HomeMy WebLinkAboutCity Council - 5581 RESOLUTION NO. 5581
A RFSOLUTION OF THE CITY COUNCIL OF THE CITY
OF HUNTINGTON BEACH CONSENTING TO ASSIGNMENT
BY ATLANTIC RICHFIELD COMPANY TO ITS
WHOLLY-OWNED SUBSIDIARY, FOUR CORNERS PIPE
LINE COMPANY OF ITS PIPELINES IN THIS CITY,
PURSUANT TO CALIFORNIA PUBLIC UTILITIES
COMMISSION DECISION NO. 88640
WHEREAS, Ordinance No. 989, adopted by the City Council on
September 3, 1.963, granted to Atlantic Richfield Company a
franchise for the operation and maintenance of its oil pipe-
lines in this city; and
California Public Utilities Commission Decision No. 88640
directed Atlantic Richfield Company to transfer its crude oil
pipelines to its wholly-owned subsidiary, Four Corners Pipe
Line Company, a common carrier; and
Article XV of Ordinance No. 989 requires the city to con-
sent to any alteration in the operation of such pipelines by
Atlantic Richfield Company,
NOW, THEREFORE, BE IT RESOLVED by the City Council of the
City of Huntington. Reach that, pursuant to Article XV of
Ordinance No. 989, consent is hereby given to the assignment
by Atlantic Richfield Company to its wholly-owned subsidiary,
Four Corners Pipe Line Company, a common carrier, of the pipe-
line described in Exhibit A, as directed by California Public
Utilities Commission Decision No. 88640, both attached hereto
and by this reference made a part of this resolution.
PASSED AND ADOPTED by the City Council of the City of
adjourned
Huntington Beach at a regulargreeting thereof held on the 14th
day of October 1985.
ATTEST:
I .r
/�/44��41 '� Mayor
City Clerk
1 .
REVIEWED AND APPROVED: APPROVED AS TO FORM:
ity, A_cministra tor City Attorney 5
INITIAT A D APPR D:
ie o mi istrativ
ervices
ahb; 9/25/85
0828L/2931 (3779 )
2 .
File: HUNTBEACH Franchise Statement to the City of
Huntington Beach, by Four Corners Pipe
Line Company on behalf of Atlantic
Richfield Company under Ordinance No.
989
March 27, 1984
Office of the City Clerk
City of Huntington Beach City Hall
P. 0. Box 190
Huntington Beach, CA 92648
Gentlemen:
Pursuant to Ordinance No. 989 ATLANTIC RICHFIELD COMPANY hereby files the
following statement of its total gross receipts for 1983 under franchise
and encloses its payment accordingly. (Franchise expires 10/02/88)
STATEMENT
1983 Gross Receipts from Trunkline No. 8 = $3911404.32
Trunkline Mileage - 23. 1920
Gross Receipts per mile of Trunkline Pipe - $16,876.70
P/L MILEAGE GROSS RCPTS. GROSS RCPTS. TWO
UNDER ORD. X PER MILE UNDER ORD. X PERCENT _ PATH
8.09070 $16,876.70 $136,544.32 .02 $2,730.89
I hereby certify that the foregoing statement is
true and correct to the best of my knowledge and
belief.
V. A. Nix, Manager
Land Services
Subscribed and sworn to before me this
day of , 1984.
Notary Public in and for the
County of Los Angeles, State of
California
U F'."�
88640 MAR 2 1 181E
111E P BLIC UTILITIES COr_l IScION OF =':�L STATE OF CALIF 0%.:._A
Investigation on the Cor.=issior. ' s own }
Motolon Into the rates, rules , charges , )
operations , business practices , co'.po— )
ratior., individual, partnership, joint ) Case No. 9893
venture or other entity which operates )
an�' pipeline for the transportation of }
truce or refined petroleum products )
w_:rin the state of California. )
INTERIM CPINIO;; ADOPTING STIPULATION AIJD
AGR=r.Y%!iT FtEGrRDTJ:G ATrA?'?'TC zICs:iz`,`.&D COMPANY
On April 1, 1975, the :onanission 'issued an Order Instituting
Investigation (011) to determine whether certain -pipelines trar.spc
F•et«oieu in California were common carriers . On October 28, 19?=
.he O 3 was amended to delete reference to "common carriers" and t
nqu!re whether the pipelines were owned by transportation corpani
or public utilities . One -of the respondents named in both the orl
and amended 0II's was Atlantic Richfield Company (ARCO) .
