SECOND CARBON DIOXIDE
TRANSPORTATION AGREEMENT
BETWEEN
DENBURY ONSHORE, LLC
AS "TRANSPORTER"
AND
GENESIS CRUDE OIL, L.P.
AS "SHIPPER"
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Table of Contents
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DALLAS1 834152v4 28040-00026
ARTICLE I DEFINITIONS......................................................1
1.1. Defined words and terms...................................1
ARTICLE II SCOPE OF TRANSPORTATION SERVICE.................................4
2.1. Transportation of Carbon Dioxide..........................4
2.2. Redelivery of Carbon Dioxide..............................4
2.3. Non-Exclusive Transportation..............................4
2.4. INTENTIONALLY OMITTED.....................................4
2.5. Operation of Transporter's Pipeline.......................4
2.6. Transporter's Processing Rights...........................4
2.7. Excess Quantities.........................................4
2.8. Call Option...............................................5
ARTICLE III RATES AND CHARGES..............................................5
3.1. Initial Rate..............................................5
3.2. Adjusted Rate.............................................5
3.3. Minimum Rate..............................................6
3.4. Tax Reimbursement.........................................6
ARTICLE IV TERM; EARLY TERMINATION FOR DEFAULT.............................6
4.1. Term......................................................6
4.2. Default...................................................6
4.3. Occurrence of Default.....................................6
ARTICLE V RECEIPT POINTS, DELIVERY POINTS AND PRESSURES....................7
5.1. Receipt Points and Delivery Points........................7
5.2. Responsibility............................................7
5.3. Pressure Criteria.........................................7
ARTICLE VI QUANTITY........................................................8
6.1. Delivery Rates............................................8
6.2. Cooperation Regarding Deliveries..........................8
ARTICLE VII QUALITY SPECIFICATIONS.........................................8
7.1. Specification.............................................8
7.2. Testing...................................................8
7.3. Disclaimer................................................9
ARTICLE VIII OWNERSHIP AND OPERATION OF FACILITIES.........................9
8.1. Facility Ownership........................................9
ARTICLE IX MEASUREMENT.....................................................9
9.1. Measurement Point.........................................9
9.2. Procedure.................................................9
9.3. Atmospheric Pressure......................................9
9.4. Meter Standards...........................................9
9.5. Temperature..............................................10
9.6. Density..................................................10
9.7. Samples..................................................10
ARTICLE X FORCE MAJEURE...................................................10
10.1. Definition...............................................10
10.2. Extended Force Majeure...................................10
10.3. Strikes and Lockouts.....................................11
ARTICLE XI NOTICES........................................................11
11.1. Transporter Notices......................................11
11.2. Shipper Notices..........................................11
11.3. Change of Address........................................11
ARTICLE XII PAYMENT, AUDIT AND FINANCIAL RESPONSIBILITY...................11
12.1. Payment..................................................11
12.2. Auditing.................................................12
12.3. Failure to Pay...........................................12
12.4. Financial Responsibility.................................12
ARTICLE XIII WARRANTY.....................................................12
13.1. Warranty.................................................12
ARTICLE XIV GENERAL TERMS AND CONDITIONS..................................13
14.1. Waiver of Breach.........................................13
14.2. Regulatory Bodies........................................13
14.3. CHOICE OF LAW............................................13
14.4. Joint Preparation........................................13
14.5. Assignment...............................................13
14.6. Modification and Entire Agreement........................13
14.7. Headings.................................................14
14.8. Damage Limitation........................................14
14.9. Arbitration..............................................14
14.10. Second Master Agreement; Conflicts.......................14
14
SECOND CARBON DIOXIDE TRANSPORTATION AGREEMENT
THIS SECOND CARBON DIOXIDE TRANSPORTATION AGREEMENT (this "Agreement"),
made and entered into effective as of July 1, 2004, by and between DENBURY
ONSHORE, LLC, a Delaware limited liability company, hereinafter referred to as
"Transporter", and GENESIS CRUDE OIL, L.P., a Delaware limited partnership,
hereinafter referred to as "Shipper".
WITNESSETH:
WHEREAS, Shipper owns an interest in and/or has the right to market or
otherwise control the disposition of Carbon Dioxide produced from certain wells
located in the Jackson Dome area in Rankin County, Mississippi; and,
WHEREAS, Transporter owns and operates a gathering system connected to
a mainline pipeline extending approximately one hundred eighty-three miles from
a point at the outlet flange of a Carbon Dioxide dehydration facility located in
Rankin County near Jackson, Mississippi, to a point in White Castle, Ascension
Parish, Louisiana, which currently is capable of delivering Carbon Dioxide to
the various delivery points; and,
WHEREAS, Transporter currently has available pipeline capacity for the
transportation of Carbon Dioxide for Shipper; and,
WHEREAS, Shipper desires to arrange for the transportation of Carbon
Dioxide through Transporter's pipeline and Transporter desires to receive from,
transport and redeliver to Shipper Carbon Dioxide in accordance with the terms
and conditions stated in this Agreement.
