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HomeMy WebLinkAboutC2006-235 - 6/6/2006 - Approved GAS SUPPLY CONTRACT BETWEEN NATIONAL ENERGY & TRADE, LP ("SELLER") AND THE CITY OF CORPUS CHRISTI, TEXAS ("BUYER") 2006-235 06/06/06 Res026k 18 '\ational Ener~.v & Trade ......' --- INDEX Article Definitions.... . II Quantity & Price III Points of Delivery and Pressure. IV Measurement . . Page .........1 .........3 .........9 .........9 V Measuring Equipment & Testing Provisions... . .......12 \/1 Quality... ..... ....... .............14 VII Transfer of Assets. . ...... .17 VIII InVOicing, Payment and Audit.. . ........19 !X Term.. ... ..... .. . ......... ........20 X Force Majeure... ... ...... . .......20 XI Successors and Assigns ........21 XII Warranty of Title ......... .......21 XIII Indemnity....... ..... ....... .......21 XIV Transfer of Title To and Possession of Gas .... ........23 XV Regulatory Bodies ................. . .. . .... 24 XVI Contract Administrator ...... ........ .......24 XVII I ndependent Contractor .... ....... ........25 XVIII Insurance ....- .... ............... . ........25 XIX Subcontractors.. . .... .......... ................ ........25 XX Fiscal Year... ................ ........26 XXI Waiver . . . . . . . . . ...... ........26 R63303B 1 DOC >(XII Compliance with Laws XXIII Dispute Resolution XXIV Limitation of Liability XXV Duty to Mitigate XXVI Application of UCC XXVII Confidentiality . XXVIII General Provisions XXIX Venue . XXX Amendments. XXXI Termination.. XXXII Notice .. .. ....26 .. ..27 .. . .. . .28 . ...... .29 . .. . .. .30 .. . ...30 ......31 .......31 .......31 ........31 . . .. .. .. 32 R63303B1 DOC GAS SUPPLY CONTRACT BETWEEN NATIONAL ENERGY & TRADE, LP AND THE CITY OF CORPUS CHRISTI, TEXAS GAS SUPPLY CONTRACT NO. THIS CONTRACT is made and entered into by and between National Energy & Trade, LP, a Texas Limited Partnership, with its offices at 5847 San Felipe, Suite 1910, Houston Texas 77057 hereinafter referred to as "Seller," and the CITY OF CORPUS CHRIST! TEXAS, a municipality, with its offices for purposes of this Contract at 4225 South Port Avenue Corpus Christi Texas 78415-5311 hereinafter referred to as "Buyer "'Seller' and Buyer" may also be referred to in this Contract individually as ''Party' or collectively as "Parties," ARTICLE I DEFINITIONS Except as otherwise specified, the following terms as used herein shall be construed to have the following scopes and meanings: 1 Day means the period from nine o'clock (9:00) a,m. local time to the next nine o'clock (9:00) a.m. local time 2 Month means a period of one (1) calendar month commencing at nine o'clock (9'00) a m local time on the first day of any calendar month and ending at nine o'clock (9:00) a.m, local time on the first day of the next succeeding calendar month 3 Year means a period of three hundred sixty-five (365) consecutive days provided, however, that any such period which contains the date of February 29 shall consist of three hundred sixty-six (366) consecutive days. R63303B < DOC Page 1 of 34 J. PSla means pounds per square inch. absolute. c, Gas means natural gas that meets the quality standards contained in this Contract. h Cubic Foot of Gas means the volume of dry gas contained in one (1) cubic foot of space at a standard pressure base of fourteen and seventy-three hundredths (14.73) psia and a standard temperature base of sixty (60) degrees Fahrenheit hereinafter referred to as "F" 7 Met means one thousand (1.000) cubic feet 8. British Thermal Unit or BTU means one (1) the measurement unit of the quantity of heat required to raise the temperature of one (1) avoirdupois pound of oure water from fifty-nine and five tenths (59.5) degrees F to sixty and five-tenths 60.5) degrees F at a constant pressure of fourteen and seventy-three hundredths (14.73) psia 9. MMBTU means one million (1,000,000) BTUs. 10 Gross Heating Value means the number of BTUs produced by the complete i:ombustion at constant pressure of one cubic foot of gas saturated with water vapor at a constant pressure of fourteen and seventy-three hundredths (14.73) aSia and under standard gravitational force (acceleration 32.175 feet per second per second) with air of the same temperature and pressure as the gas, when the oroducts of comt)ustlon are cooled to the initial temperature of the gas and air and when the water formed by such combustion is condensed to the liquid state. The Gross Heating Value of gas delivered under this Contract shall be corrected from the conditions of testing to those of the actual conditions, expressed in BTU R63303B 1 Joe Page 2 of 34 per cubic toot and reported at a pressure base of fourteen and seventy-three hundredths (14. ~'3) pSla: however. if the gas as delivered contains seven (7) Dounds of water or less per one million (1.000,000) cubic feet, such gas shall be ;jeemed to be drl 11 MAOP means the maximum allowable operating pressure of the City's system as shown in Exhlbit..A, attached to and made part of this Contract. 1 " L Mineral interest gas means that royalty share of gas owned by Buyer from wells producing, Dr will in the future produce, on City of Corpus Christi property of which Buyer has a legal right to take in kind, and which Buyer at its sole discretion receives directly into Buyer's distribution system. 13 Effective Date means the first day of July 2006. ARTICLE" QUANTITY & PRICE 1 Subject to the terms and conditions of this Contract, commencing with the effective date and continUing throughout the term of this Contract. Seller agrees to deliver and sell and Buyer agrees to accept and purchase one hundred (100) percent of Buyer's total dally gas requirement. with the exception of royalty gas and Liquefied Natural Gas "LNG"} supplied from a source other than Seller, for resale within the operation of Buyer's distribution system, which is illustrated in Exhibit "B." attached to and made part of this Contract. as such distribution system exists and may be reduced, enlarged, or extended from time to time The Parties acknowledge, however, that Buyer shall be entitled to use its royalty gas and LNG supplied from a source other than Seller to satisfy a portion of its daily gas requirements "/63303B 1 DOC Page 3 of 34 2 If Buyer elects to purchase LNG supply from a source other than Seller, then Buyer will enter Into a transportation agreement with Seller, or Seller's affiliate. Seller, or Seller's affiliate will reserve firm capacity in its pipeline system