1
EXHIBIT 10.8
GAS PURCHASE CONTRACT
Between
CONSUMERS POWER COMPANY
As Buyer
and
NORTHERN MICHIGAN EXPLORATION COMPANY
As Seller
December 1, 1987
2
TABLE OF CONTENTS
ARTICLE PAGE
------- ------
I. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. Seller's Reservations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
III. Commitment of Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
IV. Determination of Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
V. Quantity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
VI. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
VII. Delivery Point - Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
VIII. Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
IX. Quality of Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
X. Delivery Pressure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
XI. Measurement and Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
XII. Warranty of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
XIII. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
XIV. Billing and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
XV. Conditions of Connection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
XVI. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
XVII. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
XVIII. Laws and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
XIX. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
XX. Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
XXI. Transportation of Liquids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
XXII. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3
GAS PURCHASE CONTRACT
THIS CONTRACT made and entered into as of, and effective the first
day of December 1987 by and between NORTHERN MICHIGAN EXPLORATION COMPANY, a
Michigan corporation, hereinafter referred to as Seller, and CONSUMERS POWER
COMPANY, a Michigan corporation, hereinafter referred to as Buyer:
W I T N E S S E T H :
WHEREAS, Seller owns certain oil and gas leases on property situated
in the northern portion of the Southern Peninsula of Michigan within the
Contract Area as described on Exhibit "A" hereto and desires to sell certain
gas which has been or may be developed thereon, in accordance with the terms
and conditions hereof; and
WHEREAS, Buyer, a public utility engaged in the distribution and sale
of gas within the State of Michigan, desires to purchase gas that may be
produced from Seller's leases within said Contract Area;
NOW, THEREFORE, in consideration of the covenants and promises of
each as set forth herein, the parties agree as follows:
ARTICLE I
Definitions
1. The term "lease" shall mean any written instrument which gives
Seller the rights to drill for, produce, and dispose of gas in, under, and from
the lands described therein.
2. The term "gas" means all elements, compounds, and mixtures
thereof which are contained in the effluent produced from a well and which
remain in the vapor phase when produced at the mouth of the well or from a
lease separator.
3. The term "gas well gas" shall mean gas produced from a well
classified as a gas well by the regulatory agency having jurisdiction.
4
2
4. The term "oil well gas" shall mean gas produced from a well
classified as an oil well by the regulatory agency having jurisdiction.
5. The term "reserves," unless the context makes evident another
intended meaning, shall mean that quantity of gas underlying the acreage
attributable to each well, which may reasonably be expected to be recovered and
delivered under the terms of this Agreement plus the volume of gas which has
theretofore been delivered by Seller from such well to Buyer.
6. The term "Contract Area" shall mean that area encompassed by
the description set forth on Exhibit "A", as it may be revised from time to
time as hereinafter provided.
7. The term "contract year" shall mean the calendar year; except
that the first contract year shall commence on the date of this Agreement and
shall end on December 31 of the year in which this Agreement is dated.
8. The term "Winter Purchase Period" shall mean a period of six
(6) months from October 1 of one Contract Year through March 31 of the next
Contract Year.
9. The term "Contract Area Purchase Commitment" shall mean the
daily quantity of gas which Buyer commits to purchase from the Contract Area
under this Agreement and other agreements. During the Winter Purchase Period
the Contract Area Purchase Commitment shall be equal to the lesser of (a) the
daily average production allowable authorized by the State for all ▇▇▇▇▇
selling gas from the Contract Area to Buyer, (b) 15 MMcf per day or (c) 3 MMcf
per day per well. For the remainder of each year the Contract Area Purchase
Commitment shall be equal to the simple average of Buyer's daily purchases from
the Contract Area for the preceding Winter Purchase Period multiplied by
thirty-three percent (33%), but in no event less than the lesser of (a) 15 MMcf
per day or (b) the aggregate at the daily well production capabilities which
shall, for purposes of this provision, never exceed 1 MMcf per day for any
single well.
5
3
10. The term "annual contract quantity" shall, subject to Article
XIX, mean Buyer's minimum annual purchase obligation hereunder. Said quantity
to be the sum in Mcf of Buyer's share of the daily Contract Area Purchase
Commitments during the contract year. Said share, as a percentage of the total
may vary from day to day but shall be equal to Seller's daily average
production allowable authorized by the State for gas produced hereunder divided
by the combined daily average production allowable authorized by the State for
all Sellers with regard to the gas committed to Buyer from the Contract Area
pursuant to this and other agreements. Notwithstanding the above, the annual
contract quantity hereunder shall not exceed eighty-five percent (85%) of the
daily average production allowable authorized by the State for the gas
committed hereunder.
11. The term "month" shall mean the period of time
beginning at 7:00 a.m. Eastern Standard Time on the first day of a calendar
month and ending at 7:00 a.m. Eastern Standard Time on the first day of the
next succeeding calendar month.
12. The term "day" shall mean a period of twenty-four
(24) hours beginning at 7:00 a.m. Eastern Standard Time of one calendar day and
ending at 7:00 a.m. Eastern Standard Time on the next succeeding calendar day.
13. The term "cubic foot of gas" shall denote the unit
of gas measurement hereunder and shall mean a cubic foot of gas at an absolute
pressure of fifteen and twenty-five thousandths (15.025) pounds per square inch
at a temperature of sixty degrees Fahrenheit (60 degrees F).
14. The term "deliverability" is used as a measure of a
well's productivity and shall mean the average quantity of gas, per
twenty-four-hour period, which a well being tested for deliverability at a time
agreed to by both parties, produced during a seventy-two-hour period of
continuous delivery into Buyer's pipeline operating at the then existing
pipeline pressure not to exceed one thousand four hundred forty (1440) psig.
15. The term "Mcf" shall mean one thousand (1,000) cubic feet.
6
4
16. The term "Btu" shall mean British thermal unit.
17. The term "MMBtu" shall mean 1,000,000 British Thermal Units
(Btu's).
18. The term "Kalkaska Plant" shall mean the gas processing
plant located in ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
Michigan, and operated by Amoco Production Company as of the date of this
Agreement.
19. The term "Plant Owner" means an owner of the "Kalkaska Plant"
as described in the Kalkaska Plant Processing and Operating Agreement dated
November 15, 1974.
20. The term "tender of gas" or like expression shall be
understood to mean the notice by Seller to Buyer that Seller has gas available
for delivery at the point of delivery specified in the notice. A notice of
completion and request for connection, for instance, would constitute a
"tender." Such one-time notice to Buyer shall constitute a continuous tender
of such gas unless and until Seller shall give Buyer written notice to the
contrary.
