HECO Exhibit 10.9
-----------------
INTER-ISLAND INDUSTRIAL FUEL OIL AND DIESEL FUEL SUPPLY CONTRACT
By and Between
CHEVRON PRODUCTS COMPANY,
A DIVISION OF CHEVRON U.S.A. INC
and
HAWAIIAN ELECTRIC COMPANY, INC.;
MAUI ELECTRIC COMPANY, LTD.;
HAWAII ELECTRIC LIGHT CO., INC.;
HAWAIIAN TUG & BARGE CORP.;
and YOUNG BROTHERS, LIMITED.
* * * * * * * * * * * * * * *
TABLE OF CONTENTS
ARTICLE PAGE
- ------- ----
ARTICLE I: Definitions 1
ARTICLE 2: Term 4
ARTICLE 3: Quantity 4
Section 3.1: Minimum and Maximum Annual Quantities 4
Section 3.2: Forecast 5
Section 3.3: Ratability 6
Section 3.4: Effect of Purchase Power Agreements (PPA) 6
ARTICLE 4: Quality 7
Section 4.1: CIFO Specifications 7
Section 4.2: Diesel Specifications 7
Section 4.3: Jet Fuel Grade 7
Section 4.4: No Warranty of Merchantability or Fitness 8
ARTICLE 5: Price, BTU Determination 8
Section 5.1: Diesel, CIFO and Jet Prices 8
Section 5.2: Determination of Source of Raw Materials 8
Section 5.3: Reimbursement of All Taxes, Assessments and
Levies 10
Section 5.4 Determination of BTU Content For Diesel 11
Section 5.5: Determination of BTU Content For CIFO 11
Section 5.6: Dispute 11
Section 5.7: Rounding of Prices 11
Section 5.8: Successor Publications 12
ARTICLE 6: Deliveries 12
Section 6.1: Delivery of Diesel and CIFO to MECO
and HELCO 12
Section 6.2: Delivery of Diesel to HT&B and YB 13
Section 6.3: Delivery of Diesel to HECO 13
Section 6.4: Delivery of Jet to MECO and HELCO 13
Section 6.5: Chevron's Delivery of Diesel to Molokai,
Kahului, Maui, Hilo, Hawaii and Kawaihae,
Hawaii 13
Section 6.6: Title and Risk of Loss 13
Section 6.7: Notice of Delivery 14
ARTICLE 7: Determination Of Quality 14
Section 7.1: Sampling Procedures 14
Section 7.2: Quality Disputes 15
Section 7.3: Impact of Less Than Quality Product 15
ARTICLE 8: Measurement Of Quantity 16
Section 8.1: Determination of Quantity 16
Section 8.2 Determination of Quantities at HDT 16
Section 8.3 Quantity Dispute 16
ARTICLE 9: Invoicing and Payment 17
Section 9.1: Invoices 17
Section 9.2: Payment Terms 17
Section 9.3: Method of Payment 17
ARTICLE 10: Chevron's Facilities On Oahu 18
ARTICLE 11: Chevron's Facilities On Maui And Hawaii 19
Section 11.1: Use of Chevron Storage and Handling
Facilities 19
Section 11.2: Barge Schedule Notification 19
Section 11.3 Loaded Samples 20
Section 11.4 Coast Guard Dock Watch Requirements 20
Section 11.5: Care, Custody and Control of Received Oil 20
ii
Section 11.6: Determination of Quality of Received Oil
at Unloading 21
Section 11.7 Determination of Quantity of Received Oil
and Oil at Time of Custody Transfer 21
Section 11.8 Commingle Product 22
Section 11.9 Transfer Notification From Kahului and Hilo 22
Section 11.10 Custody of Returned Fuel Oil 22
Section 11.11 Custody of Returned Diesel 22
Section 11.12 Return Oil Quantities 23
Section 11.13 Transfer of Returned Oil 23
Section 11.14 Terminaling and Handling Fees 23
ARTICLE 12: Contingencies 24
Section 12.1: Definition of Contingency 24
Section 12.2: Obligation to Supply Product 25
Section 12.3: Obligation to Purchase Product 25
Section 12.4: Price Determination Prevention 25
Section 12.5: Governmental Regulation Requirements 25
Section 12.6: Chevron's Obligations Under Contract 25
ARTICLE 13: Effect Of Suspension Or Reduction 26
Section 13.1: Event of Suspension 26
Section 13.2: Suspension For More Than 180 Days 26
Section 13.3: Notification of Suspension 26
Section 13.4: Obligation to Pay In Full 26
Section 13.5 Suspension Not A Breach Of Contract 26
ARTICLE 14 Waiver And Nonassignability 26
Section 14.1: Waiver By One Party 26
Section 14.2: Assignability of Contract 27
ARTICLE 15 Conflict Of Interest 27
ARTICLE 16: Default 27
ARTICLE 17: Applicable Law 28
ARTICLE 18: Indemnity 28
Section 18.1: Buyer Held Harmless for General Indemnity
when title and risk of loss is with Chevron 28
Section 18.2: Buyer Held Harmless for Releases to the
Environment when title and risk of loss is
with Chevron 28
Section 18.3 Chevron Held Harmless for General Indemnity
when title and risk of loss is with Buyer 28
Section 18.4: Chevron Held Harmless for Releases to the
Environment when title and risk of loss is
with Buyer 29
ARTICLE 19: Public Utilities Commission 29
Section 19.1: Filing Requirements; Buyers Energy Cost
Adjustment Clause 29
Section 19.2: Decision and Order Impairing Chevron 29
Section 19.3 Use as a Public Utility 29
ARTICLE 20: Insurance 30
Section 20.1: Requirements 30
Section 20.2: Change of Insurance Notification 30
Section 20.3: Certificate of Insurance From Subsequent
Buyers and Carriers 30
Section 20.4: Obtaining Insurance Documents 31
Section 20.5: Terminaling and Handling Fees Insurance
Exclusion 31
ARTICLE 21: Safety And Terminal Protection 31
Section 21.1: Operating and Safety Regulations 31
Section 21.2: Right To Refuse Acceptance 31
ARTICLE 22: Pollution Mitigation 31
Section 22.1: Responsibility To Mitigate 31
Section 22.2: Cooperation With Chevron's Measures 32
iii
ARTICLE 23: Miscellaneous 32
Section 23.1: Heading of Articles and Sections 32
Section 23.2: Content of Document 32
Section 23.3: Notification 32
Section 23.4 Court Rulings 33
Section 23.5: Benefit of And Binding 33
Section 23.6: Effective Date and Supersedence 33
ADDENDUM No. 1 Illustrative Schedule of Prices 36
ADDENDUM No. 2 Quality Control Samples Summary and Schematic of
Sample Locations 46
ADDENDUM No. 3 [---] 49
iv
INTER-ISLAND INDUSTRIAL FUEL OIL AND DIESEL FUEL SUPPLY CONTRACT
----------------------------------------------------------------
THIS CONTRACT, dated as of Nov. 14, 1997, by and between CHEVRON
PRODUCTS COMPANY, A DIVISION OF CHEVRON U.S.A. INC a Pennsylvania corporation
("Chevron"), and HAWAIIAN ELECTRIC COMPANY, INC.; MAUI ELECTRIC COMPANY, LTD.;
HAWAII ELECTRIC LIGHT CO., INC.; HAWAIIAN TUG & BARGE CORP.; and YOUNG BROTHERS,
LIMITED, each a Hawaii corporation (collectively referred to as "Buyers" and
individually referred to as "Buyer" herein unless otherwise indicated).
WHEREAS, Chevron is a supplier of petroleum fuels with terminal and
Refinery facilities in Hawaii.
WHEREAS, Buyers are engaged in various business activities: HECO,
HELCO, and MECO are utilities engaged in the generation, purchase and sale of
electricity in Hawaii; HT&B is a tug and barge company; YB is a barge company
engaged in general marine transportation.
NOW, therefore, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
Except where otherwise indicated, the following definitions shall apply
throughout this Contract:
1. "API" or "API Gravity" means the American Petroleum Institutes
standard measurement of gravity for petroleum products.
2. "ASTM" means the American Society for Testing and Materials whose
standards are utilized in this Contract with respect to fuel
specifications, quantitative measurements, sampling and testing.
3. "Affiliate", except where otherwise expressly provided, means a
corporation controlling, controlled by or under common control with
Chevron or Buyer, as the case may be.
4. [---]
5. "barrel" means 42 American bulk gallons at 60 degrees Fahrenheit
6. "Black Oil Pipeline" means Chevron's 8 inch black oil distribution
pipeline between Chevron's Refinery and HMT with interconnections to
HECO's Waiau electric generating station and HECO's Iwilei petroleum
storage facility.
7. "BPH" means barrels per hour, a unit of measure of the rate of the
physical transfer or movement of petroleum products.
8. "BTU" and "BTU content" means British Thermal Unit and refers to the
standard assessment of a fuel's gross heating value or gross heat
content.
9. "Buyer's Barbers Point Storage Facilities" means Buyer's bulk
petroleum receiving, storage and distribution facilities located in
the Barbers Point area of Oahu, located in Campbell Estate
Industrial Park, Kapolei, Hawaii.
1
10. [---] means [---]
11. [---] means [---]
12. "Carrier" means Buyer's Nominated Barge or designated trucking
company.
13. "Certificate of Quality" means the means the formal document
recording the Chevron laboratory determinations of the quality and
BTU content of a particular sample which represents a specific
Delivery, said laboratory determinations having been performed in
accordance with the standard test methods described in Article 4.
14. "Certificate of Quantity" means the document issued by the
Independent Inspector verifying the measurements and quantities of
oil delivered to Buyer as determined under Article VIII.
15. [---] means [---]
16. "Chevron's Terminal" means Chevron's bulk petroleum receiving,
storage and distribution facility used to Deliver Oil to a
respective Buyer's Nominated Barge.
17. "CIFO" means Chevron Industrial Fuel Oil No. 6 as per Section 4.1.
18. "Contingency" means an act or event specified in Section 12.1
19. "Contract" means this Inter-Island Industrial Fuel Oil and Diesel
Fuel Supply Contract, between Chevron and HECO, MECO,HELCO, HTB &
YB, the term of which commences January 1, 1998.
20. "Day" or "Days" means a calendar day of 24 hours
21. "Deliver, Delivery, Deliveries, or Delivered" refers to the Oil or
Jet sold by Chevron and purchased by Buyer.
22. "Diesel" means Chevron Diesel Fuel No. 2 per Section 4.2.
23. "diesel" means either Chevron Diesel Fuel No. 2 or a third party
diesel fuel similar to Chevron Diesel Fuel No. 2.
24. "Effective Date" means, for the purposes of this Contract,
January 1, 1998
25. "Extension" means successive 12-Month periods in the term of this
Contract in addition to and after the initial term of this Contract
which is through December 31, 2004, each Extension beginning
January 1.
26. "Fuel Oil" means either Chevron Industrial Fuel Oil No. 6 or third
party industrial fuel oil similar to Chevron Industrial Fuel Oil
No. 6.
27. "G.S.V." means gross standard volume in U.S. barrels or in U.S.
gallons at 60 degrees Fahrenheit.
28. "gallon" means a United States gallon of 231 cubic inches at 60
degrees Fahrenheit
2
29. "HDT" means Chevron's Honolulu Distribution Terminal at Honolulu
Harbor Pier 35.
30. "HMT" means Chevron's Honolulu Marine Terminal at Honolulu Harbor
Piers 30 and 31.
31. "HT&B" means Hawaiian Tug & Barge Corp., which operates a tug and
barge fleet.
32. "HECO" means Hawaiian Electric Company, Inc., which has electrical
generating facilities on the island of Oahu.
33. "HELCO" means Hawaii Electric Light Co., Inc., which has electrical
generating facilities on the island of Hawaii.
34. "Independent Inspector" means a qualified third-party petroleum
inspection contractor acceptable to both Chevron and Buyer
providing petroleum sampling, measurement and oversight over
Delivery operations.
35. [---]
36. "Jet" means Chevron Jet Fuel per Section 4.3.
37. "jet" means either Chevron Jet Fuel or a third party jet fuel
similar to Chevron Jet Fuel.
38. "Kaunakakai Terminal" means a third party Marine Terminal at
Kaunakakai Harbor, Molokai.
39. "Loaded", when used in conjunction with Oil or Jet, refers to
Buyer's Delivered Oil or Jet mixed with any cargo retains within
Buyer's Nominated Barge.
40. "loaded", when used in conjunction with Oil or Jet, refers to
Buyer's Delivered Oil or Jet or a third party's delivered oil or
jet mixed with any cargo retains within Buyer's Nominated Barge.
41. "MECO" means Maui Electric Company, Ltd., which has electrical
generating facilities on the islands of Maui, Lanai and Molokai.
For the purposes of this Contract "MECO" refers to the operations
on the island of Maui only.
42. "MECO-Molokai" means the Molokai Division of Maui Electric Company,
Ltd., which has electrical generation facilities on the island of
Molokai.
43. "Month" means a calendar month.
44. "Nominated Barge" means a petroleum tank barge or vessel designated
by Buyer to receive Oil Delivered by Chevron when the defined term
is used in conjunction with Buyer, as in "Buyer's Nominated Barge";
and means a petroleum tank barge or vessel designated by Chevron to
Deliver Diesel when the defined term is used in conjunction with
Chevron, as in "Chevron's Nominated Barge."
45. "Nominated Terminal" means a bulk petroleum receiving, storage and
distribution facility designated by a respective Buyer to receive
Diesel Delivered by Chevron at Kahului, Maui, Hilo, Hawaii or
Kawaihae, Hawaii, when used in conjunction with "Buyer's" as in
"Buyer's Nominated Terminal."
3
46. "Nominated Vessel" means a petroleum tank vessel designated by
Buyer to deliver or receive Buyer's Petroleum Products when he
defined term is used in conjunction with Buyer, as in "Buyer's
Nominated Vessel."
47. "Oahu P/L" means Chevron's 8 inch white oil distribution pipeline
between Chevron's Refinery and HMT with an interconnection to
HECO's Waiau electric generating station.
48. "Oil" means either Chevron Industrial Fuel Oil No. 6 or Chevron
Diesel Fuel No. 2.
49. "oil" means Chevron Industrial Fuel Oil No. 6, Chevron Diesel Fuel
No. 2, a third party industrial fuel oil similar to Chevron
Industrial Fuel Oil No. 6, or a third party diesel fuel similar to
Chevron Diesel Fuel Oil No. 2.
50. "Received", when used in conjunction with Oil or Jet, refers to
Buyer's Oil or Jet to be received by Chevron into its terminals on
Maui and Hawaii. "Received", when used in conjunction with oil,
means a third party industrial fuel oil similar to Chevron
Industrial Fuel Oil No. 6 or a third party diesel fuel similar to
Chevron Diesel Fuel Oil No. 2 received by Chevron into its
terminals on Maui and Hawaii from Buyer's Nominated Barge.
51. "Returned", when used in conjunction with Oil, oil or Jet, refers
to the Oil, oil or Jet returned by Chevron from its terminals on
Maui and Hawaii to Buyer for Buyer's use in Buyer's electrical
generating facilities.
52. "Refinery" means Chevron's oil refining and related facilities
located in the Barbers Point area of Oahu, in Campbell Estate
Industrial Park, Kapolei Hawaii.
53. "YB" means Young Brothers, Limited, which operates a general marine
transportation business.
54. "Year" means a calendar year.
ARTICLE II
TERM
----
The term of this Contract shall be from January 1, 1998 through December 31,
2004, and shall continue thereafter for Extensions beginning each successive
January 1, unless Buyer or Chevron gives written notice of termination at least
120 Days before the beginning of an Extension.
ARTICLE III
QUANTITY
--------
Section 3.1: Minimum And Maximum Annual Quantities
During each Year this Contract is in effect, Chevron shall sell and Deliver to
Buyer, and Buyer shall purchase and receive from Chevron no less than the
minimum nor more than the maximum annual quantity, except as otherwise expressly
provided herein, of CIFO, Diesel and Jet as set out below for each Buyer and
described in Article IV, from the HMT, the HDT, the Oahu P/L, Chevron-Nominated
Barge at Kahului, Maui, Chevron-Nominated Barge at Hilo, Hawaii, Chevron-
Nominated Barge at Kawaihae, Hawaii or a Chevron-Nominated Barge at the
Kaunakakai Terminal, as described in Article VI. The purchase of CIFO and
Diesel shall be at a reasonably uniform rate. Chevron shall sell and Deliver to
Buyer and Buyer shall purchase and receive from Chevron CIFO and Diesel [---]
4
All quantities shall be stated
in annual physical barrels.
I. DIESEL
1998 MINIMUM MAXIMUM
---- ------- -------
HECO [---] [---]
HELCO [---] [---]
MECO [---] [---]
MECO-Molokai [---] [---]
HT&B and YB [---] [---]
TOTAL [---] [---]
1999-2004
---------
HECO [---] [---]
HELCO [---] [---]
MECO [---] [---]
MECO-Molokai [---] [---]
HT&B and YB [---] [---]
TOTAL [---] [---]
II. CIFO
1998- MINIMUM MAXIMUM
----- ------- -------
HELCO [---] [---]
MECO [---] [---]
TOTAL [---] [---]
1999-2004
---------
HELCO [---] [---]
MECO [---] [---]
TOTAL [---] [---]
III. JET
1998-2004 MINIMUM MAXIMUM
----------- ------- -------
HELCO 0 [---]
MECO 0 [---]
TOTAL 0 [---]
Upon prior written notice to Chevron, the respective Buyers may modify their
individual minimum and maximum annual physical quantities of Fuel Oil and Diesel
provided that the total annual minimum and maximum annual physical quantities of
CIFO, Diesel and Jet which shall be sold and Delivered by Chevron and purchased
and received by Buyers collectively, shall fall within the limits specified in
this Section 3.1
The minimum and maximum annual volumes of CIFO, Diesel and Jet to be sold and
Delivered by Chevron and purchased and received by Buyer shown above for Year
2004 shall also apply to any Extensions, unless mutually agreed otherwise .
Subject to availability, Chevron will sell and Deliver and Buyer shall purchase
and receive such additional volumes as are mutually agreed.
Section 3.2: Forecast
Prior to the [---] Day of each Month, Buyer shall give Chevron a forecast of
each respective Buyer's Monthly lifting of Diesel, CIFO and Jet for each of the
coming three Months. In addition and also prior to the [---] Day of each
Month, Buyer shall provide Chevron a schedule of Buyer's Nominated Barge
loadings for the following Month. Such schedule shall show the expected place,
date and time of the commencement of the vessel's loading.
5
Each Buyer should update seller of any changes as they might occur. Buyer
recognizes the importance to Chevron of reasonably accurate lifting forecasts
because of Chevron's need to plan production and shipments.
Section 3.3: Ratability
Buyers' purchases and Chevron's Deliveries of CIFO and Diesel will occur in a
reasonably ratable fashion throughout the Year.
At the end of each Year, Buyers' CIFO and Diesel purchase performance will each
be reviewed by Chevron for ratability.
i. If upon review Buyers' volumes in any calendar quarter were [---] of
the total minimum annual liftings for either CIFO or Diesel, [---]
ii. If upon review Buyers' volumes in any calendar quarter were [---] of
the total maximum annual liftings for either CIFO or Diesel, [---]
iii. Chevron understands Buyers' Jet purchases will occur in a
non-ratable fashion and no ratability premiums will be applied to
Jet purchases
Section 3.4: Effect of Purchase Power Agreements (PPA)
If due to the commencement of commercial operation of a generating plant or
generating plants supplying power to HELCO or MECO, or an increase in firm
capacity output under contracts existing as of the Effective Date, in aggregate
under one or more Purchase Power Agreements ("PPA") firm capacity in excess of
twenty (20) megawatts (gross basis), HELCO's or MECO's anticipated demands for
CIFO or Diesel results in Buyers' aggregate anticipated demand from Chevron on
an annual basis during any Year during the term of this Contract for CIFO or
Diesel to decline below the Buyers' aggregate minimum annual quantities set
forth in Section 3.1 (the difference between Buyers' aggregate anticipated
demand from Chevron and Buyers' aggregate minimum annual quantities being the
"Fuel Requirement Reduction"), then Buyers shall give written notice to Chevron
of Buyers' request that Chevron accept the Fuel Requirement Reduction. Chevron
shall have fifteen (15) Days within which to accept Buyers' Fuel Requirement
Reduction or reject Buyers' Fuel Requirement Reduction and request a
renegotiation of HELCO's or MECO's, whichever is the affected Buyer, minimum
annual quantities of CIFO or Diesel in Section 3.1 and/or the price of HELCO's
or MECO's, whichever is the affected Buyer, CIFO or Diesel in Section 5.1 of
this Contract.
If Chevron either accepts Buyers' Fuel Requirement Reduction or fails to give
any notice of acceptance or rejection within said fifteen (15) Day period, then
Buyers' Fuel Requirement Reduction shall be deemed to have been accepted by
Chevron and shall become effective upon the expiration of said fifteen (15) Day
period. Should Chevron reject Buyers' request for the Fuel Requirement
Reduction then, within sixty (60) Days following the date of any such rejection
notice, if the parties are unable to renegotiate HELCO's or MECO's, whichever is
the affected Buyer, minimum annual quantities and/or the price for HELCO's or
MECO's, whichever is the affected Buyer, CIFO or Diesel, in a manner mutually
satisfactory to both Chevron and the affected Buyer, then Chevron, upon thirty
(30) Days written notice, may elect to terminate its obligation to sell CIFO or
Diesel to the affected Buyer under this Contract. Until Buyers' request for a
Fuel Reduction Requirement (i) is accepted or deemed accepted by Chevron, (ii) a
mutually satisfactory provision for the affected Buyer's minimum annual
quantities and/or the affected Buyer's price for CIFO or Diesel, is
renegotiated, or (iii) the obligation to sell CIFO or Diesel to HELCO or MECO,
whichever is the affected Buyer, under this Contract is terminated in accordance
with this Section 3.4, the terms and conditions of this Contract shall be and
remain in full force and effect.
6
Notwithstanding any item to the contrary herein, any reduction in Buyers'
aggregated demand suppliers as a result of PPA's, shall be ratably allocated
among all Buyers' suppliers and/or sellers on basis of actual sales from each
supplier and/or seller over the immediately preceeding Year . Any reduction in
Chevron's minimum annual quantities as a result of PPA's shall also identically
reduce [---]
ARTICLE IV
QUALITY
-------
Section 4.1: CIFO Specifications
The CIFO to be supplied hereunder shall be Chevron's regular commercial grade of
Chevron Industrial Fuel Oil No. 6, having the following specifications:
ASTM
Item Specifications Test Method
- ---------------------------- ------------------ ---------------------
Gravity @ 60 degrees F, API 6.5 min. D1298 or D4052-86
Flash, degrees F 150 min. D93
Viscosity, SSF @ 122 degrees F 179 min., 226 max. D445/D2161
Pour Point, degrees F 55 max. D97
Sulfur, % Wt. 2.00 max. D1552, D2622 or D4294
Sediment & Water, % Vol. 0.5 max. D1796
BTU content *, MM BTU/BBL 6.0 D240
Vanadium **, PPM wt. 100 D5863
Nitrogen ***, PPM wt. 6500 D5762 or D4629
* Typical Value is 6.3 MM BTU/bbl, value is typical; it is not guaranteed.
** Typical Value is shown, value is not a specification limit.
*** Typical Value is shown, value is not a specification limit.
Section 4.2: Diesel Specifications
The Diesel to be supplied hereunder shall be similar to Chevron's regular
commercial grade of Chevron Diesel Fuel No. 2 and have the following
specifications:
Specification Test
Item Units Limits Method
- --------------------------- ------------- ------------------- ------------------
Gravity @ 60 degrees F degrees API, 30.0 min., .88 max. D1298 or D4052-86
Specific
Viscosity @ 100 DF SSU 32.3 - 40.0 D445, D2161
BTU content * MM BTU/BBL 5.84 Calculated or D240
Heat Value, Net MM BTU/BBL Report Calculated or D240
Flash Point, PM degrees F 150 min. D93
Pour Point * degrees F 35 D97
Ash PPM, wt. 100 max. D482
Cetane Index 40 min. D4737
Carbon Residue,
10% Residuum %, wt. 0.35 max. D524
Sediment & Water %, vol. 0.05 max. D1796
Sulfur %, wt. 0.40 max. D1552, D2622 or
D4294
Distillation
90% Recovered degrees F 540 - 650 D86
Sodium+Potassium PPM, wt. 0.5 max. D3605
Solium+Potassium+Lithium PPM, wt. Report D3605
Vanadium ** PPM, wt. 0.8 D3605
7
Nitrogen *** PPM, wt. 120 D4629 or D5762
* Chevron does not provide specifications on these items. Values are typical;
they are not guaranteed.
** Typical value is shown, value is not a specification limit.
*** Typical value is shown, value is not a specification limit.
Section 4.3: Jet Fuel Grade
The Jet to be supplied hereunder shall be similar to Chevron's regular
commercial grade of Chevron Jet Fuel; provided, however, Buyer agrees that the
Jet shall be used exclusively as stationary combustion turbine start-up fuel.
Any other use, including without limitation its use for aviation purposes, shall
constitute foreseeable misuse.
Section 4.4: No Warranty of Merchantability or Fitness
CHEVRON MAKES NO WARRANTY, EXPRESSED OR IMPLIED IN FACT OR BY LAW, AS TO
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE concerning the Oil and Jet
other than it shall comply with the quality herein specified, that the Diesel
shall be suitable for use as a fuel, the CIFO shall be suitable for use as a
boiler fuel, and the Jet shall be suitable for use as stationary combustion
turbine start-up fuel.
ARTICLE V
PRICE, BTU DETERMINATION
------------------------
Section 5.1: Diesel, CIFO and Jet Prices
I. NO. 2 DIESEL FUEL
a. For HECO, HT&B, YB; and MECO or HELCO FOB point of Delivery
as per Section 6.3, Section 6.2 and Section 6.1,
respectively:
[---]
b. For MECO-Molokai/Delivered Kaunakakai:
[---]
c. For MECO-Maui/Delivered Kahului:
[---]
d. For HELCO-Hawaii/Delivered Hilo:
[---]
e. For HELCO-Hawaii/Delivered Kawaihae:
[---]
where:
PD1 = Price per physical gallon for the Month of Delivery for No. 2
Diesel Fuel purchased by HECO, HT&B, YB, MECO or HELCO in U.S. Dollars
("$") per ("/") gallon.
PD2 = Price per physical gallon for the Month of Delivery for No. 2
Diesel purchased by MECO-Molokai, in $/gallon.
PD3 = Price per physical gallon for the Month of Delivery for No. 2
Diesel purchased by MECO-Maui, Delivered to Kahului Maui, in $/gallon.
8
PD4 = Price per physical gallon for the Month of Delivery for No. 2
Diesel purchased by HELCO-Hawaii, Delivered to Hilo Hawaii, in
$/gallon.
PD5 = Price per physical gallon for the Month of Delivery for No. 2
Diesel purchased by HELCO-Hawaii, Delivered to Kawaihae Hawaii, in
$/gallon.
DI = Index for No. 2 Diesel Fuel, which shall be the simple average
of the high and low price assessments on all dates of publication for
West Coast Pipeline, Los Angeles California Low Sulfur No. 2 Diesel as
reported by Platt's Oilgram Price Report ("Platt's Oilgram") during
the period beginning the 21st Day of the second preceding Month to
the 20th Day of the Month preceding Delivery, expressed in $/gallon.
[---]
[---]
[---]
[---]
LP1, LP2, LP3, and LP4 are [---] for Deliveries in bulk to the
respective Buyer at Kaunakakai, Molokai, Kahului, Maui, Hilo, Hawaii
or Kawaihae, Hawaii, during the period indicated and expressed in $
per gallon, as follows:
1988-1989 2000-2001 2002-2004
[---] [---] [---] [---]
[---] [---] [---] [---]
[---] [---] [---] [---]
[---] [---] [---] [---]
TD1/TD2/TD3/TD4/TD5 = Taxes applicable to the sale of Diesel pursuant
to Section 5.3 herein.
II. CIFO
[---]
where:
PF = Price per physical barrel for the Month of Delivery for CIFO,
in $/barrel .
FI = the Index for CIFO which shall be the simple average of the low
and high price assessments for Los Angeles Bunker C Fuel Oil as
reported by Platt's Oilgram Bunkerwire ("Platt's Bunkerwire") for all
dates of publication from the 21st Day of the second preceding Month
to 20th Day of the Month preceding Delivery expressed in $/barrel,
converting to barrels from metric tons using a conversion factor of
6.368 barrels/metric ton.
[---]
[---]
9
[---]
[---]
TF = Taxes applicable to the sale of CIFO pursuant to Section 5.3
herein.
III. JET.
[---]
where:
PJ = price per physical barrel for the Month of Delivery for Jet, in
$/gallon.
JI = Index for jet fuel which shall be the simple average of the
Friday high and low price assessments of West Coast Spot
Pipeline price for jet fuel in Los Angeles as reported by
Platt's Oilgram from the 21st of the second preceding Month to
the 20th Day of the Month preceding Delivery expressed in $ per
gallon.
If Platt's Oilgram is not published or does not publish a high
and low price for a particular Friday during the relevant
period, the high and low prices for the closest preceding Day
for which Platt's Oilgram publishes a price report will be used.
TJ = Taxes applicable to the sale of Jet pursuant to Section 5.3
herein.
Addendum No. 1 hereto contains an illustrative schedule of prices calculated
pursuant to this Section 5.1
Section 5.2: Determination of Source of Raw Materials
To provide the flexibility needed by Chevron to meet its obligations to Buyer,
the source and type of crude oil and other raw material, the place of
manufacture, and the manufacturer of Oil and Jet for Delivery to Buyer hereunder
shall be determined solely by Chevron. The price of all Oil and Jet Delivered by
Chevron to Buyer hereunder shall be determined in accordance with the terms of
this Contract regardless of where, how and by whom such Oil and Jet is
manufactured and regardless of the type or source of crude oil or other raw
materials used in its manufacture.
Section 5.3: Reimbursement of All Taxes, Assessments and Levies
In addition to all other amounts payable by Buyer under this Contract, Buyer
shall reimburse Chevron for all taxes, assessments, levies and imposts of
whatsoever kind or nature imposed on Chevron by any governmental or quasi-
governmental body as adjusted, modified or revised from time to time, including
without limitation the Hawaii General Excise Tax, [---] the Hawaii Environmental
Response Tax and Hawaii Liquid Fuel Tax, applicable to the sale of Diesel, with
respect to the execution or performance of this Contract or the receipt by
Chevron of payments hereunder. Notwithstanding the foregoing and any
illustrative schedule of prices herein, Buyer shall not be required to reimburse
Chevron for any tax measured by or based on the net income of Chevron. To avoid
duplication of recovery, Buyer shall not be required to reimburse Chevron under
this Section 5.3 for any item expressly mentioned by Platt's Oilgram Price
Report or Platt's Bunkerwire, or confirmed by Platt's Oilgram Price Report or
Platt's Bunkerwire in writing upon inquiry by either Buyer or Chevron, as being
included in a price used to compute PD1, PD2, PD3, PD4, PD5, PD6, PF or PJ under
Section 5.1.
As of the Effective date of this Contract, the taxes and government fees which
are currently in effect include the Hawaii General Excise Tax (4.166%), [---],
the Hawaii Environmental Response Tax
10
($0.05 per barrel or $0.0012 per gallon) and the Hawaii Liquid Fuel Tax,
applicable to the sale of Diesel only, ($0.01 per gallon). The Hawaii
Environmental Response Tax and Hawaii Liquid Fuel Tax are not subject to the
Hawaii General Excise Tax [---]
Section 5.4: Determination of BTU Content For Diesel
Chevron will draw representative samples of all Diesel Delivered to each
respective Buyer as per Sections 6.1, 6.3. ii and 6.5 to determine the BTU
content per Section 7.1. If the weighted average BTU content per gallon of the
representative samples of Diesel purchased by each respective Buyer during any
calendar quarter [---] the price charged for the Diesel sold and Delivered to
that respective Buyer during each Month of the calendar quarter in question
shall be adjusted by multiplying the Diesel price determined in Article V, by
the ratio of the actual heat content to a standard of [---]. If the weighted
average BTU content per gallon of the representative samples of Diesel purchased
by each respective Buyer during any calendar quarter [---], the price charged
for the Diesel sold and Delivered to that respective Buyer during each Month of
the calendar quarter in question shall be adjusted by multiplying the Diesel
price determined in Article V, by the ratio of the actual heat content [---].
