HomeMy WebLinkAboutAppropriation of Funds for Repair of Civic Center Oil Well Cl�) -- M. Pin -- Vj:r,,-11�7
Council/Agency Meeting Held: A h V 3a 0, d 0
Deferred/Continued to:
Approved ❑ Conditionally Approved ❑ Denied D:a�- le S Signature
Council Meeting Date: May 1, 2000 Department ID Number: FD 00-003
CITY OF HUNTINGTON BEACH
REQUEST FOR COUNCIL ACTION
SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS},
SUBMITTED BY: RAY SILVER, City Administrator cvlzd
PREPARED BY: MICHAEL P. DOLDER, Fire Chief/Information Systems Director_
SUBJECT: APPROVE APPROPRIATION FOR THE REPAIR OF CIVICtl,CENTER
OIL WELL CC#2 -D
F
atement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s)
Statement of Issue: Should the City authorize a General Fund expenditure to replace the
funds expended for the repair of Civic Center Oil Well CC#2?
Funding Source: The Fiscal Year 1999/00 Capital Budget included $40,000 for repair of
Civic Center Oil Well CC#2. Actual cost of repairs exceeded the $40,000 appropriation by
$34,600, for a total cost of $76,600. The repaired oil well now exceeds previous production
by 25%. Revenues generated by increased oil production will repay the additional
appropriation of $34,600 within 16 months. The Fiscal Impact Statement (Attachment 1)
identifies sufficient undesignated General Fund Reserves.
Recommended Action: MOTION TO:
Approve and authorize the appropriation of $34,600 from the Unreserved, Undesignated
General Fund to the Fire Department's PetroChem Program Operating Fund Maintenance
and Repair Account E-AA-FR-316-4-43-00 for the purpose of maintaining City oil production.
Alternative Action(s): Do not appropriate the funds and suspend oil production when
current fiscal year budget funds are exhausted.
Analysis: Civic Center Oil Well CC#2 became nonproductive due to wear, resulting in well
casing perforations at 2800 feet below the surface that were too large. Casing perforations
allowed excess sand and rock to enter the well bore preventing oil removal. On November
28, 1998, Civic Center Oil Well CC#2 was shut down pending repairs. Because of the high
repair cost estimates and oil prices at or below the City's production cost ($8 per barrel), the
oil well was left inoperative.
Civic Center Oil Well CC#2 had a large casing and was a good candidate for installing a new
well casing inner liner. Also, it appeared that only minor problems might influence the inner
liner installation, and the City's consultants, Merrill Wright, Monte Weaver, and Renic
ktQUEST FOR COUNCIL ACTION
MEETING DATE: May 1, 2000 DEPARTMENT ID NUMBER: FD 00-003
Analysis: (continued)
Sampson, all agreed that $40,000 should cover the repair project. Estimates were based on
a similar repair in Newport Beach. Therefore, when oil prices began to rise during the
summer months of 1999, plans were made to repair Civic Center Oil Well CC#2.
Repairs started on December 27, 1999, by installing a new well casing inner liner. The inner
liner installation process involved pumping large volumes of water into the well bore to force
any intruding sand or rock back out of the casing and into the surrounding formation.
However, the amount of sand and rock inside Civic Center Oil Well CC#2's bore significantly
exceeded original estimates. Once water pumping began, the operation had to be continued
until all sand and rock was removed and a new liner was installed. Halting the operation to
request additional funds would have placed the project back to its original starting point
resulting in the doubling of repair costs. Consequently, the field decision was made to
proceed with the repair and seek reimbursement later. The volume of sand and rock added
four additional days for crews, equipment, and supervision. Additionally, residual water from
the process had to be trucked to an appropriate disposal site. The added repair costs totaled
$34,600. The repairs were completed on January 10, 2000.
Oil production resumed on January 15, 2000. Civic Center Oil Well CC#2 is now producing
25 barrels of oil per day, a consistent 5 barrels per day more than prior to shutdown in 1998.
By fixing Civic Center Oil Well CC#2, the City's net revenue, at current oil prices, is $11,500
per month or $138,240 per year.
