exv10w5






Exhibit 10.5



Specific terms in this exhibit have been redacted, as marked with three asterisks (***), because
confidential treatment for those terms has been requested. The redacted material has been
separately filed with the Securities and Exchange Commission.




GAS GATHERING AGREEMENT




BY AND BETWEEN




PIÑON GATHERING COMPANY, LLC




AND




SANDRIDGE EXPLORATION AND PRODUCTION, LLC




DATED




JUNE 30, 2009





 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page
	Article 1 DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	Article 2 DEDICATION AND SERVICES
	 	 	14	 
	 
	 	 	 	 
	Section 2.1 Dedication
	 	 	14	 
	Section 2.2 Shipper’s Right To Deliver Other Gas
	 	 	15	 
	Section 2.3 Covenant Running with the Land
	 	 	15	 
	Section 2.4 Services
	 	 	15	 
	Section 2.5 Operation and Maintenance of Gathering System
	 	 	15	 
	Section 2.6 Priority of Services; Curtailment
	 	 	16	 
	Section 2.7 Third Party Gas
	 	 	16	 
	Section 2.8 Release of Dedicated Gas
	 	 	16	 
	Section 2.9 Maintenance of System Capacity
	 	 	18	 
	Section 2.10 Memorandum of Agreement
	 	 	18	 
	Section 2.11 No Breach
	 	 	18	 
	 
	 	 	 	 
	Article 3 MONTHLY SHORTFALL PAYMENTS
	 	 	18	 
	 
	 	 	 	 
	Section 3.1 Deliveries in Excess of the Base Volume
	 	 	18	 
	Section 3.2 Deliveries Less Than the Base Volume
	 	 	18	 
	Section 3.3 Force Majeure Volumes
	 	 	19	 
	Section 3.4 Monthly Shortfall Payments Offset Against Future Fees
	 	 	19	 
	Section 3.5 Example of Operation of Monthly Excess Bank
	 	 	19	 
	Section 3.6 Adjustment to Account for Released Gas
	 	 	19	 
	 
	 	 	 	 
	Article 4 WELL CONNECTIONS AND EXPANSIONS
	 	 	20	 
	 
	 	 	 	 
	Section 4.1 Well Connection and Timing
	 	 	20	 
	Section 4.2 System Expansions
	 	 	20	 
	Section 4.3 Gatherer’s Purchase of Expansions
	 	 	21	 
	 
	 	 	 	 
	Article 5 TERM
	 	 	21	 
	 
	 	 	 	 
	Section 5.1 Term
	 	 	21	 
	Section 5.2 Obligations Upon Termination
	 	 	21	 
	 
	 	 	 	 
	Article 6 SERVICE FEES AND FL&U
	 	 	21	 
	 
	 	 	 	 
	Section 6.1 Gathering Fee
	 	 	21	 
	Section 6.2 Commodity Fee
	 	 	22	 
	Section 6.3 Adjustment to Base Fee and Commodity Fee after Trigger Event
	 	 	22	 
	Section 6.4 Condensate
	 	 	22	 
	Section 6.5 Modifications to Determination of Operations Fee
	 	 	23	 
	Section 6.6 Operating Expense Budget Process
	 	 	23	 
	 
	 	 	 	 
	Article 7 ALLOCATIONS
	 	 	24	 
	 
	 	 	 	 
	Section 7.1 Fuel, Lost and Unaccounted for Gas Allocation Procedures
	 	 	24	 
	Section 7.2 Modifications to Allocation Procedures
	 	 	24	 
	 
	 	 	 	 
	Article 8 SHIPPER COMMITMENTS AND RIGHTS
	 	 	25	 
	 
	 	 	 	 
	Section 8.1 Conveyance of Rights to Gatherer
	 	 	25	 
	Section 8.2 Shipper Compression
	 	 	25	 
	Section 8.3 Gas for Lease Operations
	 	 	25	 
	Section 8.4 Pooling or Units
	 	 	26	 
	Section 8.5 Operational Control of Shipper’s Wells
	 	 	26	 
	Section 8.6 Access to Facilities
	 	 	26	 
	Section 8.7 Line Pack
	 	 	26	 
	Section 8.8 Cholla Gathering Agreement
	 	 	26	 
	 
	 	 	 	 
	Article 9 MAINTENANCE AND MARKETING OF CONDENSATE
	 	 	26	 






 









 




TABLE OF CONTENTS



	 	 	 	 	 
	 	 	Page
	Section 9.1 Maintenance
	 	 	26	 
	Section 9.2 Marketing of Condensate
	 	 	26	 
	 
	 	 	 	 
	Article 10 RECEIPT POINTS, DELIVERY POINTS, AND PRESSURES
	 	 	27	 
	 
	 	 	 	 
	Section 10.1 Receipt Points
	 	 	27	 
	Section 10.2 Delivery Points
	 	 	27	 
	Section 10.3 Uniform Deliveries
	 	 	27	 
	Section 10.4 Pressure at Receipt Points
	 	 	27	 
	Section 10.5 Pressure at Delivery Points
	 	 	28	 
	Section 10.6 Arrangements Prior to Receipt and After Redelivery
	 	 	28	 
	 
	 	 	 	 
	Article 11 NOMINATION AND BALANCING PROCEDURES
	 	 	29	 
	 
	 	 	 	 
	Section 11.1 Notice of Available Capacity
	 	 	29	 
	Section 11.2 Nomination Procedures
	 	 	29	 
	Section 11.3 Gas Balancing
	 	 	30	 
	Section 11.4 Imbalances
	 	 	30	 
	Section 11.5 Maintenance
	 	 	31	 
	Section 11.6 Unscheduled Capacity Allocations
	 	 	32	 
	Section 11.7 Modifications to Nomination and Balancing Procedures
	 	 	32	 
	 
	 	 	 	 
	Article 12 GAS QUALITY
	 	 	32	 
	 
	 	 	 	 
	Section 12.1 Receipt Point Gas Quality Specifications
	 	 	32	 
	Section 12.2 Non-Conforming Gas
	 	 	32	 
	Section 12.3 Off-Specification Receipts
	 	 	33	 
	Section 12.4 Reimbursement and Shipper Indemnity
	 	 	33	 
	Section 12.5 Delivery Point Gas Quality Specifications
	 	 	33	 
	Section 12.6 Gatherer Indemnity
	 	 	33	 
	 
	 	 	 	 
	Article 13 MEASUREMENT EQUIPMENT AND PROCEDURES
	 	 	33	 
	 
	 	 	 	 
	Section 13.1 Equipment and Specifications
	 	 	33	 
	Section 13.2 Gas Meter Standards
	 	 	33	 
	Section 13.3 Notice of Measurement Equipment Inspection and Calibration
	 	 	34	 
	Section 13.4 Measurement Accuracy Verification
	 	 	34	 
	Section 13.5 Special Tests
	 	 	35	 
	Section 13.6 Metered Flow Rates in Error
	 	 	35	 
	Section 13.7 Record Retention
	 	 	35	 
	Section 13.8 Correction Factors for Volume Measurement
	 	 	35	 
	Section 13.9 Exception to Gas Measurement Basis
	 	 	36	 
	Section 13.10 Gas Sampling
	 	 	36	 
	Section 13.11 Modifications to Measurement Procedures
	 	 	37	 
	Section 13.12 Measurement Disputes
	 	 	37	 
	 
	 	 	 	 
	Article 14 NOTICES
	 	 	37	 
	 
	 	 	 	 
	Article 15 PAYMENTS
	 	 	38	 
	 
	 	 	 	 
	Section 15.1 Payments and Invoices
	 	 	38	 
	Section 15.2 Audit Rights
	 	 	38	 
	Section 15.3 Right to Suspend on Failure to Pay
	 	 	39	 
	Section 15.4 Creditworthiness
	 	 	39	 
	Section 15.5 Payment Disputes
	 	 	39	 
	Section 15.6 Interest on Late Payments
	 	 	40	 
	 
	 	 	 	 
	Article 16 FORCE MAJEURE
	 	 	40	 
	 
	 	 	 	 
	Section 16.1 Suspension of Obligations
	 	 	40	 
	Section 16.2 Definition of Force Majeure
	 	 	40	 





 








 




TABLE OF CONTENTS





	 	 	 	 	 
	 	 	Page
	Section 16.3 Non-Gatherer Force Majeure Events
	 	 	41	 
	 
	 	 	 	 
	Article 17 INDEMNIFICATION
	 	 	41	 
	 
	 	 	 	 
	Section 17.1 Gatherer
	 	 	41	 
	Section 17.2 Shipper
	 	 	42	 
	 
	 	 	 	 
	Article 18 CUSTODY AND TITLE
	 	 	42	 
	 
	 	 	 	 
	Section 18.1 Shipper Custody
	 	 	42	 
	Section 18.2 Gatherer Custody
	 	 	42	 
	Section 18.3 Shipper Warranty
	 	 	42	 
	Section 18.4 Title
	 	 	43	 
	Section 18.5 Carbon Dioxide
	 	 	43	 
	 
	 	 	 	 
	Article 19 ROYALTY AND TAXES
	 	 	43	 
	 
	 	 	 	 
	Section 19.1 Proceeds of Production
	 	 	43	 
	Section 19.2 Production Taxes
	 	 	43	 
	Section 19.3 Indemnification
	 	 	43	 
	 
	 	 	 	 
	Article 20 DISPUTE RESOLUTION
	 	 	43	 
	 
	 	 	 	 
	Section 20.1 Negotiation
	 	 	43	 
	Section 20.2 Jurisdiction and Venue
	 	 	44	 
	Section 20.3 Jury Waiver
	 	 	44	 
	Section 20.4 Costs and Expenses
	 	 	44	 
	 
	 	 	 	 
	Article 21 MISCELLANEOUS
	 	 	44	 
	 
	 	 	 	 
	Section 21.1 Rights
	 	 	44	 
	Section 21.2 Applicable Laws
	 	 	44	 
	Section 21.3 Governing Law
	 	 	44	 
	Section 21.4 Assignments
	 	 	45	 
	Section 21.5 Set-off
	 	 	46	 
	Section 21.6 Published Indices
	 	 	46	 
	Section 21.7 Exhibits
	 	 	46	 
	Section 21.8 Entire Agreement, Amendments
	 	 	47	 
	Section 21.9 Waivers
	 	 	47	 
	Section 21.10 Limitation of Liability
	 	 	47	 
	Section 21.11 Headings
	 	 	48	 
	Section 21.12 Rights and Remedies
	 	 	48	 
	Section 21.13 No Partnership
	 	 	48	 
	Section 21.14 Rules of Construction
	 	 	48	 
	Section 21.15 No Third Party Beneficiaries
	 	 	48	 
	Section 21.16 Further Assurances
	 	 	48	 
	Section 21.17 No Inducements
	 	 	48	 
	Section 21.18 Counterpart Execution
	 	 	48	 






 









 





TABLE OF EXHIBITS




EXHIBITS




Exhibit A  —  Map of Dedicated Area

Exhibit B  —  Dedicated Area Description

Exhibit C  —  Base Volumes

Exhibit D  —  Wellhead Meters

Exhibit E  —  Delivery Points

Exhibit F  —  Sub-Systems

Exhibit G  —  Trigger Event Example

Exhibit H  —  Gas Quality Specifications

Exhibit I  —  Monthly Average Receipt Point Pressure Example

Exhibit J  —  Gathering System

Exhibit K  —  Monthly Excess Bank Example

Exhibit L  —  Memorandum of Gas Gathering Agreement





 









 








GAS GATHERING AGREEMENT




     This Gas Gathering Agreement (as amended, restated or otherwise modified from time to time,
the “Agreement”) is made and entered into this 30th day of June, 2009 (the “Effective Date”), by
and between SANDRIDGE EXPLORATION AND PRODUCTION, LLC, a Delaware limited liability company
(together with its Affiliates, successors and their respective Affiliates, “Shipper”), and PIÑON
GATHERING COMPANY, LLC, a Delaware limited liability company (together with its successors and
permitted assigns, “Gatherer”). Shipper and Gatherer may be referred to herein individually as
“Party,” or collectively as the “Parties.”



RECITALS




     A. Gatherer owns and operates the Gathering System (as defined in Article 1 below).



     B. Shipper owns or controls Shipper’s Gas (as defined in Article 1 below) produced from wells
connected to, or that in the future may be connected to, the Gathering System.



     C. Subject to the terms and conditions of this Agreement, Shipper desires, and has the
capability, to deliver to Gatherer, and Gatherer desires to receive from Shipper, Shipper’s Gas, at
the Receipt Points for Gathering on the Gathering System.



     D. In accordance with the terms and conditions of this Agreement, Gatherer will provide the
Services with respect to Shipper’s Gas delivered to Gatherer hereunder.



     NOW THEREFORE, in consideration of the premises and mutual covenants set forth in this
Agreement, the Parties agree as follows:



ARTICLE 1

DEFINITIONS




     Capitalized terms used in this Agreement shall have the following meanings:



     1.1 Accounting Arbitrator. The first of the following firms (or successor thereof) that has
not been engaged by either of the Parties at any time during the one (1) year period immediately
prior to the time of selection: Ernst & Young, KPMG, Deloitte, PricewaterhouseCoopers, Grant
Thornton. If all of such firms (or their successors) have been engaged by either one or both of
the Parties during such one (1) year period, then the Parties shall in good faith mutually agree on
one of such firms (or their successors) or another accounting firm which has not been engaged by
either of the Parties during such one (1) year period to serve as the Accounting Arbitrator.



     1.2 Adjusted Force Majeure Volumes. As defined in Section 3.3 of this Agreement.



     1.3 Affiliate. With respect to any Person, any other Person that, directly or indirectly,
controls, is controlled by, or is under common control with, such specified Person through one or
more intermediaries or otherwise. For the purposes of this definition, “control” means, where used
with respect to any Person, 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 or interests, by contract or otherwise, and the terms
“controlling” and “controlled” have correlative meanings.



     1.4 Agreement. As defined in the preamble of this Agreement.



     1.5 Alternate Delivery Points. Those points of delivery not identified as Delivery Points on
Exhibit E, but which are agreed to by the Parties from time to time to act as Delivery Points
hereunder.



     1.6 Base Fee. Subject to adjustment in accordance with Section 6.3, with respect to any
Month, the sum of (i) *** and (ii) ***.



     1.7 Base Volume. With respect to any Month during the Term, the Volume of Gas set forth in
Exhibit C applicable to such Month, prorated for any partial Month and as adjusted pursuant to
Section 3.3; provided, that if at any time Dedicated Gas is permanently released from the
Dedicated Area pursuant to the terms hereof, the Volumes of Gas set forth in Exhibit C shall be
reduced in accordance with Section 3.6.



     1.8 Base Volume Monthly Gas Receipt. With respect to any Month, the total actual Volume of
Gas received into the Gathering System during such Month that, without duplication, is (i) produced
from a well located on lands within the Dedicated Area or on lands pooled or unitized therewith,
(ii) produced from a well operated by Shipper and located on lands outside of the Dedicated Area or
lands pooled or unitized therewith, or (iii) Shipper’s Gas.



     1.9 Btu or British Thermal Unit. The amount of heat required to raise the temperature of one
(1) pound of water from fifty-nine degrees Fahrenheit (59oF) to sixty degrees Fahrenheit (60oF) at
a constant pressure of fourteen and sixty-five hundredths (14.65) psia.



     1.10 Business Day. Any calendar day, other than a Saturday or Sunday, on which commercial
banks in Dallas, Texas are open for business.



     1.11 Calendar Quarter or Quarterly. The quarterly periods of (i) January 1st through March
31st, (ii) April 1st through June 30th, (iii) July 1st through September 30th, and (iv) October 1st
through December 31st.



     1.12 Calendar Year. The time period from January 1st through December 31st of the same
calendar year.



     1.13 Central Clock Time. Central Standard time throughout the year, as adjusted for Central
Daylight time.



     1.14 Century Plant. The CO2 gas treating and delivery plant under construction and owned by
OXY USA, Inc. located in Section 68, Block 101, T.C. RR Company Survey, Pecos County, Texas.



     1.15 Cholla Gathering Agreement. That certain Gas Gathering Agreement dated June 30, 2009,
between Cholla Pipeline, L.P. and SandRidge Exploration and Production, LLC relating to Gas being
shipped on the Cholla gathering system.



2









 





     1.16 Claim. Any lawsuit, claim, proceeding, investigation, review, audit or other cause of
action of any kind.



     1.17 Commodity Fee. As defined in Section 6.2 of this Agreement.



     1.18 Company Conveyance. That certain Assignment of Membership Interests dated as of June 30,
2009, between SandRidge Midstream, Inc. and TCW Pecos Midstream, LLC, together with all amendments,
modifications or waivers thereto.



     1.19 Condensate. Hydrocarbons that have condensed from Gas downstream of a Receipt Point and
are collected as a liquid in the Gathering System.



     1.20 Condensate Purchase Price. As defined in Section 6.4 of this Agreement.



     1.21 Confidentiality and Disclosure Agreement. That certain Confidentiality and Disclosure
Agreement dated as of June 30, 2009, between SandRidge Energy, Inc., TCW Asset Management Company,
and Piñon Gathering Company, LLC, together with all amendments, modifications or waivers thereto.



     1.22 CPI Index. The Consumer Price Index — All Urban Consumers (Series ID CUUR0000SA0), Not
Seasonally Adjusted, U.S. city average, All items (Base Period 1982-84=100), as published by the
United States Department of Labor, Bureau of Labor Statistics.



     1.23 Cubic Foot of Gas. The volume of Gas occupying one (1) cubic foot of space when such Gas
is at a base pressure of fourteen and sixty-five hundredths (14.65) psia and at a base temperature
of sixty degrees Fahrenheit (60oF). Whenever the conditions of pressure and temperature differ
from the foregoing standard, conversion from the foregoing standard conditions shall be made in
accordance with the Ideal Gas Laws.



     1.24 Day or Daily. A period of time commencing at 6:00 A.M., Central Clock Time, on a
calendar day and ending at 6:00 A.M., Central Clock Time, on the next succeeding calendar day.



     1.25 Dedicated Area. The lands identified on the map attached hereto as Exhibit A and more
particularly described on Exhibit B.



     1.26 Dedicated Gas. As defined in Section 2.1 of this Agreement.



     1.27 Dedication. As defined in Section 2.1 of this Agreement.



     1.28 Dehydration. The removal of water in its vapor phase from Gas, such that the Gas
contains seven (7) pounds of water or less per MMcf.



     1.29 Delivery Point Gas. As defined in Section 2.4(c) of this Agreement.



     1.30 Delivery Point Gas Quality Specifications. As set forth in Exhibit H attached hereto.



3









 





     1.31 Delivery Points. The points of delivery identified in Exhibit E attached hereto and the
Alternate Delivery Points.



     1.32 Effective Date. As defined in the preamble of this Agreement.



     1.33 Expansion Period. As defined in Section 4.2 of this Agreement.



     1.34 Expansions. As defined in Section 4.2 of this Agreement.



     1.35 Field Fuel. With respect to each Month and each Sub-System, the measured Quantity of Gas
actually used and consumed in the operation of such Sub-System during such Month, including, but
not limited to, compressor fuel, Dehydration fuel, and instrument Gas; provided, however, (i) if
Other Shippers use Shipper Compression, then the Gas used and consumed in the operation of Shipper
Compression shall also be included in Field Fuel for the applicable Sub-System, and (ii) for each
Month following the first anniversary of the end of the Month in which the Expansion Period ends,
Field Fuel for each Sub-System shall be limited to no more than one hundred ten percent (110%) of
the average Monthly Field Fuel measured for such Sub-System during the twelve (12) Months
immediately following the Month in which the Expansion Period ends.



