Principal "deal" terms:

• Minerals covered- Only oil and gas and related hydrocarbons.                        
• Primary term- 3 year initial (or primary) term, plus Lessee has option to renew for 2 years.

• Bonus- $5,250 for first three years, and $2,500 for the additional 2 option years if Lessee exercises their option.  (Note: All dollar amounts and %'s are to be proportionately reduced and are per net mineral acre.  For example, if you own a ˝ acre of minerals, your initial bonus amount would be $2,625.)

• Royalty-
  
  •  25% on oil and gas.
    
  • No deductions for the costs of producing, gathering, storing, separating, treating, dehydrating, compressing, processing, transporting, and/or marketing the gas.  (Note: Exception is that Lessee can pass on to Lessor a share of costs charged by an unaffiliated pipeline company to enhance the value of the gas, if (i) the costs are reasonable and actually incurred by Lessee, (ii) the value is enhanced, and (iii) only to the extent of any enhanced value.
  
  

Additional terms:

• Pooling- Lessee can pool gas units up to 320 acres (plus 10% tolerance), and they must try to continuously develop the acreage on the density basis of one well per 40 acres.

• Shut-in royalty- $50 per net mineral acre; Maximum length of shut-in period is 2 years per occurrence and 4 years in the aggregate.

• Force majeure- If Lessee is prevented from operations by an "act of God", then they have up to 12 months per occurrence or 24 months in the aggregate to get things back on track.

• Surface Waiver- Lessee is allowed no surface usage whatsoever.  (Note: This provision even survives termination of the lease.)

• Depth Limitation- After all drilling finished, Lessee must release all depths from 100' below the base of the producing formation.  

• Offset Well Language- In the event there is an offsetting well producing gas on a nearby or adjacent property, and such is draining from the leased premises or pooled acreage, Lessee must commence operations for the drilling of an offset well on the pooled acreage.

• Warranties- There are NO warranties made by Lessor as to the ownership of the minerals under their property.  

• Insurance- The Lessee's insurance policies are to include coverages for comprehensive general liability, bodily injury, property damage, blowout and loss of well coverage, and coverage for any damage to the environment, along with any local city insurance requirements.

• Compliance with Governing Law- Lessee must conduct all operations in compliance with all local, state and federal laws.  

• Assignments - Lessee must notify Lessor of any assignment and Lessee and the assignee will be jointly liable.

• Environmental Matters- includes several strong environmental protections, in addition to the city, state and federal ones in place.

• Damages/Indemnity- Lessee will pay and indemnify Lessor for damages to person or property caused by Lessee's activities.  

• Subordination- Lessee shall work with Lessor to obtain any necessary subordination or non-disturbance agreement from Lessee's mortgage company.

• Release of HWCC rep's- Lessor releases and holds the committee members and attorney harmless for the work done in this regard.

As stated above, this is a bullet point overview of the Chk lease proposal. It should be noted that the overall terms of this lease are substantially the same as the one the NETGLO coalition opted for nearby.  These terms also compare very favorably with the CAMRA, 360 NW and other finer leases of the 2008 "hey-day" (save and except for the reduced bonus amount). Virtually all of the key provisions and protections in those leases have been incorporated into this lease form, and these are the provisions that will hopefully be around for 30 or more years to come.  By having HWCC act for the betterment of our members, we have negotiated a long-form customized lease agreement with many protections embedded for our property owners--- as compared the 2-3 page "slick lease" lease that various landmen are peddling in the area with few real protections for the homeowners/mineral owners.