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HomeMy WebLinkAboutPR 14869: INDUSTRIAL DISTRICT AGREEMENT WITH PREMCOR REFINING GROUP FOR COEX EXPANSION PROJECT, GASIFICATION PROJECT AND THE EXISTING PREMCOR (VALERO) UNITSP. R. No. 14869 08/22/08 is u~pdate:d RESOLUTION NO. A RESOLUTION APPROVING i~N INDUSTRIAL DISTRICT AGREEMENT WITH PREMCOR REFINING GROUP FOR THE COEX EXPANSION PROJECT, GASIFICATION PROJECT AND THE EXISTING PREMCOR: (VALERO) UNITS (2008- 2019) WHEREAS, the City entered into a 1998 Industrial District Agreement with Clark Refining and Marketing, Inc., per Resolution No. 98-288; and WHEREAS, the City entered into a 1998 Industrial District Agreement with Clark Refining and Marketing, Inc. for a Heavy Oil Upgrade Project, per Resolution No. 98-289; and WHEREAS, the City entered a 2003 Industrial District Agx-eemen.t with Chevron U.S.A. for the ethylene plant, per Resolution Info. 03- 355; and WHEREAS, the City entered into a 2003 Industrial District Agreement with the Premcor Refining Group, Inc. for th.e Hydrotreater Refinery Expansion (50,000 BPSD gasoline hydro processing unit), per Resolution No. 03-297; and WHEREAS, the City entered into a 2005 Industrial District Agreement with Premcor Refinery Croup and the Port Arthur Coker Company, for the Refinery's Feed Rate Expansion Project and I>ecoke.r Expansion, approved per Resolution No. 05-164; and WHEREAS, the City entered into a 2005 Industrial District Agreement with Premcor Refinery Group for the Tier II Diesel z.pr14869_updated Project, per Resolution No. 05-16~i; and WHEREAS, the City approved a partial assignment of the Clark Refining and Marketing, Inc. "In. Lieu of Tax" Agreement as it pertained to the Coke Handling Facility to Trans-Global Soluitions, Inc., per Resolution No. 01-93; acid WHEREAS, the City approved a~ partial assignment of the "In Lieu of Tax" Agreement as it pertained to the HOUP Industrial Agreement to the Port Arthur Coker Company, L.P., and i~o Air Products and Chemicals, Inc. per Resolution No. 99-174; and. WHEREAS, Clark Refining and Marketing, Inc. and affiliates remained liable for the "In Lieu of Tax" payments to be paid; and WHEREAS, Premcor (Valero) is planning a major refinery expansion project and other improvements on a portion of they tract that is owned by Premcor; and WHEREAS, Premor (Valero) now desires to enter into a n.ew "In Lieu of Tax" Agreement with the Cii~y in regards to a $2,400,000,000 COEX II Expansion Project, which is expected to include th.e expansion of the refinery's Delayed Coker Unit, as well as th.e construction of a new 50 MBPD Hydrocracker, the construction of a new Saturate Gas Plant, the adciition of Oxygen Enrichment to existing Sulfur Recovery Unit, and. the construction and/or upgrade of various other related units, equipment, and re~finer~y infrastructure; and WHEREAS, Premcor is also planning a $2,000,000,000 Gasification project; and z.pr14869_updated WHEREAS, it is deemed in the best interests of the citi~sens of Port Arthur to approve an Industrial District Agreement with Premcor Refining Group, Inc. Expansion Project, Gasification Project and ex (2008-2019), in substantially the same form as Exhibit "A"; and ("In Lieu of Tax" ) for the COEX II fisting Valero units attached hereto as WHEREAS, this does not include the Agreement for the Chevron facilities, which still needs to be negotiated, as the Chevron agreement, approved per Resolution No. 03-355, is expiring this year or this area will be annexed. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF T~[E CIT'Y OF PORT ARTHUR: Section 1. That the facts and opinions in the preamble are true and correct. Section 2. That the Industrial District ("In Lieu. of Tax") Agreement with Premcor Refining Group, Inc. for the C:OEX II Expansion Project, Gasification Project, and the existing Valero units is approved (2008-2019), in substantially the same form as attached hereto as Exhibit "A". Section 3. That a copy of the caption of this Resolution be spread upon the Minutes of the City Council. READ, ADOPTED AND APPROVED on this day of A.D., 2008, at a Meeting of the City Council of the City of Port Arthur, by the following vote: AYES: z.pr14869_updated Mayor NOES: MAYOR ATTEST: TERRI HANKS, ACTING CITY SECRETARY APPROVED AS TO FORM: CITY ATTORNEY APPROVED FOR ADMINISTRATION: CIT MANA ER z.pr14869_updated EXHIBIT "A" TO THE RESOLUTION STATE OF TEXAS § COUNTY OF JEFFERSON § INDUSTRIAL DISTF:ICT AGREEMENT WITH REGARD TO THE PREMCOR REFINING GROUP INC.'S D/B/A VALERO PORT ARTHUR REFINERSi' COEX EXPANSION PROJECT, GASIFICATION PROJECT ANI) EXISTING VALERO UNITS (2008-2019) WHEREAS, the City of Port Arthur (hereinafter referred to as the "City"), The Premcor Refining Group Inc., d/b/a Valero Port Arthur Refinery, formerly known as C]Lark Refining & Marketing, Inc. (hereinafter referred to as "Premcor"), Port Arthur Coker Company L.P., and Chevron U.S.A. (hereinafter referred to as "Chevron") have entE~red into the following Industrial District Agreements as t=hey relate to industrial projects on land owned by Premcor: (1) 1998 Industrial District Agreement with Clark Refining and Marketing, Inc. for the refinery with existing improvements as of 1998, approved per Resolution 98-288, with such agreernent providing for the payment to the City of ]?ort Arthur of $1,825,000 per year until October 15, 2008, with an infla1tion factor being added for the years 2004 to 2008 with the expectation i~hat the City will continue to be paid a negotiated "in lieu of tax" payment thereafter. These z.ida premcor coex expansion project 8.21.08 1 payments have been made except for the year 2008, when $2,029,684 is due on October 15, 2008 with the increase based on the CPI. (2) 1998 Industrial District Agreement with C7_ark Refining and Market=ing, Inc Upgrade Project approved per with such agreement providing $698,000 per year i=rom 2001 payment of $872,000 per year with the expectation that the .. for Heavy Oil Resolution 98--289 for the payment. of to 2004 and the from 2005 to 2008 City will cont_'~nue to be paid a negotiated "in lieu of tax" paynnent thereafter. These payments have been made except for the year 2008, when $872,000 is due on October 15, 2008. (3) 2003 Industrial District Agreement with Chevron U.S.A. for the ethylene plant with existing improvements as of 2003 approved by Resolut=ion No. 03-355 which is. leasing a portion of the property described in Attachment "A" from C:1ark Refining and Marketing, Inc., now known as The Premcor Refining Group Inc. and affiliates, and whereunder Chevron Yias agreed to pay the City $1,185,000 per year until the year 2008 with the expectation that thE~ City will continue to be z.ida~remcor_coex expansion project_8.21.08 2 paid a negotiated "in lieu of tax" payment thereafter. These payments have been made except for the year 2008, when $1,185,000 is due on October 15, 2008. (4) 2003 Industrial District