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1989-1922795L ORDINANCE NO AN ORDINANCE AWARDING A CONTRACT FOR THE TRANSPORTATION OF GAS TO LONE STAR GAS COMPANY, 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 services as shown in the "Bid Proposals" submitted therefor, 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 accepteU and approved as being the lowest responsible proposal for the items set forth in the proposal 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,--t-Fe City Council hereby authorizes the expenditure of funds therefor in the amount and in accordance with the written contract made pursuant thereto SECTION IV That this ordinance shall become effective imme ate y upon its passage and approval PASSED AND APPROVED this the /f7 day of Ok wk&l. , 1989 RAY P , )RAYUK ATTEST APPROVED AS TO LEGAL FORM DEBRA A DRAYOVITCH, CITY ATTORNEY BY LS T MC # 716 GAS TRANSPORTATION AGREEMENT THIS AGREEMENT made and entered into the lst day of January 1990 to be effective with the date of initial deliveries hereunder 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 W T T N E S S F T H WHEREAS, Shipper owns or controls certain quantities of natural gas and desires that Transporter (a) receive gas from Shipper (or its designee) at the Point(s) of Receipt hereinafter set forth and (b) deliver equivalent quantities of gas to the Point 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 NOW, THEREFORE for and in consideration of the mutual covenants and conditions herein contained, Transporter and Shipper hereby agree as follows ARTICLE I QUANTITY 1 1 Shipper represents that from time to time it may desire for Transporter to receive and deliver gas at the points hereinafter set forth in quantities as agreed to by the parties It is agreed that the volume of gas to be transported under this Agreement will not exceed a daily volume of twenty five thousand (25 000) Mcf unless mutually agreed to by the parties hereto Transporter's obligation to deliver gas to Shipper under any and all agreements between Transporter and Shipper including but not limited to this Agreement, shall not exceed a daily volume of thirty thousand (30 000) Mcf It is further 1 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 transportation volumes will be done on a best efforts basis 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 1 2 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 (998) of the quantity of gas received by Transporter from Shipper (or its designee) Transporter shall retain the one percent (18) 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') An imbalance shall exist hereunder where there is a numerical difference between the quantity of gas delivered by Transporter to Shipper exclusive of (i) the total of the volumes of gas delivered under the Gas Sales Contract between Transporter and Shipper dated January 1 1990 (hereinafter referred to as the Gas Sales Contract') (ii) the total of any volumes of gas delivered by Transporter to Shipper at the Point of Delivery 2 specified herein, under transportation agreements between Transporter and other third parties, and (iii) the Retention Volume, and the quantity of gas received by Transporter from Shipper (or its designee) during any month and any such imbalance shall be corrected insofar as practicable during the month following the month in which it occurs, provided, however should Shipper fail by the end of any month of the term hereof to make up a prior month's imbalance due Transporter, the cumulative imbalance, as hereinafter defined owed Transporter by Shipper shall be deemed to be sold to Shipper by Transporter in accordance with the terms and conditions of the Gas Sales Contract during the most recent Billing Month, and thereafter such cumulative imbalance shall be accounted for and construed for all purposes as gas sold under the Gas Sales Contract For the purposes of this paragraph the term cumulative imbalance" shall mean the sum of (i) any imbalance due Transporter and carried forward from an immediately preceding month to the next succeeding month plus (ii) any imbalance due Transporter based on the delivery and receipt of gas hereunder during such succeeding month 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 volumes of gas Shipper nominates for transportation at each active Receipt and Delivery Point under this Agreement Each such transportation nomination shall contain Shipper's nominated maximum quantities for each applicable Receipt and Delivery Point 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 3 designee may revise nominated quantities on any business day upon verbal notice of any such reduction of nominated quantities Such verbal notice must be received by Transporter prior to 12 00 noon Dallas time of any business day to be effective the next succeeding business day If Shipper and/or its designee does not furnish transportation nominations as required herein for any month during the term hereof Transporter may interrupt transportation service hereunder for such month 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 if Shipper and/or its designee does not nominate any transportation volumes as foresaid for twelve (12) consecutive months during the term hereof Transporter, upon thirty (30) days' prior written notice to Shipper may terminate this Agreement and all rights and obligations hereunder provided however the obligation to make payment for monies due hereunder shall not be extinguished Shipper shall be entitled to assign any or all such nomination obligation(s) to a third party ("Shipper's designee") upon thirty (30) days prior written notice to Transporter ARTICLE II LOCATIONS OF POINTS OF RECEIPT AND DELIVERY 2 1 Receipt Point Gas delivered by Shipper (or its designee) to Transporter hereunder shall be delivered at points which are sometimes herein referred to as the Receipt Point(s)' or Point(s) of Receipt' and