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'RECEIVED 7/17/2006 at 2:52 PM :r;:m::r::¡¡W~;!!¡!~!¡¡¡!~~¡!¡~¡~¡ili¡~:¡¡C
RECEIVING # 920298 Lease # 06-00512
PAGE 496 STATE OF WYOMING
BOOK: 626 : Parcel # 396
JEANNE WAGNER_ OIL AND GAS LEASE
LINCOLN COUNTY CLERK, KEMMERER, WY Fund Code: CS
TnlS indentu~~ of-lease entered into by and between the State of Wyoming, acting by and
through its Board of Land Commissioners as LESSOR, and the following as LESSEE:
OÒ0496
1-
-"
Dolar Energy, LLC
Section 1. PURPOSE. The LESSOR, in consideration of the rents and royalties to be
paid and the covenants and agreements to be kept and performed by the LESSEE, does hereby
grant and lease to the LESSEE, the exclusive right to drill for, mine, extract, remove, and
dispose of all the oil, gas and associated hydrocarbon substances and gaseous substances and
elements produced therewith, including sulphur, hydrogen sulfide, sulphur dioxide, nitrogen,
carbon dioxide and helium, which may be produced from the following described land, to wit:
Tract 65 (formerly All Sec 35) Resurvey Township: 23 North Range: 116 West of the 6th P.M.
County: Lincoln
- Acres: 640.00
$640.00
($1.00 per acre or fraction thereof)
Together with the right of ingress and egress and the right to use so much of the
surface of said lands as is necessary to construct and maintain thereupon all works,
I)uilding, plants, waterways, roads, communication lines, pipe lines, reservoirs, tanks,
\ oumping stations, or other facilities necessary to the proper conduct of operations there
uhder.
Section 2. TERM OF LEASE. This lease shall become effective on the day and year set
out below and shall remain in effect for a primary term of five (5) years and for so long
,thereafter as leased substances may be produced from the lands in paying quantities. This
"lease may also be extended beyond its primary term in the absence of production of leased
s~bstances as may be provided by the statutes of the State of Wyoming and the regulations of
the Board of Land Commissioners adopted pursuant thereto. Provided, however, if drilling,
completion, testing or reworking operations are being diligently conducted, either during the
primary term or during any extension thereof, this lease shall continue in full force and
effect so long as such operations are being conducted and so long thereafter as oil or gas
may be produced in paying quantities. This lease may be relinquished or terminated at an
earlier date as herein provided.
Section 3. 'If the LESSOR owns an interest in oil and gas in said land less than the
entire fee simple estate, then the royalties and rentals to be paid LESSOR shall be reduced
proportionately.
Section 4. LESSEE expressly represents that, if an individual, LESSEE is a citizen of
the United States, or has declared an intention to become a citizen, and is over 19 years of
age-and if a corporation, is duly qualified to transact business in Wyoming.
Section 5. This lease is issued under the authority conferred, by Title 36, W.S. 1977 as
to the State and School Lands, and Title 11, W.S. 1977 as to Farm Loan lands, and shall be
subject to, and operations by LESSEE hereunder shall be conducted in compliance with the
specific lease terms set out on the reverse of this lease, and with all applicable state
statutory requirements and the regulations issued thereunder, including those providing for:
the leasing of State or Farm Loan Lands for oil and gas; the conservation of oil and gas; and
the regulation of security transactions.
Section 6. HEIRS AND SUCCESSORS IN INTEREST. It is covenanted and agreed that each
obligation hereunder shall extend to and be binding upon, and every benefit thereof shall
inure to the heirs, executors, administrators, successors of, or assigns of the respective
parties hereto.
Section 7. SOVEREIGN :IMMUNITY. The State of Wyoming and the lessor do not waive
sovereign immunity by entering into this lease, and specifically retain immunity and all
defenses available to them as sovereigns pursuant to Wyoming Statute 1-39-104 (a) and all
other state laws.
