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CONTRACT 1212A Other CLOSEDRev. 12- 24- 64- J.B.Co. 1-40 -320 SUBSURFACE OIL AND GAS LEASE THIS LEASE, made this 24th day of Juryo 19 66 by and between the parties whose names are subscribed hereto as Lessor on the signature page attached hereto, hereinafter called "Lessor" (whether one or more), and OCCIDENTAL PETROLEUM CORPORATION, a Corporation, hereinafter called "Lessee ". WITNESSETH 1. The Lands covered by this lease are all that portion lying below five hundred feet (500') from the surface of the land described on the Lessor's Signature Page attached hereto and is hereinafter referred to as the "leased land." Notwithstanding any provision to the contrary contained herein, this lease and all rights granted to Lessee hereunder are expressly limited to those depths lying below five hundred feet (500') from the surface of the land described on the Lessor's Signature Page, and Lessee shall not have the right to enter upon or use the surface of such land lying above said depth. 2. Lessor, for and in consideration of the sum of One Dollar ($1.00) and of other valuable consideration in hand paid, the receipt and adequacy of which is hereby acknowledged, and of the covenants and agreements hereinafter contained on the part of Lessee to be kept and performed, does hereby let, demise and lease unto Lessee, its successors and assigns the leased land now owned or hereafter acquired by Lessor, by operations of law or otherwise, with the exclusive and sole right to prospect, explore, mine, drill and operate the leased land for oil, gas and other hydrocarbon substances, hereinafter referred to as `said substances,' and to produce, take, treat, store, remove and to dispose of said substances from the leased land, and the right to inject into the leased land, gas, water or other fluids for purposes of pressure maintenance or secondary recovery of oil, gas and other hydrocarbon substances from the leased land and the right to conduct secondary recovery operations, together with all other rights necessary or convenient for any and all of said purposes including, but not limited to subsurface rights of way for drilling, repairing, redrilling, deepening, maintaining, operating, abandoning, reworking and removing wells, into and through said leased lands, and such other necessary subsurface easements in and through the leased lands. 3. This lease, except as otherwise herein provided, shall remain in force for a term of twe o¢� date hereof (hereinafter referred to as the "Primary Term "), and for so long thereafter (but not to exceecj��e4t>m the date hereof) as oil, gas or other hydrocarbon substances shall be produced from the leased land or land with which the leased land may be pooled, in quantities deemed paying by Lessee, or as Lessee shall conduct drilling operations (including, but not limited to, drilling, deepening, plugging back, redrilling, repairing, cleaning out and similar operations) on the leased land or land with which the leased land may be pooled, or shall be excused therefrom as hereinafter set forth; provided, however, that so long as Lessee shall continue to drill wells within the intervals permitted in Paragraph 9 hereof, Lessee shall be deemed to be conducting drilling operations within the meaning of this provision. 4. The expression "royalty share" as used hereinafter shall mean the fraction one -sixth (1/6) and all royalties shall be payable on a quarterly basis not later than the last day of January, April, July and October of each calendar year for the preceding calendar quarters ending December 31, March 31, June 30 and September 30, respectively. 5. Lessee shall pay to Lessor as royalty on oil the royalty share of all oil produced, saved and removed from the leased land. Lessee may purchase Lessor's royalty oil at the public posted market price currently offered and paid in the field in which the leased land is located for oil of like gravity and quality the day the oil is removed from gauging tanks. In the event there is no such public posted market price, Lessee may purchase Lessor's royalty oil at the same price the company or com- panies purchasing the majority of the oil in the field in which the leased land is located shall be paying for crude oil of like gravity and quality. In the event Lessee shall treat the oil produced for the purpose of making the same marketable, Lessor shall bear his royalty share, of the cost of treating such oil and for disposing of water or other waste materials by Lessee, which Lessee may deduct from any payments due Lessor. In determining the gravity, quality and quantity of oil purchased, the methods and practices including metering which are usual and customary among major oil purchasing companies shall be followed. The customary temperature corrections and deductions for injected oil, water and other substances shall be made. 6. In case of sale by Lessee of gas produced from said leased land in the natural state as produced, Lessee shall pay Lessor in cash the royalty share of the net proceeds of such sale received by Lessee. In case gas produced from said leased land is utilized by Lessee (in excess of the amount herein allowed to be used by Lessee free of royalty) in the natural state as produced, Lessee shall pay Lessor in cash the royalty share of the market value of the gas so utilized. In case Lessee delivers such gas to a third party for treatment, Lessee shall pay Lessor in cash (a) the royalty share of the market value of the net natural gasoline and /or net other liquefied petroleum gases redelivered to Lessee and utilized by Lessee (in excess of the amount herein allowed to be used by Lessee free of royalty) and (b) the royalty share of any net proceeds received by Lessee from the sale of natural gasoline and /or other liquefied petroleum gases redelivered to Lessee after deducting the royalty share of the cost of delivery for sale and (c) the royalty share of any net proceeds received by Lessee from the sale of residual dry gas redelivered to Lessee and (d) the royalty share of the market value of residual dry gas redelivered to Lessee and utilized by Lessee (in excess of the amount herein allowed to be used by Lessee free of royalty). In case Lessee shall extract in its own plant or facility on said leased land or elsewhere natural gasoline and /or other liquefied petroleum gases from the gas pro- duced from said leased land, Lessee shall pay Lessor in cash as royalty (a) the royalty share of 40% of the market value of the net natural gasoline and /or net other liquefied petroleum gases so extracted and utilized by Lessee (in excess of the amount herein allowed to be used by Lessee free of royalty) and (b) the royalty share of 40% of any net proceeds received by Lessee from the sale of the net natural gasoline and /or other net liquefied petroleum gases so extracted and sold by Lessee after deducting the royalty share of the cost of delivery for sale and (c) the royalty share of 60% of any net proceeds received by Lessee from the sale of residual dry gas and (d) the royalty share of 60% of the market value of residual dry gas utilized by Lessee (in excess of the amount herein allowed to be used by Lessee free of royalty). The market value of natural gasoline or other liquefied petroleum gases for the purposes hereof shall be the price as posted and generally paid by major processors for products of like specifications and quality effective in the same district on the date of extraction by Lessee or of redelivery to Lessee. The market value of gas in its natural state and residual dry gas for the purposes hereof shall be the price generally paid to Lessee by the major purchaser for gas of like specifications and quality effective in the same district on the date of delivery or redelivery to Lessee. Lessee shall have the right to deduct from Lessor's royalty on any gas produced hereunder the royalty share of the cost, if any, of compression for delivery, transportation and /or delivery thereof. Lessee shall have the right to commingle gas produced from said leased land with other gas and thereupon the royalty shall be computed upon an appropriate fraction of the commingled gas. Nothing in this agreement contained shall require Lessee to save, market or utilize gas from said leased land unless there be a surplus above lease requirements and a market at the well for same, nor shall Lessee be required to extract or cause to be extracted any products therefrom. —1— 12,2 Rev. 12- 24- 64- 7.B.Co. 1 -40 -320 7. Lessee shall not be required to account to Lessor for or pay royalty on oil, gas, natural gasoline, other liquefied petroleum gases, hydrocarbons, associated substances or water used by Lessee in its operations hereunder (including, without limiting the generality hereof), for fuel and /or lifting and /or injection purposes anywhere in said leased land, and gas or other substances used as fuel or lost or consumed in the gathering, compressing for processing and processing thereof and Lessee may use such oil, gas and other substances free of charge and same shall not be deemed to be "utilized" within the meaning hereof. In no event shall Lessee be responsible to Lessor for its failure or inability to save any of said substances, or for shrinkage or loss thereof, and royalty shall not be payable in respect to any of such substances lost through evaporation, leakage, fire or otherwise. In the event Lessee in its operations hereunder shall substitute other fuel or power for fuel obtained from said leased land, Lessee shall be entitled to deduct from the amount of the increased royalty accruing thereby to Lessor the royalty share of the cost of such other fuel or power, provided that no deduction hereunder shall in any event exceed the amount of such increased royalty. 