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PRODUCTION AND STORAGE UNIT AGREEMENTFOR
_____ FIELD
_____ COUNTY, _____
(This form of Agreement may be used to create a Unit for the purposes of producing oil and gas
on a pooled unit basis, from existing producing leases, and provide the Operator of the Unit the
right to inject, store, and remove “Extraneous” substances from the unitized formations.
This type of Unit has been formed in an area of existing production where the producing
formation is a candidate for enhanced recovery. The Unit Agreement serves to amend existi ng
oil and gas leases to allow for carbon dioxide storage, and extraction of this “Extraneous” gas
to perpetuate the leases.
In addition to the mineral, royalty, and leasehold owners, the surface owners should also be
parties to the Agreement.)
This Agreement is made and entered into between _____, called “Operator,” and all
parties who sign or join in this Agreement or a counterpart or ratification of it, all of whom are
collectively called the “Participants.” Operator and Participants may be referred to in this
Agreement collectively as the “Parties,” or individually as a “Party.” This Agree ment is deemed
effective _____ (the “Effective Date”) as of the date provided in Article IX of this Agreement.
For the purposes of more effectively developing, producing, and operating the Unit Area,
as defined below, in order to prevent surface and underground waste, and obtain the greatest
ultimate recovery of production of oil and gas, promote conservation, and to afford each of the
Parties the right to recover their fair and equitable share of the production to be obtained from
the Unit Area, or to receive the attributable proceeds of that production, it is deem ed in the best
interests of the Parties that the Unit Area be developed, produced, and operated as a single Unit,
all as provided for in this Agreement. The Parties further desire to provide for the utiliz ation of
the Unit Area, by Operator, and its successors or assigns, for extraneous carbon dioxide storage,
all as provided for in this Agreement.
For valuable consideration and the other benefits to be received, the receipt of which i s
acknowledged by each Participant, and of the mutual covenants and agreements contained in this
Agreement, the Parties agree as follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement, the following terms shall have the stated meanings:
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1. Extraneous Gas shall mean non-hydrocarbon gas, including carbon dioxide, not
originally produced from the Unit Area, but which is purchased and supplied by the Operator, or
a third party pursuant to arrangements with the Operator, and injected into the Unit Area for the
purposes of pressure regulation and Extraneous Gas storage, for the maintaining or raising the
reservoir pressure of the _____ Formation. Extraneous Gas shall not be deemed to include the
hydrocarbon liquids recovered at the outlet of any separator, compressor, or processing plant
located within or connected to the Unit Area.
2. Operator shall mean _____, or its successors or assigns. If the Operator is now,
or later becomes, the owner of a mineral, Royalty, or Overriding Royalty Interest within the Unit
Area, the provisions of this Agreement shall be applicable to Operator both in its capaci ty as an
Operator and a Participant.
3. Overriding Royalty Interest shall mean any interest, other than a working
interest and/or a Royalty Interest or Royalty, in or giving rise to the right to rece ive a portion of
the Unitized Substances, or their attributable proceeds, from any part of the Unit Area, a nd shall
include any Overriding Royalty Interests, oil payment interests, or other payment out of
production, or a burden on a lease which does not carry with it the right to search for and
produce Unitized Substances.
4. Overriding Royalty Owner shall mean the owner of an Overriding Royalty
Interest.
5. Pressure Maintenance shall mean the injection of fresh water, salt water, air,
gas, Extraneous Gas, or other substances into the _____ Formation and the control of the
reservoir and the producing of the wells in the _____ Formation on a pool wide basis for the
purposes of conserving and increasing the recovery of Unitized Substances, and the storage of
gas and Extraneous Gas in the Unit Area. It shall include all operations known as seconda ry and
tertiary recovery operations, cycling, recycling, repressuring, water flooding, pressure
maintenance, carbon dioxide storage, and other operations designed for a similar purpose.
