STORAGE SERVICE AGREEMENT BY AND BETWEEN BAY GAS STORAGE COMPANY, LTD. AND BP ENERGY COMPANY CONTRACT NUMBER FBP07

PORTIONS OF THIS EXHIBIT IDENTIFIED BY “***” HAVE BEEN DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND THE FREEDOM OF INFORMATION ACT.

Exhibit 10(e)

STORAGE SERVICE AGREEMENT

BY AND BETWEEN

BAY GAS STORAGE COMPANY, LTD.

AND

BP ENERGY COMPANY

CONTRACT NUMBER FBP07

TABLE OF CONTENTS

Exhibits

Exhibit “A” – Points of Receipt and Delivery

Exhibit “B” – General Terms and Conditions

Exhibit “C” – Amended Statement of Conditions

Exhibit “D” – Sample Nomination Form

Exhibit “E” – Form of Assignment Consent

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STORAGE SERVICE AGREEMENT

     THIS STORAGE SERVICE AGREEMENT (this “Contract” or “Agreement”) is made and entered into as of the 31st day of March, 2005, by and between BAY GAS STORAGE COMPANY, LTD (“Bay Gas”), an Alabama limited partnership, and BP ENERGY COMPANY (“Shipper”). Bay Gas and Shipper hereinafter may be referred to individually as “Party” and collectively as “Parties”.

W I T N E S S E T H:

     WHEREAS, Bay Gas and Shipper executed a Storage Service Agreement dated March 31, 2005 - Contract Number FBP05 (“Contract FBP05”); and

     WHEREAS, Bay Gas intends to develop certain new underground gas storage facilities (the “New Storage Facilities”) to be constructed in connection with existing underground gas storage facilities located near McIntosh, Alabama which are owned and operated by Bay Gas (the “Existing Storage Facilities”; the Existing Storage Facilities and New Storage Facilities being referred to herein collectively as the “Storage Facilities”); and

     WHEREAS, Shipper desires to contract for a portion of the storage capacity of the Storage Facilities, and desires that Bay Gas receive at the Point(s) of Receipt specified on Exhibit “A” attached hereto and made a part hereof, certain quantities of gas from the pipeline facilities identified therein for the purpose of injecting and storing such gas for Shipper (or for its account) in the Storage Facilities, and that Bay Gas deliver such gas into the pipeline facilities identified on Exhibit “A” at the Point(s) of Delivery therein specified; and

     WHEREAS, Bay Gas desires to perform such services for Shipper, all to be provided pursuant and subject to the terms and conditions hereof; and

     WHEREAS, all transactions for storage or transportation hereunder meet the Federal Energy Regulatory Commission’s requirements of Subpart C – Certain Transportation by Intrastate Pipelines, at 18 CFR 284.122(d)(1) and are on behalf of an interstate pipeline (Florida Gas); and

     WHEREAS, Shipper and Bay Gas intend this Contract, upon the occurrence of the Commencement Date as defined in Section 2.1 herein, to replace Contract FBP05.

     NOW, THEREFORE, for and in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of

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which are hereby acknowledged, Bay Gas and Shipper hereby agree as follows:

ARTICLE I

CONDITIONS PRECEDENT

     1.1 Following the date of this Agreement, Bay Gas shall exert its best efforts to obtain:

     (a) Satisfactory arrangements for financing the construction of New Storage Facilities to provide services to Shipper as provided herein (it being understood and agreed that the determinations of what New Storage Facilities shall be constructed and what financing is satisfactory shall be in the sole discretion of Bay Gas); and

     (b) All permits, authorizations, certificates and approvals, as deemed necessary or desirable by Bay Gas, from all appropriate local, state or federal agencies having jurisdiction over the construction, operation or rates charged for services, to enable it to perform its obligations and receive the benefits provided for hereunder.

     1.2 Promptly following the attainment by Bay Gas of satisfactory arrangements for financing, and all permits, authorizations, certificates and approvals as set forth in Section 1.1(a) and 1.1(b) consistent with the terms of this Agreement (or the waiver thereof by Bay Gas and Shipper), Bay Gas shall proceed with the necessary activity to commence the leaching of the required new storage capacity. Upon or before commencement of the leaching activity Bay Gas shall provide Shipper with written notice (the “Commitment Notice”) to such effect.

     1.3 Notwithstanding Section 1.1 and 1.2, Bay Gas shall provide Shipper with a Commitment Notice no later than twenty-four (24) months following the date of this Contract, failing which Shipper shall have the right to terminate this Contract by written notice to Bay Gas.

     1.4 If Bay Gas determines at any time that construction of all or any portion of the New Storage Facilities would not be economic, in Bay Gas’ sole discretion, Bay Gas shall have the right to terminate this Agreement upon 30 days prior written notice to Shipper (“Notice of Termination”). This Agreement shall terminate upon the expiration of the 30-day period unless within such period (a) Bay Gas withdraws such Notice of Termination in writing or (b) the Parties, in writing, enter into a mutually acceptable amendment to the Agreement.

