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Ordinance No. 5,492ORDINANCE NO. 5492 HE IT ORDAINED BY THE CITY COUNCIL OF THE CI'T'Y OF BAYTC N, TEA; ETT C ® HUT,TC ® Mayor STATE OF TEXAS 5 5 SURFACE LEASE COUNTY OF HARRIS 5 This agreement made and entered into as of the day of , 19 , by and between the City of Baytown, a municipal corporation, 2401 Market Street, Baytown, Texas 77520, hereinafter referred to as "Lessor," and Bridge Oil Company, L.P., 12377 Merit Drive, Suite 1600, Dallas, Texas 75251, hereinafter referred to as "Lessee;" W I T N E S S E T H WHEREAS, Lessor is the owner of the property described in Exhibit "A" and Lessee desires to obtain a Surface Lease thereon for the purposes hereinafter described; NOW THEREFORE, Lessor, in consideration of the sum of Ten Dollars and other good and valuable consideration ($10.00 & OVC), the receipt and sufficiency which is hereby acknowledged, and in consideration of the premises and the mutual covenants, agreements, and obligations hereinafter contained, and to be paid, kept and performed, does hereby demise, lease, and let unto Lessee the property described in Exhibit "A," in Harris County, Texas, hereinafter referred to as "leased premises," attached hereto and made a part hereof by reference for all purposes. TO HAVE AND TO HOLD unto Lessee, its successors and assigns, for the term, at the rentals, for the exclusive uses and purposes, and subject to the covenants, conditions and stipulations hereinafter set forth. It is hereby agreed by and between the parties hereto as 0 follows: II • This lease shall commence on the date hereof, and shall be for a term of four (4) months, hereinafter called "primary term," and shall be renewable as hereinafter provided. Lessor acknowledges the receipt of THREE HUNDRED DOLLARS AND N01100 ($300.00) DOLLARS per acre, per month, from Lessee, representing the rental due hereunder for the first month of the initial four month term beginning March 1, 1990, Lessor further acknowledges said rental payment to be full and adequate consideration for all rights and privileges herein granted. III Lessee is hereby granted the option of extending the primary term of this lease for successive periods of one (1) month each by tendering payment to Lessor of THREE HUNDRED AND N01100 ($300.00) DOLLARS per acre,'per month, which shall be tendered on or before the first day of the month. Such option shall be exercised each month by Lessee paying to Lessor the amount of said rental due on the first of each succeeding month. It is further agreed that should Lessee through inadvertence, error or oversight fail to timely exercise its option of renewal by the fifteenth (15th) day of the month that this lease will not ipso facto terminate until Lessor shall have given notice in writing to Lessee granting a period of fifteen (15) days from the receipt of said notice in which Lessee can exercise his option to renew by paying the rental due plus a penalty of One Hundred Dollars ($100.00) and upon such payment the lease shall then continue in force and effect under its terms and conditions as though such - 2 - 0 optional rental payment had been timely paid. However, upon Lessee's failure to make payment within the said fifteen (15) day period as herein provided, then said lease shall be considered as having terminated on the last day of the month for which rental payment had been timely made. Lessee may extend this lease for as long as oil, gas or other minerals are being produced, or capable of being produced from the well located on the leased premises. Rentals shall remain THREE HUNDRED AND N0 1100 ($300.00) DOLLARS per acre, per month (the "base rent "), for the first sixty (60) months this Surface Lease is in effect, at which time the rentals shall be adjusted to reflect the increase or decrease in the purchasing power of the U.S. Dollar, as reflected by the Consumer Price Index (Houston average for Urban consumers for all items) presently promulgated by the U.S. Department of Labor, Bureau of Labor Statistics. Computations to determine such adjustments shall be made utilizing the CPI as of December, 1989, which is 115.5 as the base index. To determine the adjusted rental, which will be the effective rent for the ensuing thirty- six (36) months, the base rent shall be divided by 115.5, and the result shall be multiplied by the CPI for the month of December, 1994. Thus, by way of illustration, should the CPT for December, 1994, be 125.48, the adjusted monthly rental per acre, per month, for the ensuing thirty --six (36) months commencing March 1, 1995, would be as follows: 3 ($300.00 : 115.5) X 125.48 = 325.92 Adjusted rentals shall be in effect for thirty -six (36) months and shall be re- adjusted every thirty-six (36) months for the life of this lease. (For example: Base rent will be in effect until March 1, 1995. Base rent is then adjusted at that time and will be in effect for thirty -six (36) months until March 1, 1998, and again is adjusted accordingly every thirty -six (36) months for as long as this lease is in effect.) WA The uses and purposes for which the above - described lands and premises are leased by Lessor are to grant to Lessee the right of ingress and egress to enter upon and use the land for the purposes of exploring for and producing oil, gas and other minerals from lands other than the leased premises, by way of directional drilling from the leased premises and bottoming well(s) on lands other than the leased premises, together with the use of the surface of the leased premises for all purposes incident to the exploration, production, ownership, possession, storage, and transportation of said minerals. Subject to approval by Lessor, which approval should not be unreasonably withheld, Lessee is hereby authorized to erect, construct, use, operate, maintain, and repair on the leased premises facilities, improvements and structures such as, but not limited to, warehouses, tanks, gas lines, water lines, pipe lines, booster stations, and any other buildings, structures, or appurtenances which may be deemed necessary or desirable by Lessee to operate and efficiently exercise its rights to utilize the leased - 4 - premises in connection with the purposes for which the lease is iherein granted; except Lessee shall have no right hereunder to build and operate refineries, absorption plants, extraction plants, and manufacturing plants on the leased premises without permission of Lessor, who may refuse such permission or require renegotiation of the terms of this agreement if such additional purposes are permitted. LVA In the event Lessee obtains production of oil, gas or other minerals by its operations, Lessee shall give a written release of the acreage that will not be included