§ 35.22.3. Indemnification and Insurance.

A.

Indemnification and Express Negligence Provisions.

1.

Each Gas Well Permit issued by the City shall include the following language: OPERATOR DOES HEREBY EXPRESSLY RELEASE AND DISCHARGE ALL CLAIMS, DEMANDS, ACTIONS, JUDGMENTS, AND EXECUTIONS WHICH IT EVER HAD, OR NOW HAS OR MAY HAVE, OR ASSIGNS MAY HAVE, OR CLAIM TO HAVE, AGAINST THE CITY OF DENTON, AND/OR ITS DEPARTMENTS, AGENTS, OFFICERS, SERVANTS, SUCCESSORS, ASSIGNS, SPONSORS, VOLUNTEERS, OR EMPLOYEES (COLLECTIVELY REFERRED TO AS THE "INDEMNIFIED PARTIES"), RELATING TO OR ARISING OUT OF BODILY INJURY, KNOWN OR UNKNOWN, AND INJURY TO PROPERTY, REAL OR PERSONAL, OR IN ANY WAY INCIDENTAL TO OR IN CONNECTION WITH THE PERFORMANCE OF THE WORK PERFORMED BY THE OPERATOR UNDER A GAS WELL PERMIT. TO THE FULLEST EXTENT PERMITTED BY LAW, OPERATOR SHALL DEFEND, PROTECT, INDEMNIFY, AND HOLD HARMLESS THE INDEMNIFIED PARTIES FROM AND AGAINST EACH AND EVERY CLAIM, DEMAND, OR CAUSE OF ACTION AND ANY AND ALL LIABILITY, DAMAGES, OBLIGATIONS, JUDGMENTS, LOSSES, FINES, PENALTIES, COSTS, FEES, AND EXPENSES INCURRED IN DEFENSE OF THE INDEMNIFIED PARTIES, INCLUDING, WITHOUT LIMITATION, BODILY INJURY AND DEATH IN CONNECTION THEREWITH WHICH MAY BE MADE OR ASSERTED BY OPERATOR, ITS AGENTS, ASSIGNS, OR ANY THIRD PARTIES ON ACCOUNT OF, ARISING OUT OF, OR IN ANY WAY INCIDENTAL TO OR IN CONNECTION WITH THE PERFORMANCE OF THE WORK PERFORMED BY THE OPERATOR UNDER A GAS WELL PERMIT. THE OPERATOR AGREES TO INDEMNIFY AND HOLD HARMLESS THE INDEMNIFIED PARTIES FROM ANY LIABILITIES OR DAMAGES SUFFERED AS A RESULT OF CLAIMS, DEMANDS, COSTS, OR JUDGMENTS AGAINST THE INDEMNIFIED PARTIES RELATING TO OR ARISING OUT OF THE ACTS OR OMISSIONS OF THE INDEMNIFIED PARTIES OCCURRING ON THE DRILLING AND PRODUCTION SITE OR OPERATION SITE IN THE COURSE AND SCOPE OF INSPECTING AND PERMITTING THE GAS WELLS INCLUDING, BUT NOT LIMITED TO, CLAIMS AND DAMAGES ARISING IN WHOLE OR IN PART FROM THE SOLE NEGLIGENCE OF THE INDEMNIFIED PARTIES OCCURRING ON THE DRILLING AND PRODUCTION SITE IN THE COURSE AND SCOPE OF INSPECTING AND PERMITTING THE GAS WELLS. IT IS UNDERSTOOD AND AGREED THAT THE INDEMNITY PROVIDED FOR IN THIS SECTION IS AN INDEMNITY EXTENDED BY THE OPERATOR TO INDEMNIFY AND PROTECT THE INDEMNIFIED PARTIES FROM THE CONSEQUENCES OF THE NEGLIGENCE OF THE INDEMNIFIED PARTIES, WHETHER THAT NEGLIGENCE IS THE SOLE CAUSE OF THE RESULTANT INJURY, DEATH, AND/OR DAMAGE. LIABILITY FOR THE SOLE NEGLIGENCE OF THE CITY IN THE COURSE AND SCOPE OF ITS DUTY TO INSPECT AND PERMIT THE GAS WELL IS LIMITED TO THE MAXIMUM AMOUNT OF RECOVERY UNDER THE TORT CLAIMS ACT.

B.

Insurance.

1.

General Requirements.

a.

The Operator shall provide or cause to be provided the insurance described below for each well for which a Gas Well Permit is issued, and shall maintain such insurance until the well is abandoned and the site restored, except as otherwise required in this Section. The Operator may provide the required coverage for multiple wells on a "blanket basis." Such coverage shall be approved by the Risk Manager for the City of Denton.

b.

