Exhibit 10.74
EXECUTION COPY
MASTER LEASE
THIS AGREEMENT is made and entered
into as of the 1 st day of August, 2005 (the
“Effective Date”) by and between CONSOL ENERGY INC., a
Delaware corporation, and each of the subsidiary corporations and
entities which are signatory hereto (herein, the “CEI
Subsidiaries”), herein referred to collectively as
“Lessor,” and CNX GAS COMPANY LLC, a Virginia limited
liability company, herein referred to as
“Lessee.”
WHEREAS, the entities which
constitute the Lessor own, lease or otherwise control Oil and
Natural Gas and Coalbed Methane, as such terms are herein defined,
within and underlying, or recoverable from, various tracts or
parcels of land, surface tracts, mineral tracts, coal tracts, veins
or seams of coal and other real estate located throughout the
United States of America, including, but not limited to, real
estate located in the States of Colorado, Illinois, Indiana,
Kentucky, Montana, North Dakota, Ohio, Pennsylvania, Tennessee,
Texas, Utah, Virginia, West Virginia and Wyoming; and
WHEREAS, Lessor desires to confer
upon one entity the exclusive right to explore and drill for,
operate, produce, process, transport, market and sell Oil and
Natural Gas and Coalbed Methane owned, leased or otherwise
controlled by CONSOL Energy and the various CEI Subsidiaries within
the United States of America;
WHEREAS, Lessee is engaged in the
business of exploring for, developing, producing and marketing Oil
and Natural Gas and Coalbed Methane; and
WHEREAS, Lessor has executed this
Agreement to transfer to, and consolidate in, Lessee, the Oil and
Natural Gas and Coalbed Methane rights owned, leased and otherwise
controlled by each of the entities constituting the
Lessor.
NOW, THEREFORE, WITNESSETH: That,
for and in consideration of the Bonus Payment provided in Section
4, and in further consideration of the covenants herein made,
CONSOL Energy Inc. and each of the CEI Subsidiaries signatory
hereto hereby grant, demise, lease, let and assign to, and
exclusively confer upon, Lessee any and all right, title, interest,
estate and claim in and to Oil and Natural Gas, as such term is
herein defined, and Coalbed Methane, as such term is herein defined
(in each case other than any Excluded Asset, as such term is herein
defined), owned or leased by, or otherwise vested in, Lessor as of
the Effective Date at any location within the United States of
America, together with the right of ingress and egress to enter
upon the Premises relating to the Oil and Natural Gas and Coalbed
Methane leased hereunder to Lessee and to test, explore and drill
for, operate, produce, gather, process, transport, store, market
and sell such Oil and Natural Gas and such Coalbed Methane as
herein provided.
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1. Definitions . As
used in this Agreement, the following terms shall be defined as
indicated in this section:
a. Oil and Natural Gas
. The term “Oil and Natural Gas” means any and all Oil,
which includes natural crude oil or petroleum and other
hydrocarbons, regardless of gravity, which are produced in liquid
form by ordinary production methods, and any and all Natural Gas,
which includes all gaseous substances generally known as natural
gas, other fluid hydrocarbons which are not oil, and other gaseous
substances other than Coalbed Methane, recoverable or produceable
from any subterranean formation, but including within such terms
only such constituent minerals, fluid or gaseous hydrocarbons and
chemicals which are commonly recognized as of the date of this
Agreement as being marketable as “oil” or as
“natural gas.”
b. Coalbed Methane .
The term “Coalbed Methane” means any gas, hydrocarbon,
or gaseous substance which is, can be or has been produced from a
coal seam, the rock or other strata in communication with a coal
seam, a mined-out area or a gob well, but including within such
term only such constituent minerals, gases and chemicals which are
commonly recognized as of the date of this Agreement as being
marketable as “coalbed methane.”
c. Master Agreement .
The term “Master Agreement” means that certain Master
Cooperation and Safety Agreement dated as of August 1,
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2005, by and among CONSOL Energy Inc. and
certain CEI Subsidiaries and Lessee, as the same may be amended or
supplemented from time to time. The Master Agreement, in its
entirety, is incorporated in this Agreement by
reference.
d. Premises . The term
“Premises” means all tracts or parcels of land, surface
tracts, mineral tracts, coal tracts, seams or veins of coal and
other real estate situate within the United States of America as to
which CONSOL Energy Inc. or any CEI Subsidiary owns, leases, claims
or otherwise controls the Oil and Natural Gas minerals or the
Coalbed Methane recoverable therefrom.
e. CEI Subsidiary .
The term “CEI Subsidiary” means any corporation,
limited liability company, or other entity as to which fifty
percent (50%) or more of the stock or other equity interests, or
voting control thereof, is legally or beneficially owned or
controlled, directly or indirectly, by CONSOL Energy Inc, including
but not necessarily limited to the CEI Subsidiaries which are
signatory to this Agreement.
f. Lessor’s Agent
. The term “Lessor’s Agent” means William D.
