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EXHIBIT 10.9
Pages where confidential treatment has been requested are marked "Confidential
Treatment Requested." The redacted material has been separately filed with the
Commission, and the appropriate place and in the margin with a star (*).
FRACTIONATION AGREEMENT
BY AND BETWEEN
DYNEGY MIDSTREAM SERVICES, LIMITED PARTNERSHIP
AND
DYNEGY LIQUIDS MARKETING AND TRADE
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TABLE OF CONTENTS
<Table>
1. DEFINITIONS..............................................................1
2. TERM.....................................................................4
3. DLMT PERFORMANCE.........................................................4
4. DYNEGY PERFORMANCE.......................................................5
5. MEASUREMENT, SPECIFICATIONS, WARRANTY AND TITLE..........................6
6. COMPENSATION TO DYNEGY...................................................8
7. TAXES AND OTHER PAYMENTS........................... .....................9
8. ACCOUNTING AND AUDIT PROCEDURES.........................................11
9. BILLING AND PAYMENT.....................................................11
10. FORCE MAJEURE...........................................................12
11. INDEMNIFICATION AND LIMITATION OF LIABILITY.............................13
11.1. MUTUAL INDEMNITIES.................................................13
11.2. LIMITATION OF LIABILITY............................................13
12. MISCELLANEOUS...........................................................13
</Table>
EXHIBIT A RAW PRODUCT SPECIFICATIONS
EXHIBIT B SPECIFICATIONS FOR SPECIFICATION PRODUCTS
EXHIBIT C MEASUREMENT & TESTING STANDARDS
EXHIBIT D TRUCK FACILITY OPERATIONS AND RISKS
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FRACTIONATION AGREEMENT
THIS AGREEMENT (the "Agreement") is effective as of January 1, 2002, by
and between, Dynegy Midstream Services, Limited Partnership, a Delaware limited
partnership (hereinafter referred to as "Dynegy"), and Dynegy Liquids Marketing
and Trade, a Delaware general partnership (hereinafter referred to as "DLMT"),
sometimes also referred to individually as a "Party" and collectively as the
"Parties." All capitalized terms used in this Agreement, including in the
recitals immediately below, shall have the meanings ascribed to them in this
Agreement unless reference is expressly made otherwise.
WITNESSETH:
WHEREAS, DLMT owns, controls and/or has rights (or will own, control or
have the right) to certain volumes of natural gas liquids recovered from various
gas processing plants ("Plants"), hereinafter defined, available for
fractionation; and
WHEREAS, Dynegy owns and operates a fractionation facility, hereinafter
defined, situated in Calcasieu Parish, Louisiana; and
WHEREAS, it is the mutual desire of Dynegy and DLMT that Dynegy receive
for fractionation such Raw Product at the Delivery Point and redeliver to DLMT,
or its designee, Specification Products at the Redelivery Point in quantities
equal to the volumes of the respective Components contained in the Raw Product
delivered to Dynegy hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. DEFINITIONS
When the following terms or expressions are used in this Agreement, they
shall have the meanings defined below:
"AFFILIATE" shall mean a Person that directly or indirectly through one
or more intermediates, controls, or is controlled by or is under common
control with the Person specified. The term "control" (including the
terms "controlled by" or "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through
ownership, by contract, or otherwise. Any Person shall be deemed to be
an Affiliate of any specified Person if such Person owns 50% or more of
the voting securities of the specified Person, if the specified Person
owns fifty percent (50%) or more of the voting securities of the
specified Person, if the specified Person owns fifty percent (50%) or
more of the voting securities of such Person, or if fifty percent (50%)
or more of the voting securities of the specified Person and such Person
are under common control.
"BARREL" shall mean 42 (U.S.) Gallons.
"BASE RATE" shall mean a per annum rate of interest equal to the lower
of (i) the maximum rate of interest allowed by law or (ii) two percent
above the "prime rate" of interest as announced from time to time by
Bank One, Chicago, Illinois (or any then current successor thereto).
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"Confidential Treatment Requested"
"BUSINESS DAY" shall mean a Day on which Federal Reserve member banks in
Houston, Texas, are open for business.
"COMPONENT" shall mean the individual hydrocarbon constituents of Raw
Product, including but not limited to: methane, ethane, propane and
butane-gasoline mix, and heavier liquid hydrocarbons, as well as other
non-hydrocarbon components authorized hereunder.
"DAY" OR "DAILY" shall mean a twenty-four (24) hour period commencing
12:00 a.m. Midnight Central Standard or Daylight Savings time, as
applicable, and extending until 12:00 a.m. Midnight Central Standard or
Daylight Savings time, as applicable, on the following Day.
"DELIVERY POINT" shall mean either (i) any of the inlet connections
located at the Fractionator which connects same to the Gathering System;
or (ii) the Truck Facility for volumes of Raw Product delivered by tank
truck.
"DLMT'S AGENT(s)" shall mean any officer, employee, agent or
representative of DLMT, or any independent contractor or subcontractor,
vendor, common carrier, or carrier retained by or on behalf of DLMT to
perform any of DLMT's duties hereunder including primarily, without
limitation, the loading, unloading or delivering of Raw Product or
Specification Products at the Truck Facility for, or on behalf of, DLMT.
"EFFECTIVE DATE" shall have the meaning ascribed to it in Section 2.
"FRACTIONATION FEE" shall have the meaning as ascribed to it in Section
6.2.
"FRACTIONATION FACILITY" or "FRACTIONATOR" shall mean the Dynegy
Fractionation Facility situated in or near Sulphur, Calcasieu Parish,
Louisiana, and which is operated for the purpose of fractionating liquid
hydrocarbons into Specification Products.
"FORCE MAJEURE" shall have the meaning ascribed to it in Section 10.2.
"FRACTIONATOR CAPACITY" shall mean, from time to time, the then current
operating capacity of the Fractionator, as certified by Dynegy, based on
current operating conditions and the composition of Raw Product being
* fractionated. The nominal design Fractionator Capacity is [REDACTED]
barrels of Raw Product per Day and such volume shall be deemed to be the
Fractionator Capacity unless Dynegy certifies otherwise.
"GALLON" shall mean one U.S. liquid Gallon, which is the unit of volume
used for the purpose of measurement of liquid. One U.S. liquid Gallon
contains 231 cubic inches when the liquid is at a temperature of 60 DEG.
degrees Fahrenheit and at the vapor pressure of the liquid being
measured.
"GAS INDEX PRICE" shall mean the monthly "Index" price for natural gas,
expressed in dollars per MMBTU, published in the Inside F.E.R.C. Gas
Market Report, first of month issue for the applicable month, for South
Louisiana, Henry Hub as shown in the "Market Center Spot-Gas Prices"
table. Should the publication of said Index price be discontinued, the
Parties shall mutually agree upon a comparable successor index and/or
publication.
"GATHERING AGREEMENT" shall mean that certain Gathering Agreement
between Dynegy and DLMT of even date herewith.
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"GATHERING SYSTEM" shall mean that certain Dynegy owned and operated
natural gas liquids gathering system, currently dedicated to the
gathering of Raw Product.
"GATHERING SYSTEM DELIVERY POINTS" shall mean the "Delivery Points" as
defined in the Gathering Agreement at which Dynegy receives Raw Product
from DLMT for gathering.
"HACKBERRY STORAGE FACILITY" shall mean the underground natural gas
liquids storage facility situated in Cameron Parish, Louisiana which is
owned and operated, as of the Effective Date, by Dynegy.
"LOSSES" shall mean any and all liabilities, losses, damages, demands,
claims, penalties, fines, actions, suits, legal, administrative or
arbitration or alternative dispute resolution proceedings, judgments,
orders, directives, injunctions, decrees or awards of any jurisdiction,
costs and expenses (including, but not limited to, reasonable attorneys'
fees and related costs).
"MINIMUM DAILY OPERATING VOLUME" shall mean the minimum Daily volume
necessary to operate the Fractionator on a commercially practical basis.
Dynegy shall have the sole authority to establish the Minimum Daily
Operating Volume from time to time based on costs of operation and other
conditions effecting the capabilities of the Fractionator to operate at
a given volume.
"MONT BELVIEU STORAGE FACILITY" shall mean Dynegy's underground storage
facilities at or near Mont Belvieu, Texas, including, but not limited
to, all storage caverns, related surface and subsurface equipment.
"MONTH" OR "MONTHLY" shall mean the period commencing on the first Day
of a calendar month and ending on the first Day of the next succeeding
calendar Month.
"OFFSPEC RP" shall have the meaning as ascribed to it in Section 5.5
"PLANTS" shall mean the following described gas processing plants which
produce volumes of Raw Product which DLMT currently owns and/or controls
or in which it may obtain an interest during the term of this Agreement,
as same exists as of the Effective Date, and which is being gathered by
Dynegy to the Fractionator under the terms of the Gathering Agreement
and any gas processing plants which may in the future be connected to
the Gathering System:
Plant Name Location
---------- --------
Acadia Acadia Parish, Louisiana
Barracuda Cameron Parish, Louisiana
Cameron Cameron Parish, Louisiana
CMS LNG Calcasieu Parish, Louisiana
Dupont SRW Orange County, Texas
Grand Chenier Cameron Parish, Louisiana
Iowa Jefferson Davis Parish, Louisiana
Lowry Cameron Parish, Louisiana
Sabine Pass Cameron Parish, Louisiana
Stingray Cameron Parish, Louisiana
"PRIMARY TERM" shall have the meaning as ascribed to it in Section 2.
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"PRODUCT STORAGE AGREEMENT" shall mean an agreement of that title,
executed simultaneously herewith, meant to govern any continued storage
of Specification Products by DLMT at the Hackberry Storage Facility from
and after the time of redelivery of same by Dynegy to DLMT hereunder.
"RAW PRODUCT" shall mean a mixture of natural gas liquid hydrocarbons
meeting the Raw Product Specifications set forth herein which are
recovered from the Plants and gathered to the Fractionator pursuant to
the Gathering Agreement or which are delivered to the Fractionator by
truck to the Truck Facility or from such other sources as are mutually
agreed upon by the Parties hereafter.
"RAW PRODUCT SPECIFICATIONS" shall mean either i) the "Specifications"
as defined and set forth in the Gathering Agreement with regard to
natural gas liquids produced at the Plants, or ii) the specifications
set forth in Exhibit A attached hereto.
"REDELIVERY POINT" shall mean the Hackberry Storage Facility and/or
other mutually agreeable locations.
"RESERVATION FEE" shall have the meaning as ascribed to it in Section
6.1.
"SPECIFICATION PRODUCTS" shall mean the liquid hydrocarbons ethane,
propane and butane-gasoline mix meeting the specifications provided for
in Exhibit B, attached hereto, fractionated from Raw Product.
"TRUCK FACILITY" shall mean the tank truck facility located at the
Fractionator which is currently equipped to unload Raw Product.
"NGL PIPELINE" shall mean that certain bi-directional natural gas
liquids pipeline owned by Dynegy NGL Pipeline Company and operated on
such owner's behalf by Dynegy for the transportation of NGLs or other
products which extends from Rose Bluff, Louisiana to Mont Belvieu,
Texas.
"YEAR" OR "YEARLY" shall mean a period of 365 consecutive Days;
provided, however, that any Year which contains the date of February 29
shall consist of 366 consecutive Days.
2. TERM
This Agreement shall have a primary term commencing effective January 1,
2002, (the "Effective Date") and ending December 31, 2021 (the "Primary Term")
and shall continue in effect Year to Year thereafter; provided however, that
either Party shall have the right to terminate this Agreement effective at the
end of the Primary Term or any Yearly anniversary thereafter by giving the other
Party at least ninety (90) Days prior written notice.
3. DLMT PERFORMANCE
3.1. Subject to DLMT's right under Section 3.3 below, DLMT shall deliver or
cause to be delivered to Dynegy and Dynegy shall receive at the Delivery
Point for fractionation hereunder all Raw Product which DLMT owns and/or
controls that is recovered at the Plants ("Dedicated Raw
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Product") and which DLMT elects to be fractionated at the Fractionator.
DLMT shall also have the option to deliver additional volumes of Raw
Product which it acquires from sources other than the Plants and deliver
same to the Fractionator for fractionation hereunder by tank truck to
the Truck Facility ("Additional Raw Product"); provided that the total
volumes of Dedicated Raw Product and Additional Raw Product tendered for
fractionation hereunder shall not exceed the Fractionator Capacity. DLMT
shall provide Dynegy, on a Monthly basis, an estimate of the quantity of
Raw Product DLMT desires Dynegy to fractionate at the Fractionator. In
order to avoid introduction of any Offspec RP, DLMT shall be obligated
to identify each source of Additional Raw Product prior to any
deliveries being made from same and Dynegy shall have a reasonable
period of time to certify each such source as producing Raw Product that
is in compliance with the Raw Product Specifications. Dynegy may reject
deliveries from any source which has not been certified as acceptable to
Dynegy and Dynegy may withdraw any such source certification should
Offspec RP be received from same.
3.2. Unless otherwise directed by DLMT, the deliveries to DLMT and DLMT's
receipt of Specification Products from Dynegy generally shall occur on a
ratable basis throughout each Month or the period of time the
Fractionator is operating, if only operating during a portion of a
Month. DLMT and Dynegy shall exchange and reconcile Monthly statements
detailing DLMT product movement and exchange balances.
3.3. In lieu of delivering its entire volume of Dedicated Raw Product to the
Fractionator for fractionation, DLMT may, from time to time, elect to
transport all or any portion of the Dedicated Raw Product on a space
available basis on the NGL Pipeline to Mont Belvieu, Texas ("Mont
Belvieu Option"). In the event DLMT elects to exercise its Mont Belvieu
Option, DLMT shall provide Dynegy such advance notice of that election
as is reasonable and operationally feasible, given then current
operating conditions, and arrange for such transportation with Dynegy as
the operator of the NGL Pipeline. If DLMT exercises its Mont Belvieu
Option for a volume less than the entirety of the Dedicated Raw Product,
such right shall not impose an obligation on Dynegy to fractionate
DLMT's Dedicated Raw Product in situations where it is excused of such
obligations pursuant to Section 4.2.
4. DYNEGY PERFORMANCE
4.1. Dynegy shall accept for fractionation hereunder the Dedicated Raw
Product and any Additional Raw Product tendered by DLMT in compliance
with the procedures set forth in this Agreement, but excluding volumes
in excess of the Fractionation Capacity. Dynegy shall redeliver or cause
to be redelivered to DLMT or its designee: i) Specification Products
attributable to the volumes of Raw Product delivered for fractionation
hereunder, meeting the specifications set forth in Exhibit B, equal to
the quantities calculated pursuant to Section 4.4 below, excluding any
Offspec RP and any Components contained therein; and ii) any volumes of
Raw Product delivered hereunder which DLMT has elected to not
fractionate pursuant to Section 3.3 or which Dynegy has declined to
fractionate pursuant to Section 4.2. DYNEGY AGREES TO AND DOES INDEMNIFY
FULLY AND HOLD HARMLESS DLMT AND ITS PARENTS, SUBSIDIARIES AND
AFFILIATES AND ITS AND THEIR AGENTS, OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES, SUCCESSORS AND ASSIGNS FROM AND AGAINST ANY AND ALL
LOSSES ARISING OUT OF OR IN ANY MANNER RELATED TO DYNEGY DELIVERING OR
CAUSING TO BE DELIVERED TO DLMT OR ITS DESIGNEES ANY SPECIFICATION
PRODUCTS WHICH FAIL TO MEET THE
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REQUIRED SPECIFICATIONS. The Specification Products shall be redelivered
by Dynegy to DLMT or its designee at the Redelivery Point as and when
produced. Volumes of Raw Product redelivered hereunder shall be
redelivered at the Hackberry Storage Facility, either at the inlet of
same or through an in-place inventory transfer.
4.2. Each Day during the Term hereof, or any extensions thereto, Dynegy shall
not be obligated to fractionate Raw Product tendered by DLMT for
fractionation hereunder unless the total volume of Raw Product
reasonably expected to be so tendered by DLMT on such Day equals or
exceeds the Minimum Daily Operating Volume.
4.3. Prior to the beginning of each Month, Dynegy will estimate the volumes
of Specification Products for which disposition instructions will be
required from DLMT. Such estimates will be established by utilizing the
actual volumes of Raw Product delivered to the Delivery Points during
the most recent Month for which actual volumes are available and
adjusting for anticipated variances as may be advised by DLMT from time
to time.
4.4. The quantity of the three (3) Specification Products due DLMT each Month
shall be equal to the below stated percentages of the referenced
Components contained in the Raw Product received at all Delivery Points
during that Month:
(a) PURITY ETHANE: 100% of the ethane Component plus methane
Component up to 1.5 liquid volume percent of the ethane
Component.
(b) PROPANE: the volume will be equal to 100% of the propane
Component.
(c) BUTANE-GASOLINE MIX: the volume will be equal to 100% of the
butanes, pentane and heavier Components.