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     ARTICLE II

     COMMENCEMENT OF OPERATIONS

     2.1 If Bay Gas provides the Commitment Notice described in ARTICLE I, Bay Gas shall thereafter provide Shipper written notice when facilities to provide the services specified herein are to be operational, and shall state in such notice a date upon which Bay Gas will be ready to receive gas for storage and otherwise provide to Shipper the services specified herein (hereinafter referred to as the “Commencement Date”). Such notice shall specify a Commencement Date not later than twenty-four (24) months from the date of the Commitment Notice (except in the case of force majeure as described in Bay Gas’ General Terms and Conditions, attached as Exhibit “B”). In the event of such Force Majeure the twenty-four (24) months prescribed in the preceding sentence shall be increased by a period of time equal to the time of the force majeure, but in no event shall such twenty-four (24) month period, as it may be increased hereby, be a period greater than thirty (30) months. If Bay Gas has not specified a Commencement Date or if the New Storage Facilities have not been placed in service within the time required hereby either Party may terminate this contract by written notice to the other.

     2.2 Upon the occurrence of the Commencement Date, this Contract shall replace Contract FBP05 and, except to the extent of obligations and liabilities occurring and accruing prior to the Commencement Date under Contract FBP05, the Parties shall no longer be bound by the terms and conditions of Contract FBP05.

     2.2 For a period not to exceed **** days following the Commencement Date (such period to be referred to hereinafter as the ”Start-up Period”), the amount of firm injection capacity available to Shipper shall be provided in accordance with the volumes set forth in Article 3.1 (d) below.

ARTICLE III

GAS TO BE RECEIVED, STORED AND DELIVERED

     3.1 Contract Quantities. Subject to the terms and conditions established herein and in Bay Gas’ General Terms and Conditions, attached as Exhibit “B”, and made a part hereof, and Amended Statement of Conditions, attached as Exhibit “C” and made a part hereof, Bay Gas shall provide the following capacities to Shipper, provided that under no circumstances will Bay Gas be obligated to provide to Shipper capacities in excess of the maximum quantities set forth below:

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     3.2 Gas Tendered. Shipper shall tender or cause to be tendered to Bay Gas at the Point(s) of Receipt specified on Exhibit “A” any gas which Shipper desires to have injected into storage hereunder. The obligation of Bay Gas to receive gas shall not exceed: (a) at any Point of Receipt the lesser of, (i) the Injection Quantities for such Point of Receipt, or (ii) the total daily volume that Shipper or its designee is able and willing to tender at such Point of Receipt; or (b) the aggregate Injection Quantities for all Points of Receipt. Shipper shall also receive or cause to be received at the Point(s) of Delivery herein specified on Exhibit “A” gas it requests to be withdrawn from storage by Bay Gas.

     3.3 Gas Received and Delivered. Subject to the operating conditions of the pipeline(s) delivering or receiving gas for Shipper’s account and the terms hereof, Bay Gas shall receive gas for injection from Shipper at the Point(s) of Receipt and deliver gas to Shipper at the Point(s) of Delivery specified on Exhibit “A” as scheduled by Shipper from time to time; provided that Bay Gas shall not be obligated to receive for injection any quantity of gas if the injection of the same would cause the quantity of gas stored in the Storage Facilities for Shipper’s account (“Shipper’s Gas Storage Inventory”) to exceed the total of Shipper’s FMSQ as stated above; nor shall Bay Gas be obligated at any time to deliver more gas to Shipper than Shipper has in its then-current Shipper’s Gas Storage Inventory.

     3.4 Gas to be Withdrawn on Termination. Shipper must have all of its gas withdrawn by the end of the term of this Contract. If service pursuant to this Contract is canceled or terminated prior to the end of the term specified herein, and Shipper has gas in its then-current Shipper’s Gas Storage Inventory, Shipper shall be required to withdraw its gas within a thirty (30) day period. During this period, this Contract shall continue in force and effect for the sole purpose of withdrawal and delivery of and payment for storage services for said gas. If the gas is not withdrawn within the specified time period, Bay Gas shall take title to such gas not withdrawn.

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ARTICLE IV

PERFORMANCE OBLIGATION

     Firm Service. All Firm service rendered under this Contract shall be provided to Shipper except in the case of force majeure as described in Bay Gas’ General Terms and Conditions attached as Exhibit “B”. Bay Gas shall not be obligated to provide capacities in excess of those stated in Article 3.1 of this Contract.

ARTICLE V

DELIVERY PRESSURE

     Delivery Pressure. Shipper is obligated to deliver gas at the Point(s) of Receipt identified in Exhibit “A” at a pressure sufficient for Bay Gas to transport such gas to its storage facility recognizing that the amount of such pressure required may vary based on the operations of the Bay Gas pipeline; provided however, in no event shall such pressures be greater than Bay Gas’ maximum allowable operating pressures.

ARTICLE VI

POINT(S) OF RECEIPT AND DELIVERY

     6.1 Point(s) of Receipt. The Point(s) of Receipt for all gas to be tendered by Shipper to Bay Gas for injection into the Storage Facilities shall be as specified on Exhibit “A”, and the maximum daily quantity of gas which Bay Gas is obligated to receive from Shipper at each individual Point of Receipt shall not exceed the maximum stated thereon.

     6.2 Point(s) of Delivery. The Point(s) of Delivery for all gas to be tendered by Bay Gas to Shipper for delivery pursuant to the terms hereof shall be as specified on Exhibit “A”, and the maximum daily quantities of gas which Bay Gas is obligated to deliver to Shipper at each such individual Point of Delivery shall not exceed the maximum stated thereon.

