EXHIBIT 10.79
TRADING BAY FIELD
JOINT OPERATING AGREEMENT
BY AND BETWEEN
UNION OIL COMPANY OF CALIFORNIA
AND
MARATHON OIL COMPANY
MAY 1996
OPERATING AGREEMENT
TRADING BAY FIELD
▇▇▇▇ INLET, ALASKA
TABLE OF CONTENTS
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SECTION ARTICLE PAGE
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ARTICLE 1- EXHIBITS - APPENDICES............................................ 1
1.1 EXHIBITS ......................................................... 1
ARTICLE II - DEFINITIONS.................................................... 1
2.1 AREA OR TRACT..................................................... 1
2.2 COSTS............................................................. 1
2.3 DEVELOPMENT WELL.................................................. 1
2.4 DRILL, DRILLED OR DRILLING, DEEPEN OR PLUG PACK................... 1
2.5 EXPLORATORY WELL.................................................. 1
2.6 INJECTION WELL.................................................... 2
2.7 LEASE BURDENS..................................................... 2
2.8 MARKET VALUE...................................................... 2
2.9 NON-DRILLING PARTY................................................ 2
2.10 PARTY............................................................. 2
2.11 POOL.............................................................. 2
2.12 PRODUCTION........................................................ 2
2.13 OPERATOR.......................................................... 2
2.14 WORKING INTEREST.................................................. 2
ARTICLE III - SUPERVISION OF OPERATIONS BY PARTIES.......................... 3
3.1 OVER-ALL SUPERVISION.............................................. 3
3.2 PARTICULAR POWERS AND DUTIES...................................... 3
ARTICLE IV - MANNER OF EXERCISING SUPERVISION............................... 4
4.1 VOTING PROCEDURE.................................................. 4
4.2 POLL VOTES........................................................ 4
4.3 VOTE BINDING ON PARTIES........................................... 4
4.4 VOTE REQUIRED..................................................... 5
ARTICLE V - INDIVIDUAL RIGHTS OF PARTIES.................................... 5
5.1 RESERVATION OF RIGHTS............................................. 5
5.2 SPECIFIC RIGHTS................................................... 5
ARTICLE VI - OPERATOR....................................................... 6
6.1 INITIAL OPERATOR.................................................. 6
6.2 RESIGNATION OR REMOVAL OF OPERATOR AND SELECTION OF
SUCCESSOR......................................................... 6
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TABLE OF CONTENTS (Continued)
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SECTION ARTICLE PAGE
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ARTICLE VII - AUTHORITIES AND DUTIES OF OPERATOR ........................... 7
7.1 OPERATOR ......................................................... 7
7.2 OPERATIONS........................................................ 8
ARTICLE VIII - DRILLING. DEEPENING. PLUG ING BACK OR
ABANDONMENT OF EXPLORATORY, DEVELOPMENT AND
INJECTION ▇▇▇▇▇ ....................................................... 10
8.1 GENERAL PROVISIONS FOR EXPLORATORY, DEVELOPMENT AND
INJECTION ▇▇▇▇▇ .................................................. 10
8.2 EXPLORATORY ▇▇▇▇▇ ................................................ 12
8.3 DEVELOPMENT ▇▇▇▇▇ ................................................ 12
8.4 RELINQUISHMENT AND REVERSION OF INTERESTS......................... 12
8.5 ABANDONMENT OF PRODUCING ▇▇▇▇▇ ................................... 14
8.6 INJECTION ▇▇▇▇▇ .................................................. 14
ARTICLE IX - CONSTRUCTION OF CERTAIN FACILITIES............................. 15
9.1 GENERAL .......................................................... 15
9.2 OPERATOR TO CONDUCT OPERATIONS ................................... 15
9.3 NOTICE OF PROPOSED CONSTRUCTION................................... 15
9.4 RESPONSE TO NOTICE ............................................... 15
9.5 PARTICIPATION..................................................... 16
9.6 RELINQUISHMENT AND REVERSION OF INTERESTS......................... 16
ARTICLE X - RIGHT TO TAKE IN KIND AND FAILURE TO TAKE IN
KIND -- UNDERLIFTING .................................................. 17
10.1 TAKING IN KIND.................................................... 17
10.2 UNDERLIFTING OF PRODUCTION........................................ 18
10.3 ALLOCATION OF COSTS .............................................. 18
10.4 INDEMNITY......................................................... 18
ARTICLE XI - EXPENSE ....................................................... 18
11.1 BASIS OF CHARGE TO PARTIES ....................................... 18
11.2 ADVANCE ▇▇▇▇▇▇▇▇ ................................................. 19
11.3 COMMINGLING OF FUNDS ............................................. 19
11.4 LIEN OF OPERATOR ................................................. 19
ARTICLE XII - TITLES........................................................ 19
12.1 WARRANTY AND INDEMNITY ........................................... 19
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TABLE OF CONTENTS (Continued)
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SECTION ARTICLE PAGE
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ARTICLE XIII - RENTALS AND LEASE BURDENS ................................... 20
13.1 RENTALS .......................................................... 20
13.2 LEASE BURDENS .................................................... 20
13.3 PAYMENTS TO BE BORNE BY PARTIES .................................. 20
ARTICLE XIV - TAXES ........................................................ 21
14.1 TAXES UPON PROPERTY AND OPERATIONS ............................... 21
14.2 OTHER TAXES ...................................................... 21
14.3 TRANSFER OF INTERESTS ............................................ 21
14.4 NOTICES AND RETURNS .............................................. 21
ARTICLE XV - INSURANCE ..................................................... 22
15.1 REQUIRED INSURANCE ............................................... 22
15.2 INDIVIDUAL INSURANCE ............................................. 23
15.3 CONTRACTORS' INSURANCE............................................ 23
15.4 NOTICE OF LOSSES AND CLAIMS....................................... 23
ARTICLE XVI - RELEASE FROM OBLIGATIONS: SURRENDER; RIGHT OF
FIRST REFUSAL.......................................................... 23
16.1 SURRENDER OR RELEASE ............................................. 23
16.2 ACCRUED OBLIGATIONS .............................................. 24
16.3 RIGHT OF FIRST REFUSAL ........................................... 24
ARTICLE XVII - FORCE MAJEURE................................................ 25
17.1 FORCE MAJEURE .................................................... 25
ARTICLE XVIII - NOTICES..................................................... 25
18.1 GIVING AND RECEIPT................................................ 25
18.2 PROPER ADDRESSES ................................................. 26
ARTICLE XIX - LIABILITY, CLAIMS, AND SUITS.................................. 26
19.1 INDIVIDUAL LIABILITY ............................................. 26
19.2 SETTLEMENTS ...................................................... 26
ARTICLE XX - INTERNAL REVENUE PROVISION .................................... 27
20.1 INTERNAL REVENUE PROVISION ....................................... 27
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TABLE OF CONTENTS (Continued)
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SECTION ARTICLE PAGE
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ARTICLE XXI - EFFECTIVE TERM ............................................... 27
21.1 TERM ............................................................. 27
ARTICLE XXII - NON-DISCRIMINATION........................................... 27
22.1 NON-DISCRIMINATION ............................................... 27
ARTICLE XXIII - OTHER PROVISIONS ........................................... 28
23.1 AUDITS ........................................................... 28
23.2 LAWS AND REGULATIONS ............................................. 28
23.3 ADDITIONAL BURDENS ............................................... 28
23.4 SUCCESSORS AND ASSIGNS ........................................... 29
23.5 ENTIRE AGREEMENT ................................................. 29
23.6 WAIVER ........................................................... 29
23.7 CAPTIONS ......................................................... 29
23.8 GOVERNING LAW..................................................... 29
ARTICLE XXIV - EXECUTION . ................................................. 30
24.1 COUNTERPARTS...................................................... 30
24.2 RATIFICATION ..................................................... 30
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OPERATING AGREEMENT
TRADING BAY FIELD
▇▇▇▇ INLET, ALASKA
THIS AGREEMENT, entered into as of June 12, 1996 by and between
Marathon Oil Company ("Marathon"), an Ohio corporation and Union Oil Company of
California ("Union") a California corporation (collectively the "Parties").
