GAS PROCESSING AGREEMENT
(MAYTOWN)
THIS GAS PROCESSING AGREEMENT (MAYTOWN) ("Maytown Agreement") is made and
entered into this 28th day of May, 1999, to be effective as of the "Effective
Date", as defined herein, by and between EQUITABLE PRODUCTION COMPANY, formerly
named Equitable Resources Energy Company and Kentucky Hydrocarbon, a division of
Equitable Production Company, herein referred to as ("Equitable"), and MARKWEST
HYDROCARBON, INC., herein referred to as ("MarkWest").
RECITALS:
A. Equitable owns and may acquire certain Interests in xxxxx and desires
to produce gas attributable to its Interests in those xxxxx.
B. MarkWest will install, own and, subject to the provisions hereof,
either operate, or cause the operation of, gas processing facilities in the
vicinity of the Interests of Equitable.
C. MarkWest desires to process that gas attributable to the Interests of
Equitable to extract liquid and liquefiable hydrocarbons and other products
therefrom, and for the purpose of producing marketable gas.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
The following definitions shall apply for all purposes of this Maytown
Agreement unless otherwise indicated:
ACCOUNTING PERIOD. The period commencing at 10:00 a.m., Eastern Time, on
the first day of a calendar month and ending at 10:00 a.m., Eastern Time, on the
first day of the next succeeding month.
APPALACHIA INDEX. A price equal to the price specified in "INSIDE
F.E.R.C.'S GAS MARKET REPORT, Prices Of Spot Gas Delivered To Pipelines", Index,
for the first publication of the applicable month, for Columbia Gas Transmission
Corp., Appalachia.
BTU. British Thermal Unit and is the amount of heat required to raise the
temperature of one (1) pound of pure water from fifty-nine degrees Fahrenheit
(59(0)F) to sixty degrees Fahrenheit (60(0)F); and, "MMBTU" means one million
British Thermal Units.
COLUMBIA. Columbia Gas Transmission Corporation, and its successors and
assigns.
CUBIC FOOT. The volume of gas contained in one cubic foot of space at a
standard pressure base of 14.73 pounds per square inch absolute (psia) and a
standard temperature base of 60(degree) Fahrenheit.
DELIVERY POINT. The inlet flanges of the Inlet Gas Traps, identified in the
existing facilities as ESE 102A/B, immediately upstream of the Molecular Sieve
Dehydration Unit where (i) unprocessed gas from Equitable's compressor station,
and (ii) recycle gas that is produced by the Plant and delivered back to
Equitable at the Recycle Gas Redelivery Point, is delivered by Equitable to the
Plant. The Parties acknowledge that the gas will pass through the Deethanizer
reboiler prior to the Delivery Point as defined herein.
DELIVERY VOLUME. The volume of gas that is compressed by Equitable and
delivered to the Plant at the Delivery Point that is not attributable to that
volume of recycle gas that is produced by the Plant and redelivered to Equitable
at the Recycle Gas Redelivery Point.
EFFECTIVE DATE. The expiration date of that certain Amended Hydrocarbon
Product Agreement, between Kentucky Hydrocarbon Company and Ashland Petroleum
Company, dated March 9, 1983, which is expected to be no later than December 31,
1999. Equitable agrees that it shall cancel the Amended Hydrocarbon Product
Agreement at the end of the current term and shall not, and shall cause any of
its affiliates to not, take any action to extend the term of such Amended
Hydrocarbon Product Agreement. In any event, the Effective Date shall occur no
earlier than December 31, 1999 and no later than the date on which MarkWest
receives gas for processing at the Plant in accordance with Section 4.9.
GAS OR GAS. All hydrocarbon and non-hydrocarbon substances produced from
gas and/or oil xxxxx in a gaseous state.
GATHERING SYSTEM. The gas gathering and transmission pipelines and related
facilities, including both those subject to regulatory jurisdiction and those
not subject to such jurisdiction, owned by Kentucky West Virginia Gas Company
L.L.C., or its affiliates and subsidiaries, and its or their successors and
assigns, located upstream of the Plant.
GROSS HEATING VALUE. The number of BTU's produced by the combustion, at a
constant pressure, of the amount of the gas which would occupy a volume of one
(1) Cubic Foot at a temperature of sixty degrees Fahrenheit (60(0)F), if
saturated with water vapor and under a pressure equivalent to 14.73 psia at
thirty-two degrees Fahrenheit (32(0)F) and under standard gravitational force
(acceleration 980.665 centimeters per second squared) with air of the same
temperature and pressure as the gas, when the products of combustion are cooled
to the initial temperature of the gas and air and when the water formed by
combustion is condensed to the liquid state.
INTEREST(S). Any right, title, or interest in oil and gas production
whether arising from fee ownership, working interest ownership, mineral
ownership, deed, lease, assignment, or otherwise.
MCF. 1,000 Cubic Feet.
MMCF. 1,000,000 Cubic Feet.
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NET SALES PRICE. The volume-weighted average net price per gallon of each
individual component of Plant Products received by MarkWest from unaffiliated
third parties for all Plant Products sold at MarkWest's Siloam facility during
the applicable Accounting Period, or as applicable, for Plant Products not sold
at the Siloam facility, the Net Sales Price shall be a calculated amount netted
back to the Siloam facility after deduction of all unaffiliated third party
transportation related charges and, in the event of affiliated transportation
charges, the actual costs, to include MarkWest owned railcar amortization costs
(which amortization costs shall not exceed $0.02 per gallon), incurred from the
Siloam facility in connection with that sale. In no event shall marketing fees
be deducted from the Net Sales Price.
PIPELINE. The pipeline, running from Equitable's Maytown facility to its
terminus near Institute, West Virginia which transports natural gas liquids, all
as further described and depicted on Exhibit A, attached hereto.
PLANT PRODUCTS. Ethane, propane, iso-butane, normal butane, iso-pentane,
normal pentane, hexanes plus, any other liquid hydrocarbon product, or any
mixtures thereof, and any incidental methane included in any of the foregoing,
which MarkWest separates, extracts, or condenses from gas processed in
MarkWest's Plant.
PLANT. Any gas processing facilities to be installed by MarkWest under the
terms of this Maytown Agreement to replace the existing gas processing
facilities, located in the vicinity of Langley, Kentucky, including gas
refrigeration and chilling equipment, product separation and fractionation
vessels, product storage vessels, and associated condensing, heating,
compressing, pumping, conveying, and other equipment and instrumentation;
including any refrigeration compression required by Plant operations which is
not provided by Equitable under the terms of this Maytown Agreement; and
including all structures associated with those facilities; and including all
easements, rights-of-way, and other property rights pertaining to the
construction and operation of those facilities; wherever those facilities,
structures, easements, rights-of-way, and other property rights are located. The
Plant shall also include any facilities leased by MarkWest from Equitable or its
affiliates, on the terms and conditions of the Equipment Lease Agreement,
attached hereto and incorporated herewith as Exhibit D, that MarkWest utilizes
in the operation of the Plant, including the existing molecular sieve
dehydration system, deethanizer, deethanizer reboiler, and liquid storage,
liquid metering and liquid pumping system. The Plant does not include the
Pipeline, and with respect to Plant Products, the Plant terminus is at the
discharge flange of the block valve immediately downstream of the pumps where
Plant Products are delivered into the Pipeline. With respect to Residue Gas, the
terminus of the Plant is at the Residue Gas Redelivery Point.
RECYCLE GAS REDELIVERY POINT. The downstream flange of the pressure control
valve immediately downstream of the Deethanizer, T-501, where MarkWest
redelivers gas that has been previously processed in the Plant, back to
Equitable for recompression and redelivery by Equitable to the Plant at the
Delivery Point.
RESIDUE GAS REDELIVERY POINT. The downstream flange of the Plant shutdown
block valve located downstream of Gas-Gas exchanger, E-201, and downstream of
the line feeding the Fuel Gas Scrubber, V-405, where Residue Gas is delivered by
MarkWest to Equitable, or to Equitable's designee, or to others entitled
thereto.
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RESIDUE GAS. That portion of gas delivered to the Plant that remains after
processing of the gas in the Plant.
ARTICLE II
TERMINATION OF PREVIOUS AGREEMENTS
2.1 This Maytown Agreement terminates and supersedes any prior agreements
between the parties relating to Equitable's gas covered by this Maytown
Agreement; and neither MarkWest nor Equitable shall have any further rights or
obligations under any prior agreements.
ARTICLE III
EQUITABLE COMMITMENTS
3.1 As of the date of this Maytown Agreement, "Equitable" shall mean and
include all present, or subsequently created subsidiaries of Equitable
Production Company. Equitable represents that no affiliate of Equitable owns any
Interests in Gas delivered into the Gathering System as of the date and as of
the Effective Date of this Maytown Agreement, other than Interests in Gas
purchased from or transported for third parties by affiliates of Equitable, as
set forth below in this Section 3.1, subject to Equitable's right to sell,
convey, transfer or assign its Interests under this Maytown Agreement. Equitable
represents that (i) gas purchased by such affiliates of Equitable from or
transported for third parties shall be considered third-party gas, and
considered under the terms of this Maytown Agreement as third-party gas
delivered into the Gathering System, and (ii) any gas delivered into the
Gathering System which is owned by Equitable Production Company and purchased by
affiliates of Equitable shall be considered dedicated to the performance of this
Maytown Agreement in the same manner as set forth in Section 3.2. Subject to the
other terms and conditions hereof, (a) Equitable will promptly cease gas
processing activities at its Maytown facilities upon the Effective Date and (b)
Equitable hereby commits and agrees to deliver to MarkWest all gas now or
hereafter produced from xxxxx described hereunder, as set forth in Article III
herein; and, Equitable grants MarkWest the exclusive right to process all such
gas produced from xxxxx described hereunder for liquid extraction and shall
convey to MarkWest title to all liquids and products extracted from that gas.
