HomeMy WebLinkAbout2010-065ORDINANCE NO. 2010-0.65
AN ORDINANCE OF THE CITY OF DENTON, TEXAS APPROVING A COMPROMISE
SETTLEMENT AGREEMENT BETWEEN RANGE RESOURCES AND THE CITY OF
DENTON; AUTHORIZING THE CITY MANAGER AND THE CITY' S ATTORNEYS TO
ACT ON THE CITY' S BEHALF IN EXECUTING ANY AND ALL DOCUMENTS, AND TO
TAKE OTHER ACTIONS NECESSARY TO FINALIZE THE SETTLEMENT; AND
DECLARING AN EFFECTIVE DATE.
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS. -
SECTION 1. The City Council hereby approves the Compromise Settlement Agreement
between the City of Denton and Range Resources related to pending litigation styled City of
Denton v. Range Resources, et al., Cause Number 2008-10218-16, currently pending in the 16th
District Court of Denton County, substantially in the forn of the attached Compromise
Settlement Agreement.
SECTION 2. The City Manager, or his designee, and the City's Attorneys are hereby
authorized to act on the City's behalf in approving and executing any and all documents, and to
take other actions necessary, to finalize the settlement.
SECTION 3. This ordinance shall become effective immediately upon its passage and
approval.
PASSED AND APPROVED this the
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
BY:.
APPRO 3D AS 0 LEGAL FORM:
ANITA BURGESS, CITY ATTORNEY
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MARK A. BORk UGH S, MAYOR
SAOur Documents\0rdinances1041range resources settlement ordirance.doc
No. 2008-10218-16
CITY OF DENTON, TEXAS, § IN THE DISTRICT COURT
PLAINTIFF,
V. § 16TH JUDICIAL DISTRICT
RANGE RESOURCES CORPORATION,
RANGE OPERATING TEXAS, LLC,
STROUD ENERGY, LTD., AND
DAN A. HUGHES Co.,
DEFENDANTS. § DENTON COUNTY, TEXAS
COMPROMISE SETTLEMENT AGREEMENT
THIS COMPROMISE SETTLEMENT AGREEMENT (this "reement") i .As made by and between
CITY OF DENTON, TEXAS, Plaintiff (the "City" ) and RANGE RESOURCES CORPORATION ("Range
Resources"), Range Texas Production, LLC (f/k/a. RANGE OPERATING"), (collectively "Range"},
and DAN A. HUGHES Co. ("Hughes"), Defendants.
Effective January 17, 2002, the City executed a certain Oil, Gas and Mineral Lease City
of Denton Airport (the "Base Lease"), by which the City leased 554.14 acres, more or less,
which comprised the City's municipal airport property (the "Airport Prap") to Enexco, Inc.,
as lessee for the purpose of "investigating, exploring, prospecting, drilling and mining for and
producing oil, gas and all associated minerals" on the Airport Property. The Base Lease was
assigned to Hughes and modified by a certain Modification, Clarification & Ratification of Oil,
Gas & Mineral Lease dated effective January 16, 2005, executed by Hughes and the City, a
memorandum of whichs recorded as Document No. 2005--55619, Official Public Records of
Denton County, Texas. Hughes later assigned the Base Lease, as amended and modified, to
Stroud Energy Ltd., and the City of Denton and Stroud Energy Ltd. entered into a First
269242vl Page 1
Amendment to Modification, Clarification & Ratification of Oil, Gas & Mineral Lease dated
effective June 20, 2006 (the Modification, Clarification & Ratification of Oil, Gas & Mineral
Lease as amended by the First Amendment to Modification, Clarification & Ratification of Oil,
Gas & Mineral Lease being hereafter referred to as the "First Amendment"). Stroud Energy Ltd.
was merged into Range operating Texas, LLC, which was, at the time of said merger named
Stroud Energy, Inc.
