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EXHIBIT 10.9(a)
GAS PURCHASE CONTRACT
Between
CONSUMERS POWER COMPANY
As Buyer
and
NORTHERN MICHIGAN EXPLORATION COMPANY
As Seller
December 1, 1985
PI-216-AT
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TABLE OF CONTENTS
ARTICLE PAGE
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I. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. Seller's Reservations . . . . . . . . . . . . . . . . . . . . . . . . . . 4
III. Commitment of Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
IV. Determination of Reserves . . . . . . . . . . . . . . . . . . . . . . . . 6
V. Quantity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
VI. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
VII. Delivery Point - Liability . . . . . . . . . . . . . . . . . . . . . . . . 14
VIII. Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
IX. Quality of Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
X. Delivery Pressure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
XI. Measurement and Testing . . . . . . . . . . . . . . . . . . . . . . . . . 21
XII. Warranty of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
XIII. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
XIV. Billing and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
XV. Conditions of Connection . . . . . . . . . . . . . . . . . . . . . . . . . 27
XVI. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
XVII. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
XVIII. Laws and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
XIX. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
XX. Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
XXI. Transportation of Liquids . . . . . . . . . . . . . . . . . . . . . . . . 34
XXII. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Exhibit "A"
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GAS PURCHASE CONTRACT
THIS CONTRACT made and entered into as of, and effective the first day
of December 1985 by and between NORTHERN MICHIGAN EXPLORATION COMPANY, a
Michigan corporation, hereinafter referred to as Seller, and CONSUMERS POWER
COMPANY, a Michigan corporation, hereinafter referred to as Buyer:
W I T N E S S E T H :
WHEREAS, Seller owns certain oil and gas leases on property situated in
the northern portion of the Southern Peninsula of Michigan within the Contract
Area as described on Exhibit "A" hereto and desires to sell certain gas which
has been or may be developed thereon, in accordance with the terms and
conditions hereof; and
WHEREAS, Buyer, a public utility engaged in the distribution and sale of
gas within the State of Michigan, desires to purchase gas that may be produced
from Seller's leases within said Contract Area;
NOW, THEREFORE, in consideration of the covenants and promises of each
as set forth herein, the parties agree as follows:
ARTICLE I
Definitions
1. The term "lease" shall mean any written instrument which gives
Seller the rights to drill for, produce, and dispose of gas in, under, and from
the lands described therein.
2. The term "gas" means all elements, compounds, and mixtures
thereof which are contained in the effluent produced from a well and which
remain in the vapor phase when produced at the mouth of the well or from a lease
separator.
3. The term "gas well gas" shall mean gas produced from a well
classified as a gas well by the regulatory agency having jurisdiction.
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4. The term "oil well gas" shall mean gas produced from a well
classified as an oil well by the regulatory agency having jurisdiction.
5. The term "reserves," unless the context makes evident another
intended meaning, shall mean that quantity of gas underlying the acreage
attributable to each well, which may reasonably be expected to be recovered and
delivered under the terms of this Contract plus the volume of gas which has
theretofore been delivered by Seller from such well to Buyer.
6. The term "Contract Area" shall mean that area encompassed by the
description set forth on Exhibit "A", as it may be revised from time to time as
hereinafter provided.
7. The term "contract year" shall mean the calendar year; except that
the first contract year shall commence on the date of this Contract and shall
end on December 31 of the year in which this Contract is dated.
8. The term "month" shall mean the period of time beginning at 7:00
a.m. Eastern Standard Time on the first day of a calendar month and ending at
7:00 a.m. Eastern Standard Time on the first day of the next succeeding calendar
month.
9. The term "day" shall mean a period of twenty-four (24) hours
beginning at 7:00 a.m. Eastern Standard Time of one calendar day and ending at
7:00 a.m. Eastern Standard Time on the next succeeding calendar day.
10. The term "cubic foot of gas" shall denote the unit of gas
measurement hereunder and shall mean a cubic foot of gas at an absolute pressure
of fifteen and twenty-five thousandths (15.025) pounds per square inch at a
temperature of sixty degrees Fahrenheit (60 degrees F).
11. The term "deliverability" is used as a measure of a well's
productivity and shall mean the average quantity of gas, per twenty-four-hour
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period, which a well being tested for deliverability at a time agreed to by
both parties, produced during a seventy-two-hour period of continuous delivery
into Buyer's pipeline operating at the then existing pipeline pressure not to
exceed one thousand four hundred forty (1440) psig.
12. The term "Mcf" shall mean one thousand (1,000) cubic feet.
13. The term "Btu" shall mean British thermal unit.
14. The term "Kalkaska Plant" shall mean the gas processing plant
located in Xxxxxxx 00, Xxxxxxxx 00 Xxxxx, Xxxxx 0 Xxxx, Xxxxxxxx Xxxxxx,
Michigan, and operated by Amoco Production Company as of the date of this
Contract.
15. The term "Plant Owner" means an owner of the "Kalkaska Plant" as
described in the Kalkaska Plant Processing and Operating Agreement dated
November 15, 1974.
16. The term "tender of gas" or like expression shall be understood
to mean the notice by Seller to Buyer that Seller has gas available for delivery
at the point of delivery specified in the notice. A notice of completion and
request for connection, for instance, would constitute a "tender." Such
one-time notice to Buyer shall constitute a continuous tender of such gas unless
and until Seller shall give Buyer written notice to the contrary.
17. The term "Common Line" means that certain wet header gas
transmission line (beginning at the outlet side of the purchase meters used to
measure the gas entering said line) and any extensions thereof jointly used by
Buyer and Michigan Consolidated Gas Company.
18. The term "Common Delivery Point" means the terminus of the Common
Line situated in Section 31, Township 27 North, Range 7 West, Kalkaska Township,
Kalkaska County, Michigan.
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19. The term "psig" shall mean pounds per square inch gauge.
20. The term "psia" shall mean pounds per square inch absolute.
ARTICLE II
Seller's Reservations
1. Seller reserves and excepts from the terms of this Contract the
following:
(a) All oil and condensate separated and saved by Seller.
(b) Liquefiable hydrocarbons subject to Seller's extracting
or arranging for the extraction thereof.
(c) Nonhydrocarbon substances subject to Seller's contracting
or arranging for the extracting thereof.
(d) Gas for development and field operations on any of
Seller's acreage, including fuel for the operation of compression
facilities by Seller or fuel which Seller may elect to furnish or sell
to drilling contractors for fuel in drilling on Seller's acreage.
(e) Gas for repressuring, pressure maintenance, cycling, gas
lift in a closed system, and the use of gas as a drilling fluid.
(f) Gas which Seller is obligated to furnish lessors under
leases covering acreage committed hereto.
(g) Gas attributable to any acreage acquired by Seller and
which is subject to any obligation or reservation made by a third party
for the purchase and sale of such gas.
Seller's right to separate and extract liquefiable hydrocarbons and
nonhydrocarbon substances is subject to the provisions of Article XX hereof.
2. Seller also reserves to itself the following:
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(a) The right to operate its property free from any control
by Buyer in such manner as Seller, in its sole discretion, may deem
advisable, including, without limitation by enumeration the right to
drill new xxxxx, to test xxxxx, to repair and rework xxxxx, and to
abandon any well and the right to renew, extend, release, assign,
surrender or permit to expire any lease as Seller deems best in its
sole and exclusive discretion.
