Long Beach, CA
File #: 10-0503    Version: 1 Name: LBGO-Prepaid Natural Gas Purchase
Type: Contract Status: CCIS
File created: 4/27/2010 In control: City Council
On agenda: 5/11/2010 Final action: 5/11/2010
Title: Recommendation to authorize City Manager to execute the second amendment to the Prepaid Natural Gas Purchase and Sale Agreement dated September 13, 2007, by and between Long Beach Bond Finance Authority and the City of Long Beach, to allow for alternative natural gas delivery points, balancing of prepaid gas delivered into the Long Beach Gas and Oil system from additional gas suppliers, and to stipulate that any failure to deliver prepaid gas as a result of non-performance under certain Physical Natural Gas Transaction Confirmations or Base Contract for Sale and Purchase of Natural Gas Agreement, shall not constitute an authority delivery default. (Citywide)
Sponsors: Long Beach Gas and Oil
Indexes: Agreements, Amendments
Attachments: 1. 051110-R-13sr.pdf
Related files: 09-0673, 08-1253, 07-0957
TITLE
Recommendation to authorize City Manager to execute the second amendment to the Prepaid Natural Gas Purchase and Sale Agreement dated September 13, 2007, by and between Long Beach Bond Finance Authority and the City of Long Beach, to allow for alternative natural gas delivery points, balancing of prepaid gas delivered into the Long Beach Gas and Oil system from additional gas suppliers, and to stipulate that any failure to deliver prepaid gas as a result of non-performance under certain Physical Natural Gas Transaction Confirmations or Base Contract for Sale and Purchase of Natural Gas Agreement, shall not constitute an authority delivery default. (Citywide)

DISCUSSION
The Long Beach Gas and Oil Department (LBGO) maintains agreements with Thums Long Beach Company (Thums), to purchase locally-produced gas (Local Gas), which is a standard by-product of oil production. Thums oversees the production and delivery of an additional source of Local Gas, which, due to gas quality issues, has not entered LBGO's natural gas pipeline system for four years. With the completion of the construction of an Amine Plant, this additional source of Local Gas will be cleansed of the impurities and pipeline quality natural gas will be available for acceptance and purchase by LBGO.

In November 2007, the Long Beach Bond Finance Authority issued Natural Gas Purchase Revenue Bonds to finance the prepayment of a 3D-year supply of natural gas for LBGO to Merrill Lynch Commodities, Inc. (Merrill Lynch). The supply of prepay natural gas into LBGO's gas system allows limited volume space for Local Gas. With the construction of the Thums Amine Plant, Thums is requesting to supply additional volumes of Local Gas into LBGO's gas system. Merrill Lynch has agreed to purchase part of the Local Gas volumes from Thums and will then sell "like volumes of" gas to LBGO under the terms of the prepay agreement. The proposed amendment to the prepay agreement allows for alternative natural gas deliv...

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