INFORMATION MEMORANDUM AND BINDING OPEN SEASON NOTICE I. The Rangeland RIO Pipeline On April 12, 2016, Rangeland RIO Pipeline, LLC ( Rangeland ) issued a press release announcing this open season ( Open Season ) soliciting volume commitments for transportation rights on the Rangeland RIO Pipeline System ( RIO Pipeline System ) crude oil pipeline extending approximately 109 miles from Loving County, Texas to Midland, Texas. The pipeline will move two segregations of sweet crude: a WTI stream for crude with gravities ranging from 38 to 44 degrees API gravity; and a High Gravity Sweet stream for crude and condensate with gravities ranging from 45 to 55 degrees API gravity. Rangeland will develop gathering proposals for interested shippers and will consider third- party gathering proposals as well. Rangeland s State Line Terminal, at the origin of the pipeline, is a large- scale truck unloading and gathering facility with 10 truck lanes and (2) 80,000 barrel operational tanks. Additional storage may be built and leased to customers. Its Midland Delivery Facility at the destination in the Midland County tank farm area will include truck unloading and (2) 110,000 barrel operational tanks. Additional storage tanks may be built and leased to customers on a first- come- first- serve basis. The RIO Pipeline System will have an initial capacity of 70,000 barrels per day with expansion capability of over 125,000 barrels per day and is projected to be operational in July 2016. The pipeline will be regulated by the Texas Railroad Commission ( TRRC ) and Federal Energy Regulatory Commission ( FERC ) as an interstate pipeline from Loving County, Texas to Midland, Texas. The entire pipeline will be operated as a common carrier system. Rangeland is requesting shipper commitment for capacity on the RIO Pipeline System. II. Proposed Commitment Options A. Overview Rangeland is holding this Open Season to provide potential shippers with the opportunity to make term volume commitments on up to 90 percent of the RIO Pipeline System capacity ( Committed Shipper Capacity ); Rangeland will reserve at least 10 percent of the RIO Pipeline System capacity for shippers that do not make term volume commitments but elect to make timely monthly nominations ( Uncommitted Shippers ). Uncommitted Shippers who do not make term volume commitments, are not required to sign a binding Transportation Services Agreement ( TSA ), and are charged the standard rates for transportation, subject to terms and conditions in the applicable TRRC and/or FERC tariff rules and regulations ( Uncommitted Rate ). Rangeland Energy 2150 Town Square Place, Suite 700, Sugar Land, Texas 77479 rangelandenergy.com 1 of 5
B. Volume Commitments Each shipper making a term volume commitment ( Committed Shipper ) must agree to ship a specified minimum volume of crude oil ( Minimum Volume Commitment ) over each 6- month per minimum volume period on the RIO Pipeline System at the rate applicable to the Committed Shipper ( Committed Rate ) as set forth in the Committed Shipper s final TSA. Any Committed Shipper that fails to ship its Minimum Volume Commitment during the term of the TSA will be required to make a shortfall payment to Rangeland, the calculation of which is set forth in detail in the TSA. Rangeland will reserve for Committed Shippers sufficient capacity on the RIO Pipeline to allow receipt, transportation and delivery of an amount up to the Committed Volume. The prorationing of capacity on the RIO Pipeline will be governed by the TRRC and/or FERC tariff rules and regulations, in the event prorationing of capacity becomes necessary. Committed Shippers who commit to a minimum term of 5 years shall be entitled to elect to pay the priority rate of $0.01 per barrel more than the Uncommitted Rate to avoid prorationing as provided in the applicable tariff rules and regulations. C. Committed Rates and Terms Shippers will have the option to select a Committed Rate from a rate matrix made up of 5 tiers of volume commitments with minimum volumes ranging from 1,000 barrels per day to over 25,000 barrels per day with terms ranging from 1 to 7 years, with shipper options to extend the terms. D. Allocation of Committed Shipper Capacity Committed Shipper Capacity will be awarded to potential Committed Shippers from the highest net present value ( NPV ) to the lowest NPV, based on the volume, rate and term elections in each Committed Shipper s final TSA. A subscription for Committed Shipper Capacity with a higher NPV will have priority over subscription(s) with a lower NPV. III. Key Terms for Proposed Transportation Services Agreement Some of the principal terms contained in the TSA are set forth below and should be taken into account in all binding volume commitments. A. Committed Rates The rates applicable to Committed Volumes will be those specified in Exhibit A of the TSA, and Committed Shippers will agree to pay for and support such rates in accordance with the terms of the TSA. B. Midland Deliveries All tariff rates include transportation from Rangeland s State Line Terminal and delivery to a designated third party terminal in Midland. A long- term connection agreement has been executed with Plains Pipeline, L.P. for delivery to the Plains Midland South Terminal, giving shippers access to multiple terminals at Midland as well as outbound pipelines. Rangeland Energy 2150 Town Square Place, Suite 700, Sugar Land, Texas 77479 rangelandenergy.com 2 of 5
C. Truck Unloading Fees Waived in First Year of Operation Rangeland provides truck automatic custody transfer units for customer use at both the State Line Terminal and the Midland Delivery Facility. A truck unloading fee of $0.15 per barrel will be assessed for any volumes received at State Line Terminal or the Midland Delivery Facility by truck. The truck unloading fee will be waived for Committed Shippers at State Line Terminal for the first year of operations. D. Flexible Volume True- up Terms Minimum volume is measured over a period of 6 months to give shippers flexibility in dealing with monthly volume fluctuations. E. Shipper- Friendly Losses and Shrinkage Deduction Actual losses will be assessed and shippers will not be charged a fixed loss allowance or PLA. No gravity deductions will be assessed on crude oil with API gravity less than 55 degrees. A deduction will apply to crude oil with API gravity greater than 55 degrees to cover shrinkage and incremental evaporation, as outlined in the TRRC and/or FERC tariff rules and regulations. IV. Open Season Process A. Open Season Documents The following documents will be provided as part of the Open Season. Confidentiality Agreement Pipeline Project Map Transportation Services Agreement (TSA) Proposed Tariffs Proposed Tariffs Rules and Regulations Rangeland will provide the TSA, proposed TRRC and/or FERC tariffs and proposed TRRC and/or FERC tariffs rules and regulations upon execution of a confidentiality agreement in a form satisfactory to Rangeland ( Confidentiality Agreement ). Rangeland reserves the right to revise the terms of the Open Season or any of the Open Season documents. Rangeland will inform prospective shippers of any such revisions, as well as the availability of any additional information regarding the Open Season process or the Open Season documents, by e- mailing the potential shippers that have executed the Confidentiality Agreement prior to the close of the Open Season. B. Binding Commitment Process Request for Commitments. Rangeland is requesting binding volume commitments from interested parties in the prospective RIO Pipeline System. Interested parties should submit their binding volume commitments by completing and executing a TSA and sending it to Rangeland. Binding Volume Commitments Deadline. Rangeland is soliciting various parties to participate in the Project Open Season. Interested companies must submit an executed TSA by no later than Noon CDT on May 20, 2016. All TSAs must be executed by a duly authorized representative of the company submitting the volume commitment. Rangeland Energy 2150 Town Square Place, Suite 700, Sugar Land, Texas 77479 rangelandenergy.com 3 of 5
Executed TSAs should be timely delivered by overnight courier or e- mail (in PDF form), clearly marked Confidential to: RIO Pipeline LLC Attn: Pat McGannon Vice President, Business Development 2150 Town Square Place Suite 700 Sugar Land, TX 77479 pat@rgldenergy.com All commitments shall be non- revocable. V. Credit Requirements Each Committed Shipper shall provide financial data sufficient for Rangeland to ascertain the Committed Shipper s creditworthiness in accordance with the TRRC and/or FERC tariff rules and regulations and, if Rangeland so determines, such assurance as may be requested by Rangeland, which financial assurance may be in the form of a letter of credit or guarantee agreement, or such other security as may be acceptable by Rangeland. VI. Limitations and Reservations The RIO Pipeline System, including the pipeline configuration, is subject to revision after the conclusion of the Open Season. Prior to the time that all TSAs are returned to Rangeland by prospective Committed Shippers and have been fully executed by both the Committed Shippers and Rangeland, Rangeland further reserves the right, in its sole discretion, to modify any of the Open Season materials, including the Committed Shipper Rate, if necessary, as indicated by economic, sound engineering design, environmental, legal or other factors. These Open Season procedures, this Information Memorandum and Binding Open Season Notice (the "Information Memorandum ) and the Open Season documents are informal marketing documents, and they establish no contractual relationship between or among Rangeland or any of its affiliates and any party who receives them. These procedures are not intended to be used solely for the project discussed herein and are not intended to be in lieu of the requirements of the TRRC, FERC or any applicable federal and state laws. VII. Rangeland Contacts If you should have any questions or comments regarding the Open Season, project timing, the configuration of the RIO Pipeline System, or commitment options, please feel free to contact Pat McGannon at 281-566- 3008 or Bobby Arp at 281-566- 3009. Disclaimer This Information Memorandum has been prepared by Rangeland in connection with its proposed RIO Pipeline System. The issuance of this Information Memorandum should not be taken as any form of commitment on the part of Rangeland to proceed with any transaction. This Information Memorandum is not intended to form the basis of any investment decision by a potential shipper and should not be considered as a recommendation by Rangeland or any other person in relation to the project. Rangeland Energy 2150 Town Square Place, Suite 700, Sugar Land, Texas 77479 rangelandenergy.com 4 of 5
In furnishing this document, neither Rangeland nor any of their respective representatives is obliged to provide the recipients with access to any additional information or to update this document or to correct any inaccuracies therein which may become apparent. Nevertheless, Rangeland reserves the right to amend or replace this Information Memorandum at any time and the information contained in this Information Memorandum is subject to change or amendment without notice. The description of agreements and other documents contained in this Information Memorandum, if any, are summaries only, and such summaries are qualified in their entirety by reference to the complete text of such agreements and other documents. Recipients of this Information Memorandum should be aware of the following: Rangeland may at any time conduct discussions and negotiations with any number of prospective shippers and on any basis with any prospective shippers as it or they consider appropriate, including different bases for different prospective shippers. Any changes to the terms of this Information Memorandum will be reflected on the Open Season webpage, and; Negotiations may be withdrawn and discontinued with respect to any or all prospective shippers at any time and any or all proposals or offers may be rejected at any time without any obligation or liability by Rangeland. In each case above Rangeland may act in its sole and absolute discretion without giving any reasons therefor and without any liability or obligation of any kind. In no circumstances shall Rangeland or any of their respective 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 RIO Pipeline System, the Open Season or the Open Season documents. Rangeland Energy 2150 Town Square Place, Suite 700, Sugar Land, Texas 77479 rangelandenergy.com 5 of 5