GAS PURCHASE AGREEMENT
between
MESA OPERATING CO.
as "Seller"
and
KN Marketing, L.P.
as "Buyer"
Dated: January 1, 1996
Potter, County
State of Texas
TABLE OF CONTENTS
ARTICLE PAGE
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I Definitions 1
II Quantity 3
III Term 4
IV Price 5
V Point(s) of Delivery 6
VI Delivery Pressure 6
VII Quality 7
VIII Measuring Equipment and Testing 8
IX Measurement Specifications 12
X Billings and Payments 14
XI Sale and Passage of Title 15
XII Warranty of Title 16
XIII Force Majeure 16
XIV Governmental Authorizations 18
XV Indemnification 19
XVI Assignments 19
XVII Royalty 18
XVIII Notices 20
XIX Taxes 20
XX Miscellaneous 21
Signatures 23
GAS PURCRASE AGREEMENT
THIS AGREEMENT, made and entered into as of the ist day of January,
1996, ("Effective Date") by and between KN MARKETING, L.P., a Texas Limited
Partnership, ("Buyer") , and Mesa Operating Co., ("Seller").
W I T N E S S E T H:
WHEREAS, Buyer is in the business of marketing natural gas and
requires natural gas to meet the needs of its customers in the City of
Amarillo, its environs and other customers;
WHEREAS, Seller operates a natural gas processing plant known as the
Fain Plant in Potter County, Texas and has or may have quantities of gas
available for sale in excess (1)of the quantities of gas needed to supply
Energas Company ("Energas") and other customers for consumption in the City
of Amarillo and its environs, and (2) up to two thousand (2,000) MMcf per
year beginning January 1, 1997 and for the remaining term of this Agreement
for Liquefied Natural Gas (LNG) supply requirements, and;
WHEREAS, Seller desires to sell such excess gas to Buyer and Buyer
desires to purchase such excess gas from Seller;
NOW, THEREFORE in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the parties do hereby
covenant and agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement, the following terms and phrases shall have
the respective meanings ascribed to them below, unless the context clearly
requires a different meaning.
1.1 "Cubic Feet" or "cubic foot" means the volume of gas which
occupies one (1) cubic foot of space at a temperature of sixty degrees
(600) Fahrenheit and an absolute pressure of fourteen and sixty-five
hundredths (14.65) pounds per square inch absolute ("Psia").
1.2 "Mcf" means one thousand (1, 000) cubic feet of gas, Mmcf means
one million (1,000,000) cubic feet of gas, and "Bcf" shall mean one billion
(1,000,000,000) cubic feet of gas.
1.3 "Btu" (British thermal unit) means the amount of heat required to
raise the temperature of one avoirdupois pound of pure water from
fifty-eight and five tenths degrees (58.5 degrees) Fahrenheit to fifty-nine
and five tenths degrees (59.5 degrees) Fahrenheit at a constant pressure of
fourteen and seventy-three hundredths (14.73) Psia. Where appropriate, Btu
shall mean the plural of the aforementioned definition. The term "MMBtu"
shall mean one million (1,000,000) Btu.
1.4 "Gross Heating Value" means the number of Btu's liberated by the
complete combustion at constant pressure of one (1) cubic foot of gas, at a
base temperature of sixty degrees (60 degrees) Fahrenheit and a referenced
pressure base of fourteen and sixty-five hundredths (14.65) Psia, with air
of the same temperature and pressure of the gas, after products of
combustion are cooled to the initial temperature of the gas, and after the
water of the combustion is condensed to the liquid state. The Gross
Heating Value of the gas shall be calculated on a saturated basis, with the
results adjusted to reflect the actual water vapor content of the gas as
delivered.
1.5 "Day" means a period of twenty-four (24) consecutive hours
beginning and ending at seven (7:00) o'clock a.m. Central Time ("CT"). The
reference date for any day shall be the calendar date upon which such
twenty-four (24) hour period began.
1.6 "Month" means a period beginning at seven (7:00) o'clock a.m. CT
on the first day of a calendar month and ending at seven (7:00) a.m. CT on
the first day of the calendar month immediately following.
1.7 "Year" means a period consisting of three hundred sixty five
(365) consecutive days, commencing and ending at seven (7:00) o'clock a.m.
CT; provided, however, that any such year which contains the date of
February twenty-nine (29) shall consist of three hundred sixty six (366)
consecutive days.
ARTICLE II
QUANTITY
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2.1
A. Subject to the provisions of subparagraphs B., C. and D.
below, Seller agrees to tender for delivery and sale to Buyer and Buyer
agrees to receive and purchase hereunder all gas Seller has available for
sale at the Delivery Points in excess of any gas required by Seller's
Priority Customers (defined below), and in excess of the Reserved Gas
(defined below), and reserved by Seller for its LNG supply requirements.
Notwithstanding the preceding sentence to the contrary, Seller and Buyer
recognize that in the event of sudden or extreme volume changes in either
Seller's supply or Buyer's markets, Buyer may need reasonable lead time
to adjust its gas supply or markets to accommodate such sudden or extreme
volume changes to enable Buyer to purchase gas volumes made available
hereunder, by Seller. Buyer agrees to use its best efforts to minimize
the lead time necessary to accommodate such volume changes. However, in
no instance shall Buyer take more than five (5) working days to make such
supply or market adjustments. Failure of gas markets is not cause for
nonperformance by either party under the terms of this Agreement.
