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HomeMy WebLinkAboutF-9b - State Lands Commission Review of Oil Operating AgreementJuly 11, 1983 CITY COUNCI�_f GEND� ITEM NO. TO: CITY COUNCIL From: Utilities Director BY THE CITY COUNCIL SUBJECT: STATE LANDS COMMISSION REVIEW OF OIL OPERATING AGREEMENT CITY Of NEWPORT BEACH J U L 111993 RECOMMENDATION: I. Approve the contents of the Request for Proposal 2. Approve the text of the draft resolution prepared by the City Attorney. 3. Approve the submission of the Request for Proposal and the draft resolution to the State Lands Commission in accord with the Public Resources Code. DISCUSSION: At its meeting on January 27, 1983, the Technical Oil Advisory Committee (TOAC) recommended "that the operation of the (oil) field be put out to bid in the manner of a consulting engineer's contract." In response to this recommen- dation, which was approved by the City Council at its meeting on February 14, 1983, the staff prepared a Request for Proposal (RFP) for the operation of the City's oil facilities. This RFP has been reviewed by the TOAC and a negative Environmental Impact Report has been prepared. At the present time the operation of the oil field is being managed by a private operator, the Sampson Oil Company of Long Beach. This arrangement is on a temporary month to month basis. The various legal actions surrounding the field prevented the City from going to bid at an earlier date. These legal actions were resolved in April and the City is now free to go to bid for a field operator. As the field is part of the Tidelands Trust, the State Public Resources Code places certain requirements upon the City prior to and during the bidding process seeking an operator for the field. The applicable sections of the Code are 7058.5, 7059, and 7060. These sections of the Code require that the City adopt a resolution to declare its intention to take the action of entering into an oil operating agreement. The statute also fixes the time period for public announcement of the bid, and other requirements for the City's bidding process. It also requires that the State Lands Commission approve the proposed resolution prior to the adoption of the resolution by the City. Thus, prior to adopting a resolution or putting the proposed oil operating agreement out for bid, the City is required to petition the State Lands Commission for approval of the proposed operating agreement. L -�- �oseph Devlin Ulti 1 i yes Di rector 13 iid Attachments: 1. Copy of Request for Proposal 2. Copy of Resolution RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH EXPRESSING ITS INTENTION TO ENTER INTO AN OIL OPERATING AGREEMENT AND INVITING BIDS THEREON WHEREAS, the City of Newport Beach is presently engaged in producing oil from a field located beneath tidelands; and WHEREAS, the City Council and the Technical Oil Advisory Committee (TOAC) believe that it is in the best interests of the City of Newport Beach to retain a qualified oil field operator to maintain and operate the 16 City -owned oil wells, and related oil production and storage facilities in the west Newport area; and WHEREAS, litigation with respect to the City -owned wells and production facilities has been resolved and no longer constituted an impediment to the approval of an agreement with an oil field operator; and WHEREAS, the City has petitioned the State Lands Commission for approval of this resolution, and attachments and the State Lands Commission has approved same; and WHEREAS, the provisions of Section 7058 et seq of the Public Resources Code require the City of Newport Beach to express, by resolution, its intention to enter into an operating agreement, requires that the resolution contain certain information, and requires that the City follow certain procedures prior to executing such an agreement; and WHEREAS, this resolution fully complies with the provisions of the Public Resources Code referenced above, and expresses the intention of the City not only to enter into an oil operating agreement, but to strictly follow the State statutes with regard to the execution and performance of such agreement. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Newport Beach that: 1. The City Council of the City of Newport Beach hereby expresses its intention to enter into an agreement to operate the sixteen (16) oil wells, and related oil production and storage facilities owned by the City of Newport Beach and located in the area commonly known as "West Newport", northerly of Pacific Coast Highway and westerly of 52nd Street if extended and more fully described on Exhibit "A" to the request for proposal which is attached to this resolution; 2. The term of the agreement will be two years. The agreement will relate only to oil field operations, and the agreement will convey no rights to the operator other than compensation for work performed. Other terms and conditions of the operating agreement will be as set forth in the request for proposal which is attached to this resolution, together with such additional terms and conditions as may be deemed necessary or appropriate by the City Council to fully protect the interests of the City of Newport Beach, the State of California and the State Lands Commission. 