Document:

COALBED METHANE LEASE

 

THIS
AGREEMENT (herein called the "Lease") is made wih an effective date of May 1, 2008 between INTERNATIONAL PAPER COMPANY,
a New York corporation, whose address is 7600 W. Tidwell Road, Suite 300, Houston, Texas 77040-5714 acting solely on its own behalf
and in the capacities herein expressly stated, "Lessor"), and E&Pco LLC a Texas Limited Liability Company whose address
is 2500 Tanglewilde Suite #492 Houston, Texas 77063 , (herein called "Lessee").

 

1.            For
value received, Lessor hereby GRANTS, LEASES and LETS exclusively unto Lessee the land as described in Exhibit "A" and
shown on Exhibit A-1 attached hereto and made a part hereof and situated in Caldwell Parish, LA (herein called the "Leased
Premises"), for the sole purpose of: (a) exploring, drilling, operating for, producing and marketing, coalbed methane gas,
gob gas, and their respective constituent products, and any other minerals produced in conjunction with coalbed methane from coal
seams, excluding coal, (all such substances are defined for the purpose of this Lease collectively as "CBM") to the extent
of Lessor's ownership in these substances, and (b) (but not exclusive of similar use by Lessor, its successor, assigns, grantees
or licensees) building roads, laying water and gas pipelines, installing equipment, storing oil, building tanks
(but not tank farms), and constructing and laying power stations, power lines, telephone
lines, pumping and compressor stations, making land surveys on said land, establishing and utilizing facilities for the surface
and subsurface disposal of produced water attributable to the Leased Premises in accordance with the appropriate state and federal
regulations, non commercial tower sites and other structures to the extent necessary to investigate ,
produce, save, dewater, take care of, treat
and transport CBM and water attributable to the Leased Premises to the extent of Lessor's rights to grant permission to conduct
such activities. It is not the intent of Lessor to lease, and Lessor
hereby expressly reserves from the interests leased hereby, any mineral interests (including any undivided or partial interest)
on which Lessor owns only the executive privilege, unless this Lease expressly states (i) that such executive privilege is being
exercised and (ii) the names of the owners of the mineral interest on whose behalf such executive privilege is being exercised.
For purposes of calculating any Shut In Royalty, Delay Rental or
Minimum Annual Rental payment herein provided for, Lessor
and Lessee stipulate that the Leased Premises shall be deemed to contain 9661 net mineral acres, whether they actually contain
more or less; however, this stipulation shall not be effective as to or binding upon Lessor or Lessee for any other purpose. If
this Lease now or hereafter covers separate tracts, no pooling or unitization of royalty interest as between such separate tracts
is intended or shall be implied
or result merely from the inclusion of such separate tracts
within this Lease. As used in this paragraph, the words "separate tract"
shall mean any tract with royalty or mineral ownership differing, now or hereafter, either as to parties or amounts, from any other
part of the Leased Premises. Nothing in this lease shall be construed
as granting any rights to recover anything other than CBM and specifically no rights to coal or hydrocarbons from conventional
reservoirs are granted hereunder . The
use of the term
CBM is for convenience
and is intended to
include names by which CBM is also known, inter alia, such as coal gas, coalseam gas, coalbed
gas and firedamp.

 

    	COALBED METHANE LEASE - 1

    	 

    

 

If the Lessor does not own
the surface rights to the Leased Premises, the Lessee shall be fully responsible for making all arrrangements with surface owner(s)
to allow the Lessee's realization of its rights hereunder. The Lessee is not appointed an agent, representative or partner of the
Lessor, and is not authorized or empowered to alter or compromise the Lessor's rights to the Leased Premises.

 

2.            Upon
execution of this Lease, Lessee shall pay to Lessor a bonus of $12.00 per net mineral acre in
the Leased Premises as set forth on Exhibit "A,". Subject to the further terms hereof, this Lease shall be for
a term of three (3) years from this date (the "Primary Term") and as long thereafter as CBM is produced in Paying Quantities
from the Leased Premises; or as long as this Lease is continued in effect
as otherwise provided herein. Except as otherwise specifically provided herein, "Paying
Quantities" shall mean production in
quantities sufficient to yield a return on investment in excess of operating costs even though drilling and equipment costs
may never be recovered. However, if Lessee can show to the reasonable
satisfaction of Lessor that any well(s) that fail to produce in Paying Quantities are necessary for the de-watering process, then
such wells shall be deemed to produce in Paying Quantities and shall not be released from the Leased Premises. The status and re-determination,
if necessary, of any well that has been "deemed" to produce in Paying Quantities under the foregoing sentence shall be
reviewed by Lessee and Lessor from time to time and at a minimum of on an annual basis.

 

During the Primary Term,
Lessee shall be obligated to carry out a minimum drilling program, as set forth below:

 

lst
Lease year:                6
wells or equivalent = 7,920 feet of horizontal laterals

 

2nd
Lease year:               6
wells or equivalent = 7,920 feet of horizontal laterals

 

3rd Lease
year:               6
wells or equivalent = 7,920 feet of horizontal laterals

 

As
long as the Lease is continued beyond the Primary Term
by other provisions contained herein, Lessee will continue to drill a minimum of 12 wells per calendar, or horizontal laterals
equivalent = 15,840 feet per year until seventy-five percent (75%) of the net acres in the Leased ?remises have been developed,
at which time no further drilling commitment will be required to hold the lease in
its entirety. A well shall be defined as a borehole
of sufficient depth to test the coal s eams in the Wilcox Formation. Beyond the Primary Term,
and until 75% of the net acres in
the Leased Premises have been developed , in accordance
with the provisions of 3(j) herein below the Lessee shall also make
annual minimum royalty payments of $2.00 per net acre on remaining leased acres on the anniversary date of the lease extension
in order to maintain its
interest in the whole of the Leased Premises. In the event the Lessee drills fewer
than the required number of wells in any year after the Primary Term, it shall have no right
to drill any further wells in any
subsequent year and only those wells and the
drilling or spacing unit (Well Tract) acreage assigned
to such wells actually in production or capable of being
in production (to include
any wells being de-watered) shall then comprise the "Leased Premises" for the purpose
of this Lease and the Lessee shall have no further interest of any kind in the remaining Lands.
Wells drilled in excess of the minimum in any lease year can be credited to the subsequent year.

 

    	COALBED METHANE LEASE - 2

    	 

    

 

3.            As
used herein the "Royalty Fraction" shall mean a Base Royalty of 12.5_%
plus a Supplemental Royalty based on the Gross Sales Price of the CBM, on a well-by-well basis
to be determined as follows:

 

	Price at or Then	 	 	 	 
	Greater than	 	 	Total Royalty	 
	per MCF of*	 	 	Rate of	 
	 	 	 	 	 
	$	2.50	 	 	 	12.5	%
	$	3.00	 	 	 	15	%
	$	3.50	 	 	 	16	%
	$	4.00	 	 	 	17	%
	$	4.50	 	 	 	18	%
	$	5.00	 	 	 	19	%
	$	5.50	 	 	 	20	%

 

*Average for month

 

The royalties to be paid by Lessee
to Lessor (at the address shown in Paragraph 20) are:

 

		3. (a)	On coalbed methane,
produced from the
Leased Premises
and sold off such premises, or used off the premises (other
than for processing at a plant as described in Paragraph 3(c) · hereof),
the royalties shall
be the Royalty Fraction
multiplied by the gross proceeds
received from any sale of such coalbed methane . On CBM
produced from the Leased Premises and sold by Lessee,
the production royalty to be paid to the Lessor by Lessee shall be .the
Royalty Fraction of the gross sales price f.o.b. the "Delivery
Point". Delivery Point shall be defined as the point
at which the CBM is sold to
an unaffiliated third
party purchaser or the point at which CBM is delivered to an unaffiliated pipeline
for re delivery to a point of sale. Royalties shall not
be due on any gas used on the Leased Premises by Lessee.

 

		3. (b)	If the CBM produced from
any well situated on the Leased Premises shall contain
in suspension condensate, gasoline
or other natural gas liquids that economically
can be separated from
the CBM and liquefied by the installation by Lessee of traps, separators or other mechanical devices ordinarily used in the industry
for such purpose, then
Lessee shall install such devices
on the Leased Premises, and Lessor
shall receive the royalty specified in paragraph 3(a)
on the condensate, gasoline or other natural gas liquid Hydrocarbons so recovered, together
with the royalty specified
in Paragraph 3(a) on the residue gas, determined as provided
in Paragraph 3(a).

 

		3. (c)	If CBM,
gas, or casinghead gas or separated gas resulting from field separation produced from the
Leased Premises is processed by or for the account
of Lessee,
or by or for
the account of any Affiliate
(as hereinafter
defined) for the
recovery of liquid
hydrocarbons therefrom in a gas processing ,
absorption. stripping or similar plant, then
in lieu of royalties
on CBM provided in Paragraph 3(a) or 3(b), (i) the royalties
shall be the Royalty Fraction
of the Market
Value at the plant
of all liquid hydrocarbons
recovered
and saved in such
plant and attributable
to CBM produced
from the Leased
Premises,
less the Royalty Fraction
of the reasonable, direct
costs (excluding amortization and
depreciation on pipeline
and plant investment
and direct overhead
associated therewith)
of processing
such CBM in the plant
for the recovery
of such liquid
hydrocarbons, and
(ii) the royalties on the residue CBM resulting from
such plant operation
attn'butable to CBM produced from the Leased
Premises shall be in an amount and determined as
provided in paragraph
3(a).

 

    	COALBED METHANE LEASE - 3

    	 

    

 

		3. (d)	The royalties provided in
this paragraph 3 shall be determined and delivered to Lessor free of all cost, including but not limited to any development, production,
compression, processing treating, dehydrating, gathering, marketing, transportation, delivery,
and other like costs
(other than those provided for in Paragraph 3(c) hereof; such royalties shall also bear and be subject to severence taxes applicable
to Lessor's share of production that are paid by Lessee.
The tenn "Gross Sales Price" as used in this agreement with respect to CBM shal.l
mean the final and actual sales price at which CBM ·is
sold via an anm length
transaction to a Non-Affiliated Bona Fide Third Party Purchaser f.o.b. the Delivery Point, plus BTU bonus or minus BTu penalty
without deduction from said gross sales price for any
on-site handling, collecting, transportation, dehydrating and compression charges, brokerage
fees, sales commissions, credit losses, · sales
tax, discounts on sale of promissory notes, bank fees,
license tax, privilege tax, occupational tax, advertising, and any other charges whatsoever or
taxes paid by Lessee for the privilege
of conducting business in, Louisiana or as specified in Paragraph 24 hereof. The tenn "Delivery
Point" as used herein shall mean the point at which CBM produced hereunder is delivered,
whether from the well head, compressing station, or a point of entry into a third party
transmission line or carrier or final end-user purchaser. The
tenn "Affiliate" means any individual, corporation, joint venture, partnership or
other entity or organization controlling, controlled by or under common control
with Lessee (the concept of control
meaning the possession, directly or indirectly, of the power to direct or cause the direction
of tl:ie management and policies of another, whether through ownership of voting securities
(owning 50% or tnore), by contract or otherwise). The term "Bona Fide
Third Party Purchaser'' shall mean a purchaser who pays
consideration in good
faith without intending
to take advantage of Lessee or Lessor, and in no instance
shall said purchaser include .an individual(s), party,
company or corporation which is an Affiliate
of Lessee or Affiliate Lessee's successors or assigns.

