tion of these lands. As far as I am able to ascertain the fee lands which we hold under lease and which Signal Oil and Gas Company will list in its schedule are as follows: Township 11 North, Range 8 West, M.D.B. & M. Section 19: Lots 1, 7 and 8, the W-2 of NE- and N-1⁄2 of SE- Section 28: Lots 5, 6, 7 and 8, the N-2 of SW-4 and E-1⁄2 of SE- Section 32: Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 14, 15, 17, 18 and 21 Township 10 North Range 8 West, M.D.B. & M. Section 4: Lot 6, NE-4 of SW-4 and S-1⁄2 of SW Section 5: Lot 3 I am enclosing also a supplemental statement1 which I would like included in the record. This statement reflects suggestions for amendment to the pending bills, using H.R. 4740 as the reference bill, combining for convenience the suggested amendments contained in my statement already filed and additional suggested amendments relating to questions raised at the hearings, which were both constructive and informative. My personal regards to you and to other members of the staff of the Committee. Yours very truly, JOSEPH W. AIDLIN, Secretary and General Counsel, Magma Power Co. LEASE AND AGREEMENT THIS LEASE AND AGREEMENT is made and entered into as of this day of 196, by and between Party (or parties) of the First Part, hereinafter referred to as "Lessor”, and MAGMA POWER COMPANY, a Nevada corporation, Party of the Second Part, hereinafter referred to as "Lessee". RECITALS County in the Lessor is the owner of certain land situate in State of which the parties believe are suited for development and utilization of natural steam and steam power and the earth's natural heat and energy present in or obtainable from said land, for use of such natural steam, natural heat and energy as such or for conversion into electric power or for obtaining extractable minerals therefrom. It is the desire of Lessor and Lessee to enter into an agreement which will enable the development and utilization of said natural steam, and the earth's natural heat and energy, for any of the aforesaid purposes and it is the intention of the parties that Lessee shall have under this Lease and Agreement all rights and power necessary or convenient to carry on the business of developing and utilizing steam and steam power, and, if Lessee deems it warranted, of extracting minerals therefrom. For convenience, the words and phrases "steam", "natural steam", "steam power", "thermal energy", "the earth's natural heat", "the earth's natural energy" and similar words and phrases used in this lease are generally referred to in this instrument as "steam" or as "steam and steam power", and are more specifically hereinafter defined. TERMS OF AGREEMENT FOR AND IN CONSIDERATION OF $ paid to Lessor by Lessee, and other valuable consideration, receipt of which is hereby acknowledged, and in consideration of the covenants and agreements hereinafter contained by the Lessee to be kept and performed, Lessor does hereby grant, lease, let and demise to Lessee, its grantees, successors and assigns, subject to the terms and conditions hereinafter set forth, the land hereinafter described, with the sole and exclusive right to Lessee to explore for (by such methods as it may desire), drill for, produce, extract, remove and sell steam and steam power and extractable minerals from, and utilize, process, convert and otherwise treat such steam and steam power upon, said land, and to extract any extractable minerals, during the 1 See page 145. term hereof, with the right of entry thereon and use and occupancy thereof at all times for said purposes and the furtherance thereof, including the right to construct, use and maintain thereon and to remove therefrom structures, facilities and installations, pipe lines, utility lines, power and transmission lines. The possession by Lessee of said land shall be sole and exclusive for the purposes hereof and for purposes incident or related thereto, excepting that Lessor reserves the right to use and occupy said land, or to lease or otherwise deal with the same, without interference with Lessee's rights, for residential, agricultural, commercial, horticultural or grazing uses, or for mining of minerals lying on the surface of or in vein deposits on or in said land, or for any and all uses other than the uses and rights permitted to Lessee hereunder. The land hereby leased is described in Exhibit "A" attached hereto and made a part hereof, including also in the leased land all rights of Lessor, presently owned or hereafter acquired, in and under roads, ditches, and rights of way traversing or adjacent to said land. The terms and conditions of this lease are as follows, to wit: 1. This lease shall be for a term of twenty-five (25) years from and after the date hereof, and so long thereafter as there is commercial production of steam, or of electric power or of any extractable minerals, derived or produced from the property leased hereunder, and for so long as well, as Lessee is prevented from producing same, or the obligations of Lessee hereunder are suspended, for the causes hereinafter set forth. 