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HomeMy WebLinkAboutResolution - 2747 - Contract - Mid Plains Petrochem Inc - Gas Purchase - 02_11_1988Resolution #2 747 February 11, 1988 Item 25 DGV : j s RESOLUTION BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: THAT the Mayor of the City of Lubbock BE and is hereby authorized and directed to execute for and on behalf of the City of Lubbock a Gas Purchase Contract by and between the City of Lubbock and Mid Plains Petrochem, Inc., attached herewith, which shall be spread upon the minutes of the Council and as spread upon the minutes of this Council shall constitute and be a part of this Resolution as if fully copied herein in detail. Passed by the City Council this 11th day of FPhrnar�!r , 1988. -B. C. MCMINN, MAYOR ATTEST: ette Boyd, City Secretary APPROVED AS TO CONTENT: 3- Carroll McDonald, irector of Electric Utilities APPROVED AS TO FORM: vY Do aldG. Vandiver,�FirstAssistant City Attorney GAS PURCHASE CONTRACT between CITY OF LUBBOCK as "Buyer" and MID PLAINS PETROCHEM, INC. as "Seller" I Resolution #2'47 February 11, 1988 Table of Contents PREAMBLE I DEFINITIONS 1 II DEDICATION 3 III QUANTITY 3 IV PRICE 3 V DELIVERY POINT - TITLE 4 VI DELIVERY PRESSURE 5 VII QUALITY 5 VIII MEASUREMENT AND TESTS 7 IX WARRANTY OF TITLE 11 X TAXES 12 XI RIGHTS -OF -WAY 12 XII FORCE MAJEURE 13 XIII GOVERNMENTAL RULES AND REGULATIONS 14 XIV EFFECTIVE DATE AND TERM 15 XV ASSIGNMENT 15 XVI PAYMENTS 16 XVII NOTICES 17 XVIII MISCELLANEOUS 17 GAS PURCHASE CONTRACT THIS CONTRACT, made and entered into this 11th day of February , 1988 by and between MID PLAINS PETROCHEM, INC., a Texas Corporation, hereinafter referred to as ("Seller") and the CITY OF LUBBOCK, hereinafter referred to as ("Buyer"). W I T N E S S E T H: WHEREAS, Seller owns or otherwise controls or intends to acquire, certain volumes of residue gas produced from casinghead gas processed in Seller's plant(s) and available for sale in Garza, Lynn, Crosby and Lubbock Counties, Texas, and WHEREAS, Seller desires to sell and deliver such Gas to Buyer, and Buyer desires to purchase and receive such Gas from Seller; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, Buyer agrees to purchase and Seller agrees to sell, pursuant to the terms and conditions of this Contract, all of Seller's interest in the Residue Gas produced from the Seller's plants. ARTICLE I DEFINITIONS Except where this Contract states another meaning, the following terms are defined as follows: 1.1 Day - The word "day" shall mean a period of twenty-four (24) -1- consecutive hours commencing at 8:00 a.m. on one calendar day and ending at 8:00 a.m. on the following day. 1.2 Billing Month - The word "billing month" shall mean a period commencing at 8:00 a.m. on the first day of the calendar month and ending at 8:00 a.m.. on the first day of the following calendar month. 1.3 Contract Year or Years - shall mean each successive period of twelve (12) Months beginning on the first day of the month following the month in which deliveries of Gas are commenced hereunder and each anniversary of such date; provided, however, the period beginning with the date of initial deliveries to the first Day of the following Month shall, for all purposes under this Contract, be treated as part of the first Contract year. 1.4 "MCF" - means one thousand (1,000) cubic feet. 1.5 "BTU" - means British Thermal Unit. 1.6 "MMBTU" - means million British Thermal Units. 1.7 "Heating Value" - shall mean the number of BTU's produced by combustion at constant pressure of an amount of gas which would occupy one (1) cubic foot at a temperature of sixty degrees (600) Fahrenheit and at a pressure of fourteen and sixty-five (14.65) psia and saturated with water vapor. 1.8 "Residue Gas" - Natural gas meeting quality specifications in Article VII produced from casinghead gas in Seller's plant(s). 1.9 "Spot Gas" - Means gas purchased by Buyer other than gas -2- covered by written contracts extending over a period of more than 90 days. ARTICLE II DEDICATION OF GAS Subject.to the terms and conditions of this Contract, Seller hereby commits and dedicates to the performance of this Contract all residue gas produced by Seller or otherwise made available to Seller in Garza, Lynn, Crosby and Lubbock Counties, Texas, up to a volume of 4,000,000 cubic feet per day. In the event additional gas is made available by Seller, such gas may be added to this Contract by mutual agreement between Buyer and Seller. ARTICLE III QUANTITY Seller will sell and deliver to Buyer and Buyer will purchase and pay Seller for all gas delivered to Buyer, under the terms hereof, up to 4,000,000 cubic feet per day (or more if approved by Buyer), at the point(s) of delivery hereunder. ARTICLE IV PRICE 4.1 During the first year of the contract term, Buyer shall pay to Seller $2.15 per MMBTU for gas purchased pursuant to this Contract. At the beginning of the second contract year and, at the beginning of each contract year for the succeeding four (4) years, the price paid by Buyer shall be increased 1% per year. -3- 4.2 Beginning with the first day of the sixth contract year, the price to be paid by Buyer to Seller shall be calculated on the basis of the weighted average cost of gas, excluding spot gas, to Buyer under all its long-term gas purchase contracts, less 15%. In calculating its weighted average cost of gas to be used in calculating Seller's price in a given month, Buyer shall average the costs reflected in invoices representing gas purchased up to the first of the month which is two months prior to the subject month. For example, Seller's price in the month of March would be Buyer's average cost (less 15%) of gas included in the weighted average calculation which was purchased in the month prior to the preceding January 1 but for which invoices were received after that date. Buyer shall provide to Seller, on or before the first day of each month, beginning with the first day of the first month of the sixth contract year, the applicable price per MMBTU to be charged by Seller to Buyer during that month. Seller shall be entitled, during normal business hours and upon reasonable notice, to verify Buyer's price calculations. ARTICLE V DELIVERY POINT - TITLE 5.1 The points of delivery for all gas delivered by Seller to Buyer shall be the presently existing points of delivery into the Power -Tex eight inch pipeline through which gas is transported to -4- Buyer. Title to and responsibility for all Gas shall pass from Seller to Buyer at the delivery point. 5.2 As between the parties hereto, Seller shall be in control and in possession of the Gas deliverable hereunder and responsible for any damages or injuries caused thereby until the same shall have been delivered to Buyer at the delivery point or points, except injuries and damages which shall be proximately caused by the negligence of Buyer. After reception of Gas, Buyer shall be deemed to be in exclusive control and possession thereof and responsible for any injuries and damages, except injuries and damages which shall be proximately caused by the negligence of Seller. ARTICLE VI DELIVERY PRESSURE 6.1 The Gas purchased hereunder shall be delivered at a pressure sufficient to effect delivery into Buyer's pipeline at the delivery point or points against the pressure prevailing therein from time to time; provided, however, Seller shall not be required to deliver Gas against a pressure in excess of 1000 psi. ARTICLE VII QUALITY 7.1 Buyer shall not be obligated to take or pay for (but shall pay for if taken) any gas tendered to it hereunder unless the same meets the following requirements as to quality. -5- (a) oxygen - The gas shall not, at any time, have an oxygen content in excess of two -tenths of one percent (0.2%) and every reasonable effort shall be made to keep the gas tendered free of oxygen. (b) Liquids - The gas shall be free of water and hydrocarbons in liquid form at the temperature and pressure at which the gas is delivered. The gas shall in no event contain water vapor in excess of seven (7) pounds per million cubic feet. (c) Hydrogen Sulfide - The gas shall not contain more than one -quarter (1/4) grain of hydrogen sulfide per one hundred (100) cubic -feet. (d) Total Sulphur - The gas shall not contain more than five (5) grains of total sulphur per, one hundred (100) cubic feet. (e) Carbon Dioxide - The gas shall not have a carbon dioxide content in excess of one percent (1%) by volume. (f) Heating Value - The gas shall have a gross heating value of not more than one thousand one hundred twenty (1120) nor less than nine hundred fifty (950) Btu's per cubic foot. BTU values exceeding 1120 may be accepted at the option of the Buyer. (g) Temperature - The gas shall be delivered at a IM temperature not in excess of one hundred twenty degrees Fahrenheit (1200). ARTICLE VIII MEASUREMENT AND TESTS 8.1 The unit of volume, for .purposes of measurement, shall be one (1) cubic foot of Gas at a temperature of sixty degrees Fahrenheit (600) and at a pressure of fourteen and sixty-five hundredths (14.65) pounds per square inch absolute unless otherwise specified. 8.2 Buyer shall, at Buyer's expense, install, maintain and operate orifice meters (with seven [71 day charts) and any other auxillary measuring equipment necessary in order to accomplish accurate measurement and testing of the Gas; such measurement equipment to be installed and operated in accordance with the specifications of Gas Measurement Committee Report No. 3, dated April, 1955, of the Natural Gas Department of the American Gas Association as amended or superseded from time to time, or by any other method commonly used in the industry and mutually acceptable. 