PACKET DEVELOPED FOR KATY RESIDENTS:

Western Gas Resources Information Packet

Created by local Katy citizens, the packet was made available in August 1991 to property owners in the affected area, Katy City Council Members, Katy ISD School Board Members, and other interested parties.

Fellow Property Owners:

The following is a rather lengthy explanation of what Western Gas Resources Storage, Inc. (Western) has told us of their plans for our neighborhood.  They must convince a majority of us to sign leases consenting to their plan before they can proceed.  Recipients of this communication are either within or immediately adjacent to the boundaries of their activity area.  It is essential that you read and understand the enclosed information before you sign a lease or an amendment to a lease.  The leases are for ninety-nine years - it will only take a few minutes to review the enclosed information.  You owe it to yourself and your neighbors to be informed.  If you distrust or dispute our information, we will be most eager to review it with you or refer you to the sources.  Our primary concern is that you understand the situation and we will welcome your questions and comments.

The opinions of several attorneys and the members of the steering committee are presented here.  It is not our intent to tell you what to do, or offer legal opinions, but rather to try to communicate the situation and encourage some thoughts as to the courses of action available. If you have not determined your position on this matter, it may be appropriate for you to seek independent counsel in determining how you should proceed.

Western, of Denver Colorado, plans to convert approximately 2100 Acres of the old Fulshear Gas Field into a natural gas storage facility by injecting gas taken from pipelines in the area into the reservoir for future sale back into the pipelines.  The field is substantially depleted and currently holds less than 2 billion cubic feet of gas at a pressure under 200 psi, at a depth of approximately 6,900 feet. When full, it could hold 40 billion cubic feet of gas at 3000 psi.  To force this gas back into the reservoir requires nine staged reciprocating compressors driven by 12,600 horsepower of natural gas engines weighing some 720,000 pounds.  They will be housed in a building approximately 125 by 250 feet by 2 1/2+ stories tall located at the extension of Roesner Road approximately 700 feet beyond its intersection with Green Busch road - approximately 100 feet Northwest of their recently drilled well. Two other buildings approximately 40' x 80' and 60' x 100' and a low temperature condensing unit of 400 million cubic feet per day capacity will be located nearby.  Four to nine large bore wells will be directionally drilled out from the site to inject the gas into the remote areas of the reservoir.

Western has apparently purchased the 82 Acre site for the facility and indicates that they will use berms and landscaping to obscure the buildings, which will be centrally located on the tract, and that the engines will be no louder than a refrigerator at the boundaries of the property.

WHAT IS THE PROBLEM?

VISUAL - We personally do not believe the site can be hidden effectively considering its great size and the location - which can hardly be avoided when looking at property northeast of the bayou.

NOISE - We have never heard a 12,600 horsepower refrigerator.  Even if they could muffle the noise to 55-60 dbA at the perimeter of their property, the constant 24 hour low frequency noise will have an annoyance factor much higher than the sound level would indicate.  Music at 90 dbA can be beautiful, but incessant noise at 60 dbA (1/1,000 that power level) can be intolerable.

VIBRATION - The multiple 900 r.p.m. engines will transmit vibrations to the slab and thence to the ground where it can be transmitted and perceived at significant distances.  If you have ever stopped near a railroad siding where a 3 or 4 locomtive train was starting to pull, you have experienced the equivalent in horsepower and vibration frequencies to the proposed compressor station.

SAFETY - The Fulshear Field was substantially depleted when this area began to shift from agricultural to residential use.  At that time, the open flow or "blowout" flow potential of the last producing wells was largely a threat to the economic future of the well operators.  However, the open flow capacity of the new injection wells in the repressured reservoir would be awesome - by design and intent.  Western's condensing unit capacity of 400,000,000 cubic feet of gas a day is 100 to 100 times the capacity of an excellent natural gas well- against a nominal 1000 psi pipeline back pressure.  In recognition of this risk, Factory Mutual Insurance would, by industry standards, require that all electrical equipment used in and around the project have 1D1 or 1D2 explosion proof certification - the same as, or one level above the requirement for an offshore producing platform.  All regulations and controls attempt to reduce the risk to zero, but should they fail, no one in the area, not realtor or client will ever forget it -regardless of good intentions, industry standards, or conformance with Railroad Commission Regulations!

