Richmond council OKs plan for new pipeline fees
on June 23, 2010
It was an arduous, slow-moving and at times painful step, but ultimately Richmond did inch closer Tuesday night to establishing a system of regulations on the city’s commercial gas, oil and water pipeline owners, a move that city council says could help untangle years of bureaucratic sloppiness and inject extra revenue into a city in dire need of funds.
City Attorney Randy Riddle presented the City Council with an update Tuesday on a proposed ordinance that would regulate and tax each of the city’s franchised operators of underground pipelines. The city is home to about a dozen companies – including PG&E, Kinder Morgan, Chevron and Praxair – that use underground pipes to move mostly oil and gases from the city’s port to refineries or warehouses, or to people’s homes. Currently, a number of these companies either have out-of-date franchise contracts with the city, or none at all. By not having such agreements with those companies, the city has missed an opportunity to re-assess their rates and ensure that the pipes are in good, working condition, Riddle said.
The council ultimately voted 5-0 in favor of moving ahead with the plan, a revised version of which should come back in front of the group sometime in July, but only after several hours of debate, which reached a crescendo when Councilman Nat Bates abruptly announced he was leaving the meeting in protest of its length. The council, which began its session at 6:30 p.m., did not vote on the pipeline matter until after midnight. Bates was counted as absent for the vote, although he announced earlier he did not intend to support the motion. Councilwoman Maria Viramontes abstained.
“I’m leaving,” Bates said to the council and the half-dozen or so members of the audience who’d gutted it out until the end. “We spend three hours patting people on the back,” – referring to a number of proclamations and recognitions the council made earlier during its session – “and then we keep arguing back and forth. This [council] is getting dysfunctional.”
Among its provisions, the ordinance, if passed, would charge companies a fee for the right to operate underground pipes inside the city limits. It would also establish the legal parameters for liability in the case of a leak, and would help the fire department create a more comprehensive map of the city’s underground network of pipes.
“This is not going to be a gold mine of revenue for the city,” Councilman Tom Butt said of the ordinance, “but it does have an opportunity to enhance our revenues. [Currently,] the city is not getting everything it could have gotten off these franchises.”
But while the ordinance does appear imminent, it isn’t being met with much enthusiasm from some in the business community, who call parts of the plan unfair and inconsistent with the pipe regulations imposed by surrounding cities.
“Nobody questions that the city needs a pipeline franchise ordinance,” Joshua Genser, an attorney with Point Richmond-based Genser and Watkins, LLP, said in an earlier interview. Genser, who spoke at Tuesday’s meeting, is representing natural-gas distributor Praxair, the Richmond Council of Industries, the Chamber of Commerce and the Richmond Country Club in negotiations with the city. “The only controversy is over the details.”
The most highly contested clause in the ordinance appears to be one in which the city insists that the pipeline owners shoulder all liability for potential damages to their pipes, regardless of who is found to be at fault for such damages.
“That means if there’s an accident, the city wouldn’t have to establish that the franchise was at fault,” Genser told Richmond Confidential, “even if it had nothing to do with the franchise. [The franchises are] willing to take responsibility for things that are their fault, but not for things that aren’t. Or in the case that it’s the city’s responsibility, they shouldn’t have to be liable for the city’s own screw-up.”
The City Attorney’s office has been receiving feedback on the plan from a cadre of pipeline owners for roughly a year on the specifics of the ordinance. Several companies have stressed that they object to a number of clauses in the proposed ordinance, particularly the liability provision.
Riddle said that at this point, ironing out the last few wrinkles in the plan falls on the council. “These are really policy calls now,” Riddle said. “Our interest is in coming up with something reasonable and something that protects the city’s interest. That’s a balance the council is going to have to strike.”
Among the other sticking points between the city and the pipeline owners are the length of the contract – businesses would like it to be extended longer than the proposed 10 to 15 years – and who would have to pay to dig up and relocate a pipe if the city or a developer were to build over one.
Councilman Butt downplayed the industry complaints. “[The pipeline operators] have had a free ride here for 50 years,” Councilman Butt said. “So it’s a shock for them to have some regulations after not having them for that long.”
The issue of creating a uniform system for regulating pipeline operators arose in 2007, when Butt began investigating the city’s contracts with pipe owners. To his surprise, Butt said, he found that several of the city’s agreements were out of date, and that the city had even lost a number of its contracts with pipe operators. The ordinance that the council is now considering is based on a similar ordinance passed in 2009 by the city of Redondo Beach – a model Genser said his clients aren’t thrilled with, either.
“It’s incredibly complicated,” Genser said of the Redondo Beach ordinance, which was passed in May, 2009. “These pipes are already regulated by the federal government, so you really can’t have them also being regulated by all these local jurisdictions. The city’s chosen the most complicated model possible, and we all would have preferred they use a simpler one.”
Genser pointed out that a pipeline that runs from the Richmond Port to the Shell oil refinery in Martinez passes through four cities, as well as unincorporated Contra Costa County – meaning the owner is subject to five potentially different sets of regulations and taxes.
“That’s why it’s important that none of those [cities] impose a really extraordinary burden,” Genser said. “They have to more or less be the same.”
Butt acknowledged Genser’s concerns, but in his typically clipped style, pointed out that in the end the city has all the leverage in negotiating new fees. “They’re doing their jobs, and we’re doing our job,” he said of the extensive back-and-forth between the city’s lawyers and the pipeline operators’. “Luckily, we’re the ones that get to make the rules.”
In other business Tuesday evening, the council heard a presentation from State Sen. Mark DeSaulnier (SD-7), who represents parts of northern Richmond, on the status of legislation his staff has introduced in Sacramento. Several council members thanked the senator for coming to the meeting, and Bates pointed out that in his memory, only two other state legislators had ever sat in on a Richmond City Council meeting.
Among the concerns aired to State Sen. DeSaulnier was the status of AB-32, the state’s climate-change legislation that calls for an overall reduction in greenhouse gas emissions to bring the state into compliance with the Kyoto Protocol. Vice Mayor Jeff Ritterman also asked that the legislator consider placing a tax on soda, and Councilwoman Viramontes voiced concern over the state’s plan to shift a number of inmates from state prisons to county facilities.
Earlier Tuesday, the council recognized eight separate groups or people with awards and proclamations. Congratulations were bestowed upon Ramiah Davis, a recent graduate of Hercules High for receiving a $1,000 college scholarship from the Friends of the Richmond Public Library; Texanita Bluitt and Arne Kasendorf for receiving national certifications as housing commissioners; Don Bastin and Clementia Diaz, both of whom recently retired after long careers working with the Richmond Museum of History; CJ’s Barbecue and Fish as the city’s Small Business of the Month; Pastor Kevin Hall for his 16 years of service at St. John Missionary Baptist Church; the Richmond Convention and Visitors Bureau and the Courtyard by Marriott hotel for their contributions to rehabilitating the city’s image; Everett Jenkins, a senior assistant city attorney, for receiving the West Contra Costa County YMCA’s Humanitarian of the Year award; and the 23rd Street Merchants Association for its work organizing this year’s Cinco de Mayo parade.
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