`
`In re
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`Ruby Pipeline, L.L.C.,1
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`Case 22-10278-CTG Doc 10 Filed 04/01/22 Page 1 of 37
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`IN THE UNITED STATES BANKRUPTCY COURT
`FOR THE DISTRICT OF DELAWARE
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`Chapter 11
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`Case No. 22-10278 (CTG)
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`Debtor.
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`
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`DECLARATION OF WILL W. BROWN IN SUPPORT OF
`DEBTOR’S PETITION AND REQUESTS FOR FIRST DAY RELIEF
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`I, Will W. Brown, declare pursuant to 28 U.S.C. § 1746 as follows:
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`
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`I am the Vice President, Commercial for the Kinder Morgan Natural Gas Pipelines
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`West Region, a division of Kinder Morgan, Inc. (“KMI”), and an officer at Ruby Pipeline, L.L.C.
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`(the “Company” or the “Debtor”), a natural gas pipeline company located in the western United
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`States with respect to which KMI owns an indirect equity interest and of which a wholly owned
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`subsidiary of KMI serves as operator. I am authorized to submit this declaration (the “First Day
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`Declaration”) on behalf of the Debtor in the above-captioned chapter 11 case (the “Chapter 11
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`Case”).
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`I am over the age of 18 and authorized to submit this declaration on behalf of the
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`Debtor. If called as a witness, I would testify competently to the facts set forth in this First Day
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`Declaration.
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`This First Day Declaration is divided into five parts. Part I provides background
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`information about myself. Part II is an introduction regarding the Chapter 11 Case. Part III
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`provides background information about the Debtor, its business operations, and its corporate and
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`1
`The last four digits of the Debtor’s tax identification number are 2249. The main address of the Debtor is
`1001 Louisiana Street, Houston, Texas 77002.
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`capital structures. Part IV describes the circumstances leading to the commencement of this
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`Chapter 11 Case. And Part V affirms the facts that support the “first-day” relief requested in the
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`various motions and an application filed contemporaneously herewith (the “First Day Motions”).
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`I.
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`Background of Declarant
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`In my role as Vice President, Commercial, among other things, I oversee the
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`commercial management activities, including marketing, optimization, account services and
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`financial planning for approximately ten natural gas companies located in the western United
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`States in which KMI has an ownership interest, including the Debtor.
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`I hold a Bachelor of Science in Mechanical Engineering from the University of
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`Colorado, Boulder and an MBA in Finance from the University of Colorado, Colorado Springs. I
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`have more than 30 years of experience in the oil and gas industry. Prior to joining KMI, I worked
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`for major oil and gas producers in my capacity as an engineer for more than a decade and am a
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`registered Professional Engineer (inactive) in the State of Texas. Since 2004, I have continued to
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`work in the oil and gas industry in commercial, business development and as an executive officer.
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`As a result of my role and experience with the Debtor, my review of relevant
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`documents, and my discussions with members of the Debtor’s management team, I am familiar
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`with the Debtor’s day-to-day operations, business affairs, and books and records. Except as
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`otherwise noted, I have personal knowledge of the matters set forth herein. Except as otherwise
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`stated, all facts set forth in this First Day Declaration are based on my personal knowledge, my
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`discussions with members of the Debtor’s senior management and advisors, my review of relevant
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`documents, or my opinion, based on my experience and knowledge of the Debtor’s operations and
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`financial condition. In making this First Day Declaration, I have relied in part on information and
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`materials that the Debtor’s personnel and advisors have gathered, prepared, verified, and provided
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`to me, in each case, under my supervision, at my direction, and for my use in preparing this First
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`Day Declaration.
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`II.
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`Introduction2
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`
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`The Debtor owns and facilitates the operation of a 42-inch diameter, 683-mile-long
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`natural gas pipeline (the “Ruby Pipeline”) originating at the Opal Hub in Opal, Wyoming and
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`terminating at the Malin Hub in Malin, Oregon, near the California border.3 The Debtor is a
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`midstream service provider and acts as a transporter of natural gas from the Rocky Mountain basins
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`to the Pacific Northwest. The Debtor generates revenues from the transportation services of
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`natural gas through the Ruby Pipeline and ancillary sales of natural gas. The Debtor has been
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`profitable as the result of favorable long-term Firm Contracts whereby third-party shippers of
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`natural gas reserve capacity to transport natural gas on the Ruby Pipeline in exchange for a fixed
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`fee, regardless of whether the reserved capacity is used, and a variable fee for amounts actually
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`transported through the Ruby Pipeline.
