Exhibit 10.4

 

 

TRANSPORTATION SERVICES AGREEMENT

 

by and between

 

PHILLIPS 66 CARRIER LLC

 

and

 

PHILLIPS 66 COMPANY

 

for

 

the Clifton Ridge Pipeline System

 

 

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TABLE OF CONTENTS

 

Article I.

Defined Terms

1

 

 

Section 1.01

Defined Terms

1

Section 1.02

Other Defined Terms

4

Section 1.03

Terms Generally

5

 

 

 

Article II.

Term and Termination

5

 

 

 

Section 2.01

Term

5

Section 2.02

Termination Following a Force Majeure Event

5

Section 2.03

Special Termination by Company

5

 

 

 

Article III.

Minimum Commitments

5

 

 

 

Section 3.01

Minimum Quarterly Transportation Commitment

5

Section 3.02

Loss of Available Capacity

6

Section 3.03

Partial Period Proration

6

Section 3.04

Special Reduction of Minimum Quarterly Transportation Commitment

7

 

 

 

Article IV.

Tariffs

7

 

 

 

Section 4.01

Tariff

7

Section 4.02

Adjustment

7

Section 4.03

No Challenge of Rates

7

Section 4.04

Recovery of Certain Costs

8

 

 

 

Article V.

Scheduling

8

 

 

 

Section 5.01

Scheduling

8

 

 

 

Article VI.

Quality

8

 

 

 

Section 6.01

Quality

8

 

 

 

Article VII.

Monthly Statement; Payment; Liens

9

 

 

 

Section 7.01

Monthly Statement

9

Section 7.02

Payment

9

Section 7.03

Liens

10

 

 

 

Article VIII.

Title; Custody

10

 

 

 

Section 8.01

Title

10

Section 8.02

Custody

10

 

 

 

Article IX.

Volume Determinations

10

 

 

 

Section 9.01

Volume Determinations

10

Section 9.02

Company’s Right to Witness

10

 

 

 

Article X.

Insurance

11

 

 

 

Section 10.01

Insurance

11

 

 

 

Article XI.

Taxes

11

 

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Section 11.01

Taxes

11

 

 

 

Article XII.

Health, Safety and Environment

11

 

 

 

Section 12.01

Spills; Environmental Pollution

11

 

 

 

Article XIII.

Force Majeure

12

 

 

 

Section 13.01

Suspension during Force Majeure Events

12

Section 13.02

Obligation to Remedy Force Majeure Events

12

Section 13.03

Strikes and Lockouts

12

Section 13.04

Action in Emergencies

12

 

 

 

Article XIV.

Notices

12

 

 

 

Section 14.01

Notices

12

Section 14.02

Effective upon Receipt

13

 

 

 

Article XV.

Applicable Law

13

 

 

 

Section 15.01

Applicable Law

13

 

 

 

Article XVI.

Limitation of Liability

13

 

 

 

Section 16.01

No Liability for Consequential Damages

13

Section 16.02

Limitation of Liability

13

 

 

 

Article XVII.

Default

13

 

 

 

Section 17.01

Default

13

Section 17.02

Non-Exclusive Remedies

14

Section 17.03

Right to Terminate

14

 

 

 

Article XVIII.

Miscellaneous

14

 

 

 

Section 18.01

Disputes between the Parties

14

Section 18.02

Assignment

14

Section 18.03

Partnership Change in Control

15

Section 18.04

No Third-Party Rights

15

Section 18.05

Compliance with Laws

15

Section 18.06

Severability

15

Section 18.07

Non-Waiver

15

Section 18.08

Entire Agreement

15

Section 18.09

Amendments

15

Section 18.10

Survival

16

Section 18.11

Counterparts; Multiple Originals

16

Section 18.12

Exhibits

16

Section 18.13

Table of Contents; Headings; Subheadings

16

Section 18.14

Construction

16

Section 18.15

Business Practices

16

Section 18.16

Effect of Company Restructuring

16

Section 18.17

Effect of Discontinuation of Publication

16

 

 

 

Exhibit A — Dispute Resolution Procedures

 

 

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TRANSPORTATION SERVICES AGREEMENT

 

This transportation services agreement is made and entered into as of the
Effective Date by and between PHILLIPS 66 CARRIER LLC, a Delaware limited
liability company (“Carrier”), and PHILLIPS 66 COMPANY, a Delaware corporation
(“Company”).

 

Recitals

 

WHEREAS, Company owns a petroleum refinery at 2200 Old Spanish Trail, Westlake,
Louisiana 70669 (the “Lake Charles Refinery”);

 

WHEREAS, Carrier’s affiliate, Phillips 66 Partners Holdings LLC, owns Crude Oil
terminal facilities located at 2115 Davison Rd., Sulphur, LA 70665 (the “Clifton
Ridge Terminal”) and at 1695 Pak Tank Rd., Sulphur, LA 70665 (the “Pecan Grove
Terminal,” and together with the Clifton Ridge Terminal,  the “Terminals”);

 

WHEREAS, Carrier owns a Crude Oil pipeline system (the “Pipeline”) comprising
three segments:  (a) from Shell Pipeline Inc., Calcasieu Parish, Louisiana, to
the Clifton Ridge Terminal (the “Shell Segment”); (b) from the Pecan Grove
Terminal to the Clifton Ridge Terminal (the “Pecan Grove Segment”); and (c) from
the Clifton Ridge Terminal to the Lake Charles Refinery (the “Lake Charles
Segment”); and

 

WHEREAS, Company intends to deliver Crude Oil to Origin Points (as defined
below) on the Pipeline for transportation under a Carrier Tariff (as defined
below), and Carrier desires to provide such transportation for Company, all upon
the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound, Carrier and
Company agree as follows:

 

Article I.                                              Defined Terms

 

Section 1.01                             Defined Terms.  The following
definitions shall for all purposes apply to the capitalized terms used in this
Agreement:

 

(a)                                 “Agreement” means this Transportation
Services Agreement, together with all exhibits attached hereto, as the same may
be extended, supplemented or restated from time to time in accordance with the
provisions hereof.