     6.3 Addition / Deletion of Point(s) of Receipt or Delivery. Bay Gas and Shipper may add or delete Point(s) of Receipt or Delivery from time to time by mutual agreement evidenced by a signed amendment to Exhibit “A”.

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ARTICLE VII

TITLE AND RISK OF LOSS

     7.1 Title. Title to the natural gas stored by Bay Gas and delivered to Shipper hereunder shall, at all times, be in Shipper’s name. Bay Gas makes no warranty of title whatsoever. Shipper warrants for itself, its successors and assigns, that it will have at the time of delivery of gas for storage hereunder good title or valid right to deliver such gas stored hereunder. Shipper warrants for itself, its successors and assigns, that the gas it delivers hereunder shall be free and clear of all liens, encumbrances, or claims whatsoever; and that it will indemnify Bay Gas and save it harmless from all claims, suits, actions, damages, costs and expenses arising directly or indirectly from or with respect to the title to gas tendered to Bay Gas hereunder.

     7.2 No Encumbrance on Stored Gas. Bay Gas covenants that it shall neither cause nor allow any cloud or encumbrance of any nature to arise by, through or under Bay Gas with respect to Shipper’s title to any gas tendered to Bay Gas for storage, and agrees to deliver such gas pursuant to this Agreement free from all liens and adverse claims arising by, through or under Bay Gas, and that it will indemnify, protect, and save Shipper harmless from all claims, suits, actions, damages, costs and expenses arising directly or indirectly from the same.

     7.3 Control and Possession. As between Shipper and Bay Gas: Shipper shall be in control and possession of the gas prior to delivery to Bay Gas for injection at the Point(s) of Receipt and after delivery by Bay Gas to Shipper at the Point(s) of Delivery, and shall indemnify and hold Bay Gas harmless from any damage or injury caused thereby except for damages and injuries caused by the sole negligence of Bay Gas; and, Bay Gas shall be in control and possession of the gas after the receipt of the same for injection at the Point(s) of Receipt and until delivery by Bay Gas to Shipper at the Point(s) of Delivery, and shall indemnify and hold Shipper harmless from any damage or injury caused thereby, except for damages and injuries caused by the sole negligence of Shipper. The risk of loss for all gas injected into, stored in and withdrawn from the Storage Facilities shall be and remain with the Party having control and possession of the gas as herein provided.

ARTICLE VIII

TERM

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Following the Primary Term Shipper shall have a right to extend the term of the Contract for an additional **** period under the same terms and conditions. Shipper shall provide written notice to Bay Gas that it will extend the Contract not less than **** prior to the end of the Primary Term.

ARTICLE IX

DEFAULT AND TERMINATION

     9.1 If either Party hereto shall fail to perform any of the covenants or obligations imposed upon it by virtue of this Contract (except where such failure shall be excused under any of the provisions of this Agreement or except where other termination remedies have been established under this Agreement), then in such event the other Party may, at its option, terminate this Contract by proceeding as follows: the Party not in default shall cause a written notice to be served upon the Party in default, stating specifically the cause for terminating this Contract and declaring it to be the intention of the Party giving the notice to terminate the same; whereupon, the Party in default shall have thirty (30) days after receipt of the aforesaid notice within which to remedy or remove the cause or causes of default stated in the notice of termination and if, within said period of thirty (30) days, the Party in default does so remedy and remove such cause or causes, and fully indemnifies the Party not in breach, then such notice shall be nullified and this Contract shall continue in full force and effect. In the event the Party in default does not so remedy and remove the cause or causes of default, or does not fully indemnify the Party giving the notice for such Party’s actual damages as a result of such breach within said period of thirty (30) days, then this Contract shall terminate after the expiration of said period; provided, however, that if such default be remedied but no indemnification therefor has been made due to a bona fide dispute between the Parties as to the amount thereof, then this Contract shall not terminate, but the Party not in default shall have the right to seek recovery of its actual damages as provided by law. Notwithstanding any provision to the contrary in the Amended Statement of Conditions or the General Terms and Conditions, any termination for breach of this Contract shall be carried out strictly in accordance with this section (it being the intent of this Agreement that the foregoing language is an exception to the provisions of Article X of the Amended Statement of Conditions).

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     9.2 Any cancellation of this Contract pursuant to the provisions of this Article IX shall be without prejudice to the right of the Party not in default to collect any amounts then due it and without waiver of any other remedy or performance to which the Party not in default may be entitled.

ARTICLE X

RATES

     10.1 Storage Charges. In accordance with the billing procedures described in the General Terms and Conditions, attached as Exhibit “B” beginning with the month in which the Commencement Date occurs, Shipper shall pay to Bay Gas the following charges:

ARTICLE XI

TAXES

     11.1 (a) Shipper agrees to pay Bay Gas, by way of reimbursement, within twenty (20) days of receipt of an invoice for same, all taxes levied or imposed upon Bay Gas after the date hereof; and any increases in existing taxes which may be made effective after the date hereof, with respect to the storage of gas hereunder. Bay Gas agrees to pass through to Shipper in its monthly ▇▇▇▇▇▇▇▇ any savings resulting from decreases in existing taxes which may be made effective after the date hereof, with respect to the storage of gas hereunder. In the event that any additional taxes or

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increases in taxes are imposed and, should Bay Gas elect not to challenge the same, then Shipper shall be subrogated to Bay Gas’ rights to challenge the same. In no event shall Shipper be required to pay any tax in a greater amount than its pro-rata share.