21. The term "Common Line" means that certain wet header gas
transmission line (beginning at the tap valve used to deliver the gas entering
said line) and any extensions thereof jointly used by Buyer and Michigan
Consolidated Gas Company.
22. The term "Common Delivery Point" means the terminus
of the Common Line situated in Section 31, Township 27 North, Range 7 West,
Kalkaska Township, Kalkaska County, Michigan.
23. The term "psig" shall mean pounds per square inch gauge.
24. The term "psia" shall mean pounds per square inch absolute.
7
5
ARTICLE II
Seller's Reservations
1. Seller reserves and excepts from the terms of this
Agreement the following:
(a) All oil and condensate separated and saved by
Seller.
(b) Liquefiable hydrocarbons subject to Seller's
extracting or arranging for the extraction
thereof as herein provided.
(c) Nonhydrocarbon substances subject to
Seller's contracting or arranging for the
extracting thereof as herein provided.
(d) Gas for development and field operations on
any of Seller's acreage, including fuel for
the operation of compression facilities by
Seller or fuel which Seller may elect to
furnish or sell to drilling contractors for
fuel in drilling on Seller's acreage.
(e) Gas for repressuring, pressure maintenance,
cycling, gas lift in a closed system, and
the use of gas as a drilling fluid.
(f) Gas which Seller is obligated to furnish
lessors under leases covering acreage
committed hereto.
(g) Gas attributable to any acreage acquired by
Seller and which is subject to any
obligation or reservation made by a third
party for the purchase and sale of such gas.
2. Seller also reserves to itself the following:
(a) The right to operate its property free from
any control by Buyer in such manner as Seller, in its sole discretion, may deem
advisable, including, without limitation by enumeration the right to drill new
▇▇▇▇▇, to test ▇▇▇▇▇, to repair and rework ▇▇▇▇▇, and to abandon any well and
the right to renew, extend, release, assign, surrender or permit to expire any
lease as Seller deems best in its sole and exclusive discretion.
8
6
(b) The right to unitize any of its leases with other
properties of Seller and of others in such manner as to protect Buyer's
rights hereunder, in which event this Agreement will cover Seller's interest in
the unit and gas attributable thereto, to the extent that such interest is
derived from leases committed hereunder. The term "unit" as used in this
subparagraph shall mean any unit recognized by the state regulatory agency
having jurisdiction or other pooling of acreage not requiring recognition by a
regulatory agency in which two (2) or more producers contribute acreage and
each producer owns an undivided interest in the total acreage contributed, such
as working interest units, areas of mutual interest, and joint exploration and
development areas.
(c) The right to sell gas well gas Buyer is not then
taking to other purchasers when Buyer is not taking gas at rates at
least equal to the daily production rate allowed by the government agency
having jurisdiction; however, Buyer may increase Buyer's daily production takes
at any time upon notice to Seller provided there is gas available which is not
then committed to other purchasers.
ARTICLE III
Commitment of Gas
1. Seller commits to the performance of this Agreement
all gas reserves hereafter produced from or attributable to the reservoir
penetrated by well unit(s) from the lands described on Exhibit "A",
attributable to any interest in such gas reserves now or hereafter owned by
Seller.
2. Seller, with Buyer's written concurrence, may add
well units to this Agreement provided that such units lie within Alpena,
Cheboygan, Montmorency or Presque Isle Counties, Michigan and outside the lands
described on Exhibit "A". If Seller elects to so add well units to this
Agreement, Seller shall prepare and submit to Buyer a description of the
additional units and the written acceptance by Buyer of the document containing
such description shall constitute
9
7
Buyer's written concurrence, and thereupon Exhibit "A" to this Agreement shall
be deemed to have been amended to reflect the additional units.
3. The gas reserves discovered in well units from lands
described on Exhibit "A", or any well units added to this Agreement
pursuant to Section 2 above, shall be determined in accordance with the
provisions of Article IV hereof.
ARTICLE IV
Determination of Reserves
1. Seller shall, upon request from Buyer, and from time to
time, make available to Buyer all factual information and data
(excluding interpretation) in Seller's possession that may reasonably be needed
by Buyer for the purpose of estimating the amount of reserves in any reservoir
or pool in the Contract Area in which Seller may own an interest. Buyer
recognizes that all information furnished by Seller to Buyer pursuant to this
Section is confidential and constitutes the proprietary information of Seller,
and Buyer shall not disclose or in any manner whatsoever divulge any such
information to others without Seller's written permission, except as is
required by the Michigan Public Service Commission or any other regulatory
agency having jurisdiction to approve facilities construction.
2. Following execution of this Agreement, Seller shall
promptly make available to Buyer such information an provided for in the
preceding Section.
3. After the date of initial deliveries hereunder, Buyer may
request and Seller shall make, at reasonable intervals, a redetermination of
reserves in any one or more of the reservoirs or pools covered by this
Agreement. When a new gas well is committed hereunder, either Seller or Buyer
shall have the right to cause a redetermination of reserves to be made for the
purpose of calculating reserves attributable to such new well; otherwise,
neither Seller nor Buyer may
10
8
require that the reserves in any particular reservoir or pool be redetermined
more frequently than once each year.
ARTICLE V
Quantity
1. After deliveries of gas have commenced under this
Agreement, Seller shall sell and deliver to Buyer and Buyer shall purchase and
take from Seller hereunder, or pay Seller for, whether taken or not, the annual
contract quantity of gas, as that term is defined in Article I Section 10
hereof, with adjustments where appropriate as follows:
(a) In the event of Seller's inability to perform
its delivery obligation in accordance with a specific request from Buyer
because of a valid force majeure (on the part of either Seller or Buyer), then
Buyer's take-or-pay obligation for the time of the force majeure shall be the
volume, if any, which Seller was capable of delivering and Buyer of taking
during the period of such force majeure.
(b) If for any reason other than force majeure
Seller shall fail to make available for delivery a specific volume requested by
Buyer for a given month, Buyer's take-or-pay obligation for such month shall be
the volume so made available.
2. If the total volume of gas well gas actually purchased
and taken by Buyer during any contract year is less than the annual contract
quantity adjusted as provided for above, then (a) Seller shall have the option
of terminating this Agreement following ninety (90) days written notice to
Buyer (such option shall be waived, however, if not exercised within fifty (50)
days following the end of the contract year in which Buyer's purchases are
deficient); or if not terminated by Seller, then (b) Buyer, on or before the
25th day of the second month following the end of such contract year, shall pay
Seller for any such deficiency volume assuming that the deficiency volume would
contain 1,000
11
9
Btu per cubic foot. As to gas so paid for but not taken, Buyer shall have the
right to take such gas in order of accrual during the remaining term of the
contract, free of additional cost to Buyer. The right to take such gas shall
not accrue in each ensuing contract year until the annual contract quantity for
said year has been taken. Upon the expiration of the term hereof, or upon
termination as otherwise provided for herein, Seller shall refund to Buyer for
the payments if any made to Seller hereunder that was never taken by Buyer.
3. In the event Seller's deliverability on a daily basis
hereunder should exceed the annual contract quantity x 117.6% divided by the
number of days in said contract year, Buyer shall either elect to purchase the
excess, or give Seller the option to have such excess released from this
Agreement.
ARTICLE VI
Term
This Contract, subject to the right of cancellation herein
provided, shall be effective as of the day hereof through December 31, 1995 and
shall continue from year to year thereafter subject to cancellation by either
party on three (3) months' written notice given prior to December 31, 1995 or
any anniversary date thereof. If Seller uses gas committed hereunder for
repressuring or secondary recovery operations as provided for under Article II,
Paragraph 1, Subparagraph (e), the term of this Agreement shall, at Buyer's
option, be extended, for the properties involved in such repressuring or
secondary recovery operations, for a period of time equal to the time such
operations were actually conducted.
12
10
ARTICLE VII
Delivery Point - Liability
1. The point of delivery for each well for gas sold
hereunder shall, at Seller's option, be at the inlet of Buyer's tap valve
which tap valve shall be at a mutually agreeable location on the Common
Line.
2. Title to gas shall pass from Seller to Buyer at the
inlet of Buyer's facilities at said point of delivery. Seller shall be in
control and possession of the gas delivered hereunder and responsible for any
damage or injury caused thereby until the same shall have been delivered to
Buyer, after which delivery Buyer shall be deemed to be in exclusive control
and possession thereof and responsible for any injury or damage caused thereby,
except as otherwise provided for under Article XX.
3. Buyer agrees to reimburse Seller for gathering the
gas to the point of delivery in an amount equal to 7 cents/MMBtu for the first
mile or fraction of a mile of gathering line installed by Seller and 2
cents/MMBtu for each additional mile thereafter, such reimbursement to be paid
in addition to the price paid pursuant to Article VIII hereof.
ARTICLE VIII
Price
1. Subject to the other provisions hereof the price to
be paid by Buyer to Seller for gas purchased and sold, or paid for when not
taken as provided in Article V hereof, shall be $2.10 per MMBtu effective
January 1, 1988 and said price shall thereafter be escalated at a rate of 1.8%
semiannually with such escalations to take effect on January 1 and July 1 of
each year.
2. Seller or Buyer shall have the option to request a
price redetermination effective July 1, 1989 and annually thereafter with the
redetermined price to be equal to the average commodity gas cost (ACGC) charged
by ANR Pipeline (ANR), Panhandle Eastern Pipe Line Company (Panhandle),
Northern
13
11
Natural Gas Company (Northern Natural), Northern Gas Pipeline Company of
America (Natural) and Trunkline Gas Company (Trunkline). The ACGC charge shall
be based on rate schedules in effect on April lst of each redetermined year.
The escalation provided for in Paragraph 1 of this Article VIII shall also
apply to any redetermined price.
3. If one year after Seller's first delivery of gas
hereunder or at any time thereafter it is determined that the marketability of
the subject gas is hampered in that the price on an MMBtu basis, payable under
the provisions of this Article, exceeds 95% of the weighted average cost of
Buyer's interstate gas, calculated using the gas component in the commodity
charge of the rate charged by all of Buyer's interstate pipeline company
suppliers (e.g., Trunkline Gas Company and Panhandle Eastern Pipe Line Company)
pursuant to a government approved tariff, then Buyer shall have the option to
limit the price paid hereunder to a level equal to 95% of such weighted average
cost. When in effect, such a limited price shall be increased by the same
escalation factor and as of the same effective dates as provided in Section 1
of this Article. If Buyer chooses to limit the price as herein provided,
Seller shall have the right to solicit offers from others to purchase the gas
at a higher price and, if Seller notifies Buyer of a bonafide third party offer
to purchase such gas at a higher price, Buyer shall, within thirty (30) days
thereafter, either agree to purchase the gas at a price equivalent to that
contained in the third party offer or release its contractual claim to the gas
and transport or exchange such gas under Buyer's transportation or exchange
tariff existing at such time which is applicable to for the class of third
party purchaser of such gas.
4. Notwithstanding any of the above, in no event shall
the total remuneration per MMBtu provided for in this Agreement exceed 80% of
the equivalent average price (rounded to the nearest $.001) of one million
(1,000,000) Btu of No. 6 Oil, using the daily prices reported by "▇▇▇▇▇'▇
Oilgram Price Report," U.S. Tank Car Transport Lots, Midcontinent, for Detroit
for the
14
12
preceding six (6) months. For the purposes hereof, a gallon of No. 6 Oil shall
be considered to contain one hundred fifty thousand (150,000) Btu. Should
"▇▇▇▇▇'▇ Oilgram Price Report" be discontinued, it is agreed that any other
similar service may be used in its place.
5. Furthermore, the price shall in no event fall below
$2.00 per MMBtu and such price will escalate at the rate of one and one-half
percent (1.5%) annually effective on January 1, 1989 and each January 1st
thereafter.
6. All prices pursuant to this Article VII shall be calculated
to the nearest one thousandth of one cent (.001 cent).
7. Any price increase provided for in this Article requiring
approval of the Michigan Public Service Commission or any successor state
regulatory agency shall not be effective until approved by such regulatory
agency.
8. If at any time the Michigan Public Service Commission (or
any successor state regulatory agency) shall disallow any portion of the price
paid Seller hereunder from Buyer's purchased cost of gas then in such event
Buyer shall reduce the price paid Seller to the maximum price from time to time
allowed; provided, however, Buyer shall always prosecute diligently to pay
Seller at the full contract price and to obtain inclusion of the full contract
price hereunder in Buyer's purchased cost of gas.
9. If at anytime during the term hereof, the price is reduced
pursuant to the preceding paragraph, Seller shall have an ongoing option to:
(a) terminate this Agreement upon thirty (30) days written notice to Buyer for
as long as Seller is not being paid the full price for gas otherwise payable
herein; or (b) exercise the rights specified under Section 3 above to sell such
gas to a third party and have Buyer transport or exchange such gas.
