GAS PURCHASE AGREEMENT MARATHON OIL COMPANY AND ALASKA PIPELINE COMPANY Dated: May 1, 1988
Exhibit
10.3
MARATHON
OIL
COMPANY
AND
ALASKA
PIPELINE COMPANY
Dated:
May 1,
1988
DATED
May 1,
1988
MARATHON
OIL
COMPANY
AND
ALASKA
PIPELINE COMPANY
INDEX
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ARTICLE
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PAGE
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1.
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Definitions
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5
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2.
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Conditions
and Scope of Agreement
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10
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3.
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Reservations
of Seller
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12
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4.
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Quantity
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15
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5.
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Delivery
Points
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40
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6.
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Pressure
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42
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7.
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Measuring
Stations
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43
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8.
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Measurements
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47
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9.
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Quality
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49
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10.
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Price
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51
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11.
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Billing
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63
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12.
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Force
Majeure
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65
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13.
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Default
and ▇▇▇▇▇▇▇▇▇▇▇
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▇▇
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▇▇.
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▇▇▇▇
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▇▇
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▇▇.
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▇▇▇▇▇▇▇▇
of Title
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70
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16.
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Arbitration
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71
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17.
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Regulatory
Bodies
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76
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18.
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Addresses
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76
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19.
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Miscellaneous
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77
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Signature
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81
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-2-
EXHIBITS
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Exhibit
A
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Buyer’s
Current Gas Purchase Contracts
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Exhibit
B
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Initial
Commitment Forecast
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Exhibit
C
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Seller’s
Reserved Gas and Gas Sales Commitments
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Exhibit
D
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Unocal
- Marathon Exchange Agreement
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Exhibit
E
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Initial
Delivery Points
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Exhibit
F
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Definitions
of Proved Developed Reserves, Proved Undeveloped Reserves, Probable
Reserves, and Possible Reserves
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-3-
THIS
AGREEMENT dated as of May 1, 1988, is between MARATHON OIL COMPANY, an Ohio
corporation (“Seller”), and ALASKA PIPELINE COMPANY, an Alaska corporation
(“Buyer”).
WHEREAS,
Buyer owns and operates a natural gas pipeline transmission system within the
State of Alaska and desires to reorganize its purchase schedules, extend its
gas
reserve life and provide for long-term supplies of natural gas;
WHEREAS,
Seller owns, controls, or has the right to dispose of natural gas produced
from
lands located in or near the ▇▇▇▇ Inlet region of Alaska, and Seller desires
to
sell a portion of such natural gas to Buyer; and
WHEREAS,
Buyer desires to purchase such natural gas from Seller for certain of the
requirements of its system;
NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
agreements herein contained, the parties covenant and agree as
follows:
-4-
1. DEFINITIONS
The
terms
used in this Agreement shall have meanings as follows:
1.0 Day
The
term
“Day” shall mean a period of twenty-four (24) consecutive hours beginning and
ending at eight o’clock a.m. Anchorage local time.
1.1 Month
The
term
“Month” shall mean a period beginning at eight o’clock a.m. Anchorage local time
on the first Day of a calendar month and ending at eight o’clock a.m. Anchorage
local time on the first Day of the next calendar month.
1.2 Year
The
term
“Year” shall mean a period of twelve (12) consecutive Months beginning on
January 1 and ending on the next January 1. Where the context requires, a Year
shall mean a period of less than twelve (12) Months ending on the next January
1, or starting on January 1 and ending prior to the next January 1.
-5-
1.3 Gas
The
term
“Gas” shall mean natural gas including both gas well gas and oil well gas, and
the residue gas therefrom of the quality described in Article 9.
1.4 Mcf;
MMcf;
Bcf
The
term
“Mcf” shall mean one thousand (1,000) cubic feet; the term “MMcf” means one
million (1,000,000) cubic feet; and the term “Bcf” shall mean one billion
(1,000,000,000) cubic feet.
1.5 Annual
Contract Quantity
The
term
“Annual Contract Quantity” shall mean the quantity (expressed in Bcf) of New Gas
(as defined in Section 4.6) Buyer requires each Year or, in the case of Seller’s
Final Additional Commitment Forecast, the quantity of Gas Seller forecasts
it
can supply each Year.
-6-
1.6 Swing
Rate
The
term
“Swing Rate” shall mean the maximum rate of delivery of New Gas expressed in
MMcf per Day required to serve Buyer’s customers or, in the case of Seller’s
Final Additional Commitment Forecast, the maximum rate of delivery of Gas
expressed in MMcf per Day which Seller forecasts it can supply.
1.7 Btu;
MMBtu
The
term
“Btu” shall mean British Thermal Unit and the term “MMBtu” shall mean one
million British Thermal Units.
1.8 Gross
Heating Value
The
term
“Gross Heating Value” shall mean the total calorific value, expressed in Btu’s,
obtained by the complete combustion, at constant pressure, of the amount of
Gas
which would occupy a volume of one (1) cubic foot at a temperature of sixty
(60)
degrees Fahrenheit if saturated with water vapor and under a pressure equivalent
to that of thirty (30) inches of mercury at thirty-two (32) degrees Fahrenheit
and under standard gravitational force (980.665 cm. per second per second),
with
air of the same temperature and pressure as the Gas, when the products of
combustion are cooled to the initial temperature of the Gas and air and when
the
water formed by combustion is condensed to the liquid state.
-7-
1.9 APUC
The
term
“APUC” shall mean Alaska Public Utilities Commission or any successor
governmental authority.
1.10 Seller’s
Properties
The
term
“Seller’s Properties” shall mean oil and gas leaseholds and other interests in
minerals or mineral rights and/or lands located in or near the ▇▇▇▇ Inlet region
of Alaska which Seller now or hereafter owns or controls and/or from which
it
has the right to dispose of Gas production.
1.11 Seller’s
Available Gas Reserves
The
term
“Seller’s Available Gas Reserves” shall mean the total quantity of Seller’s
proved developed Gas reserves, proved undeveloped Gas reserves, and a percentage
of probable Gas reserves (as defined in Exhibit “F” and as determined in
accordance with sound engineering practices) in the various formations
underlying Seller’s Properties, less the undelivered portion of the total
volumes of Gas which Seller has reserved and/or committed under the contracts
listed in Exhibit “C”.
-8-
1.12 Unaffiliated
Purchaser
The
term
“Unaffiliated Purchaser” shall mean an entity which acquires Gas from Seller and
which Seller does not control, does not control Seller and is not under common
control with Seller. “Control” is determined by ownership of the voting
securities of an entity, or upon other forms of ownership. Ownership of thirty
percent (30%) or more constitutes a rebuttable presumption of control and
ownership of less than thirty percent (30%) constitutes a rebuttable presumption
of non-control, unless there is actual control in the form of interlocking
directorates (which means that a majority of directors of one entity constitutes
a majority of directors of a second entity), voting arrangements, management
contracts or similar arrangements.
-9-
2. CONDITIONS
AND SCOPE OF AGREEMENT
2.0 Other
Agreements Superseded
Subject
to
future resolution of claims, if any, respecting Gas delivered prior to 8:00
a.m.
Anchorage time on May 1, 1988, this Agreement shall supersede and replace all
other Gas purchase agreements between Buyer and Seller, all of which are
terminated as of that time. Buyer and Seller shall incur no further obligations
or liabilities under those agreements for Gas delivered after their termination,
and all of Buyer’s previous take-or-pay obligations shall be extinguished at
termination of the agreements.
2.1 Agreement
to Sell and Purchase Gas
Subject
to
all of the terms, conditions, reservations and limitations set forth, Seller
agrees to sell and deliver, or cause to be delivered, to Buyer, and Buyer agrees
to purchase and receive from Seller, the quantities of Gas hereinafter provided
which Seller owns, controls, or otherwise has the right to sell.
-10-
2.2 APUC
Approval
Buyer
shall
submit this Agreement to the APUC for approval no later than June 1, 1988,
and
shall proceed diligently and in good faith to secure APUC approval. Buyer shall
supply Seller with copies of all pleadings filed with the APUC and shall keep
Seller fully informed on a timely basis about the APUC proceeding. Seller shall
cooperate with Buyer in Buyer’s efforts to obtain APUC approval.
This
Agreement shall be deemed approved when the APUC issues a final order finding
that approval of the Agreement is in the public interest and that the costs
incurred under the Agreement are fully recoverable in the rates of ENSTAR
Natural Gas Company. Buyer shall notify Seller immediately upon approval or
disapproval of the Agreement.
If
this
Agreement does not receive the approvals contemplated by the preceding paragraph
by December 1, 1988, Buyer or Seller may cancel the Agreement after thirty
(30)
Days prior written notice to the other party, provided that such prior notice
is
given prior to the receipt of the APUC’s approval. Buyer and Seller have read
the APUC’s Order No. 7 in Docket U-87-42 and are on notice that the APUC
indicated a preference to have one (1) year to review the supply contracts
of
ENSTAR’S power plant customers. While neither party has any present intent to
cancel the Agreement if it is not approved by December 1, the option to cancel
has been included because of the pending trial of the dispute about the contract
price of Gas sold under the contract between and among Buyer, Seller, and Union
Oil Company of California dated May 13, 1960 and subsequently amended, and
Buyer’s contingent liability which increases as trial is delayed.
-11-
Upon
approval
by the APUC, this Agreement shall be deemed effective as of May 1, 1988, and
deliveries of Gas shall be deemed to have started on that date.
