EXHIBIT September 12, 2014 Letter from the Department to Amy Nassif (Mars Parent Group) [363608.1/48925 DEPARTMENT OF ENVIRONMENTAL PROTECTION September 12, 2014 Ms. Amy Nassif Mars Parent Group 305 Pinto Place Mars, PA 16046 Re: Geyer Unit, Permit Application To Drill And Operate An Unconventional Well 6 wells- Nos. 019-22239, 019-22240, 019-22241, 019-22242, 019-22243 and 019-22244 Middlesex Township, Butler County (?the Project?) Dear Ms. Nassif: On July 15, 2014, the Department of Environmental Protection (?Department?) coordinated a conference between the Mars Parent Group and RE. Gas Development, LLC, Gas?) under the terms established by Section 3251(a) of the 2012 Oil and Gas Act, 58 3251(a), related to the Project. The Mars Parent Group requested the conference, as they have expressed a direct interest in speci?c matters relative to the applications listed above for the Project. Section of the 2012 Oil and Gas Act tasks the Department with reducing any agreements reached during the conference to writing, upon Department approval. Although no agreements were reached during the conference, RE. Gas committed to do the items summarized below. 1) Although not required until 2015, RE. Gas will utilize EPA-approved ?green completion technologies? in accordance with 40 CPR and will not ?are during completion operations. 2 RE. Gas will erect sound abatement walls to mitigate operationai?related noise. 3) R.E. Gas will work with the Mars Area School District to schedule completion operations during non?school hours. 4) RE. Gas will perform outreach with various interested parties, and governing bodies, to promote communication of the Project through the various stages of development. 5) RE. Gas will consult with local ?rst?responders and provide additional training, if requested. 6) RE. Gas will evaluate the use of additional air monitoring equipment. 7) RE. Gas has committed to regular communications with the Mars Area School District. As well as the comments ?om the Mars Parent Group expressed at the conference, the Department received other correspondence ?'om interested parties who also made comments about the activities related to the Project. The issues raised in those comments are consistent with issues brought forth by Northwest District 011 8A Gas Operations 230 Chestnut Street Meadville, PA 16335 814.332.6860 Fax'814.332.6121 I the Mars Parent group at the July 15 conference. The most notable of the comments brought to the attention of the Department at the conference and during the review of the applications, are summarized below. The Department?s response to each issue follows the summary of each issue. 1) RE. Gas ?s history of violations should negate their ability to obtain the necessary permits to drill and operate these wells. The Department has discretion to deny a permit to drill or operate a well in only limited circumstances. Under the 2012 Oil and Gas Act, the Department may decide to deny a well permit if it determines that the ?well site for which a permit is requested is in violation of any of this chapter or issuance of the permit would result in a violation of this chapter or other applicable law.? 58 Additionally, the Department may deny a well permit if it ?nds that the applicant, or any parent or subsidiary corporation of the applicant, is in continuing violation of oil and gas regulations, or ?any other statute administered by the Department, any regulation promulgated under [the 2012 Oil and Gas Act] or a statute administered by the Department or any plan approval, permit or order of the Department, unless the violation is being corrected to the satisfaction of the Department.? 58 The discretionary authority of the Department to deny a permit does ?not take effect until the Department has taken a ?nal action on the Violations and the applicant has not appealed the ?nal action in accordance with the act of July 13, 1988 (P.L.530, No.94), known as the Environmental Hearing Board Act; or (ii) if an appeal has been ?led, no supersedeas has been issued.? (58 R.E. Gas does not have any ?continuing violations? that are not being ?corrected to the satisfaction of the Departmen to the extent that the Department has taken a ?nal action which has not been appealed related to such violations. In addition, the well site for which the well permits are requested is not in violation of the 2012 Oil and Gas Act and the Department has determined that permit issaance would not result in a violation applicable law. As a result, the Department does not have a basis to deny the RE. Gas permit applications at issue under Section 321 1(e. 1) of the Act, as it relates to compliance status and history. 2) The siting or location of the RE. Gas wells will have'a negative impact to species of concern, public resources, property values, quality of life and produce potential health related issues. This should negate RE. Gas from obtaining the necessary permits to drill and operate these wells. Well siting restrictions for well permits are governed by Section 3215 of the 2012 Oil and Gas Act, 58 3215. Minimum distance requirements from buildings and water supplies are contained in Section 3215(a). The Department has determined that the Project meets all applicable distance requirements. In accordance with the well permit application process, every well location is required to be evaluated through the Natural Heritage Program process. As part of the well permit application, R.E. Gas submitted a copy of. a Receipt? for the project area as, part of the PNHP process. A PNDI receipt contains important information regarding