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1994-130E:\WPDOCS\ORD\LONE.STR ORDINANCE NO. 9~ -130 AN ORDINANCE AWARDING A CONTRACT BETWEEN THE CITY OF DENTON AND LONE STAR GAS COMPANY FOR THE TRANSPORTATION OF GAS; PROVIDING FOR THE EXPENDITURE OF FUNDS THEREFORE; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the City has solicited, received and tabulated com- petitive sealed proposals for the transportation of gas in accord- ance with the procedures of state law and City ordinances; and WHEREAS, the City Manager has reviewed and recommended that the proposal of Lone Star Gas Company is the lowest responsible pro- posal for services as shown in the "Bid Proposals" submitted therefor; and WHEREAS, from an examination of the bids and an investigation of alternative sources, the City Manager has determined that the sole source available to the City for the transportation of gas to Denton's Spencer Station is Lone Star Gas company's pipeline; and WHEREAS, the City Council has provided in the City Budget for the appropriation of funds to be used for the transportation of gas; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION I. That the proposal of Lone Star Gas Company is here- by accepted and approved. SECTION II. That the City Manager is hereby authorized to execute a contract with Lone Star Gas Company for the transporta- tion of, gas under the conditions set forth therein, a copy of which is attached hereto and incorporated by reference herein. SECTION III. That by the acceptance and approval of the above proposal, the City Council hereby authorizes the expenditure of funds therefore in the amount and in accordance with the written contract made pursuant thereto. SECTION IV. That this ordinance shall become effective immed- iately upon its passage and approval. PASSED AND APPROVED this the 19M day of Gkt , 1994. ATTEST: JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM: DEBRA A. DRAYOVITCH, CITY ATTORNEY BY : PAGE 2 LS-MC-#1725 GAS TRANSPORTATION AGREEMENT THIS AGREEMENT, made and entered into to be effective January 1, 1994, by and between LONE STAR GAS COMPANY, a Division of ENSERCH Corporation, a Texas corporation, hereinafter referred to as "Transporter" and CITY OF DENTON, a municipal corporation, hereinafter referred to as "Shipper"; WITNESSETH: WHEREAS, Shipper owns or controls certain quantities of natural gas which are not subject to the jurisdiction of the Federal Regulatory Commission (the "FERC") under either the Natural Gas Act of 1938, as amended, (the "NGA"), or the Natural Gas Policy Act of 1978, as amended, (the "NGPA" and Shipper desires that Transporter (a) receive gas from Shipper (or its designee) at the Point(s) of Receipt hereinafter set forth and (b) redeliver gas to the Point(s) of Delivery hereinafter set forth; and WHEREAS, Transporter owns and operates a pipeline system and is willing to transport gas for Shipper under the terms and conditions hereinafter set forth and pursuant to Section 5.02(b) of the Texas Gas Utility Regulatory Act; NOW, THEREFORE, for and in consideration of the mutual covenants and conditions herein contained, the adequacy and sufficiency of which are hereby acknowledged, Transporter and Shipper hereby agree as follows: ARTICLE I. QUANTITY 1.1 (a) Shipper hereby agrees that transportation service under this Agreement shall cover one hundred percent (100%) of Shipper's Spencer Steam Electric Station's entire natural gas requirements, except for (i) any purchases under that certain Gas Sales Contract between Shipper and Transporter dated January 1, 1994 (hereinafter referred to as the "Gas Sales Contract") or (ii) gas transported by Transporter to Shipper's plant under other gas transportation agreements between Transporter and other third party Shippers. It is agreed that (i) the total maximum daily volume of gas to be transported under this Agreement shall not exceed a daily volume of thirty thousand (30,000) MMBtu, unless mutually agreed to by the parties hereto, and (ii) in consideration of the rates established in Article IV hereof Shipper shall each year transport hereunder an annual minimum quantity of "baseload" gas (as hereinafter defined) equal to at least one million five hundred thousand (1,500,000) MMBtu, excluding any "Retention Volumes" (as hereinafter defined). It is further hereby agreed that the calculation of all quantities of gas received and delivered hereunder shall, for all purposes, including, but not limited to, payment and determination of imbalance and retention volumes, be on an MMBtu basis. Transporter's receipt and delivery of such gas volumes will be subject to Transporter's existing or future pipeline capacity, system transmissibility and operating capabilities; and Transporter may refuse to transport gas hereunder if, in the reasonable opinion of Transporter, to do so would adversely affect Transporter's sales service to residential and commercial customers and other priorities of sales service established by the Railroad Commission of Texas, or any successor thereto. Transporter will in good faith endeavor to receive and deliver such gas and will not arbitrarily and capriciously refuse to transport gas on behalf of Shipper hereunder. (b) Anytime Shipper fails to transport under this Agreement the one million five hundred thousand (1,500,000) MMBtu annual minimum quantity of "baseload" gas, as set forth herein, Transporter shall render Shipper a notice and statement of delinquent volumes specifying the volumes of "baseload" gas Shipper failed to transport. The amount due and payable under this Agreement for such delinquent volumes shall be computed by multiplying (i) the difference between (a) one million five hundred thousand (1,500,000) MMBtu and (b) the volumes of "baseload" gas, on a MMBtu basis, which Shipper actually had Transporter transport during such contract year by (ii) the rate in effect hereunder during such year for "baseload" gas. Such delinquent amount(s) shall be due and payable within thirty (30) days of the date of Transporter's notice and statement of delinquent volumes. (c) In the event this Agreement should ever be terminated or cancelled for any reason before the end of the primary term hereunder, then Transporter shall render Shipper a notice and statement of delinquent volumes specifying the "baseload" volumes Shipper failedto transport during the then current annual period and during the remainder of the primary term of this Agreement and the amount due and payable under this Agreement for such delinquent volumes. In the event this Agreement should ever be terminated or cancelled for any reason after the end of the primary term but before the end of the then current annual period, then Transporter shall render Shipper a notice and statement of delinquent volumes specifying the "baseload" volumes Shipper failed to transport during such annual period and the amount due and payable under this Agreement for such delinquent volumes. Such delinquent amount(s) shall be due and payable within thirty (30) days of the date of Transporter's notice and statement of delinquent volumes. In the event (i) Transporter