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SECOND AMENDED AND RESTATED
GAS PURCHASE CONTRACT
BETWEEN
PARAMOUNT RESOURCES LTD.
AND
SELKIRK COGEN PARTNERS, L.P.
Dated as of May 6, 1998
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TABLE OF CONTENTS
ARTICLE 1. DEFINITION OF TERMS.......................................3
ARTICLE 2. CONTRACT QUANTITIES; DELIVERIES..........................10
ARTICLE 3. DELIVERY POINT...........................................12
ARTICLE 4. DELIVERY PRESSURE........................................12
ARTICLE 5. COMMENCEMENT OF SALES AND DELIVERIES.....................12
ARTICLE 6. TERM OF CONTRACT.........................................13
ARTICLE 7. PRICE....................................................16
ARTICLE 8. BILLINGS AND PAYMENTS....................................20
ARTICLE 9. QUALITY..................................................22
ARTICLE 10. MEASUREMENT OF GAS.......................................23
ARTICLE 11. POSSESSION AND TITLE.....................................23
ARTICLE 12. SELLER'S REPRESENTATIONS AND WARRANTIES..................23
ARTICLE 13. SELLER'S RESERVATIONS....................................26
ARTICLE 14. ASSURANCES OF GAS SUPPLY; SUBSTITUTE GAS SUPPLY..........29
ARTICLE 15. LIABILITIES AND LIMITATION OF LIABILITIES................42
ARTICLE 16. FORCE MAJEURE............................................44
ARTICLE 17. LAWS AND REGULATORY BODIES...............................46
ARTICLE 18. TRANSFER AND ASSIGNMENT..................................46
ARTICLE 19. MISCELLANEOUS PROVISIONS.................................47
ARTICLE 20. ARBITRATION..............................................50
ARTICLE 21. NONRECOURSE OBLIGATION OF JOINT VENTURE..................51
ARTICLE 22. MATERIAL BREACH; REMEDIES................................52
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LIST OF EXHIBITS
Exhibit A - Summary of Lands to be Dedicated with Reserve Summaries
Exhibit B - Guarantee
Exhibit C - Indemnity
Exhibit D - Letter of Credit
Exhibit E - Form of New Contract
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SECOND AMENDED AND RESTATED GAS PURCHASE CONTRACT
This Second Amended and Restated Gas Purchase Contract is dated the
6th day of May, 1998, by and between Paramount Resources Ltd., a Canadian
corporation, herein called the "Seller," and Selkirk Cogen Partners, L.P., a
Delaware limited partnership, herein called the "Buyer," pursuant to the
following recitals and representations:
W I T N E S S E T H
WHEREAS, Seller is engaged in the production of gas in Canada and the
marketing of such gas to others; and
WHEREAS, Buyer is a limited partnership engaged in the generation and
sale of electricity from an electric generating facility located in Selkirk, New
York and will enter into an Amended and Restated Power Sale Agreement with
Niagara Mohawk Power Corporation, effective on or before the Effective Date (as
defined below), and also sells steam to the General Electric Company's plastics
facility in Selkirk, New York; and
WHEREAS, Seller and Buyer require approvals from the United States and
the Canadian regulatory and governmental authorities for the sale and purchase
of gas to operate Buyer's Plant on the terms provided herein; and
WHEREAS, Seller has entered into a gas transportation service contract
with NOVA Corporation of Alberta ("NOVA") for firm transportation pursuant to
which NOVA has agreed to transport such quantities of gas sold by Seller to
Buyer under this Gas Purchase Contract from production receipt points within the
Province of Alberta to a point near Empress, Alberta; and
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WHEREAS, Buyer has entered into a transportation contract with
TransCanada PipeLines Limited ("TCPL") pursuant to which TCPL has agreed to
receive from NOVA for Buyer's account such quantities of gas sold by Seller to
Buyer under this Gas Purchase Contract at a point near Empress, Alberta where
its facilities interconnect with the facilities of NOVA and to transport such
gas from such point to a point on the International Border between the Province
of Ontario and the State of New York near Iroquois, Ontario; and
WHEREAS, Buyer has entered into transportation contracts with
Tennessee Gas Pipeline Company and Iroquois Gas Transmission System, L.P.,
herein collectively called "United States Transporter," pursuant to which United
States Transporter agrees to receive gas from TCPL for Buyer's account at a
point on the International Border between the Province of Ontario and the State
of New York near Iroquois, Ontario where its facilities will interconnect with
the facilities of TCPL and to transport such gas from such point to Buyer's
Plant; and
WHEREAS, Seller and Buyer have entered into a Gas Purchase Contract as
of the 15th day of December 1989, as amended by a letter agreement dated June 9,
1990, as amended and restated by an Amended and Restated Gas Purchase Contract,
dated as of September 26, 1992, and as further amended prior to the date hereof
(the "Original Gas Purchase Contract"); and
WHEREAS, Seller and Buyer desire to amend and restate the Original Gas
Purchase Contract upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, Seller and Buyer agree as follows:
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ARTICLE I. DEFINITION OF TERMS
1.1. The term "AEUB" shall mean the Alberta Energy and Utilities Board or any
successor board or agency.
1.2. The term "Buyer's Plant" shall mean Phase I of Buyer's electric
cogeneration facility located in Selkirk, New York, with a net electric
generating capability of approximately 79.9 megawatts.
1.3. The term "British thermal unit" or "Btu" shall mean the amount of heat
required to raise the temperature of one (1) pound of distilled water one (1)
degree Fahrenheit at sixty (60) degrees Fahrenheit at a constant pressure of
14.73 pounds per square inch absolute.
1.4. The term "Canadian Regulatory Authorities" shall mean each governmental
agency or other authority in Canada, which has jurisdiction over the matters in
question, including without limitation the NEB, the AEUB, and the federal
Governor-in-Council and provincial Lieutenant Governor-in-Council, so long as
and to the extent that such agencies and authorities have jurisdiction over the
matters in question.
1.5. The term "Commencement of Firm Deliveries" shall have the meaning set forth
in Section 5.1.
1.6. The term "Contract", shall mean this Second Amended and Restated Gas
Purchase Contract, as amended from time to time, including all exhibits hereto.
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1.7. The term "contract year" with respect to the first "contract year" shall
mean the period commencing on the Commencement of Firm Deliveries and ending at
8:00 a.m. Eastern Standard Time on the following November 1, and with respect to
any succeeding "contract year" shall mean the period of twelve (12) consecutive
months from the end of the preceding contract year to 8:00 a.m. Eastern Standard
Time on the next succeeding November 1.
1.8. The term "cubic foot" shall mean the volume of gas which occupies one cubic
foot when such gas is a temperature of sixty degrees Fahrenheit (60(degree) F)
and at a pressure of 14.73 pounds per square inch absolute.
1.9. The term "cubic metre of gas" or "(m3)" shall mean the quantity of gas
which occupies one cubic metre at a temperature of fifteen degrees Celsius
(15(degree) C) and at an absolute pressure of 101.325 kilopascals.
1.10. The term "Daily Nomination" shall mean the volume of natural gas, up to
the Maximum Daily Quantity, which Buyer requests Seller to cause to be delivered
by NOVA to TCPL at the Delivery Point during any one day for Buyer's account.
1.11. The term "Date Certain" shall mean the first day of each contract year.
1.12. The term "Date of Commercial Operation" shall mean April 17, 1992.
1.13. The term "Date of Firm Transportation" shall be the date upon which
transportation is available to Buyer to enable firm deliveries of the Maximum
Daily Quantity from the Delivery Point to Buyer's Plant.
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1.14. The term "day" shall mean a period of twenty-four consecutive hours,
beginning and ending at 8:00 a.m. Eastern Standard Time.
1.15 The term "Deliverable Gas" shall mean the amount of Seller's Reserves for
any contract year which can be produced for sale and delivered from wells which
are (i) tied-in and (ii) producing or producible with no additional capital
expenditure, in accordance with applicable law, which amount shall be determined
by making due allowance for production losses, uses and treatment shrinkages,
transportation and fuel. All knowledge concerning all reservoirs penetrated by
wells and conditions of wells and facilities existing as of the time of each
Determination shall be taken into consideration.
1.16. The term "Delivery Point" shall mean the point where the facilities of
NOVA and TCPL interconnect near Empress, Alberta or such other point(s) proposed
by Buyer and consented to by Seller, such consent not to be unreasonably
withheld, that Seller can deliver and Buyer can receive gas.
1.17. The term "Delivery Pressure" shall mean a gauge pressure suitable to enter
TCPL's facilities at the Delivery Point.
1.18. The term "Effective Date" shall have the meaning set forth in Section
6.1.a.
1.19. The term "Exhibit `A'" shall mean Exhibit A attached hereto, as said
Exhibit A may be supplemented, or otherwise modified in accordance with the
terms hereof.
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1.20. The term "Excess Third Party Sales" shall mean any sale of gas from
Seller's Lands to a third person which is not a Third Party Sale.
1.21. The term "gas" or "natural gas" shall mean natural gas of the quality
specified in Article 9 hereof.
1.22. The term "GJ" shall mean gigajoules or one billion (1,000,000,000) joules.
1.23. The term "Heating Value" shall mean gross or higher heating value and be
expressed as MJ/M3 and shall equal the number of MJ's produced by the combustion
in a recording calorimeter at a constant pressure of a cubic metre of gas at a
temperature of fifteen degrees Celsius (15(0) C), with the gas free of all water
vapor, and at an absolute pressure of 101.325 kilopascals and with the products
of combustion cooled to the initial temperature of the gas and the water formed
by the combustion condensed to the liquid state.
1.24. The term "Initial Recoverable Reserves" shall mean the quantity of gas
which is the sum of:
1.24.a. The total quantity of gas equal to the product of the Maximum
Daily Quantity multiplied by the number of days in the period commencing on the
Commencement of Firm Deliveries and ending on the first day of the contract year
occurring during the period for which a Determination is made pursuant to
Section 14.2; and
1.24.b. The total remaining quantity of gas recoverable from Seller's
Reserves and available for pipeline transportation as of the first day of the
contract year for which a
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Determination is made pursuant to Section 14.2. In determining such total
quantity, due allowance shall be made for production losses and uses and
treatment shrinkages. All knowledge concerning all reservoirs penetrated by
wells and conditions of wells and facilities existing as of the time of each
Report shall be taken into consideration.
1.25 The term "joule" or "J" shall mean the work done when the point of
application of a force of one (1) newton is displaced a distance of one (1)
metre with direction of force.
1.26. The term "Leases" shall mean all rights, documents and/or titles by virtue
of which the holder thereof is entitled to drill for, produce and sell gas from
Seller's Lands or to cause gas to be drilled for, produced and sold from
Seller's Lands as described in Exhibit "A" attached hereto.
1.27. The term "Mcf" shall mean one thousand (1,000) cubic feet and shall be
equal to 0.02832 l03m3.
1.28. The term "MMBtu" shall mean one million (1,000,000) Btu's.
1.29. The term "MMcf" shall mean one million (1,000,000) cubic feet of gas.
1.30. The term "Maximum Daily Quantity" shall mean a daily volume of gas equal
to 464.5 103m3 (16,400 Mcf) which may be reduced from time to time pursuant to
this Contract.
1.31. The term "Minimum Deliverable Gas Amount" shall mean the Deliverable Gas
for any five consecutive contract years, or such lesser number of contract years
remaining in the unexpired term of this Contract, in an amount not less than (a)
one hundred percent (100%) of the annual
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average of the Maximum Daily Quantity for the first, second and third of such
contract years, (b) ninety percent (90%) of the annual average of the Maximum
Daily Quantity for the fourth of such contract years, and (c) eighty percent
(80%) of the annual average of the Maximum Daily Quantity for the fifth of such
contract years.
1.32. The term "Minimum Removal Permit" shall mean, so long as an AEUB removal
permit is required at law for the removal of gas from the Province of Alberta, a
removal permit issued by the AEUB authorizing the removal of gas from Alberta,
to be used in the performance of this Contract, being (i) the current AEUB
removal permit (GR 91-94F) from the Effective Date through October 31, 2001 and
(ii) as of November 1, 2001 and annually thereafter, a removal permit which at
all times permits the removal of gas as follows: (1) commencing on the November
1, 2001 Date Certain and thereafter on each annual Date Certain for the then
next succeeding full two (2) contract years of twelve (12) months each, or such
lesser number of contract years remaining in the unexpired term of the Contract,
an amount equal to the difference between (a) the product of the Maximum Daily
Quantity and the total number of days in such contract year less (b) NWT
Reserves (i) tied-in and (ii) producing or producible with no additional capital
expenditure; and (2) thereafter, as the AEUB may determine, such that Seller at
all times maintains an AEUB removal permit for the gas to be delivered hereunder
from the Province of Alberta for the then current contract year and the next
succeeding contract year during the term of this Contract.
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1.33. The term "month" shall mean the period beginning at 8:00 a.m. Eastern
Standard Time on the first day of the calendar month and ending at 8:00 a.m.
Eastern Standard Time on the first day of the next succeeding calendar month.
1.34. The term "NEB" shall mean the National Energy Board of Canada. 1.35. The
term "NOVA" shall mean NOVA Corporation of Alberta, or its successor in
interest.
1.36. The term "NWT Reserves" shall mean those reserves of gas underlying lands
of Seller located in the Northwest Territories which are dedicated to this
Contract and which have, for the purposes of this Contract, established reserves
using NEB standards not in excess of 830 l06m3 (29.3 Bcf).
1.37. The term "Prime Rate" shall mean the rate
of interest per annum established from time to time as its prime commercial
lending rate by the Chase Manhattan Bank, N.A. at its head office in New York.
1.38. The term "Seller's Lands" shall mean the undivided working interest in and
to the designated geological formations and/or members underlying the lands
described in Exhibit "A" attached hereto.
1.39. The term "Seller's Reserves"
shall mean those reserves of gas underlying Seller's Lands and covered by the
Leases.
1.40. The term "TCPL" shall mean TransCanada PipeLines Limited.
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1.41. The term "103m3" shall mean one thousand (1,000) cubic metres of gas and
shall be equal to 35.301 Mcf.
1.42. The term "l06m3" shall mean one million (1,000,000) cubic metres of gas.
1.43. The term "Third Party Sales" shall mean sales of gas from Seller's Lands
to third persons pursuant to Section 13.5.a.
1.44. The term "U.S. Regulatory Authorities" shall mean each governmental agency
or other authority in the United States of America which has jurisdiction over
the matter in question, including without limitation the Office of Fossil Energy
of the Department of Energy ("OFE"), the Federal Energy Regulatory Commission
("FERC") and other state and federal agencies, so long as and to the extent that
such agencies and authorities have jurisdiction over the matter in question.
1.45. The term "year" shall mean any period of twelve (12) consecutive months.
ARTICLE 2. CONTRACT QUANTITIES; DELIVERIES
2.1 Seller shall sell and cause to be delivered and Buyer shall purchase and
cause to be received on each day the Daily Nomination up to the Maximum Daily
Quantity.
2.2. If, during any period of at least 120 consecutive days after the
Commencement of Firm Deliveries Seller fails for any reason, other than force
majeure, to deliver to Buyer at least ninety percent (90%) of the sum of the
Daily Nominations for the 120-day period, then Buyer shall have the right, but
not the obligation, to elect within 90 days after the expiration of such 120-day
period to reduce the Maximum Daily Quantity under this Contract by a quantity of
gas equal to the
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average of the differences between the Daily Nominations and the actual
deliveries of gas hereunder during such 120-day period. In the event that the
Maximum Daily Quantity is reduced pursuant to this Section 2 and Buyer arranges
for delivery of a substitute supply of gas from a third-party supplier, Buyer
shall have the gas substitution rights and Seller shall have the obligations set
forth in Sections 14.7 and 14.8.
2.3. Except as otherwise provided in this Contract, and except in the event that
(a) the NEB issues a license and/or permit which is insufficient to authorize
the sale, purchase and export of the full quantities of gas provided for in this
Contract or (b) the AEUB fails to issue a removal permit or issues a removal
permit which is less than a Minimum Removal Permit and the relevant cure period
to obtain a Minimum Removal Permit shall have expired, Buyer shall not enter
into any gas supply contract for Buyer's Plant with a term greater than one year
with third party gas suppliers which exceed the volume of gas required for
Buyer's Plant to generate 79.9 megawatts of electricity under design conditions,
nor shall Buyer purchase Canadian gas in lieu of any quantities of gas tendered
by Seller up to the Maximum Daily Quantity.
2.4. On any day after the Commencement of Firm Deliveries if Buyer makes a Daily
Nomination of less than the Maximum Daily Quantity, Buyer agrees, insofar as may
be permitted under Buyer's transportation contracts and subject to the terms and
conditions thereof and the receipt of all necessary approvals from United States
Regulatory Authorities and Canadian Regulatory Authorities, to make available
for the transportation of Seller's gas, subject to interruption by Buyer to
operate Buyer's Plant, so long as Buyer is purchasing gas under this Contract,
Buyer's unutilized transportation rights; provided that Seller pays all the
transportation
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commodity charges per 103m3 (or other applicable units of measurement) payable
by Buyer for all such transportation rights of Buyer; provided, however, that
Buyer shall have no obligation to make such transportation rights available to
Seller in the event that Buyer's project lenders exercise any remedies under
Buyer's loan agreement or other loan documents.
ARTICLE 3. DELIVERY POINT
3.1 The gas purchased hereunder is to be delivered by Seller to Buyer at the
Delivery Point. It is understood that Buyer's request for the Daily Nominations
shall be made by TCPL for Buyer's account and that gas sold hereunder by Seller
shall be delivered by NOVA to TCPL for Buyer's account and not for TCPL's own
account. Volumes delivered at the Delivery Point for Buyer's account shall be
determined by the meters of TCPL at the Delivery Point. Buyer shall forward to
Seller copies of TCPL's metering statements within three (3) business days of
Buyer's receipt thereof.
ARTICLE 4. DELIVERY PRESSURE
4.1 Seller shall cause NOVA to deliver the natural gas to TCPL at the Delivery
Point at the Delivery Pressure.
ARTICLE 5. COMMENCEMENT OF SALES AND DELIVERIES
5.1 Firm deliveries shall commence hereunder upon the first Daily Nomination
made by Buyer after the Date of Firm Transportation. Such date of the first
Daily Nomination shall be the "Commencement of Firm Deliveries".
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5.2. Buyer and Seller acknowledge that the Date of Firm Transportation and the
date of the first Daily Nomination occurred on November 1, 1992.
5.3. Seller agrees to use all reasonable efforts with NOVA and Buyer agrees to
use all reasonable efforts with TCPL and United States Transporter(s), to have
constructed, installed, and made operational in a timely fashion any facilities
required for the firm delivery of gas to be sold hereunder to operate Buyer's
Plant.
ARTICLE 6. TERM OF CONTRACT
6.1.a. The amendment and restatement of the Original Gas Purchase Contract
embodied in this Contract shall become effective (the "Effective Date") upon the
later of (i) the approval of this Contract by the NEB and the AEUB as may be
required under applicable law and (ii) the date on which Buyer's restructuring
with Niagara Mohawk Power Corporation for Buyer's Plant becomes effective, in
respect of which Buyer shall forthwith deliver to Seller an irrevocable notice
from Buyer to Seller. On and after the Effective Date, the Original Gas Purchase
Contract as amended hereby and as restated herein shall govern the relationship
of Buyer and Seller. Buyer and Seller agree that the rights and obligations of
the parties prior to the Effective Date have been and are governed by the
Original Gas Purchase Contract prior to giving effect to the amendment and
restatement of the Original Gas Purchase Contract embodied in this Contract, and
Buyer and Seller expressly reserve all rights accrued under the Original Gas
Purchase Contract prior to the Effective Date.
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6.1.b. If the Effective Date has not occurred by August 31, 1998
(as such date may be extended, but only by mutual agreement of Buyer and
Seller), this Contract shall terminate without further action of either party
and be deemed void ab initio, and the Original Gas Purchase Contract shall
continue to be in full force and effect in accordance with its terms without
regard to this Contract.
6.2 This Contract shall continue in full force and effect until:
6.2.a. Fifteen (15) years after the date of Commencement of Firm
Deliveries hereof ("primary term"); provided, however, that Buyer shall have the
right, exercisable by notice to Seller delivered by the end of the tenth
contract year hereunder, to enter into a new gas purchase contract in the form
attached as Exhibit E hereto (the "New Contract") for a term of four (4) years
(or five (5) years upon mutual agreement of Buyer and Seller) (the "New Term"),
subject to the receipt of all authorizations of U.S. and Canadian Regulatory
Authorities necessary for the parties to perform their obligations under the New
Contract. Notwithstanding Buyer's exercise of its right to enter into the New
Contract, Buyer shall have the right to terminate the New Contract, before or at
any time during the New Term upon delivery of not less than twelve (12) month's
advance written notice to Seller.
