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9
AMENDMENT NO. 2
TO
AGREEMENT FOR THE SALE AND PURCHASE OF NATURAL GAS
between
CHUGACH ELECTRIC ASSOCIATION INC.
and
ARCO BELUGA, INC.
dated April 21, 1989
WHEREAS, Chugach Electric Association, Inc. (Chugach) and ARCO Alaska,
Inc. entered into an Agreement for the Sale and Purchase of Natural Gas
(Agreement) dated April 21, 1989, which Agreement provides for the sale and
delivery of gas by ARCO Alaska, Inc. to Chugachs gas-fueled generation
facilities located on the west side of Xxxx Inlet, Alaska (Beluga Station);
WHEREAS, on August 1, 1990, Chugach and ARCO Alaska, Inc. entered into
Amendment No. 1 to the Agreement;
WHEREAS, the Agreement has been assigned by ARCO Alaska, Inc. to ARCO
Beluga, Inc. (ARCO) effective December 27, 1996;
WHEREAS, Xxxxx Electric Association, Inc. (HEA) and Alaska Electric
Generation and Transmission, Inc. (AEG&T) have proposed to relocate the
Soldotna Unit 1 generation facility to the Alaska Nitrogen Products, LLC
(ammonia production facility) (Facility) that is located on the east side of
Xxxx Inlet, Alaska, near Nikiski on the Kenai Peninsula;
WHEREAS, to Chugachs knowledge, HEAs and AEG&Ts purpose for
proposing to relocate the Soldotna Unit 1 generation facility would not be to
displace XXXXx gas sales and deliveries to the Beluga Station under the
Agreement;
WHEREAS, the relocated generation facility would be operated under a
dispatch agreement with Chugach (Dispatch Agreement) and would be known as the
Nikiski Cogeneration Project (Nikiski Project);
WHEREAS, the portion of the generation capability of the Nikiski
Project that Chugach obtains under the Dispatch Agreement would become part of
Chugachs generation facilities;
WHEREAS, it is possible that ammonia production could cease at the
Facility,
which in turn could stop the use of steam at the Facility for process purposes;
WHEREAS, it is also possible that steam formerly used at the Facility
for process purposes could be used to generate electricity, if equipment were
installed at the Nikiski Project that permitted such use;
WHEREAS, if Chugach were to obtain steam-produced electricity from the
Nikiski Project, the electricity so obtained could displace a portion of the
electric power generated at Chugachs gas-fueled generation facilities;
WHEREAS, although it is unlikely that the above-described contingencies
will all occur, the potential exists that, if Chugach obtains steam-produced
electricity from the Nikiski Project, a reduction in gas deliveries under the
Agreement could occur;
WHEREAS, the parties desire to enter into an arrangement by which, if
the above- described contingencies do occur, ARCO may exercise an option to sell
and deliver gas under the Agreement in addition to gas otherwise sold
thereunder;
WHEREAS, Chugach and ARCO desire to further amend the
Agreement for the benefit of the parties and to accomplish the above-stated
objectives;
NOW, THEREFORE, the parties agree as follows:
1. Unless otherwise provided herein, all references in this
Amendment to Sections, Subsections, or Exhibits mean such Section, Subsection,
or Exhibit contained or referenced in the Agreement.
2. This Amendment will take effect upon the following consents
and approvals: a) written consent by Marathon Oil Company (Marathon) to the
Amendment, and b) approval of the Amendment by the Alaska Public Utilities
Commission (APUC).
3. The following conditions precedent must be satisfied in full
before the parties have rights and obligations under the Amendment:
A. Commercial ammonia production ceases at the Facility,
and the Facility stops using steam for process purposes; and
B. Equipment is installed at the Nikiski Project that
permits electricity to be generated by steam; and
C. Chugach obtains steam-produced electricity from the
Nikiski Project.
4. If the conditions listed in Paragraph 3, above, have been
satisfied in full, ARCO may exercise an option (Option) to sell and deliver
gas to Chugach at the Beluga Station (Nikiski-Displaced Gas) based on the
procedure and formula described in this Amendment. The price of gas sold under
the Option shall be the price specified in Section VIII. The Nikiski-Displaced
Gas will be considered gas sold under the Agreement in addition to gas otherwise
sold thereunder.
5. Chugach shall promptly notify ARCO under Section XII(i) when
the conditions listed in Paragraph 3, above, have been satisfied in full. ARCO
may then exercise its Option as follows: On or before thirty (30) days
(Option Deadline) from the date that ARCO receives Chugachs notice under this
Paragraph 5, ARCO shall notify Chugach under Section XII(i) that ARCO chooses to
sell and deliver Nikiski- Displaced Gas at the Beluga Station. The Options
effective date will be the date Chugach receives XXXXx notice. ARCO will be
considered to have declined to exercise the Option if ARCO does not fully and
timely exercise the Option by the Option Deadline as provided in this Paragraph
5 and in Section XII(i).
