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HomeMy WebLinkAbout025605 ORD - 12/16/2003AN ORDINANCE APPROVING THE LICENSE AGREEMENT BETWEEN THE CITY OF CORPUS CHRISTI AND GULFTERRA ENERGY PARTNERS, L.P. SETTLING CLAIMS OF THE CITY FOR PAST USE OF CITY RIGHTS OF WAY AND PROPERTY BY GULFTERRA AND ITS PREDECESSORS; GRANTING TO GULFTERRA THE RIGHT TO USE CERTAIN CITY RIGHTS OF WAY AND PROPERTY FOR PIPELINES TRANSMITTING NATURAL GAS, NATURAL GAS LIQUIDS, AND OTHER PETROLEUM PRODUCTS FOR A TERM OF TEN YEARS WITH ONE TEN YEAR RENEWAL TERM; ESTABLISHING THE CHARGES FOR SUCH USE OF PUBLIC PROPERTY; PROVIDING FOR EQUITABLE FEES;PROVIDING FOR PROTECTION OF CITY RIGHTS OF WAY, PROPERTY, ANDINTERESTS; PROVIDING FOR RELATED MATTERS; SUPERSEDING AND REVOKING PRIOR AGREEMENTS, AND DECLARING AN EMERGENCY WHEREAS, Gulfterra Energy Partners, L.P. (and its predecessors) (hereinafter "Gulfterra") presently and for many years have owned, operated and maintained natural gas pipelines within the corporate limits of the City of Corpus Christi that use public streets, ways, and other property; and WHEREAS, the City of Corpus Christi and Gulfterra have engaged in lengthy negotiations regarding the City's claim for payment for occupation and use of its rights of way and property in the past and prospectively, since notification of the proposed class action settlement in City of San Benito et al v. PG&E Gas Transmission, Texas Corporation et al, No. 96-12-7404-A, 107th District Court, Cameron County, Texas, which the City ultimately opted out of; and WHEREAS, the City and Gulfterra wish to settle all past claims with respect to Gulfterra's pipelines and wish to agree to the charge to be paid for use of City's rights of way and property in the future; and WHEREAS, the City Council believes that the agreement reached is fair and reasonable under the circumstances, and that settlement of these issues will enable the City and Gulfterra to maintain a constructive and cooperative relationship in the future; and WHEREAS, as a result of the negotiations with Gulfterra, the City has reached conclusions as to the value of its public right-of-way and the fees that should be charged for the use of the right-of-way by pipelines, and intends to implement equitable fees for all pipelines that use public rights-of-way. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF CORPUS CHRISTI, TEXAS, THAT: SECTION 1. The City Manager of the City is hereby authorized to execute on behalf of the City the License Agreement Between the City of Corpus Christi and Gulfterra R38505A1 doc Energy Partners, L.P., a substantial copy of which is attached hereto as Exhibit A and made part of this ordinance for all purposes. SECTION 2. This ordinance supersedes all revocable easements, use privilege agreements, and similar rights heretofore granted to Gulfterra Energy Partners, UP. or its predecessors for pipelines in rights-of-way and other property or the City of Corpus Christi, and all such revocable easements, use privilege agreements, and similar rights are hereby revoked. This ordinance shall be null and void unless the check tendered pursuant to Section 5.2 of Exhibit A is honored by the bank. SECTION 3. That upon written request of the Mayor or five Council members, copy attached, the City Council (1) finds and declares an emergency due to the need for immediate action necessary for the efficient and effective administration of City affairs and (2) suspends the Charter rule that requires consideration of and voting upon ordinances at two regular meetings so that this ordinance is passed and takes effect upon first reading as an emergency measure on this the 16th day of December, 2003. ATTEST: THE CITY OF CORPUS CHRISTI Armando Chapa City Secretary "~amuel ~.'N-~'~I, Jr. ''"/ (_~ Mayor APPROVED: This 11th day of December, 2003: R~.~C;y/R/ein i n g / ActinzJ' City Attorr~y R38505A1 .doc Corpus Christi, Texas ;~ day of ~,JU(~,t2003 TO THE MEMBERS OF THE CITY COUNCIL Corpus Christi, Texas For the reasons set forth in the emergency clause of the foregoing ordinance an emergency exists requiring suspension of the Charter rule as to consideration and voting upon ordinances at two regular meetings: I/we, therefore, request that you suspend said Charter rule and pass this ordinance finally on the date it is introduced, or at the present meeting of the City Council. Respectfully, Respectfully, Council Members The above ordinance was passed by the following vote: Samuel L. Neal, Jr. Brent Chesney ('~ ~,bl,~.~ Javier D. Colmenero Melody Cooper Henry Garrett Bill Kelly d Rex A. Kinnison Jesse Noyola Mark Scott R38505A1 ,doc 3 Lt'CENSE AGREEMENT BETWEEN THE CTTY OF CORPUS CHRTST! AND GULFTERRA ENERGY PARTNERS, L.P. DATED 2003 TABLE OF CONTENTS ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE ARTICLE DEFINITIONS ........................................................................ 1 LICENSE ..............................................................................3 SCOPE OF USE ...................................................................... 4 TERM ................................................................................... 5 CONSIDERATION .................................................................. 5 CONSTRUCTION, MAINTENANCE AND OPERATIONS .................. 9 PROCEDURE TO ADD NEW CUSTOMERS ................................. 10 TRANSFER OF CITY RIGHTS-OF-WAY ..................................... 11 INDEMNITY ........................................................................ 12 10 INSURANCE ..................................................................... 12 11 TERMINATION ................................................................... 15 12 ASSIGNMENT/SUBLICENSING ............................................. 15 13 RENEWAL OF LICENSE ...................................................... 16 14 ANNEXATION AND RIGHT-OF-WAY WIDENING ..................... 16 15 ANNUAL LICENSE FEE CONTINGENCIES .............................. 17 16 CHANGE IN LAW OR REGULATION ...................................... 20 17 AMENDMENT .................................................................... 20 18 NOTICES .......................................................................... 21 19 RELATIONSHIP OF PARTIES ............................................... 22 20 APPLICABLE LAW .............................................................. 22 21 CAPTIONS ....................................................................... 22 22 MISCELLANEOUS .............................................................. 22 23 ENTIRE AGREEMENT ......................................................... 23 24 MAPS ..............................................................................23 25 ACCOUNTING ................................................................... 24 EXHIBIT "A": EXHIBIT "B" EXHIBIT "C": EXHIBIT "D": PROPERTY DESCRIPTION LIST OF RELEASES FORM OF EASEMENT DISPUTE RESOLUTION PROCEDURE LTCENSE AGREEMENT This LICENSE AGREEMENT ("Agreement") dated as of , 2003 is made and entered into between the CITY OF CORPUS CHRISTI, a Texas Home- Rule Municipal Corporation (the "City"), acting by and through its City Manager pursuant to Ordinance No. dated , and GULl:TERRA ENERGY PARTNERS, L.P, a Delaware limited partnership ("Licensee"). City and Licensee are individually referred to in this Agreement as "Party" and collectively as "Parties". WZTNESSETH: WHEREAS, Licensee currently owns, operates and maintains certain natural gas pipelines within the corporate limits of the City, but, does not currently have consent for all of its affected pipe to use the City Rights-of-Way and/or City-Owned Property; WHEREAS~ this Agreement addresses Licensee's past and future obligations to the City for the use of the City Rights of Way and/or City-Owned Property. NOW THEREFORE~ the Parties hereto hereby stipulate and agree as follows: ARTICLE 1 DEFINITIONS In addition to any other terms defined within this Agreement, the following terms, when used in this Agreement, shall have the meanings ascribed to them in this Article 1: 1.1 "Abandonment" shall mean permanently removed from service in accordance with the definition of "abandoned" in the Code of Federal Regulations, Title 49, Volume 3, Section 192.3, and shall include the process defined in the Code of Federal Regulations, Title 49, Volume 3, Section 192.727 by which a pipeline owner or operator can conduct abandonment activities of its pipeline or a section thereof. 1.2 "City-Owned Property" shall mean any real property and its fixtures, other than City Rights of Way, owned in fee, leased, controlled, held in trust or otherwise possessed by the City within the corporate boundaries of the city. 1.3 "City-Owned Facilities" shall mean all streets, curbs, sidewalks, water, wastewater, gas, storm water and other amenities owned, maintained or controlled by the City. 1.4 "City Rights of Way" shall mean any water, wastewater, gas, storm water drainage, or other public utility easement, street, road, avenue, highway, freeway, toll road, bridge, alley, boulevard, sidewalk, lane, drive, circle, or canal, currently owned or controlled by, and/or located within or which may in the future be constructed within or annexed into the corporate limits of, the City, including the City's interest, if any, in all in-City portions of -1- any federal or state highway, farm to market road, or other Rights-of-Way claimed by the City. 1.5 "El Paso Corporation" shall mean the New York Stock Exchange listed company and all of its affiliates and subsidiaries, which is listed as symbol EP. 1.6 "Effective Date" shall mean October 1, 200:2. 1.7 "G.Z.S." shall mean Geographic Information Systems. 1.8 "G.P.S" shall mean Global Positioning Systems. 1.9 "GulfTerra Energy Partners, L.P. System" ("GulfTerra System") shall mean the intrastate, natural gas, natural gas liquids, and all other petroleum products transmission pipelines and all their appurtenant facilities, including, but not limited to, mains, spurs, laterals, meters, valves, corrosion protection systems, city gates and all other similar facilities of Licensee, located under, on, through or within City Rights of Way or under or under, on, through or within City-Owned Property as set forth in the map contained in Exhibit 1.10 "Large Volume Customer"shall mean a customer whose anticipated average daily purchase of natural gas exceeds one thousand two hundred and fifty (1250) MCF PER DAY over a one (1) year period. 1.11 "License" shall mean all the terms and provisions of this Agreement and any other provisions that City may include in any Ordinance authorizing the granting of the rights given to Licensee in this Agreement. 