HomeMy WebLinkAbout11 - Delivery of Natural Gas to Hoag HospitalCITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. 11
September 14, 2010
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Utilities Department
George Murdoch, Utilities Director
(949) 644 -3011 or gmurdoch @newportbeachca.gov
SUBJECT: AMENDMENT NO. 2 TO AGREEMENT BETWEEN THE CITY OF
NEWPORT BEACH AND HOAG MEMORIAL HOSPITAL
PRESBYTERIAN FOR THE DELIVERY OF NATURAL GAS
ISSUE:
Staff is recommending approval of amendment number two (2) (Attachment "A ") to
agreement between the City of Newport Beach and Hoag Memorial Hospital
Presbyterian for the delivery of natural gas. The amendment essentially extends the
term of the agreement, defines City responsibility, and updates contact information.
RECOMMENDATION:
Approve amendment number two (2) to agreement with Hoag Memorial Hospital
Presbyterian for delivery of excess natural gas produced from the sixteen City -owned oil
wells as a by- product of oil extraction activities. Authorize the Mayor to execute
amendment number two (2) to this agreement.
DISCUSSION:
Background:
The City's oil fields produce natural gas as a by- product of oil extraction activities and
cannot conduct oil extraction without producing natural gas. Attached as Exhibit "A" is a
map of the City owned gas line that connects the oil well field to Hoag Hospital. Should
there be a period when the natural gas could not be disposed; the City would have to
curtail oil extraction activities. On February 11, 1985, the City entered into an agreement
with Hoag Hospital Memorial Presbyterian (Hoag Hospital) to take delivery and
purchase this excess natural gas to ensure the long term operations of the oil fields.
Amendment No. 2 to Agreement for Natural Gas Delivery
9/14/10
Page 2
During the process of renewing the 1985 agreement in the spring of 2007, Hoag
Hospital informed the City that it would no longer be able to take delivery of the excess
natural gas from the City's oil extraction activities on a long term basis. According to
Hoag Hospital, this was the result of it being informed by Southern California Gas
Company (SCGC) that in order to guarantee natural gas deliveries to Hoag Hospital's
newly constructed co- generation facility; Hoag Hospital must enter into a "Full
Requirements Service Agreement." This agreement stipulated that customers are
prohibited from using alternate fuel sources. Hoag Hospital has stated that SCGC's Full
Requirements Service Agreement applies only to its lower campus because the co-
generation facility supplies energy only to these facilities. However, it is Hoag Hospital's
intent in the future to supply both the lower and upper campus facilities with energy
produced by this plant and thus would no longer be able to use the City's natural gas at
that time.
On August 1, 2007, the City and Hoag Hospital entered into an agreement (Attachment
"C ") in which Hoag Hospital agreed to continue taking delivery of the natural gas
produced by the City's oil extraction activities. The initial term was to terminate in
August 2009. Council approved amendment number one (1) (Attachment "B ") on April
22, 2008, extending the term to August 1, 2012.
Amendment number two (2) extends the agreement termination date to August 1, 2015.
The City agrees to clean the natural gas produced from our wells to a level that is
comparable to commercially available natural gas that complies with the Air Quality
Control Management District regulations for producers of gas. Sections six (6) and
seven (7) of the agreement are amended to remove contact names and replace with
contact titles. Staff recommends executing this second amendment to the agreement
which will ensure that there is no disruption of oil extraction activities while staff
develops alternative uses for this excess natural gas.
Environmental Review:
Staff recommends the City Council finds that taking action to the recommendations in
this report 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.
Public Notice
This agenda item has been noticed according to the Ralph M. Brown Act (72 hours in
advance of the public meeting at which the City Council considers the item).
Amendment No. 2 to Agreement for Natural Gas Delivery
9/14/10
Page 3
Funding Availability:
There are no funding requirements with this action.
Alternatives:
Do not approve amendment number two (2) to agreement with Hoag Memorial Hospital
Presbyterian for delivery of excess natural gas produced from the sixteen City -owned oil
wells as a by- product of oil extraction activities. Do not authorize the Mayor to execute
amendment number two (2) to this agreement. The current agreement will terminate on
August 1, 2012.
Submitted by:
A
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rd (56h, Utilities Director
Exhibits: ( "A ") Map of City owned gas line to Hoag Hospital
Attachments: ( "A ") Amendment number two (2)
( "B ") Amendment number one (1)
( "C ") 2007 Agreement
City of Newport Beach
EXHIBIT "A"
Gas Transmission Main
Ownership / Maintenance
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Attachment "A"
AMENDMENT NO. 2
TO AGREEMENT BETWEEN THE CITY OF NEWPORT BEACH
AND HOAG MEMORIAL HOSPITAL PRESBYTERIAN FOR
THE DELIVERY OF NATURAL GAS
THIS AMENDMENT NO. 2 TO AGREEMENT (`Amendment No. 2 "), is entered
into this 1st day of July, 2010, by and between the CITY OF NEWPORT BEACH,
a charter city and municipal corporation ( "City "), and HOAG MEMORIAL
HOSPITAL PRESBYTERIAN ( "Hospital'), a California non -profit public benefit
corporation, whose address is One Hoag Drive, P.O. Box 6100, Newport Beach,
California, 92658 (City and Hospital are sometimes referred to as the "Parties' in
this Amendment No. 2), which is made with reference to the following:
RECITALS:
A. City owns and operates oil and gas producing wells with. appurtenant
facilities and delivery pipelines in the West Newport area of the City. City
produces natural gas as a by- product of these oil extraction activities, and
cannot conduct oil extraction without producing natural gas.
B. On August 1, 2007, City and Hospital entered into an Agreement in which
the City agreed to provide the natural gas produced by its oil extraction
activities to the Hospital at no cost, provided that the Hospital put the gas
to use in its operations (hereinafter referred to as the "Agreement"
attached as Exhibit "A" .
C. On April 22, 2008, City and Hospital entered into Amendment No. 1 to
extend the term of the Agreement, until August 1, 2012.
D. City and Hospital mutually desire to further amend the termination date of
the Agreement as provided below."
NOW, THEREFORE, it is mutually agreed by and between the undersigned
Parties as follows:
Section 1, Term, of the AGREEMENT is amended to read as follows:
-The term of this AGREEMENT shall commence on the above
written date, and shall terminate on the V4 day of August, 2015
("initial Term', unless the Agreement is extended or terminated
as provided herein. This Agreement shall automatically be
extended for five additional successive terms of one (1) year each
(the "Option Term' , on the same terms and conditions as
contained in the Agreement, unless the Agreement is terminated
as provided herein."
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Z Section 3, City's Responsibilities, of the AGREEMENT is amended to read
as follows:
°H. Cleaning the City gas to a level that is comparable to other
commercially available natural gas prior to delivery to the
Hospital including compliance with any regulation imposed
by the Air Quality Control Management District on producers
of gas."
3, Section 6, Administration, of the AGREEMENT is amended to remove the
name of Steve Myrter and replace it with the Utilities Director as the
person at the City with the authority to act for the City.
4: Section 7, Notice, of the AGREEMENT is amended to remove the name of
Steve Myrter and replace it with the Utilities Director as the person at the
City to receive notice, and remove the name of Doug Koehler and replace
it with Director Facility Operations and Maintenance as the person at the
Hospital to receive notice.
5. Except as expressly modified by this Amendment No. 2, all other
provisions, terms, and covenants set forth in the Agreement shall remain
unchanged and shall be interpreted as being in full force and effect.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the date first written above.
APPROVED AS TO FORM:
�MwtiLj�'
Mynette D. Beauchahip,
Assistant City Attorney
for the City of Newport Beach
ATTEST:
Leilani 1. Brown,
City Clerk
MGM 1000441
*75655 v3
CITY OF NEWPORT BEACH,
A Municipat Corporation
By:
Keith D. Curry, Mayor
for the City of Newport Beach
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN, a California
Non - Profit Public Benefit
Corporation
Richard F. Afable, M.D.
President and CEO
. Attachment "B" .
AMENDMENT NO.1
TO AGREEMENT BETWEEN THE CITY OF NEWPORT BEACH
AND HOAG MEMORIAL HOSPITAL PRESBYTERIAN FOR
THE DELIVERY OF NATURAL GAS
THIS AMENDMENT NO. 1 TO AGREEMENT ( "Amendrent"), is entered into this
22 day of April, 2008, by and between the CITY OF NEWPORT BEACH, a
charter city and municipal corporation ( "City'), and HOAG MEMORIAL
HOSPITAL PRESBYTERIAN ( "Hospital'), a California non -profit public benefit
corporation, whose address is One Hoag Drive, P.O. Box 6100, Newport Beach,
California, 92658 (City and Hospital are sometimes referred to as the "Parties" in
this Amendment), and is made with reference to the following:
RECITALS:
A. City owns and operates oil and gas producing wells with appurtenant
facilities and delivery pipelines in the West Newport area of the City. City
produces natural gas as a•by- product of these oil extraction activities, and
cannot conduct oil extraction without producing natural gas.
B. On August 1, 2007, City and Hospital entered into an Agreement in which
the City agreed to provide the natural gas produced by its oil extraction
activities to the Hospital at no cost, provided that the Hospital put the gas
to use in its operations (hereinafter referred to as the "Agreement").
C. The Agreement is scheduled to expire on August 1, 2009. City and
Hospital want to enter into this Amendment to extend the term of the
Agreement, until August 1, 2012.
D. City and Hospital mutually desire to amend the termination date of the
Agreement as provided below."
NOW, THEREFORE, it is mutually agreed by and between the undersigned
Parties as follows:
Section 1, Term, of the AGREEMENT is amended to read as follows:
"The term of this AGREEMENT shall commence on the above
written date, and shall terminate on the 9s, day of August, 2092
07nitial Term'), unless the Agreement is extended or terminated
as provided herein. This Agreement shall automatically be
extended for five additional successive terms of one (1) year each
(the 'Option Term , on the same terms and conditions as
Contained in the Agreement, unless the Agreement is terminated
as provided herein."
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2. Except as expressly modified by this Amendment, all other provisions,
terms, and covenants set forth in the Agreement shall remain unchanged
and shall be in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the date first written above.
APP OVED AS TO FORM:
C 4.-.,
Aaron C. Harp,
Assistant City Attorney
for the City of Newport Beach
ATTEST:
LaVonne Harkless,
City Clark
C20 10002.1
H&O: assosn v2
CITY OF NEWPORT BEACH,
A Municipal Corporation
By
Edward D. Seiich, Mayor
for the City of Newport Beach
HOAG MEMORIAL. HOSPITAL
PRESBYTERIAN, a California
Non -Profit Public Benefit
Corporationz�
By.
Richard F. Afable,
President and CEO
i Attachment "C" 0
AGREEMENT BETWEEN THE CITY OF NEWPORT
BEACH AND HOAG MEMORIAL HOSPITAL
PRESBYTERIAN FOR THE DELIVERY OF NATURAL GAS
THIS AGREEMENT is made and entered into as of this 4 at day of August, 2007, by and
between the CITY OF NEWPORT BEACH, a Municipal Corporation ( "City"), and HOAG
MEMORIAL HOSPITAL PRESBYTERIAN, California non -profit public benefit
corporation whose address is One Hoag Drive, P.O. Box 6400, Newport Beach,
California 92658 ( "Hospital ") (City and Hospital are sometimes referred to as the
"Parties" In this Agreement), and is made with reference to the following:
RECITALS
A. City is a municipal corporation duly organized and validly existing under the laws
of the State of California with the power to carry on its business as it is now being
conducted under the statutes of the State of California and the Charter of City.
S. City owns and operates oil and gas producing wells with appurtenant facilities
and delivery pipelines in the West Newport Area.
C. City produces natural gas as a by- product of its oil extraction activities, and
cannot conduct oil extraction without producing natural gas. During periods the
natural gas is not used, City must curtail oil extraction activities.
D. As a result of its oil and gas operations, the City produces natural gas in excess
of its needs.
E. Hospital operates an acute. care hospital facility located in the City capable of
using City gas for its hospital operations.