NOW, THEREFORE, for and in consideration of the mutual benefits to be
derived, the terms and conditions contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Transporter and Shipper hereby agree with each other as follows:
ARTICLE I
DEFINITIONS
1.1. Defined words and terms. Except where the context otherwise indicates
another or different meaning or intent, the following words and terms as used
herein shall have the meanings indicated:
(a) The term "Additional Industrial Sale Contracts" has the
meaning set out in the Second Master Agreement.
(b) The term "Bankruptcy Event" means, with respect to either
party, the entry of a decree or order by a court of competent
jurisdiction adjudging the party a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the party under the
Federal Bankruptcy Code or any other applicable law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the party or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a
period of sixty (60) consecutive days; or the consent by such party to
the institution of bankruptcy or insolvency proceedings against it, or
the filing by it of a petition or answer or consent seeking
reorganization or similar relief under the Federal Bankruptcy Code or
any other applicable law, or the consent by it to the filing of any
such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
party or of any substantial part of its property, or the making by it
of an assignment for the benefit of creditors, or the admission by it
in writing of its inability to pay its debts generally as they become
due and its willingness to be adjudicated a bankrupt.
(c) The terms "Carbon Dioxide" and "CO2" each mean a substance
primarily composed of molecules containing one atom of carbon and two
atoms of oxygen and containing at least 99 percent (dry basis) by
volume of such molecules.
(d) The term "Contract Year" means a period of three hundred
sixty-five (365) consecutive days beginning on the first day of a full
month following the month in which deliveries commence under this
Agreement or on any anniversary thereof; provided, however, that any
such year which contains a date of February 29th shall consist of three
hundred sixty-six (366) consecutive days. This definition of Contract
Year contemplates the possibility of first deliveries occurring on a
day other than the first day of a month.
(e) The term "cubic foot" is the amount of Carbon Dioxide
necessary to fill one cubic foot of space at a base pressure of 15.025
psia and at a base temperature of 60 degrees Fahrenheit.
(f) The term "Daily Maximum Quantity" has the meaning set out
in the Master Agreement.
(g) The term "day" means a period beginning at 7:00 a.m.
(local time) on a calendar day and ending at 7:00 a.m. (local time) on
the next succeeding calendar day. The date of a day shall be that of
its beginning.
(h) The term "Delivery Points" has the meaning stated in
Section 2.2.
(i) The term "First Master Agreement" means that certain
Production Payment Purchase and Sale Agreement dated as of November 14,
2003 and effective as of September 1, 2003, between Transporter's
predecessor and Shipper, as the same may be amended, supplemented,
modified or restated from time to time.
(j) The term "First Master Documents" means the First Master
Agreement and all agreements executed in connection therewith or
pursuant thereto, including but not limited to the First T&P Agreement,
as the same may be amended, supplemented, modified or restated from
time to time.
(k) The term "First T&P Agreement" means that certain Carbon
Dioxide Transportation Agreement dated as of November 14, 2003 and
effective as of September 1, 2003, between Transporter's predecessor
and Shipper, as the same may be amended, supplemented, modified or
restated from time to time.
(j) The term "MCF" means 1,000 cubic feet of Carbon Dioxide.
(k) The term "MMCF" means 1,000,000 cubic feet of Carbon
Dioxide.
(l) The term "month" means a period beginning on the first day
of a calendar month and ending at the beginning of the first day of the
next succeeding calendar month.
(m) The term "pound-mass" means the mass quantity of Carbon
Dioxide equivalent to a pound-mass as defined by the United States
National Bureau of Standards.
(n) The term "psia" means pounds per square inch absolute.
(o) The term "psig" means pounds per square inch gauge.
(p) The term "Receipt Points" has the meaning stated in
Section 2.1.
(q) The term "Second Master Agreement" means that certain
Second Production Payment Purchase and Sale Agreement executed
contemporaneously herewith by Transporter and Shipper, as the same may
be amended, supplemented, modified or restated from time to time.
(r) The term "Second Master Documents" means the Second Master
Agreement and all agreements executed in connection therewith or
pursuant thereto, including but not limited to this Agreement, as the
same may be amended, supplemented, modified or restated from time to
time.
(s) The term "Second Production Payment" has the meaning
stated in the Second Master Agreement.
(t) The term "Transportation Fee" has the meaning stated in
Article III.
(u) The term "Transporter's Pipeline" means Transporter's
existing gathering system and pipeline used for the gathering,
dehydration and transportation of Carbon Dioxide from wells owned or
controlled by Transporter in Rankin County, Mississippi, which
gathering system extends from various wellheads owned or controlled by
Transporter to a point at the outlet flange of a Carbon Dioxide
dehydration facility located in Rankin County, Mississippi, and which
pipeline extends from that point to a point in Ascension Parish,
Louisiana.
(v) The term "Triggering Event" has the meaning stated in
Section 2.8.
ARTICLE II
SCOPE OF TRANSPORTATION SERVICE
2.1. Transportation of Carbon Dioxide. Subject to all of the terms, conditions,
and limitations of this Agreement, each day during the term hereof Shipper shall
have the right to tender to Transporter at the Receipt Points set forth in
Exhibit A (the "Receipt Points") for transportation hereunder any volume of
Carbon Dioxide up to the Daily Maximum Quantity.