IN WITNESS WHEREOF, this lease has been executed by LESSOR and LESSEE to become effective
on the 2nd day of, June, 2006 A.D.
LESSOR, STATE OF WYOMING, Acting by and through its Board of Land Commissioners.
Lessee Signature:
Address: 1Jr £" So¡,vt~ lA..1t.'ù,^- Áve-Mt¡ ç~lk 0- ~
City: ,~ State: Ur ZiP:~.l
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Phone #
Subject to Stipulations attached hereto and m~de part hereof, as
d::;;¡:¡:~*:¡:¡:¡::::: in the June 2nd, 2006 Wyoming Lea{;:m;¡:j:¡¡~¡:¡¡¡¡';~n Parcel List.
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Section t THE lESSEE AGREES:
(a) BOND. To fUmish~. b9nd:with an approved corporate surety company authorized to transact,
business in the State. of Wyoming, or such other surety as may be aCC!!ptableto the lessor, in the'
penal· sum as required by the current rules of the ·State 'Board of land Commissioners,'
conditioned upon the payme.nt of all rentals and royalties accruing to the li!ssor under the terms
hereof, and upon the full cpl))pliance of áli other terms and conditions. of this lease and the. rules
and regulations rel!!tingther~to, ,,,ndalso conditioned on the payirÌent of all' damages to (he
sUrfa"" and imþroyements thereô.i1 Where the lease covers lands the surface of Which has been·
sold Or' otherwise lease.d,,~udi bond or bonds fumished prieir ìò the development of the..I~nds
contained in this lease may, be increased in such reasonablea!T'ount~ as thé lesSor may decide
upon commencem!!nt of,dri.1ling operatiòris and after the discovery. òf oil ''''gas, ,.
(b)PAYMENTS, To make all payments accfuing hereunder tp.\he Office of State lands and
Investments, 122West 25thStreet,Cheyenne, Wyoming 8:20Ó2-œ00. . '.
(c)RENTAlS. Prior to the disccìve,yof oil or gas in.paying quantities to pay the lessor in
advimce, beginning with the effective date hereof, an annual rental of $1 ,00 per acre or fraction
thereof. , . . .'
After the discovery of oil or gas in paying quantities to pay the lessor in advance beginning with
the first day of the lease year succeeding the lease year in Which actual discoverywas made, an
annual rental of $2.00 per acre or fraction thereof, unless changed by agreement Such rental SO
paid for anyone year shall be credited on the royalty for that year.
Annual rentals on all leases shall be payable in advance for the first year and each year
thereafter. No notice of rental due shall be sent to the lessee, If the rental is not paid on or
before the date it becomes due, notice of default will be sent to the lessee, and a penalty of $0,50
per acre for late payment will be assessed.
The lessee is not legally obligated to pay either the rental or the penalty, but if the rental and
penalty are not paid within thirty (30) dåys after the nolice of default has been received, the lease
will terminate automatically by operation of law. Termination of the lease shall not relieve the
lessee of any obligation incurred under the lease other than the obligation to pay rental or
penalty. The lessee shall not be entitled to a credit on royalty due for any penalty paid for late
payments of rental on an Operating lease,
(d) ROYAL TIES. The royalties to be paid by lessee are:
(i) On oil, one-sixth of that produced, saved, and sold from said land, the same to be delivered
at the wells or to the credit of lessor into the pipe line to Which the wells may be connected,
(ii) On gas, including casinghead gas or other hydrocarbon substances, produced from said
land saved and sold or used off the premises or in the manufacture of gasoline or other products
therefrom, the mar1<et value at the well of one-sixth of the gas so sold or used, provided that on
gas sold at the wells, the royalty shall be one-sixth of the amount realized from such sale.