     1.36 Firm Basis. The provision of Services hereunder, which may only be interrupted or
curtailed by Gatherer as a result of a Force Majeure event or Maintenance.



     1.37 Force Majeure. As defined in Section 16.2 of this Agreement.



     1.38 Force Majeure Volumes. With respect to any Month, the Volumes of Gas that Shipper is not
able to deliver into the Gathering System during such Month due to Force Majeure.



     1.39 Fuel, Lost and Unaccounted for Gas or FL&U. With respect to each Month and each of the
Sweet Gas Gathering System and the Sour Gas Gathering System, the Thermal Content of Gas
necessarily flared or vented on such system during such Month, Field Fuel for such system for such
Month, and Gas that otherwise cannot be sufficiently accounted for in such system for such Month.



     1.40 G&A Expenses. All (i) costs, fees and expenses incurred by Gatherer in connection with
any management, administration, marketing and other services necessary or advisable to run
Gatherer’s business of owning and operating the Gathering System, including, without limitation,
any fees of attorneys, consultants, Tax or financial accountants, auditors, experts or advisors,
and (ii) other general or administrative expenses of Gatherer, to the extent, and only to the
extent, that each of the foregoing is (x) not duplicative of any costs, fees or expenses included
in the definition of Operating Expenses, (y) reasonably incurred in accordance with this Agreement,
and (z) reasonably allocated to the Gathering System.



     1.41 GAAP. Generally accepted accounting principles, consistently applied.



     1.42 Gallon. One (1) U.S. gallon.



4









 





     1.43 Gas. Any mixture of hydrocarbons or of hydrocarbons and non-combustible gases produced
from wells.



     1.44 Gatherer. As defined in the preamble of this Agreement.



     1.45 Gatherer Controlled Event. As defined in Section 2.8(c) of this Agreement.



     1.46 Gatherer Force Majeure Event. As defined in Section 2.8(b) of this Agreement.



     1.47 Gatherer Indemnified Parties. Gatherer, its successors and permitted assigns, and their
respective Affiliates, shareholders, members, partners, officers, directors, employees, and agents.



     1.48 Gathering or Gather. The receipt of Gas by Gatherer at the Receipt Points for
transportation, compression and/or Dehydration, and the delivery of Delivery Point Gas to the
Delivery Points.



     1.49 Gathering Fees. As defined in Section 6.1 of this Agreement.



     1.50 Gathering System. The “Gathering System” as defined in the Membership Interest Purchase
Agreement, as such gathering system is more particularly described in Exhibit J attached hereto,
together with the facilities acquired by Gatherer in each Subsequent Acquisition, including all
additions and alterations made to any of the foregoing by Gatherer from time to time.



     1.51 Governmental Authority. Any federal, state, municipal, local or similar governmental
authority, regulatory or administrative agency, court or arbitral body with jurisdiction over the
Parties, this Agreement, any of the transactions contemplated hereby or the facilities utilized
under this Agreement.



     1.52 Gross Heating Value. The number of Btus produced by the complete combustion in air, at a
constant pressure, of one Cubic Foot of Gas when the products of combustion are cooled to the
initial temperature of the Gas and air and all water formed by combustion is condensed to the
liquid state. The resultant number of Btus determined above shall be adjusted to reflect the
actual water content of the Gas at the Delivery Points except that Gas containing seven (7) pounds
of water or less per MMcf shall be considered dry for purposes of this adjustment.



     1.53 Guaranty Agreements. Collectively, that certain (a) Guaranty Agreement dated as of June
30, 2009, by SandRidge Energy, Inc. in favor of TCW Pecos Midstream, LLC, (b) Guaranty Agreement
dated as of June 30, 2009, by SandRidge Energy, Inc. in favor of Gatherer, (c) Guaranty Agreement
dated as of June 30, 2009, by SandRidge Exploration and Production, LLC in favor of Gatherer, and
(d) Guaranty Agreement dated as of June 30, 2009, by SandRidge Midstream, Inc. in favor of
Gatherer, in each case, together with all amendments, modifications or waivers thereto.



5









 





     1.54 High-Pressure Sour Sub-System. That portion of the Gathering System that typically
operates at pressures at or above seven hundred fifty (750) psig, and delivers Gas to a treating
and/or processing plant for removal of carbon dioxide and other contaminants.



     1.55 High-Pressure Sweet Sub-System. That portion of the Gathering System that typically
operates at pressures at or above seven hundred fifty (750) psig, and delivers such Gas to
third-party pipelines.



     1.56 Ideal Gas Laws. The thermodynamic laws applying to perfect gases.



     1.57 Imbalance Cash-Out Price. For each Month, (i) the average of the daily “Midpoint” prices
for that Month as reported in the Platt’s Gas Daily table entitled “Daily price survey ($/MMBtu)”
under the heading “Permian Basin Area” in the row labeled “Waha,” minus (ii) the price per MMBtu to
transport Gas from the applicable Delivery Point to Waha.



     1.58 Imbalance Gas. As defined in Section 11.4(a) of this Agreement.



     1.59 Initial Excess Pressure Period. As defined in Section 10.4(c) of this Agreement.



     1.60 Initial Force Majeure Period. As defined in Section 2.8(b) of this Agreement.



     1.61 Initial Purchase Price. The Purchase Price as defined in and paid by Gatherer pursuant
to the Membership Interest Purchase Agreement.



     1.62 Initial Service Interruption Period. As defined in Section 2.8(c) of this Agreement.



     1.63 Intercompany Conveyance. That certain Assignment, Bill of Sale and Conveyance dated as
of June 30, 2009, between SandRidge Midstream, Inc. and Piñon Gathering Company, LLC, together with
all amendments, modifications or waivers thereto.



     1.64 Interests. Any right, title, or interest in lands and the right to produce oil and/or
Gas therefrom, whether arising from fee ownership, working interest ownership, mineral ownership,
leasehold ownership, farmout or other contractual arrangement or arising from any pooling,
unitization, or communitization of any of the foregoing rights.



     1.65 L&U Percentage. With respect to each Month and each of the Sweet Gas Gathering System
and the Sour Gas Gathering System, the percentage obtained by dividing (i) the sum of the Quantity
of Gas necessarily flared or vented during such Month plus the Quantity of Gas that cannot be
sufficiently accounted for in such system during such Month into (ii) the total Quantity of Gas
received into such system during such Month.



     1.66 Line Pack. A Volume and Quantity of Gas equal to the Volume and Quantity of Gas in the
Gathering System as of the Effective Date and from time to time thereafter.



     1.67 LLC Agreement. That certain Amended and Restated Limited Liability Company Agreement of
Piñon Gathering Company, LLC, together with all amendments, modifications or waivers thereto.



6









 





     1.68 Loss. Any loss, cost, expense, liability, damage, sanction, judgment, lien, fine, or
penalty, including attorney’s fees, incurred, suffered or paid by, or resulting to, the applicable
indemnified Persons on account of (i) injuries (including death) to any Person or damage to or
destruction of any property, sustained or alleged to have been sustained in connection with or
arising out of the matters for which the indemnifying Party has indemnified the applicable
indemnified Persons, (ii) any failure of any representation or warranty made by Shipper in this
Agreement to be true and correct when made, or (iii) the breach of any covenant or agreement made
or to be performed by the indemnifying Party pursuant to this Agreement.



     1.69 Lost and Unaccounted for Gas. With respect to each Month and each of the Sweet Gas
Gathering System and the Sour Gas Gathering System, FL&U less Field Fuel; provided, however, for
each Month, Lost and Unaccounted for Gas shall be limited to the product of (i) the Quantity of Gas
received into such system during such Month and (ii) the lesser of (a) one and one-half percent
(1.5%) or (b) two hundred percent (200%) of the average L&U Percentage for such system for the
twelve (12) Months immediately preceding such Month.



     1.70 Low-Pressure Sour Sub-System. That portion of the Gathering System that typically
operates at pressures below two hundred fifty (250) psig, and delivers Gas to a treating and/or
processing plant for removal of carbon dioxide and other contaminants.



     1.71 Low-Pressure Sweet Sub-System. That portion of the Gathering System that typically
operates at pressures below two hundred fifty (250) psig, and delivers Gas to third-party
pipelines.



     1.72 Maintenance. As defined in Section 9.1 of this Agreement.



     1.73 Material Error. As defined in Section 13.4 of this Agreement.



     1.74 Mcf. One thousand (1,000) Cubic Feet of Gas.



     1.75 Measurement Dispute. As defined in Section 13.12 of this Agreement.



     1.76 Measurement Expert. As defined in Section 13.12 of this Agreement.



     1.77 Measurement Meter. Any meter used to determine the Volume and Quantity of Shipper’s Gas
delivered into the Gathering System hereunder at the Receipt Points, which meters shall be
Shipper’s wellhead meters.



     1.78 Membership Interest Purchase Agreement. That certain Membership Interest Purchase
Agreement dated as of June 30, 2009, by and between SandRidge Midstream, Inc. and TCW Pecos
Midstream, LLC, together with all amendments, modifications or waivers thereto.



     1.79 Memorandum. As defined in Section 2.10 of this Agreement.



     1.80 Mid-Pressure Sour Sub-System. That portion of the Gathering System that typically
operates at pressures at or above two hundred fifty (250) psig and below seven hundred fifty (750)
psig, and delivers Gas to a treating and/or processing plant for removal of carbon dioxide and
other contaminants.



7









 





     1.81 Mid-Pressure Sweet Sub-System. That portion of the Gathering System that typically
operates at pressures at or above two hundred fifty (250) psig and below seven hundred fifty (750)
psig, and delivers such Gas to third-party pipelines.



     1.82 MMBtu. One million (1,000,000) Btus.



     1.83 MMcf. One million (1,000,000) Cubic Feet of Gas.



     1.84 MMcf/D. One million (1,000,000) Cubic Feet of Gas per Day.



     1.85 Month or Monthly. A period commencing at 6:00 A.M., Central Clock Time, on the first day
of a calendar month and extending until 6:00 A.M., Central Clock Time, on the first day of the next
succeeding calendar month.



     1.86 Monthly Average Receipt Point Pressure. With respect to each Sub-System, each Month, the
Volume-weighted average pressure (in psig) measured at the downstream static pressure tap of each
Measurement Meter at or near each Receipt Point delivering into such Sub-System, which shall be
calculated by multiplying (i) the total Daily Volume for each Day during such Month at each such
point by (ii) the average pressure (in psig) for such Day at such point; summing the resulting
products for all such Days and points; and then dividing the resulting sum by the sum of such Daily
Volumes, and rounding the quotient to the nearest whole number; provided, however, if Shipper
Compression is installed on such Sub-System, the point at which pressure shall be measured shall be
downstream of the discharge of such Shipper Compression, and the individual Receipt Points upstream
of such Shipper Compression shall not be included. In the calculation of Monthly Average Receipt
Point Pressure, Gatherer may exclude any Day when any of the following conditions occur: (i) Force
Majeure, (ii) Maintenance, not to exceed one hundred (100) hours per Calendar Year, or (iii) when
Shipper’s Gas on such Sub-System exceeds the Sub-System Capacity for such Sub-System, not to exceed
five (5) Days in any Month and not to exceed thirty (30) Days in any Calendar Year. In order for
any Day to qualify for exclusion because of Force Majeure or Maintenance, Gatherer must give
Shipper written notice within three (3) Business Days after the occurrence of such event. Gatherer
shall provide Shipper with the calculation of the Monthly Average Receipt Point Pressure for each
Sub-System within thirty (30) Days following the end of each Month. An example calculation of the
Monthly Average Receipt Point Pressure is set forth in Exhibit I attached hereto.



     1.87 Monthly Excess Bank. As defined in Section 3.1 of this Agreement.



     1.88 Monthly Excess Volumes. As defined in Section 3.1 of this Agreement.



     1.89 Monthly Gas Receipt. With respect to any Month, the actual Volume of Gas delivered by
Shipper to Gatherer at the Receipt Points during such Month pursuant to this Agreement, as measured
at the Measurement Meters, less and except any Gas brought into the Gathering System solely for
Field Fuel or that is recirculated in the Gathering System.



     1.90 Monthly Shortfall. As defined in Section 3.2 of this Agreement.



     1.91 Monthly Shortfall Offset Amount. As defined in Section 3.2(b) of this Agreement.



8









 





     1.92 Monthly Shortfall Payment. As defined in Section 3.2 of this Agreement.



     1.93 Monthly Waha Index Price. The first of the month “Index” price for Gas published in
Platt’s Inside FERC’s Gas Market Report in the table entitled “Market Center Spot Gas Prices” under
the heading “West Texas” in the row entitled “Waha” for the applicable Month.



     1.94 Negative Shipper Monthly Imbalance Quantity. With respect to any Month, the amount, if
any, by which (i) the Quantity of Delivery Point Gas delivered by Gatherer for Shipper’s account at
the Delivery Points during such Month exceeds (ii) the Quantity of the Monthly Gas Receipt for such
Month, less the Quantity Reductions.



     1.95 Net Condensate Proceeds. With respect to each Month and each Sub-System, the gross
proceeds received by Gatherer (in U.S. Dollars) for the sale of Condensate collected on such
Sub-System during such Month, net of transportation, storage, and/or similar charges or costs
incurred by Gatherer in connection with the sale of such Condensate.



     1.96 Non-Dedicated Area Connected Wells. As defined in Section 2.1(c) of this Agreement.



     1.97 Non-Gatherer Force Majeure Event. Any Force Majeure event that does not constitute a
Gatherer Force Majeure event.



     1.98 O&M Agreement. That certain Operations and Maintenance Agreement dated as of the
Effective Date, by and between SandRidge Midstream, Inc. and Gatherer, as amended, restated or
otherwise modified from time to time, wherein Gatherer has appointed SandRidge Midstream, Inc. to
operate the Gathering System on behalf of Gatherer.



     1.99 Off-Specification Receipts. As defined in Section 12.2 of this Agreement.



     1.100 Operated Gas. Shipper’s Gas and any other Gas produced from wells operated by Shipper
and delivered to the Gathering System.



     1.101 Operating Expenses. With respect to each Sub-System, each Month, without duplication,
the sum of, in each case as reasonably allocated to the Gathering System and as further reasonably
allocated to such Sub-System and not to exceed cost and expense that would be incurred by a
reasonably prudent operator of unregulated natural gas gathering pipelines, ***.



     1.102 Operations Fee. Subject to Section 10.4, with respect to each Sub-System, each Month,
the quotient of (i) the Operating Expenses for such Sub-System for such Month, divided by (ii) the
greater of (x) total Volume of Gas delivered into such Sub-System during such Month or (y) one (1)
Mcf.



     1.103 Other Shipper. Any Person other than Shipper for whom Gatherer provides gathering,
compression, Dehydration, and/or measurement services on the Gathering System.



     1.104 Parties. As defined in the preamble of this Agreement.



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     1.105 Party. As defined in the preamble of this Agreement.



     1.106 Person. An individual, a corporation, a partnership, a limited partnership, a limited
liability company, an association, a joint venture, a trust, an unincorporated organization, or any
other entity or organization, including a government or political subdivision or an agency or
instrumentality thereof.



     1.107 Positive Shipper Monthly Imbalance Quantity. With respect to any Month, the amount, if
any, by which (i) the Quantity of the Monthly Gas Receipt for such Month, less the Quantity
Reductions, exceeds (ii) the Quantity of Delivery Point Gas delivered by Gatherer for Shipper’s
account at the Delivery Points during such Month.



     1.108 Prior Dedications. (i) As to the Interests owned by Shipper within the Dedicated Area
as of the Effective Date, all dedications or commitments for gathering services burdening such
Interests as of the Effective Date, (ii) as to any Interests acquired by Shipper within the
Dedicated Area after the Effective Date, any dedication or commitment for gathering services
burdening such Interests which is existing as of the time of any such acquisition, and (iii) as to
any Interests acquired by any successor of Shipper within the Dedicated Area, all dedications or
commitments for gathering services burdening such Interests, which are existing as of the time of
any such acquisition or that are placed on such Interests prior to any such successor becoming a
successor of Shipper; provided that such dedication or commitment was not incurred in anticipation
of such acquisition.



     1.109 Production Taxes. All gross production, severance, conservation, and similar or other
Taxes now existing or in the future imposed and measured by or based upon production, together with
all Taxes on the right or privilege of ownership of Shipper’s Gas, or upon the Services.



     1.110 Proposed Operating Expense Budget. As defined in Section 6.6(b) of this Agreement.



     1.111 psia. Pressure expressed in pounds per square inch absolute.



     1.112 psig. Pressure expressed in pounds per square inch gauge.



     1.113 Quantity. Gas as measured on an MMBtu basis.



     1.114 Quantity Reductions. With respect to each Month, the total Quantity of (i) Shipper’s
Gas measured at the Measurement Meters and used by Shipper pursuant to Section 8.3 during such
Month, (ii) Shipper’s Pro Rata Share of Field Fuel for such Month, (iii) Shipper’s Pro Rata Share
of Lost and Unaccounted for Gas for such Month and (iv) the Thermal Content of Shipper’s Pro Rata
Share of Condensate for such Month.



     1.115 Receipt Point Gas Quality Specifications. As set forth on Exhibit H attached hereto.



     1.116 Receipt Points. The points of interconnection between the Gathering System and other
facilities where Gas is delivered into the Gathering System, including, without limitation,



10









 







the points identified on Exhibit D. Exhibit D shall be amended by the Parties from time to
time to reflect the addition of new Receipt Points.



     1.117 Released Gas. Gas that would have been Dedicated Gas hereunder but was permanently
released from the Dedication and this Agreement pursuant to the terms hereof.



     1.118 Scheduled Nomination. As defined in Section 11.2(b) of this Agreement.



     1.119 Services. As defined in Section 2.4 of this Agreement.



     1.120 Shipper. As defined in the preamble of this Agreement.



     1.121 Shipper Compression. Collectively, any facilities installed by Shipper under Section
8.2.



     1.122 Shipper Indemnified Parties. Shipper, its permitted assigns, and their respective
Affiliates, shareholders, members, partners, officers, directors, employees, and agents.



     1.123 Shipper Volume Forecast. As defined in Section 6.6(a) of this Agreement.



     1.124 Shipper’s Gas. All Gas now or hereafter owned or controlled by Shipper and delivered to
the Gathering System pursuant to the terms of this Agreement.



     1.125 Shipper’s Pro Rata Share. With respect to a Sub-System, the Sweet Gas Gathering System
or the Sour Gas Gathering System, each Month, a percentage, expressed in decimal form, calculated
by dividing (i) the total Quantity of that portion of the Monthly Gas Receipt delivered into such
Sub-System, the Sweet Gas Gathering System or the Sour Gas Gathering System, as the case may be,
during such Month, by (ii) the total Quantity of Gas received into such Sub-System, the Sweet Gas
Gathering System or the Sour Gas Gathering System, as the case may be, during such Month; provided,
however, with respect to allocation of Field Fuel on the Low-Pressure Sour Sub-System, the
Mid-Pressure Sour Sub-System, the High-Pressure Sour Sub-System or the Sour Gas Gathering System,
such percentage shall be calculated by dividing (i) the total Volume of that portion of the Monthly
Gas Receipt delivered into the Low-Pressure Sour Sub-System, the Mid-Pressure Sour Sub-System, the
High-Pressure Sour Sub-System or the Sour Gas Gathering System, as the case may be, during such
Month, by (ii) the total Volume of Gas received into the Low-Pressure Sour Sub-System, the
Mid-Pressure Sour Sub-System, the High-Pressure Sour Sub-System or the Sour Gas Gathering System,
as the case may be, during such Month.