8.3 The specific gravity of the Gas shall be determined by Buyer at Buyer's expense at least monthly with accuracy to the nearest one -thousandth by taking samples of the Gas at the point of measurement by Buyer and by having specific gravity determined by the use of an instrument commonly used and accepted in the -7- industry. 8.4 The heating value per cubic foot of the Gas shall be determined by Buyer at Buyer's expense at least monthly by Gas sample or by the arithmetical average of the records of a recording calorimeter of any approved type which, at Seller's option, shall be installed, operated and maintained by Seller. 8.5 Deviation from Boyle's Law at the pressures, specific gravities and temperatures of the Gas upon delivery shall be determined as often as found necessary. Correction of volumes for deviation from Boyle's Law shall be made by use of factors obtained from tables published by the American Gas Association, Gas Measurement Committee Report. No. 3, "Supercompressibility Factors for Natural Gas", dated April, 1955, as amended or superseded from time to time. Each test shall determine the corrections to be used in computing volume until the next test is made. 8.6 Seller may, at its option, install and operate check measuring equipment to be of the same or similar type as that installed by Buyer. Seller shall install and operate such check measuring equipment so that it will not interfere with the operation of Buyer's facilities. 8.7 Each party shall give reasonable notice to the other of tests so that each party may conveniently (at its own expense) have its representative present. If such notice has been given, -8- the party giving the notice may proceed as though the other party were present and such test results shall be used until the next quarterly test or requested test. 8.8 Test for hydrogen sulfide content of the Gas delivered hereunder shall be conducted by the use of continuous monitoring equipment. Such equipment shall comply with industry standards and shall be acceptable to Buyer. In the event the gas delivered hereunder should, for any reason, not meet the quality specifications of Article VII, said gas shall be shut-in by the use of an automatic shut -down device. Monitoring and shut -down facilities shall be installed and operated at the expense of Seller. 8.9 Test for carbon dioxide and sulfur content of the gas shall be made by Seller at Seller's expense by taking gas samples at the point of measurement at least monthly. The results of such tests shall be submitted to Buyer on a monthly basis. Buyer shall, at its option, have a representative present at the time such samples are taken. 8.10 The accuracy of Buyer's measuring and testing equipment shall be verified quarterly by Buyer or upon request by Seller which shall not be more often than quarterly. All tests shall be made at Buyer's expense, except that Seller shall bear the expense of tests made at its request, if the inaccuracy found is two percent (2%) or less. If upon any test, Buyer's meter(s) is ME found to be inaccurate: (a) By less than two percent (2%), previous readings thereof shall be considered correct, but such meter shall be adjusted at once to read correctly. (b) By two percent (2%) or more, the registration of such meter shall be corrected at the rate of such inaccuracy for any period which is definitely known or agreed upon, but in case the period is not definitely known or agreed upon, then for a period extending back one-half (1/2) of the time elapsed since the date of the last calibration. Following any test, metering equipment found inaccurate shall be immediately corrected by Seller to a condition of accuracy. If, for any reason, any meter is out of service or out of repair so that the amount of Gas delivered cannot be estimated or computed from the reading.. thereof, the amount of Gas delivered through the period such meter is out of service or out of repair shall be estimated and agreed upon by the parties hereto upon the basis of the best data available, using the first of the following methods, which is feasible: (1) By using the registration of Seller's check meter if installed and accurately registering. (2) By correcting the error if the percentage of error -10- is ascertainable by calibration test or mathematical calculation. (3) By estimating the quantity of deliveries by deliveries during the preceding periods under similar conditions when the meter was registering accurately. 8.11 At all times during business hours, Buyer and Seller shall have the right to inspect equipment installed by the other, and review charts and other measurement or testing data of the other. The reading, calibration, and adjustment of such equipment and the change of charts shall be done only by the party owning such equipment. ARTICLE IX WARRANTY OF TITLE 9.1 Seller hereby warrants title to all Gas produced hereunder and that all such Gas is free from any and all liens and adverse claims. Seller shall, at all times, have the obligation to pay all royalties due and payable to the mineral and royalty owners under the Leases. Seller agrees to indemnify Buyer and save Buyer harmless from all suits, actions, debts, accounts, damages, costs, losses and expenses arising from or out of adverse claims of any or all persons to the Gas or to royalties, taxes which Seller is obligated to pay hereunder, license fees, or charges thereon which are applicable before the title to the Gas passes -11- to Buyer. 9.2 If Seller's title or right to receive proceeds is questioned or involved in any action, Buyer may withhold, without interest, all sums due hereunder up to the amount of the claim until title or right is free from such question or such action is finally determined or until Seller has furnished security or an irrevocable letter of credit conditioned to save Buyer harmless, without surety satisfactory to Buyer. 9.3 Notwithstanding anything contained herein to the contrary, Buyer shall have the option, prior to releasing the payment for Gas and thereafter at any time and from time to time during the term of this Contract, to require Seller to furnish a title opinion setting forth the ownership of all working, royalty, or other interests and reflecting curative on all requirements by the examining attorney. ARTICLE X TAXES 10.1 Seller shall pay or cause to be paid all severance or similar taxes applicable to the Gas nor or hereafter required by law to be paid to government authorities. ARTICLE XI RIGHTS -OF -WAY 11.1 To the extent that Seller may lawfully do so under its -12- Leases and agreements for easement, Seller hereby grants and assigns to Buyer such right to install, maintain and operate all pipelines, measuring equipment and other facilities and the use, for inspecting, repairing, operating, replacing or removing of same as may be required to enable the Buyer to perform under this Contract in accordance with the terms hereof. Any property of Buyer placed in or upon such easement shall remain the personal property of Buyer, subject to removal by it at any time for any reason. ARTICLE XII FORCE MAJEURE 12.1 Neither party hereto shall be liablefor any failure to perform the terms of this Contract, except failure to make timely payment of monies due, when such failure is due to "force majeure" as hereinafter defined. The term "force majeure" as employed herein and for all purposes relating hereto shall mean acts of God, strikes, lockouts, or other industrial disturbances, acts of the public enemy, wars, blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, storms, hurricane warnings, crevasses, floods, washouts, arrests, and restraints of governments and people, civil disturbance, explosions, breakage or accident of machinery or lines of pipe, the necessity for making repairs or alterations to machinery or lines of pipe, freezing of wells or lines of pipe, partial or -13- entire failure of wells, inability of any party hereto to obtain necessary materials, supplies or permits due to existing or future rules, regulations, orders, laws or proclamations of governmental authorities (both Federal and State), including both civil and military, any failure by third party transporters to deliver Seller's gas to Buyer's facilities, and any other causes whether of the kind herein enumerated or otherwise, not within the control of the party claiming suspension and which by the exercise of due diligence such party is unable to prevent or overcome; such term shall likewise include (a) the inability of such party to acquire, or the delays on the part of such party in acquiring,. at reasonable cost and after the exercise of due diligence, any necessary servitudes, right-of-way grants, permits or licenses, and (b) the inability of each party to acquire, or the delays on the part of such party in acquiring at reasonable cost and after the exercise of due diligence, any necessary materials and supplies, permits and permissions. ARTICLE XIII GOVERNMENTAL RULES AND REGULATIONS 13.1 This Contract shall be subject to all valid applicable State and Federal laws, orders, directives, rules and regulations of a governmental body or official having jurisdiction. 13.2 Seller, to the best of its knowledge, warrants and agrees that Seller has not caused the Gas hereunder to be dedicated in -14- interstate commerce. ARTICLE XIV EFFECTIVE DATE AND TERM 14.1 The contract term shall be for twenty (20) years from the date of first deliveries of gas hereunder. Thereafter it shall continue on a month to month basis until either party terminates this Contract by giving the other party thirty (30) days prior written notice. ARTICLE XV ASSIGNMENT 15.1 This Contract shall bind and benefit the parties hereto and their respective successors and assigns, provided that no conveyance or transfer of any interest of either party shall be binding upon the other party until such other party has been furnished with written notice and true copy of such conveyance or. transfer; provided, further, that either Buyer or Seller, or both, may assign its right, title and interest in, to and by virtue of this Contract, including any and all extensions, renewals, amendments and supplements thereto, to a trustee or trustees, individual or corporate, as security for bonds or other obligations or securities, without such trustee or trustees assuming or becoming in any respect obligated to perform any of the obligations of the assignor, and if any such trustee be a -15- corporation, without its being required by the parties hereto to qualify to do business in the State of Texas, but no such assignment shall serve to relieve the assigning party of its obligations hereunder. ARTICLE XVI PAYMENTS 16.1 After the delivery of Gas has commenced hereunder, Seller shall, on or before the 25th day of each month, render to Buyer a statement showing the quantity of Gas delivered during the preceding month. Buyer shall pay Seller the amount due hereunder on or before thirty-five (35) days following the month in which such Gas was received by Buyer. 16.2 Each party hereto shall have the right, at all times during business hours, to examine the books and records of the other party, to the extent necessary to verify the accuracy of any statement, charge, computation, or demand made under or pursuant to the above shall be promptly reported to Seller and Seller shall make proper adjustment thereof within thirty (30) days after final determination of the correct volumes or values involved; provided, however, that if no such errors or discrepancies are reported to Seller within two (2) years from the end of the calendar year in which such errors or discrepancies occurred, the same shall be conclusively deemed to be correct. -16- ARTICLE XVII NOTICES 17.1 Until otherwise notified in writing, any notice, request, demand, payment, statement or other communication provided for in this Contract shall be addressed as set forth below: Seller: Mid Plains Petrochem, Inc. Suite 1280, One First City Center P. 0. Box 2668 Midland, Texas 79702 Buyer: City of Lubbock Lubbock Power and Light P. 0. Box 2000 Lubbock, Texas 79457 ARTICLE XVIII MISCELLANEOUS 18.01 Election Not to Take Option: Notwithstanding anything to the contrary in this Contract, the parties understand that the Buyer has an agreement with its,,suppliers of gas, other than the Seller, under which Buyer is entitled to elect not to purchase gas from such suppliers in the event the Buyer can purchase electric power for its electric power requirements from a third party source at a price below the price then being paid for gas by Buyer to Seller. In the event the Buyer should elect, during the term of this Contract, not to purchase gas under such provisions from other suppliers, then, and in that event, the Buyer shall notify Seller in writing of its intentions, and Buyer -17- and Seller will immediately proceed to negotiate in good faith, a price for Seller's gas that is mutually acceptable to both parties. In the event the parties hereto cannot agree on a price for Seller's gas within thirty (30) days of such written notice, Buyer can discontinue purchase of gas under this Contract. Should Buyer continue to not take gas under this Contract for a period of thirty (30) days, Seller may elect to terminate this Contract. 18.02 Indemnity: The Seller agrees to be responsible for any and all damages to the pipelines, facilities, and equipment of the Buyer resulting from the Seller having furnished gas having a BTU value in excess of 1120, and the Seller shall indemnify the Buyer from any loss and damage arising out of its having provided such gas. 18.03 Non -waiver: No waiver by either Seller or Buyer of any default by the other under this Contract shall operate as a waiver of any future default, whether of like or different character or nature. 18.04 Titles: The numbering and titling of particular provisions of this Contract are for the purpose of facilitating administration and shall not be construed as having any substantive effect on the terms of this Contract. 18.05 Interpretation: The terms of this Contract shall be construed according to the laws of the State of Texas. -18- "SELLER" MID PLAINS PETROCHEM, INC. i By: V' e-President Mid —,"Plains Petrochem,Inc. Attest: 24—,z &14-*j "BUYER" CITY OF LUBBOCK By: C� B.C.'Peck" 14clAinn,Mayor Attes Ran tte:Boyd :. City Secretary r- Approved as to form:x~ 1d G. Vandiver Asst. City Attorney .e .'e�'A�5 Cie o Y l a Je,6 .r was LEGAL DOCUMENTS �. PROCESSING INSTRUCTIONS Resolution �— Contract .._ w`,y,kgreement License _Other Date for Council consideration: Number of Originals__ Number of Copies (City Secretary's Office must have signed originals for filing. SPECIAL HANDLING/ROUTING INSTRUCTIONS: F yr