Prior to issuance of the Gas Well Permit, the Operator shall furnish the City with a certificate(s) of insurance, executed by a duly authorized representative of each insurer, showing compliance with the insurance requirements set forth in this Section. A copy of the endorsements or other policy provisions adding the City as an additional insured to the insurance policies, endorsements providing the City thirty (30) days' written notice of cancellation or material change in coverage, and all waivers of subrogation shall be attached to the certificate(s) of insurance. Upon request, certified copies of the insurance policies shall be furnished to the City. The City's acceptance of documents that do not reflect the required insurance, or the City's failure to request the required insurance documents, shall not constitute a waiver of the insurance requirements set forth in this Section.

c.

In the event any insurance required by this Section is cancelled, the Gas Well Permit shall be suspended on the date of cancellation and the Operator's right to operate under the Gas Well Permit shall immediately cease until the Operator obtains the required insurance.

d.

The Operator shall provide the City thirty (30) days' written notice of any cancellation, non-renewal, or material change in policy terms or coverage, and the policies shall be endorsed to provide the City such notice.

e.

All insurance policies shall be written by an insurer authorized to do business in Texas and with companies with A: VIII or better rating in accordance with the current Best's Key Rating Guide, or with such other financially sound insurance carriers approved by the City.

f.

All insurance policies, with the exception of the workers compensation policy, shall be endorsed to name the City, its officials, employees, agents and volunteers as additional insureds on the policies. The additional insured coverage shall apply as primary insurance with respect to any other insurance or self-insurance programs maintained by the City, its officials, employees, agents and volunteers. A copy of each endorsement shall be provided to the City as evidence of coverage.

g.

All insurance policies shall be endorsed with a waiver of subrogation in favor of the City, its officials, employees, agents and volunteers. A copy of each endorsement shall be provided to the City.

h.

All insurance policies shall be written on an occurrence basis where commercially available.

i.

During the term of the Gas Well Permit, the Operator shall report, in a timely manner, to the Gas Well Division any known loss or occurrence which has caused, or may in the future cause, bodily injury or property damage.

2.

Required Insurance Coverages.

a.

Commercial General Liability Insurance. Operator shall maintain commercial general liability (CGL) insurance with a limit of not less than one million dollars ($1,000,000) each occurrence with a two million dollars ($2,000,000) aggregate. This insurance shall cover liability including, but not limited to, liability arising from premises, operations, blowout or explosion, products-completed operations, contractual liability, underground property damage, broad form property damage, and independent contractors. This insurance shall also include coverage for underground resources and equipment hazard damage. In addition to the additional insured requirements set forth above, the additional insured coverage provided to the City, its officials, employees, agents and volunteers shall include coverage for products-completed operations.

b.

Environmental Impairment (or Pollution Liability) Insurance. Operator shall maintain environmental impairment or pollution liability insurance with a limit of not less than five million dollars ($5,000,000). Such coverage shall not exclude damage to the lease site. If coverage is written on a claims-made basis, the Operator shall maintain continuous coverage or purchase tail coverage for four (4) years following the expiration or suspension of the Gas Well Permit, and the retroactive date(s) applicable to such coverage shall precede the date of issuance of the Gas Well Permit. Coverage shall apply to sudden and accidental pollution conditions resulting from the escape or release of smoke, vapors, fumes, acids, alkalis, chemicals, liquids or gases, waste material or other irritants, contaminants or pollutants. Where commercially available, Operator shall also maintain such coverage for gradual pollution incidents.

c.

Automobile Liability Insurance. Operator shall maintain automobile liability insurance with a limit of not less than one million dollars ($1,000,000) each accident. Such insurance shall cover liability arising out of any auto (including owned, non-owned, and hired autos).

d.

Worker's Compensation Insurance. Operator shall maintain workers compensation and employers liability insurance. The workers compensation limits shall be as required by statute and employers liability limits shall not be less than one million dollars ($1,000,000) each accident for bodily injury by accident and one million dollars ($1,000,000) each employee for bodily injury by disease.

e.

Excess (or Umbrella) Liability Insurance. Operator shall maintain excess (or umbrella) liability insurance with a limit of not less than twenty-four million dollars ($24,000,000) per occurrence with a twenty-four million dollar ($24,000,000) aggregate. Such insurance shall be excess of the commercial general liability insurance, automobile liability insurance and employers liability insurance as specified above.

f.

Control of Well Insurance. Operator shall maintain control of well insurance with a limit of not less than five million dollars ($5,000,000) per occurrence. The policy shall provide coverage for the cost of controlling a well that is out of control, re-drilling or restoration expenses, seepage and pollution damage. A five hundred thousand dollars ($500,000) sub-limit endorsement may be added for damage to property for which the Operator has care, custody, and control.