HomeMy WebLinkAboutR2026-112 20260727RESOLUTION NO. R2026-112
A Resolution of the City Council of the City of Pearland, Texas, authorizing a
Second Amended and Restated System Raw Water Availab ility Agreement
with the Gulf Coast Water Authority.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS:
Section 1. That certain Second Amended and Restated System Raw Water Availability
Agreement by and between the City of Pearland and Gulf Coast Water Authority, 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 a Second Amended and Restated System Raw Water Availability
Agreement by and between the City of Pearland and Gulf Coast Water Authority .
PASSED, APPROVED and ADOPTED this the 27th day of July, A.D., 2026.
________________________________
QUENTIN WILTZ
MAYOR
ATTEST:
________________________________
FRANCES AGUILAR, TRMC, MMC
CITY SECRETARY
APPROVED AS TO FORM:
________________________________
LAWRENCE G. PROVINS
CITY ATTORNEY
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SECOND AMENDED AND RESTATED SYSTEM RAW WATER AVAILABILITY AGREEMENT
BETWEEN
GULF COAST WATER AUTHORITY
AND THE
CITY OF PEARLAND
This Second Amended and Restated System Raw Water Availability Agreement
(“Agreement”) is made and entered into effective this the _____ day of ____________, 2026 (the
“Effective Date”), by and between GULF COAST WATER AUTHORITY (hereafter, “GCWA”), and
CITY OF PEARLAND, TEXAS (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 Article XVI, Section
59, Texas Constitution that operates a system of 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 (as defined
herein) 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”), as amended by
that certain Amended and Restated System Raw Water Availability Agreement dated September
1, 2022 (the “Amended and Restated Agreement”), pursuant to which GCWA agreed to make
available to Purchaser up to ten (10) 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”) following Purchaser’s
exercise of the option described in the Amended and Restated Agreement.
GCWA and Purchaser have also heretofore entered into that certain “Interim Water Supply
Agreement” dated November 16, 2006 (the “Interim Agreement”), pursuant to which Purchaser
reserved the right to purchase on a take-or-pay basis up to ten (10) MGD (after taking into
account the remarketing of certain water as provided in Section 6 of the Interim Agreement) of
Brazos River run of the river water (the “Interim Agreement Water”) (subject to applicable
regulatory and/or legal conditions imposed on GCWA by the Texas Commission on Environmental
Quality (“TCEQ”) or other state or federal administrative agencies) measured and taken from the
river at or near GCWA’s Briscoe Pump Station on the Brazos River or, if the TCEQ failed to issue
the permit amendments required therefor, at the Juliff Pump Station on the Brazos River, under
a future long-term water supply contract.
EXHIBIT A
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Purchaser now desires to convert its rights under the Interim Agreement to an option (as further
defined herein, the “Option”) to (i) acquire on a take-or-pay basis additional water supplies from
GCWA through the Canal A System or other portions of the Canal System in an amount up to ten
(10) MGD, (ii) update certain terms contained in the Amended and Restated Agreement in order
to facilitate the delivery of Water under this Agreement, and (iii) provide that the term of this
Agreement will expire August 31, 2056.
GCWA and Purchaser wish to facilitate the efficient and economic provision of water to
customers, which is facilitated by the conversion of Purchaser’s rights under the Interim
Agreement into the Option as contemplated herein.
GCWA and Purchaser therefore now desire to terminate the Amended and Restated Agreement
and the Interim Agreement and enter into this new Agreement to (i) evidence the obligation of
GCWA to make Water available from the System to Purchaser and the obligation of Purchaser to
pay the System Rate for the Water made available to Purchaser under this Agreement, regardless
of whether or not the Purchaser uses the Water, (ii) incorporate the Option, and (iii) completely
amend, repeal, replace and supersede the Amended and Restated Agreement and the Interim
Agreement.
NOW, THEREFORE, in consideration of the premises, and for good and valuable consideration,
GCWA and Purchaser agree as follows:
2
DEFINITIONS
Capitalized terms used in this Agreement have the meaning provided in the preamble and
Recitals hereto and as provided in this Section.
Board means the Board of Directors of the Gulf Coast Water Authority and any successor thereto.
