HomeMy WebLinkAboutContract 34400-A1 CITY SECRETARY
CONTRACT NO.
AMENDMENT TO EXHIBIT B
OPERATIONS RESTRICTIONS AGREEMENT FOR SPINKS AIRPORT LEASE
This Amendment to Exhibit B, "Operations Restrictions" dated December 11, 2006, between
the City of Fort Worth ("Lessor"), a home rule municipality located in Tarrant, Denton, Wise and
Parker Counties and Chesapeake Operating, Inc.,("Operator"), attached to and made a part of that
certain Oil and Gas Lease dated December 27, 2005 (the "Agreement") between the Lessor and Four
Sevens Oil Co., Ltd covering the lands described in Exhibit A attached to said Agreement.
This amendment incorporates by reference all terms defined in the existing Agreement and
Exhibits and amends the existing Articles of Exhibit B as follows to add additional provisions to be
made hereto and a part thereof of each Article of Exhibit B:
SECTION 1.
Article I, "General Surface Provisions", is hereby amended to add the following sections to
read as follows:
ARTICLE I
GENERAL SURFACE PROVISIONS
1.12. Drill Site and Access. Operator's operations on the Leased Premises shall be confined
and limited to subsurface drilling and production operations to a specific Operation Site for wells
drilled on the Leased Premises as designated by Lessor and as depicted on the plat attached hereto
and made a part hereof as Exhibit C. No well sites, uses ancillary to the development of minerals or
well access roads may be installed or used by the Operator without the prior written consent of the
Lessor and the submittal of a Site Survey approved by the Lessor.
1.13 Drilling Procedures. Operator shall use drilling methods similar to those used for
drilling wells on the Spinks Airport lease property. No fracture ponds or pits will be allowed on the
Leased Premises. Prior to the construction and installation of temporary water lines, the Operator
must obtain written authorization from the Director of Aviation for the City or his/her designee.
1.14. Well Information, Access and Reports.
(a) Lessor, upon notice to Operator, shall have free access at all times to all wells, tanks,
and other equipment that services wells on the Leased Premises, including drilling wells. Lessor or
Lessor's nominee shall be furnished with and have free access at all times to Operator's books and
records relative to the production and sales volumes of oil, gas or other minerals from wells located
on 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 wells on the Leased Premises, and
Operator agrees to prepare and deliver to Lessor or Lessor's nominee duplicate run or gauge tickets
for all minerals removed from the Leased Premises or as a result from wells located on the Leased
Premises. Operator shall furnish to Lessor daily drilling reports on each well drilled.
1.15. Off-Site Wells, Surface and Subsurface Use and ORRI.
(a) In consideration of the use of the surface of the Leased Premises, Lessor grants to
Operator the right to drill, operate and produce one or more directional or horizontal wells with
surface locations on the Operation Sites as defined in this Exhibit B and depicted on the plat attached
hereto, Exhibit C, to other lands not covered by this lease and not pooled with any lands covered by
this lease, in order to produce or develop minerals not covered by this Lease or lands pooled
therewith ("Off-Site Wells"). In connection therewith, Lessor grants unto Operator, its successors
and assigns, a surface and subsurface easement and right-of-way to provide Operator ingress to and
egress from, and the right to use and occupy, the surface of the Operation Sites for Off-Site Wells
and a non-exclusive subsurface easement for a well bore or well bores to drill across, through and
under the Operation Sites and leased premises. Lessor reserves unto itself and its successors and
assigns the right to utilize, and the right to grant third parties the right to utilize, similar subsurface
easement rights as herein granted to Operator, provided the utilization of any such rights by Lessor
and its successors, assigns and third party grantees shall not interfere with Operator's exercise and
safe operation of its rights as herein provided. Operator's easement and right of way granted herein
shall allow Operator ingress to and egress from the Operation Sites for all surface and subsurface
operations as may be necessary or desirable for the operation and production of te Off-Site Wells
r 4 C6RD
AMENDMENT TO EXHIBIT B—SPINKS AIRPORT CI' RY
Page 1
including, without limitation, drilling, testing, equipping, producing, completing, operating,
deepening, reworking, plugging back, plugging and abandoning, and performing all other associated
surface and subsurface operations.