(b) The right to unitize any of its leases with other
properties of Seller and of others in such manner as to protect Buyer's
rights hereunder, in which event this Contract will cover Seller's
interest in the unit and gas attributable thereto, to the extent that
such interest is derived from leases committed hereunder. The term
"unit" as used in this subparagraph shall mean any unit recognized by
the state regulatory agency having jurisdiction or other pooling of
acreage not requiring recognition by a regulatory agency in which two
(2) or more producers contribute acreage and each producer owns an
undivided interest in the total acreage contributed, such as
working interest units, areas of mutual interest, and joint exploration
and development areas.
ARTICLE III
Commitment of Gas
1. Seller commits to the performance of this Contract all gas
reserves hereafter produced from or attributable to the well unit(s) described
on Exhibit "A", as said Exhibit may be amended from time to time, attributable
to any interest in such gas reserves now or hereafter owned by Seller.
2. Seller, with Buyer's written concurrence, may add well units to
this Contract, provided that such units lie within Alpena, Cheboygan,
Montmorency
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or Presque Isle Counties, Michigan. If Seller elects to so add well units to
this Contract, Seller shall prepare and submit to Buyer a description of the
additional units and the written acceptance by Buyer of the document containing
such description shall constitute Buyer's written concurrence, and thereupon
Exhibit "A" to this Contract shall be deemed to have been amended to reflect
the additional units.
3. The gas reserves discovered in well units described on Exhibit
"A", or any well units added to this Contract pursuant to Section 2 above, shall
be determined in accordance with the provisions of Article IV hereof.
ARTICLE IV
Determination of Reserves
1. Seller shall, promptly after the execution hereof, make available
to Buyer such basic noninterpretive information and data in Seller's possession
as may reasonably be required by Buyer for the purpose of estimating the amount
of Seller's reserves attributable to each well unit then subject to this
Contract. Upon receipt of such information and data, Buyer shall promptly
estimate the amount of such reserves attributable to each such well unit and
shall furnish to Seller within thirty (30) days after receipt of said basic data
a written statement thereof which, after agreement by Seller, shall constitute
the original determination of reserves for such well unit for the purpose of
computing the takes therefrom under this Contract. Seller shall also make
available, upon request from Buyer, such information and data in Seller's
possession as may reasonably be required by Buyer to estimate the amount of oil
well gas available hereunder in each oil reservoir or pool covered by this
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Contract. All information furnished by Seller to Buyer pursuant to this
paragraph shall be treated and held as confidential by Buyer and shall not be
disclosed to others without Seller's written permission.
2. After the date of initial deliveries hereunder, Buyer may make,
or Seller may request Buyer to make, at reasonable intervals, but not more often
than once every two (2) years, a redetermination of reserves attributable to any
or all of the gas well units covered by this Contract. When a new gas well has
been completed, Seller within thirty (30) days after the completion thereof
shall furnish basic data as hereinbefore provided for other xxxxx and Buyer
shall calculate reserves attributable to such new well unit and shall furnish
Seller within thirty (30) days after the receipt of such data a written
statement of Buyer's estimate of reserves for such well unit. Whenever a
redetermination of reserves is made, such redetermination shall supersede the
previous determination for the well unit(s) affected and, beginning with the
first month after the date of such redetermination, shall be used in computing
the takes of gas well gas hereunder.
3. A written statement of each determination of reserves made by
Buyer (including also each redetermination made pursuant to Paragraph 2 above)
shall be furnished by Buyer to Seller after the same is made, and, if Seller
fails to give Buyer written notice that Seller does not agree with such
determination within thirty (30) days after Seller's receipt thereof, it shall
be conclusively presumed that Seller concurs therein. If, within this period of
time, Seller notified Buyer in writing that it does not agree with such
determination, Buyer and Seller together shall estimate the amount of reserves
for the purpose of a determination hereunder. If, within thirty (30) days after
Buyer's receipt of such notice, Buyer and Seller are unable to agree upon the
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amount of reserves for the purpose of determination hereunder, such amount
shall be determined by arbitration in the following manner: Upon either
party's giving notice in writing to the other of election to arbitrate, Buyer
shall appoint one arbitrator and Seller shall appoint one arbitrator, and the
two arbitrators so appointed shall select a third arbitrator. If either Buyer
or Seller shall fail to appoint an arbitrator within thirty (30) days after a
request for such appointment is made by the other party in writing, or if the
two arbitrators so appointed fail within thirty (30) days after the appointment
of the second of them to agree on a third arbitrator, the arbitrator or
arbitrators necessary to complete a board of three arbitrators shall be
appointed upon application by either party therefor, by the United States
District Judge, senior in point of service, of the Federal Judicial District in
which the property covered by this Contract is situated. In the event such
Judge should fail or refuse to act, then either party hereto may request the
American Arbitration Association to select the arbitrator or arbitrators to
complete the board of three. After three arbitrators are appointed pursuant to
the foregoing provisions of the Section, they shall meet, hear the parties with
respect to the matter of the said reserves, and arrive at a determination
thereof. Any determination agreed to in writing by at least two of the said
arbitrators shall be final and binding on the parties hereto. All arbitrators
appointed pursuant to this Section shall be qualified independent consultants
experienced in the oil and gas industry and competent to pass on the matter of
recoverable reserves. Buyer and Seller shall each bear its own costs of
arbitration hereunder, including the cost of appointing its own arbitrator,
provided, however, that the fees and expenses of the third arbitrator shall be
borne equally by Buyer and Seller.
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ARTICLE V
Quantity
1. Beginning seventy-five (75) days after Seller has received all
necessary governmental authority to connect its gas well(s) covered hereunder to
Buyer's purchase meter(s), or on such earlier date as actual deliveries may
commence, and during such contract year and each contract year thereafter Seller
agrees to sell and deliver, and Buyer agrees to purchase and receive from
Seller, or nevertheless to pay for if available in accordance with the terms
hereof but not taken, a quantity of gas referred to herein as the Annual
Contract Quantity, attributable to Seller's interest in each such well.
Although Buyer's obligation to take or pay for gas, if available, is on an
annual basis, it is desirable for administrative purposes to speak of a Monthly
Contract Quantity. The term "Monthly Contract Quantity" shall be adjusted where
appropriate as set out in Paragraph 5 hereof for the purpose of computing said
Annual Contract Quantity.
2. Subject to the deliverability qualification herein, Buyer shall
take from each gas well hereunder a Monthly Contract Quantity equal to the
number of days in the month times one million (1,000,000) cubic feet for each
four billion (4,000,000,000) cubic feet of reserves committed to Buyer
hereunder.
3. If, pursuant to a deliverability test made after proper notice
from one party hereunder to the other and agreed upon by the parties as to the
results thereof, the monthly deliverability of any gas well is established as
less than one hundred eleven percent (111%) of the Monthly Contract Quantity,
then effective with the first of the next accounting month, the Monthly Contract
Quantity shall be ninety percent (90%) of the deliverability established by such
test or by a later test for so long as such well's deliverability remains less
than one hundred eleven percent (111%) of its Monthly Contract Quantity as
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established by Paragraph 2 hereof. Either party shall have the right upon
request to secure deliverability tests at reasonable intervals, but not more
than three (3) times in any one year for any one gas well.
4. In the event regulatory authorities having jurisdiction of any of
the xxxxx subject hereto should provide for proration of the xxxxx by field
rules, then Buyer's Monthly Contract Quantity for take-or-pay purposes shall be
determined as follows:
(a) In the event the sum of the individual well allowables
of all of Seller's xxxxx in the prorated field for a given month is
less than the total of the Monthly Contract Quantity of the same
xxxxx would have been for such month in the absence of field rules,
then the allowable of each well shall become the Monthly Contract
Quantity for that month.
(b) In the event the sum of the individual well allowables
of all of Seller's xxxxx in the prorated field for a given month is
greater than the total of the Monthly Contract Quantities of the
same xxxxx, then the Monthly Contract Quantity for each such well for
that month shall be increased to the well's ratable share (based on
allowables) of the total of the Monthly Contract Quantity of all such
xxxxx that would have applied in the absence of field rules.
5. As hereinbefore stated, Buyer's annual take-or-pay obligation is
the sum of the Monthly Contract Quantities with adjustments where appropriate as
follows:
(a) In the event of Seller's inability to perform its
delivery obligation in accordance with a specific request from Buyer
because of a valid force majeure (on the part of either Seller or
Buyer), then Buyer's take-or-pay obligation for the time of the
force majeure shall be the
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volume, if any, which Seller was capable of delivering or Buyer of
taking, as the case may be, during the period of such force majeure.
(b) If for any reason other than force majeure Seller shall
fail to make available for delivery from any well the volume requested
therefrom by Buyer for a given month, the Buyer's take-or-pay
obligation for such month shall be ninety percent (90%) of the volume so
made available; provided that for take-or-pay purposes Seller's
obligation to deliver shall never be more than one hundred eleven
percent (111%) of the well's currently Monthly Contract Quantity, even
though Buyer may have requested a larger volume.
(c) If Buyer in any month makes a change in the previously
established Monthly Contract Quantity which would otherwise by
applicable to such well for such month, then Buyer as to any and all
such xxxxx shall furnish to Seller a statement not later than the
fifteenth (15th) day of the following month by which it notifies Seller
of such change and the reasons therefor.
6. In the event regulatory authorities having jurisdiction of any of
the xxxxx subject hereto should provide for proration from the xxxxx by field
rules, Buyer agrees that it is required to make nominations based on market
demand and it shall nominate for any twelve (12) month period volumes for all of
the prorated xxxxx connected to its system from the prorated field which in the
aggregate will be at least equal to the total Annual Contract Quantity which
would have applied to such xxxxx in the absence of such field rules.
Furthermore, Buyer agrees to make a "best efforts" attempt to secure allowables
under which the share allocated to xxxxx committed to it will in the aggregate
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be at least equal to the total Annual Contract Quantity which would have
applied to such xxxxx in the absence of such field rules.
7. As to each well subject hereto, Buyer shall have the right to
purchase and Seller shall have the obligation to deliver therefrom upon request
by Buyer any quantity of gas, subject to Seller's ability to so deliver, up to
one hundred eleven percent (111%) of such well's Monthly Contract Quantity.
Buyer shall have the additional right to purchase gas in excess of said one
hundred eleven percent (111%) to the extent that Seller is ready, willing, and
able to deliver such additional quantities.
8. (a) Buyer agrees to take gas from Seller's well in the same
ratable manner that it takes gas from xxxxx owned by others from whom Buyer
purchases or may purchase gas in the gas reservoirs in which Seller's
xxxxx are completed.
(b) Buyer shall increase takes beyond the Monthly Contract
Quantity, for which provisions are made herein, if necessary, in order to
maintain ratable production with takes by others from the same reservoir.
9. If the total volume of gas well gas actually purchased and taken
by Buyer during any contract year is less than the Annual Contract Quantity,
then within ninety (90) days following the end of such contract year, Buyer
shall pay Seller for any such deficiency. Interest shall accrue at the prime
interest rate, as established by the First National Bank of Chicago in effect at
the time of such deficiency, per annum from the date such deficiency payment is
due until paid. As to gas from any gas well paid for by Buyer but not taken,
Buyer shall have the right during the five (5) years immediately following the
year in which the deficiency was incurred to recoup the value thereof by taking
gas from such well, as makeup gas, from volumes in excess of the Annual Contract
Quantities.
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Any gas well gas taken as makeup gas shall be free of additional cost to Buyer,
except that Buyer shall pay Seller any tax reimbursement due under Article
XIII.
10. As to gas from oil xxxxx, Buyer agrees to purchase and take from
Seller, all of the oil well gas produced from each such well and tendered to
Buyer hereunder.
ARTICLE VI
Term
This Contract, subject to the right of cancellation herein provided,
shall be effective as of the day hereof through December 31, 1995 and shall
continue from year to year thereafter subject to cancellation by either party on
three (3) months' written notice given prior to December 31, 1995 or any
anniversary date thereof. If Seller uses gas committed hereunder for
repressuring or secondary recovery operations as provided for under Article II,
Paragraph 1, Subparagraph (e), the term of this Contract shall be extended, for
the properties involved in such repressuring or secondary recovery operations,
for a period of time equal to the time such operations were actually conducted.
ARTICLE VII
Delivery Point - Liability
1. The point of delivery for each well for gas sold hereunder shall,
at Seller's option, be at the inlet of Buyer's purchase meter which meter shall
be at a mutually agreeable location on the Common Line.
2. Title to gas shall pass from Seller to Buyer at the inlet of
Buyer's facilities at said point of delivery. Seller shall be in control and
possession of the gas delivered hereunder and responsible for any damage or
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injury caused thereby until the same shall have been delivered to Buyer, after
which delivery Buyer shall be deemed to be in exclusive control and possession
thereof and responsible for any injury or damage caused thereby, except as
otherwise provided for under Article XX.
ARTICLE VIII
Price
1. Subject to the other provisions hereof, the price to be paid by
Buyer to Seller for gas purchased and sold, or paid for when not taken as
provided in Article V hereof, shall be $2.85 per MMBtu, effective January 1,
1986 and said price shall thereafter be escalated at a rate of 2.5% semiannually
with such escalations to take effect on July 1 and January 1 of each year.
2. Seller or Buyer shall have the option to request a price
redetermination effective July 1, 1988 and biennially thereafter with the
redetermined price to be equal to the lower of: a) seventy-five percent (75%) of
the average price of one million (1,000,000) Btu of No. 6 Residual Oil for the
preceding six (6) month period ending with the prior April 30th, using the daily
prices reported by "Xxxxx'x Oilgram Price Report," U.S. Tank Car Truck Transport
Lots, Midcontinent, for both Detroit and Chicago; b) the highest price paid by a
public utility for Niagaran gas in the Northern Michigan Trend for gas of like
quality that is produced and sold on a Btu basis from a well pursuant to a gas
purchase Contract dated after January 1, 1986, having a term of at least three
(3) years that is on file with the Michigan Public Service Commission pursuant
to the requirements of MCLA 483.111; or c) the lowest delivered cost to
Consumers Power Company of gas acquired from outside the State of Michigan
pursuant to the terms of a tariff or order approved by the FERC or its
successor. The escalation
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provided for in Paragraph 1 of this Article VIII shall also apply to any
redetermined price.
3. If at any time it is determined that the marketability of the
subject gas is hampered in that the price on an MMBtu basis, payable under the
provisions of this Article VIII exceeds the cost of the gas component in the
commodity charge of the rate charged by any of Buyer's interstate pipeline
company suppliers (e.g., Trunkline Gas Company and Panhandle Eastern Pipe Line
Company) pursuant to a government approved tariff, then Buyer shall have the
option to limit the price paid hereunder to a level equal to such cost of gas
component. Such a limitation shall become effective provided that Buyer
notifies Seller in writing of such a marketing problem and furnishes Seller with
documentation to support same. If Buyer chooses to limit the price as herein
provided, Seller shall have the right to solicit offers from other pipeline or
distribution companies to purchase the gas at a higher price and, if Seller
notifies Buyer of a bonafide third party offer to purchase such gas at a higher
price, Buyer shall, within thirty (30) days thereafter. either agree to purchase
the gas at a price equal to that contained in the third party offer or release
its contractual claim to the gas.
4. Notwithstanding any of the above, in no event shall the total
remuneration per MMBtu herein provided exceed eighty percent (80%) of the
equivalent average price (rounded to the nearest $.001) of one million
(1,000,000) Btu of No. 6 Residual Oil, using the daily prices reported by
"Xxxxx'x Oilgram Price Report," U.S. Tank Car Transport Lots, Midcontinent, for
both Chicago and Detroit for the preceding six (6) months. For the purposes
hereof, a gallon of No. 6 Residual Oil shall be considered to contain one
hundred fifty thousand (150,000) Btu. Should "Xxxxx'x Oilgram Price Report" be
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discontinued, it is agreed that any other similar service may be used in its
place. Furthermore, the price shall in no event fall below $2.75 per MMBtu.
ARTICLE IX
Quality of Gas
1. All gas delivered by Seller under the terms of this Contract
shall conform to the following specifications:
(a) The gas shall be commercially free from dust, gum, gum
forming constituents, condensate and solids when delivered to Buyer.
(b) The gas shall not at any time have an oxygen content in
excess of one percent (1%) by volume and Seller shall make every
reasonable effort to keep the gas free of oxygen.
(c) The gas shall not contain more than one (1) grain of
hydrogen sulphide per one hundred (100) cubic feet. The hydrogen
sulphide content shall be determined by a Cadmium Sulphate, Xxxxxx
Titrator and/or a Xxxxxxxx quantitative test, or any other mutually
agreeable method.
(d) The gas shall not contain more than twenty (20) grains
of total sulphur per one hundred (100) cubic feet.
(e) The total gross heating value per cubic foot of gas shall
be not less than nine hundred fifty (950) Btu, however, it is agreed
that Buyer shall accept gas from individual xxxxx having a
heating value of less than nine hundred fifty (950) Btu per cubic foot
if the composite stream of gas in the Common Line immediately downstream
from the point of delivery, contains gas with a heating value of at
least nine hundred fifty (950) Btu per cubic foot. It is also agreed
that in similar manner Buyer will accept gas from individual xxxxx
having a hydrogen sulphide content in excess of
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one (1) grain per one hundred (100) cubic feet or in excess of twenty
(20) grains total sulphur per one hundred (100) cubic feet if said
composite stream at the point above described on the Common Line does
not contain more than one-fourth (1/4) grain of hydrogen sulphide or ten
(10) grains of total sulphur; provided, however, that in no event shall
any gas sold hereunder and delivered into a lateral owned by any third
party exceed one (1) grain hydrogen sulphide per one hundred (100) cubic
feet at the point of connection with said lateral. It is agreed that if
because of such relaxation of quality specifications as to individual
xxxxx, the gas in Seller's composite stream does not meet the
specifications hereinabove set forth for such composite stream, then
Buyer shall have the right to refuse to take such substandard gas from
any individual well or xxxxx so long as such composite stream would fail
to meet the specified standards.
(f) The term "total gross heating value per cubic foot" shall
mean the number of British thermal units, produced by the
combustion at constant pressure, of the amount of gas on a water-free
basis which would occupy a volume of one (1) cubic foot at a temperature
of sixty degrees Fahrenheit (60 degrees F) and at a pressure of
fifteen and twenty-five thousandths (15.025) psia, when the products
of combustion are cooled to the initial temperature of gas in air and
when the water formed by combustion is condensed to a liquid stage.
(g) The water content of the gas shall not exceed seven (7)
pounds per million cubic feet measured at fifteen and twenty-five
thousandths (15.025) psia and sixty degrees Fahrenheit (60 degrees F).
2. Should the gas offered for sale to Buyer from any well or other
delivery point fail at any time to conform to any of the specifications of this
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Article, Buyer subject to Xxxxxxxxx 0, Xxxxxxxxxxxx (e) of this Article IX may
notify Seller of any such failure and Seller shall make a diligent effort to
correct such failure in Seller's xxxxx so as to deliver gas conforming to the
above specifications. If Seller is unable to deliver gas conforming to the
above specifications by treatment consistent with prudent operations and by
means which are economically feasible in Seller's opinion, Buyer may at its
option, accept delivery of the gas and treat the gas so that it will conform to
the above specifications or Buyer may refuse to take such gas and in the event
of such refusal Buyer shall not be obligated to attribute volumes to such well
or other delivery point for take-or-pay purposes. In the event Buyer elects to
accept delivery of gas not conforming to the specifications herein and to treat
said gas so it will conform to the specifications herein, Seller shall
reimburse Buyer for the cost, including equipment, for treating said gas, but
not to exceed seventy-five percent (75%) of the sum received by Seller for such
gas. In the event both Seller and Buyer elect not to treat gas not meeting the
quality specifications herein, that gas and that gas only, shall be released
from commitment under the terms hereof.
3. It is agreed that if Seller should elect (subject to Article XX
hereof) to process or have processed gas sold hereunder, the residue gas
delivered from Seller's or other processing facility shall not contain more than
one-fourth (1/4) grain of hydrogen sulphide per one hundred (100) cubic feet.
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ARTICLE X
Delivery Pressure
1. Seller shall deliver gas well gas at a pressure sufficient to
allow the gas to enter Buyer's facilities at the delivery points hereunder,
provided Seller shall not be obligated to deliver gas well gas to Buyer at a
pressure in excess of one thousand four hundred forty (1440) psig. If the well
or xxxxx completed in any gas well gas reservoir are unable to produce the
Monthly Contract Quantity applicable to such reservoir against the pressure
prevailing in Buyer's pipelines and Seller elects to install compression
facilities, then, except as herein otherwise provided, Buyer agrees to reimburse
Seller: (a) six cents (6.00 cents) per MMBtu per stage of compression for gas
from a well that is compressed, such reimbursement will not, however, be made
with respect to monthly deliveries hereunder that are in excess of the monthly
contract quantity for the well unless the parties hereafter agree in writing to
the contrary.
