1989-1912795L
ORDINANCE NO PAZ
AN ORDINANCE AWARDING A CONTRACT FOR THE PURCHASE OF GAS FROM
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 purchase of gas in accordance
with the procedures of state law and City ordinances, and
WHEREAS, the City Manager
the proposal of Lone Star Gas
proposal services as shown
therefor, and
has reviewed and recommended that
Company is the lowest responsible
in the "Bid Proposals" submitted
WHEREAS, the City Council
the appropriation of funds to
herein, NOW, THEREFORE,
has provided in the City Budget for
be used for the purchase of gas
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS
SECTION I That the proposal of Lone Star Gas Company is
hereby accepted 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 purchase 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, Fi-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 v upon its passage and approval
PASSED AND APPROVED this
1989
A EST
, CITY SECRETARY
PROVED AS TO LEGAL FORM
DEBRA A DRAYOVITCH CITY ATTORNEY
BY 7,4
L
fij/~,dt..~ ,
the i i • day of
Y P
RECEIVED ,,u,4 4 1990
GAS SALES CONTRACT
BETWEEN
LONE STAR GAS COMPANY
AND
CITY OF DENTON TEXAS
DATED JANUARY 1, 1990
TABLE OF CONTENTS
ARTICLE
PAGE
I
Definitions
1
II
Subject Matter
3
III
Quantity
3
IV
Demand Charge
8
V
Quality
10
VI
Delivery and Connection Facilities
12
VII
Measurement
13
VIII
Price
16
IX
Adjustment for Heating Value
19
X
Reimbursement for Taxes and Rentals
19
XI
Payment
22
XII
Term
24
XIII
Force Majeure
24
XIV
Curtailment of Deliveries
26
XV
Regulatory Bodies
28
XVI
Termination Privilege
28
XVII
Intrastate Provisions
30
XVIII
Warranty
31
XIX
Right of Way
31
XX
Indemnity
31
XXI
Waiver of Breach
32
XXII
Assignment
32
XXIII
Miscellaneous
32
GAS SALES CONTRACT
THIS CONTRACT, made, entered into and effective on this 1st day of
January, 1990, by and between LONE STAR GAS COMPANY a division of ENSERCH
Corporation, a Texas Corporation, hereinafter referred to as "Seller', and the
CITY OF DENTON, TEXAS, a municipal corporation hereinafter referred to as
"Buyer"
W I T N E S S E T H.
WHEREAS Buyer owns and operates an electric generating station known
and designated as the Spencer Generating Station, located in Denton County
Texas, is hereinafter referred to as "Buyer's Plant" (or "Plant"), and
WHEREAS Buyer desires to be assured of an adequate supply of natural
gas for the operation of said Plant, and Seller desires to sell gas to Buyer
under the terms and conditions of this Contract,
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, together with other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, Seller and Buyer do
hereby contract and agree with each other as follows
ARTICLE I
DEFINITIONS
For the purposes of this Contract, unless the context of the instrument
requires otherwise, the following definitions shall be applicable
1 "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
1
2 '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
3 "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
4 "Contract Year" or "Calendar 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
5 "Mcf" shall mean one thousand (1,000) cubic feet of natural gas
6 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
7 "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 degrees (60°)
Fahrenheit, saturated with water vapor and under a pressure equivalent to
that of thirty (30) inches of mercury at thirty two degrees (320) Fahrenheit
converted to base conditions of sixty degrees (60°) 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
8 "Psia" shall mean pounds per square inch absolute
9
"Prig" shall mean pounds per
square inch
gauge
10
'Transportation
Agreement"
shall mean
that certain
Gas Transportation
Agreement between Buyer and Seller dated January 1 1990
2
11 "Transfer Agreement" shall mean that certain Transfer of Gas Agreement
between Buyer and Seller dated January 1 1990
ARTICLE II
SUBJECT MATTER
Subject to the terms and provisions hereinafter set out and to the extent
of and in accordance with the terms, conditions and limitations hereinafter
stipulated Seller agrees to sell and deliver to Buyer and Buyer agrees to
purchase and receive from Seller, at the point of delivery herein provided for,
natural gas for that portion of the natural gas fuel requirements of Buyer's
Plant during the term specified herein, including but not limited to Article III
hereof, hereinafter called "Buyer's Fuel Requirements"
ARTICLE III
QUANTITY
1 The quantity of gas computed on an MMBtu basis, to be purchased and sold
hereunder shall be a volume of gas equal to that amount of Buyer's Fuel
Requirements specified by this Contract for its Plant up to but not in
excess of Buyer's Maximum Hourly Volume, Maximum Daily Volume and Maximum
Annual Volume for each Contract Year as such requirements are set forth
below
Maximum Hourly Volume
Maximum Daily Volume
Maximum Annual Volume
For Each Contract Year
1,500 MMBtu
30 000 MMBtu
Contract Year Beginning
January 1. 1990
1 250 000 MMBtu
3
2 (a) On or before September 1 of each Contract Year during the term of this
Contract, Buyer shall submit written notice to Seller specifying the
Maximum Annual Volume obligation for the immediately following Contract
Year The Maximum Annual Volume designated for 1991 and each
succeeding Contract Year shall not be greater than one hundred twenty
five percent (1258) nor less than seventy five percent of the Maximum
Annual Volume designated for the immediately preceding Contract Year
however Buyer may, once and only once during the term hereof increase
the Maximum Annual Volume for any one Contract Year to equal more than
one hundred twenty five percent (1258) but not more than one hundred
fifty percent (1508) of the immediately preceding Contract Year's
Maximum Annual Volume In no event will Buyer ever establish a Maximum
Annual Volume of less than one million two hundred and fifty thousand
(1,250 000) MMBtu for any Contract Year
(b) If during any Contract Year, Buyer fails to submit a Maximum Annual
Volume as provided for herein, Buyer's Maximum Annual Volume for the
next succeeding Contract Year shall be equal to the Maximum Annual
Volume in effect for the preceding Contract Year
(c) Notwithstanding anything to the contrary contained herein nothing in
this Article or any other provision of this Contract shall prevent
Seller from selling and delivering to Buyer hereunder quantities of
gas in excess of the volumes Seller is obligated to sell and deliver
hereunder, which Seller has available and desires to sell and which
Buyer desires to purchase
3 Buyer agrees that all of the gas purchased hereunder will be used or
consumed in and for the operations of Buyer's Plant and that no part of
4
such gas will be resold or used for any other purposes except as otherwise
expressly provided in the Transfer Agreement
4(a) Should Buyer, during any Contract Year beginning on or after January
1, 1991, receive a bona fide written offer to sell and deliver gas
directly to Buyer's facilities (which serve Buyer's Plant) through a
pipeline other than Seller's pipeline and at a price (including taxes
transportation and all other costs necessary for delivery of gas to
Buyer's facilities which serve Buyer's Plant) lower than Seller's then
current price (including taxes transportation and all other costs
necessary for delivery of gas to Buyer's facilities which serve Buyer's
Plant) per MMBtu Buyer may purchase and receive natural gas from such
other person firm, or corporation in accordance with such offer (such
purchases herein referred to as "Supplemental Volumes") provided
however, the total of such Supplemental Volumes during such Contract
Year do not exceed the following volume limitations (herein referred
to as "Maximum Supplemental Volume")
(i) For the Contract Year beginning January 1 1991 and each Contract
Year thereafter during the term hereof, Buyer may receive
Supplemental Volumes not to exceed fifty percent (508) of the
Maximum Annual Volume in effect for such Contract Year
(ii) Notwithstanding anything to the contrary contained herein, if
Buyer notifies Seller as provided in paragraph 2(a) of this
Article that it desires to increase its Maximum Annual Volume for
any one Contract Year herein to equal more than one hundred
twenty five percent (1258) but not more than one hundred fifty
percent (1508) of the immediately preceding Contract Year's
5
Maximum Annual Volume then for such Contract Year and each
Contract Year thereafter the Maximum Supplemental Volume
limitation specified in this paragraph 4(a) shall be reduced by
twenty percent (208)
(b) Notwithstanding the provisions of paragraph 4(a) above prior to
entering into any agreement for the purchase of such Supplemental
Volumes, or prior to entering into any amendment to an agreement under
which Buyer may purchase Supplemental Volumes Buyer shall notify
Seller in writing of the terms and conditions of the bona fide offer
for such proposed Supplemental Volumes (including a complete facsimile
of the offer which is presented to the Denton City Council for such
proposed Supplemental Volumes) If Seller (or its assignee) (i)
within five (5) days of receiving Buyer's said notice if the delivery
period of such notice is one (1) month or less, (ii) or within thirty
(30) days of receiving Buyer's said notice if the delivery period of
such notice is greater than one (1) month offers in writing to sell
and deliver gas to Buyer all or any portion of the quantity offered
under such bona fide offer, under similar terms and conditions as
stated in Buyer's said notice to Seller, at the same or lower price
(including taxes, transportation and all other costs necessary for
delivery of gas to Buyer's facilities which serve Buyer's Plant) per
MMBtu, then Buyer shall purchase from Seller (or its assignee) a
quantity of gas equal to the lesser of (i) the quantity offered in
writing by Seller (or its assignee), (ii) a quantity equal to no less
than 508 of the quantity offered for purchase under the aforesaid
bona fide offer, or (iii) a quantity equal to no less than fifty
6
percent (509) of the applicable Maximum Supplemental Volume limitation
set forth in the preceding paragraph 4(a) above, under Seller's (or
its assignee's) aforesaid offered terms and conditions rather than
under the aforesaid bona fide offer If Seller (or its assignee)
fails to meet or better the aforesaid bona fide offer as provided
above for all or a portion of the quantities offered under the bona
fide offer or if Buyer and Seller (or its assignee) cannot agree to
some other mutually agreeable offer within the said five (5) or thirty
(30) day period (whichever is applicable) nothing shall limit Buyer's
purchases of Supplemental Volumes under such bona fide offer provided
that during each Contract Year herein the sum of (i) all Supplemental
Volumes purchased by Buyer under any and all such bona fide offers
and (ii) all purchases of gas by Buyer from Seller (or its assignee)
under this paragraph 4(b), never exceeds the Maximum Supplemental
Volume for such Contract Year herein
(c) If at any time during the term of the bona fide offer for Supplemental
Volumes, the terms and conditions of such offer are changed in any
manner from the written terms and conditions which Buyer provided
Seller then Buyer shall notify Seller immediately of such change
Once Buyer has made such notification to Seller then Seller (or its
assignee) shall have the right to offer to sell and deliver gas to
Buyer for all or any portion of the quantity offered under the new
terms and conditions of such bona fide offer pursuant to the same
procedures as provided in the preceding paragraph 4(b)
(d) In the event Buyer enters into agreement(s) with other party(s) for
the purchase of Supplemental Volumes as set forth in this Article,
7
Buyer shall give Seller, at Seller's request, prior verbal estimates
of such Supplemental Volumes which Buyer expects to purchase and
consume each month and shall notify Seller in writing of the actual
volumes of Supplemental Volumes purchased and consumed during such
month as soon as practicable after Buyer has knowledge of such
volumes
(e) Buyer's Supplemental Volumes shall not reduce nor be credited toward
Buyer's Demand Charge as set forth in Article IV of this Contract
unless hereinafter specified
ARTICLE IV
DEMAND CHARGE
1 Without limiting any obligations or rights of Buyer and Seller hereunder
Buyer agrees to pay an annual fee to Seller for the availability of gas fuel
service under this Contract (herein referred to as 'Demand Charge") For
each Contract Year of the term herein the Demand Charge shall be equal to
the Maximum Annual Volume in effect for such Contract Year multiplied by
the Demand Charge Rate of thirty seven and one half cents (37 5C)
2 Seller shall render to Buyer after the end of each Contract Year an invoice
for the uncredited Demand Charge applicable for such Contract Year and Buyer
shall make payment to Seller for such amount no later than twenty (20) days
from the date Seller's statement is deposited postage prepaid in the United
States mail
3 The Demand Charge due and payable by Buyer to Seller at the end of each
Contract Year shall be credited as follows For any Contract Year, Buyer
will receive credits toward such Contract Year's Demand Charge, as defined
herein by deducting the following amounts from the applicable Demand Charge
for such Contract Year
8
(a) For Buyer's purchases from Seller during any Contract Year of the term
hereof, excluding any volumes Seller (or its assignee) delivers to
