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Coso Energy Developers - Offer To Lease And Lease For Geothermal Resources
Exhibit 10.40
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3200-24 FORM APPROVED (May 1984) UNITED STATES OBM No. ___________ (Formerly 3200-8 & 3200-21) DEPARTMENT OF THE INTERIOR Expires January 31,1986
BUREAU OF LAND MANAGEMENT
OFFER TO LEASE AND LEASE FOR GEOTHERMAL RESOURCES Serial No. CA 11402
The undersigned have reserved others to lease all or any of the lands in item 2 that are available for lease pursuant to the Geothermal Steam Act of 1970 ________________________.
Read Instructions Before Completing
1. Name California Energy Company, Inc.
Street 3333 Mendocino Ave., Suite 100
City, State, Zip Code Santa Rosa, California 95401 - ----------------------------------------------------------------
2. Surface managing agency if other than BLM ____________Unit Project_________
Legal description of land requested (segregate by public domain and
acquired lands):
T. 22 S., R. 39 E., Meridian Mt. Diablo State California County Inyo
Sec. 19, lots 1 to 4, E1/2, E1/2W1/2;
Secs. 20 and 29;
Sec. 30, lots 1 to 4, E1/2, E1/2W1/2.
Total acres applied for 2,554.04
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Percent U.S. interest __________ Amount remitted: Filing fee$_____ Rental fee $5,110.00 Total $ 5,110.00
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DO NOT WRITE BELOW THIS LINE 3. Land included in lease:
T. R. Meridian State County
Same as Item 2.
Total acres in lease 2554.04
Rental retained $5110.00 ________________________________________________________________________________
In accordance with the above offer, or the previously submitted competitive bid, this lease is issued granting the exclusive right to drill for, extract, produce, remove, utilize, sell, and dispose of all the geothermal resources in the lands described in item 3 together with the right to build and maintain necessary improvements thereupon, for a primary term of 10 years. Rights granted are subject to applicable laws, the terms, conditions, and attached stipulations of this lease, the Secretary of Interior's regulations
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and formal orders in effect as of lease issuance and, when not inconsistent with lease rights granted or specific provisions of this lease, regulations and formal orders hereafter promulgated.
THE UNITED STATES OF AMERICA
Type of lease:
by /s/ Joan B. Russell
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Noncompetitive - ---
Chief, Leasable Minerals Section
----------------------------------- X Competitive Coso KGRA; Parcel 20 - ---
Other Lease Sale of 9/15/81 EFFECTIVE DATE OF LEASE MAY 1, 1985 - --- ---------------------------- --------------
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4. (a) Undersigned certifies that
(1) Offeror is a citizen of the United States; an association of such
citizens; a municipality; or a corporation organized under the laws of
the United States, any State or the District of Columbia; (2) All parties
holding an interest in the offer are in compliance with 43 CFR 3200 and
the authorizing Act; (3) Offeror's chargeable interests, direct and
indirect, do not exceed that allowed under the Act; and (4) Offeror is
not considered a minor under the laws of the State in which the lands
covered by this offer are located. (b) Undersigned agrees that signature to this offer constitutes acceptance of this lease, including all terms, conditions and stipulations of which offeror has been notice, and any amendment or separate lease that may cover any land described in this offer open to lease application at the time this offer was filed but omitted for any reason from this lease. The offeror further agrees that this offer cannot be withdrawn, either in whole or part, unless the withdrawal is received by the BLM State Office before this lease, an amendment to this lease, or a separate lease, whichever covers the land described in the withdrawal, has been signed on behalf of the United States. This offer will be rejected and will afford the offeror no priority if it is not properly completed and executed in accordance with the regulations, or if it is not accompanied by the required payments. Title 18 U.S.C. Sec. 1001 makes it a crime for any person knowingly and willfully to make to any Department or agency of the United States any false, fraudulent, or untrue statements or representations as to any matter within its jurisdiction.
Duly executed this 19th day of April , 1985 /s/ signature illegible
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LEASE TERMS
Sec. 1. Rentals -- Rentals shall be paid to proper office of lessor in advance of each lease year until there is production in commercial quantities from the leased lands. Annual rental rates per acre or fraction thereof are: $1 for noncompetitive leases and $2 for competitive leases. If this lease or a portion thereof is committed to an approved cooperative or unit plan which includes a well capable of producing leased resources, and the plan contains a provision for allocation of production, royalties shall be paid on the production allocated to this lease. However, annual rentals shall continue to be due for those lands not within a participating area. Failure to pay annual rental, if due, on or before the anniversary date of this lease (or next official working day if office is closed) shall automatically terminate this lease by operation of law. Rentals may be suspended by the Secretary upon a sufficient showing by lessor.