     1.126 Similarly Situated Shipper. Any Other Shipper that is similarly situated to Shipper, as
determined by applying the criteria set forth in Rule 2.1(b)(16) of Chapter 2 of Part 1 of Title 16
of the Texas Administrative Code or any successor or replacement rule.



     1.127 Sour Gas Gathering System. That portion of the Gathering System comprised of the
Low-Pressure Sour Sub-System, the Mid-Pressure Sour Sub-System, and the High-Pressure Sour
Sub-System.



     1.128 Subsequent Acquisition. As defined in Section 4.3 of this Agreement.



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     1.129 Subsequent Acquisition Purchase Price. As defined in Section 4.3 of this Agreement.



     1.130 Sub-System. The integrated portions of the Gathering System described on Exhibit F
attached hereto.



     1.131 Sub-System Capacity. Individually for each Sub-System, the Mcf per Day Volume shown on
Exhibit F attached hereto, as such capacity may be increased from time to time as a result of any
Subsequent Acquisitions.



     1.132 Sub-System Turnover Average Receipt Point Pressure. With respect to each Sub-System,
one hundred and five percent (105%) of the average of the Monthly Average Receipt Point Pressure
for the lesser of (x) twelve (12) Months, but excluding the three (3) highest pressure Months and
the three (3) lowest pressure Months, or (y) if the last capital project occurred less than twelve
(12) months prior to the calculation date, the number of Months since the last capital project
(including, without limitation, Expansions) was performed that reduced the pressure on such
Sub-System, in each case, immediately preceding the Month following the one (1) year anniversary of
the end of the Expansion Period.



     1.133 Surface Use Agreement. That certain Amended Surface Use and Damages Agreement dated
September 21, 2007, between Longfellow Ranch Partners, LP and SandRidge Energy, Inc. covering lands
in Pecos, Terrell, and Brewster Counties, Texas.



     1.134 Sweet Gas Gathering System. That portion of the Gathering System comprised of the
Low-Pressure Sweet Sub-System, the Mid-Pressure Sweet Sub-System, and the High Pressure Sweet
Sub-System.



     1.135 System Capacity. The Gathering System throughput capacity as it exists on the Effective
Date, as increased from time to time as a result of any Subsequent Acquisitions.



     1.136 Tax or Taxes. Any (i) federal, state, provincial, county, local or foreign taxes,
charges, fees, levies or other assessments, including all sales and use, goods and services, ad
valorem, transfer, gains, profits, excise, franchise, real and personal property, gross receipt,
value added, capital stock, production, business and occupation, disability, employment, payroll,
license, estimated, stamp, custom duties, severance, unemployment, social security, Medicare,
alternative minimum or withholding taxes or charges imposed by any Governmental Authority, and
including any interest and penalties (civil or criminal) on or additions to any such taxes, but
expressly excluding any income tax or tax based on income, such as, without limitation, the
franchise tax set forth in V.T.C.A. Tax Code Section 171.0001 et. seq., as the same may be amended
or recodified from time to time, and (ii) liability for items in (i) of any other Person by
contract, operation of Law (including Treasury Regulation 1.1502-6) or otherwise.



     1.137 Term. As defined in Article 5 of this Agreement.



     1.138 Termination Event. As defined in the Intercompany Conveyance.



     1.139 Thermal Content. With respect to Gas, the product of (i) a volume of Gas and (ii) the
Gross Heating Value of such Gas, adjusted to a same pressure base of fourteen and sixty-



12









 







five hundredths (14.65) psia, expressed in MMBtus; and with respect to Condensate, the product
of (i) a volume of Condensate and the (ii) Gross Heating Value of such Condensate, expressed in
MMBtus.



     1.140 Thermally Equivalent. An equal number of MMBtus.



     1.141 Third Party Gas. Gas other than Shipper’s Gas.



     1.142 Third Party Receipt Point Gas Quality Specifications. The Receipt Point Gas Quality
Specifications for Third Party Gas set forth on Exhibit H attached hereto.



     1.143 Third Party Shipper. Enterprise Products Operating, LLC, to the extent it delivers
Third Party Shipper Gas.



     1.144 Third Party Shipper Gas. Gas delivered to the Gathering System by Third Party Shipper
pursuant to that certain Gathering Agreement dated June 26, 2009, between Enterprise Products
Operating, LLC, as shipper, and SandRidge Midstream, Inc.



     1.145 Transaction Documents. Collectively, this Agreement, the O&M Agreement, the Membership
Interest Purchase Agreement, the Intercompany Conveyance, the Company Conveyance, the Guaranty
Agreements, the Confidentiality and Disclosure Agreement, and the LLC Agreement.



     1.146 Trigger Event. The date on which the stream of cash flows consisting of the Base Fee,
the Commodity Fee, the Monthly Shortfall Payments, and all amounts (or the value of non-cash
consideration) paid by third parties for services on the Gathering System with respect to Operated
Gas (exclusive of amounts attributable to the reimbursement of Gatherer for Operating Expenses),
when discounted back to the Effective Date from each date of receipt by Gatherer of such amounts,
first results in an internal rate of return to Gatherer, as calculated in accordance with
Microsoft’s Excel’s internal rate of return function, of *** on the sum of (i) ***, (ii) ***, and
(iii) ***. An example of how the Trigger Event is to be calculated is included in Exhibit G.



     1.147 Volume. Gas as measured on an Mcf basis.



     1.148 Voting Securities. As it relates to a Person, securities of any class of such Person
entitling the holders thereof to vote in the election of, or to appoint, members of the board of
directors or other similar governing body of the Person; provided that if such Person is a limited
partnership, Voting Securities of such Person shall be the general partner interest in such Person.



     1.149 Year. A period of three hundred sixty-five (365) consecutive Days; provided, however,
any year that contains the date of February 29 shall consist of three hundred sixty-six (366)
consecutive Days.



13









 





ARTICLE 2

DEDICATION AND SERVICES




     Section 2.1 Dedication. Shipper hereby dedicates for Gathering under this Agreement
and, subject to the other terms and conditions hereof, shall deliver, or cause to be delivered,
hereunder to Gatherer at the Receipt Points, the following (the “Dedication,” and the Gas that is
the subject of the Dedication being herein referred to as the “Dedicated Gas”):




     (a) all Gas produced and saved from wells now or hereafter located within the Dedicated
Area or on lands pooled or unitized therewith, to the extent such Gas is attributable to
Interests within the Dedicated Area now owned or hereafter acquired by Shipper and not
delivered or used as permitted pursuant to Section 8.3;




     (b) with respect to wells now or hereafter located within the Dedicated Area or on
lands pooled or unitized therewith for which Shipper is the operator, Gas produced from such
wells which is attributable to Interests in such wells owned by other working interest
owners and royalty owners which is not (i) taken “in-kind” by such working interest owners
and royalty owners or (ii) delivered or used as permitted pursuant to Section 8.3, and for
which Shipper has the right or obligation to gather such Gas, but only for the period that
Shipper has such right or obligation;




     (c) all Gas produced and saved from wells that are located outside of the Dedicated
Area but are connected to the Gathering System as of the Effective Date (“Non-Dedicated Area
Connected Wells”), to the extent such Gas is attributable to Interests now owned or
hereafter acquired by Shipper and not delivered or used as permitted pursuant to Section
8.3; and




     (d) with respect to Non-Dedicated Area Connected Wells for which Shipper is the
operator, Gas produced from such Non-Dedicated Area Connected Wells which is attributable to
Interests in such Non-Dedicated Area Connected Wells owned by other working interest owners
and royalty owners which is not (i) taken “in-kind” by such working interest owners and
royalty owners or (ii) delivered or used as permitted pursuant to Section 8.3, and for which
Shipper has the right or obligation to gather such Gas, but only for the period that Shipper
has such right or obligation;


provided, however, with respect to Dedicated Gas that is subject to a Prior Dedication, such Gas
shall not be subject to the Dedication during the existence of such Prior Dedication. In the event
that any such Prior Dedication expires or terminates, then the Gas subject to such Prior Dedication
shall automatically be included within the Dedication and subject to this Agreement without any
further actions by Shipper. In the event that at any time in the future Shipper has the right or
ability to terminate any such Prior Dedication, then Shipper shall terminate such Prior Dedication,
and upon such termination, the Gas subject to such Prior Dedication shall automatically be included
within the Dedication and subject to this Agreement without any further actions by the Parties.
Nothing herein shall obligate Shipper to terminate any Prior Dedication to the extent that such
termination would require Shipper to file suit, bring any arbitral or mediation proceeding, incur
any cost, or pay any termination fee or penalty. Shipper (but excluding any successors and
assigns) represents to Gatherer, that, as of the Effective Date,


14









 






Shipper (but excluding any successors and assigns) is not subject to any Prior Dedications, other
than the Cholla Gathering Agreement and the agreement between Shipper and Third Party Shipper
transferring the Third Party Shipper Gas to Third Party Shipper.




     Section 2.2 Shipper’s Right To Deliver Other Gas. Subject to the other terms and
conditions hereof, Shipper shall have the continuing right to deliver Gas (other than Dedicated
Gas) to Gatherer at the Receipt Points, and Gatherer shall provide Services for such Gas on the
Gathering System.



     Section 2.3 Covenant Running with the Land. This Agreement shall (i) be a covenant
running with (x) the Gathering System, (y) the Interests now owned or hereafter acquired by
Shipper and its assigns within the Dedicated Area and (z) the Non-Dedicated Area Connected Wells,
(ii) be binding on and enforceable by Gatherer against Shipper and its assigns, and (iii) be
binding on and enforceable by Shipper against Gatherer. In the event Shipper sells, transfers,
conveys, assigns, grants or otherwise disposes of all or any Interests in the Dedicated Area or
the Non-Dedicated Area Connected Wells, then any such sale, transfer, conveyance, assignment or
other disposition shall be expressly subject to this Agreement and state such in any instrument of
conveyance. In the event Gatherer sells, transfers, conveys, assigns, grants or otherwise
disposes of all or any interest in the Gathering System, then any such sale, transfer, conveyance,
assignment or other disposition shall be expressly subject to this Agreement and state such in any
instrument of conveyance.



     Section 2.4 Services. Subject to the terms and conditions of this Agreement,
Gatherer agrees, during each Month of the Term, to provide the following services, each on a Firm
Basis, (collectively, the “Services”):




     (a) receive, or cause to be received, from Shipper, Shipper’s Gas at the Receipt
Points;




     (b) gather, Dehydrate, and compress Gas received from Shipper hereunder; and




     (c) deliver, or cause to be delivered, to Shipper, and Shipper shall accept, or cause
to be accepted, at the Delivery Points, each Month, a Volume and Quantity of Gas that is
equal to the Volume of, and Thermally Equivalent to the Quantity of, the Monthly Gas Receipt
for such Month, less the Quantity Reductions for such Month (such Gas delivered to Shipper
hereunder at the Delivery Points being herein referred to as the “Delivery Point Gas”).



     Section 2.5 Operation and Maintenance of Gathering System. Gatherer shall (i) be
entitled to complete operational control of the Gathering System, (ii) operate and maintain the
Gathering System in accordance in all material respects with all applicable laws, rules and
regulations, as a prudent operator in accordance with good practices in the unregulated natural
gas gathering industry and in a cost efficient and effective manner for Shipper, including,
without limitation, (x) minimizing recycle volumes and other practices that would result in
excessive Field Fuel, (y) using electric compression or Gas compression where appropriate and (z)
using owned or leased compression facilities where appropriate, and (iii) operate and



15









 







maintain the Sweet Gas Gathering System and the Sour Gas Gathering System as separate systems
and shall not commingle the Gas streams between such systems, without Shipper’s prior written
consent; provided that Gatherer shall have the unqualified right to commingle Shipper’s Gas with
other Gas within each such system; provided that such other Gas meets the Third Party Receipt
Point Gas Quality Specifications.



     Section 2.6 Priority of Services; Curtailment. Gatherer agrees not to provide
services for Third Party Gas on the Gathering System on a basis that has a priority higher than
Shipper is entitled to under this Agreement. If for any reason (including, without limitation,
Force Majeure, Maintenance, or constraints at the Delivery Points) Gatherer needs to curtail
receipt, gathering or delivery of Gas on the Gathering System, the following procedures shall be
followed:




     (a) First, Gas deliveries from all Persons other than Shipper and Similarly Situated
Shippers shall be curtailed prior to any curtailment or interruption of Shipper’s Gas or Gas
from Similarly Situated Shippers; and




     (b) Second, if additional curtailments are required beyond Section 2.6(a) above,
Gatherer shall curtail Shipper’s Gas and Gas from Similarly Situated Shippers, and allocate
the capacity of the Gathering System, at the affected point on a pro rata basis based upon
Shipper’s and other Similarly Situated Shippers’ last confirmed nominations through the
affected point prior to the event causing the curtailment.


Notwithstanding anything to the contrary herein contained, to the extent Gas deliveries from
Persons other than Shipper or Similarly Situated Shippers causes or would reasonably be expected to
cause a reduction in the production of any of Shipper’s Gas or Similarly Situated Shippers’ Gas,
Gatherer shall curtail receipts of Gas deliveries from such Persons into the Gathering System.




     Section 2.7 Third Party Gas. Gatherer agrees that Third Party Gas delivered into the
Gathering System shall meet the Third Party Receipt Point Gas Quality Specifications; provided,
however, Shipper may, at its option, agree to allow Gatherer to accept Third Party Gas that does
not meet the Third Party Receipt Point Gas Quality Specifications on an interruptible basis;
provided, however, any incremental FL&U and costs incurred by Shipper as a result of such
non-conforming Third Party Gas shall be borne by Gatherer and reimbursed to Shipper.



     Section 2.8 Release of Dedicated Gas.




     (a) Temporary Release. If (i) Gatherer is unable to provide Services with
respect to all or any Volume of the Dedicated Gas that Shipper is ready, willing, and able
to deliver, or cause to be delivered, in accordance with the terms of this Agreement, and
(ii) no event has occurred or condition exists that constitutes a material breach or
violation of, or a failure to comply with, this Agreement or the O&M Agreement on the part
of Shipper which remains uncured, then (y) Shipper, at its option, may elect to temporarily
release the Volume of Dedicated Gas for which Gatherer is unable to provide Services from
this Agreement by delivering written notice thereof to Gatherer, and (z)



16









 







during such period of time, Shipper shall have the right to deliver such volume of
Dedicated Gas to alternative facilities for the provision of services. Upon the resumption
of Gatherer’s ability to provide Services, Gatherer shall provide written notice thereof to
Shipper, such temporary release shall end and Shipper shall resume the delivery of all
Dedicated Gas to Gatherer no later than the first Day of the second Month immediately
following Gatherer’s ability to provide Services. Nothing herein shall relieve Gatherer of
any liability for failure to provide Services pursuant to, and in accordance with, the terms
of this Agreement.




     (b) Permanent Release on Account of Force Majeure. If (i) Gatherer because of
Force Majeure is unable to provide Services, for (A) a period of one hundred eighty (180)
Days or more during any Year or (B) a continuous period of ninety (90) Days or more, at any
Receipt Point (the “Initial Force Majeure Period”), for all or any Volume of Dedicated Gas
that Shipper is ready, willing, and able to deliver to such Receipt Point in accordance with
the terms of this Agreement, and (ii) no event has occurred or condition exists that
constitutes a material breach or violation of, or a failure to comply with, this Agreement
or the O&M Agreement on the part of Shipper which remains uncured, then (y) Shipper, at its
option, may elect to permanently release the Dedicated Gas produced from the wells
delivering to such Receipt Point from the Dedication and this Agreement by delivering
written notice thereof to Gatherer, and (z) if Shipper exercises such option, Shipper and
Gatherer shall acknowledge in writing the wells and Dedicated Gas that have been released
from the Dedication and this Agreement. Notwithstanding anything herein to the contrary, no
Dedicated Gas shall be released pursuant to this paragraph (b) prior to the occurrence of
the Trigger Event, unless (i) the applicable Force Majeure event is a condition or
circumstance that may be remedied by Gatherer (a “Gatherer Force Majeure Event”) and (ii) at
any time after the end of the Initial Force Majeure Period, Gatherer is not using
commercially reasonable efforts to remedy the situation with all reasonable dispatch;
provided, however, that with respect to any Gatherer Force Majeure Event, if after an
additional ninety (90) Days after the end of the Initial Force Majeure Period, Gatherer has
failed to remedy such Gatherer Force Majeure Event, then Shipper, at its option, may elect
to permanently release the Dedicated Gas produced from the wells delivering to such Receipt
Point as provided above.




     (c) Permanent Release for Other Reasons. If (i) Gatherer, for any reason other
than Force Majeure, is unable to provide Services, for (A) a period of one hundred eighty
(180) Days or more during any Year or (B) a continuous period of ninety (90) Days or more,
at any Receipt Point (the “Initial Service Interruption Period”), at any Receipt Point, for
all or any Volume of Dedicated Gas that Shipper is ready, willing, and able to deliver to
such Receipt Point in accordance with the terms of this Agreement, and (ii) no event has
occurred or condition exists that constitutes a material breach or violation of, or a
failure to comply with, this Agreement or the O&M Agreement on the part of Shipper which
remains uncured, then (y) Shipper, at its option, may elect to permanently release the
Dedicated Gas produced from the wells delivering to such Receipt Point from the Dedication
and this Agreement by delivering written notice thereof to Gatherer, and (z) if Shipper
exercises such option, Shipper and Gatherer shall acknowledge in writing the wells and
Dedicated Gas that have been released from the



17









 







Dedication and this Agreement. Notwithstanding anything herein to the contrary, no
Dedicated Gas shall be released pursuant to this paragraph (c) prior to the occurrence of
the Trigger Event, unless (i) the applicable condition or circumstance can be remedied by
Gatherer (a “Gatherer Controlled Event”) and (ii) at any time after the end of the Initial
Service Interruption Period, Gatherer is not using commercially reasonable efforts to remedy
the situation with all reasonable dispatch; provided, however, that with respect to any
Gatherer Controlled Event, if after an additional ninety (90) Days after the end of the
Initial Service Interruption Period, Gatherer has failed to remedy the Gatherer Controlled
Event, then Shipper, at its option, may elect to permanently release the Dedicated Gas
produced from the wells delivering to such Receipt Point as provided above. Nothing herein
shall relieve Gatherer of any liability for failure to provide Services pursuant to, and in
accordance with, the terms of this Agreement.



     Section 2.9 Maintenance of System Capacity. After expiration of the Expansion
Period, Gatherer shall maintain the System Capacity and each Sub-System Capacity and shall not
take, without Shipper’s prior written consent, any action that could cause the System Capacity or
any Sub-System Capacity to be reduced or Shipper’s ability to deliver Gas to any Receipt Point to
be reduced, including, without limitation, the removal of owned or leased compression facilities
on the Gathering System or the implementation of pipeline modifications.



