HomeMy WebLinkAbout20083122.tiff RESOLUTION
RE: ACTION OF THE BOARD CONCERNING OIL AND GAS LEASE COVERING CERTAIN
PROPERTY OWNED BY WELD COUNTY, COLORADO, AND AUTHORIZE CHAIR TO
SIGN - S1/2 NW1/4, NE1/4 NW1/4, SW1/4 NE1/4, S13, T4N, R61W
WHEREAS, the Board of County Commissioners of Weld County, Colorado, pursuant to
Colorado statute and the Weld County Home Rule Charter, is vested with the authority of
administering the affairs of Weld County, Colorado, and
WHEREAS, Weld County, Colorado, is the owner of vast acres of mineral lands located in
Weld County, Colorado, and
WHEREAS, the Department of Purchasing was authorized to solicit bids for lease of a
portion of said mineral acres not currently leased, and
WHEREAS, Lonetree and Associates, LLC, 141 Union Boulevard, Suite 260, Lakewood,
Colorado 80228, submitted the sole bid to lease 160.0 net mineral acres, more or less, described
to-wit:
S1/2 NW 1/4,/4, NE1/4 NW 1/4,/4, SW 1/4/4 NE1/4 of Section
13, Township 4 North, Range 61 West of the 6th
P.M., Weld County, Colorado
WHEREAS, Weld County desires to reject the sole bid offer submitted by Lonetree and
Associates, LLC, to lease the above described mineral acreage for$25.00 per net mineral acre,
due to a lack of interest regarding this lease, with only the one bid being submitted, and with said
bid being for an amount deemed to be unacceptable, and
WHEREAS,the Board of County Commissioners has determined this lease will not be rebid
until after January 1, 2009, and not until the 2009 Board of County Commissioners is in place and
has had an opportunity to review the matter.
NOW, THEREFORE, BE IT RESOLVED by the Board of County Commissioners of Weld
County, Colorado, that the sole bid offer for $25.00 per net mineral acre be, and hereby is,
rejected.
2008-3122
LE0259
@c '. / 'GL Ql �6"dt
OIL AND GAS LEASE - S1/2 NW1/4, NE1/4 NW1/4, SW1/4 NE1/4, S13, T4N, R61W
PAGE 2
The above and foregoing Resolution was, on motion duly made and seconded, adopted by
the following vote on the 1st day of December, A.D., 2008.
BOARD OF COUNTY COMMISSIONERS
WELD COUNTY, COLORADO
ATTEST: Ail ' yE 11' `"Y /1-,- r!- CL-/
` Wil 'am H. Jerke, Chair
Weld County Clerk to th- :,. ; A
�N� _��, a Ro rt �. i ��sd ro-T
BY: / r 1i �i 1/ / e '_
Deputy Clerk to the Boni, ` / ✓��'�-
WilliF. Garcia
-7
APPROVfi4 AS T -
C-- David E. Long
ounty Attorney
Dougla Rademach r
Date of signature: LP a
2008-3122
LE0259
WELD COUNTY OIL AND GAS LEASE
Containing 160.0 acres, more or less:
Containing 160.0 net mineral acres, more or less:
THIS LEASE AGREEMENT, dated this 1st day of December, 2008, made and entered into by and
between WELD COUNTY, COLORADO, a political subdivision of the STATE OF COLORADO, acting by and
through the BOARD OF COUNTY COMMISSIONERS OF THE COUNTY OF WELD, for its respective
interests, c/o BOARD OF COUNTY COMMISSIONERS, 915 10TH STREET, P.O. BOX 758, GREELEY, CO
80632, hereinafter called Lessor, and:
hereinafter called Lessee:
WITNESSETH
WHEREAS, said Lessee has applied to Lessor for an oil and gas lease covering the land herein
described, and has paid a filing fee in the amount of$10.00, plus a bonus consideration of$ per
mineral acre, fixed by Lessor as an additional consideration for the granting of this lease, and Lessee agrees
to pay an annual rental of $160.00, computed at the rate of $1.00, per mineral acre or fraction thereof per
year, and the following consideration:
WHEREAS, all the requirements relative to said application have been duly complied with and said
application has been approved and allowed by Lessor;
THEREFORE, in consideration of the agreements herein, on the part of Lessee to be paid, kept and
performed, Lessor does lease exclusively to Lessee for the sole and only purpose of drilling for, development
of and production of oil and gas, or either of them, thereon and therefrom with the right to own all oil and gas
so produced and saved therefrom and not reserved as royalty by Lessor under the terms of this lease,
together with rights-of-way, easements and servitudes for pipelines, telephone and telegraph lines, tanks and
fixtures for producing and caring for such product, and housing and boarding employees, and any and all
rights and privileges necessary for the exploration and operation of said land for oil and gas, the following
described land situated in the County of Weld, State of Colorado, and more particularly described as follows:
DESCRIPTION OF LAND SECTION TOWNSHIP RANGE
S1/2 NW 1/4(80.0 acres)
NE1/4 NW1/4 (40.0 acres) 13 4N 61W
SW1/4 NE1/4 (40.0 acre)
TO HAVE AND TO HOLD said land, and all the rights and privileges granted hereunder to Lessee until
the hour of twelve o'clock noon on the 1st day of December, 2011 as primary term, and so long thereafter as
oil and gas, or either of them, is produced in paying quantities from said land or Lessee is diligently engaged
in bona fide drilling or reworking operations on said land, subject to the terms and conditions herein. Drilling
or reworking operations shall be deemed to be diligently performed if there is no delay or cessation thereof for
a greater period than sixty consecutive days unless an extension in writing is granted by lessor; provided that
such drilling or reworking operations are commenced during said primary term or any extension thereof or
while this lease is in force by reason of production of oil and gas or either of them, or that such reworking is
commenced within sixty days upon cessation of production for the purpose of re-establishing the same, and
provided further that such production is commenced during such primary term or any extension thereof, or
while this lease is in force by reason of such drilling or reworking operations or other production.
2008-3122
LE0259
Esther Gesick
From: Joe Thames Uoseph@baselineminerals.com]
Sent: Wednesday, October 08, 2008 4:09 PM
To: Esther Gesick
Subject: RE: Mineral Lease
Esther, the information you requested is as follows:
ESENJAY OIL & GAS, LTD.
500 North Water Street
Suite 1100 South
Corpus Christi, Texas 78471
(361) 883-7464
Attn: Eric Gardner
Let me know if you need anything else.
Joe Thames
303-534-3628, extension 202
Original Message
From: Esther Gesick [mailto:egesick@co.weld.co.us]
Sent: Tuesday, October 07, 2008 9:14 AM
To: Joe Thames
Subject: RE: Mineral Lease
Joe,
I have found the three parcels in question. I do need the contact
information for the company you represent(i.e. , name, address, phone #,
etc. ) so Purchasing can provide you with the notice and leasing
information.
Thanks!
Esther E. Gesick
Deputy Clerk to the Board
915 10th Street
Greeley, CO 80631
(970) 356-4000 X4226
(970) 352-0242 (fax)
Original Message
From: Joe Thames [mailto:joseph@baselineminerals.com]
Sent: Monday, October 06, 2008 2 :49 PM
To: Esther Gesick
Subject: RE: Mineral Lease
Thanks Esther. Attached is a title report that outlines several tracts
in
one section. Weld County owns under a few of them. Let me know if you
have
any questions.
Joe Thames
303-534-3628, extension 202
1
Le 6,259
Original Message
From: Esther Gesick [mailto:egesick@co.weld.co.us]
Sent: Monday, October 06, 2008 2:19 PM
To: joseph@baselineminerals.com
Subject: Mineral Lease
Joseph,
As discussed, I will proceed with the leasing process upon receipt of
your written request for the mineral interest(s) . If you have any
further questions, please let me know.
Thanks!
Esther E. Gesick
Deputy Clerk to the Board
915 10th Street
Greeley, CO 80631
(970) 356-4000 X4226
(970) 352-0242 (fax)
2
TRACT THREE: 40.00 acres,more or less
SURFACE OWNER: Walter Thomas Jones and John Edward Jones,as tenants in common
OIL AND GAS OWNER INTEREST NET ACRES LEASEHOLD STATUS
County of Weld,Colorado(1107/157) 100.00000% 40.000000 APPEARS OPEN OF RECORD
100.00000% 40.000000
TRACT FOUR: 40.00 acres,more or less
SURFACE OWNER: Sublette General Partner, Inc.
OIL AND GAS OWNER INTEREST NET ACRES LEASEHOLD STATUS
County of Weld,Colorado 100.000000% 40.000000 APPEARS OPEN OF RECORD
100.00000% 40.000000
TRACT FIVE: 40.00 acres,more or less
SURFACE OWNER: Sublette General Partner,Inc.—that portion lying South of Irrigation Ditch.
Walter Thomas Jones and John Edward Jones, as tenants in common—that portion
lying North of Irrigation Ditch.
OIL AND GAS OWNER INTEREST NET ACRES LEASEHOLD STATUS
Estate of Helen C. Clark, deceased 25.000000% 10.000000 APPEARS OPEN OF RECORD
SEE NOTE THREE
Phillip Clark,aka Phillip W. Clark 18.750000% 7.500000 APPEARS OPEN OF RECORD
Joyce Ann Clark,now Joyce Ann Segura 18.750000% 7.500000 APPEARS OPEN OF RECORD
Jean H.Flanagan 18.750000% 7.500000 APPEARS OPEN OF RECORD
David Clark,aka David A. Clark 6.250000% 2.500000 APPEARS OPEN OF RECORD
John C. Kruse 6.250000% 2.500000 APPEARS OPEN OF RECORD
Catherine C. Kruse,now 6.250000% 2.500000 APPEARS OPEN OF RECORD
Catherine C. Kruse Bradley
100.00000% 40.000000
Page 2 of 4
Fee 0601 Weld Co Mins 0601 4N-61W-(13 NW N2NE SWNE NWSW) (2).doc
TRACT SIX: 32.90 acres,more or less
SURFACE OWNER: Sublette General Partner,Inc.
OIL AND GAS OWNER INTEREST NET ACRES LEASEHOLD STATUS
U.S. AgBank FCB, formerly Federal Land 50.000000% 16.450000 APPEARS OPEN OF RECORD
Bank of Wichita
Sublette General Partner,Inc. 50.000000% 16.450000 APPEARS OPEN OF RECORD
100.00000% 32.900000
TRACT SEVEN: 7.10 acres,more or less
SURFACE OWNER: Walter Thomas Jones and John Edward Jones, as tenants in common
OIL AND GAS OWNER INTEREST NET ACRES LEASEHOLD STATUS
U.S. AgBank FCB, formerly Federal Land 50.000000% 3.550000 APPEARS OPEN OF RECORD
Bank of Wichita
Sublette General Partner,Inc. 25.000000% 1.775000 APPEARS OPEN OF RECORD
Walter Thomas Jones 12.500000% 0.887500 APPEARS OPEN OF RECORD
John Edward Jones 12.500000% 0.887500 APPEARS OPEN OF RECORD
100.00000% 7.100000
EXAMINERS NOTES:
1. The Irrigation Ditch referred to in the above descriptions is the Irrigation Ditch granted by William E. Day to the South Platte Lan
Reservoir and Irrigation Company as recorded at Book 163,page 224.
2. A right-of-way for an inlet ditch to Jackson Lake Reservoir was conveyed by Quit Claim Deed recorded at Book 163,page 224 to TI
South Platte Land,Reservoir and Irrigation Company running across all of Section 14 and others. The instrument included no reversions
clause but the Assessors Office of Weld County, Colorado does not separate this right-of-way as belonging to the Irrigation Company.
appears that it was actually intended to be only a right-of-way and is included herein.
