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EXHIBIT 10.8
NATURAL GAS SALES AGREEMENT
This Natural Gas Sales Agreement ("Agreement") is made and entered into
as of the 23rd day of October, 1996, by and between EASTERN ENERGY MARKETING,
INC., a Virginia corporation located at 2900 Eisenhower Avenue, Suite 300,
Alexandria, VA 22314 ("EEM" or "Buyer"), and EASTERN STATES OIL & GAS, INC., a
Virginia corporation located at 2900 Eisenhower Avenue, Suite 300, Alexandria VA
22314, ("ESOG" or "Seller") (hereinafter sometimes referred to singularly as
"Party" and jointly as "Parties").
WITNESSETH:
WHEREAS, ESOG owns and operates certain oil and gas interests,
including oil and gas leases and oil and gas wells, all of which properties are
located in the states of Ohio, West Virginia and Commonwealth of Kentucky (the
"Properties");
WHEREAS, EEM contracts for the purchase of natural gas supply for
resale to its industrial and institutional end-use markets;
WHEREAS, ESOG desires to sell to EEM certain natural gas it produces
and controls originating from the Properties;
WHEREAS, EEM wishes to purchase the natural gas produced by ESOG from
the Properties at the Delivery Points specified herein;
NOW, THEREFORE, in consideration of the premises and covenants
contained herein, the Parties agree as follows:
ARTICLE I
TERM
1.1 The term of this Agreement shall be for an additional two (2) year
period commencing as of November 1, 1995, and ending October 31, 1997 (the
"Initial Term"), and after the Initial Term shall continue month-to-month
thereafter; provided, however, that after the Initial Term, either Party may
renegotiate the provisions of, or terminate entirely, this Agreement by
providing the other Party with thirty (30) days' prior written notice.
1.2 The terms and conditions of this Agreement are intended to
facilitate the entering into by the Parties of a variety of transactions with
specific terms and durations. The terms of this Agreement shall, unless and to
the extent specifically agreed otherwise, apply to and be incorporated in the
Confirmation Letter executed between the Parties using the form attached hereto
at Exhibit A. The type of transactions covered by this Agreement will be
designated on the Confirmation Letter. In case of conflict between the terms of
any Confirmation Letter and the terms of this Agreement the terms of a
Confirmation Letter shall control.
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ARTICLE II
CONTRACT QUANTITIES; DELIVERY POINTS
2.1 Seller agrees to sell and deliver, and Buyer agrees to purchase and
receive, the Contract Quantity for a particular transaction in accordance with
the terms of this Agreement and the applicable Confirmation Letter.
2.2 The Delivery Points and point-specific Contract Quantities of the
natural gas produced from the Properties and sold pursuant to this Agreement
shall be identified on the applicable Confirmation Letter.
ARTICLE III
DELIVERY AND PRESSURE
3.1 Seller and Buyer agree to deliver and receive Gas at an
approximately constant rate of flow throughout the term of this Agreement. To
that end, Buyer and Seller shall communicate timely the anticipated market
requirements and supply forecasts for the forthcoming month. Changes in the
availability of supply or ability to take gas shall be communicated between the
Parties immediately and, in order to allow for the effectuation of changes in
Contract Quantities scheduled for transportation, at least twenty-four (24)
hours in advance of their effective date. Imbalance penalties and any related
charges resulting from failure to communicate timely such changes or to take or
dispatch agreed-up confirmed quantities shall be the responsibility of the Party
whose failure caused the imbalance. Notwithstanding the liability established in
the preceding sentence (and without attempting to alter the fixing of that
liability), to the extent changes are not communicated twenty-four (24) hours
prior to their effective date, the Parties shall nonetheless communicate changes
immediately in order to attempt to mitigate scheduling penalties and related
charges, wherever possible pursuant to effective pipeline operating procedures.
Notice of changes provided for in this Section 3.1 shall not relieve the
notifying Party of its delivery obligations provided for in this Agreement.
3.2 The natural gas volumes delivered hereunder shall be at commercial
operating pressures sufficient to deliver such volumes at regulated pressures at
the Delivery Points.
ARTICLE IV
PURCHASE PRICE
4.1 During the term of this Agreement, Buyer shall pay to Seller the
Purchase Price specified on the applicable Confirmation Letter for all Contract
Quantities delivered to the applicable Delivery Point. The Purchase Price shall
include current gathering or pipeline transportation, pipeline shrinkage and
fuel factors and all related surcharges, to deliver Gas to the Point of Sale.
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ARTICLE V
TAXES
5.1 Seller shall be responsible for and pay for any taxes and charges
attributable to the gas before the Delivery Point. Buyer shall be responsible
for and pay for any taxes and charges attributable to the gas after the Delivery
Point.
