SETTLEMENT AGREEMENT As a result of good faith negotiations between the SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT, on behalf ofitself and the People of the State of California, ("SCAQMD" or "District") and SOUTHERN CALIFORNIA GAS COMPANY ("SoCalGas") (each, a "£ill:ty," and collectively, the "Parties"), the following settlement agreement ("Agreement") was entered into by and between the Parties on this day, Februru·y J_, 20 17 ("Effective Date"). RECITALS A. On or about October 23, 2015 natural gas began leaking from the Aliso Canyon Natural Gas Storage Facility (the "Facility") from well SS-25 (the "Incident"). B. On November 23, 2015, the District issued Notice of Violation P62646 to SoCalGas alleging an ongoing public nuisance pursuant to California Health and Safety Code Section 41700 and District Rule 402 as a result of the Incident. C. On January 26, 2016, the District filed a lawsuit against SoCalGas in the Los Angeles County Superior Court entitled People ofthe State of California ex rel. South Coast Air Quality Management District v. Southern Califhrnia Gas Company, Case No. BC608322, for violations of the California Health & Safety Code and District Rul.es. On July 13, 2016, the District filed a First Amended Complaint adding a Seventh Cause of Action for Declaratory Relief seeking a declaration, among others, that the Abatement Order requires SoCalGas to fund the reasonable costs of a health study not limited to a "health risk assessment" (as amended, the "Complaint"). D. On January 23, 2016, the Hearing Boru·d of the South Coast Air Quality Management District ("Hearing Board") approved a Petition for a Stipulated Order for Abatement and issued Findings and Decision for an Order for Abatement Upon Stipulation (as the same has been amended, the "Abatement Order"). The Abatement Order requires that SoCalGas perform a number of actions to address conditions and mitigate potential health hazards arising from the Incident. E. On February 18, 2016, the California Department of Conservation's Division of Oil, Gas and Geothern1al Resources confirmed that the leaking well SS-25 was successfully sealed. F. Paragraph 12 ofthe Conditions and Increments ofProgress ("Condition 12") ofthe Abatement Order requires SoCalGas to provide a written commitment for funding the "reasonable costs" to conduct a health study relating to the Incident. G. On May 26,2016, SoCalGas committed in writing to pay up to FOUR HUNDRED THOUSAND DOLLARS ($400,000) to fund a health study relating to the Incident. SoCalGas also provided a scope of work and a proposed plan for the health study, which included a literature review, determination of released chemicals, assessment exposure of -1- points and concentrations; development of chronic toxicity values for THT and TBM, and estimating chronic cancer risk and non-cancer hazard indices. SoCalGas contends that this commitment satisfied its obligations under Condition 12. H. District Rule 301 (e) provides for the payment of an annual emissions fee, and potential late fees, based on the total weight of emissions of each of the contaminants specified in the rule from specific equipment used by an operator (hereinafter referred to as "AER Fees"). SoCalGas and the District disagree as to whether and to what extent emissions resulting from the Incident should be subject to such AER Fees in 2015 and 2016. On March 1, 2016, SoCalGas and the District entered into an Emissions Fee Payment Agreement ('•Emissions Fee Agreement") preliminarily addressing the disputed 2015 AER Fees with respect to the Facility. Pursuant to this Emissions Fee Agreement, SoCalGas deposited with the District, which in turn deposited the funds into its "AccOlmting Agency Fund (11)" (the "Accounting Agency Fund"), FOUR MILLION TWO HUNDRED THOUSAND DOLLARS ($4,200,000) (the "AER Fee Deposit") pending the resolution of the dispute. The Parties have a similar disagreement with respect to the Facility's 2016 AER Fees that are due March 1, 2017. I. The District previously withdrew TWO HUNDRED THOUSAND DOLLARS ($200,000) of the AER Fee Deposit from the Accounting Agency Fund, representing the undisputed pmiion of the 2015 AER Fees for the Facility. J. The Parties agree that it is in their mutual interest and in the interest of the public to resolve these issues without further litigation as set forth below. AGREEMENTS NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree to the following: 1. Obligations Under Abatement Order. The Parties agree that SoCalGas has fully complied with and satisfied the terms, conditions and obligations in the Abatement Order except Condition 12. The Parties hereby agree that the payment set forth in Section 3(a)(i) below shall constitute full compliance with, satisfY and discharge in full SoCalGas' obligations under Condition 12. 2. Scope. This Agreement is intended to resolve and to satisfy any and all claims, disputes and causes of action, including claims for penalties and injunctive relie1: that were raised or could have been raised by the District arising out of or related to the Incident and the potential violations that were or could have been asserted by the District as a result of or related to the operation of the Facility, except for AER or other District fees that are not attributable to the Facility. This includes, but is not limited to, the claims alleged or that could have been alleged based on the facts in the Complaint- such as the Seventh Cause of Action for Declaratory Relief- as well as claims made in any Notice of Violation and the Abatement Order proceeding, claims for AER Fees required to be paid by SoCalGas for emissions from the Facility, including without limitation, emissions arising from the -2- Incident, for compliance years 2015 and 2016, that are attributable to the Facility and any claims for legal fees or costs arising out of or related to the Incident. 3. Obligations of SoC alGas under this Agreement. (a) (b) Settlement Payments. In exchange for the releases and other terms and conditions specified in Sections 3(b) and 4 below, SoCalGas shall pay the District a total sum of EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS ($8,500,000.00), which wiU be appHed as follows: (i) ONE MILLION DOLLARS ($1 ,000,000) in full satisfaction of the funding of the health study recommended by the District as set forth in Exhibit A to this Agreement as required pursuant to Condition 12 (the "Health Study"). (ii) FIVE MILLION SIX HUNDRED AND FIFT Y THOUSAND DOLLARS ($5,650,000) in full satisfaction of AER Fees required to be paid by SoCalGas for emissions from the Facility pursuant to District Rule 301 for calendar years 2015 and 2016, of which ONE MILLION DOLLARS ($1,000,000) shall be appHed by the District to fund a project or projects or an investment in Kore Infrastructure, LLC, subject to the District and KORE entering into an agreement on appropriate <:mel acceptable terms. lf KORE and the District arc unable to reach agreement, the money shall fund a project or investment in clean-air technology development to be selected and administered by the District's Governing Board. (iii) ONE MILLION SIX HUNDRED THOUSAND DOLLARS ($1,600,000) for full reimbursement of air quality monitoring costs incurred by the District as a result of the Incident, including monitoring as required by paragraph 10 of the Abatement Order. (iv) TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) for full reimbmsement of legal fees and costs incurred by the District as a result of the Incident. Payment and Release of Funds. (i) On the Effective Date, the District is authorized to withdraw ONE MILLION DOLLARS ($1 ,000,000) from the Accounting Agency Fund to fund the Health Study. (ii) Within three (3) days of the Effective Date, SoCa!Gas shall deposit with the District FOUR MILLION THREE HUNDRED THOUSAND DOLLARS ($4,300,000). (iii) The District shall deposit the sum referenced in Section 3(b)(ii) above into the Accounting Agency Fund. -3- (iv) 4. Upon receipt of confirmation fi·om SoCalGas of its receipt of a final, nonappealahle order terminating the Abatement Order, the District shall be authorized to withdraw the remaining SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($7,300,000) (which includes the amounts previously deposited in the Accounting Agency Fund pursuant to the Emissions Fee Agreement) from the Accounting Agency Fund. Obligations of the District under this Agreement. (a) Dismissal of Claims. Within seven (7) days ofthe Effective Date, the District will file with the Comt papers dismissing the First Amended Complaint with prejudice. (b) Release of Claims. As of the Effective Date, the District fully, completely, finally and forever releases, relinquishes and discharges (a) SoCalGas and Sempra Energy, and any oftheir respective affiliates and subsidiaries; (b) the past, present, and future owners, lessors, sub lessors, managers, franchisees and operators ot: and any others with any interest in, the Facility; and (c) the respective officers, directors, shareholders, subsidiaries, affiliates, agents, principals, employees, attorneys, successors and assigns of the persons and entities described in (a) and (b) immediately above (each of (a), (b), and (c) arc a "Released Party" and collectively, the "Released Patties") relating to any and all claims, actions, causes of action, demands, rights, debts, agreements, promises, liabilities, damages, accountings, costs and expenses, whether known or unknown, suspected or unsuspected, of every nature whatsoever which the District have or may have against the Released Patties arising directly or indirectly out of the Incident (each a "Released Claim" at1d, collectively, the '"Released Claims"). The Released Claims include any and all causes of action asserted and allegations made, or that could have been made or asserted, by the District in the Complaint, Notice of Violation P62646, Abatement Order proceeding or in any other action against the Released Parties relating to or arising from the Incident, or with respect to SCAQMD Rule 301 requiring payment of the Facility's 2015 and 2016 AER F ccs. (c) California Civil Code Section 1542 and Intent of Parties. It is the intention ofthe Parties that this Agreement shall be effective as a full and 11nal accord and satisfaction and release of each and every Released Claim. In furtherance of this intention, the District acknowledges that it is familiru· with California Civil Code section 1542, which provides as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. -4- The District hereby waives and relinquishes all of the rights and benefits that it has, or may have, under California Civil Code section 1542 (as well as any similar rights and benefits which it may have by virtue of any statute or rule oflaw in any other state or territory of the United States). The District acknowledges that it may hereafter discover facts in addition to, or different from, those which it now knows or believes to be true with respect to the Incident and the Released Claims, but that notwithstanding the foregoing, it is the District's intention hereby to fully, finally, completely and forever settle and release each, every and all Released Claims, and that in furtherance of such intention, the release herein given shall be and remain in effect as a tl.tll and complete general release, notwithstanding the discovery or existence of any such additional or different facts. (d) Covenant Not to Sue. As of the Effective Date, the District covenants not to sue or take administrative action against SoCalGas or any other Released Party for any Released Claims (e) Termination of Abatement Order. Within 7 days of the Effective Date, the District shall initiate formal proceedings to terminate the Abatement Order and thereafter tal