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Home My WebLink About20073651 RESOLUTION RE: APPROVE RESCINDING CERTAIN DOCUMENTS APPROVED UNDER RESOLUTION #2007-3038, DATED SEPTEMBER 26, 2007; APPROVE REVISED RELEASE AND TWO AGREEMENTS FOR DISTRIBUTION OF ROYALTIES; AND AUTHORIZE CHAIR TO SIGN - NOBLE ENERGY, INC./NOBLE ENERGY PRODUCTION, INC. 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, by Resolution #2007-3038, dated September 26, 2007, the Board approved a Settlement Agreement, Release, and two Amendments to Lease and Assignments, between the County of Weld, State of Colorado, by and through the Board of County Commissioners of Weld County, and Noble Energy, Inc., and Noble Energy Production, Inc., and WHEREAS, a hearing before the Board was held on the 19th day of November, 2007, at which time the Board deemed it advisable to continue said matter to December 5, 2007, at 9:00 a.m., to allow additional time for the County Attorney to review the related documents, and WHEREAS, at said hearing on December 5, 2007, after review, the Board deems it advisable to rescind the previous Release and two Amendments to Leases and Assignments, approved under Resolution#2007-3038, dated September 26, 2007,with the Resolution to remain in effect for the purpose of approving the Settlement Agreement, and WHEREAS,the Board has been presented with a revised Release and two Agreements for Distribution of Royalties for properties described as the W1/2 NW1/4 of Section 20, Township 3 North, Range 66 West, as well as the SE1/4 SE1/4 of Section 18, Township 2 North, Range 65 West of the 6th P.M., Weld County, Colorado, between the County of Weld, State of Colorado, by and through the Board of County Commissioners of Weld County, and Noble Energy, Inc., and Noble Energy Production, Inc., commencing upon full execution, with further terms and conditions being as stated in said revised Release and Agreements, and WHEREAS,after review,the Board deems it advisable to approve said revised Release and Agreements, copies of which are attached hereto, and incorporated herein by reference. NOW, THEREFORE, BE IT RESOLVED by the Board of County Commissioners of Weld County, Colorado, that the previous Release and two Amendments to Leases and Assignments, approved under Resolution#2007-3038, dated September 26, 2007, between the County of Weld, State of Colorado, by and through the Board of County Commissioners of Weld County, and Noble Energy, Inc.,and Noble Energy Production, Inc., be,and hereby are, rescinded,with the Resolution to remain in effect for the purpose of approving the Settlement Agreement. BE IT FURTHER RESOLVED by the Board that the revised Release and two Agreements for Distribution of Royalties, between the County of Weld, State of Colorado, by and through the Board of County Commissioners of Weld County, and Noble Energy, Inc., and Noble Energy Production, Inc., be, and hereby are, approved. 2007-3651 CA0014 f,e I QC PLC of BE IT FURTHER RESOLVED by the Board that the Chair be, and hereby is, authorized to sign said revised Release and two Agreements for Distribution of Royalties. The above and foregoing Resolution was, on motion duly made and seconded, adopted by the following vote on the 5th day of December, A.D., 2007. ��..�` BOARD OF COUNTY COMMISSIONERS Eftt ` WE COUNTY, COLORADO ATTEST: geld1 iI1 )' oA Fob; avid E. Long, Chair �\ Weld County Clerk to the op„,, •' • b�� 5c William H. Jerke Pro-Tem BY: ` De u y Cler o the Boa (S1 W' 'am F. Garci APPROVEJD Ay- . \\ (Q Robert D. MasdenV ounty ttorney �aGe wti4 � Douglas Rademacher Date of signature: 13-40S 2007-3651 CA0014 LAW OFFICES OF GEORGE A. BARTON, P.C. 800 W.47th Street,Suite 700 Kansas City,Missouri 64112 (816)300-6254 Facsimile:(816)300-6259 GEORGE A. BARTON )i DIRECT DIAL_ (816)300-6250 November 12, 2007 Nov g t. 13 2877 VIA FEDERAL EXPRESS Mr. Bruce Barker Weld County Board of Commissioners Assistant County Attorney 915 10th Street, 3rd Floor Greeley, CO 80631 Re: Noble Energy, Inc. Royalty Underpayment Litigation Settlement Documents Dear Bruce: Because of certain underlying Lease Agreements with Kerr-McGee Rocky Mountain Corporation, instead of Noble Energy, Inc., it has been necessary for us to revise some of the Settlement Documents for such clients. I am therefore enclosing at this time the following Settlement Documents for the clients referenced below: 1. [revised] Release for execution by Weld County Board of Commissioners; and 2. Agreements for Distribution of Royalties, which is in substitution for the Amendment to Leases and Assignments which was previously executed by Weld County Board of Commissioners. Please have each of the above referenced Settlement Documents properly executed in the spaces provided, have the signature notarized, and return the executed Settlement Documents containing the original notarized signatures to me as soon as possible, preferably via Federal Express. As soon as I receive the executed Settlement Documents back from you, I will forward them to Noble's attorney. Approximately two weeks after my receipt of the executed Settlement Documents, I will be sending a check to Weld County Board of Commissioners. If you have any questions, call me at (816) 300-6250. 2007- November 12, 2007 Page 2 Yours very truly, t.(2 - 1 eorge A. Barton GAB/laa Enclosures RELEASE This RELEASE is entered into by Weld County Board of Commissioners (the"Releasing Party"), which is a party to the civil action referred to as Ace Royalties, LLC, et al. v. Noble Energy, Inc., et al., Case No. 05-CV-5633, pending in the District Court for the City and County of Denver, Colorado (the "Civil Action"). The Releasing Party is also a party to a Settlement Agreement entered into with Noble Energy, Inc. and Noble Energy Production, Inc. (collectively, "Noble") (the "Settlement Agreement"). All of the terms and conditions of the Settlement Agreement are incorporated herein by reference, and the Releasing Party agrees to be bound by them. 1. For good and valuable consideration, including without limitation the Settlement Agreement, the receipt and sufficiency of which is hereby acknowledged, the Releasing Party, for himself, herself, itself or themselves and his, her, its, or their heirs, agents, officers, directors, joint venturers, partners, members, legal representatives, successors and assigns, fully and forever releases and discharges Noble, and