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`At the time of construction of the Ruby Pipeline, the Debtor entered into long-term
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`Firm Contracts with 12 shippers for 1.103 million Dths/d4 of pipeline capacity at favorable rates.
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`The majority of these Firm Contracts were for a term of ten years and expired in July 2021. While
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`the Debtor has attempted to re-contract with parties to expired Firm Contracts or enter into new
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`Firm Contracts with replacement shippers, as a result of market dynamics described below, the
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`Debtor has generally been unable to renew or replace the Firm Contracts with long-term Firm
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`2
`Capitalized terms used in this Part II Introduction that are not otherwise defined herein shall have the same
`meanings ascribed to such terms in the body of the First Day Declaration.
`3
`A map reflecting the location of the Ruby Pipeline is located at paragraph 19, infra.
`4
`“Dths/d” is an industry terms that means dekatherms per day. A dekatherm is equivalent to 1,000,000 British
`Thermal Units, which is the amount of heat required to raise one pound of water by one degree Fahrenheit.
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`3
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`Contracts, reducing contracted capacity by approximately 700,000 Dths/d. Instead, the Debtor has
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`only been able enter into short-term contracts at rates well below those of the initial anchor shipper
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`contracts and at lower volumes, with approximately 604,000 Dths/d under contract as of March
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`2022 (approximately 40% of the Ruby Pipeline’s daily maximum capacity).
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`Over the past decade, natural gas supplies have increased in North America, which
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`has generally resulted in lower natural gas prices. This, coupled with certain other challenging
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`macroeconomic fundamentals, has resulted in decreased profitability in the Rocky Mountain
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`basins and extraction from such basins trails other basins in North America. Consequently, there
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`is less demand for natural gas from the Rocky Mountain basins and less natural gas has been
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`transported through western natural gas pipelines, including the Ruby Pipeline, during the past
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`decade. The result of the foregoing factors has created a challenging re-contracting environment
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`for the Debtor as shippers generally need to transport less natural gas from the Rocky Mountain
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`basins.
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`Despite market headwinds in recent years, the Debtor has been able to stave off
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`financial distress and remain profitable through its Firm Contracts, which function as take or pay
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`contracts and have historically accounted for approximately 84% of the Ruby Pipeline’s maximum
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`capacity. Thus, the lack of used capacity in the Ruby Pipeline has, in the past, not adversely
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`affected the Debtor’s revenue stream. As a result, the Debtor has historically and timely serviced
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`its current debt obligations, all of which are unsecured. The balance of the Debtor’s 2022
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`Unsecured Notes matures on April 1, 2022 in the principal amount of $475 million. Although the
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`Debtor has sufficient liquidity to operate its business and its balance sheet is otherwise strong, the
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`Debtor lacks sufficient liquidity to satisfy its obligations under the 2022 Unsecured Notes on the
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`maturity date of April 1, 2022.
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`In light of the anticipated expiration of the majority of the Debtor’s long-term Firm
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`Contracts, in February 2020, Standard & Poor’s (“S&P”) downgraded the Debtor’s 2022
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`Unsecured Notes and then downgraded them again in April 2020. In February 2021, S&P further
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`downgraded the 2022 Unsecured Notes. About that same time, an ad hoc group of the Debtor’s
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`2022 Unsecured Noteholders (the “Ad Hoc Group”) retained advisors and commenced
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`negotiations with KMI and Pembina (as defined below), the Debtor’s sponsors, regarding the 2022
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`Unsecured Notes. In November 2021, S&P downgraded the Debtor’s 2022 Unsecured Notes again
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`citing near-term default risk.
