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tract of unitized land shall have allocated well by a working interest owner as herein to it such percentage of said production as in special cases provided for, such worlding the number of acres of such tract included interest owner, shall make deliveries of such in said participating area bears to the total royalty share taken in kind in conformity acres of unitized land in said participating with the applicable contracts, laws, and regu. area. It is hereby agreed that production lations. Settlement for royalty interest not of unitized substances from a participating taken in kind shall be made by working inarea shall be allocated as provided herein terest owners responsible therefor under regardless of whether any wells are drilled existing contracts, laws, and regulations, on on any particular part or tract of said or before the last day of each month for participating area. If any gas produced unitized substances produced during the from one participating area is used for re- preceding calendar month; provided, howpressuring or recycling purposes in another ever, that nothing herein contained shall participating area, the first gas withdrawn operate to relieve the lessee of any land from such last-mentioned participating area from their respective lease obligations for for sale during the life of this agreement the payment of any royalties due under shall be considered to be the gas so trans- their leases. ferred until an amount equal to that trans- II gas obtained from lands not subject to ferred shall be so produced for sale and such this agreement is introduced into any par. gas shall be allocated to the participating ticipating area hereunder, for use in represarea from which initially produced as con- suring, stimulation of production, or increasstituted at the time of such final production. ing ultimate recovery, which shall be in
conformity with a plan first approved by the 13. Development of operation of non
Supervisor, a like amount of gas, after settleparticipating land or formations. Any party ment as herein provided for any gas transhereto owning or controlling the working
ferred from any other participating area and Interest in any unitized land having thereon with due allowance for loss or depletion from a regular well location may with the approval
any cause, may be withdrawn from the of the Supervisor, at such party's sole risk,
formation into which the gas was introduced, cost, and expense drill a well to test any
royalty free as to dry gas, but not as to the formation for which a participating area has
products extracted therefrom; provided that not been established or to test any forma.
such withdrawal shall be at such time as tion for which a participating area has been
may be provided in the plan of operations established if such location is not within
or as may otherwise be consented to by the said participating area, unless within 90 days
Supervisor as' conforming to good petroleum of receipt of notice from said party of his
engineering practice; and provided further, intention to drill the well the Unit Opera
that such right of withdrawal shall terms. tor elects and commences to drill such well
nate on the termination of this unit agreein like manner as other wells are drilled by ment. the Unit Operator under this agreement.
Royalty due the United States shall be If any well drilled as aforesaid by a work- computed as provided in the operating reguing interest owner results in production such
lations and paid in value or dellvered in kind that the land upon which it is situated may as to all unitized substances on the basis properly be included in a participating area, of the amounts thereof allocated to unitized such participating area shall be established
Federal land as provided herein at the rates or enlarged as provided in this agreement specified in the respective Federal leases, or and the well shall thereafter be operated by at such lower rate or rates as may be auUnit Ope
tor in accordance with the terms thorized by law or regulation: provided, that of this agreement and the unit operating for leases on which the royalty rate depends agreement.
on the daily average production per well, said If any well drilled as aforesaid by a work
average production shall be determined in ing interest owner obtains production in accordance with the operating regulations quantities insuficient to justify the inclu- as though each participating area were & sion in a participating area of the land upon single consolidated lease. which such well is situated, such well may 15. Rental settlement. Rental or mini. be operated and produced by the party drill- mum royalties due on leases committed ing the same subject to the conservation hereto shall be paid by working interest requirements of this agreement. The royal- owners responsible therefor under existing ties in amount or value of production from contracts, laws, and regulations, provided any such well shall be paid as specified in that nothing herein contained shall operate the underlying lease and agreements affected to relieve the lessees of any land from their
14. Royalty settlement. The United States respective lease obligations for the payment and any State and all royalty owners who of any rental or minimum royalty in lieu under existing contract, are entitled to take thereof due under their leases. Rental or in kind a share of the substances now unit- minimum royalty for lands of the United ized hereunder produced from any tract, Btates subject to this agreement shall be shall hereafter be entitled to the right to paid at the rate specified in the respective take in kind their share of the unitized sub- leases from the United States unless such stances allocated to such tract, and Unit rental or minimum royalty 18 walved, susOperator, or in case of the operation of a pended, or reduced by law or by approval of
the Secretary or his duly authorized representative.
