Exhibit 10.75

GAS SALE AND PURCHASE AGREEMENT

BETWEEN

HILCORP ALASKA, LLC

AND

CHUGACH ELECTRIC ASSOCIATION, INC.

CEA-13

Effective Date: July 1, 2013

Delivery Commencement Date: January 1, 2015

Termination Date: March 31, 2018

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GAS SALE AND PURCHASE AGREEMENT

TABLE OF CONTENTS

 

SECTION    PAGE   PREAMBLE      1    RECITALS      3    AGREEMENT      3    l.  

DEFINITIONS & INTERPRETATION

     3    2.  

GAS SALES

     11    3.  

DELIVERY POINT; TITLE; LIABILITY AND RISK OF LOSS

     18    4.  

TERM

     19    5.  

MEASUREMENT

     19    6.  

QUALITY

     21    7.  

SALES PRICE; COST ALLOCATION; STATE’S ROYALTY SHARE

     21    8.  

INVOICING AND ASSURANCES

     23    9.  

WARRANTY OF TITLE

     25    10.  

FORCE MAJEURE

     25    11.  

REGULATORY COMMISSION OF ALASKA

     26    12.  

INDEMNIFICATION

     27    13.  

NOTICES

     27    14.  

GOVERNING LAW AND RESOLUTION OF DISPUTES

     29    15.  

MISCELLANEOUS

     32    SIGNATURES      35    EXHIBIT A: Map of Cook Inlet Area      36   
EXHIBIT B: Delivery Points and Delivery Point Meters      37    EXHIBIT C: Gas
Quality Specifications      39   

 

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GAS SALE AND PURCHASE AGREEMENT

This GAS SALE AND PURCHASE AGREEMENT (“Agreement”) is made by Hilcorp Alaska,
LLC (“Seller”), a Delaware limited liability company, with offices located at
3800 Centerpoint Drive, Suite 100, Anchorage, Alaska 99503-5826, and Chugach
Electric Association, Inc. (“Buyer”), an Alaska nonprofit electric cooperative
corporation, with offices located at 5601 Electron Drive, Anchorage, Alaska
99518-1074, collectively referred to as “Parties” and individually as “Party,”
dated as of July 1, 2013 (the “Effective Date”).

RECITALS

 

A. Seller owns, controls, or has the right to dispose of Natural Gas produced
from lands located in the Cook Inlet Area of Alaska.

 

B. Seller has acquired substantially all of Marathon’s assets in the Cook Inlet
Area. In connection with this transaction, the State of Alaska and Seller
entered into a Consent Decree dated November 7, 2012, which was approved by the
Superior Court on January 17, 2013, in Case No. 3AN-12-10858 CIV (“Consent
Decree”). The Consent Decree imposes certain terms under which Seller must
market its gas produced in the Cook Inlet Area through December 31, 2017.

 

C. Buyer is a public utility that holds Certificate of Public Convenience and
Necessity No. 8 from the RCA. Buyer provides retail electricity in a service
territory which extends from Anchorage to the northern Kenai Peninsula, and from
Whittier on Prince William Sound to Tyonek on the west side of Cook Inlet. Buyer
also provides wholesale and economy energy sales to other Alaska utilities.
Buyer desires to purchase Gas for use in Buyer’s business including, without
limitation, generating electricity for sale to Buyer’s retail, wholesale and
economy energy customers.

 

D. Seller wishes to sell Gas to Buyer on a Firm basis for four Contract Years.

 

E. In addition to Firm Gas, Buyer may desire to purchase Gas for the purpose of
handling short-term extraordinary or emergency Gas supply needs of Buyer. Any
such purchase of Gas must comply with the Consent Decree and this Agreement.

 

F. Seller and Buyer adopt the terms and conditions set forth herein to govern
this transaction.

AGREEMENT

 

1. DEFINITIONS & INTERPRETATION.

 

  1.1 Definitions. The following definitions apply to this Agreement:

“1988 Marathon – APL GSA” means the Gas Purchase Agreement between Marathon Oil
Company and Alaska Pipeline Company dated May 1, 1988, and approved by the RCA
in Docket No. U-88-49, as amended.

 

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“2000 Union Oil – APL GSA” means the Gas Sales Agreement between Union Oil
Company of California and Alaska Pipeline Company, dated November 17, 2000, and
approved by the RCA in Docket No. U-01-7, as amended.

“ACH” has the meaning set forth in Section 8.2.

“Agreement” has the meaning set forth in the Preamble.

“Alaska Clock Time” or “ACT” means Alaska Daylight Savings Time when Daylight
Savings Time is in effect and Alaska Standard Time when Daylight Saving Time is
not in effect.

“Annual Contract Quantity” means the volume of Gas required to be delivered and
sold by Seller and received and purchased by Buyer during a Contract Year during
the Term of this Agreement as set forth in Section 2.3.

“Arbitration Act” has the meaning set forth in Section 14.1.

“Average Daily Contract Quantity” means the average volume of Gas which would be
sold and purchased on any given Day during a Contract Year if the applicable
Annual Contract Quantity were delivered evenly on each Day throughout the
Contract Year. The Average Daily Contract Quantity is reduced by 4.2% for the
Day on which local time changes from Standard Time to Daylight Savings Time and
increased by 4.2% for the Day on which local time changes from Daylight Savings
Time to Standard Time.

“Base Load Gas” means the volume of Gas delivered on a Day of the Contract Year
which is equal to or less than Average Daily Contract Quantity.

“Base Load Gas Charge” means the Monthly charge for Base Load Gas calculated
pursuant to Section 7.1.

“BTU” means British Thermal Unit which is the amount of energy needed to heat
one pound of water by one degree Fahrenheit.

“Business Day” means a Day on which Buyer’s offices at 5601 Electron Drive,
Anchorage, Alaska, are open for retail business.

“Buyer” has the meaning set forth in the Preamble.

“Category” means the nature of the Gas sold and purchased under this Agreement.
The Categories are Base Load Gas, Swing Load Gas, and Emergency Load Gas.

 

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“CINGSA” means the Natural Gas storage facility owned and operated by Cook Inlet
Natural Gas Storage Alaska, LLC.

“CINGSA Gas Substitution” has the meaning set forth in Section 2.4.

“Claim” means a claim, suit, liability, loss, demand, damages or cause of action
by a third party for physical damage to property, bodily injury or death
(including recoverable legal counsel fees and costs of litigation of the party
asserting the Claim) arising from the physical operations of a Party, whether
based in contract, tort, strict liability or otherwise. “Claim” does not include
a claim based upon, arising from or related to the failure or refusal of Seller
to deliver Gas or the failure or refusal of Buyer to receive Gas under this
Agreement, for which the sole recourse and remedy is set forth in Section 2.4.

“Consent Decree” has the meaning set forth in Recital B.

“Continuous Rate” means a continuous rate of Gas delivery without significant
deviation, which rate shall be calculated by dividing the volume per Day by 24
hours. For example, a rate of 3 MMcfpd will be delivered at a Continuous Rate of
approximately 125 Mcf per hour without significant deviation.

“Contract Year” means a period beginning on January 1 at 00:00 a.m. and ending
on the following December 31 at 24:00 p.m.

“Cook Inlet Area” means that region of Alaska bordered in red on the map which
comprises Exhibit A.

“Cook Inlet Gas Distribution System” means the system of Gas transmission and
distribution pipelines located in and around the Cook Inlet Area including
pipelines owned by Alaska Pipeline Company and Hilcorp Alaska, LLC.

“Cover,” as referred to in Section 2.4, means Buyer’s commercially reasonable
efforts to obtain replacement Gas (or an alternate fuel if elected by Buyer and
replacement Gas is not available), at a price reasonable for the Cook Inlet Area
consistent with the amount of notice provided by the Seller, the immediacy of
the Buyer’s Gas consumption needs, the quantities involved, and the anticipated
length of the nonperformance by Seller.

“Daily Contract Quantity” means the volume of Gas required to be delivered by
Seller and received by Buyer on a Day during the Term of this Agreement as set
forth in Sections 2.3(B) and 2.3(C). “Daily Contract Quantity” does not include
Emergency Load Gas.

“Day” means a 24-hour calendar day beginning at 00:00 hours and ending at 24:00
hours ACT. “Day” includes the 23-hour calendar day when local time changes from
Alaska Standard Time to Alaska Daylight Savings Time and the 25-hour calendar
day when local time changes from Alaska Daylight Savings Time to Alaska Standard
Time.

 

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“Daylight Savings Time” means the advancement of timekeeping clocks forward one
hour from Standard Time near the start of spring pursuant to the Uniform Time
Act of 1966, Pub. L. 89-387, 80 Stat. 107, 15 U.S.C. §§ 260-64, as amended, as
administered by the US Department of Transportation.

“Delivery Point” has the meaning set forth in Section 3.1.

“Delivery Point Meter” has the meaning set forth in Section 3.1.

“Delivery Shortfall Volume” has the meaning set forth in Section 2.4.

“Dispute” means any dispute or controversy between the Parties arising out of
this Agreement and any dispute or controversy regarding the existence,
construction, validity, interpretation, enforceability, or breach of this
Agreement.

“Effective Date” has the meaning set forth in the Preamble.

“Emergency Gas Transaction” means an individual agreement to sell and purchase
Emergency Load Gas reached by the Parties pursuant to Section 2.3(D).

