exv10w6



 






EXHIBIT 10.6




CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933




FRACTIONATION AGREEMENT



This AGREEMENT is made and entered into this 18th day of July, 1997, by and between
MAPCO Natural Gas Liquids Inc., hereinafter called “MNGL”, and Amoco Oil Company, hereinafter
called “Amoco.”




PREMISES



A. Amoco owns or controls demethanized natural gas liquids from sources in Amoco Pipeline Company’s
Wattenberg to Bushton pipeline system (“Wattenberg”).



B. Amoco also owns or controls demethanized natural gas liquids which are produced at Amoco
Production Company’s Hugoton Gas Processing Plant (“Hugoton”) in Grant County, Kansas.



C. MNGL owns or has rights to fractionation facilities in Conway, Kansas and other locations.



D. Amoco intends to have MNGL fractionate its natural gas liquids, and MNGL intends to fractionate
the natural gas liquids owned or controlled by Amoco from Wattenberg and Hugoton.



THEREFORE, based on the foregoing premises and in consideration of the mutual promises contained
herein, the parties agree as follows:




ARTICLE 1

DEFINITIONS AND EXHIBITS



1.1 Definitions. The following definitions of terms shall apply for all purposes of this
Agreement, including the preambles and exhibits:




     1.1.1 “Agreement” means this Fractionation Agreement as amended, restated,
supplemented, or otherwise modified from time to time.



     1.1.2 “Fractionator” shall mean MNGL’s fractionator located at Conway, Kansas or any
other fractionator which may be used by MNGL to provide fractionation service.



     1.1.3 “Y-grade” shall mean the combined stream of Liquid Hydrocarbons delivered by
Amoco meeting the specifications in Exhibit “A”.



     1.1.4 “Barrel” shall mean 42 U.S. Gallons.





 




	*****	 	denotes confidential information with respect to which a separate confidential treatment
request has been filed with the Securities and Exchange Commission.




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     1.1.5 “Products” shall mean the commercial products fractionated from the Y-grade,
including ethane/propane mix (“G-grade”), propane (“P-grade”), isobutane (“I-grade”), normal butane
(“D-grade”), and natural gasoline (“M-grade”).



     1.1.6 “Business Day” shall mean any day during which the main offices of MAPCO Inc.
are officially open for normal business.


1.2 “Exhibits.” The following exhibits are attached to and made a part of this Agreement:




     Exhibit “A” lists the specification for Y-grade.



     Exhibit “B” lists the specifications for Products.



     Exhibit “C” includes provisions for the measurement of Y-grade and Products.



     Exhibit “D” is the procedure for dispute resolution.



ARTICLE II

Y-GRADE TO BE FRACTIONATED



2.1 Dedication of Y-grade. During the term of this Agreement, Amoco shall deliver or cause
to be delivered to MNGL for fractionation hereunder 100% of its owned or controlled Y-grade from
Wattenberg and Hugoton.



2.2 Fractionation. MNGL agrees to fractionate all of the Y-grade delivered to MNGL by or
for the account of Amoco, and MNGL shall deliver to Amoco a quantity of barrels of each Product
equivalent to 100% of the barrels of each such Product contained in the Y-grade so delivered to
MNGL. Any loss or reduction in the number of barrels of Y-grade delivered by Amoco to MNGL which
occurs as a result of the fractionation hereunder shall be borne by MNGL and not by Amoco.



2.3 Linefill. In order to facilitate MNGL’s ability to provide fractionation under this
Agreement, Amoco shall supply to Mid-America Pipeline Company (“MAPL”) a volume of Y-grade equal to
the most recent 7 days’ receipts booked into MAPL’s system from Wattenberg and Hugoton to be used
as linefill during the term of this Agreement. Linefill shall be returned to Amoco upon termination
of this Agreement.



2.4 Delivery of Products and Y-grade. MNGL will deliver Products to Amoco’s account and
custody at MAPCO-Conway Holding; provided, however, if MNGL places fractionation at KN Energy’s
fractionator at Bushton, Kansas (”Bushton”), Amoco may elect to take delivery of available D-grade,
I-grade or M-grade at Bushton, up to the measured quantity of those Products in the Y-grade at
Bushton without any additional fee for transportation from MAPCO-Conway Holding to Bushton. MNGL
will accept custody of the Y-grade as it is delivered to a fractionation facility.



2.5 Storage. MNGL shall provide Amoco storage on all Products under this Agreement received
at MAPCO-Conway Holding for ***** days without charge.



