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ITEM 14(a)3, EXHIBIT 10(x)
AGREEMENT FOR THE SALE AND PURCHASE
OF
STATE ROYALTY OIL
to
TESORO ALASKA PETROLEUM COMPANY
THE STATE OF ALASKA
Department of Natural Resources
Dated as of September 27, 1994
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS ...................................................................... 1
1.1 Commissioner ......................................................... 1
1.2 Daily Royalty Oil .................................................... 1
1.3 Day .................................................................. 1
1.4 Effective Date ....................................................... 1
1.5 Field Cost Agreement ................................................. 1
1.6 Leases ............................................................... 1
1.7 Lessee ............................................................... 2
1.8 Month ................................................................ 2
1.9 Oil .................................................................. 2
1.10 Point of Delivery .................................................... 2
1.11 Royalty Oil .......................................................... 2
1.12 Royalty Settlement Agreements ........................................ 2
1.13 Royalty Value ........................................................ 2
1.14 TAPS ................................................................. 2
1.15 Unit Agreement ....................................................... 3
ARTICLE II
SALE OF ROYALTY OIL .............................................................. 3
2.1 Quantity ............................................................. 3
2.2 Quality .............................................................. 4
2.3 Price of the Royalty Oil ............................................. 5
2.4 Purchase Price Reopener .............................................. 5
2.5 No Third-Party Intervention .......................................... 6
2.6 Point and Time of Delivery ........................................... 6
2.7 Passage of Title and Risk of Loss .................................... 7
2.8 Tesoro's Responsibility .............................................. 7
2.9 Transportation Arrangements .......................................... 7
2.10 Absolute Obligations ................................................. 8
2.11 Date of First Delivery ............................................... 8
2.12 Performance Guaranty and Reservation Fee ............................. 8
2.13 In-State Processing .................................................. 8
ARTICLE III
REPRESENTATION AND OBLIGATIONS OF TESORO ......................................... 9
3.1 Good Standing and Due Authorization ................................... 9
3.2 Financial Condition ................................................... 10
3.3 Financial Statements .................................................. 10
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ARTICLE IV
MEASUREMENTS AND TESTS ............................................................ 11
ARTICLE V
PAYMENTS AND ACCOUNTING ........................................................... 11
5.1 Initial Billing ........................................................ 11
5.2 Initial Adjustment ..................................................... 12
5.3 Subsequent Adjustments ................................................. 12
5.4 Payment ................................................................ 12
5.5 Interest ............................................................... 13
5.6 Late Payment Penalty ................................................... 15
5.7 Payment to Lessee ...................................................... 15
5.8 Payment to Third Parties ............................................... 15
ARTICLE VI
TERM .............................................................................. 16
ARTICLE VII
DEFAULT OR TERMINATION ............................................................ 16
7.1 Default ................................................................ 16
7.2 Failure to Pay Debts ................................................... 18
7.3 State's Remedies ....................................................... 18
7.4 Tesoro's Exclusive Remedies ............................................ 19
ARTICLE VIII
DISPOSITION OF OIL ................................................................ 20
8.1 Disposition of Oil Upon Default or Termination ......................... 20
8.2 Inability to Receive Oil ............................................... 20
8.3 No Right to Storage or Underlift ....................................... 21
ARTICLE IX
WAIVER ............................................................................ 21
ARTICLE X
VALIDITY .......................................................................... 21
ARTICLE XI
FORCE MAJEURE AND CHANGE IN CONDITION ............................................. 22
11.1 Effect of Force Majeure ................................................ 22
11.2 Responsibility ......................................................... 22
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ARTICLE XII
NOTICES ........................................................................... 23
12.1 Method ................................................................. 23
12.2 Change of Address ...................................................... 23
ARTICLE XIII
RULES AND REGULATIONS ............................................................. 24
ARTICLE XIV
SOVEREIGN POWER OF THE STATE ...................................................... 24
ARTICLE XV
SECURITY .......................................................................... 24
ARTICLE XVI
PREFERENTIAL HIRING AND NON-DISCRIMINATION ........................................ 26
ARTICLE XVII
APPLICABLE LAW .................................................................... 27
17.1 Alaska Law ............................................................. 27
17.2 Submission to Jurisdiction ............................................. 27
ARTICLE XVIII
WARRANTIES ........................................................................ 27
ARTICLE XIX
AMENDMENT ......................................................................... 27
ARTICLE XX
SUCCESSORS AND ASSIGNS ............................................................ 28
ARTICLE XXI
HEADINGS .......................................................................... 28
ARTICLE XXII
RECORDS ........................................................................... 28
22.1 Preservation of Records ................................................ 28
22.2 Inspection of Records of Parties ....................................... 29
ARTICLE XXIII
INTERPRETATION OF TERMS AND CONDITIONS ............................................ 29
ARTICLE XXIV
COUNTERPARTS ...................................................................... 30
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SIGNATURES ............................................................................. 30
ACKNOWLEDGEMENT ........................................................................ 31
EXHIBT A ............................................................................... 33
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AGREEMENT FOR THE SALE AND
PURCHASE OF ROYALTY OIL
THIS AGREEMENT is effective as of September 27, 1994 by and between the
State of Alaska (State) and Tesoro Alaska Petroleum Company (Tesoro), a Delaware
corporation with its principal offices located at 3230 C Street, Anchorage,
Alaska 99503.
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
1.1 "Commissioner" means the Commissioner of the Alaska Department of
Natural Resources or his designee.
1.2 "Daily Royalty Oil" means the quantity of Royalty Oil produced by the
Lessees from the Prudhoe Bay Unit Area in a Day except as provided in Section
2.1(b).
1.3 "Day" means a period of twenty-four (24) consecutive hours,
beginning at 12:01 a.m., Alaska Standard Time.
1.4 "Effective Date" shall have the meaning set out in Article VI.
1.5 "Field Cost Agreement" means the Prudhoe Bay Royalty Settlement
Agreement effective April 1, 1980.
1.6 "Leases" means the Oil and Gas leases which are subject to the
terms of the Prudhoe Bay Unit Agreement.
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1.7 "Lessee" means any person owning a working interest in any
of the Leases.
1.8 "Month" means the period beginning at 12:01 a.m., Alaska
Standard Time, on the first Day of the calendar Month and ending at the same
time on the first Day of the next succeeding calendar Month.
1.9 "Oil" shall have the same meaning as the word "oil" under the
Leases and the Unit Agreement, except where inconsistent with Sections 2.1(b)
and 2.2 of this Agreement, in which case Sections 2.1(b) and 2.2 shall
control. For purposes of this Agreement, "Oil" shall also include natural gas
liquids ("NGLs").
1.10 "Point of Delivery" shall have the meaning set out in Section
2.6.
1.11 "Royalty Oil" means the Oil which the State may take in-kind (in
amount) as its royalty under the Leases whether or not the State has elected to
take or is taking that royalty in-kind except as provided in Section 2.1(b).
1.12 "Royalty Settlement Agreements" means the written royalty
settlement agreements between the State and BP Exploration (Alaska) Inc. ("BP")
dated December 31, 1991; the State and Atlantic Richfield Company and ARCO
Alaska, Inc., ("ARCO") dated September 12, 1990; and the State and Exxon
Corporation ("Exxon") dated December 31, 1991.
1.13 "Royalty Value" means the royalty value of all liquid
hydrocarbons from the Prudhoe Bay Unit calculated in accordance with the
Royalty Settlement Agreements for West Coast placements as explained in Section
2.3.
1.14 "TAPS" means the Trans Alaska Pipeline System.
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1.15 "Unit Agreement" means the Prudhoe Bay Unit Agreement effective
April 1, 1977, by and between the Lessees and the State, as amended from time to
time.
ARTICLE II
SALE OF ROYALTY OIL
2.1 Quantity.
2.1(a) Prudhoe Bay Unit Quantity. The State agrees to sell to
Tesoro and Tesoro agrees to buy from the State that amount of Oil equal to
27.2% of the Daily Royalty Oil (Maximum Quantity).
Subject to the limitations below, Tesoro may at any time decrease or
increase the amount of Oil to be tendered but not the Maximum Quantity provided
above. To increase or decrease the amount of Oil to be tendered, Tesoro must
give the State at least six Months and ten Days written notice. If, however,
the increase or decrease is less than ten percent of Tesoro's then current
in-kind nomination, Tesoro must give at least one hundred Days written notice.
In addition, the new tendering will take effect on the first Day of the Month
after the applicable notice period expires.
