IN THE SUPERIOR COURT FOR THE STATE OF ALASKA

THIRD JUDICIAL DISTRICT

Appellants, Monte J. Allen and Daniel K. Donkel, by and through their undersigned

attorneys, file this limited reply to the Department of Natural Resources' opposition to

Appellants' motion for reconsideration for the sole purpose of clarifying the specific

RECEIVEDMAR 3 1 2008

Appeal Case No. 3AN-05-09272 CIAppellee.

LIMITED REPLY TO DNR'S RULE 503(h)(3)MEMORANDUM IN OPPOSITION TO THE MOTION FOR

RECONSIDERATION OF APPELLANTS ALLEN AND DONKEL

MONTE J. ALLEN andDANIEL K. DONKEL,

vs.

ALASKA DEPARTMENT OFNATURAL RESOURCES,DIVISION OF OIL & GAS

)))

Appellants, ))))))))

-----------)

portions of the record supporting Appellants' claim that the delay in completing test

drilling by December 31, 2005 was attributable, in part, to difficulties in obtaining drilling

equipment in the aftermath of Hurricane Katrina. The portion of the record supporting this

statement appears at pages Bates stamped DONKEL 05_000816-000825.1 These

documents became part of the record in this case after the Court issued its October 15,

1 See Exhibit 1.Limited Reply to DNR's Opposition to Motion for ReconsiderationMonte J. Allen, et al. v. Ak Dept Natural Resources, Div. Oil & Gas, Case No. 3AN-05-9272 CIQ:\CLIEN1iD4127\O1\PLEADINGS\REPLY1tdreconsideration.doc

Page 1 of2

.u.~

2007 Order granting DNR's Motion to Supplement Record and to Set Date for Opening

Briefs.

""""-Respectfully submitted, this 28' day of March, 2008.

BANKSTON GRONNING O'HARA, P.e.Attorneys for Appellants

BY:~~William M. BankstonAlaska Bar No. 7111024

I HEREBY CERTIFY that a true and correct copy of theforegoing (typed in Times New R!M was mailedto the following attorney(s) on the ay ofMarch, 2008:

Attorney General's OfficeOil, Gas & Mining Section1031 W. 4th Avenue, Suite 200Anchorage, Alaska 99501

James B. GottsteinLaw Offices ofJames B. Gottstein406 G Street, Suite 206Anchorage, Alaska 99501

~~r •• LOSherry L. Lucus ....

Limited Reply to DNR's Opposition to Motion for ReconsiderationMonte J. Allen, et al. v. Ak Dept Natural Resources. Div. Oil & Gas, Case No. 3AN-05-9272 CIQ:\CLIENT\D4127\Ol\PLEADINGS\REPLYltdreconsideration.doc

Page 2 of2

~.ftlSS.Jl!!((]E <R!ASOV~OUJ1SlOl) L£CAn Alaskan Limited Liability Company

5909 Crownover CourtPlano, Texas 75093(214) 738-694S-Work(972) 378-0857 -Fa.,,<LandtlIlan l@corncast.net

" <

DEC 0 .9 2005

......~ •__••••• _--_.- --- _. --_ _",. ~p, ••••- _ , ••_---_.- •••• -"~-'-'--"--"-- • --.,-- •••~ '.'-'

December 7, 2005

William Van Dyke, Acting DirectorState of AlaskaDepartment of Natural ResourcesDivision of Oil and Gas550 West 7th Avenue, Suite 800Anchorage, AI( 99501-3560

Re: Oil and Gas Lease ADL-369116North Middle Ground Shoal Unit

Dear Bill,

This letter requests a two (2) year extension of State of Alaska Oil and Gas Lease ADL-369 116beyond the tennination date prescribed in the Order Approving Settlement and a Stipulation forDismissal with Prejudice (the "Stipulation") issued by the Superior Court on December 2, 2002.

As stated in Renaissance Resources (Alaska), LLC (URenaissance") letter dated June 26, 2005,the Stipulation. "ADL-369 116 will automatically terminate effective December 31, 2005, unlessDNR extends the termination date at its sole discretion", This letter also acknowledges thatcertain response. from the Department of Natural Resources ("DNR") dated August 2, 2005whereby the DN'R is willing to consider an extension of the drilling commitment if Renaissancesubmits written documentation of jts progress to mobiljze a rig to develop the lease. Suchdocumentation has been attained.

