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Thunder Creek NGL Pipeline, LLC: Open Season Notice

October 30, 2013
Meritage Midstream

I.Binding Open Season for Natural Gas Liquids Transportation Service

On October 30, 2013, Thunder Creek NGL Pipeline, LLC (“Thunder Creek”) issued a press release announcing the construction of a new interstate common carrier natural gas liquids pipeline (the “Project”) that will transport natural gas liquids (“NGLs”) from origin points located in Converse and Campbell Counties, Wyoming to destination points located in Laramie County, Wyoming and Weld County, Colorado.  In particular, the origin points of the Project are expected to include, but are not limited to, the following locations:  (1) Thunder Creek Gas Services, L.L.C.’s Fifty Buttes Processing Plant in Campbell County; (2) Thunder Creek Gas Services, L.L.C.’s Processing Plant in Converse County; (3) Tallgrass Energy Partners LP’s Douglas Processing Plant in Converse County; (4) Access Midstream Partners, L.P.’s Bucking Horse Processing Plant in Converse County; (5) ONEOK Partners, L.P.’s Sage Creek Processing Plant in Converse County; (6) Thunder Creek Gas Services, L.L.C.’s 4-43 Processing Plant in Campbell County; and (7) Western Gas Partners, LP’s Highlight Plant (collectively, the “Origin Points”).  The destination points of the Project are expected to include, but are not limited to, the following:  (1) an interconnection with Overland Pass Pipeline in Laramie County, Wyoming; and (2) an interconnection with Front Range Pipeline in Weld County, Colorado (collectively, the “Destination Points”).  The Project will be a ten inch (10”) diameter, 196 mile pipeline with a design capacity of approximately 40,000 barrels per day (“Project Capacity”).  The Project is scheduled to become operational in the Second Quarter of 2015.     

Thunder Creek will conduct an open season to provide the opportunity for any party to make volume and/or acreage dedication commitments, as discussed in Section II(B) and (C) below, for transportation on the Project (“Open Season”).  The Open Season will commence at 8:00 a.m. Mountain Time on October 30, 2013, and will end at 5:00 p.m. Mountain Time on November 29, 2013 (“Open Season Period”).  Interested parties should submit their binding bids by completing and executing a Transportation Services Agreement (“TSA”) in accordance with Section III(C) herein and sending it to Thunder Creek by no later than the close of the Open Season Period:  5:00 p.m. Mountain Time on November 29, 2013.  The initial form of the TSA will be made available to interested parties upon execution of a Confidentiality Agreement in a manner satisfactory to Thunder Creek, a form of which is attached as Exhibit No. 1.

II.Proposed Commitment Options and Rate

A.Overview

The Open Season provides potential shippers with the opportunity to: (1) make long-term volume commitments of at least 2,500 barrels per day (“bpd”) on up to ninety percent (90%) of the Project Capacity (“Firm Service Option”) and/or (2) dedicate the NGLs produced from working interests covering at least 25,000 net mineral acres under oil and gas leases or mineral interests for transportation on the Project (“Acreage Dedication Option”).  Thunder Creek will reserve at least ten percent (10%) of the Project Capacity for uncommitted shippers that elect to make timely monthly nominations (“Uncommitted Shippers”).  Uncommitted Shippers are those shippers that do not make a volume commitment for transportation on the Project in a binding TSA during the Open Season, which shall include those shippers electing only the Acreage Dedication Option.

B.Firm Service Option

Each shipper electing a Firm Service Option (“Firm Shipper”) must agree to ship a specified volume of NGLs per month (“Volume Commitment”) on the Project for a ten (10) year term, in accordance with the terms of the Firm Shipper’s Final TSA.[1]  Any Firm Shipper that fails to ship its Volume Commitment during any month during the term of the TSA will be required to make a shortfall payment to Thunder Creek, the calculation of which is set forth in detail in the TSA.  Firm Shippers shall receive firm service—i.e., service not subject to prorationing except in events of force majeure or other events that result in the Project operating at less than its design capacity (e.g., maintenance)—from the Origin Point(s) to the Destination Point(s) specified in the TSA with respect to their Volume Commitment; Firm Shippers will pay a premium rate in comparison to the rate applicable to Uncommitted Shippers in exchange for this firm service.

Firm Shippers can elect one of two Firm Service options.  Firm Shippers electing Firm Option 1 agree to ship at least 2,500 bpd on the Project, at the premium rate applicable to Firm Option 1 shippers.  Firm Shippers electing Firm Option 2 agree to (1) ship at least 2,500 bpd on the Project, and (2) dedicate the NGLs produced from working interests covering at least 25,000 net mineral acres under oil and gas leases or mineral interests for transportation on the Project (“Dedicated Acreage”), also for a ten (10) year term, in accordance with the dedication and commitment terms set forth in the TSA.  The rate applicable to Firm Shippers electing Firm Option 2 will be at a premium rate in comparison to the rate applicable to Uncommitted Shippers, but will be discounted as compared to the rate applicable to Firm Shippers electing Firm Option 1, with the amount of such discount based upon the amount of Dedicated Acreage the Firm Shipper dedicates and commits in its TSA.