ARTICLE I - EXHIBITS - APPENDICES
---------------------------------
1.1 EXHIBITS
The following exhibits are attached hereto and by this reference are
made a part hereof;
A. Exhibit A - Map
B. Exhibit B - Lease Description
C. Exhibit C, which is the Accounting Procedure for the determination
of costs and expenses incurred in the conduct of operations under this
Agreement. If there is any conflict between this Agreement and Exhibit
C, this Agreement shall govern.
ARTICLE II - DEFINITIONS
------------------------
2.1 AREA or TRACT - shall mean the State Lease ADL 18731 as described in
Exhibits A and B.
2.2 COSTS - shall mean all costs and expenses, other than Lease Burdens,
incurred in the development and operation pursuant to this Agreement
and all other expenses that are herein made chargeable as Costs,
determined in accordance with the Accounting Procedure set forth in
Exhibit C hereto.
2.3 DEVELOPMENT WELL - shall mean any well other than an Injection Well
Drilled to a location within the Area and projected to the Pool for
which such Area was established.
2.4 DRILL, DRILLED OR DRILLING, DEEPEN OR PLUG BACK- shall mean to perform
all operations reasonably necessary and incident to the drilling,
deepening or plugging back of a well, including testing, and completing
and equipping for production or injection, or plugging and abandoning.
2.5 EXPLORATORY WELL - shall mean any well other than a Development Well or
an Injection Well which is drilled to a new pool.
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2.6 INJECTION WELL - shall mean any well Drilled or taken over for the
injection of substances for the purpose of disposal or conducing
pressure maintenance or secondary recovery operations.
2.7 LEASE BURDENS - shall mean the royalty reserved to the lessor in an oil
and gas lease, an overriding royalty, a production payment and any
other burden upon the Working Interests.
2.8 MARKET VALUE - shall mean the arithmetical average price upon which the
State of Alaska's royalty is paid and finally accepted on the
Production during the relevant period from the Area.
2.9 NON-DRILLING PARTY - shall mean the Party or Parties who have had the
right to participate in the Costs of Drilling, Deepening or Plugging
Back a well in accordance with this Agreement at the commencement of
such operation, and who have elected not to participate therein.
2.10 PARTY OR PARTIES - shall mean a party to this Agreement.
2.11 POOL - shall mean an underground reservoir containing, or appearing to
contain, a common accumulation of oil or gas. Each zone of a structure
which is completely separated from any other zone in the same structure
is a Pool.
2.12 PRODUCTION - shall mean all oil, gas and hydrocarbons produced and
saved from the Area, except so much thereof as is used in the conduct
of operation under this Agreement with or for the benefit of the Area.
2.13 OPERATOR - shall mean Union Oil Company of California and its
successors, as the Operator designed in accordance with the Agreement,
acting in that capacity, or any successor Operator selected pursuant to
Article VI of this Agreement.
2.14 WORKING INTEREST - shall mean an interest, whether held under an oil
and gas lease or otherwise, including a carried Working Interest, which
interest is chargeable with and obligated to pay or bear, whether in
cash or out of Production or otherwise, all or a portion of the Costs
of operations conducted under this Agreement.
2
ARTICLE III - SUPERVISION OF OPERATIONS BY PARTIES
--------------------------------------------------
3.1 OVER-ALL SUPERVISION. The Parties shall exercise over-all supervision
and control of all matters pertaining to the development and operation
of the Area pursuant to this Agreement. In the exercise of such power
each Party shall act solely in its own behalf in the capacity of an
Individual Working Interest owner and not on behalf of the Working
Interest Owners as an entirety.
3.2 PARTICULAR POWERS AND DUTIES. The matters to be passed upon and decided
by the Parties as provided herein or in the Agreement shall include,
but not be limited to, the following:
A. The appointment, removal and selection of successor Operators.
B. The enlargement or contraction of the Area.
C. The subsequent joinder of any Working Interest Owner to this
Agreement
D. The kind, character and method of operation, including any
type of pressure maintenance or secondary recovery.
E. The drilling of any well within the Area either to recover
Production or for use as an injection Well, or for other
purposes.
F. The recompletion, workover, abandonment, or change of status
of any well in the Area or use of any such well for injection
or other purposes.
G. The making of any single expenditure in excess of One Hundred
Thousand Dollars ($100,000.00), except in the case of an
emergency involving the preservation of life, environment or
property.
H. The selling or otherwise disposing of any major item of
surplus material or equipment, the current list price of new
equipment similar thereto being Five Thousand Dollars
($5,000.00) or more; provided, however, surplus material or
equipment classified as junk may be disposed of by Operator at
prevailing prices.
3
I. The authorizing of charges to the joint account for services
by consultants or any Party's technical personnel not covered
by the charges set forth in Exhibit "C".
J. The taking of periodic inventories under the terms of Exhibit
"C".
K. The designation of a representative to appear before any court
or regulatory body in matters pertaining to operations
hereunder, provided, however, that such designation shall not
prevent a Party from appearing in person or from designating
another representative in its behalf and at its own expense.
ARTICLE IV - MANNER OF EXERCISING SUPERVISION
---------------------------------------------
4.1 VOTING PROCEDURE
GENERAL. In the supervision of an operation conducted by Operator the
Parties chargeable with the costs of such operation shall have the
right to vote thereon in proportion to their respective obligations for
such Costs.
4.2 POLL VOTES
The Parties may decide any matter by vote taken by letter or facsimile,
provided the matter is first submitted to each Party entitled to vote
thereon. Operator will give prompt notice of the results of such voting
to all such Patties. Any such Party failing to vote on any matter for
which a vote is provided by this Agreement within the time stated in
such letter or facsimile shall be deemed to have voted in the negative.