(b) As to any Off-Site Well, if the Off-Site Well is completed as a producing well, Lessor
shall be entitled to receive an overriding royalty interest(herein"ORRI") from Operator equal to 2.5
percent of eight-eighths (2.5 % of 8/8ths) in and to all production from the wellbore(s) of each Off-
Site Well so drilled and producing and attributable to the oil, gas and/or mineral leases covering the
land included in the proration unit or pooled unit for the Off-Site Well (the "Producing Tract"), the
surface location of which is on the Operation Site(s). The ORRI shall be evidenced by an assignment
in recordable form and shall be effective from and after first production from the applicable Off-Site
Well. The ORRI to be conveyed to Lessor shall be limited to the well bore(s) in which the surface
location is on the Operation Sites and the bottom hole location and/or portion of the production
interval of the directional or horizontal lateral of such well is producing oil, gas or other
hydrocarbons from the Producing Tract and attributable to that portion of the oil, gas or mineral
leases included within the Producing Tract. The assignment of the ORRI to Lessor shall not apply to
any well or wells in which the bottom hole and/or portion of the production interval of the
directional or horizontal lateral of such well is on the Producing Tract but the surface location is on
lands other than the Operations Site or to any tracts of land other than the Producing Tract. Except
for the amount of the ORRI itself, which is specified herein, the amounts attributable to such ORRI
shall be determined, paid, calculated and delivered to Lessor in the same manner, at the same time
and under the same terms and conditions as is provided in this Lease for the determination, payment,
calculation and delivery of royalty to the Lessor under this Lease. Additionally, such ORRI shall be
free of the same costs and expenses that such royalty is free of under this Lease.
(c) If the Oil and Gas Lease terminates as to the Leased Premises, or any portion thereof,
the surface and subsurface easement and right of way granted to Operator in this Paragraph shall,
nevertheless, survive such termination, and Operator shall continue to have the right to use the
Operations Sites and subsurface of the Leased Premises, subject to all the terms in Paragraphs 12
through 17 and 19 through 21of the Oil and Gas Lease, to drill test, equip, produce, complete,
operate, deepen, rework, plug back, plug and abandon, and perform all other associated surface and
subsurface operations as may be necessary or desirable for the operation and production of the Off-
Site Wells, for so long as Operator produces oil or gas from the Off-Site Wells or maintains a lease
on which an Off-Site Well has been drilled by payment of shut-in royalties, operations or as
otherwise provided therein, and Operator shall continue to have the right of ingress and egress over,
under and across the leased premises to the Operation Sites for the above-stated purposes.
(d) Operator shall furnish to Lessor, upon written request, a summary of the pertinent
provisions of any applicable gas purchase contracts or transportation agreements entered into in
connection with any Off-Site Wells. Furthermore, on request of Lessor and without cost to the
Lessor, Operator shall furnish Lessor a copy of the well completion reports. Such information shall
be solely for Lessor's use, and Lessor shall in good faith and in accordance with State law shall
attempt to keep same confidential for twelve(12)months after receipt.
(e) Operator shall advise Lessor in writing of the location of all wells drilled upon the
surface of 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.
SECTION 2.
Article III, "Surface Provisions for Operations", is hereby amended to add the following
language at the end of Section 3.04 and to add a new section, Section 3.16 to read as follows:
ARTICLE III
SURFACE PROVISIONS FOR OPERATIONS
3.04. Operations Sites Appearances. Operator shall implement appropriate erosion control
measures during construction, maintenance and operations of the well site and any pipelines. The
site shall be restored in compliance with any State laws and the City's Gas Drilling Ordinance.
3.16. Use of the Leased Premises. Operator's right to use the Access and Subsurface
Easements shall be non-exclusive. Operator shall in connection with its operations and activities on
AMENDMENT TO EXHIBIT B—SPINKS AIRPORT
Page 2
any Operation Site and access and subsurface easements, accommodate Lessor's development and
use of the remainder of the Leased Premises.
SECTION 3.
Article IV, "General Provisions for Operations", is hereby amended to add the word
"calendar" to the first sentence of Section 4.01, to delete the words "inclement weather" in Section
4.05 and to add notice information to Section 4.06 to read as follows:
4.01. Compliance. In the event that Lessor notifies the Operator in writing that the
Operator is not in compliance with the agreement, Operator shall have ten calendar days after receipt
of said notice to comply with the terms of this agreement.
4.05 Force Majeure. It is expressly understood and agreed by the parties to this Agreement
that if the performance of any obligations hereunder is delayed by reason of war; civil commotion;
acts of God; governmental restrictions, regulations, or interferences; fires; strikes; lockouts, national
disasters; riots; material or labor restrictions; transportation problems; or any other circumstances
which are reasonably beyond the control of the party obligated or permitted under the terms of this
Agreement to do or perform the same, regardless of whether any such circumstance is similar to any
of those enumerated or not, the party so obligated or permitted shall be excused from doing or
performing the same during such period of delay, so that the time period applicable to such design or
construction requirement shall be extended for a period of time equal to the period such party was
delayed.
4.06. Notices. All written notices called for or required by this Agreement shall be addressed
to the following, or such other party or address as either party designates in writing, postage prepaid, or
by hand delivery:
City of Fort Worth:
City of Fort Worth
Attention: Director, Planning and Development Department
1000 Throckmorton
Fort Worth, TX 76102
Chesapeake Operating, Inc.
P.O. Box 18496
Oklahoma City, OK 73154-0496
SECTION 4.
All other provisions of Exhibit B, the Oil and Gas Lease and Exhibits that are not amended
herein shall continue in force and effect.
EXECUTED and effective as of the date of the notarial acknowledgment of the Lessor's execution.