**With respect to any lease on nonFederal land containing provisions which would terminate such lease unless drilling operations. were within the time therein specified commenced upon the land covered thereby or rentals paid for the privilege of deferring such drilling operations, the rentals required thereby shall, notwithstandIng any other provision of this agreement, be deemed to accrue and become payable during the term thereof as extended by this agreement and until the required drilling operations are commenced upon the land covered thereby or some portion of such land is included within a participating area**:
16. Conservation. Operations hereunder and production of unitized substances shall be conducted to provide for the most economica) and efficient recovery of said substances without waste, as defined by or pursuant to State or Federal law or regulation.
17. Drainage. The Unit Operator shall take appropriate and adequate measures to prevent drainage of unitized substances from unitized land by wells on land not subject to this agreement or pursuant to applicable regulations pay a fair and reasonable compensatory royalty as determined by the Supervisor
18. Leases and contracts conformed and extended. The terms, conditions, and provisions of all leases, subleases, and other contracts relating to exploration, drilling, development, or operation for oil or gas of lands committed to this agreement are hereby expressly modified and amended to the extent necessary to make the same conform to the provisions hereof, but otherwise to remain in full force and effect; and the parties hereto hereby consent that the Secretary shall and by his approval hereof, or by the approval hereof by his duly authorized representative, does hereby establish, alter, change, or revoke the drilling, producing, rental, minimum royalty, and royalty requirements of Federal leases committed hereto and the regulations in respect thereto to conform said requirements to the provisions of this agreement, and, without limiting the generality of the foregoing, all leases. subleases, and contracts are particularly modified in accordance with the following:
(a) The development and operation of lands subject to this agreement under the terms hereof shall be deemed full performance of all obligations for development and operation with respect to each and every part or separately owned tract subject to this agreement, regardless of whether there is any development of any particular part or tract of the unit area, notwithstanding anything to the contrary in any lease,'operating agree
ment or other contract by and between the parties hereto, or their respective predecessors in interest, or any of them.
(b) Drilling and producing operations performed hereunder upon any tract of unitized lands will be accepted and deemed to be performed upon and for the benefit of each and every tract of unitized land, and no lease shall be deemed to expire by reason of failure to drill or produce wells situated on the land therein embraced.
(c) Suspension of drilling or producing operations on all unitized lands pursuant to direction or consent of the Secretary or his duly authorized representative shall be deemed to constitute such suspension pursuant to such direction or consent as to each and every tract of unitized land.
(d) Each lease, sublease or contract relating to the exploration, drilling, development or operation for oil or gas of lands other than those of the United States, committed to this agreement, which, by its terms might expire prior to the termination of this agreement, 18 hereby extended beyond any such term so provided therein so that it shall be continued in full force and effect for and during the term of this agreement.
(e) Any Federal lease for a fixed term of twenty (20) years or any renewal thereof or any part of such lease which is made subject to this agreement shall continue in force beyond the term provided therein until the termination hereof. Any other Federal lease committed hereto shall continue in force beyond the term so provided therein or by law as to the committed land so long as such land remains committed hereto, provided unitized substances are discovered in paying quantities within the unit area prior to the expiration date of the primary term of such lease.
(1) Each sublease or contract relating to the operation and development of unitized substances from lands of the United States committed to this agreement, which by its terms would expire prior to the time at which the underlying lease, as extended by the immediately preceding paragraph, will expire, is hereby extended beyond any such term so provided therein so that it shall be continued in full force and effect for and during the term of the underlying lease as such term is herein extended.
(8) Any lease having only a portion of its lands committed hereto shall be segregated as to the portion committed and the portion not committed, and the terms of such lease shall apply separately to such segregated portions commencing as of the effective date
3 Alternative: Paragraph between double asterisks optional non-Federal land included.
hereof. In the event any such lease provides of the Director; notice of any such approval for a lump-sum rental payment, such pay- to be given by the Unit Operator to all parment shall be prorated between the portions ties hereto. so segregated in proportion to the acreage of the respective tracts.
21. Rate of prospecting, development, and 19. Covenants run with land. The covo- production. The Director is hereby vested nants herein shall be construed to be cove- with authority to alter or modify from time nants running with the land with respect to time in his discretion the quantity and to the interest of the parties hereto and their rate of production under this agreement successors in interest until this agreement when such quantity and rate is not fixed terminates, and any grant, transfer, or con- pursuant to Federal or State law or does not veyance, of interest in land or leases subject conform to any state-wide voluntary conhereto shall be and hereby is conditioned servation or allocation program, which is upon the assumption of all privileges and established, recognized, and generally adobligations hereunder by the grantee, trans- hered to by the majority of operators in such feree, or other successor in interest. No as- State, such authority being hereby limited signment or transfer of any working interest, to alteration or modification in the public royalty, or other interest subject hereto shall interest, the purpose thereof and the public be binding upon Unit Operator until the first interest to be served thereby to be stated in day of the calendar month after Unit Op- the order of alteration or modification. Witherator is furnished with the original, photo- out regard to the foregoing, the Director is static, certified copy of the instrument of also hereby vested with authority to alter transfer.
or modify from time to time in his discre20. Effective date and term.
This agree- tion the rate of prospecting and development ment shall become effective upon approval by and the quantity and rate of production unthe Secretary or his duly authorized repre- der this agreement when such alteration or sentative and shall terminate on unless modification is in the interest of attaining (a) such date of expiration is extended the conservation objectives stated in this by the Director, or (b) It is reasonably de- agreement and is not in violation of any aptermined prior to the expiration of the fixed plicable Federal or State law. term or any extension thereof that the Powers in this section vested in the Direcunitized land is incapable of production of tor shall only be exercised after notice to unitized substances in paying quantities in Unit Operator and opportunity for hearing to the formations tested hereunder and after
be held not less than 15 days from notice. notice of intention to terminate the agree- 22. Determinations by unit operator and ment on such grounds is given by the Unit review thereof. Whenever a determination Operator to all parties in interest at their last
is required to be made in order to carry out known addresses, the agreement is termi- the express terms of this agreement and the nated with the approval of the Director, or
agreement does not specify by whom such (c) a valuable discovery of unitized sub
determination shall be made, the Unit Opstances has been made on unitized land dur
erator is hereby authorized to make the ing said initial term or any extension thereof, necessary determination subject to approval in which event the agreement shall remain of the Director in the manner hereinafter in effect for such term and so long as unitized provided. Notice of any such determination substances can be produced in paying quan- by the Unit Operator, accompanied by data tities, i. e., in this particular instance in
in support thereof, shall be furnished to the quantities sufficient to pay for the cost of Director through the Supervisor. If, after producing same from wells on unitized land
reviewing all the available evidence, the Di. within any participating area established rector finds that the determination reviewed hereunder and, should production cease, so is incorrect he shall advise the Unit Operator long thereafter as diligent operations are in accordingly, stating the reasons therefor, and progress for the restoration of production or
thereupon such determination shall be of no discovery of new production and so long force and effect. thereafter as the unitized substances so dis- The Unit Operator shall then make a new covered can be produced as aforesaid, or (d) determination in conformity with the finding it is terminated as heretofore provided in of the Director or appeal to the Secretary this agreement.
as provided in the Operating Regulations. This agreement may be terminated at any All determinations made by the Unit Opertime by not less than 75 per centum, on ator pursuant to this section shall be effecan acreage basis, of the owners of working tive unless and until altered, modified, or interests signatory hereto, with the approval rescinded as herein provided.