Agreement with The Premcor Refining Group Inc. for the Prenncor (Hydrotreater) Refinery Expansion (50,000 f3PSD gasoline hydro processing unit) approved by Resolution 03-297 with such agreement providing for Premcor's yearly payment of amounts to the City equal to 750 of the amount of taxes it would have paid with respect to the project as if the project had been constructed within the City's corporate limits and had the City entered intro a property tax abatement agreement with Premcor with the same terms and conditions as those contained in the December 23, 2002 agreement, which Premcor reached with Jefferson County for that same project, with such payments being made by Premcor to the City from 2003 through 2010, with the expectation that the City will continue to be paid a negotiated "in lieu of tax" payment thereafter. Payments have been received for the years up to 2007 based on reports by the Company z.ida_premcor_coex expansion project_8.21.08 3 to Jefferson County c-f percentages of Direct Fiire of Local Labor (Schedule A) and Local Subcontractors (Schedule B) that the Company has retained. The Company has paid the City $0 in 2003, $0 in 2004, $?164,561 in 2005, $526,304 in 2006, and $354, 110 in 2007 . The City has re]Lied on Jefferson County and the Company as to these calculations. Payments have not been received for 2008 to 2010, wh:Lch is due on October 15tk' of each month. (5) 2005 Industrial District Agreement with the Premcor Refinery Group and with the Port Art=hur Coker Company, L.P. :for the Refinery's Feed Rate Expansion Project and Decoker Expansion approved by Resolution No. 05-164 with such agreement providing for Premcor's and Port Arthur Coker Company's yearly payment of amounts to the City equal to 750 of the amount of taxes it would have paid with respect to the project as if the project had been constructed within the Cii~y's corporate limits and had the City entered intro a property tax abatement agreement with Premcor and with Port Arthur Coker Company with the :game terms and conditions as those contained in the z.ida~remcor_coex expansion project_8.21.08 4 November 30, 2004 agreement which Premcor and Port Arthur Coker Company reached with Jefferson County for that same project, with such paymE~nts being made by Premcor and Port Arthur Coker Company to the City from 2005 through 2014 vuith the expectation that the City will continue to be paid a negotiated "in lieu of tax" payment thereafter. Payments have been received for the years up to 2007 bas~sd on reports by the Com~>any to Jefferson County of percentages of Direct Fiire of Local Labor (Schedule A) and Local Subcontractors (Schedule B) that the Company has retained. The Company has paid the City $0 in 2005, $0 in 2006, and $969,053 in 2007. The (:ity has relied on Jeffer~~on County and the Company as to these calculations. Payments have not been received for 2008 to 2014, which is due on October 15th of each month. (6) 2005 Industrial District Agreement with the Premcor Refinery Group for the Tier II Diesel Project for the years of 2005 through 2009 as approved by Resolution No. 05-165 with :such agreement providing for Premcor's yearly payment of amounts to the City equal to 750 of the amount z.ida~remcor_coex expansion project_8.21.08 5 of taxes it would have paid with respect to the project as if the project had been constructed within the City's corporate limits and had the City entered into a property tax abatement agreement with Premcor with the same terms and conditions as those contained in the November 30, 2004 agreement which Premcor reached with Jefferson County for that same project, with :such payments being made by Premcor to the City i=rom 2005 through 2009 with the expectation that the City will continue t:o be paid a negotiated "in lieu of tax" payment. thereafter. Payments have been received for the years up to 2007 based on reports by the Company to Jefferson County of percentages of Direct Hire of Local Labor (Schedule A) and Local Subcontractors (Schedule B) that the Company has retained. The Company has paid the City $0 in 2005, $0 in 2006, and $370,748 in 2007. The City has relied on Jefferson County and the Company as to these calculations. Payments have not been received for 2008 to 2009, which is due on October 15t~' of each month.; and z.ida_premcor_coex expansion project_8.21.08 6 WHEREAS, the City of Port Arthur receives its "in lieu of tax" payments during the current tax year. The C'.ity receives its "in lieu of tax" payments in October of each year, which is generally earlier than when other ta~:ing entities receives its tax payments; and WHEREAS, the City has approved the partial assignment of the Clark Refining and Marketing, Inc. "in lieu of t:ax" agreement as it pertains to tYie Coke Handling Facility to Trans-Global Solutions, Inc. pursuant to Resolution No. 01- 93, wherein Clark Refining and Marketing, Inc. and affiliates, remain liable for t:he "in lieu of tax" payments to be paid; and WHEREAS, the City has approved the partial assignment of the "in lieu of tax" agreement as it pertains to the HOUP Industrial Agreement to Port Arthur Coker Company, L. P. and to Air Products and Chemicals, Inc., pursuant: to Resolution No. 99-174, whE:rein Clark Refining and Marketing, Inc. and affiliates remain liable for the "in lieu of tax" payments to be paid; and WHEREAS, Premcor plans a major refinery expansion project and other improvements on a portion of the tract that is owned by Premcor; and WHEREAS, Premcor desires to enter into another "in lieu of tax" agreement ("AgrE~ement") with the City with z.ida_premcor_coex expansion project_8.21.08 7 regards to a new COEX II Expansion Project of $2,400,000,000 which is expected to include the construction of a new refinez-y's Delayed Coker Unit, as well as the construction of a rlew 50 MBPD Hydrocracker, the construction of a new Saturate: Gas Plant, the addition. of Oxygen Enrichment to existing Sulfur Recovery Unit and the construction and/or upgrade of various other related un~Lts, equipment and refinery infrastructure; and WHEREAS, the COEX II Exp<~nsion Project will increase the crude oil refining capacity from 325,000 barrels per day to 400,000 barrels per day; and WHEREAS, Premcor currently employs over 800 regular employees at the refinery; and WHEREAS, the COEX II Expansion Project will create 40 net new full-time jobs relating to the operation of the facility; and WHEREAS, the COEX II Expansion Project will average about 1,000 construction jobs, up to a peak of 2,500 ;jobs (machinists, welders, electricians, engineers and miscellaneous labor); and WHEREAS, Premcor still owns the property described in Attachment "A"; and WHEREAS, Premcor plans t=o make a COEX II project capital upgrade in the timetables and costs as estimateci in z.ida_premcor_coex expansion project_8.21.08 g Attachment "B" and on the land described in Attachment "A"; and WHEREAS, it