2010-065ORDINANCE NO, 1
AN ORDINANCE OF THE CITY OF DENTON, TEAS APPROVING A COMPROMISE
SETTLEMENT AGREEMENT BETWEEN RANGE RESOURCES AND THE CITY OF
DENTON; AUTHORIZING THE CITY MANAGER AND THE CITY'S ATTORNEYS TG
ACT ON THE CITY' S BEHALF IN EXECUTING ANY AND ALL DOCUMENTS, AND TG
TAKE OTHER ACTIONS NECESSARY TG FINALIZE THE SETTLEMENT; AND
DECLARING AN EFFECTIVE DATE,
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS;
SECTION 1. The City Council hereby approves the Compromise Settlement Agreement
between the City of Denton and Range Resources related to pending litigation styled City of
Dutton v. Range Resources, e~ al,, Cause Number 20081021816, currently pending in the 16t~'
District Court of Denton County, substantially in the form of the attached Compromise
Settlement Agreement,
SECTION 2, The City Manager, or his designee, and the City's Attorneys are hereby
authorized to act on the City's behalf in approving and executing any and all documents, and to
tape other actions necessary, to finalize the settlement,
L
SECTION 3, This ordnance shall become effective immediately upon its passage and
approval.
PASSED AND APPROVED this the ~ay f , 2010.
1
M RK A. B UGHS, MAYOR
ATTEST:
JENNIFER wALTERS, CITY SECRETARY
BY:
APPRO D AS LEGAL FARM;
ANITA BURGESS CITY ATTORNEY
BY:
S;1Qt~r Dcseumentslnrdinances1091range resources settlement ardi~3nce,dac
d
No. 2005 10218 1 d
CITY OF DENTDN, TEXAS, ~ N THE DISTRICT CQURT
PLAINTIFF,
V. § 1 NTH JUDICIAL DISTRICT
RANGE RESOURCES CURPQRATION,
RANGE OPERATING TEXAS, LLC,
STROUD ENERGY, LTD., AND ~
DAN A. HUGHES Co., ~
DEFENDANTS, ~ DENTQN CQUNTY, TEXAS
CQMPRONIISE SETTLEMENT AGREEMENT
THIS COMPROMISE SETTLEMENT AGREEMENT this "A regiment"} is made by and between
CITY QF DENTIN, TEAS, Plaintiff the "C.~"} and RANGE RESOURCES C~RPdRATI4N ~"Range
Resources"}, Range Texas Production, LLC ~fll~la RANGE OPERATING"}, collectively "Range"},
and DAN A. HUGHES Co. ~"Hu~~. he_s"},Defendants.
RECITALS
Effective January 17, 24x2, the City executed a certain Oil, Gas and Mineral Lease City
of Denton Airport the "Base Lease"}, by which the City leased 554. ~ 4 acres, more ar less,
which comprised the City's municipal airport prope~.y the ".Airport Proper~t_~"} to Enexca, Inc.,
as lessee for the purpose of "investigating, exploring, prospecting, drilling and mining for and
producing oil, gas and ail associated minerals" on the Airport Propez~ty. The Base Lease was
assi ed to Hu hes and modified b a certain N~odificatian Clarification & Ratification of Oil, ~ g y
Gas & Mineral Lease dated effective January 16, 2405, executed by Hughes and the City, a
k
memorandum of which is recorded as Document No. 2005--55619, Official Pu~Iic Records of
Dea~to~n ~a~xn~r, Texas. Hughes later assigned the Base Lease, as amended and modified, to
Stroud Energy Ltd., and the City of Denton and Stroud Energy Ltd. entered into a First
Z69242v1. Page 1
Amendment to Modification, Clarification & Ratification of Gil, Gas & Mineral Lease dated
effective June 20, 200 the Modlficat~on, Clarification & Ratification of Gil, Gas & Mineral
Lease as amended by the First Amendment to Modification, Clarification & Ratification of Gil,
Gas & Mineral Lease being hereafter referred to as the "First Amendment"}. Stroud Energy Ltd.
was merged into Range Operating Texas, LLC, which was, at the time of said merger named
Stroud Energy, Inc.