Chevron shall credit Buyer's account for overpayments and Buyer shall pay
Chevron for underpayments resulting from the BTU adjustments as soon as
reasonably possible after the close of the Month following the end of a calendar
quarter. Such adjustments to either Buyer or Chevron will be handled as
separate credits or invoices and each individual invoice drawn during the
calendar quarter will not be corrected and reissued.
Section 5.5: Determination of BTU Content for CIFO
Chevron will draw representative samples of each CIFO Delivery to each
respective Buyer as per Section 6.1, to determine the CIFO BTU content per
Section 7.1. If the weighted average BTU content of the CIFO sold and Delivered
to Buyer during any calendar quarter falls within the range [---] physical
barrel, no price adjustment will be made. If the CIFO BTU content per physical
barrel [---] per physical barrel, the price charged for the CIFO sold and
Delivered to that respective Buyer during each Month of the calendar quarter in
question shall be adjusted by multiplying the CIFO price as determined by
Section 5.1.ii. by a ratio of actual average heat content to [---]. Chevron
shall credit Buyer's account for overpayments and Buyer shall pay Chevron for
underpayments resulting from the BTU adjustments as soon as reasonably possible
after the close of Month following the end of a calendar quarter. Such
adjustments to either Buyer or Chevron will be handled as separate credits or
invoices and each individual invoice drawn during the Month will not be
corrected and reissued.
Section 5.6: Dispute
The official BTU content determination shall be based upon Chevron's laboratory
results provided that the arithmetic difference between Chevron's and Buyer's
laboratory results is equal to or less than the then existing ASTM
reproducibility standard (currently 0.4 MJ/kg, which shall be set equal to
60,000 BTU per barrel for CIFO and 1,200 BTU per gallon for Diesel for this
purpose) for test D-240. If the difference between Chevron's and Buyer's
laboratory results should fall outside the ASTM reproducibility standard for
ASTM test D-240, at Chevron's or Buyer's option, the sealed sample in the
possession of the Independent Inspector shall be provided to an independent
laboratory for an official determination, which shall be binding upon the
parties. Chevron and Buyer shall share equally the costs of independent tests
and determinations.
Section 5.7: Rounding of Prices
All prices, adjustments thereto and other sums payable hereunder shall be stated
in the nearest thousandth of a dollar when related to the sale and purchase of
CIFO hereunder and all prices, adjustments thereto and other sums payable
hereunder shall be stated in the nearest ten thousandth of a dollar when related
to the sale and purchase of Diesel or Jet hereunder.
11
Section 5.8: Successor Publications
Platt's Oilgram and Platt's Bunkerwire shall include any successor
publication(s) and, in the event of either the discontinuance of these
publications or the assessments of West Coast Pipeline, Los Angeles California
Low Sulfur No. 2 Diesel, West Coast Spot Pipeline, Los Angeles Jet or Los
Angeles Bunker C Fuel Oil, respectively, the parties shall agree upon an
alternate price reporting services and publications or market price assessments
and any modification of the per gallon or per barrel [---] for Diesel, Jet or
CIFO, as applicable, as may be reasonable under the circumstances.
ARTICLE VI
DELIVERIES
----------
Section 6.1: Delivery of Diesel and CIFO to MECO and HELCO
i. Chevron agrees to Deliver and MECO and HELCO agree to receive their
Oil into Buyer's Nominated Barge, Free On Board ("F.O.B.") at HMT.
The Delivery rate on Diesel shall be [---] minimum. The Delivery
rate on CIFO at HMT shall be [---] minimum. Chevron agrees to make
its best, reasonable efforts to load Diesel and CIFO concurrently,
provided however that Buyer's Nominated Barge is capable of
receiving same and to operate its current CIFO Delivery systems to
Deliver CIFO into said Nominated Barge at a temperature [---] at
HMT. Buyer acknowledges that the CIFO Delivery temperature is
determined by Chevron's and HECO's scheduling of other fuels in
Chevron's pipeline, and hence cannot be guaranteed.
ii. [---]Chevron agrees to make its best, reasonable efforts to load
Diesel and CIFO concurrently, provided however that Buyer's
Nominated Barge is capable of receiving same and in operating its
current CIFO Delivery systems to Deliver CIFO into said Nominated
Barge at a temperature about [---]. Buyer acknowledges that the CIFO
Delivery temperature is determined by Chevron's and HECO's
scheduling of other fuels in Chevron's pipeline, and hence cannot be
guaranteed.
iii. Chevron and Buyer's agent or an Independent Inspector shall inspect
the receiving barge cargo tanks to ensure that they contain only
minimal remains of the previous cargo, before Chevron will Deliver
Oil to be terminaled per Article XI. The Independent Inspector and
shall draw composite samples of any diesel and fuel oil remains
("Buyer's Remains Samples") if such remains ("Remains") are
accessible to standard sampling equipment. The Remain Samples shall
be sealed and retained by the Independent Inspector for a period of
not less than three (3) Months. The quality and quantity of the
Remains exceeding common commercial practice shall be removed by
Buyer to protect the quality of the Delivered Oil. Buyer or Buyer's
agent may remove the Remains by any legal method at their disposal,
including pumping the Remains into Chevron's slop tank at the HMT,
if convenient to Chevron. Chevron shall have the right to charge
Buyer for accepting Remains if the quantity to be removed from any
barge or the number of barges requiring Remains to be removed
becomes excessive. Chevron shall have the right to flush the
receiving barge cargo tanks with a small quantity of Chevron's Oil
before loading the Delivered Oil.
iv. To provide an early warning of any quality problems with the Diesel
or CIFO, Chevron agrees to perform a preliminary analysis
("Preliminary Analysis") including API gravity, and flash point on a
composite sample(s) from the relevant HMT or Refinery issuing
tank(s) and pipeline fill, if any, so as to be approximately
representative of the quality of the Diesel and CIFO intended to be
sold and Delivered to Buyer. The Independent Inspector shall ensure
that copies of the Preliminary Analysis and other relevant quality
documentation are placed on Buyer's Nominated Barge prior to its
departure to be made available to representatives of the terminal
facility receiving the cargo onboard Buyer's Nominated Barge.
12
Section 6.2: Delivery of Diesel to HT&B and YB
Chevron agrees to Deliver and HT&B and YB agree to receive their Diesel into
their nominated vessel F.O.B. the HMT, Pier 31 or 32. The Delivery rate shall
be 175 BPH minimum.
[---]
Section 6.3: Delivery of Diesel to HECO
Chevron agrees to Deliver and HECO agrees to receive its Diesel under either of
the options below.
i. Chevron will Deliver Diesel from the HDT into HECO's nominated tank
truck at a Delivery rate of [---] minimum.
ii. Chevron will Deliver Diesel from the Oahu P/L into HECO's storage at
HECO's Waiau Power Plant, at a Delivery rate of [---] minimum.
Section 6.4: Delivery of Jet to MECO and HELCO
Chevron agrees to deliver and MECO and HELCO agree to receive Jet at MECO's or
HELCO's respective power plant truck unloading rack.
Section 6.5: Chevron's Delivery of Diesel to Molokai, Kahului, Maui, Hilo,
Hawaii and Kawaihae, Hawaii
i. Chevron agrees to Deliver Diesel in Chevron Nominated Barges and
MECO-Molokai agrees to receive its Oil into its nominated marine
terminal at Kaunakakai Harbor, Molokai. The Delivery rate shall be
[---] minimum. Buyer will provide discharge facilities through an
independent third party; Chevron has no responsibility to procure
discharge facilities on the island of Molokai.
ii. On a space available basis and when the date is mutually agreed to,
Chevron may Deliver in Chevron's Nominated Barge and MECO and HELCO
may receive into their nominated marine terminal at Kahului, Maui and
Hilo and Kawaihae, Hawaii, respectively. The Delivery rate shall be
[---] minimum. The respective Buyer is responsible for providing
discharge facilities; Chevron has no responsibility to procure
discharge facilities on the islands of Maui and Hawaii for the sole
purpose of receiving Deliveries of Diesel in bulk from Chevron's
Nominated Barge on behalf of Buyer.
Section 6.6: Title and Risk of Loss
i. For the Delivered Oil under Sections 6.1 and 6.2, care, custody,
control, title and risk of loss shall pass to Buyer as the Oil passes
the flange connecting Chevron's pipeline to the cargo hose of the
Buyer's Nominated Barge or vessel.
ii. For the Delivered Diesel under Section 6.3.i., care, custody,
control, title and risk of loss shall pass to Buyer as the Oil passes
the flange connecting the cargo hose at Chevrons' truck loading rack
to the Buyer's nominated tank truck.
iii. For the Delivered Diesel under Section 6.3.ii., care, custody,
control, title and risk of loss shall pass to Buyer as the Oil passes
the flange connecting Buyer's pipeline at the Chevron Oahu P/L to the
Waiau Power Plant.
iv. For the Delivered Diesel under Section 6.5.i and Section 6.5.ii,
care, custody, control, title and risk of loss shall pass to Buyer as
the Oil passes the flange connecting the cargo hose of the
13
Chevron's Nominated Barge or vessel to the Buyer's designated pipeline
v. For the delivered Jet under section 6.4, care, custody, control,
title and risk of loss shall pass to Buyer as the jet passes the
flange connecting the cargo hose of the Chevron's tank truck and
Buyer's truck unloading rack at HELCO's and MECO's respective power
plant.
Section 6.7: Notice of Delivery
The respective Buyer, or its agent, shall provide Chevron with advance notice of
Oil to be Delivered and received under Sections 6.1, 6.3ii, 6.4 and 6.5 in
accordance with Section 3.2 or [---], and the respective Buyer shall provide
telephone notification for Diesel to be Delivered under Section 6.2 or 6.3.i.
Chevron shall make all reasonable effort to comply with this notice and advise
Buyer promptly if the Delivery time cannot be met.
ARTICLE VII
DETERMINATION OF QUALITY
------------------------
Section 7.1: Sampling Procedures
The quality of the Oil purchased by HECO, having its origination at HDT, the
quality of Diesel purchased by HT&B and YB and the quality of Jet purchased by
HELCO and MECO shall be determined on the basis of a volumetric weighted
average composite of samples drawn from the issuing tank(s) by Chevron in such a
manner as to be representative of each Delivery. Such samples of Oil or Jet
shall be referred to as "Chevron's terminal samples" and shall be divided into a
minimum of two (2) parts one of which shall be sealed and dated and retained by
Chevron, or an Independent Inspector at the option of Chevron, for a period of
not less than three (3) Months.
The quality of Oil purchased by HECO and Delivered by Chevron from Chevron's
Oahu P/L into HECO's storage at HECO's Waiau Power Plant shall be determined on
the basis of a volumetric weighted average composite of samples drawn from
Chevron's issuing tank(s) in such a manner as to be representative of the
Delivery ("Chevron's piped sample"). In addition, a volumetric weighted average
composite of samples from HECO's receiving tank(s) at HECO's Waiau Power Plant
in such a manner as to be representative of the affected tank's contents
("Buyer's piped sample"). The Buyer's piped sample is to be divided into a
minimum of two (2) parts one of which shall be retained by the Independent
Inspector for a period of not less than three (3) Months.
The quality of the Oil purchased by MECO-Molokai, and MECO or HELCO if Delivery
is made pursuant to Section 6.5, shall be determined on the basis of a
volumetric weighted average composite of samples drawn by Chevron from tanks of
Chevron's Nominated Barge in such a manner as to be representative of the
Delivered Oil ("Chevron's barge sample," can also be considered "Chevron's
loaded sample" if the receiving tank is in Chevron's facilities on Maui or
Hawaii"). In addition, the Independent Inspector shall draw a volumetric
weighted average composite of samples from the receiving tank(s) at the
Kaunakakai Terminal, or Buyer's Nominated Terminal in Kahului, Maui, Hilo,
Hawaii and Kawaihae, Hawaii after the completion of each Delivery, in such a
manner as to be representative of the Diesel inventory ("Buyer's terminal
sample," can also be considered "Chevron's Received Sample" if the receiving
tank is in Chevron's facilities on Maui or Hawaii). The Buyer's terminal sample
is to be divided into a minimum of two (2) parts one of which shall be retained
by the Independent Inspector for a period of not less than three (3) Months.
Unless otherwise specifically agreed by the parties, the quality and heat
content of the Oil Delivered by Chevron into Buyer's Nominated Barge at
Chevron's HMT [---] shall be determined on the basis of a volumetric weighted
average composite of samples ("Chevron's loaded sample") drawn by the
Independent Inspector from the cargo tanks of Buyer's Nominated Barge at the
completion of loading in such a manner as to be representative of the total
volume of the Delivery. See Addendum No. 2 attached hereto for an overview of
Chevron sampling.
14
The Chevron's loaded sample, Chevron's piped sample, Chevron's barge sample and
any other sample not otherwise specifically provided shall be divided into three
(3) parts and dated, such parts to be distributed as follows:
1. One part shall be provided to Chevron's laboratory for analysis and
quality determination.
2. One part shall be provided to Buyer's laboratory for the purpose of
verifying Chevron's determinations.
3. One part shall be sealed and retained by the Independent Inspector
for a period of not less than three (3) Months.
The determination of the Oil or Jet's quality and BTU content shall be reported
through the preparation of a Certificate of Quality by Chevron's laboratory.
Chevron agrees to provide Buyer and the Independent Inspector copies of the
complete Certificate of Quality of the Oil or Jet; and will make best reasonable
efforts to provide the Certificate of Quality no later than two (2) working days
after the completion of the Delivery. Buyer shall have the right to perform
laboratory analyses in order to verify the results of Chevron's quality and BTU
content determinations.
Section 7.2: Quality Disputes
Within sixty (60) Days after the end of each Month, Buyer shall give Chevron
notice of any disagreement with Chevron's quality or BTU content determination
for Delivered Oil and Delivered Jet during such Month. Buyer shall present
Chevron with documents supporting such disagreement and the parties will confer,
in good faith, on the causes for the discrepancy and shall proceed to correct
such causes and adjust the quality, if justified, for the Delivery in question.
In the event that such disagreement is not resolved within thirty (30) Days of
the date of Buyer's notice, the Independent Inspector shall prepare, in whole or
in part from the samples in its possession, a representative sample of the
disputed Delivery ("Referee Sample") which shall be submitted to a mutually
agreed upon independent laboratory for a final determination, whose
determination shall be final and binding on both parties. The Referee Sample
shall include a volumetric weighted proportion of samples as are applicable to
the Oil or Jet in question, including Buyer's remain samples, or in lieu thereof
samples of the oil from the previous cargo, should the retains of the previous
cargo be reasonably suspected as a cause of the quality problem..
Section 7.3: Impact of Less Than Quality Product
If Buyer and Chevron agree or the Independent Inspector or independent
laboratory determines that the quality of Delivered Oil and Delivered Jet did
not equal the qualities described in Article IV (regardless of whether or not
the Preliminary Analysis indicated a quality problem or whether such Oil and Jet
passed tests of conditional acceptance), the Buyer and Chevron shall attempt to
minimize the impact. This may include specification waiver especially if use of
Oil and Jet will not harm Buyer or Chevron, or delivering higher quality Oil and
Jet in a timely manner to produce a specification quality blend in Chevron's
terminal or at Buyer's nominated vessel or terminal, wherever the Oil or Jet or
oil or jet in question then resides. If all such, or similar efforts fail to
resolve the quality problem, then Chevron at Chevron's expense, shall exchange
the non-specification Oil and Jet and other oil downgraded by commingling with
Chevron's Oil and Jet, with Oil and Jet meeting the qualities of Article IV. All
costs and expenses, including testing, transportation, re-refining and handling
costs incurred in returning and replacing off-specification Oil and Jet shall be
paid by the responsible party as determined by the Independent Inspector,
independent laboratory and any other available relevant evidence. However, in
no event shall Chevron be liable for any indirect, consequential, special or
incidental damages of any kind whether based in contract, tort (including
without limitation negligence or strict liability), warranty or otherwise
allegedly caused by or based upon the qualities of the Oil and Jet.
15
ARTICLE VIII
MEASUREMENT OF QUANTITY
-----------------------
Section 8.1: Determination of Quantity
i. Quantities of the Oil sold and Delivered by Chevron and purchased and
received by Buyers under this Contract at the HMT shall be determined
at the time of each Delivery by gauging the HMT tanks before and after
pumping under the supervision of the Independent Inspector.
ii. Quantities of Oil sold by Chevron and purchased and received by
Buyers under this Contract where Delivery of the Oil at the HMT pumped
from the Refinery in direct continuation through Chevron's Oahu P/L or
Chevron's Black Oil Pipeline, sold and purchased under this Contract
and Delivered to Buyer at the Waiau Power Plant [---], shall be
determined at the time of each Delivery by gauging Chevron's tanks at
its Barbers Point Refinery before and after pumping under the
supervision of the Independent Inspector.
iii. Diesel sold by Chevron and purchased and received by Buyers under
this Contract at the Kaunakakai Terminal, or at Buyer's Nominated
Terminal at Kahului, Maui, Hilo Hawaii or Kawaihae, Hawaii shall be
determined at the time of each Delivery by gauging Buyer's tank(s) at
the Kaunakakai terminal or Buyer's Nominated Terminal before and after
pumping under the supervision of the Independent Inspector.
iv. Quantities Delivered hereunder shall be calculated in accordance with
current measurement standards adopted by industry, ASTM, API and other
standard-setting bodies as applicable in the opinion of the
Independent Inspector and shall be expressed in G.S.V., U.S. barrels
or U.S. gallons @ 60 degrees F.
v. All such measurements shall be taken by a mutually agreed upon
Independent Inspector who shall (1) prepare and sign a certificate
stating the quantity of Oil determined according to the provisions of
this Section 8.1 to have been Delivered to Buyer ("Certificate of
Quantity"); (2) furnish Chevron and Buyer each with a copy of such
Certificate of Quantity; and (3) advise by facsimile or electronic
mail the quantity Delivered to Buyer. The data in the Independent
Inspector's report and Certificate of Quantity prepared as provided
herein shall, absent fraud or error and omissions, be binding and
conclusive upon both parties, and shall be used for verification of
the invoice and Bill of Lading . Chevron and Buyer shall share equally
the cost of independent inspections. Chevron reserves the right to
install meters on the Oahu P/L and to determine quantity as in Section
8.2.
Section 8.2: Determination of Quantities at HDT
Diesel sold and purchased under this Contract at the HDT and Jet sold and
purchased by HELCO and MECO shall be determined at the time of each Delivery by
reading calibrated meters, corrected in each instance to volume at 60 degrees F
in accordance with current measurement standards adopted by industry, ASTM, API
and other standard-setting bodies as applicable in the opinion of the
Independent Inspector. The meters used at the HDT and Chevron's terminals on
Hawaii and Maui shall be Chevron's meters. Both Buyer and Chevron shall have the
right to review each other's routine certification documents.
Section 8.3: Quantity Dispute
If Buyer or Chevron has reason to believe that the quantity of Oil and Jet
stated for a particular Delivery per Sections 8.1 or 8.2 is incorrect, the party
shall within sixty (60) Days of the Delivery date, present the other party with
documentation supporting such determination and the parties will confer, in good
faith, on the causes for the discrepancy and shall proceed to correct such
causes and adjust the quantity, if justified, for the Deliveries in question.
16
ARTICLE IX
INVOICING AND PAYMENT
---------------------
Section 9.1: Invoices
Invoices for the sale of CIFO, Diesel, and Jet, which will show the price per
physical barrel sold will be prepared and dated following Delivery, and for the
services provided by Chevron as outlined in Article XI, shall be rendered
promptly to Buyer. Original invoices shall include documentation acceptable to
both parties, including Certificate of Quality, Certificate of Quantity or
report of the Independent Inspector and price calculation; such documentation
may, however, be provided to Buyer or its agent separately.
Section 9.2: Payment Terms
Payments shall be made in U.S. dollars. Subject to Section 8.3 herein, the
timing of payments of invoices shall be as follows:
i. Invoices to HECO, MECO, MECO-Molokai and HELCO:
a. Payment for Deliveries and services from the first through the
tenth Day of a Month for which invoices have been received is
due on the twentieth Day of the Month.
b. Payment for Deliveries and services from the eleventh through the
twentieth Day of a Month for which invoices have been received is
due on the last Day of the Month.
c. Payment for Deliveries and services from the twenty-first
through the last Day of a Month for which invoices have been
received is due on the tenth Day of the following Month.
Due dates are dates payments are to reach Chevron. If the due date
falls on a Saturday, the payment shall be due on the preceding
business day. If such date falls on a Sunday or a holiday, payment
shall be due the following business day.
ii. Payment for Deliveries to HT&B and YB for which invoices have been
received shall be paid within thirty (30) Days of the Delivery date.
iii. If an invoice incorporating an item at variance with the documentation
or is disputed has been sent to Buyer, then Buyer shall hold said
invoice without penalty until such error, variance with documentation
or dispute is resolved and Buyer shall have received a corrected
invoice or debit or credit issued subsequently to the original
invoice. Buyer shall make payment for such subsequent invoices or
debits in accordance with Section 9.2.i or Section 9.2.ii, whichever
is applicable. If a disputed item has not been resolved in 30 Days
from date of invoice, Buyer shall pay the undisputed amount.
Section 9.3: Method of Payment
Method of payment shall be as follows:
i. Payments of HECO, MECO, MECO-Molokai, and HELCO shall be by bank wire
transfer of immediately available funds to:
First National Bank of Chicago, Chicago, Illinois 60607
Attention: GFTS
for credit to the following accounts, depending on which Buyer is
making a payment:
a. HECO Chevron Products Company,
a division of Chevron U.S.A. Inc
Section #632
Account No. 1184762
17
b. HELCO Chevron Products Company,
a division of Chevron U.S.A. Inc
Section #632
Account No. 1237632
c. MECO Chevron Products Company,
a division of Chevron U.S.A. Inc
Section #632
Account No. 1237636
d. MECO-Molokai Chevron Products Company,
a division of Chevron U.S.A. Inc
Section #632
Account No. 6049549
For identification purposes, all wires must clearly indicate that payment
is being made by order of Buyer and indicate the invoice reference number.
In addition, written documentation evidencing specific invoices being paid
shall be immediately forwarded to:
Chevron Products Company,
a division of Chevron U.S.A. Inc
P.O. Box R
Concord, California 94524
ii. Payment by HT&B and YB shall be mailed to:
Chevron Products Company,
a division of Chevron U.S.A. Inc
c/o First Interstate Bank
Dept. 7351
Los Angeles, CA 90088
Payment shall include written documentation evidencing specific invoices
being paid.
ARTICLE X
CHEVRON'S FACILITIES ON OAHU
----------------------------
i. Chevron agrees to provide the use of its Oahu P/L for the Diesel
Delivered to HECO's Waiau Power Plant per Section 6.3.ii.
ii. Chevron agrees to make available on a [---] the use of [---], such
use shall include an [---], if and whenever said [---] Contract and
Addendum No. 3 attached hereto and incorporated herein by reference.
18
ARTICLE XI
CHEVRON'S FACILITIES ON MAUI AND HAWAII
---------------------------------------
As used in this Article XI, "Buyer" will refer only to MECO or HELCO.
Section 11.1: Use of Chevron Storage and Handling Facilities
i. Chevron agrees to provide MECO the use of its storage and handling
facilities for Diesel Received at Kahului, Maui, and to provide HELCO
the use of its storage and handling facilities for Diesel and CIFO
Received at Hilo, Hawaii; for the Delivered Oil under Article VI and
the third party oil purchased as a result of the force majeure
conditions of Article XIII, on the terms and conditions described in
this Article XI. To provide operating flexibility to a valued, long-
term customer, Chevron shall grant HELCO the non-exclusive right to
terminal oil purchased from third parties at Chevron's facility at
Hilo, Hawaii up to a maximum quantity per Year of [---] and [---],
which meet the specifications set out herein. Buyer agrees to schedule
its deliveries such that they contain a minimum of [---] barrels of
oil such that they arrive at regular intervals. For the same reasons,
Chevron shall grant MECO the non-exclusive right to terminal No. 2
diesel fuel purchased from third parties at Chevron's facility on Maui
up to a maximum quantity of [---] barrels per Year, which meets the
specifications set out herein. Buyer agrees to schedule its deliveries
such that they contain a minimum of [---] barrels of diesel fuel and
that they arrive at regular intervals.
ii. Whenever Buyer purchases third party oil which is to be terminaled in
Chevron's facilities, Buyer shall obtain a sample representative of
the oil in the barge cargo tanks, after the third party supplier has
completed the loading of such oil into Buyer's Nominated Barge. Buyer
shall provide a part of a volumetric weighted average composite sample
representative of the oil in the barge cargo tanks upon completion of
loading to the Independent Inspector who shall retain it for a period
of not less than three (3) Months. This sample ("Buyer's loaded
sample") shall be available for analysis by Chevron, Buyer or an
independent laboratory should Chevron's subsequent sampling and
analysis indicate a quality problem. This sample shall indicate the
quality of this mixture of purchased oil and the previous cargo
remains. To provide an early warning of any quality problems with the
Received oil, Buyer agrees to instruct the Independent Inspector to
provide Chevron a preliminary analysis of Buyer's loaded sample
consisting of API gravity, appearance and, in the case of diesel fuel,
flash point, at the time such third party oil is loaded for transport.
Buyer also agrees to instruct the Independent Inspector to deliver one
copy of such preliminary analysis promptly to Chevron's representative
at the Honolulu Marine Terminal and to deliver a copy of the
Preliminary Analysis and other relevant quality documentation in
Buyer's or the Independent Inspector's possession to Buyer's Nominated
Barge for delivery to Chevron's representative upon arrival at the
appropriate outer island terminal. Buyer further agrees that the cost
of any additives which may be required to eliminate compatibility
problems between third party oil and Chevron's Oil at the outer island
terminal shall be solely for Buyer's account.
Section 11.2: Barge Schedule Notification
Buyer shall provide Chevron with estimated arrival times of the barge
transporting the oil for which Buyer desires to use Chevron's facilities on Maui
or Hawaii. Buyer or Buyer's agent shall provide radio, phone or facsimile
notification to Chevron's representative at each unloading location at least
seven Days prior to a third-party supplied oil delivery and at least 24 hours
prior to a Chevron supplied oil delivery. Buyer or Buyer's agent shall also
provide the Captain of the Port with radio or phone notification at least 24
hours prior to any delivery. Should the estimated time of arrival change by two
or more hours following the 24 hour arrival report, Buyer or Buyer's agent shall
promptly report the change to Chevron's representative and the Captain of the
Port at the place of planned arrival.
19
Section 11.3: Loaded Samples
i. Chevron shall analyze Chevron's Loaded sample of Section 6.1.iv and
review Buyer's supplied results from any Buyer's loaded sample of
Section 11.1.ii for conditional acceptance for receiving the oil, and
if warranted, analyze Chevron's Loaded sample of Section 6.1.iv and if
a quality problem with the loaded oil is reasonably indicated, obtain
and analyze a sufficient portion of Buyer's loaded sample of Section
11.1.ii for all the qualities described in Article IV, while Buyer's
Nominated Barge is enroute to Maui or Hawaii, to reduce the risk of
contaminating Chevron's terminal inventories. See Addendum No. 2
hereto for an overview of all Chevron sampling. If Buyer's supplied
results from any Buyer's loaded sample fails conditional acceptance or
Chevron's analysis of Buyer's loaded sample is not consistent with the
qualities described in Article IV, Chevron shall promptly notify Buyer
of any quality problems with the loaded oil. Both Buyer and Chevron
shall attempt to minimize the impact of any quality problem by
specification waiver especially if use of the loaded oil will not harm
either Buyer or Chevron, or by Buyer or Chevron Delivering higher
quality oil in a timely manner to produce a specification quality
blend at Chevron's terminal. If all such, and similar, efforts fail to
resolve the quality problem, then Buyer's loaded oil shall not be
unloaded into Chevron's terminal tanks. Buyer may return non-
specification Loaded Oil to Chevron's Barbers Point Refinery, in which
case Chevron shall replace the non-specification Loaded Oil by
Delivering an equal volume of Oil into Buyer's Nominated Barge at the
HMT, in a timely manner.
ii. All costs and expenses, including transportation, re-refining and
handling costs incurred in returning and replacing non-specification
loaded oil and Loaded Oil shall be paid by the party responsible for
the contamination. Responsibility shall be determined by analyzing the
Buyer's barge retain sample or Chevron's Loaded Sample of Section 7.1
and the Buyer's loaded sample of Section 11.1.ii. If Buyer and Chevron
cannot agree whether the Chevron's Loaded Oil or the loaded oil meet
the qualities specified in Article IV, then the applicable samples in
the possession of Chevron, Buyer and the Independent Inspector which
relate to the oil in question shall be submitted to a mutually agreed
upon independent laboratory, whose determination shall be final and
binding on both parties. Chevron shall have the responsibility for
Buyer's transportation and handling costs for its own re-refining cost
if it is determined that the qualities described in Article IV are not
met by the Delivered Oil. Otherwise, Buyer shall be responsible for
Chevron's handling and re-refining cost and its own transportation and
handling costs. The responsible party shall reimburse the other party
for such costs and expenses within sixty (60) Days of the delivery
date of the non-specification loaded oil. However, in no event shall
such party be responsible for any indirect, consequential, special or
incidental damages of any kind whether based in contract, tort
(including without limitation negligence or strict liability),
warranty or otherwise allegedly caused by or based upon the quality of
the non-specification loaded oil. Chevron and Buyer shall share
equally the cost of any independent inspections.
Section 11.4: Coast Guard Dock Watch Requirements
Buyer shall be responsible for meeting all Coast Guard dock watch requirements
at Hilo, Hawaii and Kahului, Maui. Charges levied by any governmental agency
for the use of their facilities at Hilo, Hawaii or Kahului, Maui, including but
not limited to the State of Hawaii's wharf and pipeline fees, shall be for
Buyer's account.
Section 11.5: Custody of Received Oil
Chevron will accept custody and exercise control of Received oil having
conditionally acceptable quality per Section 11.6 at the flange connecting
Chevron's independently owned pipeline at each location [---]. Title and risk of
loss shall remain with Buyer. Not withstanding Article 18, Chevron shall not be
responsible for any type of loss of the oil while it is in Chevron's custody
except when loss or damage is caused by Chevron's gross negligence or willful
misconduct in receiving, handling, storing, or delivering such oil. Received oil
will be commingled with Chevron's Oil in Chevron's tankage at Chevron's Kahului,
Maui or Hilo, Hawaii terminals.
20
Section 11.6: Determination of Quality of Received Oil at Unloading
i. Quality of Received oil at the unloading location shall be determined
by testing a volumetric weighted average composite of representative
samples taken from Carrier's barge tanks by the Independent Inspector.
See Addendum No. 2 hereto for an overview of all Chevron sampling.
Samples will be divided into three parts and dated. One part shall be
tested promptly per Section 11.6.ii. One part shall be labeled
"Chevron's Received Sample," one part shall be sealed and labeled
"Chevron's Received Retain" which shall be retained by the Independent
Inspector for a period of not less than three (3) Months.
ii. To facilitate Buyer's barge turnaround, Chevron shall promptly
perform a preliminary analysis on one part of the sample taken in
Section 11.6.i for its API gravity, appearance and in the case of
Diesel also for its flash point. Received Oil will be considered
conditionally acceptable if its API gravity is within 0.3 degrees of
its gravity delivered to Buyer under Article VI. Received oil will be
considered acceptable if its API gravity is within 0.3 degrees of the
Supplier's loaded sample gravity as determined in Section 11.1.ii, and
for diesel cargoes, if its Flash point is above its 150 degrees F
specification of Section 4.2.
iii. Notwithstanding the above conditional acceptance, Chevron may use
Chevron's Received Sample to determine all the qualities described in
Article IV for Received oil. Within thirty (30) Days after each oil
cargo unloading, Chevron shall give Buyer notice of any claim of
contamination of Chevron's Oil from commingling with Received oil. In
the event that such claim is not resolved within thirty (30) Days of
the original claim, the Independent Inspector shall prepare, in whole
or in part from the samples in its possession, a representative sample
of the disputed delivery ("Referee Sample") which shall be submitted
to a mutually agreed upon independent laboratory for a final
determination, whose determination shall be final and binding on both
parties. The Referee Sample shall include a volumetric weighted
proportion of samples as are applicable to the oil in question,
including Chevron's Received Retain Buyer's remain samples, or in lieu
thereof samples of the oil from the previous cargo, should the retains
of the previous cargo be reasonably suspected as a cause of the
quality
iv. If Buyer and Chevron agree or the Independent Inspector determines
that the quality of the Received oil did not meet the qualities
described in Article IV, and the Received oil has contaminated
Chevron's terminal inventories, both Buyer and Chevron shall attempt
to minimize the impact of any quality problem on Buyer by waiver of
Buyer's requirement to meet specifications especially if Chevron's use
of the oil will not significantly harm Chevron, or by Buyer or Chevron
delivering higher quality oil in a timely manner to produce a
specification quality blend at Chevron's terminal. If all such, and
similar, efforts fail to resolve the quality problem, then Buyer will
reimburse Chevron the transportation, handling and re-refining costs
of exchanging Buyer's and Chevron's oil, with oil meeting the
qualities described in Article IV. to the extent the contamination of
Chevron's terminal inventories was not caused or contributed to by
Chevron. Such reimbursement shall occur within sixty (60) Days of
Chevron's original claim. However, in no event shall Buyer be liable
for any indirect, consequential, special or incidental damages of any
kind whether based in contract, tort (including without limitation
negligence or strict liability), warranty or otherwise allegedly
caused by or based upon the quality of the Received oil.