6.2.b. Such earlier date as may be required to conform with an
applicable authorizations of United States and Canadian Regulatory Authorities
or any extensions thereof which are necessary for the parties hereto perform
their obligations under this Contract.
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6.3 If at any time following the approval of this Contract by the AEUB and for
the life of this Contract, Seller has less than a Minimum Removal Permit, Seller
shall, within one year from the first day of the applicable contract year,
obtain a Minimum Removal Permit. Failure to cure a shortfall in the Minimum
Removal Permit within the one year cure period provided in the preceding
sentence shall constitute a material breach by Seller giving rise to the
remedies set forth in Article 22 of this Contract.
6.4.a. Seller and Buyer agree to use their best efforts to obtain, maintain and
extend applicable authorizations of United States and Canadian Regulatory
Authorities to permit the full performance of this Contract, including but not
restricted to (1) Section 2.4, (2) the removal from the Province of Alberta of
the full quantities of gas contracted for in this Contract in accordance with
the terms hereof, and (3) the export from Canada and into the United States of
at least 15,000 Mcf of gas per day.
6.4.b. (i) Seller shall be responsible for carriage of any
application to obtain or extend the Minimum Removal Permit, provided that Seller
and Buyer shall be co-applicants, Seller shall use due diligence to ensure that
written communication from the AEUB is directed to both Buyer and Seller, Seller
shall provide Buyer with copies of all material sent to the AEUB within three
(3) business days of such delivery, and Seller shall inform Buyer of the status
of applications as developments occur. Buyer shall use due diligence to provide
Seller with information requested by the AEUB which Seller does not have
available to it and which Buyer has available to it.
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(ii) Neither Buyer nor Seller shall do any acts to change,
alter or vary the AEUB removal permit, or any extension or amendment thereof,
except as provided herein, without the consent of the other, irrespective of
whether the removal permit as issued or amended is in the name of Buyer or
Seller alone.
6.4.c. (i) Buyer shall be responsible for carriage of any application
to obtain or extend the NEB export license. Buyer shall provide Seller with
copies of all material sent to or received from the NEB within three (3)
business days of transmittal or receipt, as the case may be, and Buyer shall
inform Seller of the status of applications as developments occur. Seller shall
use due diligence to provide Buyer with information requested by the NEB which
Buyer does not have available to it and which Seller has available to it.
(ii) Neither Buyer nor Seller shall do any acts to change,
alter or vary the NEB export license, or any extension or amendment thereof,
which would impair such NEB export license without the consent of the other.
ARTICLE 7. PRICE
7.1 Upon the Commencement of Firm Deliveries and thereafter for the term hereof
as provided in Article 6, Buyer shall pay to Seller (a) a Variable
Transportation Charge determined in accordance with Section 7.3, (b) a Commodity
Charge determined in accordance with Sections 7.4 and 7.5, and (c) a Gas
Inventory Charge determined in accordance with Section 7.6. The "Price" per
month for gas service hereunder shall be the sum of the Variable Transportation
Charge multiplied by the total quantity of gas delivered to TCPL hereunder on
that month, the Commodity Charge multiplied by the total quantity of gas
delivered to TCPL hereunder in that month and the
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Gas Inventory Charge. For purposes of determining the Variable Transportation
Charge, "NOVA Charge" means the total charge in Canadian dollars paid per month
by Seller to NOVA for transportation capacity to Empress, Alberta of a quantity
of gas equal to the Maximum Daily Quantity for each day in such month, subject
to normal monthly adjustments by NOVA, provided (i) that the ratio of Seller's
receipt point demand to Delivery Point demand shall not exceed 1:1; and (ii)
that such charge excludes specific facilities charges.
7.2. All charges shall be expressed in United States dollars for purposes of
determining the Price. Any necessary conversions from either United States or
Canadian currency with respect to any charges for any month shall be: (a)
calculated at the rate of exchange published in the "Canadian Gas Price Reporter
Table: Monthly Canadian and U.S. natural gas price summary" for such month; or
(b) calculated in the manner that may be prescribed from time to time by
Canadian Regulatory Authorities.
7.3. The Variable Transportation Charge for gas delivered to TCPL hereunder in
any month shall be the NOVA Charge per 103m3, calculated on the
basis of 100% load factor, for such month, payable monthly in accordance with
Article 8.
7.4.a. The Commodity Charge per MMBtu for gas delivered in any month, payable
monthly in accordance with Article 8, shall be the amount determined in
accordance with the following formula:
CC = ABP - VTC
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Where:
"CC" is the Commodity Charge;
"ABP" is the Adjusted Base Price for such month and shall be equal to the
current month's "Avg. Border (Empress) "Bid Week" Average Spot (One Month) Firm
(100% LF) price" published in "The Canadian Gas Price Reporter Table: Canadian
Natural Gas Supply Prices" converted from Cdn $/GJ to Cdn $/MMBtus by
multiplying by 1.054615 GJ/MMBtu and converted to US $/MMBtu by multiplying by
the current month "Canada/U.S. Exchange Rate" published in "The Canadian Gas
Price Reporter Table: Monthly Canadian and U.S. natural gas price summary"
rounded to the nearest cent;
"VTC" is the Variable Transportation Charge for such month converted to U.S.
dollars per GJ pursuant to Sections 7.2 and 7.11.
7.5 In the event that any specific pricing index or publication referred to in
this Section 7 is discontinued, the parties shall promptly agree on a substitute
pricing index or publication which is equivalent to the discontinued pricing
index or publication. Such agreement shall be reflected in a mutual exchange of
letters deemed to amend this Contract for such limited purpose. In the event the
parties are unable to reach agreement as to a substitute pricing index or
publication, the matter shall be resolved by arbitration in accordance with
Article 20 hereof.
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7.6 7.6.a. The Gas Inventory Charge for any month shall be equal to the NOVA
Charge less the product of (i) the Variable Transportation Charge multiplied by
(ii) the total quantity of gas delivered hereunder to TCPL during such month.
Seller shall invoice Buyer for the Gas Inventory Charge in Buyer's bill rendered
pursuant to Article 8 immediately following the completion of such month subject
to any subsequent monthly adjustments made by NOVA in respect of the NOVA
Charge.
7.6.b. If Seller or NOVA fails to tender to TCPL, wholly or in part, the
Daily Nomination hereunder, Buyer shall be relieved of its obligations to pay
the Gas Inventory Charge to the extent of such failure, calculated as follows:
the Gas Inventory Charge for any month in which deliveries are impaired shall be
reduced by an amount equal to the product of (i) the Variable Transportation
Charge and (ii) the difference between the total of the Daily Nomination on each
day of such month minus the total quantity of gas delivered hereunder to TCPL
during such month.
7.6.c. The Gas Inventory Charge for any month shall be further reduced by
an amount equal to the product of (i) the quantity of gas per 103m3 based on the
transportation rights elected to be used by Seller pursuant to Section 2.4 of
Article 2 and (ii) the Variable Transportation Charge.
7.7 Upon Commencement of Firm Deliveries, the minimum monthly bill shall be the
NOVA Charge.
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7.8 Any conversion from volume units to heating units required for the purpose
of this Article 7 shall be based on the average heating value in the month of
delivery of the gas received by TCPL at the Delivery Point for the account of
Buyer.
ARTICLE 8. BILLINGS AND PAYMENTS
8.1 Subject to Seller's receipt of TCPL's metering statements pursuant to
Article 3 hereof, Seller shall render to Buyer on or before the tenth (10th) day
of each month after the first sale of gas hereunder a statement for the
preceding month in which the gas being billed for was sold (the "Sale Month")
showing the daily and total quantity of gas sold hereunder, the weighted average
Heating Value per cubic metre thereof, the applicable Price (determined pursuant
to Article 7), and the total amount payable to Seller therefore stated in United
States dollars (the "Sum"). Buyer agrees to deposit in Seller's account at the
Bank of Montreal, Main Branch in Calgary, Alberta, Canada, on or before the
twenty-fifth (25th) day of each such month, the Sum for the Sale Month. In the
event that Seller fails to render a statement to Buyer on or before the tenth
(10th) day of a month, the date by which Buyer must deposit the Sum in Seller's
account shall be extended one day for each day Seller's statement is late;
provided, however, that if Seller is unable to render a statement on or before
the tenth (10th) day of a month, Seller may at its option render an estimated
statement to Buyer which statement shall contain Seller's best estimate of the
daily and total quantity of gas sold hereunder during the preceding month, the
weighted average Heating Value per cubic metre thereof, and the total amount
payable by Buyer therefore stated in United States dollars. Buyer shall deposit
in Seller's account the Sum for such estimated statement within fifteen (15)
days of its receipt but no sooner than the 25th day of the month. For any month
in which Seller renders an estimated statement to Buyer, Seller shall render the
final statement for
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such month with Seller's statement for the next succeeding month. Seller's
statement for such next succeeding month shall reflect an adjustment for any
difference between the estimated statement and the final statement for the
previous month, which shall be added to or deducted from, as appropriate,
Seller's statement for such next succeeding month. If Buyer fails to deposit the
Sum or any portion thereof, in Seller's account when same is due, interest
thereon shall accrue at the annual rate of interest which is equal to the sum of
two percent (2%) plus the Prime Rate until the same is paid.
8.2. If Buyer's failure to pay continues for thirty (30) days, Seller, in
addition to all other remedies, may thereafter suspend the sale of gas hereunder
and if such default continues for thirty (30) additional days, Seller may
thereafter, in addition to any other rights Seller may have, terminate this
Contract; provided, however, in order for Seller to have the right to suspend
sales or terminate this Contract, Seller must first have notified Buyer in
writing fifteen (15) days prior to exercising such right of its intent to do so
and give Buyer the right to pay the amount so due to Seller within such fifteen
(15) day period; and provided, further, that if Buyer in good faith shall
dispute the amount of any such bill or any part thereof and shall pay to Seller
such amounts as it concedes to be correct and at any time thereafter within
twenty (20) days of a demand made by Seller shall furnish or cause to be
furnished a good and sufficient surety bond satisfactory to Seller, guaranteeing
payment to Seller of the amount ultimately found due upon such bill after a
final determination which may be reached either by agreement or judgment of the
courts, as may be the case, then Seller shall not be entitled to suspend further
sales of gas because of such nonpayment unless and until default be made in the
conditions of such bond.