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`In March 2022, the Debtor constituted a special committee of independent directors
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`(the “Special Committee”) to explore restructuring options for the Debtor, including a potential
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`chapter 11 filing. After evaluating the Debtor’s liquidity position, maturing debt obligations,
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`current and expiring Firm Contracts, and the lack of a resolution with the Ad Hoc Group, the
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`Special Committee recommended to the Debtor’s Board of Managers that the Debtor file for
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`protection under chapter 11 of the Bankruptcy Code to explore all possible restructuring
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`alternatives, including, among other options, a sale of substantially all of the Debtor’s assets
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`pursuant to section 363 of the Bankruptcy Code and/or a chapter 11 plan, or reorganization
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`pursuant to a chapter 11 plan.
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`Accordingly, on March 31, 2022 (the “Petition Date”), the Debtor filed a voluntary
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`petition for relief in the United States Bankruptcy Court for the District of Delaware (the “Court”)
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`under chapter 11 of the Bankruptcy Code, thereby commencing this Chapter 11 Case. To ease its
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`transition as debtor in possession, the Debtor subsequently filed the First Day Motions. I submit
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`this declaration to: (i) offer the Court and parties in interest a background on the Debtor and the
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`circumstances leading to the commencement of its Chapter 11 Case; and (ii) provide evidence for
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`the relief requested in the First Day Motions.
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`III. Discussion
`A. History
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`
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`In 2007, El Paso Corporation (“El Paso”), at the time one of the largest natural gas
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`pipeline companies in the United States, announced its intention to construct the Ruby Pipeline to
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`facilitate the transportation of natural gas from the Rocky Mountain basins to the Pacific
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`Northwest. At that time, the Rocky Mountain basins constituted the second largest natural gas
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`resource and the largest natural gas producing region in the United States according to the U.S.
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`Energy Information Administration. While the region had been known for decades to have
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`tremendous volumes of natural gas in place, the Rocky Mountain basins went largely undeveloped
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`because of low wellhead prices, lack of accessibility and a shortage of adequate takeaway capacity.
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`However, in the second half of the 2000s, market dynamics in the western United States became
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`more favorable as the supply of Canadian natural gas into the western United States decreased and
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`takeaway capacity from the Rocky Mountain basins increased, resulting in increased development
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`of tight natural gas formations in the Rocky Mountain basins and making the Ruby Pipeline a
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`viable economic opportunity. In addition, construction of the Ruby Pipeline would bring resource
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`diversification to Northern California and the Pacific Northwest and was in the public interest.
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`In November 2007, El Paso formed the Company to facilitate the development and
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`construction of the Ruby Pipeline. The Company’s anchor shipper, and initial investing partner in
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`the Ruby Pipeline, was Pacific Gas & Electric Company (“PG&E”). In 2011, PG&E entered into
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`a Firm Contract for 25% of the Ruby Pipeline’s maximum capacity.
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`In 2009, citing increasing costs to develop the Ruby Pipeline, PG&E pulled its
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`investment out of the Ruby Pipeline but nonetheless remained its anchor shipper. Also in 2009,
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`El Paso solicited and received a $700 million preferred equity investment from Global
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`Infrastructure Partners (“GIP”) providing GIP with 50% ownership of the Company.
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`On May 3, 2010, the Company entered into a senior secured credit facility (the
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`“2010 Secured Credit Facility”), with a syndicate of lenders, providing for construction financing
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`in the maximum amount of $1.5 billion.
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`In 2010, the Federal Energy Regulatory Commission (“FERC”),5 the main
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`governmental entity with regulatory authority over the Ruby Pipeline, and other governmental
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`agencies approved the Ruby Pipeline, and the Company began construction soon thereafter.
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`Construction of the Ruby Pipeline commenced in 2010, and the Ruby Pipeline was completed and
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`commenced service in July 2011. The total construction costs for the Ruby Pipeline were
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`approximately $3.7 billion, which was paid from the proceeds of the 2010 Secured Credit Facility
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`and El Paso’s and GIP’s combined equity investment of $2 billion.
