RATE AND DAMAGE SCHEDULE

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THE UNIVERSITY OF TEXAS SYSTEM UNIVERSITY LANDS P.O. BOX 553 MIDLAND, TEXAS 79702-0553 (432) 684 4404 Web Site Link: http://www.utlands.utsystem.edu I.

1 THE UNIVERSITY OF TEXAS SYSTEM UNIVERSITY LANDS P.O. BOX 553 MIDLAND, TEXAS (432) Web Site Link: I. Well Locations and Lease Appurtenances Page 1 II. Material Sales Page 3 III. Geophysical Surveys Page 3 IV. Commercial Surface Leases (Non-Grazing) Page 4 V. Roads Page 5 VI. Pipeline Easements Page 6 VII. Utility Line Easements Page 8 VIII. Fresh Water and Brine Page 9 IX. SWD Contracts Page 11 X. Assignments Page 12 XI. Amendments Page 12 XII. Payment Information Page 13 XIII. University Lands Representatives Page 14 EFFECTIVE September 1, 2012 This schedule supersedes all previous Rate and Damage Schedules

2 I. WELL LOCATIONS AND LEASE APPURTENANCES The location fee (damages) must be paid before any construction begins. The location fee includes damages exclusively on the applicable company oil/gas lease for well location, tank battery on existing well pad, flow-lines, power lines, etc. and use of existing roads for ingress/egress. All other appurtenances (e.g., tanks located off well pad, meters, flow-lines, power lines, etc.) require payment of damages and will require easements or commercial surface leases if benefiting more than one oil & gas lease. Caliche is not included in the location fee. Any caliche taken from University land, other than reclaimed caliche, requires a payment for consideration. (See page 3, II. Material Sales) Any new road access to a location requires a damage payment. (See page 5, V. Roads and Road Easements) Royalty due on oil and gas lease includes any lost product resulting from a leak or spill. ADVANCE NOTIFICATION to the University Lands Energy Representative is REQUIRED BEFORE ANY WORK IS INITIATED. NEW ITEM: LOCATION FEES ARE BASED ON TOTAL MEASURED DEPTH INCLUDING HORIZONTAL SECTION OF THE WELLBORE. A. New Location - Including Multiple Wellbores on Same Pad Damages 1. Less than 4,000 feet measured depth (up to 2.0 acre pad) $6, (up to a 295 X 295 pad or equivalent) 2. 4,000 feet to 7,999 feet measured depth (up to 3.0 acre pad) $11, (up to a 360 X 360 pad or equivalent) 3. 8,000 feet to 13,000 feet measured depth (up to 4.0 acre pad) $17, (up to a 415 X 415 pad or equivalent) 4. Greater than 13,000 feet measured depth (up to 5.5 acre pad) $22, (up to a 470 X 470 pad or equivalent) 5. Additional wellbores from same well pad $5, B. Re-Entry (New University Lease) 1. Less than 4,000 feet measured depth (up to 2.0 acre pad) (up to a 295 X 295 pad or equivalent) 2. 4,000 feet to 7,999 feet measured depth (up to 3.0 acre pad) (up to a 360 X 360 pad or equivalent) 3. 8,000 feet to 13,000 feet measured depth (up to 4.0 acre pad) (up to a 415 X 415 pad or equivalent) 4. Greater than 13,000 feet measured depth (up to 5.5 acre pad) (up to a 470 X 470 pad or equivalent) Damages $3, $5, $8, $11, (Section I. continued on next page) Rate & Damage Schedule 1

3 I. WELL LOCATIONS AND LEASE APPURTENANCES C. Fresh Water Frac Pit Site Requires a five year contract prior to construction. Unused pits must be closed by the end of primary term. Requires reseeding with University Land s seed mixture upon closure of pit. 1. Maximum 40,000 sq. ft. pit area Pit area calculated from the outside base of the berm Min. $10, Pit area greater than 40,000 sq. ft. Min. $0.25/sq. ft. over and above C. 1. D. Renewal of Fresh Water Frac Pit Site 1. Fresh water frac pit site Min. $ Damages Damages E. Stacked Rig Damages 1. Stacked drilling rig Min. $100.00/day F. General Damages Damages 1. Remediation of ground surface Min. $0.05/sq.ft. 2. Off-pad construction Min. $0.05/sq.ft. 3. Pad extensions Min. $0.05/sq.ft. 4. Earthen pits used for storage of produced, flowback or brackish water will require a contract. Rate & Damage Schedule 2

