Loading...
HomeMy WebLinkAboutResolution - 2022 - Agreement - Energas - Gas Sales & Delivery - 05/09/1985Resolution #2022 May 9, 1985 Agenda Item #27 JCR:da 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 Sales and Delivery Agreement by and between the City of Lubbock and Energas Company, 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 9th day of May , 1985. �A K AL NRY,AOR ATTEST: anetve boyo, uity Secretary APPROVED AS TO CONTENT: Rod Bouffard, ssistant Director of, Finance APPROVED AS TO FORM: C. Ross, Jr., C17y- Attorney Resolution #2022 GAS SALES AND DELIVERY AGREEMENT B e t w e e n ENERGAS COMPANY As "Energas" A n d CITY OF LUBBOCK As "Buyer" DATED: May 1, 1985 I N D E X ARTICLE TITLE PAGE NUMBER I DEFINITIONS 2 II QUANTITY 3 III DELIVERY POINT 6 IV DELIVERY PRESSURE 7 V MEASURING STATIONS 7 VI UNITS OF VOLUME 11 VII MEASUREMENT 11 VIII PRICE 12 IX HEATING VALUE 14 X BILLING AND PAYMENT 14 XI QUALITY 15 XII TITLE 18 XIII FORCE MAJEURE 18 XIV NOTICES 20 XV SUCCESSORS AND ASSIGNS 20 XVI MAINTENANCE OF FACILITIES 21 XVII DURATION OF AGREEMENT 21 XVIII INDEMNIFICATION 22 XIX DESCRIPTIVE HEADINGS 22 XX GOVERNMENTAL REGULATIONS 22 GAS SALES AND DELIVERY AGREEMENT THIS AGREEMENT, made and entered into as of the 1st day of May, 1985, by and between ENERGAS COMPANY, a Texas corporation, hereinafter called "Energas," and the CITY OF LUBBOCK, hereinafter called "Buyer"; W I T N E S S E T H: WHEREAS, Energas is the owner of a natural gas distribution system in Lubbock, Lubbock County, Texas, from which Energas has the general capability to deliver and sell certain volumes of gas; and WHEREAS, Energas desires to sell and Buyer desires to purchase volumes of gas for Buyer's facility located in Lubbock, Lubbock County, Texas, and known as No. 2 power station, Municipal Hill, in accordance with the terms and conditions of this Agreement; WHEREAS, Purchaser has entered into a Gas Sales Contract with GAS MARKETING, INC., herein "GMI," for the sale of natural gas to Buyer for consumption at Buyer's No. 2 power station, in Lubbock County, Texas; and WHEREAS, Buyer desires that Energas deliver Buyer's gas from such mutually agreeable points to such mutually agreeable points as may be established hereunder from time to time, and Energas desires to so deliver Buyer's gas to Buyer's facility; NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) in hand paid by Buyer to Energas, the receipt and sufficiency of which are hereby acknowledged, Buyer and Energas agree to the following: ARTICLE I Definitions Section 1. "Day" shall mean the period of twenty-four (24) consecutive hours commencing at 8:00 a.m. on one calendar day and ending at 8:00 a.m. on the following calendar day. Section 2. "Billing Month" shall mean the period commencing at 8:00 a.m. on the first day of a calendar month and ending at 8:00 a.m. on the first day of the following calendar month. Section 3. "Accounting Year" shall mean a yearly period commencing at 8:00 a.m. on January 1, and ending at 8:00 a.m. on the next succeeding January 1. In the event deliveries commence hereunder on a date other than January 1, 1985, the period of time from the date of first deliveries until January 1, 1986, shall be considered as the first accounting year. In the event deliveries permanently cease on a date other than a January 1, the period of time from the January 1, immediately preceding the date of such delivery cessation shall be considered as the final accounting year. Section 4. The term "MCF" shall mean one thousand (1,000) cubic feet. The standard cubic foot is defined at a temperature of -2- sixty (60) degrees Fahrenheit and at an absolute pressure of fourteen and sixty-five hundredths (14.65) pounds per square inch. Section 5. The term "BTU" shall mean British thermal unit. Section 6. The term "Heating Value" shall mean the BTU content of the gas delivered under the standard conditions described in Section 4 of this Article I. Section 7. The term "Energas" shall mean Energas Company, its successors or assigns. Section 8. The term "party," except where the context indicates otherwise, refers to either Energas or Buyer or both. Section 9. The phrase "receipt point" refers to the point or points on Energas' system designated by Energas at which GMI delivers Buyer's gas to Energas for delivery to Buyer under this agreement. Section 10. The phrase "delivery point" refers to the point or points on Energas' system at which gas covered by this agreement is delivered to Buyer's Lubbock, Lubbock County, Texas, consuming facility. ARTICLE II Quantity Section 1. Commencing with the first deliveries, and continuing through the remaining term of this Agreement and subject to the provisions regarding transportation of gas contained herein, Energas agrees to sell and deliver to Buyer and Buyer agrees to purchase and receive from Energas the volume of gas Buyer may -3- request in the operation of Buyer's facility located in Lubbock, Lubbock County, Texas; provided, however, Energas shall not be obligated to make deliveries of gas to Buyer in excess of 5000 MCF during any one day. Energas further agrees to transport for Buyer such gas as Buyer shall purchase from GMI for use in Buyer's facility during the term hereof. It is expressly agreed that all gas delivered to