Buyer as allowed under paragraph 4(b) of Article III Buyer will
receive a credit toward such Contract Year's Demand Charge equal to
the product resulting from the multiplication of the total of all
MMBtus purchased from Seller hereunder during such Contract Year by
the Base Price applicable to each such MMBtu purchased as such Base
Price is defined in Article VIII
(b) For Buyer's purchases from Seller (or Seller's assignee) during any
Contract Year as allowed under the terms of Article III, paragraph
4(b), Buyer shall receive a credit toward the Demand Charge in effect
for such Contract Year during which such gas is purchased and such
credit shall be equal to the product resulting from the multiplication
of twenty two cents (22c) by the total of such purchases (in MMBtu)
during such Contract Year Notwithstanding anything to the contrary
contained herein, any gas delivered to Buyer through pipelines other
than Seller's pipeline shall never be credited in any way toward
Buyer's Demand Charge
(c) For gas volumes which Buyer pays a transportation fee for under its
Transportation Agreement with Seller during any Contract Year of the
term hereof Buyer will receive a credit toward such Contract Year's
Demand Charge, and such credit shall be equal to the total of all
applicable "Transportation Fee(s)" paid to Seller under the
Transportation Agreement for transportation of such gas volumes during
such year provided, however, for purposes of crediting hereunder
such Transportation Fee will not include any amounts paid by Buyer for
9
gas lost and unaccounted for, gas used as fuel and gas used in day
to day pipeline operations as described in the Transportation
Agreement
4 Notwithstanding anything to the contrary contained herein, the combined
total amount to be credited toward Buyer's Demand Charge during any Contract
Year of the term hereof under paragraphs 3(b) and 3(c) of this Article IV
shall never exceed eighty percent (80%) of the Demand Charge applicable to
such Contract Year
5 Buyer shall never be entitled to recoup as gas any of the payments made to
Seller under the terms of this Article IV
ARTICLE V
QUALITY
1 Seller shall deliver to Buyer natural gas which is of merchantable quality
and commercially free from water sand and other objectionable fluids
solids or gas components, and shall meet the quality requirements as
follows
(a) shall have a heating value of not less than nine hundred fifty (950)
Btus per cubic foot nor greater than one thousand one hundred and
fifty (1,150) Btus per cubic foot,
(b) shall contain no oxygen
(c) shall have a temperature of not more than one hundred twenty degrees
(1200) Fahrenheit nor less than forty degrees (40°) Fahrenheit,
(d) shall not contain more than one fourth (1/4) grain of hydrogen sulfide
per one hundred (100) cubic feet
(e) shall not contain more than five (5) grains of total sulphur including
not more than one (1) grain of mercaptan sulphur per one hundred (100)
10
(f)
(g)
2
cubic feet,
shall not contain more than three percent (38) by volume of carbon
dioxide,
shall in no event have a water vapor content in excess of seven (7)
pounds per million (1,000,000) cubic feet of gas measured at a
pressure base of fourteen and sixty five one hundredths (14 65) pounds
per square inch absolute and at a temperature of sixty degrees (60°)
Fahrenheit
If at any time the gas fails to meet the quality specifications enumerated
herein, Buyer shall notify Seller and Seller shall make a diligent effort
to correct such failure If Seller is unable to deliver gas according to
such specifications, Buyer may refuse to accept delivery of gas for so long
as such conditions exist If such a refusal is the sole cause and makes
it necessary for Buyer to completely and totally shut down its Plant and
Buyer gives Seller written notice of the occurrence of such plant shutdown
then if Seller fails to correct the quality problem within forty eight (48)
hours of Seller's actual receipt of the aforesaid written notice and Buyer's
Plant has remained completely and totally shutdown during such forty eight
(48) hour period Buyer shall receive credit against the Demand Charge
applicable to such Contract Year of the term hereof Said credit shall be
determined as follows the Demand Charge applicable to such Contract Year
shall be divided by the number of days in such Contract Year and the
quotient shall be multiplied times the number of days during such Contract
Year that Buyer's Plant was so continually shutdown following the forty
eight (48) hour period(s) described above
11
ARTICLE VI
DELIVERY AND CONNECTION FACILITIES
1 The point of delivery of gas to be sold and delivered by Seller to Buyer
hereunder shall be at the outlet side of Seller's regulating and metering
stations on the sites of Buyer's Plant or which may hereafter be installed
by Seller at locations which are mutually acceptable to Buyer and Seller
Seller agrees that it will operate and maintain such regulating and metering
stations, as well as the necessary tap or lateral lines from its main
pipeline system to said regulating and metering stations and Buyer agrees
that it will furnish to Seller, without charge, suitable space at the point
of delivery for Seller's tap and lateral pipelines, regulating and metering
stations and appurtenant equipment, and that Buyer will maintain the
necessary service lines to connect with Seller's lines at the outlet side
of Seller's regulating and metering stations Buyer shall authorize no
person other than an agent of Seller or a person otherwise lawfully
authorized, to tamper with, inspect, alter or remove Seller s facilities
Seller shall have free ingress and egress to and from Buyer's premises for
the construction maintenance repair and replacement of Seller's property
located thereon, or for any purpose connected with supplying gas hereunder
2 Seller shall deliver gas hereunder to Buyer at the point of delivery at
such reasonably steady pressures as may be designated by Buyer, or absent
such designation, at pressures which are sufficient to enter Buyer's Plant
against the prevailing pressures maintained therein by Buyer, provided
however Seller shall not be required to deliver gas to Buyer at a pressure
in excess of 75 psig
12
3 The title to and ownership of the gas delivered hereunder shall pass to
and absolutely vest in Buyer at the point of delivery herein provided Each
of the parties hereto agrees to use reasonable efforts to promptly notify
the other party of any significant changes in operating conditions which
will affect the delivery and receipt of gas hereunder, and the reasons for
such significant changes Notwithstanding anything contained herein to the
contrary, in no event shall Seller be required to install new facilities
