exv10wxwy



 






PORTIONS OF THIS EXHIBIT IDENTIFIED BY “****” HAVE BEEN DELETED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER RULE 24b-2 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND THE FREEDOM OF INFORMATION ACT.




Exhibit 10(w)




STORAGE SERVICE AGREEMENT




BY AND BETWEEN




BAY GAS STORAGE COMPANY, LTD.




AND




FLORIDA POWER CORPORATION




d/b/a PROGRESS ENERGY FLORIDA, INC.




CONTRACT NUMBER FPEF-08




 









 





TABLE OF CONTENTS




	 	 	 	 	 
	ARTICLE	 	 	PAGE
	I.
	 	Conditions Precedent	 	1
	 
	 	 	 	 
	II.
	 	Commencement of Operations	 	3
	 
	 	 	 	 
	III.
	 	Gas to be Received, Stored and Delivered	 	3
	 
	 	 	 	 
	IV.
	 	Performance Obligations	 	5
	 
	 	 	 	 
	V.
	 	Point(s) of Receipt and Delivery	 	5
	 
	 	 	 	 
	VI.
	 	Title, Risk of Loss and Insurance	 	6
	 
	 	 	 	 
	VII.
	 	Term	 	7
	 
	 	 	 	 
	VIII.
	 	Default and Termination	 	8
	 
	 	 	 	 
	IX.
	 	Rates	 	9
	 
	 	 	 	 
	X.
	 	Taxes	 	9
	 
	 	 	 	 
	XI.
	 	Notices	 	10
	 
	 	 	 	 
	XII.
	 	Nominations	 	11
	 
	 	 	 	 
	XIII.
	 	General Terms and Conditions;	 	 
	 
	 	Statement of Conditions for Gas Storage	 	12
	 
	 	 	 	 
	XIV.
	 	Miscellaneous	 	12






 









 






Exhibits 



Exhibit “A” – Points of Receipt and Points of Delivery



Exhibit “B” – General Terms and Conditions



Exhibit “C” – Amended Statement of Conditions



Exhibit “D” – Sample Nomination Form



Exhibit “E” – Form of Assignment Consent




 









 








STORAGE SERVICE AGREEMENT




     THIS STORAGE SERVICE AGREEMENT (this “Contract” or “Agreement”) is made and entered into by
and between BAY GAS STORAGE COMPANY, LTD (“Bay Gas”), an Alabama limited partnership, and Florida
Power Corporation d/b/a Progress Energy Florida, Inc. (“Shipper”), Bay Gas and Shipper hereinafter
may be referred to individually as “Party” and collectively as “Parties”.



W I T N E S S E T H:




     WHEREAS, Bay Gas intends to develop certain new underground gas storage facilities (the “New
Storage Facilities”) to be constructed in connection with existing underground gas storage
facilities located near McIntosh, Alabama which are owned and operated by Bay Gas (the “Existing
Storage Facilities”; the Existing Storage Facilities and New Storage Facilities being referred to
herein collectively as the “Storage Facilities”); and



     WHEREAS, Shipper desires to contract for a portion of the storage capacity of the Storage
Facilities, and desires that Bay Gas receive at the Point(s) of Receipt specified on Exhibit “A”
attached hereto and made a part hereof, certain quantities of gas from the pipeline facilities
identified therein for the purpose of injecting and storing such gas for Shipper (or for its
account) in the Storage Facilities, and that Bay Gas deliver such gas, on a firm basis, into the
pipeline facilities identified on Exhibit “A” at the Point(s) of Delivery therein specified and
provide such other services as may be agreed upon between Shipper and Bay Gas; and



     WHEREAS, Bay Gas desires to perform such services for Shipper, all to be provided pursuant and
subject to the terms and conditions hereof; and



     NOW, THEREFORE, for and in consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Bay
Gas and Shipper hereby agree as follows:



ARTICLE I




CONDITIONS PRECEDENT




     1.1 Conditions Precedent. Within 120 days following the date of this Agreement, Bay
Gas shall exert its commercially reasonable best efforts to obtain:



 









 






	 	(a)	 	Satisfactory financing for the construction of New Storage Facilities to
provide services to Shipper as provided herein (it being understood and agreed that the
determinations of what New Storage Facilities shall be constructed and what financing
is satisfactory shall be in the sole discretion of Bay Gas); and
	 
	 	(b)	 	All permits, authorizations, certificates and approvals, as deemed necessary or
desirable by Bay Gas, from all appropriate local, state or federal agencies having
jurisdiction over the construction, operation or rates charged for services, to enable
it to perform its obligations and receive the benefits provided for hereunder.




The Parties obligations under this Agreement are expressly conditioned upon the satisfaction or
waiver of the foregoing conditions precedent on or before the day specified above.




     1.3 Commitment Notice. Promptly following the attainment by Bay Gas of satisfactory
arrangements for financing, and all permits, authorizations, certificates and approvals as set
forth in Section 1.1(a) and 1.1(b) consistent with the terms of this Agreement (or the waiver
thereof by Bay Gas and Shipper), Bay Gas shall provide Shipper with written notice (the “Commitment
Notice”) to such effect.



     1.4 Shipper’s Termination Right. Notwithstanding Section 1.1, 1.2 and 1.3, Bay Gas
shall provide Shipper with a Commitment Notice no later than **** days following the date of this
Contract, failing which Shipper shall have the right to terminate this Contract by written notice
to Bay Gas.



     1.5 Bay Gas’ Termination Right. If Bay Gas determines at any time prior to March 1,
2007, that there has been a material adverse change in its assessment of the prospective economic
benefits from construction of all or any portion of the New Storage Facilities, Bay Gas shall have
the right to terminate this Agreement upon 30 days prior written notice to Shipper (“Notice of
Termination”). This Agreement shall terminate upon the expiration of the 30-day period unless
within such period (a) Bay Gas withdraws such Notice of Termination in writing or (b) the Parties,
in writing, enter into a mutually acceptable amendment to the Agreement. Bay Gas’ termination
rights hereunder shall not apply with respect to any change in prospective economic benefit
resulting from the willingness of another shipper to pay rates or accept terms and conditions of
service more beneficial to Bay Gas than those set forth herein.



2









 





ARTICLE II




COMMENCEMENT OF OPERATIONS




     Commencement Date. If Bay Gas provides the Commitment Notice described in ARTICLE I,
Bay Gas shall thereafter provide Shipper written notice when facilities to provide the services
specified herein are to be operational, and shall state in such notice that Bay Gas will be ready
to receive gas for storage and otherwise provide to Shipper the services specified herein on or
before May 1, 2008 (hereinafter referred to as the “Commencement Date”). If the New Storage
Facilities have not been placed in service by July 1, 2008, Shipper may terminate this Contract by
written notice to Bay Gas.



ARTICLE III




GAS TO BE RECEIVED, STORED AND DELIVERED




     3.1 Contract Quantities. Subject to the terms and conditions established herein and
in Bay Gas’ General Terms and Conditions, attached as Exhibit “B”, and made a part hereof, and
Statement of Conditions, attached as Exhibit “C” and made a part hereof, Bay Gas shall provide the
following capacities to Shipper, provided that under no circumstances will Bay Gas be obligated to
provide to Shipper capacities in excess of the maximum quantities set forth below:




	 	(a)	 	Firm Storage — a Firm Maximum Storage Quantity (“FMSQ”) in the Storage
Facilities equal to 500,000 MMBtu.
	 
	 	(b)	 	Firm Withdrawal — a Firm Maximum Daily Withdrawal Quantity (“FMDWQ”) of ****
MMBtu per day;
	 
	 	(c)	 	Firm Injection — a Firm Maximum Daily Injection Quantity (“FMDIQ”) of ****
MMBtu per day.





     3.2 Gas Tendered. Shipper shall tender or cause to be tendered to Bay Gas at the
Point(s) of Receipt specified on Exhibit “A” any gas which Shipper desires to have injected into
storage hereunder. The obligation of Bay Gas to receive gas shall not exceed: (a) at any Point of
Receipt the lesser of, (i) the Injection Quantities for such Point of Receipt, or (ii) the total
daily volume that Shipper or its designee is able and willing to tender at such Point of Receipt;
or (b) the aggregate Injection Quantities for all Points of Receipt. Shipper shall also receive or
cause to be received at the Point(s) of Delivery herein specified on Exhibit “A” gas it requests to
be withdrawn from storage by Bay Gas.



3









 





     3.3 Gas Received and Delivered. Subject to the operating conditions of the
pipeline(s) delivering or receiving gas for Shipper’s account and the terms hereof, Bay Gas shall
receive gas for injection from Shipper at the Point(s) of Receipt and deliver gas to Shipper at the
Point(s) of Delivery specified on Exhibit “A” as scheduled by Shipper from time to time; provided
that Bay Gas shall not be obligated to receive for injection any quantity of gas if the injection
of the same would cause the quantity of gas stored in the Storage Facilities for Shipper’s account
(“Shipper’s Gas Storage Inventory”) to exceed the total of Shipper’s FMSQ as stated above; nor
shall Bay Gas be obligated at any time to deliver more gas to Shipper than Shipper has in its
then-current Shipper’s Gas Storage Inventory.



     3.4 Additional Volumes. In addition to the maximum daily rates of injection and
withdrawal as specified above in Section 3.1, and in addition to the maximum daily rates of receipt
and delivery specified on Exhibit “A” attached hereto for each Point of Receipt and Point of
Delivery, Bay Gas shall use its best efforts to accommodate requests of Shipper to inject or
withdraw gas at greater rates of flow at such times as such additional capacities are not required
for service to other storage customers. Any such additional services shall be provided on a fully
interruptible basis and at rates agreed to between Shipper and Bay Gas at the time such services
are rendered. Additional withdrawal and/or injections will be made only to the extent that Shipper
has gas in storage to be withdrawn, or unfilled capacity in the Storage Facilities reserved as part
of Shipper’s FMSQ as stated herein.



     3.5 Gas to be Withdrawn on Termination. Shipper must have all of its gas withdrawn by
the end of the term of this Contract. If at any time service pursuant to this Contract is canceled
or terminated prior to the end of the term specified herein and Shipper has gas in its then-current
Shipper’s Gas Storage Inventory, Shipper shall be required to withdraw its gas within a
**** day period beginning on the day of termination or Shipper may transfer title of any volumes of
gas in storage to a third party with whom Company has a Storage Service Agreement, at no charge or
expense to Shipper or such third-party, subject to such third party’s MSQ. If during the **** day
period there is an event of force majeure that prevents Shipper from withdrawing its gas, the ****
period will be extended by term of the force majeure. During this period, this Contract shall
continue in force and effect for the sole purpose of withdrawal and delivery of and payment for
storage services for said gas. If the gas is not withdrawn or transferred as provided above within
the specified time period, Bay Gas shall take title to such gas not withdrawn.



     3.6 Option to Expand Capacity at Agreed Rates. Upon execution of this Agreement and
prior to the Commencement Date, and subject to the availability of sufficient existing capacity at
the New or Existing Storage Facilities, Shipper shall have the right, upon written notice to Bay
Gas, to expand its subscription to the services provided for under this Agreement by up to an
additional 100% at the rates, terms and conditions of service provided for hereunder, subject to
the needs of Bay Gas to conduct an open season for the available capacity.



4









 





ARTICLE IV




PERFORMANCE OBLIGATION




     4.1 Firm Service. All Firm service rendered under this Contract shall be provided to
Shipper except in the case of force majeure as described in Bay Gas’ General Terms and Conditions
attached as Exhibit “B”. Bay Gas shall not be obligated to provide capacities in excess of those
stated in Section 3.1 of this Contract.



     4.2 Interruptible Service. All Interruptible service rendered under this Contract
shall be provided to Shipper on a fully interruptible basis as described in Bay Gas’ General Terms
and Conditions attached as Exhibit “B”. Bay Gas shall not be obligated to provide capacities in
excess of those stated in Article 3.1 of this Contract.



     4.3 Non-Subordination. Pursuant to Article III, Section A, Subsection 1 of Bay Gas
Storage Company’s Statement of Conditions for NGPA Section 311(a)(2) Gas Storage and Transmission
Services, once capacity is made available to Shipper pursuant to this Agreement, such capacity
shall be scheduled, allocated or curtailed only as set forth in Sections III, B and C of the
Statement of Conditions. Shipper’s firm service shall not be limited or subordinated to any other
form of firm services provided by Bay Gas.