2.2. Redelivery of Carbon Dioxide. Subject to all of the terms, conditions, and
limitations of this Agreement, each day during the term hereof Transporter shall
redeliver to Shipper, at the Delivery Points set forth in Exhibit B (the
"Delivery Points"), the volume of Carbon Dioxide delivered by Shipper to
Transporter at the Receipt Points on such day, as such volumes may be adjusted
for Shipper's proportionate share of reductions due to Carbon Dioxide lost and
unaccounted for in Transporter's Pipeline and any other loss or shrinkage factor
generally applicable from time to time to Transporter's Pipeline.
2.3. Non-Exclusive Transportation. Subject to the qualification as to priority
set out in Section 2.4, nothing in this Agreement shall be construed to prohibit
Transporter from transporting Carbon Dioxide for a person or persons other than
Shipper. Nothing in this Agreement shall be construed to require Shipper to
tender any minimum quantity of Carbon Dioxide to Transporter for transportation
hereunder.
2.4. INTENTIONALLY OMITTED.
2.5. Operation of Transporter's Pipeline. Except as otherwise provided in
Section 2.8, Transporter will at all times maintain, preserve and keep all
improvements, machinery, equipment, pipe lines, tanks, fixtures and other
personal property and equipment of every kind and nature now or hereafter
required in connection with operation of Transporter's Pipeline in good repair,
working order and condition, and promptly make all necessary and proper repairs,
renewals, replacements and substitutions. Subject to the forgoing and its other
obligations hereunder, Transporter may, at its sole discretion, at any time and
from time to time, expand, extend, repair, reconfigure or temporarily shutdown
Transporter's Pipeline and related equipment. In exercising the foregoing
rights, Transporter shall have no liability to Shipper hereunder and shall use
all reasonable efforts to minimize any adverse impact on Shipper's rights
hereunder.
2.6. Transporter's Processing Rights. Transporter reserves the right, prior to
delivery to Shipper at the Delivery Points set forth herein, at the sole cost of
Transporter, to process and/or treat Carbon Dioxide received from Shipper
hereunder for any purpose; provided, however, subject to Section 7.3, Carbon
Dioxide delivered to the Delivery Points shall meet the quality specifications
of Article VII hereof.
2.7. Excess Quantities. Shipper may, on any day and upon prior notice to
Transporter, tender at the Receipt Point volumes of Carbon Dioxide in excess of
the Daily Maximum Quantity, in which event Transporter may, in its sole
judgment, transport all or any portion of such excess volumes on a fully
interruptible basis. However, the transportation of any excess volumes by
Transporter shall otherwise be subject to all of the terms and provisions
hereof.
2.8. Call Option. In the event a Triggering Event (as hereinafter defined)
occurs, Transporter shall have the right and option to either (i) repair,
replace, restore and reconstruct Transporter's Pipeline in substantially the
form in which the same existed prior to any such Triggering Event or (ii)
exercise (or cause the exercise of) the Call Option provided for in Section 2.4
of the Second Master Agreement. Transporter shall notify Shipper in writing of
its election of one of the options set forth above within thirty (30) days from
the date of the Triggering Event. If Transporter elects the option set out in
clause (i) above, then Transporter shall commence the restoration work within
thirty (30) days from the date of the Triggering Event and diligently prosecute
and complete the restoration work within a reasonable time, in no event
exceeding twelve (12) months from the date of the Triggering Event. If
Transporter elects the option set forth in clause (ii) above, the Call Option
set forth in Section 2.4 of the Second Master Agreement shall be exercised in
accordance with the terms thereof. If Transporter fails to notify Shipper of its
election of either clause (i) or (ii) above within thirty (30) days from the
date of the Triggering Event, Transporter shall, as of such date, be deemed to
have delivered notice to Shipper electing to exercise the option set forth in
clause (i) above. For purposes hereof, a "Triggering Event" means (a) the entire
or partial destruction or damage of Transporter's Pipeline by fire or any other
casualty whatsoever; or (b) a mechanic failure or other breakdown of
Transporter's Pipeline, which in either case actually renders Transporter's
Pipeline inoperable for a minimum period of ninety-five (95) consecutive days.
ARTICLE III
RATES AND CHARGES
3.1. Initial Rate. For the transportation and dehydration of each MCF of
Shipper's Carbon Dioxide received at the Receipt Points during any month,
beginning with the date of first deliveries hereunder and continuing through the
end of the first Contract Year, Shipper shall pay Transporter a transportation
fee (the "Transportation Fee"), which fee shall initially be $0.16 (the "initial
rate").
3.2. Adjusted Rate. Effective on the first day of each Contract Year after the
first Contract Year, the Transportation Fee shall be adjusted, upward or
downward. Computations to determine such adjustments shall be made utilizing
$0.16/Mcf as the base rate. The adjustment shall be based upon the change in the
annual average of the Producers Price Index, "PPI," All Commodities, 1982 = 100,
as published by the United States Department of Labor, Bureau of Labor
Statistics. To determine the adjusted rate for each subsequent Contract Year,
the following formula shall be used:
Adjusted rate = Base rate x (0.10 + 0.90 x PPI current/PPI
base) or the initial rate, whichever is greater.