     (b) Shipper shall reimburse Bay Gas for Shipper’s pro-rata portion of all ad valorem taxes, property taxes and/or other similar taxes.

     11.2 The term “taxes” as used in Section 11.1 shall mean all taxes which are now in existence or which may in the future be levied upon Bay Gas, or its facilities or the storage of gas hereunder (other than capital stock, income or excess profit taxes, or general franchise taxes imposed on corporations on account of their corporate existence or on their right to do business within the state as a foreign corporation and similar taxes), including, but not limited to, gross receipts tax, street and alley rental tax, licenses, fees and any other taxes, charges or fees of any kind levied, assessed or made by any governmental authority on the act, right or privilege of transporting, handling or delivering gas or using Bay Gas’ Storage Facilities, or any fee in respect to the gas or the storage, transportation or other handling thereof.

ARTICLE XII

NOTICES

     12.1 Whenever any notice, request, demand, statement, nomination or payment is required or permitted to be given under any provision of this Contract, unless expressly provided otherwise, such shall be in writing, signed by or on behalf of the person giving the same, and shall be deemed to have been given and received upon the actual receipt thereof (including the receipt of a telecopy or facsimile of such notice) at the address of the Parties as follows:

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     12.2 Operating communications made by telephone or other mutually agreeable means shall be confirmed in writing or by telecopy within two (2) hours following same if confirmation is requested by either Party. To facilitate such operating communications on a daily basis, lists of names, telephone and telecopy numbers of appropriate operating personnel shall be exchanged by and between Bay Gas and Shipper before commencement of service under this Contract. Such lists shall be updated from time to time.

     12.3 Either Party may revise its addresses by giving notice in accordance herewith, designating in such writing the new address of such Party.

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ARTICLE XIII

NOMINATIONS

     13.1 Bay Gas shall accept intra-day nominations until 10:00 AM central time. Scheduled quantities resulting from such intra-day nominations will be effective at 5:00 PM central time that day. Such intra-day nominations from firm Shippers will bump any previously scheduled interruptible quantity.

     After the 10:00 AM deadline, Bay Gas shall continue to accept intra-day nominations until 5:00 PM central time. Scheduled quantities resulting from such intra-day nominations will be effective at 9:00 PM central time. Bumping of previously scheduled interruptible quantities is not allowed for such nominations.

     13.2 Bay Gas will maintain personnel and equipment available to receive and act upon nomination changes and confirmations twenty-four (24) hours per day.

     13.3 Written nominations and confirmations of verbal nominations will be made on the nomination form attached hereto as Exhibit “D”.

     13.4 In the event that Bay Gas fails to obtain confirmation from Shipper’s transportation service of Shipper’s nomination, Bay Gas shall notify Shipper of such failure as soon as practicable.

ARTICLE XIV

GENERAL TERMS AND CONDITIONS;
STATEMENT OF CONDITIONS FOR GAS STORAGE

     The following are hereby incorporated herein and made a part of this Contract as if fully set forth herein: (a) the General Terms and Conditions attached hereto as Exhibit “B” (the “General Terms and Conditions”); and the Statement of Conditions for NGPA Section 311(a)(2) Gas Storage Services attached hereto as Exhibit “C” (the “Statement of Conditions”). In the event of any conflict or inconsistency between the terms hereof and the General Terms and Conditions or the Statement of Conditions, such conflict or inconsistency shall be resolved in favor of the terms hereof (it being the intent of this Agreement that the foregoing language is an exception to the provisions of Article X of the Statement of Conditions).

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ARTICLE XV

MISCELLANEOUS

     15.1 Amendment. Neither this Contract nor any provisions hereof may be amended, changed, modified or supplemented except by an agreement in writing, duly executed by the Party to be charged with the same.

     15.2 Assignment. Either Party may assign its rights, titles or interests hereunder to any individual, bank, trustee, company or corporation (“Lender”) as security for any note, notes, bonds or other obligations or securities of such assignor. In the event of such assignment by Bay Gas, Shipper shall execute an assignment consent substantially in the form as attached hereto as Exhibit “E”, as well as cause to be delivered to Bay Gas an opinion of counsel of Shipper to the effect that the Contract has been duly authorized, executed and delivered by Shipper and is enforceable against Shipper in accordance with it’s terms. Shipper shall provide such financial information to the Lender which is the assignee of Bay Gas as may be reasonably requested by Bay Gas and which may be required under this Agreement. Except as specified in the first sentence of this Article 15.2, no assignment shall be made without the written consent of the other Party hereto, which consent shall not be unreasonably withheld. No assignment provided for hereunder shall in any way operate to enlarge, alter or change any obligation of the other Party hereto nor shall the assignee be relieved of its obligations hereunder without the express written consent of the non-assigning Party.

     15.3 Invalid Provision. In the event one or more of the provisions contained herein shall be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision hereof and this Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein, provided that the deletion of such invalid, illegal or unenforceable provision does not materially change the intended nature and risk of the services provided hereunder.

     15.4 Regulatory Approvals. This Contract shall be subject to the approval of any Federal or State regulatory agency with appropriate jurisdiction in accordance with Article 1.2.

