HomeMy WebLinkAbout921219.tiff tA112411111S
RESOLUTION
RE: APPROVE AGREEMENT, WATER DISPOSAL WELL LEASE, AND TWO OIL AND GAS LEASES
TO CFG ENERGY, INC., AND AUTHORIZE CHAIRMAN TO SIGN
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, the Board has received a proposal from CFG Energy, Inc., ("CFG")
for lease of certain oil and gas mineral rights and associated abandoned well
bores for purposes of water disposal, and possible ancillary production of oil,
gas and other hydrocarbons, with respect to the following property:
SW), Section 9, Township 7 North, Range 63
West of the 6th P.M., being 160 acres more
or less, together with the abandoned Weld
County No. 1 (Davis Oil Company) Well
located thereon, and
SE), Section 17, Township 7 North, Range 63
West of the 6th P.M., being 160 acres more
or less, together with the abandoned
Travelers Insurance 43-17, No. 1 Well
located thereon (collectively the "Leased
Premises" and "Wells", respectively), and
WHEREAS, the Board finds that the proposal of CFG is sufficiently unique
to warrant the negotiation of a Water Disposal Well Lease and Oil and Gas Leases,
rather than bidding of the same, and that the negotiated procurement of said
leases would be in the best interest of Weld County, and
WHEREAS, the Agreement regarding Water Disposal Well Lease and Oil and Gas
Leases and its Exhibits, which are incorporated herein by reference, have been
reviewed by the Board and found to be in the best interest of Weld County.
NOW, THEREFORE, BE IT RESOLVED by the Board of County Commissioners of Weld
County, Colorado, that the Agreement, Water Disposal Well Lease, and two Oil and
Gas Leases, all of which are attached hereto, be, and hereby are, approved.
BE IT FURTHER RESOLVED by the Board that the Chairman be, and hereby is,
authorized to sign any and all necessary documents.
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F 1605 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
921219
L50053,� 3
I g-n i a.g3 cc>, CF G- (Cu.r p c(TV-e c!)
RE: AGREEMENT FOR LEASES - CFG ENERGY, INC.
PAGE 2
The above and foregoing Resolution was, on motion duly made and seconded,
adopted by the following vote on the 30th day of December, A.D. , 1992.
A l ///
n BOARD OF COUNTY COMMISSIONERS
ATTEST: // WELD COUNTY, COLORADO
Weld County Clerk to the Board
, ` Ge ge Ke edy, C airman
lia
BY: `� �/ .i t , . y �4�r�" � / �-77�/rzrv_ al.�.std-_
Deputy Clerk to the Boa Constance L. Harber_ EE Pro-Tem
APPROVED AS TO FO : ,
/ C. W. Kir y
/.
i
County Attorney Gor a
W. H. Webster
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F 1606 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
921219
AGREEMENT REGARDING WATER DISPOSAL WELL LEASE
AND OIL AND GAS LEASES
THIS AGREEMENT is made and entered into this 30th day of
December, 1992, between WELD COUNTY, COLORADO, a political sub-
division of the State of Colorado, acting by and through the
Board of County Commissioners of the County of Weld, 915 10th
Street, Greeley, Colorado 80631, hereinafter referred to as
"Lessor", and CFG ENERGY, INC. , a Colorado corporation, having an
address of P.O. Box 730, 706 27th Avenue, Suite 200, Greeley,
Colorado 80630, hereinafter referred to as "Lessee. "
RECITALS
WHEREAS, Lessor owns 100 percent (100%) of the oil and gas
mineral interest in and under the SW/4, Section 9 and the SE/4,
Section 17, both in Township 7 North, Range 63 West of the 6th
P.M. , Weld County, Colorado, being a total area of approximately
320 acres more or less (the "Leased Premises") ;
WHEREAS, Lessor also owns two abandoned wells on the Leased
Premises, known as the Weld County #1 (Davis Oil Company) , and
the Travelers Insurance 43-17 #1 Well (the "Wells") ;
WHEREAS, Lessee desires to lease Lessor's interest in and to
the Leased Premises and the Wells for purposes of using and/or
reworking the Wells for disposal of fresh water, salt water,
brine or other oil field wastes produced by other of Lessee's oil
and gas wells within a surrounding and defined geographic area;
WHEREAS, it is recognized that Lessor does not own any
interest in and to the surface estate in the Leased Premises,
separate arrangements with the owners of the surface estate in
the Leased Premises may be necessary before the Leased Premises
and the Wells are used for disposal purposes;
WHEREAS, in reworking, redrilling, or otherwise re-entering
the Wells, Lessee may discover oil, gas, or other hydrocarbons in
economically recoverable quantities, and failure to produce such
substances prior to utilizing the Well or Wells for water dis-
posal purposes, and/or failure to subsequently produce such
substances from other wells would constitute waste;
WHEREAS, Lessor is willing to grant Lessee the rights
to produce oil, gas and other hydrocarbons from the Leased
Premises, so that the same will not be wasted if they are
discovered in the process of reworking, redrilling or otherwise
reentering the Wells for water disposal purposes.
