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HomeMy WebLinkAboutResolution - 1608 - Agreement - Power Tex Joint Venture - Gas Purchase, Holly Ave Plant - 03/08/1984RESOLUTION 1608 - 3/8/84 JRM:rb 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 Agreement between the City of Lubbock and Power -Tex, a Joint Venture, for gas for the Holly Avenue generation plant, 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 8th dAv of mne�k 10PA ATTEST: Evelyn a ga, City ere y- reasurer APPROVED AS TO FORM: ae 44, 01--A o er Massengale, s stant City Manager for Financial Services No Text TABLE OF CONTENTS ARTICLE TITLE PAGE I DEFINITIONS 2 I PRELIMINARY ACTS OF PARTIES . . 3 III VOLUMES k IV QUALITY . . . ... . . 6 V POINT OF DELIVERY AND PRESSURE 6 VI MEASUREMENT . . . . . .7 VII" PRICE AND BILLING . . . . . . . . . . . 11 VIII. TAXES : .' 12 IX REGULATORY BODIES . . .. ... . .'. 13 X FORCE MAJEURE 13 XI REPRESENTATIONS AND INDEMNIFICATIONS 14 XII TERM . 15 XIII MISCELLANEOUS . . . . • • • • • . 15 SIGNATURE 'PAGE . 18 ACKNOWLEDGMENTS, . { . . . 19. GAS PURCHASE• AGREEMENT This Agreement made and entered into this day of , 1964, by and between Power -Tex, a Texas Joint Venture, hereinafter called Seller, and the City of Lubbock, hereinafter called Buyers. WITNESSETH: WHEREAS, Power Line, Inc. and West Texas Transmission Corporation have agreed, and by these presents do agree, to form and enter into a Joint Venture pursuant to the Texas Uniform Partnership Act; and, WHEREAS, the Joint Venture formed by the above named companies represents that it has or will have available for the sale to the City of Lubbock adequate supplies of natural gas; and, WHEREAS, the•City of Lubbock desires to enter into this Agreement to purchase natural gas from the Seller, ,said gas to be used by the Buyer for the purpose of providing fuel for the generation of electricity at its Holly Avenue'Electric Generation Plant; and, WHEREAS, the Joint Venture has made a.firm offer as to the quantity of gas to be made available and. the price to be charged for said gas; and., WHEREAS, the City of.Lubbock`deems it to be in its best interest to accept said offer providing for firm pricing and quantities of natural gas. NOW THEREFORE, for and.in consideration of the foregoing and in further consideration of- the mutual Agreements herein con- tained, the parties hereto agree as follows: I. DEFINITIONS For the purposes of this Contract, unless the context of the instrument requires otherwise, the following definitions shall be applicable: 1.01 "Gas".shall mean natural gas produced from gas wells, and gas produced in association with oil. 1.02 "Day" shall mean the 24-hour period commencing at 7:00 a.m. local time on one calendar day and ending at 7:00 a.m. local time on the next succeeding calendar day. 1.03 "Month" shall mean the period beginning at 7:00 a.m. local time.on the first day of a calendar month and ending at 7:00 a.m. lineal time on the first, day of the succeeding calendar month. 1.04 "Accounting Period" shall mean any twelve (12) month period -beginning from date.of initial delivery during .the term of .this Contract -2- 1.05 "Mc f" shall mean one thousand (1,000) cubic feet of gas and "MMcf" shall mean one million•`(11000,000) cubic feet of gas. 1.06 "Btu shall mean British thermal units measured at 14.65 psis, sixty degrees Fahrenheit (60 deg. F), and water vapor measured as, delivered. 1.07 "MMBtu" shall mean one million (1,000,'000) Btu. 1.08 "Psis" shall mean pounds per square inch, absolute. 1.09 "Psig" shall mean pounds per square inch, gauge. II.. PRELIMINARY ACTS OF PARTIES 2.01 Seiler does hereby agree to construct, own, operate and maintain a certain natural gas transmission line to be known as the Power -Tex Transmission Line. The Seller agrees to construct this line from a mutually agreeable point, situated outside the incorporated limits of the City of L.ubbock,. Texas,_as.close as - practical to Buyer's Holly Avenue Electric Plant in Lubbock County to -a point that said line ties into and intersects a pipeline operated by E1 Paso Pipeline Company (or other accept— able pipeline), a distance of approximately 44 miles, all as more fully shown on Exhibit "A" attached hereto and made a part hereof for all purposes 2.02 It is further agreed between the parties hereto that the primary purpose of this Agreement is to provide a sufficient and adequate supply of natural gas to Buyer for use by it*in the . generation of electricity at its Holly Avenue Electric Generation Plant.. It is further agreed by -the parties hereto that Seller shall have the right to transport and sell through the facilities constructed by it additional natural gas over that required to supply the Buyer upon terms and conditions satisfactory. to -the Seller. 2.03 Seller agrees that time is of the essence-in`the. construction of the pipeline to be ,built by Seller under this Agreement and such construction shall be completed within 180 days after signing of this contract. III. VOLUMES 3.01 Buyer agrees -to purchase during the term of this Agreement the following quantities of natural gas: (a) Commencing on the date of initial delivery, which date of initial delivery shall be no sooner than the date Buyer has satisfied its minimum purchase obligation under its existing contract with Gas Marketing, Inc.'of Amarillo, Texas, entered into on the 8th day of December, 19839 but no later then September 1, 19849 Buyer agrees to receive and purchase, or pay for if available for delivery and not taken, and Seller agrees to deliver and sell, during''each Accounting Period five billion two hundred million cubic feet of natur'al gas (5.2 Bcf). (b) In addition, Buyer shall have a continuing option during the entire term hereof, which option shall be exercised in writing 60 days prior to the purchase date, to take up. to an additional two billion cubic feet (2.0 Bcf) of natural gas during each accounting.period provided,Seller has such gas available for sale. Buyer shall exercise the -4- option by giving Seller written 'notice 60 days prior to the date on which Buyer.desires 'to commence receipt of the additional gas. Only in the eventthatSeller does not have such additional gas available for sale, shall Buyer have the right to purchase quantities of gas from other suppliers