EXHIBIT 10.16
 
[logo12.jpg]
 

--------------------------------------------------------------------------------

 
 [logo11.jpg]
 

--------------------------------------------------------------------------------

 
Office of Oil and Gas
601 57th Street SE
Charleston, WV  25304
Telephone:  (304) 926-0450
Fax:  (304) 926-0452
Joe Manchin III, Governor
Randy C. Huffman, Cabinet Secretary
www.dep.wv.gov

CONSENT ORDER
ISSUED UNDER
WEST VIRGINIA CODE, CHAPTER 22, ARTICLE 6
 

TO:   E3 Petroleum Corp.  DATE: May 5, 2010   33 6th Street South, Suite 600    
St. Petersburg, FL 33701   ORDER NO.:  2010-8

 
INTRODUCTION

          This Consent Order is issued by the Chief of the Office of Oil and Gas
(hereinafter “Chief”), under the authority of West Virginia Code, Chapter 22,
Article 6, Section 1 et seq. to E3 Petroleum Corp. (hereinafter “E3”).

FINDINGS OF FACT

In support of this Order, the Chief hereby finds the following:

1.  
In May 2004, B.T.U. Pipeline (hereinafter “BTU”) entered into an Abandoned Well
Initiative Compliance Agreement with the Office of Oil and Gas to bring
seventy-one (71) wells into compliance.  Only twenty-nine (29) of those wells
were abated per that Order.

2.  
 BTU failed to meet its obligations under the Compliance Agreement.

3.  
BTU and E3 Petroleum Corp. are both owned by the same parent corporation, US
Natural Gas Corp.  E3 has posted a new bond and expressed its intent to transfer
the 115 wells currently listed under BTU’s bond.

 
4.  
E3 has submitted a compliance plan to the Office of Oil and Gas, which is
hereafter incorporated as attached appendix A.  This proposed compliance plan
designates the schedule, order and manner in which BTU’s abandoned wells are to
be either brought into production or plugged.

 
Promoting a healthy enviornment.
 
 

--------------------------------------------------------------------------------

 
E3 Petroleum Corp. Consent Order
Page 2
 
5.  
Several BTU wells have outstanding violations as referenced in attached appendix
B.  E3’s submitted compliance plan addresses some of these violations, as well
as other issues, including but not limited to Orders to Cease Operations for
Failure to Abate and outstanding Notices of Violation for missing WR-34(s),
WR-35(s) and/or WR-38(s).

ORDER FOR COMPLIANCE

           Now, therefore, in accordance with Chapter 22, Article 6, Section 1
et seq. of the West Virginia Code, it is hereby agreed between the parties, and
ORDERED by the Chief:

1.  
E3 shall immediately take all steps necessary to follow the reporting
requirements within West Virginia Code §22-6-7(d) and General Water Pollution
Control Permit GP-WV-1-88.  Under Section E of the General Water Pollution
Control Permit GP-WV-1-88, an operator must submit a DMR (WR-34) no later than
thirty (30) days following the discharge of fluids.

2.  
E3 shall immediately take all steps necessary to follow the reporting
requirements within 35 CSR § 12.2.  Under 35 CSR § 12.2 requires Completion
Reports (WR-35) to be submitted ninety (90) days following the completion of
permitted well work.

3.  
E3 shall submit all delinquent WR-34(s), WR-35(s) and/or WR-38(s) specified in
the incorporated attachment (Appendix B) within sixty (60) days from the
execution of this Order.  Delinquent WR-34(s), WR-35(s) and/or WR-38(s) are
those which have not been submitted during the time allowed under applicable
law, rule or permit condition at the time this Order is executed.  The Chief
agrees to forego enforcement action against any delinquent WR-34(s), WR-35(s)
and/or WR-38(s) which are delinquent at the time this Order is executed and
which are submitted during the allowed sixty day period.  If for any reason E3
fails to submit any delinquent WR-34(s), WR-35(s) and/or WR-38(s) within the
sixty (60) day period described above because the information necessary was
unavailable, E3 agrees to pay a stipulated penalty of $500 per
document.  Furthermore, E3 agrees to submit an affidavit to the Office of Oil
and Gas attesting that E3 made a good faith effort to obtain the information
necessary to complete the WR-34(s), WR-35(s) and/or WR-38(s), and such
information was unavailable.  The affidavit shall be submitted within sixty (60)
days from the execution of this Order.  This $500 stipulated penalty shall be in
lieu of the any other agreed to stipulated penalty.

4.  
E3 shall adhere to its proposed compliance plan, and complete all scheduled
activities in the time specified, and in an appropriate method and manner
according to West Virginia law and regulation.  Furthermore, E3 shall provide
quarterly progress updates to the Chief.

