EXHIBIT 10.22
GAS SALES AND PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day of March,
1999 by and between MONTANA-DAKOTA UTILITIES CO., a division of MDU Resources
Group, Inc., a Delaware corporation, hereinafter referred to as "Buyer," and
PENNACO ENERGY, INC., a Nevada corporation, hereinafter referred to as
"Seller."
WITNESSETH:
WHEREAS, Buyer has certain gas requirements for the customers served by
its local distribution system which demand a reliable and Firm source of
natural gas;
WHEREAS, Seller has such a supply of gas available for sale which may be
delivered to Buyer or its designee; and
WHEREAS, Buyer desires to purchase such gas from Seller, and Seller
desires to sell such gas to Buyer pursuant to the terms and conditions
contained herein;
NOW, THEREFORE, in consideration of the mutual agreements, covenants
and conditions herein contained, Seller and Buyer hereby agree as follows:
ARTICLE 1 - DEFINITIONS
1. When used in this Agreement, whether in the singular or in the plural,
the following words and terms hall have the following meanings:
(a) BTU: British Thermal Unit
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(b) DAY: A period of twenty-four consecutive hours, beginning and
ending at 9 a.m. Central Clock Time.
(c) FIRM: The uninterrupted flow of gas required to be delivered by
Seller and required to be taken by Buyer pursuant to the terms
and conditions of this Agreement.
(d) INITIAL DELIVERY DAY: The day of Initial Deliveries of natural
gas under this Agreement from Seller to Buyer shall be April 1,
1999.
(e) MMBTU: One million (1,000,000) Btu.
(f) MCF: One thousand (1,000) cubic feet.
(g) MONTH: The period beginning ht 9 a.m. Central Clock Time on the
first day of a calendar month and ending at 9 a.m. Central Clock
Time on the first day of the next succeeding calendar Month.
(h) POINT OF RECEIPT: The point on the pipeline of Transporter
where gas will be delivered by Seller for the account of
Buyer. Unless otherwise mutually agreed upon, the Point of
Receipt shall be the Interconnect between Williston Basin
Interstate Pipeline (Williston Basin) and MIGC, Inc. at
Recluse Area, Campbell County, Williston Basin Receipt Point
I.D. #C5069, as specified in its FERC Gas Tariff - Secona
Revised Volume No. 1.
(i) PRIME INTEREST RATE: The rate of interest announced publicly
by Chase Manhattan Bank N.A. in New York, New York from time
to time as its prime, or its equivalent, lending rate.
(j) TRANSPORTER: The party or parties designated by Buyer to
receive and handle gas deliverable under this Agreement. If
not otherwise designated by Buyer, the Transporter is hereby
specified as Williston Basin Interstate Pipeline Company.
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(k) TRANSPORTATION CONTRACTS: Those agreements between Buyer and
Transporter to be used to transport gas sold under this
Agreement.
ARTICLE 2 - QUANTITY
1. Subject to the terms and conditions of this Agreement, Buyer and
Seller, on a Firm basis, agree to purchase and sell 5,000 MMBtu's per day for
the term and at the Point of Receipt noted herein, unless otherwise mutually
agreed to.
2. In the event that Buyer fails to take the contracted quantity for
reasons other than Force Majeure, Buyer shall reimburse Seller for the deficient
dollar amount, if any, between the price at which Seller would have sold the
deficient quantity to Buyer and the lesser price at which Seller sees the
deficient quantity to third parties. Seller shall utilize commercially
reasonable efforts to minimize Buyer's damages by reselling the gas at the
highest price available to Seller for the deficient quantity during the month in
question.
3. In the event that Seller fails to deliver the contracted quantity
for reasons other than Force Majeure, Seller shall reimburse Buyer for the
increased dollar amount, if any, between the price per MMBtu which Buyer would
have paid Seller for the deficient quantity and any increased price per MMBtu
for the same quantity which Buyer may acquire in replacement thereof. Buyer
shall utilize commercially reasonable efforts to minimize Seller's damages by
acquiring gas at the lowest cost available to Buyer for the deficient quantity
during the month in question.
4. Seller recognizes that Buyer may be liable for charges and penalties
imposed by Transporter for imbalances in deliveries at the Point of Receipt and
at Point(s) of Delivery of Transporter's Facilities. Seller agrees to reimburse
Buyer for any charges and penalties imposed by
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Transporter resulting from Seller delivering quantities of gas at Transporter's
Point of Receipt differing from Buyer's contracted quantity for the Point of
Receipt. If the imbalance is created at the Points of Delivery of Transporter's
Facilities, Buyer will be responsible for the charges and penalties imposed
by Transporter. The foregoing notwithstanding, Buyer and Seller agree, to
cooperate to eliminate transportation imbalances by utilizing methods
acceptable to Transporter.
5. For purposes of nominating deliveries of natural gas pursuant to
this Article, Buyer shall provide instructions by telephone to Seller, provided
that such telephone nominations shall be confirmed by Buyer in writing or
facsimile.
ARTICLES 3 - PRICING
1. The price for each MMBtu (dry) of gas nominated by Buyer and
delivered by Seller during any billing month in the Contract Year shall be the
price determined by the first issue published during the month of delivery of
INSIDE FERC'S GAS MARKET REPORT under "Prices of Spot Gas delivered to Pipeline
- - under the heading - Northern Natural Gas Co. - Ventura, Iowa - aka "Ventura
Index" less ******** per MMBtu.
2. The price for each MMBtu (dry) during the term of this Agreement
shall be inclusive of all production, processing, treatment, odorization,
gathering, royalty, transportation, and similar costs and all production,
severance, ad valorem and other taxes levied on the gas prior to its delivery to
Transporter for the account of Buyer.
ARTICLE 4 - MEASUREMENT AND QUALITY
1. All gas delivered hereunder shall be measured by Transporter at the
Point of Receipt into Transporter's facilities in accordance with Transporter's
FERC Gas Tariff.
****** This portion of the agreement has been omitted pursuant to a
confidential treatment request that has been filed with the Securities and
Exchange Commission.
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2. The natural gas delivered hereunder shall be of pipeline quality and
shall conform to the quality and pressure specifications of Transporter's FERC
Gas Tariff. Seller shall make deliveries of gas hereunder at the Point cf
Receipt at the pressure prevailing in Transporter's facilities from time to
time.
ARTICLE 5 - EFFECTIVE DATE AND TERM
1. Subject to the other provisions of this Agreement, this Agreement
shall be effective as of the date first above written and the term of this
Agreement shall commence on the Initial Delivery Day, which shall be April 1,
1999 and shall continue in full force and effect for a term ending March 31,
2000.
ARTICLE 6 - TRANSPORTATION
1. Both parties are excused from performance under this Agreement if
the Transporter shall cease to provide the transportation service, or interrupt
the actual transportation for the period during which transportation is
unavailable. If receipt of gas by Buyer is curtailed or interrupted by
Transporter for more than thirty (30) days pursuant to this Article, Seller has
the right to cancel this Agreement with no further obligation on the part of
either Buyer or Seller.
ARTICLE 7 - BILLING AND PAYMENT
1. On or before the fifteenth (15th) day of each calendar month during
the term of this Agreement or as soon thereafter as practical, Seller or
Seller's designee shall deliver a statement to Buyer for the total quantity of
gas sold to Buyer during the preceding calendar month. Buyer will pay
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to Seller on or before the thirtieth (30th) day of each month, the amount due
for total quantity sold to Buyer during the preceding calendar month, except
when such day is a Saturday, Sunday, or bank holiday, in which case payment
is due the following business day. All such payments shall be made by wire
transfer of immediately available FED funds directed to a bank account
designated by Seller. Buy will provide a statement detailing gas purchases at
the same payment is made.
2. Buyer shall have the right at all reasonable times to examine the
books, records and charts of Seller to the extent necessary to verify the
accuracy of any statement, charge of computation made under or pursuant to any
provisions of this Agreement.
