Fill and Sign the Lessor Form C

Lessor Form ‘C’ Paid UpOIL & GAS LEASE This Agreement (the “Lease” or the “Agreement”), is made and entered into this _____ day of _____, _____, by and between _____, whose address is _____, (the “Lessor”), and _____, whose address is _____, (the “Lessee”). 1. Lessor, in consideration of the cash bonus in hand paid, the royalties provided, and the agreements of Lessee contained in this Lease, hereby grants, leases, and lets exclusive ly to Lessee for the sole and only purpose of exploring, drilling, operating for, and producing oil and gas and of laying pipelines, storing oil and building tanks (but not tank farms), telephone lines, roads and structures to produce, save, care for, treat and transport the substances produced only from the land leased by this Agreement, the following land situated in _____ County, State of _____: (Description of Land) containing _____ acres, more or less. 2. Subject to the other provisions below, this Lease shall be for a term of _____ year(s) from the date above (the "Primary Term") and as long thereafter as oil and gas, or eit her of them, is produced in paying quantities from the land or lands with which the land is pooled and the royalties are paid as provided. For the purposes of this Lease, oil and gas, or either of them will be deemed to be producing in paying quantities if during the previous six (6) months period of time the gross proceeds from the sale of all of the oil and gas, less production and severance taxes and less royalties, overriding royalties and other burdens measured by or payable out of production from the Lease, are greater than the expenses of operating the well and marketing the production during the same period of time. Operating and marketing costs shall include taxes, la bor, transportation, gathering, compressing, repairs, overhead charges, depreciation on salvable equipment, and other similar periodic cash expenditures incurred in the daily operati on of a well. If expenses of operating the wells are greater than the proceeds from the sale of oil a nd gas, calculated in the manner described above, whether or not a reasonably prudent operator would have continued operation of the well under the circumstances which will not be a fac tor in determining if the well is producing in paying quantities, this Lease shall be deem ed to have expired. 3. Lessee shall pay the following royalties, subject to the following provisions: (a) Lessee shall pay the Lessor _______ of the gross proceeds of all oil and other liquid hydrocarbons recovered or separated on the leased premises or land pooled with the l eased premises, or produced and saved from the leased premises or lands pooled with the leased premises and sold by Lessee in an arms' length transaction; provided however, in the event oil and other liquid hydrocarbons are not sold under an arms' length transaction, Lessor's royalty on that oil and other liquid hydrocarbons shall be calculated by using the highest price, plus premium, if any, paid or offered for oil and other liquid hydrocarbons of comparable quality in the general area where produced and when run, or after sixty (60) days written notice from Lessor, which notice may be given from time to time, Lessee shall deliver free of cost to Lessor at the wells or to the credit of Lessor into the pipeline to which the well may be connected the stated royalty part of all oil and other liquid hydrocarbons produced and saved from the le ased premises. (b) Lessee shall pay the Lessor _____ of the gross proceeds received by Lessee for all gas (including substances contained in the gas) recovered or separated on the leased premise s or lands pooled with the leased premises, or produced from the leased premises or land pooled wi th the leased premises, and sold by Lessee in an arms' length transaction; provided however, i n the event gas is not sold under an arms' length transaction, Lessor's royalty on the gas (including substances contained in such gas) shall be calculated by using the highest price paid or offered for gas of comparable quality in the general area where produced and when run. (c) Lessee shall pay Lessor a ________ royalty on all oil and other liquid hydrocarbons, including condensate, and on all gas, including all substances contained in the gas, (all collectively called the "Products") produced from a well on the leased premise s or on lands pooled with the leased premises and sold or used off the leased premises regardless of whet her or not the Products are produced to the credit of Lessee or sold under a contract executed by or binding on Lessee. Should Products be sold under a sales contract not binding on Lessor, Lessor's royalty, shall be calculated by using the highest price paid for any of the Products produced from the well from which the Products were produced. (d) In no event will the price paid Lessor for Lessor's share of the Products be less than the price paid Lessee for Lessee's share of Products produced from the Lease. For the purposes of this