It is understood and agreed that the volume of Daily Royalty Oil
available to the State will vary and may be interrupted from time to time, and
depends upon a variety of factors, including the rate of production from the
Leases. The State disclaims and Tesoro waives any representation, covenant or
warranty, expressed or implied, as to the specific quantity or the total or
daily, monthly, average, or aggregate volume of Royalty Oil to be sold or
tendered under this Agreement. The State warrants that it has good title to the
Oil tendered under this Agreement.
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If the State underlifts or stores Royalty Oil at the Prudhoe Bay Unit, or if
the State recovers underlifted or stored Royalty Oil, the quantity of Oil
tendered under this Agreement shall be calculated as if no Royalty Oil was
underlifted or stored or recovered.
2.1(b) Initial Participating Areas Quantity. It is understood and
agreed that the State may choose, in its sole discretion, to sell Tesoro, and
Tesoro agrees to buy from the state, oil that is produced solely from the
Initial Participating Area of the Prudhoe Bay Unit rather than from al1
participating areas and Leases within the Prudhoe Bay Unit Agreement. If the
State so elects, the Maximum Quantity of Oil shall equal 30.5% of the Royalty
Oil produced from the Initial Participating Areas in a Day. If the State so
elects, the Terms Daily Royalty Oil, Oil, and Royalty Oil shall have the same
meaning set forth in Article I as limited in this section.
2.2 Quality. The Oil sold shall be the same quality as the Royalty
Oil delivered by the Lessees to the State at the Point of Delivery from the
Prudhoe Bay Unit Area. It is understood and agreed that the quality of the Oil
sold may vary from time to time. The State disclaims, and Tesoro waives, any
guarantee, representation, or warranty, either expressed or implied, of
merchantability, fitness for use, or suitability for any particular use or
purpose, or otherwise, of any of the Oil delivered under this Agreement or as
to any specific, average, or overall quantity or characteristic of Oil to be
sold or tendered under this Agreement. Tesoro expressly waives any claim that
any liquid hydrocarbons made available to the State by the Lessees, including
such substances as crude oil, condensate, natural gas liquids, or return oil
from the Prudhoe Bay Unit Crude Oil Topping Plant, that may be blended with
crude by the Lessees before the Point of Delivery and tendered as a common
stream by the Lessees to the State as Royalty Oil are not Oil, for purposes of
this Agreement.
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2.3 Price of the Royalty Oil. The price each Month for Oil purchased
under this Agreement shall be the average Royalty Value (weighted by
production volume) for that Month of Oil delivered to the West Coast by ARCO,
BP, and Exxon from the Prudhoe Bay Unit production for which the Royalty Value
is determined by the Royalty Settlement Agreements. For ARCO, the Royalty Value
shall be determined according to the Royalty Value Formula stated in Section
III.A. of its Royalty Settlement Agreement without any field costs or
processing fees deduction. For Exxon, the Royalty Value shall be determined
according to the Royalty Value calculation stated in Section 3.1 c) of its
Royalty Settlement Agreement, except that the Average Valdez Netback shall be
the West Coast Valdez Netback. For BP, the Royalty Value shall be determined
according to the Royalty Value stated in Section 3.2 c) of its Royalty
Settlement Agreement, except that the Average Valdez Netback shall be the West
Coast Valdez Netback. Exhibit A is an illustrative calculation of the Monthly
Price.
If any applicable law of the United States of America or any rule or
regulation promulgated by a federal agency will, in the judgment of the State,
operate to prohibit or prevent the State from receiving the full amount due
under the above provision, Tesoro's obligation to pay the amount of the
purchase price in excess of the amount permitted will be suspended or adjusted
to the minimum extent required for the State to comply with that law, rule or
regulation.
2.4 Purchase Price Reopener. Neither the State nor Tesoro shall have
the right to reopen this Agreement. Further, due to potential unpredictable
increased costs to Tesoro posed by any changes to Article III of the BP or
Exxon Royalty. Settlement Agreements or Paragraph III.A. of the ARCO Royalty
Settlement Agreement and/or any changes made under the Reopener procedures of
Article IV of the BP or Exxon Royalty Settlement Agreements or
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Paragraph III.B. of the ARCO Royalty Settlement, the State shall give Tesoro
notice of such changes or a Notice of Reopener initiated by either BP, Exxon,
ARCO, or the State. Such notice shall include information on the nature of such
changes and/or the Reopener, the requested effective date of any such changes
or proposed changes, and the position taken by BP, Exxon, or ARCO and the
State. Any changes and/or Reopener action under the Royalty Settlement
Agreements will give Tesoro the right to terminate this contract upon six
Months and ten Days written notice to the State.
2.5 No Third-Party Intervention. Tesoro shall not intervene or
otherwise participate in any way regarding litigation, styled ANS Royalty
Litigation, Case No. 1-JU-77-847, any future royalty settlement agreements with
the Lessees, or reopeners or other discussions under or pertaining to royalty
settlement agreements. Any judgment resulting from the ANS Royalty Litigation,
any future royalty settlement agreements, or any reopener under any of the
Royalty Settlement Agreements shall be conclusively binding upon Tesoro whether
or not Tesoro agrees with or consents to the terms of any such judgment,
settlement, or reopener. Furthermore, Tesoro has no independent right to invoke
any of the provisions of the Royalty Settlement Agreements. If the Royalty
Value is modified in the future as a result of a modification of any of the
Royalty Settlement Agreements, a corresponding retroactive modification will be
made to the price term of this Agreement and interest will apply to the
modification, whether resulting in an overpayment or underpayment, as set forth
in Section 5.6. Tesoro agrees to be conclusively bound by any such modification
agreed to by the State and BP, Exxon, or ARCO.
2.6 Point and Time of Delivery. Simultaneously with receipt of its
Royalty Oil from its Lessees, the State shall tender the Oil to Tesoro where
the State receives the Royalty
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Oil from its Lessees. That point presently agreed to by the State and its
Lessees in Article 2.3 of the Field Cost Agreement is the TAPS Pump Station No.
1 Prudhoe Bay Custody Transfer meter ("Transfer Meter").
2.7 Passage of Title and Risk of Loss. Title and risk of loss to the
Oil sold under this Agreement shall pass from the State to Tesoro for all
purposes when the State tenders the Oil at the Point of Delivery.
2.8 Tesoro's Responsibility. Tesoro shall be responsible for the Oil
after passage of title. Tesoro will indemnify and hold the State harmless from
and against any and all claims, costs, damages (including reasonably
foreseeable consequential damages), expenses, or causes of action arising from
or in connection with any transaction or event which relates to the Oil after
title has passed to Tesoro.
2.9 Transportation Arrangements. Tesoro shall make all
necessary arrangements for transporting the Oil sold under this Agreement from
the Point of Delivery, including satisfaction of line fill obligations and
storage tank bottom requirements of the TAPS, if any. If requested by the
State, Tesoro shall submit specific information concerning its arrangement for
transportation of the Oil sold under this Agreement through and away from the
TAPS and for the resale or other disposal of the Oil. Such information may
include the specific tenders of Oil made to the TAPS and identification of
tankers, if any, which will transport the Oil. In addition, Tesoro will
provide the State, if requested by the State, with satisfactory evidence or
reasonable assurance of the existence and continuing validity of adequate
arrangements for the transportation or disposal of the Oil subject to this
Agreement. Failure to
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provide information, evidence, or assurances requested will, at the State's
election by notice to Tesoro, be a material default under this Agreement.
2.10 Absolute Obligations. The obligations of Tesoro to accept, pay
for, and arrange for the transportation of the Oil tendered or sold under this
Agreement are absolute and will not be excused or discharged by the operation
of any disability of Tesoro, event of force majeure, impracticability or
performance, change in conditions, or any other reason or cause.
2.11 Date of First Delivery. The date of First Delivery will be the
first Day of January 1, 1995.
2.12 Performance Guaranty and Reservation Fee. If, at any time,
Tesoro does not take the Maximum Quantity, Tesoro shall pay to the State, in
addition to the purchase price on the actual quantity taken, an amount equal to
.75% of the purchase price per barrel per Day on the difference between the
Maximum Quantity and the actual quantity tendered to and accepted by Tesoro for
each Day Tesoro does not take the Maximum Quantity.
