Exhibit 10.18
FIRM STORAGE SERVICE AGREEMENT
THIS AGREEMENT, made and and entered into as of this 20th day of August,
1996, by and between VIRGINIA GAS PIPELINE COMPANY, a Virginia Corporation,
hereinafter referred to as "VGPC," and UNITED CITIES GAS COMPANY, an Illinois
and Virginia corporation, hereinafter referred to as "UCG."
WITNESSETH
WHEREAS, VGPC has undertaken to provide a firm storage service from its
Saltville, Virginia property; and
WHEREAS, UCG has requested storage service from said property on a firm
basis.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
QUANTITY OF SERVICE
1.1 Subject to the terms and provisions of this Agreement and the
General Terms and Conditions applicable thereto, UCG has the right to
maintain in VGPC's Saltville storage facility ("Saltville") under the terms
of this Agreement an aggregate quantity of up to 300,000 dth (the "Maximum
Storage Quantity," or "MSQ"). VGPC's obligation to accept gas at the Delivery
Point specified on Exhibit A hereto for injection into storage on any day is
limited to the Maximum Daily Injection Quantity ("MDIQ") specified on Exhibit
A hereto. VGPC, at its sole discretion, may allow injections at rates above
the MDIQ on a best efforts, interruptible basis if such injections can be
made without adverse effect upon injections of other Customers or to VGPC's
operations.
1.2 VGPC shall redeliver a thermally equivalent quantity of gas to UCG
at the Delivery Point described on Exhibit A hereto. VGPC's obligation to
withdraw gas from storage for delivery at the Storage Point on any day is
limited to the available Maximum Daily Withdrawal Quantity ("MDWQ") specified
on Exhibit A hereto. VGPC, at its sole discretion, may allow withdrawals at
rates higher than the MDWQ on a best efforts, interruptible basis if such
withdrawals can be made without adverse effect upon withdrawals of other
Customers or to VGPC's operations and such gas is available from UCG's
Storage Gas Balance.
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ARTICLE II
CONDITIONS OF SERVICE
2.1 UCG shall pay VGPC $0.05 per each dth injected and $0.05 per each
dth withdrawn. Subject to the provisions of Section 2.3, UCG will pay VGPC an
annual storage charge ("Annual Storage Charge") which shall be the product of
$5.64 multiplied by the Maximum Storage Quantity, which fee shall be payable
in twelve (12) equal monthly installments.
2.2 VGPC shall reimburse UCG for any injected gas that cannot be
withdrawn for delivery to UCG from Saltville at Inside FERC index for
deliveries into Tennessee Gas, Zone 1, plus interruptible transportation on
Tennessee Gas and East Tennessee.
2.3 On May 1, 1997 and each May 1 thereafter, VGPC shall pro-rate the
Annual Storage Charge for the year retroactively and prospectively to reflect
any deficiencies in performance in the prior Withdrawal Period as follows:
Adjusted Annual Actual MSQ Actual MDWQ
---------------- --------------
Storage Charge = Contract MSQ X Contract MDWQ X $5.64 X 300,000
UCG's election to use the storage service at levels below the MSQ and MDWQ
shall not be considered deficiencies in performance.
2.4 UCG shall insure that the gas delivered to VGPC at the Delivery
Point for injection into Saltville meets the minimum quality specifications
of East Tennessee Natural Gas Company's FERC Tariff. VGPC shall insure that
gas delivered to UCG at the Delivery Point meets the minimum quality
specifications of East Tennessee Natural Gas Company's FERC Tariff.
2.5 The measurement of quantities for billing purposes, in MMBtu,
delivered to or received from VGPC shall be performed by East Tennessee
Natural Gas Company.
2.6 The charges described herein for Saltville services shall be
subject to the approval of the Virginia State Corporation Commission ("VSCC")
pursuant to the appropriate rate schedule and gas tariff. However, regardless
of the rates approved by the VSCC, the rates set forth in this Article shall
be the maximum rates for the term of this contract. In the event the VSCC
shall approve a rate less than the rates specified in this Article, VGPC will
charge, for the term of the contract, UCG whichever rate is lower. If during
the term of the contract, the VSCC shall require VGPC to lower its rates,
VGPC shall
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immediately reflect those changes to UCG's rates. If at anytime the VSCC
should disallow the pass-through or collections by UCG of the charges which
are the subject of this Agreement, the Agreement shall be considered null and
void and the obligation of the parties shall be terminated with the exception
of resolving any balances, imbalances, payments, etc. which occur prior to
the VSCC action.
ARTICLE III
NOTICES
3.1 Notices hereunder shall be given to the respective party at the
applicable address, telephone number or facsimile machine number stated
below, or such other addresses, telephone numbers or facsimile numbers as the
parties shall respectively hereafter designate in writing from time to time:
Virginia Gas Pipeline Company
X.X. Xxx 0000
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telephone Number: (000) 000-0000, extension 17
Facsimile Machine Number: (000) 000-0000
United Cities Gas Company
0000 Xxxxxxxx Xxx
Xxxxxxxxx, XX 00000
Attention: Xxx XxXxxxxx
Vice President/Gas Supply
Telephone Number: (000) 000-0000, extension 582
Facsimile Machine Number: (000) 000-0000
ARTICLE IV
BILLING AND PAYMENT
4.1 On or before the fifteenth (15th) day of each calendar month, VGPC
shall submit to UCG an invoice for services performed during the preceeding
month. In no event shall UCG pay for any services prior to the facilities
being completed and available for use.
4.2 UCG shall pay the amounts invoiced by the twenty-fifth (25th) day of
each month in which said invoice is received by UCG or within ten (10) days
of UCG's receipt of VGPC's invoice.
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4.3 Should UCG fail to pay all of the amount of any invoice as herein
provided when such amount is due, UCG shall pay a charge for late payment
which shall be included by VGPC on the next regular monthly invoice rendered
hereunder. Such charge for late payment shall accrue interest at an annual
rate equivalent to the then current Chase Manhattan Bank prime interest rate
plus two percent(2%), but not to exceed the maximum rate permitted by law. If
such failure to pay continues for thirty (30) days after payment is due, VGPC,
in addition to any other remedy it may have, may suspend further injections
and/or withdrawals of gas for UCG's account until such amount is paid;
provided, however, that if UCG, in good faith, disputes the amount of any
such invoice or part thereof and pays to VGPC such amounts as UCG concedes to
be correct, and, at any time thereafter within thirty (30) days of a demand
made by VGPC, furnishes a good and sufficient surety bond in an amount and
with sureties satisfactory to VGPC conditioned upon the payment of any
amounts ultimately found due upon such invoices after a final determination,
which may be reached either by agreement or judgement of the courts, as the
case may be, then VGPC shall not be entitled to suspend further injections
and/or withdrawals of gas unless and until default be made in the conditions
on such bond or there is a subsequent default under the conditions of this
agreement.
4.4 in the event any overcharge or undercharge in any form whatsoever
shall be found within twenty-four (24) months from the date a billing
discrepancy occurs, the appropriate party shall refund the amount of
overcharge or pay the amount of undercharge within thirty (30) days after the
final determination of the amount overcharged or undercharged has been made.
Any overcharge or undercharge found after such twenty-four (24) months shall
be deemed waived by both parties.
4.5 Both parties hereto shall have the right, at any and all reasonable
times, to examine the books and records of the other party to the extent
necessary to verify the accuracy of any statement, charge, computation or
demand made under or pursuant to this Agreement.
4.6 It is expressly understood that VGPC retains a landlord's lien
against the personal property of UCG stored hereunder for the recovery of any
and all amounts which may become due and payable under this agreement.
ARTICLE V
TERM
5.1 Subject to the provisions hereof, this Agreement shall become
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effective as of the date first written above and shall be in full force and
effect for a primary term through April 30, 2011 (the "Termination Date") and
shall continue and remain in force and effect for successive terms of one (1)
year each hereafter unless and until cancelled by either party giving 180
days written notice to the other party prior to the end of the primary term
and any yearly extension thereof.
5.2 United Cities shall maintain a right of first refusal on an amount
equal to the MSQ by matching competing offers for a period of five years
after the expiration of the primary term, or until April 30, 2016 (the
"Option Period"). If at any time during the Option Period, VGPC receives a
bona fide offer from a third party to use said amount of capacity, VGPC shall
give UCG written notice of such offer (an "Option Notice") and shall make
such storage capacity available to UCG on the same terms and at the same
price per dt which is set forth in such bona fide offer which VGPC is willing
to accept. If UCG declines to use such storage capacity or fails to accept
such storage capacity within a thirty day period (the "Option Exercise
Period") after receiving the Option Notice, VGPC shall be free to make such
storage capacity available to the third party.