C.Acreage Dedication Option

Shippers electing the Acreage Dedication Option (“Acreage Dedication Shipper” and, collectively with Firm Shippers, “TSA Shippers”) agree to dedicate the NGLs produced from working interests covering at least 25,000 net mineral acres under oil and gas leases or mineral interests (“Dedicated Acreage”) for transportation on the Project for a ten (10) year term, in accordance with the dedication and commitment terms set forth in the TSA.  Acreage Dedication Shippers will not receive firm service or any other prorationing benefits for the NGLs that they transport on the Project.  The rates applicable to Acreage Dedication Shippers will be discounted compared to the rates applicable to Firm Shippers and Uncommitted Shippers that are not Acreage Dedication Shippers, with the amount of such discount based upon the amount of acreage the Acreage Dedication Shipper dedicates and commits in its TSA.

D.Allocation of Capacity to Firm Shippers During the Open Season

If Thunder Creek receives more commitments for firm service in the open season than there is capacity available for such commitments (“Firm Shipper Capacity”), Thunder Creek will award the Firm Shipper Capacity to potential Firm Shippers based upon the net present value (“NPV”) of the volume commitment that each Firm Shipper made in Exhibit A to its executed TSA.[2]   Potential Firm Shippers having a volume commitment with a higher NPV will have priority over potential Firm Shippers having a volume commitment with a lower NPV.  If two or more potential Firm Shippers have volume commitments with the same NPV, and should there be insufficient Firm Shipper Capacity to meet such requests, such Shippers will receive the lower of (1) their commitment volume, or (2) their pro-rata share of the remaining capacity.  If the volume level awarded to any Firm Shipper as a result of such pro-rata distribution is below the applicable minimum subscription level of 2,500 bpd, Carrier shall have the right to reject such Shipper’s TSA.

III.Open Season Process

A.Open Season Documents

The following documents will be provided as part of the Open Season (collectively, the “Open Season Documents”):

  • Exhibit No. 1: Confidentiality Agreement
  • Exhibit No. 2: Transportation Services Agreement
  • Exhibit No. 3: Project Map

Thunder Creek will provide Exhibit Nos. 2 and 3 upon execution of a Confidentiality Agreement in a form satisfactory to Thunder Creek, a form of which is attached hereto as Exhibit No. 1. 

Thunder Creek reserves the right to revise the terms of the Open Season or any of the Open Season Documents.  Thunder Creek will inform prospective shippers of any such revisions, as well as the availability of any additional information regarding the Open Season process or the Open Season Documents, by e-mailing the potential shippers that have received the Open Season Documents.

B.TSA Comment Period

Potential TSA Shippers may provide comments to Thunder Creek on the terms and conditions of the TSA in Exhibit No. 2, provided that such comments are received on or before November 20, 2013.  Following receipt of any such comments, Thunder Creek will, in its sole discretion, decide whether to revise the TSA in Exhibit No. 2 to reflect any of the comments.  If Thunder Creek elects to revise the TSA set forth in Exhibit No. 2 to reflect any such comments, then Thunder Creek will forward a TSA that has been updated to reflect any changes made during the Open Season Period (“Final TSA”) to all parties that have executed the Confidentiality Agreement set forth in Exhibit No. 1 on or before November 25, 2013.  Any changes or modifications to the Final TSA by a potential TSA Shipper may, at Thunder Creek’s election, preclude that shipper’s ability to be allocated capacity under this Open Season process.

C.Binding Commitment Process

Following receipt of the Final TSA (as described in Section III(C) below), potential shippers that wish to become TSA Shippers must complete, execute, and submit two copies of a Final TSA no later than 5:00 p.m. Mountain Time on November 29, 2013, via hand delivery, courier, fax, or e-mail to:

Richard J. Gognat
Senior Vice President and General Counsel
1120 Washington Ave., Suite 200
Golden, CO 804041
Telephone: 303-551-8163
Fax:  303-551-8862
Email:   

Thunder Creek reserves the right to reject any Final TSA that is not received on or before 5:00 p.m. Mountain Time on November 29, 2013.  Thunder Creek also reserves the right to reject any and all Final TSAs that do not satisfy the requirements set forth in this Open Season Notice.  Without limiting the foregoing, Thunder Creek may reject any Final TSA that is incomplete, is inconsistent with the terms and conditions outlined in this Open Season Notice, contains additional or modified terms, or is otherwise deficient in any respect. 

Submission of an executed Final TSA constitutes a firm offer by a potential TSA Shipper to enter into a binding Final TSA and shall be irrevocable.  By executing and submitting a Final TSA to Thunder Creek, the potential TSA Shipper represents that it has management approval to enter into a binding Final TSA. 

