Sixth Amended and Restated Gas Gathering and Processing Agreement Between QUICKSILVER RESOURCES INC., COWTOWN PIPELINE PARTNERS L.P. and COWTOWN GAS PROCESSING PARTNERS L.P. Cowtown Gas Facilities Effective Date September 1, 2008
Exhibit
10.1
Sixth Amended and
Restated
Between
QUICKSILVER
RESOURCES INC.,
COWTOWN PIPELINE
PARTNERS L.P.
and
COWTOWN GAS
PROCESSING PARTNERS L.P.
Cowtown Gas
Facilities
Effective Date
September 1, 2008
TABLE OF
CONTENTS
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Page
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ARTICLE I
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DEFINITIONS
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1
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ARTICLE II
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COMMITMENT OF
PROCESSING RIGHTS
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5
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ARTICLE III
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RESERVATIONS
OF PARTIES
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6
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ARTICLE IV
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GATHERING
SYSTEM DELIVERY POINT(S), PLANT DELIVERY POINT(S) AND
PRESSURE
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7
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ARTICLE V
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REGULATION OF
PRODUCTION
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7
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ARTICLE VI
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QUANTITY
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8
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ARTICLE VII
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QUALITY
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9
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ARTICLE VIII
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TESTS
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10
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ARTICLE IX
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MEASUREMENT
AND METER TESTING
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11
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ARTICLE X
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ALLOCATION
PROCEDURE
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14
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ARTICLE XI
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DISPOSITION
OF PRODUCER'S PORTION OF PLANT PRODUCTS
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14
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ARTICLE XII
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GATHERING AND
PROCESSING FEES
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15
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ARTICLE XIII
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DISPOSITION
OF PRODUCER'S PORTION OF RESIDUE GAS
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15
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ARTICLE XIV
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ACCOUNTING,
PAYMENTS AND CREDIT ASSURANCES
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15
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ARTICLE XV
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WARRANTY
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18
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ARTICLE XVI
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TAXES
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18
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ARTICLE XVII
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INDEMNITY
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19
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ARTICLE XVIII
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FORCE
MAJEURE
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21
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ARTICLE XIX
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UNPROFITABLE
OPERATIONS AND RIGHTS OF TERMINATION
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21
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ARTICLE XX
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TERM
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22
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ARTICLE XXI
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REGULATORY
BODIES
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23
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ARTICLE XXII
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ARBITRATION
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23
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ARTICLE XXIII
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DISPUTES
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24
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ARTICLE XXIV
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NOTICES AND
PAYMENTS
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24
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ARTICLE XXV
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ASSIGNMENT
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26
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ARTICLE XXVI
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MISCELLANEOUS
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27
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EXHIBITS
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EXHIBIT
A
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Contract
Area
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EXHIBIT
B
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Gathering
System Delivery Point(s); Plant Delivery Point(s)
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EXHIBIT
C
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Residue Gas
Delivery Point(s); Plant Products Delivery Point(s)
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EXHIBIT
D
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Compression
Fee
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i
Sixth Amended and
Restated
THIS SIXTH AMENDED
AND RESTATED GAS GATHERING AND PROCESSING AGREEMENT (the “Agreement”)
is made and entered into as of the 1st day of September, 2008 (the
“Effective Date”), by and among COWTOWN PIPELINE PARTNERS L.P., a Texas limited
partnership (“Gatherer”), COWTOWN GAS PROCESSING PARTNERS L.P., a Texas limited
partnership, (“Processor”), and QUICKSILVER RESOURCES INC., a Delaware
corporation, (“Producer"). Gatherer, Processor and Producer are
sometimes referred to herein, individually, as a “Party” and, collectively, as
the “Parties”.
WITNESSETH,
THAT:
WHEREAS, the
Parties entered into that certain Fifth Amended and Restated Gas Gathering and
Processing Agreement dated effective August 10, 2007 (the “Fifth
Restatement”);
WHEREAS, the
Parties desire to amend certain terms in the Fifth Restatement and to provide
for revised and supplemental Exhibits to be made a part of the
Agreement;
NOW, THEREFORE, in
consideration of the representations, warranties and mutual premises and
benefits contained herein and for other good and valuable consideration, the
adequacy, receipt and sufficiency of which are hereby acknowledged, Gatherer,
Processor and Producer agree to amend and restate the Fifth Restatement as
follows:
ARTICLE I
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DEFINITIONS
1.1 For the purpose of
this Agreement, the following terms and expressions used herein are defined as
follows:
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a.
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"Btu" shall
mean one British thermal unit, which is the quantity of
heat required to raise one pound avoirdupois of pure water from
58.5 degrees Fahrenheit to 59.5 degrees Fahrenheit at a constant pressure
of 14.73 pounds per square inch
absolute.
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b.
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"Component"
shall mean those hydrocarbon and non-hydrocarbon molecular constituents
which are definable by industry standards and procedures. Such
Components as used in this Agreement shall
be:
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▇▇ -
▇▇▇▇▇▇▇▇
▇▇▇
- Carbon Dioxide
H2S - Hydrogen
Sulfide
C1 -
Methane
C2 -
Ethane
C3 -
Propane
iC4 -
Iso-butane
nC4 - Normal
Butane
iC5 -
Iso-pentane
nC5 - Normal
Pentane
C6+ - Hexanes and
Heavier Compounds
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c.
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“Compression
Fee” shall have the meaning set forth in Section 12.3 of this
Agreement.
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d.
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"Contract
Area" shall mean that area as described or outlined on Exhibit A which is
attached hereto and made a part hereof for all
purposes.
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e.
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“CPI
Adjustment” shall mean that percentage equal to the percentage increase
between:
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(i)
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the
seasonally unadjusted Consumer Price Index for All Urban Consumers (all
items), U.S. city Average (1982-84 =100), as published by the U.S.
Department of Labor, Bureau of Labor Statistics (“CPI-U”) for the month of
December of the second year prior to the Escalation Date;
and
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(ii)
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the
seasonally unadjusted CPI-U for the month of December immediately
preceding the Escalation Date.
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f.
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"Day" shall
mean a period of twenty-four (24) consecutive hours beginning and ending
at seven o'clock a.m. Central Time.
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g.
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“Escalation
Date” shall mean the January 1st
following the Effective Date and each January 1st
thereafter.
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h.
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"Facilities"
shall mean the Plant and the Gathering
System.
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i.
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"Gas" shall
mean natural gas which is owned or controlled by Producer or its
successors and assigns and produced from ▇▇▇▇▇ drilled on lands within the
Contract Area, including casinghead gas produced with crude oil, gas from
gas ▇▇▇▇▇ produced in association with crude oil (associated gas), and gas
from condensate ▇▇▇▇▇ (non-associated gas), and shall include any inerts
or impurities contained therein.
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j.
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“Gathering
Fee” shall have the meaning set forth in Section 12.1 of this
Agreement.
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2
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k.
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"Gathering
System" shall mean, but shall in no way be limited to, the gas gathering
pipelines, fuel gas pipelines, dehydration facilities, compression
facilities, junctions, heaters, meters, separators, electric power lines,
communications cables, roads, and other related facilities and equipment,
including all easements located thereon, from the inlet flange of the
pipeline metering facility installed up to the inlet flange of the
separation facilities installed upstream of the Plant inlet meter,
necessary to gather and transport gas from the Gathering System Delivery
Point(s) to the Plant Delivery Point(s) and shall include any expansion of
the Gathering System as provided in Section
4.4.
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l.
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"Gathering
System Delivery Point(s)" shall mean the inlet flange of Gatherer's
metering facilities located at or near each of Producer’s ▇▇▇▇▇ located
within the Contract Area or such other point as may be mutually agreed
upon by the Parties. The Gathering System Delivery Point(s) are
listed on Exhibit B to this Agreement which is attached hereto and made a
part hereof for all purposes and which may be amended from time to time to
reflect the addition or deletion of a Gathering System Delivery
Point.
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m.
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"Liquefiable
Hydrocarbons" shall mean ethane, propane, iso-butanes, normal butanes,
iso-pentanes, normal pentanes, hexanes and heavier hydrocarbons, and
incidental methane, or any mixtures thereof, which can be recovered or
extracted in the Gathering System or the Plant and sold as Plant
Products.