     Section 2.10 Memorandum of Agreement. Contemporaneously with the execution of this
Agreement, the Parties shall execute, acknowledge, deliver and record a “short form” memorandum of
this Agreement in the form of Exhibit L attached hereto (the “Memorandum”) which shall be placed
of record in the counties in which the Dedicated Area is located.



     Section 2.11 No Breach. No violation of any of the terms or conditions of this
Agreement or failure to provide Services hereunder shall be deemed a breach of this Agreement by
Gatherer if and to the extent such violation or failure results, directly or indirectly, from a
breach of the O&M Agreement by Shipper.



ARTICLE 3

MONTHLY SHORTFALL PAYMENTS




     Section 3.1 Deliveries in Excess of the Base Volume. If, during any Month up to and
including the Month in which the Trigger Event occurs, (i) the Base Volume Monthly Gas Receipt for
such Month is greater than (ii) the Base Volume for such Month (the volume difference being
“Monthly Excess Volumes”), Shipper shall add such Monthly Excess Volumes to a notional account
(the “Monthly Excess Bank”). The balance in the Monthly Excess Bank shall be (x) reduced each
Month by the Monthly Shortfall Offset Amount (hereinafter defined), if any, and (y) increased as
provided in Section 3.6(b).



     Section 3.2 Deliveries Less Than the Base Volume. If, during any Month up to and
including the Month in which the Trigger Event occurs, (i) the Base Volume Monthly Gas Receipt for
such Month is less than (ii) the Base Volume for such Month, as reduced by the Volume of Gas that
Shipper is ready, willing, and able to deliver during such Month pursuant to and in accordance
with the terms of this Agreement but is not received by Gatherer due to



18









 







Gatherer’s failure to receive Shipper’s Gas in material breach of the terms of this Agreement
(such amount by which (i) above is less than (ii) above, being the “Monthly Shortfall”), then
Shipper shall pay to Gatherer an amount (the “Monthly Shortfall Payment”) equal to the product of
the following:



          (a) the Base Fee applicable to such Month; and




          (b) the Monthly Shortfall minus the lesser of (1) the balance in the Monthly Excess Bank as of
the beginning of such Month or (2) the Monthly Shortfall (such lesser amount being the “Monthly
Shortfall Offset Amount”).




     Section 3.3 Force Majeure Volumes. During any Month in which there are Force Majeure
Volumes, the Volume of Gas set forth in Exhibit C for such Month shall be reduced by such Force
Majeure Volumes, and such Force Majeure Volumes shall be deducted from the balance in the Monthly
Excess Bank. If there are Force Majeure Volumes remaining after such deduction (“Adjusted Force
Majeure Volumes”), the Volume of Gas set forth in Exhibit C for each subsequent Month during which
there are no Force Majeure Volumes shall equal the greater of (A) one hundred ten percent (110%)
of such Volume and (B) the total Base Volume Monthly Gas Receipt for such Month until such time as
the Base Fee has been paid with respect to Volumes in excess of the Volumes set forth in Exhibit C
equal to the Adjusted Force Majeure Volumes. Notwithstanding anything herein to the contrary, the
Volume of Gas set forth in Exhibit C shall not be reduced for a period longer than six (6) Months
after the first Month in which there are Force Majeure Volumes unless such Force Majeure Volumes
are due to a Gatherer Force Majeure Event.



     Section 3.4 Monthly Shortfall Payments Offset Against Future Fees. The Monthly
Shortfall Payments shall be used to offset any Base Fees due hereunder with respect to any Monthly
Excess Volumes in any subsequent Month; provided, however, in such event, the balance in the
Monthly Excess Bank shall be reduced by the Monthly Excess Volumes for which Base Fees due thereon
were offset by such Monthly Shortfall Payments.



     Section 3.5 Example of Operation of Monthly Excess Bank. An example of the operation
of the Monthly Excess Bank, including the calculation of Monthly Excess Volumes, Monthly
Shortfalls, Monthly Shortfall Payments and Monthly Shortfall Offset Amounts is set forth on
Exhibit K attached hereto.



     Section 3.6 Adjustment to Account for Released Gas.



          (a) If at any time Dedicated Gas is permanently released from the Dedication and this
Agreement pursuant to the terms hereof, Gatherer and Shipper shall negotiate in good faith a
mutually agreeable reduction in the Base Volumes in order to account for the Released Gas. In the
event that the Parties cannot agree on such reduction in the Base Volumes within thirty (30) days
after the date on which such permanent release becomes effective, then the Accounting Arbitrator
shall settle the dispute. In settling the dispute, the Accounting Arbitrator (a) shall determine
the Volumes of Released Gas and the likely production curve based upon the then proved producing
reserves of the wells delivering to the applicable Receipt Point and such Volumes shall be deducted
from the Base Volumes and (b) shall be permitted to engage




19









 




technical consultants, including independent engineering firms, as necessary. Within ten (10)
days after the selection of the Accounting Arbitrator, each of the Parties shall summarize and
submit its position with regard to the dispute to the Accounting Arbitrator. Within ten (10)
Business Days after receiving the Parties’ respective submissions, the Accounting Arbitrator shall
render a decision with respect to the dispute. Any decision rendered by the Accounting Arbitrator
pursuant hereto shall be final, conclusive and binding on the Parties and will be enforceable
against the Parties in any court of competent jurisdiction. The costs of the Accounting Arbitrator
shall be borne one-half by Shipper and one-half by Gatherer.




          (b) Additions to Monthly Excess Bank. If (i) there are deductions to the Monthly
Excess Bank for Force Majeure Volumes pursuant to this Article, and (ii) the wells and/or Receipt
Points attributable to such Force Majeure Volumes are thereafter permanently released from the
Dedication and this Agreement pursuant to the terms hereof, then such Force Majeure Volumes shall
be added back to the Monthly Excess Bank.




ARTICLE 4

WELL CONNECTIONS AND EXPANSIONS




     Section 4.1 Well Connection and Timing. Subject to the provisions of Section 4.2,
Shipper shall (i) connect any well that is drilled within the Dedicated Area or on lands pooled or
unitized therewith that will produce Dedicated Gas to the Gathering System, (ii) have the option,
at Shipper’s sole election, to connect any well drilled outside the Dedicated Area and lands
pooled or unitized therewith to the Gathering System, and (iii) pay all connection costs
associated therewith, including, but not limited to, costs for well tie lines, taps into the
Gathering System, measurement facilities, right-of-way acquisition, and all requisite permits and
licenses. With respect to any well that Shipper desires to connect to the Gathering System,
Shipper shall provide written notice thereof to Gatherer, which notice shall include the well
name, Shipper’s working interest in such well, a well location survey plat, the legal location of
such well, the actual spud date or the estimated spud date if not yet spud, the completion date or
the estimated completion date if not yet completed, Shipper’s best estimate of the well’s
deliverability, the approximate location on the Gathering System where Shipper desires to connect
such well and the estimated date on which Shipper anticipates that it will make such connection.



     Section 4.2 System Expansions. Shipper shall expand the Gathering System by
installing and/or acquiring such facilities as are reasonably necessary to handle the delivery of
Dedicated Gas to the Gathering System, which facilities may include, without limitation, the
installation of compression on the Gathering System and/or the looping of Gathering System
pipelines (the real and personal property rights included with each such expansion are referred to
herein as “Expansions”). Shipper shall construct sufficient Expansions within five (5) Years
following the Effective Date (the “Expansion Period”), such that the Gathering System will have a
total throughput capacity sufficient to Gather the Base Volumes during each of the applicable
periods. All such Expansions shall be owned and operated by Shipper unless and until such time as
such Expansions are acquired by Gatherer pursuant to a Subsequent Acquisition, in which case and
at which time, such Expansions shall be owned by Gatherer and such Expansions will become a part
of the Gathering System. Gatherer shall reasonably cooperate with Shipper in connection with
Shipper’s installation of Expansions, which



20









 







cooperation shall include, without limitation, the granting by Gatherer to Shipper of
easements and other real property rights as reasonably required by Shipper in connection with the
installation of any such Expansions.



     Section 4.3 Gatherer’s Purchase of Expansions. For thirty (30) Days following each
of the first, second, and third anniversaries of the Effective Date, Shipper shall have the right
to offer to Gatherer, and, if offered, Gatherer shall have the right, for a period of sixty (60)
Days after receipt of such offer, to acquire the Expansions constructed during the one Year period
immediately preceding such anniversary date for a purchase price equal to the greater of (i) the
fair market value of such Expansions constructed during such one Year period or (ii) the actual
costs and expenses incurred by for such Expansions constructed during such one Year period (each
such consummated purchase is referred to herein as a “Subsequent Acquisition” and the
corresponding purchase price is referred to herein as the “Subsequent Acquisition Purchase
Price”).



ARTICLE 5

TERM




     Section 5.1 Term. This Agreement shall become effective on the Effective Date and
shall continue in full force and effect until the earlier of (A) twenty (20) years after the
Effective Date or (B) the later of (i) one year after the wells located on lands within the
Dedicated Area or on land pooled or unitized therewith in which Shipper owns an Interest cease to
be capable of production of hydrocarbons in paying quantities or (ii) one year after the
Non-Dedicated Area Wells cease to be capable of production of hydrocarbons in paying quantities
(the “Term”).



     Section 5.2 Obligations Upon Termination. Upon termination of this Agreement, the
Parties shall reasonably cooperate with each other in (i) disconnecting their respective
facilities from each other’s facilities and (ii) to the extent that one Party has facilities
located on the other Party’s property, allowing such Party to remove its facilities from such
other Party’s property.



ARTICLE 6

SERVICE FEES AND FL&U




     Section 6.1 Gathering Fee. Shipper shall pay Gatherer, each Month, subject to
adjustment in accordance with Section 6.3, the following fees for the Services (collectively, the
“Gathering Fees”):




     (a) Operations Fee. With respect to each Sub-System each Month, Shipper shall
pay Gatherer a fee equal to the product of (i) the greater of (A) the Volume of the Monthly
Gas Receipt delivered into such Sub-System during such Month and (B) one (1) Mcf, and (ii)
the Operations Fee applicable to such Sub-System for such Month.




     (b) Base Fee. Shipper shall pay to Gatherer, each Month, a fee equal to the
product of (i) the Monthly Gas Receipt for such Month and (ii) the Base Fee applicable to
such Month.



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     Section 6.2 Commodity Fee. Shipper shall pay Gatherer, each Month, subject to
adjustment in accordance with Section 6.3, the following variable fee (the “Commodity Fee”) for
each Mcf of the total Monthly Gas Receipts for such Month:




     (a) $*** per Mcf if the Monthly Waha Index Price for such Month is less than $***;




     (b) $*** per Mcf if the Monthly Waha Index Price for such Month is equal to or greater
than $***, but less than $***;




     (c) $*** per Mcf if the Monthly Waha Index Price for such Month is equal to or greater
than $***, but less than $***;




     (d) $*** per Mcf if the Monthly Waha Index Price for such Month is equal to or greater
than $***, but less than $***;




     (e) $***per Mcf if the Monthly Waha Index Price for such Month is equal to or greater
than $***, but less than $***; and




     (f) $0*** per Mcf if the Monthly Waha Index Price for such Month is equal to or greater
than $***.



     Section 6.3 Adjustment to Base Fee and Commodity Fee after Trigger Event. After the
occurrence of the Trigger Event, each of the Base Fee and the Commodity Fee shall each be reduced
to an amount equal to the product of (A) the applicable fee and (B) a percentage, expressed in
decimal form, equal to the sum of (i) *** and (ii) an amount equal to the product of (x) *** and
(y) the total of all Subsequent Acquisition Purchase Prices paid hereunder prior to the Trigger
Event. For example, if the Initial Purchase Price is $200,000,000 and Gatherer purchased three
(3) Subsequent Acquisitions, each with a Subsequent Acquisition Purchase Price of $100,000,000,
then the Base Fee at such time would be $***. Upon the occurrence of the Trigger Event, the Base
Fee would be adjusted to $*** and each of the per Mcf Commodity Fee figures would be adjusted by
multiplying each such figure by ***.



     Section 6.4 Condensate. Gatherer shall pay Shipper, each Month, for the value of
Shipper’s Pro Rata Share of Condensate retained by Gatherer, an amount equal to the sum of the
Condensate Purchase Price for each Sub-System during such Month. The term “Condensate Purchase
Price” as used herein means, with respect to each Sub-System, each Month, an amount equal to
Shipper’s Pro Rata Share of the Net Condensate Proceeds for such Sub-System for such Month.
Gatherer shall retain and own all such Condensate and, subject to the payment obligation described
above, shall retain any and all revenues from the sale thereof. Title to Shipper’s Pro Rata Share
of Condensate shall pass from Shipper to Gatherer upon the delivery of Shipper’s Gas at the
Receipt Points. In the event that the methodology used to allocate Condensate becomes inequitable
in any respect, including, without limitation, due to any Other Shipper having Gas that has a
liquids content significantly different than Shipper’s Gas, such methodology shall be modified
from time to time in order to remove any such inequities; provided, however, such methodology
shall be consistently applied to Shipper and all Other Shippers utilizing the Gathering System.



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     Section 6.5 Modifications to Determination of Operations Fee. In the event that the
allocation of Operating Expenses to the Gathering System, to the various Sub-Systems and to
Shipper and the Other Shippers becomes inequitable in any respect, including, without limitation,
due to a Person being burdened by a lesser or greater portion of certain Operating Expenses than
such Person should reasonably share because of the benefit derived by such Person from such
Operating Expenses, the applicable provisions hereof shall be modified from time to time in order
to remove any such inequities; provided, however, such modifications shall be consistently applied
to Shipper and all Other Shippers utilizing the Gathering System.



     Section 6.6 Operating Expense Budget Process.




     (a) Shipper’s Production Estimate. No later than (i) March 1st of
each Calendar Year, Shipper shall provide to Gatherer a forecast of the Volumes of Shipper’s
Gas (by Sub-System) that Shipper in good faith estimates that it will deliver into the
Gathering System during the third (3rd) and fourth (4th) Calendar
Quarters of such Calendar Year and (ii) September 1st of each Calendar Year,
Shipper shall provide to Gatherer a forecast of the Volumes of Shipper’s Gas (by Sub-System)
that Shipper in good faith estimates that it will deliver into the Gathering System during
the first (1st) and second (2nd) Calendar Quarters of the following
Calendar Year (each, a “Shipper Volume Forecast”).




     (b) Gathering System Throughput and Operating Expense Budget. No later than
(A) April 1st of each Calendar Year with respect to the third (3rd)
and fourth (4th) Calendar Quarters of such Calendar Year and (B) October
1st of each Calendar Year with respect to the first (1st) and second
(2nd) Calendar Quarters of the following Calendar Year, Gatherer shall provide to
Shipper, a forecast of Gatherer’s good faith estimate of (i) the total Gas throughput for
each Sub-System during the applicable period, such estimate to based on the Shipper Volume
Forecast and Gatherer’s good faith estimate of the Volumes that Other Shippers will deliver
into each Sub-System during such period, (ii) the total Operating Expenses to be incurred
for each Sub-System during such period, such estimate to be based on the prior period’s
budgeted Operating Expenses and actual Operating Expenses, as reasonably adjusted for
anticipated operating conditions during such period, and (iii) the Operations Fee per Mcf
for each Sub-System for such period, which estimate of the Operations Fee shall be
determined by dividing (x) the estimate of the Operating Expenses to be incurred for each
Sub-System during such period by (y) the estimate of the total Gas throughput in Mcf for
such Sub-System for such period (collectively, the “Proposed Operating Expense Budget”).




     (c) Review of Proposed Operating Expense Budget. On or before (A) May
1st of each Calendar Year with respect to the third (3rd) and fourth
(4th) Calendar Quarters of such Calendar Year and (B) November 1st of
each Calendar Year with respect to the first (1st) and second (2nd)
Calendar Quarters of the following Calendar, Gatherer shall meet with Shipper to review the
Proposed Operating Expense Budget and seek Shipper’s input with respect thereto; provided,
however, any such review and input by Shipper shall not be construed as (i) Shipper’s
approval of any cost or expense contained in the Proposed Operating Expense Budget or (ii)
any cost or expense incurred in connection with the



23









 







Proposed Operating Expense Budget being deemed to have been incurred in accordance with
the terms and conditions of this Agreement.




     (d) Accounting Arbitrator. If, at any time within twenty-four (24) Months
after the Month in which any Operations Fee was paid by Shipper hereunder, Shipper believes
that any cost or expense charged by Gatherer as an Operating Expense and included in the
determination of such Operations Fee was not incurred in accordance with the terms and
conditions of this Agreement, including, without limitation, Section 2.5, Shipper shall have
the right to submit the issue to the Accounting Arbitrator for resolution. Any decision
rendered by the Accounting Arbitrator pursuant hereto shall be final, conclusive and binding
on the Parties and will be enforceable against the Parties in any court of competent
jurisdiction. If the Accounting Arbitrator decides that any such cost or expense was not
incurred in accordance with the terms and conditions of this Agreement, including, without
limitation, Section 2.5, then, within thirty (30) days after the determination thereof by
the Accounting Arbitrator, Gatherer shall refund to Shipper any such costs and expenses paid
by Shipper to Gatherer hereunder. The costs of the Accounting Arbitrator shall be borne
one-half by Shipper and one-half by Gatherer. The Parties’ respective rights and
obligations under this Section 6.6 shall be in addition to and not limited by Section 15.2
hereof.



ARTICLE 7

ALLOCATIONS




     Section 7.1 Fuel, Lost and Unaccounted for Gas Allocation Procedures. Shipper shall
bear Shipper’s Pro Rata Share of FL&U in accordance with the following:




     (a) Field Fuel Allocation for Sub-Systems. That portion of the Monthly Gas
Receipt delivered into each Sub-System shall be allocated, each Month, Shipper’s Pro Rata
Share of Field Fuel for the applicable Sub-System for such Month; provided that Shipper
shall provide one hundred percent (100%) of the Field Fuel consumed in the operation of any
Shipper Compression unless Other Shippers also utilize Shipper Compression.




     (b) Lost and Unaccounted for Gas Allocation for Sweet Gas Gathering System.
That portion of the Monthly Gas Receipt delivered into the Sweet Gas Gathering System shall
be allocated, each Month, Shipper’s Pro Rata Share of Lost and Unaccounted for Gas
calculated for the Sweet Gas Gathering System for such Month.




     (c) Lost and Unaccounted for Gas Allocation for Sour Gas Gathering System.
That portion of the Monthly Gas Receipt delivered into the Sour Gas Gathering System shall
be allocated, each Month, Shipper’s Pro Rata Share of Lost and Unaccounted for Gas
calculated for the Sour Gas Gathering System for such Month.



     Section 7.2 Modifications to Allocation Procedures. In the event that the allocation
procedures herein shall cease to be reflective of actual operations or become inequitable in any
respect, such allocation procedures shall be modified, including, without limitation, the
determination of Shipper’s Pro Rata Share, from time to time in order to reflect actual



24









 







operations and to remove any such inequities; provided, however, such allocation procedures
shall be consistently applied to Shipper and all Other Shippers utilizing the Gathering System.



