Taking in Kind. Subject to Sections 22 and 28 below, Developer hereby reserves the exclusive right to take in kind or separately dispose of his proportionate share of all oil and gas produced from the w▇▇▇▇ to be drilled hereunder, exclusive of production which may be used in development and producing operations, preparing and treating oil and gas for marketing purposes, production unavoidably lost and production used to fulfill any free gas obligations under the terms of the applicable lease. If Developer exercises the right to take its share of oil and gas in kind, Developer shall pay or deliver, or cause to be paid or delivered to the Operator, all royalties and overriding royalties based upon the highest price then being paid by industrial, utility, pipeline or other purchasers for gas of a like kind , at the point of delivery to either the purchaser or pipeline transporting facilities. Such price shall include all appropriate compression and transportation fees as the case may be. In the event Developer elects to separately dispose of its share of oil and gas, all royalties and overriding royalties shall be based on the contract price including brokerage fees, if any, and transportation and compression fees as long as the gas is in Operator's possession prior to the delivery point. Any extra expenditure incurred in taking in kind or separate disposition by any Developer of its proportionate share of the production shall be borne by the Developer, and such Developer shall reimburse Operator for any loss of income that Operator incurs by reason of such separate disposition. If Developer fails or neglects to make the arrangements necessary to take in kind or separately dispose of his proportionate share of oil and gas produced from any well covered by this Agreement within thirty (30) days following completion of such well, Operator shall have the right but not the obligation, to sell such oil and gas to others at any time and from time to time, for the account of the Developer at the best price reasonably obtainable under the circumstances. Any such purchase or sale by Operator shall be subject to the right of Developer to exercise its right to take in kind or to separately dispose of its share of oil and gas not previously delivered to any purchaser or committed to any purchaser. Any such purchase or sale by Operator of any Developer's share of oil and gas shall be only for such reasonable periods of time as are consistent with the minimum needs of the industry under the particular circumstances, but in no event for a period in excess of eighteen (18) consecutive months.
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Sources: Participation and Operating Agreement (Vadda Energy Corp), Participation and Operating Agreement (Vadda Energy Corp)