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HomeMy WebLinkAboutO-1988-1622 . . ORDINANCE NO. 1622 AN ORDINANCE APPROVING AND AUTHORIZING AN OIL & GAS LEASE BETWEEN THE CITY OF LA PORTE AND ARKLA EXPLORATION COMPANY ON CITY OF LA PORTE NON-AIRPORT PROPERTIES; MAKING VARIOUS FINDINGS AND PROVISIONS RELATING TO THE SUBJECT; FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW; AND PROVIDING AN EFFECTIVE DATE HEREOF. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE: Section 1. The City Council hereby approves and authorizes the contract, agreement or other undertaking described in the title of this ordinance, in substantially the form as shown in the document which is attached hereto and incorporated herein by this reference. The Mayor is hereby authorized to execute such document and all related documents on behalf of the City of La Porte. The City Secretary is hereby authorized to attest to all such signatures and to affix the seal of the City to all such documents. Section 2. The City Council officially finds, determines, recites and declares that a sufficient written notice of the date, hour, place and subject of this meeting of the City Council was posted at a place convenient to the public at the City Hall of the City for the time required by law preceding this meeting, as required by the Open Meetings Law, Article 6252-17, Texas Revised Civil Statutes Annotated; and that this meeting has been open to the public as required by law at all times during which this ordinance and the subject matter thereof has been discussed, considered and formally acted upon. The City Council further ratifies, approves and confirms such written notice and the contents and posting thereof. Section 3. This Ordinance shall be effective from and after its passage and approval, and it is so ordered. PASSED AND APPROVED, this /~~day of ~ ' 1988. BY~~ '"No a L. Malone, ayor \ ATTEST: . ~ --~ City Secretary APPROVED: _ 1 d,. ~~ . City Attorney . . . . . OIL . GAS LEASE (Non-Airport Properties) THE STATE OF TEXAS S S COUNTY OF HARRIS S THIS AGREEMENT made and entered into this the 14th day of November, 1988, by and between the CITY OF LA PORTE, a municipal corporation, whose mailing address is P.O. Box 1115, La Porte, Texas 77572-1115, hereinafter called Lessor, and Arkla Exploration Company , whose address is P. O. Box 21734. Shreveport, LA 711'11 ; hereinafter called Lessee, whether one or more, WIT N E SSE T H: 1. GRANTING CLAUSE: Lessor, for Ten and No/lOa Dollars ($10.00) cash in hand paid, and other valuable consideration, receipt of which is hereby acknowledged, hereby grants, leases and let~ exclusively unto Lessee for the purpose of exploring for and producing oil and gas and other liquid hydrocarbons (including other minerals only if produced in conjunction with the production of any liquid or gaseous hydrocarbons produced from the leased premises), together with the non-exclusive use of the surface of the land (to the extent Lessor has such authority) for the purposes reasonably necessary and incident to the exploration for and production, sale and removal of same upon the following terms and conditions, the following described land in Harris County, Texas, to-wit: As fully described in Exhibit nAn attached hereto and made a part hereof. There is expressly reserved and excepted unto Lessor (except as hereinabove provided) all sulphur, coal, lignite, uranium and other fissionable materials, thermal and geothermal energy, base and precious metals and any and all other mineral 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 the purposes of exploration for the production of those mineral_substances and forms of energy hereby reserved and excepted unto Lessor. There is further reserved unto Lessor the right to perform or to authorize others to perform any and all geophysical and geological tests on the leased premises reasonably necessary and incident to the exploration for such mineral substances and forms of energy. 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 herein described shall be considered to constitute in the aggregate. 46.890 acres, whether actually more or less. 2. TERM OF LEASE: Subject to the other provisions herein contained~iS-lease shall be for a term of three (3) years from this date (called primary term) and as long thereafter as oil, gas, other liquid hydrocarbons, or any thereof, are produced in paying quantities (as hereinafter defined) from the leased premises, or this lease is otherwise maintained in effect as hereinafter provided. Time is of the essence in this lease. 270fl . 