EXHIBIT 10(h)
GAS TRANSPORTATION AGREEMENT
THIS AGREEMENT, made and entered into as of this 14th day of June, 1994, by
and between MESA Operating Co., a Delaware corporation, acting on behalf of
itself and as agent for Hugoton Capital Limited Partnership (HCLP) hereinafter
collectively referred to as "Shipper," and WESTERN RESOURCES, INC., a Kansas
corporation, hereinafter referred to as WR."
WITNESSETH
WHEREAS, Shipper desires that certain volumes of gas be delivered to WR,
and
WHEREAS, WR is willing on behalf of Shipper to compress and transport such
gas through WR's facilities and deliver such gas for Shipper's account at the
interconnect point(s) specified herein or at such other interconnect point(s) as
may be mutually agreed to between the parties with such compression and
transportation to take place pursuant to this Agreement between WR and Shipper
and with WR to be paid for such compression and transportation by Shipper as
hereinafter set forth; and
WHEREAS, WR is agreeable to compressing and transporting such gas on a firm
basis, in accordance with the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and premises set
forth herein, the parties hereto agree as follows:
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ARTICLE I
DEFINITION OF TERMS
Except where the content expressly states another meaning, the following
terms, when used in this Agreement shall have the following meanings:
1.1 The term "day" shall mean a period of twenty-four (24) consecutive
hours beginning and ending at 8:00 a.m. local time.
1.2 The term "month" shall mean the period of time beginning at 8:00 a.m.
local time on the first day of the calendar month and ending at 8:00 a.m local
time on the first day of the next succeeding calendar month.
1.3 The term "quarter" shall mean a three-month period beginning January
1st, April 1st, July 1st or October 1st.
1.4 The term "contract year" shall mean a period of twelve (12) consecutive
months beginning on the first day of the month during the occurrence of initial
deliveries of gas hereunder. The last contract year of this Agreement shall end
at the termination hereof as provided in Article XI of this Agreement.
1.5 The term "cubic foot" shall mean the volume of gas which occupies one
cubic foot when such gas is at a temperature of sixty degrees Fahrenheit (60
degrees F), and at a pressure of fourteen and sixty-five hundredths pounds per
square inch absolute (14.65 psia) dry and corrected for deviation from ideal gas
behavior.
1.6 The term "MCF" shall mean one thousand (1,000) cubic feet of gas; the
term "MMCF" shall mean one million (1,000,000) cubic feet of gas; and the term
"BCF" shall mean one billion (1,000,000,000) cubic feet of gas.
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1.7 The term "British Thermal Unit (BTU)" shall mean the amount of heat
required to raise the temperature of one pound of water from fifty-nine degrees
Fahrenheit (59 degrees F) to sixty degrees Fahrenheit (60 degrees F) at a
pressure of fourteen and sixty-five hundredths pounds per square inch (14.65
psia). The term "MMBTU" shall mean one million (1,000,000) BTU.
1.8 The term "gross heating value" means the total calorific value,
expressed as BTU per cubic foot, and obtained pursuant to Paragraph 7.11 of
ARTICLE VII of the amount of gas which would occupy the volume of one cubic foot
on a dry basis.
1.9 The term "gas" shall mean natural gas or a mixture of hydrocarbons or
of hydrocarbons and noncombustible gases, helium and other inerts, in a gaseous
state, consisting predominantly of methane.
ARTICLE II
DELIVERY AND REDELIVERY
2.1 Subject to the further provisions of this Agreement, Shipper agrees to
deliver or cause to be delivered to WR at the point(s) of interconnect as set
forth on Exhibit "A," attached hereto and made a part hereof, hereinafter called
the "Delivery Point(s)," or at such other points as the parties may mutually
agree and place on Exhibit "A," and WR agrees to accept, compress, transport and
redeliver, (i) up to one hundred thirty (130) MMCF per day of gas on a firm
basis during the months of April through October and up to an additional
(thirty) (30) MMCF per day of gas on an interruptible basis, and (ii) up to one
hundred forty-five (145) MMCF per day of gas on a firm basis during the months
of November through March and up to an
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additional fifteen (15) MMCF per day of gas on an interruptible basis. Except
for events of force majeure and scheduled maintenance, WR cannot refuse to
accept, compress, transport or redeliver gas delivered by Shipper on a firm
basis up to the maximum firm quantities specified above. WR shall redeliver
volumes of gas, containing the same number of BTU's, equivalent gallons of
ethane and heavier hydrocarbon products, and equivalent cubic feet of helium as
the gas contained when accepted by WR, except for any reduction for any natural
gas liquids which may occur as a result of natural condensation in the
compression or transportation process, to the point(s) of interconnect as set
forth on Exhibit "B," attached hereto and made a part hereof, hereinafter called
the "Redelivery Point(s)," or at such other points as the parties may mutually
agree and place on Exhibit "B." The acceptance and inclusion of additional
Delivery and Re-delivery Points under this Agreement shall be at WR's sole
discretion.