3. RESERVATIONS
OF SELLER
Except
as
otherwise provided, Seller reserves the following rights with respect to its
Gas
and Seller’s Properties from which Gas is produced, and sufficient Gas produced
from Seller’s Properties to satisfy such rights:
-12-
3.0 0peration
of Seller’s Properties; Use of Gas
The
right to
operate Seller’s Properties and to use Gas produced therefrom for operation of
Seller’s Properties free from any control by Buyer in such manner as Seller, in
Seller’s sole discretion, may deem advisable; including, without limitation the
right, but never the obligation, to drill new ▇▇▇▇▇, to repair and rework old
▇▇▇▇▇, to renew or extend, in whole or in part, any oil and gas lease and to
abandon any well or surrender any such oil and gas lease, in whole or in
part.
3.1 Formation
of Units
The
right,
free from any and all control by Buyer, to continue participation in or to
form
or to participate in the formation of any unit which may include all or any
part
of Seller’s Properties and thereafter to increase or decrease Seller’s
Properties contained in such unit so formed and to pool and combine any unit
or
any part of any unit with properties owned by others.
3.2 Delivery
Facilities
The
right to
use Gas produced from Seller’s Properties for the operation of the facilities
which Seller may install in order to deliver gas.
-13-
3.3 Gas
Lift;
Enhanced Oil Recovery
The
right to
use on Seller’s Properties Gas produced from Seller’s Properties for Gas lift
operations and/or enhanced oil recovery projects.
3.4 Gas
for
Delivery to Lessors
The
right to
deliver Gas produced from Seller’s Properties to any of its lessors in
accordance with its leases.
3.5 Processing
Rights
The
right at
any time, and from time to time, prior to the delivery of Gas to Buyer, to
process Gas, or cause it to be processed, including, but not limited to, the
right to use such Gas as fuel in processing for the recovery of: (i) liquefiable
hydrocarbons other than methane, except methane necessarily removed in such
processing; (ii) sulfur; and (iii) helium and other gaseous components. Buyer
shall not acquire any right, title or interest in any products resulting from
such processing.
-14-
4. QUANTITY
4.0 The
Total
Commitment
Subject
to
all of the terms of this Agreement, Seller commits to deliver and sell to Buyer
and Buyer commits to receive and purchase from Seller the Total Commitment
of
Gas. The Total Commitment (which is subject to adjustment) consists of an
Initial Commitment of four hundred fifty-six (456) Bcf of Gas, plus Annual
Additional Commitments, plus a Final Additional Commitment. Under specified
circumstances, there may be no Annual or Final Additional Commitments. Subject
to Buyer’s rights pursuant to Section 4.13(a, b and e), deliveries of the
Additional Commitments shall begin immediately after Buyer has exhausted the
Initial Commitment.
4.1 The
Annual
Additional Commitments
An
Annual
Additional Commitment is the total amount of Gas in excess of the amount of
Gas
previously committed under this Agreement and all other contracts under which
Buyer has the right to purchase Gas which:
-15-
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(a)
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Buyer
forecasts will be necessary to meet its Gas supply requirements for
the
first eight (8) Years of any Option Forecast; or
which
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(b)
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Buyer
forecasts will be necessary to meet its Gas supply requirements for
the
first nine (9) Years of any Option
Forecast.
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Annual
Additional Commitments are made pursuant to the procedures in Section
4.4.
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4.2 The
Final
Additional Commitment
The
Final
Additional Commitment is the commitment, if any, of Gas by Seller to Buyer
pursuant to Section 4.5. The sum of all Annual Additional Commitments and the
Final Additional Commitment shall not exceed four hundred (400)
Bcf.
4.3 Buyer’s
Initial, Supplemental, and Option Forecasts
Buyer
shall
prepare for Seller the following written forecasts:
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(a)
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Initial
Commitment Forecast:
Attached as Exhibit “B” is the Initial Commitment Forecast for ten (10)
Years beginning January 1, 1989 plus the Year May 1, 1988 to January
1,
1989, showing the estimated Annual Contract Quantity and Swing Rate
for
each of the Years included.
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-16-
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(b)
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Supplemental
Forecasts:
On
October 1, 1988 and on October 1 of each Year in which Seller is
delivering any part of the Initial Commitment or any part of any
Annual
Additional Commitment(s), Buyer shall give Seller a forecast
(“Supplemental Forecast”) of the Annual Contract Quantity and Swing Rate
for each of the next ten (10) Years. Any Supplemental Forecast which
shows
that the Initial Commitment plus Annual Additional commitments (if
any
have been made) will be exhausted on or before the end of the eighth
(8th)
Year of the forecast shall be called an “Option Forecast.” Every Option
Forecast presents the options in Section 4.4 until Option 1 or Option
3 is
selected. After Option 1 or Option 3 is selected, there will be no
further
Annual or Final Additional
Commitments.
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-17-
4.4 Making
the
Annual and Final Additional Commitments
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(a)
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Each
Year during which Seller receives an Option Forecast, Seller has
the sole
right to choose, but must notify Buyer no later than December 1 of
that
Year that it has so chosen, one (1) of the following
options:
|
Option
1: Seller
will
make an Annual Additional Commitment calculated pursuant to Section 4.1(a)
and
advise Buyer that Seller will stop delivery and sale of Gas to Buyer after
Buyer
has exhausted the Initial Commitment plus any Annual Additional Commitments
which have previously been made, plus the Annual Additional Commitment made
pursuant to this Option.
Option
2: Seller
will
make an Annual Additional Commitment calculated pursuant to Section
4.1(b)
Option
3: Seller
will
make a Final Additional Commitment calculated pursuant to Section
4.5.
-18-
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(b)
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If
the
Option Forecast is prepared in the Year 1995 (i.e. for the ten (10)
Year
period beginning 1996) or later, Buyer may reject Option 2. When
such an
Option Forecast is delivered to Seller, Buyer shall advise Seller
whether
it will accept Option 2. If Buyer chooses to reject Option 2, Buyer
shall
deliver Buyer’s Final Additional Commitment Forecast as described in
Section 4.5(a) with the Option Forecast, and Seller shall choose
Option 1
or Option 3 by December 1 of that Year. Seller cannot choose Option
2 in
any Year after 2001.
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(c)
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Seller
may challenge, an Option Forecast by providing notice pursuant to
Section
16.2(a) by December 1 of the Year the Option Forecast is provided;
otherwise, any challenge shall be deemed to have, been
waived.
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4.5 Determination
of the Final Additional Commitment
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(a)
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Buyer’s
Final Additional Commitment
Forecast
|
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If
it
is determined pursuant to Section 4.4 that there will be a Final
Additional Commitment, Buyer shall by December 15 of the Year in
which
that determination is made (unless Buyer, pursuant to Section 4.4,
has
furnished Buyer’s Final Additional Commitment Forecast simultaneously with
an Option Forecast) deliver to Seller Buyer’s Final Additional Commitment
Forecast showing Buyer’s estimate of the Annual Contract Quantity and
Swing Rate for each Year until four hundred (400) Bcf minus the sum
of the
Annual Additional Commitments (if any have been made) will be
exhausted.
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-19-
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Seller
may challenge the reasonableness of Buyer’s Final Additional Commitment
Forecast by providing Buyer notice pursuant to Section 16.2(a) within
thirty (30) Days of receiving Buyer’s Final Additional Commitment
Forecast; otherwise, any challenge shall be deemed to have been
waived.
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(b)
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Determination
of the Final Additional
Commitment
|
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Seller’s
Available Gas Reserves as of the date of Buyer’s Final Additional
Commitment Forecast shall be determined and the report delivered
to Buyer
within one hundred eighty (180) Days of Seller’s receipt of Buyer’s Final
Additional Commitment Forecast. The Final Additional Commitment shall
be
calculated by first subtracting from Seller’s Available Gas Reserves the
undelivered portions of the Initial and any Annual Additional Commitments
and any New Sales as of the date of Buyer’s Final Additional Commitment
Forecast. The Final Additional Commitment shall be the lesser of
(1) the
amount calculated or (2) four hundred (400) Bcf minus the sum of
all
Annual Additional Commitments, if
any.
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-20-
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(c)
|
Seller’s
Final Additional Commitment
Forecast
|
|
At
the
same time that Seller’s Available Gas Reserves are determined, Seller
shall furnish Buyer a schedule showing the Swing Rate and Annual
Contract
Quantity which Seller can deliver each Year during which Gas is to
be
delivered pursuant to the Final Additional Commitment. This schedule
(“Seller’s Final Additional Commitment Forecast”) is subject to the
following constraints:
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(1)
|
For
any
Year in Seller’s Final Additional Commitment Forecast for which there is a
corresponding Year in Buyer’s Final Additional Commitment Forecast, the
Swing Rate in Seller’s Final Additional Commitment Forecast must be either
one hundred percent (100%) or not more than eighty percent (80%)
of the
Swing Rate in Buyer’s Final Additional Commitment Forecast. Such
percentage for any Year shall not exceed the percentage for the prior
Year.
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-21-
(2)
For
any Year in Seller’s Final Additional Commitment Forecast for which there is not
a corresponding Year in Buyer’s Final Additional Commitment Forecast (i.e., if
Seller’s Final Additional Commitment Forecast covers a longer period than
Buyer’s Final Additional Commitment Forecast), the Swing Rate shall not be
greater than the Swing Rate for the prior Year.
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(d)
|
Buyer’s
Right to Challenge Seller’s Final Additional Commitment
Forecast
|
Buyer
may
challenge all or any aspect of Seller’s Final Additional Commitment Forecast by
serving a notice on Seller pursuant to Section 16.2(a) within thirty (30) Days
of receipt of such forecast.
|
(e)
|
Buyer’s
Supplemental Final Additional Commitment
Forecasts
|
On
or before
October 1 of each Year in which Seller is delivering any part of the Final
Additional Commitment, Buyer shall give Seller a forecast of the Annual Contract
Quantity for each Year until the Final Additional Commitment is expected to
be
exhausted.