and Seller agrees -to transport said gas to :Buyer.through the pipeline owned by Seller for a reasonable transportation fee. 3.02 If at the end of any Accounting Period the Buyer', shall have failed to take during such period the quantity required of it hereunder, Seller shall invoice Buyer for the quantity not taken and Buyer shall pay Seller in full for the amount of such. invoice within fifteen (15) days from receipt thereof. If Buyer shall have paid for any gas not actually received by'it during - any Accounting Period, it shall, subject to first satisfying the minimum requirements set forth in 3.01 hereof, be entitled to receive, without further payment, such quantity -in installments .as it may from time to time designate during the remaining term of this Agreement. In making up such gas deficiencies, if there has been an increase in price between that upon which payments wer..e..made and that applicable at the time of making up deficien- cies, Buyer shall pay Seller in cash for the amount of the' difference. -5- IV. 'QUALITY All gas delivered by •Seller to Buyer under this Contract, shall be of such quality th_Dt it conforms to the specifications required by third -party transporting pipelines, with such specifications being subject to mutual agreement between Buyer and Seller in accordance with Article II hereof. V. POINT OF DELIVERY AND PRESSURE 5.01 The Point of Delivery for all gas purchased and sold pursuent'hereto shall be at a mutually agreeable point situated outside the incorporated limits of the City of Lubbock, Texas as close as possible to Buyer's Holly Avenue Elec•tr1c Plant. 5.02 Seller shall construct, equip, maintain and operate all facilities necessary to. deliver Seller's gas to Buyer.st the Point of Delivery. 5.03 All gas delivered by Seller to Buyer at the afore= mentioned Point of Delivery shall be at -pressures sufficient to enter Buyer's facilities not to exceed five hundred pounds per square inch, gauge (500 psig), and not less than one hundred fifty pounds per square inch, gauge (150 psig). 5:04 Seller shall be in control and possession of the gas sold and purchased hereunder and responsible for any•damage or injury caused thereby until. the same shall have been delivered to Buyer at the Point of Delivery, -6 5.05 Buyer shall be in control and possession of the gas sold and purchased hereunder and -responsible for any damage or injury caused thereby after_the same shall have been delivered at the -Point of Delivery. VI. MEASUREMENT 6.01 The Unit of Volume for measurement of .gas delivered hereunder shall be one (1) cubic foot 'of gas at a base tempera- ture of sixty degrees Fahrenheit (60 deg.. F) and at an -absolute pressure of fourteen and sixty-five hundredths pounds per square inch (14.65 psi), and otherwise as provided by the Standard Gas Measurement Law of the State of Texas (Article 6066b of'Vernon's Texas Civil Statutes). Except as provided by that law, all fundamental constantsv observations, records, and,procedures involved in determining and/or verifying the quantity •and.other - characteristics of gas delivered hereunder shall, unless other- wise specified herein, be in accordance with the standards prescribed in Report No. 3 of the American Gas Association, as now and from time to time amended or supplemented. All measure- ments of gas shall be determined by _calculation into terms of such unit. All quantities given.herein,`unless expressly stated, are. in terms of such. -unit. 6.02 Seller or its designee shall at its own expense" install, maintain and operate, or cause to be installed, main- tained an -d operated, the necessary measuring station at the Point of Delivery. Said measuring station shall be so equipped with orifice meters, recording,gauges, or other types of meters of -7- standard make and design commonly acceptable in the industry, as to�accomplish the accurate measurement of gas delivered -here under. The changing of'chatts and calibrating and adjusting of meters shall be done by Seller or its designee. 6.03 Buyer may st its option install check meters downstream of Seller's measuring station for checking Seller's metering equipment; and the same shall be so installed as not to inter fere- with the operation of Seller's or its designee's facilities. 6.04 The temperature of the r p 'as be determined by the continuous use of a recording thermometer installed by Seller -or ..its designee so that it will.proper,ly record the temperature of the gas flowing through the meter. The temperature recorded each day during the time that gas was actually flowing through the meter shall be used. in computing measurement for that day. 6.05 The specific gravity of the gas shall be determined by Seller or Seller's designee at quarterly intervals, or more often, at Seller's election, by means elected by Seiler which are approved by. the American Gas Association asset forth in its Gas• Measurement Manual. Specific gravities so determined will be used.in calculating gas deliveries for the -day on which the test is made, and for all following days until the next specific gravity test is made. 6.06 The'heat content of the gas, shall be determined by Seller -or its •designee by taking samples of gas at Seller's meter; the samples may be run on a calorimeter or a chromatograph at another location. The result shall be applied to gas deliver _g_ ies for the day when•the sample•is taken and for all following days until the next sample is taken. Such samples shall be taken at quarterly.intervals, or more often, at Seller's election. The Btu -content per cubic foot shell be determined in accordance with Article 1.06 hereof. 