HomeMy WebLinkAboutC-1612 - Sale of crude oil by City to FletcherCITY OF NEWPORT BEACH
Office of
CITY ATTORNEY
To: FILE May 15, 1974
From: David R. Baade
Subject: Crude Oil Purchase Agreements Between The City of Newport
Beach and Fletcher Oil and Refining Company and Between
The City of Newport Beach and Golden Eagle Refining
Company
On January 14, 1974, the City entered into a Crude Oil Purchase
Agreement with Fletcher Oil and Refining Company. This Agreement
was to be effective on February 15, 1974. On January 15, 1974, the
Federal Energy Office issued its Petroleum Allocation and Price
Regulations. Paragraph 211.644(a)(3) of those Regulations provided
that if a crude oil producer on the date of these Regulations had
a contract with a purchaser the producer could not enter into another
agreement with a different purchaser without offering the initial
purchaser the option of meeting the terms of the new proposed agree-
ment. On January 15, 1974, the City had a crude oil purchase agreement
with Golden Eagle Refining Company, Inc. Therefore, the Fletcher
contract would not be binding unless Golden Eagle refused to meet
the terms of the agreement proposed by Fletcher. In fact, Golden
Eagle did meet these terms and on February 12, 1974, the City entered
into a new agreement with Golden Eagle Refining Company. Therefore,
the Fletcher agreement is of no binding effect.
DAVID R. BAADE '
Assistant City Attorney
DRB/bc /
cc: City Clerk
I
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e CITY OF NEWPORT BEACH
CALIFORNIA
City Hall
,C11:ORN, 3300 W. Newport Blvd.'
Area Code 714
673 -2110
DATE February 14, 1974
I
TO: FINANCE DIRECTOR
FROM: City Clerk
SUBJECT: Contract No. 1612
Sala of QxAs Oil by City to
Description of Contract rletehwr nil a Refinine nnm wm
Authorized by Resolution No. Al 72 , adopted on Damply . 77- 1973
Effective date of Contract Ftohnumg 1%- 1474
Contract with r1At1 Awn M1 s Rafining 03mpany
Address P. 0. Box 548
Wiladngta3, CA 90744
Amount of Contract see oontract
Note to George Pappas - The City Manager's offioe handled distribudm to oil ccapanies.
V city c
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CITY OF NEWPORT BEACH
CALIFORNIA vlseo
city Han
3300 Newport Blvd.
(714) 673 -2110
January 15, 1974
Fletcher Oil and Refining Company
P.O. Box 548
Wilmington, CA. 90744
CERTIFICATE OF EXEMPTION
It is hereby certified that to the best of my knowledge and
belief the City of Newport Beach is exempt from the regulations
of Cost of Living Council (Phase IV).
i
Robert L. Wynn 1
City Manager
CRUDE OIL PURCHASE CONTRACT
THIS CONTRACT is made and entered into this 14th day of
January, 1974, by and between THE CITY OF NEWPORT BEACH (herein
referred to as "SELLER "), and FLETCHER OIL & REFINING COMPANY
(herein referred to as "BUYER ")
SELLER agrees to sell and deliver to BUYER and BUYER agrees
to purchase and receive from SELLER crude oil subject to and in
accordance with the terms herein stated.
TERM
The term of this agreement shall begin on February 15, 1974,
and shall continue until terminated by at least thirty (30) days
prior written notice from one party to the other, provided,
however, that the term of this agreement may not be thus terminated
so as to end before one year from the commencement date. In the
event government regulations prevent this agreement from commencing
on February 15, 1974, then this agreement shall commence as soon
as possible, and shall continue until terminated by not less than
thirty (30) days prior written _xtotice from one party to the other,
provided, however, that in no event may either party terminate this
agreement earlier than one year from the commencement date.
QUANTITY
_ SELLER agrees to sell to BUYER all of the crude oil available
to SELLER for purposes of sale from the property situated in the
oil field or oil fields described herein as determined from gauges
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taken in SELLER'S delivery tanks or as determined from meters
when delivery is made by means of an automatic custody transfer
unit approved by BUYER. Said quantities, so determined, are
subject to corrections for temperature and volumetric deduction
for water, sand and other foreign substances as hereinafter pro-
vided.
fields ject to this agreement are.owned one - eighth '('/8th)
by SELLER herei and seven - eighths (7 /8ths) by,4RMSTRONG
PETROLEUM CORPORATION. A Cached heret -and designated EXHIBIT
"A ", is an agreement of waiver- fly executed by AP14STRONG
PETROLEUM CORPORATION, authorizing the'8M,_LER herein to sell ei
the entire prodyefion from the oil fields subject-_j;9 this agree/,
menud eliminating any obligation SELLER may have to deliver )
BUYER reserves the right, at any time, upon not less than
thirty (30) days prior written notice, to limit monthly deliveries
to a quantity specified by BUYER,Which quantity shall not be less
than /,� PiO& barrels per calendar month.
The term "barrel" whenever used in this agreement shall
mean a barrel of forty -two (42) U.S. gallons in bulk.
60° Fahrenheit is established as the normal temperature for
crude oil to be delivered. The quantity and temperature of the
crude oil in any tank shall be determined at time of delivery,
and the volume at 60° Fahrenheit shall be ascertained'by
multiplying the measured volume by the factor corresponding
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to the observed temperature as published in the American
Society for Testing Materials Petroleum Measurement Tables
designation D -1250 or latest revision thereof.
The net quantity of crude oil sold and delivered by
SELLER'and purchased, received and paid for by BUYER shall
be the quantity at 60° Fahrenheit determined as provided
above less full volumetric deduction for all water, sand
or other foreign substances as determined by tests herein-
after specified.
LOCATION AND PROPERTY DESCRIPTION
BUYER agrees to purchase and receive crude oil and SELLER
agrees to sell and deliver crude oil from "the oil fields
located in the State of California and from leases in said
oil fields described in EXHIBIT "B" to this agreement.
WARRANTY
SELLER represents and warrants that it has good title to
crude oil delivered and the right to deliver the same free
and clear of encumbrances or other obligations, and that said
crude oil will be produced in strict compliance with .all-,
applicable laws and rules and regulations issued thereunder.
SELLER will indemnify and hold BUYER harmless from all loss,
damage or liability which BUYER may sustain by reason of
the breach or failure of any of the representations, warranties
or guarantees above set forth.
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Title to the crude oil shall
AT '1lIE
it is delivered
QUALITY
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s to BUYER as and when
The quality of crude oil delivered.by SELLER to BUYER
hereunder shall be determined by the tests hereinafter
specified. BUYER shall not be obligated to accept any crude
oil containing more than three per cent (38) by volume of
water, sand and other foreign substances nor having a gravity
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lower than 170 A.P.I. The viscosity of the crude oil delivered
by SELLER into the pipeline utilized by BUYER shall be no
higher than that required by BUYER for operation of the pipe-
line utilized by BUYER. BUYER reserves the right to establish
such maximum viscosity. In the event that SELLER requires the
use of a dilutent to obtain such viscosity, the quality of the
dilutent used shall be subject to BUYER'S approval, provided,
however, that BUYER shall not act unreasonably in this regard.
If at any time crude oil offered for delivery shall be
of a lower gravity than the minimum gravity hereinbefore°-
specified, BUYER, at its option, may accept said crude oil.
If at any time crude oil offered for delivery shall contain
more than three per cent (38) of water, sand or other foreign
substances, ascertained as hereinafter provided, BUYER, at
its option, may accept such crude oil and make deductions for
all water, sand or other foreign substances as determined by
said test. BUYER shall be entitled to make a dehydration
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charge and SELLER agrees that BUYER can deduct said charge
from payments hereunder. Neither acceptance shall be deemed
a waiver of BUYER'S right at any time thereafter to require
strict compliance with the requirements and conditions herein -
before.specified, or of BUYER'S right to refuse to accept
thereafter crude oil failing to meet such requirements and
conditions.
SAMPLES
All samples for testing shall be taken by BUYER through
sample cocks from SELLER'S delivery tanks or by means of an
approved delivery line sampler. Sample cocks shall be installed
on SELLER'S shipping tanks in accordance.with A.P.I. standards.
TESTS
Crude oil shall be tested in BUYER'S laboratory and such
tests may be witnessed by SELLER'S representative should it
so desire. Tests shall be conducted in accordance with methods
prescribed in ASTM Standards on Petroleum Products and Lubricants
as designated hereinbelow in their. latest revision at time of
delivery.
Water, Sand and Other Foreign Substances: Crude oil
delivered must be free from water, sand and other foreign sub-
stances as ascertained by the Centrifuge Method (ASTM D -96),
using a solvent for.such test approved by BUYER. Should said
test fail to prove the existence of more than three per cent
(3%) of water,sand or other foreign substances, BUYER will
accept the crude oil and make deduction for all water, sand
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and other foreign substances determined by such test. The
solvent used in said Centrifuge Method shall be of such
composition as may be required to wholly precipitate the
water, sand and other foreign substances in the crude oil.
