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HomeMy WebLinkAbout1965-10-06 Council MinutesCITY Olt' T{t'Nia AGi-IDA REGULAR MEETING OF THE CITY COUNCIL 7:30 P.M- OCT, 60 1965 A. Roll 0211 •—•A. PER6ONS SCHLDULET TO BE H`,,ARD. This has been eliminated from thin meeting so that time may be ffiven for Union -Marathon natural gas negotiation. C. MINUTES I Special Meeting: of the 24th � • %Special Meeting of the 29th v !Regular Meeting of the 15th ✓ .P�D. CORRESPONDENCE --IS, REPORTS This will be eliminated from this meeting so that time may be given for Union -Marathon natural gas negotiation. F.UNFINISHED BUSINESS. \ i 1. Receive report at 7:30 on final papuexit of construction obligations on the Airport Hunway project. 2. At b:00 enter into negotations with Union.iMarathon for purchase of natural gas. G. NW BUSINESS. No other business will be scheduled for this ineeting. KENAI CITY CAUNCIL MINUTES — 6 OCTOBER 1965 Members present - Cheater Cone, Bud Lofstedt, Billy McCann, Roger Meeks, Gene Morin, Carl Seaman and Mayor James G. Dye. City Atty. James Fisher, Also presents City Mgr. James W. Harrison,/Airport Consultant Gene Roguszka, Airport Mgr. Red Jaynes, Engineers Harold Galliett and Allan Corthell, R. W. Beck 6 Associates representative Leon Spencer, Planning Commission Members and Airport Commission Members. Persons were not scheduled to be heard at this meeting as Council wanted to concentrate on Union Oil - Marathon Proposal. Anyone wanting to be heard will be scheduled for the next regular meeting. Minutes of the special meeting of 24 September were approved. Minutes of the special meeting of 29 September were approved. Minutes of the last regular meeting, 15 September were approved. The City Mgr. reported on a meeting with Cosby Steen, Dept. of Hwys. Council agreed to a special meeting with him on 13 October, S:00 p.m. to study Highway Planning. The Planning Commission will also attend, Agenda - F - 1: Corthell's letter recommending final payments to M-K Co. and English Electric Co.,• plus:.a :time extension for the latter, was read. FAA has inspected both projects and has signified approval. The Electric contract went overtime 12 days due to delays in transportation of materials. Seaman moved, Morin seconded to approve the 12 day extension for English Electric. Motion passed unanimously. Roguszka presented a financial report showing the position of Airpor- Said:reperv-id included in these minutes. Briefly, the City will be underwriting expenses of $719800 until final audit is made by FAA at which time FAA will then reimburse the City $73,334. Three alter. nates Reref•s$ted:fdr meeting these obligations: 1. Land Assets - Land certificates for lots in Baluga S/D can be granted; 2, 1/2 of the#22,000 for land for the South approach can be traded for other lands - the owners have agreed to this; 3. The City can borrow $509000 against the Airport account receivable of $73#000. Therefor Roguszka recommends final payments be prepared for M-K and E.E. and to negotiate with English Electric for land credits, as the latter has already signified a willingness to accept some land in lieu of cash. Seaman moved, Meeks seconded, to pay M-K the final $41,389.24.: Motion -passed unanimously. The City Mgr. recommends trade for land, not land certificates It was agreed not to offer land to M-K, as this was never discussed with them. Cone moved, McCann seconded, to pay English Electric one way or another, whatever is satisfactory to him. Passed unanimously. The project cannot be completed this year, but it is possible FAA will advance a partial payment, less 5#, on a partial audit basis. It is possible the City will have to arrange a loan for 12 months, tho' this will be avoided if at all feasible. Harrison reported his trip to HHFA in Seattle met with every success All their requirements have been met; W&S should be supported by the Airport; The $10,000 can be lease money; only Airport money should be used to support the Airport until the $52,000 is acquired. An opinion will be needed from Thorgrimson saying an election is not necesdary; Durkee says it will take two weeks to get the reques, to Washington, and another two weeks there for final action. The AE-4k i Kenai Counc Minutes rl, , ' 10/6/65 Page two City should get an architect, allowing for winter construction, so when approval comes thru we can advertise. Harrison thinks Hobbs trip to Kenai was of great benefit to the City in getting action on our requst for Terminal Bonding as PNA informed Hobbs, when he was here, that jets absolutely could not operate on gravel,and they would have to be in a new building by May. The site is ready for footings to be poured. The Atty. will study the Charter to see allowance for time for letting contracts, notification of invitation to bid, etc. Agenda Item, F-2s Negotiations with Union -Marathon for purchase of natural. gas. The Mayor requested the audience to take note of questions arising, and to present them in written form when called for, other- wise the proceedings will be confined to discussion between the Oil companies, Attorneys, Council and City Mgr, Cliff Dunham of Union Oil presented Mr. S. Co Sandusky,.Mgr., Natural Gas Division, Domestic Production, Marathon Oil Co., Findlay Ohio, and Mr. Eugene F. Griffin, Gas Operations Supervisor, Union Oil Co. of California, Los Angeles. The Attorney cautioned all speakers to speak into the mike, to speak clearly and one at a time. Mayor Dye reviewed points to be discussed; Price of gas at delivery point, number of taps, quantity to be sold, cathodic pro- tection, favored nations clause, third party considerations, odori- ;.ation, etc. Mr. Sandusky says selling to Kenai is keyed to a reasonable contract; their proposal does not give as much as they had talked obout some months ago, and they cannot agree to our proposal. Mr. Griffin says they are here to negotiate, but there are some problems they cannot go beyond. It was agreed to start with the City's proposal, and to con- sider price first as all else hinges on that. Discussion on gas sold to Anchorage Natural Gas as compared to gas sold to Kenai. They do their own cleaning, dehydrating, etc. This would be done before delivery to Kenai. Sandusky: Suggest Kenai accept their price schedule plus a favored nations clause: this starts at 261, with esculations of iC every four years up to 300 in 20 years. Price is not negotiable except for differential. Seamans This is too high. We should have a lower price to offer residential consumers than that which is offered to Anchorage residents. Sandusky: There's no favored nations with Anchorage Natural Gas or Alaska Pipeline; cost of gas to Kenai consumers should be lower unless cost of distribution brings it up to equal cost to the Anchorage consumer, due to Kenai's large distribution area. Attorney: Are you prohibited from an experimental price by prior agreements? Sandusk,ys No. It is just not prudent to do it because of the adverse economical effect. The favored nations clause would relate to Alaska Pipe contrrc or the Military --favored nations effective on lower price, not an increase. Favored nativne applies to any similar sale. Attorneys The Mayