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MATERIAL HAS BEEN OMITTED PURSUANT TO A REQUEST FOR

CONFIDENTIAL TREATMENT AND HAS BEEN SEPARATELY

FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

OMITTED PORTIONS ARE INDICATED BY “XXXX.”

 

EXHIBIT 10.1

 

FIRM INTRASTATE

GAS TRANSPORTATION AGREEMENT

 

between

 

XTO ENERGY INC. and XTO RESOURCES I, LP

 

and

 

ENERGY TRANSFER FUEL, LP

 

JULY 1, 2005


TABLE OF CONTENTS

 

 

 

 

 

 

1.

  

DEFINITIONS

  

1

 

 

 

2.

  

POINTS OF RECEIPT AND POINTS OF DELIVERY

  

2

 

 

 

3.

  

OWNERSHIP AND CONTROL

  

3

 

 

 

4.

  

QUANTITY

  

4

 

 

 

5.

  

TERM

  

5

 

 

 

6.

  

FEE

  

5

 

 

 

7.

  

PRESSURES

  

10

 

 

 

8.

  

QUALITY

  

10

 

 

 

9.

  

MEASUREMENT

  

11

 

 

 

10.

  

FORCE MAJEURE

  

14

 

 

 

11.

  

WARRANTIES, INDEMNIFICATIONS

  

15

 

 

 

12.

  

BILLING, PAYMENT AND NOTICES

  

16

 

 

 

13.

  

ASSIGNMENT

  

18

 

 

 

14.

  

TAXES

  

18

 

 

 

15.

  

CONFIDENTIALITY AND PUBLIC ANNOUNCMENTS

  

19

 

 

 

16.

  

MISCELLANEOUS

  

19

 

 

 

 

  

EXHIBIT “A”

  

 

 

  

EXHIBIT “B”

  

 

 

  

EXHIBIT “C”

  

 


FIRM INTRASTATE

GAS TRANSPORTATION AGREEMENT

 

THIS FIRM INTRASTATE GAS TRANSPORTATION AGREEMENT (the “Agreement”) made and entered into effective and operative as of the 1st day of July , 2005, by and between XTO ENERGY INC., and XTO RESOURCES I, LP, hereinafter collectively referred to as “XTO” , and ENERGY TRANSFER FUEL, LP a Delaware limited partnership “ETF” . ETF and XTO are sometimes collectively referred to herein as the “Parties,” and individually as a “Party”.

 

W I T N E S S E T H :

 

WHEREAS , XTO owns and controls certain quantities of Gas produced in Texas; and

 

WHEREAS , XTO desires to have ETF transport its equity production of natural Gas for XTO from time to time and is entering into this agreement to induce ETF to construct certain pipeline facilities in Texas in order to receive and transport said Gas for XTO as hereinafter provided.

 

NOW, THEREFORE , in consideration of the sum of Ten Dollars ($10.00) cash in hand paid by XTO to ETF and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto have agreed as follows:

 

1. DEFINITIONS

 

The following definitions shall apply hereunder:

 

(a) “Btu.” The term “Btu” shall mean British Thermal Unit.

 

(b) “Day.” The term “day” shall mean a period of time beginning at 9:00 a.m. Central Clock Time (CCT) on each calendar day and ending at 9:00 a.m. CCT on the next succeeding calendar day.

 

(c) “Demand Fee” The term “Demand Fee” shall mean the fee XTO shall pay to ETF, which will be equal to the fee as described in Paragraph 6, Section B.

 

(d) “Equity Gas” The term “Equity Gas” shall mean Gas produced from leaseholds owned and/or operated by XTO and/or Gas delivered to ETF by means of a XTO, or XTO affiliated, gathering facility at each Point of Receipt, whereby at least 80% of the Gas transported by ETF from such gathering facility is Gas produced from leaseholds owned and/or operated by XTO.

 

(e) “Gas.” The term “gas” shall mean natural gas as produced from wells classified as gas wells or oil wells.

 

(f) “Firm . The term “firm” or “firm service” as used herein means that the Reserved Capacity is not subject to a prior claim by another shipper or class of shipper or service and ETF may not interrupt, curtail or suspend the receipt, transportation or delivery of Gas hereunder without liability to XTO, except for reasons of Force Majeure.


(g) “Gross Heating Value.” The term “gross heating value” shall mean the number of Btu’s liberated by the complete combustion, at constant pressure, of one (1) cubic foot of Gas at a base temperature of sixty degrees Fahrenheit (60 °F.) and a referenced pressure base of fourteen and sixty-five hundredths (14.65) p.s.i.a. with air of the same temperature and pressure of the Gas, after products of combustion are cooled to the initial temperature of the Gas, and after the water of the combustion is condensed to the liquid state. The Gross Heating Value of the Gas shall be corrected for the water vapor content of Gas being delivered; provided, however, that if the water vapor content of the Gas is seven (7) pounds or greater per MMcf, the Gas will be deemed to be saturated. If the water vapor content of the Gas is seven (7) pounds or less per MMcf the Gas shall be deemed to be dry and no correction shall be made.

