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NATAURAL GAS LIQUIDS PURCHASE AGREEMENT

Purchase and Sale Agreement

NATAURAL GAS LIQUIDS PURCHASE AGREEMENT | Document Parties: MARKWEST ENERGY PARTNERS L P | MarkWest Western Oklahoma Gas Company, LLC | ONEOK Hydrocarbon GP, LLC | ONEOK Hydrocarbon, LP You are currently viewing:
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MARKWEST ENERGY PARTNERS L P | MarkWest Western Oklahoma Gas Company, LLC | ONEOK Hydrocarbon GP, LLC | ONEOK Hydrocarbon, LP

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Title: NATAURAL GAS LIQUIDS PURCHASE AGREEMENT
Governing Law: Oklahoma     Date: 3/2/2009
Industry: Natural Gas Utilities     Sector: Utilities

NATAURAL GAS LIQUIDS PURCHASE AGREEMENT, Parties: markwest energy partners l p , markwest western oklahoma gas company  llc , oneok hydrocarbon gp  llc , oneok hydrocarbon  lp
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Exhibit 10.33

SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPERATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS (**).

NATAURAL GAS LIQUIDS PURCHASE AGREEMENT

By and Between

ONEOK HYDROCARBON, L.P.

and

MARKWEST WESTERN OKLAHOMA GAS COMPANY, L.L.C.

Dated: August 25, 2006



TABLE OF CONTENTS

Section, Description

 

Page #

Section 1., Definitions

 

1

Section 2., Term

 

3

Section 3., Delivery by Seller, Acceptance by Buyer

 

3

 

Section 3.A., Quantity

 

3

 

Section 3.B., Change in Operations

 

4

 

Section 3.C., Deliveries

 

4

 

Section 3.D., Quality

 

5

 

Section 3.E., Marketing Agreements

 

5

Section 4., Purchase of NGL's

 

5

Section 5., Linefill

 

6

Section 6., Base and Adjusted Differential

 

6

Section 7., Quality Adjustment Fees

 

7

Section 8., Alternative Connections

 

8

Section 9., Payments, Taxes

 

8

Section 10., Credit

 

10

Section 11., Measurement, Sampling and Analysis

 

10

Section 12., Records

 

13

Section 13., Custody and Title

 

13

Section 14., Warranties

 

13

Section 15., Indemnifications

 

14

Section 16., Defaults

 

14

Section 17., Excuse of Performance

 

15

Section 18., Assignment

 

16

Section 19., Notices

 

16

Section 20., Interpretation

 

17

Section 21., Confidentiality

 

18

Section 22., Amendments

 

18



NATURAL GAS LIOUIDS PURCHASE AGREEMENT

        This Natural Gas Liquids Purchase Agreement ("Agreement") is made on this 29 Day of August, 2006, by and between MarkWest Western Oklahoma Gas Company, L.L.C., an Oklahoma limited liability company, ("Seller"), and ONEOK Hydrocarbon, L.P., a Delaware limited partnership, ("Buyer"). Buyer and Seller may be referred to herein as a "Party", or collectively as "Parties" .

         WHEREAS, Seller or its Affiliates (defined below) are in the business of producing and marketing NGL's (defined below), and Owns or Controls certain raw natural gas liquid production from Seller's Arapaho gas processing plant in Custer County, Oklahoma (hereinafter referred to as the "Plant"); and

         WHEREAS, Seller wishes to sell to Buyer all NGL's extracted at the Plant which are Owned or Controlled by Seller; and

         WHEREAS, Buyer wishes to purchase such NGL's pursuant to the terms and conditions hereinafter set forth..

         NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, and other good and valuable consideration, Seller and Buyer agree as follows:

1.      Definitions.     In this Agreement, each of the following terms shall have the meanings assigned as follows:

A.

"Adjusted Base Differential" shall have the meaning set forth in Section 6.

B.

