R2022-222 2022-09-26RESOLUTION NO. R2022-222
A Resolution of the City Council of the City of Pearland, Texas, authorizing an
Amended and Restated System Raw Water Availability Agreement with the
Gulf Coast Water Authority (GCWA), to meet the City’s long term municipal
water needs.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS:
Section 1. That certain Amended and Restated System Raw Water Availability
Agreement, a copy of which is attached hereto as Exhibit “A” and made a part hereof for all
purposes, is hereby authorized and approved.
Section 2. That the City Manager or his designee is hereby authorized to execute and
the City Secretary to attest an Amended and Restated System Raw Water Availability Agreement.
PASSED, APPROVED and ADOPTED this the 26th day of September, A.D., 2022.
_________________________________
J.KEVIN COLE
MAYOR
ATTEST:
________________________________
FRANCES AGUILAR, TRMC, MMC
CITY SECRETARY
APPROVED AS TO FORM:
________________________________
DARRIN M. COKER
CITY ATTORNEY
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AMENDED AND RESTATED SYSTEM RAW WATER AVAILABILITY AGREEMENT
BETWEEN
GULF COAST WATER AUTHORITY
AND THE
CITY OF PEARLAND
This Amended and Restated System Raw Water Availability Agreement ("Agreement") is
made and entered into effective this the 1 day of September 2022 (the "Effective Date"), by and
between GULF COAST WATER AUTHORITY (hereafter, "GCWA"), and CITY OF PEARLAND
(hereafter, "Purchaser"). GCWA and Purchaser are sometimes referred to herein as a "Party" or
the "Parties."
1
RECITALS
GCWA is a conservation and reclamation district created and organized under Art. XVI, Sec. 59,
Texas Constitution which operates a system of water rights, canals and water diversion, pumping,
storage and transmission facilities and appurtenances for obtaining, diverting, storing and
transporting Water (as defined herein) in order to make the Water available for beneficial use.
Purchaser is a political subdivision of the State of Texas and desires to purchase Water from
GCWA for beneficial use.
GCWA and Purchaser have heretofore entered into that certain System Raw Water Availability
Agreement dated April 27, 2015 (the "Prior Raw Water Availability Agreement"), pursuant to
which GCWA agreed to make available to Purchaser (i) up to zero (0) million gallons per day
("MGD") of Water from the System (as defined herein) for Municipal Use (as defined herein) and
Irrigation Use (as defined herein) in Purchaser's service area depicted on Exhibit A hereto (the
"Service Area") and (ii) an option to provide Purchaser the rights to acquire additional Water
from GCWA in the future in an amount up to ten (10) MGD (the "Option") for an initial period of
three years, ending on April 27, 2018, and one consecutive additional three-year renewal term,
which expired on April 27, 2021. The Prior Raw Water Availability Agreement is scheduled to
terminate on August 31, 2027.
The parties now wish (i) to enter into this Agreement for GCWA to make available for Purchaser
up to zero (0) MGD of Water from the System for Municipal Use and Irrigation Use in Purchaser's
service area depicted on Exhibit A hereto (the "Service Area") and (ii) to include the option
("Option") to provide Purchaser the rights to acquire water supplies from GCWA in an amount
up to ten (10) MGD (the "Option Quantity"), through May 31, 2023, subject to the terms and
conditions provided in Section 29 hereof.
GCWA and Purchaser therefore now enter into this Agreement to evidence the obligation of
GCWA to make Water available from the System to Purchaser and the obligation of Purchaser to
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pay the System Rate for the Water made available to Purchaser under this Agreement, regardless
of whether or not the Purchaser uses the Water. It is the intent of GCWA and Purchaser that this
Agreement incorporate an Option, and the parties agree that this Agreement shall completely
amend, repeal, replace and supersede the Prior Raw Water Availability Agreement.
2
DEFINITIONS
As used in this Agreement, capitalized terms used in this Agreement have the meaning provided
in the Recitals hereto and as provided in this section.
Agreement - this agreement.
Board - the Board of Directors of the Gulf Coast Water Authority.
Budgeted Cost of Service - all costs budgeted by the GCWA Board to acquire, construct, develop,
operate, maintain, repair, modify, replace, protect, finance and/or expand the System or the part
of the System consisting of the Canal Division, as appropriate, under the terms of this Agreement,
including the costs of adopting and implementing GCWA's water conservation and drought
contingency plans and rules and regulations relating thereto; principal, interest and other costs
for bonds issued by GCWA to finance the System or the part of the System consisting of the Canal
Division, as appropriate, in the same manner as the Industrial Customers; and a reasonable
reserve fund for operation, maintenance and replacement costs, all as provided in the definition
of System Rate in this Section 2 and in Sections 5 and 11 herein. To the extent third party costs
are included in preparing the Budgeted Cost of Service no mark- up of such third -party costs shall
be included.
Canal Division - the physical properties and interests in physical property and associated water
rights of the American System (also referred to as the Canal A System), the Briscoe System (also
referred to as Canal B System), and the Galveston System (also referred to as Canal G System),
acquired by GCWA from the Brazos River Authority, together with all additions to, replacements
in, and expansions and extensions of such facilities, properties and interests in property made or
acquired by GCWA. The Canal Division does not include the System facilities known as the
"Industrial Division" nor does it include the System facilities known as the "Canal J Division."
Canal J Division - the physical properties and interests in physical property and associated water
rights of the Juliff Canal System and the Chocolate Bayou -Halls Bayou -Mustang Bayou Canal
System acquired by GCWA from the Chocolate Bayou Water Company, together with all additions
to, replacements in, and expansions and extensions of such facilities, properties and interests in
property made or acquired by GCWA. The Canal J Division does not include the System facilities
known as the "Industrial Division" nor does it include the System facilities known as the "Canal
Division."
Contract Quantity - the amount of Water agreed upon to be provided on a firm basis pursuant to
the provisions of Section 3 herein. The initial Contract Quantity prior to the exercise of the Option
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described in Section 29 of this Agreement is zero (0) MGD. If Purchaser exercises its Option under
Section 29 of this Agreement, the Contract Quantity shall increase by the amount of the Option
Quantity taken by the Purchaser as provided in Section 29 of this Agreement during the term of
the Option. Upon the exercise of the Option pursuant to Section 29 of this Agreement, the Option
Quantity shall be converted to Contract Quantity.
Delivery Point(s)- the point(s) on the GCWA System at which GCWA will make Water available to
Purchaser under this Agreement as described on Exhibit B hereto.
Delivery Point Facilities - the facilities and associated appurtenances located at or near the
Delivery Point(s) as further provided in Section 4.
Diversion Point(s) - the point(s) at which GCWA will divert Water from the Brazos River or other
Supply Sources from time to time in order to make Water available to the System for the
Purchaser under this Agreement.
Effective Date - such term has the meaning provided in the first paragraph of this Agreement.
Final Option Payment — such term has the meaning provided in Section 29 of this Agreement.
Fiscal Year - the GCWA fiscal year from September 1 through August 31, or such other annual
fiscal year period as GCWA may later determine.
GCWA - the Gulf Coast Water Authority, as described in the Recitals of this Agreement.
