HomeMy WebLinkAboutCivic Center Oil Well #3 Repair - Appropriation of $296,639-
Council/Agency Meeting Held:
Deferred/Continued to: SV6�
App ved ❑ Conditionally Approved ❑ Denied I�CaP y Cle s Si ature
Council Meeting Date: November 5, 2012 Depart nt ID Number: FD12 012
CITY OF HUNTINGTON BEACH
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Fred A. Wilson, City Manager
PREPARED BY: Patrick McIntosh, Fire Chief
SUBJECT: Approve appropriation of $296,639 for the repair of Civic Center Oil
Well #3
Statement of Issue: An additional appropriation from the General Fund Equipment
Replacement Reserves for repairs to Civic Center Oil Well #3 is requested.
Financial Impact: An appropriation of up to $296,639 from the General Fund Equipment
Replacement Reserves to the Equipment Replacement — Fire business unit
(10040209.83000) for the repair of Civic Center Oil Well #3 is requested.
Recommended Action: Motion to:
Approve appropriation of up to $296,639 from the General Fund Equipment Replacement
Reserves to the Equipment Replacement — Fire business unit (10040209.83000) for the
Repair of Civic Center Oil Well #3.
Alternative Action(s): Do not appropriate the funds and suspend oil production from Civic
Center Oil Well #3.
HB -375- Item 9. - I
REQUEST FOR COUNCIL ACTION
MEETING DATE: 11/5/2012 DEPARTMENT ID NUMBER: FD12 012
Analysis: Since September 17, 2012, Civic Center Oil Well #3 has been inoperable due to a
failure of the well pumping system, which has caused the pump to seize. Several attempts to
retrieve the pump, which is located deep beneath the well, have been unsuccessful. To
determine the cause of the pump seizure, the well must be disassembled and evaluated.
If approved, City staff would authorize the City's contract Oil Pumper to do the following:
1. Extract the pump from the well
2. Examine it
3. Evaluate the well casings, tubing and rods
4. Remove accumulated debris
5. Make any required repairs
This process is complicated due to the well being approximately 4,000 feet deep. Repairs
could be as simple as removal of the pump system, cleaning well debris and performing
preventive maintenance on the pump and well, or could require extensive repair and
rehabilitation of the pump system and/or well.
The initial action would involve applying a pulling force to remove the entire pumping system,
which is currently wedged in the well. If successful, the pump components could be
extracted, examined and any necessary repairs performed. Following this, the well would be
reassembled and placed back into production. Similar repairs recently made to Civic Center
Oil Well #1 cost approximately $40,000.
A worst case scenario could result in a severing of the pumping unit at the base of the well.
This would require specialty equipment used to dislodge and retrieve the severed pumping
unit out of the base of the well. Another worst case scenario could include damage to the
well casing, which would require immediate repairs or replacement, depending upon the
extent of the damage. In either scenario, extensive damage could also result in fluids
(oil/water/sand mixture) being released by the well. This would require that the well be
contained with specialized equipment. It could also result in a well collapse, which would
necessitate re -drilling or abandonment of the well.
City staff has obtained a repair estimate of $294,985 from the City's contract Oil Pumper,
who specializes in oil well repairs. With a 10% contingency for unanticipated repairs, this
amount increases to $324,484. This amount, minus $27,845 available in the Equipment
Replacement — Fire business unit (10040209.83000), leaves $296,639 needed for the
repairs. The repair estimate is based on the worst case scenario and the extent of required
repairs cannot be determined until the well is disassembled. However, the full funding
allocation would be required in the event the worst case scenario occurs. Only the actual
amount needed for the repair will be transferred.
The FY 2012/13 budget does not include funding for major repair to City -owned oil wells.
However, at current oil prices, this well is estimated to generate over $346,750 in annual
General Fund revenue, which would offset the cost of repairs in approximately ten months.
Should the City Council decide not to repair Civic Center Oil Well #3, State law would require
that abandonment procedures be pursued. This would incur expenditures approximately
Item 9. - 2 HB -376-
REQUEST FOR COUNCIL ACTION
MEETING DATE: 11/5/2012 DEPARTMENT ID NUMBER: FD12 012
equal to those required for the worst case scenario outlined above and would remove this
revenue source from the City of Huntington Beach.
An additional appropriation of up to $296,639 from the General Fund Equipment
Replacement Reserves is requested to repair Civic Center Oil Well #3.
Environmental Status: None.
Strategic Plan Goal: Improve the City's infrastructure.
Attachment(s):
HB -377- Item 9. - 3