HomeMy WebLinkAboutItem ESEAC
AGENDA STAFF REPORT
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�OFORN P
DATE: June 11, 2018
TO: Honorable Mayor and City Council
THRU: Jill R. Ingram, City Manager
FROM: Victoria L. Beatley, Director of Finance /City Treasurer
SUBJECT:
Oil Revenue Recovery Professional Services Agreement
SUMMARY OF REQUEST:
That the City Council approve Resolution 6827 authorizing the City Manager to
execute the professional services agreement with Greg Kirste dba Municipal
Petroleum Analysts for potential oil and gas revenue recovery services and reject
all other proposals.
BACKGROUND AND ANALYSIS:
In February 2017, City staff sent out a Request for Qualifications (RFQ) to
multiple consultants to conduct an audit of oil revenue generated within City
limits. The City received one response from Millennium Consulting, LLC.
On March 27, 2017, the City held a Study Session at which Ken Ramos and
Jerry Twomey of Millennium Consulting presented their insight and approach to
the oil revenue recovery opportunities for the City. At that Study Session, the City
Council directed staff to cast a wider net and solicit additional proposal
responses.
Based upon the recommendation of some residents, staff sent the RFQ to two
additional consulting firms. Only one response was received, from CCG
International, in May 2017. The response from CCG International was evaluated
by staff as well. Since May 2017, there has been no additional work done on this
project.
In October 2017, the City Council received an unsolicited proposal from
Municipal Petroleum Analysts (MPA) in response to the City's Strategic Plan
objective regarding oil revenue recovery. Based upon the work done previously
by MPA and the associated recovery of revenue, and the references,
qualifications, work experience and cost, staff recommends the selection of MPA
and the rejection of all other proposals.
Agenda Item E
STRATEGIC PLAN:
The goals of evaluating and recovering oil revenue and recommending to Council
options for new revenue sources have been goals in the Strategic Plan since
2017.
ENVIRONMENTAL IMPACT:
There is no environmental impact related to this item.
LEGAL ANALYSIS:
The City Attorney has reviewed the attachments and all have been approved as
to form.
FINANCIAL IMPACT:
The financial impact is yet to be determined and is based upon the work of
MPA's project manager. The City will not have any cost associated with the
recovery of the revenue. In the event that the work brings in substantial revenue,
which is expected, the loan from the Swimming Pool Designated Fund will be
repaid first. Additionally, no expenditure for additional tasks, as described in the
scope of work, will begin until sufficient revenue has been received to cover the
cost of the work.
RECOMMENDATION:
That the City Council approve Resolution 6827 authorizing the City Manager to
execute the professional services agreement with Greg Kirste dba Municipal
Petroleum Analysts for oil revenue recovery services, and to reject all other
proposals.
SUBMITTED BY:
4licto4ia B. iBad ery
Victoria L. Beatley, Director of
Finance /City Treasurer
NOTED AND APPROVED:
,U J2.5nguun
Jill R. Ingram, City Manager
ATTACHMENTS:
A. Professional Services Agreement — Municipal Petroleum Analysts
B. Resolution 6827
C. Proposals from (i) Greg Kirste dba Municipal Petroleum Analysts; (ii)
Millennium Consulting; and (iii) CCG International.
D. Kirste — Work History
Page 2
Attachmtent "A"
PROFESSIONAL SERVICES AGREEMENT
Between
City of Seal Beach
211 8th Street
Seal Beach, CA 90740
0
Greg Kirste dba Municipal Petroleum Analysts
This Professional Service Agreement ( "the Agreement') is made as of June 11,
2018 (the "Effective Date "), by and between Greg Kirste dba Municipal Petroleum
Analysts ( "Consultant "), and the City of Seal Beach ( "City"), a California charter
city, (individually "Party" and collectively, "the Parties ").
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RECITALS
A. City desires certain professional services.
B. Consultant represents that it is qualified and able to provide City with such
services.
NOW THEREFORE, in consideration of the Parties' performance of the
promises, covenants, and conditions stated herein, the Parties hereto agree as
follows.
AGREEMENT
1.0 Scope of Services
1.1. Consultant shall provide those services ( "Services ") set forth in the
attached Exhibit A, which is hereby incorporated by this reference. To the extent
that there is any conflict between Exhibit A and this Agreement, this Agreement
shall control.
1.2. Consultant shall perform all Services under this Agreement in
accordance with the standard of care generally exercised by like professionals
under similar circumstances and in a manner reasonably satisfactory to City.
1.3. In performing this Agreement, Consultant shall comply with all
applicable provisions of federal, state, and local law.
1.4. Consultant will not be compensated for any work performed not
specified in the Scope of Services unless the City authorizes such work in
advance and in writing. The City Manager or her designee may authorize
Additional Services up to the amount approved at the time of award by the City
Council. Payment for additional work in excess of this amount requires prior City
Council authorization.
1.5. Consultant shall provide periodic reports of its activities, in a form
and substance to be directed by the City's Director of Finance, to the City at
three (3) months, six (6) months and twelve (12) months following the Effective
Date and, semi - annually each year thereafter during the Term not later than June
30 and December 30 each year.
2.0 Term
This Term of this Agreement shall commence as of the Effective Date and shall
continue through December 31, 2022 ( "Term ") unless previously terminated as
provided by this Agreement.
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Notwithstanding the foregoing, and with the exception of payments for fees for
additional services and authorized expenses, City's obligations to pay Consultant
as set forth in Exhibit B shall survive the Term and termination of this Agreement
only for the time set forth in Exhibit B.
3.0 Consultant's Compensation
City will pay Consultant for Fee Recovery services in accordance with the fee
schedule set forth in Exhibit B Any Additional Work authorized by the City
pursuant to Section 1.4 will be compensated in accordance with the fee schedule
set forth in Exhibit B.
4.0 Method of Payment
4.1. For non - contingent compensation and reimbursement of authorized
expenses, Consultant shall submit to City monthly invoices . Such invoices shall
be submitted within 15 days of the end of the month during which the services
were rendered and shall describe in detail the services rendered during the
period, the days worked, number of hours worked, the hourly rates charged, and
the services performed for each day in the period. City will pay Consultant within
30 days of receiving Consultant's invoice. City will not withhold any applicable
federal or state payroll and other required taxes, or other authorized deductions
from payments made to Consultant.
4.2. Contingent payments shall be based on New Revenue actually
received by the City as defined in Exhibit B. City shall make such contingent
payments to Consultant within 30 days of the end of each City fiscal quarter and
shall provide a detailed calculation, source, and description of each and every
New Revenue paid City during the preceding calendar quarter. Upon reasonable
written request by Contractor, City shall meet with Contractor to provide
documentation for the amounts paid to Contractor. This obligation to meet and
provide documentation shall survive the termination or expiration of this
Agreement for two (2) City fiscal years following the final payment from City to
Consultant as set forth in Exhibit B. City will not require Consultant's invoice, or
withhold any applicable federal or state payroll and other required taxes or other
authorized deductions from payments made to Consultant. At the end of each
calendar year during the Term of this Agreement, Consultant and City shall meet
to ensure that Contingent payments during the preceding year have been
correctly paid and to determine any overpaid amount that should be reimbursed
to the City or underpaid amount due to Consultant.
4.3. Upon 24 -hour notice from the City Consultant shall allow City or
City's or its agents or representatives to inspect at its offices during reasonable
business hours all records, invoices, time cards, cost control sheets,
correspondence and other records maintained by Consultant in connection with
this Agreement. City's rights under this Section 4.3 shall survive for four years
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following the City's final payment of New Revenue to Consultant as set forth in
Exhibit B.
5.0 Termination
5.1. This Agreement may be terminated by City, without cause, or by
Consultant based on reasonable cause, upon giving the other parry written notice
thereof not less than 30 days prior to the date of termination.
5.2. This Agreement may be terminated by City upon 10 days' notice to
Consultant if Consultant fails to provide satisfactory evidence of renewal or
replacement of comprehensive general liability insurance as required by this
Agreement at least 20 days before the expiration date of the previous policy.
5.3. Notwithstanding Sections 5.1 and 5.2, City's obligations to pay
Consultant as set forth in Exhibit B shall survive the Term and termination of this
Agreement, with the exception of fees for additional authorized services and
authorized expenses. Revenue that is first received by the City after the date of
any termination or expiration of this Agreement is not subject to payment to
Consultant under Exhibit B.
6.0 Party Representatives
6.1. The City Manager is the City's representative for purposes of this
Agreement.
6.2. Greg Kirste is the Consultant's primary representative for purposes
of this Agreement.
7.0 Notices
7.1. All notices permitted or required under this Agreement shall be
deemed made when personally delivered or when mailed 48 hours after deposit
in the United States Mail, first class postage prepaid and addressed to the parry
at the following addresses:
To City: City of Seal Beach
211 8th Street
Seal Beach, California 90740
Attn: City Manager
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To Consultant: 10 Westgate
Laguna Niguel, CA 92677
7.2. Actual notice shall be deemed adequate notice on the date actual
notice occurred, regardless of the method of service.
