The URL can be used to link to this page

Home My WebLink About11 - Oil Production Well 11CITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 11 April 14, 2009 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Utilities Department Ed Burt, Utilities Operations Manager, 949 - 718 -3432 or eburt(cDcitv.newport- beach.ca.us SUBJECT: EMERGENCY REPAIR OF OIL PRODUCTION WELL NUMBER 11 RECOMMENDATION: Approve the Letter Agreement with Oil Well Service Co. for emergency repair services to repair Oil Production Well No. 11. DISCUSSION: The City owns 15 oil wells that annually produce over 31,000 barrels of oil that are currently selling for $41.50 per barrel. This production generates average annual revenue in excess of $1,500,000, which goes into the Tidelands fund. All of the wells were drilled in the 1950s. Like the other wells, Well No. 11 is located on West Coast Highway and has a steel casing that extends straight down 1,100 feet and then makes a 450 turn and runs out under the ocean to end at 3,272' in length (Exhibit A). The well currently produces approximately 20 barrels of oil per day. On December 20, 2008 during routine maintenance and inspection of Oil Well No. 11 by the oil field contract operator (Sampson Oil Company), the well's pump was found to be clogged and the well was not operating. Sampson ordered a repair rig from Oil Well Service Company (OWSC), the City's on -call well repair contractor. OWSC was authorized to proceed with well repairs on an emergency basis in order to minimize downtime and loss of revenue. It should be noted that there are relatively few responsible and responsive oil repair firms remaining in Southern California, and they are busy; hence delays in response time — as occurred in this case — are common. OWSC arrived on -site on January 15, 2009 to initiate repairs. An initial assessment was made that determined that, in addition to broken tubing and rods in the well casing, there was approximately 100 feet of sand covering the top of the pump at approximately 3,180 feet deep. The sand and shale were cleaned out, and the problem was diagnosed as a hole in the casing. Subsequently, a mortar mixture was pumped into Emergency Repairs to Oil Production Well No. 11 April 14, 2009 Page 2 the casing to plug the hole and provide some structural support to the steel pipe which had degraded. The well was tested and another sand leak hole was discovered. On January 30"', mortar was again pumped into the well, equipment was reinstalled and the well was tested and put back into production on February 5°i. Unfortunately, after 10 days, the pump again clogged and production stopped. At this time it was determined that the casing had cracked and that about 200' of steel had perforated. Two metal (lead) liners were fabricated and installed and ultimately resolved the problem. On March 11°i, the well was put back into production and continues to operate properly to -date. A diagram showing the location of the repairs is also shown in Exhibit A. The total cost to repair Well No. 11 was $191,757.93, however, this exceeds funds available in the oil field maintenance and repair budget. The action being requested today for Oil Well Services Company will authorize payment of their $129,295.37 invoice and will be funded through the Capital Improvement Fund; the balance of $62,462.56 (equipment and materials) will be paid through the maintenance and repair account. The value of the lost oil production during this 75-day period was approximately $53,000; oil prices were near historic lows for about half of this period. The damages to the Oil Production Program may be covered by our pollution liability policy and our insurance broker is reviewing the facts of the incident to determine if any coverage is available for the loss. Environmental Review: There is no environmental impact. Funding Availability: For this emergency repair there are sufficient funds available in the Capital Improvement Fund account to cover these costs associated with this emergency repair. Account Description Oil Field Improvement Program Prepared by: 1 Ed Burt, Operittions Manger Account Number Amount 7231- C5400053 $129,295.37 Submitted by: e e M och, i ities Director Attachments: Exhibit A — diagram of Oil Production Well No. 11 E%k�BR'A' Legend ® Suction Pump — Soil Oil Line "I► Flow Direction City of Newport Beach Utilities Department Well #11 0 400 800 1,600 Feet M Pump Aoii 2008 LETTER AGREEMENT WITH OIL WELL SERVICE CO; FOR EMERGENCY REPAIR SERVICES FOR OIL WELL NO. 14 This Letter Agreement for Emergency Repair Services for 011 Well No. 11 is entered into as. of this 144' day of April, 2009, by and between the CITY OF NEWPORT BEACH, a municipal corporation, (hereinafter referred to as "City) and OIL WELL SERVICE CO., a California Corporation, whose address is 1241 .Btrmett St., Signal HIII, CA 90755 ( "Contractor"), and is made with reference to the following :. RECITALS A. On November 270', 2007, CITY and CONTRACTOR entered into an On -Call Professional Services Agreement, hereinafter referred to as "On -Call /Agreement," for Oil Well Repair Services. The provisions of which are fully incorporated herein by this reference. B. City and Contractor entered into several amendments to extend the term of the Agreement, the most recent, Amendment No. 3, .was approved by City Council on. March 241b, 2009. The provisions of which are fully incorporated herein by this reference. D. On December 20, 2008 during routine maintenance for Oil Well No. 11, it was discovered that the Oil Well was not operating properly and required immediate shut -off. Emergency services were necessary to bring the Oil Well back. on -fine. E- The emergency repair work for Oil Well No. 11 set forth fees in excess of Thirty Thousand Dollars and No Cents ($30,000.00) and requires- a separate Agreement in accordance with Council Policy F -14 and Section 4.0 of the Agreement. F. City and Contractor mutually desire to enter Into this Letter Agreement, hereinafter referred to as "Emergency Services Letter Agreement," as provided here below. NOW, THEREFORE, the parties hereto agree as follows: TERM The term of this Agreement shall commence on the above written date, and shall terminate upon payment of final invoice by City for emergency repairs to Oil Well No. 11 or by April 30, 2009, whichever occurs first. Z SCOPE OF WORK Contractor shall perform everything required to be performed, and shall provide and furnish all the labor, materials, necessary tools, expendable equipment and all utility and transportation services necessary for the emergency repair services Pursuant to this Emergency Services Letter Agreement and according to the On- Call Services Agreement dated November 27, 2009, and all amendements thereto, the most recent- amendment, Amendment No. 3, approved by City Council on March 24, 2009. 3. COMPENSATION TO CONTRACTOR Attached hereto as Exhibit A are the final invoices for all emergency work required to bring Oil Well No. 11 on -line. The total cost for all services, materials, labor and reimburseable expenses is One Hundred Twenty Nine Thousand Two Hundred and Nintey Five Dollars and 371100 ($1291295.37). 