Exhibit 10.3

 

SUNRISE EXPANSION PRECEDENT AGREEMENT

 

This Precedent Agreement (“Agreement”) is effective as of this 30th day of
May of 2013 and is between Equitrans, L.P. (“Equitrans” or “Transporter”) and
EQT Energy, LLC (“Shipper”).  Transporter and Shipper are also referred to
herein individually as a “Party” and collectively as the “Parties.”

 

RECITALS

 

WHEREAS, Transporter is a provider of interstate natural gas transmission
services; and

 

WHEREAS, Transporter is responsible for the operation of the Sunrise Pipeline
under a lease agreement with Sunrise Pipeline, LLC, which is the owner of the
Sunrise Pipeline.

 

WHEREAS, Transporter has determined it can modify and expand the Sunrise
Pipeline, or cause the same to be modified and expanded in order to provide
additional firm transmission (hereinafter referred to as “the Project”); and

 

WHEREAS, the Project will be subject to the jurisdiction of the Federal Energy
Regulatory Commission (“FERC”) and Transporter will be seeking authority for the
construction and operation of the Project and to provide services on the Project
facilities; and

 

WHEREAS, Shipper has indicated an interest in entering into a binding agreement
for the transportation of natural gas by Transporter on capacity made available
by the Project pursuant to the terms and conditions described in this Precedent
Agreement;

 

NOW, THEREFORE, in consideration of the following mutual covenants and
agreements, and intending to be legally bound, Transporter and Shipper agree as
follows:

 

1.             Facilities.  Transporter agrees, subject to the satisfaction of
the conditions precedent set forth below, to create additional capacity on the
Sunrise Pipeline through the modification and expansion of the Sunrise
Pipeline’s facilities located within the Marcellus fairway in West Virginia and
Pennsylvania (such additional capacity to be referred to as the “Project
Capacity”).

 

(a)           The Project is expected to provide in aggregate approximately
640,000 Dth per day of new firm transportation capacity and is expected to
involve the installation of approximately 12,913 horsepower of compression at
Equitrans’ Jefferson Compressor Station.

 

(b)           The primary firm receipt and delivery points and the associated
maximum daily quantities expected to be available to Shipper for the Project are
set forth on Exhibit 1 to this Agreement.

 

(c)           Transporter will be responsible for the acquisition, design,
construction, installation, rights of way, and permitting of the facilities that
may be necessary for Transporter to provide the services specified in this
Agreement and in accordance with the terms and conditions of this Agreement.

 

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(d)           Shipper shall be responsible for making all construction
arrangements with, and/or acquiring any services from, upstream and downstream
pipelines that may be necessary for Shipper to utilize the Project Capacity.
Shipper’s failure to have in place adequate upstream or downstream facilities or
arrangements shall not relieve Shipper of its obligations under this Agreement.

 

2.             Level of Service, Term, and Rates for Service.

 

(a)           Shipper commits to receive from and to pay to Transporter for firm
transportation service capacity as set forth below:

 

Capacity Subscription Table

Rate Schedule FTS Agreement
“MDQ Effective Date”

 

Maximum Daily Quantity
(Dth / Day)

 

MDQ Term

September 1, 2014

 

295,000 Dth / Day

 

10 years

 

 

The “Anticipated Service Date” shall be the date by which Transporter
anticipates the Project will be placed into service.  The “Service Commencement
Date” shall be the date the Project commences service, whether before or after
the Anticipated Service Date. The Anticipated In-Service Date for the Project is
September 1, 2014.  The Service Commencement Date for the Project shall be the
first day of the month immediately following the date on which Transporter is
authorized by FERC to commence service and Transporter is first able, in its
judgment, to render service to Shipper utilizing the Project capacity.  To the
extent the Service Commencement Date is not September 1, 2014, the MDQ Effective
Dates shown in the Capacity Subscription Table above shall be adjusted
accordingly; provided, the MDQ Terms and total contract length of ten years will
remain the same.