ARTICLE V




POINT(S) OF RECEIPT AND DELIVERY




     5.1 Point(s) of Receipt. The Point(s) of Receipt for all gas to be tendered by
Shipper to Bay Gas for injection into the Storage Facilities shall be as specified on Exhibit “A”,
and the maximum daily quantity of gas which Bay Gas is obligated to receive from Shipper at each
individual Point of Receipt shall not exceed the maximum stated thereon. Bay Gas agrees pursuant
to Article 3.4 above, to accommodate flow variations requested by Shipper different from those
specified on Exhibit “A” to the extent such variations can be accommodated without endangering the
service to Bay Gas’ other Shippers or the operational integrity of Bay Gas’ facilities.



     5.2 Point(s) of Delivery. The Point(s) of Delivery for all gas to be tendered by Bay
Gas to Shipper for delivery pursuant to the terms hereof shall be as specified on Exhibit “A”, and
the maximum quantities of gas which Bay Gas is obligated to deliver to Shipper at each such Point
of Delivery shall not exceed the maximum stated thereon. Bay Gas agrees pursuant to Article 3.4
above, to accommodate flow variations requested by Shipper different from those specified on
Exhibit “A” to the extent such variations can be accommodated without endangering the service to
Bay Gas’ other Shippers or the operational integrity of Bay Gas’ facilities.



5









 





     5.3 Addition/Deletion of Point(s) of Receipt or Delivery. Bay Gas and Shipper may add
or delete Point(s) of Receipt or Delivery from time to time by mutual agreement evidenced by a
signed amendment to Exhibit “A”.



ARTICLE VI




TITLE, RISK OF LOSS AND INSURANCE




     6.1 Title. Title to the natural gas stored by Bay Gas and delivered to Shipper
hereunder shall, at all times, be in Shipper’s name. Bay Gas makes no warranty of title
whatsoever. Shipper warrants for itself, its successors and assigns, that it will have at the time
of delivery of gas for storage hereunder good title or valid right to deliver such gas stored
hereunder. Shipper warrants for itself, its successors and assigns, that the gas it delivers
hereunder shall be free and clear of all liens, encumbrances, or claims whatsoever; and that it
will indemnify Bay Gas and save it harmless from all claims, suits, actions, damages, costs and
expenses arising directly or indirectly from or with respect to the title to gas tendered to Bay
Gas hereunder.



     6.2 No Encumbrance on Stored Gas. Bay Gas covenants that it shall neither cause nor
allow any cloud or encumbrance of any nature to arise by, through or under Bay Gas with respect to
Shipper’s title to any gas tendered to Bay Gas for storage, and agrees to deliver such gas pursuant
to this Agreement free from all liens and adverse claims arising by, through or under Bay Gas, and
that it will indemnify, protect, and save Shipper harmless from all claims, suits, actions,
damages, costs and expenses arising directly or indirectly from the same.



     6.3 Control and Possession. As between Shipper and Bay Gas: Shipper shall be in
control and possession of the gas prior to delivery to Bay Gas for injection at the Point(s) of
Receipt and after delivery by Bay Gas to Shipper at the Point(s) of Delivery, and shall indemnify
and hold Bay Gas harmless from any damage or injury caused thereby except for damages and injuries
caused by the sole negligence of Bay Gas; and, Bay Gas shall be in control and possession of the
gas after the receipt of the same for injection at the Point(s) of Receipt and until delivery by
Bay Gas to Shipper at the Point(s) of Delivery, and shall indemnify and hold Shipper harmless from
any damage or injury caused thereby, except for damages and injuries caused by the sole negligence
of Shipper. The risk of loss for all gas injected into, stored in and withdrawn from the Storage
Facilities shall be and remain with the Party having control and possession of the gas as herein
provided.



     6.4 Insurance. Bay Gas will obtain and maintain during the Primary and any subsequent
Term of this Agreement, at Bay Gas’ sole cost and expense, insurance that will cover, among other
things, risk of loss of Shipper’s natural gas held in storage in the New or Existing Storage
Facilities. Such gas loss insurance, which will be for the



6









 







benefit of Shipper, will be written on insurance industry standard forms reflecting usual and
customary terms applicable to gas storage loss insurance coverage, and will cover the market value
of Shipper’s natural gas inventory in storage. That value, unless otherwise agreed to by the
Parties, currently based on the first of the month FGT Zone 3 as published in Platts Gas Daily or,
its successor publication, plus transportation to the Storage Facilities will be adjusted from time
to time to reflect then-current inventory valuations. Shipper will have no obligation to commence
its obligations (including without limitation payment of the demand charges) under this Agreement
until Shipper has received from Bay Gas evidence that Shipper is a named insured or assured under a
policy containing substantially the terms of insurance provided herein.


Bay Gas agrees that, promptly upon identifying the insurance underwriter(s) that will provide the
referenced insurance coverage, it will inform Shipper of the identity of such underwriter(s). Bay
Gas further agrees that it will provide to Shipper, promptly upon receipt thereof, a copy of each
insurance certificate evidencing proof of coverage and the value of inventory so covered.




ARTICLE VII




TERM



Primary Term; Renewal. Subject to termination in accordance with the provisions of ARTICLE
I or ARTICLE II:





	 	(a)	 	this Contract shall be binding between the Parties as of its date of execution,
and shall be effective with respect to services rendered as of the Commencement Date;
and
	 
	 	(b)	 	upon the occurrence of the Commencement Date, this Contract shall continue in
full force and effect for a period of five (5) years (“Primary Term”).




Following the Primary Term this Contract shall continue from year to year unless terminated on the
anniversary date of the Commencement Date of any year by either Party upon not less than
one-hundred eighty (180) days written notice prior to the anniversary date of such Commencement
Date. Upon the provision of any such notice by Bay Gas to Shipper, and within thirty days of
Shipper’s receipt thereof, Shipper shall have a right to notify Bay Gas, in writing, of Shipper’s
desire to renew this Contract. Upon Bay Gas’ receipt of such notice, Bay Gas agrees to negotiate
with Shipper, in good faith and on an exclusive basis, for a period of **** days, regarding the
terms and conditions of such renewal. If Bay Gas and Shipper are unable to reach agreement on the
terms of Contract renewal within such **** day period then this Contract, and the parties
obligations hereunder, shall terminate upon the expiration of such period, but no earlier than the
expiration of the Primary Term or the anniversary date of the Commencement Date for any extension.




7









 








ARTICLE VIII




DEFAULT AND TERMINATION




     8.1 Default and Termination. If (a) either Party hereto shall fail to perform any of
the material covenants or obligations imposed upon it by virtue of this Contract (except where such
failure shall be excused under any of the provisions of this Agreement by the other Party’s failure
to perform or except where other termination remedies have been established under this Agreement),
or (b) in the event the Company invokes force majeure and such force majeure is not corrected
within **** days of the notice of such force majeure, then in such event the other Party may, at
its option, terminate this Contract by proceeding as follows: the Party not in default shall cause
a written notice to be served upon the Party in default, stating specifically the cause for
terminating this Contract and declaring it to be the intention of the Party giving the notice to
terminate the same; whereupon, the Party in default shall have thirty (30) days after receipt of
the aforesaid notice within which to remedy or remove the cause or causes of default stated in the
notice of termination and if, within said period of thirty (30) days, the Party in default does so
remedy and remove such cause or causes, and fully indemnifies the Party not in breach for any
direct damages actually incurred as the proximate result of said breach, then such notice shall be
nullified and this Contract shall continue in full force and effect. In the event the Party in
default does not so remedy and remove the cause or causes of default, or does not fully indemnify
the Party giving the notice for such Party’s actual direct damages proximately resulting from such
breach within said period of thirty (30) days, then this Contract shall terminate after the
expiration of said period and the Party not in default shall have the right to seek recovery of its
actual damages as provided by law; provided, however, that if such default be remedied but no
indemnification therefor has been made due to a bona fide dispute between the Parties as to the
amount thereof, then this Contract shall not terminate, but the Party not in default shall have the
right to seek recovery of its actual damages as provided by law. Notwithstanding any provision to
the contrary in the Statement of Conditions or the General Terms and Conditions, any termination
for breach of this Contract shall be carried out strictly in accordance with this section.



     8.2 Prejudice. Any cancellation of this Contract pursuant to the provisions of this
Article IX shall be without prejudice to the right of the Party not in default to collect any
amounts then due it and without waiver of any other remedy or performance to which the Party not in
default may be entitled.



     8.3 Survivability. Upon cancellation or termination of this Contract, Section X,
Paragraph D of the General Terms and Conditions attached hereto as Exhibit “B”, which provides each
Party the right to examine the books, records and charts of the other Party, as they relate to this
Contract, shall survive for a period of two years from the date of cancellation or termination.



8









 





ARTICLE IX




RATES




     9.1 Storage Charges. In accordance with the billing procedures described in the
General Terms and Conditions, attached as Exhibit “B”, Shipper shall pay to Bay Gas during the
Primary Term and any subsequent term, except a term resulting from Shipper exercising the ROFR
detailed above, of the Contract the following, and only the following, charges for services
hereunder:




	 	(a)	 	Firm Services Monthly Demand Charge — **** per MMBtu of Shipper’s FMSQ for each
month of the Primary Term of the Contract;
	 
	 	(b)	 	Injection and Withdrawal Charges — **** per MMBtu of gas received by Bay Gas
for injection into storage hereunder (excluding gas retained by Bay Gas as fuel)
(“Injection Charge”) and **** for each MMBtu of gas delivered by Bay Gas to Shipper
hereunder (“Withdrawal Charge”).
	 
	 	(c)	 	Fuel Charge — Bay Gas shall retain **** of all volumes of gas scheduled by
Shipper for injection at the Storage Facilities. The remaining **** shall be applied
to computing compliance with the FMSQ and computing the amount of Shipper’s Gas Storage
Inventory.





     9.2 Suspension of Payments. In the event that Bay Gas is, due to an event of force
majeure as defined in the General Terms and Conditions attached as Exhibit “B” unable to provide
storage services, or a portion thereof, under this Contract, or Bay Gas curtails firm deliveries to
Shipper in any other circumstances, then the obligation of Shipper to make payment hereunder for
such unavailable services, or a portion thereof, shall thereafter be suspended, to the extent of
the unavailable services, until such service is again made available hereunder. Company agrees, to
the maximum extent possible, to provide notice to Shipper of any planned maintenance and to conduct
any maintenance activities at times that will cause the least disruption of service hereunder.



     9.3 Payment Exceptions. Shipper shall be exempted from the advance payment of all
applicable state and federal filing, reporting and application fees incurred by Company as
described in the last sentence of Section IV, subparagraph A of the General Terms and Conditions
attached as Exhibit “B”.



ARTICLE X




TAXES




     Payment of Taxes. Shipper agrees to pay Bay Gas, by way of reimbursement, within
twenty (20) days of receipt of an invoice for same:



9









 






	 	(a)	 	all taxes charged to Bay Gas after the Commencement Date hereof with respect
to the quantities of gas stored hereunder. Bay Gas agrees to pass through to Shipper
in its monthly billings any savings resulting from decreases in existing taxes which
may be made after the effective date hereof, with respect to the quantities of gas
stored hereunder. In the event that any additional taxes or increases in taxes are
imposed and, should Bay Gas elect not to challenge the same, then Shipper shall be
subrogated to Bay Gas’ rights to challenge the same. In no event shall Shipper be
required to pay any tax in a greater amount than attributable to the quantities of its
gas stored hereunder.
	 
	 	(b)	 	Except as expressly provided in Section 10(a) above, Shipper shall have no
liability for any taxes assessed against Bay Gas.





ARTICLE XI




NOTICES




     11.1 Notices. Whenever any notice, request, demand, statement, nomination or payment
is required or permitted to be given under any provision of this Contract, unless expressly
provided otherwise, such shall be in writing, signed by or on behalf of the person giving the same,
and shall be deemed to have been given and received upon the actual receipt thereof (including the
receipt of a telecopy or facsimile of such notice) at the address of the Parties as follows:



	 	 	 
	Notices and Contract Matters:
	 	 
	 
	 	 
	Bay Gas:

	 	Contact
	Bay Gas Storage Company, Ltd.

	 	Greg Welch /David Hayden
	Post Office Box 1368

	 	Telephone: (251) 450-4749
	Mobile, Alabama 36633

	 	Fax: (251) 476-8292
	 
	 	 
	Shipper:

	 	Contact:
	Progress Energy Florida

	 	Attn: Contract Administration
	410 S. Wilmington St. PEB 16CA

	 	Telephone: 919-546-5164
	Raleigh, NC 27601

	 	Fax: 919-546-3258
	 
	 	 
	Invoices:
	 	 
	Bay Gas:

	 	Contact
	Bay Gas Storage Company, Ltd.

	 	Greg Welch / David Hayden
	Post Office Box 1368

	 	Telephone: (251) 450-4749






10









 






	 	 	 
	Mobile, Alabama 36633

	 	Fax: (251) 476-8292
	 
	 	 
	Shipper:

	 	Contact:
	Progress Energy Florida

	 	Attn: Back Office
	410 S. Wilmington St. PEB 10A

	 	Telephone: (919) 546-7518
	Raleigh, NC 27601

	 	Fax: (919) 546-3258
	 
	 	 
	Delivery Notifications, Nominations:
	Bay Gas:

	 	Contact
	Bay Gas Storage Company, Ltd.

	 	David Hayden/Brandy Clark
	Post Office Box 1368

	 	Telephone: (251) 450-4746
	Mobile, Alabama 36633

	 	Fax: (251) 476-8292
	 

	 	Nights/Weekends:
	 

	 	Fax :
	 
	 	 
	Shipper:

	 	Contact:
	Progress Energy Florida

	 	Attn: Front Office
	410 S. Wilmington St. PEB 10A

	 	Telephone: (919) 546-3252
	Raleigh, NC 27601

	 	Fax: (919) 546-2922






     11.2 Confirmation in Writing. Operating communications made by telephone or other
mutually agreeable means shall be confirmed in writing or by telecopy within two (2) hours
following same if confirmation is requested by either Party. To facilitate such operating
communications on a daily basis, lists of names, telephone and telecopy numbers of appropriate
operating personnel shall be exchanged by and between Bay Gas and Shipper before commencement of
service under this Contract. Such lists shall be updated from time to time.



     11.3 Revisions. Either Party may revise its addresses by giving notice in accordance
herewith, designating in such writing the new address of such Party.



ARTICLE XII




NOMINATIONS




     12.1 Nominations. Bay Gas shall accept intra-day nominations until 10:00 AM central
clock time. Scheduled quantities resulting from such intra-day nominations will be effective at
5:00 PM that day. Such intra-day nominations from firm Shippers will bump any previously scheduled
interruptible quantity. After the 10:00 AM deadline, Bay Gas shall continue to accept intra-day
nominations until 5:00 PM. Scheduled quantities resulting from such intra-day nominations will be
effective at 9:00 PM. Bumping of previously scheduled interruptible quantities is not allowed for
such nominations.



11









 





     12.2 Availability. Bay Gas will maintain personnel and equipment available to receive
and act upon nomination changes and confirmations twenty-four (24) hours per day, seven (7) days a
week.



     12.3 Written Confirmations. Written nominations and confirmations of verbal
nominations will be made on the nomination form attached hereto as Exhibit “D”.



     12.4 Failure to Receive. In the event that Bay Gas fails to obtain confirmation from
Shipper’s transportation service of Shipper’s nomination, Bay Gas shall notify Shipper of such
failure as soon as practicable.



ARTICLE XIII




GENERAL TERMS AND CONDITIONS;

STATEMENT OF CONDITIONS FOR GAS STORAGE




     The following are hereby incorporated herein and made a part of this Contract as if fully set
forth herein: (a) the General Terms and Conditions attached hereto as Exhibit “B” (the “General
Terms and Conditions”); and the Statement of Conditions for NGPA Section 311(a)(2) Gas Storage
Services attached hereto as Exhibit “C” (the “Statement of Conditions”). In the event of any
conflict or inconsistency between the terms hereof and the General Terms and Conditions or the
Statement of Conditions, such conflict or inconsistency shall be resolved in favor of the terms
hereof (it being the intent of this Agreement that the foregoing language is an exception to the
provisions of Article X of the Statement of Conditions).



ARTICLE XIV




MISCELLANEOUS




     14.1 Amendment. Neither this Contract nor any provisions hereof may be amended,
changed, modified or supplemented except by an agreement in writing, duly executed by the Parties.



     14.2 Assignment. Either Party may assign its rights, titles or interests hereunder to
any individual, bank, trustee, company or corporation (“Lender”) as security for any note, notes,
bonds or other obligations or securities of such assignor. In the event of such assignment by Bay
Gas, Shipper shall execute an assignment consent substantially in the form as attached hereto as
Exhibit “E, as well as cause to be delivered to Bay Gas an opinion of counsel of Shipper to the
effect that the Contract has been duly authorized, executed and delivered by Shipper and is
enforceable against Shipper in accordance with its terms. Shipper shall provide such financial
information to the Lender which is the assignee of Bay Gas as may be reasonably requested by Bay
Gas and which may be required under this Agreement. Except as specified in the first sentence of
this Article 15.2, no assignment shall be made without



12









 







the written consent of the other Party hereto, which consent shall not be unreasonably withheld;
provided, however, that either Party shall be entitled to assign its rights hereunder to an
affiliate without the prior written consent of the other Party so long as such affiliate meets the
creditworthiness provisions applicable to this Agreement. No assignment provided for hereunder
shall in any way operate to enlarge, alter or change any obligation of the other Party hereto nor
shall the assignee be relieved of its obligations hereunder without the express written consent of
the non-assigning Party.



     14.3 Invalid Provision. In the event one or more of the provisions contained herein
shall be held to be invalid, illegal, or unenforceable in any respect as determined by a court of
competent jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other
provision hereof and this Agreement shall be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein, provided that the deletion of such
invalid, illegal or unenforceable provision does not materially change the intended nature and risk
of the services provided hereunder.



     14.4 Regulatory Approvals. This Contract shall be subject to the approval of any
Federal or State regulatory agency with appropriate jurisdiction in accordance with Article 1.2.



     14.5 Creditworthiness. Shipper agrees it shall have a rating on its senior long-term
debt of “BBB-“ or better as rated by Standard & Poor’s Ratings Group, or a rating on its senior
long-term debt of Baa3 by Moody’s, or a BBB- rating on its senior long-term debt from Fitch rating
services. If at any point Shipper does not meet any of the requirements of the preceding sentence,
Shipper shall provide a payment guarantee from an affiliate with a rating on its senior long-term
debt of “BBB-“ or better as rated by Standard & Poor’s Ratings Group, or Baa3 by Moody’s, or BBB-
by Fitch rating services, or in accordance with Section XVI of the General Terms and Conditions,
furnish good and sufficient security, which may include an acceptable standby letter of credit, a
prepayment deposit or other security as commercially reasonable.



     14.6 Entire Agreement. This Agreement and the exhibits attached hereto contain the
entire agreement between the Parties and there are no representations, understandings or
agreements, oral or written, between the Parties which are not included herein.



     14.7 Governing Law. As to all matters of construction and interpretation, this
Contract shall be interpreted, construed and governed by the laws of the State of Alabama,
excluding any conflict of laws rule which would direct the application of the law of another
jurisdiction.



     14.8 Confidentiality. The Parties agree to hold the terms of this Agreement in
confidence and not to disclose either the existence of this Agreement or any of the terms hereof to
any other person, business or governmental entity without the prior written consent of the other
Party, such consent shall not be unreasonably withheld, except to the extent that such disclosure
may be required by law, in which case the



13









 







Party subject to such obligation shall provide prompt notice of such obligation to the other
Party.



     IN WITNESS WHEREOF, the Parties have executed, or caused to have executed, this Contract in
one or more copies or counterparts, each of which shall constitute and be an original of this
Contract effective between the Parties as of the later of the dates set forth below.



	 	 	 	 	 	 	 	 	 
	 	 	 	 	BAY GAS:  
	 
	 	 	 	 	 	 	 	 
	WITNESS:	 	 	 	BAY GAS STORAGE COMPANY, LTD.
	 	 	 	 	By MGS Storage Services, Inc., its managing general
partner
	 
	 	 	 	 	 	 	 	 
	/s/ Brandy Clark

	 	 	 	By:
	 	/s/ Greg Welch	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Its:
	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	Date: 4/19/06
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	SHIPPER:
	 
	 	 	 	 	 	 	 	 
	WITNESS:	 	 	 	Florida Power Corporation
	 	 	 	 	d/b/a Progress Energy Florida, Inc.
	 
	 	 	 	 	 	 	 	 
	/s/ Rick Rhodes

	 	 	 	By:
	 	[Illegible]	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Its:
	 	Vice President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	Date: 4/13/06







14









 








EXHIBIT “A”




TO STORAGE AGREEMENT FPEF-08 (“CONTRACT”) BETWEEN BAY GAS

STORAGE COMPANY, LTD. AND PROGRESS ENERGY FLORIDA




	 	 	 
	 	 	FMDIQ
	POINT(S) OF RECEIPT	 	(MMBtus)
	Interconnection between the Storage

Facilities and the pipeline facilities of

FGT in Mobile County, Alabama

(Bay Gas Interconnect ID: BG- 1002; FGT DRN: 163885)

	 	****
	 
	 	 
	Interconnection between the Storage

Facilities and the pipeline facilities of

Gulf South Pipeline Company near Whistler, Alabama

(Bay Gas Interconnect #BG – 1008; Gulf South ID: 11817)

	 	****





Gas may be scheduled for receipt at the Point of Receipt, in quantities up to the maximum
quantities indicated for such Point in Article I herein for firm injection, unless otherwise agreed
by Bay Gas.




	 	 	 
	 	 	FMDWQ
	POINT(S) OF DELIVERY	 	(MMBtus)
	Interconnection between the Storage Facilities and

the pipeline facilities of FGT in Mobile County, Alabama

(Bay Gas Interconnect ID: BG-1002; FGT DRN: 163884)

	 	****
	 
	 	 
	Interconnection between the Storage

Facilities and the pipeline facilities of

Gulf South Pipeline Company near Whistler, Alabama

(Bay Gas Interconnect #BG – 1008; Gulf South ID: 21111)

	 	****





Gas may be scheduled for delivery at the Point of Delivery, in quantities up to the maximum
quantities indicated for such Point in Article I herein for firm withdrawal, unless otherwise
agreed by Bay Gas.



Bay Gas agrees to provide gas at the respective pressures required to effectuate the deliveries
into interconnecting facilities set forth above. Shipper shall be under no obligation to supply
to Bay Gas any **** with respect to this Agreement or the Service Agreement. No ratchets shall
apply to the service described in this Agreement.



Shipper may, from time to time, transfer title of any volumes of gas in storage to a third party
with whom Company has a Storage Service Agreement, at no charge or expense to Shipper or such
third-party, subject to such third party’s MSQ.





 









 








EXHIBIT “B”




TO STORAGE AGREEMENT FPEF-08 (“CONTRACT”) BETWEEN BAY GAS

STORAGE COMPANY, LTD. AND PROGRESS ENERGY FLORIDA




GENERAL TERMS AND CONDITIONS




TO




BAY GAS STORAGE COMPANY, LTD.




STORAGE AND TRANSPORTATION SERVICE AGREEMENTS




 









 





GENERAL TERMS AND CONDITIONS

TO

BAY GAS STORAGE COMPANY, LTD.’S (“COMPANY”)

STORAGE AND TRANSPORTATION SERVICE AGREEMENTS




CONTENTS




	 	 	 	 	 	 	 
	SECTION	 	DESCRIPTION	 	PAGE
	 
	I.

	 	Definitions
	 	 	1	 
	 
	 	 	 	 	 	 
	II.

	 	Nominations, Balancing And
Excess Deliveries
	 	 	3	 
	 
	 	 	 	 	 	 
	III.

	 	Construction of Facilities
	 	 	7	 
	 
	 	 	 	 	 	 
	IV.

	 	Rate Adjustment
	 	 	7	 
	 
	 	 	 	 	 	 
	V.

	 	Regulatory Requirements
	 	 	8	 
	 
	 	 	 	 	 	 
	VI.

	 	Pressures
	 	 	8	 
	 
	 	 	 	 	 	 
	VII.

	 	Measurement
	 	 	8	 
	 
	 	 	 	 	 	 
	VIII.

	 	Measuring Equipment and Testing
	 	 	9	 
	 
	 	 	 	 	 	 
	IX.

	 	Quality
	 	 	11	 
	 
	 	 	 	 	 	 
	X.

	 	Billing, Accounting, Taxes and Reports
	 	 	11	 
	 
	 	 	 	 	 	 
	XI.

	 	Possession and Non-Odorization of Gas
	 	 	13	 
	 
	 	 	 	 	 	 
	XII.

	 	Warranty
	 	 	14	 
	 
	 	 	 	 	 	 
	XIII.

	 	Government Regulations
	 	 	14	 
	 
	 	 	 	 	 	 
	XIV.

	 	Force Majeure
	 	 	15	 
	 
	 	 	 	 	 	 
	XV.

	 	Notices
	 	 	16	 
	 
	 	 	 	 	 	 
	XVI.

	 	Creditworthiness
	 	 	16	 
	 
	 	 	 	 	 	 
	XVII.

	 	Miscellaneous
	 	 	17	 






 









 






GENERAL TERMS AND CONDITIONS




SECTION I.




Definitions





	A.	 	The term, “gas”, as used herein, shall mean natural gas as produced in its natural
state that meets the quality standards contained in these General Terms and Conditions.
	 
	B.	 	The term, “new taxes”, as used herein, shall mean any tax, license, fee or charge
hereafter levied, assessed or made by any governmental authority on the gas itself or on the
act, right or privilege of producing, severing, gathering, storing, transporting, handling,
selling or delivering gas which is measured by the volume, value, or sales price of the gas.
	 
	C.	 	The term, “cubic foot of gas”, as used herein, for the purpose of measurement of the
gas delivered hereunder is the amount of gas necessary to fill a cubic foot of space when the
gas is at an absolute pressure of fourteen and seventy-three hundredths (14.73) pounds per
square inch and at a base temperature of sixty (60) degrees Fahrenheit.
	 
	D.	 	The term, “BTU”, as used herein, shall mean British Thermal Unit and, where
appropriate, the plural thereof, and the term, “MMBtu”, shall mean one million
(1,000,000) BTU.
	 
	E.	 	The term, “MCF”, as used herein, shall mean one thousand (1,000) cubic feet of gas.
	 
	F.	 	The term, “day”, as used herein, shall mean a period of twenty-four (24) consecutive
hours beginning and ending at 9:00 a.m., Central Clock Time.
	 
	G.	 	The term, “thermally equivalent”, as used herein, shall mean an equal amount of
heating value, expressed in BTU and measured under the specifications and conditions contained
hereunder.
	 
	H.	 	The term, “month”, as used herein, shall mean a period beginning on, and including,
the first (1st) day of the calendar month and extending to but not including the first (1st)
day of the following calendar month.
	 
	I.	 	The term, “Storage Service Agreement”, as used herein, shall mean an agreement for
the provision by Company of firm or interruptible storage services; and the term,
“Transportation Service Agreement”, as used herein, shall mean an agreement for the
provision by Company of firm or interruptible transportation services.




 









 






	J.	 	The term, “Maximum Daily Injection Quantity”, as used herein, shall mean the maximum
volume of gas that Company will accept for injection into storage for Shipper in any one day,
as provided for in the Storage Service Agreement.
	 
	K.	 	The term, “Maximum Daily Withdrawal Quantity”, as used herein, shall mean the maximum
volume of gas that Company will deliver from storage for Shipper in any one day, as provided
for in the Storage Service Agreement.
	 
	L.	 	The term, “Maximum Storage Quantity”, as used herein, shall mean the maximum volume
of gas that Company will store for Shipper at any one time, as provided for in the Storage
Service Agreement.
	 
	M.	 	The term, “Maximum Daily Transportation Quantity”, as used herein, shall mean the
maximum volume of gas that Company will take delivery of, and transport for redelivery, in any
one day, as provided for in the Transportation Service Agreement.
	 
	N.	 	The term, “Point(s) of Receipt”, as used herein, shall mean the point at which
Shipper delivers to Company certain quantities of gas for injection into storage or for
transport to a Point(s) of Delivery.
	 
	O.	 	The term, “Point(s) of Delivery”, as used herein, shall mean the point at which
Company delivers to Shipper certain quantities of gas that have been withdrawn from storage or
transported from a Point(s) of Receipt.
	 
	P.	 	The term, “processed gas”, as used herein, shall mean natural gas from which gas
liquids have been extracted.
	 
	Q.	 	The term, “Unit Rate”, as used herein, shall be defined for interruptible storage
service Shippers as follows:
	 
	 	 	Unit Rate = {[ MDC x IMSQ x (12 or PT if < 12)] + Rev.} / IMSQ)
	 
	 	 	Where:





	 	 	 
	“MDC”

	 	equals the Monthly Demand Charge
	“IMSQ”

	 	equals the Interruptible Maximum Storage Quantity
	“PT”

	 	equals the Primary Term of the Agreement
	“REV”

	 	equals all other storage revenues
excluding Fuel Charges assessed for interruptible services for the last 12 billed months







	R.	 	The term, “work day” or “working day”, as used herein, shall mean the days




2









 






	 	 	Monday through Friday, inclusive, but excluding any federal holidays.





SECTION II.




 Nominations, Balancing and Excess Deliveries





	A.	 	Nominations. Shipper shall furnish to Company a nomination on a form acceptable to
Company. All quantities shall be expressed in MMBtu per Day and shall separately state Points
of Receipt, Points of Delivery or Points of Redelivery.






	 	1.	 	Shipper must deliver the nominations to Company by 11:30 A.M. Central Clock
Time the working day prior to gas flow. Shipper may submit nominations after such
deadline up to 1:00 P.M. Central Clock Time for the upcoming gas day. However, if
acceptance of Shipper’s nomination submitted between 11:30 and 1:00 P.M. Central Clock
Time would exceed Shipper’s Maximum Daily Injection Quantity or Maximum Daily
Withdrawal Quantity or Maximum Storage Quantity or Maximum Daily Transportation
Quantity, or would cause interruption of another shipper’s scheduled service, then such
nomination will be accepted or rejected by Company at Company’s sole discretion.
	 
	 	2.	 	Shipper may submit, and Company will accept, nominations after 1:00 P.M. for
the upcoming gas day or during the current gas day on a best efforts basis. If
acceptance of Shipper’s nomination for service would exceed Shipper’s Maximum Daily
Injection Quantity or Maximum Daily Withdrawal Quantity or Maximum Storage Quantity or
Maximum Daily Transportation Quantity, or would cause interruption of another shipper’s
scheduled service, then such nomination will be accepted or rejected at Company’s sole
discretion.
	 
	 	3.	 	Nominations made in accordance with this Section II A shall not become
effective until Company has confirmed the nominated storage receipts (injections) and
deliveries (withdrawals), or transportation deliveries and redeliveries, with upstream
and downstream parties. Shipper shall designate the appropriate person(s) with
authority to confirm nominations and to resolve allocation issues on a 24-hour-basis.
	 
	 	4.	 	The parties intend that the volumes of gas received or delivered or redelivered
will be equal to the confirmed nominations. To the extent that gas quantities actually
received or delivered or redelivered may be greater than or less than the confirmed
nominations, the parties intend that such variance will be treated in accordance with
an Accounting Allocation




3









 






	 	 	 	Agreement entered into between the parties.
	 
	 	5.	 	Company shall not be obligated, during any hour, to receive or to deliver or to
redeliver a total volume of gas in excess of one twenty-fourth (1/24th) of
the lesser of (a) Shipper’s aggregate Maximum Daily Injection Quantity or Maximum Daily
Withdrawal Quantity, or Maximum Daily Transportation Quantity or (b) Shipper’s accepted
nomination volumes. The parties intend that from time to time Shipper and Company may
mutually agree to a flow rate above or below a uniform hourly rate.






	B.	 	Balancing. Company will accept for storage injection or deliver for withdrawal, or
for transportation delivery and redelivery, on a daily basis, volumes thermally equivalent to
volumes nominated and scheduled, less appropriate compressor fuel and lost-and-unaccounted-for
gas (collectively called “Company Use”) charges, unless otherwise mutually agreed to in
writing. All imbalances between actual and nominated injection volumes or withdrawal volumes,
or between delivery volumes and redelivery volumes, shall be treated as imbalance under, and
received in accordance with, the Storage or Transportation Service Agreement(s) under which
the gas in question is delivered to or from the storage or transportation facilities. Gas
delivered to Company for withdrawal or redelivery hereunder on each day shall be at constant
uniform rates as practicable throughout such day.






	 	1.	 	If Shipper is advised by any upstream third party of the need to reduce or
suspend deliveries of gas scheduled for delivery to or from storage, or for
transportation delivery and redelivery, Shipper shall immediately notify Company
orally, and shall confirm such notification in writing, of such reduction or
suspension.
	 
	 	2.	 	Nothing in this Section II B shall limit Company’s right to take action as may
be required to adjust injections or withdrawals of gas, including suspending storage
services or to adjust deliveries and redeliveries, including suspending transportation
services, in order to alleviate conditions that threaten the integrity of its system.
	 
	 	3.	 	In the absence of an executed Accounting Allocation Agreement between Shipper
and Company as described in Section II A. 4, balancing procedures shall be as specified
in this Section II B. If an Accounting Allocation Agreement is in effect between
Shipper and Company, such Agreement shall take precedence over the provisions specified
in this Section II B.
	 
	 	4.	 	If there is more than one supply source (whether at a single or at multiple
Points of Receipt or Delivery) nominated to be received for Storage or Transportation,
the nomination will identify how and which supply




4









 






	 	 	 	source(s) should be allocated by means of a Receipt Pre-Determined Allocation
(“RPDA”) specified in the nomination. In accounting for the volumes delivered or
redelivered by Company, in circumstances where multiple services are provided at any
Point of Delivery or Redelivery, the sequence of volumes delivered shall be
determined by the Delivery Pre-Determined Allocation (“DPDA”) specified by Shipper
in its most recent nomination. The nomination will identify which supply source(s)
should be allocated in the event gas is not or cannot be delivered or redelivered as
nominated.
	 
	 	5.	 	To the extent feasible, all volumes received by or delivered to Company at a
Point of Receipt or Delivery shall be allocated in accordance with the confirmed
nominations for that point. In the event the actual volumes received by Company do not
equal the confirmed nominations for that point, any underage or overage will be
allocated as follows:






	 	(a)	 	First, in accordance with the effective RPDAs
submitted by Shipper (or Shipper’s suppliers). Shipper agrees that such
an allocation is binding on Shipper.
	 
	 	(b)	 	Then, if there is no effective RPDA, pro rata
to the extent applicable based on confirmed nominations, as applicable.
Shipper agrees that such an allocation is binding on Shipper.






	 	6.	 	To the extent feasible, all volumes delivered or redelivered by Company at a
Point of Delivery or Redelivery shall be allocated in accordance with the confirmed
nominations for that point. In the event the actual volumes delivered by Company do not
equal the confirmed nominations for that point, any underage or overage will be
allocated as follows:






	 	(a)	 	First, in accordance with the effective DPDAs
submitted by Shipper (or Shipper’s suppliers). Shipper agrees that such
an allocation is binding on Shipper.
	 
	 	(b)	 	Then, if there is no effective DPDA, pro rata
to the extent applicable based on confirmed nominations, as applicable.
Shipper agrees that such an allocation is binding on Shipper.






	 	7.	 	Each Shipper shall be responsible for ensuring that its suppliers submit
re-Determined Allocations (“PDAs”, which include RPDAs or DPDAs) as provided herein
using a form acceptable to Company. Unless otherwise agreed, all PDAs must be
submitted to Company via facsimile or other agreed upon electronic means on or before
the date the PDA is to be effective. Such PDA shall specify how any underage or
overage from the confirmed nominated volumes should be allocated among the entities




5









 






	 	 	 	listed on the PDA. Company shall acknowledge receipt and acceptance of the PDA by
returning acknowledgment of the PDA to Shipper via mutually agreeable means. Company
acceptance is contingent on Company being able to administer the allocation
submitted by the Shipper.
	 
