Exhibit 10.4.3
CONFIDENTIAL
RECORDATION REQUESTED:
AFTER RECORDATION, RETURN TO:
RETURN BY: MAIL ( ) PICKUP ( )
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STATE OF HAWAII
DEPARTMENT OF LAND AND NATURAL RESOURCES
GEOTHERMAL RESOURCES MINING LEASE NO. R-2
STATE OF HAWAII
DEPARTMENT OF LAND AND NATURAL RESOURCES
GEOTHERMAL RESOURCES MINING LEASE
TABLE OF CONTENTS
Page No.
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1. LEASE..................................................... 1
2. RESERVATIONS TO LESSOR.................................... 3
A. Disposal......................................... 3
B. Rights-of-Way.................................... 3
C. Certain Mineral Rights........................... 4
D. Casing........................................... 4
E. Measurements..................................... 4
3. TERM...................................................... 4
A. Primary Term, Extended Term, Maximum Term........ 4
B. Extension of Lease Beyond Primary Term
by Drilling Operations........................... 5
▇. ▇▇▇▇-in Production............................... 5
D. Drilling or Reworking Operations After
Cessation of Production.......................... 6
4. RENTALS................................................... 6
▇. ▇▇▇▇▇▇ and Time of Payment....................... 6
B. Credits Against Royalties........................ 7
5. ROYALTIES................................................. 7
A. For Period of Initial Thirty-Five Years.......... 7
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Page No.
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B. Readjustment After Thirty-Five Years............. 8
C. Deadline for Royalty Payments.................... 8
D. Royalties-Production (Absolute Open-Flow
Potential)....................................... 9
E. Geothermal By-Products Testing................... 10
F. Interest and Penalties........................... 10
6. REQUIREMENT TO COMMENCE MINING OPERATIONS................. 11
7. TAXES..................................................... 12
A. Real Property Taxes.............................. 12
B. Other Taxes...................................... 12
8. UTILITY SERVICES.......................................... 13
9. SANITATION................................................ 13
10. WASTE: USE OF PREMISES.................................... 13
11. COMPLIANCE WITH LAWS...................................... 14
12. INSPECTION OF PREMISES AND RECORDS........................ 15
13. GEOTHERMAL OPERATIONS..................................... 16
A. Removal of ▇▇▇▇▇▇▇............................... 16
B. Operating-Sites.................................. 16
C. Site Selection................................... 16
D. Drilling Operations.............................. 17
E. Water Quality - Waste Disposal................... 17
F. Fish and Game Notice - Interference.............. 18
G. Damage to Terrain................................ 18
▇. ▇▇▇▇▇▇▇▇▇........................................ 18
I. Filled Lands..................................... 19
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Page No.
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J. Road Maintenance................................. 20
▇. ▇▇▇▇▇▇ Damaged................................... 21
L. Improvements - Protection from Damage............ 21
M. Damages - Payment................................ 21
N. Damages to Surface or Condition of Land.......... 21
0. Power Plants..................................... 22
P. Agreement with Surface Owner..................... 23
Q. Drilling Mud..................................... 23
P. Facility Sites................................... 24
S. Construction of Terms............................ 24
T. Spacing, Production, Etc......................... 24
U. Drilling - Notice - Plan......................... 25
V. ▇▇▇▇▇▇▇▇, Etc. - Circulating Medium.............. 25
W. Generating Plants - Approval..................... 25
14. LIENS..................................................... 26
15. ASSIGNMENT OF SUBLEASE.................................... 26
16. INDEMNITY................................................. 27
17. LIABILITY INSURANCE....................................... 28
18. BOND REQUIREMENTS......................................... 29
19. REVOCATION................................................ 30
20. SURRENDER................................................. 31
21. ACCEPTANCE OF RENT AND ROYALTIES NOT A WAIVER............. 33
22. EXTENSION OF TIME OF PERFORMANCE.......................... 33
23. NO WARRANTY OF TITLE...................................... 34
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Page No.
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24. COMMINGLED PRODUCTION - PLANS - APPROVAL -
ACCURACY.................................................. 35
25. SUSPENSION OF OPERATIONS.................................. 36
26. DILIGENT OPERATIONS REQUIRED.............................. 37
27. PRODUCTION OF BY-PRODUCTS................................. 37
28. RECORDS AND REPORTS....................................... 38
29. FORCE MAJEURE............................................. 40
30. UNIT OR COOPERATIVE PLANS................................. 41
31. NOTICES................................................... 41
32. RESTORATION OF PREMISES................................... 42
33. HEADINGS.................................................. 42
34. REFERENCE................................................. 42
35. INSOLVENCY................................................ 42
36. SUBSIDENCE................................................ 43
37. WORKMEN'S COMPENSATION INSURANCE.......................... 43
38. SUCCESSORS................................................ 43
39. SEVERABILITY.............................................. 44
40. GEOTHERMAL OWNERSHIP...................................... 44
41. LEASE TERMS: V. REGULATION 8.............................. 44
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STATE OF HAWAII
DEPARTMENT OF LAND AND NATURAL - RESOURCES
GEOTHERMAL RESOURCES MINING LEASE NO. R-2
THIS INDENTURE OF LEASE, made this 20th day of February, 1981, pursuant
to Chapter 182, Hawaii Revised Statutes, and the rules and regulations
promulgated thereunder, by and between the STATE OF HAWAII, by its Board of Land
and Natural Resources, hereinafter called the "Lessor", and KAPOHO LAND
PARTNERSHIP, a Hawaii Limited Partnership, whose business and post office
address is P.O. Box 374, Hilo, Hawaii 96720 respectively, hereinafter called the
"Lessee",
W I T N E S S E T H:
- - - - - - - - - --
1. LEASE
Subject to the provisions of paragraph 23 entitled "No Warranty of
Title", Lessor, in consideration of the royalties, rental, and other monetary
considerations, agreements and stipulations herein contained, does hereby lease
unto the Lessee the right to develop geothermal resources and geothermal
by-products in and under that certain parcel of land, hereinafter designated as
the "leased lands", described in Exhibit "A" containing approximately 815.7997
acres situated at Kapoho, Puna, Hawaii, as shown on the map marked Exhibit "B",
which exhibits are attached and made a part hereof.
The Lessee shall have the sole and exclusive right to drill for,
produce and take geothermal resources from the leased lands and occupy and use
so much of the surface of the leased lands as may be reasonably required
pursuant to the provisions of section 182-3 of the Hawaii Revised Statutes and
section 6.1 of the regulations. ▇▇▇▇▇▇ agrees to comply with these provisions
and to save and hold the Lessor harmless with respect to the claims made under
said
statute and regulations by the owners and occupiers of the surface of the leased
lands. This Lease does include the right to reinject beneath the leased lands
geothermal fluids subject to the prior written approval of the Lessor and upon
such terms and conditions as the Lessor considers to be in the public interest
and include any other right as may be necessary to produce the geothermal
resources. This Lease does not confer upon the Lessee the privilege or right to
store hydrocarbon gas beneath the leased lands; nor does this Lease confer upon
the Lessee any other privilege or right not expressly given herein.
This Lease is entered into with the agreement that its purposes
are and its administration shall be consistent with the principle of multiple
use of public lands and resources; this Lease shall allow co-existence of other
permits or leases of the same lands for deposits of other minerals under
applicable laws, and the existence of this Lease shall not preclude other uses
of the leased lands. However, operations under such other permits or leases or
other such uses shall not unreasonably interfere with or endanger operations
under this Lease, nor shall operations under this Lease unreasonably interfere
with or endanger operations under any permit, lease, or other entitlement for
use issued or held pursuant to the provisions of any other law. Nor shall this
Lease be construed as superseding the authority which the head of any State
department or agency has with respect to the management, protection, and
utilization of the State lands and resources under his jurisdiction. The State
may prescribe in its rules and regulations those conditions it deems necessary
for the protection of resources.
2. RESERVATION TO LESSOR
All rights in the leased lands not granted to the Lessee by this
Lease are hereby reserved to the Lessor. Without limiting the generality of the
foregoing such reserved rights include:
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A. Disposal - If the State owns the surface of the land, the right
to sell or otherwise dispose of the surface of the leased lands owned by the
State or to sell or dispose of any other resource in the leased lands under
existing laws, or laws hereafter enacted subject to the rights of the Lessee
under this Lease. Nothing provided herein shall be construed to authorize or
provide for the sale or disposition of the surface of reserved or other
privately owned lands.
