THIRD AMENDING AGREEMENT
NOVEMBER 1, 1997
Between
SAN DIEGO GAS & ELECTRIC COMPANY, a
California corporation with its
principal office of business in San
Diego, California ("SDG&E")
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HUSKY OIL OPERATIONS LTD., an Alberta
corporation with its principal place of
business in Calgary, Alberta ("HOOL")
and HUSKY GAS MARKETING INC., a Delaware
corporation with its principal place of
business in Calgary, Alberta ("HGMI")
(collectively, "Seller")
Whereas:
1. SDG&E and HOOL are parties to a Natural Gas Purchase
Agreement made as of March 12, 1991 as amended by an Amending
Agreement made effective as of November 1, 1994 and a Second
Amending Agreement made effective as of January 1, 1997
("Agreement"); and
2. the parties wish to amend the Agreement in the manner
hereinafter set forth and to include HGMI as a party to the
Agreement.
Now therefore in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
1. The terms and expressions which are defined in the Agreement
shall have the same meanings where used in this Third
Amending Agreement.
2. Section 1.1 is amended to add the following as clauses to
Section 1.1:
(a-1) "Assigned ANG Transportation" means, initially, the
firm transportation service described in clause
1.1(ii)(1), subject to any reduction which occurs
from time to time when Seller assigns all or
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any portion of such service to SDG&E pursuant to any
term of this Agreement;
(a-2) "Assigned PGT Transportation" means, initially, the
firm transportation service described in clause
1.1(ii)(2), subject to any reduction which occurs
from time to time when Seller assigns all or any
portion of service to SDG&E pursuant to any term of
this Agreement;
(a-3) "Assigned PG&E Transportation" means, initially, the
transportation service described in clause
1.1(ii)(3), subject to any reduction which occurs
from time to time when Seller assigns all or any
portion of such service to SDG&E pursuant to any term
of this Agreement;
(a-4) "Assignment Transporters" means, collectively, ANG,
PGT and PG&E and "Assignment Transporter" means any
one of them, as the context requires;
(k-1) "Demand Charges" means amounts payable from time to
time by a shipper to a pipeline entity pursuant to
contract or as may be mandated to be paid by any
regulatory body or agency or by legislation or
regulations, to reserve and maintain the right to
transport quantities or volumes of gas on a firm
basis for an agreed-to period of time on a pipeline
and which are payable irrespective of actual
quantities or volumes shipped including, without
limitation, any amounts chargeable to a shipper's
account as costs, charges, surcharges, or levies for
that firm service entitlement;
(y-1) "Netback Price" means the Contract Price less Seller's
Unit Transportation Costs;
(ee-1) "Reassignment Date" means the earlier of (i) the date
that the temporary assignments referred to in the
definition of Seller's Transportation have terminated
and Seller's Transportation has reverted to SDG&E,
and (ii) the date that all of Seller's Transportation
has been reassigned by Seller to SDG&E pursuant to
this Agreement.
3. Section 1.1 is further amended as follows:
(a) Subsection 1.1(j) is amended to (1) delete the
references to "Mountain Standard Time" and "Mountain
Daylight Time" and to replace those references with
"Pacific Standard Time" and "Pacific
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Daylight Time", respectively, (2) delete the reference
to "NOVA" and to replace reference with "PG&E", and (3)
delete each reference to "8:00 o'clock a.m." and to
replace those references with "12:00 midnight".
(b) Subsection 1.1(k) is deleted and replaced with the
following:
"Delivery Point" shall mean the interconnection of the
facilities of PG&E and SoCal on the upstream side of
▇▇▇▇▇▇▇ Ridge or such other point as is mutually agreed
to by the parties pursuant to Section 8.3;
(c) Subsection 1.1(v) is deleted and replaced with the
following:
"Maximum Daily Quantity" or "MDQ" shall mean (prior to
the Authorization Date) the lesser of:
(1) ABC Heat Value Equivalent
__________________________________________________
(1 + ANG Fuel%) x (1 + PGT Fuel%) x (1 + PG&E Fuel%)
and
(2) the firm delivery capacity available under the
Assigned PG&E Transportation on that Day reduced by
PG&E's line loss percentage in effect for that Day
pursuant to PG&E's tariff and increased or reduced
to reflect any reduction or increase respectively in
PG&E's fuel gas ratio for that day (pursuant to
PG&E's tariff) below or above 1.11%.
and
"Maximum Daily Quantity" or "MDQ" shall mean
(following the Authorization Date) the lesser of:
(1) ABC Heat Value Equivalent
_____________________________________
(1 + ANG Fuel%) x (1 + PGT Fuel%) x (1)
and
(2) the firm delivery capacity available under the
Assigned PG&E Transportation on that Day.
Where:
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"ABC Heat Value Equivalent" means, for each Day, the
Heating Value of 619.8 103m3 of gas determined at
the interconnection of the NOVA and ANG systems at
the Alberta-British Columbia border calculated
using NOVA's weighted average heating value for all
gas delivered to that point on that Day (expressed
in MMBtus using the conversions in Section 21.3).
"ANG Fuel %" means, for each Day, the fuel gas ratio
in effect for that Day pursuant to ANG's tariff
expressed as a decimal number (i.e., an ANG fuel
ratio of 1.6% is converted to ".016" before being
used in the denominator of the formula in paragraph
1.1(v)(1)).
"PGT Fuel %" means, for each Day, the fuel gas ratio
in effect for that Day pursuant to PGT's tariff
expressed as a decimal number (i.e., a PGT fuel
ratio of 3% is converted to ".03" before being used
in the denominator of the formula in paragraph
1.1(v)(1)).
"PG&E Fuel %" means, for each Day, the fuel gas
ratio in effect for that Day pursuant to PG&E's
tariff expressed as a decimal number (i.e., a PG&E
fuel ratio of 1.11% is converted to ".0111" before
being used in the denominator of the formula in
paragraph 1.1(v)(1)).
"Authorization Date" means the date that the
amendment dated December 10, 1996 between PG&E and
SDG&E (which amends SDG&E's Firm Transportation
Service Agreement dated December 31, 1991, as
amended March 18, 1994) becomes effective following
the receipt of all required approvals from the CPUC
(such amendment being more particularly described in
PG&E's Advice 2003-G dated January 31, 1997 to the
CPUC).