The Base Lease required the Lessee to, among other things, pay the City royalty on gas
produced from wells located on the Airport Property according to certain terms and conditions
contained in the Base Lease. A. controversy has arisen between the City and Hughes and Range
over whether royalties on gas have been paid according to the terms of the Base Lease, as
amended and modified. The City filed the captioned lawsuit ("this Litigation") to enforce the
gas royalty terms according to the City's interpretation of the Base Lease, as amended and
modified. Defendants denied and continue to deny all claims and allegations made by Plaintiff
in this Litigation. Plaintiff denies and continues to deny all claims and allegations asserted by
Defendants in this Litigation.
The undersigned hereby acknowledge and agree that as of December 31, 2009, Range
Operating Texas, LLC was merged into Range Texas Production, LLC, and Range Texas
Production, LLC shall receive all the benefits of this Agreement and shall be entitled. to enforce
and obligated to perform this Agreement as the surviving entity of the merger between Range
Operating Texas, LLC and Range Texas Production, LLC.
269242vl Page 2
To avoid the uncertainty, application of human resources, and expense of further
litigation, the parties have agreed, without any party making any admission to any other party, to
settle the disputes and controversies that are the subject of this Litigation.
TERMS OF AGREEMENT
IN CONSIDERATION OF the mutual promises and agreements contained in this Agreement,
including the recitals set forth above, the parties agree as follows.-
1 The City and Range shall execute the Second Amendment to Oil and Gas Lease,
in the form attached as Exhibit A ("Second Amendment"), which, effective August 1, 2009, re-
states the gas royalty obligation, increases the royalty percentages by two percent (2%), modifies
the termination provision in the Base Lease and confers a right to request audit, all as stated in
more detail in the Second Amendment. Nothing in this Agreement shall modify or affect the
interpretation of the Second Amendment. The City and Range agree that the existing Gas
Purchase Agreement dated November 1, 2007, between Range Texas Production, LLC and
Targa North Texas, L.P., as amended by Amendment dated effective February 1, 2008, meets the
requirements of Section 4, subsection (b) of the Second Amendment and constitutes an arms -
length contract with a purchaser that is not an affiliate of Lessee. Except as expressly modified
by the Second Amendment, the Base Lease and First Amendment shall remain in full force and
effect, and to the extent there is any conflict between the Second Amendment and the Base Lease
and First Amendment, the Second Amendment shall control. The City and Range agree Hughes
is not a party to the Second Amendment and has no liability or obligation of performance
thereunder.
2. Contemporaneously with execution of this Agreement and the Second
mendment, Range agrees to wire transfer the sum of Six HUNDRED SEVENTY FIVE THOUSAND
269242vl Page 3
AND Nol100 DOLLARS ($675,000.00) payable to the City in accordance with wire transfer
directions to be provided by the City's undersigned counsel. Hughes agrees to at the same time
deliver to the City's undersigned counsel a cashier's check (or wire transfer) in the suns of FIFTY
THOUSAND AND No/1 00 DOLLARS ($50,000.00), payable to the City.
3. Range will, no later than April 1, 2010, recalculate the royalty due to the City
since August 1, 2009 and pay all additional amounts due to the City for that period as a result of
the changes contained in the Second Amendment. The payment shall be accompanied by
explanatory information containing the same level of detail as has been reported to the City in
the past, when royalty payments have been made. The City and Range agree Hughes shall have
no liability or obligation of performance under this paragraph.
4. Conditioned upon the compliance by Range with the understandings contained in
paragraphs 1, 2 and 3 above, the City, for itself, and its successors and assigns releases and
forever discharges Range and its officers, directors, shareholders, members, affiliates,
predecessors, successors and assigns, from all claims, demands, damages, actions, causes of
action, or suits in equity, of any kind or nature, including but not limited to attorney fees,
accruing before the date of this Agreement and whether known or unknown on this date, for or
because of any matter or thing done, omitted, or suffered to be done or omitted in any way
directlyor indirectly on an legal then arising out of or related to the gas royalty payments on
Y y g theory
the .Airport Property gas wells as of the date of this Agreement.
