Initial Public Offering (IPO): Registration Statement (General Form) — Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1 Registration Statement (General Form) 99 560K
2: EX-3.1 Certificate of Incorporation 8 30K
3: EX-3.2 Bylaws 14 55K
4: EX-10.1 Reorganization Agreement 21 93K
13: EX-10.10 Gas Treating and Processing Agreement 48 131K
14: EX-10.11 Gas Gathering, Treating and Processing Agreement 36 99K
15: EX-10.12 Gas Gathering, Treating and Processing Agreement 32 104K
16: EX-10.13 Products Exchange Agreements 3 20K
17: EX-10.14 Gas Processing and Treating Agreement 11 44K
18: EX-10.15 Processing Agreement 30 66K
19: EX-10.16 Natural Gas Liquids Purchase Agreement 7 31K
20: EX-10.17 Purchase and Demolition Agreement 25 52K
21: EX-10.18 Purchase and Demolition Agreement 25 53K
22: EX-10.19 Agreement to Design and Construct New Facilities 21 43K
5: EX-10.2 Modification Agreement 6 34K
23: EX-10.20 Sales Acknowledgement 3 18K
24: EX-10.21 Loan Agreement Dated November 20, 1992 202 752K
25: EX-10.23 Natural Gas Liquids Purchase Agree. (Boldman) 14 46K
26: EX-10.25 1996 Incentive Compensation Plan 5 23K
27: EX-10.26 1996 Stock Incentive Plan of Registrant 13 52K
28: EX-10.27 1996 Nonemployee Director Stock Option Plan 9 40K
29: EX-10.28 Form of Non-Compete With J.M. Fox & Markwest 1 10K
6: EX-10.3 Amended and Restated Mortgage 41 166K
7: EX-10.4 Secured Guaranty, Dated May 2, 1996 23 62K
8: EX-10.5 Security Agreement, Dated May 2, 1996 23 78K
9: EX-10.6 Pledge Agreement, Dated May 2, 1996 21 70K
10: EX-10.7 Participation, Ownership and Operating Agreement 83 290K
11: EX-10.8 Second Amended and Restated Agreement 10 45K
12: EX-10.9 Subordination Agreement 13 47K
30: EX-11 Computation of Per Share Earnings 1 9K
31: EX-23.1 Consent of Price Waterhouse LLP 1 9K
32: EX-23.2 Consent of Bdo Seidman, LLP 1 10K
EXHIBIT Y
GAS TREATING
AND
PROCESSING AGREEMENT BETWEEN
WEST SHORE PROCESSING COMPANY, LLC
AND
SHELL OFFSHORE, INC.
May 1, 1996
GAS TREATING AND PROCESSING AGREEMENT
TABLE OF CONTENTS
-----------------
[Download Table]
Article I - Definitions.................................. 1
Article II - Scope and Term.............................. 6
Article III - Facilities................................. 7
Article IV - Quantity.................................... 8
Article V - Deliver of Gas............................... 12
Article VI-Quality....................................... 13
Article VII - Meters and Computation of Volumes.......... 15
Article VIII - Treating Products and NGL Plant Products.. 18
Article IX - Allocation and Plant Thermal Reduction...... 19
Article X - Consideration Due SOI........................ 21
Article XI - Natural Gas Liquid Recovery................. 23
Article XII - Billing and Payment........................ 25
Article XIII - Redelivery of Gas to West Shore........... 26
Article XIV -Unprofitability and Preferential Rights..... 27
Article XV - Payment of Royalty and Taxes................ 30
Article XVI - Laws, Regulations and Force Majeure........ 30
Article XVII - Miscellaneous............................. 32
Exhibit A................................................ 36
Exhibit B - Wells Producing SOI-Owned Gas................ 37
Exhibit C - Wells Producing West Shore Gas............... 38
Exhibit D - Lease........................................ 39
Draft of April 30, 1996
GAS TREATING AND
PROCESSING AGREEMENT
THIS GAS TREATING AND PROCESSING AGREEMENT "AGREEMENT") made and entered
into this day of , 1996, by and between WEST SHORE
PROCESSING COMPANY, LLC, hereinafter designated as "West Shore" and SHELL
OFFSHORE, INC., hereinafter referred to as "SOI".
WITNESSETH
WHEREAS, SOI owns and operates the Treating Plant (as defined below) in
Manistee County, Michigan, for the purpose of removing certain gas contaminants
from gas produced from the Manistee area; and
WHEREAS, West Shore owns or controls a sour gas pipeline extending from the
Ludington, Michigan area to the West Shore facility in Section 19 of Brown
Township, Manistee County, Michigan; and
WHEREAS, West Shore owns or controls the treating and processing rights of
certain sour gas being transported in said pipeline; and
WHEREAS, West Shore desires that such gas be treated for the removal of
certain gas contaminants, and desires to have SOI provide these Services to West
Shore in accordance with this Agreement.
NOW, THEREFORE, in consideration of the premises and of other valuable
considerations and of the agreements and covenants hereinafter contained, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For all purposes of this Agreement, the terms and expressions herein used
are defined as follows:
1.1 "Accounting Period" means a period of one month, commencing at
seven (7) o'clock a.m. local time on the first day of a calendar month and
ending at seven (7) o'clock a.m. local time on the first day of the next
succeeding month.
1
1.2 "ACID GAS" shall mean carbon dioxide (C02), hydrogen sulfide (H2s) and
any other gases containing sulfur, such as mercaptans and carbonyl sulfide
(COS).
1.3 "ACTUAL DOWNTIME PERCENTAGE" shall mean the amount of time, in hours,
during any given period of time, in hours, during which the Treating Plant is
not operational or otherwise not capable of receiving and treating the full
First Priority Capacity of West Shore in accordance with this Agreement,
expressed as a percentage. In determining the amount of downtime, downtime due
to (a) conditions of force majeure described in Sections 16.2 (i) and (iii), but
not conditions of force majeure described in section 16.2(ii), (b) activities
necessary for expanding the plant capacity, or (c) activities related to
restoring plant capacity pursuant to Section 4.3 shall be excluded. During each
calendar year, SOI shall be permitted up to a maximum of 10 days of downtime for
catalyst change out which days shall not be included as time during which the
Treating Plant is not operational in calculating downtime hereunder.
1.4 "BTU" (British Thermal Unit) shall mean the quantity of heat required
to raise the temperature of one (1) pound of pure water one (1) degree on the
Fahrenheit temperature scale (i.e. from 58.5 degrees to 59.5 degrees).
1.5 "DIRECT EXPENSES" shall mean all necessary and reasonable expenses
incurred by SOI at the Treating Plant location associated with the operation,
maintenance and repair of Treating Plant. Direct Expenses shall include, but not
be limited to, salaries, wages and expenses of Treating Plant employees,
including costs of holiday, vacation, sickness and disability expenses; actual
costs of employee benefits; the costs of material, equipment and supplies used
at the Treating Plant; and the cost of outside contract services, utilities and
equipment rental.
1.6 "PRIMARY TERM" Shall have the meaning given such term in section 2.3.
1.7 "EXPANDED CAPACITY" Shall have the meaning given such term in Section
4.7(a).
1.8 "EXPANSION RATIO" Shall have the meaning given such term in Section
4.7 (b).
1.9 "SLUG CATCHER" Shall have the meaning given such term in Section
6.1(a).
1.10 "TREATING PLANT FUEL" Shall have the meaning given
2
such term in Section 9.2 (b).
1.11 "PLANT THERMAL REDUCTION" Shall have the meaning given such term in
Section 9.2.
1.12 "THEORETICAL TOTAL GROSS HEATING VALUE" Shall have the meaning given
such term in Section 9.2(a).
1.13 "THEORETICAL VOLUME OF RESIDUE GAS" Shall have the meaning given such
term in Section 9.4.
1.14 "THEORETICAL FUEL" Shall have the meaning given such term in Section
9.4.
1.15 "BASE TREATING FEE" Shall have the meaning given such term in Section
10.1.
1.16 "INDEX" Shall have the meaning given such term in Section 10.1(b).
1.17 "MAKEUP PAYMENT" Shall have the meaning given such term in Section
14.1.
1.18 "THEORETICAL YEARLY TREATING REVENUE" Shall have the meaning given
such term in Section 14.1(b).
1.19 "UNECONOMIC" Shall have the meaning given such term in Section 14.2
(a).
1.20 "FIRST POINT OF DELIVERY" Shall mean the centerline of the upstream
flange of the block valve located at the interconnection of West Shore's
pipeline with the inlet facilities of the Treating Plant.
1.21 "FIRST PRIORITY CAPACITY" Shall mean capacity at the Treating Plant
for receiving, treating and redelivering West Shore Gas in accordance with the
specifications of this Agreement, which capacity shall be available to West
Shore at all times except for conditions of force majeure. First Priority
Capacity granted to West Shore is subject to SOI's right to use unutilized
portions as provided in Article IV, below.
1.22 "GAS" Shall mean all or any portion of the hydrocarbons and
concomitant material delivered to SOI's Treating Plant, as hereinafter defined.
"WEST SHORE GAS" shall mean all Gas owned or controlled by West Shore. "SOI-
OWNED GAS" shall mean all Gas attributable to oil and gas leasehold working
interests owned bY SOI. "THIRD-PARTY GAS" shall mean all Gas owned or controlled
by
3
parties other than West Shore or SOI.
1.23 "GROSS HEATING VALUE" means the number of BTU's produced by the
combustion, at a constant pressure, of the amount of the Gas which would occupy
a volume of one (1) Cubic Foot at a temperature of sixty degrees Fahrenheit (60
degrees f), if saturated with water vapor and under a pressure equivalent to
that of thirty (30) inches of mercury at thirty-two degrees Fahrenheit (32
degrees f) and under standard gravitational force (acceleration 980.665
centimeters per second squared) 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.
1.24 "MCF" shall mean one thousand (1,000) standard cubic feet of Gas.
1.25 "MMBTU" shall mean one million (1,000,000) BTUs.
1.26 "MMCF" shall mean one million (1,000,000) standard cubic feet of Gas.
1.27 "NGL PLANT" shall mean the natural gas liquids plant to be installed
by West Shore and shall include facilities for the recovery of natural gas
liquids, depropanization, liquid storage, truck loading and hydrocarbon liquid
treating if required.
1.28 "NGL PLANT PRODUCTS" means finished commercial products and other
products, or any mixtures thereof, other than Residue Gas, which is from time to
time extracted or separated from the Treated Gas processed in the NGL plant,
including, but not limited to ethane, propane, iso-butane, normal butane, and
natural gasoline.
1.29 "PIPELINE" shall mean the sour gas gathering line extending from the
Ludington, Michigan area to the West Shore-operated facilities located in
Section 19, Township 22 North, Range 15 West of Manistee County, Michigan, and
any extensions theretO.
1.30 "RESIDUE GAS" means Gas, expressed in MMBTU's, remaining after the
extraction from the Treated Gas of NGL Plant Products, and after consumption of
NGL Plant Fuel, and after other Unmeasured Gas Uses and Losses incident to or
occasioned by the treating and processing of Gas hereunder.
1.31 "RESIDUE GAS DELIVERY POINT" means the point(s) at which the Residue
Gas is delivered by SOI at the tailgate of the NGL
4
Plant.
1.32 "SCRUBBER LIQUIDS" shall mean any liquids recovered by SOI from Gas
entering the Treating Plant prior to treating by use of conventional mechanical
separation equipment.
1.33 "STANDARD CUBIC FOOT" shall mean the quantity of Gas which would
occupy one (1) cubic foot at a base temperature of sixty degrees Fahrenheit (60
degrees f) and at a pressure base of fourteen and sixty-five hundredths (14.65)
pounds per square inch absolute. Whenever the bases of pressure and temperature
differ from the above standard, conversion of the volume from these conditions
to the standard conditions shall be made in accordance with the Ideal Gas Laws.
1.34 "SULFUR NET BACK PRICE" shall equal the difference, if any, during any
12-month calendar year of (1) the Sulfur Rail Price per long ton multiplied by
the number of sulfur long tons sold, minus (2) trucking costs and other costs
directly attributable to the aforementioned sulfur so that the foregoing
calculation results in a net price at the Treating Plant for the sulfur.
1.35 "SULFUR RAIL PRICE" shall be defined as the net price received by SOI
for sulfur at the rail loading facilities.
1.36 "THERMAL CONTENT" for Gas means the product of the measured volume in
dry MCF's and the Gross Heating Value in dry BTU's per MCF, adjusted to the same
pressure base; for NGL Plant Products means the product of the gross heat of
combustion per gallon (BTU per gallon, fuel as ideal gas) multiplied by the
total gallons of the product stream. Numerical values for gross heat of
combustion per gallon shall be those published in the Standard Table of Physical
Constants of Paraffin Hydrocarbons in GPA Publication 2145-93, as revised.
1.37 "TREATED GAS" shall mean that portion of Gas delivered to the Treating
Plant which remains after removal of Scrubber Liquids, if any, removal of Acid
Gas, extraction of Treating Products, consumption as fuel in the Treating Plant
("Plant Fuel"), and after any unavoidable flare or loss of Treating Products or
Gas.
1.38 "TREATED GAS DELIVERY POINT" shall mean the point or points at or near
the outlet of the Treating Plant at which, prior to the installation of the NGL
Plant, Treated Gas is redelivered to West Shore or West Shore's designee, and at
which, after installation of the NGL Plant, Treated Gas is delivered to the NGL
Plant.
5
1.39 "TREATING PLANT" shall mean the Sulfur Plant and associated
facilities presently owned by SOI, located in Section 23, Township 22 North,
Range 16 West in western Manistee County, Michigan.
1.40 "TREATING PRODUCTS" shall mean all sulfur and carbon dioxide contained
in the Gas which are removed therefrom by treating in the Treating Plant.
1.41 "UNMEASURED GAS USES AND LOSSES" means any Gas used, lost or not
otherwise accounted for in the Treating Plant or the NGL Plant incident to the
operation of the Treating Plant or the NGL Plant, including volumes of Gas
released through relief valves, ruptured pipelines or vessels, blow down of
vessels, etc.
ARTICLE II
SCOPE AND TERM
2.1 This Agreement supersedes, and shall replace in their entirety all
prior or existing contracts between the parties relating to the treating and/or
processing of West Shore's Gas by SOI at the Treating Plant, and upon completion
of the NGL Plant installation, that certain agreement between the SOI and West
Shore's predecessor-in-interest dated April 1, 1995, providing for the
processing of West Shore Gas at SOI's Kalkaska plant.
2.2 Delivery of Gas hereunder by West Shore shall commence as promptly
as is reasonably possible after the completion of the installation of the
facilities provided for in Article III hereof.
2.3 This Agreement shall be effective as of
, 1996, and shall remain in full force and effect for fifteen (15)
years following the first day of the month of initial delivery of Gas by West
Shore to SOI for treating (the "Primary Term"), subject to the rights of
termination as herein provided. After the Primary Term, this Agreement shall
remain in effect from year to year thereafter unless terminated by either
party's giving six months' prior written notice, or unless terminated as
provided hereinafter.
2.4 If West Shore is unable to deliver Gas to SO1 for treating at the
Treating Plant by June 1, 1997, then at either party's option, this Agreement
may be terminated upon written notice to the other party prior to July 1, 1997
and West Shore shall reimburse SOI, within thirty days' of receipt of an
itemized invoice, for all capital and Direct Expenses incurred by SOI, after
6
January 1, 1996, in modifying the Treating Plant to the extent reasonably
required to treat West Shore's Gas.
2.5 The indemnity provisions of Articles 5.1 and 17.1 shall survive any
termination of this Agreement.
ARTICLE III
FACILITIES
3.1 West Shore or West Shore's designee, at its sole expense, shall
provide, operate and maintain the Pipeline and all facilities necessary to
separate, gather, condition for transporting and deliver to the First Point of
Delivery the Gas covered hereby, including, the pipeline facilities necessary to
deliver Gas from the Brown 19 Gas Plant to SOI's Treating Plant. Details of the
tie-in between West Shore's facilities and the Treating Plant such as schedule,
engineering design, construction responsibility, and minimum operating pressures
shall be agreed upon by both parties. Any capital expenditures (including the
purchase and installation of metering and sampling equipment) or Direct Expenses
incurred by SOI which are directly attributable to the tie-in of the West
Shore's facilities shall be paid by West Shore at one hundred percent of SOI's
actual cost. SOI will provide West Shore with an estimate of costs for any tie-
in work which proposed work and cost estimate shall conform to standards
generally accepted in the industry. The pipeline connecting West Shore to SOI
will be owned and operated by West Shore or its affiliate. SOI will own all
facilities downstream of the upstream flange of the block valve located at the
terminus of that pipeline, which shall include the metering facilities described
in Article VII, subject to West Shore's reimbursement obligations under Section
7.1. In addition, West Shore will install and operate, on West Shore's property,
all separation equipment required to deliver Gas meeting the specifications
contained in this Agreement; and SOI will provide West Shore, at no cost to West
Shore, with an easement in the area of SOI's Treating Plant site at which West
Shore may install slug catchers or other facilities to reduce or eliminate the
delivery of liquids to SOI.
3.2 SOI, or its designee, at its sole expense, shall provide, operate
and maintain all facilities necessary to treat and dehydrate West Shore's Gas
after delivery thereof by West Shore to SOI at the First Point of Delivery, and
SOI shall redeliver the resulting Treated Gas attributable to West Shore's Gas
(i) before the installation of the NGL Plant, to West Shore, or West Shore's
designee, at the Treated Gas Delivery Point, and (ii) after the
7
installation of the NGL Plant, to the NGL Plant at the Treated Gas Delivery
Point for processing under the terms hereof.
ARTICLE IV QUANTITY
4.1 The designated design treating capacity of the Treating Plant is 35
MMcf per day when treating Gas containing approximately 2.0% H2S with a designed
sulfur recovery capacity of twenty-five (25) long tons per day.Presently, the
Treating Plant is not capable of meeting design capacity performance without
additional modifications, and current operating capacity is approximately 12.5
long tons per day of sulfur recovery.
4.2 Notwithstanding the above, SOI hereby agrees to provide West Shore
First Priority Capacity equal to the lesser of (i) thirty (30) MMcfD (21.4 long
tons per day of sulfur capacity), subject to increases under Section 4.7, below,
or (ii) the capacity of the Treating Plant, subject to increases under Section
4.7, below, until this Agreement is terminated. That First Priority Capacity
shall have a higher priority than any other Gas received by SOI for treating at
the Treating Plant; provided the First Priority Capacity shall be subordinate to
SOI-Owned Gas production from wells described on Exhibit "B", limited to the
greater of five (5) Mmcf/d of SOI-Owned Gas production or 6 long tons per day of
sulfur recovered from that Gas production. As SOI's production from wells
described on Exhibit "B" declines, the resulting available capacity shall first
be allocated to West Shore until West Shore has the full First Priority Capacity
described above (subject to SOI's rights as to unutilized First Priority
Capacity under Section 4.4, below).
4.3 Upon written notice from West Shore substantiating to SOI's reasonable
satisfaction that West Shore requires the Treating Plant capacity to be restored
to its design capacities specified in 4.1, above, SOI shall exercise good faith
efforts to restore at its sole expense, within six (6) months following receipt
of that notice, the actual treating capacity of the Treating Plant to treat a
minimum of thirty-five (35) MMcf/d of Gas (meeting the specifications in Article
VI), subject to the provisions below. Should the hydrogen sulfide content of
West Shore's Gas exceed two percent (2.0%), the treating capacity shall be
redefined as the product of (1) thirty-five (35) MMcf/d, and (2) a fraction, the
numerator of which is two percent (2%) and denominator of which shall be the
actual hydrogen sulfide content of West Shore's Gas, expressed as a percentage.
8
4.4 During any period that West Shore is not utilizing its full First
Priority Capacity for treating Gas at the Treating Plant, SOI shall have the
right to use any portion of the unutilized First Priority Capacity for treating
SOI-Owned Gas or Third-Party Gas by providing written notice to West Shore of
its intention to use a portion of the unutilized First Priority Capacity,
stating the quantity to be used. SOI's right to use unutilized First Priority
Capacity of West Shore shall be subject to the recall of that First Priority
Capacity upon 72 hours advance notice by West Shore; provided, West Shore
covenants with SOI and represents to SOI that it will not recall First Priority
Capacity in quantities greater than that required for the quantity of proven
deliverability of West Shore Gas then available from wells connected to the
wellhead facilities of West Shore and as necessary to fulfill contractual
arrangements to which it is, from time to time, a party.
4.5 During any period of time in which the Treating Plant is partially
shut down for any reason or in the event the Treating Plant is not able to treat
all of the Gas delivered (both from SOI, West Shore and/or Third-Party Gas) SOI-
Owned Gas shall be given the highest priority in the use of Treating Plant
capacity up to a maximum of the greater of (i) five (5) MMcf/d of Gas production
or (ii) the equivalent of six (6) long tons per day of sulfur. West Shore's
First Priority Capacity shall be given second highest priority of the Treating
Plant capacity. All other Gas, including SOI-Owned Gas in excess of five (5)
MMcf/d of Gas production or the equivalent of six (6) long tons per day of
sulfur shall be subordinate to the First Priority Capacity of West Shore.
4.6 West Shore agrees that all Gas from wells listed on the attached
Exhibit C, (other than Antrim formation gas and gas that does not require
treating), which is owned or controlled by West Shore, will be transported in
the Pipeline and will be delivered to the Treating Plant for treating for the
term of this Agreement; and during periods when the Pipeline is transporting Gas
in quantities substantially equal to its capacity, then West Shore may deliver
Gas volumes to the Treating Plant equivalent to the volumes produced from the
wells listed on Exhibit C, without regard to source. The sale or transfer of any
wells owned by West Shore and described on Exhibit C shall be made expressly
subject to the terms of this Agreement. Further, and notwithstanding anything
contained in this Agreement to the contrary, the treating of Antrim formation
gas is not included within this Agreement. West Shore shall have the right to
add to this Agreement (by providing SOI with an amended Exhibit C reflecting
such additional wells) at any time during the term of this Agreement and at the
terms of this Agreement any additional wells producing West Shore Gas.
9
4.7 (a) At any time during the term of this Agreement, West Shore
may request that SOI expand, or SOI may determine to expand by providing written
notice of such request or determination to the other party (in either case, such
notice shall be referred to herein as the "Expansion Notice"), the Treating
Plant in order to treat Gas at a rate in excess of [CONFIDENTIAL TREATMENT
REQUESTED],and SOI will expand the Treating Plant up to a capacity equal to the
then existing capacity plus the additional amount of capacity requested in such
Expansion Notice Any capacity in excess of [CONFIDENTIAL TREATMENT REQUESTED]
shall be referred to as "Expanded Capacity", and capacity up to [CONFIDENTIAL
TREATMENT REQUESTED] shall be referred to as "Base Capacity". At the time that
West Shore or SOI provides Expansion Notice to the other party, SOI and West
Shore will each identify all wells for which such expansion is required and the
treating fees under which the gas will be treated. This provision for expansion
of the Treating Plant shall not expire upon its application but may be exercised
from time to time for additional expansions in increments as set forth in an
Expansion Notice provided by either party, and the remaining provisions of this
Section 4.7 shall likewise apply to each such additional expansion modified as
applicable to such additional expansion in accordance with the terms hereof.
(b) Before commencing that expansion but not more than 120 days
from the date of West Shore's or SOI's Expansion Notice, SOI will (i) provide
West Shore with a detailed estimate of the total costs to be incurred in
providing that Expanded Capacity referred to in the Expansion Notice, (ii) (A)
provide West Shore with an election as to whether or not SOI will participate in
up to 55% of those costs to the extent related to Expanded Capacity to treat all
Gas other than SOI-Owned Gas ("Expansion Ratio"), if West Shore is the party
providing the Expansion Notice, or (B) provide West Shore with an option,
exercisable within 30 days from the date of notification of estimated total
costs, as to whether or not West Shore will participate in up to 1 minus the
Expansion Ratio of those costs to the extent related to Expanded Capacity to
treat all Gas other than SOI-Owned Gas, if SOI is the party providing the
Expansion Notice; provided further, if West Shore elects not to participate in
an expansion, SOI may participate in 100% of the Treating Plant expansion and
(iii) in the case of any Expansion Notice submitted by West Shore, obtain from
West Shore written confirmation to proceed with the expansion. In all events,
SOI will pay 100% of the costs related to the Expanded Capacity to be utilized
for SOI-Owned Gas.
(c) In addition to the treating fees described in Article X, West
Shore will pay to SOI in thirty-six (36) equal monthly payments a fee which will
allow the recovery of [CONFIDENTIAL TREATMENT REQUESTED] of the actual capital
and Direct Expenses incurred by SOI in the expansion, for which West Shore is
10
responsible based upon (b), above. Such payments shall begin on the first day
of the calendar month following the date upon which the Expanded Capacity is
available to West Shore. After West Shore has completed its thirty-six month
payment obligation, West Shore will cease paying SOI for reimbursement of
expansion expenses and will then pay only the treating fees described in Article
X. To secure payment of these expenses, upon the written request of SOI, West
Shore will provide a third party guarantee or letter of credit acceptable to SOI
in advance of SOI incurring the subject expense. At West Shore's discretion,
West Shore may elect to directly fund its proportionate share of the actual
capital and Direct Expenses, for which it is responsible, associated with this
expansion. Should West Shore choose this option, SOI will furnish West Shore an
estimate of the total initial cost expected to be associated with said expansion
and West Shore will furnish SOI, before the beginning of each month, with a
certified check for one hundred percent of the total estimated expansion costs,
for which West Shore is responsible, to be incurred in that month. SOI will
apply any overpayment from one month to amounts due for the next succeeding
month, and West Shore will make up any shortfalls in those costs in a month in
the payment for the next succeeding month.
(d) SOI shall retain one hundred percent of the ownership of the
Treating Plant and payment of these expenses shall not entitle West Shore to any
ownership interest whatsoever in the Treating Plant.
(e) If SOI elects not to participate in the expansion, then in
addition to payments for the recovery of SOI's actual capital and Direct
Expenses, West Shore shall continue to pay a treating fee as specified in
Article X. Should SOI in good faith incur additional operating expenses as a
result of the Treating Plant expansion to handle additional West Shore Gas, West
Shore agrees to reimburse SOI for those incremental unrecovered expenses in
addition to paying all treating fees specified in Article X. The monthly
incremental operating expense shall not exceed five cents per MCF of incremental
capacity plus escalation as calculated in accordance with Article X.
(f) If West Shore Gas deliveries from the wells listed on Exhibit
C decreases below the First Priority Capacity described in Section 4.2, then
West Shore may add additional wells to this Agreement, and until the aggregate
of deliveries from the wells listed on Exhibit C together with deliveries from
such new wells exceeds the First Priority Capacity, then the Gas from those new
wells will be added under the terms of section 4.4 and 4.6 and shall be deemed
to use the Base Capacity and not the Expanded Capacity.
11
(g) If either party not initiating an Expansion Notice elects to
participate in such Expanded Capacity of the expansion under 4.7(b)(ii), above,
then with respect to all volumes delivered to the Treating Plant from the
additional wells attributable to such Expanded Capacity identified herein under
4.7 (a) and for any subsequent well, whether owned or controlled by SOI or West
Shore, for which the Gas is treated at the Treating Plant and for which the
Expanded Capacity is required, either initially or at any time thereafter, to
treat any portion of the Gas produced from such subsequent well, the following
shall be allocated to SOl in a proportion equal to the Expansion Ratio and to
West Shore in a proportion equal to 1 minus the Expansion Ratio.:
i. The incremental operating costs attributable to operating
all of the Expanded Capacity (which, in the case of West
Shore, shall be in lieu of any volumetric treating fees for
West Shore Gas utilizing the Expanded Capacity);
ii. The treating revenues received by either SOI or West
Shore for Gas which is being treated utilizing the Expanded
Capacity, excluding, however, SOl-Owned Gas on which West
Shore will not participate in revenues.
(h) At the completion of construction of said Expanded Capacity,
the term of this Agreement shall be extended to the greater of (i) ten (10)
years following the date that the said expansion is completed, or (ii) the
expiration of the otherwise effective Primary Term under Section 2.3.
(i) SOI and West Shore agree that neither party shall contract to
utilize the Expanded Capacity to treat Gas at the Treating Plant under a
contract in which the full compensation is not derived solely from treating
fees.
ARTICLE V
DELIVERY OF GAS
5.1 The Gas to be treated and processed hereunder shall be delivered by
West Shore to SOI at the First Point of Delivery for the sole account of West
Shore. West Shore represents and warrants that it owns and/or has the right to
have treated and processed all Gas delivered by West Shore to the First Point of
Delivery and to recover remove and sell any and all extractable or recoverable
components, including Treating Products, NGL Plant Products, and
12
Scrubber Liquids, as are contained in the Gas delivered by West Shore. If the
right or title of West Shore is involved in any claim, action or litigation,
West Shore shall indemnify SOI against any loss, damage, claim, suit, judgment,
liability, cost and expense (including reasonable attorneys' fees) and other
costs of litigation in connection with such claims and actions, and further, SOI
may refuse to accept deliveries of the affected Gas from West Shore until said
right or title issue is cleared to SOI's reasonable satisfaction, or until West
Shore provides a bond or other surety reasonably acceptable to SOI to protect
SOI.
5.2 Until installation of the NGL Plant, West Shore shall deliver the Gas
at a pressure sufficient to overcome the operating pressure of the pipeline
system receiving the Gas; however, in no event shall such delivery pressure
exceed the maximum allowable operating pressure of the system receiving the Gas.
Subject to the provisions of Articles IV and VI hereof, and except as otherwise
provided herein, SOI shall accept delivery of West Shore's Gas from West Shore
at the First Point of Delivery for treating hereunder.
5.3 After the installation of the NGL Plant, West Shore shall deliver the
Gas at a pressure sufficient to operate the NGL plant, but in no event shall
West Shore deliver the Gas at a pressure of less than 700 psig or shall such
delivery pressure exceed the maximum allowable operating pressure of the system
receiving the Gas. West Shore shall install as part of the NGL Plant sufficient
gas compression equipment to overcome the operating pressure of the pipeline
system receiving the Gas.
ARTICLE VI
QUALITY
6.1 West Shore's Gas delivered hereunder shall be as produced in its
natural state except that said Gas shall be of such quality as to meet the
following quality specifications, and except for compositional changes due to
the operation of the separation equipment of West Shore required under Article
III, and due to dehydration of the Gas before delivery:
(a) Be commercially free of liquid hydrocarbons and liquid water that can
be removed with ordinary mechanical separators at a location no further upstream
of the Treating Plant than the Brown 19 facility. More specifically, West Shore
shall continue to operate and maintain the liquid separation facilities ("Slug
Catcher") at the Brown 19 Facility or another facility chosen by West Shore;
13
(b) Be commercially free of grease, dust, gum, gum forming constituents,
and other foreign substances, gasoline and other solid and/or liquid matter that
can be removed with ordinary field separators;
(c) Contain not more than three percent (3.0%)by volume hydrogen sulfide;
(d) Contain not more than five percent (5.0%) by volume carbon dioxide (it
being understood however, that the designated capacity under Section 4.1 can
only be guaranteed when West Shore's Gas contains not more than three and six
tenths percent (3.6%) by volume carbon dioxide; provided, that SOI will make
available all portions of West Shore's First Priority Capacity that it is
otherwise able to provide when West Shore's Gas exceeds three and six tenths
percent (3.6%) by volume carbon dioxide);
(e) Contain not more than one-tenth of one percent (0.1%) by volume
oxygen;
(f) Contain a Gross Heating Value of at least 1000 BTUs per standard cubic
foot at 14.65 psia dry;
(g) Contain not more than one thousand (1000) parts per million by weight
total sulfur, excluding sulfur contained in hydrogen sulfide;
(h) Have a temperature not exceeding one hundred twenty degrees Fahrenheit
( 120 degrees F); and
(i) Not contain any solid-forming component in a concentration which could
cause the formation of solid material at any point in the Treating Plant which
in turn could result in an impairment to the operation of the Treating Plant.
6.2 The delivery of any liquids by West Shore to SO1 may cause SOI to
incur significant costs for the recovery and disposal of such liquids. If any
Scrubber Liquids are recovered from West Shore's Gas stream, SOI may, at its
option, dispose of those liquids and bill West Shore for the disposal costs, or
require West Shore to dispose of those liquids. If after providing West Shore
thirty (30) days notice that the Gas delivered by West Shore contains
nonconforming amounts of liquid hydrocarbons, SOI may refuse to accept some or
all of West Shore's Gas, at no cost to SOI, until (a) SOI is able, at its
discretion, to blend the liquids delivered by West Shore into its own oil
facilities, and/or (b) West Shore has remedied, to SOI's reasonable
satisfaction, the situation that caused the delivery of such liquids. In the
event
14
of such refusal by SOI to accept Gas, West Shore shall not be relieved of any of
its financial obligations hereinafter described in this Agreement, including the
obligation to pay a fixed monthly treating fee as hereinafter described in
Article 10.1.
6.3 SOI shall have the option from time to time to accept Gas even if the
above quality specifications are not met; provided, however, that such
acceptance shall not operate as a waiver of such quality specifications and SOI
may decline to accept Gas which at any time does not meet such specifications.
It is further provided, that SOI shall not cease receiving West Shore Gas that
fails to conform to any of the specifications set forth in Section 6.1 unless
SOI also ceases to receive all other Gas which does not meet the specifications
set forth in Section 6.1.
ARTICLE VII
METER AND COMPUTATION OF VOLUMES
7.1 West Shore shall reimburse SOI for its actual, documented, out of
pocket expenses incurred in acquiring and installing the measuring equipment and
a continuous sapling device or a chromatograph as required for the accurate
measurement of the volume and heating content of West Shore's Gas delivered for
treating hereunder. Where available, SOI shall use "Good Used Material" in SOI's
inventory, and will charge West Shore for such material at seventy-five percent
(75%) of current new price of that material, plus the cost of reconditioning, if
any. SOI or SOI's designee shall maintain and operate, or cause to be maintained
and operated, at no cost or expense to West Shore, that measuring equipment.
7.2 In addition to the metering equipment referenced in Section 7.1, SOI
shall install, operate and maintain, or cause to be installed, operated and
maintained, a suitable meter or meters and/or other necessary equipment for the
purpose of measuring the following:
(a) The volume of each type of Treating Product recovered from West Shores
Gas and from Gas delivered to the Treating Plant from other sources.
(b) The volume, heating content and composition of Gas delivered to the
Treating Plant from sources other than West Shore.
7.3 SOI's measurement equipment shall be used in determining the total
Treating Plant Fuel and PTR (as defined in Article IX
15
hereof) in treating West Shore's Gas hereunder.
7.4 In the event of Treating Plant or Pipeline emergency conditions and/or
circumstances which, in the sole judgment of SOI, necessitate venting or flaring
or cause other losses of West Shore's Gas delivered hereunder, the volume of
West Shore's Gas so vented, flared, or otherwise lost shall be reasonably
estimated by SOI. West Shore shall not be entitled to any compensation for any
of its Gas lost under these circumstances but SOI shall not charge any
volumetric treating fee for treating such Gas.
7.5 a. The volume of West Shore's Gas delivered for treating hereunder,
the total volume of Gas delivered from all sources to SOI's Treating Plant and
the total volume of Gas consumed as Treating Plant fuel shall be measured by
orifice meters of standard make and manufacture, producing a permanent record.
Said orifice meters shall be installed and operated, and computations shall be
made, as prescribed in Gas Measurement Committee Report No. 3 of the American
Gas Association, as such report may be amended or revised from time to time.
b. The unit of volume shall be one (1) cubic foot of Gas at a base
temperature of sixty degrees Fahrenheit (60 degrees F) and at a pressure base of
fourteen and sixty-five hundredths (14.65) pounds per square inch absolute.
Whenever the bases of pressure and temperature differ from the above standard,
conversion of the volume from these conditions to the standard conditions shall
be made in accordance with the Ideal Gas Laws.
c. Temperature shall be determined by use of a recording
thermometer so installed that it may continuously record the temperature of Gas
passing through the meters, or the temperature of the Gas shall be measured by a
temperature transmitter or a resistance temperature device (RTD) and the value
inputted on a continual basis into a flow computer for use in the computation of
the Gas flow.
d. The specific gravity shall be determined in the same manner as
gross heating value of West Shore's Gas as specified in Article 7.4.
e. Corrections for deviation from Ideal Gas Laws shall be made for
all Gas metered hereunder. Such corrections shall be made by use of the American
Gas Association Manual for the Determination of Supercompressibility Factors for
Natural Gas (PAR) Project NX-t9) as the same may be amended or revised from time
to time.
f. The accuracy of all measuring equipment specified in
16
this Agreement shall be verified at least once each calendar month. Each party
shall have the right to be present at the time of any installing, reading,
cleaning, changing, repairing, inspecting, testing, calibrating, or adjusting
done in connection with the other's measuring equipment used in any measuring
required hereunder. If, after twenty-four (24) hours notice, the other party
fails to have a representative present, the results of the test shall be
considered accurate until the next tests are made. All tests of West Shore's
measuring equipment shall be made at West Shore's sole expense and all tests of
SOI's measuring equipment shall be made at SOI's sole expense, except that any
party requesting additional tests shall bear the sole expense of any such
additional tests where the results of such additional tests show any
inaccuracies in the measuring equipment tested to be one percent (1%) or less.
g. If at any time any of the measuring or testing equipment is
found to be out of service or registering inaccurately in any percentage, it
shall be adjusted at once to register accurately, within the limits prescribed
by the manufacturer. If such equipment is out of service or inaccurate by an
amount exceeding one percent (1%) at a reading corresponding to the average rate
of flow for the period since the last preceding test, the previous readings of
such equipment shall be disregarded for any period definitely known or agreed
upon, or for a period of one-half of the time elapsed since the last test of the
measuring equipment affected, not to exceed sixteen (16) days. The volume of Gas
measured during such period shall be estimated by (a) using the data recorded by
any check measuring equipment, if installed, and registering accurately, or if
not installed or not registering accurately, (b) by correcting the error if the
percentage of error is ascertainable by calibration, test, or mathematical
calculation, or if neither such method is feasible, (c) by estimating the
quantity or quality measured, based upon deliveries under similar conditions
during a period when the equipment was registering accurately. No correction
shall be required for recorded inaccuracies of one percent (1%) or less.
h. At all times during business hours, West Shore and SOI shall
have the right to inspect equipment installed or furnished by the other and the
charts and other measurement or testing data of the other. However, the reading,
calibration and adjustment of SOI's measuring equipment and changing of the
associated charts shall only be performed by SOI. Likewise, the reading,
calibration and adjustment of West Shore's Gas measuring equipment and changing
of the associated charts shall only be performed by West Shore.
i. SO1 and West Shore shall preserve all original test
17
data, charts, and other similar records in their possession for a period of at
least two (2) years, or longer if required by law or regulation.
7.6 a. The Gross Heating Value of West Shore's Gas shall be determined
each calendar month by continuous sampler or continuous gas chromatography. SOI
shall compute, or cause to be computed, the Gross Heating Value of West Shore's
Gas from chromatographic analysis of a sample of its Gas. The result shall be
applied to West Shore's Gas deliveries for the calendar month when the sample is
taken; provided, however, that upon request of West Shore, SOI shall take a
second duplicate sample and furnish same to West Shore as a check on the Gross
Heating Value of West Shore's Gas. Gross Heating Value so determined shall be
corrected from the condition of testing to the actual water vapor content of
West Shore's Gas as delivered. For purposes of this Agreement, hydrogen sulfide
shall have a Gross Heating Value of zero.
b. In the event of a dispute between the parties as to the
composition of West Shore's Gas as determined in accordance herewith, another
sample shall be taken immediately and sent to an independent testing laboratory
acceptable to both parties for determination of the composition of West Shore's
Gas in accordance herewith. The results of that laboratory testing will be
binding on both parties for the month for which the sample was taken.
ARTICLE VIII
TREATING PRODUCTS AND NGL PLANT PRODUCTS
8.1 Subject to the following, title to West Shore's Gas and the resulting
Treated Gas and Residue Gas shall remain with West Shore upon delivery of such
Gas to SOI at the First Point of Delivery. Title to any Treating Products and
Scrubber Liquids shall pass to SOI upon delivery of West Shore's Gas at the
First Point of Delivery. Title to all NGL Plant Products attributable to West
Shore's Gas shall remain with West Shore.
8.2 Should carbon dioxide ever be recovered as a Treating Product, title
to such carbon dioxide shall pass to SOI upon delivery of West Shore's Gas at
the First Point of Delivery and West Shore will be entitled to no compensation
for said carbon dioxide.
8.3 Determinations of the hydrogen sulfide content of West Shore's Gas
shall be made by SOI at SOI's sole cost and expense monthly by gas
chromatography or by any other method mutually agreed upon by the parties for
testing Gas for hydrogen sulfide
18
content. The quantity of sulfur resulting from the recovery of hydrogen sulfide
attributable to Gas delivered to the Treating Plant by West Shore at the First
Point Of Delivery shall be determined by multiplying the total quantity of
sulfur recovered and saved in the Treating Plant each month by a fraction, the
numerator of which is the quantity of hydrogen sulfide in the Gas delivered to
the Treating Plant by West Shore, and the denominator of which is the total
quantity of hydrogen sulfide contained in all Gas delivered to the Treating
Plant from all sources.
8.4 SOI shall give West Shore reasonable notice of tests to determine
hydrogen sulfide content so that West Shore may witness such tests if it so
desires.
8.5 All sulfur recovered from West Shore's Gas shall be retained and
marketed by SOI. In the event that the Sulfur Net Back Price, determined over
any 12-month calendar year beginning January 1, 1997, should be a negative
amount, West Shore shall reimburse SOI for the net negative amount of the Sulfur
Net Back Price determined for that particular 12-month calendar year. If the
Sulfur Net Back Price over any 2 consecutive year period is negative, then in
addition to reimbursing SOI for that Sulfur Net Back Price, West Shore shall
also commence paying SOI a marketing fee of $5.00 per long ton of sulfur for as
long as the Sulfur Net Back Price continues to be a negative amount.
8.6 All NGL Plant Products shall be delivered to West Shore, or for West
Shore's account at the outlet of the NGL Plant Product recovery facilities at
the NGL Plant.
ARTICLE IX
ALLOCATION AND PLANT THERMAL REDUCTION
9.1 The Treated Gas, as determined by measurement at the Treated Gas
Delivery Point, shall be allocated among the various producers delivering Gas to
SOI by multiplying the total actual measured Thermal Content of Gas remaining
after treating all Gas delivered to SOI by a fraction, the numerator of which is
the Thermal Content of West Shore's Gas delivered at the First Point of Delivery
and the denominator of which is the Thermal Content of all Gas, including West
Shore's Gas, delivered to SOI during the same period.
9.2 It is recognized that there will be a reduction in Gas volumes and
associated MMBTUs in the Gas delivered to SOI attributable to the processing of
the Treated Gas for NGL Plant Product recovery, and attributable to the use of
such Gas as
19
Treating Plant Fuel and NGL Plant Fuel, the flaring of such Gas, and other uses
of such Gas incident to or occasioned by treating and processing of the Gas and
the extraction of Scrubber Liquids, if any. Said reduction in Gas volumes and
associated MMBTUs, herein called Plant Thermal Reduction ("PTR"), shall be
accounted for (except with respect to Scrubber Liquids) on a monthly basis, and
shall be calculated and allocated to each party furnishing Gas to the Treating
Plant and NGL Plant in accordance with the following:
a. That portion of an individual NGL Plant Product at the NGL Plant which
is attributable to each Gas stream shall be determined by multiplying the total
volume, expressed in gallons, of each individual NGL Plant Product recovered in
the NGL Plant during such Accounting Period by a fraction, the numerator of
which shall be the "Theoretical total Gross Heating Value" of that NGL Plant
Product contained in West Shore's Gas entering the Treating Plant which is
delivered during the Accounting Period, and the denominator of which shall be
the "Theoretical total Gross Heating Value" of that NGL Plant Product contained
in each Gas stream delivered to the NGL Plant during such Accounting Period. The
"Theoretical total Gross Heating Value" of an NGL Plant Product in any stream of
Gas shall be calculated by multiplying the Gross Heating Value of that NGL Plant
Product determined from chromatographic analysis by the quantity of NGL Plant
Product in that Gas stream.
b. The PTR shall be separately calculated as to each Gas stream delivered
to the First Point of Delivery (including West Shore's Gas Stream) and shall be
the sum of the following:
i. The Thermal Content of the NGL Plant Products allocated to the
Gas stream; plus
ii. The Thermal Content of each Gas stream consumed as Treating Plant
Fuel, as defined in Section 9.4 in treating such Gas and the Thermal Content of
each Gas stream consumed as NGL Plant Fuel as defined in Section 9.5. in
processing such Gas.; plus
iii. The Thermal Content of each Gas stream consumed as Unmeasured Gas
Uses and Losses in treating and processing such Gas.
9.3 The Residue Gas, as determined by measurement at the Residue Gas
Delivery Point, shall be allocated among the various parties delivering Gas to
SOI by multiplying the total actual measured Thermal Content of Residue Gas by a
fraction, the numerator of which is the "Theoretical Volume of Residue Gas"
remaining from each Gas stream and the denominator of which is the "Theoretical
Volume of Residue Gas" remaining from all Gas,
2O
including West Shore's Gas, delivered to the NGL Plant during the Accounting
Period. The "Theoretical Volume of Residue Gas" shall be determined by
subtracting the PTR, as determined above, from the Thermal Content determined at
the First Point of Delivery.
9.4 The total fuel used in all Treating Plant treating and related
operations ("Treating Plant Fuel") shall be measured. Whenever practical, SOI
shall use Residue Gas for fuel. The quantity of Treating Plant Fuel attributable
each Gas stream shall be determined by multiplying the total fuel actually used
by a fraction, the numerator of which is the total Theoretical Fuel attributable
to the deliveries from such Gas and the denominator of which is the "Theoretical
Fuel" attributable to production or deliveries from all Gas treated at the.
Treating Plant. The Theoretical Fuel for each Gas or liquid stream is the
product of (i) the applicable fuel factor for all operations requiring fuel
involved in treating the particular stream and (ii) the particular stream
production rate. SOI, shall determined by sound engineering estimates performed
by SOI on an annual basis, (i) the applicable fuel factor, and (ii) the
operations for which fuel shall be allocated (the operations for which fuel is
currently being allocated include separator preheating, sour gas treating, oil
treating, produced water disposal, gas dehydration, and compression). Promptly
after making its determination, SOI shall furnish West Shore with written
statements specifying the applicable fuel factor and the operations requiring
fuel, together with its basis for those determinations. Since separator pre-
heating, oil treating, produced water disposal and compression (excluding
compression used in the NGL Plant operations) are not included in this
Agreement, fuel shall not be allocated for Gas delivered by West Shore.
9.5 The total fuel used in all NGL Plant operations ("NGL Plant Fuel")
shall be measured. The quantity of NGL Plant Fuel attributable to each Gas
stream shall be determined by multiplying the Thermal Content of the NGL Plant
Fuel used by a fraction, the numerator of which is the Thermal Content of each
Gas stream at the First Point of Delivery which is further processed at the NGL
Plant and the denominator of which is the Thermal Content of all Gas delivered
at the First Point of Delivery, which is further processed at the NGL Plant.
ARTICLE X
CONSIDERATION DUE SOI
10.1 (a) West Shore shall pay SOI a monthly treating fee ("Base
Treating Fee") of [CONFIDENTIAL TREATMENT REQUESTED]. The Base
21
Treating Fee shall commence upon the delivery of Gas from West Shore to the
First Point of Delivery. The first month in which the Base Treating Fee shall
apply will be adjusted on a prorata basis to the days utilized during the month.
(b) The Base Treating Fee shall be subject to annual adjustment
beginning April 1, 1997, and on each April 1, thereafter. The Base Treating Fee
shall be adjusted in proportion to the change in the "Average Weekly Earnings of
Crude Petroleum and Gas Production Workers" ("Index") for the previous calendar
year as compared to the Index for the calendar year of 1995, as published by the
United States Department of Labor, Bureau of Labor Statistics. If the resulting
fee is less than the fee for the previous year, then the fee for the previous
year shall be used.
10.2 In addition to the Base Treating Fee specified in Article 10.1, West
Shore will pay SOI a volumetric treating fee of [CONFIDENTIAL TREATMENT
REQUESTED] for the West Shore Gas stream delivered to the Treating Plant. This
volumetric fee, as well as all incremental fees subsequently described in this
Article shall be subject to annual adjustment beginning April 1, 1997, and on
each April 1, thereafter. Those fees shall be adjusted in proportion to the
change in the "Average Weekly Earnings of Crude Petroleum and Gas Production
Workers" ("Index") for the previous calendar year as compared to the Index for
the calendar year of 1995, as published by the United States Department of
Labor, Bureau of Labor Statistics. If the resulting fee(s) is less than the
fee(s) for the previous year, then the fee(s) for the previous year shall be
used. If, at any time, West Shore's Gas deliveries averaged over the number of
days SOI operated its Treating Plant during a calendar month exceed
[CONFIDENTIAL TREATMENT REQUESTED] then the volumetric treating fee for the
incremental volume shall be reduced from [CONFIDENTIAL TREATMENT REQUESTED] to
[CONFIDENTIAL TREATMENT REQUESTED] for that particular month. (Example: At
[CONFIDENTIAL TREATMENT REQUESTED], the treating fee paid would be [CONFIDENTIAL
TREATMENT REQUESTED] for the first [CONFIDENTIAL TREATMENT REQUESTED] and
[CONFIDENTIAL TREATMENT REQUESTED] for the remaining [CONFIDENTIAL TREATMENT
REQUESTED]. Furthermore, should West Shore's Gas deliveries averaged over the
number of days SOI operated its Treating Plant during a calendar month exceed
[CONFIDENTIAL TREATMENT REQUESTED], then the volumetric treating fee for the
incremental volume over [CONFIDENTIAL TREATMENT REQUESTED] shall be reduced from
[CONFIDENTIAL TREATMENT REQUESTED] to [CONFIDENTIAL TREATMENT REQUESTED] for
that particular month. Example: At [CONFIDENTIAL TREATMENT REQUESTED], the
treating fee paid would be [CONFIDENTIAL TREATMENT REQUESTED] for the first
[CONFIDENTIAL TREATMENT REQUESTED] for the second [CONFIDENTIAL TREATMENT
REQUESTED] and [CONFIDENTIAL TREATMENT REQUESTED] for the remaining
[CONFIDENTIAL TREATMENT REQUESTED].
10.3 Should SOI commence charging any third party treating fees less than
[CONFIDENTIAL TREATMENT REQUESTED], then, effective on the date upon which SOI
commences that fee and for so long as that fee is in effect, the Base Fee
hereunder shall be reduced by an amount equal
22
to [CONFIDENTIAL TREATMENT REQUESTED] of the otherwise applicable Base Fee
for each [CONDIDENTIAL TREATMENT REQUESTED] that the lowest third party
treating fee is below [CONFIDENTIAL TREATMENT REQUESTED].
10.4 (a) In the event the Treating Plant experiences Actual Downtime
Percentage, during any month, of 5% or more, SOI shall reduce the Base Treating
Fee for that month by the Actual Downtime Percentage of the Treating Plant. The
foregoing reduction shall not be effective during any period in which reductions
under paragraph (b) below are applicable.
(b) In the event the Treating Plant experiences Actual Downtime
Percentage, exceeding the amounts specified in the following table, averaged
over any six (6) continuous fixed calendar month period, then the Base Treating
Fee and the volumetric treating fees, above, shall be reduced by the
corresponding percentage, retroactive to the beginning of that 6-month period,
and within 10 days of the determination that the Actual Downtime Percentage
exceeded those allowances, SOI shall refund to West Shore the fees representing
the following reductions:
[Download Table]
Actual Downtime Percentage Reduction in Fees
--------------------------- -----------------
10% to 14.99% [CONFIDENTIAL TREATMENT REQUESTED]
15% to 19.99% [CONFIDENTIAL TREATMENT REQUESTED]
20% or greater [CONFIDENTIAL TREATMENT REQUESTED]
Once a refund has been paid for any 6-month period, the foregoing shall not be
applied to require the payment of any additional refunds for a period of 6
months following the end of the period for which the refund was made.
ARTICLE XI
NATURAL GAS LIQUID RECOVERY
11.1 West Shore will install the NGL Plant at SOI's Treating Plant site on
land leased to West Shore by SOI under a long term contract mutually acceptable
to both parties, and with a lease payment of $10.00 per year in the form
substantially similar to that form in Exhibit D, and which shall be coterminous
with this Agreement. The NGL Plant will be constructed under West Shore's
supervision; provided, SOI shall have approval of all design and construction
specifications, which approval shall not be unreasonably withheld. SOI hereby
grants West Shore rights of ingress to and egress from the NGL Plant site across
SOI's lands as necessary for all construction, pipeline, maintenance, operation
and related activities in connection with the NGL Plant. West Shore shall
indemnify and hold SOI harmless against any loss,
23
damage, claim, suit, liability, judgment and expense, including attorneys' fees,
and other costs of litigation arising out of injury or death of persons or
damage to or loss of property or environment arising out of or in connection
with exercise of such rights of ingress and egress. SOI will be allowed to
recover the costs of any employees or contractors employed by SOI related to the
design and construction of the NGL plant.
11.2 The NGL Plant will be owned by West Shore and SOI will operate the NGL
Plant. West Shore shall reimburse SOI for only the reasonable, incremental
direct operating and direct regulatory expenses actually incurred by SOI and
which are directly associated with the operation of NGL Plant and which are
allocated to Treated Gas delivered to the NGL Plant by West Shore, plus 12% of
those expenses to compensate SOI for its related overhead expenses. SOI will
operate the NGL Plant in accordance with prudent oilfield operating standards
consistent with good industry practice.
