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Item 7B Attachment DM E M O R A N D U M April 15, 2008 To: Shana Yelverton, City Manager From: Robert H. Price, P.E., Director of Public Works Subject: Proposed Road Damage Remediation Agreement Action Requested: Provide comments on Road Damage Remediation Agreement, if any. Background Information: The current ordinance regulating Oil and Gas Drilling in the City of Southlake was approved on second reading on October 5, 2004. A Master Roadway Repair Agreement was required to be submitted in conjunction with the application for a specific use permit. As a result of the review of city’s current drilling ordinance, a review of the Master Road Repair Agreement was in order. The City contracted with Kimley-Horn and Associates, Inc. (KHA) to study anticipated damages that may be expected to occur to roadways within the City of Southlake as a result of heavy trucks associated with gas well drilling and production activities. The goal of this study was to determine if damages can be expected on the various pavement structures within the City and if damages are anticipated, what will be the cost to remediate damages. Based upon the aforementioned study and current construction cost estimates, a Road Damage fee will be calculated based upon a recommended cost per lane mile to account for anticipated road damage resulting from the use of city streets designated on the proposed truck route identified by the applicant. Replacement costs for asphalt and/or concrete road segments were determined from current fair market value cost per square yard of road surface material, including installation and labor. The City’s investigation and determination of any and all aspects of the above referenced methodologies constitute generally accepted practices of road replacement, repair, and maintenance professionals undertaking similar project evaluations at the same time, and in the same geographical area. Financial Considerations: The Road Damage Remediation agreement requires that a road repair fee based upon a designated truck route be paid to the city in advance of the release of a drilling permit. The following table conveys road damage fees that will be assessed for gas and oil well drilling and production activities. The assessment of damages is based on the analysis of pavement structures using FPS19W pavement design software and back checking the analysis with the Texas Triaxial Method. The resultant of the pavement structure analysis determined that any flexible pavement structure (combination of asphalt concrete and flexible base) less than 10.5 inches in total thickness could experience permanent pavement deformation under the anticipated wheel loads associated with the drilling and production of a gas/oil well. The assessment fees for flexible pavements 7.5 inches or less of total thickness are equal to the replacement costs of the roadway section. The assessment fees for flexible pavements 8 inches to 9 inches of total thickness are the cost of correcting pavement deformation with an asphalt concrete pavement overlay to a 10.5 inch total pavement thickness. Assessment fees for flexible pavements 9.5 inches of total pavement thickness or greater are equal to a 1.0 inch asphalt concrete pavement overlay. It was determined from a pavement analysis that concrete pavements 6 inches or greater are adequate for the anticipated truck loadings. The assessment fees for concrete pavements are for routine full depth spot repairs of concrete pavements that are anticipated to be the direct result of gas/oil truck loadings. - Per Lane Mile Roadway Section Fee Assessment 2-Course Surface Treatment + 6” to 7” Flex Base$166,000 7” Flexible Pavement Structure (Total Inches ACP + Flex Base) $173,000 7.5” Flexible Pavement Structure (Total Inches ACP + Flex $188,000 Base) 8” Flexible Pavement Structure (Total Inches ACP + Flex Base) $115,000 8.5” Flexible Pavement Structure (Total Inches ACP + Flex $100,000 Base) 9” Flexible Pavement Structure (Total Inches ACP + Flex Base) $85,000 9.5” or More Flexible Pavement Structure (Total Inches ACP + $70,000 Flex Base) Concrete Pavement$73,000 Citizen Input/ Board Review: Oil and Gas Task Force Legal Review: This document has been reviewed by the City Attorney Alternatives: The Council may choose to approve, deny or edit this proposed document. Supporting Documents: Revised Road Damage Remediation Agreement Kimley-Horn Road Damage Assessment Study (4/1/08) Staff Recommendation: Robert H. Price, P.E., Director of Public Works Gordon J. Mayer, Jr., P.E., City