Exhibit 10.7
GAS PROCESSING AGREEMENT
(Kenova, Xxxxxxx and Xxxx Plants)
This Gas Processing Agreement ("Agreement") is made and entered into
this ____ day of ______, 2002, by and between MARKWEST ENERGY APPALACHIA,
L.L.C., a Delaware limited partnership ("MEA"), and MARKWEST HYDROCARBON, INC.,
a Delaware corporation ("MarkWest"). MEA and MarkWest may be referred to
individually as "Party", or collectively as "Parties".
Section 1. SCOPE OF AGREEMENT AND GENERAL TERMS AND CONDITIONS.
MarkWest agrees to deliver Gas and MEA agrees to receive and process Gas for
extraction of liquefiable hydrocarbons, and redeliver Residue Gas and Plant
Products to MarkWest, all in accordance with this Agreement. This Agreement
incorporates and is subject to all of the General Terms and Conditions attached
hereto, together with any other Exhibits attached hereto.
Section 2. EFFECTIVE DATE. The date on which the obligations and duties
of the Parties shall commence, being the "Effective Date", shall be
_______________, 2002.
Section 3. TERM. This Agreement shall remain in full force and effect
from the Effective Date through December 31, 2015 (the "Primary Term"), and
shall continue thereafter on a year-to-year basis until terminated by either
Party by providing at least 60 days written notice to the other Party in advance
of the termination of the Primary Term or of any one-year extension thereof.
Section 4. FEES AND CONSIDERATION.
A. As full consideration for the services provided by MEA, MarkWest
shall pay the following fees and MEA shall make the following
deliveries:
i. MarkWest shall pay MEA a fee ("Processing Fee") equal to
the Receipt Point Thermal Content (expressed in dekatherms)
multiplied by $*.
ii. A portion of the Processing Fee specified above, shall be
adjusted annually. On an annual basis, *% of the then
effective Processing Fee shall be adjusted in proportion to
the percentage change, from the preceding year, in the
Producer Price Index for Oil and Gas field services (SIC 138)
as published by the Department of Labor ("PPI"). The
adjustment of the Processing Fee shall be made effective upon
each anniversary of the Effective Date and shall reflect the
percentage change in the PPI as it existed for the immediately
preceding January from the PPI for the second immediately
preceding January. In no event will the adjustment result in a
decrease of the Processing Fee from the last effective amount
of the Processing Fee.
iii. MEA shall redeliver the Plant Products extracted from
MarkWest's Gas to the Plant Products Delivery Points for
fractionation under the terms of that certain Fractionation
Agreement between MEA and MarkWest, of even date herewith;
and, shall redeliver the Residue Gas remaining from MarkWest's
Gas to the Redelivery Point.
1
*Denotes Confidential Portion Omitted and
Filed Separately with the Commission
Section 5. NOTICES. All notices, statements, invoices or other
communications required or permitted between the Parties shall be in writing and
shall be considered as having been given if delivered by mail, courier, hand
delivery, or facsimile to the other Party at the designated address or facsimile
numbers. Normal operating instructions can be delivered by telephone or other
agreed means. Notice of events of Force Majeure may be made by telephone and
confirmed in writing within a reasonable time after the telephonic notice.
Monthly statements, invoices, payments and other communications shall be deemed
delivered when actually received. Either Party may change its address or
facsimile and telephone numbers upon written notice to the other Party:
MarkWest:
Address: 000 Xxxxxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Contract Administration
Fax: (303)
MEA:
Address: 000 Xxxxxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Contract Administration
Fax: (303)
Section 6. EXECUTION. This Agreement may be executed in any number of
counterparts, each of which shall be considered and original, and all of which
shall be considered one instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first
set forth above.
MARKWEST HYDROCARBON, INC.
By: ___________________________
Name:
Title:
MARKWEST ENERGY APPALACHIA, L.L.C.
By: ___________________________
Name:
Title:
2
GENERAL TERMS AND CONDITIONS
ATTACHED TO AND MADE A PART OF THAT CERTAIN
GAS PROCESSING AGREEMENT
BETWEEN
MARKWEST HYDROCARBON, INC., AS "MARKWEST"
AND
MARKWEST ENERGY APPALACHIA, L.L.C., AS "MEA"
DATED:
ARTICLE 1: DEFINITIONS
ACCOUNTING PERIOD. The period commencing at 8:00 a.m., Eastern Time, on the
first day of a calendar month and ending at 8:00 a.m., Eastern Time, on the
first day of the next succeeding month.
