HomeMy WebLinkAbout03/26/1984 Item #F-2bTO: CITY COUNCIL
FROM: Utilities Department
SUBJECT: OIL OPERATING AGREEMENT
RECOMMENDATION:
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CITY
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CITY COUNCIk`AGENDA
ITEM N0.
BY THE CITY COUNCIL
CITY Of NEWPORT REACH
MAR 2 G 1984
Award a contract to the Sampson Oil Company to operate the City owned oil
facilities in West Newport and direct the Mayor and City Clerk to execute
the contract.
DISCUSSION:
On December 12, 1983 the City Council adopted a resolution expressing the
City's intention to enter into an oil 2 year operating agreement and inviting sealed
bids.
Five bids were opened at 10:00 a.m. on January 11, 1984 in the office of
the City Clerk:
The bids were reviewed by the Technical Oil Advisory Committee on February
15, 1984. A copy of the minutes of the committee meeting is attached.
In reviewing the bids the committee followed the following criteria that
was specified in the City's request for a proposal:
1. Professional qualifications.
2. Monthly service fee and hourly rates.
3. Capability of the firm to accomplish the work in conformance with
the requirements of the City of Newport Beach.
4. Specialized experience of the firm in the type of work required.
5. Demonstrated performance of similar work with governmental agencies
or with private industry.
6. Familiarity with the geographical area of the project.
MONTHLY
ENGR. HOURLY
OFFICE HOURLY
BIDDER
RATE
RATE
RATE
1. R. P. Vititow, Seal Beach
$ 3,040.00
$ 25.00
$ 8.00
2. R. W. Nelson, Signal Hill
3,680.00
62.50
35.33
3. Sampson Oil Co., Long Beach
4,300.00
50.00
-0-
4. Brayton Petroleum, Santa Ana
8,800.00
42.00
28.00
5. New Lonamen, Placentia
30% of Gross
The bids were reviewed by the Technical Oil Advisory Committee on February
15, 1984. A copy of the minutes of the committee meeting is attached.
In reviewing the bids the committee followed the following criteria that
was specified in the City's request for a proposal:
1. Professional qualifications.
2. Monthly service fee and hourly rates.
3. Capability of the firm to accomplish the work in conformance with
the requirements of the City of Newport Beach.
4. Specialized experience of the firm in the type of work required.
5. Demonstrated performance of similar work with governmental agencies
or with private industry.
6. Familiarity with the geographical area of the project.
Oil Operating Agreement
March 12, 1984
Page 2
(cont'd)
Because of (1) the Sampson Oil Company success in raising the daily oil
production from approximately 130 to 210 barrells per day, (2) the present high
level of oil field maintenance and operation and (3) the over all similarity of
the bidding between Sampson and R. W. Nelson, the staff supports the finding of the
Committee. The staff also agrees with the findings that the apparent low bidder,
R. P. Vititow did not have the type of technical qualifications that the City was
seeking.
oseph`\J. Devlin
tilities Director
JTD:bc
March 12, 1984
STUDY SESSION AGENDA
ITEM NO.
TECHNICAL OIL ADVISORY COMMITTEE
MINUTES
DATE: February 15, 1984
TIME: 2:00 p.m.
PLACE: Utilities Yard
ATTENDANCE: Hans Lorenz, Member and Chairman
George Guthrie, Member
Lloyd Sellinger, Member
Joseph Devlin, Utilities Director
RECOMMENDATIONS:
MINUTES:
MEMBERSHIP:
1. Retain the Sampson Oil Company of Long Beach as the operator for the
City wells and tank farm.
2. Direct the staff to prepare anoutline of a study that would list avail-
able technical information on the wells, sub -structure, size of reser-
voir and potential for secondary recovery.
3. Install a meter and recorder on the waste water outlet line.
The Minutes of the meeting of June 13, 1983 were approved.
The reappointment of Hans Lorenz to the Technical Oil Advisory Committee
by the City Council was announced. George Guthrie was nominated and
elected chairman for the coming year.
OIL OPERATIONS:
The Committee reviewed the operation of the oil field and tank farm and
noted the following:
A. Production. Daily production since January has averaged 210 barrels
a day.
B. Operation. The Sampson Oil Company continues to serve as the field
operator on a month to month basis. The staff reported that they
were experiencing some maintenance and operational problems with
the waste water treatment plant. Because of the heavy oil, the
small diameter lines and circulating pumps are clogging. The
Technical Oil Advisory Committee Minutes
March 12, 1984
Page 2
Sampson Oil Company is now experimenting with a change in the unit
process that may result in the elimination of the small diameter
pipes and circulating pumps. Testing of the waste water effluent
is now underway.
