EXHIBIT 10(m)
UNDERGROUND GAS STORAGE LEASE AND AGREEMENT
(CANADA MOUNTAIN FIELD)
This Underground Gas Storage Lease and Agreement (Canada
Mountain Field) ("Agreement"), made, entered and effective this 9th day of
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March, 1994, by and between EQUITABLE RESOURCES EXPLORATION, a division of
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Equitable Resources Energy Company, a West Virginia corporation, with
offices at Two Executive Park Place, 0000 Xxxx Xxxxx Xxxxx, Xxxxxxxxx,
Xxxxxxxxx 00000 (hereinafter referred to as "Lessor" or "EREX"), and XXXXXX
X. XXXXXX, an individual, 000 Xxxxxxx Xxxxx, Xxxxxxx, Xxxxx 00000
(hereinafter referred to as "Lessee" or "Xxxxxx");
WITNESSETH:
WHEREAS, EREX is the fee owner of the oil and gas rights in
and underlying various tracts of land including, but not limited to the
American Association, Inc. Fee Tract Nos. 34-14, 34-18, 34-21 and 34-22,
situate on the waters of Xxxxxx Creek and Fourmile Creek, Kayjay and
Middlesboro North Quads, Xxxx County, Kentucky; and
WHEREAS, by Shallow Horizon Master Agreement dated November
1, 1971, between Kentucky West Virginia Gas Company ("Kentucky West"),
predecessor to EREX, and Xxxxxx Oil and Gas Corporation ("Xxxxxx"),
predecessor to Xxxxxx, Kentucky West granted to Xxxxxx certain shallow
horizon oil and gas exploration rights on Kentucky West acreage in various
counties in Eastern Kentucky (hereinafter referred to as "Shallow Horizon
Master Agreement," also denominated as Agreement A-432); and
WHEREAS, Section 4.3 of the Shallow Horizon Master Agreement
provides that assignments from Kentucky West to Xxxxxx shall not include any
gas storage rights in the shallow horizons; and
WHEREAS, by Deed and Assignment dated June 14, 1978, and
recorded at Lease Book 25, Page 659 of the records of Xxxx County, Kentucky,
Kentucky West assigned to Xxxxxx certain oil and gas exploration rights in
three thousand (3,000.0) acres in the form of a circle, having at its center
the Xxxxxx Mapco #1 American Association Well (American Association
#34-22-1) (Kentucky Permit No. 30992), having a radius of 6,449.5 feet, and
located at Xxxxxx Coordinates 25-C-70, 10' FSL and 950' FEL, and being part
of the American Association, Inc. Fee
Tract Nos. 34-14, 34-18, 34-21, and 34-22 (hereinafter referred to as the
"Farmout Acreage"); and,
WHEREAS, Xxxxxx drilled a total of five (5) xxxxx on the
Farmout Acreage, including the above-referenced American Association
#34-21-1, and the American Association #34-22-1, the American Association
#34-22-2, the American Association #34-22-3A, and the American Association
#34-18-1A (collectively hereinafter referred to as the "Existing Xxxxx");
and
WHEREAS, by that certain Consent to Assignment dated October
23, 1987, by and between Eastern Kentucky Production Company ("ERPC")
(successor to Kentucky West and predecessor to EREX) and Kaneb Operating
Company, Ltd. ("Kaneb") (successor to Xxxxxx and predecessor to Xxxxxx),
ERPC consented to the assignment by Kaneb to Xxxxxx of various properties
subject to the Shallow Horizon Master Agreement; and
WHEREAS, Xxxxxx has heretofore produced and marketed natural
gas from the Big Lime Formation underlying the Farmout Acreage, and now
desires to store natural gas underground in said Big Lime Formation
(hereinafter referred to as the "Storage Formation"); and
WHEREAS, a dispute arose between Xxxxxx and EREX as to the
ownership of the gas storage rights underlying the Farmout Acreage in the
litigation styled Xxxxxx X. Xxxxxx v. Equitable Resources Energy Company,
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U.S. District Court for the Eastern District of Kentucky, CA No. 92-250, and
appealed to the X.X. 0xx Xxxxxxx Xxxxx xx Xxxxxxx, XX No. 93-6082; and
WHEREAS, EREX and Xxxxxx have determined to settle their
conflicting claims to the gas storage rights underlying the Farmout Acreage
by entering into this Agreement; and
WHEREAS, upon full execution of this Agreement, Xxxxxx has
agreed to withdraw his appeal in the referenced litigation, and the parties
have agreed to execute a Stipulation to Dismiss and any other necessary
documents in order to dismiss the litigation.
