HomeMy WebLinkAbout10. LT Oil Pipeline Franchise
AGENDA MEMO
DATE:
February 8, 2011
TO:
Mayor and Members of the City Council
FROM:
Office of the City Manager
By: John Oskoui, P.E., Director of Public Works
SUBJECT:ISSUANCE OF AN OIL PIPELINE FRANCHISE TO LT PIPELINE
INCORPORATED
RECOMMENDATION:
That the City Council:
ADOPT A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
1.
DOWNEY DECLARING ITS INTENTION TO GRANT AN OIL PIPELINE
FRANCHISE TO LT PIPELINE INCORPORATED, AND SETTING FORTH
THE NOTICE OF THE TIME AND DATE FOR HEARING ANY
OBJECTIONS THERETO
; and
2. Set a public hearing for March 8, 2011 to consider any objections and
granting such franchise.
BACKGROUND:
Pursuant to applicable provisions of the California Public Utilities Code, the legislative
body of any municipality may grant a franchise to use, or to lay and use, pipes and
appurtenances for transmitting and distributing gas or industrial gas for all purposes,
under, along, across, or upon the public streets and places within the municipality.
In 1995, the City of Downey granted a ten-year franchise to ARCO Pipe Line Company
to install, operate, maintain, replace, etc., pipelines for the transportation of oil, gas,
petroleum, etc., within the public streets of the City of Downey (see attached Location
Map). In 1999, ARCO Pipe Line Company sold the four-inch pipeline to Pacific Pipeline
System LLC and the City of Downey approved the transfer of the franchise to Pacific
Pipeline System LLC.
In 2005, the ten-year franchise expired pursuant to its own terms. Pacific Pipeline
System LLC applied for a new franchise agreement in 2006, but negotiations were
never completed. However, payments to the City of Downey and insurance coverage
meeting the terms and conditions of the 1995 franchise agreement continued.
On August 17, 2010, Pacific Pipeline System LLC, sold and transferred its interest in the
pipeline to LT Pipeline Incorporated. The City of Downey and LT Pipeline Incorporated
have been negotiating the terms of a new franchise agreement. Both parties have
agreed to the terms and conditions for a new agreement.
CITY OF DOWNEY, CALIFORNIA
Mayor and Members of the City Council
Issuance of An Oil Pipeline Franchise to LT Pipeline Incorporated
February 8, 2011
Page 2
DISCUSSION:
The franchise process must follow certain procedures set forth in the Public Utilities
Code. First, the City Council must adopt the attached Resolution of Intent and set the
date for a public hearing, where the Ordinance setting forth the terms and conditions of
the franchise, including the rate to be paid by the franchisee, will be introduced. Staff is
proposing March 8, 2011 as the date to hold the public hearing.
During the public hearing, any objections, whether oral or in writing, can be received
and considered by the City Council. Once the public comment period is closed, without
the need for substantive changes to the Ordinance, the City Council will approve the
Ordinance and set the date for the adoption of the Ordinance. The Ordinance must
then be brought before the City Council for adoption.
Should the City Council direct staff to make substantive changes to the Ordinance, staff
will meet with LT Pipeline Incorporated to address the proposed change(s), and
negotiate a revised franchise agreement. This revised franchise agreement, in the form
of an Ordinance, would be brought before the City Council at a public hearing, where
the Ordinance would be introduced and considered by the City Council. The City
Council would then approve the Ordinance and set the date for the adoption of the
Ordinance.
FINANCIAL IMPACT:
Within thirty (30) days following the adoption of the ordinance, LT Pipeline Incorporated
will pay to the City a base granting fee in the amount of ten thousand dollars ($10,000),
which shall be paid within thirty (30) days after the City Council adopts the ordinance
granting the franchise and prior to signing the written acceptance of the franchise.
A base annual fee shall be paid every year within sixty (60) days after the end of each
calendar year, including the year of granting. The initial annual base rate is $1.02 per
lineal foot. The initial base annual fee for the 19,170 feet of four (4) inch pipeline within
the City of Downey right of way will be $19,553.40. A penalty at the rate of ten percent
(10%) per month or fraction thereof beyond the sixty (60) day payment date will be
charged.
The annual payment for each lineal foot of pipeline will be adjusted at the time payment
is due by the percentage change in the Consumer Price Index, all Urban Consumers for
the Los Angeles-Anaheim-Riverside area (1982-84 = 100), for the period July 1, 1991 to
the date which is sixty (60) days prior to the date of the fee. In no event shall any base
fee be charged which is less than the base fee amount of $1.02 per lineal foot.
Mayor and Members of the City Council
Issuance of An Oil Pipeline Franchise to LT Pipeline Incorporated
February 8, 2011
Page 3
The term of the agreement will be for twenty (20) years, with the option for the City to
approve five (5) year extensions should LT Pipeline Incorporated request such
extension(s). The City Council may, in its sole and absolute discretion, approve, deny
or condition the approval of any such request.
Attachments:
Resolution of Intent
Location Map
S:\AgendaMemosCC2011\02-08-11\LT Pipeline Franchise – Adopt Resolution and Set Public Hearing Date.doc
RESOLUTION NO. 11- _______
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DOWNEY DECLARING
ITS INTENTION TO GRANT AN OIL PIPELINE FRANCHISE TO LT PIPELINE
INCORPORATED, AND SETTING FORTH THE NOTICE OF THE TIME AND DATE
FOR HEARING ANY OBJECTIONS THERETO.