Stanhagen, or such other person or entity as Lessor shall designate
in writing to Lessee as Lessor’s agent.
g. Excluded Assets .
The term “Excluded Assets” or “Excluded
Asset” means any Oil and Natural Gas or Coalbed Methane or
related asset
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or right (a) previously conveyed, transferred or
assigned by Lessor to Lessee pursuant to any instrument listed on
Schedule 2 attached hereto, (b) subject to, arising from or that is
an existing lease or contract listed on Schedule 3 attached hereto,
(c) listed on Schedule 3 to that certain Master Separation
Agreement dated as of August 1, 2005 by and among the Lessor, the
Lessee and certain other parties thereto, or (d) that was evaluated
as proved, probable and/or possible oil and gas interests in that
certain Reserve and Economic Evaluation of Proved, Probable, and
Possible Reserves of Certain CONSOL Energy Inc. Oil and Gas
Interests as of March 31, 2005, dated as of June 29, 2005, prepared
by Schlumberger Data and Consulting Services, a copy of which is
attached hereto as Exhibit A. For the avoidance of doubt, no
Excluded Asset is being leased or otherwise conveyed to Lessee
under this Agreement and no rights regarding the Premises relating
to any Excluded Asset are being conveyed to Lessee under this
Agreement.
2. Excepted Interests
. There is expressly excepted from this Agreement all of the coal
and coal mining rights, and other minerals, if any, owned or leased
by Lessor which are not specifically granted to Lessee herein
(“the Reserved Minerals”), together with the right to
mine and remove the Reserved Minerals by operations which do not
conflict with the terms and provisions of the Master Agreement.
Notwithstanding anything to the contrary provided in this
Agreement, to the extent that the transaction herein described is
prohibited by the terms of a deed, mortgage, deed of trust,
security agreement, lease, contract, agreement or other instrument,
or would
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result in a breach or default by Lessor under
any such instrument, or the termination of Lessor’s rights in
or title to any portion of the Oil and Natural Gas or Coalbed
Methane due to the lease, sublease or assignment thereof without
the consent of a former owner, mortgagee, deed of trust
beneficiary, lessor or other third party, then, in such event, the
properties hereby leased and/or otherwise transferred to Lessee
shall not include, but shall exclude, such portion(s) of the Oil
and Natural Gas or the Coalbed Methane as may be affected by such
prohibition or requirement for third party consent unless and until
such prohibition has been waived or such third party consent has
been obtained.
3 Term . Subject to
the other provisions of this Agreement, this Agreement shall remain
in effect for a term of ninety-nine (99) years from the date hereof
(the “Primary Term”), and as long thereafter as
exploration, drilling or production operations commenced during the
Primary Term are continued, or Oil and Natural Gas or Coalbed
Methane is produced in paying quantities pursuant to this
Agreement.
4. Payments . (a)
Lessee covenants and agrees to pay to Lessor, c/o Lessor’s
Agent, at Post Office Box 371207M, Pittsburgh, Pennsylvania 15251 a
bonus payment of Fifty Thousand Dollars ($50,000.00) (the
“Bonus Payment”) upon Lessee’s receipt of the
proceeds of a private securities offering in which Lessee is
engaged as of the date of this Lease. The Bonus Payment will be
allocated among the parties constituting Lessor as set forth on
Schedule 1 hereto.
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(b) Lessee shall have no obligation
to pay a royalty pursuant to this Agreement.
5. Development
Obligation . Lessee shall have no obligation to drill or
produce any specific number of wells pursuant to this Agreement, it
being understood that any and all covenants, express or implied, to
develop the Premises are hereby waived. If, at the expiration of
the Primary Term, there are producing wells located anywhere on the
Premises, Lessee shall have the right to continue to produce such
wells for as long thereafter as such wells shall produce in paying
quantities, but this Agreement otherwise shall expire as to the
remaining undeveloped portions of the Premises. Not later than
thirty (30) days following the expiration of the Primary Term,
Lessee shall execute and deliver to Lessor’s Agent an
instrument of release and surrender of the undeveloped portions of
the Premises, which instrument shall identify each well, and the
productive area around such well, which Lessee shall continue to
have the right to exclusively produce. Each well held by production
after the expiration of the Primary Term shall hold such productive
area around such well as Lessee’s engineer shall reasonably
specify, giving due regard to all relevant factors, or such lesser
or greater area as Lessor’s Agent and Lessee may otherwise
agree.
6. Interference with
Operations . Lessors and Lessee have entered into the
Master Agreement, which, among other things, evidences the
undertaking of each party thereto to cooperate with the other
parties to the Cooperation Agreement
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so as to maximize the safe recovery of Reserved
Minerals, Oil, Natural Gas and Coalbed Methane in operations which
are calculated to avoid unreasonable interference with the
operations of any party. Lessor’s operations and
Lessee’s operations under this Agreement shall be governed by
the applicable provisions of the Master Agreement.
