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Exhibit 10.7    
    

PAGES
WHERE CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE MARKED "CONFIDENTIAL TREATMENT REQUESTED." THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION, AND THE APPROPRIATE SECTION
HAS BEEN MARKED AT THE APPROPRIATE PLACE AND IN THE MARGIN WITH AN ASTERISK (*). 

 
 

AMENDED AND RESTATED GAS PROCESSING CONTRACT    
    

 
 

BETWEEN    
    

 
 

KINDER MORGAN TEXAS PIPELINE, L.P. AND    
    

 
 

COPANO PROCESSING, L.P.    
    

 
 

JANUARY 1, 2004    
    

 
 

AMENDED AND RESTATED GAS PROCESSING CONTRACT
  BETWEEN
  KINDER MORGAN TEXAS PIPELINE, L.P.
  AND
  COPANO PROCESSING, L.P.    
    

 
 

TABLE OF CONTENTS    
    

	ARTICLE 1. — DEFINITIONS	1
	 	1.1.	Words and Terms	1
	ARTICLE 2. — CERTAIN OBLIGATIONS OF THE PARTIES	3
	 	2.1.	Commitments of the Parties	3
	 	2.2.	Bypass; Suspension of Processing	3
	 	2.3.	Hydrocarbon Dew Point Control	4
	 	2.4.	Termination of KMTP Conditioning and Blending Fees	4
	 	2.5.	Termination of Live Oak PCL	4
	ARTICLE 3. — ALLOCATION OF INLET GAS	4
	 	3.1.	KMTP Information	4
	 	3.2.	KMTP Gas Calculations	5
	ARTICLE 4. — PAYMENTS BY COPANO TO KMTP	5
	 	4.1.	Processing Payment — KMTP Gas	5
	 	4.2.	Processing Payment — PCL Gas	6
	ARTICLE 5. — PAYMENTS BY KMTP TO COPANO	6
	 	5.1.	Determination of the Processing Margin	6
	 	5.2.	Conditioning Month Payments	6
	ARTICLE 6. — PRESSURES	6
	 	6.1.	Delivery Pressure	6
	 	6.2.	Pressure Drop	6
	ARTICLE 7. — CONTENT TESTS	6
	 	7.1.	Sampling	6
	 	7.2.	Notices of Tests	7
	 	7.3.	Btu Content	7
	ARTICLE 8. — PRODUCT AND PTR ALLOCATION	7
	 	8.1.	Procedures for Allocating Products and PTR	7
	ARTICLE 9. — RESIDUE GAS REDELIVERY	7
	 	9.1.	Residue Gas Allocation to KMTP Gas	7
	 	9.2.	Transfer of Custody and Responsibility for Residue Gas	7
	 	9.3.	Residue Gas Volumes	7
	ARTICLE 10. — MAKE-UP OF PTR	7
	 	10.1.	Obligation	7
	 	10.2.	PTR Make-up Gas Balancing	8
	 	10.3.	Notice of Volumes	8
	ARTICLE 11. — MEASUREMENT	8
	 	11.1.	Assumed Atmospheric Pressure	8
	 	11.2.	Unit of Volume	8
	 	11.3.	Adjustment for Supercompressibility	9
	 	11.4.	Determination of Heating Value	9
	 	11.5.	Determination of Flowing Temperature	9
	 	11.6.	Determination of Specific Gravity	9
	 	 	 	 

 

	ARTICLE 12. — MEASURING EQUIPMENT AND TESTING	10
	 	12.1.	Equipment	10
	 	12.2.	Calibration and Tests of Meters	10
	 	12.3.	Access to Meters and Records	10
	 	12.4.	Correction of Metering Errors	11
	 	12.5.	Failure of Meters	11
	 	12.6.	Check Measuring Equipment	11
	 	12.7.	New Measurement Techniques	11
	 	12.8.	Liquid Measurement	11
	ARTICLE 13. — QUALITY	12
	 	13.1.	Gas Quality Specifications	12
	 	13.2.	Testing	12
	 	13.3.	Failure to Meet Quality Specifications	13
	ARTICLE 14. — ACCOUNTING	13
	 	14.1.	Statements	13
	 	14.2.	Payments	13
	 	14.3.	Auditing	13
	 	14.4.	Failure to Pay	13
	ARTICLE 15. — FORCE MAJEURE	13
	 	15.1.	Definition	13
	 	15.2.	Strikes and Lockouts	14
	 	15.3.	Plant Loss	14
	ARTICLE 16. — TAXES	14
	 	16.1.	Taxes	14
	ARTICLE 17. — LIABILITY; TITLE AND WARRANTIES	14
	 	17.1.	Transfer of Custody of and Responsibility For Gas	14
	 	17.2.	Title to Products	15
	 	17.3.	Title to PTR	15
	 	17.4.	Liability	15
	 	17.5.	Warranties	15
	ARTICLE 18. — SUCCESSORS AND ASSIGNS	15
	 	18.1.	Binding of Terms	15
	 	18.2.	Conditions	15
	 	18.3.	Pledged Rights	15
	ARTICLE 19. — NOTICES	15
	 	19.1.	Addresses	15
	ARTICLE 20. — TERM	17
	 	20.1.	Term	17
	ARTICLE 21. — MISCELLANEOUS	17
	 	21.1.	Upstream Processing	17
	 	21.2.	Indemnity	17
	 	21.3.	Waiver	17
	 	21.4.	Performance	17
	 	21.5.	Drafting	18
	 	21.6.	Headings	18
	 	21.7.	Third Party Beneficiaries	18
	 	21.8.	Renegotiation Rights	18
	 	21.9.	Prior Contract	18

ii

 
 

AMENDED AND RESTATED GAS PROCESSING CONTRACT
  BETWEEN
  KINDER MORGAN TEXAS PIPELINE, L.P.
  AND
  COPANO PROCESSING, L.P.    
    

        THIS AMENDED AND RESTATED GAS PROCESSING CONTRACT, made and entered into as of January 1, 2004 (the "Effective Date"), by and between KINDER MORGAN TEXAS
PIPELINE, L.P. ("KMTP") and COPANO PROCESSING, L.P. ("COPANO"). 

 
 

W I T N E S S E T H:    
    

        WHEREAS, COPANO owns and operates a natural gas processing plant known as the Houston Central Plant located in the
O.K. Winn and Francis Mayhar Surveys, Colorado County, Texas (the "Plant"), and 

        WHEREAS, KMTP owns and operates a 30-inch pipeline system extending from the vicinity of Laredo, Texas, to the Plant (said
pipeline system and any extensions and loops thereof shall be referred to herein as the "KMTP Line"); and 

        WHEREAS, COPANO and/or its Affiliates (defined below) own natural gas pipeline facilities that deliver gas into the KMTP Line (the "Copano
Pipeline Facilities") which gas is delivered to the Plant for Processing (all such gas so delivered from the Copano Pipeline Facilities shall be referred to herein as "Copano Pipeline Gas"); and 

        WHEREAS, subject to KMTP's written consent, COPANO and/or its Affiliates (as defined below) may enter into gas Processing or gas
conditioning arrangements with producers or other third parties delivering gas to the KMTP Line pursuant to which COPANO shall have the right to Process or condition gas produced, delivered or
supplied by such third parties (such gas may be referred to herein as "Copano Contract Gas", and together with the Copano Pipeline Gas, shall be referred to herein as "Copano Gas"); and 

        WHEREAS, KMTP transports certain quantities of Gas other than Copano Gas ("KMTP GAS") in the KMTP Line that is delivered to the Plant and
desires that such gas be Processed in the Plant, and 

        WHEREAS, COPANO desires to Process the KMTP Gas for KMTP, and 

        WHEREAS, COPANO and KMTP are parties to that certain Gas Processing Contract entered into as of September 1, 2001 which provides
for the Processing of Gas by COPANO at the Plant (the "2001 Gas Processing Agreement"), and 

        WHEREAS, COPANO and KMTP desire to amend and restate the 2001 Gas Processing Agreement in its entirety to: (i) revise the
hydrocarbon dew point specifications, and (ii) effectuate certain in other amendments and modifications as provided herein. 

        NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and benefits contained herein, KMTP and COPANO hereby
agree as follows: 

 
 
ARTICLE 1.—DEFINITIONS

        1.1.    Words and Terms    

        Unless
the context indicates a different meaning, the following words and terms shall have the meanings set out below: 

        "2001
Gas Processing Agreement" has the meaning set forth in the recitals above. 

        "Affiliate"
means, as to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such
Person. The term control means the possession, directly or indirectly, of the power to direct or cause direction of 

 

the
management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. 

        "Alternate
Redelivery Point" means the flange or weld on the downstream side of the emergency shut down valve installed downstream of the Plant at the point of connection to any pipeline
connected to the Plant as of the Effective Date other than the KMTP pipeline. 

        "Btu"
means British thermal unit. 

        "Business
Day" means a day other than a Saturday, Sunday or legal holiday for commercial banks under either the laws applicable to national banking associations or those applicable to
Texas state chartered banks. 

        "Conditioning
Month" has the meaning set forth in Section 5.2. 

        "COPANO"
has the meaning set forth in the preamble. 

        "Copano
Contract Gas" has the meaning set forth in the recitals above. 

        "Copano
Gas" has the meaning set forth in the recitals above. 2 "Copano Pipeline Facilities" has the meaning set forth in the recitals above. 

        "Copano
Pipeline Gas" has the meaning set forth in the recitals above. 

        "Creditor
Party" has the meaning set forth in Section 14.2. 

        "Day"
means a period beginning at 9:00 a.m. (local time) on a calendar day and ending at 9:00 a.m. (local time) on the next succeeding calendar day. The date of a day shall
be that of its beginning. 

        "Debtor
Party" has the meaning set forth in Section 14.2. 

        "Delivery
Point" means the flange or weld on the upstream side of the emergency shut-down valve installed upstream of the Plant. 

        "Effective
Date" has the meaning set forth in the preamble above. 

        "Forward
Month Gas Price" means the closing price of the NYMEX Henry Hub gas futures contract for the prompt Month adjusted by the NYMEX Houston Ship Channel Basis Swap for the same
closing. 

        "Gas",
as used herein, means natural gas, as produced in its natural state from oil wells or from gas wells or gas condensate wells. 

        "GPM"
means the amount of gallons of ethane and/or heavier Products per Mcf. 

        "Inlet
Gas" means all Gas delivered into the Plant from the KMTP Line, being the Copano Gas and the KMTP Gas. 

        "KMTP"
has the meaning set forth in the preamble. 

        "KMTP
Gas" has the meaning set forth in the recitals above. 

        "KMTP
Line" has the meaning set forth in the recitals above. 

        "Mcf"
means one thousand (1,000) cubic feet, and "MMcf" means one million (1,000,000) cubic feet. 

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

        "Month"
means a period beginning at 9:00 a.m. (local time) on the first day of a calendar month and ending at 9:00 a.m. (local time) on the first day of the next succeeding
calendar month. 

2

 

        "Payment
Date" has the meaning set forth in Section 14.2. 

        "PCL"
or "Process Confirmation Letter" has the meaning set forth in Section 4.2. 

        "PCL
Gas" means that portion of the KMTP Gas that is processed under a PCL. 

        "Person"
means any individual, corporation, business trust, association, company, partnership, joint venture, governmental authority, or other entity. 

        "Plant"
has the meaning set forth in the recitals above. 

        "Process"
or "Processing" means the processing of Gas for the recovery of liquefiable hydrocarbons and/or the control of hydrocarbon dew point. 

        "Processing
Margin" shall have the meaning set forth in Section 5.1. 

        "Products"
means commercial products fractionated either in the Plant or elsewhere, including, but not limited to, condensate, natural gasoline, butane, isobutane, propane and ethane. 

        "Psia"
means pounds per square inch absolute. 

        "Psig"
means pounds per square inch gauge. 

