GAS PURCHASE CONTRACT
BETWEEN
NEUTRINO RESOURCES INC.
AND
PROGAS LIMITED
DATE: NOVEMBER 1, 1997
AREA: PINE CREEK/WINDFALL
GAS PURCHASE CONTRACT
Index
PAGE
ARTICLE I DEFINITIONS 1
ARTICLE II COMMENCEMENT AND PRELIMINARY MATTERS
2.01 Commencement 5
2.02 Preliminary Obligations of Seller 5
2.03 Preliminary Obligations of Buyer 5
ARTICLE III RESERVATIONS OF SELLER
3.01 Operations 6
3.02 Rates of Flow 7
3.03 Pooling 7
3.04 Conservation 7
ARTICLE IV QUANTITY OF GAS
4.01 Daily Contract Quantity 7
4.02 Annual Purchase Obligation 8
4.03 Operating Allowance 8
4.04 Decrease in Deliverability 9
4.05 Increase in Deliverability 10
4.06 Assignment of NOVA Capacity 11
4.07 Common Operations Agreement 11
4.08 Regulatory Restriction 11
ARTICLE V QUALITY AND MEASUREMENT
5.01 Quality 11
5.02 Measurement 12
ARTICLE VI DELIVERY PRESSURE 12
ARTICLE VII RECEIPT POINT 12
ARTICLE VIII POSSESSION OF AND TITLE TO GAS 12
ARTICLE IX TERM 12
ARTICLE X PRICE
10.01 Netback Price 13
10.02 Definitions 13
10.03 Renegotiation Rights 18
10.04 Annual Audit 20
10.05 Producer Vote Mechanism for
Netback Price Clause 21
10.06 Arbitration 22
10.07 Settlement Payments 23
10.08 Use of Estimates for Calculating
Netback Price 23
10.09 Basis of Payment 24
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PAGE
10.10 Resale Price Arbitration 24
10.11 Endorsement of Previous Producer
Approvals 25
ARTICLE XI XXXXXXXX AND PAYMENTS
11.01 Xxxxxxxx and Payments 25
11.02 Failure to Pay 26
11.03 Errors and Adjustments 26
11.04 Inspection of Records 27
ARTICLE XII LAWS AND REGULATORY BODIES
12.01 Regulation 27
12.02 Law of Contract 27
ARTICLE XIII FORCE MAJEURE
13.01 Force Majeure Defined 27
13.02 Where Force Majeure Unavailable 28
13.03 Notice of Remedy 28
13.04 Discretion Re: Labour Disputes 28
13.05 Adjustment of Purchase Obligation 29
ARTICLE XIV WARRANTY OF TITLE
14.01 Warranty of Title 29
14.02 Indemnity 29
ARTICLE XV GAS RESERVES OF SELLER
15.01 Dedication of Reserves 30
15.02 Furnishing of Information 30
ARTICLE XVI ARBITRATION 30
ARTICLE XVII NOTICES 32
ARTICLE XVIII OTHER
18.01 Non-Waiver of Future Default 32
18.02 Assignment 32
18.03 Headings 33
18.04 Units of Measurement 33
18.05 Numerical References 33
18.06 Time of Essence 33
18.07 Usage or Custom 33
18.08 Severance 33
18.09 Entire Agreement 34
18.10 Execution in Counterpart 34
SCHEDULE "X"
EXHIBIT "A"
EXHIBIT "B"
THIS GAS PURCHASE CONTRACT made as of the 1st day of November, 1997 between:
NEUTRINO RESOURCES INC.,
a corporation having an office in
Calgary, Alberta
(the "Seller")
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PROGAS LIMITED,
a corporation having an office in
Calgary, Alberta
(the "Buyer")
BACKGROUND:
Seller has interests in the Areas set forth in Exhibit "A", and Seller
has, or will have, a supply of gas available from these areas which Seller has
agreed to sell to Buyer; Buyer has agreed to purchase this gas, to supplement
its existing supply, for resale to its various markets;
IN CONSIDERATION of the mutually beneficial terms and conditions in this
Contract, the parties agree as follows:
ARTICLE I - DEFINITIONS
1.01 Unless another definition is expressly stated, the following terms, where
used in this Contract, and all exhibits, recitals and appendices, will have the
following meaning:
(a) "Aggregate DCQ" means the sum of the DCQ's in effect for each
Receipt Point as set forth in Exhibit "B";
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(b) "contract year" means a period of twelve (12) consecutive months
beginning with the month of November, provided that the first (1st)
contract year will be the period commencing on the Date of First
Delivery of gas and ending the first day of the next month of
November;
(c) "cubic metre" means the volume of gas which occupies one (1) cubic
metre when this gas is at a standard temperature of fifteen (15)
degrees Celsius and at a standard pressure of one hundred and one
and three hundred and twenty-five one-thousandths (101.325)
kilopascals absolute;
(d) "Daily Contract Quantity" ("DCQ") for each Receipt Point has the
meaning set forth in Article IV;
(e) "Date of First Delivery" for each Receipt Point means the date on
which Seller first delivers gas in response to Buyer's request under
this Contract;
(f) "day" means a period of twenty-four (24) consecutive hours,
beginning at 8:00 o'clock a.m. Mountain Standard Time;
(g) "Deliverability" for each Receipt Point means Seller's share of the
maximum daily quantity of gas production which can be delivered at a
stabilized flow rate from xxxxx on Seller's Lands, to that Receipt
Point, as this deliverability is determined or redetermined under
Article IV;
(h) "energy content" means the product obtained, expressed in gigajoules
(GJ), by multiplying the standard volume of the gas, expressed in
thousands of cubic metres (103m3), by the gross heating value of the
gas;
(i) "Facilities Completion Date" for each Receipt Point means the date by
which:
(i) Buyer is in possession of completed firm transportation
capacity sufficient to transport a quantity of gas equal to
the Initial Deliverability downstream of that Receipt Point as
described in Section 2.03; and
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(ii) Seller is in possession of those facilities required to
deliver a quantity of gas equal to the Initial Deliverability
upstream of and to that Receipt Point on a firm basis, as
described in Section 2.02;
(j) "gas" means natural gas or residue gas, but excludes solution gas;
(k) "gross heating value" means the total joules, expressed in
megajoules per cubic metre (MJ/m3), produced by the complete
combustion at constant pressure of one (1) cubic metre of gas with
air, with the gas free of water vapour, the temperature of the gas,
air and products of combustion at standard temperature and all water
formed by combustion condensed to a liquid state;
(l) "Initial Deliverability" means the initial Deliverability for each
Receipt Point agreed to by Buyer and Seller and set forth in Exhibit
"B";
(m) "joule" ("J") means the work done when the point of application of a
force of one (1) xxxxxx is displaced a distance of one (1) metre in
the direction of the force; and
(i) "megajoule" ("MJ") means one million (1,000,000) joules;
(ii) "gigajoule" ("GJ") means one billion (1,000,000,000) joules;
(n) "leases" means all documents and titles under which Seller is
entitled to drill for, produce or sell gas from Seller's Lands;
(o) "month" means a period beginning at 8:00 o'clock a.m. Mountain
Standard Time on the first (1st) day of a calendar month and ending
at 8:00 o'clock a.m. Mountain Standard Time on the first (1st) day
of the next calendar month;
(p) "NOVA" means NOVA Gas Transmission Ltd. or any successor;
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(q) "NOVA Tariff" means the NOVA General Terms and Conditions, as
amended or changed by NOVA during the term of this Contract;
(r) "Purchase Obligation" has the meaning set forth in Article IV for
each Receipt Point;
(s) "Receipt Point" has the meaning set forth in Article VII;
(t) "Seller's Lands" means Seller's interest in the lands, geological
zones and horizons described in Exhibit "A";
(u) "Seller's Reserves" means all of the gas which can, or may at some
future date, be economically recovered from Seller's Lands and which
Seller, has or will have, a right to drill for, produce or sell;
(v) "solution gas" means gas that is dissolved in crude oil under
reservoir conditions and produced as a result of pressure and
temperature changes associated with the production of oil;
(w) "Target Date of First Delivery" for each Receipt Point means the
dates set out in Exhibit "B" or such other date that may be agreed
to in writing by Buyer and Seller.
(x) "103m3" means one thousand (1,000) cubic metres;
(y) "week" means a period of seven (7) consecutive days.
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ARTICLE II - COMMENCEMENT AND PRELIMINARY MATTERS
2.01 COMMENCEMENT
The obligations of Seller to deliver gas and Buyer to purchase gas for
each Area shall commence on the later of the Target Date of First Delivery or
the Facilities Completion Date. Each party will keep the other advised as to the
status of the items under Sections 2.02 and 2.03.
2.02 PRELIMINARY OBLIGATIONS OF SELLER
Seller will diligently take those steps that are necessary to commence the
production and delivery of gas from Seller's Reserves to Buyer at the Receipt
Point(s), in an amount equal to the Initial Deliverability for each Receipt
Point, including:
(a) applying for and diligently seeking to secure and maintain any
regulatory authorizations which may be necessary for the term of
this Contract;
(b) arranging the production and firm gathering and processing required;
and
(c) unless otherwise mutually agreed, Seller will be responsible for
arranging firm NOVA receipt capacity for each Receipt Point for the
level of the Initial Deliverability to that Receipt Point, and will
assign this capacity to Buyer for the date that the Seller is able
to commence deliveries. Buyer's acceptance of this assignment will
be subject to Section 4.04(b).
2.03 PRELIMINARY OBLIGATIONS OF BUYER
Buyer will diligently take those steps that are necessary to enable Buyer
to take delivery of gas from each Receipt Point up to the level of the Initial
Deliverability at that Receipt Point on the Target Date of First Delivery for
the term of this Contract, including:
(a) applying for and diligently seeking to secure and maintain any
regulatory authorizations required to accept delivery and remove the
gas for sale to Buyer's markets;
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(b) arranging and maintaining all required transportation capacity
downstream of the Receipt Point; and
(c) accepting an assignment of the NOVA receipt capacity from Seller as
set forth in Section 2.02(c).
ARTICLE III - RESERVATIONS OF SELLER
3.01 OPERATIONS
Seller expressly reserves the right to operate Seller's Lands free from
any controls by Buyer and in a manner that Seller, in its sole discretion, may
deem advisable including the right:
(a) to determine when an additional well will be drilled, when an
existing well will be reworked or recompleted, when a well cannot,
or has ceased to, produce gas in paying quantities having regard to
Seller's cost of producing, processing and delivering such gas, and
when a well is to be abandoned;
(b) to deliver gas in kind to any interest holders which Seller is
obligated to deliver to, provided that the gas is not committed to
Buyer under this Contract;
(c) to use quantities of gas which may be required for the operation of
separator equipment, extraction plants, compressor stations and
other facilities through which the gas to be delivered may be
processed or handled. However, if other gas or gas constituents are
processed through any of these facilities, an equitable amount of
other gas or gas constituents shall be used as fuel in these
facilities; and
(d) during a period of Buyer's Force Majeure under Article XIII, to sell
and deliver gas to third parties to the extent necessary to prevent
the termination of any of Seller's leases for reason of
non-production.
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3.02 RATES OF FLOW
Seller is not required to produce xxxxx in excess of the allowable rates
of flow, as determined by law or regulatory bodies; in excess of the maximum
efficient rates of flow, as determined by Seller; or in excess of the current
rate of production permitted under the terms of operating agreements in place
where xxxxx are jointly operated with other parties. Seller shall advise Buyer
about any restrictions on production as soon as Seller becomes aware of them if
these restrictions would affect Deliverability.
3.03 POOLING
Seller may pool or unitize any of Seller's Lands with the interests of
third parties in other lands in the same field provided that this Contract binds
Seller in respect of Seller's interest in the pooled or unitized area and the
gas attributable to that interest. If the pooling or unitization is entered into
voluntarily by Seller, Seller shall protect Buyer's rights under this Contract
and prevent any appreciable reduction or postponement in the Deliverability.
3.04 CONSERVATION
Seller may adopt or participate in any oil or gas proration, conservation,
rateable take or similar program, provided, if this program may decrease
Deliverability, the program shall not be entered into voluntarily by Seller
without Buyer's prior consent.
ARTICLE IV - QUANTITY OF GAS
4.01 DAILY CONTRACT QUANTITY
(a) "Daily Contract Quantity" ("DCQ") for each Receipt Point means: (i)
at the Date of First Delivery, a daily quantity of gas equal to the
Initial Deliverability for that Receipt Point; and (ii) thereafter,
the Deliverability for that Receipt Point as adjusted over the term
hereof pursuant to Sections 4.04 and 4.05. In no event shall the DCQ
exceed the maximum firm NOVA receipt capacity available to Buyer
from the Receipt Points, unless otherwise agreed to by Buyer.
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(b) After commencement under Section 2.01, Buyer shall have the right to
request, purchase and receive from Seller and Seller shall have the
obligation to sell and deliver to Buyer the gas from Seller's Lands
at the daily rates that Buyer may request up to the Daily Contract
Quantity at each Receipt Point.
4.02 ANNUAL PURCHASE OBLIGATION
Subject to the terms of this Contract, in each contract year, Buyer agrees
to purchase from Seller, from each Receipt Point, an annual quantity of gas
equal to the Purchase Obligation. The Purchase Obligation for each Receipt Point
is a quantity of gas equal to the product obtained by multiplying the Total
Annual Gas Purchases by Seller's Pro Rata Share where:
(a) "Total Annual Gas Purchases" means the total quantity of gas
purchased by Buyer for Buyer's markets in the contract year.
(b) "Seller's Pro Rata Share" means the percentage obtained by dividing,
(i) the Daily Contract Quantity for that Receipt Point under this
Contract existing on each day during the contract year less
the quantity of gas which Seller failed to deliver to Buyer in
response to Buyer's requests at that Receipt Point in the
contract year, ("Adjusted Minimum Annual Quantity") by,
(ii) the aggregate of the Adjusted Minimum Annual Quantity, or
equivalent, under all of the gas purchase contracts under
which Buyer purchased gas in the contract year.
4.03 OPERATING ALLOWANCE
Buyer will use reasonable efforts to request gas at uniform daily rates of
flow. As the Purchase Obligation is calculated at the end of a contract year and
the nature of gas buying operations necessitate accuracy tolerances, Buyer shall
be deemed to have fulfilled the Purchase Obligation if the quantity of gas
requested by Buyer in the contract year is within three percent (3%) of the
Purchase Obligation. In the event that the quantity of gas requested by Buyer
differs from the Purchase Obligation by more than three percent
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(3%), the entire difference between the quantity of gas requested and the
Purchase Obligation shall be subtracted from (or added to as the case may be)
Buyer's Purchase Obligation for the next contract year. Notwithstanding the
foregoing if, in any contract year for any reason, Seller fails to deliver the
quantity of gas requested by Buyer and Buyer has requested a quantity of gas
equal to, or greater than the Purchase Obligation then Buyer shall be deemed to
have satisfied its Purchase Obligation for such contract year and the provisions
of this Section which could otherwise obligate Buyer to add to its Purchase
Obligation for the next contract year shall not apply. Buyer is not obligated to
accept deliveries of gas in excess of Buyer's request.