(d) Subsection 1.1(aa) is amended to delete the words "the
MDQ into the NOVA system and deliver the MDQ to the
Delivery Point" and to replace those words with the
following:
into the NOVA system the volume of gas required for NOVA
to deliver 619.8 103m3 of gas each Day to the inter-
connection of the NOVA and ANG systems at the Alberta-
British Columbia border, such volume to be proportion-
ately reduced by each decrease in the MDQ pursuant to
this Agreement;
(e) Subsection 1.1(gg) is amended to delete the reference to
"SDG&E's Transporters" from the fourth line and to
replace that term with "ANG, PGT and PG&E".
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(f) Subsection 1.1(ii) is deleted and replaced with the
following:
"Seller's Transportation" means, collectively:
(1) ANG FS-1 transportation service for firm delivery
capacity at Kingsgate, British Columbia of 610
103m3 per day;
(2) PGT T-3 transportation service for firm delivery
capacity at Malin, Oregon of 21,323 MMBtus per day;
and
(3) PG&E Line 401 transportation service for firm
delivery capacity at Kern River Station of 21,089
MMBtus per day,
which has been temporarily assigned by SDG&E to Seller
for the period from November 1, 1997 to August 1, 2003,
subject to earlier reassignment (in whole or in part) by
Seller to SDG&E from time to time pursuant to the terms
of this Agreement;
(g) Subsection 1.1(jj) is deleted and replaced with the
following:
"Seller" means, collectively, HOOL and HGMI except when
the context requires that "Seller" refer to only one of
HOOL and HGMI;
(h) Subsection 1.1(kk) is deleted and replaced with the
following:
"Seller's Unit Transportation Costs" has the meaning
ascribed to this term in Section 6.1;
(i) Subsection 1.1(11) is deleted and replaced with the
following:
"Seller's Regulatory Authorities" means each federal,
provincial, state and local government agency or other
authority in Canada and in the United States, which has
jurisdiction over the sale and removal from Alberta, the
export from Canada, the import into the United States,
and transportation on Seller's Transportation, of gas
to be sold and purchased hereunder including, without
limitation, the Alberta Energy and Utilities Board, the
National Energy Board of Canada, the Alberta and federal
Governors-in-Council, the Office of Fossil Energy of the
United States Department of Energy, the Federal Energy
Regulatory Commission and the California Public
Utilities Commission.
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4. Section 1.3 is amended to delete the reference to "Mountain
Standard Time ("MST")" and to replace that reference with
"Pacific Standard Time ("PST")".
5. Article II is amended to delete Sections 2.1-2.7 inclusive,
to replace those sections with the following Sections 2.1-
2.5, and to re-title the Article "Seller's Transportation":
2.1 TRANSPORTATION MAINTENANCE OBLIGATIONS
Seller covenants, represents and warrants to SDG&E that:
(a) Seller shall use Seller's Transportation to deliver gas
to SDG&E in accordance with Seller's obligations under
this Agreement;
(b) until the Reassignment Date and subject to SDG&E's
performance of its obligations under Section 2.2, Seller
shall maintain the Seller's Transportation in good
standing including, without limitation, Seller shall be
responsible for and timely pay to the Assignment
Transporters all amounts which are due or become due
under the Seller's Transportation from time to time and
perform all of the other obligations of the shipper
relating to that transportation service;
(c) Seller shall promptly reassign Seller's Transportation
to SDG&E when required pursuant to this Agreement;
(d) Seller shall not amend, encumber, assign, broker,
terminate, allow to terminate or expire, surrender,
release, waive non-performance under, or in any other
way modify or alienate its interest in any of Seller's
Transportation except as first approved in writing by
SDG&E;
(e) Seller shall promptly provide SDG&E with copies of all
notices and other communications of any kind whatsoever
given to any Assignment Transporter by Seller or
received by Seller from any Assignment Transporter
including, without limitation, invoices, non-payment
notices, and other reports or other information provided
by any of the Assigned Transporters and required or
reasonably requested by SDG&E from time to time but
excluding other day-to-day nomination notices and
nomination confirmations and the PG&E 120 daily Report
(Scheduled Transactions) (and any replacements or
substitutions for that Report) except when specifically
requested by SDG&E from time to time;
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(f) Seller shall keep SDG&E timely informed of all material
matters relating to each of Seller's Transportation
agreements; and
(g) SDG&E shall have the right, from time to time, to review
Seller's records which pertain to the administration and
operation of Seller's Transportation.
For the purposes of certainty, it is understood that Seller's
Transportation contains the specific firm capacity rights
described in paragraphs 1.1(ii)(l)-(3) (in the definition of
Seller's Transportation) and Seller's firm capacity rights on
each of the Assignment Transporters pursuant to the Seller's
Transportation shall not be increased or reduced in the event
SDG&E either takes additional capacity on any Assignment
Transporter or releases or otherwise disposes of any of its
other existing firm service capacity on any of the Assignment
Transporters.
2.2 PIPELINE FINANCIAL ASSURANCES
SDG&E shall maintain in effect, with the Assignment
Transporters, all financial assurances and arrangements
("SDG&E Assurances") which SDG&E currently has in place with
each of the Assignment Transporters (to the extent each
Assignment Transporter continues to require the continuation
of the SDG&E assurances). Seller shall be responsible for
timely providing and maintaining, at its sole expense, any
financial assurances and arrangements (including letters of
credit) which are required by any of the Assignment
Transporters in addition to the SDG&E assurances but only if
those additional assurances would not be required to be
provided by SDG&E if SDG&E had remained as the sole shipper
of record under the applicable Seller's Transportation. If
additional financial assurances are requested of Seller by
any Assignment Transporter, SDG&E shall provide those
additional financial assurances if SDG&E would have been
required to provide those additional assurances had it
remained the sole shipper of record under Seller's
Transportation.
2.3 TRANSPORTATION INDEMNITY
(a) Seller agrees to and shall at all times indemnify and
save harmless SDG&E, and SDG&E's directors, officers,
employees and agents (collectively the "SDG&E
Indemnitees") from and against any and all:
(i) claims, demands, liabilities, actions and
prosecutions of any nature or kind whatsoever which
may be asserted, made or brought against the SDG&E
Indemnitees, or any of them; and
(ii) losses, damages, and expenses of any nature or kind
whatsoever which may be incurred, suffered or
sustained by the SDG&E Indemnitees, or any of them,
to the extent directly or indirectly resulting from,
contributed by or attributable to any breach by Seller
of any of its obligations under this Article.
