Document:

exv10w7

 

 EXHIBIT 10.7

Brookeland Gas Facilities

Gas Gathering and Processing Agreement

Between

UNION PACIFIC RESOURCES COMPANY

and

UNION PACIFIC RESOURCES COMPANY

Jasper County, Texas

Dated September 1, 1993

 

 

Brookeland Gas Facilities

Gas Gathering and Processing Agreement

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	I.

	 	Definitions
	 	 	3	 
	II.

	 	Commitment of Processing Rights
	 	 	9	 
	III.

	 	Reservations of Parties	 	 	10	 
	IV.

	 	Delivery Point and Pressure	 	 	11	 
	V.

	 	Regulation of Production	 	 	16	 
	VI.

	 	Quantity
	 	 	17	 
	VII.

	 	Quality
	 	 	18	 
	VIII.

	 	Tests
	 	 	22	 
	IX.

	 	Measurement and Meter Testing
	 	 	23	 
	X.

	 	Allocation Procedure
	 	 	28	 
	XI.

	 	Disposition of Producer’s Portion of Plant Products
	 	 	34	 
	XII.

	 	Processing Payment	 	 	35	 
	XIII.

	 	Disposition of Producer’s Portion of Residue Gas	 	 	36	 
	XIV.

	 	Accounting and Payments
	 	 	37	 
	XV.

	 	Warranty	 	 	39	 
	XVI.

	 	Taxes
	 	 	40	 
	XVII.

	 	Indemnity
	 	 	41	 
	XVIII.

	 	Force Majeure
	 	 	42	 
	XIX.

	 	Unprofitable Operations and Rights of Termination 	 	 	44	 
	XX.

	 	Term	 	 	45	 
	XXI.

	 	Regulatory Bodies
	 	 	46	 
	XXII.

	 	Arbitration
	 	 	47	 
	XXIII.

	 	Notices and Payments
	 	 	48	 
	XXIV.

	 	Assignment	 	 	49	 
	XXV.

	 	Miscellaneous
	 	 	50	 

 

 

Brookeland Gas Facilities

Gas Gathering and Processing Agreement

     THIS AGREEMENT, made as of the 1st day of September, 1993, by and between UNION PACIFIC
RESOURCES COMPANY, a Delaware corporation, the Operator, and SONAT EXPLORATION COMPANY, a Delaware
corporation, the Owners of the Facilities, hereinafter referred to collectively as “Processor,” and
UNION PACIFIC RESOURCES COMPANY, hereinafter referred to as
“Producer.”

WITNESSETH, THAT:

     WHEREAS, the Processor has agreed to construct and operate a Gas Gathering System; and

     WHEREAS, the Processor is constructing and will operate a Gas Plant; and

     WHEREAS, the Producer owns or controls Gas production from various wells on the lands within
the Contract Area and desires to have the Processor gather the Gas for processing in the Plant; and

     WHEREAS, the Processor is willing to gather and process such Gas for the Producer;

     NOW, THEREFORE, the parties agree as follows:

ARTICLE I

DEFINITIONS

     1.1 For the purpose of this Agreement, certain terms and expressions herein used are
defined as follows:

	 	a.	 	“Btu” shall mean one British thermal unit, which is the
quantity of heat required to raise one pound

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avoirdupois of pure water from 58.5 degrees Fahrenheit to 59.5 degrees Fahrenheit at
a constant pressure of 14.73 pounds per square inch absolute.

	 	b.	 	“Component” shall mean those hydrocarbon and non-hydrocarbon molecular constituents which
are definable by industry standards and procedures. Such Components as used in this Agreement
shall be:

	 	 	 	 	 	 	 
	 

	 	N2
	 	-
	 	Nitrogen
	 

	 	C02
	 	-
	 	Carbon Dioxide
	 

	 	H2S
	 	-
	 	Hydrogen Sulfide
	 

	 	Cl
	 	-
	 	Methane
	 

	 	C2
	 	-
	 	Ethane
	 

	 	C3
	 	-
	 	Propane
	 

	 	ic4
	 	-
	 	Iso-butane
	 

	 	nC4
	 	-
	 	Normal Butane
	 

	 	ic5
	 	-
	 	Iso-pentane
	 

	 	nc5
	 	-
	 	Normal Pentane
	 

	 	C6+
	 	-
	 	Hexanes and Heavier Compounds

	 	c.	 	“Contract Area” shall mean that area as outlined on
Exhibit “A,” as amended from time to time.
	 
	 	d.	 	“Day” shall mean a period of 24 consecutive hours beginning and ending at seven o’clock a.m.
Central Time.
	 
	 	e.	 	“Delivery Point” is defined as the inlet flange of Processor’s metering facilities located at
or near the well or such other point as may be mutually agreed upon. Each Delivery Point will
be listed on Exhibit “B” to this Agreement; and Exhibit “B” will be amended
from time to time to reflect the addition or deletion of Delivery Points.
	 
	 	f.	 	“Facilities” shall mean the Plant and Gathering System.

4

 

	 	g.	 	“Gas” shall mean natural gas, including casinghead gas produced with crude oil, gas from gas
wells produced in association with crude oil (associated gas) , and gas from condensate wells
(non-associated gas), and shall include any inerts or impurities contained therein.
	 
	 	h.	 	“Gathering system” shall mean, but not be limited to, the Gas gathering pipelines, fuel
gas pipelines, dehydration facilities, compression facilities, junctions, heaters, meters,
separators, electric power lines, communications cables, roads, and other related facilities
and equipment from the inlet flange of the pipeline metering facility installed up to the
inlet flange of the block valve upstream of the inlet header at the Plant inlet, necessary
to gather and transport Gas from the Delivery Point(s) to the Plant and shall include any
expansion of the Gathering System as provided in Paragraph 4.5.
	 
	 	i.	 	“Liquefiable Hydrocarbons” shall mean ethane, propane, iso-butanes, normal butanes,
iso-pentanes, normal pentanes, hexanes and heavier, and incidental methane, or any mixtures
thereof, which can be recovered or extracted in the Gathering System or the Plant and sold as
Plant Products.

5

 

	 	j.	 	“MCF” shall mean 1,000 standard cubic feet of gas.
	 
	 	k.	 	“Month,” “billing month,” “period,” and “accounting period” shall mean the period beginning
at seven o’clock a.m. on the first day of a calendar month and ending at seven o’clock a.m. on
the first day of the next succeeding calendar month.
	 
	 	l.	 	“MMBtu” shall mean 1,000,000 Btu.
	 
	 	m.	 	“Plant” shall mean, but not be limited to, all tanks, machinery, equipment, fixtures,
appliances, pipe, valves, fittings, and materials of any nature or kind whatsoever; including
appropriate storage, compression, metering, shipping, dehydration, and delivery facilities
for Plant Products; all buildings and structures of any kind whatsoever located, or to be
located, on the site or sites, at which the processing and recompression facilities of
Processor are located; all easements pertaining to such rights-of-way, the site or sites, and
the operation of the Plant, and any and all other facilities and appurtenances located, or to
be located, on or away from such site or sites deemed by Processor to be necessary for the
successful operation of the Plant, including inlet compression, if any, but not including the
Residue Redelivery Facility.
	 
	 	n.	 	“Plant Products” shall mean all Liquefiable

6

 

Hydrocarbons recovered, extracted, or otherwise removed from the Gas after the Delivery
Point, including, but not limited to, plant condensate (sometimes referred to as pentanes
plus, heavier than butanes or, natural gasoline), and all commercial non-hydrocarbon
substances recovered, extracted, or otherwise removed from the Gas in the Gathering
System or the Plant.

	 	o.	 	“Plant Tailgate” shall mean the point of interconnect between the Plant and the Residue
Redelivery Facility located at the downstream flange of the block valve which is downstream
of the Residue Gas meter and emergency shutdown valve.
	 
	 	p.	 	“Process Fuel” shall mean the MMBTU’s of Gas consumed at the Plant for fuel which shall
include, but not be limited to, fuel used for Gas conditioning and treating; recovery,
extraction, and removal of Plant Products; and the recompression of the Residue Gas.
	 
	 	q.	 	“Process Flare” shall mean any MMBTU’s of Gas dispersed or lost at the Plant as flare which
shall include, but not be limited to, flare dispersed or lost in the Gas conditioning and
treating; recovery, extraction, and removal of Plant Products; and the recompression of
Residue Gas.
	 
	 	r.	 	“Residue Gas” shall mean that hydrocarbon and non-

7

 

hydrocarbon stream remaining after the recovery, extraction, and removal of Plant
Products, and after reduction for Gas used for Process Fuel, Process Flare, and other
incidental losses.

	 	s.	 	“Residue Redelivery Facility” shall mean the Residue Gas pipeline and associated equipment
operated by Union Pacific Texas Gas Pipeline, Inc. (“UPTGPI”) that are located at the Plant
Tailgate and are used to deliver Residue Gas to the Residue Redelivery Point(s).
	 
	 	t.	 	“Residue Redelivery Point(s)” shall mean the point(s) of interconnect between the Residue
Redelivery Facility and the facilities of third party pipeline (s) to which the Residue Gas is
delivered and which point(s) are shown on Exhibit “C,” attached hereto and made a part
hereof in full.
	 
	 	u.	 	“SCF” or “standard cubic foot of gas” shall mean the amount of Gas necessary to fill a cubic
foot of space when the Gas is at a pressure of 14.65 pounds per square inch absolute and a
temperature of 60 degrees Fahrenheit.

8

 

ARTICLE II
 COMMITMENT OF PROCESSING RIGHTS

     2.1 Subject to the terms and provisions hereof and as of the date hereof, Producer
agrees to deliver for processing to Processor at the Delivery Point(s) the total volume of Gas
owned or controlled by Producer lawfully produced from wells now or hereafter drilled on the lands
within the Contract Area shown on Exhibit “A” or lands pooled therewith excluding Gas
reserved or utilized by Producer in accordance with the terms of
Article III. Any transfer
by Producer of its right, title, or interest in Producer’s Gas to a third party, whether by
farmout, contract, or otherwise, shall be made specifically subject to this Agreement. Producer
will notify any person to whom Producer transfers all or a portion of its right, title, or interest
in Producer’s Gas that such Gas is dedicated pursuant to the terms of this Agreement to be gathered
and processed in the Facilities; and Producer shall obtain such third party’s agreement to continue
delivering such Gas to Processor during the term of and in accordance with this Agreement. Producer
will notify Processor of any such transfer within 10 days of the effective date. Failure of
Producer to so notify Processor will not impair Processor’s rights under this Agreement.

     2.2 Gas shall be delivered after mechanical separation by Producer for the removal of free
water and free liquid hydrocarbons, but shall not otherwise be processed by Producer for the
removal of Liquefiable Hydrocarbons.

9

 

     2.3 Processor agrees that subject to the provisions hereof, it will take and gather Gas from
the Delivery Points and will cause such Gas to be processed in the Plant for the recovery of Plant
Products. Processor also agrees to deliver at the Plant Tailgate to Producer or Producer’s nominee
Producer’s share of Residue Gas as determined under the provisions of Paragraph 10.6.

ARTICLE III

 RESERVATIONS OF PARTIES

     3.1 Producer reserves all liquid hydrocarbons, oil, or condensate removed by Producer
by means of mechanical gas-liquid separators (including heater-treaters), drips, and/or lines from
the Gas prior to delivery to Processor. If mechanical cooling is performed by Producer to meet the
temperature specifications of this Agreement, Producer shall not reduce the temperature of the Gas
below 110 degrees Fahrenheit.

     3.2 Producer reserves all Gas that may be required for cycling, repressuring, pressure
maintenance, and gas lift operations with respect to oil reservoirs on the premises committed
hereunder; provided, however, Gas used in such operations shall be subject to the terms of this
Agreement (to the extent that such Gas can be economically saved) and delivered to Processor,
subsequent to the cessation of such operations.

     3.3 Producer reserves Gas for above ground development and operation of premises covered
hereby.

10

 

     3.4 Producer may at any time, without liability to Processor, clean out, deepen, re-work, plug
back, shut-in, use for injection, or abandon any well within the Contract Area or use any methods
for the production of oil or gas that meet current industry standards.

     3.5 Producer hereby specifically reserves the right to introduce Gas, water, or any other
extraneous substances into a well covered hereby or into the formation(s) from which said well is
producing when, in the exclusive judgment of Producer, the introduction of such substances is
desirable in the operation of such well for the production of oil or gas; provided, that if
Producer’s operations under this paragraph create a condition which, in the exclusive judgment of
Processor, (i) makes the taking and utilization of Gas therefrom unprofitable to Processor, or (ii)
tends to endanger the Plant or property of Processor or the lives of Processor’s employees, then
Processor reserves the right to discontinue taking Gas from the particular Delivery Point to which
the well is connected so long as such condition continues to exist.

     3.6 Producer expressly reserves the right to deliver or furnish to Producer’s lessor Gas as
required to satisfy the terms of Producer’s oil and gas leases.

ARTICLE IV

DELIVERY POINT AND PRESSURE

     4.1 Producer, at its own expense, shall construct, equip, maintain, and operate all
facilities (including, but not limited to, all necessary separation, dehydration, and/or
compression)

11

 

necessary to deliver Producer’s Gas to Processor at the Delivery Point at such pressure as is
required and sufficient to enter Processor’s Delivery Point, but not to exceed 1,075 psig.

     4.2 If the Processor provides compression for the Producer’s Gas other than Plant
recompression, the Processor shall provide or cause to be provided each stage of compression for an
initial fee of 6.16¢ per MCF per stage, and Producer will provide its pro rata share of fuel
required for operating such compressor(s), in order that Gas dedicated hereunder will meet the
pressure requirements at the Plant inlet. Commencing April 1, 1995, and each April 1st thereafter,
the compression fee set forth herein will be adjusted upward or downward, in proportion to the
percentage increase or decrease in the average hourly earnings of crude petroleum and Gas
production workers for the last calendar year, compared to the previous calendar year, as shown by
the “Index of the Average Hourly Earnings of Crude Petroleum and Gas Production Workers” as
published by the Bureau of Labor Statistics of the United States Department of Labor.

     4.3 The fuel used for inlet compression will be handled according to Paragraphs 10.1 or
10.6(c) depending on the source of the fuel.