3.2 Except as provided herein, Gas produced from a well in which Equitable
owns Interests is considered dedicated to the performance of this Maytown
Agreement if gas produced from that well is, as of the date or during the term
of this Maytown Agreement, ever delivered into the Gathering System, upstream of
Equitable's existing Maytown processing facilities, if prior to the Effective
Date, or upstream of the Plant, if after the Effective Date.
3.3 The parties acknowledge that this Maytown Agreement is applicable to
gas attributable to the Interests of Equitable and produced from xxxxx described
hereunder. The parties also acknowledge that this Maytown Agreement is
applicable to gas attributable to the Interests of third parties that, while not
dedicated under the provisions of Article III herein, is currently being
delivered into the Gathering System, to the extent that Equitable has the right
to process such third party gas. To the extent that Equitable knows of such
third party gas that Equitable does not have the right to process, Equitable
shall notify MarkWest in writing prior to delivering such gas to the Plant.
Notwithstanding the provisions of Section 3.2. the parties agree that any xxxxx
that (i) Equitable did not own Interests in as of the date of this Maytown
Agreement, or (ii) were drilled,
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completed and producing gas as of the date of this Maytown Agreement, but did
not deliver gas into the Gathering System for at least 30 consecutive days prior
to the date of this Maytown Agreement will not be covered by this Maytown
Agreement; and, if delivered to the Plant in the future, shall be subject to the
negotiation of a separate processing agreement with MarkWest. However, all gas
attributable to the Interests of Equitable and produced from any xxxxx, the
drilling of which commences on or after the date of this Maytown Agreement, and
which is delivered into the Gathering System, shall, from and after the
Effective Date, be subject to this Maytown Agreement upon the initial delivery
of gas from such xxxxx to the Gathering System and the gas that is produced from
such xxxxx shall be considered dedicated under this Maytown Agreement.
3.4 Equitable's commitment to deliver Gas from xxxxx described under the
terms of this Maytown Agreement expressly excludes the following Gas:
(a) all gas dedicated to MarkWest by Equitable under that certain Gas
Processing Agreement (Dwale) between Equitable and MarkWest, of even date
herewith;
(b) all gas (i) that Equitable is required to deliver to its lessors
under the terms of any oil and gas leases under which Equitable acquired its
Interests; (ii) that Equitable reasonably requires for oil and gas producing
operations on the dedicated xxxxx; (iii) that Equitable delivers to municipal or
local distribution systems, or to commercial, industrial or residential
end-users directly off of its Gathering System before the Delivery Point (and
not indirectly delivered to end users through intermediate gathering systems or
transmission facilities) for consumption by those end-users (it being understood
that such Gas shall not be processed for the extraction of liquefiable
hydrocarbons); or, (iv) gas sold and delivered to municipalities or local
distribution systems, or to commercial, industrial or residential end-users
through intermediate gathering systems or transmission facilities; provided such
gas shall not be processed for the extraction of liquefiable hydrocarbons, and
the aggregate of those deliveries in any Accounting Period shall not exceed
90,000 Mcf.
3.5 Further, Equitable reserves the right, subject to the provisions of
Section 6.1, in its sole discretion to operate all xxxxx and/or facilities
described hereunder free from the control of MarkWest and may, at any time,
clean out, deepen, shut-in, plug or abandon any well(s) described under this
Maytown Agreement, or may use any method it reasonably deems appropriate for the
production of gas. Furthermore, nothing in this Maytown Agreement shall obligate
Equitable to drill any xxxxx or maintain or replace any xxxxx and/or facilities.
3.6 Any conveyance, assignment, sale or other transfer of all or a
portion of Equitable's Interests in any well from which Gas dedicated
hereunder is produced shall include and be subject to this Maytown Agreement,
and Equitable shall require any purchaser, assignee or other transferee of
any portion of those Interests to ratify this Maytown Agreement and to
expressly assume and agree to the terms hereof to the extent of the portion
of those Interests acquired from Equitable by that party. Further, should
Equitable contribute any lands or acreage in which Equitable's Interests
exist and that are attributable to gas produced from xxxxx described
hereunder, whether in the form of a dry hole or bottom hole contribution or
other contribution to the drilling and/or exploration efforts of another
producer, and if the production attributable to those efforts is, as of the
date or during the term of this Maytown Agreement, ever delivered into the
Gathering System, the gas production attributable to the Interests of
Equitable shall remain or become subject to the terms of
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this Maytown Agreement. Equitable agrees to promptly notify MarkWest of any
such contributions. The foregoing requirements with respect to the dedication
of gas, and the assignments or other transfers of Equitable's Interests shall
not apply to Interests in xxxxx drilled after the date hereof under any
farmout agreements, participation agreements, development agreements or
similar agreements ("E&P Agreements") if, as to any particular well drilled
under the applicable E&P Agreements, Equitable (i) will not be the party
responsible for drilling the well or responsible for marketing the production
therefrom, or (ii) will not be the designated operator of the well, or (iii)
will not have fifty percent (50%) or more of the working interest ownership
in the well(s) to be drilled under the E&P Agreements or (iv) the Gas
produced from that well is not delivered into the Gathering System. Provided
however, if the Gas attributable to such E&P Agreements is delivered to the
Gathering System, it will be subject to this Maytown Agreement to the extent
that Equitable has the right to process such gas.
3.7 The parties agree that the Gathering System as defined in this Maytown
Agreement, and the Gathering System as defined in that Gas Processing Agreement
(Dwale) are physically connected and that gas dedicated under the terms of this
Maytown Agreement may in fact flow into the Delivery Point as defined in the Gas
Processing Agreement (Dwale) (the "Dwale Delivery Point"). If future operational
changes make it desirable to Equitable to have sustained deliveries of gas at
the Dwale Delivery Point in excess of 3,000 Mcf per day greater than the volume
of gas that has been delivered at the Dwale Delivery Point, on average during
the twelve months prior to the date of this Maytown Agreement (subject to
decreases in gas volumes produced from individual xxxxx and increases in gas
volumes due to xxxxx drilled or modified after the date of this Maytown
Agreement), the parties agree to such transfers or diversions upon modifications
to this Maytown Agreement as necessary to provide MarkWest with no less than the
economic benefit as MarkWest would have received absent the diversion of gas in
excess of 3,000 Mcf per day.
3.8 Equitable shall at all times have the obligation for receiving the
Residue Gas at the Redelivery Point and arranging for the transportation,
marketing or further disposition of that gas on a daily basis subject to the
ability of the pipeline on which the Residue Gas is transported to receive such
gas.
3.9 Nothing herein shall constitute any guarantee or warranty by Equitable
of minimum Delivery Volumes, or the content of hydrocarbon liquids thereof,
other than as set forth in this Maytown Agreement in Section 6.1.
ARTICLE IV
MARKWEST COMMITMENTS
4.1 Subject to the other provisions of this Maytown Agreement, as of the
Effective Date, MarkWest shall be responsible for processing all gas delivered
to the Plant and MarkWest shall deliver Residue Gas to Equitable at the Residue
Gas Redelivery Point, subject to the ability of the pipeline on which the
Residue Gas is transported to receive such gas, and shall deliver Plant Products
to MarkWest at the Pipeline.
4.2 MarkWest will construct and install, as the Plant, a refrigeration
plant at Maytown to replace Equitable's existing cryogenic facility. The Plant
will be designed to process a Delivery Volume of 75 MMcf per day of gas;
however, the parties recognize that the current available
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Delivery Volume is 55 MMcf per day, and that the Delivery Volume may increase
gradually over time. Accordingly, the Plant shall initially be constructed to
process 55 MMcf per day, and the Plant, including the refrigeration portions
thereof, will be installed in stages to accommodate increasing available
Delivery Volumes, up to the Delivery Volume of 75 MMcf per day.
4.3 MarkWest will design, construct and install the Plant to recover, based
on a gas pressure of 465 psig immediately downstream of the Inlet Gas Filter,
F-501, and based on a gas composition as set forth on Exhibit B, attached
hereto, not less than 67% of the propane, 91% of the combined butane components,
and 96% of the combined heavier components.
4.4 MarkWest will utilize Equitable's existing plant air, instrument air,
liquid drain, and utility water system, which systems shall be considered as
part of the existing compression system under the terms of this Maytown
Agreement. Other than for the utility systems outlined above, and the
refrigeration compression and recycle compression, the Plant will be as separate
from Equitable's existing Maytown compressor station as practical.
4.5 MarkWest will incorporate into the operation of the Plant, Equitable's
existing molecular sieve dehydration system, deethanizer, deethanizer reboiler
and Plant Products storage and pumping system. Equitable shall retain title to
any existing equipment that is utilized by MarkWest in the Plant; however,
Equitable shall lease such existing equipment to MarkWest, on the terms and
conditions of the Equipment Lease Agreement, attached hereto and incorporated
herewith as Exhibit D, and MarkWest shall be responsible for operating and
maintaining such equipment.