Buyer hereunder shall be deemed to be gas purchased from Energas, unless and until Energas shall receive written notification from Buyer and Energas' pipeline supplier that GNI is to begin the sale of gas to Buyer and a schedule of such deliveries is furnished to Energas. Section 2. Deliveries of gas purchased from Energas under this Agreement shall be subject to curtailment or interruption when necessary to protect public health and safety or to maintain service to higher priority customers of Energas. Such curtailment or interruption shall be performed in accordance with Energas' applicable rules from time to time in effect and on file with the Texas Railroad Commission or any successor regulatory agency, and shall not be the basis for any claim for damages sustained by any party. In the event curtailment or interruption becomes necessary, Energas will use its best efforts to curtail all customers of the same classification in the immediate vicinity proportionately. Section 3. In the event an interruption in, or curtailment of, deliveries of gas purchased from Energas shall become necessary or advisable, Energas shall notify Buyer as soon as possible before -4- actual curtailment, by telephone, telegraph or other means, of the nature, extent and probable duration of such interruption or curtailment. Buyer shall resume the taking of gas within a reasonable length of time following notification by Energas that gas is again available. Section 4. During each accounting year of this Agreement, Buyer agrees to take and pay for, or nevertheless pay for, if not taken, a minimum annual delivery volume of 150,000 MCF of natural gas. Satisfaction of Buyer's obligation under this Section shall be determined based upon the total MCF volume delivered by Energas to Buyer regardless of whether the delivered gas was purchased from Energas or from GMI or a combination of purchases from both. In the event any accounting year does not contain twelve (12) billing months, then Buyer shall be obligated to pay 1/12th of such delivery volume for each complete billing month contained in such accounting year. Section 5. In the event Buyer fails to take from Energas during any accounting year of the term hereof the minimum delivery volume of gas which Buyer is obligated to accept delivery from Energas during such accounting year pursuant to the provisions of Section 4 of this Article II, then within ninety (90) days after the end of such accounting year when there is a deficiency in takes, Buyer shall pay Energas for that quantity of deliveries of gas which equals the difference between the minimum volumes Buyer was obligated to receive or pay for and the volume which Buyer did -5- actually receive or pay for. The price which Buyer shall pay Energas for such deficiency shall be the transportation price in effect at the time the deficiency occurred, as stated in Article VIII, Section 1. Section 6. In the event the delivery of gas is interrupted or curtailed at the request of Buyer pursuant to Article XIII, Sections 1, 2, or 3, or at the request of the Seller, pursuant to Section 2 of this Article II, then and in such event, the minimum volume of gas herein contracted for shall be reduced for that annual period by 1/365th of such minimal annual volume for each day or portion of a day that the delivery of gas hereunder was interrupted or curtailed. Section 7. Energas agrees to accept the Buyer's GMI gas at the receipt point and to deliver same at the delivery point each day at the same rate at which Energas is receiving Buyer's GMI gas at the receipt point during the same day, subject to volume limitations of Article II, Section 1. ARTICLE III Delivery Point Section 1. The delivery point hereunder shall be located at No. 2 power plant, Municipal Hill, at Lubbock, Lubbock County, Texas. The parties, by mutual agreement, may later designate different or additional delivery points. Section 2. Sufficient space together with mutually acceptable access for metering and pressure regulation equipment is to be furnished free by Buyer at a location on Buyer's property to be mutually agreed upon. ARTICLE IV Delivery Pressure Section 1. Deliveries shall be made at the pressure requested by Buyer, but not to exceed the pressure normally available. ARTICLE V Measuring Stations Section 1. Energas shall install, maintain and operate, at Energas' own expense, the official billing measurement station, which shall consist of a measuring facility and all necessary auxiliary devices as designed by Energas to control and accurately measure the flow of natural gas. The type of meter used shall be Energas' choice, but shall conform to industry and A.G.A. measurement standards for its use and maintenance. If orifice meters are used, they shall utilize Flange "Taps" and shall be designed, installed, maintained and operated, and have volumes computed as designated by A.G.A. measurement standards. The installation, operation and maintenance of the auxiliary devices used in the measurement of the gas shall be the responsibility of Energas. Buyer shall have access to all such official billing measurement equipment at reasonable hours, but the calibrating and adjusting thereof and the changing of charts shall be done by Energas. -7- Section 2. Buyer may install, maintain