2. Should Seller elect not to install compression facilities in any
well or xxxxx completed in any gas well gas reservoir when the pressure in the
reservoir is inadequate to allow delivery of the gas into Buyer's facilities,
then the Buyer shall have the right to install the necessary compression
facilities. If neither the Seller nor the Buyer makes such election, then such
well or xxxxx shall be released from this Contract.
3. Seller shall deliver the oil well gas at a pressure sufficient to
enter Buyer's facilities but not to exceed one thousand four hundred forty
(1440) psig. If Seller compresses oil well gas or flash vapors to effect
deliveries thereof to Buyer, Buyer agrees to reimburse Seller six cents (6.00
cents) per MMBtu on volumes for such compressed gas, which rate shall be
increased by two-tenths
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cent (.20 cent) on January 1, 1986, and each January 1 thereafter. Seller
agrees to furnish fuel for such compression at no cost or expense to Buyer.
4. If only a portion of the gas sold to Buyer by Seller from any
given well is compressed pursuant to this Article X, Seller shall measure the
gas from said well actually compressed and shall, consistent with the foregoing,
invoice Buyer therefor on or before the twentieth (20th) day of the month
following the month in which such gas was actually compressed. If all gas sold
to Buyer by Seller from any given well is compressed pursuant to this Article X,
Seller shall furnish Buyer with the name of the well on or before the twentieth
(20th) day of the month following the month in which such compression actually
begins, and insofar as gas xxxxx are concerned, Seller shall at the same time
advise Buyer of the number of stages of compression used. If additional stages
of compression later become necessary, Seller shall advise Buyer in writing of
such. Under no circumstances shall the Buyer be obligated to reimburse the
Seller for compression prior to the written notification and the actual
commencement of compression.
5. Buyer, when operating its gathering system in conformance with
the pressure conditions herein specified, shall not be obligated to attribute
volumes for take-or-pay purposes to any well or other delivery point in excess
of the volumes made available at sufficient pressures to enter Buyer's lines at
the point of delivery.
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ARTICLE XI
Measurement and Testing
1. Buyer shall install, maintain, and operate, at no expense to
Seller, at or near each point of delivery hereunder, equipment of a character
and design acceptable to Seller and perform all tests required to accomplish the
measurement of volumes, temperatures, specific gravity and heating values. Such
volume measuring equipment shall be installed, maintained, and operated in
accordance with ANSI/API Standard 2530, dated 1978, of the American National
Standards Institute, as amended from time to time, and the volume of gas
delivered hereunder and measured by such orifice meters shall be computed in
accordance with said report.
2. The temperature of the gas passing through each orifice meter
shall be determined by means of a recording thermometer installed by Buyer so
that it will properly record the temperature of the gas through the meter. The
arithmetical average of temperature recorded during the time gas was flowing on
any day shall be used in computing gas volumes for that day.
3. The specific gravity of the gas at the points of delivery shall
be determined by Buyer at least once each six (6) calendar months, or as often
as may be found necessary in practice, by a method of test generally acceptable
to the industry. Whenever a recording gravitometer is used, the arithmetical
average of the gravity recorded during the time gas was flowing on any day shall
be used in computing gas volumes for that day.
4. Correction shall be made by Buyer for deviation from Xxxxx'x Law,
and the factors for making such correction shall be obtained from procedures
contained in the aforesaid Standard 2530, or from such other source as may be
agreed upon by the parties hereto.
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5. Unless otherwise agreed upon by the parties hereto, the
atmospheric pressure shall be assumed to be fourteen and four-tenths (14.4) psia
for the purpose of calculating the volumes of gas delivered hereunder.
6. Buyer shall test and calibrate all of Buyer's meters and
instruments used in measuring or testing the gas delivered hereunder at least
once each calendar month, or at less frequent intervals agreed to by the parties
on meters at specific delivery points. Any measurement equipment found by
calibration test to be registering inaccurately shall be immediately restored to
accurate operation. No correction shall be made for past deliveries where
inaccuracies are two percent (2%) or less, but if such equipment is found to be
out of service or registering inaccurately by more than two percent (2%), the
registrations of such equipment shall be disregarded for any period known or
agreed upon, or, if such period is not known or agreed upon, for a period
extending back one-half (1/2) of the time elapsed since the last calibration
test, or sixteen (16) days, whichever is shorter. The volume of gas delivered
during such period shall be estimated by using the first of the following
methods which is feasible:
(a) by using the registration of check measuring equipment
if installed and registering accurately;
(b) by correcting the error, if the extent of the error is
ascertainable by calibration test or mathematical calculation; or
(c) by estimation, based on deliveries under similar
conditions when the equipment was registering accurately.
7. Buyer shall determine the gross heating value in Btu per cubic
foot of gas, at each delivery point hereunder at such intervals as in Buyer's
opinion are required to determine the heating value hereunder but such intervals
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shall be of such duration as is necessary to determine accurate values to be
used in Article VIII, Paragraph 1.
8. Buyer shall make such test for determining hydrogen sulphide
content, total sulphur content, oxygen content, and carbon dioxide content at
such intervals as in Buyer's opinion are required to determine that the gas
meets the applicable quality specifications hereunder.
9. Seller may, at its option and expense, install and operate
measurement and testing equipment to check Buyer's equipment, but measurement
and testing of gas for the purpose of this Contract shall be by Buyer's
equipment, except as hereinabove specifically provided to the contrary. Any
such check measurement or testing equipment installed by Seller shall be so
installed and operated as not to interfere with the operation of Buyer's
equipment.
10. Seller shall have the right to inspect, at all reasonable times,
the measurement and testing equipment, charts, and other measurement data of
Buyer, and Buyer shall have a similar right with respect to Seller's equipment,
charts, and data, but the reading, calibration and adjustment of such equipment
shall be performed only by the owner thereof. Buyer shall give Seller at least
ten (10) days' notice of any test of Buyer's measuring or testing equipment in
order that Seller may have a representative present to witness the tests, and
Buyer shall have the right to be present at the xxxx Xxxxxx'x check measuring or
testing equipment is adjusted or calibrated.
11. If Seller shall request a special test of any of Buyer's measurement
equipment or equipment for testing the quality of gas sold hereunder, Buyer
shall make such test, and if the equipment in question is registering correctly,
the actual expenses of such test shall be borne by Seller; otherwise, the actual
expenses shall be borne by Buyer.
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12. All test data, charts, and similar records shall be preserved by
the owners thereof for a period of at least two (2) years.
ARTICLE XII
Warranty of Title
1. Seller hereby warrants title to the gas sold by it hereunder and
its right to sell the same, and warrants that all such gas is owned by it free
from all liens, encumbrances and adverse claims. Seller shall indemnify, save
and hold Buyer free and harmless from all suits, actions, debts, accounts,
damages, costs, losses and expenses arising from or out of adverse claims of any
and all persons to the gas sold by Seller hereunder.
2. With respect to each lease covered by this Contract, it is agreed,
notwithstanding anything herein contained to the contrary, that, in the event it
shall be determined that Seller owns less than the interest in such lease
described in this Contract as being owned by Seller and thereby Seller shall be
deemed to have breached any of the warranty provisions of this Contract, then
from and after such determination, this Contract shall be deemed to have been
amended so as to cover and include the interest in such lease which is, in fact,
owned by Seller.