arbitrarily and capriciously terminates this Agreement in violation of the terms hereof and through no fault of Shipper, or (ii) Transporter terminates this Agreement pursuant to Article IV subparagraph (e) hereof before the end of the primary term hereunder, then Shipper shall (within 30 days thereafter) pay Transporter a prorated amount equal to the product of (i) one twelfth (1/12) of the annual minimum quantity of "baseload" volumes and (ii) the number of months which have elapsed in the then current year through the then current month, and (iii) the "baseload" rate in effect hereunder during such year. (d) In the event of any interruption or curtailment of service to Shipper by Transporter under this Agreement, including force majeure but excluding any interruption of transportation service as a result of termination or cancellation of this Agreement, the amount by which the transportation of "baseload" volumes hereunder is interrupted or curtailed during the applicable year (but never to exceed ten thousand (10,000) MMBtu's for any day of such interruption or curtailment) shall, for the purpose of determining whether Shipper has complied with its annual minimum "baseload" transportation obligation as set forth in this Article, be added to the amount of "baseload" gas actually transported by Transporter under this Agreement during such year, provided such interruption(s) or curtailment(s) are caused solely by Transporter and occur through no fault of Shipper (and/or Shipper's gas supplier(s), agent(s), or designee(s)) hereunder (e.g., Shipper's faults might include problems with gas quality, imbalances, nominations, title to the gas. regulations, breach of warranties, payments, etc.). Shipper agrees that said credit shall be Shipper's sole and exclusive remedy for any such interruptions or curtailments by Transporter. 1.2 (a) It is recognized that a day-to-day balance of gas received by Transporter and delivered to Shipper may not be possible due to the inability of the parties to control precisely such receipts or deliveries. However, Transporter, to the extent practicable, will deliver to Shipper each day a quantity of gas equivalent to ninety nine percent (99%) of the quantity of gas received by Transporter from Shipper (or its designee) on such day and Transporter shall retain the one percent (1%) balance of the quantity of gas received as normal gas lost, gas used as fuel and gas used in day- to-day pipeline operations (the "Retention Volume"). (b) It shall be the responsibility of Shipper to monitor, and if necessary, adjust, or cause to be adjusted, (i) deliveries of gas to Transporter for transportation and (ii) receipts of transportation gas from Transporter, in order to maintain a balance of receipts and deliveries. Transporter shall not be obligated to receive or deliver quantities of gas in excess of those quantities nominated by Shipper, in accordance with paragraph 1.3 hereof, for transportation hereunder, nor shall Transporter be obligated to deliver to Shipper at the Delivery Point(s) quantities of gas in excess of those quantities received from Shipper at the Receipt Point(s), less the Retention Volume. Shipper shall monitor, to the best of its ability, receipts and deliveries hereunder and shall advise Transporter of any situation wherein an imbalance has occurred or may occur unless corrective action is taken. Shipper shall be obligated to adjust its receipts and/or deliveries of transportation gas to the extent necessary to correct or avoid any imbalance and to notify Transporter of such adjustments. Any adjustments to receipts and/or deliveries by Shipper, whether or not pursuant to notification from either party, shall be coordinated with Transporter's gas control personnel. (c) An imbalance shall exist hereunder where, during any month of the term hereof, there is a numerical difference between the quantity of gas, exclusive of the total of those volumes of gas delivered under the Gas Sales Contract, delivered by Transporter to Shipper and the quantity of gas received by Transporter from Shipper (or its designee) during any month, and any such imbalance due Transporter shall be corrected during the month immediately following the month in which such imbalance occurs by allocating to Transporter one hundred percent (100%) of deliveries at the Receipt Point(s) hereunder during such following month until such time as the imbalance due Transporter is corrected; however, should Shipper fail during any month of the term hereof to completely make up a prior month's imbalance then, (i) in the case of any portion of such prior month's imbalance due Transporter ("underdeliveries by Shipper") which is not eliminated, Shipper shall purchase such imbalance volume(s) from Transporter in accordance with and pursuant to the terms of the Gas Sales Contract; or (ii) in the case of any portion of such prior month's imbalance due Shipper ("overdeliveries by Shipper") which is not eliminated, Transporter shall have the right to collect from Shipper an amount equal to the product of ten cents (10¢) multiplied by the number of MMBtu's in such imbalance volume(s) (and further provided should Shipper fail during any month of the term hereof to correct a prior month's imbalance due Shipper, Transporter reserves the right, with twenty-four (24) hours notice to Shipper or its designee, to restrict, interrupt, or reduce the quantity of gas Transporter will accept at the Receipt Point(s) until such time as the imbalance is corrected). In the event Shipper is required to purchase from Transporter any imbalance as provided in (i) above, Transporter agrees to credit Shipper for transportation fees paid by Shipper to Transporter hereunder on such imbalance volume(s); provided, however, such imbalance volume(s) shall not be used for the purpose of determining whether Shipper has transported the annual minimum quantity of "baseload" gas. (d) Notwithstanding anything contained herein which might be construed to the contrary, Transporter shall always have the total and unrestricted right, but with no obligation whatsoever, to at any time and from time to time restrict, interrupt, or reduce its delivery of gas to Shipper at the Delivery Point(s) on a daily basis to match the quantities of gas delivered by Shipper or Shipper's designee(s) to Transporter at the Receipt Point(s) on such day, less the Retention Volume. 