AMENDATORY AGREEMENT NO. 3
TO THE AGREEMENT FOR THE SALE AND PURCHASE OF
NATURAL GAS BETWEEN
CHUGACH ELECTRIC ASSOCIATION
AND
SHELL WESTERN E&P INC.
THIS AGREEMENT is made and entered into this 14th day of October, 1996, by and
between Shell Western E&P Inc., a corporation organized under the laws of the
State of Delaware ("SWEPI"), and Chugach Electric Association, Inc., an Alaska
nonprofit electric cooperative membership corporation ("Chugach").
WHEREAS, SWEPI owns a one-third working interest in the natural gas reserves
underlying the Beluga River Unit, Cook Inlet, Alaska; and
WHEREAS, SWEPI, as Seller, and Chugach, as Buyer, have entered into an Agreement
for the Sale and Purchase of Natural Gas dated April 25, 1989, as amended on
October 1, 1989 and June 20, 1990, and as supplemented on November 2, 1990
("Natural Gas Agreement"); and
WHEREAS, SWEPI has entered into a Purchase and Sale Agreement with the
Municipality of Anchorage d/b/a Municipal Light & Power ("ML&P") dated April 9,
1996 ("PSA"), as amended by the Supplemental Agreement dated September 24, 1996,
whereby SWEPI has agreed to sell and ML&P has agreed to purchase SWEPI's
one-third working interest in the Beluga River Unit effective September 1, 1996;
and
WHEREAS, by letter dated December 4, 1989, the Alaska Department of Natural
Resources ("ADNR") agreed to use the price for the gas established in the
Natural Gas Agreement as the royalty value for the State's share of royalty
production pursuant to AS 38.05.180(aa); and
WHEREAS, SWEPI desires to assign the Natural Gas Agreement to ML&P; and
WHEREAS, Chugach desires to reduce future commercial interaction between itself
and ML&P with respect to the rights and obligations of the parties under the
Natural Gas Agreement; and
WHEREAS, SWEPI and Chugach desire to amend the terms and conditions of the
Natural Gas Agreement in order to permit the assignment of such amended Natural
Gas Agreement to ML&P with the consent of Chugach.
NOW, THEREFORE, SWEPI and Chugach, in consideration of the mutual promises set
forth herein, agree as follows:
1. All references hereunder to Sections, Subsections, or Exhibits shall
mean such Section, Subsection, or Exhibit contained in the Natural Gas
Agreement.
2. This Agreement amending the terms and conditions of the Natural Gas
Agreement shall become effective only upon the Closing of the PSA, as
such term is defined in the PSA or any amendment thereto, and upon
approval of this Agreement by the Alaska Public Utilities Commission
("APUC"). In the event the Closing does not occur under the terms and
conditions of the PSA, the Natural Gas Agreement will not be assigned
by SWEPI to ML&P and this Agreement amending the terms of the Natural
Gas Agreement shall be void, ab initio.
3. Chugach may continue its status as an intervenor in Docket U-96-36
which is pending before the APUC, but shall not take any position
before the APUC which would oppose the proposed sale of SWEPI's
one-third interest in the Beluga River Unit to ML&P or any other
position which would cause the APUC to condition the terms of the PSA.
Chugach shall be free to argue to the APUC in Docket U-96-36 that the
APUC should establish a separate docket to investigate the appropriate
limitations and requirements, if any, that should govern ML&P's
internal accounting for and pricing of gas used to generate electric
power.
4. Chugach shall give its consent to the assignment of the Natural Gas
Agreement, as amended herein to ML&P, pursuant to Section 10.6.
Assignment of the Natural Gas Agreement, as amended by this Agreement,
will be without a release of SWEPI's obligations under the Natural Gas
Agreement, and shall not relieve SWEPI of its obligations to Chugach
under the Natural Gas Agreement.
5. In Section 1.15, delete the reference to "Administrator of the Rural
Electrification Administration, an agency of the United States
Department of Agriculture, and Spokane Bank for Cooperatives."