 

		3.
                            (e)	No
shut-in payments are due hereunder during the Primary Term. If at any time, whether before or after the expiration of the Primary
Term, Lessee shall have completed on the
Leased Premises a CBM well
that is capable of
producing in Paying
Quantities but is
shut-in due to the lack of
a ready and available market, with
the result
that CBM is
not produced and sold, or used, Lessee shall pay as Shut-In Royalty to Lessor (at the address specified in Paragraph 20) for each
shut-in CBM well, on
or before the expiration
of the later
of ninety (90) days
after (i) the Completion Date
(as hereinafter defined) or (ii) the
date such CBM ceases to be sold or used or (iii) after the expiration of the
Primary Term,
as the case may be, and thereafter at quarterly
intervals on the date the first Shut-In Royalty payment
is made, an amount equal to two
Dollars $2.00
multiplied by the
number of acres of the Leased Premises included
in the Well Tract (as hereinafter defined) upon which the well is located. During the periods for
which such
payments are made,
it will be considered that
such well is producing
CBM in Paying Quantities within the meaning of this Lease and the Lease may be extended for the
Well Tract
from quarter to quarter by timely payment of the
quarterly Shut-In Royalty. Lessee may not maintain this Lease
as to any Well Tract solely by virtue of the
provisions of this paragraph
3. (e) for
more than
an aggregate of 36 months. Interruption of a
continuous shut-in
period on a
specific
well by a return to production of the
well for a period of
less than forty
five (45)
days sabll not be
considered as interrupting the basis for payment of the shut-in royalty
which shall continue
to be due and
paid quarterly
on the basis indicated
above.

 

		3.
                               (e)(l)	If
at any time Lessee causes CBM to be vented or flared,
hereinafter
venting, to
the atmosphere
for a period greater than
thirty (30) days, Lessee shall
pay to
Lessor on
a monthly
basis two Dollars $2.00
per acre for
each acre included in the
Well Tract as a Venting
Payment, due on or before the last day of the calendar month following the calendar month in
which the
venting occurred.
Venting Payments made under this
paragraph 3. (e)(l)
shall be considered
for each such well
as producing in Paying Quantities.
Interruption of a continuous
venting period on a specific well by
a return to production or shut-in of the well for
a period
of less than forty
five (45) days shall
not be
considered as interrupting the
basis for payment
of the Venting Payment which shall
continue to be due and paid monthly on the basis indicated above.
Lessee may
not maintain this Lease
as to any Well Tract solely
by virtue
of the provisions
of this paragraph 3.(e)(l)
for more than
an aggregate
of 12
months .

 

    	COALBED METHANE LEASE - 4

    	 

    

 

		3.
                               (f)	Reporting
and payment to Lessor of royalties from the
production of CBM shall commence no
later than
ninety (90)
days after the
date of first sales from each completed well.
Thereafter, unless otherwise
specifically provided herein, all
reportings and payments
of royalties shall be made on or before the last
day of the second calendar
month following
the calendar month in
which the production
occurred or within fifteen (15) working days
after Lessee receives its payment from the CBM
purchaser, whichever occurs first.
In the event Lessee
fails to pay any royalties
when due, Lessor
reserves the right,
but not the obligation. at any time
to demand payment of royalties directly from the
purchaser of
the CBM upon thirty
(30) days written notice to Lessee and
said purchaser. Reporting
shall show for the
individual well(s)
and the
monthly totals: quantities
of CBM produced,
vented and flared hereunder during the preceeding
month; the quantities
of CBM sold
and used
as permitted hereunder, the
sales price
at the
Delivery Point, calculations of the Royalty Fraction
to be paid
by Lessee and the sales
price for
all CBM
produced from Lessees operations of which the Leased Premises are a part. Royalties or other payments to Lessor provided for in
this Lease that are not paid
for whatever reason within
the time period specified therefor shall accrue mterest at the rate of six percent (6%) per annum in excess of the prime interest
rate posted by at least
75% of
the nation's largest
banks as published in the Wall
Street Journal, per annum, from due date
until paid,
provided that such interest rate shall be reduced automatically to
the legal
maximum rate in the event same ever exceeds such
maximum rate. Acceptance
by Lessor, its successors,
agents, or assigns, of royalties that are past due shall not act as a waiver or estoppel of its right to receive or recover interest
due thereon under the provisions hereof. No
tender or payment to Lessor of a sum less than
the total amount due to Lessor
shall be deemed a full settlement, whether by accord or satisfaction or otherwise, notwithstanding a check in tender of payment
may contain language of settlement or accord printed or otherwise inserted thereon unless made and received in accordance with
a separate written agreement
executed by Lessor and Lessee. Lessee
shall furnish Lessor
on a monthly basis copies
of all reports submitted to the Louisiana State Oil and Gas Board or other regulatory authority showing quantities of Hydrocarbons
and water produced from each well located on the Leased Premises and all production sales records and all other data relative
to the calculation and payments of royalties. Lessee shall keep all
proper records to enable a correct determination
of all CBM produced and marketed (or delivered
to Lessors' credit in pipelines or otherwise), to which records
Lessor or their
duly authorized agents shall have access to at
all reasonable times for a period of three (3)
years after the making of any such payments for the putpose of audit or verification of the statements furnished by Lessee
to lessor.

 

		3. (g)	Notwithstanding
the provisions of Paragraph 3.(f), Lessor and Lessee agree that the
payment and reporting to Lessor of all royalties then. due from the
production of CBM on or before the last day of the second ·calendar
month following the calendar month in which the production occurred shall be deemed a condition
of this Lease. Should
this condition be breached, subject to the provisions of Section 3(f) hereof,J,essor shall have the right at the election of Lessor,
to give written notice to Lessee and Lessee shall have
thirty (30) days from receipt of said written notice
in which to cure the
breach by the payment
and reporting of all royalties then owing, plus the interest
provided for in paragraph
3(f). If Lessee fails
to cirre the breach
within said thirty (30) day period then Lessor may, at its option, terminate this Lease. In the·absence
of an adverse claim
against Lessor's title,
Lessee shall have no right to withhold or suspend any funds claimed by
Lessor without the prior written consent of Lessor. Lessee shall pay all reasonable attorney fees incurred by Lessor in connection
with any lawsuit in
which Lessor is successful
in recovering royalties or .interest
or in confirming this Lease's termination due to Lessee's failure to pay and report royalties within the periods set forth in
this Lease.

 

		3.
                               (h)	Each
demand for payment of royalty by Lessor, made as a predicate to
Lessor's termination of this Lease, shall contain
a demand for a specific amount of royalty and
describe the time period for which the royalty payment is due. In the event Lessee
disputes
liability for paying all or any portion
of the demanded royalty, Lessee shall,
within thirty (30) days of the receipt of such demand, pay any amounts of royalty which are due to Lessor and undisputed by Lessee,
and Lessee shall, in
Writing, descnbe to the Lessor the
specific reasons
why Lessee
claims that it
does not owe the disputed
amounts to Lessor. Within ten (10) days of the receipt of Lessee's response to Lessor's demand, if
Lessee disputes the
amount of any royalties
demanded, representatives
of Lessor and
Lessee shall meet to attempt, in good
faith, to resolve the dispute with
regard to the amount of royalties owed. In the
event that such dispute cannot be
resolved within thirty
(30) days of Lessor's receipt of Lessee's response
to Lessor's demand for payment of royalties, the
parties shall submit suGh dispute
to . arbitration
before
the American Assod.ation
of Arbitr.cition
pursuant to
its Rules for
the Resolution
of Commercial Disputes.
If the amount in dispute is under $1,000;000, only one arbitrator
shall be appointed. If the.
amount m-dispute
iS in excess
of $, 000,000,
the arbitration
panel
shall be composed of three arbitrators, each of
whom shall have at least
ten. (10)
years of
experience in the oil and gas industry and
none of
whom shall
have, within
five (5)
years of the date of their appointment, been employed
by; sociated with, or
provided professional services to either Lessor or
Lessee. In the ev.ent
a three
(3) member panel of arbitrators
is required, each party shall
be entitled to appoint one (1) arbitrator,
and the
two arbitrators shall select a third arbitrator.
If the two arbitrators are unable to select
a third arbitrator, the third arbitrator shall
be appointed by the United
States District Judge
sitting for
the Souhem District of
Texas, Houston Division.
In such arbitration proceedings,
the evidence adduced shall
be governed by the
Federal Rules of Evidence.
The arbitration proceedings
shall be held in Houston, Texas,
or at such other location as may
be .agreed
to by
the parties or
ordered by
the arbitrators.
In the
event the
arbitration
panel issues an award stating an amount of unpaid
royalties owed to Lessor, Lessee shall make
full payment of the award within
thirty (30) days of its rendition.
During the
pendency of the
dispute over unpaid royalties, including arbitration
proceedings, Lessor
shall not
tenninate
the Lease; provided,
however,
should the arbitration
award determine that
Lessee did not exercise good
faith in disputing
the amount of royalties owed, the
arbitration panel may,
in addition,
provide for terrniilation
of the Lease. Any
arbitration award entered by the arbitration panel
determining that Lessor is entitled to tennination of the Lease shall be subject to appeals available from arbitration awards.
Should the
arbitration panel so determine, it may suspend the award of termination of the Lease pending the appeal from the arbitrator's
award. The Lessee shall pay all arbitration costs
if the panel awards a settlement in favor of Lessor.

 

    	COALBED METHANE LEASE - 5

    	 

    

 

		3.
                               (i)	Notwithstanding
the provisions of this Paragraph 3 to the contrary, Lessor shall have the right and option, but not the obligation, to
take in
kind all or part of
Lessor's Royalty Fraction of all CBM produced
under the terms of this Lease and to separately market such CBM for Lessor's own account. Lessor's option may
be exercised at any time and from time to time
by Lessor giving Lessee not less sixty (60) days advance written notice. Lessee agrees that all CBM contracts which obligates
Lessee to sell
gas for greater
than a thirty
(30) day term shall include a provision whereby the Lessor has the right to take
in kind and separately market Lessor's royalty
share of CBM, and Lessee shall expressly provide in the contracts that the CBM transmission carrier shall be obligated by contract
to carry the Lessor's royalty share of CBM on the same terms, conditions and at a
rate not greater than the rate applied to lessee's
CBM. In the event Lessor elects to take in kind
Lessor's royalty CBM, Lessee agrees to deliver such CBM into
the sales pipeline free of
all cost and expense to Lessor except Lessor's
share of severence taxes. Should Lessor elect
not to take in kind its Royalty Fraction of any Cl3M produced hereunder after having done so, Lessor shall notify Lessee, upon
sixty (60) days written notice,
of Lessor's desire to no longer take said royalty
in kind and it shall be Lessee's
obligation to market said production for Lessor
and to pay Lessor's royalty according to the terms of this Lease.

