Common use of Determination of Quantity and Quality Clause in Contracts

Determination of Quantity and Quality. (a) ▇▇▇▇▇▇ shall meter the net volume of Product sent to the Rail Terminal only for pipeline leak detection and batch sequencing purposes. (b) USD will meter using certified and properly calibrated and maintained meters (“Meters”) the volume of Product loaded into each railcar at the Rail Terminal and use such meter readings for custody transfer purposes and to create the bills of lading. To be considered “properly calibrated”, all Meters shall be proved at least monthly for each grouping of Product quality that is actually being loaded during that month and each meter shall also be proved at a low, medium and high flow rate corresponding to the expected operating flow range of the Meters. The applicable meter factors for each condition of flow and/or Product quality grouping shall be automatically applied by the flow/volume computation system to the calculation of the net volume of Product loaded through each Meter. The accuracy of all temperature, pressure and density sensing instruments that are used in the calculation of the volume of Product loaded shall be properly verified during proving and recalibrated when required. Calibration of meters and applicable sensing instruments shall utilize reference equipment that have current certification and are metrologically traceable to national standards. For the purpose of Sediment and Water determination, density confirmation and sample retention of the Product loaded, USD shall provide, install, operate and maintain an automatic sampling system that will extract from the delivery piping to the Rail Terminal a sample of the Product that is representative of and directly proportional to each batch loaded into sealed and pressure-containing sample vessels. The sample will be split with half provided to ▇▇▇▇▇▇ for its analysis and retention. For the purpose of quality verification, the Parties shall retain for a minimum of ninety (90) days in a sealed and labeled container a portion of the representative sample of each unit train batch movement. In the absence of fraud, equipment failure or manifest error, the quantity and quality determined by USD for the batch shall be binding on both Parties. In the event of fraud, equipment failure or manifest error the Parties shall utilize alternative measurements, such as tank car volumes, tank gauging, testing of proportional samples or other methods that are available at such time, to determine as accurately as reasonably possible the net quantity or quality, as applicable, of the Product loaded. The net quantity, reported in cubic meters corrected to 15 °C and 101.325 kPa, and quality of Product delivered through the Meters shall be documented by meter tickets, which will be made available to both Parties electronically via a continuously “on” data link and by hard paper copy in no event later than twenty four (24) hours following the completion of a unit train loading at the Rail Terminal. The Parties agree that, at a minimum, each unit train will be measured as a separate batch movement with its own meter ticket. The inventory reports sent to customers will show the net volumetric quantity and the Product loaded into customer’s railcars. To facilitate monthly volume balancing in the ▇▇▇▇▇▇ Terminal, USD shall use reasonable efforts to schedule loading times at the Rail Terminal such that a train is not being loaded (i.e. zero flow from the Pipeline Facilities) during the timeframe from 06:30 AM MST to 07:30 AM MST on the first day of the month. The Parties agree that their objective is to obtain a level of measurement accuracy of the volume of Product loaded at the Rail Terminal that meets the requirements of Applicable Law, is in accordance with the API Manual of Petroleum Measurement Standards and is consistent with Good Industry Practice. To achieve this the Parties agree that operating protocols will have to be developed and adhered to by both Parties which are specific to the operations of the Pipeline Facilities and the Rail Terminal and that such protocols will be documented in an operating protocol. (c) The inventory within the Pipeline Facilities and in the Rail Terminal piping upstream of the Meters shall always remain in the ▇▇▇▇▇▇ Terminal inventories for physical inventory tracking and reporting. *** Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. (d) Variations between running book inventories and physical inventories will be handled by ▇▇▇▇▇▇ at the ▇▇▇▇▇▇ Terminal and allocated to the throughput Customers on a prorata throughput basis monthly by ▇▇▇▇▇▇, as per the ▇▇▇▇▇▇ Rules and Regulations. (e) ▇▇▇▇▇▇ shall be deemed to be in exclusive possession, custody and control of the Product during the shipment of the Product through the Pipeline Facilities until the Product passes. the flange where it enters into the railcar loading facility at the Rail Terminal. The Product shall be in exclusive possession, custody and control of USD from the time it enters into the railcar loading facility at the Rail Terminal until it leaves the Rail Terminal on railcars via the railroad. The precise point at which the Product enters into the railcar loading facility at the Rail Terminal is as identified in Exhibits “B” and “C”. (f) ▇▇▇▇▇▇ shall be responsible for and assume any liability with respect to all losses of Product while the Product is being handled by Pipeline Facilities and at the ▇▇▇▇▇▇ Terminal in accordance with the ▇▇▇▇▇▇ Rules and Regulations. USD shall be responsible for and assume any liability with respect to all losses of Product from the time the Product passes the flange where it enters the railcar loading facility at the Rail Terminal until it leaves the Rail Terminal on railcars via the railroad. In each case, any such liability shall be determined in accordance with the provisions hereof and the applicable Facilities Services Agreement.