“Emergency Load Gas” means Gas sold to Buyer in excess of the Base Load Gas and
Swing Load Gas sold by Seller to Buyer to meet the short-term (one-Month or
less) extraordinary or emergency gas supply needs of Buyer.

“Emergency Load Gas Charge” means the Monthly charge for Emergency Load Gas
calculated pursuant to Section 7.1.

“Engineer” means an independent, registered professional petroleum engineer from
the firm then currently engaged by Seller to provide the reserve reports to
Seller respecting Seller’s oil and gas properties in Alaska or from another firm
agreed to by Buyer and Seller.

“Excess Royalties” means royalties (including interest and penalties thereon) in
excess of those payable on the sale of the gas at the Sales Price due to a value
attributed to the Gas under the applicable oil and gas lease which is higher
than the contract price. “Excess Royalties” do not include royalties, interest
or penalties thereon which are determined after audit to be due on the sale of
the Gas at the Sales Price.

“Excess Taxes” means taxes (including interest and penalties thereon) in excess
of those payable under tax law as of December 31, 2012, on the production or
severance of the Gas or the sale of Gas at the Sales Price. “Excess Taxes” do
not include taxes, interest or penalties thereon which are determined after
audit to be due under tax law as of December 31, 2012, on the production or
severance of the Gas or the sale of the Gas at the Sales Price.

 

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“Field Operations Gas” means Gas Seller determines, in its sole and unfettered
discretion, is necessary or desirable for Seller’s use for field operations and
maintenance, gas dehydration, gas treatment and other field use.

“Firm” means that a Party may interrupt its performance without liability only
to the extent that such performance is excused or permitted by the terms of this
Agreement.

“Force Majeure Event” has the meaning set forth in Section 10.2.

“Gas” or “Natural Gas” means any mixture of hydrocarbons or of hydrocarbons and
noncombustible gases, in a gaseous state consisting primarily of methane and
meeting the quality specifications of Section 6.1 or 6.2, as applicable.

“Gas Reserves” shall mean the total quantity of Seller’s proved developed
reserves, Seller’s proved undeveloped reserves, and a reasonable percentage of
Seller’s probable reserves as determined in accordance with sound petroleum
reservoir engineering practices.

“Gas Sale and Purchase Commitment” means the quantity of Gas that will be sold
and delivered and purchased and received under this Agreement in accordance with
Sections 2.3 and 2.4.

“Imbalance Volume” means the adjustment of the volume of Gas to be delivered by
Seller and received by Buyer hereunder to correct for previous Incidental
Deviations.

“Incidental Deviations” means the unintended differences between the Daily
Contract Quantity for a Day delivered at a Continuous Rate and the actual
deliveries and receipts made on that Day which arise from the ordinary
operations of the Cook Inlet Gas Distribution System. Deviations greater than 3%
are not Incidental Deviations.

“Liquefied Natural Gas” and “LNG” mean Gas condensed into a liquid by cooling it
to approximately –260 °F.

“Major Adjustment Request” has the meaning set forth in Section 2.3(A)(3).

“Mcf,” “MMcf” and “Bcf” mean thousand Standard Cubic Feet, Million Standard
Cubic Feet, and Billion Standard Cubic Feet, respectively.

“MMcfpd” or “MMcfd” means MMcf delivered at a Continuous Rate for 24 hours
during a Day.

 

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“Minor Adjustment Notice” has the meaning set forth in Section 2.3(A)(2).

“Month” means a period beginning at 00:00 hours ACT on the first Day of a
calendar month and ending at 24:00 hours ACT on the last Day of that calendar
month.

“Monthly Contract Quantity” has the meaning set forth in Section 2.3(C).

“Monthly Delivered Quantity” means the actual volume of Gas Seller delivered and
Buyer received during the applicable Month.

“Operational Notice” means a notice given as provided in Section 13.2.

“Permitted Delivery Range” has the meaning set forth in Section 2.3(C)(2)(b).

“RCA” means the Regulatory Commission of Alaska including its predecessor the
Alaska Public Utilities Commission, and any other entity succeeding to any of
its functions, in each case as the context requires.

“RCA Approval” has the meaning set forth in Section 11.3.

“Regular Notice” means a notice given as provided in Section 13.1.

“Sales Price” has the meaning set forth in Section 7.1.

“Seller” has the meaning set forth in the preamble.

“Seller’s Remedy” has the meaning set forth in Section 2.4.

“Standard Cubic Foot” means the amount of Gas that would occupy a volume of one
cubic foot at a temperature of sixty degrees Fahrenheit (60° F.) and at a
pressure of fourteen and sixty five hundredths (14.65) pounds per square inch
absolute.

“Standard Time” means the time of Day without the offset for Daylight Savings
Time.

“Swing Load Gas” means Gas sold to Buyer on any given Day in excess of the Base
Load Gas sold to Buyer on such Day, as determined in accordance with
Section 7.1(B)(2). “Swing Load Gas” does not include Emergency Load Gas.

“Swing Load Gas Charge” means the Monthly charge for Swing Load Gas calculated
pursuant to Section 7.1.

“Tariffs” means the tariffs of a utility or pipeline regulated by the RCA which
tariffs have been approved by the RCA and are currently in effect.

 

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“Term” has the meaning set forth in Section 4.1.

“Termination Date” means March 31, 2018.

“Termination Event” has the meaning set forth in Section 4.2.

“Transportation Costs” means charges imposed to move Gas sold under this
Agreement on pipeline carrier or public utility pipelines pursuant to
RCA-approved tariff rates and conditions.

“Year” means a calendar year.

 

  1.2 Principles of Construction. In this Agreement, unless the context
otherwise requires:

 

  (A) This Agreement is the entire agreement between the Parties respecting the
subject matter hereof.

 

  (B) Headings and the rendering of text in bold and/or italics are for
convenience only and do not affect the interpretation of this Agreement.

 

  (C) Words importing the singular include the plural and vice versa and the
masculine, feminine and neuter genders include all genders.

 

  (D) The words “hereof”, “herein”, and “hereunder” and words of similar import
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement.

 

  (E) A reference to a Section, paragraph, clause, Party, Exhibit or Schedule is
a reference to that Section, paragraph, clause of, or that Party, Exhibit or
Schedule to, this Agreement unless otherwise specified, and in the event of a
conflict, the provisions of the main body of this Agreement shall prevail over
the provisions of any Exhibit or Schedule.

 

  (F) A reference to this Agreement shall mean this Agreement including any
amendment or supplement to, or replacement, novation or modification of this
Agreement, but disregarding any amendment, supplement, replacement, novation or
modification made in breach of this Agreement.

 

  (G) A reference to a person or entity includes that person or entity’s
successors and permitted assigns.

 

  (H) The term “including” means “including without limitation” and any list of
examples following such term shall in no way restrict or limit the generality of
the word or provision in respect of which such examples are provided.

 

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  (I) References to any statute, code or statutory provision are to be construed
as a reference to the same as it may have been, or may from time to time be,
amended, modified or reenacted, and include references to all bylaws,
instruments, orders and regulations for the time being made thereunder or
deriving validity therefrom.

 

  (J) Each Party acknowledges and agrees that it has participated in the
drafting of this Agreement and has had the opportunity to consult with legal
counsel and any other advisors of its choice to its satisfaction regarding the
terms and provisions of this Agreement and the results thereof. As a result, the
rule of construction that an agreement be construed against the drafter will not
be asserted or applied to this Agreement.

 

  (K) All accounting terms not specifically defined herein shall be construed in
accordance with GAAP.

 

  (L) In the event of a conflict, a mathematical formula describing a concept or
defining a term shall prevail over words describing a concept or defining a
term.

 

  (M) References to any amount of money shall mean a reference to the amount in
US Dollars.

 

  (N) The expression “and/or” when used as a conjunction shall connote “any or
all of”.

 

  (O) Words, phrases or expressions which are not defined herein and which have
a generally accepted meaning in the industry which is the subject of this
Agreement shall have that meaning in this Agreement.

 

  (P) A waiver by either Party of any breach of the covenants and conditions to
be performed under this Agreement by the other Party shall not be construed as a
waiver of any succeeding breach of the same or any other covenant or condition.

 

  (Q) Except as otherwise expressly provided in this Agreement, no amendments to
or modifications of this Agreement shall be valid unless they are in writing and
signed by the Parties.

 

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  1.3 Exhibits.

 

  (A) All of the Exhibits that are attached to the body of this Agreement are an
integral part of this Agreement and are incorporated by reference into this
Agreement, including:

 

  (1) Exhibit A – Map of the Cook Inlet Area

 

  (2) Exhibit B – Delivery Points

 

  (3) Exhibit C – Gas Quality Specifications

 

  (B) If a conflict exists between the body of this Agreement and the Exhibits,
the body prevails to the extent of the conflict.

 

2. GAS SALES.

 

  2.1 Gas Sales Commitment; Limitation on Gas Use or Resale.

 

  (A) Subject to all of the terms and conditions of this Agreement, Seller
commits to deliver and sell to Buyer, and Buyer commits to receive and purchase
from Seller, the Natural Gas volumes and rates set forth in this Section 2.

 

  (B) Buyer may not resell Gas purchased under this Agreement for LNG export to
foreign nations, nor may Buyer resell Gas purchased under this Agreement to a
third party for resale for LNG export to foreign nations.

 

  2.2 Commitment Priorities. Seller may cease or curtail deliveries under this
Agreement without liability to Buyer to assure a sufficient supply of Field
Operations Gas or solely to meet Seller’s commitments as follows:

 

  (A) Pursuant to the 1988 Marathon – APL GSA, if it is at any time determined
that Seller’s Available Gas Reserves (as defined therein) are insufficient to
permit it to make deliveries under this Agreement and meet its obligations to
Alaska Pipeline Company under the 1988 Marathon – APL GSA, Gas deliveries under
this Agreement may be reduced or terminated by Seller in its sole discretion.
Seller’s Available Gas Reserves will be determined in accordance with the
provisions of the 1988 Marathon – APL GSA.

 

  (B) Pursuant to the 2000 Union Oil – APL GSA, Alaska Pipeline Company has
first call on Seller’s Gas delivered into the Cook Inlet Area necessary to meet
Seller’s commitments in that agreement.

 

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  2.3 Gas Sale and Purchase Commitment. Unless Seller and Buyer otherwise agree
in a writing signed by both Parties, the Gas Sale and Purchase Commitment under
this Agreement shall be as set forth below.

 

  (A) Annual Contract Quantity:

 

  (1) The Annual Contract Quantities under this Agreement are as follows:

 

Contract Year

  

Dates

  

Annual Contract
Quantity

(MMcf)

1

   01/01/15 through 12/31/15    2,427.25

2

   01/01/16 through 12/31/16    5,215.50

3

   01/01/17 through 12/31/17    7,975.25

4

   01/01/18 through 03/31/18    2,009.25

 

  (2) By notice to Seller on or before any October 1 during the Term, Buyer may
require an adjustment of not more than five percent (5%) to the Annual Contract
Quantity for the then-succeeding Contract Year (each, a “Minor Adjustment
Notice”). If Buyer provides such a Minor Adjustment Notice, then the applicable
Annual Contract Quantity, and the related Average Daily Contract Quantity and
Monthly Contract Quantities applicable to such Contract Year (each determined as
set forth herein), shall be adjusted as described in the Minor Adjustment
Notice. Buyer may not provide a Minor Adjustment Notice which reduces the Annual
Contract Quantity for the purpose of buying the amount by which the Annual
Contract Quantity was reduced from a third party. If Buyer later determines
Buyer needs to purchase all or a portion of the volumes reduced by a Minor
Adjustment Notice, Buyer shall provide Seller reasonable notice and the option
to supply those volumes to Buyer pursuant to the terms of this Agreement.

 

  (3)

By notice to Seller on or before any October 1 during the Term, Buyer may
request adjustments in the Annual Contract Quantity in excess of five percent
(5%) for the then-succeeding Contract Year (each, a “Major Adjustment Request”).
Seller shall consider each Major Adjustment Request in good faith, and, if
mutually agreed the Parties shall execute a document setting forth the revisions
to the applicable Annual Contract Quantity, and the related Average Daily
Contract Quantity and Monthly Contract Quantities (each determined as set forth
herein). Buyer may not provide a Major Adjustment Request which reduces the
Annual Contract Quantity for the purpose of buying the amount by which the
Annual Contract Quantity was reduced from a third party. If Buyer later
determines Buyer needs to purchase all or a portion of the volumes reduced by
the agreement of the Parties after Buyer issues a Major

 

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  Adjustment Request, Buyer shall provide Seller reasonable notice and the
option to supply those volumes to Buyer pursuant to the terms of this Agreement.

 

  (B) Average Daily Contract Quantity: The Average Daily Contract Quantity
during each Contract Year shall be as set forth in the following chart:

 

Contract Year

  

Dates

  

Average Daily Contract

Quantity

(MMcfd)

1

   01/01/15 through 12/31/15    6.650

2

   01/01/16 through 12/31/16    14.250

3

   01/01/17 through 12/31/17    21.850

4

   01/01/18 through 03/31/18    22.325

 

  (C) Daily and Monthly Obligations:

 

  (1) Daily Contract Quantity.

 

  (a) The Daily Contract Quantity is the Average Daily Contract Quantity set
forth in the chart in Section 2.3(B). Seller will make available to the Buyer a
volume of Gas on each Day of the Term up to 103% of the applicable Daily
Contract Quantity for such Day, on a Firm basis and according to Buyer’s
nominations and schedules provided to and worked out with Seller in accordance
with Sections 2.5 and 2.6, and otherwise in accordance with this Agreement.

 

  (b) Buyer may request that Seller deliver a higher volume of Gas on a given
Day or Days, and Seller shall inform Buyer whether Seller agrees to deliver such
a higher volume of Gas. All such additional volumes are interruptible by either
Party unless otherwise agreed.

 

  (2) Monthly Contract Quantity.

 

  (a) The “Monthly Contract Quantity” is the sum of the Daily Contract
Quantities for the applicable Month. Buyer will purchase and receive from Seller
the Monthly Contract Quantity on a Firm basis.

 

  (b)

The Parties understand that the Cook Inlet Gas Distribution System is currently
unable to delivery precisely the

 

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  nominated amount of Gas on any given Day. The mutual intent of the Parties is
to work toward assuring that the Monthly Delivered Quantity for a given Month is
within three percent (3%) of the Monthly Contract Quantity for such Month, and
that the delivered volume of Gas for each Contract Year is within three percent
(3%) of the Monthly Contract Quantity (assuming a 30-Day Month within such
Contract Year) for the applicable Contract Year (“Permitted Delivery Range”).

 

  (D) Emergency Load Gas:

 

  (1) The purpose of this Section 2.3(D) is to facilitate the delivery of Gas
from Seller to Buyer on relatively short notice when such Gas is required to
meet the short-term extraordinary or emergency gas needs of the Buyer. No single
Emergency Gas Transaction shall be for a period in excess of thirty (30) Days.
All notices made pursuant to this Section 2.3(D) will be given as Operational
Notices.

 

  (2) At any time during the term, Buyer may notify Seller that it has an
extraordinary or emergency Gas supply need and request a specific volume or
volumes of Emergency Load Gas to be delivered. In the notice, the Buyer must
specify the nature and anticipated duration of the extraordinary or emergency
situation which forms the basis of the request for additional Gas. Seller shall
promptly respond to the request indicating what Emergency Load Gas, if any, it
will make available to Buyer. The Parties will then negotiate toward an
Emergency Gas Transaction, but neither Party is obligated to agree to an
Emergency Gas Transaction and either Party may refuse to do so for any reason or
no reason.

 

  (3) If the Parties agree to an Emergency Gas Transaction, they shall
memorialize the agreement by an exchange of emails. The Parties will also
confirm the commencement and termination of all sales and purchases of Gas, the
Continuous Rate, the Delivery Point and any modifications of the Continuous Rate
by email exchange within a reasonable time after the applicable Operational
Notice. Buyer shall promptly inform Seller when the extraordinary or emergency
situation has been resolved. Sales of Emergency Load Gas shall cease as soon as
practical after the resolution of the extraordinary or emergency situation.

 

  (4) Volumes of Gas sold pursuant to Emergency Gas Transactions shall not be
included in the Annual Contract Quantity or Daily Contract Quantity and shall
not be included in the calculations of Base Load Gas and Swing Load Gas.

 

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  2.4 Nature of Gas Sale and Purchase Commitment and Remedies

 

  (A) Buyer’s Remedies:

 

  (1) If Seller for any reason, including a Force Majeure Event or quality
issues, does not deliver all of the applicable Daily Contract Quantity, or if
Buyer because of Force Majeure Event, cannot take from Seller all of the
applicable Daily Contract Quantity, Buyer may make whatever purchases are
necessary to replace the shortage. Buyer will in good faith attempt to purchase
only the amount of Gas necessary to replace the shortage. Should any provision
of this Agreement constrain Buyer in such a way that Buyer cannot replace the
shortage on reasonable terms and conditions, that provision (or provisions)
shall be relaxed or waived but only to the extent necessary to permit Buyer to
purchase its requirements on reasonable terms and conditions.

 

  (2) Subject to Section 2.3(C)(2)(b), on any given Day, if Seller fails to
deliver (or make available for delivery) up to 103% of the applicable Daily
Contract Quantity as nominated and scheduled as provided in Section 2.3(C)(1)(a)
for such Day (“Nominated Volume”) and such failure is not excused or permitted
under this Agreement, the difference between such Nominated Volume and the
amount of Gas actually delivered (or made available for delivery) that Day is
called the “Delivery Shortfall Volume.” Buyer’s sole remedy with respect to such
failure by Seller shall be Cover as provided below.

 

  (a)

Upon receiving notice or otherwise having actual knowledge of Seller’s delivery
failure, Buyer shall attempt to replace the Delivery Shortfall Volume via Cover.
For the avoidance of doubt, Buyer, in its sole discretion, may choose to
withdraw Gas stored by it or on its behalf in CINGSA (or any other storage
facility), up to the Delivery Shortfall Volume (“CINGSA Gas Substitution”), and
in such circumstance Buyer shall attempt to replace the Gas representing such
CINGSA Gas Substitution via Cover. Seller shall be responsible for, and shall
pay Buyer: (i) for all volumes of Gas that Buyer replaces through Cover, the
positive difference, if any, between the average weighted purchase price paid by
Buyer for such replacement Gas and the applicable Base Load Gas Price multiplied
by the volume of such replacement Gas; plus (ii) with respect to replacement Gas
obtained in relation to a CINGSA Gas Substitution, a sum equal to (x) all costs
to withdraw and transport the volumes represented by such CINGSA Gas

 

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  Substitution to Buyer’s facilities; plus (y) all costs to transport and inject
replacement Gas obtained via Cover into CINGSA (or any other applicable Gas
storage facility); provided that the total maximum amount payable by Seller to
Buyer under this Section 2.4(A)(2) shall be the Base Load Gas Price multiplied
by the applicable Delivery Shortfall Volume.