Bonds means any bonds, notes or other obligations and any refunding bonds issued by GCWA for
System purposes, including the acquisition of Supply Sources.
Budgeted Cost of Service means all costs budgeted by the Board to acquire, construct, develop,
operate, maintain, repair, modify, replace, protect, finance and/or expand the System 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, including amounts
necessary to address deficiencies in debt service and debt service reserves, in the same manner
as the other customers of the System; 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, 11 and 13 herein.
Canal System means the physical properties and interests in physical property and associated
water rights of (i) the American System (also referred to as the Canal A System), (ii) the Briscoe
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System (also referred to as the Canal B System), and (iii) the Galveston System (also referred to
as the Canal G System), acquired by GCWA from the Brazos River Authority, together with all
additions to, replacements in, and expansions and extensions of such properties and interests in
property, and (iv) the Juliff System (to the extent included as part of the Canal System by separate
action of the Board), all exclusive, however, of any physical properties which constitute Special
Project Facilities or which constitute the Industrial Division or which are used exclusively for other
than industrial water purposes.
Contract Quantity means the total volume of Water, as provided in Section 3, that GCWA agrees
to make available to Purchaser on an annual basis, and that Purchaser agrees to purchase,
regardless of whether a smaller quantity is actually diverted by Purchaser, provided, further,
Purchaser shall have the right to increase the Contract Quantity by the exercise of the Option
pursuant to the provisions of Section 29 hereof.
Delivery Point(s) means 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 means the facilities and associated appurtenances located at or near the
Delivery Point(s) as further provided in Section 4.
Diversion Point(s) means 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.
Fiscal Year means GCWA’s fiscal year from September 1 through August 31, or such other annual
fiscal year period as GCWA may later determine.
Force Majeure Event has the meaning provided in Section 20.
GCWA’s Other Customer has the meaning provided in Section 29 of this Agreement.
Industrial Division means 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 facilities 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 that are
located outside of Galveston County, Texas, or that are used exclusively for other than industrial
water purposes, or that constitute Special Project Facilities, or that are part of the Canal System
or the Juliff System. For purposes of clarity, while the Thomas Mackey water treatment plant is
a customer of the Industrial Division, the physical facilities of the Thomas Mackey water
treatment plant are not part of the Texas City Reservoir and Raw Water Conveyance System or
the Industrial Pump Station and Raw Water Transmission System.
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Industrial Pump Station means the industrial pump station located just north of FM 1765 and
west of railroad tracks west of Highway 146 in Texas City (immediately downstream of the
Industrial Reservoir).
Industrial Pump Station and Raw Water Transmission System means the Industrial Pump Station,
the Industrial Reservoir and the raw water transmission system extending from a point
immediately south of the take point for the Thomas Mackey water treatment plant to the
industrial customers having facilities 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 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 constitute Special Project Facilities or which are part of the Canal System, the
Juliff System, or the Texas City Reservoir and Raw Water Conveyance System.
Industrial Reservoir means the ten acre terminal water reservoir constructed in 2000 at the north
end of the Industrial Pump Station.
Irrigation Use means 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 pasture land, 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.
Juliff System means certain assets being historically known as the Chocolate Bayou-Halls Bayou-
Mustang Bayou Canal System and consisting of canals and other facilities and other assets
facilitating diversion and use of surface water from the Brazos River, Chocolate Bayou, Mustang
Bayou and Halls Bayou for irrigation, municipal, industrial and other purposes, all acquired by
GCWA from the Chocolate Bayou Water Company on December 14, 2006, together with all future
extensions, improvements, enlargements, modifications, repairs, additions and replacements
thereto.
Municipal Use means the use of Water for municipal uses as defined in 30 TEX. ADMIN. CODE
§297.1(34), as amended, other than the use of return flows as described in subsection (c) of 30
TEX. ADMIN. CODE §297.1(34). 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 has the meaning provided in Section 29 of this Agreement.
Option Quantity means the amount of Water agreed upon to be provided pursuant to the
provisions of Section 29 herein.
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Outstanding with respect to any Bonds has the meaning provided in Section 25.
Overage Payment has the meaning provided in Section 7 of this Agreement.
