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HomeMy WebLinkAboutResolution - 4592 - Contract - Power-Tex Joint Venture - Gas Sales - 08_25_1994Resolution No. 4592 Item #38 August 25, 1994 RESOLUTION IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: THAT the mayor of the City of Lubbock BE an is hereby authorized and directed to =te for and on behalf of the City of Lubbock a Contract by and between the City of bbock and Power -Tex Joint Venture attached hereto, which Contract shall be spread upon minutes of the Council and as spread upon the minutes of this Council shall constitute and a part of this Resolution as if fully copied herein detail. 3sed by the City Council this 25th �ofAu'gus�� - 1994. ATTEST: Secretary AAPPROVED AS TO CONTENT: Massengale, Assistdnt City Manager APPROVED AS TO FORM: 11 Dordld G. Vandiver, First City Attorney VID R. LANGSTON, MA Resolution No. 4592 Item #38 August 25, 1994 GAS SALES CONTRACT BY AND BETWEEN POWER—TEX JOINT VENTURE AND THE CITY OF LUBBOCK DATED August 25, 1994 L:\LUBB2.DOC August 2, 1994 INDEX PAGE ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . 1 ARTICLE II SALE AND PURCHASE OBLIGATIONS . . . . . . . . 4 ARTICLE III PRICE . . . . . . . . . . . . . . . . . . . . 6 ARTICLE IV TERM . . . . . . . . . . . . . . . . . . . 10 ARTICLE V BILLINGS AND PAYMENTS . . . . . . . . . . . 10 ARTICLE VI MEASUREMENT . . . . . . . . . . . . . . . 11 ARTICLE VII PRESSURE . . . . . . . . . . . . . . . . 14 ARTICLE VIII QUALITY . . . . . . . . . . . . . . . . . 14 ARTICLE IX DELIVERY, TITLE AND RISK OF LOSS. . . . . . .15 ARTICLE X DEFAULT . . . . . . . . . . . . . . . . . . 16 ARTICLE XI WARRANTY . . . . . . . . . . . . . . . . . 16 ARTICLE XII TAXES . . . . . . . . . . . . . . . . . . . 17 ARTICLE XIII FORCE MAJEURE . . . . . . . . . . . . . . . 17 ARTICLE XIV IMBALANCES . . . . . . . . . . . . . . . . 19 ARTICLE XV FINANCIAL RESPONSIBILITY . . . . . . . . . 20 ARTICLE XVI GOVERNING LAW . . . . . . . . . . . . . . . 21 ARTICLE XVII GOVERNMENT REGULATIONS . . . . . . . . . . 21 ARTICLE XVIII AUDITING OF BOOKS AND RECORDS . . . . . . . 21 ARTICLE XIX ASSIGNMENT . . . . . . . . . . . . . . . . 22 ARTICLE XX MISCELLANEOUS . . . . . . . . . . . . . . . 22 EXHIBIT "A" DELIVERY POINTS) . . . . . . . . . . . . . 25 GAS SALES CONTRACT THIS GAS SALES CONTRACT ("Contract") is hereby made and entered into this 25th day of August 1994, by and between Power -Tex Joint Venture ("Seller"), and The City of Lubbock, Texas ("Buyer"). W I T N E S S E T H• WHEREAS, Seller desires to sell natural gas on a firm basis to Buyer under the terms and conditions of this Contract; and WHEREAS, Buyer desires to purchase natural gas on a firm basis from Seller under the terms and conditions of this Contract; NOW THEREFORE, in consideration of the mutual promises and agreements made herein, Buyer and Seller agree as follows: ARTICLE I DEFINITIONS Except where another meaning is expressly stated, the following terms, wherever they shall appear in this Contract, shall have the following meanings: 1.1 "Base Index", with respect to any month, shall mean the price per MMBtu reported in the first issue of "Inside F.E.R.C.'s Gas Market Report" published in such month under the table entitled "Prices of Spot Gas Delivered to Pipelines" for gas delivered into Northern Natural Gas in Texas, Oklahoma and Kansas, under the heading "Index". -1- 1.2 "Base Load Requirements" for any month, expressed on a daily basis, shall mean that quantity nominated by Buyer, pursuant to Paragraph 2.2 hereof, at least five (5) days prior to any month, which is between the Minimum Daily Quantity and Maximum Daily Quantity. 1.4 "Base Price" shall mean an amount equal to the Base Index plus fifteen cents ($0.15). 1.5 "British thermal unit" or "Btu" shall mean the amount of energy required to raise the temperature of one (1) pound avoirdupois of pure water from 58.5 degrees Fahrenheit to 59.5 degrees Fahrenheit at a constant pressure of 14.73 pounds per square inch absolute. 1.6 "Contract Year" shall mean each period of twelve (12) consecutive months beginning on the effective date of this Contract, and on each anniversary date thereof. 1.7 "Day" or "day" shall mean a period of twenty-four (24) consecutive hours, beginning at 8:00 a.m. Any reference in this Contract to time shall refer to Central Standard Time, or Central Daylight Savings Time, whichever is then in effect. 1.8 "Delivery Point(s)" shall mean the point(s) specified in Exhibit "A" hereto, as may be amended from time to time upon mutual agreement of the parties. 