Exhibit 10.12
COOPERATIVE PLAN OF DEVELOPMENT AND OPERATION
FOR THE ANTELOPE CREEK ENHANCED RECOVERY PROJECT
DUCHESNE COUNTY, UTAH
THIS AGREEMENT, entered into as of the 17 day of February, 1994, by
and between the parties subscribing, ratifying or consenting hereto, and herein
referred to as the "parties",
W I T N E S S E T H:
WHEREAS, the parties are the owners of working, royalty or other oil
and gas interests in the Project Area subject to this Agreement;
WHEREAS, the term "Working Interest" as used herein shall mean the
interest held in Project Substances or in land containing Project Substances by
virtue of a lease, operating agreement, fee title or otherwise, which is
chargeable with and obligated to pay or bear all or a portion of the costs of
drilling, developing, producing and operating the land under this Agreement.
"Royalty Interest" as used herein shall mean a right to, or interest in, any
portion of the Project Substances or proceeds thereof other than a Working
Interest;
WHEREAS, the Indian Mineral Development Act of 1982, 25 U.S.C.
(S)2101, et seq. authorizes, among other things, the lessors and lessees of
lands owned by an Indian tribe, and their representatives to unite with each
other, or jointly or separately with others, in collectively adopting and
operating a cooperative plan of development or operation of any oil or gas pool,
field or like area, or any part thereof for the purposes of more properly
conserving the natural resources thereof whenever determined and certified by
the Secretary of the Interior to be necessary or advisable in the best interest
of the Indian tribe owning such lands; and
WHEREAS, the Ute Indian Tribe, the Ute Distribution Corporation, and
all of their lessees under the affected leases, the parties hereto, have
negotiated and agreed to a plan to conserve natural resources, prevent waste and
secure other benefits obtainable through
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development and operation of the area subject to this Agreement under the terms,
conditions, and limitations herein set forth.
WHEREAS, the Secretary of Interior or his authorized representative is
charged with the power and responsibility to approve and oversee activities
under this Agreement. This responsibility is carried out by representatives of
the Secretary of Interior including the Bureau of Indian Affairs for the
administration of this Agreement and the leases affected hereby, the Bureau of
Land Management regarding well operations and reclamation of the affected lands,
and the Minerals Management Service for royalty administration and valuation,
all of which entities are hereinafter either collectively or individually, as
appropriate, referred to as the "Secretary".
NOW, THEREFORE, in consideration of the premises and the promises
herein contained, the parties commit to this Agreement their respective
interests in the below-defined Project Area, and agree severally among
themselves as follows:
1. ENABLING ACT AND REGULATIONS. This Agreement is entered into
pursuant to the Indian Mineral Development Act of 1982, as amended. Activities
conducted pursuant to this Agreement shall also be subject to all valid,
pertinent regulations including, but not limited to, operating and cooperative
plan regulations set forth in 43 C.F.R. 3160, et seq. lease administration
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regulations at 25 C.F.R. 211, et seq., and royalty valuation regulations at 30
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C.F.R. 206, et seq., together with all valid, pertinent and reasonable
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regulations issued hereafter. These regulations are accepted and made a part of
this Agreement as to the Project Area.
Further, prior to the Secretary taking any approval actions required
by this Agreement or the applicable statutes and regulations, the Secretary
shall consult with and acquire the concurrence in such approval by the Ute
Indian Tribe and the Ute Distribution Corporation.
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2. PROJECT AREA. The area specified on the plat attached hereto
marked Exhibit "A" is hereby designated and recognized as constituting the
Project Area containing 11576.35 acres, more or less.
Exhibit "A" shows in addition to the boundary of the Project Area, the
boundaries and identity of tracts and leases in said area to the extent known to
the Project Operator. Exhibit "B" attached hereto is a schedule showing to the
extent known to the Project Operator the acreage, percentage and kind of
ownership of oil and gas interests in all land in the Project Area. (Tract means
each parcel of land described as such and given a Tract Number in Exhibit "B".)
However, nothing herein or in said schedule or map shall be construed as a
representation by any party as to the ownership of any interest other than such
interest or interests as are shown in said map or schedule as owned by such
party. Exhibits "A" and "B" shall be revised by the Project Operator whenever
changes in the Project Area render such revision necessary, or when requested by
the Secretary. In such case not less than six (6) copies of the revised exhibits
shall be filed with the Secretary.
