Legal issues concerning certain leases

On May 12, 2020, the U.S. District Court for the District of Idaho (the Court) issued a Memorandum Decision and Order in the case of Western Watersheds Project vs. Zinke (:18-cv 00 187-REB). The Court ordered the suspension of operations and production on leases in Wyoming, Utah and Nevada sold by the BLM during the June and September 2018 oil and gas lease sales. Leases held by Major Oil in Hot Creek Valley, in total 52,046 acres, are impacted by this ruling. The lease sales were challenged on the grounds that in awarding the leases the federal Bureau of Land management did not satisfy the requirements of the National Environmental Policy Act (NEPA) and the Federal Land Policy and Management Act (FLPMA).

While the Court ordered the suspension of operations and production on the affected leases pending appeal, it did not order that the lease sales be set aside. Appeals have been lodged by the federal Department of the Interior and others, including the Western Energy Alliance, a body representing oil and gas exploration companies in the region. The case is currently before the 9th Circuit Court of Appeals, and may take a considerable time to resolve.

The Company ’s current legal advice is that if the appeal succeeds, restrictions on operations on the affected leases will be lifted. If the appeal fails, the BLM could have to rescind the leases and re-auction while more closely following public comment and environmental impact rules.

None of the Company’s leases on the West Play are affected in any way by the current suspension. The Order has no impact on the Company’s plan to drill Eblana-9 or on the block’s development potential.