8. Lessee agrees to commence drilling operations on the leased lands or lands pooled therewith within said primary term and to prosecute such drilling operations with reasonable diligence until oil or gas is found in paying quantities, or to a depth at which further drilling operations would, in the judgment of Lessee, be unprofitable or impractical t may at any time within said primary term terminate this lease and surrender said lands; provided that, commencing f7M� years from the date hereof, if Lessee has not therefore terminated this lease or ommenced drilling operations, ee shall pay or tender yearly in advance, as rental to Lessor,One ilL� d red and 00ALM - • '" "' -' sonars until operations have been commenced on leased lands or lands pooled therewith. Should Lessee elect to commence drilling opera- tions on leased lands or lands pooled therewith, and if oil, gas or other hydrocarbons shall not be obtained in paying quan- tities in such well, and such well is abandoned, Lessee shall: Commence drilling operations on said leased lands or lands pooled therewith for another well within six (6) months after the completion as a dry hole or the abandonment of the last preceding well and prosecute such drilling operations with reasonable diligence until oil, gas or other hydrocarbons shall have been found in paying quantities by Lessee, or until further drilling would, in the judgment of Lessee, be unprofitable or impracticable; or terminate this lease; or Lessee may defer the commencement of further drilling operations (except offset wells) during any period for which rentals have theretofore been paid or until six (6) months after the abandonment of the last preceding well, whichever is later, and so long thereafter as Lessee continues the payment of rentals annually on a pro rata basis and in the manner and at the rate above provided, but in no event shall the commencement of drilling operations be deferred beyond the expiration of the primary term by the payment of such rentals. The consideration expressed in Paragraph 2 above covers all rental for the first one (1) years of the primary term hereof. 9. Within six (6) months after the completion and testing of a well producing oil in quantities deemed paying by Lessee, Lessee shall commence drilling operations for another well for oil or gas, and thereafter continuously operate one string of tools, allowing six (6) months (subject to extension as provided in this lease) between the completion or abandonment of one well and the commencement of drilling operations for the next succeeding well until one well has been drilled for each forty (40) acres, or major fraction thereof, of the leased land or land with which the leased land may be pooled; provided, however, that if and when drilling on the leased land or lands with which the leased land may be pooled shall indicate that oil cannot be produced therefrom in quantities deemed paying by Lessee but that gas can be produced in quantities deemed paying by Lessee, the obligation of Lessee hereunder shall be to drill only one (1) well for each one hundred sixty (160) acres, or major fraction thereof; the number of wells to be an average of one (1) to forty (40) acres for oil wells and one (1) to one hundred sixty (160) acres for gas wells, regardless of where drilled. Lessee shall be given credit for so much of the time in each such six (6) months drilling interval as is not utilized because of drilling by Lessee sooner than required and such credit may be used to extend subsequent drilling intervals in such manner as Lessee may determine. Lessee may drill as many additional wells as it may elect in excess of the number hereinabove specified. Lessee shall not be obligated to use more than one (1) string of tools for drilling on the leased land or lands with which the leased land may be pooled. 10. Definition of "paying quantities" as used in this lease shall mean production that in Lessee's opinion assures to Lessee a reasonable profit over and above the cost of drilling and producing such well including royalties, taxes and other charges in respect thereto. 11. In the event a well is drilled and completed upon adjacent property in which Lessor has no interest and the producing interval of such well is located within 330 feet of the exterior boundaries of the leased land and oil or gas in paying quantities is produced therefrom, Lessee agrees providing it is not then drilling or has not theretofore drilled in the leased land an offset thereto, within six (6) months after production of oil or gas in paying quantities from said well, if said well is then still producing oil or gas in paying quantities, either to offset such well by the formation of an operating unit under Paragraph 29 hereof and the commencement of drilling operations hereunder, or to surrender and terminate this lease under the provisions of Paragraph 17 hereof as to a portion of the leasehold, no dimension of which portion shall be less than 330 feet. 12. Lessee may commingle oil produced from any operating unit or units created under the provisions of Paragraph 29 hereof with oil produced from any other operating unit which is producing from the same pool or structure and located in the vicinity thereof. For the purpose of accounting hereunder, the quantity of oil produced and saved from each operating unit shall be determined on the basis of gauges or meter readings and adjusted to conform to the shipping tank measurements of the commingled oil. Lessee shall take samples and make tests of the oil produced and saved from each operating unit or units prior to commingling and such samples and tests shall be the basis of determining the gravity and water, sand and other foreign substance of such oil. 13. After completion of the first well herein required, there shall be no obligation upon the part of Lessee to drill in or produce from and operate the leased land, except as to offset wells when wells offset are being operated, so long as the market price in the field for oil of the quality and gravity produced on said property shall be One Dollar and Fifty Cents ($1.50) or less per barrel at the well. Lessee may at any time and from time to time suspend the production of gas from the leased land, but for any period during which such production is entirely suspended, oil not having been discovered in quantities deemed paying by Lessee in the leased land, Lessee shall pay to Lessor quarterly in advance, commencing on the first day of the month following such suspension, as advanced royalty, the sum of Twenty -five Cents (250) per acre on the leased land then covered by this lease and Lessee shall have the right to reimburse itself for any such payment out of one -half (% ) of any royalties which shall thereafter become payable hereunder. Such production may not be suspended, however, when there is a market for the gas in the field at a price which will pay Lessee to drill for and produce the same with a reasonable profit. 14. Lessee agrees to perform all operations in a careful, workmanlike manner and in accordance with the laws of the State of California. Lessee further agrees that any and all structures erected in connection with its drilling operations shall be designed —2— �212A Rev. 12- 24- 64- J.B.Co. 1 -40 -320 to be noise -proof and fireproof, and that the latest techniques and refinements in equipment and material shall be used. All drill -sites from which drilling operations are conducted will be fenced and screened. Lessee will remove the derrick used in connection with drilling operations at the cessation of such operations and all permanent production facilities will be buried in cellars or screened from view. Lessee shall keep full records covering the production and sale of gas, oil and natural gasoline from the leased land, and such records shall be open at all reasonable times to the inspection of Lessor or Lessor's duly authorized representative. 