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`The Ruby Pipeline has a takeaway capacity of 1.5 bcf/d,6 and includes four
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`compressor stations, Roberson Creek, Wildcat Hills, Wieland Flat and Desert Valley (the
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`“Compressor Stations” and, together with Ruby Pipeline, collectively, the “Facilities”), with a
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`combined 157,000 horsepower of compression to facilitate the westward transportation of natural
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`5
`FERC is the federal agency charged with specific regulatory oversight over the interstate transportation of
`energy (i.e., natural gas, oil, refined petroleum products, and electricity), wholesale power transactions, and the
`authorization of certain energy infrastructure, including liquefied natural gas (LNG) terminals, interstate natural gas
`pipelines, and hydropower projects. Pursuant to the Natural Gas Act (15 U.S.C. § 717 et seq) and its accompanying
`regulations (CFR Title 18, Chapter 1, Subchapter E), all services and related rates for interstate oil and gas
`transportation service are filed with and approved by FERC in a pipeline’s tariff (a “Tariff”). The Company’s Tariff
`was approved in connection with FERC’s approval of the Ruby Pipeline in 2010.
`6
`“bcf/d” is an industry terms that means billion cubic feet per day.
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`gas from Opal to Malin. A map setting forth the location of the Ruby Pipeline and the Compressor
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`Stations is set forth below:7
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`Upon the completion of the Ruby Pipeline, the Company gained access to all the
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`major producing basins in the Rocky Mountains as the natural gas infrastructure therein gathers
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`all natural gas to one of two hubs, the Opal Hub, which the Ruby Pipeline is connected to, and the
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`Cheyenne Hub (not pictured), located roughly 300 miles to the east of the Opal Hub.8 These hubs
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`are then linked by several pipelines including the Colorado Interstate Gas pipeline and the
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`Wyoming Interstate Company pipeline (vis a vis capacity on Overthrust Pipeline), which are
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`owned by wholly owned KMI affiliates of the Debtor.
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`7
`KMI and/or its affiliates, through KMI’s acquisition of El Paso, which is discussed at paragraph 21, infra,
`now controls the El Paso pipelines reflected in the map.
`8
`Major natural gas basins in the Rocky Mountains include, among others, Greater Green River, Uinta,
`Piceance, Powder River, Big Horn, Wind River, Central Overthrust, Paradox, San Juan, Denver-Julesberg, and Raton
`basins.
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`In 2012, KMI acquired El Paso and its equity interest in the Company. In 2014,
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`Veresen Inc. (“Veresen”) acquired from GIP its preferred equity interest in the Company. In 2017,
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`Pembina Pipeline Corporation (“Pembina”) acquired Veresen and its preferred equity interest in
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`the Company. As of the date hereof, KMI and Pembina are the co-sponsors of the Company.
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`B. Business Overview
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`The oil and gas industry are typically divided into three major sectors: “upstream,”
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`“midstream,” and “downstream.” The upstream sector is comprised of “exploration and
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`production” companies that focus on locating and extracting crude oil, raw natural gas, and other
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`hydrocarbons from the ground.9 The downstream sector is comprised of the companies that carry
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`out the marketing and distribution of the products derived from the extracted hydrocarbons to the
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`ultimate end users.10 The Debtor operates in the space between—the midstream sector.
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`The midstream sector is the link between the exploration and production of natural
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`gas and the delivery thereof to its end-users. The midstream sector itself can be thought of in
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`several subcomponents: (i) gathering, where a system of smaller diameter, lower pressure
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`pipelines are connected to producers’ wellheads to transport unprocessed, raw natural gas to a
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`centralized location for initial processing; (ii) processing, whereby the natural gas is processed
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`such that it can be further transported in the pipeline system without damaging the pipeline
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`infrastructure; (iii) transportation, where wide-diameter, higher pressure, long distance pipelines
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`move processed natural gas from producing areas to market areas, sometimes over considerable
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`distances; and (iv) storage, where processed natural gas is stored underground for future
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`9
`Upstream providers that have recently filed for chapter 11 protection include: In re Ursa Piceance Holdings
`LLC, et. al., Case No. 20-12065 (BLS) (Bankr. D. Del. Sept. 2, 2020).
`10
`Downstream providers that have recently filed for chapter 11 protection include: In re PES Holdings, LLC,
`et. al., Case No. 19-11626 (KG) (Bankr. D. Del. July 22, 2019).