Renaissance has made significant progress towards developing ADL-3691 16, including getting 3

Jack-Up drilling rig to the Cook mlet, Alaska. Listed below is a summary of these activities:

Fundin!: Aereement between Escopeta Oil Co., LLC ("Escopet.:l") and Centurion GoldHoldings. Tnc. ("Centurion")Enclosed is a recent announcement whereby Centurion agreed to fund all the costs to mobilize (and demobilize a Jack-up drilling rig and drill a well on the East Kitchen prospecl ~\Qted by _Escopeta in the Cook lnlet, Alaska. ::e-=.t-of-=t-..

Exhibit XX, 1 of 9 DONKEL05 000816OOTTSTEIN06_000086

Page :2Extension of Lease ADL 369116

Rig AyailabilityHurricane Katrina in the Gulf of Mexico has caused a tight market for Jack-up rigs to becomeeven tighter. See the article December 4, 2005 "Jack-up day rates explode" in Petroleum News.Renaissance and Escopeta are currently exploring separate options. Escopeta is currently seekingbids from Blake Drilling and Workover Co., Inc. in Metairie, Louisiana and others for drilling inthe 2006 drilling season. Renaissance is currently working with CNOOC that Q\...·ns Jack-up rigsin offshore China. CNOOC has indicated that a rig may be available in 2007. As you can seefrom the enclosed letter, Renaissance is framing the Terms of Agreement with CNOOC later thismonth in Beijing, China. Renaissance and Escopeta, as well as other Cook Inlet lease holders,would jointly develop a Rig Sharing Agreement.

Rig ShariD!:! A(reement among the lesseesEnclosed is a letter dated December 7. 2005 from Escopeta to Renaissance whereby Escopcta hasgranted Renaissance the right to utilize the Jack-up rig after the drilling of their fIrSt well on theEast Kitchen prospect.

Funding Agreement with TCW Asset Management CompanY ("TCW")Renaissance has attained financial commitment from TCW, headquartered in Los Angeles,California, to provide the necessary funding for Renaissance's share of the mobilization anddemobilization of the Jack-up rig and costs to drill and develop ADL-369116. This transactionincludes other interests and is anticipated to close in the 1st quarter of 2006.

Further evaluation of the use of 5ubsca prod uction tecbnologyRenaissance has developed with Cooper Cameron a preliminary development ptan utilizingsubsea production technology. Renaissance and Cooper Cameron strongly feet based on provenindustry experience that this technology can be safe and reliable for the condicions found in theCook Inlet. Renaissance is ready to review this development approach with State of Alaska.

Withdrawal of appeal in the Superior Con rt bv Daniel Don kel and Monte AllenEnclosed is a letter from Donkel and Allen whereby they agree to withdrawal their appeal inSuperior Court if Renaissance is granted a two (2) year extension.

We are confident that activity will occur on ADL-369116 in the next two (2) years, butour proposed work activity can not fully carry the mob/demob costs related to a Jack-uprig. Ibis extension is key to Renaissance attracting venture capital for activity in theCook Inlet, and Renaissance strongly feels it is in the mutual benefit of Renaissance andthe State of Alaska. Renaissance is available to discuss this extension, so please dC? nothcsi tate to call me at (214) 738-6945 . Your consideration is greatly appreciated.

Sincerely,

:XAJS~"RCES (ALASKA), LLC

N1ark ..· tExecutive Vice President

Exhibit XX, 2 of.g

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Page ;).. of~

DONKEL05_000817

GOTTSTE[)i06_000087

Centurion Gold Holdings Expands Into Oil & Gas ExplorationCenturion Gold Holdings, Inc. 10/21/2005URL: hl1p:l!www.rigzone.com/newslarticle.asp?3 id=26204

Centurion Gold Holdings the only South African junior gold mining company publicly listed in the U.S., says that ithas expanded ils natural resources exploration and development activities to include the all and Gas Sector byentering into an agreement with Escopeta Oil Co., LLC of Houston, Texas. The agreement includes developmentof 130,000 acres of Leases in the Cook Inlet Basin of Alaska. Centurion and Escopeta intend to dri,ll five 011 andGas wells in the next two years. Escopeta will be the operator for the program. .