Thus, by way of illustration, should the average PPI for the
year 2002 be 125, and the average PPI for the year 2003 be
130, the adjusted price for the subsequent Contract Year,
2004, commencing on the anniversary of the Contract Year,
would be computed as follows:
$0.16 x (0.10 + 0.90 x 130/125) = $0.16576
3.3. Minimum Rate. Notwithstanding the foregoing, the Transportation Fee, as
adjusted herein, shall never be less than $0.16 per MCF.
3.4. Tax Reimbursement. In addition to the Transportation Fee provided for
above, Shipper shall reimburse Transporter for all taxes which are levied upon
and/or paid by Transporter with respect to the services performed under this
Agreement, but only if and to the extent that Shipper has the right to receive
reimbursement for such taxes from Shipper's customers under the terms of
Shipper's resale contracts with its customers.
ARTICLE IV
TERM; EARLY TERMINATION FOR DEFAULT
4.1. Term. Subject to the other provisions hereof, this Agreement shall be
effective from the date hereof and shall continue in force and effect
until the Second Production Payment is fully discharged.
4.2. Default. The occurrence of one or more of the following matters shall
constitute a default by a party:
(a) the occurrence of a Bankruptcy Event involving such party;
(b) the failure of such party to make any payment to the other party as and
when due hereunder where such failure continues for thirty (30) days
after the delivery of written notice by the other party of such failure
to make such payment; and
(c) the breach by such party of any other material covenant, agreement,
obligation, duty or provision of this Agreement, where such breach
continues for thirty (30)days after its receipt of written notice
thereof from the other party; provided, however, that if the matter
which is the subject of the breach cannot by its nature with due
diligence be remedied by such within said thirty (30) day period, and
such party shall have prepared a plan for remedying such failure that
is reasonably acceptable to the other party and such party is
proceeding with diligence to implement such plan, such thirty (30)day
period shall be extended by such additional time period as may be
reasonably required to implement such plan, and, provided further,
however, that the remedying of such potential default shall not affect
the right of the other party to terminate this Agreement if other
defaults occur before such potential default has been remedied.
4.3. Occurrence of Default. Upon the occurrence of a default by a party, the
other party may exercise any right or remedy it may have at law and/or
in equity; provided that Transporter shall not be entitled to terminate
this Agreement. If pursuant to an arbitration proceeding conducted in
accordance with Section 14.9, it is determined that as a result of a
Shipper default Transporter has suffered a specified amount of damages,
the arbitrators may provided as a remedy to Transporter that
Transporter may sell a portion of Shipper's carbon dioxide necessary to
generate sufficient proceeds to reimburse Transporter for such damages.
ARTICLE V
RECEIPT POINTS, DELIVERY POINTS AND PRESSURES
5.1. Receipt Points and Delivery Points. The Receipt Points are set forth on
Exhibit A. The Delivery Points are set forth on Exhibit B. Shipper may request
at any time and from time to time that Transporter agree to one or more
additional Receipt Points or Delivery Points on Transporter's Pipeline.
Transporter shall not unreasonably withhold its agreement to the addition of any
additional Receipt Point or Delivery Point requested by Shipper as long as
Shipper reimburses Transporter for all incremental costs incurred or to be
incurred by Transporter as a result of the addition of such Receipt Point or
Delivery Point and, with respect to requested Receipt Points only, so long as
Transporter owns or controls the well or wells to be producing into the
requested Receipt Point. If Transporter's estimated incremental cost to
establish an additional Receipt Point or Delivery Point requested by Shipper
exceeds $25,000, then Transporter shall be entitled to require that Shipper pay
Transporter such estimated incremental cost before agreeing to add such
additional Receipt Point or Delivery Point, with a "true-up" payment being made
by the appropriate party to the other party when the final, actual incremental
costs of such additional Receipt Point or Delivery Point are known. Upon the
addition of any Receipt Point or Delivery Point, the parties shall execute an
amendment of this Agreement which shall reflect all of the Receipt Points or
Delivery Points on a revised Exhibit A or Exhibit B, as appropriate. The exact
point at which delivery by Transporter to Shipper shall be deemed to be made
shall be the flange or weld connecting the facilities of Transporter's Pipeline
with the facilities of Shipper or Shipper's designee.