3. The operating agreement shall specify: A. The monthly service fee to be paid to the operator for the duties required to be performed pursuant to the agreement; and B. The compensation, expressed on the basis of an hourly rate, for extra engineering work required of the operator by City; and C. The compensation, expressed on the basis of an hourly rate, for extra administrative and office work requested of operator by the City. 2 4. The award of the operating agreement will be made to the lowest responsible bidder, as determined by the City Council of the City of Newport Beach, on the basis of bids for the fees and services described in Section 3 of this resolution. Bids are to be submitted on the proposal form which is attached to this resolution. Prospective bidders may obtain one copy of the proposed form and other relevant documents, at no cost, at the office of the Utilities Department, 949 W. 16th St., Newport Beach, Ca. 92663. The Utilities Director is authorized to transmit bid documents to persons known to be qualified oil field operators. The operating agreement will be awarded during the regularly scheduled meeting of the City Council to be held on The City Clerk is hereby directed to publish this resolution, in the official newspaper, at least once a week, for four successive weeks, prior to the date and time fixed for the award of the operating agreement, and the publication of this resolution shall constitute notice to all prospective bidders. Bids must be submitted to the City Clerk and received at least days prior to the date and time scheduled for the award of the agreement. All bids shall be sealed and are to remain sealed until opened, examined and recorded by the City Council at the time the agreement is to be awarded. ADOPTED this day of , 1983. ATTEST: City Clerk RSP/Oil Mayor 3 a 5 ii. o� IL'L1� ♦ � J ' � L u I ��. ................. r ` l) . u � r 1� I� EXHIBIT %e (Sample letter uo accompany "A Request for Proposal to Operate City Owned Oil Facilities") Gentlemen: Attached is a Request for Proposal and a Proposal Form to operate and maintain 16 City owned Tideland oil wells and related oil production facilities in the West Newport Area. You are invited to submit a proposal on the attached form. All Proposal Forms must be sealed and must be received by the City Clerk on or before 10:00 A.M., August 1, 1983. Arrangements can be made to inspect the oil producing facilities by con- tacting Mr. Robert Dixon, Utilities Department Administrative Assistant at (714) 640-2221. The office of the Utilities Department is located in the City's Utilities Yard at 949 West 16th Street, Newport Beach, California 92663. The insurance certificate need not accompany the Proposal Form but will be required before starting any work. Selection of an Operator will be based on the following considerations: 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. If you have any questions regarding the Request for Proposal or the.opera- tion of the facilities, please contact Mr. Dixon at (714) 640-2221. Yours truly, Joseph T. Devlin Utilities Director & Rev. 4/26/83 Rev. 4/26/83 DRAFT REQUEST FOR PROPOSAL The City of Newport Beach is inviting proposals from qualified oil field operators with oil field engineering experience to operate and maintain 16 City owned tideland oil wells and related oil production facilities.in the West Newport area. (See attached Exhibit "A".) All proposals must be sealed and must be received by the City Clerk on or R� before 10:00 A.M., August 1, 1983. ' To assist in determining the qualifications of the Operator all proposals must include a resume of the Operator's oil field experience and a statement of financial condition. I. SCOPE OF WORK A. Duties of the Operator included in the Monthly Service Fee. 1. Perform all work necessary to manage, operate, produce, protect and maintain the City owned tideland wells, tank farm, pipelines and related oil production facilities in accordance with good oil field practice. 2. Respond to all emergencies and provide for personnel to safely and continuously operate the oil facilities 24 hours a day, 7 days a week. 3. Provide a full time qualified pump operator with field truck and pay all costs, direct and indirect, relating to the employment of the pumper and use of the truck. 4. Provide the City with detailed recommendations, cost estimates and technical advice to improve production, maintenance and security of the oil facilities. 5. Keep accurate daily records of all production, treatment of oil, cut and temperature of oil, deliveries and field testing on forms provided by the City. 6. Recommend, schedule, coordinate and inspect the work of all oil field service contractors. 7 Request for Proposal Page 2 7. Schedule, supervise and coordinate the transfer of all oil and gas sold and shall gauge and measure promptly the quantity of oil and gas pro- duced, saved and shipped. 8. Keep a detailed record and submit signed invoices for all material, equipment, and services to be reimbursed by the City. 9. Perform individual well tests at least every 6 months, indicating rate of production, the quantity of`.oil, water and sand produced. 10. Furnish small hand tools required in the normal operation. 11. Pay all State and Federal income taxes on Operators compensation and all transportation, administrative and overhead costs. B. Duties of the City. 1. Pay the Operator each month the monthly service fee stipulated in the Proposal Form. 2. Pay for all major repair and improvement work done on the oil wells and related production facilities by oil field service constractors and vendors. 3. Unless otherwise specified, -pay for all utilities, chemicals, materials and supplies required to operate and maintain the oil wells and related production facilities. 4. Be responsible for the marketing of the oil and gas produced. 5. Obtain all operating permits. 6. Pay all property taxes and all taxes on the production and mining of oil and gas. II. SPECIAL PROVISIONS A. Assignment. No agreement or portion thereof may be assigned without the consent of the City. B. Authority of City. The City shall have the final authority.in all matters affecting the work. Request for Proposal Page 3 C. Term. The term of the operating agreement shall be for a period of 2 years. D. Cancellation. The operating agreement may be cancelled at anytime by the City without liability for damages, when in the City's opinion the Operator is not complying in good faith. E. Inspection. All work and operations shall at all times be slubject to inspection and approval by the City. All material and work shall be of highest quality and shall be in accordance with good oil field and construction practices. F. Protection of Environment. The Oil production facilities are located in and near environmentally sensitive wet -land habitats. The Operator shall exercise every reason- able precaution to protect the wet -land, channels and bodies of water from pollution of any kind. G. Safety. The highest possible priority is to be placed on conducting a safe operation. The Operator shall comply with the Safety Orders of the State Division of Industrial Safety and all other applicable laws, ordi- nances and regulations relating to safety. H. Cooaeration with Others. The Operator shall cooperate and take direction from the City and its authorized representatives. The City has a "non-exclusive" property right to operate and maintain its oil production facilities. Other oil companies and utilities have operating rights over the same area. The Operator will be required to fully cooperate with others and to schedule and coordinate work so as not to interfere with the rights of others. M Request for Proposal Page 4 I. Use of City Personnel. It is the policy of the City not to use City personnel in connection with the normal operation of the oil field. Every effort shall be made by the Operator to accomplish the required work by using outside contractors and labor. J. Labor. The Operator shall comply with all applicable Federal, State and Local labor laws. K. Liability Insurance. The Operator shall furnish the City a policy or certificate of liability insurance in which the City is named as the insured or as an additional insured. The coverage shall provide the following minimum limits: Bodily Injury ................. $250,000 each person $500,000 each occurrence $500,000-aggregate products completed operations Property Damage ............... $100,000 each occurrence $250,000 aggregate A combined single limit policy with -aggregate limits in the amount of $1,000,000 will be considered equivalent to the required minimum limits. to Request for Proposal Page 5 Insurance companies shall be assigned Policyholders' Rating Q (or better) by the latest edition of Best's Key Rating Guide: Property - Casualty. The Operator shall save, keep and hold harmless the City, its officers and agents from all damages, costs or expenses in law or equity that may at any time anise or be set up because of damages to property, or of personal injury received by reason of or in the course of performing work, which may be caused by any willful or negligent act or omission by the Operator, any of the Operator's employees, or any subcontractor. All liability insurance policies shall bear an endorsement or shall have attached a rider whereby it is provided that, in the event of expiration or proposed cancellation.of such policies for any reason whatsoever, the City shall be notified by registered mail, return receipt requested, giving a sufficient time before the date thereof to comply with any applicable law or statute,`but in no event,less than 30 days before expiration or cancellation is effective. The cost of this insurance shall be included in the Operator's monthly service fee. L. Worker's Compensation -Insurance. The Operator shall comply with Section 3800 of the Labor Code by securing,paying for, and maintaining in full force and effect for the duration of the contract, complete Workmen's Compensation Insurance, and shall furnish a Certificate of Insurance to the City. The City, its officers, or employees, will not be responsible for any claims in law or equity occasioned by failure of the Operator to comply with this paragraph. Request for Proposal Page 6 All compensation insurance policies shall bear an endorsement or shall have attached a rider whereby it is provided that, in the event of expiration or proposed cancellation of such policies for any reason whatsoever, the City shall be notified by registered mail not less than 30 days before expiration or cancellation is effective. The cost of this insurance shall be included in the Operator's monthly service fee. M. Extra Work. When the City determines that required work is not covered by the monthly service fee it shall be classified as "extra work". If the price for extra work is not covered in the Proposal Form and cannot be agreed upon, the City will pay for the extra work based on the accumulation of costs of labor, materials and tools and equipment, plus a 15 percent markup for all overhead and profit. Vendor's invoices shall be submitted with the request for payment. The Operator shall not proceed with any "extra work" unless a cost estimate has been prepared and authorized by the City. N. Authority of Other Agencies. 1. The well heads and production facilities are locared in the County of Orange and the operation at all times will be subject to the rules and regulations of the County of"Orange Environmental --Management Agency. 2. The oil reservoir is located in Tidelands under the Pacific Ocean and the operation at all times will be subject to the authority of the State Lands Commission of the State of California. 1.:z_ DRAFT 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 4� 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 $ per month. 2. Provide requested extra engineering work for an hourly rate of $ per hour. 3. Provide requested extra administrative and office work for an hourly rate of $ per hour. Date HE uthorized Signature ompany ress Telephone Number