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8.3. Each party shall have the right to inspect and examine at all reasonable
times the records and charts of the other party pertaining to the purchase and
sale of gas hereunder. If any overcharge or undercharge in any amount whatsoever
shall be found within two (2) years of the date of billing and the bill
therefore has been paid, Seller shall refund the amount of the overcharge or
Buyer shall pay the amount of the undercharge within thirty (30) days after the
final determination thereof, with interest thereon for the period the overcharge
or undercharge was outstanding calculated at the annual rate of interest which
is equal to the sum of two percent (2%) plus the Prime Rate. This Section 8.3
shall survive termination of this Contract.
ARTICLE 9. QUALITY
9.1 Seller agrees to sell and cause to be delivered and Buyer agrees to purchase
and cause to be received at the Delivery Point, gas which shall meet the quality
specifications set forth in the TCPL tariff governing the transportation of the
gas sold hereunder.
9.2. If the gas offered for delivery hereunder by Seller shall fail at any time
to conform to any of the specifications identified in Section 9.1, then Buyer
shall notify Seller of such deficiency and thereupon may, at Buyer's option,
refuse to purchase such gas pending correction by Seller. Upon Seller's failure
promptly to remedy any such deficiency in quality, Buyer may purchase such gas
and may make changes necessary to bring such gas into conformity with such
specifications, and Seller shall reimburse Buyer for any reasonable expense
incurred by Buyer in effecting such changes.
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ARTICLE 10. MEASUREMENT OF GAS
10.1 Seller and Buyer agree that the measurement of the gas to be delivered by
Seller and received by Buyer at the Delivery Point shall be determined by the
measurement provisions set forth in the TCPL Tariff governing the transportation
of the gas sold hereunder.
ARTICLE 11. POSSESSION AND TITLE
11.1 Possession of and title to gas sold by Seller to Buyer hereunder shall pass
from Seller to Buyer at the Delivery Point. Until the gas reaches the Delivery
Point, Seller shall be deemed to be in control of and have title to and
possession of and be responsible for such gas, after which Buyer shall be deemed
to be in control of and possession of and have title to and be responsible for
such gas.
ARTICLE 12. SELLER'S REPRESENTATIONS AND WARRANTIES
12.1 Seller represents and warrants that: (i) it has full right and authority to
enter into this Contract; (ii) subject to the applicable laws, rules and
regulations, the Leases are in full force and effect and are capable of being
maintained and will be maintained by Seller in full force and effect for as long
as gas can be produced in paying quantities; and (iii) Seller has good title to
and the right to sell the gas to be sold and delivered hereunder and all such
gas is owned or authorized to be sold by Seller and will be delivered by Seller
free from all Alberta taxes, liens, charges and adverse claims whatsoever,
including liens to secure payment of any taxes. Seller shall at all times have
the obligation to make settlements for all royalties and overriding royalties
due and payments to the mineral and royalty owners under the Leases and
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other documents, as may appear of record or otherwise be binding upon Seller and
in accordance with the terms of the respective Leases and other documents, and
to make settlements with all other persons having any interest in the gas sold
hereunder. Seller agrees to indemnify Buyer and save it harmless from all suits,
actions, debts, accounts, damages, costs, losses, liabilities and expenses
arising from or out of claims of any other charges thereon, which attach before
the title passes to Buyer or which may be levied and assessed upon the sale
thereof to Buyer and are the responsibilities of Seller hereunder.
12.2. Seller represents that it is entitled to drill for, produce, and sell gas
from Seller's Lands. Seller warrants and represents that Seller will, subject to
and in accordance with the provisions of this Contract, equip and tie-in its
wells and construct or install its facilities so as to be able to commence and
continue delivery of gas to Buyer in accordance with the provision of this
Contract. Subject to Article 13, Seller covenants to diligently drill, develop
and produce Seller's Reserves to the extent required by Section 14.4 such that
Deliverable Gas at the time of each Determination referred to in Article 14 will
be sufficient for Seller to supply the Maximum Daily Quantity to Buyer from
Seller's Reserves for at least four (4) contract years following each such
Determination. Upon Commencement of Firm Deliveries, Seller shall deliver to
Buyer sufficient gas to meet Seller's obligations under this Contract from
Seller's Lands or from such other sources available from time to time to Seller
provided that Seller has the right and necessary regulatory approvals to deliver
to Buyer from such other sources.
12.3. 12.3.a. Seller dedicates and commits exclusively to the performance of
this Contract all of Seller's Reserves and represents to Buyer that such
Seller's Reserves will at all times (i) be sufficient in quantity and quality to
satisfy provincial and federal regulatory authorities in respect of maintaining
a provincial removal permit which satisfies the requirements of Section 6.3.a
and a
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federal export license for the full term and volumes contemplated in this
Contract; (ii) contain Initial Recoverable Reserves in an amount not less than
2,747.9 106m3 (97.01 Bcf) in accordance with Section 14.3; and (iii) contain
Deliverable Gas in an amount not less than the Minimum Deliverable Gas Amount in
accordance with Section 14.4. Seller's Reserves shall not be named or used by
Seller or any third party to support any removal permit or export license other
than the joint removal permit and the export license to be obtained by Buyer
based on Seller's Reserves to permit gas purchased hereunder to be removed from
the Province of Alberta and delivered to Buyer.
12.3.b. Buyer is hereby authorized by Seller to identify and commit
Seller's Reserves in order to jointly obtain with Seller or extend a provincial
removal permit and to obtain on its own behalf or extend a NEB export license in
respect of the Maximum Daily Quantity for the term of this Contract. Seller
agrees to cooperate with Buyer and provide Buyer with such further information
concerning Seller's Reserves as may be required for such purposes.
12.3.c. During the term of this Contract, Seller shall not sell, assign,
transfer or otherwise dispose of any interest in Seller's Reserves without
obtaining Buyer's prior written consent, such consent not be unreasonably
withheld. Seller acknowledges that a reasonable condition to Buyer providing any
such consent would be the assumption (by novation or other means acceptable to
Buyer) by such third party of that portion acquired by such third party of
Seller's obligations to Buyer under this Contract.
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12.3.d. Seller represents that no finding of producer support under the
Alberta Natural Gas Marketing Act nor any joint working interest owner approval
is or will be necessary for Seller to fulfill its obligations under the terms
and conditions of this Contract.
ARTICLE 13. SELLER'S RESERVATIONS
13.1 Seller hereby expressly reserves unto itself the following rights:
13.1.a. to operate Seller's Lands and Seller's Reserves free from any
controls by Buyer and in such manner as Seller in its sole discretion may deem
advisable consistent with good oilfield practice, including but not restricted
to, the right to determine when and whether any additional well will be drilled,
when and whether any well will be reworked or recompleted, when and whether any
lease or well cannot or has ceased to produce gas in paying quantities having
regard to Seller's cost of producing, processing and delivering such gas and
when and whether any lease or well is to be released or abandoned or
surrendered;
13.1.b. to determine the manner in which the quantities of gas to be
delivered hereunder shall be produced by Seller from the various wells on
Seller's Lands; and
13.1.c. to deliver to any lessors of the Leases the quantities of gas which
Seller is obligated to deliver in kind to such lessors.
13.2 Seller reserves unto itself the following quantities of gas from Seller's
Lands:
13.2.a. such gas (other than gas used as fuel in thermal recovery
operations) as may be required for the development and operation of Seller's
Lands, including but not limited to gas
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for gas lifting operations and return to reservoir, so long as such gas lifting
operations and return to reservoir do not interfere with Seller's ability to
deliver gas under this Contract; and
13.2.b. such gas as may be required for the operation of separator
equipment, compressor stations and other facilities through which the gas to be
delivered hereunder may be processed or handled; provided, however, that if
other gas or gas constituents are processed through any of the foregoing
facilities, an equitable amount of such other gas or gas constituents shall be
used in such facilities.
13.3 For the purpose of causing the gas to be delivered to meet the quality
specifications set forth in Article 9 hereof, Seller may extract or permit the
extraction of non-hydrocarbon and hydrocarbon constituents as are required to be
extracted in order for the gas to meet such specifications.
13.4. Seller shall not be required to produce wells in excess of the lesser of:
(a) their respective allowable rates of flow as fixed by law or regulatory
bodies; (b) their maximum efficient rates of flow as determined by Seller; or
(c) in instances of wells jointly operated with other parties, the current rate
of production permitted Seller under the terms of applicable operating
agreements.
13.5 13.5.a. Seller shall have the right on any day to make Third Party Sales in
an amount up to the Maximum Daily Quantity provided (i) Seller shall have met
Buyer's Daily Nomination on such day and (ii) neither a Reserve Deficiency nor a
Deliverability Deficiency that must be cured pursuant to Section 14.4 then
exists. Seller may accumulate its daily right to make Third Party Sales during
each calendar month, and amounts so accumulated may be sold on any
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day during such calendar month and the following calendar month in addition to
the daily limit for such day. With respect to any amount for which Seller has
accumulated its daily right to make Third Party Sales, Seller shall have no
further right to make Third Party Sales of such amount after the two month
period applicable to such amount has elapsed. Notwithstanding the foregoing,
Seller shall in no event make Third Party Sales before meeting Buyer's Daily
Nominations on any day, and in no event shall Seller make Third Party Sales in
an amount exceeding a quantity equal to (a) the product of (i) the number of
days in the relevant two-month period and (ii) the Maximum Daily Quantity, less
(b) the sum of any Daily Nominations made by Buyer in such months.
13.5.b. In addition to Third Party Sales as provided in Section 13.5.a.,
Seller shall have the right to make Excess Third Party Sales on any day provided
(i) Seller shall have met Buyer's Daily Nomination on such day and (ii) neither
a Reserve Deficiency nor a Deliverability Deficiency that must be cured pursuant
to Section 14.4 then exists.
13.6 Seller may pool or unitize any of Seller's Lands with other properties and,
if any of Seller's Lands are so pooled or unitized, this Contract will cover
Seller's interest in the unit derived therefrom and the gas attributable
thereto; provided, however, that in the event that such pooling or unitization
is entered into voluntarily by Seller, it shall protect Buyer's rights hereunder
and prevent an appreciable reduction or postponement in the Article 2 quantities
of gas to be sold by Seller to Buyer.
Buyer and Seller agree that, from time to time as appropriate, they shall
negotiate in good faith to agree upon appropriate action under or with respect
to this Contract to maintain or improve
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alignment of deliverability of Seller's Reserves, consistent with the efficient
administration of Seller's lands and reserves and the full performance of this
Contract, and subject to the receipt of all necessary regulatory approvals,
which necessary regulatory approvals shall not adversely affect any existing
approval required under this Contract.
ARTICLE 14. ASSURANCES OF GAS SUPPLY; SUBSTITUTE GAS SUPPLY
14.1 On or before the date upon which Seller proposes to make a reduction
pursuant to Section 14.9 and on or before each September 1 during the term of
the Contract, Seller shall provide to Buyer, at Seller's expense, a written
reserves and deliverability report ("Report"). Each Report shall be prepared by
McDaniels Associates ("McDaniels") or another independent reserve engineer
reasonably acceptable to Buyer. Seller shall notify Buyer in writing not less
than three (3) months prior to the delivery of a Report if Seller intends to
employ an independent reserve engineer other than McDaniels and Buyer shall have
thirty (30) days to accept or reject said independent reserve engineer. In
addition, Buyer may inform Seller that McDaniels, or an independent reserve
engineer subsequently selected, as the case may be, is no longer an acceptable
independent reserve engineer with respect to the next due Report upon written
notice given not later than the February 1 of the year in which such Report is
to be delivered. If Seller and Buyer are unable to agree upon a substitute
independent reserve engineer, the selection of an independent reserve engineer
shall be submitted to arbitration pursuant to Article 20. If Buyer and Seller
are unable to agree upon a substitute independent reserve engineer, or if
arbitration has not determined a substitute independent reserve engineer, in
either case, by September 1 of any year, Seller shall nevertheless provide the
Report due on such September 1, which Report shall have been prepared by the
independent reserve engineer which prepared the prior year's Report. Failure to
agree on an
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independent reserve engineer, by negotiation or arbitration, shall not excuse
Seller's failure to provide a Report on or before September 1 of each year.
Each Report shall redetermine and set forth the Initial Recoverable
Reserves as of the first day of the contract year immediately following the
Report. Each Report shall also determine and set forth the Deliverable Gas as at
the date of such Report under this Contract for each contract year for the
remainder of the Contract term. Each Report shall also set forth Seller's best
estimate of the cost to drill and develop additional lands and reserves
necessary to cure a Deliverability Deficiency (as defined in Section 14.4) (the
"Tie-in Cost") together with, when applicable, the information required under
Section 14.4 and Section 14.9.
14.2 Buyer shall, within 45 days of receipt of a Report, advise Seller whether
such Report is acceptable to Buyer and if it is acceptable to Buyer, such Report
shall become the "Determination" for purposes of this Article 14. In the event
that Buyer advises Seller that such Report is not acceptable, Seller and Buyer
shall endeavor to agree upon a mutually acceptable Initial Recoverable Reserves,
Deliverable Gas, estimate of the Tie-in Cost, and land removal determination. In
the event that Seller and Buyer do so agree, their determination shall be in
writing, shall set forth the Initial Recoverable Reserves, Deliverable Gas,
estimate of
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the Tie-in Cost, and land removal determination, and shall be the
"Determination" for purposes of this Article 14. In the event that Seller and
Buyer are unable to agree upon a mutually acceptable Initial Recoverable
Reserves, Deliverable Gas, estimate of the Tie-in Cost, and land removal
determination, either party may, within 90 days of delivery of Report, refer the
matter to arbitration pursuant to Article 20 hereof. An Initial Recoverable
Reserves, Deliverable Gas, estimate of the Tie-in Cost, and land removal
determination by arbitration shall be in writing, shall set forth the Initial
Recoverable Reserves, Deliverable Gas, estimate of the Tie-in Cost, and land
removal determination and shall be the "Determination" for purposes of this
Article 14.
14.3 If a Determination states that the Initial Recoverable Reserves are less
than 2,747.9 106m3 (97.01 Bcf), as adjusted to reflect on a proportionate basis,
any decrease in the Maximum Daily Quantity under the Contract (a "Reserves
Deficiency"), then, within twelve (12) months of the first day of the contract
year immediately following the Report upon which the Determination is based,
Seller shall dedicate additional lands and reserves to this Contract as needed
to cure the Reserves Deficiency.
14.4. 14.4.a. If any Determination indicates that Deliverable Gas during the
first full five (5) contract years of 12 months each detailed in the Report upon
which the Determination is based is less than the Minimum Deliverable Gas Amount
(a "Deliverability Deficiency"), then, within twelve (12) months of the first
day of the contract year immediately following such Report, Seller shall either
(i) increase the deliverability from Seller's Reserves and, if necessary,
dedicate additional lands and reserves to this Contract, as needed to cure the
Deliverability Deficiency or (ii) provide a binding written certification that
it reasonably believes that it can obtain gas from other sources ("Alternate
Sources") to meet its obligations under this Contract and that it has the right
and necessary regulatory approvals to deliver such gas to Buyer (an "Alternate
Source Notice").
14.4.b. The Alternate Source Notice shall provide in reasonable detail the
facts underlying such Notice and shall identify the extent to which Seller
intends to rely on Alternate
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Sources. Seller shall not be entitled to seek excuse from its obligation to cure
a Deliverability Deficiency as otherwise permitted pursuant to Section 14.4.c.
for any period for which an Alternate Source Notice is given. All of the terms
and conditions of this Contract (including, without limitation, Seller's duty to
supply the Maximum Daily Quantity and the pricing terms with respect thereto)
shall continue unaffected by the Alternate Source Notice. Seller shall not be
entitled to deliver an Alternate Source Notice for any Deliverability Deficiency
relating to volumes attributable to Excess Third Party Sales. If for any reason,
Seller is unable to meet at any time Buyer's nomination for gas up to the
Maximum Daily Quantity and Seller has provided an Alternate Source Notice for
such period and Buyer is unable to use NOVA transportation otherwise available
to it under Section15.3 through no fault of its own, thenSeller shall thereafter
not be entitled to rely on the Alternate Source Notice in lieu of increasing the
deliverability from Seller's Reserves, but shall thereupon immediately be
obligated to cure the Deliverability Deficiency in accordance with Section
14.4.a.(i) and Section 14.11.
14.4.c. Seller shall be excused from its obligation to cure a
Deliverability Deficiency pursuant to this Section 14.4, but only to the extent
that the Deliverability Deficiency is not the result of Excess Third Party
Sales, if:
(a) The Determination provides Buyer with at least four (4) years advance
notice that beginning with the fifth (5th) contract year following such current
Determination, that deliverability from Seller's Reserves will be insufficient
for Seller to meet its Maximum Daily Quantity delivery obligations to Buyer
hereunder; and
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(b) The Determination demonstrates that for a period of at least twelve
(12) consecutive months the weighted average price of gas under this Contract is
not greater than or equal to the price (the "Sufficient Acquisition Price")
which would be necessary in order that additional gas supplies can be acquired
and produced to cure the Deliverability Deficiency; and
(c) Buyer does not agree within six (6) months of the Determination
referred to in subsection (b) to increase the Price under the Contract for the
Deliverability Deficiency to the Sufficient Acquisition Price effective from and
after the first month of the Deliverability Deficiency.
The Sufficient Acquisition Price shall, until a contrary Determination
pursuant to Section 14.4.b, be deemed to be equal to the Price under this
Contract. In the event that Seller intends to claim that the weighted average
price of gas under this Contract is not greater than or equal to the Sufficient
Acquisition Price, Seller shall instruct its independent reserve engineer to
include as part of the Report which Seller proposes to be the basis of the
Determination referred to in Section 14.4.b a full and true accounting which:
(i) identifies the lands and reserves which are controlled by or could with
reasonable diligence become controlled by Seller and used to supply the Contract
(the "Available Lands"); and (ii) and provides Seller's least cost estimate
(exclusive of any return on monies invested) to drill, develop, process and
produce from each of the Available Lands in a manner which would cure a
projected Deliverability Deficiency in whole or in part ("Net Development
Costs"). For the purposes of estimating Net Development Costs, Seller's estimate
of the cost to drill and develop the Available Lands included in such Net
Development Costs for each of the Available Lands shall be reduced by 25%. Upon
receipt of this
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accounting and as part of such Report, Buyer and its agents shall be entitled to
attend at the offices of Seller and examine all title documents relating to the
Available Lands, historical information and any other data used by Seller to
establish its Net Development Costs including the audited and unaudited
accounting and record books of Seller, it being understood that Buyer shall keep
such information as is requested by Seller confidential except as required for
the purposes of this Contract. Following Buyer's audit, Buyer and Seller shall
use reasonable efforts to agree to a Sufficient Acquisition Price failing which
the matter shall be determined pursuant to arbitration invoked with respect to
the Report in accordance with Section 14.2. The Arbitrator shall consider and
determine the Sufficient Acquisition Price based on the costs, exclusive of any
return on monies invested, of Seller developing the Available Lands to satisfy a
Deliverability Deficiency, together with any evidence adduced by the parties and
relevant to the determination.
14.5 In the event that Seller cures a Reserve Deficiency or a Deliverability
Deficiency (each a "Deficiency") for any given year prior to the expiration of
the respective cure periods provided in Sections 14.3 and 14.4 (each, a "Cure
Period"), Seller shall provide Buyer immediate written notice thereof, to be
confirmed within 60 days by an additional Determination. Once the Cure Period
for any contract year for which the Determination projects a Deficiency begins
to run, the length of such Cure Period shall not be altered by any subsequent
Determination.
14.6 In each contract year that Seller issues a Report, Buyer shall be entitled
to elect by written notice to Seller, to be made within forty-five (45) days of
the receipt by Buyer of a Report in such contract year, to review the contracts
and other documents and technical information that are relevant to such Report.
Upon receiving such notice, and subject to Seller's reasonable needs to
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maintain the confidentiality of any information, Seller shall permit Buyer, its
agents and advisors to conduct such review, provided that such review shall be
completed within forty-five (45) days of the date on which Seller has made
available such relevant contracts and documents.
14.7 14.7.a In the event that the Maximum Daily Quantity is reduced under this
Contract, Buyer may arrange a substitute supply of gas or other fuel supplies
equal to all or part of the portion of the Maximum Daily Quantity which is
reduced.