Dale Paul, CEO and Chairman of Centurion Gold Holdings commented, '1"he management of Centurion hasrecognised what some might call an unprecedented opportunity to develop major oil and gas reserves in Alaskaat a time when prices make it attractive to enter the oil and gas business. Centurion has acted swiftly to securethis lucrative agreement to participate with Escopeta in the development of these interests in the State of Alaska.Large reserves of oil and natural gas are available to be drilled upon immediately. Management believes that theCook Inlet Agreement opens up new financial frontiers for the shareholders of Centurion and if successful couldpossibly make Centurion one of the stronger independent oil companies in the U,S. Permitting will be filed shortlyand Escopeta and Centurion are moving forward to secure a Jack-Up Rig to bring to the Cook Inlet Basin 10 begindrilling in the Summer of 2006."

The Proposed Drilling Schedule to develop these fields is as follows:

ESCOPETA/CENTURION DRILLING SCHEDULE

1) Ease Kit=he~ (Probable Offshore 2.7 TCFG, 457 MMEO) Spring of 20062) North Alexander (Probable Onshore .512 TCFGl Winter of 2006-20073) Kitchen (Probable Offshore 3.9 TCFG, 829 MMBO) March 20074) South Kitchen <Probable Offshore l.6 TCFG. 125 MMBO) July 2007

About Escopeta Oil Co.. LLC:

Escopeta Oil is an independent oil company based in Houston; Texas and holds Stale of Alaska Leases locatedin the Cook Inlet Basin. Alaska, known as "The Kilchen Prospects". Escopeta's extensive geological research andstate of the art reprocessed seismic data of the Kitchen Prospect area has resulted in Escopeta's managementand professionals estimating lhat the "Kitchen Prospects" could possibly contain recoverable reserves up to 7trillion cubic feet (7.0 TCF) of Natural Gas and between ~35 million to one billion two hundred million (1.2 billion)barrels of oil. The Kitchen Prospect areas are conveniently situated for immediate sale of produced oil and naluralgas when the fields come on line. The "Kitchen Prospect· leases in the Cook Inlet Basin are localed both onshoreand offshore and have been characterised as the "missing giant fields of the Cook Inlet Basin" in a lead article ofthe Petroleum News, Alaska, August 29, 2004.

The principals of Escopela hold inleresls in the 160 million barrel "Cosmopolitan" Field operated by ConocoPhillips In the Cook Inlet Basin. Alaska. Escopeta has demonstrated its Cook Inlet Basin insight in 1995 with aparticipation in the leases that now comprise a large part of the "Cosmo" discovery.

Centurion Gold Holdings, Inc.:

Centurion Gold Holdings is the only South African junior gold mining company publicly listed in the United States.The Company is executing a roll-up strategy acquiring proven mineral assets, and working towards "growththrough acquisition". These mineral assets generally have combined the potential for a near term revenue streamand existing low cost production operations with tumaround opportunities. Based in South Africa, the Company isideally suited to exploit new legislation implemented by the South African government in May 2004. Thislegislation enforces a 'use it or lose i1" strategy, whereby all mining claims must be prospected within adesignated time frame. otherwise, such prospects revert to the state, thereby creating never before seenopportunities, particularly for smaller companies like Centurion. The Company has built a strong team ofexperienced management and operations mining professionals to exploit these opportunities, and is positioningitself to become a major producer by continually implementing its "growth through acquisition" strateqy.

Exhibit XX, 3 of 9hrrp://v,.·Voiw.rigzone .com/news/artieleyf.asp?ajd==26204

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Exhibit XXI 4 of 9 DONKEL05 000819GOTTSTETN06_000089

DANIEL K. DONKEl., DDd MONTE J. ALLEN

968 Willow Run LaneWinter Splines, Floridn 32708407 699-'1-937

December 7, 2005

William Van 'Dyke. Acting DirectorSlate of AJasknDepartment of Natural ResourcesDivision ofOil and GasSSO West 71h Avenue, Suite &00J'.nchcrege, At< 99501·3560

ltd: Oil and Gas Leaso ADL·3691l6North Middle Ground Shoal Unit

Dear Bill,

P.O. Box 104'438Anchorage, Alaska 99510907272-8953 ,

Renaissance Resources (Alaska), LLC ("Renaissancc) has acquired 100% of theworking interest in State of Alaska Oil and Gas Lease ADL-369116'and by ~eltcr datedDecember 7, 2005 has reqlHlsted a two (2) year extension beyond the termination doteprescribed in the Order Approving Settlement and a Stipulation' for Dismissal withPrejudice issued by the Superior Court on DecembeI 2, 2002.