15
13
ARTICLE IX
Quality of Gas
1. All gas delivered by Seller under the terms of this
Contract shall conform to the following specifications:
(a) The gas shall be commercially free from dust, gum,
gum forming constituents, condensate and solids when delivered to Buyer.
(b) The gas shall not at any time have an oxygen content
in excess of one percent (1%) by volume and Seller shall make every
reasonable effort to keep the gas free of oxygen.
(c) The gas shall not contain more than one (1) grain of
hydrogen sulphide per one hundred (100) cubic feet. The hydrogen sulphide
content shall be determined by a Cadmium Sulphate, ▇▇▇▇▇▇ Titrator and/or
a ▇▇▇▇▇▇▇▇ quantitative test, or any other mutually agreeable method.
(d) The gas shall not contain more than twenty (20)
grains of total sulphur per one hundred (100) cubic feet.
(e) The total gross heating value per cubic foot of gas
shall be not less than nine hundred fifty (950) Btu, however, it is agreed
that Buyer shall accept gas from individual ▇▇▇▇▇ having a heating value
of less than nine hundred fifty (950) Btu per cubic foot if the composite
stream of gas in the Common Line immediately downstream from the point of
delivery, contains gas with a heating value of at least nine hundred fifty
(950) Btu per cubic foot. It is also agreed that in similar manner Buyer
will accept gas from individual ▇▇▇▇▇ having a hydrogen sulphide content
in excess of one (1) grain per one hundred (100) cubic feet or in excess
of twenty (20) grains total sulphur per one hundred (100) cubic feet if
said composite stream at the point above described on the Common Line does
not contain more than one-fourth (1/4) grain of hydrogen sulphide or ten
(10) grains of total sulphur; provided, however, that in no event shall
any gas sold hereunder and delivered into a lateral owned by any third
party exceed one
16
14
(1) grain hydrogen sulphide per one hundred (100) cubic feet at
the point of connection with said lateral. It is agreed that if
because of such relaxation of quality specifications as to
individual ▇▇▇▇▇, the gas in Seller's composite stream does not
meet the specifications hereinabove set forth for such composite
stream, then Buyer shall have the right to refuse to take such
substandard gas from any individual well or ▇▇▇▇▇ so long as such
composite stream would fail to meet the specified standards.
(f) The term "total gross heating value per cubic foot"
shall mean the number of British thermal units, produced by the
combustion at constant pressure, of the amount of gas on a
water-free basis which would occupy a volume of one (1) cubic
foot at a temperature of sixty degrees Fahrenheit (60 degreesF)
and at a pressure of fifteen and twenty-five thousandths
(15.025) psia, when the products of combustion are cooled to the
initial temperature of gas in air and when the water formed by
combustion is condensed to a liquid stage.
(g) The water content of the gas shall not exceed seven
(7) pounds per million cubic feet measured at fifteen and
twenty-five thousandths (15.025) psia and sixty degrees
Fahrenheit (60 degrees F).
(h) The gas should not contain by volume more than two
percent (2%) carbon dioxide.
2. Should the gas offered for sale to Buyer from any
well or other delivery point fail at any time to conform to any of the
specifications of this Article, Buyer subject to ▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇▇▇▇▇ (e)
of this Article IX may notify Seller of any such failure and Seller shall make
a diligent effort to correct such failure in Seller's ▇▇▇▇▇ so as to deliver
gas conforming to the above specifications. If Seller is unable to deliver gas
conforming to the above specifications by treatment consistent with prudent
operations and by means which are economically feasible in Seller's opinion,
Buyer may at its option, accept delivery of the gas and treat the gas so that
it will conform to the above
17
15
specifications or Buyer may refuse to take such gas and in the event of such
refusal Buyer shall not be obligated to attribute volumes to such well or other
delivery point for take-or-pay purposes. In the event Buyer elects to accept
delivery of gas not conforming to the specifications herein and to treat said
gas so it will conform to the specifications herein, Seller shall reimburse
Buyer for the cost, including equipment, for treating said gas, but not to
exceed seventy-five percent (75%) of the sum received by Seller for such gas.
In the event both Seller and Buyer elect not to treat gas not meeting the
quality specifications herein, that gas and that gas only, shall be released
from commitment under the terms hereof.
3. It is agreed that if Seller should elect (subject to
Article XX hereof) to process or have processed gas sold hereunder, the residue
gas delivered from Seller's or other processing facility shall not contain more
than one-fourth (1/4) grain of hydrogen sulphide per one hundred (100) cubic
feet.
ARTICLE X
Delivery Pressure
1. Seller shall deliver gas well gas at a pressure sufficient
to allow the gas to enter Buyer's facilities at the delivery points hereunder,
provided Seller shall not be obligated to deliver gas well gas to Buyer at a
pressure in excess of one thousand four hundred forty (1440) psig. If the ▇▇▇▇▇
completed hereunder are unable to produce the annual contract quantity against
the pressure prevailing in Buyer's pipelines and Seller elects to install
compression facilities, then, except as herein otherwise provided, Buyer agrees
to reimburse Seller: (a) six cents (6.00 cents) per MMBtu for gas from a well
that is compressed, such reimbursement will not, however, be made with respect
to monthly deliveries hereunder that are in excess of the annual contract
quantity unless the parties hereafter agree in writing to the contrary.
18
16
2. Should Seller elect not to install compression facilities
in any well or ▇▇▇▇▇ completed in any gas well gas reservoir when the pressure
in the reservoir is inadequate to allow delivery of the gas into Buyer's
facilities, then the Buyer shall have the right to install the necessary
compression facilities. If neither the Seller nor the Buyer makes such
election, then such well or ▇▇▇▇▇ shall be released from this Agreement.
3. Seller shall deliver the oil well gas at a pressure
sufficient to enter Buyer's facilities but not to exceed one thousand four
hundred forty (1440) psig. If Seller is required to compresses oil well gas or
flash vapors to effect deliveries thereof to Buyer, Buyer agrees to reimburse
Seller six cents (6.00 cents) per MMBtu on volumes for such compressed gas,
which rate shall be increased by two-tenths cent (.20 cents) on January 1,
1989, and each January 1 thereafter. Seller agrees to furnish fuel for such
compression at no cost or expense to Buyer.
4. If only a portion of the gas sold to Buyer by Seller from
any given well is compressed pursuant to this Article, Seller shall measure the
gas from said well actually compressed and shall, consistent with the
foregoing, invoice Buyer therefor on or before the twentieth (20th) day of the
month following the month in which such gas was actually compressed. If all
gas sold to Buyer by Seller from any given well is compressed pursuant to this
Article, Seller shall furnish Buyer with the name of the well on or before the
twentieth (20th) day of the month following the mouth in which such compression
actually begins. Under no circumstances shall the Buyer be obligated to
reimburse the Seller for compression prior to the written notification and the
actual commencement of compression.