1.3 At least two (2) working days prior to the first calendar day of each month during the term hereof, Shipper and/or its designee shall notify Transporter of the daily volumes of gas Shipper nominates for transportation at the Receipt and Delivery Points under this Agreement. Each such transportation nomination shall contain Shipper's nominated quantities for the Receipt and Delivery Points, Shipper's designation of whether the nominated volumes are to be "baseload" or "incremental" volumes hereunder, designation of the appropriate contract(s) covering such gas, and the identity by name and telephone number of individual(s) who have authority to confirm the nominated gas volumes at each Receipt and Delivery Point. Timely nominations may be given by verbal notice; provided, however, Shipper shall furnish written confirmation thereof within five (5) business days of the date of such verbal notice. Shipper and/or its designee may revise nominated quantities on any business day upon verbal notice of any such reduction of nominated quantities, but such verbal notice must be received by Transporter prior to 12:00 noon Central time of any business day to be effective the next succeeding business day. In no event shall the maximum daily volume to be nominated by Shipper for transportation from each Receipt Point hereunder during each month of the term hereof ever exceed the maximum daily nomination volume for each point as set by Transporter prior to the beginning of each month. If Shipper and/or its designee fails to furnish transportation nominations as required herein for any month during the term hereof, Transporter may interrupt transportation service hereunder for such month until forty eight (49) hours after such notification is received, and such interruption of service shall not prevent enforcement by Transporter of any other of its legal rights or remedies nor be construed as a breach of Transporter's obligations hereunder. Shipper shall be entitled to delegate any or all such nomination responsibilities to a third party (Shipper's designee) upon thirty (30) days prior written notice to Transporter, but Shipper shall remain ultimately liable hereunder for any and all nomination responsibilities hereunder. ARTICLE II. LOCATIONS OF POINTS OF RECEIPT AND DELIVERY 2.1 Receipt Point(s): Gas delivered by Shipper (or its designee) to Transporter hereunder shall be delivered at points which are sometimes herein referred to as the "Transporter Receipt Point(s)" or "Point(s) of Receipt" and located at mutually agreeable point(s) on Transporter's intrastate pipeline transmission system, and any such mutually agreeable points shall be specifically set forth and identified in writing signed by both Transporter and Shipper. It is agreed that all Transporter Receipt Point(s) to be established hereunder will be subject to Transporter's prior approval and such approval shall not be unreasonably withheld. 2.2 Delivery Point(s): Gas transported by Transporter hereunder shall be delivered to Shipper (or for its account) where gas first passes from Transporter's metering equipment into Shipper's Spencer Steam Electric Station in Denton, Texas (sometimes herein referred to as "Point(s) of Delivery") or other point(s) as provided in the Transfer of Gas Agreement between Transporter and Shipper dated January 1, 1990, as amended. 23 Additional Receipt Points: It is understood by both parties that Shipper and Transporter may mutually agree in writing to establish other Receipt Point(s) hereunder; provided, however, Transporter shall not be obligated to establish new Receipt Point(s) more frequently than once every two (2) months, unless due to circumstances beyond Shipper's control Shipper (or its designee) is unable to supply gas to the original Receipt Point(s) hereunder. In such event, and upon receipt by Transporter of documentation satisfactory to Transporter verifying such event and Shipper's inability to remedy same, Transporter may, in its sole discretion, agree to establish other Receipt Point(s). In the event Shipper desires that Transporter receive gas at a proposed point(s), Shipper shall notify Transporter in writing of each such proposed point, including in such notice estimated maximum daily delivery volume at such point and the location thereof and Shipper shall therein warrant that the quality of gas to be received at each such proposed point meets the quality specifications as defined herein and that such gas and each such proposed point meets the requirements of Article VI, paragraph 6.2, of this Agreement and all other applicable terms and conditions contained in this Agreement. Transporter will promptly evaluate each point and if such Receipt Point is an established Receipt Point on Transporter's pipeline system, will notify Shipper within ten (10) working days of Transporters receipt of Shipper's notice, unless otherwise mutually agreed to by the parties hereto, whether or not Transporter is able to accept gas from Shipper's proposed new Receipt Point. If such Receipt Point is not an established Receipt Point on Transporter's pipeline system, Transporter will notify Shipperwithin thirty (30) days of Transporter's receipt of Shipper's notice, unless otherwise mutually agreed to by the parties hereto, whether or not Transporter is able to accept gas from Shipper's proposed new Receipt Point. In the event Transporter anticipates the inability to complete said evaluation within the specified ten (10) and/or thirty (30) day periods, Transporter will promptly notify Shipper and provide the status of and estimated completion date of the required evaluation; provided, however, no additional Receipt Point(s) will be established hereunder without the prior written agreement of Transporter. Upon Transporter's agreement to establish any additional Receipt Point(s) pursuant hereto, Exhibit "A" shall be revised to reflect the additional Receipt Point(s). ARTICLE III. PRESSURES AT POINTS OF RECEIPT AND DELIVERY 3.1 Shipper (and/or its designee) shall deliver gas to Transporter at the Receipt Point(s) at pressures sufficient to enter Transporter's pipeline system at such point; provided, however, that Shipper's delivery pressure into Transporter's system at the Receipt Point(s) shall not exceed Transporter's maximum allowable operating pressure at any such point. 3.2 Transporter shall deliver gas to Shipper at Transporter's operating pressure at the Delivery Point(s). Shipper understands that under no circumstances shall Transporter ever be obligated to attempt to deliver gas at a pressure in excess of seventy five (75) psig into Shipper's Spencer Steam Electric Station located in Denton, Texas. ARTICLE IV. RATES 4.1 Shipper shall pay Transporter each month during the term hereof, for services rendered hereunder during such month, at the rates set forth below commencing with initial deliveries of gas hereunder: (a) For all "baseload" gas volumes (i.e. Shipper's one million five hundred thousand (1,500,000) MMBtu per year transportation obligation hereunder as set forth in paragraph 1.1 of Article I hereof) delivered hereunder by Transporter at the Delivery Point(s), Shipper shall pay Transporter thirteen cents (13e) for each such MMBtu (the "baseload rate"). Only "baseload" gas volumes' transported hereunder and paid for by Shipper during a year shall be credited toward Shipper's annual minimum obligation hereunder for such year. (b) For any "incremental volumes", the rate charged hereunder shall be (i) thirteen cents (13(t) for each incremental MMBtu delivered hereunder at the Delivery Point(s), up to one million five hundred thousand (1,500,000) MMBtu of incremental gas during a year and (ii) eleven cents (11¢) for each incremental MMBtu delivered hereunder at the Delivery Point(s) over and above one million five hundred thousand (1,500,000) MMBtu of incremental gas during a year. Any quantities of gas which Shipper elects to transport hereunder as incremental volumes in this paragraph 4.1 (b) herein shall not be credited or used for the purpose of determining whether Shipper has complied with the annual minimum transportation obligation. (c) It is agreed by the parties hereto that the thirteen cent (13e) rate charged in paragraph 4.1(a) above for "baseload" volumes shall escalate one half cent (1/2e) per MMBtu beginning on January 1, 1997, and annually thereafter during the term of this Agreement. It is also agreed by the parties hereto that the thirteen cent (13e) rate charged in paragraph 4.1 (b) above for incremental volumes up to one million five hundred thousand (1,500,000) MMBtu in a year, shall escalate one half cent ('/2e) per MMBtu beginning on January 1, 1995, and annually thereafter during the term of this Agreement. It is further agreed by the parties hereto that the eleven cent (Ile) rate charged in paragraph 4.1(b) above for incremental volumes above one million five hundred thousand (1,500,000) MMBtu in a year shall escalate one half cent (1/2v) per MMBtu beginning on January 1, 1996, and annually thereafter during the term of this Agreement. (d) The rates charged in paragraph 4.1(b) above for incremental volumes can be used at anytime to transport incremental volumes, and such incremental gas may be transported separately or together with "baseload" gas during any month of the term hereof with a written nomination by Shipper hereunder stating such prior to the beginning of such month as provided in paragraph 1.3 above. (e) Should the appropriate regulatory agency find such rates to be unreasonable for any reason or in any way in violation of any provision of law, and determine a rate lower than that provided for herein, Transporter may terminate this Agreement upon giving Shipper written notice of its intention to do so within sixty (60) days after the date of such judgement or order, which cancellation shall become effective at the end of thirty (30) days from and after the date of such notice. Should the agency determine a rate higher than that provided for herein, Shipper may terminate this Agreement upon giving Transporter written notice of its intention to do so within sixty (60) days after the date of such judgement or order, which cancellation shall become effective at the end of thirty (30) days from and after the date of such notice. (f) In addition to the rates set forth herein, Shipper also agrees to reimburse Transporter for any Taxes as defined in Section 5 of GENERAL TERMS AND CONDITIONS attached hereto as APPENDIX "A". ARTICLE V. TERM 5.1 This Agreement shall be effective as of January 1, 1994, hereunder and shall, subject to the terms and provisions hereof, remain in full force and effect for a primary term until January 1, 1999, hereof, and year to year thereafter until cancelled by either party giving the other party one hundred twenty (120) days' prior written notice. Notwithstanding anything contained herein to the contrary, Transporter shall have the right to terminate this Agreement effective on the same date as the date of termination or cancellation of the Gas Sales Contract by giving Shipper at least thirty (30) days notice, if practicable, of such termination. Notwithstanding the above, if an imbalance in deliveries exists on the date of termination hereof between the quantities theretofore delivered at 6 the Receipt Point(s) and Delivery Point(s), the term of this Agreement shall be extended for a period sufficient to allow the party whose deliveries are in arrears to promptly eliminate any imbalance. Provided further, any termination, cancellation, or expiration of this Agreement shall never operate to extinguish the obligation to make payment for monies due hereunder. ARTICLE VI. LAWS AND REGULATIONS 6.1 (a) This Agreement shall be subject to all applicable State and Federal laws, orders, directives, rules and regulations of any governmental body, official or agency having jurisdiction; therefore, Transporter's obligations and liabilities hereunder shall be limited accordingly. (b) Shipper and Transporter recognize that portions of the gas transported hereunder may from time to time be transported to Transporter by Shipper utilizing interstate pipeline facilities under the terms of Section 311(a) of the NGPA. Such transportation shall be accomplished in a manner so as not to subject Transporter's pipeline facilities or the gas transported hereunder to regulation under the NGA or the NGPA. With regard to all such transportation, Shipper agrees to obtain transportation under and perform timely all requirements of Section 311(a) of the NGPA, and Shipper agrees to timely provide Transporter with copies of all forms and correspondence received or given in regard to transportation for Shipper under Section 311(a) of the NGPA if requested to do so by Transporter. Should Shipper determine at any time that it and/or its agents are not totally in compliance with Section 311(a) of the NGPA, Shipper shall immediately terminate deliveries ofgas to Transporter. Further, this Agreementshall be deemed of its own terms to terminate on the day before the date of initial deliveries of such gas; provided, however, such termination shall never be construed to impair any right arising under this Article. (c) Except as contemplated in the immediately preceding paragraph, each party warrants to the other that its or its agent's facilities utilized for the delivery and acceptance of gas hereunder are not subject to the NGA. As a material representation, without which both parties would not have been willing to execute this Agreement, each party warrants to the other parry that it and its agents will take no action nor commit any act of omission which will subject this transaction or the other party's facilities to jurisdiction of the FERC or its successor governmental agency under the terms of the NGA or the NGPA. The gas delivered and accepted hereunder shall not have been nor shall be sold, transported, or otherwise utilized in a manner which will subject either party to the terms of the NGA or the NGPA. In addition to and without excluding any remedy the aggrieved parry may have at law or in equity, the parry who breaches the above warranties and representations shall be liable to the aggrieved parry for all damages, injury and reasonable expense the aggrieved parry may sustain by reason of any breach hereof. Further, should either party or its agents perform any act, or cause any action to be performed, at any time, that results in any gas covered hereunder becoming regulated by or subject to jurisdictional authority of the FERC, or successor governmental authority, under the terms of the NGA or NGPA, contrary to this Agreement, this Agreement shall be deemed of its own terms to terminate on the day before the date of such occurrence, provided, however, such termination shall never be construed to impair any right under this Article. Shipper hereby waives any defensefor breach of this paragraph that Transporter could avoid NGA jurisdiction under the provisions of Section I (c) of such Act. ARTICLE VII. GENERAL TERMS AND CONDITIONS 7.1 The GENERAL TERMS AND CONDITIONS attached hereto as APPENDIX "A" arc incorporated herein and made a part hereof by this reference. ARTICLE VIII. MISCELLANEOUS 8,1 This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that this Agreement shall not be transferred or assigned by Shipper without the prior written consent of Transporter (which consent shall not be unreasonably withheld) and any purported transfer or assignment without such consent shall be null and void and shall not operate to release Shipper from its obligations hereunder. 