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G A S S A L E S A 0 R E E M E N T
between
TEXAS MUNICIPAL PGWER POOP,
as "Buyer"
and J
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DELHI OAS PIPELINE CORPORATION
as "Seller"
Dated3 Juno 6, 1973 Denton County, Texas
TABLE OF CONTENTS
Preamble 1
I Definitions 1
II Representations of the Parties...,,,.,,., 4
III Dedication 4
IV Reservations of Seller., eomovess, 5
V Quantity... ....................6
V I Qua 1 i ty . . . . . . . . . . . • • . 10
I '
VII Points of Delivery and pressure 11
VIII Measurement.... ....................13
IX Price and Billing.... 17
X Taxe a . . . . . . . . . . . . ♦ + r . r r r • 19
XI Regulatory Bodies 20
XII Force Ma~eure•.•.• 21
XIIIW~arranty of Title to das 22
XIV i e rm . . . . . . . . . . . . . . . . . . 2 2
XV Miscellaneous 23
XVI Intrastate Commerce.............................. 25
Exhibit "A", List of Gas Purchase Agreemento
Exhibit "B", Sample Cost of Service
Exhibit "C", Gas Purchase Agreement between Delhi Gas
Pipeline Corporation, as Buyer, and Dallas
Production, Inc., Est al, as Seller
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GAS SALES AGREEMENT
THIS AGREEMENT, mode and entered into as of the 6th day of
Juno, 1973, by and between TEXAS MUNICIPAL POWER POOL, composed
of the Cities of Greenville, Garland, Denton, Bryan, and Brazos
Electric Power Co-operative, herein referred to collectively
as "Buyer", and DELHI GAS PIPELINE CORPORATION, herein referred
to as "Seller";
W I T N E S S E T Ht
WMM EAS, Seder has acquired certain gas reserves and
plans to construct bnd operate a gathering system in Denton and
Wise Counties, Texas; and
WHEREAS, Buyer desires to purchase gas from Seller for a
portion of its fuel requirements for its electric generating
plants?
NOW, VIEREFORE, Buyer and Seller in consideration of the
payment to Seller of One Dollar ($1.00), the receipt of which is
hereby acknowledged, and the mutual covenants and conditions
heroin contained, the parties hereto mutually covenant and agree
as follows:
ARTICLE I
DEVINITIONS
For the purposes of this Agreement, unless thn context
of the instru:narit requires otherwise, the following definitions
shall be applicable:
1.1. 'IGas" shall mean natural gas produced from gas wells, and
gas produced in association with oil (casinghoad gas) and/or
the residue gas resulting from processing both casinghead gas
and gas-well gas.
1.2 "Day" shall mean the 24-hour period commencing at 8:00
A.M. C.S.T. on any calendar day and ending at 800 A. M. C.S.T.
on the next succeeding calendar day.
1.3 "Month" shall mean tho period beginning at 8:00 A.M. C.S.T.
on the first day of a calendar month and ending at 8:00 A,9, C.S.T.
on the first day of the calendar month immediately following.
1.4 "Contract Year" or "Year" shall mean a period of twelve
(12) consecutive monthst except that the first Contract Year shall
commence on the first day of the month during the occurrence of
the earlier of (i) the expiration of one hundred twenty (120)
days after the effective date of the Gas Purchase Agreement
shown on Exhibit "C" attached hereto or (ii) initial deliveries.
of gas hereunder, and shall continue through twelve (12) months
of deliveries of gas hereundert each succeeding Contract year
shall be a succeeding twelve (12) month period.
115 "MCF" shall mean one thousand (1,000) cubic feet.
1.6 "BTU" shall mean British Thermal Unit.
117 "MMBTU" shall mean one million (11000,000) British Thermal
Shits.
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7.8 "beating Value" or "Heat Content" shall. mean the number
of BTU contained in a gas that would occupy one (1) cubic foot
at a temperature of sixty (60) degrees Fahrenheit, saturated
with water vapor and under a pressure equivalent to that of
thirty (30) inches of mercury at thirty-two (32) degrees
Fahrenheit, but converted to the base condition of sixty (60)
degrees Fahrenheit and an absolute pressure of fourteen and
sixty-five hundredths (14.65) pounds per square inch and adjusted
to reflect the actual emount of water vapor contained in the gas
delivered to Buyer.
1.9 "Psis" shall mean pounds per square inch, absolute.
1110 "Prig" shall mean pounds per square inch, gauge.
1.11 "Seller's Delivery Capacity" shall mean the maximum quantity
of gan that can be delivered to Buyer during a twenty-four (24)
hour period following seventy-two (72) hours of maximum flow from
the leases or interests therein committed to Seller under the Gas
Purchase Agreemants listed in Exhibit "A" attached hereto and
delivered throurh Sealer's gathering and processing facilities
at the points of delivery described in Article VII heroof against
the pressure in Buyer's facilities but not less than seventy hive
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(75) psig at the delivery point described in (i) of 7.1 of Article
VII and not in excess of 550 prig at the delivery
point described in (ii) of 7.1 of Article VII and nat in excess of
the mutually agreeable pressures at the delivery points described in
(iii) of 7,1 of Article VII.
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1.12 "Daily Contract Quantit," shall mean the quantity of gas
per day, averaged ovor each Contract Year, that Buyer is require,
to to'Aft and pay for, or nevertheless pay for if available and not
taken, under the provisions of this Agreement.
1,13 "Seller's Gas Reserves" shall mean the gas reserves under-
lying the leases covered by Seller's Gas Purchase 1greements listed
on Exhibit "A" attached horeto less fuel and shrinkage resulting
from compressing and processing the gas and less such gas reserved
by each seller under said Gas Purchase Agreements.
ARTICLE II
REPRESENTATIONS OF THE P, ARTIES
2,1 Seller represents that it has the right to sell the gas
produced from Seller's Gas Reserves, and that it will make said
gas available at the points of delivery hereunder in accordance
with the provisions of this Agreement. Seller further represents
that it will construct in accordance with standard industry prac.
tices and operate in a prudent manner a gathering system of suf.
ficient capacity to deliver such gas to Buyer.
2.2 Buyer represents that it will install the facilities
necessary for receiving gas from Seller in accordance with the
provisions of this Agreement.
AIMCLE III
DEDICATION
3,1 Subject to the terms and conditions of this Agreement,
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Seller covonar.ts to sell and deliver to Buyer, at the points
of delivery herein provided, all of Seller's interest in
S'eller's Gas Reserves without other disposition, except as
herein otherwise provided and Seller dedicates to the performance
of this Agreement its interest in Seller's Gas Reserves.
3.2 Seller shall not be required to produce or cause to be
produced any well or wells in any manner that in its sole judgment
would not constitute good operating practice, nor shall Seller,
or the producers under its Gas Purchase Agreem-snts be obligated
to drill additional wells or to deepen or rework any existing
wells when in its judgment it would not be prudent or profitable
for it to do so.
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ARTICLE IV
RESERVATIONS OF SELLER
Seller hereby expressly reserves the following rights with
respect to seller's Gas Reserves subject to this Agreement.
4.1 The right to such gas as the parties selling gas to
Seller are entit',ted to use under the terms of the Gas Purchase
Agreements shown on Exhibit "A"=
4.2 The right to use sufficient g,;s for tbo operation of the
facilities that Seller may install in order to deliver and
process the gas hereunder in accordance with the terms hereof
including but not limited to use of gas by Sello: fcr drilling,
workover operations, treating, gas lift, compresston and plant
fuel and shrinkage from pr.,cossingi
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4.3 The right to use gas for the operation of Seller's pipe-
lines, water stations, camps and other miscellaneous uses inci-
dent to the operation of the producer's leases covered hereby
and any other leases owned by Seller's producers in the immediate
vicinity thereof;
4.4 The right to operate its facilities Tree from any con-
trol by Buyer and in such manner as Seller, in Seller's sole
discretion, may deem advisable; and
4.5 The right to process the gas prior to delivery hereunder
for the recovery of liquid hydrocarbons therefrom, provided said
gas after processing is not rendered incapable of meeting the
quality specifications of Article VI hereof.. All such liquid
hydrocarbons so extracted by Seller shall be the property of
Seller..
ARTICLE V
UQ ANTI-TY
5.1 Buyer agrees to receive and purchaoe, or pay for if
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available for dolivery and not taken, and Seller agrees to deliver
and sell, subject to the limitations and conditions herein pro-
vided, during each Contract Year, a quantity of gas (Daily Con-
tract Quantity) attributable to Sellor's Gas Reserves dedicated
hereunder equal to eighty percent (80%) of Seller's Delivery
Capacity.
5.2 Buyer shall have the continuing right to purchase daily
volumes of gas up to the total of Seller's Delivery capacity.
5.3 Seller's Delivery Capacity shall be determined quarterly
and at such other times as either party may elect, but in any
event Seller's Delivery Capacity shall be determined at such times
so as to coincide with the determination of the delivery capacity
of the wells covered by Seller's Gas Purchane Agreements listed
on Exhibit "A". The results of such determination of Seller's
Delivery Capacity shall become effective on the first day following
tho twenty-four hour flow period referred to in 1.11 of Article I
,hereof.
