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EXHIBIT 10.28
GAS GATHERING AGREEMENT
THIS GAS GATHERING AGREEMENT (this "Agreement"), dated December 29,
1999 (the "Effective Date"), is by and between MEGS, L.L.C., a Delaware limited
liability company ("Gatherer"), and MARINER ENERGY, INC., a Delaware corporation
("Mariner") and BURLINGTON RESOURCES OFFSHORE INC., a Delaware corporation
("BROI"), and BURLINGTON RESOURCES TRADING INC., a Delaware corporation
("BRTI"). BROI and BRTI are referred to herein collectively as "Burlington."
Burlington and Mariner are referred to herein individually as a "Shipper" and
collectively as the "Shippers." Gatherer and both Shippers together are
sometimes referred to herein individually as a "Party" and collectively as the
"Parties."
R E C I T A L S :
A. Shippers have certain quantities of Gas and Condensate available
from Mississippi Canyon Blocks 673, 674, 717, and 718, offshore Louisiana.
B. Shippers have requested Gatherer to receive such quantities of Gas
and Condensate on a firm basis at Shippers' subsea production facilities in
Mississippi Canyon Block 674 and redeliver such quantities of Gas and Condensate
to Marathon Oil Company's production platform in South Pass Block 89.
C. Gatherer desires to receive, gather, and deliver, or cause the
delivery of, such Gas and Condensate, for the consideration and on the other
terms and conditions hereinafter set forth.
NOW, THEREFORE, Gatherer and Shippers do hereby agrees as follows:
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ARTICLE 1
DEFINITIONS
1. Defined Terms. As used herein, including the exhibits hereto, the
following terms shall have the meanings defined below:
"Affiliate" means any person that directly Controls, is Controlled by,
or is under common Control with the person or Party in question.
"Aggregate Dollar Commitment" means $33,602,055 less the aggregate
amount of Third Party Gathering Net Proceeds received by Gatherer.
"Annual Excess Payments" means, for each Shipper in any Contract Year,
the amount, if any, by which the aggregate Monthly Payments paid by that Shipper
for each Month in that Contract Year (as reduced by amounts credited against
Monthly Payments by that Shipper under Section 2 of Article 9) exceed the
aggregate Minimum Dollar Commitments for that Shipper for each Month in that
Contract Year. An example calculation of Annual Excess Payments is attached
hereto as Exhibit D.
"British Thermal Unit" or "Btu" means the amount of heat required to
raise the temperature of one (1) pound of water one degree (1 Degrees)
Fahrenheit at sixty degrees (60 Degrees) Fahrenheit.
"Condensate" means the liquid hydrocarbons having an API gravity not
less than twenty degrees (20 Degrees) and not more than sixty degrees
(60 Degrees).
"Contract Year" means each period of 365 consecutive days beginning on
the Effective Date, but any such period which contains a date of February 29
shall consist of 366 days.
"Control" means the ownership, directly or indirectly, of fifty percent
(50%) or more of the outstanding voting securities of an entity or the power or
authority, through the ownership of voting securities, by contract or otherwise,
to direct the management, activities, or policies of the entity.
"Crediting Account" means the account established by Gatherer for each
Shipper as of the date of this Agreement to track, record, and account for
certain amounts under this
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Agreement. The Crediting Account for each Shipper shall be deemed to have a zero
balance as of the Effective Date. The balance in the Crediting Account shall be
(i) increased, as of the last day of each Contract Year, by the amount, if any,
by which aggregate Monthly Payments paid by that Shipper in that Contract Year
exceed the aggregate Monthly Gathering Fees for that Shipper in that Contract
Year and (ii) decreased, as of the last day of each Month, for the portion of
the Monthly Payment for that Shipper satisfied from the Crediting Account that
Month under Section 2 of Article 9.
"Day" means a period of twenty-four (24) consecutive hours, beginning
and ending at 7:00 a.m. Central Prevailing Time ("CPT").
"Dedicated Reserves" means all hydrocarbon reserves owned or controlled
by each Shipper, or their respective permitted successors or assigns, in
Mississippi Canyon Blocks 673, 674, 717, and 718, offshore Louisiana.
"Gas" means methane and other gaseous hydrocarbons including gaseous
combustible, noncombustible, and inert elements, compounds, components or
mixtures thereof and liquefiable hydrocarbons in the vapor stream produced at
the wellhead.
"Gathering Rate" means (i) until the date on which the aggregate amount
of the Monthly Payments that Shippers have paid to Gatherer under Article 9,
Section 1 of this Agreement equals or exceeds the Aggregate Dollar Commitment,
$0.2575 per MMBtu and (ii) thereafter, $0.05 per MMBtu.
"Gathering System" means Gatherer's 85/8-inch pipeline approximately 29
miles long extending from the outlet of subsea production facilities of Shippers
located in Mississippi Canyon Block 674 to the inlet of the meter station
located on Marathon Oil Company's production platform in South Pass Block 89 and
all related and appurtenant facilities all as more particularly described on
Exhibit E attached hereto
"Insurable Event" means any event (a) for which insurance is generally
available, (b) that results in physical damage to the Gathering System to such
an extent that the Gathering System is not capable of receiving, transporting
and delivering Gas from the Point of Receipt to the Point
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of Delivery, and (c) that is not caused by a breach by Operator of its duties
and obligations under the Operating Agreement.
"Minimum Dollar Commitment" means, for each Shipper in each Month, that
Shipper's percentage share of the dollar amount shown in the column "Minimum
Dollar Commitment" in Exhibit A for that Month; except that for each Month after
the Month in which the aggregate of all Monthly Payments that Shippers have paid
to Gatherer reaches the Aggregate Dollar Commitment, the Minimum Dollar
Commitment shall equal zero, regardless of any amount that is otherwise set
forth in Exhibit A.
"Minimum Monthly Payment" means, for each Shipper in each Month, (i)
the Minimum Dollar Commitment for that Shipper in that Month less (ii) the
Annual Excess Payments for that Shipper in the prior Contract Year, if any,
divided by 12.
"Month" means a period beginning at 7:00 a.m. CPT on the first day of
the calendar month and ending at 7:00 a.m. CPT on the first day of the next
succeeding calendar month.
"Monthly Gathering Fee" means, for each Shipper in each Month, the
product of (i) the Gathering Rate for that Month multiplied by (ii) the total
quantity (in MMBtu's) of Gas and Condensate gathered and redelivered for that
Shipper in that Month in the Gathering System.
"Monthly Payment" is defined in Section 1 of Article 9.
"Operating Agreement" means that certain Operations and Maintenance
Agreement, of even date herewith, between MEGS, L.L.C., as Owner, and Operator.
"Operator" means Mariner Energy, Inc. as operator of the Gathering
System and any permitted successor operator of the Gathering System.
"Point of Delivery" means the interconnection between the upstream
flange connecting the Gathering System to Marathon Oil Company's processing and
handling facilities in South Pass Block 89.
"Point of Receipt" means the point of interconnection between the
Gathering System and Shippers' subsea production facilities in Mississippi
Canyon Block 674.
"Project Payout" has the meaning assigned to that term in Section VI of
that certain
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Participation Agreement between Mariner and BROI, dated May 1, 1999.
"Psia" means pounds per square inch absolute.
"Psig" means pounds per square inch gauge.
"Shipper's percentage share" means, for Mariner, 37% before Project
Payout and 51% after Project Payout, and for Burlington, 63% before Project
Payout and 49% after Project Payout.
"Third Party Gathering Net Proceeds" means cash proceeds received by
Gatherer to gather Third Party Gas on the Gathering System, less any costs and
expenses incurred by Gatherer in connection with gathering such Third Party Gas.
2. Rules of Construction. In construing and interpreting this
Agreement, the following rules of construction shall be followed:
(a) words imparting the singular shall include the plural and
vice versa;
(b) a reference in this Agreement to any Article, Section,
clause, or paragraph is, except where it is expressly stated to the
contrary or the context otherwise requires, a reference to such
Article, Section, clause, or paragraph herein;
(c) headings are for convenience of reference only and shall
not be used for purposes of construction or interpretation of this
Agreement;
(d) each reference to any applicable law shall be construed as
a reference to such applicable law as it may have been, or may from
time to time be, amended, replaced, or re-enacted and shall include any
subordinate legislation, rule, or regulation promulgated under any such
applicable law;
(e) the terms "hereof," "herein," "hereto," "hereunder," and
words of similar or like import refer to this entire Agreement and not
any one particular Article, Section, Schedule, or other subdivision of
this Agreement;
(f) any accounting terms used but not expressly defined herein
shall have the meanings given to them under generally accepted
accounting principles of the United States of America as consistently
applied by the person to which they relate;
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(g) the word "including" and its syntactical variants means
"including, but not limited to" and corresponding syntactical variant
expressions;
(h) in computing any period of time prescribed or allowed
under this Agreement, the day of the act, event, or default from which
the designated period of time begins to run shall be included and if
the last day of the period so computed is not a working day in the
place where performance is due, then the period shall run until the
close of business on the immediately succeeding working day; and
(i) this Agreement shall be deemed to be the product of each
Party hereto, and there shall be no presumption that an ambiguity
should be construed in favor of or against Gatherer solely as a result
of such Party's actual or alleged role in the drafting of this
Agreement.
ARTICLE 2
TERM
This Agreement shall become effective on the Effective Date of its
execution and shall remain in force as to each Shipper (i) until the date that
it is no longer economic for that Shipper to produce the Dedicated Reserves of
that Shipper or (ii) until the date on which the aggregate amount of the Monthly
Payments that Shippers have paid to Gatherer under Article 9, Section 1 of this
Agreement equals or exceeds the Aggregate Dollar Commitment, whichever occurs
later.
ARTICLE 3
REGULATION
The operation of the provisions of this Agreement shall be subject to
all applicable statutes and all applicable and lawful orders, rules, and
regulations of regulatory bodies having jurisdiction.
ARTICLE 4
DEDICATION AND GATHERING
1. Dedication. Each Shipper hereby commits and dedicates to the
performance of this Agreement, and covenants to deliver or cause to be
delivered, subject to the terms of this
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Agreement, its Dedicated Reserves for the term of this Agreement.
2. Quantity. Subject to the provisions of this Agreement, Gatherer
shall receive on a firm basis from the Shippers at the Point of Receipt
quantities of Gas from the Dedicated Reserves up to a maximum daily quantity
equal to the lesser of (i) the capacity of the Gathering System on that Day or
(ii) the capacity of the facilities and pipelines receiving and transporting Gas
from and after the Point of Delivery, or such additional quantities as the
Parties may agree to from time to time, and deliver or cause the delivery of
such Gas to or for the account of the Shippers at the Point of Delivery.
3. Allocation of Capacity. Subject to all applicable statues and all
applicable orders, rules and regulations, including the Outer Continental Shelf
Lands Act and any interpretations by a regulatory agency or judicial body having
jurisdiction thereof, capacity on the Gathering System shall be allocated, if
necessary, first to Shippers, and the Dedicated Reserves, and thereafter, in a
manner that Gatherer determines appropriate from time to time on the Gathering
System. If the Gatherer desires from time to time to gather Gas and/or
Condensate, other than the Dedicated Reserves on the Gathering System
(collectively, "Third Party Gas"), Gatherer must either (i) obtain each
Shippers' prior written consent, which shall not be unreasonably withheld, to
gather such Third Party Gas on the Gathering System or (ii) agree to indemnify
each Shipper in writing for all expenses and losses (including lost profits)
incurred by that Shipper as a direct result of Gatherer gathering such Third
Party Gas. Shippers understand and agree that Gatherer shall have no obligation
under this Agreement to gather Third Party Gas.
4. Nominations. Monthly nominations and daily scheduling and balancing
of gas to be gathered hereunder shall be pursuant to Exhibit B attached hereto
and hereby incorporated by reference into and made a part of this Agreement.
ARTICLE 5
CONDENSATE AND LIQUEFIABLE HYDROCARBONS
1. Receipt and Delivery. Subject to the terms of this Agreement,
Gatherer shall
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gather on firm basis the Condensate and liquefiable hydrocarbons associated with
Shipper's Gas gathered hereunder. Gatherer shall receive such Condensate and
liquefiable hydrocarbons at the Point of Receipt and deliver such Condensate and
liquefiable hydrocarbons to or for the account of Shippers at the Point of
Delivery.
2. Metering. Condensate metering shall be provided at the Point of
Delivery by Shippers at no cost to Gatherer.
ARTICLE 6
DELIVERY PRESSURE
1. Point of Receipt. Deliveries of Gas to Gatherer for gathering
hereunder at the Point of Receipt shall be at such pressures as Gatherer may
from time to time require to flow the Gas and Condensate through the Gathering
System generally at the volumes set forth on Exhibit A hereto. In no event shall
Shippers cause Gas to be delivered at the Point of Receipt at a pressure in
excess of the maximum allowable operating pressure of the Gathering System.
Shippers understand and agree that Gatherer shall be under no obligation to
provide compression services under this Agreement.
2. Point of Delivery. Deliveries of Gas by Gatherer for Shipper
hereunder at the Point of Delivery shall be at such pressures as may be
available from time to time in the facilities at the Point of Delivery.