ARTICLE 8

SHIPPER COMMITMENTS AND RIGHTS




     Section 8.1 Conveyance of Rights to Gatherer. Subject to Shipper’s obligations under
the Prior Dedications and the other terms and conditions of this Agreement, Shipper hereby grants,
sells, transfers, conveys, and assigns to Gatherer (i) the exclusive right to provide Services for
the Dedicated Gas, (ii) all right, title, interest and/or ownership in all Condensate recovered
from Shipper’s Gas, and (iii) the right to consume Shipper’s Gas as Field Fuel in connection with
the provision of the Services hereunder.



     Section 8.2 Shipper Compression.




     (a) Shipper shall have the right, at its own expense, to install compression facilities
and plunger lifts upstream of the Receipt Points. Any such facilities installed by Shipper
shall be installed, operated, and maintained in a manner that does not adversely affect (i)
Gatherer’s dehydration, measurement, gathering or other facilities, (ii) the operation of
the Gathering System, or (iii) any contractual obligations of Gatherer.




     (b) If, from time to time, Shipper desires to have lower pressures on all or any
portion of a Sub-System, Gatherer and Shipper shall negotiate in good faith for Gatherer to
install compression to lower pressures. If Gatherer and Shipper are unable to agree upon
terms under which Gatherer would install such compression, then Gatherer shall allow Shipper
to install, own and operate such compression facilities on the Gathering System as
reasonably determined by Shipper.




     (c) Shipper shall provide the Field Fuel consumed in the operation of any Shipper
Compression, unless Other Shippers also utilize Shipper Compression.




     (d) If Shipper installs Shipper Compression, Shipper shall indemnify, defend, and hold
harmless the Gatherer Indemnified Parties from and against all Claims and Losses arising out
of, or resulting from, the installation, operation, maintenance, or removal of such Shipper
Compression, unless such claims were the result of negligence, gross negligence or willful
misconduct of any of the Gatherer Indemnified Parties.



     Section 8.3 Gas for Lease Operations. Shipper shall have the right to utilize
Dedicated Gas and other Gas from the Gathering System as may be required to be delivered to
lessors under the terms of any leases or as required for Shipper’s operations within the Dedicated
Area or lands pooled or unitized therewith, as determined by Shipper in its sole discretion. In
connection therewith, Gatherer shall provide Shipper, at Shipper’s sole cost and expense, such
taps on the Gathering System as may be reasonably required by Shipper for such purposes. Shipper
shall estimate the Volume and Quantity of such Gas so used and report such estimate to Gatherer on
or before the fifth (5th) Day of the Month following the Month of such usage.



25









 





     Section 8.4 Pooling or Units. Shipper may form, dissolve, and/or participate in
pooling agreements or units encompassing all or any portions of the Dedicated Area, as determined
by Shipper in its sole discretion.



     Section 8.5 Operational Control of Shipper’s Wells. Shipper reserves the right to
operate its leases and wells in any manner that it desires, free of any control by Gatherer, as
determined by Shipper in its sole discretion, including without limitation, (i) shutting-in,
cleaning out, reworking, modifying, deepening, or abandoning any such wells, (ii) using any
efficient, modern, or improved method for the production of its wells and (iii) surrendering,
releasing, or terminating its leases or Interests at any time; provided that before any well is
taken out of service for any reason, Shipper shall first shut-off the well’s connection to the
Receipt Point.



     Section 8.6 Access to Facilities. Subject to Shipper’s safety rules, regulations and
procedures, (i) Shipper shall provide Gatherer such access to Shipper’s facilities as necessary
and convenient to perform Gatherer’s obligations under this Agreement and (ii) insofar as it has
the right to do so, Shipper grants Gatherer the use of all easements and rights-of-way held by
Shipper that are necessary and convenient for Gatherer to perform its obligations under this
Agreement. Shipper shall be responsible for maintaining such rights of access, easements and
rights-of-way at its sole cost and expense.



     Section 8.7 Line Pack. The Parties acknowledge and agree that Line Pack shall be
owned as provided for in the Intercompany Conveyance.



     Section 8.8 Cholla Gathering Agreement. Shipper shall not (a) cancel or terminate
the Cholla Gathering Agreement (or consent or accept any cancellation or termination thereof)
prior to June 30, 2029 or (b) enter into or permit any material modification of, or waive any
material right or obligation of any Person under, the Cholla Gathering Agreement.



ARTICLE 9

MAINTENANCE AND MARKETING OF CONDENSATE




     Section 9.1 Maintenance. Gatherer shall be entitled to interrupt its performance
hereunder to perform necessary or desirable inspections, pigging, maintenance, testing,
alterations, modifications, expansions, connections, repairs, or replacements to the Gathering
System (“Maintenance”), with notice as provided herein to Shipper, except in cases of emergency
where such notice is impracticable or in cases where the operations of Shipper will not be
affected. Before the beginning of each Calendar Year, Gatherer shall provide Shipper in writing
with an estimated schedule of the Maintenance to be performed during the Calendar Year and the
anticipated dates of such Maintenance. In performing Maintenance, Gatherer shall coordinate its
activities with Shipper and perform such Maintenance is such a manner so as to minimize downtime,
shutting-in of Shipper’s production and interference with Shipper’s operations.



     Section 9.2 Marketing of Condensate. Gatherer shall market Condensate to a Person
not Affiliated with Gatherer, upon terms which, in Gatherer’s good faith judgment, are reasonable
terms in light of market conditions existing at that time.



26









 





ARTICLE 10

RECEIPT POINTS, DELIVERY POINTS, AND PRESSURES




     Section 10.1 Receipt Points. Shipper shall deliver Shipper’s Gas to Gatherer
hereunder at the Receipt Points.



     Section 10.2 Delivery Points. Gatherer shall deliver Delivery Point Gas hereunder to
the Delivery Points as nominated by Shipper pursuant to this Agreement.



     Section 10.3 Uniform Deliveries. Shipper shall deliver Shipper’s Gas at the Receipt
Points and Gatherer will receive and redeliver Delivery Point Gas to the Delivery Points as nearly
as practicable at uniform hourly and daily rates of flow.



     Section 10.4 Pressure at Receipt Points. Shipper shall cause Shipper’s Gas to be
delivered to the Receipt Points at a pressure sufficient to enter the Gathering System, but shall
not be delivered at pressures in excess of the maximum allowable operating pressure at the Receipt
Points, as such pressure may exist from time to time; provided, however, the following shall
apply:




     (a) Required Pressure. From and after the one (1) year anniversary of the end
of the Expansion Period, Gatherer shall be responsible, at its sole cost and expense, to
maintain pressures on each Sub-System (other than the High-Pressure Sweet Sub-System and the
High Pressure Sour Sub-System) at or below the Sub-System Turnover Average Receipt Point
Pressure applicable to such Sub-System.




     (b) Operations Fee Reduction. If the Monthly Average Receipt Point Pressure
exceeds the applicable Sub-System Turnover Average Receipt Point Pressure for any Sub-System
(other than the High-Pressure Sweet Sub-System and the High Pressure Sour Sub-System) during
any Month after the one (1) year anniversary of the end of the Expansion Period, then for
each Receipt Point on such Sub-System that exceeds the Sub-System Turnover Average Receipt
Point Pressure for the Sub-System to which such Receipt Point is connected, the Operations
Fees for such Month applicable to such Receipt Point shall be reduced by an amount equal to
the product of (i) such Operations Fee and (ii) two percent (2%) for each one percent (1%)
that such Monthly Average Receipt Point Pressure exceeds the applicable the Sub-System
Turnover Average Receipt Point Pressure. For example, if during the applicable Month, the
applicable Operations Fee is $0.10 per Mcf and the applicable the Sub-System Turnover
Average Receipt Point Pressure is one hundred (100) psig, but during such Month, the Monthly
Average Receipt Point Pressure was one hundred ten (110) psig, then the Operations Fee would
be reduced to $0.08 per Mcf. Nothing herein shall relieve Gatherer of any liability for
failure to provide Services pursuant to, and in accordance with, the terms of this
Agreement. Notwithstanding anything contained in this Section 10.4(b), there will be no
reduction in the Operations Fee for any Receipt Point that is first established or
re-connected to the Gathering System after the one (1) year anniversary of the end of the
Expansion Period, which has, during the first thirty (30) days of production, a weighted
average pressure above the Sub-System Turnover Average Receipt Point Pressure for the
Sub-System to which such Receipt Point is connected.



27









 






     (c) Release. If (i) after the one (1) year anniversary of the end of the
Expansion Period, the Monthly Average Receipt Point Pressure for any Sub-System (other than
the High-Pressure Sweet Sub-System and the High Pressure Sour Sub-System) is greater than
the applicable Sub-System Turnover Average Receipt Point Pressure for (A) a period of one
hundred twenty (120) Days or more during any Year or (B) a continuous period of sixty (60)
Days or more (the “Initial Excess Pressure Period”), and (ii) no event has occurred or
condition exists that constitutes a material breach or violation of, or a failure to comply
with, this Agreement or the O&M Agreement on the part of Shipper which remains uncured, then
(y) Shipper, at its option, may elect to permanently release the Dedicated Gas produced from
wells delivering to each Receipt Point on such Sub-System that exceeds the Sub-System
Turnover Average Receipt Point Pressure for the Sub-System to which such Receipt Point is
connected by delivering written notice thereof to Gatherer, and (z) if Shipper exercises
such option, Shipper and Gatherer shall acknowledge in writing the wells and Dedicated Gas
that have been released from the Dedication and this Agreement. Notwithstanding anything
herein to the contrary, no Dedicated Gas shall be released pursuant to this paragraph (c)
prior to the occurrence of the Trigger Event, unless, at any time after the end of the
Initial Excess Pressure Period, Gatherer is not using commercially reasonable efforts to
remedy the situation with all reasonable dispatch; provided, however, if after an additional
ninety (90) Days after the Initial Excess Pressure Period, Gatherer has failed to remedy
such situation, then Shipper, at its option, may elect to permanently release the Dedicated
Gas produced from the wells delivering to such Sub-System or such Receipt Point as provided
above. Nothing herein shall relieve Gatherer of any liability for failure to provide
Services pursuant to, and in accordance with, the terms of this Agreement.




     (d) Excessive Shipper Volumes. If (i) Gatherer is unable to comply with the
obligations set forth in Section 10.4(a) due solely to deliveries or attempted deliveries of
Shipper’s Gas and (ii) no event has occurred or condition exists that constitutes a material
breach or violation of, or a failure to comply with, this Agreement or the O&M Agreement on
the part of Gatherer which remains uncured, then Gatherer shall be relieved of its
obligations under this Section 10.4 with respect to such Day.



     Section 10.5 Pressure at Delivery Points. Gatherer shall deliver Delivery Point Gas
to the Delivery Points at a pressure sufficient to enter the receiving facilities at each such
Delivery Point but shall not deliver the Delivery Point Gas at pressures in excess of the maximum
allowable operating pressure of the receiving facilities at the Delivery Point, as such pressure
may exist from time to time. The minimum pressures for each Delivery Point are specified in
Exhibit E attached hereto.



     Section 10.6 Arrangements Prior to Receipt and After Redelivery. It shall be
Shipper’s obligation to make any required arrangements with other parties for delivery of
Shipper’s Gas into the Gathering System at the Receipt Points and following redelivery at the
Delivery Points.



28









 





ARTICLE 11

NOMINATION AND BALANCING PROCEDURES




     Section 11.1 Notice of Available Capacity. On or before the 20th day of
each Month, Gatherer shall provide written notice to Shipper of Gatherer’s good faith estimate of
any capacity allocations or curtailments, if any, that, based on then currently available
information, Gatherer anticipates will be required or necessary during the next succeeding Month.
In the event that the 20th day of the Month is a weekend or holiday, such notice will
be provided on the last Business Day preceding the 20th day of such Month.



     Section 11.2 Nomination Procedures. Pursuant to the terms of this Agreement, the
nomination procedures detailed in this Section will be utilized by the Parties with respect to the
Services provided hereunder. All nominations must be made by Shipper or Shipper’s designee. For
the purposes of this Article 11, Shipper’s Gas shall include Third Party Shipper Gas.




     (a) Shipper and Similarly Situated Shippers shall have priority service over all Other
Shippers and Shipper’s and Similarly Situated Shippers’ nominations to the Delivery Points
shall be placed in advance of all Other Shippers. To the extent a Delivery Point does not
have capacity for the cumulative volumes from Shipper and Other Shippers’ nominations,
Gatherer will advise each Other Shipper to reduce its nominations to ensure that Shipper’s
Gas and Similarly Situated Shippers’ Gas receive priority service.




     (b) Shipper’s nominations hereunder shall be accepted and scheduled for delivery by
Gatherer to the extent (i) Shipper’s Gas (including any Imbalance Gas) hereunder is
sufficient to support such nominations, (ii) available capacity exists to provide Services
with respect to such Gas (which capacity shall be allocated to Shipper in accordance with
Section 2.6), and (iii) the party receiving Gas at each Delivery Point accepts Shipper’s
nominations. Upon being scheduled for delivery, Gatherer’s dispatcher shall thereupon
advise Shipper in writing, via fax, e-mail, or web-based nomination process of the quantity
scheduled for Services hereunder (a “Scheduled Nomination”) and the reason for any failure
to schedule any of Shipper’s Gas nominated by Shipper.




     (c) Each nomination shall be made in conformance with the North American Energy
Standards Board nominations timeline, which may change from time to time.




     (d) Shipper shall provide to Gatherer’s dispatcher in writing, via fax, e-mail, or
web-based nomination process the actual daily nominations of the quantities to be delivered
hereunder by Gatherer for Shipper’s account at each Delivery Point in accordance with
Gatherer’s requirements. Such nominations shall include the information requested by
Gatherer, and Gatherer shall maintain a record of such nominations.




     (e) Gatherer shall have the right to refuse receipt of volumes of Shipper’s Gas from
Shipper to the extent they exceed Scheduled Nominations provided that Gatherer gives Shipper
notice of such refusal. In that regard, Gatherer may require that Shipper cease or curtail
deliveries of Shipper’s Gas to match production with Scheduled



29









 







Nominations; provided, however, that to the extent available capacity exists, Gatherer
shall accept any increase in Shipper’s Scheduled Nominations made by Shipper or its designee
to match the delivered Volumes to receive such Gas so that Shipper does not have to cease or
curtail deliveries.




     (f) Gatherer shall accept any revisions to a prior Scheduled Nomination which result in
an increase in volume of Gas Shipper desires to deliver to the Delivery Point that is
supported by corresponding increases in physical volume available at the Receipt Point.



     Section 11.3 Gas Balancing. It shall be Gatherer’s responsibility to maintain
balance on the Gathering System with Shipper and all Other Shippers. Gatherer and Shipper shall
resolve an over-delivery or under-delivery of Shipper’s Gas each Month in accordance with this
Article 11 on an MMBtu basis.



     Section 11.4 Imbalances.




     (a) Imbalance Gas. Shipper intends for the Quantity of Gas actually delivered
at each Delivery Point to equal the Scheduled Nominations for each such Delivery Point and
will use reasonable efforts to nominate Gas in such manner. Shipper will use its best
efforts to base Scheduled Nominations on the forecasted quantity of Shipper’s Gas less any
deductions provided for herein. Any difference between the actual physical flow of Gas at
the Delivery Points and the Scheduled Nominations shall be deemed “Imbalance Gas” at such
Delivery Point. In that regard, Gatherer shall provide Shipper (i) a Daily balancing
statement and (ii) a Monthly balancing statement by the tenth (10th) Day of each
Month of the difference, if any, between the Quantity of Gas nominated by Shipper at each
Delivery Point during the immediately preceding Month and the Quantity of Shipper’s Gas
allocated at each Delivery Point during such Month. Such difference, positive or negative,
shall be deemed the Imbalance Gas with positive amounts being the Quantity of Gas due
Shipper and negative amounts being the Quantity due Gatherer. The Imbalance Gas shall be
eliminated over time through the nomination and delivery process by Shipper nominating less
Gas than is actually delivered if the Imbalance Gas account is negative and by Shipper
nominating more Gas than is actually delivered if the Imbalance Gas account is positive.




     (b) Imbalance Accounts. Gatherer shall (i) enter into agreements containing
similar balancing provisions to those contained herein with all Other Shippers and (ii)
maintain similar imbalance Gas accounts with, and shall provide similar balancing statements
to, all Other Shippers at each Delivery Point on an MMBtu basis. Gatherer shall diligently
coordinate with Shipper to resolve any imbalances each Month under the premise that Shipper
and Similarly Situated Shippers have priority service and any Shipper imbalances will not be
greater from a percentage standpoint than any Other Shipper imbalances. In that regard,
Gatherer shall require Other Shippers to adjust their nominations throughout the Month so as
to minimize imbalances and to achieve balance on the Gathering System. Either Party shall
have the option to exercise a cash-out for any Positive Shipper Monthly Imbalance Quantity
or Negative Shipper Monthly Imbalance Quantity pursuant to Section 11.4(c) below.



30









 






     (c) Cash-Out of Shipper Monthly Imbalances. If either Party elects to cash-out
pursuant to Section 11.3(b), for each MMBtu of Positive Shipper Monthly Imbalance Quantity
or Negative Shipper Monthly Imbalance Quantity, as the case may be, calculated at the end of
each Month that falls within each range set forth below, Shipper shall pay to Gatherer, or
Gatherer shall pay to Shipper, as applicable, the product of (i) the Cash-Out Value
Percentage attributable to such Gas, as set forth below, multiplied by (ii) the Imbalance
Cash-Out Price for such Month. Such amounts shall be included on and paid in accordance
with Gatherer’s next ensuing Monthly invoice.



	 	 	 	 	 
	Monthly Imbalance Percentage	 	 
	([Positive or Negative Shipper Monthly	 	 
	Imbalance Quantity] Divided by [the	 	 
	Quantity of the Monthly Gas Receipt for	 	 
	such Month less Quantity Reductions for	 	 
	such Month])	 	Cash-out Value Percentage
	less than 5%

	 	 	100	%
	5% up to 10%

	 	 	105	%
	greater than 10%

	 	 	110	%







For example, if the Quantity of the Monthly Gas Receipt for such Month less the Quantity
Reductions equaled one hundred (100) MMBtu, the Negative Shipper Monthly Imbalance Quantity
for such Month was twelve (12) MMBtu, and the Imbalance Cash-Out Price for such Month was
$5.00, then Gatherer would pay to Shipper $5.00 for the first five (5) MMBtu, $5.25 for the
next five (5) MMBtu, and $5.50 for the remaining two (2) MMBtu.




     (d) Imbalance Penalties. If either Party incurs any costs or fees (including,
without limitation, transportation costs, charges or penalties) from Persons receiving Gas
at the Delivery Points as a result of the other Party’s actions or negligence in maintaining
balance on the Gathering System, such other Party shall reimburse the first Party for such
costs and fees. The Party requesting such reimbursement shall provide the other Party with
all the documentation and statements justifying the claim for its review and to contest
should it not agree with the requesting Party.



     Section 11.5 Maintenance.




     (a) Monthly Maintenance schedules shall be sent via email to Shipper by the
20th day of each Month setting forth the Maintenance that is to be performed
during the next Month; provided, however, in the event the 20th day of the Month
is a weekend or holiday, monthly Maintenance schedules will be provided no later than the
last Business Day preceding the 20th day of the Month.




     (b) Maintenance schedules will include by compressor station a description of each
Maintenance project at the compressor stations and an estimate of capacity curtailment and
duration for each project.