BTU. The British thermal unit as defined by Columbia's FERC Gas Tariff.
COLUMBIA. Columbia Gas Transmission Corporation.
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 DEG. F.
DEKATHERM or DTH. A dekatherm as defined in Columbia's FERC Gas Tariff,
currently defined as one million Btus.
FORCE MAJEURE. Compliance with any law, order or regulation, whether valid or
invalid, of any governmental authority or of any person purporting to act
therefor or by any act or condition not within the reasonable control of the
Party whose performance is interfered with and which by the exercise of
reasonable diligence said Party is unable to prevent, including but not limited
to revolutions or other disorders, wars, acts of enemies, embargoes or other
import or export restrictions, strikes, lockouts or other industrial
disturbances, fires, storms, floods, acts of God, explosions or Mechanical or
Physical Failure of MEA's, Columbia's or MarkWest's equipment or facilities.
GAS. All hydrocarbon and non-hydrocarbon substances produced from gas and/or oil
xxxxx in a gaseous state at the Receipt Point.
GROSS HEATING VALUE. Heating Value as defined in Columbia's FERC Gas Tariff,
currently defined as the gross heating value on a dry basis, which is the number
of British thermal units produced by the complete combustion at constant
pressure of the amount of dry gas (gas containing no water vapor) that would
occupy a volume of one Cubic Foot at 14.73 psia and 60 DEG. F with combustion
air at the same temperature and pressure as the gas, the products of combustion
being cooled to the initial temperature of the gas and air, and the water formed
by combustion condensed to the liquid state.
HHV/DRY BASIS. Higher heating value (gross) which is utilized by the natural gas
industry as a standard for expressing heating value content of a gas stream.
INDEMNIFYING PARTY and INDEMNIFIED PARTY. As defined in Article 8, below.
LOSSES. Any actual loss, cost, expense, liability, damage, demand, suit,
sanction, claim, judgment, lien, fine or penalty which are incurred by 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 the matters for which the
Indemnifying Party has indemnified the applicable Indemnified Party.
3
LOST AND UNACCOUNTED FOR GAS. Any Gas lost or otherwise not accounted for
incident to or occasioned by the gathering, treating, processing, or compressing
and redelivery, as applicable of Gas, including Gas released through leaks,
instrumentation, relief valves, unmeasured flares, ruptured pipelines, and blow
downs of pipelines, vessels, and equipment.
MARKWEST'S GAS. All Gas as to which MarkWest has the right to process or have
processed at the Processing Plant.
MCF. 1,000 Cubic Feet.
MMBTU. 1,000,000 Btu's.
MMCF. 1,000,000 Cubic Feet.
OPERATING AGREEMENTS. That certain Kenova Operating Agreement dated October 16,
1999, that certain Xxxxxxx Operating Agreement dated October 16, 1999, and that
certain Xxxx Operating Agreement dated October 16, 1999, all between Columbia
and MarkWest, and as from time to time amended.
PLANT PRODUCTS. Commercial sulfur, carbon dioxide, nitrogen, helium, argon,
other inert gases, ethane, propane, iso-butane, normal butane, iso-pentane,
normal pentane, pentanes plus, hexanes plus, any other liquid hydrocarbon
product except for a liquefied methane product, or any mixtures thereof, and any
incidental methane included in any Plant Products, which are separated,
extracted, or condensed from Gas processed in the Processing Plant.
PLANT PRODUCTS DELIVERY POINT. The point at which Plant Products are delivered
to MarkWest, or for the account of MarkWest, being (i) at the Kenova Processing
Facility, the inlet flange of the pipeline at the tailgate of the Kenova
Processing Facility, and (ii) at the Xxxxxxx and Xxxx Processing Facilities,
into tank trucks.