6. Royalty Interest or Royalty shall mean the Royalty Interest reserved to the
lessor in an oil and gas lease on lands included within the Unit Area. It shall i nclude the mineral,
royalty, and reversionary rights to receive such interests in the Unitized Substances or the
proceeds from them, from any part of the Unit Area.
7. Royalty Owner shall mean the owner of a Royalty Interest that is a Party to this
Agreement. The rights of Royalty Owners are referred to as “Royalty Interest” or “Royal ty” to
distinguish them from the owners of a Working Interest or Overriding Royalty Interest.
8. Unit Area shall mean the _____ Formation lying within the area outlined by the
hatched border line on the plat attached as Exhibit “A,” and described on Exhibit “B” to this
Agreement.
9. Unitized Formation shall mean the formation geologically known and referred to
as the _____ Formation and lying within the Unit Area and more generally referred to but not
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limited to the stratigraphic section encountered in the following described wells at the depth
specified, as indicated on the electrical logs of these wells:
(Description of Wells, Statement of Depth, and Log References.)
10. Unitized Substances shall mean all oil and natural gas contained within or
produced from that portion of the _____ Formation which underlies the Unit Area, including all
hydrocarbons and other fluids associated with them, whether liquid, gaseous, or mixed, and all
liquids which may be recovered at the outlet of any separator, compressor, or processing plant
located within or connected to the Unit Area, but shall not include the gaseous porti on of
Extraneous Gas; provided, however, all the Extraneous Gas used or sold shall be passed through
a separator, compressor, or processing plant located within or connected to the Unit Area.
11. Working Interest shall mean the right to search for, produce, and acquire
Unitized Substances from any part of the Unit Area, whether held as an incident to ownershi p of
the fee simple title or under an oil and gas lease or leases described in E xhibit “C” to this
Agreement.
ARTICLE II
UNITIZATION
On or after the Effective Date, the right of Operator to search for and to produce Unitiz ed
Substances, develop the leases described in Exhibit “C,” and the rights and interests of each
Participant in and to Unitized Substances (or the proceeds from them) obtained from t he lands
within the Unit Area, and the Unitized Substances contained in and the Unitize d Substances that
are produced from the Unit Area are unitized and pooled for developing, operating, producing,
and Pressure Maintenance purposes as those terms are defined or described in this Agreement . It
is the intention of the Parties that Operator and each Participant, by virtue of t heir respective
interests in the lands within the Unit Area, shall be entitled to receive the ir respective
participation interests in the production (or the proceeds from them) from the Unit Area as a
whole.
On and after the Effective Date, all separately owned tracts within the Unit Are a shall be
operated without respect to their separate boundary lines and on a pooled unit basis, and there
shall be no obligation on Operator to drill interior offset wells to any well drilled on the Unit
Area producing Unitized Substances. Operator may drill, use, and produce all wells as it deems
advantageous to the Unit, shut in or abandon any wells it deems unnecessary or disadvantageous
to the Unit, use any wells that it may select for Pressure Maintenance, or storage, injection
purposes, and accrue, produce, and gather gas, Extraneous Gas, fresh water, salt water, and other
substances, and inject those substances or any of them into the Unit Area, at times, i n quantities,
at places, at pressures, and under conditions that it deems necessary or appropriate, and in
general to do all other things that it deems advisable for storage, Pressure Mainte nance and
regulation, and the maintenance or increase in the conservation of Unitized Substances.
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On and after the Effective Date, all operations for drilling on the Unit Area or any part of
it for obtaining Unitized Substances, and all operations on the Unit Area or any part of it ,
including storage operations, shall be considered for all purposes as operations on each and eve ry
tract in the Unit Area, and the Unitized Substances obtained from any tract in the Unit Area
under the leases included in the Unit and/or the continuous or pressure regulation, mainte nance,
or storage operations shall be conclusively considered for all purposes as production on or from
each and every tract in the Unit Area. The development and operation of the Unit Area on a
pooled-unit basis, as provided in this Agreement, shall satisfy all requirements, conditions, and
covenants, statutorily imposed, and both express and implied, for exploration, development, and
for operations separately on each and every oil and gas lease covering any part of the Unit Area;
but, nothing contained in this Agreement shall be construed as relieving Operator from the
obligation to protect the Unit as a reasonable and prudent operator would do, from drainage by a
well or wells outside the Unit Area.
