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EXHIBIT 10.6
GAS PURCHASE AGREEMENT
BETWEEN
NOMECO OIL & GAS CO.,
SELLER
AND
CONSUMERS POWER COMPANY,
BUYER
JANUARY 1, 1995
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TABLE OF CONTENTS
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Page
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I. Definitions . . . . . . . . . . . . . . . . . . . . 1
A. Btu . . . . . . . . . . . . . . . . . . . . . . 1
B. Contract Year . . . . . . . . . . . . . . . . . 1
C. Cubic Foot . . . . . . . . . . . . . . . . . . 1
D. Day . . . . . . . . . . . . . . . . . . . . . . 1
E. Delivery Point . . . . . . . . . . . . . . . . 2
F. Gas . . . . . . . . . . . . . . . . . . . . . . 2
G. Heating Value . . . . . . . . . . . . . . . . . 2
H. Mcf . . . . . . . . . . . . . . . . . . . . . . 2
I. MMBtu . . . . . . . . . . . . . . . . . . . . . 2
J. Month . . . . . . . . . . . . . . . . . . . . . 2
K. Prime Rate . . . . . . . . . . . . . . . . . . 2
L. PSIA . . . . . . . . . . . . . . . . . . . . . 3
M. PSIG . . . . . . . . . . . . . . . . . . . . . 3
II. Term of Agreement . . . . . . . . . . . . . . . . . 3
III. Area of Commitment . . . . . . . . . . . . . . . . 3
IV. Quantity . . . . . . . . . . . . . . . . . . . . . 3
V. Price . . . . . . . . . . . . . . . . . . . . . . . 4
VI. Billing and Payment . . . . . . . . . . . . . . . . 5
VII. Delivery Point - Liability and Title . . . . . . . 6
VIII. Delivery Pressure . . . . . . . . . . . . . . . . . 7
IX. Quality of Gas . . . . . . . . . . . . . . . . . . 7
X. Measurement . . . . . . . . . . . . . . . . . . . . 8
XI. Taxes . . . . . . . . . . . . . . . . . . . . . . . 8
XII. Assignment . . . . . . . . . . . . . . . . . . . . 9
XIII. Notices . . . . . . . . . . . . . . . . . . . . . . 9
XIV. Laws and Regulations . . . . . . . . . . . . . . . 10
XV. Force Majeure . . . . . . . . . . . . . . . . . . . 10
XVI. Miscellaneous . . . . . . . . . . . . . . . . . . . 11
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NATURAL GAS PURCHASE AGREEMENT
THIS AGREEMENT, effective as of January 1, 1995, is entered into
by and between CONSUMERS POWER COMPANY, a Michigan corporation hereinafter
referred to as Buyer, and NOMECO Oil & Gas Co., a Michigan corporation
hereinafter referred to as Seller.
W I T N E S S E T H
WHEREAS, Seller, has Michigan production, which it either
controls or has access to and can commit to the terms and provisions of this
Agreement; and
WHEREAS, Buyer is willing to purchase gas owned or controlled by
Seller which Seller now has the right to sell and deliver to Buyer; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 The following terms, when used in this Agreement, shall
have the following meanings:
A. The term "Btu" shall mean a British thermal unit.
B. The term "Contract Year" shall mean a year beginning
January 1 and ending the following December 31.
C. The term "cubic foot of gas" shall mean the volume of
gas contained in one (1) cubic foot of space at a pressure of fifteen and
twenty-five thousandths (15.025) psia, at a temperature of sixty degrees
(60 degrees) Fahrenheit.
D. The term "day" shall mean a period of twenty-four (24)
consecutive hours beginning and ending at 7:00 AM Eastern Standard Time (EST).
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E. The term "Delivery Points" or "Points of Delivery" means
the Buyer's Northville interconnect with Michigan Consolidated Gas Company or
any other point(s) on Buyer's pipeline system where Michigan origin gas can be
delivered, provided the gas to be delivered at that point, after blending with
all other gas delivered at that point, meets the quality specifications of
Article IX and Buyer has sufficient capacity at such point to take the volumes
nominated by Seller.
