AN ORDINANCE GRANTING BLACK HILLS/KANSAS GAS UTILITY, LLC, d/b/a BLACK HILLS ENERGY, A DELAWARE CORPORATION, ITS SUCCESSORS AND ASSIGNS, A NATURAL GAS FRANCHISE AND THE RIGHT TO CONSTRUCT, OPERATE, MAINTAIN AND EXTEND A NATURAL GAS DISTRIBUTION PLANT AND SYSTEM IN THE CITY OF MAIZE, KANSAS; PRESCRIBING THE TERMS OF SAID GRANT AND RELATING THERETO; AND REPEALING ORDINANCE NO. 543.

Section 1. Definitions. Unless otherwise specified, the following terms as used in this Ordinance shall mean as follows:

City and Grantor shall mean the City of Maize, Kansas.

Company and Grantee shall mean Black Hills/Kansas Gas Utility, LLC, d/b/a Black Hills Energy, a Delaware Corporation.

Distributed or Distribution shall mean all sales, distribution or transportation of gas not sold by the Company to any consumer or user within the City by the Company or by others through the Facilities of the Company in the Right-of-Way.

Facilities shall mean the natural gas mains, pipes, boxes, reducing and regulating stations, laterals, conduits and service extension, together with all necessary appurtenances thereto.

Gross Receipts shall mean any and all compensation and other consideration derived directly or indirectly by Company from any Distribution of natural gas to a consumer for any use, including domestic, commercial and industrial purposes, and including without limitation interruptible sales and single sales; and shall include revenues from any operation or use of any or all of the Facilities in the Right-of-Way by the Company or others including without limitation charges as provided in tariffs filed and approved, and shall also include all fees or rentals received by the Company for the lease or use of pipeline capacity within the corporate limits of the City, but such term shall not include revenue from certain miscellaneous charges and accounts as set forth in the Terms and Conditions of Gas Service on file and approved, including but not limited to connection and disconnection fees, reconnection fees, customer project contributions, returned check charges, temporary service changes, and delayed or late payment charges as such terms are used in tariffs filed and approved.

MCF shall mean a measurement of natural gas equal to one thousand (1,000) cubic feet; a cubic foot is the quantity of natural gas occupying one cubic foot of space at a pressure of 14.73 PSIA and a temperature of 60 degrees Fahrenheit. It is assumed for purposes of this Ordinance that one MCF equals one million (1,000,000) British Thermal Units (BTUs).

Public Improvement shall mean any existing or contemplated public facility, building or capital improvement project, including without limitation streets, alleys, sidewalks, sewer, water, drainage, right-of-way improvement and Public Projects.

Public Project shall mean any project planned or undertaken by the City or any governmental entity for construction, reconstruction, maintenance, or repair of public facilities or improvements or any other purpose of a public nature.

Right-of-Way shall mean present and future streets, alleys, rights-of-way and public easements, including easements dedicated in plats of the City for streets, and alleys.

Streets shall mean the entire width between property lines of land, property or an interest therein of every way publicly maintained where any part thereof is open to the use of the public for purposes of vehicular traffic, including street, avenue, boulevard, highway, expressway, alley or any other public way for vehicular travel by whatever name.

Transport Gas shall mean all natural gas transported by the Company or by others, but not sold by the Company, to any consumer or user within the City through the Facilities of the Company in the Right-of-Way.

Volumetric Rate shall mean seven cents ($0.07) per MCF of Transport Gas or such amounts as may hereafter be determined and set in accordance with the provisions of Section 4(D).

Section 2. Grant. (A) There is hereby granted to the Company the non-exclusive right, privilege and franchise to construct, maintain, extend and operate its Facilities in, through and along the Right-of-Way of the City for the purpose of supplying natural gas to the City and the inhabitants thereof for the full term of this franchise, subject to the terms and conditions herein set forth. Nothing in this Grant shall be construed to franchise or authorize the use of the Company’s Facilities or the Right-of-Way by the Company or others for any purpose other than the provision of natural gas. The Company will not allow a subsidiary, affiliate, or a third party to acquire rights to occupy the Right-of-Way under this franchise; provided, that nothing in this Section shall prevent the Company from allowing the use of its facilities by others when such use is compensated to the City under the provisions of this franchise. (B) The Company shall not enter into or continue any arrangement by which natural gas owned by any party other than the Company shall be transported, distributed or sold through any portion of the Company’s Facilities in the Right-of-Way for delivery to any person within the City unless the City is compensated for such use by the Company, transporter, consumer or some other party. (C) By this Franchise, the Company is granted the authority to collect on behalf of the City the compensation to be made to the City by other parties using the Company’s Facilities for Distribution of Transport Gas. The Company agrees to collect such sums for the City and to submit such payments in the manner provided. Nothing in this Section allowing the transportation of gas owned by others shall relieve the Company from the responsibility of maintaining a franchise for the placement of its Facilities in the Right-of-Way.

Section 3. Term. (A) The term of this franchise shall be ten (10) years from the effective date of this ordinance, except as otherwise provided in this Section. (B) Upon written request of either the City or the Company, the franchise may be reviewed after five (5) years from the effective date of this ordinance and either the City or the Company may propose amendments to any provision of this franchise by giving thirty (30) days written notice to the other of the amendment(s) desired. The City and the Company shall negotiate in good faith in an effort to agree upon mutually satisfactory amendment(s). (C) Upon written request of either the City or the Company, the franchise shall be reopened and renegotiated at any time upon any of the following events:(1) change in federal, state or local law, regulation or order which materially affects any rights or obligations of either the City or the Company, including but not limited to the scope of the grant to the Company or the compensation to be received by the City; (2) change in the structure or operation of the natural gas industry which materially affects any rights or obligations of either the City or the Company, including but not limited to the scope of the grant to the Company or the compensation to be received by the City; (3) any other material and unintended change or shift in the economic benefit the City or the Company relied upon and anticipated upon entering into this franchise. (D) The compensation provision of this franchise shall be reopened and renegotiated if energy consumers within the City have access to alternative natural gas suppliers or other suppliers of energy through the pipelines who use the Right-of-Way and do not pay a franchise fee or other payment substantially equivalent to this franchise, which results in a material and unfair disadvantage to the Company. The use of Right-of-Way provision of this franchise shall be reopened and renegotiated if energy consumers within the City have access to alternative natural gas suppliers or other suppliers of energy through pipelines who use the Right-of-Way and do not have the requirements on the use of the Right-of-Way substantially equivalent to the requirements of this franchise, which results in a material and unfair disadvantage to the Company. Upon any such event, the City shall have up to one hundred eighty (180) days after written request of the Company in which to restore competitive neutrality, provided that any adjustment in compensation resulting from renegotiations under this subsection (D) shall be effective no later than ninety (90) days after such notice. (E) Failure of the City and the Company to successfully renegotiate the materially affected provisions of the franchise under subsections (B), (C) or (D) shall give rise to dispute resolution as follows: At the expiration of one hundred eighty (180) days from the date of the written request (or sooner if requested by both the City and the Company) the City and the Company shall each select a representative who shall jointly select a third representative. The three representatives shall hear the positions of the City and the Company and shall determine the matters in disagreement by majority vote. Such decision shall be presented to the City and the Company as the renegotiated language under subsection (B), (C) or (D). Rejection of the dispute resolution by either the City or the Company shall give rise to the remedies provided by Section 9, or at the option of the parties, the franchise shall remain in effect according to its then existing terms. (F) Amendments under this section, if any, shall be made by ordinance as prescribed by statute. The franchise shall remain in effect, according to its terms pending completion of any review or renegotiation provided by subsections (B), (C), (D) or (E).

Section 4. Compensation to the City. In consideration of and as compensation for the franchise hereby granted to the Company by the City, the Company shall make an accounting to the City of all natural gas that has been Distributed on a monthly basis (less gas distributed to the City for City use). The Company shall pay the City:(A) a sum equal to percent (           %) of the Gross Receipts received from the Distribution of natural gas; (B) a sum equal to the Volumetric Rate multiplied by the number of MCF of Transport Gas; (C) the sums in (A) and (B) above shall be adjusted for uncollectible receivables and for uncollectible receivables which are later collected. (D) The City may request that the Volumetric Rate be adjusted once annually by giving the Company written notice between the anniversary date of the adoption of this Franchise Ordinance and sixty (60) days thereafter. The adjusted Volumetric Rate shall not be effective unless and until it is consented to by the Company, which consent shall not be unreasonably withheld. The Company, after receiving a notice concerning adjustment of the Volumetric Rate, shall notify the City in writing concerning whether it consents or does not consent within sixty (60) days of the receipt of such notice. If the Company does not consent, the reason for not consenting shall be set out in such written response. The Company’s failure to respond within such time period shall constitute consent by the Company. The adjusted Volumetric Rate shall be effective commencing the first month following the date consent to the adjustment is given by the Company. (E) Any consideration hereunder shall be reported and paid to Grantor by Grantee on a monthly basis. Such payment shall be made not more than thirty (30) days following the close of the period for which payment is due. Initial and final payments shall be prorated for the portions of the periods at the beginning and the end of the term of this Franchise Ordinance. (F) In the event the accounting rendered to the City by the Company is found to be incorrect, then payment shall be made on the corrected amount, it being agreed that the City may accept any amount offered by the Company, but the acceptance thereof by the City shall not be deemed a settlement of such item if the amount is in dispute or later found to be incorrect. The Company agrees that all of its books, records and documents and all of its contracts and agreements as may be reasonably necessary for an effective compliance review of this ordinance shall at all reasonable times be opened to the inspection and examination of the officers of the City and its duly authorized agents, auditor and employees for the purpose of verifying said accounting or for any other lawful purpose. Notwithstanding the obligation herein, the Company shall have the right to request the reasonable protection of proprietary information and to provide redacted documents or require the City or its agents to enter into such agreements pertaining to confidentiality as may reasonably protect the proprietary information of the Company, but which do not unreasonably frustrate the purposes of this subsection. (G) For each and every month, or any part thereof, that the compensation provided for by this franchise remains unpaid after the same becomes due and payable to the City, there shall be added to such payment, as a late charge, a sum equivalent to the statutory rate for interest on the unpaid amount. Such late charge shall be applicable to sums that are delinquent as well as any sums due the City as the result of an audit or review of the Company’s records.

Section 5. Payments and Charges. The payments and compensation herein provided shall be in lieu of all other licenses, charges and fees, except that the usual general property taxes and special ad valorem property taxes, sales and excise taxes and any permit fees and charges for pavement cuts or other permit fees and charges based on restoring premises to their same condition, or charges made for privileges which are not in any way connected with the natural gas business, as such, will be imposed on the Company and are not covered by the payments herein. From and after the date hereof, however, the permit fees required of the Company by an ordinance that may hereafter be adopted for a permit to excavate in any unpaved street, alley or other public place is deemed a part of the compensation paid in Section 4 and shall not be separately assessed or collected by the City; in no event, however, shall this provision be interpreted to waive the requirement of notice to the City and the procedural requirements of such ordinance.

Section 6. Use of Right-of-Way. In the use of Right-of-Way under this franchise, the Company shall be subject to all rules, regulations, policies, resolutions and ordinances now or hereafter adopted or promulgated by the City in the reasonable exercise of its police power. In addition, the Company shall be subject to all rules, regulations, policies, resolutions and ordinances now or hereafter adopted or promulgated by the City relating to permits, sidewalk and pavement cuts, utility location, construction coordination, screening and other requirements on the use of the Right-of-Way; provided, however, that nothing contained herein shall constitute a waiver of or be construed as waiving the right of the Company to oppose, challenge or seek judicial review of, in such manner as is now or may hereafter be provided by law, any such rules, regulation, policy, resolution and ordinance proposed, adopted or promulgated by the City. Further, the Company shall comply with the following:(A) The Company’s use of Right-of-Way shall in all matters be subordinate to the City’s use of Right-of-Way for any public purpose. The Company shall coordinate the installation of its Facilities in Right-of-Way in a manner which minimizes adverse impact on Public Improvements, as reasonably determined by the City. Where installation is not otherwise regulated, the Facilities shall be placed with adequate clearance from such Public Improvements so as not to conflict with such Public Improvement. (B) All earth, materials, sidewalks, paving, crossings, utilities, Public Improvements or improvements of any kind located within the Right-of-Way damaged or removed by the Company in its activities under this franchise shall be fully repaired or replaced promptly by the Company at its sole expense and to the reasonable satisfaction of the City in accordance with the ordinances and regulations of the City pertaining thereto. (C) The Company shall notify the City not less than three (3) working days in advance (such notice to be adequate for timely notice on the governing body agenda under City procedures) of any construction, reconstruction, repair or relocation of Facilities which would require any street closure which reduces traffic flow to less than two (2) lanes of moving traffic. Except in the event of an emergency, as reasonably determined by the Company, no such closure shall take place without prior authorization from the City. In addition, all work performed in the traveled way or which in any way impacts vehicular or pedestrian traffic shall be properly signed, barricaded and otherwise protected. Such signing shall be in conformance with the latest edition of the Federal Highway Administration’s Standards and Guidelines for Work Zone Traffic Control, unless otherwise agreed to by the City. (D) The Company shall cooperate promptly and fully with the City and take all reasonable measures necessary to provide accurate and complete information regarding the nature and horizontal and vertical location of its facilities located within the Right-of-Way when requested by the City or its authorized agents for a Public Project. Such location and identification shall be at the sole expense of the Company without expense to the City, its employees, agents or authorized contractors. The Company shall designate and maintain an agent, familiar with the Facilities, who is responsible for timely satisfaction of the information needs of the City and other users of the Right-of-Way. The Company shall coordinate with the City on the design and placement of Facilities in the Right-of-Way during and for the design of Public Improvements. At the request of the Company, the City may include design for Facilities in the design of Public Projects. (E) Relocation of Company Facilities. If the City elects to change the grade or otherwise alter any street, alley, avenue, bridge, public right-of-way or public place for a public purpose, the Company, upon reasonable notice from the City, shall remove and relocate its Facilities or equipment situated in the public Rights-of-Way, if such removal is necessary to prevent interference and not merely for the convenience of the City, at the cost and expense of the Company. If the City orders or requests the Company to relocate its facilities or equipment primarily for non-public purposes or the primary benefit of a commercial or private project, or as a result of the initial request of a commercial or private developer or other non-public entity, and such removal is necessary to prevent interference and not merely for the convenience of the City or other Right-of-Way user, the Company shall receive reimbursement for the cost of such relocation as a precondition to relocating its facilities or equipment. The City shall consider reasonable alternatives in designing its public works projects so as to not arbitrarily cause the Company unreasonable additional expense in exercising its authority under this Section. The City shall also provide a reasonable alternative location for the Company’s Facilities. (F) It shall be the responsibility of the Company to take adequate measures to protect and defend its Facilities in the Right-of-Way from harm or damage. If the Company fails to accurately locate Facilities when requested, it has no claim for costs or damages against the City and its authorized contractors except to the extent the City and its authorized contractors are responsible for the harm or damage by their negligence or intentional conduct. The Company shall be responsible to the City and its agents, representatives and authorized contractors for all damages including but not limited to delay damages, repair costs, down time, construction delays, penalties or other expenses of any kind arising out of the failure of the Company to perform any of its obligations under this franchise except to the extent another party is responsible for the harm or damage by its negligence or intentionally caused harm; provided, that if the responsibility of the City and its agents, representatives and authorized contractors does not arise as a contractual obligation, the Company shall have the right at its option to step in an defend such claim in its own right. The above general provisions notwithstanding, the City and its authorized contractors shall take reasonable precautionary measures including calling for utility location through Kansas One Call and exercising due caution when working near Company Facilities. (G) All technical standards governing construction, reconstruction, installation, operation, testing, use, maintenance and dismantling of the Facilities in the Right-of-Way shall be in accordance with applicable present and future federal, state and City laws and regulations including but not limited to the most recent standards of the Kansas Corporation Commission and Department of Transportation, or such substantive equivalents as may hereafter be adopted or promulgated. It is understood that the standards established in this paragraph are minimum standards and the requirement established or referenced in this franchise may be additional to or stricter than such minimum standards. (H) The City encourages the conservation of Right-of-Way by the sharing of space by all utilities. Notwithstanding provision of this franchise prohibiting third party use, to the extent required by federal or state law, the Company will permit any other franchised entity by appropriate contract or agreement negotiated by the parties to use any and all Facilities constructed or erected by the Company.