2.2 Shipper shall separately deliver to WR at the outlet of the Satanta
Plant a daily volume of residue gas equivalent to the volume of fuel actually
incurred in providing the services hereunder at WR's Ulysses compressor station
and in WR's pipeline facilities between the Delivery and Redelivery Point(s), up
to a maximum of two and thirty-eight hundredths percent (2.38%) of the volumes
accepted from Shipper by WR for compression and transportation at the
Intermediate Delivery Point hereunder. On July 1, 1996, and each succeeding July
1st during the remaining term of this Agreement, at WR's option, said maximum
percentage may be redetermined by WR. WR shall use its best judgement in
redetermining said percentage based on
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actual fuel consumption incurred in providing the services hereunder at WR's
Ulysses compressor station and in WR's pipeline facilities between the Delivery
and Redelivery Point(s).
2.3 Commencing on the date of first acceptance by WR of gas at the Delivery
Point(s), and continuing thereafter during the term hereof, WR shall redeliver
at the Redelivery Point(s), volumes of gas containing the same number of BTU's,
equivalent gallons of ethane and heavier hydrocarbon products, and equivalent
cubic feet of helium as the gas contained when accepted by WR, except for any
reduction for any natural gas liquids which may occur as a result of natural
condensation in the compression or transportation process, from Shipper under
said Paragraph 2.1 at the Intermediate Delivery Point. Measurement of gas at the
Redelivery Point(s) shall be through facilities installed, operated and
maintained by the party owning such facility or as new delivery points may be
added, by WR or others as may be designated.
2.4 Delivery and redelivery may be at points through which other volumes of
gas are being measured; therefore, the measurement of the volumes of gas
delivered and redelivered under this Agreement shall be considered as part of
the total volumes measured through the meter. Each party hereto will furnish or
cause to be furnished to the other party hereto all data required to accurately
account for all gas delivered and redelivered hereunder.
2.5 Nothing in this contract shall require WR to increase the capacity of
the existing compressor station or pipeline system. WR shall sustain the
capacity of the
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existing compressor station and pipeline system at current levels and shall
maintain such facilities in good working order.
ARTICLE III
SCHEDULING, REPORTING AND BALANCING DELIVERIES
3.1 At least ten (10) days prior to the first day of each quarter of each
calendar year, or at such other times as may be mutually agreeable to the
parties hereto, Shipper shall furnish to WR a written schedule showing the
estimated daily quantity of gas it desires WR to transport hereunder during each
month of the following four quarterly periods. This schedule is prepared only to
allow the parties hereto to schedule maintenance on compressors and other
facilities. Both parties understand and agree that this schedule reflects
estimates only and such estimates may change from time to time. WR agrees to use
its best efforts to schedule and reasonable commercial efforts to perform
maintenance on its compressors and other facilities in a manner which would
allow Shipper to produce the estimated quantities of gas provided pursuant to
this Section 3.1, as such estimates may change from time to time.
3.2 Shipper shall on a daily basis by nine o'clock (9:00) a.m. or on some
other mutually agreeable basis, verbally advise WR's Gas Control Department as
to the volumes and estimated BTU content of the gas by delivery point which
Shipper desires transported hereunder.
3.3 Either party or its designee owning the measurement facilities will
report or cause to be reported to the other party on a daily basis, the
volumetric activity
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regarding that delivery or redelivery point. Such reported volumes will be a
field approximation and not of accounting accuracy.
3.4 Notwithstanding the quarterly estimate discussed in Paragraph 3.1
above, Shipper may nominate, in writing, a transport volume by the 20th of each
month specifying the daily volumes to be transported, and WR shall notify
Shipper, in writing by the 25th of its acceptance of such original nomination
(the Original Nomination). When such Original Nomination is subsequently
modified by both parties, in writing, then such nomination, as changed, shall
nevertheless be deemed the Original Nomination for the applicable transport
month.
3.5 Whenever during any month, Shipper desires to change its transportation
nomination for the remaining day(s) in that month or desires to change its
transportation nomination on a daily basis or for any hour(s) on any particular
day(s), it may do so provided (i) Shipper requests such a change(s), in writing,
at least four hours prior to such change being effective and (ii) WR accepts
such change(s), in writing, within two hours of Shipper's requested change(s) in
its nominations(s). WR shall charge the rate provided for herein on the actual
monthly transport volume. If the actual monthly transport volume is less than
ninety percent (90%) of the Original Nomination, Shipper shall nevertheless pay
WR as though ninety (90%) of the Original Nomination had been transported if (1)
such shortfall was not the result of force majeure, (2) such shortfall was not
caused by WR and (3) WR demonstrates to Shipper that WR was unable to transport
such volumes for other parties for the month as a result of Shipper's Original
Nomination.