NOW, THEREFORE, in consideration of the above Recitals, and
for other good and valuable consideration, the receipt and suf-
ficiency of which is hereby acknowledged, the parties agree as
follows:
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F 1607 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, SO,1c
1. Lessor grants Lessee right to use the Leased Premises
and the Wells for water disposal purposes, and to cross Lessor's
lands within the Disposal Area pursuant to those purposes, under
the terms and conditions set forth in the separately executed
Water Disposal Well Lease, annexed as Exhibit 1.
2. Lessee recognizes that Lessor has no interest in and to
the surface estate of the Leased Premises, and that Lessee may be
required to make separate contractual arrangements with the owner
or owners of the surface estate in the Leased Premises.
3 . If, in deepening, reworking, or otherwise re-entering
the Wells, Lessee discovers the existence of oil, gas or other
hydrocarbon substances, Lessee may, without limitation,
stimulate, produce and recover such from the Wells pursuant to
one or both of the separately executed Oil and Gas Leases,
annexed as Exhibit 2 and 3, whether such production is from the
Wells, or from such additional wells on the Leased Premises which
may be necessary to produce oil, gas or other hydrocarbon
substances and avoid waste, all in accordance with rules and
orders of the Colorado Oil and Gas Conservation Commission.
4. In exercising rights granted under the Water Disposal
Well Lease and/or the Oil and Gas Leases, Lessee shall not be
required to obtain from Weld County additional zoning or regu-
latory permits or licenses, other than those required by the
terms of those Leases, it being expressly recognized and agreed
by the parties that the terms and conditions set forth in those
Leases satisfy the regulatory concerns and requirements of Weld
County.
Executed the day and date written above.
BOARD OF COUNTY COMMISSION
WELD COUNTY, COLORADO
„ 7,
TEST.'. rirw,
LLD /JO HE BOARD
/ BY: _% ;'/..!✓ r�
4/L7 ,. LCr1.//2.v �1
DEFUlY CLERK TO THE BOARR_ , ,
CFG ENERGY, INC.
By: `,!.j/
Title:
219
- 2 -
B 1366 REC 805 F 1608 MARY 0ANN 7 01/11/93 S2
FEUERSTEIN CLERK & RECORDER.
WELD CO, CO
STATE OF COLORADO )
) ss.
COUNTY OF WELD )
_ 4_1“,_
Acknowledged before me t is Sr -`de'y of 7-4 _,,,,, A,„--, , y
1992, by (it ,r-kiet.-rc-lssT
._ - 1 ifA t ad" as 4-AA,/,I ,l-,,,,,t--,,,., T7Lic - / F-f.�
of Board of County Commiss on, Weld County, Colorado .
Witness my official hand and seal.
~• My :commission expires: '^.' r :,;,.F to C 1. 1994 .
[SEAL)
/
/•
/y' 4 R• '2 r 7,--71_A .,' /i_c r
Notary Public __ -
STATE OF COLORADO )
) ss.
COUNTY OF WELD )
Acknowledged before me this 30th day of neremher ,
1992, by William G. Crews, Attorney-in-fact, CFG Energy, Inc.
Witness my official hand and seal.
My commission expires: MyCommisaionEpiresJanuary10,1995
•
[SEAL]
o tary u io
92. .' 9
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F 1609 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
WATER DISPOSAL WELL LEASE
THIS LEASE is entered into effective this 30th day of
December, 1992, 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, 915 10th
Street, Greeley, Colorado 80631, hereinafter referred to as
"Lessor", and CFG ENERGY, INC. , a Colorado corporation, having an
address of P.O. Box 730, 706 27th Avenue, Suite 208, Greeley,
Colorado 80632-0730, hereinafter referred to as "Lessee" .