1.9 "Maximum Daily Quantity" shall mean twenty-five thousand (25,000) MMBtu of gas per day. 1.11 "Minimum Annual Quantity" shall mean three million (3,000,000) MMBtu of gas for each of the first two Contract Years and four million (4,000,000) MMBtu of gas during each of remaining -2- three (3) Contract Years during the primary term hereof. 1.12 "Minimum Daily Quantity" shall mean seven thousand, five hundred (7500) MMBtu of gas per day. 1.13 "MMBtu" shall mean one million (1,000,000) British thermal units. 1.14 "Month" or "month" shall mean the period beginning 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 next succeeding calendar month. 1.15 "Natural gas" or "gas" shall mean natural gas produced from gas wells, casinghead gas produced from oil wells, and residue gas remaining after the natural gas has been treated for the removal of water, hydrocarbon compounds heavier than methane, or contaminants as may be required to comply with the specifications set out in Article VIII hereof. 1.16 "Excess Index" with respect to each day shall mean the average of the prices reported in the preceding business day's publication of Gas Daily for Northern Natural Gas in the table "Daily Price Survey" for the North -Texas Panhandle on the day immediately preceding the day of deliveries. 1.17 "Excess Price" shall mean the applicable day's Excess Index plus fifteen cents ($0.15). 1.18 "Excess Requirements" for any month shall mean the volumes of gas purchased and received in excess of such month's Base Load Requirements up to twenty thousand (20,000) MMBtu of gas per day, as may be adjusted pursuant to Paragraph 2.3 hereof. 1.19 "Transportation Allowance" shall mean fifteen cents ($0.15) per MMBtu during the first two (2) Contract Years and -3- seventeen cents ($0.17) per MMBtu during the last three (3) Contract Years during the primary term hereof. 1.20 "Interstate Transporter" shall mean Northern Natural Gas Company or E1 Paso Natural Gas Company. ARTICLE II SALE AND PURCHASE OBLIGATIONS 2.1 Obligations. During each Contract Year, Seller shall sell and deliver to Buyer, and Buyer shall nominate, purchase and receive from Seller or pay for if not purchased and received, the Minimum Annual Quantity in effect for that Contract Year. During days in which Buyer, pursuant to Paragraph 2.2 hereof, is purchasing gas hereunder, Buyer agrees to nominate, purchase and receive from Seller a quantity of gas not less than the Minimum Daily Quantity and up to the Maximum Daily Quantity. In addition, Buyer shall nominate, purchase and receive, and Seller shall sell and deliver, all of Buyer's Excess Requirements at the primary and any optional Delivery Points, as elected pursuant to Paragraph 2.3 hereof. 2.2 Nominations. Buyer shall, no later than five (5) days prior to each month during the term hereof, notify Seller of its Base Load Requirements then in effect for that month (the "Monthly Nomination"). Thereafter, Buyer may, upon forty-eight (48) hours prior written notice to Seller, adjust the Monthly Nomination to reflect Buyer's Excess Requirements. In no event, however, shall Buyer reduce its Monthly Nomination below its Base Load Requirements. -4- 2.3 Buyer's Option to Increase Buyer's Requirements. In the event that Buyer requires gas supplies for the facilities listed as optional Delivery Points on Exhibit "A", attached hereto and made a part hereof, Buyer may, upon thirty (30) days advance written notice, increase the Maximum Daily Quantity by up to 10,000 MMBtu per day. Upon such increase , the Minimum Annual Quantity and the Minimum Daily Quantity, as well as the maximum quantity of available Excess Requirements shall concurrently increase on a pro- rata basis. 2.4 Replacement Gas. During any month in which Seller fails to deliver the Base Load Requirements and Excess Requirements, if any, for any reason other than an event of force majeure, Seller shall, subject to Paragraph 2.5 hereof, replace such gas at its expense or reimburse Buyer for all expenses, be they gas or non -gas expenses including transportation expense differentials, incurred to replace such gas in excess of the expense Buyer would have incurred to purchase, transport and deliver gas under this Contract. 