Gas balancing agreements

when the parties have agreed upon and attached a form of gas balancing agreement
as Exhibit E.17 In the 1989 version, when the parties have elected to use a gas
balancing agreement pursuant to subarticle G, the gas balancing agreement contains
all of the terms for gas and the text of subarticle G itself relates solely to imbalances
of oil. In contrast, if the parties elect not to have a gas balancing agreement,
subarticle H addresses both oil and gas and provides as follows:
H. Taking Production in Kind (No Gas Balancing Agreement):
Each party shall take in kind or separately dispose of its proportionate share of all Oil
and Gas produced from the Contract Area, exclusive of production which may be used
in development and producing operations and in preparing and treating Oil and Gas for
marketing purposes and production unavoidably lost. Any extra expenditure incurred in
the taking in kind or separate disposition by any party of its proportionate share of the
production shall be borne by such party. Any party taking its share of production in kind
shall be required to pay for only its proportionate share of such part of Operators surface
facilities which it uses.
Each party shall execute such division orders and contracts as may be necessary for
the sale of its interest in production from the Contract Area, and, except as provided in
Article VII.B., shall be entitled to receive payment directly from the purchaser thereof for
its share of all production.
If any party fails to make the arrangements necessary to take in kind or separately
dispose of its proportionate share of the Oil and/or Gas produced from the Contract
Area, Operator shall have the right, subject to the revocation at will by the party owning
it, but not the obligation, to purchase such Oil and/or Gas or sell it to others at any time
and from time to time, for the account of the non-taking party. Any such purchase or
sale by Operator may be terminated by Operator upon at least ten (10) days written
notice to the owner of said production and shall be subject always to the right of the
owner of the production upon at least ten (10) days written notice to Operator to exercise
its right to take in kind, or separately dispose of, its share of all Oil and/or Gas not
previously delivered to a purchaser; provided, however, that the effective date of any such
revocation may be deferred at Operators election for a period not to exceed ninety (90)
days if Operator has committed such production to a purchase contract having a term
extending beyond such ten (10)-day period. Any purchase or sale by Operator of any
other partys share of Oil and/or Gas shall be only for such reasonable periods of time
as are consistent with the minimum needs of the industry under the particular
circumstances, but in no event for a period in excess of one (1) year.
Any such sale by Operator shall be in a manner commercially reasonable under the
circumstances, but Operator shall have no duty to share any existing market or
transportation arrangement or to obtain a price of transportation fee equal to that
received under any existing market or transportation arrangement. The sale or delivery
by Operator of a non-taking partys share of production under the terms of any existing
contract of Operator shall not give the non-taking party any interest in or make the nontaking party a party to said contract. No purchase of Oil and Gas and no sale of Gas

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It is not mandatory that the gas balancing agreement be made an exhibit. A separately signed gas
balancing agreement will also suffice for purposes of the 1989 version.