Section 11.7: Determination of Quantity of Received Oil and Oil at Time of
Custody Transfer
The quantity of Received oil and Received Oil over which Chevron takes custody
shall be determined at the time of each barge cargo unloading by gauging
Chevron's terminal tank before and after pumping. Free water shall be drawn off
prior to each level measurement. Volumes delivered hereunder shall be calculated
in accordance with current measurement standards adopted by industry, ASTM, API
and other standard-setting bodies as applicable in the opinion of the
Independent Inspector and shall be expressed in G.S.V., U.S. barrels @ 60
degrees F. Measurements shall be taken by Chevron and witnessed by Buyer or
Buyer's agent. However, at Buyer's option, such measurement shall be taken by a
mutually agreed upon independent inspector. Buyer and Chevron shall share
equally the cost of independent inspections.
21
Section 11.8: Commingle Product
In the event that Buyer and Chevron have agreed to commingle their oil in a
barge or vessel compartment to reduce freight costs, and there are discrepancies
between either the quantities of oil loaded per Section 6.1 and unloaded per
Section 11.7 or the qualities of oil loaded per Section 7.1 and unloaded per
Section 11.6, then Buyer and Chevron shall share the benefits or losses of the
discrepancy proportionally to the loaded volumes.
Section 11.9: Transfer Notification From Kahului and Hilo
Buyer will provide Chevron's terminal representative, during normal working
hours, at least 24-hour notice of any transfers required from Chevron's
facilities in Kahului or Hilo.
Section 11.10: Custody of Returned Fuel Oil
Buyer shall regain custody and control of Returned Fuel Oil at the flange
connecting Chevron's Hilo terminal pipeline to Buyer's pipeline.
i. The quantity of Fuel Oil over which Chevron returns custody shall be
determined at the time of each transfer by gauging Chevron's terminal
tank(s) before and after pumping. Volumes Returned hereunder shall be
calculated in accordance with current measurement standards adopted by
industry, ASTM, API and other standard-setting bodies as applicable in
the opinion of the Independent Inspector and shall be expressed in
G.S.V., U.S. barrels @ 60 degrees F. Measurements shall be taken by
Chevron and witnessed by Buyer or Buyer's agent. However, at Buyer
option, such measurements shall be taken by the Independent Inspector.
Buyer and Chevron shall share equally the cost of independent
inspections.
ii. Chevron shall maintain a record of Buyer's net Fuel Oil inventory
stored in its Hilo terminal based on receipts as determined in Section
11.7 and returns as determined in Section 11.10.i. Chevron will
provide book inventory records once each week, convenient to Chevron's
normal weekly inventory period..
Section 11.11: Custody of Returned Diesel
Buyer shall regain, custody and control of Returned diesel at the end of the
fill pipe connecting Chevron's terminal pipelines to Carrier's tank trucks.
Transfers will be made in minimum 5,000 gallons per delivery load.
i. The quantity of diesel over which Chevron returns custody shall be
determined at the time of each transfer by reading Chevron's
calibrated meters corrected in each instance in accordance with
current measurement standards adopted by industry, ASTM, API and other
standard-setting bodies as applicable in the opinion of the
Independent Inspector and shall be expressed in G.S.V., U.S. barrels
or U.S. gallons @ 60 degrees F. If Buyer or Chevron have reason to
believe that the quantity of Returned diesel stated for a particular
transfer is incorrect, that party shall within fifteen Days of the
transfer date, present the other party with documentation supporting
such determination and the parties will confer, in good faith, on the
causes for the discrepancy and shall proceed to correct such causes
and adjust the quantity, if justified, for the transfers in question.
ii. Chevron shall maintain records of Buyer's net diesel inventories
stored at each of its Kahului, Maui and Hilo, Hawaii terminals, based
on receipts as determined in Section 11.7 and returns as determined in
Section 11.11.i. Chevron will provide book inventory records once each
week, convenient to Chevron's normal weekly inventory period.
iii. Chevron will periodically reconcile meter measurements with tank
gaugings. Buyer may review Chevron's reconciliation calculations.
However, there will be no retroactive adjustments to the volumes
delivered or received as a result of this procedure.
22
Section 11.12: Return Oil Quantities
Chevron shall be under no obligation to provide Buyer quantities of Returned oil
greater than Buyer's current net oil inventory. However, Chevron will attempt to
meet Buyer's unanticipated needs, after considering the needs of its other
customers and its own available inventory.
Section 11.13: Transfer of Returned Oil
i. Returned oil transferred by Chevron shall meet the qualities
described in Article IV. Chevron, or at Buyer's option the Independent
Inspector, shall draw a volumetric weighted average composite sample
representative of the oil in Chevron's tanks on Maui and Hawaii after
each receipt of Buyer's or Chevron's oil in order to verify the
quality of the Returned oil in Chevron's terminal ("Chevron's Returned
sample"). This sample will be divided into three parts and dated. .
See Addendum No. 2 hereto for an overview of Chevron sampling. One
part of this sample shall be promptly tested by Chevron for its API
gravity, appearance and in the case of diesel also for its flash
point. Buyer and Chevron agree that successful passage of the prompt
test on this sample is sufficient evidence for Chevron to return oil
to Buyer, without limiting Buyer's rights within Section 11.13.ii. One
part of the Chevron's Returned sample shall be retained by Chevron and
one part shall be sealed and shall be provided to the Independent
Inspector to be retained for a period of not less than three (3)
Months.
ii. Notwithstanding the above conditional acceptance, if a quality
problem with the Returned oil is reasonably indicated, Buyer may
obtain and analyze a sufficient portion of Chevron's Returned Sample
in the possession of the Independent Inspector to determine all the
qualities described in Article IV for the Returned oil. Within thirty
(30) Days after each oil delivery, Buyer shall give Chevron notice of
any claim of contamination and of resulting losses. In the event that
such claim is not resolved within thirty (30) Days of the original
claim, the Independent Inspector shall prepare, in whole or in part
from the samples in its possession, a representative sample of the
disputed delivery ("Referee Sample") which shall be submitted to a
mutually agreed upon independent laboratory for a final determination,
whose determination shall be final and binding on both parties. The
Referee Sample shall include a volumetric weighted proportion of
samples as are applicable to the oil in question..
iii. If Buyer and Chevron agree or the Independent Inspector determines
that the quality of the Returned oil did not meet the qualities
described in Article IV and that and indicates that Chevron's terminal
inventories, including Buyer's oil stored there and Buyer's power
plant inventories are contaminated, both Buyer and Chevron shall
attempt to minimize the impact of any quality problem on Chevron by
waiver of Chevron's requirement to meet specifications, especially if
Buyer's use of the oil will not significantly harm Buyer, or by
Chevron Delivering higher quality oil to produce a specification
quality blend at Chevron's terminal inventory and Buyer's plants. If
all such, and similar, efforts fail to resolve the quality problem,
then Chevron will, at Chevron's expense, exchange Buyer's Returned oil
to the extent the contamination of Buyer's other similar oil was
caused or contributed to by Chevron, and, if appropriate, any of
Buyer's other similar oil which has been downgraded by commingling
with the Returned oil, with oil meeting the qualities described in
Article IV. Chevron shall make its best, reasonable effort to replace
Buyer's oil in a timely manner. However, in no event shall Chevron be
liable for any indirect, consequential, special or incidental damages
of any kind whether based in contract, tort (including without
limitation negligence or strict liability), warranty or otherwise
allegedly caused by or based upon the quality of the Returned oil.
Section 11.14: Terminaling and Handling Fees
Effective upon the commencement of this Contract, Chevron will invoice Buyer and
Buyer will pay Chevron per Article IX, terminaling and handling fees based on
the quantities of oil determined in Section 11.7 at the rates listed below.
23
i. At Kahului, Maui, the terminaling and handling fee shall be [---]
per gallon of diesel [---] per physical barrel of diesel).
ii. At Hilo, Hawaii, the terminaling and handling fee shall be [---] per
gallon of oil [---] per physical barrel of oil).
iii. The terminaling and handling fees specified in Section 11.14i and
Section 11.14.ii shall be subject to [---], 50% of the annual
escalation factor shall be the arithmetic average of the hourly
earnings in dollars per hour for the petroleum and coal products
industry as shown in the "Employment and Earning" publication of the
U.S. Department of Labor, Bureau of Labor Statistics, for the three
Months of the second calendar quarter immediately preceding the
calendar quarter of the Month in which services are rendered, divided
by the arithmetic average of the hourly earnings in dollars per hour
for the petroleum and coal products industry as shown in the
"Employment and Earning" publication of the U.S. Department of Labor,
Bureau of Labor statistics, for the Months January through March, 1997
(20.353);the remaining 50% of the annual escalation factor shall be
the arithmetic average of the Producer Price Index (PPI) for
Industrial Commodities as published by the U.S. Department of Labor,
Bureau of Labor Statistics, for the three Months of the second
calendar quarter immediately preceding the calendar quarter of the
Month in which services are rendered, divided by the arithmetic
average of the Producer Price Index (PPI) for Industrial Commodities
as published by the U.S. Department of Labor, Bureau of Labor
Statistics, for the Months January through March, 1997 (128.50).
For the purpose of invoicing, the terminaling and handling services shall be
considered received by Buyer when Chevron first takes custody of Buyer's oil per
Section 11.5.
ARTICLE XII
CONTINGENCIES
-------------
Section 12.1: Definition of Contingency
As used in this Article XII, the term "Contingency" means:
(a) any event reasonably beyond the control of the party affected;
(b) compliance, voluntary or involuntary, with a direction or request of
any government or person purporting to act with governmental
authority; excluding, however, any such direction or request
restricting or otherwise regulating combustion of the oil to be
purchased by Buyer hereunder, the effect of which restrictions or
regulation upon the parties' performance shall be governed by Section
12.5 of this Contract;
(c) total or partial expropriation, nationalization, confiscation,
requisitioning or abrogation or breach of a government contract or
concession;
(d) closing of, or restriction on the use of, a port or pipeline;
(e) maritime peril (including but not limited to, negligence in
navigation or management of vessel, collision, stranding, destruction,
or loss of vessel), storm, earthquake, flood;
(f) accident, fire, explosion;
(g) hostilities or war (declared or undeclared), embargo, blockage, riot,
civil unrest, sabotage, revolution, insurrection;
(h) strike or other labor difficulty (whomever's employees are involved),
even though the strike or other labor difficulty could be settled by
acceding to the demands of a labor group; or,
24
(i) loss or shortage of supply, production, manufacturing, distribution,
refining, transportation, Delivery facilities, receiving facilities,
equipment, labor, material, power generation or power distribution
caused by circumstances which the affected party is not able to
overcome by the exercise of reasonable diligence or which the affected
party is able to overcome only at substantial additional expense in
relation to the expected revenue, benefits or rights related directly
to this Contract.
Section 12.2: Obligation to Supply Product
Chevron shall not be obligated to sell or deliver Oil or Jet to the extent that
performance of this Contract is prevented, restricted or delayed by a
Contingency which significantly affects Chevron's ability to supply, manufacture
or transport Diesel or Jet to Buyer under this Contract from [---]. In such
circumstances, Deliveries of Oil or Jet to Buyer may be reduced on a basis as
equitable to Buyer as to Chevron's and its affiliates' other customers of crude
and petroleum products, and Chevron shall not be obligated to acquire additional
crude, oil or jet but to the extent that it does acquire additional crude, oil
or jet, Buyer shall be entitled to an equitable share of the oil or jet acquired
or derived from the crude acquired, at a price to be agreed from time to time.
Section 12.3: Obligation to Purchase Product
Buyer shall not be obligated to purchase, receive or use Oil or Jet to the
extent that performance of this Contract in the customary manner is prevented,
restricted or delayed by a Contingency. In such circumstances, purchases from
Chevron may be reduced on any basis as equitable to Chevron as to Buyer's other
suppliers of oil or jet.
Section 12.4: Price Determination Prevention
If at any time any price determined under this Contract cannot be given effect
because to do so would violate a direction or request of any government or
person purporting to act with governmental authority, Buyer and Chevron shall
attempt to agree on an alternate course of action but failing agreement within
ten (10) Days the party adversely affected may suspend performance with respect
to the quantity of Oil or Jet affected by the direction or request.
Section 12.5: Governmental Regulation Requirements
To the extent that any governmental regulation requires combustion of oil or jet
meeting specifications other than those in Article IV, Buyer and Chevron shall
negotiate in good faith to agree on an alternative course of action that will
reasonably allow Buyer to comply with such regulation while fulfilling its
minimum annual purchase volume commitment under Article III, at a price and on
other terms and conditions that are fair to both parties. Chevron shall have no
obligation to Deliver oil or jet meeting new specifications if it is not
available for purchase from third parties and Chevron cannot manufacture such
oil or jet in existing facilities without substantial new capital investment.
If Buyer and Chevron do not agree on such an alternative course of action, then
Buyer may comply with such regulation in any reasonable manner it chooses,
including the option to purchase from other sources for its plants located
within the area in which such regulation specifically applies, fuels which will
enable Buyer to comply with such regulation. In such case, Buyer's minimum
purchase requirement under Article III shall be reduced accordingly.
Section 12.6: Chevron's Obligations Under Contract
[---]
25
[---]
[---]
ARTICLE XIII
EFFECT OF SUSPENSION OR REDUCTION
---------------------------------
Section 13.1: Event of Suspension
In the event of any suspension of sales and Deliveries under Article XII,
Chevron shall not be obligated to sell and Buyer shall not be obligated to buy,
after the period of suspension or reduction, the undelivered quantity of Oil or
Jet which normally would have been sold and Delivered hereunder during the
period of suspension or reduction.
Section 13.2: Suspension For More Than 180 Days
If sales and Deliveries are suspended under Article XII for more than one
hundred eighty (180) Days, Chevron or Buyer shall then have the option while
such suspension continues to terminate its obligations to the other party under
this Contract on thirty (30) Days' written notice to the other party.
Section 13.3: Notification of Suspension
Any party which relies upon Article XII shall give the other party prompt notice
thereof specifying the anticipated amount and duration of any suspension or
reduction of Deliveries. It shall also give prompt notice when it no longer
expects to rely on Article XII and Deliveries shall be reinstated subject to all
conditions of this Contract, unless this Contract has been terminated previously
under Section 13.2.
Section 13.4: Obligation to Pay In Full
Nothing in Article XII shall relieve Buyer of the obligations to pay in full in
United States currency for the Oil or Jet sold and Delivered hereunder and for
other amounts due to Buyer to Chevron under this Contract, nor relieve Chevron
of the obligation to return to Buyer the net positive inventory of Buyer's oil
stored in Chevron's Hilo, Hawaii and Kahului, Maui terminals.
Section 13.5: Suspension Not A Breach Of Contract
While Deliveries are suspended or reduced by Chevron pursuant to Article XII, it
shall not be a breach of this Contract for Buyer to buy from a supplier other
than Chevron the quantities of Oil or Jet which Chevron does not Deliver. During
this period of time, there will be no minimum volume requirements. After any
suspension or reduction has ended, minimum and maximum volume requirements for
the semiannual period in which the suspension or reduction occurred will be
reduced in proportion to the ratio of the number of Days within the semiannual
period during which no suspension or reduction was in effect, to the number of
Days within the semiannual period.
ARTICLE XIV
WAIVER AND NONASSIGNABILITY
---------------------------
Section 14.1: Waiver By One Party
Waiver by one party of the other's breach of any provision of this Contract
shall not be deemed a waiver of any subsequent or continuing breach of such
provisions or of the breach of any other provision or provisions hereof.
26
Section 14.2: Assignability of Contract
This Contract shall not be assignable by either party without the written
consent of the other, which shall not be unreasonably withheld, except that
Chevron may assign this Contract to any affiliate, provided that any such
assignment shall not release Chevron from any of its obligations hereunder, and
except that HECO, MECO, MECO-Molokai, and HELCO may assign their interests in
the Contract to the Trustee under their respective First Mortgage Bond
Indentures. Chevron does not, by agreement to such an assignment, waive any
right it may have to terminate this Contract for any breach hereof occurring at
any time before or after any such assignment or release Buyer of any obligations
arising under this Contract after any such assignment. Following any such
assignment, no further assignment may be made without the consent of Chevron.
ARTICLE XV
CONFLICT OF INTEREST
--------------------
Conflicts of interest related to this Contract are strictly prohibited. Except
as otherwise expressly provided herein, neither party nor any director, employee
or agent of a party shall give to or receive from any director, employee or
agent of the other party any gift, entertainment or other favor of significant
value, or any commission, fee or rebate. Likewise, neither party nor any
director, employee or agent of a party shall enter into any business arrangement
with any director, employee or agent of the other party (or any affiliate),
unless such person is acting for and on behalf of the other party, without prior
written notification thereof to the other party. In the event of any violation
of this paragraph, including any violation occurring prior to the date of this
Contract which resulted directly or indirectly in one party's consent to enter
into this Contract with the other party, such party may, at its sole option,
terminate this Contract at any time and, except for Buyer's obligation to pay in
full in United States currency for the Oil sold and Delivered hereunder and for
other amounts due by Buyer to Chevron under this Contract, and for Chevron's
obligation to return to Buyer the net positive inventory of Buyer's oil stored
in Chevron's Hilo, Hawaii and Kahului, Maui terminals, shall be relieved of any
further obligation under this Contract.
Both parties agree to immediately notify the other of any known violation of
this Article.
ARTICLE XVI
DEFAULT
-------
If Buyer or Chevron considers the other party to be in default of any obligation
under this Contract, such party shall give the other party notice thereof. Such
other party shall then have 30 Days in which to remedy such default. If the
default is not remedied, the other party may, without prejudice to any other
right or remedy of such party in respect of such breach, terminate its
obligations under this Contract, except for Buyer's obligation to pay in full in
United States currency for the Oil or Jet sold and Delivered hereunder and for
other amounts due by Buyer to Chevron under this Contract, and for Chevron's
obligation to return to Buyer the net positive inventory of Buyer's oil stored
in Chevron's Hilo, Hawaii and Kahului, Maui terminals, by forty five (45) Days'
written notice to the party in breach. Any termination shall be without
prejudice to accrued rights. All rights and remedies hereunder are independent
of each other and election of one remedy shall not exclude another.
Except as provided under Sections 18.2 and 18.4, in no event shall either party
be liable for any indirect, consequential, special or incidental damages of any
kind whether based in contract, tort (including without limitation negligence or
strict liability), warranty or otherwise.
Chevron's termination of its obligations to a Buyer in this Contract due to
default by that Buyer shall not terminate Chevron's obligations to the remaining
Buyers not in default of this Contract.
27
ARTICLE XVII
APPLICABLE LAW
--------------
This Contract shall be construed in accordance with, and all disputes arising
hereunder shall be determined in accordance with, the local law of the State of
Hawaii, U.S.A.
ARTICLE XVIII
INDEMNITY
---------
Section 18.1: Buyer Held Harmless for General Indemnity where title and risk of
loss is with Chevron
Chevron shall indemnify, defend and hold harmless Buyer, its directors,
officers, employees and agents (including but not limited to affiliates and
contractors and their employees) from and against all liabilities, damages,
losses, penalties, claims, demands, suits, costs, expenses (including reasonable
attorneys' fees), and proceedings of any nature whatsoever for personal injury
(including death), or property damage, including but not limited to Buyer's
facilities (collectively "Injury or Damage"), that results from non-
specification or contaminated Delivered Oil or Jet, or that arises out of or is
in any manner connected with the Delivery or Receipt of Oil or Jet related to
this Contract at Chevron's facilities when in the custody of Chevron or the
transportation of Oil or Jet related to this Contract when in the custody of
Chevron, except to the extent that such Injury or Damage may be attributable to
the negligence or willful action of Buyer. This Section 18.1 shall not include
any indirect, consequential, special or incidental damages of any kind whether
based in contract, tort (including without limitation negligence or strict
liability), warranty or otherwise.
Section 18.2: Buyer Held Harmless for Releases to the Environment when title
and risk of loss is with Chevron
Without limiting the generality of Section 18.1, Chevron shall indemnify, defend
and hold harmless Buyer, its directors, officers, employees and agents
(including but not limited to affiliates and contractors and their employees)
from and against all liabilities, damages, losses, penalties, claims, demands,
suits, costs, expenses, and proceedings of any nature whatsoever directly or
indirectly arising out of or attributable to the release, threatened release,
discharge, disposal or presence of Oil, Jet or hazardous material related to
this Contract when in the custody of Chevron, or of Diesel sold pursuant to the
provisions of Section 6.5 herein when in the custody of any Chevron-chartered
barge, except to the extent that such release, threatened release, discharge,
disposal or presence of Oil, Jet or hazardous material may be attributable to
the negligence or willful action of Buyer, including without limitation: (1) all
foreseeable and unforeseeable consequential damages; (2) the reasonable costs of
any required or necessary repair, cleanup or detoxification of an area of oil,
jet or hazardous material and the preparation and implementation of any closure,
remedial or other required plans; (3) the reasonable costs of the investigation
of any environmental claims by Buyer; (4) the reasonable costs of Buyer's
enforcement of this Contract; and (5) all reasonable costs and expenses incurred
by Buyer in connection with clauses (1), (2), (3), and (4), including without
limitation reasonable attorneys' fees and court costs.
Section 18.3: Chevron Held Harmless For General Indemnity when title and risk
of loss is with Buyer
Buyer shall indemnify, defend and hold harmless Chevron, its directors,
officers, employees and agents (including but not limited to affiliates and
contractors and their employees) from and against all liabilities, damages,
losses, penalties, claims, demands, suits, costs, expenses (including reasonable
attorneys' fees), and proceedings of any nature whatsoever for personal injury
(including death), or property damage, including but not limited to Chevron's
facilities (collectively "Injury or Damage"), that results from non-
specification or contaminated Received oil or jet, or that arises out of or is
in any manner connected with the Delivery or receipt of oil or jet at Chevron's
facilities when in the custody of Buyer, any carrier or subsequent buyer of oil
or jet related to this Contract or the transportation of oil or jet when in the
custody of Buyer, any carrier or subsequent buyer of oil or jet related to this
Contract, except to the extent that such Injury or Damage may be attributable to
the negligence or willful action of Chevron. This Section 18.3 shall not
include any indirect, consequential, special or incidental
28
damages of any kind whether based in contract, tort (including without
limitation negligence or strict liability), warranty or otherwise.
Section 18.4: Chevron Held Harmless for Releases to the Environment when title
and risk of loss is with Buyer
Without limiting the generality of Section 18.3, Buyer shall indemnify, defend
and hold harmless Chevron, its directors, officers, employees and agents
(including but not limited to affiliates and contractors and their employees)
from and against all liabilities, damages, losses, penalties, claims, demands,
suits, costs, expenses, and proceedings of any nature whatsoever directly or
indirectly arising out of or attributable to the release, threatened release,
discharge, disposal or presence of oil, jet or hazardous material related to
this Contract when in the custody of Buyer, any carrier (except any Chevron-
chartered barge carrying Diesel sold pursuant to the provisions of Section 6.5
herein) or subsequent buyer of oil or jet related to this Contract, except to
the extent that such release, threatened release, discharge, disposal or
presence of oil, jet or hazardous material may be attributable to the negligence
or willful action of Chevron, including without limitation: (1) all foreseeable
and unforeseeable consequential damages; (2) the reasonable costs of any
required or necessary repair, cleanup or detoxification of an area of oil, jet
or hazardous material and the preparation and implementation of any closure,
remedial or other required plans; (3) the reasonable costs of the investigation
of any environmental claims by Chevron; (4) the reasonable costs of Chevron's
enforcement of this Contract; and (5) all reasonable costs and expenses incurred
by Chevron in connection with clauses (1), (2), (3), and (4), including without
limitation reasonable attorneys' fees and court costs.
ARTICLE XIX
PUBLIC UTILITIES COMMISSION
---------------------------
Section 19.1: Filing Requirements; Buyers Energy Cost Adjustment Clause
This Contract is required to be filed with the Hawaii Public Utilities
Commission ("PUC") for approval. If in the proceedings initiated as a result of
the filing of this Contract the PUC disapproves or fails to authorize the full
recovery of the fuel costs incurred under this Contract through Buyer's Energy
Cost Adjustment Clause, Buyer may terminate this Contract at any time within
ninety (90) Days of disapproval by giving sixty (60) Days' written notice to
Chevron.
Section 19.2: Decision and Order Impairing Chevron
In the event that a Decision and Order or other action by a governmental
regulatory body impairs Chevron's ability to enforce any terminal and safety
protection or operation provisions under this Contract, Buyer and Chevron shall
attempt to agree on an alternate course of action, but failing agreement within
10 Days, the Chevron may suspend performance with respect to the quantity of oil
or jet affected by said Decision and Order after giving Buyer ninety (90) Days'
written notice.
Section 19.3: Use as a Public Utility
No use of the pipelines, facilities or equipment owned by Chevron and used in
connection with this Contract shall be construed as having been dedicated by
Chevron to a public use and it is hereby acknowledged by the parties that
Chevron retains the exclusive right to determine who, other than the parties to
this Contract, shall use said pipelines, facilities, and equipment.
29
ARTICLE XX
INSURANCE
---------
Section 20.1: Requirements
Without in any way limiting Buyer's liability pursuant to this Contract, Buyer
shall maintain and require any carrier or subsequent buyer of oil or jet related
to this Contract to maintain the following insurance and all insurance that may
be required under the applicable laws, ordinances, and regulations of any
governmental authority:
i. Workers' Compensation and Employers' Liability Insurance as
prescribed by applicable law, including insurance covering liability
under the Longshoremen's and Harbor Workers' Act, the Jones Act and
the Outer Continental Shelf Land Act, if applicable.
ii. Commercial General Liability Insurance including Bodily Injury and
Property Damage Insurance with a limit not less than $1,000,000
combined single limit per occurrence.
iii. Automobile Bodily Injury and Property Damage Liability Insurance on
all owned, non-owned and hired vehicles used in receiving oil or jet
from Chevron's facilities with a limit not less than $1,000,000
combined single limit per occurrence for bodily injury and property
damage.
iv. Hull and Machinery Insurance including collision liability and
tower's liability on vessels engaged in towage with a limit at least
equal to the actual value of each vessel and barge.
v. Marine Insurance under one of the two following options:
Option One: Protection and Indemnity Insurance including coverage
for injuries to or death of masters, mates and crew and
excess collision liabilities. The limits of such
insurance shall not be less than $25 million per
occurrence. Vessel pollution liability insurance
including coverage for pollution liabilities imposed by
federal and state laws now or hereafter in effect in an
amount not less than $500 million; or,
Option Two: Protection and Indemnity Insurance on a full entry basis
with an International Group P&I Club. Such insurance
shall include, but not be limited to, coverage for
injuries to or death of masters, mates and crew; excess
collision liabilities and pollution liabilities imposed
by federal and state laws now or hereafter in effect).
Such insurance shall be unlimited as per International
Group, P&I Club rules except for pollution liabilities
which shall be limited to $500 million or the maximum
pollution limit offered by the P&I Clubs of the
International Group.
Section 20.2: Change of Insurance Notification
The above insurance shall include a requirement that the insurer provide Chevron
with 30 Days' written notice prior to the effective date of any cancellation or
material change of the insurance. The insurance specified in Sections 20.1 (i)
and 20.1 (iv) shall contain a waiver of subrogation against Chevron and an
assignment of statutory lien, if applicable. The insurance specified in
Sections 20.1 (ii), 20.1 (iii), and 20.1 (v) Option One Protection and Indemnity
Insurance shall name Chevron as additional insured.
Section 20.3: Certificate of Insurance From Subsequent Buyers and Carriers
Before performance of this Contract, Buyer shall provide Chevron with
certificates or other documentary evidence satisfactory to Chevron of the
insurance coverages and endorsements.
30
Section 20.4: Obtaining Insurance Documents
Without in any way limiting Chevron's liability, Chevron shall obtain from any
Chevron carrier or subsequent buyer from Chevron of oil or jet related to this
Contract the insurance coverages and endorsements set forth in this Article
excepting that both Chevron and Buyer be named as additional insureds.
Section 20.5: Terminaling and Handling Fees Insurance Exclusion
The terminaling and handling fees listed in Section 11.14 do not include any
insurance covering loss of Buyer's oil or jet while it is in the custody of
Chevron. It is expressly understood and agreed that insurance, if any is desired
by Buyer, shall be carried by Buyer at its own expense.
ARTICLE XXI
SAFETY AND TERMINATION PROTECTION
---------------------------------
Section 21.1: Operating and Safety Regulations
Any buyer or carrier of oil or jet related to this Contract or their agents
shall comply with all of the operating and safety regulations of Chevron, as
amended from time-to-time, when alongside, upon, or when approaching the
premises of Chevron for the purpose of loading oil or jet related to this
Contract or when departing Chevron's premises after loading oil or jet related
to this Contract. In particular, all smoking shall be limited to such locations
and occasions as are specifically authorized in writing by Chevron. If Chevron
determines that an unsafe condition exists, Chevron may, at its absolute
discretion, cease the loading or unloading operations and order any buyer or
carrier of oil or jet related to this Contract or their agents to leave its
place of mooring. Any loss or damage incurred by Chevron, any buyer or carrier
of oil or jet related to this Contract or their agents due to any violation by
any buyer or carrier of oil or jet related to this Contract or their agents of
Chevron's operating and safety regulations shall be for Buyer's or Carrier's
account. Copies of Chevron's operating and safety regulations are available
upon request.
Section 21.2: Right To Refuse Acceptance
In addition to its rights under Section 21.1, Chevron shall have the[---] of any
barge or vessel nominated by Buyer to load or discharge if in Chevron's
Terminal's [---] for [---]. Chevron's Terminal's acceptance or rejection of
Buyer's Nominated Barge or vessel shall be communicated to Buyer within [---]
hours after the Terminal's receipt of nomination, and in the event Buyer's barge
nomination is rejected, Chevron shall provide Buyer satisfactory documentation
of the basis for the rejection of such nomination. Chevron's Terminal's
acceptance or rejection of any barge or vessel shall not constitute a continuing
acceptance or rejection of such barge or vessel for subsequent loading or
discharge. Chevron shall not be liable for any loss, damage or delay caused by
its rejection of a vessel nomination hereunder, nor any loss, damage or delay
caused by its rejection of a vessel for failure to comply pursuant to Section
21.1. In no event shall the acceptance of a vessel by Chevron be construed in
any manner as a representation as to the vessel's operational, environmental or
safety status. Neither Buyer nor any other party shall be entitled to rely on
any such acceptance of a vessel by Chevron hereunder.
ARTICLE XXII
POLLUTION MITIGATION
--------------------
Section 22.1: Responsibility to Mitigate
In the event an escape or discharge of oil or jet occurs from any barge or
vessel carrying oil or jet related to this Contract and causes or threatens to
cause pollution damage, Buyer or carrier will promptly take whatever measures
are necessary to prevent or mitigate such damage. Buyer hereby authorizes
Chevron, or its agent, at
31
Chevron's option, upon notice to Buyer or master on the tug, to undertake such
measures as are reasonably necessary to prevent or mitigate the pollution
damage. Chevron or its agent shall keep Buyer advised of the nature and results
of any such measures taken and, if time permits, intended to be taken. Any of
the aforementioned measures shall be at Buyer's sole expense (except to the
extent that such escape or discharge was caused by the negligence or willful
action of Chevron or its agent), provided that if Buyer considers said measures
should be discontinued, Buyer shall so notify Chevron or its agent and
thereafter Chevron or its agent shall have no right to continue said measures at
Buyer's authority or expense except as provided in Section 18.4. This provision
shall be applicable only between Buyer and Chevron and shall not affect, as
between Buyer and Chevron, any liability of Buyer to any third parties,
including but not limited to governments.
Section 22.2: Cooperation With Chevron's Measures
In addition to its duties under Section 22.1, Buyer agrees to cooperate with all
efforts and to pay all reasonable costs associated with preventive booming or
other preventive measures that Chevron reasonably determines is advisable on an
isolated or routine basis.
ARTICLE XXIII
MISCELLANEOUS
-------------
Section 23.1: Heading of Articles and Sections
Headings of the Articles and Sections are for convenient reference only and are
not to be considered part of this Contract.
Section 23.2: Content of Document
This document contains the entire agreement between the parties covering the
subject matter and cancels, as of the Effective date hereof, all prior
agreements of any kind between the parties covering such subject matter and any
amendments thereto. There are no other agreements which constitute any part of
the consideration for, or any condition to, either party's compliance with its
obligations under this Contract.
Section 23.3: Notification
Except as otherwise expressly provided herein, all notices shall be given in
writing, by letter, facsimile, electronic mail to the following addresses, or
such other address as the parties may designate by notice, and shall be deemed
given upon receipt.
Chevron: Manager, Petroleum Coke, Heavy Fuels & Sulfur
Chevron Products Company,
A Division of Chevron U.S.A. Inc
P.O. Box 7006
San Francisco, CA 94120-7006
FAX: (415) 894-1195
Buyer: Manager, Power Supply Services Department
Hawaiian Electric Company, Inc.
P.O. Box 2750
Honolulu, HI 96840-0001
FAX: (808) 543-4366
The Manager, Power Supply Services Department, for Hawaiian Electric Company,
Inc., shall be responsible for forwarding notices to the other parties to this
Contract.
32
Section 23.4: Court Rulings
If any term or provision, or any part of any term or provision, of this Contract
is held by any court or other competent authority to be illegal or
unenforceable, the remaining terms, provisions, rights and obligations shall not
be affected.
Section 23.5: Benefit of And Binding
This Contract shall inure to the benefit of and be binding upon the parties
hereto, their successors and permitted assigns.
Section 23.6: Effective Date and Supersedence
Effective as of the Effective Date of the Term hereunder, this Contract hereby
supersedes that certain Inter-Island Industrial Fuel Oil and Diesel Fuel
Contract between the parties dated, November 20, 1995 and all amendments
thereto.
33
IN WITNESS WHEREOF, the parties have caused these presents to become
effective as of the day and year first herein above written.
ACCEPTED AND AGREED:
"Chevron"
CHEVRON PRODUCTS COMPANY,
A DIVISION OF CHEVRON U.S.A. INC
BY: /s/ Phillip H. Fisher
---------------------
Phillip H. Fisher
TITLE: Manager, Petroleum Coke, Heavy Fuels & Sulfur
"Buyers"
HAWAIIAN ELECTRIC COMPANY, INC. MAUI ELECTRIC COMPANY, LTD.
BY: /s/ Edward Y. Hirata BY: /s/ Edward Y. Hirata
------------------------------ ------------------------------
Edward Y. Hirata Edward Y. Hirata
- ---------------------------------- ----------------------------------
(Printed or Typed Name) (Printed or Typed Name)
TITLE: Vice President, Regulatory TITLE: Vice President, Regulatory
Affairs Affairs
--------------------------- ---------------------------
BY: /s/ Marvin A. Hawthorne BY: /s/ Marvin A. Hawthorne
------------------------------ ------------------------------
Marvin A. Hawthorne Marvin A. Hawthorne
- ---------------------------------- ----------------------------------
(Printed or Typed Name) (Printed or Typed Name)
TITLE: Assistant Treasurer TITLE: Assistant Treasurer
--------------------------- ---------------------------
34
HAWAII ELECTRIC LIGHT COMPANY, INC. HAWAIIAN TUG & BARGE CORP.
BY: /s/ Edward Y. Hirata BY: /s/ Glenn K. Y. Hong
------------------------------ ------------------------------
Edward Y. Hirata Glenn K. Y. Hong
- ---------------------------------- ----------------------------------
(Printed or Typed Name) (Printed or Typed Name)
TITLE: Vice President, Regulatory TITLE: President
Affairs ---------------------------
---------------------------
HAWAII ELECTRIC LIGHT COMPANY, INC. HAWAIIAN TUG & BARGE CORP.
BY: /s/ Marvin A. Hawthorne BY: /s/ Lisa M. K. Sakamoto
------------------------------ ------------------------------
Marvin A. Hawthorne Lisa M. K. Sakamoto
- ---------------------------------- ----------------------------------
(Printed or Typed Name) (Printed or Typed Name)
TITLE: Assistant Treasurer TITLE: Vice President
--------------------------- ---------------------------
YOUNG BROTHERS, LIMITED
BY: /s/ Glenn K. Y. Hong
------------------------------
Glenn K. Y. Hong
- ----------------------------------
(Printed or Typed Name)
TITLE: President
---------------------------
BY: /s/ Lisa M. K. Sakamoto
------------------------------
Lisa M. K. Sakamoto
- ----------------------------------
(Printed or Typed Name)
TITLE: Vice President
---------------------------
35
ADDENDUM NO. 1
ILLUSTRATIVE SCHEDULE OF PRICES
-------------------------------
Illustrative Product Price Calculation for [---]
I. NO. 2 DIESEL FUEL
For HECO, HT&B, YB; and MECO or HELCO FOB point of Delivery as per Section 6.3,
Section 6.2 and Section 6.1, respectively:
[---]
where PD1 is equal to the price per physical gallon for the Month of Delivery
for No. 2 Diesel Fuel purchased by HECO, HT&B, YB, MECO or HELCO in U.S. Dollars
("$") per ("/") gallon.
I. DI = Index for No. 2 Diesel Fuel, which shall be the simple average of the
high and low price assessments on all dates of publication for West Coast
Pipeline, Los Angeles California Low Sulfur No. 2 Diesel as reported by
Platt's Oilgram Price Report ("Platt's Oilgram") during the period
beginning the 21st Day of the second preceding Month to the 20th Day of the
Month preceding Delivery, expressed in $/gallon.
Date Low High Average
---- --- ---- -------
[---]
AVERAGE [---] IN USD [---] PER GALLON
II. [---]
36
Assume [---] per barrel premium values apply:
[---]
[---]
[---]
III. TD1/TD2/TD3/TD4/TD5 = Taxes applicable to the sale of Diesel pursuant to
Section 5.3 herein.
Hawaii General Excise Tax = 4.166% of pre-HGET price
[---]
Taxes after application of HGET [---]
Hawaii Environmental Response Tax = $0.05 per barrel, $0.0012 per
gallon
Hawaii Liquid Fuel Tax = $0.01 per gallon
IV. LP1, LP2, LP3, and LP4 are [---] for Deliveries in bulk to the respective
Buyer at Kaunakakai, Molokai, Kahului, Maui, Hilo, Hawaii and Kawaihae,
Hawaii, respectively, during the period indicated and expressed in $ per
gallon, as follows:
1988-1989 2000-2001 2002-2004
LP1 [---] [---] [---]
LP2 [---] [---] [---]
LP3 [---] [---] [---]
LP4 [---] [---] [---]
A. PRODUCT PRICE COMPUTATION FOR [---] DELIVERY OF NO. 2 DIESEL FUEL PURCHASED
BY HECO, HT&B, YB, MECO OR HELCO HAVING A STANDARD BTU CONTENT OF [---] TO
141,000 BTU PER GALLON
[---] = [---]
= [---]
where TD1 = sum of
HGET = 4.166% of Diesel Index + [---] = 0.04166*[---]= [---]
[---] of Diesel Index + [---] = [---]
Hawaii Environmental Response Tax = $0.0012/gallon
Hawaii Liquid Fuel Tax = $0.0100/gallon
--------------
[---]
[---] = [---]
= [---] PER GALLON
37
B. PRODUCT PRICE COMPUTATION FOR [---] DELIVERY OF NO. 2 DIESEL FUEL PURCHASED
BY HECO, HT&B, YB, MECO OR HELCO HAVING OTHER THAN A STANDARD BTU CONTENT
Assume the weighted average BTU content per gallon of the representative
samples of Diesel purchased by a respective Buyer during a calendar quarter
was [---]. The price charged for the Diesel sold and Delivered to that
respective Buyer during each Month of the calendar quarter in question shall
be adjusted by multiplying the Diesel price by the ratio of the actual heat
content to a standard of [---].
[---] = [---]
= [---]
= [---]
where TD1 = sum of
HGET = 4.166% of adjusted (Diesel Index + [---] = [---]
[---] of adjusted (Diesel Index + [---] = [---]
Hawaii Environmental Response Tax = $0.0012/gallon
Hawaii Liquid Fuel Tax = $0.0100/gallon
--------------
[---]
[---] = [---]
= [---] PER GALLON
C. PRODUCT PRICE COMPUTATION FOR [---] DELIVERY OF NO. 2 DIESEL FUEL
PURCHASED BY MECO AND HELCO TO BUYER'S NOMINATED MARINE TERMINAL AT
KAUNAKAKAI, MOLOKAI, KAHULUI, MAUI, HILO, HAWAII OR KAWAIHAE HAWAII HAVING A
STANDARD BTU CONTENT OF [---]
1. For MECO-Molokai/Delivered Kaunakakai:
[---]
Where PD2 is equal to the price per physical gallon for the Month of Delivery
for No. 2 Diesel purchased by MECO-Molokai, Delivered to Kaunakakai, in
$/gallon.
Assume [---] value applies, thus
[---]
[---]
[---]
38
where TD2 = sum of
HGET = 4.166% of Diesel Index +[---] = [---]
[---]
[---] = [---]
Hawaii Environmental Response Tax = $0.0012/gallon
Hawaii Liquid Fuel Tax = $0.0100/gallon
--------------
[---]
[---] = [---]
= [---] PER GALLON
2. For MECO/Delivered Kahului:
[---]
Where PD3 is equal to the price per physical gallon for the Month of Delivery
for No. 2 Diesel purchased by MECO-Maui, Delivered to Kahului, Maui, in
$/gallon,
Assume [---]value applies, thus
[---] = [---]
[---] = [---]
= [---]
where TD3 = sum of
HGET = 4.166% of Diesel Index [---] = 0.04166*[---] = [---]
[---] = [---]
Hawaii Environmental Response Tax = $0.0012/gallon
Hawaii Liquid Fuel Tax = $0.0100/gallon
--------------
[---]
[---] = [---]
= [---] PER GALLON
3. For HELCO/Delivered Hilo:
[---]
Where PD4 is equal to the price per physical gallon for the Month of Delivery
for No. 2 Diesel purchased by HELCO-Hawaii, Delivered to Hilo Hawaii, in
$/gallon.
Assume [---] value applies, thus
39
[---] = [---]
[---] = [---]
= [---]
where TD4 = sum of
HGET = 4.166% of Diesel Index [---] = [---]
[---] = [---]
Hawaii Environmental Response Tax = $0.0012/gallon
Hawaii Liquid Fuel Tax = $0.0100/gallon
--------------
[---]
[---] = [---]
= [---] PER GALLON
4. For HELCO/Delivered Kawaihae:
[---]
Where PD5 is equal to the price per physical gallon for the Month of Delivery
for No. 2 Diesel purchased by HELCO-Hawaii, Delivered to Kawaihae Hawaii, in
$/gallon.
Assume [---] value applies, thus
[---] = [---]
[---] = [---]
= [---]
where TD5 = sum of
HGET = 4.166% of Diesel Index [---] = [---]
[---] = [---]
Hawaii Environmental Response Tax = $0.0012/gallon
Hawaii Liquid Fuel Tax = $0.0100/gallon
--------------
[---]
[---] = [---]
= [---] PER GALLON
40
D. PRODUCT PRICE COMPUTATION FOR [---] DELIVERY OF NO. 2 DIESEL FUEL PURCHASED
BY MECO AND HELCO TO BUYER'S NOMINATED MARINE TERMINAL AT KAUNAKAKAI,
MOLOKAI, KAHULUI, MAUI, HILO, HAWAII OR KAWAIHAE HAWAII HAVING A BTU
CONTENT OF OTHER THAN STANDARD
Assume the weighted average BTU content per gallon of the representative
samples of Diesel purchased by a respective Buyer during a calendar quarter
[---]. The price charged for the Diesel sold and Delivered to that
respective Buyer during each Month of the calendar quarter in question
shall be adjusted by multiplying the Diesel price by the ratio of the
actual BTU content to a standard of [---].
For MECO-Molokai/Delivered Kaunakakai:
[---]
Where PD2 is equal to the price per physical gallon for the Month of Delivery
for No. 2 Diesel purchased by MECO-Molokai, Delivered to Kaunakakai, in
$/gallon.
Assume [---] value applies, thus
[---] = [---]
[---] = [---]
= [---]
= [---]
where TD2 = sum of
HGET = 4.166% of adjusted (Diesel Index [---] = [---]
[---] = [---]
Hawaii Environmental Response Tax = $0.0012/gallon
Hawaii Liquid Fuel Tax = $0.0100/gallon
--------------
[---]
[---] = [---]
= [---] PER GALLON
Note on computation of other Diesel Delivered to Kahului, Hilo and Kawaihae:
- ----------------------------------------------------------------------------
Price per physical gallon for the Month of Delivery for No. 2 Diesel purchased
by MECO-Maui, Delivered to Kahului, HELCO-Hawaii, Delivered to Hilo, Hawaii and
by HELCO-Hawaii, Delivered to Kawaihae, Hawaii in $/gallon having a BTU content
other than standard would be determined in a manner logically consistent with
than computed above for MECO-Molokai.
CIFO
For MECO or HELCO FOB their respective Nominated Barge:
41
[---]
Where PF is equal to the price per physical barrel for the Month of Delivery for
CIFO, in $/barrel.
I. FI = the Index for CIFO which shall be the simple average of the low and
high price assessments for Los Angeles Bunker C Fuel Oil as reported by
Platt's Oilgram Bunkerwire ("Platt's Bunkerwire") for all dates of
publication from the 21st Day of the second preceding Month to 20th Day of
the Month preceding Delivery expressed in $/barrel
Date Low High Average
---- --- ---- -------
[---] [---] [---] [---]
AVERAGE [---] IN USD [---] PER [---]
[---]
= [---]
[---] = [---] PER BARREL
II. [---]
Assume [---]per barrel premium values apply:
[---]
42
Assume further that the barrel volume in the Delivery to be priced is [---],
thus
[---] = [---]
III. TF = Taxes applicable to the sale of CIFO pursuant to Section 5.3 herein.
Hawaii General Excise Tax = 4.166% of pre-HGET price
[---]
Taxes after application of HGET [---]:
Hawaii Environmental Response Tax = $0.05 per barrel
E. PRODUCT PRICE COMPUTATION FOR [---] DELIVERY OF CIFO PURCHASED BY MECO OR
HELCO HAVING A STANDARD BTU CONTENT OF [---] BARREL
[---] = [---]
= [---]
where TF = sum of
HGET = 4.166% of CIFO Index [---] = [---]
[---] = [---]
Hawaii Environmental Response Tax = $0.050/barrel
-------------
[---]
[---] = [---]
= [---] PER BARREL
F. PRODUCT PRICE COMPUTATION FOR [---] DELIVERY OF CIFO PURCHASED BY MECO OR
HELCO HAVING OTHER THAN A STANDARD BTU CONTENT
Assume the weighted average BTU content per barrel of the representative
samples of CIFO purchased by a respective Buyer during a calendar quarter
[---]. The price charged for the CIFO sold and Delivered to that
respective Buyer during each Month of the calendar quarter in question
shall be adjusted by multiplying the CIFO price by the ratio of the actual
BTU content to a standard of [---].
[---] = [---]
= [---]
= [---]
where TF = sum of
43
HGET = 4.166% of adjusted (CIFO Index +[---] = [---]
[---] = [---]
Hawaii Environmental Response Tax = $0.050/barrel
-------------
[---]
[---] = [---]
= [---] PER BARREL
Note on items as they appear on invoices
- ----------------------------------------
Actual invoices for sales and Deliveries of Diesel and CIFO may include
additional charges for Hawaii DOT/Harbors Div. wharfage fees applied when
Buyer's Nominated Barge is moored, all or in part, against or to State piers.
For billing purposes, certain taxes, such as the HGET [---], on the sale and
Delivery of Diesel may be consolidated with the corresponding tax charged on the
sale and Delivery of CIFO.
Actual invoices for sales and Deliveries of Diesel and CIFO may also contain
comments which reference the wharfage charge per unit, and volume of Diesel and
CIFO on which the wharfage fee is levied and the identifying number of the State
pier for which wharfage is being levied.
JET
For MECO or HELCO FOB MECO's or HELCO's respective power plant truck unloading
rack:.
their respective Nominated Barge:
PJ = JI + [---] + TJ
Where PJ is equal to the price per physical barrel for the Month of Delivery for
Jet, in $/gallon.
