Model Form of a Federal Communitization Agreement

COMMUNITIZATION AGREEMENT

Contract No.

This Agreement, entered into as of the date shown in Section 10 (the “Effective Date”), is between the parties subscribing, ratifying, or consenting to it; those parties being referred to as the “Parties.”

The Act of February 25, 1920 (41 Stat. 437), as amended and supplemented, authorizes communitization or drilling agreements communitizing or pooling all or a portion of a Federal oil and gas lease, with other lands, whether or not owned by the United States, when separate tracts under the Federal lease cannot be independently developed and operated in conformity with an established well-spacing program for the field or area and the communitization or pooling is determined to be in the public interest.

The Parties own working, royalty, other leasehold interests, or operating rights under the oil and gas leases and lands subject to this Agreement which cannot be independently developed and operated in conformity with the well-spacing program established for the field or area in which the lands are located.

The Parties desire to communitize and pool their respective mineral interests in lands subject to this Agreement for the purpose of developing and producing communitized substances in accordance with the terms and conditions of this Agreement.

In consideration of the mutual advantages to the Parties, it is mutually covenanted and agreed by and between the Parties as follows:

1. The lands covered by this Agreement the (“communitized area”) are depicted on the Plat attached to this Agreement as Exhibit “A,” and are described as follows:

containing acres, and this Agreement shall include only the Formation(s) underlying these lands and the , (referred to as “communitized substances,” producible from that Formation(s).

2. Attached to, and a part of this Agreement for all purposes, is Exhibit “B,” designating the operator of the communitized area and showing the acreage, percentage and ownership of oil and gas interests in all lands within the communitized area, and the authorization, if any, for communitizing or pooling any patented or fee lands within the communitized area.

3. All matters of operation shall be governed by the operator under and pursuant to the terms and provisions of this Agreement. A successor operator may be designated by the owners of the working interest in the communitized area, and four (4) executed copies of a designation of successor operator shall be filed with the Authorized Officer.

4. Operator shall furnish the Secretary of the Interior, or his authorized representative, with a log and history of any well drilled on the communitized area, monthly reports of operations, statements of oil and gas sales and royalties and other reports as are deemed necessary to compute monthly the royalty due the United States, as specified in the applicable oil and gas regulations.

5. The communitized area shall be developed and operated as an entirety, with the understanding and agreement between the Parties that all communitized substances produced shall be allocated among the leaseholds comprising the area in the proportion that the acreage interest of each leasehold bears to the entire acreage interest committed to this Agreement.

All proceeds, 8/8ths, attributed to unleased Federal, State or fee land included within the communitized area are to be placed in an interest earning escrow or trust account by the designated operator until the land is leased or ownership is established.

6. The royalties payable on communitized substances allocated to the individual leases comprising the communitized area and the rentals provided for in the leases shall be determined and paid on the basis prescribed in each of the individual leases. Payments of rentals under the terms of leases subject to this Agreement shall not be affected by this Agreement except as provided for under the terms and provisions of the leases or as may be otherwise provided in this Agreement. Except as modified and changed by the terms of this Agreement, the oil and gas leases subject to this Agreement shall remain in full force and effect as originally made and issued. It is agreed that for any Federal lease bearing a sliding or step-scale rate of royalty, the rate shall be determined separately as to production from each communitization agreement to which the lease may be committed, and separately as to any noncommunitized lease production; provided, however, as to leases where the rate of royalty for gas is based on total lease production per day, that rate shall be determined by the sum of all communitized production allocated to a lease plus any noncommunitized lease production.

7. There shall be no obligation on the lessees to offset any well or wells completed in the same formation as covered by this Agreement on separate component tracts into which the communitized area is now or may later be divided, nor shall any lessee be required to measure separately communitized substances by reason of the diverse ownership, but the lessees shall not be released from their obligation to protect the communitized area from drainage of communitized substances by a well or wells which may be drilled offsetting the area.

8. The commencement, completion, continued operation, or production of a well or wells for communitized substances on the communitized area shall be construed and considered as the commencement, completion, continued operation, or production on each and all of the lands within and comprising the communitized area, and operations or production pursuant to this Agreement shall be deemed to be operations or production as to each lease committed to this Agreement.

9. Production of communitized substances and disposal of them shall be in conformity with allocation, allotments, and quotas made or fixed by any duly authorized person or regulatory body under applicable Federal or State statutes. This Agreement shall be subject to all applicable Federal and State laws, executive orders, rules, and regulations, and no Party shall suffer a forfeiture or be liable in damages for failure to comply with any of the provisions of this Agreement if the compliance is prevented by, or if the failure results from, compliance with any of those laws, orders, rules, or regulations.

10. The date of this Agreement is , (the “Effective Date”) and it shall become effective as of this date or from the onset of production of communitized substances, whichever is earlier on execution by the necessary Parties, notwithstanding the date of execution, and on approval by the Secretary of the Interior or by his duly authorized representative. It shall remain in force and effect for a period of two (2) years and for as long as communitized substances are, or can be, produced from the communitized area in paying quantities.

Provided, that prior to production in paying quantities from the communitized area and on the fulfillment of all requirements of the Secretary of the Interior, or his duly authorized representative, with respect to any dry hole or abandoned well, this Agreement may be terminated at any time by mutual agreement of the Parties. This Agreement shall not terminate on cessation of production if, within sixty (60) days after that time, reworking or drilling operations on the communitized area are commenced and are then conducted with reasonable diligence during the period of nonproduction. The two (2) year term of this Agreement will not in itself serve to extend the term of any Federal lease which would otherwise expire during that period.

11. The covenants in this Agreement shall be construed to be covenants running with the land with respect to the communitized interests of the Parties and their successors in interests until this Agreement terminates. Any grant, transfer, or conveyance of any land or interest subject to this Agreement, whether voluntary or not, shall be and is conditioned on the assumption of all obligations of this Agreement by the grantee, transferee, or other successor in interest, and as to Federal land shall be subject to approval by the Secretary of the Interior, or his duly authorized representative.

12. It is agreed between the Parties that the Secretary of the Interior, or his duly authorized representative, shall have the right of supervision over all fee and State mineral operations within the communitized area to the extent necessary to monitor production and measurement, and assure that no avoidable loss of hydrocarbons occurs in which the United States has an interest pursuant to applicable oil and gas regulations of the Department of the Interior relating to the production and measurement.

13. This Agreement shall be binding on the Parties and shall extend to and be binding on their respective heirs, executors, administrators, successors, and assigns.

14. This Agreement may be executed in any number of counterparts, no one of which needs to be executed by all parties, or may be ratified or consented to by separate instrument, in writing, specifically referring to it, and shall be binding on all Parties who have executed a counterpart, ratification or consent with the same force and effect as if all Parties had signed the same document.

The Parties have executed this Agreement to be effective as of the Effective Date provided in numbered paragraph 10., and have set opposite their respective names the date of execution.

EXHIBIT “A”

Plat of communitized area covering the following lands:

(NOTE: Show well location and tract numbers, in addition to ownership and tract acreage.)

EXHIBIT “B”

To Communitization Agreement dated to be effective , embracing the following lands:

Operator of Communitized Area:

DESCRIPTION OF LEASES COMMITTED

Tract No. 1

Lease Serial No.:

Lease Date:

Lease Term:

Lessor:

Original Lessee:

Present Lessee:

Description of Land Committed:

Number of Acres:

Royalty Rate:

Name and Percent ORRI Owners:

Name and Percent WI Owners:

Tract No. 2

Lease Serial No.:

Lease Date:

Lease Term:

Lessor(s):

Lessee on effective date of agreement if different from present lessee:

Present Lessee:

Description of Land Committed:

Number of Acres:

Pooling Clause:

Basic Royalty Rate:

Name and Percent ORRI Owners:

Name and Percent WI Owners:

RECAPITULATION