6. In Section 4.4, SWEPI acknowledges that gas committed to Chugach under
the Natural Gas Agreement enjoys a priority over any gas that ML&P will
acquire from SWEPI, to the extent that ML&P uses or otherwise disposes
of such gas for sale or to generate electric power. Chugach
acknowledges that SWEPI retains the rights specified in Article II of
the Natural Gas Agreement and that the priority for the contract
specified in Exhibit A of the Natural Gas Agreement is not affected by
this Agreement.
7. SWEPI shall be deemed to decline any offer by Chugach, pursuant to
Section 5.5, to sell any volume of gas not previously committed under
the Natural Gas Agreement.
8. Under Section 5.5(C), if ARCO Alaska, Inc. ("ARCO") either declines or
does not decline to permit Chugach the right to take as Third Party
Replacement Gas any gas then committed to Chugach under the Sale and
Purchase of Natural Gas Agreement dated April 21, 1989, between ARCO
and Chugach ("ARCO Contract"), SWEPI shall be deemed to have acted in
the same manner as ARCO. In this respect, Chugach shall
provide to SWEPI on a timely basis a copy of the communications between
ARCO and Chugach pertaining to this Third Party Replacement gas matter.
Notwithstanding the above, SWEPI may decline to permit Chugach to take
Third Party Replacement gas to the extent that ML&P requires the
necessary deliverability to satisfy ML&P's actual and verifiable
requirements for deliverability necessary for the generation of
electric power by ML&P.
9. Except for differences in excess deliverability provided by producers
for gas supplied under Sections 5.5(C), 5.7(B) or 5.7(C), pursuant to
Section 5.6, Chugach shall have met its obligation to SWEPI and SWEPI
shall have met its obligation to Chugach if Chugach purchases and
takes from SWEPI and SWEPI sells and delivers to Chugach exactly the
same volumes as Chugach purchases and takes from ARCO and ARCO sells
and delivers to Chugach under the ARCO Contract. In this respect,
Chugach shall provide to SWEPI on a timely basis a copy of the
communications between Chugach and ARCO pertaining to the volume of
gas purchased and taken under the ARCO Contract.
10. Under Sections 5.7(B) and 5.7(C), if ARCO declines or does not decline
to permit Chugach to take gas in excess of the then applicable
deliverability requirement ("excess delivery gas") under its Contract,
then SWEPI shall be deemed to have acted in the same manner as ARCO.
In this respect, Chugach shall provide to SWEPI on a timely basis a
copy of the communications between ARCO and Chugach pertaining to
excess delivery gas. Notwithstanding the above, SWEPI may decline to
permit Chugach to take excess delivery gas to the extent that ML&P
requires such gas to satisfy ML&P's actual and verifiable requirements
for deliverability necessary for the generation of electric power by
ML&P.
11. The reference in Section 5.5(C) to "then existing other commitments",
the reference in Section 5.7(B) to "the deliverability is not committed
to the performance of any other contract", and the reference in Section
5.7(C) to "within the operational and contractual limitations and
constraints to which SWEPI is subject" shall, subject to the provisions
of Section 4.4, as described in Section 6 of this Agreement, include
satisfaction of ML&P's actual and verifiable requirements for
deliverability necessary for the generation of electric power by ML&P.
12. Under Section 6.1, SWEPI shall be deemed to have acted in the same
manner as ARCO reacts under the ARCO Contract as to whether the annual
Forecast is unreasonably high or low. "Va" in Section 6.1 under this
Agreement shall be equal to "Va" under the ARCO Contract, as the same
shall be determined and resolved by ARCO and Chugach under the ARCO
Contract.
13. In complying with Section 6.1, any records which Chugach, in the
ordinary course of doing business, would not make public or provide to
a competitor shall not be required to be furnished to SWEPI under the
terms of the Natural Gas Agreement. Further, SWEPI shall not knowingly
obtain or seek to obtain such information from ARCO, Chevron, Marathon,
or their respective successors or assigns of their respective contracts
with
Chugach.