I. JI = the Index for Jet which shall be the Friday simple average West Coast
Spot Pipeline price for jet fuel in Los Angeles in the Month preceding
Delivery, as reported by the Platt's Oilgram from the 21st of the second
preceding Month to the 20th Day of the Month preceding Delivery.
Date Low High Average
---- ------- ------- -------
08/22/97 $0.5850 $0.6025 $0.5938
08/29/97 $0.5775 $0.5850 $0.5813
09/05/97 $0.5750 $0.5875 $0.5813
09/12/97 $0.5700 $0.5800 $0.5750
09/19/97 $0.6025 $0.6150 $0.6088
AVERAGE OF MEAN IN USD $0.5880 PER GALLON
II. TJ = Taxes applicable to the sale of Jet pursuant to Section 5.3 herein.
44
Hawaii General Excise Tax = 4.166% of pre-HGET price
[---]
Taxes after application of HGET[---]:
Hawaii Environmental Response Tax = $0.05 per barrel, $0.0012 per gallon
G. PRODUCT PRICE COMPUTATION FOR DELIVERY OF JET PURCHASED BY MECO OR HELCO
PJ = $0.5880 + [---] + TJ
= [---] + TJ
where TJ = sum of
HGET = 4.166% of Jet Index [---] = 0.04166* [---] = [---]
[---] = [---]
Hawaii Environmental Response Tax = $0.0012/gallon
--------------
[---]
[---] = [---]
= [---] PER GALLON
45
ADDENDUM NO. 2
QUALITY CONTROL SAMPLES SUMMARY
-------------------------------
----------------------------------
FREQUENCY APPLICATION CONTRACT SELECTION
-------------- ----------------------------------
TAKING THE SAMPLE METHOD & SAMPLE SAMPLE ACTION ON
TYPE LABEL SAMPLE ANALYSIS LOCATION TAKING ANALYSIS FAILURE
- ---- ----- -------------- ------------- -------------- ----------- -------- ---------
1. Refinery Production --- After Each After Each Composite N/A N/A N/A
Tank Receipt Receipt from Refinery
Tank
2. HMT Inventory --- After Each After Each Composite N/A N/A N/A
Tank Receipt Receipt from HMT Tank
3. Delivered A. Buyer's During Each Only If Drip From 7.1 7.2 7.3
Sample Barge Necessary Loading Line
Loading or at HMT or
B. Chevron's Monthly Composite
Sample from [---]
C. Buyer's
Retain
4. Loaded A. Chevron's After Each A. After Composite 6.1iii 11.3i 11.3I &
Sample Barge Loading Each Loading From Barge 11.3ii
B. Only If Tanks at HMT
Necessary
B. Buyer's
Retain
5. Loaded (Third-Party) A. Buyer's After Each A. After Composite 11.1ii 11.3I 11.3I &
Sample Barge Loading Each Loading from Barge 11.3ii
of B.( Only If Tanks at
Third-Party Necessary Third-Party
B. Chevron's Oil Supplier's
Sample Dock
C. Buyer's
Retain
6. Received A. Prompt Before Each A. Before Composite A. 11.6i 11.6ii 11.6iv
Barge Each Loading from Barge
B. Buyer's Unloading B.,C.,D. Tanks at Hilo B. 11.6Ii 11.6iii 11.6iv
Sample Whether (Only if or Kahului
Buyer's or Necessary) Harbor
Chevron's
C. Chevron's
Sample
D. Buyer's
Retain
7. Returned A. Prompt After Each A. Before Composite A. 11.3i 11.13I 11.13iii
Barge Each Loading from
B. Buyer's B.,C.,D. Chevron's B. 11.3i 11.13ii 11.13iii
Sample Unloading (Only if Tanks at Hilo
Whether Necessary or Kahului
Buyer's or Terminals
C. Chevron's Chevron's
Sample
D. Buyer's
Retain
46
ADDENDUM NO. 2 - QUALITY CONTROL SAMPLES
SCHEMATIC Part 1 of 2 (diagram)
47
ADDENDUM NO. 2 - QUALITY CONTROL SAMPLES
SCHEMATIC Part 2 of 2 (diagram)
48
ADDENDUM NO. 3
[---]
SECTION 1
- ---------
[---] (also referred to herein as the [---]). The provisions of [---] shall only
apply to the [---] as described herein and shall [---]. If and whenever said
[---] for the use of [---] and for the [---] provided:
1. Chevron shall have the right to review the quality of [---]; and
2. Buyer shall permit Chevron, its employees and agents (including but not
limited to affiliates and contractors and their employees) to enter upon
and inspect Buyer's Barbers Point Storage Facilities immediately prior to,
during and immediately after [---] upon reasonable advance notice to Buyer
and provided that such entry and inspection shall not interfere with
operation of Buyer's Barbers Point Storage Facilities.
3. Buyer shall operate the [---] in a safe manner, in compliance with all
applicable laws and regulations, and in accordance with good engineering
and operating practices ("GEOPS") and in accordance with generally accepted
industry practices.
4. Buyer's use of the [---] during any Year of this Contract, if and
whenever said [---] are completed, shall be [---]
SECTION 2
- ---------
[---] need to be constructed in the location where [---] physically intersect
and connect with the [---], which shall be taken to be at the[---]. Provided
further:
a. [---] shall be responsible for the design, engineering and construction and
shall bear the costs arising therefrom of the [---] shall have the right to
approve in advance, [---] designs, engineering and construction standards,
provided, however, that such approval shall not be unreasonably withheld
b. [---], may, at its option, engage third-party consultants or contractors to
perform the design, engineering and construction of the [---], provided
that [---] selection of such consultants and contractors shall be subject
to [---] approval, provided, however, that such approval shall not be
unreasonably withheld.
49
c. The design and engineering plans (the "Plans") for the [---] shall be
developed in accordance with all applicable laws and regulations and GEOPS.
[---] shall have twenty (20) working days following its receipt of the
Plans ("20-day Period") to review the Plans and submit written comments to
[---]. Should [---] fail to provide written notice to [---] of its
approval, conditional approval or disapproval of the Plans prior to the end
of said 20-day Period, [---] shall be deemed to have approved the Plans.
d. [---] shall permit [---] to inspect the construction of the [---] at all
times during normal business hours and upon reasonable advance notice. [---
] shall perform all construction work in compliance with all applicable
laws and regulations.
e. Following the completion of the construction of the [---] shall transfer
to [---] all of [---] rights, title and interest in and to the [---] which
shall then be a part of the [---]. On and after such date and time of
transfer, [---] shall own, operate and maintain the tee branch connection
and other components of the [---]. Subject to the prior approval of [---],
which shall not be unreasonably withheld, [---] shall schedule and perform
such routine maintenance on the [---] as shall be required to by applicable
laws, regulations, general industry practices and GEOPS. [---] shall
reimburse [---] for its reasonable documented out of pocket costs and
expenses incurred solely as a result of such routine maintenance.
SECTION 3
- ---------
Whenever [---] operates the [---], it shall do so at all times in a safe,
effective and efficient manner, in compliance with all applicable laws and
regulations, in a reasonable and prudent manner and in conformance with
generally accepted industry practices and GEOPS.
[---] operating standards and instructions shall be available for [---]
inspection at [---].
SECTION 4
- ---------
Consent of [---] shall not be required for routine maintenance of the [---],
provided, however, [---] shall be required to advise [---] regarding the
potential impact on shipments of [---] caused by any maintenance procedures or
improvements which are not routine or minor in nature and which are not urgent
and necessary to maintain the [---] in good order. Such maintenance shall be
performed by [---] as may be required from time to time.
[---] shall maintain accurate and complete records of maintenance performed and
shall provide same and any other relevant supporting information as [---] may
reasonably require.
SECTION 5
- ---------
If subsequent to [---], additions or modifications to any part of the [---] are
reasonably required in the mutual opinion of [---] and [---] solely in order to
accommodate [---] use, such modifications shall be designed, engineered and
constructed in accordance with the provisions of Section 2 herein. All rights,
title and interest in the addition or modification shall rest with [---] who
shall own, operate and maintain such addition or modification in accordance with
the provisions herein including but not limited to Sections 2, 3 and 4. [---]
shall reimburse [---] for its reasonable costs and expenses incurred pursuant to
the installation and maintenance of the addition or modification upon
presentation of invoices or other suitable documentation in accordance with
Section 2 and Section 11 herein.
50
SECTION 6
- ---------
[---] will mutually coordinate the shipment of [---] through the [---].
Shipment scheduling shall be flexible to ensure that [---] shipments are not
unreasonably interrupted. To assist in the coordination of shipments:
1. [---] shall provide [---] a forecast of intended shipments of [---]
through the [---] ten Days prior to the beginning of any Month for the [---
]. The forecast for the [---] shall define on a [---] basis the nature and
volume of shipments. The forecast for the [---] shall specify the total
volume of shipments for [---].
2. With respect to each individual shipment of [---] though the [---] shall
provide [---] a proposed 3-Day shipment period or window upon no less than
ten (10) Days' notice prior to the first Day of the proposed shipment
period ("10-Day Notice"). The 10-Day Notice shall also specify the amount
of [---] to be shipped, subject to a variation of plus or minus twenty (20)
percent with respect to the actual volume shipped. [---] may reject the
proposed shipment period upon providing [---] notice, no later than one (1)
business day from the receipt of [---] 10-Day Notice, of an alternate 3-Day
shipment period where the date of the first Day of such alternate 3-Day
period is within one (1) Day of the date of the first Day of [---] first
proposed 3-Day shipment period. Subsequent to the agreement by the parties
on the shipment period contained in the 10-Day Notice, [---] shall make
reasonable best efforts to adjust the shipment period to accommodate the
priority berthing of [---] at the [---]. Should [---] reasonably estimate
that the duration of shipment operations will be less than 3 Days, the
agreed 3-Day shipment period is to be narrowed by [---] to two (2) Days
upon no less than five (5) Days' notice prior to the first Day of the 2-Day
shipment period. Similarly, should [---] reasonably estimate that the
duration of shipment operations will be less than 2 Days, the 2-Day
shipment period is to be narrowed by [---] to one (1) Day upon no less than
two (2) Days' notice prior to the date and time of commencement of shipment
operations. Notices may be given by electronic mail, facsimile, radio or
telephone.
3. Notwithstanding the estimated duration of shipment operations, the
estimated date and time of the commencement of shipment operations shall be
narrowed to 12 hours by mutual consent of [---] and [---] no later than two
(2) Days prior to the estimated shipment commencement time and date
4. When [---] is ready to load or discharge, the master of said vessel shall
provide [---] notice of readiness ("NOR"), and laytime shall commence six
(6) hours after receipt of the NOR, or upon [---] arrival in berth (all
fast), whichever first occurs. [---] shall be allowed laytime for loading
or discharging [---] on the basis of the shipment volume in barrels divided
by a pumping rate standard of [---] barrels per hour. Demurrage shall be
payable to [---] against [---] invoice, supported by such data as may be
reasonably requested, at a rate equal to [---] actual demurrage rate per
hour for each hour used and prorated for each portion of an hour used in
excess of allowable laytime and for all delays caused by [---] subsequent
to six (6) hours after NOR is effective and prior to the time [---] is
advised that a berth is available for the vessel except if such delay is
caused by any event or acts beyond the reasonable control of [---],
including but not limited to acts of God, fire, governmental acts or labor
disturbances.
5. [---] shall vacate the berth at [---] when cargo operations are completed.
[---] shall be responsible for any actual loss or damage incurred by [---]
as a direct result of the failure of [---] to promptly vacate the berth
except if such delay is caused by any event or acts beyond the reasonable
control of [---], including but not limited to acts of God, fire,
governmental acts or labor disturbances. In no event shall either party be
responsible for loss of prospective profits, or consequential damages
allegedly caused by or based upon failure of [---] to promptly vacate the
berth.
51
SECTION 7
- ---------
The quantity of each shipment of [---] shall be determined by an Independent
Inspector in accordance with Article VIII. The Independent Inspector or [---]
shall provide [---] with summary documentation of [---] shipments describing the
volumes and dates of such shipments through the [---].
SECTION 8
- ---------
Title to [---] transported through the [---] for [---] account shall at all
times remain with [---].
SECTION 9
- ---------
If for operational reasons it is necessary for [---] to deliver line
displacement stock to [---], such line displacement stock shall be the least
expensive grade or type available which is suitable for the purpose and the line
displacement stock shall be of such quality specification that neither causes
operational problems to [---] nor results in the contamination of [---] such
that [---] fail to comply with the specification limits with which they would
have otherwise been in compliance. If time permits, [---] shall have the right
to approve in advance the suitability of such pipeline displacement stock,
provided that such approval shall not be unreasonably withheld. [---] shall
purchase such stock from [---] in accordance with the prices set forth in
Article 5. The quantity of line displacement stock delivered to [---] shall be
determined by the Independent Inspector in accordance with Article VIII.
To the extent that small portions of [---] shipped through the [---] are
delivered to [---] in the course of acting as an interface between [---]
petroleum products in that portion of the [---] not used to ship [---] shall
credit [---] for such transferred petroleum products at the prices set forth in
Article V. The quantity of such transferred petroleum products shall be
determined by the Independent Inspector in accordance with Article VIII.
SECTION 10
- ----------
In consideration for its use of the [---] and for performing line displacement
operations for [---] both before and after [---] use of the [---] shall pay to
[---] a throughput charge ("Throughput") on each shipment of [---] transferred
through the [---].
The Throughput shall be calculated by multiplying the number of physical barrels
of [---] shipped through the [---] as determined by the Independent Inspector
and the transport charge per physical barrel ("Rate"). The number of physical
barrels of [---] shipped shall be determined pursuant to Article 8.
The base Rate shall be [---] per barrel. [---]. Escalation factor A ("FA"),
escalation factor B ("FB") and escalation factor C ("FC") are defined as
follows:
(i) A labor adjustment factor An which is defined as the arithmetic
average of the hourly earnings in dollars per hour for the petroleum
and coal products industry as shown in the "Employment and Earnings"
publication of the U.S. Department of Labor, Bureau of Labor
Statistics, for the three Months of the second calendar quarter
immediately preceding the calendar quarter of the Month in which
services are rendered, divided by (19.76).
52
(ii) An industrial commodities adjustment factor Bn which is defined as
the arithmetic average of the Producer Price Index for Industrial
Commodities as published by the U.S. Department of Labor, Bureau of
Labor Statistics, for the three Months of the second calendar
quarter immediately preceding the calendar quarter of the Month in
which services are rendered, divided by (128.0).
(iii) A fuels and power adjustment factor Cn which is defined as the
arithmetic average of the Producer Price Index for Fuels and Power
(Code 5), as published by the U.S. Department of Labor, Bureau of
Labor Statistics, for the three Months of the second calendar
quarter immediately preceding the calendar quarter of the Month in
which services are rendered, divided by (88.9).
[---] shall employ and also be responsible for costs of any support vessels,
pilots, mooring masters, or line handlers supplied by [---] or otherwise
required by [---], all of which shall become borrowed servants of [---]. Dues
and other charges on [---] (whether or not such dues or charges are based on the
quantity of [---] loaded or discharged or on the freight and without regard from
whom such dues or charges are withheld) shall be paid by [---]. Any taxes on
freight shall be borne by [---] shall be responsible for any State fee imposed
for its use of the [---] in the nature of wharfage or pipeline toll.
SECTION 11
- ----------
[---] shall issue invoices for Throughput or for reimbursement for additions or
modifications in the Month following the Month in which the services or costs
and expenses are incurred. [---] will pay on these invoices in accordance with
Article IX.
SECTION 12
- ----------
[---] shall each indemnify, defend and hold harmless the other party pursuant to
Article XVIII herein.
SECTION 13
- ----------
In the event an escape or discharge of [---] occurs from [---], the
responsibilities of the respective parties shall be as per Article XXII herein.
SECTION 14
- ----------
[---] shall comply with all applicable provisions of Article XX and XXI of this
Contract, including but not limited to compliance with regulations, compliance
with [---] vessel acceptance standards, compliance with [---] Operations Manual,
pollution mitigation, required insurance, liability for dues and other charges
on said vessel.
SECTION 15
- ----------
Nothing herein shall be construed as a dedication of the [---] to public use
pursuant to Section 19.3 of this Contract.
53
SECTION 16
- ----------
Neither [---] nor [---] shall commit or suffer to be committed any act or
default whereby the rights and interests of either party in and under right of
entry or easements shall be jeopardized.
54