Section 7. Indemnity and Hold Harmless. The Company shall hold and save the City, its officers, employees, agents and authorized contractors harmless from and against all claims, demands, expenses, liability and costs, including attorney fees, to the extent occasioned in any manner by the Company’s occupancy of the Right-of-Way, except to the extent that such were caused by the negligence or intentional conduct of the City, its officers, employees, agents or authorized contractors. In the event a claim shall be made or an action shall be instituted against the City growing out of such occupancy of the Right-of-Way by Facilities of the Company, then upon notice by the City to the Company, the Company will assume responsibility for the defense of such actions at the cost of the Company, subject to the option of the City to appear and defend, at its own cost, any such case; provided, that the Company shall have no duty to defend any such action to the extent that such action has resulted from the negligence or intentional conduct of the City, its officers, employees, agents or authorized contractors.

Section 8. Right to Assign. This franchise shall be assignable only in accordance with the laws of the state of Kansas, as the same may exist at the time when any assignment is made.

Section 9. Termination and Forfeiture of Franchise. In case of failure on the part of said Grantee, its successors and assigns, to comply with any of the provisions of this ordinance, or if said Grantee, its successors and assigns should do or cause to be done any act or thing prohibited by or in violation of the terms of this ordinance, said Grantee, its successors and assigns shall forfeit all rights and privileges granted by this ordinance and all rights hereunder shall cease, terminate and become null and void, provided that said forfeiture shall not take effect until the Grantor shall carry out the following proceedings:(A) Before Grantor proceeds to forfeit said franchise, as in this section prescribed, it shall first serve a written notice upon the manager of said Grantee, and upon the trustee or trustees in any deed of trust securing bonds of said Grantee of record in Sedgwick County, Kansas, or the office of the Secretary of the State of Kansas, by mailing notice to such trustee or trustees to the address designated in such trust deed, setting forth in detail in such notice the neglect or failure complained of, and said Grantee shall have ninety (90) days thereafter in which to comply with the conditions of this franchise. (B) If, at the end of such ninety (90) day period, the Grantor deems that the conditions of such franchise have not been complied with by the Grantee and that such franchise is subject to cancellation by reason thereof, the Grantor, in order to terminate such franchise, shall enact an ordinance setting out the grounds upon which said franchise or agreement is to be canceled or terminated. (C)(1) If, within thirty (30) days after the effective date of said ordinance, the Grantee shall not have instituted an action either in the District Court of Sedgwick County, Kansas, or some other court of competent jurisdiction to determine whether or not the Grantee has violated the terms of this franchise and that the franchise is subject to cancellation by reason thereof, such franchise shall be canceled or terminated at the end of such thirty (30) day period. (2) If, within such thirty (30) day period the Grantee does institute an action as provided in (1) above, to determine whether or not Grantee has violated the terms of this franchise and that the franchise is subject to cancellation by reason thereof, and prosecutes such action to final judgment with due diligence, then, in that event, in case the court finds that the franchise is subject to cancellation by reason of the violation of its terms, this franchise shall terminate thirty (30) days after such final judgment is rendered; provided, however, that the failure of said Grantee to comply with any of the provisions of this ordinance or the doing or causing to be done by said Grantee of anything prohibited by or in violation of the terms of this ordinance shall not be grounds for the forfeiture thereof when such act or omission on the part of the said Grantee is due to any cause or delay beyond the control of said Grantee, its successors and assigns, or bona fide legal proceedings.