15. Lessee agrees, subject to the other provisions of this lease, to operate each completed oil or gas well with reasonable diligence and in accordance with good oil field practice so long as such well shall produce oil or gas in quantities deemed paying by Lessee; provided, however, that Lessee shall not be obligated to remove any oil, gas or other hydrocarbon substances produced from the leased land by any means other than a subsurface line. Lessee will not use trucking facilities to remove oil, gas or other hydrocarbon substances except during the drilling and testing periods of each well. 16. All the labor to be performed and materials to be furnished in the operations hereunder shall be at the sole cost and expense of Lessee, and Lessor shall not be chargeable with, nor liable for, any part thereof, and Lessee shall keep said land duly and fully protected against all liens of every character arising from or connected with its operations. Lessor hereby grants unto Lessee full power and authority to do and perform all and every act and thing necessary or appropriate to be done to protect said leased land against all liens of every character arising from or connected with its operations, including the right to post a Notice of Non - Responsibility on behalf of Lessor. 17. In consideration of the payment made by Lessee to Lessor for the execution of this lease, it is agreed that Lessee may at any time, or from time to time, either before or after discovery of oil in the leased land, quitclaim this lease, either in its entirety or in part, and thereupon Lessee shall be released from all further obligations as to the part or parts so quitclaimed, and all rentals and drilling obligations as set forth in this lease shall be reduced pro rata according to the amount of acreage so quitclaimed by Lessee; it being particularly understood, however, that all leased lands so quitclaimed shall remain subject to — and Lessee shall have the right to use and enjoy —such subsurface rights of way and easements through the quitclaimed portion of the leased land as may be necessary or convenient, in whole or in part, for Lessee's operations in the leased land retained under this lease or other lands whether or not pooled with the leased land; provided, however, that any well drilled through any such quitclaimed portion of the leased land shall have no part of its producing interval in such quitclaimed portion. 18. Lessee shall pay all taxes levied on its improvements and personal property. Lessor shall pay all taxes and assessments on the leased land, exclusive of Lessee's mineral rights therein, and on all other improvements and personal property thereon. All increase in the taxes and assessments on the leased land or, if Lessee shall have quitclaimed a portion thereof, on such part thereof as is retained by Lessee under this lease, caused by or resulting from the discovery or production of oil, gas or other hydrocarbon substances thereon and therefrom, whether assessed upon the leased land as a whole or as mineral rights or otherwise, and all charges and taxes of whatsoever kind or collected by reason of the production, sale or removal of oil, gas or other hydrocarbon sub- stances from the leased land shall be borne by the parties hereto in the proportion of the royalty share by Lessor and the remainder by Lessee. If Lessor shall fail to pay any taxes, assessments or charges required to be paid by Lessor, Lessee may at its option pay the same and in such event Lessee may reimburse itself for such taxes, assessments or charges so paid by it from any royalties or rentals accruing hereunder. 19. On the expiration of this lease, or its sooner termination, Lessee shall quietly and peaceably surrender possession of the leased lands to Lessor, and shall cause a good and sufficient quitclaim deed to be placed of record in said County. 20. In case of default in performance by Lessee of any of its obligations under this lease, and the failure to commence to remedy the same within ninety (90) days after receipt of written notice so to do signed by parties owning a majority of Lessor's interest or in the event the leased land is pooled with other lands as provided in paragraph 29 hereof by parties owning a majority of the landowners' interest in all the lands so pooled, specifying the particulars in which it is claimed Lessee is in default and thereupon to continue such remedying with reasonable diligence to completion, then at the option of Lessor all rights of Lessee under this lease shall forthwith cease and terminate except that Lessee shall have the right to retain all wells then producing or in the course of drilling or having work done on them, as to which Lessee is not in default, together with forty (40) acres surrounding the producing interval of each well producing or being drilled for oil or one hundred sixty (160) acres surround- ing the producing interval of each well producing or being drilled for gas with full right to drill new wells on the lands so retained and to operate, produce, redrill, deepen or plug back to any depth, and to perforate casing at any depth believed to be in an oil or gas zone, and properly to maintain all such wells subject to all provisions of this lease, so long as such wells respectively shall produce oil or gas in quantities deemed paying by Lessee. Temporary discontinuance of production from any well in order to work on such well, or cessation of production in any well which is followed by work on such well diligently conducted to restore production therefrom shall not be deemed to be an end of producing from such well within the meaning of this paragraph. Forfeiture of rights in this paragraph provided shall be the exclusive remedy of Lessor for the breach of any obligations hereunder except the obligations of Lessee to make payment of rentals or royalties. 21. Notwithstanding anything in this lease contained to the contrary, it is expressly understood and agreed that the obligations of Lessee hereunder shall be suspended so long as and to the extent that Lessee is prevented or hindered from complying with such obligations in part or in whole by the elements, accidents, strikes, lockouts, riots, delays in transportation, inability to secure materials in the open market, acts of war or conditions attributable to war or compliance by Lessee with federal, state, county, municipal or other governmental agency regulations, rules or orders including but not limited to failure or refusal to grant land use or operating licenses or permits, or with proration or curtailment regulations of authorities constituted by law, or other causes beyond the reasonable control of Lessee, whether similar or dissimilar to the foregoing. This lease shall remain in full force and effect during any suspension of any of Lessee's obligations under any provisions of this paragraph and for a reasonable time thereafter, provided, that after the removal of the cause or causes preventing or hindering the performance of such obligation, Lessee diligently commences or resumes the performance of such obligation. Lessee shall have the right to join in the execution of and to comply with the voluntary agreement of producers representing a majority of the production in the district in which the leased land is located with respect to proration or curtailment of production in said district, provided such agreement is not contrary to law or to comply with any laws, regulations or governmental orders with respect to any such proration or curtailment of production. Whenever Lessee is required to make a payment or suffer termination of this lease as to any of the lands included hereunder as an alternative to commencing drilling operations, then, so long as the obligation to commence drilling operations is suspended by any provision of this paragraph, Lessee shall not be required to make such payment nor shall this lease be terminated. If before Lessee may commence drilling operations in the leased land it must secure a permit therefor or approval thereof in any form from any federal, state, county or municipal body or agency, than if Lessee shall have applied for such permit within sixty (60) days prior to the date upon which such drilling operations must be commenced under -3- 1212A . . Rev. 12- 24- 64- J.B.Co. 1 -40 -320 the terms of this lease to avoid a forfeiture or termination thereof, the obligation to commence such drilling operations shall be suspended until such time as such permit is granted, or in the event such permit is denied so long as Lessee shall in good faith and with due diligence conduct proceedings appealing from such denial, for a period of thirty (30) days thereafter; provided, however, that in no event shall such obligation be suspended under this paragraph beyond a period of one (1) year from the time upon which such drilling operations should otherwise have been commenced. 