Engineer Road Damage Remediation Agreement STATE OF TEXAS § COUNTY OF TARRANT § This Road Damage Remediation Agreement , (hereafter the “Agreement”), is made and entered into on this the ______ day of __________________, 20 , by and between the City of Southlake, Texas (hereafter the “City”), a municipal corporation and a home-rule municipality of the State of Texas, located within Tarrant & Denton Counties, Texas; and ____________________________________ (hereafter the “Operator;” the term “Operator” as used herein shall collectively include all agents, servants, employees, contractors, patrons, guests, licensees, invitees and other representatives of the Operator) for the payment of fees for damage remediation of certain streets and/or roadways within the City of Southlake, Texas, as more fully described herein. WHEREAS , Operator is in the business of drilling gas and/or oil wells and, in connection therewith, shall be engaged in drilling and production activities on property identified on Operator’s gas well permit, which abuts or is adjacent to, and/or is accessed by roadways within the City of Southlake, and WHEREAS ,the Operator’s gas well permit from the City of Southlake, dated ________20___, is made a part of this Agreement by reference; and WHEREAS , the nature of heavy vehicular traffic during natural gas well development (“drilling”), post-production well stimulation (“fracing”) and re-working activities will exceed the normal and anticipated use of the public roadways within the City’s corporate limits; and WHEREAS , according to the study conducted by Kimley-Horn and Associates, Inc., dated April 1, 2008 ( hereafter the “Study”) the life expectancy of a roadway decreases with heavy vehicular traffic traveling upon it, and heavy equipment loads produce greater amounts of road distress according to the Study; and WHEREAS, distress which may either be structural or functional, which in turn, increases overall maintenance oversight, repair, and replacement costs to the City respecting the roadways, in connection with the Operator’s gas and/or oil well drilling and production activities; and WHEREAS, structural distress is recognized as the pavement’s ability to carry traffic and/or cracking or deterioration of the pavement section; and WHEREAS , functional distress is recognized as the ride quality and safety of the pavement; and WHEREAS , use of the roadways by the Operator for the purpose of performing the activities described hereinabove causes distress to the roadways as a result of the frequency of their specific operations and such distress may be immediate or it may be gradual and delayed, and also will exceed the design criteria of said roadways, thus causing greater than ordinary wear and tear and damaging of the roadways; and WHEREAS , the City and Operator, for the mutual consideration hereinafter stated, desire to enter into this Agreement for Operator to compensate City for the maintenance and damage remediation of such roadways for the duration of the term of this Agreement in consideration for Operator’s use of such roadways for the purpose of the activities described hereinabove. NOW THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows: ARTICLE 1. RECITALS The foregoing recitals are understood and agreed upon by the parties and are incorporated into the terms of this Agreement. ARTICLE 2. DAMAGE REMEDIATION OBLIGATION 1.Fee : City and Operator understand and agree that use by Operator, its contractors, subcontractors, employees and agents (all hereafter referred to as “Operator”) of roadways that abut and lead to the property for which a Well Permit has been issued to Operator, will decrease the life expectancy of such roadways. Operator and City agree that it is and will continue to be impracticable and extremely difficult to determine the actual amount of such damage. Therefore, City and Operator hereby agree that Operator shall pay to City a road damage remediation fee based upon the formula set forth in Exhibit “A” to this Agreement, a copy of which is attached hereto and incorporated herein. Both City and Operator agree that the amount assessed pursuant to the formula set forth herein is the minimum value of the costs and actual damage and decreased life expectancy of roadways caused by the normal use of the roadways by Operator. Such sum of money shall be paid by Operator to the City prior to the commencement of any activity under the Well Permit. It is expressly understood and agreed that such formula and fee are not to be considered a penalty, nor a tax, but shall be deemed taken and treated as a fee that is roughly proportionate and necessary for City to repair and maintain its roadways based upon normal usage by Operator acting in the ordinary course of its business. 