F. The term "gas" shall mean and include natural gas
produced from gas xxxxx (gas well gas), gas which immediately prior to being
produced from a reservoir is in solution with crude oil, or dispersed in an
intimate association with crude oil, or in contact with crude oil across a
gas-oil contact (casinghead gas), or residue gas resulting from the processing
of either or both casinghead gas and gas well gas.
G. The term "Heating Value" shall mean the quantity of heat,
in Btu, produced by the complete combustion of a cubic foot of gas under
standard conditions at constant pressure with air of the same temperature and
pressure as the gas where the products of combustion are cooled to the initial
temperature of the gas and air and where water formed by the combustion is
condensed to a liquid state, all adjusted to reflect the actual water vapor
content of the gas delivered. Standard conditions for the gas shall be a
temperature of sixty degrees (60 degrees) Fahrenheit, and a pressure of
fifteen and twenty-five thousandths (15.025) psia.
H. The term "Mcf" shall mean one thousand (1,000) cubic feet
of gas.
I. The term "MMBtu" shall mean a quantity of gas having a
Heating Value of one million (1,000,000) Btu.
J. The term "month" shall mean the period beginning at 7:00
AM Eastern Standard Time (EST) on the first day of a calendar month and ending
at 7:00 AM EST on the first day of the next succeeding calendar month.
K. The term "Prime Rate" shall mean the fluctuating per
annum lending rate of interest from time to time published by the National Bank
of Detroit or its successor for creditors having a credit rating equal to or
better than that required to qualify for such bank's lowest commercial rate of
interest without a third party's guarantee of the debt.
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L. The term "psia" shall mean pounds per square inch
absolute.
M. The term "psig" shall mean pounds per square inch gauge.
ARTICLE II
TERM OF AGREEMENT
2.1 This Agreement, subject to the provisions of Article V,
shall be effective January 1, 1995 and shall continue in full force and effect
through December 31, 1999.
ARTICLE III
AREA OF COMMITMENT
3.1 Seller agrees to commit to the performance of this
Agreement, sufficient production from Michigan xxxxx operated by Seller or to
which Seller has access to meet the quantity commitments set forth in Article V
hereof.
ARTICLE IV
QUANTITY
4.1 Buyer agrees to purchase and take from Seller, and Seller
agrees to sell and deliver to Buyer, 20,000 MMBtu per day.
4.2 Buyer and Seller agree that it is the intent of both
parties to meet such daily purchase and sale commitments on as level a basis
as operations allow and that daily fluctuations in purchases and sales
should not vary (other than for force majeure conditions) by more than 5
percent per day.
4.3 On or before the fifth (5th) working day preceding the
first of each month, Seller shall submit a nomination to Buyer indicating the
Point(s) of Delivery and associated volumes for the following month. If any
such nominated volumes cannot be received by Buyer due to capacity constraints
at any Point of Delivery, Seller shall adjust its nominations accordingly.
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ARTICLE V
PRICE
5.1 Subject to the other provisions hereof, the price to be
paid by Buyer to Seller for gas purchased and sold hereunder shall be $2.50 per
MMBtu delivered in the first Contract Year and $2.60 per MMBtu delivered in the
second Contract Year. If Seller has failed to reach an annual average sales
level of 20,000 MMBtu per day during the first Contract Year, then the price
shall not increase but will remain at $2.50 per MMBtu for the second Contract
Year. For each of the last three Contract Years, the parties shall negotiate a
delivered price which will fall within the range specified as follows: third
Contract Year, $2.25 - $2.75 per MMBtu; fourth Contract Year, $2.35 - $2.85 per
MMBtu; fifth Contract Year, $2.45 - $2.95 per MMBtu. If the parties are unable
to agree to a contract price prior to thirty days before the beginning of
either the third, fourth or fifth Contract Years, then this Agreement shall
terminate at the end of the then current Contract Year.
5.2 If at any time after January 1, 1995 the Michigan Public
Service Commission (or any other regulatory agency exercising jurisdiction)
shall disallow any portion of the price paid Seller hereunder from Buyer's
purchased cost of gas in a ratemaking proceeding, then in such event Buyer may
reduce the price paid Seller to the maximum price allowed effective as of the
"effective date" of the aforementioned disallowance.
5.3 If at any time after January 1, 1995 the position of the
Staff of the Michigan Public Service Commission (MPSC), or its successor, in a
ratemaking proceeding is that a portion of the price to be paid Seller
hereunder should be reduced or disallowed, then Buyer shall deposit into an
escrow account the difference between the price that would otherwise be
applicable hereunder and the price for such gas recommended by the MPSC Staff.
Any portion of the price that is so escrowed and later disallowed by a final
order of the Courts or the MPSC shall be returned, with accumulated interest
thereon, to Buyer. Any portion of the price that is so escrowed and later
allowed by the final order of the Courts or the MPSC shall be paid, with
accumulated interest thereon, to Seller. All payments from the escrow
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account shall be made within 45 days after the relevant order becomes final.
For the purpose of this paragraph, an MPSC or Court order will be considered
final when it is no longer subject to appeal or other challenge by Buyer or
Seller.
5.4 If Sections 5.2 or 5.3 above result in a price reduction,
Seller shall have the right to seek sales to third parties and upon receipt of
a bona fide offer to purchase all or any portion of the gas committed hereunder
at a higher price, Buyer will release such gas from this Agreement upon 90
days' written notice to Buyer.
ARTICLE VI
BILLING AND PAYMENT
6.1 Seller shall, on a monthly basis, furnish Buyer a
detailed statement showing the total quantity of gas delivered by Seller to
Buyer hereunder and a tax statement showing severance tax liability. Buyer's
payment shall be due fifteen days after Buyer's receipt of Seller's statement.
6.2 Each party shall have the right at reasonable hours to
examine the books, records and charts of the other party to the extent
necessary to verify the accuracy of any statement, charge or computation made
pursuant to the provisions hereof. If any such examination reveals any
inaccuracy in any billing theretofore made, the necessary adjustment in such
billing and payment shall be promptly made, provided that no adjustment for any
billing or payment shall be made after the lapse of six (6) months from the
rendition thereof unless challenged prior thereto.
6.3 Should Buyer fail to pay any amount due Seller under any
provisions of this Agreement when same is due, interest shall accrue at the
Prime Rate until all payments, including such interest, are paid and current.
If a default in payment continues for sixty (60) days, Seller may, in addition
to all other rights and remedies, suspend deliveries of gas hereunder and
terminate this Agreement. The foregoing provision in this Section shall not
apply, however, if Buyer's refusal to pay is the result of a bona fide dispute
as to the accuracy of any statement and Buyer pays all amounts not in dispute.
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ARTICLE VII
DELIVERY POINT - LIABILITY AND TITLE
7.1 All costs incurred to produce, compress, transport or
process such gas prior to its delivery to Buyer shall, as between Buyer and
Seller, be for the account of Seller.
7.2 Title to gas shall pass from Seller to Buyer at the
Point(s) of Delivery. Seller shall be in control and possession of the gas
delivered hereunder and responsible for any damage or injury caused thereby
until the same shall have been delivered to the Point(s) of Delivery, after
which delivery Buyer shall be deemed to be in exclusive control and possession
thereof and responsible for any injury or damage caused thereby.
7.3 Seller agrees that it will and hereby does warrant title
to all gas sold under this Agreement and the right to sell the same, and that
such gas is free and clear from all liens, encumbrances and adverse claims; and
Seller agrees to indemnify, defend and save Buyer harmless from and against all
suits, actions, debts, accounts, damages, costs, losses and expenses arising
from or out of adverse claims of any and all persons or parties to said gas or
to royalties, taxes, license fees or charges with respect thereto, which are a
proper charge against Seller, or which may be levied or assessed upon the
production of said gas, the operation of Seller's xxxxx, or the handling of
such gas prior to its delivery hereunder.
7.4 Seller undertakes and agrees to maintain and be entirely
responsible for the xxxxx, equipment and other facilities used by it up to the
Point of Delivery hereinabove specified and further agrees to indemnify, defend
and save Buyer harmless from and against all suits, actions, debts, accounts,
damages, costs, losses and expenses arising from or in any manner connected
therewith. Buyer, except as herein otherwise specifically provided, agrees to
maintain and be entirely responsible for the facilities beyond the
above-mentioned Point(s) of Delivery.