3. Helen C. Clark died March 29, 1995 in Morgan County, Colorado. This examiner tried to get the probate file but court approval
required to search for probate files. No record of death,will or probate was found in the County Records of Weld County, Colorado.
4. That portion of the NW quarter and the NWSW lying North of the Irrigation Ditch is subject to an unrecorded 99 year hunting at
fishing lease dated March 4, 1994 and may affect the rights to perform any operations on this land during hunting season.
5. Peter H. Coors recorded a Deed of Trust at instrument number 2530658 and an assignment of rents recorded at instrument numb
2530659,both dated December 2, 1996,on that portion of the NWSW, SENW AND SWNE lying South of the Irrigation Ditch recorded
Book 163, page 224. Said Deed of Trust and Assignment of Rents were released at instrument number 2822028. No other document
any kind was found for this land in the name of Peter H. Coors. It could be that he actually owns this land individually and a portion of tl
minerals in the NWSW and SENW,being a total acreage of 44.3 in these two quarter quarters.
CURRENT UNSATISFIED MORTGAGES AFFECTING MINERAL OWNERS:
That part of Section 14 lying North of the right-of-way of the inlet ditch to The Jackson Lake Reservoir as the right-of-way described
Quit Claim Deed from William E. Day to The South Platte Land, Reservoir and Irrigation Company recorded in Book 163, page 22
Weld County, Colorado is subject to a Deed of Trust from the Sublette Land and Cattle Company to the Public Trustee of the Coun
Weld, Colorado for the benefit of The Colorado State Bank of Denver for a sum of$1,000,000.00 as recorded at Book 1383, docume
number 2333598.
Page 3 of 4
Fee 0601 Weld Co Mins 0601_4N-61W-(13 NW N2NE SWNE NWSW)(2).doc
UNSATISFIED JUDGMENTS OR LIENS:
Not checked
TAXES:
Not checked
ADDRESSES FOR ALL PARTIES:
Central Colorado Water Conservancy District,the Ground Water Management Subdistrict of the Central Colorado Water Conservancy
District,and the Well Augmentation Subdistrict of the Central Colorado Water Conservancy District
3209 West 28th Street
Greeley, Colorado 80634
Walter Thomas Jones and John Edward Jones
17024 Road 2
Wiggins, Colorado 86654
Sublette General Partner,Inc.,a Colorado corporation
7860 Berry Place,Suite 202
Englewood,Colorado 80111
Leroy D. Smith and Myrtle E. Smith
P.O. Box 81
Orchard,Colorado 80649
County of Weld Colorado,a political subdivision of the State of Colorado
Weld County Centennial Center
915 10th Street
Greeley,Colorado 80631
Helen C. Clark,deceased
20133 Weld County Road 93.5
Orchard,Colorado 80649
Phillip Clark, aka Phillip W. Clark(wife-Sharon L. Clark)
Orchard,Colorado 80649
Joyce Ann Clark,now Joyce Ann Segura(husband-Jose Angel Segura)
20133 Weld County Road 93.5
Orchard,Colorado 80649
Jean H.Flanagan(husband-Joseph L.Flanagan)
1900-30`h Street Road
Greeley,Colorado 80631
David Clark,aka David A. Clark
20133 Weld County Road 93.5
Orchard,Colorado 80649
John C. Kruse
7391 Rattlesnake Drive
Littleton,Colorado 80125
Catherine C. Kruse,now Catherine C.Kruse Bradley
3605 North High Ridge Drive
Peoria,Illinois 61614
U.S.AgBank FCB,formerly Federal Land Bank of Wichita
245 North Waco
Wichita,Kansas 67202
Peter H. Coors
15205 W 32°a Avenue
Golden,Colorado 80401
This report was prepared from a careful examination of the numerical indices of the LandAmerica Title Company in Greeley,Colorad
and of the records located in the County Clerk and Recorder's office of Weld County,Colorado.This report is made solely for the bene
of Baseline Minerals, Inc. for the purpose of assisting in a determination of the apparent ownership of the mineral lands involved. T]
instruments referred to have not been examined to determine their legal sufficiency. No warranty of title is expressed or implied and t
liability is assumed by the preparer of this report.
Prepared By: John Lifer
Page 4 of 4
Fee 0601 Weld Co Mins 0601 4N-61W-(13 NW N2NE SWNE NWSW) (2).doc
CURSORY OWNERSHIP REPORT
Fee 0601 DATE: September 16,2008
REV.DATE:
PROSPECT: INDIAN PEAKS
LAST DOC: Rec. #3376425
DESCRIPTION:
Weld County,Colorado
Township 4 North,Range 61 West, 6th P.M.
TRACT ONE: Section 13: N2NE(Containing 80.00 acres,more or less)
- TRACT TWO: Section 13: S2NW(Containing 80.00 acres,more or less)
TRACT THREE: Section 13: NENW(Containing 40.00 acres,more or less)
—TRACT FOUR: Section 13: SWNE(Containing 40.00 acres,more or less)
TRACT FIVE: Section 13: NWNW(Containing 40.00 acres,combined,more or less)
TRACT SIX: Section 13: That portion of the NWSW lying South of Irrigation Ditch(Containing 32.9 acres, more or
less)
TRACT SEVEN: Section 13: That portion of the NWSW lying North of Irrigation Ditch(Containing 7.1 acres,more or
less)
TOTAL GROSS ACRES: 320.00 more or less,combined
TRACT ONE: 80.00 acres,more or less
SURFACE OWNER: Central Colorado Water Conservancy District, the Ground Water Management Subdistrict of
the Central Colorado Water Conservancy District, and the Well Augmentation Subdistrict of
the Central Colorado Water Conservancy District
OIL AND GAS OWNER INTEREST NET ACRES LEASEHOLD STATUS
Leroy D. Smith and Myrtle E. Smith,life 100.000000% 80.000000 APPEARS OPEN OF RECORD
estate(#3339507)
Remainder: Central Colorado Water
Conservancy District,the Ground Water
Management Subdistrict of the Central
Colorado Water Conservancy District, and
the Well Augmentation Subdistrict of the
Central Colorado Water Conservancy
District
100.00000% 80.000000
TRACT TWO: 80.00 acres,more or less
SURFACE OWNER: Sublette General Partner,Inc.—that portion lying South of Irrigation Ditch.
Walter Thomas Jones.and John Edward Jones,as tenants in common—that portion
lying North of Irrigation Ditch.
OIL AND GAS OWNER INTEREST NET ACRES LEASEHOLD STATUS
County of Weld,Colorado(1107/157) 100.000000% 80.000000 APPEARS OPEN OF RECORD
100.00000% 80.000000
Page 1 of 4
Fee 0601 Weld Co Mins 0601_4N-61W-(13 NW_N2NE_SWNE_NWSW)(2).doc
a WELD COUNTY ATTORNEY'S OFFICE
915 TENTH STREET
P.O. BOX 758
GREELEY, CO 80632
TWEBSITE: www.co.weld.co.us
C
PHONE: (970) 336-7235
FAX: (970)352-0242
COLORADO
December 11,2008
Austin Mater, CPL
LoneTree Energy&Associates, LLC
141 Union Boulevard,Suite 260
Lakewood,CO 80228
Re: Bid#B019-08
Dear Mr. Mater:
The Board of County Commissioners of Weld County has reviewed your letter of December 3,
2008,regarding the Board's decision to reject your bid for Bid#019-08.
The Board will not reconsider its decision. Contrary to your assertions, the Board has total
authority to reject any bid offer to lease minerals if the Board, in its sole discretion, determines
that it does not wish to accept the offer and enter into the lease. The Board's authority to reject a
bid offer does not need to be stated in the bid documents for it to be effective.
Please feel free to call me at(970) 356-4000, ext.4390, if you should have any questions
regarding this letter or wish to discuss.
Sincprelv,/�7
Bruce T.Barker
Weld County Attorney
pc: Esther Gesick
r'' „tiCOE'31-24/KivJ /a-/7- 2U�P
!t_ONETREEENoERGY
CIATES, LLC
December 3,2008
Weld County Board of County Commissioners
915 10th Street
3rd Floor
Greeley, CO 80631
Attn: Commissioner William Jerke
Re: Notice of Bid#B019-08
T4N-R61W-Section 13: S/2NW/4
T4N-R61 W-Section 13: NE/4NW/4
T4N-R61W-Section 13: SW/4NE/4
Weld County, CO
Dear Commissioner Jerke:
On December 1, 2008, LoneTree Energy & Associates, LLC submitted a sealed bid for
oil and gas lease on the subject lands per the attached instructions (Exhibit A attached
hereto) which are posted on the Weld County website. The bid was for $25.00/acre
which far exceeds the $10.00/acre minimum required per the aforementioned
instructions. Our bid was rejected by the Weld County Board of Commissioners because
they apparently were not satisfied with the offer or the level of competition on the lease.
Furthermore, we were not offered the opportunity for oral auction at the meeting as
described on the Notice of Sale (Exhibit B attached hereto). After researching the
instructions to bidders for oil and gas leases, we find no language which entitles the
Board of Commissioners the right to reject a high bid submitted in good faith for no
reason other than not being satisfied with the offer or level of competition. If there are
county by-laws that allow for that, or if the approval of the terms is further subject to the
Board approval,we recommend that be noted in the Sales Notice.
As you know, the price of oil and gas has dropped dramatically from the historical highs
in July, 2008. As a result of this, the level of enthusiasm and competition in the industry
is decreasing proportionately. Also,the location of the subject lands is on the outer edges
of the Wattenberg Field in Weld County, Colorado making this a less competitive area.
This should have been evidenced by the lack of interest at the Lease Sale on December 1,
2008. Another possible reason for the lack of interest for this section may be the high
royalty rate of 20% on the county lease form which is disproportionately high compared
to what we have been paying in the general area. As an example we refer you to the State
of Colorado leases we recently purchased (CO State Sale on 11/20/2008) in this area for
an average price of $31.66/acre and a 12.5% royalty interest for 5 years (Exhibit C,
includes State lease form and the Sales Results, attached hereto). Many companies are
not interested in purchasing leases in certain areas of risk if the royalty burdens on the
lease exceed 15-16.66%.
Page 1 of2
I4 i UNION Rout EVARD, Sure 260 • _Anew000, CO 80228
T :303) 233-8700 • F (303) 233-8787
J .
Due to the fact that we submitted our bid in person, in good faith per the instructions
attached, we believe that we should be entitled to purchase the lease on this particular
section. We, therefore, request that the Board of Commissioners reconsider our bid for
lease and grant the lease per the terms offered. We are available to meet in person or by
telephone at the convenience of the Board. Thank you and I look forward to hearing
from you.
Very truly yours,
VY ---
Austin Mater, CPL
cc: Marcia Walters-Weld County Purchasing Department
enc
CH Garcia /1
Jerke
1 I
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Long
Masden �l
Rademacher _ dav
Page 2 of 2
Exhibit A
INSTRUCTIONS TO BIDDERS
The Weld County,Colorado,OII and Gas Lease will be used as the bid form. Please note the Weld County Oil and
Gas Lease contains a signature sheet which must be signed and notarized.
1. Please do not fill in date on first page of oil and gas lease. The date will be filled in when the Weld County
Commissioners have approved the lease.
2. Bidder must fill in name and address of lessee in the introductory paragraph of the Weld County Oil and
Gas Lease.
