Fill and Sign the Lease Agreementlock Solid Storage Form

Page 1 of 4 UNDERGROUND STORAGE LEASE AND AGREEMENT(Surface Only) This Underground Storage Lease and Agreement (the “Storage Agreement” or “Agreement”) is entered into effective _____ (the “Effective Date”), between _____ (the “Lessor”), whose address is _____, and _____ (the “Lessee”), whose address is _____. Lessor is the owner of the surface of the Property described in Exhibit “A” (the “Property”). The owner of the surface of the Property is deemed to have the right to store and make use of subsurface stratas, formations, and depths to deposit, store, sequester, and withdraw non- hydrocarbon substances, including, but not limited to, carbon dioxide, both in liquid and gaseous forms (referred to in this Agreement as “Substances”). Deeming itself to have the right of storage, sequestration, and withdrawal, Lessor enters into this Agreement with Lessee on the following terms: 1. Grant of Lease: Lessor, for and in consideration of the payments provided below, the receipt and sufficiency of which is acknowledged, lets and leases to Lessee, and Le ssee leases from Lessor, the exclusive right, on the terms and conditions of this Agreement, to inject, store, and hold and retain title to Substances in and withdraw and remove Substances from the depths, zones, or formations underlying the surface of the lands described in Exhibit “A” (the “Property”). The depths, zones, and formations are referred to in this Agreement as the “Storage Reservoir.” Lessee is also granted all rights to make use of the surface of the Property i ncident to the injection, sequestration, storage into, and withdrawal and removal of Substances from t he Storage Reservoir. 2. Consideration for Agreement: On execution and delivery of this Agreement by Lessor to Lessee, Lessee shall pay to Lessor the amount of $_____. This consideration shall be dee med to be the full payment of bonus and rents for the initial term of this Lease, as define d in paragraph 4. below. 3. Storage Fee: If, during the term of this Agreement, Lessee shall begin injecting or storing Substances, from off the Property or a unit, as provided for in paragraph ____ (“Non- Native Substances”) in and under the Property, Lessee shall pay Lessor a storage fee (the “Storage Fee”), subject to the provisions of paragraphs 4. and 17. below, an amount equal to fi fty cents ($.50) per long ton of injected and stored Non-Native Substances. If Lessee does not begin injecting or storing Non-Native Substances during the Initial Term, and extends this Agreement for an additional ten (10) year period, as provided in paragraph 4. below, and during that period begins injecting or storing Non-Native Substances for which a Storage Fee is due Lessor, the Storage Fees due Lessor shall be offset against a port ion of the Extension Consideration provided for in paragraph 4. Page 2 of 5 4. Term: This Storage Agreement shall be for a term of ten (10) years (the “Initial Term”) from and after the Effective Date of this Agreement, and so long as the Storage R eservoir is used for storage of Substances with no continuous period of non-use of two (2) consecutive years. The term “non-use” as used in this paragraph shall mean both no injection of non-hydrocarbon substances into and no withdrawal of Substances from the Storage Reservoir. Non-use shall not be deemed to have occurred if there was either injection of Substances into or wit hdrawal of Substances from the Storage Reservoir within the relevant period. Nothing in this paragraph or Storage Agreement shall obligate or require Lessee to use or continue to use the Storage Reservoir unless so required by a state or federal agency having jurisdiction. If operations for storage of Substances are not initiated during the Initial Term, Lessee shall be entitled to extend this Storage Agreement beyond the Initial Term for an a dditional ten (10) year term, on the same terms and conditions set forth in this Agreement, by de livering written notice of its intent to extend to Lessor not sooner than one (1) year and not l ater than three (3) months prior to expiration of the Initial Term, and the payment provided below (t he “Extension Consideration”). The Extension Consideration is $_____, which, if Lessee extends this Agreement, shall be paid by Lessee with the notice to Lessor that it is ext ending this Agreement. One-tenth (1/10) of the Extension Consideration shall be deemed applicable to each year of the ten (10) year extended term. If Lessee begins injecting or storing Substances in the Property, or on lands with which the Property is unitized during the extension term, Lessee shall be entitled to rec over the Extension Consideration paid to Lessor attributable to the period of the extended t erm after Lessee begins injecting or storing Substances for the time period for which Storage Fees are due Lessor. For example, if Lessee begins injecting and storing Substances in the fourth year of the extended term, Lessee shall recover six-tenths (6/10) of the Extension Compensation paid to Lessor out of Storage Fees due Lessor. When Lessee has recovered, out of Storage Fees due Lessor, the amount of the Extension Consideration paid to Lessor attributable to the t ime period after Lessee begins injecting and storing Substances, Lessee shall begin payments of Stora ge Fees to Lessor. 