8.2 Any notice, request, demand, statement or payment provided for in this Agreement may be given in writing directed to the party to whom given and mailed or delivered at such party's address as follows: (Notices and Invoices) City of Denton Municipal Utilities 1701-A Spencer Road Denton, Texas 76205 Attn: Electric Production Manager Fax:(817) 383-7555 (Notices) (Payments) Lone Star Gas Company 301 S. Harwood Street Dallas, Texas 75201 Attn: Transportation Contract Administration Fax: (214) 573-5134 Lone Star Gas Company P.O. Box 910255 Dallas, Texas 75391-0255 or at such address as each party may by like notice give to the other. Such mailed items shall be deemed to have been given when deposited in the United States mail (first class, registered or certified) or overnight delivery (e.g. Federal Express), postage prepaid, or in the case of hand delivery; when given by a representative of either party to a representative of the other party; provided, however, except for payments of amounts due hereunder, either party may provide such items hereunder by electronic mail or facsimile to the other party at the telephone number listed in paragraph 8.2 herein, and further provided the original copy of such item shall be sent to the other party within two (2) business days thereafter. 8.3 This Agreement constitutes the entire agreement between the parties covering the subject matter hereof, and there are no agreements, modifications, conditions or understandings, written or oral, express or implied, pertaining to the subject matter hereof which are not contained herein. 8.4 Modifications of this Agreement shall be or become effective only upon the mutual execution of appropriate supplemental agreements or amendments hereto by duly authorized representatives of the respeetill otties. 8.5 If any provision hereof shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability shall have no effect upon and shall not impair the enforceability of any other provision of this Agreement. 8.6 Transporter and Shipper acknowledge, agree and intend that this Agreement is entered into solely for the respective benefit of Transporter and Shipper and nothing contained in this Agreement, either express or implied, shall be interpreted or construed as conferring any rights, remedies or claims under or in respect to this Agreement or any provision hereof upon any person or entity not a party hereto, other than the successors or assigns of the Parties hereto. 8.7 This Agreement was drafted by both Transporter and Shipper, and, accordingly, no court construing this Agreement shall construe it more stringently against one party than against the other. 8.8 This Agreement supersedes and replaces that certain Gas Transportation Agreement dated January 1, 1990, between the parties; however, the requirement to make payment of any amount(s) due under such preceding agreement shall not be extinguished hereby. In Witness Whereof, this Agreement has been executed in duplicate originals by the parties hereto as of the day and year first herein written. LONE STAR GAS COMPANY, a Division CITY OF DENTON of ENSERCH Corporation By Name: Richard A. Erskine Title Attorney-in-Fact Attest: By Title: Corporate Secretary By Name: Title ydg. Attest: By Title: cry STATE OF COUNTY OF BEFORE ME, the undersigned authority, a Notary Public in and for said County and State, on this day personally appeared I~L) Gh (.Ci r I e r e r1YA ~01 y , of City of Denton, a municipal 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 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 the ~~lYyl day of A.D., 1 i~. C~CR OST EPHANIE FORD NOTIEiY PI,BLiC. STATE CF IE%AS ~dy Commission Erdre reb- 13. '85' ' r Notary Public in and for Cu ! County, i u My commission expires thel \tr\ day of 1-eP(W ✓y , 191. STATE OF TEXAS COUNTY OF DALLAS BEFORE ME, the undersigned authority, a Notary Public in and for the State of Texas, on this day personally appeared Richard A. Erskine, Attorney-in-Fact of LONE STAR GAS COMPANY, a Division of ENSERCH Corporation, a Texas 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 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 the _day of A.D. 19 Notary Public in and for County, My commission expires the day of 19_ SHEET NO. 1 APPENDIX "A" GAS TRANSPORTATION AGREEMENT GENERAL TERMS AND CONDITIONS 1. Definitions (a) "Gas" shall mean natural gas produced from gas wells, vaporized natural gas liquids, gas produced in association with oil (casinghead gas) and/or the residue gas resulting from processing casinghead gas and/or gas well gas. (b) "Day" shall mean the 24-hour period beginning at 7:00 a.m., Central time, on one calendar day and ending at 7:00 a.m., Central time, on the following calendar day. (c) "Month" shall mean the period beginning at 7:00 a.m., Central time on the first day of a calendar month and ending at 7:00 a.m., Central time, on the first day of the succeeding calendar month. (d) "Year" shall mean a period of twelve (12) consecutive months beginning at 7:00 a.m., Central time, on the first day of a calendar month and ending at 7:00 a.m, Central time, on the same date of each succeeding year during the term hereof. (e) "McF shall mean one thousand (1,000) cubic feet. (f) The term "Btu" as used herein shall mean British Thermal Unit and, where appropriate, the plural thereof. The term "MMBtu" shall mean one million (1,000,000) Btu. (g) "Heating Value" or "Heat Content" shall mean the total heating value expressed in Btu per cubic foot (gross heating value) of the gas delivered hereunder, and shall be determined at a temperature of sixty (60) degrees Fahrenheit, saturated with water vapor and under a pressure equivalent to that of thirty (30) inches of mercury at thirty-two (32) degrees Fahrenheit converted to base conditions of sixty (60) degrees Fahrenheit and an absolute pressure of fourteen and sixty- five one hundredths (14.65) pounds per square inch and adjusted to reflect actual water vapor content. (h) "Psia" shall mean pounds per square inch absolute. (i) "Psig" shall mean pounds per square inch gauge. (j) "Point of Receipt" or "Receipt Point" shall mean the point(s) where Transporter receives gas delivered to it by Shipper or by the designee of Shipper for Shipper's account. (k) "Point of Delivery" or "Delivery Point" shall mean the point(s) where Transporter delivers gas to Shipper. 