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EXHIBIT 10.2
INTRASTATE FIRM
GAS TRANSPORTATION AGREEMENT
Effective Date: March 1, 1997
between
TRANSTEXAS GAS CORPORATION
"Shipper"
and
LOBO PIPELINE COMPANY
"Transporter"
Certain portions of this document have been omitted and filed separately with
the Commission pursuant to an Application for Confidential Treatment pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934.
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TABLE OF CONTENTS
ARTICLE SUBJECT PAGE
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I. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
III. Quantity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
IV. Receipt Point(s) and Delivery Point(s) . . . . . . . . . . . . . . . . . . . . . . . . . 9
V. Scope and Character of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
VI. Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
VII. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
VIII. Nominations, Scheduling and Rates of Flow . . . . . . . . . . . . . . . . . . . . . . 13
IX. Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
X. Balancing of Receipts and Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . 16
XI. Pressures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
XII. Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
XIII. Metering Facilities, Measurement and Testing . . . . . . . . . . . . . . . . . . . . . 19
XIV. Measurement Specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
XV.. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
XVI. Billing and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
XVII. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
XVIII. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
XIX. Governmental Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
XX.. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
EXHIBITS: Exhibit "A" - Receipt Point(s)
Exhibit "B" - Delivery Point(s)
Exhibit "C" - Nomination Form
Exhibit "D" - Bob West North Field
Exhibit "E" - Gas Allocation - Approximation of Composition Example
Exhibit "F" - Other Properties
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INTRASTATE FIRM GAS TRANSPORTATION AGREEMENT
THIS AGREEMENT entered on this first day of March 1997, (Effective Date)
between LOBO PIPELINE COMPANY, a Delaware corporation, hereinafter referred to
as "TRANSPORTER", and TRANSTEXAS GAS CORPORATION, a Delaware corporation,
hereinafter referred to as "SHIPPER".
W I T N E S S E T H:
WHEREAS, Shipper has requested that Transporter transport, from the
Receipt Point(s) identified and described herein, certain quantities of Gas;
and
WHEREAS, Transporter operates certain facilities in the State of Texas
for the gathering and transportation of natural gas, and is an "intrastate
pipeline" within the meaning of Section 2(16) of the Natural Gas Policy Act of
1978 ("NGPA") and is subject to the regulatory jurisdiction of the Railroad
Commission of Texas ("RRC").
NOW, THEREFORE, in consideration of the mutual covenants in this
Agreement, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 "GAS" means natural gas and includes casinghead gas produced with crude
oil, gas well gas produced from gas wells, and residue gas resulting from
processing both casinghead gas and gas well gas, which natural gas is both
owned by Shipper (or is Shipper's royalty gas) and produced from the Bob West
North Field located in Zapata County, Texas, from leases in which Shipper is an
equity owner. This definition of "Gas" shall also include natural gas produced
from specific properties as identified on Exhibit "F".
1.2 "DAY" or "DAILY" mean the period of time beginning at 9:00 a.m., local
time, on any calendar Day and ending at 9:00 a.m., local time, on the calendar
Day immediately following.
1.3 "MONTH" or "MONTHLY" means a period beginning at 9:00 a.m., local time,
on the first Day of a calendar month, and ending at 9:00 a.m., local time, on
the first Day of the calendar month immediately following.
1.4 "YEAR" means a period consisting of three-hundred-sixty-five (365)
consecutive Days, commencing on the Effective Date at 9:00 a.m., local time and
ending at 9:00 a.m., local time; provided, that any Year which contains the
date of February 29 will consist of three-hundred-sixty-six (366) consecutive
Days.
1.5 For payment and measurement purposes, the quantity of Gas delivered and
received, stated in MMBtu, is derived by taking the measured volumes of Gas in
Cubic feet multiplied by their Gross Heating Value divided by one million
(1,000,000). The pertinent terms are as follows:
(a) "CUBIC FEET", "CUBIC FOOT" or "CF" mean the volume of gas
which occupies one (1) cubic foot of space at a temperature of sixty
degrees (60 degrees) Fahrenheit and an absolute pressure of fourteen and
sixty-five hundredths (14.65) pounds per square inch absolute (psia).
(b) "MCF" means one thousand (1,000) Cubic feet of gas and "MMCF"
means one million (1,000,000) Cubic feet of gas.
(c) "BTU" means the amount of heat required to raise the
temperature of one avoirdupois pound of pure water from fifty-eight and
five tenths degrees (58.5 degrees) Fahrenheit to fifty-nine and five
tenths degrees (59.5 degrees) Fahrenheit at a constant pressure of
fourteen and sixty-five hundredths (14.65).
(d) "MMBTU" means one million (1,000,000) Btu.
(e) "GROSS HEATING VALUE" means the number of Btu's liberated by
the complete combustion, at a constant pressure, of one (1) Cubic foot of
gas, at a base temperature of sixty degrees (60 degrees) Fahrenheit and
a base pressure of fourteen and sixty-five hundredths (14.65)
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psia, with air of the same temperature and pressure of the gas, after
the products of combustion are cooled to the initial temperature of the
gas, and after the water resulting from combustion is condensed to the
liquid state. The Gross Heating Value of the gas shall be corrected for
the water vapor content of the gas being delivered; provided, that if
the water vapor content of the gas is seven (7) pounds or less per one
million (1,000,000) Cubic feet, the gas shall be assumed to be dry and
no correction will be made.
(f) "PSIA" means per square inch absolute.
1.6 "STANDARD TEMPERATURE" means sixty degrees (60 degrees) Fahrenheit.
1.7 "STANDARD PRESSURE" means fourteen and sixty-five hundredths (14.65)
pounds per square inch absolute.
1.8 "PARTY" means either Transporter or Shipper and the term "PARTIES" shall
mean both Transporter and Shipper.
1.9 "TAXES" means any tax (other than ad valorem, income or excess profit
taxes), license, fee or charge now or hereafter levied, assessed or made by a
governmental authority on any natural gas transportation, or any occupation,
production, severance or sales tax, first use tax, gross receipt tax, or taxes
similar in nature or equivalent in effect which are now or hereafter imposed or
assessed against Transporter by any lawful authority as a result of the
transportation of Gas pursuant to this Agreement or on the act, right or
privilege of transporting, handling or delivering Gas which is measured by the
volume, value, carbon content or sales price of the Gas or the gross receipts
from providing transportation service.
1.10 "EQUIVALENT QUANTITIES" means that volume of gas which is thermally
equivalent to the volume of Gas received by Transporter at the Receipt
Point(s), less applicable deductions for fuel adjustments as provided for in
this Agreement on any one Day.
1.11 "PRIME INTEREST RATE" means the "prime commercial rate" of interest
published by Citibank, N.A., New York, New York.
1.12 "RECEIPT POINT(S)" means such point(s) specifically identified in
Exhibit "A", a copy of which is hereby incorporated into this Agreement and
made a part hereof for all purposes.
1.13 "DELIVERY POINT(S)" means such point(s) specifically identified in
Exhibit "B", a copy of which is hereby incorporated into this Agreement and
made a part hereof for all purposes.
1.14 "KING RANCH" means the Delivery Point located at the interconnection
between Transporter's facilities and the Exxon Co. USA operated King Ranch
Plant located in Kleberg County, Texas ("EXXON KING RANCH PLANT"), and which is
specifically set forth and identified in Exhibit "B".
1.15 "MDCQ" and "MAXIMUM DAILY CONTRACT QUANTITY" have the meaning set forth
at Section 3.1.
1.16 "PRODUCTS" or "LIQUIDS" shall mean those natural gas liquids, including
ethane, propane, isobutane, normal butane, and natural gasoline, and mixtures
thereof, which may be present in the gas stream and removable in a liquid
extraction process.