        "PTR"
means plant thermal reduction, that is, the amount (expressed in MMBtu) by which inlet Gas is reduced by reason of shrinkage (including recovered condensate), fuel, flares and
other losses in the Plant during operations. 

        "PTR
Make-up Gas" has the meaning set forth in Section 10.1. 

        "Residue
Gas" means the Gas remaining at the outlet of the Plant after the reduction of Inlet Gas by PTR. 

        "Residue
Gas Redelivery Point" means the flange or weld on the downstream side of the emergency shut-down valve installed downstream of the Plant and connecting to KMTP's
pipeline. 

        "Ship
Channel Index" means the Index published in Inside F.E.R.C.'s Gas Market Report for the first of each month under the heading
"Market Center Spot-Gas Prices," subheading "East Texas, Houston Ship Channel" or if Inside F.E.R.C.'s Gas Market Report ceases to be
published or fails to publish said index price, an alternative index price that is comparable selected by the parties. 

 
 

ARTICLE 2.—CERTAIN OBLIGATIONS OF THE PARTIES

        2.1.    Commitments of the Parties    

        Subject
to the terms and conditions herein, KMTP agrees to deliver or cause to be delivered to COPANO at the Delivery Point all of the Gas in the KMTP Line available for delivery at the
Delivery Point. COPANO shall have the exclusive right and option to Process all such Gas in the Plant. 

        Notwithstanding
the foregoing, KMTP shall have the right to require COPANO to bypass the Plant with all or part of the Inlet Gas during any period in which the threat of hurricanes or
freezing weather in the U. S. Gulf Coast area in imminent, present or recent, if, in KMTP's sole opinion, such Inlet Gas is needed to fulfill KMTP's contract obligations. During such period, COPANO's
payment obligations under Article 4, KMTP's payment obligations under Article 5, and COPANO's performance obligations under Section 2.3 shall be deemed suspended and waived by
both KMTP and COPANO. 

        2.2.    Bypass; Suspension of Processing.    

        Subject
to the provisions of the immediately succeeding sentence, COPANO shall have the right to: (i) bypass the Plant with all or a portion of the KMTP Gas, (ii) suspend
processing, or (iii) suspend or curtail the operation of the Plant at any time and from time to time during the term of this 

3

 

*
CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION, AND THE APPROPRIATE SECTION HAS BEEN MARKED AT THE APPROPRIATE PLACE AND IN THE MARGIN WITH AN
ASTERISK (*). 

Agreement.
However, notwithstanding such bypass, suspension or curtailment, unless such bypass, suspension or curtailment is the result of force majeure or KMTP's request to bypass the KMTP Gas,
COPANO shall: (i) pay KMTP the fees provided for in Sections 4.1 and 4.2, and (ii) condition Gas hereunder as required by Section 2.3. 

	2.3.
	Hydrocarbon Dew Point Control.

	*
	COPANO
shall condition Gas delivered to the Plant such that all Gas in the KMTP Line immediately downstream of the Plant shall have a hydrocarbon dew point
no greater than [REDACTED] Fahrenheit at the pressures existing in the KMTP Line from time to time. COPANO shall provide such gas conditioning service by any means it
determines, including but not limited to the Processing of a partial quantity of Inlet Gas sufficient to enable it to meet the specifications set out above. Notwithstanding the foregoing, COPANO shall
not be obligated to Process more than a total of 550 MMcf of Gas per day. If the volume of Gas delivered by KMTP to the Plant exceeds 550 MMcf per day, COPANO may, but shall not be obligated to
Process volumes in excess of 550 MMcf per day. In such case, the hydrocarbon dew point of Gas in the KMTP Line immediately downstream to the Plant may exceed [REDACTED]
Fahrenheit to the extent resulting from the delivery by KMTP of Inlet Gas in excess of 550 MMcf Per day.

	2.4.
	Termination of KMTP Conditioning and Blending Fees

        From
and after the Effective Date, notwithstanding any prior agreement or agreements between the parties hereto or any of their Affiliates to the contrary, COPANO and its
Affiliates shall not be obligated to bear or pay, and KMTP and its Affiliates shall not charge COPANO or any or its Affiliates, or deduct from any payments made to COPANO or any of its Affiliates, any
fees to condition or blend COPANO Gas to meet KMTP's hydrocarbon dew point specifications. From and after the Effective Date, notwithstanding any prior agreement or agreements between KMTP and any of
its Affiliates and any third party to the contrary, no third party shall be obligated to bear or pay, and KMTP and its Affiliates shall not charge any third party, or deduct from payments made to any
third party, any fees to condition or blend COPANO Gas to meet KMTP's hydrocarbon dew point specifications unless COPANO and KMTP agree in writing that such charges or deductions may be made by KMTP
or its Affiliates. KMTP and COPANO shall amend any existing agreements between them and/or execute any new agreement(s) necessary to effectuate the agreement set forth in this Section 2.4. 

	2.5.
	Termination of Live Oak PCL

        KMTP
and COPANO are parties to a PCL dated                        , relating to Gas delivered at PIN 905796 on the KMTP Line from the
Live Oak Gas Gathering System owned by Copano
Field Services/Live Oak, L.P. Effective as of the Effective Date, said PCL shall be terminated. The termination of the PCL shall not alter or affect rights or obligations of the parties under said PCL
that accrued prior to the Effective Date. 

	2.6.
	Copano Contract Gas

        Copano
may only enter into agreements for the processing or conditioning of Copano Contract Gas after obtaining the written consent of KMTP thereto. 

 
 

ARTICLE 3.—ALLOCATION OF INLET GAS    
    

	3.1.
	KMTP Information

        KMTP
shall provide COPANO with the volume, average Btu per Mcf, average GPM, and any other information necessary for the processing allocation of the KMTP Gas and the
Copano Gas by the fifth Business Day of each month following the month of production. Such information shall be 

4

 

*
CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION, AND THE APPROPRIATE SECTION HAS BEEN MARKED AT THE APPROPRIATE PLACE AND IN THE MARGIN WITH AN
ASTERISK (*). 

provided
separately for (i) PCL Gas, (ii) Inlet Gas; (iii) Copano Contract Gas; and (iv) Copano Pipeline Gas. 

	3.2.
	KMTP Gas Calculations

KMTP
shall calculate the Mcf, MMBtu, Btu factor, and average GPM by component of the KMTP Gas as follows: 

KMTP
Gas Btu factor =Heating Value of KMTP Gas (expressed in MMBtu)/Volume of KMTP Gas (expressed in Mcf) 

KMTP
Gas MMBtu=Heating Value of Inlet Gas (expressed in MMBtu) minus the Heating Value of Copano Gas (expressed in MMBtu) 

KMTP
Gas Mcf =Volume of Inlet Gas (expressed in Mcf) minus the Volume of Copano Gas (expressed in Mcf) 

KMTP
Gas GPM by component = (Inlet Gas theoretical gallons by component minus the Copano Gas theoretical gallons by component)/Volume of KMTP Gas Mcf (expressed in Mcf) 

Sum
of each Copano Gas theoretical gallons by component = the sum of each Copano Gas GPM by component times the applicable Copano Gas Mcf 

Inlet
Gas theoretical gallons by component = Inlet Gas GPM by component times the Inlet Gas (expressed in Mcf) 

                An
example of the foregoing procedure for the calculation of Mcf, MMBtu, Btu factor, and average GPM by component for the KMTP Gas is set forth
in Exhibit A attached hereto. 

 
 

ARTICLE 4.—PAYMENTS BY COPANO TO KMTP    
    

	4.1.
	Processing Payment—KMTP Gas

	*
	Subject
to the provisions of Section 4.2 which may provide for an alternate fee for PCL Gas, COPANO shall pay KMTP a fee of
[REDACTED] for each theoretical gallon of Product contained in the KMTP Gas, unless (i) the KMTP Gas contains less than [REDACTED] GPM on average
for the Month; or (ii) the Month is a Conditioning Month, in either of which case no payment shall be made to KMTP. The payment hereunder shall be calculated as follows.   

 
	*
	 Volume of KMTP Gas (expressed in Mcf) × Average GPM of KMTP Gas × [REDACTED] per gallon  

	*
	Subject
to the provisions of Section 4.2 which may provide for an alternate fee for PCL Gas, COPANO shall pay KMTP a fee in addition to that specified in this Section 4.1
above when the average GPM of the Inlet Gas is [REDACTED] or greater in any calendar month that COPANO operates the Plant. The additional fee shall be
[REDACTED] per Mcf of Inlet Gas calculated as follows: 

 
	*
	 Volume of Inlet Gas (expressed in Mcf) X [REDACTED] per Mcf  

COPANO
shall retain one hundred percent (100%) of the Products and replace one hundred percent (100%) of the PTR attributable to the processing of the KMTP Gas. 

5

 

*
CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION, AND THE APPROPRIATE SECTION HAS BEEN MARKED AT THE APPROPRIATE PLACE AND IN THE MARGIN WITH AN
ASTERISK (*). 

	4.2.
	Processing Payment—PCL Gas

        The
parties acknowledge that it may be necessary to structure processing arrangements other than as set forth in Section 4.1 to attract rich gas
supplies to the KMTP Line and the Plant. A Process Confirmation Letter ("PCL") in substantially the form of Exhibit B hereto shall set forth the terms for processing such Gas,
referred to herein as PCL Gas, as mutually agreed upon by COPANO and KMTP. The PCL shall set forth the procedure for determining the Products and PTR attributable to the PCL Gas. In the absence of
entry by the parties into a PCL, the terms contained in the body of this contract shall control regard to all processing carried out pursuant hereto. 

 
 

ARTICLE 5.—PAYMENTS BY KMTP TO COPANO    
    

	5.1.
	Determination of the Processing Margin

	*
	On
the third Business Day prior to the beginning of each Month during the term hereof, KMTP and COPANO shall calculate the processing margin for the
following Month (the "Processing Margin") in accordance with the formulae set forth in Part 1 of Exhibit D hereto and the provisions of this Section 5.1.
[REDACTED]

	5.2.
	Conditioning Month Payments

	*
	For
each Month for which the Processing Margin determined pursuant to Section 5.1 is less than [REDACTED] per gallon (each a
"Conditioning Month"), KMTP shall pay COPANO [REDACTED].
 
 

ARTICLE 6.—PRESSURES  

	6.1.
	Delivery Pressure

        Inlet
Gas shall be delivered to COPANO at the Delivery Point at the pressure that exists in the KMTP Line. Although the pressure in the KMTP Line may vary, KMTP will make
reasonable efforts to effect deliveries of Gas at the Delivery Point at a pressure of not less than 750 psig and not more than 1000 psig. COPANO will accept Gas at the Delivery Point at the KMTP Line
pressures; provided, however, that if KMTP effects deliveries that are outside of the range of pressures listed above, then COPANO may refuse to accept such deliveries of KMTP Gas for processing,
bypassing all or a part of said Gas as COPANO deems necessary for safe and efficient operation of the Plant. 

	6.2.
	Pressure Drop

        COPANO
shall deliver and KMTP shall receive Residue Gas at the Residue Gas Redelivery Point or the Alternate Redelivery Point at a pressure that is not more than 50 psig
less than the pressure at which KMTP Gas was delivered at the Delivery Point, unless KMTP will accept a lesser pressure at the Residue Gas Redelivery Point or the Alternate Redelivery Point. 

 
 

ARTICLE 7.—CONTENT TESTS

	7.1.
	Sampling

        The
inlet and outlet gas metering and sampling facilities at or near the Delivery Point and the Residue Gas Redelivery Point shall be owned and operated by KMTP. Such
facilities shall be equipped with chromatographs to provide a continuous chromatographic analysis of KMTP Gas and Residue Gas returned to KMTP on a daily basis. KMTP shall be responsible for
determining the contents of the Copano Gas by taking samples and analyzing with a chromatograph or by use of a continuous chromatographic analysis. 

6

 

        7.2.    Notices of Tests    

        KMTP
shall give COPANO sufficient notice in advance of each test of the gas chromatographs in order to permit COPANO to have a representative present to witness such tests, and KMTP
shall furnish COPANO in writing the results of each such test of the gas chromatographs. 

        7.3.    Btu Content    

        Heating
value determination shall be done according to methods prescribed in Article 11. Daily MMBtu shall be calculated and accumulated using continuous data from a chromatograph
when available. The average monthly Btu per cubic foot shall be calculated by dividing the sum of the daily total MMBtu for the month by the sum of the daily total Mcf for the month. 

 
 

ARTICLE 8.—PRODUCT AND PTR ALLOCATION    
    

        8.1.    Procedures for Allocating Products and PTR    

        Each
month COPANO shall determine the Products and PTR attributable to each source of Inlet Gas. The procedure for determining the Products and PTR attributable to KMTP Gas is set forth
in Exhibit "C' attached hereto. COPANO may change the procedure described in Exhibit C hereto upon written consent of KMTP, which consent shall not be unreasonably withheld. The procedure for
determining the Products and PTR for PCL Gas shall be set forth in the applicable PCL. 

 
 

ARTICLE 9—RESIDUE GAS REDELIVERY

        9.1.    Residue Gas Allocation to KMTP Gas    

        The
volume of KMTP Gas at the Delivery Point, less the volumes of PTR allocated pursuant to Section 8.1, shall be the volume of Residue Gas attributable to KMTP Gas each month. 

        9.2.    Transfer of Custody and Responsibility for Residue Gas    

        COPANO
agrees to deliver Residue Gas attributable to KMTP Gas to KMTP or its designee at the Residue Gas Redelivery Point or the Alternate Redelivery Point as directed by KMTP from time
to time. Custody of and responsibility for Residue Gas attributable to KMTP shall pass from COPANO to KMTP at such points. 

        9.3.    Residue Gas Volumes    

        COPANO
shall use reasonable commercial efforts each day to deliver Residue Gas attributable to KMTP Gas in the same day as such Gas was delivered to the Plant. Any imbalances in
deliveries of Residue Gas shall be cashed out each month in the same manner specified for PTR Make-Up Gas in Section 10.2 below. 

 
 

ARTICLE 10.—MAKE-UP OF PTR

        10.1.    Obligation    

        COPANO
agrees to deliver or cause to be delivered to KMTP, or its designee, a volume of Gas with an MMBtu content equal to one hundred percent (100%) of the difference between the number
of MMBtu contained in KMTP Gas and the number of MMBtu contained in Residue Gas attributable to KMTP Gas. Gas so delivered is herein called "PTR Make-up Gas". COPANO also agrees to deliver
or cause to be delivered to KMTP, or its designee, COPANO's share of the PTR Make-up Gas attributable to the PCL Gas in accordance with the terms of the particular PCL. 

7

 

*
CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION, AND THE APPROPRIATE SECTION HAS BEEN MARKED AT THE APPROPRIATE PLACE AND IN THE MARGIN WITH AN
ASTERISK (*). 

	10.2.
	PTR Make-up Gas Balancing

        COPANO
shall use reasonable commercial efforts each month to deliver PTR Make-up Gas due KMTP in the same month as such Gas was delivered to the Plant. The
number of MMBtu delivered by COPANO as PTR Make-up Gas may not equal to amount due from time to time, and COPANO shall maintain an account of the over-and under-deliveries of
PTR Make-up Gas. Any imbalance in deliveries of PTR Make-up Gas shall be cashed out each month in accordance with the following: 

	*
	(a)        Over-delivery
of PTR Make-up Gas shall be sold to KMTP at a price equal to
[REDACTED].

	*
	(b)        Under-delivery
of PTR Make-up Gas shall be purchased from KMTP by COPANO at a price equal to
[REDACTED].

	10.3.
	Notice
of Volumes 

        On
or before the third work day preceding the end of each month, KMTP will provide COPANO with KMTP's reasonable estimate of Gas volume anticipated to be delivered to the
Plant from the KMTP Line during the next succeeding month, and shall make reasonable efforts to give COPANO advance notice of expected material changes in this volume. Following each month, COPANO
will provide KMTP by the eighth (8th) workday with a complete listing of PTR Make-up Gas and Residue Gas deliveries. 

 
 

ARTICLE 11.—MEASUREMENT

	11.1.
	Assumed Atmospheric Pressure

        The
average atmospheric pressure shall be assumed to be fourteen and seven tenths pounds per square inch (14.7 psi), irrespective of actual elevation or location of the
delivery point(s) above sea level or variations in such atmospheric pressure from time to time, unless specified otherwise. 

	11.2.
	Unit of Volume

        The
unit of volume for measurement of Gas for all purposes shall be one (1) cubic foot of Gas at a base temperatures of sixty degrees Fahrenheit (60° F.)
and at a base pressure of fourteen and seventy-three hundredths pounds per square inch absolute (14.73 psia). Where measurement is by orifice meter, all fundamental constants, observations, records
and procedures involved in the determination and/or verification of the quantity and other characteristics of Gas delivered hereunder shall be made according to the latest revision of ANST/API
2530-92 Chapter 14.3, Part 1-4 (AGA Report No. 3), with any revisions, amendments or supplements as may be mutually acceptable to KMTP and COPANO, unless
otherwise specified herein. Measurement by turbine meter, unless specified otherwise, shall be in accordance with A.G.A. Report No. 7, with any revisions, amendments or supplements as may be
mutually agreeable to the parties hereto. When positive displacement or turbine meters are used for the measurement of Gas, the flowing temperature of the Gas shall be assumed to be sixty degrees
Fahrenheit (60° F.) and no correction shall be made for any variation therefrom; provided, however, KMTP shall have the option of installing or causing to be installed a recording
thermometer, should chart measurement be used, and if KMTP exercises such option and installs or causes to be installed such thermometer, correction shall be made for each degree variation in the
average flowing temperature for each meter recording. Where measurement is by other than orifice, turbine or positive meter, standards commonly acceptable in the natural gas industry shall be used in
the determination of all factors involved in the computation of Gas volumes. 

8

 

        11.3.    Adjustment for Supercompressibility    

        Adjustment
to measured Gas volumes for the effects of supercompressibility shall be made according to accepted AGA standards. Measuring party shall obtain representative relative
density, gas composition, carbon dioxide and nitrogen mole fraction values, from the Gas samples obtained for the Gas delivered or received as may be required to compute such adjustments according to
standard testing procedures. Equations for the calculation of supercompressibility will be taken from the latest revision of AGA Report No. 8, Compressibility for Natural Gas and Other
Hydrocarbon Gases. Each month, the supercompressibility will be calculated using the latest gas analysis and the monthly average of the flowing temperature and pressure. 

        11.4.    Determination of Heating Value    

        At
the mutual agreement of KMTP and COPANO, the heating value of the Gas may be determined by recording calorimeter or by the use of a chromatograph, a continuous gas sampler or by
taking spot Gas samples. The arithmetical average of the hourly heating value recorded by a recording instrument during periods of flow each day shall be considered as the heating value of the Gas
delivered hereunder during such day. If spot or continuous samples are taken, the samples shall be analyzed on the measuring party's calorimeter or chromatograph. The result of a sample shall be
applied to Gas
deliveries on the first day of the month the sample is removed and for all succeeding months until a new sample is taken. All heating value determinations made with a chromatograph shall use physical
gas constants for gas compounds as outlined in the latest revision of GPA 2172 or revisions to related reports to which the parties may mutually agree. Heating value shall be determined to the nearest
whole Btu. 

        11.5.    Determination of Flowing Temperature    

        The
temperature of the Gas flowing through the meter or meters shall be determined by the continuous use of a recording thermometer installed so that it will properly record the
temperature of the Gas flowing through the meter or meters should chart measurement be used. The average of the temperature recorded each day shall be used in computing the volumes of Gas for that
day. Temperature shall be determined to the nearest whole degree in Fahrenheit. 

        11.6.    Determination of Specific Gravity    

        The
specific gravity of the Gas flowing through the meter or meters may be determined by the use of a recording gravitometer or chromatograph so that it will properly record the specific
gravity of the Gas flowing through the meter or meters. The average of specific gravity recorded each day shall be used in computing the volume of Gas for that day. At the mutual agreement of KMTP and
COPANO, the specific gravity of the Gas flowing through the meter or meters may be determined by means of a portable gravitometer or chromatograph, by taking Gas samples or by the use of a continuous
gas sampler in lieu of a recording gravitometer. In the event Gas samples are taken or a continuous gas sampler is installed, the samples shall be run on the measuring party's gravitometer or
chromatograph at another location. If spot or continuous samples are taken, to determine specific gravity of the Gas, the result of such sample shall be applied to Gas deliveries on the first day of
the month the sample is removed and for all succeeding months until a new sample is taken. All specific gravity determinations made with a chromatograph shall use physical constants for gas compounds
as outlined in the latest revision of GPA 2172 or revisions to related Reports to which the parties may mutually agree. Specific gravity shall be determined to the nearest one thousandth (0.001). 

9

 

 
 

ARTICLE 12.—MEASURING EQUIPMENT AND TESTING

        12.1.    Equipment    

        At
or near each point at which either KMTP Gas or COPANO Gas is measured, KMTP, or its designee, shall, at its expense, operate and maintain in accurate working order, the meters,
instruments and equipment of standard type necessary to measure the Gas to be delivered hereunder. KMTP shall likewise furnish, install, operate and maintain, or cause the same to be done, such
instruments and equipment as may be necessary at points other than such point(s) of delivery and other than any Alternate Redelivery Point to obtain the information to measure the Gas to be delivered
hereunder. The metering and other equipment installed, together with any buildings erected for such equipment, shall be and remain the property of KMTP. 

        As
specified by KMTP, all measuring stations provided hereunder shall be equipped with orifice meter runs, orifice meter gauges, recording gauges or other types of meter or meters of
standard make and design commonly accepted in the natural gas industry in order to accurately measure the Gas delivered hereunder. At KMTP's and COPANO's mutual agreement, a computer, transducers and
other associated sensing devices may be installed to accurately measure the Gas delivered hereunder in accordance with A.G.A. Report Nos. 3,5,6 and 7, as appropriate, in lieu of mechanical devices
with charts. If a computer and associated devices are installed, the values for gross heating value and specific gravity may be entered either manually (but not more frequently than once per month) or
as real time data if such data is available. Values for carbon dioxide and nitrogen used in supercompressibility correction determinations shall be entered as real time data if such data is available
or shall be entered manually at intervals mutually agreed upon, but at least once every six (6) months. 

        12.2.    Calibration and Tests of Meters    

        The
measuring party shall calibrate chromatographs, if used, at least once each month against a standard gas sample. All other measuring equipment shall be calibrated and adjusted as
necessary by the measuring party or as frequently as deemed necessary by KMTP but not less frequently than once each month. COPANO may, at its option, be present for such calibration and adjustment.
KMTP shall give COPANO notice of the time of all tests sufficiently in advance of conducting same so that both parties may conveniently have their representatives present. Following any test, any
measuring equipment found to be inaccurate to any degree shall be adjusted immediately to measure accurately. Each party shall have the right, at any time, to challenge the accuracy of any measuring
equipment used hereunder and may request additional tests. If, upon testing, the challenged equipment is found to be in error, then it shall be repaired and calibrated. The cost of any such special
testing, repair and calibration shall be borne by the party requiring the special test if the percentage of inaccuracy is found to be two percent (2%) or less (one percent [1%]
if electronic flow measurement equipment is utilized). Otherwise, the cost shall be borne by the party operating the challenged measuring equipment. 

        12.3.    Access to Meters and Records    

        The
other party shall have access at all reasonable times to the measuring equipment and all other instruments used by the measuring party in determining the measurement and quality of
the Gas delivered hereunder, but the reading, calibrating, and adjusting thereof shall be done only by employees, agents or representatives of the measuring party. The measuring party shall keep on
file copies of original records for a period of three (3) years for mutual use of KMTP and COPANO. Upon request, the measuring party shall submit to the other party copies of original records
from such equipment, subject to return by the party within sixty (60) days after receipt thereof. 