22. "Drilling operations" as used in this lease is defined to mean any work or operations for the actual purpose of drilling a well hereunder including but not limited to operations commenced on other land in preparation of the ground therefor and the building of roads and facilities, provided the same be followed by the construction or erection of a derrick, the installation of drilling equipment and actual drilling in other land, for a well or wells to be slant drilled into leased lands or lands pooled with leased lands and that all such work be prosecuted diligently. 23. In the event that the leased land is less than the entire fee interest in the lands described, or if mineral rights only are leased and less than the entire mineral rights are covered, then the royalties herein provided for shall be paid Lessor only in the proportion which Lessor's interest bears to the entire undivided fee interest in the land as a whole or in the mineral rights therein. If it develops that Lessor owns less than the interest purported to be leased hereby, then the rentals herein provided for shall be paid Lessor only in the proportion which Lessor's interest bears to the interest purported to be leased hereby. If Lessor owns a greater interest in the lands described than is purported to be leased hereby or hereafter acquires any additional interest or title in the lands described, by operation of law or otherwise, then this lease shall cover such greater or additional after - acquired interest or title, and Lessor agrees to give Lessee written notice of any such acquisition as soon as the same is made, in which event the rentals and royalties payable to Lessor shall be increased proportionately. 24. Lessor hereby agrees to defend Lessor's title to the leased land and agrees that Lessee, at its option, may pay and dis- charge any taxes, mortgages or other liens existing, levied or assessed on or against the leased land and, in the event it exercises such option, it shall be subrogated to the rights of any holder or holders thereof and may reimburse itself by applying to the discharge of any such mortgage, tax or other lien, any royalty or rentals accruing hereunder. Lessee, at its option, shall have the right to defend any suit brought attacking Lessor's title to the leased land, or to bring a quiet -title action in Lessor's name to validate Lessor's title thereto or in its own name to validate Lessee's title to the leasehold created hereby and in such case Lessor agrees fully to assist and cooperate with Lessee in any such action. The reasonable cost and expense of any action to defend or validate Lessor's title shall be deductible by Lessee from monies becoming due to Lessor hereunder. This lease shall be subject to the lien of any mortgage or deed of trust hereafter executed by Lessor, his successors or assigns, to secure a bonafide loan or renewal of any such loan and Lessee agrees to execute and deliver all such documents as may be reasonably required in order to assure further such subordination of this lease. 25. If the estate of either party hereto is assigned or conveyed (and the privilege of assigning in whole or in part is expressly allowed), the rights and obligations created hereby and the covenants hereof shall extend to and be binding upon such party's assigns or transferee, and the party so assigning or transferring such interest shall thenceforth be released from all obligations hereunder to the extent of the interest so assigned or transferred, but no change of ownership in the land or in the rentals or royalties shall be recognized by Lessee until Lessee has been furnished with written notice of such transfer or assignment, with evidence thereof satisfactory to Lessee, which notice shall designate in writing the address to which checks covering payments affected by such change shall be mailed. If this lease shall be assigned to as a particular part or as to particular parts of the leased land, such division or severance of the lease shall constitute and create separate and distinct holdings under the lease of the several portions of the leased land as thus divided, and the holder of each such portion of the leased land shall be required to comply with and perform the Lessee's obligations under this lease for, and only to the extent of, his portion of the leased land; provided that nothing herein shall be construed to enlarge the drilling or rental obligations, and provided further that the commencement of the drilling operations and the prosecution thereof, as provided in Paragraph 8 hereof, either by the Lessee or any assignee hereunder, shall protect the lease as a whole. 26. All statements of production and royalty and all payments to be made by Lessee to Lessor hereunder shall be sent to the persons whose names are hereunto subscribed as Lessor on the Signature Page attached hereto, respectively, at the addresses shown thereon. Lessee shall, upon notification of change of ownership in the lands or in rentals or royalties hereunder, as provided in Paragraph 25 hereof, divide and distribute the same to the new owners of such interests; provided, however, that at any time after royalty becomes payable hereunder, Lessee may, at its option, withhold payment of such rentals or royalties until parties owning a majority of Lessor's interest designate in writing a recordable instrument delivered to Lessee, a bank, trust company or corporation in California, as a common agent and depository, to receive all payments due hereunder to such persons. Such designation may be changed at any time in the same manner. Delivery of all statements and payments hereunder may be made by depositing the same in the United States mail duly addressed to Lessor at the above address or addresses or to such agent and depository which shall constitute full performance of Lessee's obligation to make such delivery. In the event that the amount payable under this lease shall result in a payment of less than Twenty -five Dollars ($25.00) becoming due Lessor, Lessee may, at its option, withhold and accrue sufficient periodic payments until the total due Lessor exceeds Twenty -five Dollars ($25.00). 27. Lessee may give any notice or deliver any document hereunder to Lessor in person or by delivering the same by mail addressed to Lessor at the address shown on the signature page attached hereto. Any notice from Lessor to Lessee shall be given by sending the same by mail addressed to Lessee at 5000 Stockdale Hwy., Bakersfield, Calif. All notices so given by mail shall be deemed delivered when deposited in any United States Post Office in the State of California. Either party may at any time by appropriate written notice to the other change the address to which that party's notices are to be sent. 28. For the consideration paid at the time of execution of this agreement and without any additional consideration to be paid therefor, Lessor hereby grants to Lessee and its assigns the exclusive easement and right to drill into and through the leased land, by means of a well or wells drilled from surface locations outside the leased land together with the sole and exclusive right to repair, redrill, deepen, maintain, rework and operate such wells and produce oil, gas and other hydrocarbons from such wells which may be drilled into or through the leased land or into other land, whether or not pooled with the leased land; such subsurface rights -of -way, easements and servitudes to continue for the duration of this lease and thereafter as hereinafter provided. If Lessee shall assign to any third party or parties such subsurface rights granted to Lessee under this paragraph, the said subsurface rights of Lessee shall not thereby be diminished, in such event both Lessee and its assignee shall have, hold and enjoy said rights, each independently of the other. The subsurface rights of Lessee and of each assignee of Lessee under this paragraph shall continue