3. Should Buyer fall to pay the amount of any statement rendered by
Seller or Seller's designee as herein provided when such amount is due, interest
thereon shall accrue from the due date until the date of payment, at the then
effective Prime Interest Rate (Chase Manhattan Bank). If such failure to pay
shall continue for fifteen (15) days after is due, Seller may suspend further
service to Buyer until such amount is paid.
4. If presentation of a statement by Seller or Seller's designee is
delayed after the fifteenth (15th) day of the month then the time for payment
shall be extended correspondingly.
5. If Buyer shall find at any time within twenty-four (24) months after
the date of any statement rendered that it has been overcharged on the amount
billed in such statement, and if said overcharge shall have been paid, and Buyer
shall have made a claim therefore, the overcharge, if verified, shall be
refunded within thirty (30) days. If Seller shall find at any time within
twenty-four (24) months after the date of any statement rendered by it that
there has been an undercharge in the amount billed in such statement, it may
submit a statement for such undercharge and Buyer, upon verifying same, shall
pay such amount within thirty (30) days.
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ARTICLE 8 - INDEMNIFICATION
1. Seller shall defend, indemnify, and save Buyer harmless from all
suits, actions, debts, accounts, damages, costs, losses, liabilities, and
expenses arising from or out of claims of any persons to natural gas sold
hereunder and other charges thereon which attach before title passes to Buyer.
2. Buyer shall defend, indemnify, and save Seller harmless from all
suits, actions, debts, accounts, damages, costs, losses, liabilities, and
expenses arising from or out of claims of any persons to natural gas sold
hereunder and or other charges thereon which attach after title passes to Buyer.
ARTICLE 9 - REPRESENTATIONS AND WARRANTIES OF SELLER
1. Seller warrants that it has good title to all of the gas delivered
to Buyer hereunder free and clear of any all liens, encumbrances, and claims
whatsoever, except royalties and current production tax obligations which are to
be paid by Seller, and that Seller has good right and lawful authority to sell
the same. Seller shall indemnity and save Buyer harmless from any and all suits,
claims, liens, and encumbrances of whatever nature relating to such gas,
payments for such gas, or the title thereto and shall reimburse Buyer for any
and all costs incurred by Buyer (including, without limitation, all attorney's
fees) in defense of suit or claim.
2. Title to, and risk of loss for, all natural gas delivered hereunder
shall pass from Seller to Buyer at the Point of Receipt.
ARTICLE 10 - FORCE MAJEURE
1. Neither Seller nor Buyer shall be liable in damages to the other for
any act, omission or circumstances occasioned by or in consequence of, any acts
of God, strikes, lockouts or other
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industrial disturbances, acts of the public enemy, wars, blockades,
insurrections, riots, epidemics, fires, arrests and restraints of rulers and
peoples, civil disturbances, explosions, breakage or accident to machinery,
vessels or lines of pipe, repair or alterations of machinery, vessels or lines
of pipe, acts of third party transporters including Williston Basin, freezing or
failure of wells or lines of pipe, the binding of any court or governmental
authority, and any other cause, whether of the kind herein enumerated or
otherwise, not within the control of the one claiming suspension and which, by
the exercise of due diligence, it is unable to prevent or overcome.
2. Such causes or contingencies affecting performance shall not relieve
Seller or Buyer of liability in the event of its concurring negligence or in the
event of failure of either to use due diligence to remedy the situation and
remove the cause in an adequate manner and with all reasonable dispatch, nor
shall such causes or contingencies relieve either from its obligations to make
payments of amounts then due hereunder.
3. In order to suspend by reason of Force Majeure, the party claiming
must give notice in writing or by telecopy, or orally and confirmed in writing
or by telecopy to the other party as soon as possible after the occurrence of
the cause relied on, and such cause shall be remedied with all reasonable
dispatch. No party shall be required against its will to adjust or settle any
labor disputes.
4. In the event of a Force Majeure incident which would only allow a
partial delivery of Seller's total deliveries, Seller shall deliver to Buyer a
quantity of gas which represents Buyer's pro-ratable share of Seller's total
available delivery quantity which is proportionate to Seller's obligation to
Buyer compared to the quantity obligation to Seller's other firm gas purchase
customers.