10

 

        12.4.    Correction of Metering Errors    

        If,
upon any test, the measuring equipment, in the aggregate for any measurement facility, is found to be inaccurate by more than two percent (2%) (one percent
[1%] if electronic flow measurement equipment is utilized), registration thereof and any payments 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; provided, however, if such period is not definitely known or agreed upon, then such registration and payment shall be corrected
for a period extending back one-half (1/2) of the time elapsed since the last day of calibration. 

        12.5.    Failure of Meters    

        If,
for any reason, the measuring equipment is out of service or out of repair so that the quantity of Gas delivered hereunder through such measuring equipment cannot be ascertained or
computed from the readings thereof, the quantity of Gas so delivered during the period such equipment is out of service or out of repair shall be estimated and agreed upon by KMTP and COPANO upon the
basis of the best available data, using the first of the following methods which is feasible: 

        (a)   By
using the registration of any duplicate measuring equipment installed by the measuring party, if installed and registering correctly; 

        (b)   By
using the registration of any check measuring equipment of the other party O, if installed and registered accurately; 

        (c)   By
correcting the error if the percentage of error is ascertainable by calibration, test or mathematical calculation; 

        (d)   By
estimating the quantity of deliveries by using the volumes delivered under similar conditions during preceding periods when the measuring equipment was registering
accurately. 

        12.6.    Check Measuring Equipment     

        COPANO
may install, maintain and operate at its own expense, at or near the Delivery Point hereof, such check measuring equipment as desired; provided, however, that such equipment shall
be installed so as not to interfere with the operation of any other measuring equipment. KMTP shall have access to such check measuring equipment at all reasonable times, but the reading, calibration
and adjusting thereof and the changing of charts shall be done only by COPANO. 

        12.7.    New Measurement Techniques    

        If,
at any time during the term hereof, a new method or technique is developed with respect to gas measurement or liquids measurement or to the determination of the factors used in such
measurements, such new method or technique may be substituted for the method set forth in this Article 12 when the party employing such new method or technique receives consent from the other
party. 

        12.8.    Liquid Measurement    

        COPANO
shall measure Products and condensate by utilizing meters operated and maintained in accordance with recognized industry standards. Measurement procedures and calculations will be
in accordance with the API Manual of Petroleum Measurement. Meter tests and calibration will be conducted as determined by COPANO, but at least once each month. Procedures used in testing and
calibration will be in accordance with the aforementioned API Manual of Petroleum Measurement to ensure measurement accuracy to within one-half of one percent. Consecutive meter factors
differing by more than 50/10,000 will result in an adjustment to recorded volumes. KMTP shall have access to the measuring equipment at all reasonable times, but readings, calibrations and adjustments
thereof shall 

11

 

be
done by employees or agents of COPANO. COPANO shall notify KMTP in advance of the performance of tests and calibrations so that KMTP may have its representative present as a witness. 

 
 
ARTICLE 13.—QUALITY

        13.1.    Gas Quality Specifications    

        All
KMTP Gas delivered to the Plant, and PTR Make-up Gas and Residue Gas returned to KMTP hereunder shall meet the following
specifications: 

        (a)   The
Gas shall be free of water and other objectionable liquids at the temperature and pressure at which the Gas is delivered and the Gas shall not contain any
hydrocarbons which might condense to free liquids in the pipeline under normal pipeline conditions and shall in no event contain water vapor in excess of seven (7) pounds per one million
(1,000,000) cubic feet, measured at fourteen and seventy—three hundredths pounds per square inch absolute (14.73 psia) at a standard temperature of sixty degrees Fahrenheit
(60° F.). 

        (b)   The
Gas shall not contain more than one-quarter (1/4) grain of hydrogen sulphide per one hundred (100) cubic feet as determined by quantitative
methods in general use within the natural gas industry and as mutually acceptable to the parties hereto. 

        (c)   The
Gas shall not contain more than two (2) grains of total sulphur per one hundred (100) cubic feet as determined by quantitative methods in general use
within the natural gas industry and as mutually acceptable to the parties hereto. 

        (d)   The
Gas shall not contain more than one-quarter (1/4) grain of mercaptan per one hundred (100) cubic feet as determined by quantitative methods in
general use within the natural gas industry and as mutually acceptable to the parties hereto. 

        (e)   The
Gas shall not contain in excess of: 

        (1)   Three
percent (3%) by volume of carbon dioxide (CO2) 

        (2)   Ten
parts per million (10 ppm) by volume of oxygen (O2); 

        (3)   Three
percent (3%) by volume of nitrogen (N2), 

        (f)    The
Gas shall contain no carbon monoxide, halogens or unsaturated hydrocarbons and not more than four hundred parts per million (400 ppm) of hydrogen. 

        (g)   The
Gas shall have a temperature of not more than one hundred and twenty degrees Fahrenheit (120° F) nor less than forty degrees Fahrenheit
(40° F). 

        (h)   The
Gas shall contain a daily average heating content of not less than nine hundred fifty (950) Btu per cubic foot and not more than one thousand one hundred
seventy-five (1,175) Btu per cubic at 14.73 psia, dry. 

        (i)    The
Gas shall be commercially free from dust, gum, gum forming constituents or other objectionable liquid or solid matter that might become separated from the Gas in the
course of transmission through pipelines. 

        13.2.    Testing    

        Tests
to determine the quality of Gas shall be conducted by either party at its sole expense and shall be made as often as mutually agreed upon and as reasonably required by approved
standard methods in general use by the gas industry. The testing party shall promptly furnish the other party with copies of all test results. The testing party shall give the other party reasonable
notice of all such tests in order that the other party may have its representatives present if it so desires. 

12

 

        13.3.    Failure to Meet Quality Specifications    

        If
any Gas subject hereto fails to meet an applicable quality specification, the receiving party shall have the right to waive such failure and to continue to receive such Gas. If the
receiving party refuses to
receive such Gas and if the delivering party does not elect to treat the Gas so as to cause the same to meet such quality specification, then such delivering party shall stop the delivery of Gas that
fails to meet such quality specification. 

 
 
ARTICLE 14.—ACCOUNTING

        14.1.    Statements    

        COPANO
shall provide KMTP by the twentieth (20th) day of each calendar month a statement for the previous month setting forth the payments due KMTP pursuant to Article 4, the
payments due COPANO pursuant to Article 5 and any amounts owed to or by KMTP for Residue Gas pursuant to Section 9.3 and for PTR Make-up Gas pursuant to Section 10.2. 

        14.2.    Payments    

        The
party that is owed the greater amount as reflected in a statement referred to in Section 14.1 (the "Creditor Party") shall net its obligation against the obligation of the
other party (the "Debtor Party"). Specifically, the Debtor Party shall make payment of the difference between amounts owed by the Creditor Party hereunder and amounts owed by the Debtor Party
hereunder. Payment of such difference shall be made not later than the twenty-fifth (25th) day of the month following the month of delivery (the "Payment Date"). If the amounts owed by
each party to the other are equal, neither party shall make payment. If the Payment Date falls on a Saturday, or a bank holiday other than Monday, payment shall be made on the preceding banking day.
If the Payment Date falls on a Sunday or a Monday bank holiday, payment shall be made on the succeeding banking day. 

        14.3.    Auditing    

        Each
party shall have the right at reasonable hours to examine the books, records, and charts of the other party to the extent necessary to verify the accuracy of any statement, payment,
calculation, or determination made pursuant to the provisions of this Contract. If any such examination shall reveal, or if either party shall discover, any error or inaccuracy in its own or the other
party's statement, payment, calculation, or determination, then proper adjustment and correction thereof shall be made as promptly as practicable thereafter, provided that all statements, payments,
calculations and determinations shall be final unless questioned within three (3) years of the date thereof. 

        14.4.    Failure to Pay    

        If
either party fails to pay any amount payable to the other hereunder when due, interest thereon shall accrue and be payable from the date on which payment was due until the date
payment is made. The rate of such interest shall be the prime rate of interest quoted by Fleet National Bank; provided, that the interest rate provided herein shall never exceed the highest rate of
interest permitted by applicable law. If any such failure to pay continues for thirty (30) days after protest in writing, the aggrieved party may suspend deliveries or acceptance of deliveries
of Gas hereunder and, in addition, may terminate this Contract upon written notice to the non-paying party as applicable. The exercise of any such right by either party shall be in
addition to any and all other remedies available to such party. 

 
 

ARTICLE 15.—FORCE MAJEURE

        15.1.    Definition    

        If
either party is rendered unable, wholly or in part, by force majeure to carry out its obligations (except financial obligations) under this Contract, it is agreed that, on such
party's giving notice and 

13

 

reasonably
full particulars of such force majeure in writing or by telegraph to the other party within a reasonable time after the occurrence of the cause relied on, then the obligations of the party
giving such notice, so far as they are affected by force majeure, shall be suspended during the continuance of any inability so caused, but for no longer period, and such cause shall so far as
possible be remedied with all reasonable dispatch. The term "force majeure," as employed herein, means acts of God, strikes, lockouts or other industrial disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, storms, hurricanes, floods, high water, washouts, arrests and restraints of government and people, civil
disturbances, explosions, breakage or accident to machinery or lines of pipe, freezing of wells or lines of pipe, partial or entire failure of wells, and any other causes, whether of the kind herein
enumerated or otherwise, not reasonably within the control of the party claiming suspension; such term shall likewise include (a) in those instances where either party hereto is required to
obtain servitudes, rights-of-way grants, permits or licenses to enable such party to perform hereunder, the inability of such party to acquire, or the delays on the part of
such party in acquiring, at reasonable cost and after the exercise of reasonable diligence, such servitudes, rights-of-way grants, permits or licenses, and (b) in those
instances where either party hereto is required to furnish materials and supplies for the purpose of constructing or maintaining facilities or is required to secure permits or permissions from any
governmental agency to enable such party to perform hereunder, the inability of such party to acquire, or the delays on the part of such party in acquiring, at reasonable costs and after the exercise
of reasonable diligence, such materials and supplies, permits and permissions. 

        15.2.    Strikes and Lockouts    

        It
is understood and agreed that the settlement of strikes or lockouts shall be entirely within the discretion of the party having the difficulty, and that the above requirement that any
force majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes or lockouts by acceding to the demands of an opposing party when such course is inadvisable in
the discretion of the party having the difficulty. 

        15.3.    Plant Loss    

        In
the event of loss of or damage to all or a substantial part of the Plant or the KMTP Line for any cause, COPANO and KMTP shall have no obligation to repair, rebuild, or replace same
unless each party determines, in its sole discretion, to do so, and the above requirement that any force majeure shall be remedied with all reasonable dispatch shall not apply in such event. 

 
 
ARTICLE 16.—TAXES

        16.1.    Taxes    

        As
between the parties hereto, KMTP shall be responsible for all taxes and assessments levied on facilities owned by KMTP and activities prior to the delivery of COPANO Gas and KMTP Gas
at the Delivery Point and after the redelivery at the Residue Gas Redelivery Point or Alternate Redelivery Point. COPANO shall be responsible for all taxes and assessments levied on facilities owned
by COPANO and activities from the time Copano Gas and/or KMTP Gas is so delivered to Copano until the redelivery of Gas to KMTP at the Residue Gas Redelivery Point or the Alternate Delivery Point. 

 
 

ARTICLE 17.—LIABILITY; TITLE AND WARRANTIES    
    

        17.1.    Transfer of Custody of and Responsibility For Gas    

        As
between KMTP and COPANO, KMTP shall be in control and possession of the Gas until such Gas has been delivered to COPANO at the Delivery Point and after it has been redelivered to KMTP
at the Residue Gas Redelivery Point or Alternate Redelivery Point. As between COPANO and KMTP, COPANO shall be in control and possession of the Gas after it has been delivered to COPANO at the 

14

 

Delivery
Point and until it is redelivered to KMTP at the Residue Gas Redelivery Point or Alternate Redelivery Point. Nothing in this Section 17.1 shall affect title to the Gas, which will
remain with the owner thereof. 

        17.2.    Title to Products    

        Title
to Products attributable to KMTP Gas shall be transferred to COPANO at the Delivery Point. 

        17.3.    Title to PTR    

        Title
to PTR Make-up Gas shall be transferred to KMTP at the point at which said PTR Make-Up Gas is delivered to KMTP. 

        17.4.    Liability    

        Neither
Party shall be liable to the other for punitive or exemplary damages under this Agreement. 

        17.5.    Warranties    

        KMTP
hereby warrants that it has the right to have processed all KMTP Gas delivered from the KMTP Line and agrees, if notified by COPANO, to indemnify COPANO
against all suits, actions, debts, accounts, damages, costs (including attorneys' fees), losses and expenses arising from or out of any adverse legal claims of any and all persons with respect to such
processing rights. COPANO hereby warrants that it has the right to process COPANO Gas and warrants title to PTR Make-up Gas and agrees, if notified by KMTP,  to indemnify KMTP against all suits, actions,
debts, accounts, damages, costs (including attorneys' fees), losses and expenses arising from or out of any adverse legal claims
of any and all persons with respect to such right to process and/or title.

 
 

ARTICLE 18.—SUCCESSORS AND ASSIGNS

        18.1.    Binding of Terms    

        All
the terms and conditions of this Contract shall extend to and be binding upon the respective successors and assigns of the parties hereto. 

        18.2.    Conditions    

        No
assignment of an interest in this Contract shall be made by either party without the prior written consent of the other party; which consent shall not be unreasonably withheld,
provided, that prior written consent shall not be required: (i) for an assignment to an Affiliate of a party in connection with a corporate consolidation, amalgamation, merger or reorganization
or (ii) for an assignment by either party to a purchaser in connection with a sale of the KMTP Line by KMTP or the Plant by COPANO. 

        18.3.    Pledged Rights    

        Notwithstanding
any provision hereof to the contrary, any party hereto shall have the right to pledge, mortgage or grant a security interest in its rights hereunder to secure the
indebtedness of such party and the consent of the other party shall not be required in connection with the foreclosure of any liens, security interests created by any such pledge, mortgage or security
agreement. 

 
 
ARTICLE 19.—NOTICES

        19.1.    Addresses    

        All
notices to be given hereunder shall be in writing and shall be delivered personally or by prepaid mail, overnight delivery service, telefacsimile, or telegram to the respective
parties at the 

15

 

addresses
stated below or to such other addresses as they shall respectively designate hereafter in writing from time to time: 

To
KMTP: 

Address
for Notices: 

KINDER
MORGAN TEXAS PIPELINE, L.P.

One Allen Center

500 Dallas Street, Suite 1000

Houston, Texas 77002

ATTN: Accounting Dept. (For Accounting Matters)

Telephone: (713) 369-9000

Facsimile: (713) 369-9385 

KINDER
MORGAN TEXAS PIPELINE, L.P.

One Allen Center

500 Dallas Street, Suite 1000

Houston, Texas 77002

ATTN: Vice President, Gas Supply & Processing (For all other matters)

Telephone: (713) 369-8860

Facsimile: (713) 369-9395 

Address
for Payments: 

KINDER
MORGAN TEXAS PIPELINE, L.P.

The Chase Manhattan Bank, New York

ABA No. 021000021

Acct. No. 323-189474 

To
COPANO: 

Address
for Notices: 

Copano
Processing, L.P.

ATTN: Contract Services (For Contract Matters)

2727 Allen Parkway, Suite 1200

Houston, Texas 77019-2154

Telephone: 713-621-9547

Facsimile: 713-621-9553 

Copano
Processing, L.P.

ATTN: Plant Accounting (For Accounting Matters)

2727 Allen Parkway, Suite 1200

Houston, Texas 77019-2154

Telephone: 713-621-9547

Facsimile: 713-621-9545 

Copano
Processing, L.P.

ATTN: Vice President Gas Processing (For all other matters)

2727 Allen Parkway, Suite 1200

Houston, Texas 77019-2154

Telephone: 713-621-9547

Facsimile: 713-621-9545 

16

 

Address
for Payments: 

Copano
Processing, L.P.

Comerica Bank—Texas

ABA No. 111000753

Acct No. 1880699754 

 
 

ARTICLE 20.—TERM    
    

        20.1.    Term    

        This
Contract shall be effective as of the Effective Date and shall continue in full force and effect for a primary term ending on August 31, 2006, and year to year thereafter,
unless canceled by either party giving advance written notice to the other at least 180 days before the date of termination of the primary term or any subsequent anniversary date thereof. 

 
 
ARTICLE 21.—MISCELLANEOUS

        21.1.    Upstream Processing    

        KMTP
shall not process or arrange for processing of any of the Gas in the KMTP Line upstream of the Plant or prior to delivery of such Gas into the KMTP Line with a third party processor
except that KMTP shall have the sole option to process or arrange for processing of any Gas upstream of the Plant from any pipeline or plant that KMTP or any Affiliate of KMTP acquires after the date
of this Agreement if such Gas was subject to a processing agreement on the effective date of the acquisition of such pipeline or plant by KMTP or its Affiliate. Arrangements for processing by a third
party seller
or transporter of Gas delivered into the KMTP Line shall not, for purposes hereof, be deemed arrangements by KMTP. 

        21.2.    Indemnity    

        KMTP
and COPANO each hereby releases, relinquishes and discharges and, at the sole cost and expense of each, shall indemnify, protect, save harmless and defend the other of and from any
and all claims, demands, causes of actions, damages, liabilities and costs, (including reasonable attorneys' fees,) of any and every nature whatsoever arising out of the performance of this Contract
which are asserted against the indemnitee by any person, whether they be third persons or employees of either of the parties hereto, for personal injury, death, or loss of or damage to property where
such personal injury, death, or loss of or damage to property is due to the sole negligence or sole willful misconduct of the indemnitor, its employees, agents, contractors or subcontractors. Where
personal injury, death, or loss of or damage to property is the result of joint negligence or willful misconduct of KMTP and COPANO, their employees, agents, contractors or subcontractors, the
indemnitor's duty of indemnification shall be in the same proportion that the indemnitor's negligent acts or omissions contributed thereto. If KMTP or COPANO is held strictly liable under law, the
indemnitor's duty of indemnification shall be in the same proportion that the indemnitor's negligent acts or omissions contributed to the personal injury, death, or losses of or damage to property for
which the indemnitee is held strictly liable. 

        21.3.    Waiver    

        No
waiver by KMTP or COPANO of any default of the other party under this Contract shall operate as a waiver of any subsequent default, whether of a like or a different character. 

        21.4.    Performance    

        Any
provision herein that requires action by either party where a performance date is not specified shall require performance of such action within a reasonable time. 

17

 

*
CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION, AND THE APPROPRIATE SECTION HAS
BEEN MARKED AT THE APPROPRIATE PLACE AND IN THE MARGIN WITH AN ASTERISK (*). 

	21.5.
	Drafting

        As
between the parties hereto, it shall be conclusively presumed that each and every provision of this Contract was drafted jointly by KMTP and COPANO. 

	21.6.
	Headings

        The
Table of Contents and headings contained in this Contract are used solely for convenience and do not constitute a part of the agreement between the parties hereto, and
they should not be used to aid in any manner in construing this Contract. 

	21.7.
	Third Party Beneficiaries

        It
is the specific intention of the parties hereto that the provisions of this Contract shall not impart rights enforceable by any person, firm, or organization not a party
or not a successor or assignee of a party to this Contract and, therefore, that there be no third party beneficiary to this agreement. 

	21.8.
	Renegotiation Rights

	*
	If
significant changes to the conditioning fees or services contemplated herein, ([REDACTED]), either party shall have
the right to require the other to enter into negotiations to amend this agreement to the mutual satisfaction of the parties.

	21.9.
	Prior Contract

        This
Agreement supersedes and replaces the 2001 Gas Processing Agreement as of the Effective Date. This Agreement shall not alter or affect any rights or obligations of the
parties under the 2001 Gas Processing Agreement that accrued prior to the Effective Date. 

	21.10
	Replacement Indices.

        Should
any index utilized by the parties be unavailable or cease to be published, the parties shall promptly meet and in good faith determine an alternative index or
payment methodology that will place each in a comparable economic position to that they would have been in had the original index have been available and utilized. Should the parties be unable to so
reach agreement, either may submit the matter for arbitration pursuant to the expedited rules of the American Arbitration Association. 

18

 

        IN WITNESS WHEREOF, this Contract is executed in multiple originals as of the dates signified below, effective as of the  date first above written. 

	 	COPANO PROCESSING, L.P.

by Copano Processing (Texas), L.L.C.

its Managing General Partner
	

 	

By:	

/s/ Brian D. Eckhart

	 	Title:	Senior Vice President
	 	Date:	1/30/04

	

 	

KINDER MORGAN TEXAS PIPELINE, L.P.

By Kinder Morgan Tejas Pipeline GP LLC
	

 	

By:	

/s/ [ILLEGIBLE]

	 	Title:	VICE PRESIDENT
	 	Date:	2/4/04

19

 
 

EXHIBIT B    
    

 
  PROCESSING CONFIRMATION LETTER (PCL)    

KMTP
METER STATION NO.            

Name
of Producer: 

Field(s):

County:

Quantity:

Quality:

Effective
Date: 

Term
of Contract: 

Renewal: 

KMTP
share of: 

Products: 

PTR: 

Direct
Operating Costs: 

Allocation
Procedure: To be attached 

Other
Fees Paid: 

Other
Provisions: 

This
Processing Confirmation Letter is accepted by and agreed to by: 

Kinder
Morgan Texas Pipeline, L.P. COPANO PROCESSING, L.P. 

	This            day of                    ,
200    	 	This            day of                    ,
200    
	

By:	

 	
 	

By:	

 
	 	
	 	 	

 
 

EXHIBIT C    
    

 
 

DETERMINATION OF PLANT PRODUCTS, PTR AND RESIDUE GAS    

	A.
	Determination of Plant Products

        The
quantity of Products attributable to the KMTP Gas delivered to COPANO hereunder shall be determined by multiplying the total quantity of each such Product contained as a component in
the KMTP Gas by the recovery factor for each Product. The Recovery Factor shall equal a fraction, the numerator of which is the quantity of each such Plant Product recovered and saved in the Plant,
and the denominator of which is the total quantity of each such Plant Product contained as a component of Gas from all sources delivered to the Plant for processing. 

	B.
	Determination of PTR

        The
PTR shall be the sum of the Plant fuel and shrinkage as determined below: 

	(i)
	The
quantity of the KMTP Gas, stated in MMBtu's, that is consumed as Plant fuel, flare and vent in the processing of the KMTP Gas during a given Month shall be
determined by multiplying the total quantity of MMBtu's consumed as Plant Fuel, flare and vent in Plant operations during such Month by a fraction, the numerator of which is the total quantity of KMTP
Gas in MMBtu and the denominator of which is the total quantity in MMBtu of Gas from all sources delivered to the Plant for processing; and

	(ii)
	Shrinkage
shall be calculated each Month by multiplying the number of gallons of each component recovered and allocated to the KMTP Gas by the Btu equivalent of each
such component as set forth in the GPA Technical Standards Publication No. 2145-96, as revised from time to time and as adjusted to sixty degrees Fahrenheit (60°) and
14.73 psia pressure base; the aggregate Btu's of all such components shall constitute the shrinkage hereunder.

	C.
	Determination of Residue Gas

        The
quantity of Residue Gas shall be determined by subtracting the quantity of PTR in MMBtu attributable to the KMTP Gas from the quantity of KMTP Gas in MMBtu delivered for processing
at the Plant. 

*
CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION, AND THE APPROPRIATE SECTION HAS BEEN MARKED AT THE APPROPRIATE PLACE AND IN THE MARGIN WITH AN
ASTERISK (*). 