4.5. In accordance with timely and reasonable authorizations and instructions
given by DLMT, Dynegy shall be responsible for preparation and timely
distribution of all shipping papers pertaining to the delivery of
Specification Products to DLMT at the Redelivery Point.
4.6. With regard to volumes of Additional Raw Product delivered by DLMT via
truck to the Truck Facility, DLMT agrees to comply with the terms of
Exhibit D governing Truck Facility operations. The terms of said Exhibit
D shall also be applicable to redelivery of Specifications Products or
Raw Product at the Truck Facility should the capability for such
redeliveries be added at the Truck Facility during the term of this
Agreement.
5. MEASUREMENT, SPECIFICATIONS, WARRANTY AND TITLE
5.1. Custody of the Raw Product shall transfer to Dynegy at the Delivery
Points. At no time shall Dynegy take title to the Raw Product. Subject
to the foregoing, title and custody of Specification Products shall be
redelivered to DLMT or its designee at the Redelivery Point.
5.2. It is understood and agreed that the Raw Product and the Specification
Products recovered therefrom, shall be subject to being commingled with
like Raw Product and Specification Products in Dynegy's custody, and
DLMT hereby consents to such commingling, unless such commingling will
result in contamination of DLMT's Raw Product and/or Specification
Products.
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"Confidential Treatment Requested"
5.3. The volumes of Raw Product delivered to and fractionated by Dynegy under
this Agreement, and the Components contained therein, shall be measured
and determined at the Delivery Points in accordance with the measurement
and testing procedures set forth in Exhibit C attached hereto. The
volumes of Raw Product delivered by DLMT by truck delivery to the Truck
Facility shall be determined by weighing delivering and receiving trucks
before and after loading or unloading in accordance with GPA Publication
8182 and other appropriate GPA and API publications. Additionally,
Dynegy shall have the right to submit any truck delivered load of Raw
Product to sampling and a component analysis by Dynegy or its designee
in accordance with industry standard or generally accepted sampling and
analysis procedures.
5.4. Volumes of Specification Products redelivered by Dynegy to DLMT in
accordance with Section 4 shall be measured and calculated in accordance
with Dynegy's standard measurement procedures at the Redelivery Point
which shall conform to good measurement practices in the industry and
the then current API Manual of Petroleum Measurement Standards. DLMT
shall have the right to witness all such measurements, tests and
determinations.
5.5. If the Raw Product received by Dynegy pursuant to the Gathering
Agreement are in compliance with the Raw Product Specifications
applicable to the individual Gathering System Delivery Points, it shall
be presumed that the Raw Product delivered into the Fractionator at the
Delivery Points under this Agreement are in compliance with the Raw
Product Specifications. In the event DLMT's Raw Product from a
particular Plant or other source does not comply with the applicable Raw
Product Specifications ("Offspec RP"), Dynegy, at its option, shall have
* the right to (i) handle such Offspec RP for a fee of [REDACTED] per
Barrel to be paid to Dynegy by DLMT (in addition to all other amounts
due by DLMT hereunder); or (ii) discontinue receipt of Raw Product
produced or delivered by such source under the Gathering Agreement,
and thereby reduce the volume of Raw Product available for fractionation
hereunder, until the Raw Product produced or delivered from such source
once again meets the applicable Raw Product Specifications. If it is
subsequently determined that Dynegy unknowingly accepted Offspec RP, the
Parties will mutually agree upon a handling fee for such Offspec RP.
DLMT agrees to INDEMNIFY and HOLD HARMLESS Dynegy and its Affiliates,
and their respective Representatives, from and against all Losses
incurred by any such indemnified Persons arising out of, or in any way
associated with, the delivery to Dynegy of Raw Product that fails to
meet the Raw Product Specifications which are unknowingly accepted by
Dynegy. Dynegy agrees to INDEMNIFY and HOLD HARMLESS DLMT and its
Affiliates, and their respective Representatives, from and against
all Losses incurred by any such indemnified Persons arising out of,
or in any way associated with, the delivery to Dynegy of Offspec RP
that is knowingly accepted by Dynegy.
6. COMPENSATION TO DYNEGY
6.1. Beginning January 1, 2002, DLMT shall pay to Dynegy a Monthly capacity
* reservation fee equal to [REDACTED] per Gallon ("Reservation Fee") based
on the sum of the volume of all Dedicated Raw Product gathered by Dynegy
during the applicable Month pursuant to the Gathering Agreement, as
measured under the terms of the Gathering Agreement, and the volume of
Additional Raw Product delivered by or on behalf of DLMT during the
applicable Month via the Truck Facility, but not to exceed a volume
equal to the then current Fractionation Capacity. Said Reservation Fee
is payable to Dynegy on a Monthly basis, whether DLMT elects to
fractionate such Raw Product at the Fractionator or exercise, in whole
or in part, its Mont Belvieu
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"Confidential Treatment Requested"
Option as set forth in Section 3.3 above. Notwithstanding the foregoing,
if Dynegy has exercised its rights to not operate the Fractionator as
provided in Section 4.2 above, with respect to the volume of Raw Product
that DLMT desired to be fractionated at the Fractionator but was
precluded from fractionating same based on Dynegy's election, no
reservation fee shall be payable by DLMT to Dynegy.
6.2. In addition to the Fees addressed in Section 6.1 above, beginning
January 1, 2002, DLMT shall pay to Dynegy, for each Gallon of Raw
Product delivered to and fractionated by Dynegy under this Agreement, a
* fractionation fee ("Fractionation Fee") equal to [REDACTED] per Gallon,
* on [REDACTED] of the Components, including but not limited to, all
methane and CO(2) contained therein. Beginning April 1, 2002, the
Fractionation Fee shall be redetermined and adjusted quarterly
accordingly to the following formula (Fractionation Fee in cents per
Gallon):
* Fractionation Fee = [REDACTED]
* Where: A = [REDACTED]
* B = [REDACTED]
GDP2 = United States Bureau of Economic
Analysis GDP Implicit Price Deflator
for the previous calendar quarter.
GDP1 = The GDP Implicit Price Deflator
for the fourth calendar quarter of
the Year 2001.
* Fuel 2 = [REDACTED]
* Fuel 1 = [REDACTED]
* At no time shall the Fractionation Fee be less that [REDACTED] per
Gallon.
* 6.3 DLMT shall also pay Dynegy a truck unloading fee for [REDACTED] per
Gallon for each Gallon of Additional Raw Product delivered to and
* accepted at the Truck Facility exceeding [REDACTED] Barrels per Day on a
Monthly average basis, regardless of whether or not such volumes are
fractionated. No truck unloading fees shall be charged for unloading
* Additional Raw Product of [REDACTED] Barrels per Day or less on a
Monthly average basis.
6.3. All product gains and/or losses across the Fractionator shall be for the
account of Dynegy.
7. TAXES AND OTHER PAYMENTS
Solely as between DLMT and Dynegy, DLMT shall be responsible for the
payment of any royalties, overriding royalties and other similar payments due or
to become due on the Raw Product or the Specification Products, which are
subject to this Agreement. Any tax applicable to the production or ownership of
the Raw Product or the Specification Products or sales or use taxes with respect
to the transfer of Raw Product or the Specification Products or the services
provided by Dynegy hereunder, including but not limited to any sales and/or use
tax applicable to stored volumes of Specification Products, shall be borne and
paid by DLMT unless such tax is by law imposed upon Dynegy, in which event, such
tax shall be paid by Dynegy and reimbursed by DLMT upon receipt of invoice for
same. In no event shall DLMT be liable to Dynegy for other taxes due on the
account of the services rendered by Dynegy hereunder (including, without
limitation, taxes measured by the gross receipts or net income of Dynegy).
DLMT shall indemnify and hold Dynegy and its Affiliates, and their
respective Representatives, harmless from and against any and all
Losses arising with respect to the payment of any
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taxes, royalties, overriding royalties and other payments which are the
responsibility of DLMT as set forth above.
8. ACCOUNTING AND AUDIT PROCEDURES
8.1. Dynegy shall furnish each Month for the preceding Month, the following
reports to DLMT: (i) volumes of Specification Products delivered to DLMT
or its designee each Month; and (ii) DLMT's inventories of Specification
Products each Month. Dynegy shall furnish initial reports of these items
by the twentieth (20th) Day of the Month succeeding the Month in
question.
8.2. All reports, invoices, statements, volume and money reconciliation
reports, or balancing reports, issued by either Party during any
calendar Year shall conclusively be presumed to be true and correct
after twenty-four (24) Months following the end of any such calendar
Year, unless within the said twenty-four (24) Month period the other
Party takes written exception thereto and makes claim for an adjustment
on the Party issuing the applicable report, invoice, or statement.