F. The City and Hospital each own portions of the gas transmission pipeline and
appurtenances as described and delineated in Exhibit "A" which is attached
hereto and incorporated herein by this reference.
G. City requires the excess natural gas produced from the City's oil and gas
operations to be put to use, and Hospital has agreed to use the gas, under the
terms and conditions set forth in this Agreement.
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NOW THEREFORE, in consideration of the foregoing, City and Hospital mutually and
understand that:
TERM
The term of this Agreement shall continence on the above written date, and shall
terminate on the 1st day of August 2009 ( "Initial Term "), unless the Agreement is
extended or terminated as provided herein. This Agreement shall automatically
be extended for five additional successive terms of five (1) year (the "Option
Terms"), on the same terms and conditions as contained in this Agreement,
unless the Agreement is terminated as provided herein.
2. MAINTENANCE & REPAIR
The City and Hospital shall each be responsible for repairing and maintaining
their respective production facilities, gas pipelines, valves and associated and
appurtenant facilities and shall make any necessary repairs in a timely manner.
3. CITY'S RESPONSIBILITIES
City shall be responsible for
A. Providing natural gas through Clty -owned transmission facilities and gas
meter to the Hospital owned gas line system.
B. Odorizing City - produced natural gas with an industry standard odorant
chemical.
C. Maintaining and operating City -owned gas transmission facilities along
West Coast Highway to the point of connection to the Hospital owned gas
line system.
D. Maintaining a maximum pressure of twelve (12) pounds per square inch
(p.s.i.) set at point of connection to Hospital owned gas line system _
E. Allowing Hospital to maintain the gas pipeline within City's utility easement
across Hospital's property via a City- issued encroachment permit.
F. Calibrating the gas delivery meter and testing meter for accuracy at such
times as reasonably requested by Hospital. The delivery meter will be
operated by City at City's tank farm.
G. Granting Hospital a written right -o#- -entry onto City property to inspect City
gas transmission and metering facilities.
4. HOSPITAL'S RESPONSIBILITIES
Hospital shall be responsible for.
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A. Making use of any and all natural gas delivered by City.
B. Taking delivery of City gas on a first priority basis.
C. Maintaining and operating the Hospital owned gas line system.
D. Operating the Hospital owned gas line system so as to draw gas through
City's gas transmission facilities at a more or less continuous demand
rate.
E. Granting City a written right -of -entry onto Hospital property to inspect or
repair City gas delivery facilities.
5. CONSIDERATION
A. It is agreed between Hospital and City that Hospital shall receive the gas
at no cost to Hospital,
B. During a Hospital - required shutdown, Hospital shall vent City's gas
through Hospital's gas flare system. An interruption in use by acts of God,
war, civil commotion, riots, strike, damage to Hospital by reason of fire or
other casualty, and /or other casualty, beyond the control of Hospital will
not be considered a Hospital- required shutdown.
6. ADMINISTRATION
This Agreement will be administered by the Utilities Department. Steve Myrter,
Utilities Director, shall be the Project Administrator and shall have the authority to
act for City under this Agreement. The Project Administrator or his/her
authorized representative shall represent City in all matters pertaining to the
services to be rendered pursuant to this Agreement.
7. NOTICE
All notices, demands, requests or approvals to be given under the terms of this
Agreement shall be given in writing, and conclusively shall be deemed served
when delivered personally, or on the third business day after the deposit thereof
in the United States mail, postage prepaid, first -class mail, addressed as
hereinafter provided. All notices, demands, requests or approvals from Hospital
to City shall be addressed to City at
Attn: Steve Myrter
Utilities Department
City of Newport Beach
949 West 16'h Street
Newport Beach, CA, 92663
Phone: 949- 644 -3011
Fax: 949- 644 -5204
BMW 10001.41
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11
All notices, demands, requests or approvals from City to Hospital shall be
addressed to Hospital at:
Attn: Doug Koehler
Director Facility Operations and Maintenance
Hoag Memorial Hospital Presbyterian
One Hoag Dr, PO Box 6100
Newport Beach, California 92658 -8913
Phone: 949 - 764 -8016
Fax: 949- 764 -8019
8, TERMINATION
A. Without Cause
After the Initial Tema, either party hereto may terminate this Agreement,
without cause, by providing the other party with ninety (90) calendar day
prior written notice of the party's intent to terminate this Agreement.