B. Rights-of-way - The right to authorize geological and
geophysical explorations on the leased lands which do not interfere with or
endanger present operations or reasonable prospective operations under this
Lease, and if the State owns the surface of the land the right to grant such
easements or rights-of-way for joint or several use upon, through or in the
leased lands for steam lines and other public or private purposes which do not
interfere with or endanger present operations or reasonable prospective
operations or facilities constructed under this Lease. Nothing provided herein
shall be construed as a grant or the right to grant an easement or right-of-way
upon reserved or other privately owned lands.
C. Certain Mineral Rights - The right to extract at its sole cost
and expense and own oil, hydrocarbon gas, and helium from all geothermal steam
and associated geothermal resources produced from the leased lands; provided,
however that such extraction and ownership rights shall be exercised by Lessor
in such manner as will not unduly interfere with the rights of Lessee under this
Lease.
D. Casing - If the State owns the surface of the land, the right
to acquire the well and casing when the Lessee finds only potable water, and
such water is not required in lease operations; and
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E. Measurements - The right to measure geothermal resources and to
sample any production thereof.
3. TERM
A. Primary Term, Extended Term, Maximum Term
This Lease shall be for a term of ten (10) years from and after
the effective date of this Lease pursuant to Rule 3.11 of the Regulations,
(hereinafter referred to as the "primary term"), and for so long thereafter as
geothermal resources are produced or utilized in commercial quantities, provided
that the maximum term of this Lease shall not exceed sixty-five (65) years;
provided, however, that if the primary term or the maximum term for geothermal
leases should be extended by statute, retroactively, such extended terms shall
be applicable to this Lease, or should said terms be extended generally by
statute, such extended terms may be made applicable to this Lease upon such
other terms and conditions as the Board may determine. Production or utilization
of geothermal resources in commercial quantities shall be deemed to include the
completion of one or more ▇▇▇▇▇ capable of producing geothermal resources for
delivery to or utilization by a facility or facilities not yet installed but
scheduled for installation not later than fifteen (15) years from the date of
commencement of the primary term of this Lease.
B. Extension of Lease Beyond Primary Term by Drilling Operations
If at the expiration of the primary term hereof geothermal
resources in commercial quantities are not being produced from the leased lands,
but the Lessee is actively engaged in drilling operations designed to drill
below the depth of 1,000 feet, or, to a production zone at a lesser depth in a
diligent manner, this Lease shall be continued for so long thereafter as such
operations are continued with no cessation thereof for more than 180 days, but
not to exceed a period of five (5) years, and if such drilling operations are
successful, as long thereafter
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as geothermal resources are being produced or utilized in commercial quantities
except for the sixty-five (65) year limit provided above.
▇. ▇▇▇▇-in Production
If the Lessee has voluntarily shut-in production for lack of a
market, but is proceeding diligently to acquire a contract to sell or to utilize
the production or is progressing with installations needed for production, this
Lease shall continue in force upon payment of rentals for the duration of the
primary term or for five (5) years after shut-in, whichever is longer. The
Chairman shall continue to review this Lease every five (5) years until
production in commercial quantities occurs or this Lease is terminated by Lessor
for ▇▇▇▇▇▇'s lack of due diligence or is surrendered by the Lessee. When
production and sale or utilization of geothermal resources in commercial
quantities has been established, the term of this Lease shall continue as
provided in Paragraph A of this paragraph 3.
D. Drilling or Reworking Operations After Cessation of Production
If production of geothermal resources should cease by reason of a
deadline in the productive capacity of existing ▇▇▇▇▇ after expiration of the
primary term, or before the end of the primary term if production has commenced,
this Lease shall continue so long as Lessee actively and continuously engages in
drilling or reworking operations which shall be commenced within One Hundred
Eighty (180) days after cessation of production. Continuous drilling or
reworking operations shall be deemed to have occurred where not more than One
Hundred Eighty (180) days elapse between cessation of operations on one well and
commencement of operations on the same or another well. If such operations are
continued and if they are successful, this Lease shall continue as long
thereafter as geothermal resources are being produced in commercial quantities,
except for the sixty-five (65) year limit provided above.
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4. RENTALS
▇. ▇▇▇▇▇▇ and Time of Payment
The first year's annual rent shall be paid pursuant to Rule 3.12.
Thereafter, Lessee shall pay to Lessor at the Department, in advance each year
on or before the anniversary date hereof, the annual rental of EIGHT HUNDRED AND
SIXTEEN DOLLARS ($816.00)
B. Credits Against Royalties
The annual rental due and paid for each year shall be credited
against any production royalties due and accrued during the same year. Annual
rentals paid for a given year shall not be credited against production royalties
due in future years.
5. ROYALTIES
A. For Period of Initial Thirty-five Years
For the primary ten (10) year term and during the first
twenty-five (25) years thereafter ▇▇▇▇▇▇ shall pay to Lessor the following
royalties on production measured and computed in accordance with the
regulations:
1 Geothermal Resources (Excluding Geothermal By-products)
A royalty of ten (10%) percent of the gross proceeds received
by the Lessee from the sale or use of geothermal resources
produced from the leased lands and measured at the wellhead
without any deduction for treating, processing and
transportation cost, notwithstanding Rule 3.13b. of
Regulation 8.
2. Geothermal By-Products
Five (5%) percent of the gross proceeds received by the
Lessee from the sale of any such by-product produced under
this Lease, including demineralized or desalted water, after
deducting the treating, processing and transportation costs
incurred.
In the event that geothermal resources hereunder is not sold to a
third party but is used or furnished to a plant owned or controlled by the
Lessee, the gross proceeds of such production for the purposes of computing
royalties hereunder shall be that which is reasonably
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equal to the gross proceeds being paid to other geothermal producers for
geothermal resources of like quality under similar conditions without deducting
any treating, processing and transportation costs incurred, notwithstanding Rule
3.l3b. of Regulation 8.
No payment of royalty will be required on water if it is used in
plant operation for cooling or generation of electric energy or is reinjected
into the sub-surface. No royalty shall be paid for geothermal by-products used
or consumed by Lessee in his production operations.
Gross proceeds shall not be deemed to include excise, production,
severance or sales taxes or other taxes imposed on the Lessee by reason of the
production, severance or sale of geothermal resources or geothermal by-products.
B. Readjustment After Thirty-five Years
Royalty rates on geothermal resources and geothermal by-products
shall be readjusted, subject to the limitations specified in the regulations and
in accordance with the procedures prescribed therein at the expiration of the
thirty-fifth (35th) and fiftieth (50th) years of the Lease; provided, however,
that such readjustment shall be only as to the royalty rate and not as to the
basis for determining payment to the Lessor.
If the royalty rates for any ensuing period have not been
determined prior to the expiration of the preceding period, the Lessee shall
continue to pay the royalty rates effective for the previous period, but the
Lessee shall, within thirty (30) days after the new royalty rates have been so
determined, pay the deficiency, if any.
C. Deadline for Royalty Payments
The Lessee shall make payments of royalties to the Lessor within
thirty (30) days after the end of each calendar month following such production
and accompany such payment with a certified true and correct written statement
by the Lessee, showing the amount of geothermal resource and geothermal
by-product produced, sold, used and/or otherwise disposed
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of and the basis for computation and determination of royalties. The Lessee
shall furnish such other data as may be necessary to enable the Lessor to audit
and verify all royalties due and payable to the Lessor.
D. Royalties-Production (absolute open flow potential)
If the Lessee supplies steam to any electrical generating facility
from ▇▇▇▇▇ on both the leased lands and other lands and there is producible from
all such ▇▇▇▇▇ in aggregate a quantity of steam greater than the maximum
quantity utilizable by said electrical generating facility, Lessee agrees to
produce and sell or use steam from the leased lands in a proportion no less than
the proportion that the absolute open flow potential (the absolute open flow
potential as used herein is the rate of flow in pounds of steam per hour that
would be produced by a well if the only pressure against the face of the
producing formation in the well bore were atmospheric pressure) of the ▇▇▇▇▇ on
the leased lands bears to the total absolute open flow potential of all such
▇▇▇▇▇ from which Lessee supplies steam to such electrical generating facility.
