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HomeMy WebLinkAboutResolution - 2019-R0215 - Palisade Pipeline, LLC - 06/11/2019 Resolution No. 2019-RO215 Item No. 6.13 June 11, 2019 RESOLUTION BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: THAT the Mayor of the City of Lubbock is hereby authorized and directed to execute for and on behalf of the City of Lubbock, a Memorandum of Understanding in connection with the purchase of reclaimed water produced by the City's Southeast Water Reclamation Plant, by and between the City of Lubbock and Palisade Pipeline, LLC, of Houston, Texas, and related documents. Said Memorandum of Understanding is attached hereto and incorporated in this resolution as if frilly set forth herein and shall be included in the minutes of the City Council. Passed by the City Council on June 11, 2019 DANIEL M. POPE, MAYOR ATTEST: Rebe ca Garza, City Sec etas APPROVED AS TO CONTENT: Jarrett tkinson, City Manager APPROVED T 'ORM: i ryl°rte, First Assistant City Attorney vw:ccdocs/RES.Memorandum of Understand in,-.Palisade Pipeline LLC May 13,2019 Resolution No. 2019-RO215 MEMORANDUM OF UNDERSTANDING This Memorandum of Understanding(the"MOU") is made on this 11 th day of June 2019, by and between the City of Lubbock,Texas ("City") and Palisade Pipeline, LLC of Houston, Texas, a Texas limited liability company ("Palisade"), (individually, each a "Party" and collectively, the "Parties") for the purpose of memorializing certain preliminary terms and preconditions associated with the potential purchase by Palisade of reclaimed water produced by City's Southeast Water Reclamation Plant ("Reclaimed Water"). 1. TERM Unless earlier terminated pursuant to the terms hereof,this MOU shall expire upon the earlier to occur of: 1) twelve months after its execution; or 2) upon the execution by the Parties of a subsequent agreement(the"Reclaimed Water Use Agreement"or"Agreement")forthe purchase of Reclaimed Water (the "Term"); provided, however, that the Term may be extended up to two (2) additional forty-five (45) day periods upon mutual written agreement of the Parties, and tender of any additional required consideration as set forth herein. 2. NATURE OF MOU Except as specifically set forth herein, this MOU is non-binding, and shall not constitute an enforceable agreement between the Parties. The purpose of the MOU is only to set forth certain expectations of discussion and negotiation between the Parties of an Agreement on mutually agreeable terms, if said Agreement may be reached. 3. TERMS AND CONDITIONS OF MOU a. Exclusivity Period. In consideration of the time, effort and expense anticipated to be incurred by Palisade in connection with its due diligence in advance of the contemplated Agreement, the Parties agree that for a period of twelve (12) months from the date of this MOU (the "Exclusivity Period"), City, its administrators, officials, council members, officers, directors, employees, agents, and representatives, shall not directly or indirectly solicit, initiate, or participate in discussions or negotiations, or enter into any agreement with any person, company or entity, other than Palisade, concerning any transaction related to the Reclaimed Water, or otherwise similar to that described in this MOU or the essential terms of an Agreement as set forth below, or any unrelated transaction that would in any way reduce the amount of Reclaimed Water to be allocated to Palisade pursuant to the Agreement; provided, however, that nothing herein shall preclude or prohibit City from undertaking obligations it has attendant to existing agreements concerning Reclaimed Water. The Exclusivity Period may be extended by written consent of City Manager for an additional forty-five (45) days; provided, however, that Palisade shall pay to City TWENTY THOUSAND AND NO/100 DOLLARS ($20,000.00) for each forty- five (45)day extension. There shall not be more than two(2)extensions of the Exclusivity Period unless expressly approved by the City Council. Memorandum of Understanding—City of Lubbock/Palisade Pipeline LLC Page 1 of 9 b. Exclusivity Payment. As additional consideration for the restrictions placed an the Reclaimed Water during the Exclusivity Period described above, Palisade and City agree that ONE HUNDRED TWENTY THOUSAND AND NO/100 DOLLARS ($120,000.00) will be paid by Palisade to the City in four(4)equal payments of THIRTY THOUSAND AND NO/100 DOLLARS ($30,000.00), with the first payment due within seven (7) days of the full execution of this MOU, and each succeeding quarterly payment due three months thereafter until all four payments have been made. c. Cooperation. During the Exclusivity Period, both Palisade and City agree to use commercially reasonable efforts and work in good faith with each other to negotiate the Agreement. Such efforts shall include but not be limited to the following: i. Providing reasonable access to City real property and other records concerning the Southeast Water Reclamation Plant and the Lubbock Land Application Site; ii. Providing requested information and reasonable access to City records as needed by Palisade in performing its due diligence; iii. Providing requested information and reasonable access to City records as needed by Palisade in completing its feasibility studies; and iv. Providing requested information and necessary consents to Palisade, as Palisade seeks applicable approvals from the Texas Commission on Environmental Quality (TCEQ) necessary for the required 210 Authorizations,Agreement and/or pipeline projects necessary for delivery of Reclaimed Water from City. d. Interim Period and Payment. Upon the expiration of the Exclusivity Period, and prior to the commencement of Palisade's taking Reclaimed Water under the terms of the Agreement, Palisade and City agree that the sum of TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($250,000.00) per twelve (12) month period shall be paid by Palisade to the City in equal quarterly installments of SIXTY-TWO THOUSAND FIVE HUNDRED AND NO/100 DOLLARS ($62,500.00), with the first payment due within seven (7) days of the expiration of the Exclusivity Payment, and each succeeding quarterly payment due three months thereafter, until payment commences by Palisade pursuant to Section 4(e) hereof. e. Authority. The individuals signing this MOU each represent that he or she is authorized to execute and deliver it on behalf of the entity whose name appears below his or her signature. f. Allocation of Costs. Each Party will bear its own costs associated with this MOU. g. Force Majeure: Neither Party shall be held responsible for losses or damages hereunder, if the fulfillment of any terms of provisions of the contract is delayed or prevented by strike,walkouts, acts of God, or public enemy,fire, or flood. h. Non-Appropriation: All funds for payment by the City under this MOU are subject to the availability of an annual appropriation for this purpose by the City. In the event of non- appropriation of funds by the City Council of the City of Lubbock for the obligations under Memorandum of Understanding—City of Lubbock/Palisade Pipeline LLC Page 2 of 9 the MOU,the City will terminate the MOU,without termination penalty or other liability, on the last day of the then-current fiscal year or when the appropriation made for the then-current year for the obligations covered by this MOU is spent, whichever event occurs first. If at any time funds are not appropriated for the continuance of this MOU, cancellation shall be accepted by Palisade on thirty (30) days prior written notice, but failure to give such notice shall be of no effect and the City shall not be obligated under this MOU beyond the date of termination. 4. TERMS AND CONDITIONS OF THE AGREEMENT Although the Parties acknowledge and agree that the provisions set forth below are merely aspirational,they nonetheless represent a present intent of the Parties to negotiate in good faith toward a written Agreement with terms consistent therewith. a. Volume. Palisade shall have the right to purchase up to six (6) million gallons per day ("MGD") of Reclaimed Water from City, and City shall deliver up to six (6) MGD of purchased Reclaimed Water to Palisade; provided, however, that Reclaimed Water volume may be less than six(6) MGD for no more than aggregated total of fifteen percent (15%) of the days during the year. Palisade will have preferred right to purchase additional Reclaimed Water volumes,if any, produced and made available for sale by City during the term of the Agreement. Palisade agrees that the City is under no obligation to provide Reclaimed Water when, in the opinion of the City and in the interest of operating its reclamation plant, there is insufficient Reclaimed Water available for supply, or when doing so may violate any federal or state statute, regulation,contract,or permit. Palisade agrees that the quantity of Reclaimed Water available for delivery and use by Palisade shall be solely dependent on the actual operations and production of the City's reclamation plant. The City shall endeavor to deliver the quantity of Reclaimed Water necessary to meet Palisade's needs as contemplated by this Agreement subject to the normal operation and production of the City's reclamation plant. b. Exclusivity. Palisade's right to purchase the Reclaimed Water from City shall be exclusive. c. Water Quality. In compliance with applicable state and federal law, City shall maintain consistent minimum quality standards for Reclaimed Water delivered to Palisade from the City's storage reservoir throughout the duration of the Agreement. City shall not be responsible for, or liable to any party in connection with, any use or application of Reclaimed Water beyond the point of delivery. Reclaimed Water is not intended for human consumption or domestic purposes and is to be used only for purposes authorized in Palisade's 210 Authorization. Palisade has satisfied itself that such Reclaimed Water will be suitable for its use. THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, WHICH EXTEND BEYOND THE DESCRIPTION CONTAINED IN THIS AGREEMENT RELATIVE TO THE QUALITY OF THE RECLAIMED WATER OR ITS SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. Memorandum of Understanding—City of Lubbock/Palisade Pipeline LLC Page 3 of 9 d. Use of Effluent. Palisade agrees to follow all applicable Texas Commission on Environmental Quality (TCEQ) and Railroad Commission regulations and procedures required of it as a Reclaimed Water Provider including, but not limited to, all 30 Tex. Admin. Code Chapter 210 regulations as the same may be revised or amended. e. Pricing&Volume. i. Pricing for Reclaimed Water. 1. Minimum Payment (i.e., take or pay) for first 2 MGD ("Base Amount"): $3.30 per 1,000 gallons. 2. Unit pricing in excess of 2 MGD: $3.00 per 1,000 gallons. ii. Volume. As noted above, the Base Amount shall be take or pay, and all other volumes shall be on an as needed basis. iii. Volume Adjustment. If,in the fourth year of the Agreement,Palisade is not taking a daily average delivery of three (3) MGD Reclaimed Water,the guaranteed daily volume of Reclaimed Water shall be reduced to a volume equal to the average daily volume of Reclaimed Water purchased by Palisade during the most recent twelve (12) month period. However, this provision shall not apply in the event that the Minimum Payment as specified in (i)(1) of this section is adjusted to 3 MGD. f. Pricing Adiustment. Pricing above shall be adjusted each five (5) year anniversary of the effective date of the Agreement based upon the greater of: (i)the Consumer Price Index for All Urban Consumers (CPI-u); or (ii) the City's increase in operating costs for effluent treatment associated with the Southeast Reclamation Plant, if any, proportionate to the quantity of effluent obligated to Palisade. g. Billing Period. City will invoice Palisade monthly for Reclaimed Water under the applicable payment structure. h. Delivery Point. i. The custody transfer point of the Reclaimed Water (the "Delivery Point") and lift station will be located at the Lubbock Land Application Site storage reservoir, to be more specifically identified in the Agreement. ii. Palisade will provide all infrastructure from and after the Delivery Point, including the lift station and/or pumping facilities, which shall be located on land leased from City under separate instrument. The lease rate for such leased land shall be the prevailing market rate for unimproved land in the vicinity of the lease. Flow rates at the Delivery Point will be identified by two separate water flow meters on each side of the Delivery Point. iii. Palisade will be solely responsible for obtaining all easements and leases required to install any water towers, pumps, components, and pipelines on the real property required for any related pipeline project. iv. City and Palisade shall enter into a separate joint use agreement related to the use of the storage reservoir. City shall grant Palisade an access easement,electric Memorandum of Understanding—City of Lubbock/Palisade Pipeline LLC Page 4 of 9 utility easement, and pipeline easement from the Delivery Point on City owned real property to the West or South of the storage reservoir at Palisade's sole election. The easement acquisition rates shall be a commercially reasonable value to be set in the Agreement. v. City shall not guarantee Reclaimed Water flow pressure. i. Conditions. The Agreement will be expressly conditioned upon the following: i. Approval by any required state or federal regulatory authority, including but not limited to an amendment to the City's Chapter 210 Authorization,which includes TCEQ approval of use of Reclaimed Water, as well as Texas Pollutant Discharge Elimination System permit requirements. City will submit the necessary applications to the TCEQ required to effectuate the purposes of the Agreement. Palisade may sell Reclaimed Water from the City to any agency, individual, corporation, or other party only if Palisade first obtains a 210 Authorization from TCEQ for that resale as a "Provider" in accordance with 30 Tex. Admin. Code Chapter 210. Palisade shall be responsible for all reasonable costs associated with the acquisition the required Chapter 210 Authorizations, as well as any permit modifications or amendments required to implement the use of the purchased Reclaimed Water with full regulatory TCEQ approval. ii. Final approval by the Lubbock City Council. j. Force Majeure. If at any time during the term of this Agreement the City is unable to deliver Reclaimed Water under the terms of this Agreement due to circumstances beyond the City's control and without its fault, whether such occurrence or circumstance be an act of God or the common enemy or the result of war, riot, civil commotion, sovereign conduct, or the act or conduct of any person or persons not party or privy hereto, then the City shall be excused from such performance for such period of time as is reasonably necessary after such occurrence to remedy the effects thereof,then the City shall not be liable for the breach of this Agreement. The City shall use reasonable and good faith efforts to correct any impediment preventing delivery of Reclaimed Water and give Palisade advance notice when possible and to the extent it is reasonable,give such notice of any inability to deliverthe water needed so that Palisade may seek alternative sources. k. Repairs and Maintenance. The City may temporarily suspend delivery of Reclaimed Water to Palisade for the purpose of performing maintenance and repairs to the Reclaimed Water Facilities or other parts or components of the City's wastewater system, including the reclamation plant. The City shall commit necessary resources and use best efforts to expediently complete such maintenance and repairs and provide Palisade with verbal notice prior to suspension of such service and an estimate of when service shall be reestablished. I. RegulatorV Action. The City may temporarily suspend delivery of Reclaimed Water to Palisade pursuant to the request, written order, or direction of any regulatory agency having jurisdiction over the use of Reclaimed Water. The City shall commit necessary resources and use best efforts to take corrective action necessary to rectify all matters Memorandum of Understanding—City of Lubbock/Palisade Pipeline LLC Page 5 of 9 causing such temporary suspension of deliver and provide Palisade with verbal notice prior to suspension of such service and an estimate of when service shall be re- established. m. Diligence. Palisade will be solely responsible for completing any and all due diligence that it deems necessary,and for all costs associated with pipeline projects required for delivery of Reclaimed Water from the City pursuant to the Agreement. n. Term. The term of the Agreement shall be twenty-five (25) years, with any extensions based upon terms to be mutually agreed to by the Parties. i. At any time after the twentieth anniversary of the execution of the Agreement, City shall have the option of terminating the Agreement, without penalty, provided it gives Palisade ninety (90) days advance notice of its intent to do so, and on such effective date of termination, tenders to Palisade an amount equal to the depreciated value of the pipeline constructed by Palisade for the transportation and delivery of Reclaimed Water based upon a 25-year asset life, where the base depreciable value equals the original, direct construction cost of the pipeline infrastructure from the point of connection with the City system to the point of delivery to Palisade's customer. ii. The Agreement shall automatically terminate if Palisade does not either pay or take Reclaimed Water pursuant to Section 4(e) within thirty-six (36) months of the execution of this MOU, unless an extension of said requirement for six (6) months is mutually agreed upon by City and Palisade. iii. In the event City must secure additional water sources to satisfy the City of Lubbock Drought and Emergency Contingency Plan, City reserves the right to suspend the Agreement,without penalty, until such time performance under the Agreement may be resumed by City consistent with said Plan. A suspension under this section shall not constitute a material breach of the Agreement. iv. City shall have the right to suspend the Agreement, without penalty, if City's performance under the Agreement shall cause City an inability to satisfy,or other violation of any water supply agreement to which the City is presently a party, or the City's related permits with the State of Texas. o. Indemnification/Hold-Harmless. PALISADE AGREES TO PROTECT, DEFEND, INDEMNIFY, AND HOLD-HARMLESS THE CITY, ITS OFFICERS, AGENTS, EMPLOYEES, REPRESENTATIVES, AND ELECTED OFFICIALS FROM AND AGAINST ANY AND ALL CLAIMS, SUITS, ACTIONS, ENFORCEMENT ACTIONS, LOSSES, LIABILITY, OR DAMAGES,WHETHER DIRECT, INDIRECT, OR CONSEQUENTIAL, INCLUDING ALL LITIGATION, COSTS, EXPENSES, AND ATTORNEYS' FEES BROUGHT BY ANY PERSON, ENTITY OR REGULATORY AUTHORITY ARISING OUT OF, OR OCCASIONED BY THE ACTS OF PALISADE OR PALISADE'S AGENTS OR EMPLOYEES IN THE EXECUTION OR PERFORMANCE OF THIS AGREEMENT, PALISADE'S USE OF RECLAIMED WATER, AND PALISADE'S OPERATION OF THE FACILITIES ASSOCIATED WITH ITS MANAGEMENT,STORAGE, DISTRIBUTION, OR USE OF RECLAIMED WATER. Memorandum of Understanding—City of Lubbock/Palisade Pipeline LLC Page 6 of 9 p. No Vested Right to Reclaimed Water. Palisade hereby expressly acknowledges that Palisade shall have no right or entitlement to any Reclaimed Water following the expiration of the term of this Agreement, and that any rights Palisade may have to Reclaimed Water during the effectiveness of this Agreement derives solely and exclusively from the provisions set forth herein,and not by any other legal or equitable source. q. Insurance. Palisade will carry liability insurance, in amounts acceptable to the City, naming the City of Lubbock as an additional insured, and any such policy shall include a waiver of subrogation in favor of the City of Lubbock,and must be provided on a separate endorsement. Standard General Liability $1,000,000 per occurrence $2,000,000 aggregate Pollution Liability to Include Gradual $1,000,000 per occurrence $2,000,000 aggregate With an umbrella of No less than $1,000,000 Auto Liability $1,000,000 per occurrence Workers Compensation Statutory$500,000 r. Governing Law/Venue/Jurisdiction. The Agreement will be governed by the laws of the State of Texas. The sole and exclusive venue for any action,controversy,dispute,or claim arising under the Agreement shall be in a court of appropriate jurisdiction in Lubbock County,Texas. s. Assignability. The Agreement shall not be assignable without the advance, written consent of City. 5. INDEMNITY/HOLD-HARMLESS To the extent permitted by law, Palisade agrees to protect,defend, indemnify, and hold-harmless the City from and against any damages, whether direct, indirect, or consequential, all liability, or claims made against the City as a result from, or otherwise in connection with,this MOU. Memorandum of Understanding—City of Lubbock/Palisade Pipeline LLC Page 7 of 9 6. NO LIABILITY Except as expressly provided herein, no liability will arise or be assumed by any Party hereto as a result of this MOU. All Parties to this document will act in good faith to achieve the goals of the MOU in a reasonable time frame. 7. NO JOINT ENTERPRISE This MOU is not intended to be,and shall not be construed to create,anyjoint enterprise between or among the Parties. 8. GOVERNING LAW This Agreement will be governed by the laws of the State of Texas. The sole and exclusive venue for any action, controversy, dispute, or claim arising under this MOU shall be in a court of appropriate jurisdiction in Lubbock County,Texas. 9. BINDING PROVISIONS Upon the execution of this MOU, provisions found in Section 3(a)-(h) will constitute the only legally binding and enforceable agreements of Palisade and the City. [THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY] Memorandum of Understanding—City of Lubbock/Palisade Pipeline LLC Page 8 of 9 CITY OF LUBBOCK PALISADE PIPELIN L.,—fv — - DANIEL M. POPE, MAYOR Phillip J. Laughlin, Pre ATTEST: '-Q, ��' ,)\�(_ Rebec a Garza, City Secretary APPROVED AS TO CONTENT: W. Jarr t Atkinson, City Manager APPR M: i IIS r ite, First Assistant City Attorney Memorandum of Understanding—City of Lubbock/Palisade Pipeline LLC Page 9 of 9