for Buyer and Buyer will De charged and will pay for the following fees. In addition to the monthly reservation fee In Paragraph 5 of this Article II, as per the payment terms of this Contract: a I Demand charges of $005 (five cents) per MMBtu times the number of days per season, times the amount of reserved capacity per season, season defined as "Summer' April through October and "Winter" - November through March. Reserved capacity will be an amount equal to the maximum quantity Buyer delivers to Seller, or Seller's affiliate, at the points of receipt of its pipeline system, for redelivery to Buyer at the points of delivery. Summer reserved capacity will be 6.000 MMBtu per day. Winter reserved capacity will be 16,000 MMBtu per day ibl Commodity price of $0,05 (five cents) times the actual quantity transported by Seller or Seller s affiliate, on behalf of Buyer. Buyer shall have the responsibility to maintain as nearly as practicable, on an hourly, daily and monthly basis, an equal balance between quantities of gas nominated by Buyer at a receipt pOint and quantities delivered by Seller, or Seller's affiliate, to a delivery point If Buyer does not maintain an equal balance, the resulting daily and monthly Imbalances will be cashed out in accordance with this Section Each Party will designate appropriate authorized representatives to work With each other in the scheduling of all deliveries of supply under this Contract R63303B 1 DOC Page 4 of 34 R63303B 1 DOC 1) Dally balancing requirement - Buyer agrees that if deliveries of gas at the pOlnt(s) of delivery on any given gas day exceed receipts of gas at the pOlnt(s of receipt on any such gas day by greater than five percent (5%), Buyer shall purchase from Seller any gas volumes in excess of five percent (5%) on that day at a price equivalent to the East-Houston-Katy Houston Ship Channel Daily Midpoint price reported times one hundred fifteen percent (115% . If receipts of gas at the point(s) of receipt on any given day exceed deliveries of gas at the point(s) of delivery on any such day by greater than five percent (5%), Seller shall purchase from Buyer any gas volume In excess of five percent (5%) on that day at a price equIvalent to the East-Houston-Katy Houston Ship Channel Daily Midpoint price reported times eighty five percent (85%). (2) Monthly balancing requirement - Buyer agrees that if deliveries of gas at the point(s) of delivery on any given month exceed receipts of gas at the pOlnt(s) of receipt by greater than five percent (5%), Buyer shall purchase from Seller any gas volumes in excess of five percent (5%) at a price eqUivalent to the East-Houston-Katy Houston Ship Channel Daily Midpoint price average for that month times one hundred twenty percent (120%) If receipts of gas at the point( s) of receipt on any given month exceed deliveries of gas at the point( s) of delivery by greater than five percent (5%), Seller shall purchase from Buyer any gas volume in excess of five percent (5%) at a price equivalent to the East-Houston-Katy Page 5 of 34 Houston Ship Channel Daily Midpoint average price reported times eighty percent (80%) 3 The contract price of gas delivered into Buyer's gas distribution system for the full contract term shall be equal to the Houston Ship Channel delivery point in the table titled East-Houston-Katv Midpoint price as published in Platt's Gas Daily Daily Price Survey referred to in this Contract as the "HSC Index", plus $.10/MMBTU. In other words. the price for any day of delivery shall be determined by the following formula: HSC Index + $0 1000 (ten cents) per MMBtu The price under the contract shall be adjusted accordingly effective as of the first day of July 2006, and every day of each month during the term of the contract 4 If at any time the HSC Index should cease to be published or otherwise becomes unavailable or not calculable, Buyer and Seller shall meet as soon as practicable after the HSC Index is no longer available to determine and agree upon a comparable "Substltute Index' The Substitute Index shall be implemented retroactively as of the first day of the month In which the HSC Index became unavailable. a} If despite their good faith efforts, Buyer and Seller are unable to agree on a Substitute Index (to replace the HSC Index) within thirty (30) days after the time the HSC Index s no longer In existence, they shall, within fifteen (15) days thereafter. each promptly prepare a prioritized list of up to five (5) alternative published reference price postings or prices representative of spot prices for 'latural gas delivered in the same geographic area covered by the Contract. The first listed index appearing on each Party's list will constitute the Substitute Index. R6330381 DOC Page 6 of 34 If no common inrjices appear on the lists, each Party will submit a new listing adding two Indices. (b) If the Parties are still unable to reach agreement on a Substitute Index based on the procedures described in the foregoing paragraph, they will then have fifteen 15) days (following their final failure to reach a voluntary agreement on a Substitute Index to agree on the appointment of an expert who will be given the responsibility of establishing a Substitute Index for the Parties for use in this Contract This expert will be knowledgeable and experienced in natural gas marketing and pricing matters in Texas and along the Gulf Coast of the United States (c) All costs associated with hiring the expert will be divided equally among the Parties. The expert will have thirty (30) days to identify a Substitute Index for use by the Parties under the Contract The expert's selection of a Substitute Index shall be final and non-appealable by the Parties. In the unlikely event that the Parties are not able to agree on the selection of an expert in accordance with the procedures described above. they will request the President of the Natural Gas Supply Association to appoint an expert for them, and his selection of an expert to determine a Substitute Index shall be binding on the Parties. 5 In addition to the Price per MMBTU paid by Buyer to Seller under this Contract as described in Article II, Paragraph 3 Buyer also agrees to pay Seller on the Effective Date an additional monthly reservation fee of $0 1600 (sixteen cents) per MMBTU on an assumed sales quantity of 15,000 MMBTU per day for the 60 month period. R633038' DOC Page 7 of 34 6 It is understood by the Parties that this reservation fee among other things, will serve to reimburse Seller for ail of the following costs it IS incurring under the Contract: (a) .AlI fixed costs associated with the reservation fee component of firm transportation cilarges that Seller will have to pay to pipeline transporters in connection with Seller's shipment of gas sold and delivered to Buyer under the terms of this Contract (b) Seller's fixed operating and maintenance ("O&M") expenses relating to Seller's performance of Its duties and obligations owed to Buyer under this Contract. (c) All of Seller's expenses relating to the construction of new facilities and the acquisition of eXisting pipelines (d) Seller's building and Installing of some new gas metering and regulating facilities at interconnects with Buyer's facilities, which are provided for under the Contract 7 Buyer and Seller agree to consider alternative pricing options, and the pricing method may be changed by mutual agreement, as evidenced by a written amendment executed by both parties to thIs contract. Through an adjustment to the Index price, Buyer agrees to reimburse Seller, or Seller's affiliate, for any fees, levies, licenses, charges or taxes imposed by Buyer or imposed by any other local or governmental authonty with respect to this Contract. for the term of this Contract. 8. Seller agrees to pay $50.000.00 (fifty thousand dollars) to Buyer at the end of each Contract year for the benefit of Buyer's Heat Help assistance program. R63303B' DOC Page 8 of 34 ARTICLE III POINTS OF DELIVERY AND PRESSURE The POints of Delivery for all gas to be sold and purchased under this Contract shall be at the outlet of Seller's (or Seller's designee's) existing metering and pressure regulating facilities identified In Exhibit "A", attached to and made a part of this Contract, which may be amended from time to time as Points of Delivery are added or deleted. 2 The gas delivered into the Corpus Christi System at Locations 4, 5, and 6, the Annaville/Calallen System at Locations 10 and 11 (upon transfer of assets as described In Article VII. Paragraph 2(b), and completion of the necessary interconnect), and the Padre Island North Beach and Packery Channel Systems shall be measured through facilities which are owned, operated and maintained by Seller or Seller's designee. The gas delivered Into the Country Creek/King Estates System and Farm Taps shall be measured through facilities. which exist and are owned, operated and maintained by Buyer or Buyer s designee upon transfer of assets. 3. The gas delivered hereunder by Seller (or Seller's designee) to Buyer shall be delivered at the pressure described as normal operating pressure in Exhibit "A" at the POINTS OF DELIVERY ARTICLE IV MEASUREMENT The measurement provisions for pOints of delivery shall be as follows: a Unit of Volume -- The Unit of Volume for measurement of gas sold and purchased shall be one (1) cubic foot of gas as provided by Sections 91.051 through 91 062 of the Texas Natural Resources Code. R63303B1 DOC Page 9 of 34 Basis -- All measurement facilities under this Contract shall be operated under the standards approved by the American National Standards Institute of June 28, 1977 and prescribed in the Gas Measurement Committee of the American Gas Association referred to In this Contract as AGA, Report Number 3/American Petroleum institute Manual of Petroleum Measurement Standards, Chapter 14.3 AGA Report No 3/API 143) as it is now and from time to time may be revised, amended. or supplemented Where measurement is by other than orifice meters. determination of the necessary factors for proper volume shall be as mutually agreed In writing by the parties. Atmospheric pressure -- The atmospheric pressure applicable at all points of delivery shall be determined In accordance with AGA Report No. 3/API14.3 as it :s now and from time to time may be revised. amended or supplemented. j. Ideal Gas Laws -- Measurement under this Contract shall be corrected for deViation from Ideal Gas Laws, and corrections shall be determined in accordance with AGA Report No. 3/API 14.3 as it is now and from time to time may be revised, amended or supplemented. e. Where a displacement meter is used. the square of the orifice meter super- compressibility factor shall be applied. except as may otherwise be agreed in writing by the parties Determination of Flowing Temperature -- The temperature of gas flowing through the measuring facilities under this Contract shall be determined by means of the continuous use of a recording thermometer or by such other method as the oarties hereto may agree in writing. The arithmetic average R63303B' DOC Page 10 of 34 1emperature of the gas recorded each day, during periods of flow only, shall be used in computing the quantity of gas delivered for that day. g. Determination of Specific Gravity -- The specific gravity of gas flowing through the measunng facilities under this Contract shall be determined by use of a continuously recording gravitometer. The arithmetic average specific gravity recorded each day, during periods of flow only, shall be used in computing the gas volume for that day In the event a recording gravitometer is not installed, the specific gravity of the gas under this Contract shall be determined at approximately 3D-day intervals or at such other intervals as may be mutually agreed upon In writing by the parties hereto. by means which are approved by the AGA as set forth in its Gas Measurement Manual or by fractional analysis by the use of a spot or continuous sample taken at the point of delivery. '1. Fractional analysis will be on a real gas basis in accordance with ANSI/ASTM 03588-79. as it is now and from time to time may be revised, amended or supplemented Specific gravities so determined will be used in calculating gas volumes under this Contract tor the month in which the test is made and all succeeding months until that month in which a new sample is taken. , Determination of Gross Heating Value -- The gross heating value of the gas shall be determined by means)f a recording calorimeter, employing the Thomas principle of calorimetry. proportional to flow continuous sample, or such other method mutually agreed upon in wnting by the parties hereto The arithmetic average of the hourly gross heating value recorded each day, during periods of flow only, shall be considered as the heat content of the gas during such day. If a recording calorimeter is not available, the R63303B' DOC Page 11 of 34 gross heating value