11.3 During any given month, SOI shall be granted daily processing capacity
in the NGL Plant during such month equal to its deliverability from the wells
listed on Exhibit B, not to exceed [CONFIDENTIAL TREATMENT REQUESTED]; and, SOI
shall not be charged any processing fee on that Gas, but will be responsible for
its proportionate share of the operating expenses in connection with operating
the NGL Plant.
11.4 SOI acknowledges that certain upgrades and modifications to its
Treating Plant will be paid for or the costs thereof reimbursed by West Shore.
That arrangement, together with the availability of processing at the NGL Plant
to be installed by West Shore, at West Shore's cost, provides significant
consideration and value to SOI. In recognition thereof, SOI agrees to pay West
Shore a surcharge of [CONFIDENTIAL TREATMENT REQUESTED] per gallon of propanes,
butanes and pentanes (or combinations or isomers thereof) contained in that
Treated Gas that is not subsequently delivered to West Shore for processing at
the NGL Plant, excluding, however, SOI-Owned Gas produced from wells described
on Exhibit B, and West Shore Gas that West Shore elects not to have processed in
the NGL Plant.
11.5 SO1 and West Shore agree that West Shore shall have the right to
market all NGL Plant Products recovered from the NGL Plant, including NGL Plant
Products allocated to SOI or to other producers. West Shore agrees that the NGL
Plant Products allocated to SOI or to other producers will be sold not more than
45 days after the last day of the month in which the Products were produced and
at market prices not less than those at which West Shore's NGL Plant Products
are sold. West Shore will remit the proceeds received for the sale of SOI's
allocated NGL Plant Products to SOI within 45 days after the last day of the
month in which said Plant
24
Products were produced.
ARTICLE XII
BILLING AND PAYMENT
12.1 On or about the twentieth (20th) day of each calendar month, SOI shall
send a statement to West Shore via U.S. mail, overnight mail or telecopy, at
SOI's discretion, detailing the charges specified in Article X and any
additional fees or amounts owing for the prior month. West Shore shall pay SOI
the amount billed in that statement within fifteen (15) days of receipt of the
statement. All such payments shall be made in the form of immediately available
funds directed to a bank account designated by SOI.
12.2 West Shore shall have the right at all reasonable and mutually
agreeable times to examine the books, records, and charts of S0I to the extent
necessary to verify the accuracy of any statement, charge or computation made
under or pursuant to any provisions of this Agreement.
12.3 Should West Shore fail to pay any undisputed amount of any statement
sent by SOI as herein provided by the time such payment is due, a late payment
charge equal to one and one-half percent (1.5%) per month of the undisputed
amount of the statement, net of taxes, not compounded, shall be added to the
statement and shall be payable by West Shore. In the event said late payment
charges exceed the maximum allowed under the laws of the State of Michigan, the
late payment charge shall be reduced to the maximum amount allowed under the
laws of the State of Michigan.
12.4 Should West Shore fail to pay any undisputed amount of any statement
sent by SOI as herein provided by the time such payment is due, SOI in its sole
discretion may, if such undisputed amount remains unpaid for a period of thirty
days after written notice of said failure to pay is given to West Shore,
terminate this Agreement, or suspend further service to West Shore, or both.
12.5 If West Shore finds at any time within twenty-four (24) months after
the date of any statement rendered to it by SOI that it has been overcharged in
the amount billed in such statement, and if said overcharged amount has been
previously paid by West Shore, the overcharged amount, if verified by SOI, shall
be refunded to West Shore within thirty (30) days. If SOI finds at any time
within twenty-four (24) months after the date of any statement rendered to West
Shore by SOI that there has been an undercharge in
25
the amount billed to West Shore in such statement, SOI may submit a statement
for such undercharged amount, and West Shore, upon verifying the same, shall pay
such amount within thirty (30) days. Should West Shore determine within twenty-
four (24) months after a statement is rendered that there has been an
undercharge in the amount billed to West Shore by SOI, or should SOI determine
within twenty-four (24) months after a statement is rendered that there has been
an overcharge in the amount billed to West Shore, the party discovering the
error shall bring such error to the attention of the other party for further
handling. Billing statements shall be deemed accurate if not challenged by
either party within twenty-four (24) months after the statement is rendered.
ARTICLE XIII
REDELIVERY OF GAS TO WEST SHORE
13.1 In addition to treating and dehydrating West Shore's Gas, SOI shall
redeliver, or cause to be redelivered, to West Shore, or West Shore's designee,
(i) before the installation of the NGL Plant, at the Treated- Gas Delivery
Point, and (ii) after the installation of the NGL Plant, at the Residue Gas
Delivery Point, a quantity of Gas containing MMBTUs equivalent to the MMBTUs
contained in West Shore's Gas delivered to SOI at the First Point of Delivery,
less West Shore's proportionate share of PTR, as specified in Article IX hereof.
13.2 The Treated Gas redelivered by SOI to West Shore at the Treated Gas
Delivery Point shall be of such quality as to meet the following quality
specifications:
(a) Be commercially free of liquid hydrocarbons and liquid water, and not
contain more than five (5) pounds of water vapor per MMcf;
(b) Be commercially free of grease, dust, gum, gum forming constituents,
and other foreign substances, gasoline and other solid and/or liquid matter that
can be removed with ordinary field separators;
(c) Contain not more than one-quarter grain hydrogen sulfide;
(d) Contain not more than one and eight tenths percent(1.8%) by volume
carbon dioxide;
(e) Contain not more than one-tenth of one percent (0.1%) by volume
oxygen; provided that West Shore's Gas delivered to the
26
Treating Plant conformed to the specification contained in Section
6. 1 (E);
(f) Contain a Gross Heating Value of at least 1000 BTUs per standard cubic
foot at 14.65 psia dry;
(g) Contain not more than five(5) grains of total sulfur per 100 cubic
feet;
(h) Have a temperature not exceeding one hundred twenty degrees Fahrenheit
( 120 degrees F);
13.3 The Residue Gas redelivered by SO1 to West Shore at the Residue Gas
Delivery Point shall be of such quality as to meet the quality specifications
set forth above.
13.4 SOI shall redeliver the Treated Gas at a pressure sufficient to
overcome the operating pressure of the facilities receiving the Treated Gas at
the Treated Gas Delivery Point; however, in no event shall such delivery
pressure exceed the maximum allowable operating pressure of the system receiving
the Gas; provided, SOI shall have no obligation to compress the Gas to effect
delivery other than to operate and maintain compression and other equipment
associated with the installation of the NGL Plant.
ARTICLE XIV
UNPROFITABILITY AND PREFERENTIAL RIGHTS
14.1 (a) Beginning in the calendar year 2000, should the yearly
Direct Expenses incurred by SOI to operate the Treating Plant exceed the yearly
revenue derived from all treating fees received by SOI, whether from West Shore
or from any other person, then SOI shall have the right, but not the obligation,
to bill West Shore for an amount equal to West Shore's prorata share (based on
the proportion that West Shore Gas delivered to the Treating Plant bears to the
total of all Gas delivered to Treating Plant) of the difference in SOI's Direct
Expenses and SOI's treating revenue ("Makeup Payment") for that calendar year.
(b) In determining SOI's treating revenue for purposes of
calculating the Makeup Payment, SOI shall use the otherwise applicable Base
Treating Fees and volumetric treating fees provided for in this Agreement to
calculate the treating revenues with respect to all West Shore Gas and with
respect to all Gas other than West Shore's Gas as if such Gas were covered by a
single Base Treating Fee and volumetric treating fees substantially equivalent
to those in this Agreement applied to each individual
27
producer, without regard to whether the Gas treated was West Shore's Gas, SOI-
Owned Gas or Third-Party Gas, and without regard to any actual reductions to
those fees resulting from Actual Downtime Percentages exceeding the limitations
in this Agreement. This shall herein be defined as the "Theoretical Yearly
Treating Revenue". Provided, however, if Third-Party Gas and SOI-owned Gas
deliveries together average 15,000 Mcf per day or less, then the combined Base
Treating Fee and volumetric treating fees for the Third-Party Gas, in
determining the Theoretical Yearly Treating Revenue, will be assumed to be $.228
per Mcf. The following is an example of the calculation of Theoretical Yearly
Treating Revenue, assuming West Shore Gas deliveries of 25,000 Mcf per day, and
SOI-Owned Gas and Third-Party Gas deliveries of 5,000 Mcf per day:
Theoretical Yearly
Treating Revenue = West Shore Revenue + Other Gas Revenue
West Shore
Revenue = [CONFIDENTIAL TREATMENT REQUESTED]
Other Gas Revenue = [CONFIDENTIAL TREATMENT REQUESTED]
Theoretical Yearly
Treating Revenue = [CONFIDENTIAL TREATMENT REQUESTED]
(c) Notwithstanding the actual expenses and revenues, in no
event will SO1 have the right to bill West Shore, nor shall West Shore have any
obligation for Makeup Payments for more than any two years within any
consecutive five year period.
(d) Makeup Payments hereunder shall be due within thirty days
of receipt of SOI's invoice by West Shore and shall be subject to the same
conditions specified in Article XII.
14.2 In addition to SOI's rights under 14.1 above, should the volume of all
gas delivered to the Treating Plant be less than [CONFIDENTIAL TREATMENT
REQUESTED], averaged over any six (6) continuous month period, then SOI shall
have the right to charge West Shore a treating fee such that if that treating
fee were applied to all Gas delivered to the Treating Plant, SOI would derive
operating revenues equal to [CONFIDENTIAL TREATMENT REQUESTED] the actual direct
operating expenses of the Treating Plant. That treating fee will continue in
effect for as long as the volume of all Gas delivered to the Treating Plant is
less than [CONFIDENTIAL TREATMENT REQUESTED], averaged over any six (6)
continuous month
28
period; provided, West Shore shall have the right, upon 60 days advance written
notice, during any time that such treating fee is being charged hereunder, to
terminate this Agreement.
14.3 Should SOI decide to sell the Treating Plant to an unaffiliated
company at any time during the term of this Agreement and should SOI receive a
bona fide offer to purchase the Treating Plant on terms that it is willing to
accept, it shall provide written notice thereof to West Shore specifying the
purchase price and other terms and conditions offered by that third party,
including a true and correct copy of the written offer. West Shore shall have
the right to purchase the Treating Plant by agreeing to match the terms and
conditions offered by such third party. West Shore shall notify SOI in writing
of its decision to purchase the Treating Plant within thirty (30) days of
receipt of written notice from SOI. Should West Shore decline to purchase the
Treating Plant, SOI shall have the option, but not the obligation, to sell the
Treating Plant to the party which made that offer on terms and conditions no
less favorable to SOI than those contained in the written notice to West Shore.
Should SOI elect not to sell to such third party, the right of first refusal
granted West Shore herein shall be applicable to any offer thereafter. Should
West Shore elect to purchase the Treating Plant, the purchase price otherwise
specified in the third party offer will be reduced by an amount equal to the sun
of (i) the lesser of (x) the amount of Base Fees paid by West Shore hereunder as
of that date, not to exceed $1,500,000 or (y) the total of all direct capital
and Direct Expenses incurred by SOI in restoring the Base Capacity of the
Treating Plant under Section 4.3, plus (ii) all payments made by West Shore for
Expanded Capacity under 4.7, as of the date of West Shore's purchase, and upon
that purchase all repayment obligations under Section 4.7 shall be deemed
extinguished.
