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EXHIBIT 10-AB
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re THE COLUMBIA GAS SYSTEM, INC. and
COLUMBIA GAS TRANSMISSION CORPORATION
Debtors. Case Nos. 91-803
91-804
Chapter 11
STIPULATION
WHEREAS, Trailblazer Pipeline Company (Trailblazer) and Columbia Gas
Transmission Corporation (TCO) are parties to certain agreements, as amended,
as follows (Contracts):
Contract No. Mcf/Day Contract Date
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WH-33404-GN 69,500 October 8, 1982
WH-23597-GN 175,000 September 20, 1979
WHEREAS, on April 8, 1992, the Federal Energy Regulatory Commission (FERC)
issued Order No. 636, as amended by subsequent Commission orders (Order No.
636) requiring inter alia, restructuring of interstate pipeline rates and
services; and
WHEREAS, Trailblazer commenced implementation of Order No. 636 on its
system on December 1, 1993; and
WHEREAS, TCO implemented restructured services under Order No. 636 on
November 1, 1993 and does not require the Contracts and has been unable to
assign any of the capacity associated with Contract No. WH-33404-GN, a 69,500
Mcf per day firm transportation contract, to its customers or other parties;
and
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WHEREAS, TCO and Trailblazer wish to terminate the Contracts in
consideration of the agreements set out herein; and
WHEREAS, TCO and Trailblazer agree that the term "Excess Capacity"
Shall mean the total amount of unassigned or capacity not required under
Contract No. WH-33404-GN as of the first day of the month following the
effective date of this Stipulation pursuant to Paragraph 10 herein; and
WHEREAS, TCO and Trailblazer have agreed to an exit fee (as has been
contemplated by Order No. 636) to be calculated as specified below (Exit Fee)
in consideration of TCO's abandonment of the Excess Capacity, which capacity is
not required as a result of TCO's implementation of Order No. 636; and
WHEREAS, TCO will use its Transportation Cost Rate Adjustment mechanism
(TCRA) to fully recover the Exit Fee from its customers pursuant to Order No.
636, which mechanism for such recovery was approved by the FERC by orders
issued on July 14, 1993 and September 29, 1993, in Docket Nos. RS92-5, et
al.; and
WHEREAS, Trailblazer filed proofs of claim against TCO on March 12, 1992,
Claim No. 8629, for $583,519.91 for transportation expense and on March 9,
1992, Claim No. 7984, a duplicate of Claim No. 8629, and which was disallowed
by the Bankruptcy Court by Order issued July 13, 1993; and
WHEREAS, TCO and Trailblazer have agreed that the amount of transportation
expense under Claim No. 8629 is $589,267.45, which amount will be paid within
ten (10) days after the approval of this Stipulation by the Bankruptcy Court;
and
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WHEREAS, pursuant to the Bankruptcy Court's orders of September 20,
1991 and October 3, 1991, TCO is authorized to remedy pre-petition gas
imbalances under transportation and exchange agreements in the ordinary course
of business and TCO and Trailblazer will remedy any pre- and post-petition gas
imbalances under transportation and exchange agreements in the ordinary course
of business; and
WHEREAS, a settlement filed by Trailblazer with FERC on October 23,
1990 and approved by FERC order dated April 9, 1991, in Docket Nos. RP84-94,
et al., provides for the annual refund by Trailblazer of certain excess
deferred taxes related to the period January 1, 1983 through June 30, 1987 of
which TCO claims entitlement in an amount totalling approximately $3.4 million,
against which Trailblazer has an alleged right of setoff for its pre-petition
transportation expense claim.
WHEREAS, TCO supplied line pack gas to Trailblazer under the Contracts
in the amount of 248,558 Dth which TCO agrees to transfer to Trailblazer upon
termination of the Contracts for the payment of $1.77 per Dth.
IT IS THEREFORE STIPULATED AND AGREED by the parties hereto as follows:
1. The Contracts are hereby terminated by agreement of the parties upon
the effective date of this Stipulation pursuant to Paragraph 10; provided
however, that such Contracts shall continue for a period not to exceed sixty
(60) days solely to enable the paries to rectify any imbalances (it being
understood that the Exit
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Fee will commence notwithstanding such continuation of the Contracts and that
no demand payment shall be owed by TCO for any such period). Other than as
provided for in this Stipulation, each party hereby waives any claim for
damages thereunder for services rendered prior to the termination date, except
for (1) claims with respect to imbalances which shall be remedied in the
ordinary course of business pursuant to the Bankruptcy Court's orders of
September 20, 1991 and October 3, 1991 authorizing TCO to remedy gas
imbalances; (2) post-petition unpaid invoice claims which shall be satisfied in
the ordinary course of business as administrative expense claims under Section
503 of the Bankruptcy Code; (3) the right of Trailblazer to recover from TCO
costs which have been authorized by the FERC for service periods predating the
effective date of this Stipulation pursuant to Paragraph 10 herein; and (4) the
right of TCO to refunds, including refunds of excess deferred taxes from
Trailblazer for overpayments made to Trailblazer, as determined by the FERC,
for services rendered to TCO by Trailblazer during periods which predate the
effective date of this Stipulation pursuant to Paragraph 10 herein.
2. Prior to the effective date of this Stipulation pursuant to
Paragraph 10 herein, the Contracts will be fully or partially assignable to
TCO's customers and to other parties in accordance with Order No. 636, as it
may be amended, modified or superseded, and Trailblazer's and TCO's approved
FERC Gas Tariff, and subject to applicable laws, rules, regulations, and orders
of applicable regulatory authorities. Without limiting the foregoing, TCO
shall
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have the right prior to the date this Stipulation becomes effective to assign
all or a portion of the firm transportation capacity underlying the Contracts,
on a permanent basis in connection with TCO's and/or Trailblazer's
restructuring under Order No. 636 to one or more of TCO's customers or other
parties which would be eligible to receive service under Trailblazer's Tariff
and Trailblazer agrees that any permanent full or partial assignment(s) of
capacity to an eligible shipper shall constitute an assignment of the
underlying Contracts pursuant to 11 U.S.C. Section 365(f). Accordingly, upon
permanent assignment of capacity by TCO to such customers or other parties, TCO
shall not, consistent with the provisions of 11 U.S.C. Section 365(k), have
any liability for "breach of such [contracts] occurring after such
assignment(s)" with respect to the assigned capacity; provided, however, that
nothing herein shall affect (1) the right of Trailblazer to recover from TCO
costs (a) which have been authorized by the FERC for service periods predating
the effective date of assignment of the underlying contract(s), and (b) which
are recoverable by Trailblazer from TCO, consistent with the terms of a FERC
order, during that portion of the FERC-approved recovery period predating the
effective date of assignment of the underlying contracts; and (2) the right of
TCO to refunds from Trailblazer for overpayments made to Trailblazer, as
determined by the FERC, for services rendered to TCO by Trailblazer during
periods which pre-date the effective date of assignment of the underlying
contract(s).
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3. Without limiting in any respect the provisions of Paragraph 2, TCO
shall, until the effective date of this Stipulation pursuant to Paragraph 10
herein, be entitled to the same rights and subject to the same obligations
under Trailblazer's tariff and FERC orders as all other customers of
Trailblazer under the same Rate Schedule, including the right to participate in
Trailblazer's capacity release program.
4. Trailblazer shall make excess deferred tax refunds to TCO in
Docket Nos. RP84-94, et al., as they become due and payable, which refunds
shall continued to be made after the effective date of this Stipulation
pursuant to Paragraph 10 herein; provided, however, that refunds which became
due and payable prior to the effective date of this Stipulation but which have
not yet been paid by Trailblazer shall be paid within ten (10) days after the
effective date of this Stipulation.
5. Within ten (10) days after all amounts payable by TCO hereunder to
Trailblazer have been paid, Trailblazer shall pay TCO $439,947, plus interest
from the effective date of this Stipulation pursuant to Paragraph 10 herein at
the applicable FERC interest rate, for transfer of title to the line pack gas
in the amount of 248,558 Dth which TCO supplied under the Contracts.
6. Within ten (10) days after this Stipulation is approved by the
Bankruptcy Court TCO shall pay Trailblazer $589,267, without interest, in
satisfaction of Trailblazer's Claim No. 8629 for pre-petition transportation
expenses and any right of setoff by Trailblazer under Section 553 of the
Bankruptcy Code. In
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consideration of such payment, all of Trailblazer's proofs of claim against TCO
shall be deemed withdrawn with prejudice on the tenth day after the date of
approval by the Bankruptcy Court; provided, however, such proofs of claim are
subject to reinstatement by Trailblazer to the extent provided under Paragraph
10, as well as TCO concomitant right to assert any objections to such proofs of
claim.
7. Beginning the first day of the month following the date the
Stipulation becomes effective pursuant to Paragraph 10 herein, TCO shall pay
Trailblazer the Exit Fee, plus interest from the effective date of this
Stipulation pursuant to Paragraph 10 herein at the applicable FERC interest
rate on the remaining outstanding balance of the Exit Fee, based on a payment
schedule corresponding to TCO's collection of the Exit Fee, plus the aforesaid
interest, from its customers pursuant to the TCRA in consideration of the
termination of Contract WH-33404-GN. The Exit Fee principal amount shall be
calculated using the formula on Attachment A and using the Excess Capacity that
exists as of the first dy of the month following the date the Stipulation
becomes effective pursuant to Paragraph 10 herein. (1)
8. TCO shall continue to make payments billed by Trailblazer relating
to the Contracts up to the effective date of this Stipulation pursuant to
Paragraph 10 herein.
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(1) Assuming a January 1, 1994 effective date and 69,500 Mcf per day of
Excess Capacity, the Exit Fee would be $18,800,000 in accordance with the
Schedule on Attachment A. Assuming a January 1, 1995 effective date and 69,500
Mcf per day of Excess Capacity, the Exit Fee would be $17,175,306.
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9. This Stipulation shall not be deemed an admission of any fact or
proposition of law, and shall not be used for any purpose other than to enforce
the terms of this Stipulation and the orders entered approving this Stipulation
as described in Paragraph 10. Notwithstanding the prior sentence, the parties
hereto shall be free to refer to and discuss this Stipulation for informational
purposes in any proceedings before the FERC or other courts and regulatory
bodies and in related discussions and negotiations.
10. This Stipulation shall not be effective until it is approved,
executed and entered by the Bankruptcy Court and until FERC issues a final
order, no longer subject to rehearing, approving this Stipulation, including,
specifically, authorization for TCO to fully recover the Exit Fee, with
interest, from its customers. A FERC order relating to the Exit Fee which
contains any provision or condition which would have a material adverse effect
on Trailblazer's ability to adjust its rates to reflect termination of the
Contracts shall not satisfy the prior sentence unless Trailblazer consents to
such order as constituting an order approving the Stipulation. TCO and
Trailblazer agree to use reasonable, good faith efforts to obtain approval from
the Bankruptcy Court and FERC where such approvals are required and to take all
reasonable steps necessary to assist the other in obtaining such approvals.
Without limitation of the prior sentence, Trailblazer agrees that it will
actively support TCO inn its filing to recover the Exit Fee costs from its
customers (which filing may be in the form of a joint filing for approval of
the
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Stipulation) and TCO agrees that it will not take any position in Trailblazer's
proceedings before FERC which is adverse to Trailblazer with respect to
disposition of the amounts received by Trailblazer for the Exit Fee,
Trailblazer's ability to adjust its rates to reflect termination of the
Contracts or adjustment of the volumes used in the design of Trailblazer's
rates to reflect termination of the Contracts. If any Court should reverse in
whole or in part the order of the Bankruptcy Court or the final order of the
FERC approving this Stipulation, unless the parties agree in writing to the
contrary, all monies paid by TCO to Trailblazer under Paragraphs 6 and 7, plus
interest, shall be returned to TCO, the status quo ante shall be restored and
TCO and Trailblazer agree to pay all amounts due (e.g., demand charges, etc.)
between the effective date and the date of reversal, and TCO and Trailblazer
retain all rights to assert claims, objections and other rights that are to be
resolved by this settlement, and no party can use this settlement as evidence
against TCO and Trailblazer. If, forty-five (45) days prior to the date first
set for hearing on the confirmation of a plan of reorganization for TCO (which
plan has been distributed to voting purposes) (the "Notification Date"), the
Bankruptcy Court has entered an order and the FERC has issued a final order
approving this Stipulation, no longer subject to rehearing, but either or both
of such orders are subject to review on appeal, TCO may elect to assume the
obligations arising under this Stipulation and the Contracts, post-confirmation
by notifying Trailblazer of its decision in writing within five (5) business
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days following the Notification Date. In the event TCO does not exercise the
option described above in the time prescribed herein, this Stipulation shall be
treated as if either the order of the Bankruptcy Court or the final order of
FERC approving this Stipulation has been reversed on appeal and the parties
shall be returned to the status quo ante. Trailblazer and TCO shall have all
of their respective rights under the Bankruptcy Code and other applicable law,
including, without limitation, TCO's right to reject the Contracts and
Trailblazer's right to file claims arising out of any rejection of the
Contracts and to seek allowance and payment of such claims.
Dated: May 10, 1994.
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TRAILBLAZER PIPELINE COMPANY COLUMBIA GAS TRANSMISSION
CORPORATION
By: /s/ James A. Brett By: /s/ B. D. Perine
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Its: Vice President Its: Senior Vice President
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