Exhibit 10.6
FORM OF
PIPELINES AND TERMINALS STORAGE AND THROUGHPUT AGREEMENT
This Pipelines and Terminals Storage and Throughput Agreement (this
"Agreement") is dated as of _____, 2002, by and among Sunoco, Inc. (R&M), a
Pennsylvania corporation ("Sunoco R&M"), Sunoco Logistics Partners L.P., a
Delaware limited partnership ("Sunoco Logistics"), Sunoco Logistics Partners
Operations L.P., a Delaware limited partnership (the "Operating Partnership"),
Sunoco Partners LLC, a Pennsylvania limited liability company (the "General
Partner"), Sunoco Partners Marketing & Terminals L.P., a Delaware limited
partnership ("Sunoco Marketing"), Sunoco Pipeline L.P., a Texas limited
partnership, ("Sunoco Pipeline"), Sunoco Logistics Partners Operations GP LLC, a
Delaware limited liability company ("Sunoco Operations LLC"), and Sunoco
Logistics Partners GP LLC, a Delaware limited liability company ("Sunoco LLC"
and, together with the Operating Partnership, Sunoco Logistics, the General
Partner, Sunoco Marketing, Sunoco Pipeline and Sunoco Operations LLC, the
"Partnership Entities").
RECITALS:
WHEREAS, as of the date hereof, by virtue of its indirect ownership
interests in the Partnership Group (as defined below), Sunoco R&M has an
economic interest in the financial and commercial success of the Partnership
Group; and
WHEREAS, the Partnership Group is substantially dependent upon Sunoco R&M
for the volumes of crude oil and refined products transported through the
Partnership Group's pipelines and handled at the Partnership Group's terminals
such that a significant reduction in Sunoco R&M's use of the Partnership Group's
services to transport and handle the crude oil and refined products would likely
result in a correspondingly significant reduction in the financial and
commercial success of the Partnership Group; and
WHEREAS, Sunoco R&M and the Partnership Entities desire to enter into this
Agreement.
NOW, THEREFORE, in consideration of the covenants and obligations contained
herein, the parties to this Agreement hereby agree as follows:
Section 1. Definitions
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Capitalized terms used throughout this Agreement and not otherwise defined
herein shall have the meanings set forth below.
"Accounting Firm" has the meaning set forth in Section 9(b).
"Affiliate" means with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with such Person, excluding, in the
case of Sunoco, Inc. and Sunoco R&M, the Partnership Group Members. For the
purposes of this definition, "control" (including with correlative meaning, the
term "controlled by"), as used with respect to any Person, means the possession,
directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise.
"Applicable Law" means any applicable statute, law, regulation, ordinance,
rule, judgment, rule of law, order, decree, permit, approval, concession, grant,
franchise, license, agreement, requirement, or other governmental restriction or
any similar form of decision of, or any provision or condition of any permit,
license or other operating authorization issued under any of the foregoing by,
or any determination by any Governmental Authority having or asserting
jurisdiction over the matter or matters in question, whether now or hereafter in
effect and in each case as amended (including, without limitation, all of the
terms and provisions of the common law of such Governmental Authority), as
interpreted and enforced at the time in question.
"Arbitrable Dispute" means any and all disputes, Claims, counterclaims,
demands, causes of action, controversies and other matters in question between
any of the Partnership Entities, on the one hand, and Sunoco R&M, on the other
hand, arising out of or relating to this Agreement or the alleged breach hereof,
or in any way relating to the subject matter of this Agreement or the
relationship between any of the Partnership Entities, on the one hand, and
Sunoco R&M, on the other hand, created by this Agreement regardless of whether
(a) allegedly extra-contractual in nature, (b) sounding in contract, tort or
otherwise, (c) provided for by Applicable Law or otherwise or (d) seeking
damages or any other relief, whether at law, in equity or otherwise.
"Bpd" means barrels per day.
"Claim" means any existing or threatened future claim, demand, suit,
action, investigation, proceeding, governmental action or cause of action of any
kind or character (in each case, whether civil, criminal, investigative or
administrative), known or unknown, under any theory, including those based on
theories of contract, tort, statutory liability, strict liability, employer
liability, premises liability, products liability, breach of warranty or
malpractice.
"Contract Year" means a year that commences on February 1 and ends on
January 31, except that for purposes of Section 2(a)(iii), "Contract Year" means
a year that commences on April 1 and ends on March 31.
"Controlled Affiliates" means with respect to any Person, any other Person
that directly or indirectly through one or more intermediaries is controlled by
such Person, excluding, in the case of Sunoco, Inc. and Sunoco R&M, the
Partnership Group Members. For the purposes of this definition, "control"
(including with correlative meaning, the term "controlled by"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise.
"Crude Oil Pipelines" means the pipelines described on Exhibit A attached
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hereto.
"Deficiency Notice" has the meaning set forth in Section 9(a).
"Deficiency Payment" has the meaning set forth in Section 9(a).
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"Governmental Authority" means any federal, state, local or foreign
government or any provincial, departmental or other political subdivision
thereof, or any entity, body or authority exercising executive, legislative,
judicial, regulatory, administrative or other governmental functions or any
court, department, commission, board, bureau, agency, instrumentality or
administrative body of any of the foregoing.
"Force Majeure" means acts of God, strikes, lockouts or other industrial
disturbances, acts of the public enemy, wars, blockades, insurrections, riots,
storms, floods, washouts, arrests, the order of any court or Governmental
Authority having jurisdiction while the same is in force and effect, civil
disturbances, explosions, breakage, accident to machinery, storage tanks or
lines of pipe, inability to obtain or unavoidable delay in obtaining material,
equipment, right of way easements, franchises, or permits, and any other causes
whether of the kind herein enumerated or otherwise not reasonably within the
control of the party claiming suspension and which by the exercise of due
diligence such party is unable to prevent or overcome.
