HomeMy WebLinkAbout979908Form Approved by the Board
and Effective 08/04/2011
This Lease is entered into by and between the State of Wyoming, acting by and through its Board of Land Commissioners as LESSOR,
and administered by the Office of State Lands and Investments, and Trail Energy, LLC as LESSEE.
Section 1. PURPOSE. LESSOR, in consideration of the rents and royalties to be paid and the covenants and agreements to
be kept and performed by LESSEE, does hereby grant and lease to 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
sulfur, hydrogen sulfide, sulfur dioxide, nitrogen, carbon dioxide and helium, which may be produced from the following described land, to
wit:
County: Lincoln
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, buildings, plants, waterways, roads, communication lines, pipe lines, reservoirs, tanks, pumping stations, or
other facilities necessary to the proper conduct of operations in conformance with all applicable rules and regulations of the Board of Land
Commissioners in effect during the term of this lease. LESSEE must obtain a Special Use Lease pursuant to Chapter 5 of the Rules of
the Board of Land Commissioners for any equipment and facilities placed on this leasehold which do not solely benefit State interests.
Section 2. TERM OF LEASE. Subject to the terms and conditions herein, 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. 'Paying quantities" is defined as production in quantities sufficient to yield a return in excess of
operating costs even though drilling and equipment costs may never be repaid. In the absence of production of leased substances this
lease may also be extended beyond its primary term as provided by the statutes of the State of Wyoming and the rules of the Board of
Land Commissioners. 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 provided herein.
Section 3. If 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, as to the State and School Lands, and Title 11, 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 rules and 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 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 WYO. STAT. 1 -39 -104 (a) and all
other laws of the State of Wyoming.
IN WITNESS WHEREOF, this lease has been executed by LESSOR and LESSEE to become effective on December 02,
2014 A.D.
LESSOR, STATE OF WYOMING, Acting by and through its Board of Land Commissioners.
LESSEE: Print Name J ca tea -tti-4
State of Utah
County of Salt Lake
On this LI day of
Notary Public
My commission expires: CD
Residing at: J
LESSEE: Signature X3 t w A`
Address: gel &ar F" cc�r
City f'S i 7 rdcw State 6C7 Zip 'O f
Subject to Stipulation No(s). 1,5,117,136
OIL AND GAS TERMS
t 2a, personally appealed
before me Proved to me on
the basis of satisf2r,t ry eviden e to be the person whose name IS
scribed on thii s iient, and o Iedged that he/she executed the 601
9
b
610,„
STATE OF WYOMING
OIL AND GAS LEASE
T19N R118W, Sec 16 All
MASON NOWELS
Notary Public
State of Utah
Comm. No. 664735
My Comm. Expires Jul 1, 2017
BY:
LEASE NO. 14 -00514
PARCEL NO. 205
FUND CODE CS
Total Acres: 640.00 Advance Rental: $640.00
($1.00 per acre or fraction thereof)
Fr
1 4 rYC 14,
Bridget Hill
Director, Office of State?
sera
979908 12/31/2014 2:35 PM
LINCOLN COUNTY FEES: $21.00 PAGE 1 OF 4
BOOK: 845 PAGE: 729 OIL GAS LEASE
JEANNE WAGNER LINCOLN COUNTY CLERK
illllil IIIII H 1 IIII I III I II II I III IIH illll 11111 IIIII 1011I111II I III IIII IIII
Section 1. LESSEE AGREES:
(a) BOND(S). To furnish a bond(s) with an approved corporate surety company authorized to transact business in the State of Wyoming,
or such other surety as may be reasonably acceptable to LESSOR, in an amount fixed by LESSOR, to secure the payment for any
damages to the surface of the land, including crops, water wells, reservoirs, or improvements, caused by LESSEE'S operations on the
land, and to assure compliance with all the terms and provisions of this lease, including rent and royalties owed, the laws of the State of
Wyoming, and all applicable rules and regulations. LESSEE shall provide such bond(s) prior to the development of the lands contained in
this lease. Such bond(s) may be increased in such reasonable amounts as LESSOR may decide upon commencement of drilling and
other operations, and after discovery of oil or gas, in which case lessee has sixty (60) days to post any additional bond(s) or show cause
reasonably acceptable to LESSOR that a bond(s) increase should not be required or this lease may be terminated. This bonding
requirement does not affect any obligations pursuant to the Split Estate Act. Wyo. Stat. 30 -5-401 -409.
