EXECUTION VERSION

EXHIBIT 10.2

--------------------------------------------------------------------------------

ELK HILLS POWER, LLC
AND
CALIFORNIA RESOURCES ELK HILLS, LLC

--------------------------------------------------------------------------------

COMMERCIAL AGREEMENT

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

FEBRUARY 7, 2018

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

TABLE OF CONTENTS
Page
 
 
 
ARTICLE I Definitions
2

 
 
ARTICLE II Term of the Agreement
10

 
 
ARTICLE III Representations, Warranties and Covenants
10

3.1
CREH’s Representations, Warranties, and Covenants
10

3.2
The Company’s Representations, Warranties and Covenants
11

 
 
 
ARTICLE IV Operation and Maintenance of the Facilities
12

4.1
Operation and Maintenance of Facilities
12

4.2
Permits and Licenses; Environmental Compliance
12

4.3
Communications
13

4.4
Material Malfunctions
13

4.5
Operational Expenses
13

 
 
 
ARTICLE V Measuring Equipment and Testing
14

5.1
Equipment
14

5.2
Calibration and Tests of Meters
14

5.3
Access to Meters and Records; Access to Measurement Data
14

5.4
Correction of Metering Errors
14

5.5
Failure of Meters
14

5.6
CREH Check Meters
15

 
 
 
ARTICLE VI Exclusive Provider and Processor; Sale and Purchase of Steam and
Electricity
15

6.1
General Sale and Purchase Obligations
15

6.2
Unused Capacity
17

6.3
Third Party Sales
17

6.4
Scheduling
18

 
 
 
ARTICLE VII Steam and Electricity Delivery Points and Conditions
18

7.1
Conditions
18

7.2
Title
18

7.3
DISCLAIMER OF REPRESENTATIONS AND WARRANTIES
19

 
 
 
ARTICLE VIII Covenants of CREH Related to Gas
19

8.1
Receipt and Delivery Rates
19

8.2
Transportation
19

 
 
 
ARTICLE IX Gas Processing
19

9.1
Tender of Gas
19

9.2
Services; Service Standard
19

9.3
Planned Gas Processing Outage Schedule
20

-i-

--------------------------------------------------------------------------------

9.4
Unplanned Gas Processing Outages
20

9.5
Unsafe Conditions
20

9.6
Control and Possession
20

9.7
Title to CREH Gas
20

 
 
 
ARTICLE X Specifications
21

10.1
Specifications
21

10.2
Failure to Meet Specifications
21

10.3
Redelivery
22

 
 
 
ARTICLE XI Payment Obligations
22

11.1
Power Capacity Payment and Other Payments for Electricity
22

11.2
Gas Processing Capacity and Steam Payment
22

11.3
Billing
23

11.4
Method of Payment
23

11.5
Disputed Payments
23

11.6
Late Payments
23

11.7
Independent Audits; Record Retention
23

 
 
 
ARTICLE XII Tax Matters
24

12.1
Allocation of Tax Responsibility
24

12.2
Allocation of Taxes
24

12.3
Tax Contests
24

12.4
No Liability for Income, Franchise, or Property Taxes
25

12.5
Responsibility for Reporting and Paying Royalties
25

 
 
 
ARTICLE XIII Events of Default and Termination
26

13.1
Events of Default
26

13.2
Notice and Cure
26

13.3
Termination for Default
27

 
 
 
ARTICLE XIV Force Majeure; Other Excused Performance
26

14.1
Definition
26

14.2
Effect of Force Majeure
26

14.3
Strikes and Lockouts
27

14.4
Change of Law
27

 
 
 
ARTICLE XV Indemnification
28

15.1
WARRANTY OF TITLE AND QUALITY
28

15.2
ADVERSE CLAIMS
28

15.3
CERTAIN PAYMENTS
28

15.4
Compliance with Regulations
29

15.5
INDEMNIFICATION
29

15.6
LIMITATION OF CLAIMS
29

15.7
CREH’S BREACH OF THE MSA OR COMPANY GAS SUPPLY AGREEMENT
30

15.8
Advancement of Expenses
30

-ii-

--------------------------------------------------------------------------------

 
 
 
ARTICLE XVI Access and Information Rights.
30

16.1
Access
30

16.2
Information and Reporting
30

 
 
 
ARTICLE XVII Notices
31

 
 
ARTICLE XVIII Authorized Representative
32

18.1
Designation of Authorized Representative
32

18.2
Functions
32

18.3
Limited Authority
32

 
 
 
ARTICLE XIX Assignability
32

19.1
Assignment
32

 
 
 
ARTICLE XX Disputes; Arbitration
33

20.1
Disputes
33

20.2
Arbitration
33

 
 
 
ARTICLE XXI Jurisdiction; Waiver of Jury Trial
37

21.1
Dispute Resolution
37

 
 
 
ARTICLE XXII Miscellaneous
39

22.1
Entire Agreement
39

22.2
Governing Law
39

22.3
Severability and Construction
39

22.4
Cumulative Remedies; Specific Performance
39

22.5
Interpretation
39

22.6
Amendments
39

22.7
Counterparts
39

22.8
Number and Gender; References
39

22.9
Further Assurances; Survival
40

22.10
No Implied Waiver
40

22.11
Integration
40

22.12
No Recourse
40

Exhibits
Exhibit A – Schematic of Key Meters, Requirements, and Quality Specifications
Exhibit B – Dedication Area

-iii-

--------------------------------------------------------------------------------

COMMERCIAL AGREEMENT
This COMMERCIAL AGREEMENT, dated as of February 7, 2018, is by and between ELK
HILLS POWER, LLC, a Delaware limited liability company (the “Company”) and
CALIFORNIA RESOURCES ELK HILLS, LLC, a Delaware limited liability company
(“CREH”). Each of the Company and CREH is sometimes referred to herein as a
“Party” and collectively as the “Parties.”
W I T N E S S E T H
WHEREAS, pursuant to a Contribution and Unit Purchase Agreement, dated as of the
date of this Agreement (the “Contribution Agreement”), by and among California
Resources Corporation, a Delaware corporation (“CRC”), CREH, a wholly owned
subsidiary of CRC, the Company and ECR Corporate Holdings L.P., a Delaware
limited partnership (“Sponsor”), CREH is contributing to the Company the assets
comprising that certain cryogenic gas plant referred to by the Parties as
“CGP-1” (the “Gas Processing Facility”) and certain other Contributed Assets (as
defined in the Contribution Agreement);
WHEREAS, after giving effect to the transactions contemplated by the
Contribution Agreement, the Company will own, among other assets, the Gas
Processing Facility and that certain 550 MW natural gas, combined-cycle power
plant (the “Power Plant”), each located in Tupman, California on land leased
from CREH;
WHEREAS, the Transaction Documents, including this Agreement, and the other
agreements and documents expressly referred to herein or therein shall
constitute an unseverable and single agreement of the Parties with respect to
the transactions contemplated hereby and thereby;
WHEREAS, CREH and its Affiliates operate oil and gas production facilities that
are immediately adjacent to the Power Plant and Gas Processing Facility (“CREH’s
Field Facilities”), and require access to reliable sources of steam and
electricity in the production of such oil and Gas;
WHEREAS, CREH desires to purchase from the Company, and the Company desires to
sell to CREH, subject to the exceptions herein, all of CREH’s and its
Affiliates’ electricity requirements for the assets now or hereafter owned,
acquired and operated by CREH or its Affiliates within the Dedication Area, and
all of CREH’s and its Affiliates’ Steam requirements for the assets now or
hereafter owned, acquired and operated by CREH or its Affiliates, in each case
until such time as the Power Plant is at full capacity; and
WHEREAS, CREH desires for the Company to process, subject to the exceptions
herein, all of CREH’s and its Affiliates’ Gas produced from (i) wells at CREH’s
Field Facilities and (ii) any other assets now or hereafter owned, acquired and
operated by CREH or its Affiliates within the Dedication Area at the Gas
Processing Facility, and the Company desires to process such Gas at the Gas
Processing Facility.
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
agreements herein contained, the Company and CREH hereby agree as follows:

-1-

--------------------------------------------------------------------------------

ARTICLE I
Definitions
“Actual Utilized Power” for any Month means the monthly average for such Month
of Electricity used on Line 3 as set forth in Exhibit A by CREH, any of its
Affiliates or the Company.
“Additional Change in Law Operating Expenses” has the meaning given to such term
in Section 14.4.
“Affiliate” means as to any party, any corporation, limited liability company,
partnership or other entity directly or indirectly Controlling, Controlled by or
under common Control with such party.
“Agreement” means this Commercial Agreement, including exhibits and attachments,
and all amendments and modifications hereafter executed by the Parties.
“Appeal” has the meaning given to such term in Section 20.2(b).
“Appeal Award” has the meaning given to such term in Section 20.2(b)(iv).
“Appeal Panel” has the meaning given to such term in Section 20.2(b)(i).
“Appellant” has the meaning given to such term in Section 20.2(b).
“Appellee” has the meaning given to such term in Section 20.2(b)(i).
“Applicable Gas Price” means, for any Month, the price per MMBtu of Gas supplied
to the Power Plant under the Company Gas Supply Agreement during such period.
“Arbitration Award” has the meaning given to such term in Section 20.2(a)(ii).
“Authorized Representative” means a person designated as such pursuant to
Section 18.1.
“Bankruptcy Event” means, with respect to a Person, (a) commencement of any
case, proceeding or other voluntary action seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it bankrupt or insolvent,
or seeking liquidation, arrangement, adjustment, winding-up, reorganization,
dissolution, composition under any Bankruptcy Law or other relief with respect
to it or its debts; (b) applying for, or consent or acquiesce to, the
appointment of, a receiver, administrator, administrative receiver, liquidator,
sequestrator, trustee or other official with similar powers for itself or any
substantial part of its assets; (c) making a general assignment for the benefit
of its creditors; (d) commencement of any involuntary case seeking liquidation
or reorganization under any Bankruptcy Law, or seeking issuance of a warrant of
attachment, execution or distraint, or commencement of any similar proceedings
against such Person under any other applicable law and (i) consent to the
institution of the involuntary case against it, (ii) the petition commencing the
involuntary case is not timely controverted, (iii) the petition commencing the
involuntary case is not dismissed within 60 days of its filing, (iv) an interim
trustee is appointed to take possession of all or a portion of the property, or
to operate all or any part of the business of

-2-

--------------------------------------------------------------------------------

such Person or any of its Subsidiaries and such appointment is not vacated
within 60 days, or (v) an order for relief shall have been issued or entered
therein; (e) entry of a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, administrator, administrative
receiver, liquidator, sequestrator, trustee or other official having similar
powers, over such Person or all or a part of its property; (f) the granting of
any other similar relief under any applicable Bankruptcy Law, filing a petition
or consent or shall otherwise institute any similar proceeding under any other
applicable law, or taking any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in any of the acts set forth above in
this definition; (g) such Person taking any form of corporate action to be
liquidated or dissolved; (h) admitting in writing its inability to pay its debts
as they become due or its liabilities exceed its assets; or (i) such entity
otherwise becoming insolvent under applicable law.
“Bankruptcy Law” means title 11 of the United States Code, 11 U.S.C. §§ 101 et.
seq. or any similar federal or state law.
“BOE” means one barrel of oil equivalent, equal to (a) 42 gallons of natural gas
liquids or (b) 6 Mcf of natural gas.
“Btu” means one or more British thermal units, as the context requires, at the
higher heating value.
“Business Day” means any day except a Saturday, Sunday, the Friday after the
United States Thanksgiving holiday, and any day when banks in the States of
California or New York are required or permitted to be closed for business.
“CAISO” means the California Independent System Operator Corporation or
successor entity.
“Change in Law” has the meaning given to such term in Section 14.4.
“Claimant” has the meaning given to such term in Section 20.2(a)(i).
“Company” has the meaning given to such term in the introduction to this
Agreement.
“Company Asset” means a Subject Asset (as defined in the Contribution Agreement)
or other asset of the Company acquired by the Company after the Execution Date
(as defined in the Contribution Agreement).
“Company Covered Persons” has the meaning given to such term in Section 15.1.
“Company Gas Supplier” means CRC Marketing, Inc. and its successors and assigns.
“Company Gas Supply Agreement” means that certain Gas Sales Agreement dated July
30, 2014, by and between the Company and Company Gas Supplier, as amended, or
any substitute arrangement entered into by the Company pursuant to Section 5.18
of the LLC Agreement.

-3-

--------------------------------------------------------------------------------

“Condensate” means liquid water resulting from the condensation of steam. For
the avoidance of doubt, liquid water recovered from traps along steam pipelines
shall not be considered Condensate, but instead shall be considered wastewater.
“Contract” means any contract, agreement, indenture, note, bond, mortgage, deed
of trust, loan, instrument, lease, license, commitment or other arrangement,
understanding, undertaking, commitment or obligation, whether written or oral.
“Contract Power Capacity” means 220 MW per Contract Year.
“Contract Steam Capacity” means 60,000 lbs/hr.
“Contract Year” means the period beginning on the Effective Date and ending on
January 31, 2019 and/or each succeeding twelve (12) Month period thereafter
during the Term, as applicable.
“Contribution Agreement” has the meaning set forth in the Recitals.
“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 the ownership of voting securities, by Contract or otherwise. The terms
“Controlled” and “Controlling” shall have correlative meanings.
“CRC” has the meaning given to such term in the Recitals.
“CREH” has the meaning given to such term in the introduction to this Agreement.
“CREH Gas” means all Gas delivered by CREH or its Affiliates at a Gas Receipt
Point.
“CREH’s Field Facilities” has the meaning given to such term in the Recitals.
“CREH’s Field Operations” means the operation of CREH’s Field Facilities.
“Cross-Appeal” has the meaning given to such term in Section 20.2(b)(i).
“Dedication Area” means the area depicted on Exhibit B attached hereto.
“Dispute” has the meaning given to such term in Section 20.1.
“Effective Date” means the date of this Agreement.
“Electricity” means electric energy generated by the Power Plant.
“Environmental Law” means any Law or Order relating to pollution, remediation of
contamination, human or worker health and safety, or protection of the
environment or natural resources, including the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.), the Solid
Waste Disposal Act and Resource Conservation and Recovery Act (42 U.S.C. § 6901
et seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42
U.S.C. § 7401 et seq.), the Occupational Safety and Health Act (29 U.S.C. § 1251
et seq.), and

-4-

--------------------------------------------------------------------------------

the Hazardous Materials Transportation Act (49 U.S.C. § 5101 et seq.), as each
has been amended and the regulations promulgated thereto, and all analogous,
related, or supplemental state or local laws.
“Event of Default” has the meaning given to such term in Section 13.1.
“Excess Capacity” has the meaning given to such term in Section 6.2.
“Existing CREH Well” has the meaning given to such term in Section 6.1(b)(ii).
“Existing CREH Well Exception Period” has the meaning given to such term in
Section 6.1(b)(ii).
“Extended Existing CREH Well Exception Period” has the meaning given to such
term in Section 6.1(b)(ii).
“Extended New CREH Well Exception Period” has the meaning given to such term in
Section 6.1(b)(i).
“FL&U” means the volume of CREH Gas used as fuel to operate the Gas Processing
Facility, plus the volume of CREH Gas lost or unaccounted for in the operation
of the Gas Processing Facility.
“Force Majeure” has the meaning given to such term in Section 14.1.
“Gas” means natural gas produced in its original state from gas and/or oil
wells.
“Gas Capacity Reserve” means 225 MMcf/d.
“Gas Delivery Point” means each of the gas delivery points illustrated on
Exhibit A. With respect to Residue Gas, the gas delivery point is referred to as
“GTU2” and measured at “CP1-AI-206.” With respect to Plant Products, the gas
delivery point is referred to as “Storage” and measured at “CP1-AI-408 Propane,”
“CP1-AI-413B Butane” and “CP1-AI-420 Natural Gasoline.”
“Gas Processing Facility” has the meaning given to such term in the Recitals.
“Gas Receipt Point” means the meter at the Gas Processing Facility located at a
given location to which CREH or its Affiliates are responsible for Tendering Gas
under this Agreement. The initial Gas Receipt Point is identified on Exhibit A
as “Meter 2118.”
“GHG Allowance Price” means the arithmetic average for the most
recently-completed Month, of the California ISO’s “Greenhouse Gas Allowance
Index Price” for each day of the Month.
“Governmental Body” means any federal, state, local, municipal, tribal or other
government; any governmental, regulatory (including self-regulatory) or
administrative agency, commission, body or other authority exercising or
entitled to exercise any administrative, executive, judicial, legislative,
regulatory or taxing authority or power; and any court or governmental tribunal,
including any tribal authority having or asserting jurisdiction.

-5-

--------------------------------------------------------------------------------

“Hazardous Material” means any substance, material or waste that is listed,
regulated or defined under or pursuant to any Environmental Law, or that can be
the subject of enforcement, investigation, Liability, or standards of conduct
pursuant to any Environmental Law, whether or not recycled or beneficially used,
including coal, coal ash, combustion products, residues, emissions, fly ash,
bottom ash, flue gas desulfurization material, petroleum and its by-products,
chemical substances, pesticides, pollutants, contaminants, asbestos,
polychlorinated biphenyls, radon, radiation, noise, odor, mold or other fungi,
and urea formaldehyde insulation.
“Hearing” has the meaning given to such term in Section 20.2(a)(ii).
“Implementation Plan” has the meaning given to such term in Section 10.2.
“JAMS Appellate Rules” has the meaning given to such term in Section
20.2(a)(iv).
“JAMS Rules” has the meaning given to such term in Section 20.2(a).
“Judicial Arbitration and Mediation Service” or “JAMS” has the meaning given to
such term in Section 20.2(a).
“kWh” means kilowatt-hour.
“Law” means any federal, state, local or foreign Order, writ, injunction,
judgment, settlement, award, decree, statute, law (including common law), rule,
regulation or other provision having the force or effect of law established by a
Governmental Body.
“Liability” means any and all debts, losses, liabilities, claims, damages,
expenses, Taxes, fines, indebtedness or other penalties, fines, costs,
royalties, proceedings, deficiencies or obligations (including those arising out
of any action, such as any settlement or compromise thereof or judgment or award
therein), of any nature, whether known or unknown, absolute, contingent, accrued
or unaccrued, liquidated or unliquidated, or otherwise and whether due or to
become due, and whether in contract, tort, strict liability or otherwise, and
whether or not resulting from third party claims.
“LLC Agreement” means the Second Amended and Restated Limited Liability Company
Agreement of the Company, dated as of the date of this Agreement.
“Mcf” means one thousand cubic feet of Gas under Standard Conditions.
“MDQ” means the maximum daily quantity of 225 MMcf of Gas.
“Mlbs/hr” means 1,000 pounds per hour.
“MMBtu” means 1,000,000 Btu.
“MMcf/d” means one million cubic feet of Gas per day under Standard Conditions.

-6-

--------------------------------------------------------------------------------

“Month” means the period beginning at 12:00 midnight PPT on the first day of a
calendar month and ending at 11:59:59 p.m. PPT on the last day of such month.
“Monthly Fuel Capacity Payment” means, with respect to the most
recently-completed Month, an amount equal to (a) the Contract Power Capacity,
multiplied by (b) 730 hours, multiplied by (c) the realized gross plant heat
rate of the Power Plant for that Month (expressed in Btu per kWh), multiplied by
(d) Applicable Gas Price for such Month.
“Monthly Gas Processing Capacity and Steam Payment” means, with respect to the
most recently-completed Month, subject to reduction pursuant to Section 9.4, an
amount equal to $1.467 per Mcf multiplied by the Gas Capacity Reserve multiplied
by 730 hours, increased by 1% per annum each Contract Year.
“Monthly Generation Capacity Payment” means, with respect to the most
recently-completed Month, subject to reduction pursuant to Section 6.4(c), an
amount equal to $69.50 per megawatt hour multiplied by 730 hours multiplied by
the Power Capacity Reserve, increased by 1% per annum each Contract Year.
“Monthly GHG Regulatory Capacity Payment” means, with respect to the most
recently-completed Month, an amount equal to the Contract Power Capacity,
multiplied by 730 hours, multiplied by the realized gross plant heat rate of the
Power Plant for that Month (expressed in Btu per kWh), multiplied by .058 MT
CO2/MMBtu of Gas, multiplied by the GHG Allowance Price per MT for the
applicable month.
“MSA” means that certain Master Services Agreement, by and between CREH and the
Company, as may be amended or restated in accordance with its terms, dated as of
the date hereof.
“MT” means metric ton.
“MW” means megawatt.
“New CREH Well” has the meaning given to such term in Section 6.1(b)(i).
“New CREH Well Exception Period” has the meaning given to such term in Section
6.1(b)(i).
“Non-Conforming Gas” has the meaning given to such term in Section 10.2.
“Order” means any order, injunction, judgment, decree, award, ruling, writ,
determination, assessment or arbitration award of a Governmental Body.
“Party” has the meaning given to such term in the introduction to this
Agreement.
“Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, association or other entity or a Governmental Body.

-7-

--------------------------------------------------------------------------------

“PG&E” means Pacific Gas and Electric Company.
“Pipelines” means any pipeline that is (a) directly connected to that certain
gas treating unit referred to as “GTU2” and (b) capable of receiving Residue Gas
originally derived from the Gas Processing Facility.
“Planned Gas Processing Outage” means any outage of the Gas Processing Facility
which materially affects the Gas Processing Facility’s ability to reliably
perform the Services under this Agreement which is scheduled to occur in the
Planned Gas Processing Outage Schedule.
“Planned Gas Processing Outage Schedule” has the meaning given to such term in
Section 9.3.
“Planned Power Outage” means any outage of the Power Plant which materially
affects the Power Plant’s ability to reliably supply the requirements of CREH
and its Affiliates (other than the Company) under this Agreement which is
scheduled to occur in the Planned Power Outage Schedule.
“Planned Power Outage Schedule” has the meaning given to such term in Section
6.4(a).
“Plant Products” means ethane, propane, butane, natural gasoline, and any
incidental methane that is included in “Plant Products,” which are separated,
extracted, recovered or condensed, and saved, from Gas that is Processed by the
Company at the Gas Processing Facility.
“Power Capacity Reserve” means 220 MW.
“Power Plant” has the meaning given to such term in the Recitals.
“PPT” means Pacific Daylight time when California observes Daylight Savings Time
and Pacific Standard Time otherwise.
“Prime Rate” means the prime rate on corporate loans at large U. S. money center
commercial banks as set forth in the Wall Street Journal “Money Rates” table
under the heading “Prime Rate,” or any successor thereto, on the first date of
publication for the calendar Month in which payment is due.
“Processing” or “Processed” means the removal and recovery of any liquefiable
hydrocarbons components contained in Gas by the Gas Processing Facility by means
of refrigeration and/or cryogenic operations resulting in Residue Gas and Plant
Products.
“Psia” means pounds per square inch, absolute.
“Quality Specifications” has the meaning given to such term in Section 10.1.
“Required Operations Permits” has the meaning given to such term in Section
4.2(a).

-8-

--------------------------------------------------------------------------------

“Residue Gas” means Gas remaining after Processing at the Gas Processing
Facility, less FL&U and Shrinkage.
“Respondent” has the meaning given to such term in Section 20.2(a)(i).
“Services” means (a) the receipt of CREH Gas at the Gas Receipt Points up to the
MDQ, (b) the Processing of CREH Gas received by the Company at the Gas Receipt
Point, (c) the redelivery of Plant Products and Residue Gas that is thermally
equivalent to CREH Gas Tendered at the Gas Receipt Point in compliance with the
requirements of this Agreement, to the Gas Delivery Points, subject to FL&U and
Shrinkage, and (d) the other services to be performed by the Company in respect
of such Gas as set forth in this Agreement, all in accordance with the terms of
this Agreement.
“Shrinkage” means the decrease in Gas volume determined by the Company as
adjusted for heating content that results from the conversion of liquefiable
components of Gas into Plant Products, but exclusive of FL&U.
“Sponsor” has the meaning given to such term in the Recitals.
“Standard Conditions” means a base pressure of 14.73 Psia and a base temperature
of 60 degrees Fahrenheit (60ºF).
“Steam” means water vapor produced by the Power Plant.
“Subject Assets” means the Power Plant and the Gas Processing Facility.
“Subsidiary” means, with respect to any Person, any corporation, limited
liability company, partnership, association or business entity of which (a) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or Controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, (b) if a limited liability company,
partnership, association or other business entity (other than a corporation), a
majority of limited liability, partnership or other similar ownership interests
thereof with voting rights at the time owned or Controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall be deemed to
have a majority ownership interest in a limited liability company, partnership,
association or other business entity (other than a corporation) if such Person
or Persons shall be allocated a majority of limited liability company,
partnership, association or other business entity gains or losses or shall be or
Control, directly or indirectly, the manager, managing member, managing director
(or a board comprised of any of the foregoing) or general partner of such
limited liability company, partnership, association or other business entity.
“Tax Period” has the meaning given to such term in Section 12.2.
“Taxes” has the meaning given to such term in Section 12.1(d).

-9-

--------------------------------------------------------------------------------

“Tender” means, with respect to action by (a)  the Company, making available to
CREH and its Affiliates any amount of Steam and quantity of Electricity and
(b) CREH or its Affiliates, making available Gas to the Company at a Gas Receipt
Point.
“Term” has the meaning given to such term in Article II.
“Third-Party Service Providers” has the meaning given to such term in Section
6.1(b).
“Transaction Documents” has the meaning given to such term in the Contribution
Agreement.
“Unplanned Gas Outages” has the meaning given to such term in Section 9.4.
“Unplanned Power Outages” has the meaning given to such term in Section 6.4(c).

ARTICLE II
Term of the Agreement
The term of this Agreement (the “Term”) shall begin on the Effective Date and
shall continue for thirty (30) Contract Years following the Effective Date,
unless sooner terminated as provided for in this Agreement.

ARTICLE III
Representations, Warranties and Covenants

3.1    CREH’s Representations, Warranties, and Covenants. In addition to the
representations, warranties and covenants specifically identified elsewhere in
this Agreement, CREH makes the following representations, warranties and
covenants:
(a)    Due Organization; Good Standing; Requisite Power. CREH is duly organized
and validly existing under the Laws of the State of Delaware, is qualified to do
business and in good standing in the State of California, and has all requisite
power and authority to enter into this Agreement and perform its obligations
under this Agreement;
(b)    Due Authorization and Execution. The execution, delivery, and performance
of this Agreement have been duly authorized by CREH and are in accordance with
its organizational instruments, and this Agreement has been duly executed and
delivered by an authorized representative of CREH;
(c)    Sufficient Rights. CREH or its Affiliates (other than the Company) have,
and will have, sufficient rights, title, and interest in CREH’s Field Facilities
to be able to perform its obligations under this Agreement;
(d)    No Default. The execution, delivery, and performance of this Agreement
will not (i) result in a breach of, or constitute a default under, any
agreement, lease, or instrument to which CREH is a party or by which CREH or its
respective properties may be bound or affected, or (ii) violate any applicable
Law;

-10-

--------------------------------------------------------------------------------

(e)    No Litigation. Except as set forth on Schedule 3.1(e), no litigation,
investigation, or other legal, administrative, or arbitration proceeding is
pending or, to the best of CREH’s knowledge, threatened against CREH or any of
its properties or revenues, existing or future, which is reasonably likely to
have a material adverse effect on its ability to perform hereunder; and
(f)    Binding Agreement. This Agreement constitutes a legal, valid, and binding
obligation against CREH, enforceable in accordance with its terms except to the
extent that enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, or other similar Laws affecting creditors rights generally and
by principles of equity.
(g)    Specifications of Plant Products and Residue Gas. As of the date of this
Agreement, (a) all Plant Products that are Processed at the Gas Processing
Facility meet the quality specifications under the heading “NGL Product
Specifications” set forth on Exhibit A and (b) all Residue Gas resulting from
Gas Processed at the Gas Processing Facility meets the quality specifications
set forth on Exhibit A.

3.2    The Company’s Representations, Warranties and Covenants. In addition to
the representations, warranties and covenants specifically identified elsewhere
in this Agreement, the Company makes the following representations, warranties
and covenants:
(a)    Due Organization: Good Standing; Requisite Power. The Company is duly
organized and validly existing under the Laws of the State of Delaware, is in
good standing in the State of California, and has all requisite power and
authority to enter into this Agreement and perform its obligations under this
Agreement;
(b)    Due Authorization and Execution. The execution, delivery, and performance
of this Agreement have been duly authorized by the Company and are in accordance
with its organizational instruments, and this Agreement has been duly executed
and delivered by an authorized representative of the Company;
(c)    Title to Steam and Electricity. The Company will have clear, indefeasible
title to the Steam and Electricity to be delivered to CREH or its Affiliates
pursuant to this Agreement, subject to any rights of Governmental Bodies under
applicable Law;
(d)    No Default. The execution, delivery, and performance of this Agreement
will not (i) result in a breach of, or constitute a default under, any
agreement, lease, or instrument to which the Company is a party or by which the
Company or its properties may be bound or affected, or (ii) violate any
applicable Law;
(e)    No Litigation. Except as set forth in Schedule 3.2(e), no litigation,
investigation, or other legal, administrative, or arbitration proceeding is
pending or, to the best of the Company’s knowledge, threatened against the
Company or any of its properties or revenues, existing or future, which is
reasonably likely to have a material adverse effect on its ability to perform
hereunder; and

-11-

--------------------------------------------------------------------------------

(f)    Binding Agreement. This Agreement constitutes a legal, valid, and binding
obligation against the Company, enforceable in accordance with its terms except
to the extent that enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, or other similar Laws affecting creditors rights
generally and by principles of equity.

ARTICLE IV
Operation and Maintenance of the Facilities

4.1    Operation and Maintenance of Facilities.
(a)    Maintenance of the Company’s Facilities. The Company shall operate and
maintain the Power Plant, the Gas Processing Facility and its equipment and
systems that are directly connected with CREH’s Field Operations as depicted in
Exhibit A in accordance with (i) this Agreement, (ii) all applicable Laws and
(iii) generally accepted industry standards. The Company shall not be deemed in
breach of this Section 4.1(a), however, to the extent the Company does not
comply with the foregoing as a result of any act or omission, whether directly
or indirectly, of CREH or any of its Affiliates (other than the Company).
(b)    Maintenance of CREH’s Facilities.
(i)    CREH shall, and shall cause its Affiliates (other than the Company) to,
operate and maintain their respective equipment and systems that are directly or
indirectly interconnected with the Subject Assets in accordance with (1) this
Agreement, (2) all applicable Laws, and (3) generally accepted industry
standards.
(ii)    The Company shall install, own, operate, and maintain Gas measurement
facilities reasonably sufficient to measure the volume and composition of Gas at
the Gas Receipt Points in accordance with Section 5.1.
(c)    Operation of the Company’s Facilities. In consideration for the payments
under this Agreement, the Company shall operate the Power Plant and the Gas
Processing Facility in a commercially reasonable manner that (i) maximizes the
reliability of (A) the Power Plant in order to (x) provide consistent power to
support CREH’s Field Operations up to the Contract Power Capacity plus any
additional Electricity in excess of the Contract Power Capacity that CREH has
the option to purchase pursuant to Section 6.2(b) and (y) provide an outlet for
all permeate Gas from CGP-1 and (B) the Gas Processing Facility in order to
provide an outlet for all of CREH and its Affiliates’ Gas from CREH’s Field
Operations up to the MDQ and (ii) maximizes Plant Product recovery and provides
Residue Gas that meets the required specifications pursuant to Section 10.3.

4.2    Permits and Licenses; Environmental Compliance.
(a)    To the extent not the responsibility of CREH pursuant to Section 14.4, at
its own expense, the Company shall obtain, maintain and comply in all material
respects with all permits, licenses, easements, and other approvals, including
those required under Environmental Laws, required by the Company to: (i) operate
and maintain the Power Plant

-12-

--------------------------------------------------------------------------------

and Gas Processing Facility; (ii) make physical modifications thereto; and
(iii) fulfill its obligations and duties under this Agreement (collectively, the
“Required Operations Permits”). CREH shall, and shall cause its Affiliates
(other than the Company) to, cooperate fully with the Company in the procurement
and maintenance of, and compliance with, the Required Operations Permits.
(b)    The Company will be responsible for compliance with, and shall comply in
all material respects with, all applicable Laws, including Environmental Laws,
relating to operation of the Power Plant and Gas Processing Facility, including
with respect to any Hazardous Materials emanating from and arising out of the
operation of the Power Plant and Gas Processing Facility.
(c)    At its own expense, CREH shall, and shall cause its Affiliates (other
than the Company) to, obtain, maintain and comply in all material respects with
all permits, licenses, releases, rights, and other approvals, including those
required under Environmental Laws, necessary for it to fulfill the obligations
and duties of CREH and its Affiliates (other than the Company) under this
Agreement. The Company shall cooperate fully with CREH or its applicable
Affiliates (other than the Company) in the procurement and maintenance of, and
compliance with, any such permits.
(d)    CREH will be responsible for compliance with, and shall comply in all
material respects with, all applicable Laws, including Environmental Laws,
relating to CREH’s Field Operations, including with respect to any Hazardous
Materials emanating from and arising out of CREH’s Field Operations.

4.3    Communications. The Company and CREH shall, and CREH shall cause its
Affiliates (other than the Company) to, establish and maintain a comprehensive
communication protocol to be followed by the Parties in connection with the
Power Plant, the Gas Processing Facility and CREH’s Field Facilities insofar as
they affect each other, the scheduling of deliveries and outages of Electricity,
Steam and Gas on a day-ahead and real time basis, the monitoring of services and
products proved hereunder and such other matters as the Parties may mutually
agree.

4.4    Material Malfunctions. The Company shall notify CREH promptly after
learning of any forced outage or other malfunction at or in the operation of the
Power Plant or Gas Processing Facility having or likely to have a material
adverse effect on its ability or CREH’s ability to perform hereunder. Likewise,
CREH shall notify the Company promptly after learning of any malfunction at or
in the operation of CREH’s Field Operations likely to affect the amount of Steam
and/or Electricity it will require, the amount of Gas CREH or its Affiliates
will Tender to the Company for processing, or having or likely to have a
material adverse effect on its ability or the Company’s ability to perform
hereunder.

4.5    Operational Expenses.
(a)    To the extent not required to be paid by CREH pursuant to Section 4.5(b)
or elsewhere in this Agreement, the Company shall bear all operating expenses
and capital expenditures associated with the generation of Electricity at the
Power Plant and the

-13-

--------------------------------------------------------------------------------

processing of Gas at the Gas Processing Facility.
(b)    CREH shall continue to pay all PG&E departing and standby charges in
order to provide CREH and its Affiliates (other than the Company) with access to
electricity from PG&E in the event of an emergency.
(c)    CREH shall be responsible for the delivery of a portion of the
Electricity and Steam purchased by CREH pursuant to this Agreement for use by
CGP-1 as is necessary for the Company to process CREH Gas in accordance with
this Agreement and CREH shall promptly reimburse the Company for any
out-of-pocket fees or tariffs incurred by the Company in connection with such
delivery.

ARTICLE V
Measuring Equipment and Testing

5.1    Equipment. At the Gas Receipt Point and Gas Delivery Point, the Company
shall, at its expense, operate and maintain in accurate working order, the
meters, instruments and equipment to measure the Gas, Residue Gas and Plant
Products to be delivered and redelivered under this Agreement, as applicable.
The metering and other equipment installed, together with any buildings erected
for such equipment, shall be and remain the property of the Company.

5.2    Calibration and Tests of Meters. All other measuring equipment shall be
calibrated and adjusted by the Company as deemed necessary by the Company. At
its option, CREH may be present for such calibration and adjustment. The Company
shall give CREH notice of the time of all tests sufficiently in advance of
conducting any such tests so that the Parties may conveniently have their
representatives present. Following any such test, any measuring equipment found
to be inaccurate to any degree shall be adjusted immediately to measure
accurately. At any time, each Party shall have the right to challenge the
accuracy of any measuring equipment used and may request additional tests. If,
upon testing, the challenged equipment is found to be in error, then it shall be
repaired and calibrated. The cost of any such special testing, repair and
calibration shall be borne by the Party requiring the special test if the
percentage of inaccuracy is found to be 1% or less. Otherwise, the cost shall be
borne by the Party operating the challenged measuring equipment.

5.3    Access to Meters and Records; Access to Measurement Data. CREH shall have
access at all reasonable times to the measuring equipment and all other
instruments used by the Company in determining the measurement and quality of
the Gas delivered under this Agreement, but the reading, calibrating, and
adjusting thereof shall be done only by employees, agents or representatives of
the Company.

5.4    Correction of Metering Errors. Upon any test, if the measuring equipment,
in the aggregate for any measurement facility, is found to be inaccurate by more
than 1% registration thereof, then any payments based upon such registration
shall be corrected at the rate of such inaccuracy for any period of inaccuracy
that is definitely known or agreed upon. If such period is not definitely known
or agreed upon, then such registration and payment shall be corrected for a
period extending back one-half (1/2) of the time elapsed since the last day of
calibration.

-14-

--------------------------------------------------------------------------------

5.5    Failure of Meters. If, for any reason, the measuring equipment is out of
service or out of repair such that the quantity of Gas delivered through such
measuring equipment cannot be ascertained or computed from the readings, the
quantity of Gas so delivered during the period such equipment is out of service
or out of repair shall be estimated and agreed upon by the Company and CREH upon
the basis of the best available data, using the first of the following methods
that is feasible:
(a)    using the registration of any duplicate measuring equipment installed by
the Company, if installed and registering accurately;
(b)    using the registration of any check measuring equipment of CREH, if
installed and registering accurately;
(c)    correcting the error if the percentage of error is ascertainable by
calibration, test or mathematical calculation; and
(d)    estimating the quantity of deliveries by using the volumes delivered
under similar conditions during preceding periods when the measuring equipment
was registering accurately.

5.6    CREH Check Meters. At its own expense, CREH may install, maintain and
operate, at or near the Gas Receipt Point, such check measuring equipment as
desired. Any such equipment shall be installed so as not to interfere with the
operation of any other measuring equipment. The Company shall have access to
such check measuring equipment at all reasonable times, but the reading,
calibration and adjusting thereof shall be done only by CREH.

ARTICLE VI
Exclusive Provider and Processor; Sale and Purchase of Steam and Electricity

6.1    General Sale and Purchase Obligations.
(a)    Subject to Sections 6.1(b) and 6.1(c), beginning on the Effective Date
and continuing each day until the last day of the Term, the Company shall
provide the Contract Power Capacity and the Contract Steam Capacity to CREH, and
be CREH’s and its Affiliates’ exclusive provider of, electricity and steam to,
and shall exclusively process all of CREH’s and its Affiliates’ Gas produced
from, (A) the assets now or hereafter owned, acquired and operated by CREH or
its Affiliates within the Dedication Area and (B) any Subject Assets located
outside of the Dedication Area (the “Power and Gas Services ROFO”), and CREH
shall make the payments in consideration thereof as set forth in Article XI.
(b)    CREH and its Affiliates may engage in activities with providers of
electricity, steam or Gas processing services other than the Company (the
“Third-Party Service Providers”) solely as provided below in this Section 6.1(b)
and in Section 6.1(c):

-15-

--------------------------------------------------------------------------------

(i)    Upon at least five (5) Business Days prior written notice to the Company,
CREH or its Affiliates may construct temporary facilities and/or engage in
activities with Third-Party Service Providers for a period of up to one hundred
and eighty (180) days (the “New CREH Well Exception Period”) to the extent
reasonably necessary (as determined by CREH in good faith) for any well of CREH
or its Affiliates that is spud or newly acquired from a third party after the
date of this Agreement and cannot be connected to the Gas Processing Facility or
Power Plant, as applicable, as of such time (each, a “New CREH Well”). CREH may
extend the New CREH Well Exception Period (A) by an additional one hundred and
eighty (180) days upon the prior written consent of the Company, such consent
not to be unreasonably withheld, delayed or conditioned by the Company (the New
CREH Well Exception Period as extended pursuant to this clause (b)(i)(A), the
“Extended New CREH Well Exception Period”) and (B) for additional days beyond
the Extended New CREH Well Exception Period upon the prior written consent of
the Company, such consent to be granted by the Company in its sole and absolute
discretion. Notwithstanding the foregoing, if CREH or its Affiliates construct
temporary facilities and/or engage in activities with Third-Party Service
Providers for any New CREH Wells beyond the time periods permitted by this
Section 6.1(b)(i) despite CREH or its Affiliates using commercially reasonable
efforts to connect such New CREH Wells to the Gas Processing Facility or Power
Plant, as applicable, CREH shall not be deemed in breach of this Section
6.1(b)(i) if such New CREH Wells represent the lesser of (A) twenty-five (25)
New CREH Wells and (B) a total of 2,500 BOE per Day in respect of such New CREH
Wells’ aggregate production.
(ii)    Upon at least five (5) Business Days prior written notice to the
Company, CREH or its Affiliates may construct temporary facilities and/or engage
in activities with Third-Party Service Providers for a period of up to sixty
(60) days (the “Existing CREH Well Exception Period”) to the extent reasonably
necessary (as determined by CREH in good faith) for any well of CREH or its
Affiliates that has been spud prior to the date of this Agreement (each, an
“Existing CREH Well”). CREH may extend the Existing CREH Well Exception Period
(A) by an additional sixty (60) days upon the prior written consent of the
Company, such consent not to be unreasonably withheld, delayed or conditioned by
the Company (the Existing CREH Well Exception Period as extended pursuant to
this clause (b)(ii)(A), the “Extended Existing CREH Well Exception Period”) and
(B) for additional days beyond the Extended Existing CREH Well Exception Period
upon the prior written consent of the Company, such consent to be granted by the
Company in its sole and absolute discretion.
(iii)    Notwithstanding the foregoing, CREH shall not be deemed in breach of
this Agreement for failure to comply with Section 6.1(b)(i) or
Section 6.1(b)(ii) to the extent such failure results from (A) the actions or
inactions of third parties beyond the reasonable control of CREH and its
Affiliates or (B) to the extent not duplicative with preceding clause (iii)(A),
a Force Majeure.

-16-

--------------------------------------------------------------------------------

(c)    To the extent the Company fails to provide all of CREH’s and its
Affiliates’ electricity, steam or Gas processing requirements in the Dedication
Area due to any reason other than (i) action or inaction by CREH or any of its
Affiliates (other than the Company) under this Agreement, including by reason of
CREH or its Affiliates delivering Non-Conforming Gas to the Company or (ii) a
breach of CREH or any of its Affiliates (other than the Company) of any
provision of the MSA or the Company Gas Supply Agreement (the extent of such
failure in the provision of Services for such requirements, the “Services
Shortfall”), the Power and Gas Services ROFO shall be of no further force and
effect to the extent of such Services Shortfall and CREH or its Affiliates may
construct temporary facilities and/or enter into agreements on a “secondary
basis” with Third-Party Service Providers for the provision of electricity,
steam, Gas processing and/or capacity in the Dedication Area to the extent of
such Services Shortfall and only until such time as the Company is again able to
provide all of CREH’s and its Affiliates’ electricity, steam and Gas processing
requirements, as applicable.
(d)    Steam shall be delivered and received under this Article VI as set forth
on Exhibit A. Additionally, the Parties’ sale and purchase obligations are in
all respects subject to the other terms and conditions set forth in this Article
VI, Article XI and elsewhere in this Agreement.

6.2    Unused Capacity.
(a)    To the extent CREH and its Affiliates do not take receipt of all of the
Contract Power Capacity, the Company shall schedule and sell to CAISO an amount
of Electricity equal to the positive difference between (i) Contract Power
Capacity and (ii) the Actual Utilized Power (the “Excess Capacity”). CREH shall
be entitled to receive the revenue of any sale of such Excess Capacity actually
realized by the Company. For the avoidance of doubt, in the event the Company is
unable to produce the Contract Power Capacity, CREH and its Affiliates shall
have the right to receive all Electricity produced by the Company (up to the
Contract Power Capacity), subject to any arrangements for sale of Electricity
between the Company and any third party entered into on or prior to the
Effective Date.
(b)    To the extent the Power Plant produces Electricity in excess of the
Contract Power Capacity, subject to the Company’s contractual obligations to
third parties under contracts entered into by the Company after having complied
with this Section 6.2(b), CREH and its Affiliates (other than the Company) shall
have the option to purchase such additional Electricity in accordance with the
payment obligations set forth in Article XI. Notwithstanding the foregoing, with
the prior written consent of CREH (not to be unreasonably withheld, conditioned
or delayed), the Company is not restricted from securing additional contractual
obligations with third parties for capacity in excess of the Contract Power
Capacity to the extent CREH and its Affiliates do not exercise the option to
purchase such additional Electricity.

6.3    Third Party Sales. All capacity in excess of Contract Power Capacity (if
any) and Steam in excess of Contract Steam Capacity (if any) shall be available
for sale to third parties if not otherwise purchased by CREH or its applicable
Affiliates pursuant to Section 6.2(b).

-17-

--------------------------------------------------------------------------------

6.4    Scheduling.
(a)    Capacity Scheduling. Each Party shall designate an authorized
representative to effect the scheduling of the supply of Electricity and Steam
pursuant to this Agreement. On or before 7:00 a.m. PPT on any Business Day, CREH
shall give the Company written notice, in a format mutually agreed by the
Company and CREH, of Electricity to be supplied under this Agreement for each
hour of the following day (and, at CREH’s discretion, for any additional days
thereafter), subject to limitations in availability due to Force Majeure, forced
outage or other malfunction, or planned outage as reflected in the Planned Power
Outage Schedule.
(b)    Planned Power Outage Schedule. If requested by CREH, within sixty (60)
days after the Effective Date and thereafter not less than thirty (30) days
before the beginning of each Contract Year, the Company will advise CREH of the
Company’s proposed schedule for Planned Power Outages (a “Planned Power Outage
Schedule”) in such Contract Year, subject to CREH’s consent (not to be
unreasonably withheld, conditioned or delayed). Notwithstanding the foregoing,
the Company may amend the Planned Power Outage Schedule at any time by obtaining
CREH’s consent (not to be unreasonably withheld, conditioned or delayed). Within
fifteen (15) days after receipt of a Planned Power Outage Schedule, including
any amendments thereto, CREH shall advise the Company in writing if it would
like to request any changes in the Planned Power Outage Schedule and, if so, the
reasons for any such changes and all necessary supporting information. Following
the Company’s receipt of such written request, the Company shall consult with
CREH in good faith regarding the same. For the avoidance of doubt, the Company
and CREH may discuss and agree to Planned Power Outages as the Company and CREH
may mutually agree.
(c)    Unplanned Power Outages. The Company and CREH shall, to the extent
reasonably practicable, coordinate and negotiate in good faith with respect to
the timing and duration of outages of the Power Plant, other than Planned Power
Outages. In any given Month, in the event of unplanned outages (A) during which
the Power Plant is unable to generate the Power Capacity Reserve for at least
one (1) hour and (B) that are not caused or contributed to by (1) an action or
inaction by CREH or any of its Affiliates (other than the Company) under this
Agreement, (2) a breach of CREH or any of its Affiliates (other than the
Company) of any provision of the MSA or (3) a Planned Power Outage (“Unplanned
Power Outages”), the Monthly Generation Capacity Payment shall be reduced (but
not below zero), with respect to each such Unplanned Power Outage, in proportion
to the reduced percentage of the Power Capacity Reserve provided during such
Unplanned Power Outage.

ARTICLE VII
Steam and Electricity Delivery Points and Conditions

7.1    Conditions.

-18-

--------------------------------------------------------------------------------

(a)    Steam Conditions. All Steam delivered by the Company to CREH or its
Affiliates pursuant to Article VI and the other terms of this Agreement shall be
delivered in accordance with the requirements and quality specifications set
forth in Exhibit A.
(b)    Electricity Conditions. All Electricity delivered by the Company to CREH
or its Affiliates pursuant to Article VI shall be delivered in accordance with
the other terms of this Agreement.

7.2    Title. Title to, risk of loss for, and full responsibility for all
Electricity and Steam sold and Tendered to CREH or its Affiliates shall pass to
CREH or such Affiliate at the Meter 660-OEH-9031W and Meter USDS-PIC-0001,
respectively.

7.3    DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. EXCEPT AS EXPRESSLY
PROVIDED IN THIS AGREEMENT, THE COMPANY EXPRESSLY DISCLAIMS ANY AND ALL
WARRANTIES OF ANY KIND WHATSOEVER WITH RESPECT TO ANY ELECTRICITY OR STEAM
DELIVERED HEREUNDER, INCLUDING ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
ANY USE OR INTENDED PURPOSE, WHETHER BASED ON STATUTE, CONTRACT, TORT OR
OTHERWISE.

ARTICLE VIII
Covenants of CREH Related to Gas

8.1    Receipt and Delivery Rates. CREH will use commercially reasonable efforts
to deliver the Gas at the Gas Receipt Points at reasonably uniform hourly rates
of delivery. Each Party will have authorized representatives available at all
reasonable times to cooperate with the other Party regarding changes in the
rates of delivery of CREH Gas as may be required from time to time.

8.2    Transportation. CREH shall use commercially reasonable efforts to secure
adequate transportation capacity or make appropriate arrangements to market all
CREH’s Residue Gas and/or Plant Products downstream of the Gas Delivery Points
in sufficient quantities to allow the Company to receive and deliver all CREH
Gas, subject to the terms of this Agreement. CREH will not be entitled to a
remedy under this Agreement due to the failure of CREH to secure adequate
transportation capacity or to market CREH’s Residue Gas and/or Plant Products
downstream of the Gas Delivery Point.

ARTICLE IX
Gas Processing

9.1    Tender of Gas. Beginning on the Effective Date, on any day during the
Term, CREH and its Affiliates shall be entitled to Tender up to the MDQ to the
Gas Processing Facility at the Gas Receipt Point and, from time to time, CREH
and its Affiliates shall be entitled to Tender an additional 5 MMcf of Gas per
Day to the Gas Processing Facility at the Gas Receipt Point. Notwithstanding the
foregoing, the Company shall not be deemed in breach of this Section 9.1 (A) for
failing to accept such additional 5 MMcf of Gas per day above the MDQ:
(a) during the pendency of any Planned Gas Processing Outage or Unplanned Gas
Outages or (b) to the extent the Company, acting reasonably and in good faith,
believes that (i) CREH Tendering such additional 5 MMcf of

-19-

--------------------------------------------------------------------------------

Gas per day above the MDQ will result in damage to the Gas Processing Facility
or a hazardous or unsafe condition at the Gas Processing Facility or (ii) the
Gas Processing Facility is unable to receive such 5 MMcf of Gas per day above
the MDQ as a result of weather conditions or other natural causes, in each case,
that have an adverse impact on the operational efficiency of the Gas Processing
Facility or (B) for rejecting Non-Conforming Gas as permitted by Article X.

9.2    Services; Service Standard.
(a)    Services. Subject to the terms of this Agreement, the Company shall
provide the Services.
(b)    Services Standard. The Company shall own and operate the Gas Processing
Facility and perform the Services in a good and workmanlike manner in accordance
with standards customary in the industry. The Company shall not contract with
third parties for Processing in excess of the capacity of the Gas Processing
Facility.

9.3    Planned Gas Processing Outage Schedule. Within sixty (60) days after the
Effective Date and thereafter not less than thirty (30) days before the
beginning of each Contract Year, the Company will advise CREH of the Company’s
proposed schedule for Planned Gas Processing Outages (a “Planned Gas Processing
Outage Schedule”) in such Contract Year, subject to CREH’s consent (not to be
unreasonably withheld, conditioned or delayed). Notwithstanding the foregoing,
the Company may amend the Planned Gas Processing Outage Schedule at any time by
obtaining CREH’s consent (not to be unreasonably withheld, conditioned or
delayed). Within fifteen (15) days after receipt of a Planned Gas Processing
Outage Schedule, including any amendments thereto, CREH shall advise the Company
in writing if it would like to request any changes in the Planned Gas Processing
Outage Schedule and, if so, the reasons for any such changes and all necessary
supporting information. Following the Company’s receipt of such written request,
the Company shall consult with CREH in good faith regarding the same. For the
avoidance of doubt, the Company and CREH may discuss and agree to Planned Gas
Processing Outages as the Company and CREH may mutually agree.

9.4    Unplanned Gas Processing Outages. The Company and CREH shall, to the
extent reasonably practicable, coordinate and negotiate in good faith with
respect to the timing and duration of outages of the Gas Processing Facility,
other than Planned Gas Processing Outages. In any given Month, in the event of
unplanned outages (A) as a result of which the Gas Processing Facility is unable
to receive and process the Gas Capacity Reserve for at least one (1) hour and
(B) that are not caused or contributed to by (1) an action or inaction by CREH
or any of its Affiliates (other than the Company) under this Agreement,
including by reason of CREH or its Affiliates delivering Non-Conforming Gas to
the Company, (2) a breach of CREH or any of its Affiliates (other than the
Company) of any provision of the MSA or (3) a Planned Power Outage (“Unplanned
Gas Outages”), the Monthly Gas Processing Capacity and Steam Payment shall be
reduced (but not below zero), with respect to each such Unplanned Gas Outage, in
proportion to the reduced percentage of the Gas Capacity Reserve provided during
such Unplanned Gas Outage.

-20-

--------------------------------------------------------------------------------

9.5    Unsafe Conditions. The Company reserves the right to cease taking Gas so
long as the Company, in its sole opinion, acting reasonably and in good faith,
determines that a dangerous or unsafe condition exists, subject to all rights
and remedies available to CREH under this Agreement or at Law or in equity.

9.6    Control and Possession. As between the Company and CREH, the Company
shall be deemed to be in exclusive control and possession of CREH Gas (including
all constituents thereof) from the time such Gas is Tendered at the Gas Receipt
Point(s) until the Plant Products and Residue Gas is delivered to CREH or its
Affiliates or for CREH’s account at the applicable Gas Delivery Point(s)
pursuant to this Agreement. CREH shall be deemed to be in exclusive control and
possession of CREH Gas (including all constituents thereof) at all other times.
The Party having control and possession of the Gas (including all constituents
thereof) shall bear the risk of loss.

9.7    Title to CREH Gas. Notwithstanding anything to the contrary contained in
this Agreement, CREH or its applicable Affiliate shall continue to hold title to
the CREH Gas Tendered to the Company, including after the Company Tenders the
Residue Gas to the applicable Gas Delivery Point. Notwithstanding the foregoing,
title of CREH Gas related to FL&U shall pass to the Company at the Gas Receipt
Point.

ARTICLE X
Specifications

10.1    Specifications. CREH Gas delivered to each Gas Receipt Point shall
conform to the following quality specifications (the “Quality Specifications”):
 
(a)    The Gas shall not contain in excess of: (i) 7.0% by volume of carbon
dioxide (CO2), (ii) 1,000 parts per million by volume of oxygen (O2) and (iii)
4% by volume of nitrogen (N2).
(b)    The Gas shall have a temperature of not more than one hundred and forty
degrees Fahrenheit (140° F).
(c)    The Gas shall be at a pressure of at least 350 psig.
(d)    The Gas shall not contain more than 0.25 grain of hydrogen sulfide (H2S)
per 100 cubic feet.
(e)    The Gas shall not contain more than 1.7 micrograms per normal cubic meter
of mercury on average, and not more than 9.0 micrograms per normal cubic meter
maximum.

10.2    Failure to Meet Specifications. If the Gas delivered at any Gas Receipt
Point fails to meet any of the Quality Specifications stated herein (such Gas,
“Non-Conforming Gas”), then CREH will as promptly as practicable notify the
Company. If acceptance and processing by the Company of such Non-Conforming Gas
will not require, as reasonably determined in good faith by the Company, any
changes to the Gas Processing Facility’s configuration in order (i) to prevent
damage to the Gas Processing Facility or (ii) for the Company to achieve the
quality specifications

-21-

--------------------------------------------------------------------------------

of applicable Pipelines and purchasers of Plant Products, including the
applicable quality specifications set forth on Exhibit A, the Company shall
receive and process such Gas at the Gas Processing Facility in accordance with
this Agreement. In the event the Company reasonably determines in good faith
that acceptance and processing of such Non-Conforming Gas will require capital
expenditures by the Company in order to effect changes to the Gas Processing
Facility’s configuration in order (i) to prevent damage to the Gas Processing
Facility or (ii) for the Company to achieve quality specifications of applicable
Pipelines and purchasers of Plant Products, including the applicable quality
specifications set forth on Exhibit A, the Company shall provide written notice
to CREH of such determination, and (a) CREH may elect to treat such Gas to
conform to the applicable Quality Specifications at its own cost by providing
written notice to the Company or (b) if CREH has not yet provided written notice
of its election to treat Gas or is otherwise unable to treat such Gas pursuant
to preceding clause (a), the Company may effect changes to the Gas Processing
Facility’s configuration such that the Company is able to achieve quality
specifications of applicable Pipelines and purchasers of Plant Products,
including the applicable quality specifications set forth on Exhibit A,
notwithstanding such failure of the Gas to meet the Quality Specifications. If
neither CREH elects to treat the Non-Conforming Gas nor the Company elects to
effect changes to the Gas Processing Facility’s configuration, in each case,
pursuant to the preceding sentence, then the Company may refuse to accept such
Gas and, if such refusal continues for a period longer than one Month, the
Company may terminate this Agreement as to the affected Gas by giving written
notice of termination to CREH. Acceptance by the Company of Non-Conforming Gas
shall not constitute a waiver by the Company in regard to Gas delivered under
this Agreement in the future. Nor shall the Company’s acceptance of
Non-Conforming Gas without the Company’s express written waiver constitute a
waiver of any claim for damage resulting from delivery of Gas not meeting such
Quality Specifications.

10.3    Redelivery. Provided that CREH delivers Gas to the Gas Receipt Point in
conformance with the Quality Specifications, the Residue Gas and/or Plant
Products that are redelivered by Company to CREH or its designee at the
applicable Gas Delivery Point(s) will at least meet the applicable quality
specifications set forth on Exhibit A. If at any time after date of this
Agreement any applicable Pipeline or purchaser of Plant Products changes its
quality specifications such that revisions to the Quality Specifications or
changes to the Gas Processing Facility’s configuration are necessary for the
Company to achieve such changed Pipeline or Plant Product specifications (as
determined by the Company in its reasonable discretion), then the Company may
provide CREH written notice of such revisions to such Quality Specifications or
to the Gas Processing Facility’s configuration, as applicable, in which case (a)
CREH may elect to treat such Gas to conform to such revised Quality
Specifications at its sole cost or (b) if CREH does not agree to or cannot treat
such Gas as provided in preceding clause (a), the Company may elect to effect
such changes to the Gas Processing Facility’s configuration or, for so long as
the Company is unable to achieve such changed Pipeline or Plant Product
specifications, refuse to accept Gas from CREH and its Affiliates, which such
Gas shall be deemed “Non-Conforming Gas” hereunder.

-22-

--------------------------------------------------------------------------------

ARTICLE XI
Payment Obligations

11.1    Power Capacity Payment and Other Payments for Electricity.
(a)    Each Month following the first full Month after the Effective Date in
accordance with Section 11.4, CREH will make a monthly payment equal to the
following: (i) the Monthly Fuel Capacity Payment attributable to the previous
Month; (ii) the Monthly Generation Capacity Payment attributable to the previous
Month; and (iii) the Monthly GHG Regulatory Capacity Payment attributable to the
previous Month. Notwithstanding the foregoing, on March 15, 2018, CREH shall
make a monthly payment to the Company equal to the amount of the Monthly Fuel
Capacity Payment, the Monthly Generation Capacity Payment and the Monthly GHG
Regulatory Capacity Payment for the prior Month, pro rata for the number of days
in the prior Month after the Effective Date. For the avoidance of doubt, the pro
rata payment of the Monthly Generation Capacity Payment for February 2018 shall
only be made once.
(b)    Each Month following the first full Month after the Effective Date in
accordance with Section 11.4, CREH shall make a monthly payment equal to (i) the
transmission price set forth on PG&E’s E-20 rate schedule minus $0.01 per kWh
multiplied by (ii) an amount equal to the positive difference between (1) the
Actual Utilized Power in the prior Month and (2) the Contract Power Capacity, if
any.

11.2    Gas Processing Capacity and Steam Payment. Each Month following the
first full Month after the Effective Date in accordance with Section 11.4, CREH
will make a monthly payment to the Company equal to the Monthly Gas Processing
Capacity and Steam Payment attributable to the previous Month. Notwithstanding
the foregoing, on March 15, 2018, CREH shall make a monthly payment to the
Company equal to the amount of the Monthly Gas Processing Capacity Payment for
the prior Month, pro rata for the number of days in the prior Month after the
Effective Date. For the avoidance of doubt, the pro rata payment of the Monthly
Gas Processing Capacity and Steam Payment for February 2018 shall only be made
once.

11.3    Billing. The Company shall invoice CREH on or before the tenth (10th)
day of each month for all amounts payable by CREH in accordance with this
Agreement through and as of the last day of the preceding month, including any
amount due for underpayment or meter errors. Each invoice shall be accompanied
by sufficient information to enable CREH to determine the accuracy of the
invoice. Discrepancies identified through meter verifications or other means
that would result in reimbursement of billed amounts to CREH will be reimbursed
to CREH within thirty (30) days of notice to the Company from CREH that such
amount is due, accompanied by meter verifications or description of other means
used to identify the discrepancy in accordance with the terms of this Agreement.
In no event will an adjustment be made for discrepancies over eighteen (18)
months old. Any such reimbursements will be paid to CREH by wire transfer to
such bank account as may be designated in writing from time to time by CREH.

11.4    Method of Payment. CREH shall pay to the Company the payment amount set
forth on each invoice on the 15th day of the month such invoice is received. All
payments required from

-23-

--------------------------------------------------------------------------------

CREH to the Company shall be made by wire transfer to such bank account as may
be designated in writing from time to time by the Company, or in such other
manner as is mutually acceptable to the Parties.

11.5    Disputed Payments. Notwithstanding a bona fide question or dispute as to
the propriety of any charges invoiced, CREH shall pay the entire amount of the
invoice without any deductions or set-offs. The payment of any invoice shall not
prejudice the right of either Party to question the propriety of any charges set
forth in the invoice. Notwithstanding the foregoing, neither Party may for the
first time question an invoice of the other Party eighteen (18) months or more
from the date of receipt of such invoice. If an invoice is questioned, and it is
determined that it is not accurate, CREH shall be entitled to a prompt refund of
any overpayment and the Company shall be entitled to prompt payment of any
underpayment. The Company shall have the right in lieu of making any such
payment to credit the amount of such overpayment to CREH’s obligations then
outstanding or to be outstanding on the next invoice.

11.6    Late Payments. If CREH fails to pay an amount reflected as due to the
Company in any invoice when such amount is due, interest thereon will accrue
from, but excluding, the due date to, and including, the date payment is
actually made at the lesser of: (i) the Prime Rate plus 3%, computed on an
annualized basis and compounded monthly, and (ii) the maximum legal rate of
interest permitted by applicable Law. If CREH fails to pay any undisputed amount
when due, and has not made payment of such undisputed amount to the Company,
then the Company may suspend its performance under this Agreement until such
amount is paid.

11.7    Independent Audits; Record Retention. Either Party shall have the right,
at its own expense, from time to time, to examine and audit, or to have an
outside accounting firm of its choice examine and audit, such of the other
Party’s relevant financial and other records as are necessary for verifications
of payments due under this Agreement. Records created by a Party under this
Agreement shall be retained by such Party in accordance with its record
retention policy.

ARTICLE XII
Tax Matters

12.1    Allocation of Tax Responsibility.
(a)    From the Effective Date, except for any Taxes for which CREH is
responsible pursuant to Section 12.1(b) or any other agreement or arrangement
between CREH and the Company, the Company shall be solely responsible for any
Taxes relating to the Power Plant, the Gas Processing Facility and their
components or appurtenances to the extent a Company Asset, including the land on
which they are situated to the extent a Company Asset, in each case, that accrue
after the Effective Date.
(b)    CREH shall be solely responsible for, and pay for, (i) any Taxes relating
to CREH’s Field Operations, (ii) any Taxes imposed upon the Company from time to
time as a consequence of the sale to CREH of Steam or Electricity hereunder,
which Taxes another utility provider would be entitled to collect from its
industrial ratepayers in payments for sales of electric energy or steam or which
CREH would have had to pay if CREH had

-24-

--------------------------------------------------------------------------------

produced the Electricity or Steam hereunder for its own account, (iii) any Taxes
imposed with respect to the Services provided hereunder and (iv) to the extent
not a Company Asset, any Taxes relating to any components or appurtenances of
the Power Plant or Gas Processing Facility.
(c)    The obligations provided in Section 12.1(a) and Section 12.1(b) shall be
discharged by direct payment of any applicable tax, reimbursement of such tax
within thirty (30) days of invoice, or such other procedure as may be necessary
or appropriate to effectuate the allocation of taxes contemplated by this
Article XII. The Company shall indemnify CREH for any Taxes paid by CREH that
the Company is responsible for pursuant to Section 12.1(a) provided that CREH is
in compliance with all the terms of the Transaction Documents, and CREH shall
indemnify the Company for any Taxes paid by the Company that CREH is responsible
for pursuant to Section 12.1(b).
(d)    For purposes of this Agreement “Taxes” means any sales, use, ad valorem,
property, state utility, production, greenhouse gas or similar taxes.

12.2    Allocation of Taxes. For purposes of Section 12.1, Taxes that are
imposed on a periodic basis, where the period for which such Taxes are imposed
(a “Tax Period”) begins before and ends after the Effective Date, shall be
prorated between the period ending on the day before the Effective Date and the
period beginning on the Effective Date based on the number of days in such
periods that fall before the Effective Date and on and after the Effective Date.

12.3    Tax Contests.
(a)    Other than as provided in Section 12.3(b) and Section 12.3(c), (i) Either
CREH or the Company may contest, in good faith, by appropriate legal
proceedings, each at its own expense, the validity, applicability, or amount of
any tax or charge for which it is responsible pursuant to Section 12.1 or
otherwise that is levied or assessed against it in connection with this
Agreement; provided the contesting Party has taken such actions as will preclude
foreclosure of a lien on the Power Plant, the Gas Processing Facility or CREH’s
Field Facility and (ii) the Party contesting the tax or assessment, after
notifying the other Party in writing of such tax contest, may contest the same
in its own name or, with the consent of the non-contesting Party (which consent
shall not be unreasonably withheld), in the name of such non-contesting Party,
and the non-contesting Party agrees to reasonably cooperate in such contest. In
the event of any such contest, all costs and expenses of pursuing such contest
incurred by the contesting Party shall be paid by the contesting Party. No such
contest shall subject the non-contesting Party to any possible liabilities,
costs, or criminal penalties or, strictly by virtue of such contest, result in
the imposition of a lien upon the Power Plant or Gas Processing Facility.
Notwithstanding anything to the contrary in this Agreement, the nonpayment of
taxes in connection with a tax contest as described in this Section 12.3 shall
not be deemed a default under this Agreement until the final determination in
such contest and the expiration of any due date therein established, so long as
the contesting Party has taken the actions provided above and shall not allow
the foreclosure of the Power Plant or Gas Processing Facility or any part
thereof.

-25-

--------------------------------------------------------------------------------

(b)    CREH shall have the exclusive right to contest, by appropriate legal
proceedings, at its own expense, the validity, applicability, or amount of any
ad valorem tax or charge with respect to the Gas Processing Facility for which
CREH has responsibility under applicable Law.
(c)    CREH shall have the exclusive right to contest, by appropriate legal
proceedings, at its own expense, the validity, applicability, or amount of any
ad valorem tax or charge with respect to the Power Plant for which CREH has
responsibility under applicable Law, provided that, upon request by the Company,
CREH shall keep the Company informed as to the status of any such contest and
shall consider in good faith the recommendations or suggestions of the Company
with respect to any such contest.

12.4    No Liability for Income, Franchise, or Property Taxes. Notwithstanding
any provision in this Agreement to the contrary, neither Party shall be liable
for any income taxes, state or local franchise taxes, or, except as provided in
Section 12.1, property or ad valorem taxes levied or assessed against the other
Party.

12.5    Responsibility for Reporting and Paying Royalties. CREH shall be
responsible for reporting and paying any royalty, tax, or other burdens on
CREH’s and its Affiliates’ Gas Tendered to the Gas Processing Facility in
accordance with Section 15.3.

ARTICLE XIII
Events of Default and Termination

13.1    Events of Default. Each of the following, if not remedied pursuant to
Section 13.2, shall constitute an “Event of Default” in respect of a Party:
(a)    Non-payment. Either Party shall default in payment to the other Party of
any payment required under any of the Transaction Documents; and
(b)    Bankruptcy Event. With respect to CREH only, the occurrence of a
Bankruptcy Event in respect of CREH, CRC or any of their Affiliates (other than
the Company).

13.2    Notice and Cure. Except to the extent more limited rights are provided
elsewhere in this Agreement, if a default occurs or is claimed to have occurred
under this Agreement, the non-defaulting Party shall give the defaulting Party
written notice describing such default. The defaulting party shall then have at
least thirty (30) days after receipt of such notice to cure the default if the
default is claimed under Section 13.1(a), or sixty (60) days after receipt of
such notice to cure the default if the default is claimed under Section 13.1(b).
To the extent, however, the Section 13.1(b) default cannot be cured in such
sixty (60) day period through the exercise of reasonable diligence, the
defaulting Party shall have a reasonable additional period of time, not to
exceed sixty (60) days in which to cure such default. The additional sixty (60)
day extension set forth in the prior sentence is conditioned on the defaulting
Party commencing promptly within the initial sixty (60) day period immediate and
substantial good faith efforts to effect a cure and at all times thereafter
proceeding diligently to complete such cure.

-26-

--------------------------------------------------------------------------------

13.3    Termination for Default. After notice and expiration of the applicable
cure period, if an Event of Default remains uncured, the non-defaulting Party,
by notice in writing to the defaulting Party may terminate this Agreement,
except to the extent limited or otherwise provided in this Agreement. The right
to terminate pursuant to this Section 13.3 is in addition to and not in lieu of
any other rights and remedies available under this Agreement in Law or in
equity.

ARTICLE XIV
Force Majeure; Other Excused Performance

14.1    Definition. “Force Majeure” means any event or circumstance beyond the
reasonable control of, and not the result of the negligence or greater fault of
or caused by, the Party seeking to have its performance obligation excused
thereby, and which by the exercise of due diligence such Party could not
reasonably have been expected to avoid. By way of example, events that could
constitute “Force Majeure” include: (i) acts of God; (ii) acts of public enemy;
(iii) severe weather conditions, including hurricanes and floods;
(iv) accidents, explosions or fires; (v) the inability to obtain or renew
necessary governmental authorizations and orders, injunctions and similar
directives issued by a court or Governmental Body, in each case that are not
attributable to the acts or omissions of the Party claiming Force Majeure;
(vi) civil disturbances; (vii) strikes or labor disturbances; (viii) equipment
breakdown; (ix) equipment maintenance; (x) with respect to the Company only, any
breach by CREH under the Company Gas Supply Agreement; and (xi) without
limitation by enumeration, any other cause or causes, whether of the kind
enumerated in this Agreement or otherwise, not reasonably within the control of
the Party claiming suspension and which, by exercise of reasonable diligence,
such Party is unable to prevent or overcome.

14.2    Effect of Force Majeure. In the event either Party hereto is unable,
wholly or in part, by reason of Force Majeure, to carry out its obligations
under this Agreement, other than to make payments due under this Agreement or
provide indemnity, such obligations of the Party giving such notice, so far as
they are affected by such Force Majeure, will be suspended during the
continuance of any inability so caused and such Party shall not be deemed in
default under this Agreement as a result of its inability to perform such
obligations. The suspension of performance set forth in the prior sentence is
conditioned upon the Party claiming Force Majeure giving written notice and the
full particulars of such Force Majeure to the other Party as soon as practical
and shall remedy such inability so caused with all reasonable dispatch.
Notwithstanding the requirement that a party affected by Force Majeure shall, so
far as possible, remedy the cause of Force Majeure with all reasonable dispatch,
if there is a permanent loss of or major damage to all or a substantial part of
the Gas Processing Facility or the Power Plant, the Company shall (i) not have
any obligation to repair, rebuild, or replace same if the Company can continue
to perform its obligations under this Agreement without doing so and (ii) have
the right to terminate this Agreement if the Company is unable to continue to
perform its obligations under this Agreement without repairing, rebuilding, or
replacing the same.

14.3    Strikes and Lockouts. It is understood and agreed that the settlement of
strikes or lockouts shall be entirely within the discretion of the Party having
the difficulty. Consequently, the above requirement that any Force Majeure be
remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of an opposing Party when such

-27-

--------------------------------------------------------------------------------

course is inadvisable in the discretion of the Party having the difficulty.

14.4    Change of Law. If at any time during the Term, there is an adoption,
repeal, imposition, promulgation or material modification of any Law of any kind
that is both announced and effective after the date change of Law that, (a)
renders this Agreement illegal or unenforceable, (b) would render performance in
whole or in material part by a Party illegal or unenforceable, or (c) materially
prevents or impairs a Party’s ability to perform under this Agreement, the
affected Party shall notify the other Party of such change of Law. Upon the
receipt of such, the Parties shall promptly negotiate in good faith an agreement
as to how compliance, and restoration of the Parties’ relative economic rights
and benefits, can be restored or maintained. Notwithstanding the foregoing, if
there is any adoption, repeal, imposition, promulgation or modification of any
Law (“Change in Law”) that results in the Company incurring any additional
operating expenses (excluding, for the avoidance of doubt, any capital
expenditures related thereto) required for the Company’s compliance with
applicable Laws relating to operation of the Power Plant or Gas Processing
Facility after giving effect to such Change in Law, including Environmental Laws
(the aggregate amount of such additional operating expenses, the “Additional
Change in Law Operating Expenses”), then, in addition to charging CREH the
Monthly GHG Regulatory Capacity Payment, the Company may, in accordance with
Article XI, charge CREH an amount equal to (a) 80% multiplied by (b) such
Additional Change in Law Operating Expenses. Notwithstanding the foregoing, CREH
shall not have any obligation to pay any share of such Additional Change in Law
Operating Expenses attributable to or associated with the sale of Electricity to
a third party (as permitted pursuant to Sections 6.2 and 6.3); provided, that
the price paid by such third party recoups for the Company the proportionate
share of such Additional Change in Law Operating Expenses.

-28-

--------------------------------------------------------------------------------

ARTICLE XV
Indemnification

15.1    WARRANTY OF TITLE AND QUALITY. CREH HEREBY REPRESENTS AND WARRANTS TO
THE COMPANY THAT CREH, CREH’S AFFILIATES (OTHER THAN THE COMPANY) OR THE OWNERS
FOR WHOM THEY ARE ACTING HAVE GOOD, MERCHANTABLE TITLE TO THE GAS DELIVERED TO
THE COMPANY UNDER THIS AGREEMENT, THE RIGHT TO DELIVER AND SELL THE SAME, AND
THAT SUCH GAS IS FREE FROM ALL LIENS, ENCUMBRANCES AND ADVERSE CLAIMS. CREH
AGREES TO PROTECT, DEFEND, INDEMNIFY, RELEASE AND HOLD HARMLESS THE COMPANY AND
ITS AFFILIATES (OTHER THAN CREH), AND THEIR RESPECTIVE EMPLOYEES, OFFICERS,
DIRECTORS, PARTNERS, MEMBERS, MANAGERS, AGENTS AND REPRESENTATIVES (TOGETHER
WITH THE COMPANY, THE “COMPANY COVERED PERSONS”) FROM AND AGAINST ANY AND ALL
LIABILITIES ARISING FROM OR OUT OF ANY ADVERSE CLAIMS OF ANY AND ALL PERSONS
MADE AGAINST THE COMPANY COVERED PERSONS REGARDING TITLE TO OR OWNERSHIP OF THE
GAS DELIVERED UNDER THIS AGREEMENT. CREH REPRESENTS AND WARRANTS THAT ALL GAS
DELIVERED AND SOLD HEREUNDER WILL CONFORM TO THE QUALITY SPECIFICATIONS SET
FORTH IN THIS AGREEMENT AND AGREES TO PROTECT, DEFEND, INDEMNIFY, RELEASE AND
HOLD HARMLESS THE COMPANY COVERED PERSONS AGAINST ALL LIABILITIES ARISING FROM
OR OUT OF THE GAS AS DELIVERED SHOULD IT CONTAIN CONTAMINANTS NOT IN CONFORMANCE
WITH THE SPECIFICATIONS SET FORTH IN SECTION 10.1.

15.2    ADVERSE CLAIMS. IN THE EVENT ANY ADVERSE CLAIM IS ASSERTED WITH RESPECT
TO ANY OF THE GAS, THE RESIDUE GAS OR PLANT PRODUCTS, THE COMPANY MAY WITHHOLD
ANY PAYMENT DUE CREH UNDER THIS AGREEMENT WITHOUT INTEREST UNTIL SUCH CLAIM HAS
BEEN FINALLY DETERMINED OR UNTIL CREH FURNISHES THE COMPANY A BOND, IN FORM AND
WITH SURETIES ACCEPTABLE TO COMPANY, CONDITIONED TO HOLD THE COMPANY COVERED
PERSONS HARMLESS FROM ANY SUCH CLAIMS.

15.3    CERTAIN PAYMENTS. CREH HAS THE EXCLUSIVE OBLIGATION AND LIABILITY FOR
AND AGREES TO PAY OR CAUSE TO BE PAID TO THE PARTIES ENTITLED THERETO ALL
WORKING INTEREST, ROYALTIES, OVERRIDING ROYALTIES, PAYMENTS OUT OF PRODUCTION,
AND OTHER LIKE INTERESTS AND CHARGES APPLICABLE TO THE GAS, THE RESIDUE GAS AND
PLANT PRODUCTS. CREH HAS THE EXCLUSIVE OBLIGATION AND LIABILITY FOR AND AGREES
TO PAY OR CAUSE TO BE PAID ALL TAXES LEVIED AGAINST OR WITH RESPECT TO THE GAS
(INCLUDING ALL CONSTITUENTS AND PRODUCTS THEREOF) DELIVERED OR SERVICES PROVIDED
UNDER THIS AGREEMENT. CREH SHALL PROTECT, DEFEND, INDEMNIFY, RELEASE AND HOLD
HARMLESS THE COMPANY COVERED PERSONS AGAINST ALL LIABILITIES ARISING FROM OR OUT
OF THE PAYMENTS TO BE MADE BY CREH IN ACCORDANCE WITH THIS SECTION 15.3,
INCLUDING, WITHOUT LIMITATION, LIABILITIES ARISING FROM CLAIMS FOR THE
NONPAYMENT,

-29-

--------------------------------------------------------------------------------

MISPAYMENT, OR WRONGFUL CALCULATION OF THOSE PAYMENTS.

15.4    Compliance with Regulations. CREH shall take no action that, directly or
indirectly, results in the Company being subjected to, or not remaining
otherwise exempt from, federal regulation under the Natural Gas Act or Section
311 of the Natural Gas Policy Act. If CREH takes any action prohibited by the
previous sentence, and if such action by CREH actually results, directly or
indirectly, in the Company being subject to, or not remaining otherwise exempt
from, federal regulation under the Natural Gas Act or Section 311 of the Natural
Gas Policy Act, and if the Company would not have been otherwise made subject
to, or not have remained otherwise exempt from, such federal regulation but for
such action by CREH, then (i) the Company shall have the right to terminate this
Agreement immediately, and (ii) CREH SHALL BE RESPONSIBLE AND PAY FOR AND SHALL
RELEASE, DEFEND, INDEMNIFY, RELEASE AND HOLD HARMLESS THE COMPANY AND ITS
RESPECTIVE EMPLOYEES, OFFICERS, DIRECTORS, PARTNERS, MEMBERS, MANAGERS, AGENTS,
REPRESENTATIVES TO THE MAXIMUM EXTENT PERMITTED UNDER APPLICABLE LAW, FROM ANY
AND ALL LIABILITIES DIRECTLY RESULTING FROM AN AFFIRMATIVE ACTION BY CREH IN
BREACH OF ITS OBLIGATION UNDER THIS SECTION 15.4. In addition to the foregoing,
the Company may terminate this Agreement without penalty if the Company or the
facilities (or any portion thereof) become subject to, or do not remain
otherwise exempt from, federal regulation under the Natural Gas Act or Section
311 of the Natural Gas Policy Act, and the Company elects to discontinue
providing gathering, processing and all other services to all customers on the
applicable facilities.

15.5    INDEMNIFICATION. SUBJECT TO THE OTHER PROVISIONS OF THIS AGREEMENT, EACH
OF THE COMPANY AND CREH (EACH AN “INDEMNIFYING PARTY”) SHALL INDEMNIFY, RELEASE,
PROTECT, DEFEND, AND HOLD THE OTHER PARTY AND ITS RESPECTIVE EMPLOYEES,
OFFICERS, DIRECTORS, PARTNERS, MEMBERS, MANAGERS, AGENTS AND REPRESENTATIVES
(THE “INDEMNIFIED PARTIES”) HARMLESS AGAINST AND IN RESPECT OF ANY AND
LIABILITIES INCURRED BY THE INDEMNIFIED PARTY TO THE EXTENT THOSE LIABILITIES
ARISE FROM OR ARE RELATED TO EACH OF THE FOLLOWING EXCEPT TO THE EXTENT ARISING
OUT OF THE GROSS NEGLIGENCE, BAD FAITH, FRAUD AND/OR WILLFUL MISCONDUCT OF THE
INDEMNIFIED PARTIES: (I) THE INDEMNIFYING PARTY’S FACILITIES OR OPERATIONS UNDER
THIS AGREEMENT; (II) THE INDEMNIFYING PARTY’S POSSESSION AND CONTROL OF THE GAS,
THE RESIDUE GAS AND THE PLANT PRODUCTS (EXCEPT FOR LIABILITIES CAUSED BY OR
RELATING TO GAS RECEIVED BY THE COMPANY THAT DOES NOT CONFORM TO THE QUALITY
SPECIFICATIONS WHICH IS COVERED BY SECTION 15.1 ABOVE); (III) THE INDEMNIFYING
PARTY’S VIOLATION OF APPLICABLE LAWS; OR (IV) THE INDEMNIFYING PARTY’S BREACH OF
THIS AGREEMENT.

15.6    LIMITATION OF CLAIMS. EACH PARTY WAIVES ALL RIGHTS, EXCEPT SUCH RIGHTS
AS ARE OTHERWISE EXPLICITLY RETAINED IN THIS AGREEMENT, TO CLAIM INCIDENTAL,
CONSEQUENTIAL, OR PUNITIVE DAMAGES UNDER THIS AGREEMENT OTHER THAN WITH RESPECT
TO DAMAGES RESULTING FROM THE

-30-

--------------------------------------------------------------------------------

DELIVERY OF CREH GAS TO THE COMPANY THAT DOES NOT CONFORM TO THE QUALITY
SPECIFICATIONS.

15.7    CREH’S BREACH OF THE MSA OR COMPANY GAS SUPPLY AGREEMENT.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, CREH EXPLICITLY AGREES THAT ANY
AND ALL BREACHES BY THE COMPANY UNDER THIS AGREEMENT CAUSED OR CONTRIBUTED TO BY
A BREACH OF CREH OR ANY OF ITS AFFILIATES (OTHER THAN THE COMPANY) OF THE MSA OR
THE COMPANY GAS SUPPLY AGREEMENT SHALL NOT CONSTITUTE A BREACH BY THE COMPANY
UNDER THIS AGREEMENT. CREH ALSO AGREES THAT IT SHALL INDEMNIFY, RELEASE,
PROTECT, DEFEND, AND HOLD THE COMPANY AND ITS EMPLOYEES, OFFICERS, DIRECTORS,
PARTNERS, MEMBERS, MANAGERS, AGENTS AND REPRESENTATIVES HARMLESS FOR ANY AND ALL
CLAIMS OR CAUSES OF ACTION IN CONNECTION WITH OR RESULTING FROM ANY SUCH BREACH
BY CREH OR ANY OF ITS AFFILIATES (OTHER THAN THE COMPANY) OF THE MSA AND THE
COMPANY GAS SUPPLY AGREEMENT.

15.8    Advancement of Expenses. Any right to indemnification conferred in
Section 15.5 shall include a limited right to be paid or reimbursed promptly by
the Party obligated to provide indemnification pursuant to this Article XV for
any and all reasonable and documented out-of-pocket expenses as they are
incurred by the Person who may be entitled or authorized to be indemnified under
this Article XV who was, is or is threatened, to be made a named defendant or
respondent in a threatened, pending or completed Disputes, whether civil,
criminal, administrative or investigative, and whether formal or informal and
including appeals, in advance of the final disposition of the Dispute and
without any determination as to such Person’s ultimate entitlement to
indemnification. Notwithstanding the foregoing, the payment of such expenses
incurred by any such Person who may be entitled or authorized to be indemnified
under this Article XV in advance of the final disposition of a Dispute shall be
made only upon delivery to the Party obligated to provide indemnification
pursuant to this Article XV of a written affirmation by such Person who may be
entitled or authorized to be indemnified under this Article XV of its good faith
belief that it has met the requirements necessary for indemnification under
Section 15.5 and a written undertaking by or on behalf of such Person to
promptly repay all amounts so advanced if it shall ultimately be determined that
such Person is not entitled to be indemnified under Section 15.5 or otherwise.

ARTICLE XVI
Access and Information Rights.

16.1    Access. The Company shall afford CREH and its employees, representatives
and agents access during normal business hours to the Power Plant and Gas
Processing Facility, including meters and measuring instruments in the Power
Plant and Gas Processing Facility, and employees of the Company.

16.2    Information and Reporting. The Company shall deliver to CREH in a timely
manner such information and reports as are reasonably requested by CREH in
connection with this Agreement, including with respect to quantity and quality
of the Electricity, Steam and CREH Gas.

-31-

--------------------------------------------------------------------------------

ARTICLE XVII
Notices
All notices provided for in this Agreement shall be in writing at the addresses
listed below or to such other address either Party shall designate by written
notice. Such notices shall be sent by certified U.S. mail, return receipt
requested, postage prepaid, by facsimile, by electronic mail, or by courier.
Notices sent by certified mail or courier shall be deemed provided upon delivery
as evidenced by the receipt of delivery. Notices sent by facsimile shall be
deemed to have been provided upon the sending Party’s receipt of its facsimile
machine’s confirmation of successful transmission. However, if the day on which
such facsimile is received is not a Business Day or is after five p.m. local
time on a Business Day, then such facsimile shall be deemed to have been
provided on the next following Business Day. Notices sent by electronic mail
shall be deemed to have been provided upon the sending Party’s receipt of a
non-automated response from the recipient or automatic read receipt generated
from the recipient’s electronic mail provider. If to the Company:
If to the Company:
Elk Hills Power, LLC
c/o California Resources Corporation
9200 Oakdale Avenue, Suite 900
Los Angeles, CA 91311
Telephone: 818-661-3702
Fax: 818-661-3750
Email: michael.preston@crc.com
Attn: General Counsel
and
ECR Corporate Holdings L.P.
c/o Development Capital Resources LLC
712 Main Street, Suite 920
Houston TX, 77002
Attention: Matthew M. Loreman
Email: mloreman@dcrlp.com
with a copy to (which shall not constitute notice):
Kirkland & Ellis LLP
609 Main Street
Houston, TX 77002
Attention: John Pitts, P.C.
Email: john.pitts@kirkland.com
If to CREH:
California Resources Elk Hills, LLC

-32-

--------------------------------------------------------------------------------

27200 Tourney Road, Suite 315
Santa Clarita, CA 91355
Telephone: 818-661-3702
Fax: 818-661-3750
Email: michael.preston@crc.com
Attn: General Counsel

or to such other person or address as the addressee may have specified in a
notice duly given as provided herein.

ARTICLE XVIII
Authorized Representative

18.1    Designation of Authorized Representative. Each Party will designate by
written notice to the other an Authorized Representative who is authorized to
act on its behalf with respect to those matters contained herein which are
properly the functions and responsibilities of the Authorized Representatives.
As of the date hereof, the Company’s Authorized Representative shall be the
Company’s Gas and Power Operations Manager and CREH’s Authorized Representative
shall be the Elk Hills Field Operations Manager. Each Party will have the right
to change the designation of its Authorized Representative upon written notice
to the other.

18.2    Functions. The Authorized Representatives will serve as liaisons between
the Parties and will provide the means of securing prompt and effective
cooperation and interchange of information in connection with this Agreement
between the management of the Parties. The Authorized Representatives will have
the following responsibilities, among others:
(a)    Providing liaison services on matters which may arise with respect to the
quality of and the arrangements for the delivery and receipt of Steam,
Electricity, and the other services and utilities to be provided in connection
with the Power Plant, and the Services to be provided in connection with the Gas
Processing Facility;
(b)    Reviewing, discussing, and attempting to resolve any disputes arising
between the parties under this Agreement; and
(c)    Performing such other functions and duties as may be assigned to them in
or pursuant to this Agreement.

18.3    Limited Authority. The Authorized Representative, in such capacity, will
have no authority to modify the terms and conditions of this Agreement.

ARTICLE XIX
Assignability

19.1    Assignment. Except as otherwise provided in this Section 19.1 and
Sections 11.2(d) and 11.2(e) of the LLC Agreement, neither Party hereto may
assign any of its rights or obligations under this Agreement without the prior
express written consent of the other, which consent shall

-33-

--------------------------------------------------------------------------------

not be unreasonably withheld. Notwithstanding the foregoing, a Party shall be
entitled to and shall assign this Agreement to any Affiliate to which the Power
Plant and Gas Processing Facility, in the case of the Company, or CREH’s Field
Facilities, in the case of CREH, are transferred without the prior consent of,
but upon written notice to, the other Party, so long as such Affiliate assumes
all of the obligations and liabilities of the assigning Party hereunder.

ARTICLE XX
Disputes; Arbitration

20.1    Disputes. If the Parties are at an impasse with respect to any dispute,
controversy or claim arising out of or relating to this Agreement, or the
breach, termination or validity thereof (a “Dispute”), the matter shall be
submitted to the Class B Representative (as defined in the LLC Agreement) and
the Elk Hills Vice President for Operations for resolution of the impasse.
Submission of such matter for resolution by these individuals shall be
accomplished by written notice from the Company or CREH to the other which
reasonably describes the nature of the Dispute and states that it is being
submitted for resolution pursuant to this Section 20.1. Such individuals shall
consult promptly regarding the resolution of such impasse and shall use all
reasonable efforts to resolve the impasse within twenty (20) Business Days
following its submission.

20.2    Arbitration.
(a)    Any Dispute not resolved pursuant to Section 20.1 within twenty (20)
Business Days may, upon the agreement of the Parties, be referred to binding
arbitration, to be administered in Los Angeles, California, by the Judicial
Arbitration and Mediation Service (“JAMS”) in accordance with the JAMS
Comprehensive Arbitration Rules and Procedures then in effect (“JAMS Rules”). If
the Parties do not agree to proceed with arbitration, each Party shall retain
its rights and remedies as provided by Law, except to the extent limited or
restricted by this Agreement, including pursuant to Article XXI. To the maximum
extent permitted by applicable Law, each of the Parties hereby knowingly waives
its respective rights to a jury trial of any Dispute that the Parties agree to
submit to arbitration, and such arbitration shall be conducted as follows:
(i)    Arbitration may be initiated by a Party (“Claimant”) serving written
notice on the other Party subject to the Dispute (“Respondent”) that Claimant
has referred the Dispute to binding arbitration pursuant to this Section 20.2.
Claimant’s notice initiating binding arbitration must describe in reasonable
detail the nature of the Dispute and the facts and circumstances relating
thereto and identify the arbitrator Claimant has appointed. Respondent shall
respond to Claimant within 30 Days after receipt of Claimant’s notice,
identifying the arbitrator Respondent has appointed. The two arbitrators so
chosen by the Persons to the Dispute shall select a third arbitrator within 30
Days after the second arbitrator has been appointed. If either (A) Respondent
fails to name its appointed arbitrator within the time permitted, or (B) the two
arbitrators are unable to agree on a third arbitrator within 30 Days from the
date the second arbitrator has been appointed, then, in either case, the missing
arbitrator(s) shall be selected by JAMS with due regard given to the selection
criteria above and input from the Parties and other arbitrators. JAMS shall
select the missing

-34-

--------------------------------------------------------------------------------

arbitrator(s) not later than 90 Days from initiation of arbitration.
(ii)    The arbitration hearing for any Dispute (the “Hearing”) shall be
conducted in Los Angeles, California and commence within 90 Days after the
selection of the third arbitrator, unless delayed for good cause by order of the
arbitrators. The Hearing shall be based upon written position papers and any
declarations or expert reports attached thereto submitted by Claimant and
Respondent within 30 Business Days after the selection of the third arbitrator,
stating such Person’s proposed resolution of the dispute and any argument
presented at the Hearing. Reply papers may be submitted by either Party up to 10
Business Days prior to the Hearing. To the extent that any Party submits
declarations or expert reports, the admissibility of such declarations and
expert reports shall be determined in substantial compliance with the federal
rules of evidence and any declarant or expert must attend the hearing and be
subject to cross examination. The Parties and the arbitrators shall proceed
diligently and in good faith in order that the award may be made as promptly as
possible. The arbitrators in the Hearing shall determine the Disputes subject
thereto and render a final award (the “Arbitration Award”) by majority vote on
or before 21 Days following the completion of the Hearing, unless the
arbitrators extend such deadline for good cause. The Arbitration Award shall be
in writing and set forth the reasons for the award.
(iii)    Claimant and Respondent shall each pay one-half of the compensation and
expenses of JAMS and the arbitrator not appointed by Claimant or Respondent.
Each of Claimant and Respondent shall pay the compensation and costs of the
respective arbitrator appointed by such party.
(iv)    Notwithstanding any other provision of this Agreement, any Party to the
Dispute may, prior to the appointment of the third arbitrator, seek temporary
injunctive relief from any court of competent jurisdiction; provided that the
Party seeking such relief shall (if arbitration has not already been commenced)
simultaneously commences arbitration. Such court-ordered relief shall not
continue more than 30 Days after the appointment of the arbitrators. In order to
prevent irreparable harm, the arbitrators shall have the power to grant
temporary or permanent injunctive or other equitable relief. Except as provided
in Section 20.2(b) below, the Arbitration Award of the arbitrators in the
Hearing shall be final, binding on and non-appealable by Claimant or Respondent.
Notwithstanding any language in this Agreement or the Transaction Documents to
the contrary, the Parties agree that the Arbitration Award may be appealed
pursuant to JAMS Optional Arbitration Appeal Procedure (“JAMS Appellate Rules”)
except to the extent those Rules have been modified by this Agreement. Once an
Appeal has been timely filed with respect to any Arbitration Award, such
Arbitration Award will no longer be considered final until the earlier of the
time for filing the notice of appeal pursuant to JAMS Appellate Rules has
expired or the appeals process set out herein has resulted in an Appeal Award
(as defined herein).

-35-

--------------------------------------------------------------------------------

(b)    Any Person subject to an Arbitration Award (the “Appellant”) may appeal
an Arbitration Award that has been rendered pursuant to Section 22.2 (an
“Appeal”) as follows:
(i)    The Appellant may initiate an Appeal by providing written notice to the
other Person(s) subject to the Arbitration Award (the “Appellee”) within 30
calendar Days from the date such Arbitration Award is submitted to the Parties.
Appellant’s notice of Appeal must describe in reasonable detail the nature of
the Appeal and the elements of the Arbitration Award being appealed and identify
the arbitrator Appellant has appointed for the Appeal. The Appellee shall
respond to Appellant within 30 Days after receipt of Appellant’s notice of
Appeal, identifying the arbitrator Appellee has appointed and evidencing any
cross appeal (a “Cross-Appeal”) that Appellee intends to claim (which must be
described in reasonable detail, including the elements of the Arbitration Award
subject to Appellee’s Cross-Appeal). The two arbitrators so chosen by such
Persons shall select a third arbitrator within 30 Days after the second
arbitrator has been appointed. If either (A) the Appellee fails to name its
party-appointed arbitrator within the time permitted, or (B) the two arbitrators
are unable to agree on a third arbitrator within 30 Days from the date the
second arbitrator has been appointed, then, in either case, the missing
arbitrator(s) shall be selected by JAMS with due regard given to the selection
criteria above and input from the Parties and other arbitrators. JAMS shall
select the missing arbitrator(s) not later than 90 Days from initiation of
arbitration. Such arbitrators so selected or appointed are referred to herein as
the “Appeal Panel”.
(ii)    The record on Appeal will consist of the stenographic or other record of
the Hearing and all exhibits, declarations and expert reports (including, in
each case, documents appended thereto) that have been accepted into the record
of the Hearing. The Parties will cooperate with each other in compiling the
record on Appeal, and shall provide the record to the Appeal Panel as
expeditiously as possible. No evidence not previously accepted by the
arbitrators rendering the Arbitration Award will be considered by the Appeal
Panel, unless the basis of the Appeal or Cross-Appeal is non-acceptance by such
arbitrators of certain evidence, or unless the Appeal Panel determines that
there is good cause to re-open the record. In addition to the record, each
Person subject to an Appeal will be permitted to submit to the Appeal Panel
within 30 Business Days after selection of the third arbitrator a written
position paper (of no more than 50 pages). Each Party shall be entitled to a
reply brief not to exceed 25 pages, which must be submitted to the Appeal Panel
no less than 15 Business Days prior to any hearing, or as directed by the Appeal
Panel.
(iii)    If the Appeal Panel decides a hearing is necessary, the hearing for any
Appeal shall be conducted in Los Angeles, California and commence within 90 Days
after the selection of the third arbitrator, unless delayed for good cause by
order of the Appeal Panel. Such hearing shall be based upon written position
papers submitted by Parties and the record compiled pursuant to Section
20.2(b)(ii).

-36-

--------------------------------------------------------------------------------

(iv)    The Appeal Panel will apply the same standard of review that the
first-level appellate court in the jurisdiction would apply to an appeal from
the trial court decision; provided that if for any reason the Appeal Panel
cannot apply such standard of review, the standard of review set out in the JAMS
Appellate Rules shall apply. The Appeal Panel may affirm the Arbitration Award,
reverse the Arbitration Award or modify the Arbitration Award. The Appeal Panel
may not remand to the original arbitrators, but may re-open the record in order
to review evidence that had been improperly excluded by such arbitrators or
evidence that is now necessary in light of the Appeal Panel’s interpretation of
the relevant substantive law. The Appeal Panel will make its decision (the
“Appeal Award”) by majority vote and will issue the Appeal Award with the
reasons therefor in writing to the Parties within 21 Days of the latest of the
date of oral argument or the date of receipt of the record and of all position
papers. Upon receipt of the Appeal Award issued by the Appeal Panel by the
Parties, the Appeal Award will be final for purposes of judicial review, and
judgment upon such award may be entered in any court having jurisdiction
thereof.
(v)    Appellant and Appellee shall each pay one-half of the compensation and
expenses of JAMS and the arbitrator not appointed by the Claimant or Respondent.
Each of Appellant and Appellee shall pay the costs of the respective arbitrator
it appointed.
(c)    All arbitrators appointed pursuant to this Section 20.2 must be neutral
parties who have never been officers, directors or employees of or performed
material work for the Parties or any of their Affiliates within the preceding
five year period and must agree in writing to keep strictly confidential the
specifics and existence of the applicable Dispute as well as all proprietary
records of the Parties reviewed by the arbitrators in the process of resolving
such Dispute or the Appeal relating to such Dispute. To the extent reasonably
available, such arbitrators in any proceeding shall be retired judges with
extensive experience in resolving disputes in the energy industry, including
midstream oil and gas transaction issues or other applicable experience. To the
extent no such retired judges are reasonably available for the Hearing or Appeal
Panel, as applicable, then each arbitrator for the Hearing or Appeal, as
applicable, that is not such a retired judge shall be a lawyer who, in addition
to having formal training in the area of dispute resolution, must have not less
than 10 years’ experience in the energy industry, including experience with
midstream oil and gas transactional issues or other applicable experience. No
arbitrator participating in any Hearing shall be appointed to any Appeal Panel
relating to the same Dispute.
(d)    Each Party agrees that any Arbitration Award not subject to an Appeal and
any Appeal Award may be enforced by a court of competent jurisdiction and that
any Person that is a party to the Dispute may authorize any such court to enter
judgment on the arbitrators’ decisions. No arbitrator may grant or award
indirect, consequential, punitive or exemplary damages or damages for lost
profits.
(e)    In rendering the Arbitration Award or any Appeal Award, the arbitrators
shall abide by (i) the terms and conditions of this Agreement including, without
limitation, any

-37-

--------------------------------------------------------------------------------

and all restrictions, prohibitions or limitations on damages or remedies set
forth in this Agreement and (ii) the Law of the State of California. No
arbitrator shall have jurisdiction or authority to add to, detract from or alter
in any way the provisions of this Agreement.
(f)    All applicable statutes of limitation and defenses based upon the passage
of time shall be tolled with respect to the matters at issue in the Dispute
while the procedures specified in this Section 20.2 are pending. The Parties
shall take any action required to effectuate that tolling. Each Party is
required to continue to perform its obligations under this Agreement pending
completion of the procedures set forth in this Section 20.2, unless to do so
would be impossible or impracticable under the circumstances.
(g)    All Disputes and any Appeal of any Arbitration Award relating thereto
shall be resolved in accordance with the procedures specified in this Section
20.2. All Disputes and any Appeal of any Arbitration Award relating thereto
shall be resolved in accordance with the procedures specified in this Section
20.2, which shall be the sole and exclusive procedure for the resolution of any
such Dispute and/or Appeal.
(h)    With respect to any Dispute that may be claimed by any Affiliate of a
Party, such Party agrees to cause such Affiliate to be subject to the provisions
of this Section 20.2, and such Party and its Affiliate shall collectively act as
one Person for the purposes of such Dispute and any Appeal of an Arbitration
Award with respect thereto.
(i)    If there is any inconsistency between this Section 20.2 and JAMS Rules,
or JAMS Appellate Rules (as the case may be), the terms of this Section 20.2
shall control the rights and obligations of the Parties.

ARTICLE XXI
Jurisdiction; Waiver of Jury Trial

21.1    Dispute Resolution. In the event any Dispute is not resolved in
accordance with Article XX, the following shall apply:
(a)    Consent to Jurisdiction. EACH PARTY TO THIS AGREEMENT HEREBY CONSENTS TO
THE EXCLUSIVE JURISDICTION OF ANY UNITED STATES DISTRICT COURT OR STATE COURT
LOCATED IN KERN COUNTY, CALIFORNIA. EACH PARTY IRREVOCABLY AGREES THAT ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER SUCH ACTIONS OR PROCEEDINGS ARE BASED
IN STATUTE, TORT, CONTRACT OR OTHERWISE), SHALL BE LITIGATED IN SUCH COURTS.
EACH PARTY (i) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF SUCH
COURTS FOR SUCH ACTIONS OR PROCEEDINGS, (ii) AGREES THAT IT WILL NOT ATTEMPT TO
DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST FOR LEAVE
FROM ANY SUCH COURT, AND (iii) AGREES THAT IT WILL NOT BRING ANY SUCH ACTION OR
PROCEEDING IN ANY COURT OTHER THAN SUCH COURTS. EACH PARTY ACCEPTS FOR ITSELF
AND IN CONNECTION WITH ITS

-38-

--------------------------------------------------------------------------------

PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE AND IRREVOCABLE
JURISDICTION AND VENUE OF THE COURTS DESCRIBED IN THIS SECTION 21.1(a). EACH
PARTY WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE
BOUND BY ANY NON-APPEALABLE JUDGMENT RENDERED IN CONNECTION WITH SUCH ACTIONS OR
PROCEEDINGS. A COPY OF ANY SERVICE OF PROCESS SERVED UPON THE PARTIES SHALL BE
MAILED BY REGISTERED MAIL TO THE RESPECTIVE PARTY. NOTWITHSTANDING THE
FOREGOING, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH
COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED
BY A PARTY REFUSES TO ACCEPT SERVICE, EACH PARTY AGREES THAT SERVICE UPON THE
APPROPRIATE PARTY BY REGISTERED MAIL SHALL CONSTITUTE SUFFICIENT SERVICE.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
(b)    WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE PARTIES TO THIS AGREEMENT WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT. EACH PARTY ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND
WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ANY OF THE OTHER PARTIES. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
AGREEMENT, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND
ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH
HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH
WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. EACH PARTY FURTHER
AGREES THAT THE WAIVER SET FORTH IN THIS SECTION 21.1(b) SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED
HEREBY. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAYBE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.

-39-

--------------------------------------------------------------------------------

ARTICLE XXII
Miscellaneous

22.1    Entire Agreement. This Agreement supersedes and completely supplants any
and all prior oral or written and all contemporaneous oral discussions,
negotiations, and agreements the Parties may have had with respect to any
matters relating to the subject matter of this Agreement.

22.2    Governing Law. This Agreement has been executed and delivered and shall
be construed, interpreted and governed pursuant to and in accordance with the
laws of the State of California, without regard to any conflict of laws
principles which, if applied, might permit or require the application of the
laws of another jurisdiction.

22.3    Severability and Construction. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity and enforceability of
any other provision, and each provision of this Agreement shall be enforced to
the maximum extent permitted by applicable Law. The terms of any provision
hereof held to be invalid or unenforceable shall be construed, if possible, to
give effect to the parties’ lawful intent, as evidenced by the terms of this
Agreement.

22.4    Cumulative Remedies; Specific Performance. Except as otherwise set forth
in this Agreement, the remedies provided are cumulative, not exclusive, of any
remedies provided by Law or in equity, and may be pursued separately,
successively, or concurrently. Each Party acknowledges that it would be
impossible to determine the amount of damages that would result from any breach
of any provision of this Agreement and that the remedy at law for any breach, or
threatened breach, of any of such provisions would likely be inadequate and,
accordingly, agrees that the other Party shall, in addition to any other rights
or remedies which it may have, be entitled to such equitable and injunctive
relief as may be available from any court of competent jurisdiction to compel
specific performance of, or restrain any party from violating, any of such
provisions. In connection with any action or proceeding for injunctive relief,
each Party hereby waives the claim or defense that a remedy at law alone is
adequate and agrees, to the maximum extent permitted by law, to have each
provision of this Agreement specifically enforced against it, without the
necessity of posting bond or other security against it, and consents to the
entry of injunctive relief against it enjoining or restraining any breach or
threatened breach of such provisions of this Agreement.

22.5    Interpretation. The captions, headings, table of contents, and
arrangements are for convenience only and do not and shall not be deemed to
affect, limit, amplify, or modify the terms and provisions hereof. Whenever the
words “include,” “includes” or “including” are used in this Agreement, they
shall be deemed to be followed by the words “without limitation.”

22.6    Amendments. No amendment or modification of the terms of this Agreement
shall be binding on either Party hereto unless reduced to writing and signed by
both Parties.

22.7    Counterparts. This Agreement may be executed in any number of
counterparts, and each executed counterpart shall have the same force and effect
as an original instrument.

-40-

--------------------------------------------------------------------------------

22.8    Number and Gender; References. Pronouns, of whatsoever gender, shall
include natural persons, corporations, and associations of every kind and
character. Whenever the words hereof, hereunder, herein, or words of similar
import are used in this Agreement, they shall refer to this Agreement in its
entirety rather than to a particular section or provision unless the context
specifically indicates to the contrary.

22.9    Further Assurances; Survival. If either Party to this Agreement
reasonably determines or is reasonably advised that any further instruments or
any other things are necessary or desirable to carry out the terms of this
Agreement, the other Party shall execute and deliver all such instruments and
assurances and do all things reasonably necessary and proper to carry out the
terms of this Agreement. Upon the expiration or termination of this Agreement,
this Agreement shall forthwith become void and the Parties shall have no
liability or obligation under this Agreement, except that the termination or
expiration of this Agreement shall not relieve any Party from any expense,
liability or other obligation or remedy therefor which has accrued or attached
prior to the date of such termination or expiration.

22.10    No Implied Waiver. None of the provisions of this Agreement shall be
considered waived by either Party, except when such waiver is given in writing.
The failure of any party to insist in any instance on strict performance of any
provision of this Agreement shall not be construed as a waiver of any such
provision or the relinquishment of any rights hereunder in the future.

22.11    Integration. This Agreement, the other Transaction Documents and the
other agreements and documents expressly referred to herein are intended by the
Parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the Parties in
respect of the subject matter contained herein and therein. This Agreement, the
other Transaction Documents and the other agreements and documents expressly
referred to herein or therein supersede all prior agreements and understandings
between the Parties with respect to such subject matter. Each of the Parties
acknowledges and agrees that in executing this Agreement the intent of the
Parties in this Agreement, the other Transaction Documents and the other
agreements and documents expressly referred to herein or therein shall
constitute an unseverable and single agreement of the Parties with respect to
the transactions contemplated hereby and thereby. On behalf of itself and each
of its Affiliates, each Party waives any claim or defense based upon the
characterization that this Agreement, the other Transaction Documents and the
other agreements and documents expressly referred to herein or therein are
anything other than a true single agreement relating to such matters. Each Party
further acknowledges and agrees the matters set forth in this Section 22.11
constitute a material inducement to enter into this Agreement, the other
Transaction Documents and the other agreements and documents expressly referred
to herein or therein. Each of the Parties stipulates and agrees: (i) not to
challenge the validity, enforceability or characterization of this Agreement,
the other Transaction Documents and the other agreements and documents expressly
referred to herein or therein as a single, unseverable instrument pertaining to
the matters that are the subject of such agreements; (ii) this Agreement, the
other Transaction Documents and the other agreements and documents expressly
referred to herein or therein shall be treated as a single integrated and
indivisible agreement for all purposes, including the bankruptcy of any Party;
and (iii) not to assert or take or omit to take any action inconsistent with the
agreements and understandings set forth in this Section 22.11.

-41-

--------------------------------------------------------------------------------

22.12    No Recourse. Notwithstanding anything that may be expressed or implied
in this Agreement or any Contract delivered contemporaneously with this
Agreement, and notwithstanding the fact that any Party may be a partnership or
limited liability company, each Party agrees and acknowledges that no Persons
other than the Parties shall have any obligation under this Agreement. Each
Party to this Agreement further acknowledges and agrees that it has no rights of
recovery, whether under this Agreement or under any Contracts delivered
contemporaneously herewith, in respect of any oral representations made or
alleged to be made in connection herewith or therewith. The prohibition set
forth in this Section 22.12 shall apply with equal application to any former,
current or future director, officer, agent, Affiliate, manager, assignee,
incorporator, controlling Person, fiduciary, representative or employee of any
Party (or any of their successors or permitted assignees), against any former,
current, or future general or limited partner, manager, stockholder or member of
any Party (or any of their successors or permitted assignees) or any Affiliate
thereof or against any former, current or future director, officer, agent,
employee, Affiliate, manager, assignee, incorporator, controlling Person,
fiduciary, representative, general or limited partner, stockholder, manager or
member of any of the foregoing, but in each case not including the Parties. The
prohibition set forth in this Section 22.12 shall apply to any and all claims,
whether such claims sound in tort, contract or otherwise. This prohibition shall
apply whether such claims are asserted by attempting to pierce the corporate
veil, or through a claim brought by or on behalf of such Party against such
Persons and whether by the enforcement of any assessment or by any legal or
equitable proceeding, or by virtue of any statute, regulation or other
applicable Law, or otherwise. The Parties to this Agreement further expressly
agree and acknowledge that no personal liability whatsoever shall attach to or
be incurred by any of the Persons or entities referenced in this Section for any
obligations of the applicable Party under this Agreement or the transactions
contemplated hereby, under any documents or instruments delivered
contemporaneously herewith, in respect of any oral representations made or
alleged to be made in connection herewith or therewith, or for any claim
(whether in tort, contract or otherwise) based on, in respect of, or by reason
of, such obligations or their creation.
[Signature Page Follows]

-42-

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties have executed multiple originals of this
Agreement as of the date first written above.
 
ELK HILLS POWER, LLC
 
 
 
 
By:
/s/ Shawn M. Kerns
 
Name:
Shawn M. Kerns
 
Title:
President
 
 
 
 
 
 
 
CALIFORNIA RESOURCES CORPORATION
 
 
 
 
By:
/s/ Shawn M. Kerns
 
Name:
Shawn M. Kerns
 
Title:
Executive Vice President – Corporate Development

Signature Page to Commercial Agreement