Fill and Sign the Storage Lease Form

Page 1 of 8 STORAGE LEASE STATE: COUNTY: This Storage Lease (the “Lease”) is dated to be effective _____ (the “Effective Date”), between _____ (the “Owner”) whether one or more, whose address is _____, and _____ (the “Lessee”), whose address is _____. Owner owns the surface estate, and certain interests in the mineral estate, in and to the tract or parcel of land more particularly described below (the “Land”). Owner desires to lease to Lessee, and Lessee desires to lease from Owner, the Land for the purpose of conducting Storage Operations (as defined below). For valuable consideration paid by Lessee to Owner, and of the agreements contained in this Lease, Owner grants, demises, leases, and lets to Lessee the following tract or pa rcel of land for the purpose of conducting Storage Operations: (Description of Land) together with all estates, interests and rights appurtenant to it as may be rea sonable or necessary for Lessee to conduct Storage Operations including, without limitation, the rights to: (a) build and use roads on the Land; (b) construct, convert, install, maintain, operate, remove, and re place Surface Equipment on the Land; (c) enter, cross over or on, occupy or use the surface of the Land, or any part of it; and, (d) other rights and privileges as may be reasonably necessary or convenient for Lessee to conduct Storage Operations (all collectively the “Land”). 1. TERM. This Lease shall be for a term of _____ (_____) year(s) from the Effective Date, and as long thereafter as the Lessee conducts Storage Operations in, on, under, or with respect to the Land including, without limitation, acreage adjacent to it or in the vicinity of it or the Buffer Zone (defined below). Lessee shall be the sole judge as to whether it is conducting St orage Operations with respect to the Land (or whether the Land is included in the Buffer Zone), and its determination shall be final and conclusive. In addition to the terms defined elsewhere in this Lease, the following capitalized terms shall have the meanings specified below: a. “Buffer Zone” means tracts or parcels of land that: (i) are located adj acent to or in the vicinity of a Storage Unit; (ii) overlie the extremities of any of the depths covered by it, or cover portions of the depths that may have limited potential for storage of Non-Native Substances; and, (iii) are used or useful for the purpose of creating a buffer zone between the Storage Unit and adjacent acreage (the “Buffe r Zone”) to reduce the possibility that wells on adjacent property could: (a) cause the Non-Native Substances to migrate through the depths included in a Storage Unit and be produced by wells located on adjacent lands; or, (b) otherwise interfere with the Lessee’s conduct of Storage Operations. Page 2 of 8 b. “Native Hydrocarbons” means all classifications and types of oil, gas, and other hydrocarbons indigenous to the Land, and currently in place in depths under the Land, excluding any Non-Native Substances. c. “Non-Native Substances” means all classifications and types of non-native gaseous, liquid or liquefiable substances including carbon dioxide owned, injected, stored and withdrawn by the Lessee or third parties in, on, under, or with respect to the Land. d. “Storage Operations” means: (i) injecting, storing, and withdrawing Non-Native Substances in, on, under, or with respect to the Land; and, (ii) conducting any and all activities, operations and undertakings associated with them or related t o them including, without limitation, the following: (a) evaluating, developing, maintaining, operating, testing, and using any and all depths for Storage Operations whether the depths are: (1) classified as a gas reservoir, an oil reservoir or otherwise by _____; (2) currently suitable, or are later made suitable by employing any existing or future methods, procedures or technologies, for storage of Non-Native Substances; (3) located in, on, or under the Land (or any part of it) or acreage adjacent to, or in the vicinity of the Land; and, (4) now known or later discovered; (b) injecting substances into any depths Lessee is utilizing (or intends to utilize) for Storage Operations to create, leech, solution mine, or to fracture, improve porosity, increase reservoir pressure, permeate, or otherwise improve, a depth for Storage Operations; (c) injecting, storing and withdrawing Non-Native Substances in connection with Lessee’s Storage Operations from time to time, and at any time, in the depths, free of any cl aim or right by the Owner to: (1) produce, reduce to possession, take or own the Non- Native Substances, or any part of them (by the law of capture or otherwise); or, (2) receive royalty, or any other payments in or measured by the Non-Native Substances, provided that nothing in this Lease is intended nor shall be construed to reduce the royalties that may accrue pursuant to or under an oil and gas lea se with respect to Native Hydrocarbons that may be produced and saved from the Land or acreage pooled with it; (d) installing, maintaining, operating, removing, replacing and using Surface Equipment as provided