HomeMy WebLinkAbout07 - West Newport Oil FieldsQ��WPOR� CITY OF
NEWPORT BEACH
City Council Staff Report
Agenda Item No, 7
October 11, 2011
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Public Works Department
Stephen G. Badum, Public Works Director
949 - 644 -3311, sbadum @newportbeachca.gov
PREPARED BY: John Kappeler, jkapperler @newportbeachca.gov
APPROVED:
TITLE: APPROVAL OF PROFESSIONAL SERVICES AGREEMENT
WITH NETHERLAND, SEWELL & ASSOCIATES, INC., FOR
WEST NEWPORT OIL FIELD REVIEW, EVALUATION AND
MODIFICATION PROGRAM
ABSTRACT:
The City operates an oil field in West Newport. City Council has requested an
evaluation of potential changes that could be implemented to improve production. Staff
has requested and evaluated consultant proposals and recommends approval of a
Professional Services Agreement to analyze and evaluate the City's oil field operation.
Approve a Professional Services Agreement with Netherland, Sewell & Associates, Inc.,
(NSAI) of Dallas, Texas at a cost not to exceed $160,000, and authorize the Mayor and
City Clerk to execute the Agreement.
FUNDING REQUIREMENTS:
A. Budget Includes Sufficient Funding
The current adopted budget for FY 2011 -12 includes sufficient funding for this purchase.
It will be expensed to the Tidelands -Oil fund account in the Municipal Operations
Department, Account No. 5400 -8080.
West Newport Oil Field Review, Evaluation, and Modification Program — Approval of
Professional Services Agreement with Netherland, Sewell & Associates
October 11, 2011
Page 2
DISCUSSION:
The City of Newport Beach owns and operates sixteen circa- 1950's oil wells that
produced 30,000 barrels in 2009. Fifteen oil wells are operating today, with one of
these wells being used for water injection to increase productivity from the other wells.
One well is permanently out of service. The wells are located on two sites along West
Coast Highway (see Attachment B). The wells are slant - drilled from the City property
into an area under the ocean which is called the West Newport Offshore Oil Field. The
wells are operated under the supervision of the City's Municipal Operations Department.
Day -to -day operation and management has historically been contracted to a private
operator.
The City is interested in having an evaluation conducted of the oil field operations to
establish the value of the oil reserves along with recommendations for improving oil /gas
production and options for managing the oil field. A request for Statement of
Qualifications (SOQs) was sent to over 40 consulting firms with four firms subsequently
submitting SOQs. These SOQs were reviewed by staff and a Request for Proposals
was sent to the four consulting firms. Three proposals were submitted to the City:
1. Ryder Scott Company — Petroleum Consultants
2. Gaffney, Cline & Associates, Inc. (GCA)
3. Netherland, Sewell & Associates, Inc. (NSA])
The proposals were independently rated by three reviewers for each consultant's
qualifications, past experience on similar projects and project understanding. The GSA
proposal was ranked highest. Staff negotiated with GSA but was initially unable to
reach an agreement on the fee for the scope of services. Subsequently after many
discussions with all three proposers, staff was finally able to come to an agreement with
the second highest ranked firm, NSAI, on a scope of work, cost of services and contract
language that met the City's needs. Staff negotiated with NSAI to provide the
necessary scope of services for a not -to- exceed fee of $160,000.
ENVIRONMENTAL REVIEW:
Staff recommends that the City Council find that 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) 15060(c), and (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.
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West Newport Oil Field Review, Evaluation, and Modification Program —Approval of
Professional Services Agreement with Netherland, Sewell & Associates
October 11, 2011
Page 3
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
Submitted by:
Director
A. Professional Services Agreement
B. Location Map
PROFESSIONAL SERVICES AGREEMENT WITH
NETHERLAND, SEWELL & ASSOCIATES, INC. FOR
OILFIELD REVIEW, EVALUATION AND MODIFICATION PROGRAM
THIS AGREEMENT FOR PROFESSIONAL SERVICES ( "Agreement') is made
and entered into as of this _ day of , 2011 by and between the CITY
OF NEWPORT BEACH, a California Municipal Corporation ( "City "), and
NETHERLAND, SEWELL & ASSOCIATES, INC., a Texas corporation ( "Consultant'),
whose address is 4500 Thanksgiving Tower, 1601 Elm Street, Dallas, Texas 75201 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.
B. City is planning to conduct oilfield studies.
C. City desires to engage Consultant to perform reviews, evaluations and
modification studies of oilfields. ( "Project').
D. Consultant possesses the skill, experience, ability, background, certification and
knowledge to provide the services described in this Agreement.
E. The principal member of Consultant for purposes of Project shall be Michael F.
Krehel, Jr.
F. City has solicited and received a proposal from Consultant, has reviewed the
previous experience and evaluated the expertise of Consultant, and desires to
retain Consultant to render professional services under the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, it is mutually agreed by and between the undersigned
parties as follows:
TERM
The term of this Agreement shall commence on the above written date, and shall
terminate on March 31, 2012 unless terminated earlier as set forth herein.
2. SERVICES TO BE PERFORMED
City and Contractor acknowledge that the above Recitals are true and correct and are
hereby incorporated by reference. Consultant shall diligently perform all the services
described in the Scope of Services attached hereto as Exhibit A and incorporated
herein by reference ( "Work" or "Services "). The City may elect to delete certain tasks of
the Scope of Services at its sole discretion.
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3. TIME OF PERFORMANCE
3.1 Time is of the essence in the performance of Services under this
Agreement and the Services shall be performed to completion in a diligent and timely
manner. The failure by Consultant to perform the Services in a diligent and timely
manner may result in termination of this Agreement by City.
3.1.1 Notwithstanding the foregoing, Consultant shall not be responsible
for delays due to causes beyond Consultant's reasonable control. However, in the case
of any such delay in the Services to be provided for the Project, each party hereby
agrees to provide notice to the other party so that all delays can be addressed.
3.2 Consultant shall submit all requests for extensions of time for performance
in writing to the Project Administrator not later than ten (10) calendar days after the start
of the condition that purportedly causes a delay. The Project Administrator shall review
all such requests and may grant reasonable time extensions for unforeseeable delays
that are beyond Consultant's control.
3.3 For all time periods not specifically set forth herein, Consultant shall
respond in the most expedient and appropriate manner under, the circumstances, by
either telephone, fax, hand - delivery or mail.
4. COMPENSATION TO CONSULTANT
4.1 City shall pay Consultant for the Services on a time and expense not -to-
exceed basis in accordance with the provisions of this Section and the Schedule of
Billing Rates attached hereto as Exhibit B and incorporated herein by reference.
Consultant's compensation for all Work performed in accordance with this Agreement,
including all reimbursable items and subconsultant fees, shall not exceed One Hundred
Sixty Thousand Dollars and no 1100 ($160,000.00) without prior written authorization
from City. No billing rate changes shall be made during the term of this Agreement
without the prior written approval of City Consultant shall submit monthly invoices to City
describing the Work performed the preceding month. Consultant's bills shall include the
name of the person who performed the Work, a brief description of the Services
performed and /or the specific task in the Scope of Services to which it relates, the date
the Services were performed, the number of hours spent on all Work billed on an hourly
basis, and a description of any reimbursable expenditures. City shall pay Consultant no
later than thirty (30) days after approval of the monthly invoice by City staff.
4.2 City shall reimburse Consultant only for those costs or expenses
specifically approved in this Agreement, or specifically approved in writing in advance
by City. Unless otherwise approved, such costs shall be limited and include nothing
more than the following costs incurred by Consultant:
4.2.1 The actual costs of subconsultants for performance of any of the
Services that Consultant agrees to render pursuant to this Agreement, which have been
approved in advance by City and awarded in accordance with this Agreement.
4.2.2 Approved reproduction charges.
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4.2.3 Actual costs and /or other costs and /or payments specifically
authorized in advance in writing and incurred by Consultant in the performance of this
Agreement.
4.3 Consultant shall not receive any compensation for Extra Work performed
without the prior written authorization of City. As used herein, "Extra Work" means any
Work that is determined by City to be necessary for the proper completion of the
Project, but which is not included within the Scope of Services and which the parties did
not reasonably anticipate would be necessary at the execution of this Agreement.
Compensation for any authorized Extra Work shall be paid in accordance with the
Schedule of Billing Rates as set forth in Exhibit B
5. PROJECT MANAGER
5.1 Consultant shall designate a Project Manager, who shall coordinate all
phases of the Project. This Project Manager shall be available to City at all reasonable
times during the Agreement term. Consultant has designated Michael F. Krehel, Jr. to
be its Project Manager. Consultant shall not remove or reassign the Project Manager or
any personnel listed in Exhibit A or assign any new or replacement personnel to the
Project without the prior written consent of City. City's approval shall not be
unreasonably withheld with respect to the removal or assignment of non -key personnel.
5.2 Consultant, at the sole discretion of City, shall remove from the Project
any of its personnel assigned to the performance of Services upon written request of
City. Consultant warrants that it will continuously furnish the necessary personnel to
complete the Project on a timely basis as contemplated by this Agreement.
6. ADMINISTRATION
This Agreement will be administered by the Public Works Department. Robert Stein,
Assistant City Engineer or his designee, 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. CITY'S RESPONSIBILITIES
7.1 In order to assist Consultant in the execution of its responsibilities under
this Agreement, City agrees to, where applicable:
7.1.1 Provide access to, and upon request of Consultant, one copy of all
existing relevant information on file at City. City will provide all such materials in a
timely manner so as not to cause delays in Consultant's Work schedule.
7.1.2 Provide blueprinting and other Services through City's reproduction
company for bid documents. Consultant will be required to coordinate the required bid
documents with City's reproduction company. All other reproduction will be the
responsibility of Consultant and as defined above.
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7.1.3 Provide usable life of facilities criteria and information with regards
to new facilities or facilities to be rehabilitated.
8.1 All of the Services shall be performed by Consultant or under Consultant's
supervision. Consultant represents that it possesses the professional and technical
personnel required to perform the Services required by this Agreement, and that it will
perform all Services in a manner commensurate with community professional
standards. All Services shall be performed by qualified and experienced personnel who
are not employed by City, nor have any contractual relationship with City. By delivery of
completed Work, Consultant certifies that the Work conforms to the requirements of this
Agreement and all applicable federal, state and local laws and the professional standard
of care.
8.2 Consultant represents and warrants to City that it has, shall obtain, and
shall keep in full force in effect during the term hereof, at its sole cost and expense, all
licenses, permits, qualifications, insurance and approvals of whatsoever nature that is
legally required of Consultant to practice its profession.
8.3 Consultant shall not be responsible for delay, nor shall Consultant be
responsible for damages or be in default or deemed to be in default by reason of strikes,
lockouts, accidents, or acts of God, or the failure of City to furnish timely information or
to approve or disapprove Consultant's Work promptly, or delay or faulty performance by
City, contractors, or governmental agencies.