is anticipated that Premcor may also commence a Gasification project of $2,000,000,,000 (hereinafter sometimes referred to as "the Gasification project"), which is expected to include a new Petro7Leum Coke Gasifier Unit, a new P-ir Separation Unit, a new Sulphur Plant, a new Gas Turb:Lne, a new Hydrogen Recovery Unit, a new Carbon Dioxide Sequestering System, a new Power Recovery System, and associated smaller projects and infrastructure improvements; and WHEREAS, Premcor is also considering a Gasification Project capital upgrade in the timetables and costs as estimated in Attachment "C" and on the land described in Attachment "A"; and WHEREAS, the Gasification Project will average about 1,000 construction jobs, up to a peak of 2,500 ;jobs (machinists, welders, electricians, engineers and miscellaneous labor); and WHEREAS, Premcor is a business that presently produce the products described in Attachment "D" on the tract; and WHEREAS, Premcor, or its assignees, presently has the equipment and units, and the accompanying values thereof, z.ida~remcor_coex expansion project_8.21.08 9 described in Attachment "E" for the property described. in Attachment "A"; and WHEREAS, the City and Premcor wish to address the following: (1) health and safety issues on the land, existing plant, and the proposed improvements described. in Attachments "A","B" and "C" and at any existing plant or any plant that may be built thereon and procedures for the City's review thereof, (2) the needs of the City to have a stable revenue source that is not materially affected by appraisal litigation, (3) the need to define backup services provided by the City, (4) employment opportunit=ies for Port Arthur residents, minorities, and companies, and (5) the terms of such Agreement; and WHEREAS, the City and Premcor desire to enter into an Industrial District Agreement with respect to the projects described in Attachments "B" and "C" and on the property described in Attachment ".A" that is within the extraterritorial jurisdiction of the City; and WHEREAS, the City and Premcor agree that there has been full and adequate consideration for this Agreement; and WHEREAS, Premcor has previously obtained or is obtaining tax abatements on the projects from Jefferson County for the projects described in Attachments "B" and z.ida_premcor_coex expansion project_8.21.08 10 "C" therefore, agree that these: projects constitute a major capital upgrade or expansion for which Premcor is required to pay additional "in lieu of tax" payments to the City of Port Arthur; and WHEREAS, this Agreement i_s authorized under Sections 42.044 and 212.172 Local Government Code, Vernon's Texas Code Annotated and Article 1, Section 5 of the Cit:y's Charter, and that the parties agree that the following terms are reasonable, appY~opriate, and not unduly restrictive of business activities; and WHEREAS, all parties find that this Agreement as delineated herein is beneficial to each party. NOW, THEREFORE, in consideration of the promises and the mutual agreements of the parties contained herein, the City and Premcor agree with each other as follows: Section 1-Payments by Premcor (a) The City and Premcor hereby agree that, in addition to covering the COEX II project and the Gasification project as described in Exhibits "B" and "C", this Agreement shall replace and supersede the following prior agreements: (1) The City's 1998 Industrial District Agreement with Clark Refining and Marketing, CCnc. approved by Resolution No. 98-288, z.ida_premcor_coex expansion project_8.21.08 11 (2) The City's :1998 Industrial District Agreement with Clark Refining and Marketing, ]:nc. for a Heavy Oil Upgrade Project (including the partial assignment to Port Arthur Coker Company) approved by Resolutions No. 98-289 and 99-174, (3) The City's 2003 Industrial District Agreement with Premcor for the Premcor (Hydrotreater) Refinery Expansion approved by Resolution No. 03-297, (4) The City's 2005 Industrial District Agreement with Premcor and Port Arthur Coker Company for the Refinery's Feed Rate Expansion Project and DeCoke:r Expansion approved by Resolution No. 05-164, and (5) The City's 2005 Industrial District Agreement with Premcor for the Tier II Diesel Project approved by Resolution No. 05-165 (b) The Parties agree that for the years 2008 through 2019, Premcor shall pay to the City of Port Arthur the following: YEAR AMOUNT OWED TAX YEAR PAYME:NiT DUE 1 $6,000,000 2008 10/15/2008 2 $6,000,000 2009 10/15/2009 z.ida_premcor_coex expansion project_8.21.08 12 3 $6,000,000 2010 10/15/2010 4 $6,000,000 2011 10/15/2011 5 $6,000,000 2012 10/15/2012 6 $6,000,000 2013 10/15/2013 7 $6,000,000 2014 10/15/2014 8 $6,000,000 2015 10/15/2015 9 $6,000,000 2016 10/15/2016 10 $6,000,000 2017 10/15/2017 11 $6,000,000 2018 10/15/2018 12 $6,000,000 2019 10/15/2019 With respect to the above annual payments, and expressly subject to and o:n the condition that the Gasification project is actually undertaken and completed by Premcor, the parties agree that the amount of Premcor's annual payments to the City shall include an additional $1,000,000 payment relating to the Gasification. If the Gasification project is actually undertaken and comple=ted by Premcor, then this $1,000,000 additional annual paynnent will be due and payable beginning with the first October after twelve (12) full mont=hs have elapsed from the Gasification project's groundbreaking with "groundbreaking" being defined as the driving or pouring of the first pile relating to the construction of the Gasifier Reactor. The parties to this Agreement further specifically and expressly agree that, in the event Premcor elects to not z.ida_premcor_coex expansion project_8.21.08 13 undertake and construct the Gasification project, then Premcor shall not be responsible for the additional $1,000,000 annual payments. (c) Premcor further agrees to pay an additional $6,000,000 in September 2008 (car within 20 days of the ciate upon which this agreement is executed) so that $12,000,000 will be paid in 2008. (d) Once the agreement has been executed by all parties, Premcor agrees to iriumediately commit to pay the City $300,000 to assist in they funding of a new community center. Premcor will retain this $300,000.00 until it is actually needed by the City for funding of the new community center; however, if the City fails to uti]_ize this $300,000 toward the construction of the new community center before the expiration •of this Agreement, then the parties agree that Premcor will, not be obligated to pay the $300,000 to the City. (e) The City of Port Arthur is entering into t:his agreement with the expectation that Premcor will use its best efforts as to the usage of Port Arthur residents as employees and as to the usage of Port Arthur contractors, suppliers, and professionals. Premcor will post job openings with the Texas Workforce in Port Arthur. Prenncor will also request that its contractors and subcontract:ors z.ida_premcor_coex expansion project 8.21.08 14 post its job openings with the Texas Workforce in Port Arthur. (f) The City shall not :refund or credit any monies previously paid by Premcor prior to the date of execution of this Agreement, either diY-ectly or indirectly to the City. Also, once monies are paid to the City of ~?ort Arthur in a tax year, the City shall not refund any of said monies. The City of Port Arthur shall also not credit any of said monies for previous tans: years or for any future tax year. (g) The City of Port Arthur reserves the right to annex the property described ir.~ Resolution No. 03-355 if` an agreement is not entered into with Chevron as to continue to pay In Lieu of Tax Payments as the City deems appropriate. Section 2. If requests::d orally or in writing by Premcor, the City's Fire Department shall provide bac}~-up Fire Suppression Support as determined by the City's F?ire Chief, and the City's Police Department shall assist in providing an evacuation route and traffic control in the case of a fire or a chemical release at Premcor's facilities located in thE~ City's extraterritorial jurisdiction. Nevertheless, Premcor shall abide by and shall take such precautions as to prevent (1) p-~~~ z.ida_premcor_coex expansion project_8.21.08 15 fires, explosions and chemical releases and (2) the imprudent discharge of storm water that contribute to flooding on adjacent property. Premcor shall also provide an evacuation as is expected in the industry, and as is required by applicable federal and state laws, and the health and safety laws of the City. Premcor shall employ or provide sufficient primary fire suppression response, as well as control and abate chemical releases. Premcor sYiall provide the City's Fire Chief and Police Chief vaith Emergency Response Plans for any plants, refineries, chemical operations or other hazardous operations that take place on the land described in Attachments "A" ~ "~". If there is a fire and the Cii~y is requested to provide initial and primary fire suppression services or if a c]_ean up is required under the 2000 International Fire Code, Premcor will pay to the City the costs and expenses incurred by the City and any of its departments. Section 3. Premcor shall promptly notify the central dispatch office which Nerves the City's Fire Ch_Lef, Police Chief and the City's Emergency Managernent Coordinator of all incident: involving fires, ser_Lous injuries, deaths, chemical releases and flooding that create a health and safety hazard to the community or t=hat z.ida~remcor_coex expansion project_8.21.08 16 exceed OSHA, TNRCC or EPA permissible exposure limits at the plant fence lines. Section 4. Annexation for Health, Safety and Welfare Reasons. It is specifically stipulated ghat nothing in this Agreement will in any manner limit or restrict the authority of the City to annex all or part: of said lands and facilities during the period of the Agreement if the City should determine that such annexation is reasonably necessary to promote and protect the general health, safety and welfare of the persons residing within or adjacent to the City, provided however, that the C"ity agrees that such annexation foY• the land which contains the Valero units described in Attachment "A" prior to October 1, 2019 will not be made for revenue purposes only. Section 5. Annexation due to Legislative Action. Notwithstanding the provisions of Section 4, the parties agree and consent that the C_Lty may annex if a bill is adopted by the State legislature which limits or restricts the authority of the City to annex all or part of said 7_and and improvements. In the event: of annexation, Premcor will not be required to make further payments under this Agreement for any calendar year- commencing after annexation with respect to the property so annexed, but sYiall nevertheless be obligated to make full payments for the z.ida~remcor_coex expansion project 8.21.08 1~ year during which such annexation becomes effective if the annexation becomes effective after January 1st of said year. Premcor shall not be required to pay ad valorem taxes to the City for the same period of: time they have already paid an "in lieu of tax" payment, with respect to the propE~rty described in Attachment "A" t:o this Agreement. If the annexation laws are changed so that the City can no longer annex the property of Premcor and if the parties cannot reach an agreement on a new payment schedule or on a new "in lieu of tax" agreement, ]?remcor agrees that it vuill continue to pay to the City tYie "in lieu of tax" paymE~nts delineated in Section 1 until L)ecember 31, 2019 and it will thereafter continue to annually pay the City an "in lieu of tax" payment of seventy-five percent (750) of its taxable value times the City's tax rate for so long as it or its assignees and successors or affiliates own the property as described in Attachment "A". Payments will be due on October 15th of each year. Pursuant to Sections 42.044 and 212.172 Local Government Code, Premcor agrees and con;~ent that the City has the option in the City' s sole discretion to extend this contract and that Premcor will continues to pay the City "in lieu of tax" payments at the seventy-~°ive percent (750) rate, as denoted above for successive periods not to exceed 15 years each, for a total duration not. to z.ida_premcor_coex expansion project_8.21.08 18 exceed 45 years. "Taxable value" is the value as determined by the Jefferson County Appraisal District in appraisal rolls after the completion of all litigation and appeals (if any), of all property, industrial realty and improvements, excluding the value of exempt pollution control devices, owned by Premcor and located within the extra-territorial jurisdiction of the City, as described in Attachment "A". The "taxable value" also includes the appraised value of any property that is located in a foreign trade zone or in any other type of federal, state or local zone. Section 6. The parties agree that the City has the sole discretion after August 1, 2019 to annex the property in Attachment "A" or to enter into negotiations on the payment by Premcor of additional "in lieu of tax" payments. Section 7. The present: owners and lessees of the property in Attachment "A" are described in Attachment "F". The City reserves the right to annex that tract or parcel with the minimum required adjacent area as per Chapter 43 Local Government Code if the owners or the lessees do not pay an "in lieu of tax" paymE~nt for its interest in the property and in the improvements. Nothing contained herein shall be construed to prohibit or prevent Premcor i=rom paying the other owners' or lessees' "in lieu of tax" z.ida~remcor_coex expansion project_8.21.08 19 payment to prevent annexation by the City. If the City annexes a tract or tracts, the total "in lieu of t.ax" payment will be reduced by the same percentage as