Common use of The Economic Costs and Benefits to the State and Other Relevant Factors Clause in Contracts

The Economic Costs and Benefits to the State and Other Relevant Factors. Approval of the Agreement in combination with DNR’s proposed XXX will result in both short term and long term economic benefits to the State. The assessment of the hydrocarbon potential of the subject leases will create jobs in the short term. If BP makes a commercial discovery, the state will earn royalty and tax revenues over the long term life of the field. The primary terms of eight leases in the proposed unit area will expire on March 31, 2001, unless extended by unitization. If the leases expire, the leasehold interest will return to the state. The earliest that DNR could reoffer the land, under the current Five-Year Oil and Gas Lease Sale Schedule, is November 2001. If DNR leased the expired lands in 2001, the state could receive bonus payments and rentals for the primary term of the new leases. However, it could be years before the new lessees would propose exploration of the area and even longer before the state receives royalties and taxes on any commercial production. If after committing to drill the first Slugger Unit well, BP fails to drill the well to completion by May 15, 2003, the entire unit acreage will then be available for reoffer in the North Slope 2003 Areawide Lease Sale, however, the state will have lost the opportunity to receive bonus bids on the acreage in the two previous sales (NS 2001 and NS 2002). Therefore, the Initial XXX imposes a $430,000 charge if BP fails to drill the Slugger Unit #1 well after committing to do so. BP agreed in concept to compensate the state for extending the lease terms through unitization and foregoing the bonus bids and interest the state could have earned if the acreage was offered in the NS 2001 or NS 2002 Areawide lease sales. Imposing this charge protects the state from the loss of revenue due to withholding the acreage from leasing for two years. If BP commits to and does not drill Slugger #2 well by May 15, 2004, then the entire unit will terminate, and BP will pay a charge of $370,000 to compensate the state for extending the lease terms through unitization and foregoing the bonus bids and interest the state could have earned if the acreage was offered in the NS 2001, NS 2002 and NS 2003 Areawide lease sales. If both xxxxx are drilled in the same area, acreage will contract out of the Slugger Unit, and BP will pay a charge to compensate the state for extending the lease terms through unitization and foregoing the bonus bids and interest the state could have earned in the ensuing lease sales. Imposing this charge protects the state from the loss of interest payments due to withholding the acreage from leasing for three years. If BP commits to drill the Slugger Unit #1 and #2 xxxxx, successfully completes them as scheduled by their scheduled dates, and evaluates both Area A and Area B, no financial charge will be due. The working interest owners have 30-days from this date, March 30, 2001, to agree in writing to the terms of this Decision. If they choose not to agree, DNR’s approval of the unit is rescinded and the primary terms of the leases will expire as originally scheduled, making eight of the leases available for lease in the next lease sale. If BP does not continue to explore and develop the unit area in accordance with DNR’s proposed XXX, the unit will terminate and the leasehold interests will return to the state. The potential long-term economic benefit of exploration and earlier development of the Slugger Unit area outweighs the short- term loss of potential bonus payments. The state receives a 12.5% royalty share from leases in the unit area.

The Economic Costs and Benefits to the State and Other Relevant Factors. Approval of the Agreement in combination with DNR’s proposed the Initial XXX will result in both short short-term and long long- term economic benefits to the Statestate. The assessment of the hydrocarbon potential of the subject leases will create jobs in the short short-term. If BP makes the WIOs make a commercial discoverydiscovery and begin development/production from the Cosmopolitan Unit, the state will earn royalty and tax revenues over the long long-term life of the field. The primary terms term of eight two of the state leases in the proposed unit area will expire on March December 31, 2001, unless extended by unitization. If the leases expire, the leasehold interest interests will return to the state. The earliest that DNR could reoffer the land, under the current Five-Year Oil and Gas Lease Sale Schedule, is November 2001May 2002. If DNR leased the expired lands in 20012002, the state could receive bonus payments and rentals for the primary term of the new leases. However, it could be years before the new lessees would propose exploration of the area and even longer before the state receives royalties and taxes on any commercial production. If after committing to drill the first Slugger Unit well, BP