AMARILLO SUPPLY AGREEMENT
This Agreement is made and entered into effective the 2nd day of
January, 1993 by and between MESA Operating Limited Partnership, a Delaware
limited partnership, ("SELLER") and Energas Company a division of Atmos
Energy Corporation, a Texas Corporation ("BUYER").
WITNESSETH:
WHEREAS, SELLER and BUYER are the respective successors to that
certain Agreement between Amarillo Oil Company and Amarillo Gas Company,
dated June 27, 1949, ("Amarillo Supply Contract"); and
WHEREAS, SELLER and BUYER desire to consolidate the Amarillo, Supply
Contract and all amendments thereto into a single document which reflects
the current agreement between SELLER and Buyer;
Now THEREFORE, in consideration of the premises and mutual covenants
and agreements contained herein as well as other valuable consideration,
the sufficiency and receipt of which are hereby acknowledged, SELLER and
BUYER mutually covenant and agree as follows:
I. Amarillo Supply Contract Superseded: Effective January 2, 1993,
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all provisions of the Amarillo Supply Contract, and all amendments thereto
are terminated and are hereby superseded by the terms of this Agreement.
II. Supply of Gas: (a) SELLER agrees and obligates itself to sell
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and deliver to BUYER, and BUYER agrees to purchase and take from SELLER and
pay for, all volumes of gas made available by SELLER to BUYER and which are
required by BUYER to supply its present and future domestic and commercial
customers located in the City of Amarillo, Texas, and its environs.
(b) In order that BUYER may be assured of an adequate and permanent
supply of gas under the terms and provisions hereof with which to meet its
present and future market requirements, as above defined; BUYER shall have
first call upon residue gas attributable to the gas now owned or controlled
by SELLER under and by virtue of that certain agreement dated January 3,
1928, between the Amarillo Oil Company, predecessor in interest of, the
SELLER and Canadian River Gas Company predecessor, in interest to Colorado
Interstate Gas Company as amended from time to time (the "B" Contract).
BUYER's first call rights to receive "B" Contract residue gas in preference
to SELLER's rights to sell such gas to customers other than Energas shall
be subject to the "B" Contract, as amended by that certain Production
Allocation Agreement dated January 1, 1991, and that certain instrument
entitled Amendment to "B" Contact and Production Allocation Agreement dated
January 1, 1993 (collectively, the PAA) between the SELLER and Colorado
Interstate Gas Company and shall apply only to such volumes of residue gas
as are required to serve BUYER's domestic and commercial customers in the
City of Amarillo and its environs; provided, however, that SELLER shall not
be obligated to deliver to BUYER on a daily basis volumes in excess of the
available residue gas attributable to 100 MMcf per day of SELLER's
production under the "B" Contract.
(c) SELLER will make no sale, transfer, assignment, or other
disposition of its "B" Contract gas rights as are required to serve BUYER's
domestic and commercial customers in the City of Amarillo and its environs,
except subject to the first call rights described herein.
(d) That in the event SELLER shall default in the performance of any
of its obligations hereunder, BUYER shall be subrogated to and entitled to
exercise and enforce all the rights, privileges, remedies of SELLER against
any and all persons and corporations through or from which SELLER's "B"
Contract gas is obtained.
III. Delivery Points and Pressure: The gas purchased hereunder by
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BUYER shall be delivered by SELLER to BUYER at the outlet discharge header
of SELLER's Xxxx Gas Plant and at such other points as may be mutually
agreed upon between BUYER and SELLER.
During periods when the volume of gas demand on BUYER's system is
less than or equal to the maximum volume of gas SELLER is required to
deliver to BUYER's system pursuant to Article II hereof, the deliveries at
the outlet of SELLER's Xxxx Gas Plant as aforesaid shall be made at
pressures not less than 190# per square inch gauge and not in excess of
400# per square inch gauge, as required from time to time by BUYER.
Notwithstanding the foregoing, if during periods when the volume of gas
demand on BUYER's system is more than the maximum volume of gas SELLER is
required to deliver to BUYER's system pursuant to Article II hereof, then
SELLER's deliveries may be made all pressures less than 190# per square
inch gauge. In the event BUYER desires a minimum delivery pressure in
excess of 190# per square inch gauge then same shall be subject to
negotiations between the parties, provided that BUYER shall give SELLER one
year's advance written notice requesting such future pressure. The
deliveries made at points other than the outlet of SELLER's Xxxx Gas Plant
shall be made at pressures suitable to BUYER but within the then existing
limitations of SELLER's supply at such points.
IV. Prices and Charges:
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(a) Prices: Except as provided in Section (C) of this Article IV, all
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gas delivered to BUYER by SELLER pursuant to this Agreement shall be priced
as follows:
A composite price per Mcf for gas delivered hereunder shall be
determined by a formula comprised of a Fixed Price component which will be
utilized for seventy percent (70%) of the composite price, and a Spot Price
component which will be utilized for thirty percent (30%) of the composite
price. Such formula price will be in effect for a period beginning January
2, 1993 and ending December 31, 1997. The pricing of gas to be delivered
hereunder in periods subsequent to December 31, 1997 is described in
Section (c) of this Article IV.
The composite price per Mcf to be paid each month by BUYER sill be
calculated as follows:
Monthly Price = {FP x 0.7) + {(SP + $0.10) (0.3)}
where:
FP = Fixed Price component
SP = Spot Price component
The Fixed Price component shall be determined fore each year by
establishing a fixed Price of $2.71 per Mcf for the initial year of 1993.
The Fixed Price shall be determined for each subsequent year by escalating
the prior year's Fixed Price by five percent (5%) for calendar years 1994
and 1995, and seven and one half percent (7-1/2%) for calendar years 1996
and 1997.
The Fixed Price component of the formula price is thus calculated as
follows:
Year Fixed Price Component Per Mcf
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1993 $2.71 = 1993 Fixed Price
1994 $2.71 x 1.05 = 1994 Fixed Price
1995 1994 Fixed Price x 1.05 = 1995 Fixed Price
1996 1995 Fixed Price x 1.075 = 1996 Fixed Price
1997 1996 Fixed Price x 1.075 = 1997 Fixed Price
The Spot Price component shall be determined monthly and shall be
comprised of the hereinafter described Spot Index Price, plus a fee of
$0.10. The parties shall use the first issue of Natural Gas Week published
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each month to determine the Spot Index Price. The Spot Index Price shall
be that price reported in the table titled "Gas Price Report" under the
subheadings "Texas, West, Spot, Delivered to Pipeline" in the "Bid Week"
column for the month of actual delivery. If such index ceases to be
published, or the parties mutually agree that the index ceases to
reasonably reflect the spot price for gas, the parties shall attempt to
agree on a substitute index giving due regard to the purpose and intent in
selecting this original index. If the parties cannot mutually agree on a
substitute index or cannot agree that the index in effect at the time has
ceased to reasonably reflect the spot price for gas delivered hereunder,
then in either of such events, the parties agree that they shall submit the
issue of the alternate selection of an appropriate index to binding
arbitration to be conducted by and under the then existing rules of the
American Arbitration Association ("AAA") within thirty (30) days of written
notification from one party to the other; provided, however, that such
arbitration shall not be conducted more often than once every two years in
the event of disagreement as to whether a particular index reasonably
reflects the spot price for gas. The question of selection of an index
brought about by the cessation of publication of an index being used may be
submitted to arbitration as often as is necessary. The selection of
arbitrators will be conducted pursuant to the process described under
Section (c) of Article IV below and the three arbitrators so chosen will be
required to issue within thirty (30) days from the date of their selection
their decision on the appropriate index to be utilized.
The parties agree that until a new index has been established, the
applicable Spot Price to be used on an interim basis each month will be the
Spot Price for the same month of the prior year plus 5%. As soon as the
new index is established, it will become retroactively effective as of the
first day of the month following the month during which the thirty (30) day
written notification was received by the second party and any required
adjustment will be made within ninety (90) days.
(b) Tax Surcharges: It is understood and agreed that the prices for
gas provided for herein shall be increased or decreased, as the case may
be, to reflect the full amount of any new or additional, or of any increase
or decrease in present rates of severance, gross production, gross
receipts, and excise taxes of any nature whatsoever or similar taxes which,
after January 1, 1993, may be imposed, levied or assessed by any
governmental authority upon the gas sold hereunder, whether or not the same
shall be paid or payable directly or indirectly by SELLER. Taxes being
reimbursed by BUYER to SELLER as of December 31, 1992 will continue to be
reimbursed by BUYER and shall be calculated in the same manner as such
taxes were calculated on December 31, 1992. Applicable laws, rulings or
orders increasing, decreasing or creating any such tax shall be binding and
conclusive upon BUYER until such time as the invalidity thereof has been
finally established by the decision of a court of competent jurisdiction.
In no event, however, shall the provisions of this paragraph be applied or
construed so as to (decrease the prices for gas sold by virtue of this
Agreement below the applicable prices then in effect pursuant to Sections
(a) or (c) of this Article IV. In the event any tax included within this
Section is legally determined to be invalid or unlawfully collected and a
refund thereof is subsequently received by SELLER, then SELLER agrees to
return to BUYER such portion of the refund as may have been applicable to
purchases made by BUYER and paid by BUYER to SELLER, less, SELLER's costs
of recovering such refund.
(c) Future price determinations: The price redetermination procedure
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set forth hereinafter shall be employed for each two year period of the
remaining term of the Amarillo Supply Agreement, following the formula
pricing period (1993 - 1997) outlined in (a) above. On or before September
1, 1997, and on or before September I each two nears thereafter, BUYER and
SELLER shall meet to determine the price(s) or pricing formula to be in
effect during each subsequent two year period, commencing January 1, 1998.
If the parties have not redetermined the price(s) or agreed upon a pricing
formula by September 1, 1997, and each September 1 each two years
thereafter, then the parties agree that they shall submit such pricing
determination to binding arbitration to be conducted by, and under the then
existing rules of the AAA within thirty (30) days of written notification
from one party to the other. Within sixty (60) days of such submission,
three arbitrators shall be chosen by the parties from panels supplied by
the AAA. If the parties are unable to select three arbitrators during such
period, the selection of the remaining arbitrator(s) shall be conducted
pursuant to the rules of the AAA governing the selection of arbitrator(s)
when the parties have failed to do so.
The arbitrators so chosen shall be instructed to determine, within
ninety (90) days from their selection, a reasonable price(s) or pricing
formula based on the particular characteristics of the supply under the
Amarillo Supply Agreement at the time of the price redetermination for the
two year period beginning January 1, 1998, or any subsequent two year
period, for which the parties are unable to agree upon a price(s) or
pricing formula. Essential characteristics to be considered by the
arbitrators include the following:
1) The annual volume normally purchased from SELLER by BUYER.
2) The daily volume made, available from SELLER to BUYER during the
various seasons of the year.
3) The average daily volume utilized by BUYER during the course of a
year.
4) The load factor and daily and seasonal swings of BUYER's
Amarillo system demands.
5) The remaining term of the Amarillo Supply Agreement.
The parties agree that until a new price(s) or pricing formula has
been established, the applicable composite price for each month to be used
on an interim basis will be the same as the applicable composite price
established for the same month of the prior year plus 5%. As soon as the
new price(s) or pricing formula is established, it will become
retroactively effective as of the first day of the new pricing period and
any required adjust will be made within ninety (90) days.
V. Quality: All of the gas sold hereunder shall be gasoline plant
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residue gas and shall have the following characteristics:
(a) It shall contain not more than twenty five one hundredths (0.25)
grain of hydrogen sulphide per 100 cubic feet measured as herein provided;
(b) The dew point at delivery pressure shall be at least ten degrees
below the existing ground temperature at pipeline depth;
(c) It shall be commercially free of dust, gums, and other solid
matter;
(d) The gas shall have a monthly weighted gross heating value of not
less than nine hundred fifty (950) British Thermal Units per cubic foot.
