SECOND CARBON DIOXIDE TRANSPORTATION AGREEMENT

 

 

 

 

                              SECOND CARBON DIOXIDE

                            TRANSPORTATION AGREEMENT

 

                                     BETWEEN

 

                              DENBURY ONSHORE, LLC

 

                                AS "TRANSPORTER"

 

                                       AND

 

                             GENESIS CRUDE OIL, L.P.

 

                                  AS "SHIPPER"

 

 

 

 

 

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                                Table of Contents

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                                Table of Contents

 

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DALLAS1 834152v4 28040-00026

 

ARTICLE I  DEFINITIONS......................................................1

         1.1.     Defined words and terms...................................1

 

ARTICLE II  SCOPE OF TRANSPORTATION SERVICE.................................4

         2.1.     Transportation of Carbon Dioxide..........................4

         2.2.     Redelivery of Carbon Dioxide..............................4

         2.3.     Non-Exclusive Transportation..............................4

         2.4.     INTENTIONALLY OMITTED.....................................4

         2.5.     Operation of Transporter's Pipeline.......................4

         2.6.     Transporter's Processing Rights...........................4

         2.7.     Excess Quantities.........................................4

         2.8.     Call Option...............................................5

 

ARTICLE III  RATES AND CHARGES..............................................5

         3.1.     Initial Rate..............................................5

         3.2.     Adjusted Rate.............................................5

         3.3.     Minimum Rate..............................................6

         3.4.     Tax Reimbursement.........................................6

 

ARTICLE IV  TERM; EARLY TERMINATION FOR DEFAULT.............................6

         4.1.     Term......................................................6

         4.2.     Default...................................................6

         4.3.     Occurrence of Default.....................................6

 

ARTICLE V  RECEIPT POINTS, DELIVERY POINTS AND PRESSURES....................7

         5.1.     Receipt Points and Delivery Points........................7

         5.2.     Responsibility............................................7

         5.3.     Pressure Criteria.........................................7

 

ARTICLE VI  QUANTITY........................................................8

         6.1.     Delivery Rates............................................8

         6.2.     Cooperation Regarding Deliveries..........................8

 

ARTICLE VII  QUALITY SPECIFICATIONS.........................................8

         7.1.     Specification.............................................8

         7.2.     Testing...................................................8

         7.3.     Disclaimer................................................9

 

ARTICLE VIII  OWNERSHIP AND OPERATION OF FACILITIES.........................9

         8.1.     Facility Ownership........................................9

 

ARTICLE IX  MEASUREMENT.....................................................9

         9.1.     Measurement Point.........................................9

         9.2.     Procedure.................................................9

         9.3.     Atmospheric Pressure......................................9

         9.4.     Meter Standards...........................................9

         9.5.     Temperature..............................................10

         9.6.     Density..................................................10

         9.7.     Samples..................................................10

 

ARTICLE X  FORCE MAJEURE...................................................10

         10.1.    Definition...............................................10

         10.2.    Extended Force Majeure...................................10

         10.3.    Strikes and Lockouts.....................................11

 

ARTICLE XI  NOTICES........................................................11

         11.1.    Transporter Notices......................................11

         11.2.    Shipper Notices..........................................11

         11.3.    Change of Address........................................11

 

ARTICLE XII  PAYMENT, AUDIT AND FINANCIAL RESPONSIBILITY...................11

         12.1.    Payment..................................................11

         12.2.    Auditing.................................................12

         12.3.    Failure to Pay...........................................12

         12.4.    Financial Responsibility.................................12

 

ARTICLE XIII  WARRANTY.....................................................12

         13.1.    Warranty.................................................12

 

ARTICLE XIV  GENERAL TERMS AND CONDITIONS..................................13

         14.1.    Waiver of Breach.........................................13

         14.2.    Regulatory Bodies........................................13

         14.3.    CHOICE OF LAW............................................13

         14.4.    Joint Preparation........................................13

         14.5.    Assignment...............................................13

         14.6.    Modification and Entire Agreement........................13

         14.7.    Headings.................................................14

         14.8.    Damage Limitation........................................14

         14.9.    Arbitration..............................................14

         14.10.   Second Master Agreement; Conflicts.......................14

 

 

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                 SECOND CARBON DIOXIDE TRANSPORTATION AGREEMENT

 

         THIS SECOND CARBON DIOXIDE TRANSPORTATION AGREEMENT (this "Agreement"),

made and entered into effective as of July 1, 2004, by and between DENBURY

ONSHORE, LLC, a Delaware limited liability company, hereinafter referred to as

"Transporter", and GENESIS CRUDE OIL, L.P., a Delaware limited partnership,

hereinafter referred to as "Shipper".

 

                                   WITNESSETH:

 

         WHEREAS, Shipper owns an interest in and/or has the right to market or

otherwise control the disposition of Carbon Dioxide produced from certain wells

located in the Jackson Dome area in Rankin County, Mississippi; and,

 

         WHEREAS, Transporter owns and operates a gathering system connected to

a mainline pipeline extending approximately one hundred eighty-three miles from

a point at the outlet flange of a Carbon Dioxide dehydration facility located in

Rankin County near Jackson, Mississippi, to a point in White Castle, Ascension

Parish, Louisiana, which currently is capable of delivering Carbon Dioxide to

the various delivery points; and,

 

         WHEREAS, Transporter currently has available pipeline capacity for the

transportation of Carbon Dioxide for Shipper; and,

 

         WHEREAS, Shipper desires to arrange for the transportation of Carbon

Dioxide through Transporter's pipeline and Transporter desires to receive from,

transport and redeliver to Shipper Carbon Dioxide in accordance with the terms

and conditions stated in this Agreement.

 

         NOW, THEREFORE, for and in consideration of the mutual benefits to be

derived, the terms and conditions contained herein and other good and valuable

consideration, the receipt and sufficiency of which are hereby acknowledged,

Transporter and Shipper hereby agree with each other as follows:

 

ARTICLE I

 

                                   DEFINITIONS

 

1.1. Defined words and terms. Except where the context otherwise indicates

another or different meaning or intent, the following words and terms as used

herein shall have the meanings indicated:

 

                  (a) The term "Additional Industrial Sale Contracts" has the

         meaning set out in the Second Master Agreement.

 

                  (b) The term "Bankruptcy Event" means, with respect to either

         party, the entry of a decree or order by a court of competent

         jurisdiction adjudging the party a bankrupt or insolvent, or approving

         as properly filed a petition seeking reorganization, arrangement,

         adjustment or composition of or in respect of the party under the

         Federal Bankruptcy Code or any other applicable law, or appointing a

         receiver, liquidator, assignee, trustee, sequestrator (or other similar

         official) of the party or of any substantial part of its property, or

         ordering the winding up or liquidation of its affairs, and the

         continuance of any such decree or order unstayed and in effect for a

         period of sixty (60) consecutive days; or the consent by such party to

         the institution of bankruptcy or insolvency proceedings against it, or

         the filing by it of a petition or answer or consent seeking

         reorganization or similar relief under the Federal Bankruptcy Code or

         any other applicable law, or the consent by it to the filing of any

         such petition or to the appointment of a receiver, liquidator,

         assignee, trustee, sequestrator (or other similar official) of the

         party or of any substantial part of its property, or the making by it

         of an assignment for the benefit of creditors, or the admission by it

         in writing of its inability to pay its debts generally as they become

         due and its willingness to be adjudicated a bankrupt.

 

                  (c) The terms "Carbon Dioxide" and "CO2" each mean a substance

         primarily composed of molecules containing one atom of carbon and two

         atoms of oxygen and containing at least 99 percent (dry basis) by

         volume of such molecules.

 

                  (d) The term "Contract Year" means a period of three hundred

         sixty-five (365) consecutive days beginning on the first day of a full

         month following the month in which deliveries commence under this

         Agreement or on any anniversary thereof; provided, however, that any

         such year which contains a date of February 29th shall consist of three

         hundred sixty-six (366) consecutive days. This definition of Contract

         Year contemplates the possibility of first deliveries occurring on a

         day other than the first day of a month.

 

                  (e) The term "cubic foot" is the amount of Carbon Dioxide

         necessary to fill one cubic foot of space at a base pressure of 15.025

         psia and at a base temperature of 60 degrees Fahrenheit.

 

                  (f) The term "Daily Maximum Quantity" has the meaning set out

         in the Master Agreement.

 

                  (g) The term "day" means a period beginning at 7:00 a.m.

         (local time) on a calendar day and ending at 7:00 a.m. (local time) on

         the next succeeding calendar day. The date of a day shall be that of

         its beginning.

 

                  (h) The term "Delivery Points" has the meaning stated in

         Section 2.2.

 

                  (i) The term "First Master Agreement" means that certain

         Production Payment Purchase and Sale Agreement dated as of November 14,

         2003 and effective as of September 1, 2003, between Transporter's

         predecessor and Shipper, as the same may be amended, supplemented,

         modified or restated from time to time.

 

                  (j) The term "First Master Documents" means the First Master

         Agreement and all agreements executed in connection therewith or

         pursuant thereto, including but not limited to the First T&P Agreement,

         as the same may be amended, supplemented, modified or restated from

         time to time.

 

                  (k) The term "First T&P Agreement" means that certain Carbon

         Dioxide Transportation Agreement dated as of November 14, 2003 and

         effective as of September 1, 2003, between Transporter's predecessor

         and Shipper, as the same may be amended, supplemented, modified or

         restated from time to time.

 

                  (j) The term "MCF" means 1,000 cubic feet of Carbon Dioxide.

 

                  (k) The term "MMCF" means 1,000,000 cubic feet of Carbon

         Dioxide.

 

                  (l) The term "month" means a period beginning on the first day

         of a calendar month and ending at the beginning of the first day of the

         next succeeding calendar month.

 

                  (m) The term "pound-mass" means the mass quantity of Carbon

         Dioxide equivalent to a pound-mass as defined by the United States

         National Bureau of Standards.

 

                  (n) The term "psia" means pounds per square inch absolute.

 

                  (o) The term "psig" means pounds per square inch gauge.

 

                  (p) The term "Receipt Points" has the meaning stated in

         Section 2.1.

 

                  (q) The term "Second Master Agreement" means that certain

         Second Production Payment Purchase and Sale Agreement executed

         contemporaneously herewith by Transporter and Shipper, as the same may

         be amended, supplemented, modified or restated from time to time.

 

                  (r) The term "Second Master Documents" means the Second Master

         Agreement and all agreements executed in connection therewith or

         pursuant thereto, including but not limited to this Agreement, as the

         same may be amended, supplemented, modified or restated from time to

         time.

 

                  (s) The term "Second Production Payment" has the meaning

         stated in the Second Master Agreement.

 

                  (t) The term "Transportation Fee" has the meaning stated in

         Article III.

 

                  (u) The term "Transporter's Pipeline" means Transporter's

         existing gathering system and pipeline used for the gathering,

         dehydration and transportation of Carbon Dioxide from wells owned or

         controlled by Transporter in Rankin County, Mississippi, which

         gathering system extends from various wellheads owned or controlled by

         Transporter to a point at the outlet flange of a Carbon Dioxide

         dehydration facility located in Rankin County, Mississippi, and which

         pipeline extends from that point to a point in Ascension Parish,

         Louisiana.

 

                  (v) The term "Triggering Event" has the meaning stated in

         Section 2.8.

 

ARTICLE II

 

                         SCOPE OF TRANSPORTATION SERVICE

 

2.1. Transportation of Carbon Dioxide. Subject to all of the terms, conditions,

and limitations of this Agreement, each day during the term hereof Shipper shall

have the right to tender to Transporter at the Receipt Points set forth in

Exhibit A (the "Receipt Points") for transportation hereunder any volume of

Carbon Dioxide up to the Daily Maximum Quantity.

 

2.2. Redelivery of Carbon Dioxide. Subject to all of the terms, conditions, and

limitations of this Agreement, each day during the term hereof Transporter shall

redeliver to Shipper, at the Delivery Points set forth in Exhibit B (the

"Delivery Points"), the volume of Carbon Dioxide delivered by Shipper to

Transporter at the Receipt Points on such day, as such volumes may be adjusted

for Shipper's proportionate share of reductions due to Carbon Dioxide lost and

unaccounted for in Transporter's Pipeline and any other loss or shrinkage factor

generally applicable from time to time to Transporter's Pipeline.

 

2.3. Non-Exclusive Transportation. Subject to the qualification as to priority

set out in Section 2.4, nothing in this Agreement shall be construed to prohibit

Transporter from transporting Carbon Dioxide for a person or persons other than

Shipper. Nothing in this Agreement shall be construed to require Shipper to

tender any minimum quantity of Carbon Dioxide to Transporter for transportation

hereunder.

 

2.4. INTENTIONALLY OMITTED.

 

2.5. Operation of Transporter's Pipeline. Except as otherwise provided in

Section 2.8, Transporter will at all times maintain, preserve and keep all

improvements, machinery, equipment, pipe lines, tanks, fixtures and other

personal property and equipment of every kind and nature now or hereafter

required in connection with operation of Transporter's Pipeline in good repair,

working order and condition, and promptly make all necessary and proper repairs,

renewals, replacements and substitutions. Subject to the forgoing and it