     15.5 Creditworthiness. Shipper agrees it shall have a rating on its senior long-term debt of “BBB-“ or better as rated by Standard & Poor’s Ratings Group, or an equivalent rating from another nationally recognized credit rating agency. Should Shipper’s rating on its senior long-term debt fall below “BBB-“ then Shipper shall provide a payment guarantee from an affiliate with a rating on it’s senior long-term debt of “BBB-“ or better as rated by Standard & Poor’s Ratings Group, or an equivalent rating from another nationally recognized credit rating agency.

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     15.6 Entire Agreement. This Agreement and the exhibits attached hereto contain the entire agreement between the Parties and there are no representations, understandings or agreements, oral or written, between the Parties which are not included herein.

     15.7 Governing Law. As to all matters of construction and interpretation, this Contract shall be interpreted, construed and governed by the laws of the State of Alabama, excluding any conflict of laws rule which would direct the application of the law of another jurisdiction.

     IN WITNESS WHEREOF, the Parties have executed, or caused to have executed, this Contract in one or more copies or counterparts, each of which shall constitute and be an original of this Contract effective between the Parties as of the date first-above written.

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EXHIBIT “A”

TO STORAGE AGREEMENT (“CONTRACT”) BETWEEN BAY GAS STORAGE
COMPANY, LTD. AND BP ENERGY COMPANY

Gas may be scheduled for receipt at the Point of Receipt, in quantities up to the maximum quantities indicated for such Point in Article I herein for firm injection, unless otherwise agreed by Bay Gas

Gas may be scheduled for delivery at the Point of Delivery, in quantities up to the maximum quantities indicated for such Point in Article I herein for firm withdrawal, unless otherwise agreed by Bay Gas.

EXHIBIT “B”

TO STORAGE AGREEMENT (“CONTRACT”) BETWEEN BAY GAS STORAGE
COMPANY, LTD. AND BP ENERGY COMPANY

GENERAL TERMS AND CONDITIONS

TO

BAY GAS STORAGE COMPANY, LTD.

STORAGE AND TRANSPORTATION SERVICE AGREEMENTS

GENERAL TERMS AND CONDITIONS
TO
BAY GAS STORAGE COMPANY, LTD.’S (“COMPANY”)
STORAGE AND TRANSPORTATION SERVICE AGREEMENTS

CONTENTS

GENERAL TERMS AND CONDITIONS

SECTION I.

Definitions

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Unit Rate = {[ MDC x IMSQ x (12 or PT if < 12)] + Rev.} / IMSQ)

Where:

“MDC” equals the Monthly Demand Charge

“IMSQ” equals the Interruptible Maximum Storage Quantity

“PT” equals the Primary Term of the Agreement

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SECTION II.

Nominations, Balancing and Excess Deliveries

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5

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SECTION III.

Construction of Facilities

     Under no circumstances shall Company be obligated to construct or add facilities to receive or deliver or redeliver gas under a Storage or Transportation Service Agreement, or to increase the capacity of Company’s pipeline system or storage or transportation facilities. Upon Shipper’s written request to evaluate connections of new facilities, Company will prepare and submit to Shipper a construction cost estimate. All new or additional facilities that may be required for the delivery of acceptable gas to Company, or for the delivery or redelivery of gas to the receiving party or parties will be constructed, maintained, owned and operated by Company, except as may otherwise be expressly agreed in writing. The design and installation of all facilities shall be in accordance with the specifications then used by Company for like or similar facilities. Shipper shall bear the cost of all such new connections, unless otherwise mutually agreed.

SECTION IV.

Rate Adjustment

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SECTION V.

Regulatory Requirements

     Company’s interstate services shall be in accordance with and subject to the requirements of Section 311(a)(2) of the NGPA and the rules and regulations of the FERC thereunder. Company’s intrastate services shall be in accordance with and subject to the laws, rules and regulations of the State of Alabama.

     Company agrees to proceed with reasonable diligence during the term of the Storage or Transportation Service Agreement with the filing for and prosecution of any authorizations as may be required for the storage or transportation of the gas hereunder or the rate(s) charged therefore. Company reserves the right to pursue any necessary regulatory filings with FERC and any other governmental or regulatory body having jurisdiction in such matter as it deems to be in its best interest, including the right to file whatever pleadings and motions it deems desirable. In the event Company has obtained such necessary regulatory authorization, but the terms and conditions are significantly different than those terms originally filed with the regulatory agency, or in the event FERC rejects or modifies Company’s Statement of Conditions for NGPA Section 311(a)(2) Gas Storage and Transportation Services, as same may be amended by Company from time to time, Company shall pursue other reasonable options to continue providing such services or, at Company’s option, shall terminate such services as provided in Article VII, Right to Terminate Services, of Company’s Statement of Conditions.

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SECTION VI.

Pressures

Company shall operate its storage facilities at pressures which will accommodate the withdrawal of gas in accordance with Company’s outstanding firm service storage commitments. Company shall operate its transportation facilities at pressures which will accommodate the redelivery of gas in accordance with Company’s outstanding firm service transportation commitments. Shipper shall be obligated to deliver gas for injection or for transportation, at a pressure sufficient for Company to transport such gas to and inject into its storage facility, or to transport such gas for redelivery, recognizing that the amount of such pressure will vary based on the operation of the Company pipeline.

