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Res 063-87 4/21/1987RESOLUTION NO. 4 .-,17 RESOLUTION APPROVING CONTRACT WITH NORTH CENTRAL OIL CORPORATION AND STRAWN DRILLING COMPANY CONCERNING THE PLUGGING AND ABANDONING OF 12 OIL WELLS OWNED BY THEM IN LAKE ARROWHEAD. WHEREAS, North Central Oil Corporation and Strawn Drilling Company jointly own 12 oil wells located in the waters of Lake Arrowhead, and the City has a contract dated July 7 , 1969 , with them establishing certain rights and responsibilities of the parties; and, WHEREAS, production from these wells has ceased, and they must be plugged, and it is deemed proper that the parties agree as to the procedures for the plugging of the wells, under the terms of the original contract. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WICHITA FALLS, TEXAS, THAT: That certain contract, a copy of which is attached hereto, between the City of Wichita Falls and North Central Oil Corporation and Strawn Drilling Company concerning the plugging and abandoning of said 12 oil wells, is hereby approved, and the City Manager is authorized to execute the same for the City of Wichita Falls. PASSED AND APPROVED this the /j, - day of C 1987 . ut M A Y O R ATTEST: 417)/let City Clerk THE STATE OF TEXAS § COUNTY OF WICHITA § This agreement, made and entered into as of the day of 1987, by and between the City of Wichita Falls, Wichita County, Texas, a Municipal Corporation in the State of Texas, (hereinafter called "CITY") and the firms of North Central Oil Corporation and Strawn Drilling Company (herein- after called "OPERATORS"): WITNESSETH: WHEREAS, North Central Oil Corporation and Strawn Drilling Company jointly own twelve oil wells located in the waters of Lake Arrowhead, a reservoir owned by the City of Wichita Falls; WHEREAS, CITY made and entered into a contract on July 7, 1969, with M. 0. Rife, Jr. , and Strawn Drilling Company regarding these same twelve oil wells in Lake Arrowhead (hereinafter called 'ORIGINAL CONTRACT"); WHEREAS, North Central Oil Corporation acquired the interest of M. 0. Rife, and by an Assignment of Oil and Gas Lease dated July 10, 1970, assumed all obligations imposed upon M. 0. Rife under the said ORIGINAL CONTRACT; WHEREAS, the ORIGINAL CONTRACT establishes a relationship between CITY and OPERATORS in regard to the twelve oil wells in Lake Arrowhead; and, WHEREAS, CITY and OPERATORS desire to agree on certain stipulations re- garding the planned closing of the oil wells; NOW, THEREFORE, it is understood, stipulated and agreed as follows: I. Under the terms of Section XIII of the ORIGINAL CONTRACT, CITY elects to have the production casing remain in place in each well. The total amount of casing which would have been recovered and salvaged by OPERATORS is agreed to be 38,250 linear feet. The salvaged value of said casing is agreed to be $1.30 per linear foot, making the casing in place have a total value of 49,725.00. CITY agrees to pay this amount to OPERATORS when OPERATORS have presented an invoice for the abandoned casing and when the plugging operations for the twelve oil wells have begun. II. OPERATORS will plug the wells in accordance with the laws of the State of Texas and in a professional, workmanlike manner. OPERATORS will specifically request the Texas Railroad Commission to have a Commission representative present at the wells during the plugging operation. CITY will have a techni- cal representative present at the wells during the plugging operation. The CITY representative will not interfere with the plugging operations which are the total responsibility and authority of OPERATORS. If the CITY representative detects an unsafe or incorrect plugging procedure, he immedi- ately will notify the OPERATORS' representative at the site, and immediately will notify CITY management. III. OPERATORS have provided reasonable data to show that the cost of similar plugging operations on land is $3,334.00 per well, a total of $40,008.00 for twelve wells. OPERATORS estimate the additional costs to be incurred be- cause of the presence of the lake to be $8-10,000.00. CITY and OPERATORS acknowledge these costs are based on the normal, routine procedures to plug wells and do not include technical difficulties that may arise to create an extraordinary situation; therefore, the costs are not maximum exposures for either OPERATORS or CITY. Any added costs for the extraor- dinary situations are subject to the provisions of the ORIGINAL CONTRACT. Should an extraordinary situation occur, OPERATORS and CITY immediately will discuss the factors creating the extraordinary situation so as to arrive at an early conclusion as to whether those factors are related to the presence of the lake and, if so, to what degree. IV. In connection with the plugging operations, OPERATORS agree