 

(b)                                 “Barrel” means 42 Gallons.

 

(c)                                  “Business Day” means any Day except for
Saturday, Sunday or an official holiday in the State of Texas.

 

(d)                                 “Calendar Quarter” means a period of three
consecutive Months beginning on the first Day of each of January, April,
July and October.

 

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(e)                                  “Carrier” has the meaning set forth in the
introductory paragraph.

 

(f)                                   “Carrier Affiliated Parties” means
Carrier, Phillips 66 Partners LP and their respective contractors and the
directors, officers, employees and agents of each of them.

 

(g)                                  “Carrier Tariff” means Carrier’s Louisiana
Public Service Commission Tariff No. 3.0 or Carrier’s FERC Tariff No. 3.0.0, as
applicable, and any supplements thereto or reissues thereof.

 

(h)                                 “Claims” means any and all judgments,
claims, causes of action, demands, lawsuits, suits, proceedings, governmental
investigations or audits, losses, assessments, fines, penalties, administrative
orders, obligations, costs, expenses, liabilities and damages, including
interest, penalties, reasonable attorneys’ fees, disbursements and costs of
investigations, deficiencies, levies, duties and imposts.

 

(i)                                     “Clifton Ridge Terminal” has the meaning
set forth in the Recitals.

 

(j)                                    “Company” has the meaning set forth in
the introductory paragraph.

 

(k)                                 “Control” means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract, or otherwise.

 

(l)                                     “Crude Oil” means any grade or grades of
crude petroleum or condensate that is the direct liquid product of oil or gas
wells.

 

(m)                             “Day” means the period of time commencing at
0400 hours on one calendar day and running until, but not including, 0400 hours
on the next calendar day, according to local time in Houston, Texas.

 

(n)                                 “Effective Date” means the date of the
closing of the initial public offering of common units representing limited
partner interests of Phillips 66 Partners LP.

 

(o)                                 “FERC” means the United States Federal
Energy Regulatory Commission.

 

(p)                                 “Force Majeure” means: (i) acts of God,
fires, floods or storms; (ii) compliance with orders of courts or Governmental
Authorities; (iii) explosions, wars, terrorist acts or riots; (iv) inability to
obtain or unavoidable delays in obtaining material or equipment; (v) accidental
disruption of service; (vi) events or circumstances similar to the foregoing
(including inability to obtain or unavoidable delays in obtaining material or
equipment and disruption of service provided by third parties) that prevent a
Party’s ability to perform its obligations under this Agreement, to the extent
that such events or circumstances are beyond the Party’s reasonable control and
could not have been prevented by the Party’s due diligence; (vii) strikes,
lockouts or other industrial disturbances; and (viii) breakdown of refinery
facilities, machinery, storage tanks or pipelines irrespective of the cause
thereof.

 

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(q)                                 “Gallon” means a United States gallon of two
hundred thirty-one cubic inches of liquid at 60º Fahrenheit, and at the
equivalent vapor pressure of the liquid.

 

(r)                                    “Governmental Authority” means any
government, any governmental administration, agency, instrumentality or other
instrumentality or other political subdivision thereof or any court, commission
or other governmental authority of competent jurisdiction.

 

(s)                                   “Initial Term” has the meaning set forth
in Section 2.01.

 

(t)                                    “Lake Charles Refinery” has the meaning
set forth in the Recitals.

 

(u)                                 “Lake Charles Segment” has the meaning set
forth in the Recitals.

 

(v)                                 “Law” means all constitutions, laws
(including common law), treaties, statutes, orders, decrees, rules, injunctions,
licenses, permits, approvals, agreements, regulations, codes, ordinances issued
by any Governmental Authority, including judicial or administrative orders,
consents, decrees, and judgments, published directives, guidelines, governmental
authorizations, requirements or other governmental restrictions which have the
force of law, and determinations by, or interpretations of any of the foregoing
by any Governmental Authority having jurisdiction over the matter in question
and binding on a given Person, whether in effect as of the date hereof or
thereafter and, in each case, as amended.

 

(w)                               “Loss Allowance Fee” has the meaning set forth
in Section 4.01(a).

 

(x)                                 “Minimum Quarterly Transportation
Commitment” has the meaning set forth in Section 3.01(a).

 

(y)                                 “Month” or “Monthly” means a calendar month
commencing at 0400 hours on the first Day thereof and running until, but not
including, 0400 hours on the first Day of the following calendar month,
according to local time in Houston, Texas.

 

(z)                                  “Non-Conforming Crude Oil” means any Crude
Oil that fails to meet specifications established by Carrier for pipeline
transportation of that Crude Oil (or in the absence of Carrier specifications,
specifications established by Phillips 66 Pipeline LLC for such Crude Oil).

 

(aa)                          “Normal Business Hours” means the period of time
commencing at 0800 hours on one Day and running until 1700 hours on the same
Day, according to local time in Houston, Texas.

 

(bb)                          “Notice” means any notice, request, instruction,
correspondence or other communication permitted or required to be given under
this Agreement.

 

(cc)                           “Origin Point” means each of the pipeline
connection points located at Shell Pipeline Inc., Calcasieu Parish, Louisiana
(for the Shell Segment), Pecan Junction, Calcasieu Parish, Louisiana (for the
Pecan Grove Segment), Clifton

 

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Ridge, Calcasieu Parish, Louisiana (for the Lake Charles Segment), or such other
point(s) as Carrier may establish where Crude Oil may be accepted for shipment
on the Pipeline.

 

(dd)                          “Parties” means Carrier and Company, collectively.

 

(ee)                            “Partnership Change in Control” means Phillips
66 ceases to Control the general partner of Phillips 66 Partners LP.

 

(ff)                              “Party” means Carrier or Company,
individually.

 

(gg)                            “Pecan Grove Segment” has the meaning set forth
in the Recitals.

 

(hh)                          “Pecan Grove Terminal” has the meaning set forth
in the Recitals.

 

(ii)                                  “Person” means, without limitation, an
individual, corporation (including a non-profit corporation), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or Governmental
Authority, and shall include any successor (by merger or otherwise) of such
entity.

 

(jj)                                “Pipeline” has the meaning set forth in the
Recitals.

 

(kk)                          “Platts Oilgram” means the publication of that
name published by a unit of The McGraw-Hill Companies Inc.

 

(ll)                                  “Quarterly Deficiency Payment” has the
meaning set forth in Section 3.01(b)

 

(mm)                  “Renewal Term” has the meaning set forth in Section 2.01.

 

(nn)                          “Shell Segment” has the meaning set forth in the
Recitals.

 

(oo)                          “Tariff Rate” means the rate applicable from time
to time to the shipment of Crude Oil through the Pipeline under the terms of the
Carrier Tariff, which shall be the rate in effect at the Effective Date,
adjusted from time to time as provided in Section 4.02.

 

(pp)                          “Taxes” means any income, sales, use, excise,
transfer, and similar taxes, fees and charges (including ad valorem taxes),
including any interest or penalties attributable thereto, imposed by any
Governmental Authority.

 

(qq)                          “Term” has the meaning set forth in Section 2.01.

 

(rr)                                “Terminals” has the meaning set forth in the
Recitals.

 

Section 1.02                             Other Defined Terms.  Other terms may
be defined elsewhere in this Agreement, and, unless otherwise indicated, shall
have such meanings throughout this Agreement.

 

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Section 1.03                             Terms Generally.  The definitions in
this Agreement shall apply equally to both singular and plural forms of the
terms defined.  Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.  The word “include,”
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation.”  All references to Articles, Sections and Exhibits shall be deemed
to be references to Articles and Sections of, and Exhibits to, this Agreement
unless the context requires otherwise.

 

Article II.                                         Term and Termination

 

Section 2.01                             Term. This Agreement shall have a
primary term commencing on the Effective Date and ending June 30, 2023 (the
“Initial Term”), and may be renewed by Company, at Company’s sole option, for up
to two successive renewal terms, each with a duration of five years (each, a
“Renewal Term”), upon at least 180 Days’ written Notice from Company to Carrier
prior to the end of the Initial Term or any Renewal Term.  The Initial Term and
Renewal Terms, if any, shall be referred to in this Agreement as the “Term.”

 

Section 2.02                             Termination Following a Force Majeure
Event.  If a Force Majeure event prevents Carrier or Company from performing its
respective obligations under this Agreement for a period of more than 12
consecutive Months, this Agreement may be terminated by either Party at any time
after the expiration of such 12-Month period upon at least 30 Days’ Notice to
the other Party.

 

Section 2.03                             Special Termination by Company.  If
Company determines to completely suspend refinery operations at the Lake Charles
Refinery for a period of at least 12 consecutive Months, then after Company has
made a public announcement of such suspension, Company may provide written
Notice to Carrier of its intent to terminate this Agreement and this Agreement
will terminate 12 Months following the date such Notice is received by Carrier. 
In the event Company publicly announces, prior to the expiration of such
12-Month period, its intent to resume operations at the Lake Charles Refinery,
then such Notice shall be deemed revoked and this Agreement shall continue in
full force and effect as if such Notice had never been delivered.

 

Article III.                                    Minimum Commitments

 

Section 3.01                             Minimum Quarterly Transportation
Commitment.

 

(a)                                 During each Calendar Quarter, Company shall
tender at the Origin Point at the Clifton Ridge Terminal an average of 190,000
Barrels per Day of Crude Oil for transportation to the Lake Charles Refinery, in
approximately ratable quantities (such average, the “Minimum Quarterly
Transportation Commitment”) at the Tariff Rate in effect at the time of the
tender.

 

(b)                                 If Company fails to meet its Minimum
Quarterly Transportation Commitment during any Calendar Quarter, then Company
will pay Carrier a deficiency payment (a “Quarterly Deficiency Payment”) equal
to:

 

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(i)                                     the volume of the deficiency multiplied
by the Tariff Rate in effect for the relevant Calendar Quarter, plus

 

(ii)                                  0.1% of the volume of the deficiency
multiplied by the average midpoint of the prices published by Platts Oilgram for
Louisiana light sweet Crude Oil on each publication Day during that Calendar
Quarter.

 

(c)                                  The dollar amount of any Quarterly
Deficiency Payment paid by Company may be applied as a credit against any
amounts incurred by Company and owed to Carrier with respect to volumes of Crude
Oil tendered at the Origin Point at the Clifton Ridge Terminal for
transportation to the Lake Charles Refinery in excess of Company’s Minimum
Quarterly Transportation Commitment (or, if this Agreement expires or is
terminated, to volumes that would have been in excess of Company’s Minimum
Quarterly Transportation Commitment if this Agreement were still in effect)
during any of the four Calendar Quarters immediately following the Calendar
Quarter for which such Quarterly Deficiency Payment was made, at the end of
which time any unused credits arising from such Quarterly Deficiency Payment
will expire.  This Section 3.01(c) shall survive the expiration or termination
of this Agreement.

 

(d)                                 Carrier shall provide transportation
services in addition to Company’s Minimum Quarterly Transportation Commitment on
an “as available” basis at the Tariff Rate in effect at the time of the tender.

 

Section 3.02                             Loss of Available Capacity.  If, for
any reason (other than outages caused by Carrier’s planned maintenance), the
average daily capacity of the Pipeline during a given Calendar Quarter is less
than the Company’s Minimum Quarterly Transportation Commitment for such Calendar
Quarter, or if the capacity of the Pipeline is required to be allocated among
shippers with the result that the average daily capacity of the Pipeline
available to Company during a given Calendar Quarter is less than the Company’s
Minimum Quarterly Transportation Commitment for such Calendar Quarter, then
Company’s Minimum Quarterly Transportation Commitment for the applicable
Calendar Quarter shall be reduced to equal the average daily capacity available
to Company during such Calendar Quarter.