 

		3.
                               (j)	If,
during any calendar year after the Primary Term while this Lease is in force, CBM shall be produced from any well on the Leased
Premises, but there
has not
been paid hereunder to Lessor the
sum of at least $2.00 per net acre during
that year for each
net acre subject to this Lease at the end of such year, by way of shut-in CBM well royalties and/or royalties paid on actual production,
Lessee shall, within ninety (90) days after the end of such lease year, pay or tender to Lessor
(at the address specified in Paragraph 20), as
a minimum annual royalty, the difference between the total of such production royalty and shut in gas royalty payments made under
this Lease during such lease year
and said sum of $2.00 per net mineral acre multiplied by the number of net acres to which
this Lease is in force at the end
of such calendar year. The payment of minimum
annual royalty
provided for in this Paragraph 3U) shall not be in lieu of actual production of CBM in paying quantities and Lessee shall not
be entitled to
continue this Lease
in force
by payment of such minimum royalty if, in fact, the
actual production of CBM is not in paying quantities
as determined in accordance with the provisions of Paragraph 2
above. It is further provided that nothing contained
in this Paragraph 3U) shall be
construed as preventing or delaying the termination of this Lease
under the
provisions of Paragraph 4
hereof, nor as impairing Lessee's continuing obligation
to reasonably develop the Leased Premises after the discovery of CBM thereon in paying quantities, in accordance
with this Lease, nor as in any manner impairing
Lessee's continuing obligations to protect
the Leased Premises
from drainage
by wells on
adjoining or adjacent lands, as
provided in Paragraph
6 hereof.

 

		3.
                               (k)	Measurement
of CBM. (a) The unit of vol\IDle for measurement of the CBM
produced hereunder shall be one (1) cubic foot
of gas at a base temperature of 60 degrees Fahrenheit
and at an absolute pressure of fourteen and seventy-three hundredths (14.73)
pounds per square
inch, absolute ("PSIA"). All
fundamental constants, observations, records and
procedures involved in determining and/or verifying the quaritity and other characteristics of gas delivered hereunder, unless
otherwise specified herein shall be
in accordance
with the standards prescribed in Report No. 3 of the American
Gas Association ("AGA'')
as now
and from time
to time
may be amended
or supplemented.. All
measurements of CBM shall be determined by calculations in the terms
of such unit All quantities given herein, unless
expressly otherwise stated, are
in tenm of such unit (b)   Lessee
or the purchaser of production, as required
by Lessee
and under Lessee's
direction and supervision shall maintain and operate
at its sole expense
measuring stations located at
each wellhead.. Said measuring stations shall
be equipped with turbine
or rotary
meters or
other types of meters with totalizer as agreed
to by
Lessor
and Lessee so
as to accomplish the
accurate measurement of volumes of CBM
produced hereunder. (c) Lessor
may at its option and expense install check meters
for checking
Lessee's metering equipment and
the same shall be so
installed as to
not interfere with the operation of Lessee's facilities
. (d)
The specific
gravity of the CBM flowing
through the meter
or meters
shall be detemrined monthly by the use of an AGA accepted gravitometer or
by computing
from fractional
analysis of samples of
the CBM
taken at
as many points as necessary to permit
the calculation
of an average
specific gravity representativ e
of all the
CBM produced hereunder.
Specific gravity
so determined will
be used in calculating
gas production
for the month in wruch the tests are made. (e)
The Gross Heating Value of
the CBM shall be determined
by taking continuous
samples at as many points as necessary to
permit the calculation
of an average Gross Heating Value representative
of all
CBM produced and sold hereunder. .The
sample may
be run on a calorimeter or Gross heating
Value may be computed from
fractional analysis of
such sample.
The result shall
be applied to CBM produced during the month in
which samples are taken. (f) Ifupon any test, the metering equipment in the aggregate is found to be inaccurate by two (2) percent
or more, registration thereof or any payment based upon such registration shall be corrected at the rate of such inaccuracy which
is definitely known or agreed upon, or if not known or agreed upon, then for a period extending back one-half of the time elapsed
since the previous calibration. Following any test, any metering equipment found to be inaccurate to any degree shall be adjusted
immediate ly
to measure accurately.

 

    	COALBED METHANE LEASE - 6

    	 

    

 

4.            If
Lessee has not met its minimum annual drilling program as set out in Paragraph 2 hereof, as of each respective anniversary
date, the Lease shall terminate as to the undeveloped acreage unless on or before such respective
anniversary date Lessee shall pay or tender the sum of $2.00 per net undeveloped mineral acre, (being $2.00 times the number of
undeveloped acres in the Leased Premises) (herein called "Delay Rental") to Lessor at the following address: International
Paper Minerals Division, 7600 W. Tidwell Road, Suite 300, Houston, Texas 77040- 5714, Attention:
Manager Mineral Resources.Such payment shall cover the privilege
of deferring the respective annual minimum drilling program for a period of twelve 02) months. The payment or tender of Delay Rental
may be made by check delivered on or before the due date for such payment to Lessor at the address designated above or to such
other address hereafter specified in written notice from Lessor to Lessee, said written notice to be delivered to Lessee at least
forty-five (45) days prior to any particular anniversary date. Lessee may at
any time execute, file in the proper public records and deliver to Lessor a rel;;se or releases
covering any portion or portions of the Leased Premises and thereby surrender this Lease as to
such portion ot portions and be relieved of all obligations not theretofore accrued as to
the acreage surrendered, and thereafter the Delay Rental hereunder and the Minimum Annual Rental payable
in accordance with paragraph 3G) shall be reduced in the proportion that the acreage covered hereby is reduced by such release
or releases. Any bonus or other payμient or consideration paid by Lessee to Lessor for
this Lease shall not be credited, allocated or prorated to or against the Delay Rentals provided for in this paragraph. Ifduring
the Primary Term Drilling Operations
(as hereinafter defined) are commenced on the Leased Premises, this Lease will remain in effect
as to the entirety of the Leased Premises without the further payment of annual Delay Rentals
only for so long as Continuous Operations (as hereinafter defined) are prosecuted or the minimum annual drilling commitment has
been met. Should Lessee thereafter during the Primary Term hereof cease to conduct such Continuous Operations, or if all of the
Leased Premises are not maintained by Continuous Operations or the minimum annual drilling commitment
has not been
met, this Lease shall terminate as to all portions of the Leased Premises not
then included in Well Tracts
(as hereinafter defined) unless on or before the date on which the next subsequent
well is required to be commenced, or on or before the anniversary date of a respective annual
minimum drilling program, whichever date is later, Lessee pays or tenders to Lessor,
in the manner Specified above, Delay Rentals equal to $2.00 times the number
of net undeveloped acres in the Leased Premises located outside of existing Well Tracts, and
thereafter resumes payment of annual Delay Rentals thereon as hereinabove
provided . Delay Rentals
can not extend the lease
longer than three(3) years under any circumstances.

 

    	COALBED METHANE LEASE - 7

    	 

    

 

5.(a)       As
used in this Lease, the terms "Operations," "Drilling
Operations,"Continuous Operations" and "Other Operations" shall have the meanings set forth in
Paragraph 5(d) hereof

 

 

5.(b)       In
the event Lessee at any time drills a dry Hole on the Leased Premises and
no CBM is then being produced in paying quantities hereunder, 0r in the event all production of CBM in paying quantities
from the Leased Premises should at any time cease for any cause and this Lease is not otherwise
being maintained, this Lease shall continue in effect for a period of ninety (90) days from abandonment
of such dry hole or cessatioh of production and may be ;

continued thereafter under the following conditions:

 

5(b)(l) If Lessee commences
Operations on the Leased Premises within such 90 day period, this Lease shall continue in effect as long as IDrilling Operations
or Other Operations are prosecuted with due diligence and so long ther1after
as CBM is produced hereunder; provided however, this Lease may not be maintained so. ely
by Other Operations for any period in excess of ninety (90) consecutive days unless the minimum annual drilling commitment is continually
met or delay rentals have been paid.

 

5.(c)       If
no CBM is being produced from the Lease Premises at the expiration of the Primary Term, but Lessee
is then engaged in Drilling Opera,ons, or if within the ninety (90)day period specified in Para,graph 5.(b) above Lessee
commenies Drilling Operations, this Lease shall continue in effect
in the manner and for the time speci:fi.4 in Paragraph 5.(e) hereof.

 

5.(d)       For
purposes of this Lease:

 

5.(d)(l)          The
term "Drilling Operations" shAfl mean that a derrick,
a rig and machinery capable of drilling a depth sufficient to test the prospective
coalseam horizon at the permitted depth has been erected on the Leased Premises and tJiat such
rig is rotating under power.

 

5.(d)(2)         The
term "Other Operations" shalll include
all completion
or abandonment operations, reworking, reconditioning, deepening,
p1ugging back, cleaning out, repairing, testing or dewatering of a well being conducted
with eqiliptnent customarily used in the
industry for such operations, in a prudent manner with reasona le diligence in
a bona fide good faith effort to obtain, maintain,
enhance and/or restore
the prMuction of CBM
in Paying Quantities. Coal desorption testing beyond 90
days from coal core retrieved shall not meet
the definition of "Other Operations" under this Lease.

 

5.(d)(3)         The
term "Operations " shall mean ither Drilling Operations
or Other Operations, or both.

 

5.(d)(4)         The
completion date of a produchlg
well is herein defined as: (i)        the
date thirty (30) days following the running of final producti9n casing and/or liner in the
hole, or, (ii) thirty (30) days following the
date total depth
is r ached, or (iii)
the date of completion as reported to the statewide conservation
agency or co:rrlmission having jurisdiction, whichever is
the earlier date. The
completion date
of a well
whic results
in a dry hole and
is abandoned shall be the
date upon which all work in the hole has be completed and
the plug is set,
or the drilling rig
ceases to operate
on such well,
whichev¢r
is the earlier date.The
commencement date of Operations not specifically set forth in this pfu-agraph
shall be the date on
which the equipment required to conduct such Operations in the manner specified herein has been installed
on the well and the actual operation thereof has commenced; and the completion or cessation of any such Operations shall be deemed
to have occurred on the earlier of the date such Operations are discontinued or the date such equipment is removed from the well.

 

    	COALBED METHANE LEASE - 8

    	 

    

 

The
cessation of production from a well shall be deemed to have occurred when actual production has ceased, without any reasonable
expectation of resumption of production in Paying Quantities from that well; and except for a gas well on which Shut-In Royalty
payments have been paid under paragraph 3(e) above, a well shall be conclusively presumed to have ceased production without reasonable
expectation of resumption thereof if no CBM is produced in Paying Quantities for a period of ninety (90) consecutive days, and
no Operations are conducted thereon during such ninety
(90) day period.

 

5.(d)(5)         Operations
shall be Continuous Operations if not more than ninety (90) days elapse.betWeen the completion or abandonment of Drilling Operations
on one well and the Commencement of Drilling Operations on another well.