(ili) On all other hydrocarbons of value and gaseous substances and elaments produced or
extracted, including propane, butane, sulphur, nitrogen, cerbon dioxide, and helium, at. such
royalty as shall be mutually determined to be fair and reasònable,
(iv) For royalty purposes on gås and natural gasoline'lhe value.shall be as approved by the
lessor, and in the determination .of the value of natural gasoline the fair rost of extraction shall be
considered as a deductlb!e itam; provided, howaver, that the .allowance for the cost of extraction
mày exceed Iwo-thirds o.f the.amount or value only on approval of the lessor and in no avent shall
the pncë for gas, or natural gasolin~, be less than that received by the United State of America for
its royalties from the same field, " , '
(v) Natural gas and oil actually used for operating purposes upon the lånd and, except as to the
ultimate sala thereof, gas or ïiquidhydrocarbons retumed to ¡he sand for stimulating the
production of oil or secpndary recovery purposes shall be royalty free,
(e) DISPOSITION OF ROYALTY Oil AND GAS, To deliver to the lessor, or to such individual,
firm or corporation as tha lessor may designate, all royalty oil, gas, or other kindred hydrocarbons,
free of charge on the premises Where produced, or, at the option of the lessor, and in lieu of said
royalties in kind, the lessee agrees to pay the lessor the field mar1<et price or value of all royalty
oil, gas, or other kindred hydrocarbons produced and saved,
When the lessor elects to take its royalty oil, gas, or other hydrocarbons in kind such as oil, gas,
or other kindred hydrocarbons shall be good merchantable oil, gas, or other kindred
hydrocarbons, The lessee shall if necessary fumish storage for royalty oil free of charge for thirty
(30) days after the end of the calendar month in Which the oil is produced, upon the leased
premises, or at the such place as the lassor and the lassee may mutually agree upon, provided,
that the lessee shall not be held liable for loss or destruction of royalty oil so stored from causes
beyond his CClntrol.'
'n The free sto:~~_of oil, as here~~:ovided, shall apply only as long as the said oil is the property
---oflfïe-1essor, .__n__ ~__'.._'_..__________
(I) MEASUREMENTS OF PRODUCTION, To gauge, measure and correct for temperatureall
production from said lands in conformance with the rules and regulations adopted by the Board of
land Commissioners and report said production to the lessor in accordance therewith,
To keep books, records, and reports pertaining to the production from the land herein leased as
well as those pertaining to the production from offset wells operated by the lessee, his operator,
or sub-lessee on other lands, which shall be opened at all times for the inspection of any duly
authorized agent of tha lessor.
To fumish tha lessor with original pipe line reports showing the day, month, year, amoun~
gravities, and temperatures of all oil run and with monthly reports showing the month, year,
amount, and price of all gas and natural gas gasoline and other products produced and sold from
the land herein leased, and the amount of gas returned to the sand,
(g) MONTHLY PAYMENTS AND STATEMENTS, Unless the time of payment is otharwise
extended by tha Office of State lands and Investments to make payment on or befora the
twentieth (20th) day of the calendar month succeading the month of production and removal and
sale of oil and gas from said land, and to furnish swom monthly statements therewith showing in
detail the quantity and quality of the production (per wall if required Where practical) !rom the land
hereby leased, and tha quantity and quatity of the production (per well where practical) !rom offset
wells upon COmering or contiguous land operated by the lessee, his operator or sub-lessee and
such other information as may be called for in the form or report prescribed by lessor,
(h) WEllS TO BE DRillED. To drill and operate effectively all wells necessary to reasonably
offset wells upon and production from adjoining lands.
To drill such additional wells at such times or places as are necessary and essential to the
proper development and commercial production of the oil and gas contant of said land.
(i)lOG OF WEllS AND REPORTS, To keep a log, in the form approved by the lessor, of each
well drilled by the lessee on the lands herein leased, showing the strata and character of the
formations, water sands and mineral deposits panetrated by the drill, amount of casing, size and
Where set, and such other information as the lassor may require Which log or copy thereof shall
be fumished to the lessor,
To file progress reports, in the form prescribed by the lessor, at the end of each thirty (30) day
period While each well is being drilled,
To file annually, or at such times as the lassor may require, maps showing the development of
the structure and the location of all wells, pipe lines and other wor1<s used in connection with the
operations of the lessee upon said land.