'e 3. ANNUAL RENTALS: This lease shall terminate one (1). year from this date as to all the leased premises lying outside of a well tract or unit on which there is located a well which is producing or which is capable of producing oil, gas, or other liquid hydrocarbons, unless on or before such anniversary date Lessee shall payor tender to Lessor at BAYSHORE NATIONAL BANK OF LA PORTE, P.O. Box 998, La Porte, Texas 77572-0998, the sum of Fiftv & 00/100------- . Dollars ($ 50.00 ) per acre (herein called Rentals) for all the leased premises lying outside of such well tracts or units, which payment or tender shall continue this lease in force and effect as to all such land for a period of twelve (12) months. In like manner and upon like payment or tender annually, such termination of all the leased premises lying outside of such well tracts or units may be further deferred for successive periods of twelve (12) months each during the primary term. For purposes of determining rental payable hereunder, such well tracts or units shall be deemed to consist of 40 acres for each oil well or 160 acres for each gas well, as the case may be. Lessee shall not be held in default for failure to make such payment or tender of rental until thirty (30) days after Lessor shall deliver to Lessee written notice designating another address at which to receive the payments or tenders. The cash down payment is consideration for this lease according to its terms and shall not be allocated as a mere rental for a period. 4. ROYALTY: The royalties to be paid by Lessee are: (a) On oil and condensate or other liquid hydrocarbons produced at the well or at any oil and gas separator of the conventional type, ~ of the entire eight-eighths (8/8) of that produced and saved from the land described herein, free 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 Lessee's well or wells for the purpose of storage andlor 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 an affiliate of Lessee, whichever is greater. Provided, however, if the oil and condensate or other liquid hydrocarbons be run through or processed in a plant of the type authorized in sub-paragraph (d) below, the royalty thereon shall be calculated and paid under the terms and provisions of such sub-paragraph (d). (b) Lessee agrees that before any gas containing recoverable liquid hydrocarbons (except gas run through an absorption plant or other type plant for the extraction of hydrocarbon products as . .authorized in sub-paragraph (d) below) produced from said land is sold or used, if practical and economical, it will be run through an adequate oil and gas separator of the conventional type or other equipment at least as efficient, to the end that as much of such liquid hydrocarbons as can be reasonabl~ recovered from the gas b~ such means will be recovered, without diminishing the BTU rating below the prevailing minimums of the industry for the sale of gas in the area. 2 e e (c) If gas, casinghead gas or other gaseous substances pro- duced from said land is sold at the well or at a delivery point on 27j:7% or off the leased land, the roya~ty on same shall be ~ of the market value of the gas at the tlme it is produced, provided that 27. r in no event shall the price paid be less than xlQE1& of the amount realized therefrom by Lessee or any affiliate of Lessee. (d) If Lessee, or an affiliate of Lessee shall themselves, or by arrangement with others, run oil, condensate, other liquid hydrocarbons, gas, casinghead gas, or other gaseous substances produced from said land through a processing, absorption 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 27.!i:; shall be, at the option of Lessor, eitherx1~.of the market value of such oil, condensate, other liquid hydrocarbons, gas, casinghead gas, or other gaseous substances at the well or delivery point on 2~77~ the leased premises, or ~ of the market value of the gross pro- . duction of products and components derived therefrom by such pro- cessing and manufacturing at such plant, and Lessor shall be paid 27;t7 on residue gas ~ of the market value at the tailgate 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 sep- arated or extracted, shall be not less 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 not be less than the average price quoted (if prices are quoted) in two of the leading periodicals of the industry for similar grades of the products enumerated above. 27, ls) 27JJf (e) The royalty on any gas, casinghead gas or other gaseous substances, produced from the land herein described and used, sold or delivered in any way other than specificallY provided above shall be ~ of the market value at the well at the time it is produced, except that if the same is run through an oil and gas s~parator as hereinabove provided, the royalty shall be~' 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 Lessee. frI (f) 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 produced 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 either (1) receive the royalty herein provided for gas, oil or other liquid hydrocarbons produced and saved or sold, or (2) to be paid ~ of the amount realized by Lessee or Lessee'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 lie~ of the gas, oil or other liquid hydrocarbons produced from the said land, or any components thereof. (g) . On sulphur, salt or water associated with the oil, gas or other liquid hydrocarbons, used, separated, extracted, or pro- duced and manufactured from the land described herein, a royalty 2~. % hall be paid Lessor of~of the entire eight-eighths (8/8) of the proceeds received by Lessee or Lessee's affiliate for such products and elements extracted, used or produced and marketed from the land described herein. 