2.6 Demethanized Mix Specifications. The Y-Grade delivered by Amoco to MNGL shall meet the
specifications set forth in Exhibit “A”. To the extent amendments


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are dictated by industry practices, governmental regulation, or the reasonable operational
requirements of MAPL, MAPL reserves the right to amend these specifications from time to time, and
revised specifications shall be effective for all deliveries subsequent to the date Amoco receives
notice of the change.



2.7 Product Specifications. The Products delivered to Amoco shall meet the specifications
set forth in Exhibit “B”. To the extent amendments are dictated by industry practices, governmental
regulation, or the reasonable operational requirements of MAPL, MAPL reserves the right to amend
these specifications from time to time, and revised specifications shall be effective for all
deliveries subsequent to the date Amoco receives notice of the change.



2.8 Scheduling and Delivery. Amoco shall be responsible for scheduling and delivering
Y-grade to MAPL at delivery pressures necessary to enter MAPL’s system, but not greater than 1440
psig. Monthly tenders to MAPL for Y-grade and Products will be provided by Amoco by the 15th of the
month immediately preceding the month that deliveries are requested.



2.9 Measurement and Testing. Measurement of the Y-grade and Products, allocation of
Products, and testing of equipment will be performed by the Parties in accordance with the
provisions of Exhibit “C”. To the extent amendments are dictated by industry practices,
governmental regulation, or the reasonable operational requirements of MAPL, MAPL reserves the
right to amend these procedures from time to time. Such revised procedures shall govern 30 days
after written notice is provided to Amoco.




ARTICLE III

FRACTIONATION FEE



3.1 Initial Fractionation Fee. Amoco shall pay MNGL a fractionation fee of ***** per barrel
on the first ***** barrels per day delivered hereunder and a fee of ***** per barrel for volumes
delivered hereunder greater than ***** barrels per day, until January 1, 2001. The daily rate shall
be calculated by taking the total volume recorded at MAPL’s ticket pull, divided by the number of
days in the period covered by the ticket pull.



3.2 Fee Escalation. Beginning January 1, 2001, (by calendar quarter) the fractionation fee
will be based on the following escalation calculation applied by calendar quarter and calculated in
accordance with the actual delivered fuel cost for the previous calendar quarter.




Up to ***** barrels per day:




*****




Greater than ***** barrels per day:




*****



At no time during the term, of this Agreement will the fractionation fee be less than ***** per
barrel on the first ***** barrels per day fractionated hereunder and ***** per barrel for


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fractionated volumes greater than ***** barrels per day. Additionally, the fractionation fee will
never be greater than ***** per barrel.




ARTICLE IV

TERM



4.1 Wattenberg Term. For Y-grade from Wattenberg, this Agreement shall become effective on
January 1, 1998 and shall remain in effect for an initial term of 10 calendar years (“Primary
Term”), and thereafter It will automatically extend from calendar year to calendar year (“Extended
Term”) unless either party terminates the Agreement by giving the other party notice of termination
at least 60 days prior to the end of the Primary Term or any Extended Term. The Primary Term and
any Extended Term will be called the “Wattenberg Term” of this Agreement.



4.2 Hugoton Term. For Y-grade from Hugoton, this Agreement shall become effective on
January 1, 1998 and shall remain in effect for a period of 15 years; provided, however, either
Amoco or MNGL may terminate this Agreement on the tenth anniversary of its effective date by giving
written notice to the other during the eighth year of the Agreement. If notice of termination is not
given by the end of the eighth anniversary of the effective date, then this Agreement shall remain
in effect for the full 15 year term. The 10 year or 15 year period, whichever is applicable, will
be called the “Hugoton Term” of this Agreement. If notice of termination is given, Amoco and MNGL
shall enter into good faith negotiations for ***** days after receipt of the notice to reach terms
acceptable to both parties for the continued fractionation of Y-grade after the termination of this
Agreement. MNGL shall have the right to negotiate with Amoco if any third party offer for
fractionation is received by Amoco during the eighth year which Amoco intends to accept and which
is to become effective after the termination of this Agreement. Amoco shall provide MNGL with
information which accurately represents the terms and conditions of any such offer it receives.
Notwithstanding the foregoing, the ***** day negotiation period shall not commence until after
MNGL’s receipt of the terms and conditions of such offer. In the event Amoco has notified MNGL of
such a third party offer and Amoco elects not to accept such offer after the negotiation period
indicated above has expired, then the final offer by MNGL for that period shall be deemed to be
accepted by Amoco.