5.  
E3 agrees to pay a civil administrative penalty of $25,000 as a consequence of
the violations described in this Order.  An initial payment of $5,000 shall be
made within 30 days of the effective date of the Order, with subsequent payments
of $5,000 to be made on July 1, 2010, October 1, 2010, January 1, 2011 and April
1, 2010.  Payment shall be mailed and payable to:

 
 
 

--------------------------------------------------------------------------------

 
E3 Petroleum Corp. Consent Order
Page 3
Office of Oil and Gas
601 57th Street, SE
Charleston, WV  25304

6.  
If for any reason E3 fails to make any of the scheduled $5,000 payments within
seven (7) days of their due date, the remainder of the civil administrative
penalty shall become immediately due and payable.  If E3 fails to pay the
remainder of the civil administrative penalty, E3 agrees to pay a stipulated
penalty of $2,500 per day that the civil administrative penalty remains unpaid.

7.  
If E3 fails to meet the requirements of the proposed compliance plan, E3 agrees
to pay a stipulated penalty of $10,000 per month for each month that E3 remains
out of compliance.  The Chief shall make a finding that E3 failed to meet its
requirements under the proposed compliance plan on the last day of any month
which the Chief determines that E3 failed to meet the proposed compliance plan’s
requirements, and the $10,000 stipulated penalty for that month shall become
immediately due and payable.

OTHER PROVISIONS

1.  
E3 agrees to accept responsibility for complying with, and intends to be bound
by, the terms and conditions of this Order as part of this ongoing
agreement.   E3 and the Chief understand that the terms and conditions of this
Order are part of an ongoing agreement which sets forth certain requirements
that E3 agrees to meet at a future time.

2.  
Unless duly executed, the terms and conditions of this agreement shall expire in
seven (7) consecutive days from the date of this Order.  Only the Chief shall
have the right to extend the terms and conditions of the offer to enter into
this Order beyond seven days.

3.  
In order for any stipulated penalty to become payable, the Chief shall first
notify E3 in writing that it is in violation of the terms and conditions of the
Order, and the stipulated penalty shall then become due and payable ten (10)
days from E3’s receipt of notification that it is in violation.  Payments made
under this agreement are not tax-deductible expenditures for purposes of State
or federal law.

4.  
E3 hereby waives its right to appeal this Order under the provisions of Chapter
22, Article 6, of the Code of West Virginia.  E3 agrees to take all actions
required by the terms and conditions of this Order and consents to and will not
contest the Chief’s jurisdiction regarding this Order.  However, E3 does not
admit to any factual and legal determinations made by the Chief and reserves all
rights and defenses available regarding liability or responsibility in any
proceedings regarding E3 other than proceedings, administrative or civil, to
enforce this Order.

5.  
The Chief reserves the right to take further action if compliance with the terms
and conditions of this Order does not adequately address the violations noted
herein and reserves all rights and defenses which he may have pursuant to any
legal authority, as well as the right to raise, as a basis for supporting such
legal authority or defenses, facts other than those contained in the Findings of
Fact.

 
 
 

--------------------------------------------------------------------------------

 
E3 Petroleum Corp. Consent Order
Page 4

 
6.  
If any event occurs which causes delay in the achievement of the requirements of
this Order, E3 shall have the burden of proving that the delay was caused by
circumstances beyond its reasonable control which could not have been overcome
by due diligence (i.e., force majeure).  Force majeure shall not include delays
caused or contributed to by the lack of sufficient funding.  Within three (3)
working days after E3 becomes aware of such a delay, notification shall be
provided to the Chief, and E3 shall within ten (10) working days after initial
notification, submit a detailed written explanation of the anticipated length
and cause of the delay, the measures taken and/or to be taken to prevent or
minimize the delay, and a timetable by which E3 intends to implement these
measures.  If the Chief agrees that the delay has been or will be caused by
circumstances beyond the reasonable control of E3 (i.e., force majeure), the
time for performance hereunder shall be extended for a period of time equal to
the delay resulting from such circumstances.  A force majeure amendment granted
by the Chief shall be considered a binding extension of this Order and of the
requirements herein.  The determination of the Chief shall be final and not
subject to appeal.

7.  
Compliance with the terms and conditions of this Order shall not in any way be
construed as relieving E3 of the obligation to comply with any applicable law,
permit, other order, or any other requirement otherwise applicable.  Violations
of the terms and conditions of this Order may subject E3 to additional penalties
and injunctive relief in accordance with the applicable law.

8.  
This agreement is intended to address only the violations specified in the
Findings of Fact, and in no way is to be construed as applicable to any other
ongoing enforcement action(s).

9.  
The provisions of this Order are severable and should a court or board of
competent jurisdiction declares any provisions to be invalid or unenforceable,
all other provisions shall remain in full force and effect.

10.  
This Order is binding on E3, its successors and assigns.

This Order shall terminate upon E3’s full compliance with this Order and
verification by the Chief of that compliance

 

                   
E3 Petroleum Corp.    
   
Date
 
 
   
 
                      James Martin, Chief       Date   Office of Oil and Gas