5. Conditioned upon the compliance by Hughes with the obligations of its
performance contained in paragraph 2 above, the City, for itself, and its successors and assigns
releases and forever discharges Hughes and its officers, directors, shareholders, members,
affiliates, predecessors, successors and assigns, from all claims, demands, damages, actions,
269242vl Page 4
causes of action, or suits in equity, of any kind or nature, including but not limited to attorney
fees, accruing before the date of this Agreement and whether known or unknown on this date, for
or because of any matter or thing done, omitted, or suffered to be done or omitted in any way
directly or indirectly on any legal theory arising out, of or related to the gas royalty payments on
the Airport Property gas wells as of the date of this Agreement.
6. Conditioned upon the compliance by Range with the understandings contained in
paragraphs l through 3 above, Range, for itself and its successors and assigns, releases and
forever discharges the City and its elected officials, appointed officials, successors and assigns,
from all claims, demands, damages, actions, causes of action, or suits in equity, of any kind or
nature, including but not limited to attorney fees, accruing before the date of this Agreement and
whether known or unknown on this date, for or because of any matter or thing done, omitted, or
suffered to be done or omitted in any way directly or indirectly on any legal theory arising out of
or related to the gas royalty payments on the Airport Property gas wells as of the date of this
Agreement.
7. Conditioned upon the compliance by Hughes with the obligations of performance
contained in paragraph 2 above, Hughes, for itself, and its successors and assigns releases and
forever discharges the City and its elected officials, appointed officials, successors and assigns,
from all claims, demands, damages, actions, causes of action, or suits in equity, of any kind or
nature, including but not limited to attorney fees, accruing before the date of this Agreement and
whether known or unknown on this date, for or because of any matter or thing done, omitted, or
suffered to be done or omitted in any way directly or indirectly on any legal theory arising out of
or related to the gas royalty payments on the Airport Property gas wells as of the date of this
Agreement.
269242vl Page 5
8. It is the intent of the parties to this Agreement to resolve, settle, and release any
and all claims that the parties may have against each other arising out of, resulting from, relating
to, or based in any manner upon the Base Lease as amended and modified by the First
Amendment as of the date of this Agreement and the matters asserted in this Litigation, or that
could have been asserted in this Litigation, whether known or unknown.
9. Once the undertakings described in paragraphs 1 through 3 above have been
consummated, this Litigation will be dismissed with prejudice to refiing pursuant to the form
Order of Dismissal attached as Exhibit B. Range's compliance with paragraphs 1 through 3
above shall have no bearing on Hughes' right to a- dismissal with prejudice of the claims asserted
in the Litigation against it upon its completion of the undertakings required of it in paragraph 2
above.
10. This Agreement is made according to the laws of the State of Texas. The parties
expressly agree that this Agreement is governed by, and will be construed and enforced in
accordance with, Texas law.
11. This Agreement is binding on and inures to the benefit of the parties and their
respective successors, and assigns.
12. Each party acknowledges that this Agreement contains the entire agreement
between the parties, and that it is a complete, written statement of the terms and conditions of the
settlement. Each party acknowledges that it is fully aware of the significance and legal effect of
this Agreement, including the Agreement's release provisions, and that it is not entering into the
Agreement in reliance on any representation, promise, or statement made by any party or their
attorneys, except for the express representations and promises contained in this Agreement. This
Agreement supersedes any and all prior agreements, arrangements, or understandings between
269242v1 Page 6
the parties on all subjects in any way related to the transaction or occurrence described in this
Agreement. No oral understandings, statements, promises, or inducements contrary to or
inconsistent with the terms of this Agreement exist.
13. Each party represents and warrants that it is the sole owner of all rights, claims,
and causes of action asserted by it, or that could have been asserted by it, in this litigation, and
that it has not sold or assigned any such rights, claims, or causes of action to any person or entity,
and that all such rights, claims, and causes of action from the beginning of time through the
effective date of this Agreement are released herein.
14. This Agreement may be executed in a number of identical counterparts, each of
which shall be deemed an original for all purposes.
15. Each person whose signature appears below represents that they hold the
respective titles indicated beneath their signatures, that they are fully authorized by the party on
whose behalf they respectively act to execute this Agreement, as well as the Second Amendment,
as the act and deed of said party.
