exv10w2





Exhibit 10.2


Execution Version


 

SPECIFIC TERMS IN THIS AGREEMENT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL 

TREATMENT FOR THOSE TERMS
HAS BEEN
REQUESTED. THE REDACTED MATERIAL HAS 

BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, AND THE 

TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH THREE ASTERISKS
(* * *).




GAS TREATING AND CO2 DELIVERY AGREEMENT




by and between




SANDRIDGE EXPLORATION AND PRODUCTION, LLC




and




OXY USA INC.




Dated June 29, 2008



 


 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I DEFINITIONS	 	 	1	 
	 
	 	 	 	 	 	 
	1.1
	 	Definitions	 	 	1	 
	1.2
	 	General Interpretative Principles	 	 	15	 
	 
	 	 	 	 	 	 
	ARTICLE II TERM	 	 	16	 
	 
	 	 	 	 	 	 
	ARTICLE III TREATMENT COMMITMENTS	 	 	16	 
	 
	 	 	 	 	 	 
	3.1
	 	Treating Requirement	 	 	16	 
	3.2
	 	SD Gas	 	 	17	 
	3.3
	 	Treating	 	 	18	 
	3.4
	 	Nomination and Delivery of SD Gas to Century Plant	 	 	23	 
	3.5
	 	Century Plant Cost-Sharing	 	 	24	 
	3.6
	 	Sole Remedy	 	 	25	 
	3.7
	 	Royalty Owner Volumes	 	 	25	 
	3.8
	 	Expert	 	 	25	 
	 
	 	 	 	 	 	 
	ARTICLE IV DELIVERY AND ACCEPTANCE OF CO2	 	 	26	 
	 
	 	 	 	 	 	 
	4.1
	 	Annual CO2 Requirement	 	 	26	 
	4.2
	 	Exception to CO2 Obligations	 	 	26	 
	4.3
	 	CO2	 	 	27	 
	4.4
	 	Monthly Nominations for Delivery of CO2	 	 	27	 
	4.5
	 	Five Year Budget and Three Year Monthly Delivery Schedule	 	 	29	 
	4.6
	 	Plant Operating Expense and Fuel and Electric Power Cost Reimbursement	 	 	29	 
	4.7
	 	CO2 Delivery Deficiency	 	 	31	 
	4.8
	 	CO2 Take Deficiency	 	 	31	 
	4.9
	 	Delivery /Take Obligations	 	 	32	 
	4.10
	 	Sole Remedies	 	 	34	 
	4.11
	 	SD Equity CO2 Adjustments	 	 	34	 
	4.12
	 	Aggregate Delivery Obligation	 	 	34	 
	4.13
	 	Expert	 	 	34	 
	 
	 	 	 	 	 	 
	ARTICLE V MEASUREMENT, TESTING, TITLE AND RISK OF LOSS	 	 	34	 
	 
	 	 	 	 	 	 
	5.1
	 	Meter Stations	 	 	34	 
	5.2
	 	Procedure	 	 	35	 






i  









 






	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	5.3
	 	Meter Tests	 	 	35	 
	5.4
	 	Testing	 	 	35	 
	5.5
	 	Disputes	 	 	36	 
	5.6
	 	Title and Risk of Loss	 	 	36	 
	 
	 	 	 	 	 	 
	ARTICLE VI PIPELINE TRANSPORTATION OF CO2	 	 	37	 
	 
	 	 	 	 	 	 
	6.1
	 	McCamey to Seminole Pipeline	 	 	37	 
	6.2
	 	Space Available Redelivery Points	 	 	37	 
	6.3
	 	Settlement of Imbalances	 	 	37	 
	6.4
	 	Third Party Transportation	 	 	38	 
	6.5
	 	Additional Oxy Transportation Obligations	 	 	39	 
	6.6
	 	Transport to McCamey	 	 	39	 
	 
	 	 	 	 	 	 
	ARTICLE VII TAXES	 	 	39	 
	 
	 	 	 	 	 	 
	7.1
	 	Tax Liability	 	 	39	 
	7.2
	 	Exemption Claim	 	 	39	 
	 
	 	 	 	 	 	 
	ARTICLE VIII CARBON CREDITS AND INCREMENTAL COSTS	 	 	39	 
	 
	 	 	 	 	 	 
	ARTICLE IX REPRESENTATIONS AND WARRANTIES	 	 	39	 
	 
	 	 	 	 	 	 
	9.1
	 	Representations by Oxy	 	 	39	 
	9.2
	 	Representations by SD	 	 	40	 
	9.3
	 	Disclaimer	 	 	41	 
	 
	 	 	 	 	 	 
	ARTICLE X ACCOUNTING AND PAYMENTS	 	 	41	 
	 
	 	 	 	 	 	 
	10.1
	 	Data to be Supplied by Oxy	 	 	41	 
	10.2
	 	Data to be Supplied by SD	 	 	41	 
	10.3
	 	Invoices	 	 	41	 
	10.4
	 	Auditing	 	 	42	 
	10.5
	 	Waiver of Lien Rights	 	 	42	 
	10.6
	 	Set Off Rights	 	 	42	 
	 
	 	 	 	 	 	 
	ARTICLE XI SCHEDULES	 	 	42	 
	 
	 	 	 	 	 	 
	11.1
	 	Completion of Century Facilities	 	 	42	 
	11.2
	 	Operations Reporting and Other Information	 	 	43	 






ii  









 






	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE XII REMEDIES	 	 	44	 
	 
	 	 	 	 	 	 
	12.1
	 	Termination Rights	 	 	44	 
	12.2
	 	Payment Obligations	 	 	44	 
	12.3
	 	Other Obligations	 	 	44	 
	12.4
	 	Waiver of Consequential Damages	 	 	45	 
	12.5
	 	Effect of Termination	 	 	45	 
	12.6
	 	Past Due Interest	 	 	45	 
	12.7
	 	Reasonable Damages	 	 	45	 
	 
	 	 	 	 	 	 
	ARTICLE XIII INDEMNIFICATION AND RELEASE	 	 	46	 
	 
	 	 	 	 	 	 
	13.1
	 	Employee; Third Person Claims	 	 	46	 
	13.2
	 	Release	 	 	46	 
	 
	 	 	 	 	 	 
	ARTICLE XIV FORCE MAJEURE	 	 	46	 
	 
	 	 	 	 	 	 
	14.1
	 	Force Majeure	 	 	46	 
	14.2
	 	Strikes and Lockouts	 	 	48	 
	14.3
	 	Reference to Expert	 	 	48	 
	 
	 	 	 	 	 	 
	ARTICLE XV INSURANCE	 	 	48	 
	 
	 	 	 	 	 	 
	15.1
	 	Coverages	 	 	48	 
	15.2
	 	Certificates: Proof of Loss	 	 	48	 
	 
	 	 	 	 	 	 
	ARTICLE XVI GENERAL PROVISIONS	 	 	48	 
	 
	 	 	 	 	 	 
	16.1
	 	Relationship of the Parties	 	 	48	 
	16.2
	 	No Third Party Beneficiaries	 	 	49	 
	16.3
	 	Confidentiality	 	 	49	 
	16.4
	 	Governing Law	 	 	49	 
	16.5
	 	Disputes; Jurisdiction	 	 	49	 
	16.6
	 	Effect of Waiver	 	 	51	 
	16.7
	 	Assignment	 	 	51	 
	16.8
	 	Counterparts	 	 	52	 
	16.9
	 	Entire Agreement	 	 	52	 
	16.10
	 	Amendments	 	 	52	 
	16.11
	 	Severability	 	 	52	 
	16.12
	 	Notices	 	 	52	 
	16.13
	 	Authorized Representatives	 	 	55	 
	16.14
	 	Public Announcements	 	 	55	 
	16.15
	 	Power Marketing	 	 	55	 






iii  









 






Exhibits




	 	 	 
	Exhibit A

	 	Annual Oxy CO2 Requirement
	Exhibit B

	 	Measurement and Measurement Equipment
	Exhibit C

	 	CO2 Credits and Costs
	Exhibit D

	 	Insurance
	Exhibit E

	 	Inlet Gas, Residue Gas and CO2 Specifications
	Exhibit F

	 	Delivery Points






iv  









 






GAS TREATING AND CO2 DELIVERY AGREEMENT



THIS GAS TREATING AND CO2 DELIVERY AGREEMENT is entered into as of June 29, 2008 (the
“Effective Date”) by and between SandRidge Exploration and Production, LLC, a Delaware
limited liability company (“SD”), and Oxy USA Inc., a Delaware corporation (“Oxy”).




Recitals




     Pursuant to the Construction Management Agreement, SD and Oxy have made various covenants and
agreements regarding the design, construction and installation of the Century Facilities. The
Century Facilities will be owned by Oxy, and upon transfer of care, custody and control of the
Century Facilities to Oxy, Oxy will commence operating the Century Facilities.



     SD desires to enter into this Agreement in order to effectuate the disposal of CO2 that
results from the treating of SD Gas in the Century Plant and the Legacy Plants.



     SD and Oxy desire to enter into this Agreement to set forth various rights and obligations of
SD and Oxy with regard to the Century Facilities and the delivery and taking of CO2 from the Legacy
Plants.



     Capitalized terms used in these Recitals shall have the meanings ascribed to such terms in
Article I.



     NOW, THEREFORE, in consideration of the mutual covenants and agreements herein and intending
to be legally bound, SD and Oxy agree as follows:



ARTICLE I

DEFINITIONS





     1.1 Definitions. In addition to any terms or expressions defined elsewhere in this
Agreement, the terms or expressions set forth below shall have the following meanings in this
Agreement. All references in this Agreement to any volume or quantity of Gas or CO2 shall be
deemed to refer to the number of MSCF of such Gas or CO2, as applicable, unless a different
measurement metric is used in connection with any such reference to any volume or quantity of
CO2 or Gas.



     “Adjusted Annual Oxy CO2 Percentage” shall have the meaning ascribed to such term in
Section 4.9(b).



     “Adjusted Oxy Allocated Century Plant Fuel and Power Percentage” shall have the
meaning ascribed to such term in Section 3.5(c).



     “Affiliate” shall mean, in relation to any Person, any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such Person. For purposes
of this definition, “control” (including “controlled by” and “under common control with”) as used
with respect to any Person means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise.



 









 





     “Agreement” shall mean this Gas Treating and CO2 Delivery Agreement, including all
exhibits hereto, as the same may be amended from time to time.



     “Annual CO2 Delivery Deficiency” shall mean, as to any applicable Year, the positive
number (if any) resulting from (a) the Annual Oxy CO2 Requirement for such Year minus (b) the sum
(i) of the Delivered SD CO2 for such Year, and (ii) Deemed Delivered CO2 Volumes for such Year.



     “Annual CO2 Take Deficiency” shall mean, as to any applicable Year, the positive
number (if any) resulting from (a) the Annual Oxy CO2 Requirement for such Year, minus (b) the sum
of (i) the Delivered SD CO2 for such Year, and (ii) the Deemed Taken CO2 Volumes for such Year.



     “Annual Oxy Century Plant Per MSCF CO2 Cost” for any Year shall mean (a) the positive
difference between (i) the aggregate for such Year of the SD Century Plant Monthly Gas Fuel and
Power Cost Amount less (ii) the aggregate amounts required to be paid by SD pursuant to Section
3.5(f) for such Year; then divided by (b) the aggregate for such Year of the Century Plant CO2.



     “Annual Oxy CO2 Requirement” shall mean as to each Year, the quantity of CO2 set forth
on Exhibit A for such Year, as adjusted pursuant to Sections 4.5(c), 4.7(a), 4.8(a) and 4.9(e).



     “Applicable Laws” shall mean all statutes, regulations, rules, ordinances, codes,
licenses, permits, orders and approvals of each Governmental Authority including Environmental
Laws, all health, building, fire, safety and other codes, ordinances and requirements and all
applicable standards of the National Board of Fire Underwriters, in each case, as amended, and any
judicial or administrative interpretation thereof, including any judicial order, consent, decree or
judgment; in each case, as applicable to Oxy, SD or the Century Facilities, as the case may be.



     “Authorized Representative” shall mean, with respect to each Party, the individual
appointed by such Party pursuant to Section 16.13 to act on such Party’s behalf with respect to
that Party’s duties and responsibilities under this Agreement.



     “Average Monthly CO2 Concentration of SD Gas” shall mean, for any Month, the weighted
average mole % concentration of CO2 in the SD Gas delivered to the Century Plant for such Month.



     “Average Daily CO2 Amount” shall mean, (a) as to any day during a Month that the
Annual Oxy CO2 Requirement is described on a Month-by-Month basis, the portion of the Annual Oxy
CO2 Requirement applicable to such Month, divided by the number of days in such Month, and (b)
otherwise, the Annual Oxy CO2 Requirement divided by 365.



     “British Thermal Unit” or “Btu” means the quantity of heat required to raise
the temperature of one pound of water from 58.5 degrees Fahrenheit to 59.5 degrees Fahrenheit.



     “Business Day” means a calendar day other than Saturday, Sunday or a legal or bank
holiday in the State of Texas.



 2 









 





     “Carbon Dioxide” or “CO2” shall mean a substance primarily composed of
molecules containing one atom of carbon and two atoms of oxygen and containing at least 95 percent
by volume of such molecules.



     “Century Facilities” shall mean the Century Plant and Pipelines.



     “Century Facilities In-Service Date” shall mean the first day of the first month
following the date that all portions of the Century Facilities have been transferred to Oxy
pursuant to Section 5.2 of the Construction Management Agreement.



     “Century Plant” shall mean the gas treating plant constructed pursuant to the
Construction Management Agreement.



     “Century Plant CO2” shall mean, as to any applicable day, Month or Year, the total
quantity of CO2 measured at the Century Plant CO2 Delivery Point resulting from the treatment of SD
Gas that has been delivered to the Century Plant during such period.



     “Century Plant CO2 Delivery Point” shall mean the location at which CO2 delivered from
the Century Plant into the McCamey CO2 Pipeline is measured (including associated meter(s)).



     “Century Facilities Design Deficiencies” shall mean any design deficiencies, failure
in process, construction deficiencies, or other shortcomings in the Century Facilities that
negatively impact the operation, treating capacity, or efficiency of the Century Plant and that are
identified by Oxy (a) on or before the end of the first full calendar Year of operation following
the Century Facilities In-Service Date, (b) following the end of such first full calendar Year of
operation and the particular design deficiency, failure in process, construction deficiency or
other shortcoming was not discovered during such first full calendar Year of operation because the
actual operation of the Century Plant during such Year did not permit the discovery of the same, or
(c) following the end of such first full calendar Year of operation and are the result of operating
conditions at the Century Plant falling outside the design specifications for the Century Plant;
and in the case of each of clause (a), (b) and (c) above, excluding any such design deficiency,
failure in process, construction deficiency or other shortcoming as to periods from and after (but
not before) the time such design deficiency, failure in process, construction deficiency or other
shortcoming is cured or remedied. Any disputes between the Parties with respect to clause (b) or
(c) above shall be resolved pursuant to Section 16.5(b).



     “Century Plant Monthly Gas Fuel and Power Cost Amount” shall have the meaning ascribed
to such term in Section 3.5(a).



     “Century Plant Net Power Amount” shall mean, as to any applicable Month, the Century
Plant Power Cost less the Century Plant Power Revenue. The Century Plant Net Power Amount for any
Month may be a positive or negative number.



     “Century Plant Power Cost” shall mean, as to any applicable Month, the cost of
electricity used in the operation of the Century Plant that is purchased from third party
electricity suppliers.



 3 









 





     “Century Plant Power Revenue” shall mean, as to any applicable Month, the amount of
money received by the operator of the Century Plant (excluding any set-off amount, if any, in
respect of Century Plant Power Costs) for electricity generated on site at the Century Plant and
placed into the electric transmission grid serving the Century Plant.



     “Century Plant Products” shall mean ethane, propane, iso-butane, normal butane,
iso-pentane, normal pentane, hexanes plus any other liquid hydrocarbon product except for Residue
Gas, or any mixtures thereof, and any incidental methane included in any Century Plant Products,
which are separated, extracted, recovered or condensed, and saved, from Gas treated in the Century
Plant.



     “Century Plant Products Delivery Point” shall mean the location at which Century Plant
Products resulting from the treatment of Gas at the Century Plant are measured (including
associated meter(s)).



     “Century Plant Receipt Point” shall mean the location at which Gas delivered to the
Century Plant is measured (including associated meter(s)).



     “Century Plant Residue Gas Delivery Point” shall mean the location at which Residue
Gas resulting from the treatment of Gas at the Century Plant is measured (including associated
meter(s)).



     “Claims” shall mean any claim, cause of action, demand, proceeding or lawsuit and all
costs, expenses, disbursements and damages incurred in connection therewith including reasonable
attorneys’ fees, disbursements and costs of court.



     “Confidential Information” shall have the meaning ascribed to such term in Section
16.3.



     “Construction Management Agreement” shall mean the Construction Management Agreement
dated as of the Effective Date by and between SD and Oxy, as the same may be amended from time to
time.



     “Conversion Methodology” shall mean, as applicable, (a) 0.65 MCF of CO2 per MCF of
Gas, and (b) 1.5385 MCF of Gas per MCF of CO2.



     “CP Delivery Shortfall Volume” shall have the meaning ascribed to such term in Section
4.6(d).



     “D” means “per day” and is used to quantify a flow rate.



     “Deemed Daily Treatment Capacity” shall mean for any given day following the Selexol
Unit In-Service Date, the lesser of (a) the Designed Inlet Capacity Volume and (b) the Annual Oxy
CO2 Requirement for the Year in which such day occurs (such volumes of CO2 to be converted to SD
Gas volumes using the Conversion Methodology) divided by 365.



     “Deemed Delivered CO2 Volumes” shall mean, as to any applicable Year and without
duplication, the sum of:



 4 









 






	 	(a)	 	the volumes of SD Gas that are Properly Nominated and Made
Available for Delivery by SD at the Century Plant pursuant to Section 3.1 that
Oxy is excused from taking by Force Majeure pursuant to Article XIV (such
volumes of SD Gas to be converted to CO2 volumes using the Conversion
Methodology);
	 
	 	(b)	 	the volumes of SD Gas that are Properly Nominated and Made
Available for Delivery by SD at the Century Plant that Oxy is required to take
pursuant to Section 3.1 that Oxy fails to take for reasons other than Force
Majeure (such volumes of SD Gas to be converted to CO2 volumes using the
Conversion Methodology);
	 
	 	(c)	 	the volumes of Legacy Plant Oxy CO2 that are Properly Nominated
by SD that SD is required to deliver pursuant to Section 4.1 but fails to so
deliver to the extent that SD is excused from such delivery by Force Majeure
pursuant to Article XIV; and
	 
	 	(d)	 	the volume of Legacy Plant Oxy CO2 that are Properly Nominated
and Made Available for Delivery by SD that Oxy is required to take pursuant to
Section 4.1 that Oxy fails to take for any reason.






For clarification purposes, the phrase “without duplication” as used above means that a
particular volume of CO2 or SD Gas can only be counted once for purposes of this definition
even though such volume would be (but for such “without duplication” phrase) covered by more
than one of clauses (a), (b), (c) and (d) of this definition.



     “Deemed Runtime Percentage” shall mean, as to any applicable Month and without
duplication,




	 	(a)	 	the sum of






	 	(i)	 	the volumes of SD Gas that are delivered to the Century
Plant by SD during such Month;
	 
	 	(ii)	 	the volumes of SD Gas that the party acting as operator
of the Century Plant is excused from treating during such Month because of
Force Majeure pursuant to Article XIV;
	 
	 	(iii)	 	the volumes of SD Gas that SD fails to deliver to the
Century Plant during such Month because of Force Majeure impacting SD
pursuant to Article XIV;
	 
	 	(iv)	 	the volumes of SD Gas that the party acting as operator
of the Century Plant is unable to treat during such Month because of Major
Maintenance at the Century Plant;
	 
	 	(v)	 	the volumes of SD Gas that the party acting as operator
of the Century Plant is unable to treat during such Month because of (A)
Century




 5 









 






	 	 	 	Facilities Design Deficiencies, or (B) the construction of the remaining
portions of the Century Facilities during operation of the Century Plant (as
described in Section 5.5 of the Construction Management Agreement);
	 
	 	(vi)	 	the volumes of SD Gas that Oxy (while serving as the
operator of the Century Plant) is unable to treat during such Month because
of any decrease in Century Plant efficiencies caused by (A) Off-Spec Gas
delivered by SD to the Century Plant, or (B) SD Gas delivered by SD to the
Century Plant having a CO2 concentration that reduces the treating capacity
of the Century Plant;
	 
	 	(vii)	 	during any period that Oxy is serving as the operator
of the Century Plant, any other volumes of SD Gas (as to any day, up to the
Designed Inlet Capacity Volume) that SD fails to deliver during such Month;
	 
	 	(viii)	 	during any period that SD is serving as the operator of the Century
Plant, the volumes of SD Gas that SD is unable to treat during such Month
because of any decrease in Century Plant efficiencies caused by (A)
Off-Spec Gas delivered by SD to the Century Plant (limited, however, to the
average decrease in Century Plant efficiencies caused by Off-Spec Gas
delivered by SD to the Century Plant during the three Months preceding the
date SD takes over as operator of the Century Plant); or (B) SD Gas
delivered by SD to the Century Plant having a CO2 concentration that
reduces the treating capacity of the Century Plant (limited, however, to
the average decrease in Century Plant efficiencies caused by SD Gas
delivered by SD to the Century Plant during the three Months preceding the
date SD takes over as operator of the Century Plant having a CO2
concentration that reduces the treating capacity of the Century Plant); and
	 
	 	(ix)	 	during any period SD is serving as the operator of the
Century Plant, any other volumes of SD Gas (as to any day, up to the lesser
of (A) the Designed Inlet Capacity Volume and (B) the average daily volume
of SD Gas covered by clause (vii) above over the three Months preceding
such Month) that SD fails to deliver during such Month; provided, any
reduction in SD Gas volumes that are Properly Nominated and Delivered in
accordance with the Annual Oxy CO2 Requirement shall not count against SD;






	 	(b)	 	divided by the product of (i) the number of days in such Month,
multiplied by (ii) the Designed Inlet Capacity Volume.






For clarification purposes, the phrase “without duplication” as used above means that a
particular volume of SD Gas can only be counted once for purposes of this definition even
though such volume would be (but for such “without duplication” phrase) covered by more than
one of clauses (a)(i) — (vii) of this definition



 6 









 





     “Deemed Taken CO2 Volumes” shall mean, as to any applicable Year and without
duplication, the sum of




	 	(a)	 	the volumes of SD Gas that are Properly Nominated and Made
Available for Delivery by SD pursuant to Section 3.1 that Oxy is excused from
taking by Force Majeure pursuant to Article XIV (such volumes of SD Gas to be
converted to CO2 volumes using the Conversion Methodology);
	 
	 	(b)	 	the Performance Carve-Out Volumes (such volumes of SD Gas to be
converted to CO2 volumes using the Conversion Methodology);
	 
	 	(c)	 	the volumes of CO2 that SD are required to deliver pursuant to
Section 4.1 but fails to deliver for any reason; and
	 
	 	(d)	 	the volumes of CO2 that Oxy are required to take pursuant to
Section 4.1 to the extent that Oxy is excused from such obligation to take by
Force Majeure pursuant to Article XIV.






For clarification purposes, the phrase “without duplication” as used above means that a
particular volume of CO2 or SD Gas can only be counted once for purposes of this definition
even though such volume would be (but for such “without duplication” phrase) covered by more
than one of clauses (a), (b), (c) and (d) of this definition.



     “Deficient Party” shall have the meaning ascribed to such term in Section 4.9(a).



     “Delivered SD CO2” shall mean, for any applicable day or Year, the sum of Century
Plant CO2 and Legacy Plant Oxy CO2 delivered by SD to Oxy during such period pursuant to this
Agreement.



     “Denver City Facilities” shall mean those facilities owned by Oxy or third parties
located in Denver City, Texas and used for the collection, distribution and transportation of CO2
(whether owned by Oxy or third parties).



     “Designed Inlet Capacity Volume” shall mean (a) commencing upon the Selexol Unit
In-Service Date and continuing until the Train 1 In-Service Date, 100 MMSCFD, (b) commencing on the
Train 1 In-Service Date until the Century Facilities In-Service Date, 400 MMSCFD, and (c)
commencing upon the Century Facilities In-Service Date and continuing thereafter, 675 MMSCFD.



     “Effective Date” shall have the meaning ascribed to such a term in the Preamble to
this Agreement.



     “Environmental Law” shall mean any and all Applicable Laws pertaining to pollution,
protection of human health or the environment, or workplace health and safety, including the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq.; the Federal Water Pollution
Control Act, 33 U.S.C. § 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic Substances Control



 7 









 







Act, 15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act, 33 U.S.C. § 2701 et seq.; the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq.; the Safe Drinking
Water Act, 42 U.S.C. §§ 300f through 300j; the Occupational Safety and Health Act, 29 U.S.C. § 651
et seq.; and all similar Applicable Laws of any Governmental Authority having jurisdiction over the
Century Facilities or their respective operations, and all amendments to such Applicable Laws and
all regulations implementing any of the foregoing.



     “Executive Officer” shall mean, with respect to Oxy, any officer of Occidental
Petroleum Corporation with the title of vice president or any title senior to vice president, and
with respect to SD, any officer of SD with the title of executive vice president or any title
senior to executive vice president.



     “Final Monthly SD Gas Delivery Nomination” shall have the meaning ascribed to such
term in Section 3.4(b).



     “Final Legacy Plant CO2 Nomination” shall have the meaning ascribed to such
term in Section 4.4(b).



     “Final Three Year Monthly Delivery Schedule” shall have the meaning ascribed to such
term in Section 4.5(b).



     “FM Assets” shall have the meaning ascribed to such term in Section 14.1(b)(i).



     “Force Majeure” shall have the meaning ascribed to such term in Section 14.1.



     “Gas” shall mean all hydrocarbon and non-hydrocarbon substances produced from gas
and/or oil wells in a gaseous state.



     “Governmental Authority” shall mean any governmental authority, agency, department,
commission, bureau, board, instrumentality, court or quasi-governmental authority of the U. S., or
any other state that has or obtains jurisdiction over the matter in question, or any political
subdivision thereof.



     “Grey Ranch CO2 Pipeline” shall mean the pipeline from the Grey Ranch Plant to the
Mitchell Interconnect, and all facilities and equipment relating thereto constructed pursuant to
the Construction Management Agreement, which pipeline shall be sized to accommodate all of the CO2
output of the both the Grey Ranch Plant and the Pikes Peak Plant (both operating at full capacity).



     “Grey Ranch Plant” shall mean the gas treating plant currently owned by SD and located
in Pecos County, Texas.



     “HR Liabilities” shall have the meaning ascribed to such term in Section 3.3(k)(iii).



     “IF Waha” shall mean, for any applicable Month, the price per MMBtu of natural gas
stated in U.S. Dollars, published under the heading “Market Center Spot-Gas Prices ($/MMBtu): West
Texas: Waha: Index” in the issue of Inside FERC that reports prices effective on the first day of
such Month.



 8 









 







     “Indemnified Parties” shall have the meaning ascribed to such term in Section 13.1.



     “Indemnifying Party” shall have the meaning ascribed to such term in Section 13.1.



     “Labor Difficulties” shall mean strikes and other forms of organized actions by labor
or other personnel to stop or significantly reduce or slow down work or production or to withdraw
or withhold labor or services.



     “Legacy Opex” shall have meaning ascribed to such term in Section 4.6(a).



     “Legacy Plant CO2 Nomination” shall have the meaning ascribed to such term in Section
4.4(a) and in the form below:



	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Quantity of	 	 
	 	 	 	 	Quantity of SD	 	Legacy Plant Oxy	 	Total Quantity
	Delivered to Oxy	 	Legacy Plant	 	Equity CO2	 	CO2	 	of CO2
	by SD	 	Delivery Point	 	(MMFSCD)	 	(MMFSCD)	 	(MMFSCD)
	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 





     “Legacy Plant Delivery Points” shall mean the points of delivery of Legacy Plant Oxy
CO2 and SD Equity CO2 (and associated measurement meter(s)) (a) from the Grey Ranch Plant into the
Grey Ranch CO2 Pipeline, (b) from the Mitchell Plant into the Mitchell Interconnect, (c) the
McCamey Delivery Point and (d) from the Pikes Peak Plant into the Grey Ranch CO2 Pipeline. Such
delivery points are generally located at or near the points shown on Exhibit F.



     “Legacy Plant Oxy CO2” shall mean, as to any applicable Month or Year, the volumes of
CO2 resulting from the treatment of Gas at the Legacy Plants that are Properly Nominated and
Delivered by SD to Oxy at the specified Legacy Plant Delivery Points during such period.



     “Legacy Plants” shall mean the Pikes Peak Plant, the Grey Ranch Plant and the Mitchell
Plant and each of their associated compressor facilities.



     “LIBOR” shall mean the one (1) month interest rate appearing on Reuters Screen LIBOR01
Page (or on any successor or substitute page of such service, or any successor to or substitute for
such service, providing interest rate quotations comparable to those currently provided on such
page of such service) at approximately 11:00 a.m., London time.



     “Loss and Unaccounted For” means, with respect to hydrocarbons and CO2, volumes that
are released into the atmosphere or otherwise removed from the system and not made available as
Residue Gas, Plant Fuel, Century Plant Products or Century Plant CO2 for delivery at the respective
delivery points set forth herein. Loss shall be determined by the operator of the Century Plant and
may be measured directly, such as with a vent or flare meter, or indirectly measured, such as
through subtraction of volumes as measured at Century Plant inlet meters



 9 









 







from Century Plant outlet meter on a per MMBtu basis, not including an allowance for
reasonable measurement errors as determined by the operator of the Century Plant.



     “M” means one thousand.



     “Major Maintenance” shall mean maintenance activities at the Century Plant that
require a reduction in plant throughput or a shutdown of all or part of a plant process. For
clarification purpose, Major Maintenance does not include maintenance on spared (n+1) rotating
equipment.



     “MM” means one million.



     “McCamey CO2 Pipeline” shall mean the 24-inch in diameter pipeline from the Century
Plant to the McCamey Pump Station and all facilities and equipment relating thereto constructed
pursuant to the Construction Management Agreement.



     “McCamey Delivery Point” shall mean the interconnection between the Val Verde Pipeline
and the Oxy CO2 Pipelines located near McCamey, Texas.



     “McCamey Pump Station” shall mean the booster pumps operated by SD and located near
McCamey, Texas.



     “Methane Standard” shall have the meaning ascribed to such term in Section 3.3(b).



     “MSCF” shall mean 1,000 standard cubic feet of Gas or CO2 (as applicable) at a
standard pressure base of 14.73 pounds per square inch absolute dry and standard temperature base
of 60 degrees Fahrenheit.



     “Mitchell Interconnect” shall mean the interconnection point between the Grey Ranch
Pipeline and the McCamey CO2 Pipeline which will be located at or in the vicinity of the Mitchell
Plant.



     “Mitchell Plant” shall mean the gas treating plant currently operated by Anadarko
Petroleum Corporation and located 14 miles South and 23 miles East of Fort Stockton, Texas.



     “MMBtu” shall mean 1,000,000 Btus.



     “MMSCF” shall mean 1,000,000 standard cubic feet of Gas or CO2 (as applicable) at a
standard pressure base of 14.73 pounds per square inch absolute dry and standard temperature base
of 60 degrees Fahrenheit.



     “Month” shall mean the period commencing at 00:01 o’clock a.m. Central Time, on the
first day of a calendar month and ending at 00:01 o’clock a.m., Central Time, on the first day of
the next succeeding calendar month.



     “Monthly SD Equity CO2 Redelivery Schedule” shall have the meaning ascribed to such
term in Section 4.4(c).



 10 









 





     “Monthly SD Gas Delivery Nomination” shall have the meaning ascribed to such term in
Section 3.4(a).



     “NYMEX WTI” shall mean, for any applicable Month, the average of the daily closing
prices per barrel of West Texas Intermediate light sweet crude oil on the New York Mercantile
Exchange, stated in U.S. Dollars, as made public by the New York Mercantile Exchange for such
Month.



     “Off-Spec CO2” shall have the meaning ascribed to such term in Section 4.3(b)(i).



     “Off-Spec Gas” shall mean Gas that is not consistent with the specification set forth
in the part of Exhibit E labeled “Inlet Gas”.



     “Original Oxy Requirement” shall mean the treating requirement of Oxy pursuant to
Section 3.1 and the take requirement of Oxy pursuant to Section 4.1(b), in each case prior to any
adjustment pursuant to Sections 4.5(c), 4.7(a), 4.8(a) and 4.9.



     “Original SD Requirement” shall mean the delivery requirement of SD pursuant to
Section 4.1(a) prior to any adjustment pursuant to Sections 4.5(c), 4.7(a), 4.8(a) and 4.9.



     “Outstanding Amount” shall have the meaning ascribed to such term in Section 10.6.



     “Oxy” shall have the meaning ascribed to such term in the preamble to this Agreement.



     “Oxy Allocated Century Plant Fuel and Power Percentage” shall mean 43% as such
percentage is adjusted Monthly after the Selexol Unit In-Service Date by the following equation and
subject to the minimum and cap described below:



	 	 	 	 	 
	     ((NYMEX WTI/IF Waha) divided by ($72.35/$6.261)) times 0.43

	 	=
	 	Oxy Allocated Century
	 

	 	 	 	Plant Fuel and Power
	 

	 	 	 	Percentage






     As adjusted pursuant to the preceding equation, such percentage shall be capped at 75% and
shall not be reduced below 25%.



     “Oxy Banked CO2” shall mean, in respect of any Year (or partial Year) from and after
the earlier of (i) January 1, 2011, or (ii) the Train 1 In-Service Date, the positive difference
(if any) between:




     (a) the sum of volume of CO2 (on a MSCF basis) that (i) is delivered by SD from the
Legacy Plants and taken by Oxy pursuant to this Agreement, and (ii) results from the
treatment at the Century Plant of SD Gas that is delivered by SD and taken by Oxy pursuant
to this Agreement, less (b) the Annual Oxy CO2 Requirement.



     “Oxy CO2 Pipelines” shall have the meaning ascribed to such term in Section 6.2.



 11 









 





     “Oxy CO2 Redelivery Points” shall mean those custody meter transfer points on Oxy CO2
Pipelines where SD takes delivery of SD Equity CO2.



     “Oxy Reallocated Volumes” shall have the meaning ascribed to such term in Section
4.8(a).



     “Party” and “Parties” shall mean SD and Oxy and their respective permitted
successors and assigns.



     “Per MSCF CO2 Cost” shall have the meaning ascribed to such term in Section 4.6(a).



     “Per MSCF Weighted Average CO2 Cost” shall have the meaning ascribed to such term in
Section 4.6(a).



     “Performance Carve-Out Volumes” shall mean, as to any applicable Year, the sum of the
volumes included in sub clauses (ii) through (ix) of clause (a) of the definition of the term
“Deemed Runtime Percentage” for the same Year.



     “Person” shall mean any natural person, corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association, joint stock company,
government or any agency or political subdivision thereof or any other entity.



     “Pikes Peak Plant” shall mean the gas treating plant currently owned by SD and located
in Pecos County, Texas.



     “Pipelines” shall mean the McCamey CO2 Pipeline and the Grey Ranch CO2 Pipeline.



     “Plant Fuel” shall mean, as to any applicable Month, the MMBtu volume of metered Gas
or other hydrocarbons used or consumed as fuel in the operation (including compression) of the
Century Plant or the Legacy Plants, as applicable.



     “Properly Nominated” shall mean (a) with respect to SD Gas, quantities of SD Gas
properly nominated by SD in accordance with Article III of this Agreement, and (b) with respect to
Legacy Plant Oxy CO2, quantities of Legacy Plant Oxy CO2 properly nominated by SD in accordance
with Article IV of this Agreement.