Overuse means withdrawal or release of Water in excess of the Contract Quantity or at an
average rate higher than the maximum rate provided in Section 3.
Purchaser’s Customer has the meaning provided in Section 29 of this Agreement.
Remarket Quantity has the meaning provided in Section 29 of this Agreement.
Reuse Water has the meaning provided in Section 17.
Service Area means the Purchaser’s service area and groundwater reduction plan service area as
described in Exhibit A, as may be amended by Purchaser with the written consent of GCWA from
time to time, where Purchaser is allowed to use the Water delivered to it by GCWA pursuant to
this Agreement; provided, however, for purposes of this Agreement, 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.
Special Project Bonds means GCWA’s revenue bonds issued for the purpose of constructing,
acquiring, adding to, expanding or extending facilities to serve any new or existing water
customers of GCWA. The principal of and interest on Special Project Bonds shall be payable from
revenues derived from Special Project Facilities.
Special Project Facilities means facilities constructed or acquired with the proceeds of Special
Project Bonds or paid for by any new or existing water customers of GCWA, and any addition to
or expansion or extension of any part of the Industrial Division, or the Canal System or the Juliff
System, to the extent financed with the proceeds of Special Project Bonds or paid for by any new
or existing water customers of GCWA.
Supply Sources means (i) the surface water rights, permits and/or certificates of adjudication held
by GCWA and stored water purchased by GCWA from the Brazos River Authority or its customers
and (ii) the water rights or other water supply sources owned by GCWA or made available to
serve, benefit or support the System. Supply Sources may be adjusted from time to time and in
the future may include surface water rights, permits, certificates of adjudication or supplies,
groundwater rights or supplies, reclaimed or reuse water, desalinated water or other water
supplies acquired, obtained, or purchased by GCWA.
System or GCWA System means 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
other sources of water supply, or a combination thereof, unless specifically excluded from the
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System by the Board. Although the GCWA System includes the Canal System, the Juliff System,
and the Industrial Division, the term “System” in this Agreement shall mean the Canal System
(including the Juliff System, at such time as the Board takes separate action to combine the Juliff
System with the components of the Canal System described in subparts (i) – (iii) of the definition
of Canal System herein) and all future extensions, improvements, enlargements, modifications,
repairs, additions and replacements thereto when calculating the Budgeted Cost of Service. The
System shall not include any water treatment facilities owned by GCWA for production of potable
water nor does it include the Industrial Division.
System Payment means 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 and calculated as provided for in Section 5.
System Rate means the dollar amount per million gallons of the Contract Quantity as established
by GCWA from time to time utilizing the Budgeted Cost of Service, calculated as provided in
Sections 5, 11 and 13 hereof.
Texas City Reservoir means the approximately nine hundred acre reservoir north of Attwater
Avenue in Texas City, Texas, as may be modified from time to time.
Texas City Reservoir and Raw Water Conveyance System means the Texas City Reservoir and the
canal running south from the Texas City 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 facilities in the
Texas City industrial area and municipal water providers utilizing the Thomas Mackey water
treatment plant, all as acquired by GCWA 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 that are located outside of Galveston County, Texas, or that are used
exclusively for other than industrial water purposes, or that are part of the Canal System, the
Juliff System or the Industrial Pump Station and Raw Water Transmission System.
Then Outstanding Bonds has the meaning provided in Section 25.
Water means untreated raw water obtained by GCWA from the Supply Sources.
3
OWNERSHIP, AVAILABILITY AND CONTROL OF WATER
Contract Quantity
During the term of this Agreement, GCWA shall make available and deliver to Purchaser at the
Delivery Point(s) ten (10) MGD (the “Contract Quantity”) of Water, and Purchaser agrees to
purchase and take, or pay for if not taken, the Contract Quantity of Water at the Delivery Point(s).
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GCWA makes no representation as to the quality or suitability of the Water in the System or from
any Supply Source. GCWA represents and warrants that it currently has Supply Sources that
authorize its diversion and use of Water in quantities sufficient to supply the Contract Quantity
to Purchaser. However, the Water to be made available under this Agreement is subject to
Supply Source availability, availability of Delivery Point(s), and System characteristics. Such
System characteristics are subject to factors that include but are not limited to drought,
conveyance losses, evaporation losses, seepage losses, regulatory requirements, third-party
rules, unauthorized diversions, required maintenance and construction, total System demand at
the time of any request, System pump rate capacities, and prior contractual obligations.