NOW, THEREFORE, for and in consideration of the premises and
of the sum of Eighteen Thousand Dollars ($18,000.00), cash in hand paid and
other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Lessor does hereby lease and let exclusively
unto the Lessee the right, use and privilege to inject, store, withdraw and
remove natural gas underground into and from the
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Storage Formation (hereinafter collectively referred to as "Gas Storage
Operations"), in and underlying the Leased Premises (as hereinafter
defined), together with all rights incident thereto and with all necessary
and convenient rights-of-way and easements incident to or required by Lessee
in the conduct thereof, subject however, to the following terms and
conditions:
1. Leased Premises and Extensions. Lessor does hereby lease and let
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unto Lessee for a gas storage project those portions of the fee oil and gas
acreage, and any presently subsisting oil and gas leases with gas storage
provisions, which Lessor owns or controls within the following described
rectangular unit situate on the waters of Xxxxxx Creek and Fourmile Creek,
Kayjay and Middlesboro North Quads, Xxxx County, Kentucky:
Being in the form of a rectangle, and beginning at dry hole No.
F-2646 (no Kentucky Permit, Xxxxxx Coordinates 5-B-70, 800' FSL, 1000' FWL)
near the southwest corner of the rectangular unit; thence west using the
astronomic north meridian to the intersection of a line running due south of
a point 2,000 feet xxxx xx Xxxx Xx. X-00000 (American Association #34-22-2,
XX-0000, Xxxxxxxx Permit No. 30991, Xxxxxx Coordinates 1-B-69, 1400' FNL, 5'
FEL) as located on the ground; thence running north through said
aforementioned point 2,000 feet west of said Well No. F-17862 to the
intersection of said line with a line running west from a point 2,000 feet
north of Well No. F-12635 (Xxxxxx X. Cannes #2, Kentucky Permit No. 44100,
Xxxxxx Coordinates 17-C-70, 2000 FSL, 700' FWL.); thence east through said
point 2,000 feet north of said Well No. F-12635 to the intersection of this
line with a line running north from a point 2,000 feet east of Well No.
F-12520 (Xxxxxx X. Cannes #1, Kentucky Permit No. 40019, Xxxxxx Coordinates
17-C-70, 10' FSL, 2150' FEL); thence south through said point 2,000 feet
east of said Well No. F-12520 to the intersection of said line with a line
running due east of Well No. F-2646; thence west to dry hole No. F-2646, the
point of beginning.
The rectangular unit herein described contains 4,212.00 acres, more
or less, in which Lessor does hereby lease and let unto Lessee approximately
3,128.00 acres, more or less, which leased acreage .has been planimetered
and which is more particularly set forth and described as the cross-hatched
area on Exhibit "A" (Map of Leased Premises) , attached hereto and by this
reference made a part hereof (hereinafter referred to as the "Leased
Premises").
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It is understood that as the exact boundaries of the proposed gas
storage project are not determined at this time, that Lessor agrees, upon
the written request of Lessee, to lease additional gas storage rights it
owns or controls upon fee or lease acreage within 2,000 feet of any future
drilled xxxxx by Lessee that may prove to be necessary to identify and
protect Lessee's gas storage project. The parties agree that three thousand
one hundred twenty eight (3,128.0) acres shall be used for purposes of
rental and storage payments (as hereinafter defined), which acreage figure
may be amended from time to time as required, and which shall be set forth
as a written Amendment to this Agreement. However, the acreage figure for
rental and storage payments shall never be less than three thousand one
hundred twenty eight (3,128.0) acres. It is understood and agreed that
Lessee shall not request any extension of the Leased Premises after five (5)
years from the effective date hereof.
2. Primary Term and Extension of Primary Term due to Governmental
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Delay: The primary term of this Agreement is three (3) years from the date
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hereof, and as long thereafter as the Leased Premises are operated by Lessee
for Gas Storage Operations.
It is understood and agreed that the Primary Term may be extended
for successive periods of one (1) year each by Lessor upon the written
request of Lessee upon demonstration by Lessee of a governmental delay due
to Federal Energy Regulatory Commission ("FERC") involvement, defined as a
failure to issue a required certificate-of public convenience and necessity
or other necessary authorization. Lessee agrees to diligently pursue the
needed permits and certificates for this project. It is understood that any
extension for FERC governmental delay shall not exceed two (2) years, for a
total primary term of five (5) years. Xxxxxx shall give notice to EREX if
said FERC governmental delay occurs, and shall provide EREX with
documentation to evidence any said governmental delay.
3. Delay Rentals and Storage Rentals: Commencing in the second year
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of the Primary Term, Lessee shall pay Lessor Delay Rentals at the rate of
Two Dollars ($2.00) per acre per annum based on three thousand one hundred
twenty eight (3,128.0) acres, payable annually in advance. When Lessee
commences Gas Storage Operations (as hereinafter defined), whether or not
such event occurs before the end of the Primary Term, Lessee shall pay
Lessor Storage Rentals at the rate of Four Dollars ($4.00) per acre per
annum based on three thousand one hundred twenty eight (3,128.0 acres
payable annually in advance.