WATER - The entire area is absolutely dependent upon water wells for existence - including the city of Katy.  The risk to our potable water aquifers has become a cause of great conern to many, because there have been instances where natural gas had migrated into potable water supplies and caused durable and substantial problems.  The risk to the aquifers due to faulting along much of the reservoir boundary will be resolved by expert testimony.  The risk from a properly plugged and abandoned well is, honestly, quite small, considering what would have to go wrong to create a problem.  However, the risk presented by an improperly plugged well is real and substantial.  Plugging a well that has been a money losing proposition for some time is just an additional expense on top of a loss to the well operator.  Discrepancies between submitted records of abandonment procedures and actual fact are legendary - and a legitimate cause for concern.  The Texas Railroad Commision has recently begun superiving such procedures as a result, unfortunately, years after these area wells were abandoned.  Western exhibits a concerned and conscientious attitude towards these historic wells and appears to be making every effort to discover how these wells were plugged and abandoned. However, the one unknown well or the deceitfully abandoned well could do irreparable damage to our aquifers and the stability and value of our properties.  We find little comfort in Western's "due diligence" and consistent solicitation of information as to the location of undocumented wells or, additional information as to actual plugging history that would indicate an undocumented problem.  If they are uncertain, how are we to find comfort in their unwillingness and inability to guarantee us there will never be a problem.  There are no regulations that require Western to post bond to protect our interests should gas migrate into the aquifers or should there be a gas discharge accident.  Be assured, the damage could persist for many years after Western had abandoned the project and returned to Colorado.

REALTY VALUES - Real estate values are in the eyes of the beholder and difficult to determine exept by a contract for purchase.  Every seller promotes the value and every potential buyer detracts the value of a property.  You can be assured, regardless of how beautiful Western may perceive their project, that potential buyers will not agree and will almost certainly negotiate for reduced sales prices.  Potential buyers in this area will be motivated by a set of values that Western's proposed operation will offend.  Heavy industry, in a substantially residential, peaceful, rural area will alter the perception and future development in a manner that cannot encourage residential property values.  If that is not the basis for a substantial devaluation in property values, we would anticipate our day in court to argue the point!  Consider the value of Western's lease bonuses and rental payments compared to a one percent decline in property values - a loss of $100 to $300 per acre and $1,000 on your house.  One percent would be a very modest decrease in values.  Consider the effect of five or ten percent!  You simply cannot afford the risk considering the compensation.

HOW CAN WESTERN DO THIS?

Under current Texas law (the validity of which we may have to litigate), if Western secures natural gas storage leases from at least 2/3 of the mineral and royalty interest owners, and the Railroad Commission rules that there is a need for the gas storage facility and that it serves the public interest, Western could be granted the right to condemn, under eminent domain, by virtue of their status as a public utility.  If unable to secure a lease, they could initiate condemnation proceedings and purchase the dissenting interest, at a price determined by the Damages Assessment Commission or, by the courts or jury upon subsequent appeal.  Condemnation could apply to the remaining gas and condensate mineral interest in the Hillebrenner reservoir, the reservoirs and itself at approximately 6,900 feet below the surface (which is part of the surface estate), or pipeline right of ways and small tracts of the surface "required" to construct pipeline interchanges, metering stations, or similar facilities that Western deems necessary to the project.  Although some unsightly equipment might appear in your yard or neighborhood, condemnation would not typically apply as to your entire surface and improvements, except in extreme instances.  However, counsel has advised us that in their opinion, Western should be liable for payments as to any damage (devaluation) to the surface estate.  An equitable evaluation of surface damage recovery should yield compensation that would grossly exceed the token storage lease payment offers.  You might have to appeal the evaluation to get it, but, at least one major law firm has indicated that they would pursue litigation and appeal of an inadequate evaluation on a contingency, or, fee as a percentage of additional recovery basis.  If a lawyer will take a case on contingency, you can be certain he is confident of additional recovery.  If we cannot stop Western's project, the only real hope of compensation for lost real estate value is through condemnation damage awards, which will only be available to those that have refused to lease!