its officers, directors, employees, attorneys, agents, parents, subsidiaries, affiliates, insurers, predecessors, successors and assigns, and Kerr McGee Oil & Gas Onshore LP ("Kerr McGee") to the extent Noble pays or has paid royalties on its behalf and all non-operating working interest owners (with regard to these properties and/or property interests as to which Noble pays, or has paid, royalties and/or overriding royalties on behalf of such non-operating working interest owners to the Releasing Party) (hereinafter "Noble's Additional Released Parties"), from any and all claims, demands, obligations, actions, liabilities and damages of every kind and nature whatsoever, (including any claims, demands, obligations, actions, liabilities and damages which may have arisen or be based upon facts which occurred while the Releasing Party's predecessors, whether known or unknown, owned the Leases and/or Assignments in whole or in part) whether foreseen or unforeseen, whether known or unknown, in law or in equity, which the Releasing Party may now have based upon any act or omission arising from the calculation, payment and reporting of royalties or overriding royalties for natural gas and associated liquid hydrocarbons (excluding oil or other liquid hydrocarbons recovered by mechanical separators at or near the wellhead and before the natural gas and liquids are both measured for volume and sampled for Btu content) produced and sold by Noble pursuant to the Leases and Assignments prior to July 1, 2007 ("Settled Claims"), without regard to present actual knowledge of any such acts or omissions, that were alleged or which could have been alleged in the Civil Action or which in any way relate to the proper payment of Royalties (as that term is defined in the Settlement Agreement)to the Releasing Party prior to July 1, 2007, except for claims limited to mathematical or calculation errors in determining volumes, price, value or decimal interest arising on or after January 1, 2007 and except for the rights and obligations created by the Settlement Agreement. For the purposes of this Release, the "Leases" are defined as all documents under which Noble, or Kerr McGee to the extent Noble pays or has paid royalties on its behalf to the Releasing Party or a non-operating working interest owner on whose behalf Noble pays, or has paid, royalties to the Releasing Party, and the Releasing Party have both owned or now own an interest in natural gas or liquids, including but not limited to leases and other documents conveying or reserving royalty, to the extent of those mutually owned interests. For the purposes of this Release, the "Assignments" are defined as all documents that convey or reserve overriding royalty interests and other documents conveying or reserving overriding royalty interests under which both Noble, or Kerr McGee to the extent #813027.1 o70L'I Noble pays or has paid royalties on its behalf to the Releasing Party or a non-operating working interest owner on whose behalf Noble pays, or has paid, royalties to the Releasing Party, and the Releasing Party have both owned or own an interest. 2. The Releasing Party represents, covenants and warrants (i) that he, she, it or they is/are the sole owner(s) of the Settled Claims, including any portion of the Settled Claims which may have arisen while any predecessor, known or unknown, owned the Leases and/or Assignments, in whole or in part, that he, she, it or they is/are releasing, (ii) that no portion of, or interest in, such Settled Claims has been sold, assigned, transferred, pledged or hypothecated to any other person or entity, and that there are no persons or entities having any rights of subrogation or substitution with respect to such Settled Claims, and (iii)that no other person or entity is entitled to assert any Settled Claims arising by, through, or under the interest of the Releasing Party or his, her, their or its predecessors, which are related to the subject matter of either the Civil Action or which could have been asserted therein. 3. The Releasing Party, for himself, herself, itself, or themselves and his, her, its, or their officers, directors, joint venturers, partners, members, heirs, legal representatives, successors and assigns, covenant and agree that they will not commence,participate in, prosecute or cause to be commenced or prosecuted against Noble, Kerr McGee, and/or Noble's Additional Released Parties, any action or other proceeding based upon any of the Settled Claims released by the Releasing Party. 4. The Releasing Party agrees to indemnify, defend and hold harmless Noble, Kerr McGee, and Noble's Additional Released Parties from and against any and all actions, causes of action, claims and demands, including but not limited to litigation expenses, costs and reasonable attorney fees, that Noble, Kerr McGee, and/or Noble's Additional Released Parties may sustain by reason of any breach of the releases, covenants not to sue, or warranties set forth in this Release. In this respect, such releases, covenants and warranties may be pleaded as a defense or by way of counterclaim, third-party complaint, or cross-claim. The covenants not to sue will be specifically enforceable and the Releasing Party agrees that any breach thereof will cause irreparable harm justifying injunctive relief 5. Nothing herein or in the Settlement Agreement shall operate or be construed to release any claims the Releasing Party may have against any person or entity who is not a party thereto, except for Kerr McGee with regard to properties as to which Noble pays or has paid royalties on its behalf and Noble's Additional Released Parties. 6. The Releasing Party represents that he, she or it has not received, and does not anticipate receiving, a payment as the result of the settlement of the civil actions styled as Jack Holman, et al. v. Noble Energy Production, Inc., et al., Case No. 03-CV-9, Weld County, Colorado District Court and as Wardell Family Partnership, et at v. Noble Energy, Inc., et at, Case No. 06-CV-734, Weld County, Colorado District Court. Each Releasing Party covenants that, in the event he, she or it receives a payment check relating to the settlement of the civil actions described in the preceding sentence, he, she or it will not cash that check but will, instead, immediately mail it to the Releasing Party's counsel and will direct counsel to mail the check to Noble's counsel. 