WHEREAS
, in 1995, the City of Downey granted a 10-year franchise to ARCO Pipe Line
Company, under Ordinance No. 1007, to construct, lay, operate, maintain, use, renew, repair,
replace, move, change the size and number of, and remove or abandon in place a system of
pipelines and appurtenances, for the purpose of conducting, transporting, conveying and
carrying liquid industrial waste and other substances, on along, in, under and across the public
streets, ways, alleys and places; and
WHEREAS
, in 1999, ARCO Pipe Line Company made application for
Transfer/Assignment of Franchise granted by the City of Downey to ARCO Pipe Line Company
under Ordinance No. 1007, to Pacific Pipeline System LLC, a Delaware limited liability
company; and
WHEREAS
, such Transfer of Franchise was approved by the City of Downey; and
WHEREAS
, such franchise was for a term of ten years, and expired by its own terms on
October 27, 2005; and
WHEREAS
, Pacific Pipeline System LLC was a subsidiary owned and controlled by
Pacific Energy Group LLC; and
WHEREAS
, Pacific Energy Group LLC was a subsidiary owned and controlled by Pacific
Energy Partners L.P; and
WHEREAS
, effective November 15, 2006, Pacific Energy Partners L.P. merged with and
into Plains All American Pipeline, L.P., therefore Pacific Pipeline System LLC became a
subsidiary owned and controlled by Plains All American Pipeline, L.P.; and
WHEREAS
, on August 17, 2010 Pacific Pipeline System LLC sold and transferred its
entire interest in the system of pipelines and appurtenances to LT Pipeline Incorporated; and
WHEREAS,
under the Franchise Act of 1937, as amended, comprising California Public
Utilities Code sections 6201-6302, the City of Downey is authorized to grant a new oil pipeline
franchise; and
WHEREAS
, LT Pipeline Incorporated has notified the City of Downey that it wishes to
obtain a franchise for the four-inch pipeline system for the transportation of gas, petroleum oil
and liquid hydrocarbon for production, transportation and storage of petroleum oil, gas and other
hydrocarbon substances, and general operations incident to the oil industry; and
WHEREAS
, LT Pipeline Incorporated shall pay a one-time base granting fee of ten
thousand dollars ($10,000); and
WHEREAS,
pursuant to Public Utilities Code Section 6231.5(e)(2), LT Pipeline
Incorporated shall pay a base annual fee every year within sixty (60) days after the end of each
calendar year, including the year of granting; and
RESOLUTION NO. 11- ______
PAGE TWO
WHEREAS
, the initial annual base rate is $1.02 per lineal foot and the initial base
annual fee for the 19,170 foot long pipeline will be $19,553.40; and
WHEREAS
, the annual payment for each lineal foot of pipeline will be adjusted at the
time payment is due by the percentage change in the Consumer Price Index, all Urban
Consumers for the Los Angeles-Anaheim-Riverside area (1982-84 = 100), for the period July 1,
1991 to the date which is sixty (60) days prior to the date of the fee. In no event shall any base
fee be charged which is less than the base fee amount of $1.02 per lineal foot; and
WHEREAS
, a penalty at the rate of ten percent (10%) per month or fraction thereof
beyond the sixty (60) day payment date will be charged; and
WHEREAS
, failure by LT Pipeline Incorporated to make the annual payment will result in
the forfeiture of the franchise, and
WHEREAS
, the term of the agreement will be for twenty (20) years, with the option for
the City to approve five (5) year extensions should LT Pipeline Incorporated request such
extension(s); and
WHEREAS
, the City Council may, in its sole and absolute discretion, approve, deny or
condition the approval of any such request.
WHEREAS,
pursuant to Public Utilities Code Section 6232, the City Council is required
to adopt a resolution of intention to grant such franchise, and direct the City Clerk to publish
within fifteen (15) days after adoption of such resolution of intention and the holding of a public
hearing on adopting an ordinance granting the franchise; and
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF DOWNEY DOES
HEREBY RESOLVE AS FOLLOWS:
SECTION 1.
That consistent with the provisions of Public Utilities Code Section 6232,
it is the intention of the City Council of the City of Downey to grant a franchise to LT Pipeline
Incorporated, a successor in interest to Pacific Pipeline System LLC, for a pipeline system for
the transportation of gas, petroleum oil and liquid hydrocarbon for production, transportation and
storage of petroleum oil, gas and other hydrocarbon substances, and general operations
incident to the oil industry.
SECTION 2.
Notice is hereby given that on March 8, 2011, in the Council Chamber of
Downey City Hall located at 11111 Brookshire Avenue, Downey, California, all interested
persons may appear before the City Council and be heard concerning the granting of this
franchise and all other matters relating thereto. Protests stating objections against the granting
of the franchise may be in writing and must be filed with the City Clerk prior to the conclusion of
the hearing.
SECTION 3.
The City Clerk shall cause notice of the hearing to be given by causing
the notice to be published in the manner required by Public Utilities Code Sections 6232 and
6233.
RESOLUTION NO. 11- ______
PAGE THREE
th
APPROVED AND ADOPTED
this 8 day of February, 2011.
________________________________
LUIS H. MARQUEZ, Mayor
ATTEST:
JOYCE E. DOYLE, Interim City Clerk
I HEREBY CERTIFY
that the foregoing Resolution was adopted by the City Council of
the City of Downey at a regular meeting thereof held on the __ day of __ __, 2011,
by the following vote, to wit:
AYES: Council Members
NOES: Council Members
ABSTAIN: Council Members
ABSENT: Council Members
JOYCE E. DOYLE, Interim City Clerk