14.7.b. Buyer and Seller shall use their best efforts to secure all
necessary regulatory approvals to implement delivery of any substitute gas
supply by any third-party supplier or suppliers in the event the Maximum Daily
Quantity is reduced for whatever reason pursuant to this Contract with the
understanding that any provincial removal permit held by Seller and/or Buyer
shall be sought to be utilized (by transfer, assignment or otherwise) as
authorization of the removal and export by any third party supplier or suppliers
of any substitute gas supplies. Buyer and Seller agree to use their best efforts
to assist in accomplishing such transfer or assignment.
14.7.c. Upon notice by Buyer to Seller that Buyer has arranged for a
substitute gas supply, Seller shall assign or otherwise-make available to each
third party supplier a corresponding quantity of firm capacity on the facilities
of NOVA or other intraprovincial pipeline and, to the extent permitted by NOVA
or such other intraprovincial pipeline, Seller's rights under its contract with
NOVA or such other intraprovincial pipeline to the extent of the substitute gas
supplies to be supplied by each third-party supplier.
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14.8 In the event that the Maximum Daily Quantity is reduced pursuant to any
provision of this Contract and Buyer obtains a substitute gas supply pursuant to
Section 14.7 or other fuel supplies to operate Buyer's Plant, and provided that
Seller's failure to cure the Deficiency is not excused pursuant to the
provisions of Section 14.4, Seller shall indemnify Buyer for: (i) any and all
costs and expenses reasonably incurred by Buyer in arranging, obtaining and
using the substitute supply of gas or other fuel to the extent that such
costs-and expenses exceed those which would have been incurred by Buyer had
Seller delivered a quantity of gas equivalent to the substitute gas supply; and
(ii) any demand charges incurred by Buyer pursuant to its transportation
contracts with TCPL and United States Transporter(s) to the extent that
transportation under such contracts is not utilized by Buyer; provided, however,
that Seller's liability pursuant to this Section 14.8 shall not exceed an amount
equal to the product of the amount of the reduction in the Maximum Daily
Quantity and the sum of the demand charges per 103m3 or other applicable units
of measurement incurred by Buyer pursuant to its transportation contracts with
TCPL and United States Transporter(s).
14.9 14.9.a. Seller and Buyer agree that not more frequently than once every
contract year, at such time as (i) Seller has a Minimum Removal Permit and (ii)
Buyer has an NEB export license for the sum of 3,681 106m3 (130 Bcf) as at
November 1, 1992, less the amount of gas which Seller is permitted to have
produced from Seller's Lands as of the date of such removal pursuant to this
Contract (i.e., Buyer's Daily Nomination plus Third Party Sales permitted
pursuant to Section 13.5), and such NEB export license authorizes the sale and
export from Canada of 424.9 103m3 (15,000 Mcf) per day for the unexpired term of
this Contract, then Seller may remove from Seller's Lands as described in
Exhibit A any lands not required to support any Canadian
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regulatory authorizations or approvals required for the performance of this
Contract, including, but not limited to, the NEB export license and the AEUB
removal permit; provided, however, that there shall have been a Determination
pursuant to Section 14.2 setting forth the information required pursuant to
Section 14.9.b (in addition to any other information required to be included in
a Determination); and provided, further, that the conditions of Sections 14.9.c
and 14.9.d have been satisfied.
14.9.b. If Seller proposes to remove from Seller's Lands any lands as
described in Section 14.9.a, there must first have been a Determination which,
in addition to any other information required to be included in a Determination,
(i) identifies the lands and reserves proposed to be removed pursuant to Section
14.9.a and the lands and reserves to remain dedicated to this Contract, (ii)
establishes that deliverability from the remaining Seller's Reserves, tied-in
and producing or in respect of which a letter of credit or letters of credit
have been posted for the Tie-in Cost are sufficient for Seller to meet its
Maximum Daily Quantity delivery obligations to Buyer hereunder for the then next
five (5) full contract years of at least twelve (12) months; (iii) establishes
that not less than 67% of the Seller's Reserves after the proposed removal are
proven reserves and the remainder are probable reserves using NEB/AEUB
standards; and (iv) demonstrates that Seller's Tie-in Cost for the remaining
Seller's Reserves is not increased by the proposed removal.
14.9.c. No removal of lands pursuant to this Section 14.9 shall be
permitted until (i) any letter(s) of credit required in connection with the
applicable Determination shall have been posted, (ii) all regulatory approvals
necessary for the removal of the proposed lands from this
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Contract and from any existing permit required for the performance of this
Contract, including, but not limited to, the NEB export license and the AEUB
removal permit, shall have been received, and such necessary regulatory
approvals shall not adversely affect any existing permit required for the
performance of this Contract, including, but not limited to, the NEB export
license and the AEUB removal permit and (iii) the Cure Gas Amount, if any, has
been satisfied in accordance with Section 22.3.
14.9.d. Seller may not remove tied-in and producing Seller's Reserves
pursuant to this Section 14.9 unless the remaining Seller's Reserves, tied-in
and producing, are sufficient for Seller to maintain the Minimum Removal Permit.
Buyer agrees to do such acts as are necessary to evidence Seller's removal
of Lands completed in accordance with this Section 14.9.
14.10. In the event that, at any time, Buyer and Seller agree to remove lands
from Seller's Lands and substitute additional different lands ("Reserve
Substitution"), the parties shall use reasonable efforts to effect Reserve
Substitution in a manner which provides Buyer with sufficient security that the
Maximum Daily Quantity will be met for the remaining term of the Contract. In
order to allow Buyer to assess a proposed substitution of reserves Seller shall
provide Buyer with full information as may be requested by Buyer on the reserves
to be added as a result of the Reserve Substitution. Buyer shall evaluate and
determine whether the Reserve Substitution provides it with sufficient security
of supply. In the event that Buyer and Seller cannot agree as to the Reserve
Substitution the matter shall be determined by arbitration on the basis of
providing Seller with the ability to produce up to the Maximum Daily Quantity
from the Seller's Lands and
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provide Buyer with assurance that the Maximum Daily Quantity shall be available
for the remaining term of the Contract and on the basis that only lands of
equivalent value will be substituted and, further, that seller's Reserves
following any such Reserve substitution will meet the conditions of Sections
14.9.b.(ii)-(iv) (in each case, applying such conditions to the substitution
rather than the removal of lands). Seller may not replace tied-in and producing
Seller's Reserves pursuant to this Section 14.10 unless Seller's Reserves,
tied-in and producing, following such Reserve Substitution, are sufficient to
maintain the Minimum Removal Permit. Whether by agreement or by arbitration, the
Reserve Substitution shall not take effect until both the AEUB and NEB have
demonstrated to the satisfaction of Buyer that a removal permit and export
license as required under this Contract shall remain in full force and effect
notwithstanding the Reserve Substitution.
Buyer agrees to do such acts as are necessary to evidence a Reserve
Substitution completed in accordance with this Section 14.10.
14.11. 14.11.a. If a Report indicates a Deliverability Deficiency and Seller has
not provided an Alternate Source Notice continuing in effect for the period
covered by the Report or is not excused from its obligation to cure the
Deliverability Deficiency pursuant to Section 14.4, Seller shall supply to Buyer
an irrevocable letter of credit, with a term of not less than one calendar year,
substantially in the form attached hereto as Exhibit D or otherwise satisfactory
to Buyer. The letter of credit shall be transferable to the Collateral Agent or
other agent of the bondholders under Buyer's Trust Indenture dated as of May 1,
1994, as amended from time to time. Buyer and Seller shall promptly take the
necessary and appropriate actions to transfer to such agent any letter of
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credit outstanding on the Effective Date which does not on its face provide for
transfer to such agent. The letter of credit shall be issued by a financial
institution whose long-term unsecured debt securities are rated A or better by
Standard and Poor's Corporation or A or better by Dominion Bond Rating Service.
Each letter of credit shall be in the amount of the Tie-in Cost (as set forth in
the applicable Report) estimated by the independent reserve engineer for the
additional lands and reserves necessary to cure the applicable Deliverability
Deficiency; provided, however, that if Buyer does not accept such Report, the
amount of the letter of credit shall be adjusted to equal the amount of the
Tie-in Costs for the additional lands and reserves necessary to cure the
Deliverability Deficiency as set forth in the Determination, which increase or
decrease in the amount of the letter of credit shall be effected within ten
business days of such Determination, unless Seller is not obligated to cure the
Deliverability Deficiency pursuant to Section 14.4 with respect to the adjusted
Tie-in Cost.
Seller shall supply any required letter of credit within the later of (i)
forty-five (45) days of delivery to Buyer of a Report and (ii) five (5) days of
delivery to Seller of Buyer's response to such Report, unless Seller shall have
sooner cured the applicable Deliverability Deficiency as evidenced by a
Determination in accordance with Section 14.5. Seller agrees that (i) the
posting of a letter of credit by the Seller in respect of a Deliverability
Deficiency identified in a Report which is accepted by Buyer, and (ii) the
adjustment by Seller of the amount of a posted letter of credit following a
Determination in respect of the Tie-in Cost estimated by Seller in a Report
which was not so accepted by Buyer shall in each case, but not otherwise,
constitute Seller's conclusive acknowledgment that, with respect to the
Deliverability Deficiency to which
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the letter of credit relates, the Sufficient Acquisition Price for gas supplies
and reserves required to cure such Deliverability Deficiency does not exceed the
Price under this Contract.
14.1l.b. Buyer shall have the right to draw upon the letter of credit to
indemnify itself to the extent of the costs, expenses and charges recoverable by
Buyer pursuant to Section 14.8 ("Costs of Cover") if Seller has not cured the
Deliverability Deficiency, as evidenced by a Determination in accordance with
Section 14.5, required to be cured by the expiration of the Cure Period for such
Deliverability Deficiency. Buyer shall promptly return to Seller any amounts
drawn on said letter of credit in excess of the Costs of Cover.
14.1l.c. Not less than thirty (30) days prior to the expiration of such
letter of credit, Seller shall provide Buyer with written evidence of the
renewal of such letter of credit. If Seller does not renew such letter of
credit, or if Seller fails to provide evidence of the renewal of such letter of
credit by the time required pursuant to the preceding sentence, and Seller has
not previously cured the relevant Deliverability Deficiency as evidenced by a
Determination in accordance with Section 14.5, Buyer shall be entitled to draw
the full amount of such letter of credit prior to its expiration and to apply
the proceeds of such a drawing to its Costs of Cover. Buyer shall promptly
return to Seller any amounts drawn under a letter of credit in excess of the
Costs of Cover.