     “Properly Nominate and Deliver”, and derivatives therof, shall mean (a) with respect
to SD Gas, quantities of SD Gas properly nominated and delivered by SD to Oxy in accordance with
Article III of this Agreement, and (b) with respect to Legacy Plant Oxy CO2, quantities of Legacy
Plant Oxy CO2 properly nominated and delivered by SD to Oxy in accordance with Article IV of this
Agreement.



     “Properly Nominate and Make Available for Delivery” shall mean (a) with respect to SD
Gas, quantities of SD Gas properly nominated by SD in accordance with Article III of this Agreement
that SD makes available for delivery to Oxy pursuant to the terms of this Agreement but that Oxy
fails to take, and (b) with respect to Legacy Plant Oxy CO2, quantities of Legacy Plant Oxy CO2
properly nominated by SD in accordance with Article III of this Agreement that



 12 









 







SD makes available for delivery to Oxy pursuant to the terms of this Agreement but that Oxy
fails to take.



     “Reasonable and Prudent Person” shall mean a Person seeking in good faith and acting
reasonably (taking into account cost and commercial considerations) to perform its contractual
obligations and, in so doing and in the general conduct of such undertaking, exercising that degree
of skill, diligence, prudence and foresight which would reasonably and ordinarily be expected from
a skilled and experienced Person engaged in the same type of undertaking under the same or similar
circumstances and conditions, and the expression the “Standard of a Reasonable and Prudent Person”
shall be construed accordingly.



     “Released Parties” shall have the meaning ascribed to such term in Section 13.3.



     “Releasing Party” shall have the meaning ascribed to such term in Section 13.3.



     “Residue Gas” shall mean hydrocarbon gas (primarily methane) resulting from the
treatment at the Century Plant of SD Gas for the removal of Century Plant Products and CO2
therefrom and delivered to the Century Plant Residue Gas Delivery Point.



     “Royalty Obligations” shall mean all monetary and other obligations owed to the owners
of any royalty interest in SD Gas, Residue Gas, Century Plant Products, CO2 resulting from the
treatment of SD Gas, or CO2 delivered by SD to Oxy hereunder.



     “SD” shall have the meaning ascribed to such term in the preamble to this Agreement.



     “SD Banked CO2” shall mean, in respect of any Year (or partial Year),




     (a) any volume of CO2 (on an MSCF basis) delivered by SD and taken by Oxy prior to the
earlier of (i) January 1, 2011, and (ii) the Train 1 In-Service Date, and




     (b) from and after the earlier of (i) January 1, 2011, and (ii) the Train 1 In-Service
Date, the positive difference (if any) between




     (A) the sum of the volume of CO2 (on a MSCF basis) that (1) is delivered by SD
from the Legacy Plants and taken by Oxy pursuant to this Agreement, and (2) results
from the treatment at the Century Plant of SD Gas that is delivered by SD to Oxy
pursuant to this Agreement, less




     (B) the Annual Oxy CO2 Requirement.



     “SD Century Plant Monthly Gas Fuel and Power Cost Amount” shall have the meaning
ascribed to such term in Section 3.5(b).



     “SD Equity CO2” shall mean, as to any applicable Month or Year, volumes of CO2
resulting from the treatment of Gas at the Legacy Plants other than Legacy Plant Oxy CO2.



     “SD Gas” shall mean Gas owned by SD or Gas as to which SD or an Affiliate of SD has
the right to market or treat (as applicable) the same.



 13 









 





     “SD Reallocated Volumes” shall have the meaning ascribed to such term in Section
4.7(a).



     “SD Self Retention Amount” shall have the meaning ascribed to such term in Section
3.3(k)(v).



     “SD Upstream Compressor Facilities” shall mean any compressor station servicing the
Legacy Plants or the Century Plant that either (a) is greater than 6,000 horsepower or (b) has a
throughput capacity of greater than 70 MMSCFD.



     “Section 4.9 Notice” shall have the meaning ascribed to such term in Section 4.9(a).



     “Section 4.9 Payment” shall have the meaning ascribed to such term in Section 4.9(c).



     “Selexol Unit In-Service Date” shall mean the first day of the first month following
the date on which care, custody and control of the Selexol Unit (as defined in the Construction
Management Agreement) is transferred to Oxy pursuant to Section 5.2 of the Construction Management
Agreement.



     “Seminole Pipeline” shall have the meaning ascribed to such term in Section 6.1.



     “Seminole Pipeline In Service Date” shall have the meaning ascribed to such term in
Section 6.1.



     “Standard Cubic Feet” or “SCF” means the quantity of gaseous material which,
at a temperature of 60°F and a pressure of 14.73 psia occupies a volume of one cubic foot.



     “Stipulated MSCF Amount” shall mean (a) as to Oxy, $0.70 per MSCF, and (b) as to SD,
$0.70 per MSCF (i) as to any Year in which the weighted average of the Average Monthly CO2
Concentration of SD Gas for such Year is less than 60 mole%, (ii) for the purpose of calculating
the Section 4.9 Payment, and (iii) for the purpose of calculating the amount (if any) due by SD
pursuant to Section 4.7(a) for the final Year of the Term; and $0.25 per MSCF as to any Year in
which the weighted average of the Average Monthly CO2 Concentration of SD Gas for such Year is
equal to or greater than 60 mole%.



     “Subject CO2” shall have the meaning ascribed to such term in Section 6.5.



     “Taxes” mean any and all taxes, levies or other like assessments, including but not
limited to income tax, franchise tax , profits tax, windfall profits tax, surtax, gross receipts
tax, capital gains tax, remittance tax, withholding tax, sales tax, use tax, value added tax, goods
and services tax, presumptive tax, net worth tax, special contribution, production tax, pipeline
transportation tax, severance tax, excise tax, ad valorem tax, property tax (real, personal or
intangible), inventory tax, transfer tax, premium tax, environmental tax (including taxes under
Section 59A of the U.S. Internal Revenue Code), customs duty, stamp tax or duty, capital stock tax,
franchise tax, margin tax, occupation tax, payroll tax, employment tax, social security tax,
unemployment tax, disability tax, alternative or add-on minimum tax, estimated tax, and any similar
tax or assessment imposed by any Governmental Authority or other taxing authority, together with
any interest, fine or penalty, or addition thereto, whether disputed or not.



 14 









 





     “Term” shall have the meaning ascribed to such term in Article II.



     “Three Year Monthly Delivery Schedule” shall have the meaning ascribed to such term in
Section 4.5(a).



     “Train 1 In-Service Date” shall mean the first day of the first month following the
date on which care, custody and control of Train 1 (as defined in the Construction Management
Agreement) is transferred to Oxy pursuant to Section 5.2 of the Construction Management Agreement.



     “Transfer” including the correlative terms “Transferring” or “Transferred” shall mean
any direct or indirect transfer, assignment, sale, gift, pledge, hypothecation or other
encumbrance, or any other disposition (whether voluntary, involuntary or by operation of law).



     “Transfer Date” shall have the meaning ascribed to such term in Section 3.3(k)(ii).



     “Transferred Employees” shall have the meaning ascribed to such term in Section
3.3(k)(ii).



     “TSCF” shall mean 1,000,000,000,000 standard cubic feet of Gas or CO2 (as applicable)
at a standard pressure base of 14.73 pounds per square inch absolute dry and standard temperature
base of 60 degrees Fahrenheit.



     “U.S.” shall mean United States.



     “Val Verde Pipeline” shall mean the 10-inch in diameter CO2 pipeline owned by SD or
its Affiliates running from the gas treating plant owned by Oxy or its Affiliates (commonly
referred to as the “Terrell Plant”) to the McCamey Pump Station, including lateral pipelines owned
by SD or its Affiliates that provide metering facilities and interconnection with (i) Oxy CO2
Pipelines located at or near the McCamey Pump Station and (ii) the Pecos and Canyon Reef Carrier
pipelines at or near the McCamey Pump Station operated by Kinder Morgan, Inc. or its Affiliates.



     “Work Site Employees” shall have the meaning ascribed to such term in Section
3.3(j)(ii).



     “Year” shall mean the calendar year (or partial calendar year) commencing on the
January 1, 2009 and ending on December 31 of such calendar year, and each succeeding full calendar
year (January 1 through December 31) occurring during the Term.




     1.2 General Interpretative Principles. For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:




	 	(a)	 	The use of the singular form includes the plural, and the use
of the plural form includes the singular.
	 
	 	(b)	 	The use of any gender herein shall be deemed to include the
other gender.




 15 









 






	 	(c)	 	The captions and headings used in this Agreement are inserted
for convenience only and do not constitute part of this Agreement and are in no
way intended to describe, interpret, define or limit the scope or content of
this Agreement or any provision of this Agreement.
	 
	 	(d)	 	The term “include” or “including” and similar phrases shall
mean including without limitation.
	 
	 	(e)	 	References to “Articles” and “Sections” refer to Articles and
Sections of this Agreement.
	 
	 	(f)	 	Each reference to an “Article” of this Agreement shall include
all Sections of such Article. Similarly, each reference to a “Section” shall
include all subsections of such Section.
	 
	 	(g)	 	The terms “hereof”, “herein”, “hereto” and similar words refer
to this entire Agreement and not any particular Article, Section, Exhibit or
any other subdivision of this Agreement.
	 
	 	(h)	 	References to “this Agreement” (including any Exhibit hereto)
or any other agreement or documents shall be construed as a reference to such
agreement or document as the same may be amended, modified, supplemented or
restated and shall include a reference to any agreement or document which
amends, modifies, supplements or restates, or is entered into, made or given
pursuant to or in accordance with its terms.
	 
	 	(i)	 	Reference to any Person shall be construed as a reference to
such Person’s successors and permitted assigns.





ARTICLE II

TERM




     This Agreement shall become effective as of the Effective Date and shall continue until the
end of the Year during which the thirtieth (30th) anniversary of the Selexol Unit In-Service Date
occurs (the “Term”).



ARTICLE III

TREATMENT COMMITMENTS





     3.1 Treating Requirement. Subject to the terms of this Agreement including Section
4.12, from and after the Selexol Unit In-Service Date and thereafter during the Term, Oxy shall
treat at the Century Plant (subject to and in accordance with Sections 3.2 and 3.3) any SD Gas
that is Properly Nominated and Delivered for any day during the Term up to the Deemed Daily
Treatment Capacity of the Century Plant less any Performance Carve-Out Volumes applicable to
such day.



 16 









 






     3.2 SD Gas.




	 	(a)	 	SD shall use commercially reasonable efforts to cause SD Gas
delivered to the Century Plant to meet specification as shown on Exhibit
E; provided, for the first full calendar Year of operation following the
Century Plant In-Service Date, SD shall cause SD Gas delivered to the Century
Plant to meet specification as shown on Exhibit E and to have a CO2
concentration of no less than 62% and no more than 68% (and SD shall use
commercially reasonable efforts to cause the average CO2 concentration over a
reasonable testing period during such Year established by Oxy to equal 65%).
	 
	 	(b)	 	Off-Spec Gas.






	 	(i)	 	Oxy shall use commercially reasonable efforts
to accept SD Off-Spec Gas; provided, Oxy shall have no obligation to
accept such Off-Spec Gas if the processing of such Off-Spec Gas (A)
will result in damage to the Century Facilities, or (B) will not,
following treatment in the normal course at the Century Plant, result
in Residue Gas consistent with the specifications set forth in the part
of Exhibit E labeled “Residue Gas” or CO2 consistent with the
specifications set forth in the part of Exhibit E labeled
“CO2”. Any CO2 resulting from the treatment of any Off-Spec Gas
accepted by Oxy pursuant to this Section 3.2(b) shall be deemed to have
been Properly Nominated and Delivered by SD to Oxy for purposes of this
Agreement.
	 
	 	(ii)	 	To the extent that Oxy agrees to accept
Off-Spec Gas pursuant to Section 3.2(b)(i), any incremental operating
fuel and operating costs associated with the treatment and processing
of such Off-Spec Gas shall be calculated pursuant to Section 3.5, shall
be for the account of SD, and SD shall pay such amounts pursuant to the
provisions of Section 10.3 and 10.4. To the extent that Oxy determines
that the treatment of any such Off-Spec Gas will require additional
capital expenditure at the Century Plant, Oxy will not be required to
use commercially reasonable efforts to accept such Off-Spec Gas except
to the extent that (A) SD agrees to pay for such capital improvements
on a payment schedule acceptable to Oxy; (B) the Parties agree on an
allocation of the additional operating costs (if any) associated with
such capital improvement between the Parties; and (C) to the extent
such capital improvement will, in the reasonable judgment of Oxy,
negatively impact the performance obligations of Oxy pursuant to this
Agreement, the Parties agree on an equitable adjustment to such
performance obligations.




 17 









 






	 	(iii)	 	SD shall give Oxy reasonable prior written
notice of any Off-Spec Gas that SD anticipates wanting to deliver to
the Century Plant. Any Off-Spec Gas not explicitly accepted in writing
for delivery by Oxy shall not be deemed to have been delivered to Oxy
for purposes of Sections 3.1 or 4.1, and SD shall be liable for any
damage to the Century Plant caused by such SD Gas not explicitly
accepted by Oxy.






     3.3 Treating.




	 	(a)	 	Upon receipt of SD Gas at the Century Plant Receipt Point, Oxy
shall treat such SD Gas in the Century Plant, and following such treating Oxy
shall deliver to SD the Century Plant Products and Residue Gas resulting from
such treating at the Century Plant Products Delivery Point and the Century
Plant Residue Gas Delivery Point, respectively. CO2 resulting from the
treating of SD Gas shall be retained by Oxy. Title to such CO2 shall vest in
Oxy at the time the CO2 is separated from the SD Gas stream, and such CO2 shall
be deemed to be properly taken by Oxy pursuant to Section 4.1.
	 
	 	(b)	 	Oxy shall use commercially reasonable efforts to have the
Century Facilities operational 24 hours per day, seven days per week, subject
in all events to the provisions of the “Deemed Runtime Percentage” definition.
Scheduled and unscheduled maintenance shall be conducted in a manner that
limits the amount of time the Century Facilities are not fully operational to
the least amount of time practicable. Oxy shall use commercially reasonable
efforts to maintain and operate the Century Facilities in accordance with
Applicable Laws and standard industry practices. Additionally, Oxy shall use
commercially reasonable efforts to operate the Century Plant in the manner
required to meet the plant design methane concentration in the CO2. In
addition, Oxy’s obligations to take and treat SD Gas pursuant to this Article
III shall be reduced to reflect the full extent of the Deemed Runtime
Percentage. Except as provided in the following sentence, if the Party
operating the Century Plant desires to contract for electricity on an
interruptible basis, then such action shall be subject to the mutual agreement
of the Parties. If Oxy desires to contract for electricity for the Century
Plant on a interruptible basis during any period of the Term from and after the
time at which Oxy has received 3.5 TSCF of CO2 from SD pursuant to the terms of
this Agreement, Oxy shall notify SD thereof and SD shall have the right to
elect (by notice given to Oxy within ten (10) days after receipt of such notice
from Oxy) to have electricity during such period provided on a firm basis, in
which event SD shall bear and pay the difference between the cost of such
electricity on a firm basis as compared to such interruptible basis.
	 
	 	(c)	 	(i) If, during any Month, the average methane component of the
CO2 resulting from the treatment of SD Gas at the Century Plant exceeds the
greater of (i) 1.0 mole% or (ii) the mole percentage composition




 18 









 






	 	 	 	demonstrated through performance testing of the Century Plant (the
“Methane Standard”), then Oxy shall pay to SD for the calculated
Btus in excess of the Methane Standard an amount equal to the IF Waha value
of such Btus.






(ii) If, during any Month, the difference of (A) the measured Gas streams in
Btus from the process to the plant vent or flare, less (B) losses resulting
from Century Plant Design Deficiencies and upsets not caused by the operator
(including Force Majeure), exceeds (C) 0.25 mole% of the SD Gas Btus, then
Oxy shall pay SD for the calculated Btus in excess of 0.25 mole% of the SD
Gas Btus an amount equal to the IF Waha value of such Btus.




(iii) If, in the opinion of non-operator, the operator is not prudently
managing plant Loss and Unaccounted For, then the Parties agree to refer the
dispute to resolution in accordance with Section 16.5(b).




	 	(d)	 	Oxy shall initially operate the Century Plant, and shall
continue to operate (or cause the operation of) the Century Plant for the
entire Term except as set forth in this Section 3.3. During any time that Oxy
is acting as operator of the Century Plant, Oxy will have the right to replace
any management, supervisory and other employees, as Oxy determines in its
reasonable discretion.
	 
	 	(e)	 	The Parties shall establish an operating committee, with two
representatives from each Party, to meet semi-annually (commencing on the
Selexol Unit In-Service Date), or more frequently as either Party may
reasonably request, to review performance of the Century Plant, and to identify
opportunities for operational enhancement (including capital improvements) at
the Century Plant. Minutes of each operating committee meeting shall be
prepared and distributed by the Party then acting as operator of the Century
Plant. The operating committee is a consultative body only, and shall have no
authority to bind the Parties.
	 
	 	(f)	 	SD may, by written notice to Oxy, notify Oxy that SD is
considering invoking its rights to become operator of the Century Plant
pursuant to Section 3.3(h) if (i) from and after the end of the second full
calendar Year of operation following the Century Facilities In-Service Date,
the average Deemed Runtime Percentage for any three (3) consecutive Month
period is less than 80%, (ii) from and after the end of the third full calendar
Year of operation following the Century Facilities In-Service Date, the average
Deemed Runtime Percentage for any three (3) consecutive Month period is less
than 84%, (iii) from and after the end of the fourth full calendar Year of
operation following the Century Facilities In-Service Date, the average Deemed
Runtime Percentage for any three (3) consecutive Month period is less than 87%,
or (iv) from and after the end of the fifth full calendar Year of operation
following the Century Facilities In-Service




 19 









 






	 	 	 	Date, the average Deemed Runtime Percentage for any three (3) consecutive
Month period is less than 90%.