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ARTICLE VIII
DELIVERY PRESSURE
8.1 Seller shall deliver gas hereunder against the varying
pressures in the pipeline at the Point(s) of Delivery, but will not be required
to deliver gas at a pressure in excess of 1,150 lbs psig.
ARTICLE IX
QUALITY OF GAS
9.1 The gas delivered hereunder (a) shall not contain more
than three percent oxygen by quantity; (b) shall be commercially free from
objectionable odors, solid or liquid matter, dust, gum or gum-forming
constituents which might interfere with its merchantability or cause injury to
or interference with proper operation of the lines, regulators, meters or other
appliances through which it flows; (c) shall not contain more than 0.3 grain of
hydrogen sulphide per one hundred cubic feet; (d) shall not contain more than
twenty grains of total sulfur (including hydrogen sulphide and mercaptan
sulfur) per one hundred cubic feet; (e) shall not at any time have a carbon
dioxide content in excess of two percent (2%) by volume; and (f) shall not
contain an amount of moisture which at any time exceeds seven pounds per
million cubic feet; and (g) shall be fully "interchangeable" in accordance with
the provisions of AGA Research Bulletin No. 36.
9.2 The gas hereunder shall have a total Heating Value per
cubic foot of not less than 960 Btu's nor more than 1,110 Btu's.
9.3 Should the gas offered for sale to Buyer fail at any time
to conform to any of the specifications of this Article, Buyer shall be under
no obligation to accept it. Buyer, however may notify Seller of any such
failure and Seller shall make a diligent effort to correct such failure so as
to deliver gas conforming to the above specifications. If Seller is unable to
deliver gas conforming to the specifications hereof by treatment consistent
with prudent operations and by means which are economically feasible in
Seller's opinion, Buyer may, at its opinion, accept delivery of the gas, and
at Buyer's sole cost, treat the gas so that it will conform to the subject
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specifications or Buyer may refuse to take such gas. In the event neither
Seller nor Buyer elect to treat gas that fails to meet the quality
specifications hereof, that gas and that gas only shall be released from
commitment under the terms hereof.
ARTICLE X
MEASUREMENT
10.1 Measurement of gas delivered at the Point(s) of Delivery
will be based on equipment operated at the Point(s) of Delivery by Buyer.
Buyer shall provide Seller with access to the measurement information.
ARTICLE XI
TAXES
11.1 Seller agrees to pay or cause to be paid all taxes
imposed upon gas prior to its delivery to Buyer hereunder or upon any
occupation or privilege relating to the production, sale or delivery of such
gas to Buyer. Buyer agrees to pay or cause to be paid all taxes imposed on
such gas after its receipt by Buyer, or any occupation or privilege tax
relating to the transmission or sale of such gas after its receipt by Buyer.
11.2 As used in this Article XII, the term "tax" shall mean
sales, transaction, occupation, service, production, severance, gathering,
transmission, value added, export or excise tax, assessment or fee levied,
assessed or fixed by governmental authority, and taxes of a similar nature or
equivalent in effect.
11.3 Buyer agrees to deduct from the amount payable to Seller
the severance and privilege taxes due from the sale of gas hereunder, and
furthermore shall remit and report to the State of Michigan in accordance with
the severance and privilege tax statutory filing requirements.
11.4 If either party receives written notice from the other
that questions the validity of any tax, the parties will consult with each
other as to the best procedure to be followed in the payment of the questioned
tax and the means of testing its validity, having due regard for the protection
of the
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interests of both Seller and Buyer. Following such consultation, each party
will pursue the course of action it deems proper.
ARTICLE XII
ASSIGNMENT
12.1 This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided that no conveyance, transfer of any interest, or change of ownership
by either party shall be binding upon the other party until such other party
has been furnished with a written notice evidencing such conveyance, transfer
of interest, or change of ownership and approved it. Such approval shall in no
event, however, be unreasonably withheld. The foregoing shall not, however,
restrict either party from pledging, granting a security interest in or
assigning as collateral all or any portion of such party's interest hereunder
to secure any debt or obligation.