(b)PAYMENTS. To make all payments accruing hereunder to the State of Wyoming Office of State Lands and Investments, Herschler
Building, 3rd West, 122 West 25th Street, Cheyenne, Wyoming 82002 -0600.
(c)RENTALS /MINIMUM ANNUAL ROYALTY. (i) Prior to the discovery of oil or gas in paying quantities, to pay LESSOR in advance,
beginning with the effective date of this lease, an annual delay rental of $1.00 per acre or fraction thereof. If the delay rental is not paid on
or before the date it becomes due, notice of default will be sent to LESSEE, and an administrative handling assessment of one dollar
($1.00) per acre for the missing payment will be assessed. LESSEE agrees that if the rental and any administrative handling assessment
are not paid within thirty (30) day's after the LESSOR gives notice of the default, the lease may be terminated without further notice.
(ii) After the discovery of oil or gas in paying quantities, to pay LESSOR in advance beginning with the first day of the lease year
succeeding the lease year in which actual discovery was made, a minimum annual royalty of $2.00 per acre or fraction thereof, unless
changed by agreement. To maintain the lease, any deficient minimum annual royalty shall be paid within thirty (30) days of the deficiency
notice from the Office of State Lands Investments being sent by certified U.S. Mail to LESSEE'S last known address. The minimum
royalty paid for any one (1) year shall be credited on the royalty for that year.
(d)ROYALTIES. Unless otherwise stipulated and agreed in writing, the royalties to be paid by LESSEE are:
(i) On oil, condensate, and other associated hydrocarbons in liquid form, one -sixth (1 /6th) of the market value (as defined in (d) (v)) of
that produced, saved, and sold from this lease. LESSOR'S royalty is not subject to costs incurred for exploration, development,
production, primary or enhanced recovery and abandonment operations, including, but not limited to, lease acquisition, drilling, testing and
completion, pumping and lifting, recycling, gathering, separating, treating, dehydrating, removing contaminants, transporting the oil to
storage tanks, storing, as well as any marketing costs, and taxes of any kind. The reasonable, actual, unreimbursed costs of
transportation of oil and condensate beyond the storage tanks shall be deductible, however such costs are subject to audit at the
discretion of LESSOR.
(ii) On gas, including casinghead gas or other hydrocarbon substances, produced from said land saved and sold or used off the
premises or processed for the extraction of natural gasoline, natural gas liquids or other products therefrom, one -sixth (1 /6th) of the market
value, as defined in (d) (iv)) of the gas, natural gasoline, natural gas liquids, or other hydrocarbon and non hydrocarbon elements and
compounds, including, but not limited to, inert gases, sulfur and helium so sold or used. LESSOR'S royalty is not subject to costs incurred
for exploration, development, production, primary or enhanced recovery and abandonment operations, including, but not limited to, lease
acquisition, drilling, testing and completion, lifting, recycling, gathering, single or multiple stage compression, separating, treating,
dehydrating, removing contaminants, amine treating, glycol, methanol and chemical injection, transporting the gas to the market pipeline,
marketing costs, and taxes of any kind. The reasonable, actual, unreimbursed costs of transportation in the market pipeline up to fifty
percent (50 of the value of the residue gas shall be deductible, unless a greater amount is agreed to by LESSOR in writing. However,
such costs are subject to audit at the discretion of LESSOR. Market pipeline is defined as the pipeline segment(s) from which gas can be
sold without further treating or compressing.
(iii) On all other, hydrocarbons of value and gaseous substances and elements produced or extracted, including, but not limited to,
propane, butane, sulfur, nitrogen, carbon dioxide, and helium one -sixth (1 /6th) of the market value (as defined in (d) (iv)) of that produced,
saved, and sold from this lease less the reasonable, actual, unreimbursed cost of extraction shall be deductible, provided, however, that
the allowance for the cost of extraction may not exceed two- thirds (2 /3rds) of the value unless prior written approval of the Lessor has
been received.