2.5 Cost of Replacement Gas. Buyer agrees to act in good faith to purchase replacement gas supplies which it shall deem to be reliable yet which shall also minimize Seller's payment obligation to Buyer as called for in Paragraph 2.4 hereof. Buyer and Seller agree that any reimbursement from Seller to Buyer is intended to compensate Buyer for the extra costs actually incurred by Buyer to replace such supply, and the payment calculated in Paragraph 2.4 is intended to serve solely as an upper limit to such obligation. Seller's obligation to pay the amounts specified under -5- Paragraphs 2.4 and this Paragraph 2.5 shall be Buyer's sole and exclusive remedy for Seller's failure, if any, to deliver the quantities of gas required under Paragraph 2.1 hereof. ARTICLE III PRICE 3.1 Sales Price. For each MMBtu of gas delivered by Seller to Buyer which qualifies as Base Load Requirements, Buyer shall pay to Seller an amount equal to the Base Price plus the Transportation Allowance. For each MMBtu of gas delivered by Seller to Buyer which qualifies as Excess Requirements, Buyer shall pay to Seller an amount equal to the applicable Excess Price plus the Transportation Allowance. For each MMBtu of gas delivered by Seller to Buyer which qualifies as Option Quantity, as defined in Paragraph 3.3 hereof, Buyer shall pay to Seller an amount equal to the Fixed Price, as defined in Paragraph 3.3 hereof. In the event that Buyer fails to take the Minimum Annual Quantity during any Contract Year, Buyer shall pay Seller for each MMBtu of gas which constitutes the deficiency an amount equal to the Base Price in effect on the last day of said Contract Year plus the Transportation Allowance. 3.2 Unavailability of Price Indexing Information. 3.2.1 Substitute Pricing Mechanism. In the event that information necessary to determine the Base Index or Excess Index ceases to be available to Buyer and Seller, then, upon notice and request by either party, the parties shall immediately commence negotiations to establish a substitute pricing mechanism to govern the remainder of the term of this Contract. In the event the Q. parties, after exercising their best efforts, fail to agree on a new pricing mechanism within fifteen (15) days of the notice and request for negotiation, then such new pricing mechanism shall be established by arbitration under this Article III. 3.2.2 Arbitration. Arbitration under this Article shall be in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The parties shall attempt to agree upon a single arbitrator within thirty (30) days of the notice and request for negotiation provided for under Paragraph 3.2.1. If the parties are unable to agree upon a single arbitrator, then each party shall select an arbitrator within fifteen (15) days of the end of said thirty (30) day period. The two arbitrators shall select a third arbitrator. 3.2.3 Pending the resolution of any arbitration proceeding hereunder, the last effective sales price shall be the interim price charged and paid during the period of arbitration; provided, however, that any new pricing mechanism established as the result of the arbitration proceeding shall be made effective retroactively to the date such interim price first became effective; and, provided further, that any refunds by Seller to Buyer, and any additional payments owed by Buyer to Seller, as the case may be, which are owed as the result of the retroactive application of the new pricing mechanism shall be paid within thirty (30) days after the termination of the arbitration proceeding. -7- 3.3 Fixed Price Option. Notwithstanding anything to the contrary in this Article III, Buyer shall have the option to elect to fix the price for a quantity of gas (the "Option Quantity") equal to all or a portion of its Base Load Requirements and its Excess Requirements, if any, for any period extending up to twelve (12) months from the time Buyer exercises such option. The new monthly price (the "Fixed Price") shall be equal to the NYMEX natural gas futures price on the date and time Buyer elects to price gas under this Paragraph 3.3 plus the Transportation Allowance minus four cents ($0.04) per MMBtu. Such election shall be made during days the NYMEX is open for business, between 9 a.m. and 10 a.m., and Buyer shall confirm in writing to Seller during the same period the price and Option Quantity it has elected. The date of such election must be on or before the fifteenth day of the month preceding the month in which deliveries subject to the Fixed Price are to commence. The election may be for deliveries for one or more months, but deliveries during each month must be at a uniform rate throughout the month. Once the option to fix the price for an Option Quantity has been exercised for a given period, that Fixed Price or Option Quantity cannot change. Buyer will take or pay for if not taken such Option Quantity it elected under this option. For purposes of determining quantities of gas taken, it shall be assumed that the first quantity of gas taken each day shall be any Option Quantity Buyer has elected. 