• The termination date to be specified in section 20 should not be more than 5 years from the effective date of the agreement.
5 Section 22 entitled "Determinations by Unit Operator and Review Thereof” may be omitted at the option of the parties.
Any party hereto shall have the right to request the Director (such request to be accompanied by appropriate supporting evidence) to review any determination made by the Unit Operator pursuant to this section not previously reviewed on appeal to the Secretary. Such request will be granted or denied in the discretion of the Director within 60 days after being received. I denied, the requesting party shall have the right to appeal to the Secretary. the request for review is granted and thereafter the Director finds that the determination should be altered, modified, or rescinded, the Unit Operator shall be advised accordingly and shall either comply with the finding of the Director or appeal to the Secretary.
23. Appearances. Unit Operator shall, after notice to other parties affected. have the right to appear for or on behalf of any and all interests affected hereby before the Department of the Interior and to appeal from orders issued under the regulations of said Department or to apply for relief from any of said regulations or in any proceedings relative to operations before the Department of the Interior or any other legally constituted authority: provided, however, that any other Interested party shall also have the right at his own expense to be heard in any such proceeding.
24. Notices. All notices, demands or statements required hereunder to be given or rendered to the parties hereto shall be deemed fully given if given in writing and personally delivered to the party or sent by postpaid registered mail, addressed to such party or parties at their respective addresses set forth in connection with the signatures bereto or to the ratification or consent hereof or to such other address as any such party may bave furnished in writing to party sending the notice, demand or statement.
25. No waiver of certain rights. Nothing in this agreement contained shall be construed as a waiver by any party hereto of the right to assert any legal or constitutional right or defense as to the validity or invalidity of any law of the State wherein said unitized lands are located, or of the United States, or regulations issued thereunder in any way affecting such party, or as a waiver by any such party of any right beyond his or its authority to waive.
26. Unavoidable delay. All obligations un. der this agreement requiring the Unit Operator to commence or continue drilling or to operate on or produce unitized substances from any of the lands covered by this agreement shall be suspended while. but only 80 long as, the Unit Operator despite the exercise of due care and diligence is prevented from complying with such obligations, in whole or in part, - by strikes, acts of God,
Federal, State, or municipal law or agencies. unavoidable accidents, uncontrollable delays in transportation, inability to obtain necessary materials in open market, or other matters beyond the reasonable control of the Unit Operator whether similar to matters herein enumerated or not.
27. Fair employment. The Unit Operator shall not discriminate against any employee or applicant for employment because of race, creed, color or national origin, and an identical provision shall be incorporated in all subcontracts.
28. Loss of title. In the event title to any tract of unitized land shall fall and the true owner cannot be induced to join in this unit agreement, such tract shall be automatically regarded as not committed hereto and there shall be such readjustment of future costs and benefits as may be required on account of the loss of such title. In the event of a dispute as to title as to any royalty, working Interest, or other interests subject thereto, payment or delivery on account thereof may be withheld without liability for interest until the dispute is finally settled; provided, that, as to Federal land or leases, no payments of funds due the United States should be withheld, but such funds shall be deposited as directed by the Supervisor to be held as unearned money pending final settlement of the title dispute, and then applied as earned or returned in accordance with such final settlement.
Unit Operator as such is relieved from any responsibility for any defect or failure of any title hereunder.