3. Bidder must complete the first paragraph following"WITNESSETH"of the Weld County Oil and Gas Lease,
writing the dollar amount for the bonus amount of the Oil and Gas Lease on a per mineral acre basis.
4. Bidder must sign as lessee and have notarized.(Last page of the Weld County Oil and Gas Lease).
5. The term of the leasing period shall be for 3 years.
6. There shall be a continuation of the sealed bid process with the amendment that the top two bidders and
any other bidder within 10%of the top bid shall participate In an auction. The opening of the sealed bids
and the auction shall be held the same day. If an auction is held on a parcel of land the higher bidder may
give a company check or personal check for the difference between the written bid and oral bid.
7. A bid of at least$10.00 per acre shall be the minimum amount required.
8. Where there is a conflict concerning the ownership of the lease,the owner of the lease shall provide
evidence of ownership.
9. Certified checks or cashier's check for the bonus amount of bid must accompany the bids. Other forms of
security will not be accepted. A filing fee of$10.00 must also accompany the bid. This may be certified
check,cashier's check or cash. The check for the bonus amount will be returned to the unsuccessful
bidders immediately after the awarding of the bid. The$10.00 for the filing fee is kept by Weld County. The
name and address for the lessee must appear on the checks.
10. Bidder must use the enclosed envelope for returning bid and must show name and mailing address in the
upper left hand corner of the envelope.
11. Errors sometimes occur in the listing,though every effort is made to avoid them. The Board is not liable
for any Inconvenience or loss caused by errors which may occur.
12. Checks are to be made payable to the Board of Weld County Commissioners.
_ _
Exhibit B
NOTICE OF BID#8019-08
Weld County, Colorado, will receive sealed bids for the gas and oil leases on the parcels shown below until
Monday,.December 1 2008 no later than 8:30 a.m.in the Weld CountyPurchasing Department 91510th
Street, 3rd Floor Greeley,CO 806311. BE ADVISED THAT THE WELD COUNTY CENTENNIAL CENTER,
'915 10"a STREET, GREELEY COLORADO IS A SECURE FACILITY. ALL PERSONS ENTERING THE
BUILDING MUST PASS THROUGH SECURIY. IF YOU DECIDE TO DELIVER YOUR BID IN PERSON YOU
SHOULD ALLOW ENOUGH TIME TO ARRIVE AT THE PURCHASING DEPARTMENT AT OR BEFORE THE
ESTABLISHED BID TIME.
The bids will be opened and read aloud.during the regularly scheduled Weld County Commissioners Public
Board Meeting held in the Assembly Room on the first floor of the Centennial Building,915 10th Street,Greeley.
The exact time of the reading will not be specified; however,the Weld County Board Meeting begins at 9:00
a.m.and bids will be listed after Communications on the agenda. After the bids are read,an auction will be held
and the top two bidders and any other bidder within 10%of the top bid shall participate in the auction.
1) NE V. • - . Section 12,Township ON,and Range 66W containing 160.00 acres
2) NW % Section 14,Township 8N,and Range 66W containing 160.00 acres
3) WY SET. Section 14,Township 8N,and Range 66W containing 80.00 acres
4) SE'% Section 14,Township 9N,and Range 66W containing 160.00 acres
5) NW% Section 24,Township 9N, and Range 66W containing 160.00 acres
6) E'G SE 1/4 Section 26,Township 9N,and Range 66W containing 80.00 acres
7) NW i44 SE% Section 26,Township 9N,and Range 66W containing 40.00 acres
8) S%NW Y. Section 13.Township 4N,and Range 61W containing 80.00 acres
NE'1NW Y4 Section 13,Township 4N,and Range 61W containing 40.00 acres tali one.ease's
SW%NE Yi Section 13,Township 4N,and Range 61W containing 40.00 acres
"Leases and instructions will be available on website:www.co.weld.co,us listed under Purchasing""
Further information may be obtained from the Weld County Purchasing Department,915 10th Street.Greeley,
Colorado(970-358-4000 x4223.) The Board of Wald County Commissioners shall give preference to resident
Weld County bidders in all cases where the bids are competitive in price and quality.
WELD COUNTY, COLORADO
By: Monica Mika
Director of Administrative Services
Date Advertised: November 14th,2008
Greeley Tribune
Daily Journal
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SLB 193-6
Rev.8/89
STATE OF COLORADO
BOARD OF LAND COMMISSIONERS
OIL AND GAS LEASE NO.OG 7000.4
Containing 640.00 acres,more or less: Land Fund School
THIS LEASE AGREEMENT,Dated this 20th day of May,2004 made and entered into by and between the
STATE OF COLORADO.acting by and through the STATE BOARD OF LAND COMMISSIONERS,hereinafter
called Lessor,and Joe Sample
1313 Sherman Street,Suite 621,Denver,CO 80203
hereinafter called Lessee:
WITNESSETH
WHEREAS,Said Lessee has applied to Lessor for an oil and gas lease covering the land herein described,
and has paid a filing fee in the amount of$ 20.00 , plus a bonus consideration of$ -0- fined by Lessor as an
additional consideration for the granting of this lease, and Lessee agrees to pay an annual rental of$ 960.00
computed at the rate of$ 1.50,per acre or fraction thereof per year.
WHEREAS, All the requirements relative to said application have been duly complied with and said
application has been approved and allowed by Lessor; ?<x
THEREFORE, In consideration of the agreements herein, on thepatt of Lessee to be paid, kept and
performed,Lessor does lease exclusively to Lessee for the sole and only purpoffiebf drilling for,development of and
production of oil and gas,or either of them,thereon and therefrom with the right toiown,except as set forth in the
METHANE FROM COAL SEAMS paragraph.herein, all oil and,gas so produced and saved therefrom and not
reserved as royalty by Lessor under the terms ofdtin lease;together with rights-of-way,easements and servitudes for
pipelines,telephone and telegraph lines,tanks ata( g}ves for producing and caring for such products,and any and
all rights and privileges necessary for the expltfioit} d operation of said land for oil and gas, the following
described land situated in the County gf Denver S*of .q` 1prado,and more particularly described as follows:
DESCRIPTION OF LAM .a TOVWW'SHIP RANGE SECTION
Surface Patents:Yes. No '"
TO HAVE AND TO HOLD Said land,and all the rights and privileges granted hereunder to Lessee until the
hour of twelve o'clock noon on the 20°i day of May,2009,as primary term,and so long thereafter as oil and gas,or
either ofthem,is produced in payng quantities from said land or Lessee is diligently engaged in bona fide drilling or
reworking operations on said land,subject to the terms and conditions herein. Drilling or reworking operations shall
be deemed to be diligently performed if there is no delay or cessation thereof for a period greater than 60 consecutive
days unless an extension in writing is granted by Lessor; provided that such drilling or reworking operations are
commenced during said primary term or any extension thereof or while this lease is in force by reason of production
of oil and gas or either of them,or that such reworking is commenced within 60 days upon cessation of production
for the purpose of re-establishing the same, and provided further that such production is commenced during such
primary term or any extension thereof, or while this lease is in force by reason of such drilling or reworking
operations or other production.
METHANE FROM COAL SEAMS - Coalbed methane may be produced, saved and/or sold by a coal
mining lessee from mineable coal measures and from roofs and floors of mineable coal measures and the gas shall be
the property of that lessee provided that the gas is removed only as a mining safety procedure prior to or during
mining. Gas that is uneconomical to produce may be vented or flared provided that such venting or flaring complies
with all Federal and State requirements. Gases produced by the oil and gas lessee from the mineable coal measures
and from roofs and floors of mineable coal measures prior to,during,or after mining shall be the property of the oil
and gas lessee tinder the terms of lease. Oil and gas operations shall not render coal seams unmineable.
EXPLORATION - Lessor reserves the right to conduct exploration on the leased land provided such
exploration does not interfere with rights granted herein.
In consideration of the premises,the parties covenant and agree as follows:
I. RENTAL-If lease is extended for any reason beyond primary term rental will be determined by Lessor.
The rental in effect at the time production is established shall not be increased due to the term of this lease being
extended by such production. Rentals set at the time of established production shall be paid during the remaining life
of this lease,annually, in advance,on or before each anniversary date hereof. There shall be no refund of unused
rental.
2. ROYALTY - Lessee shall account for any and all substances produced on the leased land and Lessee
shall pay to Lessor a royalty on same in addition to the rentals provided. Products used on the leased land,
unavoidably lost or flared on the leased land,may be exempt with approval of Lessor:
(a) On oil, one-eighth of the oil produced and saved from the leased land.
At the option of lessor,and with 60 days'notice to Lessee,Lessor may take its royalty oil in kind,
in which event Lessee shall deliver such royalty oil to Lessor on the leased land, free of cost or
deduction,into the pipelines or storage tanks designated by Lessor,but Lessee shall not in such case
be required to provide free tankage for any such oil for a longer period than I:Month after the same
is run into tanks. With 60 days'notice to Lessee,Lessor may cease taking oil royalty in kind. When
paid in cash,the royalty shall be calculated upon the fair market valueofte oil at the well which
shall not be deemed to be less than the price actually paid to Lessee at the well by the purchaser
thereof;and in no event shall the royalties be based:upon a market value at the welt:less than the
posted price in the field for such oil,or in the absenceeta posted price in the field for such oil,upon
a market value at the well less than the prevailing price itceived by other producers in the field for
oil of like grade and gravity at the time such oil is tort into pfpehnes or stotanks.
(b) On gas,including casinghead gas or other gaseous substance, one- lh of the fair market value at
the well or of the price received by Lessee at the well,whichever is greater,of all gas produced and
sold from the leased land or itti cl off the land by Lessee. A copy of all contracts for sale of gas
shall be furnished to Lessor. 11If rotas is sold under a contract that has been approved by Lessor,
the fair market value of such gaSfor delanniningthe royalties payable hereunder shall be the price at
which such gas is sold under such cot:ri pct. No approval by Lessor of the terms of any such
agreement shall op4'#`NIRto make Lamor a patty thereto or obligate it thereunder in any way. At the
option of Lessor,a' ..days notice tote see,Lessor may take its royalty in kind. With 60
days'notice to Lessee,lossor'may ceasetaking gas royalty in kind.
(c) All costs of marketing the orlaidlor gas produced shall be borne by lessee and such costs shall not
directly or indirectly reduce the royalty payments to lessor,except that marketing costs for Lessors
in-kind royalty shall be borne by Lessor.
lfLessor owns a lesser interest in the oil and gas deposits of the above described land than the entire
and undivided fee simple estate, then the royalties and rentals herein provided shall be paid to
Lessgrooly in the proportion which its interest bears to the whole and undivided fee.
3-.RECORDS-Lessee agrees to keep and to have in possession complete and accurate books and records
showing the production and:disposition of any and all substances produced on the leased land and to permit Lessor,
at all reasonable hours, to examine the same, or to furnish copies of same to Lessor upon request along with
purchasers supporl.dne rnentation. Lessor will not be unreasonable with requests.All said books and records shall
be retained by Lessee and made available in Colorado to lessor for a period of not less than 5 years. All gas
contracts and subsequent agreements and amendments shall be submitted to Lessor within 60 days of execution.
4. MEASUREMENTS - All production shall be accurately measured using standards established by the
American Gas Association(AGA)and/or the American Petroleum Institute(API)and all measuring devices shall be
tamperproof as nearly as possible. Oil royalties due within the terms of this lease shall be calculated on actual and
accurate measurements within API standards unless a different means of measurement,subject to Lessor's approval,
is provided.