8.3. DLMT, upon at least thirty (30) Days prior written notice to Dynegy,
shall have the right to audit Dynegy's records pertaining to performance
under this Agreement, for any calendar Year within the twenty-four (24)
Month period following the end of such calendar Year; provided, however,
the making of an audit shall not extend the time for the taking of
written exception to and the adjustments provided for in Section 8.2.
DLMT shall make every reasonable effort to conduct an audit in a manner
which will result in a minimum of inconvenience to Dynegy. Dynegy shall
reply in writing to an audit report within ninety (90) Days after
receipt of such report.
8.4. Dynegy shall retain all financial and volume records for each calendar
year during the term hereof for a minimum of thirty-six (36) Months
following the end of each such calendar Year.
9. BILLING AND PAYMENT
9.1. Each Month during the Term hereof or any extensions thereto, Dynegy
shall furnish to DLMT an invoice reflecting all applicable fees and
charges due under this Agreement covering the prior Month's activities
and DLMT shall pay to Dynegy via electronic funds transfer, in
accordance with instructions provided by Dynegy, the amounts due no
later than ten (10) Business Days after DLMT's receipt of invoice.
9.2. For payments due under Section 9.1 above, and if the Day on which any
payment is due is not a Business Day, then the relevant payment shall be
due upon the immediately succeeding Business Day. Any amounts which
remain due and owing after the due date shall bear interest thereon at
the Base Rate. If a good faith dispute arises as to the amount payable
in any invoice, the amount not in dispute shall be paid. If either Party
elects to withhold any payment otherwise due as a consequence of a good
faith dispute, such withholding Party shall provide to the invoicing
Party written notice of its reasons for withholding payment. If it is
subsequently determined, whether by mutual agreement of the Parties or
otherwise, that the withholding Party is required to pay all or any
portion of the disputed amounts to the other Party, in addition to
paying over such amounts, the withholding Party shall pay interest
accrued on such amounts at the Base Rate from the original due date
until paid in full.
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10. FORCE MAJEURE
10.1. In the event either Party hereto is rendered unable, wholly or in part,
by reason of Force Majeure to carry out its obligations under this
Agreement, upon such Party's giving notice and reasonably full
particulars of such Force Majeure in writing to the other Party after
the occurrence of the cause relied on, then the obligations of such
Party, other than the obligation to pay money due hereunder, insofar and
only insofar as they are affected by such Force Majeure, shall be
suspended during the continuance of any inability so caused, but for no
longer period; and such cause shall, so far as reasonably possible, be
remedied with all reasonable dispatch.
10.2. The term "Force Majeure" shall mean any causes, whether the kind
enumerated herein or otherwise, which are not within the control of the
Party claiming suspension and which by the exercise of due diligence
such Party is unable to prevent or overcome and may include acts of God,
strikes, lockouts or other industrial disputes or disturbances, acts of
the public enemy, wars, blockades, insurrections, riots, epidemics,
landslides, lightning, earthquakes, fires, tornadoes, hurricanes,
storms, and warnings for any of the foregoing which may necessitate the
precautionary shut-down of wells, plants, pipelines, gathering systems,
loading facilities, terminals, the Fractionator or any portion thereof,
or other related facilities, floods, washouts, arrests and restraints of
governments (either federal, state, civil or military), civil
disturbances, explosions, sabotage, breakage or accidents to equipment,
machinery, plants (including the Plants), the Fractionator or any
portion thereof, or lines of pipe, the making of repairs or alterations
to any of the foregoing, inability to secure labor or materials, partial
or entire failure of wells or gas supply, electric power shortages or
outages, and necessity for compliance with any court order, or any law,
statute, ordinance, rule, regulation or order promulgated by a
governmental authority having or asserting jurisdiction. Such term shall
likewise include, in those instances where either Party hereto is
required to obtain servitudes, rights-of-way, grants, permits or
licenses to enable such Party to fulfill its obligations hereunder, the
inability of such Party to acquire, or delays on the part of such Party
in acquiring, at reasonable cost and after the exercise of reasonable
diligence, such servitudes, rights-of-way grants, permits or licenses,
and in those instances where either Party hereto is required to furnish
materials and supplies for the purpose of constructing or maintaining
facilities to enable such Party to fulfill its obligations hereunder,
the inability of such Party to acquire, or delays on the part of such
Party in acquiring, at reasonable cost and after the exercise of
reasonable diligence, such materials and supplies. The term "Force
Majeure" shall also include any event of force majeure occurring with
respect to the facilities or services of either Party's suppliers,
including such Party's affiliates, or customers providing a service or
providing any equipment, goods, supplies or other items necessary to the
performance of such Party's obligations, and shall also include
curtailment or interruption of deliveries or services by such suppliers
or customers as a result of an event that would otherwise be defined as
Force Majeure hereunder.
10.3. Notwithstanding Section 10.1 above, it is understood and agreed that the
settlement of strikes or lockouts shall be entirely within the
discretion of the Party having the difficulty, and that the above
requirement that any Force Majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes or lockouts by
acceding to the demands of the opposing party when such course is
inadvisable in the discretion of the Party (or its Affiliate) having the
difficulty.
10
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11. INDEMNIFICATION AND LIMITATION OF LIABILITY
11.1. MUTUAL INDEMNITIES
As between the Parties, DLMT shall be deemed to be in exclusive control
and possession of: (i) the Raw Product delivered hereunder, until the
same shall have been delivered to Dynegy at the Delivery Point; and (ii)
the Specification Products, once same have been redelivered by Dynegy to
DLMT at the Redelivery Point hereunder; and with regard to same, DLMT
shall be responsible for any injury or damage caused thereby or for loss
of such Raw Product or Specification Products. After receipt of Raw
Product by Dynegy at the Delivery Point and until redelivery of the
Specification Products attributable thereto to DLMT at the Redelivery
Point, Dynegy shall be deemed to be in exclusive control and possession
of such Raw Product and Specification Products and shall be responsible
for any injury or damage caused thereby or for loss of same. Each Party
will indemnify and hold the other Party and its Affiliates, and their
respective Representatives, harmless from and against any injuries,
damages or losses for which such Party is responsible as set forth in
this Section 11.1; provided, however, that no Party or its Affiliates,
or their respective Representatives, shall be indemnified against their
own negligence or intentional misconduct or the negligence or
intentional misconduct of their own Representatives or Affiliates.
11.2. LIMITATION OF LIABILITY
Except as to third party claims covered by any indemnity provisions
contained in this Agreement, neither Party shall be responsible or
liable to the other Party or its Affiliates, or their respective
Representatives, for any special, incidental, consequential or punitive
damages arising out of this Agreement or any breach hereof.
12. MISCELLANEOUS
12.1. EXISTING LAWS AND REGULATIONS. This Agreement and the operations
hereunder shall be subject to the applicable federal and state laws and
the applicable orders, laws, rules and regulations of any state or
federal authority having or asserting jurisdiction, but nothing
contained herein shall be construed as a waiver of any right to question
or contest any such order, law, rule or regulation. The parties shall be
entitled to regard all such laws, rules, regulations and orders as valid
and may act in accordance therewith until such time as the same may be
invalidated by final judgment in a court of competent jurisdiction.
12.2. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES
ARISING OUT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED,
ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, WITHOUT GIVING
EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD
CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF TEXAS.
12.3. WAIVER. No waiver by either Party of any default under this Agreement or
any of the provisions of this Agreement shall be deemed to be a waiver
of any future default or any other provision hereof, whether of a like
or a different character. No waiver shall be effective unless made in
writing and signed by the Party to be charged with such wavier, nor
shall such waiver constitute a continuing waiver unless expressly
provided by the Party to be charged with such wavier.
11
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12.4 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
assigns. Notwithstanding the foregoing, neither Party may assign this
Agreement, nor any interest herein, without the prior written consent of
the other Party, which consent shall not be unreasonably withheld or
delayed; provided, however, that a Party may from time to time (i)
designate an Affiliate to perform this Agreement, either in whole or in
part, such performance being considered that of the Party hereto, or
(ii) assign this Agreement to an Affiliate without obtaining the other
Party's consent thereto. It is understood, however, that by such
designation or assignment, unless the non-assigning Party expressly
releases the assigning Party, such assigning Party shall not thereby
avoid obligations imposed by the terms and provisions hereof, past,
present or future. DLMT agrees that it will not assign or transfer any
interest in the volumes of Raw Product dedicated to this Agreement
during the term hereof without the prior written consent of Dynegy,
which consent shall not be unreasonably withheld; provided such
assignment is made subject to this Agreement and any assignee ratifies
and adopts this Agreement in writing.