ARTICLE III
BASIS OF PARTICIPATION AND ALLOCATION OF UNITIZED SUBSTANCES
In determining the method, manner, and extent of paying the Royalty and Overriding
Royalty Interests on Unitized Substances to Participants, the following principles shall be
applied to conditions of ownership and participation in the Unitized Substances:
1. Royalty Interests and Overriding Royalty Interests shall accrue with respect to the
Unitized Substances produced and saved by Operator from the Unit Area under leases covering
lands described in Exhibit “B,” and shall be apportioned among and allocated to all of the
respective separately owned tracts of land in the Unit Area pro rata, on an acrea ge basis,
determined by the ratio by which the acreage in each tract, as shown in Exhibit “B,” bears to the
total acreage within the Unit Area, regardless of whether all owners of Interests in t he Unit Area
are bound by this Agreement; and, then, each Royalty and Overriding Royalty Owner owning a
Royalty or Overriding Royalty Interest in the separately owned tracts shall be entitl ed to payment
of Royalty or Overriding Royalty, except as otherwise provided for in this Agreement, in
accordance with the terms of the lease covering the interests in each tract, solely on the
production allocated to each tract, without regard to the tract or tracts from which the unitized
substance is actually being obtained. However, no Royalty Interests or Overriding Royalty
Interests which is not bound by this Agreement on the Effective Date shall participa te in the
payment of Royalty or Overriding Royalty or other payments which have accrued or which will
later accrue prior to the first day of the calendar month preceding the date whe n the interest
becomes bound by this Agreement. Nothing in this Agreement shall inure to the benefit of any
nonparticipating Royalty or Overriding Royalty Owner or to any Participant’s interest which i s
not bound by this Agreement. The tracts of land covered by this Agreement shall each be
construed as contained the designated acreage shown on the map attached as Exhibit “A,” and
shall be conclusive on the Parties to this Agreement.
2. If any lease or any Royalty Interest included in the Unit terminates, expires,
becomes canceled or forfeited, or was never included by reason of a Royalty Owner refusing or
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electing not to become a Participant to this Agreement, or this Agreement is or becomes invalid
for any reason as to any Royalty Interest, then if that interest is not subject to any other valid and
existing lease included within the Unit Area, that interest shall then be eli minated from
participating in this Agreement and shall be free from the effect of this Agreement . If any
Royalty or Overriding Royalty Interest owner now owns or later acquires any Royalty or
Overriding Royalty Interest in the Unit Area which is not subject to any lease covered by this
Agreement, the Royalty or Overriding Royalty Interest shall not be covered by nor shall it
participate in this Agreement unless and until that later interest becomes subj ect to one or more
leases presently held or which may later be acquired by Operator covering lands within the Unit
Area.
3. No Royalty or Overriding Royalty shall be due on Unitized Substances used for
the operation or development of the Unit Area, lost by leakage, handling, treating or
transportation, that may be injected into the Unit Area, or that may be used or consume d in or
incident to the operation or development of the Unit or a Pressure Maintenance regulati on
system.
4. During each calendar year of the term of this Agreement, commencing with the
calendar year _____, and continuing thereafter as long as this Agreement is in effect, if no
royalties have accrued to each Royalty Owner, or if the Royalties do not amount t o a minimum
Royalty of as much as _____ Dollars ($ ) per annum for each acre included in the Unit, Operator
shall, on or before the expiration of ninety (90) days following the end of each calendar yea r, pay
or tender to the Royalty Owners, as a minimum Royalty, a sum of money, either by check or
draft, equal to the difference between the amount of the annual accrued Royalties and the sum of
_______ Dollars ($ ) for each acre in the Unit Area, as of December 31st of the calendar year. In
the event the whereabouts of a Royalty Owner is unknown to Operator, Operator may hold any
sum due for the Royalty Owner’s credit or may tender the sum to the credit of the Royal ty
Owner in the depository bank designated in the respective oil, gas, and mineral lease covering
the Royalty Owners Interests, as the depository for delay rentals, or other payments provided for
in a lease.