     4.4 Processor, at its own expense, shall construct, equip, maintain, and operate all meters
and facilities necessary to measure Producer’s Gas at the Delivery Point(s);

     4.5 As of the effective date, Processor has installed the initial portion of a Gathering
System with a number of pipelines,

12

 

trunklines, and laterals in the Contract Area as shown in Exhibit “A.” It is expected that
Processor will expand the Gathering System to handle new wells which will be connected to
additional Delivery Points within the Contract Area. To expeditiously handle expansion of the
Gathering System, the Processor and Producer agree to the following terms:

	 	a.	 	Producer shall provide written notice to Processor of
Producer’s intent to drill a well or wells on lands within the Contract Area or
lands pooled therewith and request that Processor initiate the construction of
necessary pipelines and related facilities to connect the Delivery Point(s) for
the well or wells to the existing Gathering System (hereinafter “pipeline
expansion”). Processor shall notify Producer of the estimated costs of the
right-of-way portion of the pipeline expansion, and if those costs exceed
$40,000, Producer shall have ten days from receipt of notice to make a written
election for Processor to proceed with the pipeline expansion or to rescind its
request for the pipeline expansion. If Producer elects to proceed with the
pipeline expansion, Processor may decline to construct the pipeline expansion
if it determines that it would not be profitable to do so. In such event,
Producer may construct the pipeline expansion at its sole cost. The pipeline

13

 

	 	 	 	expansion must meet all Processor’s specifications, and Processor will be responsible for
the meter station and connection to the Gathering System. The Processor may, at its
election, acquire the ownership of the pipeline expansion installed by the Producer by
reimbursing Producer for the actual pipeline expansion costs with no allowance for
inflation or depreciation. Producer agrees to execute all assignments or contracts deemed
necessary to accomplish the transfer to Processor of title to the pipeline expansion,
including rights-of-way and easements. In the event neither Processor nor Producer elect to
construct the necessary pipeline expansion to connect the Delivery Point to the existing
Gathering System, then this Agreement shall terminate as to the Gas from the well or wells
to be connected to that Delivery Point.
	 
	 	b.	 	If Producer timely elects to proceed with pipeline expansion where right-of-way costs exceed
$40,000 or the estimated cost does not exceed $40,000, and Processor has agreed to construct
the pipeline expansion, Processor shall cause commencement of construction as soon as
practicable after the later of right-of-way acquisition or commencement of drilling of the
well.

14

 

	 	c.	 	Producer shall guarantee reimbursement to Processor of the total actual cost
associated with each pipeline expansion (including, but not limited to, the costs of
right-of-way, construction, and materials) according to the following
calculations:

	 	 	 	 	 	 	 
	 

	 	R
	 	=
	 	C — ($0.215 * V)

Where:

	 	 	 	 	 	 	 
	 

	 	R
	 	=
	 	Amount to be reimbursed.
	 
	 	 	 	 	 	 
	 

	 	C
	 	=
	 	Pipeline expansion cost.
	 
	 	 	 	 	 	 
	 

	 	V
	 	=
	 	The volume of Gas, in thousands of cubic feet
(MCF), delivered by the Producer to Processor from the Delivery Point
through the pipeline expansion; provided that if more than one Delivery
Point utilizes the pipeline expansion, or any portion thereof, the Volume
used in the calculation will be determined by summing the prorated volumes
of all Gas from Delivery Points using the pipeline expansion. To determine
the prorated volumes from each Delivery Point, the volume of Gas from each
Delivery Point will be multiplied by a fraction, the numerator of which is
the length in feet of the pipeline expansion utilized by such Delivery
Point, and the denominator is the total length of the pipeline expansion.
The sum of all these prorated volumes using the pipeline expansion will be
the volume used in the calculations.

	 	1)	 	Reimbursement will be due only when the
value of “R” is positive.
	 
	 	2)	 	Any reimbursement due Processor from
Producer shall be paid by Producer within
30 days of the first of the following to occur:

15

 

(i) the date that the well is determined to be a dry hole or
is plugged or abandoned;

(ii) the date that the well has delivered no Gas for a
period of 180 consecutive days;

(iii) two years from the date of initial production from the
well; or

(iv) the date of termination of this Agreement.

ARTICLE V

REGULATION OF PRODUCTION

     5.1 It is understood and agreed by the parties hereto that in order for Processor to
maintain maximum efficiency in the Facilities, and in order to prevent flaring and/or bypassing of
Gas, it will be necessary to maintain a uniform rate of flow of Gas to the Facilities from all
sources during each 24 hour period. Therefore, Producer agrees that it will cooperate with
Processor in regulating the flow rate of Producer’s Gas and in establishing a producing schedule
to deliver on a best efforts basis the Gas at a uniform and continuous flow rate.

16

 

ARTICLE VI

QUANTITY

     6.1 Subject to Gathering System and Plant capacity, Processor shall take and process that
volume of Gas legally allowed to be produced which is attributable to the interest owned or
controlled by Producer in wells drilled on lands within the Contract Area or lands pooled
therewith; provided, after processing, Producer or Producer’s nominee will accept the Residue
Gas attributable to Producer.

     6.2 If insufficient Plant capacity exists to process all the Gas, the Plant processing capacity
will be prorated for all Gas, without undue discrimination, and the Gas unable to be processed will
be bypassed ratably during the period that processing capacity is not available in the Plant,
provided that such unprocessed volumes of Gas, together with all other volumes of Gas owned by
third parties which are bypassed around the Plant will not, in Processor’s sole opinion, cause the
commingled Gas and Residue Gas to fail to meet the quality specifications set forth by the third
party pipelines at the Residue Redelivery Point(s) listed on Exhibit “C.”

     6.3 Recognizing that the Plant may not have sufficient capacity to process all Gas produced from
the Contract Area, Processor shall have the right, but not the obligation, to expand the Plant or
build a new Gas processing plant at a different location, and in such event, Producer’s Gas, or a
portion thereof, may be processed by Processor in the expanded Plant or the new Gas

17

 

processing plant in accordance with the terms of this Agreement.

     6.4 Notwithstanding the above, Processor reserves the right to operate the Plant and Gathering
System in the manner it deems necessary, in its sole judgment.

ARTICLE VII

QUALITY

     7.1 Processor shall not be obligated to receive and process Gas delivered hereunder that fails to
meet the following specifications:

	 	a.	 	Commercial in quality and free from any foreign materials such as dirt, dust, iron
particles, crude oil, dark condensate, and free water, and other similar matter; and
substances which may be injurious to pipelines or which may interfere with the
processing, transmission, or commercial utilization of said Gas;
	 
	 	b.	 	the Gas delivered hereunder shall not exceed a temperature of 120 degrees Fahrenheit at the
Delivery Point(s) to Processor;
	 
	 	c.	 	The Gas delivered hereunder shall not contain more than:

	 	(i)	 	One-fourth grain of hydrogen sulfide, or five grains of total sulfur, or one grain mercaptan
per 100 cubic feet;

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	 	(ii)	 	five parts per million by volume of oxygen;
	 
	 	(iii)	 	five and one-half percent by volume of carbon dioxide;
	 
	 	(iv)	 	two percent by volume of nitrogen;
	 
	 	(v)	 	seven and one-half percent by volume of a
combined total of inerts, including, but
not limited to, carbon dioxide and
nitrogen Components; or
	 
	 	(vi)	 	seven pounds of water per million cubic
feet.

	 	d.	 	No diluents such as carbon dioxide, air, or nitrogen shall be added to the Gas;
	 
	 	e.	 	The Gas shall contain no carbon monoxide, halogens, or unsaturated hydrocarbons, and no more
than 400 parts per million of hydrogen; and
	 
	 	f.	 	The Gas shall contain no less than 1,050 Btu and 2.1 GPM ethane and heavier hydrocarbons.

     7.2 If any of the Gas delivered by Producer hereunder should fail to meet the quality
specifications set forth in this Article VII, Processor may elect to accept and process
such Gas, or elect to accept, but treat and/or condition, such Gas prior to gathering or
processing. The acceptance of Gas not meeting the quality specifications set forth in Article
VII shall not be deemed a waiver of Processor’s right to reject such Gas at any later time, and
Processor shall be entitled, at any time and from time to time,

19

 

to decline to accept proffered deliveries of Gas not meeting the quality specifications set forth
herein.

     7.3 If Processor elects to accept but treat and/or condition the non-conforming Gas prior to
gathering and processing, the Processor shall advise the Producer of such election, and the
Producer shall have a maximum of 30 days to advise Processor if it will treat and/or condition its
own Gas. If Producer does not elect to treat and/or condition or fails to make such election within
the specified time, then the Processor shall have the right to proceed and the following shall
apply:

	 	a.	 	If for any reason the Gas delivered hereunder fails to comply with the quality
specifications for temperature as described in Paragraph 7.1(b) above, the
Processor shall have the right, but not the obligation, to treat non-conforming Gas in
order that it will comply with the temperature specifications. In the event Processor
exercises its right to treat non-conforming Gas, Processor shall receive a fee for
performing said treating in accordance with the following:

	 	 	 
	Temperature (°F) 	 	Fee 
	Less than or equal to 120°F

	 	No Fee
	Between 120°F and 160°F

	 	3¢/MCF
	Equal to or greater than 160°F

	 	Rejected

	 	b.	 	If for any reason the Gas delivered hereunder fails to comply with the quality
specifications for carbon dioxide (CO2) as described in Paragraph 7.1(c) above,
the

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	 	 	 	Processor shall have the right, but not the obligation, to treat non-conforming Gas in order that
it will comply with the CO2 specifications. In the event Processor exercises its right
to treat non-conforming Gas, Processor shall receive a fee for performing said treating in
accordance with the following schedule:

	 	 	 
	CO2 MOL %	 	FEE
	under 5.5%
	 	No Fee
	5.5%-6%
	 	$.0675/Mcf
	6%-7%
	 	$.0775/Mcf
	7%-8%
	 	$.0875/Mcf
	over 8.0%
	 	$.1000/Mcf

	 	c.	 	If for any reason the Gas delivered hereunder fails to comply with the quality
specifications for water content as described in Paragraph 7.1(c) above, the Processor
shall have the right, but not the obligation, to treat non-conforming Gas in order that it will
comply with the water content specifications. In the event Processor exercises its right to treat
non-conforming Gas, Processor shall receive a fee for performing said treating of $0.03/MCF.

     7.4 Processor shall have the right to invoice Producer for treating and/or conditioning the
non-conforming Gas, or Processor may elect to deduct the fees from payments to be made by Processor
to Producer. The fees noted in Paragraph 7.3 shall be in effect until April 1, 1995, at
which time the fee will be adjusted up or down in accordance with the adjustment methodology used
for compression fees in Paragraph 4.2.

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ARTICLE VIII

TESTS

     8.1 a. Processor shall procure or cause to be procured a sample of Gas at each Delivery
Point and analyze the samples by chromatographic analysis to determine the Component content (mole
percent), specific gravity, the BTU content, and the Plant Product content (expressed in gallons
per MCF) thereof.

          b. The individual Plant Products contained in the commingled stream of Plant Products delivered
from the Plant each month shall be determined from a chromatographic analysis of a spot sample or a
sample taken from a continuous sampling device. The results of the chromatographic analysis shall
be applied to the commingled stream of Plant Products to determine the volume of each individual
Plant Product delivered from the Plant.

          c. Tests provided for in Subparagraphs (a) and (b) of this Paragraph 8.1 shall be
made by Processor using its own equipment or by an independent testing service at least once in
each calendar quarter. All such tests shall be made in accordance with approved engineering
practices. Representatives of Producer shall be entitled to witness such tests, and Producer shall
be given at least ten days written notice in advance of tests to be made concerning Producer.

     8.2 Physical constants required for making calculations hereunder shall be taken from the Gas
Processors Association Physical Constants Publication No. 2145-93 (as it may be hereafter amended
from time to time). Physical constants for the hexanes and

22

 

heavier hydrocarbons portion of hydrocarbon mixtures shall be assumed to be the same as the
physical constants for hexane. The heat content per gallon of each liquid hydrocarbon Component
shall be determined by multiplying the cubic feet per gallon of such liquid hydrocarbon Component
by the heat content per cubic foot thereof. Said physical constants, adjusted to 14.65 psia, with
the heat content per gallon as calculated, are now as follows:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Cubic Feet	 	BTU Per	 	BTU Per
	Component	 	Per Gallon	 	Cubic Ft.	 	Gallon
	Methane
	 	 	59.321	 	 	 	1006.8	 	 	 	59,724	 
	Ethane
	 	 	37.594	 	 	 	1764.1	 	 	 	66,320	 
	Propane
	 	 	36.489	 	 	 	2508.2	 	 	 	91,521	 
	Iso-Butane
	 	 	30.735	 	 	 	3241.7	 	 	 	99,634	 
	Normal Butane
	 	 	31.891	 	 	 	3252.1	 	 	 	103,713	 
	Iso-Pentane
	 	 	27.466	 	 	 	3988.4	 	 	 	109,545	 
	Normal Pentane
	 	 	27.759	 	 	 	3996.4	 	 	 	110,936	 
	Hexanes Plus
	 	 	24.456	 	 	 	4741.0	 	 	 	115,946	 

ARTICLE IX

MEASUREMENT AND METER TESTING

     9.1 The unit of volume for measurement of Gas delivered hereunder shall be 1,000 cubic feet
of Gas at a base temperature of 60 degrees Fahrenheit and at an absolute pressure of 14.65 psia and
saturated with water vapor. All fundamental constants, observations, records, and procedures
involved in determining the quantity of Gas delivered hereunder shall be in accordance with the
standards prescribed in Report No. 3 of the American Gas Association, as now and from time to time
amended or supplemented. It is agreed that for the purpose of measurement and computations
hereunder, the atmospheric pressure shall be assumed to be 14.7

23

 

psia regardless of the atmospheric pressure at which the Gas is measured and that the Gas obeys the
Ideal Gas Laws as to variations of volume with pressure and specific gravity, including the
deviation from Boyle’s law, shall all be made by Processor in accordance with applicable rules,
regulations, and orders promulgated by the Railroad Commission of Texas pursuant to the Standard
Gas Measurement Law of Texas. It is also agreed that the Processor may apply a uniform correction
factor for water vapor if the Processor deems necessary.

     9.2 Processor shall install, maintain, and operate a measuring station located at each
Delivery Point. Said measuring station(s) shall be so equipped with orifice meters, recording
gauges, or other types of meter or meters of standard make and design commonly acceptable in the
industry, and of suitable size and design, as to accomplish the accurate measurement of Gas
delivered hereunder. The changing and integration of the charts (if utilized for measurement
purposes hereunder) and calibrating and adjusting of meters shall be done by Processor. At
Processor’s election, electronic gas measuring equipment may be used.

