REPLACEMENT AGREEMENT FOR MANAGEMENT
OF ASH AND OTHER BYPRODUCTS GENERATED
AT NAVAJO GENERATING STATION
TABLE OF CONTENTS
1.0 PARTIES 2.0 RECITALS 3.0 DEFINITIONS 4.0 MANAGEMENT OF ASH AND OTHER BYPRODUCTS 5.0 CONSTRUCTION AND OPERATION OF NEW FACILITIES 6.0 USE OF WATER IN PROCESSING 7.0 COMPENSATION SCHEDULE 8.0 INTELLECTUAL PROPERTY RIGHTS 9.0 EFFECTIVE DATE, SUCCESSION OF PRIOR AGREEMENT, TERM, AND TERMINATION 10.0 RISK OF LOSS 11.0 AUDIT 12.0 FIRE PROTECTION 13.0 HAZARDOUS MATERIALS AND WASTE 14.0 SAFETY 15.0 FORCE MAJEURE 16.0 INDEMNIFICATION 17.0 LIENS 18.0 OTHER BUSINESS OPPORTUNITIES, OTHER BYPRODUCTS 19.0 ALLOWANCES, CREDITS AND OTHER BENEFITS 20.0 DISPUTE RESOLUTION, ARBITRATION 21.0 INSURANCE 22.0 NAVAJO NATION ECONOMIC DEVELOPMENT 23.0 INDIAN PREFERENCE AND EQUAL OPPORTUNITY 24.0 ARCHAEOLOGICAL RESOURCE PROTECTION 25.0 NON-WAIVER 26.0 COMPLETE AGREEMENT
27.0 PAYROLL TAXES 28.0 NOTICES AND REPRESENTATIVES 29.0 CONFIDENTIALITY 30.0 SEVERABILITY 31.0 SUCCESSORS AND ASSIGNS 32.0 SUBCONTRACTS 33.0 GOVERNING LAW AND VENUE 34.0 ATTORNEYS FEES 35.0 HEADINGS
Exhibit A Ash Disposal Area Map Exhibit B Plant Site Map Exhibit C Equipment Lease Exhibit D ISG Initial Designated Work Areas Exhibit E Minimum Wage Scale
Page 2 of 44
REPLACEMENT AGREEMENT FOR MANAGEMENT
OF ASH AND OTHER BYPRODUCTS GENERATED
AT NAVAJO GENERATING STATION
This Agreement is entered into this _____ day of September, 2002 by the Salt River Project Agricultural Improvement and Power District (SRP), a political subdivision of the State of Arizona, as Operating Agent of the Navajo Generating Station ("NGS"), a steam electric generating station and facilities or structures related thereto located on the Navajo Reservation near Page, Arizona; and ISG Resources, Inc. ("ISG"), a Utah corporation having offices at 136 East South Temple, Salt Lake City, Utah, 84111. This Agreement replaces, succeeds, and supercedes the Coal Combustion Products Management Agreement entered into by the Parties on February 9, 2000 and all exhibits and addendums thereto (collectively, the "2000 CCP Contract").
2.1 Under an Indenture of Lease dated September 29, 1969 and a Grant of Rights-of-Way and Easements dated September 30, 1969 ("NGS Lease and Rights-of-Way"), the Navajo Nation and the United States granted SRP and the other participants in NGS (the "NGS Participants") the right to occupy and use lands on the Navajo Reservation to construct and operate NGS.
2.2 SRP is the operating agent of the NGS and enters into this Agreement on behalf of all of the NGS Participants.
2.3 All rights granted to the NGS Participants under the NGS Lease and Rights-of-Way extend to the NGS Participants' respective officers, agents, licensees, representatives, contractors, successors, and assigns.
2.4 The NGS Lease and Rights-Of-Way govern, among other matters, the disposal of Ash and Other Byproducts resulting from the operation of NGS, and allow construction, installation,
Page 3 of 44
major modification, or removal of facilities for the management or disposal of Ash and Other Byproducts with the prior written approval of the Secretary of Interior.
