<PAGE>
 
                                                                   Exhibit 10.6

 
                   NATURAL GAS PURCHASE AND SALE AGREEMENT

                                   BETWEEN

                             CHEVRON U.S.A. INC.

                                     AND

                          NATURAL GAS CLEARINGHOUSE
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                              TABLE OF CONTENTS
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                                                                          Page
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I.     DEFINITIONS.....................................................     1
 
II.    COMMITMENT OF GAS AND OBLIGATIONS TO PURCHASE...................     2
       2.1  Committed Gas .............................................     2
            2.1.1  Pre-Effective Date Commitment.......................     3
            2.1.2  Post-Effective Date Commitment......................     3
            2.1.3  Addition of New Sources of Committed Gas............     3
            2.1.4  Lease Use Gas.......................................     3
            2.1.5  Non-Operated Wells..................................     5
            2.1.6  Non-Conventional Gas................................     5
            2.1.7  Farmout Acreage.....................................     6
       2.2  Availability Reports.......................................     6
            2.2.1  Revision of Availability Report.....................     7
            2.2.2  NGC Information.....................................     7
       2.3  Right to Control Production and Curtailment................     7
       2.4  Dedicated Contracts........................................     8
       2.5  Right to Process...........................................     8
            2.5.1  Accounting and Billing Procedures...................     9
            2.5.2  Offshore Condensate.................................     9
            2.5.3  Documentation of Charges............................     9
 
III.   TRANSPORTATION AND PENALTIES....................................     9
       3.1  Upstream Gathering and Transportation Agreements...........     9
       3.2  Transporter's Tariff.......................................    10
       3.3  Imbalance Charges..........................................    10
            3.3.1  Underdeliveries - Cash-Out Costs....................    11
            3.3.2  Overdeliveries - Cash-Out Costs.....................    11
            3.3.3  Imbalance Trading...................................    12
       3.4  Operational Flow Orders....................................    12
       3.5  Operational Balancing Agreements...........................    12
 
IV.    COMMODITY PRICE.................................................    13
       4.1  First of the Month Commodity Price.........................    13
       4.2  Description of Sources of Supply...........................    13
       4.3  Split Connect Committed Gas................................    14
       4.4  Split Connect Committed Gas Price..........................    14
            4.4.1  Effect of Capacity Constraints......................    15
            4.4.2  Measurement Capacity Constraints....................    15
       4.5  Firm Market Split Connect Committed Gas....................    16

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       4.6  Downstream Released Firm Transportation............... .....   16
       4.7  Mid-Month Increases........................................    16
       4.8  Mid-Month Decreases...,,,,,................................    18
       4.9  Commodity Price of Curtailed Sources of Supply.............    20
       4.10 Locked Price Option........................................    20
            4.10.1  Request for Locked Price...........................    21
            4.10.2  Procedures.........................................    21 
            4.10.3  Locked Quantities..................................    22
            4.10.4  Irrevocability.....................................    22
            4.10.5  Availability of Committed Gas......................    22
            4.10.6  Failure to Deliver Committed Gas...................    22
            4.10.7  Cessation of Futures Trading.......................    23
       4.11  NGC's Failure to Purchase Committed Gas...................    23
 
V.     TITLE AND RESPONSIBILITY........................................    24
       5.1  CUSA Responsibility........................................    24
       5.2  NGC Responsibility.........................................    25
 
VI.    QUALITY, MEASUREMENT AND TESTS..................................    25
       6.1  Quality Specifications.....................................    25
       6.2  Volume and Heating Value...................................    25
       6.3  Test Data and Charts.......................................    25
 
VII.   ACCOUNTING, BILLING AND PAYMENT.................................    25
       7.1  Statements.................................................    25
       7.2  Payment....................................................    26
       7.3  Failure to Pay.............................................    26
       7.4  Two Year Limit on Adjustments..............................    27
       7.5  Audit......................................................    27
       7.6  Accounting Information.....................................    27
       7.7  Setoff.....................................................    27
       7.8  Letter of Credit...........................................    28

VIII.  DISCLAIMER AND WARRANTY.........................................    28
       8.1  Warranty...................................................    28
       8.2  Disclaimer.................................................    28
 
IX.    FORCE MAJEURE...................................................    28
       9.1  Suspension of Obligations..................................    28
       9.2  Force Majeure Defined......................................    29
 
X.     TERM............................................................    29
       10.1  Term......................................................    29
       10.2  Early Termination.........................................    30
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XI.    RENEGOTIATION, PRICE REDETERMINATION AND ARBITRATION............    31
       11.1  Renegotiation and Price Redeterminations..................    31
       11.2  Limits on Arbitration.....................................    31
       11.3  Price Redetermination.....................................    31
             11.3.1  Scope of Price Redetermination....................    32
             11.3.2  Price Redetermination Procedure...................    32
             11.3.3  Arbitration of Price Redetermination..............    33
             11.3.4  Effective Date....................................    34
       11.4  Substitution of Published Index Prices....................    34
       11.5  Unavailability of Published Index Prices..................    34
       11.6  Dispute Resolution - Other Price Issues...................    34
       11.7  Arbitration After the Fifth Anniversary...................    35
       11.8  Renegotiation of the Premium..............................    35
       11.9  All Disputes Arbitration..................................    35
       11.10 Procedure.................................................    35
       11.11 Arbitration Hearings......................................    36
       11.12 Arbitration Decision......................................    36
 
XII.   GOVERNMENTAL REGULATIONS AND AUTHORIZATIONS.....................    36
       12.1  Application of Law and Regulation.........................    36
       12.2  Authorization and Regulatory Filings......................    37
 
XIII.  NOTICES.........................................................    37
       13.1  Procedure.................................................    37
 
XIV.   NON-ASSIGNABILITY AND TRANSFER OF INTEREST BY CUSA..............    38
       14.1  Non-Assignability.........................................    38
       14.2  Transfer of Interest......................................    38
 
XV.    MISCELLANEOUS...................................................    39
       15.1  Waiver....................................................    39
       15.2  Entire Agreement..........................................    39
       15.3  Choice of Law.............................................    39
       15.4  Confidentiality...........................................    39
       15.5  Limitation of Damages.....................................    39
       15.6  Severability..............................................    39
</TABLE>

EXHIBIT A Sources of Supply, Delivery Points, Published Index Prices, and Index
          Price Adjustments
EXHIBIT B Pre-Effective Date Commitments
EXHIBIT C Upstream Gathering and Transportation Agreements
EXHIBIT D Firm Market Split Connect Committed Gas
EXHIBIT E Price Lock Confirmation
EXHIBIT F Letter of Credit
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     "Pages where confidential treatment has been requested are stamped
Confidential Treatment Requested.  The redacted material has been separately
filed with the Commission, the appropriate section has been marked at the
appropriate place and in the margin with a star (*)."


                   NATURAL GAS PURCHASE AND SALE AGREEMENT


     This Natural Gas Purchase and Sale Agreement is made and entered into this
_____ day of August, 1996, but effective as of the 1st day of September, 1996
("Effective Date"), between CHEVRON U.S.A. INC., a Pennsylvania corporation
("CUSA"), and NATURAL GAS CLEARINGHOUSE, a Colorado general partnership ("NGC"),
both CUSA and NGC sometimes referred to collectively as "Parties" or singularly
as "Party".

                                 RECITALS

     1.   CUSA is the owner and producer of natural gas and desires to sell
          natural gas to NGC; and

     2.   NGC is a marketer of natural gas, provides products and services
          associated with the production, transportation and marketing of
          natural gas, and desires to purchase natural gas from CUSA;

     NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained in this Agreement, CUSA and NGC agree as follows:

I.   DEFINITIONS

     "Agreement" means the provisions of this document as it may be amended from
     time to time.

     "Alliance Agreement" means that certain Master Alliance Agreement dated as
     of September 1, 1996, executed by CUSA and NGC among other parties.

     "Btu" (British Thermal Unit) means the amount of heat energy required to
     raise the   temperature of one pound of water from fifty-nine degrees
     Fahrenheit (59EF) to sixty degrees Fahrenheit (60EF), as determined on a
     dry basis.

     "Business Day" means a day on which commercial banks are open for business
     in Houston, Texas.

     "Day" means that period of 24 consecutive hours beginning and ending at
     8:00 a.m. Central Time, or such other time as may be specified in the
     FERC Gas Tariff, or the equivalent, of a pipeline transporting gas subject
     to this Agreement.
<PAGE>
 
     "Delivery Point" means the point at which title of gas delivered under this
     Agreement passes from CUSA to NGC.

     "Effective Date" means September 1, 1996.

     "FERC" means the Federal Energy Regulatory Commission or any successor
     government authority.

     "gas" or "natural gas" means the effluent vapor stream in its natural state
     produced from wells, including all hydrocarbon and nonhydrocarbon
     constituents and including casinghead gas produced with crude oil, and
     residue gas resulting from the processing of gas well gas or casinghead
     gas.

     "MMBtu" means one million (1,000,000) Btu.

     "Month" means the period commencing at 8:00 a.m. Central Time on the first
     Day of a calendar month and ending at 8:00 a.m. Central Time on the first
     Day of the immediately following calendar month.

     "Source of Supply" means the wells, common field point, field, or similar
     designation used by CUSA to describe sources of gas supply subject to this
     Agreement.

     "Transporter" means the pipeline receiving the gas for the account of Buyer
     immediately downstream of a delivery point.

II.  COMMITMENT OF GAS AND OBLIGATION TO PURCHASE

     2.1  Committed Gas.  During the term of this Agreement, CUSA agrees to sell
          to NGC and NGC agrees to purchase from CUSA under the terms of this
          Agreement all Committed Gas.  Subject to the terms and conditions of
          this Agreement, CUSA's obligation to sell one hundred percent (100%)
          of the Committed Gas and NGC's obligation to purchase one hundred
          percent (100%) of the Committed Gas made available by CUSA are firm
          obligations.  Committed Gas is defined as all gas produced and owned
          or controlled by CUSA during the term of this Agreement, except gas
                                                                   ------    
          that is dedicated to a Pre-Effective Date Commitment, gas dedicated to
          a Post-Effective Date Commitment, gas reserved by CUSA for Lease Use,
          gas produced from non-conventional sources of supply, and gas produced
          from acreage farmed out by CUSA to a third party.  Committed Gas
          includes, without limitation, gas produced from wells in existence on
          the Effective Date, wells drilled or recompleted subsequent to the
          Effective Date and make up gas accruing to, and capable of being
          delivered by, CUSA after the Effective Date as a result of production
          or pipeline imbalances regardless of whether the imbalances

                                      -2-
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          occurred before or after the Effective Date.

          2.1.1  Pre-Effective Date Commitment.  Exhibit B to this Agreement
                 describes wells, oil, gas and mineral leases, gas reserves, or
                 producing properties however characterized that are not subject
                 to this Agreement because the gas produced from such properties
                 is dedicated to the contractual arrangements described in
                 Exhibit B ("Pre-Effective Date Commitment"). Gas subject to a
                 Pre-Effective Date Commitment shall become Committed Gas at
                 such time as the gas may be sold and delivered to NGC as a
                 result of termination or cancellation of the Pre-Effective Date
                 Commitment or other release of the gas from the Commitment.

          2.1.2  Post-Effective Date Commitment.  For purposes of this
                 Agreement, a Post-Effective Date Commitment is defined as an
                 instance where (i) CUSA acquires well(s), oil, gas and mineral
                 leases, gas reserves, or producing properties however
                 characterized ("Subsequently Acquired Properties") subsequent
                 to the Effective Date; and (ii) contractual arrangements in
                 place at the time of CUSA's acquisition prohibit CUSA from
                 selling all or a portion of the gas produced from the
                 Subsequently Acquired Property to NGC under this Agreement. Gas
                 subject to a Post-Effective Date Commitment shall become
                 Committed Gas at such time as the gas may be sold and delivered
                 to NGC as a result of a termination or cancellation of the 
                 Post-Effective Date Commitment or other release of the gas from
                 the commitment. CUSA agrees to exercise reasonable efforts to
                 terminate any Post-Effective Date Commitment at the earliest
                 opportunity in accordance with the terms and conditions of the
                 commitment if, in the reasonable judgment of CUSA, such
                 termination will not result in adverse economic consequences to
                 CUSA.

          2.1.3  Addition of New Sources of Committed Gas.  In the event CUSA
                 acquires or develops new sources of Committed Gas or enhances
                 the productive capability of existing Sources of Supply, CUSA
                 shall exercise reasonable efforts to give NGC notice as soon as
                 possible of the new sources and increased production, including
                 an estimate of the date of initial deliveries or increased
                 production of Committed Gas to NGC. In addition, CUSA and NGC
                 will cooperate in the development of a joint strategy to market
                 Committed Gas from a new Source of Supply.

          2.1.4  Lease Use Gas.  CUSA retains the right to use gas produced from
                 wells in which CUSA has an interest for purposes of the
                 operation of such wells, or the operation of other wells, in
                 quantities deemed necessary by CUSA acting as a prudent
                 operator. For purposes of this Agreement, the Lease Use of gas
                 includes, without limitation, gas lift, pressure

                                      -3-
<PAGE>
 
                 maintenance, enhanced recovery, equipment fuel, delivery to a
                 third party for purposes of clearing a positive joint venture
                 partner imbalance incurred by CUSA, satisfying in-kind royalty
                 obligations to the extent such obligations require CUSA to
                 deliver royalty gas to a third party, and delivery of gas to a
                 third party in consideration of the delivery by that third
                 party to CUSA of equivalent (although not always equal)
                 quantities of gas at a different location. Lease Use Gas
                 utilized by CUSA in connection with the operation of a well
                 located on the lease producing such Lease Use Gas, or a well
                 located on a different lease in instances where gathering or
                 transportation downstream of the applicable Delivery Point is
                 not required to transport the Lease Use Gas to the different
                 lease, will not appear in an Availability Report, as defined in
                 Section 2.2 below. Lease Use Gas utilized by CUSA in connection
                 with the operation of a well in which CUSA has an interest
                 located on a lease other than the lease producing such Lease
                 Use Gas, and requiring gathering or transportation downstream
                 of the applicable Delivery Point, will: (i) not constitute
                 Committed Gas but will appear in an Availability Report as a
                 separate category specifically designated as Lease Use Gas;
                 (ii) be purchased by NGC at the applicable First of the Month
                 Commodity Price, as defined in Section 4.1 below; (iii) be
                 transported by NGC to the location designated by CUSA; and (iv)
                 be resold to CUSA at the same First of the Month Commodity
                 Price, plus any incremental costs associated with
                 transportation of such Lease Use Gas to the point designated by
                 CUSA. In addition to the categories of Lease Use Gas described
                 above in this Section 2.1.4, CUSA and NGC acknowledge that CUSA
                 shall have the right from time to time during the term of this
                 Agreement to supply gas from a Source of Supply to a third
                 party for emergency use in the operation of a well in which
                 CUSA has no interest. For purposes of this Section 2.1.4 such
                 emergency use is intended to apply in an instance where a third
                 party requires an immediate short term (typically no more than
                 seven Days) supply of gas for purposes of restoring or
                 maintaining the productive capacity of a well. Typically
                 gathering or transportation downstream of the applicable
                 Delivery Point is not required to transport the emergency use
                 gas to the third party well; however the Parties acknowledge
                 that such gathering or transportation may be required in
                 isolated instances, in which cases CUSA will pay the gathering
                 or transportation charges. In the event CUSA determines to
                 supply emergency use gas to a third party in accordance with
                 this Section 2.1.4, the applicable Availability Report will
                 designate the quantity of such emergency use gas as a separate
                 entry and set forth the estimated duration of CUSA's delivery
                 of the emergency use to the third party. Should NGC conclude
                 that CUSA's delivery of emergency use gas to a third party may
                 have an adverse

                                      -4-
<PAGE>
 
                 of NGC's ability to serve NGC's markets, the Parties will
                 confer in an attempt to mitigate any such potential adverse
                 impact. Nothing in this Section 2.1.4 shall authorize CUSA to
                 deliver gas to a third party for purposes of pressure
                 maintenance or enhanced recovery. Once gas has been designated
                 as Committed Gas on an Availability Report for any Month, CUSA
                 shall not subsequently reduce the quantity of Committed Gas
                 designated for delivery in that Month by declaring any portion
                 of such Committed Gas to be Lease Use Gas.

