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HomeMy WebLinkAboutC-2244 - Purchase of Crude Oil1000CEANGATE, SUITE 1010 LONG BEACH, CALIFORNIA 90802 (213) 436 -9685 775 -2281 Telex 65 -0441 November 24, 1981 Mr. J. T. Devlin Utilities Director City of Newport Beach 3300 Newport Blvd. Newport Beach, CA 92663 Dear Mr. Devlin: C - -�)qli As per our recent discussions, please be advised that Kern County Refinery, Inc. has diligently tried to move the City of Newport Beach's crude oil for you. Under our original contract dated January 26, 1981, Kern would have purchased your crude oil. However, in view of the fact that eleven (11) months have passed without Kern having received any barrels, we have since arranged to purchase the necessary crude elsewhere. Of course, we hope that you understand our feeling that the original contract has been terminated, but in any event, please accept this letter as a formal written termination of our contract. Thank you for your cooperation and in the future if I can be of service to you in trying to help you move the crude, please do not hesitate to call me. Very truly yours, A dhn 5����� Manager, C' rude Oil & Raw Materials Supply AK /rm ROUTE 6- BOX 336 1825 BARNETT BANK BLDG. 27507 TWO ALLEN CENTER BAKERSFIELD, CALIFORNIA 93307 JACKSONVILLE, FLORIDA 32202 HOUSTON, TEXAS 77002 (805) 8450761 (9041358A 95 (713) 759-0044 Telex 6&1492 Telex 05 -6359 Telex 79-0128 I CITY OF NEWPORT BEACH OFFICE OF THE CITY CLERK (714) 640 -2251 February 4, 1981 TO: FINANCE DIRECTOR FROM: City Clerk SUBJECT: Contract No. C -2244 Description of Contract Crude Oil Purchase Contract Jan 26, 1981 Effective date of Contract Kern County Refinery, Inc. Authorized by Resolution No. 9970 , adopted on 1-26-81 Contract with Kern County Refinery, Inc. Adress 100 Oceangate, ST 1010 Long Beach, CA 90802 Amount of Contract highest posted price & maximum legal price 4 ,, � - , � >a."l � � Wanda E. Andersen City Clerk WEA:bf City Hall • 3300 Newport Boulevard, Newport Beach, Califomia 92663 CRUDE OIL PURCHASE CONTRACT THIS CONTRACT is made and entered into this 10th day of January, 1981, by and between THE CITY OF NEWPORT BEACH (herein referred to as "SELLER "), and KERN COUNTY REFINERY, INC. (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 January 26, 1981, 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 July 1, 1981. 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 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 provided. ) days' - ;AIGh .,t;, ..�...ii .,r �.o ie�� rbw i� nnn �.,, of i a 4 � 7 -�i The term "barrel" whenever used in this agreement shall mean a barrel of forty -two (42) U.S. gallons in bulk. 60 degrees 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 degrees Fahrenheit shall be ascertained by multiplying the measured volume by the factor corresponding to the observed temperature as published in the American Society for Testing Materials Petroleum Measurement Tables designation D -1250 or latest revision thereof. ft 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 degrees Fahrenheit determined as provided above less full volumetric deduction for all water, sand or other foreign substances as determined by tests hereinafter 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 "ONE" to this agreement. weuueumv 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 obliga- tions, 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. TITLE Title to the crude oil shall pass to BUYER as and when it is delivered to BUYER. QUALITY 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 percent (3%) by volume of water, sand and other foreign substances nor having a gravity lower than 17 degrees 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 pipeline utilized by BUYER. BUYER reserves the right to establish such maximum viscosity. In the event that SELLER requires the use of 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. Page -2- 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 percent (3%) 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 charge of $0.50 per barrel 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 hereinbefore speci- fied, 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 a laboratory agreed to between the parties hereto 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 hereinbeloww 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 substances 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 percent (3%) of water, sand or other foreign substances, BUYER will accept the crude oil and make deduction for all water, sand and other foreign substances determined by such test. The solvent used in 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 Page -3- ft ft Gravity: The gravity of the crude oil delivered shall be the gravity of the samples as determined by ASTM Method D -287 corrected to 60 degrees Fahrenheit 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. 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 with the receipt and movement of crude oil delivered hereunder. Should trucking be required in the judgement of BUYER, such trucking shall be scheduled by BUYER and the expense therefore 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 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 the highest posted price for uncontrolled crude oil and the maximum legal Page -4- i w w price for crude oil subject to price controls for the Newport (other than Anaheim Sugar type) Field 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. SELLER shall provide appropriate certifications to BUYER for all quanti- ties of crude oil sold hereunder. 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: THE CITY OF NEWPORT BEACH 3300 NEWPORT BOULEVARD NEWPORT BEACH, CALIFORNIA 92660 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. NOTTCRR 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 KERN COUNTY REFINERY, INC. 100 Oceangate, Suite 1010 Long Beach, California 90802 Page -5- 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. 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. APPROVED AS TO FORK :CITY ATTORNEYA CITY OF NEWPORT BEACH �iL�GLc�c- YO ATTEST: BY Acting City Clerk KERN COUNTY REFINERY, INC. BY D. M. LeDOUX, VICE PRESIDENT CRUDE OIL SUPPLY Page -6- EXHIBIT ONE All those certain uplands, tidelands, submerged lands and filled lands owned by the City of Newport Beach, lying between the southwesterly prolong- ation of the southeasterly line of 53rd Street, as said 53rd Street is laid out and shown upon a map of Ocean Front Tract, Newport Beach, recorded in Book 4, page 12 of Miscellaneous Maps, records of Orange County, California, and the westerly boundary line of the City of Newport Beach, and south- westerly of the Northeasterly line of Ocean Front, formely Ocean Avenue, as said Ocean Avenue is laid out and shown upon said map of Ocean Front, and map of Seashore Colony Tract, recorded in Book 7, page 25 of Miscellaneous Maps, records of said County. February 4, 1981 CITY OF NEWPORT BEACH UTILITIES DEPARTMENT (714) 640 -2221 Mr. D. M. Le Doux Kern County Refinery, Inc. 100 Ocean Gate Drive, Suite 1010 Long Beach, CA 90802 Dear Mr. Le Doux: E CEIVEO C �'LERK FEB 5 1981. an OF / Enclosed is the fully executed Crude Oil Purchase Contract and a copy of Newport Beach Resolution no. 9970. We will keep you informed of our construction schedules and notify you when we anticipate resuming production. Sincerely yours, Jack Be /with Admj. i�trative Assistant J-BB: be cc: City Clerk Encls: (2) City Hall • 3300 Newport Boulevard, Newport Beach, California 92663 0- AW j TO: CITY COUNCIL By tha L"'i Y COUiVCIL CITY OF NAVMlT kWahties Director SUBJECT: CRUDE OIL PURCHASE CONTRACT RECOMMENDATION: Adopt a Resolution authorizing execute an agreement with Kern purchase of crude oil. DISCUSSION: On December minated the agreement the purchase of crude to negotiate a new oil payments of 7 /8ths to City of Newport Beach. be made to the City of January 26, 1981 CITY COUNCIL AGENDA ITEM N0. the Mayor and the City Clerk to County Refinery, Inc. for the 22, 1981 by Resolution No. 9953 the City Council ter - between the City and Kern County Refinery, Inc. for oil from the West Newport wells, and directed the staff purchase contract. The old agreement provided for the Armstrong Petroleum Corporation and 1 /8th to the The new agreement provides that all of the payments Newport Beach after January 25, 1981. For crude oil delivered, Kern County Refinery, Inc. the highest posted price for uncontrolled oil and the maximum subject to price controls for the Newport Field. The term of shall continue until terminated by at least a 30 days' prior however, the term may not be terminated before July 1, 1981. oseph Devlin tilities Director JTD:bc agrees to pay legal price the agreement written notice, l RESOLUTION NO. 9 97:. A RESOLUTION OF THE CITY COUNCIL OF NEWPORT BEACH AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE AN AGREEMENT BETWEEN THE CITY OF NEWPORT BEACH AND KERN COUNTY REFINERY, INC., FOR THE PURCHASE OF CRUDE OIL WHEREAS, there has been presented to the City Council of the City of Newport Beach a certain Agreement between the City of Newport Beach and Kern County Refinery, Inc., for the purchase of crude oil; and WHEREAS, the City Council has reviewed the terms and conditions of said Agreement and finds them to be satisfactory and that it would be in the best interest of the City to execute said Agreement, NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Newport Beach that the Agreement above described is approved, and the Mayor and City Clerk are hereby authorized and directed to execute the same on behalf of the City of Newport Beach. ATTEST: City Clerk ADOPTED this 26th day of January, 1981. Mayor 012081 kv