31









 






     (c) No later than forty-eight (48) hours prior to the beginning of the Day of each
Maintenance project, a volume curtailment allocation will be sent to Shipper if capacity
allocations are determined to be necessary by Gatherer.



     Section 11.6 Unscheduled Capacity Allocations.




     (a) Gatherer shall use reasonable efforts to provide timely notification to Shipper by
telephone, with subsequent e-mail notification, of the potential size and duration of any
unscheduled capacity disruption. If Shipper does not make necessary adjustments to its
nominations within four (4) hours, Gatherer may adjust Shipper’s nominations and/or not
confirm additional nominations requested by Shipper.




     (b) Gatherer also may request that Shipper curtail production to match production with
nominations of Shipper’s Gas. In such event, if Shipper does not adjust its nomination as
reasonably directed by Gatherer, and such failure to adjust nominations materially impacts
operations on the Gathering System, Gatherer may curtail or shut in Gas for a reasonable
period of time to match Shipper’s production with Shipper’s nominations. Gatherer shall not
be liable for Losses caused by any such curtailment under this Section 11.6(b) unless such
curtailment is due to the negligence of Gatherer.



     Section 11.7 Modifications to Nomination and Balancing Procedures. In the event that
the nomination and balancing procedures herein shall cease to be reflective of actual operations
or become inequitable in any respect, such nomination and balancing procedures shall be modified
from time to time in order to reflect actual operations and to remove any such inequities;
provided, however, such nomination and balancing procedures shall be consistently applied to
Shipper and all Other Shippers utilizing the Gathering System.



ARTICLE 12

GAS QUALITY




     Section 12.1 Receipt Point Gas Quality Specifications. Shipper’s Gas delivered to
the Receipt Points shall meet the applicable Receipt Point Gas Quality Specifications.



     Section 12.2 Non-Conforming Gas. If at any time Gatherer becomes aware that
Shipper’s Gas at the Receipt Points fails to conform to the applicable Receipt Point Gas Quality
Specifications (“Off-Specification Receipts”), then (i) Gatherer shall give Shipper written notice
of the deficiency and Shipper shall take steps to remedy the deficiency and (ii) Gatherer may take
any combination of the following actions:




     (a) take receipt of the non-conforming Shipper’s Gas and that receipt shall not be
construed as a waiver or change of standards for future volumes; or




     (b) after providing notice as provided above in this Section 12.2, immediately cease
receiving the non-conforming Shipper’s Gas by shutting in the sources of such non-conforming
Shipper’s Gas or by other appropriate means and shall notify Shipper that Gatherer has
ceased, or will cease, receiving the non-conforming Shipper’s Gas.



32









 




Notwithstanding anything to the contrary herein, the fact that Dedicated Gas may not meet the
Receipt Point Gas Specifications shall not operate to release such Dedicated Gas from the
Dedication.




     Section 12.3 Off-Specification Receipts. Notwithstanding Section 12.2, Gatherer shall
accept Off-Specification Receipts; provided that Gatherer shall have the right to cease receiving
such Off-Specification Receipts if Gatherer determines in good faith that the blended Gas stream in
the applicable Sub-System would not meet the Delivery Point Gas Quality Specifications or the
receiving party at the Delivery Point would not agree to accept such Off-Specification Receipts.



     Section 12.4 Reimbursement and Shipper Indemnity. Any damages caused by
Off-Specification Receipts from Shipper to the Gathering System or the Gas therein shall be
remedied by Shipper through a reimbursement of the costs incurred by Gatherer to mitigate or
remedy the damages. In addition, Shipper agrees to defend, indemnify, and hold harmless Gatherer
from and against all Claims and Losses arising out of, resulting from, or caused by Shipper
delivering Gas to Gatherer at the Receipt Points that does not conform to the applicable Receipt
Point Gas Quality Specifications.



     Section 12.5 Delivery Point Gas Quality Specifications. The Delivery Point Gas
delivered by Gatherer to Shipper at the Delivery Points shall meet the Delivery Point Gas Quality
Specifications, except to the extent that the delivery of non-conforming Gas is caused by the
receipt of Off-Specification Receipts from Shipper at the Receipt Points.



     Section 12.6 Gatherer Indemnity. Gatherer agrees to defend, indemnify, and hold
harmless Shipper from and against all Claims and Losses arising out of, resulting from, or caused
by Gatherer delivering Gas to Shipper at the Delivery Points that does not conform to the
applicable Delivery Point Gas Quality Specifications, except to the extent that the delivery of
such non-conforming Gas is caused by the receipt of Off-Specification Receipts from Shipper at the
Receipt Points.



ARTICLE 13

MEASUREMENT EQUIPMENT AND PROCEDURES




     Section 13.1 Equipment and Specifications. For measurement purposes under this
Agreement, Shipper’s Gas delivered into the Gathering System shall be measured at the Measurement
Meters and the Delivery Point Gas shall be measured at the meters at the Delivery Points.
Measurement and appurtenant facilities shall be installed, operated, and maintained by the
measuring party in accurate working order and condition to measure Gas at all applicable
measurement points in accordance with the provisions hereof.



     Section 13.2 Gas Meter Standards. Orifice meters installed in such measuring
stations shall be constructed and operated in accordance with ANSI/API 2530 API 14.3, AGA Report
No. 3, Orifice Metering of Natural Gas and Other Related Hydrocarbon Fluids, as it is now
and from time to time may be revised, amended, or supplemented and shall include the use of flange
connections and, where necessary, straightening vanes, flow conditioners and/or pulsation
dampening equipment. Ultrasonic meters installed in such measuring stations shall be



33









 







constructed and operated in accordance with AGA Report No. 9, Measurement of Gas by
Ultrasonic Meters, First Edition, and any subsequent modification and amendment thereof
generally accepted within the Gas industry. Electronic flow computers shall be used and the Gas
shall have its volume, mass, and/or heat content computed in accordance with the applicable AGA
standards including, but not limited to, AGA Report Nos. 3, 5, 6, 7, 8 and API 21.1 “Flow
Measurement Using Electronic Metering Systems” and any subsequent modifications and amendments
thereof generally accepted within the Gas industry. When Gas chromatographs are used they shall
be installed, operated, maintained, and verified according to industry standards (GPA 2261, GPA
2145, GPA 2172, and GPA 2177).



     Section 13.3 Notice of Measurement Equipment Inspection and Calibration. Each Party
shall give reasonable notice to the other Party in order that the other Party may, at its option,
have representatives present to observe any reading, inspecting, testing, calibrating, or
adjusting of measuring equipment used in measuring or checking the measurement of receipts or
deliveries of Gas under this Agreement. The official electronic data from such measuring
equipment shall remain the property of the measuring equipment owner, but copies of such records
shall, upon written request, be submitted, together with calculations and flow computer
configurations therefrom, to the requesting Party for inspection and verification.



     Section 13.4 Measurement Accuracy Verification. Each Party shall verify the accuracy
of all transmitters, flow computers, and other equipment used in the measurement of the Gas
hereunder at intervals not to exceed one hundred eighty (180) Days and cause such equipment to be
adjusted or calibrated as necessary. Testing frequency will be based upon each well or station’s
flow rate (Mcf/Day). Any flow rate greater than or equal to 5,000 Mcf/Day shall be tested
monthly. Any flow rate that is greater than or equal to 1,000 Mcf/Day, but less than 5,000
Mcf/Day, shall be tested semi-annually. Neither Party shall be required to cause adjustment or
calibration of such equipment more frequently than once every Month, unless a special test is
requested pursuant to Section 13.5 of this Agreement. If, upon test, (i) no adjustment or
calibration error is found that results in an incremental adjustment to the calculated flow rate
through each meter run in excess of one percent (1%) of the adjusted flow rate (whether positive
or negative and using the adjusted flow rate as the percent error equation denominator) or (ii)
any quantity error is not greater than two hundred fifty (250) Mcf per Month, then any previous
recordings of such equipment shall be considered accurate in computing deliveries but such
equipment shall be adjusted or calibrated at once. If, during any test of the measuring
equipment, an adjustment or calibration error is found that results in (i) an incremental
adjustment to the calculated flow rate through each meter run in excess of one percent (1%) of the
adjusted flow rate (whether positive or negative and using the adjusted flow rate as the percent
error equation denominator) and (ii) a quantity error greater than two hundred fifty (250) Mcf per
Month (“Material Error”), then any previous recordings of such equipment shall be corrected to
zero error for any period during which the error existed (and which is either known definitely or
agreed to by the Parties) and the total flow for such period shall be determined in accordance
with the provisions of Section 13.6 of this Agreement. If the period of error condition cannot be
determined or agreed upon between the Parties, such correction shall be for a period extending
over the last one half (1/2) of the time elapsed since the date of the last test.



34









 





     Section 13.5 Special Tests. In the event a Party desires a special test (a test not
scheduled by a Party under the provisions of Section 13.4 of this Agreement) of any measuring
equipment, seventy-two (72) hours advance notice shall be given to the other Party and, after
providing such notice, such test shall be promptly performed. If no Material Error is found, the
Party requesting the test shall pay the costs of such special test including any labor and
transportation costs pertaining thereto. If a Material Error is determined to exist, the Party
responsible for such measurement shall pay such costs and perform any corrections required under
Section 13.4 of this Agreement.



     Section 13.6 Metered Flow Rates in Error. If, for any reason, any measurement
equipment is (i) out of adjustment, (ii) out of service, or (iii) out of repair, and, in each
case, a Material Error exists as a result thereof, the total quantity of Gas delivered shall be
determined in accordance with the first of the following methods which is feasible:




     (a) by using the registration of any mutually agreeable check metering facility, if
installed and accurately registering (subject to testing as provided for in Section 13.4 of
this Agreement);




     (b) where multiple meter runs exist in series, by calculation using the registration of
such meter run equipment; provided that they are measuring Gas from upstream and downstream
headers in common with the faulty metering equipment, are not controlled by separate
regulators, and are accurately registering;




     (c) by estimating the quantity, based upon deliveries made during periods of similar
conditions when the meter was registering accurately.



     Section 13.7 Record Retention. The Party owning the measurement equipment shall
retain and preserve all test data, charts, and similar records for any calendar year for a period
of at least sixty (60) Months following the end of such calendar year unless applicable law or
regulation requires a longer time period or the Party has received written notification of a
dispute involving such records, in which case records shall be retained until the related issue is
resolved.



     Section 13.8 Correction Factors for Volume Measurement. The computations of the
volumes of Gas measured shall be made as follows:




     (a) The hourly orifice coefficient for each meter shall be calculated at the base
pressure of fourteen and sixty-five hundredths (14.65) psia and the base temperature of
sixty (60) degrees Fahrenheit. All Gas volume measurements shall be based on an local
atmospheric pressure assumed to be thirteen and two-tenths (13.2) psia.




     (b) The flowing temperature of the Gas shall be continuously measured. In the case of
electronic metering, such temperature measurement shall be used as continuous input to the
flow computer for calculation of Gas volume, mass and/or energy content in accordance with
the applicable AGA or API 21.1 standards including, but not limited to, AGA Report Nos. 3,
5, 6, 7 and 8 and any subsequent modification and amendments thereof generally accepted
within the Gas industry.



35









 






     (c) Measurements of inside diameters of pipe runs and orifices shall be obtained by
means of a micrometer to the nearest one-thousandth of an inch, and such measurements shall
be used in computations of coefficients.




     (d) In determining the volume of Gas, when electronic transducers and flow computers
are used, the Gas shall have its volume, mass and/or energy content continuously integrated
in accordance with the applicable AGA standards including, but not limited to, AGA report
Nos. 3, 5, 6, 7 and 8 and any subsequent modification and amendments thereof generally
accepted within the Gas industry.




     (e) In calculating the volume of Gas, deviation from Boyle’s Law at the pressure,
specific gravity, and temperature for each measurement shall be determined by use of AGA
Report No. 8, Compressibility Factors for Natural Gas and Other Related Hydrocarbon
Gases, published by the AGA in conjunction with Gas Measurement Committee Report No.
3 and amendments thereto generally accepted within the Gas industry.




     (f) Whenever the conditions of pressure and temperature differ from the standards
described herein, conversion of the volume from these conditions to the standard conditions
shall be made in accordance with the Ideal Gas Laws, corrected for deviation by the methods
set forth in the AGA Gas Measurement Committee Report No. 3, as said report may be
amended from time to time.



     Section 13.9 Exception to Gas Measurement Basis. If at any time the basis of
measurement set out in this Agreement should conflict with rules, regulations, or orders of any
state or federal regulatory body having jurisdiction, then the basis of measurement provided for
in such rules, regulations, or orders shall govern measurements hereunder.



     Section 13.10 Gas Sampling. The frequency of sampling will be at the same interval
as the calibration for all meters. New wells or wells that have been changed due to a work over
or other well bore alteration that could alter the Gas composition shall be sampled monthly until
the analyses demonstrate reasonable consistency. After such time said meters will then be sampled
at the stated calibration frequency.




     (a) The C6+ composition, specific gravity and Gross Heating Value of Gas
will be determined by the measuring party taking a sample at the same frequency as the meter
calibration test. The sample will be acquired through a spot, composite, or on-line Gas
chromatograph. The analytical results shall be applied at the beginning of the Month the
sample is taken until a subsequent representative sample is applied.




     (b) The specific gravity of Gas at all applicable measurement points shall be
determined by a Gas chromatographic component analysis to the nearest one thousandth (0.001)
of the samples of the Gas taken for test purposes as provided above, or by such other method
as shall be mutually agreed upon.




     (c) The Gross Heating Value shall be measured by Gas chromatographic analysis component
analysis of the samples of the Gas taken for test purposes as provided above, or by such
other method as shall be mutually agreed upon.



36









 





     Section 13.11 Modifications to Measurement Procedures. In the event that the
measurement procedures herein shall cease to be reflective of actual operations or become
inequitable in any respect, such measurement procedures shall be modified from time to time in
order to reflect actual operations and to remove any such inequities; provided, however, such
measurement procedures shall be consistently applied to Shipper and all Other Shippers utilizing
the Gathering System.



     Section 13.12 Measurement Disputes. Any dispute, controversy, or claim arising out
of or in connection with this Article 13 (a “Measurement Dispute”), which the Parties are unable
to resolve shall be referred to and determined by a mutually agreeable measurement expert (the
“Measurement Expert”), as the sole and exclusive remedy of the Parties as to the Measurement
Dispute. Prior to retention of a Measurement Expert, the Parties will collectively approach and
negotiate fees with such Measurement Expert. Before any material information pertaining to the
Measurement Dispute is presented to the Measurement Expert, the Measurement Expert must agree in
writing to maintain the confidentiality of all information provided to the Measurement Expert by
either Party. All Party communications with the Measurement Expert prior to and after retention,
including explanations of the dispute, data submissions, and data reviews, must be attended by
representatives of the other Party or its designees. The decision of the Measurement Expert shall
be final and binding upon the Parties.



ARTICLE 14

NOTICES




     Except as specifically provided otherwise herein, any notice, claim, or other communication
provided for in this Agreement or any notice that either Party may desire to give to the other
shall be in writing and shall be: (i) sent by facsimile transmission; (ii) delivered by hand; (iii)
sent by United States mail with all postage fully prepaid; or (iv) delivered by courier with
charges paid in accordance with the customary arrangements established by such courier, in each of
the foregoing cases addressed to the Party at the following addresses:



	 	 	 	 	 
	 

	 	Gatherer:
	 	Piñon Gathering Company, LLC
	 

	 	 	 	c/o TCW Asset Management Company
	 

	 	 	 	333 Clay Street, Suite 4150
	 

	 	 	 	Houston, Texas 77002
	 

	 	 	 	Attention: Clay Taylor
	 

	 	 	 	Fax Number: 713.615.7460
	 
	 	 	 	 
	 

	 	with a copy to:
	 	TCW Asset Management Company
	 

	 	 	 	865 South Figueroa Street, Suite 1800
	 

	 	 	 	Los Angeles, California 90017
	 

	 	 	 	Attention: R. Blair Thomas
	 

	 	 	 	Fax Number: 213.244.0604
	 
	 	 	 	 
	 

	 	Shipper:
	 	SandRidge Exploration and Production, LLC
	 

	 	 	 	123 Robert S. Kerr Avenue
	 

	 	 	 	Oklahoma City, Oklahoma 73102-6406
	 

	 	 	 	Attention: Midstream — Manager of Administration
	 

	 	 	 	Fax Number: 405.429.5990






37









 




or at such other address as either Party may at any time designate by giving written notice to the
other Party. Such notices, invoices, allocation statements, claims, or other communications shall
be deemed received as follows: (i) if delivered personally, upon delivery; (ii) if sent by United
States mail, whether by express mail, registered mail, certified mail or regular mail, the notice
shall be deemed to have been received on the day receipt is refused or is confirmed orally or in
writing by the receiving Party; (iii) if sent by a courier service, upon delivery; or (iv) if sent
by facsimile, the Business Day following the day on which it was transmitted and confirmed by
transmission report or such earlier time as confirmed orally or in writing by the receiving Party.




ARTICLE 15

PAYMENTS




     Section 15.1 Payments and Invoices. Not later than the fifteenth (15th)
day of the Month immediately following the Month for which the consideration is due, Shipper shall
pay to Gatherer the Gathering Fees and the Commodity Fee for the Base Volumes for the Month for
which the consideration is due. Gatherer shall provide Shipper with a detailed statement and
supporting documentation for the net amount of all consideration due (including deductions) under
the terms of this Agreement (including amounts due or deductions for monthly imbalances pursuant
to Section 11.3), not later than the last day of the Month immediately following the Month for
which the consideration is due. In the event Shipper disputes any portion of the net amount set
out in Gatherer’s statement, Shipper shall provide Gatherer with a detailed accounting of the
disputed amounts and its basis for the dispute and shall make payment to Gatherer of the net
amount due and not in dispute within fifteen (15) days after receipt of Gatherer’s statement.
Such payment shall be made by wire transfer pursuant to wire transfer instructions delivered by
Gatherer to Shipper in writing from time to time; provided that upon the request of Gatherer,
Shipper shall make payment of the Operations Fee directly to Operator. Any amounts owing by
Gatherer to Shipper shall be deducted from amounts otherwise due Gatherer in the next ensuing
Monthly invoice. Notwithstanding anything herein to the contrary, any indemnification payments
required to be made by a Party hereunder shall be made to the indemnified Party upon receipt by
the indemnifying Party of written demand therefor from the indemnified Party.



     Section 15.2 Audit Rights. Each Party, on not less than thirty (30) Days’ prior
written notice to the other Party, shall have the right at its expense, at reasonable times during
normal business hours, to audit the books and records of the other Party to the extent necessary
to verify the accuracy of any statement, allocation, measurement, computation, charge, or payment
made under or pursuant to this Agreement. The scope of any audit shall be limited to transactions
affecting the Gas delivered or Services provided hereunder and shall be limited to the twenty-four
(24) month period immediately prior to the Month in which the notice requesting an audit was
given. However, no audit may include any time period for which a prior audit hereunder was
conducted, and no audit may occur more frequently than once each twelve (12) Months. All
statements, allocations, measurements, computations, charges, or payments made hereunder shall be
conclusively deemed true and correct and shall be final for all purposes, unless a specific
written claim detailing the amounts in question is made on or before the end of the twenty-fourth
(24th) Month after the Month in which such statement,



38









 







allocation, measurement, computation, charge or payment was made; provided, however, if any
such statement, allocation, measurement, computation, charge or payment is the subject of an audit
requested within the time periods provided herein, then the Party conducting such audit shall have
ninety (90) Days after the date on which such audit is requested to make such specific written
claim detailing the amounts in question. To the extent the foregoing varies from any applicable
statute of limitation, the Parties expressly waive all such statutes of limitation.