8.0 Independent Contractor
8.1. Consultant is an independent contractor and not an employee of
the City. All services provided pursuant to this Agreement shall be performed by
Consultant or under its supervision. Consultant will determine the means,
methods, and details of performing the services. Any additional personnel
performing services under this Agreement on behalf of Consultant shall also not
be employees of City and shall at all times be under Consultant's exclusive
direction and control. Consultant shall pay all wages, salaries, and other
amounts due such personnel in connection with their performance of services
under this Agreement and as required by law. Consultant shall be responsible
for all reports and obligations respecting such additional personnel, including, but
not limited to: social security taxes, income tax withholding, unemployment
insurance, disability insurance, and workers' compensation insurance.
8.2. Consultant shall indemnify and hold harmless City and its elected
officials, officers, employees, servants, designated volunteers, and agents
serving as independent contractors in the role of City officials, from any and all
liability, damages, claims, costs and expenses of any nature to the extent arising
from Consultant's personnel practices. City shall have the right to offset against
the amount of any fees due to Consultant under this Agreement any amount due
to City from Consultant as a result of Consultant's failure to promptly pay to City
any reimbursement or indemnification arising under this Section.
9.0 Subcontractors
No portion of this Agreement shall be subcontracted without the prior written
approval of the City. Consultant is fully responsible to City for the performance of
any and all subcontractors.
10.0 Assignment
Consultant shall not assign or transfer any interest in this Agreement whether by
assignment or novation, without the prior written consent of City. Any purported
assignment without such consent shall be void and without effect.
Notwithstanding the foregoing, Consultant's interest in payments set forth in
Exhibit B shall inure to Consultant's heirs to the extent they are due.
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11.0 Insurance
11.1. Consultant shall not commence work under this Agreement until it
has provided evidence satisfactory to the City that Consultant has secured all
insurance required under this Section. Consultant shall furnish City with original
certificates of insurance and endorsements effecting coverage required by this
Agreement on forms satisfactory to the City. The certificates and endorsements
for each insurance policy shall be signed by a person authorized by that insurer
to bind coverage on its behalf, and shall be on forms provided by the City if
requested. All certificates and endorsements shall be received and approved by
the City before work commences. The City reserves the right to require
complete, certified copies of all required insurance policies, at any time.
11.2. Consultant shall, at its expense, procure and maintain for the
duration of the Agreement, insurance against claims for injuries to persons or
damages to property that may arise from or in connection with the performance
of this Agreement. Insurance is to be placed with insurers with a current A.M.
Best's rating no less than A:VII, licensed to do business in California, and
satisfactory to the City. Coverage shall be at least as broad as the latest version
of the following: (1) General Liability: Insurance Services Office Commercial
General Liability coverage (occurrence form CG 0001); (2) Automobile Liability:
Insurance Services Office Business Auto Coverage form number CA 0001, code
1 (any auto); and, if required by the City, (3) Professional Liability. Consultant
shall maintain limits no less than: (1) General Liability: $2,000,000 per
occurrence for bodily injury, personal injury and property damage and if
Commercial General Liability Insurance or other form with a general aggregate
limit is used, either the general aggregate limit shall apply separately to this
Agreement/location or the general aggregate limit shall be twice the required
occurrence limit; (2) Automobile Liability: $1,000,000 per accident for bodily injury
and property damage.
11.3. The insurance policies shall contain the following provisions, or
Consultant shall provide endorsements on forms supplied or approved by the
City to state: (1) coverage shall not be suspended, voided, reduced or canceled
except after 30 days prior written notice by certified mail, return receipt
requested, has been given to the City; (2) any failure to comply with reporting or
other provisions of the policies, including breaches of warranties, shall not affect
coverage provided to the City, its directors, officials, officers, (3) coverage shall
be primary insurance as respects the City, its directors, officials, officers,
employees, agents and volunteers, or if excess, shall stand in an unbroken chain
of coverage excess of the Consultant's scheduled underlying coverage and that
any insurance or self - insurance maintained by the City, its directors, officials,
officers, employees, agents and volunteers shall be excess of the Consultant's
insurance and shall not be called upon to contribute with it; (4) for general liability
insurance, that the City, its directors, officials, officers, employees, agents and
volunteers shall be covered as additional insureds with respect to the services or
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operations performed by or on behalf of the Consultant, including materials, parts
or equipment furnished in connection with such work; and (5) for automobile
liability, that the City, its directors, officials, officers, employees, agents and
volunteers shall be covered as additional insureds with respect to the ownership,
operation, maintenance, use, loading or unloading of any auto owned, leased,
hired or borrowed by the Consultant or for which the Consultant is responsible.
11.4. All insurance required by this Section shall contain standard
separation of insureds provisions and shall not contain any special limitations on
the scope of protection afforded to the City, its directors, officials, officers,
employees, agents, and volunteers.
11.5. Any deductibles or self- insured retentions shall be declared to and
approved by the City. Consultant guarantees that, at the option of the City,
either: (1) the insurer shall reduce or eliminate such deductibles or self- insured
retentions as respects the City, its directors, officials, officers, employees,
agents, and volunteers; or (2) the Consultant shall procure a bond guaranteeing
payment of losses and related investigation costs, claims and administrative and
defense expenses.
12.0 Indemnification, Hold Harmless, and Duty to Defend
Consultant shall defend, indemnify, and hold the City, its officials, officers,
employees, volunteers and agents serving as independent contractors in the role
of city officials (collectively "Indemnitees ") free and harmless from any and all
claims, demands, causes of action, costs, expenses, liability, loss, damage or
injury, in law or equity, to property or persons, including wrongful death, in any
manner arising out of or incident to any acts or omissions of Consultant, its
employees, or its agents in connection with the performance of this Agreement,
including without limitation the payment of all consequential damages and
attorneys' fees and other related costs and expenses, except for such loss or
damage arising from the sole negligence or willful misconduct of the City. With
respect to any and all such aforesaid suits, actions, or other legal proceedings of
every kind that may be brought or instituted against Indemnitees, Consultant
shall defend Indemnitees, at Consultant's own cost, expense, and risk, and shall
pay and satisfy any judgment, award, or decree that may be rendered against
Indemnitees. Consultant shall reimburse City and its directors, officials, officers,
employees, agents and/or volunteers, for any and all legal expenses and costs
incurred by each of them in connection therewith or in enforcing the indemnity
herein provided. Consultant's obligation to indemnify shall not be restricted to
insurance proceeds, if any, received by Consultant, the City, its directors,
officials, officers, employees, agents or volunteers. All duties of Consultant
under this Section shall survive termination of this Agreement.
13.0 Equal Opportunity
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Consultant affirmatively represents that it is an equal opportunity employer.
Consultant shall not discriminate against any subcontractor, employee, or
applicant for employment because of race, religion, color, national origin,
handicap, ancestry, sex, sexual orientation, or age. Such non - discrimination
includes, but is not limited to, all activities related to initial employment,
upgrading, demotion, transfer, recruitment or recruitment advertising, layoff, or
termination.
14.0 Labor Certification
By its signature hereunder, Consultant certifies that it is aware of the provisions
of Section 3700 of the California Labor Code that require every employer to be
insured against liability for Workers' Compensation or to undertake self- insurance
in accordance with the provisions of that Code, and agrees to comply with such
provisions before commencing the performance of the Services.
15.0 Entire Agreement
This Agreement contains the entire agreement of the parties with respect to the
subject matter hereof, and supersedes all prior negotiations, understandings,
contracts, agreements, or proposals either verbal or written, which shall be null
and void. This Agreement may only be modified by a writing duly- approved and
signed by both parties.
16.0 Severability
The invalidity in whole or in part of any provisions of this Agreement shall not
void or affect the validity of the other provisions of this Agreement.
17.0 Governing Law
This Agreement shall be governed by and construed in accordance with the laws
of the State of California.
18.0 No Third Party Rights
Except as provided herein, no third party shall be deemed to have any rights
hereunder against either parry as a result of this Agreement.
19.0 Waiver
No waiver of any default shall constitute a waiver of any other default or breach,
whether of the same or other covenant or condition. No waiver, benefit, privilege,
or service voluntarily given or performed by a party shall give the other parry any
contractual rights by custom, estoppel, or otherwise.
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20.0 Prohibited Interests; Conflict of Interest
20.1. Consultant covenants that it presently has no interest and shall not
acquire any interest, direct or indirect, which may be affected by the Services, or
which would conflict in any manner with the performance of the Services.
