EXHIBIT 10.8
CARBON DIOXIDE TRANSPORTATION AGREEMENT
BETWEEN
DENBURY RESOURCES INC.
AS "TRANSPORTER"
AND
GENESIS CRUDE OIL, L.P.
AS "SHIPPER"
CARBON DIOXIDE TRANSPORTATION AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS ............................................... 1
1.1 Defined words and terms ...................................... 1
ARTICLE II - SCOPE OF TRANSPORTATION SERVICE .......................... 3
2.1 Transportation of Carbon Dioxide ............................. 3
2.2 Redelivery of Carbon Dioxide ................................. 3
2.3 Non-Exclusive Transportation ................................. 4
2.5 Operation of Transporter's Pipeline .......................... 4
2.6 Transporter's Processing Rights .............................. 4
2.7 Excess Quantities ............................................ 4
2.8 Call Option .................................................. 4
ARTICLE III - RATES AND CHARGES ....................................... 5
3.1 Initial Rate ................................................. 5
3.2 Adjusted Rate ................................................ 5
3.3 Minimum Rate ................................................. 5
3.4 Tax Reimbursement ............................................ 5
ARTICLE IV - TERM; EARLY TERMINATION FOR DEFAULT ...................... 6
4.1 Term ......................................................... 6
4.2 Default ...................................................... 6
4.3 Occurrence of Default ........................................ 6
ARTICLE V - RECEIPT POINTS, DELIVERY POINTS AND PRESSURES ............. 6
5.1 Receipt Points and Delivery Points ........................... 6
5.2 Responsibility ............................................... 7
5.3 Pressure Criteria ............................................ 7
ARTICLE VI - QUANTITY ................................................. 7
6.1 Delivery Rates ............................................... 7
6.2 Cooperation Regarding Deliveries ............................. 8
ARTICLE VII - QUALITY SPECIFICATIONS .................................. 8
7.1 Specification ................................................ 8
7.2 Testing ...................................................... 8
7.3 Failure to Meet .............................................. 8
ARTICLE VIII - OWNERSHIP AND OPERATION OF FACILITIES .................. 9
8.1 Facility Ownership ........................................... 9
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ARTICLE IX - MEASUREMENT .............................................. 9
9.1 Measurement Point ............................................ 9
9.2 Procedure .................................................... 9
9.3 Atmospheric Pressure ......................................... 9
9.4 Meter Standards .............................................. 9
9.5 Temperature .................................................. 9
9.6 Density ...................................................... 9
9.7 Samples ...................................................... 9
ARTICLE X - FORCE MAJEURE ............................................. 10
10.1 Definition ................................................... 10
10.2 Extended Force Majeure ....................................... 10
10.3 Strikes and Lockouts ......................................... 10
ARTICLE XI - NOTICES .................................................. 11
11.1 Transporter Notices .......................................... 11
11.2 Shipper Notices .............................................. 11
11.3 Change of Address ............................................ 11
ARTICLE XII - PAYMENT, AUDIT AND FINANCIAL RESPONSIBILITY ............. 11
12.1 Payment ...................................................... 11
12.2 Auditing ..................................................... 11
12.3 Failure to Pay ............................................... 12
12.4 Financial Responsibility ..................................... 12
ARTICLE XIII - WARRANTY ............................................... 12
13.1 Warranty ..................................................... 12
ARTICLE XIV - GENERAL TERMS AND CONDITIONS ............................ 12
14.1 Waiver of Breach ............................................. 13
14.2 Regulatory Bodies ............................................ 13
14.3 CHOICE OF LAW ................................................ 13
14.4 Joint Preparation ............................................ 13
14.5 Assignment ................................................... 13
14.6 Modification and Entire Agreement ............................ 13
14.7 Headings ..................................................... 13
14.8 Damage Limitation ............................................ 14
14.9 Arbitration .................................................. 14
14.10 Master Agreement; Conflicts .................................. 14
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CARBON DIOXIDE TRANSPORTATION AGREEMENT
THIS CARBON DIOXIDE TRANSPORTATION AGREEMENT (this "Agreement"), made and
entered into effective as of September 1, 2003, by and between DENBURY RESOURCES
INC., a Delaware corporation, hereinafter referred to as "Transporter", and
GENESIS CRUDE OIL, L.P., a Delaware limited partnership, hereinafter referred to
as "Shipper".
WITNESSETH:
WHEREAS, Shipper owns an interest in and/or has the right to market or
otherwise control the disposition of Carbon Dioxide produced from certain wells
located in the Jackson Dome area in Rankin County, Mississippi; and,
WHEREAS, Transporter owns and operates a gathering system connected to a
mainline pipeline extending approximately one hundred eighty-three miles from a
point at the outlet flange of a Carbon Dioxide dehydration facility located in
Rankin County near Jackson, Mississippi, to a point in White Castle, Ascension
Parish, Louisiana, which currently is capable of delivering Carbon Dioxide to
the various delivery points; and,
WHEREAS, Transporter currently has available pipeline capacity for the
transportation of Carbon Dioxide for Shipper; and,
WHEREAS, Shipper desires to arrange for the transportation of Carbon
Dioxide through Transporter's pipeline and Transporter desires to receive from,
transport and redeliver to Shipper Carbon Dioxide in accordance with the terms
and conditions stated in this Agreement.
NOW, THEREFORE, for and in consideration of the mutual benefits to be
derived, the terms and conditions contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Transporter and Shipper hereby agree with each other as follows:
ARTICLE I
DEFINITIONS
1.1 Defined words and terms. Except where the context otherwise indicates
another or different meaning or intent, the following words and terms as used
herein shall have the meanings indicated:
(a) The term "Airgas Contract" has the meaning set out in the Master
Agreement.
(b) The term "Bankruptcy Event" means, with respect to either party,
the entry of a decree or order by a court of competent jurisdiction
adjudging the party a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the party under
the Federal Bankruptcy Code or any other applicable law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the party or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance
of any such decree or order unstayed and in effect for a period of sixty
(60) consecutive days; or the consent by such party to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or similar relief
under the Federal Bankruptcy Code or any other applicable law, or the
consent by it to the filing of any such petition or to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the party or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due and its willingness to be adjudicated a bankrupt.
(c) The terms "Carbon Dioxide" and "CO(2)" each mean a substance
primarily composed of molecules containing one atom of carbon and two
atoms of oxygen and containing at least 95 percent by volume of such
molecules.
(d) The term "Contract Year" means a period of three hundred
sixty-five (365) consecutive days beginning on the first day of a full
month following the month in which deliveries commence under this
Agreement or on any anniversary thereof; provided, however, that any such
year which contains a date of February 29th shall consist of three hundred
sixty-six (366) consecutive days. This definition of Contract Year
contemplates the possibility of first deliveries occurring on a day other
than the first day of a month.
(e) The term "cubic foot" is the amount of Carbon Dioxide necessary
to fill one cubic foot of space at a base pressure of 15.025 psia and at a
base temperature of 60 degrees Fahrenheit.
(f) The term "Daily Maximum Quantity" has the meaning set out in the
Master Agreement.
(g) The term "day" means a period beginning at 7:00 a.m. (local
time) on a calendar day and ending at 7:00 a.m. (local time) on the next
succeeding calendar day. The date of a day shall be that of its beginning.
(h) The term "Delivery Points" has the meaning stated in Section
2.2.
(i) The term "Industrial Sale Contracts" has the meaning set out in
the Master Agreement.
(j) The term "Jackson Dome Plant" means the Jackson Dome Processing
Plant owned by Denbury located in Brandon, Rankin County, Mississippi.
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(k) The term "Master Agreement" means that certain Production
Payment Purchase and Sale Agreement executed contemporaneously herewith by
Transporter and Shipper.
(l) The term "Master Documents" means the Master Agreement and all
agreements executed in connection therewith or pursuant thereto, including
but not limited to this Agreement.
(m) The term "MCF" means 1,000 cubic feet of Carbon Dioxide.
(n) The term "MMCF" means 1,000,000 cubic feet of Carbon Dioxide.
(o) The term "month" means a period beginning on the first day of a
calendar month and ending at the beginning of the first day of the next
succeeding calendar month.
(p) The term "pound-mass" means the mass quantity of Carbon Dioxide
equivalent to a pound-mass as defined by the United States National Bureau
of Standards.
(q) The term "Production Payment" has the meaning set out in the
Master Agreement.
(r) The term "psia" means pounds per square inch absolute.
(s) The term "psig" means pounds per square inch gauge.
(t) The term "Receipt Points" has the meaning stated in Section 2.1.
(u) The term "Transportation Fee" has the meaning stated in Article
III.
(v) The term "Transporter's Pipeline" means Transporter's existing
gathering system and pipeline used for the gathering, dehydration and
transportation of Carbon Dioxide from wells owned or controlled by
Transporter in Rankin County, Mississippi, which gathering system extends
from various wellheads owned or controlled by Transporter to a point at
the outlet flange of a Carbon Dioxide dehydration facility located in
Rankin County, Mississippi, and which pipeline extends from that point to
a point in Ascension Parish, Louisiana.
ARTICLE II
SCOPE OF TRANSPORTATION SERVICE
2.1 Transportation of Carbon Dioxide. Subject to all of the terms,
conditions, and limitations of this Agreement, each day during the term hereof
Shipper shall have the right to tender to Transporter at the Receipt Points set
forth in Exhibit A (the "Receipt Points") for transportation hereunder any
volume of Carbon Dioxide up to the Daily Maximum Quantity.
2.2 Redelivery of Carbon Dioxide. Subject to all of the terms, conditions,
and limitations of this Agreement, each day during the term hereof Transporter
shall redeliver to
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Shipper, at the Delivery Points set forth in Exhibit B (the "Delivery Points"),
the volume of Carbon Dioxide delivered by Shipper to Transporter at the Receipt
Points on such day, as such volumes may be adjusted for Shipper's proportionate
share of reductions due to Carbon Dioxide lost and unaccounted for in
Transporter's Pipeline and any other loss or shrinkage factor generally
applicable from time to time to Transporter's Pipeline.
2.3 Non-Exclusive Transportation. Subject to the qualification as to
priority set out in Section 2.4, nothing in this Agreement shall be construed to
prohibit Transporter from transporting Carbon Dioxide for a person or persons
other than Shipper. Nothing in this Agreement shall be construed to require
Shipper to tender any minimum quantity of Carbon Dioxide to Transporter for
transportation hereunder.
2.4 INTENTIONALLY DELETED.
2.5 Operation of Transporter's Pipeline. Except as otherwise provided in
Section 2.8, Transporter will at all times maintain, preserve and keep all
improvements, machinery, equipment, pipe lines, tanks, fixtures and other
personal property and equipment of every kind and nature now or hereafter
required in connection with operation of Transporter's Pipeline in good repair,
working order and condition, and promptly make all necessary and proper repairs,
renewals, replacements and substitutions. Subject to the forgoing and its other
obligations hereunder, Transporter may, at its sole discretion, at any time and
from time to time, expand, extend, repair, reconfigure or temporarily shutdown
Transporter's Pipeline and related equipment. In exercising the foregoing
rights, Transporter shall have no liability to Shipper hereunder and shall use
all reasonable efforts to minimize any adverse impact on Shipper's rights
hereunder.
2.6 Transporter's Processing Rights. Transporter reserves the right, prior
to delivery to Shipper at the Delivery Points set forth herein, at the sole cost
of Transporter, to process and/or treat Carbon Dioxide received from Shipper
hereunder for any purpose; provided, however, subject to Section 7.3, Carbon
Dioxide delivered to the Delivery Points shall meet the quality specifications
of Article VII hereof.
2.7 Excess Quantities. Shipper may, on any day and upon prior notice to
Transporter, tender at the Receipt Point volumes of Carbon Dioxide in excess of
the Daily Maximum Quantity, in which event Transporter may, in its sole
judgment, transport all or any portion of such excess volumes on a fully
interruptible basis. However, the transportation of any excess volumes by
Transporter shall otherwise be subject to all of the terms and provisions
hereof.
2.8 Call Option. In the event a Triggering Event (as hereinafter defined)
occurs, Transporter shall have the right and option to either (i) repair,
replace, restore and reconstruct Transporter's Pipeline in substantially the
form in which the same existed prior to any such Triggering Event or (ii)
exercise (or cause the exercise of) the Call Option provided for in Section 2.4
of the Master Agreement. Transporter shall notify Shipper in writing of its
election of one of the options set forth above within thirty (30) days from the
date of the Triggering Event. If Transporter elects the option set out in clause
(i) above, then Transporter shall commence the restoration work within thirty
(30) days from the date of the Triggering Event and
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diligently prosecute and complete the restoration work within a reasonable time,
in no event exceeding twelve (12) months from the date of the Triggering Event.
If Transporter elects the option set forth in clause (ii) above, the Call Option
set forth in Section 2.4 of the Master Agreement shall be exercised in
accordance with the terms thereof. If Transporter fails to notify Shipper of its
election of either clause (i) or (ii) above within thirty (30) days from the
date of the Triggering Event, Transporter shall, as of such date, be deemed to
have delivered notice to Shipper electing to exercise the option set forth in
clause (i) above. For purposes hereof, a "Triggering Event" means (a) the entire
or partial destruction or damage of Transporter's Pipeline by fire or any other
casualty whatsoever; or (b) a mechanic failure or other breakdown of
Transporter's Pipeline, which in either case actually renders Transporter's
Pipeline inoperable for a minimum period of ninety-five (95) consecutive days.
ARTICLE III
RATES AND CHARGES
3.1 Initial Rate. For the transportation and dehydration of each MCF of
Shipper's Carbon Dioxide received at the Receipt Points during any month,
beginning with the date of first deliveries hereunder and continuing through the
end of the first Contract Year, Shipper shall pay Transporter a transportation
fee (the "Transportation Fee"), which fee shall initially be $0.16 (the "initial
rate").
3.2 Adjusted Rate. Effective on the first day of each Contract Year after
the first Contract Year, the Transportation Fee shall be adjusted, upward or
downward. Computations to determine such adjustments shall be made utilizing
$0.16/Mcf as the base rate. The adjustment shall be based upon the change in the
annual average of the Producers Price Index, "PPI," All Commodities, 1982 = 100,
as published by the United States Department of Labor, Bureau of Labor
Statistics. To determine the adjusted rate for each subsequent Contract Year,
the following formula shall be used:
Adjusted rate = Base rate x (0.10 + 0.90 x PPI current/PPI base) or
the initial rate, whichever is greater.
Thus, by way of illustration, should the average PPI for the year
2002 be 125, and the average PPI for the year 2003 be 130, the
adjusted price for the subsequent Contract Year, 2004, commencing on
the anniversary of the Contract Year, would be computed as follows:
$0.16 x (0.10 + 0.90 x 130/125) = $0.16576
3.3 Minimum Rate. Notwithstanding the foregoing, the Transportation Fee,
as adjusted herein, shall never be less than $0.16 per MCF.
3.4 Tax Reimbursement. In addition to the Transportation Fee provided for
above, Shipper shall reimburse Transporter for all taxes which are levied upon
and/or paid by Transporter with respect to the services performed under this
Agreement, but only if and to the extent that Shipper has the right to receive
reimbursement for such taxes from Shipper's customers under the terms of
Shipper's resale contracts with its customers.
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ARTICLE IV
TERM; EARLY TERMINATION FOR DEFAULT
4.1 Term. Subject to the other provisions hereof, this Agreement shall be
effective from the date hereof and shall continue in force and effect until the
Production Payment is fully discharged.
4.2 Default. The occurrence of one or more of the following matters shall
constitute a default by a party:
(a) the occurrence of a Bankruptcy Event involving such party;
(b) the failure of such party to make any payment to the other party
as and when due hereunder where such failure continues for thirty (30)
days after the delivery of written notice by the other party of such
failure to make such payment; and,
(c) the breach by such party of any other material covenant,
agreement, obligation, duty or provision of this Agreement, where such
breach continues for thirty (30) days after its receipt of written notice
thereof from the other party; provided, however, that if the matter which
is the subject of the breach cannot by its nature with due diligence be
remedied by such within said thirty (30) day period, and such party shall
have prepared a plan for remedying such failure that is reasonably
acceptable to the other party and such party is proceeding with diligence
to implement such plan, such thirty (30) day period shall be extended by
such additional time period as may be reasonably required to implement
such plan, and, provided further, however, that the remedying of such
potential default shall not affect the right of the other party to
terminate this Agreement if other defaults occur before such potential
default has been remedied.
4.3 Occurrence of Default. Upon the occurrence of a default by a party,
the other party may exercise any right or remedy it may have at law and/or in
equity; provided that Transporter shall not be entitled to terminate this
Agreement. If pursuant to an arbitration proceeding conducted in accordance with
Section 14.9, it is determined that as a result of a Shipper default Transporter
has suffered a specified amount of damages, the arbitrators may provided as a
remedy to Transporter that Transporter may sell a portion of Shipper's carbon
dioxide necessary to generate sufficient proceeds to reimburse Transporter for
such damages.
ARTICLE V
RECEIPT POINTS, DELIVERY POINTS AND PRESSURES
5.1 Receipt Points and Delivery Points. The Receipt Points are set forth
on Exhibit A. The Delivery Points are set forth on Exhibit B. Shipper may
request at any time and from time to time that Transporter agree to one or more
additional Receipt Points or Delivery Points on Transporter's Pipeline.
Transporter shall not unreasonably withhold its agreement to the addition of any
additional Receipt Point or Delivery Point requested by Shipper as long as
Shipper reimburses Transporter for all incremental costs incurred or to be
incurred by
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Transporter as a result of the addition of such Receipt Point or Delivery Point
and, with respect to requested Receipt Points only, so long as Transporter owns
or controls the well or wells to be producing into the requested Receipt Point.
If Transporter's estimated incremental cost to establish an additional Receipt
Point or Delivery Point requested by Shipper exceeds $25,000, then Transporter
shall be entitled to require that Shipper pay Transporter such estimated
incremental cost before agreeing to add such additional Receipt Point or
Delivery Point, with a "true-up" payment being made by the appropriate party to
the other party when the final, actual incremental costs of such additional
Receipt Point or Delivery Point are known. Upon the addition of any Receipt
Point or Delivery Point, the parties shall execute an amendment of this
Agreement which shall reflect all of the Receipt Points or Delivery Points on a
revised Exhibit A or Exhibit B, as appropriate. The exact point at which
delivery by Transporter to Shipper shall be deemed to be made shall be the
flange or weld connecting the facilities of Transporter's Pipeline with the
facilities of Shipper or Shipper's designee.
5.2 Responsibility. As between the parties hereto, and subject to the
limitations set forth in other provisions of this Agreement, Transporter shall
be responsible for any injuries, losses, expenses, claims, liabilities, or
damages caused by the Carbon Dioxide while it is in Transporter's Pipeline until
it shall have been delivered to Shipper or Shipper's designee at the Delivery
Points, and, after such delivery, Shipper shall be responsible for any injuries,
losses, expenses, claims, liabilities, or damages caused thereby. Subject to the
limitations set forth in other provisions of this Agreement, each party (the
"Indemnifying Party") shall indemnify the other party in respect of any
injuries, losses, expenses, claims, liabilities, or damages occurring while the
Carbon Dioxide is in possession of the Indemnifying Party. Transporter shall not
take title to Shipper's Carbon Dioxide in Transporter's Pipeline merely by
receipt of such Carbon Dioxide for Shipper's account
5.3 Pressure Criteria. All Carbon Dioxide tendered by Shipper at any
Receipt Point shall be delivered at pressures sufficient to enter Transporter's
Pipeline at the working pressures maintained by Transporter at such Receipt
Point from time to time. Transporter shall deliver the volumes of Carbon Dioxide
as provided for hereunder at the Delivery Points at pressures ranging from 1100
to 1400 psig. Notwithstanding the foregoing, Transporter reserves the right at
any time and from time to time, to revise the maximum and/or the minimum
pressures set forth above on ten (10) days' prior notice to Shipper to the
extent the implementation of any such revision is prudent in light of the
operating conditions on the Transporter's Pipeline.