2 Each person signing this Release on behalf of a Releasing Party represents and warrants that such signatory has the full and complete power, authority and capacity to execute and deliver this Release, that all formalities necessary to authorize execution of this Release so as to bind the principal, limited liability company, trust, partnership or corporation have been undertaken and that this Release will constitute the valid and legally binding obligation of the Releasing Party, enforceable by and against that Releasing Party in accordance with its terms. DONE THIS 5th _1 DAY OF December , 2007 RELEASING PARTY WELD COUNTY BOARD OF COMMISSIONERS u. By: --� Njk Name: David E. Long Title: Chair DEC 0 5 2007 ACKNOWLEDGMENTS STATE OF Colorado ) ) ss. COUNTY OF Weld ) The foregoing instrument was acknowledged before me this 5th_day of December 2007, by David E. Long , as Chair of Weld County Board of Commissioners, a Witness my hand and offipial;seal., My commission expires. } c`©`A 43!4 Notary Public Name: Donna J. Bechler Address: 915 10th Street Greeley, Colorado 80631 [seal] 3 u2ce>- 36.7/ HUM NMI 11111I IIII IIII1111111III I1111011III 3534182 02/08/2008 02:50P Weld County,CO 1 of 6 R 31.00 D 0.00 Stave Moreno Clerk&Recorder AGREEMENT FOR DISTRIBUTION OF ROYALTIES This Agreement for Distribution of Royalties is entered into effective July 1, 2007, among the undersigned owner("Royalty Owner')and Noble Energy,Inc.("Operator"). A. Royalty Owner owns a royalty interest in the Lease described in Exhibit 1 attached hereto("Lease")covering the SE/4 SE/4 of Section 18, Township 2 North,Range 65 West. B. The Codell and Niobrara Formations underlying the SE/4 of Section 18, Township 2 North,Range 65 West,have been spaced based upon 160 acres("Spacing Unit"). C. Operator owns leasehold working interests in the Spacing Unit other than the lands covered by the Lease("Noble Leasehold Lands"). D. Operator is designated operator of wells located on the Noble Leasehold Lands and, pursuant to a Segregation Agreement effective December 1, 1990, has assumed the obligation to pay royalties owed to Royalty Owner which are due under the terms of the Lease. E. The parties have agreed to clarify the valuation of the royalty share of the production attributable to such Lease. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,Royalty Owner and Operator hereby agree as follows: 1. For the purposes of this Agreement,the following definitions shall apply: (a) "Greater Wattenberg Area"means Adams,Boulder,Broomfield,Larimer, and Weld Counties,Colorado. (b) "Initial Measurement Point"means,as to any given well or group of wells, the initial point at which gas production from the well or group of wells is both measured for volume and sampled for Btu content. (c) "Mainline Transmission Inlet"means the point at which natural gas has entered a Mainline Transmission Pipeline. (d) "Mainline Transmission Pipelines"means the large-diameter natural gas transmission pipelines located downstream of plants located in the Greater Wattenberg Area used to treat and/or process Natural Gas and Liquids produced from or pursuant to the Lease, including the natural gas transmission pipelines owned or operated by Colorado Interstate Gas Company and Public Service Company of Colorado at the time this Agreement is signed. A Mainline Transmission Pipeline transports Residue Gas after processing. (e) "Natural Gas and Liquids" means natural gas and/or associated liquid hydrocarbons, but does not include oil, condensate or other liquid hydrocarbons recovered by mechanical separators at or near the wellhead and before the natural gas and associated liquid hydrocarbons are both measured for volume and sampled for Btu content. (f) "Natural Gas Liquids"means liquid hydrocarbons associated with natural gas and separated from the gas stream at a processing plant in the Greater Wattenberg Area,but does not include oil, condensate or other liquid hydrocarbons recovered by mechanical separators at or near the wellhead. (g) "Natural Gas Liquids Pipeline or Storage Tank" means the pipeline located immediately downstream of plants located in the Greater Wattenberg Area used to treat or process natural gas produced from or pursuant to the Lease,which is used to transport Natural Gas Liquids, or the storage tank into which Natural Gas Liquids are placed for storage and/or transportation after separation from the gas stream at a processing plant in the Greater Wattenberg Area. (h) "Other Working Interest Owner(s)"means owner(s)of a working interest in the Lease for whom Operator sells or markets Natural Gas and Liquids and/or pays Royalties. r81t655 110111 1111 Mt IIII till 1111111 III 11111 liii Ilil 3634182 02/06/2006 02:50P Weld County,CO 2 el 6 A 31.00 0 0.00 Steve Moreno Clerk 8 Recorder (i) "Rost-Wellhead Expenses" means the actual expenses incurred by Operator(i)in the case of the gas component of production,to transport,process and treat gas from the Initial Measurement Point until that gas component has been converted to Residue Gas and entered the Mainline Transmission Pipeline at the Mainline Transmission Inlet, and (ii)in the case of the Natural Gas Liquids component of production,to transport,process and treat the Natural Gas Liquids entrained in the gas stream until Natural Gas Liquids are produced at a processing plant located in the Greater Wattenberg Area and placed in a Natural Gas Liquids Pipeline or Storage Tank. Post-Wellhead Expenses include all costs of gathering,compression, dehydration, transportation, processing, removal of liquid or gaseous substances or impurities from the affected production and all losses of produced volumes whether by use as fuel,line loss, flaring, venting, retention by a provider of Post-Wellhead Services, or otherwise incurred between the Initial Measurement Point to the Mainline Transmission Inlet and the Natural Gas Liquids Pipelines or Storage Tank,respectively;provided that Post-Wellhead Expenses shall not include costs of fractionation for purposes of calculating Royalties under this Agreement. (j) "Post-Wellhead Services" means the services obtained and/or facilities utilized when Post-Wellhead Expenses are incurred. (k) "Residue Gas"means natural gas that has been processed at a plant in the Greater Wattenberg Area and has entered and is ready for transport in a Mainline Transmission Pipeline. (1) "Royalty"or"Royalties"means royalty and overriding royalty interests in Natural Gas and Liquids. 