5. Use of Surface: Lessee is granted access to and the right to make use of as much of the surface of the Property as is necessary for the purposes of injecting, storing, and withdrawing Substances in the Storage Reservoir. Lessee shall pay Lessor $_____ per acre, as damages, for its use of the surface of the Property. 6. Ad Valorem Taxes: Lessee shall be responsible for payment of any ad valorem property taxes assessed against the personal property of Lessee installed on the Property under the t erms of this Agreement, which shall be billed separately from any taxes assessed against t he real property of Lessor. 7. Payments: All payment provided for in this Agreement, following the initial payment provided for in paragraph 2., may be made by check mailed directly to Lessor at the addre sses set out in paragraph 14. If at any time there are four (4) or more parties entitled to any payments from Lessee under the terms of this Agreement, Lessee may withhold payment until all those parties designate, in writing to Lessee, a common agent to receive all payments due. Page 3 of 5 8. Proportionate Reduction: If the Lessor owns a less interest than the entire and undivided fee simple estate in the surface of the Property, the payments referred to in this Storage Agreement shall be proportionately reduced. 9. Release: Lessee, at its option, may at any time release and surrender all of the Property and rights under this Agreement, or any portion of it, in which event this Storage Agreement shall be at an end as to that portion of the Property surrendered and released, and Lessee shall be relieved of all obligations under this Agreement as to that portion of the Property exce pt the obligations then accrued, including an obligation on the part of Lessee to restore the Property. 10. Force Majeure: Performance of the covenants and conditions imposed on Lessee in this Agreement shall be excused while, and to the extent that, Lessee is hindered in or pre vented from compliance in whole or in part, by war, riots, strikes, walkouts, action of the elements, laws, rules, and regulations of any federal, state, municipal or other governmental agency or a ny other cause beyond the control of the Lessee, whether similar or dissimilar to those specific ally enumerated, without regard to whether the cause exists at the date of this Agreement or later arises; provided, however, Lessee shall provide written notice to Lessor of any claim of suspension or excuse of Lessee’s obligations under this paragraph, specifying with particularity the act, event, or condition giving rise to the claim of suspension or excuse and specifying the date on which the act, event, or condition arose. 11. Warranty of Title: Lessor hereby warrants and agrees to defend the title to the Property and should Lessor later acquire any additional rights, title, or interests in or to the Property, it shall be subject to the provisions of this Agreement to the same extent as if owned by Lessor on the Effective Date of this Agreement. Lessor agrees that Lessee shall have the right at any time to redeem for Lessor, by payment, any deed of trust, mortgage, taxes, or other liens on the Property, in the event of default of payment by Lessor, and shall be subrogated to the rights of the holder; and, Lessor agrees that any payments made by Lessee shall be deducted from any amounts of money which may become due Lessor under the terms of this Storage Agreement. 12. Default: Should Lessor claim that a default has been made by Lessee in the payment of any sum due to Lessor under the terms of this Agreement, or in the performance of any other term or condition of this Agreement, Lessor shall provide written notice of that occurrenc e to Lessee. If the claimed default is not contested, cured, or the cure begun by Lessee wit hin a period of sixty (60) days following Lessee’s receipt of Lessor’s written notice, or, if the default is not curable within the 60-day period, if Lessee has not either contested or commenced the cure of the default within the 60-day period and diligently prosecutes the cure to completion, L essor may pursue any remedies available at law or in equity. 13. Binding Effect: This Storage Agreement shall extend to and be binding on the heirs, assigns, executors, administrators, personal representatives, and successors of the Lessor and Lessee. Either of them may assign, transfer, and convey, either in whole or in part, an owne rship or interest in the land, rights, privileges, and Property covered by this Storage Agreeme nt; but no change in ownership of the Property shall be binding on Lessee until the instrument conveying Page 4 of 5 title shall have been properly recorded in the Official Records of _____ County, _____, and a certified copy shall have been furnished to the Lessee. 