after the expiration, surrender, forfeiture or other termination of this lease for a period of twenty (20) years from the date of this lease and so long thereafter as oil, gas or other hydrocarbon substances are produced by means of any such well or as drilling, redrilling or remedial --- 4 - 1212A, Rev. 12- 24- 64- I.B.Co. 1 -40 -320 operations are being conducted with respect to any such well. Lessee and each such assignee utilizing any such rights after the expiration, surrender, forfeiture or other termination of this lease shall pay to Lessor a rental for each well subsequently maintained by it under or through the leased land at the rate of One Dollar ($1.00) per annum per foot of the horizontal projection (computed to the nearest foot) of the surveyed course of the part of the well of such Lessee or assignee lying within the confines of the leased land, the rental with respect to any such well to commence on the completion thereof and to continue until such well is abandoned in accordance with the requirements of the State of California; provided, however, that Lessor shall not be entitled to receive any rental under the provisions of this paragraph during such times as Lessor is entitled to receive royalty or rentals under other provisions of this lease. During the term of this lease, Lessor shall not grant any subsurface rights of way, easements or servitudes in and to the leased land in respect to the drilling for or the production of oil, gas, hydrocarbons and associated substances to any other person, firm or corporation without the written consent of Lessee. 29. Lessee is hereby given the right at its sole option, by a written declaration of pooling, at any time or from time to time, to combine or pool all or any part of the leased land with all or any part of any other tract or tracts of land, so as to create by such combining or pooling one or more operating units for the development and production of oil, gas and other hydrocarbon substances. Any such operating unit shall not exceed three hundred and twenty (320) contiguous acres in area; provided, however, that any such operating unit may nevertheless include all or any part of the lands within any oil drilling district which embraces the leased land and which may be established by any federal, state, county or municipal body or agency acting by and pursuant to any present or future law, ordinance, rule or regulation; and provided further that such operating unit and leased land shall be subject to all of the provisions and conditions of any such oil drilling district and any present or future laws, ordinances, rules or regulations of any federal, state, county or municipal body or agency. The designation of such operating unit shall be made prior to thirty (30) days after the completion of a well capable of producing oil or gas from the lands within the operating unit, but in no event shall such unit be created later than twenty (20) years from the date of this lease; and such designation shall define the area which shall constitute such operating unit. In the event and as soon as any such operating unit is so created, Lessee shall promptly record in the office of the county recorder of the county in which the leased land is situated such written declaration of pooling, and Lessee shall give written notice of such pooling, and Lessee shall give written notice of such pooling to Lessor. In the event Lessee shall acquire an Oil and Gas Lease covering any interest in any land within the boundaries of any such unit, then such Lease and the rights covered thereby shall be included in such unit providing such Lease authorizes such inclusion and Lessee has recorded such Lease with the County Recorder in the County wherein such unit is situated. Such unit, as theretofore created by such Declaration of Pooling, shall be considered as amended to cover such Lease. In the event of such pooling, then, in lieu of computing royalties upon substances produced from the leased land as provided in Paragraphs 4, 5 and 6 hereof, Lessor's royalty shall be computed and paid upon the value of the total of oil, gas and other hydrocarbon substances produced, saved and sold by Lessee from such operating unit or units, in the proportion that the amount of said leased land included in such unit bears to the total land in such unit; and in lieu of the taxes provided to be borne by Lessor under Paragraph 18 hereof, Lessor shall bear the royalty share of such taxes on land in such unit and taxes on the production therefrom in the same proportion as production is allocated to said leased land included in such unit. For the purpose of determining drilling obligations for such unit, which shall be equal to the drilling obligations set forth hereinabove in this lease, the entire land within such unit shall be treated as if it were covered by one lease, and the drilling of a well into such unit, whether or not in said leased land, shall fulfill Lessee's drilling obligations under this lease to the same extent as if such well were drilled in said leased land, and no offset obligations shall accrue with respect to the several tracts of land which have been pooled within the same operating unit. Upon the pooling of less than all of the leased land, as hereinabove provided, this lease shall be severed, and leased land included in such unit and leased land not included in such unit shall be segregated and constitute separate and distinct leaseholds, and the performance of the obligations of one such separate leasehold shall validate that one regardless of any default in the other separate leasehold. Lessee may, at any time, quitclaim to the persons entitled thereto all or any part of the land included within such unit, and thereupon Lessee shall be released from all further obligations with respect to land so quitclaimed, and all drilling requirements with respect to lands included within said unit shall be reduced pro rata, and any such quitclaim covering any such land, other than said leased land, shall have the same force and effect, for the purpose of clearing title to the quitclaimed land, as if Lessor had joined in such quitclaim. The division of royalties from such unit between each Lessor and other owners of interest in such unit shall, after the discovery of oil or gas in paying quantities, not be changed, altered or affected notwithstanding any subsequent surrender or quitclaim or forfeiture of any land in such unit, save and except land surrendered because of lack of good and merchantable title; provided, however, that in the event the leased land or any part thereof, after surrender or quitclaim or forfeiture shall be made subject to any other oil or gas lease or a well be commenced thereon for oil or gas, then such of the above described leased lands so surrendered or quitclaimed or forfeited shall thereupon and forever thereafter be excluded from participating in the benefits accruing from such unit, but Lessee shall not be held responsible or accountable for payments made without actual knowledge of the execution of any such other oil or gas lease or the drilling of any well for oil or gas in such quitclaimed, surrendered or forfeited land. Lessee may, at its sole option, at any time when there is no production from such unit of oil or gas in quantities deemed paying by Lessee, terminate such operating unit by a written declaration thereof, in the same manner in which it was created. Upon the termination of any such operating unit, if only a part of the leased land was included therein, this lease shall no longer be considered as a separate and distinct lease, and the effect of such termination shall be to return this lease to the status in which it was immediately prior to the creation of such operating unit as though no operating unit had been created. 30. This agreement may be executed in any number of counterparts with the same force and effect as if all parties signed the same document. The execution hereof by any person named as Lessor herein shall bind such person's interest whether or not any other person named as Lessor herein shall execute the same. 31. The entire agreement between the parties is set forth in this lease, and no covenant or agreement, express or implied, other than those set forth in this lease, shall be binding upon either of the parties hereto except insofar as this lease may subsequently be modified by written agreement of the parties. 