4. PREVAILING WAGES Pursuant to the applicable provisions of the Labor Code of the State of California, not less than the general prevailing rate of per diem wages including legal holidays and overtime work for each craft or type. of workman needed to execute the work contemplated under the Agreement shall be paid to all workmen employed on the `work to be done according: to the Agreement by the Contractor and any subcontractor. In accordance with the California. Labor Code (Sections 1770 et seq.), the Director of Industrial Relations has ascertained the general prevailing rate of per diem wages in the locality in which the work is to be performed for each craft, classification, or type of workman or mechanic needed to execute the Agreement. A copy of said determination is available by calling the prevailing wage hotline number (415) 703 -4774, and requesting one from the Department of Industrial Relations. The Contractor is required to obtain the wage determinations from the Department of Industrial Relations and post at the job site the prevailing rate or per diem wages. It shall. be the obligation of the Contractor or any subcontractor under himfher to comply with all State of California labor. laws; rules. and regulations and the parties agree that the City shall not be liable for any violation thereof. 5. ADDITIONAL TERMS AND COVENANTS Except as expressly modified herein, all other provisions, terms, and covenants set forth in the On -Call Agreement shall remain unchanged and shall be in full force and effect. Page 12 IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 3 on the date first above written. APPROVED AS TO FORM: OFFICE OF CITY ATTORNEY By: ettri . u emp, Assistant City Afto ney. for the City of Newport Beach ATTEST: $y: Leilani I. Brown, City Clerk Attachment: Exhibit A — Invoices for services CITY OF NEWPORT BEACH A Municipal Corporation By: Edward Selich, Mayor for the City of Newport Beach OIL WELL SERVICE CO.' By: Title: President Print Name: By. (Financial Officer) Title: Print Name: Page 1.3 t OR Well Service Cq. 1241 East ffumett ' Signal Hill, CA 90755 662-596-4501 Fax: 562-424-8026 E-Mail: rnatt@owsl.com , OIL WELL SERVICE /SAN EMPLOYEE OWNED COMPANY �I,,m0FNWPOKTUUCff hwolmNo. OOK33 LIM DErr Our lob A%.38"108 .m w. mursnaw. WdV CNB #11 65062-~ 11 "I toW •due is SLU-50 INVOR *m I 804 Oil Well Service Co. INVOR St?YtvR�ur CQ . 1241 East Burnett Signal Hill, CA 90755 562- 595 -4501 Fax: 562 -424 -8026 E -Mail: matt @ows1.com OIL WELL SERVICE IS AN EMPLOYEE OWNED COMPANY 1 CITY0PNEWPORTBEAC H invoke No. 00013345 ATIN: UM. DEPT Our Job No. 38 -"l03 949 W. 16ursn irr. wd18 CNB d11 AGREENUW IAG14279 SM RptB 163623-67625 NEWPORT REACH CA 926M r Customer Conv ,F r total due is.1ti595.00 ,� �SOti113' S 34S 40 W 135.00. 14588 2.0 DAYS I050.00 $2100 15 no a 135.00 $2a2 lA DAY 900:00 $'900 37.0 $cs n 292 00 $10804 tihbtotal • 18595: ' Oil Well Service CO. P05 1241 East Burnett . Signal Hill, CA 90755 11038 562 -595 -4501 Fax: 562-424-8020 $3700 &Wit: matt @6wsl.com it038 OIL WELL SEgWC€ IS AN EMPLOYEE OWNW COMPANY OF NEWPORT daroieo No. 00013322 TH.. DEPT OCa Job No. 35-"M LT]WACHCA92453 WdW .CNPflt sw s a 63612 -63W cmtomw erode is CIT589 Is 52395.00 INVOK G PUMP P05 6.0 DAIS 105&00 . VER SVi�'EI, 11038 3.8. DAYS 908:00 $3700 !1N CREW it038 Ks Hts 0. 3WAO 830240 S RCEL4RGE 11038 1.0 on* 135.60 $135 Oil Well Service Co. y 5 1241 East Burnett Signal Hill; CA 90755 562 -595 -4501 Fax: 562-424-8026 E -Mail: matt @owsl.com OIL WELL SSVWCE IS AN EMPLOYEE OWNED COMPANY F Y of NEWPORT REACH kwoloa No. 00013425 TN: UDL..DEPT Oar Job No.38-I.-0111 . W.- 1611T'STREET. 'wdw cm fit REEbfBNT 9 AG14M Svc Rp& 65068 -65074 W'. 1 INVOII PUMP SURCHARGE nw- V. Ci W stofv 81 due b 35a 4.0 DAYS MO-00 1.5 Una 135.00 74.5 Bra 48 292M 1 a1 Y Olt Well Ser0ce Co. } 1241 East Burnett CO- Signal Hill, GA 90755 562 - 595 -4-604 Fax: 5o2-424-8026 E-Mal: matt @vws4.com . at WELL 3MV1IWJSAIVMPIOYffOWVMCOMPAAfY �1 .00 a j}btOW : x1567.8 n 00 W ®A service Co. INV il $o s1241 Hl CA 65 562 - 695 -4501 Fax: 562-424-8026 Edi ed: matt@owsl.com CWT OF NEWPOBT AR&M . Iaa®ioe No. @®ate ATM. iP$L., AWT CWr Job M. 90 W. lowr emuwr. wem #1@ 1 EFYPQBi WAMCA 4im a Q-'J i 3N /r Your eusFU�oF his. CI358 Yom Subto BI : 2782.56