3. EXPANSION OF PROJECT AREA. Any enlargement of the Project Area
shall require approval by the Secretary of the Interior or his authorized
representative, hereinafter referred to as the "Secretary". The Project Area
may, with the approval of the Secretary, be expanded to include therein any
additional lands whenever such expansion is necessary or advisable to conform
with the purposes of this Agreement. Such approval by the Secretary of any such
expansion may be accomplished pursuant to an agreement fixing the royalty
interest share in production for production from the Project Area and providing
for the commitment of the interests of the owners thereof to this Agreement, and
if applicable, to the Project Operating Agreement. The Project Operator acting
on behalf of the Working Interest Owners collectively shall negotiate with such
new owners after it has been duly authorized as provided in the Project
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Operating Agreement. Whenever the Project Area is enlarged so as to admit
additional land qualified for participation, the royalty interest share of
production shall be revised as set forth in Section 12, Participation and
Allocation of Production. Any such expansion shall be effected in the following
manner:
(a) Project Operator, on its own motion, after preliminary concurrence
by the Secretary, shall prepare a notice of proposed expansion describing
the contemplated changes in the boundaries of the Project Area, the reasons
therefore, and the proposed effective date thereof, preferably the first
day of the month subsequent to the date of notice.
(b) Said notice shall be delivered to the Secretary and copies thereof
mailed to the last known address of each Working Interest Owner, lessee,
and lessor whose interests are affected, advising that thirty (30) days
will be allowed for submission to the Project Operator of any objections.
(c) Upon expiration of the thirty (30) day period provided in the
preceding item (b) hereof, Project Operator shall file with the Secretary
evidence of mailing of the notice of expansion and a copy of any objections
thereto which have been filed with the Project Operator, together with an
application and appropriate joinder in sufficient number for approval of
such expansion.
(d) After due consideration of all pertinent information, the
expansion shall, upon approval by the Secretary, become effective as of the
date prescribed in the notice thereof.
4. PROJECT LAND AND PROJECT SUBSTANCES. All lands committed to this
Agreement as provided in Section 5, Tracts Qualified for Participation, as to
the Project Formations defined immediately below, shall constitute land referred
to herein as "Project Land"
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or land subject to this Agreement. All oil and gas in and produced from the
Project Formations are combined under the terms of this Agreement and are called
"Project Substances."
The Project Formations shall mean all formations lying under the lands
committed to this Agreement.
5. TRACTS QUALIFIED FOR PARTICIPATION. Inasmuch as the objective of this
Agreement is to have lands in the Project Area operated and entitled to
participation under the terms hereof, no joinder shall be considered a
commitment to this Agreement unless the Tract involved is qualified under this
section. On or after the effective date hereof, the Tracts within the Project
Area which are entitled to participation in the production of Project Substances
therefrom shall be those Tracts within the Project Area, more particularly
described in Exhibit "B", that are qualified by the commitment to this Agreement
of one hundred percent (100%) of both the Working Interest and Royalty Interest
in the affected lease.
6. PROJECT OPERATOR. Petroglyph Operating Company, Inc. is hereby
designated as Project Operator, and by its signature hereto agrees and consents
to accept the duties and obligations of Project Operator for the development and
production of Project Substances as herein provided. Whenever reference is made
herein to the Project Operator, such reference means the Project Operator acting
in that capacity and not as an owner of interest in Project Substances, and the
term "Working Interest Owner" when used herein shall include or refer to Project
Operator as the owner of a Working Interest when such an interest is owned by
it.
7. RESIGNATION OR REMOVAL OF PROJECT OPERATOR. Project Operator shall
have the right to resign at any time, but such resignation shall not become
effective so as to release Project Operator from the duties and obligations of
Project Operator and terminate the Project Operator's rights as such for a
period of six (6) months after notice
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of intention to resign has been served by Project Operator on all Working
Interest Owners and the Secretary, and until all wells are placed in a
satisfactory condition for suspension or abandonment, whichever is required by
the Secretary in accordance with the applicable provisions of 43 C.F.R. and
Onshore Order requirements, unless a new Project Operator shall have been
selected and accepted and shall have taken over and assumed the duties and
obligations of Project Operator prior to the expiration of said period.
The resignation of Project Operator shall not release the Project Operator
from any liability for default by it hereunder occurring prior to the effective
date of its resignation.
The Project Operator may, upon default or failure in the performance of its
duties or obligations hereunder, be subject to removal by an affirmative vote of
the Working Interest Owners of at least ninety percent (90%) of the voting
interest remaining after excluding the voting interest of the Project Operator.
Such removal shall be effective upon notice thereof to the Secretary. In all
such instances of resignation or removal, until a successor Project Operator is
selected and accepted as hereinafter provided, the Working Interest Owners shall
be jointly responsible for performance of the duties of Project Operator, and
shall, not later than thirty (30) days before such resignation or removal
becomes effective, appoint a common agent to represent them in any action to be
taken hereunder.
The resignation or removal of Project Operator under this Agreement shall
not terminate its right, title, or interest as the owner of a Working Interest
or other interest in Project Substances, but upon the resignation or removal of
Project Operator becoming effective, such Project Operator shall deliver
possession of all wells, equipment, materials, and appurtenances used in
conducting the project operations and owned by the Working Interest Owners to
the new duly qualified successor Project Operator or other owners thereof if no
such new Project Operator is elected, to be used for the purposes of conducting
operations hereunder. Nothing
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herein shall be construed as authorizing removal of any material, equipment or
appurtenances needed for the preservation of any wells.