ARTICLE VI
INDEMNITY
6.1 UCG Shall be deemed to have the exclusive control and possession of
the Gas until delivered to VGPC at the Delivery Point and after the Gas is
redelivered to UCG at the Delivery Point pursuant to Sections 1.1 and 1.2
hereof. VGPC shall be deemed to have the exclusive control and possession of
the Gas after it has been delivered to VGPC at the Delivery Point, until
such time as the Gas is redelivered to UCG at the Delivery Point pursuant to
Sections 1.1 and 1.2 hereof.
6.2 The party in control of the Gas will defend, indemnify and hold the
other harmless from and against any and all claims, causes of action or
judgements (including attorney's fees and expenses) in any way arising with
respect to the Gas while in that party's control, and the other shall not be
liable for any part thereof.
ARTICLE VII
FORCE MAJEURE
7.1 Subject to the provisions of this Article VII, no party shall be
liable to the other party for the failure to perform in conformity with this
Agreement
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to the extent such failure results from an event of Force Majeure which is
beyond the reasonable control of the party affected thereby, which wholly or
partially prevents the supply, transportation, sale, delivery, injection,
storage, withdrawal, or redelivery of Gas, except that it is expressly
understood by UCG and VGPC that the occurrence of an event of Force Majeure
will not excuse VGPC of its obligations under Section 2.2 hereof for a period
in excess of one month after the Termination Date.
7.2 Events of Force Majeure shall include, by way of illustration, but
not limitation: acts of God, strikes, lockouts or other industrial
disturbances, acts of public enemy, wars, insurrections, floods, and the
operation of Governmental Authority (other than at the request of the party
claiming inability to perform), earthquakes and fires, it being understood
and agreed by the parties hereto that the failure to hold the Maximum Storage
Quantity, the inability of VGPC to withdraw the MDWQ from the field and the
failure or breakage of any of VGPC's equipment, machinery or pipelines
shall not constitute Force Majeure.
7.3 Immediately upon becoming aware of the occurrence of an event of
Force Majeure, the party affected shall give notice thereof to the other
party, describing such event and stating the specific obligations, the
performance of which are, or are expected to be, delayed or prevented, and
(either in the original or in supplemental notices) stating the estimated
period during which performance may be suspended or reduced, including, to
the extent known or ascertainable, the estimated extent of such reduction of
performance. Such notice of an event of Force Majeure is to be first given
by telephone communication, and then shall be confirmed in writing within
five (5) days, giving particulars available to the reporting party, and being
supplemented if necessary within twenty (20) days to give full particulars.
Not withstanding any other provision in this Agreement, the parties mutually
agree that should some cause or event, beyond the control of VGPC, make it
appear to VGPC that the storage area is losing pressure and may no longer be
viable for storage, it may immediately notify UCG (by fax, phone or other
means) and UCG shall immediately start accepting the stored gas in order to
drain the storage area and cut down on the potential loss to VGPC, or VGPC
may otherwise dispose of such gas and pay UCG for the value thereof plus the
value of any gas otherwise lost. Thereafter this Agreement shall be
considered of no further force and effect unless VGPC can reasonably
revitalize and stabilize such storage area to hold gas pressure in which
event VGPC shall give the thirty (30) day notice as provided in Section 2.1
and the Agreement shall thereafter continue in full force and effect.
7.4 The party relying upon an event of Force Majeure shall act prudently
and use all reasonable efforts to eliminate the effects of Force Majeure as
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soon as reasonably practicable, provided that the settlement of strikes and
lockouts shall be entirely within the discretion of the party affected.
7.5 No suspension or reduction of performance by reason of an event of
Force Majeure shall invalidate this Agreement, and upon removal of the Force
Majeure, performance shall resume in this Agreement as soon as practicable.
7.6 To the event that there is a Force Majeure event, UCG shall not be
responsible for payment of any charges including storage capacity charges, as
a result of services not received.
ARTICLE VIII
OPERATIONAL FLOW ORDERS
8.1 UCG may be subject to certain operational flow orders ("OFO's")
issued by VGPC: (a) to alleviate conditions that threaten the integrity of
VGPC's system; (b) to maintain pressures necessary for VGPC's operations; (c)
to alleviate operational problems arising from overdeliveries or
underdeliveries by UCG in violation of this Agreement; and (d) to prevent
damage to the Saltville storage field.
8.2 Upon the issuance of an OFO, UCG must take the actions set forth in
the OFO, which may include, but are not limited to, reducing its withdrawals
from storage.