 
 

EXHIBIT D    
    

	*
	[REDACTED]

QuickLinks

Exhibit 10.7

AMENDED AND RESTATED GAS PROCESSING CONTRACT

BETWEEN

KINDER MORGAN TEXAS PIPELINE, L.P. AND

COPANO PROCESSING, L.P.

JANUARY 1, 2004

AMENDED AND RESTATED GAS PROCESSING CONTRACT BETWEEN KINDER MORGAN TEXAS PIPELINE, L.P. AND COPANO PROCESSING, L.P.

TABLE OF CONTENTS

AMENDED AND RESTATED GAS PROCESSING CONTRACT BETWEEN KINDER MORGAN TEXAS PIPELINE, L.P. AND COPANO PROCESSING, L.P.

W I T N E S S E T H

ARTICLE 1.—DEFINITIONS

ARTICLE 2.— CERTAIN OBLIGATIONS OF THE PARTIES

ARTICLE 3.— ALLOCATION OF INLET GAS

ARTICLE 4.— PAYMENTS BY COPANO TO KMTP

ARTICLE 5.— PAYMENTS BY KMTP TO COPANO

ARTICLE 6.—PRESSURES

ARTICLE 7.— CONTENT TESTS

ARTICLE 8.— PRODUCT AND PTR ALLOCATION

ARTICLE 9— RESIDUE GAS REDELIVERY

ARTICLE 10.— MAKE-UP OF PTR

ARTICLE 11.—MEASUREMENT

ARTICLE 12.— MEASURING EQUIPMENT AND TESTING

ARTICLE 13.—QUALITY

ARTICLE 14.—ACCOUNTING

ARTICLE 15.— FORCE MAJEURE

ARTICLE 16.—TAXES

ARTICLE 17.—LIABILITY; TITLE AND WARRANTIES

ARTICLE 18.— SUCCESSORS AND ASSIGNS

ARTICLE 19.—NOTICES

ARTICLE 20.—TERM

ARTICLE 21.—MISCELLANEOUS

EXHIBIT B

PROCESSING CONFIRMATION LETTER (PCL)

EXHIBIT C

DETERMINATION OF PLANT PRODUCTS, PTR AND RESIDUE GAS

EXHIBIT DQuickLinks
 -- Click here to rapidly navigate through this document
  

 
 

Exhibit 10.11    
    

[GRAPHIC] 

 
  TEXAS ASSOCIATION OF REALTORS®
  IMPROVED PROPERTY COMMERCIAL LEASE    
    

USE OF THIS FORM BY PERSONS WHO ARE NOT MEMBERS OF THE TEXAS ASSOCIATION OF REALTORS® IS NOT AUTHORIZED

Texas Association of REALTORS®, Inc 1906 

	1.
	PARTIES:    The parties to this lease are the owner of the Property Mateo Lueia (Landlord) and the tenant Copano Field Services / Agua
Dulce, L.P., a Texas limited partnership (Tenant).

	2.
	LEASED
PREMISES:    Landlord leases to Tenant the following described real property, known as the "leased premises," along with all its improvements: 

3943
N. Highway 281, Alice, TX 78332, consisting of approximately (address, city, state) which is legally described as 33/8 acres or
o as described on attached exhibit. "Property" means the building or complex in which the leased premises are located,
inclusive of any common areas, drives, parking areas, and walks. The parties agree that the rentable area of the leased premises may not equal the actual or useable area within the leased premises and
may include an allocation of common areas in the Property. 

	3.
	TERM:

	A.
	Term:    The term of this lease is 36 months, commencing on September 1, 2003 (Commencement Date) and ending on
September 1, 2006 (Expiration Date), with a renewal option, exercisable at least thirty (30) days prior to the Expiration Date, for an additional 36-month term, with the rent
payable hereunder to be adjusted by the Consumer Price Index.

	B.
	Delay of Occupancy:    If Tenant is unable to occupy the leased premises on the Commencement Date because of construction on
the leased premises to be completed by Landlord that is not substantially complete or a prior tenant's holding over of the leased premises. Landlord will not be liable to Tenant for such delay and
this lease will remain enforceable. In the event of such a delay, the Commencement Date will automatically be extended to the date Tenant is able to occupy the Property and the Expiration Date will
also be extended by a like number of days, so that the term of this lease remains unchanged. If Tenant is unable to occupy the leased premises after the 30th day after the Commencement Date because of
construction on the leased premises to be completed by Landlord that is not substantially complete or a prior tenant's holding over of the leased premises. Tenant may terminate this lease by giving
written notice to Landlord before the leased premises become available to be occupied by Tenant and Landlord will refund to Tenant any amounts paid to Landlord by Tenant. This Paragraph 3B does
not apply to any delay in occupancy caused by cleaning or repairs.

	4.
	RENT
AND EXPENSES:

	A.
	Base Monthly Rent:    On or before the first day of each month during this lease, Tenant will pay Landlord base monthly rent
in the amount of $2,300.00. The first full base monthly rent is due on or before September 1, 2003. 

(TAR-2101) 10-19-98 Initialed for Identification by Tenants:                        , and
Landlord:                        

1

 

	B.
	Prorated Rent:    If the Commencement Date is on a day other than the first day of a month, Tenant will pay Landlord as
prorated rent, an amount equal to the base monthly rent multiplied by the following fraction: the number of days from the Commencement Date to the first day of the following month divided by the
number of days in the month in which this lease commences. The prorated rent is due on or before the Commencement Date.

	C.
	Additional Rent:    In addition to any base monthly rent or prorated rent, Tenant will pay Landlord all other amounts as
provided by the attached. N/A

	(1)
	Net
Addendum

	(2)
	Percentage
Rent Addendum

	(3)
	Expense
Reimbursement Addendum

	(4)
	Expense
Addendum for Single-Tenant Property

	(5)
	Parking
Addendum

	(6)
	

	D.
	Place of Payment:    Tenant will remit all amounts due Landlord under this lease to Mateo Lueia at P.O. BOX 4108, Alice,
TX-78332 or to such other person or at such other place as Landlord may designate in writing.

	E.
	Method of Payment:    Tenant must pay all rent timely without demand, deduction, or offset, except as permitted by law or this
lease time is of the essence for the payment of rent. If Tenant fails to timely pay any amounts due under this lease or if any check of Tenant is returned to Landlord by the institution on which it
was drawn, Landlord may require Tenant to pay, in addition to any other available remedy, all amounts due under this lease by certified funds by providing written notice to Tenant.

	F.
	Late Charges:    If Landlord does not actually receive a rent payment at the
designated place of payment within 5 days after the date the rent is due, Tenant will pay Landlord a late charge equal to 5% of the base monthly rent. The mailbox is not the agent for receipt
for Landlord. The late charge is a cost associated with the collection of rent and Landlord's acceptance of a late charge does not waive Landlord's rights to exercise remedies under
Paragraph 20.

	G.
	Returned Checks:    Tenant will pay $25.00 (not to exceed $25) for each check
Tenant tenders to Landlord which is returned by the institution on which it is drawn for any reason, plus any late charges until Landlord receives payment.

	5.
	SECURITY
DEPOSIT:    Upon execution of this lease, Tenant will pay a security deposit to Landlord in the amount of $1,000. Landlord may apply the security deposit to any
amounts owed by Tenant under this lease. If Landlord applies any part of the security deposit during any time this lease is in effect to amounts owed by Tenant. Tenant must, within 10 days
after receipt of notice from Landlord, restore the security deposit to the amount stated. Within a reasonable time after this lease ends. Landlord will refund the security deposit to Tenant less any
amounts applied toward amounts owed by Tenant.

	6.
	TAXES:    Unless
otherwise agreed by the parties, Landlord will pay all real property ad valorem taxes assessed against the leased premises.

	7.
	UTILITIES:    Tenant
will pay all charges for the use of all utility services to the leased premises and any connection charges except the following which will be paid by
Landlord: NONE. 

NOTICE:    Tenant
should determine if any and all necessary utilities (e.g., water, gas, electricity, telephone, sewer, etc.) are available to the leased premises are adequate for Tenant's
intended use, and the cost to provide the necessary utilities. 

2

 
	8.
	TENANT'S
INSURANCE:

	A.
	During
all times this lease is in effect, Tenant must maintain in full force and effect:

	(1)
	public
liability insurance from an insurer acceptable to Landlord in an amount not less than $1,000,000, INCLUDING LANDLORD AS ADDITIONAL INSD on an occurrence basis naming Landlord
as an additional insured; and

	(2)
	personal
property damage insurance for Tenant's business operations on the leased premises from an insurer acceptable to Landlord in an amount not less than $1,000,000, on an
occurrence basis.

	B.
	Before
the Commencement Date, Tenant must provide Landlord with a copy of the insurance certificates evidencing the required coverage. If the insurance coverage changes in any manner
or degree at any time this lease is in effect, Tenant must provide Landlord a copy of an insurance certificate evidencing such change within 10 days of the change.

	C.
	If
Tenant fails to maintain the required insurance in full force and effect at all times this lease is in effect, Landlord may: (1) purchase such insurance on behalf of Tenant
and Tenant must immediately reimburse Landlord for such expense; or (2) exercise Landlord's remedies under Paragraph 20.

	D.
	If
there is an increase in Landlord's insurance premiums for the leased premises or Property or its contents that is caused by Tenant, Tenant's use of the leased premises, or any
improvements made by or for Tenant, Tenant will, for each year this lease is in effect, pay Landlord the increase immediately after Landlord notifies Tenant of the increase.

	9.
	USE
AND HOURS:    Tenant may use the leased premises for the following purpose and no other: Office space and equipment storage yard.

	A.
	Tenant's Normal Business Hours:    Tenant's normal business hours are (specify hours, days of week,
and if inclusive or exclusive of weekends and holidays): N/A 

        Tenant
will keep the leased premises open substantially during Tenant's normal business hours. 

	B.
	Building Operation Hours:    The building in which the leased premises are located maintains operating hours of
(specify hours, days of week, and if inclusive or exclusive of weekends and holidays): N/A. 

If
Landlord is to provide HVAC services to the leased premises under this lease, Landlord is obligated to provide the HVAC services only during the specified building operating hours. 

	10.
	LEGAL
COMPLIANCE:

	A.
	Tenant
may not use or permit any part of the leased premises to be used for:

	(1)
	any
activity which is a nuisance or is offensive, noisy, or dangerous;

	(2)
	any
activity that interferes with any other tenant's normal business operations or Landlord's management of the Property;

	(3)
	any
activity that violates any applicable law, regulation, zoning ordinance, restrictive covenant, governmental order, owners' association rules, tenants' association rules.
Landlord's rules or regulations, or this lease;

	(4)
	any
hazardous activity that would require any insurance premium on the Property or leased premises to increase or that would void any such insurance; 

3

 

	(5)
	any
activity that violates any applicable federal, state, or local law, including but not limited to those laws related to air quality, water quality, hazardous materials, wastewater,
waste disposal, air emissions, or other environmental matters;

	(6)
	the
permanent or temporary storage of any hazardous material; except that Tenant shall be permitted to store and use de minimus amounts of hazardous materials that are incidental to
Tenant's business.

	B.
	"Hazardous
material" means any pollutant, toxic substance, hazardous waste, hazardous material, hazardous substance, solvent, or oil as defined by any federal, state, or local
environmental law, regulation, ordinance, or rule existing as of the date of this lease or later enacted.

	C.
	Landlord
does not represent or warrant that the leased premises or Property conform to applicable restrictions, zoning ordinances, setback lines, parking requirements, impervious
ground cover ratio requirements, and other matters that may relate to Tenant's intended use. Tenant must satisfy itself that the leased premises may be used as Tenant intends
by independently investigating all matters related to the use of the leased premises or Property. Tenant agrees that it is not relying on any warranty or representation made by Landlord, Landlord's
agent, or any broker concerning the use of the leased premises or Property.