4.3 VOTE BINDING ON PARTIES
Any approval, direction, consent, determination, redetermination,
agreement, stipulation, designation or other decision of the Parties
provided for in this Agreement which receives the affirmative vote
herein specified shall be deemed given by and shall be binding upon all
Parties to this Agreement, except as otherwise specified herein.
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4.4 VOTE REQUIRED
Except where specified otherwise in this Agreement, a vote of the
owners of a majority of the Working Interests shall decide all issues
to be decided hereunder.
ARTICLE V - INDIVIDUAL RIGHTS OF PARTIES
----------------------------------------
5.1 RESERVATION OF RIGHTS
The Parties severally reserve to themselves all their rights, except as
otherwise provided in this Agreement.
5.2 SPECIFIC RIGHTS
Each Party owning a Working Interest shall have, among others, the
following specific rights:
A. REPORTS. The right to receive from Operator copies of all
reports to any governmental agency, reports of crude oil runs
and stocks, inventory reports, well logs, engineering and
geological data and all other information pertaining to
operations hereunder. All such reports and information shall
be limited to factual and not interpretative data, unless
accomplished by or charged to the Parties. The cost of
gathering and furnishing information not ordinarily furnished
by Operator to the Parties shall be charged to the Party who
requests the information.
B. ACCESS to such operations being conducted for the benefit
thereof at all reasonable times to inspect such operations,
▇▇▇▇▇ and the records and data pertaining thereto.
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ARTICLE VI - OPERATOR
---------------------
6.1 INITIAL OPERATOR
Union Oil Company of California is hereby designated as Operator.
6.2 RESIGNATION OR REMOVAL OF OPERATOR AND SELECTION OF SUCCESSOR
Any Operator shall have the right to resign at any time, but such
resignation shall not become effective so as to release such Operator
from its duties and obligations and terminate its rights as such for a
period of six months after notice of Intention to resign has been
served by an Operator on all Parties, unless a new Operator shall have
been selected and approved and shall have taken over and assumed the
duties and obligations of that Operator prior to the expiration of said
period. In all instances of resignation or removal, until a successor
Operator is selected and approved as hereinafter provided, the Parties
snail be jointly responsible for performance of the duties of that
Operator, and shall not later than 30 days before such resignation or
removal becomes effective appoint a common agent to represent them in
any action to be taken hereunder.
The resignation of the Operator shall not release that Operator from
any liability for any default by it hereunder occurring prior to the
effective data of its resignation.
Any Operator may, upon default or failure in the performance of its
duties or obligations hereunder be subject to removal by a vote
representing fifty percent (50%) or more of the voting power of the
Parties. Such removal shall be effective upon notice thereof to the
Parties.
The resignation or removal of an Operator under this Agreement shall
not terminate its right, title, or interest as the owner of a Working
Interest, but upon the resignation or removal of an Operator becoming
effective such Operator shall deliver possession of all equipment,
materials, and appurtenances used in conducting the operations and
owned by the Parties to the duly qualified successor Operator or to the
owners thereof if no such new Operator is elected, to be used for the
purpose of conducting operations hereunder. Nothing herein shall be
construed as authorizing removal of any
6
material, equipment and appurtenance needed for the preservation of any
▇▇▇▇▇.
Whenever the Operator shall resign, or shall be removed as hereinabove
provided or a change of an Operator is negotiated by the Parties, the
Parties shall select a successor Operator. Such selection shall not
become effective until the Operator so selected shall accept in writing
the duties and responsibilities of Operator.
ARTICLE VII - AUTHORITIES AND DUTIES OF OPERATOR
------------------------------------------------
7.1 OPERATOR
A. GENERAL DUTIES. Operator shall be responsible for submitting
all required reports to the State of Alaska and other
regulatory authorities and shall, subject to subsection 3.2K,
represent the Parties at hearings or other meetings held by
any regulatory bodies pertaining to operations hereunder.
Pursuant to the provisions of this Agreement, Operator shall
have the exclusive right and duty to conduct operations
according to plans and procedures as specified by the Parties
and to do all things necessary and consistent therewith,
including the execution of all contracts as Operator which
affect drilling, reworking and servicing of ▇▇▇▇▇, and
construction and operation of facilities, and the purchasing
of supplies, and shall prepare or assist in the preparation of
any and all applications, reports, or other documents required
by any governmental agency.
B. RECORDS AND REPORTS. Operator shall keep correct books,
accounts and records and shall furnish the Parties with
periodic reports of operations conducted by it pursuant to
this Agreement. Daily or periodic reports for production,
drilling and other operations shall be submitted as general
practices dictate.
▇. ▇▇▇▇▇ DRILLED, DEEPENED OR WORKED OVER BY OPERATOR. All ▇▇▇▇▇
drilled by Operator through independent contractors shall be
at not more than the usual rates prevailing in the area.
Operator may employ its own tools and equipment, butt the
charge therefor shall not exceed the prevailing rate in the
area and the work shall be performed under terms
7
and conditions customary in the area in contracts of
independent contractors doing work of a similar nature.
7.2 OPERATIONS
A. WORKMANLIKE CONDUCT Operator shall conduct all operations in a
good and workmanlike manner. Operator shall not be liable to
the Parties for damages unless such damages result from
Operator's gross negligence or willful misconduct.
B. LIENS AND ENCUMBRANCES. Operator shall endeavor to see that
the lands and leases in the Area are kept free from all liens
and encumbrances occasioned by operations, except the liens of
Operator granted hereunder.
C. EMPLOYEES. All individuals employed by Operator in conducting
operations shall be the employees of that party employing
same, and their selection, hours of labor, compensation, and
all other matters relating to their employment shall be
determined by Operator.
D. EXPENDITURES.
1. The Operator shall have the right to make
expenditures up to an aggregate of one hundred
thousand dollars ($100,000) for any single project of
any kind, without consent of the Parties.
2. For all projects exceeding fifty thousand dollars
($50,000) but less than fifty thousand dollars
($100,000), an international Authorization for
Expenditure (AFE) shall be prepared by the Operator
and submitted to the working Interest owners before
work commences
3. Projects exceeding one hundred thousand dollars
($100,000) shall require approval of the Parties. An
AFE shall be prepared by the Operator and supplied to
the Parties for approval. Response to a request for
approval of an AFE shall be given to the Operator
within forty-five (45) days after receipt of the
request. The non-consent
8
provisions of Article IX shall apply if fewer than
all Parties vote to approve the AFE.
4. If, at any time, it becomes apparent that
expenditures for an AFE and any Supplemental AFE's
for such item previously approved pursuant to this
Subsection 7.2D will be or has exceeded the
authorized limit by ten percent (10%) or fifty
thousand dollars ($50,000) whichever is greater, or
by one million dollars ($1,000,000), the Operator
shall notify the Parties and shall. without delay,
prepare a Supplemental AFE. A Supplemental AFE shall
also be prepared for an informational AFE if it
becomes apparent that expenditures will have or have
exceeded the $100,000 formal AFE threshold. The
Supplemental AFE shall include reasons of the
increased cost, and shall request approval for the
additional expenditures anticipated. The Operator
shall give verbal notification to the Parties
advising that a Supplemental AFE may be required. The
Parties shall have 3 business days from receipt of a
Supplemental AFE to vote on the approval requested.
