EXHIBIT 10.10
GAS PURCHASE AGREEMENT
BETWEEN
PANENERGY FIELD SERVICES, INC., A COLORADO CORPORATION
AND
ENERGAS PIPELINE COMPANY, AN OKLAHOMA CORPORATION
INDEX
I. REPRESENTATIONS OF SELLER . . . . . . . . . . . . . . . . . . . . 2
II. COMMITMENT OF SELLER'S GAS . . . . . . . . . . . . . . . . . . . 2
III. PIPELINE GATHERING SYSTEM, POINT(S) OF DELIVERY . . . . . . . . . 2
IV. QUANTITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
V. GENERAL TERMS AND CONDITIONS. . . . . . . . . . . . . . . . . . . 3
VI. PRICE AND REVENUE DISTRIBUTION. . . . . . . . . . . . . . . . . . 3
VII. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
VIII. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 4
EXHIBIT A - THE LEASES . . . . . . . . . . . . . . . . . Page 1.A
EXHIBIT B - APPENDIX - GENERAL TERMS AND CONDITIONS
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . Page 1.B
2. POINT(S) OF DELIVERY AND OWNERSHIP . . . . . . . . . . Page 2.B
3. RESERVATIIONS OF SELLER . . . . . . . . . . . . . . . . Page 2.B
4. GAS MEASUREMENT AND QUALITY . . . . . . . . . . . . . . Page 3.B
5. PRICING AND REFUNDS . . . . . . . . . . . . . . . . . . Page 4.B
6. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . Page 4.B
7. PAYMENT . . . . . . . . . . . . . . . . . . . . . . . Page 5.B
8. SELLER'S REPRESENTATIVE . . . . . . . . . . . . . . . . Page 5.B
9. REGULATORY BODIES . . . . . . . . . . . . . . . . . . . Page 6.B
10. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . Page 6.B
11. WARRANTY OF TITLE TO SELLER'S GAS . . . . . . . . . . . Page 7.B
12. EASEMENTS . . . . . . . . . . . . . . . . . . . . . . . Page 7.B
13. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . Page 7.B
14. UNECONOMIC WELL CONNECTIONS . . . . . . . . . . . . . . Page 8.B
15. LITIGATION - ATTORNEYS' FEES . . . . . . . . . . . . . Page 8.B
16. DAMAGES . . . . . . . . . . . . . . . . . . . . . . . . Page 8.B
17. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . Page 8.B
GAS PURCHASE AGREEMENT
THIS
GAS PURCHASE AGREEMENT (the "AGREEMENT"), is entered into this 13th day of
February, 1997 by and between PANENERGY FIELD SERVICES, INC., Colorado
Corporation, with offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, hereinafter referred to as "BUYER", and ENERGAS PIPELINE COMPANY, an
Oklahoma corporation, whose address is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, hereinafter referred to as "SELLER".
R E C I T A L S
1. Buyer or its designee owns, operates and maintains a natural gas
gathering system, compression facilities and natural gas processing
facilities, all such facilities in the aggregate hereinafter referred
to as the "FACILITIES", which Facilities are located in Pittsburg and
Atoka Counties,
Oklahoma, to enable Buyer to purchase and accept
delivery of Seller's natural gas (including natural gasoline and other
liquefiable hydrocarbons), produced and saved from the oil and gas
leases, lands and formations committed hereunder, at the Point(s) of
Delivery defined herein.
2. Seller holds interests in, operates, or has the right to market natural
gas produced and saved from ▇▇▇▇▇ located upon the oil and gas leases
described in Exhibit "A" attached hereto and made a part hereof
covering the lands and formations located in Atoka County,
Oklahoma,
which oil and gas leases are specifically described in said Exhibit
"A", said oil and gas leases, lands and formations hereinafter
sometimes being referred to as the "LEASES".
3. Seller desires to sell to Buyer all of the Gas owned or controlled by
Seller which is produced and saved from the Leases covered hereunder
upon the terms and for the consideration herein expressed.
4. Buyer desires to purchase Seller's Gas, as defined herein, utilizing
the Facilities constructed, owned and operated by Buyer and upon the
terms and for the consideration herein expressed.
NOW THEREFORE, in consideration of the mutual agreements herein, contained and
other good and valuable consideration, the parties hereto agree as follows:
ARTICLE I
REPRESENTATIONS OF SELLER
1.1 Seller represents and warrants to Buyer, its successors and assigns,
that Seller owns an interest in, or has the right to market the Gas
produced and saved from the Leases described in Exhibit "A" attached
hereto ("SELLER'S GAS") and that Seller has constructed the facilities
necessary to enable Seller to sell and deliver to Buyer for sale at the
Point(s) of Delivery, as hereinafter set forth, all of Seller's Gas in
accordance with the terms and provisions of this Agreement.
ARTICLE II
COMMITMENT OF SELLER'S GAS
2.1 Subject to the terms and conditions contained herein, Seller hereby
commits to the performance of this Agreement all of Seller's Gas
produced and saved from the Leases, and to insure the faithful
performance of the provisions of this Agreement, Seller covenants to
sell and deliver the same to Buyer at the Point(s) of Delivery without
other disposition except as herein otherwise provided.
ARTICLE III
PIPELINE GATHERING SYSTEM, POINT(S) OF DELIVERY
3.1 Subject to the economic out provisions in the Appendix, Buyer agrees to
construct the additional Facilities necessary to provide Point(s) of
Delivery to connect all of the ▇▇▇▇▇ drilled and produced, or to be
drilled and produced, on the Leases by Seller ("SELLER'S ▇▇▇▇▇").
3.2 The Point(s) of Delivery for all Gas produced from Seller's ▇▇▇▇▇
shall be at the inlet of Buyer's metering facilities located at at the
central delivery point on Buyer's existing Facilities located in
Section 26-T1N-R4E, Atoka County and further described on Exhibit "A"
hereto.