At the Railroad Commission hearing, we will attack the "need" for the storage facility based on the current glut of natural gas, curtailed production because of price, and the apparent lack of interstate market or excess peak demand for natural gas in Texas.  Sources would deny the right of condemnation and subvert the gas storage project.  Failing that, a favorable ruling on the damages and condemnation value of the unleased interests and a significant unleased (holdout) mineral and/or surface interest could destroy the project economically and force abandonment.  To be effective, dissenting interest owners must stand firm in their opposition.  The Railroad Commission will take our complaints lightly if the majority of the interest has signed!

Should the foregoing fail to deter the project, the remaining hope for relief would be litigation in the courts or review of the law by the Texas Attorney General based on the gas storage project.  As a practical matter, dissent evidenced by rejected leases by the majority of the surface interests would obviously be required to credibly pursue this position.  The more interests that sign, surface or mineral, the smaller the probability of stopping Western's project!

Some of you that receive this letter may have already signed a lease with Alcorn, or Western, which acquired Alcorn's leases and interest in the storage project.  This letter is not intended to cause animosity between yourselves and Western or to criticize the decision to lease.  Should you regret the decision because you were uninformed or under informed, you probably have few options but to complain.  We would dispute any allegations of intent to deceive unless proven, however, anyone who perceives such problems in their decision to lease should feel free to seek independent counsel as to their options.

Those of you that have not yet committed have a critical decision before you that will have long lasting implications - to lease for a token amount considering the potential negative impact on area real estate values, or, to dissent in hopes of defeating the project or realizing a more equitable settlement for devaluation (damages) before the condemnation evaluation board. Unfortunately, there is no guarantee that the evaluation board or the court system upon appeal, will perceive equitable compensation the same as we do.  Common sense persuades us that if we pursue the appeals process until we are heard before a jury, we should be fairly compensated.

The really bad news comes last.  The services of good attorneys are not cheap.  We must present our case before the Railroad Commission and enter our protest of record to protect our right to litigate in the courts if Western is permitted to proceed.

Depending on the length of the hearing, legal costs have been estimated from 3,000 to 7,000 dollars.  We will incur expert testimony expenses, approximately $1,000 for an environmentally oriented geologist - geophysicists that will review Western's definition of the reservoir boundaries and question the integrity of the upthrust fault that forms the entire northwestern reservoir boundary.

Unfortunately, this means that we must reach generously into our shallow pockets again if we are to proceed in opposition to Western.  We are attempting to distribute the activity and cost among the several attorneys representing the varied interests to avoid duplication of effort.  The small homestead owner has proportionally more to gain or lose than the undeveloped acreage owners because of the value and nature of the improvements.  Raw land can be sold for any use, but a homestead is a home.  To successfully pursue this action we must have the proportionate financial commitment of everyone involved - You will have to determine your own commitment.

We have collected $2755 to date from 35 individuals.  Expenditures and payables are approximately:  1300 to our Austin attorneys for meetings, research, and actions before the RRC.- 500 to Dr. H. C. Clark for geophysical consultation, and 900 to Elkins and Yount for legal research and a legal opinion letter.  Previous and current mailing expenses advanced by dedicated volunteers should be reimbursed as should other sundry expenses.

Volunteers that dedicate weeks of their time to this cause should not be required to fund it unless they choose to make an additional voluntary contribution.  We are currently insolvent.  We must hope that this mailing will reach many of you that did not realize what was going on and that you will feel compelled to contribute to the campaign.  Western has called for the formal RRC hearing on September 5 [1991].  Our Austin attorneys estimate a probable fee of %5,000 to do what may be required before the RRC.  Understandably, they must assume that we are a cash basis client.  Therefore, we must raise additional funds, preferably with a surplus, by the scheduled meeting next Sunday.  Be assured, if contributions exceed expenses when this is finished, the excess will be refunded on a percentage of contribution basis.  If we could average one dollar contribution for each $1000 of property market value, a small percentage of risk, we could be able to fight this all the way through the courts - it is up to you!  Please send us a message by the next meeting so we will know how you wish to proceed.  It's up to you!