	 	(g)	 	From and after the sixth full calendar Year of operation following the Century Plant In-Service Date, if for any rolling two (2) Year
period commencing with the fifth full calendar Year of operation following the
Century Plant In-Service Date, the Deemed Runtime Percentage for such two (2)
Year period is less than 96%, then SD, by written notice to Oxy, may require
Oxy to appoint SD as operator of the Century Plant, subject to the provisions
of Section 3.3(j).
	 
	 	(h)	 	Upon delivery of a notice pursuant to Sections 3.3(f) or
(i)(2), the Parties shall meet promptly to appoint an independent expert to
consult with the Parties to develop an action plan to be undertaken by the
Party acting as operator to improve Deemed Runtime Percentage to an acceptable
level (as determined by the Parties). The action plan will include targeted
completion dates for such actions. If the Party acting as operator does not
complete the required actions on or before the agreed schedule, or the Deemed
Runtime Percentage does not improve to 96% as measured over the ninety (90) day
period commencing with completion of the action plan, the non-operator Party
will have the right (i) if SD is the non-operator Party, to require Oxy to
appoint SD as operator of the Century Plant (such appointment to be subject to
the provisions of Section 3.3(j)), or (ii) if Oxy is the non-operator Party, to
terminate SD’s appointment as operator.
	 
	 	(i)	 	Following the appointment of a new operator pursuant to Section
3.3 (g), 3.3 (h), 3.3(i)(3) or 3.3(k)(iv):






	 	1.	 	the operating committee shall continue to meet
to address operational issues at the Century Plant;
	 
	 	2.	 	the non-operating Party may, by written notice
to the other Party, trigger the provisions of Section 3.3(h) if (i)
from and after the second anniversary of the appointment of the
operator, the average Deemed Runtime Percentage for any three (3)
consecutive Month period is less than 80%, (ii) from and after the
third anniversary of the appointment of the operator, the average
Deemed Runtime Percentage for any three (3) consecutive Month period is
less than 84%, (iii) from and after the fourth anniversary of the
appointment of the operator, the average Deemed Runtime Percentage for
any three (3) consecutive Month period is less than 87%, or (iv) from
and after the fifth anniversary of the appointment of the operator, the
average Deemed Runtime Percentage for any three (3) consecutive Month
period is less than 90%; and




 20 









 






	 	3.	 	from and after the third anniversary of the
appointment of the new operator pursuant to Section 3.3(g), 3.3(h) or
3.3(i)(3), if for any rolling two (2) Year period following such
appointment, the Deemed Runtime Percentage for such two (2) Year period
is less than 96%, then the non-operator Party may, by written notice to
the other Party, (i) if SD is the non-operator Party, require Oxy to
appoint SD as operator of the Century Plant (such appointment to be
subject to the provisions of Section 3.3(j)), or (ii) if Oxy is the
non-operator Party, to terminate SD’s appointment as operator.






	 	(j)	 	The following provisions shall apply in the event SD exercises
its right to cause Oxy to appoint SD as operator of the Century Plant:






	 	(i)	 	Oxy will continue to bear the operating expense
of the Century Plant, subject to Section 3.5.
	 
	 	(ii)	 	SD shall be responsible for general direction,
supervision and control of employees working at the Century Plant (the
“Work Site Employees”).
	 
	 	(iii)	 	Oxy shall retain the authority to hire,
terminate, discipline and reassign all Work Site Employees; provided,
with Oxy’s consent, which shall not be unreasonably withheld, SD may
replace any management, supervisory and other Work Site Employees and
Oxy will have the right to approve the terms of employment.
	 
	 	(iv)	 	Oxy shall be responsible for the payment of
wages to the Work Site Employees, for payment of payroll taxes and for
tax withholdings and other lawful and authorized deductions from pay
with respect to the Work Site Employees.
	 
	 	(v)	 	SD and Oxy shall promptly notify the other of
all complaints, allegations or incidents of any discrimination or
harassment, gross misconduct, workplace safety violations, labor
grievances or union organizational activity. The Parties agree to
cooperate with and assist each other in the investigation of any such
complaints, allegations or incidents.
	 
	 	(vi)	 	SD shall use commercially reasonably efforts to
maintain a safe working environment and provide proper safety training
in compliance with state and Federal OSHA Standards.
	 
	 	(vii)	 	SD shall indemnify, hold harmless, protect and
defend Oxy and its Affiliates from and against any and all Claims (A)
asserted by Work Site Employees arising out of SD’s direction,
supervision and control of Work Site Employees other than Claims for
bodily injury to or death of any Work Site Employee, except those
involving claims of gross negligence; (B) asserted by Persons other




 21 









 






	 	 	 	than Oxy and its Affiliates arising out of any failure by SD to
comply with the provisions of Section 3.3(j)(vi) or otherwise arising
out of the operation of the Century Plant by SD (excluding Claims for
bodily injury to or death of any Work Site Employee, except those
involving claims of gross negligence); and (C) any environmental
Claim in connection with the operation of the Century Plant by SD.
	 
	 	(viii)	 	Oxy shall add SD as an alternate employer under Oxy’s workers’
compensation insurance policy covering the Work Site Employees and
shall notify the Work Site Employees of such coverage. For purposes of
Section 13.1 of this Agreement, the Work Site Employees will be
considered employees of Oxy until such time (if ever) they become a
Transferred Employee, and Transferred Employees will be considered
employees of SD for purposes of Section 13.1 from and after the date
they become a Transferred Employee.






	 	(k)	 	(i) If SD is appointed operator of the Century Plant and as of
the first anniversary of such appointment SD continues to serve as the operator
of the Century Plant, then within 30 days following such first anniversary date
SD shall notify Oxy whether SD desires to continue to serve (or not serve) as
the operator of the Century Plant. If SD notifies Oxy that it desires to
continue to serve as the operator of the Century Plant, then within 30 days of
such notice SD (A) may make employment offers to those employees of Oxy working
at the Century Plant designated by SD and (B) shall obtain the all risk
physical damage insurance coverage for the Century Plant described in Section
IID of Exhibit D.






(ii) As to those employees who accept SD’s employment offer
(“Transferred Employees”), from and after the date such employees
become Transferred Employees (the “Transfer Date”) SD shall provide
to such employees (while they continue to be employed by SD) with employee
benefit plans that are provided by SD to its similarly situated employees,
and SD shall cause such employees to be credited with service with SD and
its Affiliates under SD’s employee benefit plans for purposes of
eligibility, vesting and seniority.




(iii) Oxy shall be responsible for and discharge all liabilities,
obligations, costs, claims and demands, including, but not limited to,
wages, bonuses, variable compensation and benefits under applicable plans
(including retiree welfare benefits), workers’ compensation coverage and
severance pay (“HR Liabilities”): (A) for those Oxy employees who do
not become Transferred Employees and/or (B) that are accrued or incurred or
are attributable to any breach or default by Oxy prior to the Transfer Date
in respect of Transferred Employees.



 22 









 






(iv) Effective as of the Transfer Date, SD shall be responsible for and
discharge all HR Liabilities in respect of Transferred Employees.




(v) As to such all risk physical damage insurance coverage for the Century
Plant obtained by SD, (A) the self retention or deductible amount under such
policy shall be consistent with the self retention or deductible amounts
maintained by SD on the Pikes Peak Plant, Grey Ranch Plant and similar
plants or facilities owned by SD or its Affiliates (the “SD Self
Retention Amount”), (B) in the event of any casualty or other event with
respect to the Century Plant giving rise to a claim on such all risk
physical damage insurance coverage, SD shall bear and pay the SD Self
Retention Amount, and (C) SD shall invoice Oxy for (and Oxy shall pay to SD)
the premiums for such all risk physical damage insurance (excluding the self
retention and deductible amounts referenced in clause (B) preceding).




(vi) If SD notifies Oxy that it does not desire to continue to serve as the
operator of the Century Plant, then as soon as reasonably practicable
thereafter Oxy shall commence serving as the operator of the Century Plant.




	 	(l)	 	If an independent expert is appointed pursuant to this Section
3.3, the Party then operating the Century Plant will bear the cost of such
independent expert.






     3.4 Nomination and Delivery of SD Gas to Century Plant.




	 	(a)	 	SD shall, commencing on or before the fifteenth (15th) Business
Day prior to the Selexol Unit In-Service Date, and fifteen (15) Business Days
prior to the end of each Month thereafter during the Term, deliver to Oxy a
delivery schedule (“Monthly SD Gas Delivery Nomination”) setting forth
the amount of the SD Gas nominated by SD to be delivered by SD to the Century
Plant Receipt Point during the immediately following Month expressed as a daily
rate. The amount nominated by SD in any Monthly SD Gas Delivery Nomination
shall not exceed the Designed Inlet Capacity Volume less (if known) the
Performance Carve-Out Volumes applicable to such day. If SD fails to provide
such Monthly SD Gas Delivery Nomination within such fifteen (15) Business Day
period, the Monthly SD Gas Delivery Nomination for such Month shall be deemed
to be the volumes that were delivered by SD during the immediately preceding
Month.
	 
	 	(b)	 	Within five (5) Business Days after receipt of each Monthly SD
Gas Delivery Nomination from SD, Oxy shall provide SD with notice of how much
of the SD Gas nominated by SD for each day of such Month pursuant to such
Monthly SD Gas Delivery Nomination that Oxy is able to accept delivery of
(“Final Monthly SD Gas Delivery Nomination”) expressed as a daily rate.
Subject to Article XIV, SD shall deliver to the




 23 









 






	 	 	 	Century Plant Receipt Point on each day of Month the applicable amount of SD
Gas (consistent with the specification set forth in the part of Exhibit
E labeled “Inlet Gas”) as set forth on the Final Monthly SD Gas Delivery
Nomination. If Oxy does not deliver the Final Monthly SD Gas Delivery
Nomination within such five (5) Business Day period, the applicable Monthly
SD Gas Delivery Nomination shall be deemed the Final Monthly SD Gas Delivery
Nomination.
	 
	 	(c)	 	SD shall use commercially reasonable efforts to make SD Gas
available at the Century Plant Receipt Point at an even rate throughout each
day. To the extent that SD fails to make SD Gas available at the Century Plant
Receipt Point at an even rate throughout each day, Oxy’s obligation to take
such SD Gas shall be on a commercially reasonable efforts basis.
	 
	 	(d)	 	All amounts of Gas nominated by SD in accordance with Article
III shall be deemed to be SD Gas that has been “Properly Nominated” by SD.
Except as set forth in Section 3.2(b), Oxy shall have no obligation to take
delivery of SD Gas that has not been Properly Nominated by SD consistent with
the provisions of Sections 3.1, 3.2 and 3.4.






     3.5 Century Plant Cost-Sharing. The provisions of clauses (a), (b) and (c) of this
Section 3.5 shall apply until (but not after) the time at which Oxy has received delivery of 3.5
TSCF of CO2 from SD pursuant to the terms of this Agreement.




	 	(a)	 	Electric power and Plant Fuel used in the operation of the
Century Plant shall be separately metered and recorded. The “Century Plant
Monthly Gas Fuel and Power Cost Amount” shall be the sum of:






	 	(i)	 	Century Plant Net Power Amount, plus
	 
	 	(ii)	 	the product of (A) Plant Fuel used at the
Century Plant, multiplied by (B) IF Waha.






	 	(b)	 	The “SD Century Plant Monthly Gas Fuel and Power Cost Amount”
shall be the product of:






	 	(i)	 	Century Plant Monthly Gas Fuel and Power Cost
Amount, multiplied by
	 
	 	(ii)	 	SD Gas volumes treated in the Century Plant
during such Month, divided by
	 
	 	(iii)	 	total Gas volumes treated in the Century Plant
during such Month.






(such SD Gas volumes and Gas volumes based on respective inlet volumes of
Gas delivered to the Century Plant during such Month.)



 24 









 






	 	(c)	 	SD shall bear the following portion of the SD Century Plant
Monthly Fuel and Power Cost Amount:






	 	(i)	 	1, minus
	 
	 	(ii)	 	the sum of (A) the Oxy Allocated Century Plant
Fuel and Power Percentage, plus (B) the Average Monthly CO2
Concentration of SD Gas, minus 0.65;
	 
	 	 	 	multiplied by
	 
	 	(iii)	 	SD Century Plant Monthly Gas Fuel and Power Cost Amount.






	 	(d)	 	If the Average Monthly CO2 Concentration of SD Gas is less than
60 mole % or greater than 70 mole %, as a condition to Oxy’s agreement to
accept such SD Gas, the Parties will agree on an equitable method for adjusting
the cost sharing mechanism in respect of such SD Gas.
	 
	 	(e)	 	Notwithstanding anything to the contrary, if during any Month
any Gas other than SD Gas is treated at the Century Plant and any such Gas is
Off-Spec Gas, then any incremental electric power and Plant Fuel associated
with the treatment and processing of such Off-Spec Gas shall be calculated by
Oxy and shall be excluded from the SD Century Plant Monthly Gas Fuel and Power
Cost Amount.
	 
	 	(f)	 	Oxy shall invoice SD Monthly for the amount to be borne by SD
pursuant to Section 3.2 and this Section 3.5, and SD shall pay such invoiced
amounts pursuant to the provisions of Section 10.3 and 10.4.
	 
	 	(g)	 	Oxy shall provide SD Monthly a statement reflecting the total
Plant Fuel used at the Century Plant during such Month (excluding any such
Plant Fuel purchased from third Persons) and SD shall invoice Oxy for (and Oxy
shall pay) an amount equal to such total Plant Fuel multiplied by IF Waha for
such Month.






     3.6 Sole Remedy. The sole and exclusive remedies for failure to perform pursuant
to this Article III are as set forth in Section 3.3.




     3.7 Royalty Owner Volumes. If any royalty owner elects to take in kind its royalty
share of any Gas produced by SD or any of its Affiliates and such Gas is treated at the Century
Plant, then solely for purposes of Section 4.1, the quantity of CO2 resulting from such
treatment shall be deemed to have been delivered by SD to Oxy to the extent that title to such
CO2 is transferred to Oxy and the royalty owner of such CO2 has no further claims to such CO2.




     3.8 Expert. Any disputes with respect to Sections 3.2(b) and (c), and 3.3-3.5
shall be resolved pursuant to Section 16.5(b).




 25 











 





ARTICLE IV

DELIVERY AND ACCEPTANCE OF CO2





     4.1 Annual CO2 Requirement. Subject to the terms of this Agreement, from and after
January 1, 2009 and each Year thereafter during the Term, (a) SD shall cause the sum of (i) the
Century Plant CO2 and (ii) the Legacy Plant Oxy CO2, when added to the Deemed Delivered CO2
Volumes for the same Year, to equal or exceed the applicable Annual Oxy CO2 Requirement, and (b)
Oxy shall take delivery of Legacy Plant Oxy CO2 at the Legacy Plant Delivery Points until the
sum of such Legacy Plant Oxy CO2, Century Plant CO2 and the Deemed Taken CO2 Volumes for the
same Year equal the applicable Annual Oxy CO2 Requirement.




     4.2 Exception to CO2 Obligations. Notwithstanding the provisions of Section 4.1,
the obligations of the Parties to make and take delivery of CO2 pursuant to Section 4.1 are
subject to the following limitations:




	 	(a)	 	for the period from January 1, 2009 through the Selexol Unit
In-Service Date, (i) the obligation of SD to deliver CO2, and the obligation of
Oxy to take delivery of CO2, shall be on a commercially reasonable efforts
basis, and neither Party shall incur any liability to the other Party for any
failure to deliver or take CO2 during such period, and (ii) to the extent Oxy
takes delivery of CO2 from SD pursuant to this Section 4.2(a), Oxy shall
reimburse SD for such CO2 at the Per MSCF Weighted Average CO2 Cost for such
Month.
	 
	 	(b)	 	for the period from the Selexol Unit In-Service Date through
the Train 1 In-Service Date, (i) Oxy shall have a firm obligation to take any
Century Plant CO2, subject to Oxy having in place adequate transportation for
such Century Plant CO2, and (ii) all other obligations of SD to deliver CO2,
and obligations of Oxy to take CO2, shall be on a commercially reasonable
efforts basis, and neither Party shall incur any liability to the other Party
for any failure to deliver or take CO2 during such period. Oxy shall provide
periodic updates to SD regarding Oxy’s efforts to secure adequate
transportation for the Century Plant CO2 to be delivered during the period from
the Selexol Unit In-Service Date through the Train 1 In-Service Date.
	 
	 	(c)	 	In no event shall Oxy be required to accept deliveries of CO2
that have not been Properly Nominated.
	 
	 	(d)	 	Oxy shall be obligated to only use commercially reasonable
efforts to take on any day volumes of CO2 greater than 105% of the Average
Daily CO2 Amount applicable to such day, and Oxy shall incur no liability to SD
for any failure to take such excess.




26









 












     4.3 CO2.




	 	(a)	 	SD shall cause all CO2 delivered to Oxy at the Legacy Plant
Delivery Points to meet the specifications as shown on Exhibit E.
	 
	 	(b)	 	Off-Spec CO2






	 	(i)	 	Oxy shall have no obligation to take delivery
of Legacy Plant Oxy CO2 that is not consistent (on a composite basis)
with the specification as shown on Exhibit E (such CO2, “Off-Spec
CO2”); provided that, to the extent the CO2 transportation pipeline
to be utilized by either Party will not accept such CO2 for transport,
such CO2 shall constitute Off-Spec CO2. Notwithstanding the foregoing,
(A) Oxy shall use commercially reasonable efforts to blend Legacy Plant
Oxy CO2 with Century Plant CO2 to meet CO2 pipeline specifications and
(B) Oxy shall use commercially reasonable efforts to accept Off-Spec
CO2. Any such CO2 accepted in writing by Oxy for delivery shall, to the
extent delivered, be deemed to have been Properly Nominated and
Delivered by SD to Oxy for purposes of this Agreement.
	 
	 	(ii)	 	SD shall give Oxy reasonable prior written
notice of any Off-Spec CO2 that SD anticipates wanting to deliver to
Oxy. Any Off-Spec CO2 not explicitly accepted in writing for delivery
by Oxy shall not be deemed to have been delivered to Oxy for purposes
of Section 4.1, and SD shall be liable for any damage caused by such
Off-Spec CO2 not explicitly accepted by Oxy. To the extent Oxy’s
acceptance of Off-Spec CO2 impacts Oxy’s ability to perform Oxy’s
obligations pursuant to this Agreement, Oxy’s obligations under this
Agreement shall be adjusted to reflect the full extent of such impact,
as determined by the Parties.






     4.4 Monthly Nominations for Delivery of CO2.




	 	(a)	 	Legacy Plant CO2 Nominations. SD shall, commencing on or
before the fifteenth (15th) Business Day prior to the end of December 2008, and
fifteen (15) Business Days prior to the end of each Month thereafter during the
Term, provide to Oxy a delivery schedule (“Legacy Plant CO2
Nomination”) setting forth the amount of (i) Legacy Plant Oxy CO2 and (ii)
SD Equity CO2 nominated by SD to be delivered to each Legacy Plant Delivery
Point during the immediately following Month expressed as a daily rate. If SD
fails to provide such Legacy Plant CO2 Nomination within such fifteen (15)
Business Day period, the Legacy Plant CO2 Nomination for such Month shall be
deemed to be the quantities that were delivered by SD during the immediately
preceding Month.




27









 






	 	(b)	 	Final Legacy Plant CO2 Nominations. Within five (5) Business
Days after receipt of each Legacy Plant CO2 Nomination from SD, Oxy shall
provide SD with notice of how much of the Legacy Plant Oxy CO2 and SD Equity
CO2 nominated for such Month by SD pursuant to such Legacy Plant CO2 Nomination
that Oxy is able to accept delivery of (“Final Legacy Plant CO2
Nomination”) expressed as a daily rate. Subject to Article XIV, SD shall
deliver to each Legacy Plant Delivery Point on each day of such Month the
applicable amount of CO2 (consistent with the specification set forth on
Exhibit E) as set forth on the Final Legacy Plant CO2 Nomination. If Oxy does
not deliver the Final Legacy Plant CO2 Nomination within such five (5) Business
Day period, the Legacy Plant CO2 Nomination shall be deemed the Final Legacy
Plant CO2 Nomination.
	 
	 	(c)	 	SD Equity CO2 Redelivery Nominations. SD shall, commencing on
or before the fifteenth (15th) Business Day prior to the end of December 2008,
and fifteenth (15) Business Days prior to the end of each Month thereafter
during the Term, provide to Oxy a CO2 redelivery schedule (“SD Equity CO2
Redelivery Nomination”) for the amount of the SD Equity CO2 nominated by SD
to be redelivered by Oxy, up to the amount of SD Equity CO2 nominated pursuant
to the Final Legacy Plant CO2 Nomination and subject to adjustments made
pursuant to Section 6.3, to specific Oxy Redelivery Points on Oxy CO2 Pipelines
during such immediately following Month. If SD fails to provide such SD Equity
CO2 Redelivery Nomination within such fifteen (15th) Business Day
period, the SD Equity CO2 Redelivery Nomination for such Month shall be deemed
to be the quantities that were delivered by SD during the immediately preceding
Month.
	 
	 	(d)	 	SD Delivery Rates. SD shall use commercially reasonable
efforts to make Legacy Plant Oxy CO2 and SD Equity CO2 to be delivered pursuant
to the Final Legacy Plant CO2 Nomination available at the Legacy Plant Delivery
Points at an even rate throughout each day. To the extent that SD fails to
make Legacy Plant Oxy CO2 and SD Equity CO2 available at the Legacy Plant
Delivery Points at an even rate throughout each day, Oxy’s obligation to take
such Legacy Plant Oxy CO2 and SD Equity CO2 shall be on a commercially
reasonable basis.
	 
	 	(e)	 	Oxy Redelivery Rates. Oxy shall use commercially reasonable
efforts to redeliver SD Equity CO2 nominated pursuant to the Final Legacy Plant
CO2 Nomination subject to adjustments made pursuant to Section 6.3 at an even
rate throughout each day.
	 
	 	(f)	 	Properly Nominated. All amounts of Legacy Plant Oxy CO2
nominated by SD in accordance with Article IV shall be deemed to be CO2 that
has been “Properly Nominated” by SD. Except as set forth in Section 4.3(b),
Oxy shall have no obligation to take delivery of Legacy Plant Oxy CO2




28









 






	 	 	 	that has not been Properly Nominated by SD consistent with the provisions of
Sections 4.1-4.4.






     4.5 Five Year Budget and Three Year Monthly Delivery Schedule.




	 	(a)	 	SD shall, commencing ninety (90) days after the Effective Date,
and on or before August 1 for each year during the Term, provide Oxy with a
projected Month-by-Month delivery schedule for the next successive five (5)
Year period. This shall be for budget planning purposes only.
	 
	 	(b)	 	From time to time SD may have CO2 volumes available from SD
Legacy Plants in excess of the Annual Oxy CO2 Requirement. Under such
circumstances, SD shall provide Oxy a two (2) Year notice of such excess CO2
volumes and an associated thirty-six (36) Month forecast of such volumes
available for the period following the two (2) Year notice (“Three Year
Monthly Delivery Schedule”) indicating the nomination of volumes SD will
cause to be delivered to Oxy. The Three Year Monthly Delivery Schedule will
include (i) SD Gas to Century Plant, (ii) Annual Oxy CO2 Requirement, (iii) SD
Equity CO2 and (iv) SD Equity CO2 being offered to Oxy in excess of the Annual
Oxy CO2 Requirement.
	 
	 	(c)	 	Within thirty (30) days after receipt of each Three Year
Monthly Delivery Schedule, Oxy shall provide notice to SD with a corresponding
schedule of volumes that indicates the volumes of additional SD Equity CO2
nominated by SD that Oxy is able to accept for delivery (“Final Three Year
Monthly Delivery Schedule”) which shall then increase the Annual Oxy CO2
Requirement for each Year Oxy accepts delivery of such additional volumes, and
decrease SD’s obligation to deliver CO2 volumes, and Oxy’s obligation to take
CO2 volumes, in successive Years beginning with the Year closest to the end of
the Term of this Agreement in which Oxy is obligated to deliver CO2 volumes to
Oxy.






     4.6 Plant Operating Expense and Fuel and Electric Power Cost Reimbursement.




	 	(a)	 	The operating costs incurred in operating the Pikes Peak Plant,
Grey Ranch Plant and Mitchell Plant shall be separately tracked and recorded.
The aforesaid operating costs shall include cash costs only (such as plant
operating expenses, Plant Fuel, electric power costs at such plants, and the
third party treating fee payable at the Mitchell Plant) and shall not include
such non cash items such as depreciation, amortization, depletion and corporate
overhead (the aggregate amount of such Legacy Plant operating costs, the
“Legacy Opex”). For purposes of this Agreement, such Legacy Opex for a
Month or a Year, as applicable, will be expressed on a per MSCF of CO2 basis
(i.e., CO2 that results from the treatment of Gas at all Legacy Plants,
including any such CO2 that is vented) (the “Per MSCF CO2 Cost”), and
the weighted average of such Per MSCF CO2 Costs shall be determined (as to the
applicable Month or Year, as applicable, the “Per 




29









 






	 	 	 	MSCF Weighted Average CO2 Cost”). Notwithstanding the foregoing,
for all purposes of this Agreement, the Per MSCF Weighted Average CO2 Cost
shall not exceed an amount equal to (i) $1.00, plus (ii) the product of one
percent (1%) multiplied by the positive difference (if any) between (A)
NYMEX WTI for such Month, less (B) $125.00.
	 
	 	(b)	 	SD shall invoice Oxy Monthly for an amount determined by
multiplying the Legacy Plant Oxy CO2 for such Month by the Per MSCF Weighted
Average CO2 Cost for such Month, and Oxy shall pay such invoiced amounts
pursuant to the provisions of Sections 10.3 and 10.4, and such payment shall be
in full satisfaction of all obligations of Oxy to SD in respect of such volumes
of Legacy Plant Oxy CO2.
	 
	 	(c)	 	For purposes of this Agreement, Plant Fuel used in any Month
shall be deemed to have a value/cost equal to IF Waha.
	 
	 	(d)	 	Notwithstanding the foregoing provisions of this Section 4.6,
to the extent that SD fails in any Year to Properly Nominate and Make Available
for Delivery at the Century Plant Receipt Point a quantity of SD Gas that, when
treated at the Century Plant, results in a volume of CO2 at least equal to the
product of (i) the Deemed Daily Treatment Capacity, multiplied by (ii) 365,
multiplied by (iii) the Deemed Runtime Percentage for such Year, multiplied by
(iv) 0.65 (such shortfall, the “CP Delivery Shortfall Volume”), then
without prejudice to the provisions of Section 4.7 (to the extent the CP
Delivery Shortfall Volume results in an Annual CO2 Delivery Deficiency):






	 	(i)	 	to the extent that a volume of Legacy Plant Oxy
CO2 in excess of the CP Delivery Shortfall Volume shall have been
delivered and taken during such Year, SD shall repay to Oxy an amount
equal to the product of (A) the positive difference, if any, of the Per
MSCF Weighted Average CO2 Cost less the Annual Oxy Century Plant Per
MSCF CO2 Cost multiplied by (B) the CP Delivery Shortfall Volume;
	 
	 	(ii)	 	to the extent that the CP Delivery Shortfall
Volume exceeds the volume of Legacy Plant Oxy CO2 delivered and taken
during such Year, SD shall repay to Oxy an amount equal to the product
of (A) the positive difference, if any, of the Per MSCF Weighted
Average CO2 Cost less the Annual Oxy Century Plant Per MSCF CO2 Cost
multiplied by (B) the volume of Legacy Plant Oxy CO2 delivered and
taken during such Year; and
	 
	 	(iii)	 	to the extent no Legacy Plant Oxy CO2 was
delivered and taken during such Year, the provisions of Section 4.7
shall apply.




30









 












     4.7 CO2 Delivery Deficiency.




	 	(a)	 	Within forty-five (45) days following each Year, SD shall
provide Oxy a statement for such Year, itemized on a Month-by-Month basis,
reflecting (i) the Annual Oxy CO2 Requirement, (ii) Delivered SD CO2, (iii)
Deemed Delivered CO2 Volumes, and (iv) the Annual CO2 Delivery Deficiency. If
for such Year, the Annual CO2 Delivery Deficiency is zero or less, then no
payment or offset with SD Banked CO2s shall be required pursuant to this
Section 4.7. If for such Year the Annual CO2 Delivery Deficiency is greater
than zero, then as liquidated damages SD shall (x) use an amount of SD Banked
CO2s required to offset the Annual CO2 Delivery Deficiency, provided that in no
event shall the amount of SD Banked CO2 volumes used in respect of any Month
during such Year to offset the portion of the Annual CO2 Delivery Deficiency
applicable to such Month exceed 0.833% of the Annual Oxy CO2 Requirement for
such Year, and (y) if the amount of SD Banked CO2s permitted to be used to
offset the Annual CO2 Delivery Deficiency are not sufficient to offset the
Annual CO2 Delivery Deficiency, SD shall pay to Oxy an amount equal to the
Stipulated MSCF Amount multiplied by the remaining (non-offset) volumes of
Annual CO2 Delivery Deficiency. The volumes of the Annual CO2 Delivery
Deficiency with respect to which the payment amount was calculated pursuant to
clause (y) preceding shall not be counted against the Annual Oxy CO2
Requirement but rather shall be added to the final Year of the Term (“SD
Reallocated Volumes”).
	 
	 	(b)	 	Upon the application of any SD Banked CO2s pursuant to Section
4.7(a)(x), such SD Banked CO2 volumes shall be deemed eliminated from the SD
Banked CO2s.






     4.8 CO2 Take Deficiency.




	 	(a)	 	Within forty-five (45) days following each Year, Oxy shall
provide to SD a statement for such Year, itemized on a Month-by-Month basis,
reflecting (i) the Annual Oxy CO2 Requirement, (ii) Delivered SD CO2, (iii)
Deemed Taken CO2 Volumes, and (iv) the Annual CO2 Take Deficiency. If for such
Year the Annual CO2 Take Deficiency is zero or less, then no payment or offset
with Oxy Banked CO2s shall be required pursuant to this Section 4.8. If for
such Year the Annual CO2 Take Deficiency is greater than zero, then as
liquidated damages Oxy shall (x) use an amount of Oxy Banked CO2s required to
offset the Annual CO2 Take Deficiency, provided that in no event shall the
amount of Oxy Banked CO2 volumes used in respect of any Month during such Year
to offset the portion of the Annual CO2 Take Deficiency applicable to such
Month exceed 0.833% of the Annual Oxy CO2 Requirement for such Year, and (y) if
the amount of Oxy Banked CO2s permitted to be used to offset the Annual CO2
Take Deficiency are not sufficient to offset the Annual CO2 Take Deficiency,
Oxy shall pay to SD an amount equal to the Stipulated MSCF Amount




31









 






	 	 	 	multiplied by the remaining (non-offset) volumes of Annual CO2 Take
Deficiency. The volumes of Annual CO2 Take Deficiency with respect to which
the payment amount was calculated pursuant to clause (y) preceding shall not
be counted against the Annual Oxy CO2 Requirement but rather shall be added
to the final Year of the Term (“Oxy Reallocated Volumes”).
	 
	 	(b)	 	Upon the application of any Oxy Banked CO2s pursuant to Section
4.8(a)(x), such Oxy Banked CO2 volumes shall be deemed eliminated from the Oxy
Banked CO2s.






     4.9 Delivery /Take Obligations.




	 	(a)	 	If during any two (2) consecutive Year period following the
first five (5) Years of the Term following the Century Facilities In-Service
Date, either the Annual CO2 Delivery Deficiency, or the Annual CO2 Take
Deficiency, is greater than twenty percent (20%) of the applicable Annual Oxy
CO2 Requirement, then the Party so failing to perform its obligations during
such two (2) Year period (the “Deficient Party”) may, by one hundred
eighty (180) days prior written notice to the other Party (the “Section 4.9
Notice”), make a lump sum payment to the other Party to reduce its
liquidated damages obligations pursuant to Section 4.7 or 4.8 (as applicable)
for the remaining Term, as follows:
	 
	 	(b)	 	the Section 4.9 Notice shall indicate the amount of CO2 the
Deficient Party intends to deliver (if the Deficient Party is SD) or that the
Deficient Party intends to take (if the Deficient Party is Oxy) for the
remaining Term, expressed as percentage of the Annual Oxy CO2 Requirement (the
“Adjusted Annual Oxy CO2 Percentage”).
	 
	 	(c)	 	The Deficient Party shall include in the Section 4.9 Notice a
calculation of the following amount (the “Section 4.9 Payment”): the
present value (calculated on a 10% discount basis) of the sum of the following
amounts, calculated for each remaining Year of the Term:






	 	(i)	 	one (1) minus the Adjusted Annual Oxy CO2
Percentage, multiplied by
	 
	 	(ii)	 	the Annual Oxy CO2 Requirement for such Year,
multiplied by
	 
	 	(iii)	 	the Stipulated MSCF Amount.






	 	(d)	 	Within five (5) Business Days after delivery of the Section 4.9
Notice, the Party receiving the Section 4.9 Notice shall notify the Deficient
Party if it agrees with calculation of the Section 4.9 Payment. Any disputes
between the Parties with respect to the calculation of the Section 4.9 Payment
shall be resolved pursuant to the provisions of Section 16.5(b).




32









 






	 	(e)	 	Within five (5) Business Days following resolution of the
correct amount of the Section 4.9 Payment, the Deficient Party shall pay such
Section 4.9 Payment to the other Party. Effective on the date such Section 4.9
Payment is received by the other Party (or on such later date as the Parties
may agree), the Annual Oxy CO2 Requirement for each Year (or partial Year) of
the remaining Term shall be deemed adjusted by multiplying such amount by the
Adjusted Annual Oxy CO2 Percentage.
	 
	 	(f)	 	Following the payment of the Section 4.9 Payment pursuant to
Section 4.9(e), this Agreement shall continue in full force and effect for the
adjusted Annual Oxy CO2 Requirement for each remaining Year of the Term (as
determined by Section 4.9(e)), and subject to the other provisions of this
Agreement, provided that






	 	(i)	 	to the extent such Section 4.9 Payment is made
by SD:






(A) during each Year, SD shall offer to Oxy (for delivery at the Legacy
Plant Delivery Points) all CO2 produced at the Legacy Plants in excess of
the applicable adjusted Annual Oxy CO2 Requirement for such Year (up to
the Original SD Requirement less volumes offered by SD to Oxy during the
same Year pursuant to Section 4.9(f)(i)(B)), and any volumes of Legacy
Plant Oxy CO2 so offered in excess of the applicable adjusted Annual Oxy
CO2 Requirement and up to the Original SD Requirement shall be priced in
accordance with Section 4.6(d)(i) as if such volumes were a CP Delivery
Shortfall Volume; and




(B) SD shall offer to Oxy (for delivery to and treating at the Century
Plant in accordance with Section 3.3) all volumes of SD Gas that can be
delivered to the Century Plant through collection and transportation
systems then used by SD to transport SD Gas to the Century Plant (up to
the Original SD Requirement), and SD shall have no obligation under this
clause (B) to modify, add to or enlarge any such systems;




	 	(ii)	 	to the extent such Section 4.9 Payment is made
by Oxy






(A) Oxy shall use commercially reasonable efforts to take the volumes of
CO2 in excess of the applicable adjusted Annual Oxy CO2 Requirement for
such Year made available by SD at the Legacy Plant Delivery Points (up to
the Original Oxy Requirement less volumes treated by Oxy during the same
Year pursuant to Section 4.9(f)(ii)(B));




(B) Oxy shall give first priority to any proposed deliveries by SD of SD
Gas to the Century Plant (as to any day up to the Deemed Daily Treatment
Capacity less any Performance Carve-Out Volumes applicable to such day)
for treatment pursuant to Section 3.3 (up to the Original Oxy
Requirement); and



33









 






(C) Oxy shall not take delivery of CO2 from any other source for use in
Oxy’s enhanced oil recovery operations in the Permian Basin.




     4.10 Sole Remedies. Each Party’s sole and exclusive remedies for the other Party’s
failure to perform pursuant to Sections 4.1-4.4 are as set forth in Sections 4.6-4.8.




     4.11 SD Equity CO2 Adjustments. In addition to SD’s delivery obligations of CO2
set forth in Sections 4.1-4.4, to the extent that SD has volumes of SD Equity CO2 that SD is not
using for enhanced oil recovery projects in which SD or one of its Affiliates operates or owns
an interest, Oxy shall have a right of first refusal to acquire such additional SD Equity CO2 by
reimbursing SD an amount equal to the Per MSCF Weighted Average CO2 Cost applicable for the
Month of delivery of such SD Equity CO2. SD shall nominate and Oxy make acceptance of these
additional volumes pursuant to Section 4.4.




     4.12 Aggregate Delivery Obligation. Notwithstanding anything on this Agreement to
the contrary, the provisions of Sections 3.1, 4.1, 4.2, 4.5, 4.6, 4.7, 4.8, and 4.10 shall be of
no force or effect from and after the time at which Oxy has received delivery of 3.5 TSCF of CO2
from SD pursuant to the terms of this Agreement; provided, SD shall use commercially reasonable
efforts to deliver volumes of CO2, and Oxy shall use commercially reasonable efforts to treat
and take SD Gas and to take volumes of CO2, in each case, in excess of 3.5 TSCF and the terms of
this Agreement (other than such Sections 3.1, 4.1, 4.2, 4.5, 4.6, 4.7, 4.8 and 4.10) shall apply
to such volumes.




     4.13 Expert. Any disputes between the Parties with respect to this Article IV
shall be resolved pursuant to Section 16.5(b).



ARTICLE V

MEASUREMENT, TESTING, TITLE AND RISK OF LOSS





     5.1 Meter Stations. SD shall ensure that a measuring station for custody transfer
of Legacy Plant Oxy CO2 delivered hereunder is installed, operated and maintained in accurate
working order at each of the Legacy Plant Delivery Points. SD shall ensure that a measuring
station for custody transfer of Century Plant CO2 delivered hereunder is installed in accurate
working order at the Century Plant CO2 Delivery Point. SD may, at its discretion and cost,
install and operate check measurement and check chromatographs on the SD Gas, Residue Gas, and
Century Plant CO2 streams. Check measurement may be accomplished with either redundant meter
tubes, or parallel meters on a single meter tube. Oxy shall ensure that a measuring station for
custody transfer of Century Plant CO2 delivered hereunder is operated and maintained in accurate
working order at the Century Plan CO2 Delivery Point. Oxy shall also cause the measuring
station for custody transfer of inlet Gas at the Century Plant Receipt Point, for custody
transfer of Century Plant Products at the Century Plant Products Delivery Point, and for custody
and transfer of Residue Gas at the Century Plant Residue Gas Delivery Point to be operated and
maintained in accurate working order. Each such measuring station shall be equipped in
accordance with the standards set forth in the American Petroleum Institute, Manual
of Petroleum Measurement Standards, Chapters 14.3 and 21.1 and American Gas
Association Report No. 3 and No. 9 (latest editions). Measurement equipment



34









 







will be subject to change to allow use of improved technology under such standards. Each
such measuring station will have a check meter installed in the adjoining piping circuit.




     5.2 Procedure. Custody transfer measurement of Gas entering the Century Plant, of
Residue Gas and Century Plant Products at the Century Plant, and of CO2 at the Legacy Plants
shall be calibrated and inspected in accordance with Exhibit B.




     5.3 Meter Tests. SD shall ensure that the measurement equipment at the Legacy
Plant Delivery Points is accurate and in repair, and that such periodic tests of such equipment
as SD or the operator of each Legacy Plant may deem necessary are made as often as needed, but
in no case shall the calibration interval exceed 31 days. SD shall give Oxy reasonable notice
of each such test of the measuring equipment in order that, if Oxy desires, Oxy may have its
representative present to witness such test (subject to the receipt of any required approval of
any third party operator of the applicable Legacy Plant). Oxy shall ensure that the measurement
equipment at the Century Plant Receipt Point, the Century Plant CO2 Delivery Point, the Century
Plant Residue Gas Delivery Point, and the Century Plant Products Delivery Point is accurate and
in repair, and that such periodic tests of such equipment as Oxy may deem necessary are made as
often as needed, but in no case shall the calibration interval exceed 31 days. Oxy shall give
SD reasonable notice of each such test of the measuring equipment in order that, if SD desires,
SD may have its representative present to witness such test.




     5.4 Testing.




	 	(a)	 	SD shall cause monthly composite tests to determine the
quantity and specifications of Legacy Plant Oxy CO2 delivered to Oxy at the
Legacy Plant Delivery Points to be made as often as reasonably necessary by
approved standard methods in general use. SD shall promptly furnish Oxy with
copies of all such test results. SD shall give Oxy reasonable notice of all
such tests in order that Oxy may have its representative present, if Oxy so
desires (subject, however, to obtaining any required approval from any third
party operator of any Legacy Plant).
	 
	 	(b)	 	Composition of SD Gas, Residue Gas and CO2 at the Century
Plant, relative density, heating value, and other relevant values shall be
determined by online chromatographic analysis, except that analysis of the
Century Plant Product shall be determined by monthly laboratory analysis. The
chromatographs shall be interfaced with the electronic flow meter on each
particular stream for updates of noted values as such are measured and
calculated in order that measured quantities are determined utilizing such
information and thereby representative of the gas quality experienced at the
delivery point, receipt point or other pertinent measurement location for the
reported time interval. Chromatographs shall be calibrated daily using
standards representative of the streams being analyzed. If analysis is outside
chromatograph design accuracy and repeatability, the chromatograph will require
calibration that day. At a minimum each chromatograph must be tested and
verified weekly. This will require a




35









 






	 	 	 	minimum of three separate standards. Gas Chromatographs shall be installed,
operated, maintained and verified according to applicable industry standards
(API 14.1, API 21.1, GPA 2261, GPA 2145, GPA 2172, and GPA 2177).
	 
	 	(c)	 	Century Plant Product samples shall be taken monthly for all
volumes sold during the preceding Month and delivered to a third party
laboratory for analysis.
	 
	 	(d)	 	Oxy and SD shall use commercially reasonable efforts to cause
all of the data resulting from the tests and analyses described in this Section
5.4 to be made available electronically on line to the other Party at all
times, including feeds of live chromatograph analysis data.






     5.5 Disputes. Any dispute between the Parties with respect to matters addressed in
Sections 5.1-5.5 shall be resolved pursuant to Section 16.5(b).




     5.6 Title and Risk of Loss.




	 	(a)	 	As between SD and Oxy, (i) title to Century Plant Products and
Residue Gas shall remain in SD at all times, (ii) title to CO2 resulting from
the treating of SD Gas in the Century Plant shall vest in Oxy at the time such
CO2 is separated from the SD Gas stream, and (iii) title to CO2 delivered by SD
to Oxy at the Legacy Plant Delivery Points shall transfer from SD to Oxy at the
time such CO2 passes through such Legacy Plant Delivery Points.
	 
	 	(b)	 	As between SD and Oxy, (i) during the period following the
delivery to Oxy of SD Gas at the Century Plant Receipt Point and the redelivery
of the Residue Gas and Century Plant Products to SD, the Party acting as
operator of the Century Plant shall be in possession and control of such SD Gas
and shall be responsible for any loss of such SD Gas (without limiting Section
3.3(c), except Century Plant Fuel due to the same being addressed in Section
3.5, and loss and unaccounted for Gas as normally occurs during treating) and
Claims caused thereby (other than as set forth in Section 13.2) , (ii) prior to
the delivery to Oxy of CO2 at Legacy Plant Delivery Points, SD shall be in
possession and control of such CO2 and shall be responsible for any loss of
such CO2 and Claims caused thereby (provided, if any of such CO2 is transported
to any such delivery point through a pipeline owned or operated by Oxy or one
of its Affiliates, the terms of any tariff or other agreement relating to such
transportation shall control over any conflicting provisions set forth in this
Section 5.7(b)(ii)), (iii) following the delivery to Oxy of Legacy Plant Oxy
CO2 at the Legacy Plant Delivery Points, and following the separation in the
Century Plant of CO2 from the SD Gas stream when Oxy is operator of the Century
Plant, Oxy shall be in possession and control of such CO2 and shall be
responsible for any loss of such CO2 and Claims caused thereby, and (iv)




36









 










SPECIFIC TERMS IN THIS AGREEMENT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL 
TREATMENT FOR THOSE TERMS
HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS 
BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, AND THE 
TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH THREE ASTERISKS
(* * *).





when SD is operator of the Century Plant, following the separation in the
Century Plant of CO2 from the SD Gas stream and until delivery of such CO2
to Oxy, SD shall be in possession and control of such CO2 and shall be
responsible for any loss of such CO2 and Claims caused thereby.



ARTICLE VI

PIPELINE TRANSPORTATION OF CO2





     6.1 McCamey to Seminole Pipeline. Oxy may, at its sole option, elect to construct
and place in service a pipeline (and related equipment and facilities) from (or near) the
McCamey Delivery Point to (or near) Seminole, Texas (the “Seminole Pipeline”) to
transport CO2. If constructed, Oxy shall notify SD when the Seminole Pipeline is placed into
service (the “Seminole Pipeline In Service Date”). During the period commencing no
sooner than the thirtieth (30th) day following SD’s receipt of the aforesaid notice (if any)
from Oxy regarding the Seminole Pipeline In Service Date and ending as of the expiration of the
Term, SD agrees to transport over, and Oxy agrees to provide the requisite capacity on the
Seminole Pipeline to so transport, SD Equity CO2 to the Denver City Facilities. Without
limiting Section 6.4, to the extent Oxy elects to construct and place in service the Seminole
Pipeline, the maximum volume of SD Equity CO2 that Oxy shall be obligated to transport pursuant
to this Section 6.1 is 780 MMSCFD less the sum of (a) Century Plant CO2 and (b) Legacy Plant Oxy
CO2 transported on the same day by Oxy under this Agreement. SD shall pay to Oxy $*** per MSCF
of SD Equity CO2 so transported over the Seminole Pipeline.




     6.2 Space Available Redelivery Points. “Oxy CO2 Pipelines” shall include
(a) Bravo pipeline system, (b) Sheep Mountain pipeline, (c) ESTE pipeline, (d) Anton Irish
pipeline, (e) Permian Basin pipelines (I) that originate at Denver City or (II) that are located
near or at the McCamey Pump Station, now or hereafter that Oxy or its Affiliates either own or
over which they have assignable rights to transport without fee and (f) all associated laterals
and pipelines of the pipelines described in clauses (a) through (e) preceding. With respect to
SD Equity CO2 transported on the Seminole Pipeline pursuant to Section 6.1 or by third Person
pursuant to Section 6.3, SD may elect to take redelivery of all or any volume of such SD Equity
CO2 at any interconnection point on any one or more of the Oxy CO2 Pipelines subject to capacity
being available on such Oxy CO2 Pipeline for such volume of SD Equity CO2 pursuant to Section
4.4. Oxy shall use commercially reasonable efforts to accommodate SD’s request. The fee payable
by SD pursuant to Section 6.1 shall also cover any service provided on the Oxy CO2 Pipelines;
provided, Oxy may also include any pipeline booster pump fees at Oxy’s actual incremental cost
or as mutually agreed.




     6.3 Settlement of Imbalances. Oxy and SD agree to deliver CO2 in accordance with
and subject to all the terms of this Agreement and to maintain as close as reasonably possible a
Monthly balance between SD Equity CO2 delivered and SD Equity CO2 redelivered. The differences,
if any, between the volumes of CO2 delivered by SD to Oxy and the volumes of



37









 




SPECIFIC TERMS IN THIS AGREEMENT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL 

TREATMENT FOR THOSE TERMS
HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS 
BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, AND THE 
TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH THREE ASTERISKS
(* * *).





CO2 redelivered by Oxy to SD hereunder at the end of each calendar year (any such difference being
an “Imbalance Quantity”) shall be settled as follows:




	 	(a)	 	The Party that has a greater amount of CO2 delivered to it
under this Agreement during a calendar year (“Over-receiving Party”)
shall attempt to balance in kind with the Party that has received the lesser
amount of CO2 during the same Year under this Agreement (“Under-receiving
Party”) by increasing to the extent possible the Over-receiving Party’s
volume of deliveries hereunder to eliminate such Imbalance Quantity within
ninety (90) days after the end of the applicable Year of the imbalance or
within ninety (90) days after the end of the Term. The Under-receiving Party
may elect to receive all or part of the volumes of CO2 constituting an
Imbalance Quantity at any of its respective Legacy Plant Delivery Points if for
Oxy’s account, or Oxy CO2 Redelivery Points if for SD’s account. If after the
ninety (90) day period, an Imbalance Quantity still remains, both Parties will
work in good faith to resolve any outstanding balances. At any time throughout
the Term should the Imbalance Quantity exceed five (5) BCF, the Under-receiving
Party may at its sole option, by providing notice thereof to the Over-receiving
Party within thirty (30) days of such determination, elect to either (i) take
delivery of such Imbalance Quantity during the twelve (12) Months following
such determination or (ii) be paid the Per MSCF Weighted Average CO2
Cost of the settlement Month for such Imbalance Quantity by the Over-receiving
Party within sixty (60) days of receiving such notification.
	 
	 	(b)	 	An Imbalance Quantity existing at the termination of this
Agreement will be adjusted by the Over-receiving Party, in its sole discretion,
either (i) by delivering to the Under-receiving Party such Imbalance Quantity
over a six Month period from the date of such termination on a schedule
determined by the Under-receiving Party or (ii) by paying the Under-receiving
Party an amount equal to the Per MSCF Weighted Average CO2 Cost of
the settlement Month for such Imbalance Quantity.






     6.4 Third Party Transportation. To the extent that Oxy does not elect to construct
and place into service the Seminole Pipeline, Oxy shall enter into one or more transportation
agreements with one or more CO2 pipeline transportation companies, which transportation
agreement(s) shall permit Oxy to ship up to 780 MMSCFD which shall include (a) Century Plant
CO2, (b) Legacy Plant Oxy CO2 and (c) SD Equity CO2. Through the Train 1 In-Service Date, SD
shall pay to Oxy the actual third party costs incurred by Oxy in transporting such SD Equity CO2
pursuant to this Section 6.4; thereafter, SD shall pay Oxy $*** per MSCF of SD Equity CO2
transported pursuant to this Section 6.4.



38









 




SPECIFIC TERMS IN THIS AGREEMENT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL 
TREATMENT FOR THOSE TERMS
HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS 
BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, AND THE 
TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH THREE ASTERISKS
(* * *).





     6.5 Additional Oxy Transportation Obligations. If Oxy fails or is unable to take
CO2 in satisfaction of its obligations under Article IV or CO2 resulting from the treatment of
SD Gas at the Century Plant (the “Subject CO2”), in addition to the transportation
obligations of Oxy pursuant to Sections 6.1 and 6.3, Oxy shall provide transportation for the
Subject CO2 consistent with the terms of this Article VI (including the payment to Oxy of $***
per MSCF of Subject CO2 transported pursuant to this Section 6.5), subject to Article XIV.




     6.6 Transport to McCamey. Notwithstanding anything to the contrary, as to CO2
volumes transported under this Article VI, the segment of such transportation service from
Legacy Plant Delivery Points or Century Plant CO2 Delivery Point to the McCamey Delivery Point
shall be provided free of charge to SD.



ARTICLE VII

TAXES





     7.1 Tax Liability. In the event SD is appointed operator of the Century Plant, all
Taxes arising from SD’s conduct as operator of the Century Plant shall become the responsibility
of SD. Oxy shall be responsible for all Taxes arising from its receipt of CO2 produced from the
treatment of SD Gas. SD shall be responsible for all Taxes arising from its receipt of the
Century Plants Products and Residue Gas. Any other Tax shall be the responsibility of the Party
having the legal liability for such Tax under applicable federal, state, or local laws.




     7.2 Exemption Claim. To the extent applicable to any tax to be borne by a Party
pursuant to Section 7.1, such Party may furnish a properly executed direct payment certificate
or an exemption certificate in lieu of sales or use tax.



ARTICLE VIII

CARBON CREDITS AND INCREMENTAL COSTS




     SD and Oxy shall each comply with, and cause their Affiliates to comply with, their respective
obligations pursuant to Exhibit C.



ARTICLE IX

REPRESENTATIONS AND WARRANTIES





     9.1 Representations by Oxy. Oxy represents and warrants to SD that:




	 	(a)	 	Oxy is duly organized, validly existing and in good standing
under the laws of the State of Delaware and is duly qualified to do business in
the State of Texas.
	 
	 	(b)	 	Oxy has all requisite corporate power, authority and capacity
to execute, deliver and perform this Agreement and to consummate the
transaction




39









 






	 	 	 	contemplated hereby. The execution, delivery and performance of this
Agreement and the consummation of the transaction contemplated hereby by Oxy
have been duly and validly authorized by all necessary corporate action on
the part of Oxy, and this Agreement has been duly and validly executed and
delivered by Oxy, and is the valid and binding obligation of Oxy,
enforceable against Oxy in accordance with its terms, subject to Applicable
Laws of bankruptcy, insolvency and similar laws affecting creditors’ rights
and remedies generally.
	 
	 	(c)	 	The execution, delivery and performance by Oxy of this
Agreement does not and will not (i) conflict with or violate any provision of
Oxy’s organizational documents; (ii) violate any provision of any Applicable
Laws; (iii) conflict with, violate, result in a breach of, constitute a default
under (without regard to requirements of notice, lapse of time, or elections of
other Persons, or any combination thereof) or accelerate or permit the
acceleration of the performance required by, any contracts or other instruments
to which Oxy is a party; or (iv) require any consent, approval or authorization
of, or filing of any certificate, notice, application, report or other document
with, any Governmental Authority or other Person that has not been obtained or
the failure to obtain which would cause a material adverse effect on Oxy’s
ability to perform its obligations under this Agreement.