ARTICLE VI
QUANTITY
6.1 Delivery Rates. Transporter and Shipper shall endeavor to deliver and
to accept, respectively, Carbon Dioxide in as reasonable constant rates as is
practicable. Transporter and Shipper understand and agree that the amount of
Carbon Dioxide delivered hereunder from time to time may not exactly equate with
the volume of Carbon Dioxide requested for delivery hereunder since variations
may occur due to the inherent fluctuations in normal pipeline operations. Upon
request from Shipper, Transporter may deliver Carbon Dioxide on any day in
excess of the Daily Maximum Quantity, but Transporter shall not be obligated to
do so.
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6.2 Cooperation Regarding Deliveries. Shipper or Shipper's agent shall
notify Transporter monthly, in advance, of Shipper's estimated daily
requirements at each of the Receipt Points and the Delivery Points for the next
succeeding month and Transporter shall deliver such requirements, up to the
Daily Maximum Quantity, out of the volumes received by Transporter at the
Receipt Points for Shipper's account. Transporter and to the extent it will not
result in a default under a Industrial Sale Contract, Shipper agree to fully
cooperate with each other in adjusting monthly and daily deliveries hereunder.
Shipper or Shipper's agent shall give twenty-four (24) hours' prior notice of
any additional changes in its daily requirements as may be necessary from time
to time and, on receipt of such notice by Shipper, Transporter shall undertake
as soon as practicable to conform its deliveries to Shipper's revised daily
requirements (up to the Daily Maximum Quantity) and shall notify Shipper as soon
as practicable if Transporter is unable to do so. In the event of an emergency
which poses danger to life or property, no prior notice shall be necessary
before partial or total shutdown by either party, but notice of such shutdown
and the reason therefor shall be given as soon as practicable thereafter. If a
shutdown becomes necessary for either party on a non-emergency basis, such party
shall give at least twenty-four (24) hours' prior notice to the other party.
ARTICLE VII
QUALITY SPECIFICATIONS
7.1 Specification. The Carbon Dioxide delivered by Transporter to Shipper
at the Delivery Points shall meet the following specifications (collectively the
"Quality Specification"):
(a) Water. The Carbon Dioxide shall not contain any free water and
the water vapor content shall not exceed thirty (30) pounds per MMcf.
(b) Hydrogen sulfide and sulfur. The Carbon Dioxide shall not
contain more than 10 parts by weight of hydrogen sulphide nor more than 35
parts by weight of total sulfur per 1,000,000 parts of Carbon Dioxide.
(c) CO(2) Volume. The Carbon Dioxide shall be 95% pure (dry basis).
7.2 Testing. Transporter shall ensure that tests to determine the quality
of Carbon Dioxide are conducted as often as necessary in Transporter's sole
opinion, utilizing approved standard methods in general use. Transporter may
furnish Shipper with copies of all test results. Transporter shall give Shipper
reasonable notice of all such tests in order that Shipper or Shipper's agent may
have its representative present, if Shipper so desires.
7.3 Disclaimer. THE PARTIES HERETO RECOGNIZE AND AGREE THAT TRANSPORTER IS
NOT A MERCHANT OF FOOD GRADE OR MERCHANTABLE CARBON DIOXIDE FOR USE IN FOOD OR
DRINK OR OTHER CONSUMABLES AND TRANSPORTER IN NO WAY WARRANTS THE
MERCHANTABILITY OR FITNESS OF ANY CARBON DIOXIDE DELIVERED OR TO BE DELIVERED
HEREUNDER FOR ANY PARTICULAR PURPOSE.
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ARTICLE VIII
OWNERSHIP AND OPERATION OF FACILITIES
8.1 Facility Ownership. Transporter will own, operate and maintain the
Transporter's Pipeline, and the pipelines and measurement facilities, including
any additional equipment installed by or at the request of Shipper, at each
Receipt Point and at each Delivery Point. Transporter will maintain Carbon
Dioxide custody to the upstream flange of Shipper's valve on the outlet side of
Transporter's measurement facilities at each Delivery Point. Transporter shall
be solely responsible for the delivery of Carbon Dioxide to the inlet side of
Shipper's tap valve at each Delivery Point. All piping downstream from the
Delivery Points shall be the responsibility of Shipper.
