SR-511-001
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jUl 25 1989
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CA:RMM:kp91/hpadv
City council Heeting 7-25-89
Santa Monica, California
STAFF REPORT
TO:
Mayor and city Council
city Attorney
Resolution Declaring the Intention of the city
council to Enter Into a Franchise Agreement with
Shell California Pipeline Company for an
Existing pipeline
FROM:
SUBJECT:
The accompanying Resolution of Intention schedules a public
hearing for August 22, 1989, regarding the granting of a
franchise to Shell California Pipeline Company (hereinafter
"Shell" ) for the purposes and under the terms and conditions
described in the attached franchise agreement for an existing
pipeline.
The principal points of the franchise agreement are as
follows:
a. 20 year franchise.
b. The annual franchise fee is $12,000.00 adjusted
annually by increases in the Producer Price Index tor All
commodities.
c. Shell has an option to extend the franchise for an
additional 20-year term, subject to negotiations on a Hreasonable
fee. II
d. Shell shall maintain $50,000,000.00 in liability
insurance. This is a substantial increase from the $5,000,000.00
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required by the Interim Agreement under which Shell has been
operating. The franchise which expired in 1981 required no
liability insurance.
e. Shell agrees to comply with all safety requirements
of federal and state law.
f. Shell may only use the pipeline for the
transportation of petroleum as defined in Shell's Public
Utilities Commission Tarriff No. 1 effective September 16, 1988.
This definition does not include refined gasoline. The expired
franchise allowed the tranportat1on of "petroleum, oil, and
1 iquid hydrocarbon products thereof, and gas," which could have
included refined gasoline.
These terms are advantaqous to the Ci ty considering the
pending condemnation action instituted by Shell.
Were such
action successfully completed, Shell would be granted a fee
interest in the easement, and the City would be without authority
to negotiate any of the above conditions. If Shell held a fee
interest rather than a franchise, Shell could change the product
transported from crude oil to refined gasoline, without the
City's approval.
RECOMMENDATION
It is respectfully recommended that the city Council adopt
the accompanying resolution.
PREPARED BY: Robert M. Myers, City Attorney
Mary H. Strobel, Deputy City Attorney
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