Ownership and Control of Water
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 shall not be 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 twenty percent (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 in writing within seven (7) days prior to any such change.
Notice of unscheduled emergency changes shall be provided to GCWA (either in writing or orally
with a subsequent writing) 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 scheduled operational changes within
GCWA’s System within seven (7) days prior to such change, and any unscheduled emergency
conditions as soon as practicable.
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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
System 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
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 System 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
Point Facilities so as to impair GCWA’s ability to operate the Canal System 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 System facilities to provide water to all GCWA customers in a lawful and prudent
manner.
5
CALCULATIONS; PAYMENTS UNCONDITIONAL NATURE; DATE AND PLACE
The System Payment is equal to the product of the sum of Contract Quantity (expressed in MGD)
times the 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.
The System Rate is calculated as follows: Purchaser shall pay the same rate for Water from the
System as GCWA charges its other similarly-situated customers, which rate shall be based initially
on the Budgeted Cost of Service. The Budgeted Cost of Service shall be reduced by income
received by GCWA from water sales to non-System Rate customers from the System (being
Interruptible Water Sales or sales to other 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. The Parties recognize that the
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System Rate is charged to other customers receiving Water from 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 any changes in
the System Rate, shall be just, reasonable, and nondiscriminatory.
Commencing the first 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 fifth (5th) day of each month and shall be due and payable by Purchaser no
later than thirty-one (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 4243 Emmett F. Lowry Expressway, Texas City, Texas 77591.
Purchaser shall be unconditionally obligated to pay the amounts due hereunder regardless of
whether or not Purchaser actually receives Water hereunder, whether due to a Force Majeure
Event 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. Notwithstanding any
other provisions of this Agreement, in the event of any conflict between the provisions of this
paragraph and any other provision of this Agreement, the provisions of this paragraph shall
prevail.
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
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.
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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 thirty (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 thirty (30) days after receiving such notice and attains compliance
with the Agreement within ninety (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.
If Purchaser, for any given sixty (60)-day period, takes a quantity of Water that when averaged
over the sixty (60)-day period is 10% or more greater than Purchaser’s Contract Quantity,
Purchaser’s Contract Quantity shall, at GCWA’s option, increase to the amount of Water taken
over such sixty (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 sixty (60)-day period. Such notice shall specify an effective date of the
increase that shall be the next day after the date such sixty (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
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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 sixty (60)-day period shall not be deemed a waiver of the right to
exercise such option with respect to other sixty (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.
If Purchaser, for any given sixty (60)-day period, takes a quantity of Water that when averaged
over such sixty (60) days is greater than Purchaser’s Contract Quantity then in effect, 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. GCWA 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 GCWA’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.
9
PURCHASER DELIVERY POINT FLOW METERING
Purchaser and GCWA agree that the Delivery Point meters shall be owned by GCWA and tested
and calibrated for accuracy by GCWA once each calendar year at intervals of approximately
twelve (12) months, and a report of such test and calibration shall be furnished to Purchaser.
Purchaser shall be given at least five (5) days’ prior notice of the time of any test and calibration
of a meter and Purchaser 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
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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 Purchaser or GCWA. The expense
of such test is to be borne by the party requesting the test if the meter is found to be correct and
by GCWA if it is found to be incorrect. Readings that vary within five percent (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 five percent (5%) of accuracy, plus or minus),
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 ninety (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, GCWA shall cause the same to be calibrated to register accurately and a
report forwarded to Purchaser. IN NO EVENT SHALL ANY ADJUSTMENT BE MADE TO ANY
PAYMENT FOR WATER BASED UPON ANY METER ERROR, METER READING ERROR, OR BILLING
ERROR RESULTING FROM SUCH METER OR METER READING ERROR, KNOWN OR UNKNOWN,
MORE THAN FOURTEEN (14) MONTHS AFTER SUCH PAYMENT IS MADE OR RECEIVED.
