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Home My WebLink About20174275.tiffLilli (DSAND) Unit Area December 15, 2017 • Brant Douglass from Noble Energy contacted Weld with information to help update files in the Lilli Unit. • Lilli Unit should be attached to the following LE File Locations: o LE0113, LE0115, LE0119 • Lilli Unit did produce royalties for years, but as of November 1, 2017, Noble converted the unit to a Gas Storage Unit, which Weld County is to receive a storage payment yearly, per paragraph 13 of Tyler Document 952712. o The storage payment is the mineral acres of the three leases (431.988 x $1.9028, which is in the Lilli Unit Agreement, but with modified payment that comes from the BLM. The BLM reviews the amount every five years. • Each of these leases will receive an annual rental payment, in addition to one Storage payment per year to cover the entire unit. 12-21-17 — Bruce Barker agreed/approved this with Karla Ford to accept these rentals and storage payments. *Emails from Mr. Douglass and copy of BLM letter are attached. 2017-4275 Cbrteart ea► t an LEoiI3 Ltarl5 twig Karla Ford From: Sent: To: Subject: Attachments: Brant Douglass <Brant.Douglass@nblenergy.com> Friday, December 15, 2017 9:56 AM Karla Ford Weld County Lilli Leases Lilli BLM approval letter 12-16-16.pdf Karla, LEO/1_5 To follow up on our conversation. The Weld County leases committed to the Lilli Unit are Rec. No. 2035218, 2035217, 2035216. —tEa1 / These leases cover 160, 80 and 191.988 net acres, respectively, or 431.988 net mineral acres collectively. Noble made a payment of $821.99 or 431.988 * $1.9028, which is the annual storage payment for Weld County's minerals under the Lilli Unit Agreement filed in Rec. No. 2468536, but with modified payment amounts. See the attached letter from the BLM. Please let me know if you have any further questions. Thanks, Brant Brant S. Douglass Staff Landman DJBU Land Group direct: 720.587.2055 cell: 97G.593.8244 Brant. Douglass©ntsienergy. corn noble energy 1 United States Department of the Interior BUREAU OF 1.,ANr) MANAGEMENT Colorado State Office 2850 Youngfield Street Lakewood. Colorado 80215-7210 wwtv.CO.b1111.gov In Reply Refer To: 3180 (CO -922) 1..,1111 Unit Agreement — COC58278X Lilli Unit Gas Storage Agreement — COC58278 Noble Energy, Inc. Attn:Julie Jenkins 1625 Broadway, Suite 2200 Denver, CO 80202 Dear Ms. Jenkins: DEC 1 6 2016 4WtAV Oi4N0 FkW,MMl.H Effective November 21, 1995, the United States entered into an agreement for the development and operation of the Lilli (D -Sand) Unit Area, involving lands in Weld County, Colorado, and referred to by the Bureau of Land Management (BLM) Colorado State Office (CSO) as the Lilli Unit Agreement, COC58278X. Noble Energy, Inc. (Noble) is the current operator of the Lilli Unit, The Lilli Unit Agreement anticipated the subsurface storage of gas in the unitized formation, and provisions for such storage were included in Section 13 of the agreement. Section 13 states in part: "It is agreed that the Unit Operator shall be allowed hereunder to establish a. 'gas storage reservoir' comprising the Unitized Formation under the lands shown on Exhibit `A' hereto. The Unit Operator proposes to utilize the said gas storage reservoir for the underground storage of natural gas, whether or not gas injected for the purposes of gas storage is produced from lands subject to this agreement. No gas storage operations shall be conducted prior to the consent. approval or certification of the Federal Energy Regulatory Commission (FERC), or other authorizing agency, allowing gas storage operations..." Noble has requested by letter received October 17, 2016, that the Bureau of Land Management (BLM) Colorado State Office (CSO) "approve the conversion of the Lilli Unit to a gas storage unit as contemplated by Section 13 of the Lilli Unit Agreement." The letter further states that "Noble believes approval from the BLM, and only the BLM. is required for Noble to convert the Lilli Unit to a gas storage unit." Because the operations associated with the proposed conversion to gas storage will not involve natural gas under the jurisdiction of FERC, and the Colorado Oil and Gas Conservation Commission has previously approved the subject unit agreement (including the provisions for conversion to gas storage), the