Paragraph 3, an arms length transaction shall be considered to be the sale of Products by Lessee to any non-affiliated company, subsidiary, or other entity through an agreement negotiated in good faith by all parties. Lessor shall not bear, directl y or indirectly, any post-production cost or expenses, including without limitation, cost or expenses for storing, separating, dehydrating, transporting, compressing, treating, gathering, or otherwise rendering marketable or marketing the Products, and no deduction or reduction shall be made for any such costs and expenses in computing any payment, or the basis on which any payment is to be made to Lessor, pursuant to clauses (a), (b), or (c) above. (e) While there is a well on the leased premises capable of producing gas in payi ng quantities but the production from the well is shut-in or suspended for any reason, Lessee may pay, as royalty, on or before 90 days after the date on which (i) production from any the well i s shut-in or suspended or (ii) this Lease is no longer maintained by compliance with any of i ts other provisions, whichever is the later date, and thereafter at annual intervals, a sum in the amount of $_____ per acre, or a minimum of _____ Dollars ($_____ ), whichever is greater, for each and every shut-in gas well. If this payment is made or tendered in accordanc e with the stated terms, this Lease shall not terminate but shall continue in full force, subj ect to the provisions of paragraph 15, and it will be considered that gas is being produced from the leased premises in paying quantities within the meaning of each pertinent provision of this Lea se; however, in no event shall shut-in well payments maintain this Lease in force for a cumulative period exceeding _____ years. Lessee shall not be entitled to recover any shut-in royalty payments from the future sale of gas. Should the shut-in period extend beyond the expiration of the Primary Term, this shut-in provision will pertain only to the producing unit of the gas we ll as provided for in paragraph 15. Should the shut-in royalty payments not be made in a timely manner as provided in this paragraph, it will be considered for all purposes that there is no production or no excuse for delayed production of gas from any well or wells, and unless there is then in effect other preservation provisions of this Lease, this Lease shall terminat e at midnight on the last day provided for the payment of the shut-in royalties, and Lessee shall t hen furnish Lessor a release of all its interest in and to this Lease insofar as that port ion of the leased premises is included in the producing unit(s) assigned to the shut-in well(s). (f) Lessee agrees that before any gas produced from the leased premises is used or sold off the leased premises, Lessee will run the gas, free of cost to Lessor, through an ade quate oil and gas separator of a conventional type, or equipment at least as efficient, t o the end that all liquid hydrocarbons recoverable from the gas by such means will be recovered on the Lease. (g) Lessee agrees that if it enters into any contract for sale of any Products from this Lease, which shall extend for two (2) years from the effective date of that sales cont ract and the contract does not have adequate provisions for redetermination of price at intervals of not less frequently than annually, then Lessee, its successors and assigns shall, in advance of executing any sales contract, provide Lessor with a full and complete copy of the proposed contract for the purpose of allowing Lessor to determine whether Lessee may sell Lessor's royalty share of Products under Lessee's proposed sales contract. Lessor shall, within thirty (30) days of receiving the sales contract, notify Lessee as to whether Lessee may sell Lessor’s royalty share of Products under Lessee's proposed sales contract. In the event Lessor approves Lessee's proposed sales contract, Lessee shall pay the Lessor _____ of all consideration received by or for the benefit of Lessee under the contract, without deducting any post-production cost or expenses, including without limitation, cost of expenses for dehydrating, transporting, compressing, treating, gathering, or otherwise rendering marketable or marketing the Products. In the event Lessor does not approve Lessee’s proposed sales contract, then Lessor's royalty shall nonetheless be calculated by using the highest price paid or offered for Products of comparable quality in the general area where produced and when run. (h) Lessor, at its sole option and discretion, may from time to time elect to take in kind and separately dispose of its royalty share of the gas for the periods of time as Le ssor may designate in writing. In the event Lessor elects in writing to take and separatel y dispose of its royalty share of the gas, an appropriate gas balancing agreement shall be entered into be tween the Lessor and Lessee. It is expressly agreed, however, that the inclusion of an option to permit Lessor to take its royalty gas in kind shall