 

5.(e)       This
Lease shall continue in force as to all of the Leased Premises so long
as Lessee is engaged in Continuous Operations (as hereinabove defined) on the Leased
Premises and production in paying quantities continues, subject to the limitations
set forth in this
Paragraph 5.(e). Upon Lessee's failure to maintain Continuous Drilling Operations this Lease shall tenninate except as follows:

 

5.(e)(l)          If
Lessee has completed a CBM well on the Leased Premises, then this Lease shall continue as to and only as to the intervaJ
from the surface to 100 feet below the base of the deepest
producing Coal Seam in such well, insofar as such interval pertains
to a tract of a maximum of one hundred sixty (160)
surface acres, plus
or minus a tolerance of 10%,
around each such well. The respective surface acres and
strata thereunde!perpetuated as prescribed above shall be referred to herein as a "Well Tract". In the event any federal
or state law, or any order, rule or regulation of the statewide conservation agency or commission having jurisdiction prescribes
a spacing pattern for the development of the field, or
allocates a producing
allowable in whole or in part based on surface acreage per well or based upon the acreage to
be drained by a well drilled horizontally , or otherwise
in an articulated
manner, then any
Well Tract retained hereunder may include as much additional acreage as may be so prescribed or as may be used in such allocation
or allowable. If such "order" results
in a spacing pattern or allocation
of allowable based on acreage which amount is less than that originally established,
then each such Well Tract shall be revised
to include such lesser .amount
of acreage. Such reduction shall
be immediately effective and Lessee shall then comply with
the continuous
drilling provisions
of Paragraph 5. Each Well Tract shall, as nearly as practicable
, be in the fonn of a square
or a rectangle with the
well by virtue of which same
is held located in the approximate
center thereof.
However, as an overriding consideration, Lessee shall form each Well Tract so as to best utilize
all available acreage covered by this Lease and so as not
to leave acreage
outside of a Well Tract
which cannot be utilized or included in subsequently created Well Tracts.

 

    	COALBED METHANE LEASE - 9

    	 

    

 

5.(e)(2)         If
the statewide conservation
agency or commission
does not prescribe a spacing unit and pattern, then
within ninety (90) days after the completion
date of any producing well, Lessee shall designate to Lessor in writing a Well Tract for each such
well, with the producing stratum or strata defined with particularity by reference to Lessee's well logs. Lessee shall file a memorandum
in the proper county records describing the Well Tract or
Well Tracts. After the expiration of the Primary Term, and the expiration of compliance with
the continuous development obligations herein described, each Well Tract
shall constitute a
separate Lease with the terms of this Lease, and neither production from nor Operations
on any other Well Tract or any other portion of the Leased Premises shall maintain this Lease in force as to any other Well Tract.
The determination of a well's classification as CBM by a governmental authority shall be
controlling as between Lessor and Lessee for all purposes of this Lease; provided however, if it is subsequently determined that
such classification is not correct, Lessor's and Lessee's
rights under this Lease shall in no way be limited or impaired thereby.

 

5.(f)        Lessee
may at any time execute, file in the proper public records
and deliver to Lessor a release or releases covering any portion or portions of the Leased Premises and thereby surrender this
Lease as to such portion or portions and be relieved of all obligations not theretofore accrued as to the acreage surrendered.

 

6.            In
the event a well or wells producing CBM should be brought in draining
the Leased Premises, Lessee agrees to drill such offset wells as a reasonable and prudent operator would drill under the same or
similar circumstances. Without limiting the foregoing,
it shall be presumed that any producing CBM well situated within 500 feet of the
Leased Premises, is draining the Leased Premises. Operations for any such
offset well to be drilled to protect the Leased Premises from drainage shall be commenced within one hundred twenty (120)
days after commencement of production from the draining well and continued
with due diligence and in a prudent manner with no cessation of Operations of more
than thirty (30)
days. It is further provided
that in lieu of drilling such offset well, Lessee may, at its option,
within the one hundred
twenty (120) day period, release the Lease
as to that portion of
the Leased Premises lying
adjacent to such draining well. The portion of the Leased Premises so released shall be
as nearly as practical in the form of a square or rectangle (either in stand-up
or laydown form) and
shall be 160 acres or such larger area as may be permitted or prescribed by the
appropriate governmental
authority for the draining well.

 

7.            Lessee
recognizes that Lessor does not own the surface estate
associated with the Lease Premises and that Lessor
only is leasing whatever right it may have relative to
the coalbed methane on the lease premises. At least three days .
prior to commencement· of seismic or operations other than drilling hereunder, Lessee will contact said Regional
Manager and.Lessor notifying them of the date and locations where said operations will
be conducted, and an estimate of the time necessary for its completion with a copy to
Lessor. Lessor does not grant permission for
said seismic surveys without the permission of the surface
owner. Upon receipt
of such notice, Lessor will furnish Lessee with its then
current fee schedule for seismic damages, if applicable. In the
event Lessee performs, or causes to be performed,
any seismic operations on the Leased Premises, Lessee
agrees to pay Lessor, or the applicable surface owner, the amounts set forth in
such fee schedule. Lessee agrees
to make such payment promptly upon the completion
of said seismic operations by check payable to INTERNATIONAL
PAPER COMPANY or the applicable surface owner. Such payment shall be for minimum damages
to the surface of the Leased Premises.Any excessive damages as determined by the Regional Manager, as a result of said seismic
operations, shall be borne by Lessee. It is understood that notwithstanding the criteria set out in this clause that the provisions
of applicable legislation, rules and policies will override the criteria and that such must be complied with by the Lessee. It
is also understood by the Lessee that such legislation, rules and policies may be in the process of being changed to reflect CBM.
It is the responsibility of the Lessee to obtain all necessary permits and authorizations necessary for the conduct of its operations
and the Lessor agrees to cooperate with respect to obtaining such permits or authorizations when necessary or appropriate.

 

    	COALBED METHANE LEASE - 10

    	 

    

 

8.            It
is expressly agreed and understood that the Lessee is not granted any right to voluntarily
pool, combine or unitize the Leased Premises in which Lessor owns one hundred percent (100%) of the CBM rights with any land not
covered by this Lease without the prior written consent
of Lessor. Lessee shall notify Lessor in writing not less than ten
(10) days prior to
Lessee's commencement of any action to institute or support any statutory, administrative or regulatory action to combine, pool
or unitize the Leased Premises with any lands not covered
by this Lease. Said notice shall include copies of any support materials available to Lessee
which would aid Lessor in assessing the consequences of
the proposed action. Additionally, Lessee shall
notify Lessor in writing upon receiving notice that a third party intends to institute
such action to combine, pool or unitize the Leased Premises with lands
not covered by this
Lease, such notice to be given within five (5) days of Lessee's receipt thereof, or in any
event within a time sufficient to permit Lessor to participate in any proposed hearing or proceeding. In
the event any part of the land included in this Lease is unitized by order of any governmental authority having jurisdiction
for production of oil and/or gas/and or CBM then, notwithstanding
anything to the contrary contained in this Lease or in the unit order, and whether or not the unit well is located on the Leased
Premises, the royalty herein reserved in favor of Lessor
on production from such unit shall be calculated and paid
on the proportion of the land included in this Lease bears to the land included in the whole government approved well-site
spacing unit.

 

9.            This
Lease does not include and there is hereby excepted and reserved to
Lessor all minerals except "CBM" as defined in
Paragraph 1, including
but not limited to sulphur
(except when produced as a constituent element), coal, lignite, iron ore, limestone, uranium
and other fissionable materials, geothermal energy (including
hydrostatic pressur e and .
thermal energy), base and precious metals and other mineral
and non-mineral substances, presently
owned by Lessor in, under or upon the Leased Premises, together with the
rights of ingress and egress and use of the Leased Premises by Lessor and its mineral
lessees, for purposes
of exploration for and production of the non-CBM minerals
reserved herein to Lessor. Lessor and Lessee each shall
conduct their respective
operations on the Leased
Premises so as not
to unreasonably interfere with the operations or activities
of the other. Gob gas is considered CBM and for the purpose
of this Lease is defined as
that gas which is
liberated and accumulates
within the fractured collapse zone resulting from the underground mining of coal seams.

 

    	COALBED METHANE LEASE - 11

    	 

    

 

10.          The
rights of either party hereunder
may be assigned in whole or in part and the
provisions hereof shall extend to the respective heirs, executors, administrators, successors
and assigns of the parties hereto; provided, however that any such assignment by
Lessee shall require the
prior written consent of Lessor, and such consent shall not be unreasonably withheld. If
Lessor denies Lessee's request to assign, Lessor may, at its sole discretion, agree to
grant such consent after an amendment of the terms contained herein, including, but
not limited to: a)
increased insurance requirements, b) bonding or letters of credit covering financial obligations, plugging, abandonment, restoration,
or other mutually agreed considerations. No change or division
in Lessor's ownership of the land, rentals or royalties however accomplished shall operate to enlarge the obligations or diminish
the rights of Lessee, nor shall any such change or division be effective for any purpose until the person acquiring any interest
has furnished Lessee with the instrument or instruments, or certified copies thereof, constituting the change of title from Lessor.
Notwithstanding the foregoing, if Lessee elects to assign any part or all of Lessee's rights and interests hereunder, Lessee and
Lessee's assignees shall remain liable and responsible to Les.sor
(unless released in writing by Lessor) for all surface and subsurface damages which may
be caused to the Leased Premises, both before and after the effective date of any .such
assignment, and shall remain bound by all of the terms, conditions and covenants, both express and implied, of this Lease, including
the payment of royalty. Lessee shall comply and cause any
successor assignee to comply with all valid laws, rules, and regulations affecting the Leased Premises and all operations thereon.

 

Notwithstanding
any consent to assignment, in whole or in part, Lessor
shall retain the right and in its sole discretion havethe right to approve
any operator, including any party which may take an assignment of Lessee's interest in the Leased Premises. In the event Lessee
elects not to act the capacity of operator in conducting the drilling or
production operations for any well drilled under the terms of this Lease_, Lessee shall furnish Lessor a written notice which informs
Lessor of such election and which simultaneously designates a proposed
substitute operator for approval by Lessor. Lessor reserves
the absolute right to approve or disapprove any such proposed
substitute operator and no operations may be conducted on the Leased
Premises by any such proposed substitute operator until Lessor has furnished Lessee a written
notice of such approval. Any written request by Lessee
for Lessor's consent to
assign its operating rights
hereunder must be accompanied by evidence acceptable to Lessor
that the proposed operator/assignee
has the financial and technical capabilities to undertake the obligations and liabilities imposed by
the terms and conditions ofthis Lease unless such requirement
is waived in writing by
Lessor.

 

11.          In
no event shall Lessee enter into
a contract for the sale
of Lessor's Royalty Fraction of
CBM which does not provide for at
least semi-annual redetermination
of the prices paid for
CBM sold under any such contract. Lessee
shall not enter into
any contract with any Affiliate relative to
the sale, gathering, treating,
compressing, marketing,
operating, transporting or
processing of any CBM produced
from the Leased Premises
without the prior written
consent . of Lessor.
IfLessee enters into any
such Affiliate contract without
Lessor's prior written
consent, Lessor shall
have the right to unilaterally
declare that all royalties
have not been paid and that a default has
occurred under the provisions of
Paragraph 3.(g) of this
Lease .