1.12 "Person" means an individual, a partnership (limited or general), a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or other legal entity or governmental authority. 1.13 "Pipeline or Pipe" shall mean an intrastate pipeline which transports for a fee or for sale any and all substances which are in any way derived from crude oil or natural gas, including, but not limited to, crude oil, natural gas, propane, butane, ethane, natural gasoline, methane, jet fuel, fuel oil, all gasoline blends, and natural gas liquids. 1.14 "Released Pipe"shall mean the pipe described in Exhibit "A" and any Abandoned pipe ever owned by Licensee or ANY Releasee at any time prior to the date of this License. 1.15 "Releasee" shall mean any and all entities or PERSONS listed OR OTHERWISE DESCRIBED in Exhibit "B". 1.16 "Termination Date" shall mean the date ten (10) calendar years after the Effective Date. -2- ARTZCLE 2 LTCENSE 2.1 Descrietion of License. The City, hereby grants to Licensee and to entities owned and controlled by Licensee, including, but not limited to, Gult'Terra South Texas, L.P., GulfTerra Field Services, L.L.C. and GulfTerra G.C., L.P., a non-exclusive license to operate, maintain, alter, inspect, repair, replace with like property, remove, construct, extend or Abandon the Gulf-rerra System within City Rights of Way and City-Owned Property as specifically described in Exhibit "A", which is attached hereto and incorporated herein for all purposes. This License shall only authorize Licensee to use City Rights of Way and City-Owned Property to the extent specifically described in Exhibit "A" and to the extent authorized by Section 2.2. This grant is limited by the nature of the City's interest in any particular City Rights of Way or City-Owned Property and does not purport to grant an interest in any real property, estate or interest owned by another Person. With respect to any portion of the GulfTerra System under, on, through or within City-Owned Property, City hereby grants to Licensee an exclusive easement for its Pipe to continue to occupy the City-Owned Property as provided in the easement form attached hereto as Exhibit "C". Following the passage into law of an ordinance approving this License, Licensee will prepare such easement describing in metes and bounds the actual crossing that the Gulf-terra System makes of each City-Owned Property and submit it to City. Within 60 days of such submission, City will execute each such easement and return it to Licensee for recording. In no event shall the metes and bounds description contained in the described easements be used to calculate the annual license fee owed under Section 5.1. In the event that the City does not execute each such easement within the relevant 60 day period, it shall provide to Licensee written reasons explaining any such delay. 2.2 Extensions of Pioeline System. Licensee is hereby granted the right to extend or enlarge its Pipeline system beyond the configuration identified in Exhibit "A" within the City Rights of Way. Licensee may make such additions to its system without giving the City prior notice except as required by Section 6.4 herein and by Chapter 35, Article VT! of the Code of City Ordinances. However, in so extending or enlarging its system, Licensee must, at all times, remain in compliance with all Federal, State and City Statutes and Ordinances and must notify the City of such extension or enlargement within ten (10) days of first beginning such work. In the event that Licensee desires to extend its system across City-Owned Property, it must seek permission to do so from the City prior to commencing any work or construction. If the City is agreeable to the requested use of City-Owned property, it will grant an easement to Licensee for said use. Licensee, in the event of such an extension, is obligated to include the additional Pipe that occupies the City Rights of Way or City-Owned Property as a result of any extension, in the calculation of its annual license fee to City as outlined in Section 5.2, subject to possible modification by Article 15. -3- 2.3 Chan,le in Pioe Diameter. If Licensee desires to replace any part of the GulfTerra System that occupies City Rights of Way or City-Owned Property with new equipment/Pipe that has the same or a smaller diameter than the existing Pipe, it may make any such improvement without first seeking City's approval except as required by Section 6.4 and by Chapter 35, Article VII of the Code of City Ordinances. A replacement of existing Pipe with such new Pipe will not result in Licensee owing City an additional License fee. 2.4 Drainaae Easements. If Licensee desires to construct, extend or locate part of the Gulf'rerra System in such a way so that it would occupy new City owned drainage easements, or expand or alter existing facilities, Licensee shall first seek permission to use the subject easements from the City Engineering Department. All such requests shall be in writing and will be evaluated for approval on the basis of whether the requested use materially interferes with the primary function of the subject drainage easement. 2.5 Evidence of Consent. City acknowledges that, by Licensee's obtaining a license from City to use the identified portions of City Rights of Way and City-Owned Property, Licensee is fulfilling its legal obligation to obtain consent to use governmentally-owned or controlled City Rights of Way or real property, as may be required by state and municipal law including, but not limited to Texas Utilities Code Sections 181.006, 181.023 and 181.026, the City Charter and The City Code of Ordinances. ARTZCLE 3 SCOPE OF USE 3.1 Character and Scoee of Use and Operation. City hereby grants to Licensee a permit under Section 55-3(b) of the City's Code of Ordinances for the GulfTerra System as described in Exhibit A and for any extensions of this System authorized by this License to use the City Rights of Way and City- Owned Property described in Exhibit A and authorized_extensions thereof: 1, to sell natural gas to Large Volume Customers; and to sell natural gas to the City's natural gas distribution system; and to sell natural gas to customers approved under the procedure described in Article 7; and consistent with its status as a common carrier in the State of Texas and its status as an entity regulated by the Texas Railroad Commission, to provide transportation services for natural gas, at rates within Licensee's sole discretion in compliance with applicable regulations, for any Person regardless of whether the delivery point is within or without the corporate limits of the City. -4- This License also grants Licensee a right for the GulfTerra System and for any extensions of this System authorized by this License to use City Rights of Way and City-Owned Property to sell and/or provide transportation services for natural gas liquids and any other petroleum-based product besides natural gas, to or for any Person. Nothing in this Section 3.1 or in any other Section or Article of this License shall be construed to allow the Licensee to make any new use of City Rights of Way or City-Owned Property to sell natural gas to customers other than Large Volume Customers or the City's natural gas distribution system without first complying with the provisions of Article 7 of this Agreement. The legal right of the City to enforce regulations or ordinances prohibiting or limiting natural gas sales to customers within the corporate limits of the City is intentionally not addressed by this License. City and Licensee reserve all their legal rights with respect to the issue of whether the City may enforce regulations or ordinances prohibiting or limiting natural gas sales within the corporate limits of the City. The Parties agree that if, at any time during the pendency of this License or any extension thereof, City decides to sell, lease or transfer to any non- governmental Person its right, title, interest to or ownership of the natural gas distribution system within the City that it currently owns, then, as of the closing date of any such sale, lease or transfer, Licensee can then use the Gult-rerra System and any extension thereof to sell natural gas to any customer within the City without first complying with the provisions of Article 3.1 or Article 7. Nothing herein shall limit the City's ability to hire a third-party operator for its natural gas distribution system. 3.2 Recordin(~. This License will be recorded by Licensee in the Official Records of Real Property of Nueces County, Texas. The Licensee shall pay the recording costs. Licensee shall also record all easements granted with this License in Official Records of Real Property of Nueces County. Licensee shall provide a copy of the recorded instrument to the City. ARTZCLE 4 TERM The License granted by the City to the Licensee in this Agreement shall be for a period of time beginning on the Effective Date of this Agreement and terminating ten (10) years thereafter, unless renewed in accordance with Article 13. ARTI'CLE S CONSZDERATI'ON 5.1 License Fees. As consideration for the grant of the License, Licensee, FI Paso Corporation and Releasees agree to pay the City $3,000,000. Licensee also agrees to pay City an annual License fee consisting of: (i) $89,000, which represents $500.00 per street crossing per year multiplied by 178 street crossings made by Licensee's Pipeline and (ii) $133,947.00, which represents $1.25 per linear foot for 107,157 linear feet of Licensee's Pipe located in City Rights of Way or under or along City-Owned Property. The total annual lump-sum payment due the City is $222,947.00. In the event that at any time during the period of this License, City enters an agreement with another Person or firm that owns or operates a Pipeline within the City limits, which charges the City Right-of-Way user a fee that is less than the $1.25 per linear foot or charges the City Right-of-Way user a fee for crossing City streets of less than $500 per crossing per year as set forth by this Section 5.1, then the annual fee for this License shall at that point be reduced accordingly. The Parties agree that the annual License fee specified in this Section 5.1 is a street rental. The Parties also agree that the amounts Licensee is required to pay according to this Section may be subject to possible modification by Article 15. 5.2 I~elease. In consideration for the payments described by 5.1, and subject to possible modification by Section 15.1 or 15.2, the City agrees to give Licensee and Releasees an unconditional release from any and all actual or potential liability that Licensee or Releasees may have to City: (i) as a result of any Released Pipe being located under, on, through, within or using City Rights of Way or City-Owned Property, with or without City's consent, at any time in the past; or (ii) as a result of Licensee's or any Releasee's use of pipe in violation of, location of pipe in violation of, or failure to comply with any City Ordinance, law, state or federal statute, franchise, license or other rules that might have been applicable to Licensee's or any Releasee's conduct within City Rights of Way or, on, under, through or within City~Owned Property or otherwise within City boundaries at any time in the past, including, but not limited to, any actual or potential liability Licensee or Releasees might have to the City based upon any past or present violations of Corpus Christi City Code Chapter 55, Article 1, Section 55-3, entitled "Franchises required to construct or maintain gas lines or to provide gas for end-use consumption within the corporate limits of the City", Corpus Christi City Code, Chapter 49, Article IV., Section 49-70, entitled "Street Rental Fees for Public Utilities", and/or City Code, Section 5 of An Ordinance "Prescribing the Taxes to Be Levied, Assessed and Collected By the City of Corpus Christi, Texas, For the Year 1962 and For Each Succeeding Year Thereafter Until Otherwise Provided and Ordained, and Such Other Years As the Same May Be Applicable; Providing A Savings Clause; And Declaring An Emergency", Passed, ~luly 31, 1962 (or their predecessors) at any time in the past or; (iii) as a result of any other claims the City may have or make against Licensee or any Releasee for compensation related to the past use without consent of the City Rights of Way or City-Owned Property by Released Pipe; or (iv) in any way related to fees, rentals, penalties, interest or other monetary amounts that might be owed by Licensee or any Releasee to City based upon or as a result of sales of natural gas or other petroleum derived products by Licensee or Releasees to customers located within the City at any time in the past. -6- Furthermore, in exchange for the above-described payments, City agrees to unconditionally release Licensee and all Releasees from any and all actual or potential liability Licensee or these Releasees may have to City as a result of the existence of and any failure of Licensee or Releasees to comply with any City Ordinances that may have granted franchises to Southern Community Natural Gas Company (which were later assigned to Nueces industrial Gas Company which later became Lo Vaca Gathering Company) to sell natural gas to industrial, commercial or residential accounts located within the City at any time in the past. Payment of $3,000,000 shall be tendered to the City at least 24 hours prior to the final adoption by the City Council of the ordinance approving this License. City agrees to refrain from negotiating any check or wire transfer that effects such payment until after said ordinance is law. 5.3 Possible Adiustment of License Fee. Beginning with the second year of the License, the per linear foot fee of $1.25, as specified in Section 5.1 subject to possible_modification by Section 15.1 and/or Section 15.2 will be adjusted each year by the cumulative percentage increase in the Consumer Price Index--All Urban Consumers, published by the U.S. Department of Labor Statistics, as measured from the $1.25 base in effect on the Effective Date, unless the City charges other similarly situated licensees less as described in Section 5.1 or Section 15.1, in which event the adjustment will apply to the_lesser amount. The street crossing fee will not be adjusted and will stay at $500 per crossing for the duration of the License term. 5.4 Late Fee. Except as provided in Section 15.1 herein, each required annual payment shall be made on or before October ! of each year of the License. Any payments due for October 1, 2002 and 2003 shall be made in accordance with Section 15.1 herein. Late payments will accrue interest at the rate of two percent (2%) over the per annum rate of interest announced as the "Prime Rate" for commercial loans by Citibank, N.A., provided, however, the interest rate shall never exceed the maximum lawful rate permitted by applicable law. 5.5 Pipeline Extension. if Licensee extends its Pipeline beyond the configuration described in Exhibit "A" and if any part of the extension occupies City Rights of Way or City-Owned Property, then the annual license fee described in Section 5.1 herein shall be adjusted accordingly. For purposes of determining when any new occupation of City Rights of Way or City-Owned Property begins, Licensee shall use the date on which construction commenced or existing Pipe was acquired. Any increment to the annual License fee that results from such an extension shall first be due to the City in the October payment subsequent to the commencement or acquisition of the extension. For example, if Licensee's extension adds 1000 feet of Pipe to its system, 100 of which occupies City Rights of Way, and the extension is commenced or acquired on 3une 30, 2005, the increment to the annual Licensee fee owed the following October would be t/2 x $1.25 (as -7- adjusted) x 100 or $67.25, plus $250 for each additional street crossing, if any. 5.6 Pioelino Reduction. If Licensee sells Pipe it has in City Rights of Way or under City-Owned Property, then the License fee described in Section 5.1 will be reduced in each year following the year of sale in an amount equal to the fee that would have otherwise been charged for the linear feet and crossings included in the Pipe sold. Provided, however, Licensee will by contract require any "third party purchaser" of its Pipe to obtain a license from City for Licensee's Pipe to be acquired, and Licensee will not close a Pipeline sales transaction with a "third party purchaser" until that purchaser has executed a license agreement with the City on the same terms as those in this License or substantially similar terms that are no less favorable to the new licensee than are set forth in this License; Licensee's fee will not be reduced until the third party purchaser has executed the license agreement. As used in this Section 5.6, "sells" includes trade, gift or other conveyance, and third party purchaser includes any Person to whom the Pipe is sold, traded, given, or conveyed; provided, however, the City, if it is the purchaser, is not required to obtain a license. If Licensee Abandons or otherwise reduces the amount of pipe it has in City Rights of Way or under City-Owned Property any time during the pendency of this License, then the License fee described in Section 5.1 will be reduced in each year following the year of written notification to the City in an amount equal to the fee that would have otherwise been charged for the Abandoned pipe and Abandoned crossings. If Licensee Abandons Pipe, Licensee shall remain responsible for complying with legal Abandonment processes and for the safe condition of the facilities and appurtenances until the Pipe is formally Abandoned. Abandoned Pipe shall, however, not be used to calculate Licensee's annual license fee obligation under Paragraph 5.1 once the Abandonment is complete. City shall not own the Abandoned facilities and appurtenances and shall have no responsibility for their maintenance and safety unless the City in writing accepts a particular facility. Section 6.5 shall continue to apply to any facilities and appurtenances not removed by Licensee after Abandonment. If Licensee removes Pipe, it shall restore the City property, at the sole cost of the Licensee, in accordance with Section 6.3. 5.7 Additional Pioe Found. Licensee has endeavored to identify all of its un-Abandoned Pipe within Corpus Christi, which Pipe is described in Exhibit "A". If, however, additional un-Abandoned Licensee pipe should subsequently be identified by the Parties which has not been included in Exhibit "A", Licensee shall pay to City the incremental amount Licensee which would have paid to the City if the additional Pipe had been included in Exhibit "A" plus interest at a rate that equals the rate that the City has received on its investments plus two percent. 5.8 Exclusive Charue, The total consideration described in this Article 5 shall be the exclusive compensation, payable or due to the City by Licensee or any Releasee pertaining to or arising out of: -8- (a) the granting of this License; and (b) the occupation and use of the City Rights of Way or City-Owned Property by the GulfTerra System and any extensions thereto at any time in the past and during the pendency of this License; and (c) the sale of natural gas by Licensee to Large Volume Customers, the City's natural gas distribution system and any other customers approved under the procedure set forth in Article 7 during the pendency of this License; and (d) the sale of natural gas or any substance described in Section 1.11 by Licensee or any Releasees to any customers located in the City prior to the Effective Date of this License; and (e) the transportation of natural gas to the extent permitted by Section 3.1 or the transportation of any substance by Licensee described in Section 1.11 for any shipper during the pendency of this License; and (f) the transportation of natural gas or any substance described in Section 1.11 for any shipper prior to the Effective Date of this License. (g) required compliance by Licensee with City Code of Ordinances Chapter 49, Article I'V, Section 49-70 or with Chapter 55, Article I, Section 55-3 during the pendency of this License. ART]'CLE 6 CONSTRUCT?ON, MAI'NTENANCE AND OPERATI'ONS 6.1 equipS. Licensee shall be solely responsible for all costs of construction, installation, maintenance, operation and future repair of any portion of the GulfTerra System that occupies City Rights of Way or City-Owned Property during the term of this License. 6.2 f-taintenance and New Construction. GulfTerra System shall be constructed and maintained in conformity with valid federal, state, and local regulations governing operations in the City Rights-of-Way, and so as not to unreasonably interfere with traffic over streets, alleys, and sidewalks, the flow of storm water in any gutter, drain, sewer, or open drainage system, or with City water, wastewater, storm water and gas utility operations. "constructed and maintained" shall include installation, construction, maintenance, and repair of the GulfTerra System. 