ARTICLE IX
MEASUREMENT
9.1 Measurement Point. The Carbon Dioxide delivered hereunder shall be
measured for custody transfer at the Delivery Points in accordance with the
standards set out in this Article.
9.2 Procedure. Custody transfer measurement of Carbon Dioxide shall be
determined from pound-mass quantities, which will be converted to standard cubic
feet quantities. The molecular weight of the metered stream of Carbon Dioxide,
calculated from the compositional analyses, shall be the basis for conversion of
pound-mass measurement units to standard cubic feet measurement units.
9.3 Atmospheric Pressure. The atmospheric pressure at the Delivery Point
shall be based upon 14.73 psia at sea level, corrected to actual elevation, and
may be assumed to be constant for calculation purposes.
9.4 Meter Standards. The Carbon Dioxide delivered hereunder shall be
measured with orifice meters constructed and installed in accordance with the
October, 1981, compilation of standards in the American Petroleum Institute,
Manual of Petroleum Standards, Chapter 14, with any subsequent amendments,
revisions and additions which may be mutually acceptable to Transporter and
Shipper. Computations of pound mass shall also be made in accordance with said
manual.
9.5 Temperature. The temperature of the Carbon Dioxide shall be determined
by an on-line temperature measuring device so installed that it will sense the
temperature of the Carbon Dioxide flowing through the meter.
9.6 Density. The density of the Carbon Dioxide shall be determined by an
on-line density meter referenced to weight in a vacuum, or by calculation
utilizing the pressure, temperature and composition of the Carbon Dioxide
flowing through the meter.
9.7 Samples. A composite sample of Transporter's Pipeline Carbon Dioxide
stream shall be accumulated during each month and analyzed for its composition
by gas chromatograph or other methods agreed to by Transporter and Shipper, at
Transporter's expense.
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ARTICLE X
FORCE MAJEURE
10.1 Definition. If, while this Agreement is in effect, either party is
rendered unable, wholly or in part, by Force Majeure to carry out its
obligations (except financial obligations) under this Agreement, it is agreed
that, on such party's giving notice and reasonably full particulars of such
Force Majeure in writing to the other party within ten (10) business days after
the occurrence of the Force Majeure relied on, then the obligations of the party
giving such notice, so far 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 possible be remedied with all reasonable
dispatch. The term "Force Majeure", as used herein, shall mean acts of God,
strikes, lockouts or other industrial disturbances, acts of the public enemy,
wars, terrorism, blockades, insurrections, riots, epidemics, landslides,
lightning, earthquakes, fires, storms, floods, high water, washouts, arrests and
restraints of government and people, civil disturbances, explosions, breakage or
accident to machinery or lines of pipe, freezing of wells or lines of pipe,
partial or entire failure of wells, and any other causes, whether of the kind
herein enumerated or otherwise, not reasonably within the control of the party
claiming Force Majeure. Without limiting the generality of the foregoing, the
term "Force Majeure" shall likewise include (a) in those instances where either
party hereto is required to obtain servitudes, rights-of-way grants, permits or
licenses to enable such party to perform hereunder, the inability of such party
to acquire, or the 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 (b) in those instances where
either party hereto is required to furnish materials and supplies for the
purpose of constructing or maintaining facilities or is required to secure
permits or permissions from any governmental agency to enable such party to
perform hereunder, the inability of such party to acquire, or the delays on the
part of such party in acquiring, at reasonable cost and after the exercise of
reasonable diligence, such materials and supplies, permits and permissions. An
occurrence of Force Majeure affecting Transporter's supply sources or processing
facilities or gathering system or Transporter's Pipeline shall be deemed to be
an occurrence of Force Majeure affecting Transporter hereunder.
10.2 Extended Force Majeure. If, after deliveries have commenced
hereunder, an event of Force Majeure significantly affects the amount of Carbon
Dioxide Transporter is capable of delivering for a consecutive period of 180
days, then, at any time after such period and prior to the time such event has
been remedied, Shipper may cancel this Agreement.
10.3 Strikes and Lockouts. 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 any opposing party when
such course is inadvisable in the discretion of the party having the difficulty.
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ARTICLE XI
NOTICES
11.1 Transporter Notices. All notices provided for herein shall be in
writing and shall be deemed to be delivered to Transporter when deposited in the
United States mail to the following address:
DENBURY RESOURCES INC.
Attn: Linda A. Miller
5100 Tennyson Parkway
Suite 3000
Plano, Texas 75024
11.2 Shipper Notices. All notices provided for herein shall be in writing
and shall be deemed to be delivered to Shipper when deposited in the United
States mail to the following address:
GENESIS CRUDE OIL, L.P.
Attn: Mark J. Gorman
500 Dallas St. Suite 2500
Houston, Texas 77002
11.3 Change of Address. Either party may change its address described in
this Article by sending written notice to the other party in accordance with the
provisions of this Article.
