Attached files
Exhibit
10.1
GAS
GATHERING AGREEMENT
BETWEEN
COWTOWN
PIPELINE L.P. (“GATHERER”)
AND
QUICKSILVER
RESOURCES INC. (“PRODUCER”)
Alliance
Area Gathering System, Tarrant and Denton Counties, Texas
Effective
Date December 1, 2009
TABLE OF
CONTENTS
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1.
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Definitions
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1
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2.
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Dedication
of Contract Area;
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6
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3.
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Reservations
of Parties
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7
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4.
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Receipt
Point(s) and Delivery Point(s)
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7
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5.
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System
Operations; Imbalances
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8
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6.
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Quantity;
Nominations and Dispatching
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9
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7.
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Quality
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10
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8.
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Tests
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12
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9.
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Measurement
and Meter Testing
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12
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10.
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Allocation
of Gains, Fuel and Loss
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15
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11.
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Fees
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16
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12.
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Accounting,
Payments and Credit Assurances
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17
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13.
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Warranty
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19
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14.
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Taxes
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20
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15.
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Indemnity
and Damages
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20
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16.
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Force
Majeure
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22
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17.
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Unprofitable
Operations and Rights of Termination
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23
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18.
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Term
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24
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19.
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Regulatory
Bodies
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24
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20.
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Disputes
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24
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21.
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Notices
and Payments
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24
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22.
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Right
to Process the Gas
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26
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23.
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Assignment
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26
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24.
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Miscellaneous
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26
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EXHIBIT A
– CONTRACT AREA
EXHIBIT B
– RECEIPT POINTS AND DELIVERY POINTS
GAS
GATHERING AGREEMENT
THIS GAS
GATHERING AGREEMENT (this “Agreement”) is made and entered into as of the 1st
day of December, 2009 (the “Effective Date”), by and among COWTOWN PIPELINE
L.P., a Texas limited partnership (“Gatherer”), and QUICKSILVER RESOURCES INC.,
a Delaware corporation (“Producer. Gatherer and Producer are
sometimes individually referred to herein as a “Party” and collectively as the
“Parties.”
WITNESSETH,
THAT:
WHEREAS,
Producer is in the business of producing gas and owns or controls gas production
from one or more wells (and one or more contemplated wells) on the lands within
the Contract Area (or lands pooled therewith) and desires for Gatherer to gather
such gas for redelivery to Producer or Producer’s Transporter; and
WHEREAS,
Gatherer is in the business of providing natural gas gathering services along
its Gathering System and desires to receive, gather and deliver such Gas to
Producer or Producer’s Transporter, subject to the terms and conditions
herein;
NOW,
THEREFORE, for good and valuable consideration the adequacy, receipt and
sufficiency of which are hereby set forth and acknowledged, and for all of the
representations, warranties and mutual covenants set forth herein, Gatherer and
Producer agree as follows:
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1.
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Definitions
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1.1 For
the purpose of this Agreement, the following terms and expressions used herein
are defined as follows:
a. “Affiliate”
shall mean, with respect to any specified Person, any other Person that directly
or indirectly, through one or more intermediaries, Controls, is Controlled by,
or is under common Control with, such specified Person. As used in
this definition, the term “Control” (including its derivatives and similar
terms) means the ownership, directly or indirectly, of fifty percent (50%) or
more of the capital stock issued by a corporation, the limited liability company
interests of a limited liability company or the equivalent equity interests in
any other Person, the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or Persons with
management authority performing similar functions) of such Person, even though
the right so to vote has been suspended by the happening of such a
contingency.
b. “Actual
Quarterly Volumes” means for any calendar quarter during the primary term of
this Agreement the sum of (a) the actual volumes (measured in Mcf) of
Procucer's Gas received by Gatherer and metered at any Receipt Points
during such calendar quarter, (b) the actual
volumes
(measured in Mcf) of Gas received by Gatherer from Eni and metered at any
Receipt Points during such calendar quarter pursuant to the Eni GGA, and (c) the
actual volumes (measured in Mcf) of Gas received by Gatherer from third parties
(other than Eni) and metered at any Receipt Points during such calendar quarter;
provided, however, that third party volumes that are included in the calculation
pursuant to this clause (c) shall never exceed the excess, if any, of (i)
Producer’s Quarterly Modeled Volumes (measured in Mcf) for such calendar quarter
over (ii) the sum of the volumes that are included in the calculation pursuant
to clauses (a) and (b) of this definition for such calendar
quarter.
c. “Btu”
shall mean one British thermal unit, which is the quantity of heat required to
raise one pound avoirdupois of pure water from 58.5 degrees Fahrenheit to 59.5
degrees Fahrenheit at a constant pressure of 14.73 pounds per square inch
absolute.
d. “Component”
shall mean those hydrocarbon and non-hydrocarbon molecular constituents which
are definable by industry standards and procedures. Such Components
as used in this Agreement shall be:
N2 -
Nitrogen
CO2 -
Carbon Dioxide
H2S -
Hydrogen Sulfide
C1 -
Methane
C2 -
Ethane
C3 -
Propane
iC4 -
Iso-butane
nC4 -
Normal Butane
iC5 -
Iso-pentane
nC5 -
Normal Pentane
C6+ -
Hexanes and Heavier Compounds
e. “Contract
Area” shall mean that area described, depicted or outlined on Exhibit A which is
attached hereto and made a part hereof for all purposes and which may be amended
from time to time.
f. “CPI
Adjustment” shall mean that percentage equal to the percentage increase
between:
(i) the
seasonally unadjusted consumer Price Index for All Urban Consumers (all items),
U.S. city Average (1982-84 =100), as published by the U.S. Department of Labor,
Bureau of Labor Statistics (“CPI-U”) for the month of December of the second
year prior to the Escalation Date; and
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(ii) the
seasonally unadjusted CPI-U for the month of December immediately preceding the
Escalation Date.
g. “Day”
shall mean a period of twenty-four (24) consecutive hours beginning and ending
at seven o’clock a.m. Central Standard Time.
h. “Delivery
Points” shall mean the point(s) of interconnect between the Gathering System and
the Transporter receiving Producer’s Gas, which point(s) are shown on Exhibit B
which is attached hereto and made a part hereof for all purposes.
i. “Effective
Date” has the meaning set forth in the opening paragraph of this
Agreement.
j. “Electrical
Power” shall mean the electricity consumed in the operation of, and purchased
from a utility or like entity which serves, the Gathering System and any of the
related field facilities.
k. “Eni”
means Eni Petroleum US LLC.
l. “Eni
GGA” means that certain Gas Gathering Agreement dated effective as of
April 1, 2009, by and between Gatherer and Eni.
m. “Escalation
Date” shall mean January 1, 2011 and each January 1st thereafter during the
Term.
n. “Fuel
and Loss” shall mean the gas volumes used or consumed in the operation of the
Gathering System, which shall include, but shall in no way be limited to, (i)
gas used as fuel for dehydration, compression, conditioning, blending, treating,
or recompression, (ii) gas needed for line pack, (iii) gas vented during
operations, (iv) lost and unaccounted for gas, and (v) any Liquefiable
Hydrocarbons that become separated from the gas while the gas is in the
Gathering System.
o. “Gas”
shall mean natural gas which is owned or controlled by Producer and produced
from lands within the Contract Area, including casinghead gas produced with
crude oil, gas from gas wells produced in association with crude oil (associated
gas), and gas from condensate wells (non-associated gas), and shall include any
inerts or impurities contained therein.
p. “Gathering
Fee” shall have the meaning set forth in Section 11.1.
q. “Gathering
System” shall mean, but shall in no way be limited to, the gas gathering
pipelines, fuel gas pipelines, dehydration facilities, treating facilities,
compression facilities, junctions, heaters, meters, separators, electric power
lines, communications cables, roads,
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and other
related facilities and equipment, including the rights to the lands on which any
part of such facilities or equipment is located, necessary to gather and
transport gas from the Gathering System’s Receipt Point(s) to the Delivery
Point(s), from the inlet flange of the pipeline metering facility installed at
the Receipt Point(s) up to the upstream flange of the metering facility at the
Delivery Point(s), and shall include any expansion of the Gathering System as
provided in Section 4.4.
r. “GPM”
shall mean gallons per thousand cubic feet.
s. “Gross
Quarterly Revenue” means for any calendar quarter during the primary term of
this Agreement the product of (i) the Actual Quarterly Volumes for such calendar
quarter and (ii) a rate equal to $0.55 per Mcf (as such rate is escalated
during the primary term of this Agreement in accordance with Section
11.2).
t. “Law”
means any law, statute, code, ordinance, order, determination, rule, regulation,
judgment, decree, injunction, franchise, permit, certificate, license,
authorization or other directive or requirement of (i) the United States of
America, (ii) any state, county, municipality, or other governmental subdivision
within the United States of America, and (iii) any court or any governmental
department, commission, board, bureau, agency, or other instrumentality of the
United States of America or of any state, county, municipality, or other
governmental subdivision within the United States of America.
u. “Liquefiable
Hydrocarbons” shall mean ethane, propane, iso-butanes, normal butanes,
iso-pentanes, normal pentanes, hexanes and heavier hydrocarbons, and incidental
methane, or any mixtures thereof, which may be recovered or extracted in the
Gathering System.
v. “MCF”
shall mean 1,000 standard cubic feet of gas.
w. “MMBtu”
shall mean 1,000,000 Btus.
x. “MMCF”
shall mean 1,000,000 standard cubic feet of gas.
y. “MMCFD”
shall mean 1,000,000 standard cubic feet of gas per day.
z. “Month,”
“billing month,” “period,” and “accounting period” shall mean the period
beginning at seven o’clock a.m. on the first day of a calendar month and ending
at seven o’clock a.m. on the first day of the next succeeding calendar
month.
aa. “Person”
means any natural person, corporation, limited liability company, partnership,
joint venture, association, cooperative, or other entity.