5. Buyer, when operating its gathering system in conformance
with the pressure conditions herein specified, shall not be obligated to
attribute volumes for take-or-pay purposes in excess of the volumes made
available at sufficient pressures to enter Buyer's lines at the point of
delivery.
19
17
6. If at any time the Michigan Public Service Commission (or
any successor state regulatory agency) shall disallow any of the reimbursement
paid Seller hereunder from Buyer's purchase cost of gas in a ratemaking
proceeding, then in such event Buyer shall reduce the reimbursement paid to
Seller to the maximum rate from time to time allowed.
ARTICLE XI
Measurement and Testing
1. Buyer shall install, maintain, and operate, at no expense
to Seller, at or near the location of Seller's wellhead(s) equipment of a
character and design acceptable to Seller and perform all tests required to
accomplish the measurement of volumes, temperatures, specific gravity and
heating values. Such volume measuring equipment shall be installed,
maintained, and operated in accordance with ANSI/API Standard 2530, dated 1978,
of the American National Standards Institute, as amended from time to time, and
the volume of gas delivered hereunder and measured by such orifice meters shall
be computed in accordance with said report.
2. The temperature of the gas passing through each orifice
meter shall be determined by means of a recording thermometer installed by
Buyer so that it will properly record the temperature of the gas through the
meter. The arithmetical average of temperature recorded during the time gas was
flowing on any day shall be used in computing gas volumes for that day.
3. The specific gravity of the gas at the points of delivery
shall be determined by Buyer at least once each six (6) calendar months, or as
often as may be found necessary in practice, by a method of test generally
acceptable to the industry. Whenever a recording gravitometer is used, the
arithmetical average of the gravity recorded during the time gas was flowing on
any day shall be used in computing gas volumes for that day.
20
18
4. Correction shall be made by Buyer for deviation from
▇▇▇▇▇'▇ Law, and the factors for making such correction shall be obtained from
procedures contained in the aforesaid Standard 2530, or from such other source
as may be agreed upon by the parties hereto.
5. Unless otherwise agreed upon by the parties hereto, the
atmospheric pressure shall be assumed to be fourteen and four-tenths (14.4)
psia for the purpose of calculating the volumes of gas delivered hereunder.
6. Buyer shall test and calibrate all of Buyer's meters and
instruments used in measuring or testing the gas delivered hereunder at least
once each calendar month, or at less frequent intervals agreed to by the
parties on meters at specific delivery points. Any measurement equipment found
by calibration test to be registering inaccurately shall be immediately
restored to accurate operation. No correction shall be made for past
deliveries where inaccuracies are two percent (2%) or less, but if such
equipment is found to be out of service or registering inaccurately by more
than two percent (2%), the registrations of such equipment shall be disregarded
for any period known or agreed upon, or, if such period is not known or agreed
upon, for a period extending back one-half (1/2) of the time elapsed since the
last calibration test, or sixteen (16) days, whichever is shorter. The volume
of gas delivered during such period shall be estimated by using the first of
the following methods which is feasible:
(a) by using the registration of check measuring
equipment if installed and registering accurately;
(b) by correcting the error, if the extent of the error
is ascertainable by calibration test or mathematical calculation; or
(c) by estimation, based on deliveries under similar
conditions when the equipment was registering accurately.
7. Buyer shall determine the gross heating value in Btu per
cubic foot of gas, at each delivery point hereunder at such intervals
as in Buyer's
21
19
opinion are required to determine the heating value hereunder but such
intervals shall be of such duration as is necessary to determine accurate
values to be used in Article VIII, Paragraph 1.
8. Buyer shall make such test for determining hydrogen
sulphide content, total sulphur content, oxygen content, and carbon dioxide
content at such intervals as in Buyer's opinion are required to determine that
the gas meets the applicable quality specifications hereunder.
9. Seller may, at its option and expense, install and operate
measurement and testing equipment to check Buyer's equipment, but measurement
and testing of gas for the purpose of this Contract shall be by Buyer's
equipment, except as hereinabove specifically provided to the contrary. Any
such check measurement or testing equipment installed by Seller shall be so
installed and operated as not to interfere with the operation of Buyer's
equipment.
10. Seller shall have the right to inspect, at all reasonable
times, the measurement and testing equipment, charts, and other measurement
data of Buyer, and Buyer shall have a similar right with respect to Seller's
equipment, charts, and data, but the reading, calibration and adjustment of
such equipment shall be performed only by the owner thereof. Buyer shall give
Seller at least ten (10) days' notice of any test of Buyer's measuring or
testing equipment in order that Seller may have a representative present to
witness the tests, and Buyer shall have the right to be present at the ▇▇▇▇
▇▇▇▇▇▇'▇ check measuring or testing equipment is adjusted or calibrated.
11. If Seller shall request a special test of any of Buyer's
measurement equipment or equipment for testing the quality of gas sold
hereunder, Buyer shall make such test, and if the equipment in question is
registering correctly, the actual expenses of such test shall be borne by
Seller; otherwise, the actual expenses shall be borne by Buyer.
12. All test data, charts, and similar records shall be
preserved by the owners thereof for a period of at least two (2) years.
22
20
ARTICLE XII
Warranty of Title
1. Seller hereby warrants title to the gas sold by it hereunder
and its right to sell the same, and warrants that all such gas is owned by it
free from all liens, encumbrances and adverse claims. Seller shall
indemnify, save and hold Buyer free and harmless from all suits, actions,
debts, accounts, damages, costs, losses and expenses arising from or out of
adverse claims of any and all persons to the gas sold by Seller hereunder.
2. With respect to each lease covered by this Contract, it is
agreed, notwithstanding anything herein contained to the contrary, that, in the
event it shall be determined that Seller owns less than the interest in such
lease described in this Agreement as being owned by Seller and thereby
Seller shall be deemed to have breached any of the warranty provisions of this
Agreement then from and after such determination, this Agreement shall be
deemed to have been amended so as to cover and include the interest in such
lease which is, in fact, owned by Seller.
ARTICLE XIII
Taxes
1. Seller agrees to pay or cause to be paid all taxes imposed upon
gas prior to its delivery to Buyer hereunder or upon any occupation or
privilege relating to the production, sale or delivery of such gas to Buyer.
Buyer agrees to pay or cause to be paid all taxes imposed on such gas after
its receipt by Buyer, (except those, if any covered in Section 5 below) or any
occupation or privilege relating to the transmission or sale of such gas after
its receipt by Buyer.
2. As used in this Article XIII, the term "tax" shall mean sales,
transaction, occupation, service, production, severance, gathering,
transmission, value added, export or excise tax, assessment or fee levied,
assessed or fixed
23
21
by governmental authority, and taxes of similar nature or equivalent in effect.
Any present or future tax levied on any liquid product which Seller is entitled
to retain shall be borne wholly by Seller.
3. Buyer agrees to deduct from the amount payable to Seller the
severance and privilege taxes due from the sale of gas hereunder and shall
remit and report to the State of Michigan in accordance with the severance and
privilege tax filing requirements.
4. If Seller receives written notice from Buyer that questions the
validity of any tax, Seller will consult with Buyer as to the best procedure
to be followed in the payment of the questioned tax and the means of testing
its validity, having due regard for the protection of the interests of both
Seller and Buyer. Following such consultation, each party will pursue the
course of action it deems proper.
5. Nevertheless, Buyer shall never be liable for and shall never
be obligated to reimburse Seller for any tax levied or assessed upon or with
respect to oil, condensate, liquefiable hydrocarbons or other liquids, helium
or nonhydrocarbon substances which may be extracted or separated by Seller from
gas delivered to Buyer hereunder, prior to such delivery, or upon or with
respect to the process of extracting or separating any such products or
substances from such gas or of handling, selling, transporting or otherwise
dealing in or with any of such products or substances, all of which taxes shall
be borne and paid solely by Seller and if paid by Buyer shall be reimbursed by
Seller to Buyer.
ARTICLE XIV
Billing and Payment
1. Buyer, not later than the twenty-fifth (25th) day of each
calendar month, shall furnish Seller a detailed statement showing the total
quantity of gas delivered by Seller to Buyer hereunder during the preceding
calendar month and the amount due and payable by Buyer therefor, and
simultaneously shall make
24
22
payment to Seller in such amount. Upon request, Buyer shall furnish Seller
charts and measurement data supporting such statement.
2. For gas not taken by Buyer as provided for in Article V hereof,
Seller shall ▇▇▇▇ Buyer for said gas by rendering a statement on or before the
tenth (10th) day of the second month following the end of each contract year.
Buyer shall pay Seller for the gas so billed no later than the twenty-fifth
(25th) day of the second month following the end of each contract year.
3. Should Buyer fail to pay any amount due Seller under the
provision of this Agreement when same is due, interest shall accrue at the
prime interest rate, as established by the First National Bank of Chicago in
effect at the time of such deficiency, per annum, from the date payment is due
until paid. If such default in payment continues for sixty (60) days, Seller
may, in addition to all other rights and remedies, suspend deliveries of
gas hereunder and terminate this Agreement. The foregoing provision in this
Section 3 shall not apply, however, if Buyer's refusal to pay is the result of
a bona fide dispute as to the accuracy of any statement and Buyer pays all
amounts not in dispute.
4. On or before the 15th of each calendar month, Seller shall
render a statement to Buyer of the gathering costs (as the same are defined in
Article VII) for the preceding calendar month.
5. On or before the last day of each month, Buyer shall pay Seller
for the gathering costs of the Seller during the preceding month. This
payment obligation shall be extended to the extent, if any that Seller's
statement for such gathering costs is not received by the 15th of the month.
6. Each party shall have the right at reasonable hours to examine
the books, records and charts of the other party to the extent necessary to
verify the accuracy of any statement, charge, or computation made pursuant to
the provisions of any article hereof. If any such examination reveals any
inaccuracy in any billing theretofore made, the necessary adjustment in such
billing and payment shall be promptly made, provided that no adjustment for
any billing or
25
23
payment shall be made after the lapse of two (2) years from the rendition
thereof unless challenged prior thereto.
ARTICLE XV
Conditions of Connection
1. Buyer and Seller agree to attempt to apply for all
permits and authorizations within ten (10) working days of executing this
contract and further agree to secure with due diligence any necessary permits
or authorizations allowing Seller to connect each well hereunder to Buyer's
facilities where Buyer will commence purchasing. As to all ▇▇▇▇▇ subject
hereto, in the event that any such permit or authorization to allow such
connection has not been issued within ninety (90) days after Seller has
notified Buyer of the completion of each such well, either party may cancel
this Agreement as to any such well by giving, after the expiration of said
ninety (90) days, thirty (30) days' written notice to the other. Acceptance of
such permits or authorizations containing burdensome conditions shall be within
the sole discretion of the party to whom issued; except that such party agrees
that the other party shall promptly be furnished a copy of all such permits or
authorizations and that the applicant party shall not accept such permits or
authorizations that the other party deems to contain conditions which would
deny such other party rights or impose on it burdens not provided for herein.
2. Upon issuance of the permits or authorizations provided for
in Paragraph 1 above, Seller shall connect all ▇▇▇▇▇ completed as producers in
the following manner:
Seller shall use its best efforts to complete connections as
soon as possible, but in no event later than seventy-five (75) days
after the granting of said permit or authorization. If any well or
▇▇▇▇▇ are not connected within this period of time, either party may
cancel
26
24
this Agreement as to any such well after giving thirty
(30) days' written notice to the other party.
ARTICLE XVI
Assignment
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns; provided that no
conveyance, transfer of any interest, or change of ownership by either party
shall be binding upon the other party until such other party has been
furnished with a written notice evidencing such conveyance, transfer of
interest, or change of ownership and approved such assignment, approval of
which will not be unreasonably withheld, it being understood that this
provision in no way restricts the rights of Seller as to the transfer or
assignment of Seller's leases or property thereon as provided in ▇▇▇▇▇▇▇▇▇ ▇,
▇▇▇▇▇▇▇▇▇▇▇▇ (▇) of Article II hereof.
ARTICLE XVII
Notices
1. Any notice, request, demand, statement, or payment provided
for in this Contract shall be sent to the parties hereto at the following
addresses:
BUYER: Consumers Power Company
Attn: Director of Gas & Oil Supply
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
SELLER: Northern Michigan Exploration Company
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
2. Either party shall have the right by prior written notice to
the other to change the address or addresses given above at any time.
27
25
ARTICLE XVIII
Laws and Regulations
This Agreement insofar as it in affected thereby, shall be subject to
all valid and applicable laws, orders, rules and regulations of Federal and any
other governmental authorities having jurisdiction. Any party hereto shall
have the right to contest the validity of any such law, order, rule or
regulation, and the acquiescence therein or compliance therewith for any period
of time shall not be construed as a waiver of such right. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Michigan.