6.07 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's measuring equipment used for measuring deliver ies hereunder. The records from such measuring equipment shall: remain.the property of their owner, but upon request, each will submit to the other its records and charts, together with calculations therefrom, subject to return within fifteen (15) days after receipt thereof, after which the charts shall be kept on file. for a period of two (2) years. At least once each quarter, Seiler or its designee shall calibrate the meter(s) and instruments or cause the some to be calibrated. Seller shall give Buyer sufficient notice in advance of such tests so that.Buyer may, at its election, be present in person or by its representative to observe adjustments, if any, which are made. For the purpose of measurement and meter calibration, the atmospheric pressure shall be -,assumed to be fourteen and seven -tenths pounds per square inch (14.7 psi), irrespective of variations in natural atmospheric pressure from time to time. -9- 6.08 If upon any test the metering equipment in the aggre- gate is found to be'inaccurate by two percent (2010)or more, registration thereof and any payment based upon such registra- tions shall be corrected at the rate of such inaccuracy for any period of inaccuracy which is definitely known or agreed upon, or if not known or agreed upon, then for a period extending.back one-helf.(1/2) of the time elapsed since the last day of the calibration, not exceeding,•however, forty-five (45) days. roilowing any test, any metering equipment found to be inaccurate to any-degree shall be adjusted immediately to measure accurate- ly. If for any reason any meter is out of service or out of repair so that the quantity of gas delivered through such meter cannot be ascertained or computed from the readings thereof, the quantity of gas so delivered-`during such period shall be esti- mated and agreed upon by the parties hereto upon the basis of the best available data, using the first of the following methods which is feasible.- (a) easibles(a) By using the registration of any check measuring . equipment of Buyer, if installed and registering accurately; (b) By correcting the error if the percentage of error is ascertainable by calibration, test, or mathematical cal- culation; or, (c) By estimating the quantity of .deliveries by deliveries. during preceding periods under similar conditions when the meter was registering accurately. _10_ 6.09 The measurement hereunder shall be corrected for deviation from Boyle's Law at the pressure and temperature under which gas is delivered hereunder.: VII. PRICE AND BILLING 7.01 Intentionally deleted. 7.02 Commencing on the date of initial deliveries .of gas hereunder and continuing for 24 months, the first day of the month succeeding such initial delivery date, Buyer shall pay Seller a price of $3.35 MMBTU. 7.03 Thereafter on the 1st day of each Accounting Year and continuing throughout the term of this Agreement, the price to be paid for each MMBTU of gas shall be determined by the following formula: X _ Y (1 _ Z). There X = Price to be paid during the ensuingAccounting Year, Y c The price in effect during the immediately pre- ceding Accounting Year, and Z _ The percentage expressed as a decimal fraction, of increase or decrease in the posted price of low sulphur No.. 2 fuel oil as published in Platt's Oilgram (adjusted for West --Texas deliveries)_for the first and last days of the immediately pre- ceding Accounting -Year. In the equation -above, the decimal fraction will be added to one (1) if the posted price increased or subtracted from.one (1) if the posted price decreased, 7.04' Notwithstanding -any of the provisions set forth in 7.03 above, Buyer and Seller agree that the base price paid by Buyer ..to Seller shall not be less than the price set forth in 7.02 above. 7.05 After delivery of. gas has commenced, or payments are due under the terms of this Contract, Seller shall, on or before the fifteenth (15th) day of each month, render`:to-Buyer's statement showing the quantity of gas delivered the 25th day of such.month, pay Seller the amount due for all such gas. 7.06 Each party hereto shall have the right at all reason- able -times 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 madeunder or pursuant to this Contract.' Any statement shall be final as to both parties unless questioned within two (2) years after payment thereof has been made. VIII. TAXES Seller hereby agrees that it will be responsible for and pay •all existing excise, severance, production, sales, occupation, and other taxes of like nature levied in respect to the gas and handling thereof in existence and levied on the date of the 1st delivery of gas to Buyer under this contract. Buyer agrees that save and except as to those taxes Seller has heretofore agreed to 12 - pay to reimburse Seller for any* and all new taxes levied upon the gas and handling thereof not in existenceuponthe date of 1st delivery of gas to'Buyer under this Agreement and to further reimburse Seller for any and all increases.in excise, severance, production, sales, occupation and other taxes of like nature over the amount Seller has heretofore agreed to absorb and pay. Both parties agree that Federal Income Taxes paid by Seller shall not be considered taxes of a like nature under this contract. IX. REGULATORY BODIES This Contract is subject to all present and future -valid laws and lawful orders of all regulatory bodies now or hereafter having jurisdiction of.the parties or either of them; and should either of the.,parties, by -force of any such law or regulation - imposed at any time during the term -of this Cont-ract,•be rendered- unable, wholly or in para, -to carry out its obligations under this Contract, other than to make payments due hereunder, the Contract shall continue nevertheless and shall then be deemed modified to conform with the requirements of such law or regu- lation. X. FORCE MAJEURE In the event of either party hereto being rendered unable, wholly or in part, by force majeure to carry out its obligations under this Contract-, other than to make payments for gas deliv- ered and•received hereunder,,it is agreed that on such party's giving notice and full particulars of such force_majeure in writing or by telegraph to the other party as soon. as -possible -13 after `the occurrence of the cause relied on, then'the obligations of -the party giving such. -notice, so far .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 dis patch. The term "force majeure" as employed herein shall mean acts . of God, strikes, lockouts, or other industrial disturbances, acts of the public enemy, wars, blockades, insurrection, riots, epidemics, landslides, lightning, earthquakes, fires, storms, floods, washouts, arrest and restraints of governments and people, civil disturbances, explosions, breakage, accidents and/or maintenance to machinery, lines of pipe, freezing of wells or lines of�pipe, partial or 'entire failure of wells. It is understood and agreed that the settlement of strikes or lockouts shall be entirely within the disciretion of the party having the difficulty, and that the above requirement' 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 dis- cretion of the party having the difficulty. XI.' REPRESENTATIONS AND INDEMNIFICATIONS Seller hereby represents that it has authority to commit to this Contract the gas to be sold and delivered hereunder. Seller agrees to indemnify Buyer and save it harmless from all suits, actions, debts,.accounts, damages, costs, losses and expenses -14- arising from or out of adverse claims of any and all persons, firms, or corporations to said gas or to royalties, overriding royalties, taxes, license flees, •or charges thereon, which are applicable before title to the gas passes to Buyer. In addition, Seller does hereby agree to save and held Buyer harmless from all claims, causes of action, or lawsuits in any way. arising from the construction, ownership, operation or maintenance of the Power Tax transmission pipeline. In this regard, Joint Venture shall purchase and maintain all necessary insurance customary to the industry standards for businesses engaged in the pipeline business. XII. TERM 12..01 The primary term hereof shall be for a`period of five (5) years commencing on the date of -initial deliveries hereunder-. - 12.02 This Agreement shall continue in full. force and effect from year-to-year thereafter until canceled by either party hereto on one hundred eighty (160) days' prior written notice ,to the other. XIII. MISCELLANEOUS 13.01 No waiver by either Seller or Buyer of any, default of the other under this Contract shall operate as a waiver of future default, whether of like or different' -character or nature.• 13.02 "This Contract shall be binding upon and inure to the benefit of the successors and assigns, or -the heirs, admini- strators, or executors of the.parties hereto. Any party hereto may assign his. or its right, title,, and interest in, to and under -15- this Contract, including, without limitation, any and all renewals, extensions, amendments, and/or supplements hereto to any individual, bank, trustee, company or corporation as security for 'any note, notes, bonds, or other 'obligations or securities of such assignor; provided, however, that no such assignment shall be made without the prior written consent of the other party, which consent. shall not be unreasonably withheld. Any such assignment shall in -no way operate to enlarge, alter, or change any obligation of the other party or parties hereto. 13.03 Seller expressly does not by the terms of this Contract sell, transfer, or assign unto Buyer any title or interest whatsoever, in Seller's pipe, meters, lines or other equipment of any, nature owned or used by Seller in the operation of its system. 13.04 All notices, presentments and other correspondence provided for herein, or arising herefrom shall be in writing, and shall be deemed to have been delivered when deposited in.the United States Mail, postage prepaid, and addressed to the appropriate party as indicated: Seller: Power -Tex, a Joint Venture #5 Briercroft Office Park Lubbock, Texas Buyer: The City of Lubbock P.D.Box 2000 Lubbock, Texas 79457 -16- or to suchothersingle name and addr-ess as either party may, by - written notice, designate to the *other. 13.05 The parties heretD agree and confirm that in the consideration and interpretation of this Contract same shall be construed under the laws of the State of Texas, and this Contract was prepared by all parties hereto and not by any party to the exclusion of the other or others. 13.06 No.modificat,ion of the terms and provisions of this Agreement shall be or become effective except pursuant to and upon the due.and mutual execution of an appropriate supplemental written Contract by the parties hereto. 13.07 Seller does hereby agree that, it will not sell or divest itself of ownership of'the pipeline to be constructed by Seller in accordance with the terms. -of this Agreement unless and— until it has first offered to sell said pipeline to Buyer for the Market Value thereof. 13.08 Market Value shall be determined in the following manner: (a) One appraiser shall be appointed by Buyer (b) One appraiser shall be appointed by Seller (c) The two appraisers so;, appointed shall appoi-nt a third appraiser. The three appraisers shall thereafter determine the market value of the pipeline which' determination shall be binding on the parties hereto. 17- 13.09 In -the event Buyer does not desire to purchase said pip line, it shall notify Seller in writing within thirty (30) days after receipt of appraisals. IN WITNESS WHEREOF, the parties have executed -this Agreement to be effective as of the day and date first hereinabove written in multiple. originals, each of which shall constitute and be an original Contract. JOINT VENTURE -SELLER CITY OF LU 0 K -BUY BY: ALA HENRY, MAY POWER LINE, INC. ATTEST: BY: .'JOq M. BARCLAY EvelynGaf fdOa, City Sec6fetary VICE-PRESIDENT WEST TE AS TRANSMISSION CORP. APPROVED AS TO FORM: - B Y : JORDO OHN C. ROSS, JR. PRESIDENT it .ttorney _18- THE STATE OF TEXAS § CO -LINTY OF LUBBOCK § BEFORE ME, the undersigned authority,. -an this day personally appeared Joe M. Barclay, Vice President of POWER LINE, INC., a corpbration, known to me to be the person whose name is sub- scribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and as the act and deed of said.corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 22ndday of February , 1984. .11AIt -'Z6il A o a bl n- and for t e s e Texas My Commission Expires: THE STATE OF TEXAS § COUNTY OF DALLAS § BEFORE ME, the undersigned authority, on this day, personally appeared Brent Jordan, President of West Texas Transmission Corporation, a corporation, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consider- ation therein expressed, in the capacity therein stated, and as the act and deed of said corporation.' GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 22nd day of February , 1984. a li In and for T e t•a e o T exass - My Commission Expires: '/:a� THE STATE OF TEXAS § COUNTY OF LUBBOCK § BEFORE ME, the undersigned authority, on this day personally appeared Alan Henry, Mayor for the CITY OF LUBBOCK, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and•as the act and deed of said city. uEN U DER MY HAND AND SEAL OF 'OFFICE this day of r' , 1984. o 'ary Public in and for The State of Texas My Commission Expires: -20- 00 �9 ' RESOLUTION 1608 - 3/8/84 r r rrf l a.p i -R}-)7rIJREP GAS PURCHASE AGREEMENT BETWEEN POWER-TEX, A JOINT VENTURE SELLER AND CITY OF LUBBOCK f 1101:1 DATED: March 8, , 1984 I s TABLE OF CONTENTS ARTICLE TITLE PAGE IDEFINITIONS . . . . . . . . . . . . . . . 