not modify or limit Lessee's duty to pay royalties as provided in this Lease or to market Lessor’s gas at such times, and from time to t ime, as Lessor does not choose to take and separately dispose of its royalty gas. (i) Within ninety (90) days following the first sale of oil or gas produced from the leased premises, settlement shall be made by Lessee or by its agent for royaltie s due for oil or gas sold off the premises, and the royalties shall be paid monthly thereafter without t he necessity of Lessor, its successors, agents ,or assigns executing a division or transfer order. If the initial royalty payment is not made under these terms, this Lease shall terminate as of 7:00 a.m. the first day of the month following the expiration of the 90-day period. After the initial royalty payment, with respect to oil or gas produced during any month, if royalty is not paid on or before the _____ day of the third (3 rd ) succeeding month, this Lease shall terminate at midnight of that day. (j) Lessee agrees to pay Lessor’s severance taxes levied on Lessor’s royalty share of all oil, gas and Products. 4. In the event a portion or portions of the leased premises is pooled and unitized with ot her land to form a pooled unit or units, or is included in a proration or production unit under the applicable rules and regulations of the appropriate state or federal governing body (a "unit"), operations on or production from a unit or the payment of shut-in royalty as defined in paragraph 3(e) will maintain this Lease in force only as to the land included in a unit. This Lease may be maintained in force during the Primary Term as to any of the lands it covers and not included in a unit in any manner provided for in this Lease. The payment or tender of shut-in royalties may be made by Lessee’s check mailed or delivered to Lessor on or before the date payment is due. Lessee may, at any time, execute and deliver to Lessor a release or releases covering any portion or portions of said the and thereby surrender this Lease as to that portion or portions and be relieved of all obligations as to the acreage surrendered and released from the te rms of this Lease, and after that time the shut-in royalty payable under the terms of this Lease shall be reduced in the proportion that the acreage covered by this Lease is reduced by the release or releases. Lessee agrees that if this Lease terminates for any reason, in that event, Lessee shall promptly prepare and execute a recordable release instrument covering all the lea sed premises and deliver it to Lessor. 5 . Lessee is granted the right to pool or combine the land covered by this Lease, or any part or parts of the land, as to all strata or any stratum, with any other land, as to al l strata or any stratum, for the production of oil or gas. Creating pooled units which do not include 100% of the leased premises shall require the written approval of the Lessor, which approval shall not be unreasonably withheld. Pooling in one or more instances shall not exhaust the right of Lessee t o pool this Lease or portions of it into other or different units. Units pooled for oil shall not exceed forty (40) acres each, and units pooled for gas shall not exceed six hundred forty (640) acres each, provided that if any federal or state law, executive order, rule or regulation shall require a spacing pattern for the development of the field or allocate a producing allowable base d in whole or in part on acreage per well, then any unit consist of the minimum number of additi onal acres which will permit the allocation to the unit and the well the maximum produci ng allowable. To establish a unit or units Lessee shall file a written unit designation and surveyors pla t outlining the unit and describing the participating tracts in the county conveyance records in which the unit is located. A copy of the unit designation shall be furnished to Lessor within thirty (30) days after it is filed in the appropriate county records, and if Lessee fails to do so, the unit may be declared invalid by Lessor, as to the leased premises included in the unit, by an instrument filed in the county records. Drilling or reworking operations and production on any part of the pooled acreage shall be treated for all purposes of this Lease (except the payment of roya lties on production) as if the drilling or reworking operations were on or the production was from the land covered by this Lease whether the well or wells are located on the land cove red by this Lease or not. For the purpose of computing the royalties and other payments out of production to which the owners of such interests shall be entitled on production of oil and gas, or either of them, from any pooled unit, there shall be allocated to the land covered by this Lease and included in a unit (or to each separate tract within the unit if this Lease covers separate tracts within the unit) a pro rata portion of the oil and gas, or either of them, produced from the pooled unit after deducting that used for operations on