"Affiliate" of a corporation, partnership, company, or other business enterprise or entity (collectively "Person") shall mean a Person which directly or indirectly controls, is controlled by, or is under common control with such Person. As used herein, the term "control" (including its derivatives and similar terms) means (i) owning, directly or indirectly, at least fifty percent (50%) of the voting rights attributable to the outstanding shares of the controlled Person if such voting rights confer upon the shareholder the power, directly or indirectly, to direct, or cause to be directed, the management and policies of the controlled Person, or (ii) with respect to a Person that is not a corporation, having the power, directly or indirectly, to direct, or cause to be directed, the management and policies of the controlled Person through the ownership of voting securities, other ownership interests, by contract, or otherwise.

C.

"Alternate Facilities" shall have the meaning set forth in Section 17.

D.

"Barrel" shall mean forty-two U.S. Gallons.

E.

"Base Differential" shall have the meaning set forth in Section 6.

F.

"Base Rate" shall have the meaning set forth in Appendix 1 and Section 6.

G.

"Business Day" shall mean Monday through Friday of each week, excluding holidays and any day in which usual business cannot be conducted due to events of Force Majeure.

H.

"CO2" shall mean carbon dioxide.

I.

"CO2 Content" shall have the meaning set forth in Section 7.

J.

"CO2 Quality Adjustment Fee" shall have the meaning set forth in Section 7.

L.

"Contract Year" shall mean each twelve (12) Month period during the term hereof beginning on the first Day of the Original Contract Term.

M.

"Control", "Controlled" or "Controls" shall mean, when referring to NGL's, NGL's that Seller or its Affiliates, as the case may be, has the right, directly or indirectly, to sell.

N.

"Day" shall mean a period of twenty-four (24) consecutive hours commencing at 7:00 A.M. Central Time.

N.

"Delivery Point(s)" shall mean the pipeline interconnection between Buyer's (or its Affiliate's) pipeline facilities and the Plant's facilities.


O.

"Effective Date" shall mean August 1, 2006.

P.

"E/P" shall mean approximately an ** ethane/propane mix.

Q.

"Excess Methane Quality Adjustment Fee" shall have the meaning set forth in Section 7.

R.

"Force Majeure" shall have the meaning set forth in Section 17.

S.

"Forward Contract" shall have the meaning set forth in Section 16.

T.

"Forward Contract Merchant" shall have the meaning set forth in Section 16.

U.

"Fuel Gas Cost" as used in Section 6, shall mean the cost per MMBtu of the natural gas used to fractionate the NGL's sold hereunder at Buyer's Fractionator. The price per MMBtu of such Fuel Gas Cost shall be deemed to be equal to (i) the Southern Star Central Gas Pipelines Inc. ("Southern Star") ** for the Month of delivery and sale, as published each Month by "Inside F.E.R.C.", plus (ii) the then ** for Southern Star plus the maximum ** for the ** and the maximum ** and the maximum **. Capitalized terms in this subsection, not otherwise defined herein, shall be as set forth in Southern Star's Tariff.


1.

If "Inside F.E.R.C." ceases to be published, or if it ceases to publish the Southern Star index as described above, then such index shall, if available, be obtained from an alternative industry publication (either private or government) which publishes the same pricing information. If such index price is no longer available, then Buyer and Seller shall, within sixty (60) Days of the first Day of the Month that the cessation occurred, agree upon an alternative pricing mechanism which will reflect the fair market price of natural gas utilized as fuel in the Fractionator. The alternative pricing mechanism agreed upon shall apply retroactively to the first Day of the Month that the posting terminated. If the parties cannot agree upon an alternate pricing mechanism within the period stipulated above, then the issue of fuel cost shall be submitted to arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association.

ii.

If the tariff(s) described above ceases to be published, the replacement shall be the published tariff(s), which most closely resembles the original tariff, retroactive to the first Day of the Month when the original index ceased to be available. If there is no such replacement tariff(s), then Buyer and Seller shall mutually agree upon an alternative tariff(s) within sixty (60) Days after the first Day of the Month that the original tariff(s) became unavailable. The alternate tariff(s) agreed upon shall apply retroactively to the first Day of the Month that the original tariff(s) became unavailable. If the parties cannot agree upon an alternate method or tariff within the sixty (60) Day period, the issue of the appropriate replacement tariffts) shall be submitted to arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association.

V.

"Fractionator" shall mean Buyer's fractionation facility located at or near Medford, Oklahoma.

W.

"Fractionation and Gathering System" shall have the meaning set forth in Section 16.

X.

"Gallon" shall mean a U.S. Gallon of 231 cubic inches of liquid corrected for temperature to sixty degrees (60°) Fahrenheit, and atthe equivalent vapor pressure of the liquid.

Y.

"Guarantor" shall have the meaning set forth in Section 16.

Z.

"Linefill" shall have the meaning set forth in Section 5.

AA.

"Losses" shall have the meaning set forth in Sections 3 and 16.

BB.

"Maximum Production" shall have the meaning set forth in Section 3.

2


CC.

"Month" shall mean a period of time commencing at 7:00 A.M. on the first Day of a calendar Month and ending at 7:00 A.M. on the first Day of the next calendar Month.

DD.

"NGL's" shall mean the mixture of liquid hydrocarbons and non-hydrocarbon components that are condensed, adsorbed and/or absorbed from or separated out of natural gas processed in the Plant. NGL' s shall not include field condensate recovered in gas gathering systems, unless otherwise mutually agreed. As used herein, "condensate" means liquid hydrocarbons that separate from natural gas due to temperature and/or pressure changes upstream of a gas plant.

EE.

"Original Contract Term" shall have the meaning set forth in Section 2.

FF.

"Own", "Owned" "Ownership" or "Owns" shall mean, when referring to NGL's, NGL's to which Seller or any of its Affiliates holds title.

GG.

"Plant" shall mean the Arapahoe gas processing plant located in Custer County, Oklahoma.

HH.

"Propane Plus" shall mean P-Grade propane, I-Grade isobutane, normal butane and M-Grade 14# RVP natural gasoline.

II.

"Ratably" or "Ratable" shall mean or refer to the delivery of NGL's throughout each Month, in daily quantities that are approximately equal to the volume of NGL's delivered during the Month divided by the number of Days in that Month.

JJ.

"Use" shall have the meaning set forth in Section 4.

KK.

"Year" shall mean a period of three hundred sixty-five (365) consecutive Days; provided, however, that any Year which contains three hundred sixty-six (366) consecutive Days shall also constitute one "Year."

2.      Term.     This Agreement shall begin on the Effective Date, and shall be effective until ** (the "Original Contract Term"). This Agreement shall continue in effect **

** unless either Party gives the other Party written notice of termination at least ** prior to the end of the Original Contract Term or the end of any subsequent ** .

3.      Delivery by Seller, Acceptance by Buyer.     

A.

Quantity .    Subject to the provisions herein including without limitation the volume limitations set forth below, Seller shall Ratably deliver and sell to Buyer at the Delivery Point and Buyer shall accept and purchase from Seller at the Delivery Point, all of the NGUs extracted at the Plant that Seller Owns or Controls. Such volume of NGL's is estimated to be up to ** Barrels per Day (the "Maximum Production").

Buyer shall accept the NGL's tendered by Seller pursuant to this Agreement at volumes up to the Maximum Production; provided, however, Buyer shall have the right to not accept any NGL's in excess of the Maximum Production upon providing notice of such to Seller. Should Buyer decline acceptance of any such excess volumes above the Maximum Production, then Seller shall be released from the terms and conditions of this Agreement with regard to such excess volumes which have been declined by Buyer and Seller may sell, construct its own facilities or contract for the handling or disposition of such declined excess volumes to third parties or otherwise, as Seller deems appropriate.

** beginning on the Effective Date or an anniversary thereof, Seller fails to deliver an average of at least ** percent ( ** %) of the then-effective Maximum Production from the Plant, then Buyer shall have the right, within sixty (60) Days ** , by providing written notice to Seller, to reduce the then-effective Maximum Production for the Plant to a number of Barrels per Day equal to the average daily volume of NGL's actually delivered from the Plant ** . Such reduction shall be effective as of the date of Buyer's notice. For purposes of calculating the ** during any such **

3


 

during such period on which either of the following conditions occur shall be ** calculation of the ** during such Period: (i) the ** to Buyer hereunder are ** or (ii) the Plant was ** .

If the volume of the Owned and Controlled NGL's available to be delivered hereunder from the Plant increases to a level which is in excess of the then-effective Maximum Production for such Plant, then Seller may request an increase in the then-effective Maximum Production to the volume of Owned NGL's and Controlled NGL's that Seller estimates to be available from such Plant, which such request must be in writing and detail the basis for the increase or anticipated increase in volume. Buyer shall respond, in writing, to Seller's request within thirty (30) Days of Buyer's receipt of Seller's request. If Buyer declines to increase the then-effective Maximum Production for the Plant, then the volume of Owned NGL's and/or Controlled NGL's which is in excess of the then-effective Maximum Production for such Plant shall be permanently released from this Agreement, and Seller shall be free to dispose of such excess NGL's in any manner deemed appropriate by Seller.

B.

Change in Operations .    Seller shall notify Buyer via E-Mail prior to any event known to Seller which would reasonably be expected to cause NGL's to be delivered hereunder at significant variance from the normal delivery rate for a period of two Days or more. Such event(s) include without limitation (i) Seller's election to begin or cease its recovery of ethane, or (ii) by-passing the Plant with all or a portion of the natural gas stream normally processed in the Plant. Seller shall notify Buyer of any such event promptly following its occurrence if such event was not known by Seller prior to its occurrence.

C.

Deliveries .


i.

Seller has installed, or shall cause to be installed, and shall operate, or cause to be operated, at its sole cost and expense, any facilities or equipment necessary to deliver the NGL's to the Delivery Point. Seller shall deliver the NGL's (i) at a consistent and continuous flow over a twenty-four (24) hour period as reasonably practicable, and (ii) at temperatures and pressures in accordance with those set forth in Exhibit Y.

ii.

If Seller fails to deliver NGL's on a reasonably Ratable basis, in Buyer's judgment, then Buyer shall notify Seller and the parties shall promptly meet to attempt in good faith to determine a mutually agreeable remedy to such failure. If the parties are not able to agree upon a reasonable remedy within thirty (30) Days of Seller's receipt of such notice, then Buyer shall have the right but not the obligation to install appropriate facilities (such as a back-pressure valve, for example) to regulate flows, at Seller's cost and expense. If Buyer elects to install such facilities, such installation shall not relieve Seller of its obligation to deliver NGL's as set forth in this subsection C. Buyer shall invoice Seller for all reasonably incurred direct costs and expenses involved in the installation of such facilities, and Seller shall pay such invoice within ten (10) Days of Seller's receipt thereof. Buyer and Seller acknowledge that operation of such a back pressure valve may cause additional fluctuations in produced NGL volumes by causing Plant shutdowns and instability of operations. Buyer agrees that if any such operation is imposed on Seller's Plant, that it will work in good faith with Seller's operations personnel to insure commercially reasonable Plant operations and avoid unreasonable Plant shutdowns.

iii.

Seller shall filter the NGL's tendered hereunder to ensure that particles do not interfere with, or damage, the measurement equipment utilized to measure deliveries hereunder. Seller shall maintain and replace such filters on a regular and timely basis.

iv.

Title to and risk of loss associated with the NGL's shall pass from Seller to Buyer upon completion of delivery at the Delivery Point.

4


D.

Quality .


i.

