HomeMy WebLinkAboutContract 35591 -':'::`TARY��
NO.
OIL AND GAS LEASE
THE STATE OF TEXAS §
COUNTY OF TARRANT §
THIS AGREEMENT("Lease")is made and entered into as of the date herein specified by and
between- CITY OF FORT WORTH,a home rule municipal corporation of the State of Texas located
within Tarrant, Denton, and Wise Counties, Texas, (hereinafter referred to as "Lessor"), and,
CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP, whose address is P.O. Box 18496,
Oklahoma City,Oklahoma 73154-0496(hereinafter referred to as"Lessee").
WITNESSETH:
1.
GRANTING CLAUSE
Lessor,in consideration of a cash bonus in hand paid,of the royalties herein provided,and of the
agreements of Lessee hereinafter contained,hereby grants,leases,and lets exclusively unto Lessee for the
sole purpose of investigating, exploring, drilling, operating, and producing oil and/or gas from the land
leased hereunder,together with any liquid or gaseous substances produces in association with oil and gas,
the following described land situated in the City of Fort Worth,Texas described in Exhibit"A" attached
hereto(the"leased premises").
All mineral substances and mineral rights other than oil and gas(and all other liquid or gaseous
minerals produced in association with oil or gas)are expressly reserved to Lessor and excepted from this
Lease. These reserved mineral rights include, but are not limited to,the rights to lignite,coal and sulfur
not produced as a component of oil and gas.
For the purpose of determining the amount of any bonus or other payment hereunder,said leased
premises shall be deemed to contain 39.56 acres,whether actually containing more or less.
2.
PRIMARY TERM
Subject to the other provisions herein contained, this Lease shall be for a term of two(2)years
from the date of the notarial acknowledgment of Lessor's execution of this instrument(hereinafter called
"primary term")and so long thereafter as oil,gas or other minerals granted herein are produced from the
leased premises or lands pooled therewith, in paying quantities, or drilling operations are in progress
thereon as hereinafter provided,and the royalties are paid as provided herein.
3.
DELAY RENTALS
If actual drilling is not commenced on the leased premises or on any lands pooled therewith on or
before twelve(12)months from the date of this Lease,this Lease shall automatically terminate,unless on
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or before such anniversary date Lessee shall pay to Lessor or to the credit of Lessor, the sum of
TWENTY DOLLARS/ACRE($20/ACRE)(hereinafter called"rental")which shall cover the privilege of
deferring commencement of drilling operations for a period of twelve(12) months. In like manner, and
upon like payments annually, the commencement of drilling operations may be further deferred for
successive periods of twelve(12)months each during the primary term. The payment of rentals may be
made by the check of Lessee delivered to Lessor on or before such date of payment. If the rental is not
paid on or before the date it is due, then this Lease will automatically terminate. Upon termination,
Lessee shall prepare, execute and deliver to Lessor a recordable release covering the leased premises in
accordance with this Lease. Lessee may at any time or times execute and deliver to Lessor,a release or
releases of this Lease as to all or any part of the leased premises,and thereby be relieved of all obligations
as to the released land or interest,except for the indemnification obligations described in Section 16 and
the plugging obligations of this Lease. If a portion of the lands covered by this Lease is released, the
rentals and shut-in royalty payments computed in accordance therewith shall be reduced by the proportion
that the number of surface acres within such released portion bears to the total number of surface acres
which were covered by this Lease immediately prior to such release. The bonus paid hereunder is
consideration for this Lease and not rental for a period.
4.
ROYALTIES
Lessee shall pay to Lessor the following royalties,which shall be free of all costs of any kind,
including, but not limited to, costs of gathering, production, transportation, treating, compression,
dehydration,processing, marketing,trucking or other expense,directly or indirectly incurred by Lessee,
whether as a direct charge or a reduced price or otherwise. In this regard, Lessee agrees to bear one
hundred percent(100%) of all costs and expenses incurred in rendering hydrocarbons produced on or
from the leased premises marketable and delivering the same into the purchaser's pipeline for immediate
transportation to an end user or storage facility. Additionally, said royalties shall never bear, either
directly or indirectly, under any circumstances, the costs or expenses (including depreciation) to
construct, repair, renovate or operate any pipeline, plant, or other facilities or equipment used in
connection with the treating, separation, extraction, gathering, processing, refining, compression,
transporting,manufacturing or marketing of hydrocarbons produced from the leased premises or lands
pooled therewith.
A. On oil, gas (including flared gas)and casinghead gas,together with any other liquid or
gaseous hydrocarbons recovered by Lease operations(such as in drips or separators)twenty-six percent
(26%)of the proceeds of the sale or of the market value thereof,whichever is higher. Such proceeds of
oil,gas and casinghead gas,together with any other liquid or gaseous hydrocarbons recovered by Lease
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operations, is to be delivered free of cost at the well or to the credit of the Lessor into pipelines,
gathering lines,barges or other facilities to which the wells and tanks on the property may be connected.
Lessor shall always have the right..at any time and from time to time, upon reasonable written notice to
Lessee,to take Lessor's share of oil,gas and processed liquids in kind. Lessor may elect to take Lessor's
gas in kind at the well,or at the point of delivery where Lessee delivers Lessee's gas to any third party.
If gas is processed, Lessor may elect to take Lessor's share of the residue gas attributable to production
from the leased premises,at the same point of delivery where Lessee receives its share of residue gas or
has its share of residue gas delivered to a third party. Lessor may elect to have its royalty share of
processed liquids stored in tanks at the plant or delivered into pipelines on the same basis as Lessee's
share of liquids is stored or delivered. Lessor shall reimburse Lessee for all reasonable costs incurred by
Lessee in installing,operating or maintaining additional facilities necessary for Lessor's royalty gas and
processed liquids to be separately metered,accounted for,and delivered to a third party,but Lessor shall
not be charged for any expense in the production, gathering, dehydration, separation, compression,
transportation,treatment,processing or storage of Lessor's share of gas and processed liquids.
B. On products,twenty—six percent(26%)of the proceeds of sale thereof,.
C. On residue gas or gas remaining after separation, extraction or processing operations,
twenty-six percent(26%)of the proceeds of sale.