     9.3 Processor shall measure or cause to be measured the volume of Plant Products in gallons.

     9.4 Producer may, at its option and expense, install check meters for checking Processor’s
metering equipment; and the same shall be so installed as not to interfere with the operation of
Processor’s Facilities.

24

 

     9.5 The temperature of the Gas flowing through the meter shall be determined by the continuous use
of a recording thermometer or device installed by Processor so that it will properly record the
temperature of the Gas flowing through the meter.

     9.6 The specific gravity of the Gas flowing through the meter shall be determined by methods
commonly accepted in the industry. Specific gravities so determined will be used in calculating Gas
deliveries until the next specific gravity test is made.

     9.7 Each party shall have the right to be present at the time of any installing, reading,
sampling, cleaning, changing, repairing, inspecting, testing, calibrating, or adjusting done
in connection with the other’s measuring equipment used in measuring deliveries hereunder.
The records from such measuring equipment shall remain the property of their owner, but upon
request, each will submit to the other its records and charts, together with calculations
therefrom subject to return within 30 days after receipt thereof. If meters utilizing charts
are used to measure Gas hereunder, then the charts shall be kept on file for a period of two
years, or such longer period as may be required by law. In addition, any other measurement
data shall also be kept for the same time period. Each party, during each of the first three
production months, and after that at least quarterly, or more often if necessary, shall
calibrate the meters and instruments installed by it or cause the same to be calibrated.
Processor shall give the Producer ten days notice in advance of such tests so that the

25

 

latter may, at its election, be present in person or by its representative to observe
adjustments, if any which are made.

     9.8 If the metering equipment is found to be inaccurate by two percent or more, registration
thereof and any payment based upon such registration shall be corrected at the rate of such
inaccuracy for any period of inaccuracy which is definitely known or agreed upon, or if not known
or agreed upon, then for a period extending back one-half of the time elapsed since the last day of
the calibration, not exceeding, however, 90 days. If, however, the metering equipment is on a well
that averaged more than five MMCFD for the production month, the factor shall be one percent or
more in lieu of two percent or more. Unless conclusively determined that Processor’s measurement
equipment is inaccurate by two percent or more, or one percent or more, as applicable, Processor’s
measurement shall be deemed to be correct for all purposes hereunder, and no adjustment shall be
made to the previous volumes. Following any test, any metering equipment found to be inaccurate to
any degree shall be adjusted immediately to measure accurately. If for any reason any meter is out
of service or out of repair so that the quantity of Gas delivered through such meter cannot be
ascertained or computed from the readings thereof, the quantity of Gas so delivered during such
period shall be estimated and agreed upon by the parties hereto upon the basis of the best
available data using the first of the following methods which is feasible.

26

 

	 	a.	 	By using the registration of any check measuring equipment of Producer, if installed
and registering accurately;
	 
	 	b.	 	By correcting the error if the percentage of error
is ascertainable by calibration, test, or mathematical calculation; or
	 
	 	c.	 	By estimating the quantity of deliveries during preceding periods under similar conditions
when the meter was registering accurately.

     9.9 If Producer shall notify Processor, or if Processor shall notify Producer, at any time that a
special test of any meter is desired, the parties shall cooperate to secure an immediate
verification of the accuracy of such meter and joint observation of any adjustments. All tests of
Processor’s measuring equipment shall be made at Processor’s expense, except that the Producer
shall bear the expense of tests made at its request if the inaccuracy found is less than two
percent. Expense as used herein shall be limited to actual costs of Processor as the result of
testing and shall not include any costs incurred by Producer as the result of witnessing said
testing.

     9.10 If during any month less than three MMCF of Gas is delivered to a Delivery Point, (except for
reasons of Force Majeure), then Processor shall charge a meter fee applicable to any such Delivery
Point equal to $200.00. Such fee shall be deducted from the compensation otherwise due Producer
under this Agreement; or, at Processor’s election, Producer may be invoiced for such

27

 

amount payable 30 days after receipt.

     9.11 The parties hereto recognize and acknowledge that technological advances may occur over the
term of this Agreement which may render certain measurement devices obsolete, or less accurate, or
less efficient than that which may be available. In such event, Processor may, with Producer’s
approval, substitute or utilize such available measurement equipment in lieu of any measurement
equipment described above in this Article IX.

     9.12 If for any reason Producer’s Gas is delivered to the Processor at the Delivery Point with
pulsations that affect the accuracy of the measurement, the Producer shall be responsible for
installing necessary pulsation dampeners, or other devices, to eliminate or reduce the pulsations
to an acceptable level determined by the Processor.

ARTICLE X

ALLOCATION PROCEDURE

     10.1
Adjusted Gas Volume. The “Adjusted Gas Volume” for each Delivery Point shall be the
measured Gas volume delivered at that Delivery Point, less any volumes of Gas which are allocated
to that Delivery Point and which are removed or utilized in operations conducted after the Delivery
Point and before the Plant inlet which are necessary to move Gas through the Gathering System or to
make the Gas acceptable at the Plant inlet, including, but not limited to, fuel for compression,
dehydration, treating, or conditioning operations or Gas utilized for gas lift operations.
Hereinafter,

28

 

Gas utilized as fuel for such operations or removed from the Gathering System for gas lift
operations is referred to as Gathering System Fuel. The Gathering System Fuel attributable to a
Delivery Point shall be determined by multiplying the total volume of Gathering System Fuel
consumed in such operations by a fraction, the numerator of which is the Gas volume measured at the
Delivery Point, and the denominator of which is the total Gas volume measured at all Delivery
Points utilizing such operations.

     If no Gathering System Fuel is attributable to a Delivery Point, then the Gas volume measured at
the Delivery Point will be the Adjusted Gas Volume.

     Allocations of Plant Product, Process Fuel, Process Flare, and Residue Gas attributable to each
particular Delivery Point shall be made using such “Adjusted Gas Volume” for each such Delivery
Point.

     10.2 Allocation of Plant Products. The allocation of Plant Products attributable to each
Delivery Point shall be determined as follows:

	 	a.	 	The Adjusted Gas Volume for a Delivery Point shall be multiplied by its Liquefiable
Hydrocarbon content, by Component, expressed in gallons per MCF (gpm) and by its BTU/gallon factor,
in accordance with Paragraph 8.2, to arrive at the theoretical BTUs, by Component, for Gas
delivered from such Delivery Point.
	 
	 	b.	 	The Plant Products attributable to a particular Delivery Point shall be determined by
multiplying

29

 

	 	 	 	the total gallons actually saved and sold of each Component of Plant Products from all Delivery
Points by a fraction, the numerator of which is the theoretical BTUs of that Component attributable
to a particular Delivery Point, and the denominator of which is the total theoretical BTU, by
Component, attributable to all Delivery Points.

     10.3 Allocation of Process Fuel. The allocation of Process
Fuel attributable to each Delivery Point shall be determined as
follows:

	 	a.	 	Processor shall determine the MMBTU’s of Process Fuel used by the Plant by multiplying the
Process Fuel volume by the weighted average heating value of the Residue Gas.
	 
	 	b.	 	The Process Fuel attributable to a Delivery Point shall be determined by multiplying the total
Process Fuel, expressed in MMBTU, by a fraction, the numerator of which is the Adjusted Gas Volume
for that Delivery Point multiplied by its BTU content to arrive at the “Gross Theoretical BTU
Content” attributable to such Delivery Point, and the denominator of which is the sum of all
Adjusted Gas Volumes for all Delivery Points multiplied by their respective BTU content to arrive
at the “Total Gross Theoretical BTU Content”.

30

 

     10.4 Allocation of Process Flare. The allocation of Process Flare attributable to each
Delivery Point shall be determined as follows:

	 	a.	 	Processor shall determine the MMBTU’s of Process Flare, if any, by multiplying the Process
Flare volume hereof by the weighted average heating value of the Residue Gas.
	 
	 	b.	 	The Process Flare attributable to a Delivery Point shall be determined by multiplying the
total Process Flare, expressed in MMBTU, by a fraction, the numerator of which is a the Adjusted
Gas Volume for that Delivery Point multiplied by its BTU content to arrive at the “Gross
Theoretical BTU Content” attributable to such Delivery Point, and the denominator of which is the
sum of all Adjusted Gas Volumes for all Delivery Points multiplied by their respective BTU content
to arrive at the “Total Gross Theoretical BTU Content”.

     10.5 Allocation of Gains or Losses. Gains or losses, if any, will be allocated to the
Producer(s) through the allocation process described in Paragraph 10.6(b) where all Net
Theoretical BTU’s of Residue Gas [as defined in Paragraph 10.6(a)] are allocated to a
particular Delivery Point.

     10.6 Allocation of Residue Gas. The allocation of Residue Gas attributable to each Delivery
Point and of proceeds attributable thereto shall be determined as
follows:

31

 

	 	a.	 	Theoretical BTU’s of Residue Gas. Adjusted Gas Volume shall be multiplied by its
BTU content to arrive at the “Gross Theoretical BTU Content” attributable to such Delivery Point.
This “Gross Theoretical BTU Content” attributable to such Delivery Point shall then be reduced by
deducting therefrom (i) the total BTU’s contained in the Plant Products allocated to that Delivery
Point, pursuant to Paragraph 10.2 above, (ii) the total BTU’s of Process Fuel required for
recompression of and the extraction of Plant Products attributable to that Delivery Point, and
(iii) the total BTU’s of Process Flare attributable to that Delivery Point. For example, the number
of BTU’s attributable to Plant Products to be deducted, for each Delivery Point, shall be
determined by converting the allocated gallons of Plant Products at each Delivery Point to their
respective equivalents in BTU’s by multiplying the individual Component gallons by the BTU/Gallon
Liquid Ratio Factor as set forth in Article VIII hereof. The resultant difference in BTU’s
obtained by deducting the BTU’s of Plant Products, Process Fuel, and Process Flare from the “Gross
Theoretical BTU Content” shall be considered the “Net Theoretical BTU’s of Residue Gas”
attributable to such Delivery

32

 

	 	 	 	Point.
	 
	 	b.	 	The BTU’s of Residue Gas attributable to an Adjusted Gas Volume for a Delivery Point shall
be determined by multiplying the total BTU’s of
Residue Gas actually saved and sold at the Residue Redelivery
Point attributable to all the Gas
delivered to the Plant by a fraction, the numerator of which is the “Net Theoretical BTU’s of
Residue Gas” attributable to a particular Delivery Point, and the denominator of which is the total
“Net Theoretical BTU’s of Residue Gas” attributable to all Delivery Points. At a particular
Delivery Point, any allocation of proceeds for Residue Gas to the Producer shall be made on this
basis.
	 
	 	c.	 	If BTU’s of Residue Gas are consumed or used for fuel for any operations other than Process
Fuel, then the BTU’s of Residue Gas, so allocated to a particular Delivery Point, shall be reduced
by the BTU’s of Residue Gas consumed or used by that Delivery Point in those operations, such as
fuel, for gathering and inlet facilities, other than Gathering System Fuel, if its source is Residue
Gas.

33

 

ARTICLE XI

DISPOSITION OF PRODUCER’S PORTION OF PLANT PRODUCTS

     11.1 On behalf of Processor, Operator shall have the right to sell all Plant Products
removed or extracted from the Facilities after Gas is delivered at the Delivery Point. Operator
shall sell the Plant Products at the Plant Tailgate, and Producer shall have no right to take the
Plant Products in kind at the Plant Tailgate. The price received by Operator for the Plant Products
f.o.b. Plant Tailgate will be net of costs and any losses incurred by the purchaser for
transporting, fractionation, treatment, storage, upgrade, line losses, measurement, commission,
brokerage, marketing fees, exchange differentials, and fractionator retainage. The sum of all these
costs for Plant Products which are transported by pipeline shall not exceed 6.1 cents per gallon
for 1994 and will be subject to fluctuations thereafter. This limitation shall not apply to Plant
Product transported other than by pipeline.

     11.2 Operator shall notify Producer of the purchaser of the Plant Products, and Producer may,
subject to the following conditions, enter into a separate agreement with the purchaser to take in
kind purity Plant Products after fractionation at Mont Belvieu, Harris County, Texas, which are
equivalent to 80% of the Plant Products allocable to Producer at the Plant Tailgate, less costs
(excluding the marketing fee) and any losses that occur between Plant Tailgate and delivery of
purity Plant Product at Mont Belvieu.

34

 

     11.3 Producer shall notify Operator that it has exercised its right to take in kind purity Plant
Products within 30 days of execution of this Agreement or 30 days after the start-up of the Plant
Products pipeline, whichever occurs later; however, Producer may not begin taking in kind until the
month after 60,000 barrels of Plant Product have been shipped by pipeline. If Producer fails to
timely notify Operator of its election to take in kind, Operator shall pay Producer in accordance
with the provisions of Article XII until it receives notice of an election to take in kind
in accordance with the following terms. Producer may give Operator notice of its election to take
in kind annually, on or before 90 days prior to January 1 of the next calendar year. The election
shall become effective as of January 1, shall remain in effect for one calendar year, and shall
apply to all purity Plant Products. Producer’s election to take in kind purity Plant Products at
Mont Belvieu shall be at Producer’s sole cost, risk, and expense.

ARTICLE XII

PROCESSING PAYMENT

     12.1 Processor shall retain 20% of the BTUs of Residue Gas available for sale which are
attributable to Producer’s Gas; and 20% of the proceeds received by Operator for the Plant Products
attributable to Producer’s Gas. Subject to Producer’s right to take in kind purity Plant Products
from the purchaser in accordance with the provisions of
Article XI, Processor shall remit
to Producer 80% of the amount derived by summing the results of

35

 

multiplying the respective gallons of each Plant Product allocated to Producer pursuant to
Paragraph 10.2 by the price per gallon received by Operator for such Plant Product f.o.b.
Plant Tailgate. Processor shall have the right to deduct from the amount to be remitted to Producer
any amounts due Processor by Producer pursuant to the terms of this
Agreement.

ARTICLE XIII

DISPOSITION OF PRODUCER’S PORTION OF RESIDUE GAS

     13.1 Processor will deliver Producer’s portion of Residue Gas to the Residue Redelivery
Facility at the Plant Tailgate. Processor agrees to deliver Producer’s Residue Gas at a pressure
sufficient to enter the Residue Redelivery Facility, but in no event shall Processor be obligated
to deliver Residue Gas at a pressure which exceeds the higher of plant discharge pressure or 750
psig. Producer and Processor will separately contract with the Residue Redelivery Facility
regarding the redelivery of their respective shares of Residue Gas to the various Residue
Redelivery Point(s). Producer and Processor understand there will normally be some inventory gains
and losses caused by balancing of Residue Gas among the Residue Redelivery Points pipelines;
however, Processor shall not be required to bear any costs resulting from such inventory or
balancing.

36

 

ARTICLE XIV

ACCOUNTING AND PAYMENTS

     14.1 Processor shall furnish to Producer on or before the 25th day of each month a report or
statement disclosing information necessary to enable Producer to make reasonable and accurate
statistical and accounting entries upon its books concerning all phases of this Agreement related
to the preceding month, including an allocation statement of Residue Gas delivered for Producer’s
account to its Residue Gas purchaser.

     14.2 Each party shall have the right during reasonable hours to examine books, records, charts, and
original test data of the other party to the extent necessary to verify the accuracy of any
statement, charge, credit, computation, test, or delivery made pursuant to any provision hereof. If
any such examination reveals any inaccuracy in any such statement, charge, credit, computation,
test, or delivery, the necessary adjustment shall be promptly made.

     14.3 Processor shall pay to Producer monthly, on or before the 45th day after the end of the
production month, the sums due under Article XII for Producer’s Plant Products marketed by
Processor during the preceding month less the amount of any taxes actually paid by Processor which
are applicable to such quantities. This payment shall be made irrespective of the interest, title,
or lien of any royalty or mineral owner or any third party or parties in and to the Gas delivered
by Producer to Processor hereunder, the Plant Products, or Residue Gas derived therefrom, or
proceeds accruing from the sale thereof. Payments not made within the

37

 

specific time period shall accrue interest at two percent over the prime loan rate in effect
at the end of each business day as described by the Chase Manhattan Bank of New York; provided that
there shall be no obligation to pay interest if a payment is not timely made because Processor does
not have sufficient information from Producer to make the payment.

     14.4 Producer shall be responsible for the payment of all royalties due on Residue Gas and Plant
Products. Producer shall indemnify and hold Processor harmless from all claims, actions, causes of
action or damages, liability, or obligations arising out of or related to the payment of the
lessor’s royalty or any other burden or encumbrance affecting Producer’s Gas.

     14.5 Notwithstanding any change in ownership of Producer’s properties, Processor shall never be
required to make payments or to give notices required under the provisions of this Agreement to
more than one party, and, in the event the Producer’s properties shall ever be owned by more than
one party, Processor may withhold (without interest) further payments and notices until all of the
owners of Producer’s properties have designated one party to act for them in all respects relating
to said properties and this Agreement, including the rendering of bills, the submission of charts,
and the receipt of payments and notices hereunder.

     14.6 Processor, at its election, may deduct from its payment to Producer sums, if any, due to
Processor under the terms of this Agreement.

38

 

     14.7 All accounting records and documents directly related to this Agreement prepared by
either party hereto shall be retained for a period of not less than two years following the end of
the calendar year of their origination. The parties further agree that all matters relating to the
accounting hereunder for any calendar year shall be considered correct and not subject to further
audit or legal challenge after two years following the end of the calendar year.

ARTICLE XV

WARRANTY

     15.1 Producer warrants the title to all Gas and all Components thereof which shall be
delivered by Producer to Processor hereunder, the right to enter into this Agreement with reference
to such Gas, and that such Gas is free from all liens and adverse claims; and agrees, if notified
thereof by Processor, to indemnify Processor against all suits, action, debts, accounts, damages,
costs, and expenses arising from and out of any adverse legal claims of any and all persons
whomsoever to or against such Gas and against the Plant Products derived therefrom. Producer agrees
to make settlement for all royalties, overriding royalty interests, and/or production payments due
and payable on the Gas delivered to Processor hereunder, the Plant Products extracted and saved
therefrom, and the sale and disposition of the Reside Gas thereof, all in accordance with the terms
of the leases from which Gas processed hereunder is produced, applicable instruments of title,

39

 

and all amendments thereto; and Producer agrees to hold Processor harmless from any and all
claims or demands of mineral or royalty owners and third party claimants as to their respective
portions of such Gas delivered hereunder.

     15.2 If Producer’s title is questioned, Processor may withhold payments of proceeds due hereunder
without interest up to the amount of the claim until title is free from such questions or until
Producer furnishes a bond satisfactory to Processor conditioned to save Processor harmless, or
other surety satisfactory to Processor.

     15.3 Producer also represents and warrants that it has full authority to receive payment for the
sum of all Gas delivered hereunder.

ARTICLE XVI

TAXES

     16.1 Producer shall pay or cause to be paid all production, severance and ad valorem taxes,
assessments, and other charges levied or assessed against the Gas delivered by Producer hereunder,
and against Producer’s portion of the Plant Products, against Producer’s Residue Gas, and against
the sale thereof, and all taxes and statutory charges levied or assessed against any of Producer’s
properties, facilities, or operations.

     16.2 Processor shall pay all taxes and statutory charges levied or assessed against its Plant,
operations, and that portion of the Plant Products derived from Producer’s Gas which accrue to

40

 

Processor under the provisions of Article XII hereof.

ARTICLE XVII

INDEMNITY

     17.1 Each of the parties hereto assumes full responsibility and liability for the
maintenance of its respective properties and agrees to indemnify and save the other party harmless
from all liability and expense on account of any and all damages, claims, taxes, actions, including
injury to or death of persons and damage to or destruction of property arising from any act or
omission or accident in connection with control or possession of the Gas by, or the installation,
presence, maintenance, and/or operation of the property and equipment of, the indemnitor.

     17.2 Producer agrees to defend, indemnify, and hold Processor harmless from all claims, actions,
damages, liability, expenses, including wrongful death, personal injury, or property damage arising
out of or in connection with (i) Producer’s ownership and control of the Gas prior to the time the
Gas passes through the Delivery Point(s); (ii) after the Residue Gas leaves the Plant Tailgate; and
(iii) the ownership and operation of any wells and facilities installed by Producer above the
Delivery Point(s), whether or not required under the terms of this Agreement.

     17.3 Processor agrees to defend, indemnify, and hold Producer harmless from all claims, actions,
damages, liability, or expense, including wrongful death, personal injury, or property damage
arising out of or connected with the operation of the Gathering

41

 

System or Plant.

     17.4 As between the parties hereto, and as to liability, if any accruing to either party
hereto, or to any third party, Producer shall be solely liable for and in control and possession of
the Gas deliverable hereunder and shall bear the risk of loss until the Gas is delivered to
Processor at the Delivery Point. Processor shall be solely liable for and in control and possession
of the Gas and the Plant Products and shall bear the risk of loss until Processor has delivered
Residue Gas to Producer at the Plant Tailgate and delivered Plant Products to Union Pacific Fuels,
Inc. at the Plant Tailgate, whereupon Producer shall again be in control and possession thereof and
bear the risk of loss of the Residue Gas, and Union Pacific Fuels, Inc. shall be in control and
possession of and bear the risk of loss of the Plant Products.

     17.5 Neither Producer nor Processor shall have any responsiblity with respect to Gas
deliverable or delivered hereunder, Plant Products derived therefrom, and Residue Gas, or on
account of anything which may be done, happen, or arise with respect thereto, during such time as
said Gas, Plant Products, and Residue Gas are in control and possession of the other party as
hereinabove provided.

ARTICLE XVIII

FORCE MAJEURE

     18.1 In the event any party hereto is rendered unable, wholly or in part, by force majeure
to carry out its obligations under

42

 

this Agreement, other than the obligation to make payments due hereunder, it is agreed that on such
party giving notice and full particulars of such inability by telephone and in writing to the other
party as soon as possible after the occurrence of the cause relied on, then the obligations of the
party giving such notice, so far as 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,
as far as possible, be remedied with all reasonable dispatch. The term “force majeure” as employed
herein shall mean acts of God; strikes; lockouts; or other industrial disturbances; acts of the
public enemy; wars; blockades; insurrections; riots; epidemics; landslides; lightning; earthquakes;
fires; storms; floods; washouts; arrests and restraints of governments and people; civil
disturbances; explosion, breakage, or accidents to machinery, plant facilities, or lines of pipe;
the necessity for making repairs to or alterations of machinery, plant facilities, or lines of
pipe; freezing of wells or lines of pipe; partial or entire failure of wells; and the inability of
either Producer or Processor to acquire, or the delays on the part of either Producer or Processor
in acquiring, at reasonable cost and after the exercise of reasonable diligence: (a) any servitude,
rights-of-way grants, permits, or licenses; (b) any materials or supplies for the construction or
maintenance of facilities; (c) any permits or permissions from any governmental agency if such are
required; and any other causes, whether of a kind herein enumerated or otherwise,

43

 

not within control of the party claiming suspension and which by the exercise of due diligence such
party is unable to prevent or overcome. 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 requirements 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.

ARTICLE XIX

UNPROFITABLE OPERATIONS AND RIGHTS OF TERMINATION

     19.1 If, in the opinion of Processor, the processing of Gas from any well or wells, or any
Delivery Point, under this Agreement, is or becomes uneconomical due to its volume, Plant Product
content, government regulations, or any other cause, Processor shall not be obligated to process or
may cease processing the Gas therefrom so long as such condition exists. Processor agrees that in
its determination of uneconomical processing, the same criteria shall be used for Producer’s Gas as
for all other Gas being processed through Processor’s Plant. In the event that Processor refuses to
process such Gas, Producer may dispose of the Gas not processed as it sees fit; provided that
Processor at any time thereafter shall have the right to process all Gas refused, if refused for
reason or reasons resulting from an act of Producer or

44

 

lack of action on the part of Producer, conditioned upon Processor giving Producer at least two
months’ notice of its election so to do.

     19.2 In the event Processor should at any time hereafter elect to permanently discontinue the
operation of the Plant, Processor or Producer shall have the option, exercised solely at its
discretion, of terminating this Agreement in its entirety upon 120 days advance written notice of
such termination notice to the other party.

     19.3 Nothing herein shall be construed to require Producer to drill any well or to continue to
operate any well which a prudent operator would not in like circumstances drill or continue to
operate.

     19.4 It is agreed that Processor shall not be obligated to expand any Facilities in order to
provide capacity hereunder.

ARTICLE XX

TERM

     20.1 This Agreement shall be effective from the date hereof and shall continue in full force
and effect for the life of the oil and gas leases or mineral interests of Producer within the
Contract Area, or any extension or renewal thereof, or for so long as Processor continues the
operation of its Facilities.

45

 

ARTICLE XXI

REGULATORY BODIES

     21.1 This Agreement and the provisions hereof shall be subject to all laws, order, rules,
regulations, and directives of the United States, the State of Texas, and of any duly constituted
governmental body, agency, commission, legislature, or court having jurisdiction herein. Nothing
contained herein shall be construed as a waiver of any right to question or contest any such law,
order, rule, regulation, or directive in any forum having jurisdiction in the premises. Producer
and Processor have entered into this Agreement with the understanding, and in reliance on the fact,
that this Agreement and/or performance of this Agreement are not and will not be subject to the
jurisdiction or regulation of the Federal Energy Regulatory Commission (“FERC”) and/or any other
local, state, or federal governmental authorities or entities including, without limitation, any
public utility or common carrier authorities or entities. If this Agreement and/or performance of
this Agreement becomes subject to such jurisdiction and/or regulation, this Agreement shall
automatically terminate unless both Producer and Processor agree, in writing, within 30 days of the
effective date of the attachment of any such jurisdiction and/or regulation, that this Agreement
shall continue after such effective date.

     21.2 If the price for Gas delivered hereunder to be paid Producer by Processor or to be paid
Processor by Processor’s Gas purchaser is a price which, under the Natural Gas Policy Act of

46

 

1978, requires an affirmative determination by a jurisdictional agency, then Producer shall file
with the appropriate jurisdictional agency prior to initial deliveries of Gas hereunder the
material required (including, but not limited to, FERC’s form No. 121) to establish Producer’s or
Processor’s right to be paid such price. If Producer fails to make such filing, then Processor
shall also retain and withhold from payment otherwise due Producer hereunder an amount equal to the
aggregate loss of Processor’s margin as a result of Producer’s failure to make such filing.

ARTICLE XXII

ARBITRATION

     22.1 Any controversy between the parties arising under this Agreement not resolved by
agreement shall be determined by a board of arbitration upon notice of submission given either by
Processor or Producer, which request shall also name one arbitrator. The party receiving such
notice shall, within ten days thereafter, by notice to the other, name the second arbitrator, or
failing so to do, the party giving notice of submission shall name the second. The two arbitrators
so appointed shall name the third, or failing so to do within ten days, then upon the written
application of either party, such third arbitrator may be appointed by the American Arbitration
Association. The arbitrators selected to act hereunder shall be qualified by education, experience,
and training to pass upon the particular question in dispute. The arbitrators so appointed shall
promptly hear and determine (after giving the

47

 

parties due notice of hearing and a reasonable opportunity to be heard) the questions
submitted and shall render their decision within 60 days after appointment of the third arbitrator.
If within said period a decision is not rendered by the board or a majority thereof, new
arbitrators may be named and shall act hereunder at the election of either Processor or Producer in
like manner as if none has been previously named. The decision of the arbitrators, or of a majority
thereof, made in writing shall be final and binding upon the parties hereto as to the questions
submitted and the parties will abide by and comply with such decision. The expenses of arbitration
shall be borne equally by the parties, except that each party shall bear the compensation and
expenses of its counsel, witnesses, and employees.

ARTICLE XXIII

NOTICES AND PAYMENTS

     23.1 Any notice, request, demand, statement, or bill provided for in this Agreement shall be in
writing and delivered by hand, mail, or telecopy. All such written communications shall be
effective upon receipt by the other party at the address of the parties hereto as follow:

	 	 	 	 	 
	 

	 	Producer	 	 
	 
	 	 	 	 
	 

	 	Statements:
	 	Union Pacific Resources Company
	 

	 	 	 	Attn: Manager,
	 

	 	 	 	         Austin Chalk Accounting
	 

	 	 	 	P.O. Box 7
	 

	 	 	 	Fort Worth, Texas 76101-0007

48

 

	 	 	 
	Payments:

	 	Union Pacific Resources Company
	 

	 	P.O. Box 842511
	 

	 	Dallas, Texas 75284-2511
	 
	 	 
	Contractual:

	 	Union Pacific Resources Company
	 

	 	Attn: General Manager — Austin Chalk
	 

	 	P.O. Box 7
	 

	 	Fort Worth, Texas 76101-0007
	 
	 	 
	Processor
	 	 
	 
	Statements:

	 	Union Pacific Resources Company
	 

	 	Attn: Manager,

         Austin Chalk Accounting
	 

	 	P.O. Box 7
	 

	 	Fort Worth, Texas 76101-0007
	 
	 	 
	Payments:

	 	Union Pacific Resources Company
	 

	 	P.O. Box 842511
	 

	 	Dallas, Texas 75284-2511
	 
	 	 
	Contractual:

	 	Union Pacific Resources Company
	 

	 	Attn: Manager, Natural Gas Operations
	 

	 	P.O. Box 7
	 

	 	Fort Worth, Texas 76101-0007

     Either of the parties may designate a further or different address by giving written notice
to the other party.