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3.6 While it is the intent of the parties hereto that gas delivered to WR
hereunder be redelivered concurrently, it is recognized that due to operating
conditions, the volumes of gas delivered may not be equal to the volume of gas
redelivered on any one particular day. The parties shall use their best efforts
to keep such variances to a minimum, and therefore agree to undertake to balance
deliveries and redeliveries monthly on a BTU basis. Any monthly BTU imbalance
shall be eliminated within the next thirty (30) days or some other mutually
agreeable time period. Upon termination of this Agreement, any party owing gas
hereunder shall tender for delivery or redelivery at the point herein designated
the amount of such deficiency within sixty (60) days from the date of such
termination. It is understood and agreed that there will be complete balancing
upon or following termination of this Agreement and that the provisions of this
Paragraph shall survive the termination of the other portions of this Agreement
until such time as such balancing is attained. Should, after a period of sixty
(60) days, Shipper be unable to eliminate a balance of gas residing in WR's
system due to Shipper's failure to provide for the redelivery of said gas, then
WR shall purchase said gas from Shipper at the spot market price discussed
below, expressed in dollars per MMBTU dry, in effect for the month said gas is
purchased. Should, after a period of sixty (60) days, Shipper not deliver gas to
make-up a shortage in its account on WR's system, Shipper shall pay WR for each
MMBTU required to eliminate said shortage at one hundred five percent (105%) of
the spot market price discussed below, expressed in dollars per MMBTU dry, in
effect for the month in which such shortage is eliminated. Said spot market
price shall be equal
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to the arithmetic average of the five (5) "Index" MMBTU price postings
representing deliveries into the pipeline systems of ANR Pipeline Co. (Oklahoma
region), Natural Gas Pipeline Co. of America (Oklahoma and Kansas region),
Northern Natural Gas Co. (Texas, Oklahoma and Kansas region), Panhandle Eastern
Pipeline Co. (Texas and Oklahoma region) and the Williams Natural Gas Co.
(Texas, Oklahoma and Kansas region) as reported in the first issue of Inside
FERC Gas Market Report for the month in which said gas is purchased by WR or
said shortage is eliminated by Shipper, respectively.
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ARTICLE IV
QUANTITY
4.1 Shipper shall deliver to WR each contract year a minimum quantity of
twenty (20) BCF at the Delivery Point(s), with daily quantities delivered to and
accepted by WR at the Delivery Point(s) up to the maximum quantities as
specified in Section 2.1.
4.2 It is understood that WR is currently obligated to transport up to
thirteen (13) MMCF per day on a firm basis for other customers from the Initial
Delivery Point to the Final Redelivery Point. In the event insufficient firm
capacity is available to transport both the quantities specified in Section 2.1
and the firm quantity stated above which WR is currently obligated to serve, the
total available firm capacity will be allocated among WR's firm customers based
on the ratio between each customer's firm (MDQ's) WR is obligated to serve.
Notwithstanding the above, the total available firm capacity allocated to
Shipper will not be less than ninety-one and eight tenths percent (91.8%) of the
total available firm capacity in the months of November through March and will
not be less than ninety and nine tenths percent (90.9%) of the total available
firm capacity in the months of April through October.
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ARTICLE V
QUALITY
5.1 All natural gas delivered and redelivered under the terms of this
Agreement shall be of merchantable quality and conform to the following
specifications:
(a) Oxygen - the gas shall be free of oxygen
(b) Hydrogen Sulfide - the hydrogen sulfide content shall not exceed
one-quarter (1/4) grain per one hundred (100) cubic feet.
(c) Carbon Dioxide - the carbon dioxide content shall not exceed five
hundred (500) parts per million.
(d) Liquids - the gas shall be free of water and hydrocarbons in liquid
form at the temperature and pressure at which the gas is delivered. The gas
delivered at the Intermediate Delivery Point and the Final Redelivery Point
shall in no event contain water vapor in excess of seven pounds (7#) per million
cubic feet.
(e) Dust, Gums and Solid Matter - the gas shall be commercially free of
dust, gum and other solid matter.
(f) Heating Value - the gas shall have a heating content of not less than
nine hundred and fifty (950) BTU per cubic foot at fourteen and seventy-three
hundredths pounds per square inch absolute (14.73 psia) saturated.
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(g) Total Sulphur - the gas shall not contain more than twenty (20) grains
of total sulphur per one hundred (100) cubic feet of gas as determined by a
method generally acceptable for use in the gas industry.
(h) Temperature - the gas shall not be delivered at a temperature of more
than one hundred twenty degrees (120 degrees) Fahrenheit.
5.2 If, at any time, gas tendered for delivery and/or redelivery hereunder
shall fail to conform to any of the quality specifications set forth above, the
receiving party may, at its option, refuse to accept delivery and/or redelivery
and be absolved of any further obligation to perform, pending correction of the
deficiency by the delivering party. The receiving party shall notify the
delivering party of the deficiency as soon as possible after its occurrence.
However, if Shipper delivers to WR gas which conforms to all of the quality
specifications set forth above, then WR must redeliver to Shipper gas which
conforms to all of the quality specifications set forth above and WR will
perform whatever work is required to cause the gas to meet such quality
specifications.
ARTICLE VI
PRESSURES
6.1 Shipper shall deliver gas to WR at the Initial Delivery Point at a
pressure of not less than one hundred (100) psig. After compression by WR, the
gas shall be delivered to Shipper at the Intermediate Redelivery Point at a
pressure not more than six hundred (600) psig nor less than five hundred (500)
psig. After dehydration or processing by Shipper, the pressure of the gas or
residue gas redelivered to WR at
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the Intermediate Delivery Point shall not decline by more than ten (10) psi if
dehydrated only, or more than twenty-five (25) psi if dehydrated and processed
from the pressure such gas was delivered at the Intermediate Redelivery Point.
WR shall deliver gas dehydrated by Shipper, back to Shipper at the inlet to the
Satanta Processing Plant at a pressure not less than four hundred ninety (490)
psig.
ARTICLE VII
MEASUREMENT AND HEATING VALUE DETERMINATION
7.1 Gas delivered to WR under this Agreement shall be measured at
prevailing meter pressures and the volumes thereof shall be calculated and
accounted for as between the parties hereto on the basis of a standard cubic
foot of gas at a pressure of fourteen and sixty-five hundredths pounds per
square inch absolute (14.65 psia) and a temperature of sixty degrees Fahrenheit
(60 degrees F), computed in accordance with Boyle's Law governing pressure and
volume of gases (with correction for deviation as hereinafter provided).
7.2 Gas redelivered under this Agreement by WR shall be measured and
calculated by the party owning said measurement facilities or his designee at
the point(s) of redelivery as described in Exhibit "B." The basis of measurement
shall be as described in Paragraph 7.1 above. All delivery and re-delivery
measurement shall be expressed or re-expressed on the same pressure base for
balancing and billing purposes as provided for herein.
7.3 Gas volumes and BTU/CF measurements shall be corrected to reflect the
actual water vapor content of the gas as delivered or redelivered. Any gas which
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contains water vapor of seven pounds (7#) per MMCF or less shall be deemed
"dry".
7.4 The specific gravity of the gas delivered and redelivered hereunder
shall be determined by the party currently operating the measurement facilities
as often as is found necessary in practice and in accordance with an approved
method, provided that such test shall be preceded by reasonable notice to the
other parties in order that they may have a representative present.
7.5 The temperature of the gas delivered and redelivered hereunder shall be
determined by means of recording thermometers of standard manufacture so
installed that they may properly record the temperature of the gas delivered and
redelivered through the meters. The arithmetical average of the hourly
temperature recorded for each period shall be used in correcting the volume of
gas measured during said period to the standard provided in Paragraph 7.1 and
7.2 above.
7.6 The deviation of the gas from Boyle's Law at the pressure and
temperatures at which the gas is measured shall be by tests and analyses
performed as often as the parties hereto deem necessary. The method of making
such tests or analyses shall be determined by mutual agreement.
7.7 It is assumed and agreed that the values of the Reynolds number
factor and the expansion factor are ONE (1).
7.8 The pressure and uncorrected volumes of gas delivered and redelivery
hereunder shall be measured by standard type metering equipment constructed as
required by WR, at the Point(s) of Delivery and Redelivery hereunder. Orifice
metering facilities shall be constructed in accordance with Gas Measurement
Committee Report
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No. 3, dated April 1955 of the Natural Gas Department of the
American Gas Association and any subsequent amendments thereof which are
mutually agreeable to the parties hereto, and volumes shall be calculated in
accordance with said Gas Measurement Committee Report No. 3, or as hereafter
amended.
7.9 Either party shall have access to the metering equipment at all
reasonable times, but calibrations and adjustments thereof and changing of
charts shall be done by the employees or agents of the owning party and such
party shall change the charts in accordance with good practice and shall keep
said meters accurate and in good repair. The meters shall be tested and
calibrated by the owning party monthly, or as often as is found necessary in
practice, provided that such tests shall be preceded by reasonable notice to the
parties in order that the parties may have representatives present. Either party
may challenge the accuracy of any meter and if, after testing, such meter is
found by the owning party to be inaccurate by an amount exceeding one percent
(1%), high or low, then said party shall repair the meter and make the necessary
volume corrections, based on the extent of the inaccuracy and adjusting back to
zero percent (0%), for the time the meter has been inaccurate, provided that in
no event shall corrections extend back beyond the date of the preceding tests.
If the meter, when challenged, is found to be accurate within one percent (1%),
high or low, then the cost of the test shall be borne by the requesting party
and the meter shall be repaired to measure accurately. If for any reason any
meter shall be out of service or repair so that the amount of gas delivered
cannot be ascertained or computed from the reading thereof, the gas delivered
during the period
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the meter is out of service or repair shall be estimated and agreed upon by the
parties upon the basis of the best data available using the first of the
following methods which is feasible: (1) By using the registration of any check
meter(s) installed and accurately registering; (2) By correcting the error if
the percentage of error is ascertainable by calibration, test or mathematical
calculation; (3) By estimating the quantity of delivery by deliveries during
preceding periods under similar conditions when the meter was registering
accurately. If the period that the meter is out of service or repair is not
known or agreed upon, the correction shall be made for a period equal to one
half (1/2) the time since the date of the last test, but not exceeding thirty
(30) days.
7.10 The charts and records from the metering equipment shall remain the
property of the owning party but, upon request of the other party, the owning
party shall submit same to the other party together with calculations therefrom,
for such party's inspection and verification, subject to return within twenty
(20) days from receipt thereof, after which the charts and records shall be kept
on file by the owning party for a period of time not less than specified by
Kansas law and may then, at the owning party's option, be destroyed.