Consultant further covenants that, in performance of this Agreement, no person
having any such interest shall be employed by it. Furthermore, Consultant shall
avoid the appearance of having any interest, which would conflict in any manner
with the performance of the Services. Consultant shall not accept any
employment or representation during the term of this Agreement which is or may
likely make Consultant "financially interested" (as provided in California
Government Code § §1090 and 87100) in any decision made by City on any
matter in connection with which Consultant has been retained.
20.2. Consultant further warrants and maintains that it has not employed
or retained any person or entity, other than a bona fide employee working
exclusively for Consultant, to solicit or obtain this Agreement. Nor has
Consultant paid or agreed to pay any person or entity, other than a bona fide
employee working exclusively for Consultant, any fee, commission, gift,
percentage, or any other consideration contingent upon the execution of this
Agreement. Upon any breach or violation of this warranty, City shall have the
right, at its sole and absolute discretion, to terminate this Agreement without
further liability, or to deduct from any sums payable to Consultant hereunder the
full amount or value of any such fee, commission, percentage or gift.
20.3. Consultant warrants and maintains that it has no knowledge that
any officer or employee of City has any interest, whether contractual, non -
contractual, financial, proprietary, or otherwise, in this transaction or in the
business of Consultant, and that if any such interest comes to the knowledge of
Consultant at any time during the term of this Agreement, Consultant shall
immediately make a complete, written disclosure of such interest to City, even if
such interest would not be deemed a prohibited "conflict of interest' under
applicable laws as described in this subsection.
21.0 Attorneys' Fees
If either party commences an action against the other party, either legal,
administrative or otherwise, arising out of or in connection with this Agreement,
the prevailing party in such litigation shall be entitled to recover from the losing
party all of its reasonable attorneys' fees and costs incurred in connection
therewith.
22.0 Exhibits
All exhibits referenced in this Agreement are hereby incorporated into the
Agreement as if set forth in full herein. In the event of any material discrepancy
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between the terms of any exhibit so incorporated and the terms of this
Agreement, the terms of this Agreement shall control.
23.0 Corporate Authority
The person executing this Agreement on behalf of Consultant warrants that he or
she is duly authorized to execute this Agreement on behalf of said Party and that
by his or her execution, the Consultant is formally bound to the provisions of this
Agreement.
IN WITNESS WHEREOF, the Parties hereto, through their respective authorized
representatives have executed this Agreement as of the date and year first
above written.
CITY OF SEAL BEACH CONSULTANT
0
Attest:
M
M
Jill R. Ingram, City Manager
Name:
Its:
Robin L. Roberts, City Clerk
Approved as to Form:
0
Craig A. Steele, City Attorney
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EXHIBIT A
Consultant shall consult and identify, investigate, and collect New Revenue (as defined
in Exhibit B) involving entities engaged in the production, extraction, transportation,
distribution, storage, and exploration of liquids, solids, and gases including, but not
limited to, water, minerals, crude oil, gas, petroleum, and other hydrocarbon
substances, from and to locations above and beneath the earth's surface, within and
through the City (collectively "Services ").
The term Services shall be divided into the categories of Contingent Fee Services and
Additional Services.
The Term "Contingent Fee Services" includes, and Consultant agrees to perform, the
following:
1. Public Codes Revenue: Examine elements of the Seal Beach Municipal Code,
California Public Resource Code, California Public Utilities Code, California Revenue
and Taxation Code, and other codes, rules, laws, and regulations to identify revenue
opportunities from oil, gas and other hydrocarbon substances and collect New
Revenue.
2. Pipeline Franchises (SBMC § 6.15): Identify, investigate, and collect New
Revenue from pipelines. Investigate and confirm the presence, type and ownership of
water, gas, and hazardous liquid pipelines located in the City's public right -of -ways. For
pipelines requiring a franchise, contact and work with each pipeline owner to collect
taxes and fees.
3. Business Licenses (SBMC § 5.55): Identify, investigate, and collect New
Revenue from oil, gas, and other hydrocarbon substances.
The term "Additional Services" shall include, and Consultant agrees to perform
(when authorized in writing by the City Manager):
1. Investigate and /or benchmark City's Municipal Code to other similarly situated
municipalities, recommend revisions, and assist City in drafting and adopting revisions.
2. Benchmark potential pipeline franchises to other similarly situated municipalities,
recommend franchise and Municipal Code revisions including creating and updating
formulas for revenue, and assist City in drafting, negotiating, and adopting
recommended revisions.
3. Examine production, usage, sales, taxes, and fees, benchmark same to other
similarly situated municipalities, create and update formulas for Business License
revenue, recommend Municipal Code revisions, and assist City in drafting and adopting
recommended revisions.
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4. When requested in writing to do so, assist City Staff in protecting, and
representing City's interests in issues involving pipeline, oil, and gas operations within
and proximate to the City. Provide research, make recommendations, and assist in
developing guidelines, resolutions, and ordinances and negotiating with parties seeking
drilling rights, pipeline franchises, abandonments, seismic testing /surveying /mapping,
and well stimulation permits. Assist in tracking and reporting on local, county, state, and
federal policy related to oil and gas matters that effect the City.
Tangible Deliverables: Consultant shall provide periodic reports of its activities, in a
form and substance to be directed by the City's Director of Finance, to the City at three
(3) months, six (6) months and twelve (12) months following the Effective Date and,
semi - annually each year thereafter during the Term not later than June 30 and
December 30 each year and, from time -to -time as requested by City, Consultant will
provide in- person briefings detailing New Revenue, Consultant's investigations,
findings, and recommendations.
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EXHIBIT B
Consultant shall be compensated as follows:
1. CONTINGENT FEE SERVICES
The City shall pay Consultant for Contingent Fee Services a contingent fee of fifteen
percent (15.00 %) ( "Contingent Fee ") of any and all: one -time and ongoing amounts
found to be due City from any person or entity, from past and future fees, fines, interest,
judgments, payments, penalties, refunds, reimbursements, royalties, taxes, State
apportions, and the like, that are identified by Consultant's Services, approved in
advance by the City Manager for collection by Consultant, and actually received by
City, less the City's costs expended in collecting such revenue including, without
limitation any attorneys' fees and costs (individually and collectively "New Revenue ").
City's obligation to pay Consultant the Contingent Fee for any amount of New Revenue
shall expire immediately following the seventh (7th) anniversary of City's first receipt
each New Revenue payment. City shall not be obligated to pay Consultant any
individual Contingent Fee for more than seven (7) calendar years.
There shall exist no circumstance where payments of New Revenue to City are
apportioned to one Party only. In the event City accepts payments of New Revenue in a
form other than United States currency, then New Revenue shall include the fair market
value (determined either by actual price quote or by taking the average of three
appraisals or independent professional estimates) of all such forms including but not
limited to: i) currency equivalents including but not limited to credits, grants, and loans;
plus ii) payments -in -kind including but not limited to commodities, donations, goods, real
estate, securities, and services; plus iii) community benefits including but not limited to
environmental monitoring, repairs, remediation, emergency services, landscaping,
street improvements, funding for health and welfare, beach, park, parking, pier, pool
and other municipal facility improvements, community special events, and other
community benefits City determines appropriate.
City agrees and acknowledges that Consultant has agreed to perform Services and
accept 15% contingent payments of New Revenue as defined herein on the assumption
that the City will initially pay for reasonable legal costs and permit Consultant to
diligently pursue the collection of any and all New Revenue, unless the City Manager, in
her sole discretion, determines that the costs of collection will not justify the potential
recovery or that pursuit of New Revenue from a particular source is not in the City's best
interest. In any case where the City waives the right to collect a New Revenue source
that has been previously been approved, City shall compensate Consultant for time
expended on the matter at the hourly rate of $200 per hour or portion thereof in 1/4 hour
increments based on contemporaneous timesheet documentation supplied by
Consultant. The City Council will retain control over any legal proceeding filed pursuant
to this Agreement.
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2. ADDITIONAL SERVICES.
For Additional Services as defined in Exhibit A, requested and approved in writing and
in advance by the City Manager or her designee, Consultant shall be paid at a rate of
$200.00 per hour in 1/4 hour increments. Additional Services payments throughout the
Term of this Agreement shall not exceed the sum of fifty thousand dollars ($50,000.00)
in the aggregate.
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S7296- 0001\2174667v2.doc
Attachment "B"
RESOLUTION 6827
A RESOLUTION OF THE SEAL BEACH CITY COUNCIL AWARDING
AND AUTHORIZING THE CITY MANAGER TO EXECUTE A
PROFESSIONAL SERVICES AGREEMENT WITH GREG KIRSTE, DBA
MUNICIPAL PETROLEUM ANALYSTS, FOR CONSULTING SERVICES
RELATED TO POTENTIAL OIL AND GAS REVENUE RECOVERY
WHEREAS, in February 2017 the City of Seal Beach ( "City") sent out a Request for
Proposals ( "RFQ ") to multiple consultants to obtain proposals to conduct of an audit of
potential oil and gas revenue generated within City limits; and
WHEREAS, the City received several proposals in response to the RFQ; and
WHEREAS, Greg Kirste, dba Municipal Petroleum Analysts, is a qualified firm to
provide consulting services related to potential oil and gas revenue recovery;
NOW, THEREFORE, THE SEAL BEACH CITY COUNCIL DOES HEREBY RESOLVE:
Section 1. The City Council hereby awards a professional services agreement
( "Agreement') to Greg Kirste, dba Municipal Petroleum Analysts, for consulting
services related to potential oil and gas recovery generated within City limits, subject
to the financial limitations set forth in the Agreement, and rejects all other proposals.