-22-
4.6 New
Gas
“New
Gas”
means all Gas received by Buyer from all sources in excess of (i) that Gas
which
Buyer is obligated to take under its Gas supply contracts listed on Exhibit
“A”
and (ii) that Gas which Buyer has the option to take under the contract dated
January 26, 1988 with Shell Western Exploration and Production, Inc. Buyer
warrants that it has supplied Seller with all its existing Gas purchase
contracts and all related amendments and letter agreements. Buyer may, but
shall
not be obligated to, exercise its rights pursuant to Section 5.2.2 of the
contract with Shell oil Company (dated December 20, 1982) listed on Exhibit
“A”.
Except as provided in the immediately preceding sentence, Buyer shall not
directly or indirectly consent to any reduction in any swing rate provided
in
any of the Exhibit “A” contracts and shall not acquiesce in any unilateral
reductions in the swing rates in the Exhibit “A” contracts except to the extent
that on May 1, 1988 such contracts expressly authorize such reductions.
-23-
Buyer
shall
not amend the Exhibit “A” contracts after May 1, 1988, to increase Gas
purchases. If the seller under any contract listed in Exhibit “A” claims that
Buyer is obligated to take more Gas than Buyer is then taking under the contract
(and any related amendments and letter agreements), Buyer shall immediately
notify Seller of the claim. Seller shall have no cause of action against Buyer
if Buyer decides, in its sole discretion, not to contest the claim, and if
Buyer
at the request of Seller assigns to Seller all of Buyer’s rights to contest the
claim and preserves all of Buyer’s defenses to the claim.
4.7 Buyer’s
Obligation to Take Gas
Subject
to
Buyer’s rights to take Gas purchased from other sellers pursuant to Section
4.13, Buyer shall take from Seller all of Buyer’s New Gas requirements which
Seller can supply until the Initial, Annual Additional and Final Additional
Commitments, net of any reductions permitted by this Agreement, have been
exhausted.
Operational
constraints and unpredictable weather make it impossible for Buyer to predict
and control precisely the amount of Gas it will take from the Exhibit “A”
contracts. In some years, Buyer may take from its other Gas supply contracts
amounts in excess of the amounts it is obligated to take under those contracts.
Buyer will in good faith make all reasonable efforts to take no more each year
than the amount of Gas it is required to take under its other Gas supply
contracts. Total excess annual takes of two (2) Bcf or less under the contracts
listed in Exhibit “A” will not be deemed to be in violation of Buyer’s purchase
obligations under this Agreement, provided that Buyer shall not exceed its
obligations to take Gas by more than one (1) Bcf per year in more than five
(5)
of any ten (10) consecutive years.
-24-
|
4.8
|
Seller’s
Obligation to Deliver the Initial and Annual Additional
Commitments
|
Subject
to
all of the terms of this Agreement, Seller shall deliver all of Buyer’s
requirements for New Gas each Day until the Initial Commitment and any Annual
Additional Commitments are exhausted. If a reserve determination in accordance
with Section 4.18 made prior to the determination of the Final Additional
Commitment shows that Seller’s Available Gas Reserves are less than the
undelivered portion of the Initial Commitment and Annual Additional
Commitment(s), those commitments, beginning with the commitment most recently
made, shall be reduced by the shortfall. Seller shall continue to deliver all
of
Buyer’s New Gas requirements each Day and Buyer shall continue to take all of
its New Gas requirements from Seller pursuant to Section 4.7 until the Initial
and Annual Additional Commitments, less the shortfall, have been
exhausted.
-25-
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4.9
|
Seller’s
Obligation to Deliver the Final Additional
Commitment
|
Subject
to
all of the terms of this Agreement, when the Initial and Annual Additional
Commitments are exhausted, Seller shall immediately begin deliveries of the
Final Additional Commitment. Seller shall deliver all of Buyer’s New Gas
requirements each Day up to the Swing Rates shown in Seller’s Final Additional
Commitment Forecast. If a reserve determination in accordance with Section
4.18
made after the Final Additional Commitment has been determined shows that
Seller’s Available Gas Reserves are less than the undelivered portions of the
Initial Commitment, Annual Additional Commitments and the Final Additional
Commitment, those commitments, beginning with the commitment most recently
made,
shall be reduced by the shortfall. Seller shall continue to deliver all of
Buyer’s New Gas requirements each Day up to the amounts required by this Article
4 and Buyer shall continue to take such amounts from Seller pursuant to Section
4.7 until all commitments, less the shortfall, have been delivered.
-26-
Seller’s
obligation to deliver the Initial, Annual Additional, and Final Additional
Commitments requires Seller, if necessary, to reduce or stop deliveries of
Gas
pursuant to New Sales contracts executed as permitted by Section
4.12.
4.10 No
Warranty of Seller’s Available Gas Reserves
Seller
does
not represent or warrant that Seller’s Available Gas Reserves are adequate to
supply the Initial Commitment, Annual Additional Commitments, or the Final
Additional Commitment.
|
4.11
|
Effect
of Fluctuation of Seller’s Available Gas
Reserves
|
Buyer
and
Seller acknowledge that the Initial Commitment (plus any Annual Additional
Commitments) may be reduced pursuant to Section 4.8 at some time(s) prior to
the
determination of the Final Additional Commitment. Buyer and Seller also
acknowledge that after such a reduction in the Initial and/or Annual Additional
Commitments, Seller’s Available Gas Reserves may be augmented to a level
permitting Seller to make subsequent Annual Additional Commitments and/or a
Final Additional Commitment. In that event, all provisions of this Agreement
governing determination and implementation of subsequent Annual Additional
Commitments and/or the Final Additional Commitment shall be operative, and
the
following language shall be deemed added to Exhibit “A”:
-27-
Any
Gas
purchase contract executed pursuant to Section 4.13(b) by Buyer in the period
between a reduction in the Initial and/or Annual Additional Commitments pursuant
to Section 4.8 and a determination by Seller pursuant to Section 4.4 or Section
4.5 that Seller can make subsequent Annual Additional Commitments and/or a
Final
Additional Commitment.
4.12 Seller’s
Right to Sell Gas to Other Buyers
Seller
shall
not sell or otherwise commit Gas from Seller’s Properties to anyone other than
Buyer except as necessary or convenient to honor the commitments listed in
Exhibit “C” or as provided in this Section. Seller shall have (1) the right to
sell Gas produced from Seller’s Properties to any Unaffiliated Purchaser and (2)
the right to amend any transaction listed in Exhibit “C” to increase Gas use or
sales. The transactions described in the preceding sentence are collectively
defined as “New Sales.” The right to make any New Sale is subject to the
following constraints:
-28-
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(a)
|
No
New
Sale shall be made unless, at the time the New Sale contract is signed,
Seller’s Available Gas Reserves
exceed:
|
|
(i)
|
the
undelivered portions of the Initial Commitment and any Annual Additional
Commitments which have been made;
plus
|
|
(ii)
|
the
undelivered portion of the Final Additional Commitment, if the Final
Additional Commitment has been determined;
plus
|
|
(iii)
|
the
undelivered portions of all prior New Sales;
plus
|
|
(iv)
|
the
amount of Gas which would be committed to the proposed New
Sale.
|
|
(b)
|
Each
contract for a New Sale shall contain the following
provision:
|
If
it is at
any time determined that Seller’s Available Gas Reserves are insufficient to
permit it to make deliveries under this contract and meet its obligations to
Alaska Pipeline Company under the Gas Purchase Agreement dated May 1, 1988,
Gas
deliveries under this contract may be reduced or terminated by Seller in its
sole discretion. Seller’s Available Gas Reserves will be determined in
accordance with the provisions of the Alaska Pipeline Company
Agreement.
|
(c)
|
Each
▇▇▇▇ ▇▇▇▇▇▇ enters into a New Sale, Seller shall provide Buyer the
name of
the purchaser, the total and annual quantities of Gas sold, or to
be sold,
the term of the contract, and the maximum quantities deliverable
daily.
Seller shall provide this information (except for the amount of gas
actually delivered) within fifteen (15) Days of entering into a New
Sale
and at least thirty (30) Days in advance of beginning deliveries
under any
such New Sale. Each July 15, Seller shall advise Buyer in writing
of the
amount of Gas sold and delivered during the prior twelve (12) Months
under
New Sale contracts.
|
-29-
A
New Sale by
Seller directly or indirectly to a purchaser (other than ▇▇▇▇▇▇▇▇ Petroleum
Company (“▇▇▇▇▇▇▇▇”), Chugach Electric Association (“CEA”), and parties listed
on Exhibit “C”, including the successors in interest, legal representatives,
assigns, parents, subsidiaries, or affiliates of Phillips, CEA, or any Exhibit
“C” purchaser) who has purchased Gas from Buyer (or Buyer’s affiliated Gas
distribution utility) for other than space heating, cooking, water heating,
air
conditioning and similar uses within five (5) Years preceding the effective
date
of the sales contract shall be called a “Miscellaneous Sale.” Buyer may reduce
the Initial, Annual Additional, or Final Additional Commitment, by five (5)
times the amount of the Gas actually sold under each Miscellaneous Sale
contract. No such reduction will be permitted in any case in which Seller
acquires any interest in Gas production, reserves, or properties subject to
a
contract which would be a Miscellaneous Sale if such sale had originally been
made by Seller.
-30-
4.13 Buyer’s
Right to Purchase Gas from Other Sellers
Buyer
shall
have the right to purchase a portion or all of its New Gas requirements from
other sellers under the following circumstances:
|
(a)
|
If
the
Initial Commitment, any Annual Additional Commitment, or the Final
Additional Commitment is reduced pursuant to the final paragraph
of
Section 4.12, Buyer may purchase from other sellers at times of Buyer’s
choosing an amount up to, but not in excess of the amount of the
reduction, provided that such purchases shall not in any Year exceed
twice
the largest annual amount of Gas actually sold under all Miscellaneous
Sale contracts. If Buyer agrees to purchase Gas under this paragraph,
Buyer shall provide to Seller the information required by Section
4.13(g)
within fifteen (15) Days of such agreement. Buyer shall further notify
Seller at least thirty (30) Days in advance of beginning to take
Gas under
any such agreement.
|
-31-
|
(b)
|
If
the
Initial Commitment and/or the Annual Additional Commitments are reduced
pursuant to Section 4.8 or 4.9, Buyer may purchase from other sellers
the
greater of (i) the amount of the reduction or (ii) the lesser of
(a)
twenty percent (20%) of the Gas remaining (immediately after the
reduction) to be delivered under the Initial Commitment plus the
Annual
Additional Commitments or (b) twice the amount of the reduction.
If there
are further reductions of the Initial and/or Annual Additional
Commitments, Buyer may purchase from other sellers the amount of
the
further reductions, provided that the total amount of purchases which
Buyer may make from others pursuant to this paragraph is the greater
of
(i) the sum of all, reductions or (ii) the lesser of (a) twenty percent
(20%) of the undelivered portions (calculated after the reduction)
of the
Initial Commitment and Annual Additional Commitments at the time
of the
first reduction or (b) twice the amount of all reductions. Buyer’s
purchase contracts permitted by this Section 4.13(b) may include
whatever
other provisions are necessary to permit Buyer to obtain the necessary
Swing Rates.
|
-32-
|
(c)
|
If
Seller’s Final Additional Commitment Forecast projects Swing Rates lower
than those for any corresponding Year in Buyer’s Final Additional
Commitment Forecast, Buyer may contract to purchase from other sellers
the
additional Gas necessary to meet Buyer’s needs. Buyer and Seller recognize
that any such contract to purchase from other sellers may be executed
many
Years before Buyer expects to take delivery of the Gas, and further
recognize that it is likely that Buyer’s forecast of its requirements and
its actual requirements may differ, even though, in making such forecasts,
Buyer has applied the standards set forth in Section 4.21. Therefore,
in
any Year in which Buyer is taking Gas under the Final Additional
Commitment and meets a portion of its New Gas requirements with purchases
from other sellers pursuant to this Section 4.13(c), Buyer will take
from
Seller at least the lesser of: (i) the total New Gas multiplied by
a
fraction, the numerator of which is the Swing Rate from Seller’s Final
Additional Commitment Forecast for that Year and the denominator
of which
is the Swing Rate from Buyer’s Final Additional Commitment Forecast for
that Year; or (ii) the Annual Contract Quantity (net of any reduction
pursuant to the final paragraph of Section 4.12) from Seller’s Final
Additional Commitment Forecast for that
Year.
|
-33-
|
(d)
|
If
the
Swing Rate for any Year in Seller’s Final Additional Commitment Forecast
equals the Swing Rate in Buyer’s Final Additional Commitment Forecast,
Buyer will take from Seller in that Year an amount of Gas equal to
the
Annual Contract Quantity (net of any reduction pursuant to the final
paragraph of Section 4.12) in Seller’s Final Additional Commitment
Forecast for that Year, or all of Buyer’s New Gas requirements for that
Year, whichever is less.
|
|
(e)
|
If
Seller for any reason, including Force Majeure, does not deliver
all of
Buyer’s daily requirements for New Gas, or if Buyer because of failure
of
its facilities and/or Force Majeure, cannot take from Seller all
of
Buyer’s daily requirements for New Gas, Buyer may make whatever purchases
are necessary to cover the shortage. Buyer will in good faith attempt
to
purchase only the amount of Gas necessary to cover the shortage.
Buyer is
a public utility and must attempt to meet the needs of its customers.
Should any provision of this Agreement constrain Buyer in such a
way that
Buyer cannot cover the shortage on reasonable terms and conditions,
that
provision (or provisions) shall be relaxed or waived but only to
the
extent necessary to permit Buyer to cover its requirements on reasonable
terms and conditions. In addition, Buyer and Seller shall have all
remedies provided by the Uniform Commercial Code, except the remedies
of
incidental or consequential damages. Further, in the event of Force
Majeure neither Buyer nor Seller shall have a cause of action against
the
other.
|
-34-
|
(f)
|
Buyer
may contract during the term of this Agreement for delivery of Gas
after
termination of this Agreement.
|
|
(g)
|
Each
time Buyer agrees to receive Gas from a supplier other than Seller,
Buyer
shall provide Seller the name of the supplier, the total and annual
quantities of Gas obtained or to be obtained, the term of the transaction
and the Swing Rate.
|
-35-
|
4.14
|
Extension
of Time for Taking Final Additional
Commitment
|
If
Buyer
purchases from Seller less than the Annual Contract Quantities shown in Seller’s
Final Additional Commitment Forecast, the period during which the Final
Additional Commitment is taken may be longer than the period shown in Seller’s
Final Additional Commitment Forecast. If the period for taking the Final
Additional Commitment is longer than projected, the Swing Rate for each
additional Year shall be the Swing Rate in the last Year of Seller’s Final
Additional Commitment Forecast multiplied by a fraction, the numerator of which
shall be the total actual purchases by Buyer from Seller during the period
shown
in Seller’s Final Additional Commitment Forecast and the denominator of which
shall be the Final Additional Commitment.
4.15 Seller
Not
Obligated to Source of Supply
Seller
may
supply Gas to Buyer from any or all of Seller’s Properties, but Seller shall not
be obligated to provide Gas to Buyer from any particular source of supply
available to Seller.
-36-
4.16 Buyer
Not
Ob1igated to Construct New Faci1ities
Except
as may
be necessary pursuant to Section 7.0, Buyer shall not be obligated to construct
new facilities at Buyer’s expense or attempt to receive Gas in volumes, at
rates, or under conditions which existing facilities are unable to receive
and
handle. Buyer shall be obligated to operate and maintain its facilities in
a
prudent manner in order to be able to maximize possible receipts of Gas from
Seller. If either Buyer or Seller determines that new compression facilities
are
necessary to enable Seller to deliver and Buyer to receive Gas from Seller
at
pressures in excess of those provided in Section 6.0, Seller and Buyer shall
meet and negotiate in good faith to allocate fairly the .cost of the necessary
compression.
4.17 Seller’s
Obligations as Operator
Seller
shall
act as a prudent operator to develop, produce, and deliver Gas from Seller’s
Properties so as to meet its obligations to Buyer under this
Agreement.
-37-
4.18 Determination
of Seller’s Available Gas Reserves
On
or before
July 1, 1988, and on or before July 1 each Year thereafter, Seller shall in
good
faith following sound engineering practice make and provide to Buyer a
determination of Seller’s Available Gas Reserves as of January 1 of that Year.
When determining Seller’s Available Gas Reserves, there shall be a determination
of the Swing Rates and Annual Contract Quantities which can be delivered to
Buyer. To permit Buyer to evaluate any such determination, Seller shall make
available to Buyer (and, if necessary, to any panel of arbitrators) all
information, material and data which Seller has available concerning Seller’s
Available Gas Reserves. To challenge Seller’s determination, Buyer shall provide
Seller with a notice pursuant to Section 16.2(a) within thirty (30) Days after
Seller first makes available to Buyer such information, material and data.
All
information, material, and data furnished to Buyer, or to any panel of
arbitrators, shall be subject to an appropriate confidentiality agreement
acceptable to Seller. Seller’s Available Gas Reserves as last determined shall
remain in effect until redetermined.
-38-
4.19 Deliveries
Prohibited by Law Not Permitted
Nothing
in
this Agreement shall be construed to require Seller to produce and deliver
or
Buyer to purchase and receive from Seller any quantities of Gas in excess of
those which may be produced under any applicable statute or the applicable
rules, regulations, or orders of regulatory bodies having
jurisdiction.
4.20 Curtailment
of LNG Operations
Seller
has an
interest in and delivers Gas to a liquefied natural gas plant at Nikiski,
Alaska. While delivering the Initial, Annual Additional, and Final Additional
Commitments, and after utilizing all other sources of Gas available to Seller,
Seller will reduce or stop deliveries of Seller’s Gas to that plant to the
extent necessary to permit it to deliver the portion of Buyer’s Swing Rate which
Seller is obligated to deliver pursuant to Article 4.
|
4.21
|
Buyer’s
Forecasts Advisory Only; Relevant Data Submitted to
Seller
|
The
Initial
Commitment Forecast, the Supplemental Forecasts, the Option Forecasts, Buyer’s
Final Additional Commitment Forecast, and Buyer’s Supplemental Final Additional
Commitment Forecasts (collectively “Buyer’s Forecasts”) are advisory only and
impose no obligations on Buyer other than (1) the obligation to prepare Buyer’s
Forecasts in good faith as accurately as possible using methods generally
accepted in the American gas distribution industry and (2) the obligation to
provide to Seller all the relevent information, data, and material which Buyer
has available in preparing Buyer’s Forecasts at the time it submits such
forecasts to Seller, and to furnish that information, data and material to
any
panel of arbitrators.
-39-
5. DELIVERY
POINTS
5.0 Delivery
Points
The
Delivery
Point(s) for Gas shall be at the inlet side of Buyer’s meters at the locations
shown on Exhibit “E” and at such other locations as shall be agreed upon from
time to time by Buyer and Seller. Buyer shall not unreasonably withhold its
consent to Delivery Points proposed by Seller.
