North American Energy Standards Board
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via posting
TO: NAESB Wholesale Gas Quadrant Contracts Subcommittee and Interested Industry Participants
FROM: Elizabeth Mallett, NAESB Staff Attorney
RE: NAESB Wholesale Gas Quadrant (WGQ) Contracts Subcommittee Meeting Final Minutes – June 12, 2012
DATE: June 18, 2012
NORTH AMERICAN ENERGY STANDARDS BOARD
WGQ CONTRACTS SUBCOMMITTEE MEETING
HELD AT THE NAESB OFFICE IN HOUSTON, TX
June 12, 2012 – 10:00 AM to 3:00 PM Central
FINAL MINUTES
1. Welcome & Administrative Items
Mr. Sappenfield opened the meeting and welcomed the meeting participants. Ms. Mallett provided the antitrust guidance. The participants introduced themselves in the room and on the phone. Mr. Sappenfield reviewed the draft agenda and recommended that it be modified to include time for questions about the LEAP contract from Mr. Jandora. The agenda was also modified to delay the approval of the May 15, 2012 draft minutes until the next meeting. Ms. Denton moved, seconded by Ms. Klecka, to adopt the agenda as modified. The motion passed without opposition.
Mr. Sappenfield reviewed the draft minutes from the March 7, 2012 meeting and asked if anyone would like to offer any modifications. Ms. Denton moved, seconded by Ms. Klecka, to adopt the minutes as final. The motion passed without opposition. The final meeting minutes can be found through the following hyperlink: http://www.naesb.org/pdf4/wgq_contracts030712fm.doc.
2. Development of 2012 WGQ Annual Plan Item 7.b – Development of NGL Master Purchase and Sales Agreement
Mr. Sappenfield directed attention to several work papers posted for this meeting. The participants decided to review the comments submitted by C. Brown from BP, P. Abel from Suburban Propane, and J. Lavery from Chevron Products Company during the meeting on July 10, 2012. Mr. Sappenfield reviewed the outlay and design of the Product Specifications document, and asked each participant to generate a list of Products they believed should be covered under the NGL Agreement. It was noted that a Product could be attached to the confirmation page to cover a transaction where there is no specification, such as crude or a tank at a wellhead. Mr. Sappenfield stated that a specification list of the top 30 or 50 Products would be beneficial to inform interested parties what Products were considered as the contract was drafted.
The participants continued their review of the terms for exchanges in Section 7.4. The term, “Gallon-for-Gallon,” was changed to “Unit-for-Unit” and the addition of a parenthetical, “(Gallons or Barrels),” was added. The term, “Point(s) of Delivery” was changed to “location(s) of Delivery” to conform to the sections above.
Ms. Klecka asked the group if pipelines ever change tariffs in the middle of the month. Mr. Ray stated that a change in the middle of the month could, theoretically, happen, but most pipelines’ practice is to modify their tariff at the beginning of the month. Mr. Brown supported Mr. Ray’s comment. The participants discussed exchange differentials based on pipeline tariffs. Mr. Sappenfield stated that an option or recognition that parties can agree to an exchange differential should be added to the document.
The participants made minor grammatical corrections to section 7.5. After it was determined that the term “Agreement,” was not defined, participants agreed to replace the term “Agreement” with the term “Contract” in all instances where the term “Agreement” appeared, excluding instances of the term “Master Agreement.” Mr. Sappenfield undertook the task of making the change throughout the document after the meeting. The participants also agreed to remove the headings for sections 7.4 through 9.0.
After Ms. Ike identified a conflict between section 7.3 and section 2.39 regarding the timeline of the payment date, the participants agreed to make the sections consistent with the definition of Payment Date, which provides a timeline of “net ten Days after the receipt by Buyer of the invoice.” During the review, the participants made other modifications to section 7.3 and added the term Interest Rate to section 2.
Next, the participants reviewed section 7.7 and section 7.8 and determined to replace the sections in their entirety with section 7.6 of the NAESB Base Contract.
The participants highlighted the cross reference in section 8.3 to sections 8.2 and 15.8 and agreed to return to review the reference during a future meeting. At the recommendation of Mr. Ray section 8.3 was modified to replace the words “merchantable title” with “free and clear title.”
Ms. Pantazi noted that section 8 uses the terms “Seller” and “Delivering Party” interchangeably, but that only the term “Seller” is a defined term. Mr. Sappenfield stated that the term “Seller” should be used instead of “Delivering Party” and any instance of the term “Delivering Party” in the document should be replaced by the term “Seller.” Likewise, the term “Buyer” should be used instead of the term “Receiving Party.”
There was debate among participants about whether language regarding the hazardous nature of the product should be removed from section 8.5. Mr. Sappenfield stated the language should be removed as there is a whole section of the agreement devoted to MSDS. Mr. Ray responded that some parties to the contract may have a duty to warn beyond the MSDS and that the language regarding hazardous nature should remain in section 8.5 because it would be sufficient enough to cover a duty beyond the MSDS. After further discussion, the participants decided to keep the representation and warranty of the Buyer’s knowledge that the Product is hazardous material remained in the document but remove language which warned of odorant loss and required odorant testing.