7.11 The gross heating value of the gas delivered and redelivered hereunder
shall be determined monthly by gas chromatography from a continuous sample of
the gas taken at the Intermediate Delivery Point. From this analysis, a
determination of the gross heating value will be made in accordance with the
latest published procedures by the Gas Processors Association. The continuous
sample will be taken such that
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the monthly measured volume and monthly BTU/CF
content are for the same period and will be used together in payment
calculations for the gas delivered to WR and redelivered by WR.
7.12 In the event daily BTU calculations are required, the monthly BTU/CF
determination derived from the analysis of the monthly continuous or periodic
sample would be applicable to each and every daily volume in the given month. As
an alternative to gas chromatography, WR may determine the gross heating value
of the monthly continuous or periodic sample by a calorimeter employing the
Thomas Principle of Calorimetry described in Research Paper #519 published by
the U.S. Department of Commerce. In the event a continuous sample is lost or
inadvertently destroyed, the previous month's gross heating value will be
applied unless a mutually agreeable alternate source of accurate data is
available for that month. All tests and analyses of samples shall be preceded by
reasonable notice to the other party in order that such party may have a
representative present.
7.13 If during the term hereof, any new and improved method or technique is
developed for gas measurement or for determination of factors used in gas
measurement, such new and improved method or technique may be substituted for
the gas measurement described herein by mutual agreement of the parties.
ARTICLE VIII
RATES
8.1 For gas transported on behalf of Shipper hereunder, Shipper shall pay
WR a transportation rate equal to six cents ($.06) for each MCF of gas
transported
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from the Initial Delivery Point to the Final Redelivery Point based on the
volumes of gas actually delivered by WR for Shipper's account at the Final
Redelivery Point. The transportation rate shall escalate at four percent (4%) on
each annual anniversary date beginning June 1, 1996.
8.2 The parties hereto agree that transportation of gas hereunder shall not
include storage service.
8.3 Should it appear to WR that it will be required to incur additional
costs of any kind, excluding property, ad valorem, franchise and income taxes
and costs of administering this agreement or operating, maintaining, or
replacing existing capacity, equipment, pipelines, or facilities used and useful
in the performance of this Agreement and not otherwise identified in this
Agreement, WR shall advise Shipper of its estimate of such costs with supporting
workpapers, the reasons such costs are expected to be incurred to provide
service, and the changes required in Shipper's nominations and scheduling of gas
transportation needed to avoid incurrence of such costs in writing before WR
incurs such costs. Shipper shall have the right to alter its nominations and
schedules to avoid the necessity for WR to incur such additional costs. The
notice provided for in this Section 8.3 will allow Shipper a reasonable time,
not less than thirty (30) business days, in which to take action to avoid the
incurrence of such costs by WR. If Shipper does not take appropriate action in
the period specified in the notice, WR will be authorized to increase the rates
and charges to Shipper hereunder in an amount sufficient to allow it to recover
such additional costs over the then-remaining term of this agreement.
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8.4 In each contract year during the term of this Agreement, Shipper shall
purchase or pay for an annual quantity of natural gas transportation service
equal to the minimum annual quantity specified in Article IV (20 BCF per
contract year) at the then effective transportation rate. If Shipper transports
less than the annual minimum amount and such deficiency was not caused by WR, WR
shall, in its first invoice after the end of the applicable contract year,
invoice Shipper for the difference between Shipper's actual annual
transportation quantity and such minimum annual quantity in the applicable
contract year at the transportation rate in effect in the last month of the
applicable contract year and Shipper shall be obligated to pay such charges. In
any contract year after Shipper has, by virtue of this Paragraph 8.4, been
required to pay transportation charges for volumes not transported, Shipper may
transport such deficient volumes on an interruptible basis by providing WR
written notice of the volume to be transported hereunder and subject to the
availability of capacity to transport such volumes. Shipper may not transport
such deficient volumes hereunder in any contract year until it shall have first
transported under this Agreement the minimum annual quantity Specified in
Article IV for that contract year. In connection with the transportation of such
deficient volumes, Shipper shall, in addition to the charges previously paid to
WR, pay WR the difference between the transportation rate in effect hereunder
when such volumes are actually transported and the rate which was in effect and
applied to such deficient volumes at the time such deficiency was incurred.
Shipper shall have six (6) months after termination of the Agreement to make up
any deficient volumes that may have previously occurred.
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ARTICLE IX
BILLING AND PAYMENT
9.1 Following the commencement of deliveries and redeliveries pursuant to
Paragraph 2.1 and 2.3 herein, WR shall on or before the tenth (10th) day of each
month submit to Shipper a statement of the total MCF and MMBTU of gas delivered
and redelivered pursuant to this Agreement during the preceding months as well
as a billing for the transportation fee as determined in accordance with Article
VIII herein.
9.2 Shipper shall pay WR the amount shown as due by such billing within
fifteen (15) days from the date of receipt of said statement, or by the
twenty-fifth (25th) day of the month, whichever is later.
9.3 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 contract.
9.4 If an error should be discovered in any billing, such error shall be
adjusted within thirty (30) days of the determination thereof, provided that
claim therefor shall have been made in writing within twenty-four (24) months
from the date of such billing.