ARTICLE XXIV

ASSIGNMENT

     24.1 This Contact shall extend to and be binding upon and inure to the benefit of the heirs,
executors, administrators, successors, and assigns, of the respective parties hereto, but no
transfer of or succession to the interest of either party hereunder, wholly or partially, shall
affect or bind the other party until it shall have been furnished with the original instrument or
with the proper proof that the claimant is legally

49

 

entitled to such interest.

ARTICLE XXV

MISCELLANEOUS

     25.1 No waiver by either party of any one or more defaults in the performance of any
provision of this Agreement shall operate or be construed as a waiver of any default or future
defaults, whether of a like or different character.

     25.2 No modifications of the terms and provisions of the Agreement shall be made except by the
execution of written agreements. This Agreement contains the entire agreement between the parties
and there are no oral promises, agreements, or warranties affecting it.

     25.3 The descriptive headings of the provisions of these general provisions are formulated and used
for convenience only and shall not be deemed to affect the meaning or construction of any such
provisions.

     25.4 This Agreement supersedes and replaces any other contract(s) or agreements(s) which may exist
between the parties covering the processing of the Gas dedicated hereunder.

     25.5 Nothing in this Agreement is intended to create a partnership or joint venture under state law
or to render the parties hereto jointly and severally liable to any third party. Each of the
parties elects to be excluded from the provisions of Subchapter K, Chapter 1 of Subtitle A, of the
Internal Revenue Code of 1986 pursuant to the provisions of Article 761(a) of such code

50

 

and from any similar provisions of state law. Processor shall timely file such evidence of this
election as may be required under applicable law.

     25.6 Should any section, paragraph, subparagraph, or other portion of this Agreement be found
invalid as a matter of all in a duly authorized court, or by a duly authorized government agency,
then only that portion of the Agreement shall be invalid. The remainder of the Agreement which
shall not have been found invalid shall remain in full force and effect.

     25.7 This Agreement shall be interpreted, construed, and governed by the laws of the State of
Texas.

     25.8 This Agreement was prepared jointly by the parties hereunder and not by either party to the
exclusion of the other.

     25.9 Producer recognizes and acknowledges Processor’s proprietary interest in this Agreement,
and Producer agrees not to divulge any of the contents hereof to any other person, firm,
corporation, or other entity. Producer agrees to be responsible for enforcing the confidentiality
of this Agreement and agrees to take such action as necessary to prevent any disclosure by any of
its agents or employees.

51

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement in several originals as of
the date first above written.

	 	 	 	 	 	 	 	 	 	 	 
	UNION PACIFIC RESOURCES

COMPANY	 	UNION PACIFIC RESOURCES

COMPANY
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Donald P. Amsden
	 	By:
	 	/s/ J. B. Vering	 	 	 	 
	 

	 	 

Donald P. Amsden
	 	 	 	 

J. B. Vering
	 	 	 	 
	 

	 	Attorney-in-Fact
	 	 	 	Attorney-in-Fact	 	 	 	 
	 

	 	PROCESSOR
	 	 	 	PRODUCER	 	 	 	 
	 

	 	 
	 	 	 	 
	 	 	 	 

52

 

EXHIBIT “B”

to the

Brookeland Gas Facilities

Gas Gathering and Processing Agreement

between

UNION PACIFIC RESOURCES COMPANY

and

UNION PACIFIC RESOURCES COMPANY

September 1, 1993

	 	 	 	 	 	 	 
	Delivery Point	 	Survey	 	API #
	Donner Unit Well No. 1
	 	Lutcher & Moore A-1152	 	 	42-351-30561	 
	Donner Unit A Well No. 1
	 	H. & T. C.R.R. A-230	 	 	42-351-30570	 
	Gulf States Utilities Well No. 1
	 	Lutcher & Moore A-1139	 	 	42-351-30549	 
	Champion International Unit Well No. 2
	 	Lutcher & Moore A-1139	 	 	42-351-30559	 
	Champion International Unit A-20 Well No. 1
	 	William Williams A-20	 	 	42-351-30569	 
	Champion International Unit A-1159 Well No. 1
	 	Lutcher & Moore A-1159	 	 	42-351-30571	 
	Champion International Unit Well No. 1
	 	T. & N. O.R.R. A-447	 	 	42-351-30567	 
	Texaco Champion International Unit A-610 Well No.
1H
	 	R. L. Stapp A-610	 	 	42-351-30574	 
	Champion Well No. 1H
	 	M. Coyle A-777	 	 	42-351-30576	 
	Champion International Unit A-20 Well No. 2
	 	William Williams A-20	 	 	42-351-30572	 
	Hall Unit Well No. 1
	 	William Williams A-20	 	 	42-351-30581	 
	Arco Fee Unit, Well #1
	 	H. & T.C.R.R., Survey #69 A-231	 	 	42-351-30558	 
	Arco Fee A Well #1
	 	H. & T.C.R.R. A-245	 	 	42-241-30531	 
	Arco Fee A-1006 Well #1
	 	John H. Kirby Survey #70 A-1006	 	 	42-351-30564	 
	Areo Fee A-205 Well #1
	 	H. & T.C.R.R. Survey #189 A-205	 	 	42-241-30553	 
	Arco Fee A-248 Well #1
	 	H. & T.C.R.R. Survey #171 A-248	 	 	42-241-30554	 
	Arco Fee Unit A-208 Well #1
	 	H. & T.C.R.R. Survey #197 A-208	 	 	42-241-30557	 

 

 

EXHIBIT “C”

to the

Brookeland Gas Facilities

Gas Gathering and Processing Agreement

between

UNION PACIFIC RESOURCES COMPANY

and

UNION PACIFIC RESOURCES COMPANY

September 1, 1993

Residue Redelivery Point(s)

Point of interconnect with the mainline of Tennessee Gas Pipeline in East Texas in survey H & T.
CRRCO. A-246, Jasper County, Texas

 

 

Exhibit “A”

Brookeland Gas Facilities

Gas Gathering and Processing Agreement

	A Subtldloiy at Union Poo
BROOKELAND
JASPER AND NEWTON
        . PLANT AND GATHERING SYSTEM /
NW; 31o 17,0.00” N / 9-1o 17’ 0.00” W            SE: 30o 53 10000 0 10000
SCALE 1 : 192000
5000 0 500

 

 

EXHIBIT “D”

to the

Brookeland Gas Facilities

Gas Gathering and Processing Agreement

between

RME PETROLEUM COMPANY

and the predecessor of

DUKE ENERGY FIELD SERVICES, LP

dated as of

September 1, 1993

     This Exhibit “D” is attached to and made a part of that certain Brookeland Gas
Facilities Gas Gathering and Processing Agreement dated September 1, 1993, as amended, between RME
Petroleum Company (“RME”) and the predecessor of Duke Energy Field Services, LP (“DEFS”),
regarding the gathering and processing by DEFS, as processor or buyer, of gas produced and
supplied by RME, as producer or seller (“Agreement”).

     From time to time, the quantities of gas confirmed and delivered by DEFS to the Tennessee Gas
Pipeline Company Redelivery Point (“Delivered Quantities”) are greater or less than the quantities
of gas to which RME is actually entitled at the tailgate of the Brookeland Processing Plant,
resulting in over- or under-deliveries relative to Receipt Quantities; and

     The Parties desire to implement a balancing agreement in order to facilitate more efficient
gas scheduling and accounting at the Brookeland Processing Plant and at the Redelivery Point as
defined in the Agreement;

     Therefore, in consideration of the premises and mutual covenants contained herein, the
Parties agree as follows:

     1. COMMITMENT. In accordance with the requirements of the Agreement, RME shall make
nominations, and DEFS shall confirm nominations and make deliveries at the Redelivery Point. The
Parties intend that the quantity of gas actually delivered each day at the Redelivery Point will
equal RME’s full entitlement of producer’s share of all gas owned and controlled by RME and
gathered to the Brookeland Processing Plant for processing or for bypass. This full entitlement
quantity is less (a) the MMBtu’s of gas attributable to gas returned for RME’s gas lift and lease
operations, (b) the MMBtu’s of gas attributable to RME for fuel for compression, dehydration,
treating, or conditioning, and (c) the MMBtu’s attributable to RME’s gas for process fuel, flare,
shrinkage, and gains and losses (“Receipt Quantities”). Any imbalance created when the Receipt
Quantities are different than the Delivered Quantities will be the “Imbalance,” which will be the
responsibility of the Parties to eliminate pursuant to this Exhibit D. Any Imbalance shall be
eliminated as soon as practicable, using the same Redelivery Point to the greatest extent feasible,
pursuant to the terms and conditions of this Exhibit.

 

 

     2. REDELIVERY POINT. Subject to the downstream pipeline’s capacity
allocation rules, and to the extent pipeline capacity is available, the Redelivery Point for
RME’s
redelivered gas shall be the existing pipeline interconnect to Tennessee Gas Pipeline Company
in
Jasper County, Texas, Meter No. 012277. DEFS will use reasonable efforts to deliver at the
required pipeline inlet pressure and quality specifications of the applicable pipeline that
may be used
as a Redelivery Point. DEFS shall not be required to install any additional facilities to
accommodate
RME’s redelivered Gas disposition.

     3. NOMINATION
PROCESS. Estimated operating quantities flowing at the Brookeland Processing Plant inlet and at the Redelivery Point will be used on a daily basis
during
any current period to determine the estimated Imbalance, with nomination adjustments to be
made
during that current period by RME to attempt to maintain or achieve an Imbalance of zero at
the
Redelivery Point. The Parties will cooperate in order to minimize the daily over and under
deliveries. In this regard, the Parties’ gas marketing operations and scheduling personnel
will be in
contact each business day, or more frequently if needed, in order to balance Receipt
Quantities of
gas with Delivered Quantities of gas to the greatest extent feasible.

     4. IMBALANCES. Any cumulative Imbalance remaining at the end of a month
will be eliminated using the following cash-out procedure.

     (a) If the total Delivered Quantities of gas at the Redelivery Point for the month exceed
the total Receipt Quantities for that month (“Excess Redeliveries”), then RME or its designee
will
purchase the Excess Redeliveries for that month. The purchase price for each MMBtu of the
Excess
Quantities shall be equal to the monthly average of the midpoint for Tennessee under the
South-Corpus Christi area as listed in Gas Daily’s Daily Price Survey (the “Cashout Price”).

     (b) If the total Delivered Quantities at the Redelivery Points for the month are less than
the total Receipt Quantities for that month (“Excess Receipts”), then DEFS or its designee
shall
purchase the Excess Receipts for the month. The purchase price for each MMBtu of the Excess
Receipts will be the Cashout Price.

     (c) DEFS will make the imbalance and Cashout Price calculations and will render an invoice or
statement to RME by the 25th of each month following the month of production. The party
owing an Imbalance cash-out payment for a month shall make that payment not later than the last
day of the month following the month of production. If the owing party fails to remit the full
amount payable by it when due, interest on the unpaid portion shall accrue at a rate equal to the
lower of (i) the then effective prime rate of interest published under “Money Rates” by The Wall
Street Journal, plus two percent per annum from the date due until the date of payment; or (ii)
the maximum applicable lawful interest rate.

     5. TERM. This Exhibit is effective as of September 1, 2001, and will remain
in
effect for a term coterminous with that of the Agreement except as stated below. Either party may
invoke a renegotiation of the terms of this Exhibit upon at least 30 days advance written notice,
with any agreed resulting changes to be effective as of the first of the month following the
notice period. If no renegotiation has been agreed within 60 days of the date of a notice under
the preceding sentence, then either party may cancel this Exhibit and thereby delete it from the
Agreement upon 30 days advance written notice to the other Party, effective as of the end of a
month. Notwithstanding any termination of this Exhibit or the Agreement, the Parties agree to
reconcile and eliminate any remaining Imbalance pursuant to the terms and conditions of this
Exhibit and the Agreement within 30 days of termination of this Exhibit. If the remaining
Imbalance is not resolved

- 2 -

 

within 30 days following termination of this Agreement, it will be reduced to zero pursuant to the
cash-out provisions set forth in Section 4.

     6. FORCE MAJEURE. If an event of force majeure as defined in the Agreement
occurs affecting DEFS’ ability to receive gas hereunder, then RME’s gas volume will be reduced
by
a percentage equal to the overall system reduction for gas in each priority category. DEFS
will use
reasonable efforts to notify RME promptly of any reduction and to restore gas volumes
equitably to
RME as soon as the force majeure event is corrected.

     7. ADDRESSES AND NOTICES. Either party may give notices to the other party or
parties by first class mail prepaid, by overnight delivery service, or by facsimile at the
following
addresses or other addresses furnished by either Party by written notice.

Notices to RME Petroleum Company:

	 	 	 
	Notices to RME — General:

	 	RME Petroleum Company
	(Commercial)

	 	P.O. Box 1330
	 

	 	Houston, TX 77251-1330
	 

	 	Phone: (281) 863-7160
	 

	 	Fax: (281) 863-7090
	 
	 	 
	Notices to RME — operations, imbalances,

	 	RME Petroleum Company
	Nominations, and revisions:

	 	c/o Gas Control — Marketing Field Services
	 

	 	1200 Timberloch Place
	 

	 	The Woodlands, TX 77380-1046
	 

	 	Phone: (281) 863-7174
	 

	 	Fax: (281) 863-7198
	 
	 	 
	Payments to RME via wire transfer:

	 	RME Petroleum Company
	 

	 	Bank of America (Dallas, TX)
	 

	 	Account #: 1252625601
	 

	 	ABA#: 111000012
	 
	 	 
	Notices to DEFS — General:

	 	Duke Energy Field Services, LP
	(Commercial and Accounting)

	 	5718 Westheimer, Suite 2000
	 

	 	Houston, TX 77057
	 

	 	Fax: (713) 627-6429
	 
	 	 
	Marketing Operations, imbalances, nominations

	 	Duke Energy Field Services, LP
	and revisions:

	 	Marketing Operations — Brookeland Plant
	 

	 	5718 Westheimer, Suite 2000
	 

	 	Houston, TX 77057
	 

	 	Phone: (713) 627-6200
	 

	 	Fax: (713) 627-6273
	 
	 	 
	Payments to DEFS via wire transfer:

	 	Chase Manhattan Bank
	 

	 	Credit to Duke Energy Field Services, LP
	 

	 	ABA#: 021 000 021
	 

	 	Account #: 910-2-771343

- 3 -

 

	 	 	 
	Payments to DEFS via check:

	 	Duke Energy Field Services, LP

P. O. Box 201207

Houston, TX 77216-1207

End of Exhibit D Balancing Agreement provisions.

- 4 -

 

Amendment to Brookeland Gas Facilities

Gas Gathering and Processing Agreement

#80-29.2

WITNESSETH, THAT:

     WHEREAS, UNION PACIFIC RESOURCES COMPANY, hereinafter referred to as “Processor”, and UNION
PACIFIC RESOURCES COMPANY, hereinafter referred to as “Producer” are parties to a Gas Gathering and
Processing Agreement, hereinafter referred to as the “Agreement”, dated September 1, 1993, covering
the gathering and processing of gas produced from certain wells delivering gas to Processor’s Gas
Facilities (Facilities) in Jasper, Newton, and Sabine Counties, Texas and Vernon Parish, Louisiana;
and

     WHEREAS, Producer and Processor desire to amend the Agreement as described herein.

     NOW THEREFORE,
in consideration of the premises and covenants herein contained, Producer and Processor agree that
effective July 1, 1998:

	1.	 	Article 4.2 is deleted in its entirety and replaced by the
following:

	 
	 	 	“4.2 If the Processor provides compression for the Producer’s Gas (other than Plant
recompression), the Processor shall provide or cause to be provided each stage of
compression for an initial fee of $0.05 per MCF per stage, and Producer will provide its pro
rata share of fuel required for operating such compressor(s), in order that Gas dedicated
hereunder will meet the pressure requirements at the Plant inlet. Commencing April 1, 1999,
and each April 1st thereafter, the compression fee set forth herein will be adjusted upward
or downward, in proportion to the percentage increase or decrease in the

1

 

	 	 	average hourly earnings of crude petroleum and Gas production workers for the last
calendar year, compared to the previous calendar year, as shown by the “Index of the Average
Hourly Earnings of Crude Petroleum and Gas Production Workers” as published by the Bureau of
Labor Statistics of the United States Department of Labor.”

	2.	 	Paragraph 7.1 .c (iii) is deleted in its entirety and replaced by the
following:

“(iii) six percent by volume of carbon dioxide;”
	 
	3.	 	The first sentence of Article 7.3.(b) is deleted and replaced by the following:

“If for any reason the commingled stream of all Gas delivered at the Plant inlet hereunder
exceeds five and one-half percent by volume of carbon dioxide (CO2), the Processor shall
have the right, but not the obligation, to treat non-conforming Gas.”
	 
	4.	 	Article 12.1 shall be deleted in its entirety and replaced by the following:

“12.1 For Gas produced from wells spud before July 1, 1998 Processor shall retain 20% of
the BTU’s of Residue Gas available for sale which are attributable to Producer’s Gas; and
20% of the proceeds received by Operator for Plant Products attributable to Producer’s Gas.
For Gas produced from wells spud after July 1, 1998 Processor shall retain 15% of the BTU’s
of Residue Gas available for sale which are attributable to Producer’s Gas; and 15% of the
proceeds received by Operator for Plant Products attributable to Producer’s Gas. Subject to
Producer’s right to take in kind purity Plant Products from the purchaser in accordance with
the provisions of Article XI, Processor shall remit to Producer 80% or 85%, depending on
well spud date, of the amount derived by summing the results of multiplying the respective
gallons of each Plant Product allocated to Producer pursuant to Paragraph 10.2 by the price
per gallon received by

2

 

	 	 	Operator for such Plant Product f.o.b. Plant Tailgate. Processor shall have the right to
deduct from the amount to be remitted to Producer any amounts due Processor by Producer
pursuant to the terms of this Agreement.”

	5.	 	The following Article 25.10 is added:

“25.10 Processor, each month, shall notify Producer of its intent to recover or reject
ethane at the Plant in the following month. Processor will reject ethane when Processor’s
expected value of ethane as part of Residue Gas at the Plant Tailgate exceeds Processor’s
expected value of ethane as a Plant Product at the Plant Tailgate. Processor reserves the
right to alter its decision to recover or reject ethane at any time in the event of
significant price changes. Should Processor alter Plant operations during a month Producer
will be notified as soon as practical.”

          Except as amended herein, the Agreement remains in full force and effect as
originally executed, and the parties hereto do hereby adopt and ratify and confirm same.

     IN WITNESS WHEREOF, each of the paries hereto has executed this Agreement on the
date of its acknowledgment hereof.

	 	 	 	 	 	 	 	 	 	 	 
	UNION PACIFIC RESOURCES COMPANY	 	 	 	UNION PACIFIC RESOURCES COMPANY	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ [ILLEGIBLE]
	 	 	 	By:
	 	/s/ B. Bowersock	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Its:

	 	Business Unit Manager
	 	 	 	Its:
	 	Attorney-in-Fact	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	“Producer”
	 	 	 	 	 	“Processor”	 	 

3

 

Amendment to Brookeland Gas Facilities

Gas Gathering and Processing Agreement

#80-29.2

WITNESSETH, THAT:

     WHEREAS, UNION PACIFIC RESOURCES COMPANY, hereinafter referred to as “Processor”, and UNION
PACIFIC RESOURCES COMPANY, hereinafter referred to as “Producer” are parties to a Gas Gathering and
Processing Agreement, hereinafter referred to as the “Agreement”, dated September 1, 1993, covering
the gathering and processing of gas produced from certain wells delivering gas to Processor’s Gas
Facilities (Facilities) in Jasper, Newton, and Sabine Counties, Texas and Vernon Parish, Louisiana;
and

     WHEREAS, by Amendment dated December 1, 1995 (the “Amendment”), Processor and Producer amended
the Agreement by deleting and replacing Paragraph 13.1 thereof and by adding a new Paragraph 13.2;
and

     WHEREAS, Producer and Processor desire to further amend the Agreement by rescinding
the Amendment as more particularly described herein.

     NOW THEREFORE, in consideration of the premises and covenants herein contained, Producer and
Processor agree that effective July 1, 1998:

	1.	The version of Paragraph 13.1 contained int
the Amendment shall be deleted in its
entirety and replaced by the version contained in the original
Agreement, which reads as follows:
	 
	 	“13.1 Processor will deliver Producer’s portion of Residue Gas to the Residue

1

 

	 	Redelivery Facility at the Plant Tailgate. Processor agrees to deliver Producer’s
Residue Gas at a pressure sufficient to enter the Residue Redelivery Facility, but in no
event shall Processor be obligated to deliver Residue Gas at a pressure which exceeds the
higher of Plant discharge pressure or 750 psig. Producer and Processor will separately
contract with the Residue Redelivery Facility regarding the redelivery of their respective
shares of Residue Gas to the various Residue Redelivered Point(s). Producer and Processor
understand there will normally be some inventory gains and losses caused by balancing of
Residue Gas among the Residue Redelivered Points pipelines; however, Processor shall not be
required to bear any costs resulting from such inventory or balancing.”

	2. 	Paragraph 13.2 that was add to the Agreement by the Amendment is hereby deleted in its
entirety.

          Except as amended herein, the Agreement remains in full force and effect as
originally executed, and the parties hereto do hereby adopt and ratify and confirm same.

2

 

     IN WITNESS WHEREOF, each of the paries hereto has executed this Agreement on the date of its
acknowledgment hereof.

	 	 	 	 	 
	PROCESSOR	 	 
	 
	 	 	 	 
	UNION PACIFIC RESOURCES COMPANY	 	 
	 
	 	 	 	 
	By:

	 	/s/ B. Bowersock	 	 
	 

	 	 

	 	 
	Its:

	 	Attorney-in-Fact	 	 
	 
	 	 	 	 
	PRODUCER	 	 
	 
	 	 	 	 
	UNION PACIFIC RESOURCES COMPANY	 	 
	 
	 	 	 	 
	By:

	 	/s/ [ILLEGIBLE]	 	 
	 

	 	 

	 	 
	Its:

	 	General Manager	 	 
	 

	 	Austin Chalk Business Unit	 	 

3

 

Amendment to Brookeland Gas Facilities

Gas Gathering and Processing Agreement

#80-29.2

     THIS AGREEMENT, dated February 1, 1998, by and between UNION PACIFIC RESOURCES COMPANY,
a Delaware corporation, the Operator, hereinafter referred to as “Processor”, and UNION
PACIFIC RESOURCES COMPANY, hereinafter referred to as “Producer”.

WITNESSETH, THAT:

     WHEREAS, Producer and Processor are parties to a Gas Gathering and Processing Agreement,
hereinafter referred to as the “Agreement”, dated September 1, 1993, covering the gathering and
processing of gas produced from certain wells delivering gas to Processor’s Gas Facilities
(Facilities) in Jasper, Newton, and Sabine Counties, Texas and Vernon Parish, Louisiana; and

     WHEREAS, Producer has acquired from Texaco Exploration and Production Inc. (Texaco)
interest in a gas gathering system and wells dedicated to Texaco’s Brookeland Gas Processing
Plant; and

     WHEREAS, Processor has acquired 100% of Texaco’s Brookeland Gas Processing Plant; and

     WHEREAS, Processor desires to operate and maintain the gas gathering system Producer acquired
from Texaco, cancel the Texaco Brookeland Gas Processing Plant gas processing agreements between
Producer and Processor, and amend the Agreement to include the interest in the wells Producer
acquired from Texaco; and Producer agrees.

     NOW THEREFORE, in consideration of the premises and covenants herein contained, the Producer
and Processor agree that effective February 1, 1998:

I.

     All contracts and agreements, including but not limited to those specified on Exhibit
“1” attached hereto and hereby made a part of, related to the Texaco Brookeland Gas Processing
Plant between Producer and Processor are terminated.

II.

     Exhibit “A” of the Agreement shall be amended to increase the Contract Area by moving the
Northern boundary in Texas 10 miles North of its present position.

 

 

III.

     Exhibit “B” of the Agreement shall be amended to include Producer’s interest in wells
on Exhibit “B-l”, attached hereto and hereby made a part of this Amendment.

IV.

The Agreement shall be amended by the addition of the following paragraph
25.10:

25.10 It is Producer’s intent to convey to Processor, Producer’s interest in all gas
metering and gathering assets located in Jasper, Sabine, and Newton Counties, Texas which
Producer acquired January 1, 1998 from Texaco Exploration and Production Inc. (the “Texaco
Gathering System”). Until such conveyance, Producer and Processor agree, Processor shall
have complete control of the Texaco Gathering System and at its own expense, shall operate,
maintain, and when appropriate, abandon the Texaco Gathering System. In addition, Processor
shall be liable for any claim, demand, or cause of action arising out of the operation of
the Texaco Gathering System.”

     Except as amended herein, the Agreement remains in full force and effect as originally
executed, and the parties hereto do hereby adopt and ratify and confirm same.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement in several originals, as of the
date first written above.

	 	 	 	 	 
	UNION PACIFIC RESOURCES COMPANY	 	 
	as Processor	 	 
	 
	 	 	 	 
	By:

	 	/s/ B. Bowersock	 	 
	 

	 	 

Attorney-In-Fact
	 	 
	 
	 	 	 	 
	UNION PACIFIC RESOURCES COMPANY	 	 
	as Producer	 	 
	 
	 	 	 	 
	By:

	 	/s/ [ILLEGIBLE]	 	 
	 

	 	 	 	 
	 

	 	Attorney-In-Fact	 	 

 

 

EXHIBIT “1”

Terminated Contracts

	 	 	 	 	 	 	 	 	 
	UPRC#	 	Date	 	Type	 	Parties	 	 
	80-29.5

	 	6/22/94
	 	Gas Processing
	 	Producer -
	 	Union Pacific Resources Company
	 

	 	 	 	 	 	Processors -
	 	Texaco Exploration and Production, Inc.*
	 

	 	 	 	 	 	 	 	Maersk NGL, Inc.*
	 
	 	 	 	 	 	 	 	 
	80-29.11

	 	11/27/95
	 	Gas Gathering & Processing
	 	Gatherer -
	 	Union Pacific Resources Company
	 

	 	 	 	 	 	Producer -
	 	Texaco Exploration and Production, Inc.*
	 
	 	 	 	 	 	 	 	 
	80-29.12

	 	8/1/95
	 	Gas Purchase/Processing
	 	Producer -
	 	Torch Energy Marketing, Inc.*
	 

	 	 	 	 	 	Processor -
	 	Texaco Exploration and Production, Inc.*
	 
	 	 	 	 	 	 	 	 
	80-29.13

	 	12/1/95
	 	Gas Purchase/Processing
	 	Producer -
	 	Union Pacific Resources Company
	 

	 	 	 	 	 	Processor -
	 	Texaco Exploration and Production, Inc.*
	 
	 	 	 	 	 	 	 	 
	80-29.14

	 	1/1/96
	 	Gas Purchase/Processing
	 	Producer -
	 	Union Pacific Resources Company
	 

	 	 	 	 	 	Processor -
	 	Texaco Exploration and Production, Inc.*
	 
	 	 	 	 	 	 	 	 
	80-29.16

	 	7/7/93
	 	Gas Purchase/Processing
	 	Producer -
	 	Maersk Energy, Inc*
	 

	 	 	 	 	 	Processor -
	 	Texaco Exploration and Production, Inc.*
	 
	 	 	 	 	 	 	 	 
	80-29.17

	 	7/26/93
	 	Gas Purchase/Processing
	 	Processor -
	 	Maersk NGL, Inc*
	 

	 	 	 	 	 	Producer -
	 	Texaco Exploration and Production, Inc.*
	 
	 	 	 	 	 	 	 	 
	80-29.18

	 	3/15/96
	 	Gas Purchase/Processing
	 	Producer -
	 	Bexco Operating, Inc.*
	 

	 	 	 	 	 	Processor -
	 	Texaco Exploration and Production, Inc.*

 