or to enlarge or modify its existing facilities in order to make deliveries
of gas to Buyer except to the extent that such facilities are necessary
to deliver the Maximum Hourly Volume of gas hereunder
4 Subject to the terms and provisions of this Contract Seller and Buyer
recognize and agree the point of delivery described in this Contract may
be a point at which Seller delivers gas for sale or transportation under
other agreements with Buyer or under other agreements with parties other
than Buyer It is understood and agreed by the parties that the Maximum
Hourly Volume and the Maximum Daily Volume set forth in Article III
paragraph 1 is the cumulative maximum volume of gas which Seller is
obligated to deliver at such point of delivery on any given Day under (i)
this Contract (ii) the Transportation Agreement herein described and (iii)
any other delivery of gas to Buyer by Seller on behalf of a third party
ARTICLE VII
MEASUREMENT
1 For the purpose of this Contract the volumetric 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 degrees (600) Fahrenheit Meter measurements
13
shall be computed by Seller into such units, adjusted for volume variations
due to pressure and temperature in accordance with the Ideal Gas Law, and
corrected for deviation using daily averages of recorded specific gravity
(determined to three (3) decimal places) and a value for atmospheric
pressure of fourteen and four tenths (14 4) pounds per square inch absolute
2 The period during which gas is flowing shall be used in determining daily
averages of metered pressure, specific gravity flowing temperature and
heating value
3 The gas delivered hereunder shall be measured by means of measuring devices
of standard type with flange connections (installed in accordance with
current industry standards) which shall be operated and maintained by Seller
at its sole expense and placed at the aforementioned point of delivery or
in as close proximity thereto as practicable Meters and other measurement
instruments and equipment, shall be tested and adjusted for accuracy monthly
by Seller at Seller's expense
4 Buyer shall have access to said metering equipment at all times, including
telemetry output signals as long as such access is at no cost to Seller
but the maintenance reading, calibration and adjustment thereof shall be
done only by the employees or agents of Seller Records from such metering
equipment shall remain the property of Seller and shall be kept on file by
Seller for a period of not less than three (3) years However, upon request
of Buyer, Seller shall make available to Buyer records from its metering
equipment, together with calculations therefrom for Buyer's inspection and
verification, subject to return by Buyer within ten (10) days after receipt
thereof
14
5 Buyer may, at its option and expense install and operate meters,
instruments and equipment to check Seller's meters, instruments and
equipment, but the measurement of gas for the purpose of this Contract
shall be by Seller's meters only, except as hereinafter specifically
provided The meters instruments and equipment installed by Buyer shall
be subject at all reasonable times to inspection or examination of Seller
but the maintenance reading calibration and adjustment thereof shall be
done only by Buyer
6 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
7 Meter measurements computed by Seller shall be deemed to be correct except
where the measuring device 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 Seller shall repair or replace the meter The quantity of gas
delivered while the meter was inaccurate or failed to register shall be
determined first by the reading of Buyer s check meter, if installed and
in good operating condition, or second, by correcting the error if the
percentage of error is ascertainable by calibration or mathematical
calculation If it is 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 adjustment or correction
shall be made only for one half (1/2) of the period between the test in
15
which the inaccuracy was discovered and the previous test for accuracy
provided, however, such adjustment or correction period shall not exceed
ninety (90) days
8 The daily average heating value and specific gravity of the gas delivered
hereunder, shall be determined at Seller's expense by the use of recording
devices of standard type, which shall be installed and operated by Seller
Each device used to determine such average heating value and specific
gravity shall be tested for accuracy by Seller at regular monthly intervals
and should any test show it to be inoperative or recording in error as much
as one-half of one percent ( 05%), plus or minus, proper correction shall
be made for the period during which the recorder was inoperative or
recording in error and if this period cannot be ascertained correction
shall be made to an average of the values recorded during the most recent
fifteen (15) day period prior to the previous test under similar conditions
of flow, and such device shall immediately be calibrated to measure as
accurately as practicable The degree of saturation by water vapor of the
gas to be delivered hereunder shall be determined monthly by Seller using
standard instruments and methods, and the results thereof shall be properly
taken into account in determining the heating value of the gas delivered
9 Seller will make available to Buyer, upon request a compositional analysis
of gas delivered by Seller to Buyer at the point of delivery hereunder
ARTICLE VIII
PRICE
1 The price payable by Buyer for the gas to be delivered hereunder shall be
determined for each Billing Month by increasing the Base Price in effect
during such month, as set forth below in paragraph 2 of this Article VIII,
16
by an amount equal to the weighted average price per Mcf as defined in
paragraph 3 of this Article VIII for all gas purchased by Seller during
such Billing Month, provided however that the price payable by Buyer for
the gas to be delivered by Seller to Buyer hereunder is subject to
adjustment for variations in the Btu heat content of the gas in the manner
and to the extent set out in Article IX hereof
2 The Base Price per Mcf for gas to be delivered hereunder shall be as
follows
(a) For the Contract Year beginning January 1 1990 and ending December
31 1990, the Base Price per Mcf shall be (i) forty three cents (43C)
for gas delivered and received hereunder during the Billing Months of
January, February, March, November and December and (ii) thirty nine
cents (39(,) for the Billing Months of April through October
(b) For each Contract Year beginning on or after Janaury 1 1991 both of
the aforesaid Base Prices shall escalate one cent (1C) on January 1
of each such Contract Year
