Common use of Reduction and Termination of Reserve Clause in Contracts

Reduction and Termination of Reserve. (a) In the event that the Grantor determines, acting reasonably and in accordance with prudent oil and gas industry practices, that the Reserve contains an amount that is in excess of its reasonably foreseeable requirements, the Grantor may withdraw such amount from the Reserve, and include such amount in Production Revenues for the period during which it is withdrawn. (b) When the term of this Agreement expires pursuant to subsection 7.1(a), the funds in the Reserve shall be used to pay all obligations and liabilities of the Grantor (whether then due or thereafter becoming due) incurred in the business or affairs of the Grantor while otherwise complying with the terms hereof, the Trust Indenture and any other related agreements and when, in the reasonable opinion of the Grantor, all such obligations and liabilities of the Grantor have been paid, the Reserve (including the Reclamation Fund) shall be collapsed and the remainder of the funds in the Reserve, up to an amount equal to ninety-nine percent (99%) of such amount, shall be paid to the Royalty Owner, provided that such payment to the Royalty Owner does not result in any material adverse income tax consequences to the Grantor, the Royalty Owner or the Unitholders, and the balance of the funds in the Reserve, if any, shall be retained by the Grantor.