1.17 "BOB WEST NORTH FIELD" shall mean the area currently known as the Bob
West North Field located in Zapata County, Texas, as shown on Exhibit "D", a
copy of which is hereby incorporated into this Agreement and made a part hereof
for all purposes.
1.18 OTHER TERMS - Each of the following terms is defined in the Section set
forth opposite such term:
Term: Section:
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Transporter Preamble
Shipper Preamble
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NGPA 2d Whereas
RRC 2d Whereas
Exxon King Ranch Plant 1.14
MDCQ 3.1
Interruptible Agreement 3.1
Deficiency 3.6
Overage 3.6
Primary Term 7.1
Imbalance 10.1
Basket Price 10.2
MAOP 11.1
Operator 13.1
API 13.2
force majeure 15.1
Payment Due Date 16.1
good faith 20.12
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ARTICLE II
GENERAL
2.1 WARRANTY OF TITLE - Shipper warrants that it will at the time
of delivery of Gas to Transporter under this Agreement have good title to all
Gas (excepting only its royalty gas), and the right to deliver its royalty gas,
so made available, and that the Gas is free and clear of all liens,
encumbrances, or adverse claims of any kind.
2.2 INDEMNIFICATION - Shipper shall indemnify Transporter and save
Transporter harmless from and against any and all suits, actions, losses,
damages, costs, and expenses (including reasonable attorneys' fees and court
costs), arising from or in connection with any title-related liens,
encumbrances, or adverse claims of any persons regarding the Gas.
2.3 POSSESSION AND RESPONSIBILITY - Prior to the Gas being
received by Transporter at the Receipt Point(s) and upon delivery of the Gas to
the Shipper at the Delivery Point(s), Shipper is deemed to be in control and in
possession of the Gas, and Shipper is responsible for any damages, losses or
injuries caused by the Gas while in Shipper's control and/or possession, except
for injuries or damages which have been caused by the negligence of
Transporter. Transporter is in control and in possession of the Gas subsequent
to receipt at the Receipt Point(s) and until such Gas is redelivered to Shipper
at the Delivery Point(s), and is responsible for any damages, losses or
injuries caused by the Gas while in Transporter's control and/or possession,
except for injuries or damages which have been caused by the negligence of
Shipper. Notwithstanding the immediately preceding sentences, the Parties
hereto understand and acknowledge that title to, or the right to deliver, all
Gas transported hereunder shall at all times remain with Shipper or Shipper's
designee and not the Transporter.
2.4 CREDITWORTHINESS OF SHIPPER - Transporter's obligation to
perform hereunder is contingent upon Shipper's reciprocal obligation to pay for
the services contemplated hereunder in a timely fashion. Prior to commencement
of service, or at any time thereafter, Transporter may require Shipper to
supply Transporter with credit information including, but not limited to, bank
references, financial statements and/or names of persons with whom Shipper has
recently transacted business in order that Transporter may make reasonable
inquiry into Shipper's creditworthiness and obtain adequate assurance of
Shipper's solvency and ability to perform.
Only if, during the Primary Term or any other term of this Agreement,
Shipper fails to pay all monies due under this Agreement within the time frame
and in the manner set forth at Article XVI, then Transporter may take any, or a
combination, of the following actions: suspend performance of future service
pending assurance of payments, demand security for payment, require payment in
cash or on a more frequent basis than a Monthly billing cycle, terminate this
Agreement pursuant to Section 16.2, or take such other action as is reasonable
under the circumstances to protect Transporter's interests, all in
Transporter's sole opinion, including requiring Shipper to immediately provide
Transporter with an irrevocable standby letter of credit in an amount and in a
form acceptable to Transporter and from an institution acceptable to
Transporter.
2.5 GAS PROCESSING - Shipper has the right to process, cause to be
processed, or allow the processing of Gas delivered to Transporter. To the
extent Shipper does not nominate Gas to the Delivery Point(s), Transporter may
in its sole discretion elect to process Shipper's Gas for Transporter's own
account but at no cost or expense to Shipper.
ARTICLE III
QUANTITY
3.1 MAXIMUM DAILY CONTRACT QUANTITY - The total volume of Gas
transported under this Agreement on any Day shall not exceed the total Maximum
Daily Contract Quantity which is initially agreed to be 400 MMcf per Day
("MDCQ"). Subject to the conditions and limitations hereinafter set forth,
Transporter agrees to receive up to the MDCQ of Gas tendered by Shipper at the
Receipt Point(s), and to transport and redeliver subject to Article V, on a
firm basis, Equivalent Quantities on behalf of Shipper to the Delivery
Point(s). Transporter shall not be obligated to accept for transportation
hereunder Gas on any Day in excess of the lesser of the following: i) the MDCQ
at the Receipt Point(s), or ii) the amounts of Shipper's Gas the Exxon King
Ranch Plant will accept from
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time to time.
The Parties agree that for each Day volumes of Gas are nominated and
confirmed under that certain Interruptible Gas Transportation Agreement dated
March 1, 1997 ("INTERRUPTIBLE AGREEMENT") between Transporter and Shipper, the
MDCQ hereunder shall be reduced by each Mcf nominated and confirmed under the
Interruptible Agreement for such Day.
3.2 SHIPPER'S DEDICATION - Shipper dedicates to its performance
under this Agreement all Gas, with the exception being the specific properties
as identified on Exhibit "F".
3.3 MINIMUM DAILY CONTRACT QUANTITY - If volumes transported by
Shipper during any thirty (30) day period average less than, cumulatively, 100
MMcf per Day under i) this Agreement and ii) to the Exhibit "B-2" Delivery
Point(s) under the Interruptible Agreement, then Transporter shall not be
required to transport Gas hereunder for the succeeding six (6) month period.
3.4 REDETERMINATION OF MAXIMUM DAILY CONTRACT QUANTITY - (a)
Beginning on the first Day of the sixth contract Year, should the average
quantity of Gas transported by Transporter during:
i) the last six (6) Months of the fifth Year be equal to or less
than 80 percent (80%) of the initial MDCQ of 400 MMcf per Day, or
ii) any six (6) consecutive Month period thereafter during the
term of this Agreement be less than 80 percent (80%) of the MDCQ for the
immediately preceding six (6) consecutive Month period,
then Transporter shall have the unilateral right to reduce the MDCQ for the next
succeeding six (6) consecutive Month period to no lower than the average of the
quantities of Gas actually delivered by Shipper to Transporter during the
immediately prior six (6) consecutive Month period. Transporter shall exercise
such right by written notice to Shipper no later than thirty (30) Days prior to
beginning of any such period. The last Month of each six (6) consecutive Month
period will be estimated, based upon the previous five (5) Months' Gas
deliveries hereunder.
(b) Beginning on the first Day of the sixth contract Year and continuing
throughout the term of this Agreement, should the average quantity of Gas made
available to Transporter during:
i) the last six (6) Months of the fifth Year be more than
one-hundred and twenty percent (120%) of the initial MDCQ set forth in
Section 3.1, above; or
ii) any six (6) consecutive Month period thereafter during the
term of this Agreement be more than one hundred and twenty percent (120%)
of the MDCQ for the immediately preceding six (6) consecutive Month
period,
then Shipper shall have the right to request in writing an increase to the MDCQ
for the next succeeding six (6) consecutive Month period to no higher than the
average of the quantities of Gas actually available during the immediately
prior six (6) consecutive Month period. Shipper shall exercise the right set
forth in the immediately preceding sentence by written notice to Transporter no
later than thirty (30) Days prior to the beginning of any such period. The
last Month of each six (6) Month period will be estimated, based upon the
previous five (5) Months' Gas deliveries hereunder. If sufficient
transportation capacity is available, Transporter shall grant Shipper's request
to increase the MDCQ. However, Transporter shall not be under any obligation
to increase the MDCQ above 400 MMcf per Day.
