TITLE
Recommendation to authorize City Manager to execute the First Amendment to the Produced Water Agreement between the City of Long Beach, Tidelands Oil Production Company, and Oil Operators, Inc., for a seven-year term, with automatic renewal for successive one-year periods unless any party elects to terminate the Agreement within 30 days of its expiration; and authorize City Manager to execute any subsequent amendments to the Produced Water Agreement.
(Districts 1,2)
DISCUSSION
In 2001, the City of Long Beach (acting in its capacity as Unit Operator for Unit
Segments I and II under the Unit Agreements for Fault Block Units II, 111, IV, and V
Ranger Zone, as operator of certain un-unitized formations, and as operator of
certain general facilities in the Wilmington Oil Field) and the Tidelands Oil Production
Company (Contractor), the City's oil field contractor, entered into a Produced Water
Agreement (Agreement) with Oil Operators, Inc. (OOI), a private company operating
in Long Beach. The Agreement covered the terms of delivery of water produced by
001 as a normal by-product of its oil production operations in Signal Hill and Long
Beach oil production operations. The City uses the water in its west Wilmington area
oil operations, which has an ongoing need for additional injection water. Under the
Agreement, 001 provides the water delivery and bears all related capital costs,
including a volume-based treatment fee to be paid by them to the Contractor. The
Agreement estimates the delivery volume as approximately 30,000 barrels per day
and is in the fifth year of a seven-year term, automatically renewable for successive
one-year periods, unless any party elects to terminate the Amendment within 30 days
of its expiration.
The First Amendment to the Produced Water Agreement (Amendment) modifies the
term of the Agreement. The term of the Amendment is for seven years, automatically
renewable for successive one-year periods, unless any party elects to terminate the
Amendment within 30 days of its expiration. The Contractor implements all
operational and administrative aspects of this Amendment, with City oversight.
OOI plans to make significant capital improvements to its pipeline that delivers its
produced water to the City and desires to secure the Amendment for an extended
term of seven years from now with the option for automatic annual renewals
thereafter.
This item was reviewed by Deputy City Attorney J. Charles Parkin on May 30, 2006
and by Budget Management Officer David Wodynski on June 9, 2006.
TIMING CONSIDERATIONS
City Council action on this matter is requested on June 20, 2006, to allow 001 to
begin capital improvements to its pipeline as soon as possible.
FISCAL IMPACT
The Agreement provides for a $0.027/Barrel payment from 001 to the Contractor for
water treatment costs and supplies the Contractor with an additional source of water.
This will result in a $295,650 revenue stream to the Tideland Oil Revenue Fund (NX
420).
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
CHRISTOPHER J. GARNER |
APPROVED: |
DIRECTOR OF LONG BEACH GAS AND OIL |
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GERALD R. MILLER |
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CITY MANAGER |