	 	8.	 	To the extent that actual injections or actual withdrawals, or actual
deliveries or actual redeliveries, for each Shipper do not exactly match confirmed
nominations for any day, Company will attempt to balance any such differences among
Company and the upstream or downstream entities, without impacting Shipper, whenever
possible. If an upstream or downstream entity requires a Balancing Agreement for which
any fee is required, Shipper agrees to reimburse Company for any incurred expenses.






	C.	 	Storage Balance Reconciliation. To the extent Shipper and Company agree, in writing,
that imbalances may be accounted for under the Shipper’s Storage Service Agreement, and to the
extent Shipper has sufficient storage capacity, Company will issue a formal storage balance
notice to Shipper by the 20th of the month following the injection/withdrawal month (“the
Notice Month”), reflecting the effect of Shipper’s storage balance or any imbalance. Shipper
understands and agrees to contact or cause to be contacted, the parties that deliver injection
volumes to Company, or receive withdrawal volumes from Company, for the Shipper’s account to
confirm any imbalance.
	 
	 	 	Following the termination of the Storage Service Agreement, Shipper shall be required to
either (a) transfer title to any volumes of gas in storage to a third party with whom
Company has a Storage Service Agreement, with such transfer to be subject to any injection
conditions or charges applicable to such third party, or (b) withdraw such volumes from
storage within a sixty (60) day balancing period after the determination by Company that any
such volumes exist, or within such longer period of time mutually agreed upon by Shipper and
Company. Shipper agrees that at the end of the above sixty (60) day balancing period,
Company will, for any storage volumes not withdrawn, take title to such gas and such title
is to pass automatically without cost to Company.
	 
	D.	 	Excess Deliveries. In the event that Shipper, from time to time, desires to have
injected into or withdrawn from storage, or to have transported, quantities of gas in excess
of the Maximum Daily Injection Quantity or Maximum Daily Withdrawal Quantity, or Maximum Daily
Transportation Quantity, respectively, which Company is obligated to accept or deliver or
redeliver under storage or transportation arrangements for Shipper on any day under a Storage
or Transportation Service Agreement, Shipper may request injection or withdrawal or
transportation of such excess gas, and Company in its sole discretion may accept or deliver or
redeliver all or any part of such gas subject to the restrictions




6









 






	 	 	of these General Terms and Conditions.





SECTION III.




Construction of Facilities



Under no circumstances shall Company be obligated to construct or add facilities to receive or
deliver or redeliver gas under a Storage or Transportation Service Agreement, or to increase the
capacity of Company’s pipeline system or storage or transportation facilities. Upon Shipper’s
written request to evaluate connections of new facilities, Company will prepare and submit to
Shipper a construction cost estimate. All new or additional facilities that may be required for
the delivery of acceptable gas to Company, or for the delivery or redelivery of gas to the
receiving party or parties will be constructed, maintained, owned and operated by Company, except
as may otherwise be expressly agreed in writing. The design and installation of all facilities
shall be in accordance with the specifications then used by Company for like or similar facilities.
Shipper shall bear the cost of all such new connections, unless otherwise mutually agreed.




SECTION IV.




Rate Adjustment





	A.	 	Rates charged for services shall be negotiated between Company and Shipper. Company reserves
the right to seek authorization from the Federal Energy Regulatory Commission (“FERC”) or
other appropriate agency to increase, decrease or restructure the rates (including market
based rates), and Company Use charges in effect at any time as may be found necessary to
assure Company’s right to charge and collect fair and equitable rates within the meaning of
Section 311 (a)(2) of the Natural Gas Policy Act of 1978 (“NGPA”) and the FERC’s rules and
regulations thereunder. Nothing herein contained shall be construed to deny any Shipper any
rights which it may have under FERC rules and regulations, including the right to participate
fully in rate proceedings by intervention or otherwise to contest changes in rates and Company
Use charges in whole or part. In addition to the rates above, Shipper shall pay in advance
all applicable state and federal filing, reporting and application fees incurred by Company
for providing such services.
	 
	B.	 	Company may at any time provide firm or interruptible storage services at different rates
from the market based rates approved by the FERC for Company’s NGPA Section 311(a)(2)
services. Nothing herein shall obligate or require, or be construed to obligate or require,
Company to offer or continue such different rates.




7









 











SECTION V.




Regulatory Requirements



Company’s interstate services shall be in accordance with and subject to the requirements of
Section 311(a)(2) of the NGPA and the rules and regulations of the FERC thereunder. Company’s
intrastate services shall be in accordance with and subject to the laws, rules and regulations of
the State of Alabama.



Company agrees to proceed with reasonable diligence during the term of the Storage or
Transportation Service Agreement with the filing for and prosecution of any authorizations as may
be required for the storage or transportation of the gas hereunder or the rate(s) charged
therefore. Company reserves the right to pursue any necessary regulatory filings with FERC and any
other governmental or regulatory body having jurisdiction in such matter as it deems to be in its
best interest, including the right to file whatever pleadings and motions it deems desirable. In
the event Company has obtained such necessary regulatory authorization, but the terms and
conditions are significantly different than those terms originally filed with the regulatory
agency, or in the event FERC rejects or modifies Company’s Statement of Conditions for NGPA Section
311(a)(2) Gas Storage and Transportation Services, as same may be amended by Company from time to
time, Company shall pursue other reasonable options to continue providing such services or, at
Company’s option, shall terminate such services as provided in Section VII, Right to Terminate
Services, of Company’s Statement of Conditions.




SECTION VI.




Pressures



Company shall operate its storage facilities at pressures which will accommodate the
withdrawal of gas in accordance with Company’s outstanding firm service storage commitments.
Company shall operate its transportation facilities at pressures which will accommodate the
redelivery of gas in accordance with Company’s outstanding firm service transportation commitments.
Shipper shall be obligated to deliver gas for injection or for transportation, at a pressure
sufficient for Company to transport such gas to and inject into its storage facility, or to
transport such gas for redelivery, recognizing that the amount of such pressure will vary based on
the operation of the Company pipeline.




SECTION VII.




Measurement





	A.	 	The gas received for injection or delivered for withdrawal at the storage facilities, or
delivered or redelivered at the transportation facilities, shall be measured with




8









 






	 	 	meters constructed and installed, and whose computations of volume are made, in accordance
with the provisions of ANSI-API 2530-AGA-3, latest revision as adopted by Company.
	 
	B.	 	The temperature of the gas shall be determined by a recording thermometer so installed that
it will record the temperature of the gas flowing through the meters. The average of the
record to the nearest one degree (1o) Fahrenheit, obtained while gas is being delivered, shall
be the applicable flowing gas temperature for the period under consideration. For all
measurement of gas required in this Section, the BTU content per cubic foot shall be
determined for a cubic foot of gas at a temperature of sixty degrees (60o) Fahrenheit, at an
absolute pressure of fourteen and seventy-three hundredths (14.73) pounds per square inch on a
dry basis.
	 
	C.	 	The BTU, specific gravity, carbon dioxide, and nitrogen content of the gas shall be
determined by the use of an on-line chromatograph or by a chromatographic analysis of the gas
obtained by a continuous sample or spot sampling method. The results of any sample taken with
an on-line chromatograph shall be applied to the month in which the sample was taken.
	 
	D.	 	Adjustment for the effect of supercompressibility shall be made according to the provisions
of the latest version of either NX-19 or AGA Committee Report No. 8, as required by Paragraph
A. of this Section and as adopted by Company, for the average conditions of pressure, flowing
temperature, and specific gravity at which the gas was measured during the period under
consideration and with the proportionate values of carbon dioxide and nitrogen in the gas
delivered included in the computation of the applicable supercompressibility factors.
	 
	E.	 	If at any time during the term hereof a new method or technique is developed with respect to
gas measurement or the determination of the factors used in such gas measurement, such new
method or technique may be substituted for the gas measurement set forth in this Section on
the date such method or technique is adopted by Company.





SECTION VIII.




Measuring Equipment and Testing





	A.	 	General. The construction, ownership, operation and maintenance of any measuring
equipment necessary to accomplish the storage receipt of gas for injection by Company for the
account of Shipper and the delivery of gas withdrawn by Company for the account of Shipper, or
the transportation delivery of gas to Company for the account of Shipper and the redelivery of
gas by Company for the account of shipper shall be the responsibility of Company.




9









 






	 	 	Shipper shall at all reasonable times have access to the premises of Company for
inspections, insofar as such premises are connected with any matter or thing covered hereby.
The operation of measuring equipment and changing of charts shall be done only by the
employees or agents of Company.
	 
	B.	 	Testing and Repair of Equipment.






	 	1.	 	Company shall keep its own measuring equipment accurate and in repair, making
periodic tests to verify the condition of meter tubes, orifice plate, and chart
recorder or flow computer. Company agrees to give Shipper(s) seven (7) calendar days
notice prior to such tests of the measuring equipment so that, if desired, Shipper(s)
may have its representative present. Shipper(s) shall have the right to challenge the
accuracy of Company’s equipment, and when challenged, the equipment shall be tested,
calibrated and, if required, repaired by Company, the cost of such special test to be
borne by Company if the percentage of the inaccuracy is found to be more than two
percent (2%), but if the percentage of inaccuracy is found to be two percent (2%) or
less, the cost of such special test shall be borne by the Shipper(s). If upon any test
the percentage of inaccuracy is found to be in excess of two percent (2%),
registrations thereof shall be corrected for a period extending back to the time such
inaccuracy occurred, if such time is ascertainable, and if not ascertainable, then back
one-half (1/2) of the time elapsed since the last date of calibration. Any measuring
equipment found to be measuring inaccurately by one percent (1%) or more shall be
adjusted at once to read accurately.
	 
	 	2.	 	If, for any reason, the meter(s) are out of service or out of repair so that
the amount of gas received or delivered cannot be ascertained or computed from the
readings thereof, the gas received or delivered during the period such meter(s) are out
of service or out of repair shall be estimated and agreed upon by the parties hereto by
the use of the first applicable of the following methods:






	 	(a)	 	By comparative utilization of any like check measuring
equipment if such check measuring equipment can be proven and verified to be
measuring accurately; or
	 
	 	(b)	 	By computing the error if the percentage of error is
ascertainable by calibration, test or mathematical calculation; or
	 
	 	(c)	 	By estimating the quantity received or delivered by reference
to actual receipts or deliveries during preceding periods under similar
conditions when Company’s measuring equipment was registering accurately.




10









 












	C.	 	Inspection of Charts and Records. The charts and records from the measuring
equipment shall remain the property of Company and shall be kept on file for a period of time
not less than two (2) years from the end of the calendar year in which the charts and records
were generated or prepared. At any time within such period, upon written request by Shipper,
records or charts from the measuring equipment, together with calculations therefrom, will be
submitted for Shipper’s inspection and verification subject to return to Company within thirty
(30) days from receipt thereof. All inquiries regarding this Section VIII, including but not
limited to, measurement charts, records or audits of charts and records, shall be directed to
Company.





SECTION IX.




Quality



The gas delivered by either party to the other hereunder shall meet or exceed the quality
specifications of the transporting pipeline which receives or delivers such gas to the other party
hereunder.




SECTION X.




Billing, Accounting, Taxes and Reports





	A.	 	Billings and Payments.






	 	1.	 	For the purpose of billing and accounting for the gas delivered hereunder, the
day shall begin at 9:00 a.m. Central Clock Time and extend to 9:00 a.m. the following
day, and the month (hereinafter called “billing month”) shall begin at 9:00 a.m.
Central Clock Time on the first (1st) day of the calendar month and extend to 9:00 a.m.
on the first (1st) day of the following calendar month.
	 
	 	2.	 	Company shall render to its Shippers, by mail or facsimile, on or before the
first (1st) day of each month an invoice setting forth the demand charges as
applicable. Within ten (10) days from the date of the invoice, Shipper agrees to make
payment to Company by wire transfer to the AmSouth Bank of Alabama, crediting Company’s
account number 83794638 for such firm demand charges for the account of Shipper at the
Delivery Point(s) during the current month.
	 
	 	3.	 	On or before the fifteenth (15th) day of each calendar month, Company shall
render or cause to be rendered, by mail or facsimile, to all Shippers




11









 






	 	 	 	an invoice of the amount due for the preceding month setting forth the total
quantity of gas (1) received by Company from Shipper for injection into the storage
facilities, or delivered by shipper to Company for transportation; (2) delivered by
Company to Shipper for withdrawal from the storage facilities, or redelivered by
Company to Shipper after transportation; (3) gas balance at the beginning and end of
the injection/withdrawal, or transportation, month and (4) the rates and charges for
storage or transportation services hereunder during such billing month. Billings
for volumes transported shall be determined on a dry basis.
	 
	 	4.	 	Within ten (10) days from the date of the fifteenth (15th) day invoice, Shipper
shall pay Company the amount due for all gas injected, withdrawn or stored, or
transported, by Company for the account of Shipper during the injection/withdrawal, or
transportation, month. Payments to Company shall be made either by wire transfer to
the AmSouth Bank of Alabama, crediting Company’s account number 83794638, or by check
such that funds are available to Company on or before the tenth (10th) day after the
date of the invoice. If rendering of an invoice by Company is delayed after the
fifteenth day of the month, then the time of payment shall be extended accordingly
unless Shipper is responsible for such delay.






	B.	 	Late Payment. In the event Shipper shall fail to pay any amount due Company when the
same is due, Company shall have the option of accruing interest at a varying rate per annum
(based on a year of 365 or 366 days, as the case may be) which shall be one hundred fifteen
percent (115%) of the prime rate charged by the AmSouth Bank of Alabama to its largest and
most creditworthy commercial borrowers on ninety (90) day commercial loans (but in no event
greater than the maximum rate of interest permitted by law) with adjustments in such rate, for
any period during which the same shall be overdue, such interest to be paid when the amount
past due is paid. Shipper shall not be required to pay interest on any amount billed which is
in good faith disputed in writing by Shipper and is ultimately determined to be in error;
provided, however, interest shall be due if such amount billed is found not to be in error.
If a portion of an invoice is disputed, Shipper shall pay when due the portion of the invoice
not in dispute. If such failure to pay continues for thirty (30) days after the payment due
date, Company may suspend deliveries of gas, subject to Company providing forty-eight (48)
hours written notice, during normal working hours, of such intention to suspend deliveries;
provided, however, that if Shipper, in good faith, disputes the amount of any such bill or
part thereof and pays to Company such amounts as Shipper concedes to be correct, conditioned
upon the payment of any amounts ultimately found due upon such bills after a final
determination, then Company shall not be entitled to suspend further delivery due to failure
to pay such bills. In the event Shipper’s financial position significantly deteriorates from
that on the execution date of the Storage or Transportation Service Agreement,





12









 





	 	 	advance cash payments or acceptable security (including but not limited to an irrevocable
letter of credit from a financial institution in an amount acceptable to Company) shall be
given by Shipper upon demand of Company. Company may, without waiving any other rights or
remedies it may have, withhold further delivery until such payment is received. In the
event Company pursues collection on late payment, Shipper shall be liable for all expenses
and costs, including court costs and attorneys’ fees, incurred as a result of such failure
to pay on time.
	 
	C.	 	Tax Reimbursement. Shipper agrees to reimburse Company for all new taxes (federal,
state, local or other) that may be levied upon or paid by Company, with respect to the
services performed hereunder.
	 
	D.	 	Examination of Books, Records and Charts. Each party shall have the right during
reasonable working hours to examine the books, records and charts of the other party to the
extent necessary to verify the accuracy of any statement, payment calculations or
determinations made pursuant to the provisions contained herein. If any such examination shall
reveal, or if either party shall discover, any error in its own or the other party’s
statements, payment calculations or determinations, then proper adjustment and correction
thereof shall be made as promptly as practicable thereafter. The accuracy of any statement,
payment calculations or determinations made pursuant to the provisions contained herein shall
be conclusively presumed to be correct after two (2) years from the end of the calendar year
in which the charts and records were generated or prepared if not challenged in writing prior
thereto.





SECTION XI.




Possession and Non-Odorization of Gas



As between Shipper and Company, Shipper shall be in exclusive control and possession of the
gas deliverable and responsible for any damage or injury caused thereby until the same shall have
been received by Company for injection at the storage facilities, or until delivered at the
transportation facilities, and after delivery of the gas for the account of Shipper for withdrawal
at the storage facilities, or after redelivery for the account of Shipper at the transportation
facilities. After delivery of gas for injection or transportation by Shipper to Company, and until
delivery by Company to Shipper or Shipper’s designee upon withdrawal or until redelivery after
transportation, Company shall be in exclusive control and possession thereof and responsible for
any injury or damage caused thereby. Neither Company nor Shipper assumes any obligation to odorize
any gas delivered to the other.




13









 








SECTION XII.




Warranty



Shipper warrants that it will have and maintain good and marketable title or the right to
deliver for a third party owning good and marketable title all gas tendered for injection, storage
and withdrawal under a Storage Service Agreement, and all gas delivered for transportation under a
Transportation Service Agreement, and that such gas shall be free and clear of all liens and
adverse claims; and each party agrees, with respect to the gas delivered by it, to indemnify the
other against all suits, actions, debts, accounts, damages, costs (including attorney’s fees),
losses and expenses arising from or out of any adverse claims of any and all persons to or against
said gas.




SECTION XIII.




Government Regulations





	A.	 	All of the provisions of any Storage or Transportation Service Agreement are hereby expressly
made subject to all present and future applicable federal or state laws, orders, rules and
regulations of governmental authorities having jurisdiction. Except as otherwise provided
herein, in the event any provision of a Storage or Transportation Service Agreement or of
these General Terms and Conditions is found to be inconsistent with or contrary to any such
law, order, rule or regulation, the latter shall be deemed to control, and the Storage or
Transportation Service Agreement and these General Terms and Conditions, to the extent
possible, shall be regarded as modified accordingly and as so modified shall continue in full
force and effect.
	 
	B.	 	The parties hereto recognize that a Storage or Transportation Service Agreement has been
entered into by Company in the good faith understanding that all acts, obligations and
services performed by Company hereunder, and the charges therefore, are exempt from the
regulation of FERC or any successor federal governmental authority, except as presently
provided by Section 311(a)(2) of the NGPA and FERC’s relevant regulations thereunder. Company
reserves the right to terminate a Storage or Transportation Service Agreement immediately if,
in the opinion of counsel for Company, any act shall occur or be seriously threatened which is
in any way inconsistent with such understanding.
	 
	C.	 	Equal Employment Opportunity. Company and Shipper agree to comply with any and all
applicable executive orders and acts pertaining to equal employment opportunity.




14









 











SECTION XIV.




Force Majeure





	A.	 	In the event of either party being rendered unable, wholly or in part, by reason of force
majeure to carry out its obligations under any Storage or Transportation Service Agreement
(other than the obligation to make payment of amounts due hereunder), it is agreed that such
party shall give notice and reasonably full particulars of such force majeure, in writing or
by facsimile, to the other party within a reasonable time after the occurrence of the cause
relied on, and the obligations of the party giving such notice, so far as they are affected by
such force majeure, shall be suspended during the continuance of any inability so caused, but
for no longer period, and such cause shall, so far as possible, be remedied with all
reasonable dispatch.
	 
	B.	 	The term, “force majeure,” as employed herein shall mean acts of God; strikes, lockouts, or
other industrial disturbances; conditions arising from a change in governmental laws, orders,
rules or regulations; acts of public enemy; wars; blockades; insurrections; riots; epidemics;
landslides; lightning; earthquakes; fires; storms; floods; washouts; arrests and restraints of
governments and people; civil disturbances; explosions; breakage or accident to machinery or
lines of pipe; the necessity for making repairs, tests or alterations to machinery or lines of
pipe; freezing of wells or lines of pipe; partial or entire failure of wells, processing or
gasification and gas manufacturing facilities; and any other causes, whether of the kind
herein enumerated or otherwise, not within the control of the party claiming suspension, and
which by the exercise of due diligence, such party is unable to prevent or overcome. Such
term shall likewise include: (a) those instances where either Company or Shipper is required
to obtain servitudes, rights-of-way, grants, permits or licenses to enable such party to
fulfill its obligations under a Storage or Transportation Service Agreement; the inability of
such party in acquiring, at reasonable costs, and after the exercise of reasonable diligence,
such servitudes, rights-of-way, grants, permits or licenses, and (b) those instances where
either Company or Shipper is required to furnish materials and supplies for the purpose of
constructing or maintaining facilities or is required to secure permits or permissions from
any governmental agency to enable such party to fulfill its obligations under a Storage or
Transportation Service Agreement; the inability of such party to acquire, or the delays on the
part of such party in acquiring, at reasonable costs, and after the exercise of reasonable
diligence, such materials and supplies, permits and permissions. Force majeure shall not
include failure of gas supply due to pricing considerations.
	 
	C.	 	It is understood and agreed that the settlement of strikes or lockouts shall be entirely
within the discretion of the party having the difficulty, and that the above




15









 






	 	 	requirement that any force majeure shall be remedied with all reasonable dispatch shall not
require the settlement of strikes or lockouts by acceding to the demands of the opposing
party when such course is inadvisable in the discretion of the party having the difficulty.





SECTION XV.




Notices



Except as herein otherwise provided, any communication, notice, request, demand, statement or
bill provided for in a Storage or Transportation Service Agreement which any party may desire to
give to any other party shall be made in writing and mailed by first class mail to the post office
address of the party intended to receive the same, as the case may be, at the addresses each
respective party shall designate in the Storage or Transportation Service Agreement or change by
subsequent formal written notice to the other. Routine communications, including monthly
statements and payments, may be mailed by either certified or ordinary first class mail.




SECTION XVI.




Creditworthiness 



Neither the Company nor the Shipper shall be required to commence service or continue with
service, subject to the following timing provisions, to continue under this Storage or
Transportation Service Agreement if either the Shipper or the Company (a) is or has become
insolvent; (b) has applied for bankruptcy under Chapter 11 of the Bankruptcy Code, or which is
subject to similar proceedings under state or federal law; or no longer meets the credit worthiness
standards specified in Section 14.5 of the Agreement or (c) when requested by the non-affected
party to demonstrate creditworthiness, fails to do so in requesting party’s reasonable judgment, in
light of previous payment or performance experience and the prudent credit analysis of information
available; provided, however, if the Shipper is the affected party and is receiving service they
shall continue to receive service for a period of fifteen (15) days after written notice by Company
of any such circumstance, and shall continue thereafter to receive service if, within such fifteen
(15) day notice period, such Shipper (a) deposits with Company and maintains, on account, an amount
which would be due for three (3) months service at the full Maximum Daily Withdrawal Quantity, or
the full Maximum Daily Transportation Quantity, including an amount of the current gas imbalance
plus, an amount equal to the three (3) highest cashout payments, if any, incurred during the
previous twelve months, or (b) furnishes good and sufficient security, which may include an
acceptable standby letter of credit, or monthly prepayment agreement or other security as
reasonably determined by Company, of a continuing nature and in an amount equal to such amounts
which would be due for service. If such payment on


16









 






account or payment security is not received within such fifteen (15) day notice period, Company
may, without waiving any rights or remedies it may have, suspend further service for a period of
ten (10) days. If such payment on account or a payment security is not received within such ten
(10) day suspension period, then Company shall no longer be obligated to continue to provide
service to such Shipper. Further, if such payment on account or a payment security is not received
within sixty (60) days after the end of such suspension period, Company may terminate its
obligations to provide service under all agreements between Shipper and Company, which termination
shall not affect any of Company’s claims or remedies it may have under any Storage or
Transportation Service Agreement. If the Company is the affected party and is providing service,
Shipper will only be obligated to continue service for a period of fifteen (15) days after written
notice by Company of any such circumstance but may opt to continue service beyond fifteen (15) days
at their sole discretion.




SECTION XVII.




Miscellaneous





	A.	 	Headings and Subheadings. The headings and subheadings contained in the Storage or
Transportation Service Agreement are used solely for convenience and do not constitute a part
of the Storage or Transportation Service Agreement between the parties hereto, nor should they
be used to aid in any manner in construing the Storage or Transportation Service Agreement.
	 
	B.	 	Successors and Assigns. The Storage or Transportation Service Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns of the parties
hereto, but no assignment shall relieve any party of its obligations hereunder unless such
party is expressly released in writing from said obligations by the party to which it is
obligated.
	 
	C.	 	Entire Agreement. The Storage or Transportation Service Agreement, the Statement of
Conditions for NGPA Section 311(a)(2) for Gas Storage and Transportation Services, and these
General Terms and Conditions constitute the entire agreement of the parties hereto as to the
matters contained herein, and there are no oral promises, agreements or warranties affecting
same.
	 
	D.	 	Non-Waiver. The waiver of any default or right to require performance under a
Storage or Transportation Service Agreement shall not operate as a waiver of any future
default or right to require performance, whether of like or different character or nature.
	 
	E.	 	Jurisdiction and Venue. The parties agree that a Storage or Transportation Service
Agreement shall be governed by and construed in accordance with the laws of the State of
Alabama, excluding any conflicts of law, rule or principle that




17









 






	 	 	might refer such construction to the laws of another state and that venue shall be in the
State of Alabama for services performed in Alabama, with respect to any cause of action
brought under or with respect to a Storage or Transportation Service Agreement.
	 
	F.	 	Confidentiality. The terms of any Storage or Transportation Service Agreement shall
be kept confidential by the parties except to the extent that any information must be
disclosed to a third party as required by law, for either party’s financial needs or for the
purpose of effectuating any Storage or Transportation Service Agreement.






18









 








EXHIBIT “C”




TO STORAGE AGREEMENT FTECO-07 (“CONTRACT”) BETWEEN BAY GAS

STORAGE COMPANY, LTD. AND PROGRESS ENERGY FLORIDA




BAY GAS STORAGE COMPANY, LTD.




AMENDED STATEMENT OF CONDITIONS FOR




NGPA SECTION 311 (a)(2)




GAS STORAGE AND TRANSPORTATION SERVICES




Dated December 22, 1998




 









 





BAY GAS STORAGE COMPANY, LTD.

STATEMENT OF CONDITIONS FOR

NGPA SECTION 311 (a)(2)

GAS STORAGE AND TRANSPORTATION SERVICES




Dated December 22, 1998




CONTENTS




	 	 	 	 	 	 	 
	SECTION	 	DESCRIPTION	 	PAGE
	 
	I.

	 	Bay Gas Basic Status and Function
	 	 	1	 
	 
	 	 	 	 	 	 
	II.

	 	Qualified Shippers
	 	 	1	 
	 
	 	 	 	 	 	 
	III.

	 	Capacity Availability, Scheduling and Allocations
And Curtailments
	 	 	2	 
	 
	 	 	 	 	 	 
	IV.

	 	Minimum Storage Service Volume
	 	 	5	 
	 
	 	 	 	 	 	 
	V.

	 	Receipt and Delivery
	 	 	6	 
	 
	 	 	 	 	 	 
	VI.

	 	General Terms and Conditions for Gas Storage
And Transportation
	 	 	6	 
	 
	 	 	 	 	 	 
	VII.

	 	Right To Terminate Services
	 	 	6	 
	 
	 	 	 	 	 	 
	VIII.

	 	Compliance With Laws and Survivability
	 	 	7	 
	 
	 	 	 	 	 	 
	IX.

	 	Changes to This Statement of Conditions
	 	 	7	 
	 
	 	 	 	 	 	 
	X.

	 	Authority of Statement of Conditions
	 	 	7	 






 









 






BAY GAS STORAGE COMPANY’S

STATEMENT OF CONDITIONS FOR

NGPA SECTION 311 (a)(2)

GAS STORAGE AND TRANSPORTATION SERVICES




Dated December 22, 1998.




     Bay Gas Storage Company, Ltd. (“Bay Gas”), a natural gas storage public utility that qualifies
as an intrastate pipeline company providing services within the meaning of Natural Gas Policy Act
of 1978 (“NGPA”) Section 2 (16) and Section 284.1 (a) of the Federal Energy Regulatory Commission’s
(“Commission”) regulations, files this amended Statement of Conditions For NGPA Section 311 (a)(2)
Gas Storage and Transportation Services, pursuant to the Commission’s regulations. 18 C.F.R. §
284.123 (e). Firm and interruptible gas storage and transportation-only services, on terms and
conditions authorized by the Commission and accepted by Bay Gas, shall be provided by Bay Gas
pursuant to NGPA Section 311 (a)(2), 15 U.S.C. §3371 (a)(2), and the Commission’s implementing
Orders, Rules and Regulations, to qualified Shippers that comply with the conditions set forth in
this Statement and with the terms and conditions contained in Bay Gas’ Storage or Transportation
Service Agreement executed with Shipper.



I.




BAY GAS’ BASIC STATUS AND FUNCTION




     Bay Gas is a gas storage public utility, certificated by the Alabama Public Service Commission
and subject to regulation by that Commission, which qualifies as an intrastate pipeline company
providing storage and transportation services within the meaning of NGPA Section 2 (16) and Section
284.1 (a) of this Commission’s regulations. Any such NGPA Section 311 (a)(2) services that Bay Gas
provides will be consistent with, and shall not infringe on, Bay Gas’ status and function as a
non-Federal-jurisdictional intrastate pipeline, and shall not subject Bay Gas to this Commission’s
Natural Gas Act jurisdiction. 18 C.F.R. § 284.3.



II.




QUALIFIED SHIPPERS




     Besides other conditions contained in this Statement, Bay Gas’ services are available only to
a Shipper that enters into a Service Agreement mutually acceptable to Bay Gas and Shipper. All
transactions for storage or transportation of gas that has flowed, or will flow, in interstate
commerce must qualify under NGPA Section 311 (a)(2)



 









 




and 18 C.F.R. Part 284 of Subchapter I. If, in the opinion of Bay Gas’ counsel, such qualified
status of Shipper or its proposed transaction is in doubt, then Shipper must apply for and receive
a final, non-appealable ruling from this Commission, or successor agency thereto, affirming such
qualifying status of Shipper and its proposed transaction, prior to commencement of services by Bay
Gas.




III.




CAPACITY AVAILABILITY, SCHEDULING AND ALLOCATIONS 

AND CURTAILMENTS





	A.	 	Capacity Availability






	 	1.	 	Storage service shall be conditioned on availability of sufficient injection
rate capacity, field storage capacity and withdrawal rate capacity (collectively called
“Capacity,” and including pipeline transportation service capacity) to perform the
service in accordance with the terms and conditions set forth in this Statement of
Conditions without detriment or disadvantage to services by or for the account of Bay
Gas. Transportation service shall be conditioned on availability of sufficient
Capacity to perform the service in accordance with the terms and conditions set forth
in this Statement of Conditions without detriment or disadvantage to services by or for
the account of Bay Gas. Bay Gas reserves all rights to retain sufficient Capacity for
its intrastate, non-Federal-jurisdictional firm and interruptible services and for its
operational swings attributable to firm and interruptible storage services prior to
making Capacity available by contract to NGPA Section 311 (a)(2) Shippers. Once
Capacity is made available to NGPA Section 311 (a)(2) Shippers, such Capacity shall be
scheduled, allocated or curtailed only as set forth in Sections III. B and C here.
	 
	 	2.	 	Storage service availability further shall be conditioned on Bay Gas receiving
an acceptable market value, in Bay Gas’ sole judgment, for such storage services,
determined when a request for storage service is received. Bay Gas reserves all rights
to refuse a request for storage service that, in Bay Gas’ sole judgment, might provide
less than market value. Apart from such Bay Gas judgment as to market value, Bay Gas’
judgment shall be exercised on a non-discriminatory basis.
	 
	 	3.	 	Criteria applied to requests for NGPA Section 311 (a)(2) services shall be the
same as criteria applied to requests for intrastate, non-Federal-jurisdictional
services.
	 
	 	4.	 	Shipper shall be responsible for making all arrangements for its transportation
of gas to be injected into or withdrawn from storage through




2









 






	 	 	 	Bay Gas’ storage services. Bay Gas reserves all rights to refuse storage service
for any otherwise qualified Shipper if Bay Gas determines that such storage would be
detrimental to Bay Gas’ storage operations in any way, including, without
limitation, Bay Gas’ storage compression and affected processing operations.






	B.	 	Scheduling and Allocations





     Bay Gas shall schedule contracted services according to these principles:




	 	1.	 	Nomination deadlines shall be as prescribed in Bay Gas’ General Terms and
Conditions.
	 
	 	2.	 	Bay Gas will be under no obligation to schedule the injection of gas into
storage or the withdrawal of gas from storage until Bay Gas has confirmed the
availability of Shipper’s transportation service to or from Bay Gas’ storage services
for the gas concerned. Subject to the foregoing subsection “1.” and this subsection
“2.”, firm storage and transportation services shall be scheduled before interruptible
services in all instances, regardless of the relative service rates to be paid.
	 
	 	3.	 	In-field transfer of title (transfer of gas balances in the storage field
between storage service agreements) may be made only with Bay Gas’ approval.
	 
	 	4.	 	Interruptible storage service Shippers paying a higher Unit Rate, as defined in
Bay Gas’ General Terms and Conditions, shall be scheduled ahead of interruptible
storage service Shippers paying a lower Unit Rate. If, because of changes in available
Capacity at any time, Bay Gas is required to reschedule interruptible Shippers that are
injecting, storing or withdrawing gas and are paying the same Unit Rate, then the
Capacity shall be rescheduled pro rata based on applicable contract quantities for said
Shippers.
	 
	 	5.	 	Bay Gas reserves the right to interrupt service to an interruptible Shipper
injecting, storing or withdrawing gas, in order to enable Bay Gas to provide service to
another, bumping, interruptible Shipper injecting, storing or withdrawing gas, if such
Shipper is paying a higher Unit Rate to Bay Gas.
	 
	 	6.	 	All overrun volumes in excess of a storage service Shipper’s contract
quantities nominated for delivery by Shipper shall be scheduled according to the above
subsections “4.” and “5.” only after all other storage service Shippers’ nominated
volumes equal to or less than each Shippers’ Maximum Daily Injection Quantity or
Maximum Daily Withdrawal Quantity are scheduled.




3









 






	 	7.	 	Bay Gas may reschedule Capacity on a daily basis, or on such other periodic
basis as is necessary for Bay Gas to recognize the priority of new storage or
transportation service Shippers or any changes in the priorities of existing such
Shippers, and to conform to its storage system operational requirements. Such
priorities or changes will include, but will not be limited to, those instances
involving a storage service Shipper paying a higher Unit Rate for interruptible service
and firm storage service Shippers changing volumes within their Maximum Daily Injection
Quantity or Maximum Daily Withdrawal Quantity. However, such changes in scheduling
shall not at any time bump any existing firm Shipper.






	C.	 	Curtailments






	 	1.	 	General. If curtailment of storage or transportation service is required,
volumes shall be curtailed in the reverse order of the priority in effect at the time
of curtailment established during scheduling as set forth in Section “III. B” above.
Intrastate, non-Federal-jurisdictional firm and interruptible services shall be
curtailed in a manner determined solely by Bay Gas, but in no event shall such
curtailments have a different priority than similar types of services for NGPA Section
311 (a)(2) Shippers.
	 
	 	2.	 	Reduction of Services. Without limitation to the foregoing, Bay Gas shall have
the right to reduce receipts, deliveries, injections or withdrawals of gas on any day
below a storage service Shipper’s Maximum Daily Injection Quantity or Maximum Daily
Withdrawal Quantity, or below the storage rights applicable, for repair, overhaul,
replacement or construction of pipelines, compressors, metering, regulating or other
production, gathering and transmission facilities and equipment, or to maintain system
integrity; provided, however, that with respect to routine repair and maintenance, Bay
Gas will implement restrictions for scheduling purposes only, not for curtailment, and
will attempt to schedule such activity during a period when it will not result in
limitation of firm service or when such limitation will be minimized, and after
consulting with the Shippers that could be affected.
	 
	 	3.	 	Notice of Curtailment. For shippers under all firm services, Bay Gas shall
provide notice of any curtailment as far in advance as feasible. Services reserved by
Bay Gas for system operations shall be curtailed last, in consideration of the need to
preserve system integrity. If capacity is curtailed and two or more firm Shippers have
the same priority according to this Section “III. C”, firm Shippers shall be allocated
their pro rata share of capacity based on their Maximum Daily Injection Quantity or
Maximum Daily Withdrawal Quantity or Maximum Daily Transportation Quantity, as
allocated pro rata among those firm Shippers with unsatisfied




4









 








	 	 	 	nominations. All non-firm Shippers shall be allocated their pro rata applicable. If
firm Shippers nominate fewer than their respective curtailment period entitlements,
the difference shall be share of Capacity based on their nominations in effect at
the time of the curtailment.
	 
	 	4.	 	Limitation of Firm Services. While firm services are not ordinarily interrupted
by nominations for firm service within Shipper’s Maximum Daily Injection Quantity or
Maximum Daily Withdrawal Quantity or Maximum Daily Transportation Quantity, Bay Gas may
decline to schedule firm service for any of the following reasons:






	 	(a)	 	if Shipper tenders gas which does not conform to applicable
pressure requirements of the Storage or Transportation Service Agreement
	 
	 	(b)	 	if Shipper tenders gas which does not conform to the gas
quality requirements of both the upstream and downstream entities’ gas quality
requirements
	 
	 	(c)	 	for reasons of force majeure
	 
	 	(d)	 	due to routine repair and maintenance to be reasonably
determined by Bay Gas
	 
	 	(e)	 	due to delinquency in payment by Shipper
	 
	 	(f)	 	to rectify imbalances or to conform physical flows to nominations
	 
	 	(g)	 	to maintain system integrity, or
	 
	 	(h)	 	if there is a dispute over title, ownership or right to tender,
receive or deliver gas.





IV.




MINIMUM STORAGE SERVICE VOLUME




     Bay Gas shall not be obligated to furnish storage service to any Shipper whose average daily
gas volume tendered for storage in a given month is less than 100 MMBtu per day. Such storage
Shipper’s obligation to tender gas for delivery shall be suspended and modified for the time and to
the extent that Bay Gas does not accept deliveries due to Shipper’s inability to deliver such
minimum average daily volume. If the amount of gas subsequently tendered for delivery once again
is less than such minimum average daily volume, Bay Gas shall have the right to cancel the Storage
Service Agreement at any time on thirty (30) days written notice to Shipper. Bay Gas



5









 







shall be deemed released from all obligations and liabilities, direct or indirect, under such
Storage Service Agreement on the effective date of such a cancellation.



V.




RECEIPT AND DELIVERY




     Bay Gas shall have sole operational control over the injection of gas into, the retention of
gas within, and the withdrawal of gas from, Bay Gas’ system storage facilities. A Shipper seeking
to direct gas into storage shall nominate “Storage” as the Point of Delivery on Bay Gas’ system
and shall identify the number of the Storage Service Agreement to be used for the receipt of such
gas into storage. A Shipper seeking to withdraw gas from storage shall nominate “Storage” as the
Point of Redelivery from Bay Gas’ system and shall identify the number of the Storage Service
Agreement under which the gas is to be withdrawn from storage. Bay Gas shall have sole operational
control over the transportation of gas on Bay Gas’ system from the Point of Delivery to the Point
of Redelivery. For transportation service, “Delivery” shall mean the act of causing gas to be
transported to the Points of Delivery, and “Redelivery” shall mean the transportation of gas from
the Points of Delivery to the Points of Redelivery.



VI.




GENERAL TERMS AND CONDITIONS

FOR GAS STORAGE AND TRANSPORTATION




     Amended General Terms and Conditions to Bay Gas Storage Company, Ltd.’s Storage and
Transportation Service Agreements, dated December 22, 1998, are incorporated by reference as part
of this Statement of Conditions. Shipper’s failure to comply with the provisions in Section II,
Nominations, Balancing And Excess Deliveries, of such General Terms and Conditions shall relieve
Bay Gas of its obligation to perform services, and, if such failure to comply unreasonably
interferes, in Bay Gas’ judgment, with Bay Gas’ control over its system facilities, then Bay Gas
may, at its option, cease services and terminate any related Service Agreements or other
agreements, without limitation of Bay Gas’ rights or remedies at law or in equity.



VII.




RIGHT TO TERMINATE SERVICES




     Bay Gas reserves the right to discontinue, on a non-discriminatory basis, all services that
subject Bay Gas to the non-discriminatory access requirements of 18 C.F.R. Part 284, and any
subsequent Commission Orders, Rules or Regulations applicable to such services. Bay Gas may cancel
the affected Service Agreements at



6









 




any time on ninety (90) days prior written notice to Shippers if Bay Gas has no other reasonable
options available that will allow the continuation of such Service Agreements. Bay Gas shall be
relieved of all obligations and liabilities on the effective date of such notice of discontinuance
and cancellation. Bay Gas additionally reserves the right to terminate any interruptible Service
Agreement if the Shipper either has not executed the Service Agreement within thirty (30) days of
receiving such Agreement, or has failed to nominate service under such Agreement within one (1)
year after execution of the Agreement.




VIII.




COMPLIANCE WITH LAW AND SURVIVABILITY




     If any part of this Statement of Conditions conflicts with, or violates, any Commission or
other Judicial, Governmental or Regulatory Body’s Orders, Rules or Regulations, such part shall be
deemed void, but shall not affect the remaining provisions of this Statement. Bay Gas shall not be
liable to any party with a Service Agreement subject to this Statement that loses priority status
or any other rights enumerated in this Statement because of the issuance by the Commission or other
Judicial, Governmental or Regulatory Body of any Orders, Rules or Regulations affecting this
Statement of Conditions.



IX.




CHANGES TO THIS STATEMENT OF CONDITIONS




     Bay Gas reserves the right to add to, delete or modify the conditions in this Statement
without prior notice.



X.




AUTHORITY OF STATEMENT OF CONDITIONS




     This Statement of Conditions, and the incorporated General Terms and Conditions (see Section
“VI.” above) take precedence over conflicting language in any of Bay Gas’ Service Agreements or
amendments thereto, unless such language specifically states that it is an exception to this
Statement, and then only to the extent of such stated exception.




7









 








EXHIBIT “D”




TO STORAGE AGREEMENT FPEF-08 (“CONTRACT”) BETWEEN BAY GAS

STORAGE COMPANY, LTD. AND PROGRESS ENERGY FLORIDA




NOMINATION FORM




	 	 	 
	Nomination To:

	 	Bay Gas Storage
	 
	 	 
	Nomination From:

	 	Progress Energy Florida






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Daily	 	 	 	 	 	 	 	 	 	 
	Nom	 	Start	 	 	End	 	 	Volume	 	 	Delivery	 	 	Delivery	 	 	Upstream	 
	Type	 	Date	 	 	Date	 	 	(MMBtu)	 	 	Pipe	 	 	Point	 	 	Contract	 
	Inject
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	DAILY
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TOTAL:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Daily	 	 	 	 	 	 	 	 	 	 
	Nom	 	Start	 	 	End	 	 	Volume	 	 	Delivery	 	 	Delivery	 	 	Upstream	 
	Type	 	Date	 	 	Date	 	 	(MMBtu)	 	 	Pipe	 	 	Point	 	 	Contract	 
	Withdrawal
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	DAILY
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TOTAL:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 







 









 








EXHIBIT “E”




TO STORAGE AGREEMENT FPEF-08 (“CONTRACT”) BETWEEN BAY GAS

STORAGE COMPANY, LTD. AND PROGRESS ENERGY FLORIDA




FORM of ASSIGNMENT CONSENT

                                        , 2006




Bay Gas Storage Company, Ltd.

2828 Dauphin Street

Mobile, Alabama 36606

Attention: Chief Financial Officer




Regions Bank, as Trustee

106 St. Francis Street

Mobile, Alabama 36602

Attention: Corporate Trust Department



Ladies and Gentlemen:




     Reference is made to that certain Storage Service Agreement made as of                                         , 2006
(the “Subject Agreement”) between Bay Gas Storage Company, Ltd. (the “Company”) and Progress Energy
Florida (the “Customer”). Under the Subject Agreement, the Company has agreed to provide natural
gas storage services in accordance with the terms and conditions of said Agreement. At the request
of the Company, the Customer has been asked to enter into this Assignment Consent.



     The Customer hereby (i) acknowledges that the Company has granted a security interest in and
assigned, as a collateral assignment, all its right, title and interest in, to and under the
Subject Agreement to Regions Bank (the “Trustee”), as trustee for the benefit of the holders of
certain Senior Secured Notes of one or more series (the “Notes”) of the Company issued pursuant to
a Trust Indenture and Security Agreement, dated as of December 1, 2000 (the “Indenture”), between
the Company, as debtor, and the Trustee, as secured party, which Indenture will secure the Notes,
and (ii) consents to such grant and assignment.



     In addition, the Customer acknowledges that, (i) upon the occurrence of an Event of Default
under the Indenture, the Trustee may elect by written notice delivered to the Customer to require
that any and all sums payable from time to time by the Customer to the Company under the Subject
Agreement be paid to an account as directed by the Trustee, (ii) the Indenture provides that the
Trustee, as secured party, shall have the right, upon the occurrence of an Event of Default under
the Indenture, to collect



 









 







amounts payable under the Subject Agreement and to take actions to enforce collection of payments
thereunder as fully as could the Company, and (iii) the Indenture restricts waivers, modifications
or amendments by the Company with respect to the Subject Agreement, as well as any subsequent
assignment by the Company of any sums payable thereto or rights thereof under the Subject Agreement
to any party other than the Trustee without the prior written consent of the Trustee so long as any
Notes remain outstanding thereunder.



     The Customer hereby confirms and agrees that:




	 	(i)	 	The Subject Agreement has not been amended, modified or altered
and is in full force and effect and neither the Customer nor, to the Customer’s
best knowledge, the Company is in default thereunder;
	 
	 	(ii)	 	The Customer will not assign any of its obligations under the
Subject Agreement to any entity unless it shall deliver to the Trustee a
certificate from the Customer certifying that the long term senior debt of the
assignee is rated “BBB-“ or better by Standard and Poor’s or an equivalent
investment-grade or better rating by another nationally recognized credit rating
agency; and
	 
	 	(iii)	 	The Customer will provide such financial information to the
Trustee as may from time to time be reasonably requested by the Company.





     The assignments referred to herein shall not be deemed to relieve the Company from any of its
obligations under the Subject Agreement. The parties hereto agree that this Consent may be
executed in counterparts.



     This Consent and all undertakings herein contained shall be binding upon and inure to the
benefit of the Trustee and all holders of the Notes from time to time and their respective
successors and assigns.



     This Consent shall be governed by and construed in accordance with Alabama law, without
reference to its conflicts of laws principles.



     All modifications to the undertakings provided in this Consent shall be effective only if the
same shall be in writing and signed by all parties hereto.



     The parties hereto agree that all notices and communications to be sent pursuant to this
Assignment Consent, shall in each case be sent (in the manner provided for notices in the Subject
Agreement) to (i) the Trustee at the following address (or as the Trustee shall otherwise direct in
writing):



2









 




Regions Bank, as Trustee

106 St. Francis Street

Mobile, Alabama 36602

Attention: Corporate Trust Department



and (ii) to the Customer at the following address (or as the Customer shall otherwise direct in
writing):



Florida Power Corporation d/b/a Progress Energy Florida, Inc.

410 S. Wilmington St. PEB 10A

Raleigh, North Carolina 27601

Attention: Director, Fuel Supply




     The parties hereto, acting through their duly authorized representatives, have executed this
Consent as of the date first aforesaid.


Florida Power Corporation d/b/a Progress Energy Florida, Inc.



By  
                
                
               
               
               
 



Its                                                                    
            




     The undersigned, Bay Gas Storage Company, Ltd., hereby acknowledges the execution and delivery
of this Assignment Consent and agrees to be bound by the terms hereof.


BAY GAS STORAGE COMPANY, Ltd.



By MGS Storage Services, Inc., its General Partner



By         
                
                
                
               
        



Its                                                                    
            



Accepted and agreed to:




REGIONS BANK,

As Trustee on behalf of the holders of the Notes




	 	 	 	 	 
	By

	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Its
	 	 	 	 
	 

	 	 	 	 






3