6.3 Restoration. The surface of any City Rights of Way or any City- Owned Property disturbed by Licensee in the construction of or maintenance of the GulfTerra System shall be restored within a reasonable time after completion of the work to the same or better condition as it was in before the commencement of the work. Should the City reasonably determine, within one year from the date of such restoration activities, that such surface requires additional restorative work in order to place it in its original condition, Licensee shall perform such additional restorative work to the reasonable satisfaction of the City. Licensee shall not encumber any City -9- Rights of Way or any City-Owned Property to a greater extent than shall be reasonably necessary to execute any of its work. 6.4 City Aoorovals. In constructing improvements to or maintaining the Gulfrerra System, Licensee shall not disturb City's street pavement, water, wastewater, gas or storm water facilities without first obtaining the approval of the City's Director of Engineering, except during an emergency. As soon as practicable after the occurrence of an emergency, Licensee shall report any emergency work it performed to the director of Engineering. Licensee shall, at its sole cost and expense, refill and repair all excavations made by Licensee in City Rights of Way or on City-Owned Property and all damage to City's streets, water, wastewater, gas and storm-water facilities. 6.5 Relocations. City reserves the right to construct, maintain, and modify City-Owned Facilities for City operations. City shall give thirty (30) days prior written notice to Licensee whenever City has determined that removal, relocation, change or alteration to the Gulr-rerra System is reasonably necessary for construction, maintenance, or modification of City- Owned Facilities. The amount of notice shall be reasonable under the circumstances. Upon written notice by City, Licensee shall, at Gult-rerra's expense, temporarily or permanently, remove, relocate, change or alter the position of the affected portion of the GulFFerra System. ARTICLE 7 PROCEDURE TO ADD NEW CUSTOHERS If, during the period of this License or any valid extensions thereof, Licensee desires to make use of City Rights of Way or City-Owned Property to make natural gas sales to customers within the City, then Licensee will, before making any such use(s) of City Rights of Way or City-Owned Property, first make a request in writing to the City seeking its consent to add these use(s) of City Rights of Way or City- Owned Property to the scope of this License. A separate copy of the request shall be delivered to the City Manager, the City Attorney and the Director of the Gas Department, at the addresses set forth in Article 17.1 hereof. Any such request shall be made in writing at least forty (40) days prior to the day the sales are to commence and shall specifically refer to this Article 7 of the Agreement. The City shall, within thirty (30) days of receiving Licensee's request, respond to Licensee's request in writing, by either consenting to or denying Licensee's request. The City Manager is hereby authorized to deny the request on behalf of the City. If the City consents, then Licensee may use the City Rights of Way or City-Owned Property to make natural gas sales to the subject customer, providing that it complies in all other respects with the terms of this License. If the city denies Licensee's request, then Licensee may seek legal redress for the City's denial. The Parties agree that neither the commencing of nor the prosecution of such a suit shall, in any way, constitute a breach of any of the obligations created by this License. The Parties also agree, contrary to anything contained in Section 21.2, that, in any such suit, each Party will bear its own costs including, but not limited to, any attorney's fees it may incur. If, as the result of such a suit, the City's denial is held to be invalid, then such - 10- result shall not affect the enforceability of the remainder of the License. if the City neither consents to nor denies Licensee's request within the thirty (30) day period, then Licensee's request to make new use of City Rights of Way to make natural gas sales to the subject customers to the License shall be deemed granted. If the City neither consents to nor denies Licensee's request within the thirty (30) day period, then Licensee's request to make new use of the City-Owned Property to make natural gas sales to the subject customers shall be deemed denied. Once a new customer is added to the scope of the Licensee, it shall become a permanent part of Licensee's Customer base. City and Licensee agree that Licensee shall not be required by this License to seek City's approval to make natural gas sales to a new customer if: (a) the end user's place of business is outside the corporate City limits; or the portion of GulfTerra System that transports the natural gas to the location of the sale does not use City Rights of Way or City-Owned Property; or (b) the new customer is a Large Volume Customer or is the City- owned Natural gas Distribution System; or (c) the subject sale is validly mandated by a rule, order or statute promulgated by any governmental entity and Licensee gives notice to the City referencing the rule, order or statute within 10 days of such sale. ARTICLE 8 TRANSFER OF CITY RIGHTS-OF-WAY City agrees that, if, during the term of this License or any renewal thereof, it sells any City Rights of Way or City-Owned Property under, on, through or within which the GulfTerra System now or in the future is situated, City will, in writing, inform the buyer of any such property or right-of-way of the existence of this License and convey any property or right-of-way to the Buyer subject to the rights created by this License and the rights created by any of the easements referred to in Section 2.1. Moreover, in the event of any sale of any City Rights of Way or City-Owned Property under, on, through or within which the GulfTerra System now or in the future is situated, during the pendency of this License or any extension thereof, City agrees to make Licensee aware of such sale at least thirty (30) days prior to its being closed. Moreover, City agrees to (1) ensure that the written sales contract which is used to effect any such sale makes the transfer of property subject to this License and any easements granted pursuant to Section 2.1. and (2) ensure that any buyer in such sale agrees in writing to be bound by this License. In the event that City fails to meet the obligations created by this Article 8, it agrees to reimburse Licensee for any and all damages that Licensee suffers as a result of City's failure to meet said obligations. -11- ARTI'CLE 9 1'NDE f4 NI~TY 9.1 Licensee covenants and agrees to fully indemnify and hold harmless the City and the elected officials, employees, officers, directors, volunteers and representatives of the City, individually or collectively, from and against any and all costs, claims, liens, damages, losses, expenses, fees, fines, penalties, proceedings, actions, demands, causes of action, liability and suits of any kind and nature, including but not limited to, personal injury or death and property damage, made upon the City, directly or indirectly arising out of, resulting from or related to Licensee's activities under this License, including any acts or omissions of Licensee, and any respective agent, officer, director, representative, employee, consultant or sublicensee of Licensee, and their respective officers, agents, employees, directors and representatives while in the exercise or performance of the rights or duties under this License, all without, however, waiving any governmental immunity available to the City under Texas Law and without waiving any defenses of the Parties under Texas Law. The provisions of this indemnification are solely for the benefit of the Parties hereto and are not intended to create or grant any rights, contractual or otherwise, to any other person or entity. Licensee shall promptly advise the City in writing of any claim or demand against the City or Licensee known to the Licensee related to or arising out of Licensee's activities under this License and shall see to the investigation and defense of such claim or demand at Licensee's cost. The City shall have the right, at its option and at its own expense, to participate in such defense without relieving Licensee of any of its obligations under this paragraph. 9.2 If City's sole negligence, intentional act or gross negligence causes Licensee or any third party to suffer costs, liens, claims, damages, losses, expenses, fees, fines, penalties, demands, liability, attorney's fees or suits of any kind and nature, including, but not limited to, personal injury, death or property damage, then City, to the extent it legally may, agrees to hold Licensee harmless for all such losses notwithstanding anything to the contrary stated in Section 9.1 above; provided, however, in no event shall City's liability for an occurrence exceed its limits of liability under the Texas Tort Claims Act. I~loreover, if City's intentional act or gross negligence is a cause of the incident for which City claims indemnity against Licensee on the basis of Section 9.1 above, then any duty imposed on Licensee by either of those Sections is hereby agreed by the Par~ies to be without legal effect. ARTZCLE 10 ZNSURANCE 10.1 Without limiting the City's rights to indemnification, Licensee shall (or require its contractors to) provide and maintain insurance, at its own expense, with companies admitted to do business in the State of Texas, in the following type and amounts for the term of this License, including periods of construction and installation of said improvements: -12- TYPE AMOUNT Worker's Compensation during construction or an approved alternate plan et other periods during the term hereof. Statutory, with a waiver of subrogation in favor of City Employers' Liability during construction or an approved alternate plan at other periods during the term hereof. $:!.,000,000 per category, with a waiver of subrogation in favor of City. Commercial General (Public) Liability - to include coverage for the following where the exposure exists: (a) Premises/Operations (b) Independent Contractors (c) Products/Completed (d) Personal Injury Liability (e) Contractual Liability (f) Explosion, Collapse and Underground Property* (g) Broad Form Property Damage (h) Pollution Liability* Combined Single Limit for Bodily Injury and Property Damage: $1,000,000 per occurrence; $5,000,000 general aggregate, or it equivalent in Umbrella or Excess Liability coverage. * Mandatory Property Insurance -- for physical damage to the property of Licensee including actual cash value of improvements and betterments to the PREMISES. Coverage for a minimum of 80% of the replacement cost Any alternate plan for Workers' Compensation and Employer's Liability must be approved in advance by the City's Risk Manager. Alternate plans will not be allowed or accepted during any periods of installation, construction, repairs, additions, alterations, relocation, renovation, remodeling, restoration, reconstruction, or maintenance of the improvements on the City Rights of Way or City-Owned Properb/. 