"Fort Mifflin Terminal Complex" means the storage tanks, ship docks and
pipelines located in Philadelphia, Pennsylvania as described on Exhibit B
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attached hereto.
"Inkster Terminal" means the storage facility near Detroit, Michigan as
described in Exhibit C attached hereto.
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"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) by ▇▇▇▇▇'▇ Investors Service, Inc. or BBB- (or the equivalent)
by Standard & Poor's Ratings Services or Fitch, Inc.
"Marcus Hook Refinery" means the refinery owned by Sunoco R&M or its
Controlled Affiliates in Marcus Hook, Pennsylvania.
"Marcus Hook Tank Farm" means the tanks and pipelines located in Marcus
Hook, Pennsylvania as described on Exhibit D attached hereto.
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"Partnership Entities" has the meaning set forth in the introductory
paragraph to this Agreement.
"Partnership Group" means Sunoco Logistics and any Person controlled,
directly or indirectly, by Sunoco Logistics. For the purposes of this
definition, "control" (including with correlative meaning, the term "controlled
by"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise.
"Partnership Group Member" means any member of the Partnership Group.
"Person" means an individual, corporation, partnership, joint venture,
trust, limited liability company, unincorporated organization, or any other
entity.
"Philadelphia Refinery" means the refinery owned by Sunoco R&M or its
Controlled Affiliates in Philadelphia, Pennsylvania.
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"Prime Rate" means the prime rate per annum established by Bank of America,
N.A., or if Bank of America, N.A. no longer establishes a prime rate for any
reason, the prime rate per annum established by the largest U.S. bank measured
by deposits from time to time as its base rate on corporate loans, automatically
fluctuating upward or downward with each announcement of such prime rate.
"Refined Products" means gasoline, diesel fuel, jet fuel, heating oil,
distillates, liquefied petroleum gas, natural gas liquids, blend stocks,
ethanol, xylene, toluene and petrochemical feedstocks.
"Refined Product Pipelines" means the pipelines described on Exhibit E
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attached hereto.
"Refined Product Terminals" means the terminals described on Exhibit F
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attached hereto.
"Refineries" means, collectively, the Marcus Hook Refinery, the
Philadelphia Refinery, the Toledo Refinery and the Tulsa Refinery.
"Refund" has the meaning set forth in Section 9(c).
"Sunoco, Inc." means Sunoco, Inc., a Pennsylvania corporation.
"Toledo Refinery" means the refinery owned by Sunoco R&M or its Controlled
Affiliates in Toledo, Ohio.
"Tulsa Refinery" means the refinery owned by Sunoco R&M or its Controlled
Affiliates in Tulsa, Oklahoma.
"VLCC" means a vessel that is in the class of Very Large Crude Carrier, as
that term is used in the shipping industry.
Section 2. Agreement to Use Services Relating to Pipelines and Terminals
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[Add language regarding intent of the parties.]
(a) Storage and Throughput Commitment. During the term of this Agreement
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and subject to the terms and conditions of this Agreement, Sunoco R&M agrees as
follows:
(i) Refined Product Pipelines and Refined Product Terminals.
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(A) Subject to Section 3, for a term of five Contract Years
commencing on February 1, 2002, Sunoco R&M will, and will cause its
Controlled Affiliates to, transport on the Refined Product Pipelines
and throughput in the Refined Product Terminals an amount of Refined
Products that will produce revenue to the Partnership Group in an
amount at least equal to the amount set forth below next to each
Contract Year.
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Contract Year Amount
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1 $75,000,000
2 76,252,500
3 77,525,917
4 78,820,600
5 80,136,904
(B) Subject to Section 3, Sunoco R&M will, and will cause its
Controlled Affiliates to, transport on the Refined Product Pipelines
an amount of Refined Products that will produce at least $54.3 million
of revenue to the Partnership Group during the Contract Year
commencing on February 1, 2007, and at least $55.2 million of revenue
to the Partnership Group during the Contract Year commencing on
February 1, 2008.
(C) The applicable tariffs and charges for transporting and
throughputting the Refined Products under this Section 2(a)(i) are set
forth on the throughput fee schedule attached hereto as Exhibit G.
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(ii) Marcus Hook Tank Farm.
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(A) Subject to Section 3, for a term of five Contract Years
commencing on February 1, 2002, Sunoco R&M will, and will cause its
Controlled Affiliates to, deliver at least 130,000 bpd of Refined
Products to the Marcus Hook Tank Farm.
(B) Sunoco R&M and its Controlled Affiliates will pay the
Partnership Group a fee of $0.1627 per barrel for the first 130,000
bpd received at the Marcus Hook Tank Farm and $0.0813 per barrel for
volumes in excess of 130,000 bpd received at the Marcus Hook Tank
Farm. These per barrel fees will escalate at the rate of 1.67%
(rounded to the nearest one-hundredth of one cent) on January 1 of
each year commencing January 1, 2003.
(C) The per barrel fees payable under Section 2(a)(ii)(B) for a
given month shall be based on an average of the number of barrels
received during the entire month from Sunoco R&M and its Controlled
Affiliates. Sunoco R&M and its Controlled Affiliates shall not be
entitled to pay the lower per barrel fee under Section 2(a)(ii)(B) in
any month in a given Contract Year until Sunoco R&M and its Controlled
Affiliates have paid the higher per barrel fee under Section
2(a)(ii)(B) for an average of 130,000 bpd for each prior month in that
Contract
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Year. Examples of this monthly calculation are set forth on Exhibit H
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attached hereto.
(D) The Partnership Group may have one tank at the Marcus Hook
Tank Farm out of service at a time for maintenance purposes.
(iii) Inkster Terminal.
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(A) Subject to Section 3, for a term of seven Contract Years
commencing April 1, 2002, the Partnership Group will provide storage
services to Sunoco R&M to store up to 975,734 barrels of Refined
Products at the Inkster Terminal.
(B) Sunoco R&M will pay the Partnership Group an annual fee of
$2.04 per barrel of storage capacity made available to Sunoco R&M at
the Inkster Terminal, a fee of $0.204 per barrel for receipts at the
Inkster Terminal greater than 975,734 barrels per Contract Year and a
fee of $0.204 per barrel for deliveries at the Inkster Terminal
greater than 975,734 barrels per Contract Year. The annual and per
barrel fees will escalate at the rate of 1.875% (rounded to the
nearest one-tenth of one cent) on January 1 of each year commencing
January 1, 2003. Mercaptin and Mercaptin injection are included in
these fees. The fees payable under this Section 2(a)(iii) will be paid
in monthly installments in accordance with Section 2(i) of this
Agreement.
(C) The Partnership Group may have one storage cavern at the
Inkster Terminal out of service for up to 45 days in each Contract
Year.
(iv) Fort Mifflin Terminal Complex.
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(A) Subject to Section 3, for a term of seven Contract Years
commencing on February 1, 2002, Sunoco R&M will, and will cause its
Controlled Affiliates to, deliver an aggregate of at least 290,000 bpd
of crude oil or Refined Products to the Fort Mifflin Terminal Complex.
(B) Sunoco R&M and its Controlled Affiliates will pay the
Partnership Group a fee of $0.1627 per barrel for the first 180,000
bpd received at the Fort Mifflin Terminal Complex and $0.0813 per
barrel for volumes in excess of 180,000 bpd received at the Fort
Mifflin Terminal Complex. These per barrel fees will escalate at the
rate of 1.67% (rounded to the nearest one-hundredth of one cent) on
January 1 of each year commencing January 1, 2003.
(C) The per barrel fees payable under Section 2(a)(iv)(B) for a
given month shall be based on an average of the number of barrels
received during the entire month from Sunoco R&M and its Controlled
Affiliates. Sunoco R&M and its Controlled Affiliates shall not be
entitled to pay the lower per barrel fee under Section 2(a)(iv)(B) for
any month in a given Contract Year until Sunoco R&M and its Controlled
Affiliates have paid the higher per barrel fee under Section
2(a)(iv)(B) for an average of 180,000 bpd for each prior month in that
Contract
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Year. Examples of this monthly calculation are set forth on Exhibit H
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attached hereto.
(D) For a term of seven Contract Years commencing on February 1,
2002, the Partnership Group will pay to Sunoco R&M, on a monthly
basis, $1.00 for each barrel of crude oil offloaded from a VLCC that
is not delivered to, or for the benefit of, any refinery owned by
Sunoco R&M and its Affiliates.
(E) The Partnership Group may have one tank out of service at the
Fort Mifflin Terminal Complex at a time for maintenance purposes.
(v) Crude Oil Pipelines.
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(A) Subject to Section 3, for a term of seven Contract Years
commencing on February 1, 2002, Sunoco R&M will, and will cause its
Controlled Affiliates to, use or cause others to use the services of
the Partnership Group to transport on the Crude Oil Pipelines at the
published tariffs an aggregate of not less than 140,000 bpd of crude
oil, consisting of imported crude oil to be refined by the Toledo
Refinery and crude oil to be refined by the Tulsa Refinery.
(B) If Sunoco R&M is unable to transport the volumes of crude oil
required under Section 2(a)(v)(A) as a result of the Partnership
Group's operational difficulties, prorationing or difficulties with
pipeline connections, then Sunoco R&M's obligations under this Section
2(a)(v) will be reduced by the volumes of crude oil that are diverted
or displaced and are transported by Sunoco R&M and its Controlled
Affiliates to the Toledo and Tulsa Refineries on pipelines owned by
third parties.
(C) The tariff rates charged by the Partnership Group for the
transportation of crude oil under Section 2(a)(v)(A) may not exceed
the maximum allowable FERC rate under index pricing.
(b) Rates Effective. Notwithstanding that the annual commitments of Sunoco
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R&M will be determined on a Contract Year basis, the applicable fees, tariff
rates and other charges provided for in this Agreement will become effective as
of the date of this Agreement.
(c) Obligations of the Partnership Group. During the term of this
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Agreement and subject to the terms and conditions of this Agreement, the
Partnership Group agrees to own, operate and maintain the assets necessary to
accept the deliveries from Sunoco R&M and its Controlled Affiliates and to
provide the services required under this Agreement. To the extent that Sunoco
R&M is entitled to an exception under Section 3 of this Agreement to its
obligations under Sections 2(a)(ii), (iii) or (iv) of this Agreement, the
corresponding obligations of the Partnership Group under this Section 2(c) will
be proportionately reduced.
(d) Ancillary Fees. The Partnership Group will provide ancillary services,
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such as blending and tank-to-tank transfers, to Sunoco R&M at rates determined
from time to time by the Partnership Group.
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(e) Jointly Owned Assets. In any instance in which the Partnership Group
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owns an interest in a pipeline or terminal jointly with other parties, the terms
"Crude Oil Pipelines," "Refined Product Pipelines" and "Refined Product
Terminals" when used in reference to such pipeline or terminal, as applicable,
means only the ownership interest therein held by the Partnership Group. In any
such instance, volumes transported or terminalled for Sunoco R&M and its
Controlled Affiliates by or for the account of other owners of the pipeline or
terminal shall not be considered as volumes transported in a Crude Oil Pipeline
or a Refined Product Pipeline or terminalled through a Refined Product Terminal,
as applicable, for purposes of determining whether Sunoco R&M's obligations have
been met under this Agreement.
(f) Jointly Owned Subsidiaries. In any instance in which a subsidiary that
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is not directly or indirectly through one or more intermediaries, a wholly-owned
subsidiary of the Partnership Group owns a pipeline or terminal, the volumes
deemed transported in a Crude Oil Pipeline or a Refined Product Pipeline or
terminalled through a Refined Product Terminal, as applicable, by such
subsidiary shall be equal to the total volume transported on such pipeline or
terminalled through such terminal multiplied by the direct or indirect ownership
interest, on a percentage basis, of the Partnership Group in such subsidiary.
(g) Product Losses. With respect to the Marcus Hook Tank Farm, the Inkster
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Terminal, the Fort Mifflin Terminal Complex and the Refined Product Terminals,
the Partnership Group is responsible for all product losses greater than one
fourth of one percent of the product transported or throughput in accordance
with this Section 2. The Partnership's responsibility for product losses on the
Refined Product Pipelines and the Crude Oil Pipelines will be determined by the
applicable tariffs.
(h) Taxes. Sunoco R&M will, and will cause its Controlled Affiliates to,
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pay all taxes, import duties, license fees and other government charges levied
on the Refined Products or crude oil delivered by Sunoco R&M and its Controlled
Affiliates for transportation or storage by the Partnership Group in the Refined
Product Pipelines, Refined Product Terminals, the Marcus Hook Tank Farm, the
Inkster Terminal, the Fort Mifflin Terminal Complex and the Crude Oil Pipelines
(including, without limitation, government charges imposed on the transfer of
crude oil from water borne carriers).
(i) Timing of Payments. Sunoco R&M will, and will cause its Controlled
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Affiliates to, make payments to the Partnership Group on a monthly basis during
the term of this Agreement with respect to services rendered by the Partnership
Group under this Agreement in the prior month. Payments not received by the
Partnership Group on or prior to the applicable payment date will accrue
interest at the Prime Rate from the applicable payment date until paid.
(j) Monthly Surcharge. If new laws or regulations are enacted that require
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the Partnership Group to make substantial and unanticipated capital expenditures
with respect to the Refined Products Terminals, the Marcus Hook Tank Farm, the
Inkster Terminal or the Fort Mifflin Terminal Complex, the Partnership Group may
impose a monthly surcharge to cover the cost of complying with these laws or
regulations. Sunoco R&M and the Partnership Group shall use their reasonable
commercial efforts to comply with these laws and regulations, and shall
negotiate in good faith to mitigate the impact of these laws and regulations and
to determine the level of the monthly surcharge. If Sunoco R&M and the
Partnership Group are unable to agree
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on the level of the monthly surcharge, the Partnership Group will have the
option to terminate this Agreement with respect to the affected asset.
Section 3. Exceptions to Sunoco R&M's Obligations
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(a) Shut Down or Reconfiguration of Refineries. Sunoco R&M must deliver to
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the Partnership Group at least six months advance written notice of the shut
down or reconfiguration of any Refinery. Sunoco R&M will use its commercially
reasonable efforts to mitigate any reduction in revenues or throughput
obligations under this Agreement that would result from such a shut down or
reconfiguration. If Sunoco R&M shuts down or reconfigures any one of the
Refineries and Sunoco R&M reasonably believes in good faith that such shut down
or reconfiguration will jeopardize its ability to satisfy its minimum revenue or
throughput obligations under this Agreement, Sunoco R&M shall propose a new
minimum revenue or throughput obligation, as the case may be, such that the
ratio of the new minimum revenue and throughput obligations under this Agreement
over the anticipated production level following the shut down or reconfiguration
will be approximately equal to the ratio of the original minimum revenue and
throughput obligations under this Agreement over the original production level.
To the extent that the Partnership Entities do not agree with Sunoco R&M's
proposal, any changes in Sunoco R&M's obligations will be determined by binding
arbitration in accordance with Section 10(g) of this Agreement.
(b) MTBE Prohibition. If Sunoco R&M is prohibited from using MTBE in the
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gasoline it produces and Sunoco R&M reasonably believes in good faith that such
prohibition will jeopardize its ability to satisfy its minimum revenue or
throughput obligations under this Agreement, then Sunoco R&M shall deliver to
the Partnership Group at least 60 days advance written notice of Sunoco R&M's
proposed new minimum revenue or throughput obligation, as the case may be, such
that the ratio of the new minimum revenue and throughput obligations under this
Agreement over the anticipated production level following the MTBE prohibition
will be approximately equal to the ratio of the original minimum revenue and
throughput obligations under this Agreement over the original production level.
To the extent that the Partnership Entities do not agree with Sunoco R&M's
proposal, any changes in Sunoco R&M's obligations will be determined by binding
arbitration in accordance with Section 10(g) of this Agreement.
(c) Failure of Partnership Group to Provide Services. Sunoco R&M shall not
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be deemed to have failed to satisfy its obligations under Section 2(a) during
any period of time following 30 days advance written notice by Sunoco R&M to the
Partnership Group that Sunoco R&M and its Controlled Affiliates are unable to
provide for the transportation, throughput or storage of the required volumes
because of the continued inability of the Partnership Group to transport,
throughput or store volumes of crude oil made available for shipment by Sunoco
R&M and its Controlled Affiliates or to transport, throughput or store volumes
of Refined Products made available for shipment or terminalling by Sunoco R&M
and its Controlled Affiliates, whether because of operational difficulties with
the Crude Oil Pipelines, Refined Products Pipelines, Refined Product Terminals,
Marcus Hook Tank Farm, Inkster Terminal, Fort Mifflin Terminal Complex or
otherwise.
(d) Force Majeure. In the event that any party is rendered unable, wholly
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or in part, by a Force Majeure event from performing its obligations under this
Agreement for a period of
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more than 30 days, the parties agree that upon the delivery of notice and full
particulars of the Force Majeure event in writing within a reasonable time after
the occurrence of the Force Majeure event relied on, the obligations of the
parties, so far as they are affected by the Force Majeure event, shall be
suspended during the continuance of any inability so caused. Any suspension of
the obligations of the parties as a result of this Section 3(d) shall not extend
the term of this Agreement. Sunoco R&M will be required to pay any amounts
accrued and due under this Agreement at the time of the Force Majeure event. The
cause of the Force Majeure event shall so far as possible be remedied with all
reasonable dispatch, except that no party shall be compelled to resolve any
strikes, lockouts or other industrial disputes other than as it shall determine
to be in its best interests.
Section 4. Agreement to Remain Shipper
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Subject to the availability of adequate supplies of crude oil at
commercially reasonable prices, Sunoco R&M agrees that it will, and will cause
its Controlled Affiliates to, continue their historical commercial practice of
purchasing crude oil for their own account at crude oil receipt points
consistent with their past practices and to continue acting in the capacity of
the shipper of crude oil on the Crude Oil Pipelines. Subject to the availability
of adequate supplies of Refined Products at commercially reasonable prices,
Sunoco R&M agrees that it will, and will cause its Controlled Affiliates to,
continue their historical commercial practice of acting in the capacity of the
shipper of Refined Products for their own account to delivery points consistent
with their past practices and to continue acting in the capacity of the shipper
of Refined Products on the Refined Product Pipelines.
Section 5. Agreement not to Challenge Tariff Rates or Terminal Charges
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During the term of this Agreement, Sunoco R&M agrees not to (a) challenge,
nor to cause its Controlled Affiliates to challenge, nor to encourage or
recommend to any other Person that it challenge, or voluntarily assist in any
way any other Person in challenging, in any forum, interstate or intrastate
tariff rates (including joint tariffs) for transportation of crude oil or
Refined Products of the Partnership Group, (b) protest or to file a complaint,
nor to cause its Controlled Affiliates to protest or to file a complaint, nor to
encourage or recommend to any other Person that it protest or file a complaint,
or voluntarily assist in any way any other Person in protesting or filing a
complaint with respect to regulatory filings of the Partnership Group to change
interstate or intrastate tariff rates (including joint tariffs) for
transportation of crude oil or Refined Products or (c) seek, nor to cause its
Controlled Affiliates to seek, nor to encourage or recommend to any other
Person, or voluntarily assist in any way any other Person that in seeking
regulatory review of, or regulatory jurisdiction over, the contractual rates
charged by the Partnership Group for terminalling services or to challenge, in
any forum, such rates or changes to such rates.
Section 6. Effectiveness and Term
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This Agreement shall be effective as of January ___, 2002 and shall
terminate at 12:01 a.m. Philadelphia, Pennsylvania, time on March 31, 2009,
unless extended by written mutual agreement of the parties hereto.
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Section 7. Notices
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All notices, requests, demands, and other communications pertaining to this
Agreement shall be delivered personally, or by registered or certified mail
(postage prepaid and return receipt requested), or by express carrier or
delivery service, or by telecopy, to the parties hereto at the addresses below
(or at such other addresses as shall be specified by notice under this Section
6):
(i) if to Sunoco R&M:
Sunoco, Inc. (R&M)
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Telecopy:
if to the Partnership Entities:
Sunoco Logistics Partners L.P.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Telecopy:
Section 8. Successors and Assigns
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This Agreement shall inure to the benefit of, and shall be binding upon,
Sunoco R&M, the Partnership Entities and their respective successors and
permitted assigns. Successors shall include any corporation (limited liability
or otherwise), any partnership (limited or otherwise), or any person which
succeeds to a controlling interest in, or all of the economic interest of,
Sunoco R&M or the Partnership Entities, as applicable. The parties hereto agree
to require their respective successors, if any, to expressly assume, in a form
of agreement acceptable to the other parties, the obligations under this
Agreement.
Section 9. Deficiency Payments
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(a) As soon as practicable following the end of each Contract Year under
this Agreement, the Partnership Group shall deliver to Sunoco R&M a written
notice (the "Deficiency Notice") detailing Sunoco R&M's failure to meet any of
its obligations under this Agreement. The Deficiency Notice shall (i) specify in
reasonable detail the nature of any deficiency (including identifying which
provision of Section 2 has not been satisfied) and (ii) specify the approximate
dollar amount that the Partnership Group believes would have been paid by Sunoco
R&M and its Controlled Affiliates to the Partnership Group if Sunoco R&M had
complied with the applicable provision(s) of Section 2 (the "Deficiency
Payment"). Sunoco R&M shall pay the Deficiency Payment to the Partnership Group
within 10 days of its receipt of the Deficiency Notice.
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(b) If Sunoco R&M disagrees with the Deficiency Notice, then following the
payment of the Deficiency Payment to the Partnership Group, the chief financial
officers of Sunoco R&M and the General Partner (on behalf of the Partnership
Group) shall meet or communicate by telephone at a mutually acceptable time and
place, and thereafter as often as they reasonably deem necessary and shall
negotiate in good faith to attempt to resolve any differences that they may have
with respect to matters specified in the Deficiency Notice. During the 30-day
period following the payment of the Deficiency Payment, Sunoco R&M shall have
access to the working papers of the Partnership Group relating to the Deficiency
Notice. If such differences are not resolved within 30 days following the
payment of the Deficiency Payment, Sunoco R&M and the Partnership Group shall,
within 45 days following the payment of Deficiency Payment, submit any and all
matters which remain in dispute and which were properly included in the
Deficiency Notice to arbitration in accordance with Section 10(g).
(c) If it is finally determined pursuant to this Section 9 that Sunoco R&M
is not required to make any or all of the Deficiency Payment (the "Refund"), the
Partnership Group shall promptly pay to Sunoco R&M the Refund in immediately
available funds, plus interest on the Refund at the Prime Rate from the first
day after the payment of the Deficiency Payment.
(d) Deficiency Payments will be credited against any payments owed by
Sunoco R&M in the following year of this Agreement in excess of the minimum
commitments established by this Agreement; provided, however, that (i) a
Deficiency Payment may only be credited against a payment owed by Sunoco R&M in
excess of the minimum commitments under the same provision of this Agreement and
(ii) Sunoco R&M will not receive credit for any Deficiency Payment until it has
met the annual minimum requirements under the applicable provision in the
succeeding Contract Year. For example, a Deficiency Payment made with respect to
the Marcus Hook Tank Farm may only be credited against payments owed with
respect to the Marcus Hook Tank Farm in excess of the minimum commitments under
Section 2(a)(ii) in the following Contract Year if Sunoco R&M and its Controlled
Affiliates have delivered the annual minimum volume commitment at the Marcus
Hook Tank Farm in that Contract Year.