 

Section 3.03                             Partial Period Proration.

 

(a)                                 If the Effective Date is any Day other than
the first Day of a Calendar Quarter, or if this Agreement is terminated on any
Day other than the last Day of a Calendar Quarter, then any calculation
determined with respect to a Calendar Quarter will be prorated by a fraction,
the numerator of which is the number of Days in that part of the Calendar
Quarter beginning on the Effective Date or ending on the date of such
termination, as the case may be, and the denominator of which is the number of
Days in the Calendar Quarter.

 

(b)                                 If the Effective Date is any Day other than
the first Day of a Month, or if this Agreement is terminated on any Day other
than the last Day of a Month, then any

 

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quantity based on a Monthly determination will be prorated by a fraction, the
numerator of which is the number of Days in that part of the Month beginning on
the Effective Date or ending on the date of such termination, as the case may
be, and the denominator of which is the number of Days in the Month.

 

Section 3.04                             Special Reduction of Minimum Quarterly
Transportation Commitment.  If Carrier’s use of all or part of the Pipeline for
transportation of Crude Oil shall be restrained, enjoined, restricted or
terminated by (a) any Governmental Authority, (b) right of eminent domain or
(c) the owner of leased land, Carrier, upon being notified of such restraint,
enjoinder, restriction or termination, shall notify Company and the Minimum
Quarterly Transportation Commitment shall be reduced to the extent that
Carrier’s use of the part of the Pipeline is so restrained, enjoined, restricted
or terminated.

 

Article IV.                                     Tariffs

 

Section 4.01                             Tariff.  Shipments on each of the Shell
Segment, the Pecan Grove Segment and the Lake Charles Segment shall be subject
to, and the Parties shall be required to comply with, the provisions of the
applicable Carrier Tariff.  For so long as this Agreement is in effect, the
Carrier Tariff shall include a provision substantially the same as the
following:

 

(a)                                 Company shall pay to Carrier a Monthly fee
(the “Loss Allowance Fee”) equal to 0.1% of an amount equal to the total number
of Barrels of Crude Oil injected into the Pipeline at an Origin Point during the
relevant Month multiplied by the average midpoint of the prices published by
Platts Oilgram for Louisiana light sweet Crude Oil on each publication Day
during that Month; and

 

(b)                                 Carrier shall be entitled to the value of
volume gained in transit and shall be responsible for the value of any volume
lost in transit.  Company shall pay Carrier the value of any volume gained, and
Carrier shall pay Company the value of any volume lost, with the value of Crude
Oil gained or lost being equal to the average midpoint of the prices published
by Platts Oilgram for Louisiana light sweet Crude Oil on each publication Day
during that Month.

 

For clarity, the Loss Allowance Fee described in Section 4.01(a) and the
entitlement and obligation described in Section 4.01(b) relate only to losses or
gains of a type normally incurred in connection with the transportation of Crude
Oil and are exceptions to and not modifications of the general provisions of
Section 16.02.

 

Section 4.02                             Adjustment.  Carrier may file with FERC
(or the Louisiana Public Utilities Commission, as the case may be) to adjust
Tariff Rates annually beginning July 1, 2013, at a rate equal to the percentage
change in the inflationary index promulgated by FERC, in accordance with FERC’s
indexing methodology.  If FERC terminates its indexing methodology and does not
adopt a new methodology, the parties will negotiate in good faith any
adjustments to existing Tariff Rates.

 

Section 4.03                             No Challenge of Rates.  Each of Company
and Carrier agrees not to commence or support any tariff filing, application,
protest, complaint, petition, motion, or

 

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other proceeding before FERC or the Louisiana Public Service Commission for the
purpose of requesting that FERC or the Louisiana Public Service Commission
accept or set Tariff Rates applicable to the Pipeline which are inconsistent
with this Agreement; provided, however, that Company reserves its rights under
FERC regulations to challenge any proposed changes in the Tariff Rate (a) to the
extent that such changes are inconsistent with the indexing method provided in
18 C.F.R. §342.3, or (b) through other rate changing methodologies under 18
C.F.R. §342.4.

 

Section 4.04                             Recovery of Certain Costs.

 

(a)                                 If Carrier agrees to make any expenditures
at Company’s request, Company will reimburse Carrier for such expenditures or,
at Carrier’s option and if the Parties agree, Carrier may amend the Carrier
Tariff in order to increase the Tariff Rate so that Carrier may recover the
amounts paid for such expenditures over time.

 

(b)                                 If new Laws require Carrier to make
substantial and unanticipated expenditures in connection with the services
Carrier provides to Company under this Agreement, Company will reimburse Carrier
for Company’s proportionate share of the costs of complying with such Laws, or
at Carrier’s option and if the Parties agree, Carrier may amend the Carrier
Tariff in order to increase the Tariff Rate so that Carrier may recover such
costs over time.

 

Article V.                                          Scheduling

 

Section 5.01                             Scheduling.  For each Origin Point,
Company shall provide Carrier with a written schedule by the tenth Day of the
Month preceding the Month during which injections into the Pipeline are to be
made, advising Carrier of the volumes and types of Crude Oil to be tendered for
transportation, and estimated date(s) of such tenders.  Carrier will review and
confirm its ability to receive according to the schedule by the 20th Day of such
preceding Month.

 

Article VI.                                     Quality

 

Section 6.01                             Quality.

 

(a)                                 Company agrees not to deliver or cause to be
delivered into the Pipeline any Non-Conforming Crude Oil.