 

  (b) To the extent the Delivery Shortfall Volume cannot be fully replaced
through Cover, then Seller shall be responsible for, and shall pay Buyer, the
applicable Base Load Gas Price times such portion of the Delivery Shortfall
Volume that could not be replaced through Cover.

 

  (c) In no event shall Seller be liable to Buyer under this Section 2.4(A)(2)
for the payment of more than an amount equal to the Delivery Shortfall Volume
multiplied by the then-current Sales Price for Base Load Gas, whether or not all
or a portion of the Delivery Shortfall Volume could be replaced by Cover.

 

  (3) Buyer shall provide to Seller all information necessary to calculate
amounts due from Seller to Buyer (including volume, price, transportation and
injection costs (if applicable), and delivery Day, as applicable) as soon as
practicable after acquiring replacement Gas through Cover.

 

  (B) Seller’s Remedy: Subject to Section 2.3(C)(2)(b), for any given Month,
Buyer shall pay Seller for the Monthly Contract Quantity (reduced by the volume
of the Monthly Contract Quantity Seller did not deliver or Buyer did not
receive, respectively, to the extent and only to the extent such non-delivery or
non-receipt is excused or otherwise permitted under this Agreement) or the
Monthly Delivered Quantity, whichever is greater (“Seller’s Remedy”).

 

  (C) Neither Cover nor Seller’s Remedy applies to Incidental Deviations, the
remedy for which is solely the adjustment through Imbalance Volumes.

 

  (D)

Neither Party shall be entitled to an award of, and hereby waives the right to
recover, incidental, consequential, punitive, exemplary, or other non-direct
damages or any other damages from the other Party arising from or related to
this Agreement, whether asserted by or awarded to such Party or any third party
and whether based on contract, tort, strict liability or other claim or theory
of liability. The remedies listed in this Section 2.4 are the

 

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  sole and exclusive remedies for Buyer’s failure or refusal to receive Gas, or
Seller’s failure or refusal to deliver Gas, where such failures or refusals are
not excused or permitted under this Agreement.

 

  2.5 Delivery Rate and Scheduling.

 

  (A) Subject to Incidental Deviations, Seller shall deliver and Buyer shall
receive Gas at a Continuous Rate calculated based on the Average Daily Contract
Quantity applicable in a particular Contract Year.

 

  (B) By 4:00 p.m. ACT, the Day before Buyer is to receive Gas from Seller,
Buyer shall send Seller’s Gas Control Group an estimate of its hourly Gas needs
for the next Day within the quantity provisions set forth in Section 2.3.

 

  (C) Daily scheduling of Gas by gas controllers shall incorporate an Imbalance
Volume.

 

  (D) Buyer’s Fuel Supply personnel work normal business hours from 08:00 AM to
17:00 PM Alaska Clock Time (“Normal Business Hours”). Buyer’s Fuel Supply
personnel are on call outside of Normal Business Hours for emergency response
purposes. Seller and Buyer will use reasonable efforts to perform all gas
scheduling and management activities during Normal Business Hours.

 

  2.6 Communication and Rescheduling Undelivered Gas.

 

  (A) Buyer and Seller understand that this Agreement will require frequent
communication and cooperation for proper scheduling and delivery of Gas. The
acting Party will provide timely notice to the other Party when (i) Buyer
changes its receipt rate, (ii) Seller ceases or curtails deliveries or Buyer
ceases or curtails receipts, or (iii) either Buyer or Seller incurs a Force
Majeure Event.

 

  (B) Buyer and Seller will communicate and work in good faith to coordinate Gas
deliveries and receipts with the other Party regarding anticipated shut-downs or
curtailments, facility outages, maintenance and other scheduled or irregular
events which do not constitute Force Majeure Events.

 

  (C) By mutual agreement of the Parties confirmed by email or other writing,
the Parties may reschedule Gas which will not be or has not been delivered and
received as provided in Section 2.3, whether due to shut-downs or curtailments,
facility outages, maintenance and other scheduled or irregular events, due to
Force Majeure Events, or otherwise as mutually agreed.

 

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  2.7 Notices.

 

  (A) All Minor Adjustment Notices and Major Adjustment Requests shall be made
by Regular Notices. All other requests and notices made pursuant to this
Section 2 will be given as Operational Notices.

 

  (B) The Parties will document the commencement and termination of all sales
and purchases of Gas, the Continuous Rate, the Delivery Point and any
modifications of the Continuous Rate within a reasonable time after the
applicable Operational Notice. The transactional summaries will be tabulated by
the Seller in a spreadsheet that will be provided to Buyer periodically or in
response to a request. Delays in updating the spreadsheet shall not negate or
otherwise affect a sale of Natural Gas under this Agreement.

 

  2.8 Gas Reserves Opinion and Development Plans.

 

  (A) No later than September 30, 2013, and then annually on or before March 31
thereafter during the Term, Seller shall deliver to Buyer an opinion letter from
the Engineer regarding Seller’s Gas Reserves. The Engineer’s fees and expenses
shall be paid by Seller. The letter must be based on sound geologic, economic,
and other data, and must be consistent with sound engineering principles. The
letter must conclude that Seller’s Gas Reserves are sufficient to meet Seller’s
obligations to deliver the Annual Contract Quantity each Year during the
then-remaining Term, assuming reasonable and prudent operations.

 

  (B) Seller shall make an oral presentation to Buyer outlining Seller’s Gas
Reserves development plans in an annual meeting between the Parties which shall
take place no later than April 30 beginning in 2014. Buyer will take all
reasonable steps to preserve the confidentiality of all information received by
Buyer from Seller or disclosed by Seller to Buyer under this Section 2.8.

 

3. DELIVERY POINTS; TITLE; LIABILITY AND RISK OF LOSS; PIPELINES.

 

  3.1 Delivery Points.

 

  (A) Unless otherwise agreed between the Parties, the authorized delivery
points are set forth in Exhibit B (“Delivery Points”) and the “Delivery Point
Meters” listed thereunder.

 

  (B) Buyer may request Gas to be delivered at specific Delivery Point Meters
and to otherwise minimize the costs payable by Buyer pursuant to Section 7.3,
and Seller will work in good faith to honor such requests, in each case within
the limitations of Seller’s Gas production facilities, the requirements of
Seller’s other Gas sales agreements and Seller’s ability to economically
administer its business.

 

  3.2 Title. Title to all Gas delivered by Seller and received by Buyer will
pass at the Delivery Point Meters. All liability and risk associated with the
Gas will follow title.

 

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4. TERM.

 

  4.1 Term. The term of this Agreement shall commence on the Effective Date, and
unless sooner terminated under Section 4.2, end on the Termination Date
(“Term”).

 

  4.2 Termination Event Defined. Each of the following events is a “Termination
Event”: (a) any Party makes an assignment for the benefit of creditors; (b) any
Party defaults in its payment obligations under this Agreement and does not
resolve the default, as provided in Section 8; (c) any Party commences,
authorizes, or acquiesces in the commencement of a proceeding under any
bankruptcy, insolvency, or similar law, or has such a proceeding commenced
against it; or (d) any Party or any Party’s parent company becomes bankrupt or
insolvent, or is unable to pay its debts when due.

 

  4.3 Termination. If a Termination Event described in Section 4.2 occurs, the
non-defaulting Party shall have the right to immediately withhold or suspend
deliveries or payment, or terminate this Agreement.

 

  4.4 Reservations. Each Party reserves all claims, rights, setoffs,
counterclaims, and other defenses to which it is entitled under this Agreement.

 

5. MEASUREMENT.

 

  5.1 Cook Inlet Gas Distribution System Measurement Standards. The measurement
standards in effect on the applicable delivery pipelines of the Cook Inlet Gas
Distribution System on the date of delivery will apply to all Gas delivered
under this Agreement.

 

  5.2 Other Measurement Standards. The following provisions will apply with
respect to Delivery Points that are not part of the Cook Inlet Gas Distribution
System:

 

  (A) Seller shall, at its expense, provide continuous data showing Gas delivery
rates for each such Delivery Point, if so requested by Buyer, when such Delivery
Point is owned, maintained and operated by Seller. Seller shall have the right
to refuse to tender Gas for delivery to Buyer at any Delivery Point that is not
operating properly or measuring volumes of Gas accurately; provided, that such
refusal shall not alter Seller’s obligations to make available and deliver Gas
to Buyer under Section 2.

 

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  (B) If a meter at such a Delivery Point is out of service or registering
inaccurately by a variation greater than one percent (1%), the volumes of Gas
delivered shall be estimated:

 

  (1) by using the volumes registered by the check meter or meters of Seller, if
installed and accurately registering, or

 

  (2) in the absence of estimation pursuant to clause (1), by correcting the
error if the percentage of error is ascertainable by calibration, test or
mathematical calculations, or

 

  (3) in the absence of estimation pursuant to both clause (1) and clause (2),
then by estimating the quantity of deliveries based on deliveries during
comparable periods under similar conditions when the meter was registering
accurately.

 

  (C) If any measuring equipment is found to be inaccurate by one percent
(1%) or less, previous records of the equipment shall be considered accurate. If
any measuring equipment is found to be inaccurate by more than one percent (1%),
any previous records of that equipment, any previous billings will be corrected
to zero error for any period known definitely or agreed upon using the estimate
obtained via Section 5.2(B) (1), (2) or (3) above (as applicable). If a period
of inaccuracy is not definitely known or agreed upon by the Parties, the
correction shall be made for a period of one half ( 1⁄2) of the time elapsed
since the date of the last test of the meter. The correction shall fully settle
all claims based on the inaccuracy. Any measuring equipment found by test to be
inaccurate, even if such error is less than one percent (1%), will immediately
be adjusted or replaced, as appropriate, to measure accurately.

 

  (D) If Buyer notifies Seller that it desires to test the accuracy of a meter
at such a Delivery Point, Seller will test the accuracy of the measuring
equipment promptly after such notification. Buyer shall have the right to
witness the calibrating, adjusting and testing of the measuring equipment, at
Buyer’s sole cost and expense. Seller shall, on reasonable request of Buyer,
give its physical test and meter proving reports to Buyer. If there is a dispute
about any measurement, the Parties shall conduct a joint test that shall be
dispositive. If the joint test reveals there is an error, Seller shall pay all
costs associated with the joint test. If the joint test reveals there was no
error then the Party requesting such test shall pay all costs associated with
the joint test.

 

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6. QUALITY.

 

  6.1 Cook Inlet Gas Distribution System Quality Standards. Seller warrants all
Natural Gas delivered to the Delivery Point will be of a pressure, condition,
and quality which meets the requirements of the pipeline Tariff(s) applicable to
the Delivery Points.

 

  6.2 Other Quality Standards. With respect to Natural Gas delivered to Delivery
Points that are not part of the Cook Inlet Gas Distribution System or do not
otherwise have an applicable Tariff, Seller warrants that all such Natural Gas
will be of a pressure, condition, and quality that meets the Gas Quality
Specifications set forth in Exhibit C.

 

  6.3 Buyer Curtailment. Buyer may cease or curtail receipt of Gas delivered by
Seller which does not satisfy the warranty requirements of Section 6.1 or 6.2,
as applicable, and Buyer may invoke remedies available to it pursuant to this
Agreement, including under Section 2.4, with respect to all such Gas deliveries
ceased or curtailed.

 

7. SALES PRICE; COST ALLOCATION; STATE’S ROYALTY SHARE.

 

  7.1 Sales Price and Monthly Calculation.

 

  (A) Sales Price: The “Sales Price” for Gas purchased and sold hereunder shall
be as follows:

 

Contract Year

   Base Load Gas Price
(Dollars per Mcf)      Swing Load Gas Price
(Dollars per Mcf)      Emergency Load Gas Price
(Dollars per Mcf)  

1

     7.13         8.91         10.70   

2

     7.42         9.28         11.13   

3

     7.72         9.65         11.58   

4

     8.03         10.04         12.04   

 

  (B) Monthly Calculation: The amount due from Buyer to Seller for Gas sales
shall be calculated on a Monthly basis as follows:

 

  (1) Base Load Gas Charge: The Base Load Gas Charge shall be the Monthly
Delivered Quantity, subject to a cap equal to the Monthly Contract Quantity and
further subject to the provisions of Section 7.1(B)(2), times the applicable
Base Load Gas Price; provided that the Base Load Gas Charge shall include an
appropriate amount representing Seller’s Remedy, if any, as calculated in
accordance with Section 2.4(B).

 

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  (2) Swing Load Gas Charge: The Swing Load Gas Charge shall be the applicable
Swing Load Gas Price times the positive difference between the Monthly Delivered
Quantity and the Monthly Contract Quantity; provided, that if the Monthly
Delivered Quantity is within the Permitted Delivery Range, then the entire
Monthly Delivered Quantity for such Month shall be billed at the Base Load Gas
Price.

 

  (3) Emergency Load Gas Charge: The Emergency Load Gas Charge shall be the
Emergency Load Gas volume Seller sold and delivered and Buyer purchased and
received during the Month times the applicable Emergency Load Gas Price.

 

  7.2 Costs Allocated to Seller. Seller is responsible for the following costs
relating to Gas sold or moved under this Agreement:

 

  (A) Gas development, production, separation, dehydration and other processing;

 

  (B) Facility construction, operation and maintenance;

 

  (C) Gas gathering, treatment and compression necessary to meet pipeline
specifications and pressures;

 

  (D) Costs, other than Transportation Costs, to move Gas to a Delivery Point;

 

  (E) Lessor royalties, overriding royalties, production payments and other
payments of any kind (other than taxes) due to third parties upon the production
and sale of the Gas at the Sales Price, but not including Excess Royalties;

 

  (F) Severance and/or production taxes at the tax rates and under the laws and
rules in place on the Effective Date, but not including Excess Taxes; and

 

  (G) Charges and costs (other than Transportation Costs, which shall be
allocated solely pursuant to Sections 7.2(D) and 7.3(C)) assessed by the
applicable owner(s) of any portion of the Cook Inlet Gas Distribution System in
relation to Imbalance Volumes, to the extent that Seller is determined by such
owner(s) to have been responsible for the underlying imbalance.

 

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  7.3 Costs Allocated to Buyer: Buyer is responsible for the following costs
relating to Gas sold under this Agreement:

 

  (A) Transportation Costs at, from and after delivery at a Delivery Point,
including reimbursement of Transportation Costs paid initially by Seller if the
Delivery Point Meter requested by Buyer requires Seller to incur Transportation
Costs;

 

  (B) Storage, facilities, equipment, operations, and maintenance costs after
delivery at a Delivery Point;

 

  (C) Taxes imposed on the Gas or Buyer’s operations after a Delivery Point;

 

  (D) Excess Royalties;

 

  (E) Excess Taxes; and

 

  (F) Charges and costs (other than Transportation Costs, which shall be
allocated solely pursuant to Section 7.3(A)) assessed by the applicable owner(s)
of any portion of the Cook Inlet Gas Distribution System in relation to
Imbalance Volumes, to the extent that Buyer is determined by such owner(s) to
have been responsible for the underlying imbalance.

 

  7.4 Valuation of State’s Royalty Share. Pursuant to AS 38.05.180(aa) and (bb),
within thirty (30) Days after the execution of this Agreement and before any
deliveries of Gas are made under this Agreement, Seller shall submit a written
request to the Department of Natural Resources to enter into an agreement with
Seller to accept the price for the Gas established in this Agreement as the
value of the State of Alaska’s royalty share of Gas production sold by Seller
under this Agreement. The Parties shall use reasonable efforts and shall
cooperate with one another and the State in seeking the State’s approval of the
request.

 

8. INVOICING AND ASSURANCES.

 

  8.1 Billing. By the fifteenth (15th) Day of each Month, Seller shall give
Buyer an invoice showing the following for the previous Month:

 

  (A) the charge for the Gas showing the volumes of each Category of Gas sold
times the applicable Sales Price for each Category as calculated in accordance
with Section 7.1(B);

 

  (B) the credit for any Delivery Shortfall Volume as provided and calculated in
accordance with Section 2.4;

 

  (C) the costs allocated to Buyer;

 

  (D) any corrections for the previous or prior Months;

 

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  (E) any interest charges imposed under Section 8.4; and

 

  (F) the total amount due from Buyer to Seller.

 

  8.2 Payment.

 

  (A) Buyer shall make payment to Seller on or before the twenty-fifth
(25th) Day of each Month by Automated Clearing House (“ACH”) or wire transfer to
the account of Seller set out below. Upon thirty (30) Days’ written notice,
Seller may designate a different financial institution or account to which Buyer
will thereafter make payments.

 

Bank Name:          Amegy Bank Bank ABA #:          113011258 Account Name:     
    Hilcorp Alaska, LLC Account Number:          53484238

 

  (B) Buyer may set-off against and withhold from amounts payable by Buyer to
Seller any and all amounts that are due Buyer by Seller under this Agreement
where such amounts have not been credited to Buyer in Seller’s invoice.

 

  (C) Buyer may, without prejudice to any claim or right, pay any disputed
amount and must pay any undisputed amount. The Parties shall cooperate to
resolve any disputed amount in a timely manner.

 

  8.3 Remedies for Non-Payment. If Buyer fails to pay undisputed amounts to
Seller for Gas within thirty (30) Days after the invoice is received, in
addition to any other remedy available, Seller will have the right to cease or
curtail deliveries under this Agreement after notice to Buyer until payment (and
interest under Subsection 8.4 below) is received, which right will not prejudice
Seller’s rights to collect any sums due Seller (including interest under
Subsection 8.4 below) for Gas previously delivered to Buyer hereunder.

 

  8.4 Interest. Pending resolution of a billing dispute, if payment is not made
within thirty (30) Days of invoice receipt, the unpaid balance shall bear
interest, compounded Monthly, at the prime rate in effect at JPMorgan Chase
Bank, NA, plus 1% on the first Day of each Month, or the maximum contract rate
permitted by law, whichever is less, plus attorney’s fee, court costs, and other
costs in connection with the collection of unpaid amounts.

 

  8.5

Assurances. Except as described in this Section 8.5, Buyer shall not be required
to provide any assurance of payment to the other Party hereunder. If at any time
during the Term, Buyer’s credit rating (corporate or long-term senior unsecured
debt) is below BBB- by Standard & Poor’s or Baa3 by Moody’s, upon Seller’s
request Buyer shall provide to Seller, within ten (10) Business Days of any such

 

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  request, a letter of credit, a bond, a guaranty, or such other security in a
form and in a sufficient amount as shall be satisfactory to Seller in its
reasonable discretion, and Buyer shall maintain such security at its sole cost
and expense for so long as the Buyer’s credit rating is below BBB- by Standard &
Poor’s or Baa3 by Moody’s. If and when Buyer’s credit rating is equal to or
above BBB- by Standard & Poor’s and Baa3 by Moody’s, Buyer may rescind, and
Seller shall promptly release and (if applicable) deliver to Buyer, any such
security.

 

9. WARRANTY OF TITLE.

Seller warrants title at the Delivery Point to all Gas delivered to Buyer
hereunder and Seller’s right to deliver the same, and agrees to hold Buyer
harmless from, and indemnify it against, any and all loss, damage, cost,
expense, or liability of whatsoever kind arising out of claims of third persons
with respect to the title to such Gas, including costs, expenses, and reasonable
attorney’s fees incurred by Buyer in defending against any such claims.

 

10. FORCE MAJEURE.

 

  10.1 Force Majeure Event. In the event either Party is rendered unable wholly
or in part by the occurrence of a Force Majeure Event to perform its obligations
under this Agreement, the obligation of such Party (other than payment of
money), insofar as fulfillment of the obligation is affected by such Force
Majeure Event, will be suspended during the continuance of any inability so
caused, but for no longer period, and such cause will, insofar as possible, be
remedied with reasonable dispatch.

 

  10.2

Force Majeure Defined. “Force Majeure Event” means any event that directly or
indirectly renders a Party unable, wholly or in part, to perform or comply with
any obligation, covenant or condition in this Agreement if the event, or the
adverse effects of the event, is outside of the control of, and could not have
been prevented by, the affected Party with reasonable foresight, at reasonable
cost, and by the exercise of reasonable diligence in good faith, and is not
attributable to the negligence or willful misconduct of the affected Party.
Force Majeure Events include without limitation the following events (to the
extent they otherwise satisfy the definition): (i) act of God, fire, lightning,
landslide, earthquake, volcano activity, storm, hurricane, hurricane warning,
flood, high water, washout, explosion, or well blowout; (ii) strike, lockout, or
other industrial disturbance, act of the public enemy, war, military operation,
blockade, insurrection, riot, epidemic, arrest or restraint by government of
people, terrorist act, civil disturbance, or national emergency; (iii) the
inability of the affected Party to acquire, or the delay on the part of the
affected Party in acquiring pipeline shipping capacity, permits or licenses,
approvals, or authorizations by regulatory bodies needed to enable the Party to
perform; (iv) breakage of or accident to machinery, equipment, facilities, or
lines of pipe and the freezing of a well or line of pipe, well blowout, or the
partial or entire failure of a Gas well, a Gas storage

 

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  facility or any facilities for the transmission of electricity; or (v) act,
order, or requisition of any governmental agency or acting governmental
authority, or any governmental law, proration, regulation, or priority.

 

  10.3 Notices. A Party experiencing a Force Majeure Event will notify the other
Party by Operational Notice of the nature, extent and estimated duration of the
Force Majeure Event as soon as reasonably possible but in no event more than
twenty-four (24) hours after becoming aware of the occurrence of the event. The
Party experiencing the Force Majeure Event will update the other Party on a
reasonably frequent basis but in no event less than once every five (5) Days
thereafter by Operational Notice.

 

  10.4 Diligence. The Party experiencing a Force Majeure Event shall exercise
diligence in good faith to remedy the Force Majeure Event and resume full
performance under this Agreement as soon as reasonably practicable (except that
the settlement of strikes, lockouts, or other labor disputes or the restoration
of a failed natural gas well shall be entirely within the discretion of the
affected Party).

 

  10.5 Extended Force Majeure Events. If the Party claiming the Force Majeure
Event estimates that the Force Majeure Event will not be remedied for a period
of more than ninety (90) Days, the Parties shall meet within thirty (30) Days to
agree upon a commercially reasonable course of action during the period of the
Force Majeure Event that is consistent with the intent of this Agreement. If the
Parties are unable to agree upon a commercially reasonable course of action,
either Party, upon sixty (60) Days’ notice, may reduce Seller’s and Buyer’s
obligations with respect to the affected portion of the Gas to be made available
and taken hereunder; provided however, that the remaining provisions of this
Agreement shall apply with respect to the portion of Seller’s and Buyer’s
obligations that are not so reduced.

 

11. REGULATORY COMMISSION OF ALASKA.

 

  11.1 Submission. It is a condition precedent to the effectiveness of this
Agreement that it has received RCA Approval. Buyer will submit this Agreement to
the RCA for its consideration on or before July 31, 2013.

 

  11.2 Buyer’s Efforts. Buyer will use commercially reasonable efforts to obtain
regulatory approval of this Agreement. Seller shall have no responsibility to
take any action or incur any cost to obtain regulatory approval of this
Agreement. If the RCA issues an order that approves (conditionally or otherwise)
this Agreement and imposes terms and conditions or modifications unacceptable to
Buyer or Seller, each as determined in its sole and absolute discretion, Buyer
or Seller may terminate this Agreement upon written notice to the other Party,
such termination to take effect on the date outlined in any such written notice
of termination. If RCA Approval has not been obtained by January 31, 2014,
either Party may terminate this Agreement upon notice to the other Party, such
termination to take effect on the date outlined in any such written notice of
termination.

 

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  11.3 Approval. “RCA Approval” will be deemed to have occurred on the date that
an RCA order approving the Agreement without conditions or modifications
unacceptable to the Parties becomes final and is not subject to further
reconsideration or appeal, or on such other date as may be mutually agreed by
the Parties in writing.

 

12. INDEMNIFICATION.

 

  12.1 Indemnification. Each Party will protect, defend, indemnify and hold
harmless the other from any and all liability and expense on account of all
Claims arising from any act or accident including a failure to act, as to which
and to the extent that the indemnifying Party was at fault in connection with
the installation, presence, maintenance, and operation of property, equipment,
and facilities of the indemnifying Party used in connection with or associated
with the Gas delivered hereunder. This duty to protect, defend, indemnify, and
hold harmless will survive the expiration or termination of this Agreement.

 

  12.2 No Alteration of Cover Provisions. Nothing in this Section 12 shall add
to, detract from or otherwise modify the provisions of this Agreement concerning
the failure or refusal of Seller to deliver Gas or the failure or refusal of
Buyer to receive Gas under this Agreement, for which the sole recourse and
remedy is set forth in Section 2.4.

 

13. NOTICES

 

  13.1 Regular Notices. Except as specifically provided otherwise in Sections
2.7 and 10.3 of this Agreement, all notices and communications under this
Agreement (other than Operational Notices) will be made in writing by certified
mail (return receipt requested), facsimile (with confirmation by one of the
other means described herein received within two (2) Business Days of receipt of
such facsimile), email, or by nationally recognized overnight courier. All such
notices will be deemed effective (a) if mailed, on the date indicated on the
returned receipt, (b) if delivered personally, when delivered, (c) if sent by
email or by facsimile during the normal business hours of the recipient, on the
same Business Day as sent, and (d) if sent by email or facsimile after the
normal business hours of the recipient, on the next Business Day following the
date of transmission.

 

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Seller Hilcorp Alaska, LLC Attn:            Senior Vice President Physical:   
        3800 Centerpoint Drive, Suite 100            Anchorage, AK 99503
Mailing:            PO Box 244027            Anchorage, AK 99524-4027 Fax:   
        (907) 777-8350 Email:            jbarnes@hilcorp.com Buyer    Chugach
Electric Association, Inc. Attn:            Mr. Lee Thibert, Senior VP Physical:
           5601 Electron Dr.            Anchorage, AK 99519 Mailing:   
        PO Box 196300            Anchorage, AK 99519 Fax:            (907)
762-4514 Email:            Lee_Thibert@chugachelectric.com

 

  13.2 Operational Notices. Any Operational Notice required or permitted to be
given to either Party will be given by telephone and confirmed by email, at the
telephone numbers and email addresses set forth below (or such other telephone
numbers and email addresses as the Parties may designate from time to time by
written notice under Section 13.3). Notices given by telephone will be effective
immediately and the confirmation by email will be effective as provided in
Section 13.1. The Party providing an Operational Notice will attempt to contact
the primary contact first. If the primary contact is unavailable to receive
notice in a timely manner, the Party providing an Operational Notice will
contact the alternate contact.

 

Seller

 

Hilcorp Alaska, LLC

3800 Centerpoint Drive, Suite 100

Anchorage, AK 99503

 

Primary Contact:

Rich Novcaski

Commercial Manager

Telephone: (907) 777-8336

Mobile: (907) 301-1357

Fax: (907) 777-8351

Email: rnovcaski@hilcorp.com

  

 

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Alternate Contact:

Tami Ertz

Commercial Marketing Technician

Telephone: (907) 777-8411

Mobile: (907) 351-8283

Fax: (907) 777-8351

Email: tertz@hilcorp.com

 

Buyer

 

Chugach Electric Association, Inc.

PO Box 196300

Anchorage, Alaska 99519

 

Primary Contact:

Andrew White

Manager of Fuel Supply and Operations

Fuel Dispatch Telephone: (907) 762-4502

Telephone: (907) 762-4577

Mobile: (907) 306-0123

Fax: (907) 561-0027

Email: Andrew_White@chugachelectric.com

 

Alternate Contact:

Jamie Stout

Fuel Supply Analyst

Fuel Dispatch Telephone: (907) 762-4502

Telephone: (907) 762-4415

Mobile: (907) 602-0056

Fax: (907) 561-0027

Email: Jamie_Stout@chugachelectric.com

  

 

  13.3 Changes in Contact Information. Either Party may designate address
changes by formal written notice as provided in this section.

 

14. GOVERNING LAW AND RESOLUTION OF DISPUTES.

 

  14.1 Governing Law. This Agreement is governed by and interpreted under the
laws of the State of Alaska, without regard to its choice of law rules.
Arbitration shall be governed by the Revised Uniform Arbitration Act as adopted
by the State of Alaska, AS 09.43.300 – .595 (“Arbitration Act”), except as
modified in this Agreement.

 

  14.2

Resolution of Disputes. Before initiating litigation, the Parties shall work
together in good faith to resolve any Dispute between them using direct

 

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  negotiations and mediation as set out in this Section 14. While the procedures
in this Section 14 are pending, each Party shall continue to perform its
obligations under this Agreement, unless to do so would be impossible or
impracticable under the circumstances.

 

  14.3 Direct Negotiations. If a Dispute arises, a Party shall initiate the
resolution process by giving notice setting out in writing and in detail the
issues in Dispute and the value of the claim to the other Party. A meeting
between the Parties, attended by individuals with decision-making authority,
must take place within thirty (30) Days from the date the notice was sent in an
attempt to resolve the Dispute through direct negotiations.

 

  14.4 Mediation. If the Dispute cannot be settled by direct negotiations within
thirty (30) Days of initiation of the resolution process, either Party may
initiate non-binding mediation by giving notice to the other Party. The place of
mediation shall be Anchorage, Alaska. The Parties shall select a mutually
acceptable mediator within five (5) Business Days of the notice initiating
mediation.

 

  14.5 Arbitration. If the Dispute is not resolved by mediation within thirty
(30) Days from the date of the notice requiring mediation, or if the Dispute is
unresolved within sixty (60) Days from the date of the notice requiring direct
negotiations, then the Dispute shall be finally settled by binding arbitration
and either Party may initiate such arbitration by giving notice to the other
Party. The arbitration shall be conducted in accordance with The International
Institute for Conflict Prevention & Resolution (“CPR”) Rules for
Non-Administered Arbitration (“CPR Rules”), except to the extent of conflicts
between the CPR Rules at present in force and the provisions of this Agreement,
in which event the provisions of this Agreement prevail. The CPR is the
appointing authority. The place of arbitration shall be Anchorage, Alaska.

 

  14.6 Procedure. The following provisions shall apply to any arbitration
proceedings commenced pursuant to Section 14.5:

 

  (A) The number of arbitrators shall be one if the monetary value of the
Dispute is US $5,000,000 or less. The number of arbitrators shall be three if
the monetary value is greater than US $5,000,000.

 

  (B) The arbitrator or arbitrators must remain neutral, impartial and
independent regarding the Dispute and the Parties. If the number of arbitrators
to be appointed is one, that arbitrator, or the presiding arbitrator if the
arbitrators are three, must be a lawyer experienced in the resolution of
disputes with experience relating to the issues in dispute.

 

  (C)

The Parties waive any claim or right to recover for, and the arbitrator has or
arbitrators have no power to award, incidental, consequential, punitive or
exemplary damages. The arbitrator has or arbitrators have no authority

 

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  to appoint or retain expert witnesses for any purpose unless agreed to by the
Parties. The arbitrator has or arbitrators have the power to rule on objections
concerning jurisdiction, including the existence or validity of this arbitration
clause and existence or the validity of this Agreement.

 

  (D) All arbitration fees and costs shall be borne equally regardless of which
Party prevails. Each Party shall bear its own costs of legal representation and
witness expenses.

 

  (E) The arbitrator is or arbitrators are authorized to take any interim
measures as the arbitrator considers or arbitrators consider necessary,
including the making of interim orders or awards or partial final awards. An
interim order or award may be enforced in the same manner as a final award using
the procedures specified below. Further, the arbitrator is or arbitrators are
authorized to make pre- or post-award interest at the interest rate specified in
Subsection 8.4.

 

  (F) The arbitrator or arbitrators must render a reasoned award in writing.
This award shall be based upon a decision which must detail the findings of fact
and conclusions of law on which it rests.

 

  (G) The Dispute will be resolved as quickly as possible. The arbitrator’s or
arbitrators’ award must be issued within three (3) Months from completion of the
hearing, or as soon as possible thereafter.

 

  14.7 Enforceability.

 

  (A) All disputes arising under this Agreement not resolved by the Parties via
mediation and/or arbitration will be resolved in the state or federal courts of
Alaska in Anchorage, Alaska. Each party, to the extent permitted by law,
knowingly, voluntarily, and intentionally waives its right to a trial by jury in
any action or other legal proceeding arising out of or relating to this
Agreement and the transactions it contemplates. This waiver applies to any
action or legal proceeding, whether sounding in contract, tort, or otherwise.

 

  (B) Except for proceedings to preserve property pending determination by the
arbitrator or arbitrators or to enforce an award, the mandatory exclusive venue
for any judicial proceeding permitted in this Agreement is Anchorage, Alaska.
The Parties consent to the jurisdiction of the state and federal courts in
Anchorage, Alaska, and waive any defenses they have regarding jurisdiction.

 

  (C) Proceedings to enforce judgment entered on an award may be brought in any
court having jurisdiction over the person or assets of the non-prevailing Party.
The prevailing Party may seek, in any court having jurisdiction, judicial
recognition of the award, or order of enforcement or any other order or decree
that is necessary to give full effect to the award.

 

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  14.8 Confidentiality.

 

  (A) The Parties agree that any Dispute and any negotiations, mediation and
arbitration proceedings between the Parties in relation to any Dispute shall be
confidential and will not be disclosed to any third party.

 

  (B) The Parties further agree that any information, documents or materials
produced for the purposes of, or used in, negotiations, mediation or arbitration
of any Dispute shall be confidential and will not be disclosed to any third
party.

 

  (C) Without prejudice to the foregoing, the Parties agree that disclosure may
be made:

 

  (1) In order to enforce any of the provisions of this Agreement including
without limitation, the agreement to arbitrate, any arbitration order or award
and any court judgment.

 

  (2) To the auditors, legal advisers, insurers and affiliates of that Party to
whom the confidentiality obligations set out in this Agreement shall extend.

 

  (3) Where that Party is under a legal or regulatory obligation to make such
disclosure, but limited to the extent of that legal obligation.

 

  (4) With the prior written consent of the other Party.

 

  (D) The Parties agree to submit to the jurisdiction of the state and federal
courts in Anchorage, Alaska, for the purposes of any proceedings to enforce this
Section 14.8.

 

15. MISCELLANEOUS

 

  15.1 Authority. Each Party covenants to each other Party that it has the legal
authority to enter into and perform this Agreement and each obligation assumed
by such Party under this Agreement.

 

  15.2 Further Assurances. The Parties shall at their own cost and expense
execute and deliver such further documents and instruments and shall take such
other actions as may be reasonably required or appropriate to evidence or
perform the intent and purposes of this Agreement or to show the ability to
perform the intent and purposes of this Agreement.

 

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  15.3 No Duty to Third Parties. This Agreement is made for the sole benefit of
the Parties and their respective successors and assigns. The Parties do not
intend to create, and this Agreement will not be construed to create, by
implication or otherwise, any rights in any other person or entity not a Party
to this Agreement, and no such person or entity will have any rights or remedies
under or by reason of this Agreement, or any right to the exercise of any right
or power hereunder or arising from any default hereunder.

 

  15.4 No Partnership. The execution and performance of this Agreement is not
intended by the Parties to create and will not be construed to create any
partnership or business association between the Parties.

 

  15.5 Right to Examine Books and Records. Each Party to this Agreement, at its
sole expense, will have the right to audit the books and records of the other
Party relating to performance of this Agreement. All audits will be conducted in
accordance with professional auditing standards and during normal business
hours. The audited Party will fully cooperate with the auditing Party to
accomplish the audit as expeditiously as possible. Each Party’s right to audit
will remain in effect until two (2) years after termination or expiration of
this Agreement.

 

  15.6 Conflicts of Interest. Each Party represents and warrants to the other
Party that said Party or its subcontractors, and its and their owners,
shareholders, partners, directors, offices, employees or other agents have
neither paid, agreed to pay, nor will pay, any sums, kickbacks, or other such
consideration to any owners, shareholders, partners, directors, offices,
employees or other agent of the other Party, or to any third party in connection
with this Agreement, nor has any such payment or agreement for payment been
requested or solicited by any such owners, shareholders, partners, directors,
offices, employees or other agents.

 

  15.7 Binding Nature; Successors and Assigns; Assignment. This Agreement shall
be binding upon and inure to the benefit of the successors, assigns, personal
representatives, and heirs of the respective Parties hereto, and the covenants,
conditions, rights and obligations of this Agreement shall run for the full term
of this Agreement. This Agreement is assignable only with the prior written
consent of the other Party, which consent will not be unreasonably withheld. No
assignment for which written consent has been received will be effective until
the assignee agrees in writing to assume and fully perform the terms of this
Agreement.

 

  15.8 Seller Not A Public Utility. Seller is not a public utility and nothing
contained herein will be deemed as a dedication to the public of the Natural
Gas, or any land, wells, pipelines, or other facilities, or any part thereof.

 

  15.9

Counterparts. This Agreement may be executed by the Parties in any number of
counterparts and on separate counterparts, including electronic transmittals,
each of which when so executed will be deemed an original, but all such
counterparts,

 

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  when taken together, will constitute but one and the same Agreement. In the
event one Party executes the Agreement, and the other Party does not execute the
Agreement within ten (10) Days of the first Party’s execution, the execution of
the Agreement by the first Party will be deemed null and void.

The remainder of the page intentionally left blank.

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the
date set forth in the preamble.

IMPORTANT NOTICE: THIS AGREEMENT CONTAINS PROVISIONS REGARDING INDEMNITIES AND
WARRANTIES THAT EXPRESS THE AGREEMENT OF THE PARTIES CONCERNING CLAIMS ARISING
OUT OF THIS AGREEMENT.

 

HILCORP ALASKA, LLC     CHUGACH ELECTRIC ASSOCIATION, INC. Signature:    
Signature:

/s/ John A. Barnes

   

/s/ Bradley Evans

Name:  

John A. Barnes

    Name:  

Bradley Evans

Title:  

Sr VP HAK

    Title:  

CEO

Date:  

28 June 2013

    Date:  

July 1st, 2013

 

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GAS SALE AND PURCHASE AGREEMENT

Exhibit A

Map of Cook Inlet Area

 

LOGO [g597134ex10_75pg036.jpg]

 

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GAS SALE AND PURCHASE AGREEMENT

Exhibit B

Delivery Points and Delivery Point Meters

The following Delivery Points are authorized under this Agreement. Unless
otherwise agreed by the Parties, Seller may deliver Gas sold under this
Agreement at any Delivery Point listed herein.

 

1. Beluga River Unit (Connections), as follows:

 

  a. The inlet to Buyer’s facilities connected to the Beluga Unit Area
Connection to CEA off the Beluga River Unit’s gas filter building (Meter Station
110) located within the West  1⁄2 of the Southeast  1⁄4 of Section 26, Township
13 North, Range 10 West, Kenai Peninsula Borough, Seward Meridian, State of
Alaska.

 

  b. Beluga Area Unit Connection (ENSTAR/APC Metering station 8601, Meters 170
A&B). At the upstream flange of Alaska Pipeline Company’s meter at or near the
inlet of Alaska Pipeline Company’s Beluga-Anchorage pipeline located within the
West  1⁄2 of the Southwest  1⁄4 Section 26, Township 13 North, Range 10 West,
Kenai Peninsula Borough, Seward Meridian, State of Alaska.

 

2. CIGGS to Beluga Pipeline 8106/401 interconnect meters, as described in CIGGS
Pipeline Tariff RCA No. 711.

 

3. The Kenai-Anchorage Pipeline – Kenai Unit Area Connection (ENSTAR/APC Meters
500 and 502). At the upstream flange of the Alaska Pipeline Company’s master
meter located at or near the inlet of the Alaska Pipeline Company’s
Kenai-Anchorage pipeline in Section 30, Township 5 North, Range 11 West, Kenai
Peninsula Borough, Seward Meridian, State of Alaska.

 

4. The Kenai Kachemak Pipeline – KKPL-APC Interconnection Point (MSN 601). At
the downstream weld of the 8-inch electronic isolation fitting, located just
outside of KKPL’s meter building, between the northern terminus of the KKPL and
the APL’s lateral to the inlet of the APC’s Kenai-Anchorage pipeline in
Southeast  1⁄4 of Section 30, Township 5 North, Range 11 West, Kenai Peninsula
Borough, Seward Meridian, State of Alaska.

 

5. The Kenai-Anchorage Pipeline –

 

  a. Sterling Unit Connection (ENSTAR/APC Metering station 677, 9100). At the
upstream flange of the Transporter’s meter at or near the connection of the
Transporter’s Royalty Pipeline located within the Northeast  1⁄4 of Section 9,
Township 5 North, Range 10 West, Kenai Peninsula Borough, Seward Meridian, State
of Alaska.

 

  b. West Fork (ENSTAR/APC Station K676, 2200). West Fork Connection (ENSTAR/APC
Station K676, Meters 924 & 925). At the upstream flange of Alaska Pipeline
Company’s meter at or near the connection of the pipeline from the West Fork
field and Alaska Pipeline Company’s Kenai-Anchorage pipeline located in the
South 60 feet of the Northwest  1⁄4 of the Northwest  1⁄4 of Section 12,
Township 5 North, Range 9 West, Kenai Peninsula Borough, Seward Meridian, State
of Alaska.

 

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6. APC Royalty Line

 

  a. ENSTAR/APC Meter Beaver Creek 1100: At the upstream flange of transporter’s
meter at or near Transporter’s existing pipeline within the Northwest  1⁄4 ,
Southwest  1⁄4, Section 7, Township 6 North, Range 10 West, Kenai Peninsula
Borough, Seward Meridian, Alaska.

 

  b. ENSTAR/APC Meter Swanson River 520: At the upstream flange of
Unocal/Chevron’s meter located at or near the inlet of the Company’s North Kenai
Lateral pipeline in Government Lot 1, Section 21, Township 7 North, Range 12
West, Kenai Peninsula Borough, Seward Meridian, State of Alaska.

 

7. APC Beluga-Anchorage Pipeline ENSTAR/APC Metering Points for the following
interconnection meters, as described below:

 

  a. Pretty Creek Unit & Storage (ENSTAR/APC Metering station B602, Meters 189 A
& 189 B). At the upstream flange of Alaska Pipeline Company’s meter at or near
the connection of the Alaska Pipeline Company’s Beluga-Anchorage pipeline
located within the South  1⁄2, Section 28, Township 14 North, Range 9 West,
Matanuska-Susitna Borough, Seward Meridian, State of Alaska.

 

  b. Stump Lake/Ivan River Unit & Storage (ENSTAR/APC Metering station B603,
Meters 600& 601). At the upstream flange of the Alaska Pipeline Company’s meter
at or near the connection of the Alaska Pipeline Company’s Beluga-Anchorage
pipeline located within the Southeast  1⁄4 of the Northwest  1⁄4 of the
Northeast  1⁄4 of the Southwest  1⁄4 of Section 22, Township 14 North, Range 9
West, Matanuska-Susitna Borough, Seward Meridian, State of Alaska.

 

  c. Lewis River Unit (ENSTAR/APC Metering station B604, Meters 168 A & 168 B).
At the upstream flange of the Alaska Pipeline Company’s meter at or near the
connection of the Alaska Pipeline Company’s Beluga-Anchorage pipeline located
within the Northwest  1⁄4 of Section 2, Township 14 North, Range 9 West,
Matanuska-Susitna Borough, Seward Meridian, State of Alaska.

 

8. The Kenai Kachemak Pipeline – KKPL-KNPL 600 interconnect meter, as described
in the KKPL Tariff RCA No. 668.

 

9. The Kenai Nikiski Pipeline – KNPL Receipt Points (301, 303, 400, 420, 600),
as described in the KNPL Tariff RCA No. 689

 

  a. Cannery Loop (301, 303).

 

  b. Kenai Gas Field (400).

 

  c. Swanson River (420).

 

  d. Kenai Kachemak Pipeline (600).

 

10. CIGGS to KNPL 401 interconnect meter at the upstream flange of the CIGGS and
KNPL pipelines located in the Northeast  1⁄4 of the Northeast  1⁄4 of
Section 21, Township 7 North, Range 12 West, Kenai Peninsula Borough, Seward
Meridian, State of Alaska.

 

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GAS SALE AND PURCHASE AGREEMENT

Exhibit C

Gas Quality Specifications

The following are the “Gas Quality Specifications” for Gas sold and purchased
under this Agreement:

 

Quality    Specification Gross Heating Value   

³ 950 BTUs per Standard Cubic Foot; and

£ 1,050 BTUs per Standard Cubic Foot.

Deleterious Matter       General    Commercially free of dust, gum, gum forming
constituents, or other liquid or solid matter that may separate from the Gas in
transportation    Temperature    £ 120º Fahrenheit    Water    £ 4 pounds per
MMcf    Hydrogen Sulfide    £ 1 grain per 100 Standard Cubic Feet    Sulphur   
£ 20 grains of sulphur per 100 Standard Cubic Feet    Carbon Dioxide    £ 3% by
volume    Oxygen    £ 1% by volume    Filtration    Passed through a .3 micron
coalescing filter prior to delivery Pressure    Gas shall be delivered at
sufficient pressure to enter the pipeline for delivery at the Delivery Point

 

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