2. For the Natural Gas and Liquids produced from wells located on the Noble Leasehold Lands on or after July t,2007,at 7:00 a.m.local time and attributable to the Lease by virtue of a pooling agreement or force pooling order, the Operator (and its successors) in the ordinary course of business shall,when calculating Royalties due to the Royalty Owner(and his, her, their or its successors), apply the following provisions relative to its deduction of Post- Wellhead Expenses: (a) Fifty percent (50%) deduction. When calculating Royalties due to the Royalty Owner and his,her, their or its successors pursuant to the Lease,Operator will cease deducting one hundred percent of Post-Wellhead Expenses and will, instead, deduct only fifty percent (50%) of the Post-Wellhead Expenses actually incurred, directly or indirectly, by Operator. A further description of how this calculation will be made is provided below. (i) Post-Wellhead Services Paid for in Money.When any provider of Post-Wellhead Services charges monies, directly or indirectly, to Operator for such services, Operator shall include and only deduct 50%of the monies paid or to be paid by Operator to the provider of Post-Wellhead Services when calculating Royalties due to the Royalty Owner. For example,if Company A charges Operator 510,000 for gathering services,then Operator will only deduct$5,000 for those gathering services in calculating Royalties on the production to which the gathering services pertain. (ii) pecentat.of-Proceeds Ana utements. When any provider of Post- Wellhead Services retains a percentage of the provider's sale proceeds as compensation for Post- Wellhead Services and returns a percentage of the provider's sale proceeds to Operator,then Operator win,in addition to paying Royalties on the sale proceeds returned to Operator,also pay Royalties on 50%of the amount of sale proceeds retained by the provider of such Post-Wellhead Services.The amount of sale proceeds retained by the provider shall be measured and accounted for at the same unit price used by the provider to determine Operator's sale proceeds for Residue Gas at the Mainline Transmission inlet and for Natural Gas Liquids at the Natural Gas Liquids Pipeline or Storage Tank. This type of arrangement includes, without limitation, wellhead percentage-of-proceeds sale contracts under which another person or entity takes title to Operator's Natural Gas and Liquids at or near the wellhead,gathers and processes the Natural Gas and Liquids,sells the resulting Residue Gas and Natural Gas Liquids,retains a percentage of the sale proceeds, and pays a percentage of the sale proceeds to Operator. For example, if Company B gathers and processes Natural Gas and Liquids and retains 10%of the sale proceeds thereof and pays 90%of the sale proceeds to Operator,then Operator will,in addition to paying Royalties on 90%of the sale proceeds it receives,also pay Royalties on 50%of the sale proceeds retained by Company B,i.e.,pay Royalties on a total of 95%of the sale proceeds. -2- � inn it 1111111111 MI 1111111 III 11111 JIII IIII 3534182 02/08/2008 02:50P Weld County,CO 3 of 6 R 31.00 0 0.00 Steve Moreno Clerk 8 Recorder(iii) Arrangements Involving Retained Volumes. When any provider of Post-Wellhead Services receives or retains Residue Gas and/or Natural Gas Liquids volumes in exchange for Post-Wellhead Services, then Operator will pay additional Royalties based on 50% of the value of the Residue Gas and Natural Gas Liquids received or retained by the provider. The value of the Residue Gas and Natural Gas Liquids received or retained by the provider will be calculated by multiplying the same unit price received by Operator for the remaining Residue Gas at the Mainline Transmission Inlet and for the remaining Natural Gas Liquids at the Natural Gas Liquids Pipeline or Storage Tank times the volume of Residue Gas (MMEtu)and Natural Gas Liquids(gallons) received or retained by the service provider. For example, if Company C provides gathering and processing services to Operator and, as a gathering and processing fee,retains twenty-six percent(26%)of the Residue Gas and Natural Gas Liquids volumes attributable to the gas gathered and processed by Company C and returns seventy-four percent(74%) of the Residue Gas and Natural Gas Liquids volumes to Operator, then Operator will,in addition to paying royalties on the Residue Gas and Natural Gas.Liquids returned to Operator,also pay royalties on 50%of the value of the Residue Gas and Natural Gas Liquids received or retained by Company C. (iv) Fuel and Other Lost Volumes. Post-Wellhead Expenses incurred by Operator shall include gas used by a provider of Post-Wellhead Services as fuel and all other losses of production volumes(whether through the use of gas or liquids as fuel;through line loss, flaring or venting;or through the retention of drips by the provider,or whether otherwise lost or unaccounted for)incurred between the Initial Measurement Point and the Mainline Transmission Inlet with respect to Residue Gas and the Natural Gas Liquids Pipeline or Storage Tank with respect to Natural Gas Liquids("Fuel and Other Lost Volumes").Operator shall pay Royalties on 50%of the value of the Fuel and Other Lost Volumes measured and accounted for by the average price paid to Operator for Residue Gas at the Mainline Transmission Inlet per MMEtu during that same period. (v) Services Provided by Oneratoz. If Post-Wellhead Services are provided by Operator itself,then Operator may deduct 50%of Operator's actual,direct costs for such services or facilities,all of which costs must be reasonable.Such costs shall not include any overhead,profit,or return on investment. (vi) Other Arrangements.The Parties recognize that there are a variety of arrangements that have been made,or may be made in the future,for the provision of Post- Wellhead Services. Regardless of the particular arrangement,when calculating Royalties due to the Royalty Owner and their successors, Operator will implement such Royalty accounting procedures and methodologies as may be necessary to ensure that Operator deducts only 50%of the Post-Wellhead Expenses it incurs,including(a)deducting only 50%of any monies charged, directly or indirectly, by providers of Post-Wellhead Services, and (b)paying additional Royalties