Section 10. Miscellaneous
--------------
(a) Sunoco R&M Intention as to Refineries. Sunoco R&M represents to the
-------------------------------------
Partnership Entities that, as of the date of this Agreement, it does not intend
to close or shut down any of the Refineries or to cause any changes that would
have a material adverse effect on the operation of any of the Refineries.
(b) Amendments and Waivers. No amendment or modification of this Agreement
----------------------
shall be valid unless it is in writing and signed by the parties hereto and, in
the case of any amendment or modification adverse to the Partnership Group,
approved by the Conflicts Committee of the General Partner. No waiver of any
provision of this Agreement shall be valid unless it is in writing and signed by
the party against whom the waiver is sought to be enforced, and, in the case of
any waiver by the Partnership Entities, approved by the Conflicts Committee of
the General Partner. No failure or delay in exercising any right hereunder, and
no course of conduct, shall operate as a waiver of any provision of this
Agreement. No single or partial
12
exercise of a right hereunder shall preclude further or complete exercise of
that right or any other right hereunder.
(c) Permitted Assignments. Neither this Agreement nor any of the rights or
---------------------
obligations hereunder shall be assigned without the prior written consent of
Sunoco R&M (in the case of any assignment by the Partnership Entities) or the
Conflicts Committee of the General Partner (in the case of any assignment by
Sunoco R&M; provided, however, that (i) the Partnership Entities may make such
an assignment to an affiliate of the Partnership Entities and (ii) Sunoco R&M
may make such an assignment to any Person to which Sunoco R&M has sold any of
its assets that rely on the services provided by the Partnership Group under
this Agreement if such Person (A) is reasonably capable of performing Sunoco
R&M's obligations under this Agreement assigned to such Person, which
determination shall be made by Sunoco R&M in its reasonable judgment (B) has an
Investment Grade Rating and (C) has agreed in writing with the Partnership Group
to assume the obligations of Sunoco R&M assigned to such Person. Any attempt to
make an assignment otherwise than as permitted by the foregoing shall be null
and void. Any assignment agreed to by Sunoco R&M or the Partnership Entities as
applicable, shall not relieve the assignor of its obligations under this
Agreement.
(d) Severability. If any provision of this Agreement shall be held invalid
------------
or unenforceable by a court or regulatory body of competent jurisdiction, the
remainder of this Agreement shall remain in full force and effect.
(e) No Inconsistent Actions. No party hereto shall undertake any course of
-----------------------
action inconsistent with the provisions of this Agreement. Without limiting the
foregoing sentence, no party hereto shall enter into, modify, amend, or waive
any contract right or obligation if such action would conflict with or impair
the rights and protections granted to any other party under this Agreement.
(f) Choice of Law. This Agreement shall be subject to and governed by the
-------------
laws of the Commonwealth of Pennsylvania, excluding any conflicts-of-law rule or
principle that might refer the construction or interpretation of this Agreement
to the laws of another state. Each Party hereby submits to the jurisdiction of
the state and federal courts in the Commonwealth of Pennsylvania and to venue in
Philadelphia, Pennsylvania.
(g) Arbitration Provision. Except as provided in Section 9, any and all
---------------------
Arbitrable Disputes must be resolved through the use of binding arbitration
using three arbitrators, in accordance with the Commercial Arbitration Rules of
the American Arbitration Association, as supplemented to the extent necessary to
determine any procedural appeal questions by the Federal Arbitration Act (Title
9 of the United States Code). If there is any inconsistency between this Section
and the Commercial Arbitration Rules or the Federal Arbitration Act, the terms
of this Section will control the rights and obligations of the parties.
Arbitration must be initiated within the applicable time limits set forth in
this Agreement and not thereafter or if no time limit is given, within the time
period allowed by the applicable statute of limitations. Arbitration may be
initiated by a party ("Claimant") serving written notice on the other party
("Respondent") that the Claimant elects to refer the Arbitrable Dispute to
binding arbitration. Claimant's notice initiating binding arbitration must
identify the arbitrator Claimant has appointed. The Respondent shall respond to
Claimant within 30 days after receipt of Claimant's
13
notice, identifying the arbitrator Respondent has appointed. If the Respondent
fails for any reason to name an arbitrator within the 30 day period, Claimant
shall petition to the American Arbitration Association for appointment of an
arbitrator for Respondent's account. The two arbitrators so chosen shall select
a third arbitrator within 30 days after the second arbitrator has been
appointed. The Claimant will pay the compensation and expenses of the arbitrator
named by or for it, and the Respondent will pay the compensation and expenses of
the arbitrator named by or for it. The costs of petitioning for the appointment
of an arbitrator, if any, shall be paid by Respondent. The Claimant and
Respondent will each pay one-half of the compensation and expenses of the third
arbitrator. All arbitrators must (a) be neutral parties who have never been
officers, directors or employees of Sunoco R&M, the Partnership Entities or any
of their affiliates and (b) have not less than seven years experience in the
energy industry. The hearing will be conducted in Philadelphia, Pennsylvania and
commence within 30 days after the selection of the third arbitrator. Sunoco R&M,
the Partnership Entities and the arbitrators should proceed diligently and in
good faith in order that the award may be made as promptly as possible. Except
as provided in the Federal Arbitration Act, the decision of the arbitrators will
be binding on and non-appealable by the parties hereto. The arbitrators shall
have no right to grant or award indirect, consequential, punitive or exemplary
damages of any kind.
14
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement as
of the date first written above.
SUNOCO, INC. (R&M)
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
SUNOCO LOGISTICS PARTNERS L.P.