16. The undersigned hereby covenant not to sue each other with respect to any right, claim,
or cause of action released in this Agreement. Any person or entity having the right to enforce
this Agreement who is sued in violation of this Agreement shall have the right to recover all
damages allowed by contract and law, including attorney's fees, expert witness fees, copy costs,
and all other litigation costs and expenses incurred in defense of any suit brought in violation of
this covenant not to sue.
17. This Agreement shall not constitute an admission of liability by any party hereto,
as all fault and liability are expressly denied. The provisions of this Agreement are contractual,
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and not merely recitals, and shall be considered severable, so that if any of the provisions of this
26924v1 Page 7
Agreement are declared null, void, or in violation of any applicable law or ordinance, then such
provision or provisions shall be disregarded and shall not effect the enforceability of the
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remaining provisions.
18. The parties acknowledge having read all of the provisions of this Agreement and
the parties agree to all of its terms. The parties acknowledge having participated in the
negotiating and drafting of this Agreement, and agree that ambiguities, if any, shall not be
construed against any party.
THIS AGREEMENT EXCEPT THE SECOND AMENDMENT SHALL BE EFFECTIVE AS OF
FE13RUARY 12010.
ATTEST:
3y.
kn ifer w ers, City Secretary
THE CITY OF DENTON, TEXAS
By:_
ebrge Ca0 m bell, City ManagerDate : .^' R r 0
RANGE RESOURCES CORPORATION
By:_
Its $
Bate:
RANGE TEXAS PRODUCTION, LLC (F/K/A RANGE
OPERATING TEXAS, LLC)
269242vl Page 8
By:_
Its:
Date:
DA.N A. HUGHES Co,
By:
Its:
Date:
269242vl Page 9
APPROVED AS To FORM:
Bruce Monning
State Bar No. 14269500
ATTORNEY FOR PLAINTIFF
CITY OF DENTON, TEXAS
Andrew D. Sims
State Bar No. 18415600
ATTORNEY FOR DEFENDANTS
RANGE RESOURCES CORPORATION,
RANGE OPERATING TEXAS, LLC (N/K/A
RANGE TEXAS PRODUCTION, LLC), and
STROUD ENERGY, LTD,,
James M. Truss
State Bar No. 00797577
ATTORNEY FOR DEFENDANTS
DAN A. HUGHES CO.
269242vl Page 10
Exhibit A
NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON,
YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING
INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN
REAL PROPERTY BEFORE IT IS FILET] FOR RECORD IN THE PUBLIC
RECORDS: YOUR SOCIAL SECURITY NUMBER. OR. YOUR DRIVERS LICENSE
NUMBER.
Second Amendment to oil and Gas Lease
STATE OF TEXAS §
COUNTY OF DENTON §
By oil, Gas and Mineral Lease dated January 17, 2002, a Memorandum of which is
recorded in volume 5010, page 858, Official Public Records of Denton County, Texas (the
"Lease"), the City of Denton leased to Enexco, Inc., 554.14 acres of land (the "Land")
described in attached Exhibit A to the Lease. The Lease was subsequently assigned to Dan A.
Hughes Company ("Hughes") and amended by Modification, Clarification and Ratification of
011, Gas and Mineral Lease dated January 16, 2005, a memorandum of which 1s recorded as
Document No. 2005-55619, official Public Records of Benton County, Texas, and further
amended by First Amendment to Modification, Clarification & Ratification of 011, Gas &
Mineral Lease dated June 20, 2006 (collectively the `First Amendment"). The First
Amendment, among other things, divided the Lands covered by the Lease into four tracts
described as Tracts 1 through 4 on the Exhibit A attached to the First Amendment. The First
Amendment increased the royalty to 114 h on Tracts 1, 3, and 4, and the royalty on Tract 2
remained at 115th as provided M' the Lease.
Range Operating Texas, LLC ("Range") owns the lessee's interest under the Lease,
and Range and the City of Denton desire to further modify the Lease to amend and clarify the
royalty provisions and other provisions as provided herein.