9. HOLD HARMLESS
To the fullest extent permitted by law, Consultant shall indemnify, defend and hold
harmless City, its City Council, boards and commissions, officers, agents, volunteers
and employees (collectively, the "Indemnified Parties) from and against any and all
claims for bodily injury, death or damage to property, (including, without limitation,
attorney's fees, disbursements and court costs) of every kind and nature whatsoever
(individually, a Claim; collectively, "Claims "), which may arise from or in any manner
relate (directly or indirectly) to the negligence, recklessness, or willful misconduct of the
Consultant or its principals, officers, agents, employees, vendors, suppliers,
subconsultants, subcontractors, anyone employed directly or indirectly by any of them
or for whose acts they may be liable or any or all of them.
9.1 Notwithstanding the foregoing, nothing herein shall be construed to
require Consultant to indemnify the Indemnified Parties from any Claim arising from the
sole negligence, active negligence or willful misconduct of the Indemnified Parties.
Nothing in this indemnity shall be construed as authorizing any award of attorney's fees
in any action on or to enforce the terms of this Agreement. This indemnity shall apply to
all claims and liability regardless of whether any insurance policies are applicable. The
policy limits do not act as a limitation upon the amount of indemnification to be provided
by the Consultant.
9.2 The City shall indemnify and hold harmless Contractor, each person who
controls it, and each employee of it and each consultant or contractor engaged by it
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from and against any and all losses, claims, damages, expenses or liabilities, joint or
several, to which they or any of them may become subject (expressly excluding claims
for bodily injury, death or damage to property), in connection with the performance of
such consulting work or the preparation of such evaluations or the reliance thereon by
the City or any other party to which the City discloses, divulges or delivers any work
product of Contractor, and the City shall reimburse Contractor and each such person or
any legal or other expenses reasonably incurred in connection with investigating for
defending any actions, whether or not resulting in any liability, insofar as such losses,
claims, damages, expenses; liability or actions arise out of or are based upon such
consulting petroleum engineering, geological, geophysical, petrophysical or evaluation
work or any reliance thereon; provided, however, nothing herein shall require
indemnification or reimbursement for expenses with respect to losses, claims, damages,
expenses or liability arising from the gross negligence or willful misconduct of
Contractor.
10. INDEPENDENT CONTRACTOR
It is understood that City retains Consultant on an independent contractor basis and
Consultant is not an agent or employee of City. The manner and means of conducting
the Work are under the control of Consultant, except to the extent they are limited by
statute, rule or regulation and the expressed terms of this Agreement. Nothing in this
Agreement shall be deemed to constitute approval for Consultant or any of Consultant's
employees or agents, to be the agents or employees of City. Consultant shall have the
responsibility for and control over the means of performing the Work, provided that
Consultant is in compliance with the terms of this Agreement. Anything in this
Agreement that may appear to give City the right to direct Consultant as to the details of
the performance or to exercise a measure of control over Consultant shall mean only
that Consultant shall follow the desires of City with respect to the results of the Services.
11. COOPERATION
Consultant agrees to work closely and cooperate fully with City's designated Project
Administrator and any other agencies that may have jurisdiction or interest in the Work
to be performed. City agrees to cooperate with the Consultant on the Project.
12. CITY POLICY
Consultant shall discuss and review all matters relating to policy and Project direction
with City's Project Administrator in advance of all critical decision points in order to
ensure the Project proceeds in a manner consistent with City goals and policies.
13. PROGRESS
Consultant is responsible for keeping the Project Administrator and/or his/her duly
authorized designee informed on a regular basis regarding the status and progress of
the Project, activities performed and planned, and any meetings that have been
scheduled or are desired.
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14. INSURANCE
14.1 Without limiting Consultant's indemnification of City, and prior to
commencement of Work, Consultant shall obtain, provide and maintain at its own
expense during the term of this Agreement, policies of insurance of the type and
amounts described below and in a form satisfactory to City.
14.2 Proof of Insurance. Consultant shall provide certificates of insurance to
City as evidence of the insurance coverage required herein, along with a waiver of
subrogation endorsement for workers' compensation. Insurance certificates and
endorsement must be approved by City's Risk Manager prior to commencement of
performance. Current certification of insurance shall be kept on file with City at all times
during the term of this contract. City reserves the right to require complete, certified
copies of all required insurance policies, at any time.
14.2.1 Consultant shall procure and maintain for the duration of the
contract insurance against claims for injuries to persons or damages to property, which
may arise from or in connection with the performance of the Work hereunder by
Consultant, his agents, representatives, employees or subconsultants. The cost of such
insurance shall be included in Consultant's bid.
14.3 Acceptable Insurers. All insurance policies shall be issued by an
insurance company currently authorized by the Insurance Commissioner to transact
business of insurance in the State of California, with an assigned policyholders' Rating
of A- (or higher) and Financial Size Category Class VII (or larger) in accordance with the
latest edition of Best's Key Rating Guide, unless otherwise approved by the City's Risk
Manager.
14.4 Coverage Requirements.
14.4.1 Workers' Compensation Coverage. Consultant shall maintain
Workers' Compensation Insurance (Statutory Limits) and Employer's Liability Insurance
(with limits of at least one million dollars ($1,000,000)) for Consultant's employees in
accordance with the laws of the State of California, Section 3700 of the Labor Code In
addition, Consultant shall require each subconsultant to similarly maintain Workers'
Compensation Insurance and Employer's Liability Insurance in accordance with the
laws of the State of California, Section 3700 for all of the subconsultant's employees.
14.4.1.1 Any notice of cancellation or non - renewal of all
Workers' Compensation policies must be received by City at least thirty (30) calendar
days (ten (10) calendar days written notice of non - payment of premium) prior to such
change.
14.4.1.2 Consultant shall submit to City, along with the
certificate of insurance, a Waiver of Subrogation endorsement in favor of City, its
officers, agents, employees and volunteers.
14.5 General Liability Coverage. Consultant shall maintain commercial general
liability insurance in an amount not less than one million dollars ($1,000,000) per
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occurrence for bodily injury, personal injury, and property damage, including without
limitation, blanket contractual liability.