3 The weighted average price of gas purchased by Seller hereunder shall be
determined as follows
(a) The term "weighted average price" of gas purchased by Seller shall
mean the weighted average price per one thousand (1 000) cubic feet
of all gas purchased by Seller during the Billing Month computed to
the nearest one-hundredth of one cent 0001) and shall be
determined by dividing the total dollar amount paid or accrued on
Seller's books during such Billing Month for all gas purchased by
Seller by the total number of thousands of cubic feet of gas purchased
by Seller during such Billing Month adjusted to the same pressure
17
base as gas sold hereunder, and shall include, in addition to the cost
of gas itself, all Class A Taxes, as hereinafter defined in Article
X hereof, provided if any portion of the cost of gas (or if any Class
A Tax) which has been paid by Seller is refunded to Seller, or if
Seller is required by the terms of any gas purchase contract, or of
any agreed settlement of a disputed claim or by a determination or
judgement of a regulatory body or court having or asserting
,jurisdiction, to make retroactive payments with respect to gas which
has been or may be purchased by Seller, or if billing corrections are
made with respect to gas previously purchased by Seller, then such
payments refunds, or corrections shall be included in Seller's
determination of the weighted average price of gas for the month
during which any such payments, refunds or corrections occur
(b) It is recognized that some of the gas delivered by Seller to Buyer
hereunder during any month of the term hereof may be gas previously
purchased by Seller which is taken from one of its underground storage
reservoirs, but such gas shall not be considered in determining the
weighted average price of gas purchased by Seller during such month,
provided, however, that gas placed in storage by Seller for later
delivery to Buyer or to other customers of Seller shall be accounted
for as gas purchased during the month in which it was actually
purchased by Seller
4 If at any time following the execution of this Contract by the parties
hereto, Seller's standard method of determining its weighted average price
as described in paragraph 3(a) of Article VIII hereunder is changed from
an Mcf basis to an MMBtu basis under Seller's standard industrial contracts
18
as described in the Schedule of Industrial Rates N, State of Texas or any
replacement schedule, Seller will notify Buyer of such change and
incorporate that change into the method of determining Buyer's weighted
average price
ARTICLE IX
ADJUSTMENT FOR HEATING VALUE
If the weighted average heating value of the gas delivered by Seller to
Buyer during any month is less than one thousand (1 000) Btus per cubic foot
the price payable by Buyer per Mcf of gas computed as provided in Article VIII
hereof shall be decreased one tenth of one percent (0 1%) for each Btu below one
thousand (1,000) Btus per cubic foot, and if the weighted average heating value
of the gas so delivered during any month is more than one thousand (1,000) Btus
per cubic foot, the price payable by Buyer per Mcf of gas as provided in Article
VIII hereof shall be increased one tenth of one percent (0 1%) for each Btu above
one thousand (1,000) Btus per cubic foot for such gas so delivered during such
month
ARTICLE X
REIMBURSEMENT FOR TAXES AND RENTALS
1 The term "tax" or "taxes", as used in this Contract, shall mean any kind
or character of tax (other than ad valorem capital stock general property,
income or excess profits taxes), license fee, rental or charge of any
governmental authority including specifically, without limitation by
enumeration, any production, severance, gathering transportation
processing, compression, dedication, use, sales, delivery or gross receipts
tax, now or hereafter levied, assessed or made by any governmental authority
on the gas itself or on the act, right or privilege of production
19
severance gathering, transportation processing, compression, dedication,
use, sale, handling or delivery of gas which is measured by gross receipts
or by the volume, value or sales price to Seller or Buyer of the gas in
question, but shall not include any value attributable to the liquid
hydrocarbons in said gas, provided, however that the term "tax" or "taxes'
shall not be deemed to include any general franchise tax imposed on
corporations on account of their corporate existence or on their right to
do business within the State of Texas as a foreign corporation
2 The terms "Class A Taxes", "Class B Taxes" and "Class C Taxes" as used in
this Contract shall have the following meanings, to wit
(a) The term "Class A Taxes" shall be construed to mean all taxes, as
herein defined, which Seller pays for the account of or by way of
reimbursement to its gas suppliers with respect to all gas purchased
by Seller
(b) The term "Class B Taxes" shall be construed to mean all taxes as
herein defined, which are or may be levied upon and/or paid by
Seller with respect to the gas sold by Seller to Buyer hereunder
exclusive of any Class A Taxes or Class C Taxes
(c) The term "Class C Taxes" shall be construed to mean any license fee
rental or charge which is or may be levied or imposed upon by and/or
paid by Seller to any governmental authority for the use of its
public streets, alleys and thoroughfares in the conduct of Seller's
business, with respect to the gas sold by Seller to Buyer hereunder
and/or the gross receipts received by Seller from the sale of gas to
Buyer hereunder, or any sales or delivery tax which is or may be
levied or imposed upon, and/or paid by Seller with respect to the gas
20
sold by Seller to Buyer hereunder and/or the gross receipts received
by Seller from the sale of gas to Buyer hereunder, exclusive of any
Class A Taxes or Class B Taxes
3 Buyer agrees to reimburse Seller with respect to all Class B Taxes and
Class C Taxes, as herein defined, which are paid by Seller with respect to
that gas sold by Seller to Buyer hereunder including any amounts due for
Demand Charges billed hereunder
4 It is understood and agreed that the amount of reimbursement for all
existing, new increased, or additional Class B Taxes and/or Class C Taxes
shall be determined by applying the rate of any such tax measured by gross
receipts, units of volume, value or sales price, to Seller's gross receipts
hereunder or to the volume, value or sales price respectively of the gas
delivered hereunder, provided, that in the event such taxes cannot be
directly related to the gas delivered hereunder or the gross receipts
received by Seller as hereinabove provided, the amount of reimbursement
to Seller shall be in the same proportion to the volume of gas sold