in Section 4. below; (e) obtaining regulatory approvals, storage rights; (f) retaining title to all Non-Native Substances injected, stored, and withdrawn with respect to the Land; (g) securing markets for storage; (h) serving as part of the Buffer Zone; (i) suspending all or any part of the Storage Operations during periods of force majeure including, without limitation, acts of God or public enemies, fire, floods, scarcity of (or inability to obtain or use) equipment, labor or material, storms, strikes, as a result of any law, order, rule, regulation or necessity of government authority or other causes reasonably beyond Lessee’s control; and, (j) transporting Non-Native Substances over and across the Land for interchange, storage, or other services performed by the Lessee on or with respect to the Land (or acreage adjacent to it or in the vicinity of it). Page 3 of 8 2. POOLING. Lessee is granted the right to combine, pool, or unitize all or any portion of the Land with any other land, lease, or leases adjacent to or in the vicini ty of the Land, at the Lessee’s option during the term of this Lease, to form one or more storage units (a “Storage Unit”) if the Lessee in its sole judgment determines that it is advisable or reasonably necessary to do so to conduct Storage Operations in, or with respect to, any and all compartments, de pths, formations, horizons, reservoirs, or strata that underlie multiple tracts or parcels of land, to promote conservation, prevent waste, or protect the Non-Native Substances injected and stored by Lessee in depths under the Land or acreage pooled with it. Without limiting the generality of the foregoing: a. The Lessee may: (i) conduct physical operations at one or more locations on a Storage Unit, which shall constitute Storage Operations for all of the tracts or parcels of land within that Storage Unit including, without limitation, all or a portion of the Land; and, (ii) form a Storage Unit containing one or more depths, and covering the number of surface acres, as the Lessee determines is advisable or reasonably necessary (in the Lessee’s sole discretion). b. The formation of any Storage Unit shall not reduce: (i) the amount of rental payable to the Owner pursuant to Section 3. below. c. The formation of any Storage Unit shall be independent of, and separate from, the formation of a unit pursuant to any existing or future oil, gas, and mineral lease, and the leases pooled or unitized therewith; and, d. The formation of one Storage Unit shall not exhaust the rights of the Lessee to form additional Storage Units, or to contract, expand, limit, modify, or otherwise redesignate any Storage Unit previously formed, and it shall be unnecessary for Owner to approve any action (or execute any instrument in addition to this Lease) as a condition to it. 3. RENTAL. This is a Paid-Up lease. Lessee shall not owe Owner any rental or other payment under this Lease prior to the _____ anniversary date of it. Beginning on the _____ anniversary date of this Lease, and on each anniversary date thereafter that Lessee wi shes to conduct Storage Operations in, on, under, or with respect to the Land (or acreage pooled with it), Lessee shall pay Owner an annual rental in an amount equal to _____ Dollars ($_____) times t he number of surface acres covered by this Lease. a. Lessee and Owner shall adjust the annual rental rate based on increases of the Consumer Price Index as measured by the Bureau of Labor Statistics of the United States Department of Commerce (“CPI”) on or before the _____ anniversary date of this Lease, and on or before each anniversary date thereafter, as follows. For each period, the Lessee and the Owner shall determine the percentage increase of the CPI. If the CPI for the period between _____ of the preceding year and _____ of the then current year increases by _____ per cent (_____%), or more, the Lessee shall increase the initial rental rate of _____ Dollars ($_____) by the lesser of: (i) the actual percentage increase of the CPI for Page 4 of 8 that period; or, (ii) _____ per cent (_____%). If the Consumer Price Index for any relevant periods are not available to Lessee and Owner on or before any anniversary date of this Lease, Lessee shall: (i) calculate the annual rental for the current year based on the rental rate in effect for the preceding year; (ii) determ ine the percentage adjustment to the rental rate for the preceding year when the Consumer Price Index for the relevant period becomes available; and, (iii) pay the Owner supplemental rental based on the increase to the rental rate for the preceding year, if any. b. Lessee may pay all rental that accrues under this Lease to Owner by check or dra ft mailed or delivered to Owner’s address set forth above, or to another address designated by Owner in an instrument delivered to the Lessee for that purpose in accordance with this Lease. If Lessee makes a bona fide attempt to mail or deliver a rental payment to Owner’s last known address as reflected in Lessee’s records on or before any date when due, or the rental payment is erroneous or ineffective in any regard, Lessee shall remain unconditionally obligated to pay Owner the full amount of rental property payable under this Lease for the rental period involved, and Lessee shall not be held in default for failure to make the applicable rental payments until thirty (30) days after receipt of written notice of non-payment from Owner. At Lessee’s request, Owner shall cooperate with Lessee, and deliver any documents as may be reasonably necessary for Lessee to make the proper rental payments. 