C. Revenue. Gross revenue for the last 6 months was $841,615. Gross
revenue since the beginning of City operation was $3,254,336.
D. Sale of Oil. The City continues to sell the oil to Powerine Oil
Company under a one-year "evergreen" contract. The current selling
price is $23.80 a barrel]. Powerine Oil pays all transportation costs.
E. Litigation. The Department of Energy action concerning payments
made to Armstrong Petroleum by Kern County Refinery continues.
The City is still a party to this action as a result of its position
as the Tidelands Trustee. The City and Rutan and Tucker are still
working on acquiring the pass-through easements under private pro-
perties in West Newport. Because of the complexity of some of
the ownerships, progress has been slow.
F. Natural Gas. The field produces an average of 30,000 cubic feet
of surplus gas a day. At the present time there is no market for
the gas.
STUDY OF FIELD:
The Committee requested the staff to prepare a detailed outline for a study
of the oil field that would list available information on the wells, sub-
structure, size of reservoir and potential for secondary recovery.
PROPOSAL TO OPERATE CITY OIL FIELD:
On January 11, 1984 at 10:00 a.m. the City Clerk received and opened the
following sealed proposals to operate the City oil f1eld:
MONTHLY ENGR.HOURLY OFFICE HOURLY
BIDDER RATE RATE RATE
1. R. P. Vititow, Seal Beach
2. R. W. Nelson, Signal Hill
3. Sampson Oil Co., Long Beach
$3,040.00 $ 25.00 $ 8.00
3,680.00 62.50 35.33
4,300.00 50.00 -0-
4. Brayton Petroleum, Santa Ana 8,800.00 42.00 28.00
5. New Lonamen, Placentia 30% of Gross
The Proposal provided that the selection of an Operator would be based
on the following considerations:
Technical Oil Advisory Committee Minutes
March 12, 1984
Page 3
1. Professional qualifications.
2. Monthly service fee and hourly rates.
3. Capability of the firm to accomplish the work in conformance with
the requirements of the City of Newport Beach.
4. Specialized experience of the firm in the type of work required.
5. Demonstrated performance of similar work with governmental agencies
or with private industry.
6. Familiarity with the goegraphical area of the project.
After reviewing the proposals, the Committee unanimously decided to
recommend to the City Council that the Sampson Oil Company be retained
as the operator. The Committee felt that the Sampson Oil Company should
be retained for the following reasons:
1. Their excellent past performance.
2. Their technical qualifications and experience in the type of work
required.
3. Their familiarity and knowledge of the area.
It was noted that although R. W. Nelson was lower on the monthly rate bid,
both the engineering and hourly rates were higher than the Sampson Oil
Company. It was also noted that the Sampson Oil Company has not made it
a practice in the past to bill for engineering and office time, and
depending on how each company charged would really determine which was
the lower of the 2 bids. The apparent low bidder, R. P. Vititow, did not
appear to have the local knowledge and type of technical qualifications
that the City was seeking.
C,
osep Devlin
tilit' Director
TD:bc
CITY OF NEWPORT BEACH
UTILITIES DEPARTMENT
PROPOSAL FORM
To the Honorable City Council
City of Newport Beach
3300 Newport Boulevard
P. 0. Box 1768
Newport Beach, CA 92663-3884
Gentlemen:
The undersigned declares that he has carefully examined the site and the oil
production facilities, has read the Request for Proposal, and hereby proposes
to furnish all services and do all the work required to operate and maintain
the oil production facilities in accordance with the Request for Proposal,
and will take in full payment therefor the following prices for the work:
1. Operate and maintain -the City owned oil production facilities for a monthly
service fee of $_4,300.00 per month.
2. Provide requested extra engineering work for an hourly rate of
$ 50.00 per hour. not to exceed $400.00 per day.
3. Provide requested extra administrative and office work for an hourly
rate of $ o_00 per hour.
ae
Authorized Signature
— amp-Qoj0il Company
Company
301 Ultimo Long Beach, Ca. 90814
Address
213 498-3797
Telephone Number
";`X ' G \ 1'V"'ORT LMcYT_�A'U" 1PNMI T
( 714) 640-2221
Gentlemen:
Attached is a Per_!est for ?r000sal and a Proposal Form to operate and maintain
16 C i � y o'wrec delanc oi' we!1s anc related oil production facilities in the
West Newport area.
You are invite to su1D^'it a pr000sal on the attached form. All Proposal
Forms n _.s !: �� seal c 4 a! -d �, st- be rice ved by the City Clerk on or before 10:00am
January , , , 1 9„i;.