For purposes of this section it shall be deemed that the Lessee supplies steam
from a well to an electrical generating facility when such well is capable of
producing geothermal resources in commercial quantities to such facility. The
absolute open flow potential of all such ▇▇▇▇▇ whether on the leased lands or
other lands shall be determined by the Lessor and shall be based upon tests
performed by the Lessee as prescribed by the Lessor. In this regard, Lessee
shall, upon completion of each of such ▇▇▇▇▇, and prior to the placing of such
▇▇▇▇▇ on commercial production, perform, and deliver to the Lessor the results
of, the following tests:
1. Pressure Test - Pressure-buildup tests to determine static
reservoir pressure and well bore conditions. If pressure-buildup tests
are based on shut-in wellhead data, then static well bore temperature
surveys must also be conducted:
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2. Isochronal Flow Tests - Isochronal flow tests or two rate flow
tests to establish a back pressure curve and the absolute open flow
potential;
3. Other Tests-Static Reservoir Pressure - Other tests as deemed
to be necessary by the Lessor.
After commencement of commercial production from each of such
▇▇▇▇▇, Lessee shall annually, or more frequently if requested by the
Lessor, determine static reservoir pressure and complete any other
tests as specified by the Lessor.
E. Geothermal By-Products Testing
The Lessee shall furnish the Chairman the results of periodic
tests showing the content of by-products in the produced geothermal resources.
Such tests shall be taken as specified by the Chairman and by the method of
testing approved by him, except that tests not consistent with industry practice
shall be conducted at the expense of the Lessor.
F. Interest and Penalties
1. Interest - It is agreed by the parties hereto that any
royalties, rentals, or other monetary considerations arising under the
provisions of this Lease and not paid when due as provided in this Lease, shall
bear interest from the day on which such royalties, rentals, or other monetary
consideration were due at the rate of 12% per annum or such higher rates as may
be permitted by law until such royalties, rentals, or other monetary
considerations shall be paid to the Lessor.
2. Penalty - It is agreed by the parties hereto that any
royalties, rentals or other monetary considerations arising under the provisions
of this Lease and not paid when due as provided in this Lease, shall be subject
to a five (5%) percent penalty on the amount of any such royalties, rentals,
percentage of net profits, or other monetary considerations arising under the
provisions of this Lease.
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3. Definition of Royalties, etc. - It is agreed by the parties
hereto that, for the purpose of this section, "royalties, rentals or other
monetary considerations arising under the provisions of this Lease and not paid
when due" includes but is not limited to any amounts determined by the Lessor to
have been due to the Lessor if, in the judgment of the Lessor, an audit by the
Lessor of the accounting statement required by paragraph 28 below shows that
inaccurate, unreasonable or inapplicable information contained or utilized in
the statement resulted in the computation and payment to the Lessor of less
royalties, rentals, or other monetary considerations than actually were due to
the Lessor.
6. REQUIREMENT TO COMMENCE MINING OPERATIONS
Lessee shall commence mining operations upon the leased lands
within three years from the effective date of this Lease, excluding any research
period which has been granted; provided, that so long as the Lessee is actively
and on a substantial scale engaged in mining operations on at least one
geothermal resources mining lease, the covenant to commence mining operations
shall be suspended as to all other leases held by the Lessee, covering lands on
the same island.
7. TAXES
A. Real Property Taxes
Lessee shall pay any real property taxes levied on that portion of
the surface of the leased lands utilized by ▇▇▇▇▇▇, according to the value
allocated thereto by Lessor or other appropriate State or County agency based on
the use of the surface of the portion of the land by ▇▇▇▇▇▇ and the use of the
remainder of the land by others entitled thereto. Lessee shall also pay any real
property taxes levied on the structures and improvements placed thereon and
utilized by ▇▇▇▇▇▇; provided that all subsurface rights and any geothermal
resources underlying the leased lands under this Lease shall be deemed to have
only nominal value for real property tax
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assessment purposes until such time, if any, as specifically authorized by law.
If Lessor has exercised its rights under paragraph 2 herein, said taxes shall be
prorated according to ▇▇▇▇▇▇'s interests.
B. Other Taxes
Royalties paid hereunder shall be in lieu of any severance or
other similar tax on the extracting, producing, winning, beneficiating,
handling, storage, treating or transporting of geothermal resources or any
product into which the same may be processed in the State of Hawaii;
nevertheless, if any such tax should be assessed, then such tax shall be
deducted from any royalties otherwise due hereunder. As to any and all other
taxes of any nature assessed upon geothermal resources or geothermal by-products
therefrom or assessed on account of the production or sale of geothermal
resources or geothermal by-products from the leased land, Lessor and Lessee each
shall bear such tax in proportion to its respective fractional share of the
value of such production.
8. UTILITY SERVICE
Lessee shall be responsible for all charges, duties and rates of
every description, including water, electricity, sewer, gas, refuse collection
or any other charges, arising out of or in connection with ▇▇▇▇▇▇'s operations
hereunder.
9. SANITATION
Lessee shall keep its operations and improvements in a strictly
clean, sanitary and orderly condition.
10. WASTE: USE OP PREMISES
a. Lessee shall not commit, suffer or permit to be committed any
waste, nuisance, strip mining or unlawful use of the leased lands or any part
thereof.
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b. Negligence - Breach - Non-Compliance - Lessee shall use all
reasonable precautions to prevent waste of, damage to, or loss of natural
resources including but not limited to gasses, hydrocarbons and geothermal
resources, or reservoir energy on or in the leased lands, and shall be liable to
the Lessor for any such waste, damage or loss to the extent that such waste,
damage, or loss is caused by (1) the negligence of Lessee, its employees,
servants, agents or contractors; (2) the breach of any provision of this Lease
by Lessee, its employees, servants, agents or contractors, or non-compliance
with applicable federal, state or county statutes or rules and regulations;
provided, however, that nothing herein shall diminish any other rights or
remedies which the Lessor may have in connection with any such negligence,
breach or non-compliance. With respect to any other such waste damage or loss,
▇▇▇▇▇▇ agrees to indemnify, save the Lessor harmless and, at the option of the
Lessor, defend the Lessor from any and all losses, damages, claims, demands or
actions caused by, arising out of, or connected with the operations of the
Lessee hereunder as more specifically provided under paragraph 16 hereof. Lessee
shall not be obligated to defend the Lessor's title to geothermal resources.
11. COMPLIANCE WITH LAWS
Lessee shall comply with all valid requirements of all municipal,
state and federal authorities and observe all municipal, state and federal laws
and regulations pertaining to the leased lands and ▇▇▇▇▇▇'s operations
hereunder, now in force or which may hereafter be in force, including, but not
limited to, all water and air pollution control laws, and those relating to the
environment; provided, however, no revision or repeal of the regulations as
defined in paragraph 34 subsequent to the effective date hereof shall change the
rental, royalty rate, term, or otherwise substantially change the economic terms
under this Lease; provided, further, however, that the State of Hawaii, acting
in its governmental capacity, may by such regulations or amendments thereto made
at any time regulate the drilling, location, spacing, testing, completion,
production,
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operation, maintenance and abandonment of a well or ▇▇▇▇▇ or similar activity as
well as the construction, operation and maintenance of any power plant or other
facilities in the exercise of its police powers to protect the public health,
welfare and safety as provided in the regulations.
Lessee shall have the right to contest or review, by legal
procedures or in such other manner as Lessee may deem suitable, at its own
expense, any order, regulation, direction, rule, law, ordinance, or requirement,
and if able, may have the same cancelled, removed, revoked, or modified. Such
proceeding shall be conducted promptly and shall include, if ▇▇▇▇▇▇ so decides,
appropriate appeals. Whenever the requirements become final after a contest,
Lessee shall diligently comply with the same. ▇▇▇▇▇▇ also agrees that in its
employment practices hereunder it shall not discriminate against any person
because of race, color, religion, sex, ancestry or national origin.