ARTICLE XIII
NOTICES
13.1 Any nomination, notice, request, demand, statement or
payment provided for in this Agreement shall be sent to the parties hereto at
the following addresses:
BUYER: Consumers Power Company
Attn: Director of Gas Supply
0000 Xxxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000
FAX - (000) 000-0000
SELLER: NOMECO Oil & Gas Co.
Attn: Gas Marketing
Xxx Xxxxxxx Xxxxxx
XX Xxx 0000
Xxxxxxx, XX 00000
FAX - (000) 000-0000
13.2 Either party shall have the right by prior written notice
to the other to change its address or addresses given above at any time.
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ARTICLE XIV
LAWS AND REGULATIONS
14.1 This Agreement, insofar as it is affected thereby, shall
be subject to all valid and applicable laws, orders, rules and regulations of
Federal, State and any other governmental authorities having jurisdiction. Any
party hereto shall have the right to contest the validity of any such law,
order, rule or regulation, and the acquiescence therein or compliance therewith
for any period of time shall not be construed as a waiver of such right. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Michigan.
14.2 This Agreement is subject to the Federal Requirements set
forth in Exhibit A.
ARTICLE XV
FORCE MAJEURE
15.1 If Buyer or Seller is rendered unable, wholly or in part,
by force majeure to perform or comply with any obligations or conditions of
this Agreement, such obligations or conditions shall be suspended to the same
extent during the continuance of the inability so caused and such party so
rendered unable shall be relieved of liability and shall suffer no prejudice
for failure to perform the same during such period, it being understood that
Buyer's obligation to take or pay for gas hereunder shall be reduced by the
volume which Buyer was unable to take/receive during the period of time the
inability exists; provided, obligations to make payment then due for gas
delivered hereunder shall not be suspended, and provided further that the cause
of suspension (other than strikes, lockouts or labor disputes) shall be
remedied insofar as possible with reasonable dispatch. The foregoing
notwithstanding, settlement of strikes, lockouts, or labor disputes shall be
wholly within the discretion of the party having the difficulty.
15.2 The term "force majeure" shall include, without
limitation by the following enumeration, acts of God and of the public enemy,
unseasonal weather, freezing of xxxxx or lines of pipe, repairing or altering
machinery
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or lines of pipe, fires, accidents, breakdowns, strikes, labor disputes, and
any other industrial, civil or public disturbance, inability to obtain
materials, supplies, rights-of-way, permits, or labor on customary terms, any
act or omission by a third party Transmission Company, or parties not
controlled by the party having the difficulty, any act or omission (including
failure to take gas) of a purchaser of gas from Buyer which is excused by any
event or occurrence of the character herein defined as constituting force
majeure and any laws, orders, rules, regulations, acts, or restraints of any
governmental body or authority, civil or military, or any other cause beyond
the control of the parties claiming force majeure.
ARTICLE XVI
MISCELLANEOUS
16.1 No waiver by either party hereto of one or more defaults
in the performance of any provision of this Agreement shall operate or be
construed as a waiver, by such party, of a future default, whether of a like or
a different character.
16.2 All headings appearing herein are for convenience only
and shall not be considered a part of this Agreement for any purpose or as in
any way interpreting, construing, varying, altering or modifying this Agreement
or any of the provisions hereof.
16.3 Each party hereby agrees to grant to the other, wherever
necessary or convenient for carrying out the terms of this Agreement,
requisite easements and rights-of-way over, across and under any land as to
which such party has the right to make such grants.
16.4 There shall be no modification of any of the terms and
provisions of this Agreement except by the formal execution of supplemental
written agreements.
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IN WITNESS WHEREOF, the parties hereto have caused this contract
to be executed and effective as of the day and year first above written.
WITNESSES: BUYER: CONSUMERS POWER COMPANY
/s/ Xxxxx X. Xxxx By: /s/ X. X. Xxxxxxx
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X. X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxx
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SELLER: NOMECO OIL & GAS CO.
/s/ Xxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxx
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Xxxx X. Xxxxxxx Xxxxxx X. Xxxxxx
Executive Vice President
Chief Operating Officer
/s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