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`processing and consumption. The Debtor participates in the midstream sector as a transporter of
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`processed natural gas in the western United States via the Ruby Pipeline.
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`As a transporter, the Debtor generates revenues by transporting natural gas through
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`the Ruby Pipeline. To do this, the Debtor principally sells the capacity of the Ruby Pipeline in
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`advance of transportation, subject to the rates set forth in its FERC-approved Tariff. Typically,
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`the Debtor enters into either (i) firm commitment contracts (the “Firm Contracts”) where the
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`shipping party pays (a) a fee to reserve a portion of the Ruby Pipeline’s daily capacity and (b) a
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`variable fee for natural gas transported through the Ruby Pipeline or (ii) interruptible contracts
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`(“Interruptible Contracts”) where the shipping party does not reserve capacity, may only use the
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`Ruby Pipeline if capacity is available and, to the extent capacity is available and the shipper
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`transports natural gas through the Ruby Pipeline, the shipper pays a variable fee. Historically, the
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`vast majority of the Company’s revenues have been generated under Firm Contracts.
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`At the time of the Ruby Pipeline’s completion in 2011, the Debtor had long-term
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`Firm Contracts through July 2021 with 12 shippers accounting for 71% of the Ruby Pipeline’s
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`capacity. As of the Petition Date, though, Firm Contracts now account for approximately 25% of
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`the Ruby Pipeline’s maximum capacity as certain of those contracts have rolled off (i.e., expired).
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`C. Corporate Structure
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`The Debtor is a Delaware limited liability company that is wholly owned by non-
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`debtor Ruby Investment Company, L.L.C. (“Ruby Investment”), a Delaware limited lability
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`company, which is in turn wholly owned by Ruby Pipeline Holding Company, L.L.C. (“Ruby
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`Holding”), a Delaware limited liability company. The ultimate parent entities of the Debtor are
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`(i) KMI, which acquired its equity interest in the Debtor through its acquisition of El Paso in 2012,
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`and (ii) Pembina, which acquired its preferred equity interest in the Debtor through its acquisition
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`of Veresen in 2017. Pembina holds its preferred equity interest in the Debtor indirectly through
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`Ruby Holding’s Class A Preferred Units, and KMI holds its equity interest indirectly through EP
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`Ruby LLC, a Delaware limited liability company (“EP Ruby”), which holds Ruby Holding’s Class
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`B Common Units. As discussed below, EP Ruby is the Operator and Construction Manager (each
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`as defined below) for the Facilities. A chart depicting the Debtor’s corporate structure is attached
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`hereto as Exhibit A.
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`As set forth in the First Amended and Restated Limited Liability Agreement of Ruby
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`Pipeline Holding Company, L.L.C. (as amended from time to time, the “Ruby Holding LLCA”),
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`EP Ruby serves as the managing member of Ruby Holding to manage and control the business,
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`affairs and properties of Ruby Holding, Ruby Investment, and the Debtor. Certain matters, though,
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`require
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`the approval of Ruby Holding’s management committee (the “Management
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`Committee”), as more fully set forth in the Ruby Holding LLCA. The Management Committee
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`is comprised of one representative from each of KMI, the common member, and Pembina, the
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`preferred member, the only two members holdings interests in Ruby Holding. Among other items
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`requiring approval of the Management Committee, the Management Committee has approval
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`rights over the Operating Period Budget under the O&M Agreement (each as defined below).
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`D. Agreements with Affiliates
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`i. Operation and Maintenance Agreement
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`The Debtor does not have any employees. Instead, the Debtor contracts with EP
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`Ruby to operate, manage and maintain the Facilities. In connection with the construction of the
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`Facilities and its operation, CIG Pipeline Services Company, L.L.C. (“CIG Services”), as the
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`Operator thereunder, and the Debtor entered into that certain Operation and Maintenance
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`Agreement, dated August 13, 2009 (as amended, the “O&M Agreement”).