(b) For purposes of certainty, it is agreed that the parties
comprising Seller shall be jointly and severally liable
for the performance of all obligations in respect of
each of Seller's Transportation agreements and the
indemnification in subsection 2.3(a) notwithstanding
that only one party comprising Seller is a party to each
of Seller's Transportation agreements.
(c) SDG&E agrees to and shall at all times indemnify and
save harmless Seller, and Seller's directors, officers,
employees and agents (collectively, the "Seller's
Indemnitees") from and against any and all:
(i) claims, demands, liabilities, actions and
prosecutions of any nature or kind whatsoever which
may be asserted, made or brought against the
Seller's Indemnitees, or any of them; and
(ii) costs, losses, damages, and expenses of any nature
or kind whatsoever which may be incurred, suffered
or sustained by the Seller's Indemnitees, or any of
them,
to the extent directly or indirectly resulting from,
contributed by or attributable to any breach by SDG&E of
any of its obligations under this Article.
2.4 TRANSPORTATION DEFAULT
(a) In the event Seller defaults in any of its obligations
under this Article, SDG&E shall have the right (but not
the obligation) to require that Seller reassign Seller's
Transportation to SDG&E and take all other steps as are
reasonably required to terminate the temporary
assignments (described in the definition of Seller's
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Transportation) in order for SDG&E to be recognized by
the Assignment Transporters as the sole shipper of
record in respect of Seller's Transportation. Upon
receipt of a notice from SDG&E identifying Seller's
default and requiring the return of all of Seller's
Transportation, Seller shall promptly take all steps
required to cause the return of Seller's Transportation
to SDG&E. For purposes of certainty, SDG&E shall be
entitled to require the return of all of Seller's
Transportation even though Seller's default may pertain
to less than all of the Assignment Transporters.
(b) Effective upon the return of Seller's Transportation to
SDG&E, Seller and SDG&E shall, from and after that date,
continue to sell and purchase gas for the remainder of
the term in Section 3.1 (subject to any other rights or
remedies available to SDG&E arising from Seller's non-
performance of any of its obligations under this
Article) upon the terms of the original Natural Gas
Purchase Agreement made as of March 12, 1991 as amended
by the Amending Agreement made effective as of November
1, 1994 and the Second Amending Agreement made effective
as of January 1, 1997 ("original arrangements"). To the
extent any dispute arises in respect of any matter when
returning to the original arrangements, either party
shall be entitled to refer the matter to a single
arbitrator and the decision of the arbitrator shall be
binding upon the parties. The arbitration shall be
conducted pursuant to the provisions of Section 11(d) of
Appendix A to the original arrangements which shall
apply, mutatis mutandis, to any arbitration conducted
pursuant to this provision. The parties shall use all
reasonable efforts to continue performing their
respective obligations under this Agreement during any
such arbitration proceedings and to make all required
adjustments following the receipt of the arbitrator's
decision retroactive to the date that Seller's
Transportation was returned to SDG&E.
(c) In the event of a default by Seller in any payment
obligation pertaining to any of Seller's Transportation,
SDG&E shall be entitled (but not obligated) to make any
overdue payment to maintain Seller's Transportation in
good standing (without limiting its rights under this
Article) and to set off any such payment against any
amount then or thereafter payable by SDG&E to Seller
under this Agreement.
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2.5 EARLY TRANSPORTATION REVERSION
(a) In the event that this Agreement terminates prior to
August 1, 2003, Seller shall promptly reassign Seller's
Transportation to SDG&E and take all other steps as are
reasonably required to terminate the temporary
assignments (referred to in the definition of Seller's
Transportation) in order that SDG&E is recognized by the
Assignment Transporters as the sole shipper of record.
6. Subsection 3.1(b) is amended to delete "and (d)" from the
first line of that subsection. In addition, subsections
3.1(c) and (d) are deleted and replaced with the following:
(c) If Seller is unable to obtain the long term import
authorization (referred to in subsection 12.1(c)) by
September 1, 1998, then and promptly following that
date, Seller shall take all necessary steps to re-assign
the Seller's Transportation to SDG&E effective as of
November 1, 1998 and to otherwise ensure that, as of
November 1, 1998, SDG&E is recognized by the Assignment
Transporters as the sole shipper of record in respect of
Seller's Transportation. Without limiting the
generality of the foregoing, Seller shall take all steps
as are reasonably required to terminate the temporary
assignments (described in the definition of Seller's
Transportation). All such action shall be taken in a
timely manner, taking into account the advance notice
requirements of each of the Assignment Transporters, to
ensure that SDG&E will be able to place nominations with
the Assignment Transporters for November 1, 1998.
Effective upon the return of Seller's Transportation to
SDG&E, Seller and SDG&E shall, from and after that date,
continue to sell and purchase gas for the remainder of
the term set out in Section 3.1 (subject to any other
rights or remedies available to SDG&E arising from
Seller's non-performance of any of its obligations) upon
the terms of the original arrangements (as that term is
defined in subsection 2.4(b)). For the purposes of
effecting such purchases and sales from and after
November 1, 1998:
(i) Seller shall continue to use its long term removal
permit originally obtained by Seller for the
purposes of this Agreement (prior to the
Commencement of Firm Deliveries) to remove gas from
Alberta for delivery to SDG&E; and
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(ii) SDG&E shall continue to use the long term export
licence originally obtained by the parties (on a
joint basis) and the long term import authorization
originally obtained by SDG&E, in each case for the
purposes of this Agreement (prior to the
Commencement of Firm Deliveries).
7. Article III is amended to add the following as Sections 3.4,
3.5 and 3.6:
3.4 The parties entered into the Third Amending Agreement
(dated as November 1, 1997) to this Agreement ("Third
Amendment") with the understanding that the assignment
of the Seller's Transportation to Seller and the
management and use of that transportation service by
Seller will enable Seller to share increased revenues
and other benefits (over and above those that Seller
would have obtained had the Seller's Transportation
remained with SDG&E and the parties performed their
obligations and obtained the benefits provided for under
the original arrangements, as defined in subsection
2.4(b)). If at any time SDG&E determines, acting
reasonably, that Seller is failing to perform in
accordance with its obligations hereunder including,
without limitation, its obligation to mitigate demand
charges payable to the Assignment Transporters, or any
of them, for unutilized transportation capacity, then
SDG&E shall be entitled to forward a notice ("Election")
to Seller electing to terminate the Third Amendment.
Upon receipt of the Election, Seller shall take all
necessary steps to re-assign the Seller's Transportation
to SDG&E and otherwise ensure that, as of the first day
of the third month following the month that Seller
receives the Election, SDG&E is recognized by the
Assignment Transporters as the sole shipper of record in
respect of the Seller's Transportation. Without
limiting the generality of the foregoing, Seller shall
take all steps as are reasonably required to terminate
the temporary assignments (described in the definition
of Seller's Transportation). All such actions shall be
taken in a timely manner, taking into account the
advance notice requirements of each of the Assignment
Transporters to ensure that SDG&E will be able to place
nominations with the Assignment Transporters on the
first day of the aforementioned third month (following
the month that Seller receives the Election). Effective
upon the return of the Seller's Transportation to SDG&E,
Seller and SDG&E shall, from and after that date,
continue to sell and purchase gas for the remainder of
the term set out in Section 3.1 upon the terms of the
original arrangements (and the Third Amendment shall
thereafter cease to have any force or effect).
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3.5 If at any ▇▇▇▇ ▇▇▇▇▇▇ determines, acting reasonably,
either that:
(a) it has not been able to generate sufficient
increased revenues and other benefits as a result
of managing and using Seller's Transportation (in
accordance with the understanding as expressed in
the first sentence of Section 3.4); or
(b) SDG&E has repeatedly failed to act in a reasonable
manner when considering whether to accept
Opportunities presented by Seller to SDG&E under
Section 4.4 (excluding from that determination any
Opportunities rejected by SDG&E for any of the four
reasons cited in subsection 4.4(c)),
then Seller shall be entitled to forward a notice
("Assignment Notice") to SDG&E electing to terminate the
Third Amendment effective as of the first day of the
third month following the month that SDG&E receives the
Assignment Notice. Upon SDG&E's receipt of the
Assignment Notice, Seller shall take all necessary steps
to reassign the Seller's Transportation to SDG&E and
otherwise ensure that, as of the first day of the third
month following the month that SDG&E receives the
Assignment Notice, SDG&E is recognized by the Assignment
Transporters as the sole shipper of record in respect of
the Seller's Transportation. The last three sentences
of Section 3.4 shall apply, mutatis mutandis, to this
provision.
3.6 To the extent any dispute arises in respect of any
matter when returning to the original arrangements
(pursuant to subsection 3.1(c), Section 3.4 or Section
3.5), either party shall be entitled to refer the matter
to a single arbitrator and the decision of the
arbitrator shall be binding upon the parties. The
arbitration shall be conducted pursuant to the
provisions of Section 11(d) of Appendix A to the
original arrangements which shall apply, mutatis
mutandis, to any arbitration conducted pursuant to this
provision. The parties shall use all commercially
reasonable efforts to continue performing their
respective obligations under this Agreement during any
such arbitration proceedings and to make all required
adjustments following the receipt of the arbitrator's
decision retroactive to the date that Seller's
Transportation was returned to SDG&E.
8. Section 4.2(a) is amended to delete the words "less an amount
equal to any `elected capacity' pursuant to subsection 4.4(b)
for such Months.".
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9. Clause 4.2(b)(1) is deleted and replaced with the following:
(i) the Netback Price less
10. The last sentence of subsection 4.2(b) is amended to delete
"the weighted average heat content of all gas received in
such Month by SDG&E at the Delivery Point" and to replace
those words with the following:
NOVA's weighted average heating value for the Month for all
gas delivered by NOVA for the Month at the interconnection of
the NOVA and ANG systems at the Alberta-British Columbia
border
11. Subsection 4.2(d) is amended to delete the reference to
"paragraphs 4.2(a)(i) and (ii)" and to replace that reference
with "subsections 4.2(a) and (b)".
12. Subsection 4.2(e) is amended to add the following additional
sentences:
If Seller elects to reduce the MDQ pursuant to this
subsection, Seller shall have the one time option of
reassigning to SDG&E a proportionate share of Seller's
Transportation, such proportionate share to be equal to the
proportionate reduction in the MDQ elected by Seller.
Seller's election to assign such share of Seller's
Transportation must be specified in the aforesaid notice to
SDG&E (in which Seller elects to reduce the MDQ). For
purposes of certainty, any election to reassign
transportation service to SDG&E must include a proportionate
share of Seller's capacity on all three of the Assignment
Transporters. If Seller does not elect to reassign such share
of Seller's Transportation to SDG&E (when Seller has elected
to reduce the MDQ), then SDG&E shall have the option to
require that Seller assign such proportionate share of
Seller's Transportation to SDG&E. SDG&E's option must be
exercised within 60 days of receipt of Seller's notice
electing to reduce the MDQ. In the event SDG&E elects to
obtain that transportation service, Seller shall promptly
take all steps required to cause the return of that
proportionate share of Seller's Transportation to SDG&E. If
Seller does not elect to reassign, and SDG&E does not elect
to acquire, such proportionate share of Seller's
Transportation, Seller shall assume all Demand Charge
obligations and other liabilities in respect of that
transportation service for the remainder of the term of this
Agreement and SDG&E's obligation under Section 4.3 shall be
reduced accordingly.