Section 2. Any revenue recovered through this agreement shall first be used to repay
any funding advanced by the Swimming Pool Designated Fund to pay for the two
additional Police Officers.
Section 3. The City Council hereby authorizes and directs the City Manager to execute
the Agreement on behalf of the City.
PASSED, APPROVED and ADOPTED by the Seal Beach City Council at a regular
meeting held on the 11th day of June, 2018 by the following vote:
AYES: Council Members
NOES: Council Members
ABSENT: Council Members
ABSTAIN: Council Members
Mike Varipapa, Mayor
57 296 -0001 \2189770v2 Am
ATTEST:
Robin L. Roberts, City Clerk
STATE OF CALIFORNIA }
COUNTY OF ORANGE) SS
CITY OF SEAL BEACH }
I, Robin L. Roberts, City Clerk of the City of Seal Beach, do hereby certify that the
foregoing resolution is the original copy of Resolution 6827 on file in the office of the
City Clerk, passed, approved, and adopted by the Seal Beach City Council at a regular
meeting held on the 11 th day of June , 2018.
Robin L. Roberts, City Clerk
-2-
S7296- 0001 \2189770v2.dm
Attachment "C
Municipal Petroleum Analysts
October 12, 2017
Re: City's Strategic Initiative - Oil Revenue Recovery
Honorable Mayor and City Council
City of Seal Beach
211 Eighth Street
Seal Beach, CA 90740
via email
Dear Mayor / Councilmember:
On Wednesday, October 18`s, you will be participating in the City's Strategic Planning
Workshop and may evaluate options to hire an oil revenue recovery consultant(s). Municipal
Petroleum Analysts wishes to be considered for this work. Attached is MPA's comprehensive
proposal that delivers near -term revenue without impacting the City's 2017/18 budget.
MPA is an oil, gas, and pipeline revenue recovery company and is familiar with the City's oil
& gas operations, Municipal Code, and the production, fees, taxes, and regulations of other area
municipalities. For the City of Seal Beach, MPA has already collected oil revenue of more than
$216,000.
I look forward to answering any questions you may have and the successful collection of more
City revenue.
Thank your for your consideration.
Greg Kirste
DATE: October 12, 2017
TO: Honorable Mayor and City Council
FROM: Municipal Petroleum Analysts
SUBJECT: Oil Revenue Recovery — Unsolicited Proposal
INTRODUCTION
This is an unsolicited proposal to collect oil revenue for the City of Seal Beach. This
proposal does not impact the City's 2017/18 budget. Payments made by the City will
be paid from amounts collected.
L�TOY1Z11.191111 7
Seal Beach's oil fields lie primarily to the City's northwest. These fields were first
drilled in the early 1920's and are still producing today. To ensure the safe and fiscally
responsible extraction of mineral resources, the City has memorialized in its Charter,
Municipal Code, Ordinances, and Resolutions the rules and regulations by which all
oil, gas, and pipeline companies must operate.
As part of its regulating duties, the City imposes certain Business License related fees
and taxes ( "revenue ") on oil and gas extraction and transportation. From time -to -time
the City desires to review the revenue it collects. Recently, as part of its strategic goal
to achieve fiscal sustainability, Council directed staff to evaluate the City's oil and gas
revenue.
PROPOSAL
As detailed herein, MPA will evaluate the City's oil, gas, and pipeline operations and
identify new collectable revenue. MPA will be responsible for all facets including
research, financial analysis, legal coordination, Municipal Code revisions and
compliance, and reporting. MPA will also be responsible for collecting all
identified revenue.
Task 1: Municipal Code Revision
1A) Targeted Revision: Chapters 5.55 (Oil & Gas Production) and 6.15 (Pipeline
Franchises) of the City's Municipal Code (together "oil code ") were last adopted in
2004 (ORD 1515). MPA will examine essential sections of the City's current oil code,
benchmark said sections to other similarly situated municipalities, and work with the
City to draft and adopt recommended targeted revisions.
11B) Comprehensive Revision: As an alternative to subtask 1A, MPA will undertake a
broad rewrite of the City's oil code. Revisions may include but are not limited to: types
of permitted drilling methods; well stimulation treatments including acidizing and
hydraulic fracturing; proximity of oil operations to residential areas; abandoned oil
wells and pipelines; public health; and taxes, fees and penalties. MPA will benchmark
the City's current oil code with other similarly situated municipalities and work with the
City to draft and adopt a comprehensive revision, unique to the City's needs.
Task 2: Pipeline Franchises
2A) Oil & Gas: There are a total of ten oil & gas pipelines located within Seal Beach
(excluding historical substructure). Of these, four are no longer in use. Of the
remaining six, two are Common Carriers (Crimson Pipeline and Plains Marketing), one
is a Public Utility (SoCal Gas), and three are Private pipelines (DCOR - two pipelines,
and Seal Beach Gas Processing Ventures aka Breitburn). Based on records, Crimson,
Plains, and Breitburn do not possess pipeline franchises. Crimson's 8 -inch oil
gathering pipeline originates near the City's transfer valve at 15` Street and travels a
mere 1,600ft prior to entering Long Beach. Plains' oil pipeline enters the City's
northern boundary and measures 4,960ft. Breitburn maintains a 4 -inch 5,400ft gas
transmission pipeline originating from their Naval Weapons Station production facility
leading westbound along Bolsa Ave and terminating at Seal Beach Blvd.
Only pipelines located in public right -of -ways pay franchise fees. Fees for privately -
owned pipelines located in public right -of -ways are set by the City's Council (MC 6.15).
Fees for regulated ( "Common Carrier") pipelines located in public right -of -ways are set
exclusively by the California Public Utility Commission (Public Utilities Code, Division
3, Chapter 2, Article 1, Sections 6231 - 6235). MPA will analyze maps and markers to
identify and confirm the presence and type of all pipelines located in the City's public
right -of -ways. For pipelines requiring a franchise, MPA will contact and work with each
pipeline owner to recover all fees and obtain Municipal Code compliance.
2B) Gas Utility: The City granted its first natural gas utility (pipeline) franchise to
Southern Counties Gas Company in 1925 (ORD 118). The City granted Southern
Counties a subsequent (perpetual) franchise in 1965 (ORD 660). Through a series of
mergers, Southern California Gas (SoCal Gas) became the ultimate parent of
Southern Counties. Records indicate the City currently receives approximately
$50,000 per year (% of gross receipts) from SoCal Gas (see "Natural Gas Franchise
Fee "). MPA will work with the City to ensure that this amount is correct and that said
amount is in addition to the City's Natural Gas Utility Users Tax. MPA will assist City to
ensure that "gross receipts" includes all amounts arising from any sale & transportation
of gas for: i) retail use; ii) amounts sold to any electric utility generation customers; iii)
amounts sold to the United States Government (Naval Weapons); and amounts of gas
transported, supplied, and distributed, but not sold to the City or its inhabitants.
2C) Water Utility: The City supplies the majority of its own water. However, by way of
its 1967 annexation (annexation 66 -1), a portion of Golden State Water's Los Alamitos
Service Area (Rossmoor) was incorporated into the City. MPA will determine if GSW's
pipelines are located in the City's public right -of -way, and if so, MPA will contact and
work with GSW and the City to recover any fees and obtain Municipal Code
compliance.
Task 3: Directional Drilling
3A) Seal Beach Oil Field: The City's Municipal Code requires all parties producing oil
and gas pay certain production fees. To that end MPA has reviewed maps, drilling
logs, production reports, etc. pertaining to twenty -one oil wells located on the Long
Beach side of the Seal Beach Oil Field. In each case, MPA concluded the well was
bottomed within the jurisdictional boundary of Long Beach (i.e. not directionally drilled
and bottomed in Seal Beach).
Synergy Oil (Beach Oil Minerals Partners) is now in the long process of redeveloping
its oil operations located on the Long Beach side of the Seal Beach Oil Field (adjacent
to the City's Hellman Properties). Synergy's work will include the eventual
abandonment of the subject twenty-one wells (fifty -three wells total), consolidation of
its oil production area, and the directional drilling of new oil wells from the "Pumpkin
Patch" east of the Market Place Shopping Center. On behalf of the City, MPA will
monitor, attend meetings, evaluate Synergy's oil field development, and confer with
Hellman Properties on an as- needed /requested basis.
