HomeMy WebLinkAboutRES 98-171 RESOLUTION NO. /
BE IT RESOLVED BY THE CITY COUNCIL
OF THE CITY OF BEAUMONT:
THAT the City Manager is hereby authorized to execute a lease agreement with Tesoro
Exploration and Production Company for the oil, gas and mineral rights for approximately
500 acres of land in Tyrell Park. The agreement is substantially in the form attached
hereto as Exhibit "A."
PASSED BY THE CITY COUNCIL of the City of Beaumont this the day of
1998.
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OIL AND GAS LEASE
THE STATE OF TEXAS §
COUNTY OF JEFFERSON §
THIS AGREEMENT made and entered into this the day of , 1998 by and
between the City of Beaumont, hereinafter called Lessor, and Tesoro E&P Company, L.P., by Tesoro
Exploration and Production Company, General Partner, hereinafter called Lessee, whether one or
more,
WITNESSETH:
1. GRANTING CLAUSE: Lessor, for and in consideration of the sum of TEN AND
NO/100 DOLLARS ($10.00) cash in hand paid, and other valuable consideration, receipt of which
is hereby acknowledged, hereby grants, leases and lets exclusively unto Lessee for the purpose of
exploring for and producing oil and gas and other liquid hydrocarbons. Upon the following terms and
conditions, the following described land, to wit:
As fully described in Exhibit "A" attached hereto and
made a part hereof.
Due to the nature of the present use of the surface of the herein leased premises, Lessee
shall make no surface use whatsoever without the prior written consent of Lessor and all other
governmental authorities having jurisdiction hereof.
There is expressly reserved and excepted unto Lessor (except as hereinabove provided) all
other mineral substances (except those expressly covered in this lease) owned by Lessor in, under,
or upon the leased premises, together with the rights of ingress and egress for purposes of
exploration for and production of those mineral substances and forms of energy hereby reserved and
excepted unto Lessor. There is further reserved unto Lessor the right to authorize any and all
geophysical and geological tests on the leased premises reasonably necessary and incident to the
exploration for such mineral substances and forms of energy. Such exploration and production shall
not unreasonably interfere with the operations of the Lessee herein.
For the purpose of calculating payments hereinafter provided (except royalties), the land
described in Exhibit"A"attached hereto is considered to constitute five hundred (500) acres, whether
actually more or less.
2. LEASE TERM: Subject to the other provisions herein contained, this lease shall be
for a term of three (3) years from this date (called primary term) and as long thereafter as oil, gas,
other liquid hydrocarbons are produced in paying quantities (herein defined) from the leased
premises, or this lease is otherwise maintained in effect as hereinafter provided.
EXHIBIT "A"
3. ANNUAL DELAY RENTAL: This lease shall terminate as to all the leased premises
lying outside of a producing well tract or unit one year from this date unless on or before such
anniversary date Lessee shall pay or tender to Lessor at 801 Main Street, Beaumont, Texas,
regardless of changes in ownership of said land or the rentals, the sum of FIFTY DOLLARS AND
NO/100 ($50.00) per acre (herein called rentals) for all the leased premises lying outside of a
designated producing unit well tract or unit, which shall continue this lease in force and effect as to
all such land for a period of twelve (12) months. In like manner and upon like payment or tender
annually, such termination of all the leased premises lying outside of a designated producing unit
well tract may be further deferred for successive periods of twelve (12) months each during the
primary term. The payment or tender of rental under this paragraph and of royalty under on any gas
well from which gas is not being sold or used may be made by the check or draft of Lessee mailed
or delivered to the parties entitled thereto on or before the date of payment.
4. ROYALTY: The royalties to be paid by Lessee to Lessor are:
(1) On oil and condensate or other liquid hydrocarbons produced at the well or at an oil
and gas separator of the conventional type twenty-five percent (25%) of the entire eight-eights
(818%) of that produced and saved from the land described herein, free of any expense to Lessor,
to be, at Lessor's option either(1) delivered into the pipelines, tanks or other receptacles to which
Lessee may connect Lessee's well or wells for the purpose of storage and/or sale of the oil
produced, (2) delivered at the well into tanks or other receptacles provided by Lessor, at Lessor's
own expense, (3) purchased by Lessee or any affiliate of Lessee, at the market price being paid on
the date of purchase, or (4) sold by Lessee (for Lessor's account) to the purchaser of Lessee's oil
if sold by Lessee at the well or on the lease, for the price received by Lessee, or any affiliate of
Lessee, for its own oil produced from said land. In no event shall the price paid be less than the
market value on the date produced or the price received by Lessee, or any affiliate of Lessee, for
its own oil produced from said land. In no event shall the price paid be less than the market value
on the date produced or the price received by Lessee or an affiliate of Lessee, whichever is greater.