ARTICLE VI
PAYMENTS
6.1 Buyer agrees to pay Seller the amount due on or before the later of
forty-five (45) days after the conclusion of the applicable delivery month or
within ten (10) days after Buyer's receipt of the Transporters' statements
showing actual metered Contract Quantities received at the applicable
Transporters' receipt point (the "Due Date"). Any Due Date falling on a holiday
or weekend will be scheduled for payment the next working day.
6.2 Buyer's payments shall reflect the total Contract Quantities
delivered to Buyer during the applicable month, the Purchase price and the total
dollar amount due.
6.3 If Buyer or Seller, in good faith, disputes the amount of any such
payment or any part thereof, Buyer will pay to Seller such amount acknowledged
to be correct. If it is ultimately determined that Buyer owes the disputed
amount, Buyer will pay Seller that amount upon such determination, plus any
costs and expenses necessarily incurred to obtain such ultimate determination,
including reasonable attorneys fees and related costs.
6.4 The parties shall have the right, upon reasonable notice and at
reasonable times, to examine the books and records of the other to the extent
reasonably necessary to verify the accuracy of any statement, payment demand,
charge, payment or computation made under the Agreement. Provided, however, that
any such audit and any claim based upon errors in any statement must be made
within two (2) years of the date of such statement.
ARTICLE VII
GAS QUALITY AND MEASUREMENT
7.1 Seller shall sell and deliver to Buyer at the Delivery Points gas
that is merchantable and meets all the specifications, quality and pressure
which are required by the Transporters. Measurement, testing and heat content of
the gas purchased hereunder shall be measured on a dry basis, and shall be
governed by the Transporters' applicable measurement procedures.
7.2 Contract Quantities shall ultimately be determined by a
reconciliation of Seller's monthly gas supply reports and the Transporters'
monthly transportation statements. Buyer and Seller shall cooperate to determine
the Contract Quantities flowing into the Transporters. In the
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event that Seller and Buyer do not agree on the monthly Contract Quantities,
Buyer and Seller agree to work together to reconcile any volume discrepancies.
ARTICLE VIII
WARRANTY
8.1 Seller warrants that it will at the time of delivery have good and
marketable title to, and the right to sell all gas to be sold and delivered
hereunder and that the gas is free and clear from all liens and adverse claims
of every kind, and agrees to indemnify and save harmless and defend Buyer from
all suits, actions, accounts, damages, costs, losses and expenses (including
reasonable attorney's fees) arising from or connected with the adverse claim of
any person to title to said gas.
ARTICLE IX
TITLE AND LIABILITY
9.1 Seller shall indemnify, defend and hold Buyer harmless from and
against any liability or loss whatsoever (including costs and reasonable
attorney's fees in connection therewith) due to personal injury or death or
damage to or destruction of property arising out of or occurring during Seller's
possession of any gas to be delivered hereunder except as otherwise provided in
this Agreement.
9.2 Buyer shall indemnify and hold Seller harmless from and against any
liability or loss whatsoever (including costs and attorney's fees in connection
therewith) due to personal injury or death or damage to or destruction of
property arising out of or occurring during Buyer's possession of any gas to be
delivered hereunder except as otherwise provided in this Agreement.
9.3 Title to gas sold hereunder and possession thereof shall pass from
the Seller to Buyer at the Delivery Points.
9.4 Neither party shall be responsible for consequential or punitive
damages.
ARTICLE X
FORCE MAJEURE
10.1 If Seller or Buyer is rendered unable, wholly or in part, by force
majeure to carry out its obligations under this Agreement, Seller or Buyer shall
give to all other parties prompt written notice of the force majeure with
reasonable full particulars thereof; thereupon, the obligations of Seller or
Buyers so far as they are affected by the force majeure, shall be suspended
during the continuance of the force majeure. Seller or Buyer shall use all
reasonable diligence to remove the force majeure as quickly as possible.
10.2 The requirement that any force majeure shall be remedied with all
reasonable diligence shall not require the settlement of strikes, lockouts, or
other labor difficulty contrary to the
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wishes of the party suffering the difficulty; the manner in which such labor
difficulties shall be handled shall be entirely within the discretion of the
party suffering the difficulty.
10.3 The term "force majeure" as here employed shall mean an act of
God, strike, lockout, or other industrial disturbances, act of the public enemy,
war blockade, public disturbance, lightning, fire, storm, flood, freeze,
explosion, governmental restraint, compressor failure, pipeline ruptures, and
any other cause, whether the kind specifically enumerated above or otherwise,
which is not reasonably within the control of the parties. The term "force
majeure" specifically excludes increases or decreases in gas supply due to
allocation or reallocation of production by Seller, pipelines or other parties,
economic hardship or movements in the price of natural gas or other fuels that
would make the performance of the Agreement burdensome or undesirable for either
party.