 

	 	 	 	 	 	 	 	 	 
	UPRC#	 	Date	 	Type	 	Parties	 	 
	80-29.19

	 	7/7/93
	 	Gas Balancing
	 	Producer -
	 	Various*
	 

	 	 	 	 	 	Processor -
	 	Texaco Exploration and Production, Inc.*
	 
	 	 	 	 	 	 	 	 
	80-50.7

	 	11/1/95
	 	Gas Gathering & Redelivery
	 	Gatherer -
	 	Union Pacific Resources Company
	 

	 	 	 	 	 	Producer -
	 	Texaco Exploration and Production, Inc.*
	 
	 	 	 	 	 	 	 	 
	80-60.3

	 	7/8/92
	 	Gas Treating
	 	Producer -
	 	Arco Oil and Gas Company*
	 

	 	 	 	 	 	Treater -
	 	Texaco Exploration and Production, Inc.*
	 
	 	 	 	 	 	 	 	 
	80-60.4

	 	4/1/95
	 	Gas Treating
	 	Producer -
	 	Arco Oil and Gas Company*
	 

	 	 	 	 	 	Treater -
	 	Texaco Exploration and Production, Inc.*

 

			
	*	 	Denotes original party later succeeded by Union Pacific Resources Company

 

 

EXHIBIT “B-l”

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Well Name	 	County	 	Operator	 	API #	 	WINS
	 

	 	Arco A-360 #1
	 	Jasper
	 	UPR
	 	 	4224130612	 	 	 	42052	 
	*

	 	Arco AMI Fee A-378 # 1 H
	 	Sabine
	 	Texaco
	 	 	4240330365	 	 	 	40917	 
	 

	 	Arco Fee A-15 #1 (APO 300%)
	 	Jasper
	 	UPR
	 	 	4224130633	 	 	 	42284	 
	*

	 	Arco Fee A-418 # 1 H
	 	Sabine
	 	Texaco
	 	 	4240330381	 	 	 	42353	 
	 

	 	Arco Fee “A” No. 1
	 	Jasper
	 	UPR
	 	 	4224130531	 	 	 	22398	 
	 

	 	Black Stone Minerals A-15 # 1 (APO 300%)
	 	Jasper
	 	UPR
	 	 	4224130639	 	 	 	43335	 
	 

	 	Black Stone Minerals A -342 # 1 (excluded)
	 	Jasper
	 	UPR
	 	 	4224130625	 	 	 	42327	 
	 

	 	Black Stone Minerals Unit A-8 90 #1 (pref right)
	 	Newton
	 	Sonat
	 	 	4235130650	 	 	 	45046	 
	*

	 	Brown-Donner Unit A-1166 #1 (pref right)
	 	Newton
	 	Texaco
	 	 	4235130590	 	 	 	45047	 
	*

	 	Brown-Donner Unit A-567 # 1 (pref right)
	 	Newton
	 	Texaco
	 	 	4235130613	 	 	 	45048	 
	*

	 	Champion A-334 # 1 (pref right)
	 	Newton
	 	Texaco
	 	 	4235130599	 	 	 	45049	 
	 

	 	Champion International Unit A-610 # 1 H (pref right)
	 	Newton
	 	Texaco
	 	 	4235130574	 	 	 	23154	 
	*

	 	Champion Unit A-1 175 # 1 (excluded, pref right)
	 	Newton
	 	Texaco
	 	 	4235130626	 	 	 	45050	 
	*

	 	Champion Unit # 1 H (pref right)
	 	Newton
	 	Texaco
	 	 	4235130568	 	 	 	45051	 
	 

	 	Cora Armstrong # 1 H
	 	Jasper
	 	UPR
	 	 	4224130614	 	 	 	42080	 
	 
	 	Donner Brown A-1 176 #1 (pref right)
	 	Newton
	 	Sonat
	 	 	4235130647	 	 	 	45052	 
	 

	 	Donner Brown A-148 #1
	 	Newton
	 	UPR
	 	 	4235130616	 	 	 	23067	 
	*

	 	E. A. Clark Unit 1 #1 -H
	 	Sabine
	 	Texaco
	 	 	4240330370	 	 	 	40913	 
	 

	 	Fisher A-522 #1
	 	Jasper
	 	UPR
	 	 	4224130635	 	 	 	43056	 
	*

	 	Gibbs Bros. Unit #1 (pref right)
	 	Newton
	 	Texaco
	 	 	4235130578	 	 	 	45053	 
	 

	 	GSU A-543 # 1 (pref right)
	 	Newton
	 	Sonat
	 	 	4235130598	 	 	 	23874	 
	 

	 	GSU A-905 # 1 (pref right)
	 	Newton
	 	Sonat
	 	 	4235130588	 	 	 	23695	 
	 

	 	GSU No. 1 (pref right)
	 	Newton
	 	Sonat
	 	 	4235130549	 	 	 	21941	 
	 

	 	Hobbs Unit No: 1-H
	 	Newton
	 	UPR
	 	 	4235130632	 	 	 	42352	 
	 

	 	Jones Unit A-93 # 2 (pref right)
	 	Newton
	 	Sonat
	 	 	4235130649	 	 	 	45054	 
	*

	 	Jones, C.S. Unit 1 # 1-H (excluded)
	 	Sabine
	 	Texaco
	 	 	4240330415	 	 	 	41095	 
	*

	 	Jones, C.S. # l (excluded)
	 	Sabine
	 	Texaco
	 	 	4240330414	 	 	 	40828	 
	 

	 	Matthews Estate Unit # 1 (excluded)
	 	Jasper
	 	UPR
	 	 	4224130619	 	 	 	42078	 
	*
	 	Odom, R. E. 1 # 1-H
	 	Sabine
	 	Texaco
	 	 	4240330368	 	 	 	40910	 
	*

	 	Odom, R. E. 2 # 1-H
	 	Sabine
	 	Texaco
	 	 	4240330372	 	 	 	41129	 
	*

	 	Odom, R. E. 3 # 1 -H (excluded)
	 	Sabine
	 	Texaco
	 	 	4240330412	 	 	 	40741	 
	 

	 	Springer, B.K. # 1 -H
	 	Jasper
	 	Texaco
	 	 	4224130611	 	 	 	40867	 
	 

	 	Temple Industries No. 4 -H
	 	Jasper
	 	UPR
	 	 	4224130586	 	 	 	42070	 
	 

	 	Temple Inland Et Al A-41 #1
	 	Jasper
	 	UPR
	 	 	4224130599	 	 	 	42079	 
	 

	 	Temple Inland Forest A-41 #1
	 	Jasper
	 	UPR
	 	 	4224130634	 	 	 	42756	 
	*

	 	Texaco AMI Unit 1 # 1 -H
	 	Newton
	 	Texaco
	 	 	4235130546	 	 	 	40908	 
	*

	 	Texaco AMI Unit 2 # 1-H
	 	Newton
	 	Texaco
	 	 	4235130551	 	 	 	40915	 
	*

	 	Texaco AMI Unit 3 #1-H
	 	Newton
	 	Texaco
	 	 	4235130597	 	 	 	40919	 
	*

	 	Texaco AMI Unit 5 # l-H
	 	Newton
	 	Texaco
	 	 	4235130573	 	 	 	40909	 
	*

	 	Texaco Fee AM I #1-H
	 	Newton
	 	Texaco
	 	 	4235130531	 	 	 	40920	 
	*

	 	Texaco Fee AM I # 3-H
	 	Newton
	 	Texaco
	 	 	4235130555	 	 	 	40918	 
	*

	 	Texaco Fee Brookeland 1 H
	 	Newton
	 	Texaco
	 	 	4235130536	 	 	 	45061	 
	 

	 	Texaco Fee Brookeland 5 H
	 	Newton
	 	Texaco
	 	 	4235130543	 	 	 	45062	 
	*

	 	Texaco Fee Brookeland 7 H
	 	Newton
	 	Texaco
	 	 	4235130545	 	 	 	45063	 
	*

	 	Texaco Fee Brookeland 9 H
	 	Newton
	 	Texaco
	 	 	4235130556	 	 	 	45055	 
	*

	 	Texaco Fee Unit 2 No. 2-H
	 	Newton
	 	Texaco
	 	 	4235130565	 	 	 	45056	 
	*

	 	Texaco Fee Unit 3 #1H
	 	Newton
	 	Texaco
	 	 	4235130539	 	 	 	45065	 
	 

	 	Texaco Fee Unit 3 #1-H
	 	Newton
	 	Texaco
	 	 	4235130547	 	 	 	45057	 
	 

	 	Texaco Fee Unit 4 # 1-H
	 	Newton
	 	Texaco
	 	 	4235130554	 	 	 	45058	 
	*

	 	Texaco Fee Unit 5 # 1-H
	 	Newton
	 	Texaco
	 	 	4235130562	 	 	 	45059	 
	 

	 	Texaco Fee “A” No. 1
	 	Newton
	 	UPR
	 	 	4235130528	 	 	 	24103	 
	 

	 	Texaco Fee “B” No. 1
	 	Newton
	 	UPR
	 	 	4235130530	 	 	 	24105	 
	 

	 	Texaco Fee “C” No. 1
	 	Newton
	 	UPR
	 	 	4235130533	 	 	 	24106	 
	 

	 	Texaco Fee “D “ No. 1
	 	Newton
	 	UPR
	 	 	4235130542	 	 	 	24107	 
	 

	 	Tonahill, M.T . Unit A-41 #1
	 	Jasper
	 	UPR
	 	 	4224130587	 	 	 	42071	 
	*

	 	USA A-482 #1 (excluded)
	 	Sabine
	 	Texaco
	 	 	4240330417	 	 	 	41624	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Proved Undeveloped
	 	 	 	 	 	Prod. Start Dt.
	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Martindale McGraw A -33 #1
	 	 	 	 	 	 	10/01/97	 	 	 	 	 
	 

	 	Pearl A-340 #1
	 	 	 	 	 	 	01/01/98	 	 	 	 	 
	 

	 	Saul A-33 #1
	 	 	 	 	 	 	05/01/98	 	 	 	 	 
	 

	 	Texaco AMI #4
	 	 	 	 	 	 	05/01/98	 	 	 	 	 
	 

	 	Texaco AMI Unit 1 #1-H RE
	 	 	 	 	 	 	02/01/98	 	 	 	 	 
	 

	 	Texaco AMI Unit 5 #1-H RE
	 	 	 	 	 	 	03/01/98	 	 	 	 	 
	 

	 	Texaco Fee AMI #1 -H RE
	 	 	 	 	 	 	06/01/98	 	 	 	 	 

 

 

Amendment to Brookeland Gas Facilities

Gas Gathering and Processing Agreement

     THIS AGREEMENT, dated as of December 1, 1995, by and between UNION PACIFIC RESOURCES COMPANY,
a Delaware corporation, the Operator, of the Facilities, hereinafter referred to as “Processor”,
and UNION PACIFIC RESOURCES COMPANY, hereinafter referred to as “Producer”.

WITNESSETH, THAT:

     WHEREAS, Producer and Processor are parties to a Gas Gathering and Processing
Agreement, hereinafter referred to as the “Agreement”, dated September 1, 1993, covering the
gathering and processing of gas produced from certain wells delivering gas to Processor’s Gas
Facilities (Facilities) in Jasper, Newton and Sabine Counties, Texas and Vernon Parish, Louisiana;
and

     WHEREAS, Producer and Processor desire to amend the Agreement as hereinafter written; and

     NOW THEREFORE, in consideration of the premises and covenants herein contained, the Producer
and Processor agree that effective December 1, 1995, the Agreement will be amended as follows:

I.

     Exhibit “A” shall be amended by the addition of the Contract Area set forth on Exhibit “A”
attached to this Amendment. All references in the Agreement to Exhibit “A” shall now be deemed to
include the attached Exhibit “A”.

-1-

 

II.

     ARTICLE XIII paragraph 13.1 of the Agreement shall be amended
by the addition of the following:

Producer shall have no right to take its proportionate share of Residue
Gas in kind. Processor shall pay Producer the net proceeds from the sale
of Residue Gas attributable to Producer. Such net proceeds shall be
determined by multiplying Producers portion of Residue Gas by the
weighted average index price. Using the Inside F.E.R.C. Gas Market
Report First of the Month Publication the weighted average index price
shall be equal to the sum of eighty percent (80%) of the Tennessee Gas
Pipeline Zone Zero Texas index price plus twenty percent (20%) of the
Koch Gateway Pipeline Texas Index Price.

III.

     Article XIII of the Agreement shall be amended by the addition
of the following paragraph 13.2:

13.2 In the event that Inside F.E.R.C.’s Gas Market Report fails to
report said price(s) or ceases publication in its entirety, then
Processor and Producer shall mutually agree, within thirty (30) Days
thereafter on a substitute price(s) or publication (whichever the case
may be) upon which to deem “the weighted average index price” to be.
Such substitute price (s) or

-2-

 

publication as adjusted will reflect the spot market price of gas in the
producing area subject to this Agreement.

IV.

     Article XVI of the Agreement shall be amended by the addition
of the following paragraph 16.3:

16.3 The price paid under Articles XII and XIII of this Agreement include
reimbursement for state severance taxes paid by Producer and Processor under this
Article XVI of this Agreement.

V.

     Exhibit “C” shall be amended by the addition of a point of
interconnect set forth on Exhibit “C” attached to this Amendment.
All references in the Agreement to Exhibit “C” shall now be deemed
to include the attached Exhibit “C”.

     Except as amended herein, the Agreement remains in full force and effect as originally
executed, and the parties hereto do hereby adopt and ratify and confirm same.

-3-

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement in several originals,
as of the date first above written.

	 	 	 	 	 	 	 
	 	 	UNION PACIFIC RESOURCES COMPANY	 	 
	 	 	as Processor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Donald P. Amsden	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Donald P. Amsden	 	 
	 

	 	 	 	Attorney-in-Fact	 	 
	 
	 	 	 	 	 	 
	 	 	UNION PACIFIC RESOURCES COMPANY	 	 
	 	 	as Producer	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ J. B. Vering	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	J. B. Vering	 	 
	 

	 	 	 	Attorney-in-Fact	 	 

- 4 -

 

EXHIBIT “C”

to the

Brookeland Gas Facilities
Gas
Gathering and Processing Agreement

between

UNION PACIFIC RESOURCES COMPANY

and

UNION PACIFIC RESOURCES COMPANY

September 1, 1993

Residue
Redelivery Point (s)

1)Point of
interconnect with the mainline of Tennessee Gas Pipeline Company in
east Texas in H.&T. C. RR Survey A-246, Jasper County, Texas

2)Point of
interconnect with the mainline of Koch Gateway Pipeline Company in
east Texas in H. &T. C.
RR Survey A-245, Jasper County,
Texas

Amendment dated December 1, 1995

- 5 -

 

TERMINATION OF PROCESSING CONTRACT

This instrument is entered into by and between UNION PACIFIC RESOURCES COMPANY, as operator of the
Brookeland Gas Facilities (referred to herein as “Processor”) and UNION PACIFIC RESOURCES COMPANY,
as operator of certain oil and gas properties located in the vicinity of the aforementioned gas
facilities (referred to herein as “Producer”).