5. Unless otherwise stated in an AFE or Supplemental
AFE, the approval granted for the project described
in the AFE or Supplemental AFE will be canceled if no
work has been performed or money spent on the project
six (6) months after the AFE or Supplemental AFE has
received requisite approval, or six (6) months after
proposed start date, whichever occurs first.
6. If any emergency occurs, Operator may immediately
make or incur such expenditures as in its opinion are
required to deal with the emergency. Operator shall
report to the Parties as promptly as practicable the
nature of the emergency and the action taken and, as
soon as practical, prepare an AFE if otherwise
required by the provisions of this Sub-section 7.2D.
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ARTICLE VIII - DRILLING. DEEPENING, PLUGGING BACK OR ABANDONMENT OF EXPLORATORY,
--------------------------------------------------------------------------------
DEVELOPMENT AND INJECTION ▇▇▇▇▇
-------------------------------
8.1 GENERAL PROVISIONS FOR EXPLORATORY, DEVELOPMENT AND INJECTION ▇▇▇▇▇
A. GENERAL. The Drilling, Deepening, Plugging Back or abandoning
of a well within the Area shall be conducted only in
accordance with the provisions of this Article VIII.
B. OPERATOR TO CONDUCT OPERATIONS. All Drilling, Deepening,
Plugging Back, and abandoning operations shall be conducted by
the Operator.
C. NOTICE OF PROPOSED OPERATIONS. If any Party hereto should
desire to Drill any well within the Area, or, if any Party
should desire to rework, sidetrack, Deepen, recomplete or Plug
Back a dry hole or a well no longer capable of producing in
paying quantities in which such Party has not otherwise
relinquished its interest in the proposed objective Pool under
this Agreement, the party desiring to Drill, rework,
sidetrack, Deepen, recomplete or Plug back such a well shall
give written notice of the proposed operation to the Parties
who have not otherwise relinquished their interest in such
objective Pool under this Agreement and to the other Parties
in the case of a proposal for sidetracking or Deepening,
specifying the work to be performed, the location, proposed
depth, objective Pool and the estimated cost of the operation.
All proposed operations shall be subject to the requirements
of Article VII section 7.2 D.
D. RESPONSE TO NOTICE. Within forty-five (45) days after receipt
of such notice, each Party shall advise all other Parties, in
writing, whether or not it approves and desires to participate
in such operations_ If the Parties approve such operations,
then the proposed operations shall be conducted by the
designated Operator. If any Party fails to respond to such
notice within said forty-five (45) day period, it shall be
deemed to have failed to approve such proposed operation and
to have elected not to participate therein. Notwithstanding
the provisions of the foregoing paragraph, if a drilling rig
has suspended operations awaiting approval of redrilling,
Deepening, Plugging Back or abandoning of a well, then the
Parties receiving such notice shall have forty-eight (48)
hours
10
(exclusive of Saturdays, Sundays, and legal holidays) after
receipt thereof within which to notify the Parties giving such
notice whether they approve and desire to participate in the
proposed operations. All such notices given under this
paragraph shall be by telephone, or facsimile, followed by
written notice.
E. FEWER THAN ALL PARTIES. Whenever all Parties entitled to
participate in approved operations fail to agree to
participate, then within fifteen (15) days after expiration of
said forty-five (45) days' notice period or within twenty-four
(24) hours (exclusive of Saturdays, Sundays and legal
holidays) after expiration of said forty-eight (48) hour
notice period, each such Party who desires to participate in
the approved operations shall give to the other Parties
written notice (or in the case of the twenty-four (24) hour
notice period, by telephone, or facsimile) of the election to
participate in such approved operations. Failure to give such
notice shall be deemed an election not to participate. Unless
otherwise agreed by the Parties, the entire cost, risk,
liability and expense of the Drilling, Deepening. or Plugging
Back of a Development or Exploratory Well by fewer than all
the Parties shall be borne by the Parties comprising the
Drilling Party. No operations by fewer than all Parties shall
be conducted in such a manner as to interfere or conflict with
any other operations.
F. ABANDONMENT OF NON-PRODUCTIVE POOL WITHIN A WELL. In the event
the proposed operation is the abandonment of a non-productive
Pool, within a well, then the notice required in Subsection
8.1C. shall also be given to the Parties. If the Parties give
notice of election, in the manner provided in Subsection 8.1D,
to take over the well drilled into such Pool and if the
Parties participating in the Costs of said well approve the
proposed abandonment, the Parties electing not to abandon such
pool shall take over said well upon such terms and conditions
contained in Subsection 8.5.
G. USE OF EQUIPMENT. In the case of any Plugging Back or
Deepening operation, the Drilling Party shall purchase, at
salvage value, all casing, tubing and other equipment in the
well.
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8.2 EXPLORATORY ▇▇▇▇▇
A. RIGHT TO DRILL. If any Party desires to Drill, Deepen or Plug
Back a well as an Exploratory Well, then it shall have the
right to do so under the provisions of this Article VIII.
B. DRILLING FROM MOBILE PLATFORMS. The Drilling of an Exploratory
Well from a mobile platform or drilling barge shall be outside
the scope of this Agreement, but nothing herein contained
shall be deemed to prevent the Drilling of such a well on the
Tract by a Party owning a Working Interest therein.
C. OPERATIONS AND PARTICIPATION. The Drilling, Deepening or
Plugging Back of an Exploratory Well from any facility other
than a mobile platform or drilling barge shall be accomplished
in the following manner In the event the proposed operation
receives the approval of the Parties as provided in Subsection
8.10 or 8.1E, then each owner of a Working interest in the
Tract shall have the right to participate in proportion to its
Working Interest in that Tract. If fewer than all Working
Interest owners approve such operations, then those electing
to proceed shall conduct such operations al their sole cost,
risk and expense.
8.3 DEVELOPMENT ▇▇▇▇▇
A. RIGHT TO DRILL. If any Party desires to Drill, Deepen, or Plug
Back a well as a Development Well, then it shall have the
right to do so under the provisions of this Article VIII.
B. OPERATIONS AND PARTICIPATION. The Drilling, Deepening or
Plugging Back of a Development Well shall be accomplished in
the following manner in the event the proposed operation
receives the approval of the Parties as provided in Subsection
8.1 D or 8.1E, each Party shall have the right to participate
therein in proportion to its Working interest.
8.4 RELINQUISHMENT AND REVERSION OF INTERESTS
A. OPERATIONS BY LESS THAN ALL PARTIES. In order for the Drilling
Party to receive the benefits of this Section 8.4, the
proposed operations shall
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be commenced within six months after the expiration of the
notice period provided in Subsection 8.10 or 8.1E, whichever
is the later date.