By: SUNOCO PARTNERS LLC,
its general partner
By: _________________________________
Name: _______________________________
Title: ______________________________
SUNOCO LOGISTICS PARTNERS
OPERATIONS L.P.
By: SUNOCO LOGISTICS PARTNERS GP LLC,
its general partner
By: _________________________________
Name: _______________________________
Title: ______________________________
SUNOCO PARTNERS LLC
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
15
SUNOCO PARTNERS MARKETING &
TERMINALS L.P.
By: SUNOCO LOGISTICS PARTNERS
OPERATIONS GP LLC,
its general partner
By: _________________________________
Name: _______________________________
Title: ______________________________
SUNOCO PIPELINE L.P.
By: SUNOCO LOGISTICS PARTNERS
OPERATIONS, GP LLC,
its general partner
By: _________________________________
Name: _______________________________
Title: ______________________________
SUNOCO LOGISTICS PARTNERS
OPERATIONS GP LLC
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
SUNOCO LOGISTICS PARTNERS GP LLC
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
16
EXHIBIT A
CRUDE OIL PIPELINES
Miles Diameter
Origin and Destination of Pipeline in inches
--------------------------------------------------------------------------------
Marysville, MI to Toledo, OH ................. 123 16
Nederland, TX to Longview, TX ................ 199 10,12
Cushing, OK to Tulsa, OK ..................... 45 12,12
Barnsdall, OK to Tulsa, OK ................... 34 8
Bad Creek, OK to Tulsa, OK ................... 53 8,10
A-1
EXHIBIT B
FORT MIFFLIN TERMINAL COMPLEX
1. Four 80,000 barrel tanks at Fort Mifflin.
2. Twenty-one tanks at ▇▇▇▇▇ Creek with a total capacity of 2,380,000 barrels.
3. Two ship docks at Fort Mifflin and two ship docks at Hog Island Wharf.
4. The following pipelines:
(a) One 30-inch pipeline and one 16-inch pipeline that delivers crude oil
from the Fort Mifflin Terminal to the Philadelphia Refinery.
(b) Two 24-inch pipelines that deliver crude oil from Hog Island Wharf to
▇▇▇▇▇ Creek Tank Farm.
(c) One 16-inch pipeline that delivers crude oil from the ▇▇▇▇▇ Creek Tank
Farm to the Philadelphia Refinery.
(d) One 30-inch bi-directional pipeline that delivers crude oil between
the Hog Island Wharf and the Fort Mifflin Terminal.
(e) One 30-inch and one 16-inch pipeline that deliver refined products
from the Fort Mifflin Terminal to the Philadelphia Refinery.
(f) One dual diameter, 24- and 26-inch pipeline that delivers refined
products from the Hog Island Wharf to the Philadelphia Refinery.
B-1
EXHIBIT C
INKSTER TERMINAL
1. Eight salt caverns with a total capacity of 975,734 barrels as listed
below:
a. 100,443 barrels of LPG mix
b. 157,136 barrels of Butane
c. 120,000 barrels of Propane
d. 135,423 barrels of Propane
e. 123,138 barrels of Butane
f. 162,638 barrels of Butane
g. 177,100 barrels of BB
h. 59,856 barrels of Iso-butane
2. A propane truck rack.
3. Pipeline connections for movements to or from Toledo, Sarnia, Marysville
and Buckeye at ▇▇▇▇ Junction.
C-1
EXHIBIT D
MARCUS HOOK TANK FARM
1. Twenty-five tanks at Twin Oaks No. 2 tank farm with a total capacity of
2,057,722 barrels.
2. The following pipeline connections:
a. Twin Oaks refined product terminal.
b. Twin Oaks to Newark 14" pipeline.
c. Twin Oaks to Montello 8" pipeline.
d. Twin Oaks to Buckeye's Laurel pipeline.
D-1
EXHIBIT E
REFINED PRODUCT PIPELINES
Miles of
Origin and Destination Pipeline Diameter Capacity
------------------------------------------- ---------- ----------- -----------
(inches) (bpd)
Philadelphia, PA to Montello, PA .......... 210 12.8 164,400
Montello, PA to Buffalo, NY ............... 300 14.8 62,400
Montello, PA to Kingston, PA .............. 84 6 8,800
Montello, PA to Syracuse, NY .............. 230 8.6 14,100
Montello, PA to Pittsburgh, PA ............ 221 8 35,000
Toledo, OH to Blawnox, PA ................. 260 10.8 32,900
Toldeo, OH to Sarnia, Canada .............. 241 8.6 66,600
Twin Oaks, PA to Newark, NJ ............... 118 14 140,000
Philadelphia, PA to Linden, NJ/(1)/ ....... 88 16.12 60,000
____________
(1) The Partnership Group owns a one-third interest in 80 miles of this
pipeline. The capacity represents the proportionate share of capacity
attributable to the Partnership Group's ownership interest.
E-1
EXHIBIT F
REFINED PRODUCTS TERMINALS
Storage
Capacity Number of
Location (barrels) Tanks
---------------------------------- ----------- -----------
Akron, OH ........................ 98,200 8
Altoona, PA ...................... 103,400 9
Belmont, PA/(1)/ ................. 0/(1)/ ▇/(▇)/
▇▇▇▇▇▇▇▇▇▇, ▇▇ ................... 60,000 4
Blawnox, PA ...................... 72,100 4
Buffalo, NY ...................... 358,500 8
Cleveland, OH .................... 255,000 10
Columbus, OH ..................... 78,900 6
Dayton, OH ....................... 248,700 15
Delmont, PA ...................... 233,900 8
Exton, PA ........................ 132,200 7
Fullerton, PA .................... 161,700 7
Huntington, IN ................... 207,000 8
Inwood, NY/(2)/ .................. 54,200 18
Kingston, PA ..................... 148,800 7
Malvern, PA ...................... 62,900 5
Mechanicsburg, PA ................ 166,200 9
Montello, PA ..................... 67,900 7
Newark, NJ ....................... 581,100 16
Northumberland, PA ............... 170,300 6
Owosso, MI ....................... 233,300 8
Paulsboro, NJ .................... 81,000 6
Piscataway, NJ ................... 95,000 4
Pittsburgh, PA ................... 205,500 5
River Rouge, MI .................. 178,400 10
Rochester, NY .................... 173,000 7
Tamaqua, PA ...................... 113,600 8
Toledo, OH ....................... 102,400 ▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ .................... 90,000 4
Vanport, PA ...................... 179,300 ▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ................. 85,000 7
Youngstown, OH ................... 22,700 5
----------- ---------
Total ........................ 4,820,200 244
=========== =========
____________
(1) This terminal receives product from Sunoco's R&M Philadelphia refinery and
does not have any tankage.
