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HomeMy WebLinkAboutC2006-424 - 9/19/2006 - Approved OIL AND GAS LEASE THE STATE OF TEXAS COUNTY OF NUECES ~ ~ ~ KNOW ALL MEN BY THESE PRESENTS: TillS AGREEMENT is effectIve as set forth below. by and between the following parties: City of Corpus Christi (herein referred t,) as "Lessor"). and EOG Resources. Inc. whose address is 539 North Carancahua Ste. qOO. Corpus Christi Texas 7840 I, (herein "Lessee"). W!INE~~EIH I. DEFINITIONS The following terms have 1 he meanings set forth below when used in this lease: (a) "oil and gas" - oiL gas. casinghead gas. dnd by-products thereof and such other hydrocarbon substances and sulphur and other substances as are necessarily produced with, but incidental to the production of oil and gas from wells on the leased premises (b) "subsidiary" or "attiliate" . any corporatlOn. firm. or other entity (i) in which Lessee owns a J 5% or more interest. (ii) which owns a 15% or more interest in Lessee, or (iii) which is under common ownership of 15%, or more with l~essee. whether by stock ownership or otherwise, directly or indirectly. A subSIdiary or affiliate of Lessee "hall include any corporation. firm. or other entity which is controlled by Lessee and/or its affiliates. which controls Lessee and/or its affiliates, or which is under common control with Lessee and/or its affiliates, where "control" means 15~'() or more direct or indirect common ownership, or the exercIse of control by common directors. officers. managers. partners, and/or principals, or any other mechanism of control. (c) "commence" a well - a well shall be deemed to commence when a derrick, a rig, and machinery capable of drilling to a depth sufficient to test a prospective oil or gas horizon have been erected. and when such well has been spudded in and the rotary bit is rotating under power. (d) "drilling operations" - the actual work to drill a hole. in a good and workmanlike manner, prosecuted with reasonable diligence. in an attempt to reach the objective prospective oil or gas horizon. (e) "reworking operations" . actual work in the hole of a well. in a good and workmanlike manner, prosecuted with reasonable diligence. in an attempt to re-complete or repair said well to return it to production or to enhance the production from "aid welL (f) "completion" of or to "complete"a well - a well shall be deemed to have been completed on the earliest of the following dates: (i) the date on which the mitial potential test is run; (ii) the date on which a dry hole is plugged: (iii) the date reported t(1 the Railroad Commission of Texas as the date a well has been completed as a producing well. (g) "cessation of production" the cessation of production from a well shall be deemed to have occurred when actual production has ceased. without anv reasonable expectation of resumption of production from that well: and a well shall be conclusively presumed to have ceased production without reasonable !f no ()il or gas is produced therefrom for a period of ninety (90) consecutive be deemed to have ceased production as of the first day of such ninety (90) 2006-424 09/19/06 Ord026994 Eoe Resources ~"-"'_.- (h) "elt~ctive 9.llI~" the effecti\e date of this lease is ~+<ek .~'..R'\ 2-11 L-oU ~ (J) "surfac~" - the surface estate and all righb and incidents appurtenant thereto, including, without limitation, ground water. (j) "Airport - reters to all the numerous aviation science, safety, and business facilities and systems Il1volving the leased premises or rights and interests related thereto, regardless of which jurisdiction or treaty or agreement is involved. as they no\\ eXISt. nr as hereafteJ exist. or as studied or planned at the local, regional state. federal. or mtemational level' II. LEASED PREMISES Lessor, Il1 conslderatlOn ot Ten and No/OO Dollars ($10.00) and other good and valuable consideration Il1 hand paid by Lessee, the receipt of which is hereby acknowledged, and in consideration of the royalties excepted from this lease and reserved unto Lessor and the other covenants, agreements, and obligations of Lessee herein contained, and upon the conditions and with the limitations hereinafter set forth and contained, f()r the term hereof hereby bTfants. leases, and lets exclusively unto the said Lessee, its successors and assigns, t()r the limited purposes of investigating. explonng. prospecting. drilling, and mining for and producing oil and gas, conducting geophysical and seismic operations. building tanks. roads. pipelines, power stations, telephone lines. and other structures thereon 10 produce, sene. take l:are of treat, store, transport and own oil and gas, all that certain land situated m '\ueces County. fexas. descrihed and depicted in Exhibit A attached hereto and by this reference made a paI1 hereof f(lf all purposes (herein the "leased premJses"). For the purpose of calculating ..:ertam payments heremafter prO\ided f()r the land included within the terms of this lease is estimated to comprise 160 gross acres. and the I~ased premJse~ IS deemed to contain the acreage recited therefore, whether it actually comprises more e'l JeSS. This lease IS expressly made subject to any and all easements and rights-of-way affecting said premises, as shown by the records of the County Clerk ()f Nueces County. Texas, to which reference is here made INSOFAR as such easements and rights-of-\vay are in force or effect and cover or pertain to the leased premIses. Nothing contained hereip shall be con-;trued to adopt. revive. or ratify any such easement or right-of- way not now in fl)fCe or eHeet. Lessor expressly EXCEpTS from this lease and RESERVES to Lessor, their heirs, successors and assigns. all minerals of ever) kmd and character in, on. and under the leased premises, excepting only the oil and gas thereunder: and, In addition, Lessor EXCEPTS from this lease and RESERVES to Lessor, their heirs, successors and assigns. the right to use the leased premises and the surface thereof for the purpose of mvestigating, exploring. prospecting, dnlling, and mining for and producmg all such other minerals excepted from this lease, laying pipelines. huilding roads tanks, power stations, telephone lines, and other structures thereun to mine. produce. save. take care of treat. transpllI1. and own said other minerals; provided, however, that such operations shall not unreasonably I11terkre with lessee's operations and use of the leased premises. III. TERM Subject to the other provis1\ms herem contained. this lease shall be for a term of three (3) years after the effective dale hereof. as may be extended indefinitely by "continuous drilling operations" (as hereafter defined), (the term of this lease commencing the date hereof and continuing until 3 years, as extended by continuous drilling operations herein called "primar) tenn") and thereafter as to each production unit considered separately, as long thereafter as oil or gas are rJToduced in paying quantities from each such production unit created under this lease considered separately. tV as each such production unit may be otherwise maintained in force and etTect under the other terms and pnvisions hereof IV, ROYALTIES - The royaltIes EXCEPTED from thlS lease and RESERVED unto Lessor and their heirs, successors, and assigns. and to he paid ur dellVered as herein provIded by Lessee to Lessor, their heirs, successors, and assigns, are as follows: (a) Agreed Royalty Share. The tenn "/\.b'Teed Royalty Share" means twenty five (25) % . (b) 011. On all ()II (which tenn "od" inclueit's oil. other liquid hydrocarbons. and condensate, distillate. and other liquid products condensed. absorbed. or separated from the gas stream by initial mechanical separation on the leased premises through any method utilized for liquid separation prior to sale or prior to the arrival at any processing plant), the Agreed Royalty Share of that produced and saved from the lease prior to the end of the primary teI11l and from each production unit after the end of the primary term, the same to be delivered to Lessor into the pipelme or other receptack to which the Lessee may connect its wells, or, at Lessor's option. the Agreed Royalt\i Share of the market value thereot: with such market value to be determined by the highest posted price f()!' oil \'1' a like lype dnd gravity in the county where produced and when run, which market value must m no cvent be less than th(" price received by Lessee or its affiliates for its oil produced under this lease (c) ~Jas. On all gas (which tem1 "gas" includes gas well gas. casinghead gas, residue gas, and all other gaseous hydrocarbon substances produced under the terms hereof}, the Agreed Royalty Share of that produced and sold nr used from each production unit the same to be delivered to Lessor into the pipeline or at the plant outlet to which Lessee may connect its wells, Of. at Lessor's option, such gas must be delivered to Lessor into the pipeline(s I furnished by Lessor. or. at Lessor's option, such gas must be sold by Lessee and/or Its affiliates with Lessee's gas produced and sold from the leased premises. and at the price equal to that price received by Lessee or its affiliates for its gas: provided. however: such market value must not be less than the full amount receIved by Lessee anel/o!' Its affiliates either directly or indirectly for such gas at the point of the sale tu third partIes. The toregoing options are multiple and continuing options that may be exercised at any tIme and from time to time regardless of pri\lr elections hy L.essor (d) Sulphur. ThIS lease is mtended 10 cover only oil and gas, but it is contemplated that some sulphur may necessarily he produced with and incident to the production of oil and gas from the leased premIses. In such event. this lease must als(l cover sulphur. and Lessor must have and be entitled to a royalty of the Agreed Royalty Share of all sulphur so produced and saved, the same to be delivered to Lessor as royalty, tree of all costs of 011 or gas produ,..:tion. but bcanng the cost of sulfur extraction from the oil or gas stream, or, at Lessor's electIOn, sucn sulphur royalty must be sold oy Lessee. for the account of Lessor, with Lessee's portion of such sulphur produced and saved from said land and at the same prices received for Lessee's portion nf such sulphur. but bearing the co~t of sulfur extraction trl)m the oil or gas stream. (e) Disposition. Until "uch tIme as any Lessor. or any Lessor's heirs and assigns, elects by written notice to Lessee to take royalty if kind, and make the arrangements necessary to take in kind or separately dispose of such party's share of rovalty oil or gas. Lessee will. subject to revocation at will by the Lessor, sell sucn oil or gas to others or othenvl.;e contract for its treatment and sale for the time being, with royalty thereon payable as set out herein Any sUl:h sale (If oil ()r gas bv Lessee must be subject always to the right of any Lessor. or of an) Lessor's heirs and assigns. 11) exercise after 60 days' prior written notice the right to take in kind, nr separately dIspose of such party's share of all oil and gas previously sold by Lessee. (f) Costs of Production: Use of Oil, Gas, and Water. Unless other election is made by any Lessor or any Lessor's successors and assi!:,1J1s. Lessee will handle and market Lessor's royalty oil and liquid or liquefiable hydrocarbolls, sulphur, and other products extracted, separated, or saved from the gas and residue gas from the leased premises m the same manner as Lessee must handle Lessees portion of same. Subject to paragraph IV (d) above, it is further agreed that] .essor's royalty must never bear. either directly or indirectly, any part of the costs or expenses of producing or gathering the illl or gas from the leased premises, nor any part of the costs of construction, operation. or depreciation of any plant or other facilities or equipment for processing or marketing """"""' said oil and/or gas produced from the leased premises Nothing herein is intended to cause royalty to be calculated or paId "at the well." ~jccordingly no processmg (except as provided in IV(d) above), marketing, gathering, or other post-wellhead costs wi11 be home by Lessor. However. it is agreed that Lessor will bear its proportionate share of all production or severance taxes. \io royalty will be payable on any gas produced from the leased premIses and used b;; L.:ssec in the exploration. production. or marketing of oil and/or gas from the leased premises Fresh water from in. on. \lr under the Leased premises must not (i) be moved from the leased premIses by any method. manner. If de\lcl' across. over. )r under any boundary of the leased premises, nor (ii) he inleeted into an.' well on the kased premIses or elsewhere f()r primary, waterflood, secondary, or tertiary recO\ cry purposes or for am other purpose l\nm-potable water from wells situated on the leased premises may he used for secondary reUl\ ery purposes on the leased premises. 