B. With Cause
City or Hospital may terminate this Agreement on ten (10) days written
notice if the City's gas source is depleted or the quality of gas deteriorates
such that in an opinion of a qualified engineer, Hospital is unable to
feasibly utilize the gas.
C. Notice of Intent Not to Extend
City or Hospital shall provide notice of intent not to automatically extend
the terms of this Agreement at least ninety (90) days in advance of the
expiration of the Initial Term or any subsequent one -year extensions of this
Agreement.
9. RECORDS
City shall provide free access to the representative of Hospital or its designees at
all proper times to such books and records, and gives Hospital the right to
examine same, and to make transcripts therefrom as deemed necessary, and to
allow inspection of all work, data, documents, proceedings and activities related
to this Agreement.
10. WAIVER
A waiver by City or Hospital of any breach of any term, covenant, or condition
contained herein shall not be deemed to be a waiver of any subsequent breach
of the same or any other term, covenant, or condition contained herein whether
of the same or different character.
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11. INTEGRATED CONTRACT
This Agreement represents the full and complete understanding of every kind or
nature whatsoever between the Parties hereto and all preliminary negotiations
and agreements of whatsoever kind or nature are merged herein. No verbal
agreement or implied covenant shall be held to vary the provisions hereof. Any
modification of this Agreement will be effective only by written execution signed
by both City and Hospital.
12. HOLD HARMLESS
City shall indemnify and hold harmless, Hospital, its boards, officers, agents, and
employees from and against any and all loss, damages, liability, claims, suits,
costs and expenses, whatsoever, including reasonable costs of litigation,
regardless of the merit or outcome of any such claim or suit, arising from or in
any manner connected to City's errors, negligent acts, omissions, or work
conducted pursuant to this Agreement or arising from or in any manner
connected to persons, firms or corporations furnishing or supplying work,
services, materials, equipment or supplies on- City's behalf pursuant to this
Agreement.
Hospital shall indemnify and hold harmless, City, its City Council, boards and
commissions, officers, agents, and employees from and against any and all loss,
damages, liability, claims, suits, costs and .expenses, whatsoever, including
reasonable costs of litigation, regardless of the merit or outcome of any such
claim or suit, arising from or in any manner connected to Hospital's errors,
negligent acts, omissions, or work conducted pursuant to this Agreement or.
arising from or in any manner connected to persons, firms or corporations
furnishing or supplying work, services, materials, equipment or supplies on
Hospital's behalf pursuant to this Agreement.
13. INTERPRETATION
The terns of this Agreement shall be construed in accordance with the meaning
of the language used and shall not be construed for or against either party by
reason of the authorship of the Agreement or any other rule of construction which
might otherwise apply.
14. AMENDMENTS
This Agreement may be modified or amended only by a written document
executed by both Hospital and City and approved as to form by the City Attorney.
15. SEVERABILITY
If any term or portion of this Agreement Is held to be invalid, illegal, or otherwise
unenforceable by a court of competent jurisdiction, the remaining provisions of
this Agreement shall continue in full force and effect.
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16. CONTROLLING LAW AND VENUE
The laws of the State of California shall govern this Agreement and all matters
relating to it and any action brought relating to this Agreement shall be
adjudicated in a court of competent jurisdiction in the County of Orange.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on
the day and year first written above.
A AS TO FORM:
Aaron Harp
Assistant City Attorney
for the City of Newport Beach
ATTEST:
/•
City Clerk
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CITY OF NEWPORT BEACH,
A Munici al C oration
By:
Steven Rosansky
Mayor
for the City of Newport Beach
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN, a California
non- profit'public benefit
corporati
Bye /cry" 02
Richard Afable,
President and CE
City Owned Gos Line
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City of Newport Beach
EXHIBIT "A"
Gas Transmission Main
Ownership / Maintenance
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