Please mail checks payable to - Hillebrenner Protestors, 903 Avenue D, Katy, Texas 77493 --Soon.  We must operate on a cash basis, with some reserves in hand!

We will hold an open meeting for informal discussion, questions and an update of status on Sunday afternoon - 3:00 pm, August 25 at the K of C Hall behind St. Bartholomew Church, 5356 11th Street, Katy.  Please plan to attend and bring any support you can afford, your information form, and your neighbor.

MINERAL  OWNERS

We have reviewed a storage lease and a storage amendment to a production oil and gas lease which were on printed standard forms and presumably identical to all the others used.  We were surprised to discover the following provisions:

"As full compensation for the storage rights herein granted, and in lieu of all royalty or other payments due or to become due for the right to inject, withdraw and/or store...Lessee agrees to pay Lessor an annual rental of $XX per net acre ...commencing with ...use (of) any strata or startum for gas storage purposes."

"If any natural gas is injected .... (the "Injected Substances"), one hundred percent (100%) of any like substances contained in production subsequently produced ... shall be deemed to be Injected Substances until the total volume produced or otherwise extracted equals the total volume of the Injected Substance so injected. ... No payment of royalty shall be due or payable on substances ....deemed to be Injected Substances."

We have been counseled that, under current Texas law, the Injected Substances and the native gas remaining in the reservoir would normally be considered commingled and that upon subsequent extraction, the percentage of the gas representing the native gas originally in the reservoir would be subject to royalty payment to the Lessors, until the total of production subject to royalty equaled the total amount of native gas determined to have been in the reservoir at the start of injection of foreign gas.  That amount of royalty could have ranged from $200 to $400 per net acre, probably over the first year.  Further, the royalty gas would have been produced up front.  Under the lease provisions, Western gets their gas back first and any leakage or other losses are essentially out of your native gas interest.  We must assume they must have paid some generous bonuses and storage rentals to induce the mineral owners to forego that royalty.  We would hope so, because the condemnation value of a dissenting mineral interest would apparently be based on the valuation of the total mineral interest, and not upon the fractional 3/16 royalty assumed in the foregoing royalty estimates.  Regardless, if you are a surface owner also, it was not enough considering your other potential damages!

Although your rights, options and due process have been much better served by the current laws, it appears that you may also have been disadvantaged by the evolution of Western's gas storage project.  That would certainly qualify you to join us in protest - Please come!

Hillebrenner Protestors,

Steering Committee

____________________________________________________________________________________

Please complete the following information form and return it to the meeting Sunday or mail it in the return addressed envelope as soon as possible.  It is extremely difficult for us to collect this type of information and your help would be sinicerely appreciated.  Any sensitive information as to values etc. will remain confidential.  Approximation is good enough.

Legal Description_____________________________________________________________________

____________________________________________________________________________________

Owner________________________________ Tenant_______________________________________

Address ______________________________  Address______________________________________

City __________________________________  City_________________________________________

State / Zip_____________________________  State / Zip___________________________________

Day Phone no. _________________________  Surface Acres _______________________________

Evening no. ___________________________  Mineral Acres / % Owned ______________________

Home on Property?  Yes (    )  No (     )         Executive Privilege?  Yes (    )   No (    )

Major Improvements____________________?  Owns Other % ?_____________________________

Value of Surface  $ __________________________________________________________________

Improvement Value $ _____________________Signed Mineral Lease? ______________________

Signed Gas Storage Lease? _________________  Signed Storage Amendment?________________

At this point, how do you feel about Western completing their project?

Strongly Opposed  (   ), Opposed  (  ), Neutral  (   ), Supportive   (   ).

What total dollar amount would you commit to spend, out of pocket in an attempt to stop Western's project?  This is not exactly a pledge, but you must be honest with us and with yourself as to how much you would be willing and able to spend.  We will use this information in confidence to plan our opposition, which will be of no value if we cannot collect the funds to complete it.  Commitment $___________________________

Thank you for your patience in reading this, for your continued support, and for your contributions.  If we remain committed and united we have a good chance of success.