the pooled unit. This allocation shall be on an acreage basis; thus, there shall be allocated to the acreage covered by this Le ase and included in the pooled unit (or to each separate tract within the unit if this Lease c overs separate tracts within the unit) that pro rata portion of the oil and gas, or either of them, produced from the pool ed unit which the number of surface acres covered by this Lease (or in each separate tract) a nd included in the unit bears to the total number of surface acres included in the pooled unit . Royalties shall be computed on the portion of the production whether it be oil, gas or Products, or either of them so allocated to the land covered by this Lease and included in the unit just a s though the production were from the leased premises. In the event only a part, or parts, of the land c overed by this Lease is pooled or unitized with other land or lands, so as to form a pooled uni t or units, operations on or production from the unit or units will maintain this Lease in force only as to the land included in a unit, or units. This Lease may be maintained in force as to a ny land and not included in a unit or units in any manner provided for in this Lease. 6. If, prior to discovery of oil or gas on the land or land pooled with the leased premises, Lessee should drill and abandon a dry hole or holes, or, if after discovery of oil or gas, the production should cease from any cause, this Lease shall not terminate if Lessee com mences reworking or actual drilling within sixty (60) days, or, if it be within the Primary Term, commences actual drilling or reworking on or before the expiration of the Primary Term. If, at the expiration of the Primary Term, oil or gas is not being produced on the land or land pool ed with the leased premises, and Lessee is then engaged in actual drilling or reworking of any well on the leased premises, this Lease shall remain in force so long as drilling or reworking is prosecuted with no cessation of more than sixty (60) consecutive days. If the operation results in production, then so long thereafter as oil or gas is produced in paying quantities from the la nd or land pooled with the leased premises. In the event a well or wells producing oil or gas should be brought in on adjacent land within six hundred feet (600') of the leased premises not allocat ed to an oil production unit or within twelve hundred feet (1200') of the leased premises not alloca ted to a gas production unit, Lessee agrees to commence the drilling of an offset well within 120 days or release that portion of the leased premises that would be allocated to a well unit. If oil or gas is discovered on the land covered by this Lease, or on land pooled with the leased premises, Lessee agrees to further develop the land covered by this Lease as a reasonably prudent operator would under the same or similar circumstances. 7. Lessee shall, at any time during or within ninety (90) days after the expiration of this Lease, but not later, have the right to remove all property and fixtures placed by Le ssee on the land, including the right to draw and remove all casing, except as to water wells, i n which Lessee shall have the right to remove all property and fixtures except casing, and shall do nothi ng that will in any way damage a water well or prevent its future use by Lessor. Lessee will, at Lessor's request, remove the casing from and plug and abandon any water well at Lessee's sole expe nse. When required by Lessor, Lessee will bury all pipelines below ordinary plow depth, and no well shall be drilled within _____ (_____') feet of any residence or barn now on the land without Lessor's written consent. Lessor shall have the privilege, at its risk and expense, of using gas from any gas well on the land for stoves and inside lights in the principal dwelling, out of any surplus gas not needed for operations. 8. Lessee will conduct its operations in a manner so as not to interfere unreasonably wi th the owner or tenant of the surface estate of the lands covered by this Lease.9. No assignment of this Lease, or interest in it, may be made without the written approva l of the Lessor, which approval shall not be unreasonably withheld. Subject to the preceding condition, the provisions of this Lease shall extend to and be binding on the heirs, exec utors, administrators, successors and assigns of Lessor and Lessee, but no change or division in ownership of the land, rentals, or royalties, however accomplished, shall operate to enlarge the obligations or diminish the rights of Lessee. No such change or division in the ownership of the land, rentals, or royalties shall be binding on Lessee for any purpose until Lessee is furnished with the instrument or instruments, or copies, evidencing the change or division. In the event of a permitted assignment of this Lease as to a segregated portion of the land, the li ability for breach of any obligation of this Lease shall rest exclusively on the owner of this Lease or a portion of it who commits the breach. 