OIL AND GAS LEASE
THIS LEASE made as of
_____________, ____, 2007, between Farmers National Company, Agent for UNION PACIFIC RAILROAD COMPANY
(Lessor), a Delaware corporation, to be addressed at 1400 Douglas Street, Mail
Stop 1690, Omaha, Nebraska 68179, and XXXXX,
whose address XXXXX (Lessee).
W
I T N E SS E T H:
(1) Lessor, in consideration of the royalties
herein provided and of the agreement of Lessee herein contained, grants, leases
and lets unto Lessee, for the purposes of investigating, exploring,
prospecting, drilling and mining for and producing oil and gas (including,
without limitation, nitrogen, carbon dioxide, hydrogen sulphide, helium, and
other gaseous substances, and products associated therewith, except steam) and
associated liquid hydrocarbons, and laying pipelines, building tanks, power
stations, telephone lines and other structures thereon to produce, save, take
care of, treat, refine, process, store, transport, own, sell and dispose of
said oil, gas and associated liquid hydrocarbons, one hundred percent (100%) of
Lessor's right, title and interest in and to the oil and gas in and under the
leased premises acres in ______________
County, STATE (Premises) described as follows:
SEE
ATTACHED EXHIBIT "A"
The above legal description was prepared
by Lessee. Lessor does not warrant the
accuracy of the legal description.
For shut-in royalty payment purposes,
the Premises shall be conclusively deemed to contain _____________.XX.
(2) This is a paid-up lease and there shall be
no requirement for Lessee to pay delay rentals.
(3) Subject to the other provisions herein
contained, this Lease shall be for a primary term which expires at twelve
o'clock (12:00) noon, Central Time, on ___
____, 20__ (Primary Term), and as long thereafter as oil, gas, or
associated liquid hydrocarbons or any of them are produced from the Premises in
paying quantities, or drilling or reworking operations are conducted
thereon. Upon sixty (60) days written
notice to Lessee, Lessor may terminate this Lease as to any portion of the
surface of the Premises and above a plane one hundred feet (100') below the
surface, if required by Lessor for transportation operations.
(4) Subject to the right of election reserved to
Lessor below to take its share of production in kind, the royalties to be paid
by Lessee are one-fourth (1/4th) of
eight-eighths of (a) the greater of the market value at the well or the amount
realized from the sale of oil and liquid petroleum products recovered at the
well, and (b) the market value at the well of gas sold, used off the Premises
or delivered to Lessee at the tailgate of the plant to which the gas is
delivered, plus the market value of the products recovered when such gas is
processed; provided that on gas sold at the well by Lessee in an arm's length
transaction, the royalty shall be the same percentage of the amount realized
from such sale. Royalty is to be paid
on all payments received by Lessee under or as a result of a gas purchase
contract, including, but not limited to, reservation charges and, subject to
credit to Lessee when gas for which payment has been made earlier is eventually
produced, take-or-pay or contract settlement proceeds and amounts paid for gas
not taken. Lessee shall have reasonable
use of oil and gas for operations on the Premises, and the royalty on oil and
gas shall be computed after deducting any production so used.
Regardless of whether
the oil, liquid petroleum products and gas produced from the Premises or land
pooled therewith is sold or valued at the well, on the Premises or off the
Premises, and regardless of whether or not said oil, liquid petroleum products
and gas is marketable at the wellhead, and despite the holding in Heritage Resources, Inc. v. NationsBank,
939 S.W.2d 118 (Tex. 1996), Lessor and Lessee specifically agree that the royalties
payable under this Lease shall be free and clear of costs or deductions for
exploration, drilling, development, and production, including, but not limited
to, costs of lifting, gathering, transportation, treating, processing, marketing,
dehydration, storage, compression, separation by mechanical means, and
stabilization of the hydrocarbons. If
Lessee treats and/or processes its gas in a natural gas plant (either on or off
the Premises), whether in Lessee's plant or in the plant of a third party,
Lessee shall treat and/or process or cause Lessor's gas to be treated and/or
processed. In the event of any such
treating and/or processing, then notwithstanding the foregoing, Lessee shall be
entitled to deduct from the value of the products recovered by the treating
and/or processing of the gas, or if Lessor is taking its production in kind to
charge Lessor for, the actual costs incurred by Lessee for such treating and/or
processing, which costs shall include gathering or transportation costs
required to transport the gas to the plant.