The Base Lease required the Lessee to, among other things, pay the City royalty an gas
produced from wells located on the Airport Property according to certain terms and conditions
contained in the Base Lease. A controversy has arisen between the City and Flughes and Range
over whether royalties on gas have been paid according to the terms of the Base Lease, as
amended and modified. The City filed the captioned lawsuit ~"this Liti ation"~ to enforce the
gas royalty terms according to the City's interpretation of the Base Lease, as amended and
modified. Defendants denied and continue to deny all claims and allegations made by Plaintiff
in this Litigation. Plaintiff denies and continues to deny all claims and allegations asserted by
Defendants in this Litigation.
The undersi ned hereb acknowled e and agree that as of December 31, 2009, Range ~I g y g
G eratin Texas LLC was mer ed into Ran e Texas Production, LLC, and Range Texas p g ~ g g
Production, LLC shall receive all the benefits of this Agreement and shall be entitled to enforce
and obligated to perform this Agreement as the surviving entity of the merger between Range
Operating Texas, LLC and Range Texas Production, LLC.
269242~v1 Page 2
To avoid the uncertainty, application of human resources, and expense of further
litigation, the parties have agreed, without any partly mal~ing any admission to any other party, to
settle the disputes and controversies that are the subject of this Litigation,
TERMS i~F AGREEMENT
~N CONSIDERATIGN of the mutual promises and agreements contained in this Agreement,
including the recitals set forth above, the parties agree as follows:
1, The City and Range shall execute the Second Amendment to Gil and Gas Lease,
in the form attached as Exhibit A ~"Second .A,mendment"}, which, effective August l , 2009, re-
states the gas royalty obligation, increases the royalty percentages by two percent ~2%}, modifies
the termination provision in the Base Lease and confers a right to request audit, all as stated in
more detail in the Second Amendment. Nothing in this Agreement shall modify or affect the
interpretation of the Second Amendment. The City and Range agree that the existing Gas
Purchase Agreement dated November 1, 2007, between Range Texas Production, LLC and
Tanga North Texas, L.P., as amended by Amendment dated effective February 1, 2aD8, meets the
requirements of Section 4, subsection fib} of the Second Amendment and constitutes an arrns-
length contract with a purchaser that is not an affiliate of Lessee. Except as expressly modified
by the Second Amendment, the Base Lease and First Amendment shall remain in full force and
effect, and to the extent there is any conflict between the Second Amendment and the Base Lease
and First Amendment, the Second Amendment shall control, The City and Range agree Hughes
is not a party to the Second Amendment aril has na liability or obligation of performance
thereunder.
2. Contemparaneausly with execution of this Agreement and the Second
Amendment, Ran e a ees to wire transfer the sung of SIX HUNDRED SEVENTY FIVE THUUSAND g ~
269242v1 Page 3
AND X01100 DOLLARS ~$d75,000.00} payable to the City in accordance with wire transfer
directions to be provided by the City's undersigned counsel. Hughes agrees to at the same time
deliver to the City's undersigned counsel a cashier's check for wire transfers in the sum of l~ IFTY
THOC~SAN~] ADD No1100 J~aLLARS ~$50,000.00~, payable to the City.
3, Range will, no later than April 1, 2010, recalculate the royalty due to the City
since August 1, 2009 and pay all additional amounts due to the City for that period as a result of
the changes contained in the Second Amendment, The payment shall be accompanied by
explanatory information containing the same level of detail as has been reported to the City in
the past, when royalty payments have been made. The City and Range agree Hughes shall have
no liability or obligation of performance under this paragraph.
4. Conditioned upon the compliance by Range with the understandings contained in
paragraphs 1, 2 and 3 above, the City, for itself, and its successors and assigns releases and
forever discharges Range and its off cers, directors, shareholders, members, affiliates,
predecessors, successors and assigns, from all claims, demands, damages, actions, causes of
action, or suits in equity, of any kind or nature, including but not limited to attorney fees,
accruing before the date of this Agreement and whether known ar unknown on this date, for or
because of any matter or thing done, omitted, or suffered to be done or omitted in any way
directl ar indirectl on an le al then arising out of or related to the gas royalty payments on y y y g rY
the Airport Property gas wells as of the date of this Agreement.