4.04 DECREASE IN DELIVERABILITY
(a) If Seller fails in any month to deliver to Buyer at least ninety
percent (90%) of the quantity requested by Buyer from a Receipt
Point and this failure is not excused by an event of Force
Majeure, then Buyer may reduce the Daily Contract Quantity at that
Receipt Point to the level of the average Deliverability for that
month by providing Seller with a written notice of the reduction
("Reduction Notice"). The reduction will be effective on the first
(1st) day of the month following the date of the Reduction Notice
unless, prior to this date, Seller demonstrates to Buyer's
satisfaction that the Deliverability to that Receipt Point has
been restored in whole. Any restoration after this date will be in
accordance with Section 4.05.
(b) If Buyer reduces the Daily Contract Quantity at a Receipt Point by
issuing a Reduction Notice based on Deliverability during the
first twelve (12) months following the Date of First Delivery or
following an increase in the Daily Contract Quantity pursuant to
Section 4.05, Buyer will have the option to assign to Seller a
quantity of NOVA receipt capacity equal to the amount of the
reduction. Seller agrees to accept assignment of the excess NOVA
capacity and to reimburse Buyer for any NOVA charges billed to
Buyer for this excess capacity from the effective date of the
Reduction Notice.
(c) If Buyer reduces the Daily Contract Quantity at a Receipt Point by
issuing a Reduction Notice based on Deliverability after the first
twelve (12) months
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following the Date of First Delivery or following an increase in the
Daily Contract Quantity pursuant to Section 4.05, Buyer will have
the right to dispose of NOVA receipt capacity equal to the amount of
the reduction. If Buyer disposes of this excess NOVA capacity, any
subsequent increase in the Daily Contract Quantity at that Receipt
Point will be subject to Section 4.05 and, in particular, the
ability of Seller to acquire the necessary firm NOVA receipt
capacity. Seller may request Buyer to retain this excess NOVA
capacity on their behalf provided Seller agrees to reimburse Buyer
for any costs incurred by Buyer for that excess capacity from the
effective date of the Reduction Notice until such time as the
capacity is again utilized under this Contract or until Buyer is
able, with Seller's consent, to dispose of the excess capacity.
Seller agrees that Buyer has the right to offset these NOVA costs
against amounts payable to Seller pursuant to Section 11.01.
4.05 INCREASE IN DELIVERABILITY
(a) Seller shall advise Buyer in writing as soon as reasonably
practicable, of any increase or anticipated increase in the
Deliverability to a Receipt Point ("Increase Notice"). Unless an
earlier date is agreed to by Buyer, the Daily Contract Quantity at
that Receipt Point will increase to reflect the increase in
Deliverability, effective the later of:
(i) the date that Seller is able to produce and deliver the
increased Daily Contract Quantity to that Receipt Point;
(ii) the first (1st) day of the month following sixty (60) days
from Buyer's receipt of the Increase Notice; and
(iii) the date that Buyer is in possession of firm NOVA
receipt capacity at the Receipt Point sufficient to
transport the increase in the Daily Contract Quantity.
(b) Unless otherwise agreed, Seller shall be responsible for obtaining
any incremental firm NOVA receipt capacity required to transport the
increase in
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the Daily Contract Quantity and shall assign this capacity to Buyer.
If Seller is unable to maintain the increase in the Daily Contract
Quantity for twelve (12) months, Buyer will have the right to assign
to Seller any excess NOVA capacity in accordance with Section
4.04(b).
4.06 ASSIGNMENT OF NOVA CAPACITY
In the event that Seller exercises its right under Section 11.02 of this
Contract to suspend deliveries of gas, or terminate this Contract, Seller agrees
to accept a temporary assignment of the NOVA receipt capacity from Buyer for the
period of any suspension of deliveries or, a permanent assignment in the case of
termination of this Contract.
4.07 COMMON OPERATIONS AGREEMENT
In the event that Buyer is purchasing gas from two (2) or more joint
interest producers at a common Receipt Point, Seller agrees to enter into
Buyer's then standard form common operations agreement with these other joint
interest producers.
4.08 REGULATORY RESTRICTION
If the daily quantity of gas which Seller is entitled to produce from
Seller's Lands is subject to reduction by any order, regulation or action of any
court or regulatory body for any period, this reduced quantity shall be the
Daily Contract Quantity for this period. Buyer shall be entitled to reduce the
NOVA receipt capacity in accordance with Section 4.04(c) if, in the Buyer's sole
discretion, this reduction is likely to be in effect for any sustained period.
ARTICLE V - QUALITY AND MEASUREMENT
5.01 QUALITY
The quality of the gas to be purchased shall be in accordance with the
quality standards in the NOVA Tariff. If the gas offered for delivery by Seller
at a Receipt Point fails at any time, to conform with the quality standards of
NOVA, then Buyer, at its sole discretion, may refuse to accept delivery or
purchase of this gas until correction by Seller. If, on any day during a
contract year, Buyer so refuses the gas ("Off Quality Day"), the Purchase
Obligation for that Receipt Point shall be adjusted by subtracting the number of
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Off Quality Days from the number of days in the contract year when calculating
the Adjusted Minimum Annual Quantity in Section 4.02.
5.02 MEASUREMENT
Buyer and Seller agree to accept the measurements of the total volume and
gross heating value of the gas purchased at the Receipt Point as conducted by
NOVA in accordance with the NOVA Tariff.
ARTICLE VI - DELIVERY PRESSURE
6.01 The pressure of the gas to be delivered shall be at the pressure required
under the NOVA Tariff to ensure the gas will enter the pipeline facilities of
NOVA at the Receipt Point.
ARTICLE VII - RECEIPT POINT
7.01 The Receipt Point(s) for all gas delivered under this Contract shall be
that point where the gas first enters the facilities of NOVA, as set forth in
Exhibit "B", and which may be changed by mutual agreement of the parties from
time to time during the term of this Contract.
ARTICLE VIII - POSSESSION OF AND TITLE TO GAS
8.01 Title of all gas delivered shall pass from Seller to Buyer, for the account
of Buyer, at the Receipt Point(s). Until such delivery, Seller shall be deemed
to be in control or possession of, have title to and be responsible for this
gas. After delivery, Buyer shall be deemed to be in control or possession of,
have title to, and be responsible for the gas.
ARTICLE IX - TERM
9.01 The term of this Contract shall be from the date first above written until
gas can no longer be recovered or produced from Seller's Reserves.