fails to drill the well to completion by May 15, 2003, the entire unit acreage will then be available for reoffer in the North Slope 2003 Areawide Lease Sale, however, the state will have lost the opportunity to receive bonus bids on the acreage in the two previous sales (NS 2001 and NS 2002). Therefore, the Initial XXX imposes a $430,000 charge if BP fails to drill the Slugger Unit #1 well after committing to do so. BP agreed in concept to compensate the state for extending the lease terms through unitization and foregoing the bonus bids and interest the state could have earned if the acreage was offered in the NS 2001 or NS 2002 Areawide lease sales. Imposing this charge protects the state from the loss of revenue due to withholding the acreage from leasing for two years. If BP commits to and does not drill Slugger #2 well by May 15, 2004, then the entire unit will terminate, and BP will pay a charge of $370,000 to compensate the state for extending the lease terms through unitization and foregoing the bonus bids and interest the state could have earned if the acreage was offered in the NS 2001, NS 2002 and NS 2003 Areawide lease sales. If both xxxxx are drilled in the same area, acreage will contract out of the Slugger Unit, and BP will pay a charge to compensate the state for extending the lease terms through unitization and foregoing the bonus bids and interest the state could have earned in the ensuing lease sales. Imposing this charge protects the state from the loss of interest payments due to withholding the acreage from leasing for three years. If BP commits to drill the Slugger Unit #1 and #2 xxxxx, successfully completes them as scheduled by their scheduled dates, and evaluates both Area A and Area B, no financial charge will be due. The working interest owners have 30-days from this date, March 30, 2001, to agree in writing to the terms of this Decision. If they choose not to agree, DNR’s approval of the unit is rescinded and the primary terms of the leases will expire as originally scheduled, making eight of the leases available for lease in the next lease sale. If BP does not continue to explore and develop the unit area in accordance with DNR’s proposed XXX, the unit will terminate and the leasehold interests will return to the state. The potential long-term economic benefit of exploration and earlier development of the Slugger Cosmopolitan Unit area outweighs the short- short-term loss of potential bonus payments. The state receives seven State of Alaska leases proposed for the Cosmopolitan Unit are written on a 12.5% royalty share from variety of forms, containing a variety of provisions. Including the leases in the unit would conform and modify the lease contracts to be consistent with the Agreement. Consistent lease provisions allow the WIOs and the state to reduce the administrative burdens of operating and regulating this unit. Conforming the terms of the older leases to the Agreement allows the state to avoid costly and time-consuming re-litigation of some problematic lease provisions in the older forms. Xxxxxxxx and Forest control 90.52% of the unit area. Four separate parties own the remaining 9.48% of the unit area. Under the Cosmopolitan Unit Joint Operating Agreement, any two or more parties with at least 61% working interest can propose and cause the drilling of exploratory xxxxx, and any two or more parties owning at least 80% of the working interest must approve development and production operations. Despite the fact that less than 100% of the lessees are committed to the unit, Xxxxxxxx has demonstrated that a reasonable effort was made to obtain joinder of all proper parties (record owners of oil and gas interests) within the proposed unit. 11 AAC 83.306(3); 11 AAC 83.328. Furthermore, Xxxxxxxx and Forest, representing 90.52% of the working interest ownership in the unit, hold sufficient interest in the unit area to give reasonable effective control of unit operations during the term of the Initial XXX when exploration operations will be undertaken. 11 AAC 83.316(c). As a further condition of approval of the Agreement, the WIOs must demonstrate to the Division’s satisfaction that the WIOs endorsing the unit plan subsequent to the Initial XXX hold sufficient continuing interest in the unit area to give effective control of the operations, either to further explore, or develop and produce the unit. The WIOs have agreed that failure to do so will result in the immediate and automatic termination of the Unit on the expiration date of the Initial XXX. The majority WIOs provided technical data sufficient to define the prospect under consideration, committed their diverse lease interests to the proposed unit and agreed to a XXX that ensures a timely sequence of exploration activities in order to evaluate all the acreage within the proposed unit area. The Initial XXX with the agreed-to terms and conditions advances exploration and evaluation of the prospects in the unit area sooner than would occur under any individual lease exploration effort.

The Economic Costs and Benefits to the State and Other Relevant Factors. Approval of the Agreement in combination with DNR’s proposed the Initial XXX will result in both short short-term and long long-term economic benefits to the Statestate. The assessment of the leases’ hydrocarbon potential of the subject leases will create jobs in the short short-term. If BP the WIO makes a commercial discoverydiscovery and begins development/production from the Whiskey Gulch Unit, the state will earn royalty and tax revenues over the long long-term life of the field. The primary Initial XXX with the agreed-to terms and conditions set out in this decision advances exploration and evaluation of eight the prospects in the expansion area sooner than would occur under any individual lease exploration effort. Seven of the leases in the proposed unit area will expire on March 31November 30, 20012005, unless if they are not extended by unitization. If the leases expire, the leasehold interest will return to the state. The earliest that DNR the Division could reoffer re-offer the land, under the current Five-Year Oil and Gas Lease Sale Schedule, is November 2001February 2007. There is no certainty that anyone would bid on the tracts or pursue exploration of this area. If DNR the Division leased the expired lands tracts again in 20012007, the state could would receive bonus payments and rentals for the primary term of the new leases. However, it could be years before the new lessees would propose exploration of the area area. Under the proposed Agreement and even longer before Initial XXX, the state receives royalties and taxes on any commercial production. If after committing unit operator agreed to make a commitment to drill the first Slugger Whiskey Gulch Unit wellwell by November 1, BP fails to 2006, and drill the well to completion by May 15June 1, 2003, the entire unit acreage will then be available for reoffer in the North Slope 2003 Areawide Lease Sale, however, 2007. This commitment provides the state will have lost with the opportunity to receive bonus bids on royalties from the acreage in the two previous sales (NS 2001 and NS 2002). Therefore, the Initial XXX imposes a $430,000 charge if BP fails to drill the Slugger Unit #1 well after committing to do so. BP agreed in concept to compensate the state for extending the lease terms through unitization and foregoing the bonus bids and interest the state could have earned leases sooner than if the acreage was offered were re-offered. The twelve leases proposed for the Whiskey Gulch Unit are written on a variety of forms, containing a variety of provisions. Including the leases in the NS 2001 or NS 2002 Areawide Whiskey Gulch Unit Agreement would conform and modify the lease salescontracts to be consistent with the Agreement. Imposing this charge protects Consistent lease provisions allow the WIO and the state from to reduce the loss administrative burdens of revenue due operating and regulating this unit. Conforming the terms of the older leases to withholding the acreage from leasing for two years. If BP commits to and does not drill Slugger #2 well by May 15, 2004, then the entire unit will terminate, and BP will pay a charge of $370,000 to compensate Agreement allows the state for extending the to avoid costly and time-consuming re-litigation of some problematic lease terms through unitization and foregoing the bonus bids and interest the state could have earned if the acreage was offered provisions in the NS 2001older forms. During the Agreement negotiations and the discussions for this Application, NS 2002 and NS 2003 Areawide lease sales. If both xxxxx are drilled in the same area, acreage will contract out of the Slugger Unit, and BP will pay a charge to compensate the state parties bargained for extending the lease terms through unitization and foregoing the bonus bids and interest the state could have earned in the ensuing lease sales. Imposing this charge protects the state from the loss of interest payments due to withholding the acreage from leasing for three years. If BP commits to drill the Slugger Unit #1 and #2 xxxxx, successfully completes them as scheduled by their scheduled dates, and evaluates both Area A and Area B, no financial charge will be due. The working interest owners have 30-days from this date, March 30, 2001, to agree in writing amendments to the terms of this Decision. If they choose not to agree, DNR’s approval and conditions of the various lease contracts to harmonize them. The WIO has agreed to lease amendments requested by the Division as a condition of including the leases into the Whiskey Gulch Unit. The agreed-to lease amendments are: 1) Paragraph 36(b) of lease form DOG 200204 (rev. 10/2003) will replace the existing paragraph 36(b) of lease form DOG 9609 (rev. 6/97) and lease form DOG 200004; and 2) No ANS Royalty Settlement Agreement will apply to the Whiskey Gulch Unit leases. The WIO has agreed to provided technical data sufficient to define the prospect under consideration, has committed its lease interests to the proposed unit is rescinded and has agreed to an Initial XXX that ensures a timely sequence of drilling and development activities in order to evaluate and develop all the primary acreage within the proposed unit area. The Initial XXX with the agreed-to terms and conditions set out in this decision advances exploration and evaluation of the leases will expire as originally scheduled, making eight of the leases available for lease prospects in the next lease sale. If BP does not continue to explore and develop the unit area in accordance with DNR’s proposed XXX, the unit will terminate and the leasehold interests will return to the state. The potential long-term economic benefit of sooner than would occur under any individual lease exploration and earlier development of the Slugger Unit area outweighs the short- term loss of potential bonus payments. The state receives a 12.5% royalty share from leases in the unit areaeffort.