	11.
	SIGNS:

	A.
	Tenant
may not post or paint any signs at, on, or about the leased premises or Property without Landlord's written consent which consent shall not be unreasonably withheld. Landlord
may remove any unauthorized sign, and Tenant will promptly reimburse Landlord for any expense related to the removal of any unauthorized sign. Any authorized sign must comply with all laws,
restrictions, zoning ordinances, and any governmental order relating to signs on the leased premises or Property. Landlord may temporarily remove any authorized sign to complete repairs or alterations
to the leased premises or the Property.

	B.
	By
providing written notice to Tenant before this lease ends, Landlord may require Tenant, upon move-out and at Tenant's expense, to remove, without damage to the Property
or leased premises, any or all signs that were placed on the Property or leased premises by or at the request of Tenant. Any signs that Landlord does not require Tenant to remove and that are fixtures
become the property of the Landlord and must be surrendered to Landlord at the time this lease ends.

	12.
	ACCESS
BY LANDLORD:

	A.
	During
Tenant's normal business hours and upon reasonable notice to Tenant, Landlord may enter the leased premises for any reasonable purpose, including but not limited to purposes for
repairs, maintenance, alterations, and showing the leased premises to prospective tenants or purchasers. Landlord may access the leased premises after Tenant's normal business hours with Tenant's
permission or to complete emergency repairs. Landlord will not unreasonably interfere with Tenant's business operations when accessing the leased premises.

	B.
	During
the last 30 days of this lease, Landlord may place a "For Lease" or similarly worded sign in the leased premises.

	13.
	MOVE-IN
CONDITION:    Tenant has inspected the leased premises and accepts it in its present (as-is) condition unless expressly noted otherwise in
this lease. Landlord and any agent have made no express or implied warranties as to the condition or permitted use of the leased premises or Property. 

4

 
	14.
	MOVE-OUT
CONDITION AND FORFEITURE OF TENANT'S PERSONAL PROPERTY:

	A.
	At
the time this lease ends, Tenant will surrender the leased premises in the same condition as when received, normal wear and tear excepted. Tenant will leave the leased premises in a
clean condition free of all trash, debris, personal property, hazardous materials, and environmental contaminants. Before this lease ends,
Tenant ý will o will not provide Landlord with a report, by an environmental engineer
or assessor acceptable to Landlord, dated not earlier than 20 days before the date this lease ends that indicates that no hazardous material or other environmental hazard is on or affects the
leased premises.

	B.
	If
Tenant leaves any personal property in the leased premises after Tenant surrenders possession of the leased premises, Landlord may, (1) require Tenant, at Tenant's expense,
to remove the personal property by providing written notice to Tenant, or (2) retain such personal property as forfeited property to Landlord.

	C.
	"Surrender"
means vacating the leased premises and returning all keys and access devices to Landlord. "Normal wear and tear" means deterioration that occurs without negligence,
carelessness, accident, or abuse.

	D.
	By
providing written notice to Tenant before this lease ends, Landlord may require Tenant, upon move-out and at Tenant's expense, to remove, without damage to the Property
or leased premises, any or all fixtures that were placed on the Property or leased premises by or at the request of Tenant. Any fixtures that Landlord does not require Tenant to remove become the
property of the Landlord and must be surrendered to Landlord at the time this lease ends.

	15.
	MAINTENANCE
AND REPAIRS:

	A.
	Cleaning:    Tenant must keep the leased premises clean and sanitary and promptly dispose of all garbage in appropriate
receptacles.

	B.
	Repairs of Conditions Caused by a Party:    Each party must promptly repair a condition caused, either intentionally or
negligently, by that party or that party's guests, patrons, invitees, contractors or permitted subtenants.

	C.
	Repair and Maintenance Responsibility:    Except as provided by Paragraph 15B, the party designated below, at its
expense, is responsible to maintain and repair the following specified items in the leased premises. The specified items must be maintained in: (i) clean condition; (ii) good
repair; and (iii) operable condition. If a modification to any of the specified items is required by law or governmental regulation or order, the party designated to maintain the item must
complete and pay the expense of the modification. The specified items include and  

5

 

relate only to real property in the leased premises. Tenant is responsible for the repair and maintenance of its personal property. 

	 
	 	 
	 	N/A
	 	Landlord
	 	Tenant

	    (1)	 	Foundation, [ILLEGIBLE] roof, and other structural components	 	o	 	ý	 	o
	

    (2)	
 	

Glass and windows	
 	

o	
 	

o	
 	

ý
	

    (3)	
 	

Fire protection equipment and fire sprinkler systems	
 	

o	
 	

o	
 	

ý
	

    (4)	
 	

Exterior & overhead doors, including closure devices, molding, locks, and hardware	
 	

o	
 	

o	
 	

ý
	

    (5)	
 	

Grounds maintenance, including landscaping and ground sprinklers	
 	

o	
 	

o	
 	

ý
	

    (6)	
 	

Interior doors, including closure devices, frames, molding, locks, and hardware	
 	

o	
 	

o	
 	

ý
	

    (7)	
 	

Parking areas and walks	
 	

o	
 	

o	
 	

ý
	

    (8)	
 	

Plumbing systems, drainage systems, electrical systems (including ballast and lamp replacement) & mechanical systems, except those specifically designated otherwise	
 	

o	
 	

ý*	
 	

o
	

    (9)	
 	

Heating Ventilation and Air Conditioning (HVAC) systems	
 	

o	
 	

ý*	
 	

o
	

  (10)	
 	

Signs	
 	

o	
 	

ý	
 	

o
	

  (11)	
 	

Extermination and pest control, excluding wood-destroying insects	
 	

o	
 	

o	
 	

ý
	

  (12)	
 	

Storage yards and storage buildings	
 	

o	
 	

o	
 	

ý
	

  (13)	
 	

Wood-destroying insect treatment and repairs	
 	

o	
 	

ý	
 	

o
	

  (14)	
 	

Cranes and related systems	
 	

ý	
 	

o	
 	

o
	

  (15)	
 	

Interior Walls	
 	

o	
 	

o	
 	

ý
	

  (16)	
 	

*If added by Tenant as part of Tenant improvements, Tenant to provide maintenance and repair.	
 	

o	
 	

o	
 	

o
	

  (17)	
 	

All other items and systems.	
 	

o	
 	

o	
 	

o

	D.
	Repair Persons:    Repairs must be completed by trained, qualified, and insured repair persons.

	E.
	HVAC Service Contract:    If Tenant is responsible to maintain the HVAC system, Tenant
o is ý is not required to maintain, at its expense, a regularly scheduled maintenance and
service contract for the HVAC system. The maintenance and service contract must be purchased from a HVAC maintenance company that regularly provides such contracts to similar principles. If Tenant
fails to maintain a required HVAC maintenance and service contract in affect at all times during this lease. Landlord may do so and charge Tenant the expense of such a maintenance and service contract
of exercise Landlord's remedies under Paragraph 20. 

6

 

	F.
	Common Areas:    Landlord will maintain any common areas in the Property in a manner as Landlord determines to be in the best
interest of the Property. Landlord will maintain any elevator and signs in the common area. Landlord may change the size, dimension, and location of any common area, provided that such change does not
materially impair Tenant's use and access to the leased premises. If a modification to the common areas is required by law or governmental regulation or order, Landlord will modify the item. Tenant
has the non-exclusive license to use the common areas in compliance with Landlord's rules and restrictions. Tenant may not solicit any business in the common areas of interfere with any
other person's right to use the common areas.

	G.
	Notice of Repairs.    Tenant must promptly notify Landlord of any item that is in need of repair and that is Landlord's
responsibility to repair. All requests for repairs to Landlord must be in writing.

	H.
	Failure to Repair.    Landlord must make a repair for which Landlord is responsible within a reasonable period of time after
Tenant provides Landlord written notice of the needed repair. If Tenant fails to repair or maintain an item for which Tenant is responsible within 10 days after Landlord provides Tenant written
notice of the needed repair or maintenance, Landlord may: (1) repair or maintain the item, without liability for any damage or loss to Tenant, and Tenant must immediately reimburse Landlord for
the cost to repair or maintain; or (2) exercise Landlord's remedies under Paragraph 20.

	16.
	ALTERATIONS:

	A.
	Tenant
may not alter, improve, or add to the Property or the leased premises without Landlord's written consent. Landlord will not unreasonably withhold consent for the Tenant to make
reasonable alterations, modifications, or improvements to the leased premises.

	B.
	Tenant
may not alter any locks or any security devices on the Property or the leased premises without Landlord's consent. If Landlord authorizes the changing, addition, or rekeying of
any locks or other security devices. Tenant must immediately deliver the new keys and access devices to Landlord.

	C.
	If
a governmental order requires alteration or modification to the leased premises, the party obligated to maintain and repair the item to be modified or altered as designated in
Paragraph 15 will, at its expense, modify or alter the item in compliance with the order.

	D.
	Any
alterations, improvements, fixtures or additions to the Property or leased premises installed by either party during the term of this lease will become Landlord's property and must
be surrendered to Landlord at the time this lease ends, except for those fixtures Landlord requires Tenant to remove under Paragraph 14 or if the parties agree otherwise in writing.

	17.
	LIENS:    Tenant
may not do anything that will cause the title of the Property or leased premises to be encumbered in any way. If Tenant causes a lien to be filed against
the Property or leased premises. Tenant will within 20 days after Landlord demands Tenant to take action to remove the lien, pay the lien or take whatever action is necessary to cause the lien
to be released of record. Tenant will provide Landlord a copy of any release Tenant obtains pursuant to this paragraph. 

7

 
	18.
	LIABILITY:    To the extent permitted by law, Landlord is NOT responsible to Tenant or Tenant's employees, patrons, quests, or invitees for any
damages, injuries, or losses to person or property caused by.

	A.
	an art omission or neglect of Tenant, Tenant's agent; Tenant's quest; Tenant's employees; Tenant's patrons; Tenant's invitees; or any other tenant on the
Property;

	B.
	fire, flood, water leaks, ice, snow, hail, winds, explosion, smoke, riot, strike, interruption of utilities, theft, burglary, robbery, assault, vandalism, other
persons environmental contaminants or other occurrences or casually losses.

	19.
	INDEMNITY
**SEE SECTION 36**

	20.
	DEFAULT:

	A.
	If
Landlord fails to comply with this lease within 30 days after Tenant notifies Landlord of Landlord's failure to comply, Landlord will be in default and Tenant may seek any
remedy provided by law. If, however, Landlord's non-compliance reasonably requires more than 30 days to cure. Landlord will not be in default if the cure is commenced within the
30 day period and is diligently pursued.

	B.
	If
Landlord does not actually receive at the place designated for payment any rent due under this lease within 10 days after it is due, Tenant will be in default. If Tenant
fails to comply with this lease for any other reason within 10 days after Landlord notifies Tenant of its failure to comply, Tenant will be in default.

	C.
	If
Tenant is in default, Landlord may: (i) terminate Tenant's right to occupy the leased premises, by providing Tenant with at least 3 days written notice; and
(ii) accelerate all rents which are payable during the remainder of this lease or any renewal period without notice or demand. Landlord will attempt to mitigate any damage or loss caused by
Tenant's breach. If Tenant is in default, Tenant will be liable for:

	(1)
	any
lost rent;

	(2)
	Landlord's
cost of reletting the leased premises, including brokerage fees, advertising fees, and other fees necessary to refer the leased premises;

	(3)
	repairs
to the leased premises for use beyond normal wear and tear;

	(4)
	all
Landlord's costs associated with eviction of Tenant such as attorney's fees, court costs, and projudgment interest;

	(5)
	all
Landlord's costs associated with collection of rent such as collection fees, late charges, and returned check charges;

	(6)
	cost
of removing any equipment and trade-fixtures left on the leased premises by Tenant;

	(7)
	cost
to remove any trash, debris, personal property, hazardous materials, or environmental contaminants left by Tenant or Tenant's employees, patrons, guests, or invitees in the
leased premises or Property; and

	(8)
	any
other recovery to which Landlord may be entitled by law. 