5.2. Responsibility. As between the parties hereto, and subject to the
limitations set forth in other provisions of this Agreement, Transporter shall
be responsible for any injuries, losses, expenses, claims, liabilities, or
damages caused by the Carbon Dioxide while it is in Transporter's Pipeline until
it shall have been delivered to Shipper or Shipper's designee at the Delivery
Points, and, after such delivery, Shipper shall be responsible for any injuries,
losses, expenses, claims, liabilities, or damages caused thereby. Subject to the
limitations set forth in other provisions of this Agreement, each party (the
"Indemnifying Party") shall indemnify the other party in respect of any
injuries, losses, expenses, claims, liabilities, or damages occurring while the
Carbon Dioxide is in possession of the Indemnifying Party. Transporter shall not
take title to Shipper's Carbon Dioxide in Transporter's Pipeline merely by
receipt of such Carbon Dioxide for Shipper's account
5.3. Pressure Criteria. All Carbon Dioxide tendered by Shipper at any Receipt
Point shall be delivered at pressures sufficient to enter Transporter's Pipeline
at the working pressures maintained by Transporter at such Receipt Point from
time to time. Transporter shall deliver the volumes of Carbon Dioxide as
provided for hereunder at the Delivery Points at pressures ranging from 1100 to
1400 psig. Notwithstanding the foregoing, Transporter reserves the right at any
time and from time to time, to revise the maximum and/or the minimum pressures
set forth above on ten (10) days' prior notice to Shipper to the extent the
implementation of any such revision is prudent in light of the operating
conditions on the Transporter's Pipeline.
ARTICLE VI
QUANTITY
6.1. Delivery Rates. Transporter and Shipper shall endeavor to deliver and to
accept, respectively, Carbon Dioxide in as reasonable constant rates as is
practicable. Transporter and Shipper understand and agree that the amount of
Carbon Dioxide delivered hereunder from time to time may not exactly equate with
the volume of Carbon Dioxide requested for delivery hereunder since variations
may occur due to the inherent fluctuations in normal pipeline operations. Upon
request from Shipper, Transporter may deliver Carbon Dioxide on any day in
excess of the Daily Maximum Quantity, but Transporter shall not be obligated to
do so.
6.2. Cooperation Regarding Deliveries. Shipper or Shipper's agent shall notify
Transporter monthly, in advance, of Shipper's estimated daily requirements at
each of the Receipt Points and the Delivery Points for the next succeeding month
and Transporter shall deliver such requirements, up to the Daily Maximum
Quantity, out of the volumes received by Transporter at the Receipt Points for
Shipper's account. Transporter and to the extent it will not result in a default
under a Industrial Sale Contract, Shipper agree to fully cooperate with each
other in adjusting monthly and daily deliveries hereunder. Shipper or Shipper's
agent shall give twenty-four (24) hours' prior notice of any additional changes
in its daily requirements as may be necessary from time to time and, on receipt
of such notice by Shipper, Transporter shall undertake as soon as practicable to
conform its deliveries to Shipper's revised daily requirements (up to the Daily
Maximum Quantity) and shall notify Shipper as soon as practicable if Transporter
is unable to do so. In the event of an emergency which poses danger to life or
property, no prior notice shall be necessary before partial or total shutdown by
either party, but notice of such shutdown and the reason therefor shall be given
as soon as practicable thereafter. If a shutdown becomes necessary for either
party on a non-emergency basis, such party shall give at least twenty-four (24)
hours' prior notice to the other party.
ARTICLE VII
QUALITY SPECIFICATIONS
7.1. Specification. The Carbon Dioxide delivered by Transporter to Shipper
at the Delivery Points shall meet the following specifications
(collectively the "Quality Specification"):
(a) Water. The Carbon Dioxide shall not contain any free water and the
water vapor content shall not exceed thirty (30) pounds per MMcf.
(b) Hydrogen sulfide and sulfur. The Carbon Dioxide shall not contain more
than 10 parts by weight of hydrogen sulphide nor more than 35 parts by
weight of total sulfur per 1,000,000 parts of Carbon Dioxide.
(c) CO2 Volume. The Carbon Dioxide shall be 99% pure (dry basis).
7.2. Testing. Transporter shall ensure that tests to determine the quality
of Carbon Dioxide are conducted as often as necessary in Transporter's
sole opinion, utilizing approved standard methods in general use.
Transporter may furnish Shipper with copies of all test results.
Transporter shall give Shipper reasonable notice of all such tests in
order that Shipper or Shipper's agent may have its representative
present, if Shipper so desires.
7.3. Disclaimer. THE PARTIES HERETO RECOGNIZE AND AGREE THAT TRANSPORTER IS
NOT A MERCHANT OF FOOD GRADE OR MERCHANTABLE CARBON DIOXIDE FOR USE IN
FOOD OR DRINK OR OTHER CONSUMABLES AND TRANSPORTER IN NO WAY WARRANTS
THE MERCHANTABILITY OR FITNESS OF ANY CARBON DIOXIDE DELIVERED OR TO BE
DELIVERED HEREUNDER FOR ANY PARTICULAR PURPOSE.
ARTICLE VIII
OWNERSHIP AND OPERATION OF FACILITIES
8.1. Facility Ownership. Transporter will own, operate and maintain the
Transporter's Pipeline, and the pipelines and measurement facilities, including
any additional equipment installed by or at the request of Shipper, at each
Receipt Point and at each Delivery Point. Transporter will maintain Carbon
Dioxide custody to the upstream flange of Shipper's valve on the outlet side of
Transporter's measurement facilities at each Delivery Point. Transporter shall
be solely responsible for the delivery of Carbon Dioxide to the inlet side of
Shipper's tap valve at each Delivery Point. All piping downstream from the
Delivery Points shall be the responsibility of Shipper.
