December 20, 2007

Dear Homeowner:

Re:  Oil and Gas Leases

Your Board of Directors has been asked to respond to a request from O.I.L. Energy Corp. to lease mineral interests within the boundary of Summit Village.

The Board has no objection to these leases provided that they are “ non-development” leases which prevent use of the surface, that is, your land, for drilling, laying pipes, cutting in roads, installing tanks, or other structures.  This protection can be obtained by including a term in the Oil and Gas Lease that reads generally as follows: 

“Notwithstanding anything in this Oil and Gas Lease to the contrary, it is expressly agreed and understood that the lands included in this Lease are hereby leased for the exclusive purpose of pooling and/or unitizing with other lands to form a drilling unit.  Lessee shall not conduct drilling operations or place any production treatment or production storage facilities, roads or transmission lines on the surface or transmission lines under the surface of the land covered by this Lease.”

Oil and gas leases are typically presented to property owners as pre-drafted agreements which have proven suitable to the exploration companies in the past.  You should be aware that lease terms are negotiable. Areas of negotiability include the following points:

1. The Signing Bonus.  You can negotiate for a larger signing bonus than is initiallyoffered.
2. The Standard Royalty of One-Eighth (1/8).  When the location of property is desirable, exploration companies are willing to pay an enhanced royalty to obtain a lease.
3. Primary Terms of the Lease.  The longer the primary term, the longer the exploration company has before commencing drilling operations, and longer you  will wait for the potential royalty payments. 
4. Renewal Options.  The length of renewal options, and  payment for such  extensions can be negotiated.

 Conversation with other property owners in the area will be instructive on the extent to which leasing companies are is willing to negotiate on these and other variables

                                         Your Board of Directors