14.4 Upon any sale of the Treating Plant to West Shore under this Article,
this Agreement shall terminate. Upon any sale, or other transfer or disposition,
of the Treating Plant to any party other than West Shore, this Agreement shall
continue in full force and effect, shall bind the purchaser thereof, and SOI
agrees that such transfer shall include the express adoption and ratification of
this Agreement by the assignee or transferee of SOI and SOI shall be released
from all obligations relating to or arising hereunder.
14.5 At any time after the expiration of four (4) years following initial
deliveries under this Agreement, should West Shore determine in that it is
economically unprofitable to continue having its Gas treated by SOI hereunder,
West Shore shall notify SOI of this fact (which notification shall include
reasonable documentation to substantiate West Shore's claim of economic
29
unprofitability) and this Agreement shall be terminated 120 days from such
notification. The availability of lower treating fees from other treaters of Gas
shall not be a condition which would give West Shore the right to assert its
rights under this Section 14.5.
14.6 Upon request by West Shore, SOI shall obtain hazard and property
insurance coverage for the Treating Plant; provided that West Shore shall
reimburse SOI for premiums attributable to such coverage. In the event of a
catastrophic loss to the Treating Plant, SOI shall be obligated to restore the
Treating Plant to its original condition (immediately prior to such catastrophic
loss); provided however, SOI shall have no obligation to restore the Treating
Plant if West Shore failed to request that SOI obtain hazard and property
insurance coverage as described above.
ARTICLE XV
PAYMENT OF ROYALTY AND TAXES
15.1 SOI shall not be responsible for the payment of any monies due or
calculated on the production of West Shore's Gas and/or on the Treating Products
derived therefrom. West Shore shall retain sole responsibility for making any
such payments due to lessors, royalty owners, overriding royalty owners,
production payment owners, etc.
15.2 SOI shall. not be responsible for payment of any severance, gathering
or equivalent taxes due on the production, severance and handling of the Gas
delivered by West Shore for treating hereunder, nor any severance or similar
taxes due on West Shore's share of Treating Products derived from West Shore's
Gas. West Shore shall retain sole responsibility for payment of any such taxes.
15.3 Should any taxes (other than state or federal income taxes, or the
Michigan single business tax), fees, assessments, etc., be imposed upon SOI
subsequent to the signing of this Agreement which are directly attributable to
SOI's treating of West Shore's Gas, then SOI shall invoice West Shore for and
West Shore agrees to pay all such taxes, fees, etc. in accordance with all terms
and conditions contained in Article XII hereunder.
ARTICLE XVI
LAWS, REGULATIONS AND FORCE MAJEURE
16.1 This Agreement shall be subject to all valid and applicable laws,
orders, rules and regulations made by duly
30
constituted governmental authorities having jurisdiction TO THE EXTENT SUCH LAWS
ARE NOT PREEMPTED BY OTHER APPLICABLE LAWS. THIS AGREEMENT AND THE LEGAL
RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF MICHIGAN.
16.2 In the event any party hereto is rendered unable, wholly or in part,
by force majeure to perform its obligations under this Agreement, other than to
make any payments or accounting required hereunder, then the obligations of such
party, insofar 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, so far as possible, be remedied with reasonable dispatch. In
the event SOI is rendered unable by force majeure to perform its obligations to
West Shore under this Agreement, West Shore shall not be obligated to pay for
treating services during the continuance of any inability so caused, but for no
longer period. The term "force majeure" as employed herein shall mean:
(i) acts of God; acts of the public enemy; wars; blockades;
insurrections; strikes or differences with workmen; riots; disorders;
epidemics; landslides; lightning; earthquakes; fires; storms; floods;
washouts; arrests and restraints; civil disturbances; explosions; freezing
of wells or lines of pipe; requisitions, directives, diversions, embargoes,
priorities or expropriations of government or governmental authorities,
legal or de facto, whether purporting to act under some constitution,
decree, law or otherwise; failure of pipelines or other carriers to
transport or furnish facilities for transportation; rules and regulations
with regard to transportation by common carriers;
(ii) failures, disruptions, or breakdowns of machinery or of facilities of
production, manufacture, transportation, distribution and consumption
(including, but not by way of limitation, SOI's Treating Plant); breakage
or accident to machinery or lines of pipe; the necessity for making
repairs, alterations, enlargements or connections to machinery, facilities
or lines of pipe; and,
(iii) without limitation by enumeration, any other cause or causes, whether
of the kind enumerated or otherwise, not reasonably within the control of
the party claiming suspension, the term "force majeure" shall likewise
include (a) in those instances where any party hereto is required to obtain
servitudes, rights of-way grants, permits or licenses to enable such party
to fulfill its obligations hereunder, the inability of such party to
acquire or the delays on the part
31
of such party in acquiring, at reasonable cost and after the exercise of
reasonable diligence, such servitudes, rights-of-way grants, permits or
licenses; and (b) in those instances where any party hereto is required to
furnish materials and supplies for the purpose of constructing or
maintaining facilities or is required to secure permits or permissions from
any governmental agency to enable such party to fulfill its obligations
hereunder, the inability of such party to acquire, or the delays on the
part of such party in acquiring, at reasonable cost and after the exercise
of reasonable diligence, such materials and supplies, permits and
permissions.
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 requirement 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 opposition when such course is inadvisable in the discretion
of the party having the difficulty. In the event that SOI claims suspension of
its performance hereunder for a period exceeding 30 consecutive days, then,
notwithstanding the provisions of Section 10.4, the Base Fee under Article X
shall be suspended for all times following that 30-day period until the force
majeure condition is remedied and SOI recommences the performance of its
obligations.
ARTICLE XVII
MISCELLANEOUS
17.1 From and after the First Point of Delivery and prior to the Treated
Gas Delivery Point, SOI shall indemnify and hold West Shore harmless against any
loss, damage, claim, suit, liability, judgment and expense, including attorneys'
fees, and other costs of litigation arising out of injury or death of person(s)
or damage to or loss of property or the environment resulting from the
operations conducted by or on the behalf of SOI. Prior to the First Point of
Delivery and from and after the Treated Gas Delivery Point, West Shore shall
indemnify and hold SOI harmless against any loss, damage, claim, suit,
liability, judgment and expense, including attorneys fees, and other cost of
litigation arising out of injury or death of person or damage to or loss of
property or the environment resulting from the operations conducted by or on
behalf West Shore, including, expressly, operations conducted by SOI, except to
the extent arising from the wilful misconduct or gross negligence of SOI.
32
17.2 SOI shall have the right of ingress and egress to and from the
premises of West Shore for all purposes necessary or convenient to the
performance of this Agreement, insofar as West Shore has the authority to grant
such rights. West Shore shall have the right of ingress and egress to and from
the premises of SOI for all purposes necessary or convenient to the performance
of this Agreement, insofar as SOI has the authority to grant such rights.
17.3 All notices and correspondence from West Shore to SOI on matters
pertaining to this Agreement shall be addressed to:
SHELL OFFSHORE, INC.
P. 0. BOX 576
HOUSTON, TX 77001
or to such other address as may be designated hereafter in writing by SOI; and
all correspondence on matters pertaining to this Agreement from SOI to West
Shore shall be addressed to West Shore at:
WEST SHORE PROCESSING COMPANY, LLC
5613 DTC PARKWAY, SUITE 400
ENGLEWOOD, COLORADO 80111
or to such other address as may be designated hereafter in writing by West
Shore.
17.4 This Agreement shall extend to and be binding upon the parties hereto,
their successors and assigns, and the rights and obligations of any party
hereunder may be assigned or conveyed in whole or in undivided part and from
time to time, (subject to the provisions of this Agreement) but all such
assignments and conveyances shall be made expressly subject to this Agreement.
No assignment or conveyance of, nor succession to, a party's interest hereunder
shall affect or bind the other party until such time as the other party shall
have been furnished, at its address given above, with a copy of any document or
documents (recorded, if applicable) evidencing same. If the interests of West
Shore are assigned in part, then all successors of West Shore, and West Shore if
it still owns any interest, shall designate a single party to receive all
billing herein and otherwise give and receive notice and correspondence and
shall act under this Agreement according to the majority vote, by ownership
interest, of West Shore and its successors.
17.5 Nothing in this Agreement shall prevent SOI or West Shore from
contracting with any third parties to treat their Gas in the
33
Treating Plant in its existing configuration. Furthermore, subject to the
provisions of Section 4.7, nothing in this Agreement shall restrict SOI's or
West Shore's ability to expand, or cause to be expanded, the capacity of the
Treating Plant in order to treat Third-Party Gas. Provided however, such
contracts to treat Third-Party Gas shall be subordinate to West Shore's First
Priority Capacity, subject to SOI's rights to use unutilized First Priority
Capacity under Section 4.4.
17.6 The obligations under this Agreement are intended to be separate and
not joint or collective, and nothing in this Agreement shall ever be construed
as creating a partnership or Joint venture. Each party shall be responsible only
for its own obligations as set out in this Agreement and shall be liable only
for its proportionate share of the costs and expenses as above stipulated.
17.7 No waiver by either party hereto of any one or more defaults by the
other in the performance of any of the provisions of this Agreement shall
operate or be construed as a waiver of any future default or defaults whether of
a like or different character.
17.8 This Agreement constitutes the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no other agreements between the parties
in connection with the subject matter hereof. No supplement, modification or
waiver of this Agreement shall be binding unless duly executed in writing by the
party to be bound thereby.
IN TESTIMONY WHEREOF, this Agreement is executed by the parties hereto to be
effective as of the date first above enumerated.
WEST SHORE PROCESSING COMPANY, LLC
By: Michigan Production Company LLC, its member
By:
Title: Manager
By: Michigan Energy Company LLC, its member
By:
Title: MANAGER
34
SHELL OFFSHORE, INC.
BY:
Title:
35
EXHIBIT A
This exhibit left intentionally blank.