ARTICLE IX
MEASUREMENT
9.1. Measurement Point. The Carbon Dioxide delivered hereunder shall be measured
for custody transfer at the Delivery Points in accordance with the standards set
out in this Article.
9.2. Procedure. Custody transfer measurement of Carbon Dioxide shall be
determined from pound-mass quantities, which will be converted to standard cubic
feet quantities. The molecular weight of the metered stream of Carbon Dioxide,
calculated from the compositional analyses, shall be the basis for conversion of
pound-mass measurement units to standard cubic feet measurement units.
9.3. Atmospheric Pressure. The atmospheric pressure at the Delivery Point shall
be based upon 14.73 psia at sea level, corrected to actual elevation, and may be
assumed to be constant for calculation purposes.
9.4. Meter Standards. The Carbon Dioxide delivered hereunder shall be measured
with orifice meters constructed and installed in accordance with the October,
1981, compilation of standards in the American Petroleum Institute, Manual of
Petroleum Standards, Chapter 14, with any subsequent amendments, revisions and
additions which may be mutually acceptable to Transporter and Shipper.
Computations of pound mass shall also be made in accordance with said manual.
9.5. Temperature. The temperature of the Carbon Dioxide shall be determined by
an on-line temperature measuring device so installed that it will sense the
temperature of the Carbon Dioxide flowing through the meter.
9.6. Density. The density of the Carbon Dioxide shall be determined by an
on-line density meter referenced to weight in a vacuum, or by calculation
utilizing the pressure, temperature and composition of the Carbon Dioxide
flowing through the meter.
9.7. Samples. A composite sample of Transporter's Pipeline Carbon Dioxide stream
shall be accumulated during each month and analyzed for its composition by gas
chromatograph or other methods agreed to by Transporter and Shipper, at
Transporter's expense.
ARTICLE X
FORCE MAJEURE
10.1. Definition. If, while this Agreement is in effect, either party is
rendered unable, wholly or in part, by Force Majeure to carry out its
obligations (except financial obligations) under this Agreement, it is agreed
that, on such party's giving notice and reasonably full particulars of such
Force Majeure in writing to the other party within ten (10) business days after
the occurrence of the Force Majeure relied on, then the obligations of the party
giving such notice, so far as they are affected by such Force Majeure, shall be
suspended during the continuance of any inability so caused, but for no longer
period, and such cause shall so far as possible be remedied with all reasonable
dispatch. The term "Force Majeure", as used herein, shall mean acts of God,
strikes, lockouts or other industrial disturbances, acts of the public enemy,
wars, terrorism, blockades, insurrections, riots, epidemics, landslides,
lightning, earthquakes, fires, storms, floods, high water, washouts, arrests and
restraints of government and people, civil disturbances, explosions, breakage or
accident to machinery or lines of pipe, freezing of wells or lines of pipe,
partial or entire failure of wells, and any other causes, whether of the kind
herein enumerated or otherwise, not reasonably within the control of the party
claiming Force Majeure. Without limiting the generality of the foregoing, the
term "Force Majeure" shall likewise include (a) in those instances where either
party hereto is required to obtain servitudes, rights-of-way grants, permits or
licenses to enable such party to perform hereunder, the inability of such party
to acquire, or the delays on the part of such party in acquiring, at reasonable
cost and after the exercise of reasonable diligence, such servitudes,
rights-of-way grants, permits or licenses, and (b) in those instances where
either party hereto is required to furnish materials and supplies for the
purpose of constructing or maintaining facilities or is required to secure
permits or permissions from any governmental agency to enable such party to
perform hereunder, the inability of such party to acquire, or the delays on the
part of such party in acquiring, at reasonable cost and after the exercise of
reasonable diligence, such materials and supplies, permits and permissions. An
occurrence of Force Majeure affecting Transporter's supply sources or processing
facilities or gathering system or Transporter's Pipeline shall be deemed to be
an occurrence of Force Majeure affecting Transporter hereunder.
10.2. Extended Force Majeure. If, after deliveries have commenced hereunder, an
event of Force Majeure significantly affects the amount of Carbon Dioxide
Transporter is capable of delivering for a consecutive period of 180 days, then,
at any time after such period and prior to the time such event has been
remedied, Shipper may cancel this Agreement.
10.3. Strikes and Lockouts. It is understood and agreed that the settlement of
strikes or lockouts shall be entirely within the discretion of the party having
the difficulty and that the above requirement that any Force Majeure shall be
remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of any opposing party when such
course is inadvisable in the discretion of the party having the difficulty.
ARTICLE XI
NOTICES
11.1. Transporter Notices. All notices provided for herein shall be in writing
and shall be deemed to be delivered to Transporter when deposited in the United
States mail to the following address:
DENBURY ONSHORE, LLC
Attn: Linda A. Miller
5100 Tennyson Parkway
Suite 3000
Plano, Texas 75024
11.2. Shipper Notices. All notices provided for herein shall be in writing and
shall be deemed to be delivered to Shipper when deposited in the United States
mail to the following address:
GENESIS CRUDE OIL, L.P.