PROCESSING PLANTS. Collectively, the Kenova, Xxxxxxx and Xxxx extraction plants,
owned by MEA, including the natural gas liquids extraction plant, and such other
assets, including piping, tanks, machinery, valves, concrete foundations,
buildings, structural steel, fixtures, equipment and facilities, located at the
sites of the foregoing facilities which are unique and/or specifically used and
required for the extraction and processing of natural gas. Each of which are
individually referred to as the "Kenova Processing Facility", the Xxxxxxx
Processing Facility", and the "Xxxx Processing Facility".
PROCESSING PLANT FUEL. All Gas measured and utilized as fuel in the Processing
Plant.
RECEIPT POINT. As applicable, (i) for the Kenova Processing Facility, the inlet
flange of Columbia's Measuring Station No. 803958 located on the inlet/upstream
side of the Kenova Facility, (ii) for the Xxxxxxx Processing Facility, the point
on the inlet piping to the Xxxxxxx Processing Facility where it crosses the
lease boundary, and (iii) for the Xxxx Processing Facility, the point located at
the outlet flange of Valve C3-51 which is upstream of the inlet gas cooler.
RECEIPT POINT THERMAL CONTENT. The Thermal Content of the Gas delivered to MEA
by MarkWest at the Receipt Point.
REDELIVERY POINT. As applicable, (i) for Kenova Processing Facility, the inlet
flange of Columbia's Measuring Station No. 803957 located on the
outlet/downstream side of the Kenova Processing Facility, (ii) for the Xxxxxxx
Processing Facility, the point on the residue piping from the Xxxxxxx Processing
Facility where it crosses the lease boundary, and (iii) for the Xxxx Processing
Facility, the inlet flange of Columbia Meter No. 5246 downstream of a gas
separator installed at the Xxxx Processing Facility.
RESIDUE GAS. That portion of the Gas delivered to the Processing Plants that
4
remains after processing, including after Processing Plant Fuel and Lost and
Unaccounted For Gas.
THERMAL CONTENT. For Gas, the product of the measured volume in Mcf's multiplied
by the Gross Heating Value per Mcf, adjusted to the same pressure base and
expressed in MMBtu's; and for a liquid, the thermal content shall be determined
in accordance with the applicable provisions of the Operating Agreements.
ARTICLE 2: MARKWEST COMMITMENTS
2.1. MarkWest hereby commits and agrees to deliver at the Receipt Points all of
MarkWest's Gas that Columbia is required to deliver to the Processing Plants
under the terms of the Operating Agreements.
2.2. Except as permitted under the Operating Agreements, MarkWest will not
process, or cause to be processed, any of MarkWest's Gas for recovery of
liquefiable hydrocarbons, prior to delivery at the Receipt Point.
2.3 MarkWest shall furnish and be responsible for all Processing Plant Fuel
necessary for the operation the Processing Plants.
ARTICLE 3: OPERATION OF MEA'S FACILITIES
3.1. Subject to the other provisions of this Agreement, MEA agrees to accept and
process at its sole risk and expense, at all of MarkWest's Gas tendered at the
Receipt Point, up to the then-existing design capacity of the Processing Plant.
MEA shall redeliver for the account of MarkWest or for the account of parties
designated by MarkWest, Residue Gas from the Processing Plant meeting the
quality specifications set forth in Article 4, below.
3.2 MEA shall deliver all Plant Products attributable to MarkWest's Gas that are
recovered or extracted at the Processing Plants to MarkWest at the tailgate of
the applicable Processing Plants, for further transportation to MEA's Siloam
Fractionator facility for fractionation under that certain Fractionation
Agreement between MEA and MarkWest, of even date herewith.
3.3. In the event the volumes delivered to any Processing Plant exceed the
then-existing plant design capacity, which is currently 160 MMcf per day at the
Kenova Processing Facility, 70 MMcf per day at the Xxxxxxx Processing Facility,
and 35 MMcf per day at the Xxxx Processing Facility, MEA nonetheless shall use
its reasonable, diligent efforts to process all Gas that is delivered by
MarkWest to or as near as possible to the Residue Gas quality specifications
contained in Article 4. If at any time the volumes delivered to any Processing
Plant exceed, by a daily average of five percent (5%) for sixty (60) days during
any ninety (90)-day period, the volume that can be processed to the Residue Gas
quality specifications pursuant to Article 4, MEA shall promptly commence and
diligently prosecute the necessary work to increase the capacity of the
Processing Plant to process the additional gas flow.