8. SUCCESSOR PROJECT OPERATOR. Whenever the Project Operator shall
tender his or its resignation as Project Operator, or shall be removed as
hereinabove provided, or a change of Project Operator is negotiated by the
Working Interest Owners, a successor Project Operator shall be selected by the
Working Interest Owners voting according to their share of the Working Interest
in the Project Area by a majority vote; provided, that if a majority but less
than 75 percent of the Working Interest Owners qualified to vote are owned by
one party to this Agreement, a concurring vote of one more additional Working
Interest Owners shall be required to select a new Operator. Such selection shall
not become effective until:
(a) a Project Operator so selected shall accept in writing the duties
and responsibilities of Project Operator; and
(b) The selection shall have been approved by the Secretary.
9. ACCOUNTING PROVISIONS AND PROJECT OPERATING AGREEMENT. If the Project
Operator is not the sole owner of the Working Interest, costs and expenses
incurred by Project Operator in conducting project operations hereunder shall be
paid and apportioned among and borne by all owners of the Working Interests, all
in accordance with the agreement or agreements, whether one or more, separately
or collectively, entered into by and between the Project Operator and all
Working Interests Owners. Any agreement or agreements, whether one or more,
entered into between the Working Interest Owners and the Project Operator as
provided in this section are herein referred to as the "Project Operating
Agreement."
Such Project Operating Agreement shall also set forth such other rights and
obligations as between Project Operator and the Working Interest Owners as may
be agreed upon by Project
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Operator and the Working Interest Owners, however no such Project Operating
Agreement shall be deemed either to modify any of the terms and conditions of
this Agreement or the leases committed hereto or to relieve the Project Operator
of any right or obligation established under this Agreement, and in case of any
inconsistency or conflict between this Agreement and the Project Operating
Agreement, this Agreement shall prevail. Three (3) true copies of any Project
Operating Agreement executed pursuant to this section shall be filed with the
Secretary prior to approval of this Agreement, and thereafter promptly after any
revision or amendment.
10. RIGHTS AND OBLIGATIONS OF PROJECT OPERATOR. Except as otherwise
specifically provided herein, the exclusive right, privilege and duty of
exercising any and all rights of the parties, including surface rights, which
are necessary or convenient for prospecting for, producing, storing, allocating,
and distributing the Project Substances are hereby delegated to and shall be
exercised by the Project Operator as herein provided. Acceptable evidence of
title to said rights shall be deposited with said Project Operator and, together
with this Agreement, shall constitute and define the rights, privileges, and
obligations of Project Operator. Nothing herein, however, shall be construed to
transfer title to any land or to any lease or operating agreement, it being
understood that under this Agreement the Project Operator, in its capacity as
Project Operator, shall exercise the rights of possession and use vested in the
parties hereto only for the purposes herein specified.
11. PLAN OF OPERATION. It is recognized and agreed by the parties hereto
that the Project Area has been partially developed and is productive. It is
contemplated that the Project Operator will drill numerous additional wells
within the Project Area. These wells shall include exploratory wells,
development wells, and injection wells, all of which are necessary in the
opinion of the Project Operator for obtaining the greatest ultimate yield of
Project Substances from the Project Area. It is recognized and understood by the
parties that it may be necessary
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to recomplete existing wells in additional or other zones than those currently
producing, convert existing wells from a producing status to injection wells, or
deepen existing wells to include additional members of the Project Formations.
Inasmuch as the primary purpose of this Agreement is to permit the
institution and consummation of a secondary recovery or pressure maintenance
program for the maximum economic production of Project Substances consistent
with good engineering and conservation practices, Project Operator, concurrently
with the filing of this Agreement, shall submit to the Secretary for approval a
plan of operations for the Project Lands for operations to be conducted during
the first year of this Project, and upon approval thereof by the Secretary, such
plan shall constitute the future operating objectives of the Project Operator
under this Agreement for the period specified therein. Thereafter, from time to
time, but at least once each year during the term of this Agreement, and before
the expiration of any existing plan, the Project Operator shall submit a plan
for an additional specified period of operations. Said plan or plans shall be
modified or supplemented when necessary to meet changed conditions, or to
protect the interests of all parties to this Agreement. Reasonable diligence
shall be exercised in complying with any approved plan of operation.
Project Operator shall have the right to drill and maintain water supply
wells on the Project Area and to inject into the Project Formations any
substances for secondary recovery or pressure maintenance purposes in accordance
with a plan of operation approved by the Secretary, including the right to drill
and maintain injection wells on the Project Land and completed in the
Project Formations for said purpose, and the parties hereto, to the extent of
their rights and interests, hereby grant to the Project Operator the right to
use as much of the surface of the land within the Project Area as may be
reasonably necessary for the operation and the development of the Project Area
hereunder. Project Operator shall have free use of water from the Project
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Land for operations hereunder except water from surface owner's and Royalty
Owner's fresh water wells, private lakes, ponds, streams or irrigation ditches.