On June 24, 19760 ARCO first approached the Commission Staff
(Staff) about settling the investigation. Negotiation proceeded c
` a4 v£:iety of issues until an agreement was reached between Staf_ :
ARCQ, subject to the Commission's approval . The agreement was rec
.o the form of a stipulation, which included a proposed order.
In substance, the proposed order called for ARCO to transfer
a sub%sidiary corporation vi rtuaily all of its crude oil pipelines
most of its products pipelines in California. The subsidiary wou�
operate the pipelines as a public utility subject to the jurisdic
of the Commission. Since certain pipelines owned by the subsidia
would be interstate in operation, the subsidiary would also be su
to the jurisdiction of the interstate Cvrunerce Corrrission (ICC) -1
1! Wiese regulatory functions of the ICC have been subsequently
trzrisfered to the Federal Energy Hegu*latory Ccmmission. (FE
•.• .9803 MEB
In return for the submission to Commission jurisdiction over the
pelines , Staff would be directed to cease any inquiry questioning
whether ARCO's pipelines had been dedicated to a public use by an
action taken before_ the effective date of the order. This, of course,
would not bind the Staff as to anything ARCO might do aft the
effective date of the order.
There were two major areas of compromise in the settlement. The
first had to do with rates and raLoe base, the second with the omission._
of certain lines from the stipulation.
RATES AND RATE BASE
A major issue in the negotiations was the appropriate rate base.
Had Staff proved that the lines have, since their construction, been
dedicated to a public use, the appropriate rate base would have been
the depreciated book value of the pipelines , which ARCO states is
approximately $1. 5 million. If ARCO were correct in its position that
hose lines have never been dedicated to a public use, the appropriate
rate base would be the fair market value of the assets . upon their
initial dedication. This latter figure , however, is difficult to
determine, since the transfer to a subsidiary may not yield the same
values as an ar m's-length transaction.?
The Staff and ARCO reached an accord that the Commission would
accept as an Initial rate base the book value of the assets as deter-
mined by the ICC. At the time , it was anticipated that the ICC would
allow a book value of $8 . 5 million, which, with the addition of $1
million in working capital , would form the rate base for Commission
purposes. To the extent the FERC lowers the book value, the CoTmnissior
rate base would be lowered; however, the $9 . 5 million would be a ceilir
rate base for Commission rates in ratemaking purposes.
2/ By a pleading filed March 13, 19782 ARCO stated that the subsidiar
Four Corners Pipeline Company , would pay $6,744 ,?76 in cash for th
public utility assets , which with $1 million in working cash, come
to a rate base of $7,744 ,766.
•C.;9Fc3 N-
::he outside sources which have Bete.-mined the value of
pipelines are the California State Board of Equalization and the
C nzy Assessors ' offices. The staff of the State Board of Equali_z6.L
recently assessed ARCO' s 165 miles of intercounty lines (all of which
are to be included in the 601 total miles of pipelines to be subject
j to CP'UC jurisdiction) and three related pump stations , at $10,060,000
market value. The State Board of Equalization revised `his assessment
upward to $20,000,000. ARCO, which agreed to the Staff issessme::t,
has paid taxes based on the Board's assessment , subject to protest,
and ma.,` later contest the Board's assessment.'
Similarly , the County Assessors have assessed ARCO' s intracounty
lines at 59,7311000. Approximately ?3$ of these lines will be included
in the public utility system. Thus, the counties ' assessments of the
finMracounty public utility lines would be about $7 ,104 ,000. Adding
this to the more conservative Board of Equalization staff assessment,
• e combined assessed value would be $17,164,000. In light of this,
cannot saythat the compromise rate b i aso ble.3•/
a r base _s unre na
The stipulation included .a proposed tariff. I+ the Commission'
enters the order and if ARCO files the tariff, the Staff would not
challenge the tariff. If, however, ARCO filed a tariff different from
that in the stipulation, or if any third party challenged the tariff
(nothing in the stipulation or proposed order precludes a third-party
challenge) , Staff would be free to act as it thinks Justified.