5. Conditioned upon the compliance by Hughes with the obligations of its
performance contained in paragraph 2 above, the City, for itself, and its successors and assigns
releases and forever discharges Hughes and its officers, directors, shareholders, members,
off Bates, predecessors, successors and assigns, from all claims, demands, damages, actions,
2b92~~v1 Page 4
causes of action, or suits in equity, of any kind or nature, including but not limited to attorney
fees, accruing before the date of this Agreement and whether known or unknown on this date, for
or because of any matter or thing done, omitted, or suffered to be done or omitted in any way
directly ar indirectly on any legal theory arising out, of or related to the gas royalty payments on
the Airport Property gas wells as of the date of this Agreement.
6, Conditioned upon the compliance by Range with the understandings contained in
paragraphs through 3 above, Range, far itself and its successors and assigns, releases and
forever discharges the City and its elected officials, appointed officials, successors and assigns,
from all claims, demands, damages, actions, causes of action, or suits in equity, of any kind or
nature, including but not limited to attorney fees, accruing before the date of this Agreement and
whether known or unknown on this date, for or because of any matter or thing done, omitted, or
suffered to be done or omitted in any way directly or indirectly on any legal theory arising out of
or related to the gas royalty payments on the .Airport Property gas wells as of the date of this
Agreement.
7. Conditioned upon the compliance by l~ughes with the obligations of performance
contained in paragraph 2 above, Hughes, for itself, and its successors and assigns releases and
forever discharges the City and its elected officials, appointed officials, successors and assigns,
from all claims, demands, damages, actions, causes of action, or suits in equity, of any kind or
nature, including but not limited to attorney fees, accruing before the date of this Agreement and
whether known or unknown on this date, for or because of any matter or thing done, omitted, or
suffered to be done or omitted in any way directly or indirectly on any legal theory arising out of
or related to the gas royalty payments on the Airport Property gas wells as of the date of this
Agreement.
2b9242v~ Page 5
8. ~t is the intent of the parties to this Agreement to resolve, settle, and release any
and all claims that the parties may have against each other arising out of, resulting from, relating
to, or based in any manner upon the Base Lease as amended and modified by the First
Amendment as of the date of this Agreement and the matters asserted in this Litigation, or that
could have been asserted in this Litigation, whether known or unl~a.awn.
9. Unce the undertakings described in paragraphs 1 through 3 above have been
consummated, this Litigation will be dismissed with prejudice to refiling pursuant to the form
order of Dismissal attached as Exhibit B. Range's compliance with paragraphs 1 through 3
above shall have no bearing on Hughes' right to a dismissal with prejudice of the claims asserted
in the Litigation against it upon its campletian of the undertakings required of it in paragraph ~
above.
1 a. This Agreement is made according to the Laws of the State of Texas, The parties
expressly agree that this Agreement is governed by, and will be construed and enforced in
accordance with, Texas law,
11, This Agreement is binding on and inures to the benefit of the parties and their
respective successors, and assigns.
12, Each party acknowledges that this Agreement contains the entire agreement
between the parties, and that it is a complete, written statement of the terms and conditions of the
settlement. Each party acknowledges that it is fully aware of the significance and legal effect of
this Agreement, including the Agreem.ent's release provisions, and that it is not entering into the
Agreement in reliance on any representation, praise, or statement made by any party or their
attorneys, except for the express representations anal promises contained in this Agreement, This
Agreement supersedes any and all prior agreements, arrangements, or understandings between
269242v1 Page ~
x
the parties on all subjects in any way related to the transaction or occurrence described in this
Agreement. No oral understandings, statements, promises, or inducements contrary to or
inconsistent with the terms of this Agreement exist,
l3, Each party represents and warrants that it is the sole owner of all rights, claims,
and causes of action asserted by it, or that Gould have been asserted by ~t, in this f,itigation, and
that it has not sold or assigned any such rights, claims, or causes of actian~ to any person or entity,
and that all such rights, claims, and causes of action from the beginning of time through the
effective date of this Agreement are released herein,
14. This A.greem.ent may be executed in a number of identical counterparts, each of
which shall be deemed an original for all purposes.