Industrial Customers - GCWA's industrial customers utilizing the Canal Division and GCWA's
municipal customers receiving Water from the Thomas Mackey Water Treatment Plant under
long-term contracts with GCWA and currently paying rates for Water reserved for them by GCWA
based on the Budgeted Cost of Service (including debt service on bonds issued by GCWA) for the
portion of the System consisting of the Canal Division.
Industrial Division - the GCWA facilities and property consisting of the Industrial Pump Station
and Raw Water Transmission System and the Texas City Reservoir and Raw Water Conveyance
System, including the reservoir and water distribution system (and the lands and rights of way
on which the same are situated) used in supplying water to industrial customers having plants in
the Texas City industrial area and other physical properties acquired by GCWA from the Industrial
Water Company, under that certain "GCWA Agreement" dated June 1, 1971, between Industrial
Water Company and Galveston County Water Authority of Galveston County, Texas, together
with all additions to, replacements in, and expansions and extensions of said facilities and
physical properties heretofore or hereafter made or acquired by GCWA, all exclusive, however,
of any physical properties which are located outside of Galveston County, Texas, or which are
used exclusively for other than industrial water purposes, or which constitute Special Project
Facilities as defined in any GCWA bond covenants, or which are part of the Canal System.
Industrial Pump Station and Raw Water Transmission System - the GCWA industrial pump station
located just north of FM 1765 and west of railroad tracks west of Highway 146 in Texas City
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immediately downstream of the GCWA ten acre terminal water reservoir constructed in 2000 at
the north of the GCWA industrial pump station, the GCWA ten acre industrial reservoir and the
raw water transmission system extending from a point immediately south of the take point for
the GCWA Thomas Mackey water treatment plant to the industrial customers having plants in
the Texas City industrial area (and the lands and rights of way on which the same are situated),
all as acquired by GCWA from the Industrial Water Company, under that certain "GCWA
Agreement" dated June 1, 1971, between the Industrial Water Company and Galveston County
Water Authority of Galveston County, Texas, together with all additions to, replacements in, and
expansions and extensions of said facilities and physical properties heretofore or hereafter made
or acquired by GCWA, all exclusive of facilities which are part of GCWA's Canal System or GCWA's
Texas City Reservoir and Raw Water Conveyance System.
Interruptible Water Sales - sales of water to non -long term customers from the System or, as
appropriate, the Canal Division portion of the System, such as sales to irrigators, golf courses,
and similar short term sales.
Irrigation Use - the use of non -potable Water for irrigation of plant nurseries, golf courses, parks,
medians and public rights -of -way and other similar public areas and for storage in amenity ponds;
provided, however, water used for irrigation of crops, trees, and pastureland, for viticulture,
silviculture, keeping of animals, wildlife management, aquaculture and other similar commercial
enterprises shall be excluded from the definition of Irrigation Use for purposes of this Agreement.
Irrigation use shall be subject to rules and regulations relating to water conservation and drought
management as provided in Section 14 of this Agreement.
MGD - million gallons per day.
Municipal Use - the use of Water for municipal uses as defined in 30 TEX. ADMIN. CODE
§297.1(32), as amended, other than the use of return flows as described in subsection (c) of 30
TEX. ADMIN. CODE §297.1(32). Municipal use of Water supplied to Purchaser by GCWA from the
Supply Sources shall be subject to rules and regulations relating to water conservation and
drought management as provided in Section 14 of this Agreement.
Option Payment — such term has the meaning provided in Section 29 of this Agreement.
Option Quantity - the amount of Water agreed upon to be provided pursuant to the provisions
of Section 29 herein.
Overage Payment - such term has the meaning provided in Section 7 of this Agreement.
Prior Raw Water Availability Agreement - that certain "System Raw Water Availability
Agreement," dated April 27, 2015, between GCWA and Purchaser, as described in the Recitals to
this Agreement.
Purchaser - City of Pearland, a political subdivision of the State of Texas, as described in the
Recitals of this Agreement.
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Reclaimed Water - treated effluent or discharges produced by Purchaser through Purchaser's
owned and/or operated water and /or wastewater treatment facilities with the source of such
effluent and discharges being Water purchased from GCWA pursuant to this Agreement,
specifically excluding any effluent and discharges sourced from Purchaser's privately -owned
groundwater supplies; provided, however, Reclaimed Water shall not include any such treated
effluent or discharges once received in or discharged into (i) the Brazos River, Jones Creek, Oyster
Creek, Chocolate Bayou, Mustang Bayou, Halls Bayou, (ii) any tributary watercourse of any of the
foregoing watercourses or (iii) any component of the GCWA System.
Service Area - the Purchaser's service area and groundwater reduction plan service area as
described in Exhibit A, as may be amended by Purchaser from time to time, where Purchaser is
allowed to use the Water delivered to it by GCWA pursuant to this Agreement; provided,
however, such Service Area shall be limited to areas where GCWA's Water is authorized to be
used under GCWA's water rights constituting the Supply Sources.
Supply Sources - the Supply Sources currently include surface water rights owned by GCWA and
stored water purchased by GCWA from the Brazos River Authority or its customers. Supply
Sources may in the future include surface water rights or supplies, groundwater rights or
supplies, or other water supplies acquired, obtained or purchased by GCWA.
System or GCWA System - the water rights, canals and water diversion, pumping, storage and
transmission facilities and appurtenances for diverting, storing and transporting Water together
with all future extensions, improvements, enlargements, modifications, repairs, additions to and
replacements thereof, from surface water supplies, groundwater supplies, or a combination
thereof, unless specifically excluded from the System by the Board. The System includes the Canal
Division and the Canal J Division. The System shall not include any water treatment facilities
owned by the GCWA for production of potable water nor does it include the raw water
distribution facilities serving the GCWA's Industrial Customers known as the Industrial Division.
System Payment - the dollar amount owed by Purchaser for the Contract Quantity regardless of
whether the total contract quantity of Water is delivered to, diverted by, or used by the
Purchaser. The System Payment is equal to the product of the sum of Contract Quantity
(expressed in millions of gallons per day) times the applicable System Rate times 365 days or 366
days in a leap year. The payment will be divided by 12 and made by Purchaser in 12 equal monthly
payments and due each month as provided herein.
System Rate - the dollar amount per million gallons of the Contract Quantity as established by
GCWA from time to time utilizing the Budgeted Cost of Service for the System or the portion of
the System consisting of the Canal Division, as appropriate, as provided in Section 11 hereof.
The System Rate is calculated as follows: Purchaser shall pay the same rate for Water from the
System as GCWA charges its Industrial Customers, which rate shall be based initially on the
portion of the Budgeted Cost of Service for only the Canal Division but which may later be
calculated based on the Budgeted Cost of the System for the entire System if and when the
Industrial Customers pay a rate based on the Budgeted Cost of Service for the entire System. In
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each case, such Budgeted Cost of Service shall be reduced by income due and owing to GCWA
from water sales to non -System Rate customers from the System or the Canal Division portion of
the System, as appropriate (being Interruptible Water Sales, such as irrigators or other similar
non -long term customers). The net amount of the Budgeted Cost of Service is then prorated to
each long-term customer paying the System Rate based on their contract quantities of water
under their contracts. An example of the GCWA Budgeted Cost of Service for Fiscal Year 2015 for
its Industrial Customers is shown in Exhibit C attached hereto with the current System Rate for
Industrial Customers being $141.8239 per million gallons of Water. The Parties recognize that
the System Rate is charged to other customers receiving water from the System under long-term
water supply agreements with GCWA similar to this Agreement and that the System Rate will
vary in future years based on changes in the estimated costs included in the Budgeted Cost of
Service and changes in the contract amounts of water committed by GCWA to Purchaser and
other customers charged the System Rate. GCWA agrees the current System Rate, and as it may
be changed in the future, shall be just, reasonable and nondiscriminatory.
