St. Mary's VPP - Texas Gas Operational Flow Order [OFO]

FYI
---------------------- Forwarded by Chris Germany/HOU/ECT on 02/23/2001 07:35
AM ---------------------------
From: Joan Quick on 02/22/2001 10:55 PM
To: Phillip Ballard/NA/Enron@Enron, Scott Josey/Corp/Enron@ENRON, Jesus
Melendrez/Corp/Enron@Enron, Brian Otis/NA/Enron@Enron, Teresa G
Bushman/HOU/ECT@ECT, Shirley A Hudler/HOU/ECT@ECT, Lisa Best/Corp/Enron, Pam
Becton/HOU/ECT, Tricia Spence/HOU/ECT@ECT, Mark Castiglione/Corp/Enron@ENRON,
Don Rollins/HOU/ECT, Bradford Larson/HOU/ECT@ECT, George
Weissman/HOU/ECT@ECT, John Grass/Corp/Enron@ENRON, Gary Bryan/HOU/ECT@ECT,
Melissa Graves/HOU/ECT@ECT, Charles H Otto/HOU/ECT@ECT, Chris
Germany/HOU/ECT@ECT, Lia Halstead/NA/Enron@ENRON, Walt D
Hamilton/HOU/ECT@ECT, Craig A Fox/HOU/ECT@ECT, Shirley A Hudler/HOU/ECT@ECT
cc:
Subject: St. Mary's VPP - Texas Gas Operational Flow Order [OFO]

St. Mary's gas flows on Texas Gas [TGT].

On January 26th, TGT issued a Critical Notice, that in essence states that
they will not accept a nom to flow gas if it doesn't meet certain pipeline
spec criteria - they will not accept gas over 1050 Btu content. St. Mary's
gas is around 1085 Btu. Thus, this gas will have to be processed at the
downstream Eunice Plant, or it will be shut in, starting either Monday the
26th, or March 1st - this is uncertain right now. I am working with Charlie
Otto [Fred's group] and Jay Hartman/Brad Strong to put a processing contract
together. Charlie has/or is working on a processing contract with Hunt
[operator] and this contract will be pretty much the same as Hunt's
processing contract. Since gas HAS TO be processed in order to flow, there
is not much negotiating that will be done.

Since the price of gas is high [and producers do not want to process] , in
the last couple months, there have been several pipelines to issue OFO's re
Btu content. This is the first time that I know of that this has ever been
such an issue.

Terms of the processing contract: $0.10 fee, shrink/PVR will be about 12%,
producer keeps 100% of the NGL's. Per Charlie, he thinks that this 12%
shrink/100% liquids equates to a $0.05 or $0.06 loss. Thus, the cost of
processing is expected to be around $0.15 to $0.16. The processing contract
will be month to month and used only when it is mandatory under the OFO.

St. Mary's will be responsible for all fees, and shrink. As an example, if
100 is flowing at the wellhead, and 60 is VPP. then, there will be 60 as
VPP, 12 as PVR/PTR [shrink], and 28 as excess gas.

St. Mary's would like the processing contract in ENA's name, since ENA should
have title to the gas as it goes thru Eunice, and would just reimburse ENA
for the 10 cent fee, or any other actual applicable fees. Teresa - can you
put something together re this reimbursement. Charlie sees no problem in
putting this in ENA's name, if someone sees an issue with this, please let me
know ASAP.

George, Melissa, Lia - we will need to start nom'ing PVR/PTR.

Chris Germany - do we need a PTR contract on TGT?

Teresa - per the Production & Delivery Agrmt, it states that St. Mary's
cannot process their gas. We will need a waiver to this section 4, for the
time period that processing is mandatory.

Lia, George, John - the OFO notice came out on January 26, and I heard about
this via Charlie today, is there some way in the future we can be notified
more quickly about possible issues re the flow of any of our VPP gas?

Charlie will get his first draft of the contract on Friday and will work with
myself and Jay/Brad to get this put together on Friday, in case this OFO does
go into effect on Monday.

Anyone with any questions or concerns, please contact me immediately.

joan