4.3 The Wattenberg Term and the Hugoton Term will be called the “Term” of this Agreement.




ARTICLE V

TAXES



5.1 Taxes. Amoco shall pay or cause to be paid all taxes which may be assessed on the Y-grade
delivered under this Agreement and subject to fractionation hereunder, and such other taxes as may
be assessed on the Products attributable to Amoco’s Y-grade fractionated hereunder. MNGL shall pay
all taxes which may be assessed on the Fractionator and on the activities performed by MNGL
hereunder.




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ARTICLE VI

LAWS, REGULATIONS, AND FORCE MAJEURE



6.1 Laws and Regulations. This Agreement and all operations hereunder shall be subject to the valid
and applicable federal, state, and local laws and the valid and applicable orders, laws, rules, and
regulations of any state, federal, or local authority having jurisdiction, but nothing contained
herein shall be construed as a waiver of any right to question or contest any such order, law,
rule, or regulations in any forum having jurisdiction in the premises. This Agreement shall be
governed by and construed in accordance with the laws of the State of Kansas without regard to the
choice of law rules of that state that would require the law of another jurisdiction to apply.



6.2 Force Majeure. No failure or omission by a party to this Agreement to carry out or observe any
of the provisions of this Agreement, other than the payment of money, shall give rise to any claim
against such party or be deemed a breach of the Agreement if such failure or omission arises from
events of force majeure. Events of force majeure shall be deemed to be acts of God, explosions,
fires, floods, acts of regulation by any governmental authority, strikes, labor difficulties,
delays in methods of transportation, civil unrest, war, breakdown of machinery or facilities
(whether total or partial), Plant or other mechanical shutdown or turnaround, and any other event
which a party is unable to prevent or overcome by the exercise of reasonable diligence. If an event
of force majeure renders a party unable to perform any of its obligations under this Agreement,
then upon giving notice in full particulars of such event of force majeure to the other parties as
soon as is practical after the event occurs, including the particulars of the affected party’s
reasonable diligence in attempting to eliminate the force majeure situation, performance shall be
suspended for the duration of the event of force majeure provided that the party claiming force
majeure exercises reasonable diligence to resolve the event of force majeure. Any strike or labor
difficulties may be addressed by the affected party in its own discretion without regard to
reasonable diligence. During the Term of this Agreement, any events of force majeure shall extend
the Term for the same period of time as the duration of the force majeure unless otherwise mutually
agreed by the parties in writing. Promptly upon the termination of the force majeure event the
party who declared it shall notify the other party of their resumption of performance.




ARTICLE VII

NOTICES



All notices or communications between the parties shall be deemed to have been properly given if
sent in writing by U.S. mall, postage prepaid, or by facsimile, addressed as follows:




     If to MNGL:



          MAPCO Natural Gas Liquids Inc.

          Manager-Fractionation, Storage and Logistics

          1800 South Baltimore Avenue 74119

          P.O. Box 645

          Tulsa, Oklahoma 74101-0645

          Fax #(918)581-1495



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     If to Amoco:



          Amoco Oil Company

          Manager, NGL Planning & Optimization

          200 E. Randolph Dr.

          Chicago, Illinois 60680-0707

          Fax #(312)616-0624


Notices or communications transmitted by mail shall be effective 3 days from the date deposited in
the U.S. mail. Notices or communications transmitted by facsimile shall be effective upon actual
receipt. Each party may change its notice address by giving notice to the other party in the
manner set forth above; provided, however, that no change of address shall be effective until
actually received by the other party.




ARTICLE VIII

WARRANTY AND INDEMNIFICATION



8.1 Warranty of Title. Amoco hereby warrants that it has the right to deliver the Y-grade
delivered hereunder and that such Y-grade is free from all liens and adverse claims of any kind.
MNGL hereby warrants that it shall keep such Y-grade, and the Products to be recovered therefrom,
free from all liens and adverse claims of any kind.



8.2 Indemnifications. MNGL shall indemnify and hold Amoco harmless against any and all
loss, cost, and expense, including court costs and attorneys’ fees, for any claims, suits,
judgments, demands, actions, or liabilities arising out of the operations conducted hereunder by
MNGL or arising while the Y-grade or the Products recovered therefrom are in MNGL’s custody. Amoco
shall indemnify and hold MNGL harmless against any and all loss, cost, and expense, including court
costs and attorneys’ fees, for any claims, suits, judgments, demands, actions, or liabilities
arising out of the operations conducted hereunder by Amoco or arising while the Y-grade or the
Products recovered therefrom are in Amoco’s custody.