ARTICLE 7
QUALITY
1. All Gas and Condensate delivered at the Point of Receipt by Shippers
under the terms of this Agreement shall conform to the specifications of the
operator of the platform at the Point of Delivery.
2. Refuse Delivery. If any Gas or Condensate offered for delivery
hereunder shall fail at any time to conform to such quality specifications at
the Point of Delivery, then Gatherer shall immediately have the right to refuse
to accept delivery of such Gas and Condensate and
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shall immediately notify Shippers of the specifications violation. Shippers
understand and agree that Gatherer shall be under no obligation to provide any
form of separation, dehydration, or other type of treating service with respect
to the Gas and Condensate being gathered under this Agreement.
ARTICLE 8
MEASUREMENT
1. Meter. Gas received by Gatherer at the Point of Receipt for Shippers
shall be measured at the meter station at the Point of Delivery on Marathon Oil
Company's platform in South Pass Block 89. The delivery of equivalent thermal
quantities of Gas and Condensate by Gatherer at the Point of Delivery for
Shipper shall be based upon the measurement made at such meter station.
2. Procedures. The Gas shall be measured in accordance with the
provisions of Exhibit C attached hereto and hereby incorporated by reference
into and made a part of this Agreement.
ARTICLE 9
GATHERING FEES
1. Monthly Amount. Each Shipper agrees to pay to Gatherer an amount
each Month (the "Monthly Payment") equal to the greater of (i) such Shipper's
Monthly Gathering Fee for that Month or (ii) such Shipper's Minimum Monthly
Payment for that Month.
2. Payment From Crediting Account. Each Shipper shall have the right in
each Month when (i) a positive balance exists in the Crediting Account for that
Shipper as of the first day of that Month and (ii) the Monthly Gathering Fee
exceeds the Minimum Dollar Commitment for that Shipper in that Month, to satisfy
the portion of its Monthly Payment due for that Month that exceeds the Minimum
Dollar Commitment from its Crediting Account by written notice to Gatherer. Such
written notice must be received by Gatherer no later than 10 Days after such
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Shipper's receipt of Gatherer's statement described in Article 10, Section 1.
3. Temporary Suspension Period. During any period when none of
Shippers' Gas can be received and transported on the Gathering System as a
result of an Insurable Event (a "Temporary Suspension Period"), Shippers'
obligations to make Monthly Payments shall be temporarily suspended beginning
with the Month (the "Suspension Commencement Month") following the Month in
which the Temporary Suspension Period began and ending with the Month in which
the Temporary Suspension Period ended. When the Temporary Suspension Period has
ended, Shippers' obligations to make Monthly Payments shall resume in the Month
immediately following the end of the Temporary Suspension Period (the "Payment
Resumption Month"); provided, however, that the Minimum Dollar Commitment for
each Shipper in the Payment Resumption Month shall equal that Shipper's
percentage share of the Minimum Dollar Commitment for the Suspension
Commencement Month and the Minimum Dollar Commitment for each Shipper for each
Month following the Payment Resumption Month shall equal that Shipper's
percentage share of the Minimum Dollar Commitment for the corresponding Month
following the Suspension Commencement Month. By way of example, if the Temporary
Suspension Period begins in July 2000 and ends in March 2001, then the Minimum
Dollar Commitment for each Shipper in April 2001 shall equal that Shipper's
percentage share of the Minimum Dollar Commitment set forth in Exhibit A for
August 2000 and the Minimum Dollar Commitment for each Shipper in May 2001 shall
equal that Shipper's percentage share of the Minimum Dollar Commitment set forth
in Exhibit A for September 2000 and so forth. In all events each Shipper shall
remain obligated to pay such Shipper's percentage share of the Aggregate Dollar
Commitment.
4. No Responsibility. Gatherer shall not be liable by reason of this
Agreement, or the gathering of Gas or Condensate hereunder, for any Gas
gathering, occupation, production, severance, sales, or first use tax or taxes
of similar nature or equivalent in effect which are now or hereafter imposed by
any authority on the Gas gathered pursuant to this Agreement or on the
production thereof.
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5. Tax Reimbursement. Each Shipper shall reimburse Gatherer for that
Shipper's percentage share of any tax (including first use tax) charge,
assessment, or other governmental exaction, including any tax under existing
statutes validly assessed on and paid by Gatherer for, in respect of, or on
account of the taking, gathering, or delivery by Gatherer of the Gas and
Condensate under this Agreement. Such obligation to reimburse shall specifically
not include income, excess profits, capital stock, or franchise taxes.
ARTICLE 10
BILLING
1. Monthly Statement. Gatherer shall deliver to each Shipper its
statement as soon as practicable after the end of each Month for service
rendered hereunder during such Month. If actual quantities are not available to
Gatherer, Gatherer may use estimated quantities for the calculation of all
amounts due by such Shipper hereunder. As soon as actual quantities become
available for a Month, the estimated quantities shall be corrected for that
Month, the amounts due shall be recalculated, and any amounts due by one Party
to another Party shall be shown in the next statement of Gatherer.
2. Payment. Each Shipper shall pay Gatherer for the amounts due each
month by wire transfer, or any other mutually agreed upon method, to Gatherer's
account (account name and number to be specified on the statement) on or before
15 days from the date the statement for such amounts is received by such
Shipper. Each Shipper must tender a timely payment even if the statement
presented by Gatherer includes estimated receipt or delivery quantities. If a
Shipper fails to pay any statement in whole or in part when due, in addition to
any other rights or remedies available to Gatherer, interest shall accrue on
unpaid amounts at a rate equal to the lesser of (i) the prime rate published
from time to time in The Wall Street Journal plus 2% or (ii) the maximum rate
permitted from time to time by applicable law. Such interest shall accrue
beginning on the payment due date of Gatherer's statement and ending when such
statement is paid. Notwithstanding the foregoing, if a legitimate good faith
dispute arises between Gatherer
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and a Shipper concerning a statement, such Shipper shall pay that portion of the
statement not in dispute on or before such due date, and, upon the ultimate
determination of the disputed portion of the statement, such Shipper shall pay
Gatherer the remaining amount owed plus the interest accrued thereon at the rate
shown above.
ARTICLE 11
POSSESSION OF GAS AND CONDENSATE
1. Risk of Loss. As between the Parties, (i) Shipper shall be deemed to
be in control and possession of the Gas and Condensate hereunder prior to
delivery thereof to Gatherer at the Point of Receipt and after redelivery
thereof by Gatherer at the Point of Delivery, and (ii) Gatherer shall be deemed
to be in control and possession of the Gas and Condensate hereunder after
receipt thereof by Gatherer at the Point of Receipt and until redelivery thereof
by Gatherer for Shipper at the Point of Delivery.
2. Indemnity. With respect to the Gas gathered hereunder, the Party in
control and possession of the Gas shall be responsible for and shall indemnify
the other party in respect to any losses, injuries, claims, liabilities or
damages caused thereby and occurring while the Gas is in the possession of the
Party in control. With respect to the Condensate gathered hereunder, each
Shipper shall indemnify and hold harmless Gatherer against any losses, injuries,
claims, liabilities or damages whatsoever occurring in connection with or
relating to the Condensate gathered hereunder. As between MEGS, L.L.C. as Owner
and Mariner as Operator under the Operating Agreement, the foregoing indemnity
obligations of Gatherer under this Section are subject to Mariner's indemnity
obligations as Operator under Section 7.1 of the Operating Agreement.
ARTICLE 12
TITLE AND WARRANTY
Each Shipper hereby warrants that it has good title to all the Gas
delivered by it to
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Gatherer or the right to deliver such Gas to Gatherer hereunder, and that such
Gas shall be free and clear of all liens, encumbrances, and claims whatsoever
(other than liens related to any financing transaction) and agrees to indemnify
Gatherer against all losses, costs, suits, actions, damages, and expenses
incurred by it on account of any such liens, encumbrances, and claims
whatsoever. In no event shall title to the Gas gathered hereunder vest in
Gatherer as a result of the gathering services performed hereunder.
ARTICLE 13
FORCE MAJEURE
1. Excused Performance. No failure or delay in performance, whether in
whole or in part, by either Gatherer or Shippers shall be deemed to be a breach
hereof when such failure or delay is due to a Force Majeure Event.
Notwithstanding the foregoing, the occurrence of a Force Majeure Event shall not
relieve Shippers from their obligations to make Monthly Payments under this
Agreement, except to the extent such Force Majeure Event also constitutes an
Insurable Event and then such payment obligations shall be suspended only during
the Temporary Suspension Period provided for in Section 3 of Article 9.
2. Force Majeure Event Defined. "Force Majeure Event" means any event
not within the control of the affected Party and which, by the exercise of due
diligence, such Party is unable to prevent or overcome, including any act of
God, strike, lockout, or other industrial disturbance, act of the public enemy,
sabotage, war (whether or not an actual declaration is made thereof), blockade,
insurrection, riot, epidemic, landslide, lightning, earthquake, flood, storm,
fire, washout, arrest and restraint of rulers and peoples, civil disturbance,
explosion, the act of any court or governmental authority, or any other such
cause.