5. PAYMENTS&REPORTS-All payments and reports due hereunder shall he made on or before the day
such payments and reports are due. Nothing in this paragraph shall be construed to extend the expiration of the
primary term hereof.
Paget_of 6
Oil royalty payments and supporting documents shall be submitted prior to the last day of the calendar
month following each month's sale of production, and gas royalty payments and supporting documents shall be
submitted prior to the last day of the second calendar month following each month's sale of production. Payments
and supporting documents for new wells shall be submitted prior to the last day of the third calendar month following
first month's sale of production.
All payments shall be made by cash,check,certified check or money order. Payments having restrictions.
qualifications, or encumbrances of any kind whatsoever shall not be accepted by Lessor. A penalty for a late
payment shall be charged as set forth in the PENALTIES paragraph herein.
6. PENALTIES- A penalty shall be imposed for, but not limited to, late payments, improper payments,
operational deficiencies,violation of any covenant of this lease,or false statements made to Lessor. Penalties shall
be determined by lessor unless otherwise provided for by law and may be in the form of,but not limited to,interest,
fees,fines,and/or lease cancellation.
7. I.A W-The terms and conditions of this lease shall be performed and exercised subject to all laws,rules,
regulations,orders,local ordinances or resolutions applicable to and binding upon thehdminis[mtion of lands owned
by the State of Colorado.and to laws,rules and regulations governing oil and gas operations in Colorado. Violations
shall result in penalties as provided for by law or as set forth in the aforementioned schedule or shall,at the option of
Lessor,result in default as provided hereinafter.
8. SURRENDER-Lessee may at any time,by paying to ttssor all amounts then due as provided herein,
surrender this lease insofar as the same covers all or any portion oft land herein leased and be relieved from
further obligations or liability hereunder with respect to the land so surrendered;provided that no partial surrender or
cancellation of this lease shall be for less than contiguous tracts of appracisnately 40 acres or Governmental lot
corresponding to a quarter-quarter section;provided further that this surrender4ause and,the option herein reserved
to Lessee shall cease and become absolutely inoperative immediately and concunentiy pith the institution of any suit
in any court of law by Lessee, Lessor or any assignee of either to enforce this lease;'or any of its terms express or
implied. In no case shall any surrender be effeplive until Lessee shall have made full provision for conservation of
the leased products and protection of the surf'acefights of the teased land.
9. ASSIGNMENTS-
(a) Lessee,with writtews f Lessot shall live the right to assign the entire leasehold interest of
said Lessee in all or dalt� f t**coVered hereby,but not less however,than contiguous tracts of
approximately 40 acres` Governinetini.lot corresponding to a quarter-quarter section for any
partial assignment,and for Koval of such assignment Lessor shall make an assignment charge in
an amount to be date mined bigtessor. Prior to written approval by Lessor of assignment of this
lease,Lessee(assignor)shall not relieved of its obligations under the terms and conditions herein.
An assignment shall not extend the term of this lease.
'(b) If any assignment of a portion of the land covered hereby shall be approved,a new lease shall be
issued to the assignee covering the assigned land,containing the same terms and conditions as this
legsP,.indd,} ited as.to term as this lease is limited,and the assignor shall be released and discharged
•
from all further obligations and liabilities as to that portion so assigned.
(c) Lessee shall notify Lessor of all assignments of undivided percentage or other interests. Said
interests Will not be recognized or approved by Lessor,and the effect of any such assignments will
be strictly and only between the parties thereto,and outside the terms of this lease;and no dispute
between parties to any such assignment shall operate to relieve Lessee from performance of any
terms or conditions hereof or to postpone the time therefor.Ilowever, if Lessee assigns 100 percent
of said interest in this manner,a leasehold assignment must be received and approved by Lessor to
assure that a leasehold interest is maintained by the record lessee. Lessor shall at all times be
entitled to look solely to Lessee or his assignee shown on its books as being the sole owner hereof,
and for the sending of all notices required by this lease and for the performance of all terms and
conditions hereof
(d) Although not binding on lessor.all instruments of every kind and nature whatsoever affecting this
lease shall be filed in the records of the Mineral Department of lessor.
10. OVERRIDING ROYALTY-Any and all reservations or assignments of overriding royalties shall not
exceed 5 percent,including any overriding royalties previously provided for. In the event that production drops to an
amount that would cause the well to be shut-in or to be plugged,then overriding royalties based on last in first
Page 3 of 6
out,or prorated,may be suspended to allow the well,if possible,to be economic.A reservation or assignment of an
overriding royalty interest shall not relieve Lessee of any of its obligations for payment of royalties to Lessor as
provided by ROYALTY paragraph herein.
11. OFFSET WELLS -Lessee agrees to protect the leased land from drainage by offset wells located on
adjoining lands not owned by Lessor,when such drainage is not compensated for by counter-drainage. It shall be
presumed that the production of oil and gas from offset wells results in drainage from the leased land,unless Lessee
demonstrates to Lessor's satisfaction by engineering,geological,or other data that production from such offset well
does not result in such drainage.or that the drilling of a well or wells on the leased land would not accomplish the
purposes of protecting the deposits under the leased land. Lessor's decision as to the existence of such drainage shall
be final,and Lessee shall comply with Lessor's order thereon or surrender this lease as to any such undeveloped
acreage as designated by Lessor.
12. DEVELOPMENT- tipon discovery of oil and gas or either of them on the leased land, Lessee shall
proceed with reasonable diligence to develop said land at a rate and to an extent commensurate with the economic
development of the field in which the leased land lies.
13. UNITIZATION - COMMUNITIZATION - In the event Lessor permits the land herein leased to be
included within a communitization or unitization agreement,the terms of this leasemay be deemed to he modified to
conform to such agreement. When only a portion of the land under this lease is comihjttod'by an agreement,Lessor
may segregate the land and issue a separate lease for each portion not committed [hereunder; the teen of such
separate lease shall be limited as to the original tenn of this lease. The terms of the lease on that portion remaining in
the unit shall be deemed to be modified to conform to such agreement Nonproducing leases`a1*lfterminate on the
first anniversary date of the lease following the termination date cd;the unit or part thereof modifying the lease,but in
no event prior to the end of the primary term of lease orthp extens�jgn term of the lease. -'
14. DISPOSAL WELLS-No well on State land shall be„used as a disposal or injection well without a
Disposal Well Lease approved by Lessor.
IS. PRODUCTION - Lessee shall, aebjeet to applic*ble laws, regulations and orders binding upon the
administration of state lands,operate and produceeft-leells upoit he leased land so long as the same are capable of
producing in paying quantities,and shall operate th s snoop as to,prgduce at a rate commensurate with the rate of
production of wells on adjoiningdds within the same 11164 and within the limits of good engineering practice,
except for such times as there exlatxnei1her:_market nor storage therefor, and except for such limitations on or
suspensions of production as may be approvedim writ tg by LLessor. Lessee shall be responsible for adequate site
security on all producing properties
16. SHUT-IN WELLS-1P Lessee shall complete a well on the leased land productive of oil and/or gas and
Lessee is unable to produce such oil and/or gas due to a lack of suitable market therefor, Lessor may grant Lessee
suspension of his obligations to produce hereunder until a suitable market for such oil and/or gas can be found,and
during arty'sf dt suspension period, it shall be deemed that oil and/or gas is being produced hereunder in paying
quantities!. Except,however,that beginning on the anniversary date next,of the year of an extension of the lease by
reason o$a shut-in well,Lessee shell pay to Lessor a shut-in royalty equal to$2 per acre of the lease per annum in
addition to the annual tentak The minimum amount of such shut-in royalty payment shall be $320. Each years
shut-in royaltyy shall be forllijted to Lessor except for the shut-in royalty paid for the year during which the well
begins production. The maximum extension of the lease, due to the existence of a shot-in well, shall be 5 years
beyond the extension teafl.as described in the EXTENSION paragraph herein. The granting of any further
extensions shall be at the sole option of Lessor.
17. OPERATIONS - No exploration, drilling or production operation, including permanent installations.
shall he within 200 feet of any existing building or other improvement,including water well or reservoir,without the
written permission of the owner of said improvements. Lessee shall keep a correct log of each well drilled
hereunder, showing by name or description the formations passed through.the depth at which each formation was
reached,the number of feet of each size casing set in each well,where set,and the total depth of each well drilled.
Lessee,within 30 days after the completion or abandonment of any well drilled hereunder,shall file in the office of
Lessor a complete and correct log of such well,together with a copy of the electric log and the radioactivity log of
the well when such logs,or either of them,arc run; and also a copy of all drill stem test results,core records and
analyses, record of perforations and initial production tests, if any. If any of the information required by this
paragraph is contained in reports required to be filed with the Oil and Gas Conservation Commission of Colorado,
the requirements of this paragraph for such information may be satisfied by such filing with said Commission,except
for copies of the reports as are required by the following paragraph, and provided that all such information is
immediately available to Lessor. Any proprietary information so submitted shall not be subject to public inspection
under Colorado law.
Page 4 of 6
•
Lessee shall bury pipelines below plow depth. Lessee shall set and cement sufficient surface casing to
protect the fresh water wells of the area.
18. NOTIFICATION-Lessee shall notify Lessor and the surface lessee or surface owner of the location of
each drill site at least two weeks prior to commencing drilling operations thereon. Lessee shall notify Lessor before
commencing to plug and abandon any well by copy of Lessee's request for approval or sundry notice of intent to plug
and abandon.
19. BONDS -Lessee shall be liable for all damages to the surface of the land, livestock,growing crops,
water wells, reservoirs, or improvements caused by Lessee's operations on said land. No operations shall be
commenced on the land hereinabove described unless and until Lessee shall have filed a good and sufficient bond
with Lessor, in an amount to be fixed by Lessor, to secure the payment for such damages as may be caused by
Lessee's operations on said land and to assure compliance with all the terms and provisions of this lease,the laws of
the State of Colorado,and the rules and regulations thereto appertaining. A bond may be held in effect for the life of
production of any well.
20. SETTLEMENT- Lessee shall not remove any machinery,equipmenfor fixtures placed on said land,
other than drilling equipment, nor draw the casing from any well unless anditlitil all payments and obligations
currently due Lessor under the terms of this lease shall have been paid or satisfied„Any mat hinery,equipment or
fixtures left on this land for a period of more than 6 months after the expiration hereof-shall automatically become
the property of Lessor.
21. OTHER DISCOVERY - Should Lessee discover any valuable products other than oil and gas,on or
within the leased land,Lessee shall within 7 days report such:diseevery to Lessor,in which event Lessee and Lessor
may negotiate a provision for production of such discovery,'
22. WATER -This lease does not grant permission,express or implied,to Lessee for water exploration.
drilling or establishing water wells without written penµ ssion of the surface owner and other required state permits.
If Lessee desires to establish or adjudicate any water right fez beneficial use on the leased land in direct relationship
to lease operations this adjudication or application shall be:itb;the name of Lessor if Lessor is the surface owner.
Water for use off the lease may only be used with permission office surface owner and a charge may be imposed for
this use.