(iv) "Market value" is defined as the arm's- length sales price received by lessee for production in marketable condition, including all
premiums and consideration in whatever form and at whatever time. If such production is sold pursuant to a non -arm's length, buy /sell,
exchange, swap or any other similar transaction, "market value" shall be defined as the weighted average arm's length value, including all
premiums and consideration in whatever form, regardless of time and place, for like quality production in marketable condition at the
appropriate market point or hub including market points or hubs where related transactions occur. In no event shall the arm's length price
for gas, or natural gasoline, be less than that received by the United States of America for its royalties from the same field.
(v) Natural gas and oil actually used for operating purposes on the lease and, except as to the ultimate sale thereof, gas and /or liquid
hydrocarbons returned to the sand for stimulating the production of oil or secondary recovery purposes shall be royalty free. "Operating
purposes on the lease" is defined as fuel used for production purposes, including to run a pumping unit(s), operate well -head
compression, operate initial separation equipment at the well for separation of oil, water and gas, and run tank heaters, not to exceed two
percent (2 of wellhead volume unless a greater amount is agreed to by LESSOR in writing. Operating purposes upon the lease
specifically excludes any use beyond separation and storage tank heating and all procedures and processes specifically deemed as the
cost of production under the laws of the State of Wyoming.
(vi) If LESSEE receives any compensation for any function, process or liability related to production from this lease without the right
given herein to deduct the costs related to such compensation, such compensation amount shall be included in the market value for such
production type and royalty must be computed and paid thereon at the lease royalty rate.
(vii) If during any period of unapproved non production from this lease, any production is sold from offsetting acreage from any well
closer than four hundred sixty feet (460') in any direction from the lease line, the right to continue this lease will be satisfied only by the
payment of compensatory royalty, in the amount of one -half (1/2) the volume of the offset well at market value, at the lease royalty rate; or;
by evidence of regulatory agency permission for an exception location at a point closer than four hundred sixty feet (460') from any
boundary of this lease. Further, offset production may not continue for greater than one hundred eighty (180) days in paying quantities, as
sold from the offset well, without LESSEE beginning thedrilling of a lease offset hereon; or, providing geological, reservoir characteristic,
logistical, regulatory and /or financial information as necessary to satisfy LESSOR that the drilling of any specific offset on this lease will be
un- economical or otherwise not feasible within one hundred eighty (180) days. Offset production is defined as production from a well not
located onthis °lease but within four- hundred sixty feet (460') of the exterior boundary of this lease that has not been authorized by the
regulatory' agency. Failure to comply with this requirement will be cause for termination of this lease unless LESSEE can demonstrate to
the reasonable satisfaction of LESSOR that no drainage could occur from an off-lease offset well.
(viii) The Wyoming Royalty Payment Act, Wyo. Stat. 30 -5 -301 through -305 shall apply to this lease; however, where there is a
conflict between the Wyoming Royalty Payment Act and the terms of this lease, the lease language shall control.
I,
(e) DISPOSITION OF ROYALTY OIL AND CLI.A.&,-Iklidalikien.tovLESS R firm or corporation as LESSOR may
designate, all royalty oil, gas, or other kindre hydrocatbdns,.free:,of charge on the•premise where produced, or at the option of
LESSOR, and in lieu of said royalties in kind,"LESSEE agrees to „pay LESSOF0ie'itiarket kalue of all royalty oil, gas, or other kindred
hydrocarbons produced and saved and sold %pilled, lost; stolen flared or vented )u•n'le otherwise approved by LESSO in writing,tPgor, „$��Ilo
written approval is not required for the justification of such unaccounted for production that occurs within standard indust practice.
When LESSOR elects to take its royalty oi1,4as, or other hydrocarbons in kind, such oil, gas, or other kindred hydrocarbbnsfsti'a• lterdoi d'� R
marketable oil, gas, or other kindred hydrocarbons.. LESSEE shall, if necessary, furnish 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 t 1/09§4or at such place as' LESSOR and: d co)
LESSEE may mutually agree upon, provided, that LESSEE shall not be he i :ft' r r 11 o'n T s or destfClt°PI'b'�`of"Yr3'gdltsr s'o Stored from
property
causes beyond its control. The free storage of oil, as herein provided, shall I y' g as said- oil p p ert y of LESSOR.