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n.
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"MCF" shall
mean 1,000 standard cubic feet of
gas.
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o.
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"MMBtu" shall
mean 1,000,000 Btu’s.
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p.
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“MMCF” shall
mean 1,000,000 standard cubic feet of
gas.
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q.
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“MMCFD” shall
mean 1,000,000 standard cubic feet of gas per
day.
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r.
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"Month,"
"billing month," "period," and "accounting period" shall mean the period
beginning at seven o'clock a.m. on the first day of a calendar month and
ending at seven o'clock a.m. on the first day of the next succeeding
calendar month.
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s.
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"Plant" shall
mean, but shall in no way be limited to, all tanks, machinery, equipment,
buildings, structures, fixtures, appliances, pipe, valves, fittings, and
materials of any nature or kind whatsoever located on the site at which
the processing, compression, and recompression facilities of Processor are
currently located in Hood County, Texas (generally known as the Cowtown
Plant), or any other site where such facilities may later be located,
including by way of additions to, expansion or new development of the
Plant or such
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3
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related
facilities, which shall include, without limitation, the Corvette Plant
constructed in 2008; including appropriate storage, compression, metering,
shipping, dehydration, and delivery facilities for Plant Products; all
easements pertaining to rights-of-way, the site or sites, and the
operation of the Plant; and any and all other facilities and appurtenances
located, or to be located, on or away from such site or sites deemed by
Processor to be necessary for the successful operation of the Plant,
including inlet compression, if any, but not including the Residue Gas
Delivery Facility.
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t.
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“Plant
Delivery Point(s)” shall mean the point(s) of interconnect between the
Gathering System and the Plant which point(s) are shown on Exhibit "B"
which is attached hereto and made a part hereof for all
purposes.
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u.
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"Plant Fuel"
shall mean the MMBtu's of Gas consumed at the Plant for fuel which shall
include, but shall in no way be limited to, fuel used for Gas compression,
conditioning and treating; recovery, extraction, and removal of Plant
Products; and the recompression of the Residue
Gas.
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v.
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"Plant
Products" shall mean all Liquefiable Hydrocarbons recovered, extracted, or
otherwise removed from the Gas after the Plant Delivery Point(s),
including, but not limited to, plant condensate (sometimes referred to as
pentanes plus, heavier than butanes, or natural gasoline), and all
commercial non-hydrocarbon substances recovered, extracted, or otherwise
removed from the Gas in the Gathering System or the
Plant.
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w.
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“Plant
Products Delivery Point” shall mean either (a) the point(s) of
interconnect between that certain liquids pipeline owned and operated by
Gatherer, and the facilities of third party pipeline(s) to which the Plant
Products are delivered and which point(s) are shown on Exhibit "C" which
is attached hereto and made a part hereof for all purposes or (b) the
truck loading facilities of the
Plant.
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x.
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"Plant
Tailgate" shall mean the point of interconnect between the Plant and the
Residue Gas Delivery Facility located at the downstream flange of the
block valve which is downstream of the Plant residue meter and emergency
shutdown valve.
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v.
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“Primary
Term” shall have meaning set forth in ARTICLE
XX.
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z.
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"Process
Flare" shall mean any MMBtu's of Gas dispersed or lost at the Plant as
flare which shall include, but shall in no way be limited to, flare
dispersed or lost in the compression, conditioning and treating
of
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4
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Gas;
recovery, extraction, and removal of Plant Products; and the recompression
of Residue Gas.
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aa.
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“Processing
Fee” shall have the meaning set forth in Section 12.2 of this
Agreement.
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bb.
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“psia” shall
mean pounds per square inch
absolute.
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cc.
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“psig” shall
mean pounds per square inch gauge.
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dd.
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"Residue Gas"
shall mean that hydrocarbon and non-hydrocarbon stream of Gas remaining
after the recovery, extraction, and removal of Plant Products, and after
reduction for Gas used for Plant Fuel, Process Flare, and other incidental
losses, including line loss.
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ee.
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"Residue Gas
Delivery Facility" shall mean the residue gas pipeline and associated
equipment that are located at the Plant Tailgate and are used to deliver
residue gas to the Residue Gas Delivery
Point(s).
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ff.
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"Residue Gas
Delivery Point(s)" shall mean the point(s) of interconnect between the
Residue Gas Delivery Facility and the facilities of third party
pipeline(s) to which the Residue Gas is delivered and which point(s) are
shown on Exhibit C which is attached hereto and made a part hereof for all
purposes.
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gg.
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SCF" or
"standard cubic foot of gas" shall mean the amount of Gas necessary to
fill a cubic foot of space when the Gas is at a pressure of 14.65 pounds
per square inch absolute and a temperature of sixty (60) degrees
Fahrenheit.
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hh.
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“Term” shall
have the meaning set forth in ARTICLE XX of this
Agreement.
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ii.
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“Treating
Fee” shall have the meaning set forth in Section 12.4 of this
Agreement.
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ARTICLE II
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COMMITMENT
OF PROCESSING RIGHTS
2.1 Subject
to the terms and provisions hereof, Producer dedicates and agrees to deliver to
Gatherer for gathering and to Processor for processing, at the Gathering System
Delivery Point(s), the total volume of Gas owned or controlled by Producer or
its successors and assigns, lawfully produced from ▇▇▇▇▇ now or hereafter
drilled on the lands within the Contract Area or lands pooled therewith,
excluding Gas reserved or utilized by Producer or its successors and assigns in
accordance with the terms of ARTICLE III. Any transfer by Producer of
its right, title, or interest in the Gas to a third party, whether by farmout,
contract, or otherwise, shall be made specifically subject to this
Agreement. Producer will notify any person to whom Producer transfers
all or a portion of its right, title,
5
2.2 Gas
shall be delivered to the Gathering System Delivery Point(s) after mechanical
separation by Producer for the removal of free water and free liquid
hydrocarbons, but shall not otherwise be processed by Producer for the removal
of Liquefiable Hydrocarbons.
2.3 Gatherer
agrees that subject to the provisions hereof, it will take and gather Gas from
the Gathering System Delivery Point(s) and will cause such Gas to be delivered
to the Plant Delivery Point(s) for processing.
2.4 Processor
agrees that subject to the provisions hereof, it will receive the Gas at the
Plant Delivery Point(s) and will cause such Gas to be processed in the Plant for
the recovery and delivery of Plant Products. Processor also agrees to
deliver at the Residue Gas Delivery Point(s) to Producer or Producer's nominee
the Residue Gas as determined under the provisions of Section 10.2.
ARTICLE III
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RESERVATIONS
OF PARTIES
3.1 Producer
reserves all liquid hydrocarbons, oil, or condensate removed by Producer by
means of mechanical gas-liquid separators (including heater-treaters), drips,
and/or lines from the Gas prior to delivery to Gatherer. If
mechanical cooling is performed by Producer to meet the temperature
specifications of this Agreement, Producer shall not reduce the temperature of
the Gas below one hundred and twenty (120) degrees Fahrenheit.
3.2 Producer
reserves all Gas that may be required for cycling, repressuring, pressure
maintenance, and gas lift operations with respect to gas reservoirs on the
premises committed hereunder; provided, however, that the Gas used in such
operations shall be subject to the terms of this Agreement (to the extent that
such Gas can be economically saved) and delivered to Processor following the
cessation of such operations.
3.3 Producer
reserves that amount of Gas which is required for above ground development and
operation within the Contract Area.
3.4 Producer
expressly reserves the right to deliver or furnish to Producer's lessor Gas as
required to satisfy the terms of Producer's oil and gas leases.
6
ARTICLE
IV -
GATHERING SYSTEM
DELIVERY POINT(S),
PLANT
DELIVERY POINT(S) AND PRESSURE
4.1 Producer,
at its own expense, shall construct, equip, maintain, and operate all facilities
(including, but not limited to, all necessary separation, dehydration, and/or
compression equipment) necessary to deliver the Gas to Gatherer at the Gathering
System Delivery Point(s) at such pressure as is required and sufficient to enter
the Gathering System, but not to exceed one thousand two-hundred (1,200)
psig.
