Exhibit 10.16
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WATER AGREEMENT
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THIS WATER AGREEMENT ("Agreement") is entered into as of the 1st day of
October, 1994, by and between EAST DUCHESNE CULINARY WATER IMPROVEMENT DISTRICT
(hereinafter referred to as the "Water District") and PETROGLYPH OPERATING
COMPANY, INC. (hereinafter referred to as "Petroglyph").
WHEREAS, the Water District maintains a water pipeline facility (the
"System") which provides culinary water to industrial, commercial and
residential customers in Duchesne County, Utah; and
WHEREAS, the parties have entered into an agreement ("Option Agreement")
dated as of the 2nd day of April, 1994, giving Petroglyph the option to reserve
sufficient capacity and deliverability on the System so as to allow Petroglyph
to take, at Petroglyph's election, an amount of water not to exceed 210,000
gallons per day; and
WHEREAS, Petroglyph has given notice within the Option Period (as that term
is defined in the Option Agreement) in accordance with the terms of such Option
Agreement of its intention to purchase all of the reserved capacity and
deliverability; and
WHEREAS, the parties wish to further define the terms of their agreement as
set forth more fully herein.
NOW, THEREFORE, for and in consideration of the premises, the parties
hereby covenant and agree as follows:
1. Original Term. This Agreement shall continue for a term of ten (10)
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years, commencing on October 1, 1994, and ending on September 30, 2004 A.D. (the
"Original Term").
2. Renewal Term. Provided that Petroglyph has complied with the terms and
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provisions of this Agreement throughout the Original Term and any prior Renewal
Terms, this Agreement shall automatically renew for additional periods of one
(1) year each ("Renewal Term"), unless either party shall terminate this
Agreement by giving written notice to the other at least 12 months prior to the
expiration of the Original Term or any preceding Renewal Term (the "Termination
Date"). The Agreement shall continue during each Renewal Term upon the same
terms and conditions contained herein applicable to the Original Term, except as
specifically modified by the mutual agreement of the parties prior to the
Termination Date. As used herein, the "Term" of this Agreement shall refer,
collectively, to the Original Term and all Renewal Terms.
3. Capacity and Deliverability. During the Term of this Agreement, the
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Water District shall reserve sufficient capacity and deliverability on its
System so as to allow Petroglyph to take from time to time, at Petroglyph's
election, and the Water District shall deliver, up to 420,000 gallons of water
per day ("Reserved Volume") at a rate not to exceed 291.6 gallons per minute.
Petroglyph shall from time to time give the Water District reasonable notice
prior to any significant change in the volumes it intends to take up to and
including the Reserved Volume. Notwithstanding anything in this Agreement to
the contrary, the Water District shall at no time be obligated to deliver
quantities of water in excess of the physical capacity of the System at the time
of delivery.
4. Capacity Charge. Petroglyph shall pay a monthly capacity charge
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("Capacity Charge") of $300.00, payable on the first day of each month.
Petroglyph shall not be required to take any quantity of water during any month,
but it shall nonetheless pay the Capacity Charge each month during the Term of
this Agreement. The failure to pay the Capacity Charge when due shall not
effectuate a forfeiture of Petroglyph's rights under this Agreement, unless the
same has not been paid within 10 days after written demand has been made
therefor by the Water District.
5. Price per Gallon. There shall be no charge for the first 88,000
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gallons of water taken by Petroglyph during any month, the price for which is
included in the Capacity Charge (which Capacity Charge shall be paid regardless
of whether or not Petroglyph takes any or no amount of water). Any usage of
water by Petroglyph beyond 88,000 gallons per month will be billed by the Water
District at a rate of $1.00 per 1,000 gallons. This rate is based upon the
Water District's commercial rate for a 4-inch compound meter connection. This
price shall be subject to any district-wide rate increases for the class of
users to which Petroglyph belongs, with a 30-day notice to Petroglyph.
6. Delivery Point. Petroglyph may at its option install and operate
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buried pipelines at or near one or more delivery points set forth in the "Water
Supply Feasibility Study for Petroglyph Operating Company, Inc. - 1994" (the
"Study") prepared by Sunrise Engineering, Inc. (a copy of which has been
provided to the Water District, and which is incorporated herein by this
reference). Upon construction of one or more such buried pipelines and
Petroglyph's notification thereof, the Water District shall deliver the
requested quantities of water up to the Reserved Volume to such delivery point
or points. In addition to the delivery points identified in the Study,
Petroglyph may request delivery at or through one or more points where the Water
District's System connects to a third-party water pipeline, in which case the
Water District shall deliver the requested quantities of water up to the
Reserved Volume at the connection with such third-party water pipeline.