ARTICLE XI
NOTICES
11.1 All notices and written communications between the parties hereto
including Seller's invoices and Buyer's remittances, shall become effective when
delivered by the parties in accordance with the provisions of this Agreement to
the following addresses:
BUYER
Notices to: EASTERN ENERGY MARKETING, INC.
Attention: John A. Schultz
2900 Eisenhower Avenue, Suite 300
Alexandria, VA 22314
Telephone: (703) 317-2300
Facsimile: (703) 317-2201
SELLER
Notices to: EASTERN STATES OIL & GAS, INC.
2900 Eisenhower, Suite 300
Alexandria, VA 22314
Attention: Stevens V. Gillespie
Telephone: (703) 317-2327
Facsimile: (703) 317-2301
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Payments to: EASTERN STATES OIL & GAS, INC.
2900 Eisenhower, Suite 300
Alexandria, VA 22314
Attention: Stevens V. Gillespie
Telephone: (703) 317-2327
Facsimile: (703) 317-2301
11.2 Either Party may change the information, including changes, of
personnel, set out in paragraph (a) immediately above by providing the other
party with prior notice. Notice may be oral but such oral notice shall be
followed with written notice within five (5) business days.
11.3 Notices required by this Agreement may be made by
telecommunications transmission (e.g., facsimile or telecopy), including
presentation of invoices, and such telecommunication shall constitute acceptable
presentation of notice and invoices under this Agreement. If notices are sent by
overnight mail, an employee signature shall constitute receipt.
ARTICLE XII
LAWS AND REGULATIONS
12.1 This Agreement shall be subject to all applicable and valid laws,
ordinances, rules and regulations of federal, state or local authorities having
jurisdiction now or hereafter having jurisdiction over the Parties; and should
either of the Parties, by force of any such law or regulation imposed at any
time during the term of this Agreement, be rendered unable, wholly or in part,
to carry out its obligations under this Agreement, other than an obligation to
make payments due hereunder, then this Agreement shall continue nevertheless and
shall then be deemed modified to confirm with the requirements of such law or
regulation. Notwithstanding the above, this Agreement shall not be deemed to be
so modified if such law or regulation substantially and materially prohibits the
Parties from performing hereunder or has the affect of materially altering the
economic position of the Parties or either of them; then the party hereby
injured may, by written notice to the other Party, require that this Agreement
or other arrangements incidental to this Agreement be amended as necessary to
preserve the economic position held by the affected Party immediately prior to
such event. Such notice shall describe the action taken by the regulatory
authority and shall include reasonable particulars as to the manner and extent
to which the economic position of the Party giving the notice has been adversely
affected. The Parties shall use all their reasonable efforts during a sixty (60)
Day period following such notice to negotiate and effect such amendments.
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ARTICLE XIII
MISCELLANEOUS
13.1 This Agreement constitutes the entire Agreement between the
Parties hereto. There are no prior or contemporaneous Agreements or
representations affecting such subject matter other than those expressed in the
Agreement.
13.2 No modification or change herein shall be enforceable, except as
specifically provided for in the Agreement, unless reduced to writing and
executed by both Parties.
13.3 No assignment of this Agreement or any of the rights or
obligations hereunder shall be made by either Party unless the other Party has
consented in writing thereto, which consent shall not be unreasonably withheld
or delayed; provided, however, either Party may assign or pledge this Agreement
under the provisions or any mortgage, deed of trust, indenture, by operation of
law or similar instrument which it has executed or may execute.
13.4 The Agreement shall be governed by and construed, enforced and
performed in the State of Virginia, without regard to principles of conflicts of
law. The Parties acknowledge and agree that the provisions of the Uniform
Commercial Code will apply to all aspects of transactions and confirmations
engaged in and entered into under this Agreement.
13.5 In no event shall either Party be liable for any punitive,
incidental, consequential, direct, indirect, or other damages not expressly set
forth herein.
13.6 The headings used for the Articles herein are for convenience and
reference purposes only and shall in no way affect the meaning or interpretation
of the provisions of the Agreement.
13.7 The terms of this Agreement including but not limited to the
Purchase Price, the Contract Quantities, the identified Transporter(s), and all
other material terms thereof shall be kept confidential by the Parties hereto,
except that any information must be disclosed to a third-party for the purpose
of effectuating transportation of Gas subject to this Agreement or to meet New
York Mercantile Exchange requirements or regulatory filing requirements where
necessary, or as otherwise required by law.
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IN WITNESS WHEREOF, this Agreement shall be binding upon the parties
hereto and upon their respective heirs, successors, representatives and assigns.
