TITLE
Recommendation to adopt resolution authorizing City Manager to execute the Forms of Amendments to Natural Gas Purchase Agreements, amended and restated Natural Gas Purchase Agreements and assignment consent agreements. (Citywide)
DISCUSSION
The City of Long Beach, Long Beach Energy Department (LBE) had an Agreement (THUMS Agreement) with THUMS Long Beach Company (THUMS) to deliver natural gas from THUMS' gas processing plant. LBE terminated the THUMS Agreement effective January 31, 2005, based on non-compliance with gas quality specifications.
A portion of the City's local natural gas supply comes from the smaller local producers (Local Producers) listed below. The Local Producer Agreements for the delivery of natural gas between the respective Local Producers and the City each have pricing structures that are based upon the price paid by the City for gas under the THUMS Agreement. Because the THUMS Agreement has been terminated, the pricing structures under the Local Producer Agreements need to be amended. The Forms of Amendment to the Natural Gas Purchase Agreements, attached as Exhibits A and B to the attached Resolution, stipulate that the Local Producers will be paid pursuant to Southern California Gas Company's (SoCalGas) published core procurement price and will eliminate all gas pricing tiers. By eliminating all gas pricing tiers, all local gas producers will be paid 100 percent of the SoCalGas published core procurement price.
Existing Local Producer Agreements have various expiration dates. Three (3) of the Agreements have in fact expired. For consistency, the Forms of Amendment to the Natural Gas Purchase Agreements will stipulate all Local Producer Agreements to expire on December 31, 2005.
Expired Aqreements Existing Agreements
Breitburn Energy Company Elmcott LLC
Sampson Oil Company Long Beach Unified School District
Termo Company Signal Hill Petroleum
TOPKO
THUMS (Royalties & Townlots)
Additionally, each of the Local Producer Agreements will be amended and restated in order to incorporate updated gas quality requirements and to eliminate inconsistencies between the various Local Producer Agreements. The form of Amended and Restated Gas Purchase Agreements is attached as Exhibit C to the attached Resolution.
Historically, the Local Producers have asked the City to execute Assignment Consent Agreements to evidence the City's consent to the transfer of a Local Producer's rights and obligations under its Local Producer Agreement to a successor. A form of Assignment Consent Agreement is attached as Exhibit D to the attached Resolution.
This matter was reviewed by Deputy City Attorney Richard Anthony and Budget Management Officer David Wodynski on February IO, 2005
TIMING CONSIDERATIONS
City Council action on this item is requested on March 1, 2005, to extend the term of three (3) agreements with local producers and to amend the Natural Gas Purchase Agreements of all sellers of locally produced natural gas to reflect the proposed price structure change.
FISCAL IMPACT
The City will realize cost savings because the proposed pricing structure will eliminate one-half the value of the SoCalGas intrastate pipeline transportation charge. The City, however, is hesitant to provide a dollar value to this savings, as the percentage paid to the local gas suppliers varies each month and is dependent upon the quantity of gas delivered.
Neither the Amended and Restated Agreements, extension to the term of the Agreements nor the form of Assignment Consent Agreement will have a fiscal impact.
Local gas supply purchases are budgeted in the Gas Fund (EF301) in the Long Beach Energy Department (EN).
SUGGESTED ACTION
Approve recommendation.
BODY
RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF LONG BEACH PROVIDING FOR THE ADOPTION
OF FORMS OF AMENDMENTS, RESTATEMENTS AND
ASSIGNMENTS OF EXISTING LOCALLY PRODUCED
NATURAL GAS PURCHASE CONTRACTS BETWEEN THE
CITY OF LONG BEACH AND VARIOUS LOCAL
PRODUCERS OF NATURAL GAS
Respectfully Submitted,
[Respectfully Submitted,]