5.4 Under the provisions of the foregoing paragraphs of this
Article V, the Daily Contract Quantity may change from time to
time during each Contract Year. In such event, Buyer shall be
obligated to take in such Contract Year the sums of the volumes
of gas computed by applying each such Daily Contract Quantity
during the period when applicable.
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5,:. If at the end of any contract Year the Buyer, subject to
credit for.doficiencies excused by force ma sure and credit for
any emergency sales of gas made pursuant to Article XVI, or
failure of Seller. to deliver gas when and in tho quantities re-
questod within the limitations herein provided, shall have failed
to take during such period the quantity required of it hereunder,
Buyer shall pay for the deficiency as if taken, such payment to
be made within sixty (60) days after the end of such Contract Year.
In the event Seller, under the Cas Purchase Agrc~oments listed on
Exhibit "A", is required to pay for a deficient quantity of gas
greater than the deficient quantity of gas for which Buyer would
otherwise pay Seller pursuant to the above provisions (taking
into consideration shrinkage due to processing, fuel, line losses,
etc.) then Buyer shall pay Seller for such additional deficient
quantity of gas, If it is anticipated that a payment shall be
made pursuant to the preceding sentence, then Seller shall give
Buyer notice of same including the estimated amount of such paytaint
and the duration thereof and Buyer shall have the option of paying
for such deficient quantity of gas or permitting Seller to install
the necessary facilities to eliminate such expected deficiency and
the cost of all a+toh fa.r4 by Seller shall there-
after be included in Seller's cost of service.
5.6 if Buyer shall have paid for any gas not actually received
by it during any Contract Year, it shall be entitled to make up
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such deficient takings of gas during the term hereof by withholding
payment for all the gas purchased by Buyer after Buyer has first.
taken the Daily Contract Quantity for each such Contract Year;
provided that Buyer shall pay Seller any increase in price be-
tweon the price upon which payments were made and the price
applicable at the ti.;d of taking such deficient year.
5.7 In no event ethall the volume of gas that Seller !hall be
obligated to delivar to Buyer hereunder ever exceed the '+olume
of gas that can to legally produced from Seller's Gas Res-:vas
in the course of reasonably prudent operations. j
518 Notwithstanding anything contained in this Article V
to the contrary, the parties hereto agree that in the event
Seller is required to make payments for gas not taken pursuant
to the provisions of 2.3 and 2.5 of Article Ii of the Gas
Purchase Agreement attached hereto as Exhibit "C", then Bayer
shall be obligated to keep Seller whole as to such payments
and Buyer shall have the same right of recoupment of such
payments fron Seller as Seller has under 2.3 and 2.5 of
Article II of said Gas Purchase Agreement. If it is anticipated
that a prepayment shall be made pursuant to the preceding sentence,
then Seller shall give Buyer notice of same including the estimated
amount of such payment and the duration thereof and Buyer shall
have the option of making such prepayment or permitting Seller
to install the necessary facilities to eliminate such expected
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prepayment and the cost of all such facilities installed by Seller
shall thereafter be included in Seller's cost of service.
569 In the event this Agreement is terminated pursuant to 9.2
of Article IX hereof, then Buyer shall have the same right of re-
coupmont of gas paid for but not taken as afforded Seller in 5.2 of
Article V of the Gas Purchase Agreement atteched hereto as
Exhibit "C".
ARTICLE VI
QUALITY
6.1 The gas as delivered by Seller to Buyer hereunder shall be
of such quality that it shall meet the following specificatirms:
a. Be commercially free of dust, gum, gum-forming
constituents, gasoline, and other solid and/or liquid
matter that may become separated from the gas during
transportation thereof;
b. Contain not more than one-fourth (1/4th) grain
of hydrogen sulfide per one hundred (100) cubic feet;
c. Contain not more than twenty (20) grains of total
sulfur per one hundred (100) cubic feet;
d. Contain not more than three percent (3%) by
volume of carbon dioxide;
e. Contain not more than one percent (1%) by voltime
of oxygen:
f. Contain a Heating Value of at least one thousand
(1,000) BTU per Cubic foot;
g. Have a temperature of not more than nne hundred
twenty (120) degrees Fahrenheit; and
h. Contain not more than 7# of water vapor per
one (1) million cubic feet.
6.2 Buyer shall have the right to be represented and to
participate in all tests of gas delivered hereunder, and to
inspect any equipmez~aL• us(.d in determining the nature or quality
of the gas.
6.3 Should the gas tendored by Seller fail at any time to
conform to any of the specifications of this Article, Buyer
shall notify Seller of any such failure, and upon such notice,
Buyer shall have the right to reduce the volume taken or to
cease taking gas until the gas again becomes merchantable.
ARTICLE VXX
POINTS OF DELIVERY AND PRESSURE
7.1 The points of delivery for all gaa purchased and sold
hereunder shall be at (i) a mutually agreeable point located at
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or near Buyer's electric generating plant near the city of Denton,
Denton Cc:unty, 'texas and (ii) at a mutually agreeable point located
on Southwestern Gas Pipeline, Inc.'s existing pipeline located
in Denton County, Texas, and (iii) at other mutually agreeable
points and title to said gas shall pass from Seller to Buyer at
said points of delivery.
7!.2 Seller, at its own expense, shall construct., equip, main-
tain, and operate all. necessary facilities to deliver Seller's
gas to Buyer at the points of delivery, including, but not
limited to, installation and maintenance of measurement facilities.
7.3 Buyer shall provide the necessary facilities to accept
Seller's gas from Seller at said points of delivery.
7.4 Seller shall deliver gas at said points of delivery at a
pressure sufficient to enter Buyer's facilities, but not less than
seventy-five (75) psig at the delivery poi,,c described in (i) of
7.1 above and not in excess of 550 psig at the de-
livery point described in (ii) of 7.1 above and at mutually agreeab"_o.
pressures at the delivery points described in (iii) of 7.1 above.
7.5 Seller shall be in control and possession of the gas sold
and purchased hereunder and responsible for any damage or injury
caused thereby until the same shall have been delivered to Buyer
at the points of delivery. Buyer shall be in control and possession
of the gas sold and purchased hereunder and responsible for any
damage or injury caused thereby after the same shall have been
delivered to Buyer at the points of delivery.
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ARTICLE VIII
MEASUREMENT
8.1 The unit of volume for measurement of gas delivered here-
under shall be one (1) cubic foot of gas at a base temperature
of sixty (60) degrees Fahrenheit and at an absolute pressure of
fourteen and sixty-five hundredths (14.65) pounds per square innh.
All fundamental constants, observations, records, and procedures
involved in determining and/or verifying the quantity and other
characteristics of gas delivered hereunder shall, unless other-
wise specified herein, be in accordance with the standard pre-
scribed in the Gas Measurement Committee Report No. 3 of the
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American Gas Association, as now and from time to time amended
or supplemented. All measurements of gas shall be determined
by calculation into terms of such unit. All quantities given
herein, unless otherwise expressly stated, are 1
Y , in terms of such
unit.
8.2 Seller shall install, maintain, and operate i measuring
station at each point of delivery. Said measuring station shall
be so ecViipped with an orifice meter, recording gauges, or other
types of meters of standard make and design commonly acceptable
in the industry as to accomplish the accurate measurement of gas
delivered hereunder. Th3 changing of charts and calibrating and
adjustment of the motor !3hall be done by Seller.
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8.3 Buyer may, at its option, install a check meter for checking
Seller's metering equipmentl and same shall be so installed as
not to interfere with the operation of Seller's facilities. In
the event the quantities of gas measured by Seller's meter and
Buyer's check meter are in disagreement and such disagreement
cannot be resolved by Buyer and Seller, then the average of the
volumes so recorded by Seller's meter and by Buyer's check meter
shall be used for payment for gas sold and purchased hereunder.
8.4 The temperature of the gas flowing through the meters
shall be determined by the continuous use of a recording thermometer
installed by Seller so that it will properly record the temperature
flowing through the meter. The temperatures recorded each day
shall be used in ccinputing measurements for that day.
8.5 The specific gravity of the gas flowing through the meters
shall be determined by the use of a recording gravitometer installed
by Seller so that it will properly record the specific gravity
of the gas flowing through the meter. The arithmetical average
of the hourly specific gravity recorded each day shall be used
in computing measurements for that day.
8.6 The average Heat Content of the gas for each month at
each point of delivery shall be determined by Seller by the use
of a recording calorimeter.
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8.7 Buyer shall havo access at all reasonable times to metering
equipment, including all other instruments used by Seller in de-
termining the measurement and quality of the gas delivered here-
under; but the reading, calibrating, and adjusting thereof and
the changing of charts shall be done only by employees, agents,
or representatives of Seller. Seller shall submit to Buyer all
charts from such metering equipment, upon request by Buyer,
subject to return by Buyer within fifteen (15) days after thh
receipt thereof, after which the charts shall be kept on file
for a period of two (2) years for the mutual use of all parties.
At least once every month, Seller shall calibrate the
meters and instruments or cause the same to be calibrated. Seller
shall give Buyer sufficient notice in advance of such tests so that
Buyer may, at its election, be present in person or by its rep-
resentative to observe adjustments, if any, that are made. Seltar
will notify Buyer prior to calibrating the meters and instruments
so that the Buyer can have its representative present. For the
purpose of measurement and meter calibration, the atmospheric
pressure shall be assumed, unless otherwise determined by the
Standard teas Measurement Law, to be fourteen and seven-tenths
(14.7) pounds per square inch, irrespective of variations in
natural atmospheric pressure from tima to time.
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g,e3 If upon any test the metering equipment in the aggregate
is found to be inncc~tratc by two percent (2%) or more, registra-
tion thereof and any payment based up -,)n such registrations shall
be corrected at the 'rate of such inaccuracy for any period of
inaccuracy that is definitely known or agreed upon, or'if not
known or agreed upon, Vien for a period extending back one-half
(1/2) of the time elapsed since the last day of the calibration,
not exceeding, however, fifteen (15) days. Following any test,
any metering equipment found to be ina:curate to any degree shall
be adjusted inunediiately to measure accurately, If for any reason
any meter is out of service or out cf repair so that the quantity
of gas delivered through such meter cannot be ascertained or com-
puted from the readings thereof, the q+.antity of gas so delivered
during such period same is out of nervice or out of repair shall
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be estimated and agreed upon by the parties hereto upon the basis
of the best available data, using the first of the following methods
that is feasible:
a. fly ue.ing the registration of any check-measuring
equipment of Buyer, if installed and registering;
b. By correcting the error if the percentage of
error its ascertainable by calibration, test, or
mathematical calculation; or
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c. By estimating the, quantity of deliveries by
deliveries during preceding periods under similar
conditions when the meter was registering accurately.
8.9 The measurement. of gas delivered hereunder shall be
corrected for deviation from Boyle's Law at the pressures and
temperatures under which the gas is delivered hereunder.
ARTICLE IX
PRICE AND BILLING
9.1 The price to be paid by Buyer to Seiler for all gas de-
livered to Buyer hereunder or that Buyer is obligrted to pay for,
whether taken or not, shall be as follows:
(a) During the first Contract Year hereunder
the price shall be Seller's monthly weighted
average cost per MMBTU with respect to the
gas purchased by Seller for delivery to Buyer
hereunder, plus elevon and seventy-five one
hundredths cents (11,750) per MMBTU, resulting
in an initial price of seventy seven and forty
five hundredths centij (77.4540 per MMBTU.
(b) Subject to 9.2 below, for the second Contract
Year and each Year thereafter the price per MMBTU
payable to Sell•ir shall be computed on a cost
of service designed to yield Seller an eight: per-
cent (8%) rate of return on its investment. The
computation of said price shall include estimates
of the following items based on the experience
of the previous year plus any adjustments neces-
sary to reflect an actual rate of return of 8%
on Seller's investment for the previous year
including the first Contract Year (see example
in Exhibit "B" attached hereto)!
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(1) Seller's estimated cost of gas purchased at the
redetermined price provided for in Seller's Gas
Purchase Agreements listed in Exhibit "A" hereof,
including the estimated payments to producars for
list) Is recovered in Seller's processing plant,
plus (2) Seller's estimated direct system operating ex-
penses adjusted for anticipated changes in
operating conditions, plus (3) general and ad-
ministrative expenses calculated at twelve and
one-half percent (12'%) of the estimated system
operating expenses, plus (4) estimated taxes to
be paid by Seller with respect to its facilities
and operations other than Federal Income 'T'axes,
plus (5) straight line depreciation over fifteen
(15) years, plus (6) estimated Federal Income
Taxes to be paid calculated at the then effective
corporate rate assuming Seller's facilities are
owned and operated as a separate entity, plus
(7) a return of eight percent (8%) on Seller's
depreciated investmeni'r. in its gathering system,
compressors, processing plant and related fa-
cilities, but not less than five percent (5%)
on Seller's original investment in such fa-
cilities, less (8) a credit for the estimated
income to be received by Seller from the sale
of liquids recovered in its proceasing plant,
The total dollar amount derived by the rum of
the preceding itesas incltidi.ng any adjustment
necessary to reflect a rate of return of eight
percent (8%) based on actual nnndit.ions during
the previous year shall be divided by the esti-
mated total KgBTUs of gas to be deliverer) to
Buyer for the particular year in question and
the result expressed in cents per MMBTU shall be
the price payable by Buyer to Seller for the
year in which such determination is made,
9.2 If um3Ar i.2 'Of''Ai-fAO1 a'V Of tits 033 Purchase Agreement
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attached hareto as Exhibit "C" the price under (ii) of etaid 5.2
is higher than the price determined in (i) of said 5.2 then
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W.ler shall give Buyer notice of same and Buyor shall have the
right to have Seiler pay such higher price and include such price
in Seller's cost of service under this Agreement. In the event
Buyer does not choose to have Seller pay such higher price, then
this Agreement shall terminate and Buyer and Seller shall make
the necessary adjustments one to the other to reflect an eight
percent (8%) rate of return on Seller's investment for the Contract
Year or portion thereof preceding said termination date.
9.3 After delivery of gas has commenced, Seller shall, on or
before the 10th day of each month, render to Buyer a statement
showing the quantity of YMBTUs of gas sold to Buyer at each delivery
point during the preceding calendar month and Buyer shall pay Seller
the amount due for all such gas on or before the last day of the
month in which such statement was rendered.
9.4 Each party hereto shall have the right at all reasonable
times to examine the books and records of the other party to
the extent necessary to verify the accuracy of any statement,
charge, computation, or demand made under or pursuant to this
Agreement. The parties hereto agree to maintain such books and
records in accordance with standard industry practices. Any state-
meat shall. be final as to both parties unless questioned within two
(2) years after payment thereof has been made.
ARTICLE X
TAXES
3.011 Seller shall pay all excise, severanco, sales, occupation,
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and other taxes of like nature levied in respect to the gas
purchased and sold hereunder and the handling thereof prior to
the delivery to Buyer$ at the rate or rates existing as of the
date of this Agreement.
10.2 Buyer shall reimburse Seller for all of any increase in
the total cost per MMBTU to Seller occurring after the date of
this Agreement and paid or caused to be paid by Seller occasioned
by any change in the rate of the existing severance tax, or by
the imposition of or substitution of any new excise taxes,
including sales, occupation, severance, gathering, or other
taxes of like nature in respect to the gas purchased and sold
under thie Agreement.
ARTICLE XI
REGULATORY BODIES
11.1 This Agreement is subject to all present and future valid
laws and lawful orders of all regulatory bodies now or hereafter
having jurisdiction of the parties, or either of them; and should
either of the parties, by force of any such law or regulation
imposed at any time duri no the term of this Agreement, be
ordered or required to do any act inconsistent with the provisions
of this Agreement, the Agreement shall continue nevertheless and
shall then be deemed modified or cancelleol to conform with the
requirements of such law or regulation.
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ARTICLE XII
FORCE 1AJEURE
12.1 If Buyer or Seller is rendered unable, wholly or in part,
by force majeure or any other cause of any kind not reasonably
within its control, to perform or comply with any obligations
or conditions of this Agreement, upon giving notice and reasonably
full particulars to the other party, such obligations or con-
ditions shall be suspended during the continuance of the inability
so caused and such party so rendered unable shall be relieved
of liability and shall suffer no prejudice for failure to perform
the same during such period, and in all cases the cause of
suspension (other than strikes, lockouts, or labor disputes)
shall be remedied insofar as possible with reasonable dispatch.
Settlement of strikes, lockouts, and labor disputes shall be
wholly within the discretion of the party having the difficulty.
The term "forca majeure" shall include, without limitation by
the following enumeration, acts of God and of the public enemy;
the elements; freezing in pipelines; fires; accidents; breakdowns
(including breakdown of utilization equipment); strikes; labor
disputes; and any other industrial, civil, or public disturbance;
inability to obtain materials, supplies, permits, or labor;
any act or omission by parties not controlled by the party
having the difficulty; temporary failure of gas supply; and
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any laws, orders, rules, regulations, acts, or restraints of
any goverrunent or governmental body ox authority, civil or
military; or any other causes beyond the control of the parties
hereto.
ARTICLE XIII
WARRANTY OF TITLE TO GAS
13.1 Seller warrants the title to Seller's interest in all gas
sold to Buyer hereunder and agrees to indemnify and defend
Buyer from all suits, actions, debts, acts, damages, costs,
losses, and expenses arising from or out of adverse claims of
any or all persons in and to said gas.
ARTICLE XIV
TERM
14.1 This Agreement shall become effective as of the date first
above written and shall, unless terminated earlier pursuant to
9.2 of Article IX hereof, continue in fora, and effect for a period
of twenty (20) Contract Years commencing with the date of first
deliveries of gas hereunder; provided, however, after the ex-
piration of the tenth (10th) Contract Year, if in Buyer's opinion
the price payable for gas hereunder is uneconomical, then Buyer
shall have the option on thirty (30) days prior written notice to
Seller to terminate this Agreement upon the payment to Seller of an
amount equal to Seller's depreciated investment i;, its facilities
less the salvage value of such facilities.
.22-
ARTICLE XV
MISCELLANEOUS
15.1 No waiver by either Seller or Buyer of any default of the
other under this Agreement shall operate as a waiver of any future
default, whether of like or different charactor or nature.
15.2 This Agreement shall be binding upon and inure to the
benefit of the successocs and assigns, or the heiri, administrators
or executors, of the parties hereto. Any party hereto may assign
his or its right, title, and interest in, to, and under this
Agreement, including, without limitation, any and all renewals,
extensions, amendments, and/or supplements hereto to any individual,
Vink, trustee, company, or corporation as security for any note,
notes, bonds, or other obligations or securities of each assignor;
provided, however, that no such assignment shall in any way
operate to enlarge, alter, or"change any obligation of tY,e other
party or parties hereto.
15.3 Seiler has advised Buyer that Seller is one of the
Mortgagors in a Mortgage and Deed of Trttst {the "Indenture") f
I
dated as of Aptil 1, 1965, executed by Texas Oil & Gas Corp.,
Delhi Gas Pipeline Corporation and Tortkawa Gas Processing Company
to the Bank of New York, ac Trustee, anti S. L. deWusney, as
Individual Trustee, and that under the Indenture Seller has
agreed that Gas Sales Agreements coming within the provisions
of the Indonturu, as this Agreement does, shall include a pro.
+ vision that upon notice to Buyer by the corporate Trustee under
-23-
.
the Indenture, all sums that may be payable to Seller shall be
paid to the Bank of New York, as Trustee (or its successor
corporate Trustee) under the Indenture and Buyer hereby agrees
that it will, upon receipt of written notice from the, Trustee,
make future payment of amounts th::t may be payable to Seller
hereunder to the Bank of New York, as Trustee (or its successo:-
corporate Trustee) under the Indenture.
15.4 Seller expressly does not by the terms of this Agreement
sell, transfer, or assign unto Buyer any title or interest
whatsoever in Seller's pipe, meters, lines, or ether equipment
of any nature owned or used by Seller in the operation of its
system.
15.5 Any notice, request, demand, or statement provided for
in thin Agreement, except as otherwise herein provided, may
be given in writing, directed to the party to whom given and
mailed or delivered at such party's addruss as follow::
BAYER: Texas Municipal Power Pool
P. 0. Box 6296
Waco, Texas 76706
SELLER: Delhi Gas Pipeline Corporation
One Allen Center
Houston, Texas 77002
15.6 Payment by Buyer to Seller shall be made to Seller at
the addreos as follows:
.24-
Delhi Gas Pipeline Corporation
Fidelity union Tower Building
Dallas, Texas 75201
ARTICLE XVI
INTRASTATE COMMERCE
Buyer and Seller covenant and agree that none of the
gas purchased and/or transported hereunder will be transported,
used, or consumed as gas in any Mate other than the State of
Texas, nor will such gas be mixed or coinmingled with gas which
will be transported, used or consumed in any state other than
the State of Texas; provided, however, Seller shall upon
writ-ten request by Buyer make non-jt±risdictional emergency sales
of gas frun time to time pursuent to Federal Power Commission
Orders No. 402-A and No. 431.
IN WITbrZSS WHEREOF, the parties have executed this Agreement
in multiple originals, each of which, when executed by Buyer and
J
Seller, shall constitute and be an original effective contract
between Buyer and such Seller as of the date first above written.
SELLER:
DELHI GAS PIPELINE CORPORATION
ATTEST:
r
P 09 01, A-~
y M w
Mow B
Assistant Secreta Vice President
BUYERS
CITY OF GREENVILLE
ATTEST:
BY L`~~ ~t c
Mayor
-25-
Ib
CITY OF GARLAND
ATTE.
B
City Manager
CITY OF DENTON
ATTEST: r
av. Z~4e~
• Mayor
CITY OF BRYAN
ATTEST:
Mayor
BRAZOS ELECTLIC POWER CO-OPERATIVE
ATTEST
Gou ral Manager
i
-26-
BXHI BIT "A"
This Exhibit "A" is for all purposes attached to and made
a part of that certain Gas Sales Agreement dated June 6
1973, between DELHI GAS PIPELINE CORPORATION, els Seller, and TEXAS
MUNICIPAL POWER POOL, as Buyer, covering gas prc4uced under
the following described gas purchase agreement:
Gas Purchase Agreement dated May 4, 1973, between
Delhi Gas Pipeline Corporation, as Buyer, and Dallas
Production, Inc., at al covering gas produced from
certain properties located in Denton and Wise Counties,
Texas.
~I
EXHIBIT "B"
Example of Price per MMBTU on a
Cost of Service
1. Cost of Gas Purchased:
200000 MCF0 x 365 x 78.75,* - $ 5,748075()
2. Direct System Operating Expense 375,000
3. General and Administrative Expense
@12'x% of Direct System Operating
Expense 46,875
4. Actual Taxes Paid Other Than
Federal Income Tax 250000
5. Straight Line Depreciation
over 15 years 200,000
6. Federal Income Tax Calculated
at Corporate Rate of 48% 220,000 J
7. 8% Rate of Return on Depreciated
Investment but not less than 5%
Of Original Investment 240,004
Total Income Required $ 60855,625
8. Less Credit for Liquid income . 1,168,000
$ 5,687,625
$551687,625 77.950 per MMBTU
7,2960970 MMBTU
*65.70 per MMBTU x 1172 BTU = 77.006 per MCF, plus
25% liquid payment to producer (1.750 per MCP) = 78.750 per MCF
WVAF
E X H T II I T "C"
CA S PU RC 11AS E A GR'F_. EMF NT
between
DALLAS PRODUCTION INC., of al
as "Salle:"
and
I
DELHI OAS PYPI LINE CORPORATION
as "Buyer"
Dated; MAY 4 1973 Denton and Wiao Counties, Texas
TABLE OF COWENTS
Preamble 1
I Definitions 2
II Representations and Commitment 4
III Reservations of Seller 8
IV QuantiLy 9
V Price 12
VI )livery Point... .........16
VI7 Delivery Pressure 17
VIII Quality 17
IX Measurement and Tents 18
X Payment 24
XI Warranty of Ta~tZe
25
XII Taxes 26
XIII Rights-of-Way 26
Xiv Force Majeure 27
XV Governmental Rules and Regulations................ 28
XVI Effective Date and Term 29
XVII Intrastate) Use 29
XV~III Arbitration 30
X T X Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ► . . 30
XX Noticos 31
XXI Counterpart Execution 32
XXII Mi9CO11anO0UA 33
Exhibit "All Map
Exhibit I'D" List of Walls
GAS PURCHAAE AGREEMENT
THIS AGREEMENT, made and entered into this 3 day of
<u 1973, by and between DELITI GAS PIPELINE CORPORATION,
hereinafter called "Bayer", and DALLAS PRODUCTION, INC. and the
other parties who execute this Agreement, hereinafter collectively
called "Seller"s
W I T N E S 3 E T H:
WHEREAS, Seller owns and holds certain mineral leases
or interests therein which are located within the area outlined
on Exhibit "A" attached hereto and made a part hereof from which
Seller has or will have a supply of gas available for sale here-
under, and Seller dr.aires to sell such gas to Buyer; and
WHEREAS, Buyer represents that it will construe: and
operate a gas-gathering system and processing plant in :he area
in which Seller's leases are located and desires to purchase
the gas which Seller has available for sale from time to time.
NOW, THEREFORE, Buyer and Seller in consideration of
the payment to Seller of One Dollar ($1.00), the receipt of
which is hereby acknowledged, and the mutual agreements herein
contained the parties hereto hereby covenant and agree as foll()ws:
ARTICLE I
DEFINITIONS
Except in those certain instances where the context states
another meaning, the following terms, when used in this Agreement,
shall have the following meanings:
1.1 Lease - Any written instrument which gives Seller the
right to drill for, produce and dispose of oil and gas in and
under the properties located within the area outlined on Exhibit "A".
1.2 Well - A well capable of production of oil, oil and gas or
gas presently classified by the Railroad Commission of Texas as
a gas well, a 49-D gas we?l or an oil well; provided, however,
if a well is completed and capable of producing from more than
one reservoir, each reservoir shall be considered as a separate
well, unless the Railroad Commission of Texas allows commingling,
and to the rxtent as allowed, it will be considered as one well.
1.3 Area of Interest;,- The area located within the outline
shown on Exhibit "A" attached hereto.
1.4 Gas - The full wellhead stream of all hydrocarbons and
gaseous compounds produced from Seller's wells located within
the area of interest.
1.5 Delivery_ Capaci~X - The daily maximum quantity of gas
whioh each wall covorad heroby can produce against a
-2-
lino pressure of twenty-fivo (25) psig during the 24-hour
period following a 72-hour period (or such lesser period
as may be mutually agreeable to Buyer and Sellor) of
continuous delivery and which is available for delivery to
Buyer at the delivery point.
1.6 Day - The period of twenty--four consecutive hours beginning
at 8:00 a.m. C.S.T. on any calendar day and ending at 8:00 a.m.
C.S.T. on the calendar day immediately following.
1.7 Month - A period beginning at 8:00 a.m. C.S.T. on the
first day of a calendar month and ending at 8:00 a.m. C.S.T.
on the first day of the calendar month immediately following.
1.8 Year - A period of twelve (12) consecutive months: except
that the first Year shall commence on the first day of the month
during the occurrence of the earlier of (i) the expiration of
one hundred twenty (120) days after tho effective date of this
Agreement or (ii) initial deliveries of gas hereunder, and shall
continue through twelve (12) months of deliveries of gas hereunder,
each succeeding Year shall be a succeeding twelve (12) month period.
1.9 MCC - Ono thousand cubic feet
1.10 BTU - British Thermal Unit.
1.11 MMBTU - One million British Thermal Units.
1 12 Gross lleatinc~ Value - The number of BTUs which would occupy
n volumo of one (1) cubic foot at a temperature of sixty (60)
- 3-
degrueia Fahrenheit, if saturated with water vapor and under a
pressuro equivalent to that of thirty (30) inches of mercury at
i
I
thirty-two (32) degrees Fahrenheit.
i
1.13 Psi% - Pounds per square inch gauge.
ARTICLE II
REPRESENTA'PIONS AND COMMITMCNT
2.1 Seller represents that ',t owns or controls certain leases
or interests therein located within the area of interest, the
gas to be produced therefrom and has the right to sell the gas.
Subject to the other provisions hereof, Buyer represents that it
will construct a gathering system and gas processing plant capable
of receiving and processing the full wellhead stream of gas and that
it will maintain and operate said system and plant for the purpose
of receiving and processing gas from Seller hereunder together
with the gas produced by others. The gas processing plant shall
be installed and operational within 180 days from the effective
date of this agreement and will be capable of removing at least 60?4 or
the propane and essentially all of the butanes and heavier hydrocarbc-.
contained in the gas. If future economic conditions warrant, based
on specific conditions at this plant only, the plant will be ex-
panded to rcccvor additional products including ethane.
2.2 Seller hereby commits to the purformance of this Agree-
ment for the torm herook, all of .Seller's interest it now owns
or controla or hereafter awns or control: in the full wellhead
• -4-
~ l ~~u
stream which may be produced from the leases it now owns or here-
after acquires located in the area of interest, except such gas and
condensate as is reserved by Seller under Article III hereof.
2.3 Buyer and Seller shall promptly perform any necessary acts
and construct and install all necessary facilities which may be
required to commence and receive the delivery of gas in accord-
ance with the provisions of this Agreement. Subject to 2.4 below
as to any well which Buyer has not commenced taking gas on the 121st
day following the effective date of this Agreement, Buyer
shall nevertheless pay Seller for the Daily Contrect Quantity
with respect to
such well each month (which is defined for the
purpose of this sentence only to mean a period of thirty (30)
consecutive days, the first day of the first such month being the
121st day after the effective date of this Agreement), such pay-
monts to continue until deliveries of gas from such well are
actually commencer. Upon commencement of deliveries of gas all
such payments made to Seller pursuant to the preceding sentence
shall be recovered by Buyer by withholding each month 20% of the
payments otherwise duo Seller for gas purchased from such well
hereunder. If such payments are not recovered within two (2)
years from the date such recovery is commonced, thc;n Buyer shall
no longer have the right to withhold such twenty percent (20%),
2,4 As to wells completed as of the date hereof (which are
descrdbed.in Exhibit "B" attached hereto), Buyer shall be
obligated to connect to Buyer's gathering system any such well
having a Delivery Capacity of one hundred (100) MCF per day. In
the event any such well does not qualify for connection pursuant
to the preceding s:~ntenca then Seller shall have the option at
its sole cost and expense to connect such well to Buyer's gathering
system, or to have such well and the acreage attributable thereto
released from this Agreement.
2.5 As to wells completed subsequent to the date hereof,
Buyer shall be obligated to connect any such well or combination
of wells having a Delivery Capacity of at least three hundred
(300) MCF per day with a shut-in wellhead,pronsure of at least
five hundred (500) prig for each one mile of additi=onal gathering
system as the same may exist from time to time or would exist if
Buyer had then completed its connection obligations hereunder,
In the event any such well does not qualify for connection pursuant
to the preceding sentence then Seller shall have the option to
connect such well at its sole cost and expense or to have such well
and the acreage attributable thereto released froia the terms and
provisions of this Agreement. Buyer's obligation with respect
to the Daily Contract Quantity for any such well shall commence
on the earlier of (i) the expiration of ninety (90) clays follvA ng
Seller's written notice to Buyer that such well is completed,
-6-
tested and ready for connection or (ii) initial deliveries of gas
from such well; provided, hr:aever, if Buyer has not commenced
taking gas on the 91st day following Seller's written notice
that any such well is completed, tested and ready for connection,
then Buyer shall neverthele s pay Seller for the Daily Contract
Quantity each month (which is defined for the purpose of this
sentence only to mean a period of thirty (30) consecutive e..ays,
the first day of the first such month being the 91st day following
Seller's said notice), such payments to continue until deliveries
i
of gas from such well are actually corunenced. Upon commencement
of deliveries of gas all such payments made to Seller pursuant l
to the preceding sentence shall be recovered by Buyer by withholdin:: J
each month 20% of the payments otherwise due Seller ror gas pur-
chased from such well hereunder. If such payments are not re--
covered within two (7) hears from the date such recovery is c,,-)m-
menced, then Buyer shall no longer have the right to withhcld
such twenty percent (20/
-7-
' I
ART'ICLE' III
RESERVATIONS Or sEuRR
3.1 Seller reserves the following rights:
(a) To operate the leases free from any control by
Buyer in such manner as Seller, in Seller's dis-
cretion, may deem advisable, including without
limitation the right to drill new wells, to re-
pair and rework old wells, and to abandon any
well or surrender any lease when it no longer
i
is deemed by Seller to be capable of producing
gas in paying quantities under normal methods of '
operation; provided, however, that in the event
Seller should terminate or surrender any of the
{
leases, written notice of same shall be given
to Buyer within thirty (30) days thereafter.
(b) To pool or unitize the leases with other !!!j
i
leases in the same field, and, in the event- of I
I
such pooling or unitizing, this Ag-:cement s]iall
cover and apply to Seller's interest in the unit
and tho gas attributable thereto.
-8-
IMM
M. To use gas produced from the leases for developing
and operating the leases (but not for gas-lifting
oil wells or for repressuring or pressure-mainte-
nance purposes) and for fulfilling obligations to
the lessors in the leases for domestic fue'.
(d) To retain all oil and liquid hydrocarbons sepa-
rated from the gas in Buyer's central separation
I
facility and in this connection Seller shall not
be permitted to remove or recover hydrocarbons
from the gas prior to delivery to Buyer as provided
herein. i
ARTICLE IV
QUANTITY
4.1 Subject to the further provisions of this Agreement,
Seller agrees to sell and deliver duriig each Fear, and Buyer
agrees to purchase and receive from Seller or to pay for if
available but not taken, a quantity of gas equal to the ilaily
Contract Quantity for each of Seller's wells to which Buyer is
requ'_-ed to connect as heroin specified.
4.2 from initial delivery of gas hereunder and continuing
throughout tho term hereof the Daily Contract Quantity for each
of Seller's walls shall ba eighty percent (WI) of the Delivery
Capacity of each .such well; provided, however, the Deily Contract
Quantity shall not exceed the maximum quantity of gas permitter)
to be produced under applicable valid rules and regulations of the
Railroad Commission of Texas. If allowable gas volumes are based
on Buyer's nominations, Buyer agrees that it will nominate not
less than the Daily Contract Quantity for each of Seller's wells.
4.3 Buyer shall have the right to purchase and Seller shall de-
liver to Buyer such quantity of gas per day, in addition to the
Daily Contract Quantity, as Buyer may from day to day elect to
purchase, up to the total quantity per day which the wells on
Seller's leases are capable of producing when produced at their
respective maximum efficient rates cf flow; provided that any such
additional quantity shall be ;ratably taken from each of Seller's
wells.
4.4 Buyer agrees to take gas from each of Seller's wells in the
same ratable manner that it takes gas from wells owned by others
from whom Buyer purchases or may purchase gas in the area of
interest, but not at rates less than the Daily Contract Quantity.
4.5 At the request of either party, but at: least four times
each year, the Delivery capacity of each of Seller's wells shall
be conclusively determined by Buyer and Seller by ar.tual measurement
and calculations which determination shall be deemed to be the .
Delivery Capacity until a subsequent determination is made; provided,
however, if in any clay Seller's wells are unable to deliver a volume
of gas at least equal to the voliuro determined by the last Delivery
-lU-
t t.
Capacity test (provided the: delivery limitation is not due to
Buyer's line pressure boing in excess of twenty-five (25) psig),
then the volume actually delivered on such day shall constitute a
new Delivory Capacity test for that day only.
4.6 If at the end of any Year, Buyer shall have failed to take
during such Year the applicable Daily Contract Ouantity from any
of Seller's wells to which Buyer is required to connect hereunder,
after credit is allowed by Buyer for (il deficiency existing
by force majoure, (ii) default of Seller and failure of Seller
to deliver gas in quantities as and when requested in accordance
with the provisions hereof, and (iii) the total of any deficiency
in Seller's allowable for such well covered hereby below the
Daily Contract Quantity on any day or days during su^h Year,
Buyer shall pay for the remaining deficiency as if taken. Payment
for such gas shall be made by Buyer to Seller within sixty (60) days
I
following the close of such Year. If Buyer shall have paid for any
i
gas not actually taken by it from a well during any Year, it shall ba
be entitled to take such qu-intity in installments from such well. as
it may from time to time designate prior to the and of the term
hereof, but Buyer shall pay to Seller (a) any difference between
the price paid by Buyer under paragraphs 5.1 and 5.2 for gas not
taken and the price in existence under such paragraphs at the time
-11--
such gas ip taken by Buyer, and (b) the amounts provided for in
paragraph 5.4 attributable to such gas. In no event shall Seller
be obligated to refund to Buyer any amounts paid by Seller pursuant
to this paragraph. Only that quantity of gas in excess of the
Daily Contract Quantity which Buyer is obligated to purchase
from Seller hereunrie,_' from such well shall he make-up gas.
4.7 Buyer shall not be obligated to maintain connection with
any well when the volume delivered therefrom is less than that
volume required for original connection under the conditions
of this Agreement and in Buyer's sole judgment is not economically
feasible to purchase. If Buyer discontinues the connection of any
such well for a period of ninety (90) days,.Buyer shall upon
written request from Sellex :Colease the well and the acreage
attributable thereto from this Agreement.
ARTICLE V
PRICE
5.1 Buyer agrees to pay Seller the following amount for the
gas purchased and received hereunder:
(a) From initial delivery and continuing for one
(1) year .................................65.7{'/NIMB'I'U
(b) For the second one (1) year period following initial
delivery and each year thereafter the price shall
increase one cent (1C) per MM BTU.
-12-
^r
Ij -7
5.2 At-the end of each Year Seller shall have the right to
have the price payable in 5.1 redetermined based on the higher of
(i) the average of the three hig:.a t prices paid for gas of like
quantity and quality located in Texas Railroad Commission Districts
5, b, 7-B, 7-C, 01 8-T, 9 and 10, and (ii) Lhe best bona fide
third party offer which Scller is willing to accept for its gas;
provided, however, if the price determined in (i) above is
higher than the price determined in (ii) above then Buyer shall
be obligated to pay such price to Seller and if the price de-
termined in (ii) above is higher than Cie price determined ir.
(i) above, then Buyer shall have the option of paying Seller
such higher price or selling its gathering system to Seller at
its depreciated book value or continuing to operate such gathering
system and be paid on a cost of service by Seller computed by
using methods and criteria approved by the Federal Power Corrmision
including a rate of return of eight percent (8%) and in either
event as to any gas paid for by Buyer and not taken from any
well, Buyer shall have the right during the next three (3)
years to take such quantity of gas attributable to such well
at a mutually agreeable point durmstream of the central separation
facility by paying Seiler the then effective price being received
by Seller for gas produced in the area of interest, less the
amounts previously paid by Buyer, for such gas; provided further,
-13-
I
however, no such redetermination shall result in a lower price
than that provided for in paragraph 5.1 above.
5.3 Buyer shall allocate the MMBTUs of gav for which Buyer
shall pay Seller hereunder back to each wellhead by multiplying
the MMBTUs measured at each wellhead times a fraction, the
s
-13a-
numerator of which is the total of MMBTUs of qas measured at the
outlet of Buyer's central separation facility and the denominator
of which is the total of MMBTUs of gas measured at each of the
1
wellheads at which Buyer is purchasing gas hereunder; provided,
however, Seller shall not be charged for any gas used by Buyer
and Buyer's payments to Seller shall be adjusted to reflect any
gas so used by Buyer.
5.4 In addition to the prices payable in 5.1 and 5.2 above,
Buyer shall pay Seller a percentage of the net plant proceeds
derived from the sale of products from Buyer's processing plant
constructed and operated to process the gas purchased hereunder,
such percentage to be based on the average daily quantity of
gas delivered to Buyer from Seller's properties during each
month as follows:
Average MCFD Percent
25,000 or less 25%
25,000-?0,000 30%
30, 000.33, 000 35%
35,000-40,000 40%
40,000-50,000 45%
50,000 and over 50%
The term "net plant proceeds" shall mean the total net amount
rcccived from the sale of productn loss the value of the gas
shrinkage resulting from the operation of the processing plant
..lq-
computed at the price applicable in 5.1 or 5.2 above. The
"total net amount- received" shall be the gross value of the
products recovered and sold less actual payments made for freight
differentials, adjustments for impurities, taxes, cash discounts,
sates commissions, and tank car rentals impos-!d by parties other
than Buyer.
5.5 Buyer shall own and operate at ambient temperatures a
central separation facility for the purpose of separating the
condensate out of the total wellhead stream received by Buyer
at the wellhead and Buyer shall deliver to Seller at such central
I facility all of the condensate so separated. Xf Buyer's gathering
system is operated at pressures in excess of 25 psig, then Buyer
will install and operate stage separation equipment to provide
a 25 psig separation of the high pressure condensate recovered
in the central separation facility. Seller shall furnish ade-
quate storage tanks to ro.ceive the condensate so delivered.
5.6 Buyer shall allocate the percentage of net plant proceeds
provided for in 5.4 above back to each wellhead by multiplyincr
the total payment computed in accordance with 5.4 times a
fraction, the numerator of which is the 1-IM3TUe measured at each
wellhead and the denominaLor of which is the total WABTUs
measured at all the wellheads.
-15-
I
5,7 The-products from Buyer's processing plant shall be sold
at arm's length to a third party or parties which is not a subsidiary,
parent or affiliate of Buyer and without Buyer having a direct or
indirect interest in the subsequent resale or disposal of the
products or any cornnercial relationship affact:ing the sale of the
products, whether created by contract or otherwise, (other than
that created by the sale), or an arrangement involving an exchange
of products or a reciprocal allowance or discount on products.
ARTICLE VI
DELIVERY POINT
6.1 The delivery point of the gas purchased and sold hereunder
shall be the outlet side of the adjustable choke on the wellhead
of each of Seller's wells.
6.2 Title to the gas sold and delivered hereunder shall pass
to Buyer at the point or points of delivery; provided, heaever,
title to the condensate produced from Seller's wells shall revest
in Seller upon delivery to Seller as provided in paragraph 5.5.
Seller shall be in control and possession of the gas delivered
hereunder and responsible for any damage or injury caused thereby
until same shall have been delivered to Buyer, after which de-
livery Buyer shall be deemed to be in exclusive control and
possession thereof- and responsible for any injury or damage
caused thereby.
.16-
ARTICLE VII
DELIVEW PRESSURE
7.1 The gas purchased hereunder shall be delivered at a
I
pressure sufficient to effect delivery into buyer's gathering
i
I
systein against the pressure prevailing therein from time to
time; provided, however, Buyer shall not be relieved from its
obligations hereunder in respect to the Daily Contract Quantity
for any of Seller's wells in the event the line pressure is in
excess of twenty-five (25) prig, it being understood that Buyer
shall not be obligated to lower its line pressure to less than
twenty-five (25) psig.
ARTICLE VIII
QUALI"
8.1 After separation at the central separation facility, the
gas delivered hereunder shall be commercially free of dust, gum,
gum-forming constituents, and other solid and/or liquid matter
and shall conform to the following specifications:
(a) Dust, rust or other solids None
(b) Carbon Dioxide Not more than 3.0% by Volume
(c) Oxygen Not more than 1% by Volume
(d) Iiydr.ogcn Sulfide Not more than 1/4 grain
per 100 cubic feet
(e) Total Sulfur Not more than 20 grains per
100 cubic feet
(f) ([eating Value Not less than 1,000 BTU
(g) Tomperaturo Not more than 1200 r
-17- .
Provided, however, Buyer shall not be obligated to accept gas at
any delivery point containing free water that would cause the
total water r4covered at the central separation facility to exceed
twenty five (25) barrels per day.
8.2 Buyer, at its option, may refuse to accept delivery of any
gas not meeting the quality specifications net out in this
Article VIII; thereafter Seller shall have the right to conform
the gas to the above specifications. If Seller does not elect
to conform the gas to said specifications, then Buyer may accept
gas tendered by Seller hereunder which does not meet the speci-
fications above, treat same to conform to said specifi~-ations
and charge Sellei: for the actual cost of such treating, including
(but not limited to) amortization, fuel, and shrinkage. If
neither Buyer nor Seller elects to treat the gas to conform to
the above specifications, then Buyer shall upon ninety (90)
days' prior written notice from Seller, release from the pro-
visions of this Agreement the well and the acreage attributable
thereto from which such gas is produced.
ARTICLC IX
MCASURT:MENT AND TnSTS
The measurement and te^.ts for quality of gas delivered
hereunder ,hnll be governed by the following;
-18-
9.1 - The volume shall be m:asured by orifice meters installed,
maintained and operated by Buyer, and computations made, as
prescribed in Gas Measurement Committee Report No. 3 of the
American Gas Association as supplemented and modified from time
to time.
9.2 The unit of volume for purposes of measurement shall be
one (1) cubic foot of gas at a temperature base of sixty degrees
j (600) Fahrenheit and at a pressure base of fourteen anI sixty-
five one-hundredths (14.65) pounds per square inch absolute.
9.3 The arithmetical average of the hourly temperature re-
corded during each day, the factor for specific gravity according
to the latest tests, and the corrections for deviation from
Boyle's Law applical-le during each day shall be u-ed to ma)ce
proper computations cf volumes hereunder. Chart integration and
volume computations shall be made as accurately as possible
and within the accurac} prescribed by the manufacturer of the
computing equipment use3.
9.4 11o.ituarature shall at Buyer's option be determined by a
recording tho,..mo;mr ter cone?.nuously used and installed so as to
record properly the temperature of the gas flowing through the
meter.
9.5 Specific gravity shall be determined with accuracy to
the nearest ono-thousandth by taking samples of tl,e gas at the
point of measurement at such times fs may be dotermine(l by
Buyer, and by having tho specific gravity d~~Larminc;cl by the
use of an instrument ccnnmonly u ned and. accepted in the industry.
~t~l®1
9.6 The average atmospheric (barometric) pressure shall
be assumed to be 24.7 psia unless otherwise specified.
9.7 Deviation from Boyle's Law at the pressures, specific
gravities and temperatures upon delivery shall be determined
by joint test as often as found necessary, but not more often
than once during any three (3) month period. The apparatus and
method recommended by the current reports of the American Gas
Association, or as othen,~i:- mutually agreed upon shall be used
in making such tests. ?ach test shall determine the corrections
to be used in computing valume until the next test is made.
9.8 The total gross heating value of the individual wellhead gas
streams shall be determined by taking samples of the gas at each
delivery point at such times as may be mutually agreed by Buyer an-
Seller, but not less often than once each three (3) months; p_n-
vided that, if at any time, either party believes that the heating
value of the gas may have changed, such party may call for a
special test to be conducted at its expense after having given
notice of the time of such test sufficiently in advance to permit
convenient arrangcioents for a representative of the other party
to be present. The gross heating value of the total combined
gas stream will be determined either by a continuous sampler
or by a continuous recording calorimeter at the central separation
facility prier to the installation of the gas processing plant,
.20-
and thereafter at the outlet side of such plant. The MMBTUs
removed due to product shrinkage will be calculated based on plant
liquid products measurement converted to MMBTUs utilizing the
constants contained in N.G.P.A. Publication No. 2145, as revised
from time to time, plus adjustment for plant fuel usage determined
by measurement and BTU determination of the gas so utilized. Any
other use or loss, including that caused by flaring, evaporation
or spillage, will be determined by measurement, estimate,
calculation or other method mutually agreeable to Buyer and
Seller.
9.9 Test for carbon dioxide, water vapor, sulfur, and hl•cir.)-
gen sulfide content of the gas delivered hereunder shall be made
by approvcd sten!?erd methods from time to time as requested by
any party hereto, but not more often than once each three (3)
months.
{
9.10 All measuring equipment, housing, devices, and materials
shall be of standard manufacture and shall, with all related
equipment, ap p liances, and buildings, be installed, maintained,
and furnished by Buyer at its expense in accordance with standards
and specifications generally accepted in the industry. Seller
may install and operate check.-measuring equirxiken~, which shall
not interfere with the use of Buyer's equipment-. All testing
-21-
equipment shall be of standard manufacture and shall be maintained,
operated, and furnished by Buyer at Buyers expense.
9.11 The accuracy of BL•. 's measuring and testing equipment
shall be verified by Buyer at reasonable intervals, but nct
more often than once each three (3) months. Tests for q-ality
of the gas may be made at the time of testing equipment, or at
other times, but not more often than once each three (3) months.
Notice of the time and nature of each test shall be given by
Buyer to Seller sufficiently in advance to permit convenient
arrangements for Seller's representative to be present. Measurin
and testing equipment shall be tested by reasonable means and
methods determined by Buyer. Tests and adjustments shall be
made in the presence of and observed by representatives of both
Buyer and Seller, if present. If after proper notice Seller
fails to have a representative present, the results of the tests
shall nevertheless be ccnside)'^d accurate until the next te_t.
All tests shall be made at Buyer's expense, except that Seller
shall bear the expense of tests made at its request, if the
inaccuracy found is two percent. (2%) or less.
9.12 If at any time any of the measuring or testing equip-
ment is found to be out of service, or registering inaccurately
in any percentage, it shall be adjusted at once to read accur-
-22-
ately, within the limits prescribed by the manufacturer. if
such equipment is out of service, or inaccurate by an amount
exceeding two percent (2Y0) at a reading corresponding to the
average rate of flow for the period since the last preceding
test, the previous readings of such equipment shall be disre-
garded for any period definitely known or agreed upon, or if
not so known or agreed upon, for a period of sixteen (16) days
or one-half (1/2) of the elapsed time since the last test,
whichever is shorter. The volume of gas delivered during such
period shall be estimated by:
(a) using the data recorded by any check-measuring
equipment if installed and accurately registering,
or if not installed or zegistering accurately;
(b) By correcting the error if the percentage of error
is ascertainable by calibration, test, or mathematical
calculation, or if neither such methorl is feasible;
(c) By estimating the quantity, or quality, delivered,
based upon deliveries under similar conditions
during a period when the equipment was registering
accurately.
No corrections shall be made for recorded inaccuracies of two
p_rccnt (2%) or loss.
-23-
9.13 Buyer and Seller shall have the right to inspect equip-
ment installed or furnished by the other, and the charts and
other measurement or testing data of the other, at all times
during buss but thlo reading, calibration, and
'nc.,s hours
adjustment of such equipment and changing of charts shall be
done only by the party owning such equipment. Each party sh<11
preserve all original test data, charts, and other similar
records, in such party's possession, for a period of at least
three (3) years.
9.14 In the event gas produced by third parties is received by
Buyer tlrrough the central separation facility herein provided
for and/or the gasMorocessing plant, Seller shall have the same
I rights as a.-c accor~dlla~? to Seller under this agreement to require
and witness periodic tests of the mcasuring and testir:g equip-
ment installed on each well frc:n ~•rhich such gas is produced.
ARTICLE X
PAYMr: P."r
10.1 After the delivery of gas has commenced hereunder, Buyer
shall, on or before the 25th day of each month, render to Seller
a statement shoring the quantity of gas and the BTU content:
thereof delivered duriwj the preceding month and shall pay Seller
the amount due hereunder on or before the last day of the month
in which :rx:h r.tat.crncnt was rend( ccd. Such ,jLnt:oir ont shall
.24-
also contain all information relative to the payment computation
and an allocation of the amount- of the payment to each of Seller's
wells, in accordance with the provisions of paragraphs 5.3 and
5.6 hereof.
1n.2 Each party hereto shall have the right, at any and all
reasonable times, to examine the books u:,d records of the
other party, to the extent necessary to verify the accuracy of
any statement, charge, computation, or demand made under or
pursuant to this Agreement.
ARTICLE XI
WARRANTY OF TITLE
11.1 Seller warrants title to all gas delivered by it and
warrants that it has the right to sell the same and ti.at such
gas is free fro,,. liens and adverse claims of every kind. Seller
shall pay all royalties and other similar charges on the gas
delivered by Seller. Seller shall indemnify and save Buyer
harmless against all loss, damage, and expense of every
character on account of adverse claims to the gas delivered by
it or of royalties, payments, or other charges thereon applicable
before or on delivery to Buyer. If Seller's title is questioned
or involved in any action, Buyer may withhold payment (without
-25-
interest? of sums due hereunder up to the amount of the claim
until title is free from such question or such action is finally
determined or until Seller has furnished bond conditioned to
save Buyer harmless, with surety satisfactory to Buyer.
ARTICLE XII
TAXF S
12.1 Seller agrees to hay or cause to be paid the taxes lawfully
levied on the gas delivered hereunder prior to its delivery to
Buyer, and Bayer agrees p --,y all taxes lawfully levied on Buyer
applic:abla to such gas aL`c.er delivery to Buyer; provided, ho,,-.,ever,
Buyer agrees to reimburse Speller for eighty-seven and one-half
percent (87;-,'O of any new, additional, or increased taxes (not
including income, excess profits, capital stock, franchise, or
general property taxes) imposed, levied, or assessed ag~.inst or
paid by Seller after t!ie date hereof.
ARTICLE XIII
RIGM S-OF-WAY
13.1 To the extent that it may lawfully do so, Seller ,.4reby
assigns and grants to Buyer an easement across Seller's leases
located in the area of interest for the purpose of installing,
using, inspecting, repniriiiq, operating, replacing, and
removing Buyer's pipelines, rn!ters, and other equipme,,'. uued or
-20-
useful in the performance of this Agreement, all at Buyer's sole
cost, risk, ana expens. Any propurty of Buyer placed in or
upon any of such lands s;iall remain the personal property of
Buyer, subject to remov.-l b; it at any time for any reason, but
in any event within a reasonable time after the termination of
this Agreement.
ARTICLE XIV
FORCE MAJEURE
14.1 Except for Buyer'3 obligations to make payment for gas
delivered hereunder, neither party hereto shall be liable for any
failure to perform the terms of this Agreement when such failure
is due to "force majeure" as hereinafter defined. Tho term
"force majeurn" as employed in this Agreement shall mean acts of
God, strikes, lockouts or industrial disputes or disturbances,
civil disturbances, arrests and rQstraint from rulers or poople,
interruptions by government or court orders, present and future
valid orders of any regulator, body having proper jurisdiction,
acts of the pu)~Iic enemy, wars, riot blockades, insurrections,
inability to secure labor or inability to secure material::,
inability to secure materials by reason of allocations promulgated b.
authorized governmental agencies, epidemics, landslides, lightnin.,
CFlrthyuakes, fire, storm, floods, washouts, explosions, breakage or
accide:,t to machinery or lines of pipe, freezing of wells or pipe-
_27_
lines, inability to obtain easements or rights-of-way, the making of
repairs or alterations to pipelines or plants, partial or entire
failure of gas supply, or any other cause, whether of the kind
herein enumerated or otherwise, not reasonably within the control
of the party claiming "force majeure", the same shall, so far as
possible, be remedied with all reasonable dispatch. The settlement
of strikes or lockouts or industrial. disputes or disturbances
shall be entirely within the discretion of the party having the
difficulty, and the above requirement that any "force majeure"
shall be remedied with all reasonable dispatch shall not require
the settlement of strikes, lockouts or industrial disputes or
disturbances by acceding to the dernands of any opposing party
therein when such course is inadvisabl(: in the discretion of
the party having the difficulty.
ARTICLE %%r
GOVERNrIFI~T RUI_FS AND REGUI.`.TIC"S
15.1 This Agrcemont shall be subject to all valid applicable
State and Federal laws and orders, directives, rules and regula-
tions of any governmental body or official having juxisdi& ion.
.28-
ARTICLE XVI
EI* ECT.LVE DATE AND TMI
16.1 This Agreement shall be effective from the date on which
Dallas Production, Inc. furnishes to Buyer its written certifica-
tion that counterparts of this Agreement have been executed by
parties owning not less than 80% of the aggregate of the working
interests in the wells listed on Exhibit "B", with the exception
of Adams Rl. McCallum #1, and Griffin #1 llo1ls, accompanied by
such executed counterparts, and shall remain in full force and
effect for twenty (20) ytars from and after the date of f-irst
deliveries of gas hereunder.
ARTICLE XVII
INTRASTATE USE
17.1 Except such cmcrcjency gas that Buyer is authorized to
sell rur. cant to Federal Co,,m,,ission Orders No. 402-1, and
No. 431, it is agreed that the gas covered hereby shall not be
transported, used or consumed outside the State of Teicas; pro%pide::,
however, buyer shall not make any sale under roderal Power
mission Order mo. 431 unless a final unappoalable order sli,;11
have boon issued by the federal Fearer Comiiii ssion with pro-granted
ab.andorur.ent provision, nor shall Buyer otherwise make any sale
which woxild yonder the sale fror:, Seller to Buyer subject to the
-29-
i
jurisdiction of the Federal Power Comnission.
ARTICLE XVIII
ARBITRATION
18.1 In the event of any dispute or controversy between the
parties hereto involving the operations under this Agreement,
same shall be settled by arbitration. Each of the parties shall
appoint an arbitrator and the two appointed shall select a third
arbitrator within thirty (30) days. The award of any t%..o
arbitrators shall be conclusive upon the parties and shall be
made within thirty (30) days after the appointment of the third
arbitrator. Each party shall pay the expenses of the arbitrato,
selected by it and the expcnses of the third arbitrator shall be
shared equally by the parties.
ARTICLE XIX
ASS IGNME'NT
19.1 This Agreement shall extend to and be binding upc~-: the
parties, their heirs, administrators, successors, and assigns,
but no transfer of or succession to the interest of cithcr party
hereunder, wholly or partially, shall. affect or bind the other
party until it shall have been furnished with written notice and
a true copy of such assignment or with other ptopcr proof that
the claimant is legally entitled to such interest. It is further
agreed, however, that nothing herein contained slhr,l.l in any way
prevent cithcr party hereto from pledging or mortgngirnq -!I1 or
30-
any part of such party's property as security under any mortgage,
deed of trust, or other similar lien or from pledging this Agree-
ment of any benefits accruing hereunder to the party making the
pledge, without the assumption of the obligations hereunder by
the mortgagee, pledgee, or other grantee under such an instrument.
ARTICLE XX
NOTICES
20.1 Any notice, request, demand, or statement provided for
in this Agreement shall be in writing and deemed given when
deposited in the United States mail postage prepaid directed to
the post office address of the parties as follows:
BUYER: Delhi Gas Pipeline Corporation
One Allen Center, Suite 1140
Houston, Texas 77002
SELLER & Dallas Procilaction, Inc.
SELLER'S Meado,;;s Bi.ilding
REPRES17N- Dallas, Texas
TATIVE
or at such address as either party may from time to time designate
as the address for such purpose by registered or certified 1,?tter
addressed to the other party.
20.2 All parties Seller hereby appoint Dallas Production, Inc.
to serve ,;s their repro entative hereunder for the purpose of
givin~j and receiving notices and requests, making and witness-.ng
torts, delivering the quantities of gas deliverable hcrcunder,
receiving 1?aplont, therefor and distributing such payments ariong
-31-
WLMNL
the various parties Soller, and doing and receiving all things
provided for concerning Seller in this Agreement. Buyer may
act, and shall be fully protected in acting, in reliance upon
any and all acts and things done and performed by, or agreements
with respect to all matters of the parties Seller by such ropre-
nontative as fully and effectively as though each had done, per-
formed, rude or executed the same, and Buyer shall not be required
to see to the application of any monies paid to such representative.
Such parties Seller may change their representative and designate
one of their number as the new representative from time to time
by delivery of written notice of change of designation to Buyer.
20.3 It is agreed that each party Seller is acting herein severally
and not jointly. Each is selling its proportionate part of the
gas, and the various covenants, agreements and obligations imposed
upon Seller in this Agreement shall be applicable to each party
Seller severally and to the extent of its interest in the gas
produced from the leases. No party Seller shall be responsible
or liable for the breach of this Agreement by any other party
Seller.
ARTICLE XXI
COUN` MPART EX3,CUTION
21.1 This Agreement may be executod in any number of counter-
parts, no one of which need be executed by all pr,rties, or may be
i
- 32-
• I
id"
ratified by separate instrument, in writing specifically referring
hereto, and it shall be binding upon all parties who execute a
counterpart or ratification with the same force and effect, and
to they same extent, with each separate counterpart or ratification,
deemoO to be an original. The Daily Contract Quantity referred
to heroin, contemplates the execution or ratification of this
Agreement by all parties owning working and oparating interests
i
i
f
-32a-
in Seller's wells, and in the event of the failure of all parties
owning working and operating interests in any of Seller's wells
to join in or ratify this Agreement, the Daily Contract Quantity
with respect to such wall shall be proportionately reduced to
reflect such failu::o.
ARTICLE XXII
MISCELLANEOUS
During the first five (5) years of this Agreement, Buyer shall
not directly or indirectly acquire any non-producing leases within
tho area of interest= pro,~'.ded, however, this provision shall
not in any manner prohibit Buyer from purchasing developed
oil or gas producing properties within the area of interest
nor prohibit Buyer from acquiring any non-producing lease which
I
Seller has surrendered with no plans to renew.
IN WITNESS WIIEREOF, the parties hereto have executed this
Agreement as of the day and year horeinabovo written.
BUYS P :
DELIII GAS PIPELINE CORPORATION
ATTEST
By_
A sistant Secrotn. Vice President
SELLER:
DALLAS I1110DUCTIO140 INC.
ATTr ST:
;;cc:rc terry ~rr.:ot(Iont
_33-
ATTEST/WITNESS:
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ATr?, ST/W ITN E "S : '
PANTHER ,DRILLING COMPANY
A'TTESTMITNESS:
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Attached to and made a part of that curtain
Gas Purchaso Agreement dated *AY 4 1973
1973, between Delhi Gas Pipeline Corporation,
As Buyer, and Dallas Production, Inc., of al,
as Seller, Denton and Wise Counties, Texas
.sac.. Area of Interest
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EXIIII31T "B"
Attached to and mado a part of that certain Gas Purchase
Agreement dated may h, 1973, between Delhi Gas Pipeline
Corporation, as Buyer, and Dallas Production, Inc., et al, as
Sollor, Denton and Wise Counties, Texas, shueiing the wells complete-
as of the date hereof.
Do-,ton County Wise County
Cuffman #1 Young #1
COX #1 Smith-Gentry #1
E,irers #1 Hancock #1
Tiridle #1 Malono #1
Lea ##1 Sitz #1
Lea "A" #1 Flinn 41
Boyd #1 Pitts-SVindor #1
Langley 41 Ferguson 01
Barnett #1 Ferguson "A" #1
Rickrich 01 Ferguson "B" #1
Huey #1 Ferguson "D" #1
Schluter 41. Ferguson "E" #1
Kibler #1 Ferguson "F" #1
McCallum "A" Ferguson "G" #1
McCallum "B" Smith 441
McCallum ##1 Blanton 01
Harrington 01 Garrett #1
Harrington 42 Adams 01
Griffin ¢#1 Branch #1
AMA= INC.
ATTVV ST/WITNCS
J }~n C. C rnahan J hn W. Mason
Assistant Secretary resident
ATTEST/WITNESS:
- -
ATTEST/WITNESS:
ATTEST/WITNESS:
ATTEST/WITNESS:
ATTEST/WITNESS:
ATTEST/WITNESS:
ATTr, 5T/W i'PNL s S :
-34-