4. SURFACE EQUIPMENT. Lessee agrees to use commercially reasonable efforts to build, drill, install, and lay new Surface Equipment, convert existing Surface Equipment used by Lessee for oil and gas production (if any) to Storage Operations, and enhance, maintain, modify, operate, plug and abandon, remove, replace, salvage, and use all Surface Equipment now or la ter located on the Land by the Lessee as follows. a. Lessee shall locate all Surface Equipment, and use commercially reasonable efforts to conduct all Storage Operations, on the Land to accommodate the Owner’s then existing surface uses. Without limiting the generality of the foregoing, Lessee shall: (i) bury all pipelines below ordinary plow depth when requested by Owner; (ii) compensate the Owner for damages to growing crops, livestock, trees, and other vegetation caused by Lessee; (iii) locate all compressors, wells, or other Surface Equipment installed on the Land at least two hundred feet hundred feet (200’) from any existing barn or residence as may then be located on the Land; (iv) remove all construction equipment, excess pipe, and other construction supplies related to, and all debris, trash, and wastes generated by the Storage Operations from the Land; (v) repair damage to Owner’s cattle guards, gates, and fences caused by Lessee; and, (vi) restore all roads and surface sites on the Land used in conducting Storage Operations to their preexisting condition to the extent practicable. b. As used in this Lease, Surface Equipment means any and all property, whether real, personal, or mixed, now or later owned, situated on or used, built for use, or Page 5 of 8 useful in connection with the conduct of Storage Operations on the Land (or acreage adjacent to it or in the vicinity of it) including, without limitation, any and all appliances, batteries, boilers, buildings, cables, Christmas trees, compressors, dehydrators, drilling rigs, drilling rig equipment, facilities, fittings, fixtures, gathering systems, implements, improvements, injection systems, liquid extractors, machinery, motors, parts, pipes, pipelines and pipeline interconnections, plants, pumps, pumping units, rods, separators, stations, structures, supplies, tank and tank batteries, tools, towers, trailers, tubing, valves, wells, wires, and all additions, substitutions, replacements for, and fixtures and attachments to, any and all of the foregoing and any automotive or other equipment which may temporarily be located on the Land. 5. LEASE MAINTENANCE AND SURRENDER. The Owner acknowledges that: (a) Storage Operations will be the best commercial use of the depths available to Owner; (b) the Lessee has invested, and will invest, substantial sums to develop the depths for Storage Operations; and, (c) the tempo of Storage Operations within a Storage Unit may be substantia lly influenced by circumstances beyond Lessee’s control, such as the availability and cost of Non- Native Substances, commodity price swings, seasonal demand and weather. Accordingly, Lessee shall be entitled to maintain this Lease as to all or any part of t he Land, and the depths under it, as Lessee deems are necessary or useful as long as Lessee determines tha t it is conducting Storage Operations as provided in this Lease solely by paying the rentals pursuant t o Section 3. above. a. This Lease shall initially be deemed to cover _____ (_____) surface acres for purposes of calculating rentals, regardless of whether it actually covers more or less. If the Lessee determines, in its sole discretion, that all or any part of the Land (or the depths under it) are no longer necessary or useful, Lessee may surrender the Lease as to all and any part of the Land by mailing a release to the Owner (or by placing a release on record in the proper county) and paying all rentals then due. Thereafter, this Lease shall terminate as to the part of the Land covere d by the release, and Lessee shall be relieved of all further obligations with respect to that portion of the Land. Without limiting the generality of the foregoing, if the Lessee releases the surface and all depths under a specific portion of the Land, t he rentals shall be reduced in the proportion that the number of surface acres within the released portion of the Land bears to the total number of surface acres which were covered by this Lease immediately prior to the release. b. On the final surrender of all of the Land and depths, or the termination of this Lease (no matter how termination may be brought about), Lessee shall: (a) file a notice of abandonment of the Land in the _____ Records of _____ County, _____, which shall release all of the Lessee’s estates, interests, and