     9.2 Representations by SD. SD represents and warrants to Oxy that:




	 	(a)	 	SD is duly organized, validly existing and in good standing
under the laws of the State of Delaware and is duly qualified to do business in
the State of Texas.
	 
	 	(b)	 	SD has all requisite corporate power, authority and capacity to
execute, deliver and perform this Agreement and to consummate the transaction
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transaction contemplated hereby by SD has been duly
and validly authorized by all necessary corporate action on the part of SD, and
this Agreement has been duly and validly executed and delivered by SD, and is a
valid and binding obligation of SD, enforceable against SD in accordance with
its terms, subject to Applicable Laws of bankruptcy, insolvency and similar
laws affecting creditors’ rights and remedies generally.
	 
	 	(c)	 	The execution, delivery and performance by SD of this Agreement
does not and will not (i) conflict with or violate any provision of SD’s
organizational documents; (ii) violate any provision of any Applicable Laws;
(iii) conflict with, violate, result in a breach of, constitute a default under
(without regard to requirements of notice, lapse of time, or elections of other
Persons, or any combination thereof) or accelerate or permit the acceleration
of the performance required by, any contracts or other




40









 






	 	 	 	instruments to which SD is a party; or (iv) require any consent, approval,
or authorization of, or filing of any certificate, notice, application,
report, or other document with, any Governmental Authority or other Person
that has not been obtained or the failure to obtain which would cause a
material adverse effect on SD’s ability to perform its obligations under
this Agreement.
	 
	 	(d)	 	SD Gas and CO2 delivered to Oxy under this Agreement shall be
free and clear of any liens, security interests or other encumbrances or
adverse claims of any parties (including Royalty Obligations).






     9.3 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT BUT WITHOUT
LIMITING ANY OF OXY’S OR SD’S RIGHTS AND OBLIGATIONS UNDER THE CONSTRUCTION MANAGEMENT
AGREEMENT, NEITHER OXY NOR SD MAKES, AND EACH HEREBY DISCLAIMS, ANY AND ALL EXPRESS OR IMPLIED
REPRESENTATIONS OR WARRANTIES, STATUTORY OR OTHERWISE, INCLUDING WARRANTIES OF FITNESS FOR
PARTICULAR PURPOSE, WARRANTIES OF MERCHANTABILITY, OR WARRANTIES AS TO QUALITY OR CONFORMANCE
WITH DESCRIPTION OR SAMPLE.



ARTICLE X

ACCOUNTING AND PAYMENTS





     10.1 Data to be Supplied by Oxy. Oxy agrees to furnish to SD Monthly statements
regarding the Century Plant and any other amounts due from SD pursuant to Sections 3.3(b),
3.5(f), 4.6(d) and Article VI on or before the twentieth (20th) day of the following
Month. The Parties shall cooperate in determining the form of such monthly statement.




     10.2 Data to be Supplied by SD. SD agrees to furnish to Oxy Monthly statements
regarding each of the Pikes Peak Plant, Grey Ranch Plant or Mitchell Plant as to those Months
during which SD delivered to Oxy at the Legacy Plant Delivery Points CO2 from such plant and any
other amounts due from Oxy pursuant to Sections 3.3(c), 3.3(j), 3.5(g), 4,6(a) and 4.11. The
aforesaid monthly statements shall be delivered to Oxy on or before the twentieth
(20th) day of the following Month. The Parties shall cooperate in determining the
form of such monthly statements.




     10.3 Invoices.




	 	(a)	 	Each Party owed any amounts pursuant to this Agreement from the
other Party shall invoice the other Party as soon as practicable after it has
received the information needed to compute such amounts (but in any event no
more frequently than Monthly), and the amounts covered by each such invoice
shall be due within thirty (30) days following the date the recipient of the
invoice received the same.
	 
	 	(b)	 	If the Party receiving an invoice hereunder in good faith
disputes all or any portion of such invoice, it may notify the invoicing Party
in writing of




41









 






	 	 	 	the basis for such dispute. The Party receiving the invoice shall pay the
undisputed portion of the invoice. No payment of any amount reflected on an
invoice shall constitute any limitation or waiver of each Party’s rights
pursuant to Section 10.4. The nonpayment by a Party of any amount disputed
by such Party and for which a notice has been given to the other Party
pursuant to the preceding provisions shall not give rise to a default
hereunder; provided, upon the resolution of such dispute any amount
determined (whether by mutual agreement, judgment or otherwise) to be owed
by the disputing Party shall be paid within fifteen (15) Business Days after
such determination together with interest thereon pursuant to Section
12.6(a) from the due date of the original invoice until paid.
	 
	 	(c)	 	Each Party shall pay or cause to be paid in U.S. Dollars in
immediately available funds all amounts which become due and payable by such
Party hereunder to a bank account or accounts designated by and in accordance
with instructions issued by the Party entitled to receive the payment.






     10.4 Auditing. Each Party shall have the right at reasonable business hours to
examine the books, records and measurement documents of the other Party to the extent necessary
to verify the accuracy of any statement, payment, calculation or determination made pursuant to
the provisions of this Agreement for any calendar year within two calendar years following the
end of such calendar year. If any such examination shall reveal, or if either Party shall
discover, any error or inaccuracy in its own or the other Party’s statement, payment,
calculation or determination, then proper adjustment and correction thereof shall be made as
promptly as practicable thereafter, except that no adjustment or correction shall be made if
more than three (3) Years have elapsed since the error or inaccuracy occurred.




     10.5 Waiver of Lien Rights. Each Party fully waives and releases any and all
rights that it may have under Applicable Law to retain (or encumber with a lien or security
interest) any SD Gas, Residue Gas, Century Plant Products, Century Plant CO2, Legacy Plant Oxy
CO2, SD Equity CO2, Subject CO2 or CO2 acquired by Oxy pursuant to this Agreement in partial or
full satisfaction of, or to secure the payment of, any amount due to such Party from the other
Party pursuant to this Agreement.




     10.6 Set Off Rights. If any amount (other than amounts being disputed in good
faith pursuant to Section 10.3(b)) becomes due and payable pursuant to the terms of this
Agreement and has not been paid by the Party required to pay the same (an “Outstanding
Amount”), the other Party may set off the Outstanding Amount against any amounts owed or to
become owing by such other Party pursuant to this Agreement to the Party that has failed to pay
the Outstanding Amount.



ARTICLE XI

SCHEDULES




     11.1 Completion of Century Facilities.



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	 	(a)	 	At least twelve (12) Months prior to the anticipated Selexol
Unit In-Service Date, SD shall provide Oxy with a written notice specifying a
two (2) Month window within which SD anticipates the occurrence of the Selexol
Unit In-Service Date. Thereafter, at least six (6) Months, three (3) Months
and one (1) Month prior to the anticipated Selexol Unit In-Service Date, SD
shall provide additional notices to Oxy specifying the anticipated Selexol Unit
In-Service Date, each of which may specify a window for such Unit 1 In Service
Date that is forth-five (45) days, thirty (30) days and fifteen (15) days,
respectively. SD shall use commercially reasonable efforts to assure that the
Selexol Unit In-Service Date occurs within the windows specified in the notices
delivered pursuant to this Section 11.1(a).
	 
	 	(b)	 	At least twelve (12) Months prior to the anticipated Century
Facilities In-Service Date, SD shall provide Oxy with a written notice
specifying a two (2) Month window within which SD anticipates the occurrence of
the Century Facilities In-Service Date. Thereafter, at least six (6) Months,
three (3) Months and one (1) Month prior to the anticipated Century Facilities
In-Service Date, SD shall provide additional notices to Oxy specifying the
anticipated Century Facilities In-Service Date, each of which may specify a
window for such Century Facilities In-Service Date that is forty-five (45)
days, thirty (30) days and fifteen (15) days, respectively. SD shall use
commercially reasonable efforts to assure that the Century Facilities
In-Service Date occurs within the windows specified in the notices delivered
pursuant to this Section 11.1(b).






     11.2 Operations Reporting and Other Information.




	 	(a)	 	The Century Plant operator shall provide the non-operator a
monthly report on or before the twentieth (20th) day of each Month
which includes, (i) for each day of the previous Month: (A) runtime, (B) loss,
(C) SD Gas MSCF, (D) SD Gas Btus, (E) Residue Gas MSCF, (F) Residue Gas Btus,
(G) Century Plant CO2 MSCF, (H) Century Plant CO2 Btus and (I) plant balance,
and (ii) for the previous month: (A) the monthly total of each of the daily
reported values and (B) plant product barrels, in a mutually agreeable format.
	 
	 	(b)	 	Each Party shall endeavor to keep the other Party informed of
any current or anticipated operational or commercial constraints, events of
Force Majeure, maintenance or repairs, impacting such Party’s ability to
perform its obligations pursuant to this Agreement. In addition, each Party
shall furnish such other information as the other Party may reasonably request.




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ARTICLE XII

REMEDIES





     12.1 Termination Rights. The Parties agree that this Agreement may be terminated
only in accordance with the provisions of this Section 12.1 and each Party waives any other
rights that such Party may have under Applicable Laws to terminate this Agreement.




	 	(a)	 	Oxy, on one hundred eighty (180) days prior written notice to
SD, may terminate this Agreement at any time; provided, in order for such
termination to be effective, Oxy, on or before expiration of such one hundred
eighty (180) day period, shall (i) pay to SD the full amount of the Section 4.9
Payment under Section 4.9(c), calculated as if the “Adjusted Annual Oxy CO2
Percentage” specified by Oxy is 0%, (ii) cause full title and interest in the
Century Facilities to be transferred to SD (such transfer to SD to be without
any representations or warranties from Oxy [save for standard representations
with respect to ownership and title], and to be without any ongoing
indemnification obligations from Oxy), and (iii) to pay to SD 100% of the
portion of the cost to construct the Century Facilities paid by SD (i.e., in
excess of any amounts paid by Oxy for the construction of the Century
Facilities), as amortized (i.e., reduced) using the same amortization schedule
that Oxy elects to use in respect of the Century Facilities. SD, by written
notice to Oxy, may elect to accept such termination by Oxy without the delivery
of title to the Century Facilities. Within a reasonable period of time
following request by Oxy, SD shall provide to Oxy the amount described in
clause (iii) above.
	 
	 	(b)	 	SD, on one hundred eighty (180) days prior written notice to
Oxy, may terminate this Agreement at any time, provided that such a termination
shall not be effective except and until SD has delivered to Oxy a payment equal
to the sum of (i) the full amount of the Section 4.9 Payment under Section
4.9(c), calculated as if the “Adjusted Annual Oxy CO2 Percentage” specified by
SD is 0%, and (ii) 100% of the then current book value of the Century
Facilities (including all initial costs of constructing the Century Facilities,
as well as all capital costs subsequently incurred by Oxy in respect of the
Century Facilities), such book value to be calculated in accordance with
generally accepted accounting principles. Within a reasonable period of time
following request by SD, Oxy shall provide to SD the amount described in clause
(iii) above.






     12.2 Payment Obligations. If a Party fails to pay when due any payment under this
Agreement and such failure is not remedied within fifteen (15) Business Days after written
notice thereof from the other Party, interest shall thereafter accrue on such amounts at the
rate set forth in Section 12.6.




     12.3 Other Obligations. If a Party fails to comply with any of its obligations
under this Agreement (excluding the obligations covered by Article III or IV) and such



44









 







failure is not remedied for thirty (30) days after written notice thereof, or if the
failure is not reasonably capable of cure within thirty (30) days, then such Party has not
commenced to cure the failure within said thirty (30) day period and is not diligently pursuing
the cure in good faith thereafter, then (except as otherwise explicitly set forth in this
Agreement) the sole remedy of such Party shall be to sue the defaulting Party for damages.




     12.4 Waiver of Consequential Damages. NOTWITHSTANDING ANYTHING TO THE CONTRARY BUT
WITHOUT LIMITING THE RIGHTS AND OBLIGATIONS OF THE PARTIES PURSUANT TO SECTIONS 4.6, 4.7 AND 4.8
AND THIS ARTICLE XII, IN NO EVENT SHALL A PARTY EVER BE LIABLE TO THE OTHER PARTY, AND EACH
PARTY HEREBY WAIVES AND RELEASES THE OTHER PARTY, WITH RESPECT TO ANY CLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT FOR ANY LOST OR PROSPECTIVE PROFITS OR ANY OTHER SPECIAL,
CONSEQUENTIAL, INCIDENTAL OR INDIRECT LOSSES OR DAMAGES FROM ITS PERFORMANCE UNDER THIS
AGREEMENT OR FOR ANY FAILURE OF PERFORMANCE HEREUNDER OR RELATED HERETO, WHETHER ARISING OUT OF
BREACH OF CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE.




     12.5 Effect of Termination. Termination of this Agreement for any reason shall not
affect (a) Oxy’s obligation to deliver to SD Residue Gas and Century Plant Products resulting
from the treatment of SD Gas at the Century Plant prior to such termination, (b) each Party’s
payment obligations pursuant to Article X with respect to amounts due under this Agreement that
are attributable to periods prior to such termination, (c) any Party’s indemnification
obligations under this Agreement or (d) any other obligations of either Party which by their
nature are to be performed after termination of this Agreement.




     12.6 Past Due Interest. (a) Amounts that become due pursuant to Section 10.3(b)
shall bear interest at the lesser of the highest legally permissible rate or LIBOR plus 2%.



          (b) If either Party fails to pay any amount payable to the other Party hereunder when due
(excluding amounts covered by Section 12.6(a)), interest thereon shall accrue and be payable at the
lesser of the highest legally permissible rate or LIBOR plus 7% from the date when payment was due
until the date payment is made.





     12.7 Reasonable Damages. The Parties acknowledge and agree that the terms,
conditions and amounts fixed as liquidated damages and exclusive remedies pursuant to Sections
3.3, 4.7, 4.8, 4.9 and 12.1, are reasonable, considering the loss of revenues and the actual
costs that either Party will incur if the other Party fails to satisfy the delivery, take and
treating obligations (as applicable) set forth in Sections 4.1 and 3.1. The amounts and terms
of such liquidated damages and exclusive remedies are agreed upon and fixed hereunder by the
Parties because of the difficulty of ascertaining the exact amount of losses and/or costs that
will be actually incurred by SD or Oxy in such event, and the Parties hereby agree that all such
amounts are a reasonable estimate of SD’s or Oxy’s probable loss (and are not a penalty) and
that such amounts shall be applicable regardless of the amount of such lost revenues and
increased costs actually incurred by such Party.



45









 





ARTICLE XIII

INDEMNIFICATION AND RELEASE





     13.1 Employee; Third Person Claims. Each Party (the “Indemnifying Party”)
shall indemnify, protect, defend and hold harmless the other Party and Affiliates of the other
Party (the “Indemnified Parties”) from and against (i) any and all Claims arising out of
the performance of this Agreement made by the employees working at the Century Plant of the
Indemnifying Party or the employees of contractors or subcontractors of the Indemnifying Party
involved in work related to the Century Plant, (ii) any and all Claims arising out of the
performance of this Agreement made by Persons other than a Party or its Affiliates for bodily
injury to or death of, or damage to or loss of property of, such Person and caused or
contributed to by the gross negligence of the Indemnifying Party, and (iii) any losses or Claims
arising out of a breach by such Party of its representations as set forth in this Agreement.
THE AFORESAID INDEMNIFICATION OBLIGATIONS SHALL APPLY EVEN IF THE NEGLIGENCE OR GROSS NEGLIGENCE
OF ANY ONE OR MORE OF THE INDEMNIFIED PARTIES CAUSED OR CONTRIBUTED TO SUCH CLAIM; PROVIDED, AS
TO CLAIMS COVERED BY CLAUSE (ii) PRECEDING THE INDEMNIFYING PARTY SHALL NOT BE OBLIGATED TO
PROVIDE INDEMNIFICATION FOR THE PORTION (IF ANY) OF SUCH CLAIMS DETERMINED TO HAVE BEEN CAUSED
BY THE NEGLIGENCE OR GROSS NEGLIGENCE OF ANY ONE OR MORE OF THE INDEMNIFIED PARTIES.




     13.2 Release. Each Party (the “Releasing Party”) hereby waives and
releases the other Party and Affiliates of the other Party from any damage to or destruction or
loss of property owned or in the possession of the Releasing Party or Affiliates of the
Releasing Party caused in whole or in part by the other Party or Affiliates of the other Party
(the “Released Parties”) INCLUDING DAMAGES, DESTRUCTION OR LOSS DUE TO THE NEGLIGENCE,
GROSS NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF ANY OF THE RELEASED PARTIES; provided,
during any period that SD is responsible for obtaining all risk physical damage insurance
coverage for the Century Plant pursuant to Section 3.3(k)(iii), SD shall be responsible for any
physical damage to or physical loss of the Century Plant.



ARTICLE XIV

FORCE MAJEURE





     14.1 Force Majeure.




	 	(a)	 	If either Party is rendered unable, wholly or in part, by Force
Majeure to carry out its obligations under this Agreement, it is agreed that,
on such Party’s giving notice and reasonably full particulars of such Force
Majeure to the other Party promptly after the occurrence of such Force Majeure
event, then the obligations of the Party giving such notice, so far as they are
affected by such Force Majeure event, shall be suspended during the continuance
of such Force Majeure event, but for no longer period than such Force Majeure
event could be remedied with all reasonable efforts (except as provided in
Section 14.2).