10.2 Licensee further agrees that, with respect to the above-required insurance, that each insurance policy required by this License shall contain the following clauses: (i) This insurance shall not be canceled, limited in scope or coverage, or non-renewed until after thirty (30) days' prior written notice has been given to: City Manager P.O. Box 9277 Corpus Christi, Texas 78469-9277 - 13- Finance Department City of Corpus Christi P.O. Box 9277 Corpus Christi, Texas 78469-9277 Attention: Director of Risk Management (ii) It is agreed that any insurance provided by Licensee is primary to any insurance or self-insurance maintained by the City. (iii) it is agreed that any insurance or self-insurance maintained by the City shall apply in excess of, or not contribute with, insurance provided by this policy. 10.3 Each insurance policy required by this License, excepting policies for Workers' Compensation, Employer's Liability, Property Insurance and Professional Liability, shall contain the following clause: "The City, its officials, employees, representatives and volunteers are added as additional insureds as respects operations and activities or, or on behalf of, the named insured performed under a License with the City." 10.4 In those cases where Licensee makes the initial construction of improvements or any subsequent repair, maintenance, alterations, additional improvements, relocation or reconstruction work, as provided herein, the Licensee shall further procure and maintain in full force and effect during the term of such construction contract and until all work is accepted by the City, (i) builder's risk insurance for the replacement cost of the improvements being constructed; (ii) commercial general liability insurance adequate to fully protect City and Licensee from and against any and all liability for death of, or injury to, persons, or damage to property, caused in or about, or by reason of, the construction of said improvements; (iii) workers' compensation and employer's liability insurance; (iv) professional liability insurance for architects and engineers; and (v) any other liability or other insurance coverage in the amounts and types of coverage approved by City's Risk Nlanager, covering all risks of physical loss during the term of any Contract for such construction work and until said work is accepted by the City. Also payment and performance bonds naming the City as indemnitee shall be provided by the Licensee or its contractors or subcontractors. Should the size and scope of a contract for such construction work be limited in nature, the Licensee may request, in writing to the City's Director of Risk Management, a waiver of the requirements in this Article. A waiver may only be granted by said Director. In any event, the Director's decision shall be final. 10.5 Further, Licensee agrees to provide to City, within thirty (30) days of the execution date of this Agreement, endorsements to the above-required policies, which add to these policies the applicable clauses referenced above in Section 10.3 and Section 10.4: Such endorsements shall be signed by an authorized representative of the insurance company and shall include the - 14- signatory's company affiliation and title. Should it be deemed necessary by the City, it shall be Licensee's responsibility to see that the City receives documentation acceptable to City which confirms that the individual signing said endorsements is authorized to do so by the insurance company. 10.6 Said Notices and Certificates of Tnsurance shall be provided to Director of Risk Hanagement, Finance Department, City of Corpus Christi, P.O. Box 9277, Corpus Christi, Texas 78469-9277. 10.7 Nothing herein contained shall be construed as limiting in any way the extent to which Licensee may be held responsible for the payment of damages to Persons or property resulting from Licensee's activities or the activities of Licensee's agents, employees, sublicensees, or invitees under this License. 10.8 Self-Tnsurance. Licensee shall have the right to self-insure all the coverages to be obtained by Licensee in Article 10 hereof, ARTZCLE 11 TERf4ZNAT;[ON 11.1 Termination. The Parties agree that this License may not be terminated by City prior to the Termination Date for any other reason other than non-payment of the consideration described in Article 5. The License consideration shall be considered "not paid" for the purposes of this Section only in the event that it is more than six (6) months late. The City shall have the right to enforce any other provision of this License by action for damages, specific performance, injunction, or any other remedy under law or equity. 11.2 Termination Obliqations, If this License terminates or expires, City, at its sole option, upon consideration of the nature of the encroachment, may determine and direct Licensee to Abandon any facilities and appurtenance thereto, including lines and equipment. City shall not own the facilities and appurtenances and shall have no responsibility for their maintenance and safety unless the City in writing accepts a particular facility. Section 6.5 shall continue to apply to any facilities and appurtenances not removed by Licensee after termination or expiration of the License. ART1'CLE 12 ASSI'GNHENT/SUBLI'CENSI'NG This License is personal to Licensee; however, Licensee may assign this License to other entities provided that, prior to any such assignment, it shall first obtain the City's written consent to such assignment. City shall not unreasonably withhold its consent to any such Licensee request to assign this Licensee. Tn the event of any transfer of the License to a third party, all of the benefits and obligations created by this License will inure to the benefit of and become binding upon any such assignee. Notwithstanding any of the foregoing, Licensee may assign -15- its interest in the License to any affiliate without the prior written consent of City, but such assignment shall not relieve Licensee of any of its obligations or liabilities hereunder, whether accrued or unaccrued. If Licensee elects during the pendency of this License to sell the GulfTerra System, in whole or in part, to a buyer other than the City, then the City will not unreasonably deny Licensee's request to assign any rights it has under this License to the buyer of said Pipe. ARTI~CLE 13 RENEWAL OF LZCENSE Licensee shall have the right to be re-licensed to use the described City Rights of Way and City-Owned Property for one additional ten-year term. If Licensee desires to remain licensed for the additional ten-year term, it shall notify the City in writing of its desire at least one (1) year prior to the Termination Date. Within thirty (30) days of receipt of such notice, the City shall offer a renewal license agreement that does not require terms, conditions or consideration of Licensee that are unreasonably different from the least restrictive terms, conditions or considerations that are contained in any license in effect for any other pipeline company that is licensed to use City Rights of Way and City-Owned Property at the time of the City's offer. In the event that the Licensee believes that the City's proposal consists of terms, conditions or considerations that are unreasonably different from those of the least restrictive terms, conditions or consideration in effect for any other pipeline company, it shall so advise the City in writing within thirty (30) days of receipt of City's offer, specifying the deficiencies it contends exist in the City's offer. If the Parties cannot then agree on the terms of a new ten(10)-year license agreement within fifteen (15) days of City's receipt of Licensee's written specification of deficiencies, then the Parties agree to undertake the Dispute Resolution procedures set forth in Exhibit "D" of this Agreement, which is incorporated into this License for all intents and purposes. ARTZCLE 14 ANNEXATZON AND RZGHT-OF-WAY WZDEN?NG City acknowledges that it is aware of Texas Utilities Code Section 151.026. Under the terms of this statute, a gas utility having a facility located in the annexed area may continue to exercise in that area the authority granted in Chapter 181, Subchapter B, until the 10th anniversary of the date of annexation without the consent of but subject to the direction of the governing body of the municipality. Section 181.022, in Subchapter B, states that "a gas utility has the right to lay and maintain a gas facility through, under, along, across, or over a public highway, a public road, a public street or alley, or public water." In accordance with said statute, if, during the term of the License, City annexes new area so that the number of feet of the GulfTerra System occupying City Rights of Way is greater than shown in Exhibit "A'; then Licensee is entitled to occupy such new City Rights of Way at no charge for a period of ten years. After the expiration of said ten year period, the subject annexed Rights of Way will become subject to the terms of this License so - 16- that all the provisions, consents, exemptions, releases and other protections offered by this License shall automatically extend to include any new portions of the GulfTerra System within City Rights of Way. In consideration for the License being so extended, at the end of the ten year grace period, Licensee shall pay the City, in its next annual payment after the date of the expiration of the ten year grace period, any additional License fee that results from including any new City Rights-Of-Way occupation footage or crossings, created by the annexation, according to the methodology set forth in Section 5.5 herein, subject to possible modification by Sections 15.1 and 15.2. ARTICLE 15 ANNUAL LICENSE FEE CONTINGENCIES 15.1 City's Failure to Amend Ordinances. In order to implement uniform user fees for all Pipelines, the City intends to enact an ordinance or ordinances ("Ordinance") under which Pipelines occupying City Rights of Way pay $1.25 per year for non-crossing linear footage which occupies City Rights of Way and $500 per year for each crossing of a City street made by the subject Pipe. Licensee shall have no obligation to make any payments that may be required under Section 5.1 other than the payment of the $3,000,000 until an Ordinance providing for charges of $1.25 for non-crossing linear Pipeline footage that occupies City Rights of Way and $500 per crossing for each Pipeline