based on 50%of the value of all Natural Gas and Liquids retained,used, consumed, lost, or unaccounted for by providers of Post-Wellhead Services. It is agreed that Operator's contracts and other arrangements for obtaining Post-Wellhead Services existing on or before February 15, 2007, so long as they remain in effect, properly may be used when calculating Royalties due to Royalty Owner, subject to the limitation on the portion of Post-Wellhead Expenses that may be deducted when calculating Royalties from and after July 1, 2007 as provided for in this paragraph 2. (vii) 4DDlication. Subparagraphs(i) through (vi) apply as appropriate to Operator's Post-Wellhead Expenses, including by applying these provisions to various portions (e.g., fee-based portions and percentage of proceeds portions)of Operator's contracts for Post-Wellhead Services. (b) No Modification of Lease. The revised method of calculating Royalties set forth in this paragraph 2 does not amend the provisions of the Lease. This Agreement also has no impact on the respective responsibilities of the Parties for production, severance, ad valorem,conservation,or any other applicable taxes. (c) Impact on Division Orders and Other Instnmtents. This Agreement describes the allocation of Post-Wellhead Expenses between Operator and the Royalty Owner, but does not supersede or nullify any division order,pooling agreement or unitization agreement now in existence or executed hereafter,except to the extent that the teams of such instruments conflict with the Agreement,in which case the terms of the Agreement shall prevail. 3 • 1111111 all MIME]till IIIIEnt HIM IIII IIII 3534182 02/08/2008 02:60P Weld County,CO 4 of 6 ft 31.00 D 0.00 Steve Moreno Clerk 8 Recorder (d) Limits on Deductions. Operator shall not make any deductions for expenses incurred prior to the Initial Measurement Point or any administrative or other costs Operator incurs in making arrangements for Post-Wellhead Services, nor shall Operator make any deductions for any operations or facilities that are used to produce Natural Gas and Liquids and/or deliver the Natural Gas and Liquids to the inlet of a gathering system, including well facilities, flow lines, field separators, field dehydrators, and all other operations, activities, and equipment on the lease. (e) Downstream Costa. If Residue Gas or Natural Gas Liquids are sold downstream of the Mainline Transmission Inlet and Natural Gas Liquids Pipeline or Storage Tank, respectively, any costs incurred by Operator after the Residue Gas enters the Mainline Transmission Inlet or the Natural Gas Liquids enter the Natural Gas Liquids Pipeline or Storage Tank shall not be treated as or deemed to be Post-Wellhead Expenses, and nothing in this Agreement shall preclude the deduction of such costs in their entirety from Royalty payments to the Royalty Owner. It is agreed that Operator may deduct when calculating Royalties the entire reasonable costs incurred by Operator to fractionate Natural Gas liquids into separate,distinct products(e.g., into Propane, Butane,Natural Gasoline)and/or to transport Natural Gas Liquids to a location outside of the Greater Wattenberg Area for fractionation and/or sale. (f) Proportionate Burden. Nothing herein shall be construed to provide, imply or suggest that the Post-Wellhead Expenses and other costs Operator is allowed under this Agreement to deduct when calculating Royalties will be borne in their entirety by the Royalty Owner. Instead,it is understood that Operator's deductions will be calculated on an 8/8m°basis for any given well and that a Royalty Owner's share of the deductions allowed hereunder will only be a proportionate share based on his decimal revenue interest in the well. GENERAL PROVISIONS 3. Term. This Agreement shall remain in effect for so long as Operator and its successors and assigns are required to distribute royalties to the Royalty Owner or its successors and assigns pursuant to the[Segregation Agreement]. 4. The Royalty calculation method set forth in paragraph 2 above shall be a covenant that runs with the lands included in the Spacing Unit and be binding on the Royalty Owner and Operator and their successors and assigns. This Agreement shall not be interpreted or construed as preventing or limiting Operator's ability, at its sole discretion and without notice to the Royalty Owner, to enter into new contracts for Post-Wellhead Services, including gathering, transportation,processing or marketing arrangements relating"to the I ease or to modify existing gathering,transportation,processing or marketing arrangements relating to the Lease,provided, however,that the obligations of Operator under this Agreement will continue. 5. Authority and Capacity to Execute. Each person signing this Agreement on behalf of a Royalty Owner or Operator represents and warrants that such signatory has the full and complete power, authority and capacity to execute and deliver this Agreement, that all formalities necessary to authorize execution of this Agreement so as to bind the principal,limited liability company, trust,partnership or corporation have been undertaken, and this Agreement will constitute the valid and legally binding obligation of each such Royalty Owner and Operator hereto, enforceable by and against that Royalty Owner and Operator in accordance with its terms. -4- IIIIII.IIIII 111111 IIIIII HE"HMI III 11111 IIII III 3534182 02/08/2008 02:50P Weld County,CO 5 of 8 R 31.00 D 0.00 Steve Moreno Clerk&Recorder Effective this 1m day of July,2007. NOBLE ENERGY,INC. IN By: l- Name: Title: ---- :- WELD COUNTY BOARD OF COMMISSIONERS By: &W Cc Name: David E. Long Title: Chair DEC 05 2007 ACKNOWLEDGMENTS STATE OF COLORADO ) )ss. COUNTY OF DENVER ) The foregoing instrument was acknowledged before me this2hday o('/I]lldl(1� 2008 ,1, , attorney-in-fact for 6e , o�— FNobi gy,Inc.,on behalf of such corporation. Witness my hand and official seal. My conunission expires: -[-t-]-Dip U . ^ � K M'-' MELISSA K L`iT o- Ma,L ° p NOTARY PUBLIC t Notary blic ATE OF CCr J n:gin Name: Melissa Mellen Address: 1825 Broadway Denver, CO 80202 [seal] STATE OF Colorado ) )It COUNTY OF 141 d ) The foregoing instrument was acknowledged before me this-5th day of D.remh.r , 2007, by David E. Long , as Chair of Weld County Board of Commissioners,a . Witness my hand and officia:seal. My commission ex `.w.T ?••:ea• �•,= sus ,� ,L. � , 4a L',°' j: Notary Public _15: .......:......:......:.:.:.....:....... Name: Donna J. Bechler Address: 915 10th Street Greeley, Colorado 80631 [seal] -5- aoo9-335/ r s 1 A0"' �+Gd;go53 w- m q yo- t � U elet3 till* iio°+a3d�oao Wq go niL H s .. al I a 1 il 1 sm$ 9y V q i a 8 3 R 1 x I lA s s I 0 Q 3 T a 1 I I s II I Asp W J n.� Y oU O0.raJJ VA ob Z O 1O(i. I o ,uwoaau 4 Jaw MUM SAM on a anew 9 Jos <11 1011111 tIII Amos IIII IIII IIIIII IIIIII IIIII IIIIII I IB8111111111111111111 III!IIII 1111111 III 11111 IIII III! 3534183 02/0812008 02:50P Weld County,CO 1 of 6 R 31.00 0 0.00 Steve Moreno Clerk&Recorder 183 AGREEMENT FOR DISTRIBUTION OF ROYALTIES This Agreement for Distribution of Royalties is entered into effective July 1, 2007, among the undersigned owner("Royalty Owner")and Noble Energy,Inc.("Operator"). A. Royalty Owner owns a royalty interest in the Lease described in Exhibit 1 attached hereto ("Lease") covering the W/2 NW/4, and other Lands in Weld County, Co. of Section 20,Township 3 North,Range 66 West. B. The Dakota and J Sand Formations underlying the N/2 of Section 20,Township 3 North,Range 66 West,have been spaced based upon 320 acres("Spacing Unit"). C. Operator owns leasehold working interests in the Spacing Unit other than the lands covered by the Lease("Noble Leasehold Lands"). D. Operator is designated operator of wells located on the Noble Leasehold Lands and, pursuant to au Assignment and Bill of Sale effective July 1, 1999, recorded at Entry #2718496 in the records of Weld County,Colorado,has assumed the obligation to pay royalties owed to Royalty Owner which are due under the terms of the Lease. E. The parties have agreed to clarify the valuation of the royalty share of the production attributable to such Lease. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,Royalty Owner and Operator hereby agree as follows: I. For the purposes of this Agreement,the following definitions shall apply: (a) "Greater Wattenberg Area"means Adams,Boulder,Broomfield,Larimer, and Weld Counties,Colorado. (b) "Initial Measurement Point"means,as to any given well or group of wells, the initial point at which gas production from the well or group of wells is both measured for volume and sampled for Btu content. (c) "Mainline Transmission Inlet" means the point at which natural gas has entered a Mainline Transmission Pipeline. (d) "Mainline Transmission Pipelines"means the large-diameter natural gas transmission pipelines located downstream of plants located in the Greater Wattenberg Area used to treat and/or process Natural Gas and Liquids produced from or pursuant to the Lease, including the natural gas transmission pipelines owned or operated by Colorado Interstate Gas Company and Public Service Company of Colorado at the time this Agreement is signed. A Mainline Transmission Pipeline transports Residue Gas after processing. (e) "Natural Gas and Liquids" means natural gas and/or associated liquid hydrocarbons,but does not include oil, condensate or other liquid hydrocarbons recovered by mechanical separators at or near the wellhead and before the natural gas and associated liquid hydrocarbons are both measured for volume and sampled for Btu content. (f) "Natural Gas Liquids"means liquid hydrocarbons associated with natural gas and separated from the gas stream at a processing plant in the Greater Wattenberg Area,but does not include oil, condensate or other liquid hydrocarbons recovered by mechanical separators at or near the wellhead. (g) "Natural Gas Liquids Pipeline or Storage Tank" means the pipeline located immediately downstream of plants located in the Greater Wattenberg Area used to treat or process natural gas produced from or pursuant to the Lease,which is used to transport Natural Gas Liquids, or the storage tank into which Natural Gas Liquids are placed for storage and/or transportation after separation from the gas stream at a processing plant in the Greater Wattenberg Area. (h) "Other Working Interest Owner(s)"means owner(s)of a working interest in the Lease for whom Operator sells or markets Natural Gas and Liquids and/or pays Royalties. 1112657 ; x9-315/ 111111l11111111111111111 III EI NE Win IIII1111 3634185 0if08 2008 02:60P Weld County,Co 2 of 6 ft 31.00 D 0.00 Stave Moreno Clerk&Recorder (h) "Other Working Interest Owner(s)"means owner(s)of a working interest in the Lease for whom Operator sells or markets Natural Gas and Liquids and/or pays Royalties. (i) "Post-Wellhead Expenses" means the actual expenses incurred by Operator(1)in the case of the gas component of production,to transport,process and treat gas from the Initial Measurement Point until that gas component has been converted to Residue Gas and entered the Mainline Transmission Pipeline at the Mainline Transmission Inlet,and (ii)in the case of the Natural Gas Liquids component of production,to transport,process and treat the Natural Gas Liquids entrained in the gas stream until Natural Gas Liquids are produced at a processing plant located in the Greater Wattenberg Area and placed in a Natural Gas Liquids Pipeline or Storage Tank. Post-Wellhead Expenses include all costs of gathering,compression, dehydration, transportation, processing, removal of liquid or gaseous substances or impurities from the affected production and all losses of produced volumes whether by use as fuel,line loss, flaring, venting, retention by a provider of Post-Wellhead Services, or otherwise incurred between the Initial Measurement Point to the Mainline Transmission Inlet and the Natural Gas Liquids Pipelines or Storage Tank,respectively;provided that Post-Wellhead Expenses shall not include costs of fractionation for purposes of calculating Royalties under this Agreement. 6) "Post-Wellhead Services" means the services obtained and/or facilities utilized when Post-Wellhead Expenses are incurred. (k) "Residue Gas"means natural gas that has been processed at a plant in the Greater Wattenberg Area and has entered and is ready for transport in a Mainline Transmission Pipeline. (I) "Royalty"or"Royalties"means royalty and overriding royalty interests in Natural Gas and Liquids. 