REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Eric G. Parra, Interim City Manager
VIA: Chau Vu, Director of Public Works
PREPARED BY: Bill Krill, Real Estate and Project Manager
Subject:
title
Approve for introduction of Ordinance No. 4230 to authorize execution of an Amendment to the Pipeline Franchise Agreement with Cardinal Pipeline, L.P. for the operation and maintenance of a pipeline system for the transportation of oil, gas, and other hydrocarbon substances
end
Statement of Issue:
The Franchise Agreement between the City of Huntington Beach and Cardinal Pipeline, L.P. expired on February 13, 2024. The Franchise Agreement is now up for extension and a ten-year Amendment is being proposed for the operation and maintenance of the existing pipeline system for the transportation of oil, gas, and other hydrocarbon substances.
Financial Impact:
The City will continue to receive a Base Annual Fee of $117,024.35 plus any adjustments by an annual rate of change based on the Consumer Price Index (CPI).
Recommended Action:
recommendation
A) Approve for introduction of Ordinance No. 4230, “An Ordinance of the City Council of the City of Huntington Beach Amending Ordinance No. 4008 which Granted an Oil Pipeline Franchise”; and,
B) Approve and authorize the Mayor and City Clerk to execute the “Amendment to Franchise Agreement between the City of Huntington Beach and Cardinal Pipeline, L.P.”
end
Alternative Action(s):
Do not approve the recommended action and direct staff accordingly.
Analysis:
Staff is requesting approval of an Amendment to the Franchise Agreement between the City of Huntington Beach and Cardinal Pipeline, L.P. for the operation and maintenance of an existing pipeline system used for the transportation of oil, gas, and other hydrocarbon substances. The pipeline system consists of approximately 86,400 linear feet of 6-inch, 10-inch, and 12-inch diameter pipeline with the following breakdown:
|
Pipe Diameter, Inches |
Base Rate, Linear Foot |
Linear Feet of Pipe |
Total Base Rate |
|
6 |
$0.895 |
39,425.00 |
$35,282.38 |
|
10 |
$1.485 |
7,409.00 |
$11,002.37 |
|
12 |
$1.787 |
39,584.00 |
$70,736.61 |
|
Totals |
|
86,418.00 |
$117,024.35 |
Cardinal Pipeline, L.P. acquired the rights granted under the Franchise Agreement and Ordinance 4075 from Paramount Petroleum Corporation in 2015. The Agreement, which was assumed by Cardinal Pipeline, had an expiration date of February 13, 2024. During the period from January 1, 2014, through December 31, 2023, the pipeline system was held as inactive. Since the Franchisee was not fully utilizing this pipeline, they were granted a 75% discount on the Base Annual Fee. The inactive period, as allowed under the agreement, was for a maximum of 10 years. This period has now expired, and the Franchisee will be obligated to pay the entire Base Annual Fee for the duration of the extension period as per the Amendment.
Terms of the proposed Amendment to the Franchise Agreement include:
• Term: 10 years
• Base Annual Fee: $117,024.35 + Annual CPI adjustment
• Corporate Surety Bond of $100,000
• Liability, Environmental, and Workers Compensation Insurance
Staff, along with a petroleum consultant Evans & Walker, analyzed oil pipeline franchise fees at the state and local level and found that the City of Huntington Beach is currently charging rates that are comparable to or higher than all agencies reviewed.
Staff recommends approval of the Amendment to the Franchise Agreement. The Agreement provides general fund revenue and ensures continued maintenance and responsibility for the pipeline network currently present within the City’s right-of-way.
Environmental Status:
This action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.
Strategic Plan Goal:
Goal 1 - Economic Development, Strategy A - Develop an updated economic development strategy to ensure business retention, local investments and job growth.
Attachment(s):
1. Ordinance No. 4230
2. Amendment to Franchise Agreement Between the City of Huntington Beach and Cardinal Pipeline L.P.
3. Cardinal Pipeline Performance Bond
4. Cardinal Pipeline Certificate of Insurance
5. Original Franchise Agreement 2014
6. PowerPoint Presentation