CONTRACT RELATING TO
DELIVERY OF RECYCLED WATER
TO DOMINGUEZ WATER CORPORATION AND ARCO
This Contract is entered into as of November 17, 1997 by and among West
Basin Municipal Water District, a California Municipal Water District
(hereinafter "West Basin"), ARCO Products Company, a division of Atlantic
Richfield Company, a Delaware corporation (hereinafter "ARCO"), and Dominguez
Water Corporation, a California corporation (hereinafter "Dominguez").
RECITALS
A. ARCO operates a refinery in the City of Carson, California (the "ARCO
Refinery"). The ARCO Refinery has purchased potable water from Dominguez, and
has also obtained water from other sources, including pumping ground water from
wells. ARCO uses the water in its refinery cooling, process and boiler
feedwater systems.
B. West Basin encourages use of recycled water for various uses,
including industrial and irrigation uses, and intends to extend two pipelines to
an agreed to point of connection, one delivering reverse osmosis treated
recycled water ("R/O Water") and the other delivering nitrified recycled water
("Nitrified Water") to a location near the ARCO Refinery. West Basin wishes to
supply recycled water to the ARCO Refinery to meet a portion of ARCO's cooling
tower needs.
C. West Basin is willing to finance, construct, own and operate a
microfiltration/reverse osmosis and nitrification water treatment plant
("Plant") and other facilities to enable the ARCO Refinery to use a significant
quantity of recycled water.
D. West Basin is willing to sell recycled water to Dominguez for resale
to the ARCO Refinery. West Basin will sell recycled water to Dominguez.
Dominguez will sell that recycled water to ARCO.
E. Dominguez obtains potable water for delivery to ARCO from groundwater
supplies and through purchases of imported water from West Basin. ARCO's use of
recycled water will reduce, but not entirely eliminate, ARCO's reliance on
potable water delivered by
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Dominguez. During the foreseeable future, ARCO will also continue to
purchase potable water from Dominguez, under such tariffs as may exist from
time to time.
F. Dominguez will finance recycled water facilities (hereinafter
"Dominguez Facilities"). The Dominguez investment in the Dominguez Facilities
is an important element of providing recycled water service to ARCO. West Basin
or ARCO will not have any obligation to finance Dominguez Facilities.
G. This Agreement includes attached Exhibits. In the event of a
conflict between the language of this Agreement and the attached Exhibits, this
Agreement shall prevail.
NOW, THEREFORE, West Basin, Dominguez, and ARCO agree as follows:
1. SCHEDULE
A. CONSTRUCTION. Each party hereto covenants and agrees to exercise its
best efforts to perform its respective promises and obligations, and to design,
construct and place into operation, such items as is its responsibility in
accordance with the time schedule attached hereto as Exhibit 1. The parties
mutually agree to cooperate and to provide reasonable support for each other in
order to minimize delay in the performance of their respective obligations.
B. ARCO OBLIGATION TO TIMELY COMPLETE REFINERY PIPING. ARCO shall
exercise its best efforts to complete construction of the Refinery Piping in
order to enable it to take delivery of treated recycled water at the Metering
Facility and use such water in the cooling towers by such time as the Plant is
completed. However, ARCO shall not be obligated to begin construction of the
Refinery Piping until after West Basin obtains a permit from the appropriate
regulatory agency for the discharge of the Plant waste water streams. West
Basin is obligated to obtain the Plant's waste water streams discharge permit
within the period specified in Exhibit 1. If the Plant is ready to commence
delivery of recycled water at the Metering Facility, and the Refinery Piping is
not complete to take such deliveries, West Basin may nonetheless declare the
Commencement Date for purposes of Section 9(A) hereby has occurred as of the day
the R/O Plant is ready and physical capable of making delivery hereunder.
However, any delay by West Basin in obtaining said permit past the period
specified in Exhibit 1 shall extend ARCO's obligation to complete construction
of the Refinery Piping on a day for day basis, and similarly extend West Basin's
ability to declare the Commencement Date for purposes of Section 9(A) on a day
for day basis.
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2. PIPELINES
West Basis will design and construct an extension of its existing recycled
water pipeline system (hereinafter the "Pipeline") from its current recycled
water distribution system to serve the Plant and thence from the Plant to serve
the ARCO Refinery. Such construction is a prerequisite to delivery of recycled
water under this Agreement. Construction of the Pipeline shall be done at no
direct cost and expense to either Dominguez or ARCO, although the parties
acknowledge that West Basin will be recovering the cost of capital facilities,
including the Pipeline, through its general water rates and charges applied to
its customers, including Dominguez and ARCO. West Basin currently intends to
complete such construction of the Pipelines within 20 months from the date of
this Agreement.
3. REVERSE OSMOSIS PLANT, REFINERY PIPING AND RELATED FACILITIES
A. DESIGN RESPONSIBILITY. West Basin will design the following items or
facilities: the "Plant", the Pipeline and a piping system and appurtenances for
the disposal of waste water streams from the Plant (the "Discharge System").