Please be advise~ in the event the State of Alaska grants the foregoing extensionrequested by Renaissance, Daniel K. Donkel and Monte J. Allen agree to dismiss thatcertain appeal of the Director's March 3, 2005, decision entitled North Middle GroundShoal Unit 2005 Plan of Development Approved (Decision), Case No. 3At\l 05-9272 CI.

Your consideration oftbe foregoing is greatly appreciated.

Sincerely,

/f2./,ed2-/Daniel K. Donkel

Exhibit XX, 5 of 9

\t~ <rii;. tl..~Monte 1. Atibn

DONKEL05 000820 GOTTSTEIN06_000090

Providing coverage of Alaska and northern Canada's oil and gasindustry

December 2005

Vol. 10, No. 49

Jack":up day ratesexplode

Costs up in wake ofhurricanes thatdestroyed or heavilydamaged nine rigs

Ray Tyson

Week of December 04, 2005

Gulf hurricanesraise governmentworry over failedoffshore mooringsystemsIndustry is coming under increasingpressure from the federal government toimprove offshore mooring systems thatfailed during major hurricanes, sinkingplatforms and drilling rigs and settingothers adrift in the Gulf of Mexico.

General concern about inadequatemooring systems, which actually dates tolast year's Hwricane Ivan, has evolvedinto a major safety issue since monsterstorms Katrina and Rita ripped throughthe Gulf this year, causing unprecedenteddamage to offshore facilities in therelatively shaUow waters of thecontinental shelf, as well as in deepwaterGulf.

Petroleum News ContributingWriter

Hurricanes destroyed or severelydamaged nine jack~up rigs this year onthe Gulf of Me:<..ico's continental shelf,causing day rates on new contracts forhealthy rigs to soar more than 50percent on average in the storms'aftermath, according to offshoredrilling contractors.

The doubl.e whammy of Katrina andRita added gasoline to an alreadyintense fire, coming at a time ofexceptionally high rig demandworldwide and esca laring offshore dayrates. But contractors are not sobbingover their losses in the Gulf.

Gulf rotes for jack-ups have climbed

"The issue of mooring system design isgetting a lot of attention both fromindustry and the government," saidRobert Long, chief executive 0 ffieer of \

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p~~0_of3-GOTTSTEf.\:06_000091

Exhibit XX, 6 of 9 DONKhnp:llwwv.:.petroleumne ws.comJpnarcbpop/051204-02.html EL05_ 00082 I

from $70,000-$80,000 per day pre­storms to $)05,000 per day and on upto $120,000 per day for a 300-footjack-up. Premium jack-ups are said tobe fetching $130,000 a day and moreon new contracts.

"00 the jack-up side, the loss of rigsdue to hurricanes has strengthened analready very good market," RobertLong, chief executive officer of bigoffshore drilling company Transocean,told analysts in a Novemberconference call.

Transocean, the world's largest offshoredrilling contractor. "At this time there isno simple answer regarding the right wayforward."

Two TraDsocean rigs broke moorings

Transocean deepwater rigs Nautilus andMarianas broke from their anchorm~orings during this year's stonns,drifted and eventually ran aground.Nautilus is back working, while Marianasis undergoing repairs at a shipyard inBrownsville, Texas.

Two Diamond rigs were aground

"The answer could be different for eachrig, so it's not clear where we're going tocome out on this at this point;" he added.

Transocean is only one ofseveral majoroffshore drilling contractors whose rigmoorings failed ~uring this year'shurricane season.

Long said a number of mooring optionsthat might fix the problem are underconsideration, ranging from "new biggersystems!' to upgrading Transocean'scurrent eight-anchor system to one thatemploys 12 or even 16 anchors, withstronger cable and a new anchor design.

;i!,I!i!

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Diamond Offshore's Ocean Saratoga andOcean Star broke free from theirmoorings as Rita passed. Both rigs wentagTound and were eventually found,tracked by onboard locator beacons.