ARTICLE XIII
Taxes
1. Seller shall bear the economic burden of all taxes and assessments
imposed on the date hereof with respect to the gas delivered hereunder prior to
its delivery to Buyer at the point of delivery specified herein as well as those
imposed incident to the sale or delivery of such gas to Buyer at the point of
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delivery, and Buyer shall bear the economic burden of all taxes and assessments
imposed upon Buyer with respect to the gas delivered hereunder after its
receipt by Buyer. Neither party shall be responsible or liable for any taxes
or other statutory charges levied or assessed against any of the equipment of
the other party used for the purpose of carrying out the provisions of this
Contract. As to taxes to be borne by Seller as above set out, but for which
Buyer makes payment on Seller's behalf, Buyer may deduct such payment from
amounts due Seller hereunder.
2. Any sales, transactions, occupation, service, production,
severance, gathering, transmission, ecological or environmental, export or
excise tax, assessment or fees (other than franchise, capital stock, ad valorem,
excess profits or income taxes or transfer or sales taxes levied incident to the
sale of the leases or gas in place), levied, assessed, fixed or collected, by
the United States or any state or other governmental authority and assessments
or taxes which are of a similar nature or equivalent in effect, in addition to
or greater than those, if any, being levied, assessed, fixed or collected on the
date of this Contract in respect of or applicable to the gas to be delivered by
Seller to Buyer hereunder and which Seller may pay or be liable for in its own
account or that of a royalty owner, overriding royalty, production payment or
similar interest owners during any month, either directly or indirectly through
any obligations to reimburse others, are hereinafter collectively referred to as
"additional tax," to the extent (and only to the extent) that the aggregate
amount of all such taxes per Mcf of gas exceeds the aggregate amount of all such
taxes per Mcf of gas being levied, assessed, fixed or collected on the date of
this Contract in respect of or applicable to the gas to be delivered by Seller
to Buyer hereunder. Buyer shall, except as herein otherwise provided, reimburse
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Seller for one hundred percent (100%) of every additional tax paid by Seller
attributable to the gas sold by Seller to Buyer hereunder; such reimbursement
will not, however, be made with respect to monthly deliveries from any well
hereunder that are in excess of the monthly contract quantity for the well
unless the parties hereafter agree in writing to the contrary.
3. Anything hereinabove to the contrary notwithstanding, Buyer shall
never be liable for and shall never be obligated to reimburse Seller for any tax
levied or assessed upon or with respect to oil, condensate, liquefiable
hydrocarbons or other liquids, helium or nonhydrocarbon substances which may be
extracted or separated by Seller from gas delivered to Buyer hereunder, prior to
such delivery, or upon or with respect to the process of extracting or
separating any such products or substances from such gas or of handling,
selling, transporting or otherwise dealing in or with any of such products or
substances, all of which taxes shall be borne and paid solely by Seller and if
paid by Buyer shall be reimbursed by Seller to Buyer.
ARTICLE XIV
Billing and Payment
1. Buyer, not later than the twenty-fifth (25th) day of each
calendar month, shall furnish Seller a detailed statement showing the total
quantity of gas delivered by Seller to Buyer hereunder during the preceding
calendar month and the amount due and payable by Buyer therefor, and
simultaneously shall make payment to Seller in such amount. Upon request, Buyer
shall furnish Seller charts and measurement data supporting such statement.
2. Should Buyer fail to pay any amount due Seller under the
provisions of this Contract when same is due, interest shall accrue at the prime
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interest rate, as established by the First National Bank of Chicago in effect
at the time of any such deficiency, per annum from the date payment is due
until paid. If such default in payment continues for sixty (60) days, Seller
may, in addition to all other rights and remedies, suspend deliveries of gas
hereunder and terminate this Contract. The foregoing provisions in this
Paragraph 2 shall not apply if Buyer's refusal to pay is the result of a
bonafide dispute as to the accuracy of any statement and Buyer pays all amounts
not in dispute until final determination of the dispute.
3. Each party shall have the right at reasonable hours to examine
the books, records and charts of the other party to the extent necessary to
verify the accuracy of any statement, charge, or computation made pursuant to
the provisions of any article hereof. If any such examination reveals any
inaccuracy in any billing theretofore made, the necessary adjustment in such
billing and payment shall be promptly made, provided that no adjustment for any
billing or payment shall be made after the lapse of two (2) years from the
rendition thereof unless challenged prior thereto.
ARTICLE XV
Conditions of Connection
1. Buyer and Seller agree to attempt to secure with due diligence
any necessary permits or authorizations allowing Seller to connect each well
hereunder to Buyer's facilities where Buyer will commence purchasing. As to all
xxxxx subject hereto, in the event that any such permit or authorization to
allow such connection has not been issued within ninety (90) days after Seller
has notified Buyer of the completion of each such well, either party may cancel
this Contract as to any such well by giving, after the expiration of said ninety
(90)
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days, thirty (30) days' written notice to the other. Acceptance of such
permits or authorizations containing burdensome conditions shall be within the
sole discretion of the party to whom issued; except that such party agrees that
the other party shall promptly be furnished a copy of all such permits or
authorizations and that the applicant party shall not accept such permits or
authorizations that the other party deems to contain conditions which would
deny such other party rights or impose on it burdens not provided for herein.
2. Upon issuance of the permits or authorizations provided for in
Paragraph 1 above, Seller shall connect all xxxxx completed as producers in the
following manner:
Seller shall use its best efforts to complete connections as
soon as possible, but in no event later than seventy-five (75) days
after the granting of said permit or authorization. If any well or
xxxxx are not connected within this period of time, either party may
cancel this Contract as to any such well after giving thirty (30) days'
written notice to the other party.
ARTICLE XVI
Assignment
This Contract shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns; provided that no
conveyance, transfer of any interest, or change of ownership by either party
shall be binding upon the other party until such other party has been furnished
with a written notice evidencing such conveyance, transfer of interest, or
change of ownership and approved such assignment, approval of which will not be
unreasonably withheld, it being understood that this provision in no way
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restricts the rights of Seller as to the transfer or assignment of Seller's
leases or property thereon as provided in Xxxxxxxxx 0, Xxxxxxxxxxxx (x) of
Article II hereof.
ARTICLE XVII
Notices
1. Any notice, request, demand, statement, or payment provided for
in this Contract shall be sent to the parties hereto at the following addresses:
BUYER: Consumers Power Company
Att: Director of Gas & Oil Supply
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
SELLER: Northern Michigan Exploration Company
P. O. Xxx 0000
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
2. Either party shall have the right by prior written notice to the
other to change the address or addresses given above at any time.
ARTICLE XVIII
Laws and Regulations
This contract, insofar as it is affected thereby, shall be subject to
all valid and applicable laws, orders, rules and regulations of Federal and any
other governmental authorities having jurisdiction. Any party hereto shall have
the right to contest the validity of any such law, order, rule or regulation,
and the acquiescence therein or compliance therewith for any period of time
shall not be construed as a waiver of such right. This agreement shall be
governed by and construed in accordance with the laws of the State of Michigan.