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5. In the event of Force Majeure preventing total delivery by Seller of
the Nominated Quantity at Transporter's Point of Receipt, Buyer and Seller shall
be relieved of their obligations under this Agreement until such cause of Force
Majeure is remedied.
6. In the event of Force Majeure, both parties agree to exort their
best efforts to effectuate performance of this Agreement.
ARTICLE 11 - MISCELLANEOUS
1. This Agreement represents the entire agreement between the parties
relative to the matters contained herein. This Agreement may not be amended
without the execution of a written document by both parties.
2. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
This Agreement may not be assigned by either party, without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, either party may pledge or mortgage its interests
hereunder for financing purposes. In the event of the sale or other transfer of
the business assets of either party to this Agreement, the Agreement shall be
assigned to the new entity. The nonassigning party, in its sole judgment, may
terminate this Agreement if the new entity through its performance cannot
demonstrate its ability to perform under the terms and conditions of this
Agreement.
3. The rights and remedies of each party enumerated in this Agreement
are not exclusive but shall be in addition to all the rights and remedies at law
and in equity to which that party is or may be entitled against the other party.
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4. The terms, covenants, representations, warranties, and conditions of
this Agreement may be waived only by a written instrument executed by the party
waiving compliance. The failure of any party at any time or times to require
performance of any provision of this Agreement shall in no manner affect the
right at a later date to enforce the same. No waiver by any party of any
condition or of the breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation, or warranty of this Agreement.
5. Any notice, request, demand, or statement provided in this Agreement
shall be in writing and will be deemed properly given if hand delivered,
telegraphed, telecopied, or mailed, registered or certified mail, return receipt
requested, prepaid to the other at the following address:
BUYER SELLER
- ----- ------
Montana-Dakota Utilities Co. Mercator Energy, Inc.
400 North Fourth Street 600 17th Street, Suite 600 So.
Bismarck, ND 58501 Denver, CO 80202-54C-2
Attn. Gas Supply Dept. Tel (303) 825-1100
Tel (701) 222-7870 Fax (303) 825-2300
FAX (701) 222-7853
6. Either Seller or Buyer may change addresses by giving the other
party notice of such change. Scheduling and dispatching by telephone may be
accomplished, provided written confirmation of the same is given to the other
party within five (5) days.
7. If any provision in this Agreement shall be held invalid, illegal,
or unenforceable, the validity, legality, and enforceability of the remaining
provisions hereof will not in any way be affected or impaired thereby.
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8. The terms of this Agreement, including, but not limited to, the
price paid for gas, the identified transporting pipelines and cost of
transportation, the volumes of gas purchased or sold and all other material
terms of this Agreement shall he kept confidential by the parties hereto, except
to the extent that any information must be disclosed to a third party for the
purpose of effectuating transportation of the subject gas pursuant to this
Agreement, to auditors, counsel, and lenders or potential lenders of either
Party; and, further provided, that disclosure is permitted in the event and to
the extent such Party is required by court, or agency exercising jurisdiction
over the subject matter hereof, by order or by regulation, to make such
disclosure; and further provided in the event that either Party becomes aware of
judicial or administrative proceedings that has resulted or may result in such
an order requiring disclosure, it shall so notify the other Party immediately.
9. The descriptive headings used in this Agreement are for convenience
only and shall not be deemed to affect the meaning or construction of any
provisions of the Agreement.
10. This Agreement and the respective obligations of the parties
hereunder are subject to all valid laws, orders, rules and regulations of duly
constituted authorities having jurisdiction over either party.
11. Seller and Buyer expressly agree that the Laws of the State of
Wyoming govern the validity, construction interpretation, and effect of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
"BUYER" MONTANA-DAKOTA UTILITIES CO., A
Division of MDU Resources Group, Inc.
By: Bruce Imsdahl
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Title:
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"SELLER" PENNACO ENERGY, INC.
By: Paul M. Rady
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Title: President/CEO
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