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HomeMy WebLinkAbout2003-287$AOur Documents\Ordinances\03\South Lake Oil and Gas Lease Ordinance Best Bid.doc ORDINANCENO. a .-%- 'eV AN ORDINANCE ALLOWING THE NEGOTIATION OF THE BEST BID FOR A CONTRACT FOR AN OIL AND GAS NON -DRILL SITE/POOLING AGREEMENT AT THE SOUTH LAKE PARK WITH R. L. ADKINS CORPORATION AND ALLOWING THE CITY MANAGER TO EXECUTE A LEASE AS LONG AS THE LEASE IS IN SUBSTANTIALLY THE SAME FORM AS THE CITY'S STANDARD LEASE; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, The City Council of the City of Denton has heretofore determined that it is advisable to lease for oil and gas purposes certain real property located at South Lake Park, Denton, Texas; and WHEREAS, in compliance with Chapter 71 of the Texas Natural Resources Code (the "Code") the City published notice of its intention to lease such real property for oil and gas purposes once a week for three consecutive weeks in a newspaper with general circulation and published in Denton County, Texas; and WHEREAS, in compliance with the Code, the City Council of the City of Denton held a public hearing under Chapter 26 of the Texas Parks and Wildlife Code and Chapter 71 of the Texas Natural Resources Code; and WHEREAS, Pursuant to the Code, the City of Denton desires to negotiate the lease of the property for oil and gas well development with the best bidder submitted by R. L. Adkins Corporation; and WHEREAS, R. L. Adkins Corporation desires to enter into lease negotiations for the land at South Lake Park for a non -drill site/pooling agreement for oil and gas well development and after negotiation, to enter into a lease for the land for oil and gas well development and to agree to pay to the City the agreed upon amounts; and WHEREAS, after negotiation the City desires to authorize the City Manager to execute the lease as long as the lease is in substantially the same form as the City's standard lease agreement for non -drill site/pooling agreements. NOW THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. Incorporation of Preamble. The above and foregoing preamble is incorporated into the body of this Ordinance as if copied herein in its entirety. SECTION 2. The City Manager or his designee are hereby authorized to negotiate a non -drill site/pooling oil and gas lease agreement between the City of Denton and R. L. Adkins Corporation in return for the payment(s) as outlined in Attachment A for the approximately 187.33 acres of South Lake Park. SECTION 3. If any section, article, paragraph, sentence, clause, phrase or word in this Ordinance or application thereof to any person or circumstance is held invalid or unconstitutional by a Court of competent jurisdiction, such holding shall not affect the validity of the remaining portions of this Ordinance, and the City Council hereby declares it would have passed such remaining portions of this Ordinance despite such invalidity, which remaining portions shall remain in full force and effect. SECTION 4. This ordinance shall become effective immediately upon its passage and approval. p PASSED AND APPROVED this the day of (SJ 2003. ATTEST: JENNIFER WALTERS, CITY SECRETARY HERBERT L. PROUTY, CITY ATTORNEY zt� A�tdL EULINE BROCK, MAYOR BY:, 2 ATTACHMENT "A" CITY OF DENTON BID FORM GAS WELL DEVELOPMENT ON SOUTH LAKE PARK NON-DRHLLING/POOLING AGREEMENT Description of property and lease: The legal description is attached as Exhibit "A" in the lease. The lease will be a non-drilling/pooling agreement for South Lake Park. An alternate bid of a portion of South Lakes Park may be considered. Minimum Standards of the Bid: Please check each item that will be included in the lease. ■ A primary term of three (3) years from date of execution. ■ A royalty to lessor of 17% of all oil and gas produced from said land. ❑ The royalty to be paid at the highest price in the area. A statement by the Lessee that the royalty to be paid the City is equal to the highest price paid by the Lessee to any mineral owner in Denton, County; and that if the Lessee pays a mineral owner in Denton County, Texas a higher royalty percentage during the tern of this lease, the Lessee shall increase the royalty paid to the City so as to equal this higher amount. SEE ATTACHMENT 1 ■ An annual delay rental of $10.00 per acre. (This is a 3 year Paid Up Lease) a Shut-in payment of $20.00 per acre. ■ Bonus money as specified by bidder. 