The Leadership for Energy Automation Practices (“LEAP”) published its new master agreement, the LEAP Master Agreement for the Purchase and Sale of Physical Commodities Version 3.0 (the “LEAP 3.0”) on June 10. This agreement is the result of the combined efforts of at least 10 major energy trading firms and more than two years of work to update and improve upon the LEAP Master Agreement for the Purchase and Sale of Physical Commodities Version 2.1 (the “LEAP Version 2.1”), which was published in April 2009.

Historically, there has been very little standardization of contract terms in the North American crude oil and products trading markets, with the exception of the widespread use of Conoco’s 1993 General Provisions Domestic Crude Oil Agreements (the “Conoco ‘93 GTCs”). LEAP published its version 2.0 industry master agreement for crude oil and other petroleum products in November 2007, which was followed by an updated edition in 2009 (the LEAP Version 2.1). LEAP’s industry master agreement has arguably become the most widely used set of standardized terms in the United States next to Conoco Crude GTCs.

Recognizing the benefits of increasing the use of one standardized document in the North American trading markets, LEAP, in this latest effort, set out to simplify the master agreement and make it more “user-friendly.” One of the most significant changes is the reorganization of the document into a short base agreement containing legal terms that would apply to all transactions, and separate annexes for terms specific to each of the three product groups (crude oil, refined products and NGLs/LPGs), and specific to the different modes of transportation. The new structure is intended to streamline a user’s negotiations by allowing the user to include in its master agreement only the annexes that are relevant for its business with a particular counterparty.

The LEAP Version 3.0 master agreement also updates many terms to reflect current market practices. For instance, the agreement includes an anti-corruption provision and an ethics provision. The balancing provision has been changed to apply solely to exchange and buy/sell transactions for crude oil, and conforms in substance to a widely accepted amendment to the Conoco ‘93 GTCs addressing balancing of exchanges and buy/sells. This quick reference guidehighlights a selection of the changes incorporated into the new LEAP Version 3.0 master agreement.