1\on-potable water produced from the leased premIses may he moved tTum the leased premises and/()f injected into any well on the leased premises, or elsewhere, for the sole and -mly purpose of disposing of such non-potable produced water in any legal manner consistent with the Rules ,md R\:gulations of the Railroad Commission of Texas or other governmental authority having lUrisdlction 19) Due Dates of Royalty. NotWithstanding any statutory requirement no division order may require more than the certification by the particular Lessor j)f his interest m the leased premises, of his tax IdentIfication, and of his address and an undertakmg to reImburse any incorrect payment made to Lessor that is Identified and claimed hy Lessee \\ Ithin .2 years of payment. Al1 royalties that may become due hereunder will commence to be paid on each well within thirty (~O) days after the first day of the month following the month during which that well IS completed and commences production. Thereafter all royalties must be paid to Lessor \lll or hefore the \ .::;tb day ,)f the selCmd month t{dlowing the month of production. Royalties not paid when due must bear interest at the pnme rate of interest at \\ells Fargo Bank Corpus Christi, N.A., plus two percent (2%) (but not to exceed the maxmlUm legal Texas interest rate) !Tom their due date until paid. If royalty is not paid by such due date, Lessor may give L~ssee wntten notice of nonpayment of royalty, and if Lessor' royalty is not paid on or before expiration ()f sixt, (60) days from the tlrst notice, then at any time thereafter Lessor may give a second written notice Failure of L,essee tll cure the nonpayment within thirty (30) days from Lessee's receipt nf such second notIce, Lessor may termmale this lease and evict Lessee forthwith. However, if there is a bona tide dispute or a good taith question, based 1m an attorne\'s written opinion, of royalty entitlement ("bona fide dIspute or a good faith question". \)1' rovaltv entitlement to include not only title questions, but also disputes relating to measurement and markl'1 value) Lessee may ray the bona fide disputed portion of Lessor's royalty II) either (i) a trustee t\ I he sekcted by both parties h) he retained by the trustee and invested in a governmentally lIlsured interest-bearing account pending resolution of the entitlement issue, with the interest to helong to the rightful royalt\ owne,"; or (Ii) If the parties do not or cannot agree on a trustee, Lessee may tender the royalty into 1I court of competent junsdlction hv Bill nf Interpleader, to be so held and invested by the clerk under the directIon of the court. If The ruyaltv IS so paid h such trustee or to the court within the time provided, then L.essor shall not have the nght to teml1nate this lease t<Jr nonpayment of royalty. It is agreed that Lessee shall be under the duty tt, accoLnt hi LeSSUI tor Lessor's royalty oil and gas and liquid or liquefiable hydrocarbons. sulphur. and other products extracted. separated. or saved from the oil and gas from the leased premIses. All royaltIes are pay'able n Nueces County. TeX,ls. (h) Ilhxes. Lessor shall be l1abk t{lr all state severance taxes imposed on their proportionate part of production from the leased premise..;. (i) Separate Lessee's Elect to Take in Kind. If, by reason of assignments of undivided interests in Lessee's interest in this lease. more than one (1) party becomes entitled to a portion of Lessee's share of oil or gas produced from any well on the leased premises, and if any or all of such co-owners elect to take their share of oil or gas in kmd, each Lessor shall be entitled, at his election, to require the operator of the leased premises to exercise the obligations (If Lessee hereunder for all royalties due on oil or gas production. Such election, if made. shall not reheve any party dherwisc liable for payment of royalties from such liability, and all parties owning an undivided interest in oil or am p0l1ion of the leased premises shall be and remain jointly and ..;everallv liable tor the payment of :111 rovaltles due on production therefrom. u) Right to Inspect. Accounting Record~. Lessor has the right at all reasonable times during normal husiness hours and upon prior request. personall) or by representative, to inspect, copy, and audit the books, accounts, contracts. compilatIOns, .md records of Lessee pertaining to the saving, transportation, sale, use, and marketmg ofthe oil. sulphur. and other products produced from or attributable to the leased premises. V. DELAY RENTALS During the primary term. if a well 1S not producing oil or gas in paying quantities on the leased premlses on or before the anniversary date of the effectlVe date. then thlS Lease will terminate, unless on or before such date Lessee elects :0 pay or tender to Lessor at City of Corpus Christi Attn. Petroleum Superintendent, addressed as provided XVI (c) below. or such other place as Lessor notifies Lessee, its proportionate share of Twenty-fivl Dollars ($25.00) per acre as rental for each acre then subject to this Lease. This payment will operate as a rental and cover the pri\ ilege of deferring production of oil or gas in paying quantities for one ( I ) year from such date. Lessee may at any time or times execute and deliver to Lessor at the place named above a release or releases covenng any portion or portions of the leased premises. In such event the acreage covered hereby will be reduced by said release or releases. VI. PARTIAL TERMINATION (a) Initial Termmation Upon expiration of the primary term, this lease must terminate as to all the lands and depths covered hereby except lands and depths then properly and timely designated by Lessee, in accordance with the reqUIrements of this SectIOn, to be within a "production unit" (as hereinafter defined) assigned to each well that producmg in paying quantities (or on which shut-in rental has been properly and appropriately p31d) on the leased premises. Lessee shall be conSIdered to be engaged in "continuous drilling operation" if at the end of three years from the effectlve date Lessee i~ engaged in drilling operations on the leased premises, or if Lessee has completed or abandoned a well within ninety (90) days prior to the end of such three years and Lessee shall be deemed to be engaged m continuous drilling operations for as long thereafter as Lessee conducts drilling operations on the leased premises with due dil1gence and with not more than one hundred twenty (120) days between the date of completion 01 one well and the date of commencement of the next well. No additional or accumulative time may be earned by drilling wells more rapidly than the time interval set forth below. (b) Production Lnits. A "production unit," fl)r purposes of this lease, is an area ofland and depths from the surface down to an identified subsurface stratigraphic equivalent depth around a well properly desib'11ated as provided below. Subject to any special field rules set at a hearing with respect to which Lessor had at least 90 days notice that require an allocatlOn of a lract larger than a production unit in order to obtain an allowable suffiCIent to produce the well 111\ olved at its maximum efficient rate of production, no production unit assigned to any well may exceed the following 5-izes: ill OilWells. If the wellls classified as an oil well under the Rules and Regulations of the Railroad CommiSSIon of fexas then in effect. the maximum size of the production unit is forty (40) acres. (2) Gas Wells If the well IS classified as a gas well under the Rules and Regulations of the Railroad Commission of 'Texas then in effect the maximum size of the production unit is one hundred sixty (1 (10) acres Lessor has the right at an) time dnd from time to time to be a party to and/or to initiate special field rules hearings applicable to any field Ot fields all or a part of which are within the leased premises with the same effect as if Lessee initiated the field rule hearings. Lessor hereby reserves all rights necessary for it to be a proper party with standing 111 any regulator) proceedings concerning or affecting the leased premises regardless of Lessee's partICIpation therein. n the e\ ent that special field rules no\\ or hereafter adopted as described in ,.... the second sentence of parabrraph \1 (b) provide for densIty greater or less than the maximum production unit Slzes provided, tor above (lesser density requiring the allocation of a tract larger than a production unit in order to obtaIn an allo',;vable suffiClent to produce the well invol \ied at its maximum efficient rate of production), then Lessee must re-designate a product1On unit for such well( s) out of lands then subject to this Lease (but not lands 110 longer burdened by this lease) which are producing from such fields which comply with such field rules and the other provisions hereot Each production unit must be I1mited 111 depth from the surface down to one hundred feet (100') below the stratigraphic equivalent depth of the deepest usable production casing in the well for which such production unit was established. and all depths below such depth must be released. If at any time, and from time to time, the depth of the deepest usable production caSl11g changes due to physical conditions, then the depth limitation \\/i11 deeur again 'with respect to the new determInation Ilf deepest usable production casing and a release of depths will occur. Insofar as possihle, taking Into utmost consideration the productive limits of the producing mterval and then the contiguration of the leased premise:-,. the lands included within the production unit for a well must be in the form of a square or rectangle (provided that the length of one side of the rectangle does not exceed the length (If an adjacent side of said rectangle by more than 2 times) around the well. Every effort must be made. in deslt,'11ating productioli units, to a\(lJd releasl11g small or irregularly shaped portions of the leased premIses. or portions not contiguous with othel released portions. Acreage assigned to wells producing from different zones may overlap. and must overlap when necessary to comply with the requirements of this Section, primary consideratIon given to productive I1mils I f a well IS producing from more than one zone, its production unit'" size and cnntiguration must lonfclrm ill the proviSIons hereof which provide the largest production unit. i c) g~ease. Pnor to the termmation of this lease at the end of the primary term, Lessee must deliver to Lessor a plat showmg th,' productIon UI1lts designated by Lessee. copies of logs showing depths to be retained within each unit and a release legally describing the lands and depths to be retained by Lessee around each well producing in paymg quantities (o! on which shut-in paYments have been properly and appropriately made) and also legally describint,: the lands and depths to be released If such release complies with the requirements of thlS Section and has been executed by, and is effective upon, the then owners of the leasehold estate. Lessee must record such release at Lessee' s expense and must furnish a copy of same to Lessor. At all times. Lessee has the duty t( 1 releasl: those portions of the leased premises not held under this lease. td) casements Retained Over Lands Released. Subject to all limitations on surface use herein, although this lease may have terminated in part and been partially released under the provisions of this Section, it is agreed that L.essee shall have and retain such casements over and across such terminated portion or portions nfthe lands origmally covered by rnis lease as may be reasonably necessary for ingress and egress and to enable Lessee to develop and operate the portion 1\1' the leased premises as to which this lease remains in effect, and Lessee shall not be reqUIred to 1I10ve or relocate any pipelines. tanks. separators, or other equipment or machInery used 111 connectIOn with such product!on of oil ,)r gas. (e) Subsequent Operatlons and Severability of Lease After initial Termination. After the initial termination of thIS lease except as to production units at the end of the primary term, paying quantity production trom or "Operations," as detined he1ow. conducted on each properly designated production unit shall maintain this lease in force only as to those portions of the leased premises included within such production unit, and paying quaatity production from 01 Operations on a particular production unit will not maintain this lease as to any other production unit. each production unit considered to be covered by a separate lease after the initial termmation referenced above. If paying quantIty production should cease from any production unit, this lease shall terminate w all lands and depths included within such production umt unless lessee commences a drilling or reworking operation \vlthm such unit WIthin