NuStar Logistics, L.P.

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1 NuStar Logistics, L.P. Rules and Regulations Governing the Interstate Transportation by Pipeline of CRUDE PETROLEUM Rules and Regulations published herein apply only under tariffs which make specific reference by number to this Tariff; such reference will include successive issues hereof. Specific rules and regulations published in individual tariffs will take precedence over rules and regulations published herein. The matter published herein will have no adverse effect on the quality of the human environment. ISSUED: June 30, 2014 EFFECTIVE: July 1, 2014 Issued by: Danny Oliver Senior Vice President NuStar Logistics, L.P IH-10 West San Antonio, Texas Compiled by: Adam Cummins IH-10 West San Antonio, Texas Phone:

2 Rules and Regulations Section I The following nineteen (1-19) rules are reprinted here pursuant to the requirements of the Texas Railroad Commission Title 16 Part 1 Chapter 3 Rule Carrier (herein generally referred to as the pipeline", in this tariff) will accept Crude Petroleum (referred to variously in this tariff as crude oil", crude", oil", and "marketable oil", and defined in Rule 1 below) for intrastate transportation by pipeline from the point of origin to the point of destination named in this tariff, subject to the following rules and regulations: Rule 1. All Marketable Oil To Be Received For Transportation By the term "marketable oil" is meant any crude petroleum adopted for refining or fuel purposes, properly settled and containing not more than two percent of basic sediment, water, or other impurities above a point six inches below the pipeline connection with the tank. Pipelines shall receive for transportation all such marketable oil" tendered; but the pipeline shall not be required to receive for shipment from any one person an amount exceeding 3,000 barrels of petroleum in any one day; and, if the oil tendered for transportation differs materially in character from that usually produced in the field and being transported therefrom by the pipeline, then it shall be transported under such terms as the shipper and the owner of the pipeline may agree or the Railroad Commission of Texas ("Commission ) may require. Rule 2. Basic Sediment, How Determined Temperature In determining the amount of sediment, water, or other impurities, the pipeline is authorized to make a test of the oil offered for transportation from an average sample from each such tank, by the use of centrifugal machine, or by the use of any other appliance agreed upon by the pipeline and the shipper. The same method of ascertaining the amount of the sediment, water or other impurities shall to used in the delivery as in the receipt of oil. The pipeline shall not be required to receive for transportation, nor shall consignee be required to accept as a delivery, any oil of a higher temperature than 90 degrees Fahrenheit, except that during the summer oil shall be received at any atmospheric temperature, and may be delivered at like temperature. Consignee shall have the same right to test the oil upon delivery at destination that the pipeline has to test before receiving from the shipper. Rule 3. Barrel Defined For the purpose of these rules, a "barrel of crude petroleum is declared to be 42 gallons of 231 cubic inches per gallon at sixty degrees Fahrenheit (60 F). Rule 4. Oil Involved in Litigation, Etc. Indemnity Against Loss When any oil offered for transportation is involved in litigation, or the ownership is in dispute, or when the oil appears to be encumbered by lien or charge of any kind, the pipeline may require of shippers an indemnity bond to protect it against all loss. Rule 5. Storage The pipeline shall provide, without additional charge, sufficient storage, such as is incident and necessary to the transportation of oil, including storage at destination or so near thereto as to be available for prompt delivery to destination point, for five days from the date of order of delivery at destination. Page 2 of 21

3 Rule 6. Identity Of Oil, Maintenance of Oil The pipeline may deliver to consignee, either the identical oil received for transportation, subject to such consequences of mixing with other oil as are incident to the usual pipeline transportation, or it may make delivery from its common stock at destination; provided, if this last be done, the delivery shall be of substantially like kind and market value. Rule 7. Minimum Quantity To Be Received The pipeline shall not be required to receive less than one tank carload of oil when oil is offered for loading into tank cars at destination of the pipeline. When oil is offered for transportation for other than tank car delivery, a pipeline shall not be required to receive less than 500 barrels. Rule 8. Gathering Charges The pipeline currently has no charges for gathering of the oil, for transportation, and for delivery. Rule 9. Gauging, Testing and Deductions (Reference Commission Special Order No , 098, Effective June 18, 1973). (a) All crude oil tendered to the pipeline for transportation shall be gauged and tested by a representative of the pipeline prior to its receipt by the pipeline. The shipper may be present or represented at the gauging and testing. Quantities shall be computed from correctly compiled tank tables showing 100% of the full capacity of the tanks, and adjustments shall be made for temperature from the nearest whole number degree to the basis of 60 F and to the nearest 5/10 API degree gravity in accordance with the volume correction Tables 5A and 6A contained in API Standard 2540, American Society for Testing Materials 01250, Institute of Petroleum 200, first edition, August The pipeline may deduct the basic sediment, water, and other impurities as shown by the centrifugal or other test agreed upon; and 1% for evaporation and loss during transportation. The net balance shall be the quantity deliverable by the pipeline. (b) The gauging and testing of oil by the pipeline representative is directed toward and intended to require tank measurement of produced crude prior to the transfer of custody to the initial transporter from a producing property. A transfer of custody of crude between transporters is subject to measurement as agreed upon by the transporters. Rule 10. Delivery and Demurrage The pipeline shall transport oil with reasonable diligence, considering the quality of the oil, the distance of transportation and other material elements, but at any time after receipt of a consignment of oil, upon 24 hours' notice to the consignee, may offer oil for delivery from its common stock at the point of destination, conformable to Rule 6 of this tariff, at a rate not exceeding 10,000 barrels per day of 24 hours. Computation of time of storage (as provided for in Rule 5 of this tariff) shall begin at the expiration of such notice. At the expiration of the time allowed in Rule 5 of this tariff for storage at destination, the pipeline may assess a demurrage charge on oil offered for delivery and remaining undelivered, at a rate for the first 10 days of $.001 per barrel and thereafter at a rate of $.0075 per barrel, for each day of 24 hours or fractional part thereof. Rule 11. Unpaid Charges, Lien For And Sale To Cover The pipeline shall have a lien on all oil to cover charges for transportation, including demurrage, and it may withhold delivery of oil until the charges are paid. If the charges shall remain unpaid for more than 5 days after notice of readiness to deliver, the pipeline may sell the oil at public auction at the general office of the pipeline on any day not a legal holiday. The date for the sale shall be not less than 48 hours after publication of notice in a daily newspaper of general circulation published in San Antonio, Texas, the city where the general office of the pipeline is located. The notice shall give the time and Page 3 of 21

4 place of the sale, and the quantity of the oil to be sold. From the proceeds of the sale, the pipeline may deduct all charges lawfully accruing, including demurrage, and all expenses of the sale. The net balance shall be paid to the person lawfully entitled thereto. Rule 12. Notice Of Claims Notice of claim for loss, damage or delay in connection with the shipment of oil must be made in writing to the pipeline within 91 days after the damage, loss, or delay occurred. If the claim is for failure to make delivery, the claim must be made within 91 days after a reasonable time for delivery has elapsed. Rule 13. Telephone - Telegraph Line - Shipper To Use If the pipeline maintains a private telegraph or telephone line, a shipper may use it without extra charge, for messages incident to shipments. However, the pipeline shall not be held liable for failure to deliver any messages away from its office or for delay in transmission or for interruption of service. Rule 14. Contracts Of Transportation When a consignment of oil is accepted, the pipeline shall give the shipper a run ticket, and shall give the shipper a statement that shows the amount of oil received for transportation, the points of origin and destination, corrections made for temperature, deductions made far impurities, and the rate for such transportation. Rule 15. Shipper's Tanks. Etc. Inspection When a shipment of oil has been offered for transportation, the pipeline shall have the right to go upon the premises where the oil is produced or stored, and have access to any and all tanks or storage receptacles for the purpose of making any examination, inspection, or test authorized by these Rules and Regulations. Rule 16. Offers In Excess Of Facilities If oil is offered to the pipeline for transportation in excess of the amount that can be immediately transported, the transportation furnished by the pipeline shall be apportioned among all shippers in proportion to the amounts offered by each; but no offer for transportation shall be considered beyond the amount which the person requesting the shipment then has ready for shipment by the pipeline. The pipeline shall be considered as a shipper of oil produced or purchased by itself and hold for shipment through its line, and its oil shall be entitled to participate in such apportionment. Rule 17. Interchange of Tonnage Pipelines shall provide the necessary connections and facilities for the exchange of tonnage at every locality reached by two or more pipelines, when the Commission finds that a necessity exists for connection, and under such regulations as said Commission may determine in each case. Rule 18. Receipt and Delivery - Necessary Facilities For The pipeline shall install and maintain facilities for the receipt and delivery of marketable crude petroleum of shippers at any point on its line if the Commission finds that a necessity exists therefor, and under regulations by the Commission. Rule 19. Report Of Loss From Fire, Lightning and Leakage (a) The pipeline shall immediately notify the Commission, by telegraph, telephone, or letter, of each fire that occurs at any oil tank owned or controlled by the pipeline, or of any tank struck by lightning. The pipeline shall in like manner report each break or leak in any of its tanks or pipelines from Page 4 of 21

5 which more than 5 barrels escape. The pipeline shall report in writing to the Commission, by the fifteenth day of each calendar month, the estimated amount of loss of oil by fire or leakage from its tanks and pipelines for this preceding month; but not including leakage or evaporation ordinarily incident to transportation. (b) No risk of fires, storm, flood or act of God, and no risk resulting from riot, insurrection, rebellion, war, an act of the public enemy, or from quarantine or authority of law or any order, requisition or necessity of the government of the United States in time of war, shall be borne by the pipeline, nor shall any liability accrue to it from any damage thereby occasioned. If loss of any crude oil from such causes occurs after the oil has been received for transportation, and before it has been delivered to the consignee, the shipper shall bear a loss in such proportion as the amount of his shipment is to all of the oil held in transportation by the pipeline at the time of such loss, and the shipper shall be entitled to have delivered only such portion of his shipment as may remain after a deduction of his due proportion of such loss, but in such event the shipper shall be required to pay charges only on the quantity of oil delivered. This rule shall not apply if the loss occurs because of negligence of the pipeline. Page 5 of 21