 

(b)                                 Company shall be liable for all reasonable
costs and losses in curing, removing, or recovering any Non-Conforming Crude Oil
except to the extent that such non-conformity is due to the negligence or
willful misconduct of Carrier.  After such consultation with Company as may be
practical under the circumstances but otherwise at Carrier’s sole discretion,
Carrier may attempt to blend the Non-Conforming Crude Oil, remove and dispose of
the Non-Conforming Crude Oil, or, if necessary, recover any Non-Conforming Crude
Oil from field locations and, except to the extent that such non-conformity is
due to the negligence or willful misconduct of Carrier, Company shall reimburse
Carrier for all reasonable costs associated therewith.  Except to the extent
that a non-conformity is due to the

 

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negligence or willful misconduct of Carrier, if Company’s Non-Conforming Crude
Oil causes any contamination, dilution or other damages to Crude Oil of other
customers of Carrier, Company agrees to indemnify, defend and hold the Carrier
Affiliated Parties harmless from and against any Claims incurred by, or charged
against any of the Carrier Affiliated Parties, as a result of such event and
shall be responsible for all costs and liabilities associated with or incurred
as a result of such event.

 

Article VII.                                Monthly Statement; Payment; Liens

 

Section 7.01                             Monthly Statement.

 

(a)                                 Promptly after the end of each Month,
Carrier shall provide Company with a statement for such Month, showing:  (i) the
volume of Crude Oil injected into a Pipeline at an Origin Point under each
applicable Carrier Tariff, (ii) the Loss Allowance Fee due Carrier, and
(iii) the tariff due to Carrier (after application of any credit to which
Company may be entitled pursuant to Section 3.01(c) and settlement of any
obligations under Section 4.01(b)).  If requested by Company, Carrier shall
provide Company with copies of individual meter tickets for such Month, if
available.

 

(b)                                 The Monthly statement for the last Month in
each Calendar Quarter shall include any Quarterly Deficiency Payment that may be
due and payable by the Company pursuant to Section 3.01(b).

 

Section 7.02                             Payment.

 

(a)                                 Payment of the amount(s) identified on each
Monthly statement shall be due, without discount, on the later of (i) two
Business Days after such Monthly Statement is received, and (ii) the 22nd Day of
the Month in which such Monthly statement is received, provided that if such Day
is not a Business Day, then such payment shall be due, without interest, on the
next Business Day.  Payments not paid by the due date shall bear interest at the
rate of the lesser of 1.5% per Month and the maximum rate allowed by Law for
each Month or portion of a Month thereafter during which such amount remains
unpaid.

 

(b)                                 All payments shall be made to Carrier by
automated clearing house to an account specified by Carrier from time to time,
provided that as long as Carrier is an affiliate of Company, Carrier and Company
may settle Company’s financial obligations to Carrier through Company’s normal
interaffiliate settlement processes.  Any bank charges incurred by Company in
remitting funds by automated clearing house shall be for Company’s account. 
Acceptance by Carrier of any payment from Company for any charge or service
after termination or expiration of this Agreement shall not be deemed a renewal
of this Agreement or a waiver by Carrier of any default by Company hereunder.

 

(c)                                  If Company reasonably disputes any Monthly
statement, in whole or in part, Company shall promptly notify Carrier in writing
of the dispute and shall pay the

 

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undisputed portion according to the terms of this Section 7.02, and shall
promptly seek to resolve the dispute including, if necessary, by arbitration as
provided in Section 18.01.  An arbitral panel may award reasonable interest on
any unpaid amount determined to have been due to Carrier but withheld in good
faith.

 

Section 7.03                             Liens.  Company hereby grants to
Carrier an irrevocable (a) lien on all of Company’s Crude Oil in transit and
(b) power of attorney to dispose of such Crude Oil at fair market value to the
extent of all amounts owed to Carrier by Company hereunder.

 

Article VIII.                           Title; Custody

 

Section 8.01                             Title.  Company shall retain title to
all of Company’s Crude Oil in transit on the Pipeline at all times.  This
provision does not preclude Company from any intraline transfer of title to a
third party; in the event of such a transfer, such third party, and not Carrier,
shall have title to the affected Crude Oil according to the terms of the
relevant agreement between Company and such third party.

 

Section 8.02                             Custody.  Carrier shall be deemed to
have custody of Crude Oil injected into the Pipeline from the time such Crude
Oil passes through the flange connection between the relevant Origin Point and
the Pipeline until it is delivered to Company or, at the direction of Company,
to a third party through the flange connection (a) between the Pipeline and the
Lake Charles Refinery, (b) between the Pipeline and a receiving third party
pipeline, or (c) between the Pipeline and the Clifton Ridge Terminal, as the
case may be.

 

Article IX.                                    Volume Determinations

 

Section 9.01                             Volume Determinations.

 

(a)                                 All measurements, volume corrections and
calibrations will be made in accordance with the most recent edition of the
American Petroleum Institute’s Manual of Petroleum Measurement Standards.

 

(b)                                 All volume determinations shall be adjusted
to a temperature of 60° Fahrenheit and a pressure of one standard atmosphere
(14.7 PSIA) per the most recent edition of the American Petroleum Institute’s
Manual of Petroleum Measurement Standards, Chapter 11 (Table 6A).

 

(c)                                  All Crude Oil received from or delivered to
pipeline at the Terminals will be determined by calibrated custody transfer
grade meters or by tank measurements (static tank).

 

Section 9.02                             Company’s Right to Witness.  A Company
representative may witness the testing, calibration of equipment, meter reading,
gauging and sampling of Crude Oil at the Terminals, at Company’s expense.  In
the absence of a Company representative, Carrier’s measurements shall be deemed
to be accurate.

 

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Article X.                                         Insurance

 

Section 10.01                      Insurance.  Insurance for Company’s Crude
Oil, if any, that may be desired by Company, shall be carried by Company at
Company’s expense.  Should Company elect to carry commodity insurance, then each
policy of insurance shall be endorsed to provide a waiver of subrogation rights
in favor of the Carrier Affiliated Parties.  Carrier shall not be liable to
Company for commodity losses or shortages for which Company is compensated by
its insurer.

 

Article XI.                                    Taxes

 

Section 11.01                      Taxes.  Company shall be responsible for and
shall pay all sales Taxes and similar Taxes on goods and services provided
hereunder and any other Taxes now or hereafter imposed by any Governmental
Authority in respect of or measured by Crude Oil handled or stored hereunder or
the manufacture, storage, delivery, receipt, exchange or inspection thereof, and
Company agrees to promptly reimburse Carrier for any such Taxes Carrier is
legally required to pay, upon receipt of invoice therefor. Each Party is
responsible for all Taxes in respect of its own real and personal property.

 

Article XII.                               Health, Safety and Environment

 

Section 12.01                      Spills; Environmental Pollution.

 

(a)                                 In the event of a Crude Oil spill or other
environmentally polluting discharge caused by Carrier’s operation of the
Pipeline, any clean-up resulting from any such spill or discharge and any
liability resulting from such spill or discharge shall be the responsibility of
Carrier, except to the extent such spill or discharge is caused by Company.

 

(b)                                 In the event and to the extent of a Crude
Oil spill or other environmentally polluting discharge caused by Company or in
connection with the operation of Company’s or a third party’s pipeline, barge,
tank truck or transport trailer receiving Crude Oil on Company’s behalf, at its
request or for its benefit, Carrier is authorized to commence containment or
clean-up operations as deemed appropriate or necessary by Carrier or as required
by any Governmental Authority, and Carrier shall notify Company of such
operations as soon as practicable.  All liability and reasonable costs of
containment or clean-up shall be borne by Company except that, in the event a
spill or discharge is caused by the joint negligence of both Carrier and Company
or a third party’s pipeline, barge, tank truck or transport trailer receiving
Crude Oil on Company’s behalf, at its request or for its benefit, liability and
costs of containment or clean-up shall be borne jointly by Carrier and Company
in proportion to each Party’s respective negligence.

 

(c)                                  For purposes of this Section 12.01, the
negligence of a third party pipeline, barge, tank truck or transport trailer
receiving Crude Oil on Company’s behalf, at its request or for its benefit shall
be attributed to Company.

 

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(d)                                 The Parties shall cooperate for the purpose
of obtaining reimbursement if a third party is legally responsible for costs or
expenses initially borne by Carrier or Company.

 

Article XIII.                          Force Majeure

 

Section 13.01                      Suspension during Force Majeure Events.  As
soon as possible upon the occurrence of a Force Majeure, a Party affected by a
Force Majeure event shall provide the other Party with written notice of the
occurrence of such Force Majeure.  Each Party’s obligations (other than an
obligation to pay any amounts due to the other Party) shall be temporarily
suspended during the occurrence of, and for the entire duration of, a Force
Majeure event to the extent that such an event prevents Carrier from performing
its obligations under this Agreement.  Each Party’s obligations (other than an
obligation to pay any amounts due to the other Party) shall be temporarily
suspended beginning 20 Days after the commencement of, and for the entire
remaining duration of, a Force Majeure event to the extent that such event
prevents Company from performing its obligations under this Agreement. At the
conclusion of the Force Majeure event, the Minimum Quarterly Transportation
Commitment with respect to each Calendar Quarter in which the Force Majeure
event remained in effect shall be ratably reduced to reflect such suspension.

 

Section 13.02                      Obligation to Remedy Force Majeure Events.  A
Party affected by a Force Majeure event shall take commercially reasonable steps
to remedy such situation so that it may resume the full performance of its
obligations under this Agreement within a reasonable period of time.

 

Section 13.03                      Strikes and Lockouts.  The settlement of
strikes, lockouts and other labor disturbances shall be entirely within the
discretion of the affected Party and the requirement to remedy a Force Majeure
event within a reasonable period of time shall not require the settlement of
strikes or lockouts by acceding to the demands of an opposing Person when such
course is inadvisable in the discretion of the Party having the difficulty.

 

Section 13.04                      Action in Emergencies.  Carrier may
temporarily suspend performance of the services to prevent injuries to persons,
damage to property or harm to the environment.

 

Article XIV.                           Notices

 

Section 14.01                      Notices.  Unless otherwise specifically
provided in this Agreement, all Notices between the Parties given under or in
relation to this Agreement shall be made in writing and shall be deemed to have
been properly given if:  (i) personally delivered (with written confirmation of
receipt); or (ii) delivered by a recognized overnight delivery service (delivery
fees prepaid), in either case to the appropriate address set forth below:

 

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If to Carrier:

If to Company:

 

 

Phillips 66 Carrier LLC

Phillips 66 Company

c/o Phillips 66 Pipeline LLC

3010 Briarpark Dr.

3010 Briarpark Dr.

Houston, TX 77042

Houston, TX 77042

Attn: General Counsel

Attn: President

 

 

Either Party may change its address for Notice upon Notice to the other in
accordance with this Section 14.01.

 

Section 14.02       Effective upon Receipt.  Any Notice given in the manner set
forth in Section 14.01 shall be effective upon actual receipt if received during
Normal Business Hours, or at the beginning of the recipient’s next Business Day
if not received during Normal Business Hours.

 

Article XV.           Applicable Law

 

Section 15.01       Applicable Law.  Regardless of the place of contracting,
place(s) of performance or otherwise, this Agreement and all amendments,
modifications, alterations or supplements to it, shall be governed and
interpreted in accordance with the laws of the state of Texas without regard to
the principles of conflicts of law or any other principle that might apply the
law of another jurisdiction.

 

Article XVI.         Limitation of Liability

 

Section 16.01       No Liability for Consequential Damages.  In no event shall
either Party be liable to the other Party for, and no arbitral panel is
authorized to award, any punitive, special, indirect or consequential damages of
any kind or character resulting from or arising out of this Agreement,
including, without limitation, loss of profits or business interruptions,
however they may be caused.

 

Section 16.02       Limitation of Liability.  Notwithstanding anything to the
contrary in this Agreement, Carrier shall in no event be liable for loss of, or
damage to, any of Company’s Crude Oil except to the extent caused by Carrier’s
negligence, or the negligence of Carrier’s employees, agents, contractors or
subcontractors, in the safekeeping and handling of Company’s Crude Oil.  In no
event shall Carrier be liable for more than the replacement of lost or damaged
Crude Oil or, at its option, payment of the replacement cost of any lost or
damaged Crude Oil.  Each Party shall be discharged from any and all liability
with respect to services performed and any loss or damage Claims arising out of
this Agreement unless suit or action is commenced within two years after the
applicable cause of action arises.

 

Article XVII.       Default

 

Section 17.01       Default.  Should either Party default in the prompt
performance and observance of any of the terms and conditions of this Agreement,
and should such default continue for 30 Days or more after Notice thereof by the
non-defaulting Party to the

 

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defaulting Party, or should either Party become insolvent, commence a case for
liquidation or reorganization under the United States Bankruptcy Code (or become
the involuntary subject of a case for liquidation or reorganization under the
United States Bankruptcy Code, if such case is not dismissed within 30 Days), be
placed in the hands of a state or federal receiver or make an assignment for the
benefit of its creditors, then the other Party shall have the right, at its
option, to terminate this Agreement immediately upon Notice to the other Party.

 

Section 17.02       Non-Exclusive Remedies.  Except as otherwise provided, the
remedies of Carrier and Company provided in this Agreement shall not be
exclusive, but shall be cumulative and shall be in addition to all other
remedies in favor of Carrier or Company, at Law or equity.

 

Section 17.03       Right to Terminate.  In the event of a default by Company,
the amounts theretofore accrued shall, at the option of Carrier, become
immediately due and payable and Carrier shall also have the right, at its
option, to terminate this Agreement.  In the event of a default by Carrier,
Company shall also have the right, at its option, to terminate this Agreement,
provided Company has paid Carrier for the amounts that have accrued to the date
of such termination.

 

Article XVIII.      Miscellaneous

 

Section 18.01       Disputes between the Parties.  Any dispute between the
Parties in connection with this Agreement shall be resolved by arbitration in
accordance with the procedures set forth in Exhibit A; provided, however, that
either Party may seek a restraining order, temporary injunction, or other
provisional relief in any court with jurisdiction over the subject matter of the
dispute and sitting in Houston, Texas, if such Party in its sole judgment
believes that such action is necessary to avoid irreparable injury or to
preserve the status quo ante.

 

Section 18.02       Assignment.

 

(a)                                 Neither Party may assign its rights under
this Agreement without prior written consent of the other Party except:

 

(i)                                     if Company transfers the Lake Charles
Refinery, Company may assign this Agreement to the transferee of the Lake
Charles Refinery subject to the provisions of Section 18.02(b); and

 

(ii)                                  Carrier may make collateral assignments of
this Agreement to secure working capital financing;

 

provided, however, that in no event shall Company be required to consent to
Carrier’s assignment of this Agreement to any Person that is engaged in the
business of refining and marketing petroleum products (or that directly or
indirectly Controls or is Controlled by a Person that is engaged in the business
of refining and marketing petroleum products) in the states of Louisiana or
Texas.

 

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(b)                                 Upon an assignment of this Agreement by
either Party, the assigned rights and obligations shall be novated into a new
agreement with the assignee, and such assignee shall be responsible for the
performance of the assigned obligations unless the non-assigning Party has
reasonably determined that the assignee is not financially or operationally
capable of performing such assigned obligations, in which case the assignor
shall remain responsible for the performance of such assigned obligations.

 

Section 18.03       Partnership Change in Control.  Company’s obligations
hereunder shall not terminate in connection with a Partnership Change in
Control.  Carrier shall provide Company with Notice of any Partnership Change in
Control at least 60 Days prior to the effective date thereof.

 

Section 18.04       No Third-Party Rights.  Except as expressly provided,
nothing in this Agreement is intended to confer any rights, benefits or
obligations to any Person other than the Parties and their respective successors
and assigns.

 

Section 18.05       Compliance with Laws.  Each Party shall at all times comply
with all Laws as are applicable to its performance of this Agreement.

 

Section 18.06       Severability.  If any provision of this Agreement or the
application thereof shall be found by any arbitral panel or court of competent
jurisdiction to be invalid, illegal or unenforceable to any extent and for any
reason, it shall be adjusted rather than voided, if possible, in order to
achieve the intent of the Parties.  In any event, the remainder of this
Agreement and the application of such remainder shall not be affected thereby
and shall be enforced to the greatest extent permitted by Law.

 

Section 18.07       Non-Waiver.  The failure of any Party to enforce any
provision, condition, covenant or requirement of this Agreement at any time
shall not be construed to be a waiver of such provision, condition, covenant or
requirement unless the other Parties are so notified by such Party in writing. 
Any waiver by a Party of a default by any other Party in the performance of any
provision, condition, covenant or requirement contained in this Agreement shall
not be deemed to be a waiver of such provision, condition, covenant or
requirement, nor shall any such waiver in any manner release such other Party
from the performance of any other provision, condition, covenant or requirement.

 

Section 18.08       Entire Agreement.  This Agreement, together with all
exhibits attached hereto, constitutes the entire Agreement between the Parties
relating to its subject matter and supersedes all prior and contemporaneous
agreements, understandings, negotiations and discussions, whether oral or
written, between the Parties relating to the subject matter hereof, and there
are no warranties, representations or other agreements between the Parties in
connection with the subject matter hereof except as specifically set forth in,
or contemplated by, this Agreement.

 

Section 18.09       Amendments.  This Agreement shall not be modified or
amended, in whole or in part, except by a written amendment signed by both
Parties.

 

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Section 18.10       Survival.  Any indemnification granted hereunder by one
Party to the other Party shall survive the expiration or termination of all or
any part of this Agreement.

 

Section 18.11       Counterparts; Multiple Originals.  This Agreement may be
executed in any number of counterparts, all of which together shall constitute
one agreement binding on each of the Parties.  Each of the Parties may sign any
number of copies of this Agreement.  Each signed copy shall be deemed to be an
original, but all of them together shall represent one and the same agreement.

 

Section 18.12       Exhibits.  The exhibits identified in this Agreement are
incorporated in this Agreement and constitute a part of this Agreement.  If
there is any conflict between this Agreement and any exhibit, the provisions of
the exhibit shall control.

 

Section 18.13       Table of Contents; Headings; Subheadings.  The table of
contents and the headings and subheadings of this Agreement have been inserted
only for convenience to facilitate reference and are not intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement or any
provision hereof.

 

Section 18.14       Construction.  The Parties have participated jointly in the
negotiation and drafting of this Agreement.  In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring either Party by virtue of the authorship of any of
the provisions of this Agreement.

 

Section 18.15       Business Practices.  Carrier shall use its best efforts to
make certain that all billings, reports, and financial settlements rendered to
or made with Company pursuant to this Agreement, or any revision of or
amendments to this Agreement, will properly reflect the facts about all
activities and transactions handled by authority of this Agreement and that the
information shown on such billings, reports and settlement documents may be
relied upon by Company as being complete and accurate in any further recording
and reporting made by Company for whatever purposes.  Carrier shall notify
Company if Carrier discovers any errors in such billings, reports, or settlement
documents.

 

Section 18.16       Effect of Company Restructuring.  If Company decides to
restructure its supply, refining or sales operations at the Lake Charles
Refinery in such a way as could reasonably be expected to materially and
adversely affect the economics of Company’s performance of its obligations under
this Agreement, then the Parties will negotiate in good faith a reduction in
Company’s Minimum Quarterly Transportation Commitment or an exchange of the
Pipeline for other assets not so affected.

 

Section 18.17       Effect of Discontinuation of Publication.  If Platts Oilgram
discontinues publication of prices for Louisiana Light Sweet Crude Oil or ceases
to provide the information to be obtained therefrom pursuant to this Agreement,
the Parties shall negotiate in good faith to agree upon a replacement
publication or pricing mechanism.

 

[Signature page follows.]

 

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IN WITNESS WHEREOF, Carrier and Company have signed this Agreement as of the
Effective Date.

 

 

PHILLIPS 66 CARRIER LLC

 

By:

Phillips 66 Partners Holdings LLC

 

 

Sole Member of Phillips 66 Carrier LLC

 

By:

Phillips 66 Partners LP,

 

 

Sole Member of Phillips 66 Partners Holdings LLC

 

By:

Phillips 66 Partners GP LLC

 

 

General Partner of Phillips 66 Partners LP

 

 

 

 

 

 

 

By:

/s/ J.T. Liberti

 

 

J.T. Liberti

 

 

Vice President and Chief Operating Officer

 

 

of Phillips 66 Partners GP LLC

 

 

 

 

 

 

 

PHILLIPS 66 COMPANY

 

 

 

 

 

 

 

By:

/s/ T.G. Taylor

 

 

T.G. Taylor

 

 

Executive Vice President, Commercial, Marketing,

 

 

Transportation and Business Development

 

Signature Page to Transportation Services Agreement (Clifton Ridge)

 

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Exhibit A

 

Arbitration Procedure

 

Either Party may initiate dispute resolution procedures by sending a Notice to
the other Party specifically stating the complaining Party’s Claim and by
initiating binding arbitration in accordance with the Center for Public
Resources Rules for Non-Administered Arbitration of Business Disputes, by three
arbitrators who shall be neutral, independent, and generally knowledgeable about
the type of transaction which gave rise to the dispute.  The arbitration shall
be governed by the United States Arbitration Act, 9 U.S.C. §§ 1-16, provided
that the arbitrators shall include in their report/award a list of findings,
with supporting evidentiary references, upon which they have relied in making
their decision.  Judgment upon the award rendered by the arbitrators may be
entered by any court having jurisdiction thereof.  The place of arbitration
shall be Houston, Texas.

 

Notwithstanding anything herein and regardless of any procedures or rules of the
Center for Public Resources, it is expressly agreed that the following shall
apply and control over any other provision in this Agreement:

 

(a)                                 All offers, conduct, views, opinions and
statements made in the course of negotiation or mediation by any of the Parties,
their employees, agents, experts, attorneys and representatives, and by any
mediator, are confidential, made for compromise and settlement, protected from
disclosure under Federal and State Rules of Evidence and Procedure, and
inadmissible and not discoverable for any purpose, including impeachment, in
litigation or legal proceedings between the Parties, and shall not be disclosed
to any Person who is not an agent, employee, expert or representative of the
Parties, provided that evidence otherwise discoverable or admissible is not
excluded from discovery or admission as a result of presentation or use in
mediation.

 

(b)                                 Except to the extent that the Parties may
agree upon selection of one or more arbitrators, the Center for Public Resources
shall select arbitrators from a panel reviewed by the Parties.  The Parties
shall be entitled to exercise peremptory strikes against one-third of the panel
and may challenge other candidates for lack of neutrality or lack of
qualifications.  Challenges shall be resolved in accordance with Center for
Public Resource rules.

 

(c)                                  The Parties shall have at least 20 Days
following the close of hearing within which to submit a brief (not to exceed 18
pages in length) and ten Days from date of receipt of the opponent’s brief
within which to respond thereto.

 

(d)                                 The Parties expressly agree that the
arbitrators shall not award punitive damages, consequential damages, or
attorneys’ fees (except attorneys’ fees specifically authorized by the
Agreement).

 

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(e)                                  The fees and expenses of any mediator or
arbitrator shall be shared equally by the Parties.

 

(f)                                   The Parties may, by written agreement
(signed by both Parties), alter any time deadline or location(s) for meetings.

 

Time is of the essence for purposes of the provisions of this Exhibit.

 

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