          2.1.5  Non-Operated Wells.  NGC and CUSA acknowledge that CUSA has
                 interests in wells operated by third parties and that from time
                 to time NGC and CUSA may determine that it is more efficient to
                 sell gas attributable to CUSA's interest in such wells to third
                 parties, including, without limitation, the operator of a well.
                 In addition to gas produced from non-operated wells, CUSA
                 produces casinghead gas from CUSA operated wells and sells such
                 gas to third parties. This gas shall be treated as gas produced
                 from non-operated wells for purposes of determining whether or
                 not such gas will be Committed Gas under this Agreement. In
                 respect to instances where, as of the Effective Date, CUSA
                 sells gas produced from a non-operated well to a third party,
                 CUSA and NGC will evaluate each such sale and determine whether
                 to continue the sale to the third party or to declare the gas
                 Committed Gas subject to this Agreement. CUSA and NGC
                 acknowledge that their evaluation will not be complete on the
                 Effective Date. The Parties will complete the evaluation within
                 one year of the Effective Date, or within such other period
                 agreed upon by the Parties. If during the term of this
                 Agreement CUSA deems it advisable to sell gas produced from a
                 non-operated well to a third party, CUSA will give notice to
                 NGC and the Parties will determine whether to sell the gas to a
                 third party or declare the gas Committed Gas under this
                 Agreement. In the event CUSA and NGC are unable to agree on
                 whether the gas will be sold to a third party or to NGC under
                 this Agreement, and in the event the quantity of gas at issue
                 is less than 200 MMBtu per Day, CUSA may sell the gas to a
                 third party. In the event the quantity of gas at issue is more
                 than 200 MMBtu per Day, on average over the preceding three
                 Months, NGC may declare the gas Committed Gas under this
                 Agreement. Notwithstanding the foregoing, CUSA shall be
                 entitled to continue the sale to the third party at its option
                 if CUSA concludes in its reasonable judgment that the
                 termination of the sale will result in adverse economic
                 consequences to CUSA.

          2.1.6  Non-Conventional Gas.  For purposes of this Agreement, "Non-
                 Conventional Gas" means gas which is (a) produced from Devonian

                                      -5-
<PAGE>
 
                 shales, coal seams, or tight gas sands, defined as very low
                 permeability sandstones ( 0.1 millidarcies or less, as measured
                 using sound engineering practices) and (b) administered within
                 CUSA by CUSA's Non-Conventional Gas Business Team or its
                 successor. Non-Conventional Gas shall not be Committed Gas
                 subject to this Agreement and CUSA shall not be obligated to
                 sell such Non-Conventional Gas to NGC, nor shall NGC be
                 obligated to purchase such gas from CUSA. Notwithstanding the
                 foregoing, upon NGC's request, made not more frequently than
                 once each six Months, NGC and CUSA shall evaluate CUSA's
                 portfolio of Non-Conventional Gas and determine whether or not
                 any quantity of such Non-Conventional Gas is suitable for
                 treatment as Committed Gas subject to this Agreement. If the
                 Parties are unable to agree on the treatment of any quantity of
                 Non-Conventional Gas, it shall remain Non-Conventional Gas.

          2.1.7  Farmout Acreage.  During the term of this Agreement CUSA shall
                 be entitled to farmout to a third party undeveloped acreage
                 covered by an oil, gas and mineral lease or mineral fee
                 interest held by CUSA in the event CUSA, acting as a prudent
                 operator, determines that such a farmout is in the best
                 interests of CUSA. In the event of such a farmout, CUSA will
                 exercise reasonable efforts to (i) retain a call on gas
                 produced from the acreage subject to the farmout, provided that
                 such a call does not diminish the return to CUSA when compared
                 to the return in the absence of the call; or (ii) minimize the
                 period of time elapsing before CUSA is entitled to take and
                 market its proportionate share of the gas produced from the
                 farmout acreage. Gas produced from farmout acreage shall not be
                 Committed Gas under this Agreement until such time that CUSA is
                 entitled to take and market such gas.

     2.2  Availability Reports.  In each Month during the term of this
          Agreement, CUSA shall submit to NGC an Availability Report setting
          forth CUSA's best estimate of the quantity of Committed Gas that CUSA
          will deliver to NGC from each Source of Supply during the following
          Month.  If the quantity of Committed Gas available for delivery from a
          Source of Supply is expressed as a single monthly quantity, and unless
          the Availability Report states otherwise, it shall be presumed that
          such quantity will be delivered at a relatively constant daily rate of
          flow throughout the Month.  Except as provided below in this Section
          2.2, the Availability Report shall be delivered to NGC no later than
          the tenth Business Day before the first Day of the Month of delivery.
          It shall identify the estimated quantity of Committed Gas that will be
          produced from each Source of Supply and the estimated quantity that
          will be delivered at each Delivery Point.  The quantity of Committed
          Gas set forth in the Availability Report in effect at 8:00 a.m. on the
          second Business Day before the Day

                                      -6-
<PAGE>
 
          nominations to the applicable Transporter are due will form the basis
          of the quantity of Committed Gas nominated by NGC for first Day of the
          Month delivery into that Transporter. CUSA shall exercise reasonable
          efforts to submit the Availability Report applicable to a Source of
          Supply operated by a third party no later than the tenth Business Day
          before the first Day of the Month of delivery, and shall, in any
          event, submit the Availability Report as soon as possible. However, in
          the event such an Availability Report is submitted later than 8:00
          a.m. on the second Business Day before the Day nominations to the
          applicable Transporter are due, the Committed Gas set forth on the
          Availability Report will be treated as Incremental Committed Gas under
          Section 4.7 below. To the fullest extent possible, taking into account
          the information systems capabilities of CUSA and NGC, the Availability
          Report will be delivered via Electronic Data Interchange ("EDI") in a
          format permitting the downloading of data directly into NGC's systems.
          In the event the delivery of the Availability Report via EDI is not
          possible beginning on the Effective Date, the Parties will strive to
          develop the systems required to implement the electronic delivery of
          the Availability Report, provided CUSA and NGC are in agreement in
          respect to the expenditure of funds required to develop the systems.
          CUSA and NGC will each have gas control personnel accessible twenty-
          four hours a Day seven Days a week. Nothing in this Section 2.2 or in
          Section 2.2.1 below, shall require CUSA to deliver information via EDI
          if such information can be delivered to NGC faster or more efficiently
          by telephone followed by facsimile confirmation.

          2.2.1  Revision of the Availability Report.  Following submission of
                 the initial Availability Report, CUSA shall revise the
                 Availability Report to reflect changes to CUSA's estimated
                 quantities of Committed Gas (if the revision is submitted prior
                 to the beginning of the Month of delivery) or changes in actual
                 quantities of Committed Gas (if the revision is submitted
                 during the Month of delivery). The revisions shall also be
                 delivered to NGC via EDI and shall be delivered as soon as
                 commercially possible in order to permit NGC to submit revised
                 pipeline nominations and to make any market adjustments that
                 may be required, but in no event later than one hour before the
                 pipeline nomination deadline of the pipeline immediately
                 downstream of the Delivery Point.

          2.2.2  NGC Information.  In respect to instances where CUSA is a
                 Delivery Point operator, and Committed Gas flows through that
                 point, and upon CUSA's request, NGC will exercise reasonable
                 efforts to provide CUSA with information required by CUSA in
                 its role as point operator, including, without limitation,
                 NGC's downstream transportation contract number, the identity
                 of the downstream shipper, and, in the event NGC purchases gas
                 flowing through that point from other suppliers, the 

                                      -7-
<PAGE>
 
                 quantity of gas purchased from each such supplier. The Parties
                 acknowledge that the purpose of this Section 2.2.2 is not to
                 require NGC to furnish information that CUSA would otherwise be
                 able to collect on its own, but rather to obligate NGC to use
                 reasonable efforts to furnish information not readily
                 accessible to CUSA.

     2.3  Right to Control Production and Curtailment.  CUSA reserves the right,
          acting as a prudent operator, to limit, curtail or shut-in production
          (collectively referred to as "curtail or curtailment") of Committed
          Gas from any well or wells if it determines that curtailment is
          warranted as a result of any mechanical, engineering, legal, title, or
          other field or well condition.  CUSA also reserves the right to
          curtail production of Committed Gas from any well or wells if it
          concludes such action is warranted due to prevailing market prices for
          natural gas.  In the event CUSA desires to curtail production of
          Committed Gas, CUSA shall give NGC written notice of such action no
          later than the tenth Business Day before the first Day of the Month of
          delivery.  CUSA's notice shall set forth the quantity of Committed Gas
          to be curtailed, the Source of Supply and Delivery Point(s) affected
          and the estimated duration of the curtailment.  CUSA shall not curtail
          the production of Committed Gas if the Gas has been designated in
          CUSA's Availability Report as available for delivery to NGC unless
          such curtailment is the result of an event of force majeure as defined
          in Article IX below.  Any curtailment of Committed Gas after such gas
          has been designated as available in the absence of an event of force
          majeure may subject CUSA to Deficiency Keep Whole Payments pursuant to
          Section 4.8 below.  CUSA shall be entitled to reduce the period of
          curtailment by submitting a revised Availability Report in accordance
          with Section 2.2.1 above.

     2.4  Dedicated Contracts.  Notwithstanding anything in Section 2.3 above to
          the contrary, CUSA shall not be entitled to curtail production of
          Committed Gas as a result of prevailing market prices to the extent
          Committed Gas has been dedicated for delivery to a customer of NGC
          under a gas purchase and sale agreement designated a "Dedicated
          Contract" by NGC and CUSA unless CUSA and NGC agree on an alternate
          source of Committed Gas to meet the requirements of the Dedicated
          Contract during the period of curtailment.  Contracts eligible for
          designation as  a Dedicated Contract will be gas purchase and sale
          agreements that NGC proposes to execute as seller after the Effective
          Date and which will require the dedication of Committed Gas produced
          from a specific Source(s) of Supply to that contract.  NGC shall give
          CUSA written notice of NGC's desire to designate a Dedicated Contract,
          which notice shall set forth the quantity of Committed Gas dedicated,
          the Source of Supply and Delivery Point affected and the duration of
          the dedication.  CUSA's agreement to the designation of a contract as
          a Dedicated Contract shall not be construed to

                                      -8-
<PAGE>
 
          be a warranty or guaranty by CUSA that a given Source of Supply will
          produce Committed Gas in quantities sufficient to meet the
          requirements of a Dedicated Contract.

     2.5  Right to Process.  CUSA hereby reserves the right to process all or
          any portion of the Committed Gas deliverable to NGC under this
          Agreement for the removal of all or any constituents other than
          methane.  Such processing rights may be exercised either before or, if
          the Transporter allows, after delivery of the Committed Gas to NGC.
          When CUSA is exercising its right to process the Committed Gas (and
          such right may be exercised at any time and from time to time during
          the term of this Agreement), title to the liquefiable hydrocarbons and
          other constituents removed or consumed during processing shall not
          pass to NGC, but shall remain at all times in CUSA.  NGC and CUSA
          agree that they will cooperate in good faith to facilitate the
          exercise of Seller's processing right, including, without limitation,
          taking the actions described in the remainder of this Section 2.5.

          2.5.1  Accounting and Billing Procedures.  When and if CUSA elects to
                 exercise its processing rights, NGC and CUSA will establish
                 reasonable accounting and billing procedures so that (i) NGC
                 will pay only for the quantities of residue Committed Gas
                 remaining after processing and (ii) all charges of the
                 Transporter will be equitably allocated between NGC and CUSA,
                 with CUSA paying all costs attributable to the exercise of its
                 processing rights and NGC paying all costs attributable to the
                 Committed Gas purchased by it.

          2.5.2  Offshore Condensate.  It is understood that CUSA's gas wells
                 may produce liquid hydrocarbons (condensate) along with the gas
                 well Committed Gas to be delivered under this Agreement. To the
                 extent that any Delivery Point provided for in this Agreement
                 is located on an offshore platform, and if Transporter allows,
                 NGC agrees that CUSA may inject condensate into the gas stream
                 delivered hereunder for transportation and redelivery to CUSA
                 at a separation facility located onshore. CUSA agrees to bear,
                 or reimburse NGC for, all charges of the Transporter
                 attributable to the injection, transportation, and redelivery
                 of CUSA's condensate.

          2.5.3  Documentation of Charges.  NGC shall furnish CUSA with
                 documentation establishing the actual charges incurred by NGC
                 and borne by CUSA under Sections 2.5.1 and 2.5.2. Such
                 documentation shall reflect the method of allocation of such
                 charges between NGC and CUSA. Upon agreement of the Parties,
                 amounts paid by NGC and borne by CUSA under Sections 2.5.1 and
                 2.5.2 may be netted against amounts

                                      -9-
<PAGE>
 
                 NGC is obligated to pay CUSA for Committed Gas delivered
                 under this Agreement.