Texas City Reservoir and Raw Water Conveyance System - the GCWA nine hundred acre reservoir
north of Attwater Road in Galveston County and the canal running south from said nine hundred
acre reservoir to a point immediately south of the take point for the GCWA Thomas Mackey water
treatment plant (and the lands and rights of way on which the same are situated) used in
supplying water to industrial customers having plants in the Texas City industrial area and
municipal water providers utilizing the Thomas Mackey water treatment plant, all as acquired by
Seller from Industrial Water Company, under that certain "GCWA Agreement" dated June 1,
1971, between Industrial Water Company and Galveston County Water Authority of Galveston
County, Texas, together with all additions to, replacements in, and expansions and extensions of
said facilities and physical properties, all exclusive, however, of any physical properties which are
located outside of Galveston County, Texas, or which are used exclusively for other than
industrial water purposes, or which are part of the GCWA's Canal System or GCWA's Industrial
Pump Station and Raw Water Transmission System.
Water - untreated raw water obtained by GCWA from the Supply Sources to be made available
to customers of the System including the Purchaser. The term Water does not include any water
(either groundwater or surface water) owned by Purchaser from sources other than (i) Water
sold to Purchaser by GCWA pursuant to this Agreement or (ii) Water sold by GCWA to another
customer who in turns sells, assigns or otherwise transfers the Water to Purchaser. It being the
intent of the parties that such only GCWA's Water obtained or used by Purchaser is addressed
by this Agreement.
3
OWNERSHIP, AVAILABILITY AND CONTROL OF WATER
Contract Quantity for Firm Water
During the term of this Agreement, GCWA shall make available and deliver to Purchaser at the
Delivery Point(s) the Contract Quantity, on a firm basis, and Purchaser agrees to take up to the
Contract Quantity of Water at the Delivery Point(s). GCWA makes no representation as to the
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quality or suitability of the Water in the System. GCWA represents and warrants that it
currently holds the water rights permits described on Exhibit D hereto which authorize
diversion and use of Water in quantities sufficient to supply the Contract Quantity for firm
water to Purchaser and covenants to take all reasonable and necessary actions to maintain
such water right permits and any priority dates associated with the water right permits.
Ownership and Control of Water
Except as provided further herein, Purchaser agrees that it acquires no property rights in any of
the Water made available to it under this Agreement beyond the right to have the Water made
available to it for withdrawal and beneficial use as provided in this Agreement. Purchaser
acquires no rights or interest in the Supply Sources. GCWA owns, and shall exercise dominion
and control over, the Water to be delivered to Purchaser while it is in the GCWA System until it
reaches the Delivery Point(s); after the Water passes through the Delivery Point(s) ownership of,
and dominion and control over, the Water shall transfer to Purchaser. GCWA agrees that
Purchaser may provide Water to third parties for use within the Service Area, provided that
Purchaser shall be responsible for payments under this Agreement, and such use is not
inconsistent with the terms of this Agreement, including without limitation the provisions of
Sections 14 and 16.
Purchaser represents, and GCWA relies on such representation, that all Water to be made
available by GCWA under this Agreement to Purchaser shall be beneficially used solely for the
use(s) provided herein.
Timing, Delivery, and Diversion of Water
To facilitate GCWA's ability to control Water in the System, Purchaser recognizes the need, and
agrees, to notify GCWA of any significant changes in Purchaser's withdrawal rate, practices or
procedures (plus or minus 20% change in the amount of Water withdrawn over a consecutive 24-
hour period), including the expected timing of such changes. For scheduled changes, Purchaser
shall notify GCWA within 7 days prior to any such change. Notice of unscheduled emergency
changes shall be as soon as practicable. Likewise, to facilitate Purchaser's ability to manage Water
consumption, GCWA recognizes the need, and agrees, to notify Purchaser in writing of any
anticipated operational changes within GCWA's System within 7 days, and any unscheduled
emergency conditions as soon as practicable.
4
DELIVERY POINT FACILITIES; ACCESS BY PARTIES
GCWA shall own and operate the System which shall include all infrastructure necessary for the
diversion and transportation of Water to Purchaser at the Purchaser's Delivery Point(s), but all
Delivery Point Facilities for receiving the Water at the Delivery Point(s) shall be owned and
operated by Purchaser. GCWA hereby grants Purchaser a license on any portion of the Canal
Division real property interests necessary for Purchaser to utilize in order to construct, operate
and maintain Purchaser's Delivery Point Facilities; provided, however, the design and
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construction of such Delivery Point Facilities shall first be reviewed and approved by GCWA, such
approval not to be unreasonably withheld, delayed or conditioned. Upon request, GCWA shall
have the right to enter upon and inspect Purchaser's Delivery Point Facilities, including all
metering devices as provided herein.
During times of shortage of Water or at other times if necessary to ensure GCWA's ability to
operate the Canal Division facilities to provide water to all GCWA customers in a lawful and
prudent manner, GCWA may enter upon Purchaser's Delivery Point Facilities to ensure that the
Delivery Point Facilities are being operated in a manner consistent with any applicable laws, rules
or regulations (including state and federal laws and regulations and GCWA's water conservation
and drought contingency plans). Purchaser and GCWA covenant and agree to comply with all
such laws, rules and regulations. If Purchaser is not operating its Delivery Point Facilities in the
manner required by applicable laws, rules or regulations or is otherwise operating its Delivery
Facilities so as to impair GCWA's ability to operate the Canal Division facilities to provide water
to all GCWA customers in a lawful and prudent manner, GCWA shall immediately notify Purchaser
thereof in writing and Purchaser shall immediately conform its activities in order to be in
compliance with such laws, rules or regulations and to not impair GCWA's ability to operate the
Canal Division facilities to provide water to all GCWA customers in a lawful and prudent manner.
5
PAYMENTS UNCONDITIONAL NATURE; DATE AND PLACE
Commencing the second month following the month of the Effective Date, GCWA shall invoice
Purchaser monthly for the System Payment due for the previous month. Invoices shall be sent
not later than the 5th day of each month and shall be due and payable by Purchaser no later than
31 days following the date of the invoice. Purchaser unconditionally agrees to pay GCWA the
System Payment due for the previous month. Payments shall be made by either electronic
transfer approved by GCWA or check received at GCWA's administrative office, currently located
at 3630 FM 1765, Texas City 77591, Galveston County, Texas.
Purchaser shall be unconditionally obligated to pay the amounts due hereunder regardless of
whether or not Purchaser actually receives water hereunder, whether due to Force Majeure or
otherwise. Purchaser agrees that its obligation to pay the amounts due hereunder shall be
absolute and unconditional, irrespective of any rights of set-off, diminution, abatement,
recoupment or counterclaim the Purchaser might otherwise have against GCWA or any other
person, and, subject to the rights of, and limitations on, the Parties in Section 23, Purchaser
covenants not to seek and hereby waives, to the extent permitted by applicable law, the benefits
of any rights which it may have at any time to any stay or extension of time for performance or
to terminate, cancel or limit its liability to pay the amounts due hereunder.
Purchaser represents and covenants that the services to be obtained pursuant to this Agreement
are essential and necessary to the operation by Purchaser of its own waterworks facilities and
the provision of waterworks services to its constituents, and that all payments to be made
hereunder by it will constitute reasonable and necessary operating expenses of Purchaser's
waterworks system to the extent applicable to Purchaser, and the provisions of all ordinances or
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resolutions, as appropriate, authorizing the issuance of all bonds of Purchaser which are payable
from revenues of the Purchaser's waterworks system. Purchaser further agrees to establish and
collect such rates and charges for its waterworks services to be supplied by its waterworks system
as will make possible the prompt payment of all expenses of operating and maintaining its
waterworks system including the payments committed hereunder, and the prompt payment of
the principal of and interest on its obligations, if any, payable from the revenues of its waterworks
system.
Notwithstanding any other provisions of this Agreement, in the event of any conflict between
this section and any other provision of this Agreement, this section shall prevail.
6
REMEDIES FOR NONPAYMENT OR DEFAULT BY PURCHASER
Subject to the rights of, and limitations on, the parties in Section 25, should Purchaser fail to
make any payment to GCWA when due hereunder or otherwise be in material default under this
Agreement, Purchaser shall have 30 days after receiving written notice of default from GCWA
specifying the nature of the default to cure the alleged default; provided, however, a party shall
be considered in compliance with the Agreement if such party is making reasonable efforts to
cure such breach within 30 days after receiving such notice and attains compliance with the
Agreement within 90 days after receiving such notice. If Purchaser fails to cure such default
within the aforementioned time, GCWA at its sole option and in addition to and without impairing
any other remedy available to it on account of the default, may elect under this Section 6 to
either (i) suspend Water deliveries to Purchaser under this Agreement, or (ii) terminate this
Agreement if, and only if, Purchaser fails to make the payments required under this Agreement
to GCWA for a period of three (3) months or longer. Nothing in this Agreement shall be construed
in any manner so as to abridge, limit or deprive either party hereunto of any means that it would
otherwise have of enforcing any right or remedy either in law or in equity for breach of any of
the provisions hereof. Further, Purchaser agrees that this Agreement constitutes an agreement
for provision of goods and services to the Purchaser by GCWA.
7
REMEDIES FOR OVERAGE
Purchaser recognizes that any withdrawal of Water by .Purchaser in excess of its Contract
Quantity may impact GCWA's ability to make available Water to GCWA's other customers.
Purchaser agrees that if for any reason it needs to exceed the Contract Quantity, Purchaser will
give written notice to GCWA in advance of the need for such additional Water and in such notice
will state the reason for the additional need, the additional amount (gallons per day) of Water
needed to be made available, and the anticipated duration (days) of the need and will not take
such excess Water until it receives written notice of approval from GCWA. GCWA, in its sole
discretion, may make all, a portion or none of the requested additional Water available. Nothing
contained herein shall obligate the GCWA to provide Water in excess of the Contract Quantity
nor may Purchaser rely on additional Water being made available in excess of the Contract
Quantity.
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If Purchaser, for any given sixty-day (60-day) period, takes a quantity of Water that when
averaged over the 60-day period is 10% or more greater than Purchaser's Contract Quantity,
Purchaser's Contract Quantity shall, at the GCWA's option, increase to the amount of Water
taken over such 60-day period divided by sixty (60) days. Each exercise of such option by the
GCWA shall be accomplished by giving written notice to Purchaser within forty-five (45) days
after the end of such 60-day period. Such notice shall specify an effective date of the increase
that shall be the next day after the date such 60-day period ended or a date thereafter as
specified by GCWA. Each exercise by GCWA of such option shall increase the Contract Quantity
on the effective date of the increase, and the new Contract Quantity shall remain in effect
hereunder until the termination of this Agreement unless further increased or decreased
pursuant to the provisions of this Agreement. GCWA's failure to exercise such option with respect
to any given 60-day period shall not be deemed a waiver of the right to exercise such option with
respect to other 60-day periods. Periodic extraordinary events such as droughts, leaks, breaks or
hurricanes shall not be considered in calculating Contract Quantities under this section and
Purchaser's Contract Quantity will not be increased due to water used as a result of extraordinary
events such as droughts, leaks, breaks or hurricanes. Any amount of increase in the Contract
Quantity pursuant to this section shall automatically result in an equal reduction in the amount
of Option Quantity available to be purchased by Purchaser in the event Purchaser exercises its
rights under the Option provided in Section 29 and shall require Purchaser to comply fully with
all applicable terms of the Option as to the increased Contract Quantity. Notwithstanding
anything to the contrary in this Agreement, if Purchaser's overage exceeds the Contract Quantity
(including any Option Quantity included in the Contract Quantity), Purchaser may withdraw such
Water in excess of the Contract Quantity (including any Option Quantity included in the Contract
Quantity) only if GCWA has Water available to be supplied to Purchaser and such supply will not
impair GCWA's obligations to meet the obligations of GCWA to its other customers.
Once Purchaser has no additional rights to any Contract Amount of Water under its Option, then
if Purchaser, for any given 60-day period, takes a quantity of Water that when averaged over
such 60 days is greater than Purchaser's Contract Quantity, then Purchaser shall pay to GCWA
for such monthly billing periods, in addition to the amounts otherwise payable by Purchaser
under this Agreement, for the amount of Water in excess of the Contract Quantity, one and one-
half (1.5) times the System Rate then in effect. Seller shall have no obligation to deliver to
Purchaser under this Agreement Water in excess of Purchaser's Contract Quantity, and any
excess Water which may be so delivered from time to time shall not have the effect of increasing
Seller's obligation.
8
REGULATORY COMPLIANCE REQUIRED
Purchaser agrees that it will not intentionally withdraw, impound or use Water under this
Agreement unless such withdrawal, impoundment or use is made in accordance with the statutes
and rules of the State or other regulatory authority applicable to the Supply Sources and with the
terms of any permits for the Supply Sources applicable to such withdrawal, impoundment and
use of the Water and in a manner consistent with the limitations set forth in this Agreement.
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9
PURCHASER DELIVERY POINT FLOW METERING
Purchaser and GCWA agree that the Delivery Point meters shall be tested and calibrated for
accuracy by Purchaser once each Calendar Year at intervals of approximately 12 months, and a
report of such test and calibration shall be furnished to GCWA. GCWA shall be given at least 5
days' prior notice of the time of any test and calibration of a meter and GCWA shall have the right
to have a representative present at the test to observe the test and any adjustments found
thereby to be necessary. In the event any questions arise at any time as to the accuracy of a
meter, the meter shall be tested within a reasonable period of time following such request for
testing by GCWA. The expense of such test is to be borne by GCWA if the meter is found to be
correct and by Purchaser if it is found to be incorrect. Readings that vary within 5% of accuracy,
plus or minus, shall be considered correct. If, as a result of any test, any meter is found to be
registering inaccurately (i.e., currently in excess of 5% plus or minus of accuracy), then the
readings of such meter shall be corrected at the rate of its inaccuracy for any period which is
definitely known and agreed upon, but in case the period is not definitely known and agreed
upon, the period shall be extended back 90 days from the date of the initial GCWA request for
meter testing, and the records of readings shall be adjusted accordingly. Following each test of a
meter, Purchaser shall cause the same to be calibrated to register accurately and a report
forwarded to GCWA.
10
REPORTING
Purchaser agrees that it will keep accurate records of the monthly readings from the meters.
These records shall be subject to inspection by GCWA at reasonable times and places and made
available to GCWA electronically. In addition, Purchaser will make available to GCWA, at GCWA's
cost, SCADA system metering data for Water delivered to Purchaser, including allowing GCWA
(at GCWA's expense) to connect its SCADA system to Purchaser's Delivery Point Facilities meters
for the sole purpose of monitoring Purchaser's Delivery Point Facilities meters.
Sixty (60) days prior to adjusting the System Rate, GCWA agrees to provide annual budget data
and calculations used to support the proposed Budgeted Cost of Service and System Rate. If
desired, Purchaser may examine detailed records, and any such examination shall be at
Purchaser's sole cost and expense, and shall be performed at any time during GCWA's regular
business hours. Any such examination shall not commence until Purchaser has provided GCWA
with ten (10) days' written notice. For the purpose of such examinations, GCWA shall make
available to Purchaser for inspection and copying in accordance with the Texas Public Information
Act (Texas Government Code, Chapter 552) all non -privileged books, records, documents and
other evidence of accounting procedures or practices maintained to establish the System Rate
and the Budgeted Cost of Service.
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11
SYSTEM CAPITAL COSTS
Purchaser and GCWA understand that GCWA may desire to replace, rehabilitate, modify, extend,
expand, enlarge, or add water rights or supplies, facilities or other property to the System, and
that, in connection with any such replacement, rehabilitation, modification, extension,
expansion, merger, enlargement or addition, GCWA may incur additional costs and may issue
bonds payable from the revenues of this Agreement. The budgeted costs (including principal and
interest on such bonds) estimated to be incurred by GCWA related to such replacement,
rehabilitation, modification, extension, expansion, enlargement or addition shall be included in
the Budgeted Cost of Service for the System. Inclusion of any such costs in the Budgeted Costs of
Service applicable to the calculation of the System Rate for Purchaser is subject to the other
provisions of this Agreement. Purchaser hereby agrees to furnish GCWA with such financial
information, data, projections and related information as may be reasonably required by GCWA
in connection with the sale by GCWA of such bonds in order to comply with all applicable laws,
rules and regulations, including the approval of GCWA's bonds by the Attorney General of the
State of Texas.
12
ACQUISITION OF FUTURE SUPPLY SOURCES
GCWA and Purchaser recognize the need for GCWA to acquire additional Supply Sources to
supplement the current Supply Sources in order to improve the reliability of current Supply
Sources for Purchaser and GCWA's other customers. In that regard, GCWA agrees that, if and to
the extent necessary to effect an equitable apportionment of such additional costs, it will impose
a "buy -in fee," "capital recovery fee," "surcharge" or similar charge on customers (whether
existing or new) who enter into new or amended long-term water supply agreements with GCWA
similar to this Agreement that impose increased demands on GCWA for Water from the System.
Such fees or charges shall be designed to recoup from such customers imposing increased
demands on the System the portion of the future costs for increasing or supplementing the
Supply Sources that are reasonably attributable to the increased demands placed on the Supply
Sources by such customers as opposed to the portion of such costs reasonably attributable to
improving the reliability of the Supply Sources for meeting the current supply commitments of
GCWA to existing customers of the System.
13
OPERATION, MAINTENANCE AND REPLACEMENT RESERVE FUND
GCWA and Purchaser recognize and agree that GCWA's current Budgeted Cost of Service includes
provision for a reserve fund for operation, maintenance and replacement costs. The current
amounts in the reserve fund were accumulated from prior payments from customers of the
System and through annual payments for previous years' Budgeted Costs of Service. GCWA
agrees to continue its practice of requiring new customers or existing customers that increase
the amount of water purchased from GCWA to contribute appropriate amounts to the reserve
fund in order to equitably distribute the burden of the reserve fund over all customers of the
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System. Currently, GCWA has established the reserve fund at a level equal to six (6) months of
the annual amount of the Budgeted Cost of Service, and shall maintain the reserve fund at or
about the same level in calculating the System Rate. Neither Purchaser nor any other customers
of GCWA shall be entitled to any refund of any portion of the reserve fund.
14
CONSERVATION OF WATER
It is the intent of the parties to this Agreement to provide to the maximum extent practicable for
the conservation of Water, and Purchaser agrees that it is a condition of this Agreement that it
shall reasonably maintain and operate its facilities in a manner that will promote beneficial use,
and prevent unnecessary waste, of Water and will comply with any applicable water conservation
plan and drought contingency plan of GCWA and any rules and regulations of GCWA
implementing or pertaining to same pertaining to the Water supplied to Purchaser and other
customers of the GCWA System. GCWA, in accordance with applicable law or regulation, may
from time to time adopt a water conservation plan and drought contingency plan and reasonable
rules and regulations pertaining to and implementing water conservation and drought
management for Water supplied by GCWA to Purchaser and other customers of the GCWA
System. Purchaser and GCWA agree that GCWA's water conservation plan and drought
contingency plan, and the rules and regulations pertaining thereto, may include programs,
incentives and disincentives to encourage more efficient use or Water and reduction of waste of
Water. Purchaser shall adopt and implement a water conservation and drought contingency plan,
as required by applicable law, which may be reviewed by GCWA for the use of Water made
available and withdrawn by Purchaser pursuant to this Agreement. If required by applicable law
or regulation Purchaser agrees that, in the event Purchaser furnishes Water or water services
using the Water supplied to Purchaser to a thirdparty that in turn will furnish the Water or
provide water services using the Water supplied to Purchaser under this Agreement to the
ultimate consumer, the requirements relative to water conservation plans and drought
contingency plans shall be met through contractual agreements between Purchaser and the third
party providing for the establishment and implementation of a water conservation plan and
drought contingency plan in compliance with such applicable law or regulation regarding the
Water supplied by GCWA.
15
WATER QUALITY
THE WATER THAT GCWA OFFERS TO SELL TO PURCHASER IS NON -POTABLE, RAW, AND
UNTREATED. PURCHASER HAS SATISFIED ITSELF THAT SUCH WATER IS SUITABLE FOR ITS NEEDS.
GCWA EXPRESSLY DISCLAIMS ANY WARRANTY AS TO THE QUALITY OF THE RAW WATER OR
SUITABILITY OF THE RAW WATER FOR ITS INTENDED PURPOSE. GCWA EXPRESSLY DISCLAIMS THE
WARRANTIES OF MERCHANTABILITY AND FITNESS. PURCHASER AGREES THAT ANY VARIATION
IN THE QUALITY OR CHARACTERISTICS OF THE RAW WATER OFFERED FOR SALE AS PROVIDED BY
THIS AGREEMENT SHALL NOT ENTITLE PURCHASER TO AVOID OR LIMIT ITS OBLIGATION TO MAKE
PAYMENTS PROVIDED FOR BY THIS AGREEMENT. THERE ARE NO WARRANTIES WHICH EXTEND
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BEYOND THE DESCRIPTION CONTAINED IN THIS AGREEMENT. PURCHASER ASSUMES FULL
RESPONSIBILITY WITH RESPECT TO THE TREATMENT OF THE WATER PRIOR TO ITS DISTRIBUTION
FOR HUMAN CONSUMPTION OR ANY OTHER USES. NOTWITHSTANDING THE FOREGOING, GCWA
WILL UTILIZE ITS BEST EFFORTS TO PRESERVE THE QUALITY AND INTEGRITY OF WATER PROVIDED
PURSUANT TO THIS AGREEMENT.
16
RESALE OF WATER
Should Purchaser determine that it has Water surplus to its anticipated needs from the Water,
Purchaser may with prior written notice to GCWA (i) provide Water to a third party user within
the Service Area or (ii) notify GCWA as to the amount of Water no longer needed to be made
available to Purchaser. If Purchaser provides Water to a third party within the Service Area,
pursuant to subpart (i) above, Purchaser shall remain responsible for the payments required
herein. If notice is provided to GCWA as stated in subpart (ii) above, GCWA will use reasonable
efforts to find a third party who is able and willing to pay for such availability for a period
coterminous with the period of time Purchaser determines such Water is surplus to its needs. If
GCWA is successful in finding and contracting with such a third party suitable to it to acquire
Purchaser's interest in Purchaser's available surplus for said period of time, this Agreement will
be amended accordingly. If GCWA finds a third party who is able and willing to pay for such
availability for a period to the end of or beyond the term of this Agreement, GCWA shall release
Purchaser from a portion of this Agreement to the extent the new customer is bound to GCWA
in an agreement with similar provisions as contained in this Agreement.
17
RECLAIMED WATER
All rights to Reclaimed Water originating from the Water made available to Purchaser under this
Agreement that may be beneficially reused before disposal or discharge, and that is neither
disposed of nor discharged or otherwise allowed to flow into (i) the Brazos River, Jones Creek,
Oyster Creek, Chocolate Bayou, Mustang Bayou, Halls Bayou, (ii) any tributary watercourse of
any of the foregoing watercourses or (iii) any component of the GCWA System shall remain
vested in Purchaser.
18
CURTAILMENT PROVISIONS
Pursuant to the provisions of Texas Water Code §11.039, in the event of a drought or if for any
other reason (including Force Majeure) Water in the System becomes in short supply, GCWA shall
fairly apportion and ration the available Water supply from the System among all its customers,
including Purchaser, in accordance with the applicable law on distribution and allocation of water
during periods of shortage. GCWA agrees that any allocation of Water due to a drought or
shortage as provided in this Section shall be consistent with applicable laws and regulations of
the State of Texas and any water conservation or drought contingency plans adopted by GCWA
and then in effect.
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19
OTHER GCWA CONTRACTS
GCWA may adjust the System Rate and enter into agreements with other parties regarding the
System, including its operation and maintenance and the storage, release and supply of Water
therefrom; provided, however, that such adjustments to the System Rate and such agreements
(i) shall not discriminate against Purchaser in relation to the Supply Sources, the Budgeted Cost
of Service or the System Rate in a manner inconsistent with applicable laws or regulations of the
State of Texas and its agencies; or (ii) provide for the sale of perpetual water rights unless GCWA
continues to be able to make available to the Purchaser the Contract Quantity; and (iii) shall not
be entered into by GCWA if it finds that the agreement will render GCWA unable to provide the
Contract Quantity to Purchaser.
20
FORCE MAJEURE
In the event either party hereto is rendered unable, wholly or in part, by force majeure to carry
out any of its obligations under this Agreement, then the obligations of such Party, to the extent
affected by such force majeure and to the extent that due diligence is being used to resume
performance at the earliest practical time, shall be suspended during the continuance of any
inability so caused to the extent provided but for no longer period. As soon as reasonably possible
after the occurrence of the force majeure relied upon, the Party whose contractual obligations
are affected thereby shall give notice and full particulars of such force majeure to the other Party.
Such cause, as far as possible, shall be remedied with all reasonable diligence. The term "force
majeure" means acts of God, strikes, lockouts or other industrial disturbances, acts of the public
enemy, orders of any kind of the government of the United States or the State of Texas or any
civil or military authority other than a Party to this Agreement, insurrections, riots, epidemics,
landslides, lightning, earthquakes, fires, hurricanes, storms, floods, washouts, droughts, arrests,
civil disturbances, explosions, breakage or accidents to machinery, pipelines or canals, partial or
entire failure of the water supply, and any other inabilities of either Party similar to those
enumerated, which are not in control of the Party claiming such inability. It is understood and
agreed that the settlement of strikes and lockouts shall be entirely within the discretion of the
Party having the difficulty and that the above requirement that any force majeure shall be
remedied with all reasonable dispatch, but shall not require the settlement of strikes and
lockouts by acceding to the demands of the opposing party or parties when such settlement is
unfavorable to it in the judgment of the Party having the difficulty.
21
WAIVER
Any waiver at any time by any party of its rights with respect to default or any right granted under
this Agreement shall not be deemed a waiver of such rights with respect to any subsequent
default or matter.
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22
NOTICES AND CERTIFICATIONS
Notices and certifications provided for in this Agreement shall be in writing. The same shall be
delivered by mailing certified mail, postage paid, return receipt requested, or hand delivered, to
the respective parties at the following addresses:
GCWA: GULF COAST WATER AUTHORITY
Attn: General Manager
Telephone: (409) 935-2438
Until September 30, 2022:
3630 FM 1765
Texas City, Texas 77591
Beginning October 1, 2022:
4243 Emmett F. Lowry Expy
Texas City, Texas 77591
Purchaser: CITY OF PEARLAND
Attn: City Manager
3519 Liberty Dr.
Pearland, TX 77581
Telephone: (281) 652-1600
Either party may change its address as shown above by written notice to the other party.
23
OTHER REQUIREMENTS
This Agreement is subject to all conditions, provisions, and limitations included in GCWA's water
rights, permits or contracts for the Supply Sources from the applicable State agency and any third
party suppliers. Further, this Agreement is subject to all applicable Federal, State and local laws,
and any applicable ordinances, rules, orders and regulations of any local, State or Federal
governmental authority having jurisdiction. However, nothing contained in this Agreement shall
be construed as a waiver by either party of any right to question or contest any law, ordinance,
order, rule, or regulation of any governmental authority. GCWA agrees that, except to the extent
required by applicable laws or regulations of the State of Texas and its agencies or as required by
current contracts of GCWA, it will not adopt any rules or regulations or enter into any future
contracts with new customers that will cause the charges provided in this Agreement for
Purchaser to be unjust, unreasonable or discriminatory in contravention of the applicable
provisions of the Texas Water Code or to discriminate against Purchaser in the allocation of Water
in a manner inconsistent with applicable law, including Section 11.039, Texas Water Code.
Notwithstanding the previous sentence, Purchaser recognizes that GCWA may adopt and
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implement water conservation and drought contingency plans as authorized by law and as
provided in Section 18.