ARTICLE IX
SUCCESSORS AND ASSIGNS
9.1 This Agreement shall be binding upon and inure to the benefit of
the successors, assigns and legal representatives of the parties hereto.
Either party may freely assign this Agreement to a company which it controls,
is controlled by, or is under common control with, or any party succeeding to
substantially all the interests of UCG or VGPC. All other assignments shall
be subject to the prior written consent of the party not assigning, such
approval not to be unreasonably withheld. Either party hereto shall have the
right to pledge or mortgage its respective rights hereunder for security of
its indebtedness without the prior written consent of the other party.
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ARTICLE X
MISCELLANEOUS
10.1 This Agreement constitutes the entire Agreement between the
parties and no waiver by VGPC or UCG of any default of either party under
this Agreement shall operate as a waiver of any subsequent default whether of
a like or different character.
10.2 The laws of the Commonwealth of Virginia shall govern the
validity, construction, interpretation, and effect of this Agreement.
10.3 No modification of or supplement to the terms and provisions
hereof shall be or become effective except by execution of a supplementary
written agreement between the parties.
10.4 Exhibit A attached to this Agreement constitutes a part of this
Agreement and is incorporated herein.
10.5 VGPC covenants and agrees that it will take such action as may be
reasonably necessary to qualify as a Public Service Corporation under the
laws of the Commonwealth of Virginia and will apply to have this Agreement
and the rates hereunder approved by the VSCC. In the event VGPC is unable so
to qualify and obtain approval from the VSCC within a reasonable period of
time, it will promptly file for authority from the Federal Energy Regulatory
Commission to engage in the gas storage business. Should VGPC be unable to
obtain such approval from either commission, this Agreement shall be of no
further force and effect. In the event VGPC obtains approval but the agreed
storage, injection and withdrawal charges are reduced to the point VGPC feels
the project is not financially viable, it may so notify UCG in writing and
this Agreement shall be of no further force and effect.
10.6 UCG warrants that all gas received by it from Saltville will be
ultimately consumed within the Commonwealth of Virginia.
10.7 If, after proceeding with due diligence, VGPC is unable to provide
the firm storage service contemplated herein by August 31, 1996, VGPC shall
continue to proceed with due diligence to complete arrangements for such
service, and commence the firm storage service for UCG at the earliest
practicable date thereafter.
10.8 VGPC appoints UCG as its sole and exclusive agent for sales of gas
storage and transportation services from Saltville to retail customers in
UCG's Virginia territory for the life of this Agreement. VGPC recognizes that
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Saltville is located within UCG's certificated gas distribution territory in
the Commonwealth of Virginia ("UCG's Virginia territory") and intends to
honor all of UCG's rights and privileges associated with said territory in
accordance with Virginia statute and/or regulation. VGPC warrants that it
will not seek authority in its Saltville gas storage certificate of public
convenience and necessity to provide any gas storage, distribution or
transportation service to retail customers in UCG's Virginia territory. VGPC
further warrants that it shall not use its Saltville facilities to directly
provide gas storage, distribution or transportation service to any retail
customers in UCG's Virginia territory or to any marketers, brokers or
producers that directly serve retail customers in UCG's Virginia territory,
unless directed to do so by the Virginia State Corporation Commission, or any
other regulatory agency or judicial authority. Under this Section 10.8, VGPC
shall include any company under common management or control with VGPC,
including but not limited to Virginia Gas Company, Virginia Gas Storage
Company, Virginia Gas Distribution Company, or Virginia Gas Exploration
Company.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
written above by the parties' duly authorized officers.
Attest: UNITED CITIES GAS COMPANY
By: /s/ Xxxxx X. Xxxxxx
---------------------------------- -----------------------------
Its: SVP
---------------------------
Attest: VIRGINIA GAS PIPELINE COMPANY
/s/ Xxxx X. Xxxx By: /s/ X.X. Xxxxxxx
---------------------------------- -----------------------------
Its: President
----------------------------
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EXHIBIT A
to that certain Gas Storage Agreement dated August 20, 1996 by and
between
UNITED CITIES GAS COMPANY
and
VIRGINIA GAS PIPELINE COMPANY
Delivery Point: Saltville receipt/delivery point, Xxxxx County, VA.
For Injections: ETNG Meter Number 759766.
For Withdrawals: ETNG Meter Number 759777
Maximum Daily Injection Quantity, in dth:
15,000
Maximum Daily Withdrawal Quantity, in dth:
30,000
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