III. TRANSPORTATION AND PENALTIES

     3.1  Upstream Gathering and Transportation Agreements. Exhibit C to this
          Agreement contains a list of all upstream gathering and transportation
          service agreements associated with the delivery of Committed Gas to
          the Delivery Points.  The Parties shall revise the list during the
          term of this Agreement to reflect the addition or deletion of
          gathering and transportation service agreements.  CUSA shall be
          responsible for arranging, nominating and paying for, all upstream
          transportation and gathering services (and associated charges)
          necessary for CUSA to deliver Committed Gas to the Delivery Point(s),
          with the following exception.  In respect to any upstream gathering or
          transportation service agreement managed by CUSA's Natural Gas
          Business Unit as of the Effective Date, CUSA shall have the option to
          shift responsibility for the management and operation of such service
          agreements to NGC as of the Effective Date (or effective as of a later
          date if CUSA does not exercise its option on or before the Effective
          Date).  CUSA will use reasonable efforts to exercise its option on or
          before the Effective Date, however the Parties recognize that time
          constraints may preclude the completion of such action by such date.
          The Parties agree to execute any agreements they deem necessary to
          implement the shifting of such responsibility to NGC.  Management and
          operation of such service agreements will include, without limitation,
          nominations, confirmations and the payment of invoices.  Amounts paid
          by NGC to an upstream gatherer or transporter will be netted against
          amounts NGC is obligated to pay CUSA for Committed Gas delivered under
          this Agreement.  Notwithstanding the foregoing, upon agreement of the
          Parties, in respect to any payments to an upstream gatherer or
          transporter, CUSA shall reimburse NGC for one hundred percent (100%)
          of all payments made by NGC to such upstream gatherer or transporter
          prior to the date NGC is required to make such payments to the
          gatherer or transporter provided that NGC furnishes CUSA a copy of the
          invoice no later than ten Days prior to the payment due date.  If NGC
          furnishes a copy of the invoice later than the tenth Day before the
          payment due date, CUSA shall exercise reasonable efforts to reimburse
          NGC prior to the payment due date, but shall in any event reimburse
          NGC no later than the close of business on the tenth Day following
          CUSA's receipt of the invoice.  In the event CUSA requests NGC's
          assistance in obtaining a new upstream gathering or transportation
          rate during the term of this Agreement, such assistance will be
          furnished pursuant to an agreement addressing, among other items, the
          allocation between CUSA and NGC of any cost saving associated with new
          rates.

                                     -10-
<PAGE>
 
     3.2  Transporter's Tariff. The rules, guidelines, and policies of the
          pipeline immediately downstream of the Delivery Point ("Transporter")
          shall define and set forth the manner in which the Committed Gas
          purchased and sold under this Agreement is measured and transported.
          CUSA and NGC recognize that the receipt and delivery into
          Transporter's pipeline facilities of Committed Gas purchased and sold
          under this Agreement shall be subject to the operational procedures of
          Transporter as well as the terms of Transporter's transportation
          service agreement(s) with NGC, if any, addressing operational
          procedures.

     3.3  Imbalance Charges. The terms and conditions of Transporter's FERC Gas
          Tariff (or equivalent state-approved tariff) addressing penalties,
          scheduling fees, cash-out costs or similar charges attributable to
          underdeliveries or overdeliveries of gas into the pipeline
          (collectively "Imbalance Charges") shall be used for purposes of
          calculating Imbalance Charges under this Agreement. Imbalance Charges
          under this Agreement will be assessed on a transporter-by-transporter
          basis using the applicable terms of Transporter's FERC Gas Tariff and
          as if CUSA is the shipper and NGC is the transporter. In instances of
          split connect Committed Gas, as defined in Section 4.3 below, the
          tariff of the pipeline downstream of the Delivery Point associated
          with the Published Index Price selected by CUSA shall be used for
          purposes of this Section 3.3  If an Imbalance Charge is assessed under
          this Agreement, then CUSA shall pay to NGC an amount calculated in
          accordance with the applicable terms of Transporter's FERC Gas Tariff.
          For purposes of this Agreement, an underdelivery is defined as an
          instance where the monthly quantity of Committed Gas delivered to a
          given Delivery Point is less than the monthly quantity of Committed
          Gas designated for delivery at that Delivery Point in CUSA's
          Availability Report as changed throughout the Month by timely
          revisions of the Availability Report in accordance with Section 2.2.1
          above.  An overdelivery is defined as an instance where the monthly
          quantity of Committed Gas delivered to a given Delivery Point is
          greater than the monthly quantity of Committed Gas designated for
          delivery at that Delivery Point in CUSA's Availability Report as
          changed throughout the Month by timely revisions of the Availability
          Report in accordance with Section 2.2.1 above.  In the event the
          applicable Transporter requires balancing on a daily basis, the
          definitions of underdelivery and overdelivery shall be modified to
          reflect daily balancing as opposed to monthly balancing.
          Overdeliveries by CUSA into a transporter at one Delivery Point will
          be netted against underdeliveries into that transporter at a different
          Delivery Point to the extent permitted under that transporter's FERC
          Gas Tariff.  Underdeliveries by CUSA on one transporter will not be
          netted against overdeliveries by CUSA to a different transporter
          absent the Parties' consent and underdeliveries or overdeliveries by
          CUSA will not be netted against overdeliveries or underdeliveries by
          other NGC suppliers of gas.

                                     -11-
<PAGE>
 
          3.3.1  Underdeliveries - Cash-Out Costs.  In the event (i) of net
                 underdeliveries by CUSA in any Month in respect to a given
                 Transporter; (ii) that Transporter's per MMBtu cash-out prices
                 (in the case of tiered cash-out prices the cash-out price
                 associated with the level of CUSA's net underdeliveries in each
                 tier) is higher than the appropriate Published Index Price; and
                 (iii) CUSA would be required to pay cash-out costs to
                 Transporter under Transporter's FERC Gas Tariff if CUSA was the
                 shipper and NGC was the transporter, CUSA shall pay NGC an
                 amount equal to the quantity of the underdelivery, expressed in
                 MMBtu, multiplied by the difference between the per MMBtu cash-
                 out price and the Published Index Price.

          3.3.2  Overdeliveries - Cash-Out Costs.  In the event (i) of net
                 overdeliveries by CUSA in any Month in respect to a given
                 Transporter; and (ii) that Transporter would be required to
                 purchase the overdelivered quantity of gas at the cash-out
                 prices (in the case of tiered cash-out prices the cash-out
                 price associated with the level of CUSA's net overdeliveries in
                 each tier) under Transporter's FERC Gas Tariff if CUSA was the
                 shipper and NGC was the transporter, the First of the Month
                 Commodity Price of the overdelivered quantity of Gas shall be
                 calculated using the lesser of the Published Index Price or the
                 cash-out price.

          3.3.3  Imbalance Trading.  In the event of net underdeliveries or
                 overdeliveries by CUSA in any Month and notwithstanding the
                 absence of an actual net underdelivery or overdelivery assessed
                 by Transporter, NGC will exercise best efforts to mitigate the
                 adverse consequences of the net underdeliveries or
                 overdeliveries through imbalance trading, or the equivalent,
                 opportunities set forth in the FERC Gas Tariff of the
                 applicable Transporter. NGC and CUSA acknowledge that net
                 underdeliveries or overdeliveries by CUSA calculated in
                 accordance with this Agreement may or may not result in a
                 corresponding actual net underdelivery or overdelivery assessed
                 by Transporter pursuant to its FERC Gas Tariff.

     3.4  Operational Flow Orders. CUSA and NGC recognize that Transporter may
          be authorized to issue Operational Flow Orders ("OFOs"), or the
          equivalent, under the General Terms and Conditions of Transporter's
          FERC Gas Tariff, or any successor provision.  CUSA and NGC also
          recognize that Transporter may issue an OFO that obligates CUSA or NGC
          to take action that may be contrary to the terms of this Agreement,
          including, without limitation, the delivery and taking of gas in
          quantities contrary to those set forth in Availability Reports and
          prior nominations.  CUSA and NGC agree to use their best efforts to
          prevent the issuance of such an OFO.  In the event an OFO is issued,
          CUSA and NGC

                                     -12-
<PAGE>
 
          agree that compliance with any duly authorized OFO will not constitute
          a violation of this Agreement, provided that: (i) the Party receiving
          an OFO notify the other Party as soon as possible, and (ii) the
          Parties use their best efforts to minimize the operational and
          economic consequences of compliance with the OFO by all means at their
          disposal. In the event an OFO can be construed as calling for the
          shutting-in of CUSA production, the Parties will cooperate to take
          steps alternative to a shut-in to the extent such alternative steps
          may be taken without causing a different NGC firm supplier to bear a
          disproportionate share of adverse consequences flowing from the OFO.
          Nothing in this Section 3.4 shall be construed to require CUSA to bear
          adverse economic consequences under an OFO issued as a result of
          overdeliveries by a third party supplier of gas to NGC or deficient
          takes by an NGC market, and not as a result of any act or omission by
          CUSA.

     3.5  Operational Balancing Agreements.  The Parties agree to use their best
          efforts to maintain an operational balancing agreement, or the
          equivalent ("OBA"), at each point of delivery into a transporting
          pipeline or at such other points the Parties deem advisable.  In
          respect to any point at which an OBA is not in effect, upon CUSA's
          request, NGC will assume the responsibility for negotiating and
          implementing an OBA on terms and conditions acceptable to CUSA and
          NGC.



IV.  COMMODITY PRICE

     4.1  First of the Month Commodity Price.  The commodity price paid by NGC
          to CUSA for each MMBtu of Committed Gas delivered to NGC shall be
          based on prevailing index prices reported in commercial publications,
          will change each Month, and will vary by Source of Supply and Delivery
          Point.  The "First of the Month Commodity Price" of Committed Gas
          produced from a given Source of Supply shall be the index price
          reported in the first issue of the designated commercial publication
          published in the Month of delivery in the designated table, heading
          and entry in that table ("Published Index Price"), plus or minus
          adjustments applicable to that Source of Supply, including, without
          limitation, deduction of gathering and transportation charges
          (collectively "Index Price Adjustments"), and the premium, if any (the
          "Premium").  Prior to delivery of Committed Gas under this Agreement,
          CUSA and NGC shall agree on (i) the Published Index Price that will
          form the basis of the First of the Month Commodity Price of the
          Committed Gas delivered to the applicable Delivery Point; (ii) the
          Index Price Adjustments, if any, to the published index price
          necessary to arrive at the First of the Month Commodity Price; and
          (iii) the

                                     -13-
<PAGE>
 
          Premium, if any. The substitution of a new Published Index Price (or a
          change in the table, heading and entry) or a modification of the Index
          Price Adjustment also requires the agreement of CUSA and NGC. Although
          the Parties will strive to reduce agreements substituting a new
          Published Index Price or modifying an Index Price Adjustment to
          writing, the Parties recognize that market conditions may require
          prompt action. Consequently, oral agreements substituting a new
          Published Index Price or modifying an Index Price Adjustment will be
          effective until reduced to writing. The Parties agree to exercise best
          efforts to reduce such oral agreements to writing within thirty Days
          of reaching agreement. The First of the Month Commodity Price shall be
          calculated each Month during the term of this Agreement and shall
          remain in effect during the entire Month unless the Parties agree to
          change the First of the Month Commodity Price during the course of the
          Month.

     4.2  Description of Sources of Supply.  The Sources of Supply, Delivery
          Points, Published Index Price, and Index Price Adjustments effective
          as of the Effective Date are set forth in Exhibit A to this Agreement.
          The Parties expect that Exhibit A will be agreed upon and made a part
          of this Agreement on or around the Effective Date and the absence of
          Exhibit A at the time this Agreement is executed by the Parties and
          thereafter shall not affect the enforceability of this Agreement.  New
          Sources of Supply or Delivery Point(s), and the associated Published
          Index Price and Index Price Adjustments that CUSA and NGC have agreed
          upon shall be set forth in a notice prepared by NGC and furnished to
          CUSA.  The Parties may from time to time, but are not required to,
          amend Exhibit A to reflect the information contained in such notice,
          and the failure to so amend Exhibit A shall not affect CUSA's
          obligation to deliver, and NGC's obligation to purchase, Committed
          Gas.

     4.1  Split Connect Committed Gas.  In the event Committed Gas produced
          from a Source of Supply is capable of being delivered into more than
          one pipeline system ("split connect Committed Gas"), CUSA shall select
          the Published Index Price and Index Price Adjustments applicable to
          such split connect Committed Gas. Except as provided below in this
          Section, and absent agreement of the Parties to the contrary, the
          selection of a Published Index Price and Index Price Adjustments
          applicable to a given source of split connect Committed Gas will
          remain in effect for a period of no less than five full Months or
          seven full Months, as the case may be as set below. CUSA will make its
          selection for a succeeding period no later than thirty Days prior to
          the first Day of the new period. The five Month period will run from
          November 1 through March 31 and the seven Month period will run from
          April 1 through October 31. The period in effect as of the Effective
          Date will be less than seven full Months and will run through October
          31, 1996. Notwithstanding the foregoing, certain Sources of Supply
          producing split connect Committed Gas will not be subject to the
          selection described above in this Section 4.3. The Published

                                     -14-
<PAGE>
 
                                               Confidential Treatment Requested.
                                                  The redacted material has been
                                           separately filed with the Commission.
 
          Index Price(s) and Index Adjustments applicable to such Sources of
          Supply have been selected by CUSA and NGC and shall remain in place
          for the period designated by the Parties and shall not be changed
          during the designated period absent the consent of CUSA and NGC. Such
          Sources of Supply will be designed in Exhibit A-1 as "Fixed Selection
          Split Connect."

     4.4  Split Connect Committed Gas Price.  Except as to (i) Fixed Selection
          Split Connect Sources of Supply set forth in Exhibit A to this
          Agreement, (ii) as provided in Section 4.5 below, and (iii) split
          connect Committed Gas subject to a Locked Price in accordance with
          Section 4.10 below, in respect to each Source of Supply producing
          split connect Committed Gas, the First of the Month Commodity Price
          paid by NGC to CUSA for each MMBtu of split connect Committed Gas
          delivered by CUSA to NGC during a given Month will be adjusted in the
*         following instance.  REDACTED  In the event the Highest Commodity
*         Price exceeds the Selected Commodity Price by more than REDACTED per
          MMBtu, the First of the Month Commodity Price shall be increased by an
*         amount equal to REDACTED of such excess above the Selected Commodity
          Price.  In the event the Highest Commodity Price exceeds the Selected
*         Commodity Price by REDACTED or less, the First of the Month Commodity
          Price shall not be increased.

          4.4.1  Effect of Capacity Constraints.  Notwithstanding Section 4.4
                 above, the quantity of split connect Committed Gas subject to
                 the First of the Month Commodity Price adjustment during any
                 Month will take into account capacity constraints, which will
                 be defined by NGC's ability to deliver the split connect
                 Committed Gas into the pipeline system associated with the
                 Highest Commodity Price. If NGC is unable to nominate, or would
                 have been unable to nominate had it attempted to nominate,
*                REDACTED of the split connect Committed Gas designated in
                 CUSA's Availability Report for delivery on the first Day of the
                 Month into the pipeline system associated with the Highest
                 Commodity Price, the quantity of split connect Committed Gas
                 subject to the First of the Month Commodity Price adjustment
*                will be calculated by REDACTED. NGC's ability to nominate
                 REDACTED of the split connect Committed Gas will be determined
                 as of the applicable pipeline's confirmation of first Day of
                 the Month quantities of gas.

          4.4.2  Measurement of Capacity Constraints.  In all instances covered
                 by Section 4.4 above, NGC's ability to nominate Committed 
                 Gas for delivery

                                     -15-
<PAGE>
 
                                               Confidential Treatment Requested.
                                                 The redacted material has been
                                           separately filed with the Commission.
 
                 into a pipeline system associated with the Highest Commodity
                 Price shall be evaluated by reference to instances where CUSA
                 and NGC have agreed that capacity constraints exist, pipeline
                 announcements of constraints or curtailments, however
                 characterized and communicated, and by NGC's efforts to
                 nominate Committed Gas for delivery into the applicable
                 pipeline. If NGC exercises reasonable efforts to nominate gas
                 on the pipeline associated with the Highest Commodity Price,
*                and is unable to nominate REDACTED of the split connect
                 Committed Gas due to a lack of available capacity, a capacity
                 constraint will be deemed to exist to the extent of NGC's
                 inability. NGC shall exercise reasonable efforts to create and
                 retain a written record, such as notes of telephone
                 conversations, of NGC's efforts to nominate Committed Gas for
                 delivery into a pipeline system associated with the Highest
                 Commodity Price, provided, however, that NGC's failure to
                 create and retain such a written record shall not preclude NGC
                 from claiming the existence of a capacity constraint.

     4.5  Firm Market Split Connect Committed Gas.  Notwithstanding Section 4.4,
          in the Months of December, January and February during the period
          beginning with December 1996 and continuing through February 1998, the
          First of the Month Commodity Price of split connect Committed Gas
          delivered to firm market customers under certain natural gas purchase
          and sale agreements, however characterized, calling for deliveries at
          primary receipt points ( "Firm Market Split Connect Committed Gas"),
          which firm natural gas purchase and sale agreements, corresponding
          primary receipt points and affected quantities of gas are described in
          Exhibit D to this Agreement, shall not be adjusted in accordance with
*         Section 4.4 above. REDACTED

     4.6  Downstream Released Firm Transportation.  In the event (i) NGC is the
          replacement shipper under a firm transportation service agreement
          released by CUSA to NGC and covering transportation upstream of the
          point at which the applicable Published Index Price is determined;
          (ii) such firm transportation service agreement expires or is subject
          to termination by NGC or CUSA during the term of this Agreement; and
          (iii) an alternate Published Index Price is available at a point
          upstream of the point at which the then current Published Index Price
          is determined,  the following procedure shall apply.  NGC shall enter
          into negotiations with the Transporter for the purpose of obtaining
          the rate applicable to the rollover, extension or renewal, as the case
          may be, of the firm transportation service agreement.  CUSA shall have
          the option to approve the new rate, in which case the firm
          transportation service agreement will be 

                                     -16-
<PAGE>
 
          extended or renewed and the Published Index Price shall remain the
          same and the Adjustment attributable to the firm transportation
          service agreement will equal the new rate, or not approve the new
          rate, in which case the point at which the Published Index Price is
          determined shall move upstream to the appropriate point. In the latter
          case, NGC shall be entitled to enter into the new firm transportation
          service agreement at a rate equal to or higher than the rate CUSA
          elected not to approve. In the event CUSA elects not to approve the
          new rate, the foregoing procedure shall not apply to subsequent
          instances where a firm transportation service agreement expires or is
          subject to termination.

     4.7  Mid-Month Increases.  In the event (i) CUSA increases the quantity of
          Committed Gas delivered to NGC on any Day at a given Delivery Point to
          a level in excess of one hundred five percent (105%) of the quantity
          of Committed Gas designated for delivery by CUSA in the Availability
          Report in effect at 8:00 a.m. on the second Business Day before the
          date on which nominations  for delivery on the first Day of the Month
          of delivery are due ("First of the Month Committed Gas"); (ii)
          notifies NGC of such increase no later than one hour prior to the
          pipeline nomination deadline applicable to the Day on which the
          increase will be implemented; and (iii) does not in its notice
          specifically state that such increase is for the purpose of offsetting
          underdeliveries incurred by CUSA at the applicable Delivery Point
          earlier that month, the commodity price per MMBtu for the quantity in
          excess of one hundred five percent (105%) of the First of the Month
          Committed Gas ("Incremental Committed Gas") shall be determined as
          follows.  The "Incremental Gas Commodity Price" of Incremental
          Committed Gas shall be determined on a Delivery Point by Delivery
          Point basis, and therefore any increases in the quantity of Committed
          Gas delivered to a given Delivery Point will not be netted against a
          decrease at a different Delivery Point unless the Committed Gas
          delivered at different Delivery Points is delivered into a single pool
          such that an increase at one Delivery Point and a corresponding
          decrease at the second Delivery Point can be netted to arrive at the
          quantity of Committed Gas delivered into the pool on the applicable
          Day, in which case deliveries at all such Delivery Points will be
          netted for purposes of this Section 4.7.  CUSA will give notice to NGC
          of any increase in the delivery of Committed Gas in a revised
          Availability Report as soon as commercially possible, but in no event
          later than one hour prior to the nomination deadline of the pipeline
          immediately downstream of the Delivery Point.  The Incremental Gas
          Commodity Price shall be based on the Gas Daily Index Price.  The "Gas
          Daily Index Price" shall be the "Daily Midpoint" price published in
          the issue of Gas Daily reporting prices of Gas flowing on the Day on
                       ---------                                              
          which Incremental Committed Gas is delivered to NGC under this
          Agreement  in the table titled "Daily Price Survey" under the heading
          and entry applicable to the downstream pipeline and the Delivery Point
          where CUSA delivers the Incremental Committed Gas. The Gas Daily Index

                                     -17-
<PAGE>
 
          Price corresponding to each Published Index Price, including any
          adjustment required to make the two prices comparable, is set forth in
          Exhibit A to this Agreement.  For purposes of determining which issue
          of Gas Daily reports the range of prices applicable to the Day of
             ---------                                                     
          delivery, the instructions published by Gas Daily in the paragraph
                                                  ---------                 
          appearing under the heading "Daily Price Survey" will be used.  In the
          event Gas Daily does not report prices applicable to a Day on which
                ---------                                                    
          Incremental Committed Gas is delivered to NGC, then the issue of Gas
                                                                           ---
          Daily reporting prices applicable to the closest subsequent Day shall
          -----                                                                
          be used.  The same Index Price Adjustments and Premiums used to
          calculate the First of the Month Commodity Price pursuant to Section
          4.1 above shall be used to calculate the Incremental Gas Commodity
          Price if the Gas Daily Index Price covers a geographical location
          comparable to that covered by the Published Index Price.  The
          Incremental Gas Commodity Price will be based on the Gas Daily Index
          Price applicable to the Day of delivery and will therefore vary Day-
          by-Day.  Notwithstanding the foregoing, in the event that the parties
          agree that Gas Daily does not report prices applicable to any Delivery
                     ---------                                                  
          Point, the Parties shall select an alternate index price, which
          alternate index price shall be treated as the Gas Daily Index Price
          for all purposes under this Agreement.  For purposes of calculating
          the Incremental Gas Commodity Price of Incremental split connect
          Committed Gas subject to commodity price adjustment in accordance with
          Section 4.4 above, Incremental split connect Committed Gas will be
          deemed to be delivered into the pipeline system associated with the
          Highest Commodity Price. Capacity constraints, as defined and measured
          in Sections 4.4.1 and 4.4.2 above shall be taken into account in
          determining the quantity of Incremental split connect Committed Gas
          that is deemed to be delivered into the pipeline system associated
          with the Highest Index Price.  For example, if only fifty percent
          (50%) of the split connect Committed Gas designated in CUSA's
          Availability Report for delivery on the first Day of the Month can be
          nominated for delivery into the pipeline system associated with the
          Highest Commodity Price, it shall be presumed that no Incremental
          split connect Committed Gas can be delivered into the pipeline system
          associated with the Highest Commodity Price and therefore the
          Incremental Gas Commodity Price shall be based on the Selected
          Commodity Price. In the event CUSA increases the quantity of Committed
          Gas delivered to NGC on any Day (x) without prior notice; (y) with
          notice given later than one hour before Transporter's nomination
          deadline; or (z) notifies NGC that the increase is for the purpose of
          offsetting underdeliveries incurred by CUSA at the applicable Delivery
          Point earlier that Month, such Committed Gas shall not be treated as
          Incremental Committed Gas, but shall be treated as an overdelivery of
          Committed Gas for purposes of calculating imbalance charges in
          accordance with Section 3.3 above.

     4.8  Mid-Month Decreases.  In the event (i) CUSA decreases the quantity of

                                     -18-
<PAGE>
 
          Committed Gas delivered to NGC on any Day at a given Delivery Point to
          a level below ninety-five percent (95%) of the quantity of Committed
          Gas designated for delivery by CUSA in the Availability Report in
          effect at 8:00 a.m. on the second Business Day before the date on
          which nominations  for delivery on the first Day of the Month of
          delivery are due, including instances where CUSA is required to
          decrease the quantity of Committed Gas in response to a Transporter's
          instructions, ("First of the Month Committed Gas"); (ii) notifies NGC
          of such decrease no later than one hour prior to the pipeline
          nomination deadline applicable to the Day on which the decrease will
          be implemented; (iii) does not in its notice specifically state that
          such decrease is for the purpose of offsetting overdeliveries incurred
          by CUSA at the applicable Delivery Point earlier that Month; (iv) the
          applicable Gas Daily Index Price is higher than the corresponding
          First of the Month Commodity Price (whether calculated using the
          Published Index Price or the Locked Price), and (v) such reduction is
          not the result of an event of force majeure or an OFO, CUSA shall pay
          to NGC an amount calculated as follows (the "Deficiency Keep Whole
          Payment").  If on the Day that CUSA's deliveries of Committed Gas fall
          below ninety-five percent (95%) of First of the Month Committed Gas,
          the Gas Daily Index Price, as defined in Section 4.7 above, applicable
          to the Delivery Point (as adjusted by the Index Price Adjustments
          applicable to the Delivery Point and the Premium) is higher than the
          First of the Month Commodity Price calculated under Section 4.1 above,
          the difference will be the "Deficiency Cost".  The Deficiency Cost
          shall be multiplied by a number equal to the difference between
          ninety-five percent (95%) of the first of the month nominated quantity
          and the quantity of Committed Gas actually delivered by CUSA on that
          Day, and the product shall be the Deficiency Keep Whole Payment.
          Notwithstanding the foregoing, in the event any portion of the
          Committed Gas that is not delivered by CUSA is subject to a Locked
          Price in accordance with Section 4.10 below, the Deficiency Cost and
          the Deficiency Keep Whole Payment attributable to the quantities
          subject to the Locked Price shall be determined by subtracting the
          higher of (a) the First of the Month Commodity Price calculated using
          the Locked Price, or (b) the First of Month Commodity Price calculated
          using the Published Index Price that would have been used in the
          absence of the Locked Price, from the Gas Daily Index Price.  No
          Deficiency Keep Whole Payment shall be payable in the event the Gas
          Daily Index Price is lower than the First of the Month Commodity
          Price. The Deficiency Keep Whole Payment shall be determined on a
          Delivery Point-by-Delivery Point basis, and therefore any decrease in
          the quantity of Committed Gas delivered to a given Delivery Point will
          not be netted against a increase at a different Delivery Point unless
          the Committed Gas delivered at different Delivery Points is delivered
          into a single pool such that an increase at one Delivery Point and a
          corresponding decrease at the second Delivery Point can be netted to
          arrive at the quantity of Committed Gas delivered into the pool on the
          applicable Day, in which case deliveries at all

                                     -19-
<PAGE>
 
          such Delivery Points will be netted for purposes of this Section 4.8.
          A Deficiency Keep Whole Payment shall be calculated in respect to each
          Day that CUSA's deliveries fall below ninety-five percent (95%) of the
          quantity of Committed Gas nominated for delivery on the first Day of
          the Month of delivery and shall be based on the Gas Daily Index Price
          applicable to that Day. In the event Gas Daily does not report prices
                                               ---------
          applicable to a Day on which deliveries of Committed Gas are reduced,
          then the issue of Gas Daily reporting prices applicable to the closest
                            ---------
          subsequent Day shall be used. For purposes of calculating the total
          amount of Deficiency Keep Whole Payments due in any Month, a decrease
          in the quantity of Committed Gas delivered by CUSA on any given Day
          shall not be netted against an increase in the quantity of Committed
          Gas delivered by CUSA on a different Day. Deficiency Keep Whole
          Payments shall be paid in accordance with Article VII below. For
          purposes of calculating the Deficiency Cost, if any, associated with a
          decrease in the delivery of split connect Committed Gas subject to
          commodity price adjustment in accordance with Section 4.4 above, the
          decrease in delivery of split connect Committed Gas will be allocated
          to the pipeline system associated with the Highest Index Price.
          Capacity Constraints, as defined and measured in Sections 4.4.1 and
          4.4.2 above, shall be taken into account in determining the allocation
          of a decrease in the delivery of split connect Committed Gas to the
          pipeline system associated with the Highest Commodity Price. For
          example, if only fifty percent (50%) of the split connect Committed
          Gas designated in CUSA's Availability Report for delivery on the first
          Day of the Month can be nominated for delivery into the pipeline
          system associated with the Highest Commodity Price, then fifty percent
          (50%) of a decrease in the delivery of split connect Committed Gas
          will be allocated to that pipeline system for purposes of calculating
          the Deficiency Cost. In the event CUSA decreases the quantity of
          Committed Gas delivered to NGC on any Day (x) without prior notice;
          (y) with notice given later than one hour before Transporter's
          nomination deadline; or (z) notifies NGC that the decrease is for the
          purpose of offsetting overdeliveries incurred by CUSA at the
          applicable Delivery Point earlier that Month, such decrease shall not
          be treated as a mid-month decrease for purposes of this Section 4.8,
          but shall be treated as an underdelivery of Committed Gas for purposes
          of calculating imbalance charges in accordance with Section 3.3 above.
          Notwithstanding the foregoing, no Deficiency Keep Whole Payments under
          this Agreement shall be payable in respect to decreases in deliveries
          of Committed Gas to Delivery Points subject to the "Stranded Capacity
          Valuation Adjustment" set forth in Section 3 of that certain
          "Transportation Assignment and Valuation Agreement" effective
          September 1, 1996, executed by CUSA and NGC and decreases in the
          delivery of Committed Gas at those Delivery Points shall be governed
          by the terms of that agreement.

     4.9  Commodity Price of Curtailed Sources of Supply.  Notwithstanding
          anything

                                     -20-
<PAGE>
 
          in this Article IV to the contrary, in the event CUSA exercises its
          right under Section 2.3 above to curtail production of Committed Gas
          from a Source of Supply as a result of any mechanical, engineering,
          legal, title or other field or well condition, and the period of
          curtailment set forth in CUSA's Availability Report lasts less than
          the entire Month, the Commodity Price of the Committed Gas subject to
          CUSA's notice of curtailment that is produced and delivered by CUSA
          shall be the Incremental Gas Commodity Price, as determined under
          Section 4.7 above. To the extent less than one hundred percent of
          Committed Gas produced from a given Source of Supply is subject to
          CUSA's notice of curtailment, the Committed Gas not affected by CUSA's
          notice of curtailment shall be priced at the First of the Month
          Commodity Price as determined under Section 4.1 above, or at the
          Incremental Gas Commodity Price if the Incremental Gas Commodity Price
          is applicable in accordance with Section 4.7.

     4.10 Locked Price Option.  For purposes of calculating the First of the
          Month Commodity Price of Committed Gas produced from a given Source of
          Supply, and in lieu of a Published Index Price designated in Exhibit A
          to this Agreement, CUSA may request that a fixed price (the "Locked
          Price") be substituted for the Published Index Price for a period as
          short as one Month or as long as twelve Months.  In the event a Locked
          Price is substituted for the Published Index Price, the First of the
          Month Commodity Price of the Committed Gas subject to the Locked Price
          shall be calculated as set forth in Section 4.1 above except that the
          Locked Price shall be substituted for the Published Index Price.  The
          Index Price Adjustments and Premiums used to calculate the First of
          the Month Commodity Price of Committed Gas shall not be affected by
          the substitution of a Locked Price.  The Parties acknowledge that a
          Locked Price will be based on New York Mercantile Exchange (or other
          exchange selected by NGC) posting for the natural gas futures contract
          applicable to the Month(s) selected by CUSA and prevailing at the time
          of CUSA's request for a Locked Price plus a basis differential
          adjustment required to equate the posted price with an imputed price
          at the applicable Delivery Point.

          4.10.1 Request for a Locked Price.  CUSA may request a quote of a
                 Locked Price by telephone on any Business Day, between the
                 hours of 8:30 a.m. and 2:00 p.m., local Houston, Texas time, up
                 to and including the seventh Business Day prior to the
                 beginning of a Month to which the Locked Price shall apply.
                 CUSA's request shall identify the Source(s) of Supply subject
                 to the request for a Locked Price, the Month(s) for which CUSA
                 requests a Locked Price and the quantity of Committed Gas
                 delivered from the applicable Source of Supply that will be
                 subject to the Locked Price. CUSA and NGC acknowledge and agree
                 that all telephone conversations between the Parties relating
                 to a Locked Price

                                     -21-
<PAGE>
 
                 may be recorded by NGC or CUSA, or both, for
                 purposes of establishing the terms and conditions associated
                 with a Locked Price. CUSA and NGC also agree that the taped
                 conversation may be used to establish the terms and conditions
                 associated with a Locked Price in the event the Parties are
                 unable to agree on such terms and conditions subsequent to the
                 conversation in question.

          4.10.2 Procedures.  As soon as possible after CUSA's telephonic
                 request, but in any event within twenty-four hours (excluding
                 weekends and holidays), NGC shall determine if it is able to
                 offer a Locked Price and, if it is able, the per MMBtu Locked
                 Price and shall notify CUSA of such price. NGC's notice shall
                 be addressed to the person(s) identified in Section XIII below,
                 and shall separately state the basis differential component of
                 the Locked Price. If CUSA accepts the Locked Price, including
                 the basis differential, then NGC shall forward to CUSA a "Price
                 Lock Confirmation", similar to the form attached hereto as
                 Exhibit E, specifying the terms to which the Parties have
                 agreed. Such Price Lock Confirmation shall be forwarded to CUSA
                 as soon as possible following CUSA's acceptance of the Locked
                 Price. The terms set forth in the Price Lock Confirmation shall
                 be binding upon the Parties unless CUSA notifies NGC in writing
                 that CUSA disputes one or more of the terms set forth in said
                 Price Lock Confirmation within forty-eight hours, exclusive of
                 weekends and CUSA holidays, of CUSA's receipt of the Price Lock
                 Confirmation. Any terms which remain undisputed after
                 expiration of said period shall be binding on the Parties, and
                 the Parties shall work together in good faith to resolve any
                 disputes as expeditiously as possible.

          4.10.3 Locked Quantities.  CUSA may request that all, or any portion
                 of, the Committed Gas available for delivery from a Source of
                 Supply during the Month(s) designated by CUSA be subject to a
                 Locked Price, provided that CUSA's request shall designate a
                 specific quantity of Committed Gas. NGC shall be entitled to
                 decline to offer a Locked Price at its sole discretion. In the
                 event a Locked Price has been established for a portion of the
                 Committed Gas available for delivery from a Source of Supply
                 for a given period, CUSA shall be entitled to make one or more
                 additional requests for a Locked Price on all or any portion of
                 the remaining Committed Gas available for delivery from that
                 Source of Supply during the designated period.

          4.10.4 Irrevocability.  Unless CUSA and NGC agree otherwise, a Locked
                 Price shall remain effective for the entire period designated
                 in the Price Lock Confirmation and shall not be increased or
                 decreased. In the event

                                     -22-
<PAGE>
 
                 the Locked Price applies to split connect Committed Gas, the
                 periodic selection of the Published Index Price and Index Price
                 Adjustments forming the basis of the First of the Month
                 Commodity Price in accordance with Section 4.3 shall not apply
                 in respect to such split connect Committed Gas until it is no
                 longer subject to the Locked Price.

          4.10.5 Availability of Committed Gas.  CUSA shall make available and
                 deliver one hundred percent of Committed Gas subject to a
                 Locked Price. CUSA shall not be entitled to curtail production
                 and delivery of Committed Gas subject to a Locked Price
                 pursuant to Section 2.3 above. Curtailment of Committed Gas
                 subject to a Locked Price is permitted under this Agreement
                 only in the event of an event of force majeure declared in
                 accordance with Article IX below. If CUSA and NGC establish a
                 Locked Price for less than one hundred percent (100%) of the
                 Committed Gas available for delivery from a Source of Supply,
                 or establish more than one Locked Price for Committed Gas
                 available for delivery from a Source of Supply, the first
                 Committed Gas delivered on each Day and during the applicable
                 Month shall be deemed to be subject to the first Locked Price
                 established, followed by quantities of Committed Gas subject to
                 additional Locked Prices in the order established, followed by
                 quantities of Committed Gas not subject to a Locked Price.

          4.10.6 Failure to Deliver Committed Gas.  If during any Month CUSA
                 fails to deliver quantities of Committed Gas subject to a
                 Locked Price, and such failure is not the result of an event of
                 force majeure or NGC's failure to perform its obligations under
                 this Agreement, CUSA shall pay to NGC an amount calculated as
                 follows. The quantity of Committed Gas subject to a Locked
                 Price made available and delivered by CUSA during that Month
                 shall be subtracted from the quantity of Committed Gas subject
                 to a Locked Price and the result shall be multiplied by the
                 difference between the Locked Price and the settlement price of
                 the natural gas futures contract on NYMEX (or other applicable
                 exchange) for the Month in which CUSA fails to deliver
                 Committed Gas subject to a Locked Price plus or minus the basis
                 differential set forth in the Price Lock Confirmation. In
                 addition, in the event NGC has entered into a financial
                 instrument, including, without limitation, an over-the-counter
                 basis swap, for purposes of hedging the risk associated with
                 the basis differential component of the Locked Price, CUSA
                 shall reimburse NGC one hundred percent (100%) of the actual
                 losses incurred by NGC under such financial instrument to the
                 extent such losses result from CUSA's failure to deliver
                 Committed Gas subject to a Locked Price. NGC shall exercise its
                 best efforts to minimize such losses (including for example

                                     -23-
<PAGE>
 
                 the early termination of financial instruments if NGC
                 reasonably believes at the time of termination that early
                 termination may minimize such losses). CUSA's obligation to
                 deliver Committed Gas subject to a Locked Price is a monthly
                 obligation and not a daily obligation and therefore for
                 purposes of this Section 4.10.6 CUSA shall have complied with
                 its obligation to deliver quantities of Committed Gas subject
                 to a Locked Price if it delivers such quantities during the
                 course of the Month. However, for purposes of calculation of
                 Deficiency Keep Whole Payments in accordance with Section 4.8
                 above, decreases in the delivery of Committed Gas subject to a
                 Locked Price on any Day shall be taken into account.

          4.10.7 Cessation of Futures Trading.  If natural gas futures
                 contracts cease to be traded on the New York Mercantile
                 Exchange or on any other mercantile exchange acceptable to NGC
                 in its sole discretion, then after such cessation NGC shall be
                 relieved of any and all obligation to establish Locked Prices
                 hereunder.

     4.11 NGC's Failure to Purchase Committed Gas.  If NGC fails in any Month
          to purchase at least ninety five percent (95%) of the quantity of
          Committed Gas designated for delivery on CUSA's  Availability Report
          (as adjusted during the  Month) from each Source of Supply ("Availed
          Quantity"), and to the extent that such failure is not the result of
          force majeure, an OFO, or CUSA's failure to make Committed Gas
          available, NGC shall pay to CUSA, as liquidated damages, an amount
          calculated as follows:

          (a)  If NGC has purchased at least ninety percent (90%), but less than
               ninety five percent (95%) of the Availed Quantity for the Source
               of Supply, the liquidated damages shall be equal to ten percent
               (10%) of the First of the Month Commodity Price applicable to
               that Source of Supply, multiplied by the difference between
               ninety five percent (95%) of the Availed Quantity and the lesser
               quantity of Committed Gas actually purchased by NGC in such Month
               from the Source of Supply. For purposes of this Section 4.11, in
               instances where Committed Gas from different Sources of Supply
               are delivered into a single pool, the calculation of the
               percentage of Committed Gas purchased by NGC shall be based on
               NGC's purchases from the entire pool and the Availed Quantity
               applicable to the entire pool.

          (b)  If NGC has purchased less than ninety percent (90%) of the
               Availed Quantity for the Source of Supply, the liquidated Damages
               shall be equal to the sum of (i) ten percent (10%) of the First
               of the Month Commodity Price applicable to that Source of Supply,
               multiplied by five percent

                                     -24-
<PAGE>
 
               (5%) of the Availed Quantity; and (ii) twenty percent (20%) of
               the First of the Month Commodity Price applicable to that Source
               of Supply, multiplied by the difference between ninety percent
               (90%) of the Availed Quantity and the lesser quantity of
               Committed Gas actually purchased by NGC.

V.   TITLE AND RESPONSIBILITY

     5.1  CUSA Responsibility.  Title to Committed Gas delivered by CUSA to NGC
          shall pass to NGC at the Delivery Points.  The price for Committed Gas
          delivered under this Agreement is inclusive of all production,
          severance, ad valorem, or similar taxes levied on the production or
          transportation of the Committed Gas prior to its delivery to or for
          the account of NGC at the Delivery Point(s).  All charges, royalties,
          lease burdens, expenses, fees, taxes, damages, injuries, and other
          costs incurred in or attributable to production and transfer,
          transportation (except as otherwise agreed by the Parties), and
          handling of Committed Gas delivered in accordance with this Agreement
          prior to delivery to NGC at the Delivery Point(s) shall be the
          exclusive responsibility of CUSA, as between the Parties.  CUSA shall
          indemnify, defend, and hold harmless NGC from all such charges,
          royalties, expenses, fees, taxes, damages, injuries, and other costs.
          In the event NGC is required by law to collect any such taxes, and
          CUSA claims an exemption from the taxes, CUSA shall, upon NGC's
          request, furnish NGC with a copy of CUSA's exemption certificate.

     5.2  NGC Responsibility.  All charges, expenses, fees, taxes, damages,
          injuries, and other costs incurred in or attributable to the purchase
          and transfer, transportation, and handling of the Committed Gas
          delivered in accordance with this Agreement from and after delivery of
          Committed Gas at the Delivery Point(s) shall be the exclusive
          responsibility of NGC, as between the Parties.  NGC shall indemnify,
          defend, and hold harmless CUSA from all such charges, expenses, fees,
          taxes, damages, injuries, and other costs.  In the event CUSA is
          required by law to collect any such taxes, and NGC claims an exemption
          from the taxes, NGC shall, upon CUSA's request, furnish CUSA with a
          copy of NGC's exemption certificate.

VI.  QUALITY, MEASUREMENT AND TESTS

     6.1  Quality Specifications.  NGC agrees to purchase Committed Gas
          delivered by CUSA to the Delivery Point(s) meeting the quality and
          pressure specifications set forth in the filed tariff of the pipeline
          immediately downstream of the Delivery Point's ("Transporter").  If
          Committed Gas delivered by CUSA to the Delivery Point(s) is rejected
          by Transporter for failure to meet its quality specifications, NGC
          shall be relieved of the obligation to purchase such Committed Gas.
          To the extent that Transporter accepts Committed Gas

                                     -25-
<PAGE>
 
          tendered by CUSA for NGC's account at the Delivery Point(s), CUSA
          shall be deemed to have complied with the quality specifications of
          this Agreement.

     6.2  Volume and Heating Value.  NGC and CUSA agree that the volume and
          heating value of Committed Gas sold and delivered under this Agreement
          will be measured at or near the Delivery Point(s) by Transporter,
          using equipment owned or controlled by, and measuring procedures
          employed by, Transporter.  The measurements made by Transporter shall
          be accepted by NGC and CUSA (subject to adjustment if prior
          measurements are determined to be inaccurate or incomplete), provided,
          however, the measuring equipment and procedures used must conform to
          Transporter's filed tariffs and to generally recognized industry
          standards.

     6.3  Test Data and Charts.  CUSA and NGC shall preserve all original test
          data, charts and other similar records in a Party's possession for a
          period of at least three years.

VII. ACCOUNTING, BILLING AND PAYMENT

     7.1  Statements.  On or before the twentieth Day of the Month following the
          Month of delivery, NGC will furnish CUSA the following information
          concerning the Month of delivery: the quantity of Committed Gas and
          Incremental Committed Gas delivered under this Agreement at each
          Delivery Point; First of the Month Commodity Prices; Incremental Gas
          Commodity Prices; Deficiency Keep Whole Payments; Imbalance Charges;
          and the total amounts payable by NGC and CUSA.  If the actual total
          volumes of Committed Gas delivered under this Agreement are not
          available by the date of the statement, estimated volumes or prices
          shall be used and adjustments shall be made on the following Month's
          billing, or as soon as available.  CUSA shall provide NGC copies of
          pipeline allocation statements CUSA receives from applicable pipelines
          as soon as such statements become available.  NGC's statement shall
          also show the total amount of any Deficiency Keep Whole Payments and
          Imbalance Charges payable by CUSA to NGC, which amount shall be
          deducted from the amount payable by NGC to CUSA for Committed Gas
          delivered during the Month.  The statement furnished by NGC to CUSA
          shall be exchanged via EDI to the extent possible.  NGC will also
          furnish a separate statement to each CUSA profit center showing the
          information applicable to that profit center alone.  If the accuracy
          of any statement or the sufficiency of any payment is questioned by
          CUSA, CUSA shall provide written notice of its question.  If it is
          subsequently determined that NGC underpaid CUSA, NGC shall pay
          interest on such amounts from the date of CUSA's notice computed at a
          rate equal to the Base Rate in effect from time to time published by
          the First National Bank of Chicago plus two percent.

                                     -26-
<PAGE>
 
     7.2  Payment.  No later than the last Business Day of each calendar Month,
          NGC shall pay CUSA, by wire transfer of funds into an account
          designated by CUSA, all amounts due under this Agreement for Committed
          Gas delivered during the previous Month.

     7.3  Failure to Pay.  In the event NGC fails to make timely payment of
          amounts reflected on NGC's statement, NGC shall pay CUSA interest on
          all amounts past due computed from the date the payment was due at the
          rate set forth in Section 7.1 above. In addition, if NGC fails to pay
          any amount due CUSA under this Agreement within five Business Days
          after the due date, except for any amount which is disputed by NGC in
          good faith, CUSA shall have the right upon written notice to NGC to
          (i) suspend any further deliveries of Committed Gas until all
          undisputed amounts due have been paid with interest at the rate
          specified in Section 7.1, and (ii) provide notice to NGC that this
          Agreement shall terminate if the payment default has not been cured
          within five Days after the date such written notice is given.  During
          the period of any such suspension of deliveries, and until any payment
          default is cured as provided above, CUSA shall have the right, but not
          the obligation, to sell all or any portion of the Committed Gas to
          third parties, and in such event NGC shall pay to CUSA as liquidated
          damages an amount equal to the difference between a lower price
          received by CUSA in the sale of such Committed Gas to third parties
          and the commodity price CUSA would have received from NGC under this
          Agreement multiplied by the quantity of Committed Gas sold by CUSA to
          third parties.

     7.4  Two Year Limit on Adjustments.  No retroactive adjustments may be made
          for any overcharge or undercharge after a period ending twenty-four
          Months from the end of the calendar year in which the gas forming the
          basis of the overcharge or undercharge was delivered or not delivered,
          as the case may be.  Any payment with respect to a retroactive
          adjustment shall include an amount equal to interest on all amounts
          past due from the date of the initial payment at the rate set forth in
          Section 7.1 above, except in instances where neither Party knew or
          could have known that the overcharge or undercharge occurred or
          instances of reallocations of gas by a transporting pipeline, in which
          cases interest shall run from the date of demand for payment.

     7.5  Audit.  Each Party shall have the right to audit the books and records
          of the other Party at any time during reasonable business hours during
          the term of this Agreement and for a period of two years after its
          termination to the extent necessary to determine compliance by the
          other Party with the terms of this Agreement, but such audit rights
          shall be limited to auditing such books and records for the then
          current and four preceding years.  The audited Party shall make its
          books and records available to the auditing Party.  Notwithstanding
          the foregoing, in the event a governmental body asserts a claim, or
          conducts an

                                     -27-
<PAGE>
 
          audit, against a Party arising from the purchase or sale of Committed
          Gas and that Party determines in its reasonable judgment that its
          response to such claim requires or would benefit from an audit of
          books and records of the other Party, such audit may be conducted
          during the term of this Agreement and for a period ending on the tenth
          anniversary of the event or payment forming the basis of the third
          party claim. In order to accommodate such third party audits, CUSA and
          NGC will maintain the appropriate books and records for a period not
          less than ten years. Each Party shall also have access to the books
          and records of the other Party for purposes of responding to claims,
          or requests for audits, asserted by a non-governmental third party and
          arising from the purchase or sale of Committed Gas.

     7.6  Accounting Information.  CUSA and NGC will exercise reasonable efforts
          to provide each other with data required by their respective
          accounting departments to close out books for each Month as soon as
          possible.  CUSA and NGC will exercise reasonable efforts to provide
          such data no later than the fifth Business Day of the Month following
          the Month being closed out.

     7.7  Setoff.  All payments will be made without setoff or counterclaim;
          provided, however, that upon a Party's (the defaulting Party) failure
          to make payment of undisputed amounts on the due date, the other Party
          (the non-defaulting Party) may, at its option and in its discretion,
          setoff against any amounts owed to the defaulting Party any amounts
          owed by the defaulting Party under this Agreement or otherwise.  The
          obligations of the non-defaulting Party and the defaulting Party under
          this Agreement in respect of such amounts shall be deemed satisfied
          and discharged to the extent of any such setoff.  The non-defaulting
          Party will give the defaulting Party notice of any setoff made under
          this Section 7.7 as soon as practicable after the setoff is made
          provided that failure to give such notice shall not offset the
          validity of the setoff.

     7.8  Letter of Credit.  NGC shall furnish to CUSA prior to the Effective
          Date an executed irrevocable standby letter of credit issued by a bank
          acceptable to CUSA in an amount calculated in accordance with Exhibit
          F to this Agreement.  The letter of credit shall be satisfactory in
          form and substance to CUSA and the issuing bank or banks.  Subsequent
          to the Effective Date, NGC shall maintain, or cause to be maintained,
          the letter(s) of credit in accordance with the requirements and
          procedures set forth in Exhibit F.  NGC's obligation to furnish the
          executed standby letter of credit prior to the Effective Date shall be
          a condition precedent to CUSA's obligations to perform under this
          Agreement.  NGC's failure to maintain, or cause to be maintained, the
          letter(s) of credit in effect at any time during the term of this
          Agreement in accordance with the requirements and procedures set forth
          in  Exhibit F shall be deemed to be a material breach of this
          Agreement.  In addition to any other rights and remedies

                                     -28-
<PAGE>
 
          CUSA may have under this Agreement, in the event NGC fails to
          maintain, or cause to be maintained, the letter(s) of credit in effect
          at any time during the term of this Agreement and such failure
          continues for a period of more than five consecutive Days, CUSA shall
          have the right upon written notice to NGC to suspend any further
          deliveries of Committed Gas until NGC furnishes the letter(s) of
          credit in accordance with the requirements and procedures set forth in
          Exhibit F.

VIII.  DISCLAIMER AND WARRANTY

       8.1  Warranty.  CUSA hereby warrants title to all gas sold by CUSA under
            this Agreement and the right to sell the same free from adverse
            claims of third parties, and except as provided in Section 8.2, CUSA
            agrees to hold NGC harmless from such claims.

       8.2  Disclaimer.  EXCEPT AS PROVIDED IN SECTION 8.1, CUSA MAKES NO 
            EXPRESS OR IMPLIED WARRANTY TO NGC UNDER THE UNIFORM COMMERCIAL CODE
            OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, MERCHANTABILITY OR
            FITNESS FOR A PARTICULAR PURPOSE.


IX.  FORCE MAJEURE

     9.1  Suspension of Obligations.  If either CUSA or NGC is rendered unable,
          by reason of an event of force majeure, to perform, wholly or in part,
          any obligation or commitment set forth in this Agreement, except for
          the payment of monies owed, then upon that Party's giving notice (the
          initial notice may be oral notice followed by written notice) and full
          particulars of the event of force majeure, then the obligations of
          both parties under this Agreement shall be suspended, except for the
          payment of amounts owed under this Agreement, to the extent and for
          the period of the event.

     9.2  Force Majeure Defined.  The term "force majeure" means an event that
          (i) was not within the control of the Party claiming its occurrence;
          and (ii) could not have been prevented or avoided by such Party
          through the exercise of due diligence.  Events of force majeure
          include, without limitation by enumeration, acts of God; lightning,
          hurricanes or storms, hurricane or storm warnings which in CUSA's
          judgment require and result in the precautionary shut-down or
          evacuation of production facilities; earthquakes, epidemics, fires,
          floods, landslides, washouts, freezing of wells or lines of pipe used
          to supply Committed Gas under this Agreement and other similar severe
          natural calamities; acts of public enemy; wars; blockades;
          insurrections; riots; civil

                                     -29-
<PAGE>
 
          disturbances and arrests; strikes, lockouts or other industrial
          disturbances; explosions, breakage, accidents to wells, equipment,
          facilities or lines of pipe used to enable CUSA to deliver or NGC to
          receive Committed Gas under this Agreement; events of force majeure
          declared by transporting pipelines; imposition by a regulatory agent,
          court or other governmental authority having jurisdiction of binding
          laws, conditions, limitations, orders, rules or regulations that
          prevent or prohibit either Party from performing, provided such
          governmental action has been resisted in good faith by all reasonable
          legal means; or any other cause of a similar type. The Parties
          recognize that NGC is not required by this Agreement to utilize firm
          transportation to receive Committed Gas from CUSA at each Delivery
          Point, but it is the intent of both Parties that transportation or
          sales arrangements downstream of the Delivery Points be made by NGC in
          such a manner that the possibility of a curtailment of Committed Gas
          due to curtailment of interruptible transportation or recall of
          acquired transportation be minimized. In addition to the foregoing
          events of force majeure, the loss, interruption or curtailment
          (collectively "curtailment") of transportation downstream of a
          Delivery Point shall constitute an event of force majeure provided
          that NGC exercises reasonable efforts to arrange alternative
          transportation, or the resumption of the curtailed transportation
          arrangements, as soon as possible following its discovery of the
          curtailment of downstream transportation. In that event, NGC will
          consult with CUSA and endeavor to agree upon a plan of action to avoid
          further curtailment of Committed Gas from that Delivery Point.

X.   TERM

     10.1 Term.  This Agreement shall remain in full force and effect for an
          initial term of ten years from the Effective Date, and for additional
          five year terms thereafter unless terminated by either Party by giving
          written notice of termination no later than sixty Days prior to the
          last Day in the then-effective term.

     10.2 Early Termination.  Notwithstanding Section 10.1, either Party may
          terminate this Agreement as follows:

          (a)  In the event of a material breach of this Agreement by either
               Party, the non-breaching Party may terminate this Agreement upon
               sixty days' prior written notice to the breaching Party (which
               notice shall specify in detail the nature of the breach and the
               steps necessary to cure the breach), unless the breaching Party,
               within thirty days after receipt of the non-breaching Party's
               notice, cures the breach and agrees in writing to indemnify the
               non-breaching Party against all direct damages arising from the
               breach (such damages to be determined by agreement of the

                                     -30-
<PAGE>
 
               Parties, or in the event the Parties are unable to agree, by
               arbitration in accordance with Section XII below).  For purposes
               of this Section, a material breach shall be any failure to
               perform under this Agreement which is not excused by force
               majeure and which exposes the non-breaching Party to economic
               loss in an amount which the breaching Party cannot reasonably be
               expected to pay in money damages.  Notwithstanding the foregoing,
               NGC's unexcused failure to receive and purchase CUSA's available
               Committed Gas produced from a specific Source of Supply, which
               failure results in the shut-in of a CUSA-operated well(s) for a
               period of five or more consecutive days, or which failure results
               in the shut-in of one or more CUSA-operated well(s) for a
               cumulative period of at least twenty days (which need not be
               consecutive) in any calendar year shall be conclusively deemed to
               be a material breach of this Agreement.  For purposes of the
               preceding sentence a shut-in of a well shall be deemed to begin
               on the first Business Day following NGC's receipt of CUSA's
               notice of a shut-in, which notice shall be effective if delivered
               orally, followed by written confirmation, and shall be deemed to
               end on the earlier of (i) the resumption of production or (ii)
               5:00 p.m. on the Day CUSA receives NGC's notice of the resumption
               of purchases if such notice is received prior to 1:00 p.m. or
               8:00 a.m. on the next Day if CUSA receives NGC's notice after
               1:00 p.m.  For purposes of quantifying NGC's right to cure in the
               event of a material breach due to a shut-in, CUSA's direct
               damages on each Day of the shut-in are deemed to be an amount
               calculated by multiplying the  (x) the quantity of Committed Gas
               shut-in times (y) the First of the Month Commodity Price
               applicable to such Committed Gas.  In the event NGC pays such
               amount to CUSA, the quantity of Committed Gas shut-in and forming
               the basis of such amount shall be deemed to be purchased for
               purposes of Section 4.11 above, and in instances where NGC pays
               amounts to CUSA pursuant to Section 4.11 prior to the payment of
               amounts pursuant to this Section 10.2, the payment pursuant to
               Section 4.11 shall be reduced to the extent required by this
               Section 10.2.  If one Party alleges a material breach under this
               Section and the other Party disputes that allegation, the matter
               shall be submitted to arbitration in accordance with Section XII
               below and the non-breaching Party's termination notice shall be
               suspended pending the decision of the arbitrators.  If the
               arbitrators conclude that a material breach has occurred, the
               termination notice shall become effective thirty days after
               issuance of the arbitrators' written decision.

          (b)  A Party may terminate this Agreement in the event the other Party
               (the Affected Party) is:  (i) dissolved (other than pursuant to a
               consolidation,

                                     -31-
<PAGE>
 
               acquisition, amalgamation, merger, or other reorganization not
               arising from bankruptcy or insolvency proceedings); or (ii)
               institutes or has instituted against it a proceeding seeking a
               judgment of insolvency or bankruptcy or any other relief under
               any bankruptcy or insolvency law or similar law affecting
               creditors' rights, or a petition is presented for its winding up
               a liquidation, and, in the case of any such proceeding or
               petition instituted or presented against it, such proceeding or
               petition results in a judgment of insolvency or bankruptcy or the
               entry of an order for its winding up or liquidation.

XI.  RENEGOTIATION, PRICE REDETERMINATION AND ARBITRATION

     11.1  Renegotiation and Price Redetermination.  During the term of this
           Agreement, CUSA and NGC will have the right to request that the terms
           and conditions of this Agreement be renegotiated and that the various
           pricing mechanisms be redetermined. This Article XI establishes the
           procedures applicable to such renegotiations and redeterminations.

     11.2  Limits On Arbitration.  Nothing in this Article XI shall be construed
           to limit a Party's ability to present issues for discussion under the
           Alliance Agreement. However, this Article XI shall limit CUSA and
           NGC's rights to institute the renegotiation or price redetermination
           process and invoke arbitration under this Agreement or pursuant to
           the Alliance Agreement and the Parties agree that no other provision
           of this Agreement or of the Alliance Agreement shall be construed to
           supersede or modify the limitations on arbitration contained in this
           Article XI.

     11.3  Price Redetermination.  It is the intent of CUSA and NGC that the
           First of the Month Commodity Price and the Incremental Gas Commodity
           Price of Committed Gas delivered at a given Delivery Point under this
           Agreement reflect the prevailing fair market value of spot gas at
           that Delivery Point. CUSA and NGC agree that the Published Index
           Prices designated in Exhibit A and corresponding Gas Daily Index
           Prices represent an accurate measure of the fair market value of spot
           gas because those index prices reflect surveys of prices paid in
           actual transactions between willing buyers and sellers under no
           compulsion to buy or sell. In the event CUSA or NGC believes in good
           faith that the Published Index Prices or the corresponding Gas Daily
           Index Prices, or both, no longer represent an accurate measure of the
           fair market value of spot gas, that Party may seek a price
           redetermination in accordance with the following procedure.

           11.3.1 Scope of Price Redetermination.  Price redeterminations
                  pursuant to this Section 11.3 are limited to replacing one or
                  more of the Published

                                     -32-
<PAGE>
 
                  Index Prices or Gas Daily Index Prices with a different
                  measure of the fair market value of spot gas that is not based
                  on prices reported in a commercial publication. This Section
                  11.3 does not apply in instances where: (i) CUSA desires to
                  select a different index price for purposes of calculating the
                  First of the Month Commodity Price for split connect Committed
                  Gas during the six month period designated in accordance with
                  Section 4.3 above; (ii) CUSA or NGC desires to replace a
                  Published Index Price or a Gas Daily Index Price with a
                  different Published Index Price or Gas Daily Index Price; or
                  (iii) where CUSA or NGC desires to modify or amend the Index
                  Price Adjustments necessary to arrive at a First of the Month
                  Commodity Price or Incremental Gas Commodity Price.

          11.3.2  Price Redetermination Procedure.  In the event CUSA or NGC
                  seeks a price redetermination pursuant to this Section 11.3,
                  such Party (the "initiating Party") may notify the other Party
                  (the "non-initiating Party") in writing, specifying the
                  Published Index Price(s) or Gas Daily Index Price(s) at issue
                  and describing (i) the proposed replacement measure of the
                  fair market value of spot gas at the location; and (ii) the
                  proposed effective date of the replacement measure of fair
                  market value. If the non-initiating Party agrees with the
                  replacement measure of the fair market value of spot gas and
                  its effective date, Exhibit A shall be amended to reflect the
                  replacement and its effective date. If the non-initiating
                  Party does not agree with the proposed replacement measure of
                  the fair market value of spot gas or its effective date, then
                  within thirty days after delivery of the initiating Party's
                  initial notice each Party shall designate a representative
                  with authority to negotiate and agree upon a replacement
                  measure of the fair market value of spot gas. The
                  representatives shall then meet and attempt in good faith to
                  reach agreement. If the representatives have not reached
                  agreement within sixty days after delivery of the initiating
                  Party's initial notice, then the initiating Party may elect to
                  have the issue resolved by binding arbitration in accordance
                  with Section 11.3.3 below. If a replacement measure of the
                  fair market value of spot gas is established, either by
                  agreement of the Parties or through arbitration, such
                  replacement measure of the fair market value of spot gas shall
                  be reflected in an appropriate amendment to Exhibit "A". A
                  Party receiving a price redetermination request under this
                  Section 11.3 may respond by requesting a replacement measure
                  of the fair market value of spot gas at any other applicable
                  location(s) in accordance with the procedure set forth in this
                  Section 11.3.2. To the extent feasible, both the initial
                  request and any responsive request shall be addressed in the
                  same negotiating sessions and/or arbitration so as to minimize
                  the

                                     -33-
<PAGE>
 
                  administrative cost of resolving all pricing issues.
                  Notwithstanding anything in this Section to the contrary, in
                  the event a replacement measure of the fair market value of
                  spot gas is determined by arbitration, the Party invoking the
                  arbitration (or Parties if both Parties invoked the
                  arbitration) shall not be entitled to invoke arbitration
                  pursuant to this Section 11.3.2 during a period of twelve full
                  Months following the date of the arbitration award.

          11.3.3  Arbitration of Price Redetermination.  If any price
                  redetermination is presented for arbitration under this
                  Section 11.3, the Parties shall follow the arbitration
                  procedure outlined in Sections 11.7 through 11.12 below,
                  except as follows: In any arbitration under this Section 11.3,
                  each Party shall submit to the arbitration panel such Party's
                  proposed measure of the fair market value of spot gas at the
                  applicable location. The arbitrators shall select from the two
                  proposals the one which they feel most closely reflects the
                  fair market value of spot gas at the applicable location as
                  evidenced by prices paid by willing buyers and sellers under
                  no compulsion to buy or sell and, in the case of the
                  replacement of a Published Index Price, pursuant to contracts
                  providing for a one month obligation to buy and sell spot gas.
                  Any Premium that may be payable under this Agreement shall not
                  be taken into consideration by the arbitrators in their
                  deliberations. The arbitrators must select the proposal of one
                  of the Parties and may not average the two proposals or
                  otherwise craft an alternative proposal. The arbitrators, in
                  the absence of unusual extenuating circumstances, shall be
                  required to render their decision in writing within ten
                  Business days after the conclusion of the arbitration
                  proceeding. The cost of any arbitration under this Section
                  11.3 shall be borne as follows:

                  (i)  Each Party shall bear the costs of its own attorneys,
                       witnesses and representatives; and

                  (ii) The remaining costs of the arbitration, including the 
                       fees of all arbitrators, the costs of securing a location
                       for the arbitration, and any similar costs, shall be
                       borne equally by the Parties.

          11.3.4  Effective Date.  The effective date of any replacement measure
                  of the fair market value of spot gas selected by arbitration
                  shall be the first day of the month following the month in
                  which the arbitrators' decision is rendered.

     11.4 Substitution of Published Index Prices.  At any time during the term
          of this Agreement, in the event (i) CUSA or NGC believes in good faith
          that a

                                     -34-
<PAGE>
 
          Published Index Price or Gas Daily Index Price does not reflect
          the fair market value of spot gas at the applicable location; (ii)
          also believes in good faith that a different index price in the same
          commercial publication or in a different commercial publication does
          reflect such fair market value; and (iii) the Parties have been unable
          to reach agreement on an amendment to Exhibit A as contemplated in
          Section 4.1 above, the Party requesting the substitution of a new
          index price shall be entitled to present the issue to arbitration in
          accordance with the procedure established in Section 11.3 above.  In
          the event a new Published Index Price at a specific location is
          determined by arbitration, neither Party shall be entitled to invoke
          arbitration for the purpose of selecting a new Published Index Price
          at that location during a period of twelve full Months following the
          date of the arbitration award.  The same limitation shall apply if a
          new Gas Daily Index Price at a given location is determined by
          arbitration.  This Section 11.4 does not apply to instances where CUSA
          desires to change the Published Index Price selected in respect to
          split connect Committed Gas pursuant to Section 4.3 above.  In such
          instances, if the Parties are unable to agree on a change, the
          selected Published Index Price shall remain in place for the full six
          Month period.

     11.5 Unavailability of Published Index Prices.  If at any time during the
          term of this Agreement a Published Index Price or Gas Daily Price is
          no longer published and in the event CUSA and NGC are unable to agree
          on a replacement index price, either Party may submit the issue to
          arbitration in accordance with the procedure established in Section
          11.3 above, with the following modifications.  There shall be no limit
          on the number of times a Party may invoke arbitration.  The effective
          date of the replacement Published Index Price or Gas Daily Index Price
          shall be the Day after the previous index price became unavailable and
          the arbitrators shall make their award retroactive to such date.
          During the pendency of the Parties' attempt to agree on a replacement
          Published Index Price or Gas Daily Price and the subsequent
          arbitration proceeding, the commodity price of the Committed Gas
          affected by the unavailability of the index price shall be based on
          the last available Published Index Price or Gas Daily Price.  The
          amounts paid by NGC to CUSA during such period shall be adjusted to
          reflect the retroactive implementation of the replacement index price.

     11.6 Dispute Resolution - Other Price Issues.  In the event the Parties
          are unable to agree on any factor required to calculate the commodity
          price of Committed Gas that will be produced from a new source of
          supply, or  are unable to agree on the Index Price Adjustments
          applicable to Committed Gas from an existing Source of Supply, the
          issue shall be eligible for arbitration in accordance with Sections
          11.9 through 11.12 below.

                                     -35-
<PAGE>
 
     11.7  Arbitration After the Fifth Anniversary.  In addition to the
           arbitration of price redetermination issues under Sections 11.4
           through 11.6 above, following the fifth anniversary of this
           Agreement, CUSA and NGC shall have the right to request a
           renegotiation of any term or condition of this Agreement and to
           invoke arbitration in accordance with Sections 11.9 through 11.12
           below if the Parties are unable to reach agreement in respect to such
           a request. The limitation contained in this Section 11.7 shall not
           apply to disputes between CUSA and NGC relating to the construction
           or interpretation of this Agreement or to the performance of the
           Parties under this Agreement, which disputes may be presented to
           arbitration at any time during the term of this Agreement in
           accordance with Sections 11.9 through 11.12 below.

     11.8  Renegotiation of the Premium.  Neither CUSA nor NGC shall be entitled
           to request a renegotiation of the Premium paid in accordance with
           Article IV above and to invoke arbitration in the event the Parties
           are unable to agree prior to the fifth anniversary of this Agreement.

     11.9  All Disputes Arbitration.  All unresolved disputes between the
           Parties (i) arising under this Agreement and relating to the
           construction and interpretation of this Agreement or the Parties'
           performance under this Agreement; or (ii) arising from renegotiation
           or price redetermination under this Article XI shall be submitted to
           binding arbitration in accordance with this Article XI. Neither Party
           shall have the right to litigate such disputes in state or federal
           court. Arbitration shall be governed by the Federal Arbitration Act,
           9 U.S.C. ' 1, et seq., and will not be governed by the arbitration
           acts, statutes or rules of any other jurisdiction.

     11.10 Procedure.  In the event the Parties are unable to resolve a dispute
           arising under this Agreement after exercising good faith efforts to
           resolve the dispute, either Party may request arbitration by
           submitting a written notice to the other. The notice shall name the
           noticing Party's arbitrator and shall contain a statement of the
           issue(s) presented for arbitration. Within fifteen (15) Days of
           receipt of a notice of arbitration, the other Party shall name its
           arbitrator by written notice and may designate any additional
           issue(s) for arbitration. The two named arbitrators shall select the
           third arbitrator within fifteen (15) Days after the date on which the
           second arbitrator was named. Should the two arbitrators fail to agree
           on the selection of the third arbitrator, either Party shall be
           entitled to request the Senior Judge of the United States District
           Court of the Southern District of Texas to select the third
           arbitrator. All arbitrators shall be qualified by education or
           experience within the natural gas industry to decide the issues
           presented for arbitration. No arbitrator shall be: a current or
           former director, officer or employee of either Party, or its
           affiliates; an attorney (or member of a law firm) who has rendered
           legal services to either Party, or its

                                     -36-
<PAGE>
 
           affiliates, within the preceding three years; or an owner of any of
           the common stock of either Party, its affiliates or direct
           competitors.

     11.11 Arbitration Hearings.  The three arbitrators shall commence the
           arbitration hearing within twenty-five (25) Days following the
           appointment of the third arbitrator. The proceeding shall be held at
           a mutually acceptable site. If the Parties are unable to agree on a
           site, the arbitrators shall select a site. The arbitrators shall have
           the authority to establish rules and procedures governing the
           arbitration hearing. Each Party shall have the opportunity to present
           its evidence at the hearing. The arbitrators may call for the
           submission of pre-hearing statements of position and legal authority,
           but no post-hearing briefs shall be submitted. After the presentation
           of the evidence has concluded, each Party shall submit to the
           arbitration panel a final offer of its proposed resolution of the
           dispute. In the event the dispute presented to the arbitration panel
           involves (i) a price redetermination pursuant to Sections 11.3
           through 11.6 above; (ii) a renegotiation of the Premium pursuant to
           Section 11.8 above; or (iii) a claim by one or both Parties for an
           award of damages, expenses or costs of any nature, a majority of the
           arbitrators shall approve the final offer of one Party without
           modification, and reject the offer of the other Party. In the event
           the dispute presented to the arbitration panel involves issues other
           than those defined in the preceding sentence, the arbitration panel
           shall be authorized to render an award that departs from the offers
           of both Parties. The arbitration panel shall not have the authority
           to award punitive, exemplary, consequential or incidental damages.
           The arbitrators' decision must be rendered within thirty (30) Days
           following the conclusion of the hearing or submission of evidence.
           All evidence submitted in an arbitration proceeding, transcripts of
           such proceedings, and all documents submitted by the Parties in an
           arbitration proceeding shall be deemed confidential information
           subject to Section 15.4 below.

     11.12 Arbitration Decision.  The decision of the arbitrators or a majority
           of them, shall be in writing and shall be final and binding upon the
           Parties as to the issue submitted. Each Party shall bear the expense
           and cost of its arbitrator and one-half of the expense and cost of
           the third arbitrator.

XII. GOVERNMENTAL REGULATIONS AND AUTHORIZATIONS

     12.1 Application of Law and Regulation.  This Agreement shall be subject
          to all valid and applicable laws of the United States and to the
          applicable valid rules, regulations or orders of any regulatory agency
          or governmental authority having jurisdiction, and the Parties shall
          be entitled to regard all applicable laws, rules and regulations
          (federal, state or local) as valid and may act in accordance with them
          until such time as they may be declared invalid by final judgment of a

                                     -37-
<PAGE>
 
          court of competent jurisdiction and such judgment is not subject to
          appeal.