The FY 1999/2000 capital budget included $40,000 in the Fire Department's General Fund
E-AA-FR-302-6-39. The total actual field repair costs were $74,600. The Fire Department is
requesting an additional appropriation of $34,600 from the General Fund to replace the
unanticipated expenditure from the PetroChem Program's Operating Fund.
New Appropriation Criteria: In March 1998, the City Council adopted three criteria to follow
in requesting a new appropriation: 1) It is an unanticipated emergency, 2) It is required to
implement labor negotiations, or 3) It is a new expense that is offset by related new
revenues. This request primarily falls under Criteria 3 with new oil revenues exceeding
previous revenues by 25%. The repairs could also be considered an unanticipated
emergency (Criteria 1) in that failure to complete the repair would have increased
subsequent repair costs and oil revenues from Civic Center Oil Well CC#2 would cease.
Environmental Status: Not applicable.
Attachment(s):
RCA Author: Greaves/Olson
FD00 003 Repair Civic Center Oil Well CC 2 -2- 04/19/00 9:58 AM
ATTACHMENT 1
j, h? CITY OF HUNTINGTON BEACH
INTERDEPARTMENTAL COMMUNICATION
To: Ray Silver, City Administrator
From: John Reekstin, Director of Administrative Services
Subject: FIS 2000-14 Approve resolution to appropriate an additional
amount for the repair of Civic Center Oil Well #2
Date: February 16, 2000
As required by Resolution 4832, this Fiscal Impact Statement has
been prepared for "Resolution approving costs for the repair of Civic
Center Oil Well #2."
If the Council approves this action (total appropriation of $34,600),
the estimated unreserved, undesignated General Fund balance at
September 30, 2000 will be reduced to $9,273,243.
i/zz
JcAn Reekstin,
Director of Administrative Services
ADOPTED BU CURRENT ESTIMATE
$ 6,675,000 $ 9,273,243
_Adopted current
Fund Balance - general Fund Budget Estimate
Beginning Fund Balance 10/1/99 (unaudited)
$ 11,734,000
$ 17,071,000
Plus: Estimated Revenue
114,110,841
114,110,841
Less: Estimated Expenditures
(120,169,841)
(120,169,841)
Pending/Approved FIS's:
(1,704,157)
Less: FIS 2000-14
-
(34,600)
Estimated 9/30/00 Balance
$ 5,675,000
$ 9,273,243
ESTIMATED GENERAL FUND
BALANCE - SEPTEMBER 30, 2000
$105000,000
$950005000 _
$85000,000
$7,0005000
$6,000,000
$550005000 $9,273,24
$450009000
$3,000,000 _
$2,000,000
$110001000 $6,676,00
ADOPTED BUDGET CURRENT
ESTIMATE
RCA ROUTING SHEET
INITIATING DEPARTMENT:
FIRE DEPARTMENT
SUBJECT:
REPAIR OF CIVIC CENTER OIL WELL CC#2
COUNCIL MEETING DATE:
May 1, 2000 i
RCA ATTACHMENTS
STATUS
Ordinance (w/exhibits & legislative draft if applicable)
Not Applicable
Resolution (w/exhibits & legislative draft if applicable)
Not Applicable
Tract Map, Location Map and/or other Exhibits
Not Applicable
Contract/Agreement (w/exhibits if applicable)
(Signed in full by the City Attorney)
Not Applicable
Subleases, Third Party Agreements, etc.
(Approved as to form by City Attorney)
Not Applicable
Certificates of Insurance (Approved by the City Attorney)
Not Applicable
Financial Impact Statement (Unbudget, over $5,000)
Attached
Bonds (If applicable)
Not Applicable
Staff Report (If applicable)
Not Applicable
Commission, Board or Committee Report (If applicable)
Not Applicable
Findings/Conditions for Approval and/or Denial
Not Applicable
EXPLANATION FOR MISSING ATTACHMENTS
REVIEYVED
RETURNED
FORWARDED
Administrative Staff Y111 )
( )
' .I- ),
Assistant City Administrator (nitial)
( )
( )-
City Administrator (Initial)
( )
( aov:)
City Clerk
( )
EXRIANATION FOR RETURN
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