HomeMy WebLinkAboutPR 11967:OIL & GAS LEASEinteroffice
MEMORANDUM
To: Mayor, City Council, City Manager
From: Mark T. Sokolow, City Attorney /~,~ ~/~
Date: October 8, 2002
Subject: P. R. No. 11967 October 15, 2002 Council Meeting
Attached is a resolution authorizing the City Manager to
execute an Oil & Gas Lease between the City of Port Arthur and
Aspect Resources, L.L.C. on 6.57 acres of city land.
This lease does not authorize Aspect Resources to drill or
do surface operations on this site.
cc: Leslie McMahen, Director of Public Works
MTS/jb
z.prl 1967.rremo
P. R. No. 11967
~0/04/02 jb
RESOLUTION NO.
A RESOLUTION AUTHORIZING THE CITY MANAGER
TO EXECUTE AN OIL & GAS LEASE BETWEEN THE
CITY OF PORT ARTHUR AND ASPECT RESOURCES,
L.L.C.
WHEREAS, the City Council of the City of Port Arthur
hereby deems it to be in the best interests of the citizens of
the City of Port Arthur for the City Manager to execute an Oil
& Gas Lease between the City of Port Arthur and Aspect
attached as Exhibit
Resources, L.L.C.
"A"; and
, a copy of which is
WHEREAS, the bonus will be $300 per acre, the royalty
25%, and the rental $250 per acre.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF PORT ARTHUR, TEXAS:
Section 1. That the facts and opinions in the preamble
are true and correct.
Section 2. That the City Manager is authorized to
execute an Oil & Gas Lease between the City of Port Arthur and
Aspect Resources, L.L.C., in substantially the same form as
denoted in Exhibit "A".
Section 3. That a copy of the caption of this
resolution be spread upon the Minutes of the City Council.
z.pr11967
READ, ADOPTED AND APPROVED on this __ day of
, A.D., 2002, at a Regular Meeting of the City
Council of the City of Port Arthur, Texas, by the following
vote: AYES: Mayor '
Councilmembers '
NOES:
ATTEST:
MAYOR
CITY SECRETARY
APPROVED AS TO FORM:
CITY ATTOP_NEY
APPROVED FOR ADMINISTRATION:
CITY MAlqAGER
THE STATE OF TEXAS §
COUNTY OF JEFFERSON §
THIS AGREEMENT made and entered'into this 19th day of September, 2002, by and
between the CITY OF PORT ARTHUR, hereinafter called Lessor, and ASPECT RESOURCES
LLC, hereinafter called Lessee, whether one or more,
WITNESSETH:
1. ~ Lessor, for and in consideration of the sum of ONE
THOUSAND NINE HUNDRED SEVENTY ONE AND XXI100 DOLLARS ($1,971.00) (bonus)
cash in hand paid, and other valuable consideration, receipt of which is hereby acknowledged, hereby
grants, leases and lets exclusively unto Lessee for the purpose of exploring for and producing oil and
gas and other liquid hydrocarbons upon the following terms and conditions, the following described
land, to wit:
6.57 acres of land, more or less, and being a part of the Port Arthur Land Company Subdivision and
Plat of lands in Jefferson County, Texas, according to the recorded plat thereof on file and of record
in the Office of the County Clerk of said Jefferson County, at Beaumont Texas; and being the same
lands described in a deed dated April 11, 1913 from .lake Doombos and C. M. Doornbos, husband
and wife, to The City of Pott Arthur, Texas, a Municipal Corporation, recorded in Volume 155, Page
169 of the Office County Records of Jefferson County, Texas.
Due to the nature of the present use of the surface of the herein leased premises,
Lessee shall make no surface use whatsoever without the prior written consent of Lessor and ail other
governmental authorities having jurisdiction hereof. Notwithstanding anything to the contrary
contained herein, Lessee, its successors and/or assigns shall not be allowed to conduct surface
operations on the surface of the herein leased premises.
There is expressly reserved and excepted unto Lessor (except as herein above provided) all
other minerai substances (except those expressly covered in this lease) owned by Lessor in, under,
or upon the leased premises, together with the rights of ingress and egress for purposes of exploration
for and production of those mineral substances and forms of energy hereby reserved and excepted
unto Lessor. There is further reserved unto Lessor the right to authorize any and ail geophysical and
geological tests on the leased premises reasonably necessary and incident to the exploration for such
minerai substances and forms of anergy. Such exploration and production shall not unreasonably
interfere with the operations of the Lessee herein.
For the purpose of calculating payments hereinafter provided (except royalties), the land
described in Exhibit "A" attached hereto is considered to constitute 6.57 Gross Mineral Acres
(35/35ths) and 6.57 Net Minerai Acres (35/35ths) owned by City of Port Arthur, whether actually
more or less.