3.5 AVAILABLE RECEIPTS IN EXCESS OF MDCQ - In the event the
quantity of Gas which Shipper makes available on any Day to Transporter for
transportation at the Receipt Point(s) exceeds the MDCQ, then Transporter may,
at its option, (i) transport all or any portion of such excess quantities
pursuant to this Agreement, or (ii) refuse to accept all or any portion of such
excess quantities for transportation. Transporter shall grant Shipper, upon
request from Shipper, a temporary release from Shipper's dedication at Section
3.2, only for those quantities of Gas made available to Transporter but unable
to be taken by Transporter; PROVIDED, HOWEVER, such temporary release shall
only be until Transporter can take all Gas tendered by Shipper or upon the
occurrence of the increase in capacity as set forth in Section 3.7 below.
However, in the event that the quantity of Gas which Shipper makes available on
any Day to Transporter exceeds 400 MMcf per Day, then the Transporter may, at
its option, transport all or any portion of such excess quantities pursuant to
this Agreement and charge under Section 6.1.
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3.6 MINIMUM YEARLY CONTRACT QUANTITY - During each of the first
five (5) Years of this Agreement, Shipper agrees to deliver to Transporter in
accordance with the terms herein and/or in accordance with that certain
Interruptible Gas Transportation Agreement between the Parties made effective
March 1, 1997, a Minimum Yearly Contract Quantity of Gas of 127,650 MMcf (350
MMcf/Day x 365 Days). At the end of each Year, Transporter shall calculate any
Shipper deficiency or overage in meeting the Minimum Yearly Contract Quantity
obligations (hereinafter "DEFICIENCY" or "OVERAGE", as appropriate) based upon
actual transported volumes. Any Deficiency or Overage shall be settled between
the Parties at the rate specified in Article VI, Section 6.4 with an invoice or
credit within thirty (30) days of the end of such Year; Shipper's payment will
be subject to the terms of Article XVI. Any Overage shall be credited against
i) the prior Year's Deficiency payment applied by Transporter against Shipper's
first invoice of the next succeeding Year; and ii) the next succeeding
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Year's Deficiency payment (if any). For each full Day during a period of Force
Majeure, the Minimum Yearly Contract Quantity of Gas of 127,650 MMcf shall be
reduced by 175 MMcf.
3.7 MODIFICATION OF OR ADDITIONS TO FACILITIES - In the event
Shipper has available for transportation hereunder a quantity of Gas which i)
is in excess of the then-existing MDCQ and such quantity of Gas has
consistently exceeded the MDCQ during a six (6) consecutive Month period; ii)
in order to accommodate such excess quantity of Gas, it is necessary to add
capacity to Transporter's transportation assets; and iii) Shipper has exhausted
its good faith efforts to maximize deliveries to alternative delivery points
available to Shipper, then, upon Shipper's written request sent to Transporter
at the addresses set forth in Article XVII, Transporter and Shipper shall in
good faith determine and implement an increase in the capacity of Transporter's
facilities then being utilized to provide additional transportation under this
Agreement. The Parties understand that any increase in the capacity of
Transporter's transportation assets in order to accommodate Shipper's excess
quantity of Gas will require, among other things to be negotiated at that time,
an increase in the then-existing transportation rate to account for the capital
investment associated with such an expansion. Such new transportation rate
shall be computed using a payout of the required capital investment over a
period of seven (7) Years and a return on investment equivalent to five (5)
percentage points over the then existing Prime Interest Rate; PROVIDED,
HOWEVER, in the event the remaining period in the Primary Term is less than
seven (7) Years then such rate shall be calculated to reflect the shortened
time period or the Parties may agree to some other method of payment which will
result in Transporter's full recoupment of the required capital investment
within the foreshortened period of time at the same return on investment of
five (5) percentage points over the then existing Prime Interest Rate.
ARTICLE IV
RECEIPT POINT(S) AND DELIVERY POINT(S)
4.1 RECEIPT POINT(S) - Gas delivered to Transporter by Shipper
hereunder shall be delivered to Transporter at the Receipt Point(s). Prior to
adding any additional Receipt Point(s) to this Agreement, the Parties must
first agree to such point(s), in writing.
4.2 DELIVERY POINT(S) - Gas redelivered to Shipper by Transporter
hereunder shall be redelivered to Shipper at the Delivery Point(s). Prior to
adding any additional Delivery Point(s) to this Agreement, the Parties must
first agree to such point(s), in writing.
ARTICLE V
SCOPE AND CHARACTER OF SERVICE
5.1 SCOPE AND CHARACTER OF SERVICE - Shipper shall have the right
on any Day to deliver to Transporter at the Receipt Point(s) quantities of Gas
up to and including Shipper's MDCQ. Transporter shall receive such Gas and
shall deliver Equivalent Quantities at the Delivery Point(s) for Shipper's
account subject to the requirements set forth in Article III and elsewhere in
this Agreement, and:
i) Transporter's obligation to deliver Gas at the Delivery
Point(s) exists only so long and only in such quantity as Shipper
continues to make deliveries of Gas into Transporter's facilities at the
Receipt Point(s); and
ii) Transporter's obligation to accept Gas at the Receipt Point(s)
exists only so long and only in such quantity as Shipper, or its
designee, continues to take delivery of Gas made available at the
Delivery Point(s).
Shipper recognizes that, unless otherwise specified herein, the services
hereunder are to be performed by Transporter on a firm basis but may be
interrupted in accordance with Section 5.2 below. The Parties agree that in no
event shall an interruption of service as set forth in Section 5.2 constitute a
breach of this Agreement and that Transporter shall not be liable to Shipper in
damages, or otherwise, due to any such interruption of service.
5.2 PRIORITIES OF INTERRUPTION - If, for whatever reason,
Transporter is unable to transport all quantities of gas nominated by various
shippers under their gas transportation agreements with Transporter (including
Shipper's Gas hereunder), Transporter shall interrupt service thereunder in
whole or in part on all or such portions of Transporter's system as may be
necessary in Transporter's sole discretion; PROVIDED, HOWEVER, that Transporter
will act as a reasonably prudent pipeline,
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subject to operating necessities, to interrupt service (on that portion or
portions of its system where such interruption is required) in accordance with
the following schedule of priorities, beginning with the first service to be
interrupted and continuing in order as necessary to the last service to be
interrupted:
1. Interruptible intrastate transportation service and
interruptible transportation service rendered pursuant to the
NGPA.
2. Firm intrastate transportation service.
Within priority 1, interruption shall be administered on the basis of
the date of the contract, i.e., later contracts will be interrupted before
earlier contracts. For contracts of the same date, service under the lowest
priced contract will be interrupted first and service under the highest priced
contract will be interrupted last. Within priority 2, interruption shall be
administered pro rata according to all other shipper's pre-interruption
percentage of capacity utilization during the prior Month; PROVIDED, HOWEVER,
in the event Shipper did not ship Gas during the prior Month, then the last
Month in which Shipper delivered Gas to Transporter hereunder, if any, during
the immediately prior six (6) Month period shall be used to calculate the
prorationing.
5.3 INTERRUPTIBLE BLENDING - Transporter shall make reasonable
efforts, at its sole discretion, from time-to-time, on a fully interruptible
basis to allow Shipper to deliver Gas which does not meet the quality
specifications in Article XII. In such cases, Transporter may provide blending
which may involve Transporter commingling Gas with gas having different quality
specifications from that of the Shipper's Gas. The rate for such blending is
set forth at Section 6.3. To the extent the volume of Shipper's Gas falls
below the minimum daily contract quantity provided pursuant to Section 3.3,
Minimum Daily Contract Quantity, then Transporter may elect, at its sole
discretion, to either: i) not transport Shipper's Gas or ii) transport
Shipper's Gas and commingle it with any Gas belonging to Transporter or others'
gas even if such commingling would render Shipper's Gas unable to be processed
at King Ranch or other Delivery Point(s).