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ARTICLE X - PRICE
10.01 NETBACK PRICE
Subject to the other provisions in Article X, the price to be paid by
Buyer to Seller for gas delivered under this Contract shall be:
(a) during the period or periods in which an agreement between the
Governments of Alberta, British Columbia and/or Saskatchewan and the
Government of Canada exists for the purpose of establishing the
price or prices to be paid for gas purchased by Buyer (a
"Federal-Provincial Agreement"), or the price to be paid for such
gas is otherwise determined by law, the prices in effect under this
Contract for such volumes shall be the price or prices in existence
from time to time, as determined by and resulting from the
Federal-Provincial Agreement or the applicable law; and
(b) in the event that a Federal-Provincial Agreement is not in effect,
or the price to be paid for gas delivered is not otherwise
determined by law, or is in effect but does not cover all volumes
purchased by Buyer for any period of time during the term of this
Contract, Buyer shall pay Seller monthly for each unit of gas
delivered by Seller during such period a unit price (the "Netback
Price") calculated as follows:
Netback Price = GSR - TC - FFS
--------------
TGS
10.02 DEFINITIONS
For the purposes of Article X, the following definitions shall apply:
(a) "GSR" or "Gas Sales Revenue" means the sum of all revenue, including
any adjustments for prior months, received by Buyer in such month
from the resale of gas purchased from Buyer's Producer Pool to Pool
Approved Sales Contracts, less:
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(i) that portion of all demand charges or charges of a similar
type under Pool Approved Sales Contracts which relate
specifically to Buyer's costs, and
(ii) any taxes, levies or charges prescribed by law, or any
governmental body, in respect of the subject sales, and
(iii) Buyer's interest and financing costs incurred to pay the
Goods and Services Tax imposed under the Excise Tax Act
(Canada), as amended, or any successor or similar federal or
provincial legislation exigible on the purchase of gas
delivered and for which Buyer is entitled to a credit or
refund which has not yet been received; and
(iv) costs incurred by Buyer to acquire replacement gas supply
where Buyer is required to deliver gas under a Pool Approved
Sales Contract and is unable for whatever reason to obtain
supply from Buyer's Producer Pool.
(b) "TC" or "Transportation Costs" means the monthly transportation
charges of TransCanada PipeLines Limited, Foothills Pipe Lines Ltd.,
NOVA and any other transporters applicable to Pool Approved Sales
Contracts, in addition to any cost of pipeline fuel, measurement
variances and losses, taxes on the use of fuel, the carrying cost of
and changes to the value of inventory and line pack, letters of
credit and the cost of financial assurances provided to these
transporters, associated operational storage costs and other
transportation related charges as they apply to the purchase and
sale of Pool gas.
(c) "FFS" or Buyer's "Fee For Service" for any month means the sum of
Buyer's Operating Costs ("Operating Costs"), Buyer's Incentive Based
Return ("IBR") and Producer Approved Costs ("PAC") in such month.
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(d) "Buyer's Producer Pool" or "Pool" means the pool of producers who
have dedicated gas to Buyer pursuant to contracts with price clauses
substantially similar to this Article X.
(e) "Pool Approved Sales Contracts" means contracts or markets which
have been approved by Buyer's Alberta Producers as required by
Alberta law.
(f) "Buyer's Operating Costs" or "Operating Costs" include the general
and administrative costs and fixed asset expenditures incurred in
developing and administering Buyer's Producer Pool, Pool Approved
Sales Contracts and associated transportation, net of all costs
referred to in subsection 10.02 (f)
(iv) hereof, and shall be determined as follows:
(i) for the contract year commencing November 1, 1997, a monthly
amount equal to six hundred and sixty thousand dollars
($660,000),
(ii) for the contract years commencing November 1, 1998 and
thereafter, the monthly amount shall be increased by a factor
equal to the increase in the Canadian Consumer Price Index in
the 12 month period immediately preceding such contract year,
plus one and one half percent (1.5%).
(iii) for the contract years commencing November 1, 1997 and
thereafter, Buyer's Operating Costs shall also be decreased or
increased by the following:
A. Buyer's over-recovery or under-recovery of its cost of
service for the contract year ending October 31, 1997,
as determined by the APMC in its final annual audit, and
B. any surcharges paid or refunds received by Buyer as a
result of a revision to income taxes or any other
eligible Cost of Service components over-recovered or
under-recovered in the period prior to November 1, 1997.
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All adjustments to Operating Costs pursuant to subsections
10.02 (f) (iii) (A) and (B) above shall be made over the
remainder of the year in which the adjustments were identified
or period outlined above, unless Buyer's Producer Pool
approves a longer period, and shall have no effect on the
level of the Operating Costs in subsequent years.
(iv) In each month commencing November, 1997, the amount calculated
above shall be reduced by that portion of all demand charges
or similar charges recovered from Pool Approved Sales
Contracts in such month which relate to Buyer's costs.
(g) Buyer's "Incentive Based Return" or "IBR" shall consist of a charge
based on Buyer's load factor and price performance and shall be
calculated in the following manner:
(i) If, in a contract year, Buyer pays to the Pool a sum of money
equal to the amount that would be paid if Buyer purchased gas
from the Pool at a load factor of eighty percent (80%) and at
a Netback Price equal to the Alberta Reference Price (ARP)
(the "Base Revenue"), and if Buyer pays a Netback Price equal
to or greater than the ARP, Buyer shall earn a return of
eighty-five thousand dollars ($85,000) per month (the "Base
Return"). For the purpose of determining whether Buyer has
earned the Base Return, the Netback Price shall be calculated
prior to the deduction of the Base Return.
(ii) In addition to the Base Return, for each dollar of revenue
above the Base Revenue plus the Base Return which is paid to
the Pool (the "Incremental Revenue"), Buyer shall retain that
percentage set forth in the table contained in Schedule "X" to
this Contract (the "Incremental Return"), subject to the
limits shown on the Schedule. For the purpose of determining
the Incremental Return, the Incremental Revenue shall be
calculated prior to the deduction of the Incremental Return.
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(iii) If Buyer's sales fall below a load factor of eighty percent
(80%) in any year because of a failure to obtain producer
support for sales, in all calculations to determine the IBR,
the Base Revenue shall be calculated using Buyer's actual
purchase load factor in such year. The Incremental Revenue
shall be determined by multiplying the difference between the
actual netback price paid by Buyer in such year and the ARP,
by the number of units sold. The Incremental Return shall be
calculated by multiplying the Incremental Revenue by the
applicable percentage outlined in Schedule "X" for the amount
by which the actual netback price paid exceeded the ARP.
(iv) For the purpose of determining the IBR, any replacement gas
supply costs which have been deducted from GSR pursuant to
Section 10.02 (a) (iv) shall be included as revenue for the
period in question.
(v) Buyer shall estimate the level of the IBR each month of the
contract year and adjust it based on the performance of Buyer
to the end of such month and projections for the remainder of
the year. If Buyer has over or under-collected the IBR during
such year, as indicated by an audit conducted pursuant to
Section 10.04, the amount over-collected or under-collected
shall be credited to, or recovered from, the Pool in the month
following the date of the auditor's report.
(h) "PAC" or "Producer Approved Costs" means any costs which Buyer's
Producer Pool has approved for inclusion in the calculation of the
monthly Netback Price through a producer vote conducted pursuant to
Section 10.05. These costs are intended to cover extraordinary items
which are not included in Buyer's FFS and may include the following:
(i) costs of arbitration under a Pool Approved Sales Contract or
under a gas purchase contract(s),
(ii) expenses associated with litigating a regulatory decision or
process or a Pool Approved Sales Contract issue,
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(iii) any transportation costs or other transportation related
expenses which are not included within Transportation Costs,
and
(iv) any other extraordinary costs which Buyer may submit to the
Pool for inclusion in this category.
(i) "TGS" or "Total Gas Sold" means the total quantity of gas sold,
including fuel, by Buyer pursuant to all Pool Approved Sales
Contracts in the month in question.
10.03 RENEGOTIATION RIGHTS
(a) Buyer shall have the right to propose changes to the FFS component
of the Netback Price Clause for Seller's approval and the approval
of all other Sellers in Buyer's Producer Pool by way of a producer
vote to be effective for the contract year commencing November 1,
2000 and every second contract year thereafter. If Buyer wishes to
exercise this right, Buyer shall deliver a notice containing Buyer's
new proposal to all Sellers in Buyer's Producer Pool by the June 1st
preceding the November 1st on which the new proposal is to be
effective. If Buyer's proposal is not accepted by the Pool, Buyer
shall make a second proposal to the Pool. If the second proposal is
not accepted by the Pool, Buyer may submit the matter to arbitration
pursuant to Section 10.06 or, alternatively, may elect to have an
independent third party determine Buyer's Cost of Service in the
same manner as the APMC did in the period prior to November 1, 1997,
with the additional mandate to determine and implement an
appropriate mechanism for establishing Buyer's return. Buyer shall
seek the approval of the Pool for the independent third party. If
the Pool approves the independent third party, the Netback Price
Clause shall be deemed to be amended to incorporate the independent
third party's determination of Buyer's Fee For Service in place of
the Fee For Service defined in Section 10.02 (c).
(b) Seller may request a change to the FFS component of the Netback
Price Clause to be effective for the contract year commencing
November 1, 2000
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and every second contract year thereafter. Seller must deliver its
notice requesting such change no later than the June 1st preceding
the November 1st in question. If Buyer receives notice from Sellers
representing more than 30% of the volumes in Buyer's Producer Pool,
Buyer shall conduct a producer vote to determine if there is
sufficient support for a change in the agreement. If the Pool votes
in favour of an amendment, Buyer shall submit a new Netback Pricing
proposal to the Pool within 30 days. If this proposal is not
accepted, the procedure outlined in subsection (a) above shall be
followed.
(c) If Pool sales volumes increase by at least ten percent (10%) in any
contract year, or increase in aggregate by at least fifteen percent
(15%) over any two successive contract years, Buyer shall have the
right to seek a renegotiation of the FFS component of the Netback
Price Clause effective on the November 1 immediately following the
year or years in which the increase occurred by serving notice
during the month of June prior to the end of such year(s). Buyer's
notice may be sent based on the actual sales to June 1st in such
year along with estimates for the sales for the remainder of such
year. If Buyer exercises such right, the procedure outlined in
subsection (a) above shall be followed.
(d) If NOVA changes its rate design from the current postage stamp
methodology, Buyer shall have the right to seek a renegotiation of
the Netback Price Clause. If Buyer exercises such right, the
procedure outlined in subsection (a) above shall be followed.
(e) If the ARP is no longer published, Buyer shall have the right to
substitute a replacement index which conveys the same information
regarding natural gas prices in Alberta. If there is no such
replacement index, Buyer shall propose an alternative index to
Seller using the procedure outlined in subsection (a) above.
(f) Except for a replacement of the ARP pursuant to Section 10.03 (e)
which shall be effective retroactively to the date the ARP or its
replacement was no
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longer published, any redetermined Netback Price Clause shall be
effective on the later of the November 1st following the date the
renegotiation process was commenced or the first day of the month
following the approval of Buyer's Producer Pool, the decision of the
arbitrator(s) or the determination by the independent third party.
Until such time, the previously existing Netback Price Clause shall
remain in effect.
10.04 ANNUAL AUDIT
(a) By the April 30th following each contract year hereunder, Buyer
shall provide to Seller an auditors' report which shall, for the
just completed contract year:
(i) verify that Buyer's Operating Costs in the preceding contract
year were calculated in accordance with this Agreement and
properly deducted from Gas Sales Total Pool Revenue in
calculating the Netback Price,
(ii) verify the calculation of the return due to Buyer under the
IBR along with a reconciliation of the amount due with the
amount deducted by Buyer from the Netback Price during the
year,
(iii) if Buyer claims that it was unable to sell gas at a load
factor of eighty percent (80%) as a result of a failure
to obtain producer support for sales, verify Buyer's
claim and verify that the Base Return and Incremental
Return were calculated in accordance with subsection
10.02 (g) (iii),
(iv) verify the amount of any PAC deductions from the netback
calculation and that the deductions were consistent with the
producer approval granted,
(v) verify the volume and price of any replacement gas purchased
to meet sales obligations when pool supply was not available,
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(vi) verify that any adjustments made to Operating Costs pursuant
to subsections 10.02 (f) (iii) (A) and (B) have been
calculated in accordance with the provisions of this Article
X, and
(vii) report on the number of Sellers, if any, who requested a
change to the Netback Price Clause in those years where
Sellers have such rights under the Contract.
(b) If the auditor's report indicates the Buyer either under-collected
or over-collected any of the elements of the Fee For Service during
the period audited, Buyer shall make adjustments to the Netback
Price to compensate for the over or under collection.
(c) The auditor appointed by Buyer to prepare the report referred to
above shall be approved by the Pool in a vote to be conducted
pursuant to Section 10.05 hereof. Buyer shall submit a list of names
of national accounting firms, who have indicated an interest in
performing the audit, for the Pool to select from and the firm which
receives the highest number of votes shall be retained.
10.05 PRODUCER VOTE MECHANISM FOR NETBACK PRICE CLAUSE
(a) If a producer vote is to be conducted under this Article X on a
revision to the Netback Price Clause, Buyer shall conduct the vote
in accordance with the NATURAL GAS MARKETING ACT of Alberta, as
amended or successor legislation ("NGMA"), provided however, that
all pool producers shall participate in the vote as if they were
Alberta producers. If the NGMA no longer provides for a producer
vote process, Buyer must receive attain the support of at least
fifty percent (50%) of those actually voting both by number and
volume in order to pass a vote.
(b) The results of the vote shall be verified by the APMC or, if it is
not available to perform this function, by the third party auditors.
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(c) Buyer and Seller shall be bound by a finding of producer support
whether verified by the APMC or the third party auditor.
10.06 ARBITRATION
(a) If Buyer submits a new Netback Price proposal to arbitration
pursuant to Section 10.03 (a), an arbitration using a single
arbitrator shall be conducted between Buyer and all Sellers in
Buyer's Producer Pool. The arbitration shall be governed by the
following principles:
(i) Buyer shall submit a list of at least three (3) potential
arbitrators to the Pool for its approval. All arbitrators
submitted shall be knowledgeable with respect to the marketing
of Canadian natural gas and issues relating to the recovery of
costs by other buyers of gas in Western Canada performing
services substantially similar to the services performed by
Buyer hereunder. The arbitrator receiving more than fifty
percent (50%), by volume, of the votes cast shall be selected.
If no arbitrator receives the minimum amount of support, Buyer
may apply to the Court of Queen's Bench of Alberta to have a
single arbitrator appointed.
(ii) The arbitrator shall make all rules respecting the conduct of
the arbitration deemed necessary to ensure that all Sellers in
Buyer's Producer Pool have an opportunity to present their
views to the Arbitrator. The arbitrator may designate a
Seller, or group of Sellers, to act on behalf of the Pool.
(iii) The arbitrator shall proceed expeditiously to hear and
determine the issues raised by the arbitration. The standard
for the arbitrator will be to decide on a cost recovery
mechanism which is comparable to the cost recovery of other
buyers of gas in Western Canada performing services
substantially similar to the services performed by Buyer
hereunder and shall provide a fair opportunity for Buyer to
earn a reasonable return.
