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City Seeks Shorter Time Frame on Oil Pipeline Deal

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By Jonathan Friedman
Associate Editor

July 8, 2014 -- Continued operation of an underground pipeline that has been flowing crude oil through Santa Monica for nearly 75 years will be before the City Council on Tuesday.

The council will consider a 10-year franchise agreement with Crimson California Pipeline LLC, which is half the amount of years City staff proposed at a meeting in March. Council members said at the meeting they wanted a shorter time period for the agreement.

“I’m comforted to understand this pipeline has now been reviewed, its safety confirmed, its age not yet a problem, that we understand the value of the land and the property where the pipeline runs,” Council member Kevin McKeown said at the meeting in March. “But even 10 years is a long time. And I think taking a look in another 10 years makes sense.”

The approximately 85-mile-long pipeline stretches from Ventura County to an oil refinery in South Los Angeles. Crimson has separate agreements with each of the governments of the areas where the pipeline is located.

The Santa Monica portion of the 10-inch-wide steel pipeline stretches for 3.9 miles along large portions of 26th Street, Cloverfield Boulevard and 23rd Street as well as small portions of Colorado Avenue, Ocean Park Boulevard and Dewey Street.

The proposed agreement calls for Crimson to pay the City $103,000 to cover a franchise fee and administrative costs. Also, the company must pay any costs arising from an oil spill or release and maintain insurance coverage of at least $45 million.

The council could reject a franchise agreement, but Public Works Director Martin Pastucha wrote in a staff report that this action would not necessarily prevent Crimson from using the pipeline.

“Should a franchise be rejected, Crimson, operating as a regulated common carrier pipeline utility, may have eminent domain and other rights under state law that may allow it to continue to operate the pipeline,” Pastucha wrote.

A few public speakers raised some concerns at the March meeting, including about the condition of the pipeline that has been operating since 1941.

School board member and Pico Neighborhood Association Co-Chair Oscar de la Torre noted Crimson paid $1.75 million two years ago to settle a criminal case regarding a 2010 oil spill at the Port of Los Angeles.

After the pipeline’s installation, the City went into a 40-year agreement with then-operator Shell, according to Pastucha’s staff report. The agreement was not extended when it was up for renewal in 1981, but rather it continued operating while the City and Shell fought in federal court over the franchise fee, according to an article published in the Los Angeles Times in 1989.

The City and Shell settled their differences in August 1989, according to The Times, when the company agreed to pay the City $2.1 million upfront and $12,000 per year for the next 20 years as part of a new franchise agreement. Shell also raised its insurance coverage.

Shell sold its rights for the pipeline and the franchise agreement to Crimson in 2005. Although the agreement expired in 2009, Crimson has continued to operate the pipeline in accordance with the regulations set in 1989, according to the staff report.

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