With respect to operations hereunder, Non-Operators agree to release Operator from any and all losses, damages, injuries, claims and causes of action out of, incident to or resulting directly or indirectly from Operator's interpretation or application of rules, rulings, regulations or orders of the Department of Energy or predecessor or successor agencies to the extent such interpretation or application was made in good faith. Operator shall also have the right to appear and defend or otherwise participate in all legal and administrative proceedings wherein the interest of the Non-Operator's is involved. Non-Consent Penalty:         500% of each Non-consenting Party's share of the cost of newly acquired surface equipment beyond the wellhead connections, plus 100% of the cost of operation of the well commencing with first production. Before 1956, there was no real modeling agreement. In the event a party disputes in good faith the existence of a default on his part that is the subject of a Notice of Default, such party may avoid the imposition of the remedies for such    default contained in this agreement by paying the disputed amount into an account at a bank requiring the signature of both such party and the Operator (or, if the Operator is the party in default, Non-Operator designated by the Non-Operators) in order to release such funds. We will deal more with the specific provisions of the JOA in future contributions. Drilling Well Rate:         $5,000/month                    0'- 6,000', $7,000/month                    6,001' - 10,000', $8,000/month                    greater than 10,001', Producing Well Rate:         $500/month                    0' - 6,000', $700/month                    6,001' - 10,000', $800/month                    greater than 10,001'. The Operator shall at all times consult freely with the other parties concerning the operations being or to be conducted on the Contract Area and shall permit any party hereto to collaborate in any litigation or hearings before any administrative body, state or federal, affecting the Contract Area and/or the production therefrom. Just pay attention to the JOAs, which are worked in a way that is not easily visible. Operator is authorized to deliver the volumes so nominated to the transporting pipeline in accordance with the terms of this Agreement. If a party to the agreement does not respond within 72 hours after the information is received, the issuing party may disburse information to the press of other media at its own discretion. Non-Operators authorize Operator to prepare and submit such documents as may be required to be submitted to the purchaser of any crude oil sold hereunder or to any other person or entity pursuant to the requirements of the "Crude Oil Windfall Profit Tax Act of 1980" as same may be amended from time to time ("Act"), and any valid regulations or rules which may be issued by the Treasury Department from time to time pursuant to said Act. The Party not taking its Full Share of Current production hereby waives any claim related to the marketing of its Gas by the Operator under the conditions described in this paragraph 2.5 other than those occasioned by the Operator's willful misconduct or gross negligence. Any Makeup Gas allocated to such Party's account by the Operator during the month of production shall be determined by multiplying fifty percent (50%) of the Full Shares of Current Production of all Overproduced Parties by a fraction, the numerator of which is the Percentage Interest of such Underproduced Party and the denominator of which is the total of the Percentage Interests of all Underproduced Parties desiring to take Makeup Gas. J.            Non-Consent Exploratory Well. Operator shall act as the representative of all parties hereto in all hearings and proceedings before administrative bodies concerning the Contract Area and, subject to approval by Non-Operators, all costs and expenses incurred by Operator directly or by retention of outside personnel in participation in such hearings or proceedings shall be a proper charge against the joint account; provided, however, that nothing herein contained shall prohibit any of the parties other than Operator from participating in any such hearings or proceedings in his or its behalf and at his or its own cost and expense. Each party hereto agrees to furnish any and all certifications or other information which is required to be furnished by said Act in a timely manner and in sufficient detail to permit compliance with said Act. No charges for Operator's legal staff without consent of non-operator. However, if approval of this operation and subsequent expenditure is not obtained from all parties and the parties owning at least fifty-one percent (51%) in interest in the Contract Area have approved of such operation and expenditure, and the expenditure is less than Fifty Thousand and No/100 Dollars ($50,000.00), the parties who have failed to respond to such proposal or who have responded in the negative shall nevertheless be bound thereby and obligated to pay their proportionate part of such proposed operation as if they had consented to such operation pursuant to the terms hereof. Revised forms followed in 1977, 1982, and 1989. THERE IS NO EXHIBIT "F" TO THIS AGREEMENT, THERE IS NO EXHIBIT "G" TO THIS AGREEMENT, Attached to and made a part of that certain Operating Agreement dated September 1, 2005 by and between ENCANA OIL & GAS (USA) INC., as Operator, and THE EXPLORATION COMPANY, as Non-Operators covering the Northern Lands, STATE OF TEXAS                                        §. (Option No.2) or XV.C. In the event that Operator recommends not making a payment, then it shall advise the