4.2 Whether
to facilitate the movement of the Gas on the Gathering System or for other
reasons, Gatherer may, but shall have no obligation to, provide compression for
the Gas (other than Plant recompression which shall be provided by Processor),
on such basis and for the Compression Fee as more particularly provided and
described in Section 12.3 below. In such event, Producer will provide
its pro rata share of fuel required for operating such compression equipment and
any related facilities.
4.3 Gatherer,
at Producer’s expense, shall install, construct and equip all meters and
facilities necessary to measure the Gas at the Gathering System Delivery
Point(s). Gatherer, at its own expense, shall maintain and operate
such meters throughout the term of this Agreement.
4.4 Gatherer,
in its sole and absolute discretion, may decline to construct a Gathering System
expansion if it determines that it would not be profitable to do
so. In such event, Producer may construct a Gathering System
expansion at its sole cost and expense. The Gathering System
expansion must meet all of Gatherer’s specifications, and Gatherer will be
responsible for the meter station and connection to the existing Gathering
System. Gatherer may, at its election, but within two years (2) of
the initial delivery of production from the Gathering System expansion acquire
the ownership of the Gathering System expansion installed by the Producer by
reimbursing Producer for the actual cost of the Gathering System expansion with
no allowance for inflation or depreciation. In such event, Producer
agrees to execute all assignments or contracts deemed necessary to accomplish
the transfer to Gatherer of title to the Gathering System expansion, including
rights-of-way and easements. In the event neither Gatherer nor
Producer elect to construct the necessary Gathering System expansion to connect
the Gathering System Delivery Point to the existing Gathering System, then this
Agreement shall terminate as to the Gas from the well or ▇▇▇▇▇ to be connected
to that Gathering System Delivery Point.
4.5 Gatherer
hereby agrees to deliver the Gas to the Processor at the Plant Delivery Point(s)
at a pressure sufficient to enter the Plant, but in no way greater than five
hundred (500) psig unless Gatherer is providing compression pursuant to Section
4.2.
ARTICLE V
-
REGULATION
OF PRODUCTION
It is understood
and agreed by the Parties that in order for Gatherer and Processor to maintain
maximum efficiency in the Facilities, and in order to prevent flaring
and/or
7
ARTICLE
VI -
QUANTITY
6.1 Subject
to Gathering System and Plant capacity, Gatherer shall gather and Processor
shall process that volume of Gas legally allowed to be produced which is
attributable to the interest owned or controlled by Producer or its successors
and assigns in ▇▇▇▇▇ drilled on lands within the Contract Area or lands pooled
therewith; provided, after processing, Producer or Producer's nominee will
accept the Residue Gas. Processor shall regulate the flow of gas at
the Plant in the quantities and at the times desired by Processor to prudently
operate the Plant and/or to meet the fluctuating condition of Processor’s and
Producer’s markets. Gatherer or Processor may, from time to time,
find it necessary to shut off entirely or restrict the flow of gas to the
Gathering System or Plant, respectively; notwithstanding anything herein to the
contrary, in such event, neither Gatherer nor Processor shall be liable to
Producer for the resulting effect thereof. Gatherer and Processor
shall provide Producer prior notice of any shut down due to routine maintenance
and shall prudently work to minimize the amount of such downtime.
6.2 Producer
shall nominate to Gatherer in writing, not less than three (3) business Days
prior to the first day of each Month during the term of the Agreement, the daily
quantity of Gas (expressed in MCF’s and MMBtu’s) that Producer shall deliver to
Gatherer at the Gathering System Delivery Point(s) for gathering during such
Month. Producer shall also nominate to Processor in writing,
not less than three (3) business Days prior to the first day of each Month
during the term of the Agreement, the daily quantity of Residue Gas (expressed
in MCF’s and MMBtu’s) that Producer or Producer’s nominee shall receive at the
Residue Gas Delivery Point(s) following processing at the Plant.
6.3 Gatherer,
Processor, and Producer shall designate a dispatcher(s) who shall be
continuously on call for nomination purposes, and shall notify each other in
writing of such dispatcher(s) and their telephone number(s).
6.4 Producer’s
dispatcher shall notify Gatherer’s and Processor’s dispatchers in advance of any
anticipated decrease in delivery rate below the daily nominated
quantity. Producer’s dispatcher must obtain the prior written
approval from Gatherer’s and Processor’s dispatchers for any delivery rate in
excess of the daily quantity rate. Gatherer’s and Processor’s
dispatcher shall notify Producer’s dispatcher of any anticipated inability to
receive the Gas at a delivery rate less than (a) the daily nominated quantity
rate; or (b) a previously orally authorized delivery rate in excess of the daily
nominated quantity rate.
8
6.5 If
insufficient Plant or pipeline capacity exists to process all the Gas,
the Plant processing capacity will be prorated for all gas dedicated
to the Plant, without undue discrimination, and the Gas unable to be processed
will be bypassed ratably, if allowed.
6.6 Processor
shall have the right, but not the obligation, to expand the Plant or build a new
gas processing plant at a different location, and in such event, the Gas, or a
portion thereof, may be processed by Processor in the expanded Plant or the new
gas processing plant in accordance with the terms of this
Agreement. The Parties acknowledge and agree that the Corvette Plant
located in Hood County, Texas (undergoing construction in 2008), is deemed part
of the Plant and the Facilities for purposes of this Agreement, and the terms of
this Agreement shall be applicable and effective with respect
thereto.
ARTICLE VII
-
QUALITY
7.1 Gatherer
and Processor shall not be obligated to receive, gather and/or process (as the
case may be), Gas delivered hereunder that fails to meet (i) the quality
specifications of any transporter at any of the Residue Gas Delivery Point(s) or
Plant Products Delivery Point(s), or (ii) the following
specifications:
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a.
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The Gas must
be commercial in quality and free from any foreign materials such as dirt,
dust, iron particles, crude oil, dark condensate, free water, and other
impurities; and substances which may be injurious to pipelines or which
may interfere with the gathering, processing, transmission, or commercial
utilization of said Gas;
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b.
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The Gas shall
contain no free water;
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c.
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The Gas
delivered hereunder shall not exceed a temperature of one hundred forty
(140) degrees Fahrenheit at the Gathering System Delivery Point(s), as
well as the Plant Delivery
Point(s);
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d.
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The Gas
delivered hereunder shall not contain more
than:
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(i)
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One-fourth
grain of hydrogen sulfide, or five grains of total sulfur, or one grain
mercaptan per one hundred (100) cubic
feet;
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(ii)
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one part per
million by volume of oxygen;
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(iii)
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that percent
by volume of carbon dioxide which would result in the failure of the
Residue Gas or the Plant Products to meet the specifications of any
transporter at any of the Delivery Points, but in no event more than two
percent by volume;
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(iv)
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two percent
by volume of nitrogen; or
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(v)
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three percent
by volume of a combined total of inerts,
including,
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but not
limited to, carbon dioxide and nitrogen
Components;
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e.
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No diluents
such as carbon dioxide, air, or nitrogen shall be added to the
Gas;
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f.
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The Gas shall
contain no carbon monoxide, halogens, or unsaturated hydrocarbons, and no
more than 0.1 parts per million of hydrogen;
and
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g.
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The Gas shall
contain no less than 1,100 Btu and 2 GPM ethane and heavier
hydrocarbons.
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In the event of any
conflict as between a transporter’s specifications and those appearing above in
this Section 7.1, the most stringent or restrictive specifications shall be
applicable to the Gas proffered under this Agreement.
7.2 If
any of the Gas delivered by Producer hereunder should fail to meet the quality
specifications set forth in this ARTICLE VII, Gatherer and Processor may elect
to either (i) accept and process such Gas, (ii) accept, but treat and/or
condition such Gas prior to gathering or processing at an additional cost, or
(iii) refuse to accept such Gas. The acceptance of Gas not meeting
the quality specifications set forth in ARTICLE VII shall not be deemed a waiver
of Gatherer’s and Processor's right to reject such Gas at any later time, and
Gatherer and Processor shall be entitled, at any time and from time to time, to
decline to accept proffered deliveries of Gas not meeting the quality
specifications set forth herein.
7.3 If
Gatherer and Processor elect to accept but treat and/or condition the
non-conforming Gas prior to gathering and processing, Gatherer and Processor
shall advise the Producer of such election and associated
fees. Producer shall then have a maximum of thirty (30) days to
advise Gatherer and Processor if it will treat and/or condition such
non-conforming Gas and the cost associated with such treatment. If
Producer does not elect to treat and/or condition such non-conforming Gas or
fails to make such election within the specified time period, then the Gatherer
and Processor shall have the right to (a) proceed with gathering and processing
such non-conforming Gas and Producer shall pay to Gatherer and Processor all
costs associated with such actions or (b) reject and release such non-conforming
Gas from the terms of the Agreement. Notwithstanding
anything in this Section 7.3 to the contrary, Producer agrees that to the extent
non-conforming Gas at a Gathering System Delivery Point is accepted and
subsequently treated or conditioned with respect to its CO2
Component, such treating shall be done for the Treating Fee described and
provided in Section 12.4 below.
ARTICLE VIII
-
TESTS
8.1 Producer,
Gatherer and Processor do hereby agree as follows:
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a.
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Gatherer
shall procure or cause to be procured a sample of Gas at each Gathering
System Delivery Point and Plant Delivery
Point,
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10
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respectively,
and analyze the samples by chromatographic analysis to determine the
Component content (mole percent), specific gravity, the BTU content, and
the Plant Product content (expressed in gallons per MCF)
thereof.
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b.
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The
individual Plant Products contained in the commingled stream of plant
products delivered from the Plant each month shall be determined from a
chromatographic analysis of either (a) a spot sample or a sample taken
from a continuous sampling device or (b) from an online
chromatograph. The results of the chromatographic analysis
shall be applied to the commingled stream of plant products to determine
the volume of each individual Plant Product delivered from the
Plant.
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c.
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Tests
provided for in Subparagraphs (a) and (b) of this Section 8.1 shall be
made by Gatherer and Processor using their own equipment or by an
independent testing service at least once in each six month period, or
more frequently in their sole discretion. All such tests shall
be made in accordance with approved engineering
practices. Representatives of Producer shall be entitled to
witness such tests, and Producer shall give advance written notice to
Gatherer and Processor in the event that it exercises such
right.
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8.2 Physical
constants required for making calculations hereunder shall be taken from the Gas
Processors Association Physical Constants Publication No. 2145-03 (as amended
from time to time). Physical constants for the hexanes and heavier
hydrocarbons portion of hydrocarbon mixtures shall be assumed to be the same as
the physical constants for hexane. The heat content per gallon of
each liquid hydrocarbon Component shall be determined by multiplying the cubic
feet per gallon of such liquid hydrocarbon Component by the heat content per
cubic foot thereof.
ARTICLE
IX -
MEASUREMENT
AND METER TESTING
9.1 The
unit of volume for measurement of Gas delivered hereunder shall be one thousand
(1,000) cubic feet of Gas at a base temperature of sixty (60) degrees Fahrenheit
and at an absolute pressure of 14.65 psia and saturated with water
vapor. All fundamental constants, observations, records, and
procedures involved in determining the quantity of Gas delivered hereunder shall
be in accordance with the standards prescribed in Report Nos. 3 and 8, of the
American Gas Association, as amended or supplemented from time to time,
respectively. It is agreed that for the purpose of measurement and
computations hereunder, the atmospheric pressure shall be assumed to be 14.7
psia regardless of the atmospheric pressure at which the Gas is measured and
that the Gas obeys the Ideal Gas Laws as to variations of volume with pressure
and specific gravity, including the deviation from ▇▇▇▇▇'▇ law, shall all be
made by Gatherer and Processor in accordance with applicable rules, regulations,
and orders. It is also agreed that the Gatherer and
Processor
11
9.2 Gatherer
shall install, maintain, and operate, or cause to be maintained and operated, a
measuring station located at each Gathering System Delivery Point, the Residue
Gas Delivery Point(s) and the Plant Products Delivery Point. Processor shall
install, maintain, and operate a measuring station located downstream of the
separation facilities at each Plant Delivery Point. Said
measuring station(s) shall be so equipped with orifice meters, recording gauges,
or other types of meter or meters of standard make and design commonly
acceptable in the industry, and of suitable size and design, as to accomplish
the accurate measurement of Gas delivered hereunder. The changing and
integration of the charts (if utilized for measurement purposes hereunder) and
calibrating and adjusting of meters shall be done by Gatherer or Processor, as
appropriate. Gatherer and Processor shall have the right to utilize
electronic gas measuring equipment should they so desire.
9.3 Processor
shall measure or cause to be measured the volume of Plant Products in
gallons.
9.4 Producer
may, at its option and expense, install check meters for checking Gatherer’s
metering equipment at each Gathering System Delivery Point; and the same shall
be so installed as not to interfere with the operation of the
Facilities.
9.5 The
temperature of the Gas flowing through the meter shall be determined by the
continuous use of a recording thermometer or device installed by Gatherer or
Processor, as the case may be, so that it will properly record the temperature
of the Gas flowing through the meter.
9.6 The
specific gravity of the Gas flowing through the meter shall be determined by
methods commonly accepted in the industry. Specific gravities so
determined will be used in calculating Gas deliveries until the next specific
gravity test is made.
9.7 Each
Party shall have the right to be present at the time of any installing, reading,
sampling, cleaning, changing, repairing, inspecting, testing, calibrating, or
adjusting done in connection with the other's measuring equipment used in
measuring deliveries hereunder. The records from such measuring
equipment shall remain the property of their owner, but upon request, each will
submit to the other its records and charts, together with calculations therefrom
subject to return within thirty (30) days after receipt thereof. If
meters utilizing charts are used to measure Gas hereunder, then the charts shall
be kept on file for a period of two (2) years, or such longer period as may be
required by law. In addition, any other measurement data shall also
be kept for the same time period. Each Party, during each of the
first three production months, and after that at least semi-annually, or more
often if necessary, shall calibrate the meters and instruments installed by it
or cause the same to be calibrated. Gatherer shall
give Producer ten (10) days notice in advance of such tests so that
the latter may, at its election, be present in person or by its representative
to observe adjustments, if any are made.
12
9.8 If
the metering equipment is found to be inaccurate by two percent (2%) or more,
registration thereof and any payment based upon such registration shall be
corrected at the rate of such inaccuracy for any period of inaccuracy which is
definitely known or agreed upon, or if not known or agreed upon, then for a
period extending back one-half of the time elapsed since the last day of the
calibration. Unless conclusively determined that either Gatherer’s or
Processor's measurement equipment is inaccurate by two percent (2%) or more,
Gatherer’s or Processor's, as the case may be, measurement shall be deemed to be
correct for all purposes hereunder, and no adjustment shall be made to the
previous volumes. Following any test, any metering equipment found to
be inaccurate to any degree shall be adjusted immediately to measure
accurately. If for any reason any meter is out of service or out of
repair so that the quantity of Gas delivered through such meter cannot be
ascertained or computed from the readings thereof, the quantity of Gas so
delivered during such period shall be estimated and agreed upon by the Parties
hereto upon the basis of the best available data using the first of the
following methods which is feasible:
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a.
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By using the
registration of any check measuring equipment of Producer, if installed
and registering accurately;
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b.
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By correcting
the error if the percentage of error is ascertainable by calibration,
test, or mathematical calculation;
or
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c.
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By estimating
the quantity of deliveries during preceding periods under similar
conditions when the meter was registering
accurately.
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9.9 If
Producer shall notify Gatherer, or if Gatherer shall notify Producer, at any
time that a special test of any Gathering System Delivery Point meter is
desired, the Parties shall cooperate to secure an immediate verification of the
accuracy of such meter and joint observation of any adjustments. All
tests of Gatherer’s measuring equipment at any Gathering System Delivery Point
shall be made at Gatherer’s expense, except that the Producer shall bear the
expense of tests made at its request if the inaccuracy found is less than two
percent (2%). Expense as used in this Section 9.9 shall be limited to
actual costs of Gatherer as the result of testing and shall not include any
costs incurred by Producer as the result of witnessing said
testing.
9.10
If during any month less than 1,000 MCF of Gas is delivered to a Gathering
System Delivery Point, (except for reasons of Force Majeure), then Gatherer
shall charge a meter fee applicable to any such Gathering System Delivery Point
equal to four hundred dollars ($400.00). Such fee shall be deducted
from the compensation otherwise due Producer under this Agreement; or, at
Gatherer’s election, Producer may be invoiced for such amount payable thirty
(30) days after receipt.
9.11
The Parties hereto recognize and acknowledge that technological advances may
occur over the term of this Agreement which may render certain measurement
devices obsolete, or less accurate, or less efficient than that which may be
available. In such event, Gatherer or Processor may, with Producer's
approval, substitute or utilize such
13
9.12
If for any reason the Gas is delivered to Gatherer at a Gathering System
Delivery Point with pulsations that affect the accuracy of the measurement,
Producer shall be responsible for installing necessary pulsation dampeners, or
other devices, to eliminate or reduce the pulsations to an acceptable level
determined by Gatherer.
ARTICLE X
-
ALLOCATION
PROCEDURE
10.1 With
regard to the allocation of Plant Products, for each accounting period, the
actual Plant Products will be allocated to each Gathering System Delivery
Point in
the ratio of the Theoretical Plant Product Content of each Gathering System
Delivery Point over the sum of the Theoretical Plant Product Content for all
Gathering System Delivery Points. The Component amount will be
determined by analysis at the Plant Products Delivery Point.
The “Theoretical Plant Product
Content of each Gathering System Delivery Point” shall equal the product of the
Gathering System Delivery Point’s share
of plant inlet MCF multiplied by the GPM (Gallons per MCF) as determined by the
chromatograph analysis of a sample of the Gathering System Delivery Point.
10.2 With
regard to the allocation of Residue Gas, for each accounting period, the actual
metered residue gas at each Residue Gas Delivery Point shall be allocated to
each Gathering System Delivery Point in
the ratio of the calculated Theoretical Residue Remaining for the Gathering
System Delivery Point over the sum of Calculated Theoretical Residue Remaining
for all Gathering System Delivery Points.
The “Calculated
Theoretical Residue Remaining” shall equal each Gathering System
Delivery Point’s share of plant inlet volume MCF\MMBtu, minus each Gathering
System Delivery Point Plant Product
shrinkage (product shrinkage factors based on GPA 2145-03 bulletin), minus the
allocated Plant Fuel.
ARTICLE
XI -
DISPOSITION
OF PRODUCER'S PORTION OF PLANT PRODUCTS
On behalf of
Producer, Processor shall have the right to sell all Plant Products removed or
extracted from the Facilities after Gas is delivered at the Plant Delivery
Point(s). Processor shall sell the Plant Products at the Plant
Products Delivery Point(s), and Producer shall have no right to take the Plant
Products in kind at the Plant Products Delivery Point(s). Processor
shall remit to Producer its share of the net proceeds received by Processor at
the Plant Product Delivery Point(s).
14
ARTICLE
XII -
GATHERING
AND PROCESSING FEES
12.1 Producer
shall pay to Gatherer 41.63 cents ($0.4163) per MMBtu of Gas gathered pursuant
to this Agreement (the “Gathering Fee”).
12.2 Producer
shall pay to Processor 52.04 cents ($0.5204) per MMBtu of Gas processed pursuant
to this Agreement (the “Processing Fee”).
12.3 Producer
shall pay to Gatherer a compression fee or fees (the “Compression Fee”) computed
by multiplying the MMBtu’s of Producer’s Gas metered at each Gathering System
Delivery Point by the compression rate applicable to such Gathering System
Delivery Point, which shall be based upon the average monthly operating pressure
registered at such Gathering System Delivery Point as more particularly provided
and described in Exhibit D, attached hereto and incorporated
herein. Notwithstanding
anything herein to the contrary, Producer agrees that the Compression Fee
payable by Producer at a Gathering System Delivery Point shall never be less
than Gatherer’s actual cost to perform such compression
service.
12.4 In
the event Gas is treated as provided by Section 7.3, Producer shall pay a
treating fee (the “Treating Fee”) computed by multiplying 3.5 cents ($0.035) per
mole percent of CO2 (based
on tests conducted pursuant to Section 8.1), per MMBtu of Gas metered at the
applicable Gathering System Delivery Point where such Gas was
delivered.
12.5 On
each Escalation Date, the Gathering Fee, the Processing Fee, the Treating Fee
and the rates provided in Exhibit D (pertaining to the Compression Fee) will
increase by a percentage equal to the CPI Adjustment.
12.6. At
any time during the term of this Agreement, Producer may request that the
Parties enter into negotiations to reduce either the Gathering Fee or Processing
Fee, or both, and Gatherer and Processor agree to participate fully and
reasonably in such negotiations.
ARTICLE
XIII -
DISPOSITION
OF PRODUCER'S PORTION OF RESIDUE GAS
Processor will
deliver the Residue Gas to the Residue Gas Delivery
Point(s). Processor agrees to deliver Producer's Residue Gas at a
pressure sufficient to enter the third party natural gas pipeline(s), but in no
event shall Processor be obligated to deliver Residue Gas at a pressure which
exceeds the Plant discharge pressure of one thousand and sixty (1,060)
psig. Producer will separately contract with a third party regarding
the transportation and sale of their Residue Gas.
ARTICLE XIV
-
ACCOUNTING,
PAYMENTS AND CREDIT ASSURANCES
14.1 Gatherer
and Processor shall furnish to Producer on or before the twenty-fifth (25th) day
of each month a report or statement disclosing information necessary to
enable
15
14.2 Each
Party shall have the right during reasonable hours to examine books, records,
charts, and original test data of another Party to the extent necessary to
verify the accuracy of any statement, charge, credit, computation, test, or
delivery made pursuant to any provision hereof. If any such
examination reveals any inaccuracy in any such statement, charge, credit,
computation, test, or delivery, the necessary adjustment shall be promptly made
without interest or penalty. No Party will have any right to recoup or recover
prior overpayments or under payments that result from error that occur in spite
of good faith performance if the amounts involved do not exceed one thousand
dollars ($1,000.00).
14.3 Processor
shall pay to Producer monthly, on or before the sixtieth (60th) day after the
end of the production month, but in no case sooner than Processor receives
payment from its purchaser, the sums due under ARTICLE XI for Producer's Plant
Products marketed by Processor during the preceding month less the amount of any
taxes actually paid by Processor which are applicable to such
quantities. This payment shall be made irrespective of the interest,
title, or lien of any royalty or mineral owner or any third party or parties in
and to the Gas delivered by Producer to Processor hereunder, the Plant Products,
or Residue Gas derived therefrom, or proceeds accruing from the sale
thereof.
14.4 Producer
shall be responsible for the payment of all royalties due on the Gas. PRODUCER
SHALL INDEMNIFY AND HOLD GATHERER AND PROCESSOR HARMLESS FROM ANY AND ALL
CLAIMS, ACTIONS, CAUSES OF ACTION, DAMAGES, LIABILITY, OR OBLIGATIONS ARISING
OUT OF OR IN ANY WAY RELATED TO THE PAYMENT OF THE LESSOR'S ROYALTY OR ANY OTHER
BURDEN OR ENCUMBRANCE AFFECTING THE GAS.
14.5 Notwithstanding
any change in ownership of Producer's properties, Gatherer and Processor shall
never be required to make payments or to give notices required under the
provisions of this Agreement to more than one party, and, in the event that the
properties subject to this Agreement shall ever be owned by more than one party,
Gatherer and Processor may withhold (without interest) further payments and
notices until all of the owners of such properties have designated one party to
act for them in all respects relating to said properties and this Agreement,
including the rendering of bills, the submission of charts, and the receipt of
payments and notices hereunder.
16
14.6 Processor,
at its election, may deduct from its payment to Producer sums, if any, due to
Gatherer or Processor under the terms of this Agreement.
14.7 All
accounting records and documents directly related to this Agreement prepared by
any Party hereto shall be retained for a period of not less than two (2) years
following the end of the calendar year of their origination. The
Parties further agree that all matters relating to the accounting hereunder for
any calendar year shall be considered correct and not subject to further audit
or legal challenge after two years following the end of the calendar
year.
Producer must
maintain such creditworthiness as Gatherer and Processor shall reasonably
require. Gatherer and Processor’s creditworthiness requirements shall
be substantially similar to the requirements set forth below:
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a.
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Producer will
be deemed creditworthy if its long-term unsecured debt securities are
rated at least BB- by Standard & Poor’s Corporation (“S&P”) and at
least Ba3 by ▇▇▇▇▇’▇ Investor Service (“Moody’s”); provided, however, that
if the Producer’s rating is at BB- or Ba3 and the short-term or long-term
outlook is negative, Gatherer and Processor may require further
analysis.
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b.
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If Producer
does not meet the criteria described above, then Producer may request that
Gatherer and Processor evaluate its creditworthiness based upon the level
of service requested relative to the Producer’s current and future ability
to meet its obligations. Further, if Producer’s
creditworthiness does not meet any of the foregoing criteria, Producer
will be considered creditworthy if Producer maintains and delivers to
Gatherer and Processor an irrevocable guaranty of payment in form
acceptable to Gatherer and Processor, or an irrevocable letter of credit
from a financial institution rated at least A- by S&P or at least A3
by Moody’s, in a form acceptable to Gatherer and Processor, in either case
of the guaranty or the letter of credit in an amount satisfactory to
Gatherer and Processor. The obligation to maintain such credit
assurance shall extend until such time as Producer is deemed creditworthy
as defined herein. Producer shall provide the guaranty or the
letter of credit within twenty (20) days of written notice by Gatherer and
Processor that such financial assurance is
required.
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c.
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The
creditworthiness requirements set forth in this Section 14.8 shall apply
to any permitted assignment (in whole or in part), and to any permitted
permanent release, as applicable, of this Agreement. Gatherer
and Processor shall apply consistent evaluation practices to all similarly
situated producers to determine the Producer’s financial ability to
perform the payment obligations due to Gatherer and
Processor.
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17
ARTICLE
XV -
WARRANTY
15.1 Producer
warrants the title to all Gas and all Components thereof which shall be
delivered by Producer to Gatherer and Processor hereunder, the right to enter
into this Agreement with reference to such Gas, and that such Gas is free from
all liens and adverse claims; AND
AGREES, IF NOTIFIED THEREOF BY GATHERER OR PROCESSOR, TO INDEMNIFY, DEFEND AND
HOLD GATHERER AND PROCESSOR HARMLESS FROM AND AGAINST ANY AND ALL SUITS,
ACTIONS, LOSSES, DEBTS, ACCOUNTS, DAMAGES, COSTS, AND EXPENSES ARISING FROM OR
OUT OF ANY ADVERSE CLAIM AS TO PRODUCER’S TITLE, INCLUDING, BUT NOT LIMITED TO,
ANY ADVERSE CLAIM BROUGHT BY OR THROUGH A MINERAL INTEREST OR ROYALTY OWNER, TO
OR AGAINST THE GAS AND AGAINST THE PLANT PRODUCTS DERIVED
THEREFROM. Producer agrees to make settlement for all
royalties, overriding royalty interests, and/or production payments due and
payable on the Gas delivered to Gatherer and Processor hereunder, the Plant
Products extracted and saved therefrom, and the sale and disposition of the
Residue Gas thereof, all in accordance with the terms of the leases from which
Gas processed hereunder is produced, applicable instruments of title, and all
amendments thereto.
15.2 If
Producer's title to the Gas, Plant Products derived therefrom, or Residue Gas is
questioned, Processor may withhold payments of proceeds due hereunder without
interest up to the amount of the claim until title is free from such questions
or until Producer furnishes a bond satisfactory to Processor conditioned to save
Gatherer and Processor harmless, or other surety satisfactory to Gatherer or
Processor.
15.3 Producer
also represents and warrants that it has full authority to receive payment for
the sum of all Gas delivered hereunder.
ARTICLE
XVI -
TAXES
16.1 Producer
shall pay or cause to be paid all production, severance and ad valorem taxes,
assessments, and other charges levied or assessed against the Gas delivered by
Producer hereunder, and against Producer's portion of the Plant Products,
against Producer's Residue Gas, and against the sale thereof, and all taxes and
statutory charges levied or assessed against any of Producer's properties,
facilities, or operations.
16.2 Processor
shall pay all taxes and statutory charges levied or assessed against the Plant
and operations concerning such plant.
16.3 Gatherer
shall pay all taxes and statutory charges levied or assessed against the
Gathering System and operations concerning such system.
16.4 The
price paid under ARTICLE XII of this Agreement includes reimbursement for state
severance taxes paid by Producer and Processor under this ARTICLE XVI of the
Agreement.
18
ARTICLE
XVII -
INDEMNITY
17.1 As
between the Parties, and as to liability, if any, accruing to a Party hereto, or
to any third party, Producer shall be solely liable for and in control and
possession of the Gas deliverable hereunder until the Gas is delivered to
Gatherer at the Gathering System Delivery Point(s). Gatherer shall be
solely liable for and in control and possession of the Gas deliverable hereunder
until the Gas is delivered to Processor at the Plant Delivery
Point(s). Processor shall be solely liable for and in control and
possession of the Gas and the Plant Products until Processor has delivered
Residue Gas to Producer at the Residue Gas Delivery Point(s) whereupon Producer
shall again be in control and possession thereof and bear the risk of loss of
the Residue Gas.
17.2 PRODUCER
SHALL BE AFFORDED ACCESS TO GATHERER’S AND PROCESSOR’S PROPERTY AND THE
FACILITIES TO THE EXTENT NECESSARY TO CARRY OUT ITS RIGHTS AND OBLIGATIONS UNDER
THIS AGREEMENT, AND PRODUCER SHALL FULLY OBSERVE AND COMPLY WITH ALL OF
GATHERER’S AND PROCESSOR’S SAFETY PRACTICES AND PROCEDURES WHILE ON THE
PREMISES. PRODUCER HEREBY AGREES TO INDEMNIFY, HOLD HARMLESS,
PROTECT, DEFEND, AND DISCHARGE GATHERER AND PROCESSOR AND THEIR AFFILIATED
COMPANIES, PARTNERS, SUCCESSORS, ASSIGNS, OFFICERS, DIRECTORS, SHAREHOLDERS,
EMPLOYEES AND AGENTS FOR, FROM AND AGAINST ANY AND ALL JUDGMENTS, EXECUTIONS,
CAUSES OF ACTION, DEMANDS, RIGHTS, SUITS, DEBTS AND SUMS OF MONEY, ACCOUNTINGS,
DUES, PENALTIES, FINES, CLAIMS (INCLUDING, WITHOUT LIMITATION, CLAIMS FOR
CONTRIBUTION), LIABILITIES, LOSSES, COSTS, DAMAGES AND EXPENSES (INCLUDING COURT
COSTS, REASONABLE COSTS OF INVESTIGATION, DEFENSE AND ATTORNEY’S FEES) FOR THE
INJURY TO OR DEATH OF ANY PERSON (INCLUDING, WITHOUT LIMITATION, EACH OF
PRODUCER’S, GATHERER’S AND PROCESSOR’S EMPLOYEES, AGENTS AND CONTRACTORS) OR
PROPERTY DAMAGE OF ANY NATURE, KIND OR DESCRIPTION OR ANY OTHER CLAIM OF ANY
NATURE, KIND OR DESCRIPTION BROUGHT BY ANY PERSON OR ENTITY, WHETHER LEGAL OR
EQUITABLE, WHICH ARISES OUT OF, RESULTS FROM OR IS IN ANY WAY RELATED TO (i)
PRODUCER’S OWNERSHIP AND CONTROL OF THE GAS PRIOR TO THE TIME THAT THE GAS
PASSES THROUGH THE GATHERING SYSTEM DELIVERY POINT(S) AND AFTER THE RESIDUE GAS
PASSES THROUGH THE RESIDUE GAS DELIVERY POINT(S), (ii) PRODUCER’S
OWNERSHIP AND OPERATION OF THE ▇▇▇▇▇ LOCATED WITHIN THE CONTRACT AREA AND ANY
FACILITIES OR EQUIPMENT INSTALLED OR MAINTAINED BY PRODUCER UPSTREAM OF THE
GATHERING SYSTEM DELIVERY POINT, REGARDLESS OF WHETHER SUCH WAS REQUIRED BY THE
TERMS OF THIS AGREEMENT, (iii) THE PERFORMANCE OF ANY OBLIGATIONS, RIGHTS OR
DUTIES HEREUNDER, (iv) PRODUCER’S BREACH OF THIS AGREEMENT, OR (v) ANY
VIOLATION OF THE LAW, REGARDLESS OF EITHER GATHERER’S OR PROCESSOR’S SOLE,
CONCURRENT OR COMPARATIVE NEGLIGENCE. GATHERER HEREBY AGREES TO
INDEMNIFY, HOLD HARMLESS, PROTECT, DEFEND AND DISCHARGE
PROCESSOR
19
20
ARTICLE
XVIII -
FORCE
MAJEURE
In the event any
Party is rendered unable, either wholly or in part, by force majeure to carry
out its obligations under this Agreement, other than the obligation to make
payments due hereunder, it is agreed that on such Party giving notice and full
particulars of such inability by telephone and in writing to the other Parties
as soon as possible after the occurrence of the cause relied on, then the
obligations of the Party giving such notice, so far as they are affected by such
force majeure, shall be suspended during the continuance of any inability so
caused, but for no longer period, and such cause shall, as far as possible, be
remedied with all reasonable dispatch. The term "force majeure" as
employed herein shall mean any act or event which wholly or partially prevents
or delays the performance of obligations arising under this Agreement if such
act or event is not reasonably within the control of and not caused by the fault
or negligence of the Party claiming force majeure and which by the exercise of
due diligence such Party is unable to prevent or overcome, including, without
limitation, by the following enumeration: acts of God; strikes;
lockouts; or other industrial disturbances; acts of the public enemy; wars;
blockades; insurrections; riots; epidemics; landslides; lightning; earthquakes;
fires; storms; floods; washouts; arrests and restraints of governments and
people; civil disturbances; explosion, breakage, or accidents to machinery,
plant facilities, or lines of pipe; the necessity for making repairs to or
alterations of machinery, plant facilities, or lines of pipe; freezing of ▇▇▇▇▇
or lines of pipe; partial or entire failure of ▇▇▇▇▇; and the inability of
either Producer, Gatherer or Processor to acquire, or the delays on the part of
either Producer, Gatherer or Processor in acquiring, at reasonable cost and
after the exercise of reasonable diligence: (a) any servitude,
rights-of-way grants, permits, or licenses; (b) any materials or supplies for
the construction or maintenance of facilities; and (c) any permits or
permissions from any governmental agency if such are required. It is
understood and agreed that the settlement of strikes or lockouts shall be
entirely within the discretion of the Party having the difficulty and that the
above requirements that any force majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes or lockouts by acceding to
the demands of the opposing party when such course is inadvisable in the sole
discretion of the Party having the difficulty.
ARTICLE
XIX -
UNPROFITABLE
OPERATIONS AND RIGHTS OF TERMINATION
19.1 If,
in the sole and absolute opinion of Gatherer, the gathering of Gas from any well
or ▇▇▇▇▇, or any Gathering System Delivery Point, under this Agreement, is or
becomes uneconomical due to its volume, government regulations, or any cause
other than force majeure, Gatherer shall not be obligated to gather or may cease
gathering the Gas therefrom so long as such condition
exists. Gatherer agrees that in its determination of uneconomical
gathering, the same criteria shall be used for the Gas as for all other gas
being gathered through the Gathering System. In the event that
Gatherer refuses to gather the Gas, Producer may dispose of the Gas not gathered
as it sees fit; provided that
21
19.2 If,
in the sole and absolute opinion of Processor, the processing of Gas from any
well or ▇▇▇▇▇, or any Gathering System Delivery Point, under this Agreement, is
or becomes uneconomical due to its volume, Plant Product content, government
regulations, or any cause other than force majeure, Processor shall not be
obligated to process or may cease processing the Gas therefrom so long as such
condition exists. Processor agrees that in its determination of
uneconomical processing, the same criteria shall be used for the Gas as for all
other gas being processed through the Plant. In the event that
Processor refuses to process the Gas, Producer may dispose of the Gas not
processed as it sees fit; provided that Processor at any time thereafter shall
have the right to process all of the Gas refused, if refused for reason or
reasons resulting from an act of Producer or lack of action on the part of
Producer, conditioned upon Processor giving Producer at least two (2) months'
notice of its election so to do. In the event that Processor refuses
to process the Gas for a period of sixty (60) consecutive days and Gatherer is
unable to by-pass the Plant in order to deliver Producer’s gas to an alternative
pipeline willing to accept Producer’s unprocessed Gas causing Producer’s well(s)
to be shut-in, Producer shall have the option, exercised solely at its
discretion, to terminate this Agreement insofar as it pertains to Gas produced
from the affected well(s) by providing to Processor a thirty (30) days’ advance
written notice of such termination.
19.3 In
the event Processor should at any time hereafter elect to permanently
discontinue the operation of the Plant, Gatherer, Processor and Producer shall
each have the option, exercised solely at its discretion, of terminating this
Agreement in its entirety upon one hundred twenty (120) days advance written
notice of such termination notice to the other Parties.
19.4 Nothing
herein shall be construed to require Producer to drill any well or to continue
to operate any well which a prudent operator would not in like circumstances
drill or continue to operate.
19.5 It
is agreed that neither Gatherer nor Processor shall be obligated to expand the
Facilities in order to provide capacity hereunder.
ARTICLE XX
-
TERM
This Agreement
shall be effective from the Effective Date and, subject to the other provisions
hereof, shall continue in full force and effect until August 10, 2017 (the
“Primary Term”) and shall be automatically renewed for one (1) year periods
thereafter unless on or
22
ARTICLE XXI
-
REGULATORY
BODIES
This Agreement and
the provisions hereof shall be subject to all valid applicable federal, state,
and local laws, order, rules, and regulations. Producer, Gatherer and
Processor have entered into this Agreement with the understanding, and in
reliance on the fact, that this Agreement and/or performance of this Agreement
are not and will not be subject to the jurisdiction or regulation of the Federal
Energy Regulatory Commission ("FERC"). If this Agreement and/or
performance of this Agreement becomes subject to such jurisdiction and/or
regulation, this Agreement shall automatically terminate unless Producer,
Gatherer and Processor agree, in writing, within thirty (30) days of the
effective date of the attachment of any such jurisdiction and/or regulation,
that this Agreement shall continue after such effective date.
ARTICLE XXII
-
ARBITRATION
Any controversy
between the Parties arising under ARTICLE X of this Agreement and not resolved
by agreement shall be determined by a board of arbitration upon notice of
submission given either by Processor, Gatherer or Producer, which request shall
also name one arbitrator. The Parties receiving such notice shall,
within ten (10) days thereafter, by notice to the others, jointly name the
second arbitrator, or failing so to do, the Party giving notice of submission
shall name the second. The two arbitrators so appointed shall name
the third, or failing so to do within ten (10) days, then upon the written
application of any Party, such third arbitrator may be appointed by the American
Arbitration Association. The arbitrators selected to act hereunder
shall be qualified by education, experience, and training to pass upon the
particular question in dispute. The jurisdiction of the arbitrators
will be limited to the single issue referred to arbitration, and the arbitration
shall be conducted pursuant to the guidelines set forth by the American
Arbitration Association; provided, however, that should there be any conflict
between the guidelines and the procedures set forth in this Agreement, the terms
of this Agreement shall control. Within fifteen (15) days following
selection of the third arbitrator, each Party shall furnish the arbitrators in
writing its position regarding the issue being arbitrated. The
arbitrators may, if they deem necessary, convene a hearing regarding the issue
being arbitrated. The arbitrators shall render their decision in
writing within thirty (30) days after the appointment of the third arbitrator or
the conclusion of the hearing, if one is held. If within said period
a decision is not rendered by the arbitrators, new arbitrators may be named and
shall act hereunder at the election of any of Processor, Gatherer or Producer in
like manner as if none has been previously named. The arbitrators’
decision shall be final and binding upon the Parties as to the issue submitted
and the Parties will abide by and comply with such decision. The
expenses of arbitration shall be borne equally by the Parties, except that each
Party shall bear the compensation and expenses of its counsel, witnesses, and
employees.