Therefore, for good and valuable consideration, the receipt and. sufficiency of which are
hereby acknowledged, Range and the City of Denton hereby amend the Lease as follows:
A. Section 4, subsections a., b., and c. are deleted and replaced with the
following10
.
4. Ro a1 :
(a)
264403.1
(1) Royalty on oil and Liquids Sold at the Land: Lessee agrees to
deliver free of cost to Lessor at the wells, the Royalty Percentage
(defined below) of all oil and other liquid hydrocarbons produced,
separated from gas on the Land, and sold from tanks on the Land.
At Lessor's option Lessee shall pay to Lessor the Royalty
Percentage of the market value at the well of oil and other liquid
hydrocarbons of like grade and gravity prevailing on the day the oil
and other hydrocarbons are sold from the Lease, with market value
being determined by comparable sales in the general area of the
Land. Lessor reserves the right to take its Royalty Percentage of
oil in kind by providing Lessor 30 days prior written notice of its
election to do so.
(2) Royalty on Gas and Associated Hydrocarbons Sold: Lessee agrees
to pay to Lessor on gas and associated hydrocarbons produced
from the Land and sold by Lessee or used on or off the Land, the
Royalty Percentage of the market value of the gas and associated
hydrocarbons (or the proceeds received by Lessee pursuant to 4(b)
below) at the current or any future delivery point from. the Hickory
Creek Gathering, L.P. System to which the wells on the Land are
currently connected or the outlet flange of any other gas gathering
system to which the wells may be later connected (hereafter
referred to as the "Valuation Point." If the gas is gathered from the
wells on the Lease through a system other than the Hickory Creek
Gathering, LP System, the valuation point will be the first point at
which custody of the gas is delivered to a system owned by an
unaffiliated third party.
(b) If gas and associated hydrocarbons produced from the Land are sold by
Lessee pursuant to an arms -length contract with a purchaser that is not an affiliate of Lessee,
then royalty shall be based upon the proceeds received by Lessee as the result of the sale. In
the event it is necessary to determine the market value of gas and the associated hydrocarbons,
the market value will be determined at the Valuation Point by reference to the gross heating
value (measured in British thermal units) and quality of the gas. The market value used in the
calculation of royalty will never be less than the proceeds received by Lessee in connection
with the sale of the oil or gas produced or sold. Royalty will be payable on all oil and gas
produced from the Land including, any oil and gas consumed by Lessee on the Land for
compression, dehydration, fuel, or other use.
(c) Except as provided below, Lessor's royalty shall not bear any of the
costs associated with compression, transportation, processing, or treatment of the gas prior to
the point of sale to a nonaffiliated third party, If a third party that is not an affiliate of Lessee,
compresses, transports, processes, or treats gas produced from the Land, Lessor's royalty will
bear its proportionate share of costs and expenses associated therewith. Lessor's royalty will
not bear any of the costs (including fuel usage costs) and expenses incurred in transporting the
gas through the eX, mg gas gathering system known as the Hickory Creek Pipeline System (or
any other on lease gathering system chosen by Lessee).
264403.3
B. The third sentence of Section 4, subsection (e) is deleted_ and replaced
with the following:
"Should Lessee fail at any time to pay royalty when due, Lessor may give
Lessee written notice of the default, and if the default is not cured within 30 days of the notice
of the default, Lessor shall have, in addition to all other remedies, the right to terminate this
Lease. If Lessee in good faith disputes the amount of or the calculation of the amount of
royalty due under this Lease, and has paid Lessor an amount considered by Lessee to be the
correct amount of royalty, Lessor shall not have the right to terminate the Lease.'
C. The last sentence of Section 4 is deleted.
D. The following shall be added as subsection (f) and (g) of Section 4:
(f) As used in this Lease, "affiliate" means (1) a corporation, limited liability
company, joint venture, partnership, or other entity that owns more than ten percent of the
outstanding voting interest of Lessee or in which Lessee owns more than ten percent of the
outstanding voting interest; or (ii) a corporation, limited liability company, joint venture,
partnership, or other entity in which, together with Lessee, more than ten percent of the
outstanding voting interests of both Lessee and the other corporation, joint venture, partnership,
or other entity is owned or controlled by the same persons or group of persons.