10. Lessee shall not be liable for delays or defaults in its performance of any agreement or covenant of this Lease due to force majeure, except any and all monetary payments due under the terms of this Lease. The term "force majeure" shall mean any act of God including but not limited to storms, floods, washouts, landslides and lightning. If Lessee is required, ordered, or directed by any federal, state or municipal law, executive order, rule or regulation enacted or promulgated under color of authority to cease drilling operations, reworking operations or producing operations on the land covered by this Lease, or if Lessee by operation of force majeure, is prevented from conducting drilling operations, reworking operations or producing operations, then until the time as the law, order, rule, regulation, request, or force m ajeure is terminated and for a period of sixty (60) days after the termination, each and every provision of this Lease or implied covenant arising under it that might operate to terminat e it or the estate conveyed by it shall be suspended and inoperative and this Lease shall continue in full forc e; provided, however, in no event will the Primary Term be extended unless Lessee has begun the actual drilling of a well prior to the date of the expiration of the Primary Term. 11. If Lessor owns an interest in the land less than the entire and undivided fee simple estate, the royalties provided for in this Lease shall be paid the Lessor in the proportion whic h Lessor's interest bears to the entire and undivided fee simple estate.12. Lessor executes and delivers this Lease, and it is accepted by Lessee, without warranty of title either express or implied. Lessee, at its option, 30 days after giving written notice to Lessor, may discharge any tax lien on the interest leased; and, in the event Lessee doe s so, Lessee shall have the right to apply royalties accruing under this Lease as reimbursement for that payment.13. In the event this Lease expires for any reason as to all or any portion of the land desc ribed in this Lease, Lessee shall furnish Lessor a written, recordable release instrument c overing all of the land as to which this Lease has expired or terminated.14. Lessee shall advise Lessor in writing as to the location of each well to be dri lled on the premises, or on land pooled with the leased premises, not later than ten (10) days prior to commencement of operations, and shall advise Lessor in writing as to the date of com pletion or abandonment of each well drilled within thirty (30) days after the completion or abandonm ent. Lessee agrees to furnish Lessor with all well drilling, completion, and production data, re ports, title opinions, logs, and information when specifically requested by the Lessor. During the term of this Lease, Lessor, its successors, authorized representatives, agents or assigns shall a t all times have full right of ingress and egress to the leased premises for the purposes of inspecting drilling or producing operations and for any and all other purposes which Lessor may consider necessary or advisable. Lessor and its representatives shall also have the right, at L essee’s offices during regular business hours, to inspect, examine, and make copies of and extracts from Lessee’s books, records, accounts, contracts, commitments and agreements related to the leased premises, operations on or production on or from the leased premises (including, without limitation, the information referred to above). Lessee agrees that immediately fol lowing this Lease being recorded in the county records where the leased premises are located, Lesse e will provide Lessor with a copy of this fully recorded Lease as it appears of record. 15. If at the end of the Primary Term this Lease is still in force, this Lease shall expire as to all that part of the land on which there is not a producing oil or gas well or on which L essee is not then drilling or reworking a well. At the end of the Primary Term, Lessee shall sele ct and designate the area constituting a producing unit around and including each producing oil or gas well or drilling or reworking well, the area of the unit to be limited to and conform with the minimum area provided for or established directly or indirectly in the applicable rule s and regulations of the appropriate governing body of the state in which the leased premises is located with reference to the spacing of wells or the size of producing units. As to each designated producing unit, this Lease shall continue in force so long as oil or gas is produced in paying quantities or so long as drilling or reworking operations are prosecuted, as provided in paragraph 6 and shall be limited in depth from the surface down to and including 50 feet below t he base of the deepest producing formation; however the lower depth limit shall not exceed 100 feet below the deepest producing perforation within the well bore situated on that producing unit, and Lessee shall execute a release of this Lease as to the balance of the l