signed lease is often enough to leverage a modification at a later date.



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