4.6 MarkWest will design the Plant to allow the gas to be dehydrated even
if other portions of the Plant are not operating.
4.7 MarkWest will design the Plant to have a maximum pressure drop,
excluding the pressure drop attributable to the molecular sieve dehydration
system (Inlet Gas Trap, Molecular Sieve Dehydration Unit, and Inlet Gas Filter)
and deethanizer reboiler, of less than (i) 40 psig at a pressure at the Delivery
Point of 465 psig and Plant Delivery Volumes of 55 MMcf per day, and less than
(ii) 55 psig at a pressure at the Delivery Point of 465 psig and Delivery
Volumes of 75 MMcf per day.
4.8 Although the parties anticipate the Plant being completed by January 1,
2000, the obligations of MarkWest shall nevertheless not be effective until
completion, start-up and the initial deliveries of gas to the Plant. Both
parties shall use their commercially reasonable efforts to cause the Plant to be
completed by that date. Should the Plant not be completed by that date, this
Maytown Agreement shall nevertheless stay in full force and effect; provided,
however, (a) Equitable shall continue operating its existing facilities until
the Plant has been completed and commenced receipts of Delivery Volumes, and (b)
until the Plant has been completed and commenced receipts of Delivery Volumes,
MarkWest's only compensation hereunder shall be the transportation and
fractionation fee set forth in Section 11.3, which shall be applied to 100% of
the Plant Products, and during that time Equitable shall retain 100% ownership
and the right to all proceeds derived from Plant Products in Equitable's gas.
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4.9 In order for the gas to be processed at the Plant by January 1, 2000,
the parties understand and agree that MarkWest will install the Plant in stages
so that the Plant can initially operate without the additional refrigeration
compression, inlet compressor and recycle compression that is to be installed by
MarkWest. Furthermore, Equitable agrees that until MarkWest has installed and
started up the additional refrigeration compression, inlet compressor, and
recycle compression, Equitable shall operate, at its sole cost and expense, all
five of the existing compressors and shall provide to the Plant as much
refrigeration and recycle compression as possible, subject to utilizing the
compressors to compress the gas for delivery to the Plant at the Delivery point.
Notwithstanding the foregoing, MarkWest shall complete the construction and
start-up of the complete Plant, including the refrigeration and recycle
compression by June 1, 2000.
4.10 In addition to its obligations related to the installation of the
Plant, MarkWest will design, purchase and install a new inlet gas centrifugal
compressor ("New Compressor"), at its sole expense, on behalf of Equitable, to
allow Equitable, upon the full installation and construction of the Plant, to
initially operate only four of its existing five compressors to effect
deliveries by Equitable to the Plant. The New Compressor will be designed based
on an inlet pressure of 70 psig, a discharge pressure of 90 psig, and Delivery
Volumes of 55 MMcf per day.
4.11 In installing the New Compressor, described in section 4.10, above,
MarkWest will cooperate with Equitable to revise Equitable's plant drawings and
will pay for any required modifications to the existing compressor station
control system required to reflect the addition of the New Compressor. Equitable
will utilize its internal engineering staff to assist in making such
modifications to the compressor station control system as is practicable.
Notwithstanding the fact that MarkWest designed and installed the New
Compressor, the New Compressor shall be owned by Equitable, and MarkWest shall
execute and deliver any necessary assignments and bills of sale in recordable
form to evidence that ownership. Equitable will be responsible for operating and
maintaining the New Compressor and for developing and implementing all necessary
operating procedures, all at Equitable's expense.
4.12 Prior to commencing installation of the Plant, and for the remainder
of this Maytown Agreement, MarkWest shall obtain and maintain the insurance
coverages set forth on Exhibit C, attached hereto.
4.13 In the event that MarkWest enters into an agreement with another party
for processing of that third party's gas at the Plant, MarkWest will provide
Equitable with the corresponding terms of such processing agreement, and for a
period of thirty (30) days after receiving such corresponding terms from
MarkWest, Equitable shall have the right to accept in writing, in lieu of the
corresponding terms of this Maytown Agreement, all, but not less than all, of
the terms and provisions of that third party agreement. If Equitable accepts
those terms, they shall be effective on the date of initial deliveries of the
third party gas to the plant under such third party processing agreement. If
Equitable does not respond in that thirty (30) day period, then Equitable shall
be deemed to have elected not to accept those terms.
ARTICLE V
GAS SPECIFICATIONS
5.1 Gas delivered by Equitable to MarkWest at the Delivery Point shall:
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(a) to the extent practicable, be commercially free from dust, gum,
gum-forming constituents, free water, diluent, and other liquids and solids with
the understanding of both parties that the operation of the compressor station
upstream of the Plant may result in the condensation of hydrocarbon liquids and
free water;
(b) contain not more than 10 parts per million by volume of oxygen,
and Equitable shall make commercially reasonable efforts to keep gas free from
oxygen;
(c) contain not more than 1/4 grain of hydrogen sulfide per 100 Cubic
Feet of gas;
(d) contain not more than one grain of total sulfur, including, but
not limited to, sulfur in hydrogen sulfide and mercaptans, per 100 Cubic Feet of
gas;
(e) contain not more than 3% by volume total inerts, including but not
limited to nitrogen and carbon dioxide;
(f) contain not more than 2% by volume carbon dioxide;
(g) contain not more than 20 pounds of water vapor per MMcf of gas;
(h) not contain measurable quantities of mercury.
5.2 If gas tendered by Equitable to MarkWest should fail to meet any one or
more of the above specifications, from time to time, then:
(a) MarkWest may take receipt of the non-conforming gas, and that
receipt shall not be construed as a waiver or change of standards for future gas
volumes; or
(b) MarkWest may, at its sole discretion exercised in good faith,
cease receiving the non-conforming gas from Equitable. In that event, it shall
notify Equitable and then Equitable may elect to treat the gas to bring it
within specifications (excluding the processing of the gas for the extraction of
liquefiable hydrocarbons); provided, MarkWest shall not be required to commence
receiving the gas until it meets the specifications.
5.3 Residue Gas redelivered by MarkWest to Equitable at the Residue Gas
Redelivery Point shall not be diminished in quality or conformance to
marketability standards as a result of the operation of the Plant (except to the
extent that such gas did not meet those marketability standards when delivered
to the Plant) and shall:
(a) be commercially free from dust, gum, gum-forming constituents,
free water, diluent, and other liquids and solids;
(b) contain no more molecules of oxygen than was contained in the gas
delivered by Equitable to MarkWest at the Delivery Point, and MarkWest shall
make commercially reasonable efforts to keep gas free from oxygen;
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(c) contain no more molecules of hydrogen sulfide than was contained
in the gas delivered by Equitable to MarkWest at the Delivery Point;
(d) contain no more molecules of total sulfur, including, but not
limited to, sulfur in hydrogen sulfide and mercaptans than was contained in the
gas delivered by Equitable to MarkWest at the Delivery Point;
(e) contain no more molecules of total inerts, including but not
limited to nitrogen and carbon dioxide than was contained in the gas delivered
by Equitable to MarkWest at the Delivery Point;
(f) contain no more molecules of carbon dioxide than was contained in
the gas delivered by Equitable to MarkWest at the Delivery Point;
(g) contain not more than 7 pounds of water vapor per MMcf of gas;
(h) contain no more molecules of mercury than was contained in the gas
delivered by Equitable to, MarkWest at the Delivery Point.
ARTICLE VI
EQUITABLE'S PRODUCTION FACILITIES AND DELIVERY CONDITIONS
6.1 Equitable and its affiliates operate the Gathering System, and in the
operation thereof, Equitable agrees that it will operate the Gathering System
such that any separation equipment installed by Equitable, or its affiliates, at
the xxxxx that are described hereunder or on the Gathering System shall be those
as are commonly used in the industry on similar gathering facilities, and shall
be designed and operated so as to not remove or separate Plant Products that are
in the gaseous state. In addition, Equitable warrants and represents that its
Gas dedicated hereunder shall not be processed for recovery of liquid or
liquefiable hydrocarbons prior to delivery to the Delivery Point.
Notwithstanding the foregoing, Equitable and its affiliates may due to
operational requirements on the Gathering System, cause the extraction of
liquefiable hydrocarbons from gas delivered into the Gathering System prior to
delivery to MarkWest at the Delivery Point. In that event, all of the liquids
recovered by Equitable or its affiliates shall be transported, at Equitable's
expense, to the Plant. To the extent that Equitable's deliveries of such
liquids, as measured at the Plant, do not exceed 200,000 gallons during any
Accounting Period, Equitable shall retain 100% ownership of the liquids
attributable to said operational extraction. The composition of the liquids will
be determined by chromatographic analysis on a monthly basis, or more often if
the composition of the liquids materially varies, at Equitable's sole cost and
expense. These liquids shall be subject to the transportation and fractionation
fee described in Section 11.3. Equitable shall be solely responsible for the
cost and expense of installing and maintaining any measurement equipment
required to determine the volume of liquids delivered to the Plant as set forth
in Article IX below. Equitable shall use its commercially reasonable efforts so
that the volume of ethane contained in the liquids delivered by Equitable to the
Plant will be less than 4% of the volume of such liquids delivered to the Plant.
In the event that the volume of ethane contained in the liquids delivered by
Equitable to the Plant is greater than 4%, such liquids will be considered as
Plant Products otherwise recovered at the Plant. To the extent that Equitable's
deliveries of such liquids, as measured at the Plant, exceeds 200,000 gallons
during any
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Accounting Period, such liquids in excess of 200,000 gallons shall be considered
as Plant Products otherwise recovered at the Plant.
6.2 Equitable will compress the gas for delivery to the Plant at a pressure
sufficient to deliver the residue gas derived therefrom to Columbia's Line P
after the pressure drop across the Plant and through Equitable's residue gas
pipeline, but in no event at a pressure, at the Delivery Point, of less than 440
psig nor greater than 650 psig.
6.3 Each party shall use its commercially reasonable efforts to deliver gas
to at the Delivery Point and Redelivery Point, as the case may be, at a
reasonably uniform rate of flow.
ARTICLE VII
PLANT OPERATION
7.1 The Plant will be designed to require minimal on-site attendance.
Accordingly, MarkWest will cause the routine day-to-day operations of the Plant
to be performed in the manner of a prudent operator. Equitable shall operate and
maintain the existing compression facilities. The routine day-to-day operations
of the Plant by MarkWest or its designee shall include, but not be limited to
the following:
(a) Employ, or otherwise engage, all personnel reasonably required to
perform efficiently its duties hereunder.
(b) Keep the Plant free and clear of all liens and encumbrances on
account of any claims arising out of operations hereunder.
(c) Make all reports required to be made in connection with the
Facilities and their operations to any governmental body so far as required by
Equitable due to it providing contract operating services for the Plant under
the terms of this Maytown Agreement.
(d) Promptly notify MarkWest of the requirement of any materials or
supplies necessary for the operation of the Plant, and MarkWest shall, based
upon the information furnished by Equitable, furnish and maintain, at MarkWest's
expense, adequate materials and supplies for the operation of the Plant.
Equitable shall not purchase or commit to purchase any materials or supplies for
the operation of the Plant in excess of $1,000 without the prior written
authorization from MarkWest.
(e) Forward to MarkWest all invoices for expenses related to the
operation of the Plant.
(f) Regardless of which party is designated to provide the services of
the operator, Equitable shall, if requested by MarkWest, have the option, but
not the obligation, to perform minor maintenance and repair on the Plant (minor
maintenance and repair being such maintenance and/or repairs that can be
completed for less than $1,000 and in less than four hours). Equitable shall
keep an accounting of its expenses and its actual labor costs associated with
performing such minor maintenance. MarkWest will reimburse Equitable for those
labor, maintenance and repair costs. If Equitable does not elect to perform
minor maintenance and repairs, and with respect to maintenance and repairs that
are not considered minor, Equitable will
11
timely inform MarkWest of the need for the maintenance and repairs, and MarkWest
will undertake to perform, or cause to be performed, those maintenance and
repair activities, all at MarkWest's cost and expense. At MarkWest's option, it
shall notify Equitable that all future minor maintenance shall be performed by
MarkWest. For preventive maintenance or other scheduled maintenance to be
performed by Equitable, Equitable shall provide MarkWest with a schedule and
estimated cost prior to performing such scheduled maintenance.
(g) Use its best efforts to operate the Plant in accordance with the
commercially reasonable industry practices and the directions of MarkWest.
(h) Provide daily Plant operations reports to MarkWest, together with
such other reports as may be reasonably requested by MarkWest and reports as are
required by permits or by regulations.
The parties agree that, subject to the other provisions of this Article VII,
MarkWest shall designate Equitable on a subcontract basis to provide one or more
operating services for the Plant, and Equitable shall perform such services as
outlined in this Section 7.1 in a prudent manner.
7.2 MarkWest shall have the right to perform, take over and carry out the
services of the operator for the Plant by providing Equitable with thirty (30)
days advance written notice, which notice shall be effective upon the first day
of the Accounting Period following the expiration of that 30-day period. In that
event, Equitable shall remain responsible for the operation of its facilities
that are not included within the Plant.
7.3 If MarkWest has assumed operations of the Plant under Section 7.2,
above, and subsequently fails to maintain a 96% On-Line Performance for the
Plant, Equitable shall have the right, but not the obligation, to reassume
operations thereof on the same timing and under the same conditions as set forth
in Section 7.2, above. Thereafter, the party providing operating services for
the Plant shall be subject to change in the event that the then current operator
does not maintain an On-Line Performance of at least 96%. Upon the change of the
party providing operating services for the Plant, the duties under Section 7.1,
above, shall be transferred to the party then assuming operations. The
compensation and fees as outlined in Article XI of this Maytown Agreement shall
be the same regardless of which party is providing the operating services for
the Plant. If, for any reason including Force Majeure, the Plant is not capable
of operating at the design recovery factors set forth in Article IV, above, the
party operating the Plant shall use its commercially reasonable and prudent
efforts to operate the plant in such a manner as to achieve the highest possible
recoveries. The On-Line Performance standard is a measure only for determining
the rights of a party to assume operations of the Plant and shall not give rise
to any other claims hereunder.
7.4 As used herein, "On-Line Performance" is the number of hours during the
applicable Accounting Period the Plant is capable of operating at the design
recovery factors set forth in Article IV, above, compared to the total number of
hours in the applicable Accounting Period, and expressed as a percentage. In
determining the number of hours in an Accounting Period, there shall be deducted
the number of hours during which the Plant is shut down due to conditions of
Force Majeure or due to scheduled annual turnaround maintenance procedures.
12
7.5 Regardless of which party is the designated to provide operating
services for the Plant, MarkWest shall undertake all maintenance and repairs
required at the Plant, except for those set forth in Section 7.1(f), above.
7.6 After start up of the Plant, Equitable shall continue to operate its
compression facilities as refrigeration compression for processing, it being
understood that such compression is critical to the operation of the Plant.
Equitable will also operate its compression facilities to recompress 6.5 MMcf
per day of recycle gas produced by the Plant for Delivery Volumes of up to 55
MMcf per day, as well as all recycle gas greater than 14 MMcf per day for
Delivery Volumes above 55 MMcf per day. The parties agree that the amount of
compression available for refrigeration service may vary with the Delivery
Volume, but in no event shall the amount of refrigeration compression provided
by Equitable's existing compression be less than 1460 horsepower for Delivery
Volumes of up to 55 MMcf per day, and no less than an additional 26.5 horsepower
per MMcf of additional Delivery Volumes in excess of 55 MMcf per day and up to
the Plant design Delivery Volume of 75 MMcf per day. MarkWest will install all
additional refrigeration compression for refrigeration service at the Plant as
necessary to meet the design recoveries specified in this Maytown Agreement. The
additional refrigeration compression installed by MarkWest shall be deemed to be
part of the Plant.
7.7 Equitable shall provide, at its sole cost, all fuel required in
connection with the operation of its compressor facilities, including all fuel
required for refrigeration compression and recompression of recycle gas by
Equitable's facilities.
7.8 Despite the fact that Equitable may be designated to perform duties of
operating the Plant as outlined in Section 7.1, MarkWest will pay for all costs
associated with the Plant and new refrigeration compression installed by
MarkWest including operating, maintenance, parts and supplies, fuel gas and
power costs but excluding operating labor provided by Equitable, except for the
costs associated with the operation and maintenance of the New Compression
described in Section 4.10; provided, however, the cost of third party labor
required for minor maintenance and/or repairs, as defined in Section 7.1, shall
be paid for by MarkWest.
7.9 MarkWest and Equitable agree that MarkWest shall lease the Pipeline on
the terms and conditions of the Pipeline Lease Agreement, attached hereto and
incorporated herewith as Exhibit A.
7.10 MarkWest will have the option, at its sole cost and expense, but not
the obligation, of connecting pipelines from other locations to the Pipeline.
Subject to the terms of the existing property agreements, Equitable will grant
MarkWest any required easements for those purposes at no expense to MarkWest and
the pipelines and related facilities and equipment ("Additional Pipelines")
installed by MarkWest and connected to the Pipeline shall remain the property of
MarkWest. The design of each connection shall be approved in writing by
Equitable, which approval shall not be unreasonably withheld, prior to MarkWest
commencing construction of such connection. If MarkWest connects such Additional
Pipelines, MarkWest will also install such equipment as is required to prevent
MarkWest from exceeding the maximum allowable operating pressure of the
Pipeline. Should MarkWest connect such Additional Pipelines to the Pipeline, as
provided above, MarkWest shall be solely responsible and liable for the
maintenance and operation
13
of those Additional Pipelines, and MarkWest shall be subject to indemnity
obligations set forth in Section 16.3.
7.11 Equipment at Equitable's Dwale and Maytown facilities that is not
utilized by MarkWest in the design and operation of the Plant shall be handled
in the following manner:
(a) Equitable shall have the right to use for its own operation, or
that of its affiliates, any spare equipment not used by MarkWest in the design
and operation of the Plant.
(b) At Equitable's request, MarkWest will sell, on behalf of
Equitable, all spare processing equipment at Equitable's Maytown and Dwale
facilities that MarkWest does not select for use in the Plant, and MarkWest will
use its commercially reasonable efforts to obtain the highest price available.
If MarkWest purchases any of the equipment for use other than at the Plant, it
will pay Equitable the highest price offered by another third party or the fair
market value of that equipment if other offers have not been received. If the
sale or other disposition of any of Equitable's equipment requires demolition,
disposal or remediation in compliance with applicable laws pertaining to the
protection of the environment or the handling of hazardous materials, MarkWest
shall not be responsible for the demolition, disposal or remediation of such
equipment; and, in that event, Equitable shall remain fully responsible and
liable for the disposition of that spare equipment.
