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This PRECEDENT AGREEMENT (“Precedent Agreement”) is made and entered into as of the 29 th day of June, 2005, by and between Maritimes & Northeast Pipeline Limited Partnership, a New Brunswick limited partnership (“Pipeline”), and Anadarko Canada LNG Marketing, Corp. (“Customer”). Pipeline and Customer are sometimes referred to herein individually as a “Party”, or collectively as the “Parties”.
W I T N E S S E T H:
WHEREAS, Pipeline and its U.S . pipeline affiliate, Maritimes & Northeast Pipeline, L.L.C. (“Maritimes — U.S.”), have developed and constructed a natural gas pipeline project (the “Maritimes Project”), extending from the tailgate of a processing plant located near Goldboro, Nova Scotia, to the Canadian-United States border, through the states of Maine and New Hampshire and into Massachusetts with an interconnection with Tennessee Gas Pipeline Company at Dracut, Massachusetts and an interconnection with Algonquin Gas Transmission, LLC at Beverly, Massachusetts;
WHEREAS, Customer, or an affiliate thereof, is proposing to develop, construct, own, operate and maintain a liquefied natural gas (“LNG”) regasification facility in Nova Scotia, Canada, referred to as the Bear Head LNG Project (“Customer’s Terminal”);
WHEREAS, in order to provide pipeline transportation access to enable Customer, and/or an affiliate thereof, or third parties purchasing gas from Customer and/or Customer’s affiliate to access natural gas markets in Canada and the United States, Customer desires to have Customer’s Terminal physically connected to Pipeline’s system;
WHEREAS, in order to establish such an interconnection and enable mainline service, it will be necessary for Maritimes — U.S. to construct own and operate certain compressor facility additions and pipeline facilities on its existing system to make available to Anadarko LNG Marketing LLC (“Customer-U.S.”) the quantity of firm transportation capacity contemplated in the precedent agreement between Customer-U.S. and Maritimes-U.S. being executed contemporaneously herewith (such precedent agreement is referred to hereinafter as the “Maritimes- U . S. Precedent Agreement”);
WHEREAS, in order to make available to Customer the quantity of firm transportation capacity contemplated in this Precedent Agreement, it will be necessary for Pipeline to construct, own and operate certain compressor facilities and pipeline facilities as will be described by Pipeline in its certificate application filed with the National Energy Board (“NEB” or “Board”) as amended from time to time (the “Project”);
WHEREAS, Customer desires to obtain firm transportation service from Pipeline as part of the Project for specified quantities of Customer’s natural gas as hereinafter provided; and
WHEREAS, subject to the terms and conditions of this Precedent Agreement and applicable law, Pipeline shall construct the Project and provide the firm transportation service Customer desires.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and intending to be legally bound, subject to the terms and conditions hereof, Pipeline and Customer agree to the following:
1. Pipeline’s Regulatory Authorizations . Subject to the terms and conditions of this Precedent Agreement, Pipeline shall proceed following the date hereof with due diligence to obtain from all governmental and regulatory authorities having competent jurisdiction over the Project, including, but not limited to, the NEB, the authorizations and/or exemptions Pipeline reasonably determines are necessary: (i) for Pipeline to construct, own, operate, and maintain the Project facilities necessary to provide the firm transportation service for Customer contemplated herein; and (ii) for Pipeline to perform its obligations as contemplated in this Precedent Agreement. Pipeline reserves the right to file and prosecute any and all applications for such authorizations and/or exemptions, any supplements or amendments thereto, and, if necessary, any court review, in a manner that Pipeline reasonably determines to be in its best interest and that is consistent with Pipeline’s obligations under this Precedent Agreement. Customer expressly agrees reasonably to support and cooperate with, and to not oppose, obstruct or otherwise interfere with in any manner whatsoever, the efforts of Pipeline to obtain all authorizations and/or exemptions and supplements and amendments thereto necessary for Pipeline to construct, own, operate, and maintain the Project facilities and to provide the firm transportation service contemplated in this Precedent Agreement and to perform its obligations as contemplated by this Precedent Agreement; provided, however, that Customer reserves all rights to protect its interests in the exercise of its sole discretion with respect to any proposal(s) (whether such proposals are made by Pipeline, or any other party or in connection with an industry-wide forum, conference or proceeding) to change, clarify, or restate any tariff provisions relating to natural gas quality, heating content, or ownership of hydrocarbons other than