Recitals

i. Processor and Producer have heretofore entered into that certain Gas Gathering and
Processing Agreement dated September 1, 1993 (the “Producer Processing Agreement”) covering
the gathering and processing of natural gas owned or controlled by Producer at Processor’s
Brookeland Gas Facilities. Pursuant to the Producer Processing Agreement, an area of
dedication was created within which any interest owned by Producer (or which might be
acquired by Producer in the future) within such area would be subject to the Producer
Processing Agreement.

ii. On November 1, 1995, Torch Energy Marketing, Inc. (“Torch”) and Processor entered into a
similar Gas Gathering Agreement (the “Torch Processing Agreement”) pursuant to which Torch
dedicated the gas produced from certain identified properties to be processed at Processor’s
Brookeland Gas Facilities.

iii. Subsequent to the foregoing, Producer acquired all of Torch’s interest in certain oil
and gas leases (the “Torch Leases”) more particularly described in that certain purchase
agreement effective January 1, 1996 which Leases were subject to the Torch Processing
Agreement.

NOW, THEREFORE, for $10.00 and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:

1. The Torch Processing Agreement is hereby terminated with respect to the Torch Leases.

2. The Torch Leases shall hereafter be subject to the Producer Processing Agreement.

EXECUTED this 15th day of March, 1999.

	 	 	 	 	 	 	 	 	 	 	 
	PROCESSOR:	 	 	 	PRODUCER:	 	 
	UNION PACIFIC RESOURCES COMPANY	 	 	 	UNION PACIFIC RESOURCES COMPANY	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ [ILLEGIBLE]
	 	 	 	By:
	 	/s/ B. Bowersock	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Its:

	 	Attorney-in-Fact
	 	 	 	Its:
	 	Attorney-in-Fact	 	 

 

 

Amendment to Brookeland Gas Facilities

Gas Gathering and Processing Agreement

     THIS AGREEMENT, dated as of March 7, 1994, by and between UNION PACIFIC RESOURCES
COMPANY, a Delaware corporation, the Operator, and SONAT EXPLORATION COMPANY, a Delaware
corporation, the owners of the Facilities, hereinafter referred to collectively as “Processor,” and
UNION PACIFIC RESOURCES COMPANY, hereinafter referred to as “Producer”.

WITNESSETH, THAT:

     WHEREAS, Producer and Processor are parties to a Gas Processing Agreement, hereinafter
referred to as the “Agreement”, dated September 1, 1993, covering the gathering and processing of
gas produced from certain wells delivering gas to Processor’s Gas Facilities in Jasper and Newton
Counties, Texas; and

     WHEREAS, Producer is delivering Producer’s Gas to Processor at the Delivery Point at such
pressure as is required and sufficient to enter Processor’s Delivery Point, but not to exceed
1,075 psig.

     NOW THEREFORE, in consideration of the premises and covenants herein contained, the Producer
and Processor agree that effective as of the date of April 1, 1994, Article 4.1 in the Agreement
shall be deleted in its entirety, and the following is substituted therefor:

          4.1 Producer, at its own expense, shall

- 1 -

 

construct, equip, maintain, and operate all facilities (including, but not limited to, all
necessary separation, dehydration, and/or compression) necessary to deliver Producer’s Gas
to Processor at the Delivery Point at such pressure as is required and sufficient to enter
Processor’s Delivery Point, but not to exceed 1,250 psig.

     Except as amended herein, the
Agreement remains in full force
and effect as originally executed, and the parties hereto do hereby
adopt and ratify and confirm same.

     IN WITNESS WHEREOF, the parties hereto have executed this
Agreement in several originals, as of the date first above written.

	 	 	 	 	 	 	 
	 	 	UNION PACIFIC RESOURCES COMPANY	 	 
	 	 	as Operator for Processor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Donald P. Amsden	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Donald P. Amsden	 	 
	 

	 	 	 	Attorney-in-Fact	 	 
	 
	 	 	 	 	 	 
	 

	 	“Processor”	 	 
	 
	 	 	 	 	 	 
	 	 	UNION PACIFIC RESOURCES COMPANY	 	 
	 	 	as Producer	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ [ILLEGIBLE]	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	“Producer”	 	 

- 2 -exv10w8

 

EXHIBIT
10.8

SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL

TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL

HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,

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

MINIMUM VOLUME AGREEMENT

     This Minimum Volume Agreement is entered into as of this 1st day of October 2003, by and
between ONEOK Texas Field Services L.P. (“Buyer”) and Peak Operating of Texas, LLC (“Seller”).

     WHEREAS, Buyer and Seller have executed a Gas Purchase Agreement (“Agreement”) dated October
1, 2003 (“Effective Date”); and

     WHEREAS, Seller recognizes that Buyer is relying on a minimum volume of purchases pursuant
to said Agreement in order to compensate it for its investment in facilities necessary to take
delivery of Seller’s gas under the Agreement.

     NOW, THEREFORE, in consideration of the promises and covenants hereinafter contained, the
parties agree as follows:

     1. Seller agrees to deliver to Buyer pursuant to said Agreement at the Receipt Point(s)
specified therein the amount of 6.3 billion cubic feet of natural gas (6,300,000 Mcf) (“Minimum
Volume”) within the five-year period (“Specified Period”) commencing on the Effective Date and
ending September 30, 2008.

     2. In the event Seller delivers less than the Minimum Volume in the Specified Period.
Seller shall pay Buyer, immediately upon receipt of Buyer’s invoice therefore, an amount
based on the following formula:

Reimbursement
= (Minimum Volume — Actual Volume) x ($(**)/Mcf).

     3. Notwithstanding the foregoing, the parties further agree that (i) the Specified Period will
be extended one day for each day Buyer is unable to purchase
Seller’s gas by reason of force majeure
under the Agreement, and (ii) that the Minimum Volume will be credited with all volumes that Seller
tenders to Buyer but Buyer is unable to purchase due to lack of capacity, or as a result or release
from the Agreement pursuant to Paragraph 3.4, and (iii) the Minimum Volume will be credited with all
volumes of gas owned or controlled by third parties who have elected to take in kind under
applicable operating agreements with Seller, provided such volumes continue to move through Buyer’s
facilities.

     IN WITNESS WHEREOF, the parties have executed this Agreement this 6 day of November,
2003

	 	 	 	 	 	 	 	 	 	 	 
	ONEOK TEXAS FIELD SERVICES, L.P.	 	 	 	PEAK OPERATING OF TEXAS, LLC	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Terry Spencer
 

	 	 	 	By:
	 	/s/ Jack E. Vaughn
 

	 	 
	 

	 	Terry Spencer
	 	 	 	 	 	Jack E. Vaughn	 	 
	Title:

	 	Vice President
	 	 	 	Title:
	 	President	 	 

 

 

AMENDATORY AGREEMENT TO THE GAS PURCHASE

AGREEMENT DATED OCTOBER 1, 2003

(#431377)

     This Amendatory Agreement is entered into by and between ONEOK Texas Field Services,
L.P. hereinafter referred to as “Buyer” and Peak Operating of Texas, LLC, hereinafter referred
to as “Seller”.

     WHEREAS Buyer and Seller entered into that certain Gas Purchase Agreement, dated October 1, 2003
(the “Agreement”); and

     WHEREAS it is the desire of the parties to amend the certain provisions of the Agreement.

     NOW THEREFORE as hereinafter provided and in consideration of the mutual covenants and
promises herein contained, effective December 1, 2004, the Agreement is hereby amended as
follows.

I.

     Exhibit “A” is hereby deleted and replaced with the attached Exhibit “A”.

II.

     Exhibit “B” is hereby deleted and replaced with the attached Exhibit “B”.

     Except as herein amended, all other terms and provisions of the above referenced Agreement
shall remain in full force and effect for the term hereof.

     IN WITNESS WHEREOF, the parties hereto have signed and delivered this Amendatory Agreement
on the date and year first written

	 	 	 	 	 	 	 	 	 	 	 
	ONEOK Texas Field Services, L.P.,	 	 	 	Peak Operating of Texas, LLC	 	 
	a limited partnership	 	 	 	“Seller”	 	 
	By: ONEOK Field Services Company,
general partner “Buyer”	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Terry K. Spencer
 

	 	 
	 	By:
	 	/s/ Jack Vaughn
 

	 	 
	Name:

	 	Terry K. Spencer
	 	 	 	Name:
	 	Jack Vaughn	 	 
	Title:

	 	Vice President
	 	 	 	Title:
	 	President	 	 
	Date:

	 	1/28/05
	 	 	 	Date:
	 	January 12, 2005	 	 

 

 

EXHIBIT “A”

Percent of Proceeds

Allocated Plants

     This Exhibit “A” is incorporated into that certain Gas Purchase Agreement dated the
1st day October, 2003, by and between ONEOK Texas Field Services, L. P., hereinafter referred
to as “BUYER,” and Peak Operating of Texas, LLC, hereinafter referred to as “SELLER.”

BASIS OF COMPENSATION for the Lands and Leases and/or Wells described on Exhibit “B”
shall be the sum of the following:

	 	 	 	 	 	 	 	 	 
	Total monthly MCF received from	 	Percentage NGL Products	 	Percentage Residue Gas
	Lands and Lease and/or Wells described	 	Payment of the Net NGL	 	Payment of the Net Residue
	on Exhibit “B”	 	Proceeds	 	Proceeds
	For the first 185,000 MCF
	 	 	(**)	%	 	 	(**)	%
	For MCF’s in excess of 185,000
	 	 	(**)	%	 	 	(**)	%

	1.	 	Compression Fee. (**)
	 
	2.	 	Gathering Fee. (**)
	 
	3.	 	Dehydration Fee. (**)
	 
	4.	 	Treating Fee. (**)

DEFINITIONS:

SELLER’s NGL Products shall be determined by multiplying the total quantity of each
NGL Component saved and sold at the Plant(s) by a fraction, the numerator of which shall be
the theoretical gallons of such Component contained in SELLER’s Gas delivered at the Receipt
Point(s) and the denominator of which shall be the total theoretical gallons of each
Component contained in all Gas delivered to BUYER’s facilities upstream of the Plant(s).

Net NGL
Proceeds shall be sum of each Component of SELLER’s NGL Products multiplied
by the Monthly Average NGL Sales Price of each Component.

Monthly Average NGL Sales Price shall mean the average net price received by BUYER
f.o.b. BUYER’s Plant for the sale of each NGL Component.

Residue Gas shall mean the total quantity of MMBTU’s of gas (both processed and
unprocessed) sold at the tailgate of BUYER’s Plant(s).

NGL Shrinkage shall be the sum of the BTU equivalent (BTU/gal, fuel as ideal gas) of
each such NGL Component as set forth in the GPA Standard 2145, as revised, “Table of Physical
Constants of Paraffin Hydrocarbons and Other Components of Natural Gas with the exception of
hexanes plus, the value of which shall be 117,007 BTU per gallon.

 

 

Residue
Price shall mean average net price per MMBTU received by BUYER, f.o.b. BUYER’s
Plant for the sale of Residue Gas.

Net
Residue Proceeds shall be determined by multiplying SELLER’s Residue Gas by the
Residue Price.

SELLER’s Residue Gas shall be the total MMBTU’s of Residue Gas multiplied by a fraction,
the numerator of which shall be the MMBTU’s contained in
SELLER’s Gas at the Receipt Point(s), less
the MMBTU’s of NGL Shrinkage attributable to SELLER’s NGL Products and the denominator of which
shall be the total MMBTU’s of all gas delivered to BUYER
upstream of BUYER’s Plant less NGL
Shrinkage attributable to the total quantity of NGL Components saved and sold from BUYER’s
Plant(s).

 

 

EXHIBIT “B”

     This Exhibit “B” is incorporated into that certain Gas Purchase Agreement dated the
1st day of October, 2003, by and between ONEOK Texas Field Services, L. P., hereinafter
referred to as “BUYER,” and Peak Operating of Texas, LLC, hereinafter referred to as “SELLER.”

	1.	 	SELLER dedicates to this Gas Purchase Agreement, as amended from time to time, the Wells and
Leases described below:

	 	 	 	 	 	 	 	 	 	 	 
	Wells	 	Lands/Lease Description	 	County	 	State	 	*WI%
	 
	 
	 	NW/4 of Section 52,	 	 	 	 	 	 	 	 
	 
	 	Block Ml, H & GN Survey	 	Hemphill	 	TX	 	 	100.00	%
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	All of Section 59	 	 	 	 	 	 	 	 
	 
	 	Block Ml, H & GN Survey	 	Hemphill	 	TX	 	 	100.00	%
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	All of Section 51	 	 	 	 	 	 	 	 
	 
	 	Block Ml, H & GN Survey	 	Wheeler	 	TX	 	 	100.00	%
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	E/2, Section 60, Block Ml	 	 	 	 	 	 	 	 
	 
	 	H & GN Survey	 	Wheeler	 	TX	 	 	100.00	%
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	W/2 of Section 47, Block A2	 	 	 	 	 	 	 	 
	 
	 	H & GN Survey	 	Hemphill	 	TX	 	 	100.00	%
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	SW/4, Section 30, Block A2	 	 	 	 	 	 	 	 
	 
	 	H & GN Survey	 	Hemphill	 	TX	 	 	100.00	%

This dedication excludes the following wells producing from the designated zones, which are
under terms of another contract:

	 	 	 
	Vise John 1 Sec 52, M1 , H&GN Survey, Hemphill County, TX

	 	Chert
	 
	Young Ranch 524 Sec 52, Ml, H&GN Survey, Hemphill County, TX

	 	Strawn Granite Wash
	 
	Johnson LA 1 Sec 59, Ml , H&GN Survey, Hemphill County, TX

	 	Strawn Granite Wash

 

			
	*	 	Includes owned or controlled interest.

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