6. Provided that ARCO has exercised its Option, the quantity of
Nikiski- Displaced Gas that ARCO shall sell and deliver under this Amendment
will be determined as follows: Chugach shall first calculate the generation
capacity from steam production (Steam Capacity) that is available in megawatts
(MW) from the Nikiski Project as of the effective date of the Option. Chugach
shall then calculate the total generation capacity (Total Capacity) that is
available in MW from the Nikiski Project as of the effective date of the Option.
The Total Capacity will be the sum of: a) the capacity in MW represented by
the Soldotna Unit 1 alone; b) the capacity in MW added to the Nikiski Project
from sources other than steam production capability; and c) the Steam Capacity.
The percentage incremental capacity increase that is attributable to steam
production capability at the Nikiski Project, i.e. Steam Capacity divided by
Total Capacity, will be expressed as a percentage carried out to the first
decimal point (Steam Percentage). The quantity of Nikiski-Displaced Gas that
ARCO shall sell and deliver under this Amendment will be the product of the
following: a Steam Multiplier, multiplied by the Steam Percentage, multiplied
by the gas used as fuel for Chugachs portion of the capability and output of the
Nikiski Project. The Steam Multiplier is Twenty Percent (20%), subject however
to modification under Paragraph 8, below.
7. ARCO and Chugach recognize that Chevron U.S.A. Inc. (Chevron)
and the Municipality of Anchorage d/b/a Municipal Light & Power (ML&P) also sell
and deliver gas to Chugach at the Beluga Station under Agreements for the Sale
and Purchase of Natural Gas dated April 27, 1989 and April 25, 1989,
respectively, as later amended (respectively, the Chevron Agreement and the
ML&P Agreement). Chevron and ML&P are referred to in this Amendment as the
Remaining Beluga Producers. ARCO and Chugach further recognize that Chugach has
offered the same options under the same terms to the Remaining Beluga Producers
(Corresponding Options) as the Option that Chugach has offered ARCO under this
Amendment.
8. If ARCO exercises its Option, then after the Remaining Beluga
Producers have notified Chugach whether they exercise or decline to exercise the
Corresponding Options, Chugach shall promptly notify ARCO under Section XII(i)
if a Remaining Beluga Producer has declined to exercise its Corresponding
Option. If a Remaining Beluga Producer has so declined, ARCO may then amend its
Option by exercising a Revised Option as follows: On or before thirty (30)
days (Revised Option Deadline) from the date that ARCO receives Chugachs notice
under this Paragraph 8, ARCO shall notify Chugach under Section XII(i) that
Nikiski-Displaced Gas will be calculated using a Steam Multiplier that ARCO
shall specify in its notice and that is between Twenty Percent (20%) and Thirty
Percent (30%), inclusive (if one Remaining Beluga Producer has declined to
exercise its Corresponding Option), or between Twenty Percent (20%) and Sixty
Percent (60%), inclusive (if both Remaining Beluga Producers have declined to
exercise their Corresponding Options). The Revised Options effective date will
be the Options effective date, retroactive to such date. ARCO will be
considered to have declined to exercise its Revised Option, and shall continue
to sell Nikiski-Displaced Gas that is calculated using a Steam Multiplier of
Twenty Percent (20%), if ARCO does not fully and timely exercise the Revised
Option by the Revised Option Deadline as provided in this Paragraph 8 and in
Section XII(i).
9. If the Steam Capacity or Total Capacity at the Nikiski Project
changes after ARCO exercises its Option and (if applicable) its Revised Option,
then retroactive to the effective date of the change in the Steam Capacity or
Total Capacity, Chugach shall recalculate the Steam Capacity, Total Capacity,
and Steam Percentage for purposes of determining the quantity of Nikiski-
Displaced Gas that ARCO shall sell and deliver under this Amendment.
10. After ARCO exercises its Option and (if applicable) its
Revised Option, the sale and delivery of Nikiski-Displaced Gas shall continue
through the earlier of a) the termination of the Dispatch Agreement, or b) the
end of Period #2 as defined in the Agreement.
11. By agreeing to this Amendment, ARCO consents to Chugach
obtaining steam-produced electricity from the Nikiski Project under the
circumstances described in this Amendment, should Chugach choose at its
discretion to obtain such electricity.
12. By agreeing to this Amendment, and except as provided in this
Amendment, neither ARCO nor Chugach waives, modifies, or prejudices any right or
obligation that may be available to it, at any time. This Amendment has no
precedential effect. It does not commit either party to further amend the
Agreement or to enter into other contractual arrangements. Nor does this
Amendment commit either party to take a a certain position in discussions or
negotiations, either with the other party or with any other entity.
13. Except for the foregoing amendments, all other terms and conditions of
the Agreement remain in full force and effect.
IN WITNESS WHEREOF, Chugach and ARCO have caused this Amendment
No. 2 to be executed by their authorized representatives.
Chugach Electric ARCO Beluga, Inc.
Association, Inc.
By: /s/Xxxxxx X. Xxxxxxxxx By: /s/ X. X. Xxxxxxxx
Its: General Manager Its: Vice President
Date: May 6, 1999 Date: 5/4/99
Tal99022.AAI.Amd2
08/12/99 1:07 PM