Attn: Mark J. Gorman
500 Dallas St. Suite 2500
Houston, Texas 77002
11.3. Change of Address. Either party may change its address described in this
Article by sending written notice to the other party in accordance with the
provisions of this Article.
ARTICLE XII
PAYMENT, AUDIT AND FINANCIAL RESPONSIBILITY
12.1. Payment. Transporter shall furnish Shipper a monthly statement showing (i)
the total quantity of Carbon Dioxide received hereunder during the preceding
month at each Receipt Point, (ii) the total quantity of Carbon Dioxide delivered
hereunder during the preceding month at each Delivery Point, and (iii) the
incremental costs incurred by Transporter to add any additional Delivery Points
requested by Shipper. Shipper shall make payment by wire transfer to such
address as Transporter may designate from time to time on or before the later to
occur of (x) the tenth day following the day that Transporter's monthly
statement was delivered or (y) the twentieth day of the month following the
month that Carbon Dioxide was delivered, such wire transfer being for all
amounts payable hereunder.
12.2. Auditing. Each party shall have the right at reasonable business hours to
examine the books, records, and measurement documents of the other party to the
extent necessary to verify the accuracy of any statement, payment, calculation,
or determination made pursuant to the provisions of this Agreement for any
Contract Year within two (2) Contract Years following the end of such Contract
Year. If any such examination shall reveal, or if either party shall discover,
any error or inaccuracy in its own or the other party's statement, payment,
calculation, or determination, then proper adjustment and correction thereof
shall be made as promptly as practicable thereafter, except that no adjustment
or correction shall be made for an error or inaccuracy if more than two (2)
Contract Years have elapsed since the end of the Contract Year in which such
error or inaccuracy occurred.
12.3. Failure to Pay. If Shipper fails to pay any amount payable to Transporter
hereunder when due, interest thereon shall accrue and be payable at the lesser
of (i) the highest legally permissible rate or (ii) the prime lending rate, plus
an additional five percent (5%), established by the Chase Manhattan Bank, N.A.,
New York, from the date when payment was due until the date payment is made. If
such failure to pay any amount continues for thirty (30) days or more after the
due date of such amount for any reason, then (a) Transporter may suspend its
deliveries of Carbon Dioxide hereunder, (b) Transporter shall have the right to
make direct deliveries in satisfaction of the delivery requirements in the
Additional Industrial Sale Contracts, and (c) such matter shall be resolved in
accordance with the arbitration provisions described in Section 14.9.
12.4. Financial Responsibility. Notwithstanding anything to the contrary in this
Agreement, should Transporter reasonably believe it necessary to assure payment
for transportation of Carbon Dioxide being delivered or to be delivered
hereunder, Transporter may at any time, require (i) advance cash payment; (ii) a
standby irrevocable letter of credit at Shipper's expense in a form and from a
bank acceptable to Transporter, in Transporter's sole opinion; or (iii) other
security of a type and form and amount which may be deemed reasonably
satisfactory to Transporter. In the event banking or credit information
requested by Transporter has not been furnished within a reasonable time in
Transporter's sole opinion, Transporter shall have the right, with five (5)
days' prior notice, to withhold and/or suspend deliveries hereunder, in addition
to any and all other remedies available hereunder; provided that Transporter
shall not have the right to terminate this Agreement.
ARTICLE XIII
WARRANTY
13.1. Warranty. Each party warrants, for itself, its successors, heirs, legal
representatives and assigns, to the other party that at the time such party
delivers Carbon Dioxide to the other party, such party will have good title to
or the good right to deliver such Carbon Dioxide, and that such Carbon Dioxide
shall be free and clear from liens, encumbrances and claims of every kind,
subject to Permitted Liens. Each party shall indemnify and save the other party
harmless from all suits, claims, liens, damages, costs, losses, expenses and
encumbrances of whatsoever nature arising from and out of claims of any or all
persons to said Carbon Dioxide, or title thereto, or to royalties, taxes,
license fees, payments or other charges thereon applicable before the delivery
of the Carbon Dioxide by such party to the other party.
ARTICLE XIV
GENERAL TERMS AND CONDITIONS
14.1. Waiver of Breach. The waiver by any party of any breach of the provisions
of this Agreement shall not constitute a continuing waiver of other breaches of
the same or other provisions of this Agreement.
14.2. Regulatory Bodies. This Agreement, all operations contemplated hereunder
and all terms and provisions contained herein, and the respective obligations of
the parties are subject to applicable federal and state laws and the applicable
orders, rules, and regulations of any state or federal regulatory authority
having appropriate jurisdiction. However, nothing contained herein shall be
construed as a waiver of any right of any party to question or contest any such
law, order, rule, or regulation in any forum having or alleging to have
jurisdiction. Shipper and Transporter each agree to comply with all applicable
laws and regulations governing the operations and transactions involved in this
Agreement, including, but not limited to, applicable regulations governing
safety, pollution, and pipeline and other operations. Transporter and Shipper
understand that Shipper's ability to deliver Carbon Dioxide hereunder is subject
to existing and future governmental regulations affecting Transporter's
Pipeline.