     Section 15.3 Right to Suspend on Failure to Pay. If any undisputed amount due
hereunder remains unpaid for the longer of (i) twenty (20) days after the due date, or (ii) ten
(10) days after delivery of notice of non-payment, Gatherer shall have the right to suspend or
discontinue services hereunder until any such past due amount is paid. Each Party agrees to pay
all costs incurred by the prevailing Party in connection with the collection of, or attempt to
collect, any amounts due hereunder, including, without limitation, reasonable attorney’s fees and
court costs.



     Section 15.4 Creditworthiness.




     (a) Gatherer shall not be required to commence or to continue Services hereunder on
behalf of Shipper if Shipper (i) is or has become insolvent or (ii) at Gatherer’ request,
fails, within a reasonable period of time of not less than ten (10) days, to demonstrate
creditworthiness as reasonably determined by Gatherer. Notwithstanding the foregoing,
Gatherer shall provide Services to Shipper hereunder if Shipper (x) prepays for such
Services or (y) furnishes good and sufficient security, as determined by Gatherer in its
reasonable discretion, in an amount equal to the estimated cost of Services for a three (3)
Month period. Gatherer may reassess the creditworthiness of and performance by Shipper from
time to time.




     (b) The insolvency of Shipper shall be evidenced by the filing by Shipper or its parent
entity of a voluntary petition in bankruptcy or the entry of a decree or order by a court
having jurisdiction in the premises adjudging Shipper or its parent entity as bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of Shipper or its parent entity under the Federal
Bankruptcy Act or any other applicable federal or state law, or appointing a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of Shipper, its
parent entity or of any substantial part of their respective property, or the ordering of
the winding-up or liquidation of Shipper’s or its parent entity’s affairs, with said order
or decree continuing unstayed and in effect for a period of sixty (60) consecutive days.
Notwithstanding anything herein to the contrary, if Shipper is or has become insolvent,
Gatherer shall not suspend service in a manner that is inconsistent with the Federal
Bankruptcy Code.



     Section 15.5 Payment Disputes. In the event Shipper disputes any payment hereunder,
Shipper shall make timely payment of all undisputed amounts and Shipper and Gatherer will use
good-faith efforts to resolve the disputed amounts within sixty (60) Days following the original
due date. Any amounts subsequently resolved shall be due and payable within ten (10) Days of such
resolution.



39









 





     Section 15.6 Interest on Late Payments. In the event Shipper shall fail to make
timely payment of any sums, except those in a good-faith dispute, when due under this Agreement,
interest will accrue at an annual rate equal to the lower of the prime rate as published in the
“Money Rates” section of The Wall Street Journal plus two percent (2%) and the maximum lawful rate
of interest from the date payment is due until the date payment is made.



ARTICLE 16

FORCE MAJEURE




     Section 16.1 Suspension of Obligations. In the event a Party is rendered unable,
wholly or in part, by Force Majeure to carry out its obligations under this Agreement, other than
the obligation to indemnify and make payments then or thereafter due hereunder, and such Party
promptly gives notice and full particulars of such Force Majeure in writing to the other Party
promptly after the occurrence of the cause relied on, then the obligations of the Party giving
such notice, so far as and to the extent they are affected by such Force Majeure, shall be
suspended during the continuance of any inability so caused, but for no longer period, and such
cause shall so far as possible be remedied with all reasonable dispatch by the Party claiming
Force Majeure. A Force Majeure event affecting the performance by either Party shall not relieve
it of liability in the event of its negligence, where such negligence was a cause of the Force
Majeure event, or in the event of its failure to use commercially reasonable efforts to remedy the
situation and remove the cause with all reasonable dispatch.



     Section 16.2 Definition of Force Majeure. The term “Force Majeure” as used in this
Agreement shall mean any cause or causes not reasonably within the control of the Party claiming
suspension and which, by the exercise of reasonable diligence, such Party is unable to prevent or
overcome, including, without limitation, acts of God, acts, omissions to act, and/or delays in
action of federal, state, or local government or any agency thereof, strikes, lockouts, work
stoppages, or other industrial disturbances, acts of a public enemy, sabotage, wars, blockades,
insurrections, riots, acts of terror, epidemics, landslides, lightning, earthquakes, fires,
storms, storm warnings, floods, washouts, extreme cold or freezing weather, arrests and restraints
of governments and people, civil or criminal disturbances, interruptions by governmental or court
orders, present and future valid orders of any regulatory body having jurisdiction, explosions,
mechanical failures, breakage, or accident to equipment installations, machinery, compressors, or
lines of pipe, and associated repairs, freezing of wells or lines of pipe, partial or entire
failure of wells, pipes, facilities, or equipment, electric power unavailability or shortages,
failure of pipelines or carriers to transport, partial or entire failure or refusal of operators
of upstream or downstream pipelines or facilities to receive Gas, governmental regulations, and
inability to obtain or timely obtain, or obtain at a reasonable cost, after exercise of reasonable
diligence, pipe, materials, equipment, rights-of-way, servitudes, governmental approvals, or
labor, including those necessary for the facilities provided for in this Agreement. It is
understood and agreed that the settlement of strikes or lockouts shall be entirely within the
discretion of the Party having the difficulty, and that the above requirement that any Force
Majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes
or lockouts by acceding to the demands of the opposing party when such course is inadvisable in
the sole discretion of the Party having the difficulty.



40









 





     Section 16.3 Non-Gatherer Force Majeure Events. Notwithstanding anything herein to
the contrary, the following events shall constitute Non-Gatherer Force Majeure Events:




     (a) the termination or failure of the Surface Use Agreement for any reason other than
an act or omission of Gatherer; and




     (b) any failure of the Century Plant or any other CO2 plant to accept Shipper’s Gas for
any reason other than the failure of Gatherer to perform its obligations hereunder.



ARTICLE 17

INDEMNIFICATION




     Section 17.1 Gatherer. Subject to the terms of this Agreement, including, without
limitation, Section 21.10 of this Agreement, Gatherer shall indemnify, defend, and hold
harmless the Shipper Indemnified Parties from and against all Claims and Losses arising out of or
relating to (i) the operations conducted hereunder or in connection herewith by Gatherer to the
extent resulting from the negligence, gross negligence, or willful misconduct of Gatherer, except
to the extent such Claims or Losses are attributable to the negligence, gross negligence, or
willful misconduct of any of the Shipper Indemnified Parties, (ii) any breach of this Agreement by
Gatherer, and (iii) a breach by Gatherer under this Agreement that results in the non-performance
by Gatherer of substantially all of its obligations thereunder, including a rejection of this
Agreement under any bankruptcy case or similar proceeding under any applicable federal, state or
other law. To secure the obligation of Gatherer to pay under and perform the indemnity provided
in Section 17.1(iii) (the “Gatherer Secured Obligations”), Gatherer (i) grants,
bargains, sells, assigns, mortgages, transfers, and conveys unto Richard Gognat, as trustee for
the benefit of the Shipper Indemnified Persons (the “Shipper Trustee”), the Assets (as
defined in the Gathering Agreement) and all proceeds, products, renewals, increases, profits,
substitutions, replacements, additions, amendments, appurtenances and accessions of the Assets
(the “Shipper Collateral”), to have and to hold the Shipper Collateral unto the Shipper
Trustee and his successors or substitutes in this trust forever, and (ii) grants to Shipper, for
the benefit of the Shipper Indemnified Persons, a security interest in all of Gatherer’s right,
title and interest, now existing or hereafter arising, in the Shipper Collateral. Upon the failure
of Gatherer to timely pay or perform any Gatherer Secured Obligation, the Shipper Trustee shall
have the right and power to sell, as the Shipper Trustee may elect, all or a portion of the
Shipper Collateral at one or more sales, as an entirety or in parcels, in accordance with Section
51.002 of the Texas Property Code. Gatherer hereby designates as Gatherer’s address for the
purpose of notice the address set forth in Article 14. Any purchaser or purchasers will be
provided with a general warranty conveyance binding Gatherer and Gatherer’s successors and
assigns. Sale of part of the Shipper Collateral will not exhaust the power of sale, and sales may
be made from time to time until all of the Shipper Collateral is sold or all of the obligations
under the indemnity provided in Section 17.1(iii) are paid in full. The Shipper Trustee
will have the authority to appoint an attorney-in-fact to act as trustee in conducting the
foreclosure sale and executing a deed to the purchaser or purchasers. The Shipper Trustee may
resign in writing addressed to Shipper or be removed at any time with or without cause by an
instrument in writing duly executed by Shipper. In case of the death, resignation or removal of
the Shipper Trustee, a successor trustee may be appointed by Shipper



41









 







by instrument of substitution complying with any applicable requirements of law, and in the
absence of any requirement, without formality other than an appointment and designation in
writing. The appointment and designation will vest in the named successor trustee all the estate
and title of the Shipper Trustee in all of the Shipper Collateral and all of the rights, powers,
privileges, immunities and duties hereby conferred upon the Shipper Trustee. All references
herein to the Shipper Trustee will be deemed to refer to any successor trustee from time to time
acting hereunder. Notwithstanding anything herein to the contrary, upon the occurrence of a
Termination Event, the lien and security interest described in this Section 17.1 shall be
deemed to be released, terminated and void without further action by either Party.



     Section 17.2 Shipper. Subject to the terms of this Agreement, including, without
limitation, Section 21.10 of this Agreement, Shipper shall indemnify, defend, and hold
harmless the Gatherer Indemnified Parties from and against all Claims and Losses arising out of or
relating to (i) the operations conducted hereunder or in connection herewith by Shipper to the
extent resulting from the negligence, gross negligence, or willful misconduct of Shipper, except
to the extent such Claims or Losses are attributable to the negligence, gross negligence, or
willful misconduct of any of the Gatherer Indemnified Parties, (ii) any breach of this Agreement
by Shipper, and (iii) the provision of Services in accordance with this Agreement if the provision
of such Services is not permitted under applicable law.



ARTICLE 18

CUSTODY AND TITLE




     Section 18.1 Shipper Custody. As among the Parties, Shipper and any of its designees
shall be in custody, control, and possession of (i) Shipper’s Gas hereunder until Shipper’s Gas is
delivered to the Receipt Points and (ii) the Delivery Point Gas after it is delivered to Shipper
at the Delivery Points.



     Section 18.2 Gatherer Custody. As among the Parties, Gatherer shall be in custody,
control, and possession of Shipper’s Gas delivered hereunder, including any portion thereof which
accumulates as liquids, after Shipper’s Gas is delivered at the Receipt Points and until the
Delivery Point Gas is delivered to Shipper at the Delivery Points.



     Section 18.3 Shipper Warranty. Shipper represents and warrants that it (i) has the
right to dedicate all Dedicated Gas and (ii) owns, or has the right to deliver, Shipper’s Gas to
the Receipt Points for the purposes of this Agreement, free and clear of all liens, encumbrances,
and adverse claims. If the title to Shipper’s Gas delivered hereunder is disputed or is involved
in any legal action, Gatherer shall have the right to withhold payment (without interest), or
cease receiving such Gas, to the extent of the interest disputed or involved in legal action,
during the pendency of the action or until title is freed from the dispute or until Shipper
furnishes, or causes to be furnished, indemnification to save Gatherer harmless from all Losses
arising out of the dispute or action, with surety reasonably acceptable to Gatherer. Subject to
Section 21.10, Shipper agrees to indemnify and hold harmless the Gatherer Indemnified
Parties from and against all Claims or Losses suffered by the Gatherer Indemnified Parties, where
such Claims or Losses arise, directly or indirectly, out of, or are related to, any breach of the
foregoing representation and warranty.



42









 





     Section 18.4 Title. Title to Shipper’s Gas delivered under this Agreement, including
all constituents thereof, shall remain with and in Shipper or its designee at all times; provided,
however, (i) title to Condensate shall pass from Shipper to Gatherer immediately downstream of the
Receipt Points and (ii) title to FL&U shall pass from Shipper to Gatherer immediately downstream
of the Receipt Points.



     Section 18.5 Carbon Dioxide. Shipper shall retain title to all CO2 contained in
Shipper’s Gas tendered by Shipper under this Agreement.



ARTICLE 19

ROYALTY AND TAXES




     Section 19.1 Proceeds of Production. Shipper shall have the sole and exclusive
obligation and liability for the payment of all Persons due any proceeds derived by Shipper from
Shipper’s Gas (including all constituents and products thereof) delivered under this Agreement,
including, without limitation, royalties, overriding royalties, and similar interests, in
accordance with the provisions of the leases or agreements creating those rights to such proceeds.



     Section 19.2 Production Taxes. Shipper shall pay and be responsible for all
Production Taxes levied against or with respect to Shipper’s Gas delivered or Services provided
under this Agreement. Gatherer shall not become liable for such Production Taxes, unless
designated to remit those Production Taxes on behalf of Shipper by any duly constituted
jurisdictional agency having authority to impose such obligations on Gatherer, in which event the
amount of such Taxes remitted on Shipper’s behalf shall be (i) reimbursed by Shipper upon receipt
of invoice, with corresponding documentation from Gatherer setting forth such payments, or (ii)
deducted from amounts otherwise due Shipper under this Agreement.



     Section 19.3 Indemnification. Shipper hereby agrees to defend and indemnify and hold
Gatherer harmless from and against any and all Claims and Losses, arising from the payments made
by Shipper in accordance with Section 19.1 and Section 19.2, above, including, without limitation,
Claims and Losses arising from claims for the nonpayment, mispayment, or wrongful calculation of
those payments.



ARTICLE 20

DISPUTE RESOLUTION




     Section 20.1 Negotiation. Prior to submitting any dispute for resolution by a court,
a Party shall provide written notice to the other of the occurrence of such dispute. If the
Parties have failed to resolve the dispute within fifteen (15) Business Days after such notice was
given, the Parties shall seek to resolve the dispute by negotiation between senior management
personnel of each Party. Such personnel shall endeavor to meet and attempt to amicably resolve
the dispute. If the Parties are unable to resolve the dispute for any reason within thirty (30)
Business Days after the original notice of dispute was given, then either Party shall be entitled
to pursue any remedies available at law or in equity; provided, however, this Section 20.1 shall
not limit a Party’s right to initiate litigation prior to the expiration of the time periods set
forth in this Section 20.1 if application of such limitations would prevent a Party from filing



43









 







a lawsuit or claim within the applicable period for filing lawsuits (e.g. statutes of
limitation, prescription, etc.).



     Section 20.2 Jurisdiction and Venue.




     (a) Each Party agrees that the appropriate, exclusive and convenient forum for any
disputes between any of the Parties arising out of this Agreement or the transactions
contemplated hereby shall be in any state or federal court in Houston or Dallas, Texas, and
each of the Parties irrevocably submits to the jurisdiction of such courts solely in respect
of any legal proceeding arising out of or related to this Agreement or the transactions
contemplated hereby. The Parties further agree that the Parties shall not bring suit with
respect to any disputes arising out of this Agreement or the transactions contemplated
hereby in any court or jurisdiction other than the above specified courts.




     (b) Each Party hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby in any court referred to in paragraph (a)
above. Each of the Parties hereby irrevocably waives, to the fullest extent permitted by
applicable law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.



     Section 20.3 Jury Waiver. THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE,
TO THE FULLEST EXTENT THEY MAY LEGALLY AND EFFECTIVELY DO SO, THE RIGHT TO A JURY IN ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.



     Section 20.4 Costs and Expenses. The prevailing Party in any litigation pertaining
to any dispute hereunder shall be entitled to recover its reasonable costs, expenses, and
attorney’s fees in connection with such litigation.



ARTICLE 21

MISCELLANEOUS




     Section 21.1 Rights. The failure of either Party to exercise any right granted
hereunder shall not impair nor be deemed a waiver of that Party’s privilege of exercising that
right at any subsequent time or times.



     Section 21.2 Applicable Laws. This Agreement is subject to all valid present and
future laws, regulations, rules, and orders of Governmental Authorities now or hereafter having
jurisdiction over the Parties, this Agreement, or the Services performed or the facilities
utilized under this Agreement.



     Section 21.3 Governing Law. This Agreement shall be governed by, construed, and
enforced in accordance with the laws of the State of Texas, without regard to choice of law
principles that would require the application of the laws of any other jurisdiction.



44









 





     Section 21.4 Assignments.




     (a) Shipper shall not make any assignment of all or any part of this Agreement or any
of the rights or obligations hereunder unless there first shall have been obtained the
written consent thereto of Gatherer, which consent shall not be unreasonably withheld,
conditioned, or delayed. In connection with any proposed assignment, Shipper shall deliver
to Gatherer a written proposal detailing (i) the manner in which Shipper proposes to
allocate the Base Volumes and any balance then existing in the Monthly Excess Bank between
Shipper and the prospective assignee and (ii) a proposed crediting mechanism for adding
Monthly Excess Volumes to the Monthly Excess Bank. In the event Gatherer consents to the
proposed assignment and the proposed allocation of the Base Volumes and any balance then
existing in the Monthly Excess Bank, (i) the Parties shall sign an amendment to this
Agreement that adjusts the Base Volumes and the balance of the Monthly Excess Bank, and (ii)
Gatherer and the permitted assignee shall enter into a separate gathering agreement in a
form substantially similar to this Agreement (rather than having a portion of this Agreement
assigned to such permitted assignee) with the effective date of such gathering agreement
being the date of execution thereof. Any permitted assignee of Shipper that executes a
separate gathering agreement described in (ii) above shall not be subject to this Agreement.




     (b) Prior to the occurrence of a Termination Event, Gatherer shall neither (i) convey
all or any part of the Gathering System nor assign all or any part of this Agreement to any
Person (or an Affiliate or relative of such Person) that owns, or has a leasehold interest
in, surface or minerals located within the Dedicated Area as of the Effective Date, or (ii)
enter into any other transaction pursuant to which control over all or any part of the
Gathering System is transferred to any Person (or an Affiliate or relative of such Person)
that owns, or has a leasehold interest in, surface or minerals located within the Dedicated
Area as of the Effective Date.




     (c) Subject to the other subsections of this Section 21.4, this Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the Parties, and
shall be binding upon any purchaser of the Gathering System and upon any purchaser of
Shipper’s Interests in the Dedicated Area or of Shipper’s Interests in the Non-Dedicated
Area Connected Wells. Any assignment or sublease by Shipper of any of Shipper’s Interests
in the Dedicated Area, or of Shipper’s Interests in the Non-Dedicated Area Connected Wells
shall be completed in accordance with the obligations set forth in this Section 21.4 and
Section 2.3 of this Agreement. Any assignment or sublease by Gatherer of any of interest in
the Gathering System shall be completed in accordance with the obligations set forth in
Section 2.3 of this Agreement. Any attempted assignment of this Agreement in violation of
this Section 21.4 shall be null and void.




     (d) Gatherer shall maintain uniformity of interest across the entire Gathering System
such that any Person that owns an interest in the Gathering System has a uniform interest
across the entire Gathering System. In furtherance thereof, any assignment by Gatherer of
any interest in the Gathering System must include a uniform undivided interest in the entire
Gathering System.