14. Under Sections 6.2 and 6.3, SWEPI shall be deemed to have given its
consent for Chugach to take the actions referenced in such Sections, if
ARCO has given its consent for Chugach to take the actions referenced
in such Sections under the ARCO Contract. SWEPI may elect to give its
consent for Chugach to take the actions referenced in such Sections.
15. In Section 6.5, substitute "Chugach shall not take any action to
displace gas provided by SWEPI which it has not taken under the ARCO
Contract or under the Sale and Purchase of Natural Gas Agreement dated
April 27, 1989, between Chevron and Chugach ("Chevron Contract") to
displace gas provided by ARCO or Chevron, respectively" for the proviso
in the last three lines of Section 6.5.
16. In Section 7.3, add the following sentence at the end of the Section:
"Any Period 2 Volume remaining to be taken on December 31, 2013, shall
be taken by no later than December 31, 2015."
17. Any adjustment to the price of gas delivered by SWEPI under the Natural
Gas Agreement due to Btu adjustment under Section 7.10 or Exhibit D
shall be identical to the price adjustment, if any, as the same shall
be determined and resolved by ARCO under the ARCO Contract.
18. As long as ARCO is the Operator of the Beluga River Unit, ARCO shall be
the dispatching agent for SWEPI under the Natural Gas Agreement, and
shall be responsible for complying with dispatching requests of
Chugach. Neither SWEPI nor ML&P nor Chugach or their successors or
assigns will become Operator of the Beluga River Unit, nor will SWEPI
or ML&P become the dispatching agent responsible for complying with
dispatching requests of Chugach.
19. In Section 10.1, add the words "except in the case of bad faith" to
the end of the second sentence.
20. For purposes of Section 10.2, the Municipality of Anchorage shall not
be considered as a governmental agency of competent jurisdiction.
21. Under Section 10.9, the right of access to property of the other shall
be limited to access by Chugach to the Beluga River Unit, and shall not
give either Chugach or SWEPI the right to access of the property of the
other.
22. In Section 10.11, the access to the records of a Party by the other
Party shall be limited to records of the Operator/Dispatcher of gas
from the Beluga River Unit.
23. In Section 10.13, substitute "Alaska Public Utilities Commission" for
"approved by each entity whose approval is a Necessary Approval".
24. With respect to Exhibit D, Paragraph B. III (b), SWEPI shall be deemed
to have agreed to any substitute indices and/or commodities required
under Paragraph B as ARCO and Chevron shall agree to under the ARCO
Contract and the Chevron Contract, respectively. In the event ARCO and
Chevron do not act in the same manner with respect to substitute
indicies and/or commodities, SWEPI may elect to act in the same manner
as either ARCO or Chevron.
25. Nothing in this Agreement shall affect SWEPI's rights and obligations
under the Beluga River Unit Joint Operating Agreement dated April 1,
1962, as amended. SWEPI represents that there is nothing in the Joint
Operating Agreement which prevents SWEPI from performing its
obligations under this Agreement.
26. Exhibit E shall be deleted in its entirety and the attached Exhibit E
shall be substituted therefor.
27. Except for the foregoing amendments to the Natural Gas Agreement, all
other terms and conditions of the Natural Gas Agreement shall remain in
full force and effect.
28. In Section 7.6, add the following as subsection (F): "(F) SWEPI shall
notify Chugach of any notice or demand received from the Alaska
Department of Revenue, or successor agency, which assesses Reimbursable
Tax or Taxes with respect to the gas delivered to Chugach by SWEPI
under the Natural Gas Agreement as amended herein. At the request of
Chugach, SWEPI shall pay such assessment under protest.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
CHUGACH ELECTRIC ASSOCIATION, SHELL WESTERN E&P INC.
INC.
By: /s/ Eugene N. Bjornstad By: /s/ Steve Merritt
Its: General Manager Its: Attorney-in-Fact