2 II PRELIMINARY ACTS OF PARTIES . . . . . . . 3 IIIVOLUMES . . . . . . . . . . . . . . . . . 4 IVQUALITY . . . . . . . . . . . . . . . . . 6 V POINT OF DELIVERY AND PRESSURE 6 VI MEASUREMENT . . . . . . . . . . . . . . . 7 VII PRICE AND BILLING . . . . . . . . . . . . 11 VIIITAXES . . . . . . . . . . . . . . . . 12 IX REGULATORY BODIES . . . . . . . . . . . . 13 XFORCE MAJEURE . . . . . . . . . . . . . . 13 XI REPRESENTATIONS AND INDEMNIFICATIONS . . . 14 XIITERM . . . . . . . . . . . . . . . . . . 15 XIII MISCELLANEOUS . . . . . . . . . . 15 SIGNATURE PAGE . . . . . . . . . 18 ACKNOWLEDGMENTS . . . . . . . . . . . . . . 19 0 GAS PURCHASE AGREEMENT This.Agreement made and entered into this 8th day of March , 1984, by and between Power -Tex, a Texas Joint Venture, hereinafter called Seller, and the City of Lubbock, hereinafter called Buyer: WITNESSETH: WHEREAS, Power Line, Inc. and West Texas Transmission Corporation have agreed, and by these presents do agree, to form and enter into a Joint Venture pursuant to the Texas Uniform Partnership Act; and, WHEREAS, the Joint Venture formed by the above named companies represents that it has or will have available for the sale to the City of Lubbock adequate supplies of natural gas; and, WHEREAS, the City of Lubbock desires to enter into this Agreement to purchase natural gas from the Seller, said gas to be used by the Buyer for the purpose of providing fuel for the generation of electricity at its Holly Avenue Electric Generation Plant; and, U WHEREAS, the Joint Venture has made a firm offer as to the quantity of gas to be made available and the price to be charged for said gas; and, WHEREAS, the City of Lubbock deems it to be in its best interest to accept said offer providing for firm pricing and quantities of natural gas. NOW THEREFORE, for and in consideration of the foregoing and in further consideration of the mutual Agreements herein con- tained, the parties hereto agree as follows: I. DEFINITIONS For the purposes of this Contract, unless the context of the instrument requires otherwise, the following definitions shall be applicable: 1.01 "Gas" shall mean natural gas produced from gas wells, and gas produced in association with oil. 1.02 "Day" shall mean the 24-hour period commencing at 7:00 a.m. local time on one calendar day and ending at 7:00 a.m. local time on the next succeeding calendar day. 1.03 "Month" shall mean the period beginning at 7:00 a.m. local time on the first day of a calendar month and ending at 7:00 a.m. local time on the first day of the succeeding calendar month. 1.04 "Accounting Period" shall mean any twelve (12) month period beginning from date of initial delivery during the term of this Contract. -2- 1.05 "Mcf" shall mean one thousand (19000) cubic feet of gas and "MMcf" shall mean one million (1,0009000) cubic feet of gas. 1.06 "Btu" shall mean British thermal units measured at 14.65 psia, sixty degrees Fahrenheit (60 deg. F), and water vapor measured as delivered. 1.07 "MMBtu" shall mean one million (19,0009000) Btu. 1.06 "Psis" shall mean pounds per square inch, absolute. 1.09 "Psig" shall mean pounds per square inch, gauge. II. PRELIMINARY ACTS OF PARTIES 2.01 Seller does hereby agree to construct, own, operate and maintain a certain natural gas transmission line to be known as the Power -Tex Transmission Line. The Seller agrees to construct this line from a mutually agreeable point situated outside the incorporated limits of the City of Lubbock, Texas, as close as practical to Buyer's Holly Avenue Electric Plant in Lubbock County to a point that said line ties into and intersects a pipeline operated by E1 Paso Pipeline Company (or other accept- able pipeline), a distance of approximately 44 miles, all as more fully shown on Exhibit "A" attached hereto and made a part hereof for all purposes. 2.02 It is further agreed between the parties hereto that the primary purpose of this Agreement is to provide a sufficient and adequate supply of natural gas to Buyer for use by it in the generation of electricity at its Holly Avenue Electric Generation Plant. It is further agreed by the parties hereto that Seller shall have the right to transport and sell through the facilities -3- t constructed by it additional natural gas over that required to supply the Buyer upon terms and conditions satisfactory to the Seller. 2.03 Seller agrees that time is of the essence in the construction of the pipeline to be built by Seller under this Agreement and such construction shall be completed within 180 days after signing of this contract. III. VOLUMES 3.01 Buyer agrees to purchase during the term of this Agreement the following quantities of natural gas: (a) Commencing on the date of initial delivery, which date of initial delivery shall be no sooner than the date Buyer has satisfied its minimum purchase obligation under its existing contract with Gas Marketing, Inc. of Amarillo, Texas, entered into on the 8th day of December, 1983, but no later than September 1, 1984, Buyer agrees to receive and purchase, or pay for if available for delivery and not taken, and Seller agrees to deliver and sell, during each Accounting Period five billion two hundred million cubic feet of natural gas (5.2 Bcf). (b) In addition, Buyer shall have a continuing option during the entire term hereof, which option shall be exercised in writing 60 days prior to the purchase date, to take up to an additional two billion cubic feet (2.0 Bcf) of natural gas during each accounting period provided Seller has such gas available for sale. Buyer shall exercise the -4- r 0 option by giving Seller written notice 60 days prior to the date on which Buyer desires to commence receipt of the additional gas. Only in the event that Seller does not have such additional gas available for sale, shall Buyer have the right to purchase quantities of gas from other suppliers and Seller agrees to transport said gas to Buyer through the pipeline owned by Seller for a reasonable transportation fee. 3.02 If at the end of any Accounting Period the Buyer, shall have failed to take during such period the quantity required of it hereunder, Seller shall invoice Buyer for the quantity not taken and Buyer shall pay Seller in full for the amount of such invoice within fifteen (15) days from receipt thereof. If Buyer shall have paid for any gas not actually received by it during any Accounting Period, it shall, subject to first satisfying the minimum requirements set forth in 3.01 hereof, be entitled to receive, without further payment, such quantity in installments as it may from time to time designate during the remaining term of this Agreement. In making up such gas deficiencies, if there has been an increase in price between that upon which payments were made and that applicable at the time of making up deficien- cies, Buyer shall pay Seller in cash for the amount of the difference. -5- IV. QUALITY All gas delivered by Seller to Buyer under this Contract shall be of such quality that it conforms to the specifications required by third -party transporting pipelines, with such specifications being subject to mutual agreement between Buyer and Seller in accordance with Article II hereof. V. POINT OF DELIVERY AND PRESSURE 5.01 The Point of Delivery for all gas purchased and sold pursuant hereto shall be at a mutually agreeable point situated outside the incorporated limits of the City of Lubbock, Texas as close as possible to Buyer's Holly Avenue Electric Plant. 5.02 Seller shall construct, equip, maintain and operate all facilities necessary to deliver Seller's gas to Buyer at the Point of Delivery. 5.03 All gas delivered by Seller to Buyer at the afore- mentioned Point of Delivery shall be at pressures sufficient to enter Buyer's facilities not to exceed five hundred pounds per square inch, gauge (500 psig), and not less than one hundred fifty pounds per square inch, gauge (150 psig). 5.04 Seller shall be in control and possession of the gas sold and purchased hereunder and responsible for any damage or injury caused thereby until the same shall have been delivered to Buyer at the Point of Delivery. MM 5.05 Buyer shall be in control and possession of the gas sold and purchased hereunder and responsible for any damage or injury caused thereby after the same shall have been delivered at the Point of Delivery. VI. MEASUREMENT 6.01 The Unit of Volume for measurement of gas delivered hereunder shall be one (1) cubic foot of gas at a base tempera- ture of sixty degrees Fahrenheit (60 deg. F) and at an absolute pressure of fourteen and sixty-five hundredths pounds per square inch (14.65 psi), and otherwise as provided by the Standard Gas Measurement Law of the State of Texas (Article 6066b of Vernon's Texas Civil Statutes). Except as provided by that law, all fundamental constants, observations, records, and procedures involved in determining and/or verifying the quantity and other characteristics of gas delivered hereunder shall, unless other- wise specified herein, be in accordance with the standards prescribed in Report No. 3 of the American Gas Association, as now and from time to time amended or supplemented. All measure- ments of gas shall be determined by calculation into terms of such unit. All quantities given herein, unless expressly stated, are in terms of such unit. 6.02 Seller or its designee shall at its own expense install, maintain and operate, or cause to be installed, main- tained and operated, the necessary measuring station at the Point of Delivery. Said measuring station shall be so equipped with orifice meters, recording gauges, or other types of meters of -7- standard make and design commonly acceptable in the industry, as to accomplish the accurate measurement of gas delivered here- under. The changing of charts and calibrating and adjusting of meters shall be done by Seller or its designee. 6.03 Buyer may at its option install check meters downstream of Seller's measuring station for checking Seller's metering equipment; and the same shall be so installed as not to interfere with the operation of Seller's or its designee's facilities. 6.04 The temperature of the gas shall be determined by the continuous use of a recording thermometer installed by Seller or its designee so that it will properly record the temperature of the gas flowing through the meter. The temperature recorded each day during the time that gas was actually flowing through the meter shall be used in computing measurement for that day. 6.05 The specific gravity of the gas shall be determined by Seller or Seller's designee at quarterly intervals, or more often, at Seller's election, by means elected by Seller which are approved by the American Gas Association as set forth in its Gas Measurement Manual. Specific gravities so determined will be used in calculating gas deliveries for the day on which the test is made, and for all following days until the next specific gravity test is made. 6.06 The heat content of the gas shall be determined by Seller or its designee by taking samples of gas at Seller's meter; the samples may be run on a calorimeter or a chromatograph at another location. The result shall be applied to gas deliver - so l ies for the day when the sample is taken and for all following days until the next sample is taken. Such samples shall be taken at quarterly intervals, or more often, at Seller's election. The Btu content per cubic foot shall be determined in accordance with Article 1.06 hereof. 6.07 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's,measuring equipment used for measuring deliver- ies hereunder. The records from such measuring equipment shall remain the property of their owner, but upon request, each will submit to the other its records and charts, together with calculations therefrom, subject to return within fifteen (15) days after receipt thereof, after which the charts shall be kept on file for a period of two (2) years. At least once each quarter, Seller or its designee shall calibrate the meter(s) and instruments or cause the same to be calibrated. Seller shall give Buyer sufficient notice in advance of such tests so that Buyer may, at its election, be present in person or by its representative to observe adjustments, if any, which are made. For the purpose of measurement and meter calibration, the atmospheric pressure shall be assumed to be fourteen and seven -tenths pounds per square inch (14.7 psi), irrespective of variations in natural atmospheric pressure from time to time. S 6.08 If upon any test the metering equipment in the aggre- gate is found to be inaccurate by two percent (21M) or more, registration thereof and any payment based upon such registra- tions shall be corrected at the rate of such inaccuracy for any period of inaccuracy which is definitely known or agreed upon, or if not known or agreed upon, then for a period extending back one-half (1/2) of the time elapsed since the last day of the calibration, not exceeding, however, forty-five (45) days. Following any test, any metering equipment found to be inaccurate to any degree shall be adjusted immediately to measure accurate- ly. If for any reason any meter is out of service or out of repair so that the quantity of gas delivered through such meter cannot be ascertained or computed from the readings thereof, the quantity of gas so delivered during such period shall be esti- mated and agreed upon by the parties hereto upon the basis of the best available data, using the first of the following methods which is feasible: (a) By using the registration of any check measuring equipment of Buyer, if installed and registering accurately; (b) By correcting the error if the percentage of error is ascertainable by calibration, test, or mathematical cal- culation; or, (c) By estimating the quantity of deliveries by deliveries during preceding periods under similar conditions when the meter was registering accurately. -10- 6.09 The measurement hereunder shall be corrected for deviation from Boyle's Law at the pressure and temperature under which gas is delivered hereunder. VII. PRICE AND BILLING 7.01 Intentionally deleted. 7.02 Commencing on the date of initial deliveries of gas hereunder and continuing for 24 months, the first day of the month succeeding such initial delivery date, Buyer shall pay Seller a price of $3.35 MMBTU. 7.03 Thereafter on the 1st day of each Accounting Year and continuing throughout the term of this Agreement, the price to be paid for each MMBTU of gas shall be determined by the following formula: X = Y 0 - Z), There X = Price to be paid during the ensuing Accounting Year, Y - The price in effect during the immediately pre- ceding Accounting Year, and Z - The percentage expressed as a decimal fraction, of increase or decrease in the posted price of low sulphur No. 2 fuel oil as published in Platt's Oilgram (adjusted for West Texas deliveries) for the first and last days of the immediately pre- ceding Accounting Year. In the equation above, the decimal fraction will be added to one (1) if the posted price increased or subtracted from one (1) if the posted price decreased. 7.04 Notwithstanding any of the provisions set forth in 7.03 above, Buyer and Seller agree that the base price paid by Buyer to Seller shall not be less than the price set forth in 7.02 above. 7.05 After delivery of gas has commenced, or payments are due under the terms of this Contract, Seller shall, on or before the fifteenth (15th) day of each month, render to Buyer a statement showing the quantity of gas delivered the 25th day of such month, pay Seller the amount due for all such gas. 7.06 Each party hereto shall have the right at all reason- able times 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 this Contract. Any statement shall be final as to both parties unless questioned within two (2) years after payment thereof has been made. VIII. TAXES Seller hereby agrees that it will be responsible for and pay all existing excise, severance, production, sales, occupation, and other taxes of like nature levied in respect to the gas and handling thereof in existence and levied on the date of the 1st delivery of gas to Buyer under this contract. Buyer agrees that save and except as to those taxes Seller has heretofore agreed to -12- pay to reimburse Seller for any and all new taxes levied upon the gas and handling thereof not in existence upon the date of 1st delivery of gas to Buyer under this Agreement and to further reimburse Seller for any and all increases in excise, severance, production, sales, occupation and other taxes of like nature over the amount Seller has heretofore agreed to absorb and pay. Both parties agree that Federal Income Taxes paid by Seller shall not be considered taxes of a like nature under this contract. IX. REGULATORY BODIES This Contract is subject to all present and future valid laws and lawful orders of all regulatory bodies now or hereafter having jurisdiction of the parties or either of them; and should either of the parties, by force of any such law or regulation imposed at any time during the term of this Contract, be rendered unable, wholly or in part, to carry out its obligations under this Contract, other than to make payments due hereunder, the Contract shall continue nevertheless and shall then be deemed modified to conform with the requirements of such law or regu- lation. X. FORCE MAJEURE In the event of either party hereto being rendered unable, wholly or in part, by force majeure to carry out its obligations under this Contract, other than to make payments for gas deliv- ered and received hereunder, it is agreed that on such party's giving notice and full particulars of such force majeure in writing or by telegraph to the other party as soon as possible -13- after the occurrence of the cause relied on, then the obligations of the party giving such notice, so far 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 dis- patch. The term "force majeure" as employed herein shall mean acts of God, strikes, lockouts, or other industrial disturbances, acts of the public enemy, wars, blockades, insurrection, riots, epidemics, landslides, lightning, earthquakes, fires, storms, floods, washouts, arrest and restraints of governments and people, civil disturbances, explosions, breakage, accidents and/or maintenance to machinery, lines of pipe, freezing of wells or lines of pipe, partial or entire failure of wells. It is understood and agreed