to engage a reputable and long established firm (Halliburton, Dowell, or Western) for the pumping and placement of cement plugs so as to provide an added degree of caution in the professional quality of the work. V. OPERATORS will modify the plugging procedures approved by the Texas Railroad Commission in the following way: from a point 50—feet below the surface casing, fill the surface and production casing with cement to a point above the lake floor adequate that after the cement has settled and set, the top of the cement will be at or slightly above the lake floor. This modification has been requested by CITY as a precautionary, safety measure and the additional expense incurred by this request will be borne totally by CITY. VI. OPERATORS will have material on hand at the plugging operation to control and clean any spill of oil thay may occur during the work. VII. Upon conclusion of the complete plugging operation, OPERATORS will provide CITY an invoice detailing for each well the costs incurred by CITY under the provisions of Section XIII of the ORIGINAL CONTRACT. The invoice will include a copy of all bills paid by OPERATORS for the plugging. VIII. CITY will, at its expense and liability, dismantle and remove the standing derrick from the lake located over each of the twelve plugged wells. Furthermore, CITY will cut off the surface and production casing at the mud line point and remove same. With respect to such operations, CITY agrees to indemnify and hold harmless OPERATORS, their respective representatives and employees, from any and all claims, damages and fines, including fees and costs associated therewith which arise out of or are attributable to the acts of the CITY in connection with such operations. Ix. The parties are in disagreement as to who shall bear the cost to control and clean up any pollution spills during the plugging operations and the cost of any State and Federal fines which might be associated therewith. The parties likewise are in disagreement as to who shall bear the cost to control and clean up any pollution caused by future leaks from such wells after plugging operations have been completed. In order that this opera- tion not be delayed further, OPERATORS will proceed with the plugging opera- tion; if any such spills occur, the responsibility for the costs shall be determined when the plugging operation is completed, based on the terms of the July 7, 1969 contract. After the plugging operations have been com- pleted, if any pollution of the lake should occur in the future because of leaks from these wells, the responsibility for the costs of controlling and cleaning up any such pollution shall be determined when it occurs, based on the terms of the July 7, 1969 contract. This agreement is executed as of the day and year first set out above. CITY OF WICHITA FALLS, TEXAS BY: City Manager ATTEST: City Clerk APPROVED AS TO FORM: City Attorney NORTH CENTRAL OIL CORPORATION BY: AM-4 Charles R. Pirtle STRAWN DRILLING COMPANY BY: R ,_I CITY CLci '.: S OFFICE THE STATE OF TEXAS § I COUNTY OF WICHITA § By me -- This agreement, made and entered into as of the 2/s day of g rj/ , 1987, by and between the City of Wichita Falls, Wichita County, Texas, a Municipal Corporation in the State of Texas, (hereinafter called "CITY") and the firms of North Central Oil Corporation and Strawn Drilling Company (herein- after called "OPERATORS"): WITNESSETH: WHEREAS, North Central Oil Corporation and Strawn Drilling Company jointly own twelve oil wells located in the waters of Lake Arrowhead, a reservoir owned by the City of Wichita Falls; WHEREAS, CITY made and entered into a contract on July 7, 1969, with M. 0. Rife, Jr. , and Strawn Drilling Company regarding these same twelve oil wells in Lake Arrowhead (hereinafter called "ORIGINAL CONTRACT"); WHEREAS, North Central Oil Corporation acquired the interest of M. 0. Rife, and by an Assignment of Oil and Gas Lease dated July 10, 1970, assumed all obligations imposed upon M. 0. Rife under the said ORIGINAL CONTRACT; WHEREAS, the ORIGINAL CONTRACT establishes a relationship between CITY and OPERATORS in regard to the twelve oil wells in Lake Arrowhead; and, WHEREAS, CITY and OPERATORS desire to agree on certain stipulations re- garding the planned closing of the oil wells; NOW, THEREFORE, it is understood, stipulated and agreed as follows: I. Under the terms of Section XIII of the ORIGINAL CONTRACT, CITY elects to have the production casing remain in place in each well. The total amount of casing which would have been recovered and salvaged by OPERATORS is agreed to be 38,250 linear feet. The salvaged value of said casing is agreed to be $1.30 per linear foot, making the casing in place have a total value of 49,725.00. CITY agrees to pay this amount_ to OPERATORS when OPERATORS have