36
EXHIBIT "B"
WELLS PRODUCING SOI-OWNED GAS
[Download Table]
1. Bahr 4-24
2. Bahr 5-24
3. Gauthier 1-14
4. Kamaloski 4-23
5. Lutheran Homes 2-27
6. Manistee 1-27
7. Manistee 3-23
8. Manistee 3-27
9. McNeil 5-13A
10. Michigan State Manistee 1-25
11. Olson 2-13
12. Olson-Webb 2-23
13. PCA 10-24
14. PCA Gillespie 5-23A
15. Reid 1-23
16. Ryder 1-24
EXHIBIT "C"
WELLS CONTROLLED BY WEST SHORE PROCESSING, LLC
[Download Table]
1. Adamczak # 1-24
2. Murray-State # 1-8
3. Lakeland Association, et al. # 1-32 well
4. Lakeland Association, et al. # 1-33 well
5. Lakeland Association, et al. #2-33A well
6. Claybanks 2 Unit (gas)
7. Isley 1-22
8. Miller-Fox 1-11
9. Schultz 2-22
10. Slocurn 1-21
11. Dykstra 1-8
12. Bailey 1-24
13. Dow (Lunde 5-27)
14. Dow (Williams-Fugere 2-18)
15. Dow (Olsen 3-18)
16. Dow (Weinert 1.6)
17. Dow (Weinert 1-31)
18. Dow (Abrahamson 3-7)
19. Dow (Stolberg 1-25)
20. Dow (Stolberg 2-25)
21. Dow (Stolberg 3-25)
22. Dow (Miller 5-13)
23. Dow (Malstrom-Wms. 1-13)
24. Dow (Billow-Wrege 6-13 )
25. Dow Wierzbowski 5-13)
EXHIBIT D
LEASE
dated ,1996
between
SHELL OFFSHORE, INC.
as Lessor
and
WEST SHORE PROCESSING COMPANY, LLC
as Lessee
Affecting premises in Manistee County, Michigan
39
LEASE
-----
LEASE, dated as of ______, 1996, between SHELL WESTERN EXPLORATION
& PRODUCTION, INC. , ( "Lessor" ), and WEST SHORE PROCESSING COMPANY, LLC, a
limited liability company, ("Lessee").
1. THE DEMISED PREMISES AND LEASE TERM
-----------------------------------------
In consideration of the Rent hereinafter reserved and the terms,
covenants and conditions set forth in this Lease to be observed and performed by
Lessee, Lessor hereby demises and leases to Lessee, and Lessee hereby rents and
takes from Lessor, the following property (collectively hereinafter referred to
as the "Demised Premises"): (a) all the land (the "Land") described in Exhibit A
hereto, but excluding the buildings and improvements thereon (the
"Improvements"); and (b) all rights of way or of use, servitudes, licenses,
tenements, appurtenances and easements now or hereafter belonging or pertaining
to the Land; TO HAVE AND TO HOLD the Demised Premises unto Lessee, and the
permitted successors and assigns of Lessee, upon and subject to all of the
terms, covenants and conditions herein contained, for a term (the "Lease Term")
commencing on the date hereof and expiring upon the expiration, cancellation or
termination of that certain Gas Treating and Processing Agreement between Lessor
and Lessee dated , 1996, unless the Lease Term shall sooner
terminate pursuant to any of the conditional limitations or other provisions of
this Lease.
2. Rent
-------
Lessee covenants to pay to Lessor as a net minimum rent (the "Fixed
Rent") during the Lease Term $10.00 per annum.
The Fixed Rent shall be payable in advance in equal annual
installments commencing on the date hereof and continuing each anniversary of
said date during the Lease Term. The first installment of Fixed Rent shall be
paid simultaneously with the execution of this Lease. Each date on which Fixed
Rent is payable hereunder is hereinafter referred to as a "Rent Payment Date".
3. USE OF DEMISED PREMISES
--------------------------
Lessee covenants that the Demised Premises shall be used solely for
the purposes of constructing, installing, operating, maintaining, repairing,
enlarging and owning a natural gas liquids
extraction plant and related facilities necessary or useful in connection
therewith.
Lessee shall not do or permit any act or thing which is contrary to
any applicable laws.
Lessee shall not do or suffer any waste, damage, disfigurement or
injury to the Demised Premises.
Lessee shall not permit the spilling, discharge, release, deposit or
placement on the Demised Premises or any part thereof, whether in containers or
other impoundments, of any substance which is a hazardous or toxic substance
within the meaning of any applicable environmental law.
4. CONDITION OF DEMISED PREMISES
----------------------------------
Lessee represents that Lessee has examined and is fully familiar with
the physical condition of the Demised Premises, the Improvements thereon, the
sidewalks and structures adjoining the same, subsurface conditions, and uses
thereof. Lessee accepts the same, without recourse to Lessor, in the condition
and state in which they now are, and agrees that the Demised Premises complies
in all respects with all requirements of this Lease. Lessor makes no
representation or warranty, express or implied in fact or by law, as to the
nature or condition of the Demised Premises, or its fitness or availability for
any particular use, or the income from or expenses of operation of the Demised
Premises.
5. CONSTRUCTION OF NGL PLANT
------------------------------
After the commencement of the Lease Term, Lessee shall have the right
to construct, develop and complete on the Demised Premises a new natural gas
extraction plant and related facilities (the NGL Plant). The NGL Plant shall be
constructed in accordance with the terms of the Gas Treating and Processing
Agreement between Lessor and Lessee. Title to the NGL Plant shall be and remain
in Lessee.
6. COMPLIANCE WITH LAWS
-------------------------
Lessee, at all times during the Lease Term and at Lessee's expense,
promptly and diligently shall comply with all applicable laws.
7. Liens
--------
Lessee shall not directly or indirectly create or permit to be created
or to remain, and shall discharge, any mortgage, lien, security interest,
encumbrance or charge on, pledge of or conditional sale or other retention
agreement with respect to the Demised Premises or any part thereof, Lessee's
interest therein, other than Deeds of Trust, if any, in connection with Lessee's
financing of the NGL Plant; liens not yet payable, or payable without the
addition of any fine, penalty, interest or cost for nonpayment, or being
contested; and the liens of mechanics, materialmen, suppliers or vendors, or
right thereto, incurred in the ordinary course of business for sums which under
the terms of the related contract are not at the time due, provided that
adequate provision for the payment thereof shall have been made.
8. UTILITY SERVICES
--------------------
Lessee shall pay all charges for all public or private utility
services and all sprinkler systems and protection services at any time rendered
to or in connection with the Demised Premises or any part thereof; shall comply
with all contracts relating to any such services; and shall do all other things
required for the maintenance and continuance of all such services.
9. INDEMNIFICATION
-------------------
Lessee hereby agrees to indemnify and hold harmless Lessor from any
and all causes of action, claims and demands of any kind or character asserted
by other parties for damages resulting from use of the Demised Premises or
operations on the Demised Premises by or on behalf of Lessee, including any
environmental cleanup requirements which may be imposed by any governmental
agency having jurisdiction over the Demised Premises, except to the extent
arising from or related to the gross negligence or wilful misconduct of Lessor.
This indemnity shall survive the termination of this Lease.
10. QUIET ENJOYMENT
--------------------
Lessor covenants that so long as Lessee is not in default hereunder in
the payment of any Rent or compliance with or the performance of any of the
terms, covenants or conditions of this Lease on Lessee's part to be complied
with or performed, Lessee shall not be hindered or molested by Lessor in
Lessee's enjoyment of the Demised Premises.
11. EVENTS OF DEFAULT AND TERMINATION
--------------------------------------
If any one or more of the following events ("Events of Default") shall
occur:
(a) if Lessee shall fail to pay any Fixed Rent when as the same becomes due
and payable; or
(b) if Lessee shall fail to comply with or perform any term, covenant or
condition herein, and such failure shall continue for more than thirty days
after Lessee receives notice of such failure, regardless of the source of
such notice;
then, and in any such Event of Default, regardless of the pendency of any
proceeding which has or might have the effect of preventing Lessee from
complying with the terms, covenants or conditions of this Lease, Lessor, at any
time thereafter may give a written termination notice to Lessee, and on the date
specified in such notice this Lease shall terminate and the Lease Term shall
expire and terminate by limitation, and all rights of Lessee under this Lease
shall cease, unless before such date (i) all arrears of Rent and all costs and
expenses, including reasonable attorneys' fees, incurred by or on behalf of
Lessor hereunder, shall have been paid by Lessee, and (ii) all other defaults at
the time existing under this Lease shall have been fully remedied to the
satisfaction of Lessor. Lessee shall reimburse Lessor for all costs and
expenses, including reasonable attorneys' fees, incurred by or on behalf of
Lessor occasioned by or in connection with any default by Lessee under this
Lease.
12. ASSIGNMENT AND SUBLETTING
------------------------------
Lessee expressly covenants that Lessee shall not voluntarily or
involuntarily assign, encumber, mortgage or otherwise transfer this Lease, or
sublet the Demised Premises or any part thereof, or suffer or permit the Demised
Premises or any part thereof to be used or occupied by others, by operation of
law or otherwise, without the prior written consent of Lessor in each instance
which consent shall not be unreasonably withheld.
13. NOTICES
------------
All notices, demands, elections and other communications desired or
required to be delivered or given under this Lease shall be in writing, and
shall be deemed to have been delivered and given
when delivered by hand, or on the third business day after the same have been
mailed by first class registered or certified mail, postage prepaid, enclosed in
a securely sealed envelop addressed to the party to which the same is to be
delivered or given at such party's address as set forth in this Lease or at such
other address as said party shall have designated in writing in accordance with
Section 17.3 of the Agreement to which this Lease is attached.
14. REMOVAL OF PROPERTY AND RESTORATION
---------------------------------------
At any and all times during the term of this Lease, Lessee shall have
the right, and within 180 days of termination of this Lease Lessee shall have
the obligation, to remove any or all property placed, constructed or installed
on the Demised Premises by or on behalf of Lessee. Upon such removal of
property, Lessee shall fill and level all excavations and restore the Demised
Premises to the condition they were in on the effective date hereof.
15. MISCELLANEOUS
------------------
All rights, powers and remedies provided herein may be exercised only
to the extent that the exercise thereof does not violate any applicable law, and
are intended to be limited to the extent necessary so that they will not render
this Lease invalid, unenforceable or not entitled to be recorded under any
applicable law. If any term, covenant or condition of this Lease shall be held
to be invalid, illegal or unenforceable, the validity of the other terms,
covenants and conditions of this Lease shall in no way be affected thereby.
Lessor and Lessee agree that a memorandum of this Lease, but not this
Lease, may be recorded by Lessee, at Lessee's expense.
The headings in this Lease are for purposes of reference only and
shall not limit or define the meaning hereof.
This Lease may be changed or modified only by an instrument in writing
signed by the party against which enforcement of such change or modification is
sought.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of
the date first above written.
WESTSHORE PROCESSING COMPANY, LLC
By: Michigan Production Company LLC, its member
By:
Title: Manager
By: Michigan Energy Company LLC, its member
By:
Title: Manager
SHELL OFFSHORE, INC.
By:
Title:
EXHIBIT A
THE DEMISED PREMISES
--------------------
That area of land located within the Manistee Sulfur Plant denoted as
Location 1 or Location 2 on the attached drawing.
Dates Referenced Herein
| Referenced-On Page |
|---|
| This ‘S-1’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| | 7/1/97 | | 8 | | | | | None on these Dates |
| | 6/1/97 | | 8 |
| | 4/1/97 | | 24 |
| | 1/1/97 | | 21 |
| Filed on: | | 8/2/96 |
| | 5/1/96 | | 1 |
| | 4/30/96 | | 3 |
| | 1/1/96 | | 9 |
| | 4/1/95 | | 8 |
| List all Filings |
↑Top
Filing Submission 0000950109-96-004834 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help —
Sat., Apr. 20, 1:41:21.1am ET 