SECTION VII.

Measurement

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SECTION VIII.

Measuring Equipment and Testing

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SECTION IX.

Quality

     The gas delivered by either party to the other hereunder shall meet or exceed the quality specifications of the transporting pipeline which receives or delivers such gas to the other party hereunder.

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SECTION X.

Billing, Accounting, Taxes and Reports

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SECTION XI.

Possession and Non-Odorization of Gas

     As between Shipper and Company, Shipper shall be in exclusive control and possession of the gas deliverable and responsible for any damage or injury caused thereby until the same shall have been received by Company for injection at the storage facilities, or until delivered at the transportation facilities, and after delivery of the gas for the account of Shipper for withdrawal at the storage facilities, or after redelivery for the account of Shipper at the transportation facilities. After delivery of gas for injection or transportation by Shipper to Company, and until delivery by Company to Shipper or Shipper’s designee upon withdrawal or until redelivery after transportation, Company shall be in exclusive control and possession thereof and responsible for any injury or damage caused thereby. Neither Company nor Shipper assume any obligation to odorize any gas delivered to the other.

SECTION XII.

Warranty

     Shipper warrants that it will have and maintain good and marketable title or the right to deliver for a third party owning good and marketable title all gas tendered for injection, storage and withdrawal under a Storage Service Agreement, and all gas delivered for transportation under a Transportation Service Agreement, and that such gas shall be free and clear of all liens and adverse claims; and each party agrees, with respect to the gas delivered by it, to indemnify the other against all suits, actions, debts, accounts, damages, costs (including attorney’s fees), losses and expenses arising from or out of any adverse claims of any and all persons to or against said gas.

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SECTION XIII.

Government Regulations

SECTION XIV.

Force Majeure

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SECTION XV.

Notices

Except as herein otherwise provided, any communication, notice, request, demand, statement or ▇▇▇▇ provided for in a Storage or Transportation Service Agreement which

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any party may desire to give to any other party shall be made in writing and mailed by first class mail to the post office address of the party intended to receive the same, as the case may be, at the addresses each respective party shall designate in the Storage or Transportation Service Agreement or change by subsequent formal written notice to the other. Routine communications, including monthly statements and payments, may be mailed by either certified or ordinary first class mail.

SECTION XVI.

Creditworthiness

Company shall not be required to commence service or, subject to the following timing provisions, to continue to provide service under a Storage or Transportation Service Agreement with any Shipper, that (a) is or has become insolvent; (b) has applied for bankruptcy under Chapter 11 of the Bankruptcy Code, or which is subject to similar proceedings under state or federal law; or (c) when requested by Company to demonstrate creditworthiness, fails to do so in Company’s reasonable judgment, in light of previous payment experience and the prudent credit analysis of information available; provided, however, that any such Shipper that is receiving service shall continue to receive service for a period of fifteen (15) days after written notice by Company of any such circumstance, and shall continue thereafter to receive service if, within such fifteen (15) day notice period, such Shipper (a) deposits with Company and maintains, on account, an amount which would be due for three (3) months service at the full Maximum Daily Withdrawal Quantity, or the full Maximum Daily Transportation Quantity, including an amount of the current gas imbalance plus, an amount equal to the three (3) highest cashout payments, if any, incurred during the previous twelve months, or (b) furnishes good and sufficient security, which may include an acceptable standby letter of credit, or monthly prepayment agreement or other security as reasonably determined by Company, of a continuing nature and in an amount equal to such amounts which would be due for service. If such payment on account or payment security is not received within such fifteen (15) day notice period, Company may, without waiving any rights or remedies it may have, suspend further service for a period of ten (10) days. If such payment on account or a payment security is not received within such ten (10) day suspension period, then Company shall no longer be obligated to continue to provide service to such Shipper. Further, if such payment on account or a payment security is not received within sixty (60) days after the end of such suspension period, Company may terminate its obligations to provide service under all agreements between Shipper and Company, which termination shall not affect any of Company’s claims or remedies it may have under any Storage or Transportation Service Agreement.

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SECTION XVII.

Miscellaneous

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EXHIBIT “C”

TO STORAGE AGREEMENT (“CONTRACT”) BETWEEN BAY GAS STORAGE
COMPANY, LTD. AND BP ENERGY COMPANY

BAY GAS STORAGE COMPANY, LTD.

AMENDED STATEMENT OF CONDITIONS FOR

NGPA SECTION 311 (a)(2)

GAS STORAGE AND TRANSPORTATION SERVICES

Dated December 22, 1998

BAY GAS STORAGE COMPANY, LTD.
STATEMENT OF CONDITIONS FOR
NGPA SECTION 311 (a)(2)
GAS STORAGE AND TRANSPORTATION SERVICES

Dated December 22, 1998

CONTENTS

BAY GAS STORAGE COMPANY’S
STATEMENT OF CONDITIONS FOR
NGPA SECTION 311 (a)(2)
GAS STORAGE AND TRANSPORTATION SERVICES

Dated December 22, 1998.