In terms of the effect on rates of using the higher rate base,
staff calculates that the cost of the agreed rate base would be in
the neighborhood of an incremental 10i a barrel increase for trans-
portation from the San Joaquin Valley to the Long Beach area. At
today 's prices this translates to an increase of 1. 9.19 in the delivered
price of lower-tier Cuyama 320 A.P.I . crude . For shorter hauls , the
We wish to emphasize that the acceptance of z compromise rate
base is tied to the factual dispute over the thorny issue of
dedication. Such a compromise will not be applied to utilities
already subject tD- our, jurisdiction or to other potential utilitit
;where the question of status as a utility rests on an issue other
than dedication..
••��°=g� MEB
x to base would bring additional costs of abo,at 1. 4e per ba.rel, or
Iincrease of 0.3% in the delivered cost of lower-tier Huntington
ch 220 A.P.I . crude .
In terms of increased cost to consumers of refined petroleum
products , making the assumption least favorable to consumers , i.e. ,
those which would maximize the additional cost , the amount available
for pass-through would be in the neighborhood of 0. 2 mils per gallon.
This is de minimus . Additionally , indications .from the gasoline and
crude oil markets are that it is improbable that consumers would
have the costs passed on to them.
OMITTED PIP INES
In the negotiations ARCO insisted on keeping certain lines as
proprietary . These included the lines from the Los Angeles Harbor
to its refineries ARCO insisted that these lines were necessary
or the efficient operation of its refineries . Since we had no way
f knowing the need of other refiners for these lines we Invited
public comment . J
PUBLIC COVMENT
On August 22, 19770 a Proposed Report , which consisted of the
Stipulated Proposed Order, and -which appended the stipulation, -a com—
plete written description and map o2' the- lines to be dedicated under
the Proposed , Order, and a map of _the lines which would be maintained
by ARCO as proprietary., was circulated for public co=ent . It was
Railed to all refiners in the state, to .he independent producers
organization, to. various state and local entities with an interest
in oil production, and -to the Oil Daily (a petroleum industry
newspaper) . At the same time , a letter was sent to the recipients
f the proposed report , explaining the import of the settlement
Only four comments were received. ' c were from independence
•e finers in the Los Angeles Basin, Fletcher Oil and Refining Company
and Lundzy-Thagard Oil Company, both of which approved of the
settlement and neither of which offered a negative comment . Both
would be served by the public utility lines .
V rr
I-ne adverse comment was received fron arct�.e. respondent ,
ndard Oil Company of California (Socal ) Socal did not object
the substance of the settlement and offered no comment on the
rates , the rate base, or the omission of any line. It complained
only that the proposed order was deficient in failing to Include
findings of tact or conclusions of law. Socal suggested a finding
that hitherto ARCO's pipelines had not been dedicated to a public
use. "his illustrates the reason for the initial emission of
findings and conclusions . ARCO will not stipulate that the lines
have always been so dedicated, nor will staff stipulate that they
have never been so dedicated. This is the central dispute in the
case and it is to avoid a statement on the issue that the settlement
was en;.ered.
Calif. Pub . Util. Code Sect. , 1705 requires findings , "After the
conclusion of a hearing. . . . " The reason is to "afford a rational
atasis for judicial review. " California Motor Transport Co. v. Public
t_l. Com. , 59 Cal. 2d 270, 274 (1963) . This has no application to -
a settlement where there is no hearing. For the same reason, settle—
ments in civil cases are not burdened with the requirement of findings
of fact. Continental Bldg. & Loan Ass'n. v. Woolf, 12 Cal . App. 725,
729 (1 10) ; Magoon v. Heath, 79 Cal. App. 632, 634-35 (1926) . Insofe
as Socal has. not complained about the substance of the settlement, It-
has no grounds_ for appeal other than the technical grounds stated.