I. Riahts Granted.
1. 1 For value received, Lessor does hereby grant, lease,
and let unto Lessee all of its right title and interest in and
to the following land in Weld County, Colorado:
SW/4 , Section 9, Township 7 North, Range 63
West of the 6th P.M. , being 160 acres more or
less, together with the abandoned Weld County
No. 1 (Davis Oil Company) Well located
thereon; and
SE/4, Section 17, Township 7 North, Range 63
West of the 6th P.M. , being 160 acres more or
less, together with the abandoned Travelers
Insurance 43-17 #1 Well located thereon (col-
lectively the "Leased Premises" and "Wells, "
respectively) ;
for the limited purpose of using the Wells as water disposal
wells and returning through the Wells to non-productive
subsurface formations fresh water, salt water, brine or other oil
field wastes (individually or collectively the "Substances") , but
subject to and limited by the terms and conditions herein
contained.
1.2 Disposal of Substances in and through the Wells shall
be limited to Substances produced by and from Lessee's wells and
oil and gas operations within Sections 8, 9, 10, 15, 16, 17, 20,
21, and 22, all in Township 7 North, Range 63 West of the 6th
P.M. (the "Disposal Area") . If Lessee wishes to dispose of
Substances from other wells outside the Disposal Area or from the
wells or operations of others, Lessee must first obtain Lessor's
permission in the form of a written amendment to this Lease.
1. 3 Lessee shall have and is hereby given the use of so
much of the surface of the land owned by Lessor within the
Disposal Area as may be necessary for purposes of ingress and
egress to and from the Leased Premises; and, for the same
consideration herein recited, Lessee is hereby granted an
easement over, under and across the Lessor's lands (includin _
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F 1610 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
roads) within the Disposal Area for purposes of laying and
maintaining pipelines and constructing other equipment necessary
to operate and maintain the Wells on the Leased Premises. Any
and all pipelines shall be buried below ordinary plow depth.
1.4 Lessee shall have the right to install upon the Leased
Premises and maintain such tanks, earthen pits, power stations,
pumps, machinery, and equipment as shall be necessary or conven-
ient to take care of, treat, store, transport and inject, and
dispose of the Substances to be injected into the Wells.
1.5 Lessee shall have the right at any time during, or
within six (6) months after the expiration of, this Lease to
remove all equipment and fixtures of whatever nature placed by
Lessee upon the Leased Premises, including the right to draw and
remove all casing, tubing, and other in-hole equipment, and all
of such property shall be and remain the property of Lessee.
II. Igmm.
2. 1 This Lease shall be for a term of three (3) years, and
for so long thereafter as Substances are injected into the sub-
surface strata through the Wells, or deepening or reworking
operations are conducted on the Leased Premises for the deepening
or reworking of one or more of the Wells.
2 .2 Any suspension of the injection of Substances through
the Wells on the Leased Premises for a period of less than one
hundred eighty (180) consecutive days shall not be considered the
cessation by Lessee of the injection into the Wells under the
terms of this Paragraph.
III. Payments.
3 . 1 For the rights granted hereunder, for the term hereof,
Lessee shall pay to Lessor the sum of Two Hundred Forty and
No/100 Dollars ($240.00) per year for each of the two Wells,
which amount is due in advance on or before the tenth (10th) day
of January in each year.
IV. Other Obligations of Lessor.
4 . 1 Lessee shall obtain all permits required by law or
applicable regulations for use of the Wells as water disposal
wells, including but not limited to permits required by the
Colorado Oil and Gas Conservation Commission, and agrees to
operate the Wells in accordance with applicable law and regulations.
92;1219
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F 1611 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
4.2 Lessee, for itself and its permitted successors and
assigns, hereby obligates itself to protect and save Lessor
harmless from all damages claimed by third parties to arise from,
grow out of or to be in any way incident to or connected with the
disposal of Substances into one or more to the Wells under the
provisions hereof, and Lessee binds itself, its successors and
assigns to defend, at its sole cost and expense, all lawsuits or
court actions brought against Lessor by reason of any such claims
for damages and to pay all such damages and costs of such suits
adjudged against Lessor.
4.3 Lessee shall prepare an access control plan and a
facility diagram for each Well. The access control plan shall
outline security measures, including fencing, to prevent
unauthorized disposal, and measures to be implemented in the
event of unauthorized disposal, and shall including a list of all
parties having access to the Wells. The access control plan must
be reviewed and approved by the Environmental Protection Division
of the Weld County Health Department (the "Division") prior to
operation of the Wells. A log shall be kept on site, which log
shall document all deliveries of Substances to the Wells.
4.4 Lessee shall install and maintain a three-foot by four-
foot sign at the entrance gate to each Well listing wastes
accepted, hours of operation, and twenty-four hour emergency
telephone numbers.
4. 5 The name of the facility at which the filters, if
required, will be disposed, and copies of any analysis, if
required, shall be provided to the Division.