(2) The Partnership Group owns a 45% interest in this terminal. The capacity
represents the proportionate share of capacity attributable to the
Partnership Group's ownership interest.
F-1
EXHIBIT G
THROUGHPUT FEE SCHEDULE
1. The posted tariff for all pipeline movements.
2. $0.35 per shell barrel per month for all of the available storage at the
Vanport terminal (179,300 barrels) and $0.05 per barrel for throughput at
the Vanport terminal.
3. $0.00611 per delivered net gallon for gasoline plus $0.00051 per delivered
net gallon for additive injection equipment and services, provided that
Sunoco R&M supplies the additive.
4. $0.00611 per delivered net gallon for diesel fuel and heating oil including
red dye and anti-static additive and additive injection equipment. $0.00051
per delivered net gallon for cetane improver additive injection equipment,
provided that Sunoco R&M supplies the additive.
5. $0.00611 per delivered net gallon for jet fuel plus $0.00051 per delivered
net gallon for filtering.
6. $0.00662 per delivered net gallon for xylene, toluene and mineral spirits
at the Toledo terminal.
7. $0.00662 per delivered net gallon for ethanol.
8. $0.00662 per delivered net gallon for kerosene.
9. Throughput fees at the Inwood terminal will be $0.00204 per delivered net
gallon higher.
10. All fees and requirements listed on this Exhibit G relate to the
---------
Partnership Group's assets and capabilities as of the date of this
Agreement. Any fees or requirements with respect to new or modified assets
will be determined at the time of acquisition or modification of that
asset.
11. Each of the fees listed on this Exhibit G (except for the posted tariffs
---------
for pipeline movements) will escalate at the rate of 1.875% (rounded to the
nearest one-thousandth of one cent) on January 1 of each year commencing
January 1, 2003.
G-1
EXHIBIT H
FEE CALCULATION EXAMPLES
Deliveries through the Marcus Hook Tank Farm (130,000 bpd minimum requirement)
------------------------------------------------------------------------------
Example A
(For purposes of this example, we have assumed that each month consists of 30
days)
1. In the first month of a Contract Year, Sunoco R&M and its Controlled
Affiliates deliver an average of 120,000 bpd to the Marcus Hook Tank Farm. The
rate charged will be $0.1627 per barrel, and the shortfall of 10,000 bpd will be
carried over to the next month.
2. In the second month of the Contract Year, Sunoco R&M and its Controlled
Affiliates deliver an average of 135,000 bpd to the Marcus Hook Tank Farm. The
rate charged will be $0.1627 per barrel, and the shortfall of 5,000 bpd from the
first month will be carried over to the next month.
3. In the third month of the Contract Year, Sunoco R&M and its Controlled
Affiliates deliver an average of 140,000 bpd to the Marcus Hook Tank Farm. The
rate charged will $0.1627 per barrel for the first 135,000 bpd and $0.0813 per
barrel for the remaining 5,000 bpd. The shortfall from the first month has been
eliminated.
4. In the fourth month of the Contract Year, Sunoco R&M and its Controlled
Affiliates deliver an average of 150,000 bpd to the Marcus Hook Tank Farm. The
rate charged will be $0.1627 per barrel for the first 130,000 bpd and $0.0813
per barrel for the remaining 20,000 bpd.
Note: The same example is applicable to deliveries through the Fort Mifflin
Terminal Complex (with a 180,000 bpd requirement).
Example B
(The Contract Year extends from February 1 to January 31)
1. Sunoco R&M and its Controlled Affiliates deliver an average of 130,000 bpd
to the Marcus Hook Tank Farm for each of the first eight months (February -
September) of the Contract Year. The rate charged will be $0.1627 per barrel for
each month.
2. Sunoco R&M and its Controlled Affiliates deliver an average of 160,000 bpd
to the Marcus Hook Tank Farm in the ninth month (October) of the Contract Year.
The rate charged will be $0.1627 per barrel for the first 130,000 bpd and
$0.0813 per barrel for the remaining 30,000 bpd.
3. Sunoco R&M and its Controlled Affiliates deliver an average of 100,000 bpd
to the Marcus Hook Farm Tank for each of the remaining three months (November -
January) of the Contract Year. In each month, the rate charged will be $0.1627
per barrel.
H-1
4. For the Contract Year, Sunoco R&M and its Controlled Affiliates delivered an
average of 30,000 bpd above the minimum requirement in October (31 days), and
delivered an average of 30,000 bpd below the minimum requirement in November (30
days), December (31 days) and January (31 days). Thus, there were a net total of
61 days on which Sunoco R&M delivered below the minimum requirement and for
which Sunoco R&M and its Controlled Affiliates must pay a fee of $0.1627 per
barrel. In addition, Sunoco R&M and its Controlled Affiliates must repay the
Partnership Group for the 30,000 bpd that were charged the lower fee in October.
Sunoco R&M and its Controlled Affiliates will pay a Deficiency Payment equal to:
61 days times (60,000 x $0.1627) + 31 days times (30,000 x $0.0813) = $671,091
H-2