12. INSPECTION OP PREMISES AND RECORDS
Lessor, or persons authorized by the Lessor, shall have the right,
at all reasonable times, to go upon the leased lands for the purpose of
inspecting the same, for the purpose of maintaining or repairing said premises,
for the purpose of placing upon the leased lands any usual or ordinary signs,
for fire or police purposes, to protect the premises from any cause whatever, or
for purposes of examining and inspecting at all times the operations of Lessee
with respect to ▇▇▇▇▇, improvements, machinery, and fixtures used in connection
therewith, all without any rebate of charges and without any liability on the
part of the Lessor for any loss of occupation or quiet enjoyment of the premises
thereby occasioned.
Lessor or its agents may at reasonable times inspect the books and
records of Lessee with respect to matters pertaining to the payment of royalties
to Lessor. Complete information shall be made available to Lessor. In addition,
qualified representatives and/or consultants designated by Lessor may examine
the reports specified in this Lease and all other
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pertinent data and information regarding ▇▇▇▇▇ on the leased lands and
production therefrom. In the event of surrender of all or a part of the leased
lands Lessee shall furnish Lessor all data with respect to such surrendered
lands including interpretations of such data for use in future lease
negotiations with third parties. ▇▇▇▇▇▇ agrees on written request to furnish
copies of such information to ▇▇▇▇▇▇'s qualified representatives or consultants.
13. GEOTHERMAL OPERATIONS
Lessee shall carry on all work hereunder with due regard for the
preservation of the property covered by this Lease and with due regard to the
safety and environmental impact of its operations and in accordance with the
following terms and conditions:
A. Removal of ▇▇▇▇▇▇▇. Lessee shall remove the ▇▇▇▇▇▇▇ and other
equipment and facilities within sixty (60) days after Lessee has ceased making
use thereof in its operations.
B. Operating Sites. All permanent operating sites shall be
landscaped or fenced so as to screen them from public view to the maximum extent
possible, as required in the discretion of the Department of Land and Natural
Resources. Such landscaping or fencing shall be approved in advance by the
Lessor and kept in good condition.
C. Site Selection. Prior to commencing a particular operation on
the surface of the leased lands, Lessee will consult with the occupier and
submit the details concerning the proposed operation, such as the location or
route of any drill site, facility site, installation site, surface area, road,
pond, pipeline, power line, or transmission line, as the case may be, to the
occupier by certified mail for the occupier's approval. If the occupier does not
approve such proposal, occupier will submit within thirty (30) days an alternate
written proposal. If occupier does not submit an alternate proposal, Lessee may
proceed with its operation as originally proposed, subject to the provisions of
paragraph 23. If the occupier and ▇▇▇▇▇▇ cannot agree, the matter will be
submitted to arbitration.
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D. Drilling Operations. All drilling ahd production operations
shall be conducted in such manner as to eliminate as far as practicable dust,
noise, vibration, or noxious odors. The operating site shall be kept neat, clean
and safe. Drilling dust shall be controlled to prevent widespread deposition of
dust. Detrimental material deposited on trees and vegetation shall be removed.
Lessee will take such steps as may be required to prevent damage to crops. The
determination as to what is detrimental will be made by the Lessor.
No well shall be drilled within five hundred (500) feet of any
residence or building on the leased lands without first obtaining the occupier's
written consent.
In any well drilled by Lessee hereunder sufficient casing shall be
set and cemented so as to seal off surface and subsurface waters, any of which
would be harmful to agricultural or other operations.
E. Water Quality - Waste Disposal. Lessee shall file with the
Lessor a report of any proposed waste discharge.
Wastes shall be discharged in accordance with requirements and
prohibitions prescribed by the Lessor. The Lessor and any other state agency
having jurisdiction over the affected lands shall also approve the place and
manner of such waste disposal.
F. Fish and Game Notice - Interference. Lessee shall communicate
with the Division of Fish and Game prior to any operations which may adversely
affect fish and wildlife resources. Lessee shall conduct its operations in a
manner which will not interfere with the right of the public to fish upon and
from the public lands of the State and in the waters thereof or will not
preclude the right of the public to use of public lands and waters.
G. Damage to Terrain. Any operations disturbing the soil surface,
including road building and construction and movement of heavy equipment in
support of or relating to specific
15
geothermal exploration or development activities shall be conducted in such
manner as will not result in unreasonable damage to trees and plant cover, soil
erosion, or in degradation of waters of the State, including fish and aquatic
life habitat. Lessee will conduct its operations in a manner that will not
unreasonably interfere with the enjoyment of the leased lands by the occupier or
persons residing on or near the leased lands.
▇. ▇▇▇▇▇▇▇▇▇. Pollution of the ocean and tidelands, rivers, or
other bodies of water, and all impairment of and interference with bathing,
fishing, or navigation in the waters of the ocean or any bay or inlet thereof is
prohibited, and no brine, minerals, or any refuse of any kind from any well or
works shall be permitted to be deposited on or pass into waters of the ocean,
any bay or inlet thereof, rivers, lakes or other bodies of water, without
specific written State authorization.
No Leased Substances which may be produced from any well drilled
upon the leased lands shall be blown, flowed, or allowed to escape into the open
air or on the ground in such a manner as to create a nuisance, which shall
specifically include but not be limited to noise, air or other pollution, and
other activities which disturb the occupier's or his Tenant's use of the leased
lands. Subject to the foregoing, Lessee may bleed Leased Substances to the
atmosphere so long as such operations are lawfully and prudently conducted in
accordance with good geothermal drilling and production practices and are not
otherwise violative of the provisions of this Lease.
I. Filled Lands. No permanent filled lands, piers, platforms, or
other fixed or floating structures in, on, or over any tide and submerged lands
covered by this Lease or otherwise available to Lessee shall be permitted to be
constructed, used, maintained, or operated without obtaining any and all permits
required under applicable State and Federal law, rules and
16
regulations, and complying with all valid ordinances of cities and counties
applicable to Lessee's operations, and without securing the written permission
of the Lessor specifically authorizing the activity.
J. Road Maintenance. Lessee will take such steps at ▇▇▇▇▇▇' s own
expense as are necessary to insure that its roads, well sites, plant sites and
other operation areas will be kept as dust free as is practicable so that dust
will not decrease the market value of adjacent growing crops or interfere with
the occupier's or his tenant's uses.
Lessee will use existing roads where such are available for its
operations. All roads, bridges and culverts used by Lessee will be maintained by
it and roads surfaced or treated in a manner that will prevent dust from
interfering with agricultural or residential use of the leased lands. Lessee
shall be responsible for the maintenance of and repair of damages caused to
roads used by ▇▇▇▇▇▇ on or serving the leased lands. The occupier and Lessor and
their agents, tenants and licensees shall have the full use of roads constructed
by Lessee but shall be responsible for the repair of any unusual damage caused
to such roads by their use. In constructing roads, Lessee shall install
necessary culverts or bridges so as not to interfere with the irrigation or
drainage of the leased lands.
▇. ▇▇▇▇▇▇ Damaged. In the absence of any agreement to the
contrary, timber damaged, destroyed, or used on the leased lands shall be
compensated for at market value to the surface owner. Borrow pit material shall
not be obtained from the leased lands without permission and payment of market
value to the surface owner.
L. Improvements - Protection from Damage. Improvements,
structures, telephone lines, trails, ditches, pipelines, water developments,
fences, crops and other property of
17
the State or surface owners, other lessees or permittees shall be protected from
damage and repaired or replaced by Lessee when damaged by Lessee.
M. Damages - Payment. In the event any buildings or personal
property or crops shall be damaged or destroyed because of ▇▇▇▇▇▇'s operations
on the leased lands, then Lessee shall be liable for all damages occasioned
thereby. Lessee in its operations on the leased lands shall at all times have
due and proper regard for the rights and convenience, and the health, welfare
and safety of the occupier and of all tenants and persons lawfully occupying the
leased lands. In the event that ▇▇▇▇▇▇'s operations result in any condition,
including but not limited to water table or deposition of chemicals, or harmful
substances, which adversely affects the continued production of crops or then
beneficial uses and purposes of the land, occupier at his option may require
Lessee to reimburse the occupier, his tenants and persons lawfully occupying the
leased lands as to the affected acreage in accordance with subparagraphs N 1 and
2 of this paragraph 13.