and operate, at its own expense such pressure -volume control regulators, check measuring equipment, instruments, and telemetering devices as it shall desire. Energas hereby grants to Buyer the right to install, maintain and operate check measuring instruments and telemeters in and connected to Energas' official billing measuring station, provided that such instruments and connections shall be so installed as not to interfere with the operation or future revision of Energas' official billing meters and/or appurtenances, and Buyer shall indemnify and hold Energas harmless from liability arising out of the installation, operation, maintenance, and removal of such appendages to the official billing measuring station. Energas shall have access to any such check measuring or telemetering instruments at reasonable hours, but the reading, calibrating, and adjusting thereof and the changing of charts shall be done by Buyer. Section 3. Each party shall have the right to be present at the time of any installing, reading, cleaning, changing, repairing, inspecting, testing, calibrating, or adjusting done in connection with the other party's measuring equipment installed hereunder. All records from such measuring equipment shall remain the property of their owner, but upon request each party will submit to the other party its records and charts, together with calculations therefrom, for inspection and verification, subject to return within thirty (30) days after receipt thereof. Energas may destroy -8- meter charts and other records after three (3) years. Section 4. In the event a billing meter is out of service, or is determined to be registering inaccurately, the volumes of gas delivered hereunder during such period or periods shall be estimated by: a) Using the registration of any approved check meter or meters existing and agreed upon as being accurately registering, or; b) Recalculating if the quantity or percentage of error is ascertainable by calibration, test, or mathematical calculation or, in the absence of both a) and b), then; c) Relating the quantity of delivery to deliveries during periods under similar conditions when the billing meter was deemed to have been registering accurately. Section 5. The accuracy of each party's measuring equipment shall be verified by such party at reasonable intervals, and, if requested, in the presence of representatives of the other party, but such verification shall not be required more frequently than once in any thirty (30) day period. In the event either party shall notify the other that it desires a special test of any measuring equipment, the parties shall cooperate to secure a prompt verification of the accuracy of such equipment. The expense of such special test as may be requested by either party shall be borne by the party requesting such test if the measuring equipment, by such test, is found to be within two (2) percent (fast or slow). -9- Section 6. If upon test, any billing meter or any related instrument or device the readings of which are used in the registration, integration, or computation of quantities which affect the billing hereunder is found to be in error to the extent that it introduces not more than a two (2) percent measurement error in the individual billing meter or meters affected, previous records of such equipment shall be considered accurate in computing deliveries hereunder; but such equipment shall be adjusted at once to function correctly. If upon test, any such measuring equipment shall be found to be inaccurate to the extent that it causes the end result measurement of the individual billing meter or meters so affected to be in error by an amount exceeding two (2) percent at a recording corresponding to the average hourly rate of flow through the individual billing meter or meters affected for the period since the last preceding test, then any previous registration, integration or recordings of such billing meter or meters affected shall be corrected to zero error for any part of the period since the last test which such error is known to have existed or which may be agreed upon in actual practice by the operating representatives of the parties. In case the period of such error is not known definitely or is not agreed upon, such correction shall be for a period of one-half (1) of the time elapsed since the date of the last such test, but not exceeding a correction period of three (3) months. Section 7. Each party shall preserve for a period of at least three (3) years all test data, charts and other similar records applicable hereunder. -10- i ARTICLE VI Units of Volume Section 1. The unit of volume for gas delivered hereunder, except otherwise specifically provided herein, shall be one (1) MCF. The readings and registration of the metering equipment herein provided for shall be converted into such standard units. Measurement Section 1. Computation and/or integration of quantities shall be in accordance with A.G.A. measurement standards. Section 2. The sales or delivery unit of gas deliverable hereunder shall be one (1) MCF of gas. Section 3. The volume of the gas delivered hereunder shall be determined as follows: a) The standard unit of volume for the purpose of measurement shall be one (1) cubic foot of gas at sixty (60) degrees Fahrenheit temperature and at an absolute base pressure of 14.65 pounds per square inch. b) The average atmospheric pressure at the point of measurement is calculated to be 13.1 pounds per square inch, irrespective of slight variations in such atmospheric pressure from time to time. c) If meter or meters requiring flowing gas temperature determination are used, the temperature of the gas being measured shall be determined by the use of a recording or -11- a integrating temperature device or devices installed so as to -properly record or integrate into the computations the temperature or the effect of the temperature of the gas flowing through the meters. The arithmetical average of the temperature recorded during periods of gas flow only shall be used when computing gas volumes. Cost of installing and operating such devices shall be borne by Energas. d) If meters requiring the determination of the specific gravity are used, the specific gravity of the gas delivered hereunder shall be determined by the use of an accumulative gas sampling method, or spot test method. The specific gravity shall be determined monthly or as much more often as found necessary in practice. The specific gravity and BTU content determined by any specific test shall be made effective for the month in which the sample was accumulated. Section 4. When an undisputed error is found to have occurred in the computations of any billing gas quantities delivered, equivalent adjustment shall be made to compensate for such error upon request by either party providing such request is made within six (6) months after the end of the monthly billing period in which such error occurs. ARTICLE VIII Price Section 1. Commencing May 1, 1985, and continuing through December 31, 1985, Buyer shall pay to Energas for gas delivered -12- hereunder a price to be the sum of: 1) Energas' weighted average cost of purchased gas (WACOPG) as defined in Section 4 of this Article VIII, plus 2) An increment of 50.0 cents per MCF. In the event the gas delivered is not purchased from Energas, but from GMI, the Buyer shall be charged 43.47 cents per MCF delivered. Such prices, as applicable, shall be subject to the adjustments as provided in Section 2 and of this Article VIII. Section 2. In addition to the price to be paid for gas delivered hereunder, Buyer agrees to pay to Energas an amount equal to all gross receipts and sales taxes imposed on Energas for revenues received from Buyer under this Agreement. Section 3. For purposes of this Agreement, 'the term "weighted average cost of purchased gas" or NAMPO shall be defined as the amounts paid by Energas to its gas suppliers for volumes of gas purchased at wellheads, at field lines, at gasoline plant outlets, and at transmission lines under the provisions of the applicable contracts involved including recoupment of amortization of prepayments and including authorized transportation charges, for delivery into Energas' West Texas Distribution System. Buyer, upon due notice in writing, shall have the right at reasonable hours to examine the books and records of Energas or the information and records furnished to Energas by third parties to the extent necessary to verify the accuracy of Energas' "weighted average cost of purchased gas." This weighted average cost of purchased gas may be adjusted monthly. -13- ARTICLE I% Heating Value Section 1. The BTU content of the gas delivered hereunder shall be determined for a cubic foot of gas at a temperature of sixty (60) degrees Fahrenheit, at an absolute base pressure of fourteen and sixty-five one hundredths (14.65) pounds per square inch, and on a dry basis. Such total heating value of the gas delivered shall be determined by an instrument of standard manufacture to be installed, maintained, and operated by Energas at its sole expense. ARTICLE % Billing and Payment Section 1. On or before the 10th day of each calendar month, Energas shall render a statement to Buyer which shows the total volume, BTU content, and specific gravity of gas delivered hereunder during the preceding monthly billing period and the monies due therefor. Such statement will separately identify volumes purchased from Energas and volumes of Buyer's GMI gas delivered. Section 2. Payment shall be made by Buyer to Energas within ten (10) days after receipt of the statement. Section 3. All statements, bills and payments shall be subject to correction of any errors contained therein until the expiration of one (1) year after date of payment. Section 4. Any amounts due for delivery of gas hereunder remaining unpaid after the due date for each payment provided for -14- herein shall bear interest at the rate of fifteen (15) percent per annum until paid. ARTICLE %I Quality Section 1. The gas purchased from Energas hereunder shall be natural gas of the quality and composition produced by nature in the petroleum, oil, and natural gas fields from which Energas directly or indirectly obtains its supply, with only such processing being required as may be necessary to condition the gas to meet the quality specifications hereunder. Section 2. No natural gas purchased from Energas hereunder shall have a "total heating value" below 950 British Thermal Units (BTU). Section 3. With respect to gas purchased from Energas hereunder, Energas recognizes its obligation to provide fuel quality natural gas containing the least concentration of separable materials which is.economically feasible: The gas purchased from Energas hereunder: a) Shall be commercially free from dust, gum, gum forming constituents, and liquids at the pressure and temperature at which the gas is delivered; b) Shall have no more condensible hydrocarbons in free liquid form than that which constitutes a wetting of the pipe walls in the lines on the inlet side of any pressure reducing regulator in the delivery facilities, or in the -15- absence of such regulator no more such free hydrocarbon liquids shall be present in the piping at the point of delivery than that which constitutes a mere dampening of the pipe walls; c) Shall not contain more than a trace indication of oils and other liquids which are employed in the operation of the Seller's suppliers' gas processing and compression facilities; d) Shall not have a water vapor content in excess of .006 pounds of water vapor per thousand cubic feet of gas at an absolute base pressure and of fourteen and sixty-five hundredths (14.65) psis, and a standard temperature of sixty (60) degrees Fahrenheit. The water vapor should be determined by the use of dew point apparatus approved by the Bureau of Mines or by any other satisfactory method; e) Shall not contain more than 10.0 grains of hydrogen sulfide per 1,000 cubic feet of gas volume as determined by the Tutweiler test or some other quantitive test, mutually agreeable to both parties, after the presence of hydrogen sulfide has been indicated by qualitative test; f) Shall not contain more than one hundred (100) grains of total sulfur per 1,000 cubic feet of gas volume, in addition to any sulfur compounds contributed by gas odorants which may have been added to the gas; g) Shall not contain in excess of: 2.0% by volume of carbon dioxide; -16- 0.2% by volume of oxygen; or 0.2 gallons per MCF of gas, of those certain liquefiable hydrocarbons whose molecular weight is equal to or heavier than pentanes, commonly referred to as natural gasoline, as determined by fraction analysis or some other method mutually agreeable to both parties; h) Shall not have temperature of more than one hundred twenty (120) degrees Fahrenheit. Section 4. All measurements of gas required in this Article shall be expressed at a base temperature of sixty (60) degrees Fahrenheit and except as otherwise specifically provided to the contrary herein shall be at a base pressure of fourteen and sixty-five hundredths (14.65) pounds per square inch absolute. Section 5. No odorant shall be added to the gas for the specific purpose of this Agreement. If Energas for any reason odorizes the gas stream from which the gas hereunder is delivered, such odorization is not to be construed as interfering with the merchantability of the gas delivered hereunder. Section 6. If the gas purchased from Energas hereunder shall fail at any time to conform to any of the quality specifications herein set forth, then Buyer shall notify Energas of suchdeficiency and may, at its option, refuse to accept further delivery pending correction by Energas. Section 7. Buyer acknowledges that GMI gas being transported by Energas hereunder will be commingled in Energas' general Lubbock -17- distribution system. Energas hereby reserves the right to refuse to accept any GMI gas which does not conform to the specifications contained in this Article XI. ARTICLE XII Title Section 1. Energas shall be in control and possession of the natural gas delivered hereunder and responsible for any damage or injuries caused thereby until the same shall have been delivered to Buyer at the delivery point, after which delivery Buyer shall be deemed to be in exclusive control and possession thereof and responsible for any such damages or injuries. Section 2. Energas expressly warrants its title to and rights to sell the gas purchased from Energas and delivered hereunder free and clear of all liens, and Energas will hold Buyer harmless against adverse claims thereon. Buyer warrants its title to and rights to receive all of Buyer's GMI gas entering the receipt point and will hold Energas harmless against adverse claims thereon. ARTICLE XIII Force Majeure Section 1. The obligations of either party hereto shall be suspended during such time as such party is prevented from complying therewith in whole or in part by acts of God, strikes, war, lockouts, orders or decrees of any lawfully constituted state, federal or local body, temporary failure of Energas' gas supply due to causes or conditions beyond Energas' control, or other causes or -18- conditions, other than GMI's failure to deliver, reasonably beyond the control of either party, whether like or unlike those herein enumerated, or on account of either party making necessary replacements of facilities used in the delivery, receipt, or transmission of gas, or because of any other cause, including acts of third parties other than GMI, except financial, beyond the reasonable control of such party. Section 2. In the event of either Buyer or Energas being rendered unable wholly or in part by force majeure to carry out its obligations under this Agreement, other than to make payments due hereunder, it is agreed that such party