B. Buyer recognizes that Seller must satisfy its gas supply
obligations to Energas, as well as other customers which were receiving gas
from Seller's Fain Plant either directly or indirectly as of January 1,
1995, listed in Exhibit "A" attached hereto and made a part hereof
('Seller's Priority Customers').
C. Buyer recognizes that Seller expects to construct and operate an
LNG plant in conjunction with its Fain Plant and hereby reserves up to two
thousand (2,000) MMcf of residue gas each year commencing January 1, 1997
to satisfy its LNG supply requirements ("Reserved Gas").
D. Buyer recognizes that Seller's Priority Customers have a first
call on all gas Seller has available at the tailgate of the Fain Plant and
that Seller has reserved up to two thousand (2,000) Mmcf per year
additional gas commencing January 1, 1997; accordingly, Buyer expressly
acknowledges that on any given day Seller may be unable to deliver any gas
to Buyer hereunder.
2.2 Seller will consult with Buyer as often as necessary regarding
Seller's projection of the volume of gas to be available for delivery to
Buyer during each month. Such projection will be based upon the volume of
gas Seller expects to have available for delivery to Buyer after satisfying
the requirements of Seller's Priority Customers and LNG markets. Seller
will also provide to Buyer at least fifteen (15) days prior to the
beginning of each month, a forecast of the volumes of gas it expects to
have available for delivery to Buyer during each of the next twelve (12)
months.
2.3 It is the intent of Buyer and Seller that all of the gas
delivered hereunder be ultimately consumed in the City of Amarillo and its
nvirons to the maximum extent practicable. Accordingly, it is expressly
understood and acjreed that all gas delivered hereunder shall be allocated
by Buyer to Buyer's markets in the City of Amarillo and its environs before
Buyer allocates any gas from other sources to such markets. Buyer shall
provide Seller with a statement on a quarterly basis showing the volume of
gas purchased hereunder from Seller and the total volume of gas delivered
to Buyer's markets in the City of Amarillo and its environs.
ARTICLE III
TERM
----
3.1 This Agreement shall become effective, regardless of when
executed, on the Effective Date hereof and continue for a term ending on
the 31st day of December 1999 ("Primary Term"), and continuing year to year
thereafter until canceled by either party giving the other party sixty (60)
days written notice prior to the end of the Primary Term, or any succeeding
year thereafter.
ARTICLE IV
PRICE
-----
4.1 Buyer shall pay Seller for natural gas purchased and
received by Buyer hereunder each month a total price per MMBTU dry,
inclusive of any and all taxes and transportation charges, equal to Index
Price plus two cents ($0.02):
Where:
Index Price= the arithmetic average of the gas prices listed
under the column titled "Index" in the first issue of the month
when deliveries of gas are made, of Inside F. E. R. C. Gas Market
Report (GMR), in the table titled "Prices of Spot Gas Delivered
to Pipelines" for Transwestern Pipeline Co. Permian Basin,
El Paso Natural Gas Co. - Permian Basin, Panhandle Eastern
Pipe Line Co.- Texas, Oklahoma (mainline), Natural Gas Pipeline
Co. of America - Oklahoma, and Williams Natural Gas Co.
Texas, Oklahoma, Kansas.
4.2 If GMR ceases to report a price for a designated pipeline which
is used in determining the Index Price under Paragraph 4.1 above, then the
price for the same pipeline listed in Natural Gas Week, published by The
----------------
Oil Daily Co., in the table titled "Spot Prices on Interstate Pipeline
Systems", "Delivered-to-Pipelinell in the column labeled "This Week" for
the Transwestern Pipeline Co. Permian: Ward County, Texas, Natural Gas
Pipeline Co. of America - Forgan, Oklahoma, El Paso Natural Gas Co. -
Anadarko: Washita County, Oklahoma, Panhandle Eastern Pipe Line Co. -
Kansas/Oklahoma Field Zone, and the Williams Natural Gas Co. - Mainline,
Kansas/Oklahoma as reported in the first issue each month when deliveries
of gas are made will be substituted therefor.
4.3 If the total number of published pipelines referenced in
Paragraphs 4.1 and 4.2 above is less than three (3), then the parties shall
utilize a source of monthly price quotes as nearly as comparable to the
Index Price postings described in Paragraph 4.1 above as possible to
determine the actual Index Price in effect for each month.
ARTICLE V
POINT(S) OF DELIVERY
--------------------
5.1 The delivery of gas hereunder shall be made at the following
"Delivery Points":
A) at the outlet of Energas' meter in Section 97, Block 1,
BS & F Survey, Potter County, Texas, known as the "Nichols
Station Energas Delivery Point";
B) at the inlet of Buyer's or Buyer's designee's meter in the
SW/4 of Section 20, G & M Survey, Block M-3, Potter County,
Texas, known as the "Amarillo Creek Interconnect";
C) at the inlet of Buyer's or Buyer's designee's meter in
Section 81, Block 3, G & M Survey, Potter County, Texas, known as
the "Fain Plant Interconnect";
or
D) any other mutually agreed to point(s).
5.2 Buyer and Seller recognize that Seller has a prior obligation to
deliver a certain minimum volume of gas each year through the pipeline
facilities of Energas. Accordingly, such minimum volume of gas will be
delivered by Seller to Buyer at the Delivery Points described in 5.1 A) or
B) above.