-40-
5.1 Delivery
Point Forecast
Seller
shall
provide to Buyer an Annual Delivery Point Forecast on or before each July 1.
The
Annual Delivery Point Forecast shall be in writing and shall be Seller’s best
estimate of (i) the Delivery Points for the next Year and (ii) the volume of
Gas
that is expected to be delivered to Buyer at each Delivery Point.
5.2 Risk
of
Loss and Damage; Passage of Title
Prior
to
delivery to Buyer, Seller shall be in control and possession of Gas and shall
bear the risk of loss of Gas and be responsible for any damage to property
or
injury or death of persons caused thereby, and Seller shall protect, defend,
and
indemnify Buyer, its agents, servants, employees, officers, and directors to
the
full extent that the law will allow. At delivery, title to Gas and the risk
of
loss shall pass to Buyer, and Buyer shall be in exclusive control and possession
thereof and shall bear the risk of loss of Gas and be responsible for any damage
to property or injury or death of persons caused thereby and shall protect,
defend, and indemnify Seller, its agents, servants, employees, officers, and
directors to the full extent that the law will allow.
-41-
6. PRESSURE
6.0 Delivery
Pressure
The
Gas
delivered shall be delivered at sufficient pressure to enter Buyer’s system;
provided, however, that Seller shall not be required to deliver such Gas at
a
pressure in excess of five hundred (500) pounds per square inch gauge. By July
1
of each Year, Seller shall provide Buyer with a pressure forecast for each
of
the next two (2) Years showing the pressures expected at the Delivery Point(s).
The use of pressure forecasts by Buyer shall be at Buyer’s risk.
6.1 Reports
of
Delivery Pressure; Dispatching
Buyer
shall
make reports to Seller, as often as may be necessary in practice, of the
pressure at which Gas is being delivered and the rate of such deliveries. Seller
shall have agents or employees available at all times to receive from Buyer’s
dispatchers advice and requests for changes in the rates of delivery of Gas
as
required by Buyer from time to time. Because Seller’s Properties are situated in
isolated locations, Buyer agrees to allow a reasonable period for Seller to
comply with dispatching requests.
-42-
7. MEASURING
STATIONS
|
7.0
|
Buyer’s
Obligation to Install, Maintain and Operate Measurement
Facilities
|
Buyer
shall
install, maintain, and operate or cause to be operated, at Buyer’s expense, at
or near each Delivery Point, a measuring station, designed and installed in
accordance with the current recommendations of the American Gas Association,
properly equipped with orifice meters, and other necessary equipment, including
a Gas temperature recorder, by which the volume of Gas delivered shall be
measured. The orifice meters will utilize flange taps and be installed,
maintained, and operated with volumes computed in accordance with ANSI/API
2530
(also known as the American Gas Association Gas Committee Report No. 3) in
its
latest revision with applicable appendices. Seller shall have access to such
metering equipment at reasonable hours, but Buyer will make, or cause to be
made, the calibrations and adjustments thereof. Buyer shall have the right
to
change charts or designate Seller or others to do so, but Buyer shall have
the
exclusive right to integrate charts.
-43-
|
7.1
|
Seller’s
Right to Install, Maintain and Operate Regulators and Measuring
Equipment
|
Seller
may
install, maintain, and operate, at its own expense, such pressure regulators
and
check measuring equipment as it desires, and Buyer, to the extent that Buyer
has
the right to do so, hereby grants to Seller the right to install, maintain,
and
operate such equipment in and connected to Buyer’s measuring station or
stations. Any such equipment shall be so installed as not to interfere with
the
operation of Buyer’s measuring equipment. Buyer shall have access to such check
measuring equipment at reasonable hours, but Seller shall have the exclusive
right to read, calibrate, and adjust the equipment and change all
charts.
|
7.2
|
Parties’
Rights to Observe Installation and Regulation of Equipment; Right
to
Inspect Records
|
Each
party
shall have the right to be present at the time of any installing, reading,
cleaning, changing, repairing, inspection, testing, calibrating, or adjusting
of
the other’s measuring equipment. Notice of such activity shall be given at least
forty-eight (48) hours (if possible) in advance. Records from such measuring
equipment will remain the property of the equipment owner, but upon request
each
owner will submit to the other its records and charts, together with
calculations therefrom, for inspection and verification, subject to return
within thirty (30) Days after receipt.
-44-
|
7.3
|
Estimated
Volumes When Meters Inaccurate or Out of
Service
|
In
the event
a meter is out of service or registering inaccurately, the volumes of Gas
delivered shall be estimated:
|
(a)
|
by
using the registration of any check meter or meters if installed
and
accurately registering, or in the absence of
(a),
|
|
(b)
|
by
correcting the error if the percentage of error is ascertainable
by
calibration, test, or mathematical calculations, or in the absence
of both
(a) and (b), then,
|
|
(c)
|
by
estimating the quantity of deliveries by deliveries during comparable
periods under similar conditions when the meter was registering
accurately.
|
-45-
7.4 Verification
of Accuracy of Equipment
At
least once
each Month, Buyer and Seller will verify the accuracy of their respective
measuring equipment. If either party notifies the other that it desires to
test
the accuracy of any measuring equipment, the parties will cooperate to secure
prompt testing.
7.5 Accuracy
Requirements; Corrections
If,
upon
test, any measuring equipment is found to be not more than one percent (1%)
inaccurate, previous records of such equipment shall be considered accurate.
In
the event any measuring equipment is found to be inaccurate to the extent that
it affects the measurement accuracy by an amount exceeding one percent (1%),
any
previous records of such equipment will be corrected to zero error for any
period known definitely or agreed upon. If a period of inaccuracy is not
definitely known or agreed upon, such correction shall be made for a period
of
the lesser of sixteen (16) Days or one-half (1/2) of the time elapsed since
the
date of the last test. Any measuring equipment found by test to be inaccurate
will be adjusted at once to measure accurately.
-46-
7.6 Preservation
of Records
Each
party
shall preserve for a period of at least six (6) calendar years all test data,
charts and other similar records.
8. MEASUREMENTS
8.0 Unit
of
Sale
The
sale unit
of the Gas delivered hereunder shall be one (1) Mcf of Gas.
8.1 Parameters
of Measurement
The
calculation of the volumes of Gas delivered hereunder shall be governed by
the
following:
|
(a)
|
The
unit of volume measurement shall be one (1) cubic foot of Gas at
the base
temperature of sixty (60) degrees Fahrenheit and at a pressure of
fourteen
and sixty-five hundredths (14.65) pounds per square inch absolute
with
correction for deviation from the Ideal Gas Law according to ANSI/API
2530
or AGA Report No. 8, as applicable.
|
|
(b)
|
The
average absolute atmospheric pressure shall be assumed to be fourteen
and
seven-tenths (14.7) pounds per square inch, irrespective of actual
elevation or location of the Delivery Point above sea level or variations
in actual atmospheric pressure.
|
-47-
|
(c)
|
Unless
the parties agree to the use of a spot test method, the specific
gravity
of Gas shall be determined by the use of a recording gravitometer
generally accepted in the industry. When a recording gravitometer
is used,
the arithmetic average of the specific gravity of Gas flowing through
the
meters shall be used in computing Gas volumes. If a spot test method
is
used, the specific gravity of the Gas shall be determined at monthly
intervals. Any such test shall determine the specific gravity to
be used
in computation of volumes effective the first Day of the following
Month
and shall be used until changed in like manner by subsequent
test.
|
|
(d)
|
The
actual temperature of Gas shall be determined by a recording thermometer
so installed that it will record the temperature of the Gas flowing
through the meters. The average of the recorded temperatures to the
nearest one (1) degree Fahrenheit obtained while Gas is being delivered
shall be used in computing measurements for that
Day.
|
-48-
9. QUALITY
9.0 Heating
Value of Gas
|
(a)
|
Delivered
Gas shall have a Gross Heating Value of not less than nine hundred
fifty
(950) Btu’s per cubic foot nor more than one thousand fifty (1,050) Btu’s
per cubic foot.
|
|
(b)
|
The
Gross Heating Value of Gas shall be determined from a representative
composite Gas sample taken at the point of measurement by periodic
tests
to be conducted monthly by Buyer or at such other intervals as the
parties
may mutually agree. The determination may be made by means of a
calorimeter using the ▇▇▇▇▇▇ principle of calorimetry or its equal
or by
calculation from the component analysis using NGPA Publication 2145,
as it
may be revised, entitled “Physical Constants of Paraffin Hydrocarbons or
Other Compounds of Natural Gas”.
|
-49-
9.1 Deleterious
Matter; Specifications
Gas
shall be
commercially free of dust, gum, gum-forming constituents, or other liquid or
solid matter which may separate from the Gas in transportation, shall not exceed
one hundred twenty (120) degrees Fahrenheit, and shall not contain:
|
(a)
|
more
than four (4) pounds of water per million cubic feet of
Gas;
|
|
(b)
|
more
than one (1) grain of hydrogen sulfide per one hundred (100) cubic
feet of
Gas;
|
|
(c)
|
more
than twenty (20) grains of total sulfur per one hundred (100) cubic
feet
of Gas;
|
|
(d)
|
in
excess of:
|
|
(1)
|
three
percent (3%) by volume of carbon dioxide;
or
|
|
(2)
|
one
percent (1%) by volume of oxygen.
|
9.2 Seller’s
Responsibility to Dispose of Condensates
Seller
shall
be the owner of and be solely responsible for ultimate disposal of any
condensates which Buyer has extracted from its pipelines and which were
contained in the Gas provided by Seller. Such condensates shall be made
available to Seller in suitable containers provided by Seller at a location
designated by Seller on the road system in the Kenai Peninsula Borough or
Anchorage Area Borough.
