|Updating Pipeline Franchise Stymies City
April 23, 2008
cities, Richmond faces substantial budget cutbacks this coming fiscal
year fed by recessionary trends, but the City Attorney’s office
continues to drag its feet in exploring one potential source of revenue
enhancement – a number of expired pipeline franchises. See West
County Times story following:
Expired deals mean missed revenue for Richmond
Article Launched: 04/21/2008 05:57:01 PM PDT
Richmond has lost out on thousands of dollars in revenue from companies that use public land because no one updated the city's contracts after they expired.
Most of the agreements expired in the 1980s or 1990s, assistant city attorney Mary Renfro said. One contract dates to 1965. The revenue from some of these agreements should be double to triple what is now charged.
"For some time, it appears no one in the city was taking the lead," Renfro said.
The city holds franchise agreements with companies that have pipelines and other infrastructure on public land to transport oil, natural gas, carbon dioxide and other products. Officials began sifting through files and dusting off the agreements, which were scattered in different departments, after City Councilman Tom Butt inquired whether the city was getting all the money it could from its pipeline contracts.
Many contracts are expired and must be updated, Renfro said. The companies have continued to pay taxes calculated under the old contracts.
Two pipeline contracts with PG&E automatically renewed, but officials will check to make sure the city is charging updated rates. On other contracts, it's unclear whether anyone is still using the pipelines.
The city has two contracts for trash service, both of which are up to date.
Richmond collected $3.4 million in franchise fees last year, but Butt said it should be more.
Opinions differ on whether city officials are limited to charging the rates set by the state Public Utilities Code for oil pipelines, which run through Richmond. Those rates are based on the diameter and length of the pipeline.
Renfro thinks the city is limited by the state. Butt disagrees and wants the city attorney's office to do more research to see whether rates can be based on the value of the product being carried through the pipelines.
"With oil at $114 a barrel today, my guess is there might be some money to be made here," Butt said.
Officials should take this opportunity to rewrite the franchise agreements into something that meets local needs.
"The best course of action is to start all over again. There's nothing there. You got a clean slate," Butt said. "Don't be in such a hurry to recommend renewal at current rates. You can make these pipeline companies come to you. You can adopt a model ordinance. It can cover a lot of stuff not covered in the existing ordinance, like safety and inspections."
The city attorney's office will do more research, including reviewing ordinances in Washington state that are considered well-executed, and report back to the council Finance Committee.
At the least, the city is entitled to an annual revenue boost for inflation, Renfro said.
Butt began asking for copies of the franchise agreements last year. When city staff members could not find them, Butt contacted the companies. He found the city's contract with ConocoPhillips expired in 2002.
The oil company wrote the city in 2003 and 2006 seeking to renew its contract without success.
Reach Katherine Tam at 510-262-2787 or firstname.lastname@example.org.
Expired Franchise Agreements
· AIRCO Industrial: Expired in 1989
· Bray Oil: Expired in 1983
· Chevron: Expired in 1999
· ConocoPhilLips: Expired in 2002
· PG&E: Expired in 2005 (renewal application has been submitted)
· Santa Fe Pacific Pipeline/Kinder Morgan: Expired in 1997
· Southern Pacific Pipelines: Three contracts, expiring in 1982, 1984 and 2000
· Standard Oil:
Contract surrendered in 1965; Chevron paying