Section 10. Rights and Duties of Grantee Upon Expiration of the Franchise. Upon expiration of this franchise, whether by lapse of time, by agreement between Grantee and Grantor or by forfeiture thereof, the Grantee shall have the right to remove any and all of its mains and pipes, laterals, appurtenances and equipment used in its said business within a reasonable time after such expiration, but in such event, it shall be the duty of the Grantee immediately upon such removal to restore the streets, avenues, alleys, parks and other public ways and grounds from which said pipes, laterals and other equipment are removed to as good condition as the same were before said removal was effected.

Section 11. Acceptance of Terms by Grantee. Within sixty (60) days after the final passage and approval of this ordinance, Grantee shall file with the City Clerk of the City of Maize its acceptance in writing of the provisions, terms and conditions of this ordinance, which acceptance shall be duly acknowledged before some officer authorized by law to administer oaths; and when so accepted the ordinance and acceptance shall constitute a contract between Grantor and Grantee subject to the provisions of the laws of the state of Kansas.

Section 12. Conditions of Franchise. This contract, franchise, grant and privilege is granted and accepted under and subject to all applicable laws and under and subject to all of the orders, rules and regulations now or hereafter adopted by governmental bodies now or hereafter having jurisdiction, and each and every provision hereof shall be subject to acts of God, fires, strikes, riots, floods, war and other causes beyond Grantee’s control. This franchise shall not be exclusive.

Section 13. Invalidity of Ordinance. If any clause, sentence or section of this ordinance shall be held to be invalid, it shall not affect the remaining provisions of this ordinance.

Section 14. Effective Date of Ordinance. This ordinance shall take effect and be in force from and after its passage and publication as required by law.

Section 15. Franchise Act. All contracts, grants, rights, privileges or franchises granted to Grantee in this ordinance for the use of the streets and alleys of the City of Maize shall be subject to and governed by the provisions of the Franchise Act (K.S.A. 12-201 et seq.) and amendments thereto.

Section 16. Repeal of Conflicting Ordinances. Ordinance No. 543, which was heretofore granted to this Grantee, and all other such ordinances and resolutions or parts thereof inconsistent or in conflict with the terms hereof, shall be canceled, annulled, repealed and set aside; provided, further, that this Ordinance shall become effective and be a binding contract between the Grantor and Grantee upon its final passage and approval by Grantor, in accordance with applicable laws and regulations, and upon Grantee’s acceptance by written instrument, within sixty (60) days of passage by the City of Maize and filing with the Clerk of the City of Maize, Kansas. The Clerk of the City of Maize, Kansas shall sign and affix the community seal to acknowledge receipt of such acceptance and return one copy to Grantee. If Grantee does not, within sixty (60) days following passage of this Ordinance, either express in writing its objections to any terms or provisions contained therein, or reject this Ordinance in its entirety, Grantee shall be deemed to have accepted this Ordinance and all of its terms and conditions.

Section 17. Notices. Any notices required to be given hereunder shall be sent to the following: If to the Grantee: External Affairs Manager, Black Hills Energy, 110 East 9th Street, Lawrence, KS 66044; if to Grantor: City of Maize, Kansas, ATTN: City Clerk, 10100 Grady Avenue, Maize, KS 67101.

(08-17-2009)