Seller shall deliver NGL's which meet Buyer's specifications as such specifications may change from time to time in accordance with this Section 3.D.i., the most current of which are contained in Exhibit Y. Buyer shall have the right, but not the obligation, to reasonably modify such specifications to meet or conform to downstream conditions or requirements as a result of governmental regulation, industry standards for similarly situated persons, or changes promulgated or recommended by the Gas Processors Association or its successor(s). Buyer shall have the right to inspect and refuse to accept any NGL's which do not meet the specifications contained in Exhibit Y. If Seller has delivered NGL's that have contaminated the common fungible stream, Buyer may treat or otherwise dispose of the contaminated stream in any reasonable commercial manner at Seller's sole expense. Seller shall, without duplication of the consideration provided Buyer as Quality Adjustment Fees pursuant to Section 7 below, indemnify, reimburse and hold Boyer harmless from and against all claims, penalties, treating or blending fees, losses, costs, expenses, liabilities or damages of any kind or nature (including reasonable attorney's fees and court costs associated therewith) (collectively "Losses") to the extent caused by or arising out of Seller's delivery to Buyer of NGL's not meeting the aforementioned quality standards. Such Losses may include, but not be limited to, blending costs, filters, slop fees, loss allowances, throughput fees, additional tariffs, storage fees, fractionation fees, and discounts in sales prices required to market contaminated NGL's or purity products fractionated therefrom. Seller shall monitor the quality of its NGL's in order ensure such NGL's meet the quality specifications in this Agreement.

ii

NGL's delivered hereunder shall be subject to Buyer's inspection, and rejection if such NGL's fail to meet the quality standards required by this Agreement. Failure of Buyer to exercise its right of rejection from time to time shall not constitute a waiver of such right, nor a waiver of Seller's obligation to monitor the quality of its NGL's.

E.

Marketing Agreements.     Seller shall not enter into any agreement that would require or allow any NGL's which are Owned or Controlled by Seller or its Affiliates to be marketed by a party other than Seller unless that party agrees that all such NGL's shall be subject to this Agreement. Seller shall not forfeit, diminish, or relinquish any right to take NGL's in kind, unless the recipient of the NGL's not so taken in kind agrees that all such NGL's shall be subject to this Agreement. This paragraph shall not apply to any volumes of NGL's that have been permanently released from this Agreement pursuant to Section 3.A. above.

4.      Purchase of NGL's.     

A.

Except as otherwise provided herein, Buyer shall purchase, during the Month of delivery by Seller, a number of Gallons of each component calculated according to the number of Gallons of each hydrocarbon component contained in the NGL's delivered by Seller to Buyer. For purposes of calculating the volume of components to be purchased hereunder, methane delivered up to the limits set forth in Exhibit Y shall be deemed to be ethane, but no credit shall be given for carbon dioxide and other non-hydrocarbon components contained in the NGL's delivered to Buyer, or for methane delivered in excess of the limits set forth in Exhibit Y.

B.

The price to be paid for the NGL's purchased hereunder shall be equal to the Monthly average price per Gallon (for the Month of delivery and sale) applicable to each hydrocarbon component which comprises the NGL's sold by Seller and purchased by Buyer hereunder at the Delivery Point, as published by OPIS ** (the " ** Price"). The adjustment fees and charges due Buyer hereunder, including but not limited to the Adjusted Base Differential described below shall be deducted from the ** Price.

C.

Buyer reserves the right (i) to reject any pipelines presented for loading/unloading which would present an unsafe or potentially unsafe situation, and (ii) to refuse to load/unload, transfer, or handle any NGL's under any conditions it reasonably deems unsafe, including without limitation conditions caused by personnel, equipment, procedures, and/or weather conditions.

5


D.

With regard to NGL's delivered from Seller, its customer or agent at Buyer's facilities, Seller agrees that it and its customers, agents and employees will comply with Buyer's safety regulations and rules when on Buyer's premises. Seller shall indemnify, defend and hold Buyer harmless from and against any and all liability occurring from or arising out of any non-compliance with such safety regulations and rules or the negligence of Seller, its agents or customers. Likewise, Buyer agrees that it and its customers, agents and employees will comply with Seller's safety regulations and rules when on Seller's premises. Buyer shall indemnify, defend and hold Seller harmless from and against any and all liability occurring from or arising out of any non-compliance with such safety regulations and rules or the negligence of Buyer, its agents or customers.