(c) If Equitable does not request that MarkWest sell any of the spare
processing equipment at Equitable's Maytown and Dwale facilities, MarkWest shall
nevertheless have the preferential right to purchase any of that equipment as
set forth below. If Equitable receives a bona-fide, third party offer to
purchase any of the equipment, which the parties agree will be a cash offer,
that it is willing to accept, it shall notify MarkWest, specifying the details
of that offer. MarkWest shall have the right to elect, in writing, within 15
days of that notification, whether or not it will purchase that equipment on the
same terms and conditions as contained in that notice. If MarkWest fails to
elect to purchase the equipment on those terms within that 15-day period,
Equitable shall be free to sell that equipment to the party submitting the offer
on the terms contained in that offer. All sales of the equipment shall be on an
"as-is, where-is" basis, and Equitable shall disclaim any and all warranties of
any nature with respect to the equipment.
7.12 Subject to the terms of the existing property agreements pertaining to
the lands on which the Plant will be located, MarkWest will lease the required
space from Equitable in the vicinity of Equitable's existing Maytown facilities,
as a site for locating and operating the Plant, and subject to the terms of
those existing property agreements, Equitable will grant MarkWest an easement
across Equitable's property, at locations reasonably acceptable to MarkWest, for
all purposes related to the installation, maintenance and operation of the
Plant, for a payment of $10.00 per year for the lease and the easement. The
parties will execute a recording Memorandum of Lease and Easement describing the
property and easements. The parties agree that MarkWest will be fully
responsible for any environmental contamination that is caused by its operation
while the Plant is being installed and after the Plant is in operation.
Equitable will remain responsible for any such environmental contamination
occurring or existing prior to the time that MarkWest occupies the site, or that
occurs as a direct result of Equitable's negligent acts or omissions during
periods when Equitable is providing operating services for the Plant.
14
7.13 The parties acknowledge that both may be involved in the process of
acquiring all necessary permits for the Plant, and in that event, the parties
shall fully cooperate in acquiring those permits. If any permits required for
the installation, ownership and/or operation of the Plant require training of
personnel in connection with applicable regulations, including, but not limited
to the OSHA regulations contained in 29 C.F.R. 1910.119, MarkWest will provide
that training to the personnel of Equitable that will be involved in the
operation of the Plant. Equitable agrees to be responsible for and to cause its
employees to comply with and operate the Plant in accordance with all permit
requirements and applicable laws, rules and regulations.
7.14 All files related to the operation and maintenance of the Plant,
including but not limited to those pertaining to the physical condition,
maintenance, and regulatory compliance of the Plant shall be maintained and
located at Equitable's office, and MarkWest will have full access thereto during
normal business hours.
ARTICLE VIII
PLANT FUEL
8.1 The parties acknowledge that the only gas that is expected to be
consumed in the Plant for fuel is gas utilized in the operation of the pilot for
the Plant flare. Annually, the parties shall estimate the fuel consumption for
the pilot for the Plant flare consumed during each Accounting Period, and
MarkWest shall pay Equitable, each Accounting Period, for the estimated fuel
consumption, at the Appalachia Index price.
ARTICLE IX
PLANT PRODUCT MEASUREMENT
9.1 MarkWest shall measure all volumes of Plant Products utilizing the
existing measurement facilities, or such other measurement facilities as
MarkWest at its sole cost and expense from time to time installs, in accordance
with the provisions contained herein, to the extent practicable. Any required
modifications or additions to the existing measurement facilities shall be at
MarkWest's sole expense.
9.2 MarkWest's metering and testing installations shall be maintained,
operated, and calibrated, when applicable and practicable, in accordance with
the latest amended and revised edition of (a) "API Manual of Petroleum
Measurement Standards", Chapters 1, Vocabulary; Chapter 4, Proving Systems;
Chapter 5, Metering; Chapter 12, Calculation of Petroleum Quantities; and
Chapter 14, Section 6, Installing and Proving Density Meters; (b) GPA
Publication 2145-95, "Table of Physical Constants of Paraffin Hydrocarbons and
Other Components of Natural Gas"; (c) GPA Publication 2174, "Methods for
Obtaining Hydrocarbon Fluid Samples Using a Floating Piston Cylinder"; (d) GPA
Publication 2177, "Methods for Analysis of Demethanized Natural Gas Liquid
Mixtures by Gas Chromatography"; (e) GPA Publication 8173, "Standard for
Converting Natural Gas Liquids and Vapors to Equivalent Liquid Volumes"; and (f)
GPA Publication 8182, "Standard for the Mass Measurement of Natural Gas
Liquids".
9.3 Meter proving equipment shall be designed, manufactured, and tested in
accordance with Chapter 4 of the "API Manual of Petroleum Measurement Standards"
as current at the time of such design, manufacture, and testing. Meter proving
shall be done at least twice a year, in
15
accordance with Chapters 4 and 5 of the "API Manual Of Petroleum Measurement
Standards", as amended from time to time. Recalibration of gravitometers,
densitometers or such other similar devices, or the determination of a
gravitometer adjustment factor shall be done once per quarter, by use of a
pyonometer to an accuracy of fifty one-hundredths percent (0.50%).
(a) Measuring equipment found to be registering inaccurately or out of
service shall be adjusted to read accurately and placed in service immediately.
For the period in which the meter was inaccurate or out of service, the volume
shall be estimated as follows, in descending order:
(i) Using measurement from accurate check meters, if any, which
were in operation during the period to be corrected; or if this cannot be
done,
(ii) By correcting the error if the percentage of error is
ascertainable by calibration or calculation; or if this cannot be done,
(iii) By comparison with quantities flowing under similar
conditions when the meter was registering accurately and by the use of
pertinent plant records, including, but not limited to, storage tank
readings.
(iv) If the preceding methods cannot be done, an alternate method
agreed to by both Parties shall control.
(b) Any correction shall be retroactive for any period definitely
known or, if not known, it shall be retroactive for one-half of the volume
displaced since the last test of the measuring equipment affected, not to exceed
50% of the volume displaced. However, no correction shall be made if the
magnitude of the error is determined to be .0050 (0.50%) or less. Any
corrections shall be debited or credited on the next subsequent statements for
the Accounting Period.
(c) Both parties shall have access to metering equipment used to
measure volume at all reasonable times and may have a representative present
during any of the foregoing activities of another party. Representatives of each
party will be permitted to be present to witness any and all tests or
calibrations of meters used herein. Each party reserves the right at a future
date to install check meters; such meters shall be of a type mutually agreeable
to both Parties and shall not be installed in such a manner as to interfere with
the proper operation of the Plant equipment.
(d) If either party to this Maytown Agreement shall notify the other
party that it desires a special test of any measuring equipment, the parties
shall cooperate to secure a prompt verification of such equipment, at the
expense of the party requesting such special test. Except, if a meter or other
equipment is found to be in error by more than .0050 (0.50%) or less, the party
owning and/or operating shall bear the expense of such special test.
9.4 MarkWest shall utilize Equitable's existing gas and liquid hydrocarbon
chromatograph as part of the Plant (and that equipment shall be included in the
Equipment Lease Agreement described above), on a sampling interval not to exceed
10 minutes to determine the composition of the Plant Products. MarkWest shall
maintain the chromatograph at its sole cost and
16
expense and shall operate the chromatograph so as to provide all required inlet
gas and Residue Gas composition data to Equitable or its designee.
9.5 The pounds of Plant Products shall be as determined by the above
described equipment and procedures at the Plant terminus.
(a) The weight percent of each component in the Plant Products at the
Plant terminus shall be as determined by chromatographic analysis utilizing the
existing chromatograph, as described above. The pounds of each component of the
Plant Products delivered at each Delivery Point shall be the product of the
total pounds of Plant Product delivered at the Plant terminus during the month
in question multiplied by the weight percent of such respective component as
determined by chromatographic analysis.
(b) The volume of each component of the Plant Products, as measured in
U.S. liquid gallons of 231 cubic inches each at 60(0)F and at the vapor pressure
of the component being measured, shall be that volume determined by dividing the
number of pounds of each respective component of the Plant Products delivered by
the absolute density of that component of the Plant Products delivered at
60(0)F. This "pounds per gallon" figure shall be from GPA Publication 2145-95,
as amended from time to time, except for the component "Hexanes plus", for which
"pounds per gallon" and molecular weight shall be analytically determined.
(c) The sum of gallons determined for each component of the Plant
Products recovered shall be the total gallons recovered by MarkWest for the
Accounting Period in question for purposes of this Maytown Agreement. The
current "molecular weight" and "pounds per gallon" for each component of the
Plant Products and those components which will be utilized for purposes of
custody transfer deliveries are, as follows, from GPA Publication 2145-95:
COMPONENT MOLECULAR WEIGHT LBS/GALLON @ 60 DEGREES F
--------- ---------------- -------------------------
Carbon Dioxide 44.010 6.8199
Methane 16.043 2.5000
Ethane 30.070 2.9696
Propane 44.097 4.2268
Iso-butane 58.123 4.6927
N-butane 58.123 4.8690
Iso-pentane 72.150 5.2082
N-pentane 72.150 5.2617
Hexanes plus From lab analysis From lab analysis
In the event said GPA Publication 2145-95 is revised or amended, then the
schedule set out above shall be automatically adjusted accordingly.