8

 

	21.
	ABANDONMENT,
INTERRUPTION OF UTILITIES, REMOVAL OF TENANT'S PROPERTY, AND LOCKOUT:    Chapter 93 of the Texas Property Code governs the rights and obligations of the parties
with regard to: (a) abandonment of the leased premises: (b) interruption of utilities: (c) removal of Tenant's personal property; and (d) "lock-out" of Tenant.

	22.
	HOLDOVER:    If
Tenant fails to vacate the leased premises at the time this lease ends. Tenant will become a tenant-at-will and must vacate the
leased premises immediately upon receipt of demand from Landlord. No holding over by Tenant, with or without the consent of Landlord, will extend this lease. Tenant will indemnify Landlord and any
prospective Tenants for any and all damages caused by the holdover. Rent for any holdover period will be 2 times the base monthly rent plus any additional rent calculated on a daily basis and will be
immediately due and payable daily without notice or demand.

	23.
	LANDLORD'S
LIEN AND SECURITY INTEREST: [crossed out]

	24.
	ASSIGNMENT
AND SUBLETTING:    Tenant may not assign this lease or sublet any part of the leased premises without Landlord's written consent, which consent shall not be
unreasonably withheld. An assignment of this lease or subletting of the leased premises without Landlord's written consent is voidable by Landlord. Notwithstanding the foregoing, Tenant may assign or
sublet any part of the leased premises to an affiliate without the consent of Landlord, but Tenant shall remain liable for Tenant's obligations under the Lease.

	25.
	RELOCATION:
[crossed out]

	26.
	SUBORDINATION:

	A.
	This
lease and Tenant's leasehold interest are and will be subject, subordinate, and inferior to:

	(1)
	any
lien, encumbrance or ground lease now or hereafter placed on the leased premises or the Property by Landlord;

	(2)
	all
advances made under any such lien, encumbrance, or ground lease;

	(3)
	the
interest payable on any such lien or encumbrance;

	(4)
	any
and all renewals and extensions of any such lien, encumbrance, or ground lease;

	(5)
	any
restrictive covenant affecting the leased premises or the Property; and

	(6)
	the
rights of any owners' association affecting the leased premises or Property.

	B.
	Tenant
must, on demand, execute any instrument subordinating this lease as Landlord may request, provided that such subordination is made on the condition that this lease and Tenant's
rights under this lease are recognized by the lien-holder.

	27.
	ESTOPPEL
CERTIFICATES:    Within 10 days after receipt of a written request from Landlord. Tenant will execute and deliver to Landlord an estoppel certificate that
identifies (a) when this lease comments and ends; (b) any amendment, in this lease; (c) any rights that tenant may have to extend this lease or purchase the Property or leased
premises; (d) any default by Landlord; and (e) any other information reasonably requested in the certificate.

	28.
	CASUALTY
LOSS:

	A.
	Tenant
must immediately notify Landlord of any casualty loss in the leased premises. Within 20 days after receipt of Tenant's notice of a casualty loss, Landlord will notify
Tenant if the leased premises are less than or more than 50% unusable on a per square foot basis, and if Landlord can substantially restore the leased premises within 120 days after Tenant
notifies Landlord of the casualty loss. 

9

 

	B.
	If
the leased premises are less than 50% unusable and Landlord can substantially restore the leased premises within 120 days after Tenant notifies Landlord of the casualty.
Landlord will restore the leased premises in substantially the same condition as before the casualty. If Landlord fails to substantially restore within the time required, Tenant may terminate this
lease.

	C.
	If
the leased premises are more than 50% unusable and Landlord can substantially restore the leased premises within 120 days after Tenant notifies Landlord of the casually.
Landlord may: (1) terminate this lease; or (2) restore the leased premises to substantially the same condition as before the casualty. If Landlord chooses to restore and does not
substantially restore the leased premises within the time required, Tenant may terminate this lease.

	D.
	If
Landlord notifies Tenant that Landlord cannot substantially restore the leased premises within 120 days after Tenant notifies Landlord of the casualty loss, Landlord may:
(1) choose not to restore and terminate this lease; or (2) choose to restore, notify Tenant of the estimated time to restore, and give Tenant the option to terminate this lease by
notifying Landlord within 10 days.

	E.
	If
this lease does not terminate because of a casualty loss, rent will be reduced from the date Tenant notifies Landlord of the casualty loss to the date the leased premises are
substantially restored by an amount proportionate to the extent the leased premises are unusable.

	29.
	CONDEMNATION:    If
after a condemnation or purchase in lieu of condemnation the leased premises are totally unusable for the purposes stated in this lease, this lease will
terminate. If after a condemnation or purchase in lieu of condemnation the leased premises are partially unusable for the purposes stated in this lease, this lease will continue and rent will be
reduced in an amount proportionate to the extent the leased premises are unusable or at the option of Tenant, the Lease will terminate. Any condemnation award or proceeds in lieu of condemnation are
the property of Landlord and Tenant has no claim to such proceeds or award. Tenant may seek compensation from the condemning authority for its moving expenses and damages to Tenant's personal
property.

	30.
	ATTORNEY'S
FEES:    Any person who is a prevailing party in any legal proceeding brought under or related to the transaction described in this lease is entitled to recover
prejudgment interest, reasonable attorney's fees, and all other costs of litigation from the nonprevailing party.

	31.
	REPRESENTATIONS:    Tenant's
statements in this lease and any application for rental are material representations relied upon by Landlord. Each party signing this lease
represents that he or she is of legal age to enter into a binding contract and is authorized to sign the lease. If Tenant makes any misrepresentation in this lease or in any application for rental,
Tenant is in default. Landlord is not aware of any material defect on the Property that would affect the health and safety of an ordinary person or any environmental hazard on or affecting the
Property that would affect the health or safety of an ordinary person, except:

	32.
	BROKERS'
FEES:

	A.
	                                    
(Broker A) represents o Landlord
o Tenant. Broker A's fees will be paid pursuant to (choose 1 or 2):

	(1)
	a
separate written agreement between Broker A and o Landlord o Tenant
o Broker.

	(2)
	the
attached Addendum for Broker's Fee. 

10

 

	B.
	                                    
(Broker B) represents o Landlord
o Tenant. Broker B's fees will be paid pursuant to (choose 1 or 2):

	(1)
	a
separate written agreement between Broker B and o Landlord o Tenant
o Broker.

	(2)
	the
attached Addendum for Broker's Fee.

	C.
	                                    
(Broker C) represents o Landlord
o Tenant. Broker C's fees will be paid pursuant to (choose 1 or 2):

	(1)
	a
separate written agreement between Broker C and o Landlord o Tenant
o Broker.

	(2)
	the
attached Addendum for Broker's Fee.

	33.
	ADDENDA:    Incorporated
into this lease are the addenda, exhibits and other information marked in the Addenda and Exhibit section of the Table of Contents. If Landlord's
Rules and Regulations are made part of this lease, Tenant agrees to comply with the Rules and Regulations as Landlord may, at its discretion, amend from time to time.

	34.
	AGREEMENT
OF PARTIES:

	A.
	Entire Agreement:    This lease contains the entire agreement between Landlord and Tenant and may not be changed except by
written agreement.

	B.
	Binding Effect:    This lease is binding upon and inures to the benefit of the parties and their respective heirs, executors,
administrators, successors, and permitted assigns.

	C.
	Joint and Several:    All Tenants are jointly and severally liable for all provisions of this lease. Any act or notice to, or
refund to, or signature of, any one or more of the tenants regarding any term of this lease, its renewal, or its termination is binding on all Tenants.

	D.
	Controlling Law:    The laws of the State of Texas govern the interpretation, performance, and enforcement of this lease.

	E.
	Severable Clauses.    If any clause in this lease is found invalid or unenforceable by a court of law, the remainder of this
lease will not be affected and all other provisions of this lease will remain valid and enforceable.

	F.
	Waiver:    Landlord's delay, waiver, or non-enforcement of acceleration, contractual or statutory lien, rental due
date, or any other right will not be deemed a waiver of any other or subsequent breach by Tenant or any other term in this lease.

	G.
	Quiet Enjoyment:    Provided that Tenant is not in default of this lease, Landlord covenants that Tenant will enjoy possession
and use of the leased premises free from serious interference.

	H.
	Force Majeure:    If Landlord's or Tenant's performance of a term in this lease (other than payment obligations) is delayed by
strike, lock-out, shortage of material, governmental restriction, riot, flood, or any cause outside Landlord's or Tenant's control, the time for Landlord's or Tenant's performance will be
abated until after the delay. 

11

 

	35.
	NOTICES:    All
notices under this lease must be in writing and are effective when hand-delivered, sent by mail, or sent by facsimile transmission to: 

	 	Tenant	 	Landlord
	 	at the address of the leased premises.	 	at P.O. Box 4108

Alice, TX 78332

Fax:
	

 	

with a copy to: Kathy S. DeYoung	
 	

with a copy to:
	 	at Copano Energy	 	at
	 	2727 Allen Parkway, Ste 1200

Houston, TX 77019	 	 
	 	Fax: (713) 621-9545	 	Fax:

	36.
	SPECIAL
PROVISIONS:

	(a)
	THE
PARTIES SHALL DEFEND, INDEMNIFY, AND HOLD HARMLESS EACH OTHER FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, AND CAUSES OF ACTION AND ALL COSTS, LOSSES, LIABILITIES, EXPENSES, AND
JUDGMENTS INCURRED IN CONNECTION THEREWITH (INCLUDING WITHOUT LIMITATION ATTORNEY'S FEES, COURT COSTS, AND OTHER LITIGATION EXPENSES INCURRED IN CONNECTION WITH ANY SUCH CLAIM, DEMAND, OR CAUSE OF
ACTION INCURRED IN ENFORCING THIS INDEMNITY), BASED UPON, ARISING OUT OF OR ATTRIBUTABLE TO THIS LEASE, THE PERFORMANCE OR NONPERFORMANCE OF THIS LEASE BY SUCH PARTY, THE OCCUPATION OF THE PREMISES BY
SUCH PARTY, OR BY ANY AGENT, EMPLOYEE, CONTRACTOR, OR INVITEE OF SUCH PARTY, OR THE OPERATIONS CONDUCTED BY SUCH PARTY OR BY ANY AGENT, EMPLOYEE, CONTRACTOR, OR INVITEE OF SUCH PARTY ON THE PREMISES.

	(b)
	Notwithstanding
the provisions of Section 26, Tenant's right to quiet possession of the Leased Premises shall not be disturbed if Tenant is not in default and so long as Tenant
shall pay the rent and observe and perform all the provisions of the Lease. 

Real
estate brokers are not qualified to render legal advice, property inspections, surveys, engineering studies, (e.g. studies of the structures, drainage, and soil conditions), environmental
assessments, tax advice, financial advice, or inspections to determine compliance with zoning, governmental regulations, or any law (e.g., ADA, Texas Architectural Barriers Statute, etc.). The parties
should seek experts to render such services. Selection of such experts is the responsibility of the parties and not the real estate broker. The terms of this lease are negotiable among the parties.
This is intended to be a legal agreement binding upon final acceptance. READ IT CAREFULLY. If you do not understand the effect of this lease, consult your attorney BEFORE signing. 

	LANDLORD:	 	DATE:	 	TENANT:	 	DATE:
	

MATEO LUEIA	
 	

8-14-03	
 	

COPANO FIELD SERVICES/

AGUA DULCE, L.P., by

COPANO FIELD SERVICES, L.L.C., D.L.L.

its Managing General Partner

	

/s/  MATEO LUEIA      
	
 	

By:	

/s/  MATTHEW J. ASSIFF      
 Matthew J. Assiff, Sr. Vice President

12

QuickLinks

Exhibit 10.11

TEXAS ASSOCIATION OF REALTORS® IMPROVED PROPERTY COMMERCIAL LEASE

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