 

(h) “Interruptible.” The term “interruptible” or “interruptible service” as used herein means that ETF shall have the right to interrupt, curtail or suspend the receipt, transportation or delivery of Gas hereunder at any time and from time to time without any liability to XTO by reason thereof in the event that ETF is unable to take Gas due to capacity restraint, in which case ETF shall take Gas from XTO and other parties for which it is providing interruptible transportation on a ratable and non-discriminatory manner.

 

(i) “Mcf.” The term “Mcf” shall mean one thousand (1,000) cubic feet of Gas measured at a base temperature of sixty degrees Fahrenheit (60 °F), and at a pressure base of fourteen and sixty-five one-hundredths (14.65) pounds per square inch absolute.

 

(j) “MMBtu.” The term “MMBtu” shall mean one million (1,000,000) British Thermal Units.

 

(k) “Month.” The term “month” shall mean a period of time beginning at 9:00 a.m. CCT on the first day of a calendar month and ending at 9:00 a.m. CCT on the first day of the next succeeding calendar month.

 

(l) “Psia.” The term “psia” shall mean pounds per square inch absolute.

 

(m) “Psig.” The term “psig” shall mean pounds per square inch gauge.

 

(n) “Retention Volume” The term “Retention Volume” means the quantity of Gas retained by ETF for fuel and other unaccounted for volumes.

 

(o) “Reserved Capacity.” The term “Reserved Capacity” means the aggregate daily transportation capacity (expressed in MMBtu’s) reserved for XTO in ETF’s transmission system under this Agreement.

 

2. POINTS OF RECEIPT AND POINTS OF DELIVERY

 

The Points of Receipt for all Gas delivered or caused to be delivered by XTO to ETF for transportation hereunder shall be at existing or new mutually agreed points on the ETF pipeline system connected to XTO’s facilities in the Barnett Shale and Bossier production areas, as described on Exhibit “A”.

 

ETF will construct, own and operate approximately 264 miles of new pipelines, and related compression facilities (collectively the “Facilities”), as described below:

 

2


 

1)

A new pipeline, 36-inch in diameter, originating at or near ETF’s Cleburne compressor station in Johnson County, Texas connecting to ETF’s Reed station in Freestone County, Texas (the “Cleburne-Reed Pipeline”).

 

 

2)

A new pipeline, up to 36-inch in diameter, originating at or near XTO’s Farrar treating facility in Freestone County, Texas connecting to ETF’s Reed station in Freestone County, Texas (the “Farrar-Reed Pipeline”).

 

 

3)

A new pipeline, 42-inch in diameter, originating at or near ETF’s Reed station in Freestone County, Texas, connecting to the Energy Transfer Houston Pipeline 30-inch Texoma pipeline in Rusk County, Texas (the “Reed-Texoma Pipeline”).

 

 

4)

A new pipeline, 36-inch in diameter, originating at HPL’s 30-inch Texoma pipeline in Rusk County, Texas, connecting to various pipelines, including, but not limited to Gulf South, and NGPL in the Carthage, Texas area (the “Texoma-Carthage Pipeline”).

 

In addition, ETF will install sufficient compression on the HPL 30-inch Texoma pipeline system in order to effectuate XTO’s Gas flows to the Texoma Points of Delivery as allocated by XTO, as described in Paragraph 6, Section B of this Agreement.

 

The Points of Delivery for all Gas that ETF transports or causes to be redelivered for the account of XTO hereunder shall be at such points on ETF’s Facilities in Texas as described on Exhibit “B” (hereinafter called “Points of Delivery”). On or before the eighth (8th) work day of each month ETF shall provide to XTO the total volume of Gas received and delivered during the preceding month at each of the Points of Receipt and Delivery established hereunder. XTO shall cause the operator of the facilities delivering Gas to ETF for the account of XTO at the Points of Receipt and/or receiving Gas from ETF at the Points of Delivery for the account of XTO to furnish to ETF a written allocation on or before the tenth (10th) work day of each month allocating all volumes delivered and/ received at such points during the preceding month. In the event XTO does not cause the operator to furnish, or in the event the operator fails to furnish, such allocation to ETF on or before the tenth (10th) work day of such month, XTO hereby authorizes ETF, at its sole discretion, to estimate the volumes received or delivered hereunder at such points during the preceding month. Except as otherwise agreed by ETF, such allocation shall be prepared in accordance with XTO’s nomination of the volumes scheduled with ETF to be received and/or delivered at each point during the preceding month.

 

XTO shall submit nominations to transport Gas on ETF via ETF’s online nomination system. The deadline for submitting nominations for the first (1 st ) Day of each Month is 11:00 a.m. (CCT), one (1) business day prior to the beginning of each Month. The deadline for submitting timely nominations is 11:00 a.m. (CCT), for next Day flow. The deadline for submitting evening nominations is 4:00 p.m. (CCT) for next Day flow.