that the settlement of strikes or lockouts shall be entirely within the discretion of the party having the difficulty, and that the above requirement 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 dis- cretion of the party having the difficulty. XI. REPRESENTATIONS AND INDEMNIFICATIONS Seller hereby represents that it has authority to commit to this Contract the gas to be sold and delivered hereunder. Seller agrees to indemnify Buyer and save it harmless from all suits, actions, debts, accounts, damages, costs, losses and expenses -14- arising from or out of adverse claims of any and all persons, firms, or corporations to said gas or to royalties, overriding royalties, taxes, license fees, or charges thereon, which are applicable before title to the gas passes to Buyer. In addition, Seller does hereby agree to save and hold Buyer harmless from all claims, causes of action, or lawsuits in any way arising from the construction, ownership, operation or maintenance of the Power - Tax transmission pipeline. In this regard, Joint Venture shall purchase and maintain all necessary insurance customary to the industry standards for businesses engaged in the pipeline business. XII. TERM 12.01 The primary term hereof shall be for a period of five (5) years commencing on the date of initial deliveries hereunder. 12.02 This Agreement shall continue in full force and effect from year-to-year thereafter until canceled by either party hereto on one hundred eighty (180) days' prior written notice to the other. XIII. MISCELLANEOUS 13.01 No waiver by either Seller or Buyer of any default of the other under this Contract shall operate as a waiver of future default, whether of like or different character or nature. 13.02 This Contract shall be binding upon and inure to the benefit of the successors and assigns, or the heirs, admini- strators, or executors of the parties hereto. Any party hereto may assign his or its right, title, and interest in, to and under -15- this Contract, including, without limitation, any and all renewals, extensions, amendments, and/or supplements hereto to any individual, bank, trustee, company or corporation as security for any note, notes, bonds, or other obligations or securities of such assignor; provided, however, that no such assignment shall be made without the prior written consent of the other party, which consent shall not be unreasonably withheld. Any such assignment shall in no way operate to enlarge, alter, or change any obligation of the other party or parties hereto. 13.03 Seller expressly does not by the terms of this Contract sell, transfer, or assign unto Buyer any title or interest whatsoever, in Seller's pipe, meters, lines or other equipment of any nature owned or used by Seller in the operation of its system. 13.04 All notices, presentments and other correspondence provided for herein, or arising herefrom shall be in writing, and shall be deemed to have been delivered when deposited in the United States Mail, postage prepaid, and addressed to the appropriate party as indicated: Seller: Power -Tex, a Joint Venture #5 Briercroft Office Park Lubbock, Texas Buyer: The City of Lubbock P.O. Box 2000 Lubbock, Texas 79457 -16- or to such other single name and address as either party may, by written notice, designate to the other. 13.05 The parties hereto agree and confirm that in the consideration and interpretation of this Contract same shall be construed under the laws of the State of Texas, and this Contract was prepared by all parties hereto and not by any party to the exclusion of the other or others. 13.06 No modification of the terms and provisions of this Agreement shall be or become effective except pursuant to and upon the due and mutual execution of an appropriate supplemental written Contract by the parties hereto. 13.07 Seller does hereby agree that it will not sell or divest itself of ownership of the pipeline to be constructed by Seller in accordance with the terms of this Agreement unless and until it has first offered to sell said pipeline to Buyer for the Market Value thereof. 13.08 Market Value shall be determined in the following manner: (a) One appraiser shall be appointed by Buyer (b) One appraiser shall be appointed by Seller (c) The two appraisers so appointed shall appoint a third appraiser. The three appraisers shall thereafter determine the market value of the pipeline which determination shall be binding on the parties hereto. -17- 13.09 In the event Buyer does not desire to purchase said pipeline, it shall notify Seller in writing within thirty (30) days after receipt of appraisals. IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the day and date first hereinabove written in multiple originals, each of which shall constitute and be an original Contract. JOINT VENTURE -SELLER CITY OF L)JBB_0CK-BUNZR P16WERI LINE, IN � YL- 1'1. UF%11V IL P11 VICE PRESIDENT WEST TEUS TRANSMISSION COrRP. BY PRESIDEN -18- BY: 9 ATTEST: V Evelyn affga, City cretary APPROVED AS TO FORM: JOHN C. ROSS, JR. City Attorney J THE STATE OF TEXAS § COUNTY OF LUBBOCK § BEFORE ME, the undersigned authority, on this day personally appeared Joe M. Barclay, Vice President of POWER LINE, INC., a corporation, known to me to be the person whose name is sub- scribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this a a day of o �,LA , 1 1984. zq Notaryublic in and for the St to of Texas My Commission Expires:�� THE STATE OF TEXAS § COUNTY OF DALLAS § BEFORE ME, the undersigned authority, on this day personally appeared Brent Jordan, President of West Texas Transmission Corporation, a corporation, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consider- ation therein expressed, in the capacity therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 12A day of , 1984. Nota(ey Publjfor The ate o My Commission Expires:I_Is c _19- r THE STATE OF TEXAS § COUNTY OF LUBBOCK § BEFORE ME, the undersigned authority, on this day personally appeared Alan Henry, Mayor for the CITY OF LUBBOCK, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and as the act and deed of said city. GI V N UNDER MY HAND AND SEAL OF OFFICE this � day of 1984. tary Public in and f The State of Texas My Commission Expires: — T' SW YW t. &W� off' aaae►�t a.+.tc, its ^c �K ltdurdfj WA4 -20- MAP IN FILE SEE RESOLUTION