Exhibit 10.9
AGREEMENT
This Agreement is entered into this the ____ day of December, 1996, between
RAINBOW PIPE LINE COMPANY ("RAINBOW") and MADISON PIPE LINE COMPANY ("MADISON"),
together, "THE COMPANIES".
1.) Both Rainbow and Madison own gathering systems in the Ft. Trinidad
area of Xxxxxxx, Xxxx and Houston Counties, Texas. Currently, each company
maintains an operating staff. Operators who deliver gas to the system are
required to dehydrate and compress the gas from each well to meet the
Companies' downstream specifications.
2.) The Companies desire to enter into a mutual agreement whereby they
can share each others assets, provide additional service in compression and
dehydration, jointly market the gas throughput and cut expenses. The
project shall be called the "FT. TRINIDAD PIPELINE".
3.) In furtherance of the goals set out in Paragraph 2, the Companies
agree as follows:
A.) PIPELINES - Rainbow currently owns the pipelines shown in Blue on
Exhibit "A" attached hereto. Madison currently owns the pipelines
shown in Red on Exhibit "A" attached hereto. Each party shall continue
to own the pipelines and metering stations it currently owns, during
the term of this Agreement. Each party shall, however, make available
to Ft. Trinidad Pipeline the
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use of throughput in any of the lines shown on Exhibit "A" Central
Facility.
B.) COMPRESSION - The Companies shall construct a central compression
and dehydration facility near Seven J Well #20 (XXXXXXXXX CENTRAL
COMPRESSION STATION). The station shall be operated as a part of the
Ft. Trinidad Pipeline. The costs, in equipment, labor or dollars shall
be split equally between the Companies. The Companies shall jointly
own the facility in equal shares.
C.) OPERATOR - The Ft. Trinidad Pipeline and the Xxxxxxxxx Central
Station shall be operated by Rainbow Pipe Line Company. For this
service, Rainbow shall receive an operating fee overhead equal to
$2,000 per month from the project owners.
D.) COSTS - The following costs shall be apportioned to the owners in
their respective ownership percentages:
i.) Operating costs of the Ft. Trinidad Pipeline and
Xxxxxxxxx Central Station, including direct labor,
supervision, and associated costs.
ii.) Repair and replacement of Ft. Trinidad Pipeline and
Xxxxxxxxx Central Station. Repair and replacement items of
the pipeline shall become the property of the owner of
that section of pipeline. Repair and replacement items of
Xxxxxxxxx Central Station shall be jointly owned.
iii.) New construction on the pipeline system shall be
negotiated between the Companies
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on a project by project basis, taking into account the
location, size and profitability of the project.
iv.) New construction on the Xxxxxxxxx Central Station shall be
undertaken on an approved AFE basis and shall be jointly
owned, provided that no written AFE is required if the
estimated expenditure is less than $10,000.
v.) Depreciation on the pipelines shall remain with the owner
of each section of pipeline. Depreciation on Xxxxxxxxx
Central Station shall be for the joint account.
vi.) Ad Valorem taxes shall remain with the owner of each
section of pipeline. Ad Valorem taxes on Xxxxxxxxx Central
Station shall be for the joint account.
E.) REVENUES - The following revenues shall be apportioned to the
owners in their respective ownership percentages:
i.) Revenue from sales of gas.
ii.) Revenue from sales of natural gas liquids.
iii.) Any transportation, dehydration or compression revenues
received by the project.
iv.) Any other revenues generated by the project.
F.) PURCHASE CONTRACTS - The contracts which Rainbow and Madison have
with producers shall become the property of the joint account,
provided however that upon dissolution of the project, each existing
contract shall revert and become the property of the company whose
pipeline connects to that well.
G.) SALE CONTRACTS - Gas and natural gas liquids from the
Ft. Trinidad Pipeline and the Xxxxxxxxx Central
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Station shall be jointly marketed. Any sale contracts of either party
shall become the property of the joint account.
4.) TERM - The term of this contract shall be for one year from December
1, 1996, and from month to month thereafter, until canceled by one party
giving three (3) calendar months written notice to the other party of its
intent to terminate.
5.) IRS CODE - This agreement is not intended to create, and shall be
construed to create, a relationship of partnership or an association for
profit between or among the parties hereto. Notwithstanding any provision
herein that the rights and liabilities hereunder are several and not joint
or collective, or that this agreement and operations hereunder shall not
constitute a partnership, if, for federal income tax purposes, this
agreement and the operations hereunder are regarded as a partnership, each
party hereby affected elects to be excluded from the application of all of
the provisions of Subchapter "K", Chapter 1, Subtitle "A", of the Internal
Revenue Code of 1954, as permitted and authorized by Section 761 of the
code and the regulations promulgated thereunder. Operator is authorized and
directed to execute on behalf of each party hereby affected such evidence
of this election as may be required by the Secretary of the Treasury of the
United States or the Federal Internal Revenue Service, including
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specifically, but not by way of limitation, all of the returns, statements,
and the data required by Federal Regulations 1.761. Should there be any
requirement that each party hereby affected give further evidence of this
election, each such party shall execute such documents and furnish such
other evidence as may be required by the Federal Internal Revenue Service
or as may be necessary to evidence this election. No such party shall give
any notices or take any other action inconsistent with the election made
hereby. If any present or future income tax laws of the state or states in
which the Contract Area is located or any future income tax laws of the
United States contain provisions similar to those in Subchapter "K",
Chapter 1, Subtitle "A", of the Internal Revenue Code of 1986, under which
an election similar to that provided by Section 761 of the Code is
permitted, each party hereby affected shall make such election as may be
permitted or required by such laws. In making the foregoing election, each
such party states that the income derived by such party from operations
hereunder can be adequately determined without the computation of
partnership taxable income.
6.) ADDRESSES - The addresses of the parties for notice are as follows:
Rainbow Pipe Line Company
00000 Xxxxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Phone: 281/000-0000
Fax : 281/000-0000
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Madison Pipe Line Company
0000 Xxxxxxxx Xxxxxxxx
000 Xxxxxx
Xxxxxxx, XX 00000-0000
Phone: 713/000-0000
Fax : 713/000-0000
7.) This Agreement shall be construed under the laws of the State of
Texas.
SIGNED this the ______ day of December, 1996.
RAINBOW PIPE LINE COMPANY: MADISON PIPE LINE COMPANY:
_________________________ _________________________
Xxxx X. Xxxxxx, President Xxxx X. Xxxxxx, President
_________________________ _________________________
Xxxx Xxxxxxx, General Manager X. X. Xxxxxx, Vice President
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