other parties hereto of its recommendation 15 days prior to the date on which that payment is payable. Once the selection of all blocks is complete, the parties will cooperate to assign to one another the applicable interests in the Contract Area in a form substantially similar to Exhibit "H" to the Purchase and Sale Agreement to which this Agreement is attached as Exhibit "G-2". The Parties agree to use the cumulative method, as defined in Income Tax Regulation Section I.761-2(d)(4), to report revenue from gas production and sales for federal income tax purposes. B. If at any time there is more than one location proposed for the drilling of a required well, the parties agree that the location proposed for a required well with the shallowest objective formation, which would serve to perpetuate or earn the subject lease or interest, shall take precedence. 1.8         "Operator" shall mean the individual or entity designated under the terms of the Joint Operating Agreement to which this Agreement (Exhibit "E") is attached. A.A.P.L. Nothing herein contained shall grant, or be construed to grant, Operator the right or authority to waive or release any rights, privileges, or obligations which Non-Operators may have under federal or state laws or under rules, regulations or orders promulgated under such laws in reference to oil, gas and minerals operations, including the location, operation, or production of wells, on tracts offsetting or adjacent to the Contract Area. The forfeited interest shall be free of any Excess Burden as described in Article III.D. It will take the rest of your career to understand the nuances of all the provisions and adhesions associated with them. It also seems a bit dodgy not to make your touch-ups easily visible, and you don`t want to look shady. If any party to this agreement proposes to acquire (1) any additional acres covering oil, gas and/or mineral interests or (2) any additional unleased oil, gas or other fee mineral or royalty interests located within the boundaries of the AMI ("Fee Interest"), it shall offer ownership of the interest to be acquired by such party in any additional leases or Fee Interests to the other parties to this agreement in proportion to the percentages of ownership of working interest set forth in Exhibit A herein. In the event of an obligation to drill or rework a well on lands covered by said Leases that cannot be satisfied by a lease maintenance obligation payment, Non-Operator, within forty-five (45) days of the critical date, shall give Operator written notice of the drill or rework obligation adequately identifying the lease and stating whether or not Non-Operator    plans to satisfy the drill or rework obligation as to a depth above the base of the Glen Rose formation as same is defined in Exhibit "A" (its "Shallow Rights") in order to maintain the lease. A. Notwithstanding any other provisions of this Operating Agreement and any rights or remedies or Operator thereunder and in addition thereto, if Participating Party fails to pay any properly documented invoice with twenty (20) days of Participating Party's receipt hereof, Operator, at its option, may send written notice to Participating Party by certified mail of Operator's intention to foreclose pursuant to the terms hereof. and any other provision of this Operating Agreement or its Exhibits the provisions of this Article XV. Development Block means that part of the Contract Area designated by the proposing Party for an Exploratory Well. In addition, the Form 610 describes how the cost and revenue sharing percentages of the parties are to be calculated, how the operators and non-operators will handle title issues, and also covers the potential future acquisition and/or disposition of interests within the contract area. All legal expenses of outside attorneys shall be charged to the joint account. A well or other operation commenced within ninety (90) days prior to the date the lease or leases (or portions thereof) would expire in the absence of such operations and a well or other operation which must be drilled or conducted to earn or maintain a lease or farmout right shall constitute a "required well" or a "required operation". 14001 N. Dallas Parkway, Suite 1000 Although the 1977 JOA was subject to significant revisions, a new revision took place in 1982 and remains widespread throughout the sector. FORM 610 • MODEL FORM OPERATING AGREEMENT • 1982 ARTICLE IV continued 1 S Option No. Within a Development Block. After such notice, said Trustee shall proceed to sell those certain interests of the Participating Party whose interest is being foreclosed in that portion of the Contract Area hereinafter defined, at public auction to the highest bidder for cash, after having given notice of the time and place of sale and in the manner and after the advertisement of such sale as is now required by the statutes of the State of Texas. $50,000.00 limitation on expenditures without consent. Each Non-Operator shall automatically be covered by Operators OEE insurance and shall pay its proportionate share of the cost of such OEE Insurance, unless Non-Operator elects not to be covered by the OEE Insurance by making the appropriate election on the AFE and furnishes Operator with a Certificate of Insurance evidencing such Non-Operator is covered with no less than the minimum amounts set forth above. or under the appropriate state statutes shall also cover and affect the subsequently created interests; therefore, the rights of the parties hereto shall be the same under this Agreement or the appropriate state statutes as if the subsequently created interest had not been created. In making sales of real estate, the sale of a part of the realty would not exhaust the power of sale, and sal;es may be made from time to time until all the property is sold or the obligations paid in full. S.            Should any party sell all or any part of its interest under this Agreement or its rights and interests in the Contract Area, it shall promptly give written notice to other parties, including the name and address of the purchaser. II. If all such Gas is not taken by the Underproduced Parties, the portion not taken shall then be made available to the other Parties in the proportion that their respective interests in the Well bear to the total interest of such Parties. The only exception to the foregoing shall be that in the event of an emergency involving extensive property damage, operations failure, loss of human life, or other clear emergency, Operator is authorized to furnish such minimum strictly factual information as shall be necessary to satisfy the legitimate public interest on the part of the press and duly constituted authorities if time does not permit the obtaining of prior approval by the other party or parties; such party shall thereupon promptly advise the other party or parties of the information so furnished. X. This Agreement (Exhibit "E") shall remain in full force and effect for as long as the Joint Operating Agreement is attached shall remain in force and effect, and thereafter until the Gas accounts between the Parties are settled in full, and shall inure to the benefit of and be binding upon the Parties hereto, and their successors, legal representatives and assigns, if any. 3.1         Effective the first day of any calendar month following at least twenty (20) days prior written notice to the Operator, any Underproduced Party may begin taking Makeup Gas from a Well for a period of not less than one (1) calendar month. ・ｧThe AAPL Form was revised in 1977, 1982, 1989 and 2013 (added Horizontal Drilling). Keep an eye here, or at the AAPL for news of its publication. The Operator may carry such other insurance as he deems prudent and reasonable. In making the sale contemplated herein, the Operator shall be obligated only to obtain such priced and conditions for such sale as are reasonable under the circumstances. 1.11         "Party" and "Parties" shall mean those individuals or entities signatory to the Joint Operating Agreement to which this Agreement (Exhibit "E") is attached, and their respective heirs, successors, transferees and assigns. shall apply only to the drilling of new wells and shall not apply to the reworking, deepening, sidetracking or plugging back of existing wells. The Operating Agreement provides for and each Non-Operator does hereby grant to Operator the right to proceed to foreclose the lien of Operator as against the interest of any Non-Operator by a non-judicial sale under the laws of the State of Texas. In the event a proposed Exploratory Well is not timely commenced per the terms of this Agreement, the effect shall be as if the proposal had not been made and the creation of the applicable Development Block shall have no further force and effect. 610 - 1982 REVISED, Model Form Operating Agreement:         A.A.P.L. O,            Notwithstanding the provisions of Article VI.B. • The American Association of Petroleum (now Professional) Landmen (“AAPL”) sanctioned the drafting of a uniform joint operating agreement (“JOA”) first in 1956, known as the “Form 610.” • Form 610 was revised by AAPL in 1977, 1982 and 1989 The AAPL 610 model agreement is by far the most common enterprise agreement commonly used in the oil and gas industry, so any other proposed joint enterprise agreement should, in my view, be immediately suspect. shall be offered by Operator (or by the Non-Operator if Operator is the defaulting party) to the non-defaulting parties in proportion to their interests,    and the non-defaulting parties electing to contribute their sharers of the defaulted amount. 6.6         During periods when an Overproduced Party took Gas for its own use and had no Gas sales under an Arm's length Agreement, Overproduction will be valued at the weighted average price received simultaneously by all Parties for Gas taken in Arm's Length Agreements during such periods of imbalance. (ii)         the total quantity of gas used in operations, flared, vented or lost. In addition, upon the conclusion of the selection of the various Blocks, this Operating Agreement shall terminate except as to those 640 acre sections upon which the parties have jointly drilled an Exploratory Well or a "Development" well within an establish Development Block which the parties shall jointly own and the parties agree to amend the Contract Area in Exhibit "A" to reflect those lands jointly owned by the parties at such time. 1.13         "Royalty" shall mean payments on production to all owners of royalties, overriding royalties, production payments and similar interests. T.            In the event any lease and the interest covered thereby becomes owned by only one of the parties to this agreement under the terms hereof, any such lease and such interest covered thereby shall thereafter be excluded from the terms of this Agreement. 7)            Proposal to plug and abandon the well. 6)            Proposals to plug back and attempt completion above objective formation in ascending order. The interest in such relinquished leases shall be assigned by the non-participating party to the participating party and such interest shall be free of any subsequently created interests which may have placed thereon by the non-participating party. Failure to timely give written notice shall be conclusively deemed an election not to acquire an interest in the Acquired Property. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989 . 2 Revising the 1989 Form did not complete the horizontal portion of the project. Exploratory Well means    a well proposed to any depth below the stratigraphic equivalent of the base of the Glen Rose formation being a depth if 8,171' as shown on the electric log of the Union Producing Company - E. Halsell #1 (API 42-32301126) located in Maverick County, Texas and which is not located in an existing Development Block. 2)            Proposals to attempt completions, first in the objective formation. Any party that non-consented the Exploratory Well shall have likewise forfeited its selection right in the applicable Development Block. Notwithstanding any provision in this Agreement or any other agreement between the Parties hereto to the contrary, and further notwithstanding any termination or cancellation of this Agreement or such other agreement, for a period of two (2) years after the date that Gas accounts are settled, any Party shall have the right to audit (i) the records of any Overproduced Party as to all matters concerning volumes, Btu content, adjustments and prices (except in the case of volumetric settlement) and disposition of Gas taken from a Well, and (ii) the records of any Underproduced Party as to all matters concerning volumes. Any Non-Operator who elects to provide its own insurance or to be a self-insurer hereunder shall provide Operator with a written notice of such election prior to the commencement of operations and upon request by Operator, a certificate of insurance reflecting adequate coverage. If Operator is the party in default, the Non-Operators shall in addition have the right, by vote of Non-Operators owning a majority in interest in the Contract Area after excluding the voting interest of Operator, to appoint a new Operator effective immediately. Upon default, Operator shall have the power set out in said Operating Agreement to foreclose said lien by a non-judicial sale in compliance with the laws of the State of Texas which affect such sale. Q. The AAPL model forms have become the standard in the United States, and will be the focus of this chapter. It is further agreed that said Trustee or any holder or holders of said obligation or Operator shall have the right to become the purchaser or purchasers at such sale if they are the highest bidder or bidders, in which    event the bid or bids of the purchaser or purchasers, less allowable costs and expenses described above, may be credited upon said indebtedness of said Participating Party. OIL AND GAS LEASES SUBJECT TO THIS OPERATING AGREEMENT: Being the Oil and Gas Leases decribed in Exhibit "G-1" to Purchase and Sale Agreement dated effective September 1, 2005 by and between EnCana Oil & Gas (USA) Inc. and The Exploration Company. As between the Parties, in the event of any conflict between the terms of this Agreement (Exhibit "E") and the terms of any gas sales contract, or in the event of any conflict between the terms of this Agreement (Exhibit "E") and the terms of the Joint Operating Agreement, the terms of this Agreement (Exhibit "E") shall govern. Priority of Article XV. I.         LANDS SUBJECT TO THIS AGREEMENT: Being those lands covered by the Oil and Gas Leases described in Exhibit "G-1" to Purchase and Sale Agreement dated effective September 1, 2005 by and between EnCana Oil & Gas (USA) Inc. and The Exploration Company. It should start. The forms have, generally, been effective in establishing procedures and obligations which have resulted in the drilling of tens of thousands of wells with minimal litigation. Such AMI shall be subject to the parties pre-existing contractual obligations as of September 1, 2005. In the event any governmental authority properly prescribes that Royalty payments be made on any other basis than that described above, each Party to this Agreement shall make Royalty payments accordingly, commencing on the effective date authorized by such governmental authority but the obligation of each party to hold the other parties harmless for Royalty claims shall in all cases continue. is derived fails to pay, when due, its share of expenses chargeable hereunder, the lien and/or other rights granted the other parties hereto under the provisions of Article VII.B. (iii)         each Party's Full Share of the Current Production. 1. Exhibits Included:         A.    Exhibit "A", shall include the following information: Identification of land subject to this agreement, Restrictions, if any, as to depth, formations, or substances, Percentages or fractional interest of parties to this agreement, Oil and gas leases and/or oil and gas interest subject to this agreement, C.         Exhibit "C", Accounting Procedure, E.         Exhibit "E", Gas Balancing Agreement, H.         Exhibit "H", Memorandum of Operating Agreement. The Non-Acquiring Parties shall have twenty (20) days after receipt of such notice within which to elect whether to purchase their proportionate share of the Acquired Property for its pro-rata portion of the same consideration (or the equivalent value thereof) paid by the Acquiring Party for the Acquired Property (the "Acquisition Price"). 2. Notwithstanding anything to the contrary stated herein, the non-consent provisions pertaining to the drilling of any well drilled hereunder shall not be applicable to any well or operation which is necessary in order to perpetuate an expiring or terminating lease or leases or interest therein, nor shall it be applicable to any well or operation which is necessary in order to earn an additional lease or leases or interest therein pursuant to any farmout or other agreement.
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