10
REPORTING
GCWA agrees that it will keep accurate records of the monthly readings from the meters. These
records shall be subject to inspection by Purchaser at reasonable times and places and made
available to Purchaser electronically. In addition, GCWA will make available to Purchaser, at
GCWA’s cost, SCADA system metering data for Water delivered to Purchaser.
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 (Chapter 552, Texas Government Code) all non-privileged and non-confidential books,
records, documents and other evidence of accounting procedures or practices maintained to
establish the Budgeted Cost of Service and the System Rate.
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
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the Budgeted Cost of Service. Inclusion of any such costs in the Budgeted Cost 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 the 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 and to improve the reliability of the System and current
Supply Sources for Purchaser and GCWA’s other customers. In that regard, the Board may from
time to time adopt 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. The Board has adopted a capital recovery fee to address increased
demands on and/or improve the operations and reliability of the System. Such capital recovery
fee funds may be utilized for acquisition of additional Supply Sources and for capital
improvements benefitting 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 Cost 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 System.
Currently, GCWA has established the reserve fund at a level equal to four (4) months of the
annual amount of the Budgeted Cost of Service. GCWA reserves the right from time to time to
adjust the level of the reserve fund and to establish additional reserve funds necessary or
appropriate for the financing or operations of the System in accordance with sound management
practices for the System and to continue to include in the annual Budgeted Cost of Service
(payable by all customers paying the System Rate) amounts necessary to establish and maintain
the amount of any reserve funds at the required level. Neither Purchaser nor any other customers
of GCWA shall be entitled to any refund of any portion of any 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
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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 of 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 third party 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 BEYOND THE DESCRIPTION CONTAINED IN THIS AGREEMENT.
PURCHASER ASSUMES FULL RESPONSIBILITY WITH RESPECT TO THE TREATMENT OF THE
WATER PRIOR TO ITS DISTRIBUTION FOR ANY USES.
16
RESALE OF WATER
Should Purchaser determine that it has Water surplus to its anticipated needs from the Water to
be made available by GCWA under this Agreement, Purchaser may with prior written notice to
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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 user within the Service Area, pursuant to subpart (i) above, Purchaser shall
remain responsible for the payments required herein and compliance with the terms of this
Agreement. Purchaser acknowledges that any such third-party users do not constitute customers
of GCWA or third-party beneficiaries of this Agreement and have no rights under this Agreement
nor any right to enforce the provisions hereof.
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
REUSE
All rights to reuse of any portion of the Water originating from the Water made available to
Purchaser under this Agreement that is either disposed of or discharged or otherwise allowed to
flow into a watercourse, lake or other body of state-owned water or GCWA facility (“Reuse
Water”) (i.e., treatment process discharges, treated wastewater effluent or untreated) shall
remain with GCWA. Purchaser may not use, sell, or make available to others, any form of Reuse
Water without the express written consent of GCWA. However, Purchaser may directly reuse
the Water through its waterworks system and wastewater treatment facilities provided that such
Water has not been previously disposed of or discharged or otherwise allowed to flow into a
watercourse, lake, or other body of state-owned water or GCWA facility.
18
CURTAILMENT PROVISIONS
Pursuant to the provisions of Texas Water Code Section 11.039, as amended, in the event of a
drought or if for any other reason (including a Force Majeure Event) 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 18 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; (ii) shall not 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 GCWA 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 an event of force
majeure (as further defined herein, a “Force Majeure Event”) to carry out any of its obligations
under this Agreement, then the obligations of such Party, to the extent affected by such Force
Majeure Event 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 Event relied upon, the Party whose contractual obligations are
affected thereby shall give notice and full particulars of such Force Majeure Event to the other
Party. Such cause, as far as possible, shall be remedied with all reasonable diligence. As used
herein, the term “Force Majeure Event” includes acts of God, strikes, lockouts or other industrial
disturbances, acts of the public enemy, decrees or orders of the courts, 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, pandemics, landslides, lightning,
earthquakes, fires, hurricanes, storms, floods, washouts, droughts, lack of availability of Water
due to sedimentation, low inflows of water to, or lack of water from the Supply Sources, 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 Event 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.
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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.
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
4243 Emmett F. Lowry Expressway
Texas City, Texas 77591
Purchaser: CITY OF PEARLAND
Attn: City Manager
3519 Liberty Dr.
Pearland, Texas 77581
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
implement water conservation and drought contingency plans as authorized by law and as
provided in Section 18.
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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 subsections
(1), (2) and (3) of this Section 25, 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 during the stated term of this
Agreement, 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,
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 has been
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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 thirty (30) days of such
notice and (ii) in the event Purchaser terminates this Agreement, such termination shall be
effective at the end of the 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 thirty (30) days of such notice
and attains compliance with the Agreement within ninety (90) days of such notice.
For the purpose of this Section 25, no bond shall be deemed to be Outstanding after the date:
(a) of its scheduled maturity,
(b) on which it is retired by reason of payment to the holder thereof of the
principal thereof and accrued interest thereon, or
(c) on which, due provision having been made therefor pursuant to the terms
of the bond resolution, there has been deposited with the paying agent an amount of
cash which is designated for such purpose and is sufficient to pay the principal thereof
and interest accrued thereon as of the date of maturity or the redemption date of bonds
duly called for prior redemption pursuant to the terms of the bond resolution, whichever
first occurs.
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
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contemplated in the second paragraph of Section 27 below, the parties agree to communicate
with each other regarding the need for any amendments to this Agreement within forty-five (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,
2056, 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
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, 2056, the parties will negotiate and enter into a new agreement under terms and
conditions for Water from the System then prevailing from GCWA for other similarly-situated
customers, which new agreement 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 five (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
Background
Under the Interim Agreement (after giving effect to the prior remarketing of certain water to
INEOS Olefins and Polymers USA, a division of INEOS USA LLC as provided in Section 6 of the
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Interim Agreement) Purchaser maintained a right to purchase on a take-or-pay basis the Interim
Agreement Water. The Water to be delivered under the Interim Agreement was associated with
the acquisition by GCWA of the assets of the Chocolate Bayou Water Company and (subject to
applicable regulatory and/or legal conditions imposed on GCWA by the TCEQ or other state or
federal administrative agencies) was to be measured and taken from the river at or near GCWA’s
Briscoe Pump Station on the Brazos River or, if the TCEQ failed to issue the permit amendments
required therefor, at the Juliff Pump Station on the Brazos River, under a future long-term water
supply contract. In connection with the reservation of the right to purchase such Water on a
take-or-pay basis, Purchaser made certain payments to GCWA under the Interim Agreement.
Purchaser now desires to convert the Interim Agreement Water to an option for a long-term
supply of water accessible from GCWA’s American System (subject to applicable regulatory
and/or legal conditions imposed on GCWA by the TCEQ or other state or federal administrative
agencies). Such conversion benefits Purchaser and GCWA by making Water available to
Purchaser and other customers through existing water facilities and promoting the beneficial use
of the Supply Sources.
The purpose of this Option is to provide a mechanism for Purchaser to increase its Contract
Quantity by an amount not to exceed the Option Quantity for use at Purchaser’s Delivery Point(s),
subject in all respects to the terms, conditions and restrictions set forth herein.
Attached hereto as Schedule I, as may be amended from time to time to reflect the disposition
of the Interim Agreement Water as provided in this Agreement, is a schedule showing the current
amount of Option Quantity, the reductions in Option Quantity from the remarketing of Remarket
Quantity, the reductions in Option Quantity from the exercise of the Option, and the reductions
in Option Quantity from any release of Option Quantity pursuant to this Section.
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 purchase on a take-or-pay basis an additional
amount of Water up to the “Option Quantity” (as such term is defined and reflected in Schedule
I, as amended from time to time) from GCWA through GCWA’s System (the “Option”). The
Option Quantity shall be reduced from time to time as (i) Purchaser exercises its Option, (ii)
Purchaser decreases the amount of the Option Quantity by the amount of the Remarket Quantity
(as defined herein), (ii) Purchaser releases all or a portion of the Option Quantity or (iii) GCWA
increases Purchaser’s Contract Quantity pursuant to the exercise of its rights under Section 7 of
this Agreement.