12. PARTICIPATION AND ALLOCATION OF PRODUCTION. Beginning at 7:00 a.m.,
on the effective date hereof, the Royalty Owners shall be entitled to receive an
undivided 16.85095% of either (i) all Project Substances irrespective from which
Tract such production actually occurred, or (ii) of the value of all oil, gas,
and/or natural gasoline, and/or all other Project Substances produced and saved
from the Project Area in accordance with the existing lease terms, 30 C.F.R.
206, et seq. and 25 C.F.R. 211, et seq., save and except oil and/or gas used by
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the Project Operator for development and operation purposes on the Project Area,
which oil or gas shall be royalty free. The Working Interest Owners shall be
entitled to the balance of the Project Substances produced from the Project
Area.
After this Agreement has been in effect for four years, the royalty rate
prescribed in this paragraph 12 shall increase to 18.5%. After this Agreement
has been in effect for nine years, this royalty rate shall increase to 20%.
If after the effective date of this Agreement, any Tract or Tracts are
subsequently committed hereto because of an expansion of the Project Area under
Section 3, Expansion of Project Area, and Section 29, Subsequent Joinder, the
Royalty Owners' undivided share of production or the value thereof of Project
Substances shall be recalculated. This calculation shall be accomplished by
multiplying the then prevailing royalty rate hereunder for the Project Area
times a fraction composed of the number of acres within the before expansion
Project Area as the numerator and the total number of acres within the expanded
Project Area as the denominator and combining this product with that yielded by
multiplying the royalty rate for the lease or leases to be added to the Project
Area by a fraction composed of the number of acres within the expansion area as
the numerator and the total number of acres within the Project
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Area, as expanded, as the denominator. Upon approval of any such expansion by
the Secretary, this recomputed royalty interest share shall govern the
allocation of production from the effective date thereof until a new schedule is
so approved.
On the effective date of this Agreement and thereafter, all Project
Substances (except any part thereof used in conformity with good operating
practices for drilling, operating, and other production or development purposes,
for pressure maintenance or secondary recovery operations, or in accordance with
a plan of operation approved by the Secretary, or unavoidably lost), shall be
deemed to be produced from each and every Tract within the Project Area
irrespective of the location of the wells from which the same is produced and
regardless of depletion of any particular well or Tract. Thus, production of
Project Substances from any well located upon the Project Lands shall maintain
the leases within the Project Area, with the Royalty Owners to share in such
production in the percentage set forth in this Section 12.
13. ROYALTY SETTLEMENT. The Ute Indian Tribe and the Ute Distribution
Corporation are entitled to the entire royalty share of production produced from
the Project Area. In accordance with the applicable leases, these Royalty Owners
are entitled to take in kind a share of the Project Substances now combined
hereunder and produced from any Tract. Such right to take in kind as to the
Royalty Owner's share of production set forth in paragraph 12 shall continue
with regard to the production of Project Substances. If these Royalty Owners so
elect to take in kind, the Project Operator shall make deliveries of such
Royalty Share in kind in conformity with the applicable contracts, laws and
regulations. Settlement for the royalty share not taken in kind shall be made by
the Project Operator and the Working Interest Owners hereby designate the
Project Operator to make all such payments and file all required production
reports. The Working Interest Owners and Project Operator will execute any
necessary division orders. These payments and all production reports shall be
prepared and filed in accordance with
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the existing leases, laws and regulations on or before the last day of each
month for oil produced during the preceding calendar month and on or before
sixty days from the end of the month during which gas was produced; provided,
however, that nothing herein contained shall operate to relieve the lessees of
any Project Land from their respective lease obligations for the payment of any
royalties due under their leases.
14. RENTAL SETTLEMENT. Rental or minimum royalties due on leases
committed hereto shall be paid by the Working Interest Owners responsible
therefore under existing leases, laws and regulations, provided, that nothing
herein contained shall operate to relieve the lessees of any Project Land from
their respective lease obligations for the payment of any rental or minimum
royalty in lieu thereof due under their leases. Rental and minimum royalty for
lands of the Ute Indian Tribe subject to this Agreement shall be paid at the
rate specified in the respective leases unless such rental or minimum royalty is
waived, suspended or reduced by law or by approval of the Secretary. The parties
hereto agree that the Project Operator may on behalf of the Working Interest
Owners prepay all lease rentals by a single remittance at any time during a
lease year prior to the due date for such rental payments; provided, however,
that nothing herein contained shall operate to relieve the lessees of any
Project Land from their respective lease obligations for the payment of any
rentals due under their leases. The parties hereby agree that beginning with
calendar year 1994, each of the leases within the Prospect Area is hereby
amended to provide that any lease rental due thereunder for any year shall be
due and payable on or before September 1 of each year.
15. CONSERVATION. Operations hereunder and production of Project
Substances shall be conducted to provide for the most economical and efficient
recovery of said substances without waste, as defined by or pursuant to
applicable Tribal, State or Federal law, order, rule, or regulation.