~. ~ Subject to the other provisions herein contained, this lease shall be for
a term of three (3) yearn from this date (called primary term) and as long thereafter as oil, gas, other
'liquid hydrocafl)ons are produced in paying quantities (herein defined) from the leased premises, or
this lease is otherwise maintained in effect as hereinafter provided. In no event shail said lease exceed
twenty (20) years.
3. A N A D LA RENT L' T~i's lease shall terminate as to all the leased premises lying
outside ora producing well tract or unit one year from this date unless on or before such anniversary
date Lessee shall pay or tender to Lessor at 444-4th Street, Port Arthur, Texas, regardless of changes
in ownership of said land or the rentais, the sum of TWO HUNDRED AND FIFTY AND NO/100
DOLLARS ($250.00) per net acre per year (herein called rental) for all the leased premises lying
outside ora designated producing unit well tract or unit, which shail continue this lease in force and
effect as to all such land for a period oftweive (12) months. In like manner and upon like payment
or tender annuaily, such termination of ail the leased premises lying outside ora designated producing
unit well tract may be further deferred for successive periods of twelve (12) months each during the
primary term. The payment or tender of rental under this paragraph and of royalty under on any gas
well from which gas is not being sold or used may be made by the check or draft of Lessee mailed
or delivered to the parties entitled thereto on or before the date of payment.
4. ~ROYALTY: The royalties to be paid by Lessee to Lessor are:
(1) On oil and condensate or other liquid hydrocarbons produced at the well or at an oil and
gas separator of the conventional type twanty-five percent (25%) of the entire eight-eights' (8/gths)
of that produced end saved from the land described herein, bee of any expense to Lessor, to be at
Lessor's option either (1) delivered into the pipelines, tanks or other receptacles to which Lessee may
connect Lesseo's well or wells for the purpose of storage and/or sale of the oil produced, (2)
delivered at the well into tanks or other receptacles provided by Lessor, at Lessor's own expense, (3)
purchased by Lessee or any affiliate of Lessee, at the market price being paid on the date of purchase,
or (4) sold by Lessee (for Lessor's account) to the purchaser of Lessee's oil if sold by Lessee at the
well or on the lease, for the price received by Lessee, or any affiliate of Lessee, for its own oil
produced from said land. In no event shall the price paid be less than the market value on the date
produced or the price received by Lessee, or any affiliate of Lessee, for its own oil produced from
said lend. In no event shall the price paid be less than the market value on the date produced or the
price received by Lessee or an affiliate of Lessee, whichever is greater. Provided, however, if the oil
end condensate or other liquid hydrocarbons be run through or processed in a plant of the type
authorized below, the royalty thereon shall be calculated and paid under the terms and provisions as
herein provided.
(ii) Lessee agrees that before any 8as containing recoverable liquid hydrocarbons
(except gas run through an absorption plant or other type of plant for the
extraction of hydrocarbon products as hereinaRer authorized below) produced
from said land is sold or used, it will be run through an adequate oil and gas
separator of the conventional type or other equipment at least as efficient, so
that as much of such liquid hydrocarbons as can be reasonably recovered from
the gas by such means will be recovered, without diminishing the BTU rating
below the prevailing minimums of the industry for the sale of such 8as in the
(iii) If gas, casing head gas of the gaseous substances produced from said land is
sold at the well or a delivery point on or offthe leased land, the royalty on
same shall be twenty-five percent (25%) of the market value of the gas at the
time it is produced, provided that in no event shall the price paid be less than
twenty-five percent (25%) oftbe amount realized therefrom by Lessee or an
affiliate of Lessee.
(iv) If Lessee, or an affiliate of Lessee shall themselves, or by arrangement with
others, run oil, condensate, other liquid hydrocarbons, gas, casing head gas,
or other gaseous substances produced from said land through a processing
absorpfon or extraction plant, or use such production from said land in the
manufacture, extraction or separation of gasoline, condensate, distillate,
butanes, propanes, chemicals, chemical compounds, or other liquid or gaseous
hydrocarbons, or products manufactured, processed, separated, or extracted
therefrom the royalty therefore shall be, at the option of Lessor, either twenty-
five percent (25%) of the market value of such oil, condensate, other liquid
hydrocarbons, gas, casing head gas, or other gaseous substances at the well
or delivery point on the leased premises, or twenty-five percent (25%) of the
market value of the gross production of products end component s derived
therefrom by such processing and manufacturing at such plant, and Lessor
shall be paid on residue gas twenty-five percent (25%) of the market value at
the tall gate of the plant, but in no event less than the proportionate amount
realized by Lessee or an affiliate of Lessee for such residue gas. The market
value paid hereunder for gasoline, condensate, distillate, butanes, propanes,
chemicals, chemical compounds or other liquid or gaseous hydrocarbons, or
products manufactured, processed, so separated or extracted, shall be not less
Page :2 of 11
(v)
(vi)
(vii)
(viii)
than the average selling price of the respective grades thereof f.o.b, at the
plant for the month in which same is delivered and shall be not less than the
average price quoted (if prices are quoted) in two of the leadin8 periodicals
of the industry for similar grades of the products enumerated above.
The royalty on any gas, casing head gas or other gaseous substances,
produced from the land he'rein described and used, sold or delivered in any
way other than specifically provided above shall be twenty-five percent (25°/'o)
of the market value at the well at the time it is produced, except that if the
same is mn through on oil and gas separator as bereinabove provided, the
royalty shall be twenty-five (25%) percent of the market value at the
downstream outlet of such separator, but not less than the amount realized by
the Lessee, or an affiliate of Lessae.
Should Lessee or an affiliate of Lessee use, sell, deliver, or contract with
others for the use, sale, delivery or processing of gas, oil or other
hydrocarbons from said land for any purposes or under any condition not
specifically covered by this Paragraph 4, then Lessor shall have the option at
any time, and from time to time, to elect as to the royalty thereon to (1) either
receive the royalty herein provided for gas, oil or other liquid hydrocarbons
produced and saved or sold, or (2) to be paid twenty-five percent (25%) of
the amount realized by Lessee or Lessec's affiliate from the use, sale, delivery
or processing of such gas, oil or other liquid hydrocarbons produced from said
land or received by Lessee or an affiliate of Lessee in exchange for or in lieu
of gas, oil or other liquid hydrocarbons produced from the said land, or any
components thereof.
Lessee shall not have the right to reinject or store oil, gas or other
hydrocarbons produced from said land into any underground reservoir or
formation in or under the land described herein,
The term "affiliate of Lessee" as herein used, means and includes any partner,
joint venture, creditor, agent or representative of Lessee; any firm or
corporation that, at the time in question, is a subsidiary or part firm of Lessee,
any firm or corporation which has the same parent firm or corporation as or
substantially the same officers or directors as Lessee, any firm or corporation
in which any officers, directors, stockholders, partners, joint ventures, agents
or representatives of Lessee own controlling interest, or any person, firm or
corporation which owns a controlling interest in the capital stock or interest
of Lessee. In addition to the foregoing definition of"affliate of Lessae", it is
understood and agreed that if any oil 8as or other liquid hydrocarbons or any
portion thereof produced fi.om the land described herein is delivered or sold
to any parson or entity and subsequently the same or any portion thereof is
redeiivered or resold to Lessee, or an affiliate of Lessee, then within the
meaning of this lease, and for the purposes of calculating the royalty
hereunder, the person or entity to which such oil, gas or other liquid
hydrocarbons are delivered or sold, shall be regarded as an "affiliate of
Lessee". If Lessen or an affiliate of Lessee receives, purchases or uses all or
any portion oftbe oil, gas or other liquid hydrocarbons which were produced
from the lend covered by this lease which were obtained after Lessee, or an
affiliate of Lessee, has sold, transferred or delivered to a party, not an affiliate
of Lessee, at such time, or if Lessee, or an affiliate of Lessee, obtains by
purchase or exchange or in a trade out or exchange, gas, oil or other liquid
hydrocarbons of a similar nature to those produced or reasonably suited to the
use to which the production from the land covered hereby could be put, then
in that event, the gas, oil or other liquid hydrocarbons obtained shall be
treated for all purposes under this paragraph as if same had remained in the
hands of Lessee, or an affiliate of Lessae.
Page 3 of 11
(ix)
(x)
Notwithstanding anything herein to the contrary contained, it is expressly
stipulated that Lessor, at Lessor's option, and from time to time, upon thirty
(30) days prior written notice to Lessee, may elect to take in kind any of its
royalty share of gas, oil or other hydrocarbons produced hereunder, and to
separately sell, use or dispose of same or any portion thereof. In the event
Lessor so elects to take in kind all or a portion of its royalty share of any
mineral or production, LesSor shall install the necessary additional facilities at
Lessor's cost and expense. Any contract entered into by the Lessee for the
sale of gas, oil or other liquid hydrocarbons produced shall be subject to and
express that it is subject to Lessor's fight to take in kind. Lessor may exemise
such right to take in kind from time to time, and also may countermand same
from time to time on like written notice. Lessee shall forthwith furnish Lessor
true copies of all contracts entered into by Lessee for the sale or disposition
of any gas, oil or other liquid hydrocarbons produced under this lease. Unless
and until and at all times, except when Lessor is receiving and separately
disposing of Lessor's royalty portion of gas, oil and other liquid
hydrocarbons, Lessee will be obligated to receive and dispose of same under
the royalty provisions of this lease.
Lessee agrees that division order or other such documents shall not constitute
a valid amendment, alteration or addition to the provisions of this lease.
(xi)
Notwithstanding any provisions of paragraph 4 of this lease to the contrary,
it is specifically agreed that no gathering, dehydration, compression,
separating, processing, treating and marketing or other charges of any kind,
either directly or indirectly, to make the gas ready for sale or use, except
transportation, shall be assessed against the royalty interest of the Lessor
resulting from the sale or use of minerals produced from the land covered by
this lease or from land pooled therewith. In regard to transportation costs and
expenses, Lessee may not, either directly or indirectly, charge Lessor's royalty
for any costs or expenses of transportation where such gas is sold at the
wellhead. Where gas is sold off`the premises, Lessee may deduct from the
gross proceeds received for the sale of such gas, a reasonable transportation
fee or expense so long as the resulting price for such gas, after deduction for
a reasonable transportation fee, is greater than the then prevailing price being
paid for gas at the wellhead in the field. Said prevailing price shall be defined
as that price published in the first issue of each month of "Natural Gas
Weekly" under the heading "Gas Price Report" for Texas C. mlf Coast, On
Shore, Spot Wellhead". Upon written request by Lessor, Lessee shall f~rnish
a quote of the then current ''Natural Gas Weekly publication and any
documents supporting the transportation charges. Lessee will make all
reasonable efforts to obtain the highest prices for gas sales.
(xiii)
(xiv)
It is expressly provided that Lessee and any affiliate of Lessee shall at all times
exercise due diligence as the fiduciary agent for Lessor in the marketing of all
products produced under the terms of this lease.
Royalties payable on production hereunder shall be due within sixty (60) days
after the sale of such production provided, however, it is agreed that the
royalty payment due on the first sale of a product produced hereunder shall
not be due until one hundred twenty (120) days afrer such sale~ Any royalties
not paid as herein provided, including suspended royalties shall bear interest
at the rate often percent (10%) per annum until paid.
Notwithstanding the forgoing, the City of Port Arthur shall receive the greater
of the royalty percentages as delineated herein or as given/contracted with any
other mineral owner of the underlying property. At this time the City
understands that the highest rate paid to any participant in this drilling unit is
$300.00 per net mineral acre per year. If this changes, Port Arthur expects
Page 4 of I1
to receive the greater of the given contracted amount or the amount received
per net mineral acre by any other mineral owner in the unit.
5. SHUT-IN GAS PROVISION ON GAS: Notwithstanding anyihing to the
contrary herein, it is agreed that if and while there is a gas well or wells on the leased premises (the
term "gas well" shall be wells capable of produeing natural gas which are classified as gas wells by
the governmental authority having jurisdiction) anlt such well or wells are shut-in, then Lessee shall
pay Lessor monthly an amount equal to FIVE HUNDRED DOLLARS AND NO/100 ($ 500.00) PER
WELL. This amount shall be paid monthly, the first payment being due no later than sixty (60) days
after completion of such shut-in well or wells, and shall continue until such 8as is produced and sold.
Provided, however, Lessee may maintain this lease in force and effect solely by the tender of shut-in
payments in accordance with this paragraph for a period not to exceed twenty-four (24) consecutive
months for the first and twelve (12) consecutive months for any subsequent occurrence during the
term of this lease. It is expressly understood and agreed that such shut-in payments shall be
considered a rental and shall not constitute advance royalty.
It is understood that shut-in gas payments are additional delay rental payments and must be
timely made.
6. MINIMUM ROYALTY PAYMENTS: After the end of each year, should the total
payments made under this lease for the preceding lease year be less than TWO HUNDRED I~IF fY'
AND NO/100 DOLLARS ($250.00) per net acre per year for the land covered by this lease on the
first day of such lease year, then within 60 days after the end of such lease year Lessee shall pay to
Lessor the difference between that amount and the payments actually made. The term "lease year"
shall mean each year commencing on the anniversary date of this lease. Should this minimum royalty
payment not be timely made to Lessor, then it shall be considered that this lease is not producing in
paying quantities. A minimum royalty payment shall be allowed for no longer than three (3)
consecutive years, and after that time if the well is not providing production so that the actual royalty
due lessor equals the minimum royalty, then this lease shall terminate.
7. PARTIAL OWNERSHIP OF MINERAL ESTATE: It is agreed that if Lessor owns an
interest in said land less than the entire mineral estate royalties then rentals or other payments herein
to be paid or delivered to Lessor shall be reduced proportionately and all outstanding royalties shall
be deducted from those herein provided.
8. CESSATION OF PRODUCTION AND CONTINUOUS OPERATIONS: At~er
discovery end production of oil, gas or other liquid hydrocarbons on the leased premises, and al~er
the expiration of the primary term of thls lease, if produntion thereof should cease from any cause,
this lease shall not terminate ifLessea commences operations for drilling or reworking an existing or
new well within sixty (60) days thereafter. If at the expiration of the primary term Lessee is then
engaged in any drilling or reworking operations thereon or shall have completed a dry hole thereon
within sixty (60) days prior to the end of the primary term, this lease shall remain in force so long as
operations on said well or for the drilling or reworking of any well are prosecuted with no cessation
of more than sixty (60) consecutive days, and if they result in the production ofoil, gas or other liquid
hydrocarbons, this lease shall remain in force as hereinabove provided so long thereafter as oil, gas
or other liquid hydrocarbons are produced from said land, or on aerea8e pooled therewith (if so
provided for in this lease). In the event, and during such period of time, this lease is being continued
in effect under the provisions of this paragraph, Lessee upon written request of Lessor shall render
to Lessor weekly reports of all operations begun, conducted or terminated by Lessee upon the leased
premises, including, but not limited to, dally progress information regarding each well until oil, gas
or other liquid hydrocarbons are produced and royalties paid thereon, or until the lease is surrendered
to Lessor. Reworking operations hereuoder shall be deemed to be commenced when the first work
is commenced and prosecuted with reasonable diligence and drilling operations on a new well shall
be deemed to be commenced on the date when the well is spudded in with a rig capable of reaching
the permitted depth.
9. PARTIAL S NDER: Should any part of this lease be pooled, as provided in
Page 5 of 11
paragraph 22 hereof, with an adjoining tract of land during the primary term of this lease and a well
actually drilled on said unit, then Lessee shall reasonably develop the acreage hereunder. In
complying with this provision, it is agreed that in the event more than 180 days elapse between the
completion of the unit well and the commencement of actual drilling operations on the next unit well,
Lessee shall upon written demand of Lessor forthwith execute and place of record in the county of
which such land is located a release of all the premises covered by this lease save and except that
Lessee may retain under the terms hereoftbe minirhum number of acres as provided in paragraph 22.
To comply with the requirement of"commencement of actual drilling operations" as used herein
Lessee shall have a drilling rig capable of drilling to the permitted depth on the location of the well
and on a unit designated of record. Shall Lessee fail or refasa to place ofrecurd in the proper county
the necessary release of lease as required herein Lessor shall have the right to recover from Lessee
all reasonable and necessary expenses of obtaining and filing such release including attorneys fees and
costs of court.
10. ~FFSET OBLIGATIONS: Atter diseove~y ofoil, gas or other liquid hydrocarbons upon
the leased premises in addition to the other provision of this lease, Lessee agrees to conduct such
further operations as a reasonably prudent operator would do under the same or similar circumstances
in order to reasonably develop the leased premises. In the event a well or wells producing oil in
paying quantities should be brought in on adjoining lands within six hundred sixty (660) feet fi.om the
lease premises, or draining the leased premises, or in the event a well or wells producing gas in paying
quantities should be brought in on adjoining lands within one thousand three hundred twenty (1,320)
feet from the leased premises, or draining the leased operations on the leased premises, Lessee agrees
to at Lessor's option to commanca actual drilling operations on the leased premises of an offset well
within one hundred twenty (120) days from the date production commences fi.om said well or wells
and Lessee receives all necessary permission from the Lessor and other governmental authorities
having jurisdiction over the surface and mineral use of the leased premises. In lien of drilling such
well or wells, Lessee may at Lessee's option, pay Lessor, as compensatory royalty, a sum equal to
the royalty which would be payable under this lease on the volume of production from a well or wells
on other lands or covered by this lease had same been produced hereunder. Notwithstanding anything
to the contrary herein contained, Lessee shall not be obligated to drill such well or wells or to pay
such compensatory royalty ifLessae already has a producing well on these leased premises which may
reasonably be held to provide drainage protection.
1 I. DAMAGES: Lessee will bury and maintain all pipelines a minimum of forty-eight (48)
inches below the surface oftbe ground. Lessee will pay to Lessor actual damages to timber, to crops,
to improvements and to the surface of the leased lands suffered by Lessor and any tenant of Lesaor
caused by or aris'rog out of operations under this lease. Pits and excavations made during drilling
operations will be filled by Lessee and the surface restored, as nearly as reasonably possible, to its
original condition; and if Lessee shall fail to do so, the cost to Lessor of such filling and restoration
shall by paid by Lessee. Lessee's obligations under this paragraph shall be in addition to, and shall
not in any way modify or diminish, its o~ligatinns under any other paragraph thereof.
12. ~IJRRENDER: Except as herein otherwise provided, Lessee may, at any time, execute
and deliver to Lessor, a release covering any portion oftbe above described premises, and thereby
surrender the lease to such portion, and be relieved of all obligations as to the acreage surreudered~
provided,, however, nothing herein contained shall be construed to relieve the Lessee of any
obligations or payment already then assumed or incurred.
13. REMOVAL OF LESSEE'S PROPERTY: Lessee shall have the duty, during or
within one hundred twenty (120) days at, er the expiration of this lease, to remove all property and
fixtures placed by Lessee on the leased premises, including the fight to draw and remove casing.