14.6 Automobile Liability Coverage. Consultant shall maintain automobile
insurance covering bodily injury and property damage for all activities of the Consultant
arising out of or in connection with Work to be performed under this Agreement,
including coverage for any owned, hired, non -owned or rented vehicles, in an amount
not less than one million dollars ($1,000,000) combined single limit for each accident.
14.7 Professional Liability (Errors & Omissions) Coverage. Consultant shall
maintain professional liability insurance that covers the Services to be performed in
connection with this Agreement, in the minimum amount of one million dollars
($1,000,000) limit per claim and in the aggregate.
14.8 Other Insurance Provisions or Requirements.
14.8.1 The policies are to contain, or be endorsed to contain, the following
provisions
14.8.1.1 Waiver of Subrogation. All insurance coverage
maintained or procured pursuant to this agreement shall be endorsed to waive
subrogation against City, its elected or appointed officers, agents, officials, employees
and volunteers or shall specifically allow Consultant or others providing insurance
evidence in compliance with these requirements to waive their right of recovery prior to
a loss. Consultant hereby waives its own right of recovery against City, and shall require
similar written express waivers and insurance clauses from each of its subconsultants.
14.8.1.2 Enforcement of Contract Provisions. Consultant
acknowledges and agrees that any actual or alleged failure on the part of the City to
inform Consultant of non - compliance with any requirement imposes no additional
obligations on the City nor does it waive any rights hereunder.
14.8.1.3 Requirements not Limiting. Requirements of specific
coverage features or limits contained in this Section are not intended as a limitation on
coverage, limits or other requirements, or a waiver of any coverage normally provided
by any insurance. Specific reference to a given coverage feature is for purposes of
clarification only as it pertains to a given issue and is not intended by any party or
insured to be all inclusive, or to the exclusion of other coverage, or a waiver of any type.
14.8.1.4 Notice of Cancellation. Consultant agrees to oblige
its insurance agent or broker and insurers to provide to City with thirty (30) days notice
of cancellation (except for nonpayment for which ten (10) days notice is required) or
nonrenewal of coverage for each required coverage.
14.9 Timely Notice of Claims. Consultant shall give City prompt and timely
notice of claims made or suits instituted that arise out of or result from Consultant's
performance under this Agreement.
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14.10 Additional Insurance. Consultant shall also procure and maintain, at its
own cost and expense, any additional kinds of insurance, which in its own judgment
may be necessary for its proper protection and prosecution of the Work.
15, PROHIBITION AGAINST ASSIGNMENTS AND TRANSFERS
Except as specifically authorized under this Agreement, the Services to be provided
under this Agreement shall not be assigned, transferred contracted or subcontracted out
without the prior written approval of City. Any of the following shall be construed as an
assignment: The sale, assignment, transfer or other disposition of any of the issued
and outstanding capital stock of Consultant, or of the interest of any general partner or
joint venturer or syndicate member or cotenant if Consultant is a partnership or joint -
venture or syndicate or cotenancy, which shall result in changing the control of
Consultant. Control means fifty percent (50 %) or more of the voting power, or twenty -
five percent (25 %) or more of the assets of the corporation, partnership or joint- venture.
16. SUBCONTRACTING
The parties recognize that a substantial inducement to City for entering into this
Agreement is the professional reputation, experience and competence of Consultant.
Assignments of any or all rights, duties or obligations of the Consultant under this
Agreement will be permitted only with the express written consent of City. Consultant
shall not subcontract any portion of the Work to be performed under this Agreement
without the prior written authorization of City.
17. OWNERSHIP OF DOCUMENTS
17.1 Each and every report, draft, map, record, plan, document and other
writing produced (hereinafter "Documents'), prepared or caused to be prepared by
Consultant, its officers, employees, agents and subcontractors, in the course of
implementing this Agreement, shall become the exclusive property of City, and City
shall have the sole right to use such materials in its discretion without further
compensation to Consultant or any other party. Consultant shall, at Consultant's
expense, provide such Documents to City upon prior written request. Contractor may
retain for its archival purposes all of its work papers and copies of all reports, opinions,
appraisals, evaluations and determinations made by it.
17.2 Documents, including drawings and specifications, prepared by
Consultant pursuant to this Agreement are not intended or represented to be suitable
for reuse by City or others on any other project. Any use of completed Documents for
other projects and any use of incomplete Documents without specific written
authorization from Consultant will be at City's sole risk and without liability to
Consultant. Further, any and all liability arising out of changes made to Consultant's
deliverables under this Agreement by City or persons other than Consultant is waived
against Consultant and City assumes full responsibility for such changes unless City
has given Consultant prior notice and has received from Consultant written consent for
such changes.
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18. CONFIDENTIALITY
All Documents, including drafts, preliminary drawings or plans, notes and
communications that result from the Services in this Agreement, shall be kept
confidential unless City authorizes in writing the release of information.
19. INTELLECTUAL PROPERTY INDEMNITY
The Consultant shall defend and indemnify City, its agents, officers, representatives and
employees against any and all liability, including costs, for infringement of any United
States' letters patent, trademark, or copyright infringement, including costs, contained in
Consultant's drawings and specifications provided under this Agreement.
20. RECORDS
Consultant shall keep records and invoices in connection with the Work to be performed
under this Agreement. Consultant shall maintain complete and accurate records with
respect to the costs incurred under this Agreement and any Services, expenditures and
disbursements charged to City, for a minimum period of three (3) years, or for any
longer period required by law, from the date of final payment to Consultant under this
Agreement. All such records and invoices shall be clearly identifiable. Consultant shall
allow a representative of City to examine, audit and make transcripts or copies of such
records and invoices during regular business hours. Consultant shall allow inspection
of all Work, data, Documents, proceedings and activities related to the Agreement for a
period of three (3) years from the date of final payment to Consultant under this
Agreement.