Provided, however, if the oil and condensate or other liquid hydrocarbons be run through or
processed in a plant of the type authorized below, the royalty thereon shall be calculated and paid
under the terms and provisions as herein provided.
(ii) Lessee agrees that before any gas containing recoverable liquid hydrocarbons
(except gas run through an absorption plant or other type of plant for the extraction of hydrocarbons
products as hereinafter authorized below) produced from said land is sold or used, it will be run
through an adequate oil and gas separator of the conventional type or other equipment at least as
efficient, so that as much of such liquid hydrocarbons as can be reasonable recovered from the gas
by such means will be recovered, without diminishing the BTU rating below the prevailing minimums
of the industry for the sale of such gas in the area.
(iii) If gas, casinghead gas or the gaseous substances produced from said land is sold
at the well or at a delivery point on or off the leased land, the royalty on same shall be twenty-five
percent (25%) of the market value of the gas at the time it is produced, provided that in no event
shall the price paid be less than twenty-five percent (25%) of the amount realized therefrom by
Lessee or an affiliate of Lessee.
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(iv) If Lessee, or an affiliate of Lessee shall themselves, or by arrangement with others,
run oil, condensate, other liquid hydrocarbons, gas, casinghead gas, or other gaseous substances
produced from said land through a processing absorption or extraction plant, or use such production
from said land in the manufacture, extraction or separation of gasoline, condensate, distillate,
butanes, propanes, chemicals, chemical compounds, or the liquid or gaseous hydrocarbons, or
products manufactured, processed, separated, or extracted therefrom, the royalty therefore shall be,
at the option of Lessor, either twenty-five percent (25%) of the market value of such oil, condensate,
other liquid hydrocarbons, gas, casinghead gas, or other gaseous substances at the well or delivery
point on the leased premises, or twenty-five percent (25%) of the market value of the gross
production of products and components derived therefrom by such processing and manufacturing
at such plant, and Lessor shall be paid on residue gas twenty-five (25%) percent of the market value
at the tail gate of the plant, but in no event less than the proportionate amount realized by Lessee
or an affiliate of Lessee for such residue gas. The market value paid hereunder for gasoline,
condensate, distillate, butanes, propanes, chemicals, chemical compounds or other liquid or
gaseous hydrocarbons, or products manufactured, processed, so separated or extracted, shall be
not less than the average selling price of the respective grades thereof f.o.b. at the plant for the
month in which same is delivered and shall be not less than the average price quoted (if prices are
quoted) in two of the leading periodicals of the industry for similar grades of the products enumerated
above.
(v) The royalty on any gas, casinghead gas or other gaseous substances, produced from
the land herein described and used, sold or delivered in any way other than specifically provided
above shall be twenty-five percent (25%) of the market value at the well at the time it is produced,
except that if the same is run through an oil and gas separator as hereinabove provided, the royalty
shall be twenty-five percent(25%) of the market value at the downstream outlet of such separator,
but not less than the amount realized by the Lessee, or an affiliate of Lessee.
(vi) Should Lessee or an affiliate of Lessee use, sell, deliver, or contract with others for
the use, sale, delivery or processing of gas, oil, or other hydrocarbons from said land for any
purposes or under any condition not specifically covered by this Paragraph 4, then Lessor shall have
the option at any time, and from time to time, to elect as to the royalty thereon to (1) either received
the royalty herein provided for gas, oil or other liquid hydrocarbons produced and saved or sold, or
(2)to be paid twenty-five percent (25%) of the amount realized by Lessee or Lessee's affiliate from
the use, sale, delivery or processing so such gas, oil or other liquid hydrocarbons produced from said
land or received by Lessee or an affiliate of Lessee in exchange for or in lieu of gas, oil or other liquid
hydrocarbons produced from the said land, or any components thereof.
(vii) Lessee shall not have the right to reinject or store oil, gas or other hydrocarbons
produced from said land into any underground reservoir or formation in or under the land described
herein.