(f) MEASUREMENTS OF PRODUCTION. That LESSEE or its operator or1fi it cifAgerlfrorir ttiis:lease, unless otherwise agreed i'.i.. idtt
to by LESSOR in writing:
(i) meter, gauge, measure and correct for temperature, all production from the lands leased hereunder and pooled or unitized with this
lease in conformance with the methods and time intervals accepted as stand bi tfstrypraotieeerld erules -and regulations adopted
by the Board of Land Commissioners, and report said production to LESSOR in accordance therewith. _.T 's
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(ii) keep books, records, charts, invoices and reports pertaining to the production from the land herein leased as well as those pertaining
to the production from offset wells operated by 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 LESSOR.
(iii) furnish LESSOR with copies of all pertinent original transporter and /or pipe line and processor statements /reports showing the day, if
appropriate, month, year, amount, gravities, temperatures and pricing of all oil run and monthly reports showing the day, if appropriate,
month, year, amount (volume), gas BTU; and, price of all gas natural gas liquids and /or and natural gas gasoline and other products
produced and allocated to, and sold from the land herein leased, and the amount of gas and/or natural gas liquids or oil /condensate
returned to the underlying producing zones/ horizons, for production purposes.
(iv) furnish LESSOR with copies of original sales reports showing the month, year, amount, gravity, BTU, temperature and price per unit
of sales and by product, for all products sold from the lease or from interest within which this lease shares by any form of unit or pooling
arrangement. Further LESSEE agrees to furnish all other pertinent volume and valuation information in the form prescribed by LESSOR.
(g) MONTHLY PAYMENTS AND STATEMENTS. Unless the time of payment is otherwise extended by the Office of State Lands and
Investments to make payment on or before the last day of the calendar month succeeding the month of production and removal and sale
of oil from the leased land and any land with which this lease is pooled or unitized; and, to make payment on or before the last day of the
second calendar month succeeding the month of production and removal and sale of gas from the leased land and any land with which
this lease is pooled or unitized; and to furnish monthly operator and payer production and royalty statements therewith showing in detail
the quantity and quality of the production (per well if required where practical), including reports reflecting no production, from the land
hereby leased, and the quantity and quality of the production (per well where practical) from offset wells upon cornering or contiguous land
operated by LESSEE, its operator or sub lessee and such other information as may be called for in the form or report prescribed by
LESSOR. Failure to timely submit LESSOR required reports and reporting documents, including reports reflecting no production, as
called for within a practical time period as directed, shall result in a penalty assessment against LESSEE of $100 per lease, per month, or
fraction thereof, missing or delinquent. LESSOR shall send written notice to LESSEE requiring LESSEE to show cause for the
delinquency or provide the required reporting. If such good cause for the delinquency is not'shown by LESSEE within thirty (30) days, `the
lease may be cancelled. Failure to properly report and continued incorrect/untimely /improper reporting may result in lease cancellation.
(h) INTEREST. Any royalty not paid when due shall bear interest at a rate of eighteen percent (18 per annum. Payment for royalty
obligations on oil and lease condensate is due by no later than the end of the month immediately following the month of production and
sale. Payment for royalty obligations on gas, plant inlet condensate and natural gas liquids /natural gasoline is due by no later than the
end of the second month following the month of production and sale. The accrual and payment of interest does not constitute waiver or
satisfaction of any penalty that may apply under the rules and regulations of the Board of Land Commissioners in effect during the term of
this lease.
(i) 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 content of said land.
(j)LOG OF WELLS AND REPORTS. To keep a log, in the form approved by LESSOR, of each well drilled by LESSEE on the lands
herein leased, showing the strata and character of the formations, water sands and mineral deposits penetrated by the drill, amount of
casing, size and where set, and such other information as LESSOR may require. To furnish copies of any and all reports affecting this
lease as filed with the appropriate oil and gas regulatory agency or the authorized officer under any joinder in federal
unitization communitization or any non federal pooling arrangements or communitization.
To file progress reports, in the form prescribed by LESSOR, at the end of each thirty (30) day period while each well is being drilled.
To file annually, or at such times as LESSOR may require, maps /plats showing the development of the structure and the location of all
wells, pipe lines and other works used in connection with the operations of LESSEE, its operator(s) and any transporters or purchasers
upon said land.