3. Remedy of Force Majeure Event. Force Majeure Events shall be
remedied by the affected Party with all reasonable efforts. The settlement of
strike or lockout shall be entirely within the discretion of the affected Party.
4. Notice of Force Majeure Event. A Party affected by a Force Majeure
Event shall
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give notice in writing to the other Parties as soon as possible after the
occurrence of the Force Majeure Event. Such notice shall describe the Force
Majeure Event and give the affected Party's estimate as to its expected duration
and what steps are being taken to overcome the effects thereof.
ARTICLE 14
NOTICES
1. Notice. Any notice, request, demand or statement provided for in
this Agreement, or any notice which a Party may desire to give to the other
Party, shall be in writing and shall be delivered by first class United States
mail, postage prepaid, overnight courier, personal delivery, or facsimile
transfer at the following address:
(a) if to Gatherer:
MEGS, L.L.C.
1400 Smith Street
Houston, Texas 77002
Attention: Vice President - Gas Network Services
Facsimile No.: 713-345-7040
(b) if to Mariner:
Mariner Energy, Inc.
580 WestLake Park Blvd., Suite 1300
Houston, Texas 77079
Attention: Vice President of Marketing
Facsimile No.: 281-584-5678
(c) if to Burlington:
Burlington Resources Trading Inc.
5051 Westheimer, Suite 1400
Houston, Texas 77056
Attention: Manager, Gulf Coast Marketing & Supply
Facsimile No.: 713-624-9606
2. Change of Address. Such notices shall be effective when received by
the Party being notified; provided that with respect to any notice sent by
facsimile, such notice shall be effective when received by the Party being
notified if sent during normal business hours and such notice shall be effective
the first business day after receipt by the Party being notified if sent at any
other time. Either Party may change its address or facsimile number for notice
by giving written notice to the other Party.
3. Routine Notices. Routine dispatching contracts and communications
may be
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handled orally or in writing between the respective designated representatives
of Gatherer and Shipper.
ARTICLE 15
DISPUTE RESOLUTION
Any claim, counterclaim, demand, cause of action, dispute, and
controversy arising out of or relating to this Agreement or the relationship
established by this Agreement, any provision hereof, the alleged breach hereof,
or in any way relating to the subject matter of this Agreement, involving the
Parties and/or their respective representatives (collectively "Claims"), even if
such Claims allegedly are extra-contractual in nature, sound in contract, tort,
or otherwise, or arise under state or federal law, shall be resolved by binding
arbitration. Arbitration shall be conducted in accordance with the rules of
arbitration of the Federal Arbitration Act and, to the extent an issue is not
addressed by the federal law on arbitration, by the commercial arbitration rules
of the American Arbitration Association. The validity, construction, and
interpretation of this Agreement to arbitrate, and all procedural aspects of the
arbitration conducted pursuant hereto shall be decided by the arbitrators. In
deciding the substance of the Parties' Claims, the arbitrators shall refer to
the governing law. The arbitrators shall have no authority to award treble,
exemplary, or punitive damages of any type under any circumstances whether or
not such damages may be available under state or federal law, or under the
Federal Arbitration Act, or under the commercial arbitration rules of the
American Arbitration Association, the Parties hereby waiving their right, if
any, to recover any such damages. The arbitration proceeding shall be conducted
in Houston, Texas. Within thirty days of the notice of initiation of the
arbitration procedure, Gatherer shall select one arbitrator and Shippers shall,
collectively, select one arbitrator. If after a good faith effort to
collectively select one arbitrator the Shippers cannot agree on one arbitrator,
then Burlington shall have the right to select the arbitrator for the Shippers.
The two arbitrators shall select a third arbitrator. The third arbitrator shall
be a person who has over eight years professional experience in the natural Gas
industry and who has not previously been employed by either Party and does not
have a direct or indirect interest in either
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Party or the subject matter of the arbitration. While the third arbitrator shall
be neutral, the two Party-appointed arbitrators are not required to be neutral,
and it shall not be grounds for removal of either of the two party-appointed
arbitrators or for vacating the arbitrators' award that either of such
arbitrators has past or present minimal relationships with the party that
appointed such arbitrator. To the fullest extent permitted by law, any
arbitration proceeding and the arbitrators award shall be maintained in
confidence by the Parties.