2. The initial consideration paid upon execution hereof constitutes rental payable hereunder in advance for months. Thereafter, until such time as Lessee shall commence the drilling of a well to test whether sufficient power potential or extractable minerals in commercially paying quantities can be developed on the leased land, Lessee shall pay to Lessor rental at the rate of $ per year, said rental to be payable in install ments in advance. Upon commencement of the drilling of such well, the obligations of Lessee to pay rental hereunder shall terminate. After commencing the drilling of such well, Lessee shall continue the drilling thereof diligently and in good faith to such depth as Lessee shall deem proper to test whether or not sufficient power potential or extractable minerals in commercially paying quantities can be developed on said land. In the event the first well drilled on the leased land does not indicate or establish to the satisfaction of Lessee sufficient power potential or extractable minerals in commercially paying quantities, Lessee shall either commence the drilling of a second well on the leased land within six (6) months after completion or abandonment of said well (during which said six months' period Lessee shall not be required to pay any rental hereunder), or shall thereafter, commencing upon expiration of said six months' period, pay to Lessor the aforesaid monthly rental, monthly in advance, until such time as the drilling of a second well shall be commenced on the leased land. In the event Lessee shall drill a second well on the leased land to such depth as Lessee shall deem proper to test whether or not sufficient power potential or extractable minerals in commercially paying quantities can be developed on said land, then if such second well does not indicate or establish to the satisfaction of Lessee sufficient power potential or extractable minerals in commercially paying quantities, Lessee shall either commence the drilling of a third well on the leased land within six (6) months after completion or abandonment of said second well (during which said six months' period Lessee shall not be required to pay any rental hereunder), or Lessee shall thereafter, commencing upon expiration of said six months' period, pay to Lessor the aforesaid monthly rental, monthly in advance, until such time as the drilling of a third well shall be commenced on the leased land, and the provisions of this paragraph shall be applicable to such third well and to any and all subsequent wells drilled by Lessee upon the leased land until Lessee shall have drilled and completed a well or wells on the leased land which shall produce or be capable of producing steam of sufficient power potential or extractable minerals in commercially paying quantities. It is expressly understood and agreed by the parties hereto : (a) That if within years from the date of this agreement Lessee shall have failed to complete one or more wells on the leased land separately or collectively producing, or being capable of producing, steam of sufficient power potential, as hereinafter defined, or producing, or being capable of producing, extractable minerals of commercial value and in commercial quantities, then Lessor, at it option, may consider such circum stance a default on the part of Lessee hereunder, except that if on said date Lessee is engaged in drilling a well pursuant to the provisions hereof the time herein provided for shall be extended for the period required by Lessee to complete drilling of said well and for an additional period of six months to test said well to determine whether or not such well separately is or such well together with one or more other wells are capable of producing steam sufficient power potential, or extractable minerals in commercially paying quantities, and provided further that if such well separately is not or such well together with one or more other wells are not capable of producing steam of sufficient power potential, or extractable minerals in commercially paying quantities, if Lessee within one month after expiration of said six months testing period commences the drilling of another well on the leased land and continues such drilling diligently and in good faith the time herein provided for shall be further extended for the period required by Lessee to complete drilling of said well and to test same for six months, as aforesaid, the provisions hereof being applicable as to each subsequent well which Lessee may elect to drill, until completion on the leased land of one or more wells fulfilling the requirements of this subdivision (a). (b) That if within years from the date of this agreement Lessee shall have failed to make or arrange for a bona fide commercial sale or sales of steam, steam power or extractable minerals produced from a well or wells on the leased land then Lessor, at its option, may consider such circumstance a default on the part of Lessee hereunder, it being agreed that if Lessee shall on or before said date enter into an agreement or agreements providing for the purchase of steam for generation of electric power or sale of extractable minerals and providing also for the installation or availability of facilities for such purpose, or purposes, but which such agreement or agreements shall provide that any installation of such facilities shall not be required to be commenced until after an additional period of testing the power potential or commercial character or quantity of extractable minerals of the well or wells on the leased land, or until an additional amount of steam or extractable minerals as fixed in such agreement or agreements shall be produced from the leased land, such agreement shall be deemed to be a compliance with the provisions hereof. 3. At such time as Lessee shall have drilled and completed any well or wells on the leased land which shall indicate a sufficient power potential or the existence of extractabe minerals in commercially paying quantities, Lessee, its subsidiaries, licensees and permittees shall have the right at any time thereafter to construct, install and maintain facilities with all necessary appurtenances for the commercial sale or use of steam or steam power produced on the leased land or lands in the vicinity thereof, or for the extraction of extractable minerals, or for development of electric power from the use of steam or steam power, and for commercial sale thereof, and at such time Lessee may, but need not, purchase from the Lessor at the fair market value the land so required and used for such purposes. Such facilities for the utilization of the steam or steam power, or the extraction of extractable minerals thereof developed on the leased land, may be installed or situated on the leased land or on lands other than the leased land at Lessee's option. Upon completion of a well or wells on the leased land which shall indicate a sufficient power potential, or extractable minerals in commercially paying quantities, or upon the commencement of construction or installation of facilities for the utilization or sale, as aforesaid, of steam or steam power or extractable minerals, or upon commencement of the sale of such steam or steam power or extractable minerals, then upon any such occurrence the monthly rental obligations of Lessee hereunder shall cease. 