ARTICLE X
INDEMNIFICATION
10.1 As between the parties hereto, Shipper shall be deemed to be in
control and possession of the gas deliverable hereunder and responsible for any
loss,
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claim, demands, expenses, damages or injuries caused thereby, except for those
occasioned solely by the negligence of WR, until the same shall have been
delivered to WR at the points of delivery provided for herein, and Shipper fully
indemnifies and holds WR harmless with respect thereto. As between the parties
hereto, after delivery of such gas, WR shall be deemed to be in exclusive
control and possession of the gas and responsible for any loss, claims, demands,
expenses, injuries or damages caused thereby, except for those occasioned solely
by the negligence of Shipper, and WR fully indemnifies and holds Shipper
harmless with respect thereto.
10.2 Shipper warrants the gas delivered to WR for redelivery shall be free
from all adverse claims, liens and encumbrances. The party having control and
possession of the gas shall do all things necessary to prevent and avoid any
adverse claims, liens or encumbrances on the gas and shall indemnify and save
harmless the other party from and against all suits, action, causes of action,
claims and demands arising from or out of any adverse claims by third parties
claiming ownership of or an interest in the gas which is delivered or for the
account of the other party under this Agreement, and which are caused by the
failure to so protect clear title to the gas.
ARTICLE XI
TERM
11.1 The term of this agreement shall be for a primary period of five (5)
contract years from June 1, 1995, and shall continue in effect from year-to-year
thereafter; provided, however, after the primary period, either party, by giving
twelve (12) months' written notice to the other party prior to an anniversary
date may cancel
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and terminate this agreement without further liability hereunder, except as to
any then existing imbalance, outstanding bill and the warranties expressed in
Section 10.2.
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ARTICLE XII
PROCESSING RIGHTS
12.1 Shipper shall retain all processing rights associated with the gas to
be transported hereunder. WR will not process any gas delivered to it by
Shipper. WR will redeliver to Shipper a volume of gas containing the same number
of BTU's, equivalent gallons of ethane and heavier hydrocarbon components and
equivalent cubic feet of helium as the gas contained when accepted by WR, except
for any reduction for any natural gas liquids which may occur as a result of
natural condensation in the compression or transportation process. Such natural
gas liquids recovered shall be delivered for Shipper's account to MESA's Satanta
Plant facilities.
ARTICLE XIII
DISPUTE RESOLUTION
13.1 DISPUTE RESOLUTION. No party to this Agreement shall be entitled to
take legal action with respect to any dispute relating hereto until it has
complied in good faith with the following alternative dispute resolution
procedures. This Section 13.1 shall not apply if it is deemed necessary to take
legal action immediately to preserve a party's adequate remedy.
13.2 Negotiation. The parties shall attempt promptly and in good faith to
resolve any dispute arising out of or relating to this Agreement, through
negotiations between representatives who have authority to settle the
controversy. Any party may give the other party(ies) written notice of any such
dispute not resolved in the normal course of business. Within twenty (20) days
after delivery of the notice,
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representatives of both parties shall meet at a mutually acceptable time and
place, and thereafter as often as they reasonable deem necessary, to exchange
information and to attempt to resolve the dispute, until the parties conclude
that the dispute cannot be resolved through unassisted negotiation. Negotiations
extending sixty (60) days after notice shall be deemed at an impasse, unless
otherwise agreed by the parties.
13.3 If a negotiator intends to be accompanied at a meeting by an attorney,
the other negotiator(s) shall be given at least three (3) working days' notice
of such intention and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal and State Rules of Evidence.
13.4 ADR Procedure. If a dispute with more than twenty thousand dollars
($20,000.00) at issue has not been resolved within sixty (60) days of the
disputing party's notice, a party wishing resolution of the dispute ("Claimant")
shall initiate assisted Alternative Dispute Resolution (ADR) proceedings as
described in this Section 13.4. Once the Claimant has notified the other
("Respondent") of a desire to initiate ADR proceedings, the proceedings shall be
governed as follows: By mutual agreement, the parties shall select the ADR
method they wish to use. The ADR method may include arbitration, mediation,
mini-trial, or any other method which best suits the circumstances of the
dispute. The parties shall agree in writing to the chosen ADR method and the
procedural rules to be followed within thirty (30) days after receipt of notice
of intent to initiate ADR proceedings. To the extent the parties
24
are unable to agree on procedural rules in whole or in part, the current Center
for Public Resources (CPR) Model Procedure for Mediation of Business Disputes,
CPR Model Mini-trial Procedure, or CPR Commercial Arbitration Rules--whichever
applies to the chosen ADR method--shall control, to the extent such rules are
consistent with the provisions of this Section 13.4. If the parties are unable
to agree on an ADR method, the method shall be arbitration.