21. WITHHOLDINGS
City may withhold payment to Consultant of any disputed sums until satisfaction of the
dispute with respect to such payment. Such withholding shall not be deemed to
constitute a failure to pay according to the terms of this Agreement. Consultant shall
not discontinue Work as a result of such withholding. Consultant shall have an
immediate right to appeal to the City Manager or his/her designee with respect to such
disputed sums. Consultant shall be entitled to receive interest on any withheld sums at
the rate of return that City earned on its investments during the time period, from the
date of withholding of any amounts found to have been improperly withheld.
22. ERRORS AND OMISSIONS
Inasmuch as uncertainties are inherent in the interpretation of engineering, geological,
geophysical and petrophysical data, any determination, computation, estimate,
evaluation, classification or categorization made by Contractor will represent only its
informed professional judgment based on the data and information obtained by it.
Therefore, Contractor shall not be liable for any cost or expense incurred or for any loss
or damage sustained (a) as a result of the manner in which such services are in good
faith performed by it, (b) as a result of its failure in good faith to perform an service or
make any determination, computation, classification or categorization, or (c) as a result
of the reliance by the City or any other party on any determination, computation,
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classification or categorization made by Contractor. CITY'S RIGHT TO EMPLOY
OTHER CONSULTANTS
City reserves the right to employ other Consultants in connection with the Project.
23. CONFLICTS OF INTEREST
23.1 The Consultant or its employees may be subject to the provisions of the
California Political Reform Act of 1974 (the "Act "), which (1) requires such persons to
disclose any financial interest that may foreseeably be materially affected by the Work
performed under this Agreement, and (2) prohibits such persons from making, or
participating in making, decisions that will foreseeably financially affect such interest.
23.2 If subject to the Act, Consultant shall conform to all requirements of the
Act. Failure to do so constitutes a material breach and is grounds for immediate
termination of this Agreement by City. Consultant shall indemnify and hold harmless
City for any and all claims for damages resulting from Consultant's violation of this
Section.
24. NOTICES
24.1 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 Consultant to City shall be addressed to
City at:
Attn: Robert Stein
Public Works Department
City of Newport Beach
3300 Newport Boulevard
PO Box 1768
Newport Beach, CA 92658
Phone: 949- 644 -3322
Fax: 949 -644 -3318
24.2 All notices, demands, requests or approvals from CITY to Consultant shall
be addressed to Consultant at:
Attention: Michael F. Krehel, Jr.
Netherland, Sewell & Associates, Inc.
1601 Elm Street, Suite 4500
Dallas, TX 7501
Phone: 214 - 969 -5401
Fax: 214 - 969 -5411
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25. CLAIMS
The Consultant and the City expressly agree that in addition to any claims filing
requirements set forth in the Contract and Contract documents, the Consultant shall be
required to file any claim the Consultant may have against the City in strict conformance
with the Tort Claims Act (Government Code sections 900 et seq.).
26. TERMINATION
26.1 In the event that either party fails or refuses to perform any of the
provisions of this Agreement at the time and in the manner required, that party shall be
deemed in default in the performance of this Agreement. If such default is not cured
within a period of two (2) calendar days, or if more than two (2) calendar days are
reasonably required to cure the default and the defaulting party fails to give adequate
assurance of due performance within two (2) calendar days after receipt of written
notice of default, specifying the nature of such default and the steps necessary to cure
such default, and thereafter diligently take steps to cure the default, the non - defaulting
party may terminate the Agreement forthwith by giving to the defaulting party written
notice thereof.
26.2 Notwithstanding the above provisions, City shall have the right, at its sole
discretion and without cause, of terminating this Agreement at any time by giving seven
(7) calendar days prior written notice to Consultant. In the event of termination under
this Section, City shall pay Consultant for Services satisfactorily performed and costs
incurred up to the effective date of termination for which Consultant has not been
previously paid. On the effective date of termination, Consultant shall deliver to City all
reports, Documents and other information developed or accumulated in the
performance of this Agreement, whether in draft or final form, subject to the rights
reserved to Contractor in Section 17.1.
27. STANDARD PROVISIONS
27.1 Compliance With all Laws
Consultant shall at its own cost and expense comply with all statutes, ordinances,
regulations and requirements of all governmental entities, including federal, state,
county or municipal, whether now in force or hereinafter enacted. In addition, all Work
prepared by Consultant shall conform to applicable City, county, state and federal laws,
rules, regulations and permit requirements and be subject to approval of the Project
Administrator and City.
27.2 Waiver
A waiver by either party 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 a different
character.,
27.3 Integrated Contract
Netherland, Sewell, & Associates, Inc. Page 11 14
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 herein.
27.4 Conflicts or Inconsistencies
In the event there are any conflicts or inconsistencies between this Agreement and the
Scope of Services or any other attachments attached hereto, the terms of this
Agreement shall govern.
27.5 Interpretation
The terms 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.
27.6 Amendments
This Agreement may be modified or amended only by a written document executed by
both Consultant and City and approved as to form by the City Attorney.
27.7 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.
27.8 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.
27.9 Equal Opportunity Employment
Consultant represents that it is an equal opportunity employer and it shall not
discriminate against any subcontractor, employee or applicant for employment because
of race, religion, color, national origin, handicap, ancestry, sex or age.
27.10 No Attorney's Fees
In the event of any dispute or legal action arising under this Agreement, the prevailing
party shall not be entitled to attorney's fees.