3 e . (h) Neither Lessee nor Lessee's affiliate shall 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. (i) The term Lessee, as used in this Paragraph 4, means and includes the original Lessee named in this lease and all assignees, heirs, successors and other persons who at any time become owners of said lease or of any right to own, share or receive in kind, the production or the proceeds from the gas, oil or other liquid hydrocarbons produced from the land covered by this lease other than as Lessors under this lease, and those whose interest con- stitutes a portion of the royalties herein provided or whose royalty interest is deductible from such royalties. Any such royalty owner, at its option, shall be entitled to have the royalty interest accruing to such royalty owner calculated upon the royalty basis herein set forth as if one of the Lessors herein. The term "affiliate of Lessee" as herein used, means and includes any part- ner, joint venturer, creditor, agent or representative of Lessee; any firm or corporation that, at the time in question, is a subsid- iary or parent 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 venturers, 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 "affiliate of Lessee", it is understood and agreed that if any oil, gas or other liquid hydrocarbons or any portion thereof produced from the land described herein is delivered or sold to any person or entity and subsequently the same or any portion thereof is redelivered or re- sold 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". In addition to the foregoing, if Lessee or an affiliate of Lessee receives, purchases or uses all or any portion of the oil, gas or other liquid hydrocarbons which were produced from the land covered by this lease which was 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 in ex- change or in a trade 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 4 as if same had remained in hands of Lessee; or an affiliate of Lessee. (j) Notwithstanding anything herein to the contrary contained, it is expressly stipulated that Lessor, at Lessor's option, and from time to time, upon thirty (3Q) 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 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 right to take in kind. Lessor may exercise such right to take in kind from time to time, and also may countermand same from time to time on like written notice. 4 e e Lessee shall forthwith furnish Lessor true copies of all contracts and price redetermination letters or agreements entered into by Lessee for the sale or dispos~tion 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 hydro- carbons, Lessee will be obligated to receive and dispose of same under the royalty provisions of this lease. (k) Nothing herein shall impair or limit the right of the Lessor and Lessee to agree by recordable instrument for the cal- culations and payment of royalties hereunder in a different or modified basis. Lessee agrees that no -division order- or other such document shall constitute a valid amendment or addition to the provisions of this lease. (1) It is understood and agreed that the market price of the production upon which royalty is paid under this lease is or may from time to time by subject to valid price ceilings and price re- gulations imposed by governmental authority, rules and regulations. To the extent that said price ceilings and price regulations are valid and apply to the price of components of the production from the land described herein at the time of their production and/or sale, the market price is not to exceed the price allowed or permitted under such governmental authority, rules and regulations. If the said price ceilings and price regulations are altered, modified or removed, the market price from and after the said alteration, modification or removal shall be subject to and only - limited by said price ceilings and price regulations in effect at the time of such production and/or sale. Lessee agrees not to dispose of all or any portion of the production hereunder in a manner or market subject to governmental price regulations if an alternative market is reasonably available. (m) Lessee agrees that all royalties accruing under the lease (including those paid in kind) shall be without deduction for the cost of