Arrangement, can be 'r,ade to inspect the oil producing facilities by contact-
ing Yr. Ro�ert D`xnr,, t.es I epar!'-!ient Administrative Assistant at (7114) 640-
2221. The office cf t'� '! :; es 2epartment is located in the .City's Utilities
Yard at 9P'.9 ''n'eSStreet :;';oY' :: "each, Cal i forni a 92663.
The insurance cert.-'; rate need not accompany the Proposal Form but will
be requ-i red he -1c re s r a, n
Selection e an operator ,y,il' rased on the following considerations:
1 Pro fessicnaI gLlaca or,s
2. 'Y`.ort.'1'; y sc)rvi cP p(� .l,)d h,/1';rly rates.
3. CC", Ca9 y o : '.he 4i r r, to 1.ccompl i sit the work in conformance with
e rF_,nui„ :y of Newport Beach.
4. Soecia!izec' exne'r once o`-_ e firm in the
�type of work required.
5. Demonstrated o.simiIar work with governmental agencies
Or r;V'�_rV
6. ^,r" ' y ceoaraphi cal area of the project.
If you have any eues'.-;ors rencirding the Request for Proposal or the opera-
tion of the f-C).c' l t es of ease co )ta ci-- `Ylr. Di xon at ( 714 ) 640-2221 .
Yours truly,
IC
JOSeph /r1 DeVI 1 n
rector
�U.
"TD:bC
Enc11osures
Tln-11nV�rd, Newport Beach
NO TTCF INVITING PROPOSALS
Sealed proposals for the opera-: on of 16 oil wells and related oil
production, and stcraCe facilities owned by the City of Newport Beach,
will be received at t!�e office of the City Clerk, 3300 Newport Boulevard,
Newport Beach, CA 92663 unt" -' "_:02) : 0'` A.M. on the 11th day of January, 1,984
at which time such proposals shall tie opened and read.
T!e faci',ities are lecatec -gin the area commonly known as "West Newport,"
and north Of II -jCoaSt ,�4_1,) Jay.
The term of the prorosal ,;; l l 'De two years. The proposal will relate
only to o',1 fi elf opera tions, rc', w -'ll convey no rights to the operator
other than compensation for ,�,ork performed. Other terms and conditions will
be as set forth in t:. -ie IR'eqjest for Proposal, together with such additional
terms and coneitions as -.ay ;)e deemed necessary or appropriate by the City
Council to fully protect ,or, -interests of the City of Newport Beach. The
proposal shay specify service fees to be paid to the operator
for the duties relcuired to ^erfor cd pursuant to the agreement.
The aware of "she operat�-c acreement will be made to the lowest
responsible bidder, as de-torined by the City Council of the City of Newport
Beach.
uali�ied nroSppctive !4rlde�s »ay obtain one set of bid documents at no
cost at the office cf the City Cler'<, 3300 Newport Boulevard, Newport Beach,
CA 92663.
ror further '!nfQYi',l,a 1nj ra Rcl)ert Dixon at 640-2221.
REQUEST r_nn PROPOSAL
The City of Newport .leach i s nvi .i ng proposals from qua1.i fi ed. of 1 field
operators with oii fie':d e. neerino experience to operate and maintain 16 City
owned tideland oil wells and related oil production facilities in the West
Newport area. (See atta c4in_d r,;n.; ��,' 1
Al', proposals must be sealed and must be received by the City Clerk on or
before 10.00 A. �'anuary '^�
TO assist n determ-in4rq -±-din cua'-r-ications of the Operator all proposals
must include a res:_.ne c-1- ;e !!nera+�or's oft field experience and a statement
of financial condition.
- SCOPE OF WORK
A. Duties of the Operator incl ded n t e Monthly Service Fee.
I. Perform a17: wore necessary to manage, operate, produce, protect and
maintain the C -y -v d and trel1s, tank farm, pi Pel nes and
related o": rred_;ct`en faci144,ies in accordance with good oil, field
practice.
2. Respond to all eirercencies and provide forpersonnel to safely and
continuously operate the oil facilities 24 hours a day, 7 days a week.
3. Provide a fu': l in,e operator with field truck and pay
all costs, direct and ind rest, relating to the employment of the
pumper and USe p;F
4. Provide the City with c'.eta od recommendations, cost estimates and
technical advice to ;,�,nrove nroruction, maintenance and security of
the oi' Faci';+;es.
5. Keep accurate da";y records of all production, treatment of oil, cut
and temperature of oil, (e' veries and field testing on forms provided
by the City.