2.Truck Route: An exhibit identifying the proposed truck shall be submitted as part of the well drilling permit application. The road damage remediation fee identified in Exhibit A of this agreement will be based on the truck route submitted and the fees established by City Council. Operator shall be liable for and shall pay additional road damage assessments should Operator deviate from the truck route that is designated in the Well Permit. 3.Timely Payment: In the event that Operator does not timely and adequately make payment under this Agreement upon written demand of the City, the City has the authority to prohibit further use of its roadways by Operator’s vehicles, to suspend any and all Well Permits issued to Operator, and to make a claim on Operator’s bond or other security instrument. ARTICLE 3. ROAD DAMAGE REMEDIATION FEE 1.Methodology: The Road Damage Remediation Fee shall be calculated using the method outlined in Exhibit “A.” Replacement costs for asphalt and/or concrete road segments shall be determined from current fair market value cost per square yard of road surface material, including installation and labor. The City shall provide as an attachment to this Agreement, a copy of the calculations directly related to the methodology used to determine the fee paid by Operator; such attachment is identified as Exhibit “A”, a copy of which is attached hereto and incorporated herein. The City’s investigation and determination of any and all aspects of the above referenced methodologies constitute generally accepted practices of road replacement, repair, and maintenance professionals undertaking similar project evaluations at the same time, and in the same geographical area. The City observes the same degree of care and skill generally exercised by professionals under similar circumstances and conditions. 2. Road Damage Remediation Fee Calculation: The Road Damage Remediation Fee, hereafter stated, and in compliance with all applicable methodologies hereinabove enumerated, shall be an amount as determined by the Road Damage Remediation Calculation, Exhibit “A”. RoadwayPer Lane Mile TypeExisting Roadway Section Fee Assessment I2-Course Surface Treatment plus 6” – 7” Flex Base $ 166,000 II7” Flexible Pavement Structure (Total ACP + Flex Base) $ 173,000 III7.5” Flexible Pavement Structure (Total ACP + Flex Base) $ 188,000 IV8” Flexible Pavement Structure (Total ACP + Flex Base) $ 115,000 V8.5” Flexible Pavement Structure (Total ACP + Flex Base) $ 100,000 VI9” Flexible Pavement Structure (Total ACP + Flex Base) $ 85,000 VII9.5” or more Flexible Pavement Structure (Total ACP + Flex $ 70,000 Base) VIIIConcrete Pavement$ 73,000 3.Payment Due: The Road Damage Remediation Fee is required to be paid in full at the time of issuance of a Well Permit by the City. Such permit application shall be considered administratively incomplete until this Agreement is executed, Road Damage Remediation Fee payment received, and both are on file with the City. ARTICLE 4. TERM OF AGREEMENT This Agreement shall commence upon the date indicated above and shall continue in full force and effect until Operator has completed and/or permanently discontinued the activities upon the roadways, as described hereinabove. ARTICLE 5. INSURANCE AND INDEMNITY 1.Insurance: The Operator shall provide or cause to be provided the insurance and other security that meet the requirements of Section 9.5-259 of the Code of Ordinances of the City of Southlake, Texas, as amended. Such insurance shall be maintained in effect at all times when the Operator is engaged in exploration, development, and production of gas, oil or other hydrocarbons in the City of Southlake. 2. Indemnification: Operator hereby agrees to indemnify, defend and save harmless the City, its departments, agents, officers, servants and employees from all suits, actions or claims of any character name and description brought for or on account of any injuries or damages received as sustained by any person, persons or property, including personal injury or death, on account of the operations of Operator, its agents, employees, contractors, subcontractors or representatives, or on account of any negligent act or fault of Operator, its agents, employees, contractors, subcontractors or representatives in connection with the obligations of Operator under this Agreement; and Operator shall