D. For purposes of this Paragraph 4, the term "market value" shall mean for gas and
products therefrom (i) the gross price at which gas or products therefrom are sold pursuant to a Gas
Contract,as defined below,that is ratified by Lessor according to Paragraph G below or(ii) if not sold
pursuant to a Gas Contract, as defined below, ratified by Lessor and Lessee, the highest gross price
reasonably obtainable for the quantity of gas or products available for sale, through good faith
negotiations for gas or products produced from the leased premises at the place where such gas or
product is available for sale on the date of such a contract with adequate provisions for redetermination
of price at intervals of no less frequency than one(1)year to ensure that the production is being sold for
no less than the current market price. Included within the definition of"Market Value as used herein is
the presumption that Gas Contracts that are ratified by Lessor are arms-length contracts with purchasers
who are not affiliates of Lessee. An "affiliate" includes,but is not limited to,the parent company or a
subsidiary of Lessee,a corporation or other entity having common ownership with Lessee,a partner or
joint venturer of Lessee with respect to the ownership or operation of the processing plant,a corporation
or other entity in which Lessee owns a ten percent or greater interest, or any individual,corporation or
other entity that owns a ten percent or greater interest in Lessee. In no event shall "market value"ever
be less than the amount actually received by the Lessee for the sale of hydrocarbons.
E. This Lease is intended to cover only oil and gas, but some other substances (including
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helium and sulphur) may be produced necessarily with and incidental to the production of oil or gas
from the leased premises; and, in such event, this Lease shall also cover all such other substances so
produced. On all such substances so produced under and by virtue of the terms of this Lease, Lessor
shall receive a royalty of twenty-six percent(26%)of all such substances so produced and saved, same
to be delivered to Lessor,free of all costs;or,at Lessor's election,Lessor's twenty-six percent(26%)of
such substances shall be sold by Lessee with Lessee's portion of such substances and at the same profit
realized by Lessee for its portion of such substances.
F. All royalties hereinabove provided shall be payable in cash(unless Lessor elects to take
such royalty oil or gas in kind) to Lessor within ninety (90) days following the end of the month in
which first commercial sale of production occurred and thereafter no more than sixty(60)days after the
end of the month following the month during which production takes place. Subject to the provisions of
Paragraph 10 of this Lease concerning shut-in wells, royalties shall be paid to Lessor by Lessee and/or
its assigns or by the product purchaser for oil and/or gas. Upon the failure of any party to pay Lessor
the royalty as provided in this paragraph,Lessor may.at Lessor's option,elect to terminate this Lease by
sending written notice to Lessee. Lessee shall then have thirty (30) days from the date of service of
such written notice in which to avoid termination of this Lease by making or causing to be made the
proper royalty payment or payments that should have been paid. If such royalty payment is not made on
or before the expiration of the 30-day period, or written approval is not obtained from Lessor to defer
such payment, Lessor may elect to terminate this Lease by filing a Notice of Termination with the
County Clerk in the county where the leased premises are located. The effective date of said
termination shall be the date said Notice of Termination is filed with the said County Clerk.
G. Lessee agrees that it will not enter into any contract for the sale,delivery,transporting or
processing of gas produced from the leased premises which shall extend more than two(2)years from
the effective date of such sales contract unless such contract has adequate provisions for redetermination
of price at intervals of no less frequency than one(1)year to ensure that production from this Lease is
not being sold for less than the then current market value. At least thirty(30)days prior to the delivery or
the execution of any contract for the sale,delivery,transporting or processing of gas produced from the
leased premises, Lessee shall provide Lessor with a complete copy of each proposed contract for the
purchase, transportation and/or processing of such gas that Lessee intends to execute (each a "Gas
Contract"), whereupon, Lessor shall have fifteen (15) days within which to either ratify such Gas
Contract or notify Lessee in writing that it does not approve of such Gas Contract,including a statement
of the reasons that Lessor does not approve of such Gas Contract(Lessor's failure to respond within the
fifteen(15)days either by ratification or by written notice that it does not approve of the proposed Gas
Contract shall be deemed to be Lessor's ratification of such Gas Contract). if Lessor ratifies the Gas
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Contract, Lessor shall be deemed bound by the terns of such Gas Contract (and, at Lessee's option,
Lessor shall execute such Gas Contract as a party thereto) and the gas or products therefrom sold
pursuant to such Gas Contract shall be deemed sold at market value based on the gross price stated
therein. Lessee shall not amend or modify any material terms of a Gas Contract ratified by Lessor
without the prior written consent of Lessor. If Lessor does not approve of a Gas Contract,Lessee shall
consult with Lessor in an effort to agree to the terms of the proposed Gas Contract,and if the other party
or parties to the Gas Contract agree to the changes or modifications to the Gas Contract which are
proposed by Lessor in order for Lessor to ratify such Gas Contract,then Lessor shall be deemed to have
ratified such Gas Contract(and,at Lessee's option.Lessor shall execute such Gas Contract as amended
and modified,as a party thereto). If Lessor and Lessee cannot agree on the terms of a Gas Contract that
are acceptable to the other party or parties thereto, Lessee may elect to execute such Gas Contract and
sell,deliver, transport and process gas according to the terms thereof, subject to the other terms of this
Paragraph 4 concerning the payment of Lessor's royalty on gas and products there from, including the
right of Lessor to take its share of gas in kind. In the event Lessor elects to take and separately dispose
of its royalty share of gas, the parties shall enter into a mutually acceptable balancing agreement
providing for(a)the right of an under produced party to make up an imbalance by taking up to 150
percent of its share of production and (b) and obligation to settle any imbalance remaining after
depletion in cash, based on the proceeds received by the overproduced party when the imbalance was
created,or if the overproduced party's gas was used but not sold, based on the market value of the gas
when imbalance was created.
H. In the event Lessee enters into a gas purchase contract which contains what is commonly
referred to as a "take or pay provision" (such provision meaning that the gas purchaser agrees to take
delivery of a specified minimum volume or quantity of gas over a specified term at a specified price or
to make minimum periodic payments to the producer for gas not taken by the purchaser) and the
purchaser under such gas purchase contract makes payment to Lessee by virtue of such purchaser's
failure to take delivery of such minimum volume or quantity of gas, then Lessor shall be entitled to
twenty five percent (25%)of all such sums paid to Lessee or producer under the "pay" provisions of
such gas purchase contract. Such royalty payments shall be due and owing to Lessor within thirty(30)
days after the receipt of such payments by Lessee. If the gas purchaser"makes up"such gas within the
period called for in the gas contract and Lessee is required to give such purchaser a credit for gas
previously paid for but not taken,then Lessor shall not be entitled to royalty on such"make up"gas. If
Lessee is not producing any quantities of gas from the leased premises but is receiving payments under
the"pay"portion of such"take or pay"gas purchase contract provision,such payments shall not relieve
Lessee of the duty to make shut-in royalty payments if Lessee desires to continue this Lease, but such
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"take or pay"royalty payments shall be applied as a credit against any shut-in royalty obligation of the
Lessee. Lessor shall be a third-party beneficiary of any gas purchase contract and/or transportation
agreement entered into between Lessee and any purchaser and/or transporter of Lessor's gas,
irrespective of any provision of said contracts to the contrary, and such gas purchase contract and/or
transportation agreement will expressly so provide. Further, Lessor shall be entitled to twenty-five
percent (25%) of the value of any benefits obtained by or granted to Lessee from any gas purchaser
and/or transporter for the amendment, modification, extension, alteration, consolidation, transfer,
cancellation or settlement of any gas purchase contract and/or transportation agreement.