ARCO will design a piping system and associated control equipment and
instrumentation within the ARCO Refinery necessary and required to permit use of
the output of the Plant in the ARCO Refinery cooling tower water system (the
"Refinery Piping"). Dominguez will specify and approve the design of the
Metering Facility described on Exhibit 3A. Dominguez will design the Dominguez
Facilities. The Plant, together with its ancillary facilities, is generally
described in the description incorporated in Exhibit 3A attached hereto. The
Plant, the Discharge System, and the Refinery Piping, along with other ancillary
facilities mentioned in Exhibit 3A are sometimes collectively referred to as
"Improvements". West Basin shall not have any obligation to pay for any
facilities not included in such Improvements.
B. PERMITTING RESPONSIBILITY. West Basin will obtain permits and
environmental approvals for design, construction and operation of the Plant,
pipelines and Discharge System. Dominguez will obtain permits and environmental
approvals for design, construction and operation of any facilities it may
construct. ARCO will obtain permits and environmental approvals for design,
construction and operation of the Refinery Piping.
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C. COORDINATION PRIOR TO AND DURING CONSTRUCTION.
(1) PROJECT MANAGEMENT TEAM. West Basin, ARCO and Dominguez, through
a project management team, will coordinate design and construction of the
Improvements to: (i) maintain schedule; (ii) avoid disruption in ARCO, West
Basin, and Dominguez operations; and (iii) protect ARCO, West Basin and
Dominguez property. Exhibit 3A is the final pre-construction report, which has
been approved by West Basin and ARCO.
(2) PROGRESS REPORTS. From time to time during the design, and on a
monthly basis once construction starts, the project management team shall
deliver project progress reports to the West Basin, ARCO and Dominguez Project
Managers. The Refinery Piping progress and cost control report shall state the
actual expenditures to date and projections for future expenditures. They shall
also include reports or proposals for any scope change of the project.
(3) ADDITIONAL FACILITIES. ARCO may wish to construct additional
facilities appurtenant to, or in addition to the Refinery Piping or may wish to
substitute for equipment and materials of greater value. ARCO shall pay for the
costs of such additional facilities or substitutions.
(4) FINAL COST REPORT. After completion of construction of the
Refinery Piping, ARCO will prepare and deliver to West Basin a final written
accounting and report..
D. CONSTRUCTION.
(1) West Basin will construct the Plant, Discharge System and
Metering Facility in accordance with plans, specifications, applicable
regulations, codes and ordinances, and commonly accepted water supply industry
standards.
(2) ARCO will construct the Refinery Piping in accordance with plans,
specifications, applicable regulations, codes, and ordinances and ARCO's
engineering standards and specifications.
(3) Responsibility for any ancillary items to be constructed as part
of the Improvements, shall be as determined by the project management team.
4. OPERATOR
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A. OPERATION OF IMPROVEMENTS.
(1) INITIAL OPERATOR. West Basin shall own, maintain and operate
the Plant and Discharge System. West Basin shall obtain permits necessary
and bear the cost, expense and responsibility for the disposal of the Plant's
waste water streams. West Basin may contract with Dominguez or third parties
to provide such maintenance and operation, but shall be responsible for the
work. Dominguez shall operate and maintain the Metering Facility. Parties
shall maintain the Improvements they are obligated to operate in good working
condition.
(2) MAINTENANCE AND OPERATIONS COMMITTEE. The parties shall
designate representatives to a Maintenance and Operations Committee for the
Improvements. The committee shall confer at least quarterly, or more often
as needed, for purpose of scheduling maintenance and planned shutdowns of the
Plant, the Discharge System, the Refinery Piping, or Metering Facility. The
Committee shall coordinate maintenance and operating activities and minimize
disruption of the other parties' operations.
B. DAMAGE OR DESTRUCTION OR LOSS OF PLANT AND OTHER IMPROVEMENTS.
(1) PLANT AND DISCHARGE SYSTEM. West Basin shall repair or
replace any damage to or destruction of the Plant or Discharge System arising
from West Basin's negligence or of the negligence of the operator of the
Plant or Discharge System. West Basin shall also carry insurance or provide
self insurance covering such losses. In the event of casualty or loss,
damage or destruction of the Plant or Discharge System, West Basin shall
apply any insurance proceeds received (after first consulting with ARCO)
solely for the purposes of either reducing the unamortized amount of the
Fixed Capital Charges, or for reconstructing and repairing the damaged or
destroyed portion of the Plant or Discharge System.
(2) REFINERY PIPING. ARCO shall repair or replace any damage to
or destruction of the Refinery Piping arising from ARCO's negligence. ARCO
shall also carry insurance or provide self insurance covering such losses.
In the event of casualty loss, damage or destruction of the Refinery Piping,
ARCO shall apply insurance proceeds received to reconstruct and repair the
damaged portion of the Refinery Piping System, to construct a functional
equivalent.
(3) METERING FACILITY Dominguez shall repair or replace any damage
to or destruction of the Metering Facility arising from Dominguez's negligence.
Dominguez shall also carry insurance or provide self insurance covering such
losses.
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C. METERING AND CALIBRATION RIGHTS. The quantities of Plant effluent
sold and delivered hereunder, shall be determined by measurements taken by
meters installed at the Metering Facility located adjoining ARCO's property line
on 223rd Street just east of the Dominguez Channel. The meters shall be
maintained and calibrated by Dominguez in accordance with AWWA standards, and
shall be tested and calibrated at least annually. The results of such
calibrations shall be furnished to the parties. If there is a dispute about the
accuracy of any meter, a party may request that the meter be calibrated by an
independent engineer or consultant experienced in such calibrations. The
parties may have representatives present and observing at the time of
recalibration. If the meter is in error by more than five per cent (5%),
Dominguez shall pay for its recalibration. If the meter is in error by more
than eight per cent (8%), then charges paid on the basis of that meter's
readings during a period of not more than twelve months preceding the date of
the recalibration shall be adjusted to correct the erroneous billings due to
meter error. If the meter is in error by less than five per cent (5%), the
meter shall be recalibrated, but the party requesting the calibration shall pay
for the cost of the calibration.
5. PURCHASE OF OUTPUT
A. GENERAL. West Basin shall make available up to 5,100 acre-feet per
year of R/O Water and up to 900 acre-feet per year of Nitrified Water meeting
the standards and specifications set forth in Exhibit 4A hereof. ARCO shall
purchase and use a quantity of Nitrified Water equal to seventeen and one-half
percent (17.5%) of the daily use of R/O Water. At an annual production of
5,100 acre-feet of R/O water, the Nitrified Water production is approximately
900 acre-feet per year. Failure to take the obligated amount of Nitrified Water
shall not relieve ARCO of the obligation to pay Fixed Capital Charges and
variable commodity charges associated with said Nitrified Water. ARCO may, but
shall not be obligated to, purchase any output of the Plant not meeting the
standards and specifications set forth on Exhibit 4A hereof.
B. DEFICIENT QUALITY. West Basin shall immediately undertake to correct
the situation, if the Plant output contains quantities of minerals in excess of
the maximum amounts listed on Exhibit 4A, (a "water quality deficiency"). The
following remedies shall apply if West Basin is unable to correct the water
quality deficiency within 90 days after receiving notice from ARCO:
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(1) COMPENSATION FOR A WATER QUALITY DEFICIENCY. ARCO may continue
to purchase the output of the Plant if the water quality deficiency is not
corrected within 90 days from the date of ARCO's notice to West Basin. However,
West Basin shall compensate ARCO to the extent ARCO can demonstrate direct
operating cost impacts as a result of a water quality deficiency. The
resulting compensation will be retroactive to the date of ARCO's notice to West
Basin and will continue until the water quality deficiency is remedied.
(2) SUSPENSION OF ALL PAYMENTS AND TERMINATION OF AGREEMENT.
If the water quality deficiency has not been corrected within a period ending 24
months from the date of ARCO's notice to West Basin, ARCO may either: (a)
continue to purchase water from the Plant with compensation from West Basin in
accordance with Subsection 5B(1); or (b) give written notice to West Basin
declaring ARCO's intent to cease to purchase the output of the Plant and to
suspend payments to West Basin. Effective upon receipt of such notice, this
Agreement shall be terminated, and ARCO shall have no further obligation to West
Basin, other than that set forth in Subsection 5B(3).
(3) WEST BASIN OPPORTUNITY TO CURE AND REINSTATE AGREEMENT FOLLOWING
TERMINATION. Notwithstanding ARCO's exercise of its option to terminate
pursuant to Subsection 5B(2) above, the Agreement may be reinstated if West
Basin can modify or alter the Plant to such configuration that the Plant can
deliver the contracted for quantities of water meeting the quality
specifications set forth on Exhibit 4A to ARCO within a period of not more than
48 months following ARCO's notice of termination. ARCO shall then be obligated
to perform its obligations under the Agreement for the remaining term of the
Agreement so long as the Plant continues to deliver water meeting the quality
and quantity specifications of this Agreement. The number of months during
which the Agreement was deemed terminated shall be added to the existing term of
the Agreement.
6. CAPITAL COSTS
A. GENERAL. West Basin shall pay for the cost of design and construction
of the Refinery Piping including permits necessary for construction up to Four
Million Eight Hundred Thousand Dollars ($4,800,000.00) plus twenty (20%)
contingency as detailed in Subsection 6B(1). West Basin represents and
warrants the Refinery Piping and Dominguez represents and warrants the Metering
Facilities placed on ARCO property are not subject to any encumbrance lien,
mortgage or security interest of any kind. Further, West Basin represents and
warrants that
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it will not suffer any encumbrance, lien, mortgage or security interest of
any kind to be placed on ARCO's property.
B. REIMBURSEMENT OF ARCO FOR REFINERY PIPING.
(1) REIMBURSEMENT OF ARCO. West Basin shall reimburse ARCO for
costs incurred by ARCO to construct the Refinery Piping up to a maximum of Four
Million Eight Hundred Thousand Dollars ($4,800,00.00) plus a twenty per cent
(20%) contingency for the direct costs of designing and constructing the
Refinery Piping, as generally described in Example 3A, to distribute water to
the cooling towers within the refinery from the Metering Facility. Use of the
contingency, if necessary, will be for Improvements identified within the scope
of the project and shall be subject to approval by West Basin. West Basin's
approval shall not be unreasonably withheld. On a monthly basis, ARCO shall
submit statements to West Basin itemizing ARCO's costs incurred to design and
construct the Refinery Piping, together with such supporting data for such costs
as West Basin may reasonably request. West Basin will pay ARCO's statements
within 30 days of receipt of same.
(2) REIMBURSEMENT OF WEST BASIN. Dominguez shall reimburse West
Basin for the cost of designing and constructing the Metering Facility. Upon
completion of construction of the Metering Facility, West Basin will prepare a
final accounting of the cost of such facilities, and submit such account,
together with an invoice to Dominguez. Dominguez will pay West Basin's invoice
within 30 days of same.
C. FIXED CAPITAL CHARGES PAYMENT BY ARCO TO WEST BASIN
(1) FIXED CAPITAL CHARGES INVOICE. West Basin shall invoice ARCO on
the 10th of each month following the Commencement Date, as defined in Section
9A, for fixed capital charges (the "Fixed Capital Charges"). ARCO shall pay
such invoices on or before the 10th of the following month.
(2) FIXED CAPITAL CHARGE. The Fixed Capital Charge shall be One
Hundred Seventy Eight Thousand Dollars ($178,000.00) per month beginning upon
the Commencement Date.. If ARCO fails to timely complete the Refinery Piping
and West Basin Declares the Commencement Date as set forth in Section 1(B), ARCO
will pay West Basin the Fixed Capital Charges, as set forth herein above, until
such a time ARCO has completed Refinery Piping and began taking full delivery of
Plant output water.
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(3) PRORATION OF FIXED CAPITAL CHARGES FOR QUANTITY SHORTFALL..
ARCO's obligation to pay Fixed Capital Charges shall be prorated if West
Basin is unable to deliver recycled water to the Plant in sufficient
quantities to yield an annual output of 5,100 acre feet R/O Water and 900
acre-feet of Nitrified Water (6,000 acre-feet total) or more, and such
inability to deliver recycled water lasts for more than 90 days. The
proration of Fixed Capital Charges shall be made based on actual volumes of
Plant output received by the ARCO Refinery, divided by 6,000 acre feet per
year ("AFY"). The proration clause shall not apply if ARCO decides to reduce
its take of Plant output below 6,000 AFY, and such reduction is not due to
any deficiency or shortfall in plant performance or failure to supply
recycled water. When ARCO's obligation to pay Fixed Capital Charges has been
suspended or prorated either pursuant to this Subsection 6C(4), or pursuant
to Subsection 5B(2), West Basin shall continue to accrue the Fixed Capital
Charges on its accounting records. The Fixed Capital Charge payments during
the remainder of the term of this Agreement shall be adjusted to correct the
under-collection of capital costs if the Plant deficiencies or recycled water
supply deficiencies are subsequently corrected and Plant output is restored
above 6,000 AFY, averaged over the life of the Plant to date.
(4) ADJUSTMENT TO FIXED CAPITAL CHARGES BASIN ON TECHNOLOGY OR
REGULATORY CHANGES. ARCO's obligation to pay Fixed Capital Charges under
Section 6C hereof may be reduced through the sale by ARCO of the right to
purchase recycled water on the same terms and conditions herein, if any of the
following events have occurred: (i) the ARCO Refinery cuts crude rates
significantly such that overall cooling tower makeup water requirements drops by
more than twenty percent (20%) from the level of such requirements as at the
Commencement Date and such reduction also requires a reduction in usage of Plant
effluent; (ii) Technology advances in cooling systems make cooling towers
obsolete; (iii) the Los Angeles County Sanitation District, the Southern
California Air Quality Management District, or the Environmental Protection
Agency or other responsible regulatory agency implements or imposes cooling
tower restrictions that economically can only be adhered to by reducing usage of
recycled water; (iv) Technology advances in chemical treatment or water
conservation reduce cooling tower water makeup below the Plant production
capacity; or (v) Other regulatory or environmental or technical changes occur
such that the ARCO Refinery's need for Process Water is reduced. Such a sale by
ARCO shall not relieve ARCO of the obligation to pay such Fixed Capital Charges,
if the purchaser thereof fails to make such payments unless such a sale is
consented to by West Basin. If the fixed capital charges are reduced as set
forth above, the remaining Fixed Capital Charges shall be prorated by dividing
the number of AFY of R/O Water actually delivered from the effluent of the Plant
to ARCO by 6,000 AFY.
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(5) REDUCTION OF FIXED CAPITAL CHARGES. After 15 years from the
Commencement Date, ARCO may, upon one year's notice, reduce its right to
purchase recycled water and proportionately its Fixed Capital Charges to the
extent West Basin or ARCO can sell ARCO's right to purchase such water to
others, on the same terms and conditions herein. Such a sale by ARCO shall not
relieve ARCO of the obligation to pay such Fixed Capital Charges, if the
purchaser thereof fails to make such payments unless such a sale is consented to
by West Basin.
(6) CAPITAL REDUCTION CREDIT. ARCO shall receive from West Basin
annually, for the Initial Term of the Agreement, a capital reduction credit of
up to Six Hundred Twenty Five Thousand Dollars ($625,000.00) to account for the
portion of the treatment plant construction which is reserved to serve other
West Basin customers. West Basin's obligation to provide the capital reduction
credit shall be prorated if ARCO purchases less than 6,000 acre-feet of Plant
effluent in any given year. The proration of the capital reduction credit shall
be determined by dividing the number of AFY of Plant effluent actually delivered
to ARCO by 6,000.
D. PREPAYMENT AND CALCULATION OF REMAINING PORTION OF THE FIXED CAPITAL
CHARGES. ARCO may prepay the Fixed Capital Charges in accordance with this
Section 6D at any time. For purposes of calculating the remaining portion of
Fixed Capital Charges under this Agreement, the remaining portion of the Fixed
Capital Charges shall be equal to the amount shown in Exhibit 6D.
7. VARIABLE COMMODITY CHARGES
A. WEST BASIN CHARGES TO DOMINGUEZ. Dominguez will pay West Basin a
variable commodity charge and treatment surcharges, based on the quantity of
recycled water metered at the Metering Facility, and calculated using the prices
for recycled water West Basin establishes annually. The variable charges for
recycled water delivered from the Plant will be the West Basin recycled water
rate applicable throughout the West Basin service area plus a treatment
surcharge for Nitrified Water and a treatment surcharge for R/O Water. An
exemplar of West Basin's current commodity charges and treatment surcharges
effective July 1, 1997, and their tiered nature is attached as Exhibit 7B
hereto. The variable commodity charge includes all maintenance and operating
charges, including routine-in-kind membrane replacement, for the Plant. If ARCO
fails to timely complete the Refinery Piping and West Basin declares the
Commencement Date as set forth in Section 1(B), Dominguez will pay West Basin a
variable
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commodity charge and treatment surcharges equivalent to a delivered quantity of
Fourteen (14) acre-feet per day of R/O Water and 2.5 acre-feet per day of
Nitrified Water until at such a time ARCO has completed the Refinery Piping and
began taking full delivery of Plant output water.
B. WEST BASIN FUTURE PRICING.
West Basin's policy is to price recycled water so that it is economical to
the customer when compared to alternate supplies and the costs of using other
water of poorer quality, including increased chemical costs and life of
equipment. To ensure recycled water remains economical, West Basin shall not
increase the effective commodity rate for recycled water sold to Dominguez, or
to any other entity selling the output of the Plant to ARCO, over the life of
the agreement on a cumulative basis by an amount greater than the increase in
the West Basin effective commodity rate for potable water from the Metropolitan
Water District of Southern California during the same preceding period. West
Basin's potable water supplier may make significant price increases in one year
and not raise the price again for a period of several years. West Basin in
turn may want to increase the charge for recycled water on a different time
schedule spreading it over several years. The "cap" provided by this Subsection
7C(2) shall only apply if ARCO takes the lesser of 6,000 AFY of Plant output, or
Plant output capacity.
C. DOMINGUEZ RESALE TO ARCO.
(1) DOMINGUEZ BILLING TO ARCO. Dominguez shall bill ARCO for Plant
output water based upon the quantity of recycled water delivered by West Basin
to the Metering Facility. If ARCO fails to timely complete the Refinery
Piping and West Basin declares the Commencement Date as set forth in Section
1(b), Dominguez shall bill ARCO a variable commodity charge and treatment
surcharges equivalent to a delivered quantity of Fourteen (14) acre-feet per day
of R/O Water and 2.5 acre-feet per day of Nitrified Water until at such time
ARCO has completed the Refinery Piping and began taking full delivery of Plant
output water. Dominguez will invoice ARCO on a monthly basis, and payment shall
be made within 19 days of receipt of invoice.
(2) DOMINGUEZ TARIFF FOR RECYCLED WATER SOLD TO ARCO. The billing
will be done pursuant to a tariff to be established by Dominguez, which will
pass through the commodity and treatment surcharge cost of the recycled water
delivered by West Basin to the Metering Facility, less capitalization costs for
Dominguez Facilities, as described in Exhibit 7D. The billing shall also
include charges for recycled water delivered to the Metering Facility,
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calculated on a per acre-foot basis, sufficient to make up Dominguez's lost
margin and any difference in the borrowing cost between Dominguez and West
Basin on Dominguez Facilities. Until the PUC issues a decision on Dominguez'
request for inclusion of Dominguez Facilities in its rate base, lost margin will
be Dominguez's lost margin on sales of potable water it would have made to ARCO
but for the fact of sales of Plant output water to ARCO under this Agreement.
Dominguez will use its best efforts to establish the lost margin equal to the
difference between its potable water tariff rate and its costs of potable water
from West Basin. An exemplar of Dominguez's proposed method of billing and
adjustment for capitalization costs is attached as Exhibit 7D. When tariffs
from Dominguez's next general rate case become effective, lost margin will be
calculated in accordance with general rate making policies and procedures of the
California Public Utilities Commission at the time.
(3) WEST BASIN PRICE ADJUSTMENT TO DOMINGUEZ. West Basin's price
adjustment to Dominguez for recycled water delivered to the Metering Facility
shall equal capitalization costs for Dominguez Facilities fully amortized over
25 years using West Basin's effective total average rate of debt issued for
construction of West Basin's facilities. That adjustment is calculated by
computing what West Basin's total debt service costs on the Dominguez Facilities
would have been if Domimguez had not elected to construct such facilities. As
shown on Exhibit 7D the intent of the parties is to apply this price adjustment
only to those quantities of recycled water delivered in excess of 200 acre-feet
per month (currently estimated to be 3,600 acre feet per year).
8. EASEMENT FOR METERING FACILITIES. ARCO will provide Dominguez an
easement for the location of the Metering Facility.
9. TERM
A INITIAL TERM. The Initial Term of this Agreement shall be for a
period of 25 years commencing upon the date of the first commercial delivery to
ARCO of recycled water processed through the Plant, (the "Commencement Date") or
such earlier date as provided in Section 1(B) unless: the parties agree to
extend the Term of the Agreement; or the Term of the Agreement is extended
pursuant to Subsection 5(b)(3). Within 30 days after such first delivery, West
Basin will deliver a written notice to ARCO and Dominguez specifying the
Commencement Date. The Commencement Date shall not be later than the date the
first payment is made by ARCO. The Initial Term shall terminate upon prepayment
of all Capital Charges as provided for in Subsection 6D.
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B. EARLY TERMINATION AND PAYMENT IF REFINERY CEASES OPERATIONS.
If the ARCO Refinery permanently ceases operation at any time it shall
notify West Basin of its intent to cease operations. ARCO shall either 1) pay
West Basin the remaining unamortized portion of the Fixed Capital Charges as
shown in the buyout schedule Exhibit 6D minus the salvage value of the treatment
facilities capacity rights owned by ARCO within 180 days of cessation of
Refinery operations, and the Agreement shall be terminated upon the making of
such payment, or shall 2) pay West Basin the remaining unamortized portion of
the Fixed Capital Charges as shown in the buyout schedule Exhibit 6D plus One
Hundred Dollars ($100.00) and invoke the Purchase Option for Plant capacity
rights as provided for in Subsection 13(B), within 180 days of cessation of
Refinery operations, and the Agreement shall be terminated upon the making of
such payment..
C. PREPAYMENT OF FIXED CAPITAL CHARGES. Notwithstanding any prepayment
of Fixed Capital Charges by ARCO or purchase of capacity rights the Improvements
shall continue to be operated by West Basin, for the Initial term of this
Agreement. Unless ARCO and West Basin expressly agree to the contrary,
maintenance, operation, pricing and supply of recycled water shall continue in
accordance with the terms of this Agreement.
D. OBLIGATION TO TAKE RECYCLED WATER CEASES ON TERMINATION. If this
Agreement expires or is terminated pursuant to any provision hereof, ARCO's
obligation to take recycled water shall cease effective upon the date of
termination or expiration.
10. AUDIT PROVISION
A. AUDIT OF CONSTRUCTION COSTS. ARCO shall maintain accurate records of
the cost of any construction for which it is to be reimbursed by West Basin
under this Agreement. Those records shall be maintained for at least two years
after completion of the work, and shall be available for inspection and copying
on reasonable notice during normal business hours at the offices of the party
maintaining the records.
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11. ENVIRONMENTAL AND REGULATORY COMPLIANCE
West Basin as the constructor and operator of the Plant and Discharge
System shall comply with applicable environmental and other laws, rules and
regulations governing the Plant and Discharge System whether such laws relate to
design, construction, operation or maintenance of the Plant and Discharge
System. In particular, West Basin shall be responsible for obtaining, and for
complying with the terms and conditions of, any necessary permits for discharge
of Wastewater from the Plant. ARCO as constructor and operator of the Refinery
Piping shall comply with applicable environmental and other laws, rules and
regulations governing the Refinery Piping whether such laws relate to design,
construction, operation or maintenance of the Refinery Piping. Each party shall
indemnify and hold the other harmless for any breach of an obligation to comply
with the requirements of this Section 11. This obligation to comply with laws
rules and regulations shall be included in any contract with any contractor or
subcontractor of the parties which may be engaged to construct, operate or
maintain the Plant, Discharge System and Refinery Piping.
12. TITLE TO WATER
A. TITLE AND OWNERSHIP OF WATER FROM PLANT. West Basin will sell
recycled water based upon flow to the Metering Facilities. West Basin will hold
title to and risk of loss of the recycled water and effluent until it reaches
the Metering Facility.
B. TITLE AND OWNERSHIP OF WATER AT METERING FACILITY. Title to and
ownership of Plant output water will pass to Dominguez immediately upstream of
the Metering Facility. Title to and risk of loss of Plant output water will
pass to ARCO immediately downstream of the Metering Facility.
13. ARCO OPTION TO PURCHASE REFINERY PIPING AND CAPACITY RIGHTS
A. PURCHASE OPTION FOR REFINERY PIPING. At its option, ARCO may purchase
the Refinery Piping from West Basin at any time during the Initial Term or any
extended terms of this Agreement. The purchase price for the Refinery Piping
shall be the greater of (i) the unamortized portion of the Fixed Capital Charges
allocable to the Refinery Piping computed in accordance with Subsection 6D or
(ii) its depreciated book value at the time of purchase. Such
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option may be exercised by ARCO's giving written notice to West Basin. West
Basin shall transfer title and ownership of the Refinery Piping to ARCO at
the option price within 90 days after receiving such written notice of
exercised of option.
B. PURCHASE OPTION FOR PLANT CAPACITY RIGHTS.
ARCO may purchase capacity rights in the Plant for 5,100 acre-feet per
year of R/O Water and 900 acre-feet per year of Nitrified Water from West Basin
at an option price of One Hundred Dollars ($100.00) at the end of the Initial
Term of this Agreement or upon prepayment of all Capital Charges as provided for
in Subsection 6(D). ARCO may exercise these purchase options by giving West
Basin written notice of exercise of option not less than 90 days prior to the
end of the Initial Term. If such notice is given, West Basin will transfer
ownership of and title to the capacity rights to ARCO effective upon expiration
of the Initial Term.
14. CHANGES IN TECHNOLOGY/BUSINESS ENVIRONMENT
A. OPPORTUNITIES TO REDUCE COSTS. The parties recognize new
opportunities may develop to better manage the Plant and on-site water systems.
The parties will work in good faith to cooperate with each other to take
advantage of these opportunities.
B. RELIEF FOR A SEVERELY DISADVANTAGED PARTY. If any party believes
changes in the business environment have put it in a severe disadvantage in
performing this Agreement, it may approach the other parties and ask for relief.
The parties will discuss such request in commercial good faith, recognizing each
party is entitled to the benefit of its bargain, but no party should suffer
extreme detriment.
15. TAXES
A. PAYMENT BY ARCO. ARCO shall pay taxes, assessments, fees or charges
applicable to the Refinery Piping.
B. PAYMENT BY WEST BASIN. West Basin shall pay taxes, assessments, fees
or charges applicable to the Plant and Discharge System.
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C. INVESTMENT TAX CREDIT. At its own option, ARCO may claim the
California Manufacturers Investment Credit and the amount of such qualified cost
upon which sales or use tax has been paid or deemed paid under the regulation of
the Franchise Tax Board. West Basin does not warrant that ARCO will be found
eligible for such credits.
16.. MISCELLANEOUS
A. CHOICE OF LAW. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of California.
B. BINDING ON SUCCESSORS AND ASSIGNS. This Agreement, and its terms,
covenants and conditions apply to and are binding upon the successors and
assigns of the parties hereto.
C. NOTICES. Notices given pursuant to the terms of this Agreement or
necessary to carry out its provisions, shall be in writing and delivered
personally to the person to whom the notice is to be given, or when deposited in
the U.S. Mail, postage prepaid, addressed to such person, or when sent by
facsimile to the phone number listed below, with a confirming copy sent by U.S.
Mail. The addresses and phone numbers of the parties for this purpose shall be:
ARCO: ARCO Products Company
Los Angeles Refinery
1801 East Sepulveda Boulevard
Carson, CA 90749-6210
Attention: Refinery Manager
Fax Number 310-816-3316
WEST BASIN MUNICIPAL WATER DISTRICT:
17140 South Avalon Boulevard, Suite 210
Carson, CA 90746-1296
Attention: General Manager
Fax Number 310-217-2414
DOMINGUEZ:
Dominguez Water Corporation
21718 South Alameda Street
Long Beach, CA 90810-0351
Attention: President
Fax Number 310-834-3308
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Each party may change its address or fax number for purposes of notices under
this Agreement by giving the other parties notice of the change in writing.
D. INTEGRATION CLAUSE. There are no other written or oral agreements
between the parties concerning the subject matter hereof.
E. BENEFITS OF THIS AGREEMENT TO RESPECTIVE PARTIES. Nothing contained
in this Agreement, expressed or implied, is intended to give any person other
than West Basin, ARCO and Dominguez any right, remedy, or claim under or
pursuant hereto or thereto, and any agreement or covenant required in this
Agreement to be performed by or on behalf of West Basin, ARCO or Dominguez shall
be for the sole and exclusive benefit of the other party or parties to this
Agreement.
F. CONFIDENTIALITY. During the course of performance of this Agreement,
the parties may become aware of the business plans and operations of the other
parties to this Agreement and operating and performance data of the Plant
("Information"). To the extent permitted by law the parties and their employees
agree to keep such information confidential, and to guard it with the same
methods and concern as they guard their own confidential information. The
parties and their employees will not disclose such Information to third parties
without first obtaining the consent of the other parties to this Agreement.
Further the parties agree to use such information within their organizations
only for the purposes of performing this Agreement.
G. INDEMNIFICATION.
(1) PERSONAL INJURY AND PROPERTY DAMAGE. Each party hereto agrees to
indemnify, and save harmless and defend the other parties hereto, their
subsidiaries and affiliates their directors, officers, agents and employees from
and against losses, costs, damage, injuries, liabilities claims and demands or
causes of action of any nature whatsoever, arising or resulting from damage to
or destruction of property, or death of or injury to persons, whether they be
third persons, or the employees of the party or the party's contractors or
subcontractors, to the extent of the indemnifying party's negligence. It is the
intention of the parties hereto that liability for any such claims be
apportioned among the parties on the basis of the respective party's comparative
negligence.
(2) PATENT AND INTELLECTUAL PROPERTY INDEMNIFICATION. No party shall
use any information in the design, fabrication or construction of Improvements,
or install or use any equipment in the Improvements, which involves any
infringement of a patent or copyright or
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unauthorized use of a trade secrete of another in any manner. Any party
using such infringing data or information shall hold the other parties
harmless and defend them from and against any such claim of infringement.