N. Damages to Surface or Condition of Land. Lessee shall pay the
surface owner for the surface of each acre of land or fraction thereof utilized,
taken or used or rendered substantially unusable by the Lessee in its
operations, pursuant to the terms of this Lease, for farming or stock raising
operations or other uses or purposes for which the land is then being used or
for which the surface owner had made other plans, which shall include, but not
be limited to, the lands occupied by drill sites, facility sites, roadways
constructed by Lessee, ponds, pipelines, utility lines, power and transmission
lines, production facilities, and other facilities and structures, together with
other uses of the surface, save and except certain plants and buildings provided
for in subparagraph O below, in accordance with one of the following methods to
be elected by surface owner.
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1. Lessee shall pay the surface owner annually from the date of
acquisition a rental equivalent to the fair rental value which is being paid
each year for like property.
2. Lessee shall pay surface owner severance damages if any to the
surrounding land and purchase the surface acreage required by Lessee for its
fair market value with right of surface reverter in the surface owner when no
longer utilized by Lessee in its operations.
O. Power Plants. In the event Lessee, or a public utility,
pursuant to ▇▇▇▇▇▇'s operations hereunder, desires to construct any plant or
building site and is required to have fee title for such purpose, then Lessee
shall pay occupier the fair market value for the surface of such plant or
building site and the severance damages, if any, to the parcel from which such
plant or building site is taken.
P. Agreement with Surface Owner. In the event that the Lessor does
not own the surface of the leased lands and if the geothermal developer who is
responsible for developing the resources on the leased lands enters into a lease
with the surface owner, then the provisions of such lease from the surface owner
shall supercede the foregoing paragraphs 13.K. through 13.0 and 14 relating to
surface use, and such paragraphs shall thereafter have no force and effect where
it is inconsistent with the lease with the surface owner.
Q. Drilling Mud. Drilling mud shall be ponded in a safe manner and
place, and where required by the Lessor, posted with danger signs, and fenced to
protect persons, domestic animals, and wildlife. Upon completion of drilling,
the mud shall be disposed of, or after drying in place, covered with a
protective layer of soil.
▇▇▇▇▇▇ agrees to fence all sump holes and excavations and all
other improvements, works, or structures which might interfere with or be
detrimental to the activities
19
of the occupier or other adjacent or nearby users of the land, and to build
sumps and to take all reasonable measures to prevent pollution of surface or
subsurface waters on or in the leased lands. Upon abandonment of any well on the
leased lands, or on the termination of this Lease, or upon quitclaim or reverter
of any leased land by ▇▇▇▇▇▇, then as to such leased land Lessee shall level and
fill all sump holes and excavations shall remove all debris, and shall leave
those areas of the leased lands used by Lessee in a clean and sanitary condition
suitable for farming or in the condition it was at the inception of this Lease
if its use was other than farming, and shall pay the occupier for all damages to
occupier's buildings, structures, or other property caused by ▇▇▇▇▇▇.
R. Facility Sites. Areas cleared and graded for drilling and
production facility sites shall be kept to a reasonable number and size, and be
subject to Lessor's approval.
Unless economic and technological considerations will not permit,
▇▇▇▇▇ will be drilled directionally in order to minimize the number of drill
sites required. Well sites and facility sites will be shaped and located to the
extent practicable to interfere as little as possible with the occupier's
operations including the spacing, location and operation of the occupier's
improvements, planned and contemplated uses, grading, utility and drainage
systems, and roads, and to prevent undue interference or danger to the
occupier's or his tenant's farming and other operations. Where economically and
technologically feasible, ▇▇▇▇▇ shall be drilled directionally from a single
well site. Drill sites may also be located on unused portions of the leased
lands. The drill sites will not ordinarily exceed five (5) acres in size but
will vary in accordance with the number of ▇▇▇▇▇ drilled from such site and the
amount of production equipment placed thereon. Plant or facility sites will be
limited in size to approximately ten (10) acres per site.
S. Construction of Terms. The above are in addition to, and not to
be construed as limitations upon, all other
20
rules, regulations, restrictions, mitigation measures and all other measures
designed to restrict, limit, modify or minimize the environmental impact of
operations carried out pursuant to this Lease as set forth in this Lease.
T. Spacing, Production, Etc. The Lessor may determine the spacing
of ▇▇▇▇▇ and the rate of development and production of such ▇▇▇▇▇ to prevent the
waste of geothermal resources and to promote the maximum economic recovery from,
and the conservation of reservoir energy in, each zone or separate underground
source of geothermal resources. Such determination shall be based on recognized
engineering standards and shall be consistent with prevailing economic and
market conditions.
U. Drilling - Notice - Plan - Lessee, before commencing the
drilling of a well, shall notify the Lessor of its intention to drill, and such
notice shall contain the location and elevation above sea level of ▇▇▇▇▇▇▇,
proposed depth, bottom hole location, casing program, proposed completion
program and the size and shape of drilling site, excavation and grading planned,
and location of existing and proposed access roads. Where the surface of the
leased lands is under the jurisdiction of a State agency other than the
Department of Land and Natural Resources, Lessee shall provide at the same time
such information listed above as is pertinent to that agency.
V. Drilling, etc. - Circulating Medium - All drilling, redrilling,
perforating, or work-over operations within the leased lands shall be done with
an accepted circulating medium.
W. Generating Plants - Approval - No generating plants, buildings,
structures, production equipment, metering systems, pipelines or roads for the
production, sale or use of geothermal resources (hereinafter referred to as
"geothermal facilities") shall be installed or constructed except on prior
Lessor's approval and the approval of any other governmental agency having
jurisdiction over such installation or construction. Any contract entered into
by ▇▇▇▇▇▇
21
with a Public Utility or any other person or entity for the installation or
construction of geothermal facilities shall contain provisions requiring the
Public Utility, or other person or entity to obtain the approval of the Lessor
and other governmental agencies before installation or construction of
geothermal facilities.
14. LIENS
Lessee will not commit or suffer any act or neglect whereby the
estate of the Lessor or the surface owner or occupier of the leased lands shall
become subject to any attachment, lieu, charge or encumbrance whatsoever, and
shall indemnify and hold harmless the Lessor, surface owner and occupier,
against all such attachments, liens, charges and encumbrances and all expenses
resulting from any such act or neglect on the part of the Lessee.
Lessee will, before commencing construction of any improvements or
any drilling operations or laying any pipe lines or doing any other work on or
within the leased lands, deposit with Lessor, surface owner and occupier of such
lands a bond or certificate thereof naming Lessor, said surface owner and
occupier as obligees in a penal sum of not less than one hundred per cent (l00%)
of the cost of such construction, drilling or pipe line work and in form and
with surety satisfactory to Lessor, the surface owner and occupier guaranteeing
the completion of such work free and clear of all mechanics' and materialmen
liens.
15. ASSIGNMENT OR SUBLEASE
Lessee shall have the right to transfer this lease to any person
qualified under the applicable law and regulations by assignment, sublease, or
other transfer, of any nature including the creation of security interests in
▇▇▇▇▇▇'s interest in this Lease and ▇▇▇▇▇▇'s rights hereunder, in whole or in
part, and as to all or a part of the leased lands, subject to the approval of
the Lessor, which approval will not unreasonably be withheld. Upon approval,
Lessor may release
22
the transferor from any liabilities or duties except for any liability or duty
which arose prior to such approval.
16. INDEMNITY
The Lessee agrees to hold harmless and indemnify the State of
Hawaii and its divisions, departments, agencies, officers, agents and employees,
together with the owner or lessee of the surface of the leased lands, if any,
from any and all liabilities and claims for damages and/or suits for or by
reason of death or injury to any person or damage to property of any kind
whatsoever, whether the person or property of Lessee, his agents, employees,
contractors, or invitees, or third persons, from any cause or causes whatsoever
caused by any occupancy, use, operation or any other activity on the leased
lands or its approaches, carried on by the Lessee, his agents, employees,
contractors, or invitees, in connection therewith; and the Lessee agrees to
indemnify and save harmless the State of Hawaii, the Board, the Chairman, the
Department, owner or lessee of the surface if there be one, and their officers,
agents, and employees from all liabilities, charges, expenses (including counsel
fees) and costs on account of or by reason of any such death or injury, damage,
liabilities, claims, suits or losses.
The foregoing indemnity specified in this Lease and in the
regulations is not intended to nor shall it be construed to require the Lessee
to defend the Lessor's title to geothermal resources and in case of litigation
involving the titles of the Lessee and the Lessor, Lessee and the Lessor will
join in defending their respective interests, each bearing the cost of its own
defense.