Price of Option
Beginning September 1, 2034, Purchaser agrees to pay monthly to GCWA at its offices in Texas
City, Texas, as “Option Payments,” an amount equal to the Option Quantity times the then
current published rate for stored water for the Canal System (the “Stored Water Rate”) as set by
the Board. For purposes of illustration, GCWA’s Stored Water Rate for the period beginning
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September 1, 2025, is $120.77 per million gallons per day. For the period extending from the
Effective Date through August 31, 2034, in consideration of Purchaser’s payments to GCWA
under the Interim Agreement, the Option Payments shall be deemed prepaid.
Decrease in Option Quantity; Remarket Quantity
The Option Quantity may be decreased by Purchaser at any time and from time to time by any
amount of the then current Option Quantity (each such amount, the “Remarket Quantity”) that
(i) a political subdivision or other entity GCWA has determined is a financially responsible water
customer, whether new or old, with whom GCWA is willing to contract (each such customer,
“GCWA’s Other Customer”), is willing to contract for from GCWA under a long-term water supply
contract substantially the same GCWA’s contracts with other similarly situated customers, (ii) will
be available (taking into account Customer’s requested decrease in the Option Quantity) from
GCWA to GCWA’s Other Customer, and (iii) GCWA determines is capable of being distributed to
the proposed point(s) of delivery for GCWA’s Other Customer acquiring such Remarket Quantity
through GCWA’s facilities.
Each decrease in the Option Quantity pursuant to this subsection shall be accomplished by
written notice from Purchaser to GCWA which (i) shall be signed also by GCWA’s Other Customer
acquiring such Remarket Quantity, (ii) shall specify the amount and effective date of such
decrease and the Remarket Quantity desired by GCWA’s Other Customer as contract quantity,
(iii) shall express GCWA’s Other Customer’s willingness to enter into a long-term water supply
contract with GCWA effective as of the specified effective date for such decrease, and (iv) shall
be given at least ninety (90) days in advance of such effective date. Purchaser may include a
negotiated price per 1,000 gallons of Remarket Quantity to be paid to Purchaser by GCWA’s
Other Customer acquiring such Remarket Quantity as contract quantity; provided, however, that
such charge shall be in addition to any amounts due under the long-term water supply contract
between GCWA and GCWA’s Other Customer. If such a charge is included as a condition to the
acquisition by GCWA’s Other Customer of such Remarket Quantity as contract quantity, the
notice to GCWA shall include the amount of such charge on a price per 1,000 gallon basis. Upon
the effective date of such long-term water supply contract with GCWA’s Other Customer, the
Option shall terminate as to the Remarket Quantity but otherwise continue in effect as to any
remaining portion of the Option Quantity for the remainder of the Option Period, and Schedule
I shall be updated to reduce the Option Quantity by the quantity of Option Water that is being
converted to Remarket Quantity in such long-term water supply contract.
Exercise of Option
At any time during the Option Period, subject to the satisfaction of the conditions set forth
herein, Purchaser may exercise the Option to purchase on a take-or-pay basis additional Water
in any amount up to the Option Quantity by giving GCWA ninety (90) days’ written notice of its
intent to exercise the Option. Such amount may be less than, but may not be more than, the
Option Quantity. The written notice shall state (i) the amount of water, in MGD, that Purchaser
wishes to purchase, (ii) the proposed point of delivery for such water, and (iii) the proposed
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mechanism by which Purchaser will finance the delivery facilities required to facilitate the
delivery of water from GCWA’s existing water delivery system to Purchaser.