hereunder as the total amount of such taxes is to the total volume of gas
sold by Seller to all its customers
5 It is understood and agreed that in the event any tax charge or rental
for which Seller has been reimbursed or paid by Buyer hereunder is
subsequently declared unlawful, Seller, upon recovery of the amount of such
unlawful tax, charge or rental, shall refund to Buyer the entire amount of
such reimbursement or payment made by Buyer to Seller which is recovered
by Seller, provided however that Seller shall not be required to make a
refund to Buyer with respect to any tax charge or rental so recovered after
this Contract has terminated unless Seller has recovered such tax, charge
21
or rental prior to such termination
6 Any amounts due from Buyer to Seller as reimbursement for taxes charges
or rentals in accordance with the provisions of this Article X shall be
paid by Buyer to Seller at the time and in the manner that invoices for gas
delivered hereunder are payable as provided in Article XI hereof
ARTICLE XI
PAYMENT
1 For the purpose of billing and accounting for gas delivered hereunder the
terms "Day, "Billing Month" and "Contract Year" shall be as defined in
Article I hereof
2 On approximately the tenth (10th) Day of each calendar month Seller shall
render to Buyer at its office in Denton Texas statements of the amount
of gas delivered by Seller to Buyer at the point of delivery during the
preceding Billing Month, and shall also render an invoice for the gas sold
hereunder and an allocation statement for all the gas so delivered In
computing such invoice for gas sold hereunder by Seller to Buyer during any
Billing Month the weighted average price of gas purchased by Seller during
such Billing Month as determined in accordance with paragraph 3 of Article
VIII, shall be used Buyer shall make payment to Seller at Seller's office
in Dallas, Texas for all gas delivered hereunder to Buyer during the
preceding Billing Month by no later than twelve (12) days from the date
Seller's statement is deposited postage prepaid in the United States mail
or in case of hand delivery, within ten (10) days from the date Seller's
statement is delivered to a representative of Buyer from a representative
of Seller
22
3 If Buyer should fail to pay any amount owing to Seller when the same is
due, interest thereon shall accrue at the rate of eighteen percent (18%)
per annum from the date when such amount is due until same is paid
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 Buyer timely pays all amounts not in
dispute If such failure to pay continues for sixty (60) days Seller may
in the absence of any bona fide dispute as to the amount or the time when
same was due, suspend deliveries of gas hereunder, and the exercise of such
right shall be in addition to any and all other remedies available to
Seller, provided, however Seller shall be entitled to suspend deliveries
of gas hereunder in the event Buyer fails to pay any and all amounts not
in dispute
4 Each party shall have the right at reasonable hours to examine the books
and records of the other party to the extent necessary to verify the
accuracy of any statement, payment calculation or determination made
pursuant to the provisions hereof If any such examination shall reveal
or if either party shall discover any error or inaccuracy in its own or
the other party's statements, payments calculations or determinations then
proper adjustments and corrections shall be made as promptly as practicable
thereafter, provided, however that no adjustment or correction shall be
made with respect to any error or inaccuracy which occurred more than two
(2) years prior to the discovery thereof
5 All notices, billings, and payments provided for herein shall be in writing
and shall be deemed to be delivered (except for when actual receipt of
notice is expressly required herein) when properly addressed to the other
23
party as indicated below, and deposited in the United States mail, postage
prepaid
SELLER
Payment. Lone Star Gas Company
P 0 Box 910255
Dallas, Texas 75391 0255
Notices. Lone Star Gas Company
301 South Harwood Street
Dallas Texas 75201
Attn Gas Marketing Division
ARTICLE XII
TERM
BUYER
City of Denton, Texas
Municipal Building
Denton, Texas 76701
Attn Executive Director
of Utilities
Subject to the other terms and provisions hereof this Contract shall
be effective from the date set forth hereinabove and shall thereafter continue
and remain in full force and effect for a period and term extending to twelve
(12 00) o'clock midnight on December 31, 1993 and year to year thereafter until
cancelled by either party upon one hundred and twenty (120) days prior written
notice to the other party
ARTICLE XIII
FORCE MAJEURE
1 In the event of either party hereto being rendered unable, wholly or in
part, by force majeure to carry out its obligations under this Contract
other than to make payments due hereunder, it is agreed that on such party
giving notice and full particulars of such force majeure in writing to the
other party as soon as possible after the occurrence of the cause relied
on, then the obligations of the party giving such notice so far as they
are affected by such force majeure, shall be suspended from the inception
24
and during the continuance of any inability so caused but for no longer
period and such cause shall be as far as possible remedied with all
reasonable dispatch The term "force majeure" as employed herein shall mean
acts of God strikes, lockouts or other industrial disturbances acts of
the public enemy, wars, blockades, insurrections, riots epidemics,
landslides lightning earthquakes, fires storms floods washouts
arrests, orders, directives, requirements and restraints of governments and
governmental agencies, either federal or state civil and military, any
application of governmental conservation rules and regulations civil
disturbances explosions, breakage or accident to machinery or lines of
pipe the necessity for making repairs to or alternations of machinery
equipment or lines of pipe breakage of transmission lines failure of
electric equipment due to sleet, ice or other unavoidable causes, accidents
to or failure of electric substations transformers or switching devices
shortage of water, freezing of gas wells or lines of pipe partial or entire
failure or loss of wells and/or sources of gas supply, and any other causes
whether of the kind herein enumerated or otherwise, not within the control
of the party claiming suspension and which by the exercise of due diligence
such party is unable to prevent or overcome Such term shall also include
the inability to acquire, or the delays in acquiring at reasonable cost
and after the exercise of reasonable diligence any servitudes right of
