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HomeMy WebLinkAbout05/15/2001, C2 - ADOPT RESOLUTIONS SETTING A PUBLIC HEARING FOR PROPOSED FRANCHISE ORDINANCES REGARDING THE OPERATIO council MK°,°°p 5/15/01 acEnba PEpoRt I�.N..be, Gz C I T Y OF SAN LU I S 0 B I S P 0 FROM: Jeffrey G. Jorgensen, City AttorneyG� Prepared By: Gilbert A. Trujillo, Assistant City Attomey�`/ SUBJECT: ADOPT RESOLUTIONS SETTING A PUBLIC HEARING FOR PROPOSED FRANCHISE ORDINANCES REGARDING THE OPERATION OF PIPELINES TRANSPORTING OIL AND HYDROCARBON GASES BY TOSCO CORPORATION AND UNOCAL CALIFORNIA PIPELINE COMPANY CAO RECOMMENDATIONS: Adopt Resolutions for Tosco Corporation and Unocal California Pipeline Company setting a public hearing date for June 19, 2001, pursuant to Section 1002 of the City Charter. DISCUSSION Before granting any franchise, Section 1002 of the City Charter requires the City Council to pass a resolution declaring its intention to grant the same, stating the name of the proposed grantee, the character of the franchise and the terms and conditions upon which it is proposed to be granted. Such resolution shall set forth a date where any person having an interest therein or objection to the granting thereof may appear and be heard and shall direct the City Clerk to publish said resolution within fifteen (15) days of its passage. The time fixed for such hearing shall not be less than twenty(20)nor more than sixty(60) days after the passage of said resolution. At the time set for the hearing, the Council shall proceed to hear and pass upon all protests, and its decision thereon shall be final and conclusive. Thereafter, the Council may grant or deny the franchise subject to the right of referendum of the people. The attached Resolutions satisfy the requirements of Charter Section 1002 and set a public hearing date for June 19,2001. Backgrounds The pipelines,which are the subject of the proposed franchise Ordinances,have been operated and maintained in the City of San Luis Obispo by the Union Oil Company of California (UNOCAL) under the authority of Ordinance No. 1038 dated April 16, 1985. Ordinance No. 1038,which was for a term of 25 years, granted permission to UNOCAL to install and operate oil pipelines and provided a franchise fee as authorized by Public Utilities Code Section 6231.5. The City collects approximately$7,500 annually in franchise fees. This fee is non-negotiable and set by State law. The fee ranges from$0.088 to $0.660 per foot based on pipeline diameter. C2-1 Council Agenda Report—Report Title Page 2 In 1997, UNOCAL sold or transferred certain west coast refining, marketing and transportation assets to Tosco Corporation(TOSCO) including Unocal California Pipeline Company (UNOCAP),now a wholly owned subsidiary of TOSCO. Part of those assets were certain pipelines that were the subject of the franchise granted in Ordinance No. 1038. UNOCAL did not transfer all of its interests and retained those pipelines that are located in the Tank Farm Road area. The Tank Farm Road area is known to have petroleum contamination issues. UNOCAL has indicated to the City that it intends to abandon those lines but has not as of yet applied for permits to initiate the abandonment process. TOSCO is organized and exists under the laws of the State of Nevada and has its principal place of business in Stamford, Connecticut. It is one of the largest independent refiners of petroleum products in the United States and operates refineries in California,New Jersey, Pennsylvania, Illinois,Louisiana and Washington. Through a subsidiary, TOSCO also owns and operates petroleum product pipelines in Pennsylvania and New Jersey. TOSCO sells gasoline at more than 3,500 retail outlets under the Mobil, Exxon, 76 and Circle K brand names. In March 1999, TOSCO and UNOCAP wrote to the City and expressed their desire to enter into negotiations to acquire franchises from the City for the operation of certain pipelines they acquired from UNOCAL within the City of San Luis Obispo. The City Public Works Department and the City Attorney's Office have been the principal participants in the negotiations on behalf of the City. TOSCO, UNOCAP and the City's representatives have concluded their negotiations by producing the two proposed Franchise Ordinances which will be presented to the City Council with the staff report for the June 19, 2001 public hearing. The two Franchise Ordinances are identical in all material respects and are modeled on the franchise ordinances recently passed by the County of San Luis Obispo. The primary features of the Franchise Ordinances are as follows: Purpose: To maintain and operate pipelines for the transportation of oil and hydrocarbons within the City of San Luis Obispo. Type: Non-exclusive Term: 10 years Fees: Annual franchise fee to the City in accordance with Public Utilities Code Section 6231.5 (A fee ranging from$0.088 to $0.660 per foot based on pipeline diameter) Bond: One million dollars faithful performance bond Insurance: Ten million dollars liability insurance C2-2 i Council Agenda Report—Report Title Page 3 Indemnity: TOSCO and UNOCAP indemnify the City for any and all damages to persons or property arising out of their operations under the franchises. Includes indemnity for joint acts with the City. In addition to the salient points outlined.above, the Franchise Ordinances cover all other subjects commonly found in such franchise documents such as: the type of maintenance and operation of the pipelines to be provided, permitted transfers of the franchise, requirements for moving pipelines to accommodate public works and utilities, encroachment permits, and pipeline abandonment and removal requirements. CONCURRENCES The Public Works Department and the City Attorney's Office have been involved in negotiating these proposed ordinances. The City Attorney's Office drafted the ordinances in conjunction with TOSCO and UNOCAP representatives. FISCAL IMPACT The annual franchise fee to the City will be paid in accordance with Public Utilities Code Section 6231.5. This fee will generate approximately$7,500.00 per year in discretionary income to the General Fund. This fee is set by State law, which authorizes a fee ranging from $0.088 to $0.660 per foot based on pipeline diameter. ALTERNATIVES 1. Council may direct staff to prepare the necessary documents to effectuate a transfer or assignment of the franchise granted in Ordinance No. 1038 (1985 Series)to TOSCO and UNOCAP for the remaining term of the franchise which expires in 20i0 and may be extended for an additional five (5) year term. Staff does not recommend this action since the original franchise ordinance is now inadequate in terms of bonding, insurance, indemnification and pipeline removal and remediation requirements. Staff believes it is more advantageous to the City to enter into new comprehensive franchise ordinances at this time. ATTACHMENTS 1. Resolution for the proposed Tosco Corporation franchise setting a public hearing date for June 19, 2001 2. Resolution for the proposed Unocal California Pipeline Company franchise setting a public hearing date for June 19, 2001 C2-3 i RESOLUTION NO. (2001 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO DECLARING THE CITY'S INTENT TO GRANT A TEN YEAR FRANCHISE TO UNOCAL CALIFORNIA PIPELINE COMPANY, A CALIFORNIA CORPORATION, TO CONSTRUCT, OPERATE AND MAINTAIN PIPELINES FOR THE TRANSPORTATION OF OIL AND OTHER SPECIFIED MATERIALS IN THE CITY OF SAN LUIS OBISPO AND SETTING A PUBLIC HEARING FOR JUNE 19, 2001 WHEREAS,the City of San Luis Obispo adopted Ordinance No. 1038 on April 2, 1985 granting a franchise to Union Oil Company of California for a term of 25 years for the transportation and distribution of oil and other specified materials in the City of San Luis Obispo; and WHEREAS, Union Oil Company of California sold or transferred a portion of its pipelines subject to Ordinance No. 1038 to Tosco Corporation including its subsidiary Unocal California Pipeline Company;and WHEREAS,Union Oil Company of California informed the City of San Luis Obispo that it intends to commence the abandonment process for its remaining interests under Ordinance No. 1038 that have not been sold or transferred to Tosco Corporation and Unocal California Pipeline Company; and WHEREAS,Union Oil Company of California's remaining pipeline interests in the City of San Luis Obispo are subject to the existing franchise agreement granted in Ordinance No. 1038 until such time that Union Oil Company of California has abandoned such pipelines pursuant to applicable law; and WHEREAS, Tosco Corporation and Unocal California Pipeline Company have requested the City of San Luis Obispo to enter into new franchise agreements for the oil transportation and distribution pipelines acquired from Union Oil Company of California; and WHEREAS, City staff and Unocal California Pipeline Company have developed a draft franchise agreement for the City Council's consideration. This proposal contains the following key provisions: • Purpose: To maintain and operate pipelines for the transportation of oil and hydrocarbons within the City • Type: Non-exclusive • Tenn: 10 years • Franchise Fees: Annual fee to the City in accordance