producing, gathering, storing, separating, treating, dehydrating, compressing, processing, trucking, transporting, and otherwise making the oil, gas and other products produced hereunder ready for sale or use. (n) Anything hereinabove to the contrary notwithstanding, 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. (0) 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 ninety (90) days after such sale. Any royalties not paid as herein pro- vided, including suspended royalties, shall bear interest at the annual rate of twelve percent (12') until paid, which shall not exceed the highest lawful rate. 5. MINIMUM ROYALTY: If for any lease year after the primary term, the total royalties and shut-in payments paid to Lessor should equal less than the product of ~~ nn times the total number of net mineral acres (as hereinafter defined) covered by this lease at the beginning of such lease year, then Lessee shall pay to Lessor in cash within sixty (60) days after the end of such lease year the difference between such amounts. The product of $25.00 times the total number of net mineral acres covered by this lease at the beginning of any lease year shall be the minimum royalty payable in order to consider that oil, gas or other liquid 5 ". _...~-- --e e hydroCarbons. or any thereof, are produced in paying quantities from the leased premises. The words "lease year" shall mean each year that this lease is in force. commencing on the anniversary date of this lease. "Net mineral acres", as herein used, shall mean the number of acres divided or undivided on which Lessor had the right to execute a lease covering the mineral interest in the land described herein. 6. SHUT-IN PROVISION Q!~: Notwithstanding anything to the contrary herein contained, it is understood and agreed that if and while there is a gas well or wells on the leased premises (and for the purpose of this paragraph the term "gas well" shall include wells capable of producing natural gas, condensate, distillate, or any gaseous substance, together with wells classified as gas wells by any governmental authority) and such well or wells are shut-in, the Lessee shall pay Lessor monthly, on a well by well basis, the sum of $ 2.00 per month for the first six (6) months for which shut-ins are due and the sum of $~.oo per month for all months thereafter. The applicable amount shall be paid monthly, the first pay- ment being due no later than sixty (60) days after completion of such shut-in well and shall continue until gas is produced and sold from such well, provided, however, that Lessee may not main- tain this lease in force and effect solely by the tender of shut- in payments in accordance with the terms of this paragraph for longer than twelve (12)~per occurrence. oon'fhS 7. SUBROGATION: Lessor's rights and interest hereunder shall be charged primarily with any mortgages, taxes or other liens or interests or charges on the estate of Lessor in said land, but Lessor agrees that Lessee shall have the right at any time after thirty (30) days notice to Lessor, either before or after maturity, to be subrogated to the rights of the holder thereof, and to deduct the amount so paid from the royalties or other payments due or which may become due to Lessor, or its assigns, under this lease. 8. PARTIAL OWNERSHIP OF MINERAL ESTATE: It is agreed that if Lessor owns an interest In said land less than the entire mineral estate (whether Lessor's interest is herein specified or not,) royalties, rentals and shut-in payments to be paid or delivered to Lessor shall be reduced proportionately and all outstanding royalties shall be deducted from those herein provided. 9. CESSATION OF'PRODueTION AND CONTINUOUS OPERATIONS: After discovery and produCtion of oil, gas or other liquid hydrocarbons on any well tract. or unit, if production thereof should cease from any cause, this lease insofar as' it covers such well tract or unit shall not terminate if Lessee commences operations for drilling a new or reworking an existing well thereon within sixty (60) days thereafter, or, if it be within the primary term, commences or resumes the payment or tender of rental, or commences operations for drilling a new or reworking an existing well thereon, on or before the rental paying date next ensuing after the expiration of sixty (60) days from date of cessation of production. In the event Lessee commences operations for drilling a new or reworking an existing well, as provided in this paragraph, and production is not' termination of this lease insofar as it covers such well or tract may be further deferred as long as Lessee continues good faith operations for drilling a new or reworking an existing well with no cessations of more than sixty (60) consecutive days. 