ARTICLE XII
PAYMENT, AUDIT AND FINANCIAL RESPONSIBILITY
12.1 Payment. Transporter shall furnish Shipper a monthly statement
showing (i) the total quantity of Carbon Dioxide received hereunder during the
preceding month at each Receipt Point, (ii) the total quantity of Carbon Dioxide
delivered hereunder during the preceding month at each Delivery Point, and (iii)
the incremental costs incurred by Transporter to add any additional Delivery
Points requested by Shipper. Shipper shall make payment by wire transfer to such
address as Transporter may designate from time to time on or before the later to
occur of (x) the tenth day following the day that Transporter's monthly
statement was delivered or (y) the twentieth day of the month following the
month that Carbon Dioxide was delivered, such wire transfer being for all
amounts payable hereunder.
12.2 Auditing. Each party shall have the right at reasonable business
hours to examine the books, records, and measurement documents of the other
party to the extent necessary to verify the accuracy of any statement, payment,
calculation, or determination made pursuant to the provisions of this Agreement
for any Contract Year within two (2) Contract Years following the end of such
Contract Year. If any such examination shall reveal, or if either party shall
discover, any error or inaccuracy in its own or the other party's statement,
payment, calculation, or determination, then proper adjustment and correction
thereof shall be made as promptly as practicable thereafter, except that no
adjustment or correction shall be made for an error or
11
inaccuracy if more than two (2) Contract Years have elapsed since the end of the
Contract Year in which such error or inaccuracy occurred.
12.3 Failure to Pay. If Shipper fails to pay any amount payable to
Transporter hereunder when due, interest thereon shall accrue and be payable at
the lesser of (i) the highest legally permissible rate or (ii) the prime lending
rate, plus an additional five percent (5%), established by the Chase Manhattan
Bank, N.A., New York, from the date when payment was due until the date payment
is made. If such failure to pay any amount continues for thirty (30) days or
more after the due date of such amount for any reason, then (a) Transporter may
suspend its deliveries of Carbon Dioxide hereunder, (b) Transporter shall have
the right to make direct deliveries in satisfaction of the delivery requirements
in the Industrial Sale Contracts, and (c) such matter shall be resolved in
accordance with the arbitration provisions described in Section 14.9.
12.4 Financial Responsibility. Notwithstanding anything to the contrary in
this Agreement, should Transporter reasonably believe it necessary to assure
payment for transportation of Carbon Dioxide being delivered or to be delivered
hereunder, Transporter may at any time, require (i) advance cash payment; (ii) a
standby irrevocable letter of credit at Shipper's expense in a form and from a
bank acceptable to Transporter, in Transporter's sole opinion; or (iii) other
security of a type and form and amount which may be deemed reasonably
satisfactory to Transporter. In the event banking or credit information
requested by Transporter has not been furnished within a reasonable time in
Transporter's sole opinion, Transporter shall have the right, with five (5)
days' prior notice, to withhold and/or suspend deliveries hereunder, in addition
to any and all other remedies available hereunder; provided that Transporter
shall not have the right to terminate this Agreement.
ARTICLE XIII
WARRANTY
13.1 Warranty. Each party warrants, for itself, its successors, heirs,
legal representatives and assigns, to the other party that at the time such
party delivers Carbon Dioxide to the other party, such party will have good
title to or the good right to deliver such Carbon Dioxide, and that such Carbon
Dioxide shall be free and clear from liens, encumbrances and claims of every
kind. Each party shall indemnify and save the other party harmless from all
suits, claims, liens, damages, costs, losses, expenses and encumbrances of
whatsoever nature arising from and out of claims of any or all persons to said
Carbon Dioxide, or title thereto, or to royalties, taxes, license fees, payments
or other charges thereon applicable before the delivery of the Carbon Dioxide by
such party to the other party.
ARTICLE XIV
GENERAL TERMS AND CONDITIONS
14.1 Waiver of Breach. The waiver by any party of any breach of the
provisions of this Agreement shall not constitute a continuing waiver of other
breaches of the same or other provisions of this Agreement.
12
14.2 Regulatory Bodies. This Agreement, all operations contemplated
hereunder and all terms and provisions contained herein, and the respective
obligations of the parties are subject to applicable federal and state laws and
the applicable orders, rules, and regulations of any state or federal regulatory
authority having appropriate jurisdiction. However, nothing contained herein
shall be construed as a waiver of any right of any party to question or contest
any such law, order, rule, or regulation in any forum having or alleging to have
jurisdiction. Shipper and Transporter each agree to comply with all applicable
laws and regulations governing the operations and transactions involved in this
Agreement, including, but not limited to, applicable regulations governing
safety, pollution, and pipeline and other operations. Transporter and Shipper
understand that Shipper's ability to deliver Carbon Dioxide hereunder is subject
to existing and future governmental regulations affecting Transporter's
Pipeline.
14.3 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MISSISSIPPI, EXCLUDING ITS CONFLICTS OF
LAW PROVISIONS.