To make such other reports pertaining to the production and operations by the lessee on said
land, and report such other information as may be possessed by the lessee on the wells,
production or operations of others on lands on the sama geologic structure that may be of
importance in effecting proper development and operation otltle lands herein I"ased, as may be
called for by the lessor, All logs, maps, and reports shall be submitted in duplicata and the Office
of State Lands and Investments may waive such reports as conditions may warrant
(j)PRODUCTION, To operate the wells upon the land herein leased in a competent and efficiant
manner in an endeavor to recover all the oil and gas economically possible from said land and to
prevent the under drainaga of the oil and gas thereunder by wells operated by the lessM or
others on comering or contiguous lands to thosa leased herein, All pians or methods for the
purpose of stimulating or increasing production on iands herein ieased other than thosa in
common use shall first be presented to the lessor for approval before being put into actual
operation.
No production agreements limiting, restricting, prorating, or otherwise affecting the
naturalproduction from said land shall be entered into by the lessee, nor shall the lessee limil.
restrict, or prorate the natural production from said land in any way or in any event, except with
the consent in writing of the lessor first had an obtained,
(k)SUSPENSION OF OPERATIONS, Should any well drilled upon lands covered by this lease
obtain production of oil, gas, or other hydrocarbons in paying quantities and if the lessee is
unable to establish a satisfactory mar1<et for the oil, gas or hydrocarbons produced !rom said well,
the lessee may apply for and the lessor may grant permission for the suspension of production
operations until such times as a satisfactory mar1<et for the product from said well can be
developed, During the time any such suspension of operations is in effect, the lessee shall
continue to pay the annual rental,of $2,00 per acre or fraction thereof provided by (c) above, and
this lease shall remain in effect as though oil or gas was being produced from said lands.
(I)DILiGENCE-PREVENTION OF WASTE, To exercise reasonable diligence in drilling,
producing, and operating of wells on the land covered hereby, unless consent to suspend
operations temporarily is granted by the lessor, to cany on all operations hereunder in a good and
workmanlike manner in accordance with approved methods and practice, having due regard for
the prevention of waste of oil and gas, or the entrance of water to the oil or gas bearing sands or
strata to the destruction or injury of such deposits, the presarvation and conservation of the
property for future productive operations and to the health and safety of workrnen and employees;
to plug securely in an approved manner any well before abandoning it, and not to abandon any
well without permission of the lassor, not to drill any well within two hundred (200) feet of any of
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1,~f·I',II'i't·.'I"·'·' F';;~"¡~";~"!f"':::;~ "I . ~ v
::;::::~:I:;:~::::::::: the outer boundaries 0.1 the land covered hereby, unless to ~;~~:~~:i!~:!::~~::~\ "o'ralhage-ør 'ReIlS-
drilled on lands ådjoining "less than 200 feet from the property lines thereof; to conduct all
operations subject to the inspection of the lessor, to carry out at the lessee's expense all
reasonable orders and requirements of the lessor relative to the prevention of waste 'and
preservation of the property. and the health and,sl'lfe'r ofwor1<men including the rapl~nting and
reseeding of drilling sites and other areas disturbed by drilling operations and on failure of the
lessee so to do tha·lessor shall have the right, together with other recourse herein provided, to
enter on the property to repair damage or prevent waste at !he lessee's expense; to abide bY,and
conform to valid applicable regulations prescribed tei reimbur~ the owner of the surface, if other
than thelassor, or lësse~ of grazing rightsthen'offor aclual damages thereto and injury to "f> ~
improvements'thèreon, provided, ,that the. lessee, ,sh~1I ncit. bè held responsible for acts of
providence..oractiòns:bayona his c;ontrpL .. ,",." ' . 'i" ",
(m)TAXES ÅNP WA9ES-fREEDOM OF PURC,H~SE:' To pay,~en dua all taxe,s laWf,;,lIy
assessed and levied under the laws· of. the. State. of Wyoming upon ,mprovl\mentsp 011 and gas
produced fror;n \he fand h~raûnder;,or other ~ght~; ¡'rop~(!y or /lssets of the lessae, to' accord all
wor1<men and,emploYe,es comPleta freedom of PY<;chase, and to pay all wages ~ua wor1<men and
amployees in conformance, with the· laws of tha Stllte 9f Wyoming, '. ' ,
(n)ASSIGNMENTS OF lEASE-PRODUCTION AGREEMENTS, Not to assign this lease or any
interest therein" nor s,ublet any portion of lI1e I.eased premises, except With the consent in writing
of the lessor first had arid obtained.. ., , ' ' . . ,.