13.5 The parties shall select a single Neutral third party to preside over
the ADR proceedings, by the following procedure: Within fifteen (15) days after
an ADR method is established, the Claimant shall submit a list of five (5)
acceptable Neutrals to the Respondent. Each Neutral listed shall be sufficiently
qualified, including demonstrated neutrality, experience and competence
regarding the subject matter of the dispute. A Neutral shall be deemed to have
adequate experience if an attorney or former judge. None of the Neutrals may be
present or former employees, attorneys or agents of either party. The list shall
supply information about each Neutral, including address, and relevant
background and experience (including education, employment history and prior ADR
assignments). Within fifteen (15) days after receiving the Claimant's list of
Neutrals, the Respondent shall select one Neutral from the list, if at least one
individual on the list is acceptable to the Respondent. If none on the list are
acceptable to the Respondent, the Respondent shall submit a list of five (5)
Neutrals, together with the above background information, to the Claimant. Each
of the Neutrals shall meet the conditions stated above regarding the Claimant's
Neutrals. Within fifteen (15) days after receiving the Respondent's list of
Neutrals, the Claimant
25
shall select one Neutral, if at least one individual on the list is acceptable
to the Respondent. If none of the list are acceptable to the Claimant, then the
parties shall request assistance from the Center for Public Resources, Inc., to
select a Neutral.
13.6 The ADR proceeding shall take place within thirty (30) days after the
Neutral has been selected. The Neutral shall issue a written decision within
thirty (30) days after the ADR proceeding is complete. Each party shall be
responsible for an equal share of the costs of the ADR proceeding. The parties
agree that any applicable statute of limitations shall be tolled during the
pendency of the ADR proceedings, and no legal action may be brought in
connection with this agreement during the pendency of an ADR proceeding.
13.7 The Neutral's written decision shall become final and binding on the
parties, unless a party objects in writing within thirty (30) days of receipt of
the decision. The objecting party may then file a lawsuit in any court allowed
by this Agreement. The Neutral's written decision shall be admissible in the
objecting party's lawsuit.
26
ARTICLE XIV
REGULATORY AUTHORIZATIONS
14.1 The transportation of gas hereunder is made pursuant to the authority
under WR's certificate of convenience and necessity granted by the Kansas
Corporation Commission. If at any time during the term of this Agreement, any
governmental authority shall take action as to WR, excluding however, any action
relating to the rates prescribed under Article VIII or the costs of providing
the services hereunder, and/or Shipper whereby the sale/purchase or
transportation of gas hereunder is prescribed or subject to conditions or
restraint that, in the sole judgment of the party affected is unacceptable, such
party, upon written notice to the other, may cancel and terminate this Agreement
without further liability hereunder, except as to any then existing imbalance,
outstanding bill and the warranties expressed in Section 10.2 herein. Any
obligations of Shipper under Section 8.4 herein shall automatically cease for
that contract year and any subsequent contract year.
14.2 The parties hereto shall respectively proceed with diligence in the
preparation, filing and prosecution of any applications, filings and notices
with federal and/or other governmental agencies as may be required. Each party
shall promptly provide the other with a copy of all applications, filings,
notices, and approvals. Shipper agrees to reimburse WR for any filing fees
imposed by regulatory agencies upon such filing.
14.3 If required, WR shall, pursuant to the rules and regulations
promulgated by the regulatory agency having authority, promptly file for
approval of the rates
27
prescribed under Article VIII. In the event any such filing is not approved
within sixty (60) days of the execution of this Agreement, WR or Shipper shall
have the right to terminate this Agreement effective upon written notice given
to one by the other.
14.4 If at any time during the term of this Agreement, WR and Shipper
mutually agree upon changes in the rates prescribed under Article VIII, WR shall
promptly file for the approval of such revised rates. In the event any such
filing shall be disapproved, WR and Shipper shall attempt to agree upon new
rates. Should WR and Shipper be unable to agree upon new rates within a period
of sixty (60) days after the disapproval of such rates by the regulatory agency
having jurisdiction, then either party, by giving twelve (12) months written
notice to the other party, may cancel and terminate this Agreement. Absent
approval of revised rates, the existing (old) rates shall remain in effect while
this Agreement remains effective.
28
ARTICLE XV
NOTICES
15.1 Any formal notice, request or demand which either party may desire to
give to the other respecting this Agreement, shall be in writing and shall be
considered as duly delivered when mailed by registered or certified mail by said
party to the other party hereto, as follows:
NOTICES AND PAYMENTS:
MESA Operating Co.
5205 N. O'Connor Blvd, Suite 1400
Irving, Texas 75039-3746
Attn: Marketing Department
Facsimile: (214) 444-4394
NOTICES:
WESTERN RESOURCES, INC.
P. O. Box 889
Topeka, Kansas 66601
Attn.: Gas Supply
Gas Control Facsimile: 913-575-8137
PAYMENTS:
WESTERN RESOURCES, INC.
P.O. Box 758500
Topeka, KS 66675-8500
29
or to such other address as either party shall designate by formal written
notice. Routine communications shall be considered as duly delivered as of the
postmarked date when mailed by ordinary mail. Nominations and confirmations
thereof may be made by facsimile. Operating communications by telephone or other
mutually agreeable means shall be considered as duly delivered without
subsequent written confirmation, unless written confirmation is requested by
either party.