     Bay Gas Storage Company, Ltd. (“Bay Gas”), a natural gas storage public utility that qualifies as an intrastate pipeline company providing services within the meaning of Natural Gas Policy Act of 1978 (“NGPA”) Section 2 (16) and Section 284.1 (a) of the Federal Energy Regulatory Commission’s (“Commission”) regulations, files this amended Statement of Conditions For NGPA Section 311 (a)(2) Gas Storage and Transportation Services, pursuant to the Commission’s regulations. 18 C.F.R. § 284.123 (e). Firm and interruptible gas storage and transportation-only services, on terms and conditions authorized by the Commission and accepted by Bay Gas, shall be provided by Bay Gas pursuant to NGPA ▇▇▇▇▇▇▇ ▇▇▇ (▇)(▇), ▇▇ ▇.▇.▇. §▇▇▇▇ (a)(2), and the Commission’s implementing Orders, Rules and Regulations, to qualified Shippers that comply with the conditions set forth in this Statement and with the terms and conditions contained in Bay Gas’ Storage or Transportation Service Agreement executed with Shipper.

I.

BAY GAS’ BASIC STATUS AND FUNCTION

     Bay Gas is a gas storage public utility, certificated by the Alabama Public Service Commission and subject to regulation by that Commission, which qualifies as an intrastate pipeline company providing storage and transportation services within the meaning of NGPA Section 2 (16) and Section 284.1 (a) of this Commission’s regulations. Any such NGPA Section 311 (a)(2) services that Bay Gas provides will be consistent with, and shall not infringe on, Bay Gas’ status and function as a non-Federal-jurisdictional intrastate pipeline, and shall not subject Bay Gas to this Commission’s Natural Gas Act jurisdiction. 18 C.F.R. § 284.3.

II.

QUALIFIED SHIPPERS

     Besides other conditions contained in this Statement, Bay Gas’ services are available only to a Shipper that enters into a Service Agreement mutually acceptable to Bay Gas and Shipper. All transactions for storage or transportation of gas that has flowed, or will flow, in interstate commerce must qualify under NGPA Section 311 (a)(2)

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and 18 C.F.R. Part 284 of Subchapter I. If, in the opinion of Bay Gas’ counsel, such qualified status of Shipper or its proposed transaction is in doubt, then Shipper must apply for and receive a final, non-appealable ruling from this Commission, or successor agency thereto, affirming such qualifying status of Shipper and its proposed transaction, prior to commencement of services by Bay Gas.

III.

CAPACITY AVAILABILITY, SCHEDULING AND ALLOCATIONS
AND CURTAILMENTS

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     Bay Gas shall schedule contracted services according to these principles:

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IV.

MINIMUM STORAGE SERVICE VOLUME

     Bay Gas shall not be obligated to furnish storage service to any Shipper whose average daily gas volume tendered for storage in a given month is less than 100 MMBtu per day. Such storage Shipper’s obligation to tender gas for delivery shall be suspended and modified for the time and to the extent that Bay Gas does not accept

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deliveries due to Shipper’s inability to deliver such minimum average daily volume. If the amount of gas subsequently tendered for delivery once again is less than such minimum average daily volume, Bay Gas shall have the right to cancel the Storage Service Agreement at any time on thirty (30) days written notice to Shipper. Bay Gas shall be deemed released from all obligations and liabilities, direct or indirect, under such Storage Service Agreement on the effective date of such a cancellation.

V.

RECEIPT AND DELIVERY

     Bay Gas shall have sole operational control over the injection of gas into, the retention of gas within, and the withdrawal of gas from, Bay Gas’ system storage facilities. A Shipper seeking to direct gas into storage shall nominate “Storage” as the Point of Delivery on Bay Gas’ system and shall identify the number of the Storage Service Agreement to be used for the receipt of such gas into storage. A Shipper seeking to withdraw gas from storage shall nominate “Storage” as the Point of Redelivery from Bay Gas’ system and shall identify the number of the Storage Service Agreement under which the gas is to be withdrawn from storage. Bay Gas shall have sole operational control over the transportation of gas on Bay Gas’ system from the Point of Delivery to the Point of Redelivery. For transportation service, “Delivery” shall mean the act of causing gas to be transported to the Points of Delivery, and “Redelivery” shall mean the transportation of gas from the Points of Delivery to the Points of Redelivery.

VI.

GENERAL TERMS AND CONDITIONS
FOR GAS STORAGE AND TRANSPORTATION

     Amended General Terms and Conditions to Bay Gas Storage Company, Ltd.’s Storage and Transportation Service Agreements, dated December 22, 1998, are incorporated by reference as part of this Statement of Conditions. Shipper’s failure to comply with the provisions in Section II, Nominations, Balancing And Excess Deliveries, of such General Terms and Conditions shall relieve Bay Gas of its obligation to perform services, and, if such failure to comply unreasonably interferes, in Bay Gas’ judgment, with Bay Gas’ control over its system facilities, then Bay Gas may, at its option, cease services and terminate any related Service Agreements or other agreements, without limitation of Bay Gas’ rights or remedies at law or in equity.

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VII.

RIGHT TO TERMINATE SERVICES

     Bay Gas reserves the right to discontinue, on a non-discriminatory basis, all services that subject Bay Gas to the non-discriminatory access requirements of 18 C.F.R. Part 284, and any subsequent Commission Orders, Rules or Regulations applicable to such services. Bay Gas may cancel the affected Service Agreements at any time on ninety (90) days prior written notice to Shippers if Bay Gas has no other reasonable options available that will allow the continuation of such Service Agreements. Bay Gas shall be relieved of all obligations and liabilities on the effective date of such notice of discontinuance and cancellation. Bay Gas additionally reserves the right to terminate any interruptible Service Agreement if the Shipper either has not executed the Service Agreement within thirty (30) days of receiving such Agreement, or has failed to nominate service under such Agreement within one (1) year after execution of the Agreement.