9.6 Each party hereto shall have access at all reasonable hours to all
facilities which are related to measurement and sampling. Each party shall have
the right to be present for any installation, reading, cleaning, chart changing,
repairing, testing, calibrating and/or adjusting of either party's measuring
equipment.
17
9.7 The test data from each party's measuring equipment shall remain the
property of the party performing the test. The records and/or charts from each
party's measuring equipment shall remain the property of the party owning that
measuring equipment. Upon request, each party will submit to the other all test
data and records and/or charts, together with calculations therefrom, for
inspection and verification, subject to return within 30 days after receipt
thereof. Each party shall preserve for a period of 2 years from the date the
test is made or the records and/or charts are created, or longer as required by
law, all test data and all records and/or charts from each party's measuring
equipment for auditing. Thereafter, the test data and all records and/or charts
may be destroyed, unless one party has given notice that it desires an audit, or
an audit has commenced, in accordance with this Maytown Agreement, covering the
time in which the test data, records, or charts were originated.
9.8 MarkWest shall have the right, at its expense and liability, to install
telemetry reporting equipment at the Plant and on the facilities of Equitable as
necessary, to provide for remote operations reporting.
ARTICLE X
RECEIPTS OF GAS AND ALLOCATIONS
10.1 If all gas available from Equitable at the Delivery Point exceeds 75
MMcf per day, the parties will use their commercially reasonable efforts to
accommodate the excess gas; provided, Equitable acknowledges the recovery of
Plant Products may decrease and the pressure drop may increase, by processing
Delivery Volumes in excess of 75 MMcf per day.
10.2 Gas may be bypassed around the Plant without any liability for the
failure to process that gas during any period when (i) all or any portion of the
Plant is shut down because of mechanical failure, maintenance or repairs,
non-routine operating conditions, or Force Majeure, or (ii) the gas available
for processing exceeds the capacity of the Plant, or (iii) it is reasonably
determined by either party that the operation of all or any portion of the Plant
will cause injury or harm to persons or property or to the integrity of the
Plant, or (iv) upon Equitable's request, provided MarkWest obtains the same
economic benefit that it otherwise would have by not bypassing such gas.
10.3 Title to all Plant Products shall pass to MarkWest upon delivery of
Equitable's gas at the Delivery Point. Title to the portion of the gas remaining
as Residue Gas shall be and remain the property of Equitable.
10.4 It is recognized that, in connection with Plant operations, there will
be thermal reductions in the gas delivered to the Plant attributable to the
processing of the gas for Plant Product recovery, and attributable to the use of
such gas as Plant Fuel, the flaring of such gas, and other uses of such gas
incident to or occasioned by processing of the gas, including lost and
unaccounted for gas. MarkWest shall owe no compensation to Equitable for any
such reductions except for as provided in Section 8.1. The party operating the
Plant shall operate, with respect to fuel consumption, in the manner and in
accordance with the practices of a prudent operator of similar facilities under
similar conditions and circumstances. Equitable shall be solely responsible for
any allocations of fuel or thermal reduction between Equitable and other parties
delivering gas
18
into the Gathering System in connection with the delivery, processing and
thermal reductions under this Maytown Agreement.
ARTICLE XI
FEES AND COMPENSATION
11.1 For each Accounting Period, MarkWest shall pay to Equitable * of the
Net Sales Price per gallon, times the gallons of individual Plant Product
recovered by the Plant during that Accounting Period and attributable to gas
delivered to the Plant under the terms of this Maytown Agreement during that
Accounting Period; minus the fees payable to MarkWest under Section 11.3, below.
11.2 All Plant Products shall be marketed by MarkWest.
11.3 MarkWest will deduct a transportation and fractionation fee of * cents
per gallon of Plant Products for * of the gallons of Plant Products recovered at
the Plant and attributable to gas processed by MarkWest at the Plant under the
terms of this Maytown Agreement. Forty-five percent (45%) of the transportation
and fractionation fee will be fixed and shall not be subject to adjustment.
Fifty-five percent (55%) of the transportation and fractionation fee will be
subject to adjustment, beginning on February 1, 2001, in proportion to the
annual average percentage change, from the preceding year, in the Producer Price
Index for oil and gas field services (SIC 138) as published by the U.S.
Department of Labor. The adjustment of those fees shall be made effective upon
each February 1, and shall reflect the annual average percentage change in the
foregoing index during the immediately preceding calendar year.
11.4 With respect to all gas attributable to Equitable's Interest (i)
produced from xxxxx that, as of the first day of the month in which this Maytown
Agreement is executed, are being delivered by Equitable into the Columbia system
upstream of MarkWest's Kenova and Xxxxxxx extraction plants, and the Xxxx
extraction plant (if the Xxxx plant is purchased from Columbia by MarkWest), and
(ii) produced from xxxxx drilled by Equitable after the date hereof and
delivered into the Columbia system upstream of MarkWest's Kenova and Xxxxxxx
extraction plants, and if purchased from Columbia by MarkWest, the Xxxx
extraction plant, MarkWest will rebate to Equitable all processing fees and fuel
retainage payable to MarkWest, if any (other than fees or charges assessed under
the terms of this Maytown Agreement or under the
Gas Processing Agreement
(Dwale) between Equitable and MarkWest, of even date herewith, for gas delivered
at the Dwale location). This provision specifically includes that gas currently
processed and delivered at Equitable's Maytown and Dwale processing stations by
Equitable, to the extent that such gas is subject to MarkWest processing fees
and fuel retainage.
ARTICLE XII
STATEMENTS AND PAYMENTS
12.1 Based on the measurements set forth in this Maytown Agreement,
MarkWest shall provide Equitable with a statement explaining fully how all
payments due under the terms of this
*Denotes Confidential Portion Omitted and
Filed Separately with the Commission
19
Maytown Agreement were determined not later than 25 days following the
Accounting Period for which the payments are due.
12.2 All payments shall be paid by MarkWest to Equitable by wire transfer
not later than 25 days following the Accounting Period for which the payments
are due. Should MarkWest fail to make any payments to Equitable, interest shall
accrue on the unpaid balance at the lower of (i) the then effective prime
interest rate published in the "Money Rates" section of The Wall Street Journal,
plus two percent (2%), or (ii) the published rate allowed by law, from the date
due until paid.
12.3 Either party, on 30 days prior written notice, shall have the right at
its expense, at reasonable times during business hours, to audit the books and
records of the other party to the extent necessary to verify the accuracy of any
statement, allocation, measurement, computation, charge, or payment made under
or pursuant to this Maytown Agreement, or to determine if all gas dedicated
under this Maytown Agreement is being delivered under the terms of this Maytown
Agreement. The scope of any audit shall be limited to the 24 month period
immediately prior to the month in which the audit is requested; provided, no
audit may include any time period for which a prior audit hereunder was
conducted, and no audit may occur more frequently than once each 12 months. The
party conducting the audit shall have 60 days after requesting the audit in
which to submit a written claim for adjustments, with supporting detail. The
audited party shall respond to the written claim in writing within 30 days after
receiving the written claim. All statements, allocations, measurements,
computations, charges, or payments made in any period prior to the 24 month
period immediately prior to the month in which the audit is requested, or made
in any 24 month period for which the audit is requested but for which a written
claim for adjustments is not made within 30 days after the audit is requested,
plus any additional time caused by the unreasonable delays of the party being
audited, shall be conclusively deemed true and correct.
ARTICLE XIII
ROYALTY, TAXES, AND THIRD PARTY GAS
13.1 Equitable shall cause all royalties due on its gas delivered under
this Maytown Agreement to be paid as required.
13.2 Equitable shall pay all gross production, severance, and similar taxes
levied against Equitable or with respect to gas delivered under this Maytown
Agreement. MarkWest shall not become liable for those taxes, unless designated
to remit those taxes on behalf of Equitable by a taxing authority, in which
event the amount of those taxes remitted by MarkWest on Equitable's behalf shall
either be deducted from the amounts otherwise due Equitable hereunder, or
Equitable will promptly reimburse MarkWest for those taxes remitted by MarkWest.
13.3 The parties acknowledge that Equitable, or its affiliates, that
operate the Gathering System, may have the right to offer processing services
for third-party gas that is delivered into the Gathering System provided that
such third party gas is only processed at the Plant, and that such processing
will occur at the Plant under terms that would be no less favorable to MarkWest,
in MarkWest's reasonable opinion, than the terms of this Maytown Agreement.
Accordingly, if during the term of this Maytown Agreement, Equitable offers to
process any third-party gas on
20
terms that would be less favorable to the third party than the terms of this
Maytown Agreement provided to other third parties, then between Equitable and
MarkWest, (i) Equitable shall be responsible to MarkWest for all terms and
conditions related to such gas as outlined in this Maytown Agreement except that
such gas shall be considered third-party gas and will be subject to but not
dedicated to MarkWest as described in Article III, and (ii) Equitable and
MarkWest will share equally in the profit derived by Equitable and remaining
after payment to MarkWest of all fees and compensation as outlined in this
Maytown Agreement for processing such third-party gas and after subtracting the
actual cost to Equitable of providing compression, dehydration or other services
to such third party at the Plant, to the extent that such compression,
dehydration or other services are not otherwise charged by Equitable to the
third party in transportation or gathering fees.