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ARTICLE XIX
Force Majeure
1. If either Buyer or Seller is rendered unable, wholly or in part,
by force majeure or any other cause of any kind not reasonably within its
control, to perform or comply with any obligations or conditions of this
contract, such obligations or conditions shall be suspended during the
continuance of the inability so caused and such party so rendered unable shall
be relieved of liability and shall suffer no prejudice for failure to perform
the same during such period, it being understood that Buyer's minimum annual
obligation to take or pay for gas hereunder shall be reduced by the volume which
Buyer, under normal circumstances, would have taken from the well during the
period of time the inability exists; provided, obligations to make payments then
due for gas delivered hereunder shall not be suspended, and in other cases, the
cause of suspension (other than strikes, lockouts, or labor disputes) shall be
remedied insofar as possible with reasonable dispatch. Settlement of strikes,
lockouts, or labor disputes shall be wholly within the discretion of the party
having the difficulty.
2. The term "force majeure" shall include, without limitation by the
following enumeration, acts of God and of the public enemy, unseasonal weather,
freezing of xxxxx or lines of pipe, repairing or altering machinery or lines of
pipe, fires, accidents, breakdowns, strikes, labor disputes, and any other
industrial, civil or public disturbance, inability to obtain materials,
supplies, rights-of-way on customary terms, permits, or labor, any act or
omission by parties not controlled by the party having the difficulty, any act
or omission (including failure to take gas) of a purchaser of gas from Buyer
which is excused
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by any event or occurrence of the character herein defined as constituting
force majeure, failure of gas supply or markets, and any laws, orders, rules
regulations acts, or restraints of any governmental body or authority, civil or
military, or any other causes beyond the control of the parties hereto.
ARTICLE XX
Processing
1. Seller shall not process gas covered hereunder (other than in
standard field separation facilities) prior to delivery of such gas to Buyer at
the delivery points provided herein.
2. If Seller is not now a Plant Owner in the Kalkaska Plant, as
described in the Plant Processing and Operating Agreement dated November 15,
1974, between Consumers Power Company and Amoco Production Company, et al, Buyer
hereby grants Seller an option to participate as a Plant Owner with respect to
the gas covered by this agreement, subject to the following conditions:
(a) Seller may exercise such option by giving written notice
to Buyer and Amoco Production Company not earlier than the date of
initial delivery of gas under this Gas Purchase Contract with Buyer.
(b) Seller's option shall not be exercised later than one (1)
year from the date of initial delivery of gas under this Gas Purchase
Contract with Buyer.
(c) The acceptance and ratification by Seller of the Plant
Processing and Operating Agreement dated November 15, 1974, between
Buyer and Amoco Production Company, et al.
(d) Seller's acceptance of and consent to be bound by the
Allocation Agreement by and between Buyer, Michigan Consolidated Gas
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Company, and the principal producers of gas sold to each covering the
division of components at the Common Delivery Point of the gas and
liquids transported in the Common Line, insofar as the provisions
thereof affect Seller's rights hereunder.
(e) Seller's acceptance of and consent to be bound by the
Transportation Agreement by and between Buyer and Michigan Consolidated
Gas Company, insofar as the provisions thereof affect Seller's rights
hereunder; provided, however, if there is any conflict between said
Transportation Agreement and this Contract, the terms and provisions of
this Contract shall prevail.
3. If Seller is now a Plant Owner or if Seller subsequently becomes
a Plant Owner in the Kalkaska Plant in accordance with Paragraph 2 of this
Article, Buyer and Seller agree to the following:
(a) Seller agrees and consents to the Allocation Agreement
and the Transportation Agreement, referred to in Xxxxxxxxx 0,
Xxxxxxxxxxxx (x) and (e) of this Article, insofar as Seller's rights are
affected by such agreements with respect to the gas covered by
this Contract.
(b) Seller shall have the exclusive right to process all gas
sold to Buyer hereunder and Seller shall process such gas in
accordance with the Plant Processing and Operating Agreement referred to
in Paragraph 2, Subparagraph (c) of this Article subject to the
following:
(i) If at any time there is insufficient processing
capacity of a sustained nature in the Kalkaska Plant to process
any or all of Seller's gas covered by this Contract and the Plant
Owners of such plant have elected not to increase the capacity
thereof sufficiently to cover all or part of the gas covered by
this Contract,
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Seller shall have the right to process or have processed such gas
in any other gas processing plant near the Common Delivery Point.
Seller shall use its best efforts to limit the duration of such
processing arrangements, if possible, such that the gas covered
thereby will be available for processing in the Kalkaska Plant when
there is again adequate capacity therein. Seller shall promptly
notify Buyer and the operator of the Kalkaska Plant with respect to
such processing arrangements and advise of all necessary details
thereof.
(ii) If at any time after the Plant Owners of the
Kalkaska Plant have elected to increase the capacity of such
plant, Seller may temporarily process or have processed gas covered
by this Contract in any other gas processing plant near the Common
Delivery Point until there is capacity available in the Kalkaska
Plant.
(iii) The rights granted to Seller in Xxxxxxxxx 0,
Xxxxxxxxxxxx (x)(x) and (b)(ii) above in this Article are
subject to Seller receiving express written approval of the Plant
Committee, as defined in the Plant Processing and Operating
Agreement dated November 15, 1974 of the Kalkaska Plant to do so,
subject to necessary authorization, if any, from Plant Owners.
(iv) The provisions of the Plant Processing and
Operating Agreement shall apply at all times to the gas covered
by this Contract with respect to insufficient capacity in the
Kalkaska Plant except with respect to volumes of gas for which
processing arrangements have been made in another plant as above
provided.
(c) During any periods when Paragraph 3 of Article IX of the
Plant Processing and Operating Agreement is applicable and Buyer
elects not
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to bypass any or all of the gas well gas volumes covered hereby which
are in excess of the capacity of the Kalkaska Plant, Buyer's take-or-pay
obligation covered by Article V of this Contract shall be limited to the
gas well gas volumes hereunder actually processed in such plant for
Seller plus the volumes bypassed by Buyer, if any. Buyer's takes of gas
from Seller and all other producers from whom Buyer purchases gas in the
Contract Area shall be ratably apportioned with respect to volumes
processed and bypassed. Seller shall not have any right to process or
any interest in the liquefiable hydrocarbons or other constituents
contained in any gas volumes bypassed by Buyer.
(d) Seller shall have the right to process gas as above
provided and use gas for fuel for processing gas and other
purposes incident thereto; provided, however, that Seller shall
reimburse Buyer for fuel and shrinkage due to product extraction, and
other losses or uses of gas on the same basis (including taxes) which
Buyer purchases such gas hereunder, and provided further that Seller
shall be deemed to be in control and possession of the gas while it is
in the processing facilities and responsible for any damage or injury
caused thereby.