4. Lessee shall have the right to drill such well or wells on the leased land as Lessee may deem desirable for the purposes hereof; including wells for injection or reinjection purposes, provided, however, that notwithstanding any provisions of this lease to the contrary, Lessee shall utilize for such purpose or purposes only so much of the leased land as shall be reasonably necessary for Lessee's operations and activities thereon and shall interfere as little as is reasonably possible with the use and occupancy of the leased land by Lessor. No such well shall be drilled within an area of 100 feet of Lessor's house or surrounding buildings without the consent of Lessor. 5. Lessee shall pay to Lessor as royalty Ten Percent (10%) of the gross proceeds received by Lessee from the sale of steam, or steam power, as such, producc red and sold by Lessee from the leased land at and as of the point of origin on the leased land. Royalty on steam shall be computed on the basis of the number of kilowatt hours of electric power generated by the use of such steam, or shall be computed on whatever basis which shall more nearly reflect the royalty portion of the gross proceeds received by Lessee from the sale of steam and steam power, as such, produced from the leased land at and as of the point of origin on the leased land. With respect to extractable minerals. Lessee shall pay to Lessor as royalty Ten Percent (10%) of the net proceeds received by Lessee from the sale of effluence (containing minerals and/or minerals in solution) produced and sold from any well or wells on the leased land, or in the event Lessee does not sell such effluence but processes the effluence and extracts minerals therefrom, Lessee shall pay to Lessor as royalty Ten Percent (10%) of the proceeds received by Lessee from the sale of minerals and/ or minerals in solution contained in and extracted from the effluence produced and sold from such well or wells less costs of transportation and extraction. Lessee shall have the right to commingle, for the purpose of storing, transporting, utilizing, selling or processing, the steam or steam power or extractable minerals produced from the leased land, with the steam or steam power or extractable minerals produced from other lands, and to meter, gauge or measure the production from the leased land, and to compute and pay Lessor's royalty on the basis of such production as so determined. Lessee shall pay to Lessor on or before the twenty-fifth day of each and every month the royalties accrued and payable for the preceding calendar month, and in making such royalty payments Lessee shall deliver to Lessor statements setting forth the basis for computation and determination of such royalty. In the event that the production of steam or extractable minerals from the leased land or from lands in the general area of the leased land should at any time exceed the demand therefor or the facilities for use thereof, and the Lessee elects to reduce the total production, then in that event the production of each well participating on a commingling basis shall be reduced in a percentage amount equal to its proportion of the total production of all participating wells prior to such reduction. 6. Lessee shall not be required to account to Lessor for or to pay any royalty on steam, steam power or extractable minerals produced by Lessee on the leased land which are not utilized, saved or sold, or which are used by Lessee in its operations on or with respect to the leased land for or in connection with the development and production of steam or extractable minerals, or in the operation of facilities utilized in the generation of electric power, or which are unavoidably lost, provided that if such steam, steam power or extractable minerals are sold by Lessee, Lessor shall be entitled to Lessor's royalty thereon. Lessee shall have the right to use and utilize such water or water rights in, on, produced from or appurtenant to or crossing the leased land as Lessee may reasonably require in connection with its operations on the leased land in furtherance of the objectives of this lease and of Lessee's business and operations, without payment therefor to Lessor, provided that such use by Lessee shall be lawful and provided, further, that such use by Lessee of any water or water rights, as aforesaid, existing as of the date hereof shall not interfere with Lessor's requirements for Lessor's own use thereof for domestic or agricultural purposes on the leased land nor interfere with Lessor's contractual commitments existing as of the date hereof for the use thereof on lands other than the leased land. Lessor shall have the right to use for Lessor's own domestic or agricultural purposes on the leased land any surplus water resulting from Lessee's operations on the leased land which is not required by Lessee in its activities or operations; provided that Lessor, at Lessor's expense, shall make adequate provision for the taking and transporting of such water from such place or places on the leased land as Lessee shall designate and for the storage and treatment, if required, of such water. Except as aforesaid, any surplus water resulting from Lessee's activities or operations may be utilized, disposed of or dealt with by Lessee in such manner as Lessee shall deem appropriate. 