13.4 Any third-party gas that Equitable, or its affiliates, do not have the
right to process shall be subject to the negotiation of a processing agreement
between MarkWest and such third party and any such third-party gas will be
subject to the transportation fees in effect at the time. At no time will
third-party gas be accepted by MarkWest into the Plant without being delivered
into the Gathering System. MarkWest or the third party, will reimburse Equitable
for the third party's share of compression, dehydration or other services
provided by Equitable to MarkWest at the Plant, to the extent that such
compression, dehydration or other services are not otherwise charged by
Equitable to the third party in transportation or gathering fees.
ARTICLE XIV
TERM
14.1 This Maytown Agreement shall remain in full force and effect for a
period of 15 years following the Effective Date (Primary Term), and year to year
thereafter. Either party may terminate this Maytown Agreement at the end of the
Primary Term, or at the end of any extension thereof, by providing 6 months
prior written notice to the other party. Should the agreement currently being
negotiated between Columbia and Equitable for the transportation of Equitable's
gas on Columbia's system terminate before, on or after November 1, 2006,
Equitable shall have the right, but not the obligation, at its sole cost and
expense, to change the Residue Gas Redelivery Point.
14.2 Should this Maytown Agreement be terminated for any reason permitted
hereunder, Equitable shall have a preferential right to purchase for a period of
180 days MarkWest's equipment included as part of the Plant (the "MarkWest
Plant") from MarkWest. In addition, if at any time during the term of this
Maytown Agreement MarkWest receives a bona-fide, third-party offer to purchase
the MarkWest Plant that it is willing to accept, it shall notify Equitable,
specifying the details of that offer. Equitable shall have the right to elect,
in writing, within 30 days of that notification, whether or not it will purchase
the MarkWest Plant on the same terms and conditions as contained in that notice.
If Equitable fails to elect to purchase the MarkWest Plant on those terms within
that 30-day period, MarkWest shall be free to sell the MarkWest Plant to the
party submitting the offer on the terms contained in that offer. If no
third-party offer received by MarkWest is pending upon termination of this
Maytown Agreement, Equitable shall have the right for a period of 180 days
following the termination of this Maytown Agreement for any reason permitted
hereunder to offer to purchase the MarkWest Plant. If the parties cannot agree
on the purchase price, the purchase price, shall be established by appraisal of
an independent appraiser
21
selected by the parties. All sales of the MarkWest Plant shall be on an "as-is,
where-is" basis, and MarkWest shall disclaim any and all warranties of any
nature with respect to the Plant. During said 180day period, Equitable shall
have the right, but not the obligation, to operate and maintain the Plant at its
sole cost and expense.
ARTICLE XV
FORCE MAJEURE
15.1 "Force Majeure" means any cause or condition not reasonably within the
control of the party claiming suspension and which by the exercise of
commercially reasonable diligence, that party is unable to prevent or overcome.
15.2 In the event a party is rendered unable, wholly or in part, by Force
Majeure, to carry out its obligations under this Maytown Agreement, other than
the obligation to make any payments due hereunder, the obligations of that
party, so far as they are affected by Force Majeure, shall be suspended during
the continuance of the inability, and the cause of the Force Majeure, as far as
possible, shall be remedied with all reasonable dispatch. The party affected by
Force Majeure shall provide the other party with written notice of the Force
Majeure event, with reasonably full detail of the Force Majeure within a
reasonable time after the occurrence of the Force Majeure event.
15.3 The settlement of strikes, lockouts, and other labor difficulty shall
be entirely within the discretion of the party having the difficulty and nothing
herein shall require the settlement of strikes, lockouts, or other labor
difficulty.
ARTICLE XVI
LIABILITY, DEFAULT AND TERMINATION
16.1 As among the parties hereto, Equitable and any of its designees shall
be in custody, control and possession of the gas hereunder, including any
portion thereof which accumulates as liquids, until that gas is delivered to the
Delivery Point. As among the parties hereto, and in respect to any portion of
the Residue Gas that is to be redelivered to Equitable at the Redelivery Point,
Equitable and any of its designees shall be in custody, control and possession
of that portion of the Residue Gas, including any portion thereof which
accumulates as liquids, after it is redelivered at the Redelivery Point.
16.2 As among the parties hereto, the party then designated to provide
operating services for the Plant, and any of its designees shall be in custody,
control and possession of the gas hereunder, including any portion thereof which
accumulates as liquids, after that gas is delivered to the Delivery Point and,
in respect to any portion of the Residue Gas that is to be redelivered to
Equitable at the Redelivery Point, until it is redelivered at the Redelivery
Point.
16.3 MarkWest hereby covenants and agrees with Equitable that except to the
extent caused by Equitable's or Equitable's Indemnified Parties (as defined
below) gross negligence or willful misconduct, MarkWest shall protect, defend,
indemnify and hold harmless Equitable and its affiliates, the contractors,
subcontractors, agents or representatives of Equitable and its affiliates, and
the directors, managers, officers or employees of Equitable, its affiliates or
the contractors, subcontractors, agents or representatives of same (hereinafter
referred to as "EQUITABLE'S INDEMNIFIED PARTIES") from, against and in respect
of any and all Losses (as hereinafter defined)
22
incurred by Equitable or any of Equitable's Indemnified Parties to the extent
those Losses arise from or are related to: (a) MarkWest's Plant and facilities
from and after the Delivery Point to and including the Redelivery Point; or (b)
MarkWest's possession and control of Equitable's gas as set forth in Section
16.2, or (c) MarkWest's connection of Additional Pipelines to the Pipeline (or
MarkWest's ownership, operation or use of such Additional Pipelines), as set
forth in Section 7.10 or those facilities leased to MarkWest as contained in the
Pipeline Lease Agreement and the Equipment Lease Agreement which are attached
hereto and incorporated herein.
16.4 Equitable hereby covenants and agrees with MarkWest that except to the
extent caused by MarkWest's or MarkWest's Indemnified Parties (as defined below)
gross negligence or willful misconduct, Equitable shall protect, defend,
indemnify and hold harmless MarkWest and its affiliates, the contractors,
subcontractors, agents or representatives of MarkWest and its affiliates, and
the directors, managers, officers or employees of MarkWest, its affiliates or
the contractors, subcontractors, agents or representatives of same (hereinafter
referred to as the "MARKWEST'S INDEMNIFIED PARTIES") from, against and in
respect of any and all Losses (as hereinafter defined) incurred by MarkWest or
any of MarkWest's Indemnified Parties to the extent those Losses arise from or
are related to: (a) Equitable's facilities before the Delivery Point and after
the Redelivery Point; or (b) Equitable's possession and control of Equitable's
gas as set forth in Section 16.2.
16.5 For the purposes of this Article, "LOSS(ES)" shall mean any actual
loss, cost, expense, liability, damage, demand, suit, sanction, claim,
settlement, judgment, lien, fine, penalty, interest of every kind and character
(including reasonable fees and expenses of attorneys, technical experts and
expert witnesses reasonably incident to same) which are alleged, asserted or
suffered by the applicable indemnified party, and any expenses incurred in
enforcing this indemnity provision, incurred by, imposed upon or rendered
against one or more of the applicable indemnified party, on account of injuries
(including death) to any person or damage to or destruction of any property,
sustained or alleged to have been sustained in connection with or arising out of
or incidental to the matters for which the indemnifying party has indemnified
the applicable indemnified party, and whether based on contract, tort or
pursuant to any then existing laws, rules or regulations of any governmental
body having jurisdiction with respect thereto.
16.6 Indemnification Procedure. The indemnifications contained in this
Article shall be implemented as follows:
(a) NOTICE OF CLAIM. The party seeking indemnification under the terms
of this Maytown Agreement ("INDEMNIFIED PARTY) shall submit a written "CLAIM
NOTICE" to the other party ("INDEMNIFYING PARTY") which, to be effective, must
state: (i) the amount, if any, of each payment claimed by an indemnified party
to be owing, (ii) the basis for the claim, with reasonable supporting
documentation, and (iii) to the extent reasonably possible, each separate item
of Loss for which payment, or other performance under the Article, is so
claimed. If the Claim Notice demands payment of money, the amount claimed shall
be paid by the indemnifying party to, and only to, the extent required herein
within 30 days after receipt of the Claim Notice or after the amount of that
payment has been finally established, either judicially or by mutual agreement,
whichever last occurs.
(b) CLAIMS INVOLVING LITIGATION. Within 30 days after notification to
any indemnified party with respect to any claim or legal action or other matters
that may result in a
23
Loss for which indemnification may be sought under this Article, but in any
event in time sufficient for the indemnifying party to contest any action,
claim, proceeding or other matter that has become the subject of proceedings
before any court or tribunal, the indemnified party shall give written notice of
the claim, legal action or other matter to the indemnifying party and, at the
request of the indemnifying party, shall furnish the indemnifying party or its
counsel with copies of all pleadings and other information with respect to the
claim, legal action or other matter. If the information includes any matter
which is privileged or otherwise exempt from discovery by an adverse party,
disclosure of that matter may be made contingent upon entering into a joint
defense agreement or taking other reasonable protective measures. The failure to
provide that notice within the time specified shall not relieve an indemnifying
party of its indemnity obligations hereunder except to the extent of any Losses
which are attributable to that failure. Upon the election of the indemnifying
party made within 60 days after receipt of that notice by the indemnifying
party, indemnifying party shall have the right to assume control of that claim,
legal action or other matter (to the extent only that the claim, legal action or
other matter relates to a Loss for which the indemnifying party is liable),
including the determination of all appropriate actions, the negotiation of
settlements on behalf of the indemnified party, and the conduct of litigation
through attorneys of the indemnifying party's choice, provided, however, that no
settlement can result in any liability or cost to the indemnified party for
which it is entitled to be indemnified hereunder without its consent. If the
indemnifying party elects to assume control, (i) any expense incurred by the
indemnified party thereafter for investigation or defense of the matter shall be
borne by the indemnified party and (ii) the indemnified party shall give all
reasonable information and assistance, other than pecuniary, that the
indemnifying party shall deem necessary to the proper defense of the claim,
legal action, or other matter, subject to the requirements, if applicable, of a
joint defense agreement or reasonable protective measures as referred to above.
