AGENDA ITEM
TO: HONORABLE MAYOR
AND MEMBERS OF THE CITY COUNCIL
FROM: CARLO TOMAINO
CITY MANAGER
BY: THOMAS BEKELE
PUBLIC WORKS DIRECTOR
SUBJECT:
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RESOLUTION OF INTENT TO GRANT A PIPELINE FRANCHISE TO CRIMSON CALIFORNIA PIPELINE, L.P.
summary
Summary:
Crimson California Pipeline, L.P. (Crimson), a division of Crimson Midstream, Limited Liability Corporation is requesting to renew a pipeline franchise to operate its pipeline facilities within the City’s right-of-way.
The City Council will consider the request from Crimson to renew the pipeline franchise. If approved, the City Council would adopt the proposed resolution and set a public hearing for January14, 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 CRIMSON CALIFORNIA 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 $16,404.88 in franchise fees for the franchise under Ordinance No. 2010-06-1417 (Attachment A), currently owned by Crimson. The total pipeline footage for the franchise is 33,650.53 feet of pipeline - with 3,710 feet classified as “active” pipeline and 29,940.53 feet as “inactive” pipeline.
According to the pipeline map (Attachment B) provided by Crismon during the renewal process, the proposed franchise would include the same total of 33,650.53 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, Crimson would be responsible for the continued payments of franchise fees. In addition, Crimson 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, the City Council adopted Ordinance No. 2005-03-1344, granting a franchise to ConocoPhillips Pipeline Company (ConocoPhillips) to operate pipelines in the City’s right-of-way. In 2008, Crimson purchased ConocoPhillips’ common carrier crude oil pipeline system and its idle pipelines in Southern California. In 2010, the City Council adopted Ordinance No. 2010-06-1417, granting Crimson a franchise to operate the acquired facilities within the City’s right-of-way.
In 2010, Chevron Pipeline Company (CPL) and Crimson entered into an Asset Purchase and Sale Agreement pursuant to which CPL transferred a portion of its pipeline system to Crimson. The California Public Utilities Commission approved the transfer on December 2, 2010. CPL and Crimson finalized the transaction on February 16, 2011. In 2012, City Council adopted Resolution No. 2012-03-5943, granting approval and consent to the assignment of pipeline from CPL to Crimson.
In 2023, Crimson contacted the City to request a renewal of its franchise along with the transfer and assignment of a segment of its pipelines to DCOR, LLC (DCOR). The City did not accept the transfer at that time because Crimson did not provide a finalized agreement between the two entities. Additionally, DCOR has neither accepted nor contacted the City to establish a franchise agreement.
Therefore, staff proposes renewing Crimson’s franchise agreement with the proposed footage, without any reduction for DCOR’s future acquisition. Staff has informed Crimson that DCOR will need to establish a new oil franchise agreement with the City. Staff will process the establishment of the franchise and transfer in accordance with Chapter 16 of the Signal Hill Municipal Code. The transfer would be incorporated in the future once the agreement between DCOR and Crimson is finalized, and the City reviews and approves the proper documentation.
Next Steps:
Given that the previous franchise term has expired, and Crimson has continued to make annual payments as required by Section 4(b) of Ordinance No. 2010-06-1417, the next steps involve formalizing the renewal of the franchise agreement. Crimson has conducted business in the City for many years and has made its franchise fee payments in full and on time throughout the term of the current agreement.
Staff recommends the City Council adopt the resolution stating the City’s intent to grant a franchise to Crimson (Attachment C). 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 Crimson.
Reviewed for Fiscal Impact:
_________________________
Sharon del Rosario
Attachments:
A. Crimson Franchise Ordinance No. 2010-06-1417
B. Crimson Map of Pipelines
C. Crimson Resolution of Intent