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bb. “Producer’s
Gas” means Gas owned or controlled by Producer (including lift gas attributable
to Gas owned or controlled by Producer) lawfully produced from wells now or
hereafter drilled on the lands within the Contract Area or lands pooled
therewith).
cc. “Producer’s
Quarterly Modeled Revenue” means for any calendar quarter during the primary
term of this Agreement the product of (i) the Producer’s Quarterly Modeled
Volumes for such calendar quarter and (ii) a rate equal to $0.45 per Mcf (as
such rate is escalated during the primary term of this Agreement in accordance
with Section 11.2).
dd. “Producer’s
Quarterly Modeled Volumes” means for any calendar quarter during the primary
term of this Agreement the volume (measured in Mcf) for such calendar quarter
set forth under the column entitled “Producer’s Quarterly Modeled Volumes” in
Annex __ hereto.
ee. “PSA”
means that certain Purchase and Sale Agreement dated December 10, 2009, by
and among Gatherer, as “Seller”, and Quicksilver Gas Services LP and Cowtown
Pipeline Partners L.P., as “Purchasers”.
ff. “psia”
shall mean pounds per square inch absolute.
gg. “psig”
shall mean pounds per square inch gauge.
hh. “Quarterly
Revenue Minimum” means for any calendar quarter during the primary term of this
Agreement the product of (i) the Actual Quarterly Volumes for such calendar
quarter and (ii) a rate equal to $0.40 per Mcf (as such rate is
escalated during the primary term of this Agreement in accordance with Section
11.2).
ii. “Receipt
Points” shall mean the inlet flange of Gatherer’s metering facilities located at
or near each of Producer’s wells located within the Contract Area or such other
point as may be mutually agreed upon by the Parties. The Gathering
System’s Receipt Point(s) are listed on Exhibit B to this Agreement which is
attached hereto and made a part hereof for all purposes and which may be amended
from time to time to reflect the addition or deletion of a Receipt
Point.
jj. “SCF”
or “standard cubic foot of gas” shall mean the amount of gas necessary to fill a
cubic foot of space when the gas is at a pressure of 14.65 pounds per square
inch absolute and a temperature of 60 degrees Fahrenheit.
kk. “Senior
Executives” shall have the meaning set forth in Section 20.1.
ll. “Term”
shall have the meaning set forth in Section 18.
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mm. “Total
Delivered Quantities” shall have the meaning set forth in Section
10.1.
nn. “Transporter”
shall mean the receiving pipeline(s) downstream of the Gathering System into
which the Gas gathered hereunder is to be delivered at the Delivery
Point(s).
1.2 Any
reference to any federal, state, or local statute or law will be deemed to refer
to such statute or law, as amended, and also to refer to all rules and
regulations promulgated thereunder, unless the context requires
otherwise. Any reference to a Party will also include such Party’s
permitted successors and assigns. All defined terms in this Agreement
shall be equally applicable to the singular and plural forms of the terms so
defined. The words “including,” “includes,” and “include” will be
deemed to be followed by the phrase “without limitation.” All
personal pronouns used in this Agreement, whether used in the masculine,
feminine or neuter gender, will include all other genders; the singular will
include the plural, and vice versa, unless the context requires
otherwise. All references herein to an Exhibit, Schedule, Section,
subsection, paragraph, subparagraph or other subdivision will refer to the
corresponding Exhibit, Schedule, Section, subsection, paragraph, subparagraph or
other subdivision of this Agreement unless specific reference is made to an
exhibit, schedule, section, subsection, paragraph, subparagraph or other
subdivision of another document or instrument. The terms “herein,”
“hereby,” “hereunder,” “hereof,” “hereinafter,” and other equivalent words refer
to this Agreement in its entirety and not solely to the particular portion of
the Agreement in which such word is used.
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2.
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Dedication
of Contract Area;
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2.1 Subject
to the terms and provisions hereof, Producer dedicates and agrees to deliver or
cause to be delivered to Gatherer at Gatherer’s Receipt Point(s) the total
volume of Gas owned or controlled by Producer lawfully produced from wells now
or hereafter drilled on the lands within the Contract Area (or lands pooled
therewith), in each case excluding Gas reserved or utilized by Producer in
accordance with the terms of Section 3. Any transfer by Producer of
its right, title, or interest in the Gas, or in an oil and gas lease, fee
mineral interest or other agreement, interest or right which creates or gives
rise to Producer’s interest in the Gas, to a third party, whether by farmout,
contract, or otherwise, shall be made specifically subject to this
Agreement. Producer will notify any person to whom Producer transfers
all or a portion of its right, title, or interest in the Gas, or in such lease,
interest, agreement or right, that such Gas is dedicated pursuant to the terms
of this Agreement to be gathered by Gatherer, and Producer shall obtain such
third party’s agreement to continue delivering such Gas to Gatherer during the
term of and in accordance with this Agreement. Producer will notify
Gatherer of any such transfer within 10 days of the effective
date. Failure of Producer to so notify Gatherer will not impair
Gatherer’s rights under this Agreement.
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2.2 Gas
shall be delivered to the Receipt Point(s) after standard mechanical separation
by Producer for the removal of free water and free liquid hydrocarbons, but
shall not otherwise be processed by Producer for the removal of Liquefiable
Hydrocarbons.
2.3 Gatherer
agrees that subject to the provisions hereof, it will receive Gas from the
Receipt Point(s) and will cause the redelivery of such Gas, less Producer’s pro
rata share of Fuel and Loss, to Producer or Producer’s Transporter at the
Delivery Point(s).
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3.
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Reservations
of Parties
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3.1 Producer
reserves all liquid hydrocarbons, oil, or condensate removed by Producer by
means of mechanical gas-liquid separators (including heater-treaters), drips,
and/or lines from the Gas prior to delivery to Gatherer. If
mechanical cooling is performed by Producer to meet the temperature
specifications of this Agreement, Producer shall not reduce the temperature of
the Gas below 120 degrees Fahrenheit.
3.2 Producer
reserves all Gas that may be required for cycling, repressuring, pressure
maintenance, and gas lift operations with respect to gas reservoirs on the
premises committed hereunder; provided, however, that the Gas used in such
operations shall be subject to the terms of this Agreement (to the extent that
such Gas can be economically saved) and delivered to Gatherer following the
cessation of such operations.
3.3 Producer
reserves that amount of Gas which is required for above ground development and
operation within the Contract Area.
3.4 Producer
expressly reserves the right to deliver or furnish to Producer’s lessor such Gas
as required to satisfy the terms of Producer’s oil and gas leases.
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4.
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Receipt
Point(s) and Delivery Point(s)
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4.1 Producer
shall be responsible for all arrangements and, at its own expense, shall
construct, equip, maintain, and operate all facilities (including, but not
limited to, all necessary separation, dehydration, and/or compression
equipment), necessary to deliver the Gas to Gatherer at the Receipt Point(s) at
such pressure as is required and sufficient to enter the Gathering System, but
not to exceed 1,200 psig.
4.2 After
the Effective Date, Gatherer may, but shall have no obligation to, propose
additional compression which was not taken into consideration in the
determination of the Gathering Fee provided in this Agreement. Any
such proposal shall be provided to Producer for approval, which approval shall
not be unreasonably withheld or delayed, prior to installing additional
compression. In such event, the fee for such additional compression
shall be agreed upon by the
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Parties
but Producer agrees that the compression fee payable by Producer shall be based
upon, but shall not be less than, Gatherer’s actual cost to perform such
compression service. In addition, Producer will provide its pro rata
share of Fuel and Loss, as more particularly described below in Section 10, as
well as the cost, if any, for any Electrical Power, required for operating such
compression equipment and any related facilities.
4.3 Gatherer,
at Producer’s expense, shall (i) install, construct and equip all meters and
facilities necessary to measure the Gas at the Receipt Point(s), and (ii) secure
any right-of-way, easements, and permits as are necessary and appropriate to
construct, operate, maintain and access such facilities. Gatherer, at its own
expense, shall thereafter maintain and operate such facilities throughout the
Term of this Agreement.
4.4 Gatherer,
in its sole and absolute discretion, may decline to construct a Gathering System
expansion if it determines that it would not be profitable to do
so. In such event, Producer may construct a Gathering System
expansion at its sole cost and expense. The Gathering System
expansion must meet all of Gatherer’s specifications, and Gatherer will be
responsible for the meter station and connection to the existing Gathering
System. Gatherer may, at its election, but within two years (2) of
the initial delivery of production from the Gathering System expansion, acquire
the ownership of the Gathering System expansion installed by the Producer by
reimbursing Producer for the actual cost of the Gathering System expansion with
no allowance for inflation or depreciation. In such event, Producer
agrees to execute all assignments or contracts deemed necessary to accomplish
the transfer to Gatherer of title to the Gathering System expansion, including
rights-of-way and easements. In the event neither Gatherer nor
Producer elect to construct the necessary Gathering System expansion to connect
additional wells to the existing Gathering System, then this Agreement shall
terminate as to the Gas produced by Producer from such additional well or
wells.
4.5 Gatherer
agrees to deliver the Gas to Producer or Producer’s nominated Transporter, less
Producer’s pro rata share of Fuel and Loss, at the Delivery
Point(s). The Gas shall be deemed to have been delivered to Producer
or to the Transporter on Producer’s behalf at the Delivery Point(s), and to have
passed through the Delivery Point(s), when the Gas passes through the upstream
flange of the metering facility at the Delivery Point(s).
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5.
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System
Operations; Imbalances
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5.1 Gatherer
shall retain full operational control of the Gathering System and shall at all
times be entitled to schedule deliveries and to operate its facilities in a
manner consistent with safe and prudent operating practices under the conditions
which may exist from time to time. Accordingly, Gatherer may
interrupt the gathering of Gas as necessary to test, alter, modify, enlarge,
expand, maintain or repair any facility or property comprising any part of or
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appurtenant
to the Gathering System. It is understood and agreed by the Parties
that in order for Gatherer to maintain efficiency in the Gathering System, it
will be necessary to maintain a uniform rate of flow of Gas to the Gathering
System from all sources during each twenty-four (24) hour
period. Therefore, Producer agrees that it will cooperate with
Gatherer in regulating the flow rate of the Gas and in establishing a producing
schedule to deliver on a best efforts basis the Gas at a uniform and continuous
flow rate. In the event that Gatherer enters into an operational
balancing agreement with Producer’s Transporter or any other third party
pipeline, Producer hereby agrees to be bound by the terms set forth
therein.
5.2 It
is acknowledged that, because of dispatching and other causes, certain
imbalances may occur between the MMBtus of Gas delivered hereunder by Gatherer
to or for the account of Producer at the Delivery Point(s) and the MMBtus of Gas
received from or on behalf of Producer at the Receipt Point(s). Such
imbalances, if any, shall be eliminated as soon as practical after each such
occurrence; provided, however, Gatherer shall not be required to eliminate any
imbalance during any month in which the value of the Gas received or delivered,
as determined by Gatherer, is not representative of the market value of natural
gas when the imbalance occurred. Any imbalance remaining following
the termination of this Agreement shall be eliminated during the month following
the month in which termination occurs or as soon as practicable
thereafter. Producer authorizes the operator of each of Producer’s
Wells to be its agent for the purpose of providing Gatherer with instructions to
adjust allocations of Gas attributable to that well for gas balancing
purposes. Producer represents that it has the right to make any such
adjustments and that such adjustments are correct. Gatherer may
adjust the Gas allocated to that well in accordance with these instructions but
Gatherer is not obligated to do so at any time. Gatherer shall notify
Producer of any such allocation change implemented by Gatherer at the Producer’s
operator’s instructions.
5.3 The
Parties acknowledge that the Gathering System is connected to the facilities of
Transporter and other pipelines and, as a result, Gatherer shall be, from time
to time, subject to certain requirements imposed by those
pipelines. Accordingly, Gatherer shall have the right under this
Agreement to require Producer to comply with the same third party pipeline
requirements with which Gatherer must comply. PRODUCER AGREES TO INDEMNIFY, DEFEND,
AND HOLD GATHERER HARMLESS FROM PRODUCER’S FAILURE TO COMPLY WITH TRANSPORTER’S
OR SUCH OTHER THIRD PARTY PIPELINE REQUIREMENTS.
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6.
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Quantity;
Nominations and Dispatching
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6.1 Subject
to Gathering System capacity, Gatherer shall gather that volume of Gas legally
allowed to be produced which is attributable to the interest owned or controlled
by Producer in wells drilled on lands within the Contract Area or lands pooled
therewith; provided, Producer or Producer’s Transporter or
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nominee
will accept the Gas redelivered on Producer’s behalf at the Delivery
Point(s). Gatherer may, from time to time, find it necessary to shut
off entirely or restrict the flow of gas to the Gathering System notwithstanding
anything herein to the contrary and, in such event, Gatherer shall not be liable
to Producer for the resulting effect thereof. Gatherer shall provide
Producer reasonable prior notice of any shut down due to routine maintenance and
shall prudently work to minimize the amount of such downtime.
6.2 Producer
shall make all nominations to Transporter in accordance with Transporter’s
nomination procedures, and shall make any and all other arrangements necessary
for Transporter to receive Producer’s Gas at the Delivery
Point(s). Producer shall nominate to Gatherer in writing, not less
than three (3) business Days prior to the first day of each Month during the
Term of this Agreement, the daily quantity of Gas (expressed in MCFs and MMBtus)
that Producer shall deliver to Gatherer at the Receipt Point(s) for gathering
during such Month and that Producer or Producer’s Transporter or nominee shall
accept at the Delivery Point(s). As between Producer and Gatherer,
Producer shall be solely responsible for imbalances, penalties, cash-out
payments, or other consequences of any failure to submit timely and proper
nominations in accordance with the requirements of the Transporter or the
failure to deliver or receive quantities of Gas in accordance with said
nominations.
6.3 Gatherer
and Producer shall designate a dispatcher(s) who shall be continuously on call
for nomination purposes, and shall notify each other in writing of such
dispatcher(s) and their telephone number(s).
6.4 Producer’s
dispatcher shall notify Gatherer’s dispatcher(s) in advance of any anticipated
decrease in delivery rate below the daily nominated
quantity. Producer’s dispatcher(s) must obtain the prior written
approval from Gatherer’s dispatcher(s) for any delivery rate in excess of the
daily quantity rate. Gatherer’s dispatcher(s) shall notify Producer’s
dispatcher(s) of any anticipated inability to receive the Gas at a delivery rate
less than (a) the daily nominated quantity rate; or (b) a previously orally
authorized delivery rate in excess of the daily nominated quantity
rate.
6.5 The
quantity of Gas delivered by Producer at each Receipt Point hereunder during a
month shall be determined in accordance with the allocation procedures set forth
in Section 10 below.
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7.
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Quality
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7.1 Gatherer
shall not be obligated to receive, gather, or redeliver (as the case may be) Gas
delivered by or on behalf of Producer hereunder that fails to meet the quality
specifications of (i) the Transporter at any of the Delivery Point(s), except
for quality specifications relating to hydration and CO2 content of
the Gas that are contemplated to be satisfied by virtue of Gatherer’s provision
of
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certain
dehydration and treating services at its existing treating facility, or (ii) the
following specifications:
a. The
Gas must be commercial in quality and free from any foreign materials such as
dirt, dust, iron particles, crude oil, dark condensate, free water, and other
impurities; and substances which may be injurious to pipelines or which may
interfere with the gathering, processing, transmission, or commercial
utilization of said Gas;
b. The
Gas delivered hereunder shall not exceed a temperature of one hundred forty
(140) degrees Fahrenheit, nor have a hydrocarbon dewpoint below forty (40)
degrees Fahrenheit, at the Receipt Point(s);
c. The
Gas delivered hereunder shall not contain more than:
(i) One-fourth
grain of hydrogen sulfide, or five grains of total sulfur, or one grain
mercaptan per one hundred (100) cubic feet;
(ii) one
part per million by volume of oxygen;
(iii) two
percent by volume of nitrogen; or
(iv) three
percent by volume of a combined total of inerts, including, but not limited to,
carbon dioxide and nitrogen Components;
d. No
diluents such as carbon dioxide, air, or nitrogen shall be added to the
Gas;
e. The
Gas shall contain no carbon monoxide, halogens, or unsaturated hydrocarbons, and
no more than 0.1 parts per million of hydrogen; and
f. The
Gas shall have a total heating value of not less than 950 Btus nor more than
1050 Btus per cubic foot and 2 GPM of ethane and heavier
hydrocarbons.
In the event of any conflict as between a Transporter’s
specifications and those appearing above in this Section 7.1, the more stringent
or restrictive specifications shall be satisfied.
7.2 If
any of the Gas delivered by Producer hereunder should fail to meet the quality
specifications set forth in Section 7.1 (including those required by a
Transporter), Gatherer may elect to either (i) accept and gather such Gas, (ii)
accept, but treat and/or condition such Gas prior to gathering at an additional
cost, or (iii) refuse to accept such Gas. The acceptance of Gas not
meeting the
11
quality
specifications set forth in Section 7.1 shall not be deemed a waiver of
Gatherer’s right to reject such Gas at any later time, and Gatherer shall be
entitled, at any time and from time to time, to decline to accept proffered
deliveries of Gas not meeting the quality specifications set forth
herein.
7.3 If
Gatherer elects to accept but treat and/or condition the non-conforming Gas
prior to gathering, Gatherer shall advise the Producer of such election and
associated fees and costs to be charged by Gatherer. Producer shall
then have a maximum of thirty (30) days to advise Gatherer if it will treat
and/or condition such non-conforming Gas and the cost associated with such
treatment. If Producer does not elect to treat and/or condition such
non-conforming Gas or fails to make such election within the specified time
period, then Gatherer shall have the right to (i) proceed with gathering such
non-conforming Gas and Producer shall pay to Gatherer all associated fees and
costs charged by Gatherer in connection with such actions, or (ii) reject and
release such non-conforming Gas from the terms of this Agreement.
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8.
|
Tests
|
8.1 Producer
and Gatherer do hereby agree as follows:
a. Gatherer
shall procure or cause to be procured a sample of Gas at each Receipt Point and
Delivery Point, respectively, and analyze the samples by chromatographic
analysis to determine the Component content (mole percent), specific gravity,
and the Btu content thereof.
b. Tests
provided above shall be made by Gatherer using its own equipment or by an
independent testing service at least once in each six month period, or more
frequently in its sole discretion. All such tests shall be made in
accordance with approved engineering practices. Representatives of
Producer shall be entitled to witness such tests, and Producer shall give
advance written notice to Gatherer in the event that it exercises such
right.
8.2 Physical
constants required for making calculations hereunder shall be taken from the Gas
Processors Association Physical Constants Publication No. 2145-03 (as amended
from time to time). Physical constants for the hexanes and heavier
hydrocarbons portion of hydrocarbon mixtures shall be assumed to be the same as
the physical constants for hexane. The heat content per gallon of
each liquid hydrocarbon Component shall be determined by multiplying the cubic
feet per gallon of such liquid hydrocarbon Component by the heat content per
cubic foot thereof.
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9.
|
Measurement
and Meter Testing
|
9.1 The
unit of volume for measurement of Gas delivered hereunder shall be one thousand
(1,000) cubic feet of Gas (or MCF) at a base temperature of 60 degrees
Fahrenheit and at an absolute pressure of 14.65 psia and
12
saturated
with water vapor. All fundamental constants, observations, records,
and procedures involved in determining the quantity of Gas delivered hereunder
shall be in accordance with the standards prescribed in Report Nos. 3 and 8, of
the American Gas Association, as amended or supplemented from time to time,
respectively. It is agreed that for the purpose of measurement and
computations hereunder, the atmospheric pressure shall be assumed to be 14.7
psia regardless of the atmospheric pressure at which the Gas is measured and
that the Gas obeys the Ideal Gas Laws as to variations of volume with pressure
and specific gravity, including the deviation from Boyle’s law, and shall all be
made by Gatherer in accordance with applicable rules, regulations, and
orders. It is also agreed that Gatherer may apply a uniform
correction factor for water vapor if Gatherer deems it necessary in its sole and
absolute discretion.
9.2 Gatherer
shall install, maintain, and operate, or cause to be maintained and operated, a
measuring station located at each Receipt Point and Delivery Point. Said
measuring station(s) shall be so equipped with orifice meters, recording gauges,
or other types of meter or meters of standard make and design commonly
acceptable in the industry, and of suitable size and design, as to accomplish
the accurate measurement of Gas delivered hereunder. The changing and
integration of the charts (if utilized for measurement purposes hereunder) and
calibrating and adjusting of meters shall be done by
Gatherer. Gatherer shall have the right to utilize electronic gas
measuring equipment should it so desire.
9.3 Producer
may, at its option and expense, install check meters for checking Gatherer’s
metering equipment at each Receipt Point; and the same shall be so installed as
not to interfere with the operation of the Gathering System.
9.4 The
temperature of the Gas flowing through the meter shall be determined by the
continuous use of a recording thermometer or device installed by Gatherer, so
that it will properly record the temperature of the Gas flowing through the
meter.
9.5 The
specific gravity of the Gas flowing through the meter shall be determined by
methods commonly accepted in the industry. Specific gravities so
determined will be used in calculating Gas deliveries until the next specific
gravity test is made.
9.6 Each
Party shall have the right to be present at the time of any installation,
reading, sampling, cleaning, changing, repair, inspection, testing, calibration,
or adjustment done in connection with the other Party’s measuring equipment used
in measuring deliveries hereunder. The records from such measuring
equipment shall remain the property of their owner, but upon request, each will
submit to the other its records and charts, together with calculations therefrom
subject to return within thirty (30) days after receipt thereof. If
meters utilizing charts are used to measure Gas hereunder, then the charts shall
be kept
13
on file
for a period of two (2) years, or such longer period as may be required by
law. In addition, any other measurement data shall also be kept for
the same time period. Each Party, during the first production month,
and after that at least semi-annually, or more often if necessary, shall
calibrate the meters and instruments installed by it or cause the same to be
calibrated. Gatherer shall give Producer ten (10) days notice in
advance of such tests so that the latter may, at its election, be present in
person or by its representative to observe adjustments, if any are
made.
9.7 If
the metering equipment is found to be inaccurate by two percent (2%) or more,
registration thereof and any payment based upon such registration shall be
corrected at the rate of such inaccuracy for any period of inaccuracy which is
definitely known or agreed upon, or if not known or agreed upon, then for a
period extending back one-half of the time elapsed since the last day of the
calibration. Unless conclusively determined that Gatherer’s measurement
equipment is inaccurate by two percent (2%) or more, Gatherer’s measurement
shall be deemed to be correct for all purposes hereunder, and no adjustment
shall be made to the previous volumes. Following any test, any
metering equipment found to be inaccurate to any degree shall be adjusted
immediately to measure accurately. If for any reason any meter is out
of service or out of repair so that the quantity of Gas delivered through such
meter cannot be ascertained or computed from the readings thereof, the quantity
of Gas so delivered during such period shall be estimated and agreed upon by the
Parties upon the basis of the best available data using the first of the
following methods which is feasible:
a. By
using the registration of any check measuring equipment of Producer, if
installed and registering accurately;
b. By
correcting the error if the percentage of error is ascertainable by calibration,
test, or mathematical calculation; or
c. By
estimating the quantity of deliveries during preceding periods under similar
conditions when the meter was registering accurately.
9.8 If
Producer shall notify Gatherer, or if Gatherer shall notify Producer, at any
time that a special test of any Receipt Point meter is desired, the Parties
shall cooperate to secure an immediate verification of the accuracy of such
meter and joint observation of any adjustments. All tests of
Gatherer’s measuring equipment at any Receipt Point shall be made at Gatherer’s
expense, except that the Producer shall bear the expense of tests made at its
request if the inaccuracy found is less than two percent
(2%). Expense as used in this Section 9.8 shall be limited to actual
costs of Gatherer as the result of testing and shall not include any costs
incurred by Producer as the result of witnessing said testing.
14
9.9 If
during any month less than 1,000 MCF of Gas is delivered to a Receipt Point
(except for reasons of Force Majeure), then Gatherer shall charge a meter fee
applicable to any such Receipt Point equal to four hundred dollars
($400.00). Such fee shall be invoiced to Producer and payable thirty
(30) days after receipt by Producer of such invoice.
9.10 The
Parties recognize and acknowledge that technological advances may occur over the
term of this Agreement which may render certain measurement devices obsolete, or
less accurate, or less efficient than that which may be available. In
such event, Gatherer may, with Producer’s approval, substitute or utilize such
available measurement equipment in lieu of any measurement equipment described
above in this Section 9.
9.11 If
for any reason the Gas is delivered to Gatherer at a Receipt Point with
pulsations that affect the accuracy of the measurement, Producer shall be
responsible for installing necessary pulsation dampeners, or other devices, to
eliminate or reduce the pulsations to an acceptable level determined by
Gatherer.
