PIPELINE LEASE AGREEMENT
THIS PIPELINE LEASE AGREEMENT ("Agreement") is made and entered into this
22nd day of January, 2001 ("Effective Date"), by and between Chevron Pipe Line
Company, a Delaware corporation ("Lessor"), and Fin-Tex Pipe Line Company, a
Texas corporation ("Lessee").
WHEREAS, Lessor owns a pipeline, commonly referred to as the Big Spring to
Midland Products Pipeline System, located in the Counties of Howard, Martin, and
Midland in the State of Texas; and
WHEREAS, Lessee desires to lease the Big Spring to Midland Products
Pipeline System, said pipeline being more particularly identified in Exhibit "A"
attached hereto and incorporated herein ("Pipeline"); and
WHEREAS, Lessor is willing, subject to the conditions contained herein, to
lease the Pipeline to Lessee.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
herein made, and other good and valuable consideration, the receipt of which is
hereby acknowledged, Lessor and Lessee agree as follows:
Unless sooner terminated as provided in Section 8, Lessor agrees to lease
said Pipeline for a term of five (5) years, beginning on January 28, 2001,
and ending on January 28, 2006 ("Term").
Lessee shall pay to Lessor as rent for the use of the Pipeline the sum of
Five Hundred Thousand Dollars ($500,000) per year ("Annual Fee"). On the
15th, day of January, 2001, Lessee shall pay the Annual Fee to Lessor at
the address set forth herein. Subsequent Annual Fees shall be due on
January 15th, of each year during the term of the Lease.
3. PIPELINE USE, AND IMPROVEMENTS
a) Lessor, for and in consideration of the rents, covenants, and premises
contained in this Lease and to be kept and observed by Lessee, does hereby
lease and demise to Lessee, and Lessee does hereby lease and accept from
Lessor the Pipeline, together with all rights, privileges, easements,
appurtenances and other interests belonging to or in any way pertaining
thereto, subject, however, to the exceptions and reservations hereinafter
b) The Pipeline shall be used for the transportation of petroleum products,
including, but not limited to refined petroleum products or liquified
petroleum gas. The parties agree that the Pipeline will not be used for
the transportation of crude oil.
c) Lessee agrees to comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which may
hereafter be in force, relating, to, or arising from the use of the
Pipeline. In addition, Lessee agrees to comply with the terms and
conditions of all right-of-way agreements, franchises, or other agreements
affecting the Pipeline. If Lessee receives notice of the violation of any
such law, statute, ordinance, or governmental rule, regulation or
requirement, it shall promptly notify Lessor thereof.
d) In complying with the above-referenced laws and agreements, Lessee agrees
to conduct such tests, file such reports, and take all actions necessary
to be in compliance with all applicable State, Federal and local laws and
regulations. Lessee also agrees to furnish to Lessor results of all tests
and, at Lessor's request, from time to time other information, such as
operating pressure and inspection reports, pertaining to the use of the
e) Lessor reserves the right to audit Lessee's records that pertain to
Lessee's operation and maintenance of the Pipeline.
f) Lessee shall, at its expense, operate and maintain the Pipeline, make all
repairs, replacements, inspections and improvements thereto as required by
federal, state, and/or local regulations as well as good industry
practices, except for cathodic protection monitoring and rectifier
current. So long as this Lease is in force, Lessee shall monitor the
Pipeline for any leaks and shall repair and remediate, at Lessee's
expense, all leaks and damages, including all environmental damages,
resulting or arising from or in any way in connection with the Pipeline.
All additions, replacements, and/or repairs shall conform to Lessor's
standards of pipeline design and construction. Lessee shall provide Lessor
prior advance notice of any planned addition or replacement to the
Pipeline. Lessor shall have the right to review all design and
construction plans related to the Pipeline. Lessor's review of said
designs and construction plans shall in no way relieve Lessee of any
liability arising, out of any additions or replacements. Lessee shall have
the right to make emergency repairs to the Pipeline without the consent of
the Lessor so long as such repairs conform to federal, state, and/or local
regulations as well as good industry practice. In the event Lessee makes
such emergency repairs, Lessee agrees to notify Lessor of such repairs as
soon as practical thereafter.
g) Any alterations required by governmental agencies (such as casing
extensions and replacements for highway alterations) will be the complete
responsibility of Lessee.
h) Lessee shall be responsible for all responsibilities and liabilities
associated with any leaks, spills or discharges of petroleum products or
other contaminants from the Pipeline which occur during the term of this
Lease. Lessee's responsibilities and liabilities include its
responsibilities to comply with all State, Federal, and local laws and
regulations regarding the reporting or remediation of any leak, spill or
discharge from the Pipeline. Lessee shall further be liable for all costs
and expenses relating to any leak, spill or discharge of petroleum
products or other contaminants from the Pipeline during the term of the
Lease, including, but not limited to remediation costs and expenses.
promptly notify Lessor of any spill, leak or discharge of hydrocarbons
from the Leased pipeline during the term of this Lease.
It is understood and agreed that Lessor's Lease of the Pipeline is made
"AS IS, WHERE IS", WITHOUT ANY WARRANTY EXPRESS OR IMPLIED AND THAT LESSEE
WAIVES THE WARRANTY OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE and that this Lease is made only insofar as the Lessor has a legal
right to lease an interest in the rights-of-way over which the Pipeline
extends under the terms and conditions of the right-of-way agreements
under which Lessor now holds. Lessor is not conveying any interests in
real property, including but not limited to, any fee or leasehold interest
in the lands above, beneath, or adjacent to the Pipeline, except the
non-exclusive right to occupy and use such lands pursuant to and in
accordance with the right of way agreements held by Lessor pertaining to
Notwithstanding the above, Lessor hereby represents and warrants that it
is the owner of the Pipeline and that, to the best of Lessor's belief and
information, Lessee, on paying, the rent and other charges herein provided
for and observing, and keeping, the covenants, conditions, and terms of
this Lease on Lessee's part to be kept or performed, shall lawfully and
quietly hold, utilize, and enjoy the Pipeline so long as this Lease
remains in force without hindrance or moles