A tolling agreement is a legal document that outlines the terms and conditions of an arrangement between two parties. It is commonly used in the energy sector to allow one party to use the facilities or services of another party to produce or process a product.

At its core, a tolling agreement is a contract that allows one party (the tolling party) to use the facilities or services of another party (the toller) to process or produce a product. The tolling party provides the raw materials or input and pays a fee to the toller to use their facilities or services. The toller then processes or produces the product and returns the finished product to the tolling party.

This arrangement allows companies to maximize their resources and efficiency by utilizing the expertise and resources of another company. For example, a natural gas producer may enter into a tolling agreement with a processing facility to convert their raw natural gas into a usable form.

Tolling agreements can also help to manage risk by allowing companies to shift some of the risks associated with production or processing to another party. For example, if a natural gas producer enters into a tolling agreement with a processing facility, the toller may be responsible for any maintenance or repair costs associated with their facilities.

Tolling agreements can be structured in many different ways and can vary depending on the specific needs of the parties involved. Some tolling agreements may be short-term, while others may last years or even decades. Additionally, the fees paid by the tolling party may be fixed or variable and may depend on the volume or quality of the finished product.

In summary, a tolling agreement is a legal document that allows one party to use the facilities or services of another party to produce or process a product. It is a tool that can help companies to maximize their resources and efficiency while managing risk. By understanding how tolling agreements work, companies can make informed decisions about whether to enter into them and how to structure them for their specific needs.