way grants, permits or licenses required to be obtained to enable a party
to fulfill its obligation hereunder
2 It is understood and agreed that the settlement of strikes or lockouts
shall be entirely within the discretion of the party have the difficulty
and that the above requirements that any force majeure shall be remedied
25
with all reasonable dispatch shall not require the settlement of strikes
or lockouts by acceding to the demands of opposing party when such course
is inadvisable in the discretion of the party having the difficulty
ARTICLE XIV
CURTAILMENT OF DELIVERIES
1 Seller does not guarantee a continuous uninterrupted supply of gas to
Buyer hereunder and, subject to the provisions hereinafter set forth in
this Article XIV, Seller shall have the right to interrupt or curtail the
supply of gas to Buyer in whole or in part if in the judgment of Seller
a continuance of the supply of gas to Buyer under this Contract would
jeopardize or threaten service to Seller's domestic, commercial or
industrial customers who are accorded a higher priority of service by the
Railroad Commission of Texas Notwithstanding anything to the contrary
contained herein, refusal or inability by Seller to supply gas to Buyer in
excess of Seller's obligations provided for in Article III herein shall not
constitute a curtailment of the supply of gas to Buyer hereunder for
purposes of paragraph 4 of this Article XIV
2 Buyer and Seller recognize the fact that each is engaged in rendering a
service which is essential to the public health and safety and both consider
the continuity of Buyer's fuel supply essential to the public welfare
therefore Seller agrees to exercise due diligence in making reasonable
advance preparations to enable it to provide reasonably continuous service
to Buyer and Buyer agrees that it will provide an adequate quantity of
standby fuel and equipment to meet its fuel requirements during periods when
the gas supply hereunder may be curtailed pursuant to this Article XIV
3 Within approximately ten (10) days after the end of any curtailment of gas
deliveries by Seller, Buyer shall notify Seller in writing regarding the
26
amount of gas which was actually curtailed for any reason including force
majeure, and the details of the computation of such amount and Buyer's
determination of the amount of such curtailment shall become final and
binding on both parties unless protested in writing by Seller within ten
(10) days after receipt by Seller of such notification
4 Notwithstanding anything to the contrary contained herein (except for the
provisions of paragraph 1 of this Article XIV), in case of interruption or
curtailment of service as provided for in this Article XIV, including
curtailment by reason of force majeure as defined in Article XIII hereof
the amount of gas which was actually curtailed during any Contract Year
shall be added to the amount of gas actually purchased and received by Buyer
during such Contract Year for the purpose of determining Buyer's credits
against the Demand Charge applicable to such Contract Year, as calculated
in accordance with the provisions of Article IV, paragraph 3(a) of this
Contract, provided however, only gas curtailed under this Contract shall
receive credit against the Demand Charge for any Contract Year of the term
hereof
5 Buyer and Seller recognize the fact that Buyer requires one million
(1,000,000) cubic feet of gas each day for plant protection gas, and Buyer
and Seller agree that during periods of curtailment Buyer shall be allowed
to take one million (1,000,000) cubic feet per day for plant protection gas
provided however, that Buyer shall not be allowed to take such gas during
periods of time in which it is necessary for Seller to curtail the supply
of gas to other industrial customers of Seller in the same curtailment zone
in which Buyer's Plant is located who are accorded by Seller a priority of
service equal to that provided in Railroad Commission of Texas Gas Utilities
27
Docket No 496 for service to "(2) Large commercial (100 Mcf or more on
a peak day) and industrial requirements for pilot lights and plant
protection gas" under category "B Industrial Rate 1
ARTICLE XV
REGULATORY BODIES
1 This Contract and all operations hereunder are subject to the applicable
federal and state laws and the applicable ordinances orders rules and
regulations of any local, state or federal governmental authority having
or asserting jurisdiction, but nothing contained herein shall be construed
as a waiver of any right to question or contest any such law ordinance,
order, rule or regulation in any forum having jurisdiction over same
2 In the event either Buyer or Seller shall be required by a judgment or
order of any governmental authority having or asserting jurisdiction to
either pay or charge prices for gas sold by Seller to Buyer hereunder which
are higher or lower than the prices stipulated or provided for herein with
respect to gas sold by Seller to Buyer hereunder, the party adversely
affected shall have the option of cancelling this Contract upon giving the
other party written notice of its intention to do so within ninety (90) days
after the date of such judgment or order, which cancellation shall become
effective at the end of six (6) months from and after the date of such
notice
ARTICLE XVI
TERMINATION PRIVILEGE
1 If either party hereto shall fail to perform any of the covenants or
obligations imposed upon it under and by virtue of this Contract (except
where such failure shall be excused under any of the provisions of this
28
Contract), then in such event the other party may, at its option, terminate
this Contract by proceeding as follows The party not in default shall
cause a written notice to be served upon the party in default, stating
specifically the cause for terminating this Contract and declaring it to
be the intention of the party giving the notice to terminate the same
whereupon the party in default shall have thirty (30) days after the actual
receipt of this aforesaid notice in which to remedy or remove the cause or
causes of default stated in the notice of termination, and if within said
period of thirty (30) days the party in default does so remedy and remove
said cause or causes then such notice shall be nullified and this Contract
shall continue in full force and effect In case the party in default does
not so remedy and remove the cause or causes of default within said period
of thirty (30) days then this Contract shall terminate and become null and
void upon the expiration of said period
2 Should Buyer obtain from any court administrative or regulatory authority
an order directing Seller to continue gas service after expiration of this
Contract or after Seller's termination of this Contract or gas service