14.3. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MISSISSIPPI, EXCLUDING ITS CONFLICTS OF
LAW PROVISIONS.
14.4. Joint Preparation. This Agreement was prepared by all parties hereto and
not by any party to the exclusion of one or the other.
14.5. Assignment. The interests of the parties in this Agreement, and
Transporter's interest in the Transporter's Pipeline, may not be subsequently
assigned, either in whole or in part, unless (i) any such assignee expressly
agrees in writing to assume and perform all of the assignor's obligations under
this Agreement, and (ii) such assignment is made and accepted expressly subject
and subordinate to this Agreement. Further, any subsequent assignment, either in
whole or in part, to an entity that is not as financially creditworthy at the
time of the assignment as the assignor shall require the consent of the other
party hereto, which consent may not be unreasonably withheld or delayed. Subject
to the compliance with the terms of clauses (i) and (ii) above, either party may
encumber or pledge their respective interests in connection with a financing
without the consent of the other party. Any purported assignment, sale,
conveyance or other transfer in contravention of the foregoing terms shall be
null and void. Subject to the foregoing, this Agreement binds and inures to the
benefit of the parties and their respective permitted successors and assigns,
and nothing contained in this Agreement, express or implied, is intended to
confer upon any other person or entity any benefits, rights, or remedies.
14.6. Modification and Entire Agreement. No amendment or other modification of
the terms or provisions of this Agreement shall be made except by the execution
of written agreements by both parties, and any attempted modification or
amendment not in compliance with the terms of this sentence shall be void ab
initio. This Agreement and the other Second Master Documents contain the entire
agreement between the parties with respect to the subject matter hereof, and
supersede and terminate all prior negotiations, representations or agreements,
whether written or oral, by and between the parties with respect to such subject
matter
14.7. Headings. The Table of Contents and headings contained in this Agreement
are used solely for convenience and do not constitute a part of the agreement
between the parties hereto, and they should not be used to aid in any manner in
construing this Agreement.
14.8. Damage Limitation. Neither party shall be liable to the other for any
special, indirect, consequential or punitive damages of any nature.
14.9. Arbitration. In the event of a dispute between the parties as to any
matter arising under this Agreement, such dispute shall be resolved in
accordance with the dispute resolution provisions identified in Article XIV of
the Second Master Agreement.
14.10. Second Master Agreement; Conflicts. This Agreement is delivered pursuant
to and as a part of the transactions under the Second Master Agreement and is
made expressly subject thereto. In the event of any express conflict between the
terms and provisions of this Agreement and the terms and provisions of the
Second Master Agreement, the terms and provisions of this Agreement shall
control. The inclusion in the Second Master Agreement of provisions not
addressed in this Agreement shall not be deemed a conflict, and all such
additional provisions contained in the Second Master Agreement (including but
not limited to Section 15.1 thereof) shall be given full force and effect.
[SIGNATURE PAGE FOLLOWS]
[SIGNATURE PAGE TO SECOND T&P AGREEMENT - PAGE 1 OF 1]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed in multiple originals by their proper officers thereunto duly
authorized, to be effective as of the date first hereinabove written.
ASSIGNOR:
DENBURY ONSHORE, LLC
By: Phil Rykhoek
-------------------------------
Phil Rykhoek
Senior Vice President and
Chief Financial Officer
ASSIGNEE:
GENESIS CRUDE OIL, L.P.
By: Genesis Energy, Inc.
a Delaware corporation
By: Mark J. Gorman
--------------------------------
Mark J. Gorman
President
EXHIBIT "A"
TO
SECOND CARBON DIOXIDE TRANSPORTATION AGREEMENT BETWEEN
DENBURY ONSHORE, LLC AND
GENESIS CRUDE OIL, L.P.
DATED EFFECTIVE AS OF JULY 1, 2004
RECEIPT POINT LOCATIONS AND DAILY MAXIMUM QUANTITY
Daily Maximum Quantity: The Daily Maximum Quantity shall be the amount
specified for such term in the Second Master Agreement.
Receipt Point Description Daily Maximum Quantity at this Receipt
Point (if applicable)
1. Sandhill Facility
118 Shirley Lane
Brandon, MS 39047
NOTE: This point of delivery is subject to change and variation under
the terms of the Magna Carta Contract.
EXHIBIT "B"
TO
SECOND CARBON DIOXIDE TRANSPORTATION AGREEMENT BETWEEN
DENBURY ONSHORE, LLC AND
GENESIS CRUDE OIL, L.P.
DATED EFFECTIVE AS OF JULY 1, 2004
DELIVERY POINT LOCATIONS
Delivery Point Description Daily Maximum Quantity at this Delivery
Point (if applicable)
Wells and wellhead meter numbers:
J. O. Cox #1 FQI 313
Baker 8-5 #1 FQI 317
Denkmann #1 FQI 310
International Paper (IP) 15-4 #1 FQI 311