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Gas Transportation Agreement

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EXHIBIT 10(h)
GAS TRANSPORTATION AGREEMENT


THIS AGREEMENT, made and entered into as of this 14th day of June, 1994, by and between MESA Operating Co., a Delaware corporation, acting on behalf of itself and as agent for Hugoton Capital Limited Partnership (HCLP) hereinafter collectively referred to as "Shipper," and WESTERN RESOURCES, INC., a Kansas corporation, hereinafter referred to as WR."


WITNESSETH


WHEREAS, Shipper desires that certain volumes of gas be delivered to WR, and


WHEREAS, WR is willing on behalf of Shipper to compress and transport such gas through WR's facilities and deliver such gas for Shipper's account at the interconnect point(s) specified herein or at such other interconnect point(s) as may be mutually agreed to between the parties with such compression and transportation to take place pursuant to this Agreement between WR and Shipper and with WR to be paid for such compression and transportation by Shipper as hereinafter set forth; and


WHEREAS, WR is agreeable to compressing and transporting such gas on a firm basis, in accordance with the terms and conditions hereinafter set forth.


NOW, THEREFORE, in consideration of the mutual covenants and premises set forth herein, the parties hereto agree as follows:


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ARTICLE I


DEFINITION OF TERMS


Except where the content expressly states another meaning, the following terms, when used in this Agreement shall have the following meanings:


1.1 The term "day" shall mean a period of twenty-four (24) consecutive hours beginning and ending at 8:00 a.m. local time.


1.2 The term "month" shall mean the period of time beginning at 8:00 a.m. local time on the first day of the calendar month and ending at 8:00 a.m local time on the first day of the next succeeding calendar month.


1.3 The term "quarter" shall mean a three-month period beginning January 1st, April 1st, July 1st or October 1st.


1.4 The term "contract year" shall mean a period of twelve (12) consecutive months beginning on the first day of the month during the occurrence of initial deliveries of gas hereunder. The last contract year of this Agreement shall end at the termination hereof as provided in Article XI of this Agreement.


1.5 The term "cubic foot" shall mean the volume of gas which occupies one cubic foot when such gas is at a temperature of sixty degrees Fahrenheit (60 degrees F), and at a pressure of fourteen and sixty-five hundredths pounds per square inch absolute (14.65 psia) dry and corrected for deviation from ideal gas behavior.


1.6 The term "MCF" shall mean one thousand (1,000) cubic feet of gas; the term "MMCF" shall mean one million (1,000,000) cubic feet of gas; and the term "BCF" shall mean one billion (1,000,000,000) cubic feet of gas.


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1.7 The term "British Thermal Unit (BTU)" shall mean the amount of heat required to raise the temperature of one pound of water from fifty-nine degrees Fahrenheit (59 degrees F) to sixty degrees Fahrenheit (60 degrees F) at a pressure of fourteen and sixty-five hundredths pounds per square inch (14.65 psia). The term "MMBTU" shall mean one million (1,000,000) BTU.


1.8 The term "gross heating value" means the total calorific value, expressed as BTU per cubic foot, and obtained pursuant to Paragraph 7.11 of ARTICLE VII of the amount of gas which would occupy the volume of one cubic foot on a dry basis.


1.9 The term "gas" shall mean natural gas or a mixture of hydrocarbons or of hydrocarbons and noncombustible gases, helium and other inerts, in a gaseous state, consisting predominantly of methane.


ARTICLE II


DELIVERY AND REDELIVERY


2.1 Subject to the further provisions of this Agreement, Shipper agrees to deliver or cause to be delivered to WR at the point(s) of interconnect as set forth on Exhibit "A," attached hereto and made a part hereof, hereinafter called the "Delivery Point(s)," or at such other points as the parties may mutually agree and place on Exhibit "A," and WR agrees to accept, compress, transport and redeliver, (i) up to one hundred thirty (130) MMCF per day of gas on a firm basis during the months of April through October and up to an additional (thirty) (30) MMCF per day of gas on an interruptible basis, and (ii) up to one hundred forty-five (145) MMCF per day of gas on a firm basis during the months of November through March and up to an


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additional fifteen (15) MMCF per day of gas on an interruptible basis. Except for events of force majeure and scheduled maintenance, WR cannot refuse to accept, compress, transport or redeliver gas delivered by Shipper on a firm basis up to the maximum firm quantities specified above. WR shall redeliver volumes of gas, containing the same number of BTU's, equivalent gallons of ethane and heavier hydrocarbon products, and equivalent cubic feet of helium as the gas contained when accepted by WR, except for any reduction for any natural gas liquids which may occur as a result of natural condensation in the compression or transportation process, to the point(s) of interconnect as set forth on Exhibit "B," attached hereto and made a part hereof, hereinafter called the "Redelivery Point(s)," or at such other points as the parties may mutually agree and place on Exhibit "B." The acceptance and inclusion of additional Delivery and Re-delivery Points under this Agreement shall be at WR's sole discretion.