shall be determined at 30-day intervals or at such other intervals as may be mutually agreed upon In writing by the parties hereto, by the use of spot or continuous samples taken at the pOints of delivery. Gross heating value of a sample to be obtained either by calorimeter or chromatographic analysis using values of physical constants for the gas compounds. and the procedure for determining the gross heating value of the gas shall be on a real gas basis In accordance with ANSI/ASTM D3588-79, as it is now and from time to time may be revised. amended, or supplemented. The gross heating value of gas so determined shall be considered for all purposes to be the gross neating value of the gas for the month in which the sample is taken and all succeeding months untli that month in which a new sample is taken. ARTICLE V MEASURING EQUIPMENT AND TESTING PROVISIONS The measuring equipment and testing provisions for points of delivery shall be as follows a. Access-- The parties hereto shall at all reasonable times have access to the premises of each other insofar as such premises are connected with any matter 'Jr thing covered hereby. for Inspection. operation, installation, removal, repair and testing of equipment. but the operation of measuring equipment and changing of charts shall be done only by the employees or agents of the owner of such equipment b. Testing and Repair of Equipment -- Seller (or Seller's designee) and Buyer (or Buyer's designee) shall keep their respective measuring equipment, pressure regulators and overpressure protective equipment, including calorimeters, R63303B. DOC Page 12 of 34 accurate and in repair. makmg such monthly tests as Seller and Buyer may deem necessary. Buyer (or Buyer s designee) and Seller (or Seller's designee) agree to provide each other sufficient advance notice of the time of such tests so that Buyer (or Buyers designee) or Seller (or Seller's designee) may conveniently have its representative present In the event measuring equipment is found to be Inaccurate. It will be adjusted to register accurately. In the event either party or Seller's designee desires a special test of any measuring equipment, the parties shall cooperate to secure prompt verification of the accuracy of such equipment. If upon any test the percentage of Inaccuracy of the measuring equipment is found to be in excess of one (1) percent, registrations thereof shall be corrected for a period extending back to the time such inaccuracy occurred if such time is ascertainable. and if not ascertainable, then back one-half (1/2) of the time elapsed since the last date of calibration not to exceed fifteen (15) days. Correction for Inaccurate Measurement -- If for any reason any measuring equipment is out of service or out of repair so that the quantity of gas delivered through such equipment cannot be ascertained or computed from the readings thereof. the quantity of gas so delivered during the period such equipment is out )f service or OUl of repair shall be estimated and agreed upon by the parties hereto based upon the best available data, using the first of the following methods which is feasible: (1) By using the registration of any check measuring equipment registering accurately R63303B' DOC Page 1 3 of 34 2) By (::orrectlng the error if the percentage of error is ascertainable by c;alibratlon test or mathematical calculation: or 3) By estimating the quantity of gas delivered under this Contract based on quantities delivered during preceding periods under similar conditions when the respective measuring equipment was registering accurately. Inspection of Charts and Records -- The charts and records from the measuring equipment shall remain the property of the owner thereof and same shall be retained for a period of not less than two (2) years. At any time within such period. upon request each party or Seller's designee will submit records and charts from the measuring equipment, together with calculations therefrom, for Inspection and verification by the other party or Seller's designee. Such records and charts shall be returned to the party providing same within thirty (30) jays after receip' e Installation of Check Meters -- Buyer may, at its option, install a check meter for checking the metering equipment at the Points of Delivery; same shall be so installed as not TO interfere with the operation of metering facilities of Seller or Seller's designee ARTICLE VI QUALITY 1 The quality provisions for points of delivery shall conform to the following specifications: a. Oxygen-- The oxygen content may not exceed one (1) percent by volume. R633038 ^ DOC Page 14 of 34 - HYdrogen Sulfide/Mercaptan -- Neither the hydrogen sulfide nor the mercaptan content shall exceed one-half (1/2) grain per one hundred (100) cubic feet Sulfur -- The [otal sulfur content may not exceed twenty (20) grains per one hundred (100) cubic feet .1. Nitrogen u The nitrogen content may not exceed two (2) percent by volume. p Carbon DIoxide -- The carbon dioxide content may not exceed three (3) percent by volume. · Liquids M The gas shall be free of water and hydrocarbons in liquid form at the temperature and pressure at which the gas is delivered and shall have been dehydrated pnor to being delivered by any method other than the use of calcium '=:hloride as a desiccant for removal of water present therein in a vapor state and shall In no even: contain water vapor In excess of seven (7) pounds per one million (1,000.000) cubic feet Seller shall be responsible for collection and ,jisposal of any liquids that may accumulate. i::j Dust Gums. and Solid Matter -- The gas shall be commercially free of dust, gums. and other solid matter h. Gross Heating Value -- The gas delivered shall have a gross heating value of not less than one thousand (1.000) BTUs per cubic foot. Temperature- The gas shall have a temperature of not less than forty (40) degrees F and not more than one hundred twenty (120) degrees F. 2. Any gas delivered by Seller to Buyer under this Contract which is accepted by Buyer without protest within five (5) days of delivery. shall be deemed to have met all of the R63303B' DOC Page 15 of 34 quality specifications under the Contract. If at any time Buyer believes in good faith that gas tendered under this Contract fails to conform to any of the quality specifications set forth above, Buyer shall notify Seller and Buyer may, at its sole option, and in addition to pursuing any other legal or equitable remedies