ORDINANCE NO.

ZIA NATURAL GAS COMPANY FRANCHISE AGREEMENT

AN ORDINANCE GRANTING TO ZIA NATURAL GAS COMPANY, A DIVISION OF NATURAL GAS PROCESSING CO., A WYOMING CORPORATION, ITS SUCCESSORS AND ASSIGNS, A FRANCHISE IN THE CITY OF HOBBS, LEA COUNTY, STATE OF NEW MEXICO, AS NOW OR HEREAFTER CONSTITUTED, TO USE THE STREETS, HIGHWAYS, RIGHTS OF WAY AND PUBLIC GROUNDS OF SAID CITY FOR THE PURPOSE OF CONSTRUCTING, OPERATING, AND MAINTAINING A NATURAL GAS DISTRIBUTION SYSTEM, FOR A PERIOD OF FIFTEEN (15) YEARS AND PRESCRIBING TERMS AND CONDITIONS HEREIN CONTAINED.

WHEREAS, THE CITY OF HOBBS HAS PREVIOUSLY GRANTED TO SAID COMPANY A FRANCHISE TO OPERATE SAID COMPANY WITHIN THE CITY AND WISHES TO GRANT ANOTHER FRANCHISE GOVERNING FUTURE OPERATIONS OF GAS FACILITIES IN THE CITY BY SAID COMPANY.

NOW THEREFORE, BE IT ORDAINED BY THE GOVERNING BODY OF THE CITY OF HOBBS, LEA COUNTY, NEW MEXICO, THAT:

Section 1. Definitions used for the purposes of this ordinance are used as follows:

(a)

"City" or "Grantor" means the City of Hobbs, New Mexico;

(b)

"Company" or "Grantee" means Zia Natural Gas Company, a division of Natural Gas Processing Company, a Wyoming Corporation, its successors and assigns;

(c)

"Commission" means the City Commission of the City of Hobbs;

(d)

"Gross Receipts" means all receipts derived by the Company from the sale of gas to residential and commercial customers within the corporate limits of the City. NOTE: Commercial customers as used herein shall not be construed to include any political subdivisions of Federal, State or Local government or any non-profit organization exempt from the gross receipts tax by the State of New Mexico or any industrial customer as defined by the rules and regulations of the New Mexico Public Service Commission.

Section 2. The CITY OF HOBBS (hereinafter referred to as "Grantor"), hereby grants unto ZIA NATURAL GAS COMPANY (hereinafter referred to as "Grantee"), it successors and assigns, the authority, license, power, and privilege to use the streets, highways, and public grounds of said Grantor to construct, operate, and maintain a natural gas distribution system within the CITY OF HOBBS, LEA COUNTY, State of New Mexico, as now or hereafter constituted. Consent of the City Commission for the use by the Grantee of public grounds and places other than streets, highways, and public grounds for its facilities installed after the effective date of this ordinance will be in the form of an easement, with the City as Grantor and the Company as Grantee. This franchise shall apply to any property properly annexed to the City as provided by law, upon such annexation. However, nothing herein shall be construed as giving the Grantee any exclusive privilege. The Grantor reserves the right to grant a similar use of said streets, highways, and public grounds to any person at any time during the period of this franchise.

Section 3. The franchise granted herein shall take effect and be enforced from and after the effective date of this ordinance as established by law, provided Grantee timely files the required "Acceptance" attached herein, and shall continue in force and effect for a period of fifteen (15) years thereafter, or until such time as another franchise is granted and accepted, whichever first occurs. The franchise may be renewed for additional terms and upon such terms and conditions as may be mutually acceptable to Grantor and Grantee.

Section 4. In consideration for the grant of franchise and the right to use public rights-of-way within the City, the Grantee shall pay a cash consideration in an amount equal to two percent (2%) of the "gross receipts," as defined in Section 1(d), of the Company from the sale of gas to consumers within the corporate limits of the City of Hobbs. Payments shall be paid quarterly on or before the last day of April, July, October and January for the entire period this franchise is in force. The payment of this amount shall be in lieu of any and all licenses, taxes, fees, charges or other excises or extrications on the Company or its properties, except for general property taxes and special assessments for local improvements and except any occupation or other tax assessed on Company on other non-utility revenues derived from within the City and not included in the definition of "gross receipts" herein.

Section 5. The conditions of right-of-way occupancy shall be as follows:

(a)

Location: All pipelines and appurtenant equipment for the purpose of laying, maintaining and operating pipelines and appurtenant equipment necessary to deliver and sell gas to persons, firms and corporations, including the general public, for heat, light, and power purposes installed by the Grantor in public rights-of-way shall be located so as to cause minimum interference with other facilities and proper uses of the rights-of-way. All above-ground fixtures shall be so placed as to not interfere with the usual travel on said rights-of-way. Underground facilities may be located under the travelled portion of rights-of way provided the surface of such right-of-way is restored as hereunder provided.

(b)

Restoration: If, while installing, repairing or maintaining its facilities, the Grantee disturbs the surface of any right-of-way or public place, the Grantee shall restore the surface to as good a condition as before the disturbance and maintained to the satisfaction of the City Commission or of any City official to whom such duties have been or may be delegated, for one (1) year from the date the surface of said street, highway, right-of-way, or public ground is broken for such construction or maintenance work, after which time responsibility for the maintenance shall become the duty of the Grantor. Grantee shall perform restoration at its own cost and in accordance with all ordinances now in effect or which may thereafter be passed. Grantee shall obtain all permits that the Grantor may require, which shall be issued at no cost to the Grantee. No such street, highway, right of way, or public ground shall be encumbered for a longer period than shall be necessary to execute the work.

(c)

Specifications and Standards: All natural gas facilities shall be constructed, operated, and maintained in a proper and workmanlike manner according to accepted industry standards and all applicable government rules and regulations. All fixtures installed, repaired, maintained or operated shall be done so in compliance with all applicable City, State, and Federal specifications and standards.

(d)

Relocation of Facilities: In the event that any time during the period of this franchise, the Grantor shall elect to alter or change the grade or location of any publicly owned utility, street, easement, alley or other public grounds for the purpose of sewer or street improvement, the Grantee, upon reasonable notice by the Grantor of the necessity, and after due consideration being given to Grantee's seasonal load requirements, shall remove, relay or relocate, at Grantee's determination, its underground pipelines, manholes and other related fixtures at its own cost and expense.

(e)

Insurance: The Grantee shall keep in force for itself and its officers, agents, and employees, public liability and property insurance containing terms and provisions and in amounts acceptable to the Grantor. Further, such insurance policy or policies shall name the Grantor as an additional insured. Grantee agrees to provide evidence to Grantor, annually and at any other time upon request, that such insurance is in force, provided, however, Grantor shall keep the amounts of such insurance confidential, unless it is directed to do otherwise by final Court Order issued by a Court having authority to issue such an Order.

(f)

Indemnification: The Grantee agrees to hold Grantor harmless from and indemnify them against, any and all liability, claim, or loss occasioned by or resulting from, any and all act(s) of the Grantee, its agents, employees or contractors. The Grantor will notify the Grantee within a reasonable time after any claim, liability or loss is made or submitted to the Grantor from any act of the Grantee, its agents, employees or contractors.

Section 6. If any payment herein provided to be paid is not paid when due after thirty (30) days written notice from Grantor to Grantee of such non-payment (which period of 30 days commences with the day after receipt of such notice), this franchise may be terminated by the Grantor. If the Grantee substantially fails to comply with any of the other provisions of this franchise and fails to cure same or is unable to provide justification for such non-compliance within sixty (60) days after it has received written notice from the Grantor claiming such non-compliance with any of the terms and provisions of this franchise, then Grantor shall give Grantee an additional written notice that this franchise will be terminated effective ninety (90) days after receipt of said notice to Grantee, unless Grantee corrects such non-compliance within said period of time. If the Grantor and Grantee disagree over whether Grantee has substantially failed to comply with any of the other provisions of this franchise or has failed to cure an alleged non-compliance, the franchise shall continue until agreement is reached between the Grantor and Grantee resolving the matter or until the matter has been litigated through the Courts to final judgment. Non-compliance by Grantee of any terms and provisions of this franchise due to force majeure or any cause beyond its control does not constitute reason for termination of this franchise.

Section 7. This franchise may not be transferred within the first five (5) years, and after the first five (5) years, only with the written consent of the Grantor, however, consent will not be unreasonably withheld. The rights of the Grantee hereunder shall not be assignable without first giving the Grantor at least thirty (30) days notice prior to filing with the New Mexico Public Service Commission of the Grantee's intention to assign its franchise rights hereunder. The Grantee shall cause to be furnished to the City Manager information which reflects the financial ability (e.g., financial audit) and the management ability (e.g., experience and resume of proposed management) of its' proposed Assignee to operate a gas utility. The aforesaid thirty (30) days notice shall not commence to run until Grantee has furnished such information. The rights, powers, limitations, duties, and restrictions herein provided for shall inure to and be binding upon the parties hereto and upon their respective successors and assigns.

Section 8. Should any part or portion hereof be declared invalid, void or unconstitutional by any court of competent jurisdiction, such portion shall be deemed separate and distinct from the balance and such declaration shall not affect the validity of the remaining portions hereof.

Section 9. This ordinance shall be published as provided by law and the cost thereof shall be paid by the Grantee upon presentation of an invoice for publication and proof of publication by the Grantor.

Section 10. All ordinances or parts of ordinances in conflict herewith are hereby repealed.

Section 11. The New Mexico Public Service Commission has general and exclusive power and jurisdiction to regulate and supervise Grantee in respect to its rates and services regulations and in respect to its securities, all in accordance with provisions of the New Mexico Public Utility Act (§62-6-4, NMSA 1978). A copy of Grantee's rates and service regulations are on file for public reading at the Office of the City Clerk of the City of Hobbs, Lea County, New Mexico, during normal working hours.

If at any time the New Mexico Public Utility Act (§62-6-4, NMSA 1978) is amended or repealed with the effect of such action being deletion of standards of service as are now in effect, the Grantor reserves the right to establish standards of service not inconsistent with the terms of said statute or regulations promulgated pursuant thereto prior to said amendment or repeal.

Section 12. Grantee shall have ten (10) days to execute its "ACCEPTANCE" herein contained and file the same with the Office of the Clerk of the City of Hobbs, Lea County, New Mexico. In the absence thereof, the Grantee shall be deemed to have rejected the Franchise Ordinance in its entirety.

PASSED, ADOPTED AND APPROVED this 1 ^st day of July, 2013.

	/s/ SAM D. COBB
	Sam Cobb, Mayor
	CITY OF HOBBS
Approved as to Form:
		/s/ MICHAEL H. STONE
Michael H. Stone, City Attorney
		ATTEST:
By: /s/ JAN FLETCHER
Jan Fletcher, City Clerk

 

ACCEPTANCE

WHEREAS, the City Commission of the CITY OF HOBBS, LEA COUNTY, New Mexico, enacted on the ___ day of _______, _____ Ordinance Number _____ entitled:

AN ORDINANCE GRANTING TO ZIA NATURAL GAS COMPANY, A DIVISION OF NATURAL GAS PROCESSING CO., A WYOMING CORPORATION, ITS SUCCESSORS AND ASSIGNS, A FRANCHISE IN THE CITY OF HOBBS, LEA COUNTY, STATE OF NEW MEXICO, AS NOW OR HEREAFTER CONSTITUTED, TO USE THE STREETS, HIGHWAYS, RIGHTS OF WAY AND PUBLIC GROUNDS OF SAID TOWN FOR THE PURPOSE OF CONSTRUCTING, OPERATING, AND MAINTAINING A NATURAL GAS DISTRIBUTION SYSTEM, FOR A PERIOD OF FIFTEEN (15) YEARS, AND PRESCRIBING TERMS AND CONDITIONS HEREIN CONTAINED.

WHEREAS, said ordinance was duly approved by the Mayor and attested by the City Clerk;

NOW THEREFORE, in compliance with the terms of said Ordinance as enacted, approved and attested, Zia Natural Gas Company hereby accepts said Ordinance and files this as a written acceptance with the Clerk of the CITY OF HOBBS.

DATED this ___ day of _______, 2013.

	ZIA NATURAL GAS COMPANY
	___________
			David L. Hamilton, President
Acceptance filed in the Office of the Clerk of the CITY OF HOBBS, LEA COUNTY, New Mexico, this ___ day of _______, 2013.
ATTEST:
By: _____________________________
		Jan Fletcher, City Clerk