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Storage Rentals shall be paid at the aforesaid rate for each succeeding year
that Lessee operates the Leased Premises for Gas Storage Operations. All
payments provided for by this Agreement shall be made by check payable to
Lessor and mailed directly to Lessor at the address shown in Paragraph 15
below. Such Delay Rental and Storage Rental payments shall be increased upon
enlargement of the gas storage project as required pursuant to Paragraph 1
hereinabove.
4. Commencement of Gas Storage Operations: Lessee shall be deemed
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to have commenced Gas Storage Operations when Lessee completes the
following: (1) a certificate or finding from the Kentucky Department of
Mines and Minerals, Division of Oil and Gas, or its successor agency
("Department") pursuant to 805 KAR 1:080, Gas Storage Reservoir; Drilling,
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Plugging In Vicinity (or any successor or equivalent regulation)
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(hereinafter referred to as "Kentucky Gas Storage Regulation") that Lessee
has established a Gas Storage Reservoir, and (2) any other required state or
federal permits or certificates, and (3) Lessee commences in good faith to
inject gas into the Storage Formation under the Leased Premises. Xxxxxx
shall give written notice to EREX when each of the aforesaid events occurs.
5. Payments Due at Commencement of Gas Storage Operations: At the
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time Gas Storage Operations are commenced, Lessee shall pay Lessor as
settlement for the royalty on all recoverable gas from the Existing Xxxxx on
the Leased Premises an amount equal to the difference between Seventy Five
Thousand Dollars ($75,000.00) and the sum of any royalty payments made for
gas produced between January 1, 1994, and the commencement of Gas Storage
Operations. As additional consideration, Lessee will pay Lessor at the time
Gas Storage Operations are commenced the sum One Hundred Sixty Five Thousand
Dollars ($165,000.00).
6. Payments Due Twenty Four (24) Months After Commencement of Gas
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Storage Operations: Twenty four (24) months after the commencement of Gas
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Storage Operations, Lessee shall pay Lessor the sum of Two Hundred Fifty
Thousand Dollars ($250,000.00), or all gas storage=rights shall cease and
revert automatically to Lessor, and this Agreement shall terminate and be of
no further force and effect.
7. Lessee's Gas Storage Rights: The rights herein granted to Lessee
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shall, without limitation, include the following:
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a) The right to utilize Lessee's Existing Xxxxx, to drill new
injection xxxxx and withdrawal xxxxx, and to inject natural gas from any
source or supply of Lessee into the Storage Formation underlying the Leased
Premises;
b) The right to store such injected natural gas in the Storage
Formation;
c) The right to withdraw and remove natural gas from the Storage
Formation and deliver the same for transport;
d) All natural gas injected, stored, withdrawn and/or removed into
and from the Storage Formation underlying the Leased Premises shall be
considered personal property, and shall remain personal property while in
storage and shall be personal property when withdrawn;
e) Subject to compliance with Paragraph 5 hereinabove, Lessee shall
have the right to commingle its stored natural gas with the native gas;
f) All xxxxx drilled and operated by Lessee shall be in conformity
with all applicable state and federal laws, rules and regulations, including
the Department's Kentucky Gas Storage Regulation.
Lessor agrees not to unreasonably object to the Department as to
any injection and/or withdrawal xxxxx proposed by Lessee if such xxxxx are
in conformity with the Kentucky Gas Storage Regulation and this Agreement.
g) To the extent Lessor is able to do so, Lessor grants to Lessee
such rights-of-way and easements over, in, upon and under the Leased
Premises as are necessary, expedient, convenient and customarily required in
the development, construction and operation of an underground gas storage
reservoir, together with all such rights reasonably necessary for the full
and proper enjoyment of all rights herein granted.
h) Upon termination of this Agreement, Lessee shall have a period
of one hundred eighty (180) days within which time to remove all equipment
and personal property from the Leased Premises.
i) Lessee shall have the obligation to plug and abandon all of
Lessee's xxxxx now or hereafter existing on the Leased Premises in
conformity with all applicable state and federal laws, rules and
regulations. This provision shall survive any termination of the Agreement.
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j) Upon termination of Lessee's Gas Storage Operations, all rights
of Lessee to gas storage underlying the Leased Premises shall cease, and
shall revert automatically to Lessor.
8. Lessee's Indemnification and Hold Harmless: Lessee covenants
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with Lessor that Lessee shall perform all Gas Storage Operations in a good
and workmanlike manner. Lessee agrees to assume liability for and shall
defend, indemnify and hold harmless Lessor from and against any and all
claims, demands or actions for all damages, liabilities, demands, injuries,
or costs of any nature whatsoever, including attorneys' fees, to persons or
real or personal property caused by Lessee's employees, agents, or
contractors, or resulting from Lessee's Gas Storage Operations, whether
negligent or not, and whether such damages or injuries to persons or
property be suffered by Lessor, its employees, agents, or contractors, or by
third parties. Furthermore, Lessee covenants to obtain Comprehensive General
Liability Insurance, and such other insurance coverages as required, and to
provide Lessor with certificates or evidence of same. Lessee further agrees
to defend, indemnify and hold harmless Lessor for any ad valorem property or
other taxes assessed against Lessor as a result of Lessee's Gas Storage
Operations.