and covered by this Lease and all formations and depths below the respective producing units. In the absence of field rules promulgated by the appropriate governing body of the state in which the leased premises is located, the term "producing unit" means the following number of acres, depending on the depth to which the well has been drilled, and whether the well is an oil or gas well: A. 40 acres for an oil well completed at any depth; B. (i) 80 acres for a gas well completed at a depth of less than 2,000 feet subsurface; (ii) 160 acres for a gas well completed at a depth of 2,000 feet subsurface to 6,000 feet subsurface; (iii) 320 acres for a gas well completed at a depth of 6,000 feet subsurface to 9,000 feet subsurface; (iv) 640 acres for a gas well completed at a depth great er than 9,000 feet subsurface. If a portion of Lessee's rights terminate, as provided in this paragraph 15, then Lessee shall designate in writing the acreage it is allowed to retain around each oil well and each gas well and the written designation shall be filed for record in the county in which the land is located. Lessee shall be entitled to designate the number of acres specified in a shape of its choosing so long as no side is more than twice as long as any other side . The provisions of this paragraph 15 shall not have the effect of relieving the Lessee of its obl igations to develop the Lease with reasonable diligence after oil or gas is first discovered i n paying quantities. 16. This Lease does not include and there is expressly excepted and reserved to Lessor all of the sulphur, coal, lignite, uranium and other fissionable materials, geothermal energy (i ncluding entrained methane, hydrostatic pressure and thermal energy), base and precious metals and any other mineral substances (excepting oil, liquid hydrocarbons, gas and their respective constituent products expressly covered under this Lease) presently owned by Lessor in, under, or on the leased premises, together with rights of ingress and egress and use of the leased premises by Lessor and its mineral Lessees, for the purposes of exploration and production of the minerals reserved by Lessor. Lessor and Lessee shall each conduct their respective operations on t he leased premises so as not unreasonably to interfere with the operations or activities of the other. 17. If Lessor files any legal action to enforce any express or implied obligation of this Lease and receives a favorable judgment from a court of competent jurisdiction, then Lessee shall reimburse Lessor for all costs of the legal proceedings, including reasonable attorney’s fees.18. The provisions contained in paragraph 5 above regarding acreage covered by this Lease which shall be held by drilling operations on or production from any pooled unit or units shall not be altered or amended by any pooling, unitization, or like agreement or instrument, or a ny amendment or ratification or acknowledgement of an agreement, unless same shall be specifically designated as an amendment of paragraph 15 of this Lease. It is further a greed that neither this Lease nor any terms or provisions shall be altered, amended, extended, or rat ified by any division order or transfer order executed by Lessor, its successors, agents or assigns, but that any division orders or transfer orders shall be solely for the purpose of confirming the extent of Lessor’s interest in production of oil and gas from the leased premises, or any land or lands pooled with the leased premises. Any amendment, alteration, extension, or ratificati on of this Lease or of any term or provision of this Lease shall be made by an instrument in writi ng clearly denominated as to its purpose and effect, describing the specific terms or provisions of the Lease affected and the proposed change or modification, and executed by the party against whom t he amendment, alteration, extension, or ratification is sought to be enforced, and any purporte d amendment, alteration, extension, or ratification not so drafted and executed shal l be of no force or effect. 19. Lessee shall conduct its operations in compliance of all applicable rules a nd regulations of any regulatory body having jurisdiction on its operations. Lessee agrees to indemnify, save and hold harmless Lessor and its respective directors, officers, employees, agents, heirs, successors and assigns, from and against all claims, damages, demands, losses, environmental liabilities and expenses (including attorneys' fees, court costs and other expenses of li tigation) in any way arising out of or relating to Lessee's acts, omissions, performance, or operations on or pursuant to the terms of this Lease. This provision shall extend beyond termination of thi s Lease, and is recognized by Lessee as a covenant running with the land. This Lease is executed by Lessor and Lessee as of the date of the acknowledgment of their respective signatures, but shall be deemed dated as of the date specified i n the introductory paragraph of the Lease. LESSOR LESSEE (acknowledgments)