Gpavity: The gravity of the crude oil delivered shall
be the gravity of the samples as determined by ASTM Method
D -287 corrected to 60° F. as shown in Table No. 5 of ASTM -IP
Measurement Tables.
Viscosity: The viscosity of the crude oil delivered shall
be determined in accordance with ASTM Method D -88.
DELIVERIES
Deliveries shall be made as and when crude oil is produced
and accumulated in approximately shipping tank lots. Whenever
a tank of crude oil is tendered by.SELLER and accepted by BUYER,
delivery of the crude.oil so tendered and accepted shall be
made by SELLER and received by BUYER without unnecessary delay.
line desig d by BUYER from SELLER'S delivery to and SELLER
agrees to furnish pumps--icceptable to BU and to prpvide pipe-
lines and connections, stream er power and labor necessary 1�
to effect such deli ies, but SELLER shal at be required to 1 „Y
pump agai a line pressure in excess of 800 pounds p quare
BUYER shall have the right but not the obligation to lay,
maintain, operate and remove such pipelines across and from the
above described property as it may deem necessary in connection
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with the receipt and movement of crude oil delivered hereunder.
—� ;ee aclgregate-�uanti -ty of -c- rude 4i -b
which BUYER is committed to take into its pipelines and other
facilities, inc ding BUYER'S own production,- ekceeds the
then and in such
event, and while such condit�qn: all continue, BUYER shall
be obligated to receives -from SELLER onl uch relative quantit es
of crude oil a�f-ltogether with BUYER'S own production and
capacity of such pipe
f
other commitments, BUYER ban currently receive or
Should trucking be required in the judgment of BUYER, such
trucking shall be scheduled by BUYER and the expense therefor
shall be borne by BUYER.
FORCE MAJEURE
In the event of interruption of the operations of SELLER
by reason of, caused by or arising out of strikes, fires,
washouts, sanding of wells, breakage of tankage or pipelines,
war, inevitable cause or any other cause whatsoever, not under
the reasonable control of SELLER, then SELLER shall not be
required to deliver crude oil so affected during the period
of such interruption but deliveries shall commence immediately
upon cessation of such interruption... In the event of the total
or partial interruption of the business of BUYER by reason of,
or caused by or arising out of any of the aforesaid causes,
or any other cause not under the reasonable control of BUYER,
then BUYER shall not be required to receive any of said crude
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oil during the period of such interruption, but the receipt
thereof shall commence immediately upon the cessation of such
interruption.
PRICE
For all crude oil delivered hereunder, BUYER agrees to pay
and SELLER agrees to accept $8.48/Bbl. escalated up or down on
posted prices of Standard Oil Co. of California for new and released
crude bonus in California for crude oil of like gravity and quality
notwithstanding sulphur content at the well in the field where
produced in effect on the date of each delivery.
Notwithstanding the provisions of the paragraph immediately
preceding this paragraph, if at any time during the term of this
agreement, SELLER obtains a bona fide written offer from.another
purchaser to purchase the crude oil subject to this agreement,
which SELLER would desire to accept but for its obligations
hereunder, then, in such event, the following provisions shall
become operative:
1. Within five (5) days after receipt of said
written bona fide offer, SELLER shall provide a copy
thereof to BUYER with a notice as described hereinafter.
2. Said notice shall advise BUYER of SELLER'S
desire to accept the bona fide offer of said other
purchaser enclosed with said notice.
3. Within ten (10) days thereafter, BUYER shall
be required to notify SELLER of one of the following
elections:
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(a) That BUYER elects to modify the price.
provided for in this agreement so that said price
will be the same as the price reflected in the
bona fide offer. In such event, this agreement
shall be deemed amended with respect to price
accordingly.
(b) That BUYER elects to terminate this
agreement. In such event, the provisions of this
agreement shall prevail over any other provisions
concerning termination of this agreement to the
contrary.
PAYMENT
All payments for the crude oil delivered during each calendar
month shall be made by the fifteenth day of the succeeding
calendar month, by mailing check therefor to:
7 /8ths to: ARMSTRONG PETROLEUM CORPORATION
P. O. BOX 1546
NEWPORT BEACH, CALIFORNIA
1 /8th to: THE CITYfOF NEWPORT BEACH;
3300 NEWPORT BOULEVARD
NEWPORT BEACH, CALIFORNIA 92660
With each payment to the CITY OF NEWPORT BEACH, BUYER will
simultaneously provide a declaration under penalty of perjury,
in the format prescribed by the CITY OF NEWPORT BEACH, indicating
the quantity of crude oil purchased during the calendar month for
which payment is being made, the amount paid to ARMSTRONG PETROLEUM
CORPORATION in connection therewith, the amount paid to the CITY OF
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NEWPORT BEACH in connection therewith, plus any other information
relevant thereto requested by the CITY OF NEWPORT BEACH.
In the event of a dispute as to the title to crude oil
deliverable, or as'to any payment therefor, BUYER may withhold
payment pending determination of such dispute, or may interplead
the claimants; the payment into court by BUYER of the amount due
for crude oil delivered shall be compliance with the provisions
hereof in respect to payment therefor.
NOTICES
Any notice hereunder addressed to the respective parties
at the address stated below, or to such other address as each
of them may hereafter from time to time designate in writing
to the other, and deposited in a United States Post Office,
postage prepaid, shall be considered good and valid notice
hereunder effective from the date of mailing:
CITY OF NEWPORT BEACH
3300 NEWPORT BOULEVARD
NEWPORT BEACH, CALIFORNIA 92660
ARMSTRONG PETROLEUM CORPORATION
P. 0. BOY. 1546
NEWPORT -DEACH, CALIFORNIA .�
FLETCHER OIL & REFINING CO.
P. O. BOX 548
WILMINGTON, CALIFORNIA 90744
MISCELLANEOUS
This agreement shall inure to the benefit and be binding
upon the heirs, successors, and assigns of the parties hereto.
Time is expressly made of the essence in this agreement.
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That this agreement is entered into with reference
to the laws of the State of California which shall be applied
with regard to any disputes arising hereunder.
ITY OF NEWPORT BEACH
MAYOR
TTEST:
Fletcher Oil and Refining Co.
By
E. H. Anderson,
Vice President
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EXiiIB1 i "B"
All those certain uplands, ticleAands, Sub-
lied lands ox;.ed by the Ci;.y of
le-ed Janus and �_
\EtihGT` Each, 'lyiri batlleZn t.ae scuth:.esterly pro- .
i111V oL JJT4 S.. �,
. 1Gi.�atlon of t17C swuZ.,C^.StCT�% _ .. i
as said 5 3rd Street is laid cut and 511011" :j')on a
of OCC2.n iTGi,.. Tract, \elVport Beach, recorded in Bock' ,
G, p�ge,12 of Ji�scellaneous gaps, records of Orange
Count d, California, and the•westerly boundary Line o�
the City of Newport.Beach., and southwesterly of the
1J Ocean
i OTt:1EaSteXly line of Ocean cropi . , foY..,..
r 1
Avenue, 'as said Ocean Avenue is laid out and shown
N upen skid nap of Ocean Front; and ;map of Seashore
CQIGay Tract, recorded ij] Book 7, page 25 'Oy :;is— -, .•.
ounty:
cellaneous Maps, records of said C
jg�y&w-
RESOLUTION NO, 8172
�e A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH AUTHORIZING THE MAYOR AND
CITY MANAGER TO NEGOTIATE AN AGREEMENT BETWEEN
THE CITY OF NEWPORT BEACH AND AN APPROPRIATE
OIL COMPANY FOR THE PURCHASE OF CRUDE OIL, AND
AUTHORIZING THE TERMINATION OF THE EXISTING
AGREEMENT BETWEEN THE CITY OF NEWPORT BEACH
AND CARSON OIL COMPANY
WHEREAS, on December 17, 1973, the City Council of
the City of Newport Beach voted to authorize the Mayor and
City Manager to negotiate and enter into an agreement with an,
oil company for the purchase of the City's crude oil; and
WHEREAS, there presently exists a crude oil purchase
agreement between the City of Newport Beach and Carson Oil
Company; and
WHEREAS, the City Council has determined that it may
be desirable and necessary to negotiate a new agreement with
an appropriate oil company and thereafter terminate the existing
agreement with Carson Oil Company;
NOW, THEREFORE, BE IT RESOLVED by the City Council
of the City of Newport Beach that the Mayor and City Manager
are hereby authorized to negotiate and execute an agreement with
an appropriate oil company for the purchase of the City's crude
oil and to terminate the existing agreement between the City
and Carson Oil Company.
ADOPTED this 17th day of December,.1973.
Mayor
ATTEST:
City Clerk