ARTICLE VI
DELIVERY PRESSURE
-----------------
6.1 Subject to the provisions of Paragraph 6.2 below, Seller shall
deliver the gas, or cause such gas to be delivered, at the Delivery
Point(s) at a pressure sufficient to enter Buyer's or its designee's
facilities against the working pressure(s) maintained therein from time to
time but not in excess of the pressure that normally exists at the Delivery
Point(s); provided, however, Seller shall not be required to deliver gas
to Buyer at a pressure greater than the current maximum plant discharge
pressure of three hundred eighty (380) psig. Seller shall not be obligated
to install additional compression facilities in order to deliver gas
hereunder.
Notwithstanding any other provision of this Agreement, Seller shall
never deliver gas at a pressure that exceeds the maximum allowable working
pressure(s), as determined solely by Buyer or Buyer's designee.
6.2 Buyer at its sole cost and expense shall provide or cause to be
provided, all compression facilities required to transport all volumes of
gas to the Westar Transmission Company (Westar) system which are in excess
of Buyer's requirements on Westar's twenty inch (2011) Moore County
pipeline.
6.3 In the event Seller or Buyer or their respective designee
installs compression, the installation and operation of such compression
shall not adversely affect the accurate measurement of the gas delivered
hereunder. In the event such compression adversely affects such
measurement of gas, the affected party or its designee shall have the right
to suspend the receipt of gas hereunder only at that specific Delivery
Point until such condition is corrected.
ARTICLE VII
Quality
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7.1 The gas delivered at the Delivery Point(s) shall be of pipeline
quality and:
(a contain not more than one-fourth (h) grain of hydrogen sulfide
per one hundred (100) cubic feet;
(b) contain not more than five (5) grains of total sulfur per one
hundred (100) cubic feet;
(c) contain not more than two percent (2%) by volume of carbon
dioxide;
(d) shall have a Gross Heating Value of not less than nine hundred
and fifty (950) Btu's per cubic foot;
(e) contain no free liquids;
(f) contain not more than one percent (1%) by volume of oxygen;
(g) contain not more than seven (7) pounds of water vapor per one
million (1, 000, 000) cubic feet provided, however, if the gas
contains seven (7) pounds or less of water vapor per one million
(1,000,000) cubic feet, it shall be deemed dry.
(h) be commercially free of dust, gums, dirt, impurities and other
solids;
(i) not have a temperature of less than forty degrees (400)
Fahrenheit nor more than one hundred twenty degrees (1200)
Fahrenheit;
(j) contain not more than twelve percent (12%) by volume of nitrogen;
Buyer shall have the right to either (i) accept gas that does not conform
to the above specifications, or (ii) refuse delivery of such gas that does
not conform to the above specifications. Buyer or Buyer's designee's
acceptance of gas that does not conform to the quality specifications set
forth above shall not constitute a waiver of such specifications by Buyer
in regard to gas delivered by Seller hereunder in the future.
ARTICLE VIII
MEASURING EOUIPMENT AND TESTING
-------------------------------
8.1 Each of the parties hereto acknowledges and agrees that the
measuring facilities currently located at the Delivery Point(s) shall be
the "Official Billing Measurement Station" for purposes of this Agreement
and that the owner of such Official Billing Measurement Station (the
"Operator"), or such other party as the Operator and Buyer (in the event
Buyer is not the operator) may mutually designate, shall perform the
reading, calibrating, and adjusting of, and the changing of charts on, the
equipment in the official Billing Measurement Station and shall perform all
gas analysis relating to the gas delivered hereunder.
8.2 Orifice meters installed in such measuring stations shall be
constructed and operated in accordance with American National Standard
Institute ("ANSI")/American Petroleum Institute ("API'l) 2530, American Gas
Association ("AGA") Report No. 3), Orifice Metering of Natural Gas and
-----------------------------------
Other Related Hydrocarbon Fluids, Second Edition, dated September 1985, and
- --------------------------------
shall include the use of flange connections and, where necessary,
straightening vanes and pulsation dampening equipment.
8.3 When and where electronic measurement and flow computers are
utilized, the gas received hereunder may have its volume, mass, gravity,
composition and/or energy content determined and computed in accordance
with applicable AGA standards including, but not limited to, AGA Report No.
3, 1985 edition, AGA Report No. 5, 1983 edition, AGA Report No. 6, 1971
edition, and AGA Report No. 7, 1984 edition. The parties agree to use and
accept the electronic derivations, measurements and calculations in lieu of
mechanical recordings, chart integration and subsequent calculations.
8.4 Operator shall give reasonable notice to non-operator in order
that non-operator may have representatives present to observe any
installing, reading, cleaning, changing, repairing, inspecting, testing,
calibrating, or adjusting of Operator's measuring equipment used in
measuring or checking the measurement of receipts or deliveries of gas
under this Agreement. The official charts (recordings) from such measuring
equipment shall remain the property of Operator, but upon request Operator
will submit its records and charts, together with calculations therefrom,
to nonoperator for inspection and verification, subject to return to
operator within thirty (30) days after receipt thereof.
8.5
A. Operator shall, in the presence of non-operator's representative,
if requested, verify the accuracy, adjust and calibrate all recording
devices used in the measurement of the receipt of gas hereunder on at least
a monthly basis. operator shall not be required to, but may elect to,
adjust or calibrate such equipment more frequently than specified above,
unless non-operator desires a special test be performed as described in
Paragraph 8.6 below.
