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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- -