ARTICLE XIX
Force Majeure
1. If either Buyer or Seller is rendered unable, wholly or in part,
by force majeure or any other cause of any kind not reasonably within its
control, to perform or comply with any obligations or conditions of this
Agreement such obligations or conditions shall be suspended during the
continuance of the inability so caused and such party so rendered unable shall
be relieved of liability and shall suffer no prejudice for failure to perform
the same during such period, it being understood that Buyer's minimum annual
obligation to take or pay for gas hereunder shall be reduced by the volume
which Buyer, under normal circumstances, would have taken from the well during
the period of time the inability exists; provided, obligations to make payments
then due for gas delivered hereunder shall not be suspended, and in other
cases, the cause of suspension (other than strikes, lockouts, or labor
disputes) shall be remedied insofar as possible with reasonable dispatch.
Settlement of strikes, lockouts, or labor disputes shall be wholly within the
discretion of the party having the difficulty.
2. The term "force majeure" shall include, without limitation by the
following enumeration, acts of God and of the public enemy, unseasonal weather,
28
26
freezing of ▇▇▇▇▇ or lines of pipe, repairing or altering machinery or lines of
pipe, fires, accidents, breakdowns, strikes, labor disputes, and any other
industrial, civil or public disturbance, inability to obtain materials,
supplies, rights-of-way on customary terms, permits, or labor, any act or
omission by parties not controlled by the party having the difficulty, any act
or omission (including failure to take gas) of a material purchaser of gas from
Buyer which is excused by any event or occurrence of the character herein
defined as constituting force majeure, failure of gas supply or markets, and
any laws, orders, rules, regulations, acts, or restraints of any governmental
body or authority, civil or military, or any other causes beyond the control of
the parties hereto.
ARTICLE XX
Processing
1. Seller shall not process gas covered hereunder (other than in
standard field separation facilities) prior to delivery of such gas to Buyer at
the delivery points provided herein.
2. If Seller is not now a Plant Owner in the Kalkaska Plant, as
described in the Plant Processing and Operating Agreement dated November 15,
1974, between Consumers Power Company and Amoco Production Company, et al,
Buyer hereby grants Seller an option to participate as a Plant Owner with
respect to the gas covered by this Agreement, subject to the following
conditions:
(a) Seller may exercise such option by giving written notice
to Buyer and Amoco Production Company not earlier than the date of
initial delivery of gas under this Agreement.
(b) Seller's option shall not be exercised later than one
(1) year from the date of initial delivery of gas under this Agreement.
29
27
(c) The acceptance and ratification by Seller of the Plant
Processing and Operating Agreement dated November 15, 1974, between
Buyer and Amoco Production Company, et al.
(d) Seller's acceptance of and consent to be bound by the
Allocation Agreement by and between Buyer, Michigan Consolidated Gas
Company, and the principal producers of gas sold to each covering the
division of components at the Common Delivery Point of the gas and
liquids transported in the Common Line, insofar as the provisions
thereof affect Seller's rights hereunder.
(e) Seller's acceptance of and consent to be bound by the
Transportation Agreement by and between Buyer and Michigan Consolidated
Gas Company, insofar as the provisions thereof affect Seller's rights
hereunder; provided, however, if there is any conflict between said
Transportation Agreement and this Agreement, the terms and provisions
of this Agreement shall prevail.
3. If Seller is now a Plant Owner or if Seller subsequently becomes
a Plant Owner in the Kalkaska Plant in accordance with Paragraph 2 of this
Article, Buyer and Seller agree to the following:
(a) Seller agrees and consents to the Allocation Agreement
and the Transportation Agreement, referred to in ▇▇▇▇▇▇▇▇▇ ▇,
▇▇▇▇▇▇▇▇▇▇▇▇ (▇) and (e) of this Article, insofar as Seller's rights
are affected by such agreements with respect to the gas covered by this
Agreement.
(b) Seller shall have the exclusive right to process all gas
sold to Buyer hereunder and Seller shall process such gas in accordance
with the Plant Processing and Operating Agreement referred to in
Paragraph 2, Subparagraph (c) of this Article subject to the following:
(i) If at any time there is insufficient processing capacity of a
sustained nature in the Kalkaska Plant to process any or all of
Seller's gas covered by this Agreement and the Plant Owners of such
plant have elected not to increase
30
28
the capacity thereof sufficiently to cover all or part of the gas
covered by this Agreement. Seller shall have the right to process or
have processed such gas in any other gas processing plant near the
Common Delivery Point. Seller shall use its best efforts to limit the
duration of such processing arrangements, if possible, such that the
gas covered thereby will be available for processing in the Kalkaska
Plant when there is again adequate capacity therein. Seller shall
promptly notify Buyer and the operator of the Kalkaska Plant with
respect to such processing arrangements and advise of all necessary
details thereof. (ii) If at any time after the Plant Owners of the
Kalkaska Plant have elected to increase the capacity of such plant,
Seller may temporarily process or have processed gas covered by this
Agreement in any other gas processing plant near the Common Delivery
Point until there is capacity available in the Kalkaska Plant. (iii)
The rights granted to Seller in ▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇▇▇▇▇ (▇)(▇) and
(b)(ii) above in this Article are subject to Seller receiving express
written approval of the Plant Committee, as defined in the Plant
Processing and Operating Agreement dated November 15, 1974 of the
Kalkaska Plant to do so, subject to necessary authorization, if any,
from Plant Owners. (iv) The provisions of the Plant Processing and
Operating Agreement shall apply at all times to the gas covered by this
Agreement with respect to insufficient capacity in the Kalkaska Plant
except with respect to volumes of gas for which processing arrangements
have been made in another plant as above provided.
(c) During any periods when Paragraph 3 of Article IX of the
Plant Processing and Operating Agreement is applicable and Buyer elects
not to bypass any or all of the gas well gas volumes covered hereby
which are in excess of the capacity of the Kalkaska Plant, Buyer's
take-or-pay obligation covered by Article V of this Agreement shall be
limited to the
31
29
gas well gas volumes hereunder actually processed in such plant for
Seller plus the volumes bypassed by Buyer, if any. Buyer's takes of
gas from Seller and all other producers from whom Buyer purchases gas
in the Contract Area shall be ratably apportioned with respect to
volumes processed and bypassed. Seller shall not have any right to
process or any interest in the liquefiable hydrocarbons or other
constituents contained in any gas volumes bypassed by Buyer.
