exv10w10



 





Exhibit 10.10




NATURAL GAS LIQUIDS PURCHASE AGREEMENT




By and Between




KOCH HYDROCARBON, LP




and




PIONEER NATURAL RESOURCES USA, INC.




Dated: March 26, 2003




 









 





	 	 	 	 	 
	Section, Description	 	Page #
	Section 1., Definitions
	 	 	1	 
	Section 2., Term
	 	 	2	 
	Section 3., Delivery by Pioneer, Acceptance by KHLP
	 	 	2	 
	Section 3.A., Quantity
	 	 	2	 
	Section 3.B., Deliveries
	 	 	3	 
	Section 3.C., Quality
	 	 	3	 
	Section 3.D., Third Party NGL’s
	 	 	3	 
	Section 3.E., Marketing Agreements
	 	 	4	 
	Section 4., Purchase Price
	 	 	4	 
	Section 5., Base and Adjusted Fractionation Fees
	 	 	4	 
	Section 6., Other Fees, Quality Related Expenses
	 	 	5	 
	Section 7., Payments
	 	 	5	 
	Section 8., Termination of Prior Agreements
	 	 	5	 
	Section 9., Measurement, Sampling and Analysis
	 	 	5	 
	Section 10., Inspection by KHLP & the Pipelines
	 	 	5	 
	Section 11., Records
	 	 	5	 
	Section 12., Custody and Title
	 	 	6	 
	Section 13., Warranties
	 	 	6	 
	Section 14., Taxes
	 	 	6	 
	Section 15., Bankruptcy, Receivership, Breach
	 	 	6	 
	Section 16., Attorney’s Fees
	 	 	7	 
	Section 17., Force Majeure
	 	 	7	 
	Section 18., Material Safety Data Sheets
	 	 	7	 
	Section 19., KHLP’s System Shutdown
	 	 	7	 
	Section 20., Notices
	 	 	8	 
	Section 21., Laws.
	 	 	8	 
	Section 22., Entire Agreement
	 	 	8	 
	Section 23., Amendments
	 	 	9	 
	Section 24., Interpretation
	 	 	9	 
	Section 25., Governing Law
	 	 	9	 
	Section 26., Assignment
	 	 	9	 
	Section 27., Waiver
	 	 	9	 
	Section 28., Heading and Sections
	 	 	9	 
	Section 29., No Third Party Beneficiary
	 	 	9	 
	Section 30., No Partnership or Association
	 	 	9	 
	Section 31., Exhibits
	 	 	9	 
	Section 32., Joint Action
	 	 	10	 
	Section 33., Safe Handling
	 	 	10	 
	Section 34., KHLP’s Safety Regulations
	 	 	10	 
	Section 35., Use of Products
	 	 	10	 
	Section 36., Alternative Connections
	 	 	10	 






 









 





NATURAL GAS LIQUIDS PURCHASE AGREEMENT




     This Natural Gas Liquids Purchase Agreement (“Agreement”) is made on this 26th Day
of March, 2003, by and between PIONEER NATURAL RESOURCES USA, INC. (“Pioneer”), and Koch
Hydrocarbon, LP (“KHLP”).



     WHEREAS, Pioneer or its Affiliates (defined below) are in the business of producing and
marketing NGL’s (defined below), and Owns or Controls raw natural gas liquid production from the
Midkiff and Benedum Plants (“Plants”); and



     WHEREAS, Pioneer wishes to sell to KHLP all NGL’s Owned or Controlled by Pioneer or its
Affiliates from the Plants; and,



     WHEREAS, KHLP desires to purchase all such NGL’s from Pioneer pursuant to the terms and
conditions of this Agreement.



     NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, and
other good and valuable consideration, Pioneer and KHLP agree as follows:



     1. Definitions. In this Agreement, each of the following terms shall have the
meanings assigned as follows:




	A.	 	“Adjusted Base Fractionation Fee” shall have the meaning set forth in Section 5.
	 
	B.	 	“Affiliate” of a corporation, partnership, company, or other business enterprise or entity
(collectively “Person”) shall mean a Person which directly or indirectly controls, is
controlled by, or is under common control with such Person. As used herein, the term
“control” (including its derivatives and similar terms) means (i) owning, directly or
indirectly, at least fifty percent (50%) of the voting rights attributable to the outstanding
shares of the controlled Person if such voting rights confer upon the shareholder the power,
directly or indirectly, to direct, or cause to be directed, the management and policies of the
controlled Person, or (ii) with respect to a Person that is not a corporation, having the
power, directly or indirectly, to direct, or cause to be directed, the management and policies
of the controlled Person through the ownership of voting securities, other ownership
interests, by contract, or otherwise.
	 
	C.	 	“Alternate Facilities” shall have the meaning set forth in Section 19.
	 
	D.	 	“Barrel” shall mean forty-two U.S. Gallons.
	 
	E.	 	“Base Fractionation Fee” shall have the meaning set forth in Section 5.
	 
	F.	 	“Contract Year” shall mean each twelve (12) Month period during the term hereof beginning on
the first Day of the Original Contract Term.
	 
	G.	 	“Control”, “Controls”, or “Controlled” shall mean, when referring to NGL’s, NGL’s that
Pioneer or its Affiliates, as the case may be, has the right, directly or indirectly, to sell.





 









 






	H.	 	“Day” shall mean a period of twenty-four (24) consecutive hours commencing at 7:00 A.M.
Central Time.
	 
	I.	 	“Delivery Point” shall mean the interconnection between the pipeline accepting NGL’s for
KHLP’s account, at or near the tailgate of the Plant at issue.
	 
	J.	 	“Effective Date” shall mean May 1, 2003.
	 
	K.	 	“Force Majeure’’ shall have the meaning set forth in Section 17.
	 
	L.	 	“Gallon” shall mean a U.S. Gallon of 231 cubic inches of liquid corrected for temperature to
sixty degrees (60°) Fahrenheit, and at the equivalent vapor pressure of the liquid.
	 
	M.	 	“Month” shall mean a period of time commencing at 7:00 A.M. on the first Day of a calendar
Month and ending at 7:00 A.M. on the first Day of the next calendar Month.
	 
	N.	 	“NGL’s” shall mean the mixture of liquid hydrocarbons and non-hydrocarbon components that
are condensed, adsorbed and/or absorbed from or separated out of natural gas currently and
subsequently processed in the Plant(s). Unless otherwise mutually agreed, NGL’s shall not
include field condensate recovered in gas gathering systems.
	 
	O.	 	“Own”, “Owns” or “Owned” shall mean, when referring to NGL’s, NGL’s to which Pioneer holds
title.
	 
	P.	 	“Pipeline” or “Pipelines” shall mean the pipeline(s) accepting NGL’s and delivering such
NGL’s to Mt. Belvieu for KHLP’s account. Presently, the West Texas Pipeline is accepting
NGL’s from the Benedum Plant, and the Chaparral and Quanah Pipelines are accepting NGL’s from
the Midkiff Plant. The parties recognize and acknowledge that the carrier Pipelines may
vary during the term of this Agreement.
	 
	Q.	 	“Plant(s)” shall mean the New Western Gas Resources
Operated Midkiff Gas Processing Plant located in Reagan County, Texas, and
the Benedum Gas Processing Plant located in Upton County, Texas.
	 
	R.	 	“Year” shall mean a period of three hundred sixty-five (365) consecutive Days; provided,
however, that any Year which contains three hundred sixty-six (366) consecutive Days shall
also constitute one “Year.”





     2. Term. This Agreement shall begin on the Effective Date, and shall be effective
until August 1, 2005, at which time this Agreement shall expire.



     3. Delivery by Pioneer, Acceptance by KHLP.




	A.	 	Quantity. Subject to the provisions herein, Pioneer shall deliver and sell to KHLP
at the Delivery Points all of the NGL’s that Pioneer and its Affiliates Own or Control from
the Benedum Plant and the Midkiff Plant, such volume of NGL’s estimated to be 2,000 Barrels
per Day and 6,800 Barrels per Day, respectively.
	 
	 	 	Subject to the other provisions herein, KHLP shall accept and purchase NGL’s from Pioneer
in accordance with this Agreement; provided, however, KHLP shall have the right to not
accept any NGL’s in excess of the Estimated Production as specified above in this Section
for each Plant upon providing notice of such to Pioneer. If, for any period of one hundred
and eighty (180) consecutive Days (excluding periods of Force Majeure),





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	 	 	Pioneer fails to deliver and sell to KHLP at least ninety percent (90%) of the
then-effective Estimated Production from each of the Plants, then KHLP shall have the
right, within thirty (30) Days of such 180 consecutive Day period, by providing written
notice to Pioneer, to reduce the then-effective Estimated Production for the Plant with
the deficiency to the average daily NGL’s volume actually delivered and sold to KHLP from
such Plant during such 180 consecutive Day period (excluding periods of Force Majeure).
Such reduction is to be effective as of the date of KHLP’s notice.
	 
	 	 	If the volume of Pioneer’s Owned NGL’s and Controlled NGL’s available to be delivered
hereunder from a Plant increases to a level which is in excess of the then-effective
Estimated Production for such Plant, then Pioneer may request an increase in the
then-effective Estimated Production to the volume of Owned NGL’s and Controlled NGL’s that
Pioneer estimates to be available from such Plant, which request will be in writing and
detail the basis for the increase or anticipated increase in volume. KHLP shall respond, in
writing, to Pioneer’s request within fifteen (15) Days of KHLP’s receipt of Pioneer’s
request. If KHLP declines to increase the then-effective Estimated Production for the Plant
at issue, then the volume of Owned NGL’s and/or Controlled NGL’s which is in excess of the
then-effective Estimated Production for such Plant shall be permanently released from this
Agreement, and Pioneer shall be free to dispose of such excess NGL’s from the Plant in any
manner deemed appropriate by Pioneer.
	 
	B.	 	Deliveries. Pioneer has installed, or shall cause to be installed, and shall
operate, or cause to be operated, at its sole cost and expense, any facilities or equipment
necessary to deliver the NGL’s to the Delivery Points. Pioneer shall deliver the NGL’s
meeting the quality specifications, temperature and pressure requirements of the Pipelines.
	 
	C.	 	Quality. Pioneer shall deliver NGL’s which (a) are merchantable, (b) meet the more
stringent of the Pipelines’ or KHLP’s standard specifications as such specifications may
change from time to time, and (c) are free from dust, free of entrained water, and other
impurity. KHLP and the Pipelines shall have the right, but not the obligation, to modify such
specifications to meet or conform to downstream market revisions or requirements. All NGL’s
shall be received subject to KHLP’s and the Pipelines’ inspection and rejection. If KHLP or
the Pipelines determine Pioneer has delivered NGL’s that has contaminated the common fungible
stream, KHLP and/or the Pipelines may treat or otherwise dispose of the contaminated stream in
any reasonable commercial manner at Pioneer’s sole expense. Pioneer shall indemnify, reimburse
and hold KHLP harmless from and against all claims, penalties, treating or blending fees,
losses, costs, expenses, liabilities or damages of any kind or nature (including reasonable
attorney’s fees and court costs associated therewith) (collectively “Losses”) arising out of
or related to Pioneer’s delivery hereunder of product not meeting the aforementioned quality
standards.
	 
	D.	 	Third Party NGL’s. KHLP recognizes that, from time to time, Pioneer, by virtue of
its agreements with owners of a Plant(s) or otherwise, may acquire title to or obtain the
right under operating, processing or similar agreements to sell NGL’s recovered from natural
gas belonging to third parties. To the extent Pioneer so acquires such right, and subject to
the foregoing provisions of this Section 3, Pioneer shall deliver and sell to KHLP such NGL’s
under the terms and conditions of this Agreement.










3









 












	E.	 	Marketing Agreements. Pioneer shall not enter into any agreement that would
require or allow any NGL’s which are Owned or Controlled by Pioneer or its Affiliates from
the Plants to be marketed by a party other than Pioneer unless that party agrees that all
such NGL’s shall be subject to this Agreement.




4. Purchase Price. For the NGL’s purchased hereunder, KHLP shall pay Pioneer a price equal
to the monthly average price per Gallon (for the Month of actual delivery) applicable to each
component of the NGL’s as posted by OPIS for Mt. Belvieu, Non-TET prices (including “Purity
Ethane”), MINUS (i) the greater of the Base Fractionation Fee or the Adjusted Base Fractionation
Fee, and (ii) a transportation fee equal to all the fees and charges of the Pipelines charged KHLP
for the transportation of NGL’s from the Delivery Points to the fractionatior operated by an
Affiliate of KHLP and located in or near Mt. Belvieu, Texas. Such fees and charges may include,
but not be limited to charges for off-spec NGL’s, loss allowances, and the tariff rate incurred by
KHLP in moving NGL’s through the Pipelines to Mt. Belvieu. An example of this pricing is set forth
in Exhibit A, for illustrative purposes only.





	A.	 	If OPIS, or its successor publication, ceases to be published, or if it ceases to publish the
prices used in determining the purchase price herein, then the price(s) no longer published in
OPIS or its successor publication shall, if available, be obtained from an alternative
industry publication (private or government) which publishes the same pricing
information. If the OPIS price is no longer available, then KHLP and Pioneer shall, within
sixty (60) Days of the first Day of the Month that the cessation occurred, agree upon an
alternative pricing mechanism which will reflect the fair market price of the NGL’s delivered
hereunder. The alternative pricing mechanism agreed upon shall apply retroactively to the
first Day of the Month that the posting terminated. If the parties cannot agree upon an
alternate pricing mechanism within the period stipulated above, then the issue of how the
price applicable hereunder should be calculated shall be submitted to arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration Association.
	 
	B.	 	Allowable Methane. The allowable methane contained in the NGL’s will be purchased as
ethane, as such methane is credited as ethane by the Pipelines.





     5. Base and Adjusted Base Fractionation Fees. The Base Fractionation Fee shall be one
and six-tenths cents (1.6¢) per Gallon of the NGL’s delivered hereunder. Commencing on the
Effective Date, and the beginning of each Month thereafter, the Base Fractionation Fee shall be
adjusted to equal the sum of the following two components (the “Adjusted Base Fractionation Fee”):




1. Sixty-seven hundredths of a cent (0.67¢) per Gallon for fuel gas, which shall be
determined by (i) dividing the price per MMBtu of natural gas reflected by the Monthly
Houston Ship Channel/Beaumont, Texas, index (applicable to the first Day of the Month —
large packages only), for each current Month of actual delivery, as published in Inside
F.E.R.C.’s Gas Market Report, by $3.50/MMBtu, and (ii) multiplying the resulting ratio by
0.67¢ per Gallon, and




2. A base fee of ninety-three hundredths of a cent (0.93¢) per Gallon.



4









 




Notwithstanding anything to the contrary, the Adjusted Base Fractionation Fee shall not be reduced
below the Base Fractionation Fee of 1.6¢ per Gallon.




     6. Other Fees, Quality Related Expenses. In addition to any other fees and charges
deducted from the purchase price, the parties agree that if any third party charges a fee for
receiving products attributable to the NGL’s purchased hereunder (whether in connecting pipelines
or in storage facilities), KHLP shall deduct from the purchase price due Pioneer hereunder an
amount equal to such charges. Pioneer shall reimburse KHLP for the expenses and costs incurred by
KHLP or charged KHLP by the Pipelines in treating and handling the NGL’s delivered hereunder that
do not meet the quality specifications contained in this Agreement. Such expenses and costs may
include, but not be limited to, blending costs, filters, and discounts in sales prices required to
market contaminated Products.



     7. Payments. KHLP shall pay Pioneer by the fifteenth (15th) of the
Month for the NGL’s delivered in the previous Month via KHLP’s Automated Clearinghouse (“ACH”)
payment process. Such payments will reflect the purchase price due Pioneer hereunder and any
deductions therefrom, which may include but not be limited to Quality Adjustment Fees, and other
charges due KHLP hereunder.



     8. Termination of Prior Agreements. Effective on the Effective Date, all
previous agreements between the parties pertaining to the purchase or exchange of NGL’s from the
Plants shall terminate and be superseded by this Agreement.



     9. Measurement, Sampling and Analysis. The measurement systems used to measure NGL’s
delivered hereunder at the Delivery Points and the determination of volumes delivered at the
Delivery Points shall be determined and implemented by the Pipelines, in accordance with their
tariffs.



     10. Inspection by KHLP & the Pipelines. NGL’s delivered hereunder shall be subject
to the Pipelines’ and KHLP’s inspection, and rejection if such NGL’s fail to meet the quality
standards required by this Agreement. The Failure of the Pipelines or KHLP to exercise its right of
refusal from time to time shall not constitute a waiver of such right.



     11. Records. Each party shall retain all accounting records and documents related to
this Agreement and prepared by such party for a period of not less than two (2) Years after the
origination date of the document. As a condition precedent to either party’s right to challenge the
correctness of any invoice or payment under this Agreement, the challenging party must, within two
(2) Years following the date of any such invoice or the date of any such payment, as the case may
be, notify the other party in writing of the basis for such challenge. With respect to all
invoices or payments for which such notice is not timely given, such invoices and payments shall be
conclusively presumed correct.



5









 





     12. Custody and Title. Control of, title, and risk of loss to the NGL’s shall
pass from Pioneer to KHLP and vest in KHLP at the inlet flange connection at the Delivery Points.
Upon acceptance of the NGL’s, KHLP will be deemed to have exclusive ownership and control of said
NGL’s and shall be responsible for any injuries or damages caused thereby, except to the extent
caused by the acts or omission of the Pipelines, Pioneer and/or their agents. Prior to delivery
at the Delivery Points, Pioneer will be deemed to have exclusive ownership and control of said
NGL’s and shall be responsible for any injuries or damages caused thereby, except to the extent
caused by the acts or omissions of KHLP and/or its agents.



     13. Warranties. Pioneer warrants title to the NGL’s delivered to KHLP hereunder
and the right to sell the same, and further warrants that all such NGL’s are, at the time of
delivery, free from all liens, encumbrances, taxes, charges and adverse claims. Pioneer agrees to
indemnify and hold KHLP harmless from and against any and all claims, causes of action, judgments
or liabilities brought by or awarded to third parties arising out of or connected with any
allegation that Pioneer or its Affiliates did not have title or the authority to sell such NGL’s.
Said indemnity includes payments of attorney’s fees and expenses incurred in defense of said
claims or causes of action.



     14. Taxes. Pioneer shall assume liability for, and pay all taxes, including all new
taxes or increases in existing taxes including excise taxes, and any superfund petroleum taxes (but
excluding net income, excess profits, or corporate franchise taxes) imposed by any governmental
authority upon the processing, manufacture, sale, use, delivery, or receipt of the NGL’s purchased
hereunder. Pioneer agrees to indemnify and hold KHLP harmless from and against any and all
claims, causes of action, proceedings, judgments, interest, penalties, fees or other liabilities
brought by or awarded to third parties arising out of or connected with any taxes to be paid by
Pioneer pursuant to this Section. Said indemnity includes payments of attorney’s fees and expenses
incurred in defense of said claims, proceedings or causes of action.



     15. Bankruptcy,
Receivership, Breach. If either party shall:




	A.	 	Voluntarily petition under or otherwise seek the benefit of any bankruptcy, reorganization,
arrangement or insolvency law; or
	 
	B.	 	Make a general assignment for the benefit of creditors, or
	 
	C.	 	Be adjudicated bankrupt or insolvent; or
	 
	D.	 	Allow a receiver or trustee of the business to be appointed; or
	 
	E.	 	Fail to perform any part of this Agreement (except where such failure is excused under the
terms of this Agreement) and, upon written notice of such failure by the other party, fail to
either remedy the same within thirty (30) Days of such notice or fail to take reasonable steps
within thirty (30) Days to remedy the same;




then, should any of the events listed in (A) through (E) above occur, this Agreement may be
terminated forthwith by written notice at the option of the other party with such other party
retaining all its other rights and remedies at law or equity.




6









 





     16. Attorney’s Fees. In the event of a lawsuit arising out of the performance of this
Agreement, the prevailing party shall be entitled to its reasonable attorney’s fees and court costs
for prosecuting or defending such action from the non-prevailing party.



     17. Force Majeure.




	A.	 	If either party is rendered unable by Force Majeure to carry out its obligations under this
Agreement (other than the obligation to make payments of monies due hereunder), then that
party shall give prompt written notice of the Force Majeure stating facts supporting such
claim of inability to perform. Thereupon, the obligation to deliver or receive the
quantities so affected shall be suspended during the continuation of an inability so caused,
but for no longer period, but this Agreement shall otherwise remain unaffected. The party
claiming Force Majeure shall use due diligence to remove the cause with all reasonable
dispatch; provided, however, that this provision shall not require the settlement of strikes,
lockouts, or other labor difficulty of the party involved, when such course is determined
inadvisable by the party having the difficulty.






	B.	 	The term “Force Majeure,” as employed herein, shall include strikes, lockouts, or other
industrial disturbances; wars, sabotage, blockades, insurrections, or acts of the public
enemy; epidemics, landslides, lightning, earthquakes, tornadoes, fires, storms, floods,
washouts, or other acts of God; arrests or restraints of governments and people: compliance
(voluntary or involuntary) with federal, state or local laws, rules or regulations, permits,
acts, orders, directives, requisitions, or requests of any official or agency of the federal,
state, or local governments; rationing of, shortages of, or inability to obtain or use any
material or equipment; riots or civil disturbances, fires, explosions. failures, disruptions,
breakdowns, or accidents to machinery, facilities, or lines of pipe (whether owned, leased or
rented); the testing, making repairs, performing maintenance, alterations, enlargements or
connections to machinery, facilities, or lines of pipe (whether owned, leased or rented); the
necessity to not operate, or to reduce the operation of, equipment to protect the safety of
the public and/or environment; freezing of lines; embargoes, priorities, expropriation, or
condemnation by government or governmental authorities; interference by civil or military
authorities; any inability to either tender or accept NGL’s that is caused by pipeline
prorationing or lack of capacity, and any cause which is not reasonably within the control of
the party, or its Affiliates, claiming suspension.





     18. Material Safety Data Sheets. Pioneer shall supply KHLP on a timely basis with
Material Safety Data Sheets (MSDS) on the NGL’s, which MSDS shall be complete and accurate in
disclosing risks and dangers of the NGL’s and of the handling, transporting and processing the
same.



     19. KHLP’s System Shutdown. If, in the sole judgment of KHLP or its Affiliates, the
continued operation of a portion of, or all, of KHLP’s or its Affiliate’s system becomes
uneconomic, then KHLP shall have the right to shut down such uneconomic portion of its system on at
least ninety (90) Days prior written notice to Pioneer. For purposes of this Section, this



7









 




includes all NGL pipelines, fractionation facilities, loading or unloading facilities, or
other physical facilities (directly or indirectly) utilized in the performance of this
Agreement that are owned by KHLP or its Affiliates. If KHLP shuts down its entire system,
this Agreement shall terminate. If KHLP shuts down only a portion of its system, KHLP shall
have the right, to be exercised by written notice given to Pioneer within thirty (30) Days
after KHLP notifies Pioneer of the shut down, to continue to receive any NGL’s affected by
the shut down through other existing portions of KHLP’s System or new portions of KHLP’s
System to be built or acquired (the “Alternate Facilities”), and this Agreement shall
continue in full force and effect as to all unaffected volumes of NGL’s and as to any volumes
of NGL’s which KHLP notifies Pioneer it will continue to receive through the Alternate
Facilities. If the conditions set forth above are met, KHLP shall begin utilizing its
Alternate Facilities as soon as is reasonably practicable after notifying Pioneer that it
will shut down a portion of its system.




     20. Notices. Written notices, demands and statements shall be directed as
follows:



	 	 	 
	KHLP:	 	Pioneer:
	Koch Hydrocarbon, LP

	 	Pioneer Natural Resources USA, Inc.
	4111 East 37th Street North

	 	1400 Williams Square West
	Wichita, KS 67201

	 	5205 N. O’ Conner Blvd.
	Attn: NGL Accounting

	 	Irving, TX 75039-3746
	Telephone: (316)828-2247
	 	 
	Fax: (316)828-7972
	 	 
	E-mail: bagbyd@kochind.com
	 	 





Notices, demands, and statements shall be deemed received the Day after the Day of mailing if mailed by United States express or
certified mail, return receipt requested, and, in all other cases, deemed received upon actual Day of delicery or, if transmitted by
facsimile, on the Day the transmission is sent, if sent during normal business hours. Either party may change its address shown above
by notifying the other party, in writing, of such change in accordance with this Section. Invoices may be delivered via United
States mail, facsimile, E-mail, or other means, at KHLP’s discertion.




     21. Laws. This Agreement is in all respect subject to all federal, state and local laws and all directives, regulations and orders
issued or published by any federal, state and local boards, commission or agency, but nothing contained herein shall be construed
as a waiver of any right to question or contest any such order, law, rule or regulation. The parties shall be entitled to regard
all such laws, rules, regulations and orders as valid and may act in accordance therewith until such time as the same may be invalidated
by final judgment in a court of competent jurisdiction.



     22. Entire Agreement. This Agreement sets forth the final and complete agreement between the parties
with respect to this subject matter and supersedes all prior contracts, understandings, negotiations and dealings between the parties with
respect to this subject matter.



8









 





     23. Amendments. No modification of, addition to, or waiver of any of the terms of
this Agreement shall be binding upon either party unless in writing and signed by an authorized
representative of such party.



     24. Interpretation. Neither course of performance, nor course of dealing, nor usage
of trade shall be used to qualify, explain or supplement any of the terms of this Agreement.



     25. Governing Law. THIS AGREEMENT SHALL BE GOVERNED EXCLUSIVELY ACCORDING TO THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ITS PRINCIPLES REGARDING
CONFLICTS OF LAWS.



     26. Assignment. The rights and obligations of this Agreement shall bind and inure
to the respective successors and assigns of the parties hereto. However, any assignment or
attempted assignment, except to an Affiliate, shall be void without the prior written consent of
the other Party, which consent shall not be unreasonably withheld, conditioned, delayed or denied
except for reasons which may include, but not be limited to the creditworthiness of the assignee.
Pioneer further agrees that it and its Affiliates will not sell or assign their interest in the
NGL’s subject to this Agreement or the Plants unless (i) they first obtain KHLP’s prior written
consent to such sale or assignment, which shall not be unreasonably withheld or delayed; (ii)
contemporaneously with such sale or assignment, this Agreement is assigned to such assignee; and
(iii) the buyer or assignee agrees, in a writing executed by an authorized representative of the
buyer or assignee and delivered to KHLP, that the NGL’s so sold or assigned shall be bound to, and
subject to this Agreement.



     27. Waiver. No waiver by either party of any breach by the other party of any of the
terms of this Agreement shall be construed as a waiver of any subsequent breach, whether of the
same or of a different term of Agreement.



     28. Headings and Sections. All references to “Sections” herein pertain to Sections of
this Agreement, unless expressly stated otherwise. Headings are for purposes of reference only
and shall not be used to construe the meaning of this Agreement.



     29. No Third Party Beneficiary. This Agreement is for the sole benefit of the
parties hereto and their respective successors and permitted assigns, and shall not inure to the
benefit of any other person whomsoever, it being the intention of the parties that no third
parties, other than Affiliates of the parties hereto, shall be deemed a third party beneficiary of
this Agreement or otherwise have any rights hereunder.



     30. No Partnership or Association. Nothing contained in this Agreement shall
be construed to create an association, trust, partnership, or joint venture or impose a trust or
partnership duty, obligation, or liability on or with regard to either party.



     31. Exhibits. Exhibit A, attached hereto, is hereby incorporated and made a part
of this Agreement.



9









 





     32. Joint Action. The parties acknowledge and agree that the language used in this
Agreement shall be deemed to be chosen by the joint action of the parties hereto to express their
mutual intent, and no rule of strict construction against any one party shall be applied hereto.



     33. Safe Handling. KHLP reserves the sole right (i) to reject any trucks or pipelines
presented for loading/unloading which would present an unsafe or potentially unsafe situation, and
(ii) to refuse to load/unload, transfer, or handle any NGL’s under any conditions it deems unsafe,
which is caused by, including without limitation, drivers, personnel, equipment, procedures,
and/or weather conditions.



     34. KHLP’s Safety Regulations. With regards to NGL’s delivered by Pioneer, its
customer or agent to KHLP’s facilities (if any), Pioneer agrees that it and its customers, agents
and employees will comply with KHLP’s safety regulations and rules when on KHLP’s premises. Pioneer
shall indemnify, defend and hold KHLP harmless from and against any and all liability occurring
from or arising out of any non-compliance with such safety regulations and rules or the negligence
of Pioneer, its agents or customers. If applicable, KHLP shall have the right to require Pioneer,
its agents and/or customers to execute an access agreement with KHLP for truck loading.



     35. Use of Products. Pioneer acknowledges the hazards associated with the
handling, storage, transportation, use, misuse, disposal or subsequent processing (the “Use”) of
the NGL’s and assumes the responsibility of advising those of its employees, agents, contractors,
and customers, who shall use, work or come in contact with the NGL’s, of the hazards to human
health or human or environmental safety, whether such NGL’s are used singly or in combination with
other substances or in any processes or otherwise. Pioneer shall indemnify, defend and hold KHLP
harmless from and against any and all liability occurring from or arising out of a breach of
Pioneer’s obligations under this Section and from and against claims, demands or cause of action
for personal injury, damage to the environment or property arising from or attributable to the
Pioneer’s Use of the NGL’s.



     36. Alternative Connections. Notwithstanding anything to the contrary contained
herein, if any or all of the Plants are shut down or the natural gas and NGL’s previously being
processed in a particular Plant are diverted to another gas plant(s), KHLP (or its Affiliate) shall
have the right, at its option, to connect to the new gas plant(s) in order to receive the NGL’s
Pioneer or its Affiliates Own or Control that would have otherwise been extracted at the Plant. In
the event of such a diversion, Pioneer shall, within thirty (30) Days prior to such diversion,
notify KHLP of the diversion. If KHLP wishes to exercise its option, it shall so notify Pioneer,
within thirty (30) Days of its receipt of Pioneer’s notice, of KHLP’s intent (or its Affiliate’s)
to so connect to the new gas plant(s), and shall, at KHLP’s (or its Affiliate’s) own cost and
expense, connect the new gas plant(s) as soon as is reasonably practicable. Upon such connection,
the NGL’s Owned or Controlled by Pioneer or its Affiliates which were diverted from the Plant and
produced at such new gas plant(s) shall be delivered, purchased and sold under the terms and
conditions of this Agreement. If KHLP (or its Affiliate) does not so connect the new gas
plant(s), the NGL’s Owned or Controlled by Pioneer or its Affiliates which are produced at such new
gas plant(s) shall be released from this Agreement. Provided, however, NGL’s which are diverted to
another gas plant connected and flowing NGL’s to KHLP, its Affiliate, or to a



10









 




Pipeline which has the capability to deliver NGL’s to Mt. Belvieu, or deliver to
other Pipelines which may deliver NGL’s to Mt. Belvieu, shall continue to be
delivered hereunder pursuant to the terms and conditions of this Agreement. The
interconnection between KHLP’s, its Affiliate’s, or the alternate Pipelines’
facilities and the new gas plant’s facilities shall be deemed an additional Delivery
Point under this Agreement.




     IN WITNESS WHEREFORE, the undersigned parties have executed this Agreement in
duplicate originals as of date first set forth above.



	 	 	 	 	 	 	 	 	 
	PIONEER:	 	 	 	KHLP:	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	PIONEER NATURAL RESOURCES USA, INC.	 	 	 	KOCH HYDROCARBON, LP
	 	 	 	 	 	 	By: NGL/GP, LLC, its General Partner
	 
	 	 	 	 	 	 	 	 
	By:

	/s/ Hershal K. Wolfe
	 	 	 	By:
	/s/ Kurt Burmeister
	 

	 
	 	 	 	 	 
	Printed Name:

	Hershal K. Wolfe
	 	 	Printed Name:
	Kurt Burmeister
	Title: 

	Director — Marketing
	 	 	 	Title:
	Vice President






11









 





EXHIBIT “A”




PRICE



The following, for illustrative purposes only, is an example of the pricing
computations in Section 5., Base and Adjusted Fractionation Fees.



Assume Pioneer delivers to KHLP 5,000 barrels of NGL’s hereunder in a particular
Month, with such volumes containing the following hydrocarbons and
non-hydrocarbons, as determined pursuant to the Delivery Point analysis of such
NGL’s. Further assume the corresponding components attributable to such NGL’s will
be priced as follows in this example (for illustrative purposes only). The prices
listed are the monthly average OPIS prices for each respective component, as
further specified in this Agreement (such prices may or may not approximate the
actual OPIS prices).




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	%	 	Volume	 	 	 	 	 	Methane	 	 	 	 	 	Less Gathering	 	Amount
	 	 	Composition	 	Bbls.	 	Gals.	 	Gals.*	 	Price**	 	Fee***	 	Payable
	Methane
	 	 	1.50	%	 	 	75	 	 	 	3150	 	 	 	1380	 	 	$	0.1675	 	 	$	0.0160	 	 	$	209.02	 
	CO2
	 	 	2.80	%	 	 	140	 	 	 	5880	 	 	 	 	 	 	 	N/A	 	 	 	N/A	 	 	 	N/A	****
	Ethane
	 	 	43.80	%	 	 	2190	 	 	 	91980	 	 	 	 	 	 	$	0.1675	 	 	$	0.0160	 	 	$	13,934.97	 
	Propane
	 	 	23.30	%	 	 	1165	 	 	 	48930	 	 	 	 	 	 	$	0.4175	 	 	$	0.0160	 	 	$	19,645.40	 
	Iso Butane
	 	 	7.00	%	 	 	350	 	 	 	14700	 	 	 	 	 	 	$	0.3675	 	 	$	0.0160	 	 	$	5,167.05	 
	Normal Butane
	 	 	8.10	%	 	 	405	 	 	 	17010	 	 	 	 	 	 	$	0.3675	 	 	$	0.0160	 	 	$	5,979.02	 
	Gasoline (C5+)
	 	 	13.50	%	 	 	675	 	 	 	28350	 	 	 	 	 	 	$	0.3675	 	 	$	0.0160	 	 	$	9,965.03	 
	 
	Total
	 	 	100.00	%	 	 	5,000	 	 	 	210,000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	54,900.48	 







In this example, the “Amount Payable” is the gross payment due before the
deduction of any additional applicable fees and charges, which might
include, but not be limited to any applicable charges from the Pipelines.





 




			
	*	 	Estimate of the Pipelines’ allowance.
	 
	**	 	The price is determined by reference to the Monthly high and low
average OPIS postings, for the same Month in which the NGL stream was
actually delivered.
	 
	***	 	The Fractionation Fee is used in this example before adjustment and
escalation for fuel gas costs in Section 5.
	 
	****	 	KHLP is not obligated to pay for CO2 or other non-hydrocarbon substances.





 









 





AMENDMENT




     THIS AMENDMENT is made as of this 9th day of February, 2005, by and between
PIONEER NATURAL RESOURCES USA, INC., (“Pioneer”), and KOCH HYDROCARBON, LP (“KHLP”).



     WHEREAS, under that certain Natural Gas Liquids Purchase Agreement dated March 26, 2003 (the
“Agreement”), Pioneer sells and KHLP purchases certain volumes of natural gas liquids that
originate from the Midkiff and Benedum Plants as described therein; and,



     WHEREAS, said parties desire to amend the Agreement as hereinafter set forth.



     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties mutually agree to amend the Agreement as follows in this
Amendment.




	1.	 	Section 2, Term, of the Agreement shall be deleted in its entirety, and the
following substituted in lieu thereof:






“2.
Term. This Agreement shall begin on the Effective Date, and shall be
effective until March 1, 2008, at which time this Agreement shall expire.”




	2.	 	Effective March 1, 2005, Section 5, Base and
Adjusted Base Fractionation Fees, shall
be deleted in its entirety, and the following substituted in lieu thereof:






     “5. Base and Adjusted Base Fractionation Fees. The
Base Fractionation Fee shall be one and five-tenths cents (1.5¢) per Gallon of the
NGL’s delivered hereunder. Commencing March 1, 2005, and the beginning of each
Month thereafter, the Base Fractionation Fee shall be adjusted to equal the sum of
the following two components (the “Adjusted Base Fractionation Fee”):




1. Seventy hundredths of a cent (0.70¢) per Gallon for fuel gas, which
shall be redetermined by (i) dividing the price per MMBtu of natural
gas reflected by the Monthly Houston Ship Channel/Beaumont,
Texas, index (applicable to the first Day of the Month — large packages
only), for each current Month of actual delivery, as published in Inside
F.E.R.C.’s Gas Market Report, by $3.50/MMBtu, and (ii) multiplying the
resulting ratio by 0.70¢ per Gallon, and




2. A base fee of eighty hundredths of a cent (0.80¢) per Gallon.



 









 






Notwithstanding anything to the contrary, the Adjusted Base Fractionation
Fee shall not be reduced below the Base Fractionation Fee of 1.5¢ per
Gallon.”



     This Amendment shall be effective as of the date first above written. Except as hereby
amended, the Agreement shall remain in full force and effect. Capitalized terms not otherwise
defined herein shall have the respective meanings assigned to such terms by the Agreement.



     IN WITNESS WHEREOF, the parties have executed this Amendment the day and year first above
written.



	 	 	 	 	 	 	 	 	 
	PIONEER:	 	 	 	KHLP:
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	PIONEER NATURAL RESOURCES USA, INC.	 	 	 	KOCH HYDROCARBON, LP
	 	 	 	 	 	 	By: NGL/GP, LLC, its General Partner
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Hershal K. Wolfe
	 	 	 	By:
	 	/s/ Steve Tatum
	 

	 	 
	 	 	 	 	 	 
	Printed Name: Hershal K. Wolfe

	 	 	 	Printed Name: Steve Tatum

	Title: Director of Marketing

	 	 	 	Title: President








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