32. In the event leased land is pooled under Paragraph 29 hereof, the benefits of Lessor including rent and royalty accruing under the provisions of Paragraph 29 hereof are appurtenant to the leased land of Lessor, and any transferee or subsequent owner of the title to the leased land of Lessor shall be entitled to receive such appurtenant benefits under Paragraph 29 hereof, except to the extent that such benefits shall be expressly reserved or shall have been theretofore transferred in whole or in part. A reservation or exception of all or any specified portion of the minerals or oil or gas or other hydrocarbon substances in any instru- ment shall constitute, for the purpose of this agreement, a reservation or exception of all or such specified portion of the appurtenant benefits under Paragraph 29 hereof. Page — 5 — Q fonoWs 1212A 32L. Notwithstanding anything contained herein to the contrary, it is expressly understood# 1. The maximum terse of this lease is thirty -five (35) years. 2. In the event a lease or leases are executed covering t lands in the City of El Segundo owned by the are more favorable to the landowner than those contained in the lease covering the lands awned by the City of El Segundo, the more favorable provisions shall automatically be deemed a part of the lease between the City of El Segundo and Occidental. Occidental will agree to execute arq further letters or instru- m uts reasonably requested by the City to evidence the incorpora- tion of the more favorable provisions into the City's 1e88e. 3. If oil and gas production is obtained in quantities within the CVW of El Segundo, Occidental will pool, combine or unitize the entire area proven to be productive of oil and gas. 4. Occidental will market the City's royalty share of aid and gas on the same terms and conditions and for the same price* in the event Occidental elects to purchase the City's royalty share of oil and gas, Occidental agrees to pay therefor the public posted market price currently offered and paid at the field in which the City's :land is located, or if there is no independent public posted market prig for such field, then at the public posted market price currently offered and paid in adjoining or nearby fields for oil of like gravity and quality. 5. Notwithstanding the provisions of Paragraph 9 regarding the density of wells* Occidental agrees to drily and complete such wells as my reasonably be required to fully develop the field in accordance with sound engineering and oil field practice, 6. That in executing this lease lessor makes no v arrsnty of title and shall not be liable or responsible, directly or indirectly in any #Vent, amount, or degree, under or by reason of its execution of this lease. -I%- 12 1 R2v.' 12 -;4 -6� J.�.Co. 1-4b -320 33. The Lessor has executed an extra copy of the Lessor's Signature Page attached to this lease, and it is hereby agreed that such Lessor's Signature Page may be attached to an identical copy of this Subsurface Oil and Gas Lease, together with other signature pages from other identical oil and gas leases executed by other lessors, for the sole purpose of recording the same in the Official Records of the county wherein said leased lands are situate, it being expressly understood that the attaching of such Signature Page to a similar lease shall not constitute a pooling or combining of the leased land with any other land. 34. Subject to the provisions hereinabove set forth, this lease and agreement shall be binding upon and inure to the benefit of the heirs, administrators, successors and assigns of the respective parties hereto. IN WITNESS WHEREOF, the parties hereto have caused this lease to be executed the day and year first above written OCCIDENT PETROLEUM CORPORATION By -- . -- • ........................................................ Its Attorney -in -Fact LESSEE STATE OF CALIFORNIA, COUNTY OF... LO5 ANGELES SS. ONTHIS ....._2.4th--------- day of ......--•-------• •••J� .................... . ..... ..................... -- - - -• -- 19.. _, before me, Ter> y.E� -. Rutl® dge ..... ..... ...... .................... a Notary Public in and for said County and State, residing therein, duly commissioned and sworn, personally appeared .........R•. W, --- R.UCE ...... ........................... -- known to me to be the person who executed the within instrument on behalf of OCCIDENTAL PETROLEUM CORPORATION, the corporation therein named, and whose name is subscribed to the within instrument as the Attorney -in -Fact of said corporation, and acknowledged to me that he subscribed the name of said corporation thereto as principal, and his own name as Attorney -in -Fact and acknowledged to me that such corporation executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. _ 1 Notary Pu lic in and fo said County and State. February 28, 1967 i DG My Commission expires - - -- ------------ DP.NIA n -- 6 — IN LE-1�� � JviY � Rev. 4- 1- 66- J.B.Co. 12 12 /t 1 -40 -320 LESSOR'S SIGNATURE PAGE TO SUBSURFACE OIL AND GAS LEASE DATED .• -- -�`-4� - --- ENTERED INTO WITH OCCIDENTAL PETROLEUM CORPORATION. ALL THAT CALIFORNIA, LYING BELOW LANDS, O STATE OF IVE HUNDRED FEET (500') FROM THE SURFACE OF ------------_----------- ----- - - - - -- --------------------------------------------------------------------------------------- That portion of Lot "C ", TEi.�CT No, 18260 ]ying East of the Southerly prolongation of the East line of Main Street as said street is shown on the recorded official map of said Tract No. 16260 As per map recorded in Book ._. (s ) ......... 9.3_______ ____ ___ __ __ of Maps, Records of said County, �,1. ._....., Pa g e including any interest of Lessor in waterways, ditches, sloughs, canals, dikes, levees, roads, streets, alleys and railroad rights -of -way or easements upon or adjoining the above described land. WITNESS LESSOR O� -- - - - - -- ------- - - - - -- CT 7e- go - e -r- SGUZ!IDI.I z -- Y.r .....pity.. x3E --------------------------------------------- .......................................... MAILING City CC1erk ADDRESS: -- .......Q �.tty .. ±..t .............. - 350 Main Street .......... F...- SQglaDdps ... alifqrnia- - - - - -- STATE OF CALIFORNIA SS. COUNTY OF On ------------------------•---_----_-- __--- __- .__.-- __--- .-- __ - -. -, before me, the undersigned, a Notary Public in and for said State, personally appeared -------------------------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------...--------------......------------------------------------------------------------------- - - - - -I ---------- - - - ............................................. -- - known to me to be the person(s) whose name(s) is (are) subscribed to the within instrument an acknowledged that he (they) executed the same. WITNESS my hand and official seal. . _.. ----••------------------- .................................................................. Public. STATE OF CALIFORNIA ss. COUNTY OF On .................................. .................... ........... before me, the undersigned, a Notary Public in and for said State, personally appeared _______________________________________________ _______ _____ _________________I personally known to me to be the same person whose name is subscribed to the within instrument as a subscribing witness thereto who being by me duly sworn, deposed and said that he resides in the County of .................... ............................. .. State of California, that he was present and saw ................................................................... ............................... -- ----------------- •--- •---- •-- •- •- •- ••---- _... -- ---••---------------'-•--•---•-----•--••---•-----•--•-•-•-•---------•------------•--- •- •••------------- ••----- .._••I personally known to him to be the same person(s) described in and whose name(s) is (are) subscribed to the within instrument as a (the) party (ies) thereto, sign and execute the same; and that he, the affiant, then and there subscribed his name to said instrument as a witness. WITNESS my hand and official seal. ................... -------------------------------•----------------- .......................... Public. Form 6248 Department of the Treasury Internal Revenue Service Producer or Other Recipient Annual Information Return of Windfall Profit Tax -1983 Name, address, and ZIP code City of El , do City Clerk. City Han i�l meet El seVzOo, CA. =45 Employer identification no. (EIN) I Social security no., if no EIN Filer Name, address, and ZIP code Coopw � a , ca. 90748 OMB No. 1545 -0224 Copy C —File with the Producer or Other Recipient Employer identification no. (EIN) I Social security no., IT no un If you have received a Form 6248 from another person concerning oil reported on this Form 6248, enter the name and employer identification number of that person below. Name PART I.