17. LIABILITY INSURANCE
Prior to entry upon the leased lands the Lessee or transferee
shall obtain, at its own cost and expense, and maintain in force during the
entire term of this Lease, a policy or policies of comprehensive general public
liability and property damage insurance from any
23
company licensed to do business in the State of Hawaii covering liability for
injuries to persons, wrongful death, and damages to property caused by any
occupancy, use, operations or any other activity on leased lands carried on by
Lessee or transferee, its agents or contractors in connection therewith, in the
following minimum amounts:
a. Comprehensive General Bodily Injury Liability - $300,000.00
each occurrence, $1,000,000.00 aggregate.
b. Comprehensive General Property Damage $50,000.00 each
occurrence, $100,000.00 aggregate.
Liability coverage for injury or damage to persons or property
caused by explosion, collapse and underground hazards are to be included prior
to initiation of operations to drill a well for geothermal discovery, evaluation
or production. Lessee shall evidence such additional coverage to the Chairman
prior to initiation of drilling operations. If the land surface and improvements
thereon covered by this Lease are owned or leased by a person other than the
State of Hawaii, the owner and lessee, if any, of the surface and improvements
shall be a named insured. The State of Hawaii, the Hawaii State Board of Land
and Natural Resources, the Chairman of the Board of Land and Natural Resources,
and the Department of Land and Natural Resources, shall also be named insureds.
No cancellation provision in any insurance policy shall release
the Lessee of the duty to furnish insurance during the term of this Lease. A
signed and complete certificate of insurance, containing the special endorsement
prescribed in the regulations and indicating the coverage required by this
paragraph, shall be submitted to the Chairman prior to entry upon the leased
lands. At least thirty (30) days prior to the expiration of any such policy, a
signed and
24
complete certificate of insurance, indicating the coverage required by this
paragraph, showing that such insurance coverage has been renewed or extended,
shall be filed with the Chairman.
18. BOND REQUIREMENTS
The Lessee and every assignee, sublessee or transferee hereof
shall file with the Board, a bond in the amount of $10,000.00 in a form approved
by the Board and made payable to the State of Hawaii, conditioned upon faithful
performance of all requirements of Chapter 182, Hawaii Revised Statutes, the
regulations thereunder and of this Lease, and also conditioned upon full payment
by the Lessee of all damages suffered by the occupiers of the leased lands for
which Lessee is legally liable. If the Lessee holds more than one (1) geothermal
resources mining lease from the State of Hawaii, it may file with the Board, in
lieu of separate bonds for each lease, a blanket bond in the amount of
$50,000.00.
19. REVOCATION
This Lease may be revoked by the Board if the Lessee fails to pay
rentals and/or royalties when due or fails to comply with any of the other terms
of this Lease, law, or regulations, or if the Lessee wholly ceases all mining
operations for a period of one year without the written consent of the Board for
reasons other than force majeure or the production of less than commercial
quantities of geothermal resources or by-products. However, before revocation of
this Lease for defaults other than the failure to pay rents and/or royalties
when due, the Board shall give the Lessee written notice of the claimed default
and an opportunity to be heard within thirty(30) days of such notice. The Lessee
shall be allowed sixty (60) days to correct such default or, if the default is
one that cannot be corrected within sixty (60) days, to commence in good faith
and thereafter proceed diligently to correct such default, following written
notice of a determination after hearing by the Board that such default exists.
Failure to comply with the foregoing shall be deemed sufficient cause for
revocation. Defaults arising because of failure to
25
pay rents and/or royalties when due must be cured within sixty (60) days of a
written notice of default; otherwise this Lease may be revoked. In the
alternative the Lessee may surrender this Lease as hereinafter provided.
Upon the revocation of this Lease, Lessor shall have the right to
retain the improvements or require the Lessee to remove the same and restore the
leased lands to a similar condition prior to any development or improvements, to
the extent reasonably possible and, upon failure by the Lessee to do so, the
Lessor may recover the cost thereof, in addition to imposing any penalties as
provided by law or regulations.
20. SURRENDER
If ▇▇▇▇▇▇ has complied fully with all the terms, covenants and
conditions of this Lease and the Regulations, ▇▇▇▇▇▇ may surrender, at any time
and from time to time, this Lease in its entirety or with respect to any portion
of the land described in this Lease. For the purposes hereof, if there are no
deficiencies with respect to the land to be surrendered pertaining to public
health, safety, conservation of resources and preservation of the environment,
Lessee will be deemed to have complied fully with all of the terms, covenants
and conditions of this Lease and the Regulations if Lessee shall have paid all
rents and royalties due hereunder and an additional two years' rent for all of
the leased lands or, in the event of a partial surrender, two years' rent
prorated by reference to that portion of land described in this Lease which is
to be surrendered. No deficiencies shall be deemed to exist unless, within sixty
(60) days after delivery of the document of surrender, the Lessor has notified
the Lessee in writing of any deficiency claimed to exist. If there are no
deficiencies as aforesaid, such surrender shall be effective as of the delivery
to Lessor of the document of surrender executed by ▇▇▇▇▇▇ describing this Lease
or that portion of the leased lands which is to be surrendered. If there are
claimed deficiencies with respect to the land to be surrendered pertaining to
public health, safety, conservation of resources and
26
preservation of the environment at the time of delivery of the
document, such surrender shall not become fully effective until such time as
such deficiencies have been corrected or determined not to exist. However,
provided that if Lessee corrects such deficiencies within sixty (60) days of
notification thereof, or if the deficiencies cannot be corrected within sixty
(60) days, commences in good faith and thereafter proceeds diligently to correct
such deficiencies, then, in such case, although the surrender shall not be fully
effective upon delivery of the document of surrender, the Lessee shall be
relieved of any other or further obligations and liability as to this Lease or
as to that portion of the leased lands which has been submitted for surrender,
whether such liabilities or duties arise out of this Lease or the Regulations,
including, without limiting the generality of the foregoing, all obligations to
pay rent, to commence mining operations or to be diligent in exploration or
development of geothermal resources. During the notification and correction
periods above described, this Lease shall not be subject to revocation by the
Lessor except for a failure by the Lessee after notification to correct such
deficiencies within the time period and in the manner hereinabove described or a
breach of the terms of this Lease as to any of the remaining leased lands or
rights retained by the Lessee; provided, however, that should Lessee contest the
validity of any claimed deficiency, the Lessee's obligations to correct shall be
suspended pending appeal to and determination by a court of final jurisdiction.
Except as aforesaid, nothing herein contained shall constitute a waiver of any
liability or duty the Lessee may have with respect to the land or Lease
surrendered as a result of any activity conducted on the leased land or under
this Lease prior to such surrender. Upon the surrender of this Lease as to all
or any portion of the land covered thereby, or upon any other termination of
this Lease except by revocation, the Lessee shall be entitled to all equipment,
buildings, and plants placed in and on the leased lands and the Lessor may
require the Lessee to remove the same and restore
27
the premises to a similar condition prior to any development or improvements, to
the extent reasonably possible. This Lease may also be surrendered if as a
result of a final determination by a court of competent jurisdiction, the Lessee
is found to have acquired no rights in or to the minerals on reserved lands, nor
the right to exploit the same, pursuant to this Lease, and, in such event, the
Lessor shall pay over to the person entitled thereto the rentals, royalties and
payment paid to the Lessor pursuant to this Lease.
21. ACCEPTANCE OF RENT AND ROYALTIES NOT A WAIVER
The acceptance of rent or royalties by the Lessor shall not be
deemed a waiver of any breach by the Lessee of any term, covenant or condition
of this Lease, nor of the Lessor's right to give notice of default and to
institute proceedings to cancel this Lease in the manner set out in paragraph
19, and the failure of the Lessor to insist upon strict performance of any such
term, covenant or condition, or to exercise any option conferred, in any one or
more instances, shall not be construed as a waiver or relinquishment of any such
term, covenant, condition or option.
22. EXTENSION OF TIME OF PERFORMANCE
That notwithstanding any provision contained herein to the
contrary wherever applicable, the Lessor may for good cause, as determined by
the Board, allow additional time beyond the time or times specified herein to
the Lessee, in which to comply, observe and perform any of the terms,
conditions, and covenants contained herein.
23. NO WARRANTY OF TITLE
The Lessor does not warrant title to the leased lands or the
geothermal resources and geothermal by-products which may be discovered thereon;
this Lease is issued only under such title as the State of Hawaii may have as of
the effective date of this Lease or may thereafter acquire. If the interest
owned by the State in the leased lands includes less than the entire
28
interest in the geothermal resources and geothermal by-products, for which
royalty is payable, as determined by the courts or otherwise, then the bonus, if
any, rentals, royalties and other monetary considerations paid or provided for
herein shall be paid to the Lessor only in the proportion which its interest
bears to said whole for which royalty is payable, and the Lessor shall be liable
to such persons for any prior payments made and adjudged by the courts or
otherwise; provided, however, that the Lessor shall not be liable for any
damages sustained by the Lessee.
This Lease is issued subject to all existing valid rights at the
date hereof and such rights shall not be affected by the issuing of this Lease.
In the event the leased lands have been sold by the State, subject to mineral
reservation, ▇▇▇▇▇▇ agrees to follow such conditions and limitations prescribed
by law providing for the State, and persons authorized by the State to drill
for, produce and take geothermal resources, and occupy and use so much of the
surface of the leased lands as may be required for all purposes reasonably
connected therewith. Without limiting the effects of the foregoing, where ▇▇▇▇▇▇
is not the surface owner, ▇▇▇▇▇▇ agrees that before entering, occupying, or
using any of the surface of the leased lands, for any or all purposes authorized
by this Lease, Lessee will first secure the written consent or waiver of the
owner of the surface of the leased lands or occupier; second, make payment of
the damages to crops or other tangible improvements to the owner thereof; or
third, in lieu of either of the foregoing provisions, execute a good and
sufficient bond or undertaking, payable to and in an amount specified by the
Lessor for the use and benefit of the surface owner or occupier of such land, to
secure payment of such damages to the crops or tangible improvements of the
surface owner or occupier of said land as may be determined and fixed in an
action brought upon the bond or undertaking in a court of competent jurisdiction
against the principal and sureties
29
thereon, such bond or undertaking to be in the form and in accordance with the
rules and regulations. In the event that the State owns only the mineral
resources, this Lease is issued subject to any and all right, title and interest
of the purchaser, title holder or owner of the surface of the leased lands, and
any successor in interest to any such purchaser, title holder or owner of the
leased lands, any other provision in this Lease to the contrary notwithstanding.
24. COMMINGLED PRODUCTION - PLANS - APPROVALS - ACCURACY
Subject to testing the absolute open flow potential of ▇▇▇▇▇,
whether on the leased lands or other lands, as set forth in paragraph 5D hereof,
geothermal resources from any two or more ▇▇▇▇▇, regardless of whether such
▇▇▇▇▇ are located on the leased lands, may be commingled when the metering
system used to measure geothermal resources has been approved by the Lessor.
Prior to the installation of the metering system, Lessee shall submit for
approval a schematic drawing of the proposed system and specifications of the
major equipment components. The Lessor will determine if acceptable standards of
accuracy for measuring geothermal resources have been obtained, and may approve
commingling of geothermal resources. The metering equipment shall be maintained
and operated in such a manner as will meet acceptable standards of accuracy. Use
of the equipment shall be discontinued at any time upon determination by the
State that standards of measurement accuracy or quality are not being
maintained, with such commingling stopped until measurement accuracy has been
obtained. In the event that the quality and composition of the geothermal
resources to be commingled are substantially different, it shall not be approved
by the Lessor until acceptable standards and methods of payments are
established. If less than the total flow is to be utilized in a plant or
facility, then the reduction in flow for each well shall be in the proportion
which the total open flow of each contributing well bears to the total open
flows of all contributing ▇▇▇▇▇.
30
25. SUSPENSION OF OPERATIONS
In the event of any disaster or pollution, or likelihood of
either, having or capable of having a detrimental effect on public health,
safety, welfare, or the environment caused in any manner or resulting from
operations under this Lease, the Lessee shall suspend any testing, drilling and
production operations, except those which are corrective, or mitigative, and
immediately and promptly notify the Chairman. Such drilling and production
operations shall not be resumed until adequate corrective measures have been
taken and authorization for resumption of operations has been made by the
Chairman.
26. DILIGENT OPERATIONS REQUIRED
The Lessee shall be diligent in the exploration and development of
the geothermal resources on the leased lands. Failure to perform diligent
operations may subject this Lease to revocation by the Board. Diligent
operations mean exploratory or development operations on the leased lands
including without limitation geothermal surveys, heat flow measurements, core
drilling, or the drilling of a well for discovery, evaluation, or production of
geothermal resources.
The provisions hereof shall be construed and applied with
reference and in relation to geological and engineering determinations and
economic and market conditions with respect to geothermal resources in the area
or field in which the leased lands is situated. In the event Lessor believes,
based on reasonable cause, that ▇▇▇▇▇▇ has failed to perform diligently, Lessee
may request a hearing and determination, in accordance with paragraph 19 hereof,
of the particulars in which Lessee has failed to conduct diligent operations,
and if after such hearing Lessee is found not to be diligent in its operations,
then if Lessee does not, within ninety (90) days thereafter, commence and in
good faith continue remedying such finding of lack of diligence, Lessor may
revoke this Lease as herein provided.
31
27. PRODUCTION OP BY-PRODUCTS
Lessee shall have no obligation to save or process any geothermal
by-products unless such saving or processing, independent of revenues or value
received from the production of other geothermal resources, including other
geothermal by-products, is economically feasible.
28. RECORDS AND REPORTS
(a) Accounting Data. No later than the twenty-fifth (25th) day of
every calendar month following the effective date of this Lease, Lessee shall
submit a detailed accounting statement for lease operations specifying all
charges paid and credits received under this Lease, including but not limited to
information showing the amount of gross revenue derived from all geothermal
resources produced, shipped, used or sold and the amount of royalty due. The
Lessee shall, at the option of the Lessor, provide more detailed statements and
explanatory materials to aid the Lessor in interpreting and evaluating ▇▇▇▇▇▇'s
accounting statement. All such statements are subject to audit and revision by
the Lessor and ▇▇▇▇▇▇ agrees that the Lessor may inspect all ▇▇▇▇▇▇'s books,
records and accounts relating to operations under this Lease, including but not
limited to the development, production, sale, use or shipment of geothermal
resources at all reasonable times. Any statutory or other rights that Lessee may
have to object to such inspection by the Lessor are hereby waived.
(b) Exploration Data. ▇▇▇▇▇▇ agrees to supply to the Lessor within
thirty (30) days of the completion thereof, or the completion of any recorded
portion thereof, all physical and factual exploration results, logs, surveys and
any other data in any form resulting from operations under this Lease or from
any surveys, tests, or experiments conducted on the leased lands by Lessee or
any person or entity acting with the consent of Lessee or with information or
data provided by Lessee. ▇▇▇▇▇▇ agrees to supply to the Lessor within thirty
(30) days of the completion thereof, or the completion of any recorded portion
thereof, the results of all
32
geological, geophysical or chemical tests, experiments, reports and studies,
including but not limited to reservoir studies and tests, experiments, reports
or studies relating to reinjection or reservoir depletion irrespective of
whether the result of such tests, experiments, reports or studies contain
sensitive or proprietary or confidential information or trade secrets. ▇▇▇▇▇▇
further agrees that any statutory or other rights or objections it may have to
prevent disclosure of any such tests, experiments, reports or studies referred
to in this paragraph by the Lessor are hereby waived. Notwithstanding any
provisions hereof, however, all data and documents supplied by Lessee pursuant
to this section shall be deemed to have been "obtained in confidence" and may be
disclosed to other persons only with the written consent of Lessee or upon a
determination by the Lessor that such disclosure is in the public interest or as
otherwise provided by law or regulation.
(c) Waiver by ▇▇▇▇▇▇. Lessee hereby waives any and all rights and
objections it may have to prevent an examination of the books and records at
reasonable times of any individual, association, or corporation which has
transported for, or received from Lessee, any geothermal resources produced from
the leased lands. Further, Lessee waives any and all rights and objections it
may have to prevent an examination and inspection of the books and records, at
reasonable times, of any such individual, association or corporation with
respect to such individual's, association's, or corporation's, or to Lessee's
operations, ▇▇▇▇▇, improvements, machinery and fixtures used on or in connection
with the leased lands.