which are specifically set forth and identified in Exhibit "A" entitled "Transporter Receipt Point(s)" which is attached hereto and is hereby incorporated in this Agreement and made a part hereof for all purposes It is agreed that additional points to be established hereunder pursuant to paragraph 2 3 will be subject to Transporter's approval which shall not be unreasonably withheld 4 2 2 Delivery Point 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 of Delivery ) or other points as provided in the Transfer of Gas Agreement between Transporter and Shipper dated January 1 1990 2 3 Additional Points It is understood by both parties that Shipper and Transporter may mutually agree in writing to establish other Receipt Points hereunder provided however, Transporter shall not be obligated to establish new Receipt Points 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 an additional Receipt Point In the event Shipper desires that Transporter receive gas at a proposed point(s) Shipper shall notify Transporter in writing of such proposed point(s) including in such notice estimated maximum daily delivery volume(s) at such point(s) and the location(s) thereof and Shipper shall therein warrant that the quality of gas to be received at such proposed point(s) meets the quality specifications as defined herein and that such gas and such proposed point(s) meet the requirements of Article VI paragraph 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(s) 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 5 Transporter is able to accept gas from Shipper's proposed new Receipt Point(s) If such Receipt Point(s) is not an established Receipt Point(s) on Transporter's pipeline system Transporter will notify Shipper within 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(s) 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 prior written agreement between Shipper and 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 Lo 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 provided however Transporter shall not be obligated to delivery gas at a pressure in excess of seventy five (75) psig into Shipper's Spencer Steam Electric Station in Denton, Texas 6 ARTICLE IV RATES 4 1 Shipper shall pay Transporter for services rendered hereunder at the rates set forth below commencing with initial deliveries of gas hereunder (a) If during any Billing Month Shipper delivers hereunder at the Receipt Points an average volume of gas less than five thousand (5 000) Mef per day during such Billing Month the fee charged hereunder shall be twenty one cents (21C) for each MMBtu delivered hereunder at the Delivery Point after allowing one percent (1%) reduction in such delivered volumes for gas lost and unaccounted for gas used as fuel and gas used in day to day pipeline operations pursuant to Article I, paragraph 1 2 (b) If during any Billing Month Shipper delivers hereunder at the Receipt Points, an average volume of gas greater than or equal to five thousand (5 000) Mcf per day the fee charged hereunder shall be sixteen cents (16C) for each MMBtu delivered hereunder at the Delivery Point after allowing one percent (18) reduction in such delivered volumes for gas lost and unaccounted for, gas used as fuel and gas used in day to day pipeline operations pursuant to Article I paragraph 1 2 (c) It is agreed by the parties hereto that the fees charged in paragraphs (a) and (b) above shall escalate one cent (1(,) per MMBtu beginning on January 1, 1991, and annually thereafter during the term of this Agreement (d) It is understood and agreed by the parties that the rates provided for herein have been reached through arms length negotiations and that neither party had an unfair advantage during the negotiations thereof However should the appropriate regulatory agency find such rates to be unreasonable for any reason or in any way in violation of any provision of 7 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 (a) Shipper 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 is effective as of January 1 1990 and shall remain in full force and effect for a primary term extending through December 31 1993 subject to the terms and provisions hereof and month to month thereafter until cancelled by either party giving the other party thirty (30) days' prior written notice Notwithstanding anything contained herein to the contrary in the event of termination or cancellation of the Gas Sales Contract Transporter shall have the right to terminate this Agreement by giving Shipper one hundred (100) days notice of such termination Notwithstanding the above, if an imbalance in deliveries exists on the date of termination hereof between the quantities theretofore delivered at the Receipt Point(s) and Delivery Point, the term of this Agreement shall be extended for a period sufficient to allow the party whose deliveries are in arrears to eliminate promptly any deficit Provided further, any termination cancellation or expiration of this 8 Agreement shall never operate to extinguish the obligation to make payment for monies due hereunder 5 2 In the event that on or before January 1 1991 deliveries of gas for transportation hereunder have not commenced then in such event and thereafter, until such deliveries are tendered and accepted, Transporter may cancel this Agreement by giving Shipper thirty (30) days' prior written notice of such cancellation ARTICLE VI LAWS AND REGULATIONS 6 1 This Agreement shall be subject to all applicable State and Federal laws and orders, directives, rules and regulations of any governmental body official or agency having jurisdiction 6 2 Each party warrants to the other that its or its agent's facilities utilized for the delivery and acceptance of gas hereunder are wholly intrastate facilities and are not subject to the Natural Gas Act of 1938, as heretofore amended As a material representation, without which both parties would not have