     12.2 Authorization and Regulatory Filings.  Upon execution of this
          Agreement, each Party agrees to seek such government certificates,
          permits, licenses and authorizations which, in its sole discretion, it
          deems necessary to perform its obligations under this Agreement.
          During the term of this Agreement, each Party shall make all filings
          required by any regulatory bodies having jurisdiction over the
          activities covered by this Agreement and upon request of the other
          Party shall promptly provide copies of such to the other Party.
          Neither Party will knowingly enter into agreements nor undertake any
          activities or filings that would interfere with or frustrate the other
          Party's efforts to obtain the necessary regulatory approvals to
          fulfill its obligations under this Agreement.

XIII.  NOTICES

       13.1  Procedure. Except as provided in this Agreement, all notices,
             requests, demands, statements, and other communications under this
             Agreement shall be in writing and shall be deemed given on the date
             thereof if delivered personally, or by telecopy. If mailed by
             certified or registered mail, postage prepaid, return receipt
             requested, such notice shall be deemed given three Days after the
             date of mailing. All notices shall be delivered or transmitted to
             the Parties, their successors in interest or their assignees at the
             following addresses, or at such other addresses as the Parties may
             designate by written notice in the manner aforesaid:

             CUSA:
                   Notices and Correspondence:
                   Chevron U.S.A. Inc.
                   P.O. Box 2100
                   Houston, TX 77252
                   Attn: Midstream Business Unit Alliance Manager (CPDN)
                   Telephone: (713) 754-2437 or 754-4518
                   Fax: (713) 754-2536

                   Invoices and Statements:
                   Chevron U.S.A. Inc.
                   P.O. Box J
                   Concord, CA 94524
                   Attn: Section 980
                   Telephone: (510) 827-7382
                   Fax: (510) 680-3472

                                     -38-
<PAGE>
 
             NGC:
                   Notices and Correspondence:
                   Natural Gas Clearinghouse
                   13430 Northwest Freeway
                   Suite 1200
                   Houston, TX  77040
                   Attention: Contract Administration (Molly Cook)
                   Telephone: (713) 507-3713
                   Fax: (713) 507-6834

                   Invoices and Statements:
                   Natural Gas Clearinghouse
                   13430 Northwest Freeway
                   Suite 1200
                   Houston, TX 77040
                   Attn: Gas Accounting
                   Telephone: (713) 507-3701
                   Fax: (713) 507-3787

XIV. NON-ASSIGNABILITY AND TRANSFER OF INTEREST BY CUSA

     14.1  Non-Assignability. Except as provided in Section 14.2 below, neither
           this Agreement nor any obligation of a Party under this Agreement are
           assignable without the express written consent of the other, which
           consent may be withheld in its sole discretion for any reason, except
           to wholly owned subsidiaries and affiliates, in which case the
           assigning entity shall not be relieved of responsibility for any of
           its obligations under this Agreement.

     14.2  Transfer of Interest.  CUSA shall have the right to convey a Source
           of Supply to a non-affiliated entity. In the event of such a
           conveyance, and at CUSA's option, the affected Source of Supply shall
           either remain subject to this Agreement and gas produced from that
           Source of Supply shall be Committed Gas for all purposes under this
           Agreement or shall remain Committed Gas pursuant to a separate
           agreement executed by NGC and CUSA's successor in interest and
           containing terms and conditions substantially identical to this
           Agreement. In the event CUSA elects to convey the Source of Supply
           subject to this Agreement, the documents evidencing the conveyance of
           the Source of Supply shall specifically identify this Agreement and
           obligate CUSA's successor in interest to ratify and adopt this
           Agreement insofar as it applies to the Source of Supply acquired by
           CUSA's successor in interest. In the event CUSA elects to require its
           successor in interest to execute an agreement substantially identical
           to this Agreement, such agreement shall be executed contemporaneously
           with the documents evidencing the conveyance of the Source of Supply.
           
                                     -39-
<PAGE>
 
           Notwithstanding the foregoing, CUSA shall have the right to convey a
           Source of Supply to a non-affiliated entity free and clear of this
           Agreement if the Source of Supply, when combined with any other
           Source of Supply contemporaneously conveyed to the non-affiliated
           entity, produced an average of 200 MMBtu per Day, or less, over the
           six month period ending ninety Days prior to the Effective Date of
           the conveyance.

XV.  MISCELLANEOUS

     15.1  Waiver.  No waiver by either CUSA or NGC of any default of the other
           under this Agreement shall operate as a waiver of any future default,
           whether of like or different character or nature.

     15.2  Entire Agreement.  This Agreement constitutes the entire agreement of
           the Parties, and is intended to be a final, complete, integrated and
           exclusive expression of their agreement and its terms.  Except as
           otherwise provided in this Agreement, this Agreement shall not be
           modified or amended except by a written instrument executed by the
           Parties.

     15.3  Choice of Law.  THIS AGREEMENT SHALL BE SUBJECT TO, AND INTERPRETED
           IN ACCORDANCE WITH, THE INTERNAL LAWS, BUT NOT THE LAWS REGARDING
           CHOICE OF LAW, OF THE STATE OF TEXAS.

     15.4  Confidentiality.  Each Party agrees that the terms of this Agreement
           and any information provided under this Agreement shall be kept
           confidential by it and shall not be disclosed to any third Party
           without first obtaining the written consent of the other, which
           consent shall not be unreasonably withheld. In addition, any
           information designated as confidential by one Party and provided to
           the other during the term of any agreement shall be kept confidential
           by the receiving Party and shall not be disclosed to any third party
           for a period of three years from the date of receipt without first
           obtaining the written consent of the other, which consent shall not
           be unreasonably withheld. This Section shall not prevent a Party from
           making any disclosure required by law, regulation or SEC disclosure
           rules (in such case, the disclosing Party shall notify the non-
           disclosing Party as soon as practicable of the pendency, nature and
           content of the planned disclosure) or from disclosing any information
           which is already in the public domain.

     15.5  Limitation of Damages. In no event shall either Party be liable for
           punitive, exemplary, consequential or incidental damages arising from
           any breach or default under this Agreement, indemnification under
           this Agreement or from any act or omission under or in connection
           with this Agreement.

                                     -40-
<PAGE>
 
     15.6  Severability. If any provision of this Agreement is determined to be
           invalid, illegal or otherwise unenforceable for any reason by a court
           of competent jurisdiction, the remaining terms and conditions of this
           Agreement shall remain in full force and effect to the fullest extent
           permitted by law. In such an event, the Parties agree to make a good
           faith effort to replace the affected provisions.

     IN WITNESS WHEREOF, this Agreement is executed on the _____ day of August,
1996.

CHEVRON U.S.A. INC.                 NATURAL GAS CLEARINGHOUSE



__________________________          ____________________________________
By:                                 By:
Title:                              Title:

                                     -41-
<PAGE>
 
                                   EXHIBIT A

              SOURCES OF SUPPLY, DELIVERY POINTS, PUBLISHED INDEX
                      PRICES, AND INDEX PRICE ADJUSTMENTS
<PAGE>
 
                                   EXHIBIT B

                        POST-EFFECTIVE DATE COMMITMENTS
<PAGE>
 
                                   EXHIBIT C

               UPSTREAM GATHERING AND TRANSPORTATION AGREEMENTS
<PAGE>
 
                                   EXHIBIT D

                    FIRM MARKET SPLIT CONNECT COMMITTED GAS
<PAGE>
 
                                 EXHIBIT "E"


                                       [Date]


                                       Price Lock Confirmation
                                       Natural Gas Purchase and Sale Agreement
                                       NGC Contract No. ______________


Chevron U.S.A. Inc.
[Address]



Gentlemen:

In accordance with that certain Natural Gas Purchase and Sale Agreement dated
effective ______________ by and between Chevron U.S.A. Inc., as Seller, and
Natural Gas Clearinghouse, as Buyer, which agreement is incorporated herein and
made a part hereof, Buyer hereby confirms establishment of the following "Locked
Price" and "Locked Quantities" as previously discussed and agreed orally:

Date of Parties' Oral Agreement:_____________________________________
Month of Delivery:___________________________________________________
Source of Supply:____________________________________________________
Delivery Point:______________________________________________________
Locked Quantities (MMBtus/day):______________________________________
Locked Price ($/MMBtu):______________________________________________
Basis Differential Adjustment ($/MMBtu):_____________________________

This Price Lock Confirmation is binding upon the Parties unless Seller notifies
Buyer of a dispute with all or a portion hereof 48 hours (exclusive of weekends
and Chevron holidays) after Seller's receipt hereof.

                              Very truly yours,

                              NATURAL GAS CLEARINGHOUSE



                              By:_________________________________________
                                    Trading Representative
<PAGE>
 
                              Date:______________________________________
<PAGE>
 
EXHIBIT F  Letter of Credit
<PAGE>
 
                                  EXHIBIT "F"

                               LETTER OF CREDIT


                         1. CALCULATION OF FACE AMOUNT

     After CUSA submits its Availability Report applicable to the first Month of
deliveries of Committed Gas under this Agreement and prior to the Effective
Date, NGC shall furnish to CUSA one or more irrevocable standby letters of
credit (referred to in this Exhibit F as "LC" regardless of whether one or more
LCs are posted), and shall subsequently maintain the LC in effect, in a form
similar to the form attached hereto as Exhibit "F-1" and acceptable to CUSA and
the issuing bank or banks, from a bank or banks acceptable to CUSA and in an
aggregate amount calculated as follows:

     ! The face amount of the LC furnished prior to the Effective Date shall
     equal ([65 x eV x eRP] minus $80,000,000) x 25%. Thereafter, and until the
     twentieth Day of the second Month of deliveries of Committed Gas under the
     Agreement, the face amount of the LC shall be increased to the following
     face amounts according to the following schedule:

          (i) no later than the fifteenth Day after the Effective Date - ([65 x
          eV x eRP] minus $80,000,000) x 50%;

          (ii) no later than the thirtieth Day after the Effective Date - ([65 x
          eV x eRP] minus $80,000,000) x 75%; and

          (iii) no later than the forty-fifth Day after the Effective Date -
          ([65 x eV x eRP] minus $80,000,000) x 100%.

     The LC posted by NGC no later than the forty-fifth Day following the
     Effective Date in the face amount of ([65 x eV x eRP] minus $80,000,000) x
     100% is hereafter referred to as the "Initial LC".

     ! Following the twentieth Day of the second Month of deliveries of
     Committed Gas and in subsequent Months the face amount of the LC to be
     posted by NGC shall equal the aggregate face amount of the Initial LC plus
     or minus A.

     Where:

     V shall equal the average daily volume of Committed Gas designated for
     delivery by CUSA to NGC in CUSA's initial Availability Report submitted in
     accordance with Section 2.2 of the Agreement and applicable to the Month in
     which the aggregate face amount of the LC is calculated.
<PAGE>
 
     eV shall equal the average daily volume of Committed Gas designated for
     delivery by CUSA to NGC in CUSA's initial Availability Report applicable to
     the first Month of deliveries of Committed Gas under this Agreement.

     RP shall mean the Reference Price

     eRP shall mean the estimated Reference Price

     Reference Price shall equal the volume weighted average First of the Month
     Commodity Price of Committed Gas to be delivered by CUSA to NGC at the
     Delivery Points designated in the applicable initial Availability Report
     during the Month in which the aggregate face amount of the LC is
     calculated.  For purposes of calculating the volume weighted average First
     of the Month Commodity Price, the average daily volume of Committed Gas
     designated for delivery at each Delivery Point by CUSA to NGC in CUSA's
     initial Availability Report applicable to the Month in which the aggregate
     face amount of the LC is calculated will be used for weighing purposes.

     estimated Reference Price shall equal the volume weighted average imputed
     First of the Month Commodity Price of Committed Gas that will be delivered
     by CUSA to NGC during the first Month of deliveries of Committed Gas under
     this Agreement at the Delivery Points designated in the applicable initial
     Availability Report. For purposes of calculating the volume weighted
     average imputed First of the Month Commodity Price: (i) the average daily
     volume of Committed Gas designated for delivery at each Delivery Point by
     CUSA to NGC in CUSA's initial Availability Report applicable to the first
     Month of deliveries of Committed Gas under this Agreement will be used for
     weighing purposes; and (ii) the Published Index Prices applicable to the
     Month preceding the first Month of deliveries under this Agreement and the
     applicable Index Price Adjustments and Premiums, if any, set forth in
     Exhibit A to the Agreement will be used to arrive at the imputed First of
     the Month Commodity Price

     X shall equal the total net dollar amount NGC is obligated to pay CUSA in
     accordance with the terms of the Agreement as reflected in the applicable
     statement furnished by NGC to CUSA in accordance with Section 7.1 of the
     Agreement.

     A shall equal (i) the result of subtracting the aggregate face amount of
     the Initial LC from [X plus (35 x V x RP) minus $80,000,000] if [X plus (35
     x V x RP) minus $80,000,000] is greater than the aggregate face amount of
     the Initial LC or (ii) the result of subtracting [X plus (35 x V x RP)
     minus $80,000,000] from the aggregate face amount of the Initial LC if the
     aggregate face amount of the Initial LC is greater than  [X plus (35 x V x
     RP) minus $80,000,000]. Notwithstanding the foregoing, A shall equal zero
     if the result of the calculation set forth in (i) or (ii), as the case may
     be, is not greater than $30,000,000.  If the difference resulting from the
     calculation set forth in (i) is greater than $30,000,000, the difference
     shall be added to the aggregate
<PAGE>
 
     face amount of the Initial LC to arrive at the aggregate face amount of the
     LC to be posted in accordance with the procedures set forth below. If the
     difference resulting from the calculation set forth in (ii) is greater than
     $30,000,000, the difference shall be subtracted from the aggregate face
     amount of the Initial LC to arrive at the adjusted aggregate face amount of
     the LC to be posted in accordance with the procedures set forth below.

                                 2. PROCEDURES

     The aggregate face amount of the Initial LC shall not be subject to
     adjustment until the twentieth Day of the second Month of deliveries of
     Committed Gas under this Agreement. Beginning on the twentieth Day of the
     second Month and on the twentieth Day of each succeeding Month during the
     term of this Agreement, the aggregate face amount of the LC shall be
     calculated in accordance with the formula set forth above.  If an
     adjustment in the aggregate face amount of the LC is required, within five
     Business Days following the twentieth Day of the Month NGC shall at its
     sole option either: (a) authorize the issuing bank or banks to amend the
     aggregate face amount of the LC to reflect the proper adjustment; (b)
     deliver a replacement standby LC in an aggregate face amount determined in
     accordance with the formula set forth above; or (c) deliver an additional
     LC in a face amount that, when added to the aggregate face amount of any
     LC(s) in effect at that time, equals the face amount determined in
     accordance with the formula set forth above.  Upon receipt of a replacement
     LC complying with the requirements of this Exhibit F, CUSA shall return any
     superseded LC(s) to the issuing bank(s) for cancellation.