ARTICLE 16
OTHER PROVISIONS
1. Modifications. No modifications of the terms and provisions of this
Agreement shall be or become effective except by the execution by both Parties
of a supplementary written agreement.
2. No Waiver. No waiver by either Party of any one or more defaults by
the other Party in performance of any provisions of this Agreement shall operate
or be construed as a waiver of any other then existing default or future
default, whether of a like or different character.
3. Assignment. This Agreement shall not be assigned by Gatherer or
either Shipper without the prior written consent of the other Party, which
consent can be withheld by the nonassigning Party in its sole discretion.
Notwithstanding the foregoing, Gatherer and either Shipper may, without the need
for consent from the other Party (but upon prior written notice to the other
Party), (a) transfer, sell, pledge, encumber, or assign this Agreement or the
accounts, revenues, or proceeds hereof in connection with any financing,
securitization, monetization, receivables sale, factoring or other financial
arrangements, (b) transfer or assign this Agreement to an Affiliate, or (c)
transfer or assign this Agreement to any person or entity succeeding to all or
substantially all of the assets of such Party. In the case of clauses (b) and
(c) any such assignee shall agree in writing to be bound by the terms and
conditions hereof.
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4. Binding Effect. Subject to Section 3 above, this Agreement shall
inure to the benefit of and be binding upon the Parties and their respective
successors and permitted assigns. No assignment or transfer permitted hereunder
shall relieve Shippers or Gatherer of any of their respective obligations under
this Agreement unless agreed to in writing by all of the Parties.
5. Choice of Law. This Agreement shall be governed by the laws of the
State of Texas without giving effect to any principles of conflicts of laws.
6. Entire Agreement. This Agreement constitutes the entire agreement
between the Parties pertaining to the subject matter hereof and supersedes all
prior agreements and understandings, oral or written, which the Parties may have
in connection therewith.
7. No Joint Obligations. The obligations of each Shipper under this
Agreement shall be several and not joint.
[The next page is the signature page]
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IN WITNESS WHEREOF, the Parties have executed this Agreement to be
effective as of the day and year first above written.
Shippers:
MARINER ENERGY, INC.
BY: /s/ Greg K. Harless
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NAME: Greg K. Harless
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TITLE: Vice President - Marketing
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BURLINGTON RESOURCES
OFFSHORE INC.
BY: /s/ Hunter L. Malson
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NAME: Hunter L. Malson
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TITLE: Vice President
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BURLINGTON RESOURCES
TRADING INC.
BY: /s/ Hunter L. Malson
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NAME: Hunter L. Malson
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TITLE: Vice President
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Gatherer:
MEGS, L.L.C.
BY: /s/ Douglas B. Dunn
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NAME: Douglas B. Dunn
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TITLE: Vice President
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EXHIBIT A
PRODUCTION AND GATHERING SCHEDULE
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EXHIBIT B
NOMINATIONS, BALANCING, AND PENALTIES
1. Monthly Nomination Procedure. The Shippers shall cause the operator
of the Dedicated Reserves to submit in writing to Gatherer no later than the
first day of each Month Shippers' best estimate (referred to herein as
"Shippers' Daily Nominated Quality") of their daily requirements for such Month.
Shippers' Daily Nominated Quantity shall be stated in MMBtu's, shall designate
quantities at the Point of Receipt and Point of Delivery, and shall reflect any
imbalance (or Shippers' best estimate of any imbalance), make-up quantities,
scheduled daily variations, the Btu content per cubic foot of Gas, and, if
applicable, any Condensate or liquefiable hydrocarbons delivered to Gatherer.
Unless modified by Shippers as described below, Shippers' Daily Nominated
Quantity shall be effective for each day of the applicable Month. Nominations to
commence service on any day other than the first day of any Month or to modify
Shippers' Daily Nominated Quantity shall be submitted in writing by the operator
of the Dedicated Reserves on behalf of Shippers and received by Gatherer no
later than the business day immediately preceding the day that such service is
requested to commence or that such modification is to be effective.
2. Balancing. The intent of Gatherer and Shippers is that Gas be
received and delivered hereunder at the same rate, and Shippers shall not, in
any manner, use Gatherer's system for storage or peaking purposes. It is
recognized that an exact daily balancing of receipts and deliveries may not be
possible due to the inability of the Parties to control precisely such receipts
and deliveries. However, Gatherer, to the extent practicable, will deliver each
day an equivalent thermal quantity of Gas received by Gatherer that day.