Lessee shall remove the same property. In the event Lessee fails to do so, Lessor may remove the
same at the sole cost, risk and expense of Lessee.
14. ~ Any well or wells shall be abandoned in accordance with all rules and
regulations of the Railroad Commission of the State of Texas and any other environmental or
Page 6 of 11
regulatory governmental body having jurisdiction the~'eof. All pipelines shall be removed and the
surface restored and leveled.
Any pipeline, pits or other excavations shall be dug using the two-step method as understood
in the pipeline business or in accordance with standard industrial practices. Upon abandonment, top
soil shall be placed on the surface to its original d?pth.
Any ground contamination caused by Lessee shall be corrected within a reasonable time to
conform with then existing environmental rules and regulations.
15. ~ The covenants and agreements herein expressed or implied in this
agreement shall be subject to all valid Federal and Sate laws, executive orders, rules or regulations,
and this lease shall not be terminated, in whole or in part, nor Lessee be held liable in damages for
failure to comply therewith if compliance is prevented by, or its such failure is the result of any such
law; order, rule or regulation. If after the primary term, from such cause, Lessee is prevented from
conducting drillin8 or reworkin8 operations on, or producing oil or gas from the leased premises, the
time while Lessee is so prevented shall not be counted ?~inst Lessee, and this lease shall be extended
for a period of time equal to that during which Lessee is so prevented from conducting such drilling
or reworking operations on, or producing oil or gas from the leased premises, notwithstanding any
other provision thereof. Similarly, when drilling or other operations are delayed or interrupted by
storm, flood, or other acts of God, fire, war, rebellion, insurrection, riot, strikes, differences with
workman, or failure of carrier to transport or furnish facilities for transportation, or as a result of
some order, requisition, or necessity of the government, the time of such delay or interruption shall
not be counted against Lessee, anything in this lease to the contrary notwithstanding, and in such
event this lease shall be extended for a period of time equal to that during which such lessee is so
prevented from conducting drilling or reworking operations on, or producing oil or gas from such
leased premises, notwithstanding any other provision herenfLessee shall within thirty (30) days after
receivin8 notice of any such Federal or State Law, executive order, rule or regulation, act or event
contemplated under this section, notify Lessor therenfand advise Lessor of the effect of such upon
this lease. Lessee shall similarly notify Lessor promptly of the termination thereof. Provided,
however, the provisions of this paragraph shall in no way abridge the right of Lessor to receive, or
relieve Lessee of the obligation to pay, any minimum sums herein described and provided. Anything
to the contrary notwithstanding, this lease shall not be suspended by reason of this paragraph for
longer than one year per occurrence.
16. ~ Except as herein otherwise provided, the material breach by
Lessee of any obligation arising hereunder shall not work a forfeiture or a termination of this lease
or cause a termination or t~zersion of the estate hereby created nor be grounds for cancellation hereof
in whole or in part unless Lessor has first given to Lessee notice in writing specifying the particulars
in which, in the opinion of Lessor, Lessee has failed or breached this lease, and unless Lessee (if
Lessee, in fact, be in default in the particulars specified) shall fall to proceed within thirty (30) days
at~er receipt of such notice to comply with the obligations of said lease specified in said notice. If
Lessee be of the opinion that it is not in default in the particulars specified, Lessee shaIl reply to
Lessor in writing within (30) days of the receipt of such notice by Lessor, specifying how, in the
opinion of Lessee, Lessee is not in breach &this lease. If Lessor brings suits to compel performance
of, or to t~ecover for breach of any covenant or condition herein contained, or for declaratory relief,
and prevails therein, Lessee agrees to pay to Lessor reasonable attorney and consultant fees in
addition to the amount ofjudgament and costs.
17. WELL INFORMATION/INSPECTION: Upon written request, Lessee shall furnish
Lessor with true copies of each application and report made by Lessee to the governmental authority
asserting jurisdiction pertaining to operations or on land pooled therewith simultaneously with
Lessee's filing of each application and report with such governmental authority. Lessee shall
promptly furnish Lessor with final and complete copies of all logs and eiectdcal surveys mn in each
well located on the leased premises or on land pooled therewith, showing formations encountered and
the identification of such formations as d~ermined by Lessee or Lessee's geologists or
paleontologists. Lessee shall promptly furnish Lessor with copies of dally drilling reports, core
analysis and paleontological reports when available and all other technical information readily
available which Lessor deems necessary to be informed of the condition and status of all wells drilled,
Page 7 of 11
reworked, recompteted or otherwise operated on the leased premises or on land pooled therewith.