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`On May 30, 2014, EP Ruby and El Paso Pipeline Partners Operating Company,
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`L.L.C. (“El Paso Pipeline Partners”) entered into that certain Assignment and Assumption
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`Agreement whereby El Paso Pipeline Partners, after having taken assignment of CIG Services’
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`rights, duties and obligations under the O&M Agreement on May 2, 2014, assigned to EP Ruby
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`all of its rights, duties and obligations under the O&M Agreement. 11
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`Pursuant to the O&M Agreement, EP Ruby through its affiliates employs the
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`individuals who operate, manage and maintain the Facilities for the benefit of the Debtor. Under
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`the O&M Agreement, among other things, EP Ruby provides for (i) the physical operation and
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`maintenance of the Facilities, (ii) the management of the day-to-day commercial, administrative
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`and regulatory functions of the Debtor and the business development functions of the Debtor, (iii)
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`the management, administration and oversight of any contractors, vendors, consultants, service or
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`other organizations, if any, retained by the Debtor (or by EP Ruby on behalf of the Debtor), and
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`(iv) those other services set forth in Article 2.2(b) of the O&M Agreement ((i)-(iv), collectively,
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`the “O&M Services”). In effect, and except for certain matters expressly requiring the approval
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`of the Debtor under the O&M Agreement, EP Ruby is responsible for the operation and
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`management of the Debtor’s business under the O&M Agreement while the Debtor otherwise
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`maintains ownership of the Facilities.
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`Under the O&M Agreement, the O&M Services to be provided in any given
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`Operating Period (i.e., a calendar year) are limited to the budget for the Operating Period (the
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`The O&M Agreement is a comprehensive document that sets forth more fully the obligations of EP Ruby
`and the Debtor. The descriptions of the O&M Agreement provided herein are summaries of the obligations thereunder
`and are presented for convenience only. In the event of any ambiguity or inconsistency between the summaries
`provided for herein and the terms of the O&M Agreement, the terms of the O&M Agreement shall control in all
`respects.
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`“Operating Period Budget”), subject to permitted variances, as approved by the Debtor.12
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`Pursuant to Article 3.2(a) of the O&M Agreement, no less than 45 days before the first day of each
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`Operating Period, EP Ruby prepares and submits to the Debtor a proposed budget for (i) O&M
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`Services containing monthly detail for the performance of O&M Services during the applicable
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`Operating Period, and (ii) if applicable, a capital expense budget regarding any capital expenses
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`that Operator reasonably believes the Facilities should incur during such Operating Period Budget.
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`Prior to the commencement of the Operating Period, the Debtor provides EP Ruby
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`with the Company-approved Operating Period Budget, which becomes the budget for the
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`applicable Operating Period. The Operating Period Budget has been, and continues to be, the
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`product of arm’s-length discussions between EP Ruby and the Debtor. To the extent that either
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`EP Ruby or the Debtor wishes to change the Operating Period Budget, the parties work together
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`in good faith to determine the extent of any proposed change. However, the Debtor is under no
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`obligation to agree to any changes proposed by EP Ruby and to the extent EP Ruby proposes a
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`change that the Debtor does not agree to, then no change may be made to the Operating Period
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`Budget.
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`In exchange for providing the O&M Services, pursuant to Article 5.1 of the O&M
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`Agreement, EP Ruby is entitled to payment for its “Direct Costs” and “Indirect Costs”. Direct
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`costs include reasonable and necessary cash expenditures, including capital costs and expenses,
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`Approved variances may occur in the event of (i) Force Majeure (any cause not within the reasonable control
`of a party, including, but not limited to, acts of God, terrorism, fires, explosions, etc.) or Emergency (generally an
`event threatened or occurring at the Facilities that poses imminent or actual risk of serious personal injury or physical
`damages requiring immediate preventative or remedial action by EP Ruby and for which advance approval by the
`Debtor would be impossible or impracticable, or (ii) if EP Ruby becomes aware that the aggregate of all budget
`categories exceeds or is reasonably likely to exceed: (A) for any quarter, the amount provided for that quarter in the
`Operating Period Budget by ten percent (10%) or more or (B) for any year, the amount provided for that year in the
`Operating Period Budget by seven and one-half percent (7.5%) or more, EP Ruby shall promptly provide the Debtor
`notice of such variance or potential variance; provided the EP Ruby may not make expenditures exceeding the
`foregoing amounts or inconsistent with the Operating Period budget without the Debtor’s prior written approval.