If Lessor elects, Lessee shall deliver to Lessor in kind its royalty
share of oil and other liquid hydrocarbons saved at the well, into storage
tanks on the Premises; products recovered in a processing plant, into storage
tanks or onto storage sites at the plant; and gas, at the tailgate of the
plant, if processed, or at the well if the gas is sold at the well. Lessor shall give Lessee not less than sixty
(60) days' notice of such election, and shall take said royalty share in kind
for a period of not less than six (6) months following the termination of said
sixty (60) day period. Any deliveries
of production are to be made from Lessee's facilities at times and amounts
which equitably adjust deliveries between the parties. With respect to gas, Lessee shall give
Lessor notice if it intends to enter into a gas contract on its share of the
gas, and Lessor shall have a period of thirty (30) days from receipt of a copy
of the gas sales agreement to notify Lessee in writing that Lessor elects to
take in kind and separately dispose of its share of such gas.
If there is a gas
well on the Premises or on land pooled therewith capable of producing in paying
quantities, but from which gas is not being sold, and in the absence of oil or
other production from the Premises or on land pooled therewith sufficient to
maintain this Lease in full force and effect, this Lease shall be extended for
a period of ninety (90) days from the date such well is or was shut-in,
whereupon this Lease shall terminate unless Lessee shall pay to Lessor as
royalty, a sum equal to Twenty Dollars ($20) per gross acre of the Premises. Such payment shall be made on or before the ninetieth (90th) day
from and after the date on which such well is or was shut-in, and annually
thereafter a similar payment may be made on or before the anniversary date on
which such well was shut-in. If such
payment, or payments are timely made, it shall be considered that gas is being
produced in paying quantities from the Premises under all the terms and
provisions of this Lease (but only for so long as the well continues to be
capable of producing in paying quantities); however, this Lease may not be
maintained by shut-in payments for more than three (3) years during any five
(5) year period.
Lessee shall be
obligated to use diligence to market gas capable of being produced in paying
quantities from a shut-in well, but shall be under no obligation to market same
under terms, conditions or circumstances which are unreasonable.
Lessor shall at all
times have, possess and hold a lien upon all production from the Premises which
has not been sold to a bona fide purchaser, and upon all improvements placed
upon and within the Premises by or on behalf of Lessee, as security for any
unpaid balance of money due hereunder and as security for the performance by
Lessee of Lessee's covenants under this Lease.
This lien may be enforced against any such property in like manner as
liens conferred by chattel mortgages, or as any other lien security may be
enforced under the laws of the state in which the Premises are located. Nothing herein contained, however, is
intended or shall be construed to prevent the sale, shipment and removal of any
production from the Premises in the usual course of business, nor to prevent
the removal of tools, machinery, equipment or other property at any time when
Lessee is not in default. This lien
shall not apply to production sold to third parties when payment to Lessor has
or is being made pursuant to the provisions of this Lease.
(5) Lessee may at any time execute and place of
record a release or releases covering any portion or portions of the above
described Premises, furnishing a copy thereof to Lessor, and thereby surrender
this Lease as to such portion or portions and be relieved as to the acreage
surrendered of all obligations not arising from activities of Lessee prior to
said release. Upon the expiration of
any portion of this Lease, Lessee shall promptly record an appropriate, legally
effective release or releases thereof and provide to Lessor a copy of the
recorded instrument within thirty (30) days of expiration or termination.
(6) If Lessee is drilling a new well or
reworking an old well at the expiration of the Primary Term, this Lease shall
continue in force as long as such drilling or reworking operations are
prosecuted with no cessation for more than ninety (90) days, and if such
drilling or reworking operations result in production of oil or gas or
associated liquid hydrocarbons in paying quantities, then for so long
thereafter as such production in paying quantities continues. If production on this Lease ceases after the
expiration of the Primary Term, this Lease shall continue in force if drilling
or reworking operations are commenced within sixty (60) days after such
cessation of production; and if production is restored or new production is
discovered as a result of any such drilling or reworking operations conducted
without cessation for more than ninety (90) days, this Lease shall continue so
long thereafter as production in paying quantities, or additional drilling or
reworking operations are had without cessation of such production, drilling or
reworking operations for more than ninety (90) days. Lessee shall give Lessor written notice in the event production,
once obtained, ceases for a period of thirty (30) days or longer, from any well
on the Premises or land pooled therewith.