(viii) The term "affiliate of Lessee"as herein used, means and includes any partner, joint
venturer, creditor, agent or representative of Lessee; any firm or corporation that, at the time in
question, is a subsidiary or part firm of Lessee; any firm or corporation which has the same parent
firm or corporation as or substantially the same officers or directors as Lessee; any firm or
corporation in which any officers, directors, stockholders, partners, joint venturers, agents or
representatives of Lessee own controlling interest; or any person, firm or corporation which owns
a controlling interest in the capital stock or interest of Lessee. In addition to the foregoing definition
of"affiliate of Lessee,"it is understood and agreed that if any oil gas or other liquid hydrocarbons or
any portion thereof produced from the land described herein is delivered or sold to any person or
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entity and subsequently the same or any portion thereof is redelivered or resold to Lessee, or an
affiliate of Lessee, then within the meaning of this lease, and for the purposes of calculating the
royalty hereunder, the person or entity top which such oil gas or other liquid hydrocarbons are
delivered or sold, shall be regarded as an "affiliate of Lessee." If Lessee or an affiliate of Lessee
receives, purchases or uses all or any portion of the oil, gas or other liquid hydrocarbons which were
produced from the land covered by this lease which was obtained after Lessee, or an affiliate of
Lessee, has sold, transferred or delivered to a party, not an affiliate of Lessee, at such time; or if
Lessee, or an affiliate of Lessee, obtains by purchase in exchange or in a trade out or exchange,
gas, oil or other liquid hydrocarbons of a similar nature to those produced or reasonably suite to the
use to which the production from the land covered hereby could be put, then in that event, the gas,
oil or other liquid hydrocarbons obtained shall be treated for all purposes under this Paragraph as
if same had remained in the hands of Lessee, or an affiliate of Lessee.
(ix) Notwithstanding any thing herein to the contrary contained, it is expressly stipulated
that Lessor, at Lessor's option, and from time to time, upon thirty (30) days prior written notice to
Lessee, may elect to take in kind any of its royalty share of gas, oil or other hydrocarbons produced
hereunder, and to separately sell, use or dispose of same or any portion thereof. In the event Lessor
so elects to take in kind all or a portion of its royalty share of any mineral or production, Lessor shall
install the necessary additional facilities at Lessors's cost and expense. Any contract entered into
by the Lessee for the sale of gas, oil or other liquid hydrocarbons produced shall be subject to and
express that it is subject to Lessors right to take in kind. Lessor may exercise such right to take in
kind from time to time, and also may countermand same from time to time on like written notice.
Lessee shall forthwith furnish Lessor true copies of all contracts entered into by Lessee for the sale
or disposition of any gas, oil or other liquid hydrocarbons produced under this lease. Unless and until
and at all times, except when Lessor is receiving and separately disposing of Lessors royalty portion
of gas, oil and other liquid hydrocarbons, Lessee will be obligated to receive and dispose of same
under the royalty provisions of this lease.
(x) Lessee agrees that division order or other such documents shall not constitute a valid
amendment alteration or addition to the provisions of this lease.
(xi) Notwithstanding any provisions of Paragraph 4 of this lease to the contrary, it is
specifically agreed that no gathering, dehydration, compression, separating, processing, treating and
marketing or other charges of any kind either directly or indirectly to make the gas ready for sale or
use except transportation, shall be assessed against the royalty interest of the Lessor resulting from
the sale or use of minerals produced from the land covered by this lease or from land pooled
therewith. In regard to transportation costs and expenses, Lessee may not, either directly or
indirectly, charge Lessors royalty for any costs or expenses of transportation where such gas is sold
at the wellhead. Where gas is sold off the premises, Lessee may deduct from the gross proceeds
received for the sale of such gas, a reasonable transportation fee or expense so long as the resulting
price for such gas, after deduction for a reasonable transportation fee, is greater than the then
prevailing price being paid for gas at the wellhead in the field. Said prevailing price shall be defined
as that price published in the first issue of each month of"Natural Gas Weekly" under the heading
"Gas Price Report" for "Texas Gulf Coast, On Shore, Spot Wellhead." Upon written request by
Lessor, Lessee shall furnish a quote of the then current "Natural Gas Weekly" publication and any
documents supporting the transportation charges. Lessee will make all reasonable efforts to obtain
the highest prices for gas sales.
(xii) It is expressly provided that Lessee and any affiliate of Lessee shall at all times
exercise due diligence as the fiduciary agent for Lessor in the marketing of all products produced
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under the terms of this lease.
(xiii) Royalties payable on production hereunder shall be due within sixty (60) days after the
sale of such production provided, however, it is agreed that the royalty payment due on the first sale
of a product produced hereunder shall not be due until one hundred twenty (120) days after such
sale. Any royalties not paid as herein provided, including suspended royalties shall bear interest at
the rate of ten percent (10%) per annum until paid.
5. SHUT-IN GAS PROVISION ON GAS: Notwithstanding anything to the contrary
herein, it is agreed that if and while there is a gas well or wells on the leased premises (the term "gas
well" shall be wells capable of producing natural gas which are classified as gas wells by the
governmental authority having jurisdiction) and such well or wells are shut-in, then Lessee shall pay
Lessor monthly an amount equal to FIVE HUNDRED DOLLARS AND NO/100 ($ 500.00) per well.
This amount shall be paid monthly, the first payment being due no later than sixty (60) days after
completion of such shut-in well or wells, and shall continue until such gas is produced and sold.