Further, the party so indemnifying the others shall obtain a non-infringing
right to use such information equipment or data at its own sole expense, or
shall replace the infringing information equipment or data with its
functional equivalent at no expense to the other parties.
H. INSURANCE. During the term of this Agreement each party shall
maintain and provide the following types of insurance:
(1) Worker's Compensation Insurance, including Occupational Disease,
in accordance with the laws of California and Employer's Liability Insurance in
the limit of not less than One Million Dollars ($1,000,000) per person per
accident.
(2) Commercial General Liability Insurance, including contractual
liability, insuring the indemnity agreements set forth in this Agreement and
products-completed operations coverage, with limits of not less than Five
Million Dollars ($5,000,000) applicable to bodily injury, sickness or death in
any one occurrence and Five Million Dollars ($5,000,000) for loss of or damage
to property in any one occurrence.
(3) Automobile Liability Insurance covering owned, non-owned and
hired vehicles used by the party with limits of not less than One Million
Dollars ($1,000,000) applicable to bodily injury, sickness or death of any one
person and One Million Dollars ($1,000,000) for more than one person in any one
occurrence, and Five Hundred Thousand ($500,000) for loss of or damage to
property in any one occurrence.
(4) West Basin shall self insure or provide Builder's Risk Insurance
on an "All Risk" basis insuring the Plant and Discharge System on behalf of
ARCO, West Basin, and its subcontractors in the course of construction including
all materials intended to become a part of the completed Plant and Discharge
System while in transit to the premises, while in fabrication or awaiting
transit and during mechanical testing and until West Basin accepts the Plant and
Discharge System. West Basin owned or rented construction tools and equipment
are excluded. Further ARCO shall self insure or provide Builder's Risk
Insurance on an "All Risk" basis insuring the Refinery Piping on behalf of West
Basin, ARCO and its subcontractors in the course of construction including all
materials intended to become part of the Refinery Piping while in transit to the
premises, while in fabrication or awaiting transit and during mechanical
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testing and until ARCO accepts the Refinery Piping. ARCO owned or rented
construction tools and equipment are excluded.
(5) Each party hereto mutually agrees to waive all rights of recovery
against each other and all subsidiaries, affiliates, agents, employees,
invitees, servants, subcontractors, insurers, underwriters and such other
parties as each may designate whether arising from insured or self-insured loss.
Each party shall arrange for all insurance policies provided by each party with
respect to this agreement to be endorsed to waive all right of subrogation in
accordance with this provision.
(6) Each Party hereto shall each furnish Certificates of Insurance to
the other evidencing the insurance required hereunder. Each Certificate shall
provide that thirty (30) day prior written notice of cancellation shall be
provided to the Certificate Holder.
(7) Each Party hereto shall require all of its contractors and
subcontractors to obtain, maintain and keep in force during the time in which
they are engaged in performing work hereunder, similar insurance coverage
required hereunder. Each party shall require such contractors and
subcontractors to furnish acceptable evidence of such insurance. Such evidence
shall be maintained by each party and shall make such evidence available at a
convenient site for inspection and review.
I. MECHANIC'S LIENS. Each of the parties hereto covenants and agrees to
keep the land upon which any Improvements are to be constructed, and the
materials and equipment to be included in the Improvements free from any and all
claims, liens, charges or encumbrances in the nature of mechanic's, labor or
material liens or otherwise arising out of that portion of the construction or
work to be performed by the particular party, or the particular party's
contractors, agents or subcontractors.
J. DRAWINGS AND DOCUMENTS. At the close of construction, each party will
deliver to each of the other parties to this Agreement "as built" drawings of
that portion of the Improvements constructed by that party upon ARCO property.
ARCO shall deliver "as built" drawings on all items generated during the design
and construction of the Refinery Piping to West Basin.
K. FUTURE PRICING. By executing this agreement ARCO shall not prejudice
its rights to purchase recycled water at a lower price in the future. If a
change in policy by West Basin or the Dominguez Water Corporation, including
execution of future agreements with other
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industrial customers would otherwise offer recycled water to such
industrial customers at a lower price, this Agreement shall be amended to
give ARCO such a lower price.
Wherefore the parties hereto have executed this Agreement of Contract
Relating to Delivery of Recycled Water to Dominguez Water Corporation and ARCO
to be effective, subject to the conditions precedent outlined above, effective
the 1st day of December, 1997.
APPROVED:
WEST BASIN MUNICIPAL WATER DISTRICT
By:
---------------------------------------
Paul D. Jones II, Acting General Manager
APPROVED AS TO FORM:
- -----------------------------------
Wayne K. Lemieux, District Counsel
ARCO PRODUCTS COMPANY,
A Division of Atlantic Richfield Company
By:
----------------------------------------
A. W. Johnson, Refinery Manager
APPROVED AS TO FORM:
By:
--------------------------------
, Counsel
DOMINGUEZ WATER CORPORATION
By:
----------------------------------------
Brian Brady, President
APPROVED AS TO FORM:
By:
--------------------------------
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