Lessor shall have the right, personally or through any agent or representative authorized by Lessor,
at Lessor's risk, to have derrick floor, well site and logging truck or trailer privileges during
operations on the leased premises or on land pooled therewith. Upon written request, Lessee shall
promptly furnish Lessor with full information on the metering of produetion and production runs,
together with full information regarding the calcu!ation of all royalties payable under this lease.
18. ASSIGNMENT: The rights of Lessee hereunder may be assigned only with the written
consent of Lessor. The rights of Lessor hereunder may be assigned as to all or any part oftbe land
or as to any minerals thereunder, and the provisions hereof shall extend to the heirs, successors and
assigns, but no change or division in ownership of the lands, rentals or royalties, however
accomplished, shall operate to enlarge the obligation or diminish the rights of Lessee. Likewise, no
change in ownership of the leasehold rights hereby conveyed, however accomplished, shall operate
to enlarge the obligations or diminish the rights of Lessor hereunder. No sale or assignment by either
party hereto shall be binding on the other party until such other party or an authorized agent thereof
shall be furnished with a certified copy of recorded instrument evidencing same. In the event of such
assignment, LESSEE, shall remain obligated to this Lease. Also, the notice by the City as to any
default need be made only to the LESSEE.
19. LJABILITY FOR DAMAGES: It is agreed that the terms and provisions of this
agreement shall inure to and be binding upon the respective successors, heirs, and assigns of Lessor
and Lessee. Notwithstanding that this lease may be assigned in whole or part, it is understood and
agreed that the Lessee, both the original Lessee and such assignees shall nevertheless be jointly and
severally liable to Lessor, their heirs, succassors, and assigns, for all damages to the surface and
subsurface of the lands covered hereby, for any and all pollution caused by operations hereunder, for
the non-compliance with all Federal, State or other governmental or regulatory body's or agency's
laws, rules and regulations, either now in effect or hereina~er enacted or promulgated, and also
without limitation by enumeration, any and all other causes of such action which may be asserted
against Lessor, their heirs, successors, and assigns, for acts or omissions caused by operations
hereunder by any Lessee, and in connention with all of these, Lessee and all such assignees shall be
obligated to indemnify and hold harmless the Lessor, their heirs, successors and assigns.
20. PAYMENTS, NOTICES. ETC.: All payments ofmonles payable to Lessor unde~the
terms and provisions hereof may be paid or tendered to Lessor or to the credit of Lessor in a bank
as set forth by Lessor, which bank and its successors shall continue as the depository for all monies
payable hereunder, regardless of changns in ownership of said land or said minimum royalties, unless
and umil Lessor shall execute and deliver to Lessee a recordable instrument naming and designating
another and different bank for such payments or tenders. If such bank (or any successor bank) should
fail, liquidate or be succeeded by another bank, or for any reason fall or refuse to accept said
payments, Lessee shall immediately notify Lessor thercof and shall not be held in default for failure
to make such payment or tender unfl ~ (30) days after Lessor shall deliver to Lessee a proper
recordable instrument naming another bank to receive such payment or tender. Any notices, reports,
maps, logs, requests or any other communication herein provide to be made to Lessor by Lessee shall
be made to the City Manager or his designee, City of Port Arthur, 444 - 4~ Street, Port Arthur, Texas
77640. Any notices or communicafons specified in this lease to be given to Lessee by Lessor shall
be made t9 ASPECT RESOURCES LLC, 511 16~ Street, Suite 300, Denver, CO 80202, Attention:
Alex B. Campbell, Executive Vice President.
21. ~ Paragraph and section headings and titles are for convenience
only, and do not represent interpretation or intent of the substance of the terms and provisions of this
agreement.
22. POOLING: At the expiration of the primary term and after all continuous development
operations have ceased, this lease shall terminate as to all depths 100 feet below the deepest depth
Page 8 of 11
drilled in any unit containing all or part of the above described lands. Lessor reserves the fight of
ingress and egress through all formations for the purpose of drilling to and producing oil or gas from
the formations which may revert to Lessor.
h is agreed and understood that if Lessee exercises its fight to pool the land described herein
for oil or gas production, then Lessee shail include aJl of the land described herein which pass through
or run adjacent to the resulting pooled unit.
It is expressly agreed and understood Lessee is hereby granted the right, at its option, to pool
or utilize any land covered by this lease, with any other land covered by this lease, and/or with any
other land, lease, or leases, as to any or all minerals or horizons, so as to establish units, the size of
which shall be limited in the same manner described herein below for limiting producing acreage
retained after the expiration of the primary term. The size of any established unit may be changed
from time to time as required by any govemmentai ruling or order to conform to the size required by
such governmental order or ruling. There shall be allocated to the land covered by this lease within
each such unit that proportion of the total production of unitized minerals from the unit, after
deducting any production used in lease or unit operations, which the number of surface acres in the
land covered by this lease that is put in the unit bears to the total number ofmrface acres in the unit.