4 II. MATERIAL SALES Payment is due before any excavation begins or by due date established by agreement. ADVANCE NOTIFICATION to the University Lands Energy Representative is REQUIRED BEFORE ANY WORK IS INITIATED. Damages 1. Caliche or Limestone (for use on University Lands) Min. $4.00/yd 3 2. Caliche or Limestone (for use off University Lands) Min. $7.00/yd 3 3. Reclaimed Caliche (for use on or off University Lands) All reclaimed caliche must be completely removed down to ground level. After removal, the area must be ripped and/or reseeded if so directed by the University Lands Energy Representative. 4. Other materials 5. Opening of new material pit (in addition to any fees listed in II.1. through II.4.) Min. $25, III. GEOPHYSICAL SURVEYS A non-refundable consideration payment is due when permit is issued. Damage payment is due upon date established by agreement. ADVANCE NOTIFICATION to the University Lands Energy Representative is REQUIRED BEFORE ANY WORK IS INITIATED. Damages 1. 2-D $1, D $1, Min. $17.50/acre 3. Other $1, Brush removal (by written permission only) Min. $500.00/mile 5. If geophysical activity occurs during big game hunting season (in permit area) or during lambing season (potentially year round), an income loss assessment per affected acre is Hunting Maximum $3.00/acre* Lambing Maximum $5.00/acre* due from the permit holder to the UL Grazing Lessee. All such payments will be determined and monitored by UL personnel. *Separate payment required, delivered to UL office, payable to grazing lessee. Rate & Damage Schedule 3

5 IV. COMMERCIAL SURFACE LEASES (NON-GRAZING) Leases are negotiated by the Midland office. ADVANCE NOTIFICATION to the University Lands Energy Representative is REQUIRED BEFORE ANY WORK IS INITIATED. Damages 1. Commercial surface lease Rate & Damage Schedule 4

6 V. ROADS Road easements for convenience to access non-university Lands are normally discouraged and must show a significant benefit to the University. Road easements are usually only required for roads that are built on University Lands whose purpose is to access property off University Lands. Most roads on University Lands do not require an easement. If there are questions as to whether an easement is required, contact the Midland office or the University Lands Energy Representative. Payment is required before any construction begins or by due date established by agreement. Any caliche taken from University land other than reclaimed University caliche requires payment of consideration. (See page 3, II. Material Sales) For new road construction that does not require an easement, a payment for University caliche is still required. All roads, gates, and cattle guards on University Lands must be located, constructed, and maintained in accordance with specifications determined by the University Lands Energy Representative. Existing roads must be upgraded to accommodate additional traffic in accordance with specifications determined by the University Lands Energy Representative. Annual road and cattle guard maintenance by the oil and gas lessee is required at a minimum. University Lands may assess a penalty for improper road or cattle guard maintenance. DRIVING AROUND POTHOLES AND POORLY MAINTAINED AREAS is considered excessive surface use and will result in administrative fines or other penalties up to and including expulsion from University Lands. Minimum Damages are $3,000. No unauthorized off-road travel is permitted for any reason unless permission is given by the University Lands Energy Representative. All vehicles must remain on existing roads at all times. Poorly maintained roads may not be traveled. ADVANCE NOTIFICATION to the University Lands Energy Representative is REQUIRED BEFORE ANY WORK IS INITIATED. A. Roads (Maximum 10-year term for roads requiring easements) 1. Road requiring an easement (non-exclusive use unless otherwise negotiated) 2. Road construction not requiring an easement (ingress/egress to own University oil and gas lease) Min. $30.00/rod Damages Min. $20.00/rod Min. $20.00/rod Rate & Damage Schedule 5

7 VI. PIPELINE EASEMENTS Any line which exclusively serves the oil and gas lease on which it is located does not require a separate easement. All other lines require easements. Pipelines must be removed at expiration of easement or lease. ADVANCE NOTIFICATION to the University Lands Energy Representative is REQUIRED BEFORE ANY WORK IS INITIATED. A. New Pipeline Easement (Maximum 10-year term) All Pipe Sizes are Nominal 1. Less than 4 Min. $8.00/rod 2. 4 to Less than 6 Min. $14.00/rod 3. 6 to Less than 12 Min. $30.00/rod to Less than 24 Min. $45.00/rod or Greater Min. $65.00/rod Damages* $6.00/rod $8.00/rod $11.00/rod $14.00/rod $14.00/rod *INCLUDES NORMAL DAMAGES FOR REMOVAL OF PIPE. B. Renewal of Pipeline Easement (Maximum 10-year term) All Pipe Sizes are Nominal 1. Less than 4 Min. $8.00/rod 2. 4 to Less than 6 Min. $14.00/rod 3. 6 to Less than 12 Min. $30.00/rod to Less than 24 Min. $45.00/rod or Greater Min. $65.00/rod Damages (Section VI. continued on next page) Rate & Damage Schedule 6