Conditions to Exercise of Option
Purchaser acknowledges and agrees that its exercise of the Option during the Option Period is
subject to satisfaction of the following conditions:
(i) To the extent applicable, if Purchaser is exercising the Option pursuant to a
request for service from a prospective customer of Purchaser (each referred to
herein as “Purchaser’s Customer”) who is (A) a political subdivision who is party
to a contract with the Brazos River Authority for system operations water, and
(B) not actively utilizing such water to supply its municipal needs, then Purchaser
shall exercise its best efforts to obtain, or caused to be obtained, from
Purchaser’s Customer an assignment to GCWA of such Brazos River Authority
systems operation water under terms and conditions acceptable to GCWA; and
(ii) To the extent that Purchaser requests delivery of some or all of the Option
Quantity at a point or points other than Purchaser’s Delivery Point(s), Purchaser
shall not have the right to receive such portion(s) of the Option Quantity unless
and until the following steps have been completed:
(A) GCWA has provided Purchaser with written notice of the additions and
improvements to the facilities and equipment of the water supply and
transmission facilities of GCWA that GCWA deems commercially
reasonable for furnishing to Purchaser such portion(s) of the Option
Quantity after taking into account other demands on GCWA’s water supply
and transmission facilities;
(B) Purchaser has had the opportunity to review the costs of additions and
improvements to the facilities and equipment of the water supply and
transmission facilities of GCWA identified in such notice and has provided
comments to GCWA, which comments shall be provided within sixty (60)
days of Purchaser’s receipt of such notice from GCWA; and
(C) Purchaser has paid GCWA’s costs of the additions and improvements to
the facilities and equipment identified by GCWA, including all reasonable
legal, professional and other administrative costs incurred by GCWA in
connection therewith, and the additions and improvements to the
facilities and equipment of GCWA’s water supply and transmission
facilities identified by GCWA have been completed.
Result of Exercise of Option
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If Purchaser notifies GCWA of the exercise of the Option to purchase all or any part of the Option
Quantity during the Option Period as set out above, then this Agreement shall be amended to
increase the Contract Quantity by the amount of the Option Quantity taken by Purchaser on
September 1 following the date of the written notice (subject to all other terms of this Agreement
including the satisfaction of the conditions to the exercise of the option and the payment of the
System Rate by Purchaser). Provided, further, that upon request of Purchaser, GCWA may deliver
Water prior to September 1 at the System Rate. Upon execution 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 Option Period.
Term and Termination of Option
Notwithstanding the term of the Agreement, the term of the Option shall be for a period that
begins on the Effective Date and expires August 31, 2044, provided, however, that Purchaser may
terminate the Option or release to GCWA any portion of the Option Quantity on six months’
written notice to GCWA.
30
TERMINATION OF INTERIM AGREEMENT AND AMENDED AND RESTATED AGREEMENT;
COMPLETE AGREEMENT
This Agreement constitutes the entire agreement between the Parties relating to the Interim
Agreement Water.
There are no warranties, representations, agreements, arrangements, or understandings, oral or
written, relating to the subject matter hereof that are not fully expressed or provided for herein,
and the Parties shall not be bound by or liable for any alleged warranty, representation,
agreement, arrangement or understanding. Neither of the Parties hereto have relied on any
statements or representations that have been made by the other Party that are not set forth in
this Agreement, and neither Party is entitled to rely on any representation, agreement or
obligation that is not expressly stated in this Agreement.
Upon the Effective Date, this Agreement completely amends, releases and replaces and
supersedes the Interim Agreement and the Amended and Restated Agreement and all prior
agreements, understandings, negotiations, and discussions, oral or written, between the Parties
related to the subject matter of this Agreement.
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Signature Page
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GULF COAST WATER AUTHORITY
By: Date:
Name:
ATTEST:
CITY OF PEARLAND, TEXAS
By: Date:
Name:
ATTEST:
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Trent Epperson
7/30/2026 | 2:32 PM CDT
Schedule I
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Schedule I
Disposition of Option Quantity
(Updated May 2026)1
I.Interim Agreement Water: 10,000,000 GPD.
A.Current Option Quantity: 10,000,000 GPD.
B.Reductions in Option Quantity Pursuant to Section 29 of this Agreement: 0 GPD.
C.Reductions in Option Quantity from Exercise of Option: 0 GPD.
D.Reductions in Option Quantity from Release of Option Quantity Pursuant to
Section 29 of this Agreement: 0 GPD
1 This schedule will be updated by GCWA in connection with each purchase by GCWA’s Other Customers of Remarket
Quantity, the conversion of Option Quantity to Contract Quantity as provided in the Agreement, or other reduction
in Option Quantity as provided in the Agreement. GCWA will provide Purchaser with a copy of the revised schedule
in connection with each adjustment.
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Exhibit A
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Exhibit A
Service Area
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Exhibit B
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Exhibit B
Delivery Point
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