 

    	COALBED METHANE LEASE - 12

    	 

    

 

12.          This
Lease is granted without any covenant of title or warranty of title of any kind whatsoever, expressed or implied, and Lessee shall
have no recourse against the Lessor in the event of any
failure of title, nor shall any of the consideration paid hereafter, or any delay rentals or shut-in payments made hereunder be
refunded to Lessee, except as otherwise expressly stated herein. Lessee shall have the right to purchase, pay or redeem any mortgage,
tax or other lien on the Leased Premises and be subrogated
to the rights of the holder thereof. Lessee at its option
may discharge any tax lien upon Lessor's interest in the Leased Premises (unless such
tax lien is being contested in good faith by Lessor by appropriate proceedings instituted for such purpose) and, in the event Lessee
does so, Lessee shall have the right to apply royalties hereunder to reimburse
such payment after notice thereof to Lessor. IfLessee
obtains a title opinion or title insurance policy on any
portion of the Leased Premises, Lessor will be provided a copy of such title material at no cost to Lessor. Lessee may undertake
title curative work for the purpose of which is to affirm Lessor's title or possession of the
Leased Premises. The results of
any such curative work shall be furnished to Lessor.

 

13.          Except
as expressly limited in this paragraph but otherwise notwithstanding
any other provision of this Lease, if this Lease covers a lesser interest inthe
CBM in all or any part of said land other than the 100% CBM estate, or no interest therein, then the Delay Rentals and minimum
annual rentals and CBM royalties, shall be paid only in the proportion which the interest therein, if any, covered by this Lease,
bears to the whole 100% CBM estate therein. The Bonus Payments
shall be due and payable notwithstanding that the ownership of the CBM estate shall be determined or believed to be less than 100%.
The Bonding requirements shall remain the same notwithstanding the determination of any reduction in
the Lessor's CBM interests. Should
any lands covered by this Lease be subject to a nonparticipating
royalty interest, the royalty to be paid to Lessor herein
shall be proportionately burdened or reduced by said nonparticipating
royalty interest. Lessor's royalty shall proportionately bear such nonparticipating royalty
interests and Lessee shall, prior to the date herein above set out for the first payment of royalty from each well herein, notify
Lessor in writing of the existence of such nonparticipating royalty, such notice shall specifically
describe the creating of such interest and
shall include copies of the instruments creating a nonparticipating royalty to the
extent, and only to the extent that such interests would be borne by Lessor if the owners of those interests adopted and ratified
the terms of this Lease, whether or not such adoption or ratification has in fact occurred. Proceeds due any other third party
for production from
a well on the Leased Premises
shall be borne by Lessee.

 

14.          Lessee
is hereby granted the right, subject to the
provisions of Paragraph 16
of this Lease, to conduct or cause to be conducted, those
operations which it deems reasonably necessary for its development of the Leased Premises.
Such operations may be
conducted, with the permission of the surface owner, by
Lessee, its agents, representatives, and contractors solely for Lessee's
benefit, and the right
to conduct such operations may not
be assigned by Lessee
to any other party unless the grant includes all or a portion
of the leasehold operating
interest created
by this Lease. Notwithstanding anything in this Lease
to the contrary, Lessor reserves the right to
conduct, or grant the right to conduct to third
parties, exploratory
operations on the
Leased Premises in respect of the non-CBM and other Hydrocarbon
and non-Hydrocarbon estate.

 

    	COALBED METHANE LEASE - 13

    	 

    

 

All such rights are subject to
legislation, rules and policies as may exist from time
to time as established by the Commission .

 

15.          The
execution of division orders shall never be required as a prerequisite for payment of royalty or any other monies accruing under
this Lease. Any amendment, alteration, extension or ratification of this Lease or of any term or provisions hereof shall be made
by a recordable instrument titled "CBM Lease Amendment'' executed by Lessor and Lessee, and any purported amendment, alteration,
extension or ratification not so drafted and executed shall be
of no force or effect. (Insert statement of equivalents
**)

 

16.          The
provisions ofthis paragraph shall be operative as to (i)
the Leased Premises and (ii) any lands pooled therewith
(the "Area").

 

16. (a)    Lessee shall notify Lessor:

 

16. (a)(l)       inwriting
, no later than ten (10) days prior to the commencement
of any seismic or drilling operations, including the location of any proposed seismic operations and the location and objective
depth of any proposed well.

 

16. (a)(2)      either orally or inwriting,
at least forty-eight (48) hours prior to commencement of any operations to test, log or plug any well.

 

16. (a)(3)      either
orally or in writing , at least twenty-four (24) hours
prior to conducting any completion or coring operations on any well.

 

16. (a)(4)      inwriting
, as to the date any well is (i) commenced, (ii)
completed, (iii) plugged or (iv) shut-in, within twenty-four
(24) hours of same.

 

16.
(b) Lessee shall furnish Lessor the following information for each
well (including exploration
core holes) drilled within twenty-four (24) hours after such information is made, produced or obtained by Lessee:

 

1.            Daily
drilling and mud log reports.

 

2.            Samples
of all cores and samples taken from
the mud or coring.

 

3.            Complete
copies of all logs and electrical survey runs showing formations
encountered and the identification of such formations as
determined by Lessee,
its geologists or paleontologists.
Also, Lessee shall furnish Lessor with log data in LAS Fonnat or other format requested by Lessor on 3W'
floppy disk or CD-Rom.

 

4.            Results
of all tests, including drill stem tests,
formation tests, core
analyses, water quality,
desorption results, and vitrinite reflectance.

 

5.            All
dipmeter and velocity surveys, including Lessee's interpretations
thereof.

 

6.            Adsorption
isotherm data and vitrinit e reflectance
data.

 

    	COALBED METHANE LEASE - 14

    	 

    

 

7.            Copies
of all permits or forms filed with the Oil and Gas Commission or any governmental agency.

 

8.            Monthly
production reports and information regarding the sale of CBM and its respective constituent products produced hereunder.

 

9.            Surveys
of the Leased Premises, including location plats, made
by or for Lessee annually update and submit

 

10.          Such
other information and data as the Lessor may reasonably request, all of which information shall be held by Lessor as confidential
information, which shall not, without the prior written consent of Lessee, be disclosed in any way to any other person, firm
or business entity.

 

16. (c)    Lessee shall submit
to Lessor on an annual basis a map showing the well locations and designation of all Well Tracts.

 

16. (d)    Ifpermitted
by third party contacts, Lessee shall furnish Lessor copies of all proprietary seismic and geophysical data owned by Lessee, including
source tapes, field data and associated documentation and the results of any reprocessing of such data. In
addition, if so permitted, Lessee shall furnish
copies of all seismic and geophysical data acquired by or
used by Lessee after the date of this Lease including copies of source tapes, field data and
associated documentation and the results of any reprocessing
of such data relating to lines crossing the Area, and any
other seismic data generated as a result of such seismic operations from which Lessee is required to furnish data to Lessor

 

16.(e)      Information
furnished to Lessor hereunder may be used for its own purposes
or that of any affiliated, subsidiary; provided, however, Lessor and/or its affiliated subsidiary companies agree that such information
shall be maintained confidential by Lessor and/or its affiliated and subsidiary companies for a period of one (1)
year from the date such
information becomes available to Lessor.

 

17.         During
the term of this lease, Lessor
and/or its'authorized
representatives, at Lessor's sole risk and expense, shall have full rights of ingress and egress
to the Area and any lands pooled therewith for the purpose of inspecting drilling or producing operations, machinery, equipment
and all other operations or purposes which Lessor may consider
necessary or advisable. Additionally, upon not less than five (5)
days' advance notice to Lessee, Lessor and/or its authorized representatives, shall have the right,
during regular business hours at Lessee's office,
to inspect, examine, make copies of and extracts from Lessee's books, records, accoWlts, contracts,
commitments and agreements insofar
as they relate to the Leased Premises, operations thereon
or production therefrom (including, without limitation, the information
referred to in Paragraph
16 above).

 

    	COALBED METHANE LEASE - 15

    	 

    

 

 

18           (a). Prior to
Lessee abandoning any wells
on the Leased Premises Lessor shall have the right,
within thirty (30) days (twenty-four (24) hours
if a rig is
on location) after receipt
of notice of Lessee's intention to so abandon, to take over the well or wells. Lessor shall give Lessee written notice of its intention
to take over any such well or wells on or before the expiration of such thirty
( 30) day or twenty-four (24) hour period, whichever is applicableIf
the well is taken over by Lessor and results in a completion attempt wherein a well capable
of production is encountered, then all of Lessee's right and interest in such well shall be owned by
Lessor as provided hereinafter. It is expressly understood that
Lessee's interest in and rights to such
well and its associated Well Tract may be subject to agreements under which other parties may have a contractual right to take
over said well and to acquire all, or a portion, of Lessee's
rights, exclusive of those to be earned by Lessor hereunder. In the
event one or more parties having such right, including Lessor, desire to take over the well, this
Lease shall be released to Lessor
(as to the well and its associated Well Tract as hereinafter provided); provided that Lessor agrees to pay Lessee the reasonable
salvage value of any salvageable material in the hole which Lessee
has contributed, less the cost of salvaging same. Should Lessee fail to comply with the terms
and conditions of this Paragraph 18 prior to plugging any well on
the Leased Premises, Lessee shall pay to Lessor $ 100,000
as liquidated damages for such noncompliance.

 

IfLessor
takes over the well and the completion attempt results in a dry hole,
Lessor agrees to plug and abandon the well or wells at its sole cost, risk
and expense and Lessee's rights hereunder shall remain
in full force and effect.

 

Likewise, if
Lessor takes over the well, but no operations are conducted in
said well by Lessor and Lessor notifies Lessee within 30
days after Lessor took over said well that Lessor is releasing
said well, then, and in that event, Lessee agrees to plug and abandon the well or wells at its sole cost, risk and expense.

 

Upon receipt
of such notice from Lessor after the takeover of a well
that the Lessor has completed
a well capable of production., Lessee shall promptly deliver to Lessor a release of all
of its interest in the Well Tract for such well, made pursuant
to the provisions of Paragraph 5 relating to termination
of the Lease as to Well Tracts and Lessor shall pay to Lessee
the salvage value of the salvageable material for the well determined in accordance with the
provisions of customary accounting procedures .
The material shall then be conveyed to Lessor
by an itemized bill
of sale free and clear of all encumbrances.

 

Lessor's rights
and Lessee's obligations under this Paragraph 18 shall
not be effective so long as Lessee maintains the Lease as to the Well Tract for such well
by Other Operations (excluding abandonment) or by
Drilling Operations as provided in Paragraph
5.

 

18 (b) Plugging and
other covenants.

 

Lessee shall comply with all rules
and regulations of the State of Louisiana concerning the casing of
wells or the plugging of
dry and abandoned
CBM wells,
and with any other laws pertaining
to CBM wells.

 

    	COALBED METHANE LEASE - 16

    	 

    

 

Lessee shall plug all holes and abandon CBM
wells in accordance with the rules and regulations of the State of Louisiana in accordance with the following:

 

		a.	CBM wells shall be mapped
by a registered land surveyor to locate
the collar and elevation of the holes on the surface.

 

		b.	Appropriate well logs shall
be run in the well to detennine the exact depth and thickness
of all coal seams. The logs to be run shall include at a minimum gamma ray, bulk density and caliper. Lessor shall
have the right to run additional logs of its own at a time convenient to Lessee. Lessor shall bear the cost of any expenses incurred
for said additional logging.

 

		c.	Surface casing shall be
left in the hole as specified in the drilling permit.

 

		d.	Lessee shall notify Lessor
in writing at least thirty (30) days prior to the beginning of any well plugging operation as per Paragraph 18(a).