187.33 acres X $100/acre= total bonus money of $18,733.00. For bonus money as specified in the bid. ❑ A Development Plat or other drawing showing a drill plan and drill sites that are not located on South Lake Park must be submitted with this bid. The City reserves the right to award this bid based on both price and the most advantageous location of the drilling locations and sites for pooling purposes. SEE ATTACHMENT 1 a The successful bidder shall pay the cost of the advertisement of the bid. ❑ Bidders shall submit information of the bidder's reputation and quality of the bidder's oil and gas services including but not limited to the bidder's financial ability to provide the oil and gas services, safety record, compliance history and any other relevant information that the bidder submits to the city for the determination of best value. A letter from the Railroad Commission that the company is in good standing will suffice. SEE ATTACHMENT 1 ■ The successful bidder shall comply with all requirements in the Code of Ordinances for the City of Denton, Texas. A copy may be obtained in the City Secretary's office or on the City of Denton's website, www.citvofdenton.com. ❑ A bidder's conference will be held on Monday, July 28, 2003 at 2:00 p.m. at the City of Denton Purchasing Office conference room ■ An Oil and Gas lease will be negotiated within thirty (30) days after the successful bidder is selected. ■ City shall allow the successful bidder to pool the lease, the land or minerals included in the lease, or any part of these with any other land, leases, minerals estates or parts of any of these to form a drilling or spacing unit for the exploration, development, and production of oil and gas. The City will consider alternative bids on a portion of the South Lake Park lands, described, herein. By submitting a bid, each bidder agrees to waive and does hereby waive any claim the bidder has or may have against the City of Denton, Texas, and the City's respective employees and representatives for the award of attorney fees, arising out of or in connection with the administration, evaluation, or recommendation of any bid, waiver of any requirements under the Bid Documents, or the Contract Documents, acceptance or rejection of any bids, and award of the Bid. By submitting a bid, the bidder specifically waives any right to recover or be paid attorney's fees from the City of Denton, Texas, or any of the City's employees and representatives under any of the provisions of the Texas Uniform Declaratory Judgments Act (Texas Civil Practice and Remedies Code, Section 37.001, et. seq., as amended). The bidder agrees that this is the intentional relinquishment of a presently existing known right. By execution and submission of this Bid, the Bidder hereby represents and warrants to the City of Denton that the Bidder has read and understands the Bid Documents and the Contract Documents and this Bid is made in accordance with the Bid Documents. Bidder acknowledges that it understands all terms within the bid documents, which include the waiver provisions, and that it had the right to consult with counsel regarding all of the above documents. By submitting a bid, each bidder agrees to waive and does hereby waive any claim the bidder has or may have against the City of Denton, Texas and the City's employees, agents and officers, arising out of or in any way connected with the following: 1. the administration, evaluation or recommendation of any bid; 2. waiver or deletion of any of the requirements under the Bid Documents or the Contract Documents; 3. acceptance or rejection of any bids; and 4. award ofthe Bid or Lease. By submitting a bid, the bidder acknowledges that the bidder understands all terms of the bidding documents and consents to the bidding process and the possibility of a negative assessment. By submitting a bid, the bidder acknowledges and agrees that there was and is no disparity of bargaining power between the bidder and the City of Denton, Texas. The bidder agrees that this is the intentional relinquishment of the above listed presently existing rights. The City reserves the right to waive, delete or amend any of requirements connected with this bid and to reject any and all bids. Certification idder R.L. Adkins Corporation, by R.L. Adkins, CEO ATTACHMENT 1 • A ROYALTY RATE PAYABLE TO THE CITY OF DENTON AT THE HIGHEST PRICE IN THE AREA IS NOT ECONOMICALLY FEASIBLE DUE TO LACK OF SURFACE USE ON S. LAKES PARK. ALL WELLS HAVE TO BE LOCATED FROM OFFSET LOCATIONS AND DIRECTIONALLY DRILLED. THE ADDITIONAL RISK AND EXPENSE PROHIBITS A HIGHER ROYALTY RATE. • A DEVELOPMENT PLAT IS NOT AVAILABLE AT THIS TIME BUT WILL BE PREPARED IN THE EVENT OF A SUCCESSFUL BID. R.L. ADKINS CORPORATION HAS A WRITTEN AGREEMENT WITH ACME BRICK CO. THAT ALLOWS FOR DIRECTIONAL DRILLING FROM AN AREA IN THE SOUTHEAST PORTION OF THE ACME PROPERTY TO TO ACCESS BOTTOM HOLE LOCATIONS ON S. LAKES PARK • R.L. ADKINS CORPORATION HAS DRILLED AND CASED OVER 20 BARNETT SHALE GAS WELLS IN DENTON COUNTY AND IS IN THE PROCESS OF TESTING THESE WELLS FOR COMMERCIAL QUALITY. WE WILL BE CONNECTING WELLS TO THE SALES LINE BEGINNING IN AUGUST 2003. ALL OPERATIONS HAVE BEEN CONDUCTED IN STRICT COMPLIANCE WITH THE CITY OF DENTON'S REGULATIONS. WE WILL PROVIDE A LETTER OF GOOD STANDING FROM THE TEXAS RAILROAD COMMISSION IF REQUIRED.