ninety (\)0) days of the date the well ceased production and pursues such operation with due dlligence and in a good dnd workmanlike manner or commences new drilling or reworking operations dn rhe same or successIve wells within such production unit in a attempt to secure paying quaatity production from such welb WIth no cessation of separate events of drilling or of different types 1)1' reworking operations 0[1 the s"me ;lr successIve wells f,..rrealer than ninety (90) consecutive days (herein -. . "Operations"). ] t as a result (If SUCil OperatlnDS paying quantity production is restored in the production unit in which .;;uch OperatIons \\ ere conducted. thIs lease shall remain In effect as to those portions of the lands and depth:-. llf the fonner productIon unit which are properly attributable to a new production unit designated with respect to the restored production and usahle production casing as long as oil or gas is produced in paying quantItIes from such ne\\ productli'1il unit. If such Operations on said well or wells result in the capability of paying quantity production from I different/(lne or zones than those previously capable of completion for production in such productlOn unit then such \vell or wells shall maintain this lease in force only as to newly formed productIOn unlts whlch aL' detemnned In accordance with the provisions hereof as applied to such newh completed /ones. l pon completIOn \)t lt~ Operations on such unit. Lessee shall release all lands and depth:-. within the prevlOUS unit which are n(l hlilger includable m a production unit defined with respect to such newh productive /Ones. If after productwn Ul11ts have heen designated in accordance with this Section, (i) special field rules appl1cable to an v producmg \\ ell are adopted or previous special field rules are changed to provIde t{)f greater wel1 denslty or ii) if a well tonnerly classified as a gas well is for any reason reclassified as an oil well, then thlS lease shall tenninate as 1\\ all lands f(mnerly included within the production unit for such \vell except for S\l much I If the tonner produc1wn unit as IS necessary to provide a production unit for the well with regard to such ne\\ spec1al fIeld rules II)" t(\~uch oil well: provided, however, that Lessee may maintain this lease as to the lands outside such new production unit but inside the old production unit by Operations thereon commenced withlll ninety (90) da) S of the effectne date of the new field rules or the oil well designation, and hy pursuing OperatIons thereon wli h due dlligeme on the same or succeSSlve wells; but upon cessation of such OperatlOns, this lease shall term1'1ate as 1(\ all lands and depths formerly encompassed by the terminated production unit whIch are nOl properly mcludahlc 111 the new production units assigned to wells then producing m paving quantitles and properly designated h\ l~ssee in accordance with the requirements ofthis Section. VII. REASONABLE EXPLORATION AND DEVELOPMENT The drilling of wells in a-.:cordance wlth the pr~)Visions of SectlOn VI shall not be construed as an af,1feement or constructIon on the part of Lessor that such drilling would constitute reasonable development or exploration of the leased premises. and Lessee agrees to dri II any and all wells on the leased premises, or such portion or portions thereof as may t1e in torce and effect from time to time. and as are approved by the Aviation Director which approval shall not he unreasonably withheld, and as may be necessary to reasonably explore and develop the same tor the produc1Jon of t)il or gas. III this regard, Lessee recognizes that numerous gas producmg sands and oil producing sands are known to exist on or adjacent to the leased premises. Neither the royalties nor shut-m gas well rentals paid or t() he paId hereunder shall relieve Lessee from the obligations herein expressed. nor shall the pWViSlUllS (If this Section relieve Lessee of any implied duties or obligations ansing under thb Lease. In enforcmg the express obligatIons under sections VI and VII of this Lease, the so- called ""discoverY rule" Wll1 apply so that all limltations and laches will be tolled until the Lessor, exercising the ordinary prudence of a hypothetical unsophistlcated landowner without any oil and gas expertise whatsoever and vvithout regard (or access) tc an) potentlall\ available mt()rmation in the public domain, should have become aware of the breach of the obligatlOn For example, notwithstanding any similar or dissimilar mfonnatJon in the public domain, ,>uch J hypothetical Lessor should not he aware of the failure to reasonably develop unless the Lessee had pro\ Ided maps ...;howing thl' entire hreach of development situation to the Lessor to be charged wlth notice This section doe...; not Il1nit or atlec1 the surface use limitations herein. \ III. PROTECTION FROM DRAINAGE Lessee must completely protect the oil and gas in and under the leased premises, or such portions thereof as may be in force and effect from time to time. from drainage by wells on adjoining or adjacent lands or leases (but not from dram age by a production unit created under this Lease against another portion of the originally leased premlses) Lessee must drill as many wells as are necessary and to the depth or depths necessary for complete protection ,lgainst drainage from said adjacent land or leases. Neither the royalties nor shut-in gas well rentals paid or to he pmd hereunder may relieve Lessee from the obligations herein expressed, nor shall the provlsions of this Se..:tion relieve lessee oj any implied duties or obligations arising under this -- Lease Notwithstanding the foregoing, but not limiting the foregoing, in the event a well producing oil or gas In paying quantities is now or hereafter completed within 667 feet of or draining the leased premises, Lessee must within ninety (90) days after the later of the commencement of production from such well or the effective date hereof commence the drilling ,Jr recompletion of a well on the leased premises and shall make a good faith effort to establish commercial productwn 1I1 the ..;and or horizon from which the offset well is producing or record and deliver to Lessor a release as hereafter provided in order to avoid liability for failure to protect. If at the time the off"et obligation accrues. a well on the leased premises can be demonstrated to a reasonable person to be completel) protecting the leased premises. then no offset well obligation will be due. If at the time such offset obligation accrues, Lessee I" engaged in the drilling of another well on the leased premises, then Lessee has nut more than one hundred twent) (I ~()) days after the date of completion of such other well drilled by Lessee within which to commence the drillmg of the well to protect against the offset well. If Lessee elects not to dnll or recomplete such protectitm well \vithin the time provided. Lessee must (by the 91st day after the later of the commencement of production from such well or the effective date hereof) release from this lease not less than j(1fty (40) acres of land if the dfset well is an oil well and one hundred sixty(160) acres ofland if the offset well IS a gas well Such released lands must he in as near!) the fonn of a square as possible and must offset fully saJd other well: provided. should my portHm (d the acreage to be released be included in a production unit established hereunder, tt)r any producmg well of Lessee ,m the leased premises, the release to be executed by Lessee must exclude the zone ur zones producing in such producing well situated upon the leased premises. IX. REMOVAL OF LESSEE'S PROPERTY ON TERMINATION Subject to VI( d) above. Lessee has the nght at any time during or within ninety (90) days after the expiratIOn or tennination of this lease as to all ()r any part of the leased premises, but not thereafter, to remove all property and fixtures placed by Lessee ,)11 said land or the terminated portion of this lease; and all property and fixtures not so removed within such time become the property of Lessor, if Lessor elects to accept same, but if not Lessor may, at Lessor's dection. remdVe the same from the leased premises at Lessee's expense, and Lessee agrees to reimburse Lessor for all C(lstS (If removaL together with interest thereon at the rate of eighteen percent (18%) per annum and reas( mable attornev' s fees 0 r enforcement and collection. X. ASSIGNMENT No assignment of any ponion of this Lcase is etfective to transfer title unless the successor operator posts and maintains an acceptable performance hond with and for the benefit of Lessor which guarantees the performance of all plugging (in like amOUnl and as comparable to that accepted by the Railroad Commission for wells of like depth) and restoration obligations hereunder. If Lessor consents to any assignment, such consent shall not constitute consent to an) other assignment. Any assignment must be immediately disclosed to and approved by Lessor. Lessee must turnish lessor a copy (If any assignment made pursuant to this Section, with the recording data reflected thereon. Assignment of this lease or any part thereof shall not relieve Lessee, its assignees or an) successor llf any c lbligations hereunder theretofore accrued; and any assignee of Lessee must, hy acceptance of such assignment be bound bv all terms and provisions hereof. The term "assignment," as used herein, includes. without hnitatlOn. am assignment sublease, farmout, assignment, or any other agreement by which any share of the operating rights granted by this lease are assigned or succeeded to, or ahTfeed to be assigned or succeeded to, to an) other party Any permitted assignment made b) Lessee of al1 nr any portion of or interest in this lease must contain the following prOVIsion to be effectlve to transfer tItle: "B\ acceptance of thiS assignment. Assignee hereby designates and appoints EUGResources , _~___n.. _~__ [or the then current approved operator], as L\ssignee'" true and lawful attorne)-in-t~lct to execute and deliver. on Assignee's behalf, any and all releases of the lease herehy assigned Such PO\\ er of attorney IS irrevocable, shall be deemed to be coupled wIth an interest, shall he bindmg upon the heirs. successors and assigns of Assignee, and shall survive the death. II1competency. legal disability. hankruptcy or dissolution of Assignee. Nothing herein may rellc\ I...' Assif.,'11ee of \.ssignee's ()bligation 10 execute and deliver any releases required by said I ease." The proVISIOns hereof shall extend {() the benefit of and be binding upon the heir's executors, administrators, successors. and assigns of the respective parties hereto. No changes or division in the ownership of the land, rentals or royalties shall be binding upon Lessee for any purpose until Lessee has been furnished with the instrument or instruments, or copies thereof, constituting the chain of title from the original Lessors. In the event of the death of an} perSi m entitled to rentals. royalties. damages, or other sums, Lessee may payor tender such rentals. royalties. damages, or other sums to the credit of the deceased or the estate of the deceased until such time as Lessee lS furnished WIth proper 1...'