14.1l.d. Upon curing, in whole or in part, a Deliverability Deficiency, as
evidenced by a Determination in accordance with Section 14.5, in respect of
which a letter of credit has been posted, Seller shall be entitled, upon not
less than ten business days' notice in writing to Buyer, to have the amount of
the letter of credit reduced to the extent of the value of the cure so effected
(if
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such cure is partial only) and to withdraw the letter of credit, if the
relevant Deliverability Deficiency has been completely cured.
14.12. Seller shall provide to Buyer monthly the information required by AEUB
Form S-1, or any successor form, for the preceding month (the "Form S-1
Information") at the same time as Seller is required to provide such AEUB Form
S-1 to the AEUB. If for any reason the AEUB ceases to require Seller to submit
to the AEUB Form S-1 or any successor form, Seller shall nevertheless continue
to provide to Buyer the Form S-1 Information by the fifteenth day of each month
for the preceding month. If Seller does not provide Buyer with the Form S-1
Information when required, Buyer shall be entitled to take whatever actions are
necessary to obtain such Form S-1 Information, including examining seller's
original records upon which such Form S-1 Information is based if such Form S-1
Information is not publicly available from the AEUB in a timely fashion, and
Seller shall reimburse Buyer for Buyer's costs and expenses in obtaining such
Form S-1 Information.
14.13 Buyer shall provide to Seller, within thirty (30) days of Seller's written
request, a written estimate of the number of hours which Buyer anticipates that
the Plant will be dispatched on-line for the next following contract year. Buyer
shall not be obligated to provide such estimate more frequently than once each
contract year.
ARTICLE 15. LIABILITIES AND LIMITATION OF LIABILITIES
15.1 If Seller fails to deliver the Daily Nominations pursuant to Article 5
hereof, and Seller's failure is not excused pursuant to the provisions of
Section 16.1, Seller's sole liability to Buyer, except as set forth in Section
15.2 and Section 15.3, shall be liquidated damages equal to the
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product of the volume of gas which Seller fails to deliver and the sum of the
demand charges per 103m3 (or other applicable units of measurement) incurred by
Buyer pursuant to its transportation contracts with TCPL and United States
Transporter(s); provided, however, that in case of the Maximum Daily Quantity
becoming reduced pursuant to any provision of this Contract and Buyer obtaining
a substitute gas supply pursuant to Section 14.7 or other fuel supplies to
operate Buyer's Plant, and providing that Seller's failure to cure the
Deficiency is not excused pursuant to Section 14.4, Seller's liability to Buyer
shall be as set forth in Section 14.8.
15.2. If on any day Seller delivers more or less gas than Buyer requests, Seller
and Buyer shall cooperate in making all reasonable efforts to mitigate the
effect of same, provided, however, that in the event that Buyer, as a result of
an over-delivery or under-delivery which can reasonably be considered to be the
fault of Seller, is assessed by TCPL any penalty charges as set forth in the
TCPL tariff governing the transportation of the gas sold hereunder, then all
such penalty charges actually incurred by Buyer with respect to such imbalance
shall be paid by Seller within fifteen (15) days after receipt of an invoice
therefor from Buyer.
15.3. If Seller fails to deliver the Daily Nomination pursuant to Article 5
hereof and is not otherwise excused from the obligation to deliver thereunder or
under any other term of this Contract, including force majeure, Seller agrees,
insofar as may be permitted under Seller's firm transportation service contract
with NOVA (the "NOVA Contract") and subject to the terms and conditions thereof
and the receipt of all necessary approvals from Canadian Regulatory Authorities,
to make available at Seller's cost, Seller's transportation rights under the
NOVA Contract only for that portion of such transportation service from the
Alberta Energy Company
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Station "C" ("AECO-C") to Empress Stn. No. 1958 known as NOVA Firm Service
Delivery at Empress (excluding for greater certainty NOVA Firm Service Receipt)
and only to the extent of any shortfall in delivery up to the Maximum Daily
Quantity and only for the duration of such shortfall; provided that Buyer pays
all the transportation commodity charges per 103m3 (or other applicable units of
measurement) payable by Seller for all such transportation rights of Seller as
well as any penalty charges as set forth in the NOVA tariff caused by an
over-delivery or under-delivery which can reasonably be considered to be the
fault of Buyer, and Seller shall pay all other costs and charges under the NOVA
Contract. Seller shall take such actions as Buyer may reasonably require to take
service under the NOVA Contract as contemplated hereunder (including, e.g.,
nominating service thereunder as requested by Buyer). Seller covenants and
agrees to maintain in effect a firm transportation service contract with NOVA
for delivery of the Maximum Daily Quantity to the Delivery Point for the primary
term of this Contract.
ARTICLE 16. FORCE MAJEURE
16.1 Neither Buyer nor Seller shall be liable in damages to the other for any
act, omission or circumstances occasioned by or in consequence of any event
constituting force majeure and the obligations of Seller and Buyer then existing
hereunder shall be excused during the period thereof to the extent affected by
such event of force majeure. The term "force majeure" shall mean any cause,
whether of the kind enumerated below or otherwise, and whether caused or
occasioned by or happening on account of the act or omission of one of the
parties hereto which affects obligations hereunder not within the control of the
party claiming excuse and which by the exercise of due diligence such party is
unable to prevent or overcome, including but not limited to acts of God,
strikes, lockouts, acts of the public enemy, criminal acts of trespassers, wars,
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blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, storms, floods, washouts, arrests and restraints of rulers and peoples,
civil disturbances, explosions, breakages or accident to machinery or lines of
pipe, line freezeups, curtailments or prorationing by NOVA of firm service
contracts, temporary inability of TCPL due to an event of "force majeure" to
receive gas for Buyer's account, unscheduled outages which result in the
temporary inability of Buyer's Plant to utilize any portion of the Maximum Daily
Quantity, and the binding order or any court or governmental authority which has
been resisted in good faith by all reasonable legal means. A failure to settle
or prevent any strike or other controversy with employees or with anyone
purporting or seeking to represent employees shall not be considered to be a
matter within the control of the party claiming excuse. Under no circumstances
will lack of finances be construed to constitute force majeure.
16.2. Such causes or contingencies affecting the performance of this contract by
either party, however, shall not relieve it of liability in the event of its
concurring negligence or in the event of its failure to use due diligence to
remedy the situation and remove the cause in an adequate manner and with all
reasonable dispatch, nor shall causes or contingencies affecting the performance
of this Contract relieve either party from its obligations to make payments of
amounts then due hereunder nor shall such causes or contingencies relieve either
party of liability unless such party shall give notice and full particulars of
the same in writing or by telex to the other party as soon as possible after the
occurrence relied on.
16.3. In the event, as a result of force majeure, NOVA is rendered unable,
wholly or in part, to deliver to TCPL for Buyer's account the Maximum Daily
Quantity provided for herein on any day,
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then Seller shall use reasonable efforts to meet the Daily Nomination at the
Delivery Point; provided, however, that Seller shall not be obligated to curtail
firm customers in order to meet its reasonable efforts obligation.
16.4. Seller's obligation to sell and Buyer's right to purchase gas hereunder
shall be suspended during the effectiveness or any governmental action which
results in the interruption of deliveries or which prevents, totally or
partially, the exportation of gas from Canada, the importation of gas into the
United States by Buyer, or transportation of gas by TCPL and United States
Transporter for Buyer; provided, however, that where the exportation,
importation, use or transportation is only partially prevented by the
governmental action, Seller's and Buyer's obligations and rights hereunder shall
be suspended only to the extent prevented by such governmental action.
ARTICLE 17. LAWS AND REGULATORY BODIES
17.1 This Contract and the rights and obligations of the parties hereunder are
subject to all applicable present and future laws, rules, regulations and orders
of any regulatory or legislative body or other duly constituted authority having
jurisdiction over Seller or Buyer.
ARTICLE 18. TRANSFER AND ASSIGNMENT
18.1 Any company which shall succeed by purchase, merger, or consolidation of
the properties, substantially as an entirety, of Buyer or of Seller, as the case
may be, shall be entitled to the rights and shall be subject to the obligations
of its predecessor in title under this Contract. Seller may, without relieving
itself of its obligations under this Contract, assign any of its rights and
obligations hereunder to a corporation with which it is affiliated at the time
of such assignment.
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Otherwise no assignment of this Contract or any of its rights and obligations
hereunder shall be made by Seller without the written consent of Buyer first
obtained which consent shall not be unreasonably withheld. Buyer may, without
relieving itself of its obligations under this Contract, assign any of its
rights and obligations hereunder to a corporation with which it is affiliated at
the time of such assignment. Otherwise no assignment of this Contract or any of
its rights or obligations hereunder shall be made by Buyer without the written
consent of Seller first obtained which consent shall not be unreasonably
withheld. It is agreed, however, that the provisions of this Article 18 shall
not in any way prevent either party to this Contract from pledging or mortgaging
its rights hereunder as security for its indebtedness. In the event that a
person(s) with a security interest in this Contract succeeds to the rights of a
party by foreclosure or otherwise, the other party shall accord such successor
the same rights as its predecessor hereunder. This Contract shall be binding
upon and shall inure to the benefit of the respective successors and assigns of
the parties hereto.
ARTICLE 19. MISCELLANEOUS PROVISIONS
19.1 No waiver by Buyer or Seller of any default of the other under this
Contract shall operate as a waiver of a future default whether of a like or
different character.
19.2. The headings used throughout this Contract are inserted for reference
purposes only, and are to be considered or taken into account in construing the
terms or provisions of any Article or Section hereof nor to be deemed in any way
to qualify, modify or explain the effect of any such provisions or terms.
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19.3. Every notice, statement or bill provided for in this Contract shall be in
writing directed to the party to whom given, made or delivered at such party's
address as follows:
SELLER: Paramount Resources Ltd.
4000, 350 - 7th Avenue,S.W.
Calgary, Alberta
Canada, T2P 3W5
BUYER: Selkirk Cogen Partners, L.P.
c/o U.S. Generating Company
7500 Old Georgetown Road
Bethesda, Maryland 20814
Attn: Fuel Services
Selkirk Cogen Partners, L.P.
with a copy to: c/o U.S. Generating Company
One Bowdoin Square
Boston, Massachusetts 02114
Attn: Legal Group
Either party may change its address from time to time by giving written
notice of such change to the other party. Any notice, statement or bill or other
document made, given or delivered hereunder by mail shall be deemed to have been
effectively delivered to the addressee thereof at the end of the third (3rd)
business day after the date of mailing by prepaid registered mail in the United
States mail or Canadian mail; provided; that, at any time when there is a strike
affecting delivery of either United States mail or Canadian mail, all such
deliveries shall be made by hand or by telex. If any such notice, statement,
bill or other document is delivered by hand or by telex to an officer of the
addressee, it shall be deemed to have been received by the addressee as soon as
such delivery or transmission has been made to said officer.