rights in the Land and in the depths; (b) have a period of thirty-six (36) months thereafter to remove and salvage all Surface Equipment that is not necessary to the storage or withdrawal of Non-Native Substances; (c) restore the Land as provided in Section 4.a. above; and, (iii) as long thereafter as is necessary to store or withdraw all Non-Native Substances injected into any and all depths during the term of this Page 6 of 8 Lease on the Land, or on acreage adjacent to or in the vicinity of the Land. Notwithstanding the foregoing, the estates, interests, and rights conveyed by this Lease sha ll automatically terminate, and the fee simple determinable title conveye d to Lessee shall revert to and vest in Owner without the necessity of demand or reentry, if Lessee discontinues all St orage Operations in, on, under, or with respect to the Land and fails or refuses to pay rentals for _____. 6. RESERVED RIGHTS. This Lease is granted by Owner to Lessee for the purposes set forth in this Lease, and Owner shall retain the right to occupy and use the surface of the Land for farming, grazing, or other purposes, except to the extent Owner’s use would unreasonably interfere with Lessee’s Storage Operations. This Lease, and the estates, interest s, and rights granted by Owner to Lessee, are independent of, separate from, and shall not merge with the estates, interests and rights granted by any oil, gas and mineral lease. a. Owner shall not hereafter lease, or grant any estates, interests, or rights in, on, under or with respect to, the Land to any other person for (i) Storage Operations, or, (ii) the exploration, development, or production of Native Hydrocarbons (“Mineral Development”) in any depths developed by Lessee for Storage Operations. On request, Lessee will designate the depths developed for Storage Operations, and Lessee and Owner shall cooperate with each other to prepare and deliver a partial release of this Lease in form and substance reasonably accepta ble to both parties that: (a) maintains this Lease as to the depths and horizons one hundred feet (100’) above the top, and one hundred feet (100’) below the base, of each depth developed for Storage Operations; and, (b) partially releases this Lease as to the remaining depths and horizons (“Released Depths”) to permit Owner to lease the Released Depths for Mineral Development in a manner consistent with Section 6.b. below. b. If any existing oil and gas lease expires due to the cessation of production of commercial quantities of Native Hydrocarbons, Owner may lease the Released Depths under the Land for Mineral Development subject to the following covenants: (i) Owner shall (and shall cause any future Mineral Development lessee) to: (aa) conduct any and all Mineral Development operations to explore for, develop or produce Native Hydrocarbons within the Released Depths from surface locations that are outside of the peripheral boundaries of the Land, and any other lands adjacent to or in the vicinity of the Land, which Lessee may the n be using for Storage Operations; (bb) comply with all Laws in connection with Mineral Development operations; (cc) drill and complete any and all Mineral Development wells at bottom hole locations that are outside of the peripheral boundaries of the Land; (dd) produce Native Hydrocarbons from the Released Depths solely by pooling the Land with the lands used by the Mineral Development lessee as bottom hole and surface locations for Mineral Development operations; (ee) prohibit the use of directional, horizontal, slant drilling, or other techniques that might penetrate the depths under the Land used by the Lessee for Storage Operations (including the extremities of any depths that may be in the Buffer Zone); and, (ff) otherwise conduct any and all Mineral Page 7 of 8 Development operations with due regard for, and in a reasonable manner that will not damage, disturb, impair, or interrupt the Lessee’s Storage Operations; (ii) INDEMNIFY AND SAVE THE LESSEE, AND THE STORAGE OPERATIONS, HARMLESS FROM AND AGAINST DAMAGE, DESTRUCTION, INJURY OR LOSS ATTRIBUTABLE TO OR RESULTING FROM ANY MINERAL DEVELOPMENT ACTIVITIES AND OPERATIONS; (iii) provide reasonable notice in advance of any proposed Mineral Development activity or operation; (iv) prohibit the production of Non-Native Substances from the depths granted to and held by the Lessee; and, (v) waive any and all rights to use the surface of the Land to conduct Mineral Development operations c. If Owner (or any Mineral Development lessee) fails to comply with the foregoing non-disturbance provisions, their failure will forseeably result in immediate and serious harm to the Lessee and the Storage Operations that would not be adequately compensated by damages. Accordingly, Lessee shall, in addition to other remedies available to it, have the right to: (i) enjoin any pending or pla nned Mineral Development operation that is inconsistent with, or in violation of, the foregoing non-disturbance provisions; and, (ii) recover damages related to or resulting from a breach of the foregoing covenant by Owner, a lessee, or any third party. These