available, refuse to accept delivery of future gas volumes pending correction of any quality deficiencies by Seller. If Seller has not corrected any failure to meet quality specifications within fifteen (15) days after receiving notice from Buyer of such failure. then Buyer has the right to terminate this contract after said fifteen (15) day period and Seller shall be obligated to pay Buyer for any reasonable direct damages incurred by the Buyer resulting from Seller's failure to (.:omply With the Contract's quality specifications In no event, however, shall Seller be liable for consequential incidental or punitive damages, whether they arise in tort or contract. relating to Seller's performance of its duties under the Contract. Any payments made or liabilities incurred by the Buyer to Third Parties as a result of the Seller's failure to comply with the Contract's quality specifications are considered direct damages to the Buyer 3. Buyer may accept delivery of gas under this Contract at a gross heating value of less than one thousand (1,000) BTU per cubic foot: provided. however, the price herein contempiates gas sold and purchased under this Contract having a gross heating value of not less than one thousand i 1 ,000) BTU per cubic foot at the moisture content of the gas delivered. Should Seller deliver to Buyer gas having a gross heating value of less than one thousand (1,000) BTU per cubic foot. the price of gas so delivered shall be reduced at the rate of one-tenth of one (1/10 of 1) percent for each BTU below one R63303B! DOC Page 16 of 34 thousand (1,000) BTU per cubic foot The gross heating value of the gas shall be determined in accordance with Paragraph i of Article IV of this Contract 4 Seller agrees that the gas delivered to Buyer during the term of this contract may not contain any odorant which IS not first approved in writing by Buyer, After the odorant to be used IS approved bv Buyer, it may not be changed by Seller without the written consent of Buyer Such consent may not be withheld unreasonably, As of February 2006, the Buyer is using the odorant RP-Captan V or Sentinal 20, The use of this odorant or its eqUivalent. by Seller is approved by Buyer. ARTICLE VII TRANSFER OF ASSETS 1. Seller will acquire certain eXisting pipeline systems from Duke Energy Field Services (''Duke'), Texas Crude CTC") and Enterprise Products ("EP"), hereinafter referred to as the "Assets," Seller will GRANT, TRANSFER. CONVEY, ASSIGN and DELIVER the Assets (described on Exhibit el. Including all records. regulatory filings, maps, associated rights of way and easements. drawings, surveys and appurtenances to Buyer AS IS, WHERE IS" and with all faults or defects as of the date of the transfer. Seller will provide back-up supply to Buyer at Seller's existing regulating station at Flour Bluff and Graham Road until the TC assets are transferred to and connected by Buyer. To Sellers best knowledge. there is no existing condition that prevents or impairs the use and operation of the Assets as a natural gas transmission line, The Assets will be free and clear of all mortgages liens, pledges, charges or other encumbrances, except for ad valorem taxes not yet due. Seller makes no further representations or warranties of any other type or'lature whatsoever. neither expressed nor implied as to the Q63303B 1 DOC Page 1 7 of 34 sufficiency and condition of the Assets and Buyer hereby waives and releases any and all other representations as to the sufficiency and condition of the Assets, including, but not limited to representations and warranties as to merchantability, fitness for a particular purpose or ,)therwlse Seller will not be liable for the quality, condition, operation or performance of said Assets. 2 Seller will install the necessary metering and regulating equipment at the following ! nterco n nects (a) The Interconnect between South Shore Pipeline and the transferred Duke Assets near Highway 286 and FM 2444. Seller to own, operate and maintain. (b) The Interconnect between South Shore Pipeline and the transferred EP Assets near Up River Road and Renfrow Road. Seller to own, operate and maintain ! c) North Beach Station d) Packery Channel Station 3 Buyer shall be responsible for purchasing, constructing and installing any odorization facilities that are necessary for the Buyer to comply with the odorization requirements of Its distribution system. Buyer will operate and maintain the odorization facilities. ~63303B 1 DOC Page 18 of 34 ARTICLE VIII INVOICING, PAYMENT, AND AUDIT Invoice -- On or before the fifteenth (15th) day of each month, Seller shall send to Buyer at 4225 South Port Avenue Corpus Christi Texas 78415-5311, an invoice reflecting the quantity of gas delivered to and purchased by Buyer during the preceding month 2 Payment - Ten (101 days after receipt of invoice, but not later than the twenty-fifth i25th) day of each month, Buyer shall pay to Seller the amount due pursuant to this contract for delivenes during the preceding calendar month The remittance address for SeUer shall be the address set forth on Seller's invoice from time to time. If Buyer in good faith disagrees with the amount of any invoice, Buyer shall immediately notify Seller of such disagreement so that it may be resolved before the date for payment of such invoice If Buyer tails to give such notice of disagreement, or if Buyer and Seller do not resolve such disagreement before the due date, the amount of the invoice not in dispute shall be paid by Buyer on the due date, Such payment shall be subject to adjustment without penalties upon final resolution of the disagreement. 3, Adlustment of Errors -- In the event an error is discovered in any statement or payment hereunder such error shall be adjusted within ninety (90) days of the determination thereof; provided, however.. that claim therefor shall have been made within two (2) years from the date ot such statement or payment. 