24
SEVERABILITY
The provisions of this Agreement are severable, and if for any reason any one or more of the
provisions contained in this Agreement shall be held to be invalid, illegal, or unenforceable in any
respect, the invalidity, illegality, or unenforceability shall not affect any other provisions of this
Agreement and this Agreement shall remain in effect and be construed as if the invalid, illegal,
or unenforceable provision had never been contained in the Agreement and the parties agree to
attempt in good faith to amend this Agreement, if necessary, to implement the invalid, illegal, or
unenforceable provision in a manner that is valid, legal and enforceable.
25
TERMINATION
This Agreement may be terminated by either party for material breach of the terms of this
Agreement or as provided herein; provided, however, notwithstanding anything in this
Agreement to the contrary, if Purchaser terminates this Agreement at a time when GCWA has
bonds outstanding and payable from the revenues of the System, including revenues from this
Agreement (the 'Then Outstanding Bonds"), except to the extent provided below in (1), (2) and
(3) of this section, as appropriate, Purchaser shall continue to be bound thereafter to pay its
proportionate share (based on Purchaser's Contract Quantity as compared to the Contract
Quantities of all other GCWA customers purchasing Water from the System at the time of the
termination) of debt service on the Then Outstanding Bonds, such obligation to survive
termination of this Agreement (the "Continuing Obligation"); provided, however,
(1) if, and to the extent, GCWA is able to find new customers or old customers who agree
to increase their contracted amounts of supply and who make payments to GCWA for
the Purchaser's pro rata share of the debt service on the Then Outstanding Bonds of
GCWA, GCWA agrees to credit such funds, as and when received, against Purchaser's
Continuing Obligation to the extent such amount is attributable to the debt service on
the Then Outstanding Bonds; or
(2) in the event more than one customer of GCWA has a Continuing Obligation, any such
revenues received by GCWA from new customers or old customers who increase their
supplies shall be credited pro rata among Purchaser's and the other customer(s)'
Continuing Obligations based on the relative amounts of the Continuing Obligations
of all such customers with Continuing Obligations; or
(3) if permitted under the applicable bond resolutions authorizing GCWA's Then
Outstanding Bonds, Purchaser may be released from its Continuing Obligation if the
Purchaser (at Purchaser's expense) provides for the defeasance or redemption by
GCWA of the Then Outstanding Bonds attributable to Purchaser, it being understood,
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however, that Purchaser shall not be relieved from any such Continuing Obligation
until such time as such pro rata share of the Then Outstanding Bonds have been
defeased or redeemed and Purchaser has made complete payment of any accrued
but unpaid liabilities under this Agreement at the time of termination; and
(4) Purchaser shall pay all reasonable expenses incurred by GCWA in implementing
subsections (1)-(3) above.
Further, (i) neither party may terminate this Agreement or suspend delivery of Water or
payments required herein unless the party seeking termination or suspension of the Agreement
has provided the other party with written notice of such termination or suspension with an
explanation of the breach and an opportunity to cure such breach within 30 days of such notice
and (ii) in the event Purchaser terminates this Agreement, such termination shall be effective at
the end of GCWA's fiscal year which immediately succeeds the otherwise effective date of
Purchaser's termination. A party shall be considered in compliance with the Agreement if such
party is making reasonable efforts to address such breach within 30 days of such notice and
attains compliance with the Agreement within 90 days of such notice.
26
ASSIGNMENT
This Agreement may be assigned by GCWA at its discretion with prior written notice to the
Purchaser, but only so long as such assignment is to another governmental entity that assumes
GCWA's obligations herein and is capable of performing such obligations. With prior written
notice to GCWA, this Agreement may be assigned by Purchaser, in whole or in part, to a successor
in interest or an affiliate of Purchaser that is the owner of land within the Service Area of
Purchaser provided that the assignee will not require a change in the Diversion Point(s), Delivery
Point(s), Contract Quantity, purpose of use of the Water or the Service Area but only so long as
such assignee assumes Purchaser's obligations herein, or the appropriate part thereof, and is
capable of performing such obligations. Any other assignment by either party may be made only
with the prior written consent of the other party, such consent not to be unreasonably withheld,
delayed or conditioned. In the event any assignment is made more than one year after the parties
have communicated with each other regarding any needed amendments to this Agreement as
contemplated in the second paragraph of Section 29 below, the parties agree to communicate
with each other regarding the need for any amendments to this Agreement within 45 days after
said assignment.
27
TERM OF AGREEMENT: AGREEMENT TO CONSIDER AMENDMENTS PERIODICALLY
The term of this Agreement shall begin on the Effective Date and shall end the later of August 31,
2027 or the date of final payment of any bonds or other indebtedness issued by GCWA and
outstanding and payable from the revenues of this Agreement; provided, however, subject to
the rights of, and limitations on, the parties in Sections 6 and 25, this Agreement may terminate
as provided herein due to (i) any non-payment of Payments required herein, (ii) Purchaser's
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material default, (iii) GCWA's material default, (iv) the effective date of a mutual agreement in
writing between GCWA and Purchaser to terminate the Agreement, or (v) requirement by
regulatory authority. The parties agree that upon expiration of the term of this Agreement on
August 31, 2027, the parties will extend the term of this Agreement under terms and conditions
for Water from the Authority's System then prevailing from the Authority for other similarly -
situated customers, which extension shall be evidenced by mutual agreement in writing between
GCWA and Purchaser.
Notwithstanding the foregoing, GCWA and Purchaser agree that due to changes in circumstances
over the term of this Agreement, it is in their mutual and respective interests to periodically
consider amendments to this Agreement during the term hereof. Accordingly, within sixty (60)
days prior to or after each 5-year anniversary of the Effective Date of this Agreement the parties
agree to communicate with each other to identify, negotiate and attempt to approve any
amendments to this Agreement necessary or appropriate to accommodate the needs and
interests of the parties, or to address other circumstances, which have changed since the
Effective Date. The intent of this paragraph is to establish a relationship between the parties to
aid in the resolution of issues that hereafter arise so as to enable the operation and use of the
System by GCWA to meet the needs of Purchaser and the other customers of the GCWA System
in a manner which comports with sound public policy.
28
RECITALS AND EXHIBITS INCORPORATED
The recitals contained in the preamble hereof and the exhibits hereto are hereby found to be
true, and such recitals and exhibits are hereby made a part of this Agreement for all purposes.
29
OPTION TO INCREASE CONTRACT QUANTITY
Purchaser desires to obtain an option to acquire an additional supply of Water from the Canal
Division for future use from GCWA in an amount not to exceed ten (10) MGD.
The purpose of this Option is to provide a mechanism for Purchaser to require GCWA to increase
the Contract Quantity so that Purchaser can purchase an additional amount of the available
Water from GCWA for use at Purchaser's Delivery Point(s) in an amount not to exceed the
Contract Quantity plus the Option Quantity and in all respects subject to the terms, conditions
and restrictions set forth herein.
Option Quantity
For and in consideration of the payments described herein, GCWA agrees that Purchaser shall
have the option, exercisable as set out herein, to buy an additional amount of Water up to the
Option Quantity from GCWA through GCWA's System.