29. Non-joinder and subsequent joinder. If the owner of any substantial interest in a tract within the unit area fails or refuses to subscribe or consent to this agreement, the owner of the working interest in that tract may withdraw said tract from this agreement by written notice to the Director and the Unit Operator prior to the approval of this agreement by the Director. Any oil or gas interests in lands within the unit area not committed hereto prior to submission of this agreement for final approval may thereafter be committed hereto by the owner or owners thereof subscribing or consenting to this agreement, and, if the interest is a working interest, by the owner of such interest also subscribing to the unit operating agreement. After operations are commenced hereunder, the right of subsequent joinder, as provided in this section, by a working interest owner is subject to such requirements or approvals, if any, pertaining to such joinder, as may be provided for in the unit operating agreement. After final approval hereof joinder by a non-working interest owner must be consented to in writing by the working interest owner committed bereto and responsible for the payment of any beneAts that may accrue bereunder in beball of such non-working interest. Prior to inal approval hereof, joinder by any owner of a non-working interest must be accompanied by appropriate joinder by the owner of the corresponding working interest in order for the interest to be regarded as effectively committed hereto. Except as may otherwise herein be provided subsequent joinders to this agreement shall be effective as of the first day of the month following the Aling with the Supervisor of duly executed counterparts of all or any papers necessary to establish effective commitment of any tract to this agreement unless objection to such joinder is duly made within 60 days by the Director.
80. Counterparts. 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 specif. ically referring hereto and shall be binding upon all those parties who have executed such a counterpart, ratification, or consent hereto with the same force and effect as i all such parties had signed the same document and regardless of whether or not it 18 executed by all other parties owning or claiming an interest in the lands within the above-described unit area.
31. Surrender. Nothing in this agreement shall probibit the exercise by any working interest owner of the right to surrender vested in such party in any lease, sub-lease, or operating agreement as to all or any part of the lands covered thereby, provided that each party who will or migh“ acquire such working interest by such surrender or by forfeiture as hereafter set forth, is bound by the terms of this agreement.
If as a result of any such surrender, the working interest rights as to such lands become vested in any party other than the fee owner of the unitized substances, said party shall forfeit such rights and no further benefits from operations hereunder as to said land shall accrue to such party, unless within ninety (90) days thereafter said party shall execute this agreement and the unit operating agreement as to the working interest acquired through such surrender, effective as though such land had remained continuously subject to this agreement and the unit operating agreement. And in the event such agreements are not so executed, the party next in the chain of title shall be and become the owner of such working interest at the end of such ninety (90) day period, with the same force and effect as though such working interest had been surrendered to such party.
I as the result of any such surrender or forfeiture the working interest rights as to such lands become vested in the fee owner of the unitized substances, such owner may:
(1) Execute this agreement and the unit operating agreement as a working interest owner, effective as though such land had remained continuously subject to this agreement and the unit operating agreement.
(2) Again lease such lands but only under the condition that the holder of such lease shall within thirty (30) days after such lands are so leased execute this agreement and the unit operating agreement as to each participating area theretofore established hereunder, effective as though such land had remained continuously subject to this agreement and the unit operating agreement.
(3) Operate or provide for the operation of such land independently of this agreement as to any part thereof or any oil or gas deposits therein not then included within a participating area.
If the fee owner of the unitized substances does not execute this agreement and the unit operating agreement as a working interest owner or again lease such lands as above provided with respect to each existing participating area, within six (6) months after any such surrender or forfeiture, such fee owner shall be deemed to have waived the right to execute the unit operating agreement or lease such lands as to each such participating area, and to have agreed, in consideration for the compensation hereinafter provided, that operations hereunder as to any such participating area or areas sball not be affected by such surrender.
For any period the working interest in any lands are not expressly committed to the unit operating agreement as the result of any such surrender or forfeiture, the benefits and obli. gations of operations accruing to such lands under this agreement and the unit operating agreement shall be shared by the remaining owners of unitized working interests in accordance with their respective participating working interest ownerships in any such participating area or areas, and such owners of working interests shall compensate the fee owner of unitized substances in such lands oy paying sums equal to the rentals, minimum royalties, and royalties applicable to such lands under the lease in effect when the lands were unitized, as to such participating area or areas.
Upon commitment of a working interest to this agreement and the unit operating agreewent as provided in this section, an appropriate accounting and settlement shall bo
• Section 31 entitled "Surrender" may be omitted at the option of the parties.