Task 4: New Revenue Sources
4A) Gas Fee: In 2016, 247,059,000 cubic feet of un -taxed gas was extracted from the
City. This is the energy - equivalent of 42,590 barrels of oil or 11% of the City's Total
Extracted Energy.
Although the City's Municipal Code provides for the taxation of gas and other
"hydrocarbon substances", the City does not currently tax gas (wet or dry) produced by
Hellman, DCOR, or Breitburn — but does tax gas produced on the City -owned lease at
the rate of 17.0 %.
Nationally, municipal gas taxes range between 1% to 10 %. For example, Huntington
Beach imposes a $0.04 ( -1.2 %) tax on each thousand cubic feet of retailed gas (MC
5.32.030 B(3)). La Habra Heights' gas tax is $0.10 ( -3.3 %) (MC 3.6.60 B(c)). MPA will
work with the City to analyze the City's current (wet & dry) gas production, usage, and
retail sales, benchmark municipal rates, propose code language, and, if approved,
assist in navigating the implementation of a wellhead gas fee.
4B) MPA Identified New Sources: MPA has independently identified new sources of
City oil & gas revenue. To date, MPA has spent over 275 hours and estimates it's work
will consume an additional 1,500 hours. MPA is sufficiently certain these new sources
will produce millions of dollars in new City revenue. MPA will work with the City to
collect this revenue from these new sources.
COMPENSATION
Provided the type, complexity, and uncertainty of the work, MPA recommends the City
fund this proposal on a contingent -fee basis. However, at its discretion, the City may
fund any subtask using any of the following three compensation methods:
RECOMMENDED: CONTINGENT FEE COMPENSATION'
For the work proposed, the City shall pay MPA on a contingent -fee basis. MPA's rate
is 15.00% percent of all revenue collected. No payments will be made to MPA if
revenue is not collected.
ALTERNATE #1: HOURLY COMPENSATION
For the work proposed, the City shall pay MPA on a per -hour basis. MPA's per -hour
rate is $200. Prior to beginning each subtask, MPA will provide City with its estimated
hours. The amount paid MPA shall be independent of revenue collected.
ALTERNATE #2: FIXED PRICE COMPENSATION
For the work proposed, the City shall pay MPA on a fixed -price basis. MPA's fixed
price is $18,000 per subtask. All amounts paid MPA shall be independent of hours
spent and revenue collected.
In addition to compensation, the City shall pay MPA a fixed monthly fee of $975 over
the contract term. Additional work outside the scope will be billed at $200 per hour.
The City shall pay pre- approved expenses, if any.
Exhibit A lists examples of Contingent Fee Compensation contracts
2 Due to work type, Subtask 1 B is limited to Hourly compensation
3 If Fixed- Price, 3A & 4B are $10,000, and $355,000 respectively
TANGIBLE DELIVERABLES
For each completed subtask, MPA will provide City with an in- person briefing. MPA will
also provide City with a final- contract report summarizing its findings, conclusions, and
recommendations.
NON - EXCLUSIVE PROPOSAL
This proposal is non - exclusive. At the City's discretion, the City may choose to
contract MPA's proposed work (or parts thereof) to any other third -party.
ABOUT MPA
MPA is an oil, gas, and pipeline investigation, auditing, and revenue recovery
company. For the City of Seal Beach, MPA has already collected more than
$216,000 in unpaid oil revenue. The company is familiar with and has data related to
the City's oil & gas, reserves, pipelines, drilling, wells, and exploration and production
operators. MPA is also familiar with the City's Municipal Code and the oil & gas related
regulations of other Southern California municipalities.
Thank you for your consideration.
Respectfully,
Greg Kirste
Principal
Municipal Petroleum Analysts
EXHIBIT A
EXAMPLES
of
CONTINGENT FEE
REVENUE RECOVERY
MUNICIPAL CONTRACTS
City
Vendor
Contract
No.
Fee / Tax
Recovered
Hourly
Rate
Monthly
Fee
MuniServices
32329
Sales & Use
$250
$800 r r'
Long Beach
HdL
32675
Property
$195
$0
MuniServices
C- 123663
Property
$0
$0
Los Angeles
MuniServices
C- 120292
Occupancy
$0
$0
MuniServices
C- 120359
Sales & Use
$0
$0
MuniServices
C- 125598
Business Lic
$0
$0 • r',
Huntington Beach
HdL
16 -5279
Sales & Use
$250
$850 r'.
Redondo Beach
HdL
Aug '16
Property
$225
$1,450
Newport Beach
HdL
C -5297
Property
$225
$1,400 r'•
HdL
C -5274
Sales & Use
$225
$800 r'•
Los Alamitos
HdL
Sep'99
Utility Users
$160
$0 I' •
HdL
Aug'05
Property
$420 r'•
Santa Monica
MuniServices
SR200 -004
Business Lic
K, , G,
Manhattan Beach
HdL
2015
Property
$225
�'•
DRAFT PROPOSAL AND SCOPE OF WORK
FOR CONSULTING SERVICES
ANALYSIS OF CITY MUNICIPAL CODES, PIPELINE AUDITS, SLANT
DRILLING EVALUATION, AND CRUDE OIL REVENUE RECOVERIES
Submitted to
The City of Seal Beach
Prepared by:
Millennium Consulting, LLC
4401 Hazel Ave. Suite 255
Fair Oaks, California 95628
(916) 966 -0662
19
TABLE OF CONTENTS
I. STATEMENT OF WORK
A. Analysis
B. Reporting — Findings and Conclusions
C. Statement of Confidentiality
II. COST PROPOSAL
I. STATEMENT OF WORK
A. Analysis - The goals of this analytical review are to assist The City of Seal Beach
(Seal Beach): 1) Determine and document revisions to the City's Municipal code,
Section 6.15 for Pipeline Franchises and Section 5.55 Oil and Gas Production to
strengthen its ability to monitor and collect all revenues due; 2) Review all
pipeline franchise agreements and fees. Independently compute and compare
payments made to ensure compliance with the above municipal codes for all
applicable periods; 3) Identify any slant drilling and/or line wells that are not
reporting production and paying the applicable fees to Seal Beach; 4) Identify all
additional revenue opportunities related to oil and gas production; 5) Assist the
City in designing and building a billing system and an annual review function of
crude oil volumes, values, and fees.
Accordingly, Millennium proposes to provide the following consulting services to
Seal Beach:
Project 1: Review, revise, and update the City of Seal Beach Municipal Code to
reflect current business trends and best practices in computing, compiling,
reporting, taxing, collecting, and reviewing fees associated with crude oil and
natural gas.
• Millennium will interview Seal Beach management to determine its
needs to update Municipal Code 6.15 and 5.55 to enable the City to have
better authority to oversee and enforce these codes.
• Further, review existing codes to determine the need to provide the City
the authority to impose interest and penalties for failure to comply with
code requirements.
• Assist the City in drafting any needed revisions or change to the
Municipal code
80 HOURS * $200/hour = $16,000
Project 2: Review all pipeline franchise agreements, fees due and payments made to
ensure compliance with the above municipal codes and collection of all related
revenues for prior periods and on an ongoing basis annually.
• This project involves reviewing the identified companies, as follows;
Breitburn, Crimson, DCOR, Golden State Water, Hellman, Pacific Terminal,
and Plains Marketing.
• Review each agreement and payments, monthly by the different type of fees
due to the City.
• The review periods are 2010 through 2017.
130 HOURS PER COMPANY = $26, 000/ COMPANYfor the noted review period actual
hours will only be billed as used. Ongoing period estimated hours should be less per
company.
Project 3: Evaluate available information to identify companies that may be slant
drilling and/or line wells that may draining City reserves that are not reporting
production and/or paying required fees to Seal Beach
• Obtain and review available production area maps, permits, and company
production reports.
• Identify new wells drilled in surrounding areas during the review period
• Conduct production site inspections to identify potential slant or line wells.
120 HOURS = $24,000
Project 4: Identify additional revenue opportunities for Seal Beach related to oil
and gas production within its boundaries
• Identify any non - paying operators of crude oil in the city other than those
previously listed.
• Identify any non - paying transporters of crude oil in the city other than those
previously listed,
• Identify any other potential revenue streams not currently in place.
This project is dependent on opportunities identified, if any. Initial survey and research we
estimate 30 hours = $6,000
Project 5: Assist the City to design and build a billing system thatprovides the
ability to:
• Bill operators and transporters on a periodic basis consistent with the provisions
of the Municipal Codes.
• Conduct annual reconciliations /reviews of production amounts, commodity
values, and fees collected with source documentation
• Identify late or non - payment of fees
• Update fee schedules for changes in the producer price index
80 HOURS = $16,000
Proiect 6: Additional items noted by Millennium that can aid the City:
• Review of Gas Tax Revenue fund
• Tidelands Review; MC to assist the City to ensure that is receiving all
revenues due pursuant to State Public Resource Codes.