been willing to execute this Agreement each party warrants to the other party that it will take no action nor commit any act of omission which will subject its facilities this transaction or the other party's facilities to jurisdiction of the Federal Energy Regulatory Commission or its successor governmental agency under the terms of the Natural Gas Act of 1938, as amended The gas delivered and accepted hereunder shall not have been nor shall be sold transported, or otherwise utilized in interstate commerce in a manner which will subject either party to the terms of the Natural Gas Act of 1938 as amended In addition to and without excluding any remedy the aggrieved party may have at law or in equity, the party who breaches the above warranties and representations shall be liable to the aggrieved party for all damages injury 9 and reasonable expense the aggrieved party may sustain by reason of any breach hereof Further should either party 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 the jurisdictional consequences of the Natural Gas Act of 1938, as amended, or successor governmental authority 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 paragraph ARTICLE VII GENERAL TERMS AND CONDITIONS 7 1 The GENERAL TERMS AND CONDITIONS attached hereto as APPENDIX "A are 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 either party without the prior written consent of the other party which shall not be unreasonably withheld Any purported transfer or assignment without such consent shall be null and void and shall not operate to release the transferror or assignor 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 City of Denton Municipal Building Denton Texas 76701 Attn Executive Director of Utilities 10 (Notices) (Payments) Lone Star Gas Company Lone Star Gas Company 301 S Harwood Street P 0 Box 910255 Dallas Texas 75201 Dallas, Texas 75391 0255 ATTN Transportation Department or at such address as each party may by like notice give to the other Such mailed notices shall be deemed to have been given when deposited in the United States mail (first class registered or certified) postage prepaid or in the case of hand delivery, when accepted by a representative of either party from a representative of the other party 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 respective parties ACCEPTED AND AGREED to this 19 -kti day of 0~C(- s'. 1989 LONE STAR GAS COMPANY a Division of ENSERCH Corporation By l ad -4 J A 1--L ^q) Jr ll~r W WeTnt Titl 1 Attest By G'bO MW CITY OF DENTON Attest By 11 STATE OF TEXAS COUNTY OF DENTON BEFORE ME the undersigned authority a Notary Public in and for said County and State on this day personally appeared Lloyd V Harrell, City Manager of the City of Denton a corporation known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me that he executed the same for the purposes and 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 27th day of December , A D 1989 JEETTE SCOTT *AN NOTARY PUSUG STALE Of TEXAS ~ Wm mom E~pm ANr 31 ISSS STATE OF TEXAS COUNTY OF DALLAS A~7- No r Public in and for nton County Texas My commission expires the 31st day of March 19 93 BEFORE ME the undersigned authority a Notary Public in and for the State of Texas on this day personally appeared W. F. Weidler. Jr.. Vice President 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 A D 19 Notary Public in and for the State of Texas 12 day of STATE OF COUNTY OF BEFORE ME the undersigned authority a Notary Public in and for said County and State on this day personally appeared of a corporation known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me that he executed the same for the purposes and 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 STATE OF TEXAS COUNTY OF DALLAS Notary Public in and for County, My commission expires the day of , 19 BEFORE ME, the undersigned authority a Notary Public in and for the State of Texas on this day personally appeared W. F. Weidler. Jr.. Vice President 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 L-A GIVEN UNDER MY HAND AND SEAL OF OFFICE this the .~v day of A D 190 NANCY TAYLOR MY COMMIRRION RRPIRRR May 27, 1994 G~ Notary Publ in an or the State Texas 12 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 Dallas time, on one calendar day and ending at 7 00 a m Dallas time on the following calendar day (c) "Month" or "Billing Month" shall mean the period beginning at 7 00 a m Dallas time on the first day of a calendar month and ending at 7 00 a m , Dallas 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 , Dallas time on January 1 of each calendar year of the term hereof and ending at 7 00 a m, Dallas 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, wherelappropriate 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 SHEET NO 2 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) "Psis' 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 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 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 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 SHEET NO 3 of one and one half percent (lh%) per month 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 Failure of Transporter to receive total reimbursement for any amounts not in dispute 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(s), 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 (at Shipper's expense) and maintenance necessary for performance hereunder until Transporter disconnects and removes the metering facilities within a reasonable time 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 so to claim the metering facilities within ninety (90) days of Transporter's notice to Shipper of the 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 SHEET NO 4 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 three (3) 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 SHEET NO 5 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 (18) 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 (h) of the period between the test in which the inaccuracy was discovered and the previous test for accuracy provided however such adjustment or correction period shall not exceed 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) SHEET NO 6 (b) The meters for measurement of volumes at the Receipt Point(s) and Delivery Point 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 Quality (a) Each party shall deliver to the other party hereto natural gas which SHEET NO 7 is of merchantable quality and is commercially free from water other objectionable fluids, sand and other objectionable solids or gas components and which contains (i) no oxygen (ii) not more than five (5) grains of total sulphur consisting of not more than one quarter (4) 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 (38) by volume of carbon dioxide and (iv) not more than seven pounds (7#) of water vapor per one million (1,000 000) cubic feet of gas The gas shall be at temperatures not in excess of one hundred twenty (120) degrees Fahrenheit nor less than forty (40) degrees Fahrenheit and shall have a heat content of not less than nine hundred fifty (950) or more than eleven hundred fifty (1 150) British Thermal Units per cubic foot under the conditions of measurement contained herein 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 the Point(s) of Receipt hereunder Transporters 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 ±78 of the interchange factor so calculated by Transporter for the gas in its system at the Receipt Point(s) hereunder (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 SHEET NO 8 5 Taxes (a) Shipper agrees to pay Transporter by way of reimbursement all Taxes levied and imposed upon Transporter with respect to the transport of gas and associated facilities related to the performance of this Agreement If any such Taxes levied and imposed upon Transporter by any governmental authority are calculated based upon the value or sales price of the gas transported hereunder Shipper shall disclose to Transporter the value or sales 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 value or sales 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 occur as a result of Shipper's failure or refusal to disclose the value or sales price of gas transported hereunder (b) The term "Taxes" as used herein, shall mean all taxes 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 tax 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, where such taxes are based upon the volume heat content, value or sales price of the gas or transportation fee payable SHEET NO 9 hereunder 6 Billing. Accounting and Reports (a) On approximately the 15th day of each month Transporter shall render to Shipper a statement for the preceding month showing the Mcf and MMBtu delivered at the Receipt Point(s) and Delivery Point 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 within twelve (12) days from the date Transporter's statement is deposited postage prepaid in the United States mail or in the case of hand delivery within ten (10) days from the date Transporter's statement is delivered to a representative of Shipper from a representative of Transporter, 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 (lh$) per month 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 SHEET NO 10 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 or if either party should discover 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 two (2) years from the rendition of the invoice relating thereto 7 Ike spons ib i 1 i ty 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 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 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, except injuries and damages which shall be occasioned solely and proximately by the negligence of the receiving party 8 Warranty Each party hereto warrants to the other that at the time of delivery of SHEET NO 11 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 each party agrees, with respect to the gas delivered by it, to indemnify the other 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 Title to and ownership of the gas delivered hereunder shall pass to and vest in the party receiving the gas 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 telegraph, 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, lock outs or other industrial disturbances acts of the public enemy, wars, blockades insurrections civil disturbances and riots and epidemics landslides, lighting 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 SHEET NO 12 (shutdowns) of power plant equipment or lines of pipe for inspection maintenance or repair, freezing of wells or lines of pipe, the partial or entire nonperformance of any third party transportation pipeline which is necessary to receive and deliver gas under this Agreement, 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 ~Zaiver 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 either party 11 Remedy 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 SHEET NO 13 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, 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 EXHIBIT "A" TO GAS TRANSPORTATION AGREEMENT BETWEEN LONE STAR GAS COMPANY AND CITY OF DENTON Transporter Receipt Point(s) Description 1 Lone Star's interconnection with Valero at Ennis (Ellis County, Texas) 2 Lone Star's interconnection with Mobil at Waha (Pecos County, Texas) 3 Lone Star's interconnection with Exxon's Katy Plant (Waller County Texas) 4 Lone Star's interconnection with Palo Duro Pipeline (Nolan County Texas) 5 Lone Star's interconnection with Delhi (Denton County, Texas) Maximum Daily Volume 25,000 Mcf 25 000 Mcf 25,000 Mcf 25,000 Mcf 25,000 Mcf _t h I I h t 1 1 h 1 1 I I 1 I 1 3 I i r t 1 I I I t I d I h I , I I , I I 1 1 3 i , ; I 1 i k t i it I ! i I i I I 1 I k { Z I