2.2 Shipper shall separately deliver to WR at the outlet of the Satanta Plant a daily volume of residue gas equivalent to the volume of fuel actually incurred in providing the services hereunder at WR's Ulysses compressor station and in WR's pipeline facilities between the Delivery and Redelivery Point(s), up to a maximum of two and thirty-eight hundredths percent (2.38%) of the volumes accepted from Shipper by WR for compression and transportation at the Intermediate Delivery Point hereunder. On July 1, 1996, and each succeeding July 1st during the remaining term of this Agreement, at WR's option, said maximum percentage may be redetermined by WR. WR shall use its best judgement in redetermining said percentage based on


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actual fuel consumption incurred in providing the services hereunder at WR's Ulysses compressor station and in WR's pipeline facilities between the Delivery and Redelivery Point(s).


2.3 Commencing on the date of first acceptance by WR of gas at the Delivery Point(s), and continuing thereafter during the term hereof, WR shall redeliver at the Redelivery Point(s), volumes of gas containing the same number of BTU's, equivalent gallons of ethane and heavier hydrocarbon products, and equivalent cubic feet of helium as the gas contained when accepted by WR, except for any reduction for any natural gas liquids which may occur as a result of natural condensation in the compression or transportation process, from Shipper under said Paragraph 2.1 at the Intermediate Delivery Point. Measurement of gas at the Redelivery Point(s) shall be through facilities installed, operated and maintained by the party owning such facility or as new delivery points may be added, by WR or others as may be designated.


2.4 Delivery and redelivery may be at points through which other volumes of gas are being measured; therefore, the measurement of the volumes of gas delivered and redelivered under this Agreement shall be considered as part of the total volumes measured through the meter. Each party hereto will furnish or cause to be furnished to the other party hereto all data required to accurately account for all gas delivered and redelivered hereunder.


2.5 Nothing in this contract shall require WR to increase the capacity of the existing compressor station or pipeline system. WR shall sustain the capacity of the


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existing compressor station and pipeline system at current levels and shall maintain such facilities in good working order.


ARTICLE III


SCHEDULING, REPORTING AND BALANCING DELIVERIES


3.1 At least ten (10) days prior to the first day of each quarter of each calendar year, or at such other times as may be mutually agreeable to the parties hereto, Shipper shall furnish to WR a written schedule showing the estimated daily quantity of gas it desires WR to transport hereunder during each month of the following four quarterly periods. This schedule is prepared only to allow the parties hereto to schedule maintenance on compressors and other facilities. Both parties understand and agree that this schedule reflects estimates only and such estimates may change from time to time. WR agrees to use its best efforts to schedule and reasonable commercial efforts to perform maintenance on its compressors and other facilities in a manner which would allow Shipper to produce the estimated quantities of gas provided pursuant to this Section 3.1, as such estimates may change from time to time.


3.2 Shipper shall on a daily basis by nine o'clock (9:00) a.m. or on some other mutually agreeable basis, verbally advise WR's Gas Control Department as to the volumes and estimated BTU content of the gas by delivery point which Shipper desires transported hereunder.


3.3 Either party or its designee owning the measurement facilities will report or cause to be reported to the other party on a daily basis, the volumetric activity


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regarding that delivery or redelivery point. Such reported volumes will be a field approximation and not of accounting accuracy.


3.4 Notwithstanding the quarterly estimate discussed in Paragraph 3.1 above, Shipper may nominate, in writing, a transport volume by the 20th of each month specifying the daily volumes to be transported, and WR shall notify Shipper, in writing by the 25th of its acceptance of such original nomination (the Original Nomination). When such Original Nomination is subsequently modified by both parties, in writing, then such nomination, as changed, shall nevertheless be deemed the Original Nomination for the applicable transport month.


3.5 Whenever during any month, Shipper desires to change its transportation nomination for the remaining day(s) in that month or desires to change its transportation nomination on a daily basis or for any hour(s) on any particular day(s), it may do so provided (i) Shipper requests such a change(s), in writing, at least four hours prior to such change being effective and (ii) WR accepts such change(s), in writing, within two hours of Shipper's requested change(s) in its nominations(s). WR shall charge the rate provided for herein on the actual monthly transport volume. If the actual monthly transport volume is less than ninety percent (90%) of the Original Nomination, Shipper shall nevertheless pay WR as though ninety (90%) of the Original Nomination had been transported if (1) such shortfall was not the result of force majeure, (2) such shortfall was not caused by WR and (3) WR demonstrates to Shipper that WR was unable to transport such volumes for other parties for the month as a result of Shipper's Original Nomination.


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3.6 While it is the intent of the parties hereto that gas delivered to WR hereunder be redelivered concurrently, it is recognized that due to operating conditions, the volumes of gas delivered may not be equal to the volume of gas redelivered on any one particular day. The parties shall use their best efforts to keep such variances to a minimum, and therefore agree to undertake to balance deliveries and redeliveries monthly on a BTU basis. Any monthly BTU imbalance shall be eliminated within the next thirty (30) days or some other mutually agreeable time period. Upon termination of this Agreement, any party owing gas hereunder shall tender for delivery or redelivery at the point herein designated the amount of such deficiency within sixty (60) days from the date of such termination. It is understood and agreed that there will be complete balancing upon or following termination of this Agreement and that the provisions of this Paragraph shall survive the termination of the other portions of this Agreement until such time as such balancing is attained. Should, after a period of sixty (60) days, Shipper be unable to eliminate a balance of gas residing in WR's system due to Shipper's failure to provide for the redelivery of said gas, then WR shall purchase said gas from Shipper at the spot market price discussed below, expressed in dollars per MMBTU dry, in effect for the month said gas is purchased. Should, after a period of sixty (60) days, Shipper not deliver gas to make-up a shortage in its account on WR's system, Shipper shall pay WR for each MMBTU required to eliminate said shortage at one hundred five percent (105%) of the spot market price discussed below, expressed in dollars per MMBTU dry, in effect for the month in which such shortage is eliminated. Said spot market price shall be equal


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to the arithmetic average of the five (5) "Index" MMBTU price postings representing deliveries into the pipeline systems of ANR Pipeline Co. (Oklahoma region), Natural Gas Pipeline Co. of America (Oklahoma and Kansas region), Northern Natural Gas Co. (Texas, Oklahoma and Kansas region), Panhandle Eastern Pipeline Co. (Texas and Oklahoma region) and the Williams Natural Gas Co. (Texas, Oklahoma and Kansas region) as reported in the first issue of Inside FERC Gas Market Report for the month in which said gas is purchased by WR or said shortage is eliminated by Shipper, respectively.


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ARTICLE IV


QUANTITY


4.1 Shipper shall deliver to WR each contract year a minimum quantity of twenty (20) BCF at the Delivery Point(s), with daily quantities delivered to and accepted by WR at the Delivery Point(s) up to the maximum quantities as specified in Section 2.1.


4.2 It is understood that WR is currently obligated to transport up to thirteen (13) MMCF per day on a firm basis for other customers from the Initial Delivery Point to the Final Redelivery Point. In the event insufficient firm capacity is available to transport both the quantities specified in Section 2.1 and the firm quantity stated above which WR is currently obligated to serve, the total available firm capacity will be allocated among WR's firm customers based on the ratio between each customer's firm (MDQ's) WR is obligated to serve. Notwithstanding the above, the total available firm capacity allocated to Shipper will not be less than ninety-one and eight tenths percent (91.8%) of the total available firm capacity in the months of November through March and will not be less than ninety and nine tenths percent (90.9%) of the total available firm capacity in the months of April through October.


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ARTICLE V


QUALITY


5.1 All natural gas delivered and redelivered under the terms of this Agreement shall be of merchantable quality and conform to the following specifications:


(a) Oxygen - the gas shall be free of oxygen


(b) Hydrogen Sulfide - the hydrogen sulfide content shall not exceed one-quarter (1/4) grain per one hundred (100) cubic feet.


(c) Carbon Dioxide - the carbon dioxide content shall not exceed five hundred (500) parts per million.


(d) Liquids - the gas shall be free of water and hydrocarbons in liquid form at the temperature and pressure at which the gas is delivered. The gas delivered at the Intermediate Delivery Point and the Final Redelivery Point shall in no event contain water vapor in excess of seven pounds (7#) per million cubic feet.


(e) Dust, Gums and Solid Matter - the gas shall be commercially free of dust, gum and other solid matter.


(f) Heating Value - the gas shall have a heating content of not less than nine hundred and fifty (950) BTU per cubic foot at fourteen and seventy-three hundredths pounds per square inch absolute (14.73 psia) saturated.


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(g) Total Sulphur - the gas shall not contain more than twenty (20) grains of total sulphur per one hundred (100) cubic feet of gas as determined by a method generally acceptable for use in the gas industry.


(h) Temperature - the gas shall not be delivered at a temperature of more than one hundred twenty degrees (120 degrees) Fahrenheit.


5.2 If, at any time, gas tendered for delivery and/or redelivery hereunder shall fail to conform to any of the quality specifications set forth above, the receiving party may, at its option, refuse to accept delivery and/or redelivery and be absolved of any further obligation to perform, pending correction of the deficiency by the delivering party. The receiving party shall notify the delivering party of the deficiency as soon as possible after its occurrence. However, if Shipper delivers to WR gas which conforms to all of the quality specifications set forth above, then WR must redeliver
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