Provided, however, Lessee may maintain this lease in force and effect solely by the tender of shut-in
payments in accordance with this paragraph for a period not to exceed twenty-four(24) consecutive
months for the first and twelve (12) consecutive months for any subsequent occurrence during the
term of this lease. It is expressly understood and agreed that such shut-in payments shall be
considered a rental and shall not constitute advance royalty.
It is understood that shut-in gas payments are additional delay rental payments and must be
timely made.
6. MINIMUM ROYALTY PAYMENTS: After the end of the primary term, should the total
payments made under this lease for the preceding lease year be less than SEVENTY-FIVE
DOLLARS AND NO/100 ($75.00) per acre for each acre covered by this lease on the first day of
such lease year, then within 60 days after the end of such lease year Lessee shall pay to Lessor the
difference between that amount and the payments actually made. The term "lease year" shall mean
each year commencing on the anniversary date of this lease. Should this minimum royalty payment
not be timely made to Lessor, then it shall be considered that this lease is not producing in paying
quantities. A minimum royalty payment shall be allowed for no longer than two (2) consecutive
years, after that time if the well is not providing production so that the actual royalty due lessor
equals the minimum royalty, then this lease shall terminate.
7. PARTIAL OWNERSHIP OF MINERAL ESTATE: It is agreed that if Lessor owns an
interest in said land less than the entire mineral estate royalties and rentals or other payments herein
to be paid or delivered to Lessor shall be reduced proportionately and all outstanding royalties shall
be deducted from those herein provided.
8. CESSATION OF PRODUCTION AND CONTINUOUS OPERATIONS: After discovery
and production of oil, gas or other liquid hydrocarbons on the leased premises, and after the
expiration of the primary term of this lease, if production thereof should cease from any cause, this
lease shall not terminate if Lessee commences operations for drilling or reworking an existing or new
well within sixty(60)days thereafter. If at the expiration of the primary term Lessee is then engaged
in any drilling or reworking operations thereon or shall have completed a dry hole thereon within sixty
(60) days prior to the end of the primary term, this lease shall remain in force so long as operations
on said well or for the drilling or reworking of any well are prosecuted with no cessation of more than
sixty (60) consecutive days, and if they result in the production of oil gas or other liquid
hydrocarbons, this lease shall remain in force as hereinabove provided so long thereafter as oil, gas
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or other liquid hydrocarbons is produced from said land, or on acreage pooled therewith (if so
provided for in this lease). In the event, and during such period of time, this lease is being continued
in effect under the provisions of this paragraph, Lessee upon written request of Lessor shall render
to Lessor weekly reports of all operations begun, conducted or terminated by lessee upon the leased
premises, including, but not limited to, daily progress information regarding each well until oil, gas
or other liquid hydrocarbons are produced and royalties paid thereon, or until the lease is
surrendered to Lessor. Reworking operations hereunder shall be deemed to be commenced when
the first work is commenced and prosecuted with reasonable diligence and drilling operations on a
new well shall be deemed to be commenced on the date when the well is spudded in with a rig
capable of reaching the permitted depth.
9. PARTIAL SURRENDER: Should any part of this lease be pooled, as provided in
paragraph 22 hereof, with an adjoining tract of land during the primary term of this lease and a well
actually drilled on said unit, then Lessee shall reasonably develop the acreage hereunder. In
complying with this provision, it is agreed that in the event more than 180 days elapses between the
completion of the unit well and the commencement of actual drilling operations on the next unit well
Lessee shall upon written demand of Lessor forthwith execute and place of record in the county of
which such land is located a release of all the premises covered by this lease save and except that
Lessee may retain under the terms hereof the minimum number of acres as provided in paragraph
22. To comply with the requirement of"commencement of actual drilling operations" as used herein
Lessee shall have a drilling rig capable of drilling to the permitted depth on the location of the well
and on a unit designated of record. Shall Lessee fail or refuse to place of record in the proper county
the necessary release of lease as required herein Lessor shall have the right to recover from Lessee
all reasonable and necessary expenses of obtaining and filing such release including attorneys fees
and costs of court.
10. OFFSET OBLIGATIONS: After discovery of oil, gas, or other liquid hydrocarbons
upon the leased premises, in addition to the other provisions of this lease, Lessee agrees to conduct
such further operations as a reasonably prudent operator would do under the same or similar
circumstances in order to reasonably develop the leased premises. In the event a well or wells
producing oil in paying quantities should be brought in on adjoining lands within six hundred sixty
(660)feet from the leased premises, or draining the leased premises, or in the event a well or wells
producing gas in paying quantities should be brought in on adjoining lands within one thousand three
hundred twenty (1,320) feet from the leased premises, or draining the leased premises, Lessee
agrees to commence actual drilling operations on the leased premises of an offset well within one
hundred twenty(120) days from the date production commences from said well or wells and Lessee
receives all necessary permission from the Lessor and other governmental authorities having
jurisdiction over the surface and mineral use of the leased premises. In lieu of drilling such well or
wells, Lessee may, at Lessee's option, pay Lessor, as compensatory royalty, a sum equal to the
royalty which would be payable under this lease on the volume of production from a well or wells
on other lands or covered by this lease had same been produced hereunder. Notwithstanding
anything to the contrary herein contained, Lessee shall not be obligated to drill such well or wells or
to pay such compensatory royalty if Lessee already has a producing well on these leased premises
which may reasonably be held to provide drainage protection.
11. DAMAGES: Lessee will bury and maintain all pipelines a minimum of forty-eight (48)
inches below the surface of the ground. Lessee will pay to Lessor actual damages to timber, to
crops, to improvements and to the surface of the leased lands suffered by Lessor and any tenant
of Lessor caused by or arising out of operations under this lease. Pits and excavations made during
drilling operations will be filled by Lessee and the surface restored, as nearly as reasonably possible,
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to its original condition; and if Lessee shall fail to do so, the cost to Lessor of such filling and
restoration shall be paid by Lessee, Lessee's obligations under this paragraph shall be in addition
to, and shall not in any way modify or diminish its obligations under any other paragraph thereof.
12. SURRENDER: Except as herein otherwise provided, Lessee may, at any time,
execute and deliver to Lessor, a release covering any portion of the above described premises, and
thereby surrender the lease to such portion, and be relieved of all obligations as to the acreage
surrendered; provided, however, nothing herein contained shall be construed to relieve the Lessee
of any obligations or payment already then assumed or incurred.
13. REMOVAL OF LESSEE'S PROPERTY: Lessee shall have the duty, during or within
one hundred twenty(120) days after the expiration of this lease, to remove all property and fixtures
placed by Lessee on the leased premises, including the right to draw and remove casing; Property
and fixtures not removed within such one hundred twenty(120) days period will become the property
of the Lessor, except that if Lessor requires that any of such property be removed. Lessee shall
remove the same property, or in the event Lessee fails to do so, Lessor may remove the same at
the sole cost, risk and expense of Lessee.
14. TERMINATION: Any well or wells shall be abandoned in accordance with all rules
and regulations of the railroad Commission of the state of Texas and any other environmental or
regulatory governmental body having jurisdiction thereof. All pipelines shall be removed and the
surface restored and leveled.
Any pipeline, pits or other excavations shall be dug using the two-step method as understood
in the pipeline business. Upon abandonment top soil shall be placed on the surface to its original
depth.
Any ground contamination caused by Lessee shall be corrected within a reasonable time to
conform with then existing environmental rules and regulations.
15. FORCE MAJEURE: The covenants and agreements herein expressed or implied in
this agreement shall be subject to all valid Federal and State laws, executive orders, rules or
regulations, and this lease shall not be terminated, in whole or in part, nor Lessee held liable in
damages for failure to comply therewith if compliance is prevented by, or it such failure is the result
of any such law, order, rule or regulation. If after the primary term, from such cause, Lessee is
prevented from conducting drilling or reworking operations on, or producing oil or gas from the
leased premises, the time while Lessee is so prevented shall not be counted against Lessee, and
this lease shall be extended for a period of time equal to that during which Lessee is so prevented
from conducting such drilling or reworking operations on, or producing oil or gas from the leased
premises, notwithstanding any other provision thereof. Similarly, when drilling or other operations
are delayed or interrupted by storm, flood, or other acts of God, fire, war, rebellion, insurrection, riot,
strikes, differences with workmen, or failure of carrier to transport or furnish facilities for
transportation, or as a result of some order, requisition, or necessity of the government, the time of
such delay or interruption shall not be counted against Lessee, anything in this lease to the contrary
notwithstanding, and in such event this lease shall be extended for a period of time equal; to that
during which such Lessee is so prevented from conducting drilling or reworking operations on, or
producing oil or gas from such leased premises, notwithstanding any other provision hereof. Lessee
shall within thirty(30) days after receiving notice of any such Federal or State law, executive order,
rule or regulations, act or event contemplated under this section, notify Lessor thereof and advise
Lessor of the effect of such upon this lease. Lessee shall similarly notify Lessor promptly of the
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termination thereof. Provided, however, the provisions of this paragraph shall in no way abridge the
right of Lessor to receive, or relieve Lessee of the obligation to pay, any minimum sums herein
described and provided. Anything to the contrary notwithstanding, this lease shall not be suspended
by reason of this paragraph for longer than one year per occurrence.