\ idence of the appointment and qualification of an executor/admimstrator of the estak or. If there be none. then until Lessee is furnished evidence satisfactory to Lessee as to the heirs and devisees of the deceased and that all debts, taxes. state inheritance taxes, and federal estate taxes of the cstate have been paid. Lessee will provide upon execution thereof and as amended a true and correct copy of the10int 'c)perating agreement and any other agreements concerning or affecting operations on the lease XI. SHUT-IN RENTAL If after the expiration of the primary term there is a gas well (as then defined by the Texas Railroad CommIssion) on the leased premises capable of producing gas in paying quantities, but from which gas is not sold ()f used off the premises for a period greater than sixty (60) consecutive days for lack of a satisfactory market (which \vell is herem sometimes called a "shut-in" gas well). Lessee may payor tender to Lessor, as shut-in gas well rental. the following: I II It a gas production unit applicable to said shut-m gas well has not been designated because It lS not yet due as provided in Section VI hereof and there is no other production or continuous operations suffiCIent to hold all of this lease, Lessee may payor tender to Lessor, as shut-in gas well rental, a yearly sum equal 10 $_-1J)(lCliL_ _per f.,'TOSS acre times the number of gross acres subject to this lease at the time such payment is made: or 1) If a gas pfilductlOn umt has been required to be designated for such shut-in gas well as provided in Section VI hereof: Lessee may payor tender to Lessor, as shut-in gas well rental, a yearly sum equal to $ 100.00 pel gross acre times the number of f.,'TOSS acres of the leased premises designated III such gas production uni' If elected by Lessee. the tirst such payment of shut-in gas well rental is to be made on or before ninety (90) days after the day on which (i) such well was shut in or (ii) this lease ceases to be maintained in force as to such well by any other pfilvision hereof: whichever is later Such first payment must be accompanied by written evidence of the date of shut-in. Succeeding payments may be made annually thereafter on or before the anniversary ofthe shut-m: and if such shut-Ill gas well rental must be paid ur tendered as above provided, this lease shall, subject to the other terms and provlsions nereof: remain 111 force and effect as to the acreage and depths for which such payment is made, for a period of one ( I ) year from the anniversary date of the shut-in if the first shut-in rental is property paid, and tor like annual periods thereafter if subsequent shut-in rentals are properly paid, and the intermittent production of gas dunng sucn year shall not render necessary any new or additional payment of shut-m gas well royalty. but Lessee must account to Lessor for the royalty on any such gas actually produced and sold or used off the premises 1 n accordance with the provisions hereof While this lease is thus continued in fc)rce, It shall be considered for all purposes under this lease that such well is producing gas in paying quantities proVIded, however. Lessee has n( right te, maintain this lease as to any well by payment of shut-in gas well rental fiX anyone shut-in period ~reater than two (1) consecutive years or for more than two (2) years in the - aggregate; and provIded. further. tbat the payment of shut-in gas well rental shall not prevent the termination of this lease. in accordance \vith the provisions of Section VI ~otwithstanding the making of such shut-in gas well rental payments. Lessee shall be and remain (!) under the' continuing obligation to use all reasonable efforts to find an acceptable market tl.)f said gas and to commence llr resume marketing same when a market is available; (ii) under the obligation to reasonably explore and develop the lands then subject to this lease; and (iii) under the obligation to drill all such wel s on the lands then suhject to this lease as may be necessary to completely protect same from drainage hy wells on adJoinmg or adjacent lands not originally covered by this Lease. All payments or tenders provlded for in this Section must be made to Lessor. In the e\ en Lessee utilizes the pro\'lsions of this Section to continue this lease in force and effect as to all or any portion oflands by the payment of shut-m rental. Lessee must, upon the written request of Lessor and at Lessor's cost and expense. conduct appropnate and adequate tests of each shut-in well designated by Lessor m such request to determine whether each such designated well is actually capable of producing gas in paying quantities. Such tests must be made at times selected by I.essee within thirty (30) days after Lessee's receipt of Lessor's written request but not less than thirty (~()) days prior to the expiration of an annual period for which a shut-m rental pa:1TIent has been made b: Lessee on each particular well designated by Lessor. Lessee must give Lessor reasonable notice prior 0 conductmg such well tests and Lessor or Lessor's duly appointed representative sha]] have the right to be present at the testing of each well and shall be entitled to receive full mtormation in connectIOn with such testmg. In the event any such test discloses that such well is not capable of producmg gas 1f1 paying quantI tie'. it shal I be ..:onsidered that such well has ceased to produce gas in paying quantities on the date of shutting if of such well XII. PROTECTION OF THE LAND (a) Dominant Estate and Risk of Leasehold Operations and Facilities. The Airport is the dominant estate, Oil and gas exploration and production is the subservient estate, which must always accommodate the i\irport's uses, meluding. WIthout limitation, the current and future surface lessees, licensees, and users of i\irport land and improvements as depicted on Exhibit A hereto as "'Public Use Areas", "Airport Ground Lease Areas". "ADA Areas". and "Futun' Development Site". (b) NotIce to D1recto1. Pnor tp commencing drilling, seismIC, and producing operations on the leased premises. L~essee and the ""Director'" (being, collectively. Director of Aviation, City of Corpus Christi International AIrport and the Petroleum Superintendent. City of Corpus Christi), by and through their respective agents, must make a joint inspectwn of the premises so that Director may be informed where, when, and how operations are going to he conducted on the leased premises. Lessee agrees to contact Director prior to the commencement of the preparation of the locatIOn of each separate well and prior to the commencement of each separate geophysical operation. Nl' well may he drilled within five hundred feet (500') of any Airport structure now or hereafter located on the leased premises and must never interfere with the Airport. In addition, Lessee musl also complv with the Special Airport ProVIsions set forth in Subsection XII (i) below. (c) Construction and Maintenance of Roads. Lessee agrees to construct not more than one (1) road to each location on the leased premises and to cnnfine all travel incidental to the drilling and production of such well to the single road. Prior to lo,:ating and constructing any road Lessee must notify Director and must place such road and associated culverts and (fItches 111 such location(s) as Director may reasonably designate. Lessee a6Jfees to maintain all roads used hy Lessee in Lessee's operations on the premises and associated culverts and ditches in good condition and repaIr during the period of Lessee's operations on the leased premises. When any roads constructed hy Lessee are n,) longer used hy Lessee. if Lessee has constructed any character of topping, such as caliche. blacktop. or otherwise. on ..;uch roads. DIrector has the right to require Lessee to remove such toppll1g from the roads. Lipon such abandonment of an) roads. Lessee must restore the surface of the land to substantially its onginal condition to the extent reasonabh possible. (d) Location _Q.tFacilities. Pnor t(, permanently locating any pump stations, compressors, tank - battenes. or separators Immediateh adjacent to a producmg welL Lessee will notify Director and, if requested to do so. must place such facilitiesn such lucation as Director may reasonably designate, provided that Director may not require such facilitles to be located more than two thousand feet (2.000') from the wellhead Christmas tree. (e) Surface Damages. Lessee agrees to pay the surface owner reasonable compensation for all surface use of or damage to the surface estate (OJ any incident of the surface estate), which use is made or which damages are incurred III the exer,:ise of the nghts bTfanted to Lessee by this Lease. Lessee's obligation to compensate the surface owner formch surhtce use or damage exists whether or not such use or damage is due to the negligence ()f Lessee. its agents. employees. invitees, or independent contractors. Lessee agrees to pay Lessor for all damages to --:rops and other property situated on the leased premises resulting from Lessee's \)perations. Excluding any crop, aviatJon. or Jmprovement damages. the compensation to Lessor for Lessee's use of the surface for drilling well locatiom shall be TWI) Thousand and \loll 00 ($2,000.00) Dollars per acre, escalating by 10000 each] (I year anniversary ntthe date df this lease. Payment of such compensation shall not relieve Lessee \11' lts obligation to restore the surface estate as described herein or to compensate the surface owner tur all damages and use not i"easonablv contemplated at the time of mitial use. It) Care in Operations Lessee must at all times use reasonable care in all of Lessee's operations on the DJrector's premises to prevent injury PI damage. Lessee abTfees not to allow any waste oil, salt water, oil based drilling muds. or other hazardous fluids introduced to or extracted from the wellbore to flow over the surface. nor to allow same to drain down any draws, drams creeks, or ravines, nor allow same to contaminate any tanks, ground water, or under!:,Tfound wakr thereon: hut Lessee must dispose of such fluids in accordance \vJth the "Applicable La~ s" defined below Lessee must pay tix any damages resulting from any contamination of the leased premJses by such tluids resulting hom Lessee's operations. \g) Restoration of Surface: Fencing and Maintenance of Equipment. Within a reasonable time after cessation of any drilling or reworkmg operation. not to exceed three (3) months Lessee must level all dumps, fill all pits. remove all debris and all ofLessee.s equipment and material restore the surrounding land so that it will support the crops or natural range vegetation thereon. and generally restore the surface of the land to substantially the same condition a" it was before the commencement of such operations. Lessee must have no right to dig any pJts on said land (.~xcept \\ ith Director's consent: provided, however, that Lessee may dig and use pits for drilling operations at director apprll\ed locations if (] ) no hazardous fluids are introduced to the pit; (2) Lessee removes all material frl)m such pits immediately after the drill pipe has been finally removed from the hole (if a dry hole) or llnmed lateh after cementing nperations are completed (if a completion attempt is madel: and (3) Lessee le\els such pHS W Director's leasonable satisfaction within ninety (90) days after completion of all drilling operations at a11\ b..:atTon. Lessee agrees to firewall all tanks and separators and to maimam such firewalls in good repair at all times during the continuation of this lease. All firewalls must be constructed so as tn contam a v( .lume ot IiquJd equal to at least 1.25 times the total volume of all tanks, separators and other receptacles ll,cated WIthin the boundaries of the firewall. Lessee must keep all tanks and other equipmem at each we]] 10ca11On painted and must keep the well site and all roads leading thereto free of all noxious weeds and debns (h) Vv'ater Wells. Any water well drilled by Lessee upon the leased premises shall become the property of Director upon the termmation of this lease as to that portion of the leased premises upon which such water well is located If in the judgment I)f ),cssee such water well is no longer needed in connection with Lessee's development operations 1m the leased premises The casing in any such water well or wells must not be removed by Lessee. and Director shall thenceforth assume all risk and obligations attendant to Director's ownership and use of such \vater \\ ell ()r wells Lessee may not use any fresh water from the leased premises for any primary. waterflood. secondar.. or tertwry recovery operations. (i) Special Alrport Conditions ~ The 10cat1On 01 all well s upon the property described herein must be subject to the written approval of the Director of A viati, ,n as representative of the Lessor. In addition, the Lessor must approve the locatlOn and operation of storage tanks. power stations. telephone lines. structures of whatsoever nature and 10cat1On of dril1mg site or sites. tne location and method of installing pipe lines and all other installations of whatsoever kind in order to presene as far as possible the safety of this airfield and the air approaches around It. The aforementioned approvals must be given by LeSSOl1T1 writing and. subject to the over-riding importance of aIrport operation and Exhibit A actiVIties compliance .md safety. and nther airport leases currently in place, such approvals wtll not he' unrea..;onably withheld. Such approvals do not vest any expectancy, right, or property interest m Lessee and rev< ,king the consent will not cause any Lessor liability. Lessee must observe and comply with any and all requirements of the constituted public authorities and with all federaL state. or local statutes. ordinances. regulations and standard rules applicable to Lessee or its use of the leased premises. indudmg by: way of example. but not of limitation, all general rules and regulations promulgated from time to time by the Director of Aviation of The City of Corpus Christi in connection with the admltllstratllln of the Airport. Further. Lessee shall have the sole and exclusive responsibility of obtaining. at Its sole expense. all pennits required before commencing wellbore or seismic operations. In thIS connectlOn, it is expressl) understood hy the Lessee that the granting of this lease must in no way be construed as exempting ,he Lessee from obtaming required permits, including a permit from the Director of A viatlOn. and or conducting Its actIVIties and (lperations in strict compliance with all federal, state or local statutes. ordinances. regulat1nl1S and standard rules arplicable to Lessee or its use of the leased premises. Written notIce )f 1T1tent to an) surfacl' operations must be provided to Lessor, the Director of A \la11ol1, and the Federal A \iatlon Administration for each well location. Such notice must be given at least 60 days and not more than] 80 da:y..; prior tp commencing drilling operations. If there is no objection from either the F A.A. Lessor, ;>1' the Director )f AviatIon the well may be drilled at the specified location, provided said locatIOn does not contravene other provisions ~)f the lease. Immediately atter completion of drilling operations, all fluids must he hauled from the drill Si1c In the event drilling results in production, Lessee, at its own cost and expense. must Immediately remove all temporary structures and place all permanent equipment in a manner as w1l1 not interfere with ,)I" intrnduce hazard iO the operation of aircraft. The well site must, at Lessee's expense. be suitably graded and surfaced with crushed '-tone and must he fenced with chain link material or equivalent, set on steel posts. unless Less()r directs otherWIse. All surface equipment must be painted and oil free at all times Should drilling n:sult III d dry hole. Lessee must, at its pwn expense, immediately remove all temporary structures from the lane Lessee' must L"onduct routine janitorial maintenance of the leased premises and must proper! y dispose of all garbage, refuse. and \ lther waste matcrials in good and proper containers supplIed by Lessee The faCIlitIes must be fret from all danger of fire and personal injury and Lessee must refralll from actl viues. WhlCh may destroy (11 damage its bcilities. 