BLM remains the "other authorizing agency" specified by the unit agreement. The BLM therefore approves conversion of the unitized formation to gas storage, as provided for under the previously agreed to terms of Section 13 of the Lilli Unit Agreement. Regarding the -fees associated with a gas storage agreement (GSA), Section 13 of the unit agreement further states in part: 2 "For the purposes of this agreement, unless directed otherwise by the AO [BLM Authorized Officer] and/or by judicial order, the fees related to gas storage operations shall be allocated to the Mineral Owners of the Unitized Formation under the lands shown on Exhibit 'A' hereto. Unit Operator agrees to pay to the Mineral Interest Owners an injection fee of $.0028 Mcf and a withdrawal fee of $.0112 per Mcf... "The annual storage fee will be $1.1.2 per net mineral acre, or fraction thereof owned by the mineral owners, and a payment of $1.12 per net surface acre owned by the non -Federal Surface Owners, in the Unit Area... At any point while this agreement is in effect the fees for injection, withdrawal and storage are revised as a result of renegotiation with the AO [BLM Authorized Officer], the Unit Operator agrees to pay to the mineral and surface owners in accordance with this Section 13, the newly negotiated rates or the rates then in effect, whichever is the higher... The amount of fees set out in this Section 13, shall be renegotiated with the AO at the end of five years from the effective date of consent, approval or certification of the Federal Energy Regulatory Commission or other authorizing agency...." Since 1995, the BLM has updated requirements for GSA fees. In keeping with the terms of Section 13, the BLM CSO therefore approves conversion to gas storage, subject to the following proposed fees: Storage fee injection fee Withdrawal fee $1.9028 per acre X $0.0048 per MCF $0.0190 per MCF The proposed fees shall remain in effect for the initial five year term of gas storage, unless renegotiated with the BLIv1. Conversion to gas storage requires that the serial number designating the Lilli Unit Agreement be changed, to COC58278 (eliminating the "X" suffix). Please use the new serial number (COC58278) for future correspondence with the BLM and the Office of Natural Resources Revenue. Should you have any questions regarding this matter, please contact Scott Sorensen, Geologist, at (303) 239-3928. Sincerely, Peter Cowan Acting Chief, Branch of Fluid Minerals Division of Energy, Lands and Minerals cc: Legal Department Noble Energy Inc. Jordan S. Benningfield, Attorney 1001 Noble Energy Way Houston TX 77070 Karla Ford From: Sent: To: Subject: Brant Douglass <Brant.Douglass@nblenergy.com> Friday, December 15, 2017 10:33 AM Karla Ford RE: Weld County Lilli Leases Sure Karla, I'd recommend you get comfortable with paragraph 13 of the unit agreement. It details storage unit operations. The Weld County leases were committed to the unit in 1995. Paragraph 13 of the unit agreement covers Gas Storage, so with BLM approval and effective 11/1/2017, Noble converted the Lilli Unit to a Gas Storage Unit, which is subject to the payments detailed under Paragraph 13 of the agreement but modified in the letter I attached. Weld County will also be entitled to gas Injection and withdrawal fees as detailed paragraph 13 and in the letter. Plus if liquid hydrocarbons are inadvertently produced, these will be paid as royalty under the existing Division of Interest - see paragraph 13 plus paragraph 12 under the unit agreement. Thanks, Brant Brant S. Douglass Staff Landman DJBU Land Group direct: 720.587.2055 cell: 970.593.8244 8rant.Dou glassenblener gy. cam noble energy From: Karla Ford [mailto:kford@weldgov.com] Sent: Friday, December 15, 2017 10:00 AM To: Brant Douglass <Brant.Douglass@nblenergy.com> Subject: EXTERNAL: RE: Weld County Lilli Leases Could you also send me an email of how the storage thing came about and what paragraphs those are referenced? That would be great. Again, thank you so much for your help and information. We greatly appreciate it! Karla Ford R Office Manager, Board of Weld County Commissioners 1150 O Street, P.O. Box 758, Greeley, Colorado 80632 :: 970.336-7204 :: kford@weldgov.com :: www.weldgov.com My working hours are Monday -Thursday 7:00a.m.-4:00 p.m. Friday 7:00a.m. - Noon 1 Hello