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`for among other things, the performance of the O&M Services and performance of other such
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`duties exclusively related to the Facilities as are reasonably necessary and prudent to comply with
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`EP Ruby’s duties and responsibilities under the O&M Agreement that are not otherwise Indirect
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`Costs. Indirect Costs include costs that are incurred by KMI and its affiliates in providing services
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`for the collective benefit of KMI’s subsidiaries, including the Debtor. Indirect Costs are allocated
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`fairly to the Debtor in proportion to the benefits received from such services as set forth on Exhibit
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`B to the O&M Agreement. Pursuant to Article 5.1(c) of the O&M Agreement, there is no markup
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`or profit component for any Direct Costs or Indirect Costs billed to the Debtor.
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`EP Ruby bills the Debtor one month in advance and, subject to reconciling the prior
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`month’s invoice, trues up the invoices by offering the Debtor a credit for future months or by
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`increasing or decreasing the current invoice, as applicable. In the twelve months preceding the
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`Petition Date, the Debtor paid approximately $8.6 million to EP Ruby under the O&M Agreement
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`for Direct Costs and Indirect Costs.
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`ii. Construction Management Agreement
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`In addition to the O&M Agreement, the Debtor and CIG Services, as Construction
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`Manager thereunder, were also party to that certain Construction Management Agreement, dated
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`August 13, 2009 (the “CMA”).13 Pursuant to the CMA, CIG Services was responsible for the
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`construction of the Facilities. Currently, EP Ruby acts as the Construction Manager. In addition,
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`EP Ruby is responsible for managing, administering, and overseeing the development of any
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`expansions, extensions or laterals of the Facilities. Among other things, EP Ruby provides the
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`The CMA is a comprehensive document that sets forth more fully the obligations of EP Ruby and the Debtor.
`The descriptions provided herein are summaries of the obligations under the CMA and are presented for convenience
`only. In the event of any ambiguity or inconsistency between the summaries provided for herein and the terms of the
`CMA, the terms of the CMA shall control in all respects.
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`employees necessary to fulfill its obligations under the CMA and has the sole discretion to manage
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`the employees provided under the CMA. EP Ruby is also responsible for (i) managing,
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`administering and overseeing the development of the Facilities, (ii) entering into contracts with
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`contractors, vendors, consultants, service or other organizations on behalf of and in the name of
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`the Debtor, (iii) managing contractors, vendors, consultants, service or other organizations
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`employed to carry out its duties under the CMA, (iv) pursuing and managing the receipt of any
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`necessary governmental approvals and the acquisition of rights-of-way associated with the
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`Facilities, and (v) those other services set forth in Article 2.2(b) of the O&M Agreement ((i)-(v),
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`collectively, the “Management Services”).
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`In exchange for providing the Management Services, EP Ruby is entitled to, among
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`other things: (a) the reimbursement of its internal costs, which includes (i) an allocated cost for
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`employees or contract labor of EP Ruby and its affiliates who provided Management Services, (ii)
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`out-of-pocket expenses of employees associated with the provision of the Management Services,
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`(iii) the cost of all materials consumed in the performance of the Management Services, (iv) the
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`cost of operating any field or on-site offices, (v) out-of-pocket expenses incurred in connection
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`with providing the Management Services, (vi) taxes, and all excise and licensee fees, and (vi) any
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`costs related to any stand-alone insurance policies necessary under the CMA; (b) an amount
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`necessary to compensate EP Ruby and its affiliates for overhead expenses of (i) its engineering
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`services groups, (ii) its shared service functions, (iii) its pipeline services functions, (iv) general
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`insurance costs, and (v) pipeline general and administrative costs; and (c) reimbursement of any
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`costs to employ third parties or subcontractors in carrying out its duties under the CMA.
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`Billing procedures under the CMA are substantially similar to the billing practices
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`for the O&M Agreement. Often times, EP Ruby bills the Debtor under the O&M Agreement and
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`Case