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 * established, 6 e e 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 of 'oil, gas or other liquid hydrocarbons, this lease shall remain in force as hereinabove provided so long thereafter as oil, gas or other liquid hydrocarbons is produced from said land, 'or on acreage 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 pro- visions of this paragraph, Lessee shall render to Lessor weekly re- ports of all operations begun, conducted or terminated by Lessee upon the leased premises, including, but not limited to, daily 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 hereunder 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 and shall be deemed concluded when such rig is released. 10. PARTIAL RELEASE CLAUSE: If, at the expiration of the primary term of this lease or any extension thereof which may occur in accordance with any provisions herein contained, any part or parts of the leased premises is not included within a well tract or unit from which production of either oil or gas is being ob- tained, this lease shall be terminated as to all the leased pre- mises not otherwise being maintained under some other provision hereof, except as to a 40 acre well tract or unit to be selected by Lessee, surrounding each well capable of producing oil in paying quantities and except as to a 160 acre well tract or unit to be selected by Lessee surrounding each well capable of producing gas in paying quantities: provided, however, that in the event any municipal, state or federal governmental agency asserting juris- diction prescribes a spacing pattern for the orderly development of the field or allocates the producing allowable for a well with acreage content as a factor, and either of which is in excess of the above prescribed acreage, then such well tracts or units thereafter created may conform in size with those so prescribed by such govern- mental agency. Each such well tract or unit shall be in the form of a square or rectangle or other reasonable configuration accept- able to the governmental authority having jurisdiction for prodUC- tion or proration purposes. At the end of the primary term of this lease or any extension thereof which may occur in accordance with any provision herein contained, this lease will terminate automati- cally as to all the mineral estate lying more than one hundred (100) feet below the deepest producing depth within each well tract-in which Lessee has completed a well as a commercial producer of oil and/or gas on the lands described in this lease. Lessee shall forthwith execute and file of record in the county in which the property is located, and deliver to Lessor, the recorded release of all the leased premises terminated as herein provided. Similarly, if after the primary term of this lease or any extension thereof which may occur in accordance with any provisions herein contained, and after production has been obtained, the deepest producing horizon of a well should be abandoned or a gas well should become an oil well (according to criteria established by the governmental authority, asserting jurisdiction), Lessee shall forthwith execute and file of record in the county in which the property is located and deliver to Lessor the recorded release of all the mineral estate not previously released lying more than one hundred feet (100') below the deepest producing depth within the particular well tract or unit and/or a recorded release of all the mineral estate lying outside a well tract or unit of the size herein * or unit 7 " . e prescribed for an oil well, as the case may be. Upon such termination a9 to deeper horizons, Lessor and Lessor's successors, Lessees or assigns, thereafter shall have the right to reasonable use of the leased premises, but without unreasonable interference with Lessee's rights, for the purposes of investigating, exploring, prospecting and drilling for, producing and owning oil, gas and other liquid hydrocarbons from the horizons as to which this lease has terminated. 11. OFFSET WELLS: In the event a well or wells producing oil in paying quantities should be brought in on other lands not covered by this lease within six hundred sixty feet (660') from the leased premises or draining the leased premises, or in the event a well or wells producing gas in paying quantities should be brought in on other lands not covered by this lease within one thousand three hundred twenty feet (1320') from the leased premises or draining the leased premises, Lessee agrees to commence actual drilling operations on the leased premises of an offset well within one hundred twenty (120) days from the date production commences from said well or wells. In lieu of drilling such offset 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 said well or wells on other lands not 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 if: (a) Lessee already has a producing well on these leased premises which may reasonably be held to provide drainage protectionJ or (b) Lessee deems an offset well on the leased premises to be geologically or economically impractical and tenders to Lessor a release of this lease as to such offset location as to the sand or zone in which the draining well is completed, such release to be of sufficient acreage to qualify for the maximum allowable. 