46









 






	 	(b)	 	As used in this Agreement, “Force Majeure” events shall include
any events or circumstances (or any combination of events and/or circumstances)
not within the reasonable control, directly or indirectly, of the Party
affected, but only if and to the extent that: (i) such event(s) and/or
circumstance(s), despite the exercise by such Party of the Standards of a
Reasonable and Prudent Person, cannot be prevented, avoided or removed by such
Party, (ii) such event(s) and/or circumstance(s) causes or results in a failure
by such Party to perform its obligations under this Agreement, and (iii) such
Party has taken all reasonable precautions, exercised due care and has taken
reasonable alternative measures in order to avoid the effect of such event(s)
and/or circumstance(s) on such Party’s ability to perform such obligations and
to mitigate the consequences thereof. “Force Majeure” events include:






	 	(i)	 	any act of God or the public enemy, fire,
explosion, flood, war, terrorism, national emergency, riot, sabotage or
embargo, in each case affecting the physical operation of or, in the
case of an asset not owned or controlled by such Party, the ability to
utilize, (A) the Century Plant or any of the Legacy Plants, (B) any of
the pipelines from the SD Upstream Compressor Facilities to the Century
Plant or to the Legacy Plants, as applicable, (C) any of the pipelines
through which Residue Gas is transported from the Century Plant to the
applicable transmission pipeline, (D) any of the pipeline through which
CO2 is transported from the Century Plant or any of the Legacy Plants,
as applicable, to the Denver City Facilities, (E) the SD Upstream
Compressor Facilities, and (F) the Denver City Facilities
(collectively, the “FM Assets”);
	 
	 	(ii)	 	any Labor Difficulties from whatever cause
arising and whether or not the demands of the employees involved are
within the power of the claiming Party to concede, in each case
affecting the physical operation of, or the ability to utilize, any of
the FM Assets;
	 
	 	(iii)	 	compliance with any order, action, direction
or request of any Governmental Authority or with any Applicable Law not
brought about by any action or omission on the part of the Party
claiming the Force Majeure, in each case affecting the physical
operation of, or the ability to utilize, the FM Assets; and
	 
	 	(iv)	 	failure of any utilities, or lack of access or
adequate supply of any utilities (including water), needed to operate a
FM asset.






	 	(c)	 	Notwithstanding the terms of Section 14.1(b), “Force Majeure”
shall expressly exclude the following events:






	 	(i)	 	the negligence or misconduct of the Party (or
any of its Affiliates) claiming Force Majeure relief in connection with
the performance




47









 






	 	 	 	or non-performance of the terms of this Agreement or any related
activity;
	 
	 	(ii)	 	late delivery of equipment or materials (unless
caused by an independent Force Majeure event);
	 
	 	(iii)	 	changes in costs of goods and services,
changes in costs of regulatory or other compliance with Applicable Laws
and regulations;
	 
	 	(iv)	 	failure of such Party’s subcontractors to
perform (unless caused by an independent Force Majeure event);
	 
	 	(v)	 	economic hardship, the lack of finances, or
economic convenience; and
	 
	 	(vi)	 	the failure of either Party to pay money
pursuant to the terms of this Agreement.






     14.2 Strikes and Lockouts. It is understood and agreed that the settlement of
strikes or lockouts shall be entirely within the discretion of the Party suffering the Labor
Difficulties and that the above requirement that any Force Majeure shall be remedied with all
reasonable dispatch shall not require the settlement of the Labor Difficulties by acceding to
the demands of any opposing party when such course is inadvisable in the discretion of the Party
suffering the Labor Difficulties. Notwithstanding the foregoing a Party suffering Labor
Difficulties shall act in good faith with respect to the other Party when attempting to remedy
such Labor Difficulties.




     14.3 Reference to Expert. Any dispute between the Parties with respect to matters
addressed in Article XIV shall be resolved pursuant to Section 16.5(b).



ARTICLE XV

INSURANCE





     15.1 Coverages. Each Party shall procure and maintain during the Term the
insurance coverages set forth on Exhibit D.




     15.2 Certificates: Proof of Loss. On or before the required date for the insurance
to be provided hereunder, each Party shall furnish certificates of insurance to the other Party
evidencing the insurance required of such Party pursuant to this Agreement.



ARTICLE XVI

GENERAL PROVISIONS





     16.1 Relationship of the Parties. The Parties do not intend to create, and this
Agreement shall not be construed to create, a partnership, joint venture or any fiduciary
relationship between the Parties.



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     16.2 No Third Party Beneficiaries. This Agreement is intended to be solely for the
benefit of Oxy and SD, their successors and permitted assignees, and is not intended to and
shall not confer any rights or benefits on any other Person.




     16.3 Confidentiality. Unless required by Applicable Laws or the rules of any
recognized, national stock exchange, neither Party shall disclose or otherwise make available to
any other Person (other than such Party’s Affiliates, employees, contractors and subcontractors
thereof, officers, directors, legal advisors, financial advisors, accountants, prospective
lenders and assignees; provided, as a condition to such disclosure each such Person shall agree
to maintain the confidentiality of such information) any information regarding the Century
Facilities, the existence of or the terms of this Agreement, or information made available by SD
to Oxy pursuant to Section 4.5 (“Confidential Information”) without the prior written
consent of the other Party. Confidential Information shall not include information which (a)
the Party can demonstrate was known to it prior to its disclosure by the other Party; (b) is, or
later becomes, public knowledge without breach of this Agreement by such Party; (c) was received
by such Party from a third party without obligation of confidentiality; or (d) is developed by
such Party independently from Confidential Information received from the other Party, as
evidenced by appropriate documentation. In the event that disclosure is required by court order
or a Governmental Authority, the Party subject to such requirement shall promptly notify the
other Party and will use reasonable efforts to obtain protective orders or similar restraints
with respect to such disclosure. The Parties acknowledge and agrees that, in the event of any
breach or threatened breach of this Section 16.3 by either Party or its Affiliates, the other
Party would be irreparably harmed and could not be made whole by monetary damages recoverable
under this Agreement. Accordingly, in addition to any other remedy to which a Party may be
entitled at law or in equity, and notwithstanding any other provision in this Agreement, a Party
shall be entitled to an injunction or injunctions (without the posting of any bond and without
proof of actual damages) to prevent breaches or threatened breaches of, or to compel specific
performance of, the provisions of this Section 16.3, and neither Party, its Affiliates, nor its
representatives shall oppose the granting of such relief in any court of competent jurisdiction
provided the request for injunction is reasonable. For the purpose of this Section 16.3, the
Parties, on their and their Affiliates’ behalf, hereby irrevocably agree to submit to the
non-exclusive jurisdiction of any court or tribunal of competent jurisdiction in which a claim
for injunction is brought. In the event such injunctive relief is sought, the losing Party
agrees to reimburse the prevailing Party for all costs, including reasonable legal counsel fees,
incurred by the prevailing Party.




     16.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
TEXAS, WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF.




     16.5 Disputes; Jurisdiction.




	 	(a)	 	EXCEPT AS PROVIDED IN SECTION 16.5(b), ANY DISPUTE
ARISING UNDER OR RELATING TO THIS AGREEMENT OR THE RIGHTS AND DUTIES OF THE
PARTIES ARISING OUT OF THIS AGREEMENT MAY BE BROUGHT ONLY IN THE UNITED STATES




49









 






	 	 	 	DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS (OR IF THAT COURT REFUSES
JURISDICTION, THE DISTRICT COURT OF THE STATE OF TEXAS SITTING IN AND FOR
HARRIS COUNTY) AND NOT IN ANY OTHER COURT OR TRIBUNAL. EACH PARTY SUBMITS
ITSELF AND ITS PROPERTY TO THE PERSONAL JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS AND THE COURTS OF THE
STATE OF TEXAS SITTING IN AND FOR HARRIS COUNTY, IN ANY SUCH ACTION. EACH
PARTY WAIVES ANY OBJECTION THAT IT NOW OR IN THE FUTURE MAY HAVE TO THE
VENUE OF ANY SUCH ACTION AND ANY RIGHT TO ASSERT THAT THE COURT IS
INCONVENIENT, AND AGREES NOT TO RAISE ANY SUCH OBJECTION OR ASSERTION.
	 
	 	(b)	 	Notwithstanding anything to the contrary in Section 16.5(a)
(but subject to Section 16.5(c)), if pursuant to any of the other terms of this
any dispute is specifically required to be resolved pursuant to this Section
16.5(b), such dispute shall be resolved as follows:






	 	(i)	 	No later than three (3) Business Days after the
date either Party delivers to the other Party written notice of such
dispute, the Parties shall meet for a period not to exceed three (3)
Business Days and attempt in good faith to resolve such dispute;
	 
	 	(ii)	 	If the Parties are unable to resolve such
dispute within such three (3) Business Day period, either Party may
demand by written notice to the other Party that such dispute be
considered jointly by an Executive Officer of each Party. No later
than three (3) Business Days after the date of such notice, each Party
shall cause its Executive Officer to meet with the other Party’s
Executive Officer and attempt in good faith to resolve such dispute.
Any decision of the Parties’ Executive Officers with respect to such
dispute shall be final and binding on the Parties;
	 
	 	(iii)	 	If the Parties’ Executive Officers are unable
to resolve such dispute within a five (5) Business Day period, then
either Party may demand by written notice to the other Party that such
dispute be resolved by an independent and impartial individual of
national standing with relevant qualifications and experience appointed
by an agreement between the Parties (a “Sole Expert”). If the
Parties fail to agree on the Sole Expert, either Party may request that
the International Institute for Conflict Prevention and Resolution
appoint the Sole Expert. Any Sole Expert so appointed shall be acting
as an expert and not as an arbitrator. The Sole Expert shall issue a
decision with respect to such dispute no later than twenty (20)
Business Days after the date such dispute is referred to the Sole
Expert. The decision of the Sole Expert with respect to such




50









 






	 	 	 	dispute shall (expect in the case of manifest error or fraud) be
final and binding on the Parties. The decision of the Sole Expert
may include a requirement that a Party specifically perform any
obligation of such Party that is part of the subject matter of the
applicable dispute. The costs and expenses of the Sole Expert shall
be borne equally by the Parties.
	 
	 	(iv)	 	It is the intent of the Parties that the
dispute resolution proceedings described in this Section 16.15(b) shall
be conduced expeditiously, without initial recourse to the courts
(except on account of equitable relief as provided below), and without
interlocutory appeals of the decisions to the courts. However, if a
Party refuses to honor its obligations under this Section 16.5(b), the
other Party may obtain appropriate relief in the court referenced in
Section 16.5(a) compelling performance under this Section 16.5(b). Any
and all of the Sole Experts’ orders and decisions may be enforced if
necessary by the court referenced in Section 16.5(a). EACH PARTY
AGREES THAT DISPUTE RESOLUTION PURSUANT TO THIS SECTION 16.5(b) SHALL
BE THE EXCLUSIVE METHOD FOR RESOLVING ALL DISPUTES COVERED BY SECTION
16.5(b) AND THAT IT WILL NOT COMMENCE AN ACTION OR PROCEEDING, EXCEPT
AS PROVIDED IN THIS SECTION 16.5(b).






	 	(c)	 	Notwithstanding anything to the contrary other than (and
subject to) Section 16.5(b), each Party may bring actions in the court
referenced in Section 16.5(a) seeking injunctions to prevent any breach or
violation of this Agreement or seeking to compel performance with the terms and
provisions of this Agreement.






     16.6 Effect of Waiver. No waiver by a Party of any one or more defaults by the
other Party in the performance of this Agreement shall operate or be construed as a waiver of
any future default or defaults, whether of a like or different character.




     16.7 Assignment. Neither Party may assign this Agreement nor any of its rights
hereunder without the prior written consent of the other Party, such consent not to be
unreasonably withheld or delayed; provided, each Party shall have the right to assign this
Agreement or any of its rights hereunder to one of its Affiliates without the consent of the
other Party. A Party may withhold its consent to any proposed assignment if such Party
determines in good faith that the proposed assignee does not have the financial, technical or
operating ability to guarantee proper and timely payment and performance of the obligations of
the assignor Party under this Agreement. With respect to any assignment effectuated in
accordance with the terms of this Section 16.7 to a non Affiliate, the assignor Party (a) shall
be released from and not be liable for any obligations arising under this Agreement that are
attributable to any period from and after the effective date of such assignment, and (b) shall
remain liable for all obligations on the part of the assignor Party arising under this Agreement
that are attributable to any period prior to the effective date of such assignment.



51









 







With respect to any assignment effectuated in accordance with the terms of this Section
16.7 to an Affiliate, the assignor Party shall remain liable with the Affiliate (on a joint and
several basis) for all obligations on the part of the assignor Party arising under this
Agreement that are attributable to any period prior to or after the effective date of such
assignment.




     16.8 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and the same
instrument.




     16.9 Entire Agreement. This Agreement constitutes the entire agreement between the
Parties pertaining to the subject matter hereof and supersedes all prior agreements,
representations and understandings, written or oral, pertaining thereto.




     16.10 Amendments. No modifications, amendments, or other changes in or to this
Agreement will be binding on any Party unless consented to in writing by each Party.




     16.11 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of that prohibition or unenforceability without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of that provision in any other
jurisdiction.




     16.12 Notices. All notices, statements, and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have been properly
given when deposited in the United States Mail, postage prepaid, sent by mutually acceptable
electronic means, delivered by Western Union telegraph or courier service with charges prepaid,
or transmitted by a facsimile transmission device (telecopier), as the case may be, followed by
delivery of the original, and addressed as follows:




If to Oxy:


For contractual matters (including accounting):



CO2 Contracts Coordinator

Occidental Permian Ltd.

5 Greenway Plaza, Suite 110

Houston, Texas 77046

Fax: 713-985-1742

Email: CO2_Contracts@oxy.com


For operational/nomination matters:



52









 






CO2 Nominations Coordinator

Occidental Permian Ltd.

5 Greenway Plaza, Suite 110

Houston, Texas 77046

Fax: 713-985-1286

Email: CO2_Nominations@oxy.com


For all matters other than operational/nomination or contractual matters:


President and General Manager

Occidental Permian Ltd.

5 Greenway Plaza, Suite 110

Houston, Texas 77046

Fax: 713-985-8952

Email: ken_dillon@oxy.com


with copy to:


Vice President Acquisitions and Corporate Finance

Oxy USA Inc.

10889 Wilshire Boulevard

Los Angeles, California 90024

Fax: 310-443-6435

Email: todd_stevens@oxy.com


and


Occidental Oil and Gas Corporation

Vice President and General Counsel

10889 Wilshire Boulevard

Los Angeles, California 90024

Fax: 310-443-6192

Email: michael_preston@oxy.com



53









 






If to SD:


For contractual matters:


Senior Counsel

SandRidge Energy, Inc.

123 Robert S. Kerr Avenue

Oklahoma City, OK 73102

Fax: 405-753-5988

Email: scargill@sdrge.com




For accounting matters:




Assistant Controller — Midstream

SandRidge Energy, Inc.

123 Robert S. Kerr Avenue

Oklahoma City, OK 73102

Fax: 405-463-5512

Email: shopkins@sdrge.com




For operational matters:




Manager of Treating and Processing

SandRidge Energy, Inc.

123 Robert S. Kerr Avenue

Oklahoma City, OK 73102

Fax: 405-753-5986

Email: cmidkiff@sdrge.com




For nomination matters:




CO2 Coordinator

6 Desta Drive, Suite 6300

Midland, Texas 79705

Fax: 432-687-4244

Email: bharryman@sdrge.com


or, to such other address as either Party shall hereafter notify the other from time to time. If an
emergency affects significantly the ability of a Party to perform under this Agreement, such Party
shall notify the other Party by telephone or in person as soon as possible of the event, the
consequences and anticipated duration of such emergency and confirm such notification in writing as
soon thereafter as is practicable. Notices shall be effective upon receipt. From time to time the
Parties may mutually agree to the delivery of nominations, operating information regarding the
Century Facilities or other similar information through electronic means, in which


54









 






case such agreement shall be evidenced by a letter agreement or other instrument supplementing this
Agreement.





     16.13 Authorized Representatives. In order to secure effective cooperation and to
deal on a prompt and orderly basis with the various scheduling and administrative issues which
may arise in connection with the rights and obligations of the Parties hereunder, each Party
shall appoint its own Authorized Representative and notify the other Party in writing of such
representative’s name, address, e-mail address, facsimile and telephone number within five days
after the execution of this Agreement. Either Party may, at any time, change the designation of
its Authorized Representative, provided such Party shall promptly notify the other Party in
writing of such change. Each Party’s Authorized Representative shall be authorized to
administer, but not modify or amend, this Agreement on behalf of such Party and agree upon
procedures and provide such information as is necessary for coordinating the efforts of the
Parties.




     16.14 Public Announcements. The Parties shall not, except as required by
Applicable Laws or the rules of any recognized national stock exchange, (i) cause any public
announcement to be made regarding this Agreement or the Construction Management Agreement
without the consent of the other Party, which consent shall not be unreasonably withheld, or
(ii) make any public statements regarding the construction of the Century Facilities without
using reasonable efforts to consult the other Party; provided, in no event shall details of the
commercial terms of this Agreement or the Construction Management Agreement be disclosed. If a
Party shall be required to cause such a public announcement to be made pursuant to any
Applicable Laws or the rules of any recognized national stock exchange, such Party shall
endeavor to provide the other Party at least 48 hours prior written notice of such announcement.




     16.15 Power Marketing. To the extent Oxy has an Affiliate engaged in power
marketing, Oxy shall cause such Affiliate to offer the same services to SD, where commercially
reasonable, for no charge other than the cost of the electricity.



Signature Pages Follow




55









 






     IN WITNESS WHEREOF the Parties have executed this Agreement as of the Effective Date.



	 	 	 	 	 
	 	OXY USA INC., a Delaware corporation





 	 
	 	By:  	/s/ Todd A. Stevens
 	 
	 	 	Todd A. Stevens, Vice President 	 
	 	 	 	 
	 


[Signature page to Gas Treating and CO2 Delivery Agreement]




 









 





	 	 	 	 	 
	 	SANDRIDGE EXPLORATION AND PRODUCTION, LLC





 	 
	 	By:  	/s/ Tom L.Ward
 	 
	 	 	Tom L.Ward, Chairman, 	 
	 	 	Chief Executive Officer and President 	 
	 




[Signature page to Gas Treating and CO2 Delivery Agreement]