4.6 Notwithstanding the provisions of paragraph 1. 1 above,
only Substances which are Class II, as defined by the United
States Environmental Protection Agency, or their equivalent,
shall be disposed of in the Wells without prior written amendment
to this Lease.
4.7 The maximum permissible noise level not exceed the
industrial limit of 80 db(a) , as measured according to
Section 25-12-102, Colorado Revised Statutes.
4 .8 A spillage retention berm shall be constructed around
Lessee's tank batteries on the Leased Premises, if any. The
volume retained by such berms shall be greater than the volume of
the largest tank inside the each berm. The surface area within
such berms shall be constructed of at least a 24-inch compacted
or in-situ earthen materials or other low permeability materials,
n rr . n
3 - -110.1
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F 1612 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
so as not to exceed a seepage rate of 1 x 10-7 cm/sec. Lessee
shall maintain suitable evidence that a completed lining meeting
these requirements is in place.
4.9 If Substances will be delivered by truck for disposal,
an unloading area shall be constructed to the impermeability
standards set forth in paragraph 4.8 above, to ensure that spills
will be contained and collected for proper disposal.
4. 10 Chemicals stored on-site, if any, must be in locked
buildings on an impervious surface, provided, that manufacturer's
recommendations for safe storage and handling are in accord. In
any event, manufacturer's recommendations will take precedence.
4. 11 Any required air emissions permits shall be obtained
by Lessee.
4. 12 To the extent applicable, the area surrounding the
Wells shall be maintained in compliance with the Weld County
Flood Hazard Development Permit requirements.
4 . 13 To the extent required by law or regulation, analysis
of waste will be forwarded to the Division. The Division
reserves the right to require reasonable additional monitoring at
a later date.
4 . 14 The applicant shall obtain and comply with a road
improvements agreement as approved by the Board of County
Commissioners prior to disposal of Substances in the Wells.
4 . 15 All construction on the Leased Premises shall be in
accordance with the requirements of the Weld County Building Code
Ordinance.
4 . 16 Lessee shall comply with the Design Standards of
Section 24.5 and 24 . 6 of the Weld County Zoning Ordinance.
4 . 17 Personnel from the Weld County Health Department and
Weld County Department of Planning Services shall be granted
access onto the Leased Premises at any reasonable time in order
to ensure activities are carried out in compliance with this
Lease and applicable Weld County Regulations.
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F 1613 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
V. Miscellaneous Provisions.
5. 1 The terms and provisions of this Lease shall extend to,
inure to the benefit of, and be binding upon the parties hereto,
their heirs, legal representatives and permitted assigns.
5.2 Rights under this Lease may not be assigned by Lessee
without written permission of Lessor, which permission will not
be unreasonably withheld.
Executed effective the 30st day of December, 1992 .
7.� /// O BOARD OF COUNTY COMMISSIONERS
//IWELD COUNTY, COLORADO
.TT EST. / U ZMw� iv V�,614177
WLID 57,4 J ,i /. i 3 i i « BiOARD ,By:CFG ENERGY, INC.
—
By: `� %'/ '.v
i
STATE OF COLORADO )
) ss.
COUNTY OF WELD )
,
Acknowledged before me, this 'if --day of / „., r5_ ,,�; ,
1992, by 417 /._, b.) ,.vim- v<ly'it ?c,,,1 as !2,49. a .7 - -rite 7:, ,
of Board of County Commissioners, Weld County, Colorado .
Witness my official hand and seal.
My commission expires: 1JNE8 799¢ •
',LSEAL]
i I
Notary Public
92'..,.'33
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F 1614 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
STATE OF COLORADO )
) ss.
COUNTY OF WELD
Acknowledged before me this 30 day of December, 1992, by
William G. Crews, Attorney-in-fact, CFG Energy, Inc.
Witness my official hand and seal.
My commission expires: My CominissioaE:piresJamary10.1995
[SEAL]
ota1l�fry-6e-
92-1.1:19
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F 1615 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
WELD COUNTY OIL AND GAS LEASE
Containing 160 acres, more or less:
Containing 160 net mineral acres, more or less:
THIS LEASE AGREEMENT, dated this 30th day of December , 1992 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 COINISSIONERS OF THE COUNTY OF WELD, for its respective interests, c/o BOARD OF COUNTY CCCHISSIONERS, WELD COUNTY
CENTENNIAL CENTER, 915 10TH STREET, GREELEY, CO 80631, hereinafter called lessor, ands
CFG EnerQy. Inc.