However, findings of fact on. the reasonableness of the stipulation anc
conclusions of law appear hereafter.
Finally , the City of Los Angeles (City ) has asked to intervene
and requested hearings on the effect of the settlement . We grant the
right cf the City to intervene, but deny the motion for a hearing.
The City 's exceptions to the proposed report relates'_ to the issues of
the rate base and the exclusion of the lines which are not to be
dedicated. Initial rates and the rate base underlying them can be
litigated when the tariffs are filed. The City 's motion is premature
To the extent that it protests the omission of certain pipelines,
the effect on consumers is so tenuous as to male the protest unreason
able , Fzrticularly in light of the lack of objection by those who are
most di. ectly concerned with the omission , the refiners and producers
!•.C` cg93 MEB
As an independent test of our possible action herein we con-
t ted with a consultant to review and comment on the proposed stipu-
lation. His initial report , dated February 26, 1978, is received in
evidence as Exhibit No. 1 and is available for public inspection. In
essence the consultant believes the stipulation to be a reasonable
compromise.
DISCUSSION
The decision whether to settle involves the balancing of several
factors. In favor of settling are the elimination of the risk that
the staff would be unable to prove its case, or that the Commission 's
decision would be reversed on appeal ; the saving in time by having
ARCO submit to jurisdiction immediately rather than after years of
litigation and appeal; and the saving in the time of the Commission
Staff for other matters . -Against settling the case are the
sibility of showing a lower rate base, and consequently lower ---
es, and the possibility of proving that the omitted lines have
already been dedicated to a public use.
The primary public interest served by accepting the proposed stip-
ulation is that the shippers of crude oil in California will hereafter
be guaranteed public utility transportation service . That guarantee
of the availability of nondiscriminatory transportation will, in the
long run, be in the interest of this state's oil producers and inde-
pendent refiners . We would not want a situation to develop where
because of changes in oil marketing dynamics and economics independent
refiners and small producers could not move oil and be financially
squeezed. If that situation were to develop the remedy of pursuing
regulatory jurisdiction would possibly be too slow , and cause economic
harm to an important segment of California's economy .
. C�
FI :D_;:CS OF MAC^
1 . :,ere is a dispute between AACO and the Cc--a:.sion staff
tether i.M�O' s pipelines have been dedicated to a public use .
2. ::o independent oil producer or refiner has protestcd the
comprorise rate vase, rages , or the omission of any pipeline from
the settlement.
3. Acceptance of the settlement would save ccnsiderztl= t;m=
and experse of litigation end eliminate the uncert_intles cS litiga-
tion.
4 . Acceptance of the stipulation and proposed order kill
guarantee :.o crude oil shippers in California the availability of
public stiliCy pipeline transportation.
5. The exceptions of Standard Oil Company of California are
wi_houc merit .
fl. ire exceptions of the City of Los Angeles regarding rates
and rate ba a are premature, since tar_ffs have not yet been filed.
7. The interest of the City of Las Angeles ., as representative
of consurn.ers of petroleum products , in raising issues related tohe
eraissicn of pipelines is too tenuous to merit consideration,
particular_y in light of the lack of protest by independent refiners
and producers who are directly concerned.
B. in light of the foregoing, the stipulation end proposed
order (with minor editorial changes ) are reasonable.
. �. To facilitate the earliest possible filing of tariffs and
oFerat_an as an ackno:aledged public utility pipeline , Paragraphs 1 .
2 . and 3 of the order ' should be effective immediately .
CONCLUSIONS OF LAW
1. 7ne proposed order set forth in the stipulation between
AECO and the Commission Staff should be adopted,.
O R D E R
17 7-3 ORDERED as follows:
1. he agreemant set forth in the Stipulation. between Atlantic
Richfield Company (ARCO) and the Commission Staff, tiled with the
Commission .on July 5, 1977, is hereby approved. .