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(iv) The costs of any arbitration shall be passed through to the
Pool as an addition to Buyer's Operating Costs in the year in
which the arbitration occurs but shall not affect the level of
the Operating Costs in the following years.
(v) The decision of the arbitrator shall be delivered in writing
within ninety (90) days of the arbitrator's appointment. The
decision shall be final and binding upon the parties and shall
remain in effect until changed pursuant to Section 10.03
hereof.
10.07 SETTLEMENT PAYMENTS
If Buyer receives a settlement payment from a purchaser under a Pool
Approved Sales Contract for the resale by Buyer of Pool gas, Buyer shall
distribute that payment to the Pool in an equitable manner having regard to all
the circumstances existing at the time. A settlement payment means any payment
by a repurchaser to Buyer in exchange for a release from future gas purchase
obligations under a Pool Approved Sales Contract, or other payments of a similar
nature. Settlement payments shall be distributed separately from payments for
gas and shall not form part of the Netback Price determined hereunder.
10.08 USE OF ESTIMATES FOR CALCULATING NETBACK PRICE
(a) Buyer shall have the right to use reasonable estimates of those
costs, volumes and revenues for which actuals are not available, in
order to calculate the Netback Price on a timely basis. Any
adjustments or revisions for actuals shall be included in the
netback calculation following the receipt of the actuals.
(b) In determining the cost of financing the Goods and Services Tax
carrying costs, the costs of linepack and other financing charges,
Buyer shall use the prime rate of interest as published by the Bank
of Montreal for such month, plus one percent (1%).
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10.09 BASIS OF PAYMENT
(a) The Netback Price payable for the gas purchased shall be expressed
in Canadian dollars per gigajoule. The number of gigajoules shall be
determined by multiplying the gross heating value by the volume
delivered in thousands of cubic metres, both as determined in
accordance with the measurement provisions of this Contract.
(b) Notwithstanding contrary provisions in this Contract, if a
transporting pipeline changes the basis or method of measurement,
or, if in order to comply with or by reason of any present or future
law, rule, regulation or order, of the Energy Utilities Board of the
Province of Alberta or any other governmental authority having
jurisdiction, now or during the term of this Contract, the basis or
method of measurement of gas delivered is changed, then the price
for gas purchased shall be adjusted to compensate for the change in
the basis or method of measurement. Therefore, the total amount of
money payable for quantities of gas purchased, according to the
measurement provisions of this Contract, shall remain unaffected by
this change in the basis or method of measurement.
(c) For greater certainty, the parties acknowledge that the price of gas
sold to the Buyer calculated pursuant to the Contract is exclusive
of Goods and Services Tax and the Buyer shall pay to the Seller, in
addition to the payments calculated pursuant to this Contract, any
Goods and Services Tax exigible on the sale of gas to the Buyer
under this Contract and which taxes are required to be paid by Buyer
and collected by the Seller and remitted to the Government of
Canada. Seller shall provide Buyer with all of the information
required by the Buyer to enable it to claim a refund of any Goods
and Services Tax paid to the Seller.
10.10 RESALE PRICE ARBITRATION
(a) The gas sold under this Contract is acknowledged as being netback
gas for the purposes of the NGMA and where the selling price or
method for
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determining the selling price for gas in a resale contract between
Buyer and one (1) of Buyer's sales customers has been determined by
arbitration in accordance with the terms of the resale contract,
Seller agrees to accept the resale price, or method for determining
the price, determined by arbitration for the purposes of calculating
the Netback Price under this Contract.
(b) In the event that the selling price or the method for determining
the selling price for gas in a resale contract between Buyer and one
(1) of Buyer's sales customers is to be determined by arbitration,
Buyer, when seeking Sellers' approval for the inclusion of the costs
of such arbitration as Producer Approved Costs, shall advise Seller
of the arbitrator Buyer has selected to represent Buyer on the
arbitration panel.
10.11 ENDORSEMENT OF PREVIOUS PRODUCER APPROVALS
(a) Seller accepts and endorses the terms and conditions of Pool
Approved Sales Contracts which were approved prior to the effective
date of this Contract.
(b) Sellers delivering gas to Buyer from lands situated outside the
Province of Alberta accept and endorse the terms and conditions of
Pool Approved Sales Contracts which are approved in the future by
Alberta producers.
ARTICLE XI - XXXXXXXX AND PAYMENTS
11.01 XXXXXXXX AND PAYMENTS
Seller, or Seller's nominee, shall provide Buyer by the fifteenth (15th)
day of each month ("Billing Month") or such later day as Buyer specifies in a
Split Allocation Form delivered to Seller, and confirm in writing, the quantity
and the energy content of gas delivered by Seller during the preceding month
("Sale Month").
On or before the twentieth (20th) day of each Billing Month, Buyer will
provide Seller a written statement for the Sale Month showing the quantity and
the energy content of gas delivered by Seller, and the total amount payable by
Buyer. Buyer shall pay Seller
- 26 -
the amount payable for each Sale Month, on the twenty-fifth (25th) day of each
Billing Month, provided however, that if the twenty-fifth (25th) is not a
Business Day, payment shall be made on the next Business Day following the
twenty-fifth (25th). Each payment shall be made in Canadian funds to Seller in
Calgary, or at any other place in Canada, as Seller may designate by written
notice served by Seller on Buyer.
11.02 FAILURE TO PAY
If Buyer fails to make payment to Seller when due, interest shall accrue
at an annual rate of interest which is equal to one percent (1%) above the
annual prime lending rate of the Canadian chartered bank used by Buyer, in
effect as of the date when such payment is due. Interest shall accrue until
payment is made. Payment shall not be due until the following month if Seller
fails to provide Buyer with the information required under Section 11.01 by the
date specified therein. If the failure to pay continues for fifteen (15) days,
Seller, in addition to all other remedies, may suspend deliveries of gas under
this Contract. If this failure continues for an additional fifteen (15) days,
Seller may, in addition to any other rights Seller may have, terminate this
Contract. However, in order for Seller to have the right to suspend deliveries
or terminate this Contract, Seller must first have notified Buyer in writing,
delivered by hand or courier, of its intent to do so five (5) days prior to
exercising either or both of such rights and must permit Buyer to pay the amount
due to Seller within this five (5) day period.
11.03 ERRORS AND ADJUSTMENTS
Any errors discovered in any statement issued by Buyer shall be reported
and corrected promptly. If there is a discrepancy between the confirmation
provided to Buyer by Seller of the quantity and energy content of gas delivered
to Buyer in any month and the same information provided to Buyer by the
measuring pipeline at the Point of Delivery, payment shall be based on the
information provided by such pipeline. Buyer shall not be required to make
adjustments relating to the quantity of gas delivered after the earlier of
thirteen (13) months from the date of the statement or such earlier period which
may be adopted by the measuring pipeline at the Point of Delivery for the
processing of adjustments.
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11.04 INSPECTION OF RECORDS
Buyer and Seller shall have the right to inspect and examine at all
reasonable times the records and charts of the other party pertaining to the
purchase and sale of gas and, unless the parties otherwise agree, each party
shall preserve all charts and records for at least twenty four (24) months.
ARTICLE XII - LAWS AND REGULATORY BODIES
12.01 REGULATION
The rights and obligations of Buyer and Seller under this Contract are
subject to all applicable present and future laws, rules, regulations and orders
of any legislative body or duly constituted authority.
12.02 LAW OF CONTRACT
This Contract shall be construed and interpreted exclusively in accordance
with the laws of Alberta. The courts of Alberta shall have exclusive
jurisdiction in all matters contained here.
ARTICLE XIII - FORCE MAJEURE
13.01 FORCE MAJEURE DEFINED
Subject to Section 13.02, Seller and Buyer will be relieved of those
obligations under this Contract which they are prevented from carrying out due
to, and to the extent of, a Force Majeure condition. Force Majeure conditions
are those events or conditions not caused by, and beyond the reasonable control
of, the affected party which prevent such party from carrying out all or a
portion of its obligations under this Contract. Force Majeure conditions do not
include financial impracticability or financial inability but includes, without
limitation: acts of God, war, insurrection or other unlawful acts against public
order or authority; explosions, fire, freezing or other accidents or acts of
sabotage causing breakage of or damage to machinery, lines of pipe or field and
delivery facilities, or temporary failure of gas supply; any acts or omissions
(including failure to take gas) of a purchaser of gas from Buyer which are
excused by an event or condition of Force Majeure; the interruption,
prorationing or curtailment of transportation service to Buyer or Buyer's market
for any reason, even if the transporter does not declare Force Majeure; the
inability to obtain or
- 28 -
maintain licenses or other necessary regulatory authorizations or where
continued performance would be in violation of an order, legislation, regulation
or similar direction of a government, board, agency or court having
jurisdiction, which has been resisted in good faith.
13.02 WHERE FORCE MAJEURE UNAVAILABLE
Neither party shall be entitled to the benefit of Section 13.01 to the
extent that any of the following circumstances occur:
(a) the failure to perform obligations under the Contract was caused by
the contributory negligence of the party claiming suspension;
(b) the failure was caused by the party claiming suspension having
failed to remedy the Force Majeure condition and resume the
performance of its obligations with reasonable dispatch;
(c) the failure was caused by lack of funds or with respect to the
payment of any amount or amounts then due; and
(d) the non-performing party does not give notice and full particulars
of the Force Majeure condition to the other as soon as possible
after the occurrence of this condition.
13.03 NOTICE OF REMEDY
The party claiming suspension of their obligations under this Contract
shall also give notice, as soon as possible after the Force Majeure condition is
remedied, that the condition has been remedied and that the party has resumed,
or is ready to resume, the performance of its obligations.
13.04 DISCRETION RE: LABOUR DISPUTES
Notwithstanding anything to the contrary in this Article XIII, express or
implied, the parties agree that the settlement of strikes, lockouts and other
industrial disturbances shall be entirely within the discretion of the
particular party involved and that this party may make settlement at that time
and on those terms and conditions as it may deem to be
- 29 -
advisable and no delay in making this settlement shall deprive the party of the
benefit of Section 13.01.
13.05 ADJUSTMENT OF PURCHASE OBLIGATION
If, during a contract year Buyer is unable to purchase gas from Seller due
to a Force Majeure condition ("Force Majeure Day"), the Purchase Obligation
shall be adjusted by subtracting the number of Force Majeure Days from the
number of days in the contract year when calculating the Adjusted Minimum Annual
Quantity in Section 4.02.
ARTICLE XIV - WARRANTY OF TITLE
14.01 WARRANTY OF TITLE
Seller represents and warrants that it has full right and authority to
enter into this Contract, that all of the leases are in full force and effect
and are capable of being maintained and, subject to Section 3.01(a), will be
maintained by Seller in full force and effect pending commencement of and during
actual delivery of gas; that all gas committed and delivered is owned or
controlled by Seller free and clear of all liens, encumbrances and claims; that
Seller has the right to sell all of Seller's Reserves dedicated pursuant to
Section 15.01 for the duration of this Contract; that title to gas will pass to
Buyer free from all liens and adverse claims; and, that Seller is entitled to
drill for, produce or sell gas from Seller's Lands.
14.02 INDEMNITY
Seller shall at all times have the obligation to make settlements for all
royalties and overriding royalties and payments to mineral and royalty owners
due now or subsequently under the leases, in accordance with those terms, and to
make settlements with all other persons having any ownership or interest in the
gas sold. Seller agrees to indemnify Buyer and to prevent Buyer from being
affected by any suits, actions, debts, accounts, damages, costs, losses and
expenses arising from adverse claims of any person to the gas or to royalties,
taxes, licence fees or charges which are applicable to the gas before the title
passes to Buyer or which may be levied and assessed upon the sale of the gas to
Buyer. In the event of any adverse claim of any character whatsoever being
asserted in respect to any of the gas, Buyer may retain, as security for the
performance of Seller's obligations
- 30 -
under this Section, the purchase price up to the amount of a claim until the
claim has been finally determined or until Seller has furnished a bond to Buyer
in the amount of the claim.
ARTICLE XV - GAS RESERVES OF SELLER
15.01 DEDICATION OF RESERVES
Seller dedicates Seller's Lands and Seller's Reserves exclusively to the
performance of this Contract. In addition, subject to mutual agreement, Seller
may substitute lands and reserves to maintain the then existing DCQ provided the
reserves are of the same quality. Except as specifically provided otherwise,
Seller agrees to sell and deliver to Buyer all of Seller's interest in the gas
produced from Seller's Reserves. Seller shall notify Buyer of any change in
interest or ownership of Seller's Lands and Seller's Reserves. Seller shall not
dispose, cause, or allow a disposition, of any interest in Seller's Lands unless
the interest is made subject to this Contract and the assignee agrees to be
bound by the terms of this Contract.
15.02 FURNISHING OF INFORMATION
Seller shall, from time to time, at Buyer's request, furnish to Buyer all
geological, geophysical, engineering and production data available to Seller
that may be required by Buyer to conduct a study of Seller's Reserves and
Deliverability under this Contract. This data shall include, but not be limited
to, drill stem tests, core analysis, sample logs, well logs, drilling and
completion reports, pressure data, production data and flow potential data on
all xxxxx now or hereafter drilled on Seller's Lands. Buyer agrees to keep this
such data confidential if requested to do so by Seller.
ARTICLE XVI - ARBITRATION
16.01 Any controversy arising out of this Contract where arbitration is
expressly required under this Contract, and in any other case if the parties
both agree, shall be submitted to arbitration and the following principles shall
apply to this arbitration:
(a) Upon written demand by either party, the parties shall meet and
attempt to appoint a single arbitrator. If the parties are unable to
agree on a single arbitrator, then, upon written demand by either
party and within ten (10)
- 31-
days of this demand, each party shall name an arbitrator and the two
(2) arbitrators shall promptly choose a third (3rd) arbitrator. If
either party fails to name an arbitrator within ten (10) days of
this demand, then the second (2nd) arbitrator shall be appointed by
any Justice of the Court of Queen's Bench of Alberta. If the two (2)
arbitrators shall fail within ten (10) days from their appointment
to agree upon and appoint the third (3rd) arbitrator, then upon
written application by either party, the third (3rd) arbitrator
shall be appointed by any Justice of the Court of Queen's Bench of
Alberta.
