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CONTRACT 2677 Service AgreementW767 EXECUTION COPY WATER SERVICE AGREEMENT This Agreement, made as of the 4__ day of February, 1999 by and between CHEVRON PRODUCTS COMPANY, a division of Chevron U.S.A. Inc., a Pennsylvania corporation ("CHEVRON"), and WEST BASIN MUNICIPAL WATER DISTRICT ("DISTRICT"), and THE CITY OF EL SEGUNDO ("CITY") WHEREAS, CHEVRON operates a petroleum refinery in the City of El Segundo, County of Los Angeles, State of California (the "Refinery"), and WHEREAS, DISTRICT is a public utility in the business of, inter alia, wholesaling non - potable water to customers, including CITY, and WHEREAS, CHEVRON wishes to purchase from CITY, which in turn will purchase from DISTRICT, non -potable water for use in CHEVRON's boilers and DISTRICT wishes to sell such water to CITY for such purpose, NOW THEREFORE, the parties agree and covenant as follows: 1. Provision of Water. (a) At CHEVRON's request DISTRICT will provide to CITY and CITY in turn will provide to CHEVRON high quality reverse osmosis water suitable for both high and low pressure boiler feed. (b) DISTRICT will provide water which meets the specifications set out in Exhibit "A" attached hereto and incorporated herein, and to produce the low and high pressure boiler feed water at a refinery level of reliability. 01/19/99 EXECUTION COPY (c) CHEVRON shall have no obligation to take all or any part of the water subject to this Agreement. In the event that CHEVRON decides it no longer requires some or all of the boiler feed water subject to this Agreement, DISTRICT will use its best efforts to find other users to purchase such unneeded water. However, CHEVRON shall be obligated to pay the fixed monthly meter charge set out in Section 4 below for the remainder of the term of this Agreement, less any fixed monthly meter payments made by other users for such water. CITY shall only be obligated to take and provide water pursuant to this Agreement to the extent such is required by CHEVRON and is made available by DISTRICT. (d) Commencing no later than twenty-six (26) months from the date of this Agreement, DISTRICT will provide to CITY and CITY will provide to Chevron up to 1200 gpm of low pressure boiler feed water and up to 1800 gpm of high pressure boiler feed water. (e) If DISTRICT fails to supply water of the quality and/or in the amounts set forth in this Agreement DISTRICT will reimburse CHEVRON for all costs in excess of those which CHEVRON is responsible for under this Agreement which CHEVRON incurs to acquire an equivalent quality and quantity of water. CITY shall have no obligation or liabiility to either CHEVRON or DISTRICT in such event. This reimbursement will continue until DISTRICT arranges to supply CHEVRON with the quality and quantity of water specified in this Agreement. Either party shall be excused from all obligations under this Section 1(e) to the extent performance is prevented by a force majeure. For purposes of this Section 1(e), a force majeure includes only Acts of God or government action that prevents performance. 2. Term. Unless earlier terminated pursuant to the terms hereof, this Agreement shall commence on the date first set forth above and shall terminate fifteen (15) years after first request by CHEVRON for delivery of boiler feed water to CHEVRON by CITY pursuant to this Agreement. At the end of the term of this Agreement, the parties agree to negotiate in good faith to enter into a new contract for provision of such water consistent with rates and charges of the DISTRICT for similar service. The foregoing not withstanding, nothing contained herein shall require the parties to enter into such a contract. 2677 2- 01/19/99 EXECUTION COPY 3. Termination. (a) If the boiler feed water contains quantities of minerals in excess of the maximum amounts listed in Exhibit "A", DISTRICT shall immediately undertake to correct the water quality deficiencies. If DISTRICT is unable to correct the water quality deficiency after receiving notice, CHEVRON may either (i) Continue to purchase boiler feed water with compensation from West Basin in accordance with Subsection 1(e); or (ii) If the water quality deficiency has not been corrected within a period ending 24 months from the date of CHEVRON's notice, CHEVRON may give written notice to DISTRICT declaring CHEVRON's intent to cease to purchase the boiler feed water and to suspend payments to DISTRICT. Effective upon receipt of such written notice, this Agreement shall be terminated, and CHEVRON shall have no further obligation to DISTRICT. (b) No termination, cancellation or expiration of this Agreement shall release DISTRICT from any liability or obligation (whether of indemnity or otherwise) which may have attached or accrued to DISTRICT before the time of or by reason of such termination, cancellation or expiration. 4. fyr-nent for Water. DISTRICT shall sell the water to CITY, which shall in turn sell the water to CHEVRON. The price for the water shall be determined as follows: (a) Fixed Monthly Meter Charge. Beginning the first day of the month next following commencement of delivery of water, CHEVRON will pay DISTRICT a fixed monthly meter fee of $166,121. (b) Monthly Water Charge. n m r 01/19/99 EXECUTION COPY (i) The monthly water charge will be based on actual water delivery to CHEVRON. This charge consists of DISTRICT'S recycled water block rate structure plus DISTRICT'S treatment surcharge plus the CITY'S recycled water markup. (ii) The Board of Directors of the DISTRICT will establish the charge for the recycled water block rate structure plus the treatment surcharge (currently at $308 per acre- foot for low pressure boiler water and $480 per acre-foot for high-pressure boiler water). The CITY will resell the water to CHEVRON after adding the recycled water markup determined by the City Council. The CITY recycled water markup is currently $0.3056 per hundred cubic -foot (approximately $133/AF). (iii) Any increase of charges, rates, or surcharges after the date of this Agreement, by DISTRICT, shall be reasonable and shall not be greater than those charged to other purchasers of water from DISTRICT. The CITY can increase its charges, rates or surcharges up to the same percentage increase it increases the potable water charges, rates or surcharges to other purchasers of potable water. (c) The billing cycle shall be as follows: (i) DISTRICT shall send out invoices to CITY for each month's recycled water usage on the tenth day of the following month. (ii) CITY shall send out invoices to CHEVRON for each month's recycled water usage by the 20th day of the following month. (iii) CHEVRON shall pay CITY's invoice within 20 calendar days of receipt by CHEVRON. (iv) CITY shall pay DISTRICT's invoices within 15 days of receipt of CHEVRON's payment. Any late fees or penalties levied by DISTRICT to CITY resulting from -4- 01/19/99 EXECUTION COPY CHEVRON's late payment will be passed through to CHEVRON by CITY. CITY shall have no obligation to DISTRICT in the event that CHEVRON fails to make any payments to CITY. 5. Construction and License Agreement. After execution of this Agreement by all parties, CHEVRON and DISTRICT intend to enter into a "Construction and License Agreement" which will give DISTRICT permission to enter and occupy that portion of the Refinery described in Exhibit `B" attached hereto and made a part hereof (the "Premises") for the purpose of designing and constructing at DISTRICT's sole cost, a water distribution system (the "System") for delivery of water to CHEVRON's boilers. The System shall consist of the facilities listed in Exhibit "C" attached hereto and made a part hereof. The CITY is not a party to the Construction and License Agreement and shall have no obligations thereunder. 6. Standards of Operation. DISTRICT agrees to operate, maintain, and repair its water system, and to deliver treated water to CITY for redelivery to CHEVRON in the quality and quantities provided for herein, for the full term of this Agreement at DISTRICT'S sole expense and in an efficient manner and in accordance with all of the terms and provisions hereof. DISTRICT agrees to furnish its best skill and judgment and to furnish efficient business administration and supervision and to use its best efforts at all times to manage and maintain its water system in the most expeditious and economical manner consistent with the interests of CHEVRON and DISTRICT'S other users. DISTRICT agrees to keep its water system in a state of good repair for sound operating conditions as required to meet the DISTRICT'S obligations under this Agreement. DISTRICT agrees that its water system is designed and shall be operated in such a manner as to allow fluctuations in the daily consumption of water by CHEVRON, in amounts up to the amount agreed to be sold to Chevron hereunder. 