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16. DRAINAGE. The Project Operator shall take appropriate and adequate
measures to protect the Project Area from drainage by wells on land not subject
to this Agreement.
17. GAUGE OF MERCHANTABLE OIL. Project Operator shall make a proper and
timely gauge of all leases and other tanks within the Project Area and
associated with the operation of Project Land in order to ascertain the amount
of merchantable oil above the pipeline connections in such tanks at 7:00 a.m. on
the effective date hereof. All such oil shall be and remain the property of the
parties entitled thereto the same as if the Project had not been formed and such
parties shall promptly remove said oil from said tanks. Any such oil not so
removed shall be sold by Project Operator for the account of parties entitled
thereto, subject to the payment of all royalties, overriding royalties,
production payments and all other payments under the terms and provisions of the
applicable leases or other contracts.
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 on 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 consent that the
Secretary shall and by his approval hereof does hereby establish, alter, change
or revoke the drilling, producing, rental, minimum royalty and royalty
requirements of Tribal 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 of
separately owned Tracts subject to this
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Agreement, regardless of whether there is any development of or production
from any particular Tract of the Project Land, notwithstanding anything to
the contrary in any lease, operating agreement 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 Project Land will be accepted and deemed to be performed upon and
for the benefit of each and every Tract of Project 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 and producing operations on all Project
Land 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 Project
Land.
(d) Each lease, sublease or contract relating to the exploration,
drilling, development or operation for oil or gas on lands committed to
this Agreement which, by its terms, might expire prior to the termination
of this Agreement, 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 this Agreement.
19. COVENANTS RUN WITH LAND. The covenants herein shall be construed to
be covenants running with the lands with respect to the interest of the parties
hereto and their successors in interest until this Agreement terminates, and any
grant, transfer or conveyance of an interest in lands or leases subject hereto
shall be and hereby is conditioned upon the assumption of all privileges and
obligations hereunder by the grantee, transferee or other successor in interest.
No assignment or transfer of any Working Interest shall be binding upon Project
Operator nor shall any transfer of any Royalty Interest or other interest be
binding on
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the Working Interest owner responsible for payment or settlement thereof until
the first day of the calendar month after Project Operator or the responsible
Working Interest Owner, as the case may be, is furnished with the original,
photostat or certified copy of the recorded instrument of transfer.
Further, no assignment of any interest in this Agreement or the lands or
leases subject hereto shall be effective unless approved by the Secretary and
the Royalty Owners, such approval not to be unreasonably withheld.
20. EFFECTIVE DATE. This Agreement shall become binding upon each party
who executes or ratifies it as of the date of execution or ratification by such
party and shall become effective as of 7:00 a.m. on the first day of the
calendar month next following the approval of this Agreement by the Secretary.
Project Operator shall within thirty (30) days after the effective date of
this Agreement file of record in Duchesne County, Utah, a copy of this Agreement
and a certificate to the effect that this Agreement has become effective
according to its terms and stating further the effective date.
21. TERM. The term of this Agreement shall be for and during the time
that Project Substances can be produced in quantities sufficient to pay for the
cost of producing same from wells on Project Land and for as long thereafter as
drilling, reworking or other operations are prosecuted on Project Land without
cessation of more than sixty (60) consecutive days, and so long thereafter as
Project Substances can be produced as aforesaid, unless sooner terminated by the
Secretary as provided in Section 8, Successor Project Operator, or by the
Working Interest Owners as provided in Section 22.
If at any time after this Agreement has been in effect for ten (10) years,
there shall exist any section of land within the Project Area on which there is
not either (i) a well producing
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either oil and/or gas in paying quantities, or (ii) an injection well then being
used for project purposes, or (iii) a water source well providing water for
project purposes, then if no drilling, reworking, or other operations are
prosecuted on said section within 90 days from the date said section ceases to
have a well as described above, then as to that section only, this Agreement
shall terminate, and likewise the lease affecting such section of land shall
terminate. Provided, however, that, even if the lease expires or the land is no
longer within the Project Area, any then existing rights-of-way or other surface
uses of such land shall be allowed to continue for so long as they are being
used for project purposes.
22. TERMINATION BY WORKING INTEREST OWNERS. This Agreement may be
terminated at any time by Working Interest Owners owning ninety percent (90%) or
more of the participation percentage in the Project Land with the approval of
the Secretary. Notice of any such termination shall be given by the Project
Operator to all parties hereto.
Upon termination of this Agreement, the parties hereto shall be governed by
the terms and provisions of the leases, contracts, and regulations affecting the
separate Tracts, including abandonment and reclamation in accordance with
applicable regulations.
Notwithstanding the provisions of the leases combined under this Agreement,
the Royalty Owners hereby grant the Working Interest Owners a period of six (6)
months after termination of this Agreement in which to salvage, sell,
distribute, or otherwise dispose of the personal property and facilities used in
connection with operations under this Agreement.
Project Operator shall, within thirty (30) days after the termination of
this Agreement, file for record in the office or offices where a counterpart of
this Agreement is recorded, a certificate setting forth the fact of such
termination and the date thereof.