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10.
|
Allocation
of Gains, Fuel and Loss
|
10.1 Gatherer
shall use general industry care in transporting Producer’s Gas from the Receipt
Point(s) to the Delivery Point(s) for Producer’s account or
sale. However, the Parties understand and agree that certain
volumetric gains and losses in the Gas will occur and shall be shared by and
among Producer and other third parties whose gas is transported by Gatherer, in
the proportion that the gas of each Person who delivers gas into the Gathering
System bears to the total gas received at the respective receipt point. In
determining the quantity of Gas delivered by Producer at each Receipt Point
hereunder during a month, Gatherer shall allocate to Producer at each such
Receipt Point a quantity of gas equal to (a) a percentage of the
total quantities (expressed in MMBtus) reported for such Month by the
Transporter at the Delivery Point(s) (the “Total Delivered Quantities”) equal to
100% of such Total Delivered Quantities times a fraction, the numerator of which
is the number of MMBtus of Gas delivered by Producer during such Month at said
Receipt Point, and the denominator of which is the number of MMBtus of all gas
delivered into the Gathering System from all receipt points, minus (b)
Producer’s applicable Fuel and Loss. In making the determinations
under this Section 10, Gatherer may rely on, and shall be fully protected in
relying on, any determination, report or statement received by Gatherer from any
operator of a well regarding the number of MMBtus delivered from such well into
the Gathering System at any receipt point on the Gathering System.
10.2 Producer’s
pro rata share of such Fuel and Loss shall equal the product of the total Fuel
and Loss utilized, consumed or incurred by the Gathering System, multiplied by a
fraction, the numerator of which is Producer’s MMBtus of Gas metered into the
Gathering System at the Receipt Point(s) and
15
the
denominator of which is the total number of MMBtus of gas metered into the
Gathering System upstream of all receipt points.
10.3 Electrical
Power shall be utilized in the operation of the Gathering System (including
Electrical Power used for dehydration, compression, conditioning, blending,
treating, or recompression), and Producer’s pro rata share shall equal the
product of the total dollar amount paid for such Electrical Power multiplied by
a fraction, the numerator of which is the number of Producer’s MMBtus of Gas
metered into the Gathering System upstream of the Receipt Point(s) and the
denominator of which is the total number of MMBtus of gas metered into the
Gathering System upstream of all receipt points, to be invoiced to Producer and
paid to Gatherer in accordance with Section 12 below.
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11.
|
Fees
|
11.1 Producer
shall pay to Gatherer a rate equal to $0.55 per Mcf of Producer’s Gas received
by Gatherer and metered at the Receipt Points, subject to adjustment as provided
in Section 11.2 (such rate, as so adjusted, the “Gathering Fee”), and subject to
the possible refund in any calendar quarter as provided below in this Section
11.1. If for any calendar quarter during the primary term of this
Agreement the Gross Quarterly Revenue for such quarter exceeds Producer’s
Quarterly Modeled Revenue for such calendar quarter, then not later than 45 days
after the end of such calendar quarter Gatherer shall refund to Producer an
amount in cash equal to the sum of (i) the excess of (a) the Gross Quarterly
Revenue for such calendar quarter over (b) the Producer’s Quarterly Modeled
Revenues for such calendar quarter, plus (ii) the “Cumulative
Unused Refund Amount” (as defined below), if any; provided, however, that (x) in no event
shall the amount of any such refund be made in respect of any calendar quarter
during the primary term of this Agreement to the extent that the amount of the
refund would result in the sum of the gathering revenue paid to Gatherer by
Producer pursuant to this Agreement and by or on behalf of Eni pursuant to the
Eni GGA or the PSA in respect of the Actual Quarterly Volumes for such quarter
being less than the Quarterly Revenue Minimum for such calendar quarter, and (y)
the amount of any refund in respect of any calendar quarter shall be made
only to the extent of the excess, if any, of the amount that would
otherwise be refunded in respect of such calendar quarter pursuant to this
sentence over the “Cumulative Credit” (as defined below), if any, that exists at
the end of such calendar quarter. If the amount of any refund
required to be made by the Gatherer to Producer pursuant to the immediately
preceding sentence in respect of any calendar quarter during the primary term of
this Agreement is reduced in accordance with clause (x) of the proviso of the
immediately preceding sentence, the amount of such reduction, together with the
unused amount of such reductions from prior calendar quarters during the primary
term of this Agreement (the cumulative amount of such unused reductions is
referred to herein as the “Cumulative Unused Refund Amount”), shall be carried
forward to future calendar quarters during the primary term of this Agreement to
be used (subject to the proviso of the immediately preceding
16
sentence)
to increase the amount of refunds in future calendar quarters in accordance with
clause (ii) of the immediately preceding sentence. If for any
calendar quarter during the primary term of this Agreement the Producer’s
Quarterly Modeled Revenues for such calendar quarter exceed the Gross Quarterly
Revenue for such quarter, the amount of such excess (together with any such
excess from any previous calendar quarter during the primary term of this
Agreement that has not been used pursuant to clause (y) of the proviso of the
second preceding sentence to reduce the amount of any refund for any previous
calendar quarter (the cumulative amount of such unused excess is referred to
herein as the “Cumulative Credit”)) shall be carried forward to future calendar
quarters during the primary term of this Agreement to reduce (in accordance with
clause (y) of the proviso in the second preceding sentence) in such future
calendar quarters the amount that would otherwise be refunded pursuant to the
second preceding sentence.
11.2 On
each Escalation Date, the Gathering Fee (and each of the other rates specified
in Section 11.1 as set forth in such Section) will increase by a percentage
equal to the CPI Adjustment.
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12.
|
Accounting,
Payments and Credit Assurances
|
12.1 Gatherer
shall furnish to Producer on or before the twenty-fifth (25th) day of each month
a report or statement disclosing information necessary to enable Producer to
make reasonable and accurate statistical and accounting entries upon its books
concerning all phases of this Agreement related to the preceding month,
including any statement of the Gas delivered for Producer’s account to its
Transporter, the total volume of Gas in MCF and in MMBtu measured at the Receipt
Point(s), Producer’s pro rata share of Fuel and Loss and the cost billed to
Gatherer for Electrical Power, if any, and the amounts due Gatherer for the
services provided hereunder. Producer shall remit the amounts due
Gatherer within thirty (30) days after the receipt of Gatherer’s
statement. PRODUCER
SHALL INDEMNIFY AND HOLD GATHERER HARMLESS FROM ANY AND ALL CHARGES, PENALTIES,
COSTS AND EXPENSES OF WHATEVER KIND OR NATURE ARISING FROM PRODUCER’S FAILURE TO
PAY SUCH PAYMENTS, INCLUDING COSTS AND EXPENSES OF ANY LITIGATION AND REASONABLE
ATTORNEYS’ FEES ASSOCIATED THEREWITH. Unpaid amounts due shall accrue interest at the
lesser of a rate equal to one and one half percent (1.5%) per month or the
maximum rate permitted by law, until the balance is paid in
full.
12.2 Each
Party shall have the right during reasonable hours to examine books, records,
charts, and original test data of the other Party to the extent necessary to
verify the accuracy of any statement, charge, credit, computation, test, or
delivery made pursuant to any provision hereof. If any such
examination reveals any inaccuracy in any such statement, charge, credit,
computation, test, or delivery, the necessary adjustment shall be promptly made
without interest or penalty. Neither Party will have any right to
recoup or recover prior
17
overpayments
or under payments that result from error that occur in spite of good faith
performance if the amounts involved do not exceed fifty dollars ($50.00) per
month per Receipt Point.
12.3 Producer
shall be responsible for the payment of all royalties due on the
Gas. Producer shall indemnify and hold Gatherer harmless from any and
all claims, actions, causes of action, damages, liability, or obligations
arising out of or in any way related to the payment of the lessor’s royalty or
any other burden or encumbrance affecting the Gas.
12.4 Notwithstanding
any change in ownership of Producer’s properties, Gatherer shall never be
required to make payments or to give notices required under the provisions of
this agreement to more than one party, and, in the event that Producer’s
properties shall ever be owned by more than one party, Gatherer may withhold
(without interest) further payments and notices until all of the owners of
Producer’s properties have designated one party to act for them in all respects
relating to said properties and this agreement, including the rendering of
bills, the submission of charts, and the receipt of payments and notices
hereunder.
12.5 All
accounting records and documents directly related to this Agreement prepared by
any Party shall be retained for a period of not less than two years following
the end of the calendar year of their origination. The Parties
further agree that all matters relating to the accounting hereunder for any
calendar year shall be considered correct and not subject to further audit or
legal challenge after two years following the end of the calendar
year.
12.6 Producer
must maintain such creditworthiness as Gatherer shall reasonably
require. Gatherer’s creditworthiness requirements shall be
substantially similar to those requirements set forth below:
a. Producer
will be deemed creditworthy if (i) its long-term unsecured debt securities are
rated at least BBB- by Standard & Poor’s Corporation (“S&P”) and at
least Baa3 by Moody’s Investor Service (“Moody’s”) (provided, however, that if
the Producer’s rating is at BBB- or Baa3 and the short-term or long-term outlook
is Negative, Gatherer may require further analysis as discussed below); and (ii)
the sum of all fees under the Agreement is less than 15% of Producer’s tangible
net worth. The term “tangible net worth” shall mean for a corporation
the sum of the capital stock, paid-in capital in excess of par or stated value,
and other free and clear equity reserve accounts less goodwill, patents,
unamortized loan costs or restructuring costs, and other intangible
assets. Only actual tangible assets are to be included in Gatherer’s
assessment of creditworthiness. In comparing the overall value of a
Producer’s agreement to tangible net worth for credit evaluation purposes,
Gatherer will compare the net present value of the fee obligations under this
Agreement to Producer’s current tangible net worth.