2. Measuring Equipment and Testing (a) The gas delivered to Transporter at the Receipt Point(s) shall be measured by means of measuring devices of standard type which shall be installed, operated and maintained by Transporter (or its designee) and gas delivered to Shipper (or for its account) at the Delivery Point(s) shall be measured by meters of standard type which shall be installed, operated and maintained by Transporter (or its designee). Measurement devices and equipment shall be tested and adjusted for accuracy on a regular schedule by the party metering the gas ( the "metering party"). (b) Shipper agrees to reimburse Transporter, subject to Shipper's prior approval of costs, within ten (10) days from the date of receipt of Transporter's invoice, for any tap valves, metering facilities and associated equipment and all labor and overhead expenses, attributable to the installation of such equipment, incurred by Transporter in effectuating the receipt and delivery of gas hereunder. If the invoiced amount is not paid when due, interest on all unpaid amounts shall accrue at the rate of one and one-half percent (11/2%) per month, or the highest rate allowed by law, SHEET NO. 2 whichever is less, from the date such amount is due Transporter. Failure of Transporter to receive total reimbursement within thirty (30) days of Shipper's receipt of Transporter's invoice will allow Transporter to suspend and/or terminate this Agreement. It is understood that although Shipper shall reimburse Transporter for any tap valves, metering facilities and all associated costs incurred by Transporter in establishing any Receipt and/or Delivery Point, Shipper shall receive ownership of only the metering facilities and Transporter will be solely responsible for all activities in connection with said metering facilities, including, but not limited to, operation, testing, calibration, adjusting, repair and replacement (both at Shipper's expense), and maintenance, necessary for performance hereunder until Transporter disconnects and removes the metering facilities after termination of this Agreement. After said disconnection and removal, Shipper will have the right within a reasonable period of time thereafter to pick up the metering facilities from Transporter. Shipper's failure to so claim the metering facilities within ninety (90) days of Transporter's disconnection and removal thereof, shall constitute a waiver by Shipper of any right, title or interest in and to such metering facilities and all right, title and interest therein shall thereafter vest in Transporter. Transporter shall retain ownership of all equipment associated with the tap and tap valve installation. Notwithstanding the above, if adequate metering facilities are already in existence at the Receipt and/or Delivery Points hereunder, such existing metering facilities shall be used and the party having title to such facilities shall retain title to such facilities. (c) The other party shall have access to the metering party's metering equipment at all times, but the maintenance, calibration and adjustment thereof shall be done only by the employees or agents of the metering party. Records from such metering equipment shall remain the property of the metering party and shall be kept on file by said party for a period of not less than two (2) years. However, upon request of the other party, the metering party shall make available to the other party volume records from its metering equipment, together with calculations therefrom, for inspection and verification, subject to return by the other party to the metering party within thirty (30) days after receipt thereof. (d) The other party may, at its option and expense, install and operate meters, instruments and equipment, in a manner which will not interfere with the metering party's equipment, to check the metering party's meters, instruments and equipment, but the measurement of gas for the purpose of this Agreement shall be by the metering party's meter only, except as hereinafter specifically provided. The meters, check meters, instruments and equipment installed by each party shall be subject at all reasonable times to inspection or examination by the other party, but the calibration and adjustment thereof shall be done only by the installing party. (e) Each party shall give to the other party notice of the time of all tests of meters sufficiently in advance of such tests so that the other party may conveniently have its representatives present; provided, however, that if either party has given such notice to the other party and such other party is not present at the time specified, then the party giving the notice may proceed with the test as though the other party were present. (f) Meter measurements computed by the metering party shall be deemed to be correct except where the meter is found to be inaccurate by as much as one percent (1%), fast or slow, or to have failed to register, in either of which cases the metering party shall repair or replace the meter. The quantity of gas delivered while the meter was inaccurate or failed to register shall be determined by the readings of the other party's check meter, if installed and in good operating condition, or by correcting the error if the percentage of error is ascertainable by calibration or mathematical calculation. If not so ascertainable, then it shall be determined by estimating the quantity on a basis of deliveries under similar conditions when the meter was registering accurately. Such adjustments or correction shall be made only for one-half (V2) of the period which has elapsed since the previous test; provided, however, such adjustment or correction period shall not exceed SHEET NO. 3 ninety (90) days. 3. Measurements (a) In gas measurement computations, the metering party may use the findings and rules of the Railroad Commission; with respect to flowing temperature, the metering party shall at its expense properly install and operate a device of standard make to continuously determine or record flowing temperature. With respect to specific gravity, such shall be determined by "on-site" sampling and laboratory analysis or any other mutually agreeable method which is of standard industry practice (provided, however, that either party may at its expense properly install and operate a recording specific gravity instrument of standard make and in this event the specific gravity as recorded shall be used). (b) The meters for measurement of volumes at the Receipt Point(s) and Delivery Point(s) hereunder shall be installed and operated, and computations shall be made, in accordance with current industry standards. The unit of measurement of gas shall be one thousand (1,000) cubic feet at a pressure base of fourteen and sixty-five one hundredths (14.65) pounds per square inch absolute and at a temperature base of sixty (60) degrees Fahrenheit. Meter measurements shall be computed by the measuring party into such units in accordance with the Ideal Gas Laws for volume variations due to metered pressure and corrected for deviation using daily averages of recorded specific gravity and flowing temperature, or by using the calculated specific gravity determined by the method mentioned in paragraph (c) below. (c) The daily average heating value and specific gravity of the gas delivered hereunder by either party may be determined by the use of BTU recording instruments of standard type, which may be installed and operated by the metering party at the metering point, or at such other point or points as are mutually agreeable to both parties; provided, however, if there is no BTU recording instrument at a particular Receipt or Delivery Point specified herein or agreed upon hereunder, then the heating value and specific gravity of the gas at such point may be determined by "on-site" sampling and laboratory analysis or any other mutually agreeable method which is of standard industry practice. (d) The daily average meter pressure, specific gravity, flowing temperature and heating value shall be determined only during periods of time when the gas is actually flowing. 