23. RATE OF PROSPECTING, DEVELOPMENT AND PRODUCTION. The Secretary is
hereby vested with authority to alter or modify from time to time in his
discretion
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the quantity and rate of production under this Agreement when such quantity and
rate is not fixed pursuant to applicable law or regulation or does not conform
to any statewide voluntary conservation or allocation program which is
established, recognized and generally adhered to by the majority of operators in
such state, such authority being hereby limited to alteration or modification in
the public interest, the purpose thereof and the public interest to be served
thereby to be stated in the order of alteration or modification. Without regard
to the foregoing, the Secretary is also hereby vested with authority to alter or
modify from time to time at his discretion the rate of prospecting and
development and the quantity and rate of production under this Agreement when
such alteration or modification is in the interest of attaining the conservation
objectives stated in this Agreement and is not in violation of any applicable
law.
Powers in this Section vested in the Secretary shall only be exercised
after notice to Project Operator and opportunity for hearing to be held not less
than fifteen (15) days after actual receipt of the notice.
24. APPEARANCE. Project Operator shall, after notice to other parties
affected, have the right to appear for and on behalf of any and all Working
Interest Owners before the Department of 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 Interior, the Ute Indian Tribe, 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.
25. 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 either personally delivered to the party or upon receipt being sent
by postpaid, registered or certified mail, return receipt requested, addressed
to such party at the address such party has furnished
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to the party sending the notice, demand or statement. Notices may also be sent
by facsimile and are deemed received upon receipt of such facsimile provided
that a true copy of such transmission is forwarded to the receiving party within
24 hours of such transmission in accordance with the other terms of this
Section.
26. NO WAIVER OF CERTAIN RIGHTS. Nothing in this Agreement 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 Ute Indian Tribe, the state of Utah, 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.
27. UNAVOIDABLE DELAY. All obligations under this Agreement, except the
payment of money, shall be suspended while, but only so long as Project
Operator, despite the exercise of due care and diligence, is prevented from
complying with obligations, in whole or in part, by strikes, acts of God,
applicable Tribal, 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 Project Operator whether similar to matters herein enumerated or
not. Project Operator shall have the duration of the delay added to any time of
compliance for any affected obligation created by this Agreement.
28. LOSS OF TITLE. In the event title to any Tract of Project Land shall
fail and the true owner cannot be induced to join this Project 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
or Working Interest, or other interests subject hereto,
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payment or delivery on account of the amount or interest in dispute may be
withheld without liability for interest until the dispute is finally settled.
Project Operator as such is relieved from any responsibility for any defect or
failure of any title hereunder.
29. SUBSEQUENT JOINDER. After the effective date of this Agreement, the
commitment of any interest in any Tract within the Project Area shall be upon
such equitable terms as may be negotiated by Working Interest Owners and the
owner of such interest. After the effective date hereof, joinder by a Royalty
Owner must be consented to in writing by the Working Interest Owner committed
hereto and responsible for the payment of any benefits that may accrue hereunder
in behalf of such Royalty Interest. Joinder by any Royalty Owner at any time
must be accompanied or preceded by appropriate joinder by the owner of the
corresponding Working Interest in order for the interest to be regarded as
effectively committed. Joinder to this Agreement by a Working Interest Owner at
any time must be accompanied by appropriate joinder to the Project Operating
Agreement in order for the interest to be regarded as committed to this
Agreement. Except as may otherwise herein be provided, subsequent joinders to
this Agreement shall be effective as of the date of the filing with the
Secretary of duly executed counterparts of all or any paper necessary to
establish commitment of any Tract to this Agreement unless objection to such
joinder is made within sixty (60) days by the Project Operator.
30. 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 by separate instrument in writing specifically referring
hereto which shall be binding upon all those parties who have executed such a
counterpart, ratification or consent hereto with
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the same force and effect as if all such parties had signed the same document;
provided, however, that parties owning or claiming an interest in the lands
within the Project Area.
31. NO PARTNERSHIP. It is expressly agreed that the relationship of the
parties hereto is that of independent contractors and nothing in this Agreement
contained, expressed or implied, nor any operations hereunder, shall create or
be deemed to have created a partnership or association between the parties
hereto or any of them.
32. BORDER AGREEMENTS. Project Operator, subject to the provisions of the
Project Operating Agreement and subject to approval of the Secretary, may enter
into an agreement or agreements with the owners of adjacent lands with respect
to operations designed to increase the ultimate recovery of oil and/or gas from
the Project Formations, prevent waste, and protect the correlative rights of the
parties.
33. CORRECTION OF ERRORS. It is hereby agreed by all parties to this
Agreement that Project Operator is empowered to correct any mathematical or
clerical errors which may exist in the pertinent Exhibits to this Agreement;
provided, however, that correction of any error other than mathematical or
clerical shall be made by Project Operator only after first having obtained
approval of Working Interest Owners and the Secretary. If any such corrections
are made, Project Operator shall file not less than six (6) copies of the
corrected pages of this Agreement or of the Exhibits hereto with the Secretary;
Project Operator shall also provide, in conformance with Section 25, Notices,
such corrected pages to the parties hereto.