45









 






     (e) Upon the assignment by Shipper of any interest in this Agreement, any of Shipper’s
Interests in the Dedicated Area or any of Shipper’s Interests in the Non-Dedicated Area
Connected Wells, Shipper (but not its assignee) shall be released from liability hereunder
for obligations, accruing hereunder after the effective date of such assignment, with
respect to the interests assigned, except for the obligation to make Monthly Shortfall
Payments hereunder. Upon the assignment by Gatherer of all of its rights and obligations
hereunder, Gatherer (but not its assignee) shall be released from liability hereunder for
obligations accruing hereunder after the effective date of such assignment. Upon the
assignment by Gatherer of less than all of its rights and obligations hereunder, Gatherer
shall not be released from any liability hereunder.



       Section 21.5 Set-off.




     (a) All payments required to be made hereunder by Shipper shall be (i) absolute and
unconditional, (ii) calculated without reference to any netting, set-off, counterclaim or
other right which Shipper may have against Gatherer, including, without limitation, any
right to set-off against any amounts owed by Gatherer under this Agreement or any other
Transaction Document, and (iii) made free and clear of and without any deduction for or on
account of any such netting, set-off or counterclaim.




     (b) Gatherer is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to net, set-off and apply any payments owing to Gatherer against
any and all of the obligations of Shipper under this Agreement or any other Transaction
Document. Gatherer agrees to promptly notify Shipper after any such netting, set-off or
application is made; provided that the failure to give such notice shall not affect the
validity of such netting, set-off or application.



     Section 21.6 Published Indices. Unless expressly provided otherwise herein, in the
event any published price index referred to in this Agreement fails (whether due to market
disruption events or otherwise) or ceases to publish the applicable prices, rates or other
information referred to in this Agreement, changes the heading or format under which such
information is published, changes the source of information which it publishes under such heading
or format, or ceases publication altogether, then (i) Gatherer and Shipper shall for thirty (30)
Days thereafter diligently attempt to designate a mutually acceptable comparable alternative
source for the same or equivalent information, whereupon the Parties will thereafter use such
designated alternative source, and (ii) if no such mutually acceptable comparable alternative
source is agreed upon within such thirty (30) Days, Gatherer will designate a comparable and
reasonable alternative source for the same or equivalent information, whereupon the Parties will
thereafter use such designated alternative source.



     Section 21.7 Exhibits. The following Exhibits are attached to this Agreement and are
incorporated herein by this reference:


Exhibit A  —  Map of Dedicated Area

Exhibit B  —  Dedicated Area Description

Exhibit C  —  Base Volumes

Exhibit D  —  Wellhead Meters




46









 







Exhibit E  —  Delivery Points

Exhibit F  —  Sub-Systems

Exhibit G  —  Trigger Event Example

Exhibit H  —  Gas Quality Specifications

Exhibit I  —  Monthly Average Receipt Point Pressure Example

Exhibit J  —  Gathering System

Exhibit K  —  Monthly Excess Bank Example

Exhibit L  —  Memorandum of Gas Gathering Agreement




     Section 21.8 Entire Agreement, Amendments. This Agreement, including, without
limitation, all exhibits hereto, and the other Transaction Documents integrate the entire
understanding between the Parties with respect to the subject matter covered and supersede all
prior understandings, drafts, discussions, or statements, whether oral or in writing, expressed or
implied, dealing with the same subject matter. This Agreement may not be amended or modified in
any manner except by a written document signed by the Parties that expressly amends this
Agreement.



     Section 21.9 Waivers. No waiver by either Party of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless expressly provided. No
waiver shall be effective unless made in writing and signed by the Party to be charged with such
waiver.



     Section 21.10 Limitation of Liability. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO
THE CONTRARY, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR SPECIAL, INDIRECT,
CONSEQUENTIAL, PUNITIVE, OR EXEMPLARY DAMAGES SUFFERED BY SUCH PARTY RESULTING FROM OR ARISING OUT
OF THIS AGREEMENT OR THE BREACH THEREOF OR UNDER ANY OTHER THEORY OF LIABILITY, WHETHER TORT,
NEGLIGENCE, STRICT LIABILITY, BREACH OF CONTRACT, WARRANTY, INDEMNITY, OR OTHERWISE, INCLUDING,
WITHOUT LIMITATION, LOSS OF USE, INCREASED COST OF OPERATIONS, LOSS OF PROFIT OR REVENUE, OR
BUSINESS INTERRUPTIONS; PROVIDED, HOWEVER, FOR THE AVOIDANCE OF DOUBT, LOST PRODUCTION, DELAYED
PRODUCTION OF HYDROCARBONS AND LOST OPPORTUNITY TO RECEIVE GATHERING FEES AND COMMODITY FEES
THROUGHOUT THE TERM SHALL BE CONSIDERED A DIRECT DAMAGE. IN FURTHERANCE OF THE FOREGOING, EACH
PARTY RELEASES THE OTHER PARTY AND WAIVES ANY RIGHT OF RECOVERY FOR SPECIAL, INDIRECT,
CONSEQUENTIAL, PUNITIVE, OR EXEMPLARY DAMAGES SUFFERED BY SUCH PARTY REGARDLESS OF WHETHER ANY
SUCH DAMAGES ARE CAUSED BY THE OTHER PARTY’S NEGLIGENCE (AND REGARDLESS OF WHETHER SUCH NEGLIGENCE
IS SOLE, JOINT, CONCURRENT, ACTIVE, PASSIVE, OR GROSS NEGLIGENCE), FAULT, OR LIABILITY WITHOUT
FAULT; PROVIDED, HOWEVER, THE FOREGOING SHALL NOT BE CONSTRUED AS LIMITING AN OBLIGATION OF A
PARTY HEREUNDER TO INDEMNIFY, DEFEND, AND HOLD HARMLESS THE OTHER PARTY AGAINST CLAIMS ASSERTED BY
UNAFFILIATED THIRD PARTIES, INCLUDING, BUT NOT LIMITED TO, THIRD-



47









 







PARTY CLAIMS FOR SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE, OR EXEMPLARY DAMAGES.



     Section 21.11 Headings. The headings and captions in this Agreement have been
inserted for convenience of reference only and shall not define or limit any of the terms and
provisions hereof.



     Section 21.12 Rights and Remedies. Except as otherwise provided in this Agreement,
each Party reserves to itself all rights, counterclaims, other remedies, and defenses to which
such Party is or may be entitled arising from or out of this Agreement or as otherwise provided by
law.



     Section 21.13 No Partnership. Nothing contained in this Agreement shall be construed
to create an association, trust, partnership, or joint venture or impose a trust, fiduciary, or
partnership duty, obligation, or liability on or with regard to either Party.



     Section 21.14 Rules of Construction. In construing this Agreement, the following
principles shall be followed:




     (a) no consideration shall be given to the fact or presumption that one Party had a
greater or lesser hand in drafting this Agreement;




     (b) examples shall not be construed to limit, expressly or by implication, the matter
they illustrate;




     (c) the word “includes” and its syntactical variants mean “includes, but is not limited
to” and corresponding syntactical variant expressions; and




     (d) the plural shall be deemed to include the singular and vice versa, as applicable.



     Section 21.15 No Third Party Beneficiaries. Except for parties indemnified
hereunder, this Agreement is for the sole benefit of the Parties and their respective successors
and permitted assigns, and shall not inure to the benefit of any other Person whomsoever or
whatsoever, it being the intention of the Parties that no third Person shall be deemed a
third-party beneficiary of this Agreement.



     Section 21.16 Further Assurances. Each Party shall take such acts and execute and
deliver such documents as may be reasonably required to effectuate the purposes of this Agreement.



     Section 21.17 No Inducements. No director, employee, or agent of any Party shall
give or receive any commission, fee, rebate, gift, or entertainment of significant cost or value
in connection with this Agreement.



     Section 21.18 Counterpart Execution. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original, and all of which shall be considered
one and the same instrument.



48









 





     IN WITNESS WHEREOF, the Parties have executed this Agreement to be effective on the date
first set forth above.



	 	 	 	 	 
	 	GATHERER:





PIÑON GATHERING COMPANY, LLC

 	 
	 	By:  	 TCW Asset Management Company, its Manager:
 	 
	 	 	 
	 	By:  	                                              /s/ Clayton R. Taylor
 	 
	 	 	Clayton R. Taylor 	 
	 	 	Vice President 	 
	 
	 	 	 
	 	By:  	                                              /s/ Kurt A. Talbot
 	 
	 	 	Kurt A. Talbot 	 
	 	 	Managing Director 	 
	 
	 	SHIPPER:




SANDRIDGE EXPLORATION AND
 PRODUCTION, LLC

 	 
	 	By:  	/s/ Richard J. Gognat
 	 
	 	 	Richard J. Gognat 	 
	 	 	Senior Vice President 	 
	 




49









 








EXHIBIT A




DEDICATED AREA










EXHIBIT A — Page 1





 









 





EXHIBIT B




DEDICATED AREA




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	SECTION	 	BLK	 	SURVEY	 	RRD	 	COUNTY	 	STATE	 	Approx. Acres
	 	7	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,298.18	 
	 	4	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	317.69	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	29	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	627.07	 
	 	33	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	660.31	 
	 	12	 	 	 	108	 	 	EL&RR RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	320.98	 
	 	26	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.81	 
	 	41	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	637.43	 
	 	42	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	634.06	 
	 	43	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	647.15	 
	 	44	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	644.17	 
	 	48	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	644.84	 
	 	20	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	642.87	 
	 	22	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	646.55	 
	 	23	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.90	 
	 	27	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	625.40	 
	 	28	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	629.63	 
	 	30	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	631.48	 
	 	31	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	655.78	 
	 	32	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	656.45	 
	 	34	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	660.82	 
	 	35	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	663.67	 
	 	19	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	654.46	 
	 	20	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	658.82	 
	 	22	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	650.57	 
	 	23	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	638.27	 
	 	45	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	639.36	 
	 	46	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	643.62	 
	 	47	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	641.39	 
	 	50	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	634.19	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	24	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	637.71	 
	 	25	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	650.96	 
	 	27	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	650.08	 
	 	28	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.97	 
	 	29	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	643.17	 
	 	7	 	 	 	600	 	 	JM HOLBROOK

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,172.48	 
	 	6	 	 	 	600	 	 	ELIJAH ROBERTS

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,179.18	 
	 	8	 	 	 	600	 	 	SS STUBBLEFIELD

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,167.18	 
	 	5	 	 	 	600	 	 	FRANCISCO PINA

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,184.01	 
	 	19	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	644.55	 
	 	71	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	640.77	 
	 	1	 	 	 	159	 	 	GH&SA RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	638.19	 
	 	3	 	 	 	159	 	 	GH&SA RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	640.26	 
	 	4	 	 	 	159	 	 	GH&SA RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	673.67	 
	 	18	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,296.48	 
	 	2	 	 	 	168	 	 	MRS J P MULLINS

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,263.35	 
	 	2	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	302.08	 
	 	3	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	304.65	 
	 	21	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	650.55	 
	 	21	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	649.84	 






EXHIBIT B - Page 1




 









 








EXHIBIT B




DEDICATED AREA




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	SECTION	 	BLK	 	SURVEY	 	RRD	 	COUNTY	 	STATE	 	Approx. Acres
	 	7	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,298.18	 
	 	7	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,298.18	 
	 	7	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,298.18	 
	 	7	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,298.18	 
	 	7	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,298.18	 
	 	4	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	317.69	 
	 	4	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	317.69	 
	 	4	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	317.69	 
	 	4	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	317.69	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	25	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	627.96	 
	 	4	 	 	 	110	 	 	D&SE RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	300.93	 
	 	11	 	 	 	108	 	 	EL&RR RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	316.91	 
	 	12	 	 	 	108	 	 	EL&RR RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	320.98	 
	 	8	 	 	 	110A	 	 	BS&F

	 	 	8	 	 	Pecos
	 	Texas
	 	 	641.42	 
	 	52	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	646.05	 
	 	56	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	643.10	 
	 	67	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	631.09	 
	 	70	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	646.89	 
	 	4	 	 	 	600	 	 	J N SIMS

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,257.16	 
	 	2	 	 	 	600	 	 	JA DECKIE

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,214.05	 
	 	2	 	 	 	600	 	 	JA DECKIE

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,214.05	 
	 	22	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	646.55	 
	 	22	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	646.55	 
	 	24	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.66	 
	 	26	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	623.91	 
	 	27	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	625.40	 
	 	27	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	625.40	 
	 	19	 	 	 	139	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	650.61	 
	 	30	 	 	 	139	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	634.38	 
	 	31	 	 	 	139	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	666.78	 
	 	39	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	642.43	 
	 	40	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	631.14	 
	 	46	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	643.62	 
	 	46	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	643.62	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	53	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	646.29	 
	 	24	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	637.71	 
	 	24	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	637.71	 
	 	24	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	637.71	 
	 	24	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	637.71	 
	 	28	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.97	 






EXHIBITS - Page 2




 









 








EXHIBIT B




DEDICATED AREA




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	SECTION	 	BLK	 	SURVEY	 	RRD	 	COUNTY	 	STATE	 	Approx. Acres
	 	28	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.97	 
	 	28	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.97	 
	 	29	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	643.17	 
	 	29	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	643.17	 
	 	29	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	643.17	 
	 	29	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	643.17	 
	 	6	 	 	 	600	 	 	ELIJAH ROBERTS

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,179.18	 
	 	6	 	 	 	600	 	 	ELIJAH ROBERTS

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,179.18	 
	 	8	 	 	 	600	 	 	SS STUBBLEFIELD

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,167.18	 
	 	8	 	 	 	600	 	 	SS STUBBLEFIELD

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,167.18	 
	 	8	 	 	 	600	 	 	SS STUBBLEFIELD

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,167.18	 
	 	8	 	 	 	600	 	 	SS STUBBLEFIELD

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,167.18	 
	 	8	 	 	 	600	 	 	SS STUBBLEFIELD

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,167.18	 
	 	8	 	 	 	600	 	 	SS STUBBLEFIELD

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,167.18	 
	 	1	 	 	 	182	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	603.11	 
	 	36	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	664.64	 
	 	36	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	664.64	 
	 	54	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	637.41	 
	 	55	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	632.55	 
	 	57	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	638.58	 
	 	65	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.79	 
	 	66	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	644.73	 
	 	68	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	642.36	 
	 	69	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.55	 
	 	71	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	640.77	 
	 	71	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	640.77	 
	 	1	 	 	 	159	 	 	GH&SA RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	638.19	 
	 	1	 	 	 	159	 	 	GH&SA RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	638.19	 
	 	3	 	 	 	159	 	 	GH&SA RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	640.26	 
	 	3	 	 	 	159	 	 	GH&SA RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	640.26	 
	 	4	 	 	 	159	 	 	GH&SA RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	673.67	 
	 	4	 	 	 	159	 	 	GH&SA RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	673.67	 
	 	4	 	 	 	159	 	 	GH&SA RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	673.67	 
	 	3	 	 	 	600	 	 	H C KINGSTON

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,204.08	 
	 	10	 	 	 	110A	 	 	BS&F

	 	 	8	 	 	Pecos
	 	Texas
	 	 	652.51	 
	 	7	 	 	 	110A	 	 	BS&F

	 	 	8	 	 	Pecos
	 	Texas
	 	 	646.72	 
	 	9	 	 	 	110A	 	 	BS&F

	 	 	8	 	 	Pecos
	 	Texas
	 	 	638.47	 
	 	18	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,296.48	 
	 	18	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,296.48	 
	 	18	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,296.48	 
	 	18	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,296.48	 
	 	1	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	300.79	 
	 	1	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	300.79	 
	 	2	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	302.08	 
	 	2	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	302.08	 
	 	3	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	304.65	 
	 	3	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	304.65	 
	 	3	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	304.65	 
	 	3	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	304.65	 
	 	3	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	304.65	 
	 	5	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	317.38	 






EXHIBIT B - Page 3




 









 








EXHIBIT B




DEDICATED AREA




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	SECTION	 	BLK	 	SURVEY	 	RRD	 	COUNTY	 	STATE	 	Approx. Acres
	 	5	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	317.38	 
	 	6	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	316.50	 
	 	6	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	316.50	 
	 	6	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	316.50	 
	 	6	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	316.50	 
	 	2	 	 	 	108 	 	 	HANNAH DONAHUE ALIAS ALEXANDER

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,133.75	 
	 	6	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.09	 
	 	7	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,298.18	 
	 	7	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,298.18	 
	 	7	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,298.18	 
	 	7	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,298.18	 
	 	4	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	317.69	 
	 	4	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	317.69	 
	 	4	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	317.69	 
	 	4	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	317.69	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	9	 	 	 	600	 	 	MA CLAY

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,178.00	 
	 	4	 	 	 	110	 	 	D&SE RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	300.93	 
	 	4	 	 	 	110	 	 	D&SE RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	300.93	 
	 	22	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	646.55	 
	 	22	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	646.55	 
	 	27	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	625.40	 
	 	27	 	 	 	138	 	 	T&STL RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	625.40	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	51	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	635.03	 
	 	24	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	637.71	 
	 	24	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	637.71	 
	 	28	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.97	 
	 	28	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.97	 
	 	28	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.97	 
	 	28	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.97	 
	 	28	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.97	 
	 	28	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.97	 
	 	28	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.97	 
	 	28	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	648.97	 






EXHIBIT B - Page 4




 









 








EXHIBIT B




DEDICATED AREA




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	SECTION	 	BLK	 	SURVEY	 	RRD	 	COUNTY	 	STATE	 	Approx. Acres
	 	29	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	643.17	 
	 	29	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	643.17	 
	 	29	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	643.17	 
	 	29	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	643.17	 
	 	29	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	643.17	 
	 	29	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	643.17	 
	 	8	 	 	 	600	 	 	SS STUBBLEFIELD

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,167.18	 
	 	8	 	 	 	600	 	 	SS STUBBLEFIELD

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,167.18	 
	 	8	 	 	 	600	 	 	SS STUBBLEFIELD

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,167.18	 
	 	8	 	 	 	600	 	 	SS STUBBLEFIELD

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,167.18	 
	 	8	 	 	 	600	 	 	SS STUBBLEFIELD

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,167.18	 
	 	8	 	 	 	600	 	 	SS STUBBLEFIELD

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,167.18	 
	 	71	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	640.77	 
	 	71	 	 	 	2	 	 	TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	640.77	 
	 	1	 	 	 	159	 	 	GH&SA RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	638.19	 
	 	1	 	 	 	159	 	 	GH&SA RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	638.19	 
	 	3	 	 	 	159	 	 	GH&SA RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	640.26	 
	 	3	 	 	 	159	 	 	GH&SA RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	640.26	 
	 	18	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,296.48	 
	 	18	 	 	 	2	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	1,296.48	 
	 	3	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	304.65	 
	 	3	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	304.65	 
	 	3	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	304.65	 
	 	3	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	304.65	 
	 	3	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	304.65	 
	 	3	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	304.65	 
	 	5	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	317.38	 
	 	5	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	317.38	 
	 	6	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	316.50	 
	 	6	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	316.50	 
	 	6	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	316.50	 
	 	6	 	 	 	4	 	 	H&TC RR CO

	 	 	8	 	 	Pecos
	 	Texas
	 	 	316.50	 






EXHIBIT B - Page 5





 









 








EXHIBIT C



BASE VOLUMES




***




EXHIBIT C — Page 1