6 Section II Special Rules The Rules and Regulations set forth in Section 1 may be supplemented or amended by these Section II Special Rules. In the event of a conflict between the rules in Section I and the rules in Section II, the rules in Section II shall control. Special Rule 1: Definitions Rules and Regulations API API Gravity Assay American Petroleum Institute. Gravity determined in accordance with ASTM designation and expressed in degrees. A laboratory analysis of Crude Petroleum to include API Gravity, Reid vapor pressure, pour point, sediment and water content, sulfur content, viscosity at 60 degrees Fahrenheit, and other characteristics as may be required by Carrier. Assignee Shipper See Special Rule 24. ASTM Business Day Capacity Carrier American Society for Testing Materials. Monday, Tuesday, Wednesday, Thursday, or Friday of a calendar week, except when a Federal holiday falls on such day of the week. The quantity of Crude Petroleum the Pipeline Segment at issue in an Allocation Month, expressed in Barrels, that is available for transportation of Crude Petroleum pursuant to this Tariff. NuStar Logistics, L.P. Carrier Indemnified See Special Rule 19. Parties Committed Shipper Each Shipper participating in the Volume Incentive Program in Rule 24. Committed Shipper Rate Common Stream Connecting Carrier Consignee The rate paid by a Committed Shipper as published in Carrier s F.E.R.C. No. 89 or reissues thereof. Crude Petroleum moved through the Pipeline and Pipeline facilities which is commingled or intermixed with Crude Petroleums of like quality and characteristics as may be determined by Carrier based on Assays and other pertinent analytical data. A connecting pipeline company as named or referred to herein. The party to whom a Shipper has ordered the delivery of Crude Petroleum. Page 6 of 21

7 Crude Petroleum Destination Point Force Majeure The direct liquid product of oil wells or a mixture of the direct product of oil wells and the indirect petroleum products resulting either from refining crude oil or the operation of gasoline recovery plants, gas recycling plants, distillate recovery equipment in gas and distillate fields, or products broken out during the normal production or processing of natural gas and meeting the specifications referenced in Special Rule 2. A point named in the Tariff at which point Carrier will deliver Crude Petroleum to Shipper or its Consignee after transportation from an Origin Point. Shall include acts of God (and threats thereof), acts of government, acts of war, or acts of terrorists; storm, flood, earthquakes, sinkholes, extreme weather, or any threats of such events; accident, fire, freezing, or explosions; quarantine or authority of law; breakdown or accident to machinery or equipment; strikes or other industrial, civil, or public disturbances, insurrections, or rebellions; or any other cause reasonably beyond the control of the party experiencing Force Majeure, whether similar or dissimilar to the causes herein enumerated. The term Force Majeure shall include Force Majeure events on the Carrier systems but shall not include or excuse any of the following: (a) Shipper s or Carrier s decision to cease, or materially reduce, or change its operations in the market area served by the Pipeline; (b) Shipper s or Carrier s financial condition; (c) Shipper s or Carrier s obligation to pay money that has become due under the Agreement; (d) Shipper s inability to connect to or access Carrier s Origin Point(s) unless Shipper s failure to make such connection is the result of Carrier s acts or omissions; or (e) either Party s failure to perform any release, indemnity, defense, hold harmless, or similar obligations in this Tariff. Force Majeure Event An event caused by Force Majeure. Governmental Authority Any federal, state, or local government or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory, or administrative functions of or pertaining to government or any other authority, agency, department, board, commission, or instrumentality of the United States, any state of the United States, or any political subdivision thereof, whether civil or military, and any court, tribunal or arbitrator(s) of competent jurisdiction, and any governmental or nongovernmental self-regulatory organization, agency, or authority. Gravity Bank See Special Rule 22. Insecure Party See Special Rule 17. Law Any applicable federal, state, local, municipal or other administrative order, constitution, ordinance, law, decree, directive, injunction, order, permit, requirement, statute, regulation, rule, or code issued or promulgated by a Governmental Authority. Page 7 of 21

8 Loss Any loss, contamination, damage, discoloration, deterioration, degradation, change in density or quality, or other loss. Monthly Deficiency Payment Monthly Minimum Volume Monthly Volume Commitment Nomination Origin Point The amount that must be paid by Committed Shipper if it tenders less than the Monthly Minimum Volume set forth in its T&D Agreement in any Month. The Monthly Deficiency Payment will be equal to the Committed Shipper s Monthly Minimum Volume (less credits, if any, due under the T&D Agreement), multiplied by the Incentive Rate paid by Committed Shipper. The product of eighty-five percent (85%) and the Committed Shipper s Volume Commitment. The amount of Crude Petroleum an Committed Shipper agrees to Tender to Carrier, in the aggregate, each Month, as set forth in its T&D Agreement. A request by a Shipper to Carrier, to accept a stated quantity and grade of Crude Petroleum for transportation from a specified Origin Point to a specified Destination Point in accordance with this Tariff. A point named in the Tariff at which point Carrier will accept Crude Petroleum for transportation. Other Party See Special Rule 17. Pipeline Pipeline Segment R.R.C. Carrier s pipeline, including owned and leased pipeline facilities transporting Crude Petroleum from the Origin Point to the Destination Point. Section of Pipeline, the limits of which are defined by two geographically identifiable points, that, because of the way that section of Pipeline is designed and operated, must be treated as a unit for purposes of determining Capacity. Railroad Commission of Texas Reid vapor pressure The absolute vapor pressure exerted by a liquid at 100 F (37.8 C), as determined by the test method ASTM-D-323. Segregated Batch Shipper A Tender of Crude Petroleum having specific identifiable characteristics which is moved through the Pipeline and Pipeline facilities so as to maintain its identity. A party who contracts with Carrier for transportation of Crude Petroleum, as defined herein and under the terms of this Tariff. Shipper Indemnified See Special Rule 19. Parties Shipper History See Special Rule 24. Page 8 of 21

9 Sulfur Bank See Special Rule 22. Tariff These R.R.C. rules and regulations. Tender(s), (ed), (ing) A delivery by a Shipper to Carrier of a stated quantity and grade of Crude Petroleum, under a Nomination accepted by Carrier, for transportation in accordance with this Tariff. T&D Agreement Third Party Shipper A Throughput and Deficiency Agreement executed between Carrier and an Committed Shipper pursuant to the open season commencing on July 17, A Person, other than Shipper and/or its affiliate(s), designated by Shipper to transport Crude Petroleum under this Tariff and a T&D Agreement. Volume Commitment See Special Rule 24. Incentive Program Special Rule 2: Acceptance of Crude Petroleum (A) Carrier will reject Crude Petroleum containing more than one (1%) percent of basic sediment, water, and other impurities, except that: (1) If required by operating conditions, Carrier will reject Crude Petroleum containing less than one percent (1%) of basic sediment, water and other impurities. (2) Sediment and water limitations of a Connecting Carrier will be imposed upon Carrier (and thus, upon Shippers) when such limits are more restrictive than that of the Carrier, in which case the limitations of the downstream Connecting Carrier will be applied, and Carrier shall file to amend this Tariff. (B) Carrier will reject any and all of the following shipments: (1) Crude Petroleum that contains organic chlorides. (2) Crude Petroleum with a sulfur content that exceeds 0.5% by weight. (3) Crude Petroleum having Reid vapor pressure in excess of 10 pounds per square inch absolute (psia). (4) Crude Petroleum having a vapor phase hydrogen sulfide concentration greater than ten (10) parts per million. (5) Crude Petroleum where the Shipper or Consignee has failed to comply with Law, rules, and regulations made by any Governmental Authority regulating shipments of Crude Petroleum. (C) Carrier may waive the requirements set forth in Sections (A)-(B) of this Special Rule 2 on a non-discriminatory basis. If Carrier agrees in writing to accept Crude Petroleum that does not meet the applicable quality specifications in this Rule 2, then, as to such Crude Page 9 of 21

10 Petroleum (but only as to the specifications waived), Shipper shall be deemed to be in compliance with this Special Rule 2 but only until such time as Carrier may withdraw any such agreement or waiver. Carrier will actively monitor Tenders of all Shippers Crude Petroleum into the Pipeline, and it will work with all Shippers to bring off-specification Crude Petroleum into specifications. If such cooperative effort between any such Shipper and Carrier does not result in on-specification deliveries within a mutually-agreed, reasonable period of time, Carrier will have the right to reject such Shipper s continuing off-specification deliveries. Special Rule 3: Additives Crude Petroleum shall be free of any additives and inhibitors, including drag reducing agents, unless expressly approved by Carrier on a non-discriminatory basis. Special Rule 4: Storage Carrier owns no facilities for storage and will provide only minimal working tankage for storage that is incidental and necessary to the transportation of Crude Petroleum. Nonincidental storage at the Origin and Destination Point is a separate service which Shipper must obtain from another person. Special Rule 5: Segregated Batch Facilities Required Where Crude Petroleum to be shipped requires transportation in a Segregated Batch, Shipper or Consignee shall be responsible for providing tankage for the volume of Segregated Batch from another person. Special Rule 6: Destination Facilities Required Carrier will refuse to accept Crude Petroleum for transportation unless documentary evidence is furnished that the Shipper or Consignee has provided the necessary facilities for the prompt receiving of Crude Petroleum at the Destination Point. If the Shipper or Consignee is unable or refuses to receive said Crude Petroleum as it arrives at the Destination Point, Carrier reserves the right to make arrangement for disposition of the Crude Petroleum as it deems appropriate (including sale of same, pursuant to the procedures set forth in Special Rule 17(D)), in order to clear the Pipeline. Any additional expenses incurred by Carrier in making such arrangements shall be borne by the Shipper or Consignee. Page 10 of 21

11 Special Rule 7: Rejection of Crude Petroleum Subject to Dispute, Liens, or Charges; Warranty of Title Carrier will reject any Crude Petroleum which, when nominated for transportation, may be involved in litigation, or the title of which may be in dispute, or which may be encumbered by lien or charge of any kind unless the Shipper provides documentary evidence of the Shipper's unencumbered title or satisfactory indemnity bond to protect Carrier. By nominating Crude Petroleum, the Shipper warrants and guarantees that it owns or controls, has the right to deliver or have delivered for its account, such Crude Petroleum, and agrees to defend, indemnify, and hold Carrier harmless for any and all loss, cost, liability, damage, and/or expense resulting from failure of ownership or control thereto, provided that acceptance for transportation by Carrier shall not be deemed: (a) a representation by Carrier as to ownership or control or (b) a waiver of Carrier s rights hereunder. Special Rule 8: Gauging; Measurement Crude Petroleum Tendered to Carrier for transportation shall be measured by mutually accepted custody transfer facilities. Shipper and Consignee shall have the privilege of being present or represented during proving of meters and testing of shipments by Carrier. Measurement by the Carrier is final. Corrections will be made for temperature from observed degrees Fahrenheit to 60 degrees Fahrenheit. Carrier will adjust any overage or shortage of Crude Petroleum with Shippers to allow for inherent losses or gains, including but not limited to shrinkage, evaporation, interface mixture, Crude Petroleum measurements, and other physical losses not due to negligence of Carrier. The adjustments for losses or gains of Crude Petroleum will be allocated by grade by month, among the Shippers in the proportion that the total number of barrels of a given grade of Crude Petroleum delivered out of the Pipeline, by grade, for each Shipper, bears to the total number of barrels of that grade Crude Petroleum delivered out of the Pipeline for all Shippers. Special Rule 9: Evidence of Receipts and Deliveries Crude Petroleum received from Shipper or its Consignee and Crude Petroleum delivered to Shipper or its Consignee shall, in each instance, be evidenced by tickets or Carrier s statements containing data essential to the determination of quantity. Special Rule 10: Duty of Carrier (A) (B) (C) Carrier shall not be required to transport Crude Petroleum except with reasonable diligence, considering the quality of the Crude Petroleum, the distance of transportation, and other material elements, and will not accept Crude Petroleum to be transported in time for any particular market. Carrier will not be required to deliver the identical Crude Petroleum received. Carrier will use reasonable care to transport Crude Petroleum it receives at the Origin Point to the Destination Point, with a minimum of contamination and mixing, and will attempt to maintain the identity of each shipment. Rule 10(B) does not apply to a Pipeline Segment that is designated as Common Stream. Page 11 of 21

12 (D) Carrier may suspend transportation services on the Pipeline in order to comply with Law of any Governmental Authority, to perform maintenance, testing, inspections, or repairs, or to prevent injuries to persons, damage to property, or harm to the environment, without incurring any obligation for any liabilities (except for a proportionate decrease in the Monthly Deficiency Payment, if applicable, as provided in Special Rule 24(D)). Carrier will provide Shipper with at least forty-five (45) days notice advance notice of any routine or scheduled maintenance on the Pipeline. Special Rule 11: Application of Rates from and to Intermediate Points For Crude Petroleum accepted for transportation from any point on Carrier s lines not named in this Tariff, which is intermediate to a point for which rates are published in Carrier s R.R.C. No. 89 or reissues thereof, Carrier will apply the rates published in such tariff for the next more distant point specified in the tariff. For Crude Petroleum accepted for transportation to any point not named in the tariff which is intermediate to a point for which rates are published in Carrier s R.R.C. No. 89 or reissues thereof, the rate published therein for the next more distant point specified in the tariff will apply. Special Rule 12: Line Fill and Tank Bottom Inventory Requirements Carrier will require each Shipper to supply a pro rata share of Crude Petroleum necessary for Pipeline and working tankage fill to ensure efficient operation of the Pipeline prior to delivery. Crude Petroleum provided by a Shipper for this purpose may be withdrawn only after: (1) shipments have ceased and the Shipper has notified Carrier in writing to discontinue shipments in Carrier s system; and (2) the Shipper s balances have been reconciled between all Shippers and Carrier. Carrier, at its reasonable discretion, may require advance payment of transportation charges on the volumes to be cleared from Carrier s system, and any unpaid accounts receivable, before final delivery will be made. Unless Shipper has not made any required payment or unless otherwise prevented by a Force Majeure Event or actions of the Shipper, Carrier shall have a reasonable period of time, not to exceed 90 days, from the receipt of the Shipper written notice to Carrier, to complete administrative and operational requirements incidental to Shipper s withdrawal. If Shipper s inventory balance drops below its pro rata portion of the volume of Crude Petroleum necessary for the efficient operation of the Pipeline and working tankage, Carrier will require Shipper to provide the necessary volume to meet its pro rata portion of such volume of Crude Petroleum. Special Rule 13: Prorating of Pipeline Capacity The following procedures shall govern how Carrier will allocate the Capacity of a Pipeline Segment when Carrier receives more Nominations in a month for transportation on the Pipeline Segment that exceeds its Capacity. Definitions: Allocation Month means any calendar month for which Capacity is to be allocated. Base Period is the 12-calendar-month period just preceding the Calculation Month. Page 12 of 21

13 Base Shipment for each Regular Shipper means the total deliveries of Crude Petroleum during the Base Period to all Destination Point(s) on the Pipeline Segment to be prorated. Base Shipment Percentage for each Regular Shipper means a percentage equal to a specific Regular Shipper s Base Shipment divided by the sum all Regular Shippers Base Shipments. Calculation Month is the calendar month immediately preceding the Allocation Month. Good Faith Nominations means the non-contingent ability and willingness of Shipper to deliver to Carrier at the Origin Point(s) specified in the Nomination all of the Barrels to be Tendered during the month for which the Nomination is made. New Shipper means a Shipper that, with respect to the volumes in question, is not an Committed Shipper or a Regular Shipper. New Shipper Capacity means ten (10%) percent of the Capacity. Regular Shipper means a Shipper that, with respect to the volumes in question who has a record of deliveries of Crude Petroleum to a Destination Point on the Pipeline Segment to be prorated within the Base Period and who is not a New Shipper; provided, however, only volumes in excess of an Committed Shipper s Monthly Volume Commitment, if any, shall be considered for purposes of determining an Committed Shipper s volume as a Regular Shipper. Regular Shipper Capacity has the meaning set forth in (C)(i) of this Special Rule 13. (A) Committed Shipper Capacity: i. Each Committed Shipper shall receive an allocation of Capacity equal to its Monthly Volume Commitment, and such Monthly Volume Commitment shall not be subject to proration except as provided in subsection (A)(ii) of this Special Rule 13. ii. iii. If in any given month the Capacity were to be reduced so that the New Shipper Capacity and one hundred percent (100%) of the Monthly Volume Commitment could not be accommodated, Committed Shippers allocations shall be reduced in proportion to their respective Monthly Volume Commitment, and the sum of Committed Shippers Monthly Volume Commitment so allocated shall not exceed ninety (90%) percent of the Capacity. If an Committed Shipper Nominates to ship volumes of Crude Petroleum in excess of its Monthly Volume Commitment, such incremental volumes shall be subject to proration under subsection (C) of this Special Rule 13. (B) (C) New Shipper Capacity: Each New Shipper shall receive an allocation that equals the lesser of: (1) its Nomination; or (2) New Shipper Capacity allocated among all New Shippers in proportion to the volumes of Crude Petroleum Nominated by each New Shipper for the Allocation Month. Regular Shipper Capacity: Page 13 of 21

14 i. Carrier shall determine the Regular Shipper Capacity, if any, by taking (1) the Capacity less (2) the aggregate amount of Monthly Volume Commitment allocated to all Committed Shippers pursuant to (A)(i) and (ii) of this Special Rule 13 (as applicable) less (3) the aggregate amount allocated to all New Shippers pursuant to subsection (B) of this Special Rule 13. ii. All Regular Shipper Capacity will be allocated to Regular Shippers. Each Regular Shipper will receive an initial allocation that equals the lesser of: (1) the product of (a) its Base Shipment Percentage and (b) the Regular Shipper Capacity, or (2) its Nomination. (D) Remaining Capacity: Any remaining Capacity not allocated through the application of subsections (A), (B) and (C) of this Special Rule 13 will be allocated among all Shippers having remaining unmet Nominations, in proportion to each such Shipper s initial allocation for the Allocation Month pursuant to subsections (B) and (C)(ii) (for the avoidance of doubt, notwithstanding the percentage cap set forth in subsection (B) of this Special Rule 13) up to the amount of each of their Nominations, and this process shall continue with all remaining Shippers until one hundred percent (100%) of the remaining Capacity is fully allocated or all of the remaining Nominations have been fulfilled. (E) Basis of Allocation; Notification. When prorating is in effect, Capacity shall be allocated among eligible Shippers on a monthly basis. If prorating is expected to extend to the next calendar month, Carrier shall use reasonable efforts to notify each Shipper entitled to an allocation of a portion of Capacity of the amount of its allocation no later than the 25 th day of the month proceeding the month for which the allocation is made. (F) Good Faith Nominations. Carrier will accept only Good Faith Nominations from Shippers, and Carrier shall use whatever reasonable means necessary to determine whether Nominations are made in good faith. (G) Failure to Use Allocated Portion of Capacity. Notwithstanding the foregoing provisions of this Special Rule 13, if a New Shipper making a Good Faith Nomination fails to deliver at the Origin Point(s) specified by it in its Nomination, Crude Petroleum sufficient to fill the portion of Capacity allocated to it under (B) of this Special Rule 13 and such failure has not been caused by Force Majeure, as substantiated in a manner satisfactory to the Carrier, Carrier will reduce such Shipper s allocation for the next prorating period (after the end of the month during which such failure occurred) for which such Shipper nominates Crude Petroleum, by the allocated portion of Capacity not utilized. In addition, if a New or Regular Shipper Tenders a volume greater than or equal to ninety-five percent (95%) of its binding Nomination, then such Shipper will be invoiced based on its delivered volumes. If a New or Regular Shipper Tenders less than ninetyfive percent (95%) of its binding Nomination, then such Shipper shall be invoiced for its delivered volumes that month, plus the product of the applicable Tariff rate and volume equal to the difference between the actual volume Tendered and a volume equal to ninety-five percent (95%) of such Shipper s binding Nomination or such Shipper s prorated binding Nomination, as adjusted by further prorating or operational factors. (H) Transfer of Base Shipment Percentage or Allocated Portion of Capacity; Use of Affiliates. Subject to Special Rule 24, neither a Shipper s Base Shipment Percentage nor volumes allocated to it during a period when prorating is in effect shall be assigned, Page 14 of 21

15 conveyed, loaned, transferred to, or used in any manner by, another Shipper, and any such attempt to make such an assignment shall be void. However, a Shipper s Base Shipment Percentage or its allocation may be transferred as an incident of the bona fide assignment of a transportation service agreement or a material portion of the assets of a Shipper relating to a transportation service agreement or to a successor to the Shipper s business by the operation of Law, such as an executor or trustee in bankruptcy. A Shipper may not use an affiliated or cooperating entity to increase its Base Shipment Percentage or its allocated portion of Capacity. (I) Enhancement of Allocation. In no event will an allocation to a Shipper be used in such a manner that will enhance the allocation of another Shipper beyond the allocation that such Shipper would be entitled to under this policy. Carrier may require written assurances from a responsible officer of Shipper regarding its use of its allocated portion of Capacity stating that Shipper has not violated this policy. Notwithstanding the foregoing provisions of this Rule, in the event any Shipper shall, by any device, scheme, or arrangement whatsoever, attempt to transfer all or any part of its allocated portion of Capacity to any other Shipper in violation of this policy, or in the event any Shipper shall attempt to receive and use such portion of Capacity, the portion of Capacity allocated to such Shipper will be reduced, in the next month that is subject to prorating after the date that the violation is discovered, by a volume equal to such attempted transfer. Special Rule 14: Nominations; Minimum Quantity Crude Petroleum will be transported by Carrier only under a Nomination accepted by Carrier. Any Shipper desiring to Tender Crude Petroleum for transportation shall make such Nomination to Carrier in writing on or before 4:15 PM central standard time, the last Business Day prior to the 20 th day of the month preceding the month during which the transportation under the Nomination is to begin; except that, if space is available for current movement and at the reasonable discretion of Carrier, a Shipper may submit a Nomination after such 4:15 PM central standard time deadline. Nominations for the transportation of Crude Petroleum for which Carrier has facilities will be accepted under the Tariff in quantities of not less than the following: Type of Nomination: Common Stream Minimum Aggregate Nomination: 5,000 barrels per day; Carrier deliveries shall be a minimum of 2,500 barrels per day per Origin Point from a Shipper as operations permit, and provided such Crude Petroleum is of similar quality and characteristics as is being transported from an Origin Point to a Destination Point. Segregated batches may be accepted from time to time if operationally feasible. Before Carrier will accept a Nomination from a New Shipper, such New Shipper must: (i) comply with Special Rule 17(A); (ii) demonstrate to Carrier the adequacy of such Shipper s Page 15 of 21

16 arrangements and facilities as referenced in Special Rule 5 and Special Rule 6; and (iii) provide any other information reasonably requested by Carrier. Special Rule 15: Application of Rates Crude Petroleum accepted for transportation shall be subject to the rates in effect on the date of the Tender. Special Rule 16: Legality of Shipments Carrier will reject Crude Petroleum where the Shipper or Consignee has failed to comply with Law made by any Governmental Authority regulating shipments of Crude Petroleum, unless this Special Rule 16 is waived by Carrier on a non-discriminatory basis. Special Rule 17: Payment of Carrier Charges; Adequate Assurance (A) (B) (C) Prior to becoming a Shipper, a prospective Shipper must submit to Carrier sufficient financial information to establish creditworthiness. The type of information the Carrier will request from Shipper includes, but is not limited to: most recent year end financials, 10K reports or other filings with regulatory agencies and/or bank references. Unless otherwise agreed to in a T&D Agreement, if in the reasonable opinion of Carrier: (1) a new Shipper is not creditworthy, or (2) an existing Shipper s credit deteriorates, then Carrier has the option to require such Shipper to (a) prepay all transportation and other fees and lawful charges accruing on Crude Petroleum delivered and accepted by Carrier, (b) provide a payment guaranty with terms acceptable to Carrier, or (c) supply an irrevocable stand-by letter of credit from a bank acceptable to Carrier, with terms in a form acceptable to Carrier. By the tenth (10th) Business Day following the end of each transportation month, Carrier will invoice Shipper for all transportation charges and other fees due in accordance with this Tariff. Deficiency payments and/or other charges set forth in the T&D Agreement shall be invoiced pursuant to the T&D Agreement. Shipper shall pay all such invoiced transportation charges and other fees without setoff or deduction in accordance with invoice terms, any applicable T&D Agreement, and these rules and regulations by the tenth (10th) Business Day from the date of such invoice. If such charges are not paid by the due date stated on the invoice, Carrier shall assess finance charges on the entire past due balance (including principal and accumulated but unpaid finance charges) until paid in full, at a rate equal to one and one-half percent (1.5%) interest per month or the maximum finance rate allowed by Law, whichever is less. In the event a Shipper disputes any portion of any invoice, within ten (10) Business Days from the date of receipt of such invoice, Shipper shall promptly notify Carrier in writing of the disputed portion and pay the amount of the invoice. After receipt of such notice, Carrier and Shipper shall promptly work in good faith to resolve the dispute. If any amount is disputed, interest will accrue from the date due until the date paid but will only be due after the dispute is resolved and based on the amount found or agreed to be due. (D) Carrier shall have the right to withhold an amount of Crude Petroleum belonging to Shipper from delivery that would be sufficient to cover all unpaid charges due to Carrier from Shipper until all such unpaid charges have been paid. Furthermore, Carrier shall retain a perfected possessory lien under the Texas Bus. & Comm. Code, Title 1, Chapter 9 Page 16 of 21

17 (section 9.101, et seq.), as applicable, on an amount of a Shipper s Crude Petroleum in Carrier s possession sufficient to secure payment of any and all amounts owed by such Shipper to Carrier. Carrier reserves the right to set-off any such charges against any monies owed to Shipper by Carrier on any Crude Petroleum of Shipper in Carrier's custody. If said charges remain unpaid five (5) days after the due date therefor, Carrier shall have the right, through an agent, to sell such Crude Petroleum at public auction, on any day not a legal holiday, in not less than forty-eight (48) hours after publication of notice of such sale in a daily newspaper of general circulation published in the town or city where the sale is to be held, stating the time, place of sale, and the quantity and location of Crude Petroleum to be sold. At said sale, Carrier shall have the right to bid, and if the highest bidder, to become the purchaser. From the proceeds of said sale, Carrier will pay itself the transportation and all other lawful charges, including expenses incident to said sale, and the balance remaining, if any, shall be paid to Shipper. Special Rule 18: and Indemnity Liability of Carrier; Limitation of Liability; Limitation of Damages; (A) Carrier shall not be liable for: (i) any action allowed under Special Rule 10(D), (ii) any delay in delivery of Crude Petroleum, or (iii) for any Loss of Crude Petroleum caused by a Force Majeure Event. Any Loss caused by a Force Majeure Event shall be apportioned by Carrier to each Shipper of Crude Petroleum in the proportion to Shipper s total volume transported in the calendar month in which such loss occurs. Shipper shall be entitled to receive only that portion of its Crude Petroleum remaining after deducting such Shipper s proportion of such loss, as above determined. Carrier shall prepare and submit a statement to each Shipper showing the apportionment of any such Loss of Crude Petroleum. (B) (C) (D) Carrier shall be responsible for any Loss of Crude Petroleum resulting from Carrier s negligence, willful misconduct, strict liability, or breach of this Tariff; provided, however, Carrier s liability shall be for actual damages only and will not exceed: (i) the resulting loss in value (market value of the Crude Petroleum less the market salvage value of the degraded Crude Petroleum) for any Loss, all on the day of such Loss, to the extent resulting from Carrier s negligence, willful misconduct, strict liability, or breach; and (ii) for Committed Shippers, a credit equal to the applicable Incentive Rate, multiplied by the amount of the Crude Petroleum not delivered by Carrier. Carrier shall be liable to Shipper for actual damages (and only actual damages) to Shipper resulting from a material breach of the terms and conditions of this Tariff or any representations and warranties contained herein; provided, however, that, in the case of a material breach by Carrier, Shipper s damages may include, by way of illustration and not limitation, the market value of any Crude Petroleum delivered to Carrier and not redelivered by Carrier at the Destination Point(s) and the difference between the costs Shipper would have incurred under this Tariff for the transportation of Shipper s Crude Petroleum and the costs actually incurred by Shipper under alternative transportation arrangements entered into by Shipper for the transportation of Shipper s Crude Petroleum. As between Carrier and Shipper, Carrier shall be deemed to be in possession and control of the Crude Petroleum after the Crude Petroleum enters an Origin Point and until the Crude Petroleum is delivered at a Destination Point and Shipper shall be deemed to be in possession and control of the Crude Petroleum before the Crude Petroleum enters an Origin Point and after the Crude Petroleum is delivered at a Destination Point. Page 17 of 21

18 (E) (F) Except as to liabilities assumed by Shipper in Special Rule 19, Carrier shall defend, indemnify, and hold Shipper, its affiliates, and its and their shareholders, officers, directors, employees, agents, partners, and members (the Shipper Indemnified Parties ) harmless from and against any and all claims, damages, fees, causes of action, liabilities and costs (including, without limitation, reasonable attorneys fees and costs of investigation and defense) but limited to actual, direct damages only arising from or related to Carrier s possession and control of the Crude Petroleum including, without limitation, if it is alleged or proven that one or more Shipper Indemnified Parties caused the damages at issue through their sole, own, or concurrent negligence, strict liability, or other legal fault. Provided, however, that Carrier shall have no duty to defend or indemnify a Shipper Indemnified Party that is grossly negligent or that engages in willful misconduct. Provided, further however, that Carrier shall have no duty to defend or indemnify a Shipper Indemnified Party to the extent the claim at issue is caused by the Shipper delivering Crude Petroleum which failed to comply with Special Rule 2 of this Tariff. Notwithstanding anything to the contrary contained in this Tariff, and excepting damages resulting from Carrier s gross negligence or willful misconduct, Carrier will not be liable to Shipper pursuant to any indemnity or any other provision hereof for, and Shipper hereby waives, any and all consequential damages (including, without limitation, lost profits, lost business opportunities, loss of use, or other business interruption damages), indirect, incidental, punitive, exemplary, or special damages arising out of or in connection with this Tariff, regardless of how caused and regardless of the theory of recovery (other than gross negligence or willful misconduct of Carrier), including, without limitation, the negligence (whether simple, sole, joint, concurrent, comparative, contributory, active, passive, or otherwise), strict liability, statutory liability, or other fault of, or the breach of this Tariff by, Carrier. (G) The indemnities and other provisions expressed in this Special Rule 18 shall survive the expiration or termination of this Tariff and/or any agreement subject hereto. The parties hereby waive and relinquish all rights and remedies inconsistent with Special Rules 18 and 19. (H) Any claims made by Shipper under Special Rules 18(B) and 18(C) for the Loss of Crude Petroleum must be made by notice to Carrier within twenty-five (25) calendar days of the date that Shipper knew or should have known of the Loss, and Shipper irrevocably waives any claim for which the required notice is not provided within the required time. Special Rule 19: Liability of Shipper; Limitation of Liability; Limitation of Damages; and Indemnity. (A) (B) If Shipper fails to make arrangements for the removal of its Crude Petroleum from Carrier s facilities upon delivery and a disruption of Carrier s operations or the operation of downstream facilities results, Shipper shall be liable for any actual damages incurred by Carrier as a result of such disruption. Shipper shall pay or cause to be paid any and all taxes, duties, charges, levies, and other assessments made or imposed by any Governmental Authority or regulatory authority having jurisdiction with respect to the Crude Petroleum to be transported by Carrier for such Shipper s account, and shall indemnify and save harmless Carrier from any such taxes, duties, charges, levies, and assessments so made or imposed. Page 18 of 21