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7. Connection and Meter Requirements. The Water District shall provide
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Petroglyph one or more connections to its System and install a meter capable of
measuring volumes of water delivered at rates of from 25 gallons per minute to
300 gallons per minute. The connection to the System and meter shall be at the
delivery point or points requested by Petroglyph. Except to the extent
connections and meters are already present at the requested delivery point, for
each delivery point requested by Petroglyph, Petroglyph shall pay the Water
District $6,000 for the cost of connecting Petroglyph's pipeline to its System
and the installation of the meter. The 4-inch compound meter shall be capable
of delivering water from 1 gallon to 700 gallons per minute. Petroglyph shall
provide a dual check backflow preventor between the Water District's meter and
Petroglyph's pumps.
8. Sufficient Capacity. The parties agree and acknowledge that the
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volumes of water to be taken by Petroglyph hereunder shall be used for purposes
of general oil and gas field operations and for the secondary recovery of oil
through waterflooding in Duchesne County, Utah. The Water District represents
and warrants that it has sufficient volumes of water and capacity for delivery
dedicated to and of the class and type of user, whether industrial, commercial
or other class or type, to deliver to Petroglyph the quantities of water
reserved herein up to the Reserved Volume. The Water District furthermore
represents and warrants that Petroglyph shall not be required to pay any
additional charge or fee for the intended use of the water delivered hereunder
to any person or governmental agency.
9. Further Assurances. The Water District agrees and covenants that it
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will take no action nor enter into any agreement that would in any way impair or
reduce its ability to deliver the Reserved Volume of water or otherwise to fully
perform its obligations under this Agreement.
10. Assignability. The rights and obligations under this Agreement may be
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assigned and delegated in part or whole by either party to another party capable
of performing hereunder, but only upon 10 days written notice by such assigning
and delegating party to the other party.
11. Notices. All notices and communications required or permitted under
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this Agreement shall be in writing and addressed as set forth below. Any
communication or delivery hereunder shall be deemed to have been duly made and
the receiving party charged with notice i) if personally delivered, when
received, ii) if mailed, three business days after mailing, either first class
mail or certified mail, or iii) if sent by overnight courier, one day after
sending. All notices shall be addressed as follows:
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to the Water District:
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East Duchesne Culinary Water
Improvement District
P. O. Box 319
Duchesne, Utah 84021-0319
to Petroglyph:
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Petroglyph Operating Company, Inc.
P. O. Box 1807
Hutchinson, Kansas 67504-1807
12. System Shortages. In the event of a shortage of water in the System
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requiring the restriction of water use, it is understood that the Water District
may not be able to deliver the quantities of water specified in this Agreement.
It is understood and agreed that the Water District shall give preference to its
residential water customers or other customers having a higher usage priority
than Petroglyph as is in the best interest of the health and welfare of the
residents residing within the service area of the Water District.
13. Binding Effect. This Agreement shall inure to the benefit of and be
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binding upon the parties hereto, their successors, heirs, devisees,
administrators, executors, and assigns.
14. Entire Agreement. This Agreement constitutes the entire agreement of
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the parties hereto and supersedes all prior oral and written agreements and
understandings with respect to the subject matter hereof.
15. Headings. The headings contained in this Agreement shall be deemed to
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be for the convenience of the parties only and shall not be considered in
construing this Agreement.
16. Amendments. No amendments or additions to this Agreement shall be
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binding unless in writing and signed by the parties hereto, except as herein
otherwise provided.
17. Force Majeure. Neither party shall be liable for any error, failure
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to perform or delay in performance if such error, failure or delay is not due to
such party's negligence and arises from actions of civil or regulatory
authorities, national emergency, labor difficulty, fire, flood or other
catastrophe, act of God, insurrection, war, riot, power supply failure,
unavoidable malfunctions or difficulties with equipment, inability to obtain
materials or supplies, or any other cause which could not reasonably have been
foreseen and provided against.
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Executed as of the day and year first above written.
WATER DISTRICT: PETROGLYPH:
EAST DUCHESNE CULINARY WATER PETROGLYPH OPERATING COMPANY, INC.
IMPROVEMENT DISTRICT
By: /s/ John A. Swasey By: /s/ Robert C. Murdock
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John A. Swasey, Robert C. Murdock,
Chairman Vice President
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