9. Reimbursement for Title Failure as to Gas Storage Rights: Lessor
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does not warrant title to the gas storage rights underlying the Leased
Premises, either express or implied. However, Lessor agrees to reimburse
Lessee for the One Hundred Sixty Five Thousand Dollars ($165,000.00) under
Paragraph 5, and the Two Hundred Fifty Thousand Dollars ($250,000.00) under
Paragraph 6, should Lessor's title fail as to the gas storage rights
underlying the Leased Premises during the first five (5) years of the term
of the Agreement. The filing of any action as to the title to gas storage
rights within the first five (5) years of~ the term of this Agreement shall
preserve Lessee's right to seek reimbursement, subject to a final legal
determination of ownership in such action. Otherwise, no reimbursement shall
occur after the first five (5) years of the term of the Agreement. Any
reimbursement shall be on a prorata basis for the acreage which may fail as
to gas storage rights. It is understood and agreed that reimbursement shall
forever be the exclusive remedy for Lessee and that Lessor shall not be
liable for any consequential damages or any other losses or damages.
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10. Lessor's Rights to Drill and Operate: Lessor retains its
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existing rights to the deep horizons underlying the Leased Premises as
provided for in the Shallow Horizon Master Agreement.
Lessor hereby expressly reserves the perpetual right and easement
to drill xxxxx through the Big Lime Formation and the Ohio Shale Formation,
which reservation shall be a covenant running with the land. Lessor shall
notify Lessee before the commencement of drilling any xxxxx through the Big
Lime or Ohio Shale formations, and shall take all reasonable precautions and
care to protect the Storage Formation from blowout or loss of gas during the
drilling of any such xxxxx. Upon completion of any such drilling, such xxxxx
shall be properly sealed between casing and formations by cementing or by
such other means as may be required by applicable law, to prevent loss of
gas or reservoir fluids or the encroachment of water into the Storage
Formation.
Lessor shall be liable to Lessee for any damage or loss to the
Storage Formation caused by Lessor's drilling, completion, production, or
well stimulation operations. Lessor agrees to defend, indemnify and hold
harmless Lessee for any claims, demands or actions for all damages,
liabilities, demands, injuries and costs of any nature whatsoever, including
attorneys' fees, to persons or real or personal property caused by Lessor's
employees, agents, or contractors resulting from Lessor's operations through
the Storage Formation, whether negligent or not, and-whether such damages or
injuries to persons or property be suffered by Lessee, its employees,
agents, or contractors, or by third parties.
Lessor shall permit Lessee, or its duly authorized employees or
agents, at Lessee's sole risk and expense, to have access to the xxxxxxx
floor of all xxxxx which penetrate the Storage Formation for the purpose of
observing and inspecting drilling operations insofar as they relate to the
safety of Lessee's Gas Storage Operations and the integrity of the Storage
Formation.
Any xxxxx drilled by Lessor through the Storage Formation shall be
operated by Lessor in such a manner as to protect the integrity of the
Storage Formation and to prevent the loss of gas therefrom. All xxxxx
drilled and operated by Lessor shall be in conformity with all applicable
state and federal laws, rules and regulations, including the Kentucky Gas
Storage Regulation.
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Lessee agrees not to unreasonably object to the Department as to
the drilling of xxxxx proposed by Lessor if such xxxxx are in conformity
with the referenced Kentucky Gas Storage Regulation.
11. Lessee's Rights to Drill: The parties acknowledge that,
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pursuant to the Shallow Horizon Master Agreement, Lessee has the right to
drill and operate the Big Lime Formation and the Ohio Shale Formation
underlying the Leased Premises.
Upon termination of Lessee's Gas Storage Operations, all rights of
Lessee to the Big Lime Storage Formation shall cease, and shall revert
automatically to Lessor. In addition, Lessee hereby agrees that if drilling
operations are not commenced and production in paying quantities obtained
from the Ohio Shale Formation within one (1) year from the cessation of Gas
Storage Operations, then Lessee's rights to the Ohio Shale Formation shall
also cease, and shall revert automatically to Lessor.
Lessee agrees to provide Lessor with driller's logs and electric
logs for all new xxxxx drilled by Lessee on the Leased Premises, including
gamma ray-density neutron logs from the surface to the total depth of said
xxxxx.
12. Assignments: Lessee may not assign, transfer or convey, either
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in whole or in part, any rights or obligations under this Agreement, or
Lessee's leasehold ownership or interest in the Gas Storage Operations
underlying the Leased Premises without the prior written consent of Lessor.
Lessor's consent to assignment shall not be unreasonably withheld.
13. Default: In the event of default by either party under any of
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the provisions of this Agreement, including without limitation the payment
of rental, it is agreed that the other party shall give written notification
to the defaulting party of such default and shall grant to such party a
period of thirty (30) days following written notification within which time
to remedy said default and continue this Agreement in full force and effect.
Should the defaulting party after receipt of the notice above required, fail
for any reason to remedy such default, then, and in such event, this
Agreement shall terminate and be of no further force and effect.
14. Reassignment: Lessee may reassign all, but not portions, of the
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Leased Premises by a formal Assignment executed by Lessee and in recordable
form delivered to Lessor, unless otherwise agreed to by the parties.
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15. Notices: Any notices herein provided shall be deemed sufficient
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as to delivery if given in writing, deposited in the United States mails
registered, return receipt requested, or by facsimile, addressed to the
other party hereto as follows:
Lessor: Equitable Resources Exploration,
a division of Equitable Resources Energy Company
Two Executive Park Place
0000 Xxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
615/224-3800
Fax: 615/000-0000
(ATTN: Xxxxx X. Xxxxxxx, Vice President -
Engineering and Operations)
Lessee: Xxxxxx X. Xxxxxx
000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
713/461-9886
Fax: 713/000-0000
Either Lessor or Lessee may change any address for notices by a
writing sent to the other party's address, by certified mail.
16. Recording of Memorandum of Lease and Agreement: It is
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understood and agreed that a recording of this Agreement shall only be by a
Memorandum of Lease and Agreement, the terms of which shall be mutually
agreed upon by the parties.
17. Heirs, Successors and Assigns: This Agreement and all the terms
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and provisions hereof, shall extend to and be binding upon the heirs,
assigns, executors, administrators, and successors of the parties hereto.
18. Applicable Law: This Agreement and all the terms and provisions
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hereof shall be construed under the applicable laws of the Commonwealth of
Kentucky.
IN WITNESS WHEREOF, the parties have executed this Agreement by
their duly authorized officers and representatives as of the date first
hereinabove written.
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LESSOR:
ATTEST: EQUITABLE RESOURCES EXPLORATION,
a division of Equitable Resources
Energy Company
By: /s/ Xxxx X. Xxxxxxxx By: /s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
Its: Assistant Secretary Its: Vice-President - Engineering
and Operations
LESSEE:
WITNESS:
XXXXXX X. XXXXXX
/s/ Xxxxxx X. Xxxxxx
-----------------------------------
/s/ Xxxxxx X. Xxxxxxxx Xxxxxx X. Xxxxxx
--------------------------
STATE OF TENNESSEE)
COUNTY OF XXXXXXXX)
I, Xxxxxxxx Xxxxxxxx, a Notary Public in and for said County and
State, do hereby certify that the foregoing Underground Gas Storage Lease
and Agreement (Canada Mountain Field) was this day produced to me in said
County and State aforesaid and duly acknowledged before me by Xxxxx X.
Xxxxxxx known to me to be the Vice President - Engineering and Operations of
Equitable Resources Exploration, a division of Equitable Resources Energy
Company, to be the free act and deed of himself as President thereof.
Given under my hand this 9th day of March, 1994.
My commission expires: April 8, 1995.
/s/ Xxxxxxxx Xxxxxxxx
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Notary Public
** [Map of area appears
following this page.]
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STATE OF TEXAS
COUNTY OF
I, Xxxxx Xxxxxxx, a Notary Public in and for said County and State, do
hereby certify that the foregoing Underground Gas Storage Lease and
Agreement (Canada Mountain Field) was this day produced to me in said County
and State aforesaid and duly acknowledged before me by Xxxxxx X. Xxxxxx to
be the free act and deed of himself.
Given under my hand this 9th day of March, 1994
My commission expires: 8/9/97
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/s/ Xxxxx Xxxxxxx
------------------------
Notary Public
THIS INSTRUMENT PREPARED BY:
/S/ Xxxxxxxx X. Xxxxxxx, Xx.
--------------------------------
Xxxxxxxx X. Xxxxxxx, Xx.
Xxxxxxx and Xxxxxxx
000 Xxxxxx Xxxxxxxxx
X.X. Xxx 00
Xxxxxxxxx, Xxxxxxxx 00000
502/827-5635
/s/ Xxxx X. Xxxxxxxx
--------------------------------
Xxxx X. Xxxxxxxx
Equitable Resources Exploration,
a division of Equitable Resources Energy Company
0000 Xxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
615/224-3809
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AMENDMENT NO. 1 AND
NOVATION TO
UNDERGROUND GAS STORAGE LEASE AND AGREEMENT
(Canada Mountain Field)
This AMENDMENT NO. 1 AND NOVATION TO UNDERGROUND GAS STORAGE
LEASE and Agreement (Canada Mountain Field) ("Amendment") is made and
entered into this 22nd day of March, 1995, and effective the 9th day of
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March, 1995 ("Effective Date"), by and between EQUITABLE RESOURCES
EXPLORATION, a division of Equitable Resources Energy Company, a West
Virginia corporation, with offices at Two Executive Park Place, 0000 Xxxx
Xxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxx 00000 (hereinafter referred to as "Lessor"
or "EREX"); Xxxxxx X. Xxxxxx, an individual, 000 Xxxxxxx Xxxxx, Xxxxxxx,
Xxxxx 00000 (hereinafter referred to as "Xxxxxx"); and DELTA NATURAL GAS
COMPANY, INC., a Kentucky corporation, with offices at 0000 Xxxxxxxxx Xxxx,
Xxxxxxxxxx, Xxxxxxxx 00000 (hereinafter referred to as "Lessee" or "Delta").
WITNESSETH:
WHEREAS, on Xxxxx 0, 0000, XXXX and Xxxxxx entered into an
Underground Gas Storage Lease and Agreement (Canada Mountain Field)
(hereinafter "Agreement"), whereby EREX did lease and let exclusively unto
Xxxxxx the Big Lime Formation in and underlying certain described Leased
Premises for a gas storage project situate on the waters of Xxxxxx Creek and
Fourmile Creek, Kayjay and Middlesboro North Quads, Xxxx County, Kentucky;
and
WHEREAS, a Memorandum of Underground Gas Storage Lease and
Agreement (Canada Mountain Field) was recorded March 10; 1995 at Lease Book
40, Page 580, of the records of Xxxx County, Kentucky, incorporating by
reference the terms and provisions of the Agreement and referencing the
Agreement for the full particulars thereof; and
WHEREAS, by Letter dated Xxxxx 0, 0000, Xxxxxx advised EREX
that Xxxxxx and Delta have executed a Purchase and Sale Agreement dated
March 1, 1995, providing for the acquisition by Delta of all of Xxxxxx'x
interests in the Underground Gas Storage Lease and Agreement, subject to the
approval of the Kentucky Public Service Commission and various other
leasehold and title conditions; and
WHEREAS, by Letter of Xxxxx 0, 0000, Xxxxxx requested EREX,
in order to satisfy various conditions of the Purchase
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and Sale Agreement with Delta, to amend the Underground Gas Storage Lease
and Agreement as follows:(1) amend the definition of the Storage Formation;
(2) add four EREX Oil and Gas Leases to the Leased Premises; (3) provide the
written consent required for an assignment; and (4) substitute Delta as
Lessee in place of Xxxxxx, and discharge Xxxxxx as a party to the Agreement;
and
WHEREAS, EREX is willing to make the requested amendments,
provide--the written consent for the assignment from Xxxxxx to Delta,
substitute Delta as Lessee in place of Xxxxxx, and discharge Xxxxxx as a
party to the Agreement; and
WHEREAS, Delta is agreeable to the requested amendments, is
willing to be substituted in place of Xxxxxx as Lessee to the Agreement,
agrees to the discharge of Xxxxxx as Lessee, and agrees to assume all the
rights, duties, obligations and liabilities of the Lessee under the
Agreement.
NOW, THEREFORE, for and in consideration of the terms,
provisions and premises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties do hereby mutually agree as follows:
1. Storage Formation
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The definition of Storage Formation, as contained in the second
Whereas paragraph on Page 2 of the Agreement, and for all purposes
thereunder, is hereby deleted and substituted with the following:
The Storage Formation is defined as the Geologic Section from the
Top of the New Albany Shale back to and including 200 feet above the Top of
the Xxxxxx Limestone.
2. Leased Premises
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The Leased Premises, as defined in Paragraph No. 1 of the
Agreement, is amended to include, as of the Effective Date, the following
four (4) EREX Oil and Gas Leases, as to the gas storage provisions contained
therein, and shall be subject to all other terms and provisions of the
Agreement:
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a. Oil and Gas Lease dated October 15, 1992 from Xxxxxxx
X. Xxxxx, single, Lessor, to EREX, Lessee, containing 69.0
Acres, more or less, for a seven (7) year term from
November 20, 1992 and recorded at Lease Book 39, Page 677
of the records of Xxxx County, Kentucky (EREX Lease No.
241416L).
b. Oil and Gas Lease dated September 2, 1992 from Xxxxx
Xxxxx, widow, et al., Lessor, to EREX, Lessee, containing
84.0 Acres, more or less, for a seven (7) year term from
November 22, 1992, and recorded at Lease Book 39, Page 665
of the records of Xxxx County, Kentucky (EREX Lease No.