Netherland, Sewell, & Associates, Inc. Page 12 15
27.11 Counterparts
This Agreement may be executed in two or more counterparts, each of which shall be
deemed an original and all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the dates written below.
APPROVED AS TO FORM: CITY OF NEWPORT BEACH,
OFFICE OF THE CITY ATTORNEY A California municipal corporation
Date: CA / z -7 / I ( Date:
By. -'.- By:
Aaron C. Harp, �� i(j r�� I1 Michael F. Henn,
City Attorney Mayor
ATTEST:
Date:
Leilani I. Brown,
City Clerk
CONSULTANT: NETHERLAND,
SEWELL & ASSOCAITES, INC., a Texas
Corporation
C. H. (Scott) Rees III
Chairman and Chief Executive Officer
Date:
By:
Philip S. Frost,
Chief Financial Officer
Attachments: Exhibit A - Scope of Services
Exhibit B - Schedule of Billing Rates
Netherland, Sewell, & Associates, Inc. Page 13 16
r
k,
17
�HETHERLANp,SEWELL
• & ASSOCIATES, IHG.
.Ir .
WORLDWIDE PETROLEUM CONSULTANTS
ENGINEERING • GEOLOGY • GEOPHYSICS • PETROP.HYSICS
May 27, 207'1
SQQPE OF SERVICES
A. Data Review and Analysis
1. Newpdrt Beach Oil Field Resources
CHAIRMAN &CEO
EXECOTNECOMMRTEE
CH(SCOTT)REES III
PBCm FROST- DALLAS
PRESIDENT &COD J.dARTE0EN50N,JR-
HOUSTON
VM?VD PAIm'Is
OANPAOLSMIYH- DALLAS
EXECIHNEVP
JOEEYHJ.SPELIAIAN- DALLAS
G LANCE 8111DER.
THOMAS J TELIA II - DALLAS
a. We assume that this secilon is fairly self explanatory h the context of a data gathering trip. Our
designated project team will travelbnsite to review all of the pertinent oil and ga's production data and
associated technical reports that have been' asserrtbled. We may Work With the'tnaterials onsite or
request that items are tluplioated ortransmitted digitally for use from our home offices.
b. We will also tour the Newport Beach Oil Field and West Newport Oil Company facilities to gain an
understanding of the ope[attonal method§ employed 'and to. assess the eXisting productiop
Wrasfructure and equipment condition. As neoessery, We may also request an opportunity to meet
with sp @c flc City staff members and the currentoitfeid operating staff Who are currently Involved with
managing the assets.
c. Our project team will also review the geotechnical reports for the site and surrounding areas, as well
as available State of California reporting records.
d. We anticipate supplementing our project team with a contract land. and legal firm, Petrol-and
'Services, who has extensive experience in southern Califotnia. Patrol-and Services wit] focus their
efforts on reviewing the land lease, .property rights, end settlement agreement's. They Will also study
and provide recommendations pertaining to the pass through rights andegreemehts, easements, and
otherassoclsled issues,
2. Field Site Visit and Reyiew—Thls work Will be accomplished in conjunction With 1,b, above.
3. Technical Repbrt — After reviewing all CUM necessary data and performing our technical analyses, We'
Intend to lesue's draftPapbrtto.Itidtude oUr estimate of currentnil and gas reserves along with associated
cash flow projections, future net revenue, and field life: All estimates will be prepared in accordance With
the Standards : Pertaining to the estimating and Auditing Of Oil arid. Gas Reserves information
promulgated by the Scolety, of Petroleum Engineers. We will use standard .engineering and geosctence
4508 rrHANKSGIVING TOWER • 1801 ELIA STREET+PALLAS, TEXgk_ 7621
1221 LAMAR STREET, SUIT01206 '• HOUSTON, TEXAS 77010-942• PH
Ff.]
NETHERLANO,SEWELL
111 & ASSOCIATES, INC.
methods that we consider to be appropriate and necessary to estimate proved reserves in accordance
with the definitions and guidelines of the U.S. Securities and Exchange Commission (SEC). The report
Will also include conclusions and recommendations pertaining to ongoing field operations and land lease
and legal issues, We anticipate presenting our preliminary findings to City staff representatives as
necessary, and will provide a formal report with complete documentation at the conclusion of the study.
B. Developing Future Oil /Gas Production Options
1. Recommendations for Future Production and Operations Management
a. New /improved extraction techniques — We intend to review the present production methodology,
which is presumed to be rod pumping, and determine whether this is the most efficient and cost
effective artificial lift technique for the existing wells. Alternative technologies that may be explored
include electric submersible pump (ESP), progressive cavity pumping (PCP), or gas lift technologies,
b. Reconditioning oil wells — Current well completions will be evaluated by reviewing production
histories. We Intend to evaluate the well productivities to determine whether well inflow is maximized;
and may consider additional perforation or stimulation where warranted. We will also review the
mechanical integrity of the existing wellbores to determine if remedial operations are required for
optimization or regulatory compliance.
c. Drilling new wells — Based on our analysis of the in -place and remaining oil reserves;. we will make a
determination of whether the remaining recoverable reserves can be exploited using the existing well
inventory. If necessary, we may recommend additional well drilling or side- tracking of an existing
welibore to access by- passed reserves.
d. Water injection well drilling or conversion — Present produced water injection and disposal will be
analyzed. If practical, recommendations may be proposed for water Injection locations to optimize oil
production from the reservoir. If disposal is achieved in intervals other than the primary ' production
zones, these Injection volumes and pressures will be reviewed to determine overall performance.
e. Other feasible oil extraction methods — These will be addressed in item 1.a. above.
f. Gas disposal methods — The current gas contract terms with Hoag Hospital will be reviewed. After
our review of current production and subsequent forecasting of future gas production volumes, we will
have a better idea of future gas disposal needs. Various solutions will then be evaluated, including:
renegotiating the existing Hoag contract beyond the present term, gas injection Into the reservoir for
pressure maintenance, sale of gas to a local natural gas utility, or electrical generation for onsite
power usage.
g. Operation of the future field by contract management — The current management and operation of the
oil and gas assets will be reviewed, Based on our experience working with a variety of clients with
assets of similar size, and also our experience, In operating oil and gas properties, we expect to
provide recommendations for future asset management and field operation. Various options to
consider may include contract management and operation by a third party, city management with
contract field operators; joint venture with an industry working interest partner, or outright sale of the
assets.
h. As with most of our project work; we envision close communication with the City staff throughout the
entire process. We will generate a preliminary draft report detailing our analysis and findings for staff
review. We also expect to meet with City staff and City Council members, as necessary, to present
our final report and recommendations.
19
i 11 �� NETHERLANa, SEWELL
& ASSOCIATES, INC.
Z Economic Analysis — In conjunction With our oil and gas teserves analysis, we intend to explore a variety
of development options to optimize production and enhance the value of the assets. We will attempt to
acquire or generate cost estimates associated With the development seeharios. We anticipate running
economic sensitivities to evaluate the financial viability of the various options, in addition to identifying the
associated risks therein.
3. Finalize Reports — Our final report will be generated with direction from City staff, Conciusions and
recommendations contained within the report will be supported with proper docurnerntation. The report
will be structured such that the findings may be used in subsequent project development and
implementation documents.
4. Participate in Outreach Meetings —_ It is our understanding that communication with various outside
groups may be required throughoUtthe bourse of the project. We arttictpate ine$ting with individual City
Council members, finance committee, joint focus meetings, andlor the West Newport HOA, as required.
Our participation in outreach meetings is intended to provide technical background to support future
proposed activities:
C. Optional Additional Services
1. The. City may request.. optional services at the conclusion of this project, At that time, We may provide:an
additional . proposal for consulttng services relaiedto activities such as: 'assistance with bid packages for
project implementation, assistance with reviewing bids and /or proposals, or potential management and
oversight of future development activities.
PI /i
J
21
NETHERLANO,SEWELL
NMI & ASSOCIATES, INC.
SCHEDULE OF RATES
Effective April 1, 2011
Domestic
Hourly Rate
(US$)
Senior Engineers, Geologists, Geophysicists, and Petrophysicists 260-356
Staff Engineers, Geologists, Geophysicists, and Petrophysicists 175-255
Engineering, Geological, and Petrophysical Analysts 50-175
Computer Systems Analysts /Programmers 100-245
Administrative /Support Staff
25 -130
Geophysical and Other Workstation Time 36- 95
NSA] reserves the right to change the rates shown above on an annual basis.
22
Leilani
From:
Dan Purcell [dan @indexstreet.com]
Sent:
Monday, October 10, 2011 6:37 PM
To:
City Clerk's Office
Cc:
Gardner, Nancy
Subject:
City Council Consent Calendar: Oil
Attachments:
Pages from Oil.pdf
Follow Up Flag:
Follow up
Flag Status:
Flagged
Categories: Leilani
Hi Leilani:
"RECEIVED AFTER AGENDA
PRINTED. :" /0-1 H I
I intend to request Item 7. APPROVAL OF PROFESSIONAL SERVICES AGREEMENT WITH NETHERLAND, SEWELL & ASSOCIATES,
INC., be removed from the Consent Calendar. I will specifically address the SCOPE OF SERVICES DOC PROVIDED BY
NETHERLAND, SEWELL & ASSOCIATES, INC.
ITEMS A2 AND A4 (Highlighted in the attached doc)
I will encourage the Council to be certain the consultant adequately addresses RISKS associated with each of the various
options explored. Moreover, I will encourage the Council to direct the consultant to meet with the Tidelands Management
Committee and /or the Coastal /Bay Water Quality Citizens Advisory Committee in a PUBLIC MEETING, in addition to the
Finance Committee as already specified in the document.
Thanks,
Dan Purcell
Corona del Mar
1221
�IIp+1 NETHERLAMP, SEWELL
CHAIRA R &CEO
E%ECG ECOWMGE
R & ASSOCIATES JWd.
L'
CH (SGCri }REEe 111
P..5COTt FRGST•Dmm
PRMIMT$CCO J.
dmw HENSON,JR- HOUSryN
W.,ORLDWIDr PETROLEUYJ CONeUI TANTS
DnwND SGUgxs
DANPAVLSAutH -DALLPB
EHGINEERING • GEOLUPY. GEOPHYSICS • PETNOPHYSICD
E %ECNINEYP
JDSRYH J. SRetWNl+DA1tA5
G LANGEERIGER-
TNONASJ'rEUA 11•DAlU3
May 27, 2011
SCDP-E bF SERVICES
A. Data Review and Analysis .
1- Newport Beech CII FIjeld ResourQop
a. We assume that this, sectlon is fairly self explanatpry if) the context of a data gathering trip. Our
designated project feam will travel onsite to review all of the perffnenbofl and gas protluritOn data and
associated ta0hhlcal reports that have keeps' assemdb d• Wq may .Work wifh the - materials onsite or
request that Items are duplfoated�or transfnftted dtgltaily for use from our home offices.
b. We will also tour the Newport Beach Off Field art
d West Newport Off Company Facilities to gain an
uriderstanding of the operational ,methods e' Ploy' a slid to. esspss the eXisting proddrtlori
Infrastructure and equipment condition.. As necessary, We may also request an opporfunfty tp meet
With specifl9 City staff rl embers and the currep(ciftfeld operating staff Who are currently involved with
r?lari4gg the assets.
c. Our project team will also review the geotechnfcal reports for the site and surrounding areas, as well
as available Mate of California reporting records.
d. We anticipate supplementing our project team with a contract land. and legal -firm, Petrof,end
'Services, who has extensive experience in southern Oalifotnia. PetroLand Services will focus their
efforts on reviewing the land lease, ,property rights, and settlement agreements. Theyvalll also study
and provide recommendations pertaining to the pass through fights avid agreemehts, easements, and
otherlassoclated lssues,
2. Field Site Visit and Review=Thls Work Will he accompltshad fn conjunctlon with 1.b. above.
3. Technidel Rep'6rt — After revfaWing all of the necessary data and performing our tebhnlcal enaly ses, We
Ir ten'd to issue a draft'report'to.IridlUde dUr estimate 6f burrerlt oil and gat r.'eserves along with assdclated
oaSh fioWprojectfons, flltdre net revenue, and field life. All estimates will be prepared in scoofdance With
the Standards 'pertatnjn'o to" the E'sfimatlnd ehd Auditfpig of Oil 'arid. 64 Reserves iriformatfon
pMn lgatpd by the Society of Pelrplourrl Engineers. We Will use standard Angfneering and gedsclence
US, TEKA "s.7s21
7701A.$072+ PH
W
�® NETHERLANO,SEWELL
t� & ASSOCIATES, INC.
methods that we consider to be appropriate and necessary to. estimate proved. reserves in accordance,
with the definitions and guidelines of the U.S..Securifles and Exchange Commission (SEC). the report
will also Include conclusions and recommendations pertaining to on field operations and land lease
and legal, Issues. We anticipate presenting our preliminary findings to City steff representatives as
necessary, and will provide a formal report with complete documentation at the conclusion of the study.
B. Developing Future Oil /Oas Production Options
1. Recommendations for Future Production and Operations Management
a. New/tmproved extraction techniques — We intend to review the present production methodology,
which is presumed to be rod pumping, and determine whether this is the most efficient and cost
effective artificial lift technique for the existing wells. Alternative (echnologles that may be explored
include electric submersible pump (ESP), progressive cavity pumping (PCP), or gas lift technologies,
ti. Reconditioning oil wells — Current well completions will be evaluated by reviewing production
histories. We Intend to evaluate the well productivitles to determine whether well inflow is maximized;
and inay consider additional perforation or stimulation where warranted. We will also review the
mechanical integrity of the existing wellbores to determine If remedial operations are required for
optimization or regulatory compliance.
G. Drilling new wells — Based on our analysts of the In -place and remaining oil reserves,. we will make a
determination of whether the remaining 'recoverable reserves can be exploited using the existing well
inventory. If necessary, we may recommend additional well drilling or sidetracking of an existing
wellbore to access by- passed reserves.
d. Water injection well drilling or conversion — Present produced water injection and disposal Will be
analyzed. If practical, recommendations may be proposed for water injection locations to optimize oil
prodUotidn from the reservoir. If disposal is achieved in Intervals other than the primary production
zones, these injection volumes and pressures Will be reviewed to determine overall performance.
e. Other feasible oil extraction methods — These will be addressed in item 1.a. abo.Ve.
f. Gas disposal methods — The current gas contract terms with Hoag Hospital will be reviewed. After
our review of current,production end subsequent fotecasting of futll're gas production.vdlumes, Wewl(I
have 'a better Idea of future gas disposal needs. Various solutions will than be evaluated, includirig:
reneg'otiaffng the existing Hoag contract beyond the present term, gas injection Into the 'reservoir far
Pressure maintenance, sale of gas to a local nalural gas utility, or electrica
power usage. l generation for onsite
g. operation of the future field by contract management— The . current management and operation of the
oil and gas assets will be reviewed, Based on our experience working with a variety of clients with
assets of similar size, and also our experience. In operating oil and gas propedfes, we expect to
Provide recommendations for future asset management and field operation. Various options to
considpr. may include contract management and operation by a third party, city management with
cpnlract field operators; Joint venture with an industry working Interest partner, or outright sale of the
assets.
h. As with most of our project work; we envision close communication with the City staff throughout the
entire process. We will generate a preliminary draft report detailing our analysis and findings for staff
review. We also expect to meet with City-staff and City Council'members, as necessary, to present
our final report and recommendations.
19
ttA NETHERLAND, SEWELL
dpi & ASSOD7ATES, rNa.
2. Economic Analysis — in conjunbtigh with our oli acid 'gas feserves analysis, We intend to explore a vdfiety
of development options to optimize production and enhance the value of the assets. We will attempt to
acquire be generate cbst estimates assobiated with the development sceherios. We anticipate 'funning
economle sensitivities to evaluate the financial viability, bf the various options, in addition to identifying the
associated risks therein.
3. Finalize Reports — Our final report will be genb'Vated With diregtiorl from City staff, Conclusions and
recommendations contained within the report Will be supported with proper documentation. The report
Will be struckured such that the fjndings may be used in subs$guent project development and
Implementation documents.
4. participate in Outreach Meetings —.'It is our understanding that communication with various outside
groups may be tequir ;ed throughout 'the bourse of the; project 'We ahf lOpate meetitig with individuai City
Council members, finance conlmlftea, joint focus meetings, :andfor the West Newp6h HOA, as required.
Our pafticipation in outreach meetings is fntended� to prbv'ide technical background to support future
prop'o'sed activities,
C. Optional Additional Services
f. The. City may request: optional services at the conclusion of this project; At Ihat time, we, may provide'an
additional proposal for consuitfng services related to activities such as: 'assistance with bid paokag6s far
project Implementatidn, asslstance' with reviewing bids and /or proposals, or potential management and
oversight offuiure development activities.
20