�. The pipeline facilities described in the map
xhibit B to the Stipulation, entitled "Convened Pive.11nes ��•�:er" ,
re the crude oil and petroleum products pipeline facilities which are
to be dedicated to public use. The Converted Pipeline System is des-
cribed in detail in Exhibit A to the Stipulation. The Converted
Pipeline System includes , in addition tc the pipes , all ri&hts-of-way
that are assignable and other property and equipment reasonably
associated with and necessary for the operation of the Converted
Pipeline System. To the extent that rights-of-way , licenses and
permits in the Converted Pipeline System are not assignable, L the
public utility subsidiary will make all reasonable efforts to acquire
those or equivalent rights-of-way, licenses and perri is and JACJ will
cooperate with, and assist, the subsidiary in this effort . Pipeline
facilities in California owned and operated 'by ARCO and its subsidlar:
other than the Converted Pipeline System, need not be dedicated to
-- public use at this time.
3. ARCO will transfer the Converted Pipeline System tc a
subsidiary corporation as soon as practicable. The subsidiary
corporation will operate the Converted Pipeline System -as a public
utility, and will file its tariffs, and rules a-nd regulations and wil
do all other things required in order to operate the Converted Pipe-
line System at a public utility, subject to the jurisdiction of both
the Public Utilities Commission of the State of California and the
United States Federal Energy Regulatory Commission.
4. The valuation of the existing assets of the Converted
Pipeline System shall be determined initially in the same amounts
as the original cost less depreciation as deterr,:i.ned by the United
States Interstate Comnerce Commission and its successor in these
functions , 12he Federal Energy Regulatory Commission, but not to
exceed $9 ,431, 000 . The Commission Staff is directed not to issue a
challenge to this initial valuation, but the valuation is sub.'ec4 tc
challenge in any rate proceeding brought by a third party .
t . Cn the efLec ..ive date c: this order, the Cor._niss_cn S:;af is
lirected to cease any inquiry into the question whether ARCO' s p :e is
.nc','.uded within the stipulation have been dedicated to a public use
heretofore. The occurrence of the contingencies set forth In Paragra;
7 hereof shall preclude any further investigation into this question
by the Commission's Staff.
6 . "Subject to the completion of the provisions set forth r:
Paragraph 7 of this Order, ARCO is hereby dismissed as a 'respcndert
to the investigation.
7 . The effective date of Paragraphs 4 . 5, and 6 of this
decision shall be the date when the last of all the following actions
take place :
a. ARCO transfers to a subsidiary all assets
described In both Exhibits A and B to,
and in Paragraph 2 of, the Stipulation;
b. :'he subsidiary files tariffs with the
Commission; and
C. ARCO or the subsidiary files with the
Commission an affidavit stating both of
the foregoing actions have taker, place.
$. In the event that all conditions specified in Faragraph 7
are not completed within 6 months from; the date of this decision, the
• decision shall be nullified without further action by the Commission..
9. The effective date of Paragraphs 1, 2 and 3 of this decis if
Is the date hereof.
Deed at San Francisco California, this 21st day of
Nardi
Robert Batinovich
President
William Symons , Jr.
Vernon L. Sturgeon
Claire T. De dri ck
I dissent. Commissioners
I believe this matter should
go to hearing.
Richard D. Grave lle Certified as a True Copy
Commissioner of the Original,
Li:T Fi►f.1mvr nr:�.�e e•:-... ..........��.__,
Res. No. 5581
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
I, ALICIA M. WENTWORTH, the duly elected, qualified City
Clerk of the City of Huntington Beach, and ex-officio Clerk of the
City Council of said City, do hereby certify that the whole number of
members of the City Council of the City of Huntington Beach is seven;
that the foregoing resolution was passed and adopted by the affirmative
vote of more than a majority of all the members of said City Council
at a regular adjourned meeting thereof held on the 14th day
of October , 19 85 by the following vote:
AYES: Councilmen:
Kelly, MacAllister, Bailey, Finley, Green, Thomas
NOES: Councilmen:
None
ABSENT: Councilmen:
Mandic
, <
City Clerk and ex-officio Clerk
of the City Council of the City
of Huntington Beach, California