 

18 (c) Restoration

 

Lessee agrees,
upon the completion or abandonment of each well drilled
by it on the Leased Premises,
to promptly restore the surface of the Leased Premises to as near the same condition as it
was prior to the drilling of said well as is practicable. Such surface restoration shall include, without limitation, reforestation,
the cleaning and levelling of all locations, the filling and levelling of all mud pits or other excavations, including roads, the
removal
of all drilling mud and drilling fluids from such pits
and other excavations prior to the filling
and levelling thereof . Ifthe
relevant well is abandoned as a dry hole or after the cessation
of production, Lessee shall remove all fences, equipment, machinery,
and tanks, and all other structures, concrete or other foundations or property of any kind or character as soon as possible after
the cessation of such operations but no later than three (3) months after the abandonment of each drill site.

 

19.
(a). Lessee agrees to indemnify and hold Lessor harmless from
any claim or cause
of action by
any person whomsoever arising out of or in connection with
its operations on the Leased Premises, including, but not limited to any claims by the owner of the
surface or other mineral
interest holders. Inthe
event Lessor is made a party defendant in any claim for loss, injury, or
damages to persons or property arising out of or in connection with Lessee's
operations on the Leased Premises or lands pooled therewith,
Lessee agrees to defend
Lessor at
its sole cost and
expense and satisfy any judgment which may be rendered against Lessor.
IfLessee fails or refuses
to retain counsel and actively defend any such
suit, Lessor may retain
counsel of its choice to defend the action. Lessee in such
event shall be liable for reasonable attorneys' fees, court
costs, including expert
witne'Sses,
and the amount
of any money
judgme nt which may be awarded against Lessor.

 

    	COALBED METHANE LEASE - 17

    	 

    

 

19. (b).Lessee on behalf of
itself and its directors, officers,
employees, agents, consultants,
contractors, licensees
and invitees and
their respective
successors and assigns
(collectively,
the "Releasors")
shall indemnify and hold harmless Lessor and its directors, officers, employees, agents consultants, contractors, licensees and
invitees and their respective heirs, executors, administrators,
successors and assigns (collectively, the "Releasees"), and
each of them, from and against any and all liens, claims,
demands, suits, actions, causes of action, costs, expenses, losses, damages and liabilities (including without limitation special,
exemplary or consequential damages and economic loss and including losses from property damage, personal injury or death), orders
including penalties and fines imposed pursuant to any federal or state legislation, and
judgments, suffered or incurred by the Releasees or any of them or brought, made or

imposed against the Leased Premises
or lands pooled therewith or against the Releasees or any of them, in respect of, as a result of or arising from:

 

(i)          any personal injury
(including death resulting at any time therefrom) or property damage or loss suffered or incurred on the Leased Premises or lands
pooled therewith in connection with any operation or activity
of the Releasors or any of them or any exercise or purported
exercise of the CBM Rights or any rights ancillary thereto; or

 

(ii)          any breach or default
in the due observance or performance of the obligations
of Lessee under this Lease; or

 

(iii)          any negligence
or wilful misconduct on the part of the
Releasors or any of
them on or with respect to the Leased Premises or lands pooled
therewithor with respect to the CBM Rights or any exploitation
thereof; or

 

(iv)          any damage to or
contamination of the Leased Premises or lands pooled therewith or any improvements thereto or any other environmental damage caused
by the Releasors or any of them or arising from
or as a result of any exercise or purported
exercise of the CBM Rights or any rights ancillary thereto;
or

 

(v)          the CBM Rights,
or any activity or operations of the Releasors or any of
them on or with respect to any part
of the Leased Premises or lands pooled
therewith, or any act or omission of the Releasors or any
of them with respect to or in connection with the
CBM Rights or the exercise or exploitation thereof
under this Lease or otheiwise.

 

19
(£)          Lessor and any third party having coal mining
rights granted by Lessor shall have no responsibility for
the shortening of the productive life
or the reduction in the amount ofrecoverable reserves from
any Well Tract or portion of the Leased Premises as a result
of coal mining activities on the Leased
Premises ("Mine Through").

 

    	COALBED METHANE LEASE - 18

    	 

    

 

20.          Except
with respect to notices and reports required to be given
pursuant to the provisions of Paragraph
16 hereof, any notice
or other communication
permitted or required under the terms hereof shall be in writing and, unless othelWise
specified, shall be deemed properly given on the
ate personally delivered or on the date postmarked if mailed, registered or certified, by postage prepaid and United States mail,
addressed to Lessor or Lessee at the addresses set forth below, or to such other address as may hereafter be designated by either
party to the other by notice.

Notice given in any other manner
shall be effective only if and when received.

 

Except as expressly
provided herein to the contrary, all notices and reports , required
under this Lease shall be delivered to Lessor at the following
address:

 

International Paper Company

Mineral Resources Division

7600 W.Tidwell Rd., Suite 300

Houston, Texas 77040-5714

Attention: Manager Mineral Resources

 

Physical Address:

 

International Paper Company

Mineral Resources Division

7600 W.Tidwell Rd.,Suite 300

Houston, Texas 77040-5714

 

All payments,
royalty payments and royalty reports shall be made and delivered
to Lessor on the due dates set forth herein at the following
address:

 

International Paper

Mineral Resources Division

7600 W.Tidwell Rd.,Suite 300

Houston, TX 77040-5714

 

Telephone numbers listed for convenience:

 

Phone Number (713)
651-2768

Fax Number    (713)
951-4554

Email address:
________________

 

All notices
required under this Lease from Lessor to Lessee shall be delivered
to Lessee at the following address:

 

E&Pco

2500 Tanglewilde

Suite 492

Houston, TX
77063

 

Telephone numbers listed
for convenience:

 

Phone Number 713-978-6503

Fax Number 713-978-6772

 

    	COALBED METHANE LEASE - 19

    	 

    

 

21.         Upon
expiration or termination of this Lease for any reason as to all or any portion of the Leased Premises, Lessee at its sole cost
and expense shall promptly prepare, execute and
file in the appropriate Parish
land records office an appropriate release instrument covering all or
such portion of such land, and shall forward a copy of same as recorded to Lessor. Failure
to provide Lessor with a recorded copy of said instrument
within ninety (90) days after the expiration of the Primary
Term (or any other time at which there has been a termination
of the rights under this Lease, whether partial or complete)
will result in a penalty to Lessee of $100.00 per: day until said instrument is provided to Lessor. The daily penalty shall not
begin to accrue until 30 days after Lessor has notified Lessee in writing to file such release. The penalty will be due and payable
on demand of Lessor.

 

22.         Lessee,
if not in default
hereunder, and provided Lessor does not elect to take over any well(s) shall have the right at any time during or within one hundred
eighty (180) days after the expiration of this Lease to remove all property and fixtures placed by Lessee on the Leased Premises,
including the right to draw and remove all casing; provided that, Lessor
shall have the right to acquire any fresh water wells drilled by Lessee on the Leased Premises by paying Lessee
the salvage value of the equipment in and on such well less the cost of salvaging the
same. All property
and fixtures not removed within such one hundred eighty (180) day period
will become the property of the Lessor or the surface owner, except that if Lessor
at any time during or within
ten (10) days after the expiration of
this Lease requires in a written notice to
Lessee that any of such property be removed, Lessee shall
remove the same within such one hundred eighty (180) day
period, or, in the event Lessee fails so to do, Lessor may remove same at the sole cost, risk and expense of Lessee.

 

23.         During
the term of this Lease, Lessee shall, at its
expense, maintain in force and
effect minimum insurance in a form subject to approval of Lessor and with an insurance
company approved by Lessor as follows:

 

A.          Comprehensive
General Liability Insurance, with limits of liability of not
less than the following:

 

	 	Bodilyinjury/PropertyDamage	 
	 	Combined any one occurrence	$1,000,000
	 	Aggregate	$2,000,000

 

Such insurance
shall include the following:

 

		1.	Contractual Liability, insuring
the indemnity agreements contained in this contract.

		2.	Coverage for property damage due to blasting and explosion,
structural property damage,
underground property damage,
and surface damage from blowout
and cratering.

		3.	Lessee shall purchase Extended Reporting Provision if policy
is written on
a claims-made basis and
is non-renewed or cancelled.

 

    	COALBED METHANE LEASE - 20

    	 

    

 

B.           Comprehensive
Automobile Liability Insurance, with limits of liability of not less than the following:

 

Bodilylnjury/PropertyDamage

Combined any one accident or occurrence      $2,000,000

 

Such coverage shall include owned,
hired and nonowned v ehicles.

 

C.          Excess
Liability Insurance with limits of liability of not less than $5,000,000.

 

D.          Environmental
Impairment Liability Insurance with limits of liability
of not less than $5,000,000.

 

Each insurance policy maintained by
Lessee, must be endorsed as follows:

 

		1.	Lessor, its owners, subsidiaries and affiliated companies, as well as their employees, officers,
and agents shall be named as "Additional Insured ."
(Except for Workmen's Compensation policy).

 

		2.	All coverages shall contain waivers of subrogation (whether by loan
receipts, equitable assignment, or otherwise) against Lessor, its
owners, subsidiaries and affiliated companies, as well as their employees, officers
and agents.

 

		3.	The coverage afforded herein shall be primary in relation to any policies carried by Lessor, its subsidiaries, owners and affiliated
companies, as well as their employees, officers and agents.

 

In
addition to the above insurance requirements the Lessee shall obtain coverage under the Workers
Compensation Act and regulations and the Lessee shall be considered to be the "Prime
Contractor" under the Workers Compensation Act and regulations . The
Lessee shall also require that all subcontractors be in
compliance with the provisions of
the Workers
Compensation Act and regulations.

 

Lessee shall
furnish Lessor with certificates of insurance evidencing
compliance with this obligation prior to commencement of
operations hereunder and shall give Lessor
ten (10) days notice
of any proposed change of insurance carriers or coverage.

 

24.         During
the term of this Lease, Lessee shall
be responsible for and pay
when due, or
reimburse Lessor for if paid by Lessor, any and all taxes payable in respect to the
CBM, or any exploitation, or production, or operation,
or activity, or property or improvements by the Lessee on the Leased Premises or with respect to the CBM, including all real and
personal property taxes, assessments and charges and Lessee shall provide proof of payment to Lessor promptly. Lessor shall provide
copies of all such notices to Lessee
upon receipt.

 

In the event Lessee fails to pay
any royalty or any other sum due to Lessor
under this Agreement
in the manner so prescribed , Lessor
shall have, without notice to Lessee or demand to Lessee,
a perfected security
interest and
a lien
on all machinery, equipment,
structures, and
other property
of Lessee of every kind located on the Leased Premises at the time of default and thereafter.
If such a default
in payment continues
for more than thirty
(30) days,
the above
granted lien
may be enforced
as provided by the
laws of the State
of Louisiana, including
but not limited
to the Uniform Commercial
Code.