13. Subsection 4.2(f) is deleted.
14. Section 4.3 is deleted and replaced with the following:
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4.3 TRANSPORTATION ADJUSTMENT PAYMENT
Each month, SDG&E shall pay to Seller the amount of the
Transportation Adjustment Payment ("TAP") for the prior
Month calculated as follows:
TAP = Unutilized ANG Service + Unutilized PGT Service +
Unutilized PG&E Service
Where:
"Unutilized ANG Service" for a Month means the monthly
Demand Charge payable in respect of the Assigned ANG
Transportation for that Month (converted to United
States dollars pursuant to Section 21.2) ("ANG Toll")
less the portion of the ANG Toll which is attributable
to:
(a) the sum of
(i) the aggregate quantity of gas (expressed in
MMBtus) transported for or sold to a third
party by Seller using all or a portion of the
Assigned ANG Transportation during that Month,
plus
(ii) the aggregate quantity of fuel gas which is
transported using the Assigned ANG
Transportation and which is attributable to
such third party volumes and sales,
such portion of the ANG Toll to be determined
on a 100% load factor basis;
(b) the sum of:
(i) the aggregate quantity of gas (expressed in
MMBtus) diverted for that Month under Section
4.4, plus the aggregate quantity of gas
(expressed in MMBtus) not delivered by Seller
(when nominated by SDG&E) other than due to
force majeure,
plus
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(ii) the aggregate quantity of fuel gas which would
have been transported using the Assigned ANG
Transportation if such aggregate withheld and
undelivered quantities had been delivered to
SDG&E during the Month,
such portion of the ANG Toll to be determined
on a 100% load factor basis; and
(c) the sum of:
(i) the aggregate quantity of gas (expressed in
MMBtus) which is delivered by Seller to SDG&E
for the Month,
plus
(ii) the aggregate quantity of fuel gas which is
transported using the Assigned ANG
Transportation and which is attributable to
gas delivered to SDG&E.
"Unutilized PGT Service" for a Month means the monthly
Demand Charge payable in respect of the Assigned PGT
Transportation for that Month ("PGT Toll") less the
portion of the PGT Toll which is attributable to:
(a) the sum of:
(i) the aggregate quantity of gas (expressed in
MMBtus) transported for or sold by Seller to a
third party by Seller using all or a portion of
the Assigned PGT Transportation during that
Month,
plus
(ii) the aggregate quantity of fuel gas which is
transported using the Assigned PGT
Transportation and which is attributable to
such third party volumes and sales,
such portion of the PGT Toll to be determined
on a 100% load factor basis;
(b) the sum of:
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(i) the aggregate quantity of gas (expressed in
MMBtus) diverted for that Month under Section
4.4, plus the aggregate quantity of gas
(expressed in MMBtus) not delivered by Seller
(when nominated by SDG&E) other than due to
force majeure,
plus
(ii) the aggregate quantity of fuel gas which would
have been transported using the Assigned PGT
Transportation if such aggregate withheld and
undelivered quantities had been delivered to
SDG&E during the Month,
such portion of the PGT Toll to be determined
on a 100% load factor basis; and
(c) the sum of:
(i) the aggregate quantity of gas (expressed in
MMBtus) which is delivered by Seller to SDG&E
for the Month,
plus
(ii) the aggregate quantity of fuel gas which is
transported using the Assigned PGT
Transportation and which is attributable to
gas delivered to SDG&E.
"Unutilized PG&E Service" for a Month means the monthly
Demand Charge payable in respect of the Assigned PG&E
Transportation for that Month ("PG&E Toll") less the
portion of the PG&E Toll which is attributable to:
(a) the sum of:
(i) the aggregate quantity of gas (expressed in
MMBtus) transported for or sold by Seller to a
third party by Seller using all or a portion
of the Assigned PG&E Transportation during
that Month,
plus
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(ii) the aggregate quantity of fuel gas which is
transported using the Assigned PG&E
Transportation and which is attributable to
such third party volumes and sales,
such portion of the PG&E Toll to be determined
on a 100% load factor basis;
(b) the sum of:
(i) the aggregate quantity of gas (expressed in
MMBtus) diverted for that Month under Section
4.4, plus the aggregate quantity of gas
(expressed in MMBtus) not delivered by Seller
(when nominated by SDG&E) other than due to
force majeure,
plus
(ii) the aggregate quantity of fuel gas which would
have been transported using the Assigned PG&E
Transportation if such aggregate withheld and
undelivered quantities had been delivered to
SDG&E during the Month,
such portion of the PG&E Toll to be determined on a
100% load factor basis; and
(c) the sum of:
(i) the aggregate quantity of gas (expressed in
MMBtus) which is delivered by Seller to SDG&E
for the Month,
plus
(ii) the aggregate quantity of fuel gas which is
transported using the Assigned PG&E
Transportation and which is attributable to
gas delivered to SDG&E.
For purposes of certainty, if the parties agree at any
time and from time to time to deliver and receive gas
at an alternate delivery point pursuant to Section 8.3,
all such gas deliveries (including associated fuel gas
volumes) shall be included within paragraph (c) in each
of the definitions of "Unutilized ANG Service",
"Unutilized PGT Service" and "Unutilized PG&E Service"
notwithstanding that some portion of Seller's
Transportation may not have been required to
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deliver those gas quantities to SDG&E. In addition,
SDG&E's obligation to Seller under this Section is
subject to further reduction pursuant to subsection
4.2(e) and Section 4.4.
15. Section 4.4 is deleted and replaced with the following:
4.4 SALES/TRANSPORTATION OPTIMIZATION
(a) If, from time to time:
(i) either party becomes aware of a potential or actual
opportunity (including opportunities developed by
that party or anticipated to be developable by that
party or the parties) which could be served or
otherwise taken advantage of using the assets which
are subject to this Agreement (including, without
limitation, Seller's firm gas supply, Seller's
Transportation, SDG&E's SoCal transportation
service and Seller's NOVA firm service)
("Opportunity"); and
(ii) the Opportunity could reasonably be expected to
increase revenues or create other benefits for the
parties (after taking into account the sharing
arrangements in subsection 4.4(d)) in excess of the
revenues and benefits which would otherwise accrue
to each of the parties if the parties simply
continued to perform their respective commitments
under this Agreement,
then that party shall timely notify the other party of
the Opportunity, which notice shall contain reasonably
detailed particulars of the Opportunity including,
without limitation, the term of the arrangement, the
adverse effect on the rights and other benefits of each
party under this Agreement, any additional obligations
associated with the Opportunity, and the anticipated
benefits which would be expected to accrue from the
Opportunity. Opportunities could include, but are not
limited to, the delivery of gas to alternate delivery
points whether to SDG&E or a third party, third party
gas purchase and sale arrangements (including, without
limitation, peaking sales), exchanges, swaps, the
brokering of pipeline capacity (including, without
limitation, temporary assignments), buy/sell
arrangements, combinations of any of the foregoing or
other opportunities.
- 18 -
(b) If:
(i) each party identifies an Opportunity, all or any
portion of which would be in effect during the same
period of time; and
(ii) both such Opportunities cannot be accommodated at
the same time using the assets which are subject to
this Agreement,
then the parties will only consider implementing
the Opportunity which is anticipated to provide the
greater level of benefits (after taking into
account subsection 4.4(d)).
(c) The parties must jointly agree to accept any Opportunity
which would alter any of a party's rights, benefits and
obligations under this Agreement. A party's approval to
any Opportunity may be arbitrarily withheld if (1) that
party has reasonable cause for believing that the
Opportunity will not provide sufficient benefits when
compared to the efforts and costs required to implement
the Opportunity, (2) that party reasonably believes
that, during the particular time period that the
Opportunity will be in effect, it will be important for
that party to either retain all of its rights and
benefits under this Agreement or not increase its level
of obligations (as may be required to effectuate the
Opportunity), (3) in respect of quantities of gas which
are proposed to be diverted from SDG&E (for the purposes
of an Opportunity) for a period of one Month or longer,
SDG&E does not receive notice of the Opportunity
together with all required particulars at least 72 hours
prior to the first Day that gas is to be diverted from
SDG&E hereunder (if the Opportunity is agreed to by the
parties), or (4) in respect of quantities of gas which
are proposed to be diverted from SDG&E (for the purposes
of an Opportunity) for a period of less than one Month,
SDG&E does not receive notice of the Opportunity
together with all required particulars by not later than
0930 hours Pacific time on the second day preceding the
first Day that gas is to be diverted from SDG&E
hereunder (if the Opportunity is agreed to by the
parties).
(d) All net incremental benefits derived from implementing
an Opportunity shall be shared as follows:
Seller - 70%
SDG&E - 30%
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Net incremental benefit shall be the residual revenue or
other benefit remaining from the implementation of an
Opportunity after each party is reimbursed for its
reasonable, third party out-of-pocket costs incurred to
implement the Opportunity. Under no circumstances
whatsoever shall any Non-Delivery Adjustment Payments
(payable by Seller pursuant to subsection 4.4(e)) reduce
the amount of the net incremental benefits which are to
be determined for each Opportunity and shared as
provided herein. All Non-Delivery Adjustment Payments
are to be borne solely by Seller without reducing
SDG&E's benefits under this Section.
(e) If an accepted Opportunity results in SDG&E's right to
nominate for the MDQ being reduced, then and for the
term of the Opportunity, the MDQ under this Agreement
shall be deemed to be reduced accordingly. In addition,
during each Month of any accepted Opportunity that the
Replacement Price exceeds the Reference Price, Seller
shall pay to SDG&E, in respect of each MMBtu of gas
purchased by SDG&E to replace some or all of the
quantities of gas diverted to an Opportunity
("Replacement Gas Quantity") an amount ("Non-Delivery
Adjustment Payment") calculated as follows:
Replacement x (Replacement Price - Reference Price)
Gas Quantity
(total for the Month)
Where:
"Replacement Price" equals the weighted average price per
MMBtu paid by SDG&E for the Replacement Gas Quantity for
that Month at the California border into SoCal's System.
SDG&E shall not unreasonably refuse any request from
Seller to terminate any Opportunity if such termination
can occur without penalty or other cost to SDG&E.
(f) If any accepted Opportunity involves deliveries at an
alternate delivery point such that all or any portion of
the Assigned ANG Transportation, Assigned PGT
Transportation or Assigned PG&E Transportation is not
expected to be utilized during the term of the
Opportunity for the purposes of implementing or
fulfilling the Opportunity, SDG&E shall have no
obligation under Section 4.3 in respect of the entire
transportation service of the applicable Assignment
Transporter (to the extent of the Opportunity volume)
- 20 -
and Seller shall be responsible for all Demand Charges
attributable to that stranded transportation service (to
the extent of the Opportunity volume).
(g) During those periods when SDG&E is not nominating for
the MDQ, SDG&E shall have the right (without relieving
Seller of its obligations under the last paragraph of
Section 4.3) to temporarily assign or broker the
capacity under Seller's Transportation which is
attributable to the quantities not then being nominated
by SDG&E, for the purpose of mitigating SDG&E's
obligations under Section 4.3. Seller shall use all
commercially reasonable efforts to assist SDG&E in
locating opportunities to mitigate unutilized
transportation capacity under Seller's Transportation.
Seller shall timely implement any such mitigation
arrangements made by SDG&E. If, during any Contract
Year, SDG&E receives aggregate revenues from such
mitigation arrangements which exceed its aggregate
payments to Seller under Section 4.3 for that Contract
Year, the difference shall be shared by the parties in
accordance with subsection 4.4(d).
(h) If Seller receives any payment from a third party which
is attributable to any arrangements made by SDG&E
pursuant to subsection 4.4(g), Seller shall immediately
pay those amounts to SDG&E (subject to Seller's right,
if any, to receive a portion of aggregate mitigation
revenues pursuant to the last sentence of subsection
4.4(g)).
16. Article IV is amended to add the following as Section 4.5:
4.5 Pipeline Utilization
(a) The parties acknowledge that:
(i) either or both of the Sellers or any of their
Affiliates may now hold and may hereafter acquire
firm, interruptible or other transportation service
rights on all or any of the systems of the
Assignment Transporters (whether held directly by
or indirectly for the benefit of either of the
Sellers or their Affiliates and regardless of when
those rights were acquired) ("Other
Transportation"); and
- 21 -
(ii) SDG&E has obligations under this Agreement to make
Transportation Adjustment Payments under certain
circumstances when Seller's Transportation is not
being used.
Seller agrees to use all commercially reasonable efforts
to ensure that the Seller's Transportation is fully
utilized at all times in order that SDG&E is able to
avoid making Transportation Adjustment Payments in
respect of unutilized Seller's Transportation. In the
event of a curtailment of firm pipeline service by any
of the Assignment Transporters, then Seller shall
allocate its remaining capacity on the Assignment
Transporters between the Seller's Transportation and
the Other Transportation on the basis of the respective
maximum daily capacities of firm service normally
available to Seller under those transportation service
arrangements. For the purposes of this Section,
"Affiliate" means, in respect of a person, any other
person that, directly or indirectly, controls, is
controlled by or under common control with the first
mentioned person, and for the purposes of this
definition "control" means the possession, directly or
indirectly, by a person or a group of persons acting in
concert of the power to direct or cause the direction of
the management and policies of the person, whether
through the ownership of voting securities or otherwise.