16. BREACH OF TERMS: Except as herein otherwise provided, the material breach by
Lessee of any obligation arising hereunder shall not work a forfeiture or a termination of this lease
or cause a termination or reversion of the estate hereby created nor be grounds for cancellation
hereof in whole or in part unless Lessor has first given to Lessee notice in writing specifying the
particulars in which, in the opinion of Lessor, Lessee has failed or beached this lease, and unless
Lessee (if Lessee, in fact, be in default in the particulars specified) shall fail to proceed within thirty
(30) days after receipt of such notice to comply with the obligations of said lease specified in said
notice. If Lessee be of the opinion that it is not in default in the particulars specified, Lessee shall
reply to Lessor in writing within thirty (30) days of the receipt of such notice by Lessor, specifying
how, in the opinion of Lessee, Lessee is not in breach of this lease. If Lessor brings suits to compel
performance of, or to recover for breach of any covenant or condition herein contained, or for
declaratory relief, and prevails therein, Lessee agrees to pay to Lessor reasonable attorney and
consultant fees in addition to the amount of judgment and costs.
17. WELL INFORMATION/INSPECTION: Lessee shall furnish Lessor with true copies
of each application and report made by Lessee to the governmental authority asserting jurisdiction
pertaining to operations on the leased premises or on land pooled therewith simultaneously with
Lessee's filing of each application and report with such governmental authority. Lessee shall
promptly furnish Lessor with final and complete copies of all logs and electrical surveys run in each
well located on the leased premises or on land pooled therewith, showing formations encountered
and the identification of such formations as determined by Lessee or Lessee's geologists or
paleontologists. Lessee shall promptly furnish Lessor with copies of daily drilling reports, core
analyses and paleontological reports when available and all other technical information readily
available with Lessor deems necessary to be informed of the condition and status of all wells drilled,
reworked, recompleted or otherwise operated on the leased premises or on land poled therewith.
Lessor shall have the right, personally or through any agent or representative authorized by lessor,
at Lessor's risk, to have derrick floor, well site and logging truck or trailer privileges during operations
on the leased premises or on land pooled therewith. Upon written request, lessee shall promptly
furnish Lessor with full information on the metering of production and production runs, together with
full information regarding the calculation of all royalties payable under this lease.
18. ASSIGNMENT: The rights of Lessee hereunder may be assigned only with the
written consent of Lessor. The rights of Lessor hereunder may be assigned as to all or any part of
the land or as to any minerals thereunder, and the provisions hereof shall extend to the heirs,
successors and assigns, but no change or division in ownership of the lands, rentals or royalties,
however accomplished, shall operate to enlarge the obligation or diminish the rights of Lessee.
Likewise, no change in ownership of the leasehold rights hereby conveyed, however accomplished,
shall operate to enlarge the obligations or diminish the rights of Lessor hereunder. No sale or
assignment by either party hereto shall be binding on the other party until such other party or an
authorized agent thereof shall be furnished with a certified copy of recorded instrument evidencing
same.
19. LIABILITY FOR DAMAGES: It is agreed that the terms and provisions of this
agreement shall insure to and be binding upon the respective successors, heirs, and assigns of
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Lessor and Lessee. Notwithstanding that this lease may be assigned in whole or in part, it is
understood and agreed that the Lessee, both the original Lessee and such assignees shall
nevertheless be jointly and severally liable to Lessor, their heirs, successors, and assigns, for all
damages to the surface and subsurface of the lands covered hereby, for any and all pollution caused
by operations hereunder, for the non-compliance with all Federal, State or other governmental or
regulatory body's or agency's laws, rules and regulations, either now in effect or hereinafter enacted
or promulgated, and also without limitation by enumeration, any and all other causes of such action
which may be asserted against Lessor, their heirs, successors, and assigns, for acts or omissions
caused by operations hereunder by any Lessee, and in connection with all of these, Lessee and all
such assignees shall be obligated to indemnify and hold harmless the Lessor, their heirs, successors
and assigns.
20. PAYMENTS, NOTICES, ETC.: All payments of monies payable to Lessor under the
terms and provisions hereof may be paid or tendered to Lessor or to the credit of Lessor in that bank
set forth in Paragraph 3 of this lease,which bank and its successors shall continue as the depository
for all monies payable hereunder, regardless of changes in ownership of said land or said minimum
royalties, unless and until Lessor shall execute and deliver to Lessee a recordable instrument
naming and designating another and different bank for such payments or tenders. If such bank (or
any successor bank) should fail, liquidate or be succeeded by another bank, or for any reason fail
or refuse to accept said payments, Lessee shall immediately notify Lessor thereof and shall not be
held in default for failure to make such payment or tender until thirty (30) days after Lessor shall
deliver to Lessee a proper recordable instrument naming another bank to receive such payment or
tender. Any notices, reports, maps, logs, requests or any other communications herein provided to
be made to Lessor by Lessee shall be made to the City Manager or his designee, City of Beaumont
801 Main Street, Beaumont, Texas 77701. Any notices of communications specified in this lease
to be given to Lessee by Lessor be given to
21. SECTION HEADINGS: Paragraph and section headings and titles are for
convenience only, and do not represent interpretation or intent of the substance of the terms and
provisions of this agreement.