The Economic Costs and Benefits to the State and Other Relevant Factors. Approval of the Agreement in combination with DNR’s proposed the Initial XXX will result in both short short- term and long long-term economic benefits to the Statestate. The assessment of the hydrocarbon potential of the subject leases will create jobs in the short short-term. If BP makes the WIOs make a commercial discoverydiscovery and begin development/production from the NE Storms Unit, the state will earn royalty and tax revenues over the long long-term life of the field. The primary Initial XXX with the agreed-to terms and conditions advances exploration and evaluation of eight the prospects in the expansion area sooner than would occur under any individual lease exploration effort. Some of the leases in the proposed unit area will expire on March October 31, 20012005, unless if they are not extended by unitization. If the leases expire, the leasehold interest will return to the state. The earliest that DNR could reoffer re-offer the land, under the current Five-Year Oil and Gas Lease Sale Schedule, is November 2001February 2006. There is no certainty that anyone would bid on the tracts or pursue exploration of this area. If DNR leased the expired lands tracts again in 20012006, the state could would receive bonus payments and rentals for the primary term of the new leases. However, it could be years before the new lessees would propose exploration of the area area. Under the proposed Agreement and even longer before Initial XXX, the state receives royalties and taxes on any commercial production. If after committing unit operator commits to drill the first Slugger Unit well, BP fails Hailstorm Well during the 2005-2006 winter drilling season and make a commitment to drill the Thunderhead Well by September 1, 2007, and drill the well to completion by May 15June 1, 2003, the entire unit acreage will then be available for reoffer in the North Slope 2003 Areawide Lease Sale, however, 2008. These commitments provide the state will have lost with the opportunity to receive bonus bids on royalties from the acreage in the two previous sales (NS 2001 and NS 2002). Therefore, the Initial XXX imposes a $430,000 charge if BP fails to drill the Slugger Unit #1 well after committing to do so. BP agreed in concept to compensate the state for extending the lease terms through unitization and foregoing the bonus bids and interest the state could have earned leases sooner than if the acreage was offered were re-offered. The seven leases proposed for the NE Storms Unit are written on a variety of forms, containing a variety of provisions. Including the leases in the NS 2001 or NS 2002 Areawide NE Storms Unit Agreement would conform and modify the lease salescontracts to be consistent with the Agreement. Imposing this charge protects Consistent lease provisions allow the WIOs and the state from to reduce the loss administrative burdens of revenue due operating and regulating this unit. Conforming the terms of the older leases to withholding the acreage from leasing for two years. If BP commits to and does not drill Slugger #2 well by May 15, 2004, then the entire unit will terminate, and BP will pay a charge of $370,000 to compensate Agreement allows the state for extending the to avoid costly and time-consuming re- litigation of some problematic lease terms through unitization and foregoing the bonus bids and interest the state could have earned if the acreage was offered provisions in the NS 2001older forms. During the Agreement negotiations and the discussions for this Application, NS 2002 and NS 2003 Areawide lease sales. If both xxxxx are drilled in the same area, acreage will contract out of the Slugger Unit, and BP will pay a charge to compensate the state parties bargained for extending the lease terms through unitization and foregoing the bonus bids and interest the state could have earned in the ensuing lease sales. Imposing this charge protects the state from the loss of interest payments due to withholding the acreage from leasing for three years. If BP commits to drill the Slugger Unit #1 and #2 xxxxx, successfully completes them as scheduled by their scheduled dates, and evaluates both Area A and Area B, no financial charge will be due. The working interest owners have 30-days from this date, March 30, 2001, to agree in writing amendments to the terms of this Decision. If they choose not to agree, DNR’s approval and conditions of the various lease contracts to harmonize them. The WIOs have agreed to lease amendments requested by the Division as a condition of including the leases into the NE Storms Unit. The agreed-to lease amendments are: 1) Paragraph 36(b) of lease form DOG 200204 (rev. 10/2003) will replace the existing paragraph 36(b) of lease form DOG 9609 (rev. 6/97); and 2) No ANS Royalty Settlement Agreement will apply to the NE Storms Unit leases. The WIOs have provided technical data sufficient to define the prospect under consideration, have committed their diverse lease interests to the proposed unit is rescinded and have agreed to an Initial XXX that ensures a timely sequence of drilling and development activities in order to evaluate and develop all the primary acreage within the proposed unit area. The Initial XXX with the agreed-to terms and conditions advances exploration and evaluation of the leases will expire as originally scheduled, making eight of the leases available for lease prospects in the next lease sale. If BP does not continue to explore and develop the unit area in accordance with DNR’s proposed XXX, the unit will terminate and the leasehold interests will return to the state. The potential long-term economic benefit of sooner than would occur under any individual lease exploration and earlier development of the Slugger Unit area outweighs the short- term loss of potential bonus payments. The state receives a 12.5% royalty share from leases in the unit areaeffort.