Thunder Creek will, upon receipt of an executed Final TSA from a potential TSA Shipper, calculate and include in the Final TSA the Volume Commitment expected to be applicable to such shipper, if any.  Thunder Creek will then indicate its acceptance of each Final TSA submitted by a TSA Shipper by executing both copies, and returning one copy to the shipper.  Once executed and delivered by Thunder Creek, the Final TSA shall constitute a binding agreement, subject to its terms and conditions at the time of receipt. 

If a submitted Final TSA has not been executed by Thunder Creek and returned to the potential TSA Shipper by fifteen (15) days following the end of the Open Season Period, the submitted Final TSA shall become null and void, and any rights or obligations relating to the Project on the part of the TSA Shipper and Thunder Creek shall be extinguished.  If Thunder Creek decides not to proceed with the Project, Thunder Creek shall notify potential TSA Shippers of such determination.  In the event of such a determination not to proceed with the Project, the submitted Final TSAs shall become null and void.

IV.Credit Requirements

As further specified in the TSA, each TSA Shipper shall provide financial data sufficient for Thunder Creek, in its sole discretion, to ascertain the TSA Shipper’s credit-worthiness and, if Thunder Creek so determines, it may request financial assurance(s) from the TSA Shipper, which may be in the form of a letter of credit or a guaranty agreement, or such other security as may be acceptable to Thunder Creek. 

V.Acreage Dedication Information 

Carrier requests that each potential Acreage Dedication Shipper provide to Carrier, prior to the end of the TSA Comment Period (November 20, 2013), the following information: (i) GIS shape files for its proposed Dedicated Acreage, (ii) a complete list and legal description of all oil and gas leases covering any of the proposed Dedicated Acreage that are owned by the potential Acreage Dedication Shipper and/or its affiliates, along with the lease expiry dates, gross and net acres for such leases, (iii) reserve studies and type curves for wells within the potential Dedicated Acreage that are within the potential Acreage Dedication Shipper’s possession or control, and (iv) a projected rig count and drilling schedule for the proposed Dedicated Acreage.

VI.Limitations and Reservations

The Project, including the pipeline configuration, is subject to revision after the conclusion of the Open Season Period.  Thunder Creek reserves the right, in its sole discretion, not to proceed with construction—in whole or in part—of the Project.  Prior to the time that all Final TSAs are returned to Thunder Creek by prospective TSA Shippers and have been fully executed by both the TSA Shippers and Thunder Creek, Thunder Creek further reserves the right, in its sole discretion, to modify any of the Open Season materials, including the rates applicable to TSA Shippers, if necessary, as indicated by economic, sound engineering design, environmental, legal, or other factors.  If Thunder Creek decides not to proceed with all or part of the Project, it will notify all shippers that submitted Final TSAs as soon as reasonably practicable.

These Open Season procedures, this Notice and the other Open Season Documents are informal marketing documents, and they establish no contractual relationship between or among Thunder Creek or any of its affiliates and any party who receives them.  These procedures are intended to be used solely for the project discussed herein and are not intended to be in lieu of the requirements of the Federal Energy Regulatory Commission or any applicable federal and state laws. 

VII.Conclusion

If you should have questions or comments regarding the Open Season, project timing, the configuration of the Project (for example, origin and destination points), or commitment options related thereto, please feel free to contact at any time either (a) for commercial related inquiries, Cole Stanley, Vice President of Crude Oil Services at 303-551-8163 ( ) or (b) for legal related inquiries, Richard Gognat at the contact information listed above.

Disclaimer

This notification along with related Open Season materials is provided for informational purposes only.  Notwithstanding anything contained herein to the contrary, this notification, the TSA and the Open Season conducted by Thunder Creek are not intended to constitute, nor shall they be construed to constitute, an offer or any binding obligation whatsoever on Thunder Creek to proceed with the potential Project contemplated by the Open Season until Thunder Creek has countersigned and delivered a fully executed Final TSA to an interested shipper.  Thunder Creek reserves the right, in its sole discretion, to modify, terminate or extend the Open Season, in whole or in part, including without restriction any ensuing discussions among the parties at any time, without advance notice.  Thunder Creek further reserves the right to modify or supplement any of the documents associated with the Open Season without notice.

Under no circumstances shall Thunder Creek or any of its affiliated companies or any of their respective directors, officers, employees, agents, attorneys, advisers and representatives be responsible for any costs or expenses incurred by any recipient or for any other liability, howsoever arising, incurred by any recipient, in each case, in connection with any investigation or evaluation of the Project.

 

[1] Final TSA has the meaning ascribed to it in Section III(B) of this Open Season Notice.

[2] The NPV formula Thunder Creek will use is , where NPV is the summation of the cash value of the contract commitment (“C”) in each given time period (“t”) discounted over the term of the TSA by the assumed discount rate (“r”).  For this Open Season, the discount rate is assumed to be six percent (6%).