3.3.1 If, as of any business day, Seller's net marked -to - market position for the Option Quantity then in effect, as determined by Seller in a commercially reasonable manner ("Seller's -8- Net Exposure"), exceeds one hundred thousand dollars ($100,000), then Buyer shall provide Margin to Seller in an amount that, when aggregated with any Margin already held by Seller, if any, is equal to Seller's Net Exposure. Margin shall be returned if, as of any business day, the amount of Margin held by Seller exceeds its net exposure by an amount equal to or greater than twenty-five thousand dollars ($25,000). Margin shall be provided or returned by the close of business on the day of the receiving party's request if such request is made by 12:00 noon on any New York banking day; otherwise margin shall be provided or returned on the next New York banking day. All deposits shall be rounded up to the nearest integral multiple of twenty-five thousand dollars ($25,000) and all returns of Margin shall be rounded down to the nearest integral multiple of twenty-five thousand dollars ($25,000). For purposes hereof, "Margin" shall mean (i) cash, (ii) letters of credit from a bank and in a form acceptable to Seller, and (iii) any other collateral acceptable to Seller. Margin shall include any payments or other distributions received with respect to the form of collateral deposited. For purposes of determining the amount of Margin being held at any time, the amount of non -cash Margin shall equal its then current fair market value as determined by Seller in a commercially reasonable manner. 3.4 Revenue Sharing. Effective January 1, 1995, Section 7.07 of the Agreement Amending the Gas Purchase Agreement dated March 8, 1984 between Buyer and Seller shall be deleted in its entirety and replaced with the following: Seller agrees to share with Buyer the before tax net revenue of Seller which is attributable to Seller's Cm Power -Tex Transmission Line. On or about the thirty-fifth (35th) day following January 1, 1995, and each month thereafter, Seller shall submit to Buyer, by first class United States mail, postage prepaid, a statement showing gross revenue, total cost of gas, total operating expenses and before tax net revenue along with Seller's credit which represents five percent (5%) of the before tax net revenue for each such month during the period January 1, 1995 through December 31, 1996 and four percent (4%) of the before tax net revenue for each such month during the period January 1, 1997 through December 31, 1999. 3.5 Index Information. Seller shall routinely advise Buyer of the Base Index and Excess Index. 3.6 Price Redetermination. At any time, and from time to time, if Interstate Transporter increases the rates it charges for transporting volumes ultimately delivered hereunder, the Base and Excess Prices shall be escalated or increased by the amount of each such increase in Interstate Transporter's rate. Seller shall notify Buyer of each such increase. Seller shall monitor Interstate Transporter's rate filings with the Federal Energy Regulatory Commission, and take whatever actions it deems are reasonable and likely to minimize Interstate Transporter's rates. ARTICLE IV TERM This Contract shall become effective on January 1, 1995 continue in force and effect for a primary term of five (5) years, and from Contract Year to Contract Year thereafter until terminated by either party upon written notice to the other party, not less -10- than sixty (60) days prior to the commencement of any Contract Year following the primary term. ARTICLE V BILLINGS AND PAYMENTS 5.1 Invoices. Seller shall render to Buyer, on or before the tenth (10th) day of each month, or as soon thereafter as practicable, an invoice for the preceding month showing the total quantity of gas nominated by Buyer and the total amount due Seller. 5.2 Payments and Interest. Buyer shall pay to Seller the invoice amount by no later than ten (10) days following Buyer's receipt of Seller's invoice or the twentieth (20th) day of the month, whichever occurs first. Each such payment shall be made by wire transfer in accordance with the wiring instructions specified in Seller's invoices tendered hereunder. If Buyer fails to pay any portion of any amounts due and owing to Seller when same is due, interest thereon shall accrue at the prime rate of interest established by the Chase Manhattan Bank or at the highest rate permitted by law, whichever is lower, from the date when such payment is due until the same is paid. 5.3 Billing Adjustments. In the event that Buyer or Seller determine that the actual quantity of gas delivered to Buyer during a calendar month was greater than or less than the volume or quantity nominated by Buyer and for which payment has been made to Seller, then Seller