E.

Use of Products .    Buyer acknowledges the hazards associated with the handling, storage, transportation, use, misuse, disposal or subsequent processing (the "Use") of the NGL's and assumes the responsibility of advising those of its employees, agents, contractors, and customers, who shall use, work or come in contact with the NGL's, of the hazards to human health or human or environmental safety, whether such NGL's are used singly or in combination with other substances or in any processes or otherwise. Buyer shall indemnify, defend and hold Seller harmless from and against any and all liability occurring from or arising out of a breach of Buyer's obligations under this Section and from and against claims, demands or cause of action for personal injury, damage to the environment or property arising from or attributable to Buyer's Use of the NGL's.

F.

Material Safety Data Sheets .    Seller shall supply Buyer on a timely basis with Material Safety Data Sheets (MSDS) on the NGL's, which MSDS shall be in compliance with applicable laws and regulations in disclosing risks and dangers of the NGL's, and of the handling, transporting and processing the same.

5.      Linefill     

A.

Amount of Linefill.     Buyer shall retain title to and possession of a volume of NGL's equal to ** of the Maximum Production from the Plant (the "Linefill"), as the Maximum Production may be revised from time to time. The quantity of Linefill retained by Buyer will be ** of the Effective Date if (i) the ** to Buyer hereunder during the Contract Year ending on such date, ** the provisions of Section 3.A., ** (ii)  ** the Linefill then retained by Buyer. If the ** of the Linefill then retained by Buyer, then Buyer shall be entitled to ** of Products ** the following ** months. If the ** the Linefill then retained by Buyer, then Buyer shall ** of Products ** pursuant to the terms of this Agreement, ** the following ** months. Further, if the Maximum Production is increased or reduced pursuant to Section 3.A., then the amount of Linefill to be retained by Buyer will be ** , and the ** and the ** after shall be ** the next ** months.

B.

Purpose of Line fill.     The Linefill shall be held to cover intransit time. Within ten (10) Days after the expiration or early termination of this Agreement, or immediately upon an event of default by Buyer under Section 16, provided, in each case, that Seller has performed all of its obligations herein, Buyer shall make payment to Seller for such retained Linefill, at the price in effect during the Month that this Agreement expires or terminates, or in which the event of default occurs, as applicable. If this Agreement has not been terminated or has not otherwise expired following such payment by Buyer, Buyer may immediately terminated this Agreement.

6.      Base and Adjusted Base Differential.     For each Gallon of purity products which will be fractionated from the NGL's delivered to Buyer at the Delivery Point as determined by Buyer's measurement and analysis, Seller shall pay Buyer a purchase differential as set forth in the table below ("Base Purchase Differential"), as adjusted pursuant to the following provisions of this Section. Such Base Differential

6


 

(as adjusted) shall be charged Seller by Buyer upon receipt of NGL's at the Delivery Point and shall be deducted from the purchase price of the NGL's in accordance with Section 4.b.

Product

 

Base Purchase Differential
¢/Gal.

Propane Plus

 

**

Ethane in E/P

 

**

A.

Fuel Gas Adjustment.     The Base Purchase Differential, insofar as it is composed of the Fuel Gas Cost, shall be adjusted at the beginning of each Month beginning on the Effective Date by an amount attributable to the change in Fuel Gas Cost posted by Inside FERC during the current Month of actual delivery hereunder, and compared to the Base Rate, all as more fully described in Appendix 1 hereto. The Base Rate for such Fuel Gas Cost shall be equal to $ ** per MMBtu, and the Efficiency Factor applicable thereto shall be as set forth in Appendix 1. If the Fuel Gas Cost is ** in any Month, then the Fuel Gas Adjustment as described in this Subsection A ** .

B.