22. POOLING: At the expiration of the primary term and after all continuous
development operations have ceased, this lease shall terminate as to all depths 100 feet below the
deepest depth drilled in any unit containing all or part of the above described lands. Lessor reserves
the right of ingress and egress through all formations for the purpose of drilling to and producing oil
or gas from the formations which may revert to lessor and the right to use as much of said surface
as is necessary for the drilling for, production of and storage of oil and gas from such formations.
It is agreed and understood that if Lessee exercises its right to pool the land described
herein for oil or gas production, then Lessee shall include all of the land described herein in the
resulting pooled unit.
It is expressly agreed and understood lessee is hereby granted the right, at its option, to pool
or unitize any land covered by this lease, with any other land covered by this lease, and/or with any
other land, lease, or leases, as to any or all minerals or horizons, so as to establish units, the size
of which shall be limited in the same manner described herein below for limiting producing acreage
retained after the expiration of the primary term. The size of any established unit may be changed
from time to time as required by any governmental ruling or order to conform to the size required by
such governmental order or ruling. There shall be allocated to the land covered by this lease within
- 9 -
each such unit that proportion of the total production of unitized minerals from the unit, after
deducting any production used in lease or unit operations, which the number of surface acres in the
land covered by this lease that is put in the unit bears to the total number of surface acres in the unit.
Lessee shall establish all such units by filing an instrument identifying such unit for record in the
Office Public Records of Real Property in Jefferson County, Texas.
HOWEVER, after the expiration of the primary term, and after the discovery and production
of oil, gas or other liquid hydrocarbons in paying quantities on the leased premises, Lessee shall
reasonably develop the acreage retained hereunder, and in complying with this provision, it is agreed
that in the event more than one hundred eighty (180) days elapse between the completion of one
well and the commencement of actual drilling operations on the next well, Lessee shall upon written
demand of Lessors, forthwith execute and deliver to the Lessors, or place of record in the county in
which said land is located, a release of all the premises covered by this lease, save and except that
Lessee may retain under the terms hereof not more than forty(40) acres surrounding each producing
oil well or oil well then being reworked; not more than one hundred sixty (160) acres surrounding
each producing gas well, shut-in gas well, gas well then being reworked, or the acres included in any
pooled gas unit capable of producing from a depth of less than nine thousand feet (9,000')
subsurface; or not more than three hundred twenty(320) acres surrounding each producing gas well,
shut-in gas well, gas well then being reworked, or the acres included in any pooled gas unit capable
of producing from a depth of nine thousand feet (9,000') or more but less than twelve thousand feet
(12,000) subsurface; or not more than six hundred forty(640) acres surrounding each producing gas
well, shut-in gas well, gas well then being reworked, or the acres included in any pooled gas unit
capable of producing from a depth of twelve thousand feet (12,000) or more subsurface; each such
tract(except the tracts in pooled gas units, if any), to be centered by said well, to be in as nearly a
square form as is reasonably possible, unless otherwise agreed to by Lessors, provided that if at any
time the foregoing arises, the Railroad Commission of Texas or any government authority asserting
jurisdiction has prescribed a spacing pattern for the orderly development of the field or allocates a
producing allowable for a well with acreage content as a factor which is in greater than or less than
the above-described acreage, this lease shall remain in force and effect as to the tract or tracts of
land designated by Lessee in the manner herein provided containing the maximum number of acres
so prescribed or allocated and in effect at the time, such tracts around each such well and in each
pooled gas unit being hereinafter referred to as 'Well tracts.'
23. Lessee shall abandon any well or wells on lands covered by this lease within 120
days after such well ceases to produce or at such time as that part of this lease containing such well
or wells terminates, whichever is the earlier date.
24. Notwithstanding anything to the contrary herein contained, this lease is granted
without warranty of title of any kind whatsoever, expressed or implied. The Lessor's warranty of title
herein is limited to the refund to Lessee of the original per acre bonus paid for each mineral acre on
which title fails. This shall be the only recourse against the Lessor in the event of any failure of title.
25. Wherever the term"Lessor"is used it shall mean the named "Lessor," its successors,
or assigns. Wherever the term "Lessee" is used, it shall mean the named "Lessee," its successors,
heirs, devisees or assigns.
- 10 -
26. Tytex Properties, Ltd., a Texas Limited Partnership, as successor to the W.C. Tyrrell
Trust,joins herein for the sole purpose of evidencing its consent to the execution of this Oil and Gas
Lease covering that certain 500 acres of land in the City of Beaumont, Texas known as the Tyrrell
Park upon the following terms and conditions:
(1) This consent shall apply solely this particular Oil and Gas Lease and shall not affect
or have any application to any other agreement of any kind or character, and nothing herein shall be
construed as a waiver, conveyance, amendment or interpretation of any of the rights, powers,
estates or interests to which the successors of the W.C. Tyrrell Trust may be entitled by virtue of the
original General Warranty Deed dated May 22, 1920 or the Corrected General Warranty Deed dated
December 30, 1926 by which the Tyrrell Park was transferred to the City of Beaumont, Texas.
(ii) The parties hereto agree that the entire proceeds to be derived by the City of
Beaumont, Texas under the terms of this lease, including but not limited to lease bonus, rentals,
royalties, and surface damages, will be specifically dedicated as follows: one-half (%) to the
maintenance, repair, or improvement of the Tyrrell Park, and one-half(Y2) to the maintenance, repair,
or improvement of the Tyrrell Historical Library located in downtown Beaumont, Texas. Such
division of revenues must be in addition to, and not in lieu of, the amounts normally budgeted by the
City of Beaumont, Texas for the maintenance, repair, or improvement of these two facilities; it being
the intent of this paragraph to implement the expenditure of additional funds to these two properties
so that they may be further improved or maintained for the benefit and enjoyment of the citizens of
Beaumont.
(iii) All development of this lease shall be by directional drilling from adjacent tracts or by
pooling with adjacent tracts unless there is a specific written agreement approved by both the City
of Beaumont and Tytex Properties, Ltd.
(iv) By their execution of this Oil and Gas Lease, the City of Beaumont, Texas agrees to
be bound by all of the terms and provisions of this paragraph 26.
- 11 -
Witness our hands on the date first above written.
LESSOR:
CITY OF BEAUMONT
By:
Ray A. Riley, City Manager
LESSEE:
TESORO E&P COMPANY, L.P.
By:
Tesoro Exploration and Production
Company, General Partner
John W. Bissell, Senior Vice President
TYTEX PROPERTIES, LTD.
By:
Royalty Corporation of Beaumont, Inc.,
General Partner
Frank A. Eastman, President
- 12 -
THE STATE OF TEXAS §
COUNTY OF JEFFERSON §
This instrument was acknowledged before me on the day of , 1998,
by Ray A. Riley , City Manager r for the City of Beaumont, acting in said capacity.
My Commission Expires: By:
Notary Public in and for Jefferson County,Texas
By:
Print or Stamp Name of Notary
THE STATE OF TEXAS §
COUNTY OF BEXAR §
This instrument was acknowledged before me on the day of 1998,
by John W. Bissell , Senior Vice President for Tesoro E&P Company, L.P., by Tesoro
Exploration and Production Company, General Partner, acting in said capacity.
My Commission Expires: By:
Notary Public in and for Bexar County, Texas
By:
Print or Stamp Name of Notary
THE STATE OF TEXAS §
COUNTY OF JEFFERSON §
This instrument was acknowledged before me on the day of 1998,
by Frank A. Eastman President for Tytex Properties, Ltd., by Royalty Corporation of
Beaumont, Inc., General Partner, acting in said capacity.
My Commission Expires: By:
Notary Public in and for Jefferson County,Texas
By:
Print or Stamp Name of Notary
- 13 -
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EXHIBIT `A', Page 1 of 3
Area Map
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LEGAL DESCRIPTION
TYRRELL PARK
BEING a portion of the S. Stivers League of land situated in Jefferson County, Texas;
BEGINNING at the southeast corner of the S. Stivers League;
THENCE South 87 degrees 04 minutes West 3,887.55 feet along the south line of the S. Stivers
League to an iron pipe for corner;
THENCE at right angles northwest North 2 degrees 56 minutes West 63 feet to an iron pipe for
corner;
THENCE North 48 degrees 32 minutes East 1,130 feet to an iron pipe for corner;
THENCE North 4 degrees 37 minutes East 7,530 feet to corner;
THENCE North 15 degrees 48 minutes West 2,155 feet to corner;
THENCE North 6 degrees East 1,390 feet to corner;
THENCE North 23 degrees 12 minutes West 542.8 feet to the center of the Fannett Asphalt Highway
which point is marked by a monument which is 30 feet westerly from the center of the Amelia Road;
THENCE north easterly along the center of the Fannett Highway to the center of Hildebrandt's
Bayou;
THENCE in a southeasterly direction following the meanders of the said Bayou to its intersection
with the east line of the S. Stivers League;
THENCE South 5 degrees 26 minutes East along the east line of said S. Stivers League 8,320 feet
to the PLACE OF BEGINNING, containing 500 acres of land, more or less.
EXHIBIT `A', Page 3 of 3
Legal Description