ARTICLE XVI
FORCE MAJEURE
16.1 Neither party shall be liable for failure of performance (other than
to make payments due hereunder) due to labor controversies, fires, strikes,
floods, lack of water, winds, lightning, accidents, required maintenance and
repair of equipment and lines of pipe, the inability of any party hereto to
obtain right-of-way grants necessary to enable such party to fulfill any
obligation hereunder, or the delay or failure on the part of such party in
acquiring such right-of-way grants due to cost, which in the opinion of such
party is unreasonable or excessive, or any other circumstances beyond the
control of the party failing to perform, whether of similar or dissimilar
nature. Settlement of strikes and lockouts shall be wholly within the discretion
of the party involved in any such strike or lockout.
Failure by Shipper or WR to meet the quality, reliability and measurement
standards provided herein shall not constitute force majeure.
30
Immediately upon becoming aware of the occurrence or termination of an
event of force majeure, the party claiming force majeure shall give notice
thereof to the other party describing such event.
ARTICLE XVII
LAWS AND REGULATIONS
17.1 This Agreement shall be subject to all valid statutes and valid rules
and regulations of any duly constituted Federal or State regulatory body having
jurisdiction herein.
ARTICLE XVIII
NONWAIVER OF FUTURE DEFAULT
18.1 No waiver by any party of any one or more defaults by the other in
performance of any of the provisions of this Agreement shall operate or be
construed as a waiver of any other existing or future default or defaults,
whether of a like or of a different character.
ARTICLE XIX
SUCCESSORS AND ASSIGNS
19.1 Any company which shall succeed by purchase, merger or consolidation
to the properties or which shall take title, at the wellhead, of the gas
transported hereunder, substantially as an entirety, shall be subject to the
obligations of its predecessor in title under this Agreement. No other
assignment of this Agreement or any of the rights or obligations hereunder shall
be made unless there first shall have been obtained the consent thereto of the
other party, which such
31
consent shall not be unreasonably withheld. Furthermore, either party may assign
the interest in and to and under this Agreement to a trustee or trustees,
individual or corporate, as security for bonds or other obligations or
securities without the necessity of any such assignee becoming in any respect
obligated to perform the obligation of the assignor under this Agreement and, if
any such trustee be a corporation, without its being required to qualify to do
business in any state in which performance of this Agreement may occur.
ARTICLE XX
DEHYDRATION FUEL AGREEMENT
20.1 This Agreement does not modify the obligations of WR or HCLP under the
terms of the Dehydration Fuel Agreement dated April 16, 1993.
ARTICLE XXI
COMPRESSION OF GAS BY SHIPPER
21.1 In the event WR's compression capacity is being fully utilized, Shipper may
provide compression services on an interruptible basis for gas being transported
by WR. Shipper may stop providing compression services in whole or in part at
any time for any reason. WR shall pay Shipper five cents ($0.05) plus fuel for
each MCF of gas compressed by Shipper and delivered to the Intermediate
Redelivery Point. Such gas compressed by Shipper shall be measured at the inlet
to Shipper's
32
compression facilities in accordance with the measurement procedures set forth
in Article VII herein.
ARTICLE XXII
MISCELLANEOUS
22.1 Any modification of terms or amendment of provisions of this agreement
shall become effective only by supplemental written agreement between the
parties hereto.
22.2 As to all matters of construction and interpretation, this Agreement
shall be interpreted, construed and governed by the laws of the State of Kansas.
22.3 Transportation hereunder shall be effected pursuant to any and all
applicable regulations, of the regulatory agency having authority, and the
parties hereto agree to comply with all said regulations in their performance of
this Agreement.
33
IN WITNESS WHEREOF, the parties hereto have caused two (2) originals of
this Agreement to be executed, by their officers duly authorized, as of the day
and year first hereinabove written.
WITNESS: LARRY G. WILLER WESTERN RESOURCES, INC.
By: R. H. TANGEMAN
--------------------------------
R. H. Tangeman
Assistant Vice President, Gas Supply
WITNESS: D'NARD A. HEMPHILL MESA OPERATING CO. acting on behalf
of itself and as agent for
Hugoton Capital Limited Partnership
By: PAUL W. CAIN
--------------------------------
Paul W. Cain
Title: President
34
Exhibit "A"
to
Gas Transport Agreement
Dated June 14, 1994
between
Western Resources, Inc.
and
MESA Operating Co. acting on behalf of itself and
as agent for Hugoton Capital Limited Partnership
DELIVERY POINTS
Initial Delivery Point-
Interconnect between Shipper and WR at the inlet of WR's Ulysses compressor
station located in Grant County, Kansas (Sec. 10-T30S-R37W).
Intermediate Delivery Point-
Interconnect between Shipper and WR at the outlet of Shipper's Ulysses
Processing Plant located in Grant County, Kansas (Sec. 10-T30S-R37W).
Exhibit "B"
to
Gas Transport Agreement
Dated June 14, 1994
between
Western Resources, Inc.
and
MESA Operating Co. acting on behalf of itself and
as agent for Hugoton Capital Limited Partnership
REDELIVERY POINTS
Intermediate Redelivery Point-
Interconnect between WR and the inlet of Shipper's Ulysses
Processing Plant located in Grant County, Kansas (Section
10-T30S-R37W).
Final Redelivery Point-
Interconnect between WR and the inlet to Shipper's Satanta
Processing Plant in Grant County, Kansas (Sec. 5-T30S-R35W).