Lessee does hereby waive any statutory or other right or objection
to prevent disclosure to the Lessor or a duly authorized employee or
representative of the Lessor of any information, reports, data, or studies of
any kind, filed by Lessee with any public agency, federal, state or local,
relating to the leased lands, the geothermal resources thereunder, or any
operations
33
carried out in connection with this Lease irrespective of whether such
information, reports, data, or studies of any kind contain sensitive or
proprietary or confidential information or trade secrets. Any and all such
information, reports, data, or studies of any kind filed by Lessee with any
public agency, federal, state or local, including all information filed with the
Lessor pursuant to any paragraph of this Lease, shall be available at all times
for the use of the Lessor or its duly authorized representatives for any
purpose. Notwithstanding any provisions hereof, however, any information,
reports, data or studies obtained by the Lessor from any public agency and which
are not public records shall be deemed to have been "obtained in confidence" and
may be disclosed to other persons only with the written consent of Lessee or
upon a determination by the Lessor that such disclosure is in the public
interest.
29. FORCE MAJEURE
If the Lessee is rendered unable to wholly or in part by force
majeure to carry out its obligations under this Lease, Lessee shall give to
Lessor prompt written notice of the force majeure. Thereupon, any obligations of
the Lessee to perform so far as they are affected by the force majeure shall be
suspended during the continuance of the force majeure and the primary term or
any continuation period shall be extended for a period equal to the period of
suspended performance caused by the force majeure. Lessee shall use all possible
diligence to remove or correct the force majeure, but this shall not require the
settlement of strikes, lockouts or other labor difficulties. In no event shall
any extension affect the sixty-five (65) year maximum term of this Lease.
30. UNIT OR COOPERATIVE PLANS
The Lessee may, with the written consent of the Board, utilize the
leased lands or portions thereof under a unit, cooperative or other plan of
development or operation with other
34
State, Federal or privately owned lands for the drilling and production of one
or more ▇▇▇▇▇ in accordance with Rule No. 3.15 of the Regulations.
31. NOTICES
Pursuant to Rule 8.2 of the Regulations, Lessor may give any
notice or deliver any document hereunder to Lessee by mailing the same by
registered mail addressed to Lessee at P.O. Box 374, Hilo, Hawaii 96720 or by
delivering the same in person to any officer of ▇▇▇▇▇▇. Lessee may give any
notice or deliver any document hereunder to Lessor by mailing the same by
registered mail addressed to Lessor at P.O. Box 621, Honolulu, Hawaii 96709 or
by delivering the same to Lessor in person. For the purposes of this paragraph,
either party may change its address by written notice to the other. In case of
any notice or document delivered by registered mail, the same shall be deemed
delivered when deposited in any United States Post Office, property addressed as
herein provided, with postage fully prepaid.
32. RESTORATION OF PREMISES
Upon the revocation, surrender or expiration of this Lease, the
Lessor or surface owner may require the Lessee to restore the leased lands to
their original condition insofar as it is reasonable to do so within ninety (90)
days thereof, except for such roads, excavations, alterations or other
improvements which may be designated for retention by the surface owner, the
Lessor or its agency having jurisdiction over said lands. When determined by the
Lessor, surface owner or such State agency, cleared sites and roadways shall be
replanted with grass, shrubs, or trees by the Lessee.
33. HEADINGS
The paragraph headings throughout this Lease are for the
convenience of the Lessor and the Lessee and are not intended to construe the
intent or meaning of any of the provisions thereof.
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34. REFERENCE
Unless specifically indicated otherwise, the regulations referred
to in and governing this Lease shall be Regulation No. 8 relating to Regulations
on Leasing of Geothermal Resources and Drilling for Geothermal Resources in
Hawaii approved and adopted by the Board on March 10, 1978, and all terms used
herein shall be given the meaning as set out in Rule 1.5 of said Regulation 8.
35. INSOLVENCY
In the event the Lessee at any time during the term hereof is
insolvent under any of the provisions of the Federal Bankruptcy Act, or makes a
voluntary assignment of his assets for the benefit of creditors, or is adjudged
a bankrupt, either upon ▇▇▇▇▇▇'s voluntary petition in bankruptcy, or upon the
involuntary petition of ▇▇▇▇▇▇'s creditors, or any of them, or should an
attachment be levied and permitted to remain for any unreasonable length of time
upon or against the interest, rights or privileges of Lessee in or to any
geothermal resources produced from the ▇▇▇▇▇ drilled by ▇▇▇▇▇▇ upon the leased
lands, then, upon election by the Lessor, all of the interests, rights, and
privileges of Lessee in and to all geothermal resources produced and saved from
the leased lands by reason of ▇▇▇▇▇▇'s operations thereon, shall terminate upon
receipt of written notice from the Lessor advising that the State has so
elected. In such event the Lessor shall have, and Lessee, by the acceptance
hereof, hereby gives the Lessor the right, option and privilege to cancel and
terminate this Lease and all of the terms and provisions granted hereby, and all
of the rights and privileges of Lessee in and to or upon the leased lands and in
and to any geothermal resources produced and saved from the leased lands by
reason of ▇▇▇▇▇▇'s operations thereon, and all of Lessee's rights and privileges
granted by this Lease shall terminate immediately upon receipt of written notice
from the Lessor that the Lessor has so exercised its option.
36
36. SUBSIDENCE. Any subsidence to the leased or adjacent lands shall be
considered pursuant to 7.7 of Regulation 8.
37. WORKMEN'S COMPENSATION INSURANCE
Lessee shall at all times in any and all operations under this
Lease and in any and all work in and upon the leased lands carry full and
complete Workmen's Compensation Insurance covering all employees.
38. SUCCESSORS
The term "Lessor" herein shall mean and include Lessor, its legal
successors and assigns, and the term "Lessee" herein or any pronoun used in
place thereof shall mean and include the masculine or feminine, the singular or
plural number, and jointly and severally individuals, firms or corporations, and
their and each of their respective heirs, successors, personal representatives
and permitted assigns, according to the context hereof.
39. SEVERABILITY
If any provision herein is judicially determined, to be invalid,
it shall be considered deleted herefrom and shall not invalidate the remaining
provisions.
40. GEOTHERMAL OWNERSHIP
If the Lessee hereunder is the surface landowner it is mutually
agreed that issuance of this Lease by the Lessor and acceptance thereof by the
Lessee shall not be deemed or construed to be a waiver of, and shall be without
prejudice to, any claim of ownership to the geothermal resources by the Lessee
and Lessor incidental thereto.
41. LEASE TERMS VS. REGULATION 8
Unless indicated otherwise herein, Regulation 8 shall supersede
any of the lease provisions herein which conflicts with said Regulation.
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AND KAPOHO LAND AND DEVELOPMENT CO., LTD., a Hawaii corporation,
and fee simple owner of the land described in Exhibit "A" attached hereto does
hereby consent to the issuance of the foregoing Lease to the Lessee, pursuant to
an assignment of its occupier's rights to the Lessee.
IN WITNESS WHEREOF, the parties hereto have caused these presents
to be executed the 20th day of February, 1981.
STATE OF HAWAII
APPROVED BY THE BOARD OF LAND By /s/ Indecipherable
AND NATURAL RESOURCES AT ITS ----------------------------------
MEETINGS HELD ON
Chairman and Member
December 17, 1980 Board of Land and
---------------------------------- Natural Resources
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Member
---------------------------------- Board of Land and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Natural Resources
Governor of Hawaii
LESSOR
KAPOHO LAND PARTNERSHIP, a
Hawaii Limited Partnership.
By Kapoho Management Co.,
Inc., a Hawaii Corporation,
as its General Partner
By /s/ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
Its Pres
By /s/ ▇▇▇▇ ▇.▇. ▇▇▇▇▇
----------------------------------
Its VP
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Its Sec. Treas.
38
LESSEE
KAPOHO LAND AND DEVELOPMENT
CO., LTD.
By /s/ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
Its V.P.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Its Asst. Sec. Treas.
APPROVED AS TO FORM:
Deputy Attorney General
/s/ Indecipherable
----------------------
Dated: 2/9/81
39