2.13 In-State Processing. Tesoro agrees to use best efforts to insure
that any and all of the Royalty Oil tendered under this Agreement will be
processed through Tesoro's refinery near Nikiski, Alaska, or will be exchanged
for other crude oil which shall be processed at that refinery. "Process" means
the manufacture of refined petroleum products. In no event, however, shall the
quantity of Royalty Oil, which must be processed, be less than 80% of the
volume of Royalty Oil tendered under this Agreement. "Exchange" means: (1)
direct trades of equal volumes of crude oil; (2) trades of crude oil involving
either cash or volume adjustments, or both, provided that those adjustments
relate solely to quality or location differences; (3) sequential transactions
in which Tesoro receives back crude oil from a party other than the party which
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receives the Royalty Oil in a trade from Tesoro; or (4) matching purchases and
sales of crude oil. The terms under which Tesoro receives crude oil in any
exchange shall not differ in any significant term from the terms under which
Tesoro delivered Royalty Oil except for terms which adjust for differences in
quality and location. Tesoro agrees that any trade or exchange shall not reduce
the price to be paid to the State and that trades or exchanges shall be at
no cost or expense to the State.
Tesoro's obligation to process Royalty Oil or exchanged oil in-State
may only be suspended or excused under the provisions of Articles VIII and XI.
The State may, at its option, waive the in-State processing
requirement in whole or in part, if State is satisfied that Tesoro is using its
best efforts to process the Royalty Oil tendered or the oil exchanged for
Royalty Oil tendered under this Agreement at Tesoro's Alaska refinery and that
the waiver would not be contrary to the underlying intent of the other
provisions of this Agreement.
ARTICLE IV
REPRESENTATION AND OBLIGATIONS OF TESORO
Tesoro warrants, represents, and agrees:
3.1 Good Standing and Due Authorization. Tesoro is, and at all times
during the operation of this Agreement shall remain, a corporation organized
and existing under and by virtue of the laws of the United States or of any
State, territory or the District of Columbia, and qualified to do business in,
and in good standing with, the State of Alaska. Tesoro has all necessary
corporate power to enter into this Agreement and to perform the covenants and
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obligation under this Agreement. All necessary corporate action has been taken
to authorize Tesoro to enter into this Agreement and perform its covenants and
obligations under this Agreement.
3.2 Financial Condition. The financial information submitted to the
State is complete and correct and fairly presents Tesoro's financial condition
when the information was submitted to the State. The financial information was
prepared in accordance with generally accepted accounting principles
consistently applied. Since the date the information was submitted, the
condition, business, and properties of Tesoro have not been materially
adversely affected in any way. Tesoro agrees to inform the State immediately if
there is any material adverse change in its condition, business, or properties
which may have an appreciable adverse effect on its ability to perform under
this Agreement. Tesoro, in addition, will immediately inform the State of any
significant change in ownership of Tesoro, affiliates, parent company, and of
any change in Tesoro's operations or Agreements, which may appreciably affect
Tesoro's performance under this Agreement.
3.3 Financial Statements. As soon as possible after the end of the
fiscal year of Tesoro, and in any event within one hundred twenty Days
thereafter, Tesoro will furnish to the State, at Tesoro's sole cost and
expense, a report or a complete copy of a report in a form to be prescribed
from time to time by the State which will include Tesoro's balance sheet as of
the close of the fiscal year and the income statement for that year, prepared
in each case in accordance with generally accepted accounting principles
consistently applied by certified public accountants of recognized standing.
For purposes of complying with this article, Tesoro may submit, and the State
will accept, the annual report of its parent, Tesoro Petroleum Corporation,
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filed with the United States Securities and Exchange Commission pursuant to
Sec. 13 or 15 (d) of the Security Exchange Act of 1934.
ARTICLE IV
MEASUREMENTS AND TESTS
The quantity and quality of Oil sold under this Agreement shall be
determined at the Point of Delivery. Procedures and methods for measuring and
metering the Oil sold under this Ageement shall be in accordance with the
practices then in effect in the Prudhoe Bay Unit.
ARTICLE V
PAYMENTS AND ACCOUNTING
5.1 Initial Billing. The State will send to Tesoro, on or before
the tenth business Day of each Month after delivery of Oil, an invoice
statement of account of all Oil estimated to have been measured at the Transfer
Meter and tendered to Tesoro under this Agreement during the immediately
preceding Month according to the best information available to the State, the
estimated purchase prices applicable to those deliveries, and the total amount
due (Initial Billing Invoice). The estimates will be made by the State
according to the best information reasonably available to the State. The State
may render its Initial Billing Invoice to Tesoro based in part upon information
reported by the Lessees to the State, information published by the U.S.
Government, and information published in Platt's Oilgram Price Report or any
other publicly available report. The State shall thereafter adjust its Initial
Billing Invoice under this
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Article as soon as more accurate information concerning the quantity and
purchase price of Oil delivered each month is available. The State, however,
shall not be required to adjust the Initial Billing Invoice before the sending
of the next Month's invoice statement of account.
5.2 Initial Adjustment. After the Initial Billing Invoice under
Section 5.1, the next Monthly invoice will also state the State's initial
adjustments, plus interest, to be made, if any, to the Initial Billing Invoice
rendered in the immediately preceding Month, in accordance with any additional
or more accurate information which may have become available to the State
("Initial Adjustment Invoice"). Whether or not initial adjustments are made,
however, subsequent adjustments may be made under Section 5.5.
5.3 Subsequent Adjustments. Tesoro acknowledges that after the
Initial Billing and Initial Adjustment Invoices, more accurate information
concerning the quantity of or purchase price for Royalty Oil tendered may
become available to the State. If any such information should later become
available to the State, it shall furnish a corrected invoice statement of
account to Tesoro ("Subsequent Adjustment Invoice") and the State will adjust
the amount previously billed; and Tesoro will pay, or the State will credit or
Refund, the amount of any Subsequent Adjustment Invoice plus interest. If the
state should render a Subsequent Adjustment Invoice to Tesoro, any amount to be
credited or refunded from the State to Tesoro or paid by Tesoro to the State
will be refunded or paid within thirty Days after the date of the Subsequent
Adjustment Invoice. The parties recognize that subsequent adjustments may be
necessary after December 31, 1995, and, accordingly, the provisions of Article
V will survive any termination of this Agreement.
5.4 Payment. Tesoro will make payment on the Initial Billing Invoice
and the Initial Adjustment Invoice within ten Days of the date of the
respective invoice and on any
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Subsequent Adjustment Invoice within 30 days of the date of the invoice.
Payment shall be made without any deduction, set off, or withholding, by wire
transfer of immediately available funds to the State's account at the following
address:
State Street Bank & Trust Company
Boston, Massachusetts
ABA #011000028
For credit to the State of Alaska
General Investment Fund, AYO1
Account #00657189
Attn: Kim Chan, Public Funds
Payment may be made in such other manner or to such other address as
the State may specify in the invoice statement of account or by other written
notice. All other payments to be made under this Agreement shall be paid in the
same manner. If payment is due on a Saturday, Sunday, or legal holiday of the
place where payment is to be received, payment shall be made on the next
following business Day. It is recognized that the State may bill, and that
Tesoro will pay, amounts that are based upon confidential information held or
received by the State. If confidential information is used as the basis for a
billing, then the State will furnish Tesoro, upon its request, with the
certified statement of the Commissioner that the amounts billed are correct
based upon the best information available to the State. If a dispute concerning
a bill arises, Tesoro agrees to pay the full amount billed by the State, except
for obvious clerical mistakes, pending final resolution of the dispute.
5.5 Interest. The Amount of all sums, which are not paid when due
under this Agreement or which are later determined to be due as an adjustment,
shall bear interest from the date accrued until paid in full at the rate as
provided in AS 38.05.135(d) or as that statutory provision may later be
amended. Currently, that interest rate in a calendar quarter is at the rate
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of five percentage points above the annual rate charged member banks for
advances by the 12th Federal Reserve District as of the first Day of that
calendar quarter, or at the annual rate of 11 percent, whichever is greater,
compounded quarterly as of the last Day of that quarter. The term "date
accrued" means the date of the "Initial Billing plus ten Days." Interest shall
apply to both adjustments for overpayments and underpayments.
The following illustrates from what date interest will run:
January 1 -- 31, 1995 -- Tesoro takes 1995 January production;
February 10, 1995 -- State sends Tesoro the Initial Billing Invoice
for 1995 January production;
February 20, 1995 (initial Billing plus ten Days) -- Tesoro must pay
the Initial Billing Invoice for January 1995 production. If it
does not pay on this day, the Initial Billing Invoice bears
interest from this date plus a late payment penalty;
March 10, 1995 -- State sends Tesoro the Initial Adjustment Invoice
for January 1995 production; Tesoro owes the State an
additional sum;
March 20, 1995 -- Tesoro must pay the Initial Adjustment Invoice plus
interest from February 20, 1995.
January 11, 1996 -- State sends Tesoro a Subsequent Adjustment
Invoice for January 1995 production; Tesoro is entitled to a
credit;
February 11, 1996 -- State must credit or refund the amount of the
Subsequent Adjustment Invoice plus interest from February 20,
1995.