Payment of the minimum Royalty provided for in this Section 4 of this Article III may be
enforced as any other debt, but failure or omission to pay a minimum Royalty within t he time
and manner provided shall not be the basis for forfeiture or termination of this Agreement, or any
oil, gas, and mineral lease.
Without intending to limit the term of this Agreement, it is understood and agreed that in
the event that payment, credit, or tender of Royalties as provided for in this Artic le III, are made,
and while the right to make the same is accruing, it shall be conclusively presum ed that Pressure
Maintenance, regulation, or storage operations are being conducted by Operator on the Unit
Area.
5. No Royalty shall be payable to Participants with respect to or on Extraneous Gas
injected in the Unit Area or with respect to Extraneous Gas when it is later wit hdrawn, produced
from, and sold or used off the Unit Area. All Extraneous Gas shall be metered when injecte d or
sold.
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ARTICLE IV
PRESSURE MAINTENANCE SYSTEM
Subject to the provisions of Article IX below, Operator or its assigns shall install or cause
to be installed, maintained, and operate, at its sole cost and expense, except as otherwise
provided for in this Agreement, a system for regulating the pressure of and operating and
producing the Unit Area as a whole. The system shall be of the design as Operator, in its good
faith judgment, considers appropriate for the purposes of this Agreement and shall be constructe d
and placed in operation as soon as practicable after the Effective Date of thi s Agreement.
Operator shall have the right to abandon the Pressure Maintenance system or any phase of it
when, in its good faith judgment, operation and maintenance of the system shall no longer be
profitable.
ARTICLE V
OWNERSHIP OR ROYALTY AND OVERRIDING ROYALTY INTEREST
1. Each Participant represents and warrants that it is the owner of a Royalty or
Overriding Royalty Interest in a tract or tracts within the outer limits of the Unit Area as the
Participant’s interests appear of record in _____ County, _____ as of the date the Participant
executes or joins in this Agreement. Nothing in this Agreement shall be construed as al tering or
impairing the provisions of any of the leases or other contacts with reference to the reduction of
Royalties or other interests, in the event the lessor or grantor in any instrument owns less t han the
entire fee simple estate in the land described, or less than the interest whi ch each lessor or
grantor represents it was the owner.
2. From the Effective Date, all assignments and transfers of Royalty and Overriding
Royalty Interest shall be subject to, and the assignees and transferees shall be bound by t his
Agreement. No transfer of Royalty or Overriding Royalty Interests in any land or lease cove red
by this Agreement shall be binding on Operator until ninety (90) days after Operator has been
furnished with a complete original or a certified copy of the recorded instrument or i nstruments
affecting the transfer or assignment.
3. Subject to any existing contact between the affected Parties, Operator and eac h
Participant shall be severally liable for all severance, production, or other taxes asse ssed or
levied by the state or any lawful taxing authority on account of ownership, severance,
production, or sale of Unitized Substances allocated to a Participant’s interest, trac t, or tracts, and
in the event the taxes are paid by Operator for the account of a Party or Participant , then
Operator shall charge to and collect from that Party the full amount of the taxes whi ch have been
paid for the account of the liable Party, and may deduct the amount of the taxes from any amount
due that Party.
4. Nothing contained in this Agreement shall be construed as imposing on any
Participant any obligation to pay for any of the expenses of this unitization or for any
development, equipment, or operation expenses unless the Participant is obligated to pay for the
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same by the terms of an agreement or agreements existing before the execution of this
Agreement. The execution of this Agreement by any Participant shall not have the effec t of
recognizing the ownership of any other Participant that may execute this Agreement.
ARTICLE VI
USE OF PREMISES FOR UNIT OPERATIONS
Participants, to the extent of their respective rights and interests, by joining in t his
Agreement, grant to Operator and its successors and assigns, as to all or any part of t he Unit Area
and any interest in it, the right to utilize the Unit Area or any part of it for st orage and pressure
regulation or maintenance operations, including the right, at Operator’s election, from t ime to
time, to inject Extraneous Gas and store the same, and at its will, remove tha t gas from the Unit.
Operator shall the right to continue all operations so long as Unitized Substances and/or
Extraneous Gas is or can be produced from or Extraneous Gas is stored in the Unit Area or so
long as Operator shall own, maintain, or operator the pressure regulation and maintenance and/or
storage facilities in the manner provided for in this Agreement, and Operator and its succ essors
and assigns shall be the sole and exclusive judge of the necessity, advisability, or nee d of the
Unit Area, or any part of it, for use in connection with or for the protection of the pressure
regulation, maintenance, and/or storage facility or operations.
Participants, to the extent of their respective rights and interests, grant Operator all rights,
rights of ways, and easements reasonably necessary or convenient to the carrying out of the
purposes of this Agreement, including but not limited to easements and rights of way on, over,
and across their respective tracts of land, with full right of ingress and egress, for the purpose of
laying, constructing, using, maintaining, changing, repairing and removing pipelines and other
facilities for pressure regulation and maintenance, gathering, storing of Extraneous Gas,
measuring and delivering Unitized Substances and Extraneous Gas and for transporting
Extraneous Gas, water, and other substances for injection purposes, and easements and rights of
way for the purposes of constructing, erecting, maintaining, operating, and repairing all power
and communication lines, and for building and maintaining roads and easements and rights of
way for the purposes of conducting all development and operations on the Unit Area for all
purposes permitted by the oil and gas leases, and for all purposes provided for in this Agreement.
Operator shall have the right to drill for and produce water, or cause the same to be done, free of
Royalty or other charge, from any horizon, for unit operation purposes; provided, however,
Operator shall not have the right to drill for or produce water found at a depth less than _____
feet below the surface for use in injecting or repressuring purposes. Operator shall have the right
to remove and salvage any and all buildings, structures, equipment, pipes and pipelines, and
other personal property that have been placed on or in the premises or in the wells, for t he
purposes of or in connection with the development, equipment, and operation of the Unit Area.
Any property that Operator desires to remove from the premises shall be removed during the
terms of this Agreement or within _____ after the termination of this Agreement. Pipeline s for
Unit operation purposes that cross cultivated lands shall be buried below ordinary plow depth, on
request by the surface owner. If any damages are caused to growing crops, timber, fences,
improvements, or other structures by Unit operations resulting from the exercise of the rights a nd
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privileges granted to Operator in this Agreement, reasonable compensation shall be paid by
Operator to the affected owners.ARTICLE VII
PERPETUATION OF UNITIZED LEASES
No lease described in Exhibit “A” shall terminate on or after the Effective Dat e of this
Agreement or later during the term of this Agreement, insofar as Participants and the ir interests
are concerned. Operator shall not be required to pay, within the time and in the m anner provided
in each lease, any delay rental or shut in royalty provided for to continue any lease in force
during or after the primary term of the lease in the absence of production, storage, or drill ing
operations. If the production of Unitized Substances from the Unit Area should cease after the
date of this Agreement, then, nevertheless, all Royalty and Overriding Royalty Intere sts bound
by this Agreement and all of the leases, insofar as they cover land in the Unit Area, shall remain
perpetuated and in full force and effect so long after the expiration of the respective primary
terms of each of the leases as gas storage, drilling, or reworking operations are being prosecute d
on the Unit Area with reasonable diligence, and thereafter as long as gas or Extraneous Gas is or
can be produced or withdrawn from the Unit Area. The commencement of operations for the
drilling or reworking of a well within one hundred twenty (120) days after the unsuccessful
completion or reworking of a well, or permanent cessation of production or abandonment of a
well, shall constitute reasonable diligence. The provisions in this Agreement and the re spective
leases covered by it and amendments which relate to the life and continuance in force of the
leases and extensions of the existence of the leases shall be cumulative and ea ch shall be in
addition to the others.