2.5 Rights granted to SRP and the NGS Participants under the NOS Lease and Rights of Way expire upon termination or expiration of the NOS Lease and Rights-of-Way, and the terms of those agreements govern disposition of facilities and improvements at that time.
2.6 SRP represents that it has rights to use water from the Colorado River at NOS pursuant to Water Service Contract No. 14-06-400-5003 between SRP and the United States; Arizona Revised Statutes 45166; Certificate of Water Right No. 4050; and Permits No. A3224 and A3224.001 issued by the Arizona Department of Water Resources.
2.7 SRP represents that it is entitled to use the water at NOS for thermal generation of electric energy and all other purposes related to the operation of NOS, specifically including the disposal of Ash and Other Byproducts.
2.8 SRP and ISO want to take advantage of technological advances in the processing, use and disposal of Ash and Other Byproducts and to provide for environmentally preferable management of Ash and Other Byproducts.
2.9 ISO is in the business of developing and using processes and equipment to process, sell, and dispose of Ash in ways that are environmentally preferable to disposal in landfills.
2.10 ISO has acquired certain technologies that enhance the sales of Ash and ISO is willing to expend capital to maximize the sales.
2.11 The Parties' goal is for ISO to market Ash and products made from Ash, to maximize the sale of Ash for beneficial reuse, to minimize disposal of Ash in the Ash Disposal Area, and to identify new markets for Ash and Other Byproducts.
2.12 As operating agent of NOS, SRP's primary business is to generate and sell electricity, and management and disposal of Ash and Other Byproducts are an integral part of this process.
2.13 The methods of management and disposal of Ash and Other Byproducts must not interfere with the generation and sale of electricity.
Page 4 of 44
2.14 Efficient management of Ash and Other Byproducts is critical to the continuation of NGS operations.
2.15 If, for any period of time, management of Ash and Other Byproducts generated at NGS were interrupted or suspended, SRP would be unable to continue operation of NGS for that period
2.16 The management of Ash and Other Byproducts generated at NGS requires certain specialized equipment.
2.17 Through this Agreement, ISG will provide the specialized equipment necessary to manage Ash and Other Byproducts generated at NGS and SRP will no longer maintain equipment for this purpose.
2.18 If SRP must resume management of Ash and Other Byproducts, either because of the termination of this Agreement or for any other reason, SRP must have immediate access to the ash management equipment used by ISG at NGS.
3.1 "Ash" means Bottom Ash, Cenospheres, economizer Ash, Fly Ash (including Marketable Fly Ash), Scrubber Byproduct, and any other materials resulting from the combustion of coal that are identified and included in this definition by agreement of the Parties.
3.2 "Ash Disposal Area" means the area identified in Exhibit 4 to the NGS Lease, which is attached to this Agreement as Exhibit A.
3.3 "Bottom Ash" means the coarse, solid, non-combustible particles resulting from the combustion of pulverized coal in steam electric generating plants, which is collected in furnace bottoms.
3.4 "Cenosphere" means a lightweight, inert, hollow sphere comprised largely of silica and alumina and filled with air and gases, which is a naturally occurring byproduct of the coal combustion process.
3.5 "Crystallizer Salt" means the solid byproduct from the treatment process of the crystallizer,
Page 5 of 44
3.6 "Fly Ash" means the fine solid particles of non-combustible material resulting from the combustion of coal in steam electric generating units, which are removed from the combustion gas by means of electrostatic collectors. Fly Ash includes Marketable Fly Ash.
3.7 "Hazardous Materials" means any substance or material that is or may in the future be defined as a hazardous or toxic substance or material by any Hazardous Materials Laws.
3.8 "Hazardous Materials Laws" means all laws, ordinances, rules, decrees, orders, or regulations of any federal, state, or local governmental authority relating to hazardous substances, hazardous materials, hazardous waste or toxic substances.
3.9 "Marketable Fly Ash" means Fly Ash that conforms to the most current ASTM C-618, Class F Fly Ash specification, including Tables lA and 2A, except that loss on ignition (LOI) may not exceed 1%, S03 may not exceed 1.5% and color may not be darker than "6" on a Munsell ten year color chart for columns 1 and 2.
3.10 "Limestone" means, for purposes of this Agreement, the limestone purchased by SRP under separate contract from an Apex, Nevada limestone mine operated by Chemical Lime Company of Scottsdale, Arizona.
3.11 "Other Byproducts" means Crystallizer Salt and Primary Water Treatment Solids.
3.12 "Plant Site" means the plant site and switchyard facilities for NGS, the area and location of which are shown and described on Exhibit 2 to the NGS Lease, which is attached to this Agreement as Exhibit B.
3.13 "Primary Water Treatment Solids" means the solid product resulting from the primary treatment of water at NGS.
3.14 "Scrubber Byproduct" means the solid byproduct produced from a flue gas desulfurization process.
4.0 MANAGEMENT OF ASH AND OTHER BYPRODUCTS
ISG shall manage all Ash and Other Byproducts generated at NGS through the sale of the Ash and Other Byproducts to third parties, processing of the Ash and Other Byproducts into products, or disposal of the Ash and Other Byproducts in the NGS Ash Disposal Area and
Page 6 of 44
Crystallizer Salt Retention Basins, as provided in the following subparagraphs. In performing its work under this Agreement, ISG shall operate as an independent contractor, and shall not act as an agent or employee of SRP. As an independent contractor, ISG is solely responsible for determining the manner and means for performing its work, and has complete charge and responsibility for persons engaged in the performance of its work. ISG shall have an exclusive right to use, promote, sell, market, anal manage Ash and Other Byproducts during the term of this Agreement, except that SRP shall have first right to use Ash in its operations, as provided for in Subparagraph 188.8.131.52.
4.1 Receipt of Ash and Other Byproducts. ISG shall manage, be responsible for and bear the cost of handling all Ash and Other Byproducts generated at NGS from the point of receipt by ISG. The point of receipt of Bottom Ash and Ash from the economizer is at the ash gate located at the bottom of the Bottom Ash dewatering bins. The point of receipt of Fly Ash is at the discharge chute of the rotary feeders at the bottom of the Fly Ash bins. The point of receipt of Scrubber Byproduct is at the storage area located below the belt filter system. The point of receipt of Crystallizer Salt is the discharge chute of the crystallizer, and the point of receipt of Primary Water Treatment Solids is at the point of discharge from the water treatment centrifuge.
4.2 Loading and Transportation.
4.2.1 Loading at NGS. ISG shall load all trucks for delivery of Ash and Other Byproducts to its customers or to its processing facilities. ISG shall weigh all trucks for delivery of Ash and Other Byproducts to its customers or to its processing facilities and complete weight tickets showing the certified weight of each shipment. SRP shall load all trucks for delivery of Ash to the Ash Disposal Area. ISG shall load all trucks for delivery of Other Byproducts to the Ash Disposal Area or the salt retention basins.
4.2.2 Loading Operation. SRP shall provide a dedicated operator(s) to load Ash for delivery to the Ash Disposal Area as necessary to comply with a load out schedule provided by ISG, and approved by SRP, 24 hours in advance. If, at any time, SRP determines that ISG's system of operations for the loading, transportation, or disposal of Ash or Other Byproducts
Page 7 of 44
creates a threat to the generation of electricity at NGS, SRP may require ISG to operate on a 24 hours per day basis until SRP determines that the threat is eliminated.
4.2.3 Maintenance of Loading Equipment. In order to preclude load out delays, SRP shall maintain all load out equipment including the Fly Ash unloading and Bottom Ash systems at NGS, above and including the point of receipt, as well as the belts, filters, and other similar equipment. SRP shall keep an inventory of spare parts adequate to make necessary repairs to the equipment, and shall have manpower resources adequate to allow load out to proceed on schedule. SRP shall allow ISG, under SRP's direction, to assist with expediting efforts to return NGS systems to service whenever those systems fail.
4.2.4 Transportation. ISG shall haul Limestone from Apex, Nevada, to NGS, and Fly Ash from NGS to ISG's Apex, Nevada, rail transload facility. The terms of the agreement between SRP and ISG for transportation of Limestone and Fly Ash between NGS and ISG's Apex, Nevada, transload facility are as follows:
184.108.40.206 ISG shall continue to use Chance Corporation
("Chance") as a subcontractor carrier to haul Limestone and Fly Ash
with ISG's trailers, for so long as Chance continues to comply with the
terms of its subcontract with ISG.
220.127.116.11 ISG shall haul all Limestone ordered by SRP from Apex,
Nevada to meet the requirements of the NGS sulfur dioxide scrubbers.
ISG shall coordinate deliveries of Limestone so that SRP has sufficient
inventory of limestone in the NGS Limestone system hoppers and silos to
operate the scrubbers at all times.
18.104.22.168 For transportation of Limestone from Apex, Nevada to
NGS, SRP shall pay ISG as follows:
A. SRP shall pay ISG ton of Limestone transported
during the year 2002.
B. In January of 2003, and at the beginning of each
quarter thereafter, the Operating Representatives shall adjust
the base price for increases or decreases in the cost of
diesel fuel, which represents : of the base price. The
Page 8 of 44
Diesel Fuel component of the base price shall be adjusted up
or down based on the most recent Lundberg Index (Yellow
sheets) representative of the region in which ISG purchases
fuel. All other components of the base price, including labor
and equipment costs, shall remain fixed throughout the term of
C. If Limestone must be moved from SRP's reserve pile
for use in the scrubbers because of late deliveries caused by
ISG or its subcontractors, ISG shall either move the Limestone
and restock the reserve pile or reimburse SRP for the actual
costs SRP incurred in handling the Limestone from the reserve
pile and restocking the reserve pile, based on direct costs
from NGS's work management cost accounting system and 80% of
the applicable national average equipment rental rate listed
in the then-current AED Green Book.
D. SRP shall notify ISG if Limestone deliveries get
so far behind schedule that in the judgment of SRP it becomes
necessary to hire additional trucks to maintain scrubber
operation and reserve pile inventory. ISG shall either cure
the delivery delays within 24 hours or reimburse SRP for the
cost of those trucks.
E. All payments and reimbursements accruing during a
month under this Subparagraph must be included in the invoice
prepared under Subparagraph 7.11 for that month, and paid or
credited within 60 days after the end of the month.
22.214.171.124 ISG shall backhaul Ash to ISG's Apex Nevada transload
facility at ISG's sole expense.
Page 9 of 44
4.3 Marketing and Sale of Ash and Other Byproducts.
4.3.1 ISG Marketing Responsibilities.
126.96.36.199 Marketing of Ash. ISG shall provide all labor,
equipment, logistics, transportation and business coordination to
market and sell Ash, and products made from Ash, as set forth in this
188.8.131.52 Markets for Other Byproducts; Future Agreements. ISG
shall manage Other Byproducts through disposal as set forth in this
Agreement, but shall notify SRP if it becomes aware of new markets for
Other Byproducts, or products made from these substances. If new
markets are identified by ISG, the Parties may negotiate an agreement
providing for the marketing and sale of Other Byproducts generated at
4.3.2 Schedule of Annual Purchases. For each year that this
Agreement is in effect, ISG shall provide SRP with an annual schedule
of anticipated purchases of Ash and Other Byproducts. The schedule will
include 12 individual months. ISG shall revise the schedule whenever a
material change can be reasonably anticipated by ISG, and shall provide
a revised copy to SRP. The operating Representatives shall agree on due
dates for the schedule.
