Section 055. Operations Under The Lease

01. Best Practices. The Lessee will, at all times, conduct exploration, development, drilling and al l operations as a reasonably prudent operator and will conform to the best practice and engineering principles in use i n the oil and gas industry. (7-1-25) 02. Designation of Operator. A designation of operator must be submitted to the Director prior t o operations commencing when the operations are not conducted by the Lessee and are to be conducted under authority of an approved operating agreement, assignment or other arrangement. The designation authorizes the operator, o r their local representative, to act for the Lessee and to sign any papers or reports. The Lessee must immediately repor t all address changes and termination of an operator’s authority to the Director. (7-1-25) 03. Diligence. (7-1-25) a. Lessee must diligently explore for the entire Lease. Diligent exploration means that the Lesse e continually provides effort, as a reasonably prudent operator would, to achieving production on the leased premise s or on lands pooled or unitized therewith, such as performing geological and geophysical surveys and/or drilling a tes t well. (7-1-25) b. Following Lessee’s diligent exploration, Lessee must engage in continuous drilling operations o n the leased premises or on lands pooled or unitized therewith during the remaining Lease term or any extension of th e Lease pursuant to Section 022.02.b. until Production in Paying Quantities is achieved This means there is to be n o delay or cessation of drilling for more than one hundred twenty (120) days, unless an extension is granted by th e Director in writing. The Director must receive a written request for the extension at least then (10) days prior to th e one hundred twenty (120) day period ending. (7-1-25) c. All wells under a Lease must be drilled, maintained, and operated to produce the maximum amoun t of oil and/or gas possible, without injury to the well

n one hundred twenty (120) days, unless an extension is granted by th e Director in writing. The Director must receive a written request for the extension at least then (10) days prior to th e one hundred twenty (120) day period ending. (7-1-25) c. All wells under a Lease must be drilled, maintained, and operated to produce the maximum amoun t of oil and/or gas possible, without injury to the well. The Lessee will, subject to the right to surrender the Lease , diligently drill and produce as many wells as necessary to protect the Board from loss resulting from production o n other properties. The Lessee may, with the Director’s written consent, compensate the Board for failure to drill an d produce such wells. (7-1-25) 04. Loss Through Waste or Failure to Produce. If there is loss through waste or failure to drill an d produce protection wells on the leased lands, the Director will determine the value of production accruing to th e Board and the compensation due to the Board as reimbursement for such loss. Payment for such losses must be made within sixty (60) days after the date of billing. The value of production resulting from a loss through waste or failur e to take corrective measures to protect a well is calculated at ninety percent (90%) of the last year’s actual productio n royalty or a minimum royalty of five dollars ($5) per acre or fraction thereof, whichever is greater. (7-1-25) 05. By-Products. Where production, use of conversion of Oil and Gas under a Lease, is susceptible o f producing a valuable by-product(s), including, without limitation, commercially demineralized water, carbo n dioxide, or helium, the Lessee must submit to the Director all available information concerning the potential by- product(s). The Department may conduct tests or studies, at its expense, and may issue reasonable orders to produc e and preserve such by-product(s). (7-1-25) 06. Geothermal Information

g a valuable by-product(s), including, without limitation, commercially demineralized water, carbo n dioxide, or helium, the Lessee must submit to the Director all available information concerning the potential by- product(s). The Department may conduct tests or studies, at its expense, and may issue reasonable orders to produc e and preserve such by-product(s). (7-1-25) 06. Geothermal Information. Prior to abandoning any well, the Lessee must submit to the Director al l available information concerning geothermal resource potential. The Department may conduct tests or studies, at it s expense, prior to the abandoning of any well to determine geothermal resource potential. Except as provided in Subsection 022.02.d., the Lessee must promptly plug and abandon any well on the leased land that is not used o r useful, in accord with these rules, the Commission’s rules, and any applicable rules and regulations of the Departmen t of Water Resources. When drilling in a known geothermal resources area, the Lessee may need a geothermal resourc e well permit from the Department of Water Resources. (7-1-25) 056. -- 059. (RESERVED)