 

 

 

(b)           The Parties shall execute and deliver the Transportation Service
Agreement applicable to Firm Transportation Service under Rate Schedule FTS
(“Service Agreement”) set forth in Transporter’s FERC Gas Tariff, subject only
to such modifications as are necessary to reflect the terms set forth in this
Agreement and any conditions imposed by FERC in its authorization of the
Project.

 

(i)         Once Transporter has obtained any requisite FERC authorizations to
construct and operate the Project or FERC requires Transporter to demonstrate
contractual support for the Project and prior to the Service Commencement Date,
Transporter shall have the right to require Shipper to execute and to deliver,
and Shipper agrees to execute and to deliver, the applicable Service Agreement
for the Project Capacity subscribed pursuant to this Agreement promptly, but no
later than, within ten (10) business days of receipt of such Service Agreement.

 

(ii)        The Service Agreement shall become effective upon the Service
Commencement Date of the Project.

 

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(iii)       The Contract Term for the Service Agreement shall be ten (10) years
from the Service Commencement Date.

 

(c)           Transporter will only pursue the Project on a negotiated rate
basis. The negotiated rate, expressed as a monthly reservation rate and a usage
rate, shall be as follows:

 

Rate Table

 

Monthly Reservation Rate

$7.604 / MDQ

Usage Rate

$0.00 / Dth

Overrun Rate

$0.25 / Dth

 

 

(d)           In addition to the rates listed in the Rate Table above, Shipper
shall pay:

 

(i)  For gas delivered to off system interstate markets, (A) a retention rate to
recover actual fuel usage and actual lost and unaccounted for gas;   and (B) all
surcharges generally applicable in accordance with Transporter’s FERC Gas
Tariff, as it may be in effect from time to time, with the exception of the
Pipeline Safety Cost Rate (PSC).

 

(ii) For gas delivered to on system markets, (A) the tariff Mainline fuel
retention rate; and (B) all surcharges generally applicable in accordance with
Transporter’s FERC Gas Tariff, as it may be in effect from time to time,
including the Pipeline Safety Cost Rate (PSC).

 

(iii)  Shipper shall also be subject to any FERC mandated surcharges, imposed by
FERC on an industry wide and generally applicable basis to shippers on
interstate pipelines. Transporter shall assess the impact of any such FERC
proposed surcharge on its Shippers and use commercially reasonable efforts to
minimize the application or impact of such surcharge on Transporter’s Shippers,
provided that such efforts by Transporter shall not include any obligation on or
risk to Transporter of cost responsibility for such surcharge

 

3.             Open Season.

 

(a)           Transporter held an open season to obtain firm commitments for the
Project from April 18, 2013 through May 2, 2013.   This Agreement shall be
deemed a binding bid for Project Capacity in that Open Season.

 

(b)           Transporter shall have the right to reduce the Capacity
Subscriptions specified in Section 2 of this Agreement if a reduction is
necessary, in Transporter’s reasonable discretion, not to be exercised in an
unduly discriminatory manner, to comply with any FERC regulation, requirement,
directive, or order, or with Transporter’s FERC Gas Tariff.

 

4.             Transporter’s Conditions Precedent.

 

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(a)           Transporter’s obligations under this Agreement and the Service
Agreement are subject  to the satisfaction of the following conditions
precedent:

 

(i)         Transporter’s receipt of binding contractual commitments from
creditworthy shippers sufficient, in Transporter’s judgment, to economically
justify construction and operation of the Project;

 

(ii)        Transporter’s determination, in its judgment, that the Project is
economically viable, including, without limitation, the ability of Transporter 
to acquire all materials, equipment, or contractor services necessary on terms
acceptable to Transporter;

 

(iii)       Transporter’s timely receipt on terms satisfactory to Transporter
of  rights of way, permits, licenses, authorizations and regulatory consents,
including but not limited to receipt of a FERC authorization, environmental
permits and land use or zoning permits, necessary for the construction and
operation of the Project (“Authorizations”); and

 

(iv)       Obtaining any necessary approvals by the appropriate Board of
Directors and / or executive officers of Transporter by July 31, 2013.

 

(b)           Transporter has the right to determine whether the foregoing
conditions precedent have been satisfied or whether to waive any conditions
precedent.

 

(c)           If any of the aforementioned conditions precedent is not met, or
if the condition stated in section 5(a)(i) or the obligation stated in section
7(a) is not met by Shipper on or before the date that is thirty (30) days after
the date of Shipper’s execution of this Agreement, Transporter shall have the
right to provide written notice to Shipper of its intention to terminate this
Agreement.  Such notice shall designate all conditions precedent or obligations
of Shipper that have not been satisfied.  In the event of termination by
Transporter due to Shipper’s failure to satisfy or waive a condition or meet an
obligation, unless all such conditions or obligations of Shipper are satisfied
within thirty (30) days after the receipt of such notice from Transporter or the
Parties mutually agree otherwise in writing, this Agreement shall terminate
effective upon the expiration of said thirty (30) day period, without any
liability on the part of Transporter to Shipper.

 

5.             Shipper’s Conditions Precedent.

 

(a)           Shipper’s obligations under this Agreement and the Service
Agreement are subject  to the satisfaction of the following conditions
precedent:

 

(i)         Obtaining any necessary approvals by the appropriate Board of
Managers and / or executive officers of Shipper within thirty (30) days of the
execution of this Agreement.  Shipper shall promptly confirm by written notice
any disapproval by Shipper’s Board of Managers or executive officers within two
(2) business days of the decision. If approval has not been obtained within
thirty (30) days of execution of this Agreement, Shipper shall promptly give

 

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notice of termination, which shall be effective on the date of its notice to
terminate (“Termination Date”).

 

 

6.             Transporter’s Obligations.

 

(a)           Transporter agrees to use commercially reasonable efforts to
timely seek the contractual and property rights, financing arrangements and
regulatory approvals, including the necessary authorizations from FERC, as may
be necessary to construct and operate the Project so as to provide firm
transportation service to Shipper consistent with the terms and conditions in
this Agreement.  Transporter shall have the right to terminate this Agreement,
in its judgment, if FERC attaches any material conditions to Transporter’s
authority to construct, modify, own or operate any aspect of the Project.

 

Once construction of Project has commenced, Transporter shall provide Shipper
monthly written updates on the progress of the Project, including updates
regarding the Anticipated Service Date.  Shipper will use commercially
reasonable efforts to provide Shipper thirty (30) days advanced notice of the
Service Commencement Date.

 

7.             Shipper’s Obligations.

 

(a)           Shipper shall execute and deliver the Credit Agreement in the form
attached as Exhibit 2 within thirty (30) days of the execution of this Precedent
Agreement.  If Shipper does not satisfy Transporter’s creditworthiness
requirements within such thirty (30) day period, Transporter may terminate this
Agreement in accordance with section 4(c).  Shipper shall continue to meet
Transporter’s creditworthiness requirements during the term of this Agreement.

 

(b)           Upon the Service Commencement Date, Shipper agrees to pay the
charges set forth in Section 2 above pursuant to the Service Agreement.

 

(c)           Shipper agrees to cooperate with Transporter as may be reasonably
requested by Transporter in the preparation and filing of Transporter’s
applications for authorizations and to support such applications of Transporter
provided that such Transporter applications are not inconsistent with this
Agreement.

 

(d)           Shipper agrees to apply for, and will seek with due diligence to
obtain, any regulatory authorizations it deems necessary for it to utilize the
Project.

 

8.             Termination.

 

(a)           If the Service Commencement Date has not occurred by September 1,
2016, Shipper shall have the right to provide written notice to Transporter of
its intention to terminate this Agreement, the Credit Agreement and the Service
Agreement (if executed).  Unless all such Service Commencement Date has occurred
within ninety (90) days after the receipt of such notice from Transporter or the
Parties mutually agree otherwise in writing, this Agreement shall terminate
effective upon the expiration of said ninety (90) day period, without any
liability on the part of Shipper to Transporter.

 

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(b)           In the event Shipper terminates this Agreement for any reason
other than as provided by this Agreement or because of a material breach by
Transporter, or Transporter terminates this Agreement because of a material
breach by Shipper,  Shipper shall reimburse Transporter for Shipper’s
proportionate share of direct costs incurred by Transporter in connection with
the Project, including all costs incurred for  permits, licenses, regulatory
authorizations, rights of way, surveys, engineering designs, construction,
pipeline, materials, equipment, and cancellation charges.

 

(c)           Unless terminated sooner pursuant to the terms in this Agreement,
the Agreement shall terminate upon the Service Commencement Date.

 

 

9.             Assignment.  Any entity which shall succeed either Shipper or
Transporter by purchase or by merger or consolidation, substantially or
entirely, shall be entitled to the rights and subject to the obligations of its
predecessor under this Agreement.  Other than as set forth in the preceding
sentence, neither Party may assign its rights or obligations without the prior
written consent of the non-assigning Party, which consent shall not be
unreasonably withheld as long as, in the event of assignment by Shipper, (i) the
assignee meet’s Transporter’s creditworthiness standards set forth in the Credit
Agreement on Exhibit 2, (ii) Shipper remains liable for any and all financial
obligations arising under this Precedent Agreement; and, (iii) such assignment
is permitted pursuant to FERC rules, regulations or applicable precedent.

 

10.          Representations and Warranties.  Each Party represents and
warrants:

 

(a)           It is duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is in good standing in each
other jurisdiction where the failure to so qualify would have a material adverse
effect upon the business or financial condition of such Party.

 

(b)           The execution, delivery and performance of this Agreement by such
Party does not and will not require the consent of any trustee or holder of any
indebtedness, or be subject to or be inconsistent with its other obligations
under any other Agreement.

 

(c)           No governmental authorization, approval, order, license, permit,
franchise or consent, and no registration, declaration or filing with any
governmental authority is required on its part in connection with the execution
and delivery of this Agreement, except for the governmental approvals described
in the Agreement. To the best of its knowledge, there is no pending or
threatened action or proceeding affecting it before any court, government
authority, or arbitrator that could reasonably be expected to materially and
adversely affect its financial condition or operations or its ability to perform
its obligations hereunder, or that would affect the legality, validity or
enforceability of this Agreement or would otherwise hinder or prevent
performance hereunder.

 

11.          Force Majeure.

 

(a)           In the event that either Party is rendered unable wholly or in
part by Force Majeure to carry out its obligations under this Agreement, other
than the obligation to make payment

 

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of amounts accrued and due hereunder, the obligations of the Party so far as
they are affected by such Force Majeure shall be suspended during the
continuance of such inability to perform, provided that the affected Party gives
proper notice, but for no period longer than the continuation of the inability
to perform caused by such Force Majeure; such cause to be remedied with all
reasonable dispatch.  Proper notice shall be written notice delivered
electronically or otherwise that describes the full particulars of the Force
Majeure event.  The settlement of strikes or other labor disturbances shall be
in a Party’s sole discretion.

 

(b)           The term “Force Majeure” shall include any act, event or
circumstance, or any combination thereof that is beyond the reasonable control
of the Party whose performance is affected.  The term “Force Majeure” shall
include, but shall not be limited to, the following, provided that the act,
event or circumstance is beyond the reasonable control of the affected Party:
acts of God, flood, fire, lightning, earthquake,  strikes, or other labor
disturbances, unavoidable accidents or disruptions (including major equipment
breakdown), and failure or delay beyond a Party’s reasonable control in securing
necessary materials, equipment, services, facilities, or authorizations or
approvals from any governmental authority, or restraint by court order or public
authority.

 

12.          Modifications or Waivers.  No modification or waiver of the terms
and provisions of this Agreement shall be or become effective except by the
execution by both Parties of a written amendment.

 

13.          Notices.  Notices under this Agreement shall be sent to:

 

Transporter:

 

Equitrans, L.P.

Attention: Andy Murphy

625 Liberty Avenue

Pittsburgh, PA 15222

Phone: 412 395-3358

e-mail: amurphy@eqt.com

 

 

Shipper:

 

EQT Energy, LLC

Attention: Paul Kress

625 Liberty Avenue

Pittsburgh, PA 15222

Phone: 412 395-3232

e-mail: pkress@eqt.com

 

 

Any notice to be given under this Agreement shall be in writing and delivered
personally or mailed by certified mail by courier, or by facsimile.  Notice
given by personal delivery, certified mail, or courier shall be effective upon
actual receipt.  In the absence of proof of the actual receipt date, notice by
personal delivery or courier shall be deemed to have been received on the next
business day after it was sent or such earlier time as is confirmed by the
receiving Party, and notice given by certified mail shall be deemed to have been
received five (5) business days after it was sent or such earlier time as is
confirmed by the receiving Party.  Notice given by facsimile shall be effective
upon actual receipt if received during the recipient’s normal business hours or
at the beginning of recipient’s next business day if received after recipient’s
normal business hours.  All notices by facsimile shall promptly be confirmed in
writing by certified mail or courier.  Any Party may change any address to which
notice is to be given to it by providing written notice.

 

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14.          Confidentiality.  Due to the competitive nature of the information
contained in this Agreement, each Party shall keep the terms of this Agreement
confidential, except where disclosure is expressly contemplated or required by
law, regulation, or order of any governmental authority, including but not
limited to the FERC.

 

15.          Miscellaneous.

 

(a)           Neither Party shall be liable to the other for any special,
indirect, consequential or punitive damages.

 

(b)           The exhibits shall be deemed part of this Agreement as though they
were embodied in the Agreement.

 

(c)           No provision of this Agreement shall be construed as creating any
obligations for the benefit of, or rights in favor of, any person or entity
other than Transporter or Shipper.

 

(d)           No waiver of either Party of any default by the other Party in the
performance of any provision, condition or requirement in this Agreement shall
be deemed a waiver of, or in any manner release the other Party from, future
performance of any other provision, condition or requirement herein, nor shall
such waiver be deemed to be a waiver of, or in any manner release the other
Party from, future performance of the same provision, condition or
requirement.   Any delay or omission of either Party to exercise any right in
this Agreement shall not impair the exercise of any such right, or any like
right, accruing to it thereafter.

 

(e)           This Agreement requires execution by both Parties to create a
binding contractual commitment.

 

(f)            This terms and provisions in this Agreement are subject to all
laws, orders, rules and regulations of any governmental authority having
jurisdiction.

 

 

SIGNIFYING THE RESPECTIVE PARTIES’ ACCEPTANCE TO THIS AGREEMENT:

 

 

 

Equitrans, L.P.

 

EQT Energy, LLC

 

 

 

Signature:

 /s/ M. Elise Hyland

 

Signature:

 /s/ Paul Kress

 

 

 

 

 

 

Name:

M. Elise Hyland

 

Name:

Paul Kress

 

 

 

 

 

Title:

Executive Vice President,

 

 

Title:

SVP, Capacity Planning Analysis

 

Midstream Asset Mgmt & Eng

 

 

 

 

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EXHIBIT 1

PRIMARY FIRM RECEIPT AND DELIVERY POINTS

 

 

Receipt Point *

MDQ Sep 1, 2014

Mark West Mobley

195,000 Dth

Jupiter

100,000 Dth

 

Delivery Point

MDQ Sep 1, 2014

TETCO Jefferson

295,000 Dth

 

 

*Receipt Point MDQs do not include quantities required for retainage.

 

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