23. DEFAULT-Upon failure or default of Lessee to comply with any of the terms and provisions hereof,
including but not lintited to the failure to comply with laws,rules and regulations governing Colorado oil and gas
operations and including Lessor's policy now or hereafter in force relative to this lease,provided that no policy made
after the execution of thin igege affecting either the length of the term hereof the rate of royalty, or payment
hereunder,or the assignment ifeia4shall operate to alter the terns and conditions of this lease, Lessor is hereby
authorized upon notice and 4earing$mi after provided,to cancel this lease as to all of the leased land so claimed
or possessed by Lessee hereppder,ifyiVegite1M4of any such default or failure,Lessor shall,before making any such
cancellation,send to Lessee**fled mail,to the post office address of said lessee as shown by the records of
Lessor,a notice of intention to4sancel for such failure or default,specifying the same,stating that if within 30 days
from the date of mailing said tlfijce, Lessee shall correct such failure or default to the satisfaction of Lessor, no
cancellation will be made: If such failure or default is not corrected within 30 days after the mailing of such notice,
and if Lessee does not request a hearing on such notice within 30 days,this lease will terminate and be cancelled by
operation of this paragraph without further action by Lessor,or further notice to Lessee.
24. EXTENSION- If,at the expiration of the primary term of this lease,production of oil or gas has not
been obtained on the leased premises but drilling operations are being conducted thereon in good faith and in a good
and workmanlike manner, Lessee may,on or before the expiration of the primary term,make written application to
Lessor for an extension of this lease for a term equal to one year. Such application must be accompanied by a
payment of$10 per acre or portion thereof. This lease shall not be extended for more than one year past the primary
term unless production in paying quantities has been obtained or unless extended by some other provision hereof.
25. HOLD HARMLESS-Lessee shall indemnify Lessor against all liability and loss,and against all claims
and actions,including the defense of such claims or actions,based upon or arising out of damage or injury,including
death, to persons or property caused by or sustained in connection with operations on this leased land or by
conditions created thereby,or based upon any violation of any statute,ordinance.or regulation.
26. CONDEMNATION-If the leased land shall be taken in any condemnation proceeding,this lease shall
automatically terminate as of the date of taking. The award for such condemnation shall be paid to Lessor,except for
any specific award(s)paid to Lessee for severed oil and gas reserves,in which event a percentage of such specific
Awards equal to royalty as specified under Item 2(Royalty)shall be paid to Lessor in lieu of royalty lost by irtue of
Page 5 of 6
the condemnation. Improvements shall be removed by Lessee per terms in the SETTLEMENT paragraph herein. If
only a portion of the leased land is taken by condemnation,Lessee may,at its option,terminate this lease or teminate
only that portion of the lease so taken.
27. ERRORS-Every effort is made by Lessor to avoid errors in all procedures including but not limited to
auction listings and lease preparation. Lessor shall not be liable for any inconvenience or loss caused by errors
which may occur. Lessee shall notify Lessor immediately upon discovery of any errors or discrepancy whatever.
28. ARCHAEOLOGY -Lessee shall not destroy,disturb,mar,collect,remove or alter any prehistoric or
historic resources of any kind on state lands as provided by law. These resources include but are not limited to all
artifacts of stone, wood or metal, pictographs. structures, and bones. A discovery of anything of prehistoric or
historic nature shall be reported to Lessor or the State Archaeologist immediately.
29. DEFINITIONS-
A. "Gas" as used herein shall mean all gases (combustible and noncombustible), including but not
limited to all gaseous hydrocarbons.gaseous compounds,carbon dioxide,and helium.
B. "Oil and gas" as used herein shall include all substances produced as byproducts therewith,
including but not limited to sulfur.
C. "Paying quantities"as used herein shall mean and refer to quantities of oil and gas or of either of
them sufficient to return to Lessor an amount equal to the shut-in royalty.
30. TAXES- Lessee shall pay all property taxosxpr payplents ins hen of taxes,lawfully assessed for the
leased premises or improvements thereon.
333,
31. HEIRS AND ASSIGNS-The benefits and obligatiot}s of this lease shall inure to and be binding upon
the heirs, legal representatives, successors or assigns one spebsut no sublease or assignment hereof or of any
interest herein, shall be binding upon Lessor until the same₹has been approved by Lessor as explained in the
ASSIGNMENTS paragraph provided.
32. IN WITNESS WHEREOF,Lessor has hereunto signed and caused its name to be signed by the STAIN
BOARD OF LAND COMMISSIONERS,with the seal of the office affixed,and Lessee has signed this agreement.
the day and year first above written.
STATE BOARD OF LAND COMMISSIONERS
Recommended:
MAW,Davis,Minerals Di eefer John Brejcha,Acting Director
LESSEE
ATTEST Seal or Authority
State of
County of
The foregoing instrument was acknowledged before me this day of ,by
as being authorized to execute same.
Notary Public
My Commission Expires
(SEAL)
Page 6 of 6
620 Centennial Building Denver,CO 80203
1313 Sherman Street Phone: (303)866-3454
STATE BOARD OF LAND COMMISSIONERS
OF THE
STATE OF COLORADO
Oil and Gas Lease Auction
Thursday,November 20,2008
10:00 am
Room 318 Centennial Building
1313 Sherman Street
Denver, CO 80203
NOTICE IS HEREBY GIVEN,That the State Board of Land Commissioners,by means of its regular leasing
procedure(oral bidding), intends to grant oil and gas leases on the tracts listed.Leases will be on Colorado Oil
&Gas Lease Form 193-6(Rev. 8/89),as amended. The Board reserves the right to reject any and all bids,and
to withdraw any tract at any time.
PAYMENT IN FULL FOR ANY AND ALL TRACTS IS DUE AND PAYABLE AT THE CONCLUSION
OF THE SALE.A SUCCESSFUL BID CONSTITUTES THE CREATION OF A DEBT TO THE STATE OF
COLORADO
Tract Acreage Note# Subdivision Twp Rng Sec Survey County Patent
1 640.00 ALL 14S 44W 16 6th PM Cheyenne Yes
2 640.00 ALL 15S 45W 36 6th PM Cheyenne No
3 640.00 ALL 41N 13W 16 NM PM Dolores Yes
4 640.00 ALL 8S 57W 14 6th PM Elbert No
5 640.00 ALL 8S 57W 16 6th PM Elbert No
6 422.00 Lots 1-4,NE,NENW,N2SE,SESE 8S 57W 18 6th PM Elbert No
7 440.00 W2NE,SENE,NENW, W2NW, 8S 57W 26 6th PM Elbert No
SESW, SE
8 609.20 Lots 1-4,E2,E2W2(All) 8S 57W 30 6th PM Elbert No
9 640.00 ALL 8S 57W 32 6th PM Elbert Yes
10 320.00 W2 8S 57W 34 6th PM Elbert No
11 640.00 ALL 8S 57W 36 6th PM Elbert No
12 630.40 8 Lots 1-4, S2N2,S2(All) 9S 57W 2 6th PM Elbert No
Page 1 of 7
13 304.96 8 Lots 1-4, SENE,SWNW,W2SW 9S 57W 4 6th PM Elbert No
14 640.00 ALL 9S 57W 10 6th PM Elbert Yes
15 640,00 8 ALL 9S 57W 12 6th PM Elbert No
16 240.00 SW,S2SE 9S 57W 14 6th PM Elbert Yes
17 640.00 ALL 9S 57W 16 6th PM Elbert Yes
18 640.00 ALL 9S 57W 22 6th PM Elbert Yes
19 480.00 N2, SE 9S 57W 24 6th PM Elbert Yes
20 640.00 ALL 9S 57W 26 6th PM Elbert No
21 640.00 ALL 9S 57W 34 6th PM Elbert Yes
22 640.00 ALL 9S 57W 36 6th PM Elbert No
23 640.00 ALL 25S 70W 16 6th PM Huerfano No
24 640.00 ALL 26S 69W 16 6th PM Huerfano No
25 640.00 ALL 26S 69W 36 6th PM Huerfano No
26 640.00 ALL 26S 70W 16 6th PM Huerfano No
27 640.00 ALL 26S 70W 36 6th PM Huerfano
28 640.00 8 ALL 27S 66W 16 6th PM Huerfano No
29 480.00 N2NE,SENE,W2,SWSE 27S 66W 36 6th PM Huerfano Yes
30 640.00 8 ALL 27S 67W 16 6th PM Huerfano No
31 520.00 W2,SE, SWNE 27S 70W 16 6th PM Huerfano No
32 480.00 E2,E2W2 27S 70W 36 6th PM Huerfano No
33 120.00 SWNF.,W2SE 28S 66W 15 6th PM Huerfano Yes
34 80.00 W2NE 28S 66W 22 6th PM Huerfano Yes
35 640.00 ALL 28S 66W 36 6th PM Huerfano Yes
36 640.00 ALL 30S 67W 16 6th PM Huerfano Yes
37 640.00 ALL 30S 67W 36 6th PM Huerfano Yes
38 640.00 ALL 6N 79W 16 6th PM Jackson Yes
39 403.30 1 Lots 1,3,4,S2NW,SW, SENE 7N 79W 5 6th PM Jackson Yes
40 640.00 ALL 7N 79W 16 6th PM Jackson Yes
41 309.16 9 Lots 1-4,E2W2(W2) 8N 78W 30 6th PM Jackson No
42 308.36 2 Lots 1-4,E2W2,(W2) 8N 78W 31 6th PM Jackson No
43 80.00 1 E2SE 8N 79W 10 6th PM Jackson Yes
Page 2 of 7
44 240.00 W2NW,SW 8N 79W 11 6th PM Jackson Yes
45 200.00 2 NENW,E2SW,S2SE 8N 79W 23 6th PM Jackson No
46 40.00 2 SWSW 8N 79W 24 6th PM Jackson No
47 480.00 2 N2N2,SENE,SWNW,SW,S2SE 8N 79W 25 6th PM Jackson No
48 320.00 9 E2 8N 79W 26 6th PM Jackson No
49 40-00 1 SWSW 8N 79W 28 6th PM Jackson Yes
50 120.00 1 N2NW,NESW 8N 79W 29 6th PM Jackson Yes
51 312.60 1 Lots 3 &4,E2SW,SE(S2) 8N 79W 30 6th PM Jackson Yes
52 312.60 1 Lots 1 &2,E2NW,NE(N2) 8N 79W 31 6th PM Jackson Yes
53 160.00 1 W2SW,E2SE 8N 79W 32 6th PM Jackson Yes
54 160.00 2 NW 8N 79W 35 6th PM Jackson No
55 640.00 2 ALL 8N 79W 36 6th PM Jackson No
56 80.00 E2NE 9N 79W 18 6th PM Jackson Yes
57 640.00 ALL 9N 79W 36 6th PM Jackson Yes
58 120.00 SENE,E2SE ION 80W 15 6th PM Jackson Yes
59 640.00 ALL ION 80W 16 6th PM Jackson Yes
60 80.00 E2NE ION 80W 22 6th PM Jackson Yes
61 120.00 W2N W,NWSW ION 80W 23 6th PM Jackson Yes
62 80.00 SENW,NWSW ION 80W 26 6th PM Jackson Yes
63 40.00 SESE ION SOW 27 6th PM Jackson Yes
64 40.00 NENE ION 80W 34 6th PM Jackson Yes
65 640.00 ALL ION 80W 36 6th PM Jackson Yes
66 640.00 ALL 19S 42W 36 6th PM Kiowa Yes
67 640.00 ALL 19S 44W 36 6th PM Kiowa Yes
68 572.50 All except 67.5 acres under Lake 20S 42W 16 bth PM Kiowa No
Devore
69 640.00 ALL 20S 43W 16 6th PM Kiowa No
70 640.00 A1,L 20S 43W 36 6th PM Kiowa No
71 640.00 6 ALL 20S 44W 36 6th PM Kiowa No
72 640.00 ALL 12S 53W 36 6th PM Lincoln Yes
73 640.00 ALL 6N 54W 22 6th PM Logan Yes
Page 3 of 7
74 320.00 N2 6N 54W 23 6th PM Logan Yes
75 639.99 2 3.20 ac Lot 18 4N 92W 30 6th PM Moffat No
27.76 ac Lots 8,9, 18, 19 4N 92W 31
143.11 ac Lot 13 4N 93W 25
465.92 ac Lots 1,7-9, 11-18,22-25 4N 93W 36
76 413.11 2 2.91 ac Lot 8 4N 93W 8 6th PM Moffat No
401.92 ac Lot 1 4N 93W 16
5.81 ac Lot 3 4N 93W 17
0.05 ac Lot 11 4N 93W 10
2.42 ac Lot 4 4N 93W 15
77 173.95 2 143.38 ac Lot 10 4N 93W 10 6th PM Moffat No
1.19acLot9 4N 93W 9
29.38 ac Lot 2 4N 93W 15
78 732.21 2 145.18 ac Lots 9, 16, 18, 19,22, 4N 93W 12 6th PM Moffat No
24,25
517.27 ac Lots 1,4 4N 93W 13
69.76 ac Lot 2 4N 93W 24
79 289.40 2 16.24 ac Lots 4,5 5N 94W 26 bth PM Moffat No
273.16 ac Lots 1,4 5N 94W 27
80 640.00 2 ALL 11N 94W 36 6th PM Moffat No
81 640.00 ALL 3N 59W 36 6th PM Morgan Yes
82 640.00 ALL 21S 42W 16 6th PM Prowers No
83 640.00 ALL 21S 42W 36 6th PM Prowers Yes
84 640.00 ALL 21S 43W 16 6th PM Prowers Yes
85 640.00 ALL 21S 43W 36 6th PM Prowers No
86 640.00 ALL 21S 44W 16 6th PM Prowers Yes
87 640.00 ALL 21S 44W 36 6th PM. Prowers Yes
88 160.00 NE 22S 44W 36 6th PM Prowers Yes
89 200.00 N2NW,SESW,S2SE 23S 42W 16 6th PM Prowers Yes
90 638.00 All except 2 ac in NENENE 23S 42W 36 6th PM Prowers Yes
91 280.00 SWNW,SW,S2SE 23S 43W lb 6th PM Prowers Yes
92 640.00 ALL 23S 43W 36 6th PM Prowers No
93 640.00 ALL 44N 9E 36 NM PM Saguache Yes
94 640.00 ALL 44N 10E 16 NM PM Saguache No
95 640.00 ALL 44N 10E 36 NM PM Saguache No
Page 4 of 7
96 480.00 N2NE,SENE,NW,W2SW, 44N 11E 16 NM PM Saguache No
NESE,S2SE
97 640.00 ALL 45N 9E 36 NM PM Saguache Yes
98 400.00 N2,SWSW,SESE 45N 10E 16 NM PM Saguache No
99 640.00 ALL 45N 10E 36 NM PM Saguache No
100 640.00 ALL 46N 9E 36 NM PM Saguache No
101 640.00 ALL 46N 10E 16 NM PM Saguache No
102 400.00 7 N2,W2SW 3N 68W 16 6th PM Weld Yes
103 640.00 ALL 5N 62W 10 6th PM Weld No
104 640.00 ALL 5N 62W 25 6th PM Weld Yes
105 640.00 ALL 5N 62W 26 6th PM Weld No
106 160.00 E2E2 5N 62W 27 6th PM Weld Yes
107 640.00 ALL 5N 62W 34 6th PM Weld No
108 640.00 ALL 5N 62W 35 6th PM Weld No
109 640.00 10 ALL 5N 62W 36 6th PM Weld No
110 640.00 11 ALL 6N 62W 16 6th PM Weld No
111 157.10 3 Lots 1 &2,E2NW (NW) 7N 63W 18 6th PM Weld No
112 80.00 W2SW 7N 63W 28 6th PM Weld Yes
113 640.00 ALL 7N 63W 36 6th PM Weld No
114 614.76 Lots 1-4,S2N2,S2(All) 8N 62W 5 6th PM Weld No
115 600.00 N2,N2S2,S2SW, SWSE 8N 62W 8 6th PM Weld No
116 640.00 ALL 8N 62W 16 6th PM Weld No
117 360.00 NWNE,W2 8N 62W 17 6th PM Weld No
118 74.00 11 Lot 1,SENE(E2NE) 8N 63W 6 6th PM Weld No
119 160.00 NE 8N 63W 8 6th PM Weld Yes
120 640.00 8 ALL 8N 63W 16 6th PM Weld No
121 640.00 ALL 8N 63W 36 6th PM Weld Yes
122 156.43 Lot 1,SENE,E2SE(E2E2) 8N 64W 2 6th PM Weld Yes
123 120.00 N2NE, SENE 8N 64W 10 bth PM Weld No
124 440.00 8 E2NE,SWNE,N2NW,SENW, 8N 64W 14 6th PM Weld No
E2SW,N2SE, SWSE
125 640.00 ALL 8N 64W 16 6th PM Weld Yes
Page 5 of 7
126 240.00 8 S2NW, SW BN 64W 24 6th PM Weld No
127 640.00 8 ALL 8N 65W 16 6th PM Weld No
128 640.00 ALL 8N 65W 36 6th PM Weld Yes
129 320.00 4 W2 8N 67W 36 6th PM Weld No
130 320.00 N2 9N 59W 36 6th PM Weld Yes
131 640.00 ALL 10N 58W 36 6th PM Weld Yes
132 120.00 11 N2NE,SENE ION 64W 22 6th PM Weld No
133 640.00 5 ALL 1IN 60W 16 6th PM Weld N'o
134 640.00 11 ALL ON 64W 36 6th PM Weld No
135 640.00 ALL 12N 61W 36 6th PM Weld Yes
Total Acreage Offered: 64,234.03 Total Tracts Offered:135 j
Note# 1- That portion of the parcel located within the boundaries of the Arapahoe National Wildlife Refuge
shall have no surface occupancy.
Note# 2- Prior to surface occupancy,Lessee must obtain approval from Lessor's District Manager for siting
of access and rig placement and timing activities due to grouse habitat. Lessee shall submit to
Lessor's District Manager an 8-Point Drilling Plan and an 12-Point Surface Restoration Plan as par
of any Application for Permit to Drill. Such plans shall meet current B L M standards.
Note# 3- This lease is subject to Conservation Reserve Program(CRP)lease number 42358.
Note# 4- This lease is subject to Conservation Reserve Program(CRP)lease number 42227.
Note# 5- This lease is subject to Wind Energy Lease no.WI 3507.
Note# 6- Prior to surface occupancy,Lessee must obtain approval from Lessor's District Manager for siting
of access and rig placement due to erodeable soils. Lessee shall submit to Lessor's District
Manager an 8-Point Drilling Plan and an 12-Point Surface Restoration Plan as pan of any
Application for Permit to Drill. Such plans shall meet current B L M standards.
Note# 7- This parcel is subject to Long Tem Non-development(LTND)Lease 1#346I. Issuance of this oil
and gas lease is conditioned upon receiving a waiver to allow for development with a No Surface
Occupancy term. If this condition is not satisfied the lease will not issue and bid moneys will be
refunded. Additionally,prior to surface occupancy on the remainder of the lease, Lessee must
obtain agreement with Lessor's District Manager on terms and condtions of,and location of
acecess and rig placement due to surface development.
Note# 8- Prior to surface occupancy,Lessee must obtain approval from Lessor's District Manager for siting
of access and rig placement and timing activities due to mountain plover habitat. Lessee shall
submit to Lessor's District Manager an 8-Point Drilling Plan and an 12-Point Surface Restoration
Plan as part of any Application for Permit to Drill. Such plans shall meet current B L M standards.
Note# 9- Prior to surface occupancy,Lessee must obtain approval from Lessor's District Manager for siting
of access and rig placement and timing activities due to boreal toad habitat. Lessee shall submit to
Lessor's District Manager an 8-Point Drilling Plan and an 12-Point Surface Restoration Plan as par
of any Application for Permit to Drill. Such plans shall meet current B L M standards.
Page 6 of 7
Note if 10- Prior to surface occupancy,Lessee must obtain approval from Lessor's District Manager for siting
of access and rig placement and timing activities due to bald eagle habitat. Lessee shall submit to
Lessor's District Manager an 8-Point Drilling Plan and an 12-Point Surface Restoration Plan as par
of any Application for Permit to Drill. Such plans shall meet current B L M standards.
Note 11 11- Prior to surface occupancy,Lessee must obtain approval from Lessor's District Manager for siting
of access and rig placement and timing activities due to swift fox habitat. Lessee shall submit to
Lessor's District Manager an 8-Point Drilling Plan and an 12-Point Surface Restoration Plan as par
of any Application for Permit to Drill. Such plans shall meet current B L M standards.
Errors sometimes occur in the listing though every effort is made to avoid them. The Board is not liable for
any inconvenience or loss caused by these errors,which may occur. Corporations must be registered and in
good standing with the Secretary of State's Division of Corporations to do business in Colorado.
Receipts for all rental payments after the first year will not be mailed to the lessees unless a stamped,self-
addressed envelope accompanies the rental payment.
SALE PROCEDURES
All tracts will be offered for sale by oral bidding at public auction. All monies are due immediately after the
sale. A successful bid constitutes the creation of a debt to the State of Colorado. The Board may elect,at
anytime including the day of the auction,to remove from the sale any tract or parcel at its discretion without
prior notice.
Rentals and bonus bidding are on a per acre basis. The minimum bid,often called the opener by the
auctioneer,is the first year's rental of$1.50 per acre or fraction thereof,plus the statutory fees(shown below).
The bidding beyond the minimum is a bonus bid,and the winning bidder will pay the amount bid plus the first
year's rental and fees. The bonus is a one-time payment only while the rentals are annual and continuous
whether or not production is established. The bidding is in multiples of$1.00 but the Board may change this
at any time. The lease will be awarded to the highest bidder unless withdrawn by the Board, at its sole
discretion,at a regularly scheduled meeting after the auction.
In accordance with the Americans with Disabilities Act,persons needing auxiliary communicative aids and
services for these meetings may call Jolene Cabrera at(303)866-3456,giving her at least five(5)working
days notice.
FEE SCHEDULE: $20.00 per tract
WARNING
There is no assurance that there is any potential for production on any tract offered for leasing by the State
Board of Land Commissioners.
Page 7 of 7
\Lyre r2/1
WELD COUNTY OIL AND GAS LEASE �J----
Containing 160.0 acres, more or less:
Containing 160.0 net mineral acres, more or less:
THIS LEASE AGREEMENT, dated this 1st day of December, 2008, made and entered into by and
between WELD COUNTY, COLORADO, a political subdivision of the STATE OF COLORADO, acting by and
through the BOARD OF COUNTY COMMISSIONERS OF THE COUNTY OF WELD, for its respective
interests, do BOARD OF COUNTY COMMISSIONERS, 915 10TH STREET, P.O. BOX 758, GREELEY, CO
80632, hereinafter called Lessor, and:
LONETREE ENERGY & ASSOCIATES, LLC, 141 UNION BLVD, SUITE 260, LAKEWOOD, CO 80228,
hereinafter called Lessee:
WITNESSETH
WHEREAS, said Lessee has applied to Lessor for an oil and gas lease covering the land herein
described, and has paid a filing fee in the amount of$10.00, plus a bonus consideration of$25.00 per mineral
acre, fixed by Lessor as an additional consideration for the granting of this lease, and Lessee agrees to pay
an annual rental of $160.00, computed at the rate of$1.00, per mineral acre or fraction thereof per year, and
the following consideration:
WHEREAS, all the requirements relative to said application have been duly complied with and said
application has been approved and allowed by Lessor;
THEREFORE, in consideration of the agreements herein, on the part of Lessee to be paid, kept and
performed, Lessor does lease exclusively to Lessee for the sole and only purpose of drilling for, development
of and production of oil and gas, or either of them, thereon and therefrom with the right to own all oil and gas
so produced and saved therefrom and not reserved as royalty by Lessor under the terms of this lease,
together with rights-of-way, easements and servitudes for pipelines, telephone and telegraph lines, tanks and
fixtures for producing and caring for such product, and housing and boarding employees, and any and all
rights and privileges necessary for the exploration and operation of said land for oil and gas, the following
described land situated in the County of Weld, State of Colorado, and more particularly described as follows:
DESCRIPTION OF LAND SECTION TOWNSHIP RANGE
S1/2 NW1/4 (80.0 acres)
NE1/4 NW1/4 (40.0 acres) 13 4N 61W
SW1/4 NE1/4 (40.0 acre)
TO HAVE AND TO HOLD said land, and all the rights and privileges granted hereunder to Lessee until
the hour of twelve o'clock noon on the 1st day of December, 2011 as primary term, and so long thereafter as
oil and gas. or either of them, is produced in paying quantities from said land or Lessee is diligently engaged
in bona fide drilling or reworking operations on said land, subject to the terms and conditions herein. Drilling
or reworking operations shall be deemed to be diligently performed if there is no delay or cessation thereof for
a greater period than sixty consecutive days unless an extension in writing is granted by lessor; provided that
such drilling or reworking operations are commenced during said primary term or any extension thereof or
while this lease is in force by reason of production of oil and gas or either of them, or that such reworking is
commenced within sixty days upon cessation of production for the purpose of re-establishing the same, and
provided further that such production is commenced during such primary term or any extension thereof, or
while this lease is in force by reason of such drilling or reworking operations or other production.
EXPLORATION - Lessor reserves the right to conduct exploration on the leased land provided such
exploration does not interfere with rights granted herein.
In consideration of the premises, the parties covenant and agree as follows:
LE0259
Oil and Gas Lease
Page 2
1 RENTAL - If this lease is extended for an additional term as provided for in the EXTENSION
paragraph hereof, Lessee shall pay to Lessor the sum of One Dollar ($1.00) per acre for the land
covered hereby as delayed rental for the term of the extension. Rentals set at the time of
established production shall be paid during the remaining life of this lease, annually, in advance, on
or before each anniversary date hereof. There shall be no refund of unused rental.
2. ROYALTY - Lessee shall account for any and all substances produced on the leased land and
Lessee shall pay to Lessor as royalty, in addition to the rentals provided, but except for products
used on the leased land, unavoidably lost or flared on the leased land, with approval of Lessor, the
following:
A On oil, 20% of the oil produced and saved from the leased land.
At the option of Lessor, and with sixty (60) days' notice to Lessee, Lessor may take its
royalty oil in kind, in which event Lessee shall deliver such royalty oil to Lessor on the leased
land, free of cost or deduction, into the pipelines or storage tanks designated by Lessor, but
Lessee shall not in such case be required to provide free tankage for any such oil for a longer
period than one month after the same is run into tanks. With sixty (60) days' notice to Lessee,
Lessor may cease taking oil royalty in kind. When paid in cash, the royalty shall be calculated
upon the fair market value of the oil at the well which shall not be deemed to be less than the
price actually paid to Lessee at the well by the purchaser thereof; and in no event shall the
royalties be based upon a market value at the well less than the posted price in the field for
such oil, or in the absence of a posted price in the field for such oil, upon a market value at the
well less than the prevailing price received by other producers in the field for oil of like grade
and gravity at the time such oil is run into pipelines or storage tanks.
B. On gas, including casing head gas or other gaseous substance, 20% of the fair market value
at the well or of the price received by Lessee at the well, whichever is greater, of all gas
produced and sold from the leased land or utilized off the land by Lessee A copy of all
contracts for sale of gas shall be furnished to Lessor. Where gas is sold under contract that
has been approved by Lessor, the fair market value of such gas for determining the royalties
payable hereunder shall be the price at which such gas is sold under such contract. No
approval by Lessor of the terms of any such agreement shall operate to make Lessor a party
thereto or obligate it thereunder in any way. At the option of Lessor, and with sixty (60) days'
notice to Lessee, Lessor may take its royalty in kind. With sixty (60) days' notice to Lessee,
Lessor may cease taking gas royalty in kind.
C. All costs of marketing the oil and/or gas produced shall be borne by Lessee and such costs
shall not directly or indirectly reduce the royalty payments to Lessor. Except that marketing
costs for Lessor's in-kind royalty shall be borne by Lessor.
D. If Lessor owns a lesser interest in the oil and gas deposits of the above-described land than the
entire and undivided fee simple estate, then the royalties and rentals herein provided shall be
paid to Lessor only in the portion which its interest bears to the whole and undivided fee, but no
refund of any bonus consideration shall be made by Lessor hereunder.
3. RECORDS - Lessee agrees to keep and to have in possession complete and accurate books and
records showing the production and disposition of any and all substances produced on the leased
land and to permit Lessor, at all reasonable hours, to examine the same, or to furnish copies of
same to Lessor upon request along with purchaser's support documentation. Lessor will not be
unreasonable with requests. All said books and records shall be retained by Lessee and made
available in Colorado to Lessor for a period of not less than five years.
4 MEASUREMENTS - All production shall be accurately measured using standards established by
the American Gas Association (AGA) and/or the American Petroleum Institute (API) and all
LE0259
Oil and Gas Lease
Page 3
measuring devices shall be tamper proof as nearly as possible. Oil royalties due within the terms of
this lease shall be calculated on actual and accurate measurements within API standards unless a
different means of measurement, subject to Lessor's approval, is provided.
5. PAYMENTS AND REPORTS - All payments and reports due hereunder shall be made on or before
the day such payments and reports are due. Nothing in this paragraph shall be construed to extend
the expiration of the primary term hereof.
Oil royalty payments and supporting documents shall be submitted prior to the last day of the
month following each month's sale of production, and gas royalty payments and supporting
documents shall be submitted prior to the last day of the second month following each month's sale
of production.
All payments shall be made by cash, check, certified check, or money order. Payment having
restrictions, qualifications, or encumbrances of any kind whatsoever shall not be accepted by
Lessor. A penalty for a late payment shall be charged as set forth in the PENALTIES paragraph
herein.
6. PENALTIES - A penalty shall be imposed for, but not limited to late payments, improper payments,
operational deficiencies, violation of any covenant of this lease, or false statements made to Lessor.
Penalties shall be determined by Lessor unless otherwise provided for by law and may be in the
form of, but not limited to, interest, fees, fines, and/or lease cancellation. A penalty schedule shall
be prepared by Lessor and shall become effective immediately after public notice. Said schedule
may be changed from time to time after public notice.
7. LAW - The terms and conditions of this lease shall be performed and exercised subject to all laws,
rules, regulations, orders, local ordinances or resolutions applicable to and binding upon the
administration of lands and minerals owned by the County of Weld, and to laws, rules and
regulations governing oil and gas operations in Colorado. Violations shall result in penalties as
provided for by law or as set forth in the aforementioned schedule or shall, at the option of Lessor,
result in default as provided hereinafter.
8. SURRENDER - Lessee may at any time, by paying to Lessor all amounts then due as provided
herein, surrender this lease insofar as the same covers all or any portion of the land herein leased
and be relieved from further obligations or liability hereunder with respect to the land so
surrendered: provided that no partial surrender or cancellation of this lease shall be for less than
contiguous tracts of approximately forty (40) acres or Governmental lot corresponding to a quarter-
quarter section; provided further that this surrender clause and the option herein reserved to Lessee
shall cease and become absolutely inoperative immediately and concurrently with the institution of
any suit in any court of law by Lessee, Lessor or any assignee of either to enforce this lease, or any
of its terms expressed or implied. In no case shall any surrender be effective until Lessee shall
have made full provision for conservation of the leased products and protection of the surface rights
of the leased land.
9. ASSIGNMENTS -
A. Lessee, with prior written consent of Lessor, shall have the right to assign the entire leasehold
interest of said Lessee in all or part of the land covered hereby, but not less, however, than
contiguous tracts of approximately forty (40) acres or Governmental lot corresponding to a
quarter-quarter section for any partial assignment, and for approval of such assignment Lessor
shall make an assignment charge in an amount to be determined by Lessor. Prior to written
approval by Lessor of assignment of this lease, Lessee (assignor) shall not be relieved of its
obligations under the terms and conditions herein. An assignment shall not extend the term of
this lease.
LE0259
Oil and Gas Lease
Page 4
B. If any assignment of a portion of the land covered hereby shall be approved, a new lease shall
be issued to the assignee covering the assigned land, containing the same terms and
conditions
as this lease, and limited as to term as this lease is limited, and the assignor shall be released
and discharged from all further obligations and liabilities as to that portion so assigned.
C. Lessee shall notify Lessor of all assignments of undivided percentage or other interests. Said
interests will not be recognized or approved by Lessor, and the effect of any such assignments
will be strictly and only between the parties thereto, and outside the terms of this lease: and no
dispute between parties to any such assignment shall operate to relieve Lessee from
performance of any terms or conditions hereof or to postpone the time therefor. Lessor shall at
all times be entitled to look solely to Lessee or his assignee shown on its books as being the
sole owner hereof, and for the sending of all notices required by this lease and for the
performance of all terms and conditions hereof.
D. Although not binding on Lessor, all instruments of every kind and nature whatsoever affecting
this lease should be filed with the Lessor.
10. OVERRIDING ROYALTY - Any and all reservations or assignments or overriding royalties shall be
subject to approval by Lessor. The total of said overriding royalties shall not exceed five percent
(5%), including any overriding royalty previously provided for unless production exceeds a monthly
average of fifteen (15) barrels per day or ninety thousand cubic feet of gas per day (90 MCF/D). In
the event production drops to this amount or less, any overriding royalties which exceed five percent
(5%) may be suspended. Lessor's approval of a reservation or assignment of an overriding royalty
shall not bind Lessor for payment of said overriding royalty and shall not relieve Lessee of any of its
obligations for payment of royalties to Lessor as provided by ROYALTY paragraphs herein.
11. OFFSET WELLS - Lessee agrees to protect the leased land from drainage by offset wells located
on adjoining lands not owned by Lessor, when such drainage is not compensated for by counter-
drainage. It shall be presumed that the production of oil and gas from offset wells results in
drainage from the leased land, unless Lessee demonstrates to Lessor's satisfaction, by engineering,
geological, or other data, that production from such offset well does not result in such drainage, or
that the drilling of a well or wells on the leased land would not accomplish the purposes of protecting
the deposits under the leased land. Lessor's decision as to the existence of such drainage shall be
final, and Lessee shall comply with Lessor's order thereon or surrender this lease as to any such
undeveloped acreage as designated by Lessor.
12 DEVELOPMENT - Upon discovery of oil and gas or either of them on the leased land, Lessee shall
proceed with reasonable diligence to develop said land at a rate and to an extent commensurate
with the economic development of the field in which the leased land lies.