18
b. If
Producer does not meet the criteria described above, then Producer may request
that Gatherer evaluate its creditworthiness based upon the level of service
requested relative to the Producer’s current and future ability to meet its
obligations. Further, if Producer’s creditworthiness does not meet
any of the foregoing criteria Producer will be considered creditworthy if
Producer maintains and delivers to Gatherer an irrevocable guaranty of payment
in form acceptable to Gatherer, or an irrevocable letter of credit from a
financial institution rated at least A- by S&P or at least A3 by Moody’s, in
a form acceptable to Gatherer, in either case of the Guaranty or the letter of
credit in an amount satisfactory to Gatherer. The obligation to
maintain such credit assurance shall extend until such time as Producer is
deemed creditworthy as defined herein. Producer shall provide the
Guaranty or the letter of credit within twenty (2) days of written notice by
Gatherer.
c. The
creditworthiness requirements set forth in this Section 12.6 shall apply to any
permitted assignment (in whole or in part), and to any permitted permanent
release, as applicable, of this Agreement. Gatherer shall apply
consistent evaluation practices to all similarly situated producers to determine
Producer’s financial ability to perform the payment obligations due to
Gatherer. These creditworthiness requirements shall apply to any
assignment (in whole or in part) of this Agreement, or to any permanent release
of this Agreement.
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13.
|
Warranty
|
13.1 PRODUCER warrants the title to
all Gas and all components thereof which shall be delivered by Producer to
Gatherer hereunder, the right to enter into this Agreement with reference to
such Gas, and that such Gas is free from all liens and adverse claims; and AGREES, IF NOTIFIED THEREOF BY GATHERER, TO
INDEMNIFY, DEFEND AND HOLD GATHERER HARMLESS FROM AND AGAINST ANY AND ALL SUITS,
ACTIONS, LOSSES, DEBTS, ACCOUNTS, DAMAGES, COSTS AND EXPENSES ARISING FROM OR
OUT OF ANY ADVERSE CLAIM AS TO PRODUCER’S TITLE, INCLUDING BUT NOT LIMITED TO ,
ANY ADVERSE CLAIMS BROUGHT BY OR THROUGH A MINERAL INTEREST OR ROYALTY OWNER, TO
OR AGAINST THE GAS. Producer agrees to make settlement for all royalties,
overriding royalty interests, and/or production payments due and payable on the
Gas delivered to Gatherer hereunder, any Components of the Gas extracted or
saved therefrom, and the sale and disposition of the Gas and any Components
thereof, all in accordance with the terms of the leases, interests and/or
agreements (including applicable instruments of title) from which the Gas
delivered to Gatherer hereunder is produced, and all amendments
thereto.
13.2 If
Producer’s title to the Gas is questioned, Gatherer may refuse to accept the Gas
as to which Producer’s title has been questioned and/or withhold any payments
due Producer hereunder without interest up to the amount of the
19
claim
until title is free from such questions or until Producer furnishes a bond in
form and from a surety satisfactory to Gatherer conditioned to save Gatherer
harmless, or furnishes such other financial guaranties or assurances as are
satisfactory to Gatherer.
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14.
|
Taxes
|
14.1 Producer
shall pay or cause to be paid all production, severance and ad valorem taxes,
assessments, and other charges levied or assessed against the Gas gathered
hereunder, and all taxes and statutory charges levied or assessed against any of
Producer’s properties, facilities, or operations. Producer shall
reimburse Gatherer to the extent of any severance or other such taxes paid by
Gatherer on behalf of Producer.
14.2 Gatherer
shall pay all taxes and statutory charges levied or assessed against the
Gathering System and operations concerning such system.
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15.
|
Indemnity
and Damages
|
15.1 As
between the Parties, and as to liability, if any, accruing to either Party or to
any third party, Producer shall be solely liable for and in control and
possession of, and bear the risk of loss with respect to, the Gas deliverable
hereunder until the Gas is delivered to Gatherer at the Receipt
Point(s). Gatherer shall be solely liable for and in control and
possession of, and bear the risk of loss with respect to, the Gas after the Gas
is delivered to Gatherer at the Receipt Point(s) hereunder until the Gas is
delivered to Producer or to the Transporter on Producer’s behalf at the Delivery
Point(s), whereupon Producer shall again be solely liable for the Gas and in
control and possession thereof and bear the risk of loss of the Gas delivered to
Transporter.
15.2 PRODUCER SHALL BE AFFORDED ACCESS TO
GATHERER’S PROPERTY AND THE FACILITIES TO THE EXTENT NECESSARY TO CARRY OUT ITS
RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT, AND PRODUCER SHALL FULLY OBSERVE
AND COMPLY WITH ALL OF GATHERER’S SAFETY PRACTICES AND PROCEDURES WHILE ON THE
PREMISES. PRODUCER HEREBY AGREES TO INDEMNIFY, HOLD HARMLESS,
PROTECT, DEFEND, AND DISCHARGE GATHERER AND ITS AFFILIATED COMPANIES, PARTNERS,
SUCCESSORS, ASSIGNS, OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS
FOR, FROM AND AGAINST ANY AND ALL JUDGMENTS, EXECUTIONS, CAUSES OF ACTION,
DEMANDS, RIGHTS, SUITS, DEBTS AND SUMS OF MONEY, ACCOUNTINGS, DUES, PENALTIES,
FINES, CLAIMS (INCLUDING, WITHOUT LIMITATION, CLAIMS FOR CONTRIBUTION),
LIABILITIES, LOSSES, COSTS, DAMAGES AND EXPENSES (INCLUDING COURT COSTS,
REASONABLE COSTS OF INVESTIGATION, DEFENSE AND ATTORNEY’S FEES) FOR THE INJURY
TO OR DEATH OF ANY PERSON (INCLUDING, WITHOUT LIMITATION, EACH OF PRODUCER’S AND
GATHERER’S
20
EMPLOYEES,
AGENTS AND CONTRACTORS) OR PROPERTY DAMAGE OF ANY NATURE, KIND OR DESCRIPTION OR
ANY OTHER CLAIM OF ANY NATURE, KIND OR DESCRIPTION BROUGHT BY ANY PERSON,
WHETHER LEGAL OR EQUITABLE, WHICH ARISES OUT OF OR RESULTS FROM (I) PRODUCER’S
OWNERSHIP AND CONTROL OF THE GAS PRIOR TO THE TIME THAT THE GAS PASSES THROUGH
THE GATHERING SYSTEM RECEIPT POINT(S) AND AFTER THE GAS PASSES THROUGH THE
DELIVERY POINT(S), (II) PRODUCER’S OWNERSHIP AND OPERATION (OR ANY OPERATION ON
BEHALF OF PRODUCER) OF THE WELLS LOCATED WITHIN THE CONTRACT AREA AND ANY
FACILITIES OR EQUIPMENT INSTALLED OR MAINTAINED BY PRODUCER OR ITS OPERATORS
UPSTREAM OF THE GATHERING SYSTEM RECEIPT POINT, REGARDLESS OF WHETHER SUCH WAS
REQUIRED BY THE TERMS OF THIS AGREEMENT, (III) ANY ACCESS TO GATHERER’S PROPERTY
BY (OR ANY DELIVERY OF GATHERER’S RECORDS OR CHARTS TO) PRODUCER OR ITS
REPRESENTATIVES, EMPLOYEES, AGENTS OR CONTRACTORS, (IV) PRODUCER’S BREACH OF
THIS AGREEMENT, OR (V) ANY VIOLATION OF THE LAW BY PRODUCER, IN EACH CASE
REGARDLESS OF ANY SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE OR STRICT LIABILITY
OF GATHERER OR ANY OF THE PERSONS INDEMNIFIED BY PRODUCER UNDER THE FOREGOING
PROVISIONS.