12. USE Q! LEASED PREMISES: No operations of any nature may be conducted on the surface of the leased premises described herein without the prior written consent of the Lessor. 13. SURRENDER: Except as herein otherwise provided, Lessee may, at any time, execute and deliver to Lessor a release covering any portion of the above described premises and thereby be relieved of all obligations as to the acreage surrenderedJ provided, however, nothing herein contained shall be construed to relieve the Lessee of any obligations or payment already then assumed or incurred. 14. FORCE MAJEURE: The covenants and agreements herein expressed or implied in this agreement shall be subject to all valid Federal and State laws, executive orders, rules or regu1a~ tions, and this lease shall not be terminated, in whole or in part, nor Lessee held liable in damages for failure to comply therewith if compliance is prevented by, or if such failure is the result of, any such law, order, rule or regulation. If after the primary term, Lessee is prevented from conducting drilling or reworking operations on, or producing oil or gas from the leased premises from such cause,' the time while Lessee is so prevented shall not be counted against Lessee, and this lease shall be extended for a period of time equal to that during which Lessee is so prevented 8 e - from conducting such drilling or reworking operations on, or produc- ing 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 workmen, or failure of carr~er 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 hereof. Lessee shall, within thirty (30) days after receiving notice of any such Federal or State law, executive order, rule or regulation, act or event contemplated under this section, notify Lessor thereof and 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 con- trary notwithstanding, this lease shall not be suspended by reason of this paragraph for longer than one (1) year per occurrence. 15. BREACH OF TERMS: Except as herein otherwise provided, the material breach by Lessee of any obligation arising here- under shall not work a forfeiture or a termination of this lease or cause a termination or reversion 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 fail to proceed within thirty (30) days after 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 shall reply to Lessor in writing within thirty (30) days of the receipt of such notice by Lessor, specifying how, in the opinion of Lessee, Lessee is not in breach of this lease. If Lessor brings suit to compel performance of, or to re- cover 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 of judgement and costs. 16. ~ INFORMATION/INSPECTION: Lessee shall furnish Lessor with true copies of each application and report made by Lessee to the governmental authority asserting jurisdiction per- taining to operations on the leased premises or on land pooled therewith simultaneously with Lessee's filing of each application and report with such governmental authority. Lessee shall prompt~ ly furnish Lessor with final and complete copies of all logs and electrical surveys run in each well located on the leased premises or on land pooled therewith, showing formations encountered and the identification of such formations as determined by Lessee or Lessee's geologists or paleontologists. Lessee shall promptly furnish Lessor with copies Of daily drilling reports, core analyses 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, re- worked, recompleted 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 9 . e municipal, State or Federal~ without Lessor's written consent, then this lease shall ~onstitute a separate lease as to any portion in such pooled or unitized area and operations upon or production from such portion shall not maintain this lease in force as to that portion of said land not so pooled or unitized. Lessor agrees that its consent to the pooling of all or portions of the land described above will not be withheld if the proposed pool or unit conforms to the following criteria: (a) An oil unit does 'not exceed 40 acres in surface area7 (b) A gas unit does not exceed 160 acres in surface, from surface to 8,000 feet, or 320 acres in surface area for all depths below 8,000 feet7 (c) The unit is limited to the geological stratum or strata in whi~h the well is completed and producing7 (d) The unit is reasonably compact in shape with the width not exceeding twice the length7 (e) The unit will automatically terminate at such time as no drilling or reworking operations are being conducted