(d) Seller shall have the right to process gas as above
provided and use gas for fuel for processing gas and other purposes
incident thereto; provided, however, that Seller shall reimburse Buyer
for fuel and shrinkage due to product extraction, and other losses or
uses of gas on the same basis (including taxes) which Buyer purchases
such gas hereunder, and provided further that Seller shall be deemed to
be in control and possession of the gas while it is in the processing
facilities and responsible for any damage or injury caused thereby.
ARTICLE XXI
Transportation of Liquids
1. Arrangements and procedures acceptable to Buyer, Seller, Michigan
Consolidated Gas Company, and any other interested producers have been agreed
upon in the Allocation Agreement so as to provide for calculation and
allocation at the Common Delivery Point of line gain or loss and shrinkage of
various constituents of gas and liquid and liquefiable hydrocarbons injected
into the Common Line by such respective parties. Buyer, insofar as it has the
right to do so, agrees that as long as this Agreement, a Transportation
Agreement and an Allocation Agreement are in effect, and one or more processing
plants are in operation so as to permit continued processing of all the gas
transported in the Common Line, Seller shall have the right to introduce into
the Common Line the following liquids (herein called "Seller's Liquids")
belonging to the Seller:
32
30
(i) condensate or distillate produced from gas ▇▇▇▇▇ from
which gas is sold to Buyer hereunder, provided that it is separated
from such gas by normal field separation facilities prior to delivery
of such gas to Buyer;
(ii) natural gasoline produced as a result of compression of
natural gas to be sold to Buyer hereunder, provided that the
compression facilities in which it is produced are situated upstream of
the delivery points hereunder; and
(iii) such other liquids produced from ▇▇▇▇▇ from which gas is
sold to Buyer hereunder (and which are separated from such gas prior to
delivery of the gas to Buyer), other than crude oil, and which will not
interfere with any other gas operations in the Common Line.
2. All Seller's Liquids shall be introduced at mutually agreeable
points downstream from gas purchase meters at rates which will not impair any
pipeline operations. Title to Seller's Liquids so introduced shall remain in
Seller, and Seller shall be responsible therefor, except that Buyer shall be
responsible and liable for any damages caused by said liquids when said damages
are the result of Buyer's or Michigan Consolidated Gas Company's negligence.
Seller's Liquids shall be transported to the Common Delivery point at no cost
to Seller; provided, however, that Seller shall reimburse Buyer promptly after
billing, for all operating expenses incurred by Buyer as a result of the
introduction of Seller's Liquids into the Common Line.
3. If, in the opinion of Buyer, any liquids are introduced into the
Common Line by Seller, at rates that will interfere with any gas operations or
cause any operating problems, Seller shall (upon written request made at any
time and from time to time by Buyer) immediately reduce the rates of
introduction of such Seller's Liquids as directed by Buyer. Such reduced rates
shall continue until Seller has submitted evidence satisfactory to Buyer that
increased rates of introduction of such Seller's Liquids will not interfere
with any gas operations or cause any operating problems. The consent by Buyer
to any such
33
31
increased rates of introduction of Seller's Liquids shall not be deemed a
waiver by Buyer of its right, as above provided, to demand further reduction of
the rates of introduction of such Seller's Liquids. If any party or parties is
obligated by the Michigan Public Service Commission to levy any charge or fee
for the transportation of liquids so introduced into the Common Line or
laterals serving same, then Seller agrees it will either cease the introduction
of Seller's Liquids into such facilities or will pay such charge or fee to the
party or parties entitled thereto. It is expressly understood that Seller
shall bear the allocated share of line gain or loss and shrinkage occurring in
the Common Line attributable to Seller's Liquids as determined under the
provision of the Allocation Agreement. It is further understood that if the
liquids delivered to or for Seller's account at the Common Delivery Point
attributable to Seller's Liquids have a greater aggregate heating value than
the aggregate heating value actually attributable to Seller's Liquids at the
Common Delivery Point, thereby resulting in a loss of heating value to Buyer
for which adequate compensation is not provided in the Allocation Agreement
(considering that Buyer's purchases of gas are to be made on a Btu basis rather
than on an Mcf basis), then Seller and Buyer agree to make whatever reasonable
change in the method of accounting as between Seller and Buyer which is
required to eliminate such inequity to Buyer to such extent as is practical and
feasible.
4. Stabilization or processing of liquids or other hydrocarbon
constituents belonging to Seller or other producers who may have injected same
into the Common Line under this Article shall be handled on such basis as shall
be mutually agreed between the Plant Owners and the respective owners of such
liquids and other hydrocarbon constituents.
34
32
ARTICLE XXII
Miscellaneous
1. No waiver by either party hereto of one or more defaults in the
performance of any provision of this Agreement shall operate or be construed as
a waiver, by such party, of a future default, whether of a like or a different
character.
2. All headings appearing herein are for convenience only and shall
not be considered a part of this Agreement for any purpose or as in any way
interpreting, construing, varying, altering, or modifying this Agreement or any
of the provisions hereof.
3. Each party hereby grants to the other wherever necessary or
convenient for carrying out the terms of this Agreement requisite easements and
rights of way over, across and under any land as to which such party has the
right to make such grants.
4. Buyer agrees that if it enters into any contracts with parties
other than Seller hereunder who will deliver to Buyer gas that will ultimately
enter the Common Line upstream from the Kalkaska Plant, then such contracts
with such other parties will contain the same restrictions regarding recovery
of liquids or liquefiable hydrocarbons as are contained in Paragraph 1 of
Article XX and will not contain provisions which mitigate against any of the
provisions of Article XX and Article XXI.
35
33
IN WITNESS WHEREOF, the parties hereto have caused this
Contract to be executed as of the day and year first above written.
BUYER: CONSUMERS POWER COMPANY
WITNESSES:
_____________________________
By /s/ ▇. ▇. ▇▇▇▇▇▇▇
---------------------------------
▇. ▇. ▇▇▇▇▇▇▇, Vice President
_____________________________
SELLER: NORTHERN MICHIGAN EXPLORATION
WITNESSES: COMPANY
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
BY /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Vice President, Secretary
----------------------------- and Treasurer
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
36
34
EXHIBIT "A"
for
GAS PURCHASE CONTRACT
Dated
December 1, 1987
Between
CONSUMERS POWER COMPANY
and
NORTHERN MICHIGAN EXPLORATION COMPANY
Contract Area
Acreage which is included in the Production Unit(s) described below or in any
other Production Unit which drains gas from a reservoir common to same.
Production Unit Common Line Tap
--------------- ---------------
PetroStar #▇-▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇ ▇▇ Section 24, T34N-R2E
Allis Township, Presque Isle County