7. Surrender;
Well-Plugging . Subject to its compliance with the
well-plugging obligation provided in the next sentence of this
section, Lessee may at any time, and from time to time, execute and
deliver to Lessor’s Agent or place of record an instrument of
release covering the Premises, or any portion thereof, and thereby
surrender this Agreement, in whole or in part, provided that no
surrender shall be effective unless and until Lessee notifies
Lessor’s Agent of such surrender. Notwithstanding the
foregoing grant of authority, Lessee may not surrender any portion
of the Premises until Lessee has plugged all wells located within
the portion(s) of the Premises to be surrendered, which
well-plugging shall be conducted in compliance with applicable laws
and regulations. Furthermore, whenever any well on the Premises
permanently ceases to produce in paying quantities, Lessee shall
promptly plug such well in compliance with applicable laws and
regulations.
8. Dry Hole/Reworking
Extension . If, at the expiration of the Primary Term,
Lessee is engaged in drilling or reworking operations on one or
more wells, or Lessee shall have completed a dry hole within sixty
(60) days prior to the end
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of the Primary Term, this Agreement shall remain
in force as to the productive area of the well(s) then being
drilled or reworked (or, in the case of a dry hole having been
completed within the immediately preceding 60 days, for an
additional period of 60 days if Lessee, in good faith, intends to
drill another well) for so long as operations are diligently
prosecuted with no cessation of more than sixty (60) consecutive
days, and if such operations result in the production of Oil or
Natural Gas or Coalbed Methane, this Agreement shall remain in
force as to the productive area of such well(s) for so long
thereafter as Oil or Natural Gas or Coalbed Methane is produced
from such well(s) in paying quantities.
9. Removal of Property
. Provided Lessee is not in default of its obligations hereunder,
Lessee shall have the right at any time during or within sixty (60)
days after the expiration of this Agreement to remove all property
and removable fixtures placed by Lessee on the Premises, including
the right to draw and remove all casing. Any property, equipment,
machinery or fixtures left on the Premises after the expiration of
said sixty (60) day period shall be forfeited by Lessee and become
the property of the Lessor.
10. Use of Water . To
the extent that Lessor has a right to do so under the law of the
applicable jurisdictions, Lessor grants to Lessee the right to use
Lessor’s water located on the Premises, and water supplied to
the Premises by public or private water companies, for drilling and
producing operations; provided that, Lessee’s right
to
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use such water shall be subject to the condition
that there be sufficient volumes of water to satisfy Lessor’s
needs and requirements; and, provided, further, that, in the case
of water supplied to the Premises by a public or private water
company for a charge or fee, Lessee shall reimburse Lessor for the
prorated cost of the water used by Lessee.
11. Assignment .
Lessee may not assign this Agreement or sublease the Premises, in
whole or in part, unless Lessee first obtains the express written
consent of Lessor to such assignment or sublease, as well as the
express written agreement of the assignee or sublessee to assume
all of the obligations of Lessee contained in this Agreement.
Lessor’s consent to an assignment or a sublease shall not
operate as a release of Lessee from the obligations of the lessee
herein unless Lessor also expressly releases and discharges Lessee
from such obligations in writing. (For purposes of this Agreement,
any transaction which, singularly or in combination with prior
transactions, results in the ownership or voting control of more
than fifty percent (50%) of the equity interests of Lessee by a
person or persons other than CONSOL Energy Inc. or a CEI Subsidiary
shall be deemed to be an assignment as to which Lessor’s
consent is required.) No change or division in ownership of the
Premises shall be binding on Lessee until Lessee shall have been
furnished with a copy of the duly executed instrument or
instruments evidencing such change or division of
ownership.
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12. Access to
Information . Lessor shall have the right to receive from
Lessee, at Lessee’s expense, a cut of samples, copies of
reports, logs, surveys and like materials generated by or for
Lessee with respect to each well drilled and operated hereunder.
Lessor shall have full and unrestricted access to the Premises and
to all wells and operations thereon, at Lessor’s risk and
expense, at all times. Lessee shall give Lessor’s Agent
timely notice of the drilling of each well drilled hereunder.
Lessee shall furnish Lessor’s Agent with a copy of the
plugging affidavit for each well plugged by Lessee.
13. Well, Pipeline, and Road
Locations . The location of all wells, pipelines, roads and
other facilities constructed by Lessee pursuant to this Agreement
shall be governed by the applicable provisions of the Master
Agreement.
14. Landlord’s
Lien . Lessee grants to Lessor’s Agent a
landlord’s lien upon all equipment, machinery, fixtures and
other personal property located on the Premises to secure the
payment of all monies of every character due or becoming due at any
time under this Agreement and the performance by Lessee and its
assignee(s) and sublessee(s) of its obligations
hereunder.
15. Acceptance of
Premises . Lessee takes and accepts this Agreement with the
knowledge and understanding that the Reserved Minerals
have
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been, may have been, or may at some point in the
future be, mined and removed from the Premises. Lessor makes no
guarantee or warranty with respect to the quantity or quality of
the Oil and Natural Gas or the Coalbed Methane which may be
recoverable from the Premises, it being understood and acknowledged
by Lessee that the Premises ar