7. In the event Lessor at the time of making this lease owns a less interest in the leased land than the fee simple estate therein and thereto, then the rentals and royalties accruing hereunder shall be paid to Lessor in the proportions which Lessor's interest bears to the entire fee simple estate in the leased land. 8. There is hereby expressly reserved to Lessor and to Lessee the right and privilege to convey, transfer or assign, in whole or in part, or to deal with in any manner. subject to the provisions hereof, their respective rights and interests in and under this Lease and Agreement or in the leased land, or the steam, steam power, electric power, or extractable minerals, produced on or from the leased land, but in the event Lessor shall sell or transfer any part or parts of the leased land or any interest in the aforesaid extractable minerals therefrom Lessee's obligations hereunder shall not thereby be altered, increased or enlarged, but Lessee may continue to operate the leased land and to pay and settle rents and royalties as an entirety. No change in ownership of Lessor's interest (in whole or in part) shall be binding upon Lessee until the expiration of 30 days after Lessee is furnished a certified or adequate evidentiary copy of the instrument or instruments effecting such change. 9. The obligations of Lessee hereunder shall be suspended (but without impairment of Lessor's rights under (a) or (b) of Clause 2) and the term of this lease shall be extended, as the case may be, while Lessee is prevented from complying therewith, in whole or in part, by strikes, lockouts, riots, actions of the elements, accidents, delays in transportation, inability to secure labor or materials in the open market, laws, rules or regulations of any federal, state, municipal or other governmental agency, authority or representative, inability to secure, or absence of, a market for commercial sale of steam or steam power or extractable minerals developed on or from the leased land or for electric power developed therefrom, or other matters or conditions beyond the reasonable control of Lessee, whether or not similar to the conditions or matters herein specifically enumerated. It is further agreed that if at any time after expiration of twenty-five years from the date hereof the production of steam, or of electric power or of extractable minerals, theretofore derived or produced from the leased land, ceases for any cause other than one or more of the causes hereinabove enumerated, this lease shall nevertheless remain in full force and effect for an additional period of one year and thereafter if, and so long as, Lessee commences and continues diligently and in good faith the steps, operations or procedures to cause a resumption of such production, until such production shall be resumed. 10. Lessee shall pay all taxes levied on Lessee's structures and improvements placed on the leased land by Lessee and shall pay any and all taxes which may be levied or assessed against any personal property owned by Lessee or which may be produced by Lessee in connection with Lessee's operations on the leased land. In the event any taxes are levied or assessed against the right to produce steam or extractable minerals from the leased land or in the event any increase in the taxes levied or assessed against the leased land shall be based upon the production from the leased land of steam or extractable minerals, then in either such event Lessee shall pay Ninety Percent (90%) of any such taxes and Lessor shall pay Ten Percent (10%) thereof. Lessor shall pay all taxes levied or assessed against the leased land as such without reference to the production of steam or extractable minerals therefrom and shall pay all taxes levied and assessed against any and all rights in or to or with respect to the leased land not covered by this Lease and Agreement and shall pay all taxes levied and assessed against all structures and improvements owned by Lessor or placed on the leased land by or pursuant to permission of Lessor. 11. Lessor, or its agents, may at all times examine said land and the workings, installations and structures thereon and operations of Lessee thereon, and may inspect the books and records of Lessee with respect to matters pertaining to the payment of royalties to Lessor. Lessee agrees, on written request, to furnish to Lessor copies of such information. 12. All the labor to be performed and materials to be furnished in the operations of Lessee hereunder shall be at the cost and expense of Lessee, and Lessor shall not be chargeable with, or liable for, any part thereof, and Lessee shall protect said land against liens of every character arising from its operations thereon. Lessee, at its own expense, prior to commencing operations on the leased land, shall obtain and shall maintain adequate Workmen's Compensation insurance, and shall also obtain and maintain public liability insurance coverge in amounts of not less than $100,000 for one person and $300,000 for one accident, and property damage insurance coverage in an amount of not less than $50,000. Lessee shall protect Lessor against damages of every kind and character which may be occasioned to any of the parties hereto or to any other persons by reason of the operations or workings of the Lessee or those under Lessee's control upon said leased land, but Lessee shall not be liable hereunder in the event of the negligence or willful misconduct of such party or parties, person or persons. 13. In the event any buildings or personal property shall be damaged, destroyed or required to be removed, or any grazing land destroyed, because of Lessee's operations on the leased land, Lessee shall be liable for payment of the reasonable value thereof. In the event Lessee shall elect to locate a wellsite and an access road thereto on agricultural land at the time under cultivation. then Lessee shall pay to Lessor a sum agreed upon between Lessor and Lessee to |