VI. Meters and Measurement: (a). The volume of gas, delivered
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hereunder shall be measured by orifice meters installed and maintained as
prescribed in the Gas Measurement Committee Report No. 3, (ANSI/API-2530,
Second Edition) of the American Gas Association and as revised from time to
time. (AGA Report No. 3)
(b) BUYER shall maintain and operate at or near the various points of
delivery, shiftable meters and auxiliary equipment to properly measure the
volumes of gas being delivered. All such measuring equipment shall remain
the sole property of BUYER but the SELLER shall have access to said
metering equipment at all reasonable times. The reading, calibration, and
adjusting of said meters shall be done by the employees or agents of BUYER
and charts and records from such metering equipment shall remain the
property of BUYER, but upon request of SELLER, BUYER will submit to SELLER
the records and charts from said metering equipment together with
calculations therefrom for SELLER's inspection and verification subject to
return by SELLER within a reasonable period of time.
(c) SELLER may, at it option and at its sole cost and expense,
install and operate check metering equipment, but the metering equipment of
BUYER shall be used for determining the amounts of gas delivered under this
Agreement.
(d) The unit of measurement for all gas deliverable under this
Agreement shall be one thousand (1,000) cubic feet of base temperature of
sixty (60) degree Fahrenheit and at a base pressure of 14.65 pounds
absolute and the readings and registrations of all metering equipment shall
be computed into such units in accordance with AGA Report No. 3 referenced
above.
(e) For the purpose of measurement the average atmospheric pressure
shall be assumed to be thirteen (13.0) pounds irrespective of the actual
elevation of the delivery point above sea level or of variations in the
barometric pressure from time to time.
(f) For meters of the orifice type, corrections shall be made for the
following factors:
1) Flowing temperature variation from 60 degrees Fahrenheit;
2) Deviation of the gas from Xxxxx'x Law;
3) Calculations shall be based on specific gravities determined by
chromatograph analysis of the flowing gas stream for the current month,
based upon either a continuous composite sample at the tailgate of the Xxxx
Plant or a proportional to flow composite sample at the tailgate of the
Xxxx Plant.
(g) All determinations of physical characteristics, and meter tests
shall be made with standard apparatus and using generally accepted industry
methods at such times and places as in accordance with good practice may be
agreed upon from time to time between SELLER and BUYER.
VII. Billing and Payment: SELLER shall render to BUYER, on or before
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the tenth (10th) day of each month a statement showing the volume of gas
delivered to BUYER during the calendar month immediately preceding and the
amount of payment or payments then due from BUYER to SELLER for such gas
delivered. In the event an error is discovered in the amount billed in any
statement rendered by SELLER, such error shall be adjusted within thirty
(30) days after a claim is made therefore, but in any event within
twenty-four (24) months from the date of such statement. Failure to make a
written request for a required adjustment within the twenty-four (24) month
period shall be deemed a waiver of that adjustment by the party having such
adjustment rights. Both SELLER and BUYER shall have the right to examine,
at reasonable times, books, records and charts of the other to the extent
necessary to verify the accuracy of any statement, charge or computation
made under to pursuant to any of the provisions hereof.
BUYER agrees to pay SELLER at its office in Amarillo, Texas, or at
such other address designated in writing by SELLER, on or before the 20th
day of each month for all gas delivered hereunder during month according to
the gas measurements and computations and at the prices hereinbefore
provided for and billed on said monthly statement. Should BUYER fail to
pay any amount due SELLER when such amount is due and such failure to pay
continues for sixty (60) days, then SELLER may suspend deliveries of gas,
but the exercise of such right shall be in addition to any and all other
remedies available to SELLER.
VIII. Force Majeure: In the event of either party being rendered
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unable wholly or in part by force majeure to carry out its obligations
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under this Agreement other than to make payments of amounts due hereunder,
it is agreed that on such party giving notice and full particulars of such
force majeure in writing or by telegraph to the other party as soon as
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possible after the occurrence of the cause relied on, then the obligations
of the party giving such notice so far as they are affected by such force
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majeure, shall be suspended during the continuance of any inability so
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caused but for no longer period, and such cause shall, so far as possible,
be remedied with all reasonable dispatch.