4.. Secunty Badges. Each ()f Lessee's employees needing access to a restricted area must wear a security identification badge. I.essee w1l1 pay a fee tlX each badge, a deposit for each badge, and a replacement fee for each lost badge. Lessee must notify the Aviation Director immediately after an employee is term mated or loses a badgc ':'>\ccess t(l the Aircraft (}perating .A.rea (AOA). Lessee and its respective contractors, suppliers of materials and furnishers of serVIces. employees. agents, and business invitees, must comply with all present and future laws. rules, regulations. ordinances. or directions by the City, the Airport, the Transportation Security Administration (TSA) or the Federal A \'iation Administration (F AA), or other governmental agencies to protect the security and inteb'lit\ of the ,\ircratt Operating Area (AOA), as defined by the Airport, TSA and the FAA and to protect against access to the <'\OA by unauthorized persons. Subject to the approval of the A viation Director. Lessee must adopt procedures to control and limit access to the AOA by Lessee and its respective contractors. suppliers rt'materials and furnishers of services, employees, and business invitees in accordance with all present and 'uture Airport and FAA laws. rules. regulations, and ordinances. Physical harriers to prevenr acces'-' to the i\ ircraft Operating Are,1 must he in effect during operations upon the leased .....,.. -. . _.,.~ premises. Lessee further agrees to mdemnify. hold harmless. defend and insure the City, its officers, agents, and employees against the risk of legal liability for death. mjury. or damage to persons or property, direct or consequential, ansmg out pt or resulting from entry of the AOA where such entry is permitted, allowed or othenvise made possible by Lesset. its assIgnees and sub lessees or its or their respective contractors, suppliers of matenals and furnishers ,)f services. employees. business invitees. agents, or any person under the direction uf Lessee in violation nf env. Airport. and F A. A. laws. rules. regulations. or ordinances or Director-approved procedures for c:ontrolling access to the ;0,; Lessee must obtain employee identification badges for all pers(\I1nel authonzed by lessee 10 '1ave aCCt'SS tu the AOA. m accordance with the provisions of 49 CFR 1542, and other laws, rules, regulations md \)rdinances Lessee must pay all F ederal Aviation Administration fines assocIated with security hreaches/mfractioTls by L.essee's agents. officers. business invitees, and employees in the AC)A, regardless of whether the fine IS assessed to the City. the Airport, or the Lessee, or its assignees, sub1essees, and IlS or their respecti \e agents. officers. busmess mvitees. or employees. All such City or Airport tines may be passed through to thl Lessee. its agents or employees as set out in the City Code of Ordinances, Sec. u-r~. Lessee will have access to the AlrpOl1's ADA. subject to compliance with all applicable FAA, TSA and t\irpOrt secunty procedures. Mo\ement nt all persons into and trom the AOA must be cleared in accordance with AIrport and FAA "ules and regulatIOns. I essee is primarily responsible for opening and closing any security gates and doors permitting access totTom the AOA. 't\io vehicles owned or operated by Lessee its officers. emplovees. invltees. agents. contractors. and guests may operate within the Movement or Non- 'v10vement Areas 111' the A.OA ex,~ept In ,..:ompl1ance WIth FAA. TSA and Airport regulations. Lessee must comply with rules that art. applicable to Its nperal10ns on the Airport under the Airport Certification Rules of the Federal.."\. viation Regulatluns. Parl 1 )9. as amended [14 ('FR Part 139, as amended, the 'FAR"]. Copies of the FAR are available m the (ltlice i ,f the .A \ iatlUn Director. Lessee. its officers. employees, invitees, agents, (:ontractors, and bruests must compi v with all federa 1 and local AIrport Security Regulations adopted by the City pursuant to 49 ('F!\ 1542 a.., same may be ,llnended, Lessee covenants to Indemnify and hold harmless the City Its officers and employees trom aIY charges. fines. nr penalties that may be assessed or levied by the FAA by reason of the negl1gent or intentional fallurc t,f lessee. lis offIcers. employees, invitees, agents, contractors, or guests to comph \vith such Alrp0l1 Secunty Regulation". regardless of whether Lessee, City, or Airport has such tine.. charge. or penalty leVIed agaInst q n, It is understooc and agreed by the parties hereto that the Lessor holds its title to the leased premIses as set forth in the instruments and documents under which Lessor acquired same, with all terms, condItions and covenants thereof running wi th the land. and that this lease is intended to grant only a temporary and incidental use of such portions. of the leased premises as will not now or hereafter interfere with the Airport purposes to whIch the premises ,Ire dedicated. With respect to Lessee's operations on the leased premises, Lessee must not at any time during any telm nf this agreement allow to exist any condition, use, or hazard on the leased premIses adverse to AirpOrl mterests, Lessor's reasonable determination as to whether an Airport adverse condition. use. (II' hazard is final In addition tu immediately abating all adverse condition, use, or hazard identified by Lessor. Lessee must be prepared lO move to another location (from those reasonably designated by leSSOr). on ] 20 days notice to the operator. the tixtures. wellbores, equipment, pipeline, or tacihties associated with am oil or gas production on the leased premises. Lessor reserves the right to further develop or improve the Airport as it sees fit and to take any action it conSIders necessary 10 protect the aerial approaches of the Airport against obstructions, together with the right to prevent Lessee from erectmg or permitting to be erected. any building or other structure on the Airport which, In the opill1on of Lessor. would limit the usefulness of the Airport or constitute a hazard to aircraft. x During the time of war or national emergency declared by Congress. Lessor has the right to leaSe: the Airport or any part there()f to the United States Government for military or naval use, and if any such lease is executed. the proVIsions of this mstrument insotar as they are inconsistent with the lease to the Government shall be suspended Any other provision of this lease notwithstanding, this lease shall be subordmate to the prO\islOns of anv eXIsting or future ahTfeement between Lessor and the United States, relative ....... to the operation or maintenance of the AIrport. the terms and execution of which has been or may be required as a condition precedent to the expenditure or reimbursement to Lessor of Federal funds for the development of the An-port. This least' IS -;ubJect and subordinate to and IS controlled by all the provisions, stipulations, covenants and 36Tfeements m existing or future instruments and agreements between Lessor and the United States of America. and Lessee agn~es to abIde hv and enforce all such provisions, stipulations, covenants and agreements. This lease is also sublect to all orders rulesmd regulations ufthe FAA now in force or hereafter promulgated and Lessee agrees to ;:bide by and cnt<Jrce all of same and all such rules, re6'Ulations and orders are made a part hereof the same a~ if -;et Clut n fulI herem Moreover. any other provision of this lease notWIthstanding. this lease shall bl subordInate to the pr\lvisions of any existing or future agreement between Lessor and the lmted Stare>; relati\e to the uperatlOn or maintenance of the Airport, the terms and execution of which has been (lr ma)' be required as a conditiun precedent to the expenditure or reimbursement to Lessor of Federal funds for the development of the Airport In the event that Lessee's operations and/or equipment on the leased premises will now or hereatter interfere WIth any AIrport development now or hereafter contemplated by any described agreement between lessor and the t1nited States. then such operations and/or equipment shall be deemed to constitute a pn IscribeJ or prohibited condition or activit)' on the leased premises under this agreement. \! Lessor. through its duly authorized agent(s). shall have at any and all times the full and unrestncted right to enter the leased premises fur the purpose of inspection or maintenance and for the purpose of doing any and all things which i1 is obligated dnd has a right to do under this agreement. 10 It is specIficall y understood and agreed that the Lessee must conduct any, and all of its actiVIties authonzed by thIS lease I n such manner as to provide a clear space for the maneuvering and flight of aircraft on and above the !,Tfound surface of the aIrport. It IS further agreed that no structure shall ever penetrate any of the Runway safety areas or civil airport imagmary surfaces as described in 14 Code of Federal Regulations Part 7~. Federal Aviation Admll1istration Advisory Circular 150/5300-13, including changes. i I The Lessee. f(,r himselL hiS heirs. personal representatives, successors in interest, and assigns. as part of the conslderatiun hereof. does hereby covenant and agree, as a covenant running with the land, that in the event facilities are constructed. maintained. or otherwise operated on the said property described in this lease. for a purpnse for which a DOT pro6Tfam or activity is extended or for another purpose Il1vol ving the proVIsion of SImilar ....ervices iJr benefits, the Lessee. shall maintain and operate such facilities and services in compliance with all other requirements imposed pursuant to 49 CFR Part 21, Nondiscrimination in Federally Assisted Programs of the Department of Transportation, and as said Regulations may be amended. The Lessee, for himself hIS personal representatives.~uccessors in interest, and assigns, as a part of the conSIderation hereo( does hereby.:ovenam and agree. as a covenant running with the land, that: (1) no person on the grounds \)f race. c()lof. or national ongm shall be ,.~xc1uded from participation in, denied the benefits of; or be otherwise subjects t(1 discnmination in the use (If said facilities. (2) that in the construction of any Improvements on. ()ver. or under sllch land and the furnishing of services thereon, no person on the grounds of race, color, or natlOnal ongm shall be excluded from pal1icipation in, denied the benefits of; or otherwise be subjected to discrimination. (3) that the Lessee shall use the premises in compliance with all other requirements Imposed by or pursuant tn 49 ,'FR Pan .~ 1. 1\Jondiscrimination in Federally Assisted Programs of the Department of Transportation, and as said Regulations may be amended. 