shall adjust for such underdelivery or overdelivery by debiting or crediting the invoice for the succeeding month, or as soon thereafter as is practicable. -11- ARTICLE VI MEASUREMENT 6.1 Measurement. The metering facilities measuring the volumes of gas delivered at the Delivery Points hereunder shall be maintained and operated by Seller. The Btu content of the gas shall be determined by samples of such gas taken at the facilities at the Delivery Points. Such facilities and measurement data with respect to the gas covered hereby shall at all reasonable times be subject to joint inspection by the parties hereto. Seller shall routinely make available to Buyer electronically generated measurement data. All gas delivered hereunder shall be measured in accordance with the provisions of the Gas Measurement Committee Report No. 3 of the American Gas Association, as amended from time to time and mutually agreeable to Buyer and Seller. The unit of volume for measurement of gas delivered hereunder shall be one (1) cubic foot of gas at a base temperature of sixty (60) degrees Fahrenheit and at an absolute pressure of fourteen and sixty-five one hundredths pounds per square inch absolute (14.65 psia). Atmospheric pressure shall be assumed to be thirteen and two -tenths pounds per square inch absolute (13.2 psia) at the Delivery Points irrespective of the actual atmospheric pressure at such points from time to time. Temperature shall be determined by a recording thermometer of standard make acceptable to both parties. Specific gravity and Btu shall be determined by gas chromatograph or other methods as may be mutually agreed upon. The numerical value of the continuous temperature recorded during each fifteen minute period, the factor for specific gravity according to the latest test -12- therefor, and the correction for deviation from Ideal Gas Laws applicable during each fifteen minute period shall be used to make proper computations of volumes hereunder. In determining the gross heating value (Btu content) to be used hereunder, the gross heating value of the gas thus obtained shall be adjusted to a dry basis at a temperature of sixty (60) degrees Fahrenheit at an absolute pressure of fourteen and sixty-five one -hundredths (14.65) pounds per square inch absolute. 6.2 Corrections and Meter Calibration. At least once a month, and so far as convenient and practicable upon the corresponding day of each month, the measuring party shall calibrate its meters and appurtenant instruments, all in the presence of representatives of the other party, as hereinafter provided, and the parties shall jointly observe any adjustment made. If the aggregate error in these measuring devices is found upon testing to register not more than two percent (2%) in error, then they shall be deemed to be correct. All measuring devices shall be adjusted upon test to register accurately within the tolerance allowed by their respective manufacturers. If the aggregate error in these measuring devices is more than two percent (2%) in error, adjustments shall be made by applying the percentage of error to the volume involved during the time the metering equipment was out of calibration, if this period can be ascertained. If the length of time the metering equipment was out of calibration cannot be ascertained, then the percentage of error will be applied to the volume delivered for one-half of the time elapsed since the date of the last calibration. During the time -13- any meter is out of repair or is being tested, or in the event of sudden failure of any meter to register for any period accurately within the two percent (2%) variation allowed herein, and if it is not feasible to install another meter, then the volume of gas flowed shall be estimated until a new or repaired meter is installed. Adjustment and settlement shall be made at the regular monthly periods on the basis of the amount of gas registered at like pressures for like periods of time when the meter was registering accurately. Seller shall give Buyer notice of the time of all tests of meters and appurtenant instruments sufficiently in advance of the holding such tests so that Buyer party may have its representatives present, provided, however, if Seller has given such notice to Buyer and Buyer is not present at the time specified, then Seller may proceed with the tests as though Buyer were present, and the results therefrom shall be deemed correct and accurate. ARTICLE VII PRESSURES The gas delivered at the Delivery Points hereunder shall be delivered at the pressure required by Buyer's facilities at the Delivery Points from time to time. Seller shall not be required to deliver gas at pressures greater than the maximum pressure shown on Exhibit "A". Buyer shall receive gas at pressures no less than that shown on Exhibit "A". -14- ARTICLE VIII QUALITY 8.1 All gas delivered by Seller at the Delivery Points shall conform to the following specifications: 8.1.1 Liquids: The gas shall be commercially free from water and hydrocarbons in liquid form. 8.1.2 Hydrogen Sulfide: The gas shall not contain more than one quarter (1/4) grain of hydrogen sulfide per one hundred (100) cubic feet. 8.1.3 Organic Sulfur: The gas shall not contain more than five (5) grains sulfur per one hundred (100) cubic feet. 8.1.4 Carbon Dioxide: The gas shall not contain more than three percent (3%) carbon dioxide by volume. 8.1.5 Dust, Gums, etc.: The gas shall be commercially free of dust, gums and other solid matter. 8.1.6 Water Vapor: The gas shall not contain more than six (6) pounds of water in the vapor phase per million cubic feet. 8.1.7 Heating Value: The gas shall have a gross heating value of not more than eleven hundred twenty (1120) and not less than nine hundred, fifty (950) British thermal units per cubic foot. 8.1.8 Temperature: The temperature of the gas shall not exceed one hundred twenty (120) degrees. ARTICLE IX DELIVERY, TITLE AND RISK OF LOSS All gas sold hereunder shall be delivered by Seller to Buyer at the Delivery Point(s). Title to all gas sold and delivered -15- hereunder shall pass to Buyer as the gas enters the outlet side of the Delivery Point(s). Seller and Buyer each assume full responsibility and liability for and shall indemnify and hold harmless the other party from all liability and expense on account of any and all damages, claims or actions, including injury to and death of persons, arising from any act or accident occurring when the Gas is under the control of the indemnifying party, unless such act or accident arises from the negligence of the party that is otherwise entitled to the indemnity. ARTICLE X DEFAULT In the event that either party shall default in the performance of any of its obligations hereunder, including making payment on the dates established herein, and said default is not rectified within seven (7) days of written notice of said default, the non -defaulting party may, at its option, terminate this Contract upon written notice to the defaulting party. Such termination shall not relieve the defaulting party from any liability hereunder which accrued prior to the date of such termination. The non -defaulting party shall be entitled to all expenses and fees, including reasonable attorneys' fees, suffered or incurred by it in endeavoring to enforce this Contract or any provision hereof. ARTICLE XI WARRANTY Seller represents and warrants that it has full right and authority to enter into this Contract and that all gas will be -16- delivered by Seller free from all liens, royalties, and encumbrances and that all taxes in effect on the date of this Contract applicable prior to delivery shall have been or will be paid. EXCEPT AS OTHERWISE PROVIDED HEREIN, ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES AS TO MERCHANTABILITY, FITNESS OR SUITABILITY OF THE NATURAL GAS FOR A PARTICULAR PURPOSE, OR OTHERWISE, ARE HEREBY EXPRESSLY DISCLAIMED. ARTICLE XII TAXES Seller shall pay or cause to be paid taxes lawfully levied against Seller prior to the delivery of the gas by Seller to Buyer hereunder and shall fully indemnify Buyer from and against all claims with respect thereto. Unless specified otherwise, the price Buyer shall pay Seller for gas sold and delivered shall not include any applicable state or local gas revenue, utility, sales or use tax which may be assessed as a result of sales of gas hereunder. In the event Seller determines, in good faith, that sales of gas hereunder are subject to any such tax, which Seller is obligated to remit to any applicable taxing authority, Buyer shall reimburse Seller for any such taxes remitted by Seller to the applicable taxing authorities in connection with sales of gas hereunder. ARTICLE XIII FORCE MAJEURE 13.1 Suspension of Performance. Subject to the other provisions of this Article XIII, neither party shall be deemed in breach of any covenants or obligations imposed hereby in the event that either party fails to observe or perform any such covenants or -17- obligations and such failure is occasioned by, in connection with, or in consequence of force majeure, as hereinafter defined. 13.2 Force Maieure. For purposes of this Contract, the term "force majeure" shall mean acts or events beyond the control of the party claiming force majeure, and which, by the exercise of due diligence such party is unable to avoid or overcome, including, but not limited to, acts of God, strikes, lockouts, or other industrial disturbances, riots, epidemics, landslides, floods, fires, washouts, arrests and restraints, civil disturbances, explosions, breakage of or accidents to machinery or lines of pipe, failure of equipment or materials, hydrate obstructions of lines of pipe, freezing of well or delivery facilities, the failure or refusal of any transporting pipeline to transport or deliver the gas sold hereunder, well blowouts, craterings, compliance with acts, orders or regulations of any federal, state or local governmental authority, or any other cause, whether or not of the same class or kind (but not including economic hardship), reasonably beyond the control of either party and which, by exercise of due diligence, such party is unable to overcome or avoid. 13.3 Notice. The party suspending performance under this Article shall give prompt notice to the other party and shall attempt to cure promptly the cause for such suspension. Upon cessation of the cause for suspension, performance shall resume (or commence) as soon as reasonably practicable, unless otherwise agreed to by the parties. 13.4 Settlement of Labor Disputes. Notwithstanding any other provisions hereof, the parties agree that the settlement of -18- strikes, lockouts or other industrial disturbances shall be entirely within the discretion of the particular party involved and such party may make settlement at such time and on such terms and conditions as it may deem to be advisable and no delay in making such settlement shall deprive such party of the benefit of Paragraph 13.1 hereof. ARTICLE XIV IMBALANCES It is understood by the parties that the natural gas purchased and sold hereunder will be transported by Seller pursuant to Interstate Transporter's tariff approved by the Federal Energy Regulatory Commission. These tariffs may provide for penalties for the over- or under -delivery or receipt of natural gas, or for the cash -in or cash -out of any imbalances in receipts or deliveries of natural gas ("Cash-in/Cash-out Mechanism"). In the event penalties are imposed on Seller by Interstate Transporter or any losses ("Cash-in/Cash-out Losses") are incurred under any Cash-in/Cash-out Mechanism which has or which hereafter may be implemented by Interstate Transporter, the parties agree to use their best efforts to determine the validity and the cause of such penalty or Cash- in/Cash-out Losses. Seller shall be responsible for penalties charged by Interstate Transporter, or any Cash-in/Cash-out Losses incurred, as a result of Seller's action or inaction, including but not limited to, those penalties charged or Cash-in/Cash-out Losses incurred as a result of deliveries of less than or in excess of the quantities Seller agrees to deliver or cause to be delivered at the -19- Delivery Points. Buyer shall be responsible for penalties charged by the Interstate Transporter, or Cash-in/Cash-out Losses incurred as a result of Buyer's action or inaction, including, but not limited to, those penalties charged or Cash-in/Cash-out Losses incurred as a result of receipts by Buyer of less than or in excess of.the quantities Seller agrees to deliver or cause to be delivered to the Delivery Points. Buyer and Seller agree to notify the other party as soon as practicable after being informed by Interstate Transporter that an imbalance in receipts and deliveries exists. Buyer and Seller agree to minimize, to the extent possible, penalties and Cash- in/Cash-out Losses by working together to eliminate penalty conditions and imbalances as soon as practicable. ARTICLE XV FINANCIAL RESPONSIBILITY Should the creditworthiness or financial responsibility of either party become unsatisfactory to the other party at any time during the term of this Contract, satisfactory security may be required before further performance hereunder is undertaken. In the event either party shall (i) make an assignment or any general arrangement for the benefit of creditors; (ii) default in the payment or performance of any obligation to the other party under this Contract; (iii) file a petition or otherwise commence, authorize, or acquiesce in the commencement of a proceeding or cause under any bankruptcy or similar law for the protection of creditors or have such petition filed or proceeding commenced against it; (iv) otherwise become bankrupt or insolvent (however -20- evidenced); (v) be unable to pay its debts as they fall due; or (vi) fail to give adequate security for or assurance of its ability to perform its further obligations under this Contract within forty-eight (48) hours of a reasonable request by the other party, then the other party shall have the right to withhold or suspend deliveries or terminate the Contract without prior notice, in addition to any and all other remedies available hereunder or pursuant to law. Each party reserves to itself all rights, set -offs, counterclaims, and other defenses which it is or may be entitled to arising from or out of this Contract. ARTICLE XVI GOVERNING LAW This Contract shall be governed and construed in accordance with the laws of the State of Texas, excluding any conflict -of -law rule or principle which might refer such construction to the laws of another state. ARTICLE XVII GOVERNMENT REGULATIONS This Contract is made subject to, and the parties shall comply with, all valid and applicable federal, state and local laws and all valid and applicable orders, rules and regulations of all governmental authorities having jurisdiction in the premises. ARTICLE XVIII AUDITING OF BOOKS AND RECORDS Each party's books, accounts and records respecting the sale and purchase of gas under this Contract may be audited by the other -21- party within thirty-six (36) months following the end of a month for which such sale, purchase or payment was made. Each party may conduct such audit upon reasonable, written notice to the other party, and the cost of such audit shall be at the auditing party's own expense. Any claim arising out of such audit must be presented by the auditing party within two (2) months of the completion of the audit. Any overage or underage shall be paid by the appropriate party within thirty (30) days after determination thereof. ARTICLE XIX ASSIGNMENT This Contract shall be binding upon and inure to the benefit of the parties hereto, their successors and assigns. No assignment or transfer by either party shall be made without the prior, written approval of the other party, which approval shall not be unreasonably withheld. No such approval shall be required for the pledging or mortgaging by either party of its rights hereunder as security for its indebtedness. ARTICLE XX MISCELLANEOUS 20.1 Notices. Any notice provided for in this Contract or any notice which Buyer or Seller may give to the other party shall be in writing and shall be deemed delivered when mailed, telexed or telecopied to the address, telex or telecopier number of the parties as follows: -22- 0 SELLER: All Matters Hadson Gas Systems, Inc. Stemmons Place 2777 Stemmons Freeway, Suite 700 Dallas, Texas 75207 Attn: Contract Administration Telephone No.: (214) 640-6800 Telecopier No.: (214) 640-6801 BUYER: All Matters City of Lubbock, Texas P.O. Box 2000 Lubbock, Texas 79457 Attn: Managing Director, Lubbock Power & Light Telephone No.: (806) 767-2500 Telecopier No.: (806) 741-1069 or such other address, telex number, or telecopier number as a party may from time to time designate by written notice. 20.2 Headings. The headings in this Contract are inserted for convenience of reference only and shall not affect the meaning or construction thereof. 20.3 Waiver. No waiver by either party of any one or more defaults or breaches by the other party in the performance of this Contract shall operate or be construed as a waiver of any other defaults or breaches, whether of a like or of a different character. No waiver or modification of this Contract shall occur as a result of course of performance. 20.4 Entire Agreement. This Contract contains the entire agreement of the parties and there are no other promises, representations or warranties which form a part of this Contract. Any provision of this Contract which is construed to be prohibited or unenforceable shall be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining -23- provisions hereof or the validity or unenforceability of this Contract as a whole. 20.5 Amendments. Any amendments or modifications to this Contract shall be in writing and shall be signed by the parties hereto. IN WITNESS WHEREOF, this Contract has been properly executed by the parties hereto as of the date first above written. Attest: Betty R.-Johroon Title: City Secretary Approved as to Content Robert M. M sengale Title: Assistant City Manager Approved as to Form r SELLER: POWER-TEX JOINT VENTURE, by Hadson Gas Co. as Managing Joint V nturer. F By: Title: 1A By',.' Dbn&id G. Vandiver Title: First Assistant City Attorney -24- EXHIBIT "A" TO THAT GAS SALES CONTRACT BY AND BETWEEN POWER-TEX JOINT VENTURE AND THE CITY OF LUBBOCK DATED DELIVERY POINTS) Pressures(PSIG) Pipeline Delivery Point Max Min Power -Tex Holly Street Generating Plant 500 300 Optional Delivery Points Power -Tex Texas Tech Campus Cogeneration Facility 500 400 Energas Plant 2 Delivery Point N/A N/A -25-