Sec. 2. Royalties -- Royalties shall be paid to proper office of lessor. Royalties shall be computed in accordance with regulations and orders. Royalty rates on production are: 10 percent for steam, heat, or energy; 5 percent for byproducts; and 5 percent for demineralized water. Lessor reserves the right to establish reasonable minimum values on production after giving lessee notice and an opportunity to be heard. Royalties shall be due and payable on the last day of the month following the month in which production occurred. Minimum royalty shall be due for any lease year beginning on or after the commencement of production in commercial quantities in which royalty payments aggregate less than $2 per acre. Lessor shall pay such difference at the end of lease year. This minimum royalty may be waived, suspended, or reduced, and the above royalty rates may be reduced for all or portions of this lease if the Secretary determines that such action is necessary to encourage the greatest ultimate recovery of the leased resources, or is otherwise justified.
Sec. 3. Bonds -- Lessee shall file and maintain any bond required under regulations.
Sec. 4. Diligence, rate of development, unitization, and drainage -- Lessee shall perform diligent exploration as required by regulations and shall prevent unnecessary damage to, loss of, or waste of leased resources. Lessor reserves right to specify rates of development and production in the public interest and to require lessee to subscribe to a cooperative or unit plan, within 30 days of notice, if deemed necessary for proper development and operation of the area, field, or pool embracing these leased lands. Lessee shall drill and produce wells necessary to protect leased lands from drainage or pay compensatory royalty for drainage in amount determined by lessor.
Sec. 5. Documents, evidence, and inspection -- Lessee shall file with proper office of lessor, not later than (30) days, after effective date thereof, any contract or evidence of other arrangement for the sale or disposal of production. At such times and in such form as lessor may prescribe, lessee shall furnish detailed statements showing amounts and quality of all products removed and sold, proceeds therefrom, and amount used for production purposes or unavoidably lost. Lessee shall be required to provide
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plots and schematic diagrams showing development work and improvements, and reports with respect to parties in interest, expenditures, and depreciation costs. In the form prescribed by lessor, lessee shall keep a daily drilling record, a log, and complete information on well surveys and tests and keep a record of subsurface investigations and furnish copies to lessor when required. Lessee shall keep open at all reasonable times for inspection by any authorized officer or lessor, the leased premises and all wells, improvements, machinery, and fixtures thereon, and all books, accounts, maps, and records relative to operations, surveys, or investigations on or in the leased lands. Lessee shall maintain copies of all contracts, sales agreements, accounting records, and documentation such as billings, invoices, or similar documentation that support costs claimed as manufacturing, preparation, and/or transportation costs. All such records shall be maintained in lessee's accounting offices for future audit by lessor. Lessee shall maintain required records for 6 years after they are generated or, if an audit or investigation is underway, until released of the obligation to maintain such records by lessor. Notwithstanding existence of this lease, information obtained under this section shall be closed to inspection by the public in accordance with the Freedom of Information Act (5 U.S.C. 552).
Sec. 6. Conduct of operations -- Lessee shall conduct operations in a manner that minimizes adverse impacts to the land, air, and water, to cultural, biological, visual, and other resources, and to other land uses or users. Lessee shall take reasonable measures deemed necessary by lessor to accomplish the intent of this section. To the extent consistent with leased rights granted, such measures may include, but are not limited to, modification to siting or design of facilities, timing of operations, and specification of interim and final reclamation measures. Lessor reserves the right to continue existing uses and to authorize future uses upon or in the leased lands, including the approval of easements or rights-of-ways. Such uses shall be conditioned so as to prevent unnecessary or unreasonable interference with rights of lessees. Prior to disturbing the surface of the leased lands, lessee shall contact lessor to be appraised of procedures to be followed and modification or reclamation measures that may be necessary. Areas to be disturbed may require inventories or special studies to determine the extent of impacts to other resources. Lessee may be required to complete minor inventories or short term special studies under guidelines provided by lessor. If in the conduct of operations, threatened or endangered species, objects of historic or scientific interest, or substantial unanticipated environmental effects are observed, lessee shall immediately contact lessor. Lessee shall cease any operations that would result in the destruction of such species or objects.
Sec. 7. Production of byproducts -- If the production, use, or conversion of geothermal resources from these leased lands is susceptible of producing a valuable byproduct or byproducts, including commercially demineralized water for beneficial uses in accordance with applicable State water laws, lessor may require substantial beneficial production or use thereof by lessee.
Sec. 8. Damages to property -- Lessee shall pay lessor for damage to lessor's improvements, and shall save and hold lessor harmless from all claims for damage or harm to persons or property as a result of lease operations.
Sec. 9. Protection of diverse interests and equal opportunity -- Lessee shall maintain a safe working environment in accordance with standard industry practices and take measures necessary to protect the health and safety of the public. Lessor reserves the right to ensure that production is sold at reasonable prices and to prevent monopoly. Lessee shall comply with Executive Order No. 11246 of September 24, 1965, as amended, and regulations and relevant orders of the Secretary of Labor issued pursuant thereto. Neither lessee nor lessee's subcontractor shall maintain segregated facilities.