ARTICLE VIIIGENERAL
1. For the purposes of this Agreement and all of the terms, conditions, and
agreements contained in the various leases, unitization and/or pooling agreements, or ot her
contracts covering the separate tracts within the Unit Area, either express or implie d, related to
development and production or Royalty or Overriding Royalty or oil payment or other
settlements, are, to the extent, they are inconsistent with or in conflict with the provisions of this
Agreement, are superseded by and altered by and amended to conform to the terms, provisions,
and intent of this Agreement. On the termination of this Agreement, however accomplishe d, and
in all matters not covered by this Agreement, the Parties will be governed by the leases, prior
unitization agreements, and contracts affecting the various tracts included in the Unit Area.
2. This Agreement and all operations under it shall be subject to all applicable
federal and state laws and applicable orders, rules, and regulations of the State in which the
leases are located, and any other state or federal authority having jurisdiction, but not hing
contained in this Agreement shall be construed as a waiver of any right to contest a ny law, order,
rule, or regulation in any forum having jurisdiction. Neither this Agreement nor any oil and ga s
lease or leases covering lands within the Unit Area shall expired or be terminated in whole or in
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part, nor shall Operator be liable in damages for failure to comply with any regulation, if
compliance is prevented by, or if the failure is a result of any federal or state la w, order, rule or
regulation. It is not the intention of the Parties to limit, restrict, or prorat e the amount of
production to be produced from the Unit Area, it being recognized that such powers are
exclusively exercised by governmental authority, and no provision of this Agreement is intende d
to mean that the Parties are agreeing to exercise those powers.
3. In the event performance under this Agreement is prevented or delayed in whole
or in part by acts of God, strikes, lockouts, or other industrial disturbances, wars, blockades,
insurrections, civilian disturbances, riots, blowouts, inability to obtain material, equipm ent, or
services for any cause, which, by the exercise of due diligence, Operator is unable to preve nt or
overcome, this Agreement shall continue and remain in full force and effect and Operat or shall
not be in default; provided, however, that performance shall be begun and resume within a
reasonable time after the cause has been removed, and further provided that Operator shal l not be
required, against its will, to settle any labor disputes.
4. Each Party executing this Agreement acknowledges and represents it has read this
Agreement, that it has noted all of its contents, that no oral representations, promises, or
agreements have been made as an inducement for executing this Agreement, and that any oral
promise, representation, or agreement that has been made, is not being relied on, and tha t the
signing Party is bound only in the manner and to the extent stipulated in this Agreement.
5. This Agreement may be executed in counterparts, or it may be joined in or ratifie d
by any Party or Parties by executing a ratification of it, and when executed, eithe r in counterpart
or by ratification, shall have the same effect as if the Party or Parties had a ctually joined in
executing one and the same document.
6. The captions and headings of this Agreement are inserted and included solely for
convenience and shall not be considered or given any effect in construing the terms of this
Agreement.
7. The pronoun “it” may be used in this Agreement for convenience to refer to a
party to this Agreement, regardless of gender.
8. It is not the intention of the Parties, by this Agreement, to create a partne rship,
joint venture, or an association. The duties and obligations of the Parties under this Agreem ent
are intended to be separate and not joint or collective, and nothing contained in this Agreement
shall be construed to create a partnership, joint venture, or association, or to impose a partnership
or fiduciary duty, obligation, or liability with respect to any one or more of the Parties.
9. Should any additional Parties own Royalty or Overriding Royalty Interests in the
lands included within the Unit Area, after the acceptance of this Agreement by Opera tor, and at
that time during the existence of this Unit Agreement, Operator shall have the right to secure the
signature of the Party to this Agreement, or a counterpart of it, or to any other instrument or
instruments ratifying this Agreement, at which time that Party should also become a Participant
to this Agreement.