presented an invoice for the abandoned casing and when the plugging operations for the twelve oil wells have begun. II. OPERATORS will plug the wells in accordance with the laws of the State of Texas and in a professional, workmanlike manner. OPERATORS will specifically request the Texas Railroad Commission to have a Commission representative present at the wells during the plugging operation. CITY will have a techni- cal representative present at the wells during the plugging operation. The CITY representative will not interfere with the plugging operations which are the total responsibility and authority of OPERATORS. If the CITY representative detects an unsafe or incorrect plugging procedure, he immedi- ately will notify the OPERATORS' representative at the site, and immediately will notify CITY management. III. OPERATORS have provided reasonable data to show that the cost of similar plugging operations on land is $3,334.00 per well, a total of $40,008.00 for twelve wells. OPERATORS estimate the additional costs to be incurred be- cause of the presence of the lake to be $8-10,000.00. CITY and OPERATORS acknowledge these costs are based on the normal, routine procedures to plug wells and do not include technical difficulties that may arise to create an extraordinary situation; therefore, the costs are not maximum exposures for either OPERATORS or CITY. Any added costs for the extraor- dinary situations are subject to the provisions of the ORIGINAL CONTRACT. Should an extraordinary situation occur, OPERATORS and CITY immediately will discuss the factors creating the extraordinary situation so as to arrive at an early conclusion as to whether those factors are related to the presence of the lake and, if so, to what degree. IV. In connection with the plugging operations, OPERATORS agree to engage a reputable and long established firm (Halliburton, Dowell, or Western) for the pumping and placement of cement plugs so as to provide an added degree of caution in the professional quality of the work. V. OPERATORS will modify the plugging procedures approved by the Texas Railroad Commission in the following way: from a point 50-feet below the surface casing, fill the surface and production casing with cement to a point above the lake floor adequate that after the cement has settled and set, the top of the cement will be at or slightly above the lake floor. This modification has been requested by CITY as a precautionary, safety measure and the additional expense incurred by this request will be borne totally by CITY. VI. OPERATORS will have material on hand at the plugging operation to control and clean any spill of oil thay may occur during the work. VII. Upon conclusion of the complete plugging operation, OPERATORS will provide CITY an invoice detailing for each well the costs incurred by CITY under the provisions of Section XIII of the ORIGINAL CONTRACT. The invoice will include a copy of all bills paid by OPERATORS for the plugging. VIII. CITY will, at its expense and liability, dismantle and remove the standing derrick from the lake located over each of the twelve plugged wells. Furthermore, CITY will cut off the surface and production casing at the mud line point and remove same. With respect to such operations, CITY agrees to indemnify and hold harmless OPERATORS, their respective representatives and employees, from any and all claims, damages and fines, including fees and costs associated therewith which arise out of or are attributable to the acts of the CITY in connection with such operations. IX. The parties are in disagreement as to who shall bear the cost to control and clean up any pollution spills during the plugging operations and the cost of any State and Federal fines which might be associated therewith. The parties likewise are in disagreement as to who shall bear the cost to control and clean up any pollution caused by future leaks from such wells after plugging operations have been completed. In order that this opera- tion not be delayed further, OPERATORS will proceed with the plugging opera- tion; if any such spills occur, the responsibility for the costs shall be determined when the plugging operation is completed, based on the terms of the July 7, 1969 contract. After the plugging operations have been com- pleted, if any pollution of the lake should occur in the future because of leaks from these wells, the responsibility for the costs of controlling and cleaning up any such pollution shall be determined when it occurs, based on the terms of the July 7, 1969 contract. This agreement is executed as of the day and year first set out above. CITY 0. TA FALLS, TEXAS ity ManolV ATTEST: City Clerk APPROVED AS TO FORM: tea iii ,J/IV City iitorior NORTH CENTRAL OIL CORPORATION BY: Charles R. Pirtle STRAWN DRIL O. NG COMPANY BY: / Ze"