I. Lessee agrees that before any gas produced from the leased premises is used or sold off
the leased premises,it will be run,free of cost to Lessor,through an adequate oil and gas separator of a
conventional type or equipment at least as efficient,to the end that all liquid hydrocarbons recoverable
from the gas by such means will be recovered and Lessor properly compensated therefor.
J. Any payment of royalty or shut-in gas royalty hereunder paid to Lessor in excess of the
amount actually due to the Lessor shall nevertheless become the property of the Lessor if Lessee does
not make written request to Lessor for reimbursement within one (1) year from the date that Lessor
received the erroneous payment, it being agreed and expressly understood between the parties hereto
that Lessor is not the collecting agent for any other royalty owner under the lands covered hereby,and a
determination of the name, interest ownership and whereabouts of any person entitled to any payment
whatsoever under the terms hereof shall be the sole responsibility of Lessee. It is further expressly
agreed and understood that:(i)this provision shall in no way diminish the obligation of Lessee to make
full and punctual payments of all amounts due to Lessor or to any other person under the terms and
provisions of this Lease, and (ii) any overpayments made to the Lessor under any provisions of this
Lease shall not be entitled to be offset against future amounts payable to parties hereunder.
K. The terms of this Lease may not be amended by any division order and the signing of a
division order by any mineral owner may not be made a prerequisite to payment of royalty hereunder.
L. Oil, gas or products may not be sold to a subsidiary or affiliate of Lessee as defined
herein without the Lessor's prior written permission.
M. Lessee shall pay Lessor royalty on all gas produced from a well on the leased premises
and sold or used off the leased premises,regardless of whether or not such gas is produced to the credit
of Lessee or sold under a contract executed by or binding on Lessee. Should gas be sold under a sales
contract not binding on Lessee, Lessor's royalty will be calculated based on the highest price paid for
any of the gas produced from the well from which such gas is produced. In no event will the price paid
Lessor for Lessor's share of gas be less than the price paid Lessee for Lessee's share of gas.
5.
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POOLING
Lessee, upon the prior written consent of Lessor which shall not be unreasonably withheld, is
hereby given the right to pool or combine the acreage covered by this Lease or any portion thereof as to
oil and gas,or either of them with any other land, lease or leases in the immediate vicinity thereof to the
extent hereinafter stipulated, when it is necessary or advisable to do so in order to properly explore, or
develop,produce and operate said leased premises in compliance with the spacing rules of the appropriate
lawful authority,or when to do so would promote the conservation of oil and gas in and under and that
may be produced from said premises. In the absence of field rules,units pooled for oil and gas hereunder
shall not exceed 40 acres each in area, provided that should governmental authority having jurisdiction
prescribe the creation of units larger than those specified(including, for example, for a horizontal well),
for the drilling or operations of a well at a regular location or for obtaining maximum allowable from any
well to be drilled, drilling or already drilled, units thereafter created may conform in size with those
prescribed by governmental regulations. Lessee, under the provisions hereof, may pool or combine
acreage covered by this Lease or any portion thereof as above provided as to oil in any one or more strata
and as to gas in any one or more strata. The units formed by pooling as to any stratum or strata need not
conform in size or area with the unit or units into which the Lease is pooled or combined as to any other
stratum or strata, and oil units need not conform as to area with gas units. The pooling in one or more
instances shall not exhaust the rights of the Lessee hereunder to pool this Lease or portions thereof into
other units. Lessee shall file for record in the appropriate records of the county in which the leased
premises are situated an instrument describing the pooled acreage as a pooled unit. In this regard,Lessee
shall provide Lessor with a copy of any and all documents filed with any regulatory authority or recorded
in the records of any county within thirty(30)days of filing such documents. Upon the recordation of the
unit in the county records and the timely furnishing of the copies required herein to Lessor the unit shall
be effective as to all parties hereto,their heirs,successors,and assigns, irrespective of whether or not the
unit is likewise effective as to all other owners of surface,mineral,royalty or other rights in land included
in such unit. Lessee may at its election exercise its pooling option before or after commencing operations
for or completing an oil or gas well on the leased premises,and the pooled unit may include,but it is not
required to include,land or leases upon which a well capable of producing oil or gas in paying quantities
has theretofore been completed or upon which operations for the drilling of a well for oil or gas have
theretofore been commenced. In the event of operations for drilling on or production of oil or gas from
any part of a pooled unit which includes all or a portion of the land covered by this Lease,such operations
shall be considered as operations for drilling on or production of oil and gas from land covered by this
Lease whether or not the well or wells be located on the premises covered by this Lease and in such event
operations for drilling shall be deemed to have been commenced on said land within the meaning of this
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Lease. For the purpose of computing the royalties to which owners of royalties and payments out of
production and each of them shall be entitled on production of oil and gas,or either of them,there shall be
allocated to the land covered by this Lease and included in said unit(or to each separate tract within the
unit if this Lease covers separate tracts within the unit)a pro rata portion of the oil and gas, or either of
them, produced from the pooled unit. Royalties hereunder shall be computed on the portion of such
production,whether it be on oil and gas,or either of them, so allocated to the land covered by this Lease
and included in the unit just as though such production were from such land. The production from an oil
well will be considered as production from this Lease or oil pooled unit from which it is producing and not
as production from a gas pooled unit;and production from a gas well will be considered as production from
this Lease or gas pooled unit from which it is producing and not from an oil pooled unit. The formation
of any unit hereunder shall not have the effect of changing the ownership of any delay rental or shut-in
production royalty which may become payable under this Lease. if this Lease now or hereafter covers
separate tracts,no pooling or unitization of royalty interest as between any such separate tracts is intended
or shall be implied or result merely from the inclusion of such separate tracts within this Lease but Lessee
shall nevertheless have the right to pool as provided above with consequent allocation of production as
provided above. As used in this paragraph, the words "separate tract" mean any tract with royalty
ownership differing,now or hereafter,either as to parties or amounts,from that as to any other part of the
leased premises. Notwithstanding anything to the contrary therein above, no unit may be formed that
contains less than 50%of the unit acreage from the leased premises.
6.
CONTINUOUS DRILLING
At the expiration of the primary term this Lease shall remain in full force and effect for so long as
Lessee is conducting Continuous Drilling Operations(as herein defined). Lessee shall be considered to be
engaged in Continuous Drilling Operations at the expiration of the primary term if: (1) Lessee is then
engaged in drilling operations on the leased premises or lands pooled therewith or(2)Lessee has completed a
well as a producer or as a dry hole within ninety(90)days prior to the expiration of the primary term. Lessee
also shall be considered to be engaged in Continuous Drilling Operations for so long thereafter as Lessee
conducts drilling operations on the leased premises,or lands pooled therewith,with due diligence and with
intervals of no more than ninety (90) days between the date of completion of one well and the date of
commencement of drilling operations on an additional well. "Completion'shall be considered to be the date
of release of the completion rig for a completed well, but in no event more than ninety days following the
release of the drilling rig. In the case of a dry hole,"completion'shall be considered to be the date of release
of the drilling rig. "Commencement"shall be the actual spud date of a well. Continuous Drilling Operations
shall be deemed to have ceased upon the failure of Lessee to commence drilling operations on an additional
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well within such 90 day period. When the Continuous Drilling Operations cease, the provisions of
Paragraph 7 will be applicable.
7.
RETAINED ACREAGE
A. Vertical Wells
At the expiration of the primary term of this Lease or upon the termination of the continuous
drilling program set forth in Paragraph 6,each non-horizontal well drilled hereon capable of producing in
paying quantities will hold only forty (40) acres for any formation from the surface to the base of the
Barnett Shale formation. As to depths below the base of the Barnett Shale Formation,the proration unit
shall be the minimum size necessary to obtain the maximum production allowable. If the proration unit
for a well completed below the base of the Barnett Shale Formation is larger than 40 acres,the well may
maintain the Lease as to formations above the base of the Barnett Shale Formation as to not more than 40
acres. All other acreage except that included in a proration unit or pooled unit as described above will
cease to be covered by this Lease and will be released. To the extent possible,each such proration unit will
be in the shape of a square,with the bottom of the well in the center. Further,it is understood and agreed
that Lessee shall earn depths as to each proration unit or pooled unit only from the surface down a depth
which is the stratigraphie equivalent to a depth of one hundred feet(100') below the deepest producing
formation in such well which is capable of producing oil or gas in paying quantities at the expiration of
the primary term of this Lease or upon the termination of the continuous drilling program set forth in
Paragraph 6. This Lease will terminate at such time as to all depths below such depths as to each
respective proration unit or pooled unit. If production should thereafter cease as to acreage included in a
proration unit or pooled unit, this Lease will terminate as to such acreage unless Lessee commences
reworking or additional drilling operations on such acreage within ninety (90) days thereafter and
continues such reworking or additional drilling operations until commercial production is restored
thereon,provided that if more than ninety (90)days elapse between the abandonment of such well as a
dry hole and the commencement of actual drilling operations for an additional well,or more than ninety
(90)days pass since the commencement of reworking operations without the restoration of commercial
production,this Lease shall terminate as to the applicable proration unit or pooled unit.
At any time or times that this Lease terminates as to all or any portion of the acreage of the leased
premises, Lessee shall promptly execute and record in the office of the County Clerk in the County
where the leased premises are located, a proper release of such terminated acreage and shall furnish
executed counterparts of each such release to Lessor at the address shown in Paragraph 19 hereof.
B. Horizontal Wells
It is expressly understood and agreed that, subject to the other terms, provisions and limitations
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contained in this Lease, Lessee shall have the right to drill "horizontal wells" under the leased premises,
or lands pooled therewith. The term"horizontal well'or"horizontally drilled well"shall mean any well that
is drilled with one or more horizontal drainholes having a horizontal drainhole displacement of at least five
hundred eighty-five (585) feet. For the purposes of further defining the term "horizontal wells" and
"horizontally drilled" reference is made to the definitions contained within Statewide Rule 86, as
promulgated by the Railroad Commission of Texas, which definitions are incorporated herein for all
purposes.
In the event of any partial termination of the Lease as provided in Paragraph 7A, then, with
regard to a well which is a horizontal well or a horizontally drilled well,Lessee shall be entitled to retain
all sands and horizons at all depths from the surface down to a depth which is the stratigraphic equivalent of
a depth of one hundred(100)feet below the base of the deepest producing formation in such well which is
capable of producing oil or gas in paying quantities,but only in a spacing unit the area or number of acres
of which are equal to the area or number of acres detennined by adding twenty(20)acres for each five-
hundred eighty-five(585)feet horizontally drilled to the original forty(40)acres deemed to be a proration
unit for each vertical well. Each such tract around each horizontally drilled well shall be as nearly in the
shape of a square or a rectangle as is practical with the boundaries of the tract including the entire
horizontal drainhole and the lateral boundaries of such tract being approximately equal distance from such
drainhole and parallel thereto.
If production should thereafter cease as to acreage included in a proration unit or pooled unit,this
Lease will terminate as to such acreage unless Lessee commences reworking or additional drilling
operations on such acreage within ninety(90)days thereafter and continues such reworking or additional
drilling operations until commercial production is restored thereon,provided that if more than ninety(90)
days pass between the abandonment of such well and the commencement of actual drilling operations for
an additional well,or more than ninety(90)days pass since the commencement of reworking operations
without the restoration of commercial production,the Lease shall terminate as to the applicable proration
unit.
At any time or times that this Lease terminates as to all or any portion of the acreage of the leased
premises,Lessee shall promptly execute and record in the office of the County Clerk in the County where
the leased premises are located, a proper release of such terminated acreage and shall furnish executed
counterparts of each such release to Lessor at the address shown in Paragraph 19 hereof.
8.
OFFSET OBLIGATIONS
In the event a well or wells producing oil or gas should be brought in on land within 467 feet from
any boundary of the leased premises. Lessee agrees within one hundred and twenty (120) days from
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commencement of production from such well or wells to commence the actual drilling of an offset well or
wells on the leased premises, as would a reasonably prudent operator under similar circumstances;
provided that the well or wells which are to be offset are producing in paying quantities: or Lessee shall
release to Lessor free of this Lease sufficient acreage to allow for the drilling of an offset well or wells
9.
FORCE MAJEURE
A. The term "force majeure" as used herein shall mean and include: requisition, order,
regulation, or control by governmental authority or commission; exercise of rights or priority or control
by governmental authority for national defense or war purpose resulting in delay in obtaining or inability to
obtain either material, equipment or means of transportation normally necessary in prospecting or drilling
for oil,gas or other mineral granted herein,or in producing,handling or transporting same from the leased
premises; war, scarcity of or delay in obtaining materials or equipment; lack of labor or means of
transportation of labor or materials; acts of God; insurrection; flood; strike; or other things beyond the
control of Lessee. The term"force majeure"shall not include lack of markets for production or any other
events affecting only the economic or financial aspects of drilling,development or production.
B. Notwithstanding any other provisions of this Lease, but subject to the conditions
hereinafter set forth in this Paragraph 9,should Lessee be prevented by"force majeure"as defined above,
from conducting drilling or reworking operations on,or producing oil,gas or other mineral from,the leased
premises,such failure shall not constitute a ground for the termination of this Lease or subject said Lessee to
damages therefor;and the period of time during which Lessee is so prevented shall not be counted against
Lessee,but this Lease shall be extended for a period of time equal to that during which such Lessee is so
prevented from conducting such drilling or reworking operations on,or producing oil,gas or other mineral
from, such leased premises. All of the provisions of this paragraph are subject to each of the following
express conditions:
The terms and conditions of this paragraph shall not extend beyond the expiration date of any law,
order,rule or regulation invoked under this paragraph,and shall be applicable and effective only
during the following periods:
(1) If the force majeure shall occur during the primary term of this Lease,it shall not
operate to extend this Lease more than two(2)consecutive years beyond the expiration of
the primary term.
(2) If the force majeure shall occur during a ninety (90) day drilling or reworking
period provided for in Paragraphs 6 and 7 hereof,after the;primary tern has expired,then it
shall not operate to extend the Lease more than two (2) successive years beyond the
expiration of such ninety(90)day periods.
11 CPW OIL AND GAS LEASE Pr�rie Dog ParkG
C. None of the provisions of this paragraph shall ever be or become effective and applicable
unless Lessee shall,within a reasonable time(not to exceed sixty(60)days in any event)after occurrence of
the claimed event of force majeure above referred to, notify the Lessor, in writing, of such occurrence
with full particulars thereof.
D. The terms of this paragraph do not apply to monetary payments due under the terms of this
Lease.
10.
SHUT-IN GAS WELL PROVISIONS
If at any time while there is a gas well on the leased premises or land pooled therewith which is
capable of producing gas in paying quantities, but the production thereof is shut-in or suspended for any
reason,and if this Lease is not then continued in force by some other provision hereof,then this Lease shall
nevertheless continue in force as to such well and the pooled unit or proration unit allocated to it for a period
of sixty (60)days from the date such well is shut-in. Before the expiration of any such sixty (60) day
period,Lessee or any Assignee hereunder may pay or tender to the Lessor a shut-in royalty equal to Five
Thousand Dollars($5,000.00)per shut-in gas well and if such payment or tender is timely made,this Lease
shall continue in force but only as to said well or wells and the proration unit or the pooled unit allocated
to it or them and it shall be considered that gas is being produced from said well or wells in paying
quantities for one(1)year from the date such well or wells are shut-in,and in like manner one,and only one,
subsequent shut-in royalty payment may be made or tendered and it will be considered that gas is being
produced from said well or wells in paying quantities for such additional one(1)year period as well.
Lessee shall not be entitled to recover any shut-in royalty payments from the future sale of gas.
Should such shut-in royalty payments not be made in a timely manner as provided in this section,it will be
considered for all purposes that there is no production and no excuse for delayed production of gas from
any such well or wells,and unless there is then in effect other preservation provisions of this Lease,this
Lease shall terminate. Lessee shall pay or tender directly to the Lessor at the address as shown in
Paragraph 19 all shut-in royalty payments as required by this Lease.
11.
INFORMATION ACCESS AND REPORTS
A. Lessor shall have free access at all times to all wells. tanks, and other equipment that
services wells under the leased premises, including drilling wells,and Lessee agrees to furnish Lessor,or
Lessor's nominee, currently and promptly, upon written request, with full well information including
cores, cuttings, samples, logs (including Schlumberger and other electrical logs), copies and results of
deviation tests and directional and seismic surveys, and the results of all drill stem tests and other tests of
other kind or character that may be made of wells on the leased premises. Lessor or Lessor's nominee shall
be furnished with and have free access at all times to Lessee's books and records relative to the production
12 CFW OIL AND GAS LEASE Pr4ine Dog Park9
and sale of oil, gas or other minerals from the leased premises, including reports of every kind and
character to governmental authorities. State or Federal. Lessor shall have the right at its election to
employ gaugers or install meters to gauge or measure the production of all minerals produced from the
leased premises,and Lessee agrees to prepare and deliver to Lessor or Lessor's gauger or nominee duplicate
run or gauge tickets for all minerals removed from the premises. Lessee shall furnish to lessor daily
drilling reports on each well drilled.
B. Lessee shall furnish to Lessor,within a reasonable time after its execution,a copy of any
gas purchase contract or transportation agreement entered into in connection with the leased premises,or if
there is already a gas purchase contract or transportation agreement in effect due to Lessee's operations in
the field,then a copy of that contract. Furthermore,a copy of any amendments to the gas purchase contract
or transportation agreement shall be furnished said Lessor within thirty (30)days after execution thereof,
and on request of Lessor and without cost to the Lessor, Lessee shall furnish Lessor a copy of the
following reports: core record, core analysis, well completion, bottom hole pressure measurement,
directional survey records, electrical and induction surveys and logs, gas and oil ratio reports,
paleontological reports pertaining to the paleontology of the formations encountered in the drilling of any
wells on the leased premises,and all other reports which pertain to the drilling,completing or operating of
the wells located on the leased premises. Such information shall be solely for Lessor's use, and Lessor
shall in good faith attempt to keep same confidential for twelve(12)months after receipt.
C. Lessee shall advise Lessor in writing of the location of all wells drilled upon the leased
premises on or before thirty (30) days prior to commencement of operations, and shall advise Lessor in
writing the date of completion and/or abandonment of each well drilled within thirty (30) days after
completion or abandonment.
12.
PRESERVATION OF ECOLOGY OF LEASED PREMISES
Any overflows or releases affecting the leased premises. including, but not limited to, salt water,
mud, chemical, or oil shall be reported immediately to Lessor. Lessee shall not use any water in, on or
under the leased premises without the prior written consent of the Lessor.
13.
REMOVAL OF EQUIPMENT
Lessee shall have the right at any time during or within six(6)months after the expiration of this
Lease (but not thereafter) to remove all property and fixtures placed by Lessee on the leased premises,
including the right to draw and remove all casing,except as to water wells as provided for in Paragraph 14(d).
This paragraph shall not apply to equipment or casing on or in an oil or gas well capable of producing in
paying quantities,but Lessee shall be paid reasonable salvage value for any such casing or equipment. It is
contemplated that Lessee may drill across and through lands covered by this agreement where production is
13 CF W OIL AND GAS LEASE Pr4irie Dog Park9
not obtained or ceases. Where the casing or pipeline placed or laid through such non-producing lands is
necessary to the production of a well or wells located on other lands covered by this Lease,or lands pooled
therewith,it is expressly understood and agreed that Lessor will make no demand that such casing,pipelines
or other equipment necessary for the production of a well or wells drilled by Lessee be removed as long as
such casing, pipelines and other equipment is necessary for the production of a producing well or wells
drilled by Lessee.
14.
ASSIGNABILITY BY LESSEL
This Lease may be transferred at any time. All transfers by Lessee(including assignments, sales,
subleases, overriding royalty conveyances, or production payment arrangements) must be recorded in the
county where the lease premises are located,and the recorded transfer or a copy certified to by the County
Clerk of the county where the transfer is recorded must be delivered to the Lessor within sixty(60)days of
the execution date. Every transferee shall succeed to all rights and be subject to all obligations,liabilities,and
penalties owed to the Lessor by the original Lessee or any prior transferee of the Lease, including any
liabilities to the Lessor for unpaid royalties. No such transfer shall release the Lessee(or any subsequent
transferor)from any obligation hereunder.
15.
NO WARRANTY
This Lease is given and granted without warranty of title,express or implied, in law or in equity.
Lessor agrees that Lessee, at Lessee's option, may purchase or discharge, in whole or in part, any tax,
mortgage or other lien upon the leased premises and thereupon be subrogated to the right of the holder
thereof, and may apply royalties accruing hereunder toward satisfying same or reimbursing Lessee. It is
also agreed that if Lessor owns an interest in the oil and gas under the leased premises less than the entire
fee simple estate therein,the royalties to be paid Lessor shall be reduced proportionately, but in no event
shall the shut-in royalty amount for a gas well,as provided for in Paragraph 10 hereof,be reduced..
16.
INDEMNITY
Lessee shall expressly release and discharge, all claims, demands, actions, judgments, and
executions which it ever had,or now has or may have,or assigns may have,or claim to have,against the
Lessor or its departments, agents, officers, servants, successors, assigns. sponsors, volunteers, or
employees, created by, or arising out of personal injuries, known or unknown, and injuries to property,
real or personal,or in any way incidental to or in connection with the performance of the work performed
by the Lessee. The Lessee shall fully defend,protect,indemnify,and hold harmless the Lessor,its
departments,agents,officers,servants,employees,successors,assigns,sponsors,or volunteers from
14 CFW OIL AND GAS LEASE Pr4irie Dog Park9
and against each and every claim,demand,or cause of action and any and all liability,damages,
obligations,judgments,losses, fines,penalties,costs,fees,and expenses incurred in defense of the
Lessor,its departments,agents,officers,servants,or employees,including,without limitation,the
payment of bonus and/or royalties regarding ownership of the Lessor's mineral interest of the
leased premises which may be made or asserted by Lessee,its agents,assigns,or any third parties
on account of,arising out of,or in any way incidental to or in connection with the ownership and
title of the mineral interest of the Lessor under this Lease.
The Lessee shall fully defend, protect, indemnify, and hold harmless the Lessor, its
departments,agents,officers,servants,employees,successors,assigns,sponsors,or volunteers from
and against each and every claim,demand,or cause of action and any and all liability,damages,
obligations,judgments, losses,fines,penalties,costs,fees,and expenses incurred in defense of the
Lessor, its departments, agents, officers, servants, or employees, including, without limitation,
personal injuries and death in connection therewith which may be made or asserted by Lessee,its
agents,assigns,or any third parties on account of,arising out of,or in any way incidental to or in
connection with the performance of the work performed by the Lessee under this Lease.
THE LESSEE AGREES TO INDEMNIFY AND HOLD HARMLESS THE LESSOR,ITS
OFFICERS,AGENTS,SERVANTS, EMPLOYEES,SUCCESSORS,ASSIGNS,SPONSORS,OR
VOLUNTEERS FROM ANY LIABILITIES OR DAMAGES SUFFERED AS A RESULT OF
CLAIMS, DEMANDS, COSTS, OR JUDGMENTS AGAINST THE LESSOR, ITS
DEPARTMENTS, ITS OFFICERS, AGENTS, SERVANTS, OR EMPLOYEES, CREATED BY,
OR ARISING OUT OF THE ACTS OR OMISSIONS OF THE LESSOR OCCURRING ON THE
DRILL SITE OR OPERATION SITE IN THE COURSE AND SCOPE OF INSPECTING AND
PERMITTING THE GAS WELLS INCLUDING, BUT NOT LIMITED TO, CLAIMS AND
DAMAGES ARISING IN WHOLE OR IN PART FROM THE NEGLIGENCE OF THE LESSOR
OCCURRING ON THE DRILL SITE OR OPERATION SITE IN THE COURSE AND SCOPE
OF INSPECTING AND PERMITTING THE GAS WELLS. IT IS UNDERSTOOD AND
AGREED THAT THE INDEMNITY PROVIDED FOR IN THIS SECTION IS AN INDEMNITY
EXTENDED BY THE LESSEE TO INDEMNIFY AND PROTECT LESSOR AND/OR ITS
DEPARTMENTS, AGENTS, OFFICERS, SERVANTS, OR EMPLOYEES FROM THE
CONSEQUENCES OF THE NEGLIGENCE OF THE LESSOR AND/OR ITS DEPARTMENTS,
AGENTS, OFFICERS, SERVANTS, OR EMPLOYEES, WHETHER THAT NEGLIGENCE IS
THE SOLE OR CONTRIBUTING CAUSE OF THE RESULTANT INJURY,DEATH,AND/OR
DAMAGE.
17.
15 CFW OIL AND GAS LEASE Pone Dog Park9
INSURANCE
Lessee, at its own expense, shall maintain a general liability insurance policy (covering
both bodily injury and property damage and covering its indemnity provisions of this Lease) in
an amount of at least $5,000,000 combined single limit. Lessee shall also, at its own expense,
carry worker's compensation insurance as required by law. Said policies shall(i)name Lessor as
an additional insured(except for the worker's compensation policy,which instead shall include a
waiver of subrogation endorsement in favor of Lessor), (ii)be issued by an insurance company
which is reasonably acceptable to Lessor, and (iii) provide that said insurance shall not be
canceled unless thirty(30)days prior written notice shall have been given to Lessor. In addition,
such insurance provided by Lessee shall be primary coverage for Lessor when any policy issued
to Lessor is similar or duplicate in coverage, and Lessor's policy shall be excess over Lessee's
policies. Said policy or policies or certificates thereof shall be delivered to Lessor by Lessee
upon commencement of the lease and upon each renewal of said insurance.
18.
RELEASES REOUIRED
Within thirty (30)days after the partial termination of this Lease as provided under any of the
terms and provisions of this Lease, Lessee shall deliver to Lessor a plat showing the production units
designated by Lessee,copies of logs showing depths to be retained within each unit,and a fully executed,
recordable release properly describing by metes and bounds the lands and depths to be retained by Lessee
around each producing well. If this Lease terminates in its entirety,then Lessee shall deliver a complete,
fully executed, recordable release to Lessor within thirty (30) days. If such release complies with the
requirements of this section, Lessor shall record such release. If Lessee fails to deliver a release
complying with the requirements of this section within thirty(30)days after Lessor's demand therefore,
then Lessee shall pay Lessor an amount equal to Five Dollars($5.00)per acre per day for each acre of the
leased premises that should have been released, beginning with the 30th day after the date of Lessor's
request and continuing until such release has been executed and delivered to Lessor. It is agreed that
actual damages to Lessor for Lessee's failure to deliver such release are difficult to ascertain with any
certainty, and that the payments herein provided are a reasonable estimate of such damages and shall be
considered liquidated damages and not a penalty. Furthermore, Lessor is hereby authorized to execute
and file of record an affidavit stating that this Lease has expired and the reason therefor, and such
affidavit shall constitute prima facie evidence of the expiration of this Lease or any part of this Lease.
16 CF W OIL AND GAS LEASE Pr�rie Dog Park9
19.
NOTICES
A. All notices, information, letters, surveys, reports, material, and all other documents,
required or permitted to be sent to Lessor by Lessee shall be sent by certified United States mail,postage
prepaid,return receipt required,to the following address:
City of Fort Worth
Attention:City Manager
1000 Throckmorton Street
Fort Worth,Texas 76102
B. All notices required or permitted to be sent to Lessee by Lessor shall be sent to Lessee by
certified United States mail,postage prepaid,return receipt requested to the following address:
Chesapeake Operating Inc.
Attention:Henry Hood
P.O.Box 18496
Oklahoma City.OK 73154
C. Service of notices,and other documents,hereunder is complete upon deposit of the mailed
material in a post office or official depository under the care and custody of the United States Postal Service,
in a postpaid,properly addressed and certified wrapper.
D. Any party hereto shall have the right to change the name or address of the person or
persons required to receive notices,and other documents,by so notifying the other party in writing.
20.
BREACH BY LESSEE
Lessee shall conduct Lessee's operations in strict compliance with all of the terms and provisions of
this Lease and with all applicable local, state and federal rules and the regulations of any regulatory body
having jurisdiction of such operations including,but not limited to,all local,state and federal environmental
rules and regulations and applicable city ordinances.
In the event Lessor considers that operations are not,at any time,being conducted in compliance
with this Lease, or any implied covenant of this Lease, Lessor shall notify Lessee in writing of the facts
relied upon as constituting a breach of any express or implied covenant or obligation of Lessee hereunder
and, Lessee, if in default, shall have sixty(60)days after receipt of such notice in which to commence
compliance with its obligations hereunder. Failure on the part of Lessee to timely commence efforts to rectify
any such breach and to exercise diligence in remedying any such breach shall operate as a forfeiture of this
Lease as to the portion thereof effected by such breach:provided that if Lessee, in good faith,disputes any
alleged grounds of breach set forth in such notice.Lessee may,within said sixty(60)day period,institute a
Declaratory Judgment Action in any District Court in a county where all or part of the said leased
premises are located questioning whether it has in fact breached any expressed or implied covenant of this
Lease, thereby staying any forfeiture during the pendency of such action. However, in the event that
17 CFVV OIL AND GAS LEASE Pr4me Dog ParkO
Lessor obtains a final unappealable judicial ascertainment in any such proceeding that Lessee is in breach
of any covenant hereof, express or implied, then it is agreed that Lessor shall be entitled to a decree
providing for cancellation or forfeiture of the Lease in the event such breach is not rectified or
commenced in good faith to be rectified by Lessee within thirty(30)days from date such decree becomes
final.
21.
LOCATION OF DRILLING ACTIVITY,PIPELINES AND EQUIPMENT
No drilling or other activity shall be conducted on the surface of the leased premises and no
roads,electric lines, pipelines,equipment,or other structures shall be placed on the surface of the leased
premises.
22.
COMPLIANCE WITH LAWS
Lessee shall comply with all applicable rules, regulations, ordinances, statutes and other laws in
connection with any drilling, producing or other operations under the terms of this Lease, including,
without limitation,the oil and gas well regulations of the City of Fort Worth.
23.
CONFLICT OF INTEREST
Lessee represents that Lessee;its officers and directors,are not employees or officers of the City
of Fort Worth nor is Lessee(its officers and directors)acting on behalf of any such officer or employee of
the City of Fort Worth.
24.
TERP..S
All of the terms and provisions of this Lease shall extend to and be binding upon the heirs,
executors,administrators,successors and authorized assigns of the parties hereto.
25.
ENTIRE AGREEMENT
This Lease states the entire contract between the parties,and no representation or promise,verbal
or written, on behalf of either party shall be binding unless contained herein: and this Lease shall be
binding upon each party executing the same, regardless of whether or not executed by all owners of the
above described land or by all persons above named as "Lessor'', and, notwithstanding the inclusion
above of other names as"Lessor',this term as used in this Lease shall mean and refer only to such parties
as execute this Lease and their successors in interest.
26.
CAPTIONS
18 CFW OIL AND GAS LEASE P+ie Dog Parka
The captions to the various paragraphs of the Lease are for convenience only, to be used
primarily to more readily locate specific provisions. They shall not be considered a part of the Lease,nor
shall they be used to interpret any of the Lease provisions.
27.
COUNTERPARTS
This Lease may be executed in multiple counterparts,each of which shall be deemed an original,
with the same effect as if the signature thereto and hereto were upon the same instrument.
EXECUTED and effective as of the date of the notarial acknowledgment of the Lessor's
execution.
CITY OF FORT WORTH-LESSOR
By:�(.'/z /'�
Name: Marc A Ott
Title:Assistant City Manager er
Y� I lo�1OCrJ( ATTEST:
Contract Autho a atioa By:
Name: M IL r4 16 J C v
J Title:City Secretary
Date
APPROVED AS TO FORM AND LEGALITY:
Name:
Title:AssistailiCity Attorney
Date:
CHESAPEAKE EXPL TION LIMITED
PARTNERSHIP-LESS
an Oklahoma limited er
By:
Henry J.Hood,Seni resident-Land and Legal&
General Counsel Chesapeake Operating, Inc., General
Partner M R 610-
ACKNOWLEDGEMENTS
THE STATE OF TEXAS §
COUNTY OF
BEFORE ME, the undersigned notary public, on this day
personally appeared Q known to me to be the person whose name is
subscribed to the foregoing instrument and, that (s)he has executed the same for the purposes and
consideration therein expressed.
.. N under my hand and seal of office this ^7 d/a9y�of .2007.
HETTIE LANE
Notary Public,State of Texas
My Commission Expires: July 26,2007
Commission Number: 00{;93591-7
19 CFW OIL AND GAS LEASE Pr4irie Dog Pazko
STATE OF OKLAHOMA §
§
COUNTY OF� I�I,r a✓ §
Before: me, LZI�AArU1 1011 _, the undersigned notary public, on this day
personally appeared Henry J. Hood, as Senior Vice President - Land and Legal & General Counsel of
Chesapeake Operating, Inc.,as General Partner of Chesapeake Exploration Limited Partnership,on behalf
of said limited partnership, who is known to me to be the person whose name is subscribed to the
foregoing instrument,and acknowledged to me that he/she executed that instrument for the purposes and
consideration therein expressed,and in that capaci,therein stated.