ARTICLE 4: GAS QUALITY
4.1. INLET QUALITY. The inlet gas delivered to MEA at each Receipt Point shall
meet the applicable specifications set forth on Exhibit A, attached hereto.
4.2 MEA will accept natural gas meeting Columbia's FERC Gas Tariff
specifications for H2S and total sulfur. In the event MarkWest delivers natural
gas with H2S and/or total sulfur which is in excess of Columbia's FERC Gas
Tariff quality specifications, then upon notice from MEA, MarkWest will endeavor
to cause Columbia to identify the source of the excess and take appropriate
action to bring natural gas back into quality specifications. MEA will be
responsible for any and all
5
testing expenses and costs associated with or relating to this Section 4.2.
4.3 RESIDUE QUALITY. MEA shall process and dehydrate the natural gas stream made
available by MarkWest to meet or exceed the applicable Residue Gas quality
specified on Exhibit B, attached hereto.
4.4 The failure of MEA to meet the corresponding quality specifications as set
forth in this Article 4, shall not be deemed a default or a penalty under the
provisions of this Agreement during the time or times that (a) the inlet gas
delivered to MEA at the Receipt Point does not meet one or more of the
specifications set forth in Section 4.1, (b) the volume of gas delivered to the
Receipt Point exceeds the then-existing design capacity of the Processing Plant,
provided that MEA is in compliance with the requirements of Section 3.3, or (c)
with respect to the Kenova Processing Plant only, Columbia accepts gas from
Kentucky-West Virginia Gas Company near Columbia's current Beaver Creek
compressor station and flows more than 25,000 Mcf/d of that gas to the
Processing Plant through Line P. This provision shall be MEA's sole remedy for
MarkWest's failure to meet the inlet quality specifications set forth in Section
4.1.
ARTICLE 5: MEASUREMENT EQUIPMENT AND PROCEDURES
5.1. All Gas measurements required hereunder shall be made with equipment
furnished, installed, operated, and maintained in accordance with the provisions
of the applicable Operating Agreements.
ARTICLE 6: PAYMENTS
6.1. MEA shall provide MarkWest with a statement explaining fully how all
consideration due under the terms of this Agreement was determined not later
than the 15th day of the Accounting Period following the Accounting Period for
which the consideration is due.
6.2. Any sums due MEA under this Agreement shall be paid no later than the last
day of the Accounting Period in which the statement under Section 6.1 is
received.
6.3. Either Party, on 10 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, measurement, computation, charge, or payment made under or pursuant
to this Agreement. A Party electing to audit ("Auditing Party") shall complete
its audit within 3 months following the date on which the books and records of
the other Party ("Audited Party") are first made available for inspection
following the Auditing Party's notice of audit. Within that 3-month period, the
Auditing Party shall submit, in writing, all exceptions disclosed by the audit
to the Audited Party. The Audited Party shall have 30 days following receipt of
the exceptions in which to respond in writing to the exceptions. If the Audited
Party fails to respond within that 30-day period, the exceptions shall be deemed
accepted and appropriate adjustments and settlements shall be made and, as
applicable, paid. If the Parties are unable to reach agreement as to any
exceptions to which the Audited Party timely responded within 30 days of the
Audited Party's response, then either Party may submit the matter to arbitration
in accordance with the provisions in Article 9.
ARTICLE 7: FORCE MAJEURE
7.1 Neither MarkWest nor MEA shall be held responsible for any losses resulting
if the fulfillment of any terms or provisions shall be delayed or prevented
wholly or in part by Force Majeure. The settlement of strikes or lockouts shall
be entirely within the discretion of the Party having the difficulty and such
Party shall not be
6
required to make settlement of strikes or lockouts by acceding to the demands
of the opposing Party when such course is inadvisable in the discretion of
the Party having the difficulty. If by reason of any Force Majeure, supplies
of either natural gas or natural gas liquids are curtailed or cut off, then
neither Party shall be required to replace the hydrocarbons so curtailed or
cut off nor shall either Party be required to make up deliveries omitted by
reason of any of the above causes. If either Party is unable to fulfill the
terms and conditions of this Agreement by reason of any such cause as
provided in this Article, the Party rendered unable to perform hereunder
shall give the other Party notice in writing as soon as reasonably possible
after the occurrence of the cause relied on, setting forth the full
particulars in connection therewith, and performance shall be suspended
during the continuance of any inability so caused but for no longer period,
and such cause, so far as possible, shall be remedied with all reasonable
dispatch. This Agreement shall not be terminated by reason of any such cause
set out above but shall remain in full force and effect and this Agreement
shall not be extended regardless of any such curtailment or cessation.
"Mechanical or Physical Failure," as used in the definition of Force Majeure,
shall not be a Force Majeure cause or reason if such mechanical or physical
failure was caused by or due to the negligence or willful misconduct of the
Party claiming force majeure.
ARTICLE 8: LIABILITY AND INDEMNIFICATION; DEFAULT AND PENALTIES
8.1. As among the Parties hereto, MarkWest 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 Receipt
Point, and after the Residue Gas is redelivered to MarkWest at the Redelivery
Point.
8.2. As among the Parties hereto, MEA 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 at the Receipt
Point and until the Residue Gas is redelivered to MarkWest at the Redelivery
Point.
8.3. Each Party ("Indemnifying Party") hereby covenants and agrees with the
other Party, and its affiliates (except for the Indemnifying Party itself), and
each of their directors, officers and employees ("Indemnified Parties"), that
except to the extent caused by the Indemnified Parties' gross negligence or
willful conduct, the Indemnifying Party shall protect, defend, indemnify and
hold harmless the Indemnified Parties from, against and in respect of any and
all Losses incurred by the Indemnified Parties to the extent those Losses arise
from or are related to: (a) the Indemnifying Party's facilities; or (b) the
Indemnifying Party's possession and control of the Gas.
8.4 In the event MEA, for any reason other than (a) suspension of operations by
MEA necessary for turnaround time, maintenance or repair time, not to exceed
more than thirty (30) days total per year, (b) conditions of Force Majeure, and
(c) reasons related to safety considerations and the integrity of the Processing
Plants, fails to process the Gas at any of the Processing Plants to meet the
specifications of this Agreement or interrupts the Plant Product process
required under the terms and conditions of this Agreement, MEA shall pay to
MarkWest a penalty of Five Thousand Dollars ($5,000) per day unless MarkWest can
establish damages in excess of the Five Thousand Dollars ($5,000) per day, in
which event MEA shall pay to MarkWest the actual amount of its damages,
including all damages for which MarkWest is liable to Columbia resulting from
MEA's failure. MEA shall make payment of such amounts within five (5) business
days of receipt of
7
written notice from MarkWest of such penalty amount.
8.5 In the event MEA (a) interrupts the Plant Product process at any Processing
Plant for any reason, including without limitation, failure due to conditions of
Force Majeure, and such interruption continues for a period of thirty (30)
consecutive days and within such thirty (30) day period MEA fails to make good
faith, diligent and continuous efforts to resume Plant Product processing as
soon as reasonably possible; or (b) is otherwise in default of any of the terms,
conditions, covenants, warranties or agreements contained herein, and which
default continues for twenty five (25) days after written notice from MarkWest
to MEA, if curable within twenty five (25) days, or if not curable within twenty
five (25) days and MEA has not commenced good faith, diligent and continuous
efforts to cure within that 25-day period, MarkWest, at its sole discretion and
in addition to any other legal or equitable remedy available, may:
(a) Satisfy any and all obligations of MEA connected directly or indirectly
with this Agreement, including but not limited to any default of MEA
under this Agreement, with reimbursement from MEA of any amount paid
together with (i) attorneys fees and (ii) annual interest at the rate
of 15%, if this rate is allowed by law, otherwise at the highest rate
allowed by law and, if not reimbursed, such amount may be deducted
(with attorneys fees and interest as above provided) by MarkWest from
any amounts then or thereafter due MEA. These rights of reimbursement
and deduction are in addition to MarkWest's rights to indemnity under
this Agreement; and/or
(b) Seek interlocutory equitable relief against MEA, as MEA acknowledges
and agrees that a default will cause irreparable harm and loss to
MarkWest, in a form which will allow MarkWest, or any entity chosen by
MarkWest, to complete the obligations of MEA herein at the sole risk,
liability, cost and expense of MEA and, if not reimbursed, such amount
may be deducted (with attorneys fees and interest as above provided) by
MarkWest from any amounts then or thereafter due MEA. These rights of
reimbursement and deduction are in addition to MarkWest's rights to
indemnity under this Agreement; and/or
(c) Require MEA to specifically perform the terms, requirements and
provisions of this Agreement.
ARTICLE 9: MISCELLANEOUS
9.1. 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.
9.2. This Agreement shall be governed by, construed, and enforced in accordance
with the laws of the State where the applicable Processing Plant, at issue in
the dispute, is located, without regard to choice of law principles.
9.3. This Agreement shall extend to and inure to the benefit of and be binding
upon the Parties, and their respective successors and assigns, including any
assigns of MarkWest's Interests covered by this Agreement. No assignment of this
Agreement shall be binding on either of the Parties 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. Further, each assigning Party shall notify its assignee of the
existence of this Agreement and obtain a
8
ratification of this Agreement prior to such assignment. No assignment by
either Party shall relieve that Party of its continuing obligations and
duties hereunder without the express consent of the other Party.
9.4. Any change, modification or alteration of this Agreement shall be in
writing, signed by the Parties; and, no course of dealing between the Parties
shall be construed to alter the terms of this Agreement.
9.5 This Agreement, including all exhibits and appendices, contains the entire
agreement between the Parties with respect to the subject matter hereof, and
there are no oral or other promises, agreements, warranties, obligations,
assurances, or conditions precedent, affecting it.
9.6 NO BREACH OF THIS AGREEMENT OR CLAIM FOR LOSSES UNDER ANY INDEMNITY
OBLIGATION CONTAINED IN THIS AGREEMENT SHALL CAUSE ANY PARTY TO BE LIABLE FOR,
NOR SHALL LOSSES INCLUDE, ANY DAMAGES OTHER THAN ACTUAL AND DIRECT DAMAGES, AND
EACH PARTY EXPRESSLY WAIVES ANY RIGHT TO CLAIM ANY OTHER DAMAGES, INCLUDING,
WITHOUT LIMITATION, CONSEQUENTIAL, SPECIAL, INDIRECT, PUNITIVE OR EXEMPLARY
DAMAGES.
9.7 DISPUTE RESOLUTION. Any dispute arising under this Agreement ("Arbitrable
Dispute") shall be referred to and resolved by binding arbitration in Denver,
Colorado, by three (3) arbitrators, in accordance with the rules and procedures
of the Judicial Arbiter Group ("JAG"); and, to the maximum extent applicable,
the Federal Arbitration Act (Title 9 of the United States Code). If there is any
inconsistency between this Section and any statute or rules, this Section shall
control. Arbitration shall 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, by one party
("Claimant") giving written notice to the other party ("Respondent") and to JAG,
that the Claimant elects to refer the Arbitrable Dispute to arbitration, and
that the Claimant has appointed an arbitrator, who shall be identified in such
notice. The Respondent shall notify the Claimant and JAG within thirty (30) Days
after receipt of Claimant's notice, identifying the arbitrator the Respondent
has appointed. The two (2) arbitrators so chosen shall select a third arbitrator
within thirty (30) Days after the second arbitrator has been appointed (upon
failure of a party to act within the time specified for naming an arbitrator,
such arbitrator shall be appointed by the administrator's designee). MarkWest
shall pay the compensation and expenses of the arbitrator named by or for it,
MEA shall pay the compensation and expenses of the arbitrator named by or for
it, and MarkWest and MEA shall each pay one-half of the compensation and
expenses of the third arbitrator. All arbitrators must be neutral parties who
have never been officers, directors, employees, contractors or agents of the
parties or any of their Affiliates, must have not less than ten (10) years
experience in the oil and gas industry, and must have a formal
financial/accounting, engineering or legal education. The parties shall have all
rights of discovery in accordance with the Federal Rules of Civil Procedure. The
hearing shall be commenced within thirty (30) Days after the selection of the
third arbitrator. The parties and the arbitrators shall proceed diligently and
in good faith in order that the arbitral award shall be made as promptly as
possible. The interpretation, construction and effect of this Agreement shall be
governed by the laws of the State set forth in Section 9.2, above, and to the
maximum extent allowed by law, in all arbitration proceedings the law of that
State shall be applied, without regard to any conflicts of laws principles. All
statutes of limitation and of repose that would otherwise be applicable shall
apply to any arbitration proceeding. The tribunal shall
9
not have the authority to grant or award indirect or consequential damages,
punitive damages or exemplary damages.
10
EXHIBIT A
INLET GAS QUALITY SPECIFICATIONS
KENOVA PROCESSING FACILITY:
The inlet gas delivered to MEA at the Receipt Point shall meet the following
specifications:
Minimum Temperature: 90 degrees F(1)
Maximum Temperature: 110 degrees F(2)
Maximum Water Content: 25 pounds/MMSCF
Delivery Pressure Range @ Plant Inlet: 315 psig to 360 psig(3)
XXXXXXX PROCESSING FACILITY:
The inlet gas delivered to MEA at the Receipt Point shall meet the following
specifications:
Minimum Temperature: 70 degrees F
Maximum Temperature: 110 degrees F(4)
Maximum Water Content:
----------------- -----------------
MMSCFD flow rate lb/MMSCF
----------------- -----------------
40 91
----------------- -----------------
50 72
----------------- -----------------
60 60
----------------- -----------------
70 52
----------------- -----------------
Delivery Pressure Range @ Plant Inlet: 350 psig to 475 psig(5)
XXXX PROCESSING FACILITY:
The inlet gas delivered to MEA at the Receipt Point shall meet the following
specifications:
-------------
(1) In the event MEA requires a specified temperature, including the
90(0)F referred to herein, and Columbia is unable to maintain such specified
temperature with Columbia's existing equipment, MEA agrees to pay for any
modification of Columbia's existing equipment and normal operating procedures to
meet the specified temperature requirement.
(2) Unless ambient conditions cause a higher temperature.
(3) Unless operating failures do not permit.
(4) Unless ambient conditions cause a higher temperature.
(5) In the event Columbia requires a higher delivery pressure at the
plant inlet, MEA shall make the necessary plant equipment changes and Columbia
shall reimburse MarkWest, which will in turn reimburse MEA for only the actual,
reasonable, documented costs of making the plant equipment changes.
11
Temperature: Columbia will use its
reasonable efforts with
existing equipment to
maintain the lowest
temperature operationally
practicable
Maximum Water Content: saturated at flowing
temperature and pressure
Delivery Pressure Range@ Plant Inlet: 250 psig to 350 psig
At MEA's option, MarkWest will cause Columbia to deliver the inlet gas at the
final stage discharge pressure of the Xxxx Compressor Station in lieu of the
delivery pressure designated above. If MEA exercises this option, MEA shall
reimburse Columbia for all costs associated with making the change and all
ongoing additional operating costs incurred by Columbia due to this operating
mode.
12
EXHIBIT B
RESIDUE GAS SPECIFICATIONS
KENOVA PROCESSING FACILITY:
The Residue Gas delivered by MEA shall meet the following specifications:
Minimum heating value (daily average): 967 Btu/SCF (HHV/dry basis)
Maximum heating value (daily average): 1125 Btu/SCF (HHV/dry basis)
Minimum temperature: 50 degrees F
Maximum temperature: 110 degrees F(6)
Maximum water content: 7 lbs/MMSCF of gas
Maximum allowable pressure drop across the plant: 25 psig(7)
The Residue Gas shall meet, at a minimum, a -20 DEG. F cricondentherm (maximum
hydrocarbon dew point). The Residue Gas returned shall have Ninety-Nine and
One-Half percent (99.5%) of liquid and solid particles greater than three (3)
microns removed at maximum flowing conditions and at all times be commercially
free from particulate or other solid or liquid matter which might interfere with
its merchantability or cause injury to or interference with the proper operation
of the lines, regulators, meters and other equipment of Columbia. MarkWest will
accept Residue Gas containing sulfur compounds, total sulfur, mercury, dust, gum
and gum-forming constituents, oxygen, nitrogen and total inerts at levels that
do not exceed the levels in the inlet gas delivered by MarkWest.