ARTICLE VI
RATE
6.1 RATE - Transporter agrees to charge and Shipper agrees to pay
Transporter each Month for the transportation service provided herein a rate
equal to [omitted - confidential] for all Gas delivered to Transporter at the
Receipt Point(s).
6.2 FUEL ADJUSTMENT - In addition to any other amounts payable
under this Agreement, Shipper shall furnish to Transporter an amount equal to
[omitted - confidential] of Gas received at the Receipt Point(s) for
fuel use for transportation.
6.3 BLENDING FEES -
(a) CO(2) BLENDING FEE - In addition to any other amounts
payable under this Agreement and as payment for Transporter's CO(2) blending
under Section 5.3 herein, Transporter will assess and Shipper will pay a
[omitted - confidential] blending fee for Gas received at the Receipt Point(s)
by Transporter which contains an amount of CO(2) (on a Monthly average basis)
greater than the maximum CO2 requirements described in Section 12.1 plus .5%.
An example calculation of this fee is as follows:
For example, if Shipper delivers Gas to Transporter, on a Month average
basis, containing 3.6 Mole percent (3.6 Mole %) CO(2) and the maximum
CO(2) percent provided for in this Agreement is 2%, then Transporter
shall assess a blending fee equal to [omitted - confidential] multiplied
by the difference between the maximum CO(2) percentage in Section 12.1
plus .5% and the actual CO(2) Mole percent delivered by Shipper. This
calculation would be [omitted - confidential] multiplied times each Mcf
of Gas received at the Receipt Point(s) throughout the Month.
(b) BTU BLENDING FEE - In addition to any other amounts payable
under this Agreement and as payment for Transporter's Btu blending under Section
5.3 herein, Transporter will assess and Shipper will pay a [omitted -
confidential] blending fee for each Mcf of Gas received at the Receipt Point(s)
by Transporter which on a Monthly average basis is below the minimum Btu/CF
requirements described in Section
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12.1. An example calculation of this fee is as follows:
For example, if the minimum required Btu/CF is 1050 Btu/CF and Shipper
delivers Gas to Transporter, on a Monthly average basis, which is 1040
Btu/CF, Transporter shall assess a Btu blending fee equal to [omitted -
confidential] multiplied by the difference between the actual Btu/CF
quality of Shipper's Gas (1040 Btu/CF, for example) and the required
minimum Btu/CF specification of 1050 Btu/CF. This calculation would be
[omitted - confidential] multiplied by each Mcf of Gas received at the
Receipt Point(s) throughout the Month.
6.4 DEFICIENCY PAYMENT OR OVERAGE CREDIT - For any Deficiency or
Overage calculated pursuant to Section 3.6, such Deficiency or Overage shall be
multiplied by [omitted - confidential].
ARTICLE VII
TERM
7.1 TERM - This Agreement is effective, regardless of when
executed, on the Effective Date, and will continue for a primary term ending on
December 31, 2006 ("PRIMARY TERM"), and will remain in effect on a
Month-to-Month basis unless terminated by either Party by giving ninety (90)
Days written notice to the other Party prior to the end of the Primary Term or
any subsequent Month.
ARTICLE VIII
NOMINATIONS, SCHEDULING, AND RATES OF FLOW
8.1 NOMINATION - All quantities of Gas which are to be transported
during any Month shall be scheduled for transportation prior to that Month by
Shipper providing written notice no later than ten (10:00) a.m. Central Time
(whether Standard or Daylight Savings Time) five (5) business Days prior to the
Month of delivery. For all quantities that are to be scheduled or changed any
Day after the first Day of any Month, Shipper will provide written notice by
ten (10:00) a.m. Central Time (whether Standard or Daylight Savings Time) on
the Day prior to the Day of the proposed change. Shipper's Receipt Point(s)
and Delivery Point(s) nomination(s) shall remain in effect until the sooner of
i) Shipper's revision of said nomination(s) pursuant to the terms of this
Agreement, or ii) the end of the Month. Following nominations, Transporter
shall subsequently notify Shipper of the quantity that it can actually receive
and deliver at each Receipt and Delivery Point. Transporter may waive any part
of the notice requirement upon request if, in Transporter's sole judgment,
operating conditions permit such waiver. Transporter and Shipper shall
immediately inform each other of any other changes of deliveries. For both
first of Month and intra-Month nominations, Shipper shall provide Transporter
with such nominations, in writing, through the use of a Nomination Form
attached hereto as Exhibit "C", hereby incorporated into this Agreement and
made a part hereof for all purposes, or such other form as may be required by
Transporter.
8.2 RIGHT OF TRANSPORTER TO CONFIRM QUANTITY LOWER THAN NOMINATED
- - Through the process of confirming Shipper's nomination(s), Transporter shall
have the right to void or reduce Shipper nomination(s) at any time in
accordance with customary industry practices on a non-discriminatory basis and
according to Transporter's role as operator of the Receipt Point(s) and/or the
Delivery Point(s) for any reasons, including, but not limited to, the
following:
(a) Shipper does not tender Gas for transportation as nominated;
(b) Transporter cannot confirm Shipper's nomination at the Receipt
Point(s) and/or Delivery Point(s); and/or
(c) Shipper's delivery or redelivery nomination is curtailed due
to a lack of i) pipeline capacity, or ii) available gas to effect a
delivery by displacement for the purpose of transporting all quantities
of gas nominated by various shippers under gas transportation agreements
with Transporter (including Shipper's Gas hereunder), and, as a result,
Transporter interrupts service in accordance with Section 5.2. On any
Day, all nominated and confirmed Gas which has been returned to Shipper
by a third party pipeline downstream of the Delivery Point(s) shall be
remarketed by Shipper with transportation provided, as available,
hereunder. Failing the availability of transportation, such returned Gas
shall be temporarily released from Shipper's dedication at Section 3.2
for the greater of: i) such period of time as transportation is not
available on Transporter's system; or ii) a period of time mutually
agreed, but not to exceed the remainder of the Month of such
unavailability of transportation.
8.3 RATE OF FLOW - The Gas to be received by Transporter hereunder
shall be delivered
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by Shipper at uniform hourly and Daily rates of flow as nearly as practicable,
but it is recognized that due to operating conditions the quantities of Gas
received and delivered may not be in balance on any particular Day. In the
event there is an imbalance (in terms of MMBtu) caused by differences in
receipts and deliveries of Gas hereunder, Transporter shall notify Shipper of
such imbalance and such imbalance shall be corrected in the manner set forth in
Article X.
8.4 UPSTREAM AND DOWNSTREAM PARTIES - Shipper shall make, or cause
to be made, all necessary arrangements with other pipelines, processors, or
other parties upstream of the Receipt Point(s) or downstream of any Delivery
Point(s) in order to effectuate Transporter's receipt or delivery of Shipper's
Gas. Transporter's obligations under this Agreement are subject to Shipper
making such necessary arrangements as are set forth in the immediately
preceding sentence, and such arrangements must be coordinated with
Transporter's Gas Control and Scheduling Department.
ARTICLE IX
ALLOCATIONS
9.1 ALLOCATIONS AT THE RECEIPT POINT(S) AND DELIVERY POINT(S) -
Except for allocation of Liquids which will be allocated according to Section
9.2 below, Transporter shall use all reasonable efforts to ensure that the
quantities actually redelivered by Transporter at the Delivery Point(s) on
behalf of Shipper are equal to the Equivalent Quantities as may have been
adjusted pursuant to Section 8.2, above. Unless prohibited by applicable law
or regulation, all receipts and deliveries and any Imbalance shall be
determined and allocated each Day based upon such nominated and confirmed
quantities and actual receipts and deliveries.