The term "force majeure" as employed herein shall mean acts of God,
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strikes, lockouts or other industrial disturbances, acts of the public
enemy, wars, blockades, insurrections, riots, epidemics, landslides,
lightning, earthquakes, fires, storms, floods, washouts, arrests and
restraint of rules and people, civil disturbances, explosions, brakeage or
accident to machinery or lines of pipe, the necessity for making repairs
and/or alterations in machinery or lines of pipe, freezing of xxxxx or
lines of pipe, sudden partial or entire failure of natural gas xxxxx, and
any other cause, whether of the kind herein enumerated, or otherwise, not
within the control of the party claiming suspension and which by the
exercise of due diligence such party is unable to overcome.
IX. Responsibility for Handling: As between the parties hereto,
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SELLER shall be in control and possession of the gas deliverable hereunder
and responsible for any damage or 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 such injury or damage.
X. Termination for Default: If either party shall fail to perform
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the covenants or obligations imposed upon it under and by virtue of this
Agreement, then and in such event the other party may, at its option,
terminate this Agreement by proceeding as follows:
The party not in default shall cause written notice to be served on
the party in default, stating specifically the cause for terminating this
Agreement and declaring it to be the intention of the party giving the
notice to terminate the same; thereupon the party in defauft shall have
thirty (30) days after the service of the aforesaid notice in which to
remedy or remove the cause or causes for terminating this Agreement and if,
within said period of thirty (3) days, the party in default does so remove
and remedy said cause or causes and fully indemnifies the party not in
default for any and all consequences of such breach, then such notice shall
be withdrawn and this Agreement shall continue in full force and effect.
In case the party in defauft does not so remedy and remove the cause or
causes and/or does not indemnify the party giving the notice for any and
all consequences of such breach within said period of thirty (30) days, and
if the party giving the notice does not withdraw the notice, then this
Agreement shall become null and void from and after the expiration of said
period. Any cancellation of this Agreement pursuant to the provisions of
this article shall be without prejudice to any right of the party not in
default to collect any amounts then due to and without waiver of any other
remedy to which the party not in default may be entitled for violation of
this Agreement.
XI. Successors and Assigns: This Agreement shall inure to the
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benefit of and be binding upon the successors and assigns of the
parties hereto, and is intended solely for the benefit of BUYER and SELLER
and their respective successors and assigns and not for the benefit of any
third parties. Whenever the name of any corporation or partnership is used
herein it shall include the successors and assigns of such corporation or
partnership, but neither party hereto may assign this Agreement without the
written consent of the other being first had and obtained, which written
consent shall not be unreasonably withheld.
XII. Term: This Agreement shall be in force and effect from and
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after January 2, 1993, and shall continue in force and effect for so long
as SELLER has merchantable quantities of gas available hereunder for sale
to BUYER.
XIII. Miscellaneous: (a) This Agreement shall be governed by and
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construed in accordance with the laws of the State of Texas, excluding any
conflicts of law, rule, or other principle which might refer such
construction to the laws of another state. All terms and conditions of
this Agreement were prepared jointly by the SELLER and BUYER and not by any
party to the exclusion of the other.
(b) This Agreement may not be modified or amended except by the
written agreement of the parties hereto.
(c) No waiver by either party hereto of any defauft of the other
party or breach of any provision of the other party under this Agreement
shall operate as, or be deemed to be, a waiver of any other or subsequent
default or breach, whether of a like or different nature.
(d) Each provision and term of this Agreement is intended to be
several. If any term or provision hereof is held to be illegal or invalid
by a court of competent jurisdiction, such illegality or invalidity shall
not affect in any way the validity or legality of the remaining terms or
provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Amarillo
Supply Agreement effective as of the date first above Written.
MESA OPERATING LIMITED PARTNERSHIP
By Xxxxxxx Operating Co.,
General Partner
By /s/ S. Xxxxxxx Xxxxxx, Xx.
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S. Xxxxxxx Xxxxxx, Xx., Vice President
Date September 2, 1993
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ENERGAS COMPANY, a division of
Atmos Energy Corporation
By /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, Vice President
Date August 27, 1993
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