B. If during any test of the measuring equipment, an adjustment or
calibration error is found which results in an incremental adjustment to
the calculated hourly flow rate through each meter run in excess of two
percent (2%) of the correct flow rate (whether positive or negative and
using the correct flow rate as the percent error equation denominator), then
any previous recording of such equipment shall be corrected to zero (0)
error for any period which the error existed (and which is either known
definitely or agreed to by both parties) and the total flow for the period
redetermined in accordance with the provisions of Paragraph 8.7 below. If
the period of error condition cannot be determined or agreed upon between
the parties, such correction shall be made over a period extending over the
last one-half (1/2) of the time elapsed since the date of the latest test,
such correction period not to exceed fifteen (15) days.
C. If, during any test of the measuring equipment, an adjustment or
calibration error is found which results in an incremental adjustment to
the calculated hourly flow rate which does not exceed two percent (2%) of
the adjusted flow rate (as described in part (B.) of this Section), all
prior recording shall be considered to be accurate for quantity
determination purposes.
D. If, during any test of the measuring equipment, an adjustment or
calibration error is found, the measuring equipment shall be adjusted at
once to measure properly and accurately.
8.6 In the event non-operator desires a special test (a test not
scheduled by Operator under the provision of Paragraph 8.5 above) of any
measuring equipment, seventy-two (72) hours advance notice in writing shall
be given to Operator and both parties shall cooperate to secure a prompt
test of the accuracy of such equipment. If the measuring equipment tested
is found to fall under the provisions of Paragraph 8.5 C. above or if an
inspection of the primary measurement equipment indicates no problems,
operator shall have the right to bill non-operator for the cost of such
special test including any labor and transportation costs pertaining to
such special test and Non-operator shall pay such costs.
8.7 If, for any reason, any measurement equipment is (I) out of
adjustment, (ii) out of service, or (iii) out of repair and the total
calculated hourly flow rate through each meter run is found to be in error
by an amount of the magnitude described in Paragraph 8.5 B. above, the
total quantity of gas delivered shall be redetermined in accordance with
the first of the following methods which is feasible:
(a) by using the registration of any mutually agreeable check
metering facility, if installed and accurately registering
(subject to testing as described in Paragraph 8.5 above);
(b) where parallel multiple meter runs exist, by calculation using
the registration of such parallel meter runs; provided that they
are measuring gas from upstream and downstream headers in common
with the faulty metering equipment, are not controlled by
separate regulators, and are accurately registering;
(c) by correcting the error by re-reading of the official charts, or
by straightforward application of a correction factor to the
quantities recorded for the period (if the net percentage of
error is ascertainable by calibration, tests or mathematical
calculation);
(d) by estimating the quantity, based upon deliveries made during
periods of similar conditions when the meter was registering
accurately.
8.8 Operator shall retain and preserve for a period of at least two
(2) years all test data, charts, and other similar records.
8.9 To the extent permitted by the Operator, either Buyer or Seller
may install, maintain and operate check measuring instruments and
telemeters in, and connected to, the official, Billing Measurement Station
for purposes of checking the operator's meters; provided, however, that all
gas measurements required in this Agreement shall be determined by the
Operator's meters and further provided that such check measuring and
telemetering instruments and connections shall be installed so as not to
interfere with the operation or future modification of the operator's
official billing meters and appurtenances. Each party hereto agrees to
indemnify, defend, and hold harmless the other party from any and all
claims and liabilities incurred by such other party arising from the
installation, operation, maintenance, or March 1, 1996 removal by or for
the indemnifying party of such check measuring and telemetering instruments
to the Official Billing Measurement Station. Each party hereto shall have
access, at reasonable hours, upon giving the other party at least
twenty-four (24) hours prior written notice of its desire to obtain such
access, and to the extent permitted by the Operator, to such check
measuring and telemetering instruments installed by the other party, but
the reading, calibrating, and adjusting thereof and the changing of
charts thereon shall be performed by such other party.
ARTICLE IX
MEASUREMENT SPECIFICATIONS
--------------------------
The measurements of the quantity and quality of all gas delivered and
purchased hereunder shall be conducted in accordance with the following:
9.1 Unit of Volume: The unit of volume for measurement shall be one
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(1) cubic foot of gas. Such measured volumes, converted to MCF, shall be
multiplied by their Gross Heating Value per cubic foot and divided by one
thousand (1,000) to determine MMbtus received and delivered hereunder.
9.2 Volume Computations: Computations of gas volumes from measurement
-------------------
data shall be made in accordance with ANSI/API 2530 (AGA Report No. 3),
Orifice Metering of Natural Gas and Other Related Hydrocarbon Fluids,
- --------------------------------------------------------------------
Second Edition, dated September 1985, and any subsequent amendments or
revision, as mutually agreed upon. If electronic devices and flow
computers are utilized, volumes will be determined in accordance with AGA
Committee Report No(s). 3, 5, 6, and 7, as specified in Paragraph 8.3 and
any subsequent amendments or revisions, as mutually agreed upon.