241458L).
c(1). Oil and Gas Lease dated November 19, 1992 from Xxxxx
Xxxx Xxxxx, Guardian, et al., Lessor, to EREX, Lessee,
containing 86.0 Acres, more or less, for a seven (7) year
term from December 6, 1992, and recorded at Lease Book 39,
Page 741, of the records of Xxxx County, Kentucky (EREX
Lease No. 241389L).
c(2). Oil and Gas Lease dated January 11, 1993 from Xxxxx
Xxxx Xxxxx, et ux., Lessor, to EREX, Lessee, containing
86.0 acres, more or less, for a seven (7) year term from
December 6, 1992, and recorded at Lease Book 39, Page 800,
of the records of Xxxx County, Kentucky (EREX Lease No.
000000X00) (hereinafter collectively "Oil and Gas
Leases").
The four (4) Oil and Gas Leases contain a total of 239.0
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gross leasehold acres, and 196.0 net leasehold acres,
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which are hereby added to the Leased Premises for all
purposes contained in the Agreement, and are more
particularly set forth and described on the horizontal-
hatched area on Exhibit "A" (Map of Leased Premises)
attached hereto and by this reference made a part hereof.
15
It is understood and agreed that the additional 239.0 Acres shall
be added to the original 3,128.0 Acres, and that effective herewith, the new
acreage figure for the Leased Premises shall be 3,367.0 Acres, which figure
-------
shall be used for purposes of Delay Rentals and Storage Rentals in the
Agreement, and for all other purposes contained therein.
It is also understood and agreed that the four (4) Oil and Gas
Leases added hereto are the first leasehold acreage to be included in the
Leased Premises. Therefore, Lessee agrees to pay Lessor, in addition to the
Delay Rentals and Storage Rentals in the Agreement, as reimbursement for the
Delay Rentals in the Oil and Gas Leases, an additional $3.00 per acre per
year for the 239.0 additional leasehold acres, being $717.00 per year. At
such time as the land in the Oil and Gas Leases is used for gas storage, and
the $2.00 per acre per annum, payable quarterly, gas storage rental becomes
effective in lieu of the Oil and Gas Leases Delay Rental, then Lessee shall
reimburse Lessor for such payments.
Lessor agrees to maintain responsibility for payment of Delay
Rentals and gas storage rentals under the Oil and Gas Leases, and Lessee
agrees to reimburse Lessor for such payments within thirty (30) days of
receipt of an invoice for same, including documentation of payments and any
correspondence from lessors under the Oil and Gas Leases. Lessee shall also
reimburse Lessor for any reasonable costs and expenses for the renewal or
extension of the Oil and Gas Leases. Lessor shall use its best efforts to
make the required Delay Rental and gas storage rental payments, but shall
not be held liable for failure to make such payments.
Xxxxxx agrees to pay EREX upon execution of this Amendment, on the
additional 196.0 net leasehold acres, the $2.00 per acre Delay Rental in the
Agreement being $392.00, and the $3.00 per acre Delay Rentals in the Oil and
Gas Leases, being $588.00, for a total of $980.00.
EREX acknowledges receipt from Xxxxxx of the Agreement second year
Delay Rentals in the amount of $6,256.00, being $2.00 per acre for the
original 3,128.0 Acres, and states that in all other respects Xxxxxx, up to
the Effective Date hereof, has performed all of his duties and obligations
under the Agreement, and that the Agreement is in good standing and in full
force and effect.
16
3. Consent to Assignment
---------------------
Pursuant to Paragraph No. 12, Assignments, of the Agreement, EREX
hereby provides its written consent to Xxxxxx to assign all his rights,
titles and interests in the Agreement, including the above-described Oil and
Gas Leases, to Delta, on the condition that Delta agrees with EREX to assume
all of Xxxxxx'x rights, duties, obligations and liabilities of the
Agreement, as herein amended, from and after the Effective Date hereof.
4. Novation and Assumption of Rights, Duties,
------------------------------------------
Liabilities
-----------
The parties agree that as of the Effective Date hereof Delta is
hereby substituted in place of Xxxxxx as Lessee to the Agreement, and agree
that Xxxxxx is discharged as Lessee to the Agreement. Furthermore, Delta
hereby expressly agrees with EREX to assume all the rights, duties,
obligations and liabilities of the Lessee under the Agreement, including the
rental obligations of the Oil and Gas Leases referred to herein.