pay any judgment, with costs, and if applicable attorney’s fees which are a part of the judgment, which may be obtained against the City growing out of such injury or damage. IT IS UNDERSTOOD AND AGREED THAT SUCH INDEMNITY IS AN INDEMNITY EXTENDED BY THE OPERATOR TO INDEMNIFY AND PROTECT THE CITY OF SOUTHLAKE AND/OR ITS DEPARTMENTS, AGENTS, OFFICERS, SERVANTS, OR EMPLOYEES FROM THE CONSEQUENCES OF THE NEGLIGENCE OF THE CITY OF SOUTHLAKE, TEXAS AND/OR ITS DEPARTMENTS, AGENTS, OFFICERS, SERVANTS AND EMPLOYEES, WHETHER THAT NEGLIGENCE IS THE SOLE OR A CONTRIBUTING CAUSE OF THE RESULTANT INJURY, DEATH, AND/OR DAMAGEOperator specifically agrees . that road damage in excess of the road damage remediation fee assessment provided for in this Agreement shall be paid from Operator’s security required under Section 9.5-260 of the Code of Ordinances of the City of Southlake, Texas, as amended. ARTICLE 6. INDEPENDENT CONTRACTOR Operator understands and agrees that Operator, its employees, servants, agents, and representatives shall at no time represent themselves to be employees, servants, agents, and/or representatives of the City. The City shall not have any control over the means or methods by which Operator shall perform its obligations hereunder. Operator shall furnish all equipment and materials necessary to perform hereunder and shall at all times be acting as an independent contractor. No action by either party should be construed to create a partnership, joint venture, or other dual enterprise between the parties. ARTICLE 7. GOVERNMENTAL IMMUNITY By entering into this Agreement, the City does not waive, nor shall it be deemed to waive, any immunity or defense that would otherwise be available to it against claims arising by third parties. ARTICLE 8. NO IMPACT FEE Operator agrees that the Road Damage Remediation Fee provided hereunder is not an impact fee under Chapter 395 of the Texas Local Government Code, and expressly agrees that this Road Damage Remediation Fee is not a charge or assessment imposed by a political subdivision against new development in order to generate revenue for funding or recouping the costs of capital improvements or facility expansions necessitated by and attributable to new development. Further, Operator agrees that the Road Damage Remediation Fee provided hereunder will not be credited to any subsequent roadway impact fees if the subject property is subdivided or developed in the future. The Road Damage Remediation Fee shall not be applied to roadways other than those maintained by the City and designated as “transportation routes” as part of the Well Permit application pursuant to section 9.5-256(b)(4) of the Code of Ordinances of the City of Southlake, Texas, as amended. Funds from these fees shall not be expended on public roadways or streets, other than those designated as City-maintained gas well “transportation routes.” ARTICLE 9. FORCE MAJEURE In the event that the performance by either party of any of its obligations or undertakings hereunder shall be interrupted or delayed by any occurrence and not occasioned by the conduct of either party hereto, whether such occurrence be an act of God or the common enemy or the result of war, riot, civil commotion, sovereign conduct, or the act or conduct of any person or persons not party or privy hereto, then such party shall be excused from performance for a period of time as is reasonably necessary after such occurrence to remedy the effects thereof, and each party shall bear the cost of any expense it may incur due to the occurrence. ARTICLE 10. ASSIGNABILITY/CONSENT Except as otherwise provided herein, or except as may be hereafter determined by the parties and added as a written amendment or modification hereto, no party to this Agreement may sell, assign, or transfer its interest in this Agreement, or any of its right, duties, or obligations hereunder, without the prior written consent of the other party. ARTICLE 11. NOTICE Any notice given by one party to the other in connection with this Agreement shall be in writing and shall be by personal delivery; sent by registered mail or certified mail; or by United States Mail, return receipt requested, postage prepaid; to: CITY: City Manager City of Southlake, Texas 1400 Main Street, Suite 400 Southlake, Texas 76092 OPERATOR: Notice shall be deemed to have been received on the date of receipt as shown on the return receipt or other written evidence of receipt. ARTICLE 12. MODIFICATION No waiver, amendment, or modification of this Agreement or of any covenant, condition, limitation herein