12.4. EXHIBITS. Unless specifically otherwise provided, if any term or
condition expressed or implied in any Exhibit to this Agreement
conflicts or is at variance with any term or condition of this
Agreement, this Agreement shall prevail. All Exhibits as referenced
herein are attached hereto and made a part hereof.
12.5. DTPA WAIVER. THE PARTIES CERTIFY THAT THEY ARE NOT "CONSUMERS" WITHIN
THE MEANING OF THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION
ACT, SUBCHAPTER E OF CHAPTER 17, SECTIONS 17.42, ET SEQ., OF THE TEXAS
BUSINESS AND COMMERCE CODE, AS AMENDED ("DTPA"). THE PARTIES COVENANT,
FOR THEMSELVES AND FOR AND ON BEHALF OF ANY SUCCESSOR OR ASSIGNEE, THAT,
IF THE DTPA IS APPLICABLE, (a) THE PARTIES ARE "BUSINESS CONSUMERS" AS
THAT TERM IS DEFINED IN THE DTPA, (b) OTHER THAN SECTION 17.555 OF THE
TEXAS BUSINESS AND COMMERCE CODE, EACH PARTY HEREBY WAIVES AND RELEASES
ALL OF ITS RIGHTS AND REMEDIES UNDER THE DTPA AS APPLICABLE TO THE OTHER
PARTY AND ITS SUCCESSORS AND ASSIGNS, AND (c) EACH PARTY SHALL DEFEND
AND INDEMNIFY THE OTHER FROM AND AGAINST ANY AND ALL LOSSES OF OR BY
THAT PARTY OR ANY OF ITS SUCCESSORS AND ASSIGNS OR ANY OF ITS OR THEIR
AFFILIATES BASED IN WHOLE OR IN PART ON THE DTPA, ARISING OUT OF OR IN
CONNECTION WITH THE TRANSACTION SET FORTH IN THIS AGREEMENT.
12.6. HEADINGS, SECTIONS AND EXHIBITS. All references to "Sections" and
Exhibits herein pertain to Sections of this Agreement and Exhibits
attached hereto, unless expressly stated otherwise. Headings are for
purposes of reference only and shall not be used to construe the meaning
of this Agreement.
12.7. PRINCIPLES OF CONSTRUCTION AND INTERPRETATION. In construing this
Agreement, the following principles shall be followed:
(i) no consideration shall be given to the fact or presumption that
one Party had a greater or lesser hand in drafting this
Agreement;
(ii) examples shall not be construed to limit, expressly or by
implication, the matter they illustrate;
(iii) the word "includes" and its syntactical variants mean "includes,
but is not limited to" and corresponding syntactical variant
expressions; and
12
<Page>
(iv) the plural shall be deemed to include the singular and vice
versa, as applicable.
12.8. NOTICES. Any notice, request, instruction, correspondence, or other
documentation to be given hereunder by either Party to the other shall
be in writing and delivered personally or mailed by registered or
certified mail, postage prepaid and return receipt requested, or
facsimile as follows:
FOR DYNEGY:
To: Dynegy Midstream Services, Limited Partnership
Attention: Vice President, Louisiana Gulf Coast Region
At: 1000 Louisiana, Suite 5800
Houston, Texas 77002-5050
Phone: (713) 507-6729
Fax: (713) 507-6575
FOR DLMT:
To: Dynegy Liquids Marketing and Trade
Attention: Sr. Vice President
At: 1000 Louisiana, Suite 5800
Houston, Texas 77002
Phone: 713) 507-6450
Fax: (713) 507-3715
A notice sent by facsimile shall be deemed to have been receive by the
close of the first Business Day following the Day on which it was
transmitted and confirmed by transmission report or such earlier time as
confirmed orally or in writing by the receiving Party. Notice by U.S.
Mail, whether by U.S. Express Mail, registered mail or certified mail,
or by overnight courier shall be deemed to have been received by the
close of the second Business Day after the Day upon which its was sent,
or such earlier time as is confirmed orally or in writing by the
receiving Party. Any Party may change its address or facsimile number by
giving notice of such change in accordance with herewith.
12.9. NO THIRD PARTY BENEFICIARY. This Agreement is for the sole benefit of
the Parties and their respective successors and permitted assigns, and
shall not inure to the benefit of any other person whomsoever, it being
the intention of the Parties that no third person shall be deemed a
third party beneficiary of this Agreement or otherwise have any rights
hereunder.
12.10. SEVERABILITY. If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under the present or future laws effective
during the term of this Agreement, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part
of this Agreement, and (iii) the remaining provisions of this Agreement
will remain in full force and effect and will not be affected by the
illegal, invalid, or unenforceable provision or by its severance from
this Agreement. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of
this Agreement a provision similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and as may be legal, valid,
and enforceable. If a provision of this Agreement is or becomes illegal,
invalid, or unenforceable in any jurisdiction, the foregoing event shall
not affect the validity or enforceability in that jurisdiction of any
other provision of this Agreement nor the validity or enforceability in
other jurisdictions of that or any other provision of this Agreement.
13
<Page>
12.11. ENTIRE AGREEMENT AND AMENDMENT. This Agreement, including, without
limitation, all exhibits hereto, integrates the entire understanding
between the Parties with respect to the subject matter covered and
supersedes all prior understandings, drafts, discussions, or statements,
whether oral or in writing, expressed or implied, dealing with the same
subject matter. This Agreement may not be amended or modified in any
manner except by a written document signed by both parties that
expressly amends this Agreement.
12.12. SETOFFS AND COUNTERCLAIMS. Except as otherwise provided herein, each
Party reserves to itself all rights, set-offs, counterclaims, and other
remedies and/or defenses which that Party is or may be entitled to
arising from or out of this Agreement or as otherwise provided by law.
12.13. NO PARTNERSHIP OR ASSOCIATION. Nothing contained in this Agreement shall
be construed to create an association, trust, partnership or joint
venture or impose a trust or partnership duty, obligation or liability
on or with regard to either Party.
12.14. NO COMMISSIONS, FEES OR REBATES. Except as expressly authorized by this
Agreement, no director, employee or agent of either Party shall give or
receive any commission, fee, rebate gift or entertainment of significant
cost or value in connection with this Agreement. Any representative or
representative(s) authorized by either Party may audit the applicable
records of the other Party for the purpose of determining whether there
has been compliance with this Section.
12.15. OTHER AGREEMENTS. Simultaneously with the execution of this Agreement,
DLMT and Dynegy or its (or their) Affiliate(s) shall execute the Product
Storage Agreement and a Gathering Agreement of even date herewith.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Day and Year first above written.
DYNEGY MIDSTREAM SERVICES,
LIMITED PARTNERSHIP
BY: DYNEGY MIDSTREAM G.P., INC., ITS GENERAL PARTNER
By:
------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
DYNEGY LIQUIDS MARKETING AND TRADE
By:
------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
14
<Page>
EXHIBIT A
TO THE FRACTIONATION AGREEMENT
RAW PRODUCT SPECIFICATIONS
(1) The Raw Product delivered to Dynegy at the Delivery Point shall contain
no solid materials or free water at 60 DEG. F.
(2) Total sulfur content shall not exceed 30 ppm by weight to be determined
by ASTM-D-2784.
(3) The hydrogen sulfide content shall not exceed 1.5 ppm by weight, and the
corrosiveness of the Raw Product shall not exceed "1" (using a copper
strip test) as provided for in ASTM-D-1838. For Raw Product which is
found to contain corrosion additive or inhibitor in excess of 1 (one)
Part Per Million By Weight (using applicable industry test methods), the
copper strip test will be invalid and a chromatographic analysis shall
be conducted to determine hydrogen sulfide content and corrosiveness.
(4) The Raw Product shall not contain in excess of 1.0 liquid volume percent
carbon dioxide in the untreated ethane (ethane Component including all
carbon dioxide) at any time nor exceed 35 hundredths (0.35) liquid
volume percent carbon dioxide in the untreated ethane (ethane Component
including all carbon dioxide) when averaged over any given Month.
(5) The Raw Product shall not contain in excess of 1.5 liquid volume percent
methane and inerts of the ethane Component.
(6) The Raw Product color shall have a minimum Saybolt Number of +25 as
determined by ASTM-D-156.