Lessee shall establish all such units by filing an instrument identifying such unit for record in the
Office Public Records of Real Property in Jefferson County, Texas.
However, after the expiration of the primary term, and at, er the discovery and production of
oil, gas or other liquid hydrocarbons in paying quantities on the leased premises, Lessee shall
reasonably develop the acreage retained hereunder, and in complying with this provision, it is agreed
that in the event more than one hundred eighty (180) days elapse between the completion of one well
and the commencement of actual drilling operations on the next well, Lessee shall upon written
demand of Lessors, forthwith execute and deliver to the Lessors, or place of record in the county in
which said land is located, a release of all premises covered by this lease, save an except that Lessee
may retain under the terms hereufnot more than forty (40) acres surrounding each producing oil well
or oil well then being reworked, not more than one hundr~ed sixty (160) acres surrounding each
producing gas well, shut-in gas well, gas well then being reworked, or the acres included in any
pooled gas unit capable of producing from a depth of less than nine thousand feet (9,000') subsurface;
or not more than three hundred twenty (320) acres surrounding each producing gas well, shut-in gas
well, gas well then being reworked, or the acres included in any pooled gas unit capable of producing
from a depth of nine thousand feet (9,000') or more but less than twelve thousand feet (12,000')
subsurface, or not more than six hundred forty (640) antes surrounding each producing gas well,
shut-in gas well, gas well the being reworked, or the acres included in any pooled gas unit capable
of producing from a depth of twelve thousand feet (12,000') or more subsurface, each such tract
(except the tracts in pooled gas units, if any), to be centered by said well, to be in as nearly a square
form as is reasonably possible, unless otherwise agreed to by Lessor, provided that if at any time the
forgoing arises, the Railroad Commission of Texas or any governmental authority asserting
jurisdiction has prescribed a spacing pattern for the orderly development of the field or allocates a
producing allowable for a well with acreage content as a factor which is in greater than or less than
the above-described acreage, this lease shall remain in force and effect as to the tract or tracts of land
designated by Lessee in the manner herein provided containing the maximum number of acres so
prescribed or allocated and in effect at the time, such tracts around each such well and in each pooled
gas unit being hereinafter referred to as "well tracts".
23. Lessee shall abandon any well or wells on lands covered by this lease within one hundred
twenty (120) days after such well ceases to produce or at such time as that part of this lease
comaining such well or wells terminates, whichever is the earlier date.
24. Wherever the term "Lessor" is used it shall mean the named "Lessor" its successors, or
assigns. Wherever the term "Lessee" is used, it shall mean the named "Lessee", its successors, heirs,
devisees or assigns.
25. Notwithstanding anything to the contrary herein contained, this lease is granted without
Page 9 of 11
warranty of title of any kind whatsoever, expressed or implied. The Lessor's warranty of title of any
kind whatsoever, expressed or implied. The Lessor's warranty of title herein is limited to the ~fund
to Lessee of the original per acre bonus paid for each mineral acre on which title fails. This shall be
the only recourse against the Lessor in the event of any failure of title.
26. Notwithstanding anything to the cont?ry herein, all development of this lease shall be
by drilling operations from adjacent tracts.
27. Notwithstanding anything to the contrary herein, the Lessee shall make no alterations to
the surface property of the lease.
28. Notwithstanding anything to the contrary herein, the Lessee agrees to execute a load limit
agreement with the City of Port Arthur for use of City streets and to comply with the requirements
of the City of Port Arthur for load limits on streets and similar areas.
29. Notwithstanding anything to the contrary herein, the Lessee shall be required to obtain
a drilling permit and a pipeline permit(s) for any gathering lines resulting from the operation and shall
obtain the necessary liability insurance as required by the City Code of Ordinances.
30. Notwithstanding anything to the contrary, nothing in the lease shall inhibit the City's
usage of the surface property.
31. Notwithstanding anything to the contrary, the Lessee shall remain obligated to this lease
regardless of any assignment.
Signed and agreed to on the __ day of
·, 2002,
LESSOR:
CITY OF PORT ARTHUR
By: Stephen Fitzgibbons, City Manager
Signed and agreed to on the .-- day of
,2002
LESSEE:
ASPECT RESOURCES LLC
By: Scot~ Ritger, Manager
ACKNOWLEDGMENT
Page 10of 11
STATE OF TEXAS §
COUNTY OF }EFe~R. SON§
This instrument was acknowledged before me on the __ day of
Stephen Fitzgibbons, as City Manager of the City of Port Arthur, Texas.
,200~by
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
STATE OF COLORADO §
COUNTY OF DENVER §
This instrument was acknowledged before me on the day of ,2002 by
Scott Ritger of ASPECT RESOURCES LLC, a Colorado limited liability company, on behalf
of such company.
NOTARY PUBLIC IN AND FOR
THE STATE OF COLORADO
My Commission Expires:
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