9.3 Temperature Measurement: The temperature of the gas shall be
determined electronically or by a recording thermometer so installed that
it may record the temperature of the gas flowing through the meters. If
the parties do not consider the installation of such a recording
thermometer to be necessary, other agreeable means of recording temperature
may be used. The average temperature to the nearest one (1 degree) degree
Fahrenheit, obtained while gas is being delivered, shall be the applicable
flowing gas temperature for the period under consideration.
9.4 Specific Gravity Measurement: At least quarterly, the specific
----------------------------
gravity of the gas shall be determined by a recording gravitometer or a
chromatographic device installed and located at a suitable point to record
representative average specific gravity of the gas being metered or by
other mutually agreeable methods. The gravity, to the nearest
one-thousandth (0.001), obtained while gas is being delivered shall be the
specific gravity of the gas used for the recording period. If Buyer and
Seller mutually agree, spot samples or continuous sampling using standard
type specific gravity sampling methods may be used in lieu of a recording
gravitometer or chromatograph. If the spot sample or continuous sampling
method is used, the specific gravity of the gas delivered hereunder shall
be determined from a gas analysis. The result shall be obtained to the
nearest one-thousandth (0.001) and shall be applied during the applicable
quarter or time period for the determination of gas volumes delivered.
9.5 Adjustment for Supercompressibility: At least quarterly,
-----------------------------------
adjustments to measured gas volumes for the effects of supercompressibility
shall be made in accordance with accepted AGA standards. Operator shall
obtain representative carbon dioxide and nitrogen mole fraction values for
the gas delivered or received as may be required to compute such
adjustments in accordance with standard testing procedures. If Buyer and
Seller mutually agree, equations for the calculation of
supercompressibility may be taken from either (I) the AGA Manual for the
--------------
Determination of Supercompressibility Factors for Natural Gas, dated
- -------------------------------------------------------------
December, 1962 (also known as the IINX-19 Manual") or (ii) the AGA Report
No. 8, dated December, 1985, Compressibility and Supercompressibility for
--------------------------------------------
Natural Gas and Other Hydrocarbon Gases, or any subsequent revision to AGA
- ---------------------------------------
Report No. 8.
9.6 Corrections: Appropriate corrections to the gas measurements
-----------
taken hereunder shall be made for deviation from the Ideal Gas Laws at the
pressures and temperatures at which the gas was delivered hereunder.
9.7 Assumed Atmospheric Pressure: An assumed atmospheric pressure of
thirteen and two tenths pounds per square inch absolute (13.2) Psia at the
delivery points shall be utilized for measurement and calculation purposes,
irrespective of any variation of the actual atmospheric pressure from the
assumed atmospheric pressure.
9.8 Gross Heating Value: The Gross Heating Value of the gas delivered
-------------------
at the Delivery Point hereunder shall be determined by using a
Cutler-Hammer or other standard type calorimeter or by calculating the
Gross Heating Value from an in-line chromatograph or a gas analysis of a
spot or continuous gas sample. The spot or continuous sample shall be
taken monthly and such sample shall be taken at a suitable point on the
facilities to be representative of the gas being metered.
9.9 Other Tests: Other tests to determine water content, sulfur, and
-----------
other impurities in the gas shall be conducted by Operator as necessary and
shall be conducted in accordance with standard industry testing procedures.
The party requested to perform such test(s) shall bear the cost of test(s)
only in the event the gas tested is determined not to be within the
applicable specification(s), otherwise the requesting party shall bear the
cost of such test(s).
9.10 New Test Methods: If at any time during the term hereof a new
----------------
method or technique is developed with respect to gas measurement, such new
method or technique may be substituted for the method set forth in this
Article when such methods or techniques are in accordance with the
currently accepted standards of the American Gas Association, if mutually
agreed upon by the parties.
ARTICLE X
BILLING AND PAYMENTS
--------------------
10.1 On or before the fifteenth (15th) day of each calendar month,
Seller shall render a statement to Buyer giving the total volume and MMBTUS
of gas purchased and delivered hereunder during the preceding thirty (30)
day billing period, such statements to be rendered in accordance with this
Agreement.
10.2 Payment shall be made by Buyer to Seller on or bef ore the last
day of each calendar month or fifteen (15) days after the statement is
rendered, whichever is later.
10.3 All original statements, bills and payments submitted by either
party shall be subject to audit for any errors contained therein until the
expiration of two (2) years from the date appearing on such statements,
bills, and payments. Thereafter, all such statements, bills, and payments
shall be deemed correct, and all rights and claims thereunder forever
waived and released, unless a written claim f or a particular overpayment
or underpayment was made within said two(2) year period.
10.4 Should Buyer fail to pay any undisputed amount(s) due Seller
when the same is due, as provided herein, interest thereon shall accrue at
a rate equal to the then current prime rate of interest in effect at the
Citibank, New York, N.A., plus two percent (2%) from the date when such
payment was due until the same is fully paid. If any failure to pay
continues for sixty (60) days, Seller may suspend deliveries of gas
hereunder, and/or cancel this Agreement upon ten (10) days prior written
notice to Buyer, but the exercise of such right shall be in addition to any
and all other remedies available to Seller.
10.5 Each party shall have the right at all reasonable times to
examine the books, records and charts of the other party to the extent
necessary to verify the accuracy of any statement, charge, computation or
demand made under or pursuant to any of the provisions of this Agreement.