ARTICLE IX

AUDIT, DISPUTE RESOLUTION, AND OTHER PROVISIONS



9.1 Audit and Inspection of Records. Each party hereto shall have the right at all
reasonable times during business hours to examine the books, records, charts, meters, measuring
equipment, and other pertinent matter or data of the other party relating to this Agreement and to
witness the tests of the other party to the extent necessary to verify the accuracy of any
statement, charge, computation, or demand under or pursuant to any other provisions hereof. If any
such examination shall reveal, or if either party shall otherwise discover, any error or inaccuracy
in its own or other party’s statements, payments, calculations, or determinations, then proper
adjustment and correction thereof shall be made as promptly as practicable thereafter; provided
that no adjustment of any statement, billing, or payment shall be made after the lapse of 2 years
from the rendition thereof unless requested during said 2-year period.




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9.2 Fractionation Fee Invoice. MNGL’s statement shall set forth the calculation of the
fractionation fee and include an invoice for the amount due. Amoco shall pay fractionation fees
within 10 Business Days of receipt of such invoice.



9.3 Dispute Resolution. Any dispute arising under this Agreement shall be resolved in
accordance with the dispute resolution procedures set forth in Exhibit “D.”



9.4 Relationship. It is not the purpose of the parties hereto to create a partnership,
joint venture, or association, or the relationship of agency or employer/employee and neither this
Agreement nor any of the operations hereunder shall be construed or considered as creating any such
relationship.



9.5 Headings. Except when comprising a part of a sentence, the headings and subheadings
used in this instrument are provided for reference purposes only and shall not be construed to
interpret or amend any part of the text hereof.



9.6 Further Acts. Each party shall, from time to time and at all times, do all such further
acts and execute and deliver all such further deeds and instruments as shall be reasonably required
in order to fully perform and carry out the terms of this Agreement.



9.7 Changes. Any change, waiver, modification, or alteration of this Agreement shall be in
writing and signed by the parties hereto and no course of dealing or course of performance between
the parties shall be construed to alter the terms hereof.



9.8 Waivers. No waiver by either party of any default of the other under this Agreement
shall operate as a waiver of any future default, whether of a like or different character.



9.9 Successors and Assigns. Neither this Agreement nor any interest herein may be assigned
by a party without the prior written consent of the other party, and such consent shall not be
unreasonably withheld. This consent requirement shall not apply to an assignment to the successor
of a party when such succession results by way of merger, consolidation, or the sale of all or
substantially all of the assets of such party, in which event all of the terms and conditions
hereof shall be fully binding upon and inure to the benefit of the successor(s).



9.10 Entire Agreement. All exhibits attached to this Agreement are incorporated herein by
reference. This Agreement constitutes the entire and exclusive understanding between the parties
concerning the referenced matters and supersedes any other oral or written agreements between the
parties relating to such matters.



9.11 Governmental Action. If any provision of this Agreement or the performance of any
party is prevented, abrogated, or substantially modified by lawful government action or court
order, the parties will endeavor in good faith to modify this Agreement so that it may continue in
effect. However, should the parties be unable to reach mutually agreeable terms in order to
perpetuate this Agreement, then a party may terminate its respective obligations upon 30 days’
prior written notice.



9.12 Compliance with Law. The parties warrant and agree that facilities identified in this
Agreement owned and operated by each party if any shall be in compliance throughout the term of
this Agreement with all applicable local, state, and federal laws,


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regulations, rules, orders, directives, and codes, licenses, and permits that apply to the
ownership, operation, and maintenance of such facilities. Each party indemnifies the other party
for any liability which may arise from the indemnifying party’s non-compliance.



IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on the date first above
written.




	 	 	 	 	 	 	 	 	 	 	 
	AMOCO OIL COMPANY
	 	 	 	MAPCO NATURAL GAS LIQUIDS, INC.
	 

	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ A. Boyd Anderson	 	 	 	By:	 	/s/ Robert T. Cronk
	 	 	 	 	 	 	 	 	 
	

	 	Name:
	 	A. Boyd Anderson
	 	 	 	 	 	Name:  Robert T. Cronk
	

	 	Title:
	 	Vice President
	 	 	 	 	 	Title:    Sr. Vice President
	

	 	 	 	NGL Supply & Logistics	 	 	 	 	 	 







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