To make such other reports pertaining to the'production and operations by LESSEE on said land, and report such other information as
may be possessed by LESSEE on the wells, production or operations of others on lands on the same geologic structure that may be of
importance in'effecting proper development and operation of the lands herein leased, as may be called for by LESSOR. The Office of
State Lands and Investments may waive such reports as conditions may warrant.
(k)PRODUCTION. To operate the wells upon the land herein leased in a competent and efficient manner in an endeavor to recover and
deliver for sale all the oil, gas, natural gas liquids /natural gasoline and salable non hydrocarbons economically possible from said land and
to prevent the drainage of the oil and gas thereunder by wells operated by LESSEE or others on cornering or contiguous lands to those
leased herein.
All plans or methods for the purpose of stimulating or increasing production on lands herein leased other than those in common use shall
first be presented to LESSOR for approval before being put into actual operation.
No production agreements or decisions limiting, restricting, prorating, shutting -in or temporarily abandoning any well on this lease, or
otherwise affecting the natural production from said land shall be entered into by LESSEE, nor shall LESSEE limit, restrict, shut -in or
temporarily abandon any well on this lease, nor prorate the natural production from said and in any way or in any event, except with the
consent in writing of LESSOR having first been obtained.
(I)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 LESSEE is unable to establish a satisfactory market for the oil, gas or hydrocarbons produced from
said well, or, should any well drilled upon lands covered by this lease require de- watering or stimulating, LESSEE may apply for and
LESSOR may grant permission for the suspension of production operations from the well and /or the lease until such times as a
satisfactory market for the product from said well or lease can be developed. Grants of suspension shall be approved by LESSOR for a
period of no greater than one (1) year unless LESSEE requests and receives an additional suspension. During the time any such
suspension of operations is in effect, LESSEE shall continue to pay the annual royalty (rental) of $2.00 per acre or fraction thereof for the
first such suspension, and thereafter, as directed by LESSOR upon approval of each suspension, and this lease shall remain in effect as
though oil or gas was being produced from said lands.
(m)DILIGENCE PREVENTION OF WASTE. To exercise reasonable diligence in drilling, producing, and operating all wells on the land
covered hereby, unless consent to suspend operations temporarily is granted by LESSOR; to carry 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 preservation and
conservation of the property for future productive operations and to the health and safety of workmen and employees; to plug securely in
an approved manner any well before abandoning it and to reclaim the well site and any disturbances associated therewith that will not be
further used in operations on the lease, and not to abandon any such well without permission of LESSOR, and not.to drill any well within
two hundred feet (200') of any of the outer boundaries of the land covered hereby, unless to protect against drainage by wells drilled on
lands adjoining less than two hundred feet (200') from the property lines thereof or by evidence of regulatory agency permission to drill
within two- hundred feet (200') of the outer boundary of the lease; to conduct all operations subject to the inspection of LESSOR; to carry
out at LESSEE'S expense all reasonable orders and requirements of LESSOR relative to the prevention of waste and preservation of the
property and the health and safety of workmen; and, to complete all required reclamation activities including, but not limited to, the re-
contouring, replanting and reseeding of drilling sites and other areas disturbed by drilling or other operations; and, upon failure of
LESSEE to do so, LESSOR shall have the right, together with other recourse herein provided, to enter on the property to repair damage or
prevent waste at LESSEE'S expense; to abide by and conform to valid applicable regulations prescribed to reimburse the owner of the
surface, if other than LESSOR, or lessee of grazing rights thereof, for actual damages thereto and injury to improvements thereon,
provided, that LESSEE shall not be held responsible for acts of providence or actions beyond its control. Failure to extinguish such
obligations will cause a call for LESSEE and operator bond(s) and result in further action to recover any loss to LESSOR should such
bonding amounts not cover the expenses /costs incurred.
(n)TAXES AND WAGES- FREEDOM OF PURCHASE. To pay, when due all taxes lawfully assessed and levied under the laws of the
State of Wyoming upon improvements, oil and gas produced from the land hereunder, or other rights, property or assets of LESSEE, to
accord all workmen and employees complete freedom of purchase, and to pay all wages due workmen and employees in conformance
with the laws of the State of Wyoming.
(o)ASSIGNMENTS OF LEASE PRODUCTION AGREEMENTS. Not to assign this lease or any interest therein, nor sublet any portion of
the leased premises, except with the consent in writing of LESSOR first had and obtained. LESSOR reserves the right to refuse approval
of any assignment of any interest in this lease, including over riding royalty interests should LESSOR determine such assignment would
be to the detriment of proper and timely lease development. Approval will not be unreasonably withheld.
(p)DELIVER PREMISES IN CASE OF FORFEITURE. To deliver up the leased premises, with all permanent improvements thereon,
including downhole cemented casing, in good order and condition in case of forfeiture of this lease, but this shall not be construed to
prevent the removal, alteration or renewal of equipment and improvements in the ordinary course of continuing operations. Failure to
deliver up the leased premises in good order and condition satisfactory to LESSOR will cause a call for LESSEE and operator bond(s) and
result in further action to recover any loss to LESSOR.
Section 2. THE LESSOR EXPRESSLY RESERVES:
(a)The right to lease, set, or otherwise dispose of the surface of the land embraced within this lease under existing laws or laws hereafter
enacted, and in accordance with the rules of the Board of Land Commissions insofar as the surface is not necessary for the use of
LESSEE in the conduct of operations hereunder.
(b)The right to lease, 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 surface lands heretofore granted for rights -of -way and easements and reserves the right to grant
such other rights -of -way and easements as provided by the statutes of the State of Wyoming, as long as such rights -of -way and
easements do not conflict with the operations for oil and gas on the land herein leased.
(d)The right to refuse to commit the leased lands to a unit plan of development if LESSOR finds such action would impair LESSOR'S
reserved right to take its royalty gas in kind and to purchase all other gas allocated to the leased lands a provided in Section 1(e) above.
(e)The right to alter or modify the quantity and rate of production to the end that waste may be eliminated or that production may conform
to LESSEE'S fair share of allowable production under any system of State curtailment and proration authorized by law.
(f) In addition to its right to take its royalty gas in kind, the right and option to purchase all other gas produced for sale or use off the
leased lands. This option shall be exercised only if LESSOR finds that LESSEE has received and is willing to accept a bona fide offer
from a purchaser who intends to sell 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 consumption entirely within the State of Wyoming) are willing and able to
purchase the gas upon terms reasonably comparable to and at least as favorable to LESSEE as those offered by the interstate
purchaser. LESSOR shall waive this option and permit an interstate sale 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 favorable to LESSEE. As a condition to such waiver, a
satisfactory agreement 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 State of Wyoming.
Section 3. APPRAISAL OF IMPROVEMENTS. LESSEE shall have the right subject to the provisions of Title 36, as to State and State
School Lands, and Title 11, as to State Loan and Investments Board Lands, to remove any improvements owned by LESSEE, except
downhole cemented casing, within a reasonable time after the termination of this lease. LESSEE agrees that any such improvements not
removed within one hundred eighty (180) days after termination of this lease may be disposed of at LESSOR'S option and is forfeited by
LESSEE without recourse.
Section 4. FORFEITURE CLAUSE. LESSOR 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, and /or the
rules and regulations of the Board of Land Commissioners and all effective applicable statutes. Upon proper proof thereof, in the event
that LESSEE shall default in the performance or observance of any of the terms, covenants, and stipulations hereof, or of the general
rules and regulations promulgated by the Board of Land Commissioners and in force on the date hereof, LESSOR shall serve notice of
such failure or default either by personal service or by certified or registered mail upon 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 event LESSOR may, at its option, declare a forfeiture and
cancel this lease, whereupon all rights and privileges, obtained by LESSEE hereunder shall terminate and cease and LESSOR may re-
enter 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 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 forfeiture, or for the same cause 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, 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 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 LESSOR.
(b) If operations have been conducted under the lease on land proposed to be relinquished, LESSEE shall give sixty (60) days notice and
shall file with the Director a written relinquishment or surrender duly acknowledged and stating therein that operations have 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. Bonding under this lease shall not
be released to any party until such time as a field inspection has established that reclamation is satisfactory and complete.
All rentals and any minimum annual royalties 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 relinquished lands may not be reinstated.
Section 6. Governing Law and Jurisdiction. The construction, interpretation and enforcement of this lease shall be governed by the laws
of the State of Wyoming. The Courts of the State of Wyoming shall have jurisdiction over this lease and the parties, and the venue shall
be the First Judicial District, Laramie County, Wyoming.
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