• Indirect Cost Allocation Proposal
Hours and Cost to be determined
B. Reporting — Findings and Conclusions
At the completion of each of the identified projects or at other intermediate points
as appropriate, Millennium will provide reports summarizing its findings and
conclusions.
Millennium will limit its procedures to analytical work and related calculations,
and no additional work will be performed to verify the accuracy of information and
documents provided by Seal Beach to facilitate Millennium's work. Accordingly,
this work will be less extensive than an audit made in accordance with Generally
Accepted Auditing Standards (promulgated by the American Institute of Certified
Public Accountants), Government Auditing Standards (issued by the General
Accounting Office), or Standards for the Professional Practice of Internal Auditing
(issued by the Institute of Internal Auditors).
This contract will terminate, unless otherwise agreed to by both Millennium and
Seal Beach, at the time final payment(s) is /are received by Millennium for all of its
services performed. Any revisions to this contract must be made in writing and
evidence the consent of both parties.
C. Statement of Confidentiality
See ATTACHMENT #1
II. Cost Proposal
For consulting services provided by Millennium relative to the identified projects
and estimated hours, Seal Beach will pay Millennium as noted in the attached PSA
document provided by Seal Beach. Millennium will submit amounts monthly and
approved by Seal Beach. Additional travel expenses will include airfare, hotel, and
rental car for approved trips.
Agreed to this day:
On behalf of City of Seal Beach
(Name)
(Signature)
(Title)
On behalf of Millennium Consulting, LLC
(Name)
(Signature)
(Title)
Attachment 1 — Confidentiality Agreement
Attachment 2 - PSA
Proposal Submitted to the
U I
For an Audit of Oil Revenue
And Related Tasks
Prepared by
Donald D. Clarke & William Greene
9556 Flower St. #5
Bellflower, CA 90706
562 - 212 -9934
Ms. Victoria L. Beatley May 19, 2017
Director of Finance /City Treasurer
City of Seal Beach - 211 Eighth Street
Seal Beach, CA 90740
Dear Ms. Beatley:
Thank you for the opportunity to propose assistance to the City with an audit of
its oil revenues and related tasks including an update of municipal codes for pipeline
franchises and business licenses, pipeline agreements, payments and fees, identification
and monitoring of potential slant drillers, and identification of revenue recovery
opportunities.
We bring extensive qualifications and experience in oil and gas consulting to you
for the performance of these tasks and as oil and gas advisors. Don Clarke was the
geologist for the City of Long Beach for 24 years, and have since consulted over the past
5 years on leases in Seal Beach, served as oil and gas advisor for Newport Beach,
Huntington Beach, and other cities, have published extensively, and am a nationally
recognized expert on oil and gas issues. I hold a Ph.D. from Harvard focusing on oil and
gas companies, is a CPA in California, was an oil and gas expert at Deloitte, designed and
implemented THUMS information systems, and have performed similar work to what
you require annually for the past 9 years for the City of Beverly Hills. Our staff are also
similarly well qualified. We have been business partners for many years.
We are proposing a project to accomplish specific tasks with limited scope that
will update the items you have identified above and allow you to identify opportunities
for additional revenue recovery. Although audit work must be one on a time and
materials basis, we have tried to estimate reasonable budgets for each task that will
accomplish what you want. And we know that you will find that our professional rates
are reasonable. In the event the City approves a not -to- exceed budget different from
our estimates, we will not exceed it without your approval.
We look forward to the opportunity to work with you. Please direct any
questions on our proposal to me or to Don Clarke.
Sincerely,
oY &' w k-
William N. Greene
909 -510 -1053
Contents
I. Work Proposed
A. Scope of Services
B. Approach to Each Task
C. Time Estimates
D. Reporting of Results
II. Qualifications
A. Donald D. Clarke
B. William Greene
C. Staff
III. Cost Estimate
A. Hourly Rate Schedule
B. Cost Estimate
I. Work Proposed
Including Scope of Services, Approach to Each Task, Time Estimates, and
Reporting of Results
I.A. Tasks 1 & 2
You have requested that your consultant:
1. "Update the City's Municipal Code with regard to Pipeline Franchises,
Section 6.15," and
2. "Update the City's Municipal Code with regard to Business Licenses and
Regulations, Section 5.55 Oil and Gas Production,"
We would propose to do this as follows:
1. Review the City's Municipal Codes for Pipeline Franchises, Section 6.15
and Business Licenses and Regulations, Section 5.55 Oil and Gas Production.
2. Compare the Seal Beach Municipal Code to those of approximately 3 -5
similar cities with which we are familiar who have recently updated their comparable
code
3. Draft updates to the Seal Beach Municipal Code.
4. Review these updates with City officials and legal counsel and revise as
appropriate. Our estimate includes approximately 3 such meetings.
5. Submit a final draft of proposed Municipal Code updates to the City for
adoption as the City determines appropriate.
For these tasks we estimate a budget of approximately 100 hours will be
required.
I. Work Proposed
I.B. Task 3
For the third task you have requested that your consultant
Audit all Pipeline Franchise agreements, fees, and payments to ensure compliance
with the current Municipal Code,
We would propose to do this as follows:
1. Review all existing records possessed by the City for each company for
the past 3 years to include Pipeline Franchise agreements, fees, and payments and
correspondence.
2. We understand that there may be as many as 10 companies who operate
or have operated pipelines in Seal Beach including Breitburn, Plains, Socal Gas, Hellman,
Crimson, and others. These companies have also changed ownership and assets in the
past several years. From the City's records and discussions with relevant parties we will
need to identify and document all companies who should have paid fees to the City.
3. In the event that records are incomplete or not in agreement, we will
probably need to contact and confirm with each of the pipeline companies the data we
obtain from the City and ask them to supply any missing data. We anticipate that this
will require a written introduction and authorization by the City to these companies to
examine their records and discuss such matters with them.
4. The results of these audits will then be drafted into a report covering for
each company our findings on agreements, fees, payments and compliance with Seal
Municipal Code.
5. We would then submit the draft audit report to the Finance Director for
review, revision, and acceptance.
As we know little at present about the complexity or state of these records, it is
difficult to estimate accurately the time required. But we estimate approximately 150
hours for the 3 year period included in our scope under the assumption that all data and
personnel needed are readily available. Otherwise additional costs would be incurred.
I. Work Proposed
I.C. Task 4
For the fourth task you have requested that your consultant
"Identify potential slant drillers and propose a method for monitoring any slant
drilling occurring in the City"
We would propose to do this as follows:
1. Loss of revenue from slant or directional drilling can occur under a
number of circumstances. Our understanding is that the City is not a royalty or
overriding royalty holder of mineral rights on leases within its boundaries. We would
first need to identify the circumstances under which this could occur in Seal Beach.
2. Next we would identify from City boundaries, leases, and geology, the
specific locations where a lease violation might be likely to occur within the City and the
parties involved.
3. Then we would examine DOGGR (Division of Oil, Gas, and Geothermal
Resources) the specific wells that might be involved including their surface locations,
drilling coordinates, geology, depths and reservoirs with production completions and
bottom hole locations as well as any redrills, recompletions, or other well file data that
might suggest the possibility of crossing a lease boundary.
4. Then we would approach the companies involved to confirm our findings
of any potential problems or lack thereof for each well, including the data above and
any other evidence from production records such as DOG110's that slant drilling could
or did occur (or did not).
5. We would prepare a report on our findings detailing where the potential
exists slant drilling, and any evidence as to whether it has or has not occurred, for
relevant existing wells. As part of this report we would propose a method to monitor
slant drilling for existing and future wells or drilling operations. Thus the analysis would
address conditions for existing wells and the method would cover future drilling activity.
For this task we estimate that approximately 150 hours would be required.
I. Work Proposed
I.D. Task 5
For the fifth task you have requested that your consultant
"Determine revenue recovery opportunities identified in the scope of work."
We would propose to do this as follows:
1. Many issues arise in the course of a wide ranging review of a City's oil
properties, accounting, and revenues. Some of these opportunities have the potential
for additional revenue recovery. Others are also valuable for a variety of other reasons.
We would first identify from the tasks above all of the issues or opportunities that may
be of value to the City.
2. We would then suggest a discussion or briefing to appropriate City
representatives of all of the issues or opportunities found.
3. Those which appear to the City to have high value for revenue recovery
or other reasons or are of further interest we would then document in a report of
findings and recommendations for further action by the City.
4. This report would be then reviewed with the City as our final product
from this project.
For this task we would estimate approximately 150 hours to be required.
Il. Qualifications
A. Don Clarke
A resume for Donald D. Clarke is attached.
Don has been working on the Seal Beach oil field in Seal Beach for over 5 years.