3.3 Seller will deliver Gas at the required pressure at the point(s) of
Delivery sufficient to enter Buyer's System. The average maximum
working pressure of Buyer's System during each Accounting Period shall
not exceed two hundred fifty (250) psig. However, in the event Seller
determines that such working pressure excessively limits the production
of Seller's ▇▇▇▇▇, Seller shall provide written notice thereof to
Buyer. Upon receipt of such notice, Buyer, as soon as practicable,
shall present to Seller a written proposal pursuant to which Buyer
shall construct, own and operate such field compression facilities as
may be necessary to reduce such pressure to a mutually acceptable level
and shall disclose the charges to be assessed Seller therefore together
with a schedule of payment. Once such proposal has been accepted by
Seller in writing, Buyer shall utilize its best efforts to construct or
cause to be constructed and placed in operation the required field
compression facilities within ninety (90) days of receipt of such
written acceptance.
ARTICLE IV
QUANTITY
4.1 Seller shall deliver and sell to Buyer, and Buyer shall receive and
purchase Seller's Gas on a best efforts basis, subject to the
Reservations of Seller set forth in Section 3 of the Appendix attached
hereto.
-2-
4.2 Seller acknowledges and understands that Buyer will receive and
purchase Seller's Gas utilizing the Facilities, which also receive,
transmit and process Gas delivered to Buyer by other parties.
ARTICLE V
GENERAL TERMS AND CONDITIONS
5.1 The General Terms and Conditions set forth in the Appendix attached
hereto as Exhibit "B" (the "APPENDIX") are the general terms and
conditions applicable to this Agreement, which Appendix is by reference
hereby incorporated into and made an integral part of this Agreement.
In the event of any conflict between the terms as set out in the body
of this Agreement and those set out in the Appendix, the terms in the
body of this Agreement shall control.
ARTICLE VI
PRICE AND REVENUE DISTRIBUTION
6.1 As full consideration for the Gas (including all components thereof),
sold to Buyer hereunder during each Accounting Period, Buyer shall pay
Seller a price equal to the NorAm Gas Transmission Company (East) index
as reported by McGraw Hill's "INSIDE F. E. R. C.'S GAS MARKET REPORT"
in "Prices of Spot Gas Delivered to Pipelines" table dated the first of
the applicable calendar month.
6.2 GATHERING FEE: Buyer shall charge Seller and Seller agrees to pay a
gathering fee of seventeen cents ($0.17) per MMBtu plus actual fuel
retention for all gas received from Seller with Buyer providing
compression and dehydration service.
6.3 Either party shall have the right, prior to the beginning of the last
month of the current Contract Year, to request a renegotiation of the
gathering fee described herein, which shall become effective after the
end of the Contract Year in which the renegotiation is requested. If an
agreement cannot be reached after such renegotiation is requested, then
this Agreement may be terminated by either party upon thirty (30) days
written notice, but no earlier than the end of the Contract Year in
which the renegotiation is requested.
6.4 Seller shall be responsible for distribution of revenues to owners of
interest in the Gas purchased by Buyer hereunder, as further described
in the PAYMENT section of the Appendix.
-3-
ARTICLE VII
NOTICES
7.1 All notices and communications required or permitted under this
Agreement shall be in writing and any communication or delivery
hereunder shall be deemed to have been duly made when delivered
personally or three (3) business days following deposit in the United
States mails, certified mail, return receipt requested, or one (1)
business day following delivery to recognized overnight courier
service, or upon transmittal by facsimile, in each such case postage or
charges prepaid and addressed as follows:
TO: SELLER'S REPRESENTATIVE:
ENERGAS PIPELINE COMPANY
Attn: Mr. ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ - Phone
(▇▇▇) ▇▇▇-▇▇▇▇ - Facsimile
TO: BUYER:
PANENERGY FIELD SERVICES, INC.
Attn: Sr. Vice President
▇▇▇ - ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Post Office Box 5493
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ - Phone
(▇▇▇) ▇▇▇-▇▇▇▇ - Facsimile
ARTICLE VIII
TERM
8.1 This Agreement shall be effective from the 1st day of December, 1996,
and shall continue and remain in full force and effect for a primary
term lasting until November 30, 1999, and shall be automatically
renewed for successive renewal terms of one (1) year each, unless
terminated by either party at least thirty (30) days prior to the end
of the primary term or any successive renewal term. Suspension of
operations of the Facilities for a period of less than four (4)
consecutive months shall not constitute or provide a basis for
termination of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 This Agreement constitutes the entire agreement and understanding
between the parties hereto and supersedes and renders null and void and
of no further force and effect any prior understandings, negotiations
or agreements between the parties or their predecessors relating to the
subject matter hereof, and all
-4-
amendments and letter agreements in any way relating thereto. No
provision of this Agreement may be changed, modified, waived or
discharged orally, and no change, modification, waiver or amendment
of any provision will be effective except by written instrument to be
executed and approved by the parties hereto.
9.2 THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF
OKLAHOMA WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
9.3 MEMORANDUM OF AQREEMENT. The undersigned parties have entered into this
Gas Purchase Agreement (the "AGREEMENT") pursuant to which Seller
hereunder has committed to Buyer hereunder those lands included in
those certain oil and gas leases listed on Exhibit "A" attached hereto
and incorporated herein by reference and pursuant to which Buyer has
agreed to purchase, gather, transport and process any and all of the
Gas (as defined in the Agreement) produced and saved from the lands
described in Exhibit "A" for the price and upon the terms set forth in
the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
BUYER:
(SEAL)
ATTEST: PANENERGY FIELD SERVICES, INC.,
A COLORADO CORPORATION
BY: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ BY: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------- -----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
ASSISTANT SECRETARY SENIOR VICE PRESIDENT
SELLER:
(SEAL)
ATTEST: ENERGAS PIPELINE COMPANY,
AN
OKLAHOMA CORPORATION
BY: /s/ ▇▇▇▇▇ ▇▇▇▇ BY: /s/ ▇▇▇▇▇ ▇▇▇▇
--------------------------------- -----------------------------------
SECRETARY PRESIDENT
SELLER'S TAX I.D. NO. ▇▇-▇▇▇▇▇▇▇
----------
-5-
STATE OF COLORADO )
) ss.
CITY & COUNTY OF DENVER )
Before me, ▇▇▇▇ ▇▇▇▇▇▇, Notary Public in and for said County and State, on this
13th of February 1997, personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
known to me to be the Senior Vice President and Assistant Secretary,
respectively, of PanEnergy Field Services, Inc., a Colorado corporation, on
behalf of said corporation and acknowledged to me that they executed this
Agreement for the considerations and purposes therein set forth.
Given under my hand and seal of office this 13th day of February 1997.
/s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
MY COMMISSION EXPIRES: NOTARY PUBLIC
8/25/99
---------------------
--------------------------------
▇▇▇▇ ▇▇▇▇▇▇
NOTARY PUBLIC, STATE OF COLORADO
--------------------------------
STATE OF
OKLAHOMA )
) ss.
COUNTY OF
OKLAHOMA )
Before me, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, a Notary Public in and for said County and State,
on this 1st day of November, 1996, personally appeared ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇ known to me to be the ______________ President and ___________Secretary,
respectively, of Energas Pipeline Company, an
Oklahoma corporation, on behalf of
said corporation and acknowledged to me that they executed this Agreement for
the considerations and purposes therein set forth.
Given under my hand and seal of office this 1st day of November, 1996.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES:
4-28-2000
----------------------
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Gas Purchase Agreement between PANENERGY FIELD SERVICES INC., and ENERGAS
PIPELINE COMPANY, dated FEBRUARY 13, 1997.
EXHIBIT "A"
The oil and gas ▇▇▇▇▇ or leases committed to the performance of this
Agreement are described as follows:
PRODUCER'S LEGAL WORKING
WELL NAME OR LEASE NAME DESCRIPTION INTEREST
----------------------- ----------- --------
Central Delivery Sec. 26-1N-14E
Atoka Co., OK
▇▇▇▇▇▇ #1-26 Sec. 26-1N-14E
▇▇▇▇▇▇ #2-26 Sec. 26-1N-14E
▇▇▇▇▇▇ #1-25 Sec. 25-1N-14E
▇▇▇▇ ▇▇▇▇ #1-34 Sec. 34-1N-14E
All Situated in Atoka County, Oklahoma
Also committed to the performance of this Agreement are Producer's interests in
the oil and gas leases, whether existing or hereafter acquired, which cover or
pertain to the below described lands, but only insofar as such leases cover such
lands as follows:
LEGAL DESCRIPTION(S)
-1.A-
EXHIBIT B
APPENDIX
TO
GAS PURCHASE AGREEMENT
GENERAL TERMS AND CONDITIONS
1. DEFINITIONS
For the purpose of the Agreement, unless the context of the
instrument requires otherwise, the following terms and expressions used
herein shall be defined as follows:
1) "Accounting Period", except the initial "Accounting Period", shall
mean a period of one calendar month, commencing at 8:00 a.m. local
time on the first day of each month, and ending at 8:00 a.m. local
time on the first day of the succeeding calendar month. The initial
"Accounting Period" shall commence at 8:00 a.m. local time on the
date of initial deliveries of Gas hereunder, continuing for a period
of consecutive calendar days until 8:00 a.m. local time on the first
day of the succeeding calendar month.
2) "Btu" (British Thermal Unit) shall mean the amount of heat required
to raise the temperature of one (1) avoirdupois pound of pure water
from fifty-eight and five-tenths degrees (58.5(degree)) to
fifty-nine and five-tenths degrees (59.5(degree)) Fahrenheit under
standard conditions.
3) "Cubic Foot of Gas" shall mean the amount of Gas required to fill a
cubic foot of space when the Gas is at a base pressure of 14.65 Psia
and at a base temperature of 60(degree)F.
4) "Day" shall mean the 24-hour period beginning and ending at
8:00 a.m. Local Time.
5) "Gas" shall mean the effluent vapor stream including all of the
constituents thereof and entrained liquids as produced from each of
Seller's ▇▇▇▇▇ and delivered by Seller to Buyer at the Point(s) of
Delivery specified herein.
6) "MCF" shall mean one thousand (1.000) cubic feet.
7) "MMBtu" shall mean one million (1.000.000) Btu on a saturated basis.
8) "Month" shall mean the period beginning at 8:00 a.m. local time on
the first day of a calendar month and ending at 8:00 a.m. local
time on the first day of the next succeeding calendar month.
9) "Point(s) of Delivery" shall be the location(s) where Seller
delivers its gas to Buyer, as further described in Section 3.2 of
the Agreement.
10) "Point(s) of Redelivery" shall mean the points of interconnection
between Buyer's Facilities and the natural gas transportation
facilities of ANR Pipeline Company, Oklahoma Natural Gas Company,
Natural Gas Pipeline Company, NorAm, ▇▇▇▇▇▇▇▇ Pipeline Company
and/or TransOk Pipeline Company, or such other points of redelivery
as may be mutually agreed upon between Buyer and Seller from time to
time.
11) "Psia" shall mean pounds per square inch absolute.
12) "Psig" shall mean pounds per square inch gauge.
13) "Facilities" shall have the meaning ascribed in the first Recital
of the Agreement.
14) "Contract Year" shall mean a period of twelve (12) consecutive
months beginning on the first day of the next Accounting Period
following the Accounting Period in which initial delivery of gas
commenced hereunder; provided, however, the period beginning with
the date of initial delivery to the first day of the following
Accounting Period shall, for all purposes under this Agreement, be
treated as part of the first contract year.
2. POINT(S) OF DELIVERY AND OWNERSHIP
A. The Point(s) of Delivery of all of Seller's Gas delivered
hereunder shall be at the inlet of Buyer's metering facilities located at
Seller's lease separation facilities or at such other Point(s) of Delivery as
may be mutually agreed upon in writing by the parties hereto from time to
time, and title to Seller's Gas (including such hydrocarbons from the Gas
that have not been or cannot be recovered through the use of conventional
mechanical wellhead gas-oil separators) shall pass from Seller to Buyer at
said Point(s) of Delivery with respect to all the volumes of Seller's Gas
sold to Buyer hereunder. Title to Seller's Gas (excluding hydrocarbons from
the Gas that have not been or cannot be recovered through the use of
conventional mechanical wellhead gas-oil separators, title to which shall
pass to Buyer at the Point(s) of Delivery) transported hereunder shall remain
in Seller.
B. Seller, at its own expense, shall equip, maintain and operate
all lease facilities to deliver Seller's Gas to Buyer at the Point(s) of
Delivery, including, but not limited to, installation and maintenance of
mechanical separation equipment and dehydration facilities. Seller covenants
that it will deliver its Gas to Buyer without any processing or treatment
except for that associated with conventional mechanical wellhead separation
equipment.
C. Buyer shall maintain, own and operate all necessary
facilities to accept Seller's Gas at the Point(s) of Delivery. Buyer shall
keep its Facilities reasonably clear of obstruction and in consideration
thereof shall own all liquids or drip collected and removed from same.
D. As between the parties hereto. Seller shall be in possession
and control of the Gas deliverable hereunder and responsible for any injury
or damage caused thereby until the same shall have been delivered to Buyer,
after which delivery Buyer shall be deemed to be in exclusive possession and
control thereof and responsible for any injury or damage caused thereby,
except with respect to volumes of Seller's Gas transported hereunder, in
which event, upon delivery to Seller or for Seller's Account at the Point(s)
of Redelivery, Seller shall be deemed to be in exclusive possession and
control thereof and responsible for any injury or damage caused thereby,
except with respect to volumes of Seller's Gas transported hereunder.
3. RESERVATIONS OF SELLER
A. Seller, as a reasonable and prudent operator, hereby
expressly reserves the following rights with respect to Seller's Gas and the
▇▇▇▇▇ subject hereto:
1) The right to use the Gas produced from the ▇▇▇▇▇ prior to
delivery to Buyer for the following purposes:
a) For fuel in the development and operation of the
leases from which the Gas is produced.
b) For delivery to the lessors of the leases from which
the Gas is produced if such lessors are entitled to
use or take such Gas in kind under the terms of the
leases;
c) For fuel in the operation of the facilities which
Seller may install in order to deliver Gas hereunder
in accordance with the terms hereof.
2) The right to pool or unitize the ▇▇▇▇▇ or leases from which
the Gas is produced (or any portion thereof) with other
lands and leases so long as such action does not reduce
volumes of Seller's Gas. In the event of any such pooling
or unitization, the Agreement will cover Seller's interest
in the pool or unit and the Gas attributable thereto to
the extent that such interest is derived from volumes of
Seller's Gas.
-2.B-
B. Seller shall provide to Buyer all necessary information
whereby Buyer can make the proper allocation herein called for or required by
Buyer's normal and customary accounting practices or required by Buyer's
normal and customary contract administration practices.
C. Seller shall operate Seller's ▇▇▇▇▇ free of any control by
Buyer, including without limitation the right to make farm outs of any lease
subject to the Agreement, and to abandon any of Seller's ▇▇▇▇▇ and surrender
any lease when Seller deems the same no longer capable of producing Gas in
commercial quantities under normal methods of operation. Seller shall not be
required to produce any of Seller's ▇▇▇▇▇ in any manner which in its sole
judgment and discretion would not constitute good operating practice, nor
shall Seller be obligated to drill additional ▇▇▇▇▇ or to deepen, repair or
rework any of Seller's ▇▇▇▇▇.
D. Seller shall use its best efforts to make available for
delivery hereunder all Gas which it is capable of lawfully producing in
accordance with this Agreement, without shut-in, curtailment or restriction
due to market conditions or otherwise.
4. GAS MEASUREMENT AND QUALITY
A. Buyer shall furnish and install a suitable orifice meter at
the Point(s) of Delivery of the Gas covered hereby. Each meter installed by
Buyer shall be a meter acceptable in the industry and each meter shall be
installed and operated in accordance with the requirements of applicable
provisions in ANSI/API2530. "Orifice Metering of Natural Gas" (American Gas
Association Gas Measurement Committee Report No.3) of the Natural Gas
Department of the American Gas Association, as amended from time to time, or
by any other method commonly used in the industry and mutually acceptable to
the parties. Any meter installed hereunder shall be open to inspection by all
parties at all reasonable times. The charts and records pertaining to
measurement hereunder shall be kept on file by Buyer for a period of two (2)
years for the mutual use of the parties. In the event any question arises as
to the accuracy of the measurement, the meter or meters shall be tested upon
the demand of either party. The expense of any such special test shall be
borne by the party demanding same if the meter registration is found to be
correct, and by Buyer if found to be incorrect.
B. At least semi-annually, Buyer shall calibrate all meters
installed hereunder and make adjustments as necessary. Should Seller so
desire, Buyer shall give notice to Seller of the time of such calibrations
sufficiently in advance of holding same in order that Seller may have its
representative present. With respect to any test made hereunder, a
registration within two percent (2%) of correct shall be considered correct.
However, the meter or meters, when found to be incorrect, shall be adjusted
to one hundred percent (100%) accuracy as soon as possible. Settlement for
any period during which the meter registration deviates by more than two
percent (2%) of correct shall be corrected at the rate of inaccuracy for any
period of inaccuracy which is definitely known or agreed upon; but in case
the period is not definitely known or agreed upon, then either for a period
of fifteen (15) days prior to the date of said test, or for a period
calculated from the beginning of the Accounting Period in which the test was
conducted, whichever is longer. The rate of the inaccuracy shall be estimated
and agreed upon by the parties hereto on the basis of the best available
data, using the first of the following methods which is feasible:
1) By calibration, test, or mathematical calculation.
2) By estimation based on comparison of the quantity of
deliveries with deliveries during preceding periods
under similar conditions when the meter was
registering accurately.
C. All fundamental constants, observations, records and
procedures involved in the determination and/or verification of the quantity
and other characteristics of Gas measured hereunder, unless otherwise
specified herein, shall be in accordance with the applicable provisions in
ANSI/API2530, "Orifice Metering of Natural Gas" (American Gas Association Gas
Measurement Committee Report No.3) of the Natural Gas Department of the
American Gas Association, as amended from time to time, or by any other
method commonly used in the industry and mutually acceptable to the parties.
The average atmospheric pressure shall be assumed to be 14.4 Psia. The
temperature of Gas flowing through each meter shall be determined by a
recording thermometer, installed by Buyer at its sole cost and expense, to
properly record the temperature of the flowing Gas and the arithmetical
average of the temperature recorded while the Gas is flowing during each
meter chart interval shall be used in correcting volumes delivered hereunder
to a temperature base of sixty degrees Fahrenheit (60(degree)F) and to a
pressure base of 14.65 Psia.
-3.B-
D. The heating value of the Gas delivered hereunder shall be
determined by Buyer from Gas samples or other means mutually agreeable to
both parties, such samples to be taken at the Point(s) Delivery and tested in
Buyer's recording calorimeter or chromatograph located at the Point(s) of
Delivery. The first such test shall be made as soon as practicable after the
commencement of deliveries hereunder and semi-annually thereafter, or at such
other intervals as may be mutually agreed upon by the parties or found
necessary in practice. Such heating value shall become effective the first
day of the month following the date of such test, and shall remain in effect
until the next such determination. At Buyer's election, the heating value of
the Gas delivered hereunder shall be determined by means of a recording
calorimeter or chromatograph meeting industry standards acceptable to both
parties, and the average reading for each day which Gas was flowing shall be
deemed the heating value during such day. All such results shall be corrected
to reflect the actual water content at the Point(s) of Delivery.
E. All of Seller's Gas delivered hereunder at the Point(s) of
Delivery shall be commercially free of solid matter, gum and gum-forming
constituents which might interfere with its merchantability or cause injury
to or interference with the proper operation of the lines, meters, regulators
and other appliances through which it flows and shall conform to either the
following specifications, or the quality specifications required for the
acceptance and transportation thereof in the pipeline facilities of the
pipeline company into which Seller's Gas is to be delivered at the Point(s)
of Redelivery:
Dust, rust and other solids None
Carbon Dioxide Not more than 2.0% by volume
Oxygen Not more than 0.2% by volume
Hydrogen Sulfide Not more than 1/4 grain per 100 cubic feet
Total Sulphur Not more than 5 grains per 100 cubic feet
Free Water None
Btu Not less than 975 Btu's per cubic foot and
more than 1150 Btu's per cubic foot
Temperature Not more than 120(degree)F.
Water vapor Not more than 7 pounds per million cubic feet
Nitrogen Not more than 2% by volume.
F. Buyer may test Seller's Gas for adherence to the
specifications required by Section 5 of this Article 8, such testing to be in
accordance with generally accepted industry standards and procedures. If the
Gas so delivered by Seller does not meet the required specifications, Buyer,
at its option, may refuse to accept delivery of said Gas.
G. Buyer shall not be required to accept Gas from any well where
Buyer reasonably believes an unsafe condition exists.
5. PRICING AND REFUNDS
A. Seller agrees that it will supply data and information at
Buyer's reasonable request, and, to the extent such cooperation is not unduly
burdensome in Seller's sole judgment, cooperate with Buyer in any regulatory
proceeding wherein the price or other provisions set forth herein may be the
subject of review.
B. Should Buyer mistakenly overpay Seller, Seller will refund to
Buyer any previous excess payments together with interest at the rate
prescribed in 18 C.F.R. Sec. 273.302 or subsequent regulation.
C. The parties acknowledge that Buyer has not reviewed the terms
of Seller's Leases pertaining to Seller's Gas and that Buyer shall account
and make payment to royalty, overriding royalty, and other interest owners
and to taxing authorities based on the price paid for Gas as set forth in the
Agreement, and that so long as Buyer makes payment as aforesaid, Buyer shall
not be responsible for any other deficiency or overpayment, Seller
indemnifying and holding Buyer harmless therefrom.
6. TAXES
A. Buyer shall collect and remit to the appropriate authority
the taxes which Buyer is required to collect by law and as otherwise agreed
to by Buyer and Seller. Seller agrees to pay, or cause to be paid when due,
the taxes lawfully levied on Seller's Gas prior to its delivery to Buyer.
-4.B-
7. SHRINKAGE
A. Buyer agrees to use ordinary care in transporting Seller's
Gas from the Point(s) of Delivery to the Point(s) of Redelivery. However, the
parties understand and agree that certain volumetric gains and losses in the
Gas will occur and shall be shared by and among Seller and other third
parties whose gas is transported on Buyer's System, in the proportion that
each party delivers gas into Buyer's System at their respective Point(s) of
Delivery.
8. PAYMENT
A. After delivery of Seller's Gas has commenced, Buyer shall
mail a statement to Seller indicating the quantity of Gas delivered to and
purchased or transported by Buyer during the preceding Accounting Period;
transportation charges due Buyer, if any; adjustments, if any, made by Buyer;
and the amount due Seller for all of Seller's Gas. Such statement and
payments for volumes of Seller's Gas purchased hereunder shall be made by
Buyer to Seller and shall be mailed on or before the last day of each month
for Gas purchased the preceding calendar month. It shall be the obligation of
Seller and Seller agrees to cause proper settlement and accounting to be made
and make distribution of proceeds to all owners of interest in the proceeds
from the sale of Gas delivered to Buyer hereunder. Seller hereby indemnifies
and holds Buyer harmless of and from any and all claims, demands, actions,
causes of action, costs, damages and expenses related to, arising out of or
in any way stemming from such obligation of Seller.
B. After delivery of Seller's Gas has commenced, Buyer shall
mail a statement to Seller indicating the quantity of Gas delivered to Buyer
during the preceding Accounting Period and the amount due therefor,
applicable charges due Buyer, if any, adjustments, if any, made by Buyer, and
the amount due for all of Seller's Gas. Where Buyer is responsible for
distribution of revenues, it shall be the obligation of Buyer to cause proper
settlement and accounting to be made and to make distribution of proceeds to
all owners of interest in the proceeds from the sale of Gas delivered to
Buyer hereunder, and in consideration therefor, Buyer shall charge a monthly
accounting and settlement fee in the amount of Two and 00/100 Dollars ($2.00)
per interest owner per well, said fee to be deducted by Buyer pro rata from
the amount due the working interest owners hereunder on a per-well basis.
Where Seller is responsible for revenue distribution, Buyer shall remit the
amount due for all Gas purchased to Seller, and it shall be the obligation of
Seller to cause proper settlement and accounting to be made and to make
distribution of proceeds to all owners of interest in the proceeds from the
sale of Gas delivered to Buyer hereunder. Buyer shall mail the statement and
payment either on or before the last day of each month (or on the next
business day if such day is a weekend or holiday) for Gas purchased the
preceding Accounting Period, or ten (10) days after receipt by Buyer of
payment from the purchasers of the Gas from Buyer, whichever is later. The
party responsible for distribution of revenues to owners of interest in the
Gas hereby indemnifies and holds the other harmless of and from any and all
claims, demands, actions, causes of action, costs, damages and expenses
related to, arising out of or in any way stemming from such obligation. Where
monies are due Buyer which are not timely paid, Buyer shall be entitled to
recoup any costs of collection, including reasonable attorneys' fees. Buyer,
at its election, may deduct from its payment to Seller, sums, if any, due to
Buyer under the terms of the Agreement.
C. Upon execution of the other party's Confidentiality
Agreement, each party hereto shall have, at its expense, the right at all
times to examine the books and records of the other party, during normal
working hours, to the extent necessary to verify the accuracy of any
statement, charge, computation, or demand made under or pursuant to the
Agreement. Each party agrees to keep records and books of account in
accordance with generally accepted accounting principles in the industry. Any
statement shall be final as to both parties unless questioned within two (2)
years after payment thereof has been made.
9. SELLER'S REPRESENTATIVE
A. The party set forth in Article 7 of the Agreement, NOTICES,
is designated as Seller's Representative with respect to all matters under
the Agreement, including but not limited to the following:
1) To give and receive all notices;
2) To make and witness any tests to be made of the Gas
and measuring equipment and adjustments to such
equipment;
3) To deliver the quantities of Gas deliverable hereunder;
-5.B-
4) To obtain, execute and deliver to Buyer such division
order title opinions and division orders as may be
required by Buyer hereunder;
5) To comply with the requirements, rules and
regulations of any duly constituted authority having
jurisdiction: and,
6) If Seller is responsible for distribution of
revenues, to receive payment hereunder and to cause
proper settlement and accounting to be made and make
distribution of proceeds to all owners of interest in
the proceeds from the sale of Gas delivered to Buyer
hereunder.
B. Buyer may act, and shall be fully protected in acting, in
reliance upon any and all acts and things done and performed by or agreements
made with respect to all matters dealt with herein by said Representative on
behalf of Seller as fully and with the same effect as though Seller had done,
performed, made or executed the same.
C. Seller may change its Representative designated above, or
designate a new Representative from time to time by delivery of written
notice of change and designation of Representative to Buyer. The
Representative so designated shall have and may exercise all power and
authority therein granted with like effect as though named as such
Representative herein in the first instance.
10. REGULATORY BODIES
A. This Agreement is subject to all present and future valid
laws and lawful orders of all regulatory bodies now or hereafter having
jurisdiction of the parties, or either of them; and should either of the
parties, by force of such law or regulation imposed at any time during the
term of the Agreement, be ordered or required to do any act inconsistent with
the provisions of the Agreement, the Agreement shall continue nevertheless
and shall be deemed modified to conform with the requirements of such law or
regulation for that period only during which the requirements of such law or
regulation are applicable. Nothing in the Agreement shall prohibit either
party from obtaining or seeking to obtain modification or repeal of such law
or regulation or restrict either party's right to legally contest the
validity of such law or regulation, and each party reserves the right to file
with such regulatory bodies any material necessary to implement the terms of
the Agreement as they existed prior to the modification.
11. FORCE MAJEURE
A. Except for Buyer's and Seller's respective obligations to
make proper settlement, accounting and distribution of proceeds to all
interest owners as provided herein for volumes of Seller's Gas delivered to
and purchased by Buyer hereunder, and Seller's obligation to make payment to
Buyer for volumes of Seller's Gas transported hereunder, neither party hereto
shall be liable for any failure to perform the terms of the Agreement when
such failure is due to "force majeure" as hereinafter defined.
B. The term "force majeure" as employed in the Agreement shall
mean acts of God, strikes, lockouts or industrial disputes or disturbances,
arrests and restraints from rulers or people, interruptions by government or
court orders, present and future valid orders of any regulatory body having
proper jurisdiction, acts of the public enemy, wars, riots, blockades,
insurrections, inability to secure materials, including inability to secure
materials by reason of allocations promulgated by authorized governmental
agencies, epidemics, landslides, lightning, earthquakes, fires, storms,
floods, washouts, explosions, failure of gas supply, breakage or accident to
machinery or lines of pipe, freezing of ▇▇▇▇▇ or pipelines, inability to
obtain easements or rights-of-way, the making of repairs or alterations to
pipelines or plants, or any other cause whether of the kind herein enumerated
or otherwise, not reasonably within the control of the party claiming "force
majeure", the same shall, so far as possible, be remedied with all reasonable
dispatch. The settlement of strikes or lockouts or industrial disputes or
disturbances shall be entirely within the discretion of the party having the
difficulty, and the above requirement that any "force majeure" shall be
remedied with all reasonable dispatch, shall not require the settlement of
strikes, lockouts or industrial disputes or disturbances by acceding to the
demands of any opposing party therein when such course is inadvisable in the
discretion of the party having the difficulty.
C. Neither party shall be entitled to the benefit of the
provisions of this Article under either or both of the following
circumstances:
-6.B-
1) To the extent that the failure was caused by the
party claiming suspension having failed to remedy the
condition by taking all reasonable acts, short of
litigation, if such remedy requires litigation, and
having failed to resume performance of such
commitments or obligations with reasonable dispatch;
or,
2) If the failure was caused by lack of funds, or with
respect to the payment of any amount or amounts then
due hereunder.
12. WARRANTY OF TITLE TO SELLER'S GAS
A. Seller hereby warrants title to Seller's Gas sold and
delivered hereunder and the right of Seller to sell the same; and the Seller
warrants that all of Seller's Gas is owned by Seller, or that Seller has the
right to market Seller's Gas free from all liens and adverse claims,
including liens to secure payments of production taxes, severance taxes, and
other taxes. Seller agrees to indemnify Buyer and save it harmless from all
suits, actions, debts, accounts, damages, costs, losses and expenses arising
from or out of adverse claims, whether meritorious or not, of any and all
persons, firms, or corporations to said Gas or to royalties, overriding
royalties, taxes, license fees, or charges thereon, resulting from actions
of, by, through or under Seller. Buyer shall be entitled to recover all
attorneys' fees incurred as a result of its involvement in any action or
claim described herein. Buyer, at any time thereafter, when it shall appear
to Buyer by reason of receipt of written notice of claim or dispute that the
ownership or title to all or part of Seller's ▇▇▇▇▇, or Seller's Gas produced
therefrom, may be in a party or parties other than Seller, or upon learning
of any other claims, liens, taxes, royalties, fees, expenses or other adverse
claims, may retain as security for the performance of Seller's obligations
with respect thereto, the entire purchase price of the Gas until Buyer has
been satisfied as to the amount of such claim or ownership claimed, and
thereafter up to the amount of such ownership interest or claim until it has
been finally determined and satisfied or until Seller shall have furnished a
bond to Buyer in an amount and with sureties satisfactory to Buyer,
conditioned upon the protection of Buyer with respect to such ownership or
claim.
13. EASEMENTS
A. To the extent that it may contractually or lawfully do so
under its leasehold interest without impairing its own similar right, Seller
hereby assigns and transfers to Buyer any easement across the Seller's
Lease(s), and across any adjoining lands in which Seller may have an
interest, for the purposes of installing, using, inspecting, repairing,
operating, replacing, and/or removing Buyer's pipe, meters, lines, and other
equipment used or useful in the performance of the Agreement. It is intended
that any property of Buyer placed in or upon any of such land shall remain
the personal property of Buyer, subject to removal by it upon the expiration
or termination of the Agreement for any reason. Buyer shall have a reasonable
time after the expiration or termination of the Agreement to remove same.
Buyer shall indemnify and hold Seller harmless of and from any and all claims
and damages for all injuries to persons, including death, or damage to
property arising out of or incident to Buyer's use of the easement hereunder
transferred, only in the event said claim or damage shall be the result of
negligence legally imputable to Buyer, its employees, agents, and
representatives.
14. DEFAULTS
A. It is covenanted and agreed that if either party shall fail
to perform any of the covenants or obligations imposed upon it under and by
virtue of the Agreement, in addition to its other rights and remedies, the
other party may terminate the Agreement by proceeding as follows:
1) The party not in default shall cause a written notice
to be served on the other party in default, stating
specifically the cause for terminating the Agreement,
and declaring it to be the intention of the party
giving notice to terminate the same; thereupon, the
party in default shall have thirty (30) days after
the service of the aforesaid notice in which to
remedy or remove the cause or causes stated in the
notice for terminating the Agreement. If within said
thirty (30) days the party in default does so remove
and remedy said cause or causes, or fully indemnifies
the party not in default for any and all consequences
of such breach, then such notice shall be withdrawn
and this entire Agreement shall continue in full
force and effect.
-7.B-
2) In case the party in default does not remedy and
remove the cause or causes, or does not indemnify the
party giving the notice for any and all reasonable
consequences of such breach, within said period of
thirty (30) days, then the Agreement shall become
null and void from and after the expiration of said
period.
3) Any cancellation of the Agreement pursuant to the
provisions of this Article shall be without prejudice
to the obligation of Buyer to make proper settlement,
accounting and distribution of proceeds to all owners
of interest in the proceeds received for Gas
delivered to Buyer hereunder to the time of
cancellation, and without waiver of any remedy to
which the party not in default may be entitled for
violations of the Agreement.
B. No waiver by either Seller or Buyer of any default of the
other under the Agreement shall operate as a waiver of any future default,
whether of like or different character or nature, nor shall any failure to
exercise any right hereunder be considered as a waiver of such right in the
future.
15. UNECONOMIC WELL CONNECTIONS
A. In the event Seller desires Buyer to connect a well to
Buyer's System which well, in Buyer's sole opinion, would not constitute an
economic connection, Buyer shall be under no obligation to connect any such
well, or to accept any Gas therefrom. Nevertheless, Buyer, upon Seller's
request, may accept Gas from any such well if Seller shall acquire and assign
without charge to Buyer a measuring station site on Buyer's System at a
mutually agreeable point, together with all necessary rights of ingress and
egress thereto, and bear the cost of the construction, operation and
maintenance of all facilities necessary to deliver Gas from such well into
Buyer's System at said mutually agreeable point. Should Seller elect not to
deliver Gas to Buyer from such well, Buyer shall release such well and its
corresponding drilling and spacing unit from the Agreement.