34. SPECIAL SURFACE STIPULATIONS. Nothing in this Agreement shall modify
any lease stipulations attached to any individual lease included within the
Project Area.
35. RIGHTS-OF-WAY, EASEMENTS AND OTHER. The Royalty Owner with the
concurrence of the Secretary agrees that without cost to the Project Operator or
the Working Interest Owners, Royalty Owner shall promptly review, approve, and
grant reasonable requests
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of the Project Operator, from time to time, for permits necessary, or incident
to the conduct of its authorized activities, including without limitation
permits for seismic and other studies, water, easements and rights-of-way,
covering lands within or outside of the Project Area, necessary to conduct
operations authorized by this Agreement. Furthermore, without limitation, the
Royalty Owner grants to the Project Operator, and its subcontractors, the right
to build and maintain, subject to regulations governing construction and
maintenance thereof, transmission and other lines (including without limitation
oil, gas, power, and water lines, even if the water is obtained from a source
other than a well within the Project Area), storage and usual operational
facilities within the boundaries of the Project Area without further charge
therefor. The Royalty Owner shall conduct, at its own expense, all "on the
ground" archeology and threatened and endangered species surveys necessary for
the conduct of drilling operations on the Project Area. The Royalty Owner will
provide all reasonable assistance to the Project Operator regarding any
environmental assessment Project Operator must conduct. The Royalty Owner will
join and assist the Project Operator with regard to any injection well permits
it must seek from either the Environmental Protection Agency or the State of
Utah. These services together with the free use of water produced from water
source wells within the Project Area and the agreement not to charge for rights-
of-way have been granted by the Royalty Owner in consideration for the increased
royalty rates set forth in Section 12 hereof.
36. REPORTING. In addition to the reports required to be filed with the
Minerals Management Service by the applicable regulations, Project Operator
shall file with the Secretary and the Ute Indian Tribe the following:
a. Producing Wells
i. Monthly reports of Operation. (MMS Form 3160).
ii. Monthly Report of Sales and Royalty Remittance (MMS Form 2014).
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iii. A copy of Gas Sale Statement.
iv. A copy of Crude Oil Sales Statement.
b. Drilling
i. A copy of drilling time log kept in intervals not greater than 10
feet, from surface casing to total depth.
ii. A copy of any log, including but not limited to, any electrical,
radioactive, and diameter log.
iii. A copy of any drillstem test.
iv. A copy of any core analysis.
v. A copy of any special test.
vi. A copy of the completion report.
Further, the Project Operator agrees to meet with the Tribal Business
Council of the Ute Indian Tribe during every January and July during each year
this Agreement is in effect and present a review of operations and production
from the Project Area for the prior six month period. The Project Operator will
also discuss the next ensuing six month plan of operation, and will address any
other issues relating to the Project Area as requested by the Business Council.
37. INSURANCE. Project Operator shall maintain at all times during the
course of this Agreement, insurance with respect to the Project Land, as
follows:
a. Workmen's Compensation Insurance in accordance with applicable
laws on all employees of the Project Operator engaged in any manner under
this Agreement.
b. To the extent such coverage is available, Public Liability
Insurance insuring against liability for bodily injury, including death,
and property damage, in the amount of not less than $1,000,000.00 per
person and $1,000,000.00 per occurrence for property damage, as the
interests of the parties may appear, incurred or in any manner
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related to any and all operations or performance by the Project Operator or
any of its officers, agents, representatives or employees of any and all
obligations and provisions of this Agreement or any amendments or
modifications hereto.
38. UTE PREFERENCE (EMPLOYMENT AND CONTRACTING). The Project Operator
shall give preference in employment to qualified members of the Ute Indian Tribe
in all phases of operations performed, or to be performed under the terms of
this Agreement, as required by applicable Tribal and Federal laws, rules,
policies and regulations. The Project Operator agrees to abide by any applicable
provisions of the Tribal law, as amended from time to time. The Project Operator
shall contractually require its subcontractors and assignees to comply with all
provisions referred to in this paragraph.
39. ENVIRONMENT. The Project Operator acknowledges the concern of the Ute
Indian Tribe for the surface environment of its Lands and the reclamation and
protection thereof, and therefore, the Project Operator shall conduct itself
with prudence, caution, and care for the environment at all times, shall conduct
its operations in compliance with all applicable environmental laws, and shall
contractually require its subcontractors and assignees to do the same.
40. PRESERVATION OF ANTIQUITIES AND SACRED SHRINES. The Project Operator
shall take all reasonable steps necessary in connection with its operations to
preserve and protect Tribal antiquities and it shall further obtain all required
permits and clearances prior to conducting operations on land involving such
matters.