12 It is further agreed that Lessee must not interfere with the access roads to the Airport, and must not interfere with any other person or agency having a lawful right to use said leased premises, or with any buildings, or improvements of any kind thereon. belonging to any other person or agency, nor with their right to enter thereon and remove said buildings or improvements there from. (j) Plugging ot Abandoned Wells. Lessee agrees to plug, in accordance with the Rules and Regulations of the Railroad Commission of Texas or other governmental authority having jurisdiction, all dry holes drilled by Lessee on the leased premises and all wells which have once produced but which have ceased .....",. producmg in paymg quantities. Provided. however. that notwithstanding the availability of continuing exceptions, suspensions, or postp\,nements to lhe plugging and abandoning requirements of the regulatory authority. with respect to each well considered separately. Lessee must not request or obtain postponement, exception, or suspension of regulatory plugging requirements beyond a period of one year after the particular well's completion as a dry hole or cessation of production in paying quantities without Lessor's prior written consent. If Lessee fails to plug anv such well as herein provided, Director may, at Director's election, plug same. m which event. Lessee must reimhurse Director promptly for all expenses incurred, together with interest there\)il at the rate of eighteen pel cent (I ~();l) per annum and reasonable attorney's fees of enforcement and collecllon. Lessee must pOST and maintaIll with and for the benefit of Lessor an acceptable performance bond from an acceptahle surety whIch guarantees the pcrt()rmance of the plugging (in like amount and as comparable to that accepted hv the Railwad Commission for wells oflike depth) and restoration obligations hereunder. (k) ~o Lease Houses. Nothing herein contained m this lease may be construed to give Lessee the nght to construct any lease houses or lease camps tor housing Lessee's employees on the leased premises, and Lessee shall have no right t(, do so 0) Pipelines. tpon nl)tice to Director and payment of reasonable damages therefor to the surface owner, Lessee shall have the right 10 construct pIpelines at the location designated by the Director on the leased premises it connection with production from the leased premises. Lessee agrees to bury all pipelines to a depth of not less than thIrty-six II1ches (~6") helow the surface of the ground so as not to interfere in any way with aviation or the cleanng or cultivati\m of such land Lessel: must provide a plat of all pipelines "as built" within 90 days of construction. The light to construct pipelines on the leased premises may not be assigned to a pipelme company or anyone else v\ ho owns n(, interest III the leased premises. If Lessee constructs any pipeline on the leased premIses, Lessee agrees. hefore the abandonment or removal of such pipeline, to offer same to Director: and Director has the right to purchase same by paying therefore the salvage value of such pipeline. 1m) EnVIronmental Protection ProvlsHms: "Applicable Laws" shall include any and all existing or future laws, statutes. rules. regulations. and judIcial interpretations thereof of the United States, of any state in which the leased premIses. or any portIon thereo[;!ocated. and of any other governmental or quasi- governmental authority ha\mg jurisdiction. that relate to the preventIOn, abatement and/or elimination of pollution and/or protectlO}l of the emiwnment. including hut not limited to the federal Comprehensive Environmental Response. Compensation and Liahility Act. the Resource Conservation or Recovery Act, the Clean Water Act. the Safe Drinkin~ \Vater i\Cl. the Toxic Substances Control Act, and the Hazardous Materials Transportation\ct. together with all state statutes serving any simi lar or related purpose. "Hazardous Substance" shall mean an~ substance regulated Ill' covered by an Applicahle Law except those necessary for oil and gas operations whIch are subsequently removed from the leased premises within a reasonable period oftime after necessary use III oil and gas operations For purpose~ of thIS section XIII (m), "Lessee" includes all agents, employees, contractors. productior purchasers and other~ on the leased premises for purposes related to oil and gas exploration and productIon. Lessee represents. warrants, and wvenants that. at all times during its possession of the leased premises or of any easements or areas retained under VI( dl above: ( I i The leaseo premises must never be used by Lessee for the generation, storage, or disposal of Hazardous Substances or as a landfill or other waste disposal site. (2) There must be no underground fuel storage tanks on the leased premises. (3) None of the equipment owned or used hy Lessee on the leased premises may contain any polychlorinated biphenyls. (4) No Hazardous Substances or wastes exist in. on, or under the leased premises as a result - of Lessee':-; operatlOns to the best of Les~ee's knowledge. (5) \VIth respect to Lessee's operations on the leased premises, the leased premises are in full compliance with all Applicable Laws to the best of Lessee's knowledge. l ()) With respect to Lessee.s operations on the leased premises, there are no agreements, consent orders. decrees, judgments, licenses, or permit conditions or other directives of governmental authoritIes. that are basedm or arise ')111 ()f Applicable Laws and relate to the future use of the leased premises or that reqUlre an change 1J1 the present condition or use of the leased premises. 7) WIth respect to Lessee's operations on the leased premises, there are no actions, suits, claims, nr proceedmgs seeking money damages. injunctive relief: remedial action, or other remedy pending or threatened relating to (a) a \lOlation .Jr noncompliance with any Applicable Laws; (b) the disposal, discharge, or release of Hazardous Suhstances: or (c) exposure to Hazardous Substances or any other solid wastes, pollutants. chemical substances. noises, or vibrations to the extent the same will arise from any condition related to Lessee' s ownership or use of the leased premises. I).;) All necessary plans for development, applications. inspection reports, certificates, and other instruments required under any Applicable Law to be filed by Lessee in connection with the conduct of Lessee's use of the leased premises have been tiled with the appropriate federal, state, and local governmental oodies authorities and agencies. and all permits, licenses, or other authorizations necessan l()r the lawful .:onduct of Lessee's use of the leased premises in compliance with all Applicable Laws have been obtained (lJ) WIth respect to Lessee s operations on the leased premises, if violations of Applicable Laws WIth respect to the leased premises are found to exist, Lessor shall have the right and authority to notify any relevant public or governmental agency of the existence of such violations of Applicable Laws ( 10) Lessee will not engage lJ1 and v.:ill not permit any other party included within the definition of Lessee lJ1 thi~. Section XIII (m) to engage in any activity on the leased premises which would cause the leased premises t'l become a hazardous waste treatment storage, or disposal facility within the meaning of 0' otherWIse hring the leased premises within the ambit of, the Resource Conservation and Recover:, Act of i 976. as amended, or any similar state law or local ordinance or other environmentalla\\ f ! 1 ) Except f()r Hazardous Suhstances originating from the surface of the leased premises (e.g. H2S, naturally occumng radioactin:: materials. and CO2), Lessee will not engage in and will not permit any other party included within the definition of Lessee in this Section XIII (m) to engage in any activity on the leased premises which would cause a release or threatened release of a Hazardous Substance from or til the leased premises within the meaning of, or otherwise bring the leased premises within the ambIt ()f the C lmprehensl \T Environmental Response. Compensation, and Liability Act of ] 980, as amended \ 12) Lessee will not engage In and \vill not permit any other party included within the definition of Lessee in this Section Xlll (m) to engage in any activity on the leased premises which would cause the discharge of pollutants nr effluents into any water source or system, or the discharge into the air of any emissions, which would require a permit under the Federal Water Pollution Control Act or the Clean Air Act or any similarstate la\\ 'lr local ordinance or any other environmental law. I \.:;) With respect to Lessee's operations on the leased premises, Lessee will not permit any substance or conditlOns in or on the ieased premises which might support a claim or cause of action under R('R/\.. CEReL./\., wan:, other federal. stale or local environmental statute, regulation, ordinance .~ or other envmmmental regulatorv requirement. ( 14) \Vith respect to Lessee's operations on the leased premises, if Lessee determines that a threat to the environment. mcluding but not limited to a release, discharge, spill, or deposit of a hazardous substance has occurred or is occurring which affects or threatens to affect the Airport, or persons, structures, equipment or other property thereon, Lessee must immediately verbally notify; (1) the Airport Public Safety Office, and (2) all emergency respllnse centers and environmental or regulatory agencies, as required by law or regulatIon. Lessee must provldt, D1rector \\ ith written confirmation of the verbal report within 72 hours. With respect to Lessee'..;; operations on the leased premises. l.essee agrees to cooperate fully with the Airport in promptly responding to. reporting. and remed:vlllg a threat to the environment, including the drainage systems, soils. groundwater waters., 1[ atmosphere, in dccordance with applicable law or as authorized or approved by any federal, state. or local agency having authority over environmental matters. XIII. WARRANTY OF TILE This lease IS made without warranty of title, expressed or implied. Lessor agrees that Lessee, at Lessee's option. may discharge any tax, mortgage. or other lien or liens upon any interest or interests against which any such hen applies. toward satisfymg same. It is dgreed that if this lease covers a less interest in the oil and gas in all or any part of the leased premises than the entire undivided fee simple estate, then the royalties, rentals. paymenL and other monies accruing from any part as to which this Lease covers.1ess than such full interest must be paId only in the proportion which the interest therein covered by this Lease bears to the whole and undivided fee simple estate therein. XIV. FORCE MAJEURE It~ while thIS lease is in torce. at or after the expiration of the primary term Lessee's operations are delayed by reason of lessee's inability to obtain fuel for operations or lessee's inability to obtain the services of a drilling rig, or prohibition from entering or using a critical portion of the leased premises, then all proVIsions contained herem providing for the termination of this lease, in whole or in part, upon cessation of continuous drilling operations shall be extended until thirty (30) days after the removal of such delaying cause; proVided, that all such delays may in no event extend for a period longer than 365 days in the aggregate; and prOVIded further that Lessee must give wntten notice to Lessor of the existence and cause of such delay within fifteen (15) days thereafter Other than the l(lregOlng, no furce maieure type provision is applicable to this lease. XV INDEMNIFICATION AND INSURANCE With respect to Lessee's operations on the leased premises, Lessee agrees to indemnify and hold harmless the parties herein designated as Lessor and Director and their heirs. Representatives, successors, and assigns, (a) from and against any and aU claims, liabilities costs, expenses, demands, causes of 8Ction, and damages arising out of, incidental to, or resulting from (i) acts or omissions of or for Lessee. its affiliates, and/or production purchasers and their employees, agents, contractors, and others on the le.ed premises (or formerly leased premises) on behalf of them in whole or in part, and (ii) Lessor's, Director's, and their respective heirs', successors" and assigns' sole, concurrent, partial or premises related negligence relating to Lessee's operations (but not Lessor's, Director's, and their respective heirs \ successors" and assigns' acts or omissions in connection with aviation or any other City property ctr activities) and (b) further from and against all costs, risks, and expenses incurred by the parties herein designated as Lessor and/or Director and their heirs, representatives, successors and assigns, by reason of an~ such claims. liabilities, costs. expenses, demands, causes of action, and damages, including expert witness and attorneys' fees. Each assignee of this lease, or any interest herein, agrees to indemnify, and hold harmless the parties herein designated as Lessor and Director and their heirs, successors, representatives, and assigns in the same manner provided above. The obligations of the Lessee set forth immediatel:, aboH' shall not be d(~emed to be limited or defined by the minimum insurance Nquirements hereinafter set out in Exhibit B. Lessee. mast, during the term of this agreement, purchase or provide Workmen's Compensation Insurance as required by the statutes of the State of Texas, or adequate Employer's Liability Insurance, Public Liatility and Property Damage Insurance covering all of Lessee's activities on the leased premises. The policy limits of which are set out in Exhibit B. Lessee must purchase all of the required insurance coverage fllom insurance carriers acceptable to Lessor. and Lessee must furnish or cause to be furnished to Lessor a certificate of such insurance coverage which must provide that the City is an additional insured uDder said policy or policies of insurance and that said poliq or policies cannot be cancelled or materially modified except upon ten (10) days' written notice to Lessor. To the extent permitted by law, Lessee has the right to self insure such coverages if it first demonstrates to Lessor's reasonable satisfaction Lessee's abilit) to self insure such coverage. XVI. MISCELLANEOUS (a) SeIsmic Operatiom. Subject to the limitations of Section XII, Lessee has the right to conduct seismic operations on the leased premises and to contract with third parties to conduct seismic operations so long as such third party conducts SaId operatIons (i) for Lessee's sole account and use and (ii) under binding and effective confidentiality obligation Lessee has no right to grant permits to any third party for the conduct of seismic operations on the leased premises. or to divulgc' the results of Lessee's own seismic surveys on the leased premises to any thIrd party Nho has no interest in the leased premises. A third party shall be deemed to have an interest m the leased premises when (a) they previously execute a binding confidentiality agreement preventing further disclosure and (b) eIther I) purchase an undivided interest in this Lease or 2) show a bona tide interest in Joining wlth Lessel' in exploration, development. or production of the minerals and utilize the Data solely for the purposes of e\ ;lluating saidi()inder in such activities. Lessee shall pay for damages to the surface estate resulting from its seismic operations as pnn/ided elsewhere in this lease. Upon request, Lessee must furnish Lessor one ( I ) true CdPY l)f the tinal proces-;ed and migrated results of all such seismic tests and access to the original tapes as may f)e reasonabl) requested lb) Lessor's Access te, Infl)rmation llpon request, Lessee must furnish Lessor with copies of all logs, cores, and other samples and tests withm six months of taking same (unless necessary to establish production units. then promptly af1er taking the same). Lessor agrees, upon Lessee's request, not to divulge to any other person mtl)rmation given to Lessor by Lessee pursuant to Subsections XVI(a) and (b)(i) until such mfonnation is released by Lessee t,) the general public or (ii)unless necessary to enforce this lease or (iii) unless utilized to promote the exploration and development of portions of the leased premises released from this lease. Lessor has the nght (at Lessor's sole risk) to be present when wells and tanks are gauged and measured and has the nght to examine all run tlckets and to hav\: full infonnation as to production and runs and copies of all run tickets, meter charts. and production reports upon request. Lessor shall have the right to witness all gauging and meter readings. and to gauge tanks. and to 1I1stal Lessor's own metering equipment to measure production from the leased premises. at Lessor's nsk and expense. Lessee must furnish Lessor within thirty (30) days of the filing of same (or \\/Ithm thirty (3(1) days llt Lessee's receipt of same, if filed by any third parties) copies of all notices.. reports. applications. information, ,)r uther instruments tiled with any such agency which pertain to the disposition or (l1sposal of salt water. an;- Hazardous Substance, or fluids introduced to or extracted from wellhores, In the event an: notiCl is gl vel1 01 required hy law to he given to Lessee by any offset operator or other third part) concernmg any hearing of any type affecting the leased premises, or if Lessee has notice or actual knowledge nf any such heanng. Lessee agrees to notify Lessor thereof within ten (10) days of Lessee's receipt of such not1ce or knowledgt:, but in all e\ ents prior to the date of any hearing. Upon 3() days' notice. Les-;or shall have the right. no more often than once each calendar year, to call a meetmg with Lessee and!or its permitted assigns at the director's offices in Corpus Christi, Texas to review Lessee's operatIOns on the leased premIses and to discuss Lessee's and/or Its permitted assigns' then anticipated operations on the Leased premises for the succeeding yeaJ - Ie) ","otices. l\11 notil:es and other documents required to be delivered hereunder to Lessor or Lessee shall be delivered 10 person IX bv L S. mad. postage prepaid, to the addressees): If to Lessor: Petroleum Superintendent. City of( 'orpus Christi, Texas, P.O. Box 9277, Corpus Christi, Texas. 78461) With ~ copv to: Director of Aviation. C--'orpus Christi International Airport, 1000 International Dr., Corpus ChnstL TX ,o840fl If to Lessee. EO G R e E: 0 U r c e::3, III C ., 539 N. Car a n C a h u a I Sui t e 900 ~~oEP~ Chrisci f 'Ix 78401, Attn Division Land Manager or to such other address as the partIes may designate by notice in accordance herewith and such notices shall be effective when received or five (5) days after mailing to the last known correct address, proper postage prepaid, whichever is earher. (d) Abstracts. If Lessee causes an abstract of title or supplement thereto or title opmIOn to be prepared on any portion of the leased premises. it must furnish a copy of same to Lessor free of charge. (e) Expenses and Venue. Should Lessor be required to resort to legal action to enforce any of its rights or the Lessee's obligations llr duties under this lease. and if Lessor prevails in such dispute, then Lessee must reimburse Lessor for reasonable costs lIf accountants, geologists, engineers, and other experts actually employed by L..:ssor in 1f1\estigatmg such CI31I11. calculating the correct amount due, determining remedial action or the actlOns which should have been taken, and/or testifying in any proceeding regarding such claim. All obligations hereunder are exclllsively perfonnable in '\Jueces County, Texas. This lease is made and entered mto 10 Nueces County. Texas. and shall only be dfectivc upon Lessee's recordation of a memorandum hereof m Nueces County. Texas (f) Bmding on Successors and ASSigns. All the terms. provisions, a!:,Jfeements and obligations of this lease shall be bmding upon and ...;hall inure to the benefit of the parties hereto, their heirs, administrators, successors, sublessees. and assigns. The masculine pronoun, as used herein, shall include the feminine and neuter. and vice versa; and, when appropriate. the singular shall include the plural, and vice versa. (g) MultIple Counterpalts. This lease may be executed in multiple counterparts, all of which shall be construed together as an original lllstrument to the same extent and with like effect as though all the parties hereto had executed each counterpart. For convcmence. the signature and acknowledgment pages of the several counterparts may be aggregated and attached 1\) a single counterpart original for all purposes. XVII. POOLING This Section will only apply when all non-executive mineral and royalty interests in the lands covered by the proposed pool are bound tc a similar pooling arrangement and only when Lessor's lands are allocate at least 50% of the production from the pooled lands. Lessee, at Lessee's option but subject to the limitations hereinafter set out. is hereby given the right and power to pool or unitize the acreage covered by this Lease with certam other lands adjacent to the leased premises when III Lessee's judgment it is necessary or advisable to do so in order to properly explore or develop and operate the leased premises in compliance with the prescribed rules of the Railroad Commission of Texas or other lawful authority. or when to do so would, in the judgment of Lessee, promote the conservation of 011 or gas in and under and that may be produced from the leased premises. All pooled units must cllmply at all times and in all respects with Section VI hereof so that the pooled unit will be considered a productiun unit f\)r purposes hereof There will be credited to this Lease the fraction of the pool detennined by a numerator of the number of acres of the leased premises included in the pooled unit and ,J denominator \lfthe total nunlber uf acres !Tom time to time then properly included in the pooled unit (as a production unit) under SectIOn VI hereof. Urnts pooled hereunder must not exceed in area or depths those properly includable from time to time within j production unit under Section VI, notwithstanding that the governmental authority ha\ mg junsdiction may prescribe or permit the creation of units larger than those specified. Pooled units will be considered production units hereunder and must conform at all times in all respects with the requirements f( ,r productilln units hereunder. Lessee' s right to pool hereunder may be exercised only as to a partIcular producti\ e stratum as established by perforations, and the units formed by pooling as to an~ particular ..;tratun needed not cpnfoTI11 in sIze or area to the unit or units into which the Lease is pooled or combmed as te any oiher strarum. Pooling In one ur more instances will not exhaust the right of Lesse~~ to pool thi~ Lease (ll' pnrtldns thereof mlo other units Lessee must file for record in the appropriate records of the Cnunty in whIch the leased premises are sItuated an instrument legally describing and designating the pooled acreage and stratum as d pooled unit. dnd upon recordation of a proper document the unit may be effective as to all parties hereto. tlieir heirs. successors. and assih'11S. Lessee may at Lessee's election exercise Lessee's pooling option bet( Ire c\ 'mmencmg operations for or completing a well and the pooled unit may Include. but it i, nol required t\) iIdude. the adjacent land or leases described above as available for pooling upon \vhich operatIOns for dnlling A a well have theretot(lre been commenced. Notwithstanding the application (If Section VI. nl' part of the leasec premises Included in dny unit may be removed therefrom without Lessor's pnor vmtten consent. If nperatlOn'l are belllg conducted for drilling on IJ[ production of from any part of a properly pooled urnt that Includes ,iiI or a portIon of the leased premises, such operations or production will be cons](jered as operations fl.)r drillinrl on or prnduction fronl that portion of the leased premises that is included in such pooled um! \'.hether I)) not the well or welb are located on the leased premises, and whether or not such llperations for drilling were commenced hef<m...: ur aftel the execution uf this instrument or the instrument designating the pooled umt The entire acreage lllc\uded \.vithin any properly pooled unit will be treated for all purposes. except the payment of n 'yaltlCs \1n production trom the pooled unit, as if the same were included in th1S Lease. For the purpose uf computing the ro:valties. Lessor IS entitled on production of oil and gas from any pooled unit, and there will he allo~ated to that portion 01 the leased premises included in said unit, a pro rata portion of the 011 and gas pwducec from the pooled unit equal to the ratio of the number of acres of the leased premIses included In the pooled umt to the total number of acres from time to time that property included in the pooled unit (as a productwn unit under Secti~m VI hereof Royalties hereunder will be computed on the portion of SUcll productIOn so al located to the leased premises included in the unit just as though such production were horn the leased premises Production trom a well will be considered production from the pooled unit from which it is pro.Jucmg. rht. formation of any unit hereunder does not have the effect of changing the O\\'nership or amoum of any shut'lll gas rental or minimum royalty that may become payable in accordance with the terms 0 f th1 S 1 case ~"""''''-' EXECl'TED effective the date set torth 1n Section I (h) above. LESSOR: City of Corpus Christi. Texas ~: /" Ci';;;;g- koe-- City Manager ~ Resources. Inc. NffBr I~ ~!r r ~ .p~~j~N!)O OH,~PA , , . -rr:,","-: r;".F'""! . -... ...-A obe K. Garrison Senior Vice President and Division Manager ~ APPTj to :~:g#()nn on~,n Lhvb ~' I ~.-./2-y-- -.6--- ~ - - -- - --- -- ~-- n" rson,1 . -at La\\ STATE: af TFXA.S ~ i ! COuNrtoF NUECES; . )1 !}t,~/ '. ." This Instrument was ackni1wledged betnre me on thl&,~ day ot t... 6, by George K. Noe as City Manager of the Cit" of C(lrpUS Chnst1.1 exas. a Texas Municipal Corp ration, on behalf of said corporatiqn. )\1 ~Ipu\,;~.n'e P~KS ... ---l i ~*~ 'Jly Commlsslc" bplres I L:r~if ~., .,,~~ec:~. J~~~~__J '. . (1) ( il Clc)d .J., i.. v':"''e2...L~... I'U \ I'1Url.u." tY CIij"'ll _-~h~\~~-- .__.__.._..,........~. J .;:~ :-ftfTUV - \liV tS''' p. i"'..j,..' ;. ,/' ..,~ ." '"f ; ':t '. iJ-~ , c...).es ,,\._BtLtLU / :' '" _ _ .iotar, Public. State of exas ~*"-------_.......~.---- ST\TE OF TLXAS \ COUNTY OF'\JUECES ~ . '(. This instrument was ackn\)wledged bdore me on this day of_~1i (I,J, , __ 2006, by Robert K. Garrison, as Senior Vice President and DivisIon Manager for FOG Resources, Inc., a Delaware corporation, on behalf of said corporatinn N}Tp.~;~_'" JANIE 8 SNYDER i.~. *.... Notary Public , .' /~/ STATE 00 TEXAS ~ """r My Cf:lNlm. !'lip. g;HIHQ'l9 '.1 t \: {' , i, -"1'-.", l,A. '>,", ....;. " J I '~",.-"' ' J Notary Public, State ofiexa~ ........"......,..,-.-." EXHIBIT A LI~ASED PREMISES ATTACHED TO AND MADE A PART OF OIL AND GAS LEASE CORPUS CHRISTI INTERNATIONAL AIRPORT STATE OF TEXAS COUNTY OF NtJECES: FIELD NOTE DESCRIPTION 160 ACRE PRODUCTION UNIT Nt JECES COUNTY. TEXAS Being 160 Acre tract of land, more or less, uut of Farm Block 23 of the J.C. Russell Farm Blocks Subdivision, as shown on the map or plat of said subdivision recorded in Volume 3 Page 53 ofthe Map Records of Nueces County. Texas. Out of "Rincon Del Oso" Enrique Villareal Grant Abstract I. Situated about 5.5 miles West of Corpus Christi, Nueces County. Texas. Said 160 Acre tract is more particularly described by metes and bounds as follows: BEGINNING at a point. N ::>5c 25" W, a distance of 855.5 feet from the EOG Resources, Inc. Corpus Christi International Airport well No I. for the South line of a 2.418 Acre tract ofland (40' x 2633.5'), which tract was conveyed to the State Highway Department by right-of-way deed.. of record in Volume 212, page 354 Deed Records ofNueces County. Texas. tor the Northeast comer of this tract, same being the Northwest comer of a previously described 160 Acre unit Said comer also being 150 feet South of the centerline of Tex-Mex. Railroad: THENCE S 01 c 20'L with the We~t line of said 160 acre unit, a distance of 1937.5 feet to a point, for the Southwest comer of said 160 acre unit. for an inner comer of this tract: THENCE N 88e 36' E, with the South line of said 160 acre unit. a distance of 1800 feet a point, on the common line of Farm Block 22 and said Fann Block 23. ten a mid Northeast comer of this tract; THENCE S 01 G 20' E, with cnmmon line of Fann Block 22 and Farm Block 23, a distance of2023.7 feet to a point for the Southeast comer of thIs tract. THENCE S 88G 36' W. a distance (,1'2640 feet t() a point for the West line of said Farm Block 23, for the Southwest comer of this tract: THENCE N 01 20' W. with the West line of said Farm Block 23. a distance of3961.2 feet to a point, for the Southwest of comer of sald 2.418 acre tract. for the Northwest comer ofthis tract; THENCE N 88e 36' E, with the South line of said 2.418 acre tract a distance of839.8 feet to the PLACE OF BEGINNHWG and containing 160 dcres of land. more or less. ....",.-. ,-, EXHIBIT A LEASED PREMISES liDrplIS fillflSrllnremarlonaJ IIltpIIfC H :r ~ A=-:---' it .~ ~ v '""' ~4 f? )> ;,.... ::0 C Z ~ )- -< ~g'5 ~ -..l \ (;l 01 ^ / / /" ./ . )> J=-0END ___ .- - PROP!!~F - - AIRPCli<T CiPER'"\Id{1 'inl PURL 1S1. AIRPC;!!] (,RO \Sf '\R \S Fl'li. )1 V[ . ()P\1 ' AOA COMMEficlAL A?RO~ OWN. BY, VICTORG CfTTOF APPROVED fIY; DEBRAK CI1tIPt1$ CIIRJSTf DA7t: 4 20 2006 IKTERIATIIIIAI. AJRPfJRT AVlATlfJIIIEPT. PRO.!. ,~t~""lllll~, H~ \USERS\L.o' ,or Y1C';CS l-eose ~.,._-",~ EXHIBIT 8 INSl'RANCE REQUIREMENTS Oil and Gas Lease Insurance A Lessee must not commence work under this agreement all insurance required herein has been obtained and such insurance has been approved by the City. Lessee must not allow any subcontractor to commence work until all similar insurance required of the subcontractor has been so obtained. B. Lessee must furnish to the City's Risk Manager, 2 copies of Certificates of Insurance, shOWing the following minimum coverage by an insurance company(s) acceptable to the City's Risk Manager. The City must be named as an additional insured for all liability policies, and a blanket waiver of subrogation is required on all applicable policies. TYPE OF INSURANCE ---r ---.-----. I MINIMUM INSURANCE COVERAGE I I n- t Bodily Injury and Property Damage is , ----+$2,000,000 COMBINED SINGLE LIMIT I I ! j zard I i I I i i i i $1,000,000 COMBINED SINGLE LIMIT WHICH COMPLIES WITH THE TEXAS WORKERS' COMPENSATION ACT AND I PARAGRAPH II OF THIS EXHIBIT ! I $500,000 $35,000,000 COMBINED SINGLE LIMIT $100,000 for Sudden & Accidental Third Party AGE Pollution Property Damage e; to I and the I ~ $2,000,000 Blowout Insurance 30-DayWritten notice of cancellation, no renewal, material change or termination re uir on all certificates Commercial General Liability including: 11 . Commercial Form 12. Premises - Operations 13. Explosion and Collapse Hazard I 4. Underground Hazard '15. f'r. oductsl Completed Operations Ha 6. Contractual Liability 17. Broad Form Property Damage 8. Independent Contractors 9. R\ersonalln'u AUTO BILE L1ABILlTY--OWNED NON- OWNE OR RENTED WORK RS' COMPENSATION EMPLOVERS' LIABILITY EXCESS LIABILITY PROFESSIONAL POLLUTION L1ABILlTYI ENVIRONMENTAL IMPAIRMENT COVER Not limMled to sudden & accidental discharg include long-term environmental impact for dis osat of contaminants C. In the event of accidents of any kind, Lessee must furnish the Risk Manager with copies of all reports of any accidents within ten (10) days of any accident. II. ADDITIONAL REQUIREMENTS ~-,."..".= A. Lessee must obtain workers' compensation coverage through a licensed insurance company obtained In accordance with Texas law. The contract for coverage must be written on a policy and with endorsements approved by the Texas Department of Insurance The coverage provided must be in an amount sufficient to assure that all workers' compensation obligations incurred by Lessee WIll be promptly met. 8. Certificate of Insurance Operations" * The City of Corpus Christi must be named as an additional insured on the liability coverage, and a blanket waiver of subrogation is required on all applicable policies. * If your insurance company uses the standard ACORD form, the cancellation clause (bottom right) must be amended by adding the wording "changed or" between "be" and "canceled", and deleting the words. "endeavor to", and deleting the wording after "left". In lieu of modification of the ACORD form, separate policy endorsements addressing the same substantive requirements are mandatory. * The name of the project must be listed under "Description of * At a minimum, a 30-day written notice to the City's Risk Manager of material change, non-renewal, termination or cancellation is required. c If the Certificate of Insurance on its face does not show the existence of the coverage required by items 1.8 (1 )-(9), an authorized representative of the insurance company must include a letter specifically stating whether items 1.8. (1 )-(9) are included or excluded. Alrpod: Oil and Gas Lease ins req 9-27-05 ep Risk Mgmi _.-~ "")- ..:.:"' MEMORANDUM OF OIL AND GAS LEASE STATE OF TEXAS ~ ~ ~ KNOW ALL MEN BY THESE PRESENTS: COUNTY OF NUECES . . J I\t ~^ 11. BE IT REMEMBERED that effective as of the ~_ day of.' !',~ 2006, an 011 and Gas Lease (the "Lease") was made and entered into by and between the City of Corpus Christi, Texas, whose address is Attention: Petroleum Superintendent. City of Corpus Christl Texas, POBox 9277, Corpus Christi, Texas 78469-9277, with a COPy to Director of AViation, Corpus Christi International Airport, 1000 International Drive, Corpus Christi, Texas 78406, as "Lessor", and EOG RESOURCES INC, whose address IS 539 N. Carancahua Street, Suite 900, Corpus Christi, Texas 78401 as "Lessee" pursuant to which the Lessor thereunder has, upon the conditions and With I'mitatlons therein set forth and contained I for the term thereof, granted leased, and let exclusively dnto the said Lessee, its successors and assigns, for the limited purposesJf Investigating, exploring, prospecting, drilling, and mining for and producing oil and gas, conducting geophysical and seismic operations, building tanks, roads, pipelines, power stations telephone lines, and other structures thereon to produce save take care of. treat. store, transport and own oil and gas, those certain lands of the Lessor situated in Nueces County Texas, comprising 160,00 acres of land, more or less, described as follows. to-wit: Being 160 Acre tract of and , more or less. out of Farm Block 23 of the J. C. Russell Farm Blocks Subdivision as shown on the map or plat of said subdivision recorded in Volume 3 Page 53 of the Map Records of Nueces County, Texas. Out of "Rincon Del Oso" Ennque Villareal (;rant Abstract 1. Situated about 5.5 miles West of Corpus Christi, Nueces County, Texas Said 160 Acre tract is more particularly described by metes and bounds as follows BEGINNING at a point N 55e 25 W a distance of 855.5 feet from the EGG Resources, Inc. Corpus Christi International Airport well No.1, for the South line of a 2.418 Acre tract of land (40' x 2633.5'), which tract was conveyed to the State Highway Department by right-of-way deed, of record In Volume 212, page 354 Deed Records of Nueces County Texas, for the Northeast corner of thiS tract. same being the Northwest corner of a previously described 160 Acre unit Said corner also being 150 feet South of the centerline of Tex-Mex Railroad THENCE S 010 20 E, With the West line of said 160 acre unit, a distance of 1937.5 feet to a pOint for the Southwest corner of said 160 acre unit, for an inner corner of this tract AirpOftMemoO& G lease2 006 doc ~.,.,..-....~ THENCE N 880 36 E, vdh the South line of said 160 acre unit, a distance of 1800 feet a point on the common line of Farm Block 22 and said Farm Block 23, for a mid Northeast corner of this tract THENCE S 01 20 E with common line of Farm Block 22 and Farm Block 23, a distance of 2023 7 feet to a point for the Southeast corner of this tract; THENCE S 880 36' W, a distance of 2640 feet to a pOint for the West line of said Farm Block 23, for the Southwest corner of this tract THENCE N 010 20 W, with the West line of said Farm Block 23, a distance of 3961.2 feet to a point for the Southwest corner of said 2.418 acre tract, for the Northwest comer of this tract THENCE N 880 36 E, with the South line of said 2.418 acre tract, a distance of 839.8 feet to the PLACE OF BEGINNING and containing 160 acres of land, more or less. Subject to the other proviSions therein contained, the Lease is for a term of Three (3) years after the effective date thereof. as may be extended indefinitely by "continuous drilling operations" (as therein defined), (the term of the Lease commencing the date thereof and continuing until 3 years, as extended by continuous drilling operations therein called "primary term") and thereafter, as to each production unit considered separately, as long thereafter as oil or gas are produced in paying quantities from each such production unit created under the Lease considered separately, or as each such production unit may be otherwise maintained in force and effect under the other terms and provisions thereof A copy of the executed Oil and Gas Lease herein referred to is found at the offICe of Lessee at the address as listed first above. or at Lessor's address as listed first above J q-kIN WITNEq,S W. H,EREOF the parties hereto have executed this instrument this - day of j~<:/v..' -* _ 2006 to evidence of record in the Official Records of the County Clerk, ~ounty, Texas. the eXistence of said Oil and Gas Lease and for all other purposes LESSOR CITY OF CORPUS CHRISTI By: ~. .George K. Noe City Manager t~ Ii ~.- ~. --,..:.01 ~ "~,,,,"i:;)..lH.APh . ,':J:.f:I=<'H1\.'-\'i AirpertMemoO&Glease2006 doc LESSEE By: - -----...-----..--....----- obe . Garrisor Vice President and General Manager ~ ACKNOWLEDGMENT s S COUNTY OF NUECES S " /~. This instrument was acknowledged before me this~day of 2006, by George K. Noe as City Manager. City of Corp'us Christi, Texas, Municipal Corporation. on behalf of said corporation. /' 0, --==="~--' -=."'==~. '1. /' " I: : - ",,>'''1 PU6( C ,,,me Pa'\(5 . L ;. i . -, . . I ~f ~ :".'.,COI1"''':;SIC''C'.~.C. 'E',......~ Ll:)lJ;~/ ~ elk- /'h/' \' "). ~ ~ to.. 'vemo!,:l 09 LUG.J . ,~:~ ===.'--z-=~- Notary PubliC, State of Texas STATE OF TEXAS n '~~~ a Texas Printed/Stamped Name of Notary My Commission Expires: STATE OF TEXAS s s s COUNTY OF NUECES :i( r1.., This instrument was acknowledged before me this 11 (-- day of ,'~jQA'J~,-._ 2006, by ROBERT K. GARRISON Vice President and General Manager, of EOG RESOURCES. INC , a Delaware corporation, onb'ehalf of said cC(>1'poration. ~ - ~ F'~:'''~' JANIE B I~~~ SNYDER t', ~ !. j Notary Punhc \.\ 1""'\ I ! STATE OF TEXAS < ....~~~. ....__... My Comm. Exp. 03-26-2009 ,..-... ! fl f A.~ c" \. ~'-___-,- Notary Public, State ~f Tex Printed/Stamped Name of Notary My Commission Expires: AirportMemoO&Glease2006 doc - ....