Sec. 10. Transfer of lease interests and relinquishment of lease -- As required by regulations, lessee shall file with lessor, any assignment or other transfer of an interest in this lease. Lessor may relinquish this lease or any legal subdivision by filing in the proper office a written relinquishment, which shall be effective as of the date of filing, subject to the continued obligation of the lessee and surety to pay all accrued rentals and royalties.
Sec. 11. Delivery of premises -- At such time as all or portions of this lease are returned to lessor, lessee shall place all wells in condition for suspension or abandonment, reclaim the land as specified by lessor, and within a reasonable period of time, remove equipment and improvements not deemed necessary by lessor for preservation of producible wells or continued protection of the environment.
Sec. 12. Proceedings in case of default -- If lessee fails to comply with any provisions of this lease, and the noncompliance continues for 30 days after written notice thereof, this lease shall be subject to cancellation in accordance with the Act. However, if this lease includes land known to contain a well capable of production in commercial quantities, it may be cancelled only by judicial proceedings. This provision shall not be construed to prevent the exercise by lessor of any other legal and equitable remedy, including waiver of 1986the default. Any such remedy or waiver shall not prevent later cancellation for the same default recurring at any other time.
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Whenever the lessee fails to comply in a timely manner with any of the provisions of the Act, this lease, the regulations, or formal orders, and immediate action is required, the Lessor may enter on the leased lands and take measures deemed necessary to correct the failure at the expense of the Lessor.
Sec. 13. Heirs and successors-in-interest -- Each obligation of this lease shall extend to and be binding upon, and every benefit hereof shall inure to, the heirs, executors, administrators, successors, or assignees of the respective parties hereto.
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Navy Constraints On Naval Weapon Center Lands
In addition to the lease terms and requirements contained in the lease forms, the lessee shall comply with the following Navy constraints unless they are jointly modified by the Commander, NWC, and the Authorized Officer, Bureau of Land Management, with the concurrence of the Deputy Conservation Manager (DCM) for Geothermal, USGS.
The Commander, NWC, is the responsible agent of the Federal Government for the utilization of the land surface and airspace of NWC. As such, the Commander, NWC, is responsible for the protection of the health and safety of all personnel, military and civilian, within the confines of NWC, and is responsible for the continuing preservation of the ability of NWC to perform its mission of air delivered weapons research, development, test, and evaluation.
1. Access.
Access to the NWC is a privilege granted by the Commander, NWC. Exercise of
this privilege requires adherence to NWC traffic regulations, check-in/
check-out procedures, radiation control measures, environmental controls,
area access limitations, and electronic emission controls and such other
published administrative regulations as appropriate. Access shall be on a
not-to-interfere basis with NWC test schedules, and shall be limited to that
specific lease block or area being explored, developed or produced. Access
schedules shall be established on a weekly basis with NWC. NWC shall provide
uninterrupted short term access for reasons of geothermal safety or other
drilling incidents requiring access to a specific site for geothermal
operations. Experience to date shows that in any given month, scheduled and
unscheduled daylight downtime will not regularly exceed 10% and nighttime
downtime will not regularly exceed 2%. Access shall require that for each
lease holder, one responsible contact point shall at all times know who is
present on NWC lands, and this contact point shall be reachable at all times
in event evacuation is ordered.
2. Security.
The mission of the NWC is such that visitors cannot be granted access to NWC
lands without going through NWC security procedures. All non-citizen visits
must be arranged through NWC with a minimum notice of 96 hours for non-
communist-bloc visitors. The latter will be considered on a case-by-case
basis. Accessible areas visitors use will be delineated by NWC.
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3. Environmental.
NWC retains the right to suspend any operation judged by the Center to
present an imminent threat to the environment. During all operations, all
federal, state and local environmental standards shall be rigorously
observed. No components of the environment shall be unnecessarily disturbed.
NWC shall have the right to impose those emission standards required to
protect the Center's mission.
4. Sites and Routes.
All vehicular traffic shall be limited to routes approved by NWC. Power
plant sites, drill pad sites, and pipe line routes will be selected subject
to NWC approval to ensure that such sites will have a minimum impact on NWC
range operations. All site plans shall be submitted to NWC for review and
approval. Routes to and from work areas within lease blocks shall be
approved by NWC.
5. Shelters.
Lease operators shall have the option of either moving employees outside NWC
boundaries upon request of the designated representatives of the Commander,
NWC, or retiring to NWC approved personnel shelters provided by the lessee
during those times when the NWC operations require personnel protection at
the work site.
6. Radioactive Sources.
No radioactive sources shall be brought into NWC until appropriate Navy
permits have been obtained. These permits will be issued after NWC has
verified the license of the operator to be valid for the proposed effort and
has approved written standard procedures for use and for handling lost or
damaged sources.
7. Injuries and Accidents.
All disabling injuries occurring within NWC boundaries will be reported
within 24 hours to NWC. NWC will have the right to suspend any operation
judged by NWC to present an imminent danger to any personnel on NWC property
or to government property.
8. Electronic Radiation.
Electronic emissions will not be permitted without prior review and
authorization by the NWC. Periods of emission will be coordinated with the
Center and, at times, the Center may require electronic emission silence for
periods of up to four hours.
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9. Plant Protection.
All wet-heads shall be revetted to a degree acceptable to NWC; all wells so
designated by NWC shall be fitted with an approved below ground or revetted
flow limiter; all pipe lines shall be fitted with automatic flow limiters as
approved by NWC and all power plants shall be equipped with a hardened
control room approved for continuous occupancy during NWC tests.
10. Information.
All information on incidents involving both NWC equipment and/or personnel
and the geothermal operators will be released to the public jointly by NWC
and the Department of Interior. Particular attention will be given to
information concerning incidents that have the potential for high public
interest. Any serious injury or fatality and any geothermal blowout will be
reported at once to NWC.
11. Military/Government Property.
All military and government property found on the land surface or embedded
in the land shall be left in place. NWC shall be informed of the presence of
all suspected or potentially hazardous material immediately and NWC
personnel will inspect and remove such material in a timely manner. In case
of doubt, NWC is to be called for an inspection.
12. Data Exchange.
Data on flow, chemistry of fluids and reservoir conditions and structure
shall be provided to NWC with such data to remain proprietary in accordance
with current practices and procedures as developed by the Deputy
Conservation Manager and set forth in 30 CFR 270.
13. Legal Jurisdiction.
Law enforcement on NWC lands will remain the responsibility of NWC. The use
of geothermal operator employees in a guard function or the contracting by
the geothermal operator for security guards on NWC lands will be subject to
review and approval by NWC.
14. Right of Inspection.
NWC shall have the right of inspection at all times to ensure and verify
compliance with these constraints.
15. Minor administrative costs incurred by the Naval Weapons Center, i.e.,
scheduling to avoid conflict with Weapons Center range use, will be
chargeable to the leaseholder. For more information call Dr. Carl Austin,
(714) 939-3411, extension 228.
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Form 3200-17 UNITED STATES FORM APPROVED (August 1982) DEPARTMENT OF THE INTERIOR OMB NO. 1004-0074
BUREAU OF LAND MANAGEMENT Expires: April 30, 1985
Serial No. CA11402
ASSIGNMENT AFFECTING RECORD TITLE
TO GEOTHERMAL RESOURCES LEASE New Serial No.
PART I
COSO LAND COMPANY
c/o California Energy Company, Inc.
3333 Mendocino Ave., Suite 100
Santa Rosa, CA 95401
The undersigned, as owner of 100% percent of record title of the above- designated geothermal resources lease issued effective (date) May 1, 1985, hereby transfers and assigns to the assignee shown above, the record title interest in and to such lease as specified below.
________________________________________________________________________________
- -- 2. Describe the lands affected by this assignment (43 CFR 3241.2-5)
T. 22 S., R. 39 E., Mt. Diablo, Meridian
Sec. 19, Lots 1-4, Inclusive, E1/2, E1/2W1/2
Sec. 20,
Sec. 29,
Sec. 30, Lots 1-4, Inclusive, E1/2, E1/2W1/2
Total Area 2,554.04 ________________________________________________________________________________ 3. What part of assignor(s) record title interest is being conveyed to assignee? (Give percentage or share) 100% ________________________________________________________________________________ 4. What part of the record title interest is being retained by assignor(s)? NONE ________________________________________________________________________________
5a. What overriding royalty or production payments is the assignor reserving herein? (See Item 4 of General Instructions; specify percentage; no assignment will be approved which does not comply with 43 CFR 3241.7-2 on limitation of overriding royalties) NONE b. What overriding royalties or production payments, if any, were previously reserved or conveyed? (Percentage only) NONE ________________________________________________________________________________
It is agreed that the obligation to pay any overriding royalties or payments out of production of geothermal resources created herein, which, when added to overriding royalties or payments out of production previously created, aggregate in excess of 50 percent, of the rate of royalty due the United States, shall be suspended.
I CERTIFY That the statements made herein are true, complete, and correct to the best of my knowledge and belief and are made in good faith.
Executed this 17th day of May, 1985 California Energy Company, Inc.
By: /s/ Kenneth P. Nemzer 3333 Mendocino Ave., Suite 100
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(Assignor's Signature) (Assign...
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