Diamond is focusing on a 12-pointancbor "enhancement" system, which the

"Since Katrina and Rita, this (mooringsystems) bas become even marcimportant, and we're getting morepressure from the government," saidLarry Dickerson, Diamond's presidentand chiefoperating officer.

Deep-shelf driller Rowan, among thehardest hit with four jack-upsdestroyed and another heavilydamaged, expects to quickly recoverits S290,000 per day in hurricanelosses through insurance and thehigher rates on new contracts.

Rowan hardest hit

With contracts on 11 of Rowan'shealthy jack-ups rolling over beforeyear-end, the company thus far basmoved rates to a combined $500,000 aday, helping to offset losses due tohurricanes. Moreover, new Rowanland rigs scheduled to come intoscrvice next June should bring another$225,000 in daily revenue, furtherhelping to cover losses.

"We lost a total of fi ve rigs to thehurricanes and everyone got real upsetabout that fact," Rowan chiefexecutive Danny'McNease recalled."But I can tell you one thing: we cametogether as a team and figured out howwe were going to get out of this deal.The way the market tightencd up madeit very easy to work our way throughthis."

Jack-ups leaving Gulf

Exhibit XX, 7 of 9http://v.-v/w.petrolcumnews.comJpnarchpop/051204-02.btml DONKEL05_000822

GOTTSTEIN06_00(1092

In fact, the worldwide supply of jack­up rigs is so tight that Rowan andothers are urging exploration andproduction companies to secure longerterm drilling contracts in the Gulf, orface the possibility of more jack-upsleaving the shelf on more lengthy andlucrative deals abroad.

More than 23 jack-ups departed theGulf for other markets pre-storms,leaving a scant fleet of around 77working rigs when subtracting coldstacks and the nine jack-ups destroyedor damaged in the hurricanes.

"We believe operators in the Gulf ofMexico are waking up to the fact thatthis is a serious situation," Rowan'sMcNease said. "But the scary thing iswhat people are going to do in the Gulffor equipment to do their work."

With an extraordinarily high 1,130shelf leases expiring over the nextthree years, Rowan also is urgingsmaller E&P independents to sharerigs on long-tenn contracts of a year ormore, just like they have been doing inthe North Sea. Not only would sharingrigs provide independents with theequipment to drill their own prospects,Rowan believes, but it would givethem access to expiring leases on theshelfowned by companies without rigcontractS.

'They can leverage themselves intodeals, just like they did back in the'70s," McNease said. "The drilling rigwill not only become an asset to acontractor, but become an asset to anoperator. "

Interest in building new deepwaterrigs

Global competition for jack-ups is so

.co~pany could employ quickly andbeheves would significantly increase theh~lding capacity of deepwater rigs,DIckerson said.

"1 would point out that our efforts areenhanced by the fact that we' ve got lotsof data now on the behavior of our nas inoa stonn," he said.

In addition to looking for better .deepwater mooring systems, an industIystudy group is exploring ways to improvethe holding capacity of bottom-foundedplatfonns and drilling rigs, which took asevere beating from Katrina and Rita.Deep-shelfdriller Rowan alone lost fourjack-ups rigs with a fifth suffering majordamage.

~'Efforts that might be put in place 00

Jack-ups rigs to increase their strengthand holding so that we don't suffer theloss of those particular units is stillsomething too early for us to be able tocomment on." Diamond's Dickerson said.

Thee-quarters of the approximatelv4,000 manned production platform~ in theGulf were in the direct paths ofhurricanes Katrina and Rita. whichdestroyed 108 older platforms andcausing significant damage to 53 others.

-Ray Tyson

GOTISTEDl06 000093

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intense that in the North Sea alone, asmany as 250 rig months of "unsatisfieddemand" in 2006 will have to bemoved to 2007, said Roger Hunt,GlobleSantaFe's senior vice presidentof marketing.

"Given the strong outlook for 2007, weexpect (daily) prices for standard jack­ups to be in ~xccss of$150,OOO," besaid.

Meanwhile, an already warmingdeepwater rig market has turned redhot, with premium floaters in the Gulfcommanding day rates of around$475,000 with no rate cap in sight.Drillers also are reporting significantinterest from clients wanting to extenddeepwater drilling contracts out to20] 0 and beyond.

More surprising, customers arebeginning to express interest inbuilding new deepwater rigs. "This is arelatively Dew development in themarket," Transocean's Long noted.

., ,

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