AGENDA ITEM
TO: HONORABLE MAYOR
AND MEMBERS OF THE CITY COUNCIL
FROM: CARLO TOMAINO
CITY MANAGER
BY: THOMAS BEKELE
PUBLIC WORKS DIRECTOR/CITY ENGINEER
SUBJECT:
title
PUBLIC HEARING - INTRODUCTION OF AN ORDINANCE GRANTING A PIPELINE FRANCHISE TO CRIMSON CALIFORNIA PIPELINE, L.P.
summary
Summary:
Franchises are legal agreements wherein a local jurisdiction provides a utility with a right to serve customers within its boundaries. Crimson California Pipeline, L.P. (Crimson), a division of Crimson Midstream, Limited Liability Corporation is requesting to renew an existing pipeline franchise to operate its facilities within the City’s right-of-way. At the City Council meeting of December 10, 2024, the City Council adopted a resolution declaring its intent to grant a 15-year franchise to Crimson and set a public hearing for January 14, 2025. After reviewing the company’s emergency response plan, insurance coverage, financial statements, and conducting additional due diligence with the City Attorney’s Office, staff recommends the City Council adopt the proposed Ordinance extending the existing franchise with Crimson.
Form of Notice: Notice was published in the Signal Tribune newspaper on January 3, 2025. The City posted the notice in accordance with Signal Hill Municipal Code Section 1.08.010 at City Hall, the Signal Hill Public Library, Discovery Well Park, and Reservoir Park on or before January 3, 2025.
Strategic Plan Goal(s):
Goal No. 1 Financial Stability: Ensure the City’s long-term financial stability and resilience.
Goal No. 2 Community Safety: Maintain community safety by supporting public safety services and increasing emergency preparedness.
recommendation
Recommendation:
Introduce the following ordinance, entitled:
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SIGNAL HILL, CALIFORNIA, GRANTING 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.
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Fiscal Impact:
There is minimal fiscal impact associated with the recommended action. Renewal of Crimson’s existing franchise would authorize the continued collection of annual franchise fees. During calendar year 2023, the City received $16,404.88 in franchise fees from Crimson under Ordinance No. 2010-06-1417. The franchise fee is calculated based on the total amount and size of the pipeline. The City updates the franchise fee annually based on inflation, and the Finance Department utilizes current fees evaluated against change in the Consumer Price Index (CPI) to prepare annual invoices. Crimson is responsible for 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:
Franchises are legal agreements wherein a local jurisdiction provides a utility with a right to serve customers within its boundaries. A common type of franchise agreement is one between a city and a telecommunications provider for internet or cable service. Franchise agreements include the length of the service period, providing certain rights to the franchise holder to install infrastructure, and establish fees paid to the local municipality in exchange for franchise rights. Franchise agreements also establish expectations between the local municipality and the franchisee that regulate its operations, including ongoing and emergency maintenance. Signal Hill has pipelines that transfer crude oil to different destinations and these underground pipelines are maintained and operated by companies that specialize in transmission services.
Analysis:
In 2005, the City Council adopted Ordinance No. 2005-03-1344, granting a franchise to 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. Subsequently, 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 (Attachment A). The California Public Utilities Commission approved the transfer on December 2, 2010. CPL and Crimson finalized the transaction on February 16, 2011. In 2012, the City Council adopted Resolution No. 2012-03-5943, granting approval and consent to the assignment of pipeline from CPL to Crimson.
On December 10, 2024, the City Council adopted a Resolution declaring its intent to grant a franchise to Crimson and scheduled a public hearing for January 14, 2025. The linear pipeline footage covered under the current franchise is 33,650.53 feet; of this amount 3,710 feet is classified as “active” pipeline and 29,940.53 feet as “inactive” pipeline. According to the pipeline map, the proposed franchise does not change the total pipeline footage or classifications. For the City Council’s reference, staff has attached a map depicting the location of the pipelines (Attachment B). Staff reviewed the following documents in developing the proposed ordinance:
a. Emergency Response Plan that addresses how the Grantee will respond in case of oil leak or other unanticipated maintenance issue.
b. A complete inventory of the facilities, including descriptions and maps, showing pipeline location and depth (when available), the size (internal diameter) and lineal footage of each pipeline segment, and the date of each pipeline addition or deletion; active and inactive lines were identified.
c. A certificate under penalty of perjury that Grantee has complied with all requirements of Part 195 (Transportation of Hazardous Liquids by Pipeline) of Title 49 of the United States Code of Federal Regulations.
d. Insurance coverage demonstrating the Grantee carries sufficient liability insurance to cover the cost of injury, death, and property damage or destruction.
e. Organizational structure regarding the corporate ownership and operational responsibility of the Grantee.
f. Financial statement showing the financial condition of the Grantee as of a date not more than one (1) year prior to Grantee’s application for the franchise.
Next Steps:
Upon introduction of the Ordinance, the City Clerk’s office will cause to be posted a summary of the Ordinance pursuant to Signal Hill Municipal Code Section 1.08.019 at City Hall, Discovery Well Park, Reservoir Park, and the Signal Hill Library on or before January 17, 2025. The City will also publish a summary of the Ordinance in the Signal Hill Tribune newspaper pursuant to Government Code §65091(a)(4) on January 17, 2025. Subject to City Council adoption of the Ordinance, the City Clerk would schedule the Second Reading of the proposed Ordinance for the January 28, 2025, City Council meeting.
Reviewed for Fiscal Impact:
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Siamlu Cox
Attachments:
A. Crimson Franchise Ordinance No. 2010-06-1417
B. Map of Pipelines
C. Proposed Franchise Ordinance