5. Miscellaneous Provisions
------------------------
a. It is understood and agreed that if the Kentucky Public
Service Commission should not approve the Purchase and
Sale Agreement dated March 1, 1995 by and between Xxxxxx
and Delta, or if the other leasehold and title conditions
therein are not satisfied, thus preventing the completion
of said Purchase and Sale Agreement, then Xxxxxx shall so
notify EREX in writing, and this Amendment shall be of no
force and effect, and EREX and Xxxxxx shall return to
their original rights, duties, obligations and liabilities
under the Agreement, and Delta shall have no obligation to
either party under the Agreement or to the Oil and Gas
Leases referred to herein.
b. It is understood and agreed that a recording of this
Amendment shall only be by a Memorandum of Amendment No. 1
and Novation to Underground Gas Storage Lease and
Agreement (Canada Mountain Field) executed
17
by the parties herein which shall be properly placed of
record in the records of Xxxx County, Kentucky. Such
Memorandum shall not be placed of record until the
Purchase and Sale Agreement dated March 1, 1995 by and
between Xxxxxx and Delta is finalized and all approvals
and conditions have been satisfied. Xxxxxx shall notify
EREX in writing when the Purchase and Sale is finalized.
c. This Amendment and all the terms and provisions hereof
shall extend to and be binding upon the heirs, successors,
assigns and representatives of the parties hereto.
d. This Amendment and all the terms and provisions hereof
shall be construed under the applicable laws of the
Commonwealth of Kentucky.
e. The Agreement, as amended herein, shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment by
their duly authorized officers and representatives as of the date first
hereinabove written.
ATTEST: LESSOR:
EQUITABLE RESOURCES EXPLORATION,
a division of Equitable Resources
Energy Company
By: /s/ Xxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxxx
------------------------ ----------------------------
Xxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxx
ITS: Assistant Secretary ITS: Vice President - Kentucky
Operations
WITNESS: XXXXXX X. XXXXXX
/s/ Xxxxx Xxxxx /s/ Xxxxxx X. Xxxxxx
--------------------------- -------------------------------
Xxxxxx X. Xxxxxx
18
ATTEST: LESSEE:
DELTA NATTJRAL GAS COMPANY, INC.
By: /s/ Xxxx X. Xxxx By: /s/ Xxxxx X. Xxxxxxxx
------------------------ -----------------------------
Xxxxx X. Xxxxxxxx
ITS: Secretary ITS: President
STATE OF: TENNESSEE )
COUNTY OF: XXXXXXXX )
I, Xxxxxxxx Xxxxxxxx, a Notary Public in and for said County and
State, do hereby certify that the foregoing Amendment No. 1 and Novation to
Underground Gas Storage Lease and Agreement (Canada Mountain Field) was this
day produced to me in said County and State aforesaid and duly acknowledged
before me by Xxxxxxx X. Xxxxxx, known to me to be the Vice President -
Kentucky Operations of EQUITABLE RESOURCES EXPLORATION, a division of
Equitable Resources Energy Company, to be the free act and deed of himself
as Vice President - Kentucky Operations thereof.
Witness my hand this 22nd day of March, 1995.
My commission expires: April 8, 1995
-------------------
(OFFICIAL SEAL) /s/ Xxxxxxxx Xxxxxxxx
--------------------------------
Notary Public
STATE OF TEXAS )
COUNTY OF XXXXXX)
I, Xxxx X. Coutter, a Notary Public in and for said County and
State, do hereby certify that the foregoing Amendment No. 1 and Novation to
Underground Gas Storage Lease and Agreement (Canada Mountain Field) was this
day produced to me in said County and State aforesaid and duly acknowledged
before me by Xxxxxx X. Xxxxxx to be his free act and deed.
Witness my hand this 29th day of March, 1995.
My commission expires: March 6, 1999
-------------------------
(OFFICIAL SEAL) /S/ Xxxx X. Xxxxxxx
--------------------------------
Notary Public
19
STATE OF: KENTUCKY )
COUNTY OF: XXXXX)
I, Xxxxx X. Xxxxxxx, a Notary Public in and for said County
an State, do hereby certify that the foregoing Amendment No. 1 and Novation
to Underground Gas Storage Lease and Agreement (Canada Mountain Field) was
this day produced to me in said County and State aforesaid and duly
acknowledged before me by Xxxxx X. Xxxxxxxx, known to me to be the President
of Delta Natural Gas Company, Inc. to be the free act and deed of himself as
President thereof.
Witness my hand this 6th day of April, 1995.
My commission expires: November 24, 1995
--------------------------
(OFFICIAL SEAL) /s/ Xxxxx X. Xxxxxxx
---------------------------
Notary Public
/s/ Xxxxxxxx X. Xxxxxxx, Xx.
---------------------------------
Xxxxxxxx X. Xxxxxxx, Xx.
Xxxxxxx and Xxxxxxx
000 Xxxxxx Xxxxxxxxx
X.X. Xxx 00
Xxxxxxxxx, Xxxxxxxx 00000
502/827-5635
/s/ Xxxx X. Xxxxxxxx
---------------------------------
Xxxx X. Xxxxxxxx
0000 Xxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
615/224-3800 **[Map of area -
entitled "Exhibit
"A" Map of Leased
Premises" attached
after this page.]
20