6. Recom!»enc', schedule, coord;nate and inspect the work of all oil field
r
serv4re ccntrc ors
Request for Proposal
Paae 2
7. Schedule, supervise and door -;irate the transfer of all oil and gas sold
and. gauge and measure promptly the quantity of oil and gas pro-
duced, Saved and Shipped.
3. Keep a detailed record and submit signed invoices for all material,
equipment, and services to �,e reimbursed by the City.
9. Perform individual well .vests at least every 6 months, indicating rate
of orod:uct- i on, t-�,e quant-; ty of of 1 , water and sand produced.
10. Furnish smal" sand +no's rPd''-iYr, in the normal operation.
11. Pay all State ar,,d' Fedora' 'ncome taxes on Operators compensation and
all transoorLation, ad,,,-nistra 've and overhead costs.
Q. Duties of the City.
1. Pay the "perator each month the n»onthly service fee stipulated in the
Proposal Form.
2. Pay for a'1 maljor repair and improvement work done on the oil wells and
related proc'uc-I.i on. fad , ; IDY oil field service contractor and
vendors.
3.
Unless. otherwise spec`ed, nay nor all utilities, chemicals, materials
and supp'ies required to onera-!,e and maintain the oil wells and related
production -Fa cl:':.ies.
4. Be responsible for the �-ar'<e-rina of the oil and gas produced.
5. Obta. n a', : �nera nn
6. Pa,v all pronerty taxes and all taxes on the production and mining of
oil, and gas.
':?. SPEC?/1L PROVISIONS
A. /Assignment
No acreemen; t or porti or. t—ereof »ay be assigned without the consent
0f the C-I:V.
! Q. Authori ;tv_.
The yhave the :a a ort in all matters affeQting the work.
Request for Proposal
Page 3
C. Term.
The term of aqrener,en-,- shall be for a period of 2 years.
D. Cancellation.
The operat-ing agreement- may he cancelled at anytime by the City without
I i a b 4; 11 i ty for damages, le,,hen in the City's opinion the Operator is not
coR�!)Iy;no, 4n good
T �, on.
n s -r) ect
A11; work and onpral-'I'Ons steal' at a'1 times be subject to inspection and
approval by t -he C`ty. A':'
and work shall be of highest quality
and shall be 4n accordance w4;+_:h Q()od oil field and construction practices.
F Protection of 'InV4,ron9M;ent.
The Oil Droduct 4 On -f- a C 11 4
i- es are located in and near environmentally
sensitive wet -' c, !, ', n c ,)
-in: s The Operator shall exercise every reason -
ab', e Drecaut-4: on to pro'--er".- wet and, channels
and bodies of water
from Do' 1ut`;0-1 Ci any !",:r
G.
The highest Poss-:',_le prior-;ty is to be placed on conducting a safe
operation, The Or-lerF-ttoy, shla'with the Safety Orders of the
State
Division of Ty
�i Y and all other applicable laws, ordi-
nances
rdi-
nances a n d, rpcuat;nYS
to safety.
H C o op e ra t i on e r s
The Operator cooperate and,-ake direction from the City and its
.
authorized representat4ves. The C41 -
V has a "non-exclusive" property
right to o^erate and P
Int,_14n -;-I-s oil production facilities. Other oil
companies and e s nave nerat'!ng rights over the same area. The
Operator w;11 1 i I be required to fully cooperate with others and to schedule
and coord;na`_e so CIS not to -interfere with the rights of others.
Request for Proposal
page 4
T .
Use Of City i�erSOnnei
it is the policy of the City not to use City personnel -in connection
with the normal operation o -r the oil field. Every effort shall be
made by The C.)Qrator to,.n
C:,cco'r c� ,
,. ae required work by using outside
contractors and ' a',or.
Labor.
The Operator s"W'! remnly ,,,i a,, applicable Federal, State and Local
labor laws.
K. Li ai i t In-s',,rance-.
----=�. ----=---------
The Operator shall -r,;rnish C -;f -y a policy or certificate of liability
insurance in w is n -:,-d as the insured or as an additional
insured.
The coveraoe seal, Prov4de t?, I, -'o ,owing minimum limits:
30d4;1y :n. 41
.-ry ................. $250,000 each person
$500,000 each occurrence
$500,000 aggregate products
completed operations
Property Oamare ............... $100,000 each occurrence
$2.50,000 aggregate
A combined s nil e no' -' cy ,,, >, aggregate limits i n the amount of
$1Onnngr� .Y , consi�':ere'. r valent to the required minimum limits.
Reques. -t fo,r Provo s a
Pace S
Insurance com,pan e_, shall be assigned Policyholders' Rating B (or
better) by the la.':est ec'it'on of Best's Key Rating Guide: Property -
Casualty.
The Operator shall save, '<eep and hold harmless the City, its
officers and agents from all damages, costs or expenses in law or
e q u tY tat ,'ay at- any t`,' arise or be set up because of damages to
property, or of -.ersor!a.l n ry received by reason of or in the course
of performing ;;ork, a;ni y caused by any willful or negligent
act or on -ii s s i on by tine Onera'.or, any of the Operator. 's employees, or
any subcontractor.
ab4 .ty 'nsurance policies shall bear an endorsement or
shall have a r; -ier ti.;� ere.by i t i s provi ded that, i n the event
of exnirat?on. or nrenosefl cance "ation of such policies for any reason
whatsoever, � y sW, , ,e n,ct`;; f ed by regi stered mai 1 , return
rete i nt reouostec', vi r , s!il-1- ci ent time before the date thereof
t0 comply W't Iny a7n'. Ca`)'e '.aw or statute, but in no event,less than
30 clays before exp ra on or c,r,cellation is effective.
The Cos", of this ins_irance shall be included in the Operator's
L. Wor.ker's r0niJr�er1-si--,,� 4,_o�i_7hG_jrc,_ C 0
The Onerat-or anal co"),)ly with Section 3800 of the Labor Code by
secur r,ci,. nayi nn for, and ma i nta ni ng in ful 1 force and effect for
the du.ra.tion of t',e cor,,tract, complete Workmen's Compensation Insurance,
and shall f_;rni s:` a Cer" f -i rate of Insurance to the City. The City,
is off,: cern, or emp'1oyees, ;,ll not be responsible'for any claims
n on +I/ 9CC, e o,,, rl .,v _,lure of the Operator to comply with
;�} th4s very �,r'nh.
Request for Proposal
Page G
All cnrvinensa'on, nsurarce policies shall bear an endorsement or
shat', nave a-1--4-ac' od a r-: -'or ,Y,,; r v it is provided that, in the event
of expiration or nronosed cancellation of such policies for any reason
whatsoever, City. spa`.., !,n notified by registered mail not less than
0 days ! efnre exp` ra !-; or or (anCPI l ati on is effective.
The cost of th s -insurarce shall be included in the Operator's
monthly service fee,
M. Extra Work.
When .-he Ci'.y de t_er!q-i nes ! 'ha': requi red work is not covered by the monthly
service fee 1t s,na":1 11�e classified -s "extra work". If the price for
extra work is not covered it the Proposal Form and cannot be agreed upon,
the ( �; v +=fir +hn extr, ,, or:
y r k based on the accumulation of costs
of labor, materials an.c: `-oe,s and equipment, plus a 15 percent markup for
all overheat: and prof -It. 'Vendor's invoices shall be submitted with the
request for pay!�,,ent. The C,:erator shall not proceed with any "extra work"
unless a cost es -''irate '^:s ! prepared and authorized by the City.
N . Author-; I o ( C h(} /^`ni�pri PC" .
1 . The wo.l.1 h-a.ds and prod_!ct,i on facilities are located in the County of
Orange and the opera. -Ion at all times will be subject .to the rules
and reC;;l ons of e Co :n'.y of Orange Environmental Management
Agency.
2. The oil reservoir -is loca+:ed in Tidelands under the Pacific Ocean and
t"e operat-Ion at all t -7 -es 'rJ 11 be subject to the authority of the
State �a.nds Comr^;scion 0r -"--.he State of California.
CTTY NEWPORT BEACH
`j DEPARTMENT
"'OPOSAL FORM
To the Honorable city co'_;nc=
city of New,)er -
3300 New;ror'. 3oulev,.rd
n „ ' -i
Neylport eac' , CA 93rr,^_CO1: .Q
4 ✓
Gent' emen .
The undersigned declares t,,Ov no ''.as carefully examined the site and the oil
production faci i'ties, read t'�e ?.eeuest -For Proposal, and hereby proposes
to furnish all serv- ces and do l -t.',,e 'irork required to operate and maintain
the oil production raci' ,_ies n accordance with the Request for Proposal,
and w'i 1 take n -rul' payment ?hprernr :he following prices for the work:
1. Operate and main "a n -'ane (_-:t -V o`,,'reC: oil production facilities for a monthly
service fee of per month.
2. Provide requested ext-ra enn'neer'ino work for an hourly rate of
3. Provide reques:ed extra adnv nistra,�;ve and office work for an hourly
rate of
Authorized Signature
ompany
rens
Telephone Number