8 VI. PIPELINE EASEMENTS C. Maintenance of Pipeline Easement 1. Repair or replacement of pipeline (To avoid penalty, removal of replaced line from University premises required within 30 days) 2. Termination of easement Damages Same as VI. A. 1-5; See Page 6 ; included in VI. A. (Removal of pipe is required) 3. Remediation of leak/spill Min. $0.05/sq. ft. Rate & Damage Schedule 7

9 VII. UTILITY LINE EASEMENTS Utility lines and poles must be removed at expiration of easement or lease. Any line which exclusively serves the oil and gas lease on which it is located does not require a separate easement. All other lines require easements. ADVANCE NOTIFICATION to the University Lands Energy Representative is REQUIRED BEFORE ANY WORK IS INITIATED. A. New Utility Line Easement (Maximum 10-year term) 1. Less than 69,000 volts line capacity (maximum width 30 feet) 2. 69,000 volts line capacity but less than 138,000 volts line capacity (maximum width 60 feet) ,000 volts line capacity but less than 300,000 volts line capacity (maximum width 80 feet) ,000 volts line capacity but less than 345,000 volts line capacity (maximum width 145 feet) 5 345,000 volts line capacity and above volts line capacity (maximum width 180 feet) 6. Fiber optic or telephone line (line serving fewer than 100 end users) 7. Fiber optic or telephone line (line serving 100 or more end users) Min. $10.00/rod Min. $45.00/rod Min. $65.00/rod Min. $155.00/rod Min. $190.00/rod Min. $16.50/rod Min. $50.00/rod Damages $6.00/rod $17.00/rod $22.00/rod $53.00/rod $65.00/rod $6.00/rod $7.00/rod B. Renewal of Utility Easement (Maximum 10-year term) Damages 1. Less than 69,000 volts line capacity (maximum width 30 feet) Min. $10.00/rod 2. 69,000 volts line capacity but less than 138,000 volts line capacity (maximum width 60 feet) Min. $20.00/rod ,000 volts line capacity but less than 300,000 volts line capacity (maximum width 80 feet) Min. $30.00/rod ,000 volts line capacity but less than 345,000 volts line capacity (maximum width 145 feet) Min. $155.00/rod 5 345,000 volts line capacity but less than 500,000 volts line capacity (maximum width 180 feet) Min. $190.00/rod 6. Fiber optic or telephone line Rate & Damage Schedule 8

10 VIII. FRESH WATER AND BRINE CONTRACTS AND SALES* A. Water Sales Contracts (Maximum five-year term) 1. Water for municipal use 2. Water used for resale other than municipal use Min. $0.75/1000 gallon or 1/5 of highest actual selling price, whichever is greater B. Brine Sales Contracts (Maximum five-year term) 1. Brine used for any purpose Min. $0.06/barrel or 1/5 of highest actual selling price, whichever is greater * REQUIRED PAYMENT: (a) MINIMUM ANNUAL CONSIDERATION ON ANY WATER SALES CONTRACT: (1) $ FOR A LEASED AREA OF 1/4 SECTION OR LESS (2) $4.00/ACRE FOR A LEASED AREA EXCEEDING A 1/4 SECTION (b) MINIMUM ANNUAL CONSIDERATION ON ANY BRINE SALES CONTRACT IS $3, (Section VIII. continued on next page) Rate & Damage Schedule 9

11 C. Water Sales for Drilling and Completion Operators shall follow the Subchapter 6.4 Water Wells and Water Usage Board for Lease Rules. All water wells must have an identification plate. NEW ITEM: WATER FEES ARE BASED ON TOTAL MEASURED DEPTH INCLUDING HORIZONTAL SECTION OF THE WELLBORE. 1. Water used for drilling & completion of one oil or gas well on University Lands a. Less than 4,000 feet measured depth Min. $9,000.00/oil or gas well b. 4,000 feet to 7,999 feet measured depth Min. $15,000.00/oil or gas well c. 8,000 feet to 13,000 feet measured depth Min. $24,000.00/oil or gas well d. Greater than 13,000 feet measured depth Min. $42,000.00/oil or gas well 2. Water used for re-entry of plugged well a. Less than 4,000 feet measured depth MIN. $4,500.00/oil or gas well b. 4,000 feet to 7,999 feet measured depth MIN. $7,500.00/oil or gas well c. 8,000 feet to 13,000 feet measured depth MIN. $12,000.00/oil or gas well d. Greater than 13,000 feet measured depth MIN. $21,000.00/oil or gas well Rate & Damage Schedule 10