14. Notices: Any notices or requests required or permitted by this Agreement shall be deemed sufficient as to delivery if given in writing, deposited in the United State s mail, registered, return receipt requested, addressed to the other party as follows: Lessor: Lessee: 15. Compliance: Lessee shall comply with any and all terms and conditions of any state or federal agency having jurisdiction over Lessee’s activities under this Agreement. 16. Drilling: Drilling through the zones and horizons comprising the Storage Reservoir could adversely affect the integrity of the Storage Reservoir in the Property to be uti lized by Lessee in its injection, storage, and withdrawal operations. In consideration of this, Lessor, to the extent Lessor may have the rights, agrees not to drill through or into or grant others t he right to drill through or into the zones and horizons comprising the Storage Reservoir, without Lessee’s prior written consent. Lessee will not withhold its consent unless the proposed operations could potentially damage or drain the Storage Reservoir and any proposed lease or agreement does not contain protective measures and indemnifications that in Le ssee’s reasonable judgment protect Lessee from damage or loss. 17. Unitization: At its option, Lessee is granted the right and authority to unitize and combine the Property covered by this Agreement, or any portion of it, with any and all of the lands in the vicinity of the Property, when in Lessee’s sole judgment it is necessary or advisable to do so in order to effectively inject, store, and withdraw Substances. Lessee may, without Lessor’s further consent, unitize or combine all or part of the Property covered by this Agreement, by executing an instrument describing and designating the acreage included in the unit, and the unit shall be effective as to Lessor and all other parties whose lands and interests are included in the unit, their heirs, successors, and assigns, irrespective of whether or not the unit is effective as to all other owners of surface or mineral interests in the area of the Property and included in the unit. Within a reasonable time following the execution of the instrument designating the unit, Lessee shall file it, or a Me morandum of it, for record in the appropriate records of _____ County, _____. Any unit formed may be revised, reformed, increased, or decreased in size, or changed in configuration, at the election of Lessee, at any time, either before or after commencement of operations provided for in this Agree ment. Lessee may, at any time, at its election, vacate, dissolve, or termi nate any unit formed by filing for record a written instrument in the applicable records of _____ County, _____, which instrument shall specify the date of termination of the unit. Lessee may exercise its right to unitize, at any time, and from time to time, while this Agreement is in force and effect, whether before or after commencement of operations provi ded Page 5 of 5 for in this Agreement. If the Lands are included in a unit, any operations for the injection, storage, or withdrawal of Substances on any part of the unit, regardless of whether the operations are conducted on the Property covered by this Agreement, shall be deemed to be commenc ed on the Property covered by this Agreement. The entire acreage included in the unit sha ll be treated for all purposes, except the payment of Storage Fees, as if it were included under this Agreement. For the purpose of computing the Storage Fees in which Lessor is entitled, there shall be allocated to the Property covered by this Agreement and included in the unit a prorat a portion of the Storage Fee. The allocation of the Storage Fee shall be on an acreage basis; i.e., there will be allocated to the acreage covered by this Agreement and included in the unit t hat prorata portion of the Storage Fee which the number of surface acres in the Property that is the subjec t of this Agreement and included in the unit bears to the total number of surface acres incl uded in the unit. Storage Fees shall be paid to Lessor on the portion of the total Storage Fee all ocated to the Property subject to this Agreement and included in the unit just as though injection and storage were on the Property covered by this Agreement. 18. Governing Law: This Agreement, its validity, construction and all rights under it shall be governed by the laws of the State of _____. 19. Confidentiality: The terms of this Agreement are deemed confidential. Lessor agrees not to disclose any of its terms without Lessee’s consent. This Agreement will be evidenc ed of record in _____ County, _____, by the Memorandum of Lease Agreement executed by Lessor and Lessee, the form of which is attached as Exhibit “B” to this Agreement. Date: Lessee Date: Lessor (Acknowledgments) [Exhibit “A”: Description of Property subject to and covered by the Agreement] [Exhibit “B”: Form of Memorandum]