Lessor shall make such written notice to Lessor within five (5) days
after any thirty (30) day period of cessation (i.e., within 35 days of
cessation of production).
(7) At the expiration of the Primary Term, this
Lease shall automatically terminate as to: (a) all land which is not located in a drill site spacing
unit (as hereinafter defined) in which there is a well on the Premises or on
land pooled therewith, producing oil or gas in paying quantities, or a shut-in
gas well; and (b) those depths lying below the stratigraphic equivalent of
the deepest horizon producing oil or gas in paying quantities in each drill
site spacing unit of land. For purposes
hereof, a drill site spacing unit is defined as the land included in the proration
or production unit established for the well or attributed to the well by the
state or federal regulatory authority having jurisdiction. If no unit or spacing rule exists, then
drill site spacing unit shall be defined as the forty (40) acre tract
surrounding an oil well or the six hundred forty (640) acre tract surrounding a
gas well. If Lessee is engaged in
actual drilling or reworking operations on the Premises or land pooled
therewith at the expiration of the Primary Term, this provision shall be
suspended for so long as Lessee continues such drilling or reworking operations
on the Premises or land pooled therewith with no cessation of more than ninety
(90) consecutive days between the completion or abandonment of such drilling or
reworking operations on one well, and the commencement of actual drilling or
reworking operations on the next well; provided, further, that irrespective of
any such continuous drilling or reworking operations, the termination of this
Lease as to non-producing land and depths described above shall not be
suspended for more than five (5) years from the expiration of the Primary Term
hereof. If the Premises are included in
a federal unit, then for the purposes of this provision the references to land
pooled with the Premises shall include only that land which is included in an
approved participating area.
(8) Anything in this Lease to the contrary
notwithstanding, Lessee agrees that if it owns an interest in any pooled unit
that includes land that is adjacent to any part of the Premises, Lessee shall
pool the portion or portions of the Premises that are adjacent to such unit
into the unit, effective on the effective date of this Lease, the effective
date of the pooling designation, or the first date when Lessee owns an interest
in the unit, whichever is later. If any
such adjacent unit was formed prior to the effective date of this Lease or has
been formed for any well for which a drilling permit was issued prior to the
effective date of this Lease, then, unless Lessee disclosed the existence of
such unit or such well to Lessor, Lessor's share of production from the unit will
be based on a royalty share of eight eighths (8/8) commencing with the first
production from said unit or well and not the royalty share specified in
Section 4 above. Lessee, at its
option, may pool or combine the Premises or any portion thereof, as to oil and
gas, or either of them, with any other land, lease or leases, when in Lessee's
judgment it is necessary or advisable to do so in order to properly develop and
operate the Premises. Any pooling shall
be into a well unit or units not exceeding forty (40) acres, plus an acreage
tolerance of ten percent (10%), for oil, and not exceeding six hundred forty
(640) acres, plus an acreage tolerance of ten percent (10%), for gas, except
that larger units may be created to conform to any spacing or well unit pattern
that may be prescribed by state governmental authorities. Lessee may pool or combine acreage covered
by this Lease, or any portion thereof, as above provided, as to oil or gas in
any one or more strata, and oil units need not conform as to area with gas
units. The pooling in one or more instances shall not exhaust the right of
Lessee to pool this Lease or portions thereof into other units. Lessee shall execute in writing and place of
record an instrument or instruments identifying and describing the pooled
acreage. In order for the pooling of
the Premises to be effective, Lessee shall furnish to Lessor a recorded copy of
the document pooling the acreage within thirty (30) days of Lessee's execution
of the pooling instrument. The entire
acreage so pooled into a unit shall be treated for all purposes, except the
payment of royalties and except that production from any well on the unit
drilled prior to the date of this Lease shall not be considered production for
purposes of Section 3 above, as if it were included in this Lease, and drilling
and reworking operations thereon, and production of oil and gas therefrom, or
the completion thereon of a well as a shut-in gas well, shall be considered for
all purposes, except the payment of royalties, and except that production from
any well on the unit drilled prior to the date of this Lease shall not be
considered production for purposes of Section 3 above, as if such operations
were on, or such production were from, or such completion were on the Premises,
whether or not the well or wells are located on the Premises. In lieu of the
royalties elsewhere herein provided, Lessor shall receive from a unit so formed
only such portion of the royalty stipulated herein as the amount of its mineral
acres placed in the unit bears to the total acreage so pooled in the particular
unit involved. Should any unit as
originally created hereunder contain less than the maximum number of acres
hereinabove specified, then Lessee may at any time thereafter, whether before
or after production is obtained on the unit, enlarge such unit by adding
additional acreage thereto, but the enlarged unit shall in no event exceed the
acreage content hereinabove specified. In the event an existing unit is so
enlarged, Lessee shall execute and place of record a supplemental declaration
of pooling identifying and describing the land added to the existing unit;
provided, that if such supplemental declaration of pooling is not filed until
after production is obtained on the unit as originally created, then the
supplemental declaration of pooling shall not become effective until the first
day of the calendar month next following the filing thereof and the furnishing
to Lessor of a copy of such supplemental declaration within thirty (30) days of
Lessee's execution of such supplemental declaration. In the absence of production, Lessee may terminate the unitized
area by filing with Lessor and of record a notice of termination.