-50-
9.3 Buyer’s
Right to Refuse Gas
Buyer
shall
have the right to refuse to accept delivery of any Gas failing to meet the
quality requirements of this Article 9.
10. PRICE
Buyer
shall
pay for Gas delivered by Seller the applicable Total Price determined pursuant
to this Article.
10.0 Base
Prices
|
(a)
|
The
Base Price for the Initial Commitment shall be $1.55 per
Mcf.
|
|
(b)
|
The
Base Price for all Gas delivered after the Initial Commitment is
exhausted
shall be $1.35 per Mcf.
|
-51-
10.1 The
Price
Index
|
(a)
|
The
Price Index will be used to calculate the Annual Base Prices of the
Initial, Annual Additional and Final Additional
Commitments.
|
|
(b)
|
The
Price Index is a fraction. The numerator is the daily average price
per
barrel of Light Sweet Crude Oil Futures (“LSCOF”) for the quarter ending
on September 30 of the Year prior to the Year for which the Annual
Base
Price is being calculated. The denominator is $18.00 per
barrel.
|
|
(c)
|
The
average price of LSCOF shall be determined from prices for “CRUDE OIL,
Light Sweet” futures contracts traded on the New York Mercantile Exchange
or its successor. The daily average price of LSCOF shall be the sum
of the
“Settle” prices reported in the Wall
Street Journal or
its
successor for (i) July contracts for each day that July contracts
are
reported as the contracts for the Current Trading Month, plus (ii)
August
contracts for each day that August contracts are reported as the
contracts
for the Current Trading Month, plus (iii) September contracts for
each day
that September contracts are reported as the contracts for the Current
Trading Month, divided by the total number of days that such “Settle”
prices are reported. “Current Trading Month” means the final month in
which a contract can be traded.
|
-52-
|
(d)
|
In
the
event that the information necessary to calculate the daily average
price
of LSCOF is no longer publicly reported, the parties shall attempt
to
agree on a successor index. If the parties fail to agree at least
eighty—five (85) Days before the beginning of a new Year, either party may
initiate arbitration procedures by giving notice pursuant to Section
16.2(a).
|
10.2 Adjustment
of the Base Price
Effective
January 1, 1990, the Base Price of the Initial Commitment ($1.55) shall be
adjusted by multiplying it by the Price Index. The result will be the “Annual
Base Price” for 1990. This process of calculating the applicable Annual Base
Price for each Year shall be repeated annually until the Initial Commitment
is
exhausted.
-53-
When
the
Initial Commitment is exhausted, the Base Price for all additional Gas ($1.35)
sold subsequently shall be adjusted by multiplying it by the Price Index. The
result will be the “Annual Base Price” for the first Year for all additional Gas
delivered and sold. This process of calculating the applicable Annual Base
Price
for each Year shall be repeated annually until the Annual Additional and Final
Additional Commitments are exhausted.
Changes
in
the Annual Base Price are subject to limitation. If a calculated change in
the
Annual Base Price is limited by any or all of Sections 10.4, 10.5, or 10.6,
the
resulting price shall be called the “Limited Annual Base Price.” Any limitations
shall be determined by first applying Section 10.5, then Section 10.4, and
finally Section 10.6.
10.3 The
Total
Price for the Initial Commitment
The
Total
Price each Year for the Initial Commitment shall be the Annual Base Price (or
Limited Annual Base Price, if applicable) for that Year plus any Taxes and
other
charges added pursuant to Sections 10.7 and 10.8. The Annual Base Price until
January 1, 1990 shall be $1.55 per Mcf.
-54-
|
10.4
|
The
Total Price for the Annual Additional and Final Additional
Commitments
|
The
Total
Price each Year for the Annual Additional and Final Additional Commitments
shall
be the Annual Base Price (or Limited Annual Base Price, if applicable) for
that
Year plus any Taxes and other charges added pursuant to Sections 10.7 and 10.8.
The Annual Base Price (or Limited Annual Base Price, if applicable) paid each
Month while the Annual Additional or Final Additional Commitments are being
delivered shall never exceed the amount paid to Seller, net of taxes and excess
royalties, during the same Month under Seller’s largest sale (measured by
volume) to any Alaskan utility other than Buyer.
10.5 Limitation
on Annual Base Price Increase or Decrease
|
(a)
|
If
an
Annual Base Price calculated pursuant to Section 10.2 would produce
a
change from the prior Year’s Annual or Limited Annual Base Price
(whichever was used to pay Seller for Gas sold in the prior Year)
of less
than twenty percent (20%) the change in price will be limited to
the
lesser of (1) the percentage change calculated or (2) fifteen percent
(15%). If the calculated change equals or exceeds twenty percent
(20%),
the change in price will be fifteen percent (15%) plus one-half (1/2)
of
the amount of the calculated change in excess of fifteen percent
(15%)
unless the price change is limited by Section 10.5(b) and/or Sections
10.4
and 10.6.
|
-55-
|
(b)
|
If
an
Import Fee is first imposed or increased in the Year preceding the
Year
for which the price limitation is being calculated pursuant to Section
10.5(a), the permissible change from the prior Year’s Annual or Limited
Annual Base Price (whichever was used to pay Seller for Gas sold
in the
prior Year) shall be calculated as provided in Section 10.5(a) but
shall
be limited to twenty percent (20%).
|
|
(c)
|
An
Import Fee shall be considered as having been “first imposed” in the first
Year in which it is in effect for each day of the third quarter.
If an
Import Fee is eliminated and later reimposed, the later reimposition
will
be treated as a new Import Fee which is “first imposed” in accordance with
the definition in the preceding sentence. An Import Fee is “increased” in
any Year in which the average Import Fee, which has previously been
“first
imposed”, is higher for the third quarter of a Year than the average
Import Fee for the third quarter of the prior
Year.
|
-56-
|
(d)
|
The
term “Import Fee” means a fee which is imposed by the United States on or
after May 1, 1988, on crude oil imported into the United States and
which
is intended to be an economic incentive to the domestic oil industry
and/or to protect national security interests and/or to promote
conservation and/or to stabilize or increase the price of crude oil
sold
in the United States. An Import Fee is not a tax such as that imposed
by
Section 4611 of the Internal Revenue Code of 1986, or an import duty,
customs fee, antidumping or countervailing duty, or tariff schedule,
such
as currently set forth in ▇▇ ▇.▇.▇. ▇▇▇.▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Code.
|
10.6 Regulated
Prices
Seller
shall
never charge or collect a price in excess of the applicable lawful price
prescribed under the Natural Gas Policy Act of 1978 or other applicable
legislation or regulation.
-57-
10.7 Tax
Reimbursement
|
(a)
|
The
taxes to be added to each Annual Base Price (or Limited Annual Base
Price,
if applicable) to determine the Total Price for each Year shall consist
of
the full amount of any “Tax” or “Taxes” paid by Seller with respect to Gas
sold or to be sold pursuant to this Agreement regardless of the mode
or
basis of imposition. The term “Tax” or “Taxes” shall include any tax or
similar charge on Gas measured by the volume, value, removal price,
prevailing value, proceeds, gross receipts, net receipts or sales
price
imposed by any government or Alaska Native authority, including (i)
severance taxes and production taxes; (ii) windfall profits taxes;
(iii)
taxes on the Gas itself; (iv) taxes on the act, right or privilege
or
occupation of producing, severing, gathering, transporting, selling,
or
delivering Gas; and (v) the ad valorem taxes provided for in (b),
below.
The term “Tax” or “Taxes” shall not include (i) taxes or charges imposed
on any value attributable to liquid hydrocarbons removed from Gas
by
processing or arising from or incident to the processing of or handling
of
Gas through any processing plant; (ii) any franchise tax, tax on
capital
stock, or other tax imposed on corporations on account of their corporate
existence or their right to do business; (iii) any income taxes;
or (iv)
any royalty.
|
-58-
|
(b)
|
The
term “Tax” or “Taxes” shall also include any ad valorem taxes which may be
reasonably and equitably allocated to volumes of Gas which Buyer
is
entitled to have delivered as of the date of assessment. The fair
allocation of such Taxes shall be accomplished by negotiations between
Buyer and Seller, taking into account (i) the problems of allocating
Taxes
ratably among oil or other liquid hydrocarbons, reservoir substances
which
are gaseous in place but become or may be processed into liquids,
Gas, and
other minerals subject to a particular assessment; (ii) the ratio
of the
total volumes of Gas from Seller’s Properties subject to such Taxes to the
volumes which Buyer is entitled to have delivered as of the date
of
assessment; (iii) the ratio of Seller’s Properties subject to assessment
to the total acreage of Seller’s Properties; (iv) the relative proportion
of the volumes and values of Seller’s Available Gas Reserves subject to
assessment in comparison with the total volumes and values of Seller’s
Available Gas Reserves; and (v) such other factors as the circumstances
may require. Should the parties fail to agree on a fair allocation
within
thirty (30) Days of receipt by Buyer of written notice from Seller
of an
assessment, either party may initiate arbitration procedures by giving
notice pursuant to Section 16.2(a) if the dispute is subject to
arbitration pursuant to Section 16.1. Buyer shall reimburse Seller
for the
share of ad valorem taxes allocated to Buyer within thirty (30) Days
of a
final allocation (whether by agreement or arbitration) of such Taxes.