In the absence of an election, the indemnified party will use good faith efforts
to defend, at the indemnifying party's expense any claim, legal action or other
matter to which the other party's indemnification under this Article applies
until the indemnifying party assumes the defense, and, if the indemnifying party
fails to assume that defense within the time period provided above, at the
indemnified party's election either continue the defense thereof, at the
indemnifying party's expense, or settle the same in the indemnified party's
reasonable discretion, and with the consent of the indemnifying party, which
consent shall not be unreasonably withheld, at the indemnifying party's expense.
16.7 No breach of this Maytown Agreement shall cause any party hereto to be
liable to the other parties hereto for, nor shall Loss(es) include, indirect,
punitive, consequential, or exemplary damages.
16.8 MarkWest shall be deemed to be in default under this Maytown Agreement
upon the occurrence of any of the following ("Event of Default"): (i) it fails
to make timely payment of any amount not in dispute due to Equitable under this
Maytown Agreement, after Equitable gives MarkWest fifteen (15) days written
notice to cure; (ii) it fails to perform fully a material provision of this
Maytown Agreement (other than failure to pay) and fails to cure the same or to
provide a plan reasonably acceptable to Equitable to cure the same and to
diligently pursue such plan after Equitable gives MarkWest thirty (30) days
written notice to cure; (iii) it makes an assignment or any general arrangement
for the benefit of creditors; (iv) it files a petition or otherwise commences,
authorizes, or acquiesces in the commencement of a proceeding or cause under any
bankruptcy or similar law for the protection of creditors or have such petition
filed or proceeding commenced against it; (v) it otherwise becomes bankrupt or
insolvent; (vi) it is unable to pay its debts as they
24
fall due; or (vii) it fails to give adequate security for or assurances of its
ability to perform its reasonable obligations under this Maytown Agreement
within thirty (30) days of a reasonable request by Equitable.
16.9 When an Event of Default occurs, Equitable shall have the right:
(a) to terminate this Maytown Agreement in accordance with its
provisions, and/or
(b) To suspend the delivery of Gas, and/or
(c) To pursue any other remedy provided in this Maytown Agreement or
available at law or in equity, subject to the limitation of remedies contained
in Section 16.7.
It is expressly understood and agreed that the exercise of any remedies or
rights available to Equitable under paragraphs (a) through (c) above, shall not
be considered an election of remedies and shall be without prejudice to
Equitable's right to assert all other rights and remedies available to it at law
or in equity.
16.10 Upon the expiration, termination or cancellation of this Maytown
Agreement, for any reason, then in that event, the Pipeline Lease Agreement and
Equipment Lease Agreement, which are both attached, hereto and executed
contemporaneous herewith, shall also terminate. Furthermore, upon the
expiration, termination or cancellation of the Pipeline Lease Agreement or
Equipment Lease Agreement or
Gas Processing Agreement (Dwale), for any reason,
this Maytown Agreement shall also terminate.
ARTICLE XVII
TITLE
17.1 Equitable represents and warrants that it owns, or has the right to
commit, all gas and Plant Products committed hereby and has the right to deliver
that gas and any other gas delivered by Equitable to the Plant, and the Plant
Products contained therein, to MarkWest for the purposes of this Maytown
Agreement, free and clear of all liens, encumbrances and adverse claims.
Equitable hereby indemnifies MarkWest against and holds MarkWest harmless from
any and all damages, claims, actions, losses, and costs, including its court
costs and attorneys fees, arising out of or related to any breach of the
foregoing representation and warranty.
ARTICLE XVIII
MISCELLANEOUS
18.1 The failure of any party hereto to exercise any right granted
hereunder shall not impair nor be deemed a waiver of that party's privilege of
exercising that right at any subsequent time or times.
18.2 This Maytown Agreement shall be subject to all applicable state,
federal and local laws, rules and regulations, and the parties hereto shall be
entitled to regard all those laws, rules and regulations as valid, and may act
in accordance therewith until they may be invalidated by final judgment in a
court of competent jurisdiction.
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18.3 This Maytown Agreement shall be governed by, construed, and enforced
in accordance with the laws of the State of
Kentucky without regard to choice of
law principles.
18.4 This Maytown Agreement shall extend to and inure to the benefit of and
be binding upon the parties hereto, and their respective successors and assigns.
No assignment of this Maytown Agreement shall be binding on either of the
parties hereto, other than the party selling, transferring, assigning or
conveying its interests in this Maytown Agreement, until the first day of the
Accounting Period following the date a certified copy of the instrument
evidencing that sale, transfer, assignment or conveyance has been delivered to
the other party. However, MarkWest shall not assign this Maytown Agreement, or
transfer the Plant (other than assignments or transfers to wholly owned
affiliates of MarkWest, provided that MarkWest will guarantee performance by
such affiliate of the terms of this Maytown Agreement) without the prior written
consent of Equitable, which consent shall not be unreasonably withheld.
Equitable shall respond to any request for consent hereunder within thirty (30)
days following receipt of MarkWest's written request, and if Equitable fails to
respond within that thirty (30) day period, Equitable shall be deemed to have
consented to such written request.
18.5 Nothing herein contained shall be deemed to create a partnership,
mining partnership, joint venture or an association between or among the parties
hereto and each party shall be deemed to act in connection with its performance
of this Maytown Agreement for itself, and not for the other, and no party hereto
shall be liable, or responsible for any acts of the other by virtue of the
relationship created under this Maytown Agreement.
18.6 The parties agree to keep the terms of this Maytown Agreement, and any
information disclosed during any audits permitted hereunder, confidential and
not disclose the same to any other persons, firms or entities without the prior
written consent of the other party; provided, the foregoing shall not apply to
disclosures compelled by law, rule or regulation, including without limitation
the rules and regulations of a stock exchange or the Securities Exchange
Commission, or court order; or to disclosures to a party's financial advisors,
consultants, attorneys, banks, and institutional investors; or to disclosures to
prospective purchasers of property provided those prospective purchasers
likewise agree to keep this Maytown Agreement confidential. No announcement or
press release relating to this Maytown Agreement shall be made by either party
without the prior written consent of the other party, which consent shall not be
unreasonably withheld, provided however, either party, with notice to the other,
may make any announcement required by law, rule or regulation including without
limitation the rules and regulations of a stock exchange or the Securities
Exchange Commission.
18.7 In the event any published price index referred to in this Maytown
Agreement ceases to be published, the parties shall mutually agree to an
alternative published price index representative of the published price index
referred to in this Maytown Agreement.
18.8 All notices, payments, consents or other communications between the
parties given under or in relation to this Maytown Agreement shall be as
directed below. Written notices shall be delivered by letter, facsimile or other
mutually acceptable electronic means. Notice by facsimile, overnight mail,
courier or hand delivery shall be deemed to have been received on the business
day on which it was transmitted or hand delivered, unless transmitted or hand
delivered after 5 p.m. local time at the receiving parties' address, in which
case it shall be deemed to have
26
been received on the next business day. Notice by U.S. Mail shall be deemed to
have been received upon arrival at the receiving parties' address.
PAYMENTS:
WIRE TRANSFERS:
Equitable Production Company
Mellon Bank N.A. - Pittsburgh, PA
Acct.# 101-1297
ABA # 000000000
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STATEMENTS:
Equitable Production Company
0000 X. Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Accounting Department
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
NOTICES:
Equitable Production Company
0000 X. Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Vice President and General Manager
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
MarkWest Hydrocarbon, Inc.
000 Xxxxxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Contract Administration
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party may change its address for notice purposes by written notice
to that effect delivered to the other party in accordance with this Article.
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IN WITNESS WHEREOF, the parties hereto have executed this Maytown Agreement
on the dates set forth below.
Attest: EQUITABLE PRODUCTION COMPANY
By: By:
--------------------------------- -------------------------------------
Name: Name:
------------------------------- -----------------------------------
Title: Title:
------------------------------ ----------------------------------
Date: Date:
------------------------------- -----------------------------------
Attest: MARKWEST HYDROCARBON, INC.
By: By:
--------------------------------- -------------------------------------
Name: Name:
------------------------------- -----------------------------------
Title: Title:
------------------------------ ----------------------------------
Date: Date:
------------------------------- -----------------------------------
29
EXHIBIT "A"
to that
Gas Processing Agreement (Maytown)
Dated May 28, 1999,
between
MARKWEST HYDROCARBON, INC.,
and
EQUITABLE PRODUCTION COMPANY\
PIPELINE LEASE AGREEMENT
ATTACHED BEHIND THIS PAGE
30