Fractionator Electrical Power Adjustment.     The Base Purchase Differential, insofar as it is composed of the actual electrical power costs for Buyer's Fractionator, shall be adjusted at the beginning of each Month beginning on the Effective Date by an amount attributable to the change in Buyer's actual electrical power costs incurred at the Fractionator during the Month prior to the Month in question, and compared to the Base Rate, all as more fully described in Appendix 1 hereto. The Base Rate for actual electrical power costs applicable to the Fractionator shall equal to $ ** per KWH, and the Efficiency Factor applicable thereto shall be as set forth in Appendix 1. If the actual electrical power costs for the Fractionator is ** for the Fractionator's electrical power in any Month, then the electrical power Adjustment as described in this Subsection B ** .

C.

Gathering System Electrical Power Adjustment.     The Base Purchase Differential, insofar as it is composed of the actual electrical power costs for Buyer's or its Affiliate's pipeline gathering system. shall be adjusted at the beginning of each Month beginning on the Effective Date by an amount attributable to the change in Buyer's actual electrical power costs applicable to such gathering system incurred during the Month prior to the Month in question, and compared to such Base Rate, all as more fully described in Appendix 1 hereto. The Base Rate for electrical power costs applicable to such gathering system shall equal to $ ** per KWH, and the Efficiency Factor applicable thereto shall be as set forth in Appendix 1. If the actual electrical power costs for such gathering system is ** for said gathering system in any Month, then the electrical power Adjustment as described in this Subsection C ** .

D.

Adjusted Base Differential.     The Base Purchase Differential, as adjusted in accordance with Subsections A, B and C above, shall be referred to herein as the "Adjusted Base Differential."

7.      Quality Adjustment Fees.     In addition to the Adjusted Base Differential specified above, Seller shall pay Buyer the quality adjustment fees specified below.

A.

CO2 Quality Adjustment Fees .    Buyer shall deduct from the payments due Seller hereunder a CO2 quality adjustment fee ("CO2 Quality Adjustment Fee") if the CO2 Content (defined below) reaches or exceeds the levels hereinafter set forth in the table below. For purposes of determining the CO2 Quality Adjustment Fees. the term "CO2 Content" shall mean the liquid volume percentage ratio of carbon dioxide (CO2) to the ethane contained in the NGL's delivered hereunder at the Delivery Point. If Seller tenders NGL's to Buyer with a CO2 Content greater

7


than the limit set forth in Exhibit Y at the Delivery Point, Buyer shall have no obligation to accept such NGL's.

CO2 Content

 

CO2 Quality Adjustment Fee, per Barrel
of NGL's delivered hereunder

**

 

**

B.

Excess Methane Quality Adjustment Fees .    If the ratio of the methane to the ethane delivered hereunder in the NGL's is greater than ** percent ( ** %) on a liquid volume basis, then Buyer shall deduct from the payments due Seller hereunder an Excess Methane Quality Adjustment Fee equal to ** per Barrel of NGL's delivered at the Delivery Point. If Seller tenders NGL's to Buyer with a methane to ethane ratio of ** or more, Buyer shall have no obligation to accept such NGL's.

C.

Calculation of Quality Adjustment Fees.     If this Agreement is amended to add additional plants, then all quality adjustment fees payable hereunder shall be calculated and determined on a plant-by-plant basis, rather than based upon the aggregate NGL's delivered hereunder from all plants whose NGL's are dedicated for delivery under this Agreement.

8.      Alternative Connections .    Notwithstanding anything to the contrary contained herein, if the Plant is shut down or the natural gas and NGL's previously being processed in the Plant are diverted to another gas plant(s), Buyer (or its Affiliate) shall have the right, at its option, to connect the other gas plant(s) at issue in order to receive the NGL's Seller or its Affiliates Own or Control that would have otherwise been extracted at the Plant. In the event of such a diversion, Seller shall, within thirty (30) Days prior to such diversion, notify Buyer of the diversion. If Buyer wishes to exercise its option, it shall so notify Seller, within thirty (30) Days of its receipt of Seller's notice, of Buyer's intent (or its Affiliate's) to so connect to the new gas plant(s), and thereafter shall, at Buyer's (or its Affiliate'


 
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