Jefferson Energy Companies | Notice of Binding Open Season
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Notice of Binding Open Season

Introduction

Jefferson Southern Star Pipeline LLC (“Jefferson”) is conducting this open season to solicit binding long-term volume commitments for transportation service to support the construction of a new crude oil pipeline system connecting Delek Logistics Partners LP’s Paline Pipeline to the Jefferson Beaumont Terminal (the “Jefferson Pipeline”). Through this open season, interested shippers will have the opportunity to commit to Jefferson to ship a specified minimum volume of crude oil (“Committed Volume”) through a binding transportation services agreement (“TSA”) as committed shippers (“Committed Shippers”).

 

The existing Jefferson Beaumont Terminal is sited on approximately 185 acres and is strategically positioned with connections to road, rail and water near some of the largest refineries in the United States. Jefferson’s terminal assets are comprised of tanks, rail infrastructure, marine docks, manifolds and piping for the movement of products across the terminal. Jefferson’s existing assets include 4.3 million barrels of storage.

Connection

Jefferson is proposing to construct the Jefferson Pipeline, a new 5-mile, 10”-diameter crude oil pipeline system connecting the Jefferson Beaumont Terminal to the Paline Pipeline, which is a 10” crude oil pipeline that currently runs from Longview, Texas, to the Phillips 66 Beaumont terminal.  The capacity of the proposed pipeline is anticipated to be 42,000 bpd.

 

Commitment Options

Prospective shippers participating in the open season will have the option to make long-term commitments to Jefferson pursuant to a long-term TSA providing for committed service on the Jefferson Pipeline.

 

Prospective shippers will have the option to participate in the open season by entering into a binding TSA with a minimum Committed Volume of 10,000 barrels per day for a minimum primary term of two years, with a mutual option to extend the term for up to two additional one-year periods. Committed Shippers will be subject to a throughput and deficiency payment obligation. Jefferson reserves the right to recontract the Committed Volume upon the expiration of the primary or extended term of the TSA, as applicable.  Committed Shippers will have a first right to obtain capacity on any expansion of the Jefferson Pipeline.

Crude Oil Specifications

The volume moved on the Jefferson Pipeline will be subject to the crude oil specifications set forth in Jefferson’s FERC tariff, a pro forma version of which will be provided as set forth below. Those specifications will include the following:

  • API Gravity between 30 and 65 degrees
  • True vapor pressure not exceeding 11 psia
  • Basic sediment, water and other impurities of 1% or less
  • Temperature not exceeding 120⁰ Fahrenheit

 

Open Season Process

 

The binding open season begins on September 1, 2020 and ends on September 30, 2020. All bids must be submitted to the Jefferson representative listed below by 4:00 pm, Central Daylight Time, on or before September 30, 2020. Upon request and upon the execution of a confidentiality agreement (“Confidentiality Agreement”), bona fide prospective shippers will be provided access to detailed information regarding the terms and conditions for committed service by contacting the Jefferson representative listed below. The open season documents include the form of TSA and the pro forma Rates, Rules and Regulations Tariff. The executed Confidentiality Agreement must be submitted prior to the delivery of the open season documents. A Confidentiality Agreement that has been altered or amended by the prospective shipper (other than the insertion of required shipper information) may not be accepted by Jefferson.

 

Jefferson Southern Star Pipeline, LLC
811 Louisiana, Suite 2300
Houston, Texas 77002 Attention: Andrea Phillips
Email: [email protected]

Open Season Bids

This is a binding open season. To constitute a valid bid in this open season, a prospective shipper submitting a bid must include a duly executed TSA reflecting the Committed Volume on the Jefferson Pipeline, subject to the minimum Volume Commitment, and the primary term elected, which must equal or exceed the aforementioned minimum criteria established by this open season. In addition, to constitute a valid bid in the open season, prospective shippers must submit sufficient information to establish the shipper’s creditworthiness, to be determined by Jefferson in its sole discretion.

 

The form of the TSA includes places for each interested shipper to insert its company name, address, and contact information. Any other modification to the provisions of the TSA may not be accepted by Jefferson, in its sole discretion, and may therefore render any such bid invalid.

Post-Open Season Process

At the close of the open season, Jefferson will evaluate the open season results and make a decision on whether to proceed with the Jefferson Pipeline. All bids and requests are subject to rejection, partial acceptance or allocation based upon the results of the open season as determined by Jefferson in its sole discretion. Jefferson reserves the right to reject, in its sole discretion, any incomplete bids or requests, any bids that are inconsistent with this open season notice, any bids that contain modifications to any of the open season documents or bids that are submitted with any conditions.

 

After the open season process has ended, if it elects to proceed with the Jefferson Pipeline, Jefferson will return an executed copy of the executed TSAs to each shipper that has been awarded capacity in the open season. Once executed by Jefferson, the TSA shall constitute a binding agreement. Up to 90% of the capacity on the Jefferson Pipeline will be available for committed service, with at least 10% of the capacity reserved for uncommitted shippers. To the extent that capacity offered through the open season remains unsubscribed, Jefferson reserves the right, after the conclusion of the open season, to accept additional shipper commitments through fully executed TSAs which adhere to the same terms and conditions as provided in the form TSA.

 

In the event that valid bids for committed service oversubscribe 90% of the capacity of the Jefferson Pipeline, Jefferson may, in its sole discretion 1) elect to increase the capacity of the Jefferson Pipeline or 2) allocate capacity among the valid bids by using a net present value (“NPV”) methodology to rank the bids. Under the NPV methodology, Jefferson will allocate capacity among valid bids for committed service giving weight to rate, contract term, and Committed Volume. Any shipper on the Jefferson Pipeline that does not obtain committed service through the open season process will be an uncommitted shipper subject to the prorationing provisions of Jefferson’s tariff.

Disclaimer:

This open season notice along with the 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 are not intending to constitute, nor shall they be construed to constitute, an offer or any binding obligation whatsoever on Jefferson to proceed with the Jefferson Pipeline and services contemplated by the open season until Jefferson has countersigned and delivered to an interested shipper a fully executed TSA. Jefferson 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.

 

Under no circumstances shall Jefferson or any of its affiliates, or any of their respective owners, directors, officers, employees, agents, attorneys, advisers, or 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 Jefferson Pipeline and services.