3. Statement. Following the end of each Month Gatherer shall provide to
each Shipper a cumulative imbalance statement showing any imbalances on the
Gathering System. Imbalances shall be corrected insofar as practicable during
the month following the month in
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which they occur. If an imbalance exists upon termination of this Agreement, the
term hereof shall be extended for a period not to exceed an additional sixty
(60) days, during which time the party whose deliveries or redeliveries are in
arrears shall eliminate its deficit and thereby achieve zero balance, unless the
parties mutually agree upon an appropriate alternative method of balancing.
4. Constant Delivery. Gas delivered to Gatherer hereunder during any
day shall be delivered at as nearly a constant rate as operating conditions will
permit.
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EXHIBIT C
MEASUREMENT
1. Unit. The measurement unit of natural Gas received and delivered
hereunder shall be 1,000 cubic feet of Gas measured according to Boyle's Law for
the measurement of Gas under varying pressures with deviations therefrom as
provided below, on the measurement basis hereinafter specified.
2. Volume. The unit of volume for purposes of measurement of Gas
received and delivered hereunder and for the purposes of determination of
equivalent volumes hereunder shall be one (1) cubic foot of natural Gas at a
temperature of 60 degrees Fahrenheit and at a pressure of 14.73 psia.
3. Meters. Orifice meters and appurtenant facilities used in the
measurement of the Gas to be received or delivered shall be provided by Shippers
at Shippers' expense and shall be designed and fabricated in accordance with
specifications of ANSI/API 2530 "Orifice Metering of Natural Gas and Other
Related Hydrocarbon Fuels" and any modification and amendment thereof as agreed
upon by the Parties. Such facilities shall include the use of electronic
measurement and data acquisition equipment, straightening vanes and pulsation
dampening equipment where necessary. Operations of the orifice meters and
appurtenant facilities used in the measurement of Gas to be received or
delivered shall be in accordance with specifications of ANSI/API 2530 and any
modification and amendment thereof as agreed upon by the Parties.
4. Accuracy of Measurement Equipment.
(a) The accuracy of the measuring and testing equipment shall
be verified as frequently as permitted at the Point of Delivery. Tests for
quality of the Gas may be made at the time of testing equipment or at other
times as mutually agreed upon. Notice of the time and nature of each test shall
be given by Gatherer to Shippers sufficiently in advance to permit arrangement
for each Shipper's representative to be present. Tests and adjustments shall be
made in the presence of and observed by representatives of both Gatherer and
Shipper. All tests
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shall be made by Gatherer at Shippers' expense.
(b) If upon test, any measuring equipment, including recording
calorimeters, is found to be in error in the aggregate by not more than 1%,
previous recordings of such equipment shall be considered accurate in computing
deliveries of Gas, but such equipment shall be adjusted at once to record
accurately.
(c) If upon test, any measuring equipment shall be found in
the aggregate to be inaccurate by an amount exceeding 1% at a recording
corresponding to the average hourly rate of flow for the period since the last
preceding test, such equipment shall be adjusted at once to record accurately,
and any previous recordings of such equipment shall be corrected to zero error
for any period which is known definitely, but in case the period is not known or
agreed upon, such correction shall be for a period extending over one-half of
the time elapsed since the date of the last test.
5. Corrections. If a meter is out of service or registering
inaccurately, the quantities of Gas received or delivered during such period
shall be determined as follows:
(a) using the registration of any check meters or meters, if
installed and accurately registering; or in the absence of subsection a,
(b) correcting the error if the percentage of error is
ascertainable by calibration, tests or mathematical calculation or in the
absence of both subsections a and b, then,
(c) estimating the quantity received or delivered by receipts
or deliveries during periods under similar conditions when the meter was
registering accurately.
6. Review of Data. Each Party shall, upon request of the other Party,
mail or deliver for checking and calculation all volume and temperature meter
data in its possession and used in the measurement of Gas received or delivered
hereunder with 30 days after the last chart for each billing period is removed
from the meter. Such charts shall be returned within 30 days after the receipt
thereof.
7. Record Retention. Each Party shall preserve or cause to be preserved
for mutual use all test data, charts, or other similar records for a period of
at least three years unless a
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longer period is required by the applicable rules and regulations of regulatory
bodies having jurisdiction with respect to the retention of such records.
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EXHIBIT D
EXAMPLE CALCULATION
OF ANNUAL EXCESS PAYMENTS
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EXHIBIT E
DESCRIPTION OF GATHERING SYSTEM
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