methane produced from Pipeline’s processing of gas to meet pipeline specifications, as contemplated in the Service Agreement (as defined in Paragraph 4 hereof). Such support and cooperation may include providing reasonable assurances and undertakings to the NEB and other regulatory authorities with jurisdiction relating to the Project or Customer’s Terminal, including the adequacy of Customer’s LNG supply to the extent requested or required by the NEB process or process of such other regulatory authority , subject to Customer’s obligations under non-disclosure agreements with third parties; provided that Customer shall use reasonable efforts to obtain any waivers necessary under such non-disclosure agreements to ensure that Customer is able to provide any such reasonable assurances and undertakings. Customer shall have the right to seek confidential treatment from such regulatory authorities for any such reasonable assurances or undertakings and Pipeline shall support or not oppose such request for such confidential treatment. Pipeline agrees to promptly notify Customer in writing when each of the required authorizations, approvals and/or exemptions set forth in the NEB application and accompanying materials for the Project are received, obtained, rejected or denied. Pipeline shall also promptly notify Customer in writing as to whether any such authorizations, approvals, and/or exemptions received or obtained are acceptable or unacceptable to Pipeline.
2. Description of Customer’s Facilities and List of Customer’s Authorizations . Within sixty (60) days after execution of this Precedent Agreement, Customer, or an affiliate thereof, will advise Pipeline in writing of: (i) any material facilities which Customer, or an affiliate thereof, must construct, or cause to be constructed, in the Province of Nova Scotia in order for Customer, or an affiliate thereof,
to complete Customer’s Terminal and to connect Customer’s Terminal to Pipeline’s facilities (“Customer’s Facilities”); (ii) any necessary governmental and/or regulatory authorizations, approvals, certificates, permits and/or exemptions associated with the facilities identified pursuant to (i) above (“Customer’s Authorizations”); and (iii) any necessary authorizations to import and export natural gas or LNG, as applicable, through the facilities of Customer’s Terminal and across the Canadian-US border. Customer, or an affiliate thereof, shall, however, have the right to update, modify or supplement the list of Customer’s Facilities or Customer’s Authorizations periodically.
3. Customer’s Regulatory Authorizations . Subject to the terms and conditions of this Precedent Agreement, Customer shall proceed with due diligence to obtain Customer’s Authorizations. Customer reserves the right to file and prosecute applications for Customer’s Authorizations in a manner it deems to be in its best interest; provided, however, Customer shall pursue Customer’s Authorizations in a manner designed to implement the firm transportation service contemplated herein in a timely manner and Customer shall not take any action that would obstruct, interfere with or delay Pipeline’s receipt of the authorizations and/or exemptions and any supplements and amendments thereto contemplated hereunder or otherwise jeopardize timely implementation of the firm transportation service contemplated in this Precedent Agreement. Pipeline expressly agrees reasonably to support and cooperate with, and to not oppose, obstruct or otherwise interfere with in any manner whatsoever, the efforts of Customer to obtain all authorizations and/or exemptions and supplements and amendments thereto necessary for Customer to construct, own, operate and maintain Customer’s Terminal and to perform its obligations as contemplated by this Precedent
Agreement; provided, however, that the foregoing commitment shall not preclude Pipeline in the exercise of its sole discretion from seeking to change, clarify, or restate any provision of Pipeline’s NEB Gas Tariff (the “Tariff”) with respect to any proposal(s) to change, clarify, or restate any tariff provision relating to natural gas quality or heating content or to participate in any NEB proceeding or any industry wide forum to protect its interests in the exercise of its sole discretion with respect to any proposal(s) to change, clarify, or restate any tariff provision relating to natural gas quality or heating content. Customer agrees to promptly notify Pipeline in writing when each of the required authorizations, approvals and/or exemptions is received, obtained, rejected or denied. Customer shall also promptly notify Pipeline in writing as to whether any such authorizations, approvals, and/or exemptions received or obtained are acceptable or unacceptable to Customer.