the appraised value of the traci;.s under the contract are reduced. Section 8. The City will not commence annexation proceedings prior to August 1, 2019 for Premcor property as delineated in Attachment "A" to this Agreement under Chapter 43 of the Local Government Code or file litigation in District Court to abate or prevent a nuisance or seek a civil penalty under Sections 54.016, 54.017, and 217..042 Local Government Code for "health, safety and well=are concerns" until written noticE~ of the concerns have been delivered to Premcor, and they have had a reasonable opportunity to respond and to address the City Council. in open session. Section 9. If, after having a reasonable opportunity to respond and address the City Council in open session in accordance with Section 8, there is still a dispute as to whether there is a health, safety and welfare concern for an event that occurred prior to August 1, 2019, the matter may, at the request of any party, be submitted to arbitration before an arbitrator selected from a panel supplied by the American Arbitration Association. The z.ida~remcor_coex expansion project_8.21.08 20 arbitration shall take place in Jefferson County or at such other locations to which the parties agree. The request for arbitration must be demanded in writing no later than ten (10) days following the City Council meeting at which Premcor had the opportunity to address the City Council in accordance with Section 8, or the rights to arbitration shall be waived unless the parties agree otherwise. The costs of the arbitration shall be shared equally between the parties. The arbitration process shall be completed within forty-five (45) days from the date the ,~•'~; }'^,}~~~~ ^~e~ arbitration is requested, and if it is not so completed, any party may proceed with annexation or litigation, as they so desire. Section 10. Premcor shall use its best efforts to hire Port Arthur residents for both the construction arork and permanent jobs. Premcor shall also use its best efforts to give Port Arthur companies a fair opportunity to sell goods and services to Premcor. Premcor shall comply with the following: a) As a result of the PROJECT, maintain a job lErvel of not less that 40 new full-time employees (including, but not limited to, employees of independent contractors) and/or independent z.ida premcor coex expansion project 8.21.08 21 contractors during the remaining term of this AGREEMENT; b) report and certify the requisite job levels, under (a ) above, to the City by March Igt of each year; c) construct the COEX II PROJECT with an estimated investment of $2,400,000,000 and the Gasification Project with an estimated investment of $2,000,000,000 if and when the Gasification Project is actually undertaken; d) make available to the CITY information concerning the details of contractor bids on the first ~~eek of the first, second, third, and fourth quaz•ter of each year during the construction phase of the PROJECT, under the express understanding that the COMPANY is providing the CITY such contractor bid information on a strictly confidential basis as to maintain the integrity of the competitive bid process; e) report and certify to the City the requisite ccost of the PROJECT in the next quarterly report a!'ter the completion of the PROJECT; f) use its best efforts to identify and ensure ghat PORT ARTHUR vendors, suppliers and subcontractors z.ida~remcor_coex expansion project_8.21.08 22 are given the opportunity to bid on contracts for the purchase of supplies and services in connection with construction of the PROJECT and any turn around project which is undertakers as part of or in connection with this project during the term of this Agreement; g) report and certify to the City within 120 days after the completion of the PROJECT the total number of dollars spent on Port Arthur la]5or, Port Arthur subcontractors, and Port Arthur vendors/supplier in connection with the PROJEC'T'; (h) not in any way discriminate against or treat disparately Port Arthur union contractors who choose to participate in the competitive bid process relating to work on the PROJECT, nor discriminate against or treat disparately Port Arthur union members who seek employment on the PROJECT; and (i) encourage and promote the utilization of PORT ARTHUR Historically Underutilized Businesses (HUBS) (also known as Disadvantaged Business Enterprises, or DBEs) by the general contracrtor engaged by OWNER to construct the PROJECT with best efforts being made to give Port Arthur z.ida_premcor_coex expansion project_8.21.08 23 HUB/DBE vendors and contractors an opportunity to bid on contracts for supplies and services. For purposes of the foregoing: (i ) A HUB/DBE is a business owned or controlled by Socially and Economically Disadvantaged Individuals as defined by all applicable federal or state laws and local policies, including Black Americans, Hispanic Americans, Native Americans, Asian-Pacific Americans, Asian-Indian Americans, women, and individuals with disabilities. (ii) A HUB/DBE is one that is at least 51 percent owned or controlled by one or more women or Socially and Economically Disadvantaged Individuals or, in the case of a publicly owned business, one that at least 51 percrent of the stock of which is controlled by one or more women or Socially and Economically Disadvantaged Individuals. (iii) A business that has been certified a:s a HUB/DBE by an agency of the fedearal government or the State of Texas is presLUned to be HUB/DBE fo.r purposes of this policy. z.ida_premcor_coex expansion project_8.21.08 24 (iv) Only a HUB/DBE with its principal office in PORT ARTHUR will be recognized as a HUB/DBE for purposes of Y.his policy. (j) As to the use of PORT ARTHUR and HUB/DBE vendors, suppliers and sub-contractors, best efforts will include, at a minimum.. (i) Consultation with chambers of commerce, minority business associations, trade associations and other regional economic development organizations to identify FORT ARTHUR and HUB/DBE vendors, suppliers and sub-contractors; (ii) notifying a reasonable number of PORT ARTHUR and HUB/DBE vendors, suppliers and sub- contractors, allowing sufficient time for effective preparation to the planned work to be sub-contracted, or materials, supplies or equipment to be purchased; (iii ) providing PORT ARTHUR and HUB/DBE vendors, suppliers and sub-contractors who are interested in bidding on a sub-contract or contract for materials, supplies or equipment, adequate information regarding the project (i . e. , plans, specificatic>ns, z.ida~remcor_coex expansion project_8.21.08 25 scope of work, bonding and insurance requirements, and a point of contact within the Prime Contractor); (iv) use its best efforts to negotiate with interested PORT ARTHUR and HUB/DBE vendors, suppliers or sub-contractors, and awarding sub-contracts or contracts for materials, supplies or equipment to PORT ARTHUR or HUB/DBE vendors, suppliers or sub- contractors when they are the lowest qualified responsive bidder who meets alI of the applicable bid specifications; and (v) include a provision in PREMCOR'S contz•act with the general/prime contractor on the PROJECT which requires the general/pz•ime contractor to read and comply with the terms of this AGREEMENT relating to the use of Port Arthur union or non-union, local, and HUB/DBE vendors, suppliers, or subcontractors. k) with respect to the capital expansions contemplated in Attachments "B" and "C", and for major new capital expansions on the ]_and described in Attachment "A", Premcor shall also z.ida premcor coex expansion project 8.21.08 26 meet on a quarterly basis or at other intervals mutually agreed on with City officials to monitor progress on hiring and hiring efforts and to try to make adjustments in the recruitment process if needed. Premcor will also have a local hiring facility in Port Arthur or in Port Arthu.r's Extraterritorial Jurisdiction for both the retention/selection of new employees and contractors. All employees, as well as contract and construction workers, will be paid at least the prevailing wage, as set by the City, in accordance with Chapter 2258, Texas Government Code, V.T.C.A. Premcor shall also be receptive and responsive to SBE/MWBE projects and progz•ams of the City. 1) That the City concurs with Premcor as to the selection of the companies delineated in Attachment "G" as these services, equipment, units and/or goods are not readily available from Port Arthur contractors or vendors. Section 11. Premcor shall have the right to assign, transfer or convey all, or any part of, its rights, title and interest in this Agreement to any of its subsidiax-ies or Premcor affiliates (with "Premcor affiliate" meaning any z.ida~remcor_coex expansion project_8.21.08 27 entity that is controlled by or under common control of Premcor or Valero Energy Corporation), in connection with any transfer or conveyance of title to all or any part of the properties subject to this Agreement at any time during the term of this Agreement without the consent of the City. Premcor shall be financially responsible for the "in lieu of tax" payments for which it:~ subsidiaries or affiliates may become responsible under this section of the Agreement. If Premcor desires to sever its relationship to the subsidiary or affiliate, they must seek the consent of the City, which will not be unreasonably withheld, if they no longer desire to remain financially responsible for the subsidiary's or affiliate's "in lieu of tax" payments. Premcor shall have the right to assign, transfer or convey all, or any part of, its rights, title and interest in this Agreement to any person other than one of its subsidiaries or affiliates in connection with any transfer or conveyance of title to all or any part of the properties subject to this Agreement at any time during the term of this Agreement, provided, however, that Premcor shall provide written notice of such assignment and shall receive the written consent of the City Council, by a duly adopted Resolution, which will not be unreasonably withheld. If Premcor desires to make an assignment to any person of=her z.ida~remcor_coex expansion project_8.21.08 28 than a subsidiary or affiliate, they shall make a written request to the City Council attaching (1) a description of the new company, (2) a financial statement of the new company, (3) the proposed contract between Premcor and the new company, and (4) the portion or portions of the plant or plants with respect to which rights and obligations are to be assigned. If the assignment is approved by the City Council, Premcor shall be relieved of its obligations under this Agreement to the extent that an assignee expressly assumes Premcor's obligations. Subject to the preceding, this Agreement shall inure to t:he benefit of and be binding upon the parties hereto and its respective successors and assigns. Section 12. The City encourages capital expan;~ion on the land described in Attachment "A" and the City and Premcor agree to act in good faith to negotiate reasonable incentive programs with Premcor as such new projects are contemplated. This includes rnajor new capital expansions that are not presently delineated in Attachments "B" and "C", i.e. an increase in capacity to process heavy oil beyond 30,000 BPSD or beyond, since all parties agree ghat reasonable incentive programs should be offered and ghat Premcor expects to pay reasonable "in lieu of tax" payments on major new capital projects. "Major new capital z.ida_premcor_coex expansion project_8.21.08 29 projects" shall also mean any project for which Premcor seeks a tax abatement from any t:axing entity. Section 13. It is agreed by the parties to this Agreement that Premcor and the City have the right to seek equitable relief, including specific performance of this Agreement. Section 14. Premcor sha:11 allow a reasonable number of authorized employees and/or representatives of the City who have been designated and approved by the City Manager, City Council, or Mayor to have access to Premcor land and/or plants during the term of this Agreement to inspect the plants and any improvements thereto to determine compliance with the terms and conditions of the Agreement. All inspections will be made at mutually agreeable times and will only be conducted in such manner as to not unreasonably interfere with safety standards and secuY•ity standards and rules. All inspections will be made with one or more representatives of Premcor and in accordance with industry safety standards. Section 15. Premcor shall certify the commencement and completion date of the contemplated improvements described in Attachments "B" and "C" herein. Additionally, Premcor shall use its best efforts to furnish or make available for inspection the following information or z.ida~remcor_coex expansion project_8.21.08 30 written statements to the City at least every quarter during the construction period of the project described in Attachments "B" and "C" and of major capital improvements on land described in Attachment "A": (1) Statement by PremcoY~ describing the status of construction of the contemplated improvemer.~ts, percentage of construction completed, construction schedule and Premcor's estimate of cost or taxable value. of constructed improvements on the date of the statement; and (2) Statement by Premcor of numbers of Port Arthur residents, minorities, and companies hired, the amount of Port Arthur services and Port Arthur goods purchased; and (3) Any information, documents or records of any kind reasonably necessary for the City's evaluation. of Premcor's compliance with the terms and conditions of this Agreement, provided ghat Premcor shall MAKE AVAILABLE THE INFORMATION OR DOCUMENTATION ON A STRICTLY CONFIDENTIAL BASIS SO AS TO MAINTAIN THE INTEGRITY OF THE COMPETITIVE BID PROCESS AND THE EMPLOYMENT PROCESS. At the request of the City, Premcor will produce to the City any information as to its performance and z.ida~remcor_coex expansion project 8.21.08 31 hiring programs that has been made available to Jefferson County under the Tax Abatement Agreements. Premcor's statements described above shall be verified by Premcor's project managers or other appropriate representatives. Section 16. Premcor agrees on a quarterly basis to furnish information necessary for the City to evaluate Premcor's compliance with the terms and conditions of this Agreement. Premcor further agrees that on or before March 1st of each year of this Agreement, Premcor shall provide the City an annual report/statement of compliance with this Agreement. Section 17. Currently, Premcor spends over $100,000 per year through the Port Arthur Industrial Group toward assisting in the establishment of apprenticeship, internship and/or education programs and projects for the training of Port Arthur residents for permanent jobs in the Port Arthur area. Premcor affirms its intention to continue its participation in the Port Arthur Industrial Group during the life of this Agreement (2008-2019) in order to continue Premcor's efforts to assist in the establishment of apprenticeship, internship anti/or education programs and projects for the training of F>ort z.ida_premcor_coex expansion project_8.21.08 32 Arthur residents for permanent jobs in the Port Arthur area. Premcor further hereby agrees to request and encourage the contractors and subcontractors which are hired and will be hired to work on the projects described herein to work toward establishing and funding their own apprenticeship, internship and/or education programs and projects for the training of Port Arthur residents for permanent jobs in the Port Arthur area. Section 18. Premcor has indicated that additional construction jobs will be utilized in building the improvements for the new projects, as described in Attachments "B" and "C", and that new permanent jobs will be created at the plant once the new projects are completed. The City reserves the right to hire or contY•act for a monitor as to inspect Premcor's records and hiY•ing practices in accordance with this Agreement as to veY•ify whether Premcor has complied and will continue to comply with this Agreement. The City of Port Arthur and Premcor agree to the following: a. The definition of a Port Arthur resident i;s a person who has an established residency periods of 6 months or more. b. A residency verification form shall be included on all applications for employment. z.ida~remcor_coex expansion project_8.21.08 33 c. If all other ratings being equal, qualified applicants who are also Port Arthur residents shall be given priority in the hiring process. d. Quarterly reports from Premcor and its contractors shall reflect the total amount of goods and services purchased and the name and address of the major business providers. e. The Company shall, on a quarterly basis, forecast the major types of goods and services to be required during the construction phase of the projects, make the information available to Port Arthur businesses, and provide a means for Fort Arthur businesses to register as providers. f. The Company shall provide quarterly reports to be created from the employee data file as it pertains to the information required to be reported under this Agreement. This inclucLes, but is not limited, to information as to total applications received for announced positions, total applicants meeting minimum qualificatic>ns, total applicants invited to take in-house tests/assessments, total applicants with satisfactory scores on in-house assessments, total applicants invited to interview, total z.ida_premcor_coex expansion project_8.21.08 34 applicants completing the interview process, total applicants deemed acceptable, total applicants extended employment offers, total applicants disqualified through drug screening, total applicants disqualified through background checks and total hires. g. The Company and the City will meet on a quarterly basis as to discuss its overall plans or processes to hire Port Arthur residents, socially and economically disadvantaged individuals and contractors that are reasonably based on the existing experience levels and capacities of the Port Arthur population and contractors, with due consideration for the needs of the Company. If the Company provides a prospective hiring target, plan, process, or a prospective list of contractors and the City does not submit any written objections within 30 days, then said hiring target, plan, process, or prospective list of contractors is deemed in compliance with this Agreement. Section 19. Premcor certifies that they have not and will not knowingly employ an "undocumented worts;er" which means an individual who, at the time of employment, z.ida_premcor_coex expansion project_8.21.08 35 is not lawfully admitted for permanent residence to the United States or authorized under law to be employed in that manner in the United States. Premcor acknowledges that it has reviewed Chapter 2264, Texas Government Code, and hereby affirmatively agrees to repay the amount of any incentive with interest at the rate of ten percent (10~) per annum, not later than the 120th day after the date the City notifies Premcor of a violation. Premcor acknowledges the City may bring a civil action as to recover any amounts owed under this Chapter, and further acknowledges that the City may recover court costs and reasonable attorney's fees incurred in bringing an action under Section 2264.1.01, Texas Government Code. Section 20. Electrical Usage. The Company has indicated that the Premcor facilities presently obtain all of their electricity purchased from Entergy from the Gulf Oil Substation adjacent to Highway 82. The company has also indicated that the Chevron facilities presently obtain all of their electricity purchased from Entergy from the Taylor Bayou Substation adjacent to Highway 87. The Company will provide the City with information as to the electrical consumption from Entergy or from any of:her electric utilities, transmission and distribution utility, municipally owned utility, electric cooperative or from any z.ida_premcor_coex expansion project_8.21.08 36 other source as well as all metering locations that service the area in Attachment "A". The company consents to the City's annexation of the company's property that is being used as Energy substations and metering sites and the necessary adjacent land of the company as described in Attachments "H" and "I" so that a strip or strips of at least 1,000 feet can be annexed, as per Chapter 43 of the Local Government Code. If other land is, or will be, leased or utilized as substations or as metering locations, the Company also agrees to the City's annexation of said property and the nece receive funds from providers of Section charge per kilowatt $0.0016170 multiplied delivered to each :ssary adjacent land. The City will Entergy or from other electrical 33.008 Utility Code payments oi` a hour ("kWh"), which is currently times the number of kilowatt hours retail customer whose consuming facility's point of delivery is located in the City boundaries. Ordinance No. 06-90, dated October 29, 2006, allowed for an incremental surcharge, which is currently $0.0013777, to be assessed by Entergy, paid to the City of Port Arthur, and collected from customers in the City of Port Arthur. If the Company is required to pay this incremental surcharge or additional ad valorem taxes to the City based solely on the annexation of these z.ida~remcor_coex expansion project_8.21.08 37 substations or metering sites, then the City will allow a credit thereof as to the incremental charges and additional City ad valorem taxes as to the substations or metering sites against "In Lieu of Tax" payments for the year of payment. Section 21. Notice of Default. Notwithstanding anything herein to the contrary contained, in the event of any breach by Premcor of any of the terms or conditions of this Agreement, the City shall give Premcor not less than five (5) business days' written notice, specifying the nature of the alleged default and manner in which the alleged default may be satisfactorily cured. Thereafter, Premcor will be afforded a reasonable time within which. to cure the alleged default. Nevertheless, time is of the essence on the payment schedule for the "in lieu of t:ax" payments. Section 22. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the projects described herein and all prior understandings or oral or between the parties respecting such sub; as otherwise provided in the instruments This Agreement may be amended only by signed by all of the parties hereto. and supersedes any written agreements ject matter, except referenced herein. written instrurnent z.ida~remcor_coex expansion project_8.21.08 38 Section 23. Severability. If any term or provision in this Agreement or the application thereof to any peY•son or circumstance shall to any extent be held to be invalid or unenforceable by a court of competent jurisdiction, such invalidity or unenforceability shall not affect any other provision of this Agreement or the application theY•eof which can be given effect without the invalid or unenforceable provision or application, and the parties agree that the provisions of this Agreement are and shall be severable. Payment of the "in lieu of tax" payments is an essential part of this Agreement. Section 24. Remedies Cumulative. Except as other- wise expressly provided herein, all rights, privileges and remedies afforded the parties by this Agreement shall be deemed cumulative and not exclusive, and the exercise of any or more of such remedies shall not be deemed to be a waiver of any other right, remedy or privilege provided for herein or available at law or in equity. Section 25. Governing Law. This Agreement sY:~all be governed by and construed in. accordance with the laws of the State of Texas. This Agreement is to be performed in Jefferson County, Texas. Section 26. Authority. Each person executing this Agreement on behalf of any party hereto represents z.ida_premcor_coex expansion project 8.21.08 39 that he or she is duly authorized by all requisite actions and consents to execute and deliver this Agreement on such party's behalf. Section 27. Counter arts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which, taken together, shall constitute but one and the same instrument, which may be sufficiently evidenced by one counterpart. Section 28. By acceptance of this Agreement and./or benefits conferred hereunder, Premcor represents and warrants that its undersigned agents have complete and unrestricted authority to enter. into this Agreement and to obligate and bind Premcor to all of the terms, covenants and conditions contained herein. Section 29. Any notice provided for in this contract shall be given in writing to the parties hereto by certified mail, return receipt requested, addressed as follows: TO CITY: TO PREMCOR: City Manager Refinery Manager CITY OF PORT ARTHUR THE PREMCOR REFINING GROUP INC. 444 4th St. 1801 South Gulfway Drive Port Arthur, TX 77640 Port Arthur, TX 77642 (409) 985-1000 (409) 985-1799 (facsimile) z.ida_premcor_coex expansion project_8.21.08 40 WITH A COPY TO: City Attorney CITY OF PORT ARTHUR 444 4th St . Port Arthur, TX 77640 (409) 983-8126 (409) 983-8124 WITH A COPY TO: Tax Department Valero Energy Corp. P.O. Box 696000 San Antonio, Texas 78269-6000 (210) 345-2000 (210) 345-2495 (facsimile) Section 30. This agreement is effective the day of 2008, and shall expire on the 31St day of December, 2019, unless extended by the City of Port Arthur, as delineated in Section 5. z.ida_premcor_coex expansion project_8.21.08 41 SIGNED AND AGREED to on the day of 2008. THE PREMCOR REFINING GROUP INC. BY: ACKNOWLEDGMENT STATE OF TEXAS § COUNTY OF JEFFERSON § BEFORE ME, the undersigned Notary Public, on this day personally appeared -~ known to me to be the person whose name is ascribed to the foregoing instrument, and acknowledged to me that he executed the same as the act and deed of The Premcor Refining Group Inc., formerly known as Clark Refining and Marketing Inc., for the purposes and considerations therein expressed, and the capacities therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, THIS THE day of A.D., 2008. NOTARY PUBLIC, STATE OF TEXAS z.ida~remcor_coex expansion project_8-07-08-1 42 SIGNED AND AGREED to on tree _ day of , 2008. CITY OF PORT ARTHUR, TEXAS BY: Stephen Fitzgibbons City Manager ACKNOWLEDGMENT STATE OF TEXAS § § COUNTY OF JEFFERSON § BEFORE ME, the undersigned Notary Public, on this day personally appeared Stephen Fitzgibbons, City Manager of the City of Port Arthur, known to me to be the person whose name is ascribed to the foregoing instrument, and acknowledged to me that he executed the same as the act and deed of the City of Port Arthur, for the purposes and considerations therein expressed, and the capacities therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, THIS THE day of A.D., 2008. NOTARY PUBLIC, STATE OF TEXAS z.ida_premcor_coex expansion project_8.21.08 43 LIST OF ATTACHMENTS • "A" Area of land owned by Premcor • "B" Description of project and timetables for COEX II PROJECT • "C" Description of project and timetables for Gasification Project • "D" Products presently produced by the Company • "E" Existing values of land, equipment and units • "F" Description of owners of property • "G" List of companies whose services, equipment, units and/or goods are not readily available from Port Arthur contractors or vendors • "H" Area to be annexed pertaining to Entergy Gulf Oil Substation and meters • "I" Area to be annexed pertaining to Entergy Taylor Bayou Substation and meters z.ida~remcor_coex expansion project 8.21.08 44