4.4.1 Disposal Responsibility. ISG shall furnish all supervision, labor, services, and equipment, and perform all operations required to haul, handle, and permanently store Ash and Other Byproducts, as follows:
184.108.40.206 Transportation. ISG shall transport Ash and Other
Byproducts, other than Crystallizer Salt, to the NGS Ash Disposal Area.
220.127.116.11 Deposit. ISG shall dispose of all Ash and Other
Byproducts, other than Crystallizer Salt, that are not used by SRP or
sold to ISG by placing them within the NGS Ash Disposal Area, as has
been the historical practice of SRP and its contractors during the term
of the NGS Lease. If the deposition material is comprised of Bottom Ash
and Fly Ash, the Fly Ash should be laid down to a thickness of 2 feet
with a 6-inch cap of Bottom Ash on top. If the deposition material is
comprised of Bottom Ash and Scrubber
Page 10 of 44
Byproduct, the Bottom Ash should be laid down to a thickness of 2 feet
with a one-foot cap of Scrubber Byproduct on top. The surface layer of
each embankment face and surface contour must be comprised of a 6 inch
layer of Bottom Ash over a 2 foot layer of Fly Ash or, if there is
insufficient Fly Ash available to complete a 2 foot layer, a 2 foot
layer of Scrubber Byproduct over a 2 foot layer of Bottom Ash.
18.104.22.168 Site Preparation. ISG shall prepare the site before
placement of material. Before placing material in outcropping Navajo
sandstone, ISG shall excavate and remove all existing vegetation and
debris in the area, inspect all exposed areas, and fill all wide cracks
and fractures in the exposed bedrock with properly compacted Fly Ash
fill. Before placing material in native dune sand ISG shall excavate
and remove all existing vegetation and debris in the area. The dune
sand foundation should then be compacted prior to placing Fly Ash by
pre-wetting the surface by sprinkling with water. Intensive sprinkling
will be required to thoroughly wet the dune sands in order that the
densification of deeper sand layers by vibratory methods will be
effective. ISG shall then compact the dune sand with the vibratory
roller "RayGo-Rascal" - Model 600A operating at a speed of
approximately 2.0 to 2.5 feet per second, using a minimum of 5 passes.
Any other vibratory roller that will produce equivalent dynamic
compactive effort can be used to compact the dune sand.
22.214.171.124 Comp action. ISG shall compact the material deposited
in the Ash Disposal Area, as it is deposited. Prior to the placement of
material in an Ash lift, the areas should be rolled with a Caterpillar
D-4 dozer or equivalent tracked machine to create a rough surface. The
rolled surface should be sprinkled with water. Two passes of water
spraying immediately preceding the placing of an ash lift is considered
adequate. The Ash should be spread using appropriate equipment in a
manner to achieve the thicknesses specified in Subparagraph 126.96.36.199.
Any tracked or pneumatic equipment may be used to spread the Ash;
however, light tracked equipment has been found to be very satisfactory
for this operation. The dumping operation should be continued in such a
Page 11 of 44
manner to provide a storage area for the surface water run-off within
the compacted Ash embankment. Immediately following the spreading of
Ash, the Ash should be compacted with three passes of pneumatic
equipment. The "Clark Michigan dozer Model 380" large frontend loader
is recommended for compaction. Any other roller can be used to compact
the Ash. Equipment speed during compaction may not be greater than 5
miles per hour. For each lift the rolling process should be
accomplished in a manner so as to overlap the adjacent compacted tread
areas of the rolled surface and thus cover the entire width of a
particular run. All additional lifts should be placed and compacted in
accordance with the aforementioned operations. The embankment must be
constructed as a series of small terraced fills. Maximum height of each
embankment must not exceed 15 feet. The face slope of the embankment
should be 2.5 horizontal to 1 vertical (2-1/2:1). The back slope of the
embankment should be (-)1.5%. The toe of each successive embankment
must be set back 60 feet from the peak of the previous embankment. The
fills are to be sloped in the manner shown on drawing A-665-C217 so as
to provide storage for the surface water runoff. The runoff is to be
contained within the ash disposal embankment itself, and the fill
slopes must be satisfactorily maintained at all times. ISG shall keep
current with placement, and ISG shall conduct its compaction operations
in accordance with engineering drawings A-665-C216/1 Ash Disposal Area
Development and Monitoring Plan, and A-665-C217 Ash Disposal Area
Sections and Details.