street crossing is passed into law by the Corpus Christi City Council (or until passage of an Ordinance providing for a lesser amount per linear foot or crossing as illustrated by the example below); notwithstanding anything to the contrary described or stated in this License, passage of such an Ordinance is a condition precedent to Licensee's having any obligation to make an annual License payment under Section 5.1. The Ordinance is passed into law when approved by the City Council on final reading, and the payment becomes immediately due upon said approval notwithstanding that a legal challenge to the Ordinance is or might be filed, unless the Change in Law Article has been applied. City will provide written notice to Licensee of the first reading of ANY such Ordinance as well as sending a copy of the to-be- adopted Ordinance in accordance with Section 17.2 herein to be received by Licensee four (4) days prior to the first reading. All other terms of this License will remain in effect for the duration of the License whether or not City passes into law an Ordinance charging for Pipeline use of the City Rights- of-Way and street crossings during the pendency of the License. In the event that the City were to pass into law an Ordinance charging for Pipeline use of the City Rights-of-Way, but that Ordinance charges less than $1.25 per linear foot for Pipeline use of City Rights of Way and/or less than $500 per Pipeline street crossing per annum respectively , then the Parties agree that it is the rates in the subject Ordinance and not the rates specified in Section 5.1 that shall determine Licensee's annual License fee obligation for so long as the lesser rates remain in effect under the Ordinance. In the event that the city were to pass into law an ordinance charging for pipeline use of the city rights- - 17- of-way but that ordinance charges more than $1.25 per linear foot for pipeline use of city rights of way and/or more than $500 per pipeline street crossing per annum respectively, then the parties agree that it is the rates in section 5.1 and not the rates in the ordinance that shall determine licensee's annual license fee obligation. At the time that the subject Ordinance is passed, if ever, Licensee shall, at that time, pay City a sum reflecting its obligation under Sections 5.1 and 15.1 of this License, as appropriately modified by Section 15.2. For example, if, on April 1, 2005, City for the first time passes into law an Ordinance providing that pipelines must pay $1.00 per linear foot for use of City Rights Of Way and $250 per City street crossing per annum, to become effective on April 1, 2005, then Licensee will, at that point, owe City ($1.00 per/ft x 107,157 linear feet of Licensee's pipe located in City Rights of Way or under City Property x 2 years + ($250 x 178 street crossings x 2 years), which sum would then be owed to the City regardless of the operation of Section 15.2. The payment due on October 1, 2004, however, would be subject to possible modification by the application of Section 15.2. In the subject example, if, by December 12, 2004, a date 12 months after the Commencement Date, as prescribed by Section 15.2, only 30% of the non-Licensee footage in the City Right-of-Way is under License, as also defined in Section 15.2, then the annual fee owed under the Ordinance for the period October 1, 2004-October 1, 2005, $151,657, as calculated under Sections 5.1 and 15.1 would be reduced according to the following formula: 72/365 (the period from October i to December 12) x $151,657 + 293/365 (the period from December 12 to October 1) x .3 (the percentage of non-Licensee footage under license on December 12, 2004) x $151,657 or $66,438.22. Because the October 1, 2004 payment will become due before the occurrence of the December 12, 2004 date, Licensee will make the full payment of $151,657 on October 1, 2004 and then will deduct the amount of reduction, $ 85,218.78 ($151,657-$66,438.22)from the payment due on the following Oct 1. In summary, License would, on April 1, 2005, owe the October 1, 2002 payment of $151,657, the October 1, 2003 payment of $151,657 and the October 1, 2004 payment of $151,657 but would be eligible to recover its overpayment of $85,218.78 by deduction from future owed October payments as calculated under Sections 5.1, 15.1 and 15.2. The methodology of pro-rating would be carried forward in future years. For example, if on December 12, 2005 (an anniversary of the Commencement Date), the 30% of non-Licensee footage had increased to 50% (other factors remaining the same), then the annual fee owed under the Ordinance for the period October 1, 2005-October 1, 2006, $151,657, as calculated under Sections 5.1 and 15.1, would be reduced according to the following formula: 72/365 x $151,657 x .3 + 293/365 (the period from December 12 to October 1) x $151,657 x .5 or $69,845.32 15.2 City's Failure to Obtain Necessary Licenses. Notwithstanding whether or not the City passes an Ordinance as described in Section 15.1, City acknowledges that it does not presently have a non-revocable right-of- - 18- way license agreement in effect with any other Pipeline company or owner of a pipeline whose Pipe occupies City Rights of Way or crosses City streets. Furthermore, it is the Parties' intent that Licensee pay City a license fee that is precisely commensurate with that which other Pipeline companies pay to use City Rights of Way . Accordingly, if, twelve (12) months from the date of approval of this License Agreement by the City Council ("Commencement Date") the City does not have a non-revocable right-of-way license agreement in place with each and every one of the other Pipelines (excluding Abandoned Pipe) that use City Rights of Way, then the annual License fee that Licensee has agreed to pay, as set forth in Section 5.1, but subject to possible modification by Section 15.1, shall possibly be subject to further modification as follows: the annual fee for this License, as measured on each respective anniversary date, shall be equal to the License ee, multiplied by a factor equal to the number of linear feet of non-Licensee pipe in the City Rights of Way that is under license to the City divided by the total number of linear feet of non-Licensee pipe in the City Rights Of Way. For example, if by the Commencement Date, only 40% of the total non-Licensee pipe in City Rights of Way is under license, then the fee owed by Licensee on the next October I payment date shall be $222,947.00 (assuming no reduction or increase in the Pipe owned by Licensee in City Rights of Way and City-Owned Property, no reduction in the Ordinance rate, no CPI increase and assuming an Ordinance charging $1.25 for Pipe in City Right of Way and $500 per crossing has been passed), multiplied by 40% or $89,178.80. Provided, however, there shall be excluded from this formula a Pipeline that meets the definition of public utility under Section 182.025(3)(A) and which has been assessed the maximum chargeable under that statute. A Pipeline will be conclusively deemed to be "under license" if: 1) it is under license or other written agreement with the City to pay an amount that is at least equal to the per linear foot City Right Of Way and crossing rates then in effect FOR LICENSEE; or 2) it has made payment to City of an amount at least equal to the sum calculated using the per linear foot City Right of Way and crossing rates then in effect FOR LICENSEE; or (3) the City has filed a lawsuit to collect payment of the amounts calculated using the enacted Ordinance. If litigation by the City is ultimately unsuccessful in requiring payment of an amount at least equal to the amounts calculated using the enacted ordinance, the formula for the appropriate time period will be re-calculated to reduce the amount of effectively charged Pipe, and the City shall refund to Licensee the amount overcharged or shall set it off as a credit against amounts then owing by Licensee under the License. It is recognized that precise calculation of Pipelines and footages occupying City Rights of Way may not be easily ascertainable. The City will, in good faith, determine the amount of unlicensed linear Pipe footage from available public records such City's pipeline safety ordinance filings, files and records maintained by the Railroad Commission of Texas, and local tax records. Within 180 days of Council approval of this License agreement, City shall deliver to Licensee its list of other Pipelines occupying City Rights of Way and its estimate of the respective linear footages involved for each Pipeline. Should Licensee dispute the accuracy of this list, then City will make available the records upon which its calculations and determinations are based and shall attempt, in good faith, to resolve any differences between the Parties by considering the information provided by Licensee that City's determinations are incorrect. 15.3 Licensee's Obliaation. Licensee's annual License fee obligation under Section 5.1, as modified by this Article, shall be the least amount due and owing as calculated under either Section 15.1 or Section 15.2. ARTTCLE 16 CHANGE IN LAW OR REGULAT?ON If any federal statute, state statute, federal or state regulation, order by a regulatory authority, or order by any federal or Texas court that becomes final after the exhaustion of all appeals (collectively "New Law or Regulation") is enacted, issued or decided after this License has been entered into by the Parties and that New Law or Regulation (1) prohibits performance of a material provision under this License; (2) makes performance of a provision under this License illegal, violatory of a statute, order or regulation or impossible; (3) effects a change in a substantive provision of this License that has a significant material adverse impact upon the performance of either Party's obligations under this License, including, without limitation, the imposition of terms, conditions or rate restrictions; or (4) provides that a city is limited in the monetary amount that it may charge a pipeline to use the city streets or city right of way so as to render the amounts owed under Section 5.1 of this License, and as possibly modified by Article 15, to be more that is established or held to be lawful, then the Parties will use all reasonable efforts to revise the License so that performance under the License is no longer prohibited, illegal, impossible or impacts either Party, in an adverse way. Each Party will provide reasonable and prompt written notice to the other Party as to any New Law or Regulation that could affect the rights and obligations of the Parties under this License. If the Parties are unable to revise the License in accordance with the above within 90 days of such written notice, then the Party whose performance that is prohibited, illegal, impossible or impacted in an adverse way will have the right, at its sole discretion, to terminate this License upon thirty (30) days prior written notice to the other Party. The effect of any such termination under this Article shall not affect any payments that have already been made or that have become due under this License prior to the termination and, in particular, and not by way of limitation, will not affect the payment of the $3,000,000. ARTZCLE 17 AMENDMENT No amendment, modification or alteration of the terms of this Agreement shall be binding unless it is in writing, dated subsequent to the date hereof, agreed to and duly executed by the Parties, and approved by the City Council. - 20 - ARTZCLE 18 NOTZCES 18.1 Notice. All notices required or permitted by the terms of this Agreement shall be deemed sufficient if given by personal delivery, or facsimile, or by prepaid, certified mail and addressed to each Party as follows: 18.2 Notice to City. City i~lanager City Attorney City of Corpus Christi City of Corpus Christi P.O. Box 9277 P.O. Box 9277 Corpus Christi, Tx 78469-9277 Corpus Christi, Tx 78469-9277 Telephone: 361 880-3220 Telephone: 361 880-3360 Facsimile: 361 880 3839 Facsimile: 361 880-3239 For Overnight Delivery: 1201 Leopard Street Corpus Christi, Tx, 78401 or to such other address as may be hereafter designated in writing by City. 18.3 Notice to Licensee. Attention: Mark Pyburn GulfTerra Energy Partners, L.P. P.O. Box 4503 Houston, Texas 77210 Telephone: 832-676-5689 Facsimile: 832-676-1113 Notices to Licensee shall be addressed to: Attention: Greg W. 3ones GulfTerra Energy Partners, L.P. P.O. Box 4503 Houston, Texas 77210 Telephone: 832-676-3787 Facsimile: 832-676-1670 For Overniuht Delivery: 4 Greenway Plaza Houston, Tx 77046 or to such other address as may be hereafter designated Licensee. in writing by - 21 - ART'rCLE 19 RELATI'ONSH1'p OF PART'rES Nothing contained herein shall be deemed or construed by the Parties hereto, or by any third party, as creating the relationship of principal and agent, joint ventures or any other similar such relationship between the Parties hereto. It is understood and agreed that neither provisions contained herein nor any acts of the Parties hereto create a relationship other than that of City and Licensee as established by the provisions of this License. ARTZCLE 20 APPLTCABLE LAW This License shall be construed under and in accordance with the laws of the State of Texas and all obligations of the Parties created hereunder are performable in Nueces County, Texas. Venue for any cause of action brought under this License shall be the State courts of competent jurisdiction in Nueces County Texas, unless Texas law requires a matter to be submitted to a particular regulatory body or court outside Nueces County. ARTICLE 21 CAPTTONS The captions contained in this instrument are for convenience only and in no way limit or enlarge the terms and conditions of this License. ARTICLE 22 I~IISCELLANEOUS 22.1 Condemnation. [t is agreed and understood that in the event that City-Owned Property or City Rights of Way is taken, in whole or in part, by a governmental authority other than City, rights created by this License and all rights or permission to use hereunder shall, at the option of City, as to the condemned real property, cease on the date title to such land so taken or transferred vests in the condemning authority. Licensee hereby waives all rights to any proceeds of such condemnation. Licensee shall have the right to seek a separate condemnation award. Nothing herein shall be construed to limit City's condemnation authority. 22.2 Attorney's Fees. In the event either Party brings any action under this License alleging that the other Party hereto has defaulted on or breached obligations created by this License, the Party who prevails is entitled to recover its reasonable attorneys' fees from the losing Party. 22.3 Severabilitv. If for any reason any section, article, subdivision, clause, phrase, word or provision of this ordinance shall be held invalid or unconstitutional by final judgment of a court of competent jurisdiction, it shall not affect any other section, article, subdivision, clause, phrase, word or provision of this ordinance, for it is the definite intent of this City Council that - 22- every section, article, subdivision, clause, phrase or word or provision hereof be given full, force and effect for its purpose; provided, however, that this Section does not apply should the compensation provided to City hereunder be held invalid by final judgment of a court of competent jurisdiction after all appeals, if any, and City may in that event declare this License null and void. 22,4 W~iver, Failure of either Party to require the performance of any term in this License or the waiver by either Party of any breach thereof shall not prevent subsequent enforcement of this particular term and shall also not be deemed a waiver of any subsequent breach. 22.5 Publication. Publication of this License may be at any time after the Effective Date as required by City's Charter 22,6 Other Aqreements Superseded. This Agreement supersedes all previous revocable easements and other agreements between the City and Licensee or Licensee's predecessors regarding Pipelines in City Rights of Way or City-Owned Property. ARTICLE 23 ENTt*RE AGREEMENT This License, together with its exhibits and the authorizing ordinance or ordinances, in writing, constitute the entire Agreement, as it relates to the City- Owned Property or City Rights of Way with any other written or parole agreement with Licensee being expressly waived by Licensee. Tt is understood that the Charter of the City requires that this License with the City be in writing and adopted by ordinance. ARTXCLE 24 MAPS Prior to the execution of this License, Licensee completed a study identifying the position of all of Gulf'Terra System's assets in the corporate limits of the City. As an alternative to using alignment sheets, surveys or as-built drawings as a means to locate the GulfTerra System, the Parties have agreed to use G.I'.S. technology as the methodology for calculating the total number of linear feet of the GulfTerra System that occupies City Right of Way. Licensee has provided this study, including pertinent G.T.S maps and latitude/longitude readings for the points where G.P.S. readings were made, to the City as partial consideration for this License. Within 60 days of any change to the configuration of the Gulf'Terra System within the corporate limits of the City, Licensee shall file with the City Engineer the then most current map or sets of maps of Licensee's assets within the City, Any such maps shall be in digital format compatible with the City's G.I.S. software. The Parties agree that the described G.I,S. method that was selected for preparation of the subject maps is subject to inaccuracies and approximations and was intended solely for the purpose of calculating the annual license fee due under the terms of this License and for no other purpose. The Parties further agree that the prepared maps may not be - 23- reflective of the actual physical position of the GulfTerra System at any given point on a map and should not be relied upon, either within the City or on private property, to actually locate or describe the physical position of any given segment of GulfTerra System pipe therein. The City has been provided digital identification of the above-described latitude/longitude readings and has verified, by use of its own computers and software, that the linear footage and crossing figures used in Section 5.1 are correct. ARTZCLE 25 ACCOUNTZNG 25.1 Recordkeeaina. Licensee shall maintain adequate books and records describing the performance of its obligations under this License. 25.2 Audit. City may cause, upon reasonable notice, an audit to be made of the books and records of Licensee relating to Licensee's performance under this License. The omission by City to exercise its rights to any audit at any time shall not constitute a waiver of such right, in the event that City elects to exercise its right of audit, City shall provide to Licensee written notice at least five (5) business days in advance of the audit. City shall select the auditor. Licensee shall make available to the auditor personnel and records reasonably necessary to complete the audit. Licensee shall answer questions and provide records or information within fourteen business days of any written request therefore. City shall bear the cost of any audit. City and Licensee shall meet and attempt in good faith to resolve any disputed issues arising from the audit report. [REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] - 24- EXHZBTT "A" PROPERTY DESCRTPTZON EXI~IIBIT "A' EXHI'BZT "B" Lt'ST OF RELEASES EXHIBIT "B" Exhibit "B" Attached to and made a part of that certain License Agreement dated December __, 2003 by and between the City of Corpus Christi and Gulfl-erra Energy Partners, L.P. LTST OF RELEASEES General Recitals of the Parties The Parties acknowledge and agree that because of the various transactions that have occurred between El Paso Corporation, Coastal Corporation, PG&E Energy Group and GulfTerra Energy Partners, L.P. from 1998-current, as described on this Exhibit "B", an all inclusive list of all entities owning and transporting and selling natural gas, natural gas liquids and other petroleum based products within the City is not readily available. Therefore, notwithstanding the absence from this Exhibit "B" of any particular entity not herein described, the Parties acknowledge and agree that the intent of this License is to provide for a full and unconditional release of El Paso Corporation (and entities it wholly owns) and GulfTerra Energy Partners, L.P. (and entities it owns or controls) of and from any and all actual or potential liability incurred by them or the predecessors to the present entities so owned or controlled by El Paso Corporation and Gult-Terra Energy Partners, L.P., for street rentals, license fees, franchise fees related to the ownership of Pipelines, the transportation and sale of natural gas, natural gas liquids and other petroleum based products therewith, under, on, through or within the City Right of Way, City Owned Property or otherwise within the boundaries of the City, or other amounts claimed to be due the City for the unauthorized use of such property at anytime in the past, as more specifically described in Section 5.2 of the License. Representations of Licensee Licensee represents the following with respect to El Paso Corporation, GulfTerra Energy Partners, L.P. and the Releasees: 1. Pursuant to a Stock Purchase Agreement dated .January 27, 2000 and effective December 22, 2000, by and between PGAE National Energy Group ("Seller") and El Paso Field Services Company ("EPFS"), EPFS acquired 100% of the equity interests in (i) PG&E Gas Transmission, Texas Corporation, a Delaware corporation, and (ii) PG&E Gas Transmission Teco, Inc., a Delaware corporation, each of which owned or controlled entities that have conducted business in the City during some period of time in the past. 2. Pursuant to a Merger Agreement by and between Coastal Corporation and El Paso Corporation, dated in January 2000 but made effective in ]anuary 2001, all of the entities owned by the Coastal Corporation, some of which conducted business in the City during some period of time in the past, were merged into El Paso Corporation. 3. In 1993, Leviathan Energy Partners, L.P., a publicly traded master limited partnership was formed. In 1998, El Paso Corporation acquired 100% of the general partnership of this entity along with certain limited partnership units not held by the public. The name of this entity was then changed to El Paso Energy Partners, L.P. 4. Effective April 2002, pursuant to a Purchase, Sale and Merger Agreement dated April 8, 2002, by and between El Paso Energy Partners, L.P. and El Paso Tennessee Pipeline Company, El Paso Energy Partners, L.P. acquired all of the equity interests of EPGT Texas Pipeline, L.P., and other entities owning Texas pipelines. H:\A~Field Services\Eric\CoP2us Chris~ii-Sep! 03-Releasees.doc Page I 5. Effective May 15, 2003, El Paso Energy Partners, L.P. changed its name to GulfTerra Energy Partners, L.P. 6. On the date of this License, El Paso Corporation indirectly owns 100% of the general partnership interest in Gulf'l'erra Energy Partners, L.P. ("GTM"). The general partner interest in GTIVl is held by Gult'Terra Energy Company, L.L.C. As of such date, El Paso Corporation owns approximately 27% of the issued and outstanding limited partnership units in GTM, the remainder is owned by the public. 7. All Releasees listed or described below,other than Licensee and Nos. 4, 10, 19, and 28-35, that are currently in existence, are wholly-owned by El Paso Corporation. 8. Licensee presently owns all Pipe identified in Exhibit "A". Other than Licensee, as of the date of this License, no other Releasee listed or described herein owns any Pipe or Pipeline within the City's corporate boundaries. 9. The abbreviation f/k/a, as it is used in this Exhibit, means "formerly known as". In each case where f/k/a appears, it denotes that a change of name [or change of control resulting from the stock and/or merger described herein] has occurred. The following are the Releasees: EL PASO CORPORATION, including the entity f/k/a El Paso Transmission Company f/k/a PG&E Gas Transmission f/k/a Texas Corporation f/k/a Valero Energy Corporation EL PASO FIELD SERVICES MANAGEMENT, INC. f/k/a EPGT Natural Gas Company f/k/a PGE Texas Natural Gas Company f/k/a Valero Natural Gas Company EL PASO FIELD SERVICES MANAGEMENT, INC. f/k/a EPGT Pipeline Company f/k/a PG &E Texas Pipeline Company f/k/a Valero Transmission Company, EPGT Pipeline, L.L.C. GULFTERRA TEXAS PIPELINE, L.P. f/k/a EPGT Texas Pipeline L.P. f/k/a PG&E Texas Pipeline, L.P., f/k/a Valero Transmission EL PASO FIELD SERVICES MANAGEMENT, INC., f/k/a EPGT-VT Company f/k/a Valero Transmission Company f/k/a Lo Vaca Gathering Company EL PASO FIELD SERVICES MANAGEMENT, INC. f/k/a EPGT Natural Gas, L.L.C. f/k/a EPGT Texas Field Services Company f/k/a PG & E Texas Field Services Company f/k/a Valero Field Services Company EL PASO FIELD SERVTCES MANAGEMENT, INC. f/k/a EPGT Pipeline, L.L.C. f/k/a El Paso Gas Storage Company f/k/a PG &E Texas Gas Storage Company f/k/a Valero Gas Storage Company EL PASO FIELD SERVICES MANAGEMENT, INC. f/k/a EPGT Natural Gas, L.L.C. f/k/a EPGT Hydrocarbons Company f/k/a PG & E Hydrocarbons Company f/k/a Valero Hydrocarbons Company H:\A~Field Services\Eric\Co~pus Christi-Sept 03-Releasees doc Page 2 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. EL PASO HYDROCARBONS, L.P. f/k/a PG & E Hydrocarbons, L.P. f/k/a Valero Hydrocarbons, L.P. GULFTERRA FIELD SERVICES, L.L.C. f/k/a EPN Field Services, L.L.C. f/k/a El Paso Hub Services Company f/k/a PG 8, E Texas Hub Services f/k/a Valero Storage and Transfer Company EL PASO TRANSMISSION, L.L.C. f/k/a EPGT Texas Management Company f/k/a PG 8x E Texas Management Company f/k/a Valero Management Company. EPGT Gas Partners, L.P. (Dissolved 12/31/01) f/k/a PG & E Texas Gas Partners, L.P. f/k/a Valero Natural Gas Partners, L.P. EPGT Management Partnership, L.P. (Dissolved 12/31/01) f/k/a PG&E Texas Management Partnership f/k/a Valero Management Partnership, L.P. EL PASO PRODUCTION OTL & GAS, USA, L.P. f/k/a El Paso Production Offshore Partnership II, L.P. f/k/a EPGT-Tex, L.P. f/k/a PG&E-Tex, L.P. f/k/a Valerotex, L.P. EL PASO FIELD SERVICES MANAGEMENT, INC. f/k/a EPGT Natural Gas, L.L.C. f/k/a EPGT Trading Holdings Company f/k/a EPGT Texas Energy Company f/k/a PG&E Texas Energy Company EL PASO REATA ENERGY, L.P. f/k/a PG&E Reata Energy, L.P. f/k/a Reata Industrial Gas, L.P. EL PASO FIELD SERVICES MANAGEMENT, INC. f/k/a EPGT Natural Gas, L.L.C. f/k/a EPGT Trading Holdings Company f/k/a PG&E Energy Trading Holdings Corporation f/k/a Valero Gas Marketing Company f/k/a Reata Industrial Gas Company EL PASO NGL MARKETING, L.P. f/k/a PG&E NGL Marketing, L.P. f/k/a Valero Marketing, L.P. GULFTERRA TEXAS PIPELINE, L.P. f/k/a EPGT Texas Pipeline, L.P. f/k/a EPGT Texas LDC, L.P. f/k/a PG&E Texas LDC, L.P. f/k/a VLDC, L.P. EL PASO RIVER CITY ENERGY, L.P. f/k/a PG&E Rivercity Energy, L.P. f/k/a Rivercity Gas, L.P. EPGT TEXAS VGM, L.P. f/k/a PG&E Texas VGM, L.P. f/k/a Valero Gas Marketing, L.P. EL PASO INDUSTRIAL ENERGY, L.P. f/k/a PG&E Texas Industrial Energy, L.P. f/k/a Valero Industrial Gas, L.P. WEST TEXAS PIPELINE COMPANY f/k/a EPGT West Texas Pipeline Company f/k/a PG&E West Texas Pipeline Company f/k/a Valero-Teco West Texas Pipeline Company EL PASO DAUPHIN ISLAND COMPANY, L.L.C., which holds a joint venture interest along with DUKE ENERGY FIELD SERVICES, L.L.C. in Dauphin Island Gathering Partners f/k/a Gas Transmission Teco, Inc. Hg,A~Field Services\Eric\Corpus C}uisti-Sept 03-Releasees doc Page 3 f/k/a PG&E Gas Transmission Teco, Tnc. f/k/a PGS~E Gas Transmission Texas Corporation and Teco Pipeline Company 25. TECO GAS GATHERING, L.L.C. 26. EL PASO SPM COMPANY f/k/a Teco Gas Marketing, L.L.C. f/k/a Teco Gas Marketing Company 27. TECO GAS PROCESSING, L.L.C. 28. GULFTERRA ENERGY PARTNERS, L.P. 29. GULFTERRA SOUTH TEXAS, L.P. 30. GULFTERRA FIELD SERVICES, L.L.C. 31. GULFTERRA G.C., L.P. 32. Any and all interests held by El Paso Corporation (and entities it wholly owns) or GTM (and entities it owns or controls) in liabilities belonging to NUECES INDUSTRTAL GAS COMPANY 33. Any and all interests held by El Paso Corporation (and entities it wholly owns) or GTH (and entities it owns or controls) in liabilities belonging to LOVACA GATHERING COMPANY 34. Any and all interests held by El Paso Corporation (and entities it wholly owns) or GTM (and entities it owns or controls) in liabilities belonging to Southern Community Gas Corporation 35. Gulfterra Energy Company, L.L.C., the general partner of GTM. 36. All wholly-owned subsidiaries of El Paso Corporation and any subsidiary (any entity owned or controlled directly or indirectly) of GULFTERRA ENERGY PARTNERS as of the date the City Council approves this License, whether or not already listed above in this Schedule. 37. All wholly-owned subsidiaries of the Coastal Corporation as of December 31, 2000, whether or not already listed above in this Schedule, that were merged into El Paso Corporation 38. The directors, employees, officers and other representatives of all of the Releasees listed in numbers 1-37 inclusive above. H:\A\Field Services~Eric\Corpus Christi-Sept 03-R¢leasees doc Page 4 EXHI'BI'T "C" FORM OF EASEMENT Exhibit "C" EXHZBZT "D" DISPUTE RESOLUTION procedure 2 Sgbmission to Mediator. (a) If a new agreement is not agreed upon during the time provided in Article 13 of the License Agreement ("Dispute"), either Party may request the appointment of a mediator, following which request the Parties shall forthwith use reasonable efforts to agree upon the appointment of a mediator mutually acceptable to the Parties. If the Parties do not agree on the appointment of a mediator within ten (10) days of any such request, then either Party may request the President of the Corpus Christi Bar Association to appoint a mediator. Any mediation shall take place in Corpus Christi, Texas. (b) The Parties shall meet with the mediator at such reasonable times as the mediator may require and shall, throughout the involvement of the mediator, continue to negotiate in good faith to resolve their Dispute. All proceedings involving a mediator are agreed to be without prejudice to the Parties' respective rights, and the cost of the mediator shall be shared equally by the Parties. If the Dispute is not resolved within thirty (30) days after the mediator is appointed, or within such longer period as may be mutually agreed to by the Parties, the mediator shall terminate the mediated negotiations by giving notice to the Parties; provided that, the mediator may, at any time during the mediation period, declare an impasse and terminate the mediation. The mediator shall keep confidential all information learned in private caucus with any Party unless specifically authorized by such Party to make disclosure of the information to the other Party. The Parties agree that the entire mediation process shall be kept confidential, and any actions, statements, promises, offers, views and options taken, made or expressed shall be treated as compromise and settlement negotiations and shall not be discoverable or admissible in any proceeding for any purpose. The Parties agree that the mediator shall be considered as "disqualified" as a witness, consultant, expert or counsel for any Party with respect to the Dispute and any related matters. S~cond Mediation In the event that the Parties fail to resolve a dispute arising out of Section 13.1,after mediation, or if the mediation is terminated due to the mediator declaring an impasse, then the Parties agree to participate in a second mediation to again be conducted in accordance with the provisions of this Exhibit "D". The Parties shall select a different mediator. In the event the parties fail to resolve the Dispute after the second mediation, each Party will be left to its own legal remedies if any. Exhibit "D' Page !