Price of Option
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During the remaining term of this Option, which is the period beginning on September 1, 2022,
and ending on May 31, 2023 (the "Final Nine Months of the Option"), Purchaser agrees to pay
monthly to GCWA at its offices in Texas City, Texas, as "Final Option Payments" an amount equal
to fifty percent (50%) of the System Rate times the Option Quantity times 365 divided by 12..
GCWA will invoice Purchaser monthly for the Option Payments and the Final Option Payments
by the 5th day of each month. Payment by Purchaser will be due thirty (30) days after the date
of the invoice.
Exercise of Option
At any time during the term of this Option, Purchaser may exercise its option to buy additional
Water in any amount up to the Option Quantity by giving GCWA ninety (90) days' written notice.
Such amount may be less than, but may not be more than, the Option Quantity. Such notice shall
state the amount of Water, in millions of gallons per day, which Purchaser wishes to purchase.
Purchaser may choose to exercise the option in portions during the term of this Option. If such
notice is for less than the Option Quantity, Purchaser's option to buy Water shall continue as to
the unexercised portion during the remainder of the term of the Option. Notwithstanding the
foregoing, Purchaser hereby notifies GCWA that unless the Option is terminated prior to March
1, 2023, Purchaser is hereby exercising its option with respect to ten (10) MGD, effective as of
May 31, 2023. As a result of the exercise of such option, this Agreement shall automatically be
amended to increase the Contract Quantity to ten (10) MGD, effective June 1, 2023, as provided
in "Result of Exercise of Option," below.
Result of Exercise of Option
If Purchaser notifies GCWA of the exercise of its option to purchase all or any part of the Option
Quantity during the term of this Option as set out above, then this Agreement shall automatically
be amended to increase the Contract Quantity by the amount of the Option Quantity taken by
Purchaser (subject to all other terms of this Agreement including the payment of the System Rate
by Purchaser). Upon implementation of any such amendment to this Agreement, the Option shall
terminate as to the exercised portion of the Option Quantity but otherwise continue in effect as
to any unexercised portion of the Option Quantity for the remainder of the term of this Option.
Term and Termination of Option
Notwithstanding the term of the Agreement, the term of the Option shall be for a period expiring
on May 31, 2023. GCWA may terminate the Option for any nonpayment, which continues for
ninety (90) days after written notice to Purchaser. Purchaser may terminate the Option on six
months' written notice to GCWA.
GCWA Special Termination Right of Option
Notwithstanding anything herein to the contrary, during the term of this Option, GCWA shall, if
it has other customers desiring to contract for additional Water supply from GCWA's Canal
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Division, that have provided written notice of said desire and submitted evidence of an intent to
enter into a contract for an initial term of not less than ten (10) years duration, where such Water
has been otherwise reserved for Purchaser by this Option or reserved for other customers with
similar Option rights to reserve Water from the Canal Division under agreements similar to this
Agreement, notify Purchaser and all such other customers with similar Option rights in writing of
the receipt of such offer and of the quantity of Water covered by and the terms of such offer.
Purchaser and all such other customers with similar Option rights may elect to exercise their
options to acquire rights to all or any part of their respective Option Quantities as provided herein
within a period ending ninety (90) days after receiving the notice from GCWA. To the extent
Purchaser and all such other customers with similar Option rights do not elect to take all of their
respective Option Quantities, as between Purchaser, all such other customers with similar Option
rights and GCWA, GCWA shall have the right to enter into a contract with the offeror, for an initial
term of not less than ten (10) years, on the terms and provisions of the offer up to the extent of
any unexercised portions of the Option Quantities of Purchaser and all such other customers with
similar Option rights; but should GCWA fail to enter into such contract on or before the expiration
of one hundred eighty (180) days from the date of GCWA's notice to Purchaser and other
customers with similar Option rights of the bona fide offer, the right of Purchaser and all such
other customers with similar Option rights to notice and right of first refusal as to such offer and
such quantity of Water shall be reinstated to the extent not exercised by Purchaser or such other
customers with similar Option rights. GCWA agrees that any contract entered into with the
offeror shall be substantially the same terms and conditions as this Agreement and the similar
agreements with other customers with similar Option rights and that offeror shall be offered
substantiallythe same rights and obligations under its contract as the Purchaser is afforded under
this Agreement and as the other customers with similar Option rights are afforded under their
agreements, ensuring that GCWA does not treat the offeror any better or worse than the
Purchaser or such other customers with similar Option rights.
If Purchaser and such other customers with similar Option rights exercise their rights of first
refusal under this section, the Contract Quantities of Purchaser and such other customers with
similar Option rights shall be increased by the amount of Water specified in Purchaser's and such
other customers' with similar Option rights election notices so received by GCWA and Purchaser's
Option Quantity and that of the other customers with similar Option rights shall be reduced by
the same amount, respectively.
To the extent GCWA enters into a contract for an initial term of not less than ten (10) years
duration with the offeror as permitted herein, the Option Quantities of Purchaser and of other
customers with similar Option rights after the exercise of their options as provided above shall
be further reduced by an amount equal to the product of multiplying the amount of Water
contracted for by the offeror with GCWA times a fraction, (a) the numerator of which is the
amount of Option Quantity then remaining with Purchaser after the exercise of Purchaser's
option as provided above after the exercise of each such customer's option as provided above
and (b) the denominator of which is the total of all Option Quantities then remaining with
Purchaser and such other customers with similar Option rights after the exercise of their options
as provided above.
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In the event that GCWA receives an offer from another customer to purchase Water that has
been otherwise reserved for Purchaser by the Option described in this Section 29, before asking
Purchaser to exercise its Option pursuant to this Section 29, GCWA, acting in its sole discretion
(but in good faith) will first to attempt to satisfy the new offer to purchase Water with water
acquired by GCWA after the date of this Agreement, if any, that has resulted in increasing the
availability of GCWA's supplies such that GCWA is of the opinion that it can make the additional
Water available to the new customer without impairing GCWA's ability to meet its existing water
supply commitments and other Option commitments. Additionally, GCWA shall promptly provide
notice to Purchaser of any additional Supply Sources acquired after the date of execution of this
Agreement and a designation of whether that additional Supply Source was acquired for the
purpose of supplying additional water to GCWA customers or to insure reliability of the Supply
Sources to GCWA's existing customers.
30
SPECIAL PROVISIONS
GCWA and Purchaser are also parties to that certain "Interim Water Supply Agreement" dated
November 16, 2006, relating to the supply of water to Purchaser by GCWA from the Canal J
Division. Nothing in this Agreement shall affect in any way rights and obligations of GCWA and
Purchaser under such Interim Water Supply Agreement. In the event that the System Rate in this
Agreement includes costs for any portion of the costs to be paid by Purchaser in the Interim
Water Supply Agreement between the Parties, Purchaser shall not have to pay any portion of the
System Rate or System Capital Costs twice.
-22-
DocuSign Envelope ID: 77ACF803-8A58-4B55-A932-E6A78CD3D1 DB
GULF COAST WATER AUTHORITY
By: y __
Name: eafti,42 7:9 664
ATTEST: Lt_t
CITY OF PEARLAND, TEXAS
�DocuSiyned by:
By: Pt aUrSeM,
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Name: Flay Nearson
ATTEST:
,—DocuSigned by:
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Date: Ain/ �% 2221--
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Date: 9/27/2022 1 10:53 AM CDT
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