ARTICLE XXI
Transportation of Liquids
1. Arrangements and procedures acceptable to Buyer, Seller, Michigan
Consolidated Gas Company, and any other interested producers have been agreed
upon in the Allocation Agreement so as to provide for calculation and allocation
at the Common Delivery Point of line gain or loss and shrinkage of various
constituents of gas and liquid and liquefiable hydrocarbons injected into the
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Common Line by such respective parties. Buyer, insofar as it has the right to
do so, agrees that as long as this Contract, a Transportation Agreement and an
Allocation Agreement are in effect, and one or more processing plants are in
operation so as to permit continued processing of all the gas transported in
the Common Line, Seller shall have the right to introduce into the Common Line
the following liquids (herein called "Seller's Liquids") belonging to the
Seller:
(i) condensate or distillate produced from gas xxxxx
from which gas is sold to Buyer hereunder, provided that it is
separated from such gas by normal field separation facilities
prior to delivery of such gas to Buyer;
(ii) natural gasoline produced as a result of
compression of natural gas to be sold to Buyer hereunder, provided
that the compression facilities in which it is produced are situated
upstream of the delivery points hereunder; and
(iii) such other liquids produced from xxxxx from
which gas is sold to Buyer hereunder (and which are separated from
such gas prior to delivery of the gas to Buyer), other than crude oil,
and which will not interfere with any other gas operations in the
Common Line.
2. All Seller's Liquids shall be introduced at mutually agreeable
points downstream from gas purchase meters at rates which will not impair any
pipeline operations. Title to Seller's Liquids so introduced shall remain in
Seller, and Seller shall be responsible therefor, except that Buyer shall be
responsible and liable for any damages caused by said liquids when said damages
are the result of Buyer's or Michigan Consolidated Gas Company's negligence.
Seller's Liquids shall be transported to the Common Delivery Point at no cost to
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Seller; provided, however, that Seller shall reimburse Buyer promptly after
billing, for all operating expenses incurred by Buyer as a result of the
introduction of Seller's Liquids into the Common Line.
3. If, in the opinion of Buyer, any liquids are introduced into the
Common Line by Seller, at rates that will interfere with any gas operations or
cause any operating problems, Seller shall (upon written request made at any
time and from time to time by Buyer) immediately reduce the rates of
introduction of such Seller's Liquids as directed by Buyer. Such reduced rates
shall continue until Seller has submitted evidence satisfactory to Buyer that
increased rates of introduction of such Seller's Liquids will not interfere with
any gas operations or cause any operating problems. The consent by Buyer to any
such increased rates of introduction of Seller's Liquids shall not be deemed a
waiver by Buyer of its right, as above provided, to demand further reduction of
the rates of introduction of such Sellers Liquids. If any party or parties is
obligated by the Michigan Public Service Commission to levy any charge or fee
for the transportation of liquids so introduced into the Common Line or laterals
serving same, then Seller agrees it will either cease the introduction of
Seller's Liquids into such facilities or will pay such charge or fee to the
party or parties entitled thereto. It is expressly understood that Seller shall
bear the allocated share of line gain or loss and shrinkage occurring in the
Common Line attributable to Seller's Liquids as determined under the provision
of the Allocation Agreement. It is further understood that if the liquids
delivered to or for Seller's account at the Common Delivery Point attributable
to Seller's Liquids have a greater aggregate heating value than the aggregate
heating value actually attributable to Seller's Liquids at the Common Delivery
Point, thereby resulting in a loss of heating value to Buyer for which adequate
compensation is
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not provided in the Allocation Agreement (considering that Buyer's purchases of
gas are to be made on a Btu basis rather than on an Mcf basis), then Seller and
Buyer agree to make whatever reasonable change in the method of accounting as
between Seller and Buyer which is required to eliminate such inequity to Buyer
to such extent as is practical and feasible.
4. Stabilization or processing of liquids or other hydrocarbon
constituents belonging to Seller or other producers who may have injected same
into the Common Line under this Article XXI shall be handled on such basis as
shall be mutually agreed between the Plant Owners and the respective owners of
such liquids and other hydrocarbon constituents.
ARTICLE XXII
Miscellaneous
1. No waiver by either party hereto of one or more defaults in the
performance of any provision of this Contract shall operate or be construed as a
waiver, by such party, of a future default, whether of a like or a different
character.
2. All headings appearing herein are for convenience only and shall
not be considered a part of this Contract for any purpose or as in any way
interpreting, construing, varying, altering, or modifying this Contract or any
of the provisions hereof.
3. Each party hereby grants to the other wherever necessary or
convenient for carrying out the terms of this Contract requisite easements and
rights of way over, across and under any land as to which such party has the
right to make such grants.
40
38
4. Buyer agrees that if it enters into any contracts with parties
other than Seller hereunder who will deliver to Buyer gas that will ultimately
enter the Common Line upstream from the Kalkaska Plant, then such contracts with
such other parties will contain the same restrictions regarding recovery of
liquids or liquefiable hydrocarbons as are contained in Paragraph 1 of Article
XX and will not contain provisions which mitigate against any of the provisions
of Article XX and Article XXI.
5. Any price increase provided in Article VIII hereof requiring
approval of the Michigan Public Service Commission or any successor state
regulatory agency pursuant to Section 10 of PA 9 of 1929 shall not be effective
until approved by such regulatory agency.
6. If at any time the Michigan Public Service Commission (or any
successor state regulatory agency) shall disallow any portion of the price paid
Seller hereunder from Buyer's purchased cost of gas in a ratemaking proceeding,
then in such event Buyer shall thereafter reduce the price paid Seller to the
maximum price from time to time allowed; provided, however, Buyer shall always
prosecute diligently to pay Seller at the full contract price and to obtain
inclusion of the full contract price hereunder in Buyer's purchased cost of gas.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed as of the day and year first above written.
BUYER: CONSUMERS POWER COMPANY
WITNESSES:
-----------------------------
By /s/ X. X. Xxxxxxx
---------------------------------
X. X. Xxxxxxx, Vice President
/s/ X. X. Xxxxxxxx
------------------------------------
41
SELLER: NORTHERN MICHIGAN EXPLORATION CO.
WITNESSES:
/s/ Xxxxxxx Xxxxxxxx
------------------------------------
By /s/ Xxxxxx X. Xxxxxx
---------------------------------
/s/ Xxxxxxx X. Xxxxxxxxxx
------------------------------------
42
EXHIBIT "A"
for
GAS PURCHASE CONTRACT
Dated
December 1, 1985
Between
CONSUMERS POWER COMPANY
and
NORTHERN MICHIGAN EXPLORATION COMPANY
Township County
------------------------- --------------
Allis North, X00X-X0X Xxxxxxx Xxxx
Xxxxx Xxxxx, X00X-X0X Presque Xxxx
Xxxx Xxxxx, X00X-X0X Presque Isle
Case South, X00X-X0X Xxxxxxx Xxxx
Xxxxxxxx Xxxxx, X00X-X0X Presque Isle
Bismarck South, X00X-X0X Xxxxxxx Xxxx
Xxxxxxx, X00X-X0X Presque Isle
Xxxx, X00X-X0X Xxxxxxx Xxxx
Xxxxxxxx, X00X-X0X Presque Isle
Shell #1-30 Sylvania Savings
SE NW SW Section 30, T34N-3E
Case Township, Presque Isle County
NOMECO #0-00 Xxxx
XX XX XX Xxxxxxx 00, X00X-0X
Case Township, Presque Isle County