VIII.

COMPLIANCE WITH LAW AND SURVIVABILITY

     If any part of this Statement of Conditions conflicts with, or violates, any Commission or other Judicial, Governmental or Regulatory Body’s Orders, Rules or Regulations, such part shall be deemed void, but shall not affect the remaining provisions of this Statement. Bay Gas shall not be liable to any party with a Service Agreement subject to this Statement that loses priority status or any other rights enumerated in this Statement because of the issuance by the Commission or other Judicial, Governmental or Regulatory Body of any Orders, Rules or Regulations affecting this Statement of Conditions.

IX.

CHANGES TO THIS STATEMENT OF CONDITIONS

     Bay Gas reserves the right to add to, delete or modify the conditions in this Statement without prior notice.

X.

AUTHORITY OF STATEMENT OF CONDITIONS

     This Statement of Conditions, and the incorporated General Terms and

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Conditions (see Section “VI.” above) take precedence over conflicting language in any of Bay Gas’ Service Agreements or amendments thereto, unless such language specifically states that it is an exception to this Statement, and then only to the extent of such stated exception.

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EXHIBIT “D”
Sample Nomination Form

Exhibit “E”

Form of Assignment Consent
_____________________, 2005

Bay Gas Storage Company, Ltd.
28▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇ttention: Chief Financial Officer

Regions Bank, as Trustee
10▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇ttention: Corporate Trust Department

     Ladies and Gentlemen:

     Reference is made to that certain Storage Service Agreement made as of ___, 2005 (the “Subject Agreement”) between Bay Gas Storage Company, Ltd. (the “Company”) and BP Energy Company (the “Customer”). Under the Subject Agreement, the Company has agreed to provide natural gas storage services in accordance with the terms and conditions of said Agreement. At the request of the Company, the Customer has been asked to enter into this Assignment Consent.

     The Customer hereby (i) acknowledges that the Company has granted a security interest in and assigned, as a collateral assignment, all its right, title and interest in, to and under the Subject Agreement to Regions Bank (the “Trustee”), as trustee for the benefit of the holders of certain Senior Secured Notes of one or more series (the “Notes”) of the Company issued pursuant to a Trust Indenture and Security Agreement, dated as of December 1, 2000 (the “Indenture”), between the Company, as debtor, and the Trustee, as secured party, which Indenture will secure the Notes, and (ii) consents to such grant and assignment.

     In addition, the Customer acknowledges that, (i) upon the occurrence of an Event of Default under the Indenture, the Trustee may elect by written notice delivered to the Customer to require that any and all permitted payments from time to time by the Customer to the Company under the Subject Agreement be paid to an account as directed by the Trustee, (ii) the Indenture provides that the Trustee, as secured party, shall have the right, upon the occurrence of an Event of Default under the Indenture, to collect amounts payable under the Subject Agreement and to take actions to enforce collection of payments thereunder as fully as could the Company, and (iii) the Indenture

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restricts waivers, modifications or amendments by the Company with respect to the Subject Agreement, as well as any subsequent assignment by the Company of any sums payable thereto or rights thereof under the Subject Agreement to any party other than the Trustee without the prior written consent of the Trustee so long as any Notes remain outstanding thereunder

     The Customer hereby confirms and agrees that:

     The assignments referred to herein shall not be deemed to relieve the Company from any of its obligations under the Subject Agreement. The parties hereto agree that this Consent may be executed in counterparts.

     This Consent and all undertakings herein contained shall be binding upon and inure to the benefit of the Trustee and all holders of the Notes from time to time and their respective successors and assigns.

     This Consent shall be governed by and construed in accordance with Alabama law, without reference to its conflicts of laws principles.

     All modifications to the undertakings provided in this Consent shall be effective only if the same shall be in writing and signed by all parties hereto.

     The parties hereto agree that all notices and communications to be sent pursuant to this Form of Assignment Consent, shall in each case be sent (in the manner provided for notices in the Subject Agreement) to (i) the Trustee at the following address (or as the Trustee shall otherwise direct in writing):

Regions Bank, as Trustee
10▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇ttention: Corporate Trust Department

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and (ii) to the Customer at the following address (or as the Customer shall otherwise direct in writing):

BP Energy Company
60▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇ttention: Vice President, Fuel Services

* * * *

     The parties hereto, acting through their duly authorize representatives, have executed this Consent as of the date first aforesaid.

Secretary’s Certificate

     I, ______, do hereby certify that I am a duly qualified and acting [Secretary] of BP Energy Company, an [Alabama] ______, and that the signature subscribed to the foregoing certificate purporting to be the signature of ______ is the genuine signature of said person and that said ______ is the duly elected, qualified and acting ______ of said BP Energy Company.

[Secretary]

[Affix Corporate Seal]

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     The undersigned, Bay Gas Storage Company, Ltd., hereby acknowledges the execution and delivery of this Assignment Consent and agrees to be bound by the terms hereof.

Accepted and agreed to:

Regions Bank,
As Trustee on behalf of the holders of the Notes

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