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.
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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.
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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-
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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:
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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
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