7. Mininiuni ReQuired Pressure. Throughout the term of this Agreement, DISTRICT shall deliver water to CHEVRON at a flow rate in compliance with this Agreement, with a minimum pressure sufficient to fill DISTRICT'S storage tanks on the Premises. S. 01/19/99 EXECUTION COPY 8. ReQUired Meterina Devices. DISTRICT agrees not to deliver water from its water system, nor to permit water to be removed from its water system, except through standard metering devices, with records to be kept and maintained as provided in this Agreement. The DISTRICT shall recalibrate the meters semi-annually, using a certified independent inspector acceptable to CHEVRON and the CITY. CHEVRON and the CITY have the right to witness the calibration testing and will be promptly advised of the test results. 9. Revresetitations and Covenants as to Suf'f'iciency of Water Rights. DISTRICT represents that it presently has the rights to appropriate and use, in accordance with all applicable laws and regulations, an amount of water sufficient to fulfill its obligations hereunder and under all of its other existing contracts for the furnishing of water; and that it will take all steps necessary to preserve and maintain and will do nothing to impair such rights during the term of this Agreement. 10. &¢esc elutions as to Delivery Capacity. DISTRICT represents to CHEVRON that the DISTRICT has a capacity for sustained delivery of treated water of at least 4,320,000 gallons per day. 11. Right to Audit. DISTRICT and its subcontractors and vendors shall maintain complete and accurate records in connection with the performance of this Agreement and all transactions related thereto for at least 24 months after such records are created. CHEVRON and CITY may from time to time and at any time during the term of this Agreement make an audit of such records. DISTRICT shall provide records and reasonable assistance to CHEVRON and CITY in making such audit. DISTRICT shall require, and shall require all subcontractors and vendors to require, in all agreements in connection with such expansion, the agreement of the parties to the provisions of this section and shall require such subcontractors and vendors to assist in making any such audits. 2677,,. •6- 01/19/99 EXECUTION COPY 12. DISTRICT, CITY acid CHEVRON lndeven ent lititi s. DISTRICT, CITY and CHEVRON are engaged in independent activities and nothing herein contained shall be construed as granting to any party any right to control another party's activities or operations or the manner in which the same shall be conducted. 13. Compliance With Law. DISTRICT and CITY shall comply with all applicable Federal, State and local laws and regulations applicable to the sale and delivery of water hereunder. 14. hi.deninity. DISTRICT shall indemnify, defend and hold harmless CHEVRON, CHEVRON'S parent company, (Chevron Corporation), the subsidiary and affiliated companies of each of them (collectively "CHEVRON and its affiliates") and CITY, and their respective elected officials, directors, officers, agents and employees ("Indemnitees"), from and against all expense (including attorneys' fees), liability and claims for damage to property (including DISTRICT'S or CITY'S property) or injury to or death of persons (including DISTRICT'S or CITY'S employees), directly or indirectly resulting, or alleged to result from anything occurring from any cause on or about or in connection with the sale and delivery of water pursuant hereto, unless caused by the negligence or willful misconduct of their respective indemnitees. The indemnity shall include, but is not limited to, expenses, liability, and claims arising from Section 2. hereof. 15. Insurance. (a) DISTRICT shall maintain, at DISTRICT's own expense during the term hereof, insurance of the types and in the minimum amounts described generally as follows: (i) Comprehensive or Commercial General Liability Insurance (bodily injury and property damage) with contractual liability insurance to cover liability assumed under this Agreement. The limit of liability for such insurance shall not be less than $5,000,000 combined single limit per occurrence. 