Given under my hand and seal of office this day of Jam, 12007.
ry Public,State of Oklahoma
My Commission Expires:_ ' xo7aaaaos
Commission Number: iPi�f`
,E
"'iOF OK�P�`°�`
EXHIBIT A
39.56 acres,more or less,out of the M.J.Brittain Survey Abstract# 104,Tarrant County,Texas
and being more particularly described by metes and bounds in that certain Warranty Deed dated
October 2, 1969 from Thomas W. Harris and wife Mary Anne Harris to Elite Parks Inc. and
recorded in Volume 4792,Page 474 of the Deed Records of Tarrant County,Texas:
Tract 1:
Being 19.56 acres of land out of the M.J. Brittain Survey, in Tarrant County, Texas, and being
described by metes and bounds as follows:
Beginning at an iron pin 541.7 varas South of the Northwest corner of the M.J. Brittain Survey,
said point being the Southwest comer of a 50acre tract deeded to Nicholas Dayton by W.T.
Parker and wife on the 29th day of September, 1908,by deed recorded in Vol. 285, Page 410, of
the Deed Records of Tarrant County,Texas;
Thence east 726.0 feet to the point of beginning of this tract;
Thence South 0 degrees 07 minutes west along a line 726.0 feet east of and parallel to the West
line of said M.J.Brittain Survey, 1193.0 feet to a point for corner;
Thence North 88 degrees 48 minutes East,along fence line,736.0 feet to an iron pin for corner in
the West line of Parker Henderson Road;
Thence North 1 degree 34 minutes West,along the West line of Parker Henderson Road, 1178.0
feet to an iron pin for corner,said comer being the Southeast corner of said Dayton 50 acre tract;
Thence west along fence line, 701.0 feet to the point of beginning and containing 19.56 acres
more or less;
Save and except any part or portion thereof in the use or occupancy of any public road or
highway.
20 CFw OIL AND GAS LEASE Pr4irie Dog Park9
Tract 2:
Being 20 acres of land,more or less,out of the M.J. Brittain Survey,Tarrant County,Texas,and
described by metes and bounds as follows:
Beginning at an iron pin 541.7 varas South of the Northwest corner of the M.J. Brittain Survey,
said point being the Southwest corner of a 50 acre tract deeded to Nicholas Dayton by W.T.
Parker and wife on the 29`h day of September, 1908, as recorded in Vol. 285, Page 410, Deed
records of Tarrant County,Texas.-
Thence
exas;Thence South 0 degrees 07 minutes West along the West line of said survey, 1208.2 feet to an
iron pin for corner;
Thence North 88 degrees 48 minutes east,along fence line,726.0 feet to a point for corner;
Thence North 0 degrees 07 minutes Fast 1193.0 feet to a point for corner,said point being in the
South line of said Dayton 50 acre tract;
Thence West along fence line 726.0 feet to the point of beginning,and containing 20 acres,more
or less.
21 CF W OIL AND GAS LEASE Pr4irie Dog ParkO
Page 1 of 2
City of Fort Worth, Texas
Mayor and Council Communication
COUNCIL ACTION: Approved on 5/22/2007
DATE: Tuesday, May 22, 2007
LOG NAME: 30PRAIRIE DOG REFERENCE NO.: **L-14322
SUBJECT:
Approve Acceptance of Lease Agreement with Chesapeake Exploration Limited Partnership for
Natural Gas Drilling Under 39.56 Acres More or Less of City-Owned Properties Located in Tarrant
County, Texas, Known as the Prairie Dog Park
RECOMMENDATION:
It is recommended that the City Council approve the acceptance of a lease agreement for natural gas
drilling under 39.56 acres more or less of City-owned properties located in Tarrant County known as the
Prairie Dog Park to Chesapeake Exploration Limited Partnership for a two-year term.
DISCUSSION:
On June 20, 2006, (M&C L-14201) Fort Worth City Council authorized the conversion of dedicated
parkland known as Prairie Dog Park for the purpose of subsurface drilling and extraction of natural gas.
A request for bid proposals (RFP) was advertised for three consecutive weeks in the Commercial
Recorder, published on August 24, 2006, August 31, 2006 and September 7, 2006.
The following sealed bids for the gas lease were received and opened on September 14, 2006.
Bidder Lease Bonus/Acre Total Lease Bonus % Royal
Chesapeake Exploration Limited
Partnership $10,818.00 $427,960.09 26%
Marshall R. Young Oil Co.
and Quicksilver Resources, Inc. $6,000.00 $237,360.00 25%
Dale Resources, L.L.C. $6,000.00 $237,360.00 25%
Llano Royalty, Ltd. $5,050.00 $199,778.00 25%
The bids received were evaluated by staff and the City's mineral asset management consultant, JPMorgan
Chase. In addition to the lease bonus rate and royalties paid to the City, the bidder's drilling plan,
reputation, financial status, project team and compliance history were also evaluated.
In accordance with the Alternative Assets Agency Account Agreement between JPMorgan Chase and the
City (City Secretary Contract 29698), JPMorgan Chase will serve as the depository of the lease bonus
revenue until the City requests wire transfer of the funds. The net transfer to the City less administrative
and legal fees of$21,398.00 is estimated to be $406,562.00 more or less.
The City has established a Minority Women Business Enterprise (M/WBE) participation goal of 3 percent
on City-owned property of 40 acres or more without an investment goal. On leases of City-owned property
of 700 acres or more, the City has established an option of either a 3 percent M/WBE goal or the inclusion
of an M/WBE investor. This lease is less than 40 acres therefore no M/WBE participation goal is
required.
http://www.cfwnet.org/council_packet/Reports/mc_print.asp 8/1/2007
Page 2 of 2
It is anticipated that the lease bonus and royalty proceeds will be deposited in the City's Park Improvement
Fund to complete the Master Plan for Prairie Dog Park.
The Property is located in COUNCIL DISTRICT 5, Mapsco 92H.
FISCAL INFORMATION/CERTIFICATION:
The Finance Director certifies that the Engineering Department is responsible for the collection of funds due
the City under this agreement.
TO Fund/Account/Centers FROM Fund/Account/Centers
C282 446100 801929990100 $406,562.00
Submitted for City Manager's Office by: Marc A. Ott (8476)
Originating Department Head: A. Douglas Rademaker (6157)
Additional Information Contact: Jean Petr (8367)
http://www.cfwnet.org/council_packet/Reports/mc_print.asp 8/1/2007