thereon or production is being obtained therefrom for a period exceeding sixty (60) consecutive days7 and (f) At least one-half (1/2) of the acreage included in each such unit shall be acreage which is covered by this lease, provided, however, that if at any time the remaining acreage which is neither included in an existing unit nor allocated to a drilling unit, with respect to a well capable of producing oil or gas in commercial quantities, is insufficient to comprise one-half of a proposed unit to be created pursuant to paragraph 21 hereof, then such a unit may nevertheless be formed if it includes all of such remaining acreage then covered by this lease. Each such unit shall be deemed a well tract or unit under Section 3 above. Whenever the term "from the land described herein- or similar language is used, it is understood that operations for drilling a new well, reworking operations (including deepening or sidetracking) on a previously drilled well or production of oil, gas and other hydrocarbons from a well located within the confines of a unit approved or consented to by Lessor shall be deemed operations on or production from.the lands described herein or the premises leased herein. 22. PRODUCTION PURCHASE CONTRACTS: Notwithstanding anything herein contained to the contrary, it is understood and agreed that prior to entering into the sale of any oil, condensate, other liquid hydrocarbons, gas, casinghead gas, or other gaseous substances produced hereunder, Lessee shall furnish Lessor a true copy of the production purchase contract(s) which Lessee proposes to enter into and Lessor shall have fifteen (15) days after receipt to notify Lessee that the terms of such contract(s) are unacceptable to . Lessor. If such notice is given, Lessor shall have sixty (60) days from the date of such notice to provide Lessee a copy of a production purchase contract which is acceptable to Lessor and for which there is a willing and able purchaser. If Lessor fails to give notice or to submit an alternative production contract(s) and purchaser(s) within the sixty (60) day period, it is understood and agreed that any sale of production attributable to the leased premises under such contract furnished by Lessee will be deemed to have been made at market value and that Lessee shall have exercised due diligence as the fiduciary agent for Lessor in the marketing of all products produced under the terms of this lease and committed to such contract. 11 . -. . . e 23. TAXES: Ad valorem and state occupation, severance, and production taxes of every nature, kind and description levied upon the royalty interest created by or reserved in this lease by whatever taxing authority shall be borne and paid by the Lessee. Notwithstanding anything to the contrary herein contained, this provision does not apply to any taxes on any mineral interest, save and except the oil, gas and other liquid hydrocarbons interest (the subject matter of this lease), nor shall this provision apply to any income, estate, gift, inhe~itance or windfall profit taxes levied against Lessor. IN TESTIMONY .WHEREOF, this instrument is executed as of the date first above written. /~~ , '\ f.. \\ cY LESSOR: ~ OF LA PORTE BY: . ttz, n No ~. J:?e,~'-- .1' ATTEST. ~ ~ Ci Y Secretary A3Z;;; ~ city Attorney By: j) Dwight Assistant LORATION COMPANY LESSEE: Land THE STATE OF TEXAS S S COUNTY OF HARRIS S THIS INSTRUMENT WAS ACKNOWLEDGED BEFORE ME on this the ~J~ day of ~ , 1988, by NORMAN L. MALONE, Mayor of the City of La r~r.te, a municipal corporation, on behalf of sa~ corporation. . <C__-P ~ - Notary PubliC, State of Texas .-~ ~ "'" SUE LENES Notary Public in and for the State of Texas d:.. MV Commission Expires /.2.- ~(~ ...19-,-0 .~~ ~ ., ". THE STATE OF TEXAS , ::::: _ -r-::.. " S S S WAS ACKNOWLEDGED ~ORE ME on this the ~~ , 1988, by /2-M<<Ufl- . 7/lA~,/WJr..-~~1< i f)~ L~ Notary Public, State of Texas COUNTY OF HARRIS THIS INSTRUMENT day of 7J~~A/ .... ~. SUE LENES . Nota~ P,ublic in. and 101, ~ ~\a;fr of ~~ 'N1y Commls51on Exp'IrIS.- . 12 .... ..... ",. ....... -." . . e on land pooled therewith. Upon written request, Lessee shall promptly furnish Lessor with Lessee's most recent estimate of reservoir reserves and future production and, upon written request, with full information on the metering of production and production runs, together with full information regarding the calculation of all royalties payable under this lease. 