XXXXXXX PROCESSING FACILITY:
The Residue Gas delivered by MEA shall meet the following specifications:
Minimum heating value (daily average): 967 Btu/SCF (HHV/dry basis)
Minimum temperature: 50 degrees F
Maximum temperature: 110 degrees F(8)
Maximum water content: 7 lbs/MMSCF of gas
-------------
(6) Unless ambient conditions cause a higher temperature.
(7) Maximum allowable pressure drop across the plant shall be
measured at the Receipt Point and the Redelivery Point. If MEA desires to
increase the maximum allowable pressure drop across the plant to greater than
25 psig, then MarkWest will agree to such increase, provided MEA pays for all
costs, expenses and labor associated with the upgrading of Columbia's
facility and equipment, and any ongoing operating costs and expenses
resulting therefrom.
(8) Unless ambient conditions cause a higher temperature.
13
Maximum allowable pressure drop across the plant: 30 psig(9)
The Residue Gas shall meet, at a minimum, a +20 DEG. F cricondentherm (maximum
hydrocarbon dew point). The Residue Gas returned shall have Ninety-Nine and
One-Half percent (99.5%) of liquid and solid particles greater than three (3)
microns removed at maximum flowing conditions and at all times be commercially
free from particulate or other solid or liquid matter which might interfere with
its merchantability or cause injury to or interference with the proper operation
of the lines, regulators, meters and other equipment of Columbia. MarkWest will
accept Residue Gas containing sulfur compounds, total sulfur, mercury, dust, gum
and gum-forming constituents, oxygen, nitrogen and total inerts at levels that
do not exceed the levels in the inlet gas delivered by MarkWest.
XXXX PROCESSING FACILITY:
The Residue Gas delivered by MEA shall meet the following specifications:
Minimum heating value (daily average): 967 Btu/SCF (HHV/dry basis)
Maximum heating value (daily average): 1125 Btu/SCF (HHV/dry basis)
Minimum temperature: 50 degrees F
Maximum temperature: 110 degrees F(10)
Maximum water content: 7 lbs/MMSCF of gas
Maximum allowable pressure drop across the plant: 35 psig(11)
The Residue Gas shall meet, at a minimum, a +15 DEG. F cricondentherm (maximum
hydrocarbon dew point). The Residue Gas returned shall have Ninety-Nine and
One-Half percent (99.5%) of liquid and solid particles greater than three (3)
microns removed at maximum flowing conditions and at all times be commercially
free from particulate or other solid or liquid matter which might interfere with
its merchantability or cause injury to or interference with the proper operation
of
-------------
(9) Maximum allowable pressure drop across the plant shall be measured
at the Receipt Point and the Redelivery Point. If MEA desires to increase the
maximum allowable pressure drop across the plant to greater than 30 psig, then
MarkWest will agree to such increase, provided MEA pays for all costs, expenses
and labor associated with the upgrading of Columbia's facility and equipment,
and any ongoing operating costs and expenses resulting therefrom.
(10) Unless ambient conditions cause a higher temperature.
(11) Maximum allowable pressure drop across the plant shall be measured
at the Receipt Point and the Redelivery Point. If MEA desires to increase the
maximum allowable pressure drop across the plant to greater than 35 psig, then
MarkWest will agree to such increase, provided MEA pays for all costs, expenses
and labor associated with the upgrading of Columbia's facility and equipment,
and any ongoing operating costs and expenses resulting therefrom. If MEA
installs a new plant, that new plant shall be designed with a maximum allowable
pressure drop across the plant of 25 psig. In lieu of the maximum heating value
specified in Section 5.1 above, the new plant will be designed to process gas to
a Btu level that is merchantable in accordance with the provisions of the FERC
Gas Tariff and Columbia's standard meter set agreement.
14
the lines, regulators, meters and other equipment of Columbia. MarkWest will
accept Residue Gas containing sulfur compounds, total sulfur, mercury, dust,
gum and gum-forming constituents, oxygen, nitrogen and total inerts at levels
that do not exceed the levels in the inlet gas delivered by MarkWest.
15