Buyer shall also pay interest to the date of reimbursement by Buyer
on the
amount allocated, whether by agreement or arbitration, from the latter
of
(1) the date Buyer is notified of the assessment or (2) payment of
the Tax
by the Seller. The interest rate shall be the rate provided in Section
11.2.
|
-59-
|
(c)
|
Buyer
shall not be obligated to pay any interest or penalty because Seller
is
delinquent in paying any Tax. In the event that Seller contests its
obligation to pay any Tax assessed and, following the conclusion
of such
dispute, Seller is required to pay interest on the portion of the
contested amount determined to be lawfully owed, Buyer shall reimburse
Seller for the interest Seller is required to pay. If Seller is lawfully,
retroactively assessed Taxes and required to pay interest on such
amounts,
Buyer shall reimburse Seller for such Taxes as well as for such
interest.
|
-60-
|
(d)
|
Tax
reimbursements shall be paid by Buyer in accordance with the billing
procedures in Article 11 unless Buyer contests its liability to pay
any
Tax (other than ad valorem taxes reimbursable under (b) above). If
Buyer
contests its liability, Buyer shall notify Seller within thirty (30)
Days
of being billed by Seller for the Tax. Should the parties fail to
resolve
any contested liability by diligent, good faith negotiations within
thirty
(30) Days of receipt by Seller of such written notice, either party
may
initiate arbitration procedures by giving notice pursuant to Section
16.2(a) if the dispute is subject to arbitration pursuant to Section
16.1.
|
|
(e)
|
Should
Seller receive any refund, reimbursement, or credit for Taxes for
which
Buyer has reimbursed Seller, Seller shall credit Buyer on Seller’s next
invoice the full amount thereof, together with any interest received
from
or credited to Seller by the taxing entity. If the refund or credit
is
greater than the amount of Seller’s next invoice, the excess shall be
refunded when the invoice is sent to
Buyer.
|
-61-
|
(f)
|
Nothing
in this Agreement shall be construed as a limitation on Buyer’s or
Seller’s rights to contest assessment of any
Tax.
|
10.8 Payment
of
Royalties; Excess Royalties
Seller
agrees
to pay or cause to be paid to the parties entitled thereto all royalties,
overriding royalties or like charges against the Gas delivered to Buyer. Buyer
agrees to reimburse Seller for all “Excess Royalty Payments” which Seller shall
be required to pay to the State of Alaska, the United States of America or
any
other royalty or overriding royalty owners on Gas delivered to Buyer. Such
payments shall be made by Buyer in accordance with the billing procedures in
Article 11. The term “Excess Royalty Payments” means the amount by which actual
royalty or overriding royalty payments or like charges exceed the amount any
such payment would have been had royalty or overriding royalty or like charges
been calculated by using the applicable Annual Base Price as limited by Sections
10.4, 10.5 and 10.6.
-62-
|
10.9
|
Notice
of Additional Taxes and Royalties for Prior
Periods
|
If
Seller
receives a ▇▇▇▇ for Taxes or Excess Royalty Payments attributable to Gas
delivered prior to the current billing period, Seller shall advise and consult
with Buyer prior to payment of the ▇▇▇▇.
11. BILLING
11.0 Statements;
Payment
On
or before
the tenth (10th) Day of each Month, Buyer shall furnish to Seller a statement
showing the total volume of Gas delivered during the preceding Month. By the
fifteenth (15th) Day of the Month following the Month of deliveries, Seller
shall give Buyer an invoice showing the Annual Base Price (or Limited Annual
Base Price, if applicable) for Gas, Taxes, and Excess Royalty Payments. Buyer
shall make payment to Seller on or before the twenty-fifth (25th) Day of each
Month for all Gas delivered during the preceding Month according to the
measurements, computations, and prices herein provided. Payments are to be
made
by wire transfer of immediately available Federal Reserve funds to the following
account:
Marathon
Oil
Company
National
City
Bank
Cleveland,
Ohio
Account
of
Marathon oil Company
Account
No.
▇▇▇▇▇▇▇
-63-
11.1 Right
to
Examine Books and Records; Errors
Each
party
shall have the right during normal business hours to examine the books, records,
and charts of the other party to the extent necessary to verify the accuracy
of
any statement, invoice, charge, or computation made pursuant to any of the
provisions of this Agreement. In the event an error is discovered in the amount
paid by Buyer, the error shall be adjusted within thirty (30) Days. No error
will be adjusted after thirty-six (36) Months from the date of any statement
or
invoice.
-64-
11.2 Disputes
Without
prejudice to any other remedy or remedies of Seller hereunder or by operation
of
law, if the correct amount is not paid when due pursuant to Article 10 or 11,
interest on any unpaid amount shall be paid by Buyer, which shall accrue daily
at the prime rate plus one (1) percentage point charged by the Chemical Bank
of
New York or its successor bank (but not to exceed the rate permitted by law).
Payment by Buyer of any amount, whether or not disputed, shall not constitute
a
waiver of Buyer’s right to contest and recover any amounts determined to have
been overpaid. If Buyer overpays Seller, interest on any such overpayment shall
be paid by Seller and shall accrue daily at the rate applicable to late payments
under this Section by Buyer; provided, however, that no interest shall accrue
on
any Tax refund or credit if Seller timely complies with Section
10.7(e).
12. FORCE
MAJEURE
12.0 Effect
of
Force Majeure
If
either
party is rendered unable, wholly or in part, by Force Majeure to carry out
its
obligations (other than to make payments due) under this Agreement, upon such
party giving notice in writing or by telecopier and reasonably full particulars
of such Force Majeure as soon as reasonably possible after the commencement
of
the Force Majeure event relied upon, the obligations of the party giving such
notice, as far as they are affected by such Force Majeure, shall be suspended
during the continuation of any inability so caused but for no longer period,
and
such cause shall, as far as reasonably possible, be remedied with all
dispatch.
-65-
12.1 Definition
of Force Majeure
The
term
“Force Majeure” shall mean: (i) acts of God; (ii) governmental action, acts of
the public enemy, wars, blockades, insurrections, riots, or epidemics; (iii)
strikes, lockouts or other industrial disturbances of third parties; (iv)
landslides, lightning, earthquakes, fires, hurricanes, tornadoes, high winds,
storms, storm warnings, floods, tsunami, or washouts; (v) arrests and restraints
of governments and people, or civil disturbances; (vi) explosions, breakage
or
accidents to machinery or lines of pipe, the necessity for making repairs to
or
alterations of machinery or lines of pipe, freezing of ▇▇▇▇▇, equipment, or
lines of pipe, partial or entire failure
-66-
of
▇▇▇▇▇ or
sources of supply of Gas; and (vii) any other causes, whether of the kind herein
enumerated or otherwise, no reasonably within the control of the party claiming
suspension and which by the exercise of due diligence such party is unable
to
prevent or overcome. “Force Majeure” shall likewise include: (i) in those
instances where either party is required to obtain servitudes, rights-of—way
grants, permits or licenses to enable such party to fulfill its obligations,
the
inability of such party to acquire, or the delays encountered by such party,
despite its best efforts, in acquiring, at reasonable cost, such servitudes,
rights-of-way grants, permits or licenses; and (ii) in those instances where
either party is required to furnish materials and supplies for the purpose
of
constructing, repairing or maintaining facilities or is required to secure
permits or permissions from any governmental agency to enable such party to
fulfill its obligations, the inability of such party to acquire, or the delays
encountered by such party, despite its best efforts, in acquiring at reasonable
cost such materials and supplies, permits, and permissions.
-67-
12.2 Inability
of Buyer to Take Annual Contract Quantity
If
Buyer or
Seller has invoked Force Majeure which prevents Buyer from taking the Annual
Contract Quantity, expressed on a daily basis, provided in Article 4 for one
hundred eighty (180) Days during any period of three hundred sixty-five (365)
Days, the party not invoking Force Majeure shall have the option of terminating
this Agreement in the ninety (90) Days following such three hundred sixty-five
(365) consecutive Day period by giving written notice of termination, and this
Agreement shall then terminate one hundred eighty (180) Days from the date
of
receipt of such notice by the other party.
13. DEFAULT
AND TERMINATION
13.0 Breach;
Notice of Default; Correction; Termination
If
either
party fails to perform any of its material obligations under this Agreement,
the
other, in addition to any other remedies it may have, may at its option
terminate this Agreement in the following manner. The party not in default
shall
serve on the party in default a written notice stating specifically the facts
and basis upon which default is claimed. The party in default shall have sixty
(60) Days after receipt of notice in which it may decide to (A) remedy or remove
the default (“Response A”); or (B) (i) commence such actions as are reasonable
and prudent to remedy or remove the cause or causes stated in the notice, and
(ii) agree in writing to protect, defend, and indemnify fully the party not
in
default from any and all consequences of the acts or occurrences constituting
the default (“Response B”). If, within that period, the party in default acts in
accordance with either Response A or Response B, this Agreement shall continue
in full force and effect. If the party in default does not, within sixty (60)
Days of receipt of notice act in accordance with the requirements of either
Response A or Response B, the party giving notice may, at its option, terminate
this Agreement by giving written notice of termination, and this Agreement
shall
then terminate one hundred eighty (180) Days from the date of receipt of such
notice by the party in default.
-68-
|
13.1
|
Termination
Without Prejudice to Rights of Parties to Collect Amounts
Due
|
Any
termination of this Agreement shall be without prejudice to the right of either
Buyer or Seller to collect any amounts then due from the other
party.
-69-
13.2 Effect
of
Waiver of Default
No
waiver by
either party of any one or more defaults by the other party in the performance
of any of the provisions of this Agreement shall operate or be construed as
a
waiver of any other default or any future default or defaults, whether of a
like
or of a different character.
14. TERM
Subject
to
its other provisions, this Agreement shall be deemed effective May 1, 1988,
and
shall remain in full force and effect until the delivery by Seller and payment
by Buyer for the Initial Commitment and, if applicable, the Annual Additional
Commitments and the Final Additional Commitment.
15. WARRANTY
OF TITLE
Seller
hereby
warrants title to all Gas delivered by it to Buyer hereunder and the right
to
sell the same, and further represents and warrants that such Gas will, at the
time of delivery, be free from all liens and other adverse claims. Upon written
notice by Buyer, Seller agrees to indemnify and defend Buyer against all suits,
actions, debts, accounts, damages, costs, losses, and expenses arising from
or
out of any adverse claims of title or any liens or other adverse claims by
any
and all persons to or against such Gas. In the event any adverse claim of any
character is asserted as to any delivered Gas, then as security for Seller’s
performance of its obligations under this Article 15, Buyer may retain the
purchase price thereof up to the amount of such claim without interest until
the
claim has been finally determined, or until Seller shall have furnished bond
to
Buyer in an amount and with sureties satisfactory to Buyer, conditioned for
the
protection of Buyer against such claim.
-70-
16. ARBITRATION
16.1 Matters
Subject to Arbitration
Disputes
respecting the following matters shall be resolved by arbitration:
|
(a)
|
Any
Annual Contract Quantity or Swing Rate set forth in Buyer’s Final
Additional Commitment Forecast or any Annual Contract Quantity or
Swing
Rate set forth in any Option
Forecast;
|
|
(b)
|
Seller’s
Available Gas Reserves;
|
-71-
|
(c)
|
Any
determination of an Annual Contract Quantity or Swing Rate on Seller’s
Final Additional Commitment
Forecast;
|
|
(d)
|
Determination
of the successor index contemplated by Section
10.1(d);
|
|
(e)
|
An
allocation of ad valorem taxes pursuant to Section 10.7(b);
and
|
|
(f)
|
Buyer’s
obligation pursuant to Section 10.7(a) and (d) to reimburse Seller
for
Taxes;
|
Provided,
however, that disputes respecting Taxes shall not be subject to arbitration
unless the panel of arbitrators possesses sufficient authority under applicable
law to compel (i) the attendance of all witnesses with knowledge of the facts
of
the disputed issues and (ii) the submission of all relevant
information.
16.2 Initiating
Arbitration Procedures
|
(a)
|
If
a
dispute arises which is subject to arbitration pursuant to Section
16.1, a
party contemplating requesting arbitration shall provide prompt written
notice to the other of the dispute and the party’s intent to submit the
dispute to arbitration. The parties shall attempt by good-faith,
diligent
negotiations to resolve the dispute described in the notice within
forty-five (45) Days of the receipt of the
notice.
|
-72-
|
(b)
|
If
a
resolution is not achieved within the forty-five (45) Day period
provided
by Section 16.2(a), the dispute shall be resolved by a board of three
(3)
arbitrators selected in the following manner. The party first giving
notice pursuant to Section 16.2(a) shall, within ten (10) Days of
the
expiration of the forty-five (45) Day period, choose an arbitrator
and
give notice to the other party of its choice of arbitrator together
with
notice of the issues it desires to submit for arbitration. If the
party
receiving the original notice fails to name a second arbitrator within
ten
(10) Days of receipt of the second notice and notify the other party,
then
the party that served the original notice may, on five (5) Days further
notice apply to the Chief Judge of the United States District Court
for
the District of Alaska for the appointment of the second arbitrator
on
behalf of the other party, and in such case the arbitrator appointed
shall
act as if named by the other party.
|
-73-
The
two (2)
arbitrators chosen shall, within twenty (20) Days after appointment of the
second arbitrator, choose a third arbitrator. If they fail to do so, either
of
the parties may, on five (5) Days notice to the other party, apply to the Chief
Judge for the appointment of a third arbitrator.
The
arbitrators shall fix a reasonable time and place for the hearing, at which
time
each of the parties may submit such evidence as the arbitrators may require
or
permit. The action of a majority of the arbitrators shall govern, and their
decisions in writing shall be final and binding on the parties. Each party
shall
pay the expense of the arbitrator selected by or for it, and all other joint
costs of the arbitration shall be equally divided between the parties. The
arbitrations shall be conducted in accordance with the rules of the American
Arbitration Association.
-74-
16.3 Qualification
of Arbitrators
The
arbitrators shall be qualified by education, experience, and training to pass
upon the particular questions in dispute. In the case of disputes which require
determination of Seller’s Available Gas Reserves, Swing Rates, or Annual
Contract Quantities, all arbitrators shall be reservoir engineers considered
to
be experts in determining gas reserves and swing rates. No arbitrator shall
be
or have been under contract for services within the preceding year to either
Buyer or Seller or their parents, subsidiaries or affiliates, and no arbitrator
shall be or have been employed by either Buyer or Seller or their respective
parents, subsidiaries or affiliates. Each arbitrator shall agree as a condition
of appointment not to contract with or be employed by Buyer or Seller (or their
parents, subsidiaries, or affiliates) for one (1) year following the completion
of the arbitration.
16.4 Special
Arbitration Standards
|
(a)
|
In
deciding an issue subject to 16.1(a), the arbitrators shall utilize
methods generally accepted by the American gas distribution
industry.
|
-75-
|
(b)
|
In
deciding a dispute subject to Section 16.1(d), the arbitrators shall
choose the successor index which is most likely to emulate the prior
index.
|
16.5 Postponements
Due to Arbitration
If
any matter
is submitted to arbitration pursuant to this Article 16, then any decision
or
action directly related to the matter in dispute, including making or responding
to a forecast, shall be postponed until sixty (60) Days following issuance
of
the final decision of the arbitration panel.
17. REGULATORY
BODIES
This
Agreement is subject to all present and future valid orders, rules and
regulations of any regulatory body having jurisdiction. Seller shall furnish
Buyer with copies of all filings submitted to the APUC relevant to this
Agreement and a copy of any consequent order, ruling or other action of the
APUC. On request of Buyer, Seller shall furnish Buyer with copies of any
documents or filings relating to Seller’s Properties filed with or issued by any
regulatory body or any native authority having jurisdiction.
-76-
18. ADDRESSES
All
notices
shall be given in writing to the respective parties at the addresses set forth
below, or such other addresses as the parties shall designate by written notice.
Notice shall not be deemed to have been given until actual receipt thereof
by
Buyer or Seller at the address provided:
|
Buyer
|
Seller
|
|
|
Alaska
Pipeline Company
|
Marathon
Oil Company
|
|
|
Attn:
President
|
Attn:
Production Manager
|
|
|
▇.▇.
▇▇▇ ▇▇▇▇▇▇
|
▇.▇.
▇▇▇ ▇▇▇▇▇▇
|
|
|
▇▇▇▇▇▇▇▇▇,
▇▇ 99519-0288
|
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
19. MISCELLANEOUS
19.0 Binding
of
Successors
This
Agreement shall be binding upon and inure to the benefit of the legal
representatives, successors and assigns of the parties. Neither party may assign
its obligations without first obtaining the written consent of the other to
such
assignment, which consent shall not be unreasonably withheld; provided, however,
that no such consent shall be required in the event that all or substantially
all of the assets of a party are acquired by another person or in the event
that
a party is merged, consolidated or reorganized with another person; further
provided, however, that in the event of such acquisition, merger,
reorganization, stock transfer, corporate restructuring, or consolidation,
the
surviving entity shall assume the obligations of this Agreement. Nothing
contained in this Section shall in any way prevent either party from pledging
or
mortgaging its rights hereunder for security of its indebtedness.
-77-
19.1 Restrictions
on Transfers by Seller
Seller
shall
not assign or sublease any lease which is used to calculate Seller’s Available
Gas Reserves unless the assignee or sublessee ratifies and joins in this
Agreement as a party Seller by executing an instrument describing such lease
and
dedicating such party’s Gas used to calculate Seller’s Available Gas Reserves to
the performance of this Agreement.
19.2 Easement
and Rights of Way
Seller
and
Buyer, at no expense to the other, grant and assign to each other, insofar
as
each has the right to do so, all necessary easements and rights-of-way for
the
construction of pipelines and/or other facilities necessary or convenient for
the delivery or receipt of Gas hereunder.
-78-
19.3 Choice
of
Law
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Alaska.
|
19.4
|
Agreement
Not to Be Construed Against Either Party as
Draftsman
|
The
parties
recognize that this Agreement is the product of the joint efforts of the parties
and agree that it shall not be construed against one party or the other as
a
result of the preparation, submittal or other event of negotiation, drafting
or
execution hereof.
19.5 Exchange
Agreement
Paragraph
7
of that Exchange Agreement (Exhibit D) between Union Oil Company of California
and Seller shall not be amended and Seller shall not take any action which
would
cause it to be terminated without Seller first obtaining the written consent
of
Buyer.
-79-
19.6 Entire
Agreement
This
Agreement constitutes the entire agreement and understanding between the parties
respecting the subject matter of this transaction and all prior agreements,
understandings and representations, whether oral or written, respecting this
subject matter are merged into and superseded by this written Agreement. No
amendment to this Agreement shall be binding on either party until reduced
to
writing and signed by the parties.
19.7 Headings
The
headings
throughout this Agreement are for reference purposes only and shall not be
construed or considered in interpreting the terms and provisions of this
Agreement.
19.8 No
Incidental or Consequential Damages
Neither
party
shall have any liability to the other for incidental or consequential damages
resulting from or arising out of this Agreement.
-80-
IN
WITNESS
WHEREOF, the parties have executed this Agreement in two (2)
originals.
|
ALASKA
PIPELINE COMPANY
|
MARATHON
OIL COMPANY
|
||||||
|
By
|
/s/▇.
▇. ▇▇▇▇▇▇
|
By
|
/s/Wm.
▇▇▇▇▇▇
|
||||
|
Its
President
|
Its
|
Vice
President
|
|||||
|
DATE:
|
May
19,
1988
|
DATE:
|
May
21,
1988
|
||||
—81—