17. ASSIGNMENT: The rights of Lessee hereunder may be assigned only with the written consent of Lessor and any attempt to assign same without such consent shall be void. The rights of Lessor hereunder may be assigned as to all or any part of the land or as to any minerals thereunder, and the provisions hereof shall extend to its successors and assigns, but no change or division in ownership of the lands, rentals or royalties, however accomplished, shall operate to enlarge the obligations 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 true copy of recorded instrument evidencing same. 18. LIABILITY 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/Lessee. Notwithstanding that this lease may be assigned in whole or in 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, its successors 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 hereinafter enacted or promulgated, and also without limitation by enumeration, any and all other causes of such action which may be asserted against Lessor, its successors and assigns, for acts or omissions caused by operations hereunder by any Lessee, and in connection with all of these, Lessee and all such assignees shall be obligated to indemnify and hold harmless the Lessor, its suc~essors and assigns. 19. LIMITED WARRANTIES: Any implied or expressed warranties herein made as to the leased premises shall not apply to any portion of such property which is covered by a valid and subsisting oil and gas lease previously executed and appearing of record in the appropriate county in which the property is located. Upon showing of a valid and subsisting lease duly recorded, Lessor shall return to Lessee the amount of the lease bonus paid, if any, and with such payment be discharged of any and all responsibility to the Lessee under this lease, and this lease shall immediately be deemed null and void as to such portion. 20. NOTICES: Any notices, reports, maps, logs, requests or any other communications herein provided to be made to Lessor by Lessee shall be made to CITY OF LA PORTE at the address given above. Any notices or communications specified in this lease to be given to Lessee by Lessor be given to Arkla Exploration Company. P. Q. Box 21734. Shreveport. LA 71151 - Attention: Vice President. Land 21. POOLING: It is agreed by and between Lessor and Lessee that Lessee will not pool or unitize, or cause to be pooled or unitized, the land described in this lease, or 'any interest therein, with any other land or interest therein, without Lessor's written consent. If any of said land be pooled or unitized by operation of law or under lawful order of any regulatory body, 10 . . STATE OF TEXAS S S COUNTY OF HARRIS S This instrument was acknowledged before me on this the 4th day of November , 1988 by Dwioht N. Johnson , Assistant Vice President. Land. of Arkla Exoloration Comoanv. a Delaware Corooration , on behalf of said corporation. My Commission Expires OFFICiAl SEAL AlAN C. PRIGGE NOTARY PIIBUC STATE OF 1EllAS My Comm. ExpIIlS May 9, 1989 Notary's printed name ..~ . L . . . ~ , . EXHIBIT -A- Tract One: Outlots No. 402 and 403, ten acres each, of La Porte OutlotS;-in the Enoch Brinson Survey, 'Abstract 5, in Harris County, Texas, according to map o~ plat thereof recorded in Volume 61, Page 374 of the Deed Records of Harris County, Texas. Tract Two: Being a 10.004 acre (Call 100 acre) tract of land comprising all of Outlot 404, La Porte Outlots (as recorded in Volume 61, Page 374, Harris County Deed Records), Enoch Brinson Survey, A-5, Harris County, Texas, more fully described in that certain General Warranty Deed dated May 14, 1987 from Naegeli Properties, Inc. to the City of La Porte, a municipal corporation, as recorded in the Deed Records of Harris County, Texas. Tract Three: That certain 2.500 acre tract of land situated in Harris County, Texas, being a part of the Enoch Brinson Survey, A-5, and also being part of Lot Three Hundred Ninety-Nine (399), of La Porte Out1ots, as recorded in Volume 61, Page 374, of the Deed Records of Harris County, Texas, and being more particularly described in that certain General Warranty Deed dated April 7, 1983 from Robert Lynn Reeves to the City of La Porte, a municipal corporation, recorded in the Deed Records of Harris County, Texas. Tract Four: That certain 3.474 acre tract of land, being part of Outlot 417, La Porte Outlots, Enoch Brinson Survey, A-5, Harris County, Texas, being more particularly described in that certain General Warranty Deed dated December 15, 1986 from Louise Alston to the City of La Porte, a municipal corporation, recorded the Deed Records of Harris County, Texas. Tract Five: Outlot Four Hundred (400), of TOWN OF LA PORTE, in the Enoch Brinson Survey, Abstract #5, SAVE AND EXCEPT the South Sixty (S. 60) feet thereof conveyed to Harris County Flood Control District by deed dated. April 7th, 1966, reference to which is here made for any and all purposes, according to the map or plat thereof recorded in Volume 61, Page 374 of the Deed Records of Harris County, Texas, and being a 9.333 acre tract of land. Tract Six: The south 150 feet of Outlot 401 in La Porte Outlots, a subdivision in Harris County, Texas, according to the map thereof recorded in Volume 61, Page 374, of the Deed Records of Harris County, Texas, and being a 1.579 acre tract of land.