contained shall be valid unless in writing and duly executed by the party to be charged therewith. No evidence of any waiver or modification shall be offered or received in evidence in any proceeding arising between the parties hereto out of or affecting this Agreement, or the rights or obligations of the parties hereunder, unless such waiver, amendment, or modification is in writing, duly executed by both parties. The parties further agree that the provisions of this Article will not be waived unless as herein set forth. ARTICLE 13. SAVINGS/SEVERABILITY In the event that any one or more of the provisions, terms, phrases or clauses of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect; such invalidity, illegality, or unenforceability shall not affect the other provisions, terms, phrases or clauses of the provisions contained herein and the Agreement shall be construed as if such invalid, illegal, or unenforceable provision, term, phrase, or clause had never been contained in this Agreement. ARTICLE 14. GOVERNING LAW AND VENUE This Agreement shall be construed under and governed by, and in accordance with the laws of the State of Texas, and venue for any action arising under the terms and conditions of this Agreement shall lie in the state courts located in Tarrant County , Texas. ARTICLE 15. ENTIRE AGREEMENT This Agreement and the exhibits and other documents attached hereto and/or referenced herein, constitute the entire agreement among the parties hereto with respect to the subject matter hereof, and supersede any prior understandings or written or oral agreements between the parties with respect to the subject matter of this Agreement. No amendment, modification, cancellation or alteration of the terms of this Agreement shall be binding on any party hereto unless the same is in writing, dated subsequent to the date hereof, and is duly authorized andexecuted by the parties hereto. Notwithstanding the foregoing, this Agreement is cumulative of all applicable City Ordinances, as amended. ARTICLE 16. NON-WAIVER The failure of either party to enforce or insist upon compliance with any of the terms or conditions of this Agreement shall not constitute a general waiver or relinquishment of any such terms or conditions, but the same shall be and remain at all times in full force and effect. ARTICLE 17. CAPTIONS The captions contained in this Agreement are for informational purposes only and shall not in any way affect the substantive terms or conditions of this Agreement. ARTICLE 18. CONSTRUCTION OF AGREEMENT The parties hereto have negotiated the terms of this Agreement and therefore agree that as a negotiated document, this contract shall not be more strictly construed against either party. ARTICLE 19. COUNTERPARTS This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and constitute one and the same instrument. IN WITNESS WHEREOF, the parties do hereby affix their signatures and enter into this Agreement as of the ______ day of _______________ , 20__. “CITY” CITY OF SOUTHLAKE, TEXAS ATTEST: By: Shana Yelverton, City Manager Lori Payne, City Secretary APPROVED AS TO FORM: By: City Attorney “OPERATOR” By: (Name) Title: Name o f Entity: STATE OF TEXAS § § COUNTY OF TARRANT § Before me, the undersigned authority, a Notary Public in and for the State of Texas, on this day personally appeared Shana Yelverton, City Manager of the City of Southlake, Texas, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that the same was the act of the City of Southlake, Texas and that he executed the same as the act of such City of Southlake, Texas for the purposes and consideration therein expressed and in the capacity therein stated. Given under my hand and seal of office this the _____ day of __________________, 20___. [SEAL] ___________________________________ Notary Public in and for the State of Texas STATE OF TEXAS § COUNTY OF __________ § Before me, the undersigned authority, a Notary Public in and for the State of Texas, on this day personally appeared ___________________________________, (title) for ___________________________ (Entity Name of Operator), known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that the same was the act of _________________________________ (Entity Name of Operator) and that he executed the same as the act of such Operator for the purposes and consideration therein expressed and in the capacity therein stated. Given under my hand and seal of office this the ____ day of ______________________, 20___. ___________________________________ [SEAL] Notary Public in and for the State of Texas.