706 27th Avenue, Suite 200
P.O. Box 730, Greeley, CO 80630
hereinafter called Lasses:
WITNESSETH
WHEREAS, said L 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 $ 3.00 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
SW 1/4 9 7N 63W
(together with the abandoned Weld County No. 1 (Davis Oil Co.) Well located thereon)
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 3Otjky of December , 19 95 as primary term, and so long thereafter as
oil and gas, or either o£ 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.
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F 1616 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
(Revised 5/91) 1 0?AI an
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:
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 et 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, 12.5% 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 casinghead gas or other gaseous substance, 12.55 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 utilised 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 leaser interest in the oil and gas deposits of the above-described land than the entire
and undivided fee simple estate, than 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.
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F 1617 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
924019
(Revised 5/91) 2
9. RECORDS - Lessee agrees to keep and to have in p ion 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 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 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 - Les my 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.
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(Revised 5/91) 3 924 :19
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.
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, end 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 aball 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.
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F 1619 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
(Revised 5/91 4 97/11
7/r 'r)
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 1 , 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 - CWMUNITIZATION - In the event lessor permits the land herein leased to be included within a
eommunitization 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 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. Nonproducing
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 sbut-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;
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F 1620 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
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
walls, 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, 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 walls 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 nontributary 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 po by 1 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 shorn 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, L hall correct such failure or default, no cancellation will be made. If such
921 ;13
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F 1621 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
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 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 es 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.
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F 1622 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
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.
IN WITNESS WHEREOF, Lessor has hereunto signed and caused its name to be signed by the 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.
BOARD OF COUNTY COMMISSIONERS
WELD COUNTY, COLORADO /
ATTEST, Adei/O/uldi
Weld County Clerk to the Board/
By: �4 -
Deputy Clerk to the Board _
, c
LESSEE: C'illfhf1 lilt.
STATE OF COLORADO )
ss
COUNTY OF WELD )
The foregoing instrument was acknowledged before me this 30th day of December , 1992
by William G. Crews, Attorney-in-fact, CFG Energy, Inc.
Witness ay hand and off seal..
/YT� b(j< lim$1CY'i slCiaa JcUidji D. I 'dJ
My Car ission Expires:
Notary Puto]i X
B 1366 REC 02317805 01/11/93 15 :23 $0 .00 19/027
F 1623 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
(Revised 5/91) 8 R ' '
WELD COUNTY OIL AND GAS LEASE
Containing 160 acres, more or less:
Containing 160 net mineral acres, more or less:
THIS LEASE AGREEMENT, dated this 30th day of December , 19 92 , 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, WELD COUNTY
CENTENNIAL CENTER, 915 10TH STREET, GREELEY, CO 80631, hereinafter called Lessor, and:
CFG Energy, Inc.
706 27th Avenue, Suite 200; P.O. Box /SO
Greeley, CO 80630
hereinafter called Lessee:
WITNESSETH
WHEREAS, said L 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 $ 3.00 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
SE' 17 7N 63W
(together with the abandoned Travelers Insurance 43-17 No. 1 Well located thereon)
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 thejday of December , 1995 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
cosmenced 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.
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F 1624 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
(Revised 5/91) 1
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:
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, 12.5% 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 taroks. 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 caainghead gas or other gaseous substance, 12.5% 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 coats of marketing the oil and/or gas produced shall be borne by Lessee end 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.
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F 1625 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
(Revised 5/91) 2
3. RECORDS - Lessee agrees to keep and to have in p ion 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 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 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.
R. 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 L hall cease and become absolutely inoperative
perative 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.
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F 1626 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
(Revised 5/91) 3
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.
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 es 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 leases 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 (5S) 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.
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F 1627 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
(Revised 5/91) 4 n ,.)t
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 1 , 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 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. Nonproducing
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;
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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 leases 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
consented 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, 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 nontributery 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 p d by 1 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
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F 1629 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
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.
D. 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. BOLD 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
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.
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F 1630 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
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
Ins 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.
IN WITNESS WHEREOF, Lessor has hereunto signed and caused its name to be signed by the 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.
BOARD OF COUNTY COMMISSIONERS
WELD COUNTY, COLORADO
f//
ATTEST:
er:Yeti 44/tZ i1611
Weld County Clerk to the Board
Deputy Clerk to the Board %
LESSEE: CF6fne.3y, /vrc-
STATE OF COLORADO )
) as
COUNTY OF WELD
The foregoing instrument wan acknowledged before me this 30th day of December , 1992
by William G. Crews, Attorney-in-fact, CFG Energy, Inc.
Witness my hand and official seal.
My Commission Expires •�; �� 1�
Notary Public 7
32_.'19
(Revised 5/91) e
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F 1631 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO
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