(7) The maximum product end point at 14.7 psia shall not exceed 375 DEG. F
as determined by distillation pursuant to ASTM-D-216. The distillation
and color test are to be run on that portion of the mixture having a
boiling point of 70 DEG. F and above and at atmospheric pressure.
(8) DLMT shall not deliver Raw Product at temperatures in excess of
100 DEG. F or less than 60 DEG. F.
(9) The Raw Product shall not contain more than 1 ppm fluorides.
(a) The Raw Product shall not contain more than 1 ppm carbonyl sulfide
(COS).
<Page>
EXHIBIT B
TO FRACTIONATION AGREEMENT
SPECIFICATION PRODUCTS SPECIFICATIONS
PURITY ETHANE SPECIFICATION
Product characteristics with test methods are herein specified for purity ethane
mixtures received or delivered by Dynegy.
<Table>
<Caption>
TEST METHODS
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM LATEST REVISION
- ----------------------- ------- ------- ---------------
1. COMPOSITION ASTM E-260
Percent by Liquid Volume
Methane 3.0 GPA-2177
Ethane 95.0 100.0
Ethylene 1.0
Heavier than Ethane 3.5 ASTM D-863
Propylene 1.0
2. CORROSION
Copper Strip @ 100 DEG. F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
3. TOTAL SULFUR
PPM by Weight in Liquid 5 ASTM D-3246
4. DRYNESS 7 pounds per Visual
standard cubic
feet of vapor maximum
5. CARBON DIOXIDE
PPM by Weight in Liquid 1,000 GPA 2177
</Table>
PRODUCT ACCOUNTING
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
Exhibit B Page 1
<Page>
PROPANE SPECIFICATION
Product characteristics with test methods are herein specified for propane to be
redelivered by Dynegy. This product meets the requirement of the GPA HD-5
propane specification.
<Table>
<Caption>
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM TEST METHODS
- ----------------------- ------- -------
LATEST REVISION
---------------
1. COMPOSITION As limited by other ASTM E-260
Percent by Liquid Volume Ethane Components & vapor
pressure.
Propane 90.0 100 ASTM D-2163
Propylene 5.0
Butanes & Heavier 2.5
2. VAPOR PRESSURE
Psig @ 100 DEG. F 208 ASTM D-1267
3. CORROSION
Copper Strip @ 100 DEG. F 1-b ASTM D-1838
(Invalid if additive or inhibitor is
used.) 1 Applicable Industry Practices
Corrosion Additive or Inhibitor, PPM by
Weight.
4. TOTAL SULFUR
PPM by Weight in Liquid 120 ASTM D-3246
5. HYDROGEN SULFIDE
PPM by Weight in Liquid 1 Field - Length of Stain Tube
(Lab test required if field test is Lab Chromatography with Flame
positive.) Photometric Detector
6. CARBONYL SULFIDE
PPM by Weight in Liquid 2 Field - Length of Stain Tube
(Field test invalid if C(4) + exceeds Lab - UOP 212 or UOP 791
1.0 LV%) (Lab test required if field Lab - Gas Chromatography with
test is positive. Flame Photometric Detector
7. NON-VOLATILE RESIDUE
a) Milliliters @ 100 DEG. F 0.05 ASTM D-2158
b) Oil Stain Pass
THE FOLLOWING TESTS ARE OPTIONAL, DEPENDING UPON THE PRODUCT SOURCE:
8. DRYNESS
Freeze Valve, Seconds 60 (Note 2) ASTM D-2713
9. VOLATILE RESIDUE
95% Evaporated - Temperature, DEG. F -37 ASTM D-1837
10. AMMONIA
PPM by Weight in Liquid 1 Field - Length of Stain Tube
Lab - UOP 430
11. FLUORIDES
PPM by Weight in Liquid as 5 Field - Length of Stain Tube
Monatomic Fluorine
12. OTHER DELETERIOUS SUBSTANCES (PPM BY WEIGHT IN LIQUID)
Includes but not limited to 1 Gas chromatography with flame
(Isoprene, Butadiene, Vinyl ionization or electron capture
Chloride, glycol, amine, caustic) detection or other
</Table>
NOTES: (1) The test methods for items 2 and 7 are not necessary if a
compositional analysis is available which indicates compliance with
these requirements.
(2) The addition of methanol in the distribution system should be on a
spot basis and must not exceed a rate of 5 Gallons per 10,000
Gallons of product.
Exhibit B Page 2
<Page>
BUTANE-NATURAL GASOLINE MIXTURE SPECIFICATION
Product characteristics with test methods are herein specified for
butane-natural gasoline mixtures redelivered by Dynegy.
<Table>
<Caption>
PRODUCT CHARACTERISTICS MINIMUM MAXIMUM TEST METHODS
- ----------------------- ------- ------- LATEST REVISION
---------------
1. COMPOSITION Predominantly Isobutane, ASTM E-260
Percent by Liquid Volume Normal Butane & Natural
Gasoline (Pentanes &
Heavier) GPA 2177
ASTM D2597
Propane 3.0 of Isobutane
Butylene 1.0 of Isobutane
Pentanes & Heavier 15.0
2. CORROSION
Copper Strip @ 100 DEG. F 1-b ASTM D-1838
(Invalid if additive or
inhibitor is used.)
Corrosion Additive or Applicable Industry
Inhibitor, PPM by Weight 1 Applicable Industry
Practices
3. TOTAL SULFUR
PPM by Weight in Liquid 150 ASTM D-3246 or Gas Chromatography
with Flame Photometric Detection
4. DRYNESS No Free Water Visual
5. AMMONIA
PPM by Weight in Liquid 1 Field - Length of
Stain Tube
LaB - UOP 430
6. HYDROGEN SULFIDE
PPM by Weight in Liquid 1 Field - Length of
(Lab test required if field Stain Tube
test is positive) Lab - Gas Chromatography with Flame
Photometric Detection
7. PENTANES & HEAVIER No Color Visual using White Cup Method
(Only if C5+ > 2 LV%)
Perform the Saybolt color test
after weathering sample to 70 DEG. F
if white cup test indicates
possible color.
COLOR
Saybolt No. Plus 25 ASTM D-156
DISTILLATION
End Point, DEG. F 375 ASTM D-86
8. FLUORIDES
PPM by weight in liquid 1
</Table>
PRODUCT ACCOUNTING
For accounting purposes, propane shall be considered isobutane and butylenes
shall be considered normal butane within the above listed specification limits.
Any excess of these hydrocarbon components above the specification limits shall
not be accounted for.
Exhibit B Page 3
<Page>
EXHIBIT C
TO THE FRACTIONATION AGREEMENT
MEASUREMENT & TESTING STANDARDS - CORIOLIS METERS
A. GENERAL
1. UNIT OF MEASUREMENT: The unit of measurement of the Raw Product
stream shall be one (1) Pound mass.
2. DESIGN PRESSURE: The Delivery Point custody measurement station
shall be capable of measuring the volume of Raw Product delivered hereunder at
pressures up to 1440 pig or at a pressure as later amended.
3. FLOW METERING: The custody measurement station shall be designed,
operated, tested, and maintained and the mass of hydrocarbon streams calculated
in accordance with the latest edition of Gas Processors Association ("GPA")
Standard 8182 and the appropriate parts of the American Petroleum Institute
Manual of Petroleum Measurement Standards (hereinafter referred to as "MPMS").
The custody measurement station will, in Dynegy's sole discretion, be comprised
of: a coriolis meter, composite sampler and microprocessor; or a turbine meter,
densitometer, composite sampler and microprocessor; or an orifice meter,
densitometer, composite sampler and microprocessor.
4. DELIVERY POINT: As set forth in Section 1, Definitions, of the
Agreement
5. FLOW METER CALIBRATION: All calibrations, adjustments and
calculations shall be adjusted to Standard Conditions. Standard Conditions shall
mean 60 DEG. degrees Fahrenheit and the equilibrium vapor pressure of the Raw
Product being measured. All flow measurement will be made utilizing temperature
and pressure at flowing line conditions.
6. ACCESS TO EQUIPMENT: DLMT, or its representative, shall have
access at all reasonable times to the equipment of Dynegy's custody measurement
station, or that of Dynegy's designees, but the reading, calibrating and
adjusting thereof shall be done by the employees, agents, representatives or
designees of Dynegy. Similarly, Dynegy shall have access at all reasonable times
to the equipment of DLMT's check measurement stations, but the reading,
calibrating, and adjusting thereof shall be done by the employees, agents or
representatives of DLMT.
7. METER TICKET: A meter ticket will be generated for the Delivery
Point above each Day. The billing period is from 07:00 hours on the first Day of
each Month to 07:00 hours on the first Day of the following Month.