(9) Within thirty (30) days after expiration or
termination of this Lease, in whole or in part, Lessee shall remove all
fixtures, structures, buried lines, facilities, machinery and other personal
property placed by or on behalf of Lessee on the Premises or the terminated
portion of the Premises, as applicable, and restore the Premises or terminated
portion of the Premises, as applicable, to its original condition, including,
without limitation, removal of roadways, leveling of embankments and reseeding
of disturbed areas. If Lessee fails to
do so, Lessor may, at its election to be exercised by Lessor at any time after
the end of such thirty (30) day period, restore the Premises or terminated
portion of the Premises, as applicable, at Lessee's cost, and take and have
title to all or any of such personal property of Lessee, or remove all or any
of the same from the Premises at Lessee's cost.
(10) The rights of Lessor may be assigned in whole
or in part. This Lease may not be
assigned by Lessee in whole or in part, without the prior written consent of
Lessor, which consent shall not be unreasonably refused. Refusal shall be deemed reasonably denied,
if, in Lessor's judgment, the number of assignees is excessive, an assignee's
technical competence or financial ability may be inadequate, or Lessee refuses
to accept responsibility for the performance of any of its successors in
interest. Any attempted assignment by
Lessee of the rights arising under this Lease without such consent shall be
void and of no effect. The assignment
of this Lease, in whole or in part, shall not be valid as to Lessor until
Lessor shall have been furnished a true and correct certified copy of such recorded
assignment within thirty (30) days of the execution of said assignment. Unless provided otherwise in Lessor's
approval of an assignment to be made by Lessee, Lessee shall continue to be
responsible to Lessor for all of Lessee's obligations under the Lease,
including obligations accruing after the assignment.
If Lessor transfers
or assigns all or any part of its oil and gas ownership in the Premises, the provisions
of this Lease relating to surface use, indemnification (hold harmless
agreements) and insurance, shall nevertheless continue to run in favor of the
original Lessor and the term Lessor, for such purposes, shall include the
original Lessor, its successors and assigns (whether by merger, consolidation,
or otherwise), so long as any thereof shall own, use or occupy the surface of
any portion of the Premises.
(11) Lessee shall pay all wages, expenses and other
obligations incurred by it in the conduct of its operations on the
Premises. Lessee shall keep the title
to all oil and gas, and all other minerals, and the Premises free and clear
from any and all liens and other encumbrances arising in any manner from Lessee's
operations. Lessee agrees not to suffer
or permit any lien of any nature to be placed upon the Premises, or any part
thereof, and in case of any such lien attaching, to immediately pay off and
remove the same, failing in which Lessor may do so at the expense of Lessee. It is agreed by the parties hereto that
Lessee has no authority or power to cause or permit any lien or encumbrance of
any kind whatsoever, whether created by act of Lessee, operation of law or
otherwise, to attach to or be placed upon Lessor's title or interest in the Premises,
and any and all liens and encumbrances created or suffered by, through or under
Lessee, shall attach to Lessee's interest only.
(12) Lessee shall not acquire or attempt to
acquire, directly or indirectly, from any person other than Lessor, any rights
or interests in the oil and gas estate in the Premises or take any action
inconsistent with or adverse to the ownership and quiet enjoyment by Lessor of
its oil and gas estate in the Premises.
(13) The rights granted by Lessor under this Lease
are granted WITHOUT WARRANTY, EXPRESS OR
IMPLIED, and without covenants of title, including, without limitation,
covenants to give possession or for quiet enjoyment. Without limitation of the foregoing, Lessee acknowledges that
persons other than Lessor (such as, but not limited to, surface owners or
lessees or licensees of Lessor) may have or be granted by Lessor rights to
occupy, use or possess the surface of the Premises, that this Lease is subject
to such rights of such persons, and that Lessee shall obtain the necessary
permission from such persons prior to making any entry on the Premises. Lessor reserves the right to hereafter lease
or license to third parties all or any portion of the surface of the Premises. The rights of such lessees and licensees shall
be superior to the rights of Lessee hereunder to use the surface of the
Premises except for those portions of the Premises where, prior to the date of
such lease or license, Lessee has placed access roads or fenced facilities used
in the connection with exploration, drilling, development, production or
storage of hydrocarbons.
(14) Lessee shall not make any entry upon or under
any railroad right of way or station grounds or other property used for
railroad operating purposes, and shall not drill any well or maintain any
structures or facilities within two hundred feet (200') (by surface or
subsurface measurement) of: (a) any railroad tracks or buildings now or
hereafter on such right-of-way, or station grounds, or other property used for
railroad operating purposes, or (b) any buildings now or hereafter upon the
Premises.
Lessee shall ensure
the Premises are properly protected.
Any above-ground facilities shall be properly fenced with a two-lock
gate access. One lock shall be provided
for Lessor. Lessee shall keep the
fenced area clear of weeds, debris and shall be maintained in an acceptable
condition. The fence shall be secure
and not sag nor have openings other than those at the gate. Any access roads required on the Premises
shall be maintained by Lessee. Lessor
shall have the right to use any such roads for railroad maintenance
purposes. No Lessee access roads may be
within twenty-five feet (25') of the centerline of railroad tracks. Roads will be maintained in an acceptable
manner and shall be dust free and shall be graveled in order to maintain a well
kept surface. Access will be protected by a locked gate. The lock shall be a two-lock system with one
lock provided for Lessor. If Lessee
fails to properly maintain such roads, Lessor may do so at the expenses of
Lessee.
Lessee will not be
allowed any closer than fifty feet (50') of the centerline of railroad tracks
with men or equipment.
Lessee shall not
construct any structure, or stack or store equipment or materials that could
impair the sight clearances at any private or public road crossing of railroad
tracks. The minimum required sight
clearance is a clear view of the tracks in both directions for a distance of
1500 feet when a vehicle first enters the line of the railroad right-of-way.
Lessee shall not
construct any structure within twenty feet (20') of railroad signal power or
communication lines, or the distance specified in the National Electrical
Safety Code, whichever is greater. Any
power supply to Lessee shall be in compliance with Lessor's standards for power
line encroachments.
Lessor has granted
the use of certain of its property for the installation of fiber optics lines. Lessee shall
call 1-800-336-9193 prior to any excavation to ensure fiber optics are properly
marked and protected. Any interruption
of the fiber optics service or damage to the fiber optic line shall be the
responsibility of Lessee.
(15) Lessee agrees to and shall assume all
obligations and responsibility with respect to being in, establishing, achieving,
documenting, or reporting full compliance with any and all applicable laws,
orders, rules, regulations, and standards with respect to pollution, the
continued operation and eventual plugging, replugging, and abandonment
obligations of any unplugged or improperly plugged wells on the Premises or any
land pooled therewith. Lessee shall at
all times conduct its operations hereunder in full compliance with all federal,
state or municipal laws, orders, rules, regulations or ordinances now or
hereafter in effect, including, without limitation, laws, rules, regulations or
ordinances regarding mining operations, drilling operations, environmental
control and air and water
pollution. Lessee and its contractors
shall use environmentally sound materials and practices in their operations on
the Premises to minimize or eliminate wastes, hazards and impacts on the
environment. These practices shall
include, without limitation, the following:
a. Lessee shall assess the materials available
for a given purpose and shall select the least toxic option available.
b. Lessee shall perform a Phase II
Environmental Assessment upon expiration or termination of the Lease and
provide Lessor with a copy of the report on such Assessment. Lessee shall be responsible for correction
of environmental contamination or violations.
c. Lessee shall notify Lessor of any
reportable releases, citations, or violations.
d. Lessee shall remove any unused product from
the Premises. No waste materials may be
put in any reserve pit.
e. All trash shall be removed from the
Premises and all pits on the drilling location shall be properly closed
immediately following the drilling of any well.
f. Lessee shall provide dikes, ditches, or
other methods of containment for all fuel and oil containers. Any leakage or
spillage shall be properly reported by Lessee to the appropriate authorities as
required by statute, rule, or regulation, and to Lessor. Lessee shall have a Spill Prevention Control
and Countermeasure Plan in effect as required by the Code of Federal
Regulations (CFR) Title 40, Part 112.
g. Lessee shall handle and dispose of all
solid waste, including, without limitation, hazardous waste, as defined in CFR
Title 40, Parts 261.2 and 261.3, resulting from the performance of its
operations on the Premises according to all applicable federal, state and local
statutes, regulations, ordinances and requirements. Lessee shall own all waste generated in connection with Lessee's
operations on the Premises. Upon
request, Lessee shall furnish proof to Lessor of proper handling and disposal
of waste generated by Lessee.
LESSEE SHALL BE RESPONSIBLE FOR INJURY TO OR LOSS OR
DESTRUCTION OF PROPERTY, AND FOR INJURY TO OR DEATH OR ILLNESS OF ANY PERSON,
ARISING OUT OF OR IN CONNECTION WITH OPERATIONS HEREUNDER. LESSEE SHALL INDEMNIFY, DEFEND AND SAVE
HARMLESS LESSOR, ITS AFFILIATES, AND ITS AND THEIR OFFICERS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS,
LOSSES, DAMAGES, CAUSES OF ACTION, AND COST AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEY'S FEES, EXPERT WITNESS FEES AND COURT COSTS) INCIDENT
THERETO, FOR INJURY TO, OR DEATH OF, ANY PERSON WHOMSOEVER (INCLUDING, WITHOUT
LIMITATION, THE EMPLOYEES OF LESSEE OR LESSOR), AND DAMAGE TO OR LOSS OR DESTRUCTION
OF PROPERTY, INCLUDING, WITHOUT LIMITATION, THE PERSON OR PROPERTY OF LESSOR,
ITS AFFILIATES, AND THEIR OFFICERS, AGENTS AND EMPLOYEES, OWNERS OR OCCUPANTS
OF THE SURFACE OF THE PREMISES AND THIRD PARTIES, OR FOR DAMAGE TO THE
ENVIRONMENT, IN ANY MANNER RESULTING FROM LESSEE'S USE, OCCUPANCY OR OPERATIONS
HEREUNDER, OR THE FAILURE OF LESSEE TO STRICTLY COMPLY AT ALL TIMES WITH THE
TERMS OF THIS LEASE. THE FOREGOING
SHALL APPLY REGARDLESS OF ANY NEGLIGENCE (SOLE OR PARTIAL) OR STRICT LIABILITY
OF LESSOR, ITS AFFILIATES, OR ITS OR THEIR OFFICERS, AGENTS, EMPLOYEES,
SUCCESSORS OR ASSIGNS.
The obligations of
Lessee under this Section 15 shall not end at the termination of this Lease but
shall continue for such time as may be required to enable Lessee to fulfill
such obligations as shall have accrued prior to termination, including, without
limitation, obligations relative to the condition of the Premises upon
cessation of oil and gas operations.
(16) Without limiting the generality of Section 15,
Lessee shall pay either the tenant or the surface owner (whichever is
appropriate) for any and all damages to land, structures, roads, fences, gates,
cattle guards, trees, growing crops, irrigation facilities, equipment,
livestock, personal property, and improvements caused by construction,
operations, or maintenance of facilities, and shall bury all pipelines below
plow depth where they cross cultivated land.
Irrespective of
whether Lessor has consented to an assignment, farmout or other arrangement
whereby Lessee consents to drilling or other operations on the Premises by a
third party, Lessee shall be responsible for any and all claims, demands,
actions and causes of action or liens arising out of such operations, whether
arising in law, at equity or administratively.
(17) In the event of Lessee's breach of this Lease,
Lessor shall notify Lessee by certified mail of such breach, and Lessee shall
have thirty (30) days from the receipt thereof to comply with this Lease. If
Lessee fails to remedy a breach within such period, Lessor may, at its option,
terminate this Lease and be relieved from any obligation hereunder. Irrespective of whether Lessor elects to
terminate this Lease or exercise any other right or remedy under this Lease or
at law, Lessor shall be entitled to other available remedies, including
specific performance to require Lessee to (a) abandon any well and/or restore
the surface of the Premises to its condition existing prior to entry thereon by
Lessee, (b) furnish any reports required hereunder or information required
hereunder from operations on the Premises or land pooled therewith, and/or (c)
make any payment due hereunder.