2. For the Natural Gas and Liquids produced from wells located on the Noble Leasehold Lands on or after July 1,2007,at 7:00 a.m.local time and attributable to the Lease by virtue of a pooling agreement or force pooling order, the Operator(and its successors) in the ordinary course of business shall,when calculating Royalties due to the Royalty Owner(and his, her, their or its successors), apply the following provisions relative to its deduction of Post- Wellhead Expenses: (a) Fifty Dement (50%1 deduction. When calculating Royalties due to the Royalty Owner and his,her, their or its successors pursuant to the Lease,Operator will cease deducting one hundred percent of Post-Wellhead Expenses and will, instead, deduct only fifty percent (50%) of the Post-Wellhead Expenses actually incurred, directly or indirectly, by Operator. A further description of how this calculation will be made is provided below. (i) Post-Wellhead Services Paid for in Money.When any provider of Post-Wellhead Services charges monies, directly or indirectly, to Operator for such services, Operator shall include and only deduct 50%of the monies paid or to be paid by Operator to the provider of Post-Wellhead Services when calculating Royalties due to the Royalty Owner. For example,if Company A charges Operator$10,000 for gathering services,then Operator will only deduct$5,000 for those gathering services in calculating Royalties on the production to which the gathering services pertain. (ii) perrrntano-of Arrenaemetds• When any provider of Post- Wellhead Services retains a percentage of the provider's sale proceeds as compensation for Post- Wellhead Services and returns a percentage of the provider's sale proceeds to Operator, then Operator will,in addition to paying Royalties on the sale proceeds returned to Operator,also pay Royalties on 50%of the amount of sale proceeds retained by the provider of such Post-Wellhead Services.The amount of sale proceeds retained by the provider shall be measured and accounted for at the same unit price used by the provider to determine Operator's sale proceeds for Residue Gas at the Mainline Transmission Inlet and for Natural Gas Liquids at the Natural Gas Liquids Pipeline or Storage Tank. This type of arrangement includes, without limitation, wellhead percentage-of-proceeds sale contracts under which another person or entity takes title to Operator's Natural Gas and Liquids at or near the wellhead, gathers and processes the Natural Gas and Liquids,sells the resulting Residue Gas and Natural Gas Liquids,retains a percentage of the sale proceeds, and pays a percentage of the sale proceeds to Operator. For example, if Company B gathers and processes Natural Gas and Liquids and retains 10%of the sale proceeds -2- I I I I I 111111111111111111 I I I I I I I I 111111111111111 1 1 1 1 1 t h 3534183 02/08/2008 02:50P Weld County,CO 3 of 6 R 31.00 0 0.00 Steve Moreno Clerk&Recorder thereof and pays 90%of the sale proceeds to Operator,then Operator will,in addition to paying Royalties on 90%of the sale proceeds it receives,also pay Royalties on 50%of the sale proceeds retained by Company B,i.e.,pay Royalties on a total of 95%of the sale proceeds. (iii) Arrangements Involving Retained Volumeg. When any provider of Post-Wellhead Services receives or retains Residue Gas and/or Natural Gas Liquids volumes in exchange for Post-Wellhead Services, then Operator will pay additional Royalties based on 50% of the value of the Residue Gas and Natural Gas Liquids received or retained by the provider. The value of the Residue Gas and Natural Gas Liquids received or retained by the provider will be calculated by multiplying the same unit price received by Operator for the remaining Residue Gas at the Mainline Transmission Inlet and for the remaining Natural Gas Liquids at the Natural Gas Liquids Pipeline or Storage Tank times the volume of Residue Gas (MMBtu)and Natural Gas Liquids(gallons)received or retained by the service provider. For example, if Company C provides gathering and processing services to Operator and, as a gathering and processing fee,retains twenty-six percent(26%)of the Residue Gas and Natural Gas Liquids volumes attributable to the gas gathered and processed by Company C and returns seventy-four percent(74%) of the Residue Gas and Natural Gas Liquids volumes to Operator, than Operator will,in addition to paying royalties on the Residue Gas and Natural Gas Liquids returned to Operator,also pay royalties on 50%of the value of the Residue Gas and Natural Gas Liquids received or retained by Company C. (iv) Fuel and Other Lost Volumes. Post-Wellhead Expenses incurred by Operator shall include gas used by a provider of Post-Wellhead Services as fuel and all other losses of production volumes(whether through the use of gas or liquids as fuel;through line loss, flaring or venting;or through the retention of drips by the provider,or whether otherwise lost or unaccounted for)incurred between the Initial Measurement Point and the Mainline Transmission Inlet with respect to Residue Gas and the Natural Gas Liquids Pipeline or Storage Tank with respect to Natural Gas Liquids("Fuel and Other Lost Volumes"). Operator shell pay Royalties on 50%of the value of the Fuel and Other Lost Volumes measured and accounted for by the average price paid to Operator for Residue Gas at the Mainline Transmission Inlet per MMBtu during that same period. (v) Services Provided by Ooerato . If Post-Wellhead Services are provided by Operator itself,then Operator may deduct 50%of Operator's actual,direct costs for such services or facilities,all of which costs must be reasonable.Such costs shall not include any overhead,profit,or return on investment. (vi) Other Arrangements.The Parties recognize that there are a variety of arrangements that have been made,or may be made in the future, for the provision of Post- Wellhead Services. Regardless of the particular arrangement,when calculating Royalties due to the Royalty Owner and their successors, Operator will implement such Royalty accounting procedures and methodologies as maybe necessary to ensure that Operator deducts only 50%of the Post-Wellhead Expenses it incurs,including(a)deducting only 50%of any monies charged, directly or indirectly, by providers of Post-Wellhead Services, and (b)paying additional Royalties based on 50%of the value of all Natural Gas and Liquids retained,used,consumed, lost, or unaccounted for by providers of Post-Wellhead Services. It is agreed that Operator's contracts and other arrangements for obtaining Post-Wellhead Services existing on or before February 15,2007, so long as they remain in effect, properly may be used when calculating Royalties due to Royalty Owner, subject to the limitation on the portion of Post-Wellhead Expenses that may be deducted when calculating Royalties from and after July 1, 2007 as provided for in this paragraph 2. (vii) Application. Subparagraphs(i) through (vi) apply as appropriate to Operator's Post-Wellhead Expenses, including by applying these'provisions to various portions(e.g., fee-based portions and percentage of proceeds portions) of Operator's contracts for Post-Wellhead Services. (b) No Modification of Lease. The revised method of calculating Royalties set forth in this paragraph 2 does not amend the provisions of the Lease. This Agreement also has no impact on the respective responsibilities of the Parties for production, severance, ad valorem,conservation,or any other applicable taxes. -3- 111111101111111111111111111111111111111111111111111111 3534183 0210012008 02:50P Weld County,CO 4 of 6 R 31.00 D 0.00 Steve Moreno Clerk&Recorder (a) Impact on Division Orders and Other Instruments. This Agreement describes the allocation of Post-Wellhead Expenses between Operator and the Royalty Owner, but does not supersede or nullify any division order,pooling agreement or unitization agreement now in existence or executed hereafter, except to the extent that the terms of such instruments conflict with the Agreement,in which case the terms of the Agreement shall prevail. (d) Limits on Deduction. Operator shall not make any deductions for expenses incurred prior to the Initial Measurement Point or any administrative or other costs Operator incurs in making arrangements for Post-Wellhead Services, nor shall Operator make any deductions for any operations or facilities that are used to produce Natural Gas and Liquids and/or deliver the Natural Gas and Liquids to the inlet of a gathering system, including well facilities, flow lines, field separators, field dehydrators,and all other operations,activities, and equipment on the lease. (e) Downstream Costs. If Residue Gas or Natural Gas Liquids are sold downstream of the Mainline Transmission Inlet and Natural Gas Liquids Pipeline or Storage Tank, respectively, any costs incurred by Operator after the Residue Gas enters the Mainline Transmission Inlet or the Natural Gas Liquids enter the Natural Gas Liquids Pipeline or Storage Tank shall not be treated as or deemed to be Post-Wellhead Expenses, and nothing in this Agreement shall preclude the deduction of such costs in their entirety from Royalty payments the Royalty Owner. It is agreed that Operator may deduct when calculating Royalties the entire reasonable costs incurred by Operator to fractionate Natural Gas Liquids into separate,distinct products(e.g.,into Propane,Butane,Natural Gasoline)and/or to transport Natural Gas Liquids to a location outside of the Greater Wattenberg Area for fractionation and/or sale. (f) Proportionate Burden. Nothing herein shall be construed to provide, imply or suggest that the Post-Wellhead Expenses and other costs Operator is allowed under this Agreement to deduct when calculating Royalties will be borne in their entirety by the Royalty Owner. Instead,it is understood that Operator's deductions will be calculated on an 8/e basis for any given well and that a Royalty Owner's share of the deductions allowed hereunder trill only be a proportionate share based on his decimal revenue interest in the well. GENERAL PROVISIONS 3. Term. This Agreement shall remain in effect for so long as Operator and its successors and assigns are required to distribute royalties to the Royalty Owner or its successors and assigns pursuant to the[Segregation Agreement]. 4. The Royalty calculation method set forth in paragraph 2 above shall be a covenant that runs with the lands included in the Spacing Unit and be binding on the Royalty Owner and Operator and their successors and assigns. This Agreement shall not be interpreted or construed as preventing or limiting Operator's ability, at its sole discretion and without notice to the Royalty Owner, to enter into new contracts for Post-Wellhead Services, including gathering, transportation,processing or marketing arrangements relating to the Lease,or to modify existing gathering,transportation,processing or marketing arrangements relating to the Lease,provided, however,that the obligations of Operator under this Agreement will continue. 5. Authority and Capacity to Execute. Each person signing this Agreement on behalf of a Royalty Owner or Operator represents and warrants that such signatory has the full and complete power, authority and capacity to execute and deliver this Agreement, that all formalities necessary to authorize execution of this Agreement so as to bind the principal,limited liability company,trust, partnership or corporation have been undertaken, and this Agreement will constitute the valid and legally binding obligation of each such Royalty Owner and Operator hereto, enforceable by and against that Royalty Owner and Operator in accordance with its terms. -4- 1UMnuimIIIIIi��02/0812008 ilitILl11111111(11111111111 353415 0l 6 R 31.60 0 0.00 Steve Moreno Clark h Recorder Effective this 1"day of July,2007. NOBLE ENERGY,INC. By: ra ( Name: Title: . WELD COUNTY BOARD OF COMMISSIONERS ( By: dJ C?r.c `c)1'r [ Name: David E. Long I/ Title: Chair DEC 0 5 2607 ACKNOWLEDGMENTS STATE OF COLORADO ) )as. COUNTY OF DENVER ) The foregoing instrument was acknowledged before me this day of 31 r lai Wad F attorney-in-fact for 9 20070 11WY Nobergy,Inc.,on behalf of such corporation. Witness my hand and official seal. . My commission expires: —Hi*a DO 'rvIELISSA K.ti.1":: , `'l/�1. • 4< Ui- NOTARY PURI t No Public ATE OF CO'C .'; ^ ` Name: tvielissa Mellen Address: 1625 Broadway Denver, CO S0202 [seal] STATE OF Colorado ) )ss. COUNTY OF weld ) The foregoing instrument was acknowledged before me this 5th day of.Dacember 2007 by David E. Long , as Chair of Weld County Board of Commissioners,a Witness my hand and official seal. My commission expires f-e+,:: ,;;* !ca ARy a p : /J t; ',taut�ao�i r /i-H�11� Notary Public ... ='� Name: Donna J. Bechler Address: 915 10th Street Greeley, Colorado 80631 [sue] 5 4002-346/ I 0 e a 0 1 8 a a a $ a $ 0 m 3 3 33 R N1 al11 IL m m au bi t9 3 °; L-... m 1g I F Io z a� � a li .1 � 19N Z 9 ^11 ia d .<.. o as z 1 c itr a t 8 i l 1 c 3 ge- ie d Jeallrall q Vela oUemW ena1S 00'0 0 0010 Y 9 l0 9 acusAA IIIIIIIIIIIIIIlll111111 1MI111111111 INS!�� E1 a' Hello