In such instances when Transporter is receiving or delivering quantities
of gas to any Receipt Point(s) or Delivery Point(s) on behalf of others and in
addition to Shipper's Gas, then the difference on any Day between the total
nominated and confirmed quantities at such point(s) and the total actual
quantities received or delivered at such point(s) shall be allocated by
Transporter among all shippers (including Shipper). When performing an
allocation at any Receipt Point(s) or Delivery Point(s) the Transporter shall
first make a reasonable effort to identify material differences by specific
shipper(s) (including Shipper) and allocate the difference to such shipper(s).
Such allocations shall be the sole responsibility of Transporter, and once the
amounts are determined by Transporter and allocated to each shipper (including
Shipper) such amount allocated shall be deemed accurate.
9.2 ALLOCATIONS OF LIQUIDS AT THE DELIVERY POINT(S) - Shipper's
Gas will be commingled with other gas which may enter Transporter's system at
various points downstream of the Receipt Point(s). As a result, the commingled
stream may not have the same natural gas liquid constituent composition or Btu
content as the Gas received by Transporter at the Receipt Point(s). Because
gas re-delivered at the Delivery Point(s) will have a different composition
than Gas received at the Receipt Point(s), and because Transporter may
re-deliver gas at the Delivery Point(s) for the account of others, including
for the account of Shipper, an allocation by Transporter of delivered
quantities (MMcf), MMBtu/CF, and Gas components back to each Receipt Point(s)
is required.
Transporter will allocate deliveries at the Delivery Point(s) for the
account of Shipper as follows. However, it is understood by both Parties that
for the first Year, the Btu/CF and the composition of Gas may be estimated as
agreed between the Parties until Transporter installs sampling for allocation
of Gas. If Transporter receives Gas from multiple Receipt Points, then the
allocation will be based upon the blended Btu/CF and composition of all Gas
from Shipper. The Btu/CF and composition of Gas received from the Receipt
Point(s), will be determined through sampling and chromatographic analysis
where practical or may be determined as shown in Exhibit "E". Likewise, the
Btu and composition of all gas (including Gas received from the Receipt
Point(s) under this Agreement) delivered at King Ranch will be determined
through sampling and chromatographic analysis at King Ranch. Transporter's
determinations of quantity and composition shall be provided to the Exxon King
Ranch Plant and to Shipper by the fifth (5th) business Day of each Month for
the prior Month's deliveries.
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ARTICLE X
BALANCING OF RECEIPTS AND DELIVERIES
10.1 BALANCING - It is recognized that because of dispatching and
other operational variations, from time to time it may be physically impossible
or operationally impractical for an exact daily balancing of Gas receipts. For
each Day, Transporter will determine any Imbalance calculated as the difference
between Equivalent Quantities and total Transporter's actual MMBtu's delivered
for Shipper's account at Delivery Point(s) ("IMBALANCE"). Such Imbalance(s)
shall be eliminated as soon thereafter as practical through adjustments in
nominations, confirmations, and/or physical deliveries and receipts of Gas or
through the cash-out mechanism described in Section 10.2, below.
Notwithstanding the above, Transporter can take any reasonable action necessary
to prevent Shipper from intentionally creating or maintaining an Imbalance.
10.2 RESOLUTION OF IMBALANCES - To the extent operationally
practical for Transporter, both Parties shall cooperate and eliminate any Daily
Imbalance(s), which include unresolved prior Days'('s) Imbalances by a
subsequent Daily adjustment(s) in Gas nominations, confirmations and/or
physical receipts and deliveries. Any such Imbalances remaining at the end of
each Month which are less than or equal to five percent (#5%) of the Daily
average for such Month shall be eliminated by a subsequent Daily adjustment(s)
in Gas nominations, as soon as practical during the following Month. Month-end
Imbalances which are greater than five percent ()5%) of the Daily average for
such Month shall be eliminated by monetizing the entire amount of the Imbalance
by multiplying the Imbalance by the simple average of each Day's gas price for
such Month as found in Gas Daily (Pasha Publication, Inc.) or successor
publication, in the section entitled "Daily Price Survey", the column entitled
"Daily Midpoint", and under the listings applicable to a Basket Price (as
described herein) i) multiplied by one-hundred and ten percent (110%) if
Shipper owes Transporter Gas, and ii) multiplied by ninety percent (90%) if
Transporter owes Shipper Gas. "BASKET PRICE" shall mean the simple average of
each Day's price quote, as described above, for the geographic location closest
in proximity to the Delivery Point(s) for the relevant Day for Houston Pipe
Line, Midcon Texas Pipeline, the Agua Dulce hub, Koch Gateway, Tennessee Gas
Pipeline - South Texas, and NGPL - South Texas. Should any element used in
calculating the Basket Price no longer be available, the Parties shall, by
mutual agreement, determine whether a substitute element is necessary. The
monetary amounts owed by Shipper or by Transporter for that Month's cash-out
will be debited or credited to the monetary amounts owed by Shipper to
Transporter for that Month's transportation.
ARTICLE XI
PRESSURES
11.1 PRESSURE AT RECEIPT POINT(S) - All Gas delivered at a Receipt
Point(s) shall be delivered at pressures sufficient to enter Transporter's
system at the working pressures maintained by Transporter at the Receipt
Point(s) from time to time. Transporter shall not be obligated to receive Gas
at pressures exceeding the Maximum Allowable Operating Pressures ("MAOP")
prescribed under any applicable governmental regulations and in no event will
such pressure exceed the MAOP of the system. Transporter's MAOP at the Conoco
Fandango Receipt Point is 945 psig (959.65 psia).
11.2 OVERPRESSURE PROTECTION - Both Shipper and Transporter are
individually, not jointly, responsible for the installation and maintenance of
overpressure protection equipment when necessary on their own, or their
designee's, pipeline(s), valve(s) and any other interconnection equipment.
11.3 ADDITIONAL COMPRESSION AND CO(2) FACILITIES - Notwithstanding
anything herein to the contrary, and not as a breach of the requirements for
delivery pressures set forth at Section 11.1, if Shipper cannot make deliveries
of Gas to Transporter hereunder at pressures required by Section 11.1 or at
CO(2) levels required by Section 12.1, then Shipper shall arrange with
Transporter, or one of Transporter's affiliates, to install such facilities on
Transporter's pipeline for the purpose of bringing Shipper's Gas into compliance
with the requirements of Sections 11.1 and 12.1. No facilities shall be
installed unless economically justifiable to Shipper as determined in good faith
by Shipper. Any agreement between Shipper and Transporter, or one of
Transporter's affiliates, will provide that the cost of such facilities will be
recovered using a payout of capital investment over seven (7) years and a return
on investment equivalent to the Prime Interest Rate plus five (5) percentage
points; PROVIDED, HOWEVER, in the event the remaining period in the Primary Term
is less than seven
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(7) years then such rate shall be calculated to reflect the shortened time
period or the Parties may agree to some other method of payment which will
result in Transporter's full recoupment of the required capital investment
within the foreshortened period of time at the same return on investment of five
(5) percentage points over the then existing Prime Interest Rate.
