AGENDA ITEM
TO: HONORABLE MAYOR
AND MEMBERS OF THE CITY COUNCIL
FROM: CARLO TOMAINO
CITY MANAGER
BY: THOMAS BEKELE
PUBLIC WORKS DIRECTOR
SUBJECT:
title
RESOLUTION OF INTENT TO GRANT A PIPELINE FRANCHISE TO CARDINAL PIPELINE, L.P.
summary
Summary:
Cardinal Pipeline, L.P. (Cardinal), a division of Crimson Midstream, LLC., is requesting to renew a pipeline franchise to operate the pipeline facilities within the City’s right-of-way. The City Council will consider the request from Cardinal to renew the pipeline franchise. If approved, the City Council would adopt the proposed resolution and set a public hearing for January 14, 2025.
Strategic Plan Goal(s):
Goal No. 1 Financial Stability: Ensure the City’s long-term financial stability and resilience.
recommendation
Recommendations:
1. Waive further reading and adopt the following resolution, entitled:
A RESOLUTION OF INTENT OF THE CITY COUNCIL OF THE CITY OF SIGNAL HILL, CALIFORNIA, DECLARING ITS INTENTION TO GRANT A FRANCHISE TO CARDINAL PIPELINE, L.P. AND THE INTERESTS, RIGHTS, PRIVILEGES, AND DUTIES TO LAY AND USE PIPES AND APPURTENANCES FOR TRANSMITTING AND DISTRIBUTING OIL AND PETROLEUM PRODUCTS FOR ANY AND ALL LAWFUL PURPOSES UNDER AND ALONG THE PUBLIC STREETS, WAYS, ALLEYS, AND PLACES, AS THE SAME NOW OR MAY HEREAFTER EXIST, WITHIN THIS CITY
2. Set a public hearing for January 14, 2025
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Fiscal Impact:
For the 2023 calendar year, the City received $19,784.14 in franchise fees for the franchise under Ordinance No. 2006-02-1356, currently owned by Cardinal. The total pipeline footage for the franchise is 12,232 feet of “active” pipeline.
The proposed franchise will include the same total of 12,232 feet - with no changes to pipeline classifications.
The franchise fee is updated annually based on inflation, and the Finance Department utilizes current fees and the Consumer Price Index (CPI) for September of the current year when preparing annual invoices. Upon the granting of the proposed franchise, Cardinal will be responsible for the continued payments of franchise fees. In addition, Cardinal submitted a payment deposit of $7,000 to the City for labor and media publication costs associated with processing the pipeline franchise.
Background and Analysis:
In 2005, Equilon Enterprises Limited Liability Corporation, doing business as Shell Oil Products US, sold and transferred a portion of its pipelines to Cardinal. In 2006, the City Council adopted Ordinance No. 2006-02-1356 (Attachment A), granting Cardinal a franchise to operate the acquired facilities within the City’s right-of-way.
In 2019, Cardinal requested the renewal of their franchise agreement with the City. However, discussions stalled due to discrepancies made by Cardinal in reporting their current pipeline that showed a difference in inventory recorded in the 2006 franchise agreement and the inventory provided with the renewal documents (Attachment B). Using the deposit paid by Cardinal, the City hired a Licensed Land Surveyor to interpret and prepare a map based on the legal description in the 2006 Franchise Agreement, approved by the City Council (Attachment C).
The map prepared by the Licensed Land Surveyor aligned more closely with the 2006 Franchise Agreement than with the one proposed in 2019. Consequently, the City will establish franchise fees based on the linear footage of the pipeline described in the 2006 franchise agreement, which is greater than the footage shown in the 2019 renewal request. Cardinal has stated they do not have any records for the abandonment or transfer of lines from the previous record which exposed them to pay a higher fee.
Section 4(b) of the franchise Ordinance No. 2006-02-1356 requires continuous annual payments until the approval of pipeline transfer, pipeline abandonment, or actual pipeline removal. Cardinal has continued to pay the fee for the previous franchise since its expiration in 2021. Therefore, staff proposes renewing the franchise based on the 2006 records until proof of pipeline transfers or removals can be provided.
Next Steps:
Given that the previous 15-year term for this pipeline franchise expired in 2021, and Cardinal has continued to make annual payments as required by Section 4(b) of Ordinance No. 2006-02-1356, the next steps involve formalizing the renewal of a new franchise agreement. Cardinal has conducted business in the City for several years and has consistently made the franchise fee payments in full and on time throughout the current agreement's term.
Staff recommends the City Council adopt the resolution stating the City’s intent to grant a franchise to Cardinal (Attachment D). If adopted, the resolution would set a public hearing for January 14, 2025. The public hearing would allow the City Council to receive public comment on the proposed granting of the pipeline franchise to Cardinal.
Reviewed for Fiscal Impact:
_________________________
Sharon del Rosario
Attachments
A. Cardinal Franchise Ordinance No. 2006-02-1356
B. Cardinal Pipeline Map (Renewal Application)
C. Cardinal Pipeline Map (City Licensed Surveyor Interpretation)
D. Cardinal Resolution of Intent