4. Audit -- Each party hereto shall have, at its expense, the right at all reasonable times, to examine the books and records of the other party to the extent necessary to verify the accuracy of any statement charge, computation, or demand made under or R63303B 1 DOC Page 19 of 34 pursuant to this Contract. Each party agrees to keep records and books of account in accordance with generally accepted accounting principles and practices in the industry. A.ny statement shall be final as to hath parties unless questioned within two (2) years after payment of such statement ARTICLE IX TERM Subject to the provisions of this Contract, this Contract shall be effective and continue in full force for a full sixty (60) month period from 9:00 a.m. local time, on July 1, 2006 until 9:00 am local time on July 1, 2011 ARTICLE X FORCE MAJEURE 1 Definition of Force Majeure -- The term "force majeure" as employed herein shall mean acts and events not within the control of the party claiming suspension of contract obligations and which by the exercise of due diligence, such party is unable to overcome Nothing contained herein, however, shall be construed to require either party to settle a strike against its will 2. Effect of Force Majeure -- In the event either Seller or Buyer is rendered unable by force majeure to itself or a necessary third party to wholly or in part carry out its ab4igatlons under the provisions of this Contract, it is agreed that the party so affected shall give prompt notice to the other party and the obligations of the party affected by such force ma/eure other than the obligation to make payments hereunder, shall be suspended during the continuance of any inability so caused but for no longer period, R633038 DOC Page 20 of 34 and such cause shall so far as possible be remedied with all reasonable dispatch. Buyer IS not obligated to pay for gas not received ARTICLE XI SUCCESSORS AND ASSIGNS No assignment of this contract or any of the rights or obligations under this Contract, whether by purchase. merger, consolidation, or otherwise, shall be made unless there first shall have been obtained the written consent to the assignment of the non- assigning party Such consent may not be withheld unreasonably. Seller or Buyer may pledge or assign its respective nght title, and interest in, to and under this contract to a trustee or trustees individual, or corporate. as security for bonds or other obligations or securities without the necessity of such trustee(s) becoming in any respect obligated to perform the obligations of the assignor under this contract. ARTICLE XII WARRANTY OF TITLE Seller warrants the title to all gas delivered under this Contract and agrees to indemnify Buyer against all SUitS, actions, debts, accounts, damages and losses arising from or out of adverse claims by any and all persons to said gas or to royalties or to any charges against said gas. ARTICLE XIII INDEMNITY 1. TO THE EXTENT ALLOWED BY TEXAS LAW, SELLER, ITS OFFICERS, MEMBERS, PARTNERS. EMPLOYEES, AGENTS, AND LICENSEES (FOR THE PURPOSES OF THIS ARTICLE CALLED "SELLER") HEREBY FULLY INDEMNIFIES, R63303B DOC Page 21 of 34 SAVES AND HOLDS HARMLESS THE CITY OF CORPUS CHRISTI, ITS OFFICERS, EMPLOYEES. AGENTS, LICENSEES, AND INVITEES ("INDEMNITEES") AGAINST ANY AND ALL L1ABILlL TY, DAMAGE LOSS. CLAIMS, DEMANDS, AND ACTIONS OF ANY NATURE WHATSOEVER ON ACCOUNT OF PERSONAL INJURY (INCLUDING, WITHOUT LIMITATION ON THE FOREGOING WORKERS' COMPENSATION AND DEATH CLAIMS), OR PROPERTY LOSS OR DAMAGE OF ANY KIND WHATSOEVER. WHICH ARISES OUT OF OR IS IN ANY MANNER CONNECTED WITH, OR IS CLAIMED TO ARISE OUT OF OR BE IN ANY MANNER CONNECTED WITH SELLER'S INTENTIONAL OR NEGLIGENT ACTS IN ITS RESPECTIVE CONTROL WITH REGARD TO THE DELIVERY OF GAS SELLER MUST, AT ITS OWN EXPENSE INVESTIGATE ALL THOSE CLAIMS AND DEMANDS, ATTEND TO THEIR SETTLEMENT OR OTHER DISPOSITION, DEFEND ALL ACTIONS BASED THEREON WITH COUNSEL SATISFACTORY TO INDEMNITEES AND PAY ALL CHARGES OF ATTORNEYS AND ALL OTHER COST AND EXPENSES OF ANY KIND ARISING FROM ANY OF SAID LIABILITY, DAMAGE, LOSS, CLAIMS, DEMANDS, OR ACTIONS 2. TO THE EXTENT ALLOWED BY TEXAS LAW. BUYER HEREBY FULLY INDEMNIFIES SAVES AND HOLDS HARMLESS SELLER, ITS OFFICERS, EMPLOYEES. AGENTS, LICENSEES, AND INVITEES ("INDEMNITEES") AGAINST ANY AND ALL L1ABILlLTY DAMAGE. LOSS, CLAIMS, DEMANDS, AND ACTIONS OF ANY NATURE WHATSOEVER ON ACCOUNT OF PERSONAL INJURY (INCLUDING, WITHOUT LIMITATION ON THE FOREGOING, WORKERS' COMPENSATION AND DEATH CLAIMS) OR PROPERTY LOSS OR DAMAGE OF ANY KIND R63303B 1 DOC Page 22 of 34 WHATSOEVER. WHICH ARISES OUT OF OR IS IN ANY MANNER CONNECTED WITH OR IS CLAIMED TO ARISE OUT OF OR BE IN ANY MANNER CONNECTED WITH BUYER S INTENTIONAL OR NEGLIGENT ACTS IN ITS RESPECTIVE CONTROL WITH REGARD TO THE DELIVERY OF GAS BY SELLER. BUYER MUST, l\T ITS OWN EXPENSE INVESTIGATE ALL THOSE CLAIMS AND DEMANDS, ATIEND TO THEIR SETTLEMENT OR OTHER DISPOSITION, DEFEND ALL ACTIONS BASED THEREON WITH COUNSEL SATISFACTORY TO INDEMNITEES AND PAY ALL CHARGES OF ATTORNEYS AND ALL OTHER COSTS AND EXPENSES OF ANY KIND ARISING FROM ANY OF SAID LIABILITY, DAMAGE, lOSS CLAIMS, DEMANDS, OR ACTIONS ARTICLE XIV TRANSFER OF TITLE TO AND POSSESSION OF GAS 1 As between Buyer and Seller, Seller shall be deemed in control and possession of the gas sold and purchased under this Contract and responsible for any damage or Injury caused thereby until the same shall have been delivered to Buyer at the points of detivery In accordance with terms of this Contract. 2, As between Buyer and Seller, Buyer shall be in control and possession of the gas sold and purchased under thiS Contract and responsible for any damage or injury caused thereby after the same shall have been delivered to Buyer at the points of delivery in accordance with terms of this Contract. 3. Seller and Buyer shall each indemnify, defend and hold harmless the other Party from any claims arising from any act or incident occurring when title to the natural gas is vested In the indemnifYing party R63303B1 DOC Page 23 of 34 ARTICLE XV REGULATORY BODIES 1 This contract is subject to all valid orders, rules and regulations of any State, Federal or other regulatory bodv having jurisdiction over the purchase, sale or use of the gas sold and the parties agree to comply with such orders, rules and regulations, should either of the parties by lawJr regulation, be ordered or required to do any act Inconsistent with the provisions of this contract this contract shall be deemed to be modified to conform with such law or regulation 2 Each of the parties understands that should the Railroad Commission of Texas, or other governmental regulatory body, require approval for the sale and purchase of gas under this contract, then each of the parties will make any necessary applications or filings and will submit any records or data to the regulatory body so that requisite regulatory authorization may be granted, ARTICLE XVI CONTRACT ADMINISTRATOR The Contract Administrator designated by the City is responsible for approval of all phases of performance and operations under this Contract including deductions for non-performance and authorizations for payment. All of Seller's notices or communications regarding this Contract must be directed to the Contract Administrator, who is Deborah A Marroquin, Director of Gas Services. R63303B 1 DOC Page 24 of 34 ARTICLE XVII INDEPENDENT CONTRACTOR Seller will perform the services hereunder as an independent contractor and will furnish services In its own manner and method, and under no circumstances or conditions may any agent servant or employee of Seller be considered as an employee of the City. ARTICLE XVIII INSURANCE 1 A Certificate of Insurance IS attached to and incorporated into this Contract as Exhibit 0 naming Buyer as an additional insured. Its requirements may be revised annually by the Contract Administrator upon 30 days written notice to Seller. 