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10. This Agreement shall be binding on all who sign it, whether all Royalty and
Overriding Royalty Owners sign it or not, an shall inure to the benefit of the Operator and
Participants who have signed the Agreement, and their respective successors, assigns, heirs, a nd
legal representatives, and all provisions of this Agreement inuring to the benefit of the Operator
shall likewise inure to all present and future owners of the leases covered by this Agreem ent, or
any interest in this Agreement, insofar as the leases cover lands in the Unit Area. All covenants
contained in this Agreement shall run with the land, minerals, royalties, and leases covered by
this Agreement during its term.
11. If Operator later acquires any interest in any lease covering lands or interest s in
the Unit Area, Operator may subject that interest to the terms of this Agreement by filing with
the County Clerk of _____ County, _____, written notices to that effect, signed and
acknowledged by Operator, at which time that interest shall for all purposes become one of the
leases described in Exhibit “C” to the same effect as though it had been original ly described in
that Exhibit.
12. Oil, gas, and other minerals produced from wells on the lands included within the
pooled area, but not produced from the Unit Area, are not pooled or unitized by this Agreement,
and royalties and other payments on that production shall be accounted for in accordance with
the leases and contracts applicable to the respective wells from which the oi l, gas, and other
minerals are produced.
13. Operator shall have the right to assign all or any part of its interest under thi s
Agreement.
ARTICLE IX
EFFECTIVE DATE AND TERM
1. Effective Date: The Effective Date of this Agreement shall be at 7:00 a .m. on the
first day of the calendar month succeeding the filing for record in _____ County, _____, of this
Agreement or any counterpart of it executed by Operator, accepting the creation of the Uni t by
this Agreement; provided, however, if Operator fails to accept this Agreement on or before
_____, then this Agreement shall automatically terminate.
2. Term: This Agreement shall be binding on each Party executing it, from the date
of execution by that Party. If this Agreement becomes effective as provided for in Section 1. of
this Article IX, it shall then remain in full force and effect as long as eithe r or all of the following
conditions shall exist:
(a) As long as the payment or tender of Royalties, as provided for in Article III, are
made in the manner as set out in Article III.
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(b) As long as Extraneous Gas is or can be produced and/or stored in the Unit Area,
and so long thereafter as Operator shall own, maintain, or operate the pressure regulation,
maintenance, and/or gas storage facilities in the manner provided for in this Agreement.
(c) As long as Unitized Substances, in paying quantities, are obtained, or Extraneous
Gas previously injected in the Unit Area is recovered from the Unit Area, or any part of i t, and as
long as operations for the purposes of discovering and producing Unitized Substances are
conducted, and until all wells in the unit have been plugged and abandoned.
Should Operator fail to commence the construction of the Pressure Maintenance and
regulation system provided for in Article IV on or before _____, this Agreement shall
automatically terminate on that date; provided, however, Operator shall pay Royalt y Owners and
Overriding Royalty Owners their share of any payments which may have accrued under the
terms of this Agreement and be unpaid up to the date of its termination. In the event this
Agreement is terminated during and not at the end of any calendar year to whic h minimum
Royalty is guaranteed, then the guaranteed minimum Royalty during that calendar year shall be
prorated for the period and paid with respect to that portion of the calendar year to whi ch this
Agreement was in force.
This Agreement is signed by the respective Participants as of the dates set opposite their
signatures.
Date: Operator
Date: Participant
Date: Participant
Exhibit “A”: (A plat depicting the lands included in the Unit, identifying the boundaries of each tract in the Unit, the tract number assigned to each tract, and
the quantum of acreage included in each tract.)
Exhibit “B”: (A description of the lands included in each tract.)
Exhibit “C”: (A description of the oil and gas leases on the lands included in the Unit, identifying which tract is covered by each described lease.)