4. uali (a) Each party shall deliver to the other party hereto natural gas which is of merchantable quality andis commercially free from water, hazardous substances, hydrocarbon liquids, bacteria, and other objectionable liquids, solids or gas components. In addition, the gas delivered by each party shall specifically contain (i) not more than five one hundredths of one percent (.05%) oxygen, (ii) not more than five (5) grains of total sulphur consisting of not more than one quarter (V4) grain of hydrogen sulphide and one (1) grain of mercaptan sulphur per one hundred (100) cubic feet of gas, (iii) not more than three percent (3%) by volume of carbon dioxide, (iv) not more than six percent (6%) by volume total non-hydrocarbon and inert gases (including carbon dioxide, nitrogen, oxygen, helium, etc.), and (v) not more than seven pounds (7#) of water vapor per one million (1,000,000) cubic feet of gas; provided, however, if Shipper tenders gas for transportation upstream of a dehydration plant, Transporter may waive Shipper's obligation to deliver dehydrated gas, subject to Transporter's continuing right to withdraw such waiver at any time in the future. The gas shall be at temperatures not in excess of one hundred twenty (120) degrees Fahrenheit or less than forty (40) degrees Fahrenheit, provided that the gas shall have a hydrocarbon dew point not to exceed forty SHEET NO. 4 (40) degrees Fahrenheit at the delivery pressure, and shall have a heat content of not less than nine hundred fifty (950) or more than eleven hundred (1,100) British Thermal Units per cubic foot under the conditions of measurement contained herein; provided, however, if Shipper tenders gas for transport on Transporter's gathering system, such gas shall in addition to meeting the other quality specifications described herein, have a minimum BTU content of one thousand (1,000) British Thermal Units under the conditions of measurement contained herein, but there shall not be a maximum BTU content or a minimum hydrocarbon dewpoint requirement for such gas. Transporter shall not be obligated to accept any gas delivered by Shipper (or its designee) hereunder which is not interchangeable with other gas in Transporter's pipeline at each Point of Receipt hereunder. Transporter's determination of such interchangeability shall be based upon a factor which is equivalent to the quotient obtained by dividing the total heating value of such gas, expressed in BTU's, by the square root of the specific gravity of such gas. Such factor must be within ±7% of the interchange factor established by Transporter for its system at each Receipt Point hereunder; provided, however, if Shipper tenders gas for transport on Transporter's gathering system, Transporter may waive Shipper's obligation to meet these interchangeability conditions, subject to Transporter's right to withdraw such waiver at any time in the future. (b) If at any time the gas fails to meet the quality specifications enumerated herein, the party receiving such gas shall notify the party delivering such gas, and the delivering party shall immediately correct such failure. If the delivering party is unable or unwilling to deliver gas according to such specifications, the party receiving such gas may refuse to accept delivery of gas hereunder for so long as such condition exists. 5. Taxes (a) Shipper agrees to pay Transporter, by way of reimbursement, all Taxes paid by Transporter with respect to the transport of gas and associated facilities related to the performance of this Agreement. If any such Taxes paid by Transporter to any governmental authority are calculated based upon the value of or price paid for the gas transported hereunder, Shipper shall disclose to Transporter the purchase price of such gas to enable Transporter to calculate and pay all such fees and taxes to appropriate governmental authorities in a timely manner. If Shipper fails or refuses to disclose the purchase price of such gas, Transporter shall have the right to terminate this Agreement by giving Shipper ten (10) days' prior written notice; and Shipper hereby agrees to indemnify and hold Transporter harmless from and against any and all claims, demands, losses or expenses, including attorneys' fees, which Transporter may incur as a result of Shipper's failure or refusal to disclose the purchase price of gas transported hereunder. (b) The term "Taxes" as used herein, shall mean all taxes and fees levied upon and/or paid by Transporter (other than ad valorem, capital stock, income or excess profit taxes, except as provided herein, general franchise taxes imposed on corporations on account of their corporate existence or on their right to do business within the state as a foreign corporation and similar taxes), including, but not limited to, gross receipts tax, street and alley rental fees agreed upon in franchise ordinances, licenses, fees and other charges levied, assessed or made by any governmental authority on the act, right or privilege of transporting, handling or delivering gas, which taxes or fees are based upon the volume, heat content, value or sales/purchase price of the gas, or transportation fee payable hereunder. 6. Billing Accounting and Reports (a) On approximately the 15th day of each month, Transporter shall render to Shipper a SHEET NO. 5 statement for the preceding month showing the Mcf and MMBtu delivered at the Receipt Point(s) and Delivery Point(s); the amount of compensation due to Transporter hereunder, including the tax reimbursement; and other reasonable and pertinent information which is necessary to explain and support same and any adjustments made by Transporter in determining the amount billed. (b) Shipper shall pay Transporter twelve (12) days from the earlier of (i) the date Transporter's statement is deposited postage prepaid in the United States mail, or (ii) the date such statement is faxed to Shipper pursuant to Paragraph 8.2 of Article VIII hereunder, for gas transported hereunder during the preceding month, or as to payment which is otherwise due hereunder, according to the measurements, computations and rates herein provided. Transporter hereby agrees, however, that Shipper may pay any such statement by bank wire transfer by directing the bank wire transfer to Lone Star Gas