— Producer or Other Recipient Employer wemnncanon numuci 1 Type of Producer (check all applicable boxes): ❑ Individual ❑ Trust IA Corporation 110 U.S. citizen or entity, or resident alien ❑ Partnership ❑ Estate ❑ Resident of U.S. Possessions ❑ Foreign citizen or entity, or non - resident alien 2 Producer Status (check all applicable boxes): X1 Independent producer ❑ Member of "related group" ❑ Royalty owner ❑ Trust beneficary ❑ Integrated oil company ❑ Producer with no withholding Working interest Tier three c. PART II.— Exempt Oil a. Tier one i b. Tier two 1 Number of barrels of exempt oil (do not include exempt stripper well oil) . 2 Total (add amounts on line 1) . . . . . . 3 Type of exempt oil (check applicable boxes): 4 Total barrels of exempt stripper well oil (see instr PART III.— Exempt Royalty Owner Oil Total number of certified barrels (3) Heavy ❑ Qualified governmental interests ❑ Qualified charitable interests ❑ Exempt Indian oil ❑ Exempt Alaskan oil — ictions) . . . . . . . . _ I a. 1st quarter I b. 2nd quarter I c. 3rd quarter d. 4th quarter 1 Barrels removed in calendar quarter . . . . . . . I 2 Total (add amounts on line 1 a through d) . . PART IV.— Taxable Crude Oil Removed During 1983 a. Number of barrels I b. Tax liability 1 Tier one, other than Sadlerochit oil, taxed at 70% . . . . . . . . . . . . . . . 2 Tier one, other than Sadlerochit oil, taxed at 50% . . . . . . . . . • • • . 3 Tier one Sadlerochit oil taxed at 70% . . . • • • . . . • • • • • • • . . 4 Tier one Sadlerochit oil taxed at 50% . . . . . . . . . . • • • • • . 5 Tier two oil taxed at 60% . . . . . . . . . . . . . . . 6 Tier two oil taxed at 30% . . . . . . . . . . . . . . . . . . . . . . . 7 Newly discovered oil . . . . . . . . . . . . . . . . • . • • • • • . 8 Incremental tertiary oil . . . . . . . . . . . • • • • • • • • • • • • 9 Heavy oil . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Total barrels of oil (add amounts in column a) . . . . . • • • . . . • • • • 11 Amount of windfall profit tax liability for oil removed during 1983 (add amounts in column b) . . . . . . 12 Amount of windfall profit tax withheld with respect to oil removed during 1983 . . . . . . . . . . 13 If line 11 is greater than line 12, subtract line 12 from line 11. This is the amount of underwithheld windfall profit tax • • • • ' ' ' ' ' ' ' ' ' ' ' ' . . 14 If line 12 is greater than line 11, subtract line 11 from line 12. This is the amount of overwithheld windfall prof it tax PART V.— Amount of Windfall Profit Tax Withheld from Payments Made in 1983 1 Windfall orofit tax withheld from rments made in 1983 (regardless of when windfall profit tax liability arose) I 47.33 For Paperwork Reduction Act Notice, see the instructions on back of Copy A. Form 6248 (1983) partners is a partnership, that partnership(s) must file Copy A with the IRS and issue Copy C and Copy D to the partners. The same procedure must be followed until the information required is provided to all actual producers of the oil. Special Rules for Partnerships. —New section 6232 provides that certain items of the windfall profit tax are to be computed at the partnership level, rather than the partner level, under rules to be prescribed in regulations. Amongthe items to be determined at the partnership level are: 1) the removal price of the oil; 2) the adjusted base price of the oil; 3) the tier and type of oil; 4) the severance tax adjustment; 5) the net income limitation; 6) the ownership interest; 7) the tax rate; 8) the number of barrels removed, and 9) the windfall profit tax paid or withheld. However, if one or more partners who own a combined partnership interest of 5 percent or more so elect, this section will not apply to that partnership. Even though section 6232 allows the items listed above to be determined at the partnership level, each partner is ultimately responsible for his or her windfall profit tax liability. Operator. —An operator that receives a Form 6248 must in turn complete a Form 6248 for each producer (including itself), partnership and S corporation whose oil is covered on the Form 6248 that it receives. Copies C and D must be sent to producers and other recipients within 15 days of receipt. Copy A must be sent to the IRS within 30 days after Copies C and D are sent to producers or other recipients. S Corporations.— Effective for oil removed in tax years beginning after 1982, an S corporation is treated as a partnership for certain purposes of the windfall profit tax (section 4992(f)). Accordingly, an S corporation that receives a Form 6248 must complete a Form 6248 for each of its shareholders. The information shall be based upon each shareholder's share (determined under section 1377(a)) of the income of the corporation. Trusts. — Trusts that have beneficiaries who qualify for the credit for overpaid windfall profit tax must complete Form 6248 for each beneficiary. Trusts should use the allocation rules contained in section 6430(b) for basis to be used in reporting information on Form 6248 to beneficiaries. Nominee. —A nominee representing one or more producers (or partnerships or S corporations) must follow the same rules stated above for operators. ,rU.S.GP0:1983 -0- 390 -291 E.14430e14328 J-21 A. Partnerships, S corporations, operators, and nominees may aggregate the information based upon more than one Form 6248 and file one Form 6248 for the partner, shareholder, producer, or principal. If you are aggregating information based on more than one Form 6248, attach a list to Copy A showing the name and employer identification number of the persons who supplied you Form 6248. Disagreement with information on a Form 6248 filed with an operator, partnership, S corporation or nominee. —If you are an operator, partnership, S corporation or nominee who has received a Form 6248 that must be passed along to the producer or other recipient and you disagree with the information on the Form 6248 that you receive, you must, within 15 days of forming that opinion, notify the person submitting Form 6248 to you of your disagreement. File Form 6248 with the IRS and the producer or other recipient by the earlier of (1) 30 days after you notify the person who sent you the Form 6248 with which you disagree, or (2) 10 days after the person who submitted Form 6248 to you notifies you that he or she disagrees with your opinion that there is an error. Complete Form 6248 based upon the information contained on the Form 6248 that you received, including any changes agreed to by you and the originator. Attach a sheet explaining any differences to the copies that you file with the IRS and the producer or other recipient. (Regulations section 51.4997- 2(a)(2)(ii).) Form 6248 Annual Information Return of Department of the Treasury Windfall Profit Tax -1983 Internal Revenue Service Producer or Other Recipient Name, address, and ZIP code Cf 7 �l 30 WkIn SttvOt ffi . Va. 45 Employer Identification no. (El N) I Social security no., If no EIN 2 i 2A Filer Name, address, and ZIP code cx0pow & ftain 1=. vTjjmjr,gtcn, Ca. 90748 OMB No. 1545 -0224 Copy D —File with the Producer or Other Recipient Employer identification no. (EIN) I social security IT IT no cln If you have received a Form 6248 from another person concerning oil reported on this Form 6248, enter the name and employer identification number of that person below. Employer identification number Name y I IT I r t +� %i PART 1.— Producer or Other Recipient 1 Type of Producer (check all applicable boxes): ❑ Individual El Trust ER Corporation U.S. citizen or entity, or resident alien ❑ Partnershi El Estate ❑ Resident of U.S. Possessions El Forei n citizen or entity, or non-resident alien 2 Producer Status (check all applicable boxes): f7 Independent producer ❑ Member of "related group" El Royalty owner El Trust beneficary r1 Integrated oil company ❑ Producer with no withholding © Working interest Q Operator c Tier three PART 11.— Exempt 011 1 Number of barrels of exempt oil (do not include exempt stripper well oil) . 2 Total (add amounts on line 1) . . . . . 3 Type of exempt oil (check applicable boxes) a. Tier one I b. Tier two I (1) Newly discovered (3) Heavy ❑ Qualified governmental interests ❑ Qualified charitable interests ❑ Exempt Indian oil ❑ Exempt Alaskan oil 4 Total barrels of exempt stripper well oil (see instructions) i PART III. — Exempt Royalty Owner Oil Total number of certified barrels 1 Barrels removed in calendar quarter . . . . . . . 2 Total (add amounts on line 1, a through d) . PART IV.— Taxable Crude 011 Removed During 1983 a. 1st quarter 1 b. 2nd quarter c. 3rd quarter a. Number of barrels 1 Tier one, other than Sadlerochit oil, taxed at 70% . . • • • • • • . • • • . . 