23
ARTICLE XXIII
-
DISPUTES
23.1 Subject
to the terms as set forth in ARTICLE XXII of this Agreement, should a dispute
arise between the Parties, the Parties shall promptly seek to resolve any such
dispute by negotiations among the senior executives of the Parties who have the
authority to settle such dispute (“Senior Executives”) prior to the initiation
of any lawsuit. The Senior Executives shall meet at a mutually
acceptable time and place within fifteen (15) days and thereafter as often as
they reasonably deem necessary to exchange relevant information and to attempt
to resolve the dispute. All negotiations and communications pursuant
to this ARTICLE XXIII shall be treated and maintained by the Parties as
confidential information and shall be treated as compromise and settlement
negotiations for purposes of the federal and state Rules of
Evidence. If the matter has not been resolved within thirty (30) days
after the initial meeting of the Senior Executives, or such longer period as may
be mutually agreed upon, either Party may initiate a lawsuit.
23.2 THIS
AGREEMENT, AND ALL QUESTIONS RELATING TO ITS VALIDITY, INTERPRETATION,
PERFORMANCE AND ENFORCEMENT (INCLUDING, WITHOUT LIMITATION, PROVISIONS
CONCERNING LIMITATIONS OF ACTIONS) SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, NOTWITHSTANDING ANY
CONFLICT-OF-LAWS DOCTRINES OF SUCH STATE OR OTHER JURISDICTION TO THE
CONTRARY. ALL MATTERS LITIGATED BY OR BETWEEN THE PARTIES THAT
INVOLVE THIS AGREEMENT, THE RELATIONSHIP OF THE PARTIES, OR ANY RELATED
DOCUMENTS OR MATTERS HEREUNDER SHALL BE BROUGHT ONLY IN FORT WORTH, TARRANT
COUNTY, TEXAS.
23.3 In
any suit filed by a Party hereto to resolve a dispute arising under this
Agreement or related to the services provided hereunder, each Party hereby
covenants and agrees to take all steps necessary to waive a trial by
jury.
ARTICLE
XXIV -
NOTICES
AND PAYMENTS
Any notice,
request, demand, statement, or ▇▇▇▇ provided for in this Agreement shall be in
writing and delivered by hand, mail, or facsimile. All such written
communications shall be effective upon receipt by the other party at the address
of the parties hereto as follow:
Producer
|
Statements:
|
Quicksilver
Resources Inc.
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: Revenue
Accounting
|
|
Payments:
|
Quicksilver
Resources Inc.
|
24
|
|
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: Accounting
|
|
Contractual:
|
Quicksilver
Resources Inc.
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: Marketing
|
25
Gatherer
|
Statements:
|
Cowtown
Pipeline Partners L.P.
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: Revenue
Accounting
|
|
Payments:
|
Cowtown
Pipeline Partners L.P.
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: Accounting
|
|
Contractual:
|
Cowtown
Pipeline Partners L.P.
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: Marketing
|
Processor
|
Statements:
|
Cowtown Gas
Processing Partners L.P.
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: Revenue
Accounting
|
|
Payments:
|
Cowtown Gas
Processing Partners L.P.
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: Accounting
|
|
Contractual:
|
Cowtown Gas
Processing Partners L.P.
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: Marketing
|
Any of the Parties
may designate a further or different address by giving written notice to the
other Parties.
ARTICLE
XXV -
ASSIGNMENT
This Agreement (and
a Party’s rights and obligations hereunder) is assignable in whole or in
part. This Agreement shall be binding upon and inure to the benefit
of the heirs, executors, administrators, successors, and assigns of the
respective Parties hereto; provided that no transfer of or succession to the
interest of any Party hereunder, either wholly or partially, shall affect or
bind the other Parties until it shall have been furnished with the original
instrument or with the proper proof that the claimant is legally entitled to
such interest.
26
ARTICLE XXVI
-
MISCELLANEOUS
26.1 No
waiver by any Party of any one or more defaults in the performance of any
provision of this Agreement shall operate or be construed as a waiver of
any default or future defaults, whether of a like or different
character.
26.2 This
Agreement contains the entire agreement between the Parties and there are no
oral promises, agreements, or warranties affecting it. This Agreement
may be amended or modified from time to time only by the written agreement of
all the Parties hereto; provided, however, that the Parties may not, without the
prior approval of the Conflicts Committee (as such term is defined in the
partnership agreement for Quicksilver Gas Services L.P.(“MLP”), the parent of
Gatherer and Processor, agree to any amendment or modification of this Agreement
that the general partner of MLP determines will adversely affect the holders of
common units of MLP.
26.3 The
provisions of this Agreement are enforceable by the Parties hereto and MLP,
which is an intended third party beneficiary hereof. Except as described in the
immediately preceding sentence, nothing in this Agreement, express or implied,
is intended to confer upon any person other than the Parties hereto and MLP and
their respective successors and assigns, any rights, benefits or obligations
hereunder. No limited partner of the MLP shall have the right, separate
and apart from MLP, to enforce any provision of this Agreement or to compel any
Party to this Agreement to comply with the terms of this Agreement.
26.4 The
descriptive headings of the provisions of these general provisions are
formulated and used for convenience only and shall not be deemed to affect the
meaning or construction of any such provisions.
26.5 This
Agreement supersedes and replaces any other contract(s) or agreements(s) which
may exist between the Parties covering the gathering and processing of the Gas
dedicated hereunder; provided
the Parties agree that a separate gathering agreement may be executed in
substitution of this Agreement to provide for the gathering by Gatherer of gas
produced from some portion of the dedicated Contract Area but which is deemed
“dry” and not otherwise desirable or acceptable for processing at the
Facilities.
26.6 Nothing
in this Agreement is intended to create a partnership or joint venture under
state law or to render the Parties hereto jointly and severally liable to any
third party. Each of the Parties elects to be excluded from the
provisions of Subchapter K, Chapter 1 of Subtitle A, of the Internal Revenue
Code of 1986 pursuant to the provisions of Article 761(a) of such code and from
any similar provisions of state law. Processor shall timely file such
evidence of this election as may be required under applicable law.
26.7 Should
any section, paragraph, subparagraph, or other portion of this Agreement be
found invalid as a matter of law in a duly authorized court, or by a duly
authorized government agency, then only that portion of the Agreement shall be
invalid.
27
26.8 This
Agreement was prepared jointly by the Parties hereunder and not by any Party to
the exclusion of the other.
26.9 Producer
recognizes and acknowledges Gatherer’s and Processor's proprietary interest in
this Agreement, and Producer agrees not to divulge any of the contents hereof to
any other person, firm, corporation, or other entity. Producer agrees
to be responsible for enforcing the confidentiality of this Agreement and agrees
to take such action as necessary to prevent any disclosure by any of its agents
or employees.
(SIGNATURE PAGE
FOLLOWS)
28
IN WITNESS WHEREOF,
the Parties hereto have executed this Agreement in several originals to be
effective as of the Effective Date.
| PRODUCER | |||
| Quicksilver Resources Inc., a Delaware corporation | |||
|
|
By:
|
/s/ ▇▇▇▇ Page | |
| ▇▇▇▇ Page | |||
| Vice President - U.S. Operations | |||
| GATHERER | |||
| Cowtown Pipeline Partners L.P., a Texas limited partnership | |||
|
|
By:
|
Quicksilver Gas Services Operating GP LLC, its general partner | |
|
|
By:
|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
| President and Chief Executive Officer |
| PROCESSOR | |||
| Cowtown Gas Processing Partners L.P., a Texas limited partnership | |||
|
|
By:
|
Quicksilver Gas Services Operating GP LLC, its general partner | |
|
|
By:
|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
| President and Chief Executive Officer | |||