giving notice and full particulars of such force majeure in writing or by telegraph to the other party as soon as possible after the occurrence of the cause relied on, then the obligations of the parties, insofar as they are affected by such force majeure, shall be suspended during the continuance of any inability so caused but for no longer period, and such cause shall as far as possible be remedied with all reasonable dispatch. Section 3. The settlement of strikes or lockouts shall be entirely within the discretion of the party having the difficulty, and the above requirements that any force majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes or lockouts by acceding to the demands of opposing party when such course is inadvisable in the discretion of the party having the difficulty. -19- Notices Section 1. Notices to be given hereunder, unless otherwise designated in writing shall be deemed sufficiently given and served when deposited in the United States mail, postage prepaid, and certified or registered to the following addresses: To Energas: ENERGAS COMPANY Attention: Mr. W. P. McKee, Jr. P. 0. Box 40 Amarillo, Texas 79189 To Buyer: CITY OF LUBBOCK Attention: Mr. Carroll McDonald P. 0. Box 2000 Lubbock, Texas 79457 Section 2. Routine communications, including monthly statements and payments, shall be considered duly delivered when mailed, postage prepaid, by either first class or registered mail to the above addresses, or to such other address as may be mutually agreed upon. Successors and Assigns Section 1. This Agreement may not be assigned by either party without the written consent of the other party, which shall not be unreasonably withheld. -20- Section 2. Either party may assign its rights, title, and interest in, to and under this Agreement 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 the obligations of the assignor under this Agreement, and, if any such trustee be a corporation, without its being required to qualify to do business in any state in which any performance of this Agreement may occur. However, such assignment for security purposes, shall not relieve the assigning party of any of its obligations under this Agreement. ARTICLE XVI Maintenance of Facilities Section 1. Each party hereto shall maintain the equipment, including meters, and facilities owned by it and used in its performance hereof in good, safe, efficient operating condition and repair. ARTICLE XVII Duration of Agreement Section 1. This Agreement subject to the provisions hereof, shall be effective May 1, 1985, and shall remain in full force and effect for a term ending the 31st day of December, 1985. -21- ARTICLE %VIII Indemnification Section 1. Energas agrees to indemnify and hold harmless Buyer against any and all loss, cost, claim or demand on account of any damage to property or injury to persons arising or resulting from Energas' operations hereunder. Buyer agrees to indemnify \and hold harmless Energas against any and all loss, claim or demand on account of any damage to property or injury to persons arising or resulting from Buyer's or Buyer's agents. AOTTOT L` VTV Descriptive Headings Section 1. The descriptive headings of the provisions of this Agreement are formulated and used for convenience only and shall not be deemed to affect the meaning or construction of any such provisions. ARTICLE XX Governmental Regulations Section 1. This Agreement shall be subject to all valid laws of the State of Texas and of the United States and regulations or orders of duly constituted governmental authorities having jurisdiction which are applicable to the subject matter hereof and -22- effective from time to time, and to the provisions of the applicable franchises, if any, under which Energas operates. This Agreement shall not be effective until approved, if necessary, by the appropriate regulator authority. Energas and Buyer agree to cooperate and equally share reasonable expenses necessary to obtain, if possible, whatever approval or authority, if any, is necessary to effectuate the sale and delivery of gas hereunder. Section 2. Buyer's intention is that none of the gas purchased or delivered hereunder will be resold, transported, used or consumed in any state other than the State of Texas in such a manner or under any circumstances which would cause the gas covered hereunder or Energas' facilities associated with the sale of such gas, to become subject to the jurisdiction and regulations of the Federal Energy Regulatory Commission or successor body having jurisdiction, and Buyer recognizes that Energas has entered into this Agreement only on such condition. Buyer further recognizes that Energas would have been unwilling to enter into this Agreement in the absence of such an undertaking on the part of Buyer. Buyer, therefore, agrees that it will not voluntarily commit the gas purchased hereunder to interstate commerce, as that term is defined in the Natural Gas Act, 15 USCA 7176 et seq., but would so do only under compulsion of governmental authority. Buyer further agrees not to resell any gas delivered hereunder. -23- P I WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on this the day and year first above written. ATTEST: -- a. Assistant Secretary ENERGAS COMPANY By: C%t/ Vice Pre dent CITY OF LUBBOCK -24-