He did geology on the Hellman properties and the Bryant Lease. He was part of the
negotiations for the 3D seismic shoot that Synergy proposed. Don worked with DOGGF
on the permitting in Seal Beach. He worked on the last two oil wells drilled in Seal
Beach.
Don worked as a consultant for Occidental Petroleum on the Huntington Beach
oil field and the Wilmington oil field. He worked for Signal Hill Petroleum on the Long
Beach oil field. He also worked on the West Newport oil field for Sampson (City of
Newport Beach). He worked for 6 years at the California State Lands Commission on
offshore oil fields as a geologist and reservoir engineer. Don worked for 24 years at the
City of Long Beach (City Geologist). The focus was on the Wilmington oil field where he
was in charge of the geology for a $4 billion equity determination. For the city he also
worked with the Planning and Building Department on fault hazard (Alquist- Priolo fault
hazard zones). He was also significantly involved with Department of Energy cost share
projects and the 1995 seismic shoot in Long Beach Harbor.
Don has done work for the Cities of Hermosa Beach and Newport Beach and is
the petroleum advisor to the City of Beverly Hills.
Don has received many awards from his professional organizations and has
served on two National Academy of Science's Committees. He currently is invited to
Washington DC twice a year by the AGI to help establish what the critical issues are in
the geosciences for the US Congress.
Don has published over 60 articles and guidebooks. Most were on local geology
and engineering. He has appeared as an expert in the movie "A Crude Awakening ", on
the National Geographic show "A Barrel of Oil ", the Canadian show Trashopolis, VBS
Television show "LA's Hidden Oil Wells ", and numerous media interviews.
RESUME OF
DONALD DEAN CLARKE
5838 Graywood Ave.
Lakewood, CA 90712 -1128
Cell:(562) 212 -9934
POSITION: Consulting Geologist
2005 - Present Client list:
Tidelands Oil Production Company
Occidental Petroleum
California Resources, Corp.
Signal Hill Petroleum
Hellman Properties, LLC
Emerald Energy
City of Beverly Hills
City of Hermosa Beach
City of Newport Beach
Mid Con Energy
Glamour Magazine
GeoMechanics Technologies (Terralog)
Woodward and Clyde
Imperial Irrigation District
California Consulting Group International
Geopantech
Allenco
Cooper and Brain, Inc.
Geology Instructor, University of Southern California. Teach Graduate
Petroleum Geology. Compton Community College. Taught freshman and
sophomore geoscience classes for 14 years.
BUSINESS
EXPERIENCE: Forty -one years' experience in petroleum geology and reservoir engineering.
Work includes structure, fault surface, and isochore map construction;
electric log analysis, oil /water contact determination, geophysical
interpretation, in -zone well placement, wildcat exploration, reservoir
characterization, sand volume determination (net pay), reservoir modeling,
ground elevation stability and modeling, and geological field mapping. High
technology computer techniques have been developed and used. Most of
this work involved working with and coordinating teams of professionals.
Tools: Geographix, Decision Space
EDUCATION: B.S. Geology, 1972, California State University Northridge
33 units graduate work in geology in the Joint Masters Consortium, CSUN,
CSULA, and CSULB.
WORK
EXPERIENCE: CITY OF LONG BEACH - Department of Oil Properties, Long Beach,
California
1981 -2004 Division Engineer: Lead a professional geological staff and direct the
activities of sub - professional assistants. Co -chair the Geologic Team
through which the activities of nine geologists are directed for the Long
Beach Unit. Served as a member of the Voidage Task Force in an effort to
successfully balance injection and production. Served as the lead and
coordinator and co- author for the DOE cost share proposals. Against great
odds we won two of the three proposals that were submitted. This will bring
ten million dollars into the unit! Currently serve on the technical steering
committees for the DOE sponsored projects. Served as a member of the
Logging Cost Reduction Task Force. Primary responsibilities include the
monitoring of and control of oil field induced subsidence. Activities include
conducting semi - annual elevation surveys and producing reports on the
surveys, coordinating with the field contractors the necessary actions to
reduce or eliminate negative ground movement. Work closely with the
reservoir section and the field contractors to provide geological support to the
reservoir engineers. This work includes map making (structure, fault surface,
isochore, net -pay) log correlation and analysis and reservoir characterization.
Geological work is provided for the Wilmington Oil Field, the Long Beach Oil
Field, Recreation Park Oil Field, City -Wasem Lease, the Seal Beach Oil Field
and the Airport Oil Field. I serve as the Cities representative to the
Petroleum Technology Transfer Council an organization that is federally and
state funded with the purpose of encouraging oil development in California.
Non - petroleum work includes geohazards, fault hazards and seismicity in
Long Beach. Within the City of Long Beach, I work closely with the Planning
and Building Department, the City Engineers, the harbor Department, the
Redevelopment Agency, the City Council and the Health Department.
Senior Geologist: Lead a professional staff of two geologists and directed
the activities of the Geological and Geological Data Subcommittees of the
Equity Committee of the Long Beach Unit. Directed geological activates of
geologists from State Lands Commission, THUMS, and occasionally ARCO.
As Chair of the Long Beach Unit Computer Mapping Committee, I oversaw
computer mapping in the Unit. Instrumental in the selection and
implementation of computer hardware and software purchased by the Long
Beach Unit. Performed difficult geologic work that includes subsurface
geological studies designed to determine the structural and stratigraphic
relationships and reservoir rock properties so that field development can be
optimized and Unit participation can be determined. Primary petroleum work
assignments include Long Beach Unit, Non -LBU Wilmington Oil Field, Long
Beach Oil Field, Recreation Park Oil Field, City -Wasem Field, and the Airport
Oil Field. Primary non - petroleum work assignments include fault hazards in
Long Beach, Light Rail project, subsidence abatement and public relations.
1974 -1981 STATE LANDS COMMISSION, Long Beach, California
Senior Geologist: Made subsurface geological studies and prepared
geological reports on the Long Beach Unit. Represented the State Lands
Commission at Unit management, engineering and geologic meetings.
Provided the reservoir staff and management with geological assistance on
difficult technical problems. Planed, organized and directed the work of
sub - professional assistants engaged in the work of data preparation and
drafting. Served as a member of the Long Beach Unit Geology and Sand
Volume Subcommittees.
Associate Mineral Resources Engineer: Independently performed difficult
engineering and geologic work. Made subsurface geological studies
designed to determine conformance with oil operation requirements. Made
oil field operations inspections. Prepared and reviewed reports on the
possible productivity of State owned lands. Performed engineering
calculations including the computation of changes in the State's participation
in oil field Unit operations. Prepared and interpreted geologic and
engineering reports, maps, property descriptions and statistical data relating
to oil operations. Planed, organized and directed the work of sub -
professional assistants engaged in the work of data preparation. Furnished
assistance on difficult technical problems. Responsible for the development
of highly specialized information relating to the production of oil.
Represented the State Lands Commission at Unit management, engineering
and geologic meetings. Prepared geologic and engineering articles for
publication concerning subjects related to oil. Acting section head for
geology, Served as a member of the Long Beach Unit Geology and Sand
Volume Subcommittee.
Energy and Mineral Resources Engineer, Range B: Performed
intermediate engineering and geologic work of average difficulty on a semi -
independent basis. Interpreted and constructed geological and engineering
maps and graphic statistical data. Assisted reservoir engineers and senior
geologists calculate oil and gas reserves and perform the engineering
analyses necessary to make proposals to drill new wells. Reviewed
environmental impact statements. Prepared geologic and engineering
reports, maps, cross - sections, graphs and other data relating to oil.
Prepared subsidence maps, cross - sections, and graphs.
Energy and Mineral Resources Engineer, Range A: Assisted engineers of
higher level by performing less responsible engineering work. Prepared
reports on lands under applicable for offshore oil extraction leases, and
determination of oil reserves. Collected statistical data and prepared maps,
graphs, and reports.
CAREER
ACHIEVEMENTS: California Registered Geologist #3583
Texas Professional Geoscientist #4860
Developed computer mapping procedures for LBU Equity determination
Chairman, LBU Equity Geologic Subcommittee
Chairman, LBU Equity Geologic Data Subcommittee
Chairman, LBU Equity Sand Volume Subcommittee
Chairman, LBU Computer Committee
Co- chairman, LBU Geologic Committee
General Chairman, 1993 Pacific Section AAPG Annual Meeting in Long
Beach.
Co- Chairman, 1998 Cordilleran Section of the Geologic Society of America
annual meeting in Long Beach.
Co- Chairman of the joint annual meeting of the Western Region of the
Society of Petroleum Engineers and the Pacific Section of the American
Association of Petroleum Geologists in Long Beach in the year 2000.