B. RELINQUISHMENT OF INTEREST BY NON-DRILLING PARTY. When a well
which is Drilled, Deepened or Plugged Back by less than all
Parties entitled to participate therein is completed as a
producer, each Non-Drilling Party shall be deemed to have
relinquished to the Drilling Party all of its operating rights
and Working interest in and to such Well. and Drilling Party
shall make, or cause to be made, payments for Lease Burdens in
respect of Production from said well, in accordance with
Article XIII.
C. REVERSION OF RELINQUISHED INTERESTS. The operating rights and
Working Interests relinquished by a Non-Drilling Party shall
revert to it at such time as the Market Value, calculated by
Drilling Party, of that Non-Drilling Party's share of the
Production obtained from the well after such relinquishment
(after deducting from such Market Value all taxes upon or
measured by Production and all Lease Burdens) shall equal the
total of the following:
1) One hundred per cent (100%) of that portion of the
Costs Incurred in operating the well (including the
portion of costs of acquisition or use of platforms,
pipelines or other facilities attributable to such
operations by less than all Parties, but excluding
the Costs provided for in this Subsection 8.4C(2))
that would have been charged to such Non-Drilling
Party had all Parties entitled thereto participated
therein; and
2) Six hundred per cent (600%) in the case of an
Exploratory Well, or four hundred per cent (400%) in
the case of a Development Well, of that portion of
the Costs incurred by Drilling Party in the Drilling,
Deepening, or Plugging Back of said well, through and
including the wellhead connections, that would have
been chargeable to such Non-Drilling Party had all
Parties entitled thereto participated therein.
D. EFFECT OF REVERSION. From and after reversion to a
Non-Drilling Party of its relinquished interest in a well,
such Non-Drilling Party shall share in the ownership of the
well, the operating rights and Working Interest therein, the
materials and equipment in or pertaining to the well, the
13
Production therefrom and the Costs of operating the well as
otherwise provided in this Agreement.
8.5 ABANDONMENT OF PRODUCING ▇▇▇▇▇
No well which is producing or has once produced shall be abandoned
without approval of the Parties then owning a Working Interest therein.
If such approval is not obtained, then this Parties not desiring to
abandon shall pay to such other Party the latter Party's proportionate
share of the fair market value of the salvable material and equipment
in and on such well determined at the time such abandonment is
proposed. less such latter Party's estimated share of the cost of
abandonment. Upon receipt of said sum, the Party desiring to abandon
said well shall assign to the other Parties, without warranty of title,
all of its operating rights and Working Interest in the well and all
subsequent Production therefrom, as to the Pool from which said well is
then producing, or has once produced, but not as to any other Pool and
all of its interest in the material and equipment in and on said well
If such assignment or conveyance shall run in favor of more than one
Party herF.ito, the interest covered thereby shall be shared by such
Parties in the proportion that the interest of each Party assignee
bears to the interest of all Parties assignee. The Party proposing such
abandonment shall give the notice required in Subsection 8.1 C to the
Parties. If the Parties give notice of election. in the matter provided
in Subsection 8.1D, to take over said well and if the Parties then
owning a Working Interest in said well approve the proposed
abandonment, the Parties shall take over said well as provided in this
Section 8.5. Unless at the direction of the Fames me well is to be
taken over for use in operations, the Operator shall plug and abandon
the well far the account of the Parties owning a Working Interest
therein. As used in this Section 8.5, "Well" shall be deemed to apply
separately to each Pool from which that well is then producing or has
produced, and the value of the salvable material and equipment therein
shall be attributed in proportion to the ownership thereof.
8.6 INJECTION ▇▇▇▇▇
The Costs of Drilling, Deepening, Plugging Back, abandoning, or taking
over a well as an Injection Well shall be borne by all the Parties for
which the well is to be used for the purpose of disposal or pressure
maintenance or
14
secondary recovery operations. All parties shall bear such Costs
according to their respective Working Interest.
ARTICLE IX - CONSTRUCTION OF CERTAIN FACILITIES
-----------------------------------------------
9.1 GENERAL
The construction of any production equipment, pipeline, or other
facilities not related to secondary recovery or pressure maintenance
programs, the cost of which exceeds One Million Five Hundred Thousand
Dollars ($1,500,000.00), referred to in this Article IX as "Such
Construction," shall be conducted in or for the benefit of the Area
only in accordance with the provisions of this Article IX. For the
purposes of this Article IX, reference to Parties shall mean all
Parties to be served by the proposed production equipment, pipeline, or
other facility.
9.2 OPERATOR TO CONDUCT OPERATIONS
Such Construction shall be conducted by the Operator designated by the
Parties participating in the Costs thereof.
9.3 NOTICE OF PROPOSED CONSTRUCTION
Any Party may propose Such Construction by giving to each of the other
Parties written notice specifying the location, contemplated service,
design, specifications, proposed operator, and estimated Costs of Such
Construction.
9.4 RESPONSE TO NOTICE
Within forty-five (45) days after receipt of such notice, each Party
shall advise all other Parties, in writing, whether or not it approves
Such Construction AND whether or not it desires to participate in Such
Construction. If the Parties approve Such Construction in the mariner
provided in Article IV, then Such Construction shall be conducted by
the Operator.
15
9.5 PARTICIPATION
In the event Such Construction receives the approval of the Parties as
provided in Section 9.4, each Party shall have the right to participate
therein. Unless otherwise agreed by the Parties, the entire cost, risk,
liability and expense of Such Construction by fewer than all of the
Parties shall be borne by the Parties comprising the Participating
Party (as hereinafter defined) in proportion to their respective
interests in Such Construction as herein after provided. The Party or
Parties electing to participate in Such Construction shall be referred
to in this Article IX as "Participating Party."
9.6 RELINQUISHMENT AND REVERSION OF INTERESTS
A. SUCH CONSTRUCTION BY LESS THAN ALL PARTIES. In order for the
Participating Party to receive the benefits of this Section
9.6, Such Construction shall be commenced within one (1) year
after the expiration of the period provided in Section 9.4.
Each Participating Party shall participate in Such
Construction in the proportion of its Working Interest.
B. NON-OWNERSHIP AND RELINQUISHMENT OF INTEREST. When any Party
who is entitled to participate in such Construction elects not
to participate therein, such Party referred to in this Article
IX as "Non-Participating Party", it shall be deemed to have no
interest in and shall not be entitled to the use of the
facility constructed.
C. ACQUISITION OF AN INTEREST AND REVERSION OF RELINQUISHED
INTEREST. Within thirty (30) days after the production
equipment, pipeline or other facility is put into service,
operator of Such Construction shall furnish each
Non-Participating Party a statement of the estimated Costs of
Such Construction. Within sixty (60) days after receipt of
such statement. each Non-Participating Party may elect to pay
to the operator who conducted Such Construction an amount of
money equal to the total of the following:
(1) One hundred per cent (100%) of that portion of the
Costs incurred in operating the facility that would
have been charged to such Non-Participating Party had
it participated In Such Construction;
16
(2) One hundred thirty-five per cent (135%) of that
portion of the Costs incurred and committed in Such
Construction; and
(3) Interest at the rate of one percent (1%) per month
(or, if lower, the highest rate permitted by law) on
such amounts computed from the month during which
each portion of such Costs was paid. If a
Non-Participating Party has elected to make the
payment hereinabove provided, and does so within
thirty (30) days after such election, such Non-
Participating Party shall immediately have
transferred to it that interest in that production
equipment, pipeline or other facility as it would
have had if it had participated in the construction
thereof, and the operating rights and Working
interests which it relinquished by failing to
participate in Such Construction shall at that time
revert to such Party.