4. Firm Transportation Service Agreement
(A) To effectuate the firm transportation service contemplated herein, Customer and Pipeline are executing contemporaneously herewith a firm transportation service agreement under Pipeline’s Rate Schedule MN365 (“Service Agreement”) which shall become effective in accordance with its terms. The Service Agreement: (i) specifies a Maximum Daily Transportation Quantity (“MDTQ”) of 857,444 GJ, exclusive of fuel requirements, subject to the further conditions noted below; (ii) specifies a primary term of twenty (20) years, with renewal or right of first refusal extension rights, to the extent such rights are approved by the NEB for this particular transaction and reflected in the Service Agreement; (iii) specifies a primary point(s) of receipt at the interconnection of Pipeline’s facilities and Customer’s Facilities and Primary Point(s) of Delivery as
reflected in Schedule A hereto and in the Service Agreement; and (iv) shall be subject to Pipeline’s MN365 toll which shall be filed initially by Pipeline as a 100% load factor rolled-in toll plus fuel and any other charges and surcharges specified in the Tariff, as amended from time to time.
(B) In the event that the Project Description indicates that the Project facilities are designed for no more than 211,011 GJ/d of service to any shipper or shippers other than for service contemplated under the Precedent Agreement at the time that Pipeline files with the NEB the certificate application for approval of the Project, then Pipeline and Customer agree as follows:
(C) (i) Pipeline and Customer agree that the Primary Points of Delivery reflected on Schedule A may be modified, prior to September 1, 2005, by mutual written agreement of the Parties from time to time. The Parties agree further that such
modifications may encompass changes to the projected Primary Points of Delivery and delivered volumes or to the allocation of delivered volumes between U.S. and Canadian Primary Points of Delivery.
(ii) After September 1, 2005, Pipeline shall use its reasonable efforts to accommodate changes in Primary Points of Delivery and delivered volumes, to the extent such changes are operationally feasible, will not result in material adverse changes in the cost of providing service by Pipeline under the Service Agreement, and will not result in the need to re-file or file an amendment to Pipeline’s NEB certificate application related to the Project facilities or materially delay, in Pipeline’s reasonable judgment, its ability to promptly complete the NEB certificate application for the Project facilities.
5. Service Commencement Date
(A) Customer shall have a right to elect partial service under the Service Agreement subject to the provisions of this Paragraph 5(A):
(i) No later than the tenth (10 th ) day following the date on which Pipeline provides Customer with the Project Description (defined below), Customer may elect to receive partial service as contemplated under Paragraphs 5(B) and 5(C) by notifying Pipeline in writing of such election.
(ii) In the event that Customer has not elected to receive partial service by the deadline set forth under sub-paragraph 5(A)(i), then no later than one hundred and eighty (180) days following the date on which Pipeline provides
Customer with the Project Description, Customer may elect to receive partial service as contemplated under this Paragraph 5(A)(ii) by notifying Pipeline in writing of such election.
(iii) The election rights set forth in sub-paragraphs 5(A)(i) and (ii) are the exclusive means for Customer to elect to receive partial service. If Customer does not elect to receive partial service in strict compliance with either such provision, Customer shall have no right to partial service under the Service Agreement and the provisions of Paragraphs 5(B) and 5(C) of this Precedent Agreement shall have no further force or effect.
(B) Service under the Service Agreement for the Initial MDTQ (as defined below) under the Service Agreement shall commence on the later of: (i) the Target Date for Partial Service; or (ii) the date that all of the conditions precedent set forth in Paragraph 8 of this Precedent Agreement are satisfied or waived in writing to the extent necessary to permit the transportation of such Initial MDTQ under the Service Agreement (“Initial Commencement Date”).
(C) The “Target Date for Partial Service” and the Initial MDTQ shall be established as follows: