Pipeline Capacity Lease Agreement [Renewal]- LaGloria Oil and Gas Co. and Plains Marketing LP
ONE-YEAR RENEWAL OF PIPELINE CAPACITY
WHEREAS, LaGloria Oil and Gas Company ("LaGloria") and Plains Marketing,
L.P. ("Plains"), as successor to Scurlock Permian LLC are parties to that
certain Pipeline Capacity Lease Agreement ("Lease") dated April 12, 1999, a copy
of which is attached hereto as Exhibit "A"; and
WHEREAS, the Lease was for an Initial Term of five Lease Years commencing
on January 1, 2000 and expiring on December 31, 2004; and
WHEREAS, the Lease provides that it may be renewed on a year-to-year basis
after the expiration of the Initial Term; and
WHEREAS, LaGloria and Plains desire to renew the Lease for one additional
Lease Year commencing on January 1, 2005 and ending on December 31, 2005.
NOW THEREFORE, in consideration of the premises and mutual covenants and
conditions contained herein, and in the Lease, LaGloria and Plains hereby agree
to extend the term of the Lease for one Lease Year beginning on January 1, 2005
and ending on December 31, 2005. The Lease as extended herein shall remain in
full force and effect in all of its terms and provisions for one additional
Lease Year, subject to the following changes, modifications and/or amendments
thereto:
1. SECTION 2 (LEASE OF CAPACITY)
The first sentence of subsection 2.c.of the Lease shall be deleted in its
entirety and the use by LaGloria of Plains' tankage at Munro Station (tank
numbers 992 and 1016) shall no longer be included a part of the Lease.
Pursuant to the provisions of subsection 2.e. of the Lease, the parties
agree that LaGloria has already received the inventory in the storage tanks at
Plains' Munro Station, except for approximately 4,600 barrels mat still remain
in the tanks. Plains and LaGloria will make arrangements within the next sixty
(60) days for the delivery of these 4,600 barrels to LaGloria, with all costs
and expenses related to such delivery to borne by LaGloria. Upon such delivery,
LaGloria will acknowledge in writing its receipt of the entire inventory
formerly held in the storage tanks and release Plains from any obligation or
liability associated with such inventory.
In addition, subsection 2.g. of the Lease shall be deleted in its
entirety.
2. SECTION 4 (RENT)
Pursuant to the provisions of subsection 4.c. of the Lease, the monthly
Rent for the additional Lease Year provided for hereunder shall be [***] per
barrel of crude oil received from LaGloria the previous month at Plains'
ten-inch 300-pound scraper trap at
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LaGloria's Nettleton Station, as measured by LaGloria's positive displacement
meter, subject to the provisions of paragraph number 3 below. LaGloria shall
make payment of the monthly Rent due hereunder as provided for in Section 4 of
the Lease. However, on or before December 30, 2004 LaGloria shall provide Plains
with either a cash deposit equal to the parties' good faith estimate of the
amount of two (2) months Rent under the Lease or provide Plains with an
irrevocable letter of credit for such amount in a form and from a bank
acceptable to Plains. The term of the letter of credit will run until January
31, 2006. If LaGloria elects to provide a cash deposit to Plains hereunder,
Plains will keep the cash deposit in its account for the term of the Lease. The
cash deposit will earn interest at the one year Libor rate as quoted in the
Money Rates section of the Wall Street Journal on the date the cash deposit is
received by Plains from LaGloria. If at the end of the term of the Lease,
LaGloria has paid Plains all of the Rent due hereunder, Plains will return the
cash deposit to LaGloria within thirty (30) days thereafter, including any
interest earned thereon. It is expressly understood by LaGloria that Plains
shall have the right prior to the return of the cash deposit to LaGloria to
offset any unpaid Rent due Plains under the Lease. Plains shall have the right
from time-to-time to increase the amount of the Letter of Credit or the cash
deposit required hereunder if the rate of Rent hereunder is increased pursuant
to paragraph 3 below or if the monthly volumes hereunder increase more than 5%
from those volumes initially used to determine the amount of the letter of
credit or cash deposit hereunder.
3. HYDROSTATIC TESTING OF PLAINS' PIPELINE
In compliance with Plains' pipeline operating standards, Plains will be
conducting a hydrostatic test or smart pig ("Testing") on the Plains' Pipeline
during the first calendar quarter of 2005. It is Plains' understanding that
LaGloria will be conducting a turnaround of its refinery during February 2005.
Plains hereby agrees to coordinate as much as reasonably possible its Testing of
the Plains' Pipeline with LaGloria's scheduled refinery turnaround. The Testing
will be conducted in segments that will require an estimated 5 to 6 days of
downtime for each segment. It is understood that Testing periods may be extended
due to the uncertainties of the testing process. LaGloria agrees that Plains has
no obligations or liability to LaGloria due to the loss of use of Plains'
pipeline capacity under this Lease during such Testing. It is expressly
understood by LaGloria that in determining the Rent rate provided for in
Paragraph 2 above, Plains has estimated the total cost at [***] for conducting
the Testing and any repairs or other work required based on the results of such
Testing to maintain the Pipeline in compliance with Plains' pipeline operating
standards and/or any applicable regulatory rules and requirements. In the event
that after conducting such Testing, Plains determines that the total costs to
bring the Pipeline into compliance will exceed [***] by more than 5%, Plains and
LaGloria will negotiate in good faith some combination of monthly rent increase,
volume commitment and /or Term increase so as to adequately compensates Plains
for the additional costs to be incurred by Plains. LaGloria hereby agrees to
execute a written amendment to the Lease acknowledging its agreement to pay such
higher monthly Rent, make such volume commitment and/or such increase in Term as
mutually agreed to by the parties. If the parties are unable to come to a mutual
agreement within a reasonable time after Plains determines the total costs,
Plains shall have the right, without
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liability of any kind whatsoever to LaGloria, to cancel the Lease prior to
putting the Pipeline back into service after such Testing. LaGloria shall remain
responsible for any Rent unpaid at the time of Plains' cancellation of the
Lease.
Capitalized terms not defined herein shall have the meanings ascribed to
them in the Lease.
The Lease shall remain in full force and effect in all of its terms except
as otherwise provided for herein. In the event of any conflict between the terms
of the Lease and the terms of this One-Year Renewal Of Pipeline Capacity Lease
Agreement, the terms of this One-Year Renewal Of Pipeline Capacity Lease
Agreement shall control.
IN WITNESS WHEREOF, LaGloria and Plains have executed this One-Year
Renewal Of Pipeline Capacity Lease Agreement on this 21st day of December 2004,
to be effective as of January 1, 2005.
PLAINS MARKETING, L.P.
By: Plains Marketing GP Inc., its General Partner
By: /s/ George R. Coiner
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George R. Coiner, Senior Group Vice President
LaGloria Oil and Gas Company
By: /s/ RG Chapman
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Name RG Chapman
Its: VP Refining
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