188.8.131.52 Cover. ISG shall cover the deposited material in the
engineered fill of the Ash Disposal Area using slope cover from the
canyons located inside the Ash Disposal Area. As soon as practical
after completion of each of the terraced fills, but in no event later
than eight months after completion, the completed embankment face and
60 foot set back area must be covered with at least a two foot thick
layer of native soils (dune sand) from the canyons located inside the
Ash Disposal Area. After the canyon sand has been depleted, the stored
sand in front of the starter dike can be used. If the
Page 12 of 44
assigned sand is depleted, SRP shall either provide slope cover to the
Ash Disposal Area or compensate ISG for loading and transporting slope
cover to the Ash Disposal Area.
184.108.40.206 Storm Water. ISG shall ensure proper handling of storm
runoff in the Ash Disposal Area by constructing slopes in compliance
with the engineering drawings shown on Exhibit A. The Ash must be
deposited in such a manner that storm water runoff will be contained
within the Ash embankment. The 60-foot wide benches with the 1-1/2
percent slope will contain the 100-year storm runoff falling directly
on the bench and its uphill slope. The final area must be sloped so
that all upstream runoff will be contained.
220.127.116.11 Dust Control. ISG shall control and mitigate
wind-blown dust on the haul road and in the Ash Disposal Area through
the application of water and adherence to sound dust mitigation
practices. All haul roads and exposed ash fill must be sprinkled with
water so that dust will not blow from the areas. Alternately,
environmentally approved dust palliatives may be used.
18.104.22.168 Erosion Control. ISG shall control erosion of the
slopes of the Ash Disposal Area by constructing slopes in compliance
with the engineering drawings shown on Exhibit A and promptly filling
any gullies and channels.
22.214.171.124 Design, Engineering, Closure. ISG is not responsible
for design or engineering of any portion of the Ash Disposal Area, or
for closure of the Ash Disposal Area under state or federal law.
126.96.36.199 Maintenance of Haul Road and Retention Basins. ISG
shall maintain the Ash haul road by periodically grading to the
predetermined profile established-in the following engineering
* A-665-C200 Ash Haul Road On-Site Plan A-665-C201
* Ash Haul Road On-Site ProfileA-665-C204
* Ash Haul Road Sections and Details Sheet 1A-665-C101
* Location and Vicinity Plan A-665-C202
Page 13 of 44
* Ash Haul Road Off-Site Plan & Profile
ISG shall maintain associated drainage retention basins, which have
been created to prevent any materials from being transported to natural
drainage courses by any storm or maintenance water runoff. The location
of these retention basins are shown on drawing A-665-C 1002/3 Ash Haul
Road Development and Surface Drainage Map Storm Water Pollution
Prevention Plan. SRP shall identify and provide ISG, at no cost to ISG,
aggregate necessary for ISG's maintenance activities.
188.8.131.52 Crystallizer Salt. ISG shall transport Crystallizer
Salt to lined salt retention basins maintained by ISG at the Plant Site
and dispose of the Crystallizer Salt in the lined salt retention
4.4.2 Termination of Disposal Responsibility. SRP, at its sole discretion, may terminate ISG's responsibility to dispose of unsold or unprocessed Ash and Other Byproducts generated at NGS. To the extent that ISG has purchased any disposal-related equipment from SRP, SRP shall re-purchase the equipment from ISG. SRP is entitled to buy any of ISG's other disposal-related equipment. SRP is entitled to take possession of all purchased equipment immediately upon notice of termination of disposal responsibilities to ISG. SRP shall pay ISG the appraisal or market value of any equipment taken into SRP's poss