STEPHENS ENERGY CORP. - The Railroad Commission of Texas

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Page Two
keep producing and Cantem to aceive positive revenue. \ Ie believe you allow, some
.
other customers to transport.
Suggestion Two You continue to sell his g is at your WASP less 35
cents; this wmp nsates you for marketing f cse volumes plus a profit. He
will pay cohpre sion as needed.
As I mentioned, if Cantera can or will work with him. he rill bring the new well to you.
As you consider this ra uest, 1 want to relate some elcvant information, as I have
spent 18 years of my carea wo king b r pipelines as an att Irney and later an executive. I
was invited to Austin week bef re last by Commissioner C millo for the State of the
Industry Report. Governor P u y, the LL Governor and all the Railroad Commissionm
expressed there "deep concern' about future gas supply, ac d especially keeping our low
pressure, low volume wells on br as long as possible. I bcliwe the R.R.C. plans a "new
study" on this very issue soon.
1 will also note that you .company is classified as P Common Purchaser under the
Texas Natural Resources Code Chapter I I I (the '"RJRC'' .. Regardless of contracts,
Common Purchasers are subjec t to R.R.C. Rule 73 and, su xhapier D of the TNRC.
Common Purchasers' nsponsi ilities set out in these prov ;ions supersede contract
provisions that conflict with R 3.C. rula or state or ftders . laws.
I want to qectfully p lint out that Section I1 1.08 ! of the TNRC regulates
Common Purchasers for the p~ pose offurther conserving the natural gas resources of
this state. Your advisors may. Iso want to glance at sectic is 1 11.081(a)(l)(2), 11 1.083
and 11 1.085 as well.
These lype of gas pspurclasc contracts are also contr dlcd by the Texas Business
and Commerce Code, as sever d minerals. I again refer yt .ur advisors to Section 2.306.
and the U.C.C.'s various comr ~ents and cases, which requre the Buyer (Cantera) to use
good faith, honesty in fact, co~ ~rnercial reasonableness, an 1 your best efforts to sell these
severed minerals (natural gas).