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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 oe 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 I r 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 -1- 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 -2- 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. -3- E TT TT.F. Title to the crude oil shall AT '1lIE it is delivered QUALITY L 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 / 7�1 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 -4- S • • 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 -5- 0 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 :M. 0 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 -7- i 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: _g_ 9 i i 'i 0 0 (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 0 0 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. -10- r 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 -11- 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