provisions shall be covenants running with the Land from the Effective Date until t his termination of this Lease and all Storage Operations under it. 7. WARRANTY. Owner hereby warrants and agrees to defend the title to the Land against all persons claiming or to claim the Land or any part of it. If the Owner fails or refuses to pay and discharge any taxes, mortgages (including any installments or interest), or other existi ng liens, levied or assessed on or against the Land, the Lessee (at Lessee’s option) may pay and discharge the applicable tax, mortgage or other lien. On making payment, Lessee: (a ) shall be subrogated to the rights of any holder or holders of the applicable tax, mortgage or other lien; and, (b) may offset any sum Lessee may owe the Owner pursuant to this Lease against the amount of the tax, mortgage or other lien paid by Lessee. All rental payments wi ll be calculated based on the surface acreage in the Land covered by the Lease, from time to time , in accordance with the foregoing provisions of this Lease. If Owner owns less than the entire and undivided fee simple estate in the surface estate in the Land, then the rental provide d for shall be paid to Owner only in proportion which Owner’s interest in the surface estate bears to the whole and undivided fee. 8. ASSIGNMENT. If Owner conveys all or an undivided interest in the Land, Lessee shall change all rental payments accruing after the date it has received a copy of the deed or other conveyance and a division order, transfer order, or other instrument that instructs the Lessee how to make future rental payments with respect to the Land, that is reasonably satisfac tory to the Lessee and is signed by the Owner and the grantee. Lessee and Owner shall cooperate wit h the each other, and deliver any documents as may be reasonably necessary, for Lessee to divide the rental payments thereafter; provided that if at any time two or more persons are ent itled to participate in the rental payable under this Lease, Lessee may either pay or t ender: (a) the rental Page 8 of 8 jointly to those persons or to their joint credit at a bank designated by those persons for the deposit of rentals; or, (b) the proportionate part of the rentals that each participant is entitled separately to each person, or to their separate credit at a bank designated by e ach person for the deposit of rentals. Lessee’s payment or tender to any participant of a portion of the rent al as provided, shall maintain this Lease as to that participant. In the event of an a ssignment of this Lease as to a segregated portion of the Land, the rentals payable shall be apportiona ble between the several leasehold owners ratably according to the surface area of each, and defa ult in rental payments by one shall not affect the rights of other leasehold owners. If six or more parties become entitled to royalty, Lessee may withhold payment unless and until furnished wi th a recordable instrument executed by all those parties designating an agent to rece ive payment for all. 9. TITLE DISPUTE OR BREACH. If Owner’s title shall come into dispute or litigation, Lessee may withhold all or any part of the rental payments that subsequently accrue unde r this Lease until the final adjudication or settlement of the dispute or litigation; and this Lease shall not terminate nor shall the rights of Lessee be adversely affected during the period of withholding. If Owner believes Lessee is not conducting Storage Operations in compliance wit h this Lease at any time, Owner shall notify Lessee in writing of the applicable c ircumstances and conditions; and Lessee shall have thirty (30) days after receipt of the Owner’s notice to comply with the Lease and correct the circumstances and conditions identified by Owner (or to begin work to comply with this Lease if Lessee cannot reasonably correct the circumstanc es and conditions identified by Owner within that period); and thereafter Lessee shall diligentl y prosecute reasonable actions to continue compliance with the Lease and, or the c ompletion of the corrective action. Lessee’s breach of any covenant of this Lease, express or implied, shal l not cause a forfeiture or termination of this Lease, a termination or reversion of the est ate, interests or rights created by it nor be grounds for cancellation of this Lease in whole or in part. 10. SURFACE USE RESTRICTION. Lessee’s rights to utilize the surface of the Land shall be limited to operations necessary to maintain any existing oil, gas and m ineral leases covering the Land and/or any future leases Lessee may enter into with Lessor or other m ineral owners in the Land. To have and to hold the Land, together with all and singular the rights and appurtenances in anywise belonging to it, to Lessee, and Lessee’s successors and assigns subject to the t erms and provisions of this Lease. All the terms and conditions of this Lease shall be binding on and inure to the benefit of the heirs, executors, administrators, successors, and assigns of the Lessee and Owner, respectively. This Lease is executed to be effective as of the Effective Date. Owner Lessee (Acknowledgments)