8. REVIEW OF MEASUREMENT DATA: Dynegy's and DLMT's personnel shall
exchange measurement data on a timely basis in order to detect measurement
discrepancies as they arise. In the event that Dynegy and DLMT measurement
differ more than one (1) percent for two (2) or more Days in succession, both
metering facilities will be examined and calibrated to determine whether or not
either or both metering facilities are conforming to good measurement practice
and/or operation.
9. FLOW METER PROVING FREQUENCY: On a scheduled Day of each Month,
or at other mutually agreeable intervals, Dynegy or Dynegy's designee shall test
and verify the accuracy of its
Exhibit C Page 1
<Page>
measurement equipment in accordance with the appropriate referenced standards.
Dynegy or its designee shall give DLMT notice of the date and time of each test
sufficiently in advance (48 hours minimum) to permit DLMT to have a
representative present to witness such test result. Calibration records of
either Dynegy's or DLMT's measurement equipment shall be available for review by
either Party.
10. CERTIFICATION OF TEST EQUIPMENT: Certification and calibration
records of Dynegy and DLMT's applicable test equipment shall be maintained and
made available for review by either Party.
11. SPECIAL TESTS: Either Party to this Agreement may also request a
special test of any measurement equipment at its cost and expense. In such
event, the Parties shall cooperate to secure prompt verification of accuracy of
the equipment.
B. MASS MEASUREMENT CALCULATIONS
1. RAW PRODUCT: The quantity shall be determined by mass measurement
procedures in accordance with MPMS and GPA standards and/or procedures agreed to
by both Parties.
2. CORIOLIS METER: Coriolis meters will be installed, operated,
maintained and calibrated according to the latest edition of the API Draft
Standard Measurement of Fluids by Coriolis Meters (when issued) and
manufacturers recommendations.
3. DENSITOMETER: Where installed, the flowing density of the stream
shall be determined by the continuous use of a densitometer of standard make
installed in accordance with MPMS Chapter 14.6 and the manufacturer's
recommendations and operated so that the instrument will properly measure the
density of the fluid at flowing pressure and temperature.
4. TIME BASIS: Mass measurement shall be calculated on a daily basis
by determining the necessary readings at the designated time on one Day and
those same readings at the designated time on the previous Day.
5. CONVERT MASS TO GALLONS: If required by either Dynegy or DLMT, the
determined mass shall be converted to Gallons at Standard Conditions in
accordance with GPA 8173, latest edition, using weight-in-vacuum factors
from GPA Standard 2145, latest edition.
C. DENSITOMETER PROVING
1. PROVING FREQUENCY: The accuracy of the densitometer shall be
verified Monthly by calibrating and proving the instrument in accordance with
MPMS Chapter 14.6 and the manufacturer's recommendations.
2. DENSITOMETER CORRECTION FACTOR: Two (2) provings shall be
performed to establish the densitometer correction factor. The average of the
two - (2) provings shall be taken as the densitometer correction factor if the
two - (2) provings have a repeatability tolerance not greater than 0.05 percent.
3. DEVIATION REQUIREMENTS: See "Meter and Densitometer Factor or
Orifice Calibration Deviation," Section D below.
Exhibit C Page 2
<Page>
D. METER AND DENSITOMETER FACTOR OR ORIFICE CALIBRATION DEVIATION
1. ORIFICE METER CALIBRATIONS: All the orifice meter instrumentation
(DP, PT, TT and chart recorders (if applicable) shall be calibrated and the
orifice plate inspected at the beginning of the delivery and a minimum of every
thirty (30) Days during the delivery. Necessary repairs to the metering
equipment and replacement of the orifice plate shall be made when the equipment
does not meet the required standards provided in the appropriate MPMS manual,
latest edition.
2. ERRORS LESS THAN 0.25%: If the meter factor, densitometer factor
or orifice meter calibration deviates less than +/- 0.25% from one scheduled
proving to the next, the effective date of the new factor shall be the date of
the proving and shall remain in effect until the next proving.
3. ERRORS MORE THAN 0.25% AND LESS THAN 0.50%: If the meter factor,
densitometer factor or orifice meter calibration deviates more than +/- 0.25%,
but less than +/- 0.50%, then the effective date of the new factor shall be the
date on which an event occurred which is known to have changed the factor, or if
such date is not known, then the effective date is determined as defined in
"Volume Corrections", Section E below. If the factor deviation falls between
+/-0.25% and +/-0.50%, then it shall be the decision of the concerned field
Parties as to the scope and corrective action taken, if any.
4. ERRORS MORE THAN 0.50%: Any deviation greater than+/-0.50% is not
acceptable, and immediate steps shall be taken to effect the required
maintenance or repairs.
E. VOLUME CORRECTIONS
If, upon calibration tests, the meter does not meet requirements given,
then any previous recording of such equipment shall be corrected for any period
which is known or agreed upon, but in case the period is not known or agreed
upon, such correction shall apply to one-half (1/2) the total volume measured
since the date of the last calibration (proving). However, this correction shall
not exceed sixteen (16) Days.
F. SAMPLING AND ANALYSIS
1. Delivery Point: A composite sample of the Raw Product shall be
taken at the Delivery Point Monthly or more frequently, if required, and used
with the mass calculation to determine a "Raw Product delivery in volume" (if
applicable). The subject volume calculation shall be based upon a temperature of
60 DEG. degrees F and the equilibrium vapor pressure of the Raw Product.
2. COMPOSITE SAMPLER: An automatic continuous sampler shall be
installed and used at the Delivery Point or at other mutually agreeable point in
accordance with the following requirements:
a. OPERATOR: Dynegy or its designee shall operate the sampling
equipment.
b. SAMPLE BASIS: The sampling equipment shall be designed to
accumulate a representative sample proportional to the flow of the Raw Product
passing through the measurement station.
c. MIXING DEVICE: The sampling equipment shall be equipped with
mixing facilities to eliminate any stratification.
Exhibit C Page 3
<Page>
d. SAMPLING METHOD: All sampling shall be in accordance with
GPA Standard 2174, latest edition.
3. RAW PRODUCT ANALYSIS: Raw Product analysis shall be in accordance
with "Analysis of Demethanized Hydrocarbon Liquid Mixtures Containing Nitrogen
and Carbon Dioxide by Gas Chromatography", GPA Standard 2177, latest edition.
4. CHECK SAMPLE AND REFEREE: Check samples will be collected on the
same schedule as the custody samples. Analysis of these samples will be optional
based on the outcome of the custody sample analysis settlement.
5. UNAVAILABLE SAMPLE: In the event that a sample is not available
for a particular Month, the Parties shall determine an analysis based on the
most recent mutually accepted data.
G. CORRECTION OF ERRORS
Measuring equipment found to be registering inaccurately or out of
service should be adjusted to read accurately and/or placed in service
immediately. For any error not known or agreed upon for the period in which the
meter was inaccurate or out of service, the volume of the stream shall be
estimated by use of any of the following or other methods which shall be
mutually agreed upon by the Parties:
a. In the event that only one of the metering facilities is
found to have had a significant defect in performance, the other measuring
facility will be the agreed upon billing basis for that billing period.
b. If it is determined that both of the measuring installations
experienced significant defects in performance, billing for the
period in question shall be based upon such data as Dynegy and
DLMT shall find mutually acceptable.
H. TECHNICAL PUBLICATIONS
1. Revisions to such MPMS and GPA publications shall apply to
computations and operation of measurement stations but shall not be construed to
require major modifications to, or replacement of, said equipment.
2. Following is the current list of publications referenced in this
Exhibit.
a. API MANUAL OF PETROLEUM MEASUREMENT STANDARDS (MPMS),
AMERICAN PETROLEUM INSTITUTE, WASHINGTON, D.C.:
(1) Chapter 1, Vocabulary, Second Edition, July 1994
(2) Chapter 4, Proving Systems, Section 2,
Conventional Pipe Provers, First Edition, October 1988,
Reaffirmed October 1993
(3) Chapter 4, Proving Systems, Section 3, Small
Volume Provers, First Edition, July 1988, Reaffirmed
October 1993
Exhibit C Page 4
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(4) Chapter 5, Metering, Section 3, Measurement of
Hydrocarbon Liquids by Turbine Meters, Second Edition,
November 1987, Reaffirmed October 1992
(5) Chapter 5, Metering, Section 4, Accessory
Equipment for Liquid Meters, Second Edition,
November 1987, Reaffirmed October 1992
(6) Chapter 14, Natural Gas Fluids Measurement,
Section 6, Continuous Density Measurement, Second Edition,
April 1991
(7) Chapter 14, Natural Gas Fluids Measurement,
Section 3, Concentric Square-Edged Orifice Meters.