7- 01/19/99 EXECUTION COPY (ii) Excess Liability Insurance with a limit of not less than $15,000,000 combined single limit per occurrence for bodily injury and property damage. (iii) Full Workers' Compensation and Employer's Liability Insurance as prescribed by applicable law; and (b) The insurance required under subsections 15(a)(i) and 15(a)(ii) above shall include CHEVRON and its affiliates and CITY as additional insureds. (c) The insurance required under subsections 15(a)(i) and 15(a)(ii) above shall provide that it is primary coverage with respect to DISTRICT, CITY and CHEVRON and all other additional insureds. (d) The insurance required under subsection 15(a)(iii) shall contain a waiver of subrogation against CHEVRON and its affiliates and CITY and an assignment of statutory lien if applicable. (e) The insurance required above shall provide that no cancellation or material change in any policy shall become effective except upon thirty (30) days' prior written notice to CHEVRON and CITY. (f) The insurance companies issuing the policies required above shall have no recourse against CHEVRON or CITY, or any other additional insured, for payment of any premiums (or assessments under any policy issued by a mutual insurance company). (g) DISTRICT shall furnish certificates satisfactory to CHEVRON and CITY as evidence that the insurance required above is being maintained. policies, (h) DISTRICT shall be responsible for all deductibles in all of their insurance 9- 01/19/99 EXECUTION COPY (i) DISTRICT's indemnity and other obligations shall not limit, nor be limited by, the foregoing insurance requirements. 16. Authority. The undersigned represent and warrant that they have the authority to execute this Agreement and bind their principals thereby. 17. Partial Invalidity. The invalidity or unenforceability of any one or more phrases, sentences, clauses, paragraphs, sections or provisions in this Agreement shall not affect the validity or enforceability of the remaining portions of this Agreement, or any part thereof. 18. Recordiuy. Neither DISTRICT nor CITY shall record this Agreement. 19. Assi ninent. This Agreement may not be assigned or sublet by DISTRICT, CITY or CHEVRON without the written permission of the other parties. Permission to assign this Agreement shall not be unreasonably withheld or delayed. 20. Notices. All notices to be given under this Agreement shall be in writing and shall be posted by certified mail or personally delivered to the other party at the address set forth below, or at such other addresses as either party may designate by written notice to the other. Any such notice shall be deemed received when deposited in the United States mail with postage fully prepared thereon or when personally delivered. CHEVRON: CHEVRON U.S.A. PRODUCTS COMPANY Attn: Utilities Division 324 W. El Segundo Blvd. El Segundo, CA 90245 DISTRICT: WEST BASIN MUNICIPAL WATER DISTRICT Attn: General Manager 17140 S. Avalon Blvd, Suite 210 Carson, CA 90746 a 01/19/99 EXECUTION COPY CITY: CITY OF EL SEGUNDO Attn: Public Works Department 350 Main Street El Segundo, CA 00245 21. Conflicts of Interest. Conflicts of interest relating to this Agreement are strictly prohibited. Except as otherwise expressly provided herein, neither DISTRICT nor any director, employee or agent of DISTRICT or its subcontractors or vendors shall give to or receive from any director, employee or agent of CHEVRON any gift, entertainment or other favor of significant value, or any commission, fee or rebate. Likewise, neither DISTRICT nor any director, employee or agent of DISTRICT or its subcontractors or vendors shall, without prior written notification thereof to CHEVRON, enter into any business relationship with any director, employee, or agent of CHEVRON or any affiliate, unless such person is acting for and on behalf of CHEVRON. DISTRICT shall promptly notify CHEVRON of any violation of this section and any consideration received as a result of such violation shall be paid over or credited to CHEVRON. Any representative(s) authorized by CHEVRON may audit any and all records of DISTRICT and its subcontractors and vendors for the sole purpose of determining whether there has been compliance with this section. DISTRICT shall assist CHEVRON in making an audit under this section. DISTRICT shall require, and shall require all subcontractors and vendors to require, in all agreements in connection with upgrades of its water recycling facilities, the agreement of the parties to the provisions of this section and shall require such subcontractors and vendors to assist in making any such audits. 