ARTICLE XI
SALE AND PASSAGE OF TITLE
-------------------------
11.1 Title to and possession of the gas sold and delivered hereunder
shall pass from Seller to Buyer at the outlet flange of Operator's or
Operator's designee's facilities at the applicable Delivery Point(s). As
between the parties hereto, Seller shall be in exclusive control and
possession of the gas deliverable hereunder and responsible for any damage
or injury caused thereby until the same shall have been delivered to Buyer
or its designee, after which Buyer shall be in exclusive control and
possession thereof and responsible for any damage or injury caused thereby.
ARTICLE XII
WARRANTY OF TITLE
-----------------
12.1 Seller warrants title to all gas delivered by it and warrants
that it has the right to sell the same and that such gas is free from liens
and adverse claims of every kind. Seller shall indemnify and save Buyer
harmless against all claims, suits, loss, damage, and expense of every kind
whatsoever, including without limitation any expense in the enforcement of
this indemnity, arising out of or on account of adverse claims to the gas
delivered hereunder or the proceeds due thereon from Buyer. If Seller's
title to gas hereunder or its right to receive proceeds hereunder is in any
manner questioned by any third party adverse claim of any character
whatsoever asserted with respect to any gas delivered or to be delivered to
Buyer hereunder, Buyer may withhold payments of sums due hereunder, with
interest, at the rate set forth in Paragraph 10.4 above, for such gas in
question until such adverse claim is withdrawn or finally adjudicated or
until Seller has furnished a bond, with sureties satisfactory to Buyer,
conditioned to hold Buyer harmless from such adverse claim.
ARTICLE XIII
FORCE MAJEURE
-------------
13.1 Each party hereto shall be excused from performing under this
Agreement, except for making payment for gas already delivered and received
hereunder, to the extent it is rendered unable to perform by a force
majeure situation, but only for the period of time such force majeure
situation continues. The term "force majeure" as employed herein and for
all purposes relating hereto shall mean acts of God, strikes, lockouts or
other industrial disturbances, acts of the public enemy, wars, blockades,
insurrections, riots, epidemics, landslides, lightning, earthquakes, fires,
storms, hurricane warnings, crevasses, floods, washouts, arrests and
restraints of governments and people, civil disturbances, explosions,
breakages or accident to machinery or lines of pipe, the necessity for
making repairs or alterations to machinery or lines of pipe, freezing of
wells or lines of pipe, partial or entire failure of wells, inability of
any party hereto to obtain necessary materials, supplies, or permits due to
existing or future rules, regulations, orders, laws or proclamations of
governmental authorities (both federal and state), including both civil and
military; the binding order of any court; acts of public authorities;
inability to obtain, transport or deliver, or delay in obtaining,
transporting or delivering supplies of gas by Seller to Buyer or
by Buyer to its markets as a result of any federal, state or local law or
any order, rule or regulation of governmental authority, both civil and
military including but not by way of limitation, any actions by a court
of competent jurisdiction or by FERC affecting price or gas supply and/or
with respect to the 1990 Supplemental Stipulation and Agreement by and
between Seller and Colorado Interstate Gas Company now pending in FERC
Docket Nos. RP79-59 and/or RP90-69; any failure by third-party transporters
to deliver Seller's gas to Buyer's facilities or thereafter to transport
gas for Buyer, and any other causes whether of the kind herein enumerated
or otherwise, not within the control of the party claiming suspension and
which by the exercise of due diligence such party is unable to prevent or
overcome; such term shall likewise include (a) the inability of such party
to acquire, or the delays on the part of such party in acquiring, at
reasonable cost and after the exercise of due diligence, any necessary
servitudes, right-of-way grants, permits or licenses, and (b) the inability
of each party to acquire, or the delays on the part of such party in
acquiring at reasonable cost and after the exercise of due diligence, any
necessary materials and supplies, permits and permissions.
13.2 The causes or contingencies set forth in Paragraph 13.1 above,
affecting performance shall not relieve Seller or Buyer of liability in the
event of failure of either to use due diligence to remedy the situation and
remove the cause in an adequate manner and with all reasonable dispatch,
nor shall such cause or contingencies relieve either party from its
obligations to make payments of amounts then due hereunder.
13.3 In the event of either Buyer or Seller being rendered unable
wholly or in part by force majeure to carry out its obligations under this
Agreement, it is agreed that on such party giving notice and full
particulars of such force majeure in writing to the other party as soon as
possible after the occurrence of the cause relied on, then the obligations
of the parties insofar as they are affected by such force majeure shall be
suspended during the continuance of any inability so caused but for no
longer period, and such cause shall as far as possible be remedied with all
reasonable dispatch.
ARTICLE XIV
GOVERNMENTAL AUTHORIZATIONS
---------------------------
14.1 This Agreement shall be subject to all valid and applicable laws
of the United States and of the state wherein it is to be performed, and to
the applicable valid rules, regulations or orders of any regulatory agency
or governmental authority having jurisdiction, and the parties shall be
entitled to regard all applicable laws, rules and regulations (federal,
state or local) as valid and may act in accordance therewith until such
time as the same may be declared invalid by final judgment of a court of
competent jurisdiction.