B. In the event Gas volumes available for delivery from any of
Seller's ▇▇▇▇▇ hereunder become uneconomic to Buyer in the exercise of
Buyer's reasonable judgment. Buyer agrees to disconnect same and to release
from dedication to this Agreement the affected Well(s) and the Leases to the
extent of the drilling and spacing unit(s) corresponding to such Well(s).
16. LITIGATION - ATTORNEYS' FEES
A. In the event litigation arising out of the Agreement
(excluding litigation or actions indemnified pursuant to Section 11, SELLER'S
WARRANTIES, or Sections 2.E or 17.A of this Appendix) should be initiated by
any party hereto, the prevailing party, after the entry of a final
non-appealable order, shall be entitled to recover from the other party, as a
part of said judgment, all court costs, fees and expenses of such litigation,
including reasonable attorneys' fees.
17. DAMAGES
A. Whether or not occasioned by a default or other breach of the
Agreement, neither party shall be liable to the other for special, exemplary,
or consequential damages, except as to third-party claims, pursuant to the
indemnification provisions of the Agreement or this Appendix.
18. MISCELLANEOUS
A. This Agreement shall be binding upon and inure to the benefit
of the parties hereto, their successors, assigns, heirs, administrators
and/or executors and shall constitute a real right and covenant running with
the lands and leasehold interests covered hereby. Either party may assign his
or its right, title, and interest in, to and under this Agreement including,
without limitation, any and all renewals, extensions, amendments, and/or
supplements hereto; provided, however, that no such assignment shall in any
way operate to enlarge, alter or change any right or obligation of the other
party or parties hereto. No assignment shall be effective or binding until a
copy of same has been furnished to the other party.
-8.B-
B. Further, this Agreement, including, without limitation, any
and all renewals, extensions, amendments and/or supplements hereto shall be
binding upon any purchaser of Buyer's Facilities and upon any purchaser of
Seller's ▇▇▇▇▇, or any part thereof or interest therein which are subject to
this Agreement. It is agreed that no sale of Seller's ▇▇▇▇▇, or any part
thereof or interest therein, or of all or substantially all of Buyer's
Facilities, shall be made unless the purchaser thereof shall assume and agree
to be bound by this Agreement insofar as the same shall affect and relate to
Seller's ▇▇▇▇▇, Buyer's Facilities or interests so sold or conveyed.
C. Nothing in this Agreement, expressed or implied, confers any
rights or remedies on any person or entity not a party hereto other than
successors and assigns, or heirs, administrators or executors of the parties
hereto.
D. Seller expressly does not by the terms of this Agreement,
sell, transfer or assign unto Buyer any title or interest whatsoever in
Seller's ▇▇▇▇▇ or any pipe, meters, lines or other equipment of any nature
owned or used by Seller in the operation of Seller's ▇▇▇▇▇.
E. The parties hereto assume full responsibility and liability
for the maintenance and operation of their respective properties and agree to
indemnify and save harmless the other party from all liability and expense on
account of any damages, claims or actions arising from any act or accident in
connection with the installation, presence, maintenance or operation of the
property or equipment of the indemnifying party.
F. Seller agrees that Buyer, its successors and assigns, shall
have the right, but not the obligation, at any time to redeem for Seller, its
successors and assigns, by payment of any taxes, deeds of trust, judgments or
other liens on the ▇▇▇▇▇ described in Exhibit" A" hereto, on Seller's Gas or
the production therefrom, in the event of default of payment by Seller and be
subrogated to the rights of the holder or holders thereof. Seller further
agrees that any such redemption and payment by Buyer for the account of
Seller shall be applied by way of a set-off against the purchase price which
Buyer would otherwise pay to Seller or the other interest owners under
Section 8 of this Appendix, such set-off to continue until all payments by
Buyer hereunder, plus interest, have been fully recouped by Buyer.
G. Upon consent of Buyer, the Agreement may be ratified and
adopted by any owner of an interest in the ▇▇▇▇▇ subject hereto, or any
leases with which the ▇▇▇▇▇ subject hereto may be pooled or unitized, by
execution and delivery to Buyer of a separate written instrument ratifying
and adopting the Agreement insofar as said owner's interest in any such lands
or leases is concerned, all the terms and provisions of this Agreement shall
be binding upon such interest owner.
H. Each Seller executing or ratifying the Agreement makes and
enters into the Agreement severally and not jointly with other sellers, and
they are not acting as partners, joint venturers, or otherwise jointly in
this transaction, and nothing herein contained or provided shall operate to
create, or be construed as creating, any such relationship. It is expressly
provided that there shall never be any joint liability against the parties
designated herein as Seller and that no single party Seller shall be liable
for the acts or omissions of any other single party Seller.
I. Termination of this Agreement shall not relieve any party of
any obligation incurred prior to the date of such termination. The provisions
of this clause shall survive any termination hereof.
J. The Equal Employment Opportunity Clause required under
Executive Order No. 11246, the affirmative action commitment for disabled
veterans and veterans of the Vietnam era, set forth in 41 CFR 60-250.4, the
affirmative action clause for handicapped workers, set forth in CFR
650-741.4, and the related regulations of the Secretary of labor, 41 CFR
Chapter 60, are incorporated by reference in this agreement. By accepting
this agreement, Seller certifies that it complies with the authorities cited
above, and that it does not maintain segregated facilities or permit its
employees to perform services at locations where segregated facilities are
maintained, as required by 41 CFR 60.1.8.
END OF GENERAL TERMS AND CONDITIONS
-9.B-