President, Los Angeles Basin Geologic Society, 1997 -2001
PTTC Steering Committee, Western Region
DOE Class projects Steering Committees (both near -term and mid -term)
National Research Council Committee on The Preservation of Geoscience
Data and Collections, 2001 -2002
National Research Council Committee on Induced Seismicity Potential in
Energy Technologies, 2011 -2012
AAPG Distinguished Lecturer on Ethics, 2014 -2015
COMMUNITY
SERVICES: Center for Studies of Los Angeles Basin Subsurface Geology;
Organizing Committee and Director
Curriculum Review Board for the Earth Science Department at CSU
Northridge.
Science Advisory Board at Milliken High School in Long Beach.
Youth Motivation Task Force; Give motivational talks to middle school and
high school students.
Lectures; give talks on geology to local community organizations, e.g. Long
Beach Women's Club, Realtor's associations, Desk and Derrick Club,
scouting groups, elementary schools, senior groups, docent groups and rock
clubs.
Science and Math Associates, Long Beach City College; President
Community Outreach; Through the COMET program teach high school
teachers and students about petroleum geology.
Facility tours; Conduct oil island and facility tours for visiting international
dignitaries and scientists, universities, civic groups, and professional
associations
Dibblee Geological Foundation; Vice president
Orange County Engineering Council; Vice president
AWARDS AAPG Life Membership Award, 2014
AAPG House of Delegates Lifetime Membership Award, 2015
AAPG Distinguished Service, 2002
PSAAPG Lifetime Membership, 2003
Adjunct Professor of Geology at California State University, Long Beach
PROFESSIONAL
AFFILIATIONS: American Association of Petroleum Geologists, Chairman of the House of
Delegates, Advisory Council, Delegate, Chairman of the Geotours
Committee, Reservoir Committee; HOD Constitution Committee and HOD
Ways and Means Committee, Resolutions Committee (chairman), AAPG
Data Committee; Division of Environmental
Petroleum Technology Transfer Council, Board of Directors
Induced Seismicity Consortium at USC
Geology Advisory Board, CSUN
Geological Society of America
Society of Petroleum Engineers
American Geophysical Union
American Association for the Advancement of Science
Pacific Section SEPM
Los Angeles Basin Geologic Society, past president
PUBLICATIONS:
Clarke, D. D., and Phillips, C. C., 1997, Horizontal Drilling for Thermal
Recovery in the Wilmington Field, California, in The Class Act, United
States Department of Energy, National Petroleum Technology Office,
v.3/2, p. 1 -3.
Clarke, D. D., Phillips, C. C., and An, L. Y., 1997, Horizontal Wells in a
Clastic Oil Field with Intra - formational Compaction, Abs., American
Association of Petroleum Geologists, Dallas, TX.
Clarke, D. D., and Phillips, C. C., 1997, Tertiary Development of Heavy Oil
Sands Through Thermal Recovery in the Wilmington Oil Field,
California: An Update and Some New Challenges, Pacific Section,
American Association of Petroleum Geologists, Bakersfield, CA.
An, L. Y., Ershaghi, I., Phillips, C. C., and Clarke, D. D., 1997, The
Sealing Properties of Boundary Faults in Fault Block II, Wilmington Oil
Field, California, Abs., American Association of Petroleum Geologists,
Dallas, TX.
I\
II. Qualifications
B. Bill Greene
A resume for Bill Greene is attached.
Dr. Greene holds a Ph.D in Business Economics from Harvard University. His
thesis was published as a book titled, "Strategies of the Major Oil Companies." He
joined Deloitte as a senior consultant specializing in oil and gas consulting and
information systems. He designed and implemented the first integrated information
systems for THUMS Long Beach Company, the City of Long Beach, and the California
State Lands Commission. He also consulted for Deloitte for 12 years in the U.S., Asia,
and Europe and became their senior oil and gas consultant before leaving to form his
own firm, CCG Intl. which he has directed since 1991.
He also became a CPA with Deloitte and has continued to practice oil and gas
accounting, specializing in accounting for royalty interests. He was also been a long
time member of the Society of Petroleum Engineers. He and Don Clarke have been
business partners for many years. For the past 9 years they have served as oil and gas
advisors to the City of Beverly Hills for its royalty accounting and business taxes as well
as well permits and geology issues. This has included the analysis and technical support
for a multi - million dollar revenue recovery claim.
WILLIAM N. GREENE, PH.D., C.P.A.
Education • Ph.D. Business Economics, a joint doctorate program of Harvard
Business School and Department of Economics, Harvard University
• Published as Strategies of the Maior Oil Companies
• M. A. Business Economics, Harvard
• B. A. Southern Methodist Univ., mathematics and economics
California Consulting Group 1991 to present For brochure of CCG skills see
www.ccgintl.com/brochure
Deloitte & Touche
• Managing Director of California Consulting Group Intl. (CCG), a
management consulting firm whose members design, select and implement
multi -site supply chain, financial, manufacturing, and business systems and
develop high value specific applications in the United States and Europe.
CCG has strong analytical and technical skills in a variety of systems
specialties and has successfully performed several hundred projects in
business and financial accounting issues, oil and gas accounting and
operations, aerospace and defense, contract management, utilities,
government, and manufacturing, including leading large projects like major
system replacement for 1000+ users, and recruiting and staffing the Iraq and
Afghanistan buildup of 2000 supply chain personnel supporting the US
Army in Iraq, Kuwait, and the Middle East.
• Unusually broad skill set, with functional and industry experience in
•• Project Management •• Audit (CPA at Deloitte)
•• Financial & Procurement systems •• Systems design
•• Strategy &Business Process Design •• Custom database solutions
•• Oil and Gas Accounting & Operations •• Internet based systems
• Strong technical background with specialties in
•• systems selection and configuration •• real time systems
•• business process design & reengineering •• web based commerce
•• Imaging and document management •• bar code interfaces
•• relational database development •• telecommunications
--UNIX, NT, Oracle, and mainframe system interfaces
•• engineering and technically oriented projects
• Managed Los Angeles Information Technology practice office and
technical support practice for the Pacific region prior to the merger of
Deloitte & Touche; configured many of the hardware systems installed by
Deloitte's Los Angeles office; responsible for mid -range systems of all types
• Most experienced oil and gas consultant in Deloitte; represented the firm
nationally and internationally in oil and gas consulting, many oil and gas
projects, Member, Society of Petroleum Engineers
Professional • Member, California Society of Certified Public Accountants
Activities • Member, Society of Petroleum Engineers
• Colonel, 40`s Infantry Division Direct Support Brigade
Brigade Medical Officer, California State Military Reserve
Operation Desert Storm veteran, hospital administrator
• Harvard Business School Association of Southern California
• Director, National Contract Management Assn. — Los Angeles
III. Cost Estimate
A. Hourly Rate Schedule
1. Project Directors $150
Don Clarke
Bill Greene
2. Sr. Staff Consultants $100
3. Technical Consultants $ 75
III. Cost Estimate
C. Cost Estimate
Hours
Recommended
Budget
Tasks 1 & 2
100
$15,000
Task 3
150
$22,500
Task 4
150
$22,500
Task 5
150
$22,500
Expenses
$ 21000
Total Cost Estimate
800
$84,500
This cost estimate is based on the assumptions that all data are complete and
readily available, all personnel involved at the City and its contractors are also readily
available as arranged by the City, the scope of work required is limited to the tasks
proposed, and that a single submittal and review cycle of findings, recommendations
and reports to the City Finance Director will be adequate. If these assumptions prove
inaccurate, additional charges would be incurred. As this is an audit, the work must be
done on a time and materials basis. Charges will be based on actual time and out -of-
pocket expenses, including insurance required by the City. In the event that the City
approves a not -to- exceed budget different from our estimates, our charges will not
exceed it without your approval.
Attachment "T
GREG KIRSTE
949.463.6108 (m) greg.kirste @cox.net
WORK HISTORY
CHIEF FINANCIAL OFFICER (ACTING) - PROGREDI GROUP LLC
Software start -up that builds science -based business system optimizers
PRINCIPAL - MUNCIPAL PETROLEUM ANALYSTS LLC
Research and investigation consultancy that provides financial and business insights and assistance
to municipalities
DIRECTOR, MERGERS & ACQUISITIONS - HIRERIGHT INC
Human Resource software public company. Responsible for mergers, acquisitions, due diligence,
research, and business investigations
VICE PRESIDENT, CORPORATE DEVELOPMENT - PENTAIR INC
Industrial products public company. Responsible for mergers, acquisitions, partnerships, due
diligence, research, and investigations
VICE PRESIDENT - WICOR / WISCONSIN ENERGY INC
Energy and manufacturing public company. Responsible for mergers, acquisitions, corporate strategy,
due diligence, research, and investigations
RESEARCH ENGINEER - NORTHROP GRUMMAN INC
Defense contractor public company. Responsible for classified research, design and development
EDUCATION
MBA - University of California at Irvine, CA
BS ELECTRICAL ENGINEERING - California State University Long Beach, CA