any threatened or endangered species, special concern species, and rare and signi?cant ecological features. PNDI Receipts indicate if there are ?No Impacts,? ?Avoidance Measures,? and! or ?Conservation Measures? within the project area. PNDI Receipts also indicate when the Receipt must be submitted to a jurisdictional agency. Here, the PNDI Receipt indicated that there were no impacts to any threatened or endangered species, special concern species, or rare and signi?cant ecological features and that the Receipt did not have to be submitted to any jurisdictional agency. Additionally, as part of the well permit application, if the well is located in an area where it may impact any of the public resources identi?ed in SectiOn 3215(c) of the 2012 Oil and Gas Act (publically owned parks, forest, game lands and wildlife areas; national or state scenic rivers; National natural landmarks; historical and. archeological sites; public drinking water supplies), the applicant must complete the ?Coordination of a Well Location with Public Resources? form (Document No. coordinate with jurisdictional agencies, if necessary; and describe any necessary additional measures, facilities, and practices that will be employed to protect any potentially impacted public resource. Here, the Department determined that none of the public resources identi?ed in Section 3215(c) will be impacted such that additional measures are needed before the permit is issued. 1 The well permit and RE. Gas? authority to conduct activities authorized by the well permit are conditioned upon R.E. Gas? compliance with all other applicable law and regulations. The well permit is not the only environmental permit/ authorization required for this regulated activity. Permits under 25 Pa. Code Chapter 102 are required to develop and construct the well pad, and permits under 25 Pa. Code Chapter 105 may be required as well. The Department ensures protection of public health, safety and the environment through the authority granted to the Department in a comprehensive network of statutes and regulations, and speci?c permits under them. For example, R.E. Gas has also applied for an Erosion and Sediment Control General Permit (a Chapter 102 permit) for the earth disturbances associated with the Project. Property values and quality of life issues are generally addressed through local zoning controls. The applicant has received zoning approval for this project. The comments have not identi?ed any speci?c impacts to property values. Nonetheless, the applicant has committed to addressing noise and air impacts as described above. As well, the Department will include a Special condition with the permit, for the installation of sound abatement walls, during the drilling and completion of the wells- The commenters have not identi?ed any speci?c health impacts. In 2010, the Department conducted a short-term, screening level air quality sampling initiative at three locations around the Commonwealth, and did not identify concentrations of any compound that would be likely to 3) trigger acute air emission?related health issues associated with Marcellus Shale drilling activities. See the response to No. 5 below. The potential for unsafe incidents, such as an explosion, causing emergency situations that the operator or local emergency responders are not prepared for, puts the local school children and school employees at risk. The contingency program for oil and gas activities is comprehensive and is authorized by regulations at 25 Pa. Code Chapter 78, the 2012 Oil and Gas Act; the act of February 2, 2012 (PL. 67, No. 9), codi?ed at 35 7321; the Clean Streams Law and the Solid Waste Management Act. The well permit is conditioned on compliance with these requirements for the Project. RE. Gas must have containment plans required by Section 3218.2 of the 2012 Oil and Gas Act, as well as the plans required by 25 Pa. Code 78.55 for preventing and responding to emergencies at oil and gas well sites. Section 78.55 provides the following: Prior to generation of waste, the well operator shall prepare and implement a Preparedness, Prevention and Contingency Plan Plan?) under 25 Pa.Code 91.34 (relating to activities utilizing pollutants) for the control and disposal of ?uids, residual waste and drill cuttings, including tophole water, brines, drilling ?uids, additives, drilling muds, stimulation ?uids, well servicing ?uids, oil, production ?uids and drill cuttings from the drilling, alteration, production, plugging or other activity associated with oil and gas wells. The PPC Plan must identify the control and disposal methods and practices utilized by the well operator and be consistent with the 2012 Oil and Gas Act, The Clean Streams Law (35 PS. the Solid Waste Management Act (35 PS. and 25 Pa.Code 78.54, 78.56?78.58 and 78.60?78.63. The PPC Plan must also include a pressure barrier policy that identifies barriers to be used during identi?ed operations. Well drilling and completion operations requiring pressure barriers shall employ at least two mechanical pressure barriers between the open producing formation and the atmosphere that are capable of being tested. The mechanical pressure barriers shall be tested according to manufacturer speci?cations prior to operation. If during the course of operations the operator only has one functioning barrier, operations must cease until additional barriers are added and tested or the redundant barrier is repaired and tested. Finally, Section 78.55(f) requires R.E. Gas to develop and implement an emergency response plan that provides for equipment, procedures, training and documentation to properly respond to emergencies that threaten human health and safety for this well site. For emergency planning purposes, the operator has to assess and summarize the risks and hazards to the public within at least 1/2 mile of the well site and address the associated planning assumptions. The emergency response plan must be comprehensive and include: (1) The emergency contact information, including phone numbers, for the well operator?s local representative for the well site and the well operator? 