hereunder pursuant to any provision contained herein such continued gas
service shall be at a price and upon terms mutually agreeable between Buyer
and Seller unless said order contains a specific prohibition to the
contrary
3 Any cancellation of this Contract pursuant to the provisions of this Article
XVI shall be without prejudice to the right of the party not in default to
collect any amounts then due it and without waiver of any other remedy to
which the party not in default may be entitled for violation of this
Contract
29
ARTICLE XVII
INTRASTATE PROVISIONS
Each party warrants to the other that its 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 amended As a material
representation without which both parties would not have been willing to execute
this Contract each party warrants to the other party that it will take no action
or commit an act of omission which will subject its facilities this transaction
or the other party's facilities to jurisdiction of the Federal Energy Regulatory
Commission (FERC) 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
breached the above warranties and representations shall be liable to the
aggrieved party for all damages, injury and reasonable expense the aggrieved
party may sustain by reason of any breach hereof Further, should either party
perform any act or cause any act to be performed at any time that results in
any gas covered hereunder becoming regulated by or subject to the jurisdiction
of the FERC or successor governmental authority under the Natural Gas Act of
1938, this Contract 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 arising under this paragraph
30
ARTICLE XVIII
WARRANTY
Seller hereby warrants to Buyer 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 will
be free and clear of all liens and adverse claims, and Seller agrees with respect
to the gas delivered by it, to indemnify Buyer against all suits, actions debts
accounts, damages costs (including attorneys' fees) losses and expenses arising
from or out of any adverse claims, relating to Seller's title of any and all
persons to or against said gas
ARTICLE XIX
RIGHT-OF-WAY
Buyer hereby grants to Seller the right to lay and maintain pipelines and to
install metering stations and other necessary equipment at the point of delivery,
as provided for in Article VI hereof, solely for the purpose of supplying gas
hereunder, and such lines and other equipment placed by Seller at said point of
delivery shall remain the personal property of Seller and subject to the terms
of this Contract, may be removed by Seller at any time
ARTICLE XX
INDEMNITY
As between the parties hereto Seller shall be in control and in possession of
gas delivered hereunder and responsible for any damages or injuries caused
thereby until the same shall have been delivered to Buyer at the point of
delivery and shall indemnify and hold Buyer harmless from any damage or injury
caused thereby while same is in Seller's possession, except injuries and damages
which shall be occasioned proximately by the negligence of Buyer After such
delivery of gas at the point of delivery hereunder Buyer shall be deemed to be
31
in exclusive control and possession thereof and responsible for any injuries or
damages caused thereby and shall indemnify and hold Seller harmless from any
damage or injury caused thereby while same is in Buyer's control and possession,
except injuries and damages which shall be occasioned proximately by the
negligence of Seller
ARTICLE XXI
WAIVER OF BREACH
No waiver of either party hereto of any one or more breaches, defaults or
right(s) under any provisions of this Contract shall operate or be construed as
a waiver (continuing or otherwise) of any other breaches, defaults or right(s),
whether of a like or of a different character
ARTICLE XXII
ASSIGNMENT
This Contract shall be binding upon the parties hereto and their respective
successors and assigns All or any part of the rights or obligations of either
party hereto may be at any time assigned, but any such assignment, unless
accepted in writing by the other party hereto, shall not relieve the assignor
of its obligations hereunder, in the event the assignee shall fail to perform
the same in accordance with the terms hereto, provided however, consent to such
assignment would not be unreasonably withheld
ARTICLE XXIII
MISCELLANEOUS
1 The captions or headings preceding the various parts of this Contract are
inserted and included solely for convenience and shall never be considered
or given any effect in construing this Contract or any part of this
Contract, or in connection with the intent duties obligations or
liabilities of the respective parties hereto
32
7 Buyer and Seller agree that this Contract will be construed according to
the laws of the State of Texas
3 This Contract constitutes the entire agreement between the parties covering
the subject matter hereof, and there are no agreements modifications,
conditions or understandings, written or oral expressed or implied,
pertaining to the subject matter hereof which are not referenced or
contained herein
4 Nothing contained in this Contract shall prevent Seller from (i) terminating
or allowing the termination or expiration of any of its existing or future
gas supply contracts, or (ii) entering into any amendment, modification,
renewal, extension or replacement of, or any accord and satisfaction under
any existing or future gas purchase contract or contracts between Seller
and its gas suppliers
IN WITNESS WHEREOF, this Contract has been executed in duplicate
originals by the parties hereto on the day and year first herein written
ATTEST
,L-
SELLER
LANE STAR GAS COMPANY
a Divisio of ENSERCH C PORATION
By
am-
M Lyons
Vice President
ATTEST
BUYER
CITY OF D N EXf~S
By
33
RECEIVED JUN 4 1990
THE STATE OF TEXAS{
COUNTY OF DALLAS {
BEFORE ME, the undersigned authority on this day personally appeared G
M Lyons, Vice President of LONE STAR GAS COMPANY, a division of ENSERCH
CORPORATION, a Texas corporation, known to me to be the person and officer 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 stated, and as the act and deed of said corporation
- Given under my hand and seal of office this 31A4 day of
19
neYCPU NANCY WENOLER ~~Gtr the
Notary\,Publi/c in and for the State
~Afi +p COMMISSION EXPIRES of Texas My commission expires
SEPTEMBER 18 1991 9
Mk 4
n
THE STATE OF TEXAS(
COUNTY OF DALLAS 1
BEFORE ME the undersigned authority on this day personally appeared
a municipal
corporation, known to me to be the person and officer 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 stated, and
as the act and deed of said corporation
Given under my hand and seal of office this _ day of
19
Notary Public in and for the State
of Texas My commission expires
34
I `
~I
r
~ - --1- -