STEPHENS ENERGY CORP. - The Railroad Commission of Texas

force majeure event is something unexpected, out of the control of Enbridge. When
Enbridge bought this system h m Cantera, Enbridge was fully aware of the terms of the
many gas gathering contracts which it assumed. Enbridge was also fully aware that it
needed adequate transportation agreements with TXU Lone Star to move the gas for which
it was contractually obligated. Enbridge never rhade those necessary transportation
arrangements, as far as I can tell. If it ha4 Enbridge would not be curtailed by TXU Lone
Star. Therefore, Enbridge assumed all these gas gathering contracts knowing h m day one
that it would not be able to move the gas reliably and fulfill its contractual obligations. That
is not force majeure.
Here is how I interpret these monthly curtailment letten h m Enbridge: There is no
force majeure. Enbridge is simply choosing to break our gathexing contract for that month.
I can accept or be shut in. It's a hell of a way to run a business.
5. Concerning the issue of excessive deductions for fuel and Lost and Unaccounted
Gas (LUG), I have now written you about the 18% you deducted h m my November 2004
Springtown gas. In my last letter, I wrote you about the 24% you deducted h m my
December 2004 Springtown gas. I am now protesting the obviously excessive 25% of my
January Springtown gas which you deducted for fuel and LUG.
You stated in your letter of February 22,2005, that any excessive losses would
cause a loss for both Enbridge i d Stephens. That is not hue. Enbridge deducts lost gas
h m the gas producer and never pays the gas producer for that gas. Enbridge only pays for
gas it claims actually makes it all the way to the plant tailgate. Lost gas costs the producer
money. Lost gas does not cost Enbridge a dime.
And that is only talking about actual, real lost gas. We have been in this business
for over 50 years and have run our own, small gathering lines and compressors. Gas
deductions for fuel should not be over 3-5%. Real, actual LUG should not be over 1-2%.
You cannot tell me that Enbridge has gas leaks in its gathering system losing 20% of its gas
volume to the air. Impossible.
I repeat what I wrote in my last letter. I believe that your actual, real fuel and LUG
totals about 6%. I have that number in writing tiom a previous owner of this gathering
system. I believe you are allocating this 6% in an arbihary fashion between the various
producers on your gathering system. I believe that you have a better, more profitable deal
with some gas producers than others. I believe that you may allocate very low fuel+LUG to
your most profitable gas, thus maximizing the amount of this most profitable gas each
month. I believe you may then allocate a very high fuel+LUG deduction to the gas which is
less profitable to Enbridge. The total fuel+LUG may be the actual roughly 6%, but very
little deduction is made to some producers and a very high deduction is made to other
producers, such as my company.
If I am wrong, and Enbridge really is losing 25% of the gas it gathers to fuel and
LUG, then Enbridge has a problem. If I am right, and my 25% fuel+LUG deduction is
simply because Enbridge has improperly allocated excessive losses to me, then that is a
contract volume violation remedied by extra gas to me next month.
6. Our contract, page A9, says I can only go back 25 months in having contract
volume violations corrected. I believe that my fuel+LUG deductions have been excessive
for those 25 months. Without detailed justification from Enbridge, I have to believe that all
those deductions h m January 2003 through January 2005 over 6% for both my
Springtown and Gordon gas were in error. I ask that Enbridge immediately correct those 25