 

3. OWNERSHIP AND CONTROL

 

As between ETF and XTO, ETF shall be deemed to be in control and possession of the Gas after its delivery to ETF at the ETF Point(s) of Receipt and prior to its delivery to XTO or

 

3


for its account at the ETF Delivery Point. The Party in control and possession of the Gas will be responsible for and shall indemnify the other Party with respect to any losses, injuries, claims, liabilities or damages caused thereby and occurring while the Gas is in its possession. Notwithstanding the foregoing, neither Party shall be indemnified for its own negligence, and the Parties acknowledge and agree that XTO shall at all times have title to all Gas transported hereunder.

 

4. QUANTITY

 

Subject to the terms, conditions and limitations contained herein, XTO agrees to deliver, or cause to be delivered to ETF at the Points of Receipt, as listed on Exhibit “A”, and ETF agrees to accept, or cause to be accepted, on a Firm basis those daily quantities of XTO’s Gas scheduled in accordance with Section 2 and listed on Exhibit “C” and tendered daily at the Points of Receipt up to the Reserved Capacity , and such additional volumes as XTO may deliver on an interruptible basis as may be mutually agreed by the Parties; provided, however, in no event shall XTO tender volumes of Gas for transportation hereunder on any Day in excess of the volumes of transport Gas that XTO can utilize at the Points of Delivery each Day. Subject to the terms, conditions and limitations contained herein, XTO agrees to accept, or cause to be accepted, at the Points of Delivery, and ETF agrees to transport and redeliver, or cause to be transported and redelivered, on a firm basis all volumes received for transportation hereunder up to the Reserved Capacity, and all volumes received on an interruptible basis for transportation hereunder in excess of the Reserved Capacity , to the Points of Delivery a scheduled daily volume of Gas, in terms of MMBtu, equal to the scheduled daily volume of Gas, in terms of MMBtu, delivered by or for the account of XTO at the Points of Receipt, less and except Retention Volumes.

 

The Parties intend that the physical volumes actually received at the Points of Receipt and redelivered at the Points of Delivery will be equal, less and except Retention Volumes, as close as practicable, on an hourly and daily basis. Any difference between the actual total physical flow at the Points of Receipt and the total volume redelivered at the Points of Delivery is the “Operational Imbalance”. The Parties will use reasonable best efforts to minimize and/or eliminate the Operational Imbalance. In the event an operational imbalance or hourly fluctuations between receipts and deliveries is impacting ETF either operationally or economically, ETF shall notify XTO and request that XTO restrict, interrupt, or reduce its receipts or deliveries of Gas at the Points of Receipt or Points of Delivery, and direct XTO to make adjustments in its receipts or deliveries, in order to maintain a daily and hourly balance or to correct an imbalance. If XTO fails or refuses to make good faith efforts to follow any such request from ETF, ETF may, without liability hereunder, cease accepting or delivering Gas under this Agreement until the conditions causing the imbalance are corrected. The Parties agree that confirmed nominations scheduled to be received and redelivered will occur as practicable at a uniform hourly rate or at an hourly rate mutually agreeable to the Parties. The mutually agreeable hourly rate will be communicated timely in writing or by telephone between the Parties.

 

4


5. TERM

 

This Agreement shall become effective on the date of execution by both Parties hereto, and shall continue in force and effect for a primary term ending ten years from the completion of Facilities as described in Section 2 of this Agreement, and such Facilities are commercially operational (the “Primary Term”). Subject to XTO’s allocation as described in Paragraph 6(A), effective on the first Day of the Month following the full execution of this Agreement by both Parties, and preceding the Primary Term, ETF will provide Firm transportation services to XTO from the Points of Receipt to the Points of Delivery, as listed in Paragraph 6(A) (the “Initial Term”). In the event there is an imbalance, in terms of MMBtu, caused by differences in receipt and delivery of quantities hereunder existing on the date of termination of this Agreement, the Parties will use good faith efforts to correct any such imbalance within the thirty (30) day period following termination of this Agreement.

 

6. FEE

 

A.

Commencing with the Initial Term:

 

ETF will provide XTO with up to an additional XXXX MMBtu per Day of Firm transportation service for its Equity Gas production from the combination of XTO’s Farrar Treating Facility (meter number 7508), and XTO’s BOA Treating Facility (meter number 7507), both of which are currently connected to ETF’s pipeline system, to be redelivered to the Oasis-Katy Header, in Waller County, Texas (the “Bossier Additional Capacity”).

 

Notwithstanding the foregoing, XTO will provide ETF with at least 30 days written notice of the desired Bossier Additional Capacity, for each following Month. Any such capacity requested, may not be relinquished for any succeeding Month, unless such requested capacity was not utilized by XTO, due to an event of deficient supplies of Equity Gas. In such event, the Bossier Additional Capacity will be released. In addition, for any capacity requested, such capacity will be charged by ETF, for such Month and succeeding Months, as a Demand Fee, until such time as the Primary Term begins.

 

Notwithstanding the foregoing, the Bossier Additional Capacity for the Month of July 2005 will be


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