ARTICLE XII
QUALITY
12.1 SPECIFICATIONS - The Gas delivered each Day by Shipper to
Transporter at the Receipt Point(s) is to comply with the following
requirements:
(a) HYDROGEN SULFIDE - contain not more than one quarter (.25)
grain per one hundred Cubic feet;
(b) TOTAL SULFUR - contain not more than two (2) grain(s) per one
hundred (100) Cubic feet;
(c) CARBON DIOXIDE - contain not more than two percent (2%) by
volume
(d) GROSS HEATING VALUE - have a Gross Heating Value of not less
than 1050 Btu/CF at the Receipt Point(s),
(e) FREE WATER - contain no free water;
(f) OXYGEN - contain not more than five (5) parts per million
(ppm) by volume;
(g) WATER VAPOR - contain not more than seven (7) pounds per one
million (1,000,000) Cubic feet;
(h) SOLIDS - be commercially free of dust, gums, dirt, impurities
and other solids;
(i) MERCAPTANS - contain not more than five (5) ppm by
volume;
(j) TEMPERATURE - not have a temperature of less than
forty degrees (40 degrees) Fahrenheit nor more than one
hundred twenty-five degrees (125 degrees) Fahrenheit;
(k) NITROGEN - contain not more than two percent (2%) by volume;
(l) NON-HYDROCARBONS - contain not more than four percent (4%) by
volume. Typical non-hydrocarbons are, but are not limited to,
helium, carbon dioxide, nitrogen, hydrogen sulfide and
hydrogen.
Notwithstanding the specifications set forth in this Article, neither
Party nor its/their designee(s) shall dilute or inject any media, including but
not limited to air or nitrogen into the Gas stream, or treat the Gas in any
manner which will introduce or form any diluents, hazardous, toxic or other
undesirable compounds in the gas system. Transporter has the right to either
(i) accept Gas that does not conform to the specifications above, or (ii)
refuse delivery of the Gas that does not conform to the specifications above.
Transporter's acceptance of Gas that does not conform to the quality
specifications will not constitute a waiver of the specifications by
Transporter in regard to Gas delivered in the future, nor will acceptance of
the Gas without an express written waiver, constitute a waiver of any claims
for damages resulting from delivery of Gas not meeting the specifications.
ARTICLE XIII
METERING FACILITIES, MEASUREMENT, AND TESTING
13.1 MEASURING EQUIPMENT - Transporter, or Transporter's designee,
will designate the type of measuring equipment that will be utilized, and be
the operator of the measurement facilities ("OPERATOR"). Shipper may install,
maintain and operate, at its sole cost and expense, check measuring equipment;
provided, that the equipment is to be installed in a manner that will not
interfere with the operation of any other party's measuring equipment.
13.2 ORIFICE METERS - Orifice meters installed in the measuring
stations are to be constructed and operated in accordance with the American
Petroleum Institute ("API") 14.3, Orifice Metering of Natural Gas and Other
Related Hydrocarbon Fluids, dated 1992, and will include the use of flange
connections and, where necessary, straightening vanes.
13.3 ELECTRONIC DEVICES - When and where electronic measurement and
flow computers are utilized, the Gas received may have its volume, mass,
gravity, composition or energy content determined and computed in accordance
with applicable AGA standards including, but not limited to: API 14.3, 1992
edition; AGA Report No. 5, 1983 edition; AGA Report No. 6, 1971 edition; and
AGA Report No. 7, 1984 edition. The Parties will use and accept the electronic
derivations, measurements and calculations in lieu of mechanical recordings,
chart integration and subsequent calculations.
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13.4 NOTICE - Operator will give reasonable notice for Shipper to
have representatives present to observe the installation, changing, repairing,
testing, calibration, or adjustment of Operator's measuring equipment used in
measuring, of receipts or deliveries of Gas. If after proper notice, Shipper
fails to have a representative present, the results of the tests shall
nevertheless be considered accurate. The official charts or recordings or both
from the measuring equipment will remain the property of Operator, but upon
request by Shipper, Operator will submit its records and charts, together with
calculations to Shipper for inspection and verification, subject to their
return to Operator within thirty (30) Days after their receipt.
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13.5 TESTING AND CALIBRATION -
(a) Operator will verify the accuracy, adjust and calibrate all
recording devices used in the measurement of the receipt and delivery of Gas on
at least a Monthly basis or will witness such calibration. Operator is not
required to, but may elect to, adjust or calibrate the equipment more
frequently, unless non-operator desires a special test to be performed as
described in the Section 13.6 entitled Special Test.
(b) If, during any test of the measuring equipment, an adjustment
or calibration error is found which results in an incremental adjustment to the
calculated hourly flow rate through each meter in excess of one percent (1%)
of the correct flow rate (whether positive or negative and using the correct
flow rate as the percent error equation denominator), then any previous
recording of such equipment will be corrected to zero (0) error for any period
in which the error existed (and which is either known definitely, or agreed to
by both Parties), and the total flow for the period redetermined in accordance
with the provisions of Section 13.7 entitled Measurement Adjustment. If the
period of error cannot be determined, or agreed upon, between the Parties, the
correction will be made over a period extending over the last one-half (1/2) of
the time elapsed since the date of the latest test, such correction period not
to exceed fifteen (15) Days.
(c) If, during any test of the measuring equipment, an adjustment
or calibration error is found which results in an incremental adjustment to the
calculated hourly flow rate which does not exceed one percent (1%) of the
adjusted flow rate (as described in part (b) of this Section), all prior
recording will be considered to be accurate for quantity determination
purposes.
13.6 SPECIAL TEST - If Shipper desires a special test (a test not
scheduled by Operator under Section 13.5 entitled Testing and Calibration) of
any measuring equipment, seventy-two (72) hours advance written notice will be
given to Operator, and both Parties will cooperate to secure a prompt test of
the accuracy of the equipment. If the measuring equipment tested is found to
meet the requirements of Section 13.5(c), or if an inspection of the primary
measurement equipment indicates no problems, Operator has the right to bill and
Shipper is to pay those costs.
13.7 MEASUREMENT ADJUSTMENT - If, for any reason, any measurement
equipment is (i) out of adjustment as defined in Section 13.5, (ii) out of
service, or (iii) out of repair and the total calculated hourly flow rate
through each meter is found to be in error by an amount described in
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Section 13.5(b), the total quantity of Gas delivered will be redetermined in
accordance with the first of the following methods which is feasible:
(a) by using the registration of any mutually agreeable check
metering facility, if installed and accurately registering (subject to testing
as described in Section 13.5);
(b) where parallel multiple meters exist, by calculation using the
registration of such parallel meters; provided, that they are measuring Gas
from upstream and downstream headers in common with the faulty metering
equipment, are not controlled by separate regulators, and are accurately
registering;
(c) by correcting the error by re-reading of the official charts,
or by straightforward application of a correction factor to the quantities
recorded for the period (if the net percentage of error is ascertainable by
calibration, tests or mathematical calculation);
(d) by estimating the quantity, based upon deliveries made during
periods of similar conditions when the meter was registering accurately.
ARTICLE XIV
MEASUREMENT SPECIFICATIONS
The measurements of the quantity and quality of all Gas received and
delivered hereunder shall be conducted in accordance with the following:
14.1 UNIT OF VOLUME - The unit of volume for measurement is to be
one (1) Cubic Foot of gas.
14.2 VOLUME COMPUTATIONS - Computations of Gas volumes from
measurement data shall be made in accordance with API 14.3, Orifice Metering of
Natural Gas and Other Related Hydrocarbon Fluids, dated 1992, and any
subsequent amendments as mutually agreed upon. If electronic devices and flow
computers are utilized, volumes will be determined in accordance with AGA
Committee Report No(s). 5, 6, and 7, as specified in the Section titled
Electronic Devices, and any subsequent amendments or revisions, as mutually
agreed upon.
14.3 TEMPERATURE MEASUREMENT - The temperature of the Gas is to be
determined electronically, or by a recording thermometer, so installed that it
may record the temperature of the Gas flowing through the meters. If the
Parties do not consider the installation of such a recording thermometer to be
necessary, other agreeable means of recording temperature may be used. The
average temperature to the nearest one degree (1 degrees) Fahrenheit, obtained
while Gas is being delivered, will be the applicable flowing Gas temperature
for the period under consideration.
14.4 SPECIFIC GRAVITY MEASUREMENT - At least Monthly, the specific
gravity of the Gas will be determined by the chromatographic analysis of, at
Operator's option, either a spot Gas sample or a continuous composite Gas
sample. The specific gravity will be determined and calculated to the nearest
one-thousandth (0.001). At least annually, however, an extended
chromatographic test will be used to verify the heavier hydrocarbon content of
the Gas and the affect on specific gravity.
14.5 ADJUSTMENT FOR SUPERCOMPRESSIBILITY - Adjustments to measured
Gas volumes for the effects of supercompressibility are to be made in
accordance with accepted AGA standards. At least Monthly, Operator is to
obtain representative carbon dioxide (CO(2)) and nitrogen (N(2)) mole fraction
values for the Gas delivered, or received, as may be required to compute such
adjustments in accordance with standard testing procedures. The calculation of
supercompressibility will be taken from the AGA Report No. 8, dated December
1992, Compressibility and Supercompressibility for Natural Gas and Other
Hydrocarbon Gases, or at Operator's option, any subsequent revision to AGA
Report No. 8.
14.6 ASSUMED ATMOSPHERIC PRESSURE - An assumed atmospheric pressure
of fourteen and four-tenths (14.4) psia will be utilized for measurement and
calculation purposes, irrespective of any variation of the actual atmospheric
pressure from the assumed atmospheric pressure.
14.7 GROSS HEATING VALUE - At least Monthly, the Gross Heating
Value of the Gas will be determined by a chromatographic analysis of, at
Transporter's option, either a spot Gas sample or a
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continuous composite Gas sample.
14.8 SAMPLES, ANALYSIS AND CALCULATION - One Gas sample will be
physically taken at a suitable point to be representative of the flowing Gas
stream to be used to provide the sampling requirements in the Sections titled
Specific Gravity Measurement, Adjustment for Supercompressibility, and Gross
Heating Value. The sample will be taken, handled and analyzed in accordance
with the latest revision of Gas Processors Association (GPA Standards and
Procedures GPA 1161, GPA 2166 and GPA 2174, as applicable. The specific
gravity and Gross Heating Value are to be calculated and determined in
accordance with GPA Standards - GPA 2172, GPA 2145, as applicable.
14.9 OTHER TESTS - Other tests to determine water content, sulfur,
and other impurities in the Gas will be conducted by Operator as necessary and
will be conducted in accordance with standard industry testing procedures. The
Party requested to perform such test(s) will bear the cost of test(s) only if
the Gas tested is determined not to be within the applicable specification(s),
otherwise the requesting Party will bear the cost of such test(s).
14.10 NEW TEST METHODS - If at any time during the term of this
Agreement a new method or technique is developed with respect to Gas
measurement, the new method or technique may be substituted for the method or
technique identified in this Article, when the method or technique meets the
currently accepted standards of the American Gas Association, and if mutually
agreed to by the Parties.
ARTICLE XV
FORCE MAJEURE
15.1 FORCE MAJEURE - If either Transporter or Shipper is rendered
unable, wholly or in part, by force majeure to perform or comply with any
obligation or condition of this Agreement, such obligation or condition shall
be suspended during the continuance of the inability so caused and such Party
shall be relieved of liability and shall suffer no prejudice for failure to
perform the same during such period; provided, the obligation to make payments
then due for Gas received shall not be suspended and the cause for suspension
(other than strikes or lockouts) shall be remedied so far as possible with
reasonable dispatch. The Party suffering any such force majeure shall give
notice and reasonably full particulars to the other Party as soon as reasonably
possible upon the occurrence of such event. Settlement of strikes and lockouts
shall be wholly within the discretion of the Party having the difficulty. The
term "FORCE MAJEURE" shall include, without limitation by the following
enumeration: acts of God; the public enemy; the elements; fire; accidents;
breakdowns; the need to repair, maintain or alter machinery, lines of pipe, or
plants and equipment; strikes and any other industrial, civil, or public
disturbance, the inability to obtain materials, supplies, permits or labor; and
any laws, orders, rules, regulations, acts or restraints of any government or
governmental body or authority, civil or military; and any other cause, whether
of the kind herein enumerated or otherwise, not reasonably within the control
of the Party claiming force majeure, and which, by the exercise of due
diligence, such Party is unable to overcome.
ARTICLE XVI
BILLING AND PAYMENT
16.1 ACCOUNTING STATEMENTS - Transporter shall render to Shipper,
on or before the fifteenth (15th) Day of each Month i) a statement setting
forth, with respect to all Gas received by Transporter during the preceding
Month at the Receipt Point(s), the total quantity and the Gross Heating Value
of said Gas, ii) a statement setting forth, with respect to all Gas redelivered
to Shipper during the preceding Month at the Delivery Point(s), the total
quantity and the Gross Heating Value of said Gas, iii) the transportation
charge therefor Transporter may initially bill on estimates if all actual
information is not available at the time the statement is to be sent. On or
before the last Day of such Month, the Shipper shall make payment by wire
transfer, in accordance with wire transfer instructions on the invoice, to
Transporter for all Gas received by Transporter for Shipper at the Receipt
Point(s) during the preceding Month ("PAYMENT DUE DATE").
16.2 LATE PAYMENT - In the event Shipper fails to pay any amount
due Transporter when the same is due, the unpaid balance shall bear interest
from the due date until the date when same is
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paid at the Prime Interest Rate, plus one percent (1%), each change in the
Prime Interest Rate to be effective without notice on the effective date of
each change; PROVIDED, HOWEVER, the Prime Interest Rate chargeable hereunder
shall never exceed the maximum non-usurious rate of interest allowed by
applicable law. In the event such failure to pay continues for a period of
forty-five (45) Days or more past the Payment Due Date, Transporter may, in
addition to its other remedies, terminate this Agreement (Shipper's obligations
to pay any amounts then due and owing to Transporter shall survive such
termination).
16.3 ERRORS AND DISPUTES IN STATEMENTS - In the event an error is
discovered in the amount billed in any statement rendered by Transporter, such
error shall be adjusted within thirty (30) Days of the discovery of the error.
In the event a dispute arises as to the amount payable in any statement
rendered, Shipper shall nevertheless pay the undisputed amount to Transporter
under the statement rendered pending resolution of the dispute. Acceptance of
such payment shall not be deemed to be a waiver by Transporter to recoup any
underpayment, which shall be paid by Shipper. The subsequent payment of a
disputed amount shall bear interest as provided in this Article, from its
original due date until paid.
16.4 EXAMINATION OF BOOKS AND RECORDS - Each Party shall have the
right at reasonable hours on business Days to examine the books and records of
the other to assure compliance with the terms of this Agreement. If any such
examination reveals an error in billing, the necessary adjustments and payment
shall be made within thirty (30) days of a final determination.
16.5 AUDIT RIGHTS - The Parties agree the right to audit the books
and records hereunder shall be limited and Parties right to audit records will
be limited to a period of two (2) years following the date of any invoice or
payment.
ARTICLE XVII
NOTICES
17.1 NOTICES - All notices required hereunder shall be sent to the
following addresses:
TRANSPORTER: FOR PAYMENTS ONLY:
----------- -----------------
Lobo Pipeline Company
P.O. Box 1267
Ponca City, OK 74603
Attn: Gas Revenue, 300-9 NT
FOR ALL OTHER MATTERS:
---------------------
Lobo Pipeline Company
Attn: Texas Transportation Coord.
P.O. Box 2197
Houston, TX 77252-2197
SHIPPER: FOR STATEMENTS:
------- --------------
TransTexas Gas Corp.
1300 North Sam Houston Parkway East
Houston, TX 77032
Attn: Natural Gas Accounting
FOR NOTICES AND CORRESPONDENCE:
------------------------------
TransTexas Gas Corp.
Attn: Transportation Coordinator
1300 North Sam Houston Parkway East
Houston, TX 77032
ARTICLE XVIII
TAXES
In addition to paying the transportation rate and other fees and
adjustments provided in the Agreement, Shipper shall also reimburse Transporter
for Taxes and certain other fees as follows:
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18.1 TAX REIMBURSEMENT - Shipper shall reimburse Transporter for
Taxes, except income taxes, which are levied upon and/or paid by Transporter
with respect to the transportation services performed for the Gas hereunder
and under the terms of this Agreement.
18.2 REIMBURSEMENT OF FEES - Shipper shall reimburse Transporter
for any and all filing fees in connection with transportation services rendered
to Shipper hereunder that Transporter is required to pay by any governmental
authority having or asserting jurisdiction.
ARTICLE XIX
GOVERNMENTAL REGULATIONS
19.1 GENERAL -
(a) This Agreement and all rates, terms, services and operations
hereunder are subject to all present and future applicable federal and state
laws and the applicable ordinances, orders, rules and regulations of any local,
state or federal governmental authority having or asserting jurisdiction; but
nothing contained herein shall be construed as a waiver of any right to
question or contest any such law, ordinance, order, rule, or regulation, or
operating statement in any forum having jurisdiction in the premises except
that Shipper agrees not to oppose any filing related to this Agreement which
would not adversely affect Shipper's rights hereunder.
(b) If at any time during the term of the Agreement any
governmental authority shall take any action as to Transporter whereby: i) the
receipt, transportation or other services and delivery of gas throughout its
Lobo Pipeline Company system shall be proscribed or subjected to terms,
conditions, regulations, restraints or rate or price controls that are unduly
burdensome to Transporter, Transporter may suspend affected activities, seek
regulatory approval or waivers to continue such action, or Transporter may
cancel and terminate this Agreement and the Interruptible Agreement; or ii) the
effect of i) above is to increase Shipper's Section 6.1 rate or reduce Gas
transportation volumes, and either is unduly burdensome to Shipper, Shipper may
seek regulatory waiver or Shipper may cancel and terminate this Agreement and
the Interruptible Agreement.
19.2 FILINGS - Transporter shall file all necessary reports and/or
notices required by the Railroad Commission of Texas or any other entity having
jurisdiction over the matters set forth in this Agreement, and Shipper shall
provide Transporter with any necessary compliance information requested by
Transporter in connection with preparing such reports as they pertain to
Shipper.
ARTICLE XX
MISCELLANEOUS
20.1 HEADINGS AND SUBHEADINGS - The headings contained in this
Agreement are used solely for convenience and do not constitute a part of the
agreement between the Parties hereto and shall not be used to aid in any manner
in construing this Agreement.
20.2 WAIVER - No waiver by either Party of any one or more defaults
by the other Party in the performance of this Agreement shall operate or be
construed as a waiver of any future default or defaults, whether of a like or
different character.
20.3 THIRD PARTY COMPLIANCE - In the event it becomes necessary for
any designee(s) of Shipper or Transporter to perform so that the obligations of
Shipper or Transporter may be fulfilled hereunder, Shipper and Transporter
agree to use reasonable efforts to cause their respective designee(s), under
the terms of a separate agreement if necessary, to perform so that such
obligations under the terms of this Agreement may be fulfilled.
20.4 ASSIGNMENT - This Agreement shall extend to and be binding
upon the successors and assigns of the Parties hereto, but may only be assigned
in whole by Shipper; provided, further, that no assignment can be made without
the prior written consent of the Transporter, which consent may not be
unreasonably withheld.
20.5 FACILITIES - The measurement and appurtenant facilities
required at the Receipt Point(s) and Delivery Point(s) shall be installed,
owned, operated and maintained by Transporter.
20.6 GOVERNING LAW - AS TO ALL MATTERS OF CONSTRUCTION AND
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INTERPRETATION, THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS.
20.7 NO THIRD PARTY BENEFICIARY - It is expressly understood that
there is no third party beneficiary to this Agreement, and that the provisions
of this Agreement do not impart enforceable rights in anyone who is not a
Party, successor or assignee of a Party hereto.
20.8 AGREED DISPUTE RESOLUTION - It is agreed, as a severable and
independent arbitration agreement separately enforceable from the remainder of
this Agreement that if the Parties hereto or their respective successors,
assigns, heirs, or legal representatives of any of the foregoing are unable to
amicably resolve any dispute or difference arising under or out of, in relation
to or in any way connected with this Agreement (whether contractual, tortious,
equitable, statutory or otherwise), such matter shall be finally and
exclusively referred to and settled by arbitration in accordance with that
certain Dispute Resolution Agreement made effective as of July 1, 1996, between
the Parties hereto, and others, the terms and provisions of which are
incorporated by reference herein.
20.9 DAMAGE LIMITATIONS - Notwithstanding anything to the contrary
herein, neither Party shall be liable for or otherwise responsible to the other
Party for punitive, consequential, or incidental damages or for lost profits
which arise out of or relate to this Agreement or the performance or breach
thereof.
20.10 JOINT EFFORT - The Parties stipulate and agree that this
Agreement shall be deemed and considered for all purposes, as prepared through
the joint efforts of the Parties, and shall not be construed against one Party
or the other as a result of the preparation, submittal or other event of
negotiation, drafting or execution hereof.
20.11 FACSIMILE - Facsimile copies of all notices and correspondence
hereunder, including signatures thereon, shall constitute original copies
thereof and shall be as binding on the Parties hereto as the original. The
sending Party shall, within five (5) business Days of the date of any facsimile
transmission, send to the receiving Party an original of any notice or
correspondence transmitted by facsimile, other than nominations.
20.12 CONDUCT OF THE PARTIES - The Parties shall use good faith in
all matters relating to this Agreement. The phrase "GOOD FAITH" whenever used
in this Agreement shall have the meaning set forth in the Tex. Bus. & Com. Code
Ann. Section 1.201(19) (Tex. UCC) (Vernon 1994).
20.13 ENTIRETY OF AGREEMENT - This Agreement including the Exhibits
contains the entire agreement of the Parties with respect to the matters
covered hereby. No other agreement, statement, or promise made by any Party,
or to any employee, officer, or agent of any Party, which is not contained in
this Agreement shall be binding or valid.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on
this the 30th day of May, 1997, to be effective as of the Effective Date.
LOBO PIPELINE COMPANY TRANSTEXAS GAS CORPORATION
By: /s/ BARRY L. OAKES By: /s/ ARNOLD BRACKENRIDGE
------------------------------- ---------------------------------
Name: BARRY L. OAKES Name: ARNOLD BRACKENRIDGE
----------------------------- -------------------------------
Title: Vice President Title: President
---------------------------- ------------------------------
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INTRASTATE FIRM GAS TRANSPORTATION AGREEMENT
EXHIBIT "A"
RECEIPT POINT(S)*
POINT DESCRIPTION TRANSPORTER METER NUMBER
1) CONOCO FANDANGO -The interconnection Meter #11032
between Midcon North Bob West Pipeline
and Transporter
* Shipper warrants that all Gas received at the Receipt Point(s) has
not previously flowed in "interstate commerce", as that phrase is defined in
the Natural Gas Act of 1938, Sec. 2.(7).
A-1
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INTRASTATE FIRM GAS TRANSPORTATION AGREEMENT
EXHIBIT "B"
DELIVERY POINT(S)
POINT DESCRIPTION TRANSPORTER METER NUMBER
EXXON KING RANCH PLANT inlet Meter #'s 1070 & 1071
located in Kleberg Co.
B-1