14.4 Joint Preparation. This Agreement was prepared by all parties hereto
and not by any party to the exclusion of one or the other.
14.5 Assignment. The interests of the parties in this Agreement, and
Transporter's interest in the Transporter's Pipeline, may not be subsequently
assigned, either in whole or in part, unless (i) any such assignee expressly
agrees in writing to assume and perform all of the assignor's obligations under
this Agreement, and (ii) such assignment is made and accepted expressly subject
and subordinate to this Agreement. Further, any subsequent assignment, either in
whole or in part, to an entity that is not as financially creditworthy at the
time of the assignment as the assignor shall require the consent of the other
party hereto, which consent may not be unreasonably withheld or delayed. Subject
to the compliance with the terms of clauses (i) and (ii) above, either party may
encumber or pledge their respective interests in connection with a financing
without the consent of the other party. Any purported assignment, sale,
conveyance or other transfer in contravention of the foregoing terms shall be
null and void. Subject to the foregoing, this Agreement binds and inures to the
benefit of the parties and their respective permitted successors and assigns,
and nothing contained in this Agreement, express or implied, is intended to
confer upon any other person or entity any benefits, rights, or remedies.
14.6 Modification and Entire Agreement. No amendment or other modification
of the terms or provisions of this Agreement shall be made except by the
execution of written agreements by both parties, and any attempted modification
or amendment not in compliance with the terms of this sentence shall be void ab
initio. This Agreement and the other Master Documents contain the entire
agreement between the parties with respect to the subject matter hereof, and
supersede and terminate all prior negotiations, representations or agreements,
whether written or oral, by and between the parties with respect to such subject
matter
14.7 Headings. The Table of Contents and headings contained in this
Agreement are used solely for convenience and do not constitute a part of the
agreement between the parties hereto, and they should not be used to aid in any
manner in construing this Agreement.
13
14.8 Damage Limitation. Neither party shall be liable to the other for any
special, indirect, consequential or punitive damages of any nature.
14.9 Arbitration. In the event of a dispute between the parties as to any
matter arising under this Agreement, such dispute shall be resolved in
accordance with the dispute resolution provisions identified in Article XIV of
the Master Agreement.
14.10 Master Agreement; Conflicts. This Agreement is delivered pursuant to
and as a part of the transactions under the Master Agreement and is made
expressly subject thereto. In the event of any express conflict between the
terms and provisions of this Agreement and the terms and provisions of the
Master Agreement, the terms and provisions of this Agreement shall control. The
inclusion in the Master Agreement of provisions not addressed in this Agreement
shall not be deemed a conflict, and all such additional provisions contained in
the Master Agreement (including but not limited to Section 15.1 thereof) shall
be given full force and effect.
14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed in multiple originals by their proper officers thereunto duly
authorized, as of the date first hereinabove written.
TRANSPORTER
DENBURY RESOURCES INC.
By: /s/ Phil Rykhoek
-----------------------------
Phil Rykhoek
Senior Vice President and
Chief Financial Officer
SHIPPER
GENESIS CRUDE OIL, L.P.
By: /s/ Mark J. Gorman
-----------------------------
Mark J. Gorman
President
15
EXHIBIT "A"
TO
CARBON DIOXIDE TRANSPORTATION AGREEMENT BETWEEN
DENBURY RESOURCES INC. AND
GENESIS CRUDE OIL, L.P.
DATED EFFECTIVE AS OF SEPTEMBER 1, 2003
RECEIPT POINT LOCATIONS AND DAILY MAXIMUM QUANTITY
Daily Maximum Quantity: The Daily Maximum Quantity shall be the amount specified
for such term in the Master Agreement.
Daily Maximum Quantity at this Receipt
Receipt Point Description Point (if applicable)
- ------------------------- --------------------------------------
1. AirGas 22,500 Mcf/d
217 Andrew Jackson Circle
Star, Mississippi 39167
2. Praxair 8,750 Mcf/d
214 Carbonic Dr.
Brandon, Mississippi 39042
3. BOC 17,500 Mcf/d
159 Andrew Chapel Rd.
Brandon, Mississippi 39042
EXHIBIT "B"
TO
CARBON DIOXIDE TRANSPORTATION AGREEMENT BETWEEN
DENBURY RESOURCES INC. AND
GENESIS CRUDE OIL, L.P.
DATED EFFECTIVE AS OF SEPTEMBER 1, 2003
DELIVERY POINT LOCATIONS
Daily Maximum Quantity at this Delivery
Delivery Point Description Point (if applicable)
- -------------------------- ---------------------------------------
Wells and wellhead meter numbers:
McKay #2 FQI 300
McKay #1 (not flowing) FQI 301
Hauburg #4 FQI 302
Hauburg #3 FQI 303
Hauburg #1 FQI 304
Hauburg #2 FQI 305
Hauburg #6 FQI 306
Hauburg #5 FQI 307
Cruthirds #1 FQI 309
Denkmann FQI 310
International Paper (IP) FQI 311
Barksdale FQI 312