5 24?hour emergency phone number. (2) The emergency noti?cation procedures that the operator shall utilize to contact emergency responders during an emergency. (3) A description of the well site personnel?s response to the following well site emergencies: (I) Fire. (ll) Medical emergency. (Ill) Explosion or similar event. (IV) Spill. (IV) Security breach or other security event. (V) Any other incident that necessitates the presence of emergency responders. (4) A description of the procedure to be used to provide the most current information to emergency responders in the event of an emergency, including the following: (I) The current Material Safety Data Sheet (MSDS) required under law to be present at the well site. (II) The location of the at the well site. The name of the position in the operator?s organization reSponsible for providing the information in subclauses (I) and (II). (5) A list containing the location of any ?re suppression and spill control equipment maintained by the well operator at the well site. (6) A description of any emergency equipment available to the operator that is located off of the well site. (7) An outline of the emergency reSponse training plan that the operator has established. R.E. Gas must submit a copy of the current emergency response plan for that well site to the Department, the Emergency Management Agency, the county emergency management agency, the Public Safety Answering Point with jurisdiction over the well site and a copy of the plan shall be available at the well site during all phases of operation. The emergency response plan must address response actions during preparation of the access road and well site, drilling of the well, hydraulic ?acturing and stimulation of the well, production, well site restoration and plugging of the well. As a result, the emergency response plan must be developed and submitted prior to preparation of the well site. Additionally, in accordance with Section 3218.2 of the 2012 Oil and Gas Act, an unconventional well site must be designed and constructed to prevent Spills to the ground surface or spills off the well site and the operator must develop a plan describing the containment practices used where containment systems will be employed. Containment must be suf?ciently impervious and able to contain spilled material or waste until it can be removed or treated and be compatible with the 4) 5) waste materials or waste stores or used within the containment. Areas where any additives, chemicals, oils or fuels are to be stored must have suf?cient containment capacity to hold the volume of the largest container stored in the area plus 10 percent to allow for precipitation, unless the container is equipped with individual secondary containment, as outlined in 58 3218.2. Although the school is outside the mile regulatory requirement to assess and summarize, the risks and hazards to the public, frOm the well site as discussed above, RE. Gas has committed to work with the School District on safety issues, as summarized on item 3 of page 1. This activity is inconsistent with local zoning. Excessive tra?ic, sound and lighting disturbs the local residents and potentially the learning atmosphere at the local schools. Updating local emergency responders with training and equipment is cost prohibitive. The Department should interpret local zoning as prohibiting the gas well activity and enforce, pursuant to Act 6 7, Act 68 and Act 127, these local ordinances by not issuing these permits. The Department has conferred with the local municipalities as part of the application review process. The applicant obtained zoning approval, and the municipalities have not raised any objections to the Project with the Department. Further, DEP has con?rmed that the Department of Transportation issued highway occupancy permit No. 10020543 for the entrance ofthe Geyer Site on May 7, 2014. A permit to drill or operate a well does not absolve R.E. Gas from obtaining any necessary additional approvals before, or complying with any local zoning ordinances during, operations at the well site. It is understanding that R.E. Gas has committed to take certain additional steps to address local government concerns. First, RE. Gas has committed to use sound abatement walls to minimize noise issues. Second, to address traf?c safety concerns raised by Adams Township of?cials, RE. Gas will utilize a ?right turn in, right turn out? traf?c pattern. Finally, water will be piped to the site, which will have the effect of limiting water trucks on area roadways. As indicated previously, the Department will include a special condition with the permit for the installation of sound abatement walls during the drilling and completion of the wells. Methane gas associated with these facilities can potentially cause health issues, especially for children and those in respiratory distress. As well, excess gas in the atmosphere has deleterious effects to the environment related to include global warming. The Department conducted a short-term, screening level air quality