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RES 1525 12/15/2015
A 00 C_ � _• r ® == �i,/,nunnnu x I 1525 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CIBOLO, TEXAS ("CITY") APPROVING FORM OF GROUNDWATER LEASE AGREEMENT FOR CIBOLO VALLEY LOCAL GOVERNMENT CORPORATION. WHEREAS, the cities of Cibolo and Schertz jointly created the Cibolo Valley Local Government Corporation ("CVLGC") to investigate and identify new water development projects for the cities; and WHEREAS, CVLGC is a local government corporation, created and existing under the provisions of Subchapter D of Chapter 431, Texas Transportation Code, as amended, and Chapter 394, Texas Local Government Code; and WHEREAS, CVLGC identified a feasible groundwater development project in Wilson County; and WHEREAS, CVLGC has developed a plan to produce water out of the Carrizo/Wilcox formations in Wilson County for delivery to Cibolo and Schertz ("Wilson County Proj ect"); and WHEREAS, CVLGC has worked with property owners interested in leasing groundwater rights and/or the sale of water well sites to CVLGC for the implementation of the Wilson County Project; and WHEREAS, CVLGC seeks approval of the groundwater lease form from Cibolo and Schertz so it may begin work on the Wilson County Project. NOW,THEREFORE, BE IT RESOLVED BY THE CITY OF CIBOLO, TEXAS: Section 1. The recitals contained in the preamble of this Resolution are determined to be true and correct and are hereby adopted as a part of this Resolution. Section 2. City hereby approves the form of the Groundwater Lease contained in Exhibit A, attached hereto. Changes to the Groundwater Lease may be made at the discretion of CVLGC provided the intent of the lease remains the same. 1 Section 4. This Resolution shall take effect immediately upon adoption hereof. PASSED AND APPROVED the 5 day of Dec , 2015. Allen Dunn Mayor of City of Cibolo 2e;e1,0, City Secretary 2 I f� 'c\ngor `,B 1965-2015 City Council Communication Title:Resolution Adopting the CVLGC Ground Water Lease Template Date: 12/8/15 From: Timothy D. Fousse,Dir. Public Works & Capital Projects PRIOR CITY COUNCIL ACTION: City Council FINANCIAL IMPACT: At this time, there is no direct financial impact to the City of Cibolo. The city continues to make its annual contributions to the corporation, as prescribed in the approved annual budget. The lease rates for ground water are established by demand and availability, as well as prior lease actions occurring in the region. The lease payments will be made by CVLGC and are included in the budget for this year and future years. STAFF RECOMMENDATION: The attached ground water lease template has been developed by Arthur Rodriguez,the CVLGC Attorney,to be used in the leasing of Carrizo/Wilcox water in Wilson County. It is anticipated that CVLGC will be able to lease 10,000 acre feet of water using this template. BOARD/COMMITTEE RECOMMENDATION: The CVLGC Board has reviewed the lease template and has approved its content. MOTION: Motion to approve Resolution # approving the form of the Cibolo Valley Local Government Corporation Groundwater Lease to be used to lease water Carrizo/Wilcox water. ADDITIONAL INFORMATION: Resolution_ , DRAFT CVLGC Groundwater Lease Agreement - STAFF CONTACT(S): Timothy D.Fousse Director of P.W. and Capital roj ects tfousse@cibolotx.gov 210-658-9900 X3160 City Hall Office 210-275-2664 Cell 1 DRAFT—NOT FOR PUBLIC DISTRIBUTION GROUNDWATER LEASE AGREEMENT BETWEEN CIBOLO VALLEY LOCAL GOVERNMENT COPORATION AND [ ](LANDOWNER) This Groundwater Lease Agreement (this "Agreement") is entered into as of [ ], 2015 (the "Effective Date"), between the Cibolo Valley Local Government Corporation, a Texas local government corporation (the "Corporation"), and its successors and assigns, and [insert landowner name] (the "Landowner"). and the Landowner's heirs, administrators, successors and assigns, for the purposes and mutual benefits described in this Agreement. The Corporation and the Landowner are referred to in this Agreement individually as a "Party" and together as the "Parties". RECITALS I. Description of Corporation and Corporation ProjecThe Corporation, formed by the cities of Schertz and Cibolo under Chapter' 431, Subchapter D of the Texas Transportation Code, and other general laws offe\Stat/ Texas. The Corporation is engaged in the development of water for supply tos sponsor entities, and is pursuing a project (the "Corporation Project") to develop groundwater from the Carrizo-Wilcox Aquifer. The Corporation's goal i,,,-to enter into groundwater leases with multiple landowners whose collective surfac!e, aci ge-equals ap ro'Eimately 10,000 acres (the "Pooled Surface Acreage") thereby allowing theme-Corporation to ideally obtain groundwater permit(s) from the Evergr e Unde-g/----.... diVater Conservation District(the "District")in the amount of 10,000 acre,f�et. II. Description of Landownerll Wal Proerty. The Landowner owns the following tract of real property (they' ropertty' located i'[jWilson] County,Texas: Area: \\\[insert acreageh' Legal See the description attached as Exhibit A Description, Deed Volume°( ],page [__], or Document No. [ ], ,/cording: \ *ilson County [Deed/Official Public] Records / \\.\\ 'III. Thdrti'es agree hat if either Partyduring the term of this Agreementreement secures an C , update `surey�ofithe Property prepared by a professional land surveyor registered in the State of Texas(the Parties, at the request of either Party, will execute a recordable document that replaces the earlier survey with the updated survey. IV. Groundwater District Regulations. The Property is subject to the regulations of the District. The District has rules that require approvals or permits for groundwater development activities (including, without limitation, notices of test wells and permits for production wells and for transport of groundwater for use outside the District) ("District Rules"). The Parties acknowledge that the Corporation will need to apply for and secure applicable approvals and permits from the District, and thereafter comply with the terms Initials: CVLGC: Landowner: Page 1 Groundwater Lease Agreement Exhibit A DRAFT—NOT FOR PUBLIC DISTRIBUTION of the approvals and permits, to make use of the Corporation's rights under this Agreement and to develop the Corporation Project. V. Available Groundwater Determination. The District is participating or has participated in a process with other groundwater districts in Groundwater Management Areas 13 and 15 ("GMAs 13 and 15"), as designated by the Texas Water Development Board, to determine the amount of managed available groundwater for each aquifer in GMAs 13 and 15. The Parties acknowledge that this process may affect the amount of groundwater available for production in the District, and correspondingly, the amount of groundwater available for production under permits issued by the District to the C -oration related to the Property. _ AGREEMENT In consideration of the mutual promises, obligations, a d benefits t be , erived by the Parties under this Agreement, and the receipt of Ten Do and other good and valuable consideration, the receipt and sufficiency of which are herby expressly acknowledged by the Parties, the Parties agree as follows: 1. Lease of Groundwater Rights. Subjectto• the Landowner reservations in Section 2 below and the other terms and conditions of this Agreement: A. Effective as of the Effective Da ;the Landowner hereby leases and lets to the Corporation, for the Term of this Agre me ent as peeified in Section 1B. below, the following: (1) One—acre-foot o groundwater, if any, in the Carrizo-Wilcox Aquifer with' and�iui e the Prop ,o ("Leased Groundwater"); (2) The e cluszve ght to develop, explore, produce, withdraw, and transport the L as d'�Groundwder that may be produced from the Property, whether from a Corporation well located on the Property or on other land with fn the Corporat o�nlpools the Property for permitting and production purposes; Til AandTh\;\,\ ri leasednder this paragraph are referred to collectively as the "Leased Grounawater Rights". 13,\ �'V i of Agreement Defined. Unless the Agreement is terminated earlier, the "Term'\oj this Agreement consists of 1) a fifteen-year primary term beginning on the Effective Date, and 2) automatically renewing year-to-year thereafter, for as long as the Corporation continues to pay the Lease Payments to Landowner as provided in this Agreement. 2. Reserved Rights of the Landowner. The Landowner specifically reserves unto the Landowner and the Landowner's heirs, administrators, successors and assigns the following: Initials: CVLGC: Landowner: Page 2 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION A. Use and Possession. The exclusive rights of occupancy, use and possession of the Property for any and all purposes, except as expressly leased to the Corporation under this Agreement, or as specifically limited or prohibited in this Agreement. B. Landowner's Reserved Groundwater Rights. The Landowner excepts from the Leased Groundwater Rights and expressly reserves the following rights, interests and uses of groundwater within and under the Property (the "Reserved Groundwater Rights"). (1) The right to continued use of each existing wa�er'well in use by the Landowner on the Property as of the Effective Date without regard to the depth, strata, or aquifer unit within which the well may to-,inatecExisting Well"), provided such Existing Well is not located within)he Carrizo-Wilcox Aquifer unless it is an exempt well under 5.3 of the Distrie Rules. tr (2) All rights towater in the Queens g s Q/ j s City Aquifer within a d under the Property, including the right to drill and use one or more new water wells that terminate into the Queens City Aquife'("Que ns City Wells") beneath the Landowner's Property for any beneficial uee\and(pursuant to a permit issued by the District. The use of water from the Queens,City Wells may be for any beneficial purpose as authorized pursuant to a peri iiissued under the rules and regulations of the District. \------?'" (3) The right to dri I and use one or more new water wells from the ..\/f./ Carrizo-Wilcox Aquifer ("Car iz�Wilcox Wells"), but only if each such Carrizo-Wilcox Well s°exempt k om permit requirements under applicable laws gu �' ~ capacity), and the use made and re latio .,s� such as the ba is�of their size and ca aci of the waterfrom the1Cafizo Wil�ox Well is exempt from permit requirements under applicable\laws and--regulations (such as use for domestic or livestock purposes). =-----(4 The Landowner shall carry out its production of the Reserved GroundwateT Rights in a manner which does not unreasonably interfere with Corporation' rights to develop, explore, transport, and produce Leased Groundwate}iriThe Landowner hereby agrees that it will not apply for or seek any exceptionsto the production limits for groundwater wells established by the Disti'i t ider Rule 5.6 for Landowner's use of Reserved Groundwater Rights or any similar exemption available to Landowners within the District. (5) (i) The Parties to this Agreement recognize that due to state, federal or local regulatory or court action, the District's production limits (other than temporary conservation measures imposed by the District to address drought conditions) applicable to wells within its jurisdiction, including wells that are used to carry out the Corporation Project, may in the future be reduced to a level that is less than the current authorized production level. In the event that District or other action results in a reduction of the production limit (other than temporary conservation measures imposed by the District to address drought conditions) to Initials: CVLGC: Landowner: Page 3 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION an amount less than the current authorized production level, the Landowner will fully absorb the reduction against his or her Reserved Groundwater Right. The Parties also recognize that it is not the intent of this Agreement to leave the Landowner with no remaining water rights associated with his or her acreage (other than exempt wells). (ii) Accordingly, in the event that District or other action results in a reduction of the production limit (other than temporary conservation measures imposed by the District to address drought conditions) such that Landowner's Reserved Groundwater Rights is reduced to a point whefeby Landowner's withdrawal rights for non-exempt uses are zero, Landowner/ay reserve up to 0.25 acre feet of groundwater per calendar year produced from Corporation's Leased Groundwater Rights ("Landowner EmergencpReservation"). Each calendar year, Landowner shall make an electio%to usthat\portion of the Landowner Emergency Reservation s/he desires�by providin\Corporation with written notice of this election at least sixty days prior to the beginning of each calendar year. Landowner shall be/responsible)for all costs necessary or associated with accessing and receiving'*,he/water from the Landowner Emergency Reservation. Landowner's Royalty Payments for any year in which it makes this election shall be adjusted downward on��,a, pro rata basis according to the amount of the Landowner/Emergency Reservationi\reserved by Landowner for that year. To replace the vol me-of e Corporation's Leased Groundwater Right caused by use of the Landowner Emerge c Reservation by Landowner or any other landowner within the Pooled j jfa eyA Acreage, Corporation may increase the amount of the Pooled Surface� Acreage in an amount of acreage not to exceed the equivalent ofracguiring an ad`ditip nal 0.35 acre foot of groundwater rights per surface acre/ m th .The) Pooled\Mface Acreage regardless of whether such increase diminishes o} dilutes._or reduces Landowner's Royalty Payment based on the reductio`n\i i\actual product of that would have otherwise been attributed to Landowner's Proopnrty. The increase in Pooled Surface Acreage shall be a pe anent increase regardless of whether the Landowner Emergency Reservation isle annually or intermittently. . Oilt ash' and Minerals. Landowner retains all rights to any and all oil, gas an other minerals,,,meluding but not limited to gas strata, uranium and other fissionable materials associateedd with the Property. 3. Regullat/o y Approvals. A. The Parties acknowledge that the Corporation's development and export of groundwater for the Corporation Project under this Agreement will require approvals from regulatory entities ("Regulatory Approvals"), including the District, and they acknowledge that the approvals generally consist of notices of test wells, permits for drilling and production, and permits for the transport of groundwater. The Corporation agrees to diligently pursue the needed approvals. The Landowner agrees to reasonably support and cooperate with the Corporation to secure the needed approvals in response to requests by the Corporation. The Landowner agrees not to oppose, directly or indirectly, the Corporation's attempts to secure any of the Regulatory Approvals needed for the Corporation Project. Initials: CVLGC: Landowner: Page 4 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION B. If the Corporation is unable to secure all needed Regulatory Approvals for the development of groundwater under this Agreement in a manner satisfactory to the Corporation within ten years of the Effective Date, the Corporation may terminate this Agreement by (i) providing written notice to the Landowner, (ii)paying all Lease Payments owed for the portion of the Term prior to termination, and (iii) removing all Corporate Facilities (as defined in Section 12A), if any, from the Property. If it is necessary for the Landowner to obtain any permits or approvals that relate solely to the Corporation's production or transport of groundwater, the Corporation will pay all reasonable costs incurred by the Landowner in connection with applying for and maintaining the permits or approvals. 4. Corporation Payments to the Landowner. The Corporation will pay the Landowner the"Lease Payments",which include the following: C A. Bonus. The Corporation will pay the Lando nerr the\sum\of$ per surface acre of the Property as a bonus on �Lando, "Bonus Payyment"). The Bonus Payment will be the sole Lease Payment to the/'Laindowner for the irst�year of the Term. Thereafter, the Corporation will make Royalty Payments during the Term in accordance with Section B below. c‘C:\/B. Royalty Payments. After the first yeah of the Term, the Corporation will make [annual/semi-annual/monthly] royalty payments\to the Landowner (the "Royalty Payments"). The amount of these pay�menl's-will be foll'owws (1) During the p`�t'o'd ythee District issues a permit to the Corporation for production of L�ase9Groundwater from a well on the Property or for the Pooled Su�rf-a�-ce Acreage that includes the Property, each Royalty Payment will be $ / perear per s' face acre of the Property that is included in the ce` Pooled Surfaereage. ,) (2) Duringgthe-pe o ,d beginning on the date the District issues a permit to the Corporation/for production of Leased Groundwater from the Pooled Sur ace Ac eage that includes the Property and ending on the date the Corporation begins—pro �ion\fro�m the permitted well, each Royalty Payment will be N\per year per surface acre of the Property. (3) ) puring period beginning drpoeration begins production/of/Lease Groundwaterthe from a well onon thethe Pooled SurfacCoAcreage that i cclu d es the'�Property, Royalty Payment will be calculated in accordance with the ri follow gformula: FORMULA: (Number of Acres of Landowner Property in Pooled Surface Acreage±Number of Acres in Pooled Surface Acreage)x Amount of Leased Groundwater Produced for the Period Expressed in Acre Feet x$ * =Royalty Payment due Landowner *or the then current Royalty Rate as adjusted by Section 4C. Initials: CVLGC: Landowner: Page 5 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION C. Adjustment in Royalty Rate due to change in CPI. For the year beginning October 1, 2016 and on the first day of each year thereafter that occurs in an even- numbered calendar year,the Royalty Rate of$ per acre foot of water produced shall be adjusted to reflect the increase in the Consumer Price Index of U.S. Depalintent of Labor, Bureau of Labor Statistics, U.S. City Average Consumer Price Index for all urban consumers (the "CPI") issued by the Bureau of Labor Statistics since the Effective Date. The adjustment is based on the percentage increase from the CPI in effect at the Effective Date to the date that Corporation calculates the adjusted Royalty Rate. If there is a decline in the CPI for the same period of time the Royalty Rate or the adjusted Royalty Rate, as applicable, per acre foot to be paid will not decrease, rather it will remain the same until the net change in the CPI has recovered aboe'Ihe value when the decline began. The Corporation will provide the Landowner with a calculation of this change each applicable year. D. For any period in which damage to Corporation Facilities or a taking as described in Section 14 results in a complete cessation of groundwater prodection from the Pooled Surface Acreage that includes the Property,;ham amount of the Royalty Payment will be reduced temporarily to . %\o fth hen-current rate for actual production applied to the number of acres held'by Landowner that are a part of the Pooled Surface Acreage (but only for the duration''of that complete cessation). Otherwise, the Corporation will pay Landowner all Leas ,e�'Payments in full based on actual production. E. For a year in which m re than one paragraph of this section applies, the amount of the applicable Royalty Payment/Will be determined on a pro rata basis, based on the number of days in tilt—year that each paragraph applies. F. If a d/when C� oration be ins to produce water from the Wilcox 4—k-- formation IP �,. g formation separat fr th�alloowa e for the Carrizo formation set by the District using wells located in Wilson County, then any Royalty Payments on water produced from the Wilcox formation will\ e'\at percent ( %) the then current Royalty Payments-rate in effect foi\Carrizo water produced under this Agreement. G. The Royalty Payments, as set forth above shall not be subject to deduction for any of Corpora)io,i's costs relating to the development, transmission, production, treatiUent, transportation, marketing, and/or otherwise making the water ready for sale or use, nor\any,�ded}actions for any fees, payments, charges, taxes, contributions paid by the Lessee to the State of Texas and District for the privilege or right to produce Groundwater;i cluding but not limited to the following fees that may be imposed by the District: (i) Water production and/or transport fees; and (ii) Fees and costs to renew production and/or transportation permits. Initials: CVLGC: Landowner: Page 6 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION H. Payment Procedure. The Corporation agrees to make all payments to the Landowner under this Agreement as follows, unless a different process is described in this Agreement for a specific matter. As a condition for any other method of payment, the Landowner agrees to deliver to the Corporation written instructions executed by the Landowner, the taxpayer identification numbers of the Landowner, and any other information reasonably needed by the Corporation to make payments. (1) The Royalty Payments shall be paid monthly, in arrears, not later than the last business day of the applicable month. ,,�� (2) If Corporation fails to make any payment .filer this Agreement when due, Landowner shall provide written notice Corporation that Corporation has thirty(30) days from receipt of the no i e`4'�o reedy the breach of pin terms, including interest on such amounts the`dueda�te at the rate of eighteen percent (18%) per annum, or if less, te)greatest le‘i'al\nonusurious rate then in effect. In the event Corporation fail. to make payment by the 30-day deadline set forth in this Section, Landowner, at Landowner's option, may immediately terminate this Lease by written notic,��,.to Corporation as provided herein and/or pursue any other legal remedy`avail e to Landowner. (3) Corporation shall make each payment due hereunder,jointly to the parties included within the de itip�-o "Landowne ": (4) Any payments u� and payable to Landowner in accordance with the terms of this Agreement s1 ai\be4in de payable to Landowner and shall be mailed or otherwise deliveredo: Landowner at the following address, unless otherwise directed by Landowner in'vriting: Z./--- [Insert .[Insert address or Direct Deposit Instructions] )Remainder of page intentionally blank.] Initials: CVLGC: Landowner: Page 7 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION 5. Pooling. A. Corporation's Intent to Pool. The Landowner understands and agrees that the Corporation intends to pool all or a portion of the Leased Groundwater Rights with all or portions of other groundwater rights that the Corporation has or will obtain from third parties owning other tracts which are eligible for pooling under applicable laws and regulations (due to their contiguous nature or otherwise). The Corporation desires to withdraw approximately 10,000 acre feet of groundwater for the Corporation Project. However, due to District rules, the Corporation may need to lease additional surface acreage in order to accommodate yield the amount necessary for the Corporation Project. The Corporation may operate the Corporation Project with any amount of pooled surface acreage that it deems sufficient, but the initial the Pooled Surface Acreage shall not exceed 12,000 acres. After the Corporation successfully poofss/1,2,000 surface acres for the Corporation Project, the Corporation may thereafter pool additional`surface acres on the condition that the Royalty Payment for the initial 9000 acres isotdiminished or diluted by the addition of pooled acreage in excess of 12,000 surface acres. ,Jhe purpose of the pooling the initial 12,000 surface acres w)ll4be to obtaim sufficient water rights to carry out the Corporation Project, to meet regulatory',equirexnents, such as the spacing of wells and groundwater production limits based�°ori"tract •size, and to allow for the Corporation to use the Leased Groundwater Rights witlrdrilling wells or constructing other facilities on each landowner's property that is a partmfhe Pooled Surface Acreage. The purpose of increasing the Poole `,Surface"Acreage above 12,000 acre feet is to increase the water supply of the Corp° ationbeyond-1'0,000 acre feet. Pooling of the Property and the Leased Groundwater\Ri htstmay affect the payments to the Landowner as described in Section 4.B.@) and (4)\abloce"The Leased Groundwater Rights granted by this Agreement, when comined wits the leased groundwater rights from other real property as described4bove shall be referr• ed to as the "Pooled Groundwater Rights". Corporation shall(execise its right to_poollthe Leased Groundwater Rights under this Agreement with other l'e sed'gro�nndwgter rights by providing Landowner Notice within 10 days after filing"a application for groundwater permit with the District. The Corporation--sbalLinform,the*�Landowner of the other owners of real property that will have)ooled�'`Grondwater Nyights and identify both the amount of the Leased Grounddvater Right under this Agreement which are to be pooled, and the location and amount of the oth r leased groundwater rights to be pooled as Pooled Groundwater N. Rig14she Corporation may increase or decrease the size of the Pooled Groundwater Rights\establish )l ereunder without the prior written consent of Landowner, so long as the Pooled-Surface Acreage does not exceed 12,000 acres or if Corporation demonstrates to the Landown r that the Pooled Surface Acreage that exceeds 12,000 acres will not dilute the Landowner's Royalty Payment. If these conditions are not met the Corporation shall have no right to pool additional real property. The above notwithstanding, in no event will the Leased Groundwater Right be deemed pooled with any other groundwater unless Corporation has provided a written Notice of pooling with that groundwater, as set out above. In the event all or a portion of the Leased Groundwater Rights conferred under this Agreement are pooled as described above, the Pooled Groundwater Rights withdrawn shall be deemed withdrawn from the Property in that proportion which is Initials: CVLGC: Landowner: Page 8 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION equal to the number of acre feet of Lease Groundwater Rights relating to the Property which has been included in the Pooled Groundwater Right under the terms of this Agreement divided by the total number of acre feet of Pooled Groundwater Rights. The production of groundwater so allocated shall be considered for all purposes hereunder to be the production of groundwater from the Property in the same manner as though produced from the Property. B. Inability to Pool. If the Corporation is unable to pool the Leased Groundwater Rights with groundwater rights from other tracts in sufficient quantities to carry out the Corporation Project, the Corporation may terminate this-Agreement by (i) providing written notice to the Landowner, (ii) paying all Lease Payments owed for the portion of the Term prior to termination, and (iii) removing all C�orporation Facilities (as defined in Section 12A), if any, from the Property. 6. Grant of Access to Property by Landowner to' erform Inve tigattons for the Siting of Pipeline Easements, Well Sites and other/F/acihties. Landoen% grants to Corporation reasonable rights to access the Property/to/allow tie Corporation to perform investigations or studies regarding the Leased Grom1\ Ater a l/or to determine the most appropriate locations for water pipelines, well sites, monitoring wells, and other facilities necessary to carry out the Corporation Project. Such studies may include the performance of surveys, pump tests on Landowner's Existin Wells, and other\ ell tests on the Property. The Corporation shall provide Landowner with(,p o-Notice of its intent to access the Property to perform these investigations or studies. Th\ Parties shalt-schedule a time to perform the investigation at a time that is mutually cone ie t ,In performing these investigations, the Corporation shall use reasonable care to ensure that the Property, Landowner's fences, cattle guards, cattle,hunting and fishing-fights are not harmed or interfered with. 7. Separate Agreement(s) Required f r Pipeline Easements and Well Sites on the Property. Upon the com letion of the`investigation or studies described in Section 6 the Corporation will present the Landowner with a report and feasibility study performed by a professional engineer hired by the Corporation that identifies the proposed location of well sites, pipeline easeme ts, facilities locations, and permanent easements for monitoring wells to carry out the Corporation P jectIf the report •identifies the Property as a desired location for well sites, piperlin easements, facilities locations, and permanent easements for monitoring wells, the Landowner agrees that it will enter into a separate agreement with the Corporation that will allow the Corporation to acquire rights under which the Corporation can drill wells and construct pipelines and facilities oCthe Property to facilitate use of the Leased Groundwater Rights. Such agreements will a e U e'forms of the agreements attached to this Agreement as Exhibits _, and . These agreements will provide for payments based on fair market value (or as otherwise agreed by the Parties) to purchase land for well sites and/or for pipeline easement fees, among other conditions, as applicable. If such rights cannot be reasonably obtained from the Landowner (or owners of other pooled tracts), the Corporation may terminate this Agreement by (i) providing written notice to the Landowner, (ii) paying all Lease Payments owed for the portion of the Term prior to termination, and (iii) removing all Corporate Facilities (as defined in Section 12A), if any, from the Property. Initials: CVLGC: Landowner: Page 9 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION 8. Representations and Warranties of the Landowner. The Landowner represents, warrants and covenants to the Corporation as follows: A. Ownership. As of the Effective Date, the Landowner is the owner of the Property and the Leased Groundwater Rights, and there has been no previous transfer of any interest in the Leased Groundwater Rights, except with respect to lienholders from which consents and subordinations have been obtained as of the execution of this Agreement. B. Authorization and Validity of Agreement. The Landowner has obtained all approvals and authorizations needed for the execution and delivery/of this Agreement, and the Landowner has the full right, power, legal capacity and uthority to execute, deliver and perform this Agreement, and upon execution �d jdeli�erry, this Agreement constitutes the valid and legally binding obligation of the Landowner,, en_orceable against the Landowner in accordance with its terms. //2 \ C. Litigation and Claims. As of the Effective Date, there are no judgments, court orders or injunctions which may affect the Property the Leased Groundwater Rights or the Landowner's performance of this�Agreement, and there is no legal or administrative proceeding pending or threatened against relating to the Landowner, the Property or the Leased Groundwater Rights that may ady rsely affect the Property or the Leased Groundwater Rights or the Land'ownerr''s performance of this Agreement. The Landowner will notify the Corporatio immnediately`of any such actions which arise after the Effective Date. \27----7 D. Disclosure. All representations of the Landowner in this Agreement are true and correct. /7'H—) E. Provided thisAreement has not been rightfully terminated by either of the Parties, no person\shal/have the✓.has to develop, use and/or produce the Lease Groundwater Rights from tie Property other than the Corporation in accordance with the terms of this Agreement'and Corporation shall have the exclusive use of the Corporation Facilites;,as-defined\in Section')nj 12.A below. In addition, Landowner shall not own any partofthe Corporation Facilities. All such ownership and other rights to the Corporation Facilities shall belongo Corporation. � j 9. Representations and Warranties of the Corporation. The Corporation represents, warranth,5d/co/venants d4ovenants to the Landowner as follows: Axistence and Good Standing. The Corporation is duly organized and validly existing under the laws of the State of Texas, and has the power and authority to own interests in real property and to develop the Corporation Project. B. Authorization and Validity of Agreement. The Corporation has obtained all approvals and authorizations needed for the execution and delivery of this Agreement, and the Corporation has the full right, power, legal capacity and authority to execute, deliver and perform this Agreement, and upon execution and delivery, this Agreement constitutes the valid and legally binding obligation of the Corporation, enforceable against the Corporation in accordance with its terms. Initials: CVLGC: Landowner: Page 10 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION C. Litigation and Claims. As of the Effective Date, there are no judgments, court orders or injunctions which may affect the Corporation's performance of this Agreement, and there is no legal or administrative proceeding pending or threatened against or relating to the Corporation that may adversely affect the Corporation's performance of this Agreement. The Corporation will notify the Landowner immediately of any such actions which arise after the Effective Date. D. Disclosure. All representations of the Corporation in this Agreement are true and correct. 10. Mitigation. A. Existing Wells. The location of each Existing Well in u e'b .the Landowner as of the Effective Date is set out on the attached Exhibit B. K,,/\\\\ B. Mitigation Remedies. If the Corporation's production of grounclw .ter from the Pooled Surface Acreage lowers the water table to a 1 yel which causes the\Landowner to be unable to withdraw groundwater from a Carr(iWilcoisting Well that has been registered with the District, the Corporation agrees tta 't ps to mitigate its impact on such well during the Term of this Agreement by, at the Corporation's sole option, (i) reworking, lowering of pumps or re-drilling the Eating Well; or (ii) drilling a replacement groundwater well into a different groundwater\rmation, such as the Queens City formation; \‘, , C. Landowner Cooperation. The Ilandow er agree to reasonably cooperate with the Corporation to allow the Corporation to carry out the mitigation efforts. D. Separate AgreementAf a separate m tigation agreement is required by the District 1 or another regulato/ uthorit',/the Parties agree to reasonably cooperate with each other in reviewing any termeggpiired-b_y t'District or other authority, and in developing and executing such agreem.en . 11. po eek t oii" gainst Lins. Corporation will timely pay all valid charges for materials, labo5 and q ipment furnished in connection with the Corporation Project and will promptly/dizc$arge any lin against the Property imposed to secure any obligation of the Corporation or its contractorsI or subcontractors. Landowner will promptly discharge any lien asserted aga st�the Lease/Groundwater to secure any obligation of the Landowner or its contractors or subcontractors. 12. Damage or Condemnation. A. Damage or Condemnation of Corporation Facilities. If the Corporation's continued operation of the facilities used for production of groundwater from the Property, easements, leased areas, wells sites, or Leased Groundwater Rights (the "Corporation Facilities") is affected by fire, storm, flooding or other casualty, or by an act of condemnation (or a transfer under threat of condemnation), the Corporation will give written notice to the Landowner as soon as reasonably possible. Within 90 days after the damage occurs or the condemnation (or transfer) is final, the Corporation will determine in its discretion if the use of the Corporation Facilities can continue or, after Initials: CVLGC: Landowner: Page 11 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION repair or restructuring, resume to the Corporation's satisfaction, and the Corporation will notify the Landowner of this determination. If the Corporation determines the use of the Corporation Facilities can be continued or resumed after repair or restructuring, this Agreement will continue in full force and effect, and the Corporation will diligently proceed to perform any needed repairs or restructuring. If the Corporation determines the use of the Corporation Facilities could not be continued or resumed after repair or restructuring, the Corporation may terminate this Agreement by (i) providing written notice to the Landowner, (ii)paying all Lease Payments owed for the portion of the Term prior to termination, and(iii)removing all Corporate Facilities, if any, from the Property. B. Condemnation of Landowner's Interests in the Prop,eIf the Landowner receives notice that any portion of the Property is proposed to be\taken by an act of condemnation, the Landowner will give written notice to the/Corporation as soon as / \ reasonably possible, and the Landowner will notify the condemning authority of the Corporation's interests in the Leased Groundwater Ri is under thiis`AAgreement. The Landowner will be entitled to all proceeds of a condemnation award o"rrp,aiment other than the value of or damages to the Corporation's°interest in the Leased Groundwater Rights under this Agreement. 13. Default and Remedies. A. In General. If a Pafa'ils to comply w'th any provision of this Agreement, and the failure continues\fo a perif-30.days after receiving notice of the failure from the other Party, then the other Party/May-pursue all remedies available to it at law or in equity, including a claim fo' damags, or a claim for specific performance, subject to limitations on remedies contai ed in this Agreement. B. Defaulf •n ments. If th C, oration fails to make a Lease Payment by the due date, the Landowner/may provid,�written notice of default to the Corporation. In the event the Corpo ion fails to make the payment within 30 days of receipt of the notice, the Landowner\maymmediately terminate this Agreement by written notice to the Corporati no and pursue other available remedies. If a bona fide disagreement exists between the Parties as toth,'amount of any payment, the Corporation will pay any amount� not in disp�i te,Viand the Corporation's failure to pay the amount in dispute will not • co stitute a default)pending resolution of the dispute (so long as the dispute does not remain unresolved more than an additional 21 days). andowner's Right to Terminate. The Landowner may terminate this Agreement`fova default by the Corporation with respect to non-payment of amounts due under this Agreement as described in Section 13B or by mutual agreement with the Corporation. Upon such termination, the Corporation will at its own expense remove the Corporate Facilities, if any, on the Property at Landowner's request. D. Corporation's Right to Terminate. The Corporation may terminate this Agreement as specified in Sections 3, OB, 6, or 12A or by mutual agreement with the Landowner. Termination by the Corporation will not affect any other obligation that it accrues prior to the termination date. Upon such termination, the Corporation will at its Initials: CVLGC: Landowner: Page 12 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION own expense remove the Corporate Facilities, if any, on the Property at Landowner's request. E. Time for Cure of Default. If a default (other than a default in Lease Payments described in Section 13B above) cannot reasonably be cured within the 30 day period, the non-defaulting Party may not pursue remedies (other than mediation under Section 14) if the defaulting Party is reasonably and diligently attempting to cure the default, timely reports its efforts to the other Party in writing, and continues to do so until the default is cured. F. No Incidental, Consequential or Exemplary Damageeither Party will be liable to the other Party for incidental, consequential or exe,glary damages for any breach of this Agreement. // 14. Dispute Resolution. A. In the event a dispute bet en thb\Parties under this Agreement cannot be resolved by negotiation, a Party'2we ay request that t�e)dispute be submitted to mediation by written notice to the other Party. The other Party\will accept or reject the request within 10 days after receiving It the other Party accepts the request, the Parties agree to promptly select a mediator,�chedu�e ja/mediation meeting to occur within a reasonable time, attend the mediation meet hg,• d share equally the costs of the mediator. B. The use of any met off `o alternativ, dispute resolution will not be construed by either Party in a manner that would,adversely affect the other's rights in court. Nothing in this section will\ preyenrone parry from resorting to judicial proceedings if good faith efforts to resolve a dispute have been unsuccessful or if injunctive relief is necessary prevent s� rious and irreparable harm to one party or third parties. (///</- ) ,L.,,,,,, 15. Execution of Reltease�upon`Termination. Within 60 days after the date of any termination of this Agreement, the Corporation will execute and deliver to the Landowner a release of this Agreeme�.tt, as welli'as a release for all other agreements that the Parties have executed in acc dance 'ith Sectio 7. If the Corporation is terminating this Agreement, the Corporati n, iay deliver the .elease(effective as of the date of termination) with the notice of termination.cs\ 16. Assiiggnmeen . A. Assignment by the Corporation. The Corporation may assign its interests under this Agement. The Corporation will provide written notice to the Landowner of any such assignment. If the Corporation assigns this Agreement, and the assignee assumes all rights and obligations of the Corporation under this Agreement, the Corporation will have no further obligation under this Agreement. B. Assignment by the Landowner. The Landowner may assign this Agreement to any person or entity to which the Landowner conveys title to the Property; the Landowner will provide written notice to the Corporation of any such assignment and conveyance. The Landowner may otherwise assign their interests under this Agreement Initials: CVLGC: Landowner: Page 13 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION only with the prior written approval of the Corporation, which will not be unreasonably withheld. C. Binding Effect on Successors and Assigns. This Agreement will be binding upon and inure to the benefit of the Parties and their respective heirs, executors, administrators, successors, and assigns. 17. Indemnity; Defense of Claims. A. Indemnity Obligation. To the full extent authorized by law, each Party agrees to hold harmless, indemnify and defend the other Party from and against any and all losses resulting from third-party cl actions, suits, proceedings, costs, expenses, damages, and liabilities(including reasonable attorney's fees and litigation costs, to the extent caused the intentional or negligent acts or omissions of the indemnifying Party, or its officers, employe or agents in connection with this Agreement. /7/.) B. Notice. Each indemnified Party(agees tAve prompt notice to the indemnifying Party upon discovery of facts gking,r f,to an indemnity obligation, including receipt of any demand, assertion, claim a tion or proceeding from any third party. The notice will be provided in time to permit the\tndemnifying Party to investigate and defend against the claim and make a timely response"a t will include a request for indemnification. \ '''' "- -''''-"". C. Right to Contest and Df ndf)he emnifying Party will be entitled to contest and defend against any claim for•v hich indemnity is requested by the indemnified Party. The indemnified/Pa-Ay—Will have t eight, but not the obligation, to participate in contesting and defending against the clai , and to be represented by counsel of its own .� l •I choosing at its own.cost andxpense. Theindemnifying Party will have full authority to determine all action o be tallcen-wit r se pect to a claim, as long as the indemnified Party is not required to undertake7 obligation that involves any material expense. D� Coop�ati The indemnified Party agrees to cooperate with the indemnifying Party and its counsel in contesting and defending against any claim, in asserting a counterc.ai�n against the person asserting the claim, and in asserting a cross- clai iagainst any perslon. The indemnifying Party will reimburse the indemnified Party for reasonable expenses incurred by the indemnified Party. The indemnifying Party will cooperatewththe'indemnified Party and its counsel in contesting and defending against any claim\.` ,, 18. Attorney's Fees. If any action at law or in equity is brought to enforce or interpret a provision of this Agreement, the prevailing Party will be entitled to recover from the other Party reasonable attorney's fees and litigation costs. • ) 19. Force Majeure.If a Party's performance of an obligation under this Agreement is prevented or delayed by reason of any force maj eure event, including but not limited to an act of God, flood, storm, earthquake, strike, riot, governmental regulation, fire or other casualty event, or any other event or condition beyond the control of the Party, the other Party agrees to a reasonable extension of time for the performance of the obligation. The Party having the Initials: CVLGC: Landowner: Page 14 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION obligation will notify the other Party of the force maj cure event as soon as reasonably possible, and will provide an estimate of the extension of time that will be needed for the performance of the obligation. This Section 19, however, will not alter the Corporation's obligations under Section 12 (Damage or Condemnation of Corporation Facilities): 20. Severability. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement. 21. Waiver. The failure by a Party to enforce any provision of this Agreement on one or more occasions will not be deemed a waiver by that Party of the right in the)future to demand strict compliance and performance of any provision of this Agreement. The Parties agree that any right or remedy for any default under this Agreement, except the dight f the Landowner to receive Lease Payments (which will not be subject to waiver), will be/deemed to be conclusively waived unless asserted in a proper proceeding at law or in equity filleed,within threeyears after the occurrence of the default. 22. Addresses and Notice. Unless another metod f notice is provided for under this Agreement for a specific matter, all notices will( e(delivere to a Party in person, by electronic means that are confirmed, or by certified mail base on the information set forth below. If a Party changes any of this information for notice purposes, the Party will provide written notice of the change to the other Party within five days o ilk change. If to the Landowner: [name] [address] Telephone: Facsimile: Email: If to the Corporation: [name] Cibolo Vally"Loca1 Government.ent Corporation [address] Telephone: l t Facsimile: Ema'l: 23. Nb Thi d arty Beneficiaries; No Joint Venture. This Agreement will not be construed to create any rights in any third parties. The Parties are independent contractors with respect to their activities under this Agreement. This Agreement will not be construed as creating a partnership or a joint venture between the Parties. 24. Governing Law and Venue. This Agreement shall be deemed to be performed in Wilson County, Texas. All amounts due under this Agreement, including but not limited to payments due under this Agreement or damages for the breach of this Agreement, shall be paid and be due in Wilson County, Texas. This agreement will be governed by and construed in accordance with the laws of the State of Texas. Exclusive venue for any legal dispute arising Initials: CVLGC: Landowner: Page 15 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION under this agreement will be in Wilson County, Texas. The term "will" is intended to be mandatory when used in this Agreement. 25. Weekends and Holidays. If the last day of a time period or the last day for performance of an obligation under this Agreement falls on a weekend or legal holiday, the last day for period time period or performance will extend to the next day that is not a weekend or legal holiday. 26. Captions and Headings. The captions and headings in this Agreement are for reference purposes only and do not affect the meaning or interpretation of this,Agreement. 27. Memorandum of Agreement. The Memorandum of Agreement attached to this Agreement as Exhibit C, and executed by the Parties at the same time Is this Agreement, will be recorded in the official public records at the Corporation's expense(his eement will not be recorded. /2 \ 28. Entire Agreement; Amendments. This Agreement, including\exhibits and referenced attachments, constitutes the entire agreement,between tl}e'Parties on this subject and supersedes all other proposals, presentations, representai in s, and/communications, whether oral or written, between the Parties. This Agreement may be amended only by a written document that is duly approved and executed by all of the Parties. 29. Metering. Corporation shall install at its-sole cost nd expense a Meter for each Groundwater Well. The Meters shall record the tot 1 prod ction of Groundwater produced and made available at the wellhead of each Well\ lCorporation-Mall read the Meters on a regular basis. If Landowner makes a written request to Corporation to calibrate the Meters, Corporation shall give Landowner Notice of the time when(any such calibration is to be made and, if Landowner or a representative oof anlowner is riot present at the time set, Corporation may proceed with the calibration<and adjilstmment.,in thee/bsence of Landowner or any representative of Landowner. In the event.a Met ris-in-disrepjir, Corporation will install a new Meter or repair an existing Meter within a reasonable time not to exceed ninety(90) days. The accuracy ,Meter\sh✓ll be determined by application of an orifice plate port permanently/installed on`\the\discharge line from the Well, which orifice plate port has been calibrated/byrother testing procedures promulgated by ASTM or other technical oversight body applicabletohe specific measuring device in question, under the supervision of a registered professional`engi'neer r DRAFT—NOT FOR PUBLIC DISTRIBUTION (1) correcting the error if the percentage of the error is ascertainable by calibration tests or mathematical calculation; or (2) estimating the quantity of delivery by deliveries during the preceding ' periods under similar conditions when the Meter or Meters were registering accurately. All books and records pertaining to the measurement of Groundwater withdrawals under this Agreement shall be open and available for copying, inspection, and audit by Landowner, their successors and assigns. 30. Environmental Site Assessment. Prior to the opera 'on of the Wells, Corporation may prepare for the benefit of Corporation and Landow; at Corporation's cost and expense, an Environmental Site Assessment to establish baseli e envir: ental conditions of the Property and well sites. 31. Exclusive Right. Regardless of any other provision in t 's , greement, Landowner will not sell or withdraw or cause to be sold or,rrwithdraw, for use, sa e, transfer or lease to a person or other legal entity other than Corpora o`n, an 74the groundwater within the Carrizo or Wilcox formations appurtenant to or relating to he roerty. 32. Most-Favored Nations Treatment. If Corporation,,enters into any agreements with other persons or other entities to carryout he-Co oration''Rtglect that grant higher rates, fees, or payments for leased groundwater or, r ore-favolible terms than those provided in this Agreement under Sections 4 and 5 then Complany will'increase Landowner's future Royalty Payments and apply such other terms commensurately,. eIN WITNESS WHE Off;t-xe Parties hret�have caused this Agreement to be executed, in multiple counterparts, ea6/of w idh will co stitute an original, to be effective as of the Effective Date. cs\ , ' Landowner: c/7----- Acknowledgments This\instrument was acknowledged before me on , 20 by [insert Landowner name known personally to me to be the person who subscribed this instrument. \-\\:77 Notary Public, State of Texas Initials: CVLGC: Landowner: Page 17 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION Cibolo Valley Local Government Corporation By: (name) (title) Acknowledgment This instrument was acknowledged before me on , 20_by [insert name and title] known personally to me to be the person who subscribed -is instrument, on behalf of the Cibolo Valley Local Government Corporation. Notary Public, State otTeixas ' \ \/ / 2 'ti Initials: CVLGC: Landowner: Page 18 Groundwater Lease Agreement DRAFT—NOT FOR PUBLIC DISTRIBUTION EXHIBIT A Legal Description of the P oerty ,..,A. 40, , ^ < / �z / �y »w : 4 y. ,1' *mss �f . � \ 4:,1,...., 2 { is \ & °f% ''',"';',.r < Initials: Landowner: Pg 19 Groundwater Lease Agreemet DRAFT-NOT FOR PUBLIC DISTRIBUTION £X/II B Location of Existing Water Wells - »'\ « > ,' « „ .�y y V., � ` : ;#Y1 .6 --PA. ,itit /^ - . \ y � �� . - / ^©?2 m \ ` . \ � \ / /) l'4-11-t-', « - 6. ° , :0:, Initials: CVLGC: Lnown= Page 20 Groundwater L6cw7e mei DRAFT—NOT FOR PUBLIC DISTRIBUTION £\#II C Form of Memorandum of Agreement Memorandum of Groundwater Lease Agremef 4044. \ « !» : \y . f. \ z � Initials: C#£GC: Landowner: P ge21 Groundwater Lease Agreement