CHOPS QUALITY BANK

SECTION I

GENERAL
1. The purpose of this Quality Bank ("Quality Bank") is to mitigate economic damage and/or
improvement to producers whose crude oil is transported and/or purchased by CHOPS
and commingled with other crude oil within CHOPS, as well as to ensure that CHOPS is
competitive with competing pipelines and other quality banks. Differences in the quality
of all the producers’ crude oil that are mixed within the common crude oil stream in
CHOPS may change the quality of the common crude oil stream. This Quality Bank
charges the producer or pays the producer depending on the quality of the common
crude oil stream and the quality of the producer’s crude oil, based upon the quality
parameters used for such quality determination. Each producer will be required, as a
condition of tendering, to participate in this Quality Bank.
2. API gravity and sulfur content are the current quality parameters used to determine the
relative value of each producer’s receipt stream. Adjustment factors for gravity and
sulfur are currently based upon a market price spread between Louisiana Light Sweet
(“LLS”) and CHOPS Southern Green Canyon (“SGC”) (see Section III- Current Month
Gravity and Sulfur Adjustment Factors). The price spread is derived using Platt’s or
other publication spot price quote (“Price Quote”), high/low mean, posted average trade
month (the 26th of the month two months prior to delivery through the 25th of the month
one month prior to delivery, workdays only)(“Trade Month”).
3. Should a Price Quote for CHOPS common stream not be established, Mars shall replace
SGC in the Quality Bank calculations, subject to the provisions of Section VI-Periodic
Review.
4. CHOPS may implement changes to the Quality Bank, including from a Periodic Review,
from time-to-time or at any time. Unless producers with greater than seventy percent
(70%) of the volume on CHOPS oppose such change and provide written notice within
thirty days of such opposition to the proposed change, the change will go into effect upon
expiration of such thirty days period. Each five hundred (500) Barrels of monthly
average production (based on the monthly average of the twelve (12) month period prior
to the month the vote is taken) will have one vote.
(a) Any group of producers with greater than seventy percent (70%) of the volume on
CHOPS may make a proposal to CHOPS providing for an alternate method and
an explanation of why such alternate method provides a more accurate quality
relationship than the then existing Quality Bank. CHOPS will retain the right to
reject such proposal if CHOPS, in its sole discretion after using good faith,
reasonable efforts to analyze such proposal, believes that the proposal does not
uphold the intent of the Quality Bank as stated in Paragraph 1 above in this
Section I.
(b) Notwithstanding any of the above, CHOPS may, at its sole discretion, change any
of the provisions of this Exhibit as necessary to comply with any governmental
requirement, order, or mandate and such change will be binding upon all
producers and all participants upon proper notice thereof.

SECTION II

C-1
Error! Unknown document property name.
 GRAVITY AND SULFUR WEIGHTING FACTORS
1. Gravity and Sulfur weighting factors are currently used in establishing a price and quality
relationship between different crude oil streams. These weighting factors effectively
allocate a portion of the market spread to each of the quality parameters of gravity and
sulfur.
2. The weighting factors, currently used in calculating the GAF and SAF as defined in
Section III, are as follows.
Gravity Weighting (“GW”) = 31.5%
Sulfur Weighting (“SW”) = 44.3%

SECTION III
CURRENT MONTH GRAVITY AND SULFUR ADJUSTMENT FACTORS
1. The applicable delivery month Gravity Adjustment Factor (“GAF”) and the applicable
delivery month Sulfur Adjustment Factor (“SAF”) are calculated using the following
equations:
GAF = (GW x a) divided by b
SAF = (SW x a) divided by c
Where Gravity and Sulfur Weighting factors (GW and SW) are expressed as decimals
and,
“a” = The price differential between the LLS Price Quote and the SGC Price Quote for
the Trade Month.
“b” = The delivery month Gravity difference between LLS and SGC based on the gravity
of LLS crude oil at the point of sale where “a” is determined, currently Capline’s
LLS receipt stream at St. James, Louisiana as calculated by Gravcap, minus the
weighted average gravity of SGC at the point of sale where “a” is determined,
currently CHOPS’ composite volume weighted average gravity for SGC deliveries
at the Delivery Points.
“c” = The delivery month Sulfur difference between LLS and SGC based on the weighted
average of sulfur of LLS crude oil at the point of sale where “a” is determined,
currently Capline’s LLS receipt stream at St. James, Louisiana as calculated by
Gravcap, minus the weighted average sulfur of SGC at the point of sale where “a”
is determined, currently CHOPS’ composite volume weighted average gravity for
SGC deliveries at the Delivery Points.
SECTION IV
CALCULATION OF QUALITY BANK CREDIT/DEBIT
Quality Bank credit/debit adjustments between producers are computed as follows:
1. The applicable receipt Barrels and gravities are the delivery month actual net Barrels at
sixty (60) degrees Fahrenheit (with no deductions for loss allowance) and the gravities
recorded by CHOPS at the custody transfer measurement facility where CHOPS
customarily records gravities and quantities received into CHOPS.
2. No compensation is given for gravity between 37 and 45 degrees API. For gravities of
45 API degrees and above, a “bend-over” disincentive is applied.

C-2
Error! Unknown document property name.
3. GRAVITY CREDIT/DEBIT CALCULATION
To compute the gravity credit/debit to be paid / received, the following equation is used:
Gravity credit/debit = ((PG – WAG) multiplied by GAF) multiplied by T
Where,
“G” = A producer’s gravity based on each custody transfer tickets for
each receipt point into CHOPS where producer has production
being delivered into CHOPS subject to the Gravity Limits set out
below.
“WAG” = The weighted average receipt gravity of the common stream for
a given delivery Month. For Quality Bank calculation purposes,
WAG is obtained by taking the sum of the products obtained by
multiplying the gravity of each producer's Receipt Point volume
based on the custody transfer tickets (subject to the Gravity
Limits set out below) by the number of net Barrels in each
producer's receipt point volume, and divide the total resultant by
the total net Barrels received during the given delivery month.
“T” = The total current month volume produced by a producer based
on the custody transfer tickets at each point of interconnect with
CHOPS that a producer has production being delivered into
CHOPS.
Gravity Limits: When actual gravity exceeds 37 but is less than 45 degrees API,
a Deemed Gravity of 37 degrees API is used in determining PG
and WAG. When actual gravity is equal to or greater than 45
degrees API, a Deemed Gravity is used that is calculated by the
formula: Deemed Gravity = 80 minus actual API gravity. In all
other instances (gravity less than or equal to 37 API) the actual
API gravity is used.
4. SULFUR CREDIT/DEBIT CALCULATION
To compute the sulfur credit/debit to be paid or received the following equation is used:
Sulfur credit/debit = ((WAS - PS) multiplied by SAF) multiplied by T
Where,
“PS” = A producer’s Sulfur based on each custody transfer tickets for
each receipt point into CHOPS where a producer has production
being delivered CHOPS.
“WAS” = The weighted-average receipt sulfur of the common stream for a
given delivery Month. WAS is obtained by taking the sum of the
products obtained by multiplying the sulfur percentage (by
weight) of each producer's Receipt Point volume based on the
custody transfer tickets by the number of net Barrels in each
producer's Receipt Point, and divide the total resultant by the
total net Barrels received during the given delivery Month. Since
there will be no minimum or maximum sulfur percentage
limitations, this weighted average sulfur percentage calculation
will be used for Quality Bank adjustment purposes.

C-3
Error! Unknown document property name.
 “T” = The total current month volume produced by a producer based
on the custody transfer tickets at each point of interconnect with
CHOPS that a producer has production being delivered into
CHOPS.
5. To obtain the total Quality Bank Credit/Debit, add the Gravity and Sulfur credit/debit.
Sample calculations are attached hereto as Table 1.
6. These calculations will be made for each delivery month and the algebraic sum of all the
producers’ credit/debit for CHOPS will be zero (+/- fifty Dollars). If a producer has a net
debit balance (owed to Quality Bank) in combining the two adjustments made above, the
balance due will be remitted to CHOPS within fifteen (15) Days from receipt of
statements of such debit. If a producer has a credit balance (owed to producer), CHOPS
will remit the amount thereof within five (5) Days of receipt of all the payments due from
those producers owing a debit balance.
SECTION V
ADMINISTRATIVE
1. Capitalized terms, including “CHOPS”, has the meanings defined in the Agreement to
which this Exhibit is attached, unless the context dictates otherwise. Similarly, the term
“producer” means an individual producer on CHOPS (and collectively, “producers”).
2. CHOPS will include requirements for participation in the Quality Bank and procedures for
calculating adjustments between producers in all contracts to be entered into with
producers covering the transportation, and/or purchase and sale of crude oil on CHOPS.
3. CHOPS will administer the Quality Bank and will perform the clearinghouse business of
calculating and effecting adjustments, by a process of debits and credits and interchange
of funds, among the producers of crude oil connected to CHOPS. CHOPS may
subcontract any or all of the work associated with the Quality Bank, but by doing so
CHOPS will not be relieved of any of its obligations hereunder. ETS will pay CHOPS a
fee of no dollars and five tenths of a cent per barrel ($0.005 per BBL) for the
administration of the Quality Bank. If a third party administers the Quality Bank instead
of CHOPS, ETS will pay its proportionate volumetric share of such third party’s
administration fee.
4. CHOPS will perform necessary calculations and prepare appropriate statements for each
producer as soon as the gravity, sulfur, and price data is available.
5. CHOPS will be responsible, at its sole cost and expense, for determining and/or securing
data on all gravities, sulfur contents, net Barrels of the crude oil received into CHOPS,
and Price Quotes. The gravities will be determined from the custody transfer receipt
tickets written by the CHOPS. The sulfur content will be determined based on samples
secured by the CHOPS from the composite sampler at the time the custody transfer
receipt tickets are written. The gravity will be determined by ASTM 287 (Standard Test
Method for API gravity of Crude Petroleum and Petroleum Products) and the sulfur
content pursuant to ASTM D-2622 (ASTM D-4294 is acceptable if ASTM D-2622 is not
available) (Standard Test Method for Sulfur in Petroleum Products).
6. If any producer fails to perform any Quality Bank payment obligation as established
herein, CHOPS will make equivalent payment into the Quality Bank within five (5) Days
of such failure, to enable distribution of funds to producers due credits. CHOPS will,
however, have the right to withhold payment of or offset against, any moneys due such

C-4
Error! Unknown document property name.
 failing producer pursuant to the Agreement between the producer and CHOPS to
recover or otherwise fulfill any and all of producer’s Quality Bank payment obligations.
7. CHOPS agrees that all transfers of interest in CHOPS will be made subject to this
Agreement and will require the transferee to assume as to such interest all of the
obligations of CHOPS under this Agreement which accrue on or after the effective date
of the transfer.
8. Notwithstanding anything to the contrary set forth in the Agreement, inasmuch as
CHOPS has agreed to operate the Quality Bank without profit, and except to the extent
resulting from the gross negligence or willful misconduct of CHOPS, ETS hereby fully
releases and agrees to indemnify CHOPS from all claims, actions and demands for loss
by, or damage to, CHOPS or ETS arising out of, in connection with, or as an incident to
any act or omission, including any negligence, of CHOPS or its employees, agents or
contractors, in the administration of the Quality Bank. Neither CHOPS nor ETS will be
liable to CHOPS or other producers, or to any third person, in respect to obligations or
liabilities incurred by CHOPS or other producers in connection with their separate
business unrelated to said Cameron highway, and obligations to CHOPS or ETS under
this Agreement are several and not joint or in solido to CHOPS or other producer.
9. Any individual producer, or his representative, will, at any time during normal business
hours and upon reasonable notice, have access to the books, accounts, and records of
CHOPS for the purpose of verifying that CHOPS is operating the process of adjustments
and determining values in accordance with the provisions of this Quality Bank. Samples
used for Quality Bank calculations will be retained by CHOPS for sixty (60) Days
following the month in which the samples were obtained. Cost of such individual audits
will be borne by the producer(s) requesting the audit.
SECTION VI
PERIODIC REVIEW
1. The Quality Bank will be periodically reviewed and updated in accordance with the
following:
 At any time a quality parameter other than gravity or sulfur significantly materially
affects the pricing of the CHOPS common stream, or the pricing of LLS or SGC (if
SGC is then currently being used as the proxy to CHOPS common stream).
 Every five years following April 30, 2002, to determine if the market for database
crude oil types or the CHOPS common stream has changed sufficiently to
warrant modifications of the adjustment factors or formulas used by the Quality
Bank.
 In the event that CHOPS, in its sole opinion, were to determine that the CHOPS
Quality Bank is not competitive with the quality banks of other Gulf of Mexico
crude oil pipelines.
2. In any subsequent review of the Quality Bank, the CHOPS common stream will be
incorporated into the crude oil database if sufficient independently published price data
are available. Other crude oils commonly marketed on the U.S. Gulf Coast (“USGC”)
may also be added at this time if required to expand the range of the crude oil database
to ensure it encompasses the full range of gravity and sulfur applicable to crude oil
streams that might be introduced into the pipeline system. These other crude oils will
only be added if appropriate pricing data from an independent source is available
covering the specified period.

C-5
Error! Unknown document property name.
3. The following criteria will be used in assembling a historical database.
 It will include commercially traded Gulf of Mexico originating crude oil streams (types)
that are representative of the USGC market and for which there are sufficient
published price data.
Import crude oils that routinely compete in the USGC market will be added to the
historical database to cover the full range of key quality parameters anticipated to be
seen in the pipeline system.
 If pricing data is based on transactions, such pricing must be continuously available
from publicly available sources for the crude oils used, and ideally cover one
(multiple preferred) pricing cycle.
 Accurate assay data on the crude oils must be available.
 Quality banks of other Gulf of Mexico crude oil pipelines.
 Certain crude oils will be excluded from the database based on the characteristics
listed below, provided that (i) such characteristic is not taken into account in the
Quality Bank and (ii) the CHOPS common stream does not, or is not expected to,
have such characteristic.
 Crude oils not chemically similar.
 Crude oils that are known to routinely contain contaminants, to a degree that
market price is significantly affected.
 Crude oils whose assays indicate they are not whole crude oils.
4. A historical database will contain, at a minimum, the prices, API gravity, and sulfur
content of each selected crude oil type. To the extent possible, the database should
contain crude oil types which encompass the full range of gravity and sulfur applicable to
crude oil streams that might be introduced into the pipeline system and provide sufficient
variation of the key quality parameters to yield a robust Quality Bank. It is expected the
database will include the most recently available monthly data for a minimum period
encompassing not less than one complete crude oil pricing cycle or twelve (12)
consecutive months, whichever is greater. The database will be extended to a longer
period if the required data are available, provided that the database will not be extended
beyond sixty (60) Months unless a determination is made that market conditions and
transportation costs do not distort the older data.
5. For the purpose of correlating the key quality parameters to price, the published crude oil
price for each crude oil type will be adjusted to a commonly accepted market clearing
location on the USGC for that type. All costs that are reasonably expected to be incurred
in transporting each crude oil from its usual marketing center to the selected market
clearing location, using predominant and efficient transportation, will serve as the basis
for such adjustments.
6. All transportation costs will be based on arms-length transactions, and will exclude
discounted or contract rates (such as those requiring minimum shipments over a
specified period of time). If pipeline tariffs are not published then purchase and sale
(buy/sell) differentials may be substituted, provided that such differentials are known or
can be reasonably estimated from trade experience or market pricing.
7. Other types of adjustments to deal with different pricing bases and timing biases may be
made as reasonably determined to be necessary or convenient.

C-6
Error! Unknown document property name.
 C-7
Error! Unknown document property name.