The Seller and Buyer have caused this Agreement to be executed by their duly
authorized officers as of the date first above written.
BUYER:
EASTERN ENERGY MARKETING, INC.
By: /s/ John A. Herbert
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John A. Herbert
Senior Vice President
SELLER:
EASTERN STATES OIL & GAS, INC.
By: /s/ Stevens V. Gillespie
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Stevens V. Gillespie
Senior Vice President
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CONFIRMATION LETTER
Date: November 1, 1998 STATOIL ENERGY, Inc.
PLEASE DELIVER IMMEDIATELY UPON RECEIPT TO: HUGH BYERS
PHONE NO.: (304) 343-9566
FAX NO: (304) 344-0363
This letter serves to confirm the following agreement entered into by and
between STATOIL ENERGY SERVICES, INC. and BLAZER ENERGY CORPORATION and subject
to the General Terms and Conditions agreed to and entered into by the parties
hereto.
BUYER: STATOIL ENERGY SERVICES, INC.
SELLER: BLAZER ENERGY CORPORATION
TYPE OF TRANSACTION: Baseload - Term
TERM: November 1, 1998 through October 31, 1999
CONTRACT QUANTITIES (Dth): 66,000 Dth per day
PURCHASE PRICE (Dth): The Purchase Price per Dth for the Contract
Quantities set forth above will be calculated
monthly based on the Inside F.E.R.C. Columbia Gas
Appalachia Index plus $0.02 per Dth.
POINT OF SALE: Columbia Gas Transmission (WV & KY)
POINT OF DELIVERY: Columbia Gas Transmission (WV & KY)
SPECIAL PROVISIONS: The parties have respective firm obligations to
deliver and to receive the Contract Quantities.
Force Majeure due to disruption of pipeline service
is limited to interruption or curtailment of firm
transportation by the transporting pipeline(s).
THE PROVISIONS WITHIN THIS CONFIRMATION LETTER SHALL BE CONCLUSIVELY DEEMED
ACCURATE AND COMPLETE TO THE EXTENT IT IS NOT OBJECTED TO, IN WRITING, WITHIN
TWENTY-FOUR (24) HOURS OF RECEIPT.
STATOIL ENERGY SERVICES, INC. BLAZER ENERGY CORPORATION
By: /s/ Mark A. Williams By: /s/ Stevens V. Gillespie
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Name: Mark A. Williams Name: Stevens V. Gillespie
Title: Manager, Appalachian Supply Title: Senior Vice President
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CONFIRMATION LETTER
Date: January 4, 1999 STATOIL ENERGY, INC.
ESOG Contract # WV-S-0188
PLEASE DELIVER IMMEDIATELY UPON RECEIPT TO: HUGH BYERS
PHONE NO.: (304) 343-9566
FAX NO: (304) 343-0363
This letter serves to confirm the following agreement entered into by and
between STATOIL ENERGY SERVICES, INC. and EASTERN STATES OIL & GAS, INC. and
subject to the General Terms and Conditions agreed to and entered into by the
parties hereto.
BUYER: STATOIL ENERGY SERVICES, INC.
SELLER: BLAZER ENERGY CORP.
TYPE OF TRANSACTION: Baseload - Term
TERM: November 1, 1998 through October 31, 2001
CONTRACT QUANTITIES (DTH): 4,134 Dth per day
PURCHASE PRICE (DTH): 100 percent (100%) of that price published
in the first monthly issue of Inside
F.E.R.C.'s Gas Market Report, Index Price
per Dth, CNG Gas Transmission Corporation
("CNG"), Appalachia Index plus $0.02 per
Dth.
POINT OF SALE: Equitrans Meter Nos. 22379, 23509, 23510,
23511, 23512, 23513
POINT OF DELIVERY: Equitrans City Gate
SPECIAL PROVISIONS: The parties have respective firm obligations
to deliver and to receive the Contract
Quantities. Force Majeure due to disruption
of pipeline service is limited to
interruption or curtailment of firm
transportation by the transporting
pipeline(s).
THE PROVISIONS WITHIN THIS CONFIRMATION LETTER SHALL BE CONCLUSIVELY DEEMED
ACCURATE AND COMPLETE TO THE EXTENT IT IS NOT OBJECTED TO, IN WRITING, WITHIN
TWENTY-FOUR (24) HOURS OF RECEIPT.
STATOIL ENERGY SERVICES, INC. BLAZER ENERGY CORP.
By: /s/ Mark A. Williams By: /s/ Stevens V. Gillespie
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Name: Mark A. Williams Name: Stevens V. Gillespie
Title: Manager, Appalachian Supply Title: Senior Vice President