14.2 Notwithstanding any other provision of this Agreement to the
contrary, Seller shall not tender and Buyer shall not be obligated to
accept, transport or cause to be transported, or receive gas hereunder if
such act would subject Buyer or its designee to regulation or jurisdiction
of FERC under the Natural Gas Act of 1938, or any successor legislation
ARTICLE XV
INDEMNIFICATION
---------------
15.1 Buyer and Seller shall each indemnify, defend, and save harmless
the other including the other's employees and agents from and against any
and all loss, damage, injury, liability, and claims for injury to or death
of persons (including any employee of Buyer or Seller), or for loss or
damage to property (including the property of Buyer or Seller), resulting
directly or indirectly from the indemnifying party's performance of its
respective obligations arising pursuant to his Agreement (including the
installation, maintenance, and operation of property, equipment, and
facilities) or any other operations under this Agreement.
ARTICLE XVI
ASSIGNMENTS
-----------
16.1 Any successor, representative, or assignee which shall succeed
by purchase, merger or consolidation of either Seller or Buyer, as the case
may be, shall be entitled to the rights and shall be subject to the
obligations of its predecessor in title under this Agreement. Either party
may assign or pledge this Agreement under the provisions of any mortgage,
deed of trust, indenture or similar instrument which it has executed or may
execute hereafter. Otherwise, neither party shall assign this Agreement or
any of its rights, duties, or obligations hereunder unless it shall have
first obtained the consent (not be unreasonably withheld) in writing of the
other party hereto except in the case of corporate parents, affiliates, and
subsidiaries.
ARTICLE XVII
ROYALTY
-------
17.1 Buyer and Seller hereby agree that as between Seller and Buyer,
Seller is responsible for the payment of all royalty, overriding royalty
and production rights derived from the sale of gas hereunder to the parties
legally entitled thereto.
ARTICLE XVIII
NOTICES
-------
18.1 Any notice, request, demand, statement, or payment provided for
in this Agreement shall be in writing and shall be deemed delivered as of
the postmarked date when deposited in the United States mail, postage
prepaid, by first class, registered or certified addressed to the parties
as follows:
Notices: Payments:
-------- ---------
SELLER: Mesa operating Co. Mesa Operating Co.
5205 North O'Connor Blvd P. 0. Box 910148
Suite 1400 Dallas, Texas 75391-0148
Irving, Texas 75039-3746
Telephone: (214) 444-9001
Telecopy: (214) 444-4394
Attention: Marketing Department
BUYER: KN Marketing, L.P.
333 Clay, Suite 2000
Houston, Texas 77002
Telephone: (713) 739-2900
Telecopy: (713) 739-6696
Attention: Contract Administration
or at such other address as either party from time to time
designates for each purpose.
ARTICLE XIX
TAXES
-----
19.1 Seller shall pay or cause to be paid all taxes applicable to the
gas at or prior to delivery hereunder, now or hereafter required by law to
be paid to government authorities. Buyer shall pay or cause to be paid,
all taxes applicable to the gas subsequent to delivery hereunder, now or
hereafter required by law to be paid to government authorities. The term
"taxes," as used herein, shall mean all taxes, licenses, fees or charges
levied, assessed or made by any governmental authority on the act, right or
privilege of production, severance, gathering, transportation, handling,
sale or delivery of gas which is measured by the volume, value or sales
price of the gas imposed upon Seller or Buyer with respect to the gas
delivered hereunder. It is agreed that Buyer may, but is not obligated to,
remit to the governmental authority on behalf of Seller the taxes levied or
collected on gas produced and delivered to Buyer under this Agreement.
Buyer shall deduct any taxes remitted directly by Buyer on behalf of Seller
from amounts otherwise payable to Seller hereunder.
ARTICLE XX
MISCELLANEOUS
-------------
20.1 No waiver by either party of any one or more defaults by the
other in the performance of any provisions of this Agreement shall operate
or be construed as a waiver of any other default or defaults, whether of a
like or of a different character.
20.2 ANY INTERPRETATION HEREOF OR CONTROVERSY ARISING HEREUNDER SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS, EXCEPT ANY PROVISIONS OF
SUCH LAWS THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF ANOTHER STATE.
In the event that any dispute hereunder or any breach or alleged breach of
any of the provisions hereof by either party results in a lawsuit being
filed, then the losing party in any such suit shall pay the reasonable
attorneys fees, professional expert fees, and court costs incurred by the
prevailing party. Each party waives any rights to or claims for punitive
or consequential damages arising from any breach of or dispute under this
Agreement.
20.3 This Agreement may be executed in any number of counterparts, no
one of which need be executed by all parties, and it shall be binding upon
all parties who execute a counterpart with the same force and effect and to
the same extent as if all such parties had executed and signed the same
document with each separate counterpart deemed to be an original.
20.4 This Agreement constitutes the entire agreement between the
parties and no waiver, representation or agreement, oral or otherwise,
shall effect the subject matter hereof unless and until such waiver,
representation or agreement is reduced to writing and executed by the
authorized representative of the parties.
20.5 Seller and Buyer shall not publish, disclose, or otherwise
divulge to any entity or person, except necessary officers, employees, and
agents of either party, at any time, either during or after the term of
this Agreement, nor shall either party permit any of its officers,
employees, or agents, to publish, disclose, or otherwise divulge, any
information concerning the terms of Article IV Price. This paragraph shall
-----
not preclude either party upon prior written notice to the other party from
revealing or using any information concerning the terms of Article IV
Price:
- -----
a) in filing reports with or furnishing information to the Securities
and Exchange Commission, securities commission of the various
states, or other appropriate governmental authorities, or
b) when advised by legal counsel that disclosure is required.