(g) The term "Royalty Percentage" as used herein shall mean 27% insofar as
the Lease covers Tracts 1, 3, and 4 as described in the First Amendment and 22% insofar as the
Lease covers Tract 2 as described in the Lease Amendment for all oil, gas or other minerals
produced on or after August 1, 2009.
E. The following section shall be added between Section 24 and Section 25:
24a. Right to Request Audit: Once every twenty-four (24) calendar
months, Lessor shall have the right to request that Lessee audit the processing plant, if any,
being used to process gas or other liquid hydrocarbons produced from the Lease. Lessee must
perform a requested audit if Lessee has the right to do so. If Lessee does not have the right to
perform such an audit, Lessee shall make a good faith attempt to obtain the necessary audit
rights. Lessee shall never incur liability to Lessor based on an inability to obtain audit rights
and perform a requested audit.
This Amendment shall be binding upon and inure to the benefit of the parties, and their
successors and assigns.
This instrument is dated effective January 1, 2010, but the Royalty obligations shall be
effective as of August 1, 2009.
264403.3
The parties hereby adopt, ratify and confmn the Lease as amended and agree that the
Lease is in frill force and effect subject to the terms of the Lease as amended by the First
Amendment and this instrument.
The City of Denton
MI a
ATTEST:
Jennifer Walters, City Secretary
By.
APPR VED A TO LEGAL FORM:
, City Attorney
am
George C. Campbell, City Manager
Range Operating Texas, LLC
By:
Neal Harrington
Vice President — Land, Southwest
THE STATE OF TEXAS
COUNTY OF DENTON
This instrument was acknowledged before me on.-Deeem-bew by George C.
Campbell, City Manager of THE CITY OF DENTON.
r A�`''f� JANE E. RIHARlSON
Z.
4'c S Notary Public, State of Texas
icy Commission Expires
u� l
N Public, State of Texas
THE STATE OF TEXAS
This instrument was acknowledged before me on December , 2009, by Neal
Harrington, Vice President -Land, Southwest, of RANGE OPERATING TEXAS, LLC, on
behalf of the company.
Notary Public, State of Texas
264403.3
Exhible
it B
CITY OF DENTON, TEXAS,
PLAINTIFF,
1�
RANGE RESOURCES CORPORATION,
RANGE OPERATING TEXAS, LLC,
STROUD ENERGY, LTD., AND
DAN A. HUGHES CO.,
DEFENDANTS.
No. 2008- l 0218-16
ORDER OF DISMISSAL
IN THE DISTRICT COURT
16TH JUDICIAL DISTRICT
DENTON COUNTY, TEXAS
As Is EvIDENCED by the signatures of all counsel of record below, the Court has been
informed that all matters in dispute between the parties have been fully and finally compromised
and settled. Based upon that information IT IS ORDERED that the above cause be and is hereby
DISMISSED WITH PREJUDICE to the rights of Plaintiff or Defendants to refile the action or any part
of it. All costs of Court are taxed against the party incurring same.
SIGNED this day of
...... ..... .............................. -..-
JUDGE PRESIDING
ORDER OF DISMISSAL PAGE 1
SO MOVED AND ENTRY REQUESTED:
Bruce Monning
State Bar No. 14269500
ATTORNEY FOR. PLAINTIFF
CITY OF DENTON, TEXAS
Andrew D. Sims
State Bar No. 18415600
ATTORNEY FOR. DEFENDANTS
RANGE RESOURCES CORPORATION,
RANGE OPERATING TEXAS, LLC, and
STROUD ENERGY, LTD.
James M. Truss
State Bar No. 00797577
ATTORNEY FOR DEFENDANTS
DAN A. HUGHES CO.
ORDER OF DISMISSAL PAGE 2