Financial penalties are usually negotiated to help insure that the contract agreed upon is not broken by either of the parties involved.
One issue of many that I have with the city's agreement with Exxon-Mobil (Exx-Mo) is the overall annual averaging of the daily amounts being pumped through the pipeline.
There are real, on-going maintenance and safety issues as to why a daily flow restriction of 95K barrels was originally put on this pipeline.
Let’s say that the 95K barrel-a-day restriction is exceeded by, say, 5K barrels, and 100K barrels are forced through on a Monday.
Can anyone explain why pumping 90K barrels through the same pipeline on the following day (5K fewer than the restriction) reduces the danger we were living over on Monday when the flow restrictions were exceeded or why it makes us any safer on any other day of the year flow restrictions are exceeded?
Timely Fines
If Exx-Mo exceeds the recommended safety limits agreed upon, it should be fined for that day’s violation and not be allowed to “average out the danger” they put the citizens of Culver City through over a year’s time, as they are doing now.
Averaging Safety
Safety margins can ot be averaged out over time.
NASA found that out from the Challenger investigation when rogue physicist Richard Feynman proved beyond a shadow of a doubt that the redundancy of having the same three types of O-rings as backups in the shuttle’s exhaust manifolds did not give a 95 percent assurance of safety, but that they added to having a built-in, unacceptable 15 percent chance of failure.
Every time Exx-Mo exceeds the 95K barrel-a-day flow restrictions they weaken the structural integrity of this aging pipeline.
Ninety-five thousand barrels is just shy of 4 million gallons a day. There is an industry standard of acceptable loss in transporting oil through a pipeline of one-half percent. Where this one-half percent of crude goes, no one knows for sure. Exx-Mo just accepts it as a cost of doing business. It is built into its profit margin.
Drip, Drip, Drop
A one-half percent loss doesn’t sound like a lot, unless it’s a one-half percent of 4 million gallons, which comes to about 20,000 gallons of crude oil.
That loss is acceptably unaccounted-for after its 100-plus mile trip through Exx-Mo’s heated, high-pressure pipeline trip from its Lost Hills oil fields in the southern San Joaquin Valley, north of Bakersfield, all the way down to its Torrance refinery.
Culver City has about 2.7 percent of this 100-mile pipeline traveling under our city. That would mean that Exx-Mo could be losing about 540 gallons of crude somewhere beneath our city every day, and it would not be the least concerned over the loss.
Over a year, that could mean more than 195,000 gallons of crude could be seeping into the ground under our city. Could this be one of the reasons we no longer pump drinking water from our own wells?
S-l-o-w M-o-t-i-o-n Spill
I’m sure Exx-Mo would take responsibility for cleaning up any catastrophic oil spill, if it was their fault. But, by extending this agreement, does the city accept the responsibility of cleaning up this possible 195,000-gallon slow-motion oil spill under our city?
They Owe Their Souls to You-Know-Who
City staff chose to use the cities of Torrance, Long Beach, Los Angeles and Carson for pipeline fee comparisons. Torrance and Carson are, without a doubt, Big Oil company towns. They receive hundreds of thousands of dollars more from Exx-Mo in other fees and taxes.
So a low-ball pipeline fee is not going to hurt their civic bottom line much, especially if it is made up by Exx-Mo by its other charitable-like donations to the community throughout the year.
Why would staff choose to use two Big Oil company towns in making their comparisons and justifying Culver City’s own pipeline fees? It makes no sense. Torrance and Carson would skew the amount of fees Exx-Mo is paying other cities.
Comparing Okra and Oranges
If I were Exx-Mo and I wanted to maximize my profit by minimizing my pipeline fees, I would negotiate first with the cities with which I had a long, ongoing, cozy relationship and sweeten the pipeline deal off the record by promising still to be their Good Corporate Neighbor by continuing to donate to the city, schools and civic organizations in other ways.
I then would take these official, low-ball agreements and use them as examples when negotiating with other cities, to convince them that these were going-rates and what was fair.
You Blinked. I Win.
Exx-Mo’s threat of turning their Lost Hills pipeline into a common carrier was just that, a threat, a bluff. We folded. Let me explain why it was a bluff. Almost two-thirds of the crude oil capacity sent to their Torrance refinery (64.6 percent) goes under our city.
They cannot afford to lose that supply line to other companies’ usage. They need it to feed their own Torrance refinery so it can continue to produce about 10 percent of all the gasoline sold in California.
Exx-Mo could threaten to bypass Culver City altogether. It has the money. It has made record corporate profits each of the past 4 years. Last year’s profit alone was over $5 billion (more than 5,000 million dollars profit). Think about it. They could threaten, but, environmentally, it is not likely to happen.
Risk Factor
What kind of fees are we taking about possibly losing? A little over $100K and an annual increase of a COLA- a Cost of Living Allowance Increase based on the Producer’s Price Index.
The way I look at it, we simply can remain satisfied with the $100K plus the COLA or start renegotiating to receive our fair share of the hundreds of millions of dollars profit generated by Exx-Mo’s Torrance refinery.
An Offer They Couldn’t Refuse
Our City Council members were elected to do what is in the best interest of Culver City, and not in continuing to help subsidize Exx-Mo so it can go on reaping record profits.
Even though I didn’t always agree with the way Councilman Albert Vera did things, at least he got things done. At least he had some moxie in him and a dash of chutzpah.
It makes me wonder why Exx-Mo wants to start re-negotiating its new 2012 franchise agreement so soon?
Do they think they have an advantage over this newly-seated Council? That they have them set up right where they want them? That the City Council is divided and will blink again and back down when push comes to shove?
Let’s hope our current City Council can find the gumption during the up-coming Exxon-Mobil pipeline negotiations to really fight for us and get what Culver City really needs and deserves as its fair-share for having a portion of their pipeline travel under our city.
Let’s hope they can, for all our sakes.