2 Tier one, other than Sadlerochit oil, taxed at 50% . . • • • • • • • • • • . . 3 Tier one Sadlerochit oil taxed at 70% . . . . . . . . . . • • • • • • . • • 4 Tier one Sadlerochit oil taxed at 50% . . . . . . . . • • • • • • • • • . 5 Tier two oil taxed at 60% . . . . . . . . . . • • • • • • . . • 6 Tier two oil taxed at 30% . . . . . . . . • • • • • . • • • • • . . . . 7 Newly discovered oil . . . . . . . . . . . . . . . . . . . . • • • • • 8 Incremental tertiary oil . . . . . . . . . . • • • • • • • • • . . . . . 9 Heavy oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Total barrels of oil (add amounts in column a) . . . . • • • • • . • • . • . 11 Amount of windfall profit tax liability for oil removed during 1983 (add amounts in column b) . . . . . . . 12 Amount of windfall profit tax withheld with respect to oil removed during 1983 . • • • • . • • • • • 13 If line 11 is greater than line 12, subtract line 12 from line 11. This is the amount of underwithheld windfall profit tax . . . • . • • . . . . . . . . 14 If line 12 is greater than line 11, subtract line 11 from line 12. This is the amount of overwithheld windfall profit tax PART V.— Amount of Windfall Profit Tax Withheld from Payments Made in 1983 d. 4th quarter b. Tax liability 47. 1 1 Windfall profit tax withheld from payments made in 1983 (regardless of when windfall profit tax liability arose) Form 6248 (1983) For Paperwork Reduction Act Notice, see the instructions on back of Copy A. r Instructions for Producers (Section references are to the Internal Revenue Code unless otherwise noted.) Generally, a producer is a person who holds an economic interest in the crude oil. Two examples are: (1) a royalty owner, and (2) a partner in a drilling fund. Producers may use Form 6248 furnished by purchasers to: (a) determine if the correct amount of tax was withheld; or (b) assist as a starting point to figure the net income limitation. If too little windfall profit tax was paid to IRS you may have to pay the underpayment to IRS by filing Form 720, Quarterly Federal Excise Tax Return. The net income limitation is a special computation that limits the windfall profit to 90% of the net income for each barrel of taxable crude oil. Form 6248 does not contain sufficient information to compute the net income limitation. If you need additional information, you must request it from your purchaser or operator. Part III Part III is the number of barrels removed during each calendar quarter that you have certified to your purchaser as being exempt from the windfall profit tax because of the royalty owner exemption. If you are a qualified royalty owner (individuals, estates, or family farm corporations), you may be entitled to a 2 barrel a day exemption on your qualified royalty production (production attributable to a non - working interest in a well). The exemption is computed on a quarterly basis. If you must share the royalty owner exemption with other qualified royalty owners, see the rules under section 6429 to determine the amount of exemption to which you are entitled. If you do not have to share the royalty owner exemption with other qualified royalty owners, your exemption is 2 barrels times the number of days in the calendar quarter. You have no annual windfall profit tax liability with respect to your qualified royalty production if you meet the following qualifications: If you are a qualified royalty owner who was unable to certify some of your qualified production as being exempt from the windfall profit tax, or you would like to exempt qualified royalty production other than that which you have certified for exemption from the withholding tax, see Form 6249, Computation of Overpaid Windfall Profit Tax, to determine if you are entitled to a credit or refund. If you are a qualified royalty owner who has certified more production as being exempt from the withholding of windfall profit tax than you are entitled to, you have an annual windfall profit tax liability. In this case, (a) you must request information from your purchaser to compute your annual windfall profit tax liability (see regulations section 150.4997 -2(d) for this information); and (b) you must file Form 720 and pay the additional tax by May 31, 1984. See the instructions for Part IV, line 13 for rules for filing Form 720. (a) The amounts entered on line 1, columns a, b, c, or d of Part III of Form 6248 that you receive are less than 2 times the number of days in theapplicable calendar quarter; and_ (b) you do not have to share the royalty owner exemption; and (c) you were a qualified royalty owner duringthe applicable calendar quarter. Part IV Line 11 —Line 11 is your windfall profit tax liability for 1983 as computed by your purchaser, based upon information available to the purchaser at the time of filing Form 6248. The iurchaser has not taken the net income mitation into account in computing this windfall profit tax. Additionally, Part IV does not contain any information for oil that you have certified as being exempt royalty owner oil. If you are not a qualified royalty owner, Part IV will tell you if you have underpaid or overpaid the windfall profit tax for 1983 before taking the net income limitation into account. Line 12 —Line 12 is the amount of windfall profit tax paid on your behalf by the purchaser for oil removed during 1983, even if some of the tax was paid after 1983. If lines 11 and 12 were equal, there will be no entries on lines 13 and 14. Line 13 —Line 13 is only completed if line 11 is greater than line 12. If this is the case, there has been an underwithholding of windfall profit tax. Unless the net income limitation or another windfall profit tax credit applies, you may be required to file Form 720 and pay the amount underwithheld. If no credit (including the net income limitation) applies, line 13 is the amount of windfall profit tax liability outstanding at the end of the calendar year. File and pay the tax on Form 720 by May 31, 1984. Enter the amount of tax in item 52 of page 1, Form 720. If you receive more than one Form, 6248, combine the amounts on line 11- and line 12 of all Forms 6248, to determine if there is an outstanding windfall profit tax liability at the end of the calendar year. If the total of all line 11 amounts is greater than the total of all line 12 amounts, there is a windfall profit tax liability at the end of the calendar year, unless the net income limitation or other windfall profit tax credit applies. Enter the excess on page 1 of Form 720 in item 52. If your windfall profit tax liability has not been correctly computed by your withholding agent, compute the correct amount of windfall profit tax on a separate page. If the net result is that you owe additional windfall profit tax but less than the amount entered on line 13, enter the corrected amount on page 1 of Form 720, in item 52. Attach your recomputation of the windfall profit tax liability to Form 720. Line 14 —Line 14 is only completed if line 12 is greater than line 11. The amount on line 14 is the overwithheld windfall profit tax at the end of the calendar year. If this is the only Form 6248 that you receive, enter this amount on line 4, Form 6249. If you receive more than one Form 6248, combine the amounts on line 11 and line 12 of all Forms 6248, to determine if there is overwithheld windfall profit tax. If the total of all line 12 amounts exceeds the total of all line 11 amounts, there is an overwithholding of windfall profit tax for the calendar year. Enter the excess on line 4, Form 6249. Attach all copies of Form(s) 6248 (even those where the correct amount of windfall profit tax has been withheld) to Form 6249 when claiming credit or refund. Please see the instructions for Form 6249 for details on how to claim the credit or refund. Part V Part V represents the amount of windfall profit tax actually paid (withheld) by the purchaser on behalf of the producer from payments made in 1983 (regardless of when liability for the windfall profit tax arose). For cash basis producers whose income tax year ended December 31, 1983, this is the amount deductible for income tax purposes. Certain Persons Who Have Received Form 6248.— Partnership. —A partnership that receives a Form 6248 must in turn complete a Form 6248 for each of its partners. Partnerships should see regulations section 51.4997 -2 for when to file Copy A with the IRS and when to issue Copy C and Copy D to partners. The information shall be based upon the partner's allocable share of the oil reported on the Form 6248 received by the partnership. If one or more of the (Continued on back of Copy D)