22. Alternate. Dist)Llte Resolution. In the event a dispute arises with respect to the interpretation or performance of, or the relationship created by, all or any part of this Agreement, the parties shall attempt in good faith to resolve the dispute. If such efforts prove unsuccessful, 10- 01119!49 EXECUTION COPY each party agrees to consider the use of mediation, or non-binding, arbitration or other alternative dispute resolution techniques prior to resorting to litigation. CHEVRON shall continue to make payments on the fixed monthly meter charge during pendency of the dispute. During the pendency of the dispute, this Agreement shall remain in full force and effect. 23. Waiver. The right of either party to require strict performance shall not be affected by any prior waiver or course of dealing. 24. ornpliance and Affirt-native Action. To the extent applicable to this Agreement, the following clauses contained in the Code of Federal Regulations are incorporated herein by reference, the full text of which will be made available upon request: 48 C.F.R. Section 52.203-6 (Subcontractor Sales to Government); 48 C.F.R. Sections 52.219-8 and 52.219-9 (Utilization of Small and disadvantaged Business concerns); 48 C.F.R. Section 52.219-13 (Utilization of Woman - Owned Business concerns); 48 C.F.R. Sections 22.804-1 and 52.222-26 (Equal Opportunity); 48 C.F.R. Section 52.222-35 and 41 C.F.R. Section 52.222-36 and 41 C.F.R. Section 60.741-5 (Handicapped Workers); 48 C.F.R. Section 52.223-2 (Clean Air and Water); and 48 C.F.R. Section 52.223-3 hazardous Material Identification and Material Safety Data). DISTRICT shall insert the substance of the foregoing provisions of this clause into all non-exempt subcontracts or purchase orders as required. DISTRICT agrees and covenants that none of its employees, or employees of its subcontractors, who provide services to CHEVRON pursuant to this Agreement are unauthorized aliens as defined in the Immigration Reform and Control Act of 1986. Unless previously provided, DISTRICT shall provide a Certificate of Nonsegregated Facilities to CHEVRON. 2677 . , , -11- 01/19/99 EXECUTION COPY 25. General Provisions. (a) Time Is Of The Essence Time is of the essence in this Agreement and of each provision thereof. (b) Entire Areenient This Agreement contains the entire agreement among DISTRICT, CITY, and CHEVRON with respect to the matters covered by this Agreement. (c) Definition of Affiliates As used in this Agreement, "affiliate" shall mean CHEVRON Corporation and any company in which Chevron Corporation or CHEVRON now or hereafter owns directly or indirectly at least fifty-one percent (51% ) of the shares of stock entitled to vote at a general election for directors. (d) Att.ornev's Tees If any party shall bring any action at law or other proceeding against another party to enforce any of the terms or conditions hereof or for breach hereof, or to recover possession of the Premises, the substantially prevailing party or parties shall receive all reasonable attorneys' fees expended or incurred by it in any such action or proceeding, the amount of such fees to be determined by the Court and to be included in any judgment recovered in any such action or proceeding. (e) Captions The captions and headings throughout this Agreement are for convenience of reference only and the words contained therein shall in no way be held or deemed to define, limit, describe, explain, modify, amplify or aid in the interpretation, consideration or meaning of any provision or the scope or the intent of this Agreement. (f) Cumulative Renaedie;s. All rights and remedies conferred hereunder and by law shall be cumulative of each other, and neither the exercise nor the failure to exercise any such right or remedy shall preclude the exercise of any other such right or remedy. -12- 01/19/99 EXECUTION COPY (g) Modifications. This Agreement may only be modified in a writing executed by the parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Water Service Agreement. CHEVRON: CHEVRON PRODUCTS COMPANY, a division of CHEVRON U.S.A. Inc., a Pennsylvatija corporatio By: DISTRICT: APP OVED AVVFORM By Wayne miuex, District Jounsel CITY: APPROVE S TO FORM: City ALt rney APPROVED DI -VE City ALt rn A171'ES city.t C ity Cl WES'. S MUNICIPAL WATER DISTRICT BY: 2677.:::. 01/19/99 EXHIBIT "A" Maximum Concentration Low Pressure Ca 0.0 Mg 0.0 HCO3 27.0 Si02 1.5 TDS 60.0 TH 0.3 EXECUTION COPY High Pressure 0.0 0.0 3.0 0.1 5.0 0.0 All values are in mg/1 as the ion except for total hardness (TH) which is in mg/l as calcium carbonate. 14 01/19/99 EXHIBIT `B" [Description of Premises] [To be Added After the Agreement is Signed] EXECUTION COPY 6 -15- 01/19/99 EXHIBIT "C" [Facilities] [To be Added After the Agreement is Signed] EXECUTION COPY m ® , GjI -16- 01/19/99