20.6 All terms and conditions of this Agreement were prepared jointly
by the parties hereto and not by any party to the exclusion of the other.
20.7 Although this Agreement is intended by the parties not to
benefit any third parties and shall not do so, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first written above.
SELLER
MESA OPERATING CO.
By: /s/ Paul W. Cain
-----------------------------------------
Signature
Name: Paul W. Cain
--------------------------------------
Typed/Printed
Title: President and Chief Operating Officer
-------------------------------------
BUYER
KN MARKETING, L.P.
By its General Partner,
American Pipeline Company
By: /s/ S. H. Charlton, III
----------------------------------------
Signature
Name: Samuel H. Charlton, III
-------------------------------------
Typed/Printed
Title: Senior Vice President
-----------------------------------
EXHIBIT "A"
Seller's customers which were receiving
gas from Seller as of January 1, 1995.
ENERGAS:
Base Agreement and CNG
ENERMART:
Weyerhauser Paper Co., Valley Proteins,
City of Amarillo, Water Treatment,
Crouse-Hinds, Farmland, and various
irrigation customers
*The sales volume from the TDCJ sale by
Energas may be added to the Enermart sale
at some later date.
IBP INC.
KN MARKETING, L.P.:
ASARCO
Pantex
June 20, 1995
Mr. Samuel H. Charlton III
KN Marketing, L.P.
323 Clay St., Suite 2000
Houston TX 77002-9817
Gentlemen:
Re: Gas Purchase Agreement Dated January 1, 1996
Reference is made to the Gas Purchase Agreement ("Agreement") dated January
1, 1996, between Mesa Operating Co., as Seller, and KN Marketing, L.P., as
Buyer, relating to the sale and purchase of certain volumes of excess gas.
For purposes of this Agreement, "B" Contract gas shall mean that gas which
seller receives under and by virtue of that certain agreement dated January
3, 1928 between the Amarillo Oil Company, predecessor in interest of the
Seller and Canadian River Gas Company, predecessor in interest to Colorado
Interstate Gas Company as amended from time to time (The "B" Contract").
In implementing the provisions of Paragraph 2.3 of Article II of the above-
referenced Agreement, both parties agree that all of the excess gas
delivered by Seller to Buyer will be ultimately consumed in the City of
Amarillo and its environs to the maximum extent practicable. With respect
to that portion, if any, of excess "B" Contract gas which is delivered by
Seller to Buyer under the Agreement and which Buyer sells or delivers
outside the City of Amarillo and its environs, Buyer hereby agrees that the
first gas from other sources which Buyer delivers into the City of Amarillo
and its environs, if any, shall be deemed to be a return of the excess "B"
Contract gas first delivered outside the City of Amarillo and its environs.
The return of all such gas by Buyer shall be reflected in the quarterly
statements Buyer provides to Seller. If the above sets forth your
understanding of our agreement, please sign both originals of this
Agreement and return one for our records.
Sincerely,
ACCEPTED AND AGREED TO
this 1st day of August, 1995.
--- ------
MESA OPERATING CO. KN MARKETING, L.P.
By its General Partner,
American Pipeline Company
By: /s/ Paul W. Cain By: /s/ S.H. Charlton, III
----------------- ----------------------
Paul W. Cain S. H. Charlton, III
President and Chief Senior Vice President
Operating Officer
September 12, 1995
KN Marketing, L.P.
323 Clay Street, Suite 2000
Houston TX 77002-9817
Attention: Mr. Samuel H. Charlton, III
Subject: Confidentiality Provision
Gas Purchase Agreement
Dated January 1, 1996
Pursuant to Paragraph 20.5 of Article XX, Miscellaneous, of the captioned
Gas Purchase Agreement ("Agreement") Mesa Operating Co. ("Mesa") and KN
Marketing, L.P. ("KN") agreed to hold in confidence and not disclose any
information concerning the terms of Article IV, Price, of the Agreement
except in certain specific situations described therein.
Mesa has decided to offer for sale its interests in the oil and gas wells
and leases subject to the Agreement. As part of their due diligence,
prospective purchasers of these interests will need to review the captioned
Agreement.
In view of the foregoing, Mesa hereby requests that KN consent to the
disclosure of the terms of the Agreement including Article IV, Price, to
the prospective purchasers of its interests covered thereby. Mesa will
have the prospective purchasers sign a Confidentiality Agreement under
which they will agree to keep the information obtained from Mesa,
including the terms of the Agreement, confidential and use such information
only for the purpose of evaluating the properties for a transaction with
Mesa.
Please indicate your consent to Mesa's disclosure of the terms of the
agreement by signing in the space provided below and returning one (1) copy
of this letter to me. Thank you for your cooperation and prompt response.
KN herein expressly withholds its consent if the prospective purchaser is
Southwestern Public Service Company(SPS), Atmos Energy Corporation (Atmos)
and/or any affiliates of either SPS or Atmos.
Sincerely, MESA OPERATING CO.
By: /s/ D'Nard A. Hemphill
----------------------
D'Nard A. Hemphill, Attorney-in-Fact
Accepted and Agreed to this 18th day of September 1995.
---- --------------
KN MARKETING, L.P.
By its general Partner,
American Pipeline Company
By: /s/ S.H. Charlton, III
-----------------------
S.H. Charlton, III
Senior Vice President