GATHERER
HEREBY AGREES TO INDEMNIFY, HOLD HARMLESS, PROTECT, DEFEND AND DISCHARGE
PRODUCER AND ITS AFFILIATED COMPANIES, PARTNERS, SUCCESSORS, ASSIGNS, OFFICERS,
DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS FOR, FROM AND AGAINST ANY AND ALL
JUDGMENTS, EXECUTIONS, CAUSES OF ACTION, DEMANDS, RIGHTS, SUITS, DEBTS AND SUMS
OF MONEY, ACCOUNTINGS, DUES, PENALTIES, FINES, CLAIMS (INCLUDING, WITHOUT
LIMITATION, CLAIMS FOR CONTRIBUTION), LIABILITIES, LOSSES, COSTS, DAMAGES AND
EXPENSES (INCLUDING COURT COSTS, REASONABLE COSTS OF INVESTIGATION, DEFENSE AND
ATTORNEY’S FEES) FOR THE INJURY TO OR DEATH OF ANY PERSON (INCLUDING, WITHOUT
LIMITATION, EACH OF PRODUCER’S AND GATHERER’S EMPLOYEES, AGENTS AND CONTRACTORS)
OR PROPERTY DAMAGE OF ANY NATURE, KIND OR DESCRIPTION OR ANY OTHER CLAIM OF ANY
NATURE, KIND OR DESCRIPTION BROUGHT BY ANY PERSON, WHETHER LEGAL OR EQUITABLE,
WHICH ARISES OUT OF OR RESULTS FROM (I) GATHERER’S OWNERSHIP AND CONTROL OF THE
GAS AFTER THE GAS PASSES THROUGH THE GATHERING SYSTEM RECEIPT POINTS TO THE TIME
THAT THE GAS PASSES THROUGH THE DELIVERY POINT(S), (II) GATHERER’S OWNERSHIP AND
OPERATION OF THE GATHERING SYSTEM, (III) GATHERER’S BREACH OF THIS AGREEMENT, OR
(IV) ANY VIOLATION OF THE LAW BY GATHERER, IN EACH CASE REGARDLESS OF ANY SOLE,
CONCURRENT OR COMPARATIVE NEGLIGENCE OR STRICT LIABILITY OF PRODUCER OR ANY OF
THE PERSONS INDEMNIFIED BY GATHERER UNDER THE FOREGOING PROVISIONS.
21
THE
INDEMNIFICATION RIGHTS HEREIN SHALL BE CUMULATIVE OF, AND IN ADDITION TO, ANY
AND ALL OTHER RIGHTS, REMEDIES OR RECOURSE OF THE PARTIES AND SHALL SURVIVE ANY
EXPIRATION OR TERMINATION OF THIS AGREEMENT. TO THE EXTENT AND ONLY
TO THE EXTENT THE FOREGOING INDEMNIFICATION RIGHTS ARE BY LAW, EITHER
INAPPLICABLE OR NOT ENFORCEABLE, PRODUCER AND GATHERER SHALL EACH BE RESPONSIBLE
FOR THE RESULTS OF ITS OWN ACTIONS AND FOR THE ACTIONS OF THOSE PERSONS AND
ENTITIES OVER WHICH IT EXERCISES CONTROL.
15.3 NOTWITHSTANDING ANYTHING CONTAINED IN
THIS SECTION 15 OR ELSEWHERE IN THIS AGREEMENT TO THE CONTRARY, NEITHER PARTY
SHALL BE LIABLE FOR ANY PUNITIVE, EXEMPLARY, CONSEQUENTIAL, INCIDENTAL, SPECIAL,
OR INDIRECT DAMAGES, LOST PROFITS, OR OTHER BUSINESS INTERRUPTION DAMAGES, IN
TORT OR CONTRACT, IN CONNECTION WITH OR OTHERWISE ARISING OUT OF THIS AGREEMENT,
EXCEPT TO THE EXTENT SUCH DAMAGES HAVE BEEN AWARDED TO A THIRD PARTY WHO IS NOT
AN AFFILIATE OF A PARTY AND ARE SUBJECT TO ALLOCATION BETWEEN OR AMONG THE
PARTIES PURSUANT TO ANY TERMS OF THIS AGREEMENT. FOR PURPOSES OF THIS
SECTION 15.3, “AFFILIATE” SHALL MEAN, AS TO THE PERSON SPECIFIED, ANY PERSON
CONTROLLING, CONTROLLED BY OR UNDER COMMON CONTROL WITH SUCH SPECIFIED
PERSON. THE CONCEPT OF CONTROL, CONTROLLING OR CONTROLLED AS USED IN
THE AFORESAID CONTEXT MEANS THE POSSESSION, DIRECTLY OR INDIRECTLY, OF THE POWER
TO DIRECT OR CAUSE THE DIRECTION OF THE MANAGEMENT AND POLICIES OF ANOTHER,
WHETHER THROUGH THE OWNERSHIP OF VOTING SECURITIES, BY CONTRACT OR
OTHERWISE.
|
16.
|
Force
Majeure
|
In the
event any Party is rendered unable, either wholly or in part, by force majeure
to carry out its obligations under this Agreement, other than the obligation to
make payments due hereunder, it is agreed that if such Party gives notice and
reasonably full particulars of such inability in writing or by telephone
(promptly followed up by notice in writing) to the other Parties within a
reasonable time after the occurrence of the cause relied on, then the
obligations of the Party giving such notice, so far as they are affected by such
force majeure, shall be suspended during the continuance of any inability so
caused, but for no longer period, and such cause shall, as far as possible, be
remedied with all reasonable dispatch. The term “force majeure” as
employed herein shall mean any act or event which wholly or partially prevents
or delays the performance of obligations arising under this Agreement if such
act or event is not reasonably within the control of the Party claiming force
majeure, including, without limitation, by the following
enumeration: acts of God; strikes; lockouts; or other industrial
disturbances; acts of the public enemy; wars; blockades; insurrections; riots;
epidemics; landslides; lightning; earthquakes; fires; storms; floods; washouts;
arrests
22
and
restraints of governments and people; civil disturbances; explosion, breakage,
or accidents to machinery, plant facilities, or lines of pipe; the necessity for
making repairs to or alterations of machinery, plant facilities, or lines of
pipe; freezing of wells or lines of pipe; partial or entire failure of wells;
and the inability of either Producer or Gatherer to acquire, or the delays on
the part of either Producer or Gatherer in acquiring, at reasonable cost and
after the exercise of reasonable diligence: (a) any servitude,
rights-of-way grants, permits, or licenses; (b) any materials or supplies for
the construction or maintenance of facilities; and (c) any permits or
permissions from any governmental agency if such are required. It is
understood and agreed that the settlement of strikes or lockouts shall be
entirely within the discretion of the Party having the difficulty and that the
above requirements that any force majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes or lockouts by acceding to
the demands of the opposing party when such course is inadvisable in the sole
discretion of the Party having the difficulty.
|
17.
|
Unprofitable
Operations and Rights of
Termination
|
17.1 If,
in the sole and absolute opinion of Gatherer, (a) the gathering of Gas from any
well within the Contract Area or any Receipt Point(s), or (b) the delivery of
Gas to any Delivery Point(s), is or becomes uneconomical due to its volume,
quality, government regulations, or for any other cause, Gatherer shall not be
obligated to gather and may cease gathering such Gas so long as such condition
exists. Gatherer agrees that in its determination of uneconomical
gathering, the same criteria shall be used for the Gas as for all other gas
being gathered through the Gathering System. In the event that
Gatherer refuses to gather the Gas, Producer may dispose of the Gas not gathered
as it sees fit; provided that Gatherer at any time thereafter shall have the
right to gather all of the Gas refused, if refused for reason or reasons
resulting from an act of Producer or lack of action on the part of Producer,
conditioned upon Gatherer giving Producer at least two (2) months’ notice of its
election to so do. In the event that Gatherer refuses to gather the
Gas for a period of sixty (60) consecutive days causing Producer’s well(s) to be
shut-in, Producer shall have the option, exercised solely at its discretion, to
terminate the Agreement in its entirety insofar and only insofar as it pertains
to Gas produced from the affected well(s) by providing to Gatherer advance
written notice thirty (30) days in advance of such termination.
17.2 Nothing
herein shall be construed to require Producer to drill any well or to continue
to operate any well which a prudent operator would not in like circumstances
drill or continue to operate.
17.3 Gatherer
shall not be obligated to expand the Gathering System in order to provide
capacity hereunder.
23
|
18.
|
Term
|
This
terms of this Agreement shall be effective from the Effective Date and, subject
to the other provisions hereof, shall continue in full force and effect for a
primary term of ten (10) years and shall be automatically renewed for one (1)
year periods thereafter unless on or before ninety (90) days prior to the
expiration of the primary term or the expiration of a one (1) year renewal
period a Party provides written notice of termination to the other Party (the
“Term”).
|
19.
|
Regulatory
Bodies
|
This
Agreement and the provisions hereof shall be subject to all valid applicable
federal, state, and local laws, orders, rules, and
regulations. Producer and Gatherer have entered into this Agreement
with the understanding, and in reliance on the fact, that this Agreement and/or
performance of this Agreement are not and will not be subject to the
jurisdiction or regulation of the Federal Energy Regulatory
Commission. If this Agreement and/or performance of this Agreement
becomes subject to such jurisdiction and/or regulation, this Agreement shall
automatically terminate unless Producer and Gatherer agree, in writing, within
thirty (30) days of the effective date of the attachment of any such
jurisdiction and/or regulation, that this Agreement shall continue after such
effective date.
|
20.
|
Disputes
|
20.1 Should
a dispute arise between the Parties out of or in connection with this Agreement,
the Parties shall promptly seek to resolve any such dispute by negotiations
among the senior executives of the Parties who have the authority to settle such
dispute (“Senior Executives”) prior to the initiation of any
lawsuit. The Senior Executives shall meet at a mutually acceptable
time and place within fifteen (15) days after such dispute arises and thereafter
as often as they reasonably deem necessary to exchange relevant information and
to attempt to resolve the dispute. All negotiations and
communications pursuant to this Section shall be treated as compromise and
settlement negotiations for purposes of the federal and state Rules of
Evidence. If the dispute has not been resolved within thirty (30)
days after the initial meeting of the Senior Executives, or such longer period
as may be mutually agreed upon, either Party may initiate a
lawsuit.
20.2 In
any suit filed by a Party to resolve a dispute arising under this Agreement or
related to the services provided hereunder, each Party hereby covenants and
agrees to take all steps necessary to waive a trial by jury.
|
21.
|
Notices
and Payments
|
Except
for the initial telephonic notice of force majeure permitted under Section 16,
any notice, request, demand, statement, or bill provided for in this Agreement
shall be in writing and delivered by hand, mail, or facsimile. All
such written communications
24
shall be
effective upon receipt by the other party at the address of the Parties as
follows:
| Producer | ||
| Statements: |
Quicksilver
Resources Inc.
777
West Rosedale Street
Fort
Worth, TX 76104
Attn: Revenue
Accounting
Facsimile
No.: 817-665-5007
|
|
| Payments: | Quicksilver
Resources Inc.
777
West Rosedale Street
Fort
Worth, TX 76104
Attn: Accounting
Facsimile
No.: 817-665-5007
|
|
|
|
|
|
| Contractual: | Quicksilver
Resources Inc.
777
West Rosedale Street
Fort
Worth, TX 76104
Attn: Marketing
Facsimile
No.: 817-665-5008
|
|
| Gatherer | ||
| Statements: |
Cowtown
Pipeline L.P.
777
West Rosedale Street
Fort
Worth, TX 76104
Attn: Revenue
Accounting
Facsimile
No.: 817-665-5007
|
|
| Payments: | Cowtown
Pipeline L.P.
777
West Rosedale Street
Fort
Worth, TX 76104
Attn: Accounting
Facsimile
No.: 817-665-5007
|
|
| Contractual: | Cowtown
Pipeline L.P.
777
West Rosedale Street
Fort
Worth, TX 76104
Attn: Marketing
Facsimile
No.: 817-665-5008
|
|
Any of
the Parties may designate a further or different address by giving written
notice to the other Parties.
25
|
22.
|
Right
to Process the Gas
|
Producer
agrees that Gatherer shall have the right to process, or cause to be processed,
blend, or cause to be blended, the Gas delivered hereunder for the extraction of
natural gas liquids and other valuable components, to the extent that Gatherer
or its affiliates constructs, acquires or otherwise obtains access to facilities
capable of processing such Gas. Upon written notice to Producer that
Gatherer is ready and willing to exercise this right, the Parties will negotiate
in good faith the terms and fees for the processing of the Gas at any such
facility, which terms and fees (i) shall be consistent with those then
prevailing in the area for similar processing or blending and (ii) shall be set
forth in an amendment to this Agreement or in a supplemental agreement between
the Parties.
|
23.
|
Assignment
|
This
Agreement shall be binding upon and inure to the benefit of the heirs,
executors, administrators, successors, and assigns of the respective Parties,
but no transfer of or succession to the interest of any Party, either wholly or
partially, shall affect or bind the other Parties until it shall have been
furnished with the original instrument or with the proper proof that the
claimant is legally entitled to such interest; provided, however, that in the
case of any assignment by Producer (i) such assignment shall be further subject
to the satisfaction by Producer’s assignee of the creditworthiness requirements
of Section 12.6, and (ii) Producer’s assignee shall be required
to expressly agree under such assignment to assume and be bound by all of the
obligations of Producer under this Agreement.
|
24.
|
Miscellaneous
|
24.1 No
waiver by any Party of any one or more defaults in the performance of any
provision of this Agreement shall operate or be construed as a waiver of any
other default or future defaults, whether of a like or different
character.
24.2 No
modification or amendment of the terms and provisions of this Agreement shall be
made except by the execution of a written agreement by the
Parties. This Agreement contains the entire agreement between the
Parties and there are no oral promises, agreements, or warranties affecting
it.
24.3 The
headings in this Agreement are formulated and used for convenience only and
shall not be deemed to affect the meaning or construction of any provisions of
this Agreement.
24.4 This
Agreement supersedes and replaces any other contract(s) or agreements(s) which
may exist between the Parties covering the gathering or processing of the Gas
dedicated hereunder.
24.5 Nothing
in this Agreement is intended to create a partnership or joint venture under
state law or to render the Parties jointly and severally liable to
26
any
third party. Each of the Parties elects to be excluded from the
provisions of Subchapter K, Chapter 1 of Subtitle A, of the Internal Revenue
Code of 1986 pursuant to the provisions of Article 761(a) of such code and from
any similar provisions of state law. Gatherer shall timely file such
evidence of this election as may be required under applicable law.
24.6 Should
any section, subsection, paragraph, subparagraph, or other portion of this
Agreement be found invalid as a matter of law in a duly authorized court, or by
a duly authorized government agency, then only that portion of this Agreement
shall be invalid. The remainder of this Agreement which shall not
have been found invalid shall remain in full force and effect.
24.7 THIS AGREEMENT, AND ALL QUESTIONS
RELATING TO ITS VALIDITY, INTERPRETATION, PERFORMANCE, AND ENFORCEMENT
(INCLUDING, WITHOUT LIMITATION, PROVISIONS CONCERNING LIMITATIONS OF ACTIONS)
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS, NOTWITHSTANDING ANY CONFLICT-OF-LAWS DOCTRINES OF SUCH STATE OR OTHER
JURISDICTION TO THE CONTRARY. ALL MATTERS LITIGATED BY OR BETWEEN THE
PARTIES THAT INVOLVE THIS AGREEMENT, THE RELATIONSHIP OF THE PARTIES, OR ANY
RELATED DOCUMENTS OR MATTERS HEREUNDER SHALL BE BROUGHT ONLY IN FORT WORTH,
TARRANT COUNTY, TEXAS.
24.8 This
Agreement was prepared jointly by the Parties and not by any Party to the
exclusion of the other. In the event an ambiguity or question of
intent or interpretation arises, no presumption or burden of proof will arise
favoring or disfavoring any Party by virtue of the authorship, or any greater
involvement in the drafting, of any of the provisions of this
Agreement.
[Signature
Page Follows]
27
IN
WITNESS WHEREOF, the Parties have executed this Agreement in several originals
as of the date and year written above.
| PRODUCER | ||||
|
Quicksilver Resources
Inc., a Delaware corporation
|
||||
|
By:
|
/s/
Philip Cook
|
|||
|
Philip
Cook
|
||||
| Senior Vice President - Chief Financial Officer | ||||
| GATHERER | ||||
|
Cowtown Pipeline L.P., a
Texas limited partnership
|
||||
|
By:
|
Cowtown
Pipeline Management, Inc., its
|
|||
|
general
partner
|
||||
| By: | /s/ Glenn Darden | |||
| Glenn Darden | ||||
| President and Chief Executive Officer | ||||
28
EXHIBIT
A
to
the
GAS
GATHERING AGREEMENT
This
Exhibit A is attached to the Gas Gathering Agreement (the “Agreement”) dated as
of December 1, 2009, by and between Quicksilver Resources Inc., as Producer, and
Cowtown Pipeline L.P., as Gatherer, and made a part thereof for all
purposes. All defined terms used herein shall have the same meaning
as set forth in the Agreement.
Contract
Area
The leases and lands located in Denton
and Tarrant Counties, Texas commonly referred to as the Alliance Area and
designated the “Contract Area” as depicted on the plat attached hereto and made
a part hereof.
Exhibit
A, Page 1 of 1
EXHIBIT
B
to
the
GAS
GATHERING AGREEMENT
This
Exhibit B is attached to the Gas Gathering Agreement (the “Agreement”) dated as
of December 1, 2009, by and between Quicksilver Resources Inc., as Producer, and
Cowtown Pipeline L.P., as Gatherer, and made a part thereof for all
purposes. All defined terms used herein shall have the same meaning
as set forth in the Agreement.
Gathering
System Receipt Point(s)
|
Gathering
System
Receipt
Point
|
Survey
|
Meter/CDP
|
|
Egelston
#1H
|
MEP&P
RR CO A-1898
|
AL21129
|
|
Albright
#1H
|
MEP&P
RR CO A-906
|
AL21122
|
Delivery Point(s) to
Transporter
|
Delivery
Point
|
Transporter
|
Meter
|
|
[To
be determined]
|
Crosstex
North Texas Pipeline
|
70-50-031
|
|
[To
be determined]
|
Energy
Transfer Paris Loop Pipeline
|
009835
|
Exhibit
B, Page 1 of 1