Fill and Sign the Model Form Orrtfrftfrlng Agreement Nm Oil Conservation

COST OVERRUNS (NON-OPERATOR’S NON-CONSENT OPTION) When Operator, in good faith, believes or determines that the actual costs for any Drilling, Reworking, Sidetracking, Deepening, or Plugging Back operation conducted under this Agreement will exceed _____ percent (_____%) of the costs estimated for the operation on the approved AFE, Operator will give prompt notice by telephone to the other Parties participa ting in the operation and will deliver a supplemental AFE estimating the costs necessa ry to complete the operation and stating Operator’s recommendation as to continuation of the operation or conducting a different operation on the well. Each Party receiving the supplemental AFE shall have forty-eight (48) hours (inclusive of Saturday, Sunday, and legal holidays) from receipt of the notice to elect to approve Operator’s recommendation or propose an alternative opera tion; failure by a Party to respond within that period shall be deemed an election to approve Operator’s recommendation. If any Party proposes an alternative operation, it shall deliver notice of that alternative to all other Parties participating in the wel l within the period required to respond to Operator. The other Parties shall have forty-eight (48) hours (inclusive of Saturday, Sunday, and legal holidays) from their receipt of the alternative proposals to notify Operator if they elect to participate in the alternative proposal or to approve Operator’s recom mendations. Each notice shall specify whether the Party elects to: (1) participate in one or more of the proposals; and, (2) bear not only its proportionate share of the cost of any alternative proposal but also its share of the cost of any Party electing to become a Non-Consenting Party a s to the operation and its share of the cost of any Consenting Party who does not elect to bear i ts share of the cost of any Non-Consenting Party. If no agreement is reached for bearing the cost of one hundred percent (100%) of continuing the original operation or conducting an alternative operation, Operator shall t erminate the operation and plug and abandon the well as quickly and inexpensively as practica ble under the circumstances, and the participating Parties shall pay their proportionate shares of the remaining costs incurred by Operator. If there is agreement for bearing one hundred percent (100%) of the cost of either continuing the original operation or conducting one or more alternative operations, the provisions of Article VI.B.2. shall apply so that the Parties c ontinuing operations on the well beyond the end of the election period shall own all the interest in the well of the Parties electing to terminate their participation until the Consenti ng Parties have recouped the percentages of costs specified in Article VI.B.2.(b) of continuing the operation beyond the end of the election period. The operation conducted by the Consenting Parties shall be conducted pursuant to a supplemental AFE prepared by the Operator. Then, if Operator in good faith believes that the actual costs of the operation will exceed the costs e stimated in the supplemental AFE by the same percentage as provided in the above paragraph for the init ial cost overrun, Operator shall give notice to the Parties still participating in the ope ration, in like manner and with like effect as provided above for the first notice of overrun. Operator’s failure to give the notice required by this provision shall not subject Operator to any liability for excessive costs so long as the failure was not the result of gross negli gence or willful misconduct. Nothing in this provision shall be construed to permit any Party to terminate its liability for its share of costs resulting from a blowout or a well out of control or other emergency that causes costs to exceed the stipulated percentage of the approved AFE until Operator has regained control of the well or otherwise overcome the emergency.