Mr. Sappenfield expressed concern that many clauses in the contract addressed propane, while there was a separate propane section. The Warranty of Title and Indemnification portions of the contracts were deleted and the participants agreed to revisit the sections after the Propane Section was completed. After noting that 8.13 and 8.14 were similar to the other clauses in the contract, these sections were deleted. Section 8.15, which related to broker’s fees, was deleted because the contract does not allow for third party participants to the agreement.
The participants moved on to discuss section 9, Notices. In 9.1 the term, “Master Agreement” was replaced with “Contract.” In Section 9.2 the term “hand delivered” was changed to “hand delivery.” Ms. Klecka noted that section 9.3 implied that facsimile was the only acceptable electronic communication form for notice and suggested other electronic means, such as emails, should be included. Mr. Brown responded that many companies did not allow for electronic communications of notice via email. It was noted in section 9.3, that the term “receiving party was correct and should not be replaced with the term “Buyer.” In section 9.4, the participants decided to remove the phrase “commercially reasonable.”
Next, the participants focused on section 10, Credit, Financial Responsibility, and Events of Default. Minor grammatical changes were made to Section 10.1. The participants decided to add two additional sub-bullets to section 10.2 to explain the rights of a non-defaulting party in the circumstances of a default. Participants noted that numbers less than ten should be spelled out throughout the document. Ms. Mallett will make the necessary changes after the meeting.
The participants discussed section 10.3 which covers termination damages. Mr. Sappenfield asked the participants whether applying early termination damages or not applying early termination damages was the more common practice within the industry. The participants agreed applying early termination damages to be more common and removed language to the contrary. In reviewing the section regarding other agreement setoffs, Mr. Sappenfield explained to the participants that this selection was strongly rallied for and included bilateral and triangular setoffs. Ms. Klecka suggested that the “Other Agreement Setoffs Do Not Apply” section of 10.3.2 be deleted. After deleting Section 10.3.2, the participants highlighted 10.5 to note that they would return to it in the future.
Mr. Jandora, representing LEAP, stated that LEAP will soon begin a review of their agreements and is looking for nonmember feedback. He asked the Contracts Subcommittee why they decided to draft a completely new NGL Master Agreement instead of using the LEAP Base Contract. Mr. Sappenfield replied that NAESB conducted a survey to measure NAESB member and industry interest in a NAESB NGL Master Agreement. In subsequent subcommittee meetings after the survey results were analyzed, it was determined that there was a desire for NAESB to create a NGL Master Agreement, as a heavily supported standards agreement does not exist. The subcommittee analyzed several existing NGL agreements, including the ConocoPhillips GTCs, the Williams Resources Contract, the Targa Contract and the LEAP Agreement, to come up with a draft strawman for a NAESB NGL Master Agreement. Through discussion of the existing agreements, the subcommittee determined that the ConocoPhillips CTC is most supported agreement. Participants at the meeting commented that they found the LEAP Agreement to not be a user-friendly framework and time consuming to complete.
3. Future Meeting Dates
Mr. Sappenfield announced that the NAESB office has confirmed that the next two WGQ Contracts Subcommittee meetings will be on July 10, 2012 and July 24, 2012. Both meetings will be face-to-face and held at the NAESB office in Houston.
4. Other Business
Mr. Sappenfield informed participants that the next section to be addressed would be Force Majeur and requested that before the next meeting, the participants consider what clauses should be included in that section as well as review the definitions of “Firm,” “Wet,” “Any,” and “Ratable.” Ms. Klecka requested a clean version of the document be posted alongside the redlined version on the NAESB website.
6. Adjourn
Ms. Klecka motioned, seconded by Mr. Brown, to adjourn. The meeting adjourned at 3:00 PM Central.
7. Attendance
Name / Organization / Participation /Chuck Brown / BP / In Person
Deke Canada / Hall Estill / Phone
Rhonda Denton / BP / In Person
Brent Haggy / OGE Energy Resources / Phone
Stephanie Harris / Enterprise Products / Phone
Angela Ike / DCP Midstream, LP / In Person
Kevin Jandora / LEAP and CD Gray Consulting / Phone
Ellen Klecka / Targa Resources / In Person
Jane Lavery / Chevron / Phone
Tara Liscombe / Louis Dreyfus Highbridge Energy / Phone
Lisa Lockhart / DCP Midstream, LP / In Person
Dina Magnar / Louis Dreyfus / Phone
Elizabeth Mallett / NAESB / In Person
Cary Metz / OGE Energy / Phone
Sylvia Munson / SunGard / Phone
Thomasine Pantazis / ConocoPhillips / In Person
Randy Parker / Exxon Mobil / In Person
Kathy Peters / Phillips 66 / In Person
Andrew Ray / ETP / In Person
Keith Sappenfield / Encana / In Person
NAESB WGQ Contracts Subcommittee Meeting Final Minutes
June 12, 2012
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