All overriding roýallies to be valid, must have the approval of the Board or by the Office of State
lands. and Investments When authority to do so has been delegated by the Board and will be
racorded with the lease, The Board raserves the right of disapproval of such overriding royalties
When in its opinion they become excessive and hence are detrimental t.o the proper d!'velopment
of the ·Ieased lands, .,
(o)DElIVER PREMISES IN CASE OF FORFEITURE. To deliver up the leased premises, with all
permanent improvements thereon, in good order and condition in case of forfeiture of this laase,
but this shall not be construed to
prevent the removal, alteration or renewal of equipmant and improvements in the ordinary
course of operations,
. Section 2, THE lESSOR EXPRESSLY RESERVES:
(a) The right to lease sell, or otherwise dispose of the surface of tha land embraced within this
lease under existing laws or laws hereafter enacted, and in accordance with tha rules of the
Board of land Commissions insofar as the surface is not nacessary for tha usa of the lessae in
the conduct of operåtions hereunder,
(b)The right to laase, sell, or otherwise dispose of other mineral or subsurface resources not
covered by the lease, in accordance with the applicable laws and the rules of the Board of land
Commissioners.
(c)From the operation of this lease, the suñace lands heretofore granted for rights-of-way an"-,
easements and reserves the right to grant such other right~-way and easements as provided by
the statutes of the Stâte of Wyoming, as long as suGh rights-of-way and easements do not confIict-
with the operations for ·oil. and gas on the land herein' leased,
(d)Th!, right to refuse to commit the leased lands to a unit plan of development if the Board finds ~
such action y;ould impair the lesso~s raserved right to take its royalty gas in kind and to purchase
all other gasalloi::atèd to the leasad lands a pròvided in Section 3( a )below,
(e)The righÚÓ ·alter or modify the ,quantity and rata' of production to tha end that waste may be
eliminated .or that production may conform ,to. thalessee's fair share of allowab!e production under
any system of Siate ,or National curtailment and proration ,/lUthorized by law, '
(1)1n addition to its light to take Its r.oyalty gas in kind, the lessor reserves the right and option to
purchase all other gas produced .for saiè or use off the leåsed, lands,. This option shall be
exercised only if the Beiard finds that the.le.ssee has raceived and is willing to accept a bona fide
offer from a purchaser who intends to seil. or transport the gas into interstate commerce and that
one or more intrastate purchasers (I.e., purchasers Who will use, consume, or sell the gas for use
or consulJ1ption entiraly within the Stata .of Wyoming) ara willing and able to purchase the gas
upon terms reasonably comparable to and at least as favorable to the lessee as those offered by
the interstate purchaser. The Board shall waive this option and permit an interstate sala if it finds
that no intrastate purchaser is willing and. able to purchase the gas upon terms Which are
reasonably comparable to and at least as favorabla to the lessee, As a condition to such waiver,
a satisfactory agreemant may be entered into by Which the production of its royalty gas may be
deferred until it can be produced and sold for consumption and use entirely within the Stata of
Wyoming,
Section 3, APPRAISAL OF IMPROVEMENTS, The lessee shall have the right subject to the
provisions of Title 36, as to State and State School lands, and Title 1 t, as to State loan and
Investments Board lands, W,S, 1977, to remove any improvements owned by lessee within a
reasonable time after the termination of this lease. lassee agrees that any such improvements
not removed within a reasonable time after termination of this lease shall be disposed of pursuant
to Ine abovë sfâtutes.
Section 4, FORFEitURE CLAUSE, The Board shall have the power and authority to cancel
leases procured by fraud, deceit, or misrepresentations, or for the use of the lands for unlawful or
Illegal purposes, or for the violation of the covenants of the lease, upon proper proof thereof, in
the event that the lessee shall default in the peñormance or obsarvance of any of the terms,
covenants, and stipulations hereof, or of the general regulations promulgated by tha Board of
lan{ Commissionars and in force on the date hereof, the lessor shall serve notice of such failure
or de"'ult either by personal service or by certified or registered mail upon the lessee, and if such
failure or default continues for a period of thirty (30) days after the service of such notice, then
and in that avent the lessor may, at its option, declare a forfeiture and cancel this lease,
Whereupon all rights and privileges, obtained by the lessee hereunder shall terminate and cease
and the lessor may re-<>nter and take possession of said premises or any part thereof, These
provisions shall not be construed to prevent the exercise by lessor any legal or equitable remedy
Which the lessor might otherwise have. A waiver of any particular cause or forfeiture shall not
prevent the cancellation and forfeiture of this lease by any other cause of foñeiture, or for the
same causa occurring at any other time.
Section 5, RELINQUISHMENT AND SURRENDER. This lease may be relinquished and
surrendered to lessor as to all or any legal subdivision of said lands as follows:
(a) If no operations have been conducted under the lease on the land to be relinquished, the
lessee shall file with the State land Board and State loan and Investment Board, a written
relinquishment or surrender, duly signed and acknowledged and stating therein that no operations
have been conducted on the land. The relinquishment so filed shall become effective on the date
and hour of receipt thereof in the office of the Director .or at some later date, if such be so
specified by the lessee therein, If the said relinquishment fails to state that no operations have
been conducted, the effective date of relinquishment shall be the date the relinquishment is
approved by the Board,
(b) If operations have been conducted under the lease on land proposed to be relinquished, the
lessee shall give sixty (60) days notice and shall file with tha Director a written relinquishment or
surrender duly acknowledged and stating therein that operations hava been conducted on the
land, The relinquishment shall not become effective until the land and the wells thereon shall
have been placed in condition acceptable to lessor and shall have been approved by the State Oil
and Gas Supervisor,
All rentals becoming due prior to a surrender or relinquishment becoming effective, shall be
payable by lessee unless payment thereof shall be waived by lessor, A relinquishment having
become effective there shall be no recourse by lessee and the lease as to the relinquishad lands
may not ba reinstated, '
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STIPULATION APPLIES,TO,.PARCEL NOS. 396'.J99.å'nd 400 ,., .,':;1< ,::","':.,! ,i'
Be.for,~,"aBY;road,;buildihg,· &ilfing ,pad construction, 'building constrl.Jction .or .'otherearth
nî6ving'åctivities' còïTlmÈmce, ,: plans for such activities (including maps) must' be
submittedfòr' prior approvàl by the Office of State Lands and Investments or his
designated representative.
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The collection of fossils from this land is prohibited. Any fossils found on this land must
be safeguarded by the finder and given to the Office of State Lands and Investments or
his designated representative as soon as practicable after their discovery.
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~'Thislease is is'sUed siib]ecf't6 and conditioned upon lessee's acknowledgment and
agreement that, pursuant to Chapter 18, Section 3.(h) of the Rules and Regulations of
the Board of Land Commissioners, any discovery of historical, archeological or
paleontological deposits on state lands during the course of development shall be
reported to the Office of State Lands and Investments by the lessee prior to further
disturbance, and operations may only re-commence as authorized by the Director. Th~
Director shall notify the lessee regarding any necessary mitigation within five (5)
working days after receiving.the repbrt. ~," "', "':..,' ,¡"
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