2 Before activities can begin under this Contract, Seller's insurance company(ies) must deliver a Certificate of Insurance, as proof of the required insurance coverages and the fidelity bond to the Contract Administrator 3 Additionally. the Certificate must state that the City will be given at least 30 days notice of cancellation, material change in the coverages, or intent not to renew any of the polIcies by certified 'nail 4. The City must be named as an Additional Insured in each policy. The City Attorney must be given copies of all insurance policies within 15 days of the Contract Administrator's written request ARTICLE XIX SUBCONTRACTORS Saller may use subcontractors In connection with the work performed under this Contract When using subcontractors, however, Seller must obtain prior written R63303Bj DOC Page 25 of 34 approval from the Contract Administrator. In using subcontractors, Seller is responsible for all their acts and omissions to the same extent as if the subcontractor and its employees were employees of Seller All requirements set forth as part of this Contract are applicable to all subcontractors and their employees to the same extent as if the Seller and ItS empioyees had performed the services. ARTICLE XX FISCAL YEAR All parties recognize that the continuation of any contract after the close of any fiscal year of the City which fiscal year ends on July 31 annually. is subject to appropriations and budget approval providing for such contract item as expenditure in that budget. The City does not represent that the budget item will be actually adopted, that determination is within the sole discretion of the City Council at the time of adoption of each budget ARTICLE XXI WAIVER No waiver of any breach of any term or condition of this Contract waives any subsequent breach of this contract. ARTICLE XXII COMPLIANCE WITH LAWS This Contract !S subject to all applicable Federal and State laws. All duties of the parties will be performed in Nueces County, State of Texas. The applicable law for any legal disputes arising out of this Contract is the law of Texas. R633038' DOC Page 26 of 34 - ARTICLE XXIII DISPUTE RESOLUTION 1 Any claim, counterclaim, demand, contract of action dispute, and controversy arising out of or relating to this Contract or the relationship established by this Contract, any provision hereof the alleged breach thereof. or in any way relating to the subject matter of the Contract. involving the Parties and/or their respective representatives collectively the "Claims '), even though some or all of such Claims allegedly are extra- contractual in nature whether such Claims sound in contract, tort, or otherwise, at law or in equity, under State of Federal law, whether provided by statute or the common law, for damages or any other relief, shall be resolved by binding arbitration. 2 Arbitration shall be conducted In accordance with the rules of arbitration of the Federal Arbitration Act and to the extent an issue is not addressed by the federal law on arbitration. by the commercial Arbitration Rules of the American Arbitration Association. The validity, construction and interpretation of this agreement to arbitrate, and all procedural aspects of the arbitration conducted pursuant hereto shall be decided by the arbitrators In deciding the substance of the Parties Claims, the arbitrators shall refer to the governing law of the Contract. 3. It is agreed that the arbitrators shall have no authority to award treble, exemplary or punitive damages of any type under any circumstances whether or not such damages may be available under State or Federal law, or under the Federal Arbitration Act, or under the Commercial Arbitration Rules of the American Arbitration Association, the Parties hereby waiving their right, if any, to recover any such damages. The arbitration proceeding shall be conducted in Nueces County. Texas. R63303B' DOC Page 27 of 34 4 Within thirty (30) days of the notice of initiation of the arbitration procedure, each Party shall select one arbitrator The two arbitrators shall select a third arbitrator. The third arbitrator shall be a person with professional experience in natural gas related transacttons and municipal/public utility operations and who has not previously been employed by either Party, and who does not have a direct or indirect interest in either Party or the subject matter of the arbitration 5 While the third arbitrator shall be neutral, the two (2) party-appointed arbitrators are not required to be neutral, and It shall not be grounds for removal of either of the two party-appointed arbitrators or for vacating the arbitrators' award that either or such arbitrators has past or present minimal relationships with the Party that appointed such arbitrator To the fullest extent permitted by law, any arbitration proceeding and the arbitrators award shall be maintained In confidence by the Parties ARTICLE XXIV LIMITATION OF L1ABLlL TY THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND MEASURE OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR'S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY HEREIN PROVIDED. THE OBLIGOR'S LIABILITY SHALL BE LIMITED R63303Bl DOC Page 28 of 34 TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. ANY PAYMENT MADE OR LIABILITIES INCURRED BY THE BUYER TO THIRD PARTIES AS A RESULT OF THE SELLER'S FAILURE TO PROVIDE GAS OF THE QUALITY SPECIFIED IN ARTICLE VI OF THIS CONTRACT ARE CONSIDERED DIRECT DAMAGES OF THE BUYER. ARTICLE XXV DUTY TO MITIGATE Each Party agrees that it has a duty to mitigate damages