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It is expressly understood and agreed, however, that the notices,
statements and bills referred to in this Contract hereof shall first be
delivered by telex, telecopier or the similar means, in accordance with the
dates and time provided in the applicable provisions of this Contract, and shall
be mailed as soon as practicable thereafter.
19.4 This Contract shall be construed in accordance with the laws of the
Province of Alberta.
19.5. This Contract amends and restates the Original Gas Purchase
Contract effective the Effective Date.
19.6. The rights and remedies of Buyer and Seller under this Contract are
cumulative and in addition to any other rights and remedies that Buyer and
Seller may have at law or in equity.
19.7. The liabilities of Buyer and Seller for breach of any covenants,
representations or warranties and the obligations of Buyer and Seller under any
indemnity contained in this Contract shall survive termination of this Contract
except as otherwise expressly provided.
19.8. Notwithstanding any provision of this Contract, nothing herein shall be
construed as prohibiting Buyer from utilizing any gas purchased from Seller for
any other lawful purpose.
19.9. Pursuant to the Original Gas Purchase Contract, Seller has executed and
delivered to TCPL a Guarantee, a copy of which is appended as Exhibit "B"
hereto, and Buyer has executed and delivered to Seller an Indemnity, a copy of
which is appended as Exhibit "C" hereto, which Guarantee and Indemnity, each as
amended, shall continue in full force and effect, as and from the Effective
Date.
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ARTICLE 20. ARBITRATION
20.1 In the event that either party has the right to require a matter to be
submitted to arbitration pursuant to this contract the arbitration shall be
conducted in accordance with the UNCITRAL Arbitration Rules pursuant to the
British Columbia International Commercial Arbitration Act.
20.2. The arbitrators selected to act hereunder shall be qualified by education
and training to pass up on the particular question in dispute, and shall be
disinterested persons. Therefore, it is agreed that if an engineering question
is involved, qualified engineers shall be appointed, and similar procedure will
be followed in connection with other questions.
20.3. The arbitrators so chosen (the "Board") shall proceed immediately to hear
and determine the question or questions in dispute. The decision of the
arbitrators, or a majority of them, shall be made within forty-five (45) days
after appointment of the single arbitrator or third arbitrator, as the case may
be, subject to any reasonable delay due to unforeseen circumstances.
20.4. The decision of the arbitrator or arbitrators shall be in writing and
signed by the arbitrator or arbitrators and shall be final and binding upon the
parties as the question or questions submitted for determination. It is the
intention of the parties that such decision shall not be subject to court
review; however, such decision shall be enforceable through judicial
proceedings. The written decision of the Board of a majority thereof may be
issued with or without an opinion. If any party requests a written opinion with
regard to a decision, one shall be issued expeditiously, but its issuance shall
not delay compliance with and implementation of the Board's or majority's
decision.
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20.5. Pending the outcome of any such arbitration, the terms in effect
immediately prior to such arbitration shall remain in effect. Any modification
approved by the Board shall be effective prospectively only, and such
modification shall become effective on the first day of the month following the
decision of the arbitrator or arbitrators, subject, however, to the next two
sentences hereof. Actions taken pursuant to this Article 20 shall be subject to
the receipt of all governmental and regulatory approvals required to make such
actions effective without modifications (unless such modifications are
acceptable to both parties); the parties shall promptly apply for such
approvals.
20.6. Each party shall bear the cost of the arbitrator appointed by it and both
parties agree to share equally all costs and expenses of the third arbitrator
and all common costs.
ARTICLE 21. NONRECOURSE OBLIGATION OF JOINT VENTURE
21.1 Seller acknowledges and agrees that: (a) Buyer is a Limited Partnership;
(b) Seller shall have no recourse against any participant in Buyer with respect
to the obligations of Buyer and its sole recourse shall be against the Limited
Partnership assets, irrespective of any failure to comply with applicable law or
any provisions of this Contract; (c) no claim shall be made against any
participant in Buyer in connection with the obligations of Buyer under this
Contract, except that the participants may be joined as nominal parties for the
purpose of enforcing Seller's rights hereunder; (d) Seller shall have no right
to any claim in respect of Buyer not yet due and owing; and (e) this
representation is made expressly for the benefit of the participants in Buyer.
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ARTICLE 22. MATERIAL BREACH; REMEDIES
22.1 If Seller fails to deliver a Report when due pursuant to Section 14.1,
Buyer may withhold all or any part of the Sum (as defined in Section 8.1), and
no interest shall accrue thereon, until such time as Seller has delivered the
overdue Report. Seller shall continue to perform its obligations under this
Contract during any period in which Buyer is withholding all or any part of the
Sum as provided in the preceding sentence.
22.2. Each of the following events shall constitute a "material breach" by
Seller of this Contract: (a) the failure to obtain and maintain a Minimum
Removal Permit as required by Section 6.3.a, subject to the cure provisions
contained therein; (b) Third Party Sales and/or Excess Third Party Sales not
permitted pursuant to Sections 13.5.a. or 13.5.b. respectively; (c) Seller's
failure to cure a Deficiency as required pursuant to Article 14 of this
Contract; and (d) Seller's failure to post, maintain, or renew a letter of
credit as required pursuant to Section 14.11 (a "Letter of Credit Default"),
subject to Section 22.4.
Upon a material breach as set forth in the preceding sentence, Seller and
Buyer agree that, notwithstanding any other provision of this Contract, Buyer
shall have the following rights and remedies, which rights and remedies are
cumulative and not exclusive of any rights or remedies which Buyer may otherwise
have under this Contract or at law or in equity (unless otherwise specifically
stated herein):
22.2.a. Buyer may terminate this Contract upon thirty (30) days written
notice to Seller. Upon termination of this Contract, Buyer shall have the gas
substitution rights set forth in Section 14.7 and Seller shall have the
obligations set forth in Section 14.8. Seller shall indemnify
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Buyer, by means of a lump sum payment made within 180 days of the termination of
this Contract, for the costs, expenses and charges recoverable by Buyer under
Section 14.8.
22.2.b. Buyer may reduce the Maximum Daily Quantity to any amount including
zero and Buyer shall have the gas substitution rights set forth in Section 14.7
of this Contract and Seller shall have the obligations set forth in Section
14.8. Buyer shall give Seller written notice of any such reduction in the
Maximum Daily Quantity and the effective date of such reduction, such date to be
no earlier than the first (1st) day after the expiration of the Cure Period or
the thirtieth (30th) day after the date of Buyer's notice, whichever is later.
Upon Buyer's exercise of its right under this Section 22.2.b, Buyer shall have
no further remedies for the material breach which gave rise to such reduction in
the Maximum Daily Quantity, unless such material breach continues after the date
of the notice of the reduction of the Maximum Daily Quantity pursuant hereto.
22.2.c. Seller shall not make any Third Party Sales without the prior
written consent of Buyer, unless this Contract provides for a cure of the
material breach and Seller has cured such breach in the manner required by this
Contract.
22.2.d. Buyer may unilaterally take such action before any United States or
Canadian Regulatory Authority as Buyer shall deem necessary or appropriate to
secure the full performance of this Contract or to change, alter or vary any
application, permit or license issued in connection with the gas to be delivered
under this Contract; provided, however, that Seller does not hereby waive any
right to contest such action.
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22.2.e. Seller shall not remove any portion of Seller's Lands pursuant to
Section 14.9, unless this Contract provides for a cure of the material breach
and Seller has cured such breach in the manner required by this Contract.
22.3 Buyer shall provide Seller with fifteen (15) days advance written notice
prior to its exercise of any of the aforementioned remedies upon a Letter of
Credit Default and, upon Seller's delivery of a letter of credit which satisfies
the requirements of Section 14.11 of this Contract within the said fifteen (15)
days, such Letter of Credit Default shall be deemed to be cured.
22.4. The events identified in Section 22.2 as material breaches are not the
exclusive events which may constitute a material breach under this Contract.
Upon the occurrence of a material breach not identified in section 22.2 or upon
the occurrence of any other breach of this Contract, and except as is otherwise
provided in this contract the non-breaching party shall be entitled to exercise
all rights and remedies it may have at law or in equity and no single or partial
exercise of any right or remedy shall preclude any other or further exercise of
any right or remedy at law or in equity. The respective liabilities of Buyer and
Seller hereunder for breach of any covenants, representations or warranties and
the respective obligations of Buyer and Seller under any indemnity herein
contained, including any payments required pursuant to Section 8.3 and Section
22.7, shall survive termination of this Agreement, except as otherwise herein
expressly provided.
22.5. A party may withhold payments due the other party under this Contract to
offset damages, costs and expenses reasonably incurred by the withholding party
as a result of a material breach of this Contract by such other party.
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22.6. Any party which is found pursuant to a final judicial determination to be
in breach of its obligations under this Contract shall be liable to the other
party for all costs and expenses, including reasonable attorneys fees in respect
of such breach, incurred by the non-breaching party in enforcing its rights
under this Contract.
22.7. No failure or delay on the part of a party in exercising any right
hereunder and no course of dealing between the parties which does not constitute
an agreement in writing between the parties shall operate as a waiver thereof.
No waiver by a party of any breach or default of the other party under this
Contract shall operate as a waiver of a future default whether of a like or
different character.
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IN WITNESS WHEREOF the parties hereto have caused this Second Amended and
Restated Gas Purchase Contract to be executed in duplicates and have caused
their corporate seal to be hereunto affixed, attested by the hands of their
proper officers duly authorized in that behalf as of the day and year first
above written.
SELKIRK COGEN PARTNERS, L.P.
By: JMC SELKIRK, INC.
Managing General Partner
By: /s/ George J. Grunbeck
-----------------------------------
Name: George J. Grunbeck
Title: Vice President
PARAMOUNT RESOURCES LTD.
Per: /s/ James H. T. Riddell
----------------------------------
Name: James H. T. Riddell
Title: Corporate Operating Officer
Per: /s/ Laurel A. Friesen
----------------------------------
Name: Laurel A. Friesen
Title: Assistant Corporate Secretary
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