Company at Texas Commerce Bank, Dallas, Texas, ABA No. 111001150, for deposit to Lone Star Gas Company Account No. 08805016795. To assure proper credit, Shipper should designate the company name, invoice number and amount being paid in the Fedwire Text Section. If the invoiced amount of any payment due is not paid when due, interest on all unpaid amounts shall accrue at the rate of one and one half percent (11/2%) per month, or the highest rate allowed by law, whichever is less, from the date such amount is due Transporter; provided, however, no interest shall accrue on unpaid amounts when failure to make payment is the result of a bona fide dispute between the parties hereto regarding such amounts and Shipper timely pays all amounts not in dispute. (c) Each party hereto shall have the right at all reasonable times to examine the measurement records and charts of the other party to the extent necessary to verify the accuracy of any statement, charge, computation or demand made under or pursuant to any of the provisions in this Agreement. If any such examinations reveal any inaccuracy in such billing theretofore made, the necessary adjustments in such billing and payment shall be made; provided, that no adjustments for any billing or payment shall be made for any inaccuracy claimed after the lapse of twenty five (25) months from the rendition of the invoice relating thereto. 7. Responsibility Shipper shall be deemed to be in control and possession of the gas until such gas shall have been delivered to Transporter at the Receipt Point(s) and after such gas shall have been delivered at the Delivery Point(s). Transporter shall be deemed to be in control and possession of the gas after receipt of the gas at the Receipt Point(s) and until such gas shall have been delivered to Shipper (or for its account) at the Delivery Point(s). Each party shall have responsibility for gas handled hereunder, or for anything which may be done, happen or arise with respect to such gas, only when such gas is in its control and possession as aforesaid. Each party shall be responsible for any damage or injuries caused thereby until the same shall have been delivered to the other party at the Receipt Point(s) or Delivery Point(s), except injuries and damages which shall be occasioned solely and proximately by the negligence of the receiving party. 8. Warranty Shipper warrants to Transporter that at the time of delivery of gas hereunder it will have good title or the right to deliver such gas, and that such gas shall be free and clear of all liens and adverse claims, and Shipper agrees to indemnify Transporter against all suits, actions, debts, accounts, damages, costs (including attorneys' fees), losses and expenses arising from or out of any adverse claims of any and all persons to or against said gas. SHEET NO. 6 9. Force Majeure (a) In the event either party is rendered unable, wholly or in part, by force majeure to carry out its obligations under this Agreement, except the obligation to pay monies due hereunder, it is agreed that, on such party's giving notice and reasonably full particulars of such force majeure, in writing or by telecopy, to the other party within a reasonable time after the occurrence of the cause relied on 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, so far as possible, be remedied with all reasonable dispatch. (b)' The term "force majeure", as employed herein, shall mean acts of God; strikes, lockouts or other lindustrial disturbances; acts of the public enemy, wars, blockades, insurrections, civil disturbances and riots, and epidemics; landslides, lightning, earthquakes, fires, storms, floods and washouts; arrests, orders, directives, restraints and requirements of the government and governmental agencies,', either federal or state, civil and military; and application of governmental conservation rules and regulations; explosions, breakage or accident to machinery or lines of pipe; outages (shutdowns) of power plant equipment or lines of pipe for inspection, maintenance or repair; freezing of wells or lines of pipe; and any other causes, whether of the kind enumerated or otherwise, not reasonably within the control of the party claiming suspension. 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 reasonable dispatch shall not require the settlement of strikes or lockouts by acceding to the demand of the opposing party when such course is or is deemed to be inadvisable or inappropriate in the discretion of the party having the difficulty. 10. Waiver of Breaches, Defaults or Rights No waiver by either party hereto of any one or more breaches, defaults or rights under any provisions of this Agreement shall operate or be construed as a waiver of any other breaches, defaults or rights, whether of a like or of a different character. By providing written notice to the other party, either party may assert any right not previously asserted hereunder or may assert its right to object to a default not previously protested. Except as specifically provided herein, in the event of any dispute under this Agreement, the parties shall, notwithstanding the pendency of such dispute, diligently proceed with the performance of this Agreement without prejudice to the rights of eitherparty. 11. Remedv for Breach Except as otherwise specifically provided herein, if either party shall fail to perform any of the covenants or obligations imposed upon it in this Agreement (except where such failure shall be excused under the provisions of Section 9 hereof), then, and in that event, the other party may, at its option (without waiving any other remedy for breach hereof), by notice in writing specifying wherein the default has occurred, indicate such party's election to terminate this Agreement by reason thereof; provided, however, that Shipper's failure to pay Transporter within a period of ten (10) days following Shipper's receipt of written notice from Transporter advising of such failure to make payment in full within the time specified in Section 6 hereof, shall be a default which shall give Transporter the right to immediately terminate this Agreement, unless such failure to pay such amounts' is the result of a bona fide dispute between the parties hereto regarding such amounts hereunder and Shipper timely pays all amounts not in dispute. With respect to any other matters, the party in default shall have thirty (30) days from receipt of such notice to remedy such default, SHEET NO. 7 and upon failure to do so, this Agreement shall terminate from and after the expiration of such thirty (30) day period. Such termination shall be an additional remedy and shall not prejudice the right of the party not in default to collect any amounts due it hereunder for any damage or loss suffered by it and shall not waive any other remedy to which the party not in default may be entitled for breach of this Agreement. 12. Applicable Law THE PARTIES HERETO HEREBY AGREE THAT THIS AGREEMENT SHALL BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS, NOTWITHSTANDING ANY CONFLICT OF LAW PRINCIPLES THAT MIGHT REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.