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Home My WebLink About08 - Amendment to PSA for Oil Well Management ServicesQ SEW Pp�T CITY OF z NEWPORT BEACH c�<,FORN'P City Council Staff Report March 14, 2023 Agenda Item No. 8 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Mark Vukojevic, Utilities Director - 949-644-3011, mvukojevic@newportbeachca.gov PREPARED BY: Joshua Rosenbaum, Senior Management Analyst, josenbaum@newportbeachca.gov PHONE: 949-644-3011 TITLE: Amendment No. Three to Professional Services Agreement with Sampson Oil Company for Oil Well Management Services ABSTRACT: The City of Newport Beach's (City's) oil wells are managed and operated by a specialty service contractor. The services include daily maintenance, repair and operation of the City's oil wells and production tank facility; coordination of regulatory agency inspections and compliance; purchasing of materials; and managing subcontractor repairs. The current contract expires July 31, 2023, and the Utilities Department is requesting City Council approval to amend the existing agreement with Sampson Oil Company. RECOMMENDATIONS: a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and b) Approve Amendment No. Three to the Professional Services Agreement with Sampson Oil Company for Oil Well Management Services, which extends the contract for one additional year to July 31, 2024 and increases the total not -to -exceed contract amount by $750,000, and authorize the Mayor and City Clerk to execute the Agreement. DISCUSSION: Sampson Oil Company (Sampson) has managed and operated the City's oil fields in West Newport since the 1980s. The operations and services include daily maintenance, repair, operation, and regulatory compliance of the City's 15 oil wells, one injection well, a production tank facility, and pipelines. Sampson also coordinates regulatory agency inspections and compliance reporting, purchases materials, and manages subcontractors that perform as -needed repairs. RX Amendment No. Three to Professional Services Agreement with Sampson Oil Company for Oil Well Management Services March 14, 2023 Page 2 The current agreement with Sampson, which was approved after an RFP process in 2017, expires July 31, 2023. With continuous instability in the geopolitical and current oil market, along with several new State law and regulatory changes, staff recommends extending the agreement with Sampson. Sampson has decades of experience with the City and has the expertise and familiarity with the management and operations of the City's oil field. The owner of Sampson Oil will be retiring during this agreement term and City staff is advertising and noticing the industry. A new request for proposals will be issued to seek out experienced and highly qualified oil well operators to take over the contract operations. An overlap between Sampson and a new operator is envisioned to be the best way to protect the City's assets and maintain regulatory compliance. For the amendment, Sampson's proposal to continue the routine management and operations of the City wells is essentially unchanged except for a CPI adjustment. This includes all necessary time needed by Sampson's administrative, maintenance and office staff to maintain and operate the system annually. Sampson's staff will perform minor repairs and larger repairs will be done by subcontractors. The contract also includes allowances for the purchase of materials and for unforeseen repairs performed by subcontractors. During the previous and current fiscal years, expenditures were necessary for regulatory compliance with idle wells and injection wells, replacement tubing and inner liners, casing repairs, pump and motor replacements, cementing, haul -offs, zone abandonments, rehabilitations, and investigations into underperforming wells. Staff recommends City Council approval of Amendment No. Three to the Professional Services Agreement with Sampson Oil Company for Oil Well Management Services, which extends the contract for one additional year to July 31, 2024, and increases the total contract amount by $750,000. FISCAL IMPACT: Sufficient funding for this agreement will be included in the proposed budget for Fiscal Year 2023-24, which will be funded from operating funds in the Tidelands Fund (Fund 100). Revenues from oil sales offset expenditures and net proceeds from oil operations are placed in the Tidelands Fund. ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Amendment No. Three to Professional Services Agreement with Sampson Oil Company for Oil Well Management Services March 14, 2023 Page 3 NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENT: Attachment A — Amendment No. Three to Professional Services Agreement FIR ATTACHMENT A AMENDMENT NO. THREE TO PROFESSIONAL SERVICES AGREEMENT WITH SAMPSON OIL COMPANY FOR OIL WELL MANAGEMENT SERVICES THIS AMENDMENT NO. THREE TO PROFESSIONAL SERVICES AGREEMENT ("Amendment No. Three") is made and entered into as of this 14th day of March, 2023 ("Effective Date"), by and between the CITY OF NEWPORT BEACH, a California municipal corporation and charter city ("City"), and SAMPSON OIL COMPANY, a California corporation ("Consultant"), whose address is 301 Ultimo Avenue, Long Beach, California 90814, and is made with reference to the following: RECITALS A. On July 11, 2017, City and Consultant entered into a Professional Services Agreement ("Agreement") for oil well management services ("Project"). B. On July 12, 2020, City and Consultant entered into Amendment No. One to the Agreement ("Amendment No. One") to reflect additional services not previously included in the Agreement, extend the term of the Agreement, increase the total compensation, update the City's Administration of the Agreement, and to update insurance requirements. C. On June 14, 2022, City and Consultant entered into Amendment No_ Two to extend the term of the Agreement to July 31, 2023, and to increase the total compensation D. The parties desire to enter into this Amendment No. Three to extend the term of the Agreement to July 31, 2024, and to increase the total compensation. NOW, THEREFORE, it is mutually agreed by and between the undersigned parties as follows- 1 100iTi Section 1 of the Agreement is amended in its entirety and replaced with the following: "The term of this Agreement shall commence on the Effective Date, and shall terminate on July 31, 2024, unless terminated earlier as set forth herein." 2. COMPENSATION TO CONSULTANT Section 4.1 of the Agreement is amended in its entirety and replaced with the following: "City shall pay Consultant for the Services on a time and expense not -to -exceed basis in accordance with the provisions of this Section and the Schedule of Billing Rates attached hereto as Exhibit B and incorporated herein by reference_ Consultant's compensation for all Work performed in accordance with this Agreement, including all reimbursable items and subconsultant fees, shall not exceed Four Million Two Hundred Ninety One Thousand Nine Hundred Sixty Eight Dollars and 001100 ($4,291,968.00), without prior written authorization from City. No billing rate changes shall be made during the term of this Agreement without the prior written approval of City." The total amended compensation reflects Consultant's additional compensation for additional Services to be performed in accordance with this Amendment No. Three, including all reimbursable items and subconsultant fees, in an amount not to exceed Seven Hundred Fifty Thousand Dollars and 00/ 100 ($750,000.00). 3. INTEGRATED CONTRACT Except as expressly modified herein, all other provisions, terms, and covenants set forth in the Agreement shall remain unchanged and shall be in full force and effect. [SIGNATURES ON NEXT PAGE] Sampson Oil Company, Inc. Page 2 8-5 IN WITNESS WHEREOF, the parties have caused this Amendment No. Three to be executed on the dates written below. APPROVED AS TO FORM: CITY ATTORNEY'S OFFICE Date: -�//ol V"_Z Al CITY OF NEWPORT BEACH, a California municipal corporation Date: By: �ron C. Harp Noah Blom ity Attorney Mayor ATTEST: CONSULTANT: Sampson Oil Company, Date: a California c rporati n Date: 2 C Z By: By:---------1'-�---- Leilani I. Brown Renick Sampson City Clerk Owner/President Date: 1 By: 4 Pamela Picard Secretary [END OF SIGNATURES] Sampson Oil Company, Inc. Page 3 8-6