sampling initiative in the southwest, northeast and northcentral regions in 2010. These regions were selected because they have the largest concentration of drilling activities in the state. The Department?s sampling initiative focused mainly on the following natural gas source categories: compressor stations; condensate tanks; ?aring operations; wastewater impoundments; and well heads. DEP tested for forty-three compounds, including benzene and formaldehyde. Results of the limited ambient air sampling initiative in these regions did not identify concentrations of any compound that would likely trigger acute air-emission related health issues associated with Marcellus Shale drilling activities. R.E. Gas has indicated the company routinely utilizes green completion technologies and has committed to employ equipment necessary for green completion for the Geyer site wells. As well, the Department will include a special condition with the permit, for the utilization of green completion technologies that are consistent with 40 CFR during the completion of the wells, even though that regulation? 5 implementation is not effective until 2015. The speci?c special conditions, to be included in the Permit Application(s) to Drill and Operate an Unconventional Well, at the Geyer site will contain the following, as outlined in 40 CPR (1) For the duration of ?owback, route the recovered liquids into one or more storage vessels or re?inj ect the recovered liquids into the well or another well, and route the recovered gas into a gas ?ow line or collection system, re?inj ect the recovered gas into the well or another well, use the recovered gas as an on?site fuel source, or use the recovered gas for another useful purpose that a purchased ?iel or raw material would serve, with no direct release to the atmosphere. If this is infeasible, follow the requirements in paragraph (3). (2) All salable quality gas must be routed to the gas ?ow line as soon as practicable. In cases where ?owback emissions cannot be directed to the ?ow line, you must follow the requirements in paragraph (3). (3) You must capture and direct flowback emissions to a completion combustion device, except in conditions that may result in a ?re hazard or explosion, or where high heat emissions from a completion combustion device may negatively impact tundra, permafrost or waterways. Completion combustion devices must be equipped with a reliable continuous ignition source over the duration of flowback. (4) You have a general duty to safely maximize resource recovery and minimize releases to the atmosphere during ?owback and subsequent recovery. 6) Oil and Gas companies appear to be above the law, or they don have to follow laws. There seem to be no protections for citizens from the activities of oil and gas companies. Their activities necessarily pollute and create an unsafe environmenifor citizens. The Department disagrees with the judgment expressed in these The Department administers a comprehensive program overseeing the operations of the oil and gas industry in pursuant to a signi?cant list of environmental statutes, including but not limited to the 2012 Oil and Gas Act, the Clean Streams Law, the Solid Waste Management Act, the Air Pollution Control Act, the Land Recycling and Environmental Remediation Standards Act, the Dam Safety and Encroachments Act, and the regulations promulgated pursuant to those statutes. Operators are responsible to comply with these requirements. The Department reviews permit 0 applications and conducts routine inspections to determine compliance with these requirements. 7) Where the Department ?nds that non?compliance exists, the Department documents such situations and takes enforcement actions where appropriate, such as issuing administrative orders requiring corrective action to be taken, assessing civil penalties or even referral for criminal prosecution. Among the express purposes of the 2012 Oil and Gas Act are to ?[p]rotect the safety and property rights of persons residing in areas where mining, exploration, development, storage or production occurs,? as well as to ?[p]rotect the natural resources, environmental rights and values secured by the Constitution of. Hydro??ackng ofuncanventional wells causes earthquakes, as evidenced in Ohio. Hydraulic fracturing is not known to cause earthquakes in and of itself. However, on rare occasions it may induce seismic activity in already stressed parts of the earth?s crust. There have only been two cases out of hundreds of thousands of hydraulic fracturing operatidns related to oil and gas development worldwide where a relationship between earthquakes and hydraulic fracturing has been determined. Although the Ohio Department of Natural Resources has established a policy regarding hydraulic ?acturing conducted in the area of historical earthquakes or certain geologic structures, the Ohio case has not yet been thoroughly documented and determined to be directly related to the nearby hydraulic fracturing. geology and history with earthquakes is different in many ways from Ohio?s geology and history with earthquakes. The Department is studying the issue of induced seismicity and will take appropriate measures should we determine that such measures are necessary to protect public health and safety. Should you have any questions regarding this matter, please feel free to contact me at 814.332.6860. Sincerely, ado/~14 S. Craig Lobins Northwest District Oil and Gas Manager District Oil and Gas Operations CC: Jennifer MeDonough, Esq. Kelly Burch John Ryder John Guth Brian Babb Michael Braymer