Parts 1, 2, 3 and 4
(8) API Draft Standard, Measurement of Fluids by
Coriolis Meters, pending issue.
b. STANDARDS OF THE GAS PROCESSORS ASSOCIATION (GPA),
TULSA, OKLAHOMA:
(1) GPA Standard 8182-95, Standard for Mass
Measurement of Natural Gas Liquids
(2) GPA Standard 8173-94, Method for Converting Mass
Natural Gas Liquids and Vapors to English Liquid Volumes
(3) GPA Standard 2145-2000, Physical Constants for
Paraffin Hydrocarbons and Other Components of Natural Gas
(4) GPA Standard 2174-93, Obtaining Liquid Hydrocarbon
Samples for Analysis by Gas Chromatography
(5) GPA Standard 2186-95, Tentative Method for the
Extended Analysis of Hydrocarbon Liquid Mixtures
Containing Nitrogen and Carbon Dioxide by Temperature
Programmed Gas Chromatography
(6) GPA Standard 2177-95, Analysis of Demethanized
Hydrocarbon Liquid Mixtures Containing Nitrogen and Carbon
Dioxide by Gas Chromatography
(7) GPA Technical Publication TP-16, Composite
Pressure and Temperature Volume Correction Factor Table for
Liquified Petroleum Gas (LPG) and Natural Gasoline
(8) GPA Technical Publication TP-17, Table of Physical
Properties of Hydrocarbons for Extended Analysis of Natural
Gases
Exhibit C Page 5
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EXHIBIT D
TO FRACTIONATION AGREEMENT
TRUCK FACILITY OPERATIONS AND RISKS
PART A: GENERAL SAFETY OBLIGATIONS
DLMT represents, acknowledges and agrees that:
(v) DLMT is aware that hydrocarbon products are volatile and flammable and
that strict adherence to all safety requirements during loading and
unloading is necessary to avoid potential pollution of land and/or
water, personal injury or death of persons, or property damage;
(vi) The services to be provided under this Agreement will be conducted on
premises where hydrocarbon products are stored and dispensed, that
vapors therefrom may exist and may seep or leak through small openings
and may collect in sewers, drains or other places close to possible
sources of ignition, such as sparks from automobiles, electric switches
and motors, welding machines, furnaces, the smoking of tobacco, or the
striking together of metal objects; and
(vii) It is impossible to prevent damage to metal equipment, pipes and
fittings caused by vibration, electrolysis and corrosion, and that
damage from those or other causes beyond the control of Dynegy and its
Operator may allow the undetected escape of petroleum products and
vapors and ignition thereof; and
(viii) It will, and will cause DLMT's Agent(s) to, fully comply with all
Federal, State and local laws, ordinances, codes, rules, regulations,
orders and standards applicable to the particular method of delivery
utilized by DLMT or DLMT's Agents for delivery of, and receipt of, Raw
Product and Specification Products to and from the Truck Facility. DLMT
agrees to utilize motor carrier transports and drivers that comply with
all applicable U.S. Department of Transportation, Environmental
Protection Agency and Occupational Safety and Health Administration
regulations, requirements, and standards as well as any other federal,
state or local laws and regulations.
PART B: DYNEGY OPERATING PROCEDURES
(i) DLMT further agrees to comply with all safety and operating procedures
established by Dynegy and delivered to DLMT, from time to time, with
regard to the loading and unloading of Raw Product and Specification
Products at the Truck Facility and agrees that it shall require any
carriers it contracts with for delivery or transport of Raw Product or
Specification Products to and from the Truck Facility to comply with all
such Dynegy safety and operating procedures. If Dynegy maintains an
automated access and/or Raw Product and Specification Products loading
system at the Truck Facility, DLMT agrees that it shall be responsible
for administering and controlling all access cards, personal
identification numbers, passwords or other information controlling
access which are assigned to DLMT and DLMT Agents and shall be obligated
to advise Dynegy immediately upon: (i) termination of employment or
access authority of any DLMT Agents or (ii) loss or damage to any access
cards issued to DLMT Agent(s) or unauthorized or public disclosure of
any personal identification numbers or passwords; and, in either
instance, to return any access cards of such persons whose employment or
authority has
Exhibit D Page 1
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been terminated or any damaged cards still in its possession and to
advise Dynegy of any termination or other severance from its employ of
any employees with access to personal identification numbers or
passwords immediately upon such severance. All access cards and other
security access information issued to DLMT's Agent(s) shall be deemed to
have been issued to DLMT and DLMT shall be solely responsible for the
custody, control and use of same.
(ii) Dynegy shall maintain a list of persons authorized to load and unload
Raw Product and Specification Products at the Truck Facility and DLMT
must make arrangements with Dynegy in advance to obtain Dynegy's
approval of each individual which it intends to send to the Truck
Facility to perform loading and unloading work. Dynegy, in its sole
discretion, may withhold or rescind approval of an individual for
unloading and loading operations if Dynegy has not been provided
adequate proof of proper training of such an individual or if Dynegy's
representatives at the Truck Facility observe the person operating in a
manner not in compliance with applicable laws and regulations or
Dynegy's own loading, unloading and handling procedures. Dynegy shall
not be required to allow unloading and loading by any persons which have
not been approved by Dynegy and shall not be liable for any extra
transportation costs or expenses, or any damages, costs or claims of any
kind, arising from such a refusal to allow loading or unloading
operations to be conducted by a driver or other DLMT Agent(s) not
approved by Dynegy.
PART C: SCHEDULING & NOMINATIONS
DLMT shall advise Dynegy of the dates and times at which it intends to
deliver Raw Product to the Truck Facility and Dynegy, or its designated
scheduling coordinator, will coordinate deliveries and receipts of Raw Product
and Specification Products. At Dynegy's discretion, Dynegy may establish written
scheduling procedures to attempt to minimize any waiting time for parties
delivering or receiving Raw Product or Specification Products at the Truck
Facility. Dynegy shall provide any such written procedures to DLMT prior to
their taking effect and may modify same from time to time. In connection with
such scheduling, should the number of trucks present at the Truck Facility at
any one time exceed the capacity such that some trucks will have to be put into
a waiting queue, priority of loading and unloading will be given according to
the trucks scheduled times for unloading and loading and should DLMT or DLMT's
carrier arrive with unscheduled deliveries or receipts, Dynegy shall have no
obligation to alter its operations to allow unloading or loading of such
unscheduled deliveries or receipts other than as time and unloading capacity is
available to do so without preventing or materially delaying the unloading or
loading of scheduled deliveries or receipts. DYNEGY SHALL IN NO CASE BE
RESPONSIBLE OR LIABLE FOR DEMURRAGE, LABOR OVERTIME CHARGES OR OTHER COSTS OR
DAMAGES INCURRED BY DLMT IN MAKING DELIVERIES TO OR COMPLETING RECEIPT AT THE
DYNEGY PLANT DUE TO UNLOADING DELAYS.
PART D: ODORIZATION
The following provisions shall only be applicable if DLMT elects to
receive delivery of any of its Specification Products via the Truck Facility
into tank trucks rather than via pipeline or transfer in storage:
DLMT acknowledges that applicable regulations require all loads of
Products being received at the Truck Facility into transports or tank
trucks to be odorized unless an exception to such requirements is
applicable. DLMT agrees that it is solely responsible for making the
determination as to whether a load will or will not be odorized and
agrees that it must present a
Exhibit D Page 2
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certificate to Dynegy's on-site representative at the Fractionator in a
form to be provided by Dynegy on DLMT's request (the "Non-Odorization
Certificate") listing each location to which DLMT will be transporting
unodorized Products from the Truck Facility. DLMT agrees that neither it
nor DLMT's Agent(s) will load or transport unodorized Products except in
accordance with the terms of the Non-Odorization Certificate filed with
Dynegy. DLMT acknowledges and represents that DLMT and DLMT's Agent(s)
are knowledgeable in the chemical and physical properties and
limitations, storage, use and handling of ethyl mercaptan, and other
odorants, and liquefied petroleum gas products ("LPGs"), the risks
associated with same, and is familiar with all laws and regulations
regarding the handling and odorization of LPGs. DLMT also represents and
agrees that DLMT or DLMT's Agent(s) have provided, and will henceforth
provide, their customers with such information and warnings as are
necessary and appropriate for proper and safe use and storage of LPGs
odorized with ethyl mercaptan or such other odorant as is selected for
use at the Truck Facility by Dynegy.
Exhibit D Page 3