(b) During those periods when Seller is unable (or expects
to be unable) to deliver all or any portion of the
quantity of gas nominated by SDG&E due to a force
majeure event affecting Seller's performance under this
Agreement, then Seller shall promptly inform SDG&E of
the delivery shortfall (or expected delivery shortfall)
and use all commercially reasonable efforts to locate
and to obtain substitute gas supplies (to avoid a
delivery shortfall) at the lowest possible prices
reasonably obtainable under the circumstances. Once
Seller has located such substitute gas supplies, Seller
shall promptly contact SDG&E (with all relevant
particulars pertaining to the substitute supplies) to
determine whether those supplies should be acquired for
delivery to SDG&E. Without detracting from Seller's
obligations (under the preceding sentence), SDG&E shall
have the right (but not the obligation) to arrange for
substitute gas supplies (to avoid any delivery
shortfall). Seller shall use the Seller's
Transportation to transport to SDG&E all such substitute
gas supplies.
17. Article V is amended to delete Section 5.1.
- 22 -
18. (a) The formula for the calculation of "Contract Price" in
the fourth line of Section 6.1 is deleted and replaced
with the following:
Contract Price = Reference Price
(b) The definition "SDG&E's Unit Transportation Cost" is
deleted from Section 6.1 and replaced with the
following:
Seller's Unit Transportation Cost = in respect of any
Month, Seller's unit cost (expressed in $U.S./MMBtu),
being the sum of all Seller's Transportation fixed and
variable charges and surcharges, net of any credits,
that apply to the firm transportation of gas hereunder
in such Month from the interconnection of the NOVA and
ANG systems at the Alberta-British Columbia border to
the Delivery Point, including any non-tariff costs such
as shipper provided fuel and line loss. This unit cost
will be the 100% load factor rate calculated based upon
an assumed full utilization of transportation capacity,
held on Seller's Transportation equal to the MDQ
regardless of whether Seller delivered and SDG&E
received less than the MDQ.
(c) The last paragraph of Section 6.1 is amended to delete
the term "SDG&E's" and to replace that term with the
word "Seller's".
19. Section 6.3 is amended to (1) replace the "; or" at the end
of subsection 6.3(a) with a period, and (2) delete subsection
6.3(b).
20. Section 7.1 is deleted and replaced with the following:
Commencing with the Month immediately following the Month in
which the Commencement of Firm Deliveries occurs, SDG&E
shall, on or before the 10th day of each Month, notify Seller
of the Reference Price and the Base Price for the proceeding
Month and Seller shall, on or before the 15th Business Day of
such Month, render to SDG&E a statement in U.S. dollars
showing on a line basis:
(a) Seller's best reasonable estimate of the quantity of gas
delivered to SDG&E at the Delivery Point during the
preceding Month under this Agreement, the Heating Value
thereof, and the gross amount payable in respect
thereof;
(b) the amount of any Transportation Adjustment Payment in
respect of the preceding Month (including a detailed
breakdown of the
- 23 -
Unutilized ANG Service, Unutilized PGT Service and
Unutilized PG&E Service calculations for the Month);
(c) the amount of any Deficiency Volume, GIC Payment and
NOVA Adjustment (under Section 4.2) in respect of the
preceding Month;
(d) the amounts of any Non-Delivery Adjustment Payment
(under Section 4.4) in respect of the preceding Month;
(e) the amount of any credits or other adjustments
determined in accordance with the terms of this
Agreement; and
(f) the net amount payable hereunder.
Included with each statement, Seller shall separately provide
details of the appropriate conversions, calculations applied
to prepare the statement, and any other information
reasonably requested by SDG&E. SDG&E shall make payment of
the net amount on or before the 25th day of the calendar
month in which the invoice is received. In the event the 25th
day of the month is a Saturday or another day which is not a
Business Day (other than a Sunday or Monday), SDG&E shall
make payment to Seller on or before the last Business Day
immediately before the 25th day of the billing month. When
the 25th day of the month is a Sunday or a Monday (which is
not a Business Day) SDG&E shall make payment on or before the
first Business Day immediately following the 25th day of the
billing month. If presentation of the invoice to SDG&E is
delayed after the 15th day of the billing month, then the
time for payment shall be extended accordingly unless SDG&E
is responsible for the delay. Such payment shall be made by
wire transfer as set out below under "Bank Instructions". Any
adjustments necessary to reflect actual deliveries shall be
made in the Month's invoice following the receipt of
information which reflects actual deliveries. Unpaid amounts
shall accrue interest at a rate and in the manner described
in Section 7.4.
Banking Instructions:
Route through Fedwire to: Bank of America NT & SA
One World Trade ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
ABA ▇▇▇▇▇▇▇▇▇
- 24 -
To: Canadian Imperial Bank of Commerce
Toronto, Ontario
Account #655026157
Swift Address: ▇▇▇▇▇▇▇▇
Chips Member ID: 015035
Further Credit to: Canadian Imperial Bank of Commerce
▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Transit #0010-0009
Account Of: Husky Gas Marketing Inc.
#03-46217
21. Section 7.2 is amended to delete the phrase "any SDG&E
Transportation Adjustment and".
22. Section 8.3 is deleted and replaced with the following:
At any time and from time to time at the request of either
party, the parties shall meet or otherwise discuss the
possibility of establishing one or more alternate delivery
points for gas deliveries and receipts under this Agreement.
Such proposed alternate delivery points must be locations at
which SDG&E has the ability to receive gas and Seller has the
ability to deliver gas using Seller's Transportation (in each
case taking into account the quantities proposed to be
delivered and received at those alternate points), provided
that neither party shall have any obligation to agree to an
alternate delivery point or points at any time, such decision
to be in its sole discretion.
23. Section 11.1 is amended to delete the reference to "GJ's" and
to replace that reference with "MMBtus".
24. Section 11.2 is amended to delete the reference to
"transporters" in the second line and to replace that
reference with "receiving transporter".
25. Subsection 12.1(c) is deleted and replaced with the
following:
"Seller has obtained all approvals which may be required by
Seller's Regulatory Authorities, provided that Seller has
only obtained a 2 year import authorization from the United
States Department of Energy (expiring on April 30, 1999).
Seller shall use all commercially reasonable
- 25 -
efforts to promptly obtain a long-term import authorization
for the MDQ expiring August 1, 2003."