(b) The arbitrator or arbitrators shall proceed immediately to hear and
determine the question or questions in dispute. The decision of the
single arbitrator shall be made within forty-five (45) days after
that arbitrator's appointment, subject to any reasonable delay due
to unforeseen circumstances. The decision of the arbitrators, or a
majority of them, shall be made within forty-five (45) days after
the appointment of the third (3rd) arbitrator, subject to any
reasonable delay due to unforeseen circumstances. However, in the
event the single arbitrator fails to make a decision within sixty
(60) days after their appointment or if the arbitrators, (or a
majority of them), fail to make a decision within sixty (60) days
after the appointment of the third (3rd) arbitrator, then either
party may elect to choose a new arbitrator or arbitrators as if none
had previously been selected.
(c) The decision of the arbitrator or arbitrators (or a majority of
them), shall be drawn up in writing and signed by the single
arbitrator or by the arbitrators (or a majority of them) and shall
be final and binding upon the parties on any question or questions
submitted to arbitration. The parties agree to perform the terms and
conditions of this decision.
(d) The compensation and expenses of a single arbitrator or a third
(3rd) arbitrator shall be paid in equal portions by Buyer and
Seller, and Buyer and Seller shall each pay the compensation and
expenses of its named arbitrator when three (3) arbitrators are
selected.
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ARTICLE XVII - NOTICES
17.01 Every notice, statement or xxxx provided for in this Contract shall be in
writing and delivered personally, by courier, first class mail, or facsimile to
such party's address as follows:
Seller: Neutrino Resources Inc.
0000, 000 - 0xx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx
X0X 0X0
Buyer: ProGas Limited
0000, 000 Xxxxx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx
X0X 0X0
Either party may change its address from time to time by giving written
notice of the change to the other party. Any notice, statement or xxxx or other
document delivered by mail shall be deemed to have been effectively delivered to
the addressee at the end of the fifth (5th) business day after the date of
mailing. Any notice, statement, xxxx or other document delivered by hand or
courier shall be deemed delivered when delivered to the addressee and confirmed
by record of the party making the delivery. In the case of a transmission by
telecopy or other similar means, delivery shall be when receipt has been
verified. Whenever possible, all notices shall first be delivered by telex,
telecopier or courier.
ARTICLE XVIII - OTHER
18.01 NON-WAIVER OF FUTURE DEFAULT
No waiver by Buyer or Seller of any default by the other under this
Contract shall operate as a waiver of a future default, whether of a similar or
different character.
- 33 -
18.02 ASSIGNMENT
This Contract shall bind and enure to the respective successors and
assigns of the parties, but no assignment shall release either party from its
obligations without the written consent of the other party which consent shall
not be unreasonably withheld. Nothing in this Contract shall prevent either
party from pledging or mortgaging its rights as security for its indebtedness.
18.03 HEADINGS
The headings used in this Contract are inserted for reference purposes
only and are not to be considered or taken into account in construing the terms
or provisions of any Article and are not to be deemed in any way to modify,
explain or qualify the effect of any terms or provisions.
18.04 UNITS OF MEASUREMENT
All units of measurement in this Contract are and shall be expressed in
the International System of Units (SI units). In some cases, Imperial units have
been indicated in parenthesis for reference purposes only. In the case of a
discrepancy between the indicated values, the SI units shall be taken as
correct.
18.05 NUMERICAL REFERENCES
Unless the context otherwise requires, words importing the singular
include the plural and vice versa.
18.06 TIME OF ESSENCE
Time shall be of the essence.
18.07 USAGE OR CUSTOM
Words, phrases or expressions which are not defined and which have an
accepted meaning in the usage or custom of the business of exploration,
development, production, transportation, distribution or sale of gas shall have
that meaning.
- 34 -
18.08 SEVERANCE
If any provision of this Contract shall be held invalid, illegal or
unenforceable to any extent and for any reason by a court of competent
jurisdiction, the remainder of this Contract shall not be affected and shall be
enforceable to the full extent permitted by law.
18.09 ENTIRE AGREEMENT
The Contract shall be the entire agreement and there is no representation,
warranty, collateral agreement or condition affecting this Contract except as
expressed in it. Any amendment or modification shall be in writing executed by
the parties.
18.10 EXECUTION IN COUNTERPART
This Contract may be executed in counterpart, no one copy of which need be
executed by all parties. When a counterpart has been executed by each of the
parties, all copies together shall constitute one agreement and shall be a valid
and binding agreement among the parties as of the day and year first written
above.
THEREFORE, the parties have executed this Gas Purchase Contract, effective as of
the date first written above.
NEUTRINO RESOURCES INC.
Per: /s/ XXXXX XXXXXXXXXXX
Title: Executive Vice President
Per:________________________________
Title: _____________________________
Date Executed:______________________
PROGAS LIMITED
Per:________________________________
Title: _____________________________
Per:________________________________
Title: _____________________________
Execution Date:_____________________
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This page is the execution page to a Gas Purchase Contract dated November 1,
1997 between Neutrino Resources Inc. and ProGas Limited in the Pine
Creek/Windfall Area.
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SCHEDULE "X"
Annualized ProGas Netback compared to Alberta Reference Price
L Load Factor Average +Avg.-2% +2%-4% +4%-6% +6%-8% +8%-10% +10%-12% +12%-14% +14%-16% +16%-18% 18% &
-% =ARP Above
O 97.6-100 3 3.1 3.2 3.3 3.5 3.75 4 4.25 4.5 4.75 5
A 95.1-97.5 3 3.1 3.2 3.3 3.5 3.75 4 4.25 4.5 4.75 5
D 92.6-95 3 3.1 3.2 3.3 3.5 3.75 4 4.25 4.5 4.75 5
90.1-92.5 3 3.1 3.2 3.3 3.5 3.75 4 4.25 4.5 4.75 5
F 87.6-90.0 3 3.1 3.2 3.3 3.5 3.75 4 4.25 4.5 4.75 5
A 85.1-87.5 3 3.1 3.2 3.3 3.5 3.75 4 4.25 4.5 4.75 5
C 82.6-85.0 3 3.1 3.2 3.3 3.5 3.75 4 4.25 4.5 4.75 5
T 80.0-82.5 BASE 3.1 3.2 3.3 3.5 3.75 4 4.25 4.5 4.75 5
REVENUE
O 77.6-79.9 3.2 3.3 3.5 3.75 4 4.25 4.5 4.75 5
R Below 77.6 3.5 3.75 4 4.25 4.5 4.75 5
PRICE
1
EXHIBIT "A"
To a Gas Purchase Contract made as of the ____ day of ___________________,
19______, between , as "Seller", and ProGas Limited, as "Buyer" in the Area.
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Seller owns or controls in the stated percentage interest(s) in the following
described lands and zones in the Area in the Province of Alberta:
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LEGAL DESCRIPTION ZONE(S) SELLER'S INTERESTS
----------------- ------- ------------------
Xxxxxxxx 000, Xxxxx 00, X0X
All Zones to Base 90.5794%
of Bluesky-Bullhead
All of Section 15
Township 057, Range 18, W5M
All Zones to Base 37.6343%
of Bluesky-Bullhead
All of Section 16
EXHIBIT "B"
To a Gas Purchase Contract made as of the 1st day of November, 1997, between
Neutrino Resources Inc., as "Seller", and ProGas Limited, as "Buyer" in the Pine
Creek/Windfall area.
FIELD Receipt Point Target Date of First Initial DCQ
Delivery Deliverability 103M3/D
000x0/x
Xxxx Xxxxx/
Xxxxxxxx Xxxxx #0000 November 1, 1997 115.0 115.0
================ ============== =================== ================ =========
Aggregate DCQ as at November 1, 1997 =115.0 103m3/d
Exhibit "B" as at November 1, 1997