 

    	COALBED METHANE LEASE - 21

    	 

    

 

25.         The
Lessee shall give Lessor prompt written notice of any
claims of or by third parties or any other event or circwnstance that could adversely affect
the ability or legal right of the Lessee to produce, save,
take clear title to and sell CBM from the LeIased
Premises pursuant to the CBM rights granted herein(the "Adverse Claims"). The Lessee shall use all reasonable
commercial efforts to resist and defend against any Adverse Claims, anh shall not, without
Lessor's prior written corisent, which will not unreasonably be withheld, settle any Adverse Claims in
any manner that could adversely affect the ability or legal ri*t
of the Lessee to produce, save, take clear title to and
sell CBM from any part of the Leased Premises pursuant
to any of the rights granted herein. Lessor shall have
the right at Lessor's !expense to
participate in resisting and
defending against any Adverse Claims and at its option to!assume
conduct thereof, in its own name or in the name of the
Lessee or both.

 

The Lessee
shall pay and continue to pay the CBM royalty as provided herein notwithstanding any Adverse Claims, provided that to the extent
the payments hereunder=would be reduced if an Adverse Claim were successful, the Lessee may pay the proportionate part of each
subsequent

payment that would be applicable
to such reduction, into trust an escroYi account or registry of a court of competent jurisdiction in the State of Louisiana pending
final resolution or settlement of the Adverse Claim, on terms that provide for payment thereof
according to such final resolution or settlement including payment to Lessor in the event that
the Adverse Claim is not upheld.

 

26.         Notwithstanding
any operational standards set out in thi Lease, it is
understood and agreed that all rights granted hereunder are subject to the
applicable laws of the State of Louisiana without limiting the generality of the foregoing the applicable provisions of the
Petroleum and-Natural
Gas Act, the Oil and Gas. Comm-i-s--s-i--o. n..·.A_,_c_t,
the.Coal Act, the Forest Practi
Mines Act. Failure to comply with any provisions of applicable laws will allow the Lessor at its
option to terminate this Lease by giving
notice pursuant to Section 20.

 

27.         All
references to currency are
in United States funds.

 

28. (a)          
This Agreement is and will be deemed to have been
made in Louisiana, and for all purposes will be governed exclusively by and construed·and
enforced in accordance with the laws prevailing in the
State of Louisiana and the rights and
remedies of the parties will be
detennined in accordance with those laws. ·

 

28. (b) Each
of the parties irrevocably attoms to the jurisdiction of
the courts of Louisiana and all courts having appellate
jurisdiction thereover and agrees that any
proceeding commenced or
maintained in respect of or
arising as a consequence of this Lease
will be commenced or maintained only in such of those Courts
as is appropriate.

 

29. (a) All
questions or matters in
dispute with respect
to accounting, engineering
or · technical
matters, other than disputes over royalty payments which shall
be governed by paragraph 3(h)
hereof, will be submitted
to arbitration pursuant
to the terms
of this Section
29. All arbitrators appointed shall be knowledgeable with respect
to the subject matter or question.

 

    	COALBED METHANE LEASE - 22

    	 

    

 

29. (b) It
will be a condition precedent to the right of any party to submit any matter to arbitration
pursuant to the provisions of this Section 29, that any party intending to refer any matter to arbitration will have given not
less than thirty (30) days' prior written notice of its intention so to do to the other party together with particulars of the
matter in dispute.

 

29. (c) On
the expiration of such thirty (30) days, the party who
gave such notice may proceed to refer the dispute to arbitration
as provided in Paragraph 29.(d). The parties may appoint a single arbitrator by mutual agreement.

 

29. (d) In
the event the parties do not appoint a single arbitrator, the party desiring arbitration will appoint one arbitrator, and
will notify the other party of such appointment, and the other party will, within 15 days after receiving such notice, appoint
an arbitrator, and the two arbitrators so named, before proceeding to act, will, within 15 days of the appointment of the last
appointed arbitrator, unanimously agree on the appointment of a third arbitrator to act with them and be chairman of the arbitration
herein provided for.

 

29. (e) Ifthe
other party will fail to appoint an arbitrator within 15 days after receiving
notice of the appointment of the first arbitrator, and if the two arbitrators appointed by the parties fail to agree on the appointment
of the chairman, the chairman will be appointed under the
provision of the American Arbitration Association.

 

29. (£)
Except as specifically otherwise provided in Paragraph 30.(d) the arbitration herein
provided for will be conducted in accordance
with such Rules of the American Arbitration Association for the Resolution of Commercial Disputes ("Rules").

 

29. (g) The
chairman, or in the case where only one arbitrator is appointed, the single arbitrator, will fix a time and place in Houston, Texas,
for the purpose of hearing the evidence and representations
of the parties, and he will preside over the arbitration and determine all questions of procedure not provided for under such Rules
or Paragraph 30.(d).

 

29. (h)
After hearing any evidence and representations that the
parties may submit, the
single arbitrator, or the arbitrators, as the case may be, will make an award and reduce the
same to writing, specifying the time frame for the award and
deliver one copy thereof
to each of the parties.

 

29. (i) The
expense of the arbitration will be paid as
specified in the award.

 

29.(j)
The parties agree that the
award of a majority
of the arbitrators, or in the
case of a single arbitrator, of such arbitrator, will
be final and binding upon each of them, subject
only to the limited
appeals from arbitration awards.

 

30. (a) The parties agree to keep confidential certain
information. "Confidential Information"
is defined as

 

    	COALBED METHANE LEASE - 23

    	 

    

 

(i)           all information, data, kriowledge,
and know-how (in whatever form and however communicated)
relating, directly or indirectly, to Lessor (or to itsaffiliates
or to its or their business, operations, properties, products, markets, or financial positions) that is delivered or disclosed
by Lessor or any of its officers, directors, partners, members, employees, agents, affiliates, or shareholders to Lessee in writing,
electronically, verbally, or through visual means, or which Lessee learns or obtains orally, through observation or through: analyses,
interpretations, compilations, studies, or evaluations of such information, data, knowledge, or know-how, but

 

(ii)          does not include information,
data, knowledge, and know-how, as shown by written records, that

 

(A)          is in Lessee's possession before
disclosure to Lessee,

 

(B)          is in
the public domain before disclosure to Lessee, or

 

(C)          lawfully enters the public domain
through no violation of this Agreement after disclosure to Lessee, but

 

(iii)   includes all
analyses, interpretations, compilations, studies, and evaluations of such information, data, knowledge, and know-how generated
or prepared by or on behalf of Lessor or Lessee.

 

30. (b) The
term "document," as used inthis Lease, includes any writing,
instrument, agreement, letter, memorandum, chart, graph, blueprint, photograph, financial statement, or data, telex, facsimile,
cable, tape, disk,
or other electronic, digital, magnetic, laser, or other recording or image in whatever form or medium.

 

30. (c) Recipient
will use the Confidential Information solely for the Purposes of carrying out its obligations under the Lease
and for no other purpose.
·

 

30. (d) Lessee
will keep the Confidential Information confidential and not disclose the Confidential Information to any person or entity other
than

 

(i)           such
of Lessee's officers, directors,
partners, members, employees, attorneys, accountants, or
financial advisors who have a bona fide need to have access to sucb Confidential
Information in order for Lessee to
carry out the Purposes, and

 

(ii)          such
other persons as Lessor hereafter agrees
inwriting may receive such Confidential
Information (which agreement may be withheld for any reason or for no reason).

 

30. (e)
Lessee will be responsible and liable for any use or disclosure
of the Confidential
Information by such parties in violation: of this Agreement.

 

30.  (f) Nothing contained
herein will be deemed
to prevent disclosure of any
of the Confidential Information if,
such disclosure is
legally required
to be made in
a judicial, administrative,
or governmental proceeding pursuant to a valid subpoena or other applicable order,
but, Lessee will

 

    	COALBED METHANE LEASE - 24

    	 

    

 

(i)           give Lessor at least
10 days written notice (unless less time is permitted by
the applicable proceeding) before disclosing any Confidential Information in any
such proceeding and, in making such disclosure,

 

(ii)          disclose only that portion thereof
required to be disclosed, and

 

(iii)         will take all reasonable efforts
to preserve the confidentiality thereof, including obtaining protective orders and supporting Lessor in intervention.

 

31.         This
Lease may be executed in multiple counterparts, each of
which shall be deemed an original for all purposes and all of which
taken together shall constitute a single document, but shall not be effective unless executed
by all the Parties hereto.

 

32.         The
obligations of the parties under this Lease are subject to extension
due to force majeure as defined in this paragraph. If
either party hereto is rendered unable, wholly or in part, by force rnajeure to carry out its obligations under this Lease,
other than the obligation to make money payments, that
party shall give to the other party hereto prompt written notice of the force majeure with reasonably full particulars concerning
it; thereupon, the obligations of the party giving the notice, so far as
they are affected by the force majeure, shall be suspended during, but no longer than, the continuance of the force majeure.
Force Majeure does not begin and
shall not be effective for any purpose under this Lease
until the other party
shall have received
written notice of the force majeure condition from notifying
party. The affected
party shall use all reasonable diligence to remove the force majeure situation as quickly
as practicable. The requirement that any force majeure shall be remedied with all reasonable dispatch shall not require the settlement
of strikes, lockouts, or other labor difficulty by the party involved, contrary to its wishes; how all such difficulties shall
be handled shall be entirely within the discretion
of the party concerned once the cause of force majeure is eliminated, the claiming party shall
promptly recommence operations. The term "force rnajeure"
as here employed, shall mean an act
of God, strike, lockout, or other industrial disturbance, act of the public enemy, war,
blockade, public riot, lightning, fire, storm, flood,
explosion, governmental action, governmental delay,
restraint or inaction, unavailability of equipment, and
any other cause; whether
of the kind specifically enumerated above
or otherwise, which is not reasonably with in the
control of the party claiming suspension. Lessor on prior
written notice may terminate this Lease if a cause of
force majeure claimed by Lessee lasts longer than 365 days.

 

33.         Severability
-Ifany
provision of this Lease or the application
thereof to Lessor or
Lessee shall, for any reason and
to any extent, be
held to be invalid or unenforceable, the remainder
of this Leased agreement shall not be
affected thereby,
but rather shall be
enforced to the greatest extent permitted by law.

 

    	COALBED METHANE LEASE - 25

    	 

    

 

34.         Binding
Effect -This Lease agreement shall inure to the benefit
of and be binding upon the successors and assigns of Lessor and Lessee.

 

INWITNESS
WHEREOF, the parties have executed this Lease effective as of the date first above written.

LESSOR:

 

	 	LESSOR:
	 	 
	 	INTERNATIONAL PAPER COMPANY
	 
	By:	/s/ R.T. Kaczorowski
	 	 	R.T. Kaczorowski
	 	 	Agent and Attorney-in-Fact

 

	 	LESSEE:
	 	E&Pco

 

 

	 	By:	/s/ Charles E. Edwards
	 
	 
	Title: 	CHIEF EXECUTIVE OFFICER

 

	Instrument Prepared by:	INTERNATIONAL PAPER COMPANY
	 	P.O. Box 4258
	 	Houston, Texas  77210

 

    	COALBED METHANE LEASE - 26

    	 

    

 

EXHIBIT "A"

 

Attached to and made a part
of that certain Coalbed Methane Lease between International Paper Company, as Lessor and E&Pco, as Lessee, dated May 1, 2008.

 

The Leased Premises shall consist of the CBM
Interests owned by International Paper Company

in the following described lands located in
Caldwell Parish, LA

 

Caldwell Parish, LA -Exhibit A Property Description:
9661± acres

 

	Tl3N   -R5E	 
	 	 
	Section 1	Entire Section
	 	 
	Section 2	NE 4
	 	E2 of NW4 
	 	NW4 of NW4
	 	SW4 -A11lying N & E of Morengo Lake and Bayou
	 	SE4
	 	 
	Section
    12 	Entire Section
	 	 
	Section
    13	Entire Section
	 	 
	Section
    24	Entire Section
	 	 
	Section 25	Entire Section lying N of Boeuf River ·
	 	 
	T13N -R6E	 
	 	 
	Section 5	Lot 3 (SW4 of SW4 lying S & W of Boeuf River)
    
	 	 
	Section 6	Lot       3,
    4 & 5 (All lying S & W of Boeuf River) 
	 	 
	Section 7	Entire Section
	 	 
	Section 8	Lots 3, 4 & 6
    (All lying S & W of Boeuf River)
	 	 
	Section 17	Lots 2, 3,
    4, 5, 6 & 7 (All lying W of Boeuf River)
    
	 	 
	Section 18	Entire Section
	 	 
	Section 19	Lots 1, 2, 3, 4, 5, 6 & 7 (All lying W of Boeuf
    River)
	 	 
	Section 20	Lots 2, 3,
    4, 5 & 8 (All lying W of Boeuf River) 
	 	 
	Section 30	Entire Section N & W of Boeuf River
	 	 
	Section 21	Lot 4 (All of
    NW4 lying W
    of Boeuf River) 
	 	 
	Section 21	Lot 5 (All of SW4 lying W of Boeuf River)
	 	 
	T14N -R5E	 
	 	 
	Section 25	Lots 5,
    6, 7
    & 8 (All
    lying S of Boeuf River)
	 	S2 of SW4
	 	S2 of SE4

 

    	COALBED METHANE LEASE - 27

    	 

    

 

	Section 26	Lots 2, 8 & 9 (All lying S of Boeuf River) 
	 	SW4 of SW4
	 	SE4 of SE4
	 	 
	Section 27	Lots 2, 8 & 9 (All lying S of Boeuf River) E2 of SE4
	 	NW4 of SE4
	 	 
	Section 35	Entire Section 
	 	 
	Section 36	Entire Section
	 	 
	Tl4N -R6E	 
	 	 
	Section 30	Lot 5 (All lying S & W of Boeuf River)
	 	 
	Section 31	Lots 2 & 3 (All lying S & W of Boeuf River)

 

    	COALBED METHANE LEASE - 28

    	 

    

 

EXHIBIT "A-1"

 

Attached to
and made a part of that certain Coalbed Methane Lease between International Paper Company, as Lessor and E&Pco, as Lessee,
dated May 1, 2008 .

 

Map ofLeased Premises

 

 

  

    	COALBED METHANE LEASE - 29

    	 

    

 

Dear Osman,

 

Attached please find a copy of the lease agreement
which is certified and registered in the Caldwell Parish Clerk of Records. (file # 222364)

This goes along with item #7 of the outstanding
list.

 

Regards,

 

Charles E. "Chuck" Edwards

E&Pco, LLC

2500 Tanglewilde, Suite 492

Houston, Texas 77063

Direct:   713-978-6503

Fax:       713-978-6772

E-mail: chuckedwards@e-pco.comAMENDMENT
TO : Coalbed Methane lease between E &Pco, LLC and International Paper in
Caldwell Parish, LA. dated 1st day of May, 2008 .

 

This Amendment ,
with an effective date of April 30, 2011 by and between BRP LLC,
successor in interest to INTERNATIONAL PAPER COMPANY, hereinafter
sometimes referred to as "Lessor" and E &Pco LLC, a
Texas limited liability company hereinafter sometimes referred to as "Lessee."

 

WITNESSETH:

WHEREAS, it is the mutual desire of Lessor and
Lessee to amend provisions of said Agreement as hereinafter provided;

 

NOW THEREFORE ,
for and in consideration of the negotiated sum of $19,322
and other good and valuable consideration , the receipt
and sufficiency of which are hereby acknowledged , it is
agreed that:

 

The primary term of the lease is extended
by 12 months, until April 30, 2012.

 

Except as amended hereby,
said Lease Agreement shall remain unchanged.

 

	WITNESSES:	LESSOR: 
		BRP LLC
	 
	/s/ R. T. Kaczorowski
	 	R. T. Kaczorowski, Vice President-Operations
	 	Date: 6/10/2011
	 	 
	WITNESSES:	LESSEE:
	 	E &Pco, LLC
	 	 
	/s/
    Osman Kaldirim,Jr
	 	Osman Kaldirim, Jr., Vice President
	 	Date: 6/14/2011
	STATE OF TEXAS	 
	 	 
	COUNTY OF HARRIS	 

 

    	 

    	 

    

 

Before
me, the undersigned authority,
on this day personally appeared Osman Kaldirim, Jr,
Vice President of E &Pco LLC,, LLC a limited liability company, known to me to be the person
whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration
therein expressed, in the capacity stated, and as the act and deed of said limited liability company .

 

Given under my hand and seal of office this 14th
day June 2011.

 

	 	/s/ Donna C Brook
		Notary Public in/and for	 Harris Country
	The State of Texas                                                                  
	My commission expires:	12/13/2012

 

	STATE OF TEXAS	§	 
	 	§	 
	COUNTY OF HARRIS	§	 

 

Before
me, the undersigned authority,
on this day personally appeared RAY T. KACZOROWSKI, Vice President-Operations for
BRP LLC, a Delaware limited Liability Company, known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed ,
in the capacity stated, and as the act and deed of said corporation.

 

Given under my hand and
seal of office this 10th day of June 2011.

 

	 	/s/ Patricia A. Smith
		Notary Public in/and for	 HARRIS Country
	The State of Texas                                                                  __
	My commission expires:	9/12/2011

 

    	 

    	 

    

 

AMENDMENT TO : Coalbed
Methane lease between E &Pco, LLC and International Paper in Caldwell Parish, LA. dated 1st
day of May, 2008.

 

This
Amendment , with an effective date of April 30, 2012 by
and between BRP LLC, successor in interest to INTERNATIONAL
PAPER COMPANY, hereinafter sometimes referred to as "Lessor" and E &Pco LLC, a Texas limited liability company hereinafter
sometimes referred to as "Lessee."

 

WITNESSETH:

WHEREAS,
it is the mutual desire of Lessor and Lessee to amend provisions of said Agreement as hereinafter provided;

 

NOW
THEREFORE, for and in consideration of the negotiated sum of $19,322 and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged , it is agreed
that:

 

The primary term of the lease is extended
by 12 months, until April 30, 2013.

 

Except as amended hereby, said Lease Agreement
shall remain unchanged.

  

	WITNESSES:	 	LESSOR: 
		 	BRP LLC
	 	 
	 	 	 
	/s/ Randy R. Cornele 	 	/s/ R. T. Kaczorowski	
	Randy R. Cornele

	 	R. T. Kaczorowski, Vice President-Operations
	 	 	Date: 5-1-2012
	 	 	 
	WITNESSES:	 	LESSEE:
	 	 	E &Pco, LLC
		 	 
	 	 	 	 	 
		 	/s/ Osman Kaldirim,Jr
	 	 	Osman Kaldirim,Jr., Vice President
	 	 	Date: 4/30/2012	 

  

	STATE OF TEXASC

OUNTY OF HARRIS	

 

    	 

    	 

    

 

Before me,
the undersigned authority, on this day personally appeared Osman Kaldirim, Jr, Vice President of E &Pco LLC,, LLC a limited
liability company, known to me to be the person whose name is subscribed to the foregoing instrument,
and acknowledged to me that he executed the same for the purposes and consideration therein expressed, in the capacity stated,

and as the act and deed of said limited liability
company.

 

Given
under my hand and seal of office this 30th day April 2012.

 

		/s/
    Tashfeen
    Brohi
	 	Notary Public in/and for	Houston
	 	The State of 	IX
	 	My commision expires 	June 1,2012

 

	STATE OF TEXAS	$
	 	$
	COUNTY OF HARRIS	$

 

Before
me, the undersigned authority, on this day personally appeared RAY T. KACZOROWSKI, Vice President-Operations for BRP
LLC, a Delaware limited Liability
Company, known to me to be the person whose name is
subscribed to the foregoing instrument, and acknowledged
to me that he executed the same for the purposes and consideration therein expressed, in the capacity stated, and as the
act and deed of said corporation.

 

Given under my hand and seal of office this 2nd
of MAY 2012

 

		/s/ Donna C Brook
	 	Notary Public in/and for	Harris County
	 	The State of 	Texas
	 	My commision expires 	12/13/2012

  

	

 

    	 

    	 

    

 

  

AMENDMENT
TO : Coalbed Methane lease between E &Pco, LLC and
International Paper in Caldwell Parish, LA. dated 1st
day of May, 2008.

 

This
Amendment, with an effective date of April 30, 2013 by and between BRP LLC, successor in
interest to INTERNATIONAL PAPER COMPANY, hereinafter sometimes referred to as “Lessor”
and E &Pco LLC, a Texas limited liability company hereinafter sometimes referred to as “Lessee.”

 

WITNESSETH:

WHEREAS,
it is the mutual desire of Lessor and Lessee to amend provisions of said Agreement as hereinafter provided;

 

NOW
THEREFORE, for and in consideration of the negotiated sum of $19,322 and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed that:

 

The primary
term of the lease is extended by
12 months, until April 30, 2014.

 

Except as amended hereby, said
Lease Agreement shall remain unchanged.

 

		 	LESSOR: 	 
		 	BRP LLC	 
	 	 	 	 
		 	/s/ R.T.
Kaczorowski	
	 	 	R. T. Kaczorowski, Vice President-Operations	
	 	 	Date: 4/9/2013	 

 

	WITNESSES:	 	LESSEE:	 
		 	E.&Pco, LLC	 
	 	 	 	 
	 	 	/s/ Osman Kaldirim	 
	 	 	Osman Kaldirim, Jr., Vice President	 
	 	 	Date: 4/5/2013	 

 

 

	STATE OF TEXAS

     

    COUNTY OF HARRIS	

 

    	 

    	 

    

 

Before
me, the undersigned authority, on this day personally appeared Osman Kaldirim, Jr, Vice President of E &Pco LLC,, LLC a limited
liability company, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that
he executed the same for the purposes and consideration therein expressed, in the capacity stated, and as the act and deed of said
limited liability company.

   

Given
under my hand and seal of office this 5th day April 2013.

 

		
	Notary Public in/and for 	 
	The State
    of Texas
	My commission expires: August 16,2014	 

 

	STATE OF TEXAS	§
	 	§
	COUNTY OF HARRIS	§

 

Before
me, the undersigned authority, on this day personally appeared RAY T. KACZOROWSKI, Vice President-Operations for BRP LLC,
a Delaware limited Liability Company, known to me to be the person whose name is subscribed to the foregoing instrument,
and acknowledged to me
that he executed the same for the purposes and consideration therein expressed, in the capacity stated, and as the act
and deed of said corporation.

 

Given
under my hand and seal of office this 9th day of April 2013.

 

	 	
		Notary Public in/and for	 
	The
    State of Texas
	My
    commission expires: 12/13/2016

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