for use as production facilities. A metes and bounds description of the production facilities shall be included in said release. Lessee shall maintain rental payments based on the total acreage of said production facilities. Notwithstanding the foregoing, in no event shall the acreage upon which rental payments are based by less than 2.0 acres. VI During operations (whether drilling, completion or workover) and thereafter, Lessee shall: a. Fully abide in all respects with the Code of Ordinances of the City of Baytown as it is now or may hereafter be constituted. b. Operate and power any producing well by electric motors and lubricate and insulate in a manner to reduce and maintain any noise to a reasonable standard. C. Take necessary steps to keep dust to a minimum. - 5 - d. Restrict all agents, contractors, employees and irepresentatives to the immediate area of the drill site and advise all of such employees to park and congregate in such restricted area. e. Keep the drillsite and immediate area free of trash and debris. f. Confine the drillsite to the smallest possible area. g. Restore the surface to a clean and even condition, remove all boards and building materials, scrap or waste products and /or chemicals, oil, drilling mud, cement or other materials, to provide a suitable, nontoxic and nonhazardous condition, including removal and replacement of the surface if necessary. h. Employ portable tanks rather than pits for the retention or storage of drilling fluids, salt water, chemicals and the like. i. Prevent the overflow or spillage of oil, salt water or chemicals on the surface of the premises so that vegetation can grow. j. Take steps in restoring the surface to provide for adequate drainage. k. Take such steps as may be necessary to prevent salt water, waste materials, chemicals, acid or oil from running or flowing on or across the premises or into creeks, gullies, ditches or ravines that flow across or on the premises, whether by overflow or watershed caused by rain. - 6 - 1. Use best efforts to prevent agents, contractors, representatives or employees from carrying firearms, alcohol or drugs onto the premises. M. Pay a penalty of $250.00 per day for each day in which cleanup and restoration work called for herein is not completed within thirty (30) days after the workover or completion rig is released. n. Flare no gas except for such limited periods of time as reasonably necessary for testing purposes. o. Keep all areas free of trash and debris and keep trash barrels, if any, emptied and of neat appearance. p. Maintain the locations and wells in a sightly manner with clean stone, gravel or shell, fences and appropriate landscaping. q. Attempt at all times to minimize damage to or destruction of any decorative or hardwood trees inside or outside the drillsite. Lessee shall pay to Lessor reasonable compensation for all damages caused by its operations to the surface, roads, trees, landscaping, fences, sidewalks, subsurface fresh water strata, driveways, buildings, playground equipment, utility interruptions, parklands, drainage watersheds, shrubbery, parking areas, curbs and gutters or any other property or improvement of Lessor. In the event Lessee uses any of Lessor's roadways, parking areas, bridges or improvements for access to any drillsite, located on the lease premises, then and in such event, Lessee - 7 - shall, prior to such use, post a bond in an amount to be set and established by the Lessor and which bond shall be issued and signed by a corporate surety approved by Lessor to indemnify and protect Lessor from any damage of any kind to or destruction of any of L esso r ' s P awed roadway, adwa Y► parking areas c urb or gutter, bridges, or drainage or utility facilities. The bond amount shall be adequate to insure repair of any such damages. VII Lessor agrees that Lessee shall have the right, privilege and obligation to remove within a reasonable period of time after termination of this agreement, any and all improvements of whatsoever nature or character owned or placed by Lessee upon the above - described land. Upon the termination of this agreement, Lessee agrees to peaceably and quietly surrender the premises to Lessor and to clean up and restore said leased premises to as nearly their present condition as possible considering the nature and extent of the prior use of the premises. Lessor shall dispose of the following by landfarming, if legally permissible; water base drilling fluids, drill cuttings, sand, and silts obtained while using water used for cleaning drill pipe and other equipment at the well site. VIII Lessee agrees to hold, save and harmless of and from any and all claims or indirectly from its operations on including, but not limited to claims death, property damage or loss, fires, protect Lessor safe and that may arise directly the leased premises, for personal injury or blowouts, leaks, spills, pollutants, contamination and explosions and other causes. This i specifically includes, but is not limited to, all liabilities for pollution or threat of pollution to the leased premises or arising from Lessee's operations connected with use of the leased premises. Lessee agrees to keep and maintain in force adequate casualty, liability and property damage insurance against all risk and all hazards with coverage in the amounts specified in Exhibit "B" attached hereto, and to name Lessor as an additional insured thereon and to provide written proof of such coverage at Lessor's request. In the event of any increase in ad valorem taxes on the land due to the erection of improvements on said land, Lessee shall be obligated in addition to the rental provided for in this agreement, to reimburse Lessor for any such taxes. Further, if improvements erected by Lessee upon said land are taxes separate and apart from said land, Lessee agrees and obligates itself to pay said ad valorem taxes. IX Lessee agrees that it shall permit Lessor, its agents, attorneys and representatives (at their own risk) access to the drillsites to inspect the facilities and insure compliance herewith and with the terms of this lease and of the Code of Ordinances of the City of Baytown as it is now or may hereafter be constituted. X It is further understood and agreed that this agreement is not assignable by either party except with the approval of the other party, which approval shall not be unreasonably withheld. XI This agreement shall inure to the benefit of and shall be binding upon the parties hereto, their respective heirs, successors and assigns. IN WITNESS WHEREOF, this instrument is executed in duplicate as of the date first above written. ATTEST: EILEEN P. HALL, City Clerk ATTEST: By: 5:5:17 :11 - 10 - LESSOR CITY OF BAYTOWN EMMETT 0. HUTTO, Mayor LESSEE: By: