City of Culver City, California
Agenda Item Report
RECOMMENDATION:
Staff recommends the City Council introduce an ordinance granting a Franchise to
Crimson California Pipeline, L.P. (Proposed Crimson Franchise) for the operation of
existing pipelines located in the public rights-of-way for the transportation of oil or
products thereof pursuant to certain terms and conditions contained in the proposed
ordinance.
BACKGROUND:
Section 1700 of the City Charter provides, in pertinent part, the following:
“The City Council may, by ordinance, grant a franchise to furnish the City
and its inhabitants with any public utility or service and to use the public
streets for that purpose. The exercise by any person, firm or corporation
of any privilege for which a franchise is required without procuring such
franchise from the City is prohibited.”
Additionally, Section 6205.1 of the California Public Utilities Code (PUC) provides, in
pertinent part, the following:
Meeting Date: 07/27/2015 Item Number: PH-2
CITY COUNCIL AGENDA ITEM: PUBLIC HEARING – Introduction of an Ordinance
Granting a Franchise to Crimson California Pipeline, L.P. for the Operation of
Existing Pipelines Located in the Public Rights-of-Way for the Transportation of
Oil or Products Thereof Pursuant to Certain Terms and Conditions Contained in
the Proposed Ordinance.
Contact Person/Dept.:
Martin R. Cole, Assistant City
Manager/City Clerk
Phone Number: 310-253-6000
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Public Hearing: [X] Action Item: [] Attachments: [X]
Commission Action Required: Yes [] No [X] Date: _______________
Public Notification: (E-Mail) Meetings and Agendas – City Council (07/22/15);
(Publication) Culver City News (06/25/15, 07/15/15, and 07/23/15)
Department Approval:
Martin R. Cole (07/21/15)
City Attorney Approval:
Carol Schwab (by H. Baker (07/21/15)
Chief Financial Officer Approval:
Jeff Muir (07/22/15)
City Manager Approval:
John M. Nachbar (07/22/15) City of Culver City, California
Agenda Item Report
“…facilities which are part of a pipeline system transmitting oil or products
thereof, shall be granted upon the terms and conditions provided in, and in
accordance with...this chapter”
Since its incorporation in 1917, in accordance with the City Charter and the PUC, the
City has issued a number of franchises to various utilities. Some of the City’s
franchises often trace their origins back a number of decades. In the case of the
Proposed Crimson Franchise, the pipelines that are subject to the Proposed
Crimson Franchise have been in their underground location since at least 1968
(under a Franchise granted by the City Council via Ordinance CS-593 on April 11,
1968).
Since 1968, the City Charter was significantly updated in 2006. Also, the PUC has
been substantively amended. In addition to these changes in applicable law,
provisions in the 1968 Franchise have become dated (especially provisions related
to insurance and indemnity). Further, Shell Oil Company, the franchise holder of the
original 1968 Franchise, conveyed its interests to Crimson California Pipeline, L. P.
(Crimson). For all of these reasons, an updated Franchise is needed.
On June 8, 2015, the City Council adopted Resolution 2015-R045: A RESOLUTION
OF THE CITY COUNCIL OF THE CITY OF CULVER CITY, CALIFORNIA (1)
DECLARING THE CITY COUNCIL'S INTENTION TO GRANT A FRANCHISE TO
CRIMSON CALIFORNIA PIPELINE, L.P. FOR THE OPERATION OF EXISTING
PIPELINES LOCATED IN THE PUBLIC RIGHTS-OF-WAY FOR THE
TRANSPORTATION OF OIL OR PRODUCTS THEREOF PURSUANT TO
CERTAIN TERMS AND CONDITIONS UPON WHICH SUCH FRANCHISE IS
PROPOSED TO BE GRANTED; AND, (2) SETTING THE DATE, TIME, AND
PLACE FOR THE PUBLIC HEARING AT WHICH ANY PERSON MAY APPEAR
BEFORE THE CITY COUNCIL AND BE HEARD TO BE JULY 27, 2015 AT 7:00PM
IN THE MIKE BALKMAN COUNCIL CHAMBERS.
The City Council approved minutes for the City Council Meeting of June 8, 2015,
contain the following:
“…Council Member Sahli-Wells thanked Assistant City Manager/City Clerk
Martin Cole for his hard work on the issue; discussed a similar franchise in
Santa Monica; the Santa Monica agreement; notification requirements;
changing the word "reasonably" to "immediately"; the recent oil spill in
Santa Barbara; and emergencies (emphasis added).
David Blakesly, Crimson Pipeline, discussed Federal and State notification
for spill events; the National Response Center; best accommodating the
emergency response; and the emergency response plan. City of Culver City, California
Agenda Item Report
Further discussion ensued between staff and Council Members regarding
other pipelines beneath Culver City; All American Pipeline; different levels
of regulation; the Public Utilities Code of California; issues that are
negotiable; provisions of the franchise set by state law; a request that
regulators increase inspections of pipelines; the main regulator of safety;
contact with the Culver City Fire Department; and the Santa Monica
franchise.
Council Member Clarke received clarification from Mr. Blakesly regarding
the life expectancy for pipelines…”
The proposed ordinance presented to the City Council for consideration this evening
includes the amendments proposed as emphasized above.
DISCUSSION:
Given the significant changes noted above and the 47 years of time since the
installation of the subject pipelines, staff has been in discussions with Crimson to
update the Proposed Crimson Franchise. The result of over three years of
discussions is a completely re-written and updated document.
Significant Change in Applicable Law
When the PUC was last substantively amended by the State Legislature in 1989, the
amendments included a “pre-emption” provision. That provision (contained in
Section 6205.1) pre-empted the City’s authority to negotiate many substantive
provisions in the franchise and required that franchises be granted “upon the terms
and conditions provided in [the PUC].” One important provision, the amount of the
fee the City can charge oil pipeline systems for the use of the public right-of-way is
set by Section 6231.5 of the PUC (prior to 1989, the franchise fee was a negotiable
item).
Substantive Updates Contained in the Proposed Crimson Franchise
Throughout this entire process, in accordance with negotiating instructions provided
by the City Council, staff has proceeded with negotiations to update the
insurance/bond/indemnity language to provide improved protection to the residents
of the City in case of pipeline damage or oil spills. Also, secondarily to providing for
the public health and safety, the City Council’s negotiating instructions also provided
for an opportunity to standardize and update the remaining language of the franchise
agreements and provide maximum revenues for use of the public lands.
City of Culver City, California
Agenda Item Report
Improved and Updated Insurance Coverage
Because of the pre-emption of the franchise fee by the PUC, negotiations focused
mainly on the City’s main goal to modernize and improve the insurance provided by
Crimson to protect the City, it residents, and property owners. As with the City of
Santa Monica franchise, the Proposed Crimson Franchise includes updated and, in
staff’s opinion more appropriate, insurance coverage (please see Exhibit B of the
Proposed Crimson Franchise for additional details). The updated insurance
requirements now provide for $35,000,000 in Pollution Legal Liability coverage and
$10,000,000 in Excess or Umbrella Liability.
Other Major Terms and Conditions
The Proposed Crimson Franchise includes the following major terms and conditions:
1. Term of 10 Years: Staff had originally proposed an initial term of ten years
and two five-year extensions subject to payment of Extension Fees. To
maintain parity with the Santa Monica (and other) franchises, Crimson
rejected that proposal. The term reverted to a single, 10-year term, which
both parties have agreed upon.
2. Updated Language: The language of the document has been updated and
restructured to improve the ease of administration of the franchise.
3. Renewal and Annual Franchise Fee: The document reflects the payment of a
$10,000 Franchise Renewal and Extension Fee and an annual Franchise Fee
equal to the maximum allowed under the PUC. Under the PUC tariff
schedule, the City is expected to receive $1,654 for the first year of the
franchise, subject to a modest inflation factor each year thereafter.
Should the City Council introduce the proposed ordinance this evening, it will be
brought back for adoption at the August 10, 2015 City Council Meeting.
FISCAL IMPACT:
Should the City Council ultimately adopt the proposed ordinance, the City’s General
Fund will receive a one-time payment of $10,000 as a Franchise Renewal and
Extension Fee and will receive approximately $1,654 each year as the maximum
allowable franchise fee set under the PUC (the franchise fee is subject to increase
each year as allowed by the PUC).
City of Culver City, California
Agenda Item Report
ATTACHMENTS:
Proposed Ordinance
MOTION:
That the City Council:
Introduce an ordinance granting a franchise to Crimson California Pipeline,
L.P. (Proposed Crimson Franchise) for the operation of existing pipelines
located in the public rights-of-way for the transportation of oil or products
thereof pursuant to certain terms and conditions contained in the proposed
ordinance.
MEETING DATE: July 27, 2015
AGENDA ITEM: Introduction of an Ordinance Granting a Franchise to
Crimson California Pipeline, L.P. for the Operation of Existing Pipelines
Located in the Public Rights-of-Way for the Transportation of Oil or
Products Thereof Pursuant to Certain Terms and Conditions Contained in
the Proposed Ordinance.
ATTACHMENTS
Pages
1. Proposed Ordinance
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