1 S. Each person whose signature appears below represents that they hold the
respective titles indicated beneath their signatures, that they are fully authorized by the party on
whose behalf they respectively act to execute this Agree~ent, as well as the Second Amendment,
as the act and deed of said party.
l The undersigned hereby covenant not to sue each other with respect to any right, claim,
or cause of action released in this Agreement. Any person ar entity having the right to enforce
eement who is sued in violation of this A ee~nent shall have the ri ht to recover all this Agr g
damages allowed by contract and law, including attorney's fees, expert witness fees, Copy Costs,
and all other litigation costs and expenses incurred in defense of any suit brought in violation of
this covenant not to sue,
17. This Agreement shall not constitute an admission of liability by any party hereto,
as all fault and liability are expressly denied. The provisions of this Agreement are contractual,
and not merel recitals, and shall be considered severable, so that if any of the provisions of this y
Zb9242v1 Page 7
Agreement are declared null, void, or in violation of any applicable law or ordinance, then such
provision or provisions shall be disregarded and shall not effect the enforceability of the
~ r • ~
rema~n~ng prov~s~ons.
18, The parties acknowledge having read all of the provisions of this Agreement and
the parties agree to all of its terms. The parties acknowledge having participated in the
negotiating and drafting of this Agreement, and agree that ambiguities, if any, shall not be
construed against any party.
THIS ,AGREEMENTEXCEPT THE SECQND AMENDMENT} SHALL BE EFFECTIVE AS OF
FEBRUARY , 20 0.
THE CITY aF r~ENTaN, TEXAS
By. ~ -
eorgeCam bell, City Manager
Date: ~ ~ ~
ATTEST:
~y.
J n fifer ~ ers, City Secretary
RANGE REsaURCES C4RP4RATIaN
By:
its:
date:
RANGE TEXAS PRQDUCTIQN, LLC ~FIKIA RANGE
OPERATING TEXAS, Lf,C}
~~9242~r~. Page 8
By:
Its:
Date:
DAB A, HUGHES CO.
By:
Its: Date;
2d9242~r1 Page 9
APPROVED As To CORM:
Bruce 1Vlonning
State Bar No. ~426950~
ATTORNEY FOR PLAINTIFF
CITY OF DENToN, TEXAS
Andrew D. S ims
State Bar No. ~84~56~0
ATTORNEY FOR DEFENDANTS
RANGE RESOURCES CORPOR.ATIoN,
RANGE OPERATXNG TEXAS, LLC ~Nl~1A
RANGE TEXAS PRODUCTXON, LLCM, and
STROUD ENERGY, LTD,
dames M, Truss
State Bar No. Q~797577
ATTORNEY FOR DEFENDANTS
DANA. HUGHES Co.
269242~r~. Page 10
Exhibit A
NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON,
YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING
INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN
REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC
RECORDS: YOUR SOCIAL SECTJRITY NUMBER OR YOUR DRIV~ER.S LICENSE
NUMBER.
Second Amendment to Oix and Gas Lease
STATE OF TEXAS §
COIJNT~ OF DENTC3N ~
Ey Oil, Gas and Mineral Lease dated January 17, 2002, a Mernarandum of which is
recorded in volume 5010, page 855, Official Public Records of Denton County, Teas the
"Lease"}, the City of Denton leased to Enexco, Inc,, 55,14 acres of land the "Land"}
described in attached Exhibit A to the Lease. The Lease was subsequently assigned to Dan
Hughes Company ~"Hughes"} and amended by Modification, Clarification and Ratification of
Oil, Gas and Mineral Lease dated January 16, 20x5, a memorandums. of which is retarded as
Document ~o, 2005-55619, Official Public Records of Denton County, Texas, and further
amended by First Amendment to Modification, Clarification ~ Ratzf~cation of Oil, Gas 8z
Mineral Lease dated June 20, 2006 collectively the "First Amendment"}. The First
Amendment, among other things, divided the Lands covered by the Lease rota four tracts
described as Tracts 1 through 4 on the Exhibit .A attached to the First amendment, The First
Amendment increased the royalty to 114' an Tracts 1, 3, and and the royalty on Tract 2
remained at 115t~ as provided in the Lease.
Range Operat~~ng Texas, LLC ~"Range"} awns the lessee's interest under the Lease,
and Range and the City of Denton desire to further modify the Lease to amend and clarify the
royalty provisions and other provisions as provided herein.