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April 15, 2000 -- State sends Tesoro another Subsequent Adjustment
Invoice for January 1995 production; Tesoro owes the State an
additional sum;
May 15, 2000 -- Tesoro must pay the Subsequent Adjustment Invoice for
January 1995 production plus interest from February 20, 1995.
If Tesoro does not pay the Subsequent Adjustment Invoice on
this date, it must also pay a late payment penalty.
5.6 Late Payment Penalty. If Tesoro fails to make a full payment
within ten Days of the date of either an Initial Billing Invoice or Initial
Adjustment Invoice, or within thirty Days of the date of any Subsequent
Adjustment Invoice, then in addition to the amount due plus interest from the
date accrued until the date of actual payment, Tesoro will pay an amount equal
to five percent of the principal payment due as a late payment penalty.
5.7 Payment to Lessee. At the request of the State in the invoice
statement of account or otherwise in writing, Tesoro shall pay all or any
portion designated by the State of that payment required to be made to one or
more of the Lessees at an address or addresses and in the manner designated by
the State. The payment will be made within the time limit specified in Section
5.3. The State may authorize and designate a third party to make the request
and designate the amount, manner and place of payment under this provision.
Unless otherwise specified, the balance of the payment due, if any, and payment
for subsequent Months, shall be made in accordance with Section 5.3.
5.8 Payment to Third Parties. The State may direct that Tesoro pay
any amount due or which may become due directly to a third party in a manner
and time as may be
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directed by the State in written notice to Tesoro if, in the State's sole
discretion, the payment to the third party will assist the State in
monitoring or enforcing this Agreement.
ARTICLE VI
TERM
This Agreement shall become effective upon execution by the parties.
The State's obligation to sell and Tesoro's obligation to buy Royalty Oil
becomes effective immediately, Deliveries under this Agreement shall begin on
January 1, 1995, and shall end December 31, 1995. The provisions of Article V
shall survive the termination of this Agreement.
ARTICLE VII
DEFAULT OR TERMINATION
7.1 Default. If any one or more of the following events ("Events of
Default") occur, then the State, at the its sole option, may terminate or
suspend its obligation to tender and sell Oil and exercise any one or more of
the rights and remedies provided in this Agreement:
(i) At any time, Tesoro (a) repudiates any of its covenants or
obligations under this Agreement, or (b) fails, within five Days,
after written request from the State to provide the State with
written affirmation of this Agreement and of Tesoro's intention
to perform under this Agreement (together with evidence or
assurances of transportation arrangement pursuant to Section 2.9
reasonably satisfactory to the State);
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(ii) Tesoro does not pay in full any sum owed under this Agreement
at the time when payment is due;
(iii) Tesoro fails to observe or perform any of its other covenants
and obligations under Article II;
(iv) Tesoro does not perform any act required or contemplated under
this Agreement and: (a) the non-performance cannot be
cured; (b) the nonperformance continues for more than thirty
Days after the State has notified Tesoro of its
nonperformance; or (c) Tesoro has failed to perform the same
or any other act required or contemplated under this Agreement;
(v) There is a material adverse change in Tesoro's condition,
business, or property which may appreciably affect its
ability to perform any of its obligations under this Agreement
and Tesoro is unable or unwilling to give the State adequate
assurance of continued performance either within five Days of
a request for such an assurance or within such other shorter
time period as the State may request under the circumstances;
(vi) Any representation or warranty made by Tesoro in this
Agreement was materially false or incorrect when made; or
(vii) Tesoro's failure or inability for any reason (including
reasons beyond Tesoro's control) to maintain the Security
described in Article XV, notwithstanding Tesoro's continuing
willingness and
17
23
ability to perform its other obligations and covenants under
the Agreement.
7.2 Failure to Pay Debts. If Tesoro becomes unable to pay any of
its debts when due, or should otherwise become insolvent (regardless how that
insolvency may be evidenced), Tesoro will immediately give notice of that fact
to the State. Whether that notice is given, if Tesoro becomes unable to pay any
of its debts when due or should otherwise become insolvent, the State's
obligation to tender and sell Oil will automatically and immediately terminate
without any requirement of notice or other action by the State; however, Tesoro
will nevertheless be and remain liable for payment and performance of all of
its obligations and covenants under this Agreement regarding Oil actually
tendered by the State to and after any such termination. Within thirty Days
after receipt of Tesoro's notice or, if no notice is given, after the State
otherwise becomes aware (as determined in the State's sole discretion) of
Tesoro's insolvency, the State will have the right, upon written notice to
Tesoro, to reinstate all of the State's and Tesoro's obligations under this
Agreement retroactively to the date of termination.
7.3 State's Remedies. If any Event of Default occurs or if the
State's obligation to tender and sell Oil under this Agreement is terminated or
suspended, all of Tesoro's obligations accrued but not otherwise due and
payable under this Agreement will immediately be due and payable in full. In
addition, Tesoro will indemnify and hold the State harmless from and against
all other liability, damages (including reasonably foreseeable consequential
damages), costs, losses and expenses (including reasonable attorney's fees and
disbursements) incurred by the State and arising out of the Event of Default,
termination, or suspension. The State shall have the right cumulatively to
exercise any and all other rights and remedies and to obtain all
18
24
other relief available under applicable law or at equity, including mandatory
injunction and specific performance.
Additionally, in its sole discretion, the State, upon occurrence of
any Event of Default: (1) may dispose to third parties Royalty Oil to be
tendered and sold under this Agreement and (2) may release Tesoro from the
in-state processing obligations set forth in Article 2.13 until the Event of
Default no longer exists or the obligation of Tesoro to take Oil under this
Agreement expires. If the State disposes Oil to third parties, or if Tesoro is
released from Article 2.13, whether or not this Agreement is terminated, Tesoro
will nevertheless remain liable for the difference between the purchase price
for that Oil under this Agreement and the price received by the State by
disposition, including al1 of the expenses (including reasonable attorneys'
fees and costs), and losses incurred by the State arising out of the Event of
Default or disposition.
7.4 Tesoro's Exclusive Remedies. Upon any breach of, or default in
performance of any of the State's covenants or obligations under this
Agreement, Tesoro agrees that its remedies will not include a temporary
restraining order or preliminary injunction preventing the State from taking
any action regarding the Royalty Oil which is the subject of this Agreement.
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25
ARTICLE VIII
DISPOSITION OF OIL
8.1 Disposition of Oil Upon Default or Termination. Tesoro
recognizes that the State may be required to give six Months notice under the
BP Royalty Settlement Agreement (or ninety Days if the amount of increase or
decrease is less than ten percent of the then current nominations) to increase
or decrease the amount of Daily Royalty Oil to be taken in-kind. Tesoro agrees
that the State's electing to invoke its rights to return to taking its Royalty
Oil in-value on less than six Month's prior notice, or to attempt to secure a
waiver of any condition or requirement, is at the State's sole discretion.
Notwithstanding termination of this Agreement for any reason, Tesoro shall
continue to take and purchase the State's Royalty Oil in the amount and for the
price set forth in this Agreement for up to six Months following termination if
the State, in its sole discretion, so requires.
8.2 Inability to Receive Oil. If for any reason, Tesoro is unable
or refuses to accept or receive any Oil tendered under this Agreement, Tesoro
shall nevertheless be and remain responsible for the disposal of that Oil and
for paying the State for the Oil as though it had been received and accepted by
Tesoro unless the State, in its sole discretion, elects to waive this
requirement. To secure the Tesoro's obligations under Section 8.2 and Section
2.10, Tesoro shall, if the State requests, assign to the State all right, title
and interest of Tesoro under any nominations, Leases, agreements, contracts,
charter parties and other arrangements for the transportation of the Oil sold
under this Agreement through and away from the TAPS; provided, that the State
shall not have any liability or obligations under any such nominations, Leases,
agreements, contracts, charter parties or other arrangement unless, and to the
extent that, the State
20
26
shall actually exercise its rights to succeed to Tesoro's interest under them
and shall obtain the benefits of them.
8.3 No Right to Storage or Underlift. Tesoro waives and disclaims
any interest or right that it may assert to storage of Royalty Oil, including
by underlift or other means, to which the State is or may become to be
entitled under the Leases or any other agreement.
ARTICLE IX
WAIVER
The failure of either party to insist upon strict performance of any
provision of this Agreement shall not constitute a waiver of, or estoppel
against, asserting the right to require that performance in the future. A
waiver or estoppel in any one instance shall not constitute a waiver or
estoppel with respect to a later breach of a similar nature or otherwise. A
course of performance established by a party shall also not estop the other
party from complaining of a later breach similar in nature.
ARTICLE X
VALIDITY
If any provision or clause of this Agreement or application of this
Agreement is held invalid, that invalidity shall not affect other provisions or
application of this Agreement which can be given effect without the invalid
provision or application. If, however, an invalidity should operate to impair
any material right or remedy of a party to this Agreement, that party may
terminate this Agreement by notice to the other.
21
27
ARTICLE XI
FORCE MAJEURE AND CHANGE IN CONDITION
11.1 Effect of Force Majeure. Except for Tesoro's obligations to
pay for Oil tendered and to accept and dispose of Royalty Oil, neither party
shall be liable for any failure to perform when performance is prevented, in
whole or in substantial part, by force majeure after good faith efforts to
perform. The term 'force majeure" shall mean an event or condition not within
the reasonable control of the party claiming the benefit of this excuse. If,
however, any material obligation of Tesoro is excused or suspended by a force
majeure for sixty successive Days or more, the State will have the right to
terminate this Agreement. Before the State exercises its right to terminate,
the State and Tesoro shall in good faith negotiate to restore the benefits and
obligations of the force majeure condition.
11.2 Responsibility. If a party believes that force majeure has
occurred, the party shall immediately notify the other party of its claim of
force majeure. If force majeure occurs, that occurrence shall, so far as
possible, be remedied with reasonable diligence. Except for Tesoro's
obligations to pay for Oil tendered and to accept and dispose of Oil, the
disabled party's obligations to perform that are affected by the force majeure
shall be suspended from the time that notification occurs until the disability
should have been remedied with reasonable diligence, and for no longer.
22
28
ARTICLE XII
NOTICES
12.1 Method. All notices, requests, demands or statements shall be
in writing, and may be delivered personally, telecopied, or sent by registered
or certified United States mail, postage prepaid, with a return receipt
requested, to the party to be notified. Notice deposited in the mail in this
manner shall be effective upon the expiration of seven Days after it is so
deposited or upon the date of receipt, whichever is earlier. Notice given in
any other manner shall be effective only if and when received by the addressee.
For the purposes of notice, the address of the parties shall be as follows:
If to the State: State of Alaska
Commissioner of Natural Resources
400 Willoughby Avenue
Juneau, Alaska 99801
and
Director, Division of Oil and Gas
P.O. Box 107034
Anchorage, Alaska 99510-0734
Telecopy Number: (907)562-3852
If to Tesoro:
Gaylon H. Simmons
Tesoro Alaska Petroleum Company
8700 Tesoro Drive
San Antonio, Texas 78217
Telecopy Number: (210) 283-2031
12.2 Change of Address. Each party may change its address for
notice by giving written notice of the change.
23
29
ARTICLE XIII
RULES AND REGULATIONS
This Agreement is subject to all present and future valid laws,
orders, rules and regulations of the United States, the State of Alaska, and
any duly constituted agency of the State of Alaska.
ARTICLE XIV
SOVEREIGN POWER OF THE STATE
This Agreement shall not be interpreted as a limit on the State of
Alaska's exercise of any of its sovereign or regulatory powers, whether
conferred by constitution, statute or regulation, including, but not limited
to, its regulatory power over the Leases. Its exercise of any sovereign or
regulatory power will not operate or be deemed to enlarge any rights of Tesoro
or to limit or impair any obligations or liability of Tesoro under this
Agreement.
ARTICLE XV
SECURITY
Sixty Days before the Date of First Delivery, Tesoro shall cause to be
issued and delivered to the State an irrevocable stand-by letter of credit,
with an effective date no later than the Date of First Delivery, issued for the
benefit of the State by a State or national banking institution of the United
States ("Issuer"), which is insured by the Federal Deposit Insurance
Corporation and has an aggregate capital and surplus of not less than One
Hundred Million Dollars ($100,000,000), or other banking institution acceptable
to the State in its sole discretion.
24
30
The principal face amount of such letter of credit shall be a sum estimated by
the Commissioner, in his sole discretion, to be equal to the aggregate purchase
price for the approximate total amount of Oil to be tendered by the State to
Tesoro during the first sixty Days following the Date of First Delivery. The
letter of credit shall be in a form satisfactory to the Commissioner, but in
any event shall not require any documents to be submitted in support of drafts
drawn against this letter of credit other than the certified statement of the
Commissioner or his designee and the Attorney General of the State of Alaska or
his designee that Tesoro is liable to the State for a sum equal to the amount
of such draft, and that sum is due and payable in full and has not been timely
paid. The letter of credit must be renewed sixty Days before its expiration so
that a letter of credit is continuously valid for sixty Days after the date of
the last delivery of Royalty Oil. If a replacement letter of credit, in a form
satisfactory to the Commissioner in his sole discretion, is not received sixty
Days before the expiration of the existing letter of credit, then Tesoro shall
be deemed to have materially breached this Agreement, there shall have occurred
an event of default under Article 7.1, and all obligations of Tesoro accrued,
but not otherwise due and payable under this Agreement, will immediately become
due and payable in full.
If the State has reasonable grounds for asserting any claims against
Tesoro and does assert those claims in an aggregate amount in excess of the
aggregate principal face amount of the letter of credit then in effect, Tesoro
shall, upon the State's request (whether or not Tesoro may deny, reject or
otherwise resist such claims), cause the principal face amount to be increased
by an amount equal to the excess. Tesoro shall also automatically increase the
principal face amount, without request from the State, whenever the face amount
is less than the expected purchase price of sixty Days of Oil tenders, to an
amount equal to the expected purchase price
25
31
of sixty Days of Oil tenders. Upon approval of the State in its sole
discretion, Tesoro may decrease the principal face amount if the face amount is
more than the expected purchase price of sixty Days of Oil tenders to an amount
equal to the expected purchase price of sixty Days of Oil tenders.
The letter of credit must allow drafts to be drawn and presented to
the Issuer up to and including the 60th Day after the last delivery of Royalty
Oil to Tesoro under this Agreement. The Commissioner may accept such other or
additional security as he, in his sole discretion, considers adequate to
protect the State.
ARTICLE XVI
PREFERENTIAL HIRING AND NON-DISCRIMINATION
Tesoro agrees to employ Alaska residents and Alaska companies to the
extent they are available, willing and qualified for all work performed in
Alaska in connection with the Agreement. "Alaska resident" means an individual
who has resided in Alaska for one year at the time of employment and "Alaska
companies" means companies incorporated in Alaska or whose principal place of
business is in Alaska.
If this provision is determined to be unconstitutional, then Tesoro
agrees to employ Alaska residents and Alaska companies to the extent such
preferential hiring is determined to be constitutional.
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32
ARTICLE XVII
APPLICABLE LAW
17.1 Alaska Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Alaska.
17.2 Submission to Jurisdiction. Any legal action or proceeding
arising out of or relating to this Agreement or for the enforcement of the
covenants or obligations of either party must be instituted in a State court of
general jurisdiction sitting in the State of Alaska, and Tesoro hereby
irrevocably submits to the jurisdiction of that court in any such action or
proceeding.
ARTICLE XVIII
WARRANTIES
The purchase and sale of Royalty Oil are subject only to the
warranties of the State expressly set forth in this Agreement and the State
disclaims and Tesoro waives all other warranties, express or implied in law,
whatsoever.
ARTICLE XIX
AMENDMENT
This Agreement may be supplemented, amended, or modified only by
written instrument duly executed by the parties.
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33
ARTICLE XX
SUCCESSORS AND ASSIGNS
No assignment, pledge, or encumbrance of this Agreement shall be made
by either party without the written consent of the other party. The
Commissioner or the Commissioner's designee may grant or deny such consent.
Subject to the above requirements in this Article, this Agreement will be
binding upon and inure to the benefit of each of the parties and its successors
and permitted assignees.
ARTICLE XXI
HEADINGS
Headings used in this Agreement are for convenience only and
shall not affect its construction.
ARTICLE XXII
RECORDS
22.1 Preservation of Records. Tesoro will preserve and maintain all
books, accounts, and records relating to or arising out of the performance of
this Agreement including, but not limited to, the purchase or sale of Royalty
Oil and its refined products, for a period of no less than six years from the
date of transaction or last adjustment relating to the transaction. Tesoro will
also maintain and preserve all similar books, accounts, and records of which
it has possession belonging to those third parties with whom it contracts for
the performance of various parts of this Agreement. Neither Tesoro nor the
State shall be required to retain any records for
28
34
more than six years unless retention of such records is specifically required
by applicable law or regulation, or this Agreement. Tesoro shall either
maintain its records within the State of Alaska or make such records available
to the State at Tesoro's principal office in the State of Alaska within thirty
Days after written request by the State.
22.2 Inspection of Records of Parties. Tesoro and the State will
accord to each other and to their authorized agents, attorneys, and auditors
during reasonable business hours access to any and all property, records,
books, documents, and indices directly related to Tesoro's or the State's
performance of this Agreement and which are under the control of the party from
which access is desired so that the other party may inspect, photograph and
make copies of that property, records, books, documents and indices. The State
shall not be required to disclose any information, data, or records which are
required to be held confidential by State or federal law or regulation, or by
agreement. If the information obtained by the State may be held confidential
under State or federal law or regulation, Tesoro may request that information
be held confidential by the State and the State will keep this information
confidential.
ARTICLE XXIII
INTERPRETATION OF TERMS AND CONDITIONS
Any disagreement about the meaning or application of a word, term, or
condition in this Agreement will be decided according to the dispute resolution
procedure set forth in this Article. Either party may give the other written
notice of a disagreement. Within 60 days after written notice, Tesoro must
present any argument and evidence supporting its view in writing to the
Commissioner for consideration. Tesoro shall not have the right to civil
litigation-type
29
35
discovery or a civil litigation-type trial with the right to call or
cross-examine witnesses unless granted by the Commissioner in his sole
discretion. The Commissioner will subsequently issue a finding on the meaning
or application of the disputed word, term, or condition, setting forth the
basis for the conclusions. Tesoro agrees to accept findings by the Commissioner
under this Article which are supported by substantial evidence.
ARTICLE XXIV
COUNTERPARTS
This Agreement may be executed in multiple counterparts, the parties
need not sign the same counterpart. Each counterpart shall be deemed to be an
original and all of which taken together shall be one and the same instrument.
SIGNATURES
the State: THE STATE OF ALASKA
/s/ HARRY A. NOAH
------------------------------------
Commissioner
Department of Natural Resources
Date: 9/20/94
TESORO ALASKA PETROLEUM COMPANY
Tesoro Alaska Petroleum Company: By: /s/ GAYLON H. SIMMONS
--------------------------------
Its: Executive Vice President
Date: 9/27/94
30
36
ACKNOWLEDGEMENT
State of Alaska )
) SS.
Third Judicial District )
THIS IS TO CERTIFY that on the 20th day of September, 1994, before me,
appeared Harry A. Noah, the commissioner, Department of Natural Resources,
State of Alaska; that Harry A. Noah executed that document under legal
authority and with knowledge of its contents; and that this act was performed
freely and voluntarily upon the premises and for the purposes stated in the
document.
Witness my hand and official seal the day and year in this agreement
first above written.
/s/ Barbara G. Hamilton
-------------------------------------
Notary Public in and for Alaska
My commission expires: 8/19/97
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37
ACKNOWLEDGEMENT
State of Alaska )
) SS.
Third Judicial District )
THIS IS TO CERTIFY that on the 27th day of September, 1994, before me,
appeared Gaylon H. Simmons of Tesoro Alaska Petroleum Company, San Antonio,
Texas; that he executed that document under legal authority and with knowledge
of its contents; and that this act was performed freely and voluntarily upon
the premises and for the purposes stated in the document.
Witness my hand and official seal the day and year in this agreement
first above written.
/s/ Ronald G. McNeal
-------------------------------------
My commission expires: 1/17/97
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38
EXHIBIT A
CALCULATION OF MONTHLY PRICE
This exhibit shows the mechanics of the price calculation and data sources.
Royalty Value and production volumes for the Prudhoe Bay Unit lessees are taken
from the Royalty Reports filed by those lessees. Royalty Value currently is
taken from Column H of these reports; Royalty Volume currently is taken from
Column C. An example calculation using the information for February 1994 is
shown below. Attached are the Royalty Report Summaries for the Prudhoe Bay
I.P.A.
Production Royalty Value
Volume from from Column H
Column C of the from the Lessees'
Lessees' Monthly Monthly Royalty Product of Volume
Producer Royalty Report Report Times Royalty Value
-------- ---------------- ---------------- -------------------
LISBURNE PRODUCTION
CENTER
ARCO 1,188,773.05 $8.76015 $ 10,413,826.00
BP Exploration 944,154.55 $8.38000 $ 7,912,015.13
Exxon 1,377,278.40 $8.38000 $ 11,541,592.99
PRUDHOE BAY I.P.A.
ARCO 8,016,404.50 $8.98000 $ 71,987,312.41
BP Exploration 12,825,315.80 $8.61000 $110,425,969.04
Exxon 8,015,830.90 $8.61000 $ 69,016,304.05
------------- ---------------
TOTALS 32,367,757.20 $281,297,019.62
Monthly Price = Total Production Volumes Times Royalty Values / Total
Production Volume
or
$281,297,019.62 / 32,267,757.20 = $8.69066
Only BP's royalty value, calculated from the volume-weighted average of the
prices reported for each market, may be made public. The per barrel price
listed here is not BP's actual West Coast value. For purposes of this example,
it is assumed that BP's West Coast value is its reported Royalty Value plus
$0.75
Should Article 2.1(b) apply, the Monthly Price will be calculated using the
Royalty Values and production volumes for only the Initial Participating Areas.
33
39
CALCULATION OF INTEREST
Numbers in these examples are illustrative. They do not represent accurate
values that may have existed in the past or are forecasted for any time in the
future.
Mechanics of the calculations include:
1. The annual interest rate specified in legislation is converted to a
daily rate for calculations.
2. Credits are applied to the next monthly payment. Payment for an
underpayment is due (a) within 10 days of the time the bill is
sent for Initial Billings and initial adjustment or (b) within 30
days of the time the bill is sent for subsequent adjustments.
Interest on underpayments stops accruing on the date of the
invoice.
EXAMPLE 1: INITIAL BILLING
Assumptions:
1. Month is February.
2. Royalty Oil delivered to Tesoro in January = 1,240,000 barrels.
3. Monthly Price for January, as determined by the methodology of
Exhibit A, = $8.00000.
4. Bill sent to Tesoro on February 10th; Payment due to State by
February 20th.
Method for calculating Tesoro's initial invoice for February deliveries:
Volume x Price = Interim Billing
1,240,000 x $8.00000 = $9,920,000.00
Note:
The lessees are required to submit their royalty reports to the State for
January's production by February 28th. For this reason the State will bill
Tesoro for January production based on the December Monthly Price. This is an
interim value and is subject to revision, since the Agreement requires that
Tesoro pay the Monthly Price for the same production month. The revised price
is incorporated in the invoice submitted the following month (March).
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40
EXAMPLE 2: INITIAL ADJUSTMENT
Assumptions:
1. Month is March.
2. Royalty Oil delivered to Tesoro in January = 1,240,000 barrels.
3. Revised Monthly Price for January = $7.950000.
4. Annual interest rate charged member banks for advances by 12th
Federal Reserve District as of January 1st is three percent.
Annual rate for contract = 11 percent.
5. Tesoro receives notice of credit on March 3rd.
Method for calculating Tesoro's revised invoice for January deliveries:
Volume x Price = Revised Billing
1,240,000 x $7.95000 = $9,858,000.00
Amount Paid by Tesoro for January deliveries (calculated in Example 1):
$9,920,000.00
-------------
Overpayment for January: ($62,000.00)
Difference between date when Tesoro notified of credit (March 3rd) and original
accrual date (February 20th) = 12 days.
Interest due = $62,000.00 x (11%/365) x 12 = ($224.22)
-----------
Credit due Tesoro for next month's billing = ($62,224.22)
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41
EXAMPLE 3: SUBSEQUENT ADJUSTMENT
This adjustment is assumed to occur after true-up of BP transportation costs, a
reopener for one of the Royalty Settlement Agreements, or for some other
reason. It is assumed to occur June 5th.
Assumptions:
1. Month is June.
2. Royalty Oil delivered to Tesoro in January = 1,240,000 barrels.
3. Adjusted Monthly Price for January = $8.15000.
4. Annual interest rate charged member banks for advances by 12th
Federal Reserve District as of January 1 assumed to be three percent;
as of April 1 and through the third quarter, seven percent. Annual
interest rate for contract = 11 percent for the first quarter;
12 percent for the second and third quarter.
5. Tesoro is sent notice of underpayment on June 5th.
6. Tesoro's payment is received on July 5th.
Method for calculating Tesoro's revised invoice for January deliveries:
Volume x Price = Revised Billing
1,240,000 x $8.15000 = $10,106,000.00
Amount Paid by Tesoro for January deliveries (calculated in Example 2):
$9,858,000.00
-------------
Underpayment for January deliveries: $248,000.00
Days of interest in first quarter (Feb. 20th through March 31st) = 40
Days of interest in second quarter (April 1 through June 30th) = 91
Days of interest in third quarter (July 1 through July 5) = 5
Interest for first quarter = $248,000.00 x (11%/365) x 40 = $2,989.59
Interest for second quarter = ($248,000.00 + $2,989.59) x (12%/365) x 91 = $7,509.06
Interest for third quarter = ($248,000.00 + $2,989.59 + $7,509.06) x (12%/365) x 5 = $424.93
-----------
Payment from Tesoro due to the State within 30 days of invoice date = $258,923.58
If payment in full not received by or on July 5th then additional interest will
accrue from July 6th through the payment receipt date, plus a late payment
penalty will be assessed.
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42
OIL ROY RPT SUM STATE OF ALASKA PAGE 1
REVISED 1/86 DEPARTMENT OF NATURAL RESOURCES UNIT PRUDHOE BAY UNIT
DO&G # 3-86 OIL OR GAS ROYALTY REPORT SUMMARY FIELD
DNR 10-4030 ZONE
LEASE
COMPANY NAME ARCO Alaska, Inc. REPORT FOR MONTH OF Feb 1994
ADDRESS P.O. Box 100360 REVISION NUMBER
CITY, STATE, ZIP Anchorage, AK 99510 DATE OF REVISION
(a) (b) (c) (d) (e) (f)
- ------------------------------------------------------------------------------------------------------------------------
Product Gross unit or Working (a) x (b) Royalty (c) x (d) Royalty
Description Lease Production Interest (Bbls) or Rate (Bbls) or In-Kind
(Bbls) or (MCF) Ownership % (MCF) (%) (MCF) (Bbls) or
(MCF)
- ------------------------------------------------------------------------------------------------------------------------
CRUDE 28,495,074.00 25,64316% 7,307,036.03 12.50000% 913,379.50 322,942.37
- ------------------------------------------------------------------------------------------------------------------------
(1) TOTALS 28,495,074.00 7,307,036.03 913,379.50 322,942.37
- ------------------------------------------------------------------------------------------------------------------------
(g) (h) (i) (j) (k)
- ------------------------------------------------------------------------------------------------------------------------
Product Royalty Royalty Field Costs (h) - (i) (g) X (j)
Description In-Value Value per Bbl Reported Royalty
(e) - (f) $ per Bbl or MCF Royalty per In-Value
(Bbls) or (MCF) or MCF Bbl or MCF Dollars
- ------------------------------------------------------------------------------------------------------------------------
CRUDE 590,437.13 $8.98000 $0.790 $8.19000 $4,835,680.09
- ------------------------------------------------------------------------------------------------------------------------
(1) TOTALS 590,437.13 $4,835,680.09
- ------------------------------------------------------------------------------------------------------------------------
*WEIGHTED AVERAGE VALUE
I declare that I have examined this report, including accompanying (03) COTP $3,624.51
schedules and statements, and to the best of my knowledge and (04) Less field cost for RIK ($255,124.47)
belief it is true, correct, and complete. Lease/Split Costs for RIK $0.00
(05) Interest to Revision (120.68)
SIGNED /s/ BARBARA B. AVE (06) Revisions (Attach ($6,908.00)
Reconciliations or
TITLE Authorized Representative TYPED NAME Barbara B. Ave amended returns) -------------
(07) Amount Due $4,577,272.13
PHONE NO. (907) 263-4965 =============
DATE 3/25/94
GAS ROYALTY: ATTACH FORM 10-422 Mail With Applicable Statements to: State of Alaska
OIL ROYALTY: ATTACH FORM 10-405 Department of Natural Resources
OIL AND/OR Division of Oil and Gas
GAS ROYALTY: VERIFICATION OF WIRE TRANSFER AMOUNTS OR A Royalty Accounting Section
COPY OF THE CHECK MADE IN PAYMENT OF ITEM (5) P.O. Box 7034
MUST BE ATTACHED. Anchorage, Alaska 99510-7034
RECEIVED
MAR 31 1994
DIVISION OF OIL & GAS
43
OIL ROY RPT SUM STATE OF ALASKA PAGE 3
REVISED 1/86 DEPARTMENT OF NATURAL RESOURCES UNIT PRUDHOE BAY UNIT
DO&G # 3-86 OIL OR GAS ROYALTY REPORT SUMMARY FIELD
DNR 10-4030 ZONE
LEASE
COMPANY NAME ARCO Alaska. Inc. REPORT FOR MONTH OF Feb 1994
ADDRESS P.O. Box 100360 REVISION NUMBER
CITY, STATE, ZIP Anchorge, AK 99510 DATE OF REVISION
(a) (b) (c) (d) (e) (f)
- ------------------------------------------------------------------------------------------------------------------------
Product Gross unit or Working (a) x (b) Royalty (c) x (d) Royalty
Description Lease Production Interest (Bbls) or Rate (Bbls) or In-Kind
(Bbls) or (MCF) Ownership % (MCF) (%) (MCF) (Bbls) or
(MCF)
- ------------------------------------------------------------------------------------------------------------------------
NGL 1,782,693.00 39,79196% 709,368.50 12.50000% 88,671.07 31,478.23
- ------------------------------------------------------------------------------------------------------------------------
(1) TOTALS 1,782,693.00 709,368.50 88,671.07 31,478.23
- ------------------------------------------------------------------------------------------------------------------------
(g) (h) (i) (j) (k)
- ------------------------------------------------------------------------------------------------------------------------
Product Royalty Royalty Field Costs (h) - (i) (g) x (j)
Description In-Value Value per Bbl Reported Royalty
(e) - (f) $ per Bbl or MCF Royalty per In-Value
(Bbls) or (MCF) or (MCF) Bbl of MCF Dollars
- ------------------------------------------------------------------------------------------------------------------------
NGL 57,192.84 $8.98000 $3.400 $5.58000 $319,136.05
- ------------------------------------------------------------------------------------------------------------------------
(1) TOTALS 57,192.84 $319,136.05
- ------------------------------------------------------------------------------------------------------------------------
*WEIGHTED AVERAGE VALUE
I declare that I have examined this report, including accompanying (03) COTP $ 0.00
shedules and statements, and to the best of my knowledge and (04) Less field costs for RIK $ 0.00
belief it is true, correct, and complete. Lease/Split Costs for RIK ($107,025.98)
(05) Revisions (attach ($644.39)
SIGNED /s/ BARBARA B. AVE reconciliations or
amended returns) -------------
TITLE Authorized Representative TYPED NAME Barbara B. Ave (06) Amount Due $ 211,476.94
=============
PHONE NO. (907) 263-4965
DATE 3/25/94
GAS ROYALTY: ATTACH FORM 10-422 Mail With Applicable Attachments To: State of Alaska
OIL ROYALTY: ATTACH FORM 10-405 Department of Natural Resources
OIL AND/OR Division of Oil and Gas
GAS ROYALTY: VERIFICATION OF WIRE TRANSFER AMOUNTS OR A Royalty Accounting Section
COPY OF THE CHECK MADE IN PAYMENT OF ITEM (5) P.O. Box 7034
MUST BE ATTACHED. Anchorage, Alaska 99510-7034
RECEIVED
MAR 31 1994
DIVISION OF OIL & GAS
44
ARS550P 00 PROD STATE OF ALASKA 03/29/94
ARS550M 00 OIL ROYALTY REPORT SUMMARY 11:50:12
STATE OF ALASKA AMENDMENT: 00
DEPT. OF NATURAL RESOURCES ROYALTY PAYER: BP EXPLORATION (ALASKA)
DIVISION OF OIL AND GAS P.O. BOX 196612
ROYALTY ACCOUNTING SECTION ANCHORAGE, AK 99519-6612
P.O. BOX 107034
ANCHORAGE, AK 99510-7034
FIELD, POOL OR LEASE: PRUDHOE BAY UNIT
PRODUCTION MONTH: FREBRUARY 1994
FILING DATE: 03/31/94
PAGE: 1
(a) (b) (c) (d) (e) (f)
- ------------------------------------------------------------------------------------------------------------------------
Product Gross unit or Working (a) x (b) Royalty (c) x (d) Royalty
Description Lease Production Interest (Bbls) Rate (Bbls) In-Kind
(Bbls) Ownership % (Bbls)
- ------------------------------------------------------------------------------------------------------------------------
NGLCN 1,782,693.00 18.7525446 334,300.30 12.500 41,787.54 14,834.60
OILCN 28,435,515.00 43.4290721 12,491,018.60 12.500 1,561,377.33 554,347.00
OILTP 40,559.00
OILTR
- ------------------------------------------------------------------------------------------------------------------------
(1) TOTALS 30,277,767.00 12,825,318.90 1,603,144.87 569,181.60
- ------------------------------------------------------------------------------------------------------------------------
(g) (h) (i) (j) (k)
- ------------------------------------------------------------------------------------------------------------------------
Product (e) - (f) Royalty Field Costs (h) - (i) (g) X (j)
Description Royalty Value $/Bbl Reported Royalty
In-Value $/Bbl Royalty In-Value
(Bbls) $/Bbl Dollars
- ------------------------------------------------------------------------------------------------------------------------
NGLCN 26,952.94 7.8600 5.4500 2.4100 64,956.59
OILCN 1,007,030.33 7.8600 0.7900 7.0700 7,119,704.43
OILTP
OILTR
- ------------------------------------------------------------------------------------------------------------------------
(1) TOTALS 1,033,983.27 (2) 7,184,661.02
- ------------------------------------------------------------------------------------------------------------------------
I declare that I have examined this report, including accompanying (3) Topping plant 7,184,661.02
schedules and statements, and to the best of my knowledge and $ 5,820,78
belief it is true, correct, and complete. (4) Less fields costs RIK-oil $ -437,934.13
processing fees RIK-Nols $ -60,848.57
(5) Revisions (attach amended
returns or reconciliations) $ 254,908.19
SIGNED: /s/ HAROLD S. WESSELLS (6) Amount due ($) $6,928,607.29
TITLE: ROYALTY OFFICER
DATE: 3/31/94
OIL ROYALTY: ATTACH FORM 10-405
VERIFICATION OF WIRE TRANSFER AMOUNTS OR A COPY OF THE CHECK MADE IN
PAYMENT OF ITEM (6) MUST BE ATTACHED. MAIL APPLICABLE ATTACHMENTS
TO DEPARTMENT OF NATURAL RESOURCES AT ABOVE ADDRESS.
NOTES:
COLUMN 5 INCLUDES AMOUNT FOR AMENDED REPORTS FOR RECEIVED
JULY 1993 THROUGH DECEMBER 1993 AS REQUIRED PER MAR 31 1994
THE ANS SETTLEMENT AGREEMENT DIVISION OF OIL & GAS
45
OIL RO RPT SUM Page 1 of 2
REVISED 1/86 STATE OF ALASKA UNIT: PRUDHOE BAY
DO&G #3-86 OIL ROYALTY REPORT SUMMARY FIELD: PRUDHOE BAY
DNR 10-4030 STATE OF ALASKA - DEPARTMENT OF NATURAL RESOURCES ZONE: PRUDHOE BAY
ROYALTY ADDRESS: EXXON CORPORATION REPORT FOR FEBRUARY 1994
P.O. BOX 4496 REVISION NUMBER 0.00
HOUSTON, TEXAS 77210-4496 REVISION DATE
(A) (B) (C) (D) (E) (F)
- ------------------------------------------------------------------------------------------------------------------------
Gross unit Working Total Royalty
Product Production Interest Working Interest Royalty Royalty In-Kind
Description (Bbls) Ownership % Bbls Rate Bbls Bbls
- ------------------------------------------------------------------------------------------------------------------------
CRUDE 28,495,074.00 0.25641196 7,306,477.80 0.125000 913,309.73 322,917.60
- ------------------------------------------------------------------------------------------------------------------------
(1) TOTALS
- ------------------------------------------------------------------------------------------------------------------------
(G) (H) (I) (J) (K)
- ------------------------------------------------------------------------------------------------------------------------
Royalty Royalty Reported Royalty
Product In-Value Value Field Costs Royalty In-Value
Description Bbls $ per Bbl per Bbl per Bbl Dollars
- ------------------------------------------------------------------------------------------------------------------------
CRUDE 590,392.10 8.610 0.790 7.820 4,616,666.22
- ------------------------------------------------------------------------------------------------------------------------
(1) TOTALS * * (2) 4,616,666.22
- ------------------------------------------------------------------------------------------------------------------------
*WEIGHTED AVERAGE VALUE
---------------------------------------------------
PRINCIPAL (1)INTEREST (M)TOTAL
- ------------------------------------------------------------------------------------------------
(3) COTP GRAVITY ADJUSTMENT 3,624.25 N/A 3,624.25
- ------------------------------------------------------------------------------------------------
(4) LESS FIELD COSTS FOR RJK (255,104.90) N/A (255,104.90)
- ------------------------------------------------------------------------------------------------
(5) OTHER (EXPL. INCENTIVE CREDIT) 0.00 N/A 0.00
- ------------------------------------------------------------------------------------------------
(6) SUBTOTAL ((2) THRU (5)) 4,365,385.57 0.00 4,365,385.57
- ------------------------------------------------------------------------------------------------
(7) REVISIONS 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------
(8) TOTAL AMOUNT DUE ((6)+(7)) 4,365,385.57 0.00 4,365,385.57
- ------------------------------------------------------------------------------------------------
I declare that I have examined this report, including accompanying
schedules and statements, and to the best of my knowledge and
belief it is true, correct, and complete.
SIGNED BY /s/ HYMES E. PERLIN for DCS
PRINTED NAME DAVID C. SHAMPANG
TITLE STATE ROYALTY UNIT SUPERVISOR RECEIVED
PHONE NUMBER (713) 658-8649 MAR 31 1994
DATE 29-MAR-94 DIVISION OF OIL & GAS
PREPARED BY JEANNE USIE (713) 658-6691
46
OIL ROYRPTSUM PAGE 1 OR 7
REVISED 1/88 STATE OF ALASKA UNIT: PRUDHOE BAY
DO&G #3-86 OIL ROYALTY REPORT SUMMARY FIELD: PRUDHOE BAY
DNR 10-4030 STATE OF ALASKA - DEPARTMENT OF NATURAL RESOURCES ZONE: PRUDHOE BAY
LEASE: PRUDHOE BAY
ROYALTY ADRESS: EXXON CORPORATION REPORT FOR FEBRUARY 1994
P.O. BOX 4498 REVISION NUMBER 0.00
HOUSTON, TEXAS 77210-4496 REVISION DATE
(A) (B) (C) (D) (E) (F)
- ------------------------------------------------------------------------------------------------------------------------
Product Gross unit Working Working Interest Royalty Total Royalty
Description Production Interest Bbls Rate Royalty In-Kind
(Bbls) Ownership % (%) Bbls (Bbls)
- ------------------------------------------------------------------------------------------------------------------------
NGLS 1,782,693.00 0.39791097 709,353.10 0.125000 88,669.14 31,477.50
- ------------------------------------------------------------------------------------------------------------------------
(1) TOTALS
- ------------------------------------------------------------------------------------------------------------------------
(G) (H) (I) (J) (K)
- ------------------------------------------------------------------------------------------------------------------------
Product Royalty Royalty Field Costs Reported Royalty
Description In-Value Value $ per Bbl Royalty $ per In-Value
(Bbls) $ per Bbl Bbl Dollars
- ------------------------------------------------------------------------------------------------------------------------
NGLS 57,191.60 8.610 1.628 6.952 399,311.75
- ------------------------------------------------------------------------------------------------------------------------
(1) TOTALS * * (2) 399,311.75
- ------------------------------------------------------------------------------------------------------------------------
*WEIGHTED AVERAGE VALUE
---------------------------------------------------
PRINCIPAL (1) INTEREST (M)TOTAL
- ------------------------------------------------------------------------------------------------
(3) COTP GRAVITY ADJUSTMENT 0.00 N/A 0.00
- ------------------------------------------------------------------------------------------------
(4) LESS FIELD COST FOR RIK (51,243.37) N/A (51,245.37)
- ------------------------------------------------------------------------------------------------
(5) OTHER (EXPL. INCENTIVE CREDIT) 0.00 N/A 0.00
- ------------------------------------------------------------------------------------------------
(6) SUBTOTAL ((2) THRU (5)) 346,066.38 0.00 346,066.38
- ------------------------------------------------------------------------------------------------
(7) REVISIONS 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------
(8) TOTAL AMOUNT DUE ((6)+(7)) 346,066.38 0.00 346,066.38
- ------------------------------------------------------------------------------------------------
I declare that I have examined this report, including accompanying
schedules and statements, and to the best of my knowledge and
belief it is true, correct, and complete.
SIGNED /s/ HYMES E. PERLIN for DCS
PRINTED NAME: DAVID C. SHAMPANG
TITLE: STATE ROYALTY UNIT SUPERVISOR RECEIVED
PHONE NUMBER (713) 658-8549 MAR 31 1994
DATE 29-MAR-94 DIVISION OF OIL & GAS
PREPARED BY JEANNE USIE (713) 658-6691