D. PAYMENT BY OPERATOR. All payments received by Operator from a
Non- Participating Party pursuant to Subsection 9.6C shall be
paid promptly to the Participating Parties in the proportions
in which they shared the Costs of Such Construction and
Drilling.
ARTICLE X - RIGHT TO TAKE IN KIND AND FAILURE TO TAKE IN KIND - UNDERLIFTING
----------------------------------------------------------------------------
10.1 TAKING IN KIND
Each Party shall currently take in kind or separately dispose of its
share of Production, but its share shall include any Production said
Party is then making up as the result of its underlift pursuant to this
Article X. Each such Party shall have the right to construct, maintain,
and operate all necessary facilities for that purpose, provided that
they are so constructed, maintained and operated as not to interfere
with operations. Any extra expenditures incurred by reason of delivery
In kind of any portion of the Production shall be borne by the
receiving Party. If a royalty owner has the right to take in kind a
share of Production and fails to do so, each Party taking Production
shall take its lessor's Royalty Share of Production. On all purchases
or sales each
17
Party shall execute any division order or contract of sale pertaining
to its interest.
10.2 UNDERLIFTING OF PRODUCTION
Notwithstanding the ownership of Production set forth in this
Agreement, in the event any Party fails to take or otherwise dispose of
its entire share of Production, the other Parties shall be entitled to
take the Production not taken, and the Parties will cooperate in
returning all Parties to balance of cumulative Production as soon as
practicable.
10.3 ALLOCATION OF COSTS
Except as to Lease Burdens and taxes measured by production, no
adjustment shall be made in Costs when a Party is underlifting or
overlifting. Lease Burdens and taxes measured by Production shall be
borne by the Parties in proportion to the Production taken by each of
them.
10.4 INDEMNITY
In the event any Party or Parties is underlined and any such action
causes the rate of production hereunder to be reduced, then said Party
or Parties shall be solely responsible to the State of Alaska and any
other royalty owner or overriding royalty owner for, and hold the other
Parties harmless and indemnify them against any and all claims
whatsoever which arise as a result of such failure to take.
ARTICLE XI - EXPENSE
--------------------
11.1 BASIS OF CHARGE TO PARTIES
All Costs incurred for the benefit of the Area initially shall be paid
by Operator. Each Party shall reimburse Operator for its Working
Interest share of such Costs except as otherwise provided in Articles
VIII, IX, and X. All charges, credits and accounting shall be in
accordance with Exhibit "C."
18
11.2 ADVANCE ▇▇▇▇▇▇▇▇
Operator shall have the right to require the Parties to advance their
respective shares of estimated Costs by submitting to such Parties, on
or before the 15th day of any month, an itemized estimate thereof for
the succeeding month, with a request for payment In advance. Within
fifteen (15) days thereafter, each Party shall pay to Operator its
share of such estimate. Adjustments between estimated and actual Costs
shall be made by Operator at the close of each calendar month, and the
accounts of such Parties shall be adjusted accordingly.
11.3 COMMINGLING OF FUNDS
No funds received by Operator under this Agreement need be segregated
or maintained by it as a separate fund, but may be commingled with its
own funds.
11.4 LIEN OF OPERATOR
Each Party grants to the Operator a lien upon its Working Interests in
the Area, and Its interest In all property, as security for payment of
its share of Costs together with interest thereon at the rate of twelve
per cent (12%) per annum or, if lower, at the highest rate allowed by
law. Operator shall have the right to bring suit to enforce collection
of such indebtedness with or without seeking foreclosure of the lien.
In addition, upon default by any Party in the payment of its share of
Costs. Operator shall have the right to collect from the purchaser the
proceeds from the sate of such Party's share of Production until the
amount owed by such Party, plus interest as aforesaid, has been paid.
Each purchaser shall be entitled to rely upon Operators written
statement concerning the amount of any amount due hereunder.
ARTICLE XII - TITLES
--------------------
12.1 WARRANTY AND INDEMNITY
Each Party represents and warrants that it is the owner of the
respective Working Interests and hereby agrees to indemnify and hold
harmless the other
19
Parties from any loss due to failure, in whole or in part, of its title
to any such interest. except failure of title arising out of
operations: provided that such indemnity shall be limited to an amount
equal to the net value that has been received from the sale or receipt
of Production attributable to the interest as to which title failed.
Each failure of title will be deemed to be effective, insofar as this
Agreement is concerned, as of the first day of the calendar month in
which such failure is finally determined, and there shall be no
retroactive allocation of Costs or retroactive allocation of Production
or the proceeds therefrom, as a result of title failure.
ARTICLE XIII - RENTALS AND LEASE BURDENS
----------------------------------------
13.1 RENTALS
Each Party shall be obligated to pay, or cause to be paid, any and all
rentals and other sums (other than Lease Burdens) payable upon or in
respect of its Working Interests, subject, however, to the right of
each Party to surrender any of its Working Interests in accordance with
Article XVI. Upon request, each Party shall furnish to Operator
satisfactory evidence of the making of such payments. However, no Party
shall be liable to any other Party for unintentional failure to make
any such payments provided it has acted in good faith.
13.2 LEASE BURDENS
Each Party entitled to receive a share of Production shall make, or
cause to be made, payments for that portion of the Lease Burdens
constituting the Royalty Share due the State of Alaska on such Party's
share of Production or the proceeds allocated thereto under this
Agreement. Each Party shall be obligated to pay, or cause to be paid,
all other Lease Burdens attributable to its Working Interest, and shall
be liable for any additional Costs occasioned thereby.
11.3 PAYMENTS TO BE BORNE BY PARTIES
All payments made pursuant to this Article XIII shall be borne by the
Party responsible for such payments in accordance with this Agreement,
any
20
payments made by Operator on behalf of a Party snail be reimbursed by
the Party liable for payment.
ARTICLE XIV - TAXES
-------------------
14.1 TAXES UPON PROPERTY AND OPERATIONS
All taxes assessed or levied upon property or operations under this
Agreement, except income taxes, taxes measured by Production and taxes
upon Lease Burdens which are payable by the owners thereof: snail be
paid by Operator as and when due and payable. All such taxes shall be
charged to and borne by the Parties in proportion to their respective
Working Interests.
14.2 OTHER TAXES
Each Party shall pay or cause to be paid all taxes imposed upon or in
respect of its share of Production or handling of its share of
Production.