41. DEFAULT. Upon receipt of written notice, the Project Operator, shall
have thirty (30) days thereafter to cure a default existing under the provisions
of this Agreement. If such default is not cured within said thirty (30) days and
does not involve the Royalty Owner(s), either the Project Operator or the
complaining party, if such party is a Working Interest Owner,
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may submit the dispute to arbitration under the terms of this Agreement and
during the time the matter is subject to arbitration no further action shall be
taken by the moving party in connection with the alleged default. Neither the
Royalty Owner nor the Secretary shall be required to pursue arbitration, but
rather shall be entitled to pursue any remedies available to such party. Once
the matter has been arbitrated as between the Project Operator and/or Working
Interest Owners, and a decision entered therein that a default does exist, then
the defaulting party shall have thirty (30) days thereafter to cure the default;
however, should the default (other than one calling for the payment of money) be
of such a nature that same can not be reasonably cured within said period of
time, then the defaulting party shall not suffer any penalty, or damages because
thereof (including without limitation having its rights hereunder terminated),
provided the said party, in good faith, makes and continues to make reasonable
efforts to cure the default. If a default is determined to exist and is
pecuniary in nature, then the amounts due and owing shall bear interest at the
highest lawful rate not to exceed the prime rate then being charged by Chase
Manhattan Bank plus two (2%) percent.
42. ARBITRATION. The Working Interest Owners and Project Operator agree
that all matters of dispute under this Agreement between themselves shall be
submitted for determination to a Board of Arbitrators chosen as follows:
a. Upon written demand of either party, and within ten (10) days from
the date of demand, each party shall name an arbitrator and the two
arbitrators so named by the parties hereto shall promptly thereafter choose
a third arbitrator. If either party shall fail to name an arbitrator within
ten (10) days from the date of demand, or if the arbitrators appointed by
the parties shall fail to agree upon and appoint the third arbitrator, then
upon written application by either party such third arbitrator shall be
appointed by the President of the American Arbitration Association.
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b. The Board of Arbitrators so chosen shall proceed immediately to
hear and determine the questions in dispute in accordance with the rules
and procedures of the American Arbitration Association. The decision of the
Board of Arbitrators, or majority thereof, shall be made within thirty (30)
days after the appointment of the third arbitrator, subject to any
reasonable delay due to unforeseen circumstances. In the event the Board of
Arbitrators, or majority thereof, fail to make a decision within forty-five
(45) days after the appointment of the third arbitrator, new arbitrators
may, at the election of either party, be chosen in like manner as if no
arbitrator had been previously selected.
c. The decision of the arbitrators shall be rendered in writing and
signed by the arbitrators, or a majority of them, and shall be final and
binding on the parties thereto as to any questions or questions so
submitted, and said parties shall abide by such decision and perform
pursuant to the conditions thereof. All expenses in connection with such
arbitration, including a reasonable compensation to the arbitrators, shall
be divided equally between the parties hereto, with the exception of the
expenses of counsel, witnesses and employees of the parties hereto which
will be borne by the party incurring them.
d. The arbitrators selected to act hereunder shall be qualified by
education and training to pass upon the particular question in dispute.
Therefore, it is agreed that if an engineering question is involved,
qualified engineers shall be appointed, and similar procedure shall be
followed in connection with other questions.
43. BOND. The Project Operator agrees to provide sufficient evidence to
both the Secretary and the Secretary that it shall have in place and maintain
such operator's bond as required by the applicable regulations of the Secretary.
Likewise, the Project Operator agrees
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to maintain any and all bonds required of it as a lessee in accordance with the
applicable regulations.
IT WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and have set opposite their respective names and date of execution.
PROJECT OPERATOR:
Dated: 7/15/94
PETROGLYPH OPERATING COMPANY, INC.
ATTEST:
/s/ [SIGNATURE APPEARS HERE] By: /s/ Robert A. Christensen
- ---------------------------- -------------------------
Secretary Robert A. Christensen, President
WORKING INTEREST OWNERS:
Dated: 7/14/94
INLAND RESOURCES INC.
ATTEST:
/s/ Robert C. Murdock By: /s/ Kyle R. Miller, President
- --------------------- -----------------------------
Secretary Kyle R. Miller, President
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PETROGLYPH GAS PARTNERS, L.P.,
Dated: 7/15/94 By: Its General Partner,
PETROGLYPH ENERGY, INC.
ATTEST:
/s/ Robert A. Christensen By: /s/ Robert C. Murdock, President
- ------------------------- --------------------------------
Secretary Robert C. Murdock, President
Date: 7/18/94
UTE INDIAN TRIBE UTE DISTRIBUTION CORPORATION
By: /s/ Stewart Pike By: /s/ Chris Denver
---------------- ----------------
Stewart Pike, Chairman Chris Denver
Uintah and Ouray Tribal
Business Committee
APPROVED:
Date: 1/27/95
UNITED STATES DEPARTMENT OF INTERIOR
By: /s/ Perry Baker
---------------
Perry Baker, Superintendent
Uintah and Ouray Agency
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