with Public Utilities Code Section 6231.5 (A fee ranging from $0.088 to $0.660 per foot based on pipeline diameter.) NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: C2-4 J ) Resolution No. (200lSeries) Page 2 SECTION 1. Pursuant to Section 1002 of the Charter of the City of San Luis Obispo; the City Council hereby declares its intention to grant to Unocal California Pipeline Company a ten (10) year franchise for the privilege of constructing, operating and maintaining pipelines for the transportation of oil and other specified materials in the City of San Luis Obispo. SECTION 2. A public hearing will be held on June 19, 2001, at 7:00 p.m. in the Council Chambers of City Hall, located at 990 Palm Street, San Luis Obispo, California. Any persons having an interest in the franchise or any objection to the granting of the franchise may appear before the Council and be heard thereon. SECTION 3. The City Clerk shall publish this resolution at least once within fifteen (15) days of its passage in a newspaper in the City of San Luis,Obispo. Upon motion of _. _ _, seconded by and on the following roll call vote: AYES: NOES: ABSENT; the foregoing resolution was adopted this day of 2001.. Mayor Allen Settle ATTEST: Lee Price,City Clerk APPROVED AS TO FORM`. org n, ty Attorney C2-5 RESOLUTION NO. (2001 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO DECLARING THE CITY'S INTENT TO GRANT A TEN YEAR FRANCHISE TO TOSCO CORPORATION,A NEVADA CORPORATION, TO CONSTRUCT, OPERATE AND MAINTAIN PIPELINES FOR THE TRANSPORTATION OF OIL AND OTHER SPECIFIED MATERIALS IN THE CITY OF SAN LUIS OBISPO AND SETTING A PUBLIC HEARING FOR JUNE 19, 2001 WHEREAS,the City of San Luis Obispo adopted Ordinance No. 1038 on April 2, 1985 granting a franchise to Union Oil Company of California for a term of 25 years for the transportation and distribution of oil and other specified materials in the City of San Luis Obispo; and WHEREAS,Union Oil Company of California sold or transferred a portion of its pipelines subject to Ordinance No. 1038 to Tosco Corporation including its subsidiary Unocal California Pipeline Company; and WHEREAS,Union Oil Company of California informed the City of San Luis Obispo that it intends to commence the abandonment process for its remaining interests under Ordinance No. 1038 that have not been sold or transferred to Tosco Corporation and Unocal California Pipeline Company; and WHEREAS,Union Oil Company of California's remaining pipeline interests in the City of San Luis Obispo are subject to the existing franchise agreement granted in Ordinance No. 1038 until such time that Union Oil Company of California has abandoned such pipelines pursuant to applicable law; and WHEREAS, Tosco Corporation and Unocal California Pipeline Company have requested the City of San Luis Obispo to enter into new franchise agreements for the oil transportation and distribution pipelines acquired from Union Oil Company of California; and WHEREAS, City staff and Tosco Corporation have developed a draft franchise agreement for the City Council's consideration. This proposal contains the following key provisions: • Purpose: To maintain and operate pipelines for the transportation of oil and hydrocarbons within the City • Type: Non-exclusive • Term: 10 years • Franchise Fees: Annual fee to the City in accordance with Public Utilities Code Section 62.31.5 (A fee ranging from $0.088 to $0.660 per foot based on pipeline diameter.) NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: ^/ n/ Cr-V Resolution No. (2001 Series) Page 2 SECTION 1. Pursuant to Section 1002 of the Charter of the City of San Luis Obispo, the City Council hereby declares its intention to grant to Tosco Corporation a ten (10) year franchise for the privilege of constructing, operating and maintaining pipelines for the transportation of oil and other specified materials in the City of San Luis Obispo. SECTION 2. A public hearing will be held on June 19, 2001, at 7:00 p.m. in the Council Chambers of City Hall, located at 990 Palm Street, San Luis Obispo, California. Any persons having an interest in the. franchise or any objection to the granting of the franchise may appear before the Council and be heard thereon. SECTION 3. The City Clerk shall publish this resolution at least once within fifteen (15)days of its passage in a newspaper in the City of San Luis Obispo. Upon motion of , seconded by and on the following roll call vote: AYES: NOES: ABSENT: the foregoing resolution was adopted this day of , 2001. Mayor Allen Settle ATTEST: Lee Price, City Clerk APPROVED AS TO FORM:. Jq gen n, Attorney C2-7