14.3 TRANSFER OF INTERESTS
In the event of a transfer by one Party to another under the provisions
of this Agreement of any Working Interest, or of any interest in any
well or in the materials and equipment in any well, or of any interest
in platforms, pipelines or other facilities, or in the event of the
reversion of any relinquished interest as in this Agreement provided,
the taxes above mentioned assessed against the interest transferred or
reverted for the taxable period in which such transfer or reversion
occurs shall be apportioned between such Parties so that each shall
bear the percentage of such taxes which is proportionate to that
portion of the taxable period during which it owned such interest.
14.4 NOTICES AND RETURNS
Each Party shall promptly furnish Operator with copies of notices,
assessments, levies or tax statements received by it pertaining to the
taxes to be paid by Operator. Operator shall make such returns, reports
and statements as may be required by law in connection with any taxes
above provided to be paid by it, shall furnish copies to the Parties
upon request, and
21
shall notify the Parties of any tax which it does not propose to pay
before such tax becomes delinquent.
ARTICLE XV - INSURANCE
----------------------
15.1 REQUIRED INSURANCE
Operator shall procure and maintain the following insurance for the
protection of all Parties hereto and the premiums therefor shall be
charged as Costs under this Agreement. In lieu of providing insurance,
Operator may cover its obligation under this Agreement through its
financial resources and satisfy any required evidence of such with a
"Letter of Self insurance". The insurance coverage may be altered from
time to time as conditions warrant subject to approval of the Parties.
A. Operator shall carry:
(1) General Liability Insurance and Marine Liability
(also referred to as Protection and Indemnity
Insurance) and Aircraft Liability (if aircraft are
used) each with a combined single limit of at least
$500,000 per occurrence.
(2) All Risk Physical Damage Insurance, if readily
available, including Debris Removal, and Cost of
Control of Well Insurance, with a deductible of at
least $100,000 per occurrence.
B. Operator shall carry: Workmen's Compensation and Employers'
Liability in cover all operations including marine operations
(and liability for transportation, wages, maintenance and cure
to a master or a member of a crew of any vessel) conducted
under this Agreement with an Employers' Liability limit of at
least $800,000. Such insurance shall contain a provision
wherein carrier waives its right to subrogation against the
Parties hereto.
22
15.2 INDIVIDUAL INSURANCE
Any Party may procure and maintain at its own cost and expense such
other insurance as it shall determine and any such insurance shall
inure solely for the benefit of such Party procuring the same;
provided, however, that each such insurance policy shall contain a
waiver an the part of the insurance carrier of all rights, by
subrogation or otherwise, against each Party not named as an insured in
such policy or if such waiver is not secured the insured shall
indemnify and hold harmless each Party not named as an insured in such
policy against any claim of the insurance carrier arising against such
Party by subrogation or otherwise.
15.3 CONTRACTORS' INSURANCE
Operator shall require all contractors engaged in operations under this
Agreement to comply with the ▇▇▇▇▇▇▇'▇ Compensation Law or the State of
Alaska, and cover all marine operations conducted under the contract,
and to maintain such other insurance in such amounts as is deemed
necessary by the Operator. All such insurance shall contain a waiver of
subrogation by the carrier as to each Party not named as an insured
therein.
15.4 NOTICE OF LOSSES AND CLAIMS
Operator shall notify the other Parties as soon as practicable after
the occurrence of any major accident involving either damage to
property or injuries to or death of persons.
ARTICLE XVI - RELEASE FROM OBLIGATIONS; SURRENDER: RIGHT OF FIRST REFUSAL
-------------------------------------------------------------------------
16.1 SURRENDER OR RELEASE
A Working Interest shall not be surrendered except with the consent of
all Parties. However, a Party who owns a Working Interest and who is
not at the time committed to participate in the Drilling, Deepening or
Plugging Back of a Well may be relieved of further obligations with
respect to such Pool as than constituted by executing and delivering to
Operator an assignment conveying
23
to all other Parties all Working Interests owned by such Party,
together with the entire interest of such Party in any and all ▇▇▇▇▇,
materials, equipment and other property, and, if applicable, the
payment required by Section 8.5.
16.2 ACCRUED OBLIGATIONS
A Party making an assignment or surrender in accordance with Section
16.1 shall not be relieved of its liability for any obligation accrued
hereunder at the time the assignment or surrender is made or of any
obligation to bear its share of the Casts incurred in any Drilling,
Deepening or Plugging Back operation in which such Party has elected to
participate prior to the making of such assignment or surrender
provided, however, that the liability of Marathon and Union for such
costs shall terminate when both of them have disposed of all of their
Working Interests in the Area.
16.3 RIGHT OF FIRST REFUSAL
No Party shall sell all or any portion of Its Working Interests in the
Area to a third party unless that Party has first offered to sell all
or such portion of its Working Interests to each of the other Parties
pursuant to this Section 16.3. Any Party which proposes to sell all or
a portion of its Working Interests ("Selling Party") to a third party
shall provide to each of the other Parties a notice of the name end
address of the prospective third-party purchaser (who must be ready,
willing and able to purchase), the purchase price, a legal description
of the assets TO BE purchased, and all substantive terms of such offer.
Within twenty days following the date a Party receives such notice, it
("Purchasing Party") may notify the Selling Party of its agreement to
purchase the Selling Party's Working Interests which are subject to the
offer from the third party, in which case the Selling Party shall
convey the Working Interests which are subject to the third-party offer
to the Purchasing Party for the same consideration and on the same
terms and conditions to which the third party has agreed. If there is
more than one Purchasing Party, then the Selling Party shall convey
such interests to each Purchasing Party in the same proportion that
each Purchasing Party's Working Interests in the Area bears to the
Working Interests of all Purchasing Parties in the Area at the time
that the Selling Party provides the notice required by this Section
16.3 However, there shall be no preferential right to purchase in those
cases in which any Party wishes to mortgage its interests, or to
transfer title to its interests to its mortgagee in lieu of or pursuant
to foreclosure of a mortgage of its interests,
24
or to dispose of its interests by merger, reorganization,
consolidation, or by sale of all or substantially all of its oil and
gas assets to any party, or by transfer of its interests to a
subsidiary or parent company or to a subsidiary of a parent company, or
to any company in which such Party owns a majority of the stock.
ARTICLE XVII - FORCE MAJEURE
----------------------------
17.1 FORCE MAJEURE
The obligations of Operator hereunder shall be suspended to the extent
that. and only so long as, performance thereof is prevented, in whole
or in part, by acts of God, fire, action of the elements, weather or
natural phenomena, including, but not limited to, ice within the Area
rendering continued operations hazardous to life or property, strikes
or other differences with workmen, unavoidable accidents, acts of civil
or military authorities, acts of the public enemy, restrictions or
restraints imposed by law or by regulation or order of governmental
authority, whether Federal, state, or local, inability to obtain
necessary rights of access, uncontrollable delays in transportation,
inability to obtain necessary materials in open market, or any other
cause reasonably beyond control of Operator whether or not similar to
any cause above enumerated. Operator shall not be required against its
will to adjust or settle any labor dispute. Whenever performance of
obligations is prevented by any such cause, Operator shall give notice
thereof to the other Parties as promptly as reasonably possible.
ARTICLE XVIII - NOTICES
-----------------------
18.1 GIVING AND RECEIPT
Except as otherwise specified herein, any notice, consent, or statement
herein provided or permitted shall be deemed to have been properly
served when sent by mail, facsimile transmission, courier or telegram
to the address of the representative of each Party as furnished to
Operator in accordance with Article XVIII. A notice given under any
provision hereof shall be deemed given only when received by the Party
to whom such notice is directed.
25
18.2 PROPER ADDRESSES
Each Party's proper address for notice as of the date of this Agreement
is listed as follows:
Union Oil Company of California Marathon Oil Company
▇▇▇ ▇ ▇▇▇ ▇▇▇ ▇▇▇▇ ▇ ▇▇. ▇▇▇▇▇ ▇▇▇
P.O. Box 196247 ▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Ph (▇▇▇) ▇▇▇-▇▇▇▇ Ph (▇▇▇) ▇▇▇-▇▇▇▇
Fax (▇▇▇) ▇▇▇-▇▇▇▇ Fax (▇▇▇) ▇▇▇-▇▇▇▇
ARTICLE XIX - LIABILITY, CLAIMS, AND SUITS
------------------------------------------
19.1 INDIVIDUAL LIABILITY
The duties, obligations, and liabilities of the Parties shall be
several and not joint or collective; and nothing herein contained shall
ever be construed as creating a partnership of any kind, joint venture,
association, trust, or other legal entity among the Parties.
19.2 SETTLEMENTS
Operator may settle any single damage claim or suit involving
operations but not involving an expenditure in excess of Ten Thousand
Dollars ($10,000.00) provided the payment is in complete settlement of
such claim or suit. If the amount required for settlement exceeds the
above specified amount, the Parties shall assume and take over the
further handling of the claim or suit unless such authority is
expressly delegated to Operator All costs and expense of handling,
settling, or otherwise discharging such claim or suit shall be an item
of Costs. If a claim is made against any Party on account of any matter
arising from operations hereunder for which such Party is not solely
responsible under this Agreement, the Party shall immediately notify
the other Parties and the claim or suit shall be treated as any other
claim or suit involving operations.
26
ARTICLE XX - INTERNAL REVENUE PROVISION
---------------------------------------
20.1 INTERNAL REVENUE PROVISION
Each of the Parties hereby elects to be excluded from the application
of Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code
of 1986, or such portion or portions thereof as may be permitted or
authorized by the Secretary of the Treasury OF the United States or his
delegate insofar as such Subchapter or any portion or portions thereof
may be applicable to the Parties, If any present or future income tax
laws of the State of Alaska contain provisions similar to those
contained in the Subchapter of the Internal Revenue Code of 1986 above
referred to under which a similar election is permitted, each of the
Parties hereby elects to he excluded from the application of such laws.
Accordingly, each Party hereby authorizes and directs Operator to
execute such an election or elections on its behalf and file the same
with the proper administrative office or agency. If requested by
Operator, each Party agrees to execute and join in such instruments as
are necessary to make such elections effective.
ARTICLE XXI - EFFECTIVE TERM
----------------------------
21.1 TERM
This Agreement is effective on the date first written above and shall
continue in effect until:
A. all ▇▇▇▇▇ have been plugged and abandoned or otherwise
disposed of,
B. all property acquired for the joint account has been disposed
of in accordance with the instructions of the Parties, and
C. there has been a final accounting.
ARTICLE XXII - NON-DISCRIMINATION
----------------------------------
22.1 NON-DISCRIMINATION
In connection with the performance of work under this Agreement,
Operator agrees to comply with all of the provisions of Section 202(1)
to (7), inclusive,
27
of Executive Order 11246, as amended (30 FR 12319), which are hereby
incorporated by reference in this Agreement Operator agrees to insert
the foregoing provision in all contracts for standard commercial
supplies or raw materials.
ARTICLE XXIII - OTHER PROVISIONS
---------------------------------
23.1 AUDITS
An audit shall be made of Operators records and books or account
pertaining to operations under this Agreement whenever the making of
such audit is requested, except that Operator shall not be audited more
often than once each year, except upon the resignation or removal of
such Operator Such audit shall be made by auditors in the employ of the
Parties desiring to participate therein, and the allowance to be made
to each Party furnishing an auditor shall be determined by the approval
of such Parties, and paid by such Parties in proportion to their
respective participation among themselves in Costs incurred during the
period covered by the audit.
23.2 LAWS AND REGULATIONS
This Agreement shall be subject to all applicable laws and regulations,
and shall be interpreted in accordance with the laws of the State of
Alaska.
23.3 ADDITIONAL BURDENS
In the event that any Party has created or should subsequently create
against its interest, any additional royalty, overriding royalty,
production payment, or other burden or charge, the Party which has
created or subsequently creates any such additional burden or charge
shall hold the other Parties to this Agreement harmless from such
additional burdens and charges out of its own funds. As security for
the performance of the obligations created by this paragraph, the
Parties entitled to be held harmless shall have a lien to secure the
performance of the obligations created by this Section 213. Such lien
shall exist upon the interests owned by the Party charged with
performing such obligation.
28
23.4 SUCCESSORS AND ASSIGNS
The provisions of this Agreement shall be covenants running with the
lands, leases, and interests covered hereby, and shall be binding upon
and inure to the benefit of the legal representatives, successors and
assigns of the Parties hereto.
23.5 ENTIRE AGREEMENT
This Agreement including all exhibits attached here and made a party
hereof, constitute the entire agreement between the Parties with
respect to the subject matter hereof and thereof and superseded all
prior agreements, understandings, negotiations and discussion, whether
oral or written, of the Parties with respect to same. No supplement,
amendment, alteration, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the Parties
hereto.
23.6 WAIVER
No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
23.7 CAPTIONS
The captions in this Agreement are for convenience only and shall not
constitute a waiver of any other provisions hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
23.8 GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with
the laws OF the State of Alaska without regard to conflict of law rules
that would direct the application of the law of another jurisdiction.
29
ARTICLE XXIV - EXECUTION
------------------------
24.1 COUNTERPARTS
This Agreement may he executed in counterparts and all such
counterparts taken together shall be deemed to constitute one and the
same instrument,
24.2 RATIFICATION
This Agreement may be executed by the execution and delivery of a good
sufficient instrument or ratification, adopting and entering into this
Agreement. Such ratification shall have the same effect as if the Party
executing it had executed this Agreement or a counterpart hereof.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
effective as of the date first herein written.
Operator/and Party
Union Oil Company of California
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Attorney-in-fact
Date: June 12, 1996
Party
Marathon Oil Company
/s/ ▇.▇. ▇▇▇▇▇▇▇
----------------------------
Production Manager
Date: 6/12/96
30