Therefore, for good and valuable canslderation, the receipt and• sufficiency of which are
hereby acknowledged, Range and the City of Denton hereby amend the Lease as follows:
A. Section 4, subsections a., b., and c. are deleted and replaced with the following;
4. Ro al ;
~a}
~1}Royalty on Oil and Liquids Said at the Land; Lessee agrees to
deliver free of cost to Lessor at the wells, the Royalty Percentage
defined below} of all oil and other liquid hydrocarbons produced,
~~aao~.~
separated from gas on the Land, and sold from tanks on the Land.
At Lessor's option Lessee shall pay to Lessor the Royalty
Percentage of the market value at the well of oil and other liquid
hydracarbons of like grade and gravity prevailing on the day the oil
and other hydrocarbons are sold from the Lease, with market value
being determined by cornparable sales in the general area of the
Land. Lessor reserves the right to take its Royalty Percentage of
oil in kind by providing Lessor 30 days prior written notice of its
election to do sa.
~z} Royalty on Gas and Associated Hydrocarbons Sold: Lessee agrees
to pay to Lessor on gas and associated hydrocarbons produced
from the Land and sold by Lessee or used on ar off the Land, the Royalty Percentage of the market value of the gas and associated
hydrocarbons far the proceeds received by Lessee pursuant to 4~b}
below} at the current ar any future delivery point from. the Hickory
Creek Gathering, L.P. System to urhich the wells on the Land are
currently connected or the outlet flange of any other gas gathering
system to which the wells may be later connected thereafter
referred to as the "Valuation Paint." if the gas is gathered from the
wells on the Lease through a system other than the Hickory Creek
Crathering, LP System, the valuation paint will be the first point at
which custody of the gas is delivered to a system awned by an
unaffiliated third party.
fib} If gas and associated hydrocarbons produced from the Land are sold by
Lessee pursuant to an arms~length contract with a purchaser that is not an affiliate of Lessee,
then royalty shall be based upon the proceeds received by Lessee as the result of the sale. In
the event it is necessary to deternune the market value of gas and the associated hydrocarbons,
the market value will be determined at the Valuation Point by reference to the gross heating
value ~n~easured in British thermal units} and quality of the gas. The market value used in the
calculation of royalty will never be less than the proceeds received by Lessee in connection
with the sale of the oil or gas produced or sold. Royalty will be payable on all oil and gas
produced from the Land including, any oil and gas consumed by Lessee on the Land for
compression, dehydration, fuel, or other use.
~c} Except as provided below, Lessor's royalty shall not bear any of the
costs associated with compression, transportation, processing, or treatment of the gas prior to
the point of sale to anon-affiliated third party, if a third party that is not an affiliate of Z~essee, cornpresses, transports, processes, or treats gas produced from the Land, Lessor's royalty will
bear its proportionate share of costs and expenses associated therewith. Lessor's royalty will
not bear any of the costs including fuel usage costs and expenses incurred in transporting the
gas through the existing gas gathering system known as the Hickory Creek Pipeline System far
any other on Tease gathering system chosen by Lessee},
2~a~,~
The third sentence of Section 4, subsection fie} is deleted and replaced
with the following:
"Should Lessee fail at any time to pay royalty when due, Lesser nay give
Lessee written notice of the default, and if the default is not cured within 3 D days of the notice
of the default, Lessor shall have, in addition to all other remedies, the right to terminate this
Lease, if Lessee in goad faith disputes the amount of or the calculation of the amount of
royalty due under this Lease, and has paid Lessor an ammount considered by Lessee to be the correct amount of royalty, Lessor shall not have the right to tern~,inate the Lease."
The last sentence of Section 4 is deleted.
The following shall be added as subsection and fig} of Section 4:
~f} As used in this Lease, "affliate"means ~i} a corporation, limited liability
company, joint venture, partnership, or other entity that owns mare than ten percent of the
outstanding voting interest of Lessee or in which Lessee owns more than ten percent of the
outstanding voting interest; or iii} a corporation, li~.ited liability company, joint venture,
partnership, ar other entity in which, together with Lessee, more than ten percent of the
outstanding voting interests of both Lessee and the other corporation, joint venture, partnership,
or other entity is owned or controlled by the same persons or group of persons.
fig} The term "Royalty Percentage" as used herein shall mean ~7% insofar as
the Lease covers Tracts 1, 3, and 4 as described in the First Amendment and insofar as the
Lease covers Tract 2 as described in the Lease Amendment for all oil, gas or other minerals
produced on or after August 1, ~oD9.
E. The following section shall be added between Section 24 and Section 25:
24a. ~ig~t to Request Audit: Lance every twenty~four ~2~} calendar
months, Lessor shall have the. right to request that Lessee audit the processing plant, if any,
being used to process gas or other liquid hydrocarbons produced from the Lease. Lessee must
perform a requested audit if Lessee has the right to do so. Zf Lessee does not have the right to
perform such an audit, Lessee shall make a good faith attempt to obtain the necessary audit rights, Lessee shall never incur liability to Lessor based on an inability to obtain audit rights
and perform a requested audit,
Th1s An~exad.n~.ent shall be bxnd~ng upon and inure to the benefit of the parties, and their
successors and assigns,
This instrument is dated effective January 1, X01 D, but the Royalty obligations shall be
effective as of August 1, 2D~9.
X64403.3
The parties hereby adapt, ratify and confirm the Lease as amended and agree that the
Lease is in full force and effect subject to the terms of the Lease as amended by the First
Amendment and this instrument,
The City of Denton
By,
George C. Campbell, City Manager
ATTEST:
Jennifer Walters, City Secretary
By.
APPR VEDA TD LECxA,L FORM:
,City Attorney
By:
Range Operating Texas, LLC
By~
Neal Harrington
Vice President -Land, Southwest
THE STATE OF TEAS
CQUNTY GF DENTGN
Dl,
This instrument was acknowledged before me on~eee~ , by George C.
Campbell, City Manager of THE CITY GF DENTaN.
d~4~##~#1~~~i s~N N Pub11e, State of Texas ~,~,~a~r A~~ ,,r ~a~~ R1 S~ta~e of Texas NOt~~y PUb!!C,
~h~ ~y ~ti(p111t5S1~1~ ~k~i~BS
rFQ~t~~e~ c~~~Q ~ ~,~il#I11~~~
264433
THE STATE aF TE,S
C 4UNTY ~F TA,~RANT
This instrument was ac~nowiedged before me on December , 2089, by Neal
Harrington, dice President-Land, Southwest, of RAGE 4PE~.A.Tf~i~ TE~.A~S, LLC, on
behalf of the company.
rotary Public, State of Texas
z~o~.~
Exhibit B
No. L1/~V~1 Vlr1V~1~
CITY OF DENTdN, TEAS, ~ IN THE DISTRICT COURT
PLAINTIFF,
y', § 16TI~ JUDICIAL DISTRICT
RANGE RESOURCES CQRPURATION,
RANGE OPERATING TEXAS, LLC,
STROUD ENERGY, LTD., AND DAN A. HUG~IES Co., §
DEFENDANTS. ~ DENTON COUNTY, TEXAS
ORDER OF DISMISSAL
AS ~s EVIDENCED by the Signatures of all counsel of record below, the Court has been
inforr~.ed that all matters in dispute between the parties have been fully and finally comprorr~ised
and settled. Based upon that information IT ~s ORDERED that the above cause be and is hereby
DISMISSED WITH PRE1[JDICE to the rights of Plaintiff or Defendants to ref~le the action or any part
of it. All costs of Court are taxed against the party incurring same.
SIGNED this day of , ZQ09.
JUDGE PRESIDING
ORDER DF DISMISSAL PAGE 1
So MOVED AND ENTRY REQUESTED:
Bruce N~onning State Bar No.14~69500
ATTORNEY FDR PLAINTIFF
CITY DF DENTDN, TEXAS
Andrew D. Sims
State far Na. ~ 8415600
ATTORNEY FDR DEFENDANTS
RANGE RESOURCES CORPOR.A,TION,
RANGE OPERATING TEXAS, LLC, and
STRDUD ENERGY, LTD,
~a~mes M. Truss
State BarNo. 0077577
,A~TTDRNEY FDR DEFENDANTS DAN A, ~UGFIES CD.
ORDER Q~ DISN[ISSAL PAGE ~