26. Section 12.2 is amended to delete the words "other than
SDG&E's Regulatory Authorities as contemplated in Section
2.2".
27. Section 14.2 is amended to add the following as a final
paragraph to the Section:
In the event SDG&E elects, at any time, to reduce the MDQ
pursuant to subsection 14.2(a), Seller shall reassign to
SDG&E a proportionate share of Seller's Transportation, such
proportionate share to be equal to the proportionate
reduction in the MDQ elected by SDG&E. If SDG&E makes that
election, Seller shall reassign such proportionate share of
the Seller's Transportation to SDG&E and take all other steps
as are reasonably required in order for SDG&E to be
recognized by the Assignment Transporters as the sole shipper
in respect of the assigned portion of the Seller's
Transportation, effective on the date that the MDQ reduction
takes effect.
28. Section 14.3 is amended to delete subsection 14.3(b).
29. Section 15.1 is amended as follows:
(a) to replace the colon following the phrase "mechanical
breakdowns" in the 12th line with a comma.
(b) to delete the phrase "NOVA's facilities" from the 14th
line and to replace that phrase with "any of NOVA's,
ANG's, PGT's and PG&E's facilities".
(c) to delete the reference to "Transporters'" from the 16th
line and to replace that word with "or SoCal's".
30. Article XIX is amended to add the following in Section 19.2:
19.2 COMMUNICATIONS AND DEALINGS
Notwithstanding that HOOL and HGMI are parties to this
Agreement or that HGMI is the sole shipper of record for the
Assigned PGT Transportation and the Assigned PG&E
Transportation, SDG&E shall be entitled at all times to deal
solely with HOOL in respect of any and all matters which in
any way pertain to this Agreement including, without
limitation, the Assigned PGT Transportation and the Assigned
PG&E
- 26 -
Transportation as if HOOL was the only party to this
Agreement as "Seller" and was the shipper of record for the
Assigned PGT Transportation and the Assigned PG&E
Transportation. HGMI waives any and all right to deal with
SDG&E in respect of any matter and agrees that any and all
notices, conversations, negotiations and other communications
of any kind whatsoever between SDG&E and HOOL shall be
binding upon and enforceable against HGMI as if HGMI had been
involved together with HOOL in those communications. Without
limiting the generality of the foregoing:
(a) any amendment to this Agreement executed by HOOL or any
waiver provided by HOOL shall bind HGMI whether or not
executed by, known of or consented to by HGMI;
(b) any notice of any kind whatsoever served on HOOL under
this Agreement (including, without limitation, a default
notice) shall be binding upon HGMI; and
(c) SDG&E shall be entitled to disregard any notices or
other communications received from HGMI.
If, at any time, SDG&E deals with HGMI, SDG&E shall not be
under any obligation to continue dealing with HGMI, whether
in respect of the same or any other matter. Any course of
conduct by SDG&E in this regard shall not in any way modify
SDG&E's right to deal solely with HOOL, it being understood
that HOOL requested HGMI's inclusion as a party to this
Agreement for purposes relevant only to HOOL and HGMI, and
SDG&E is prepared to accept HGMI as a party to accommodate
that request so long as SDG&E is only obligated to deal with
HOOL in respect of any matter pertaining to this Agreement.
31. Section 20.1 is amended to delete the phrase "SDG&E's
Transporters" in the 9th line and to replace that phrase with
"SoCal".
32. Section 20.3 is amended to add "(including charges under
Seller's Transportation)" after the reference to "fixed
transportation charges" in the second line.
33. Article XXII is amended to include the following as an
additional Section:
22.10. Joint and Several Liability. HOOL and HGMI are
jointly and severally liable for the performance of
Seller's obligations under this Agreement (including,
without limitation, all liabilities and
- 27 -
responsibilities relating to each of the Assigned
Transportation agreements notwithstanding that both
of them are not parties to each of those agreements).
SDG&E shall be entitled, at its option, to pursue any
of its rights and remedies under this Agreement
against either or both of HOOL and HGMI and neither
HOOL nor HGMI shall be entitled to defend against any
SDG&E claim on the basis that the other is
responsible for the breach, failure or nonperformance
upon which SDG&E's claim is based.
34. This Third Amending Agreement is effective as of November 1,
1997.
35. By its execution of this Agreement, HGMI agrees to become a
party to the Agreement as "Seller" jointly with HOOL and each
of SDG&E and HOOL accept HGMI as a party to the Agreement in
that capacity effective November 1, 1997.
36. As between the parties hereto, Seller shall be responsible
for complying with all filing and other reporting
requirements of Seller's Regulatory Authorities in respect of
this Third Amending Agreement.
37. This Third Amending Agreement was prepared with each of the
parties having access to its own counsel and the parties
waive any claim they may have now or in the future based on
this Third Amending Agreement not having been prepared
jointly by the parties or by any party to the exclusion of
one or more of the other parties.
38. This Third Amending Agreement may be executed in any number
of counterparts, each of which when so executed shall be
deemed to be an originally executed copy, and it shall not be
necessary to make proof of the Third Amending Agreement to
produce all of such counterparts.
39. Each party represents and warrants that the officer or
officers signing this Third Amending Agreement on its behalf
is authorized to do so.
40. SDG&E and HOOL each restate as being true and correct as of
the date of this Third Amending Agreement each of the
representations and warranties made by them and set forth in
Article XII of the Agreement.
41. This Third Amending Agreement shall be governed by and
construed in accordance with the laws of the Province of
Alberta excluding however any conflict of laws rule that
would apply the laws of another jurisdiction. The parties
hereby attorn to the jurisdiction of the Courts of Alberta at
Calgary which shall have exclusive jurisdiction in respect of
all disputes and other
- 28 -
matters relating to this Third Amending Agreement with the
exception of those disputes and other matters referable to
arbitration under this Third Amending Agreement.
In Witness Whereof this Third Amending Agreement is executed in
multiple originals effective as of the date first above written.
SAN DIEGO GAS & ELECTRIC
COMPANY
By:________________________
Name:______________________
Title:_____________________
HUSKY OIL OPERATIONS LTD.
By:________________________
Name:______________________
Title:_____________________
HUSKY GAS MARKETING INC.
By:________________________
Name:______________________
Title:_____________________
- 29 -