under this Contract and covenants and that it will use all commercially reasonable efforts to minimize any damages It may Incur as a result of the other Party's performance or non-performance of the Agreement. R633038 - DOC Page 29 of 34 ARTICLE XXVI APPLICATION OF UCC Except as otherwise provided for herein, the provisions of the Uniform Commercial Code ("UCC") of the State of Texas shall be deemed to apply to all transactions and activities covered by this Contract and natural gas shall be deemed to be a "good" for purposes of the UCC. EXCEPT AS EXPRESSLY SET FORTH HEREIN, SELLER EXPRESSLY NEGATES ANY OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY WITH RESPECT TO CONFORMITY TO MODELS OR SAMPLES, MERCHANTABILITY, OR FITNESS FOR ANY PARTICULAR PURPOSE, ARTICLE XXVII CONFIDENTIALITY Any information provided by Seller under this Contract will be treated by the City as Information that, If released. would give advantage to a competitor or as privileged commercIal information under Sections 552.104 and 552.110 of the Texas Public Information Act, Texas Government Code, if each page is clearly marked and identified as competitive or proprietary information that should not be made available to the public If a request IS received for the information, the request and information will be forwarded to the Attorney General for a determination under Section 552.301 of the Act. The City will withhold the information from the requester under Section 552.305 of the Act, until after the Attorney General's decision is received. The City will only release the information if directed to do so by the Attorney General. R6330381 DOC Page 30 of 34 ARTICLE XXVIII GENERAL PROVISIONS Any Party in default under this Contract shall reimburse the other Party, on demand, for actual reasonable 'Jut-of-pocket expenses. Including, without limitation, reasonable legal fees and expenses incurred by the other Party during the occurrence and continuation of such default in connection with the enforcement of, or the preservation of rights in respect cf this <~ontract. This Contract shall not impart any rights enforceable by any third-party other than a permitted successor or assignee bound to this Contract ARTICLE XXIX VENUE The venue for any disputes under this Contract is the appropriate district, county, or Justice court in and for Nueces County. Texas. ARTICLE XXX AMENDMENTS This Contract may be amended only by written agreement signed by duly authorized representatives of both parties to thiS Contract. ARTICLE XXXI TERMINA TION 1 The Buyer's Contract Administrator may terminate this Contract for Seller's failure to perform the services specified In thiS contract. Failure to keep all insurance policies in force for the entire term of thiS Contract is grounds for termination. R63303S' DOC Page 31 of 34 2 The Buyer's Contract Administrator must in all cases give Seller ten (10) workdays written notice of any claimed breach and set out a reasonable opportunity for Seller to cure. 3. If the Seller has not cured within the cure period. the Buyer's Contract Administrator may terminate this Contract immediately after the cure period. 4. Notwithstanding any other proVision of this Contract, if Buyer fails to pay Seller any amounts due under the Contract on a timely basis. Seller shall have the right to (a) suspend performance under the Contract until such delinquent amounts plus accrued Interest calculated at a rate equal to the lower of (i) the then-effective prime rate of interest published under "Money Rates" oy The Wall Street Joumal, plus two percent per annum; or (ii) the maximum applicable lawful interest rate, have been paid or (b) exercise any remedy available at law or in equity to enforce payment of such amount plus interest, provided, however. that If Buyer. in good faith disputes the amount of any such billing or part thereof and pays such amounts as it concedes to be correct, no suspension shall be permitted ARTICLE XXXII NOTICE Notice may be given by fax, hand delivery, or certified mail, postage prepaid, and is deemed received on the day faxed or hand delivered or on the third day after deposit if sent certified mail Notice shall be sent as follows R6330381 DOC Page 32 of 34 City of Corpus Christi Attn: Deborah A. MarroqUin Director of Gas Services 4225 South Port Avenue Corpus Christi, TX 78415-5311 Telephone: (361) 885-6924 Facsimile (361) 885-6970 Email: debblem@cctexas.com National Energy & Trade LP Attn: Joe Gutierrez 5847 San Felipe St., Suite 1910 Houston, Texas 77057 Telephone: (713) 871-1946 Facsimile: (713) 871-0510 Email: imQutierrez@net-lp.com AGREED TO BY: SELLER: NATIONAL ENERGY & TRADE, LP ~ i / x Joe M.. Gutl€rrez-. V.P. NET General Partners. LLC , , Date: . ( ~--_....__.~_... ---~---<.- / THE STATE OF TEXAS ~ ~ COUNTY OF NUECES ~ This instrument was acknowledged before me on J.,;.y:~ u. ,2006, by Joe M. Gutierrez V.P of NET General Partners, LLC. a Texas Limited Liability Company .J ):d!i,.. .. ~_h.L_H' Notary Public State of Texas -'-~ --:=-J ~- Rebe( '''S~lor ~~~~r~~_ ~R: CITY OF CORPUS CHRISTI George K. {Skip)"f\Joe.. -_._._-~~ City Manager D~e: . -,... -- ,--.-."--.- ---._---- -.-. ---,.~._--- ~,--- CC, TX CONTRACT 06 FVR4 coe P'~3 of 34 PROPRIETARY INFORMATION THE STATE OF TEXAS ~ ~ ~TY OF NUECES ~ -"-...." This instrume~was acknowledged before me on , 2006, by Joe M. Gutierrez. V P o~~neral Partners, LLC, a Texas Limited Liability Company .----- --- Notary Public State of Texas BUYErA CITY OF CORPUS CHRISTI /~ G~K (Skip) No';- City ManagEfr I' / l, Date: ...... ! - .__.~_.._.- -- .---. I v f!'~ \;-.'1(1-( · · 'I 11\1460' \~........~,....._ ...:tIM'. Ij"\..: n ~ I ill"~ . c0 " QIItt~4t "_'Y::.'i_I.t:.~ -.... ._... .... ".. , ......../.~ ~..r'l"~~t~11_ Attest. l ~ i / Arman{o Ch~~:::::C- City Secretary Approv~~q as to form This 1 sl day of June,2006 ;' ~i~ ,..<----/.~, :>' ./ /~7 /.' .'. /" ---'",'", R. ~ R~ning - ." .r-- First AsSistant City Attorney For City Attorney THE STATE OF TEXAS ~ ~ COUNTY OF NUECES ~ This instrument was acknowledged before me on (Skip) Noe, City Manager of the City of Corpus Ch on behalf of said corporation" / , ! JL ,Ify \.t J~ {v ,2006, by George K. ,ti, a Texas Municipal Corporation, ~ .~{~ (" /'{,,)J i ' t/ J... "1 I , . _.t Notary Public State of Texas R63303Bl DOC :::::"-~-;Pv'~':~ ~'-~'~~:--:""--~____"_ ; Y j \,-r,,,, "a". 11 ',' ""'~ c, . a {:' (j? ?#"\_ ~ r,}t." C>;'H<liS!--!()':[)lrf!!; ,1 L~c_2' o. ~ N',:en." "" fur ...."...,J Page 34 of 34 ....