HomeMy WebLinkAbout08 - Amendment to PSA for Oil Well Management ServicesQ SEW Pp�T
CITY OF
z NEWPORT BEACH
c�<,FORN'P City Council Staff Report
June 23, 2020
Agenda Item No. 8
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Mark Vukojevic, Utilities Director - 949-644-3011,
mvukojevic@newportbeachca.gov
PREPARED BY: Joshua Rosenbaum, Senior Management Analyst,
jrosenbaum@newportbeachca.gov
PHONE: 949-644-3011
TITLE: Amendment No. One to Professional Services Agreement with
Sampson Oil Company for Oil Well Management Services
ABSTRACT:
The City's oil wells are managed and operated by a specialty service contractor. The
services include daily maintenance, repair and operation of the City's oil wells and
production tank facility; coordination of regulatory agency inspections and compliance;
purchasing of materials; and managing subcontractor repairs. The current contract
expires July 11, 2020, and the Utilities Department is requesting City Council approval to
amend the existing Agreement with Sampson Oil Company.
RECOMMENDATION:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because
this action will not result in a physical change to the environment, directly or indirectly;
and
b) Approve Amendment No. One to the Professional Services Agreement with Sampson
Oil Company for Oil Well Management Services, which extends the contract for two
additional years to July 31, 2022 and increase the total not -to -exceed contract amount
by $1,578,768; and authorize the Mayor and City Clerk to execute the Agreement.
FUNDING REQUIREMENTS:
The proposed FY 2020-21 budget includes sufficient funding for this Agreement. The
management services are expensed from Oil and Gas Tidelands Fund account
10090907-811008 Services Professional. The Maintenance and Repairs expenses are
expensed from the Oil and Gas Tidelands Fund account 10090907-851037 Maintenance
and Repairs. The enhanced maintenance and repairs funded by Capital Improvement
Project 20M14 will be appropriated from Tidelands Maintenance Fund 10001. Oil
Production remains a profitable operation and over the last five years has provided over
$2 million in net revenue to the Tidelands Fund.
FX
Amendment No. One to Professional Services Agreement with Sampson Oil Company
for Oil Well Management Services
June 23, 2020
Page 2
DISCUSSION:
Sampson Oil Company (Sampson) has managed and operated the City's oil fields in West
Newport since 1984. The operations and services include daily maintenance, repair and
operation of the City's fifteen oil wells, one injection well, a production tank facility and
pipelines. Sampson also coordinates regulatory agency inspections and compliance
reporting, purchases materials; and manages subcontractors that perform as -needed
repairs.
The most current Agreement with Sampson, which was approved in 2017, expires July
11, 2020. The Utilities Department is seeking a contract extension and amendment to the
existing Agreement. With instability in the current oil market and procurement challenges
created by the COVID-19 pandemic, staff recommends extending the agreement with the
current service provider. Sampson has 33 years of experience with the City and has the
best expertise and familiarity with the management and operations of the City's oil fields.
During the recent downturn in oil prices, staff directed Sampson to shut down oil
production and instead perform maintenance and repairs of the facilities. With oil prices
increasing and the recent maintenance completed, the wells are being returned to service
production.
For the Amendment, Sampson's proposal to continue the routine management and
operations of the City wells is essentially unchanged except for an increase allocated for
higher insurance premiums. For the next two years, the annual cost for the professional
services portion of the contract will be $114,384. This includes all necessary time needed
by Sampson's administrative, maintenance, and office staff to maintain and operate the
system annually. Sampson's staff will perform minor repairs and larger repairs will be
done by subcontractors and approved by City staff prior to commencement of work.
The amendment also includes an annual $300,000 not -to -exceed allowance for the
purchase of materials and for unforeseen repairs performed by subcontractors. These
materials and services are also managed and overseen by Sampson. The management
of as -needed maintenance and repairs through Sampson has contributed to a more
efficient and effectively run oil well operations over the years.
Additionally, the Utilities Department is requesting Council approval for a one-time
allowance of $750,000 (over the course of the Agreement extension) to cover the costs
associated with enhanced maintenance and repairs. Capital Improvement Project 20M14
provides one-time capital funds to perform enhanced maintenance repairs and
investigations to maintain oil productivity. This will be performed as needed over the next
two years under the contract extension period.
Utilities staff recommends City Council approve Amendment No. One to the Professional
Services Agreement with Sampson Oil Company for Oil Well Management Services,
which extends the contract for two additional years to July 31, 2022 and increase the total
not -to -exceed contract amount by $1,578,768.
29
Amendment No. One to Professional Services Agreement with Sampson Oil Company
for Oil Well Management Services
June 23, 2020
Page 3
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find 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)
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.
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).
ATTACHMENTS:
Attachment A — Amendment No. One to Professional Services Agreement with
Sampson Oil Company for Oil Well Management Services
FIN
ATTACHMENT A
AMENDMENT NO. ONE TO
PROFESSIONAL SERVICES AGREEMENT
WITH SAMPSON OIL COMPANY FOR
OIL WELL MANAGEMENT SERVICES
THIS AMENDMENT NO. ONE TO PROFESSIONAL SERVICES AGREEMENT
("Amendment No. One") is made and entered into as of this 12th day of July, 2020
("Effective Date"), by and between the CITY OF NEWPORT BEACH, a California
municipal corporation and charter city ("City"), and SAMPSON OIL COMPANY, a
California corporation ("Consultant"), whose address is 301 Ultimo Avenue, Long Beach,
California 90814, and is made with reference to the following:
RECITALS
A. On July 11, 2017, City and Consultant entered into a Professional Services
Agreement ("Agreement") for oil well management services ("Project").
B. The parties desire to enter into this Amendment No. One to reflect additional
Services not included in the Agreement, to extend the term of the Agreement to
July 31, 2022, to increase the total compensation, to update the City's
Administration of the Agreement, and to update insurance requirements.
NOW, THEREFORE, it is mutually agreed by and between the undersigned parties
as follows:
1. TERM
Section 1 of the Agreement is amended in its entirety and replaced with the
following: "The term of this Agreement shall commence on the Effective Date, and shall
terminate on July 31, 2022, unless terminated earlier as set forth herein."
2. COMPENSATION TO CONSULTANT
Exhibit B to the Agreement shall be supplemented to include the Schedule of
Billing Rates, attached hereto as Exhibit B and incorporated herein by reference
("Services" or "Work"). Exhibit B to the Agreement and Exhibit B to this Amendment No.
One shall collectively be known as "Exhibit B."
Section 4.1 of the Agreement is amended in its entirety and replaced with the
following: "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 Two Million Seven
Hundred Ninety One Thousand Nine Hundred Sixty Eight Dollars and 00/100
($2,791,968.00), 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."
The total amended compensation reflects Consultant's additional compensation
for additional Services to be performed in accordance with this Amendment No. One,
Sampson Oil Company Page 1 8-4
including all reimbursable items and subconsultant fees, in an amount not to exceed One
Million Five Hundred Seventy Eight Thousand Seven Hundred Sixty Eight Dollars
and 001100 ($1,578,768.00).
3. ADMINISTRATION
Section 6 of the Agreement is amended in its entirety and replaced with the
following:
"This Agreement will be administered by the Utilities Department. City's Senior
Management Analyst or designee shall be the Project Administrator and shall have the
authority to act for City under this Agreement. The Project Administrator shall represent
City in all matters pertaining to the Services to be rendered pursuant to this Agreement."
4. INSURANCE REQIREMENTS
Exhibit C, "Insurance Requirements," Section 5(A), is amended in its entirety and
replaced with the following:
"A. Evidence 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 and other endorsements as
specified herein for each coverage. All of the executed documents referenced in this
Contract must be returned to City within ten (10) regular City business days after the date
on the "Notification of Award." Insurance certificates and endorsements 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. The certificates and endorsements for each insurance policy shall be signed
by a person authorized by that insurer to bind coverage on its behalf. At least fifteen (15)
days prior to the expiration of any such policy, evidence of insurance showing that such
insurance coverage has been renewed or extended shall be filed with the City. If such
coverage is cancelled or reduced, Consultant shall, within ten (10) days after receipt of
written notice of such cancellation or reduction of coverage, file with the City evidence of
insurance showing that the required insurance has been reinstated or has been provided
through another insurance company or companies. City reserves the right to require
complete, certified copies of all required insurance policies, at any time."
5. INTEGRATED CONTRACT
Except as expressly modified herein, all other provisions, terms, and covenants
set forth in the Agreement shall remain unchanged and shall be in full force and effect.
[SIGNATURES ON NEXT PAGE]
Sampson Oil Company Page 2 8-5
IN WITNESS WHEREOF, the parties have caused this Amendment No. One to be
executed on the dates written below.
APPROVED AS TO FORM:
CITY ATTO NEY'S OFFICE
Date: (! ?�o
By: C.-
eor:Aaron C. Harp
City Attorney
ATTEST:
Date:
Leilani I. Brown
City Clerk
CITY OF NEWPORT BEACH,
a California municipal corporation
Date:
Bv:
Will O'Neill
Mayor
CONSULTANT: Sampson Oil Company,
a California corporation
Date:
By:
Renick Sampson
President
Date:
By:
Pamela Picard
Secretary
[END OF SIGNATURES]
Attachments: Exhibit B — Schedule of Billing Rates
Sampson Oil Company Page 3 8_6
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SCHEDULE OF BILLING RATES
Sampson Oil Yearly Fee Schedule
Effective July 12, 2020
Sampson Oil Company presents the following fee schedule to manage and operate the
City of Newport Beach's oil field. This schedule is based on a 365 -day work year.
Pumper
$51,608
Per Year
Design and Engineering
$6,838
Per Year
Rig Supervision
$17,602
Per Year
Construction Supervision
$16,582
Per Year
Special Insurance Charges
$21,754
Per Year
Total Annual Fee for
$114,384
Per Year ($9,532 per
Foreseen Maintenance
month)
Service
Total Allowance for
$750,000
Two Years
FY2020-21 CIP Project
20M14 (Oil Well
Maintenance and
Repairs)
Total Allowance for
'$300,000
* Per Year I
Unforeseen Maintenance,
Repairs, and
Professional Services
*Consultant shall be entitled to reimbursement for the cost of unforeseen maintenance,
repairs, and professional services performed as set forth herein, plus a fee not to exceed
ten percent (10%) of the invoice amounts paid by Consultant to subcontractors,
subconsultants, sub -vendors, and sub -delivery companies, as set forth herein subject to
the annual limit for subcontractors.
Sampson Oil Company Page B-1 8-7