LESSOR: OPERATOR:
CITY OF FORT WORTH CHESAPEAKEO TING, INC.
Bye' ,• By: �b
Assistant City Manager pp�Odao°���� '�, Henry J. Hood, e ' r Vice President—
Land and Legal & General Counsel
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City Secretary ---
Contract Authorization
APPROVED AS TO FORM AND LEGALITY: 416.1 IQ
e Date
By: .�tc,
Assistant City ttorney
rOFFICIAL R1=CORDAMENDMENT TO EXHIBIT B—SPINKS AIRPORT SECRETARYPage 3IC R'fH, TX
ACKNOWLEDGEMENT
STATE OF TEXAS §
COUNTY OF TARRANT §
BEFORE ME, the undersigned authority, a Notary Public in and for the State of
Texas, on this day personally appeared Fernando Costa, known to me to be the person whose name
is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the same for
the purposes and consideration therein expressed, as the act and deed of the CITY OF FORT
WORTH, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this day of
I_ , 2010.
Ju;v^ MY Cni.?h415 cir =1ES L���:^
• _I
'Notary Public, State of Texas
STATE OF OKLAHOMA §
COUNTY OF OKLAHOMA §
BEFORE ME, the undersigned authority, a Notary Public in and for the State of
Texas, on this day personally appeared Henry J. Hood, Senior Vice President — Land and Legal &
General Counsel of CHESAPEAKE OPERATING, INC., known to me to be the person whose
name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the
same for the purposes and consideration therein expressed, as the act and deed of CHESAPEAKE
OPERATING, INC., and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this day of
f► , 2010.
No`ary Public, State of Olftahoma
#08009293 —_
EXP. 09/22/12
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AMENDMENT TO EXHIBIT B—SPINKS AIRPORT
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M&C.Revievy Pagel of 2
Official site of the City of Fort Worth,Texas
CITY COUNCIL AGENDA FORT"
COUNCIL ACTION: Approved on 4/6/2010
DATE: 4/6/2010 REFERENCE NO.: L-14960 LOG NAME: 06SPINKS ORRI
CODE: L TYPE: NON-CONSENT PUBLIC NO
HEARING:
SUBJECT: Authorize the Execution of an Amendment to City Secretary Contract No. 34400 with
Chesapeake Operating, Inc., to Allow for Drilling from Existing Well Surface Locations at
Spinks Airport to Lands or Leases Outside of the Spinks Airport Lease for a 2.5 Percent
Overriding Royalty Interest (COUNCIL DISTRICT 8)
RECOMMENDATION:
It is recommended that the City Council authorize the execution of an amendment to City Secretary
Contract No. 34400 with Chesapeake Operating, Inc., to allow for drilling from existing well surface
locations at Spinks Airport to lands or leases outside of the Spinks Airport Lease for a 2.5 percent
overriding royalty interest.
DISCUSSION:
On December 5, 2005, (M&C C-21228) City Council approved a lease with Four Sevens Oil
Company for natural gas drilling under 822.08 acres known as the Spinks Airport. On June 1, 2006,
Four Sevens Oil Company assigned their interest in the Spinks Airport lease to Chesapeake
Exploration Limited Partnership and the City entered into a separate Operations Restrictions
Agreement, (City Secretary Contract No. 34400) with Chesapeake Operating, Inc., for the use of
surface locations as drill sites on the airport property. The Operations Restrictions Agreement only
allowed use of surface locations as drill sites for extraction of natural gas from properties included
within the boundaries of the Spinks Airport lease and pooled units. This amendment will allow drilling
from the airport drill sites to lands or leases outside the boundaries of the Spinks Airport lease and
pooled units. As compensation, the City will receive a 2.5 percent overriding royalty on gas produced
through wells on airport property from lands or leases not covered by the airport lease or within the
airport pooled units. A similar provision is included in the surface use agreements for the Meacham
Airport and the Village Creek Wastewater Treatment Plant leases.
The revenue from the 2.5 percent overriding royalty interest provision will be distributed according to
the current Financial Management Policy which allocates 50 percent of the revenue to Aviation
Capital Improvement projects and 50 percent to the Fort Worth Permanent Fund —Aviation
Endowment Fund.
The property is located in COUNCIL DISTRICT 8, Mapsco 119 Q, U, Y.
FISCAL INFORMATION/CERTIFICATION:
The Financial Management Services Director certifies that the Planning and Development
Department is responsible for the collection and deposit of any funds due the City under this
agreement.
TO Fund/Account/Centers FROM Fund/Account/Centers
Submitted for City Manager's Office by: Fernando Costa (6122)
Originating Department Head: Susan Alanis (8180)
http://apps.cfwnet.org/council_packet/mc—review.asp?ID=13257&councildate=4/6/2010 04/08/2010
M&GReview Page 2 of 2
Additional Information Contact: Jean Petr (8367)
ATTACHMENTS
Exhibit 1.pdf
http://apps.cfwnet.org/council_packet/mc review.asp?ID=13257&councildate=4/6/2010 04/08/2010