Except as otherwise
expressly provided in this Lease, any notices or other communications required
or permitted hereunder shall be in writing and shall be deemed given only when
received by the party to whom the same is directed at the address shown on the
top of page 1 of this Lease or to such other address as is provided to the
other party with proper notice.
(18) Lessee shall promptly furnish Lessor with not
less than one copy of all applications and reports pertaining to the Premises,
of each daily drilling report, and of each well log, core analysis or other
data taken from wells located on the Premises and land pooled therewith. Lessee agrees, at Lessor's request, to
furnish Lessor true and correct information pertaining to each well, the
production therefrom (including true and complete copies of all contracts or
agreements, and all amendments and modifications thereof for sale, processing
or other disposition of any product produced from the Premises) and such
technical information as Lessee may acquire with respect to sands and
formations encountered. Lessor and/or
its representatives shall have the right to be present when wells are tested
and/or tanks are gauged and shall have the right to examine all run tickets and
to have full information as to production and runs, including copies of all run
tickets upon request.
(19) If Lessee conducts any geophysical activities
upon the Premises, Lessee shall promptly furnish Lessor for the entirety of
each survey, shot point plats and elevations, observer's notices, surveyor's
notes, copies of all field tapes, reproducible copy and one print of each final
stacked section for each line and copies of any other processed or unprocessed
data made available to Lessee.
(20) Lessee shall carry the following insurance:
1. Comprehensive General Liability Insurance,
including contractual liability, with a combined single limit per occurrence of
not less than $2,000,000.00 for bodily injury and property damage.
2. Comprehensive Automobile Insurance,
including hired and non-owned vehicles, with a combined single limit per
occurrence of not less than $2,000,000.00 for bodily injury and property
damage.
3. Liability Umbrella (excess of underlying
insurance coverage mentioned above) with a combined limit per occurrence
coverage of not less than $10,000,000.00
4. Well Control Insurance including
underground blowout, seepage and pollution, with a minimum limit of
$10,000,000.00
Lessee
shall require each independent contractor and subcontractor to carry and
maintain insurance at its own expense in amounts deemed necessary to cover the
risks inherent to the work or services to be performed by the contractor or
subcontractor. Every such insurance
policy shall contain a waiver on the part of the insurance carrier of all
rights, by subrogation or otherwise, against Lessor. Lessor shall also be named as additional insured in each such
policy.
(21) None of the provisions of this Lease may
be altered, amended, or ratified by any division order, transfer order or any
other instrument, unless such instrument expressly states its purpose as an
alteration, amendment or ratification of this Lease and specifically identifies
the particular Lease provisions affected.
Any division and transfer orders executed by Lessor shall be solely for
the purpose of confirming the extent of Lessor's interest in production from
the Premises.
(22) Lessee represents
that the Premises are not currently producing oil, gas, casinghead gas or other
gaseous substances; and that no portion of said Premises is currently held by
an active oil and gas lease or is in a producing unit. Also, Lessee represents that production
revenue from the Premises is not being held in suspense for the benefit of the
Lessor or its predecessors in title.
(23) Lessee
affirms to Lessor that Lessee or his agents have reviewed title to the Premises
and that Lessor appears to be the record owner of the oil and gas rights under
the Premises. Lessee agrees to indemnify, defend and hold harmless Lessor from
and against all claims against Lessor related to the Lessor's title of lack
thereof.
(24)
Notwithstanding anything herein to the contrary, if Lessee has agreed to
pay or later does agree to pay a higher royalty or bonus or shut—in well
payment to another landowner within one mile of the Premises, then Lessee shall
pay Lessor based on the higher royalty, bonus and/or shut—in well payment,
retroactive to the effective date of this Lease.
IN
WITNESS WHEREOF, this Lease is executed on the date of the respective
acknowledgments hereinbelow, but shall be effective from the date first
hereinabove written.
UNION
PACIFIC RAILROAD COMPANY (Lessor)
By:_____________________________________________
David Smith, VP
Farmers National Company, Agent
XXXXXXXXX
(Lessee)
By:_____________________________________________
Its:____________________________________________