13. POOLING CLAUSE - Lessee may at any time or times pool any part or all of said land or lease or
any stratum or strata with other lands and leases, stratum or strata, in the same field so as to
constitute a spacing unit to facilitate an orderly or uniform well-spacing pattern or to comply with any
order, rule, or regulation of the State or Federal regulatory or conservation agency having
jurisdiction. Such pooling shall be accomplished or terminated by filing of record a declaration of
pooling, or declaration of termination of pooling, and by mailing or tendering a copy to Lessor, or to
the depository bank. Drilling or reworking operations upon or production from any part of such
spacing unit shall be considered for all purposes of this lease as operations or productions from this
lease Lessee shall allocate to this lease the proportionate share of production which the acreage in
this lease included in any such spacing unit bears to the total acreage in said spacing unit.
14. UNITIZATION - COMMUNITIZATION - In the event Lessor permits the land herein leased to be
included within a communitization or unitization agreement, the terms of this lease may be deemed
to be modified to conform to such agreement. When only a portion of the land under this lease is
committed by an agreement, Lessor may segregate the land and issue a separate lease for each
LE0259
Oil and Gas Lease
Page 5
portion not committed thereunder; the term of such separate lease shall be limited as to the original
term of this lease. The terms of the lease on that portion remaining in the unit shall be deemed to
be modified to conform to such agreement. Non-producing leases shall terminate on the first
anniversary date of the lease following the termination date of the unit or part thereof modifying the
lease, but in no event prior to the end of the primary term of the lease or the extension term of the
lease.
15. PRODUCTION - Lessee shall, subject to applicable laws, regulations and orders, operate and
produce all wells upon the leased land so long as the same are capable of producing in paying
quantities, and shall operate the same so as to produce at a rate commensurate with the rate of
production of wells on adjoining lands within the same field and within the limits of good engineering
practice, except for such times as there exist neither market nor storage therefor, and except for
such limitations on or suspensions of production as may be approved in writing by Lessor. Lessee
shall be responsible for adequate site security on all producing properties.
16. SHUT-IN WELLS - If Lessee shall complete a well on the leased land productive of gas and Lessee
is unable to produce such gas due to a lack of suitable market therefor, Lessor may grant Lessee
suspension of his obligations to produce hereunder until a suitable market for such gas can be
found, and during any such suspension period, it shall be deemed that gas is being produced
hereunder in paying quantities. Except, however, that beginning on the anniversary date next, of
the year of an extension of the lease by reason of a shut-in well, Lessee shall pay to Lessor a shut-
in royalty equal to $2.00 per acre of the lease per annum in addition to the annual rental. The
minimum amount of such shut-in royalty payment shall be $240. Each year's shut-in royalty shall be
forfeited to Lessor except for the shut-in royalty paid for the year during which the well begins
production. The maximum extension of the lease, due to the existence of a shut-in well, shall be
five years beyond the extension term as described in the EXTENSION paragraph herein. The
granting of any further extensions shall be at the sole option of Lessor.
17. OPERATIONS - No exploration, drilling or production operation, including permanent installations,
shall be within 200 feet of any existing building or other improvement, including water well or
reservoir, without the written permission of the owner of said improvements. Lessee shall keep a
correct log of each well drilled hereunder, showing by name or description the formations passed
through, the depth at which each formation was reached, the number of feet of each size casing set
in each well, where set, and the total depth of each well drilled. Lessee, within thirty (30) days after
the completion or abandonment of any well drilled hereunder, shall file in the office of Lessor a
complete and correct log of such well, together with a copy of the electric log and the radioactivity
log of the well when such logs, or either of them, are run; and also a copy of all drill stem test
results, core records and analyses, record of perforations and initial production tests, if any. If any
of the information required by this paragraph is contained in reports required to be filed with the Oil
and Gas Conservation Commission of Colorado, the requirements of this paragraph for such
information may be satisfied by such filing with said Commission, except for copies of the reports as
are required by the following paragraph, and provided that all such information is immediately
available to Lessor. Any proprietary information so submitted shall not be subject to public
inspection under Colorado law.
Lessee shall bury pipelines below plow depth. Lessee shall set and cement sufficient surface
casing to protect the fresh water wells of the area.
18. NOTIFICATION - Lessee shall notify Lessor and the surface lessee or surface owner of the location
of each drill site at least two weeks prior to commencing drilling operations thereon. Lessee shall
notify Lessor before commencing to plug and abandon any well by copy of Lessee's request for
approval or sundry notice of intent to plug and abandon.
19. BONDS - Lessee shall be liable for all damages to the surface of the land, livestock, growing crops,
water wells, reservoirs, or improvements caused by Lessee's operations on said land. No
operations shall be commenced on the land hereinabove described unless and until Lessee shall
LE0259
Oil and Gas Lease
Page 6
have filed a good and sufficient bond with Lessor, in an amount to be fixed by Lessor, to secure the
payment for such damages as may be caused by Lessee's operations on said land and to assure
compliance with all the terms and provisions of this lease, the laws of the State of Colorado, and the
rules and regulations thereto appertaining. A bond may be held in effect for the life of production of
any well.
20. SETTLEMENT - Lessee shall not remove any machinery, equipment or fixtures placed on said land,
other than drilling equipment, nor draw the casing from any well unless and until all payments and
obligations currently due Lessor under the terms of this lease shall have been paid or satisfied. Any
machinery, equipment or fixtures left on this land for a period of more than six (6) months after the
expiration hereof, shall automatically become the property of Lessor
21. OTHER DISCOVERY - Should Lessee discover any valuable products other than oil and gas. on or
within the leased land, Lessee shall within seven (7) days report such discovery to Lessor, in which
event Lessee and Lessor may negotiate a provision for production of such discovery.
22. WATER - This lease does not grant permission, express or implied, to Lessee for water exploration,
drilling, or establishing water wells without the written permission of the surface owner. If Lessor is
the surface owner, said permission shall not be unreasonably withheld. If Lessee desires to
establish or adjudicate any water right for beneficial use on the leased land, any such adjudication
or application shall be in the name of Lessor if Lessor is the surface owner. The same shall apply to
any non-tributary water rights established on the leased land which may be put to beneficial use off
said land.
23 DEFAULT - Upon failure or default of Lessee to comply with any of the terms and provisions hereof
including but not limited to the failure to comply with laws, rules and regulations governing Colorado
oil and gas operations, Lessor is hereby authorized upon notice and hearing, as hereinafter
provided, to cancel this lease as to all of the leased land so claimed or possessed by lessee
hereunder In the event of any such default or failure, Lessor shall, before making any such
cancellation, send to Lessee by certified mail, to the post office address of said lessee as shown by
the records of Lessor, a notice of intention to cancel for such failure or default, specifying the same,
stating that if within thirty (30) days from the date of mailing said notice, Lessee shall correct such
failure or default, no cancellation will be made. If such failure or default is not corrected within thirty
(30) days after the mailing of such notice, and if Lessee does not request a hearing on such notice
within thirty (30) days, this lease will terminate and be canceled by operation of this paragraph
without further action by Lessor, or further notice to Lessee.
24. EXTENSION - If Lessee fails to make discovery of oil and gas, or either of them. in paying quantities
during the primary term hereof, or during drilling operations commenced during the primary term
hereof, Lessee may make written application to Lessor for an extension of this lease. The granting
of such extension shall be at the sole option of Lessor, according to the following conditions:
A. No lease term will be extended for more than six (6) months from the original expiration date.
B. That the Lessee shall pay to the Lessor the sum of one-third of the original bonus, with a
minimum bonus of Ten Dollars ($10.00) per acre.
C. The Lessee must pay to the Lessor the sum of One Dollar ($1.00) per acre leased as delayed
rental for the term of the extension.
D. That the royalty will remain the same.
25. HOLD HARMLESS - Lessee shall indemnify Lessor against all liability and loss, and against all
claims and actions, including the defense of such claims or actions, based upon or arising out of
damage or injury, including death, to persons or property caused by or sustained in connection with
LE0259
Oil and Gas Lease
Page 7
operations on this leased land or by conditions created thereby, or based upon any violation of any
statute, ordinance, or regulation.
26. CONDEMNATION - If the leased land shall be taken in any condemnation proceeding, this lease
shall automatically terminate as of the date of taking. The award for such condemnation shall be
paid to Lessor, except for any specific award(s) paid to Lessee for severed oil and gas reserves, in
which event of such specific award(s) shall be paid to Lessor in lieu of royalty lost
by virtue of the condemnation. Improvements shall be removed by Lessee per terms in the
SETTLEMENT paragraph herein. If only a portion of the leased land is taken by condemnation,
Lessor may, at its option, terminate this lease or terminate only that portion of the lease so taken.
27. ERRORS - Every effort is made by Lessor to avoid errors in all procedures including but not limited
to auction listings and lease preparation. Lessor shall not be liable for any inconvenience or loss
caused by errors which may occur. Lessee shall notify Lessor immediately upon discovery of any
errors or discrepancy whatsoever.
28. ARCHAEOLOGY - Lessee shall not destroy, disturb, mar, collect, remove or alter any prehistoric or
historic resources of any kind on Weld County lands as provided by law. These resources include,
but are not limited to, all artifacts of stone, wood or metal, pictographs, structures, and bones. A
discovery of anything of prehistoric or historic nature shall be reported to Lessor or the State of
Colorado Archaeologist immediately.
29 DEFINITIONS -
A. "Gas" as used herein shall mean all gases (combustible and noncombustible), including but not
limited to all gaseous hydrocarbons, gaseous compounds, carbon dioxide, and helium.
B. "Oil and gas" as used herein shall include all substances produced as by-products therewith,
including But not limited to sulfur.
C. "Paying quantities" as used herein shall mean and refer to quantities of oil and gas or of either
of them sufficient to pay for the current cost of producing same.
30. HEIRS AND ASSIGNS - The benefits and obligations of this lease shall inure to and be binding
upon the heirs, legal representatives, successors or assigns of Lessee; but no sublease or
assignment hereof, or of any interest herein, shall be binding upon Lessor until the same has been
approved by Lessor as explained in the ASSIGNMENTS' paragraph provided.
31. WARRANTY OF TITLE - Lessor does not warrant title to the leased premises, but it shall, upon
request, allow Lessee access to such abstracts and other title papers as it has in its files. There
shall be no obligation on Lessor's part to purchase new or supplemental or other title papers nor to
do any curative work in connection with title to the subject lands. All abstracts of title, whether new
or supplementary, obtained by Lessee and covering the subject lands shall become the property of
and be delivered to Lessor after Lessee has completed its title examination and curative work,
subject, however, to the right of Lessee to use such abstracts upon request at any time during the
term of the lease.
LE0259
Oil and Gas Lease
Page 8
IN WITNESS WHEREOF, Lessor has hereunto signed and caused its name to be signed by the CHAIR,
BOARD OF COUNTY COMMISSIONERS OF THE COUNTY OF WELD, with the seal of the office affixed,
and Lessee has-signed this agreement, the day and year first above written.
ATTEST BOARD OF COUNT. COMMISSIONERS
_[WELQ,GOUNTY, COLORADO
Weld County Clerk to the Boar William H. Jerke, Chair—" ------.___
Board of County Commissioners
By
Deputy Clerk to the Board
LESSEal ENERGY & ASSOCIATES, LLC
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By 4 Crib /v ,07P, /11.4vAo&
STATE OF COLORADO )
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COUNTY OFWEE9— ) --
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Th oregoing instrument was acknowledged before me this 24: of !' ,
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Witness y Nand and offical seal
otary c
My Commission Expires. MV COMMISSION EXPIRES 1/23/2010 f,
LE0259
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