12 IX. SALT WATER DISPOSAL CONTRACTS (SWD) (Disposal of water produced from oil and gas operations) A. Operator of University Oil and Gas Lease Operates Water Disposal Well Located on the Lease - Pipeline Transport Only 1. University leases only (disposal of produced water from multiple University leases by single or multiple operators) 2. University and non-university leases commingled (disposal of water produced from both University leases and nonuniversity leases by one or more operators) Min. Prepaid $7,500 for 5 year term plus $0.05/bbl injected into the disposal well Min. Prepaid $12,500 for 5 year term plus $0.10/bbl injected into the disposal well Rate & Damage Schedule 11

13 X. ASSIGNMENTS, MERGERS, ACQUISITIONS, CONSOLIDATIONS AND NAME CHANGES A. Assignments Payment due before assignment occurs or by due date established by agreement. Easements must be assigned separately from oil and gas lease assignments and require University Lands consent. 1. Each commercial surface lease, easement, produced water disposal $ contract or water contract 2. Each additional contract $ B. Mergers, Acquisitions, Consolidations and Name Changes 1. Each commercial surface lease, easement, produced water disposal $ contract or water contract 2. Each additional contract $ XI. AMENDMENTS 1. Each commercial surface lease or easement $1, Rate & Damage Schedule 12

14 XII. PAYMENT INFORMATION A. All consideration and damage checks should be made payable to: THE UNIVERSITY OF TEXAS SYSTEM B. Unless otherwise noted in this schedule the minimums are as follows: Minimum is $ Minimum Damages are $ C. Payments should be delivered to University Lands: US Mail P. O. Box 553 Midland, TX Physical Address Telephone Contact 704 W. Dengar Ave. Midland, TX Midland Office Rate & Damage Schedule 13

15 XIII. UNIVERSITY LANDS REPRESENTATIVES P.O. Box 553, Midland, Texas Office: Energy Representatives Lazaro Acosta ( Crane & Pecos Counties Drew McEachern ( Andrews (Blk 1, 2 & 9-14) & Ector Counties Jeff White ( jeff.white@utsystem.edu) Crockett (Blk 29-33, 38-52, 55 & 56), Irion, Reagan (Blk 43, 48 & 49) & Schleicher Counties Doc Weathers ( dweathers@utsystem.edu) Andrews, Dawson, Gaines & Martin Counties (Blk 3-8) Daniel Bryant ( dbryant@utsystem.edu) Crockett (Blk 5-7, 12-14) Reagan (Blk 6-12, 58, 1 & 2) & Upton Counties Joe Petersen ( joe.petersen@utsystem.edu) Terrell County Michael Taylor ( mitaylor@utsystem.edu) Loving, Ward, Winkler, Culberson, El Paso & Hudspeth Counties Range and Wildlife Representatives Jeff White ( jeff.white@utsystem.edu) Crockett, Irion & Schleicher Counties Joe Petersen ( joe.petersen@utsystem.edu) Pecos, Reagan, Terrell & Upton Counties Drew McEachern ( dmceachern@utsystem.edu) Andrews, Crane, Culberson, Dawson, Ector, El Paso, Gaines, Hudspeth, Loving, Martin, Ward & Winkler Counties Cellular Cellular Easements and Commercial Leases Representative Midland Office Kenneth A. Polson ( kpolson@utsystem.edu) Surface Lease Inspections, Produced Water Disposal, Water and Cellular Brine Representative Jim Buice ( jbuice@utsystem.edu) Geophysical Permits Representative Midland Office James Holtzclaw ( jholtzclaw@utsystem.edu) Associate Director of Surface Interests Midland Office Richard Brantley ( rbrantley@utsystem.edu) Note: To maintain accuracy of contact information, staff will update Section XIII of the Rate and Damage Schedule as needed without providing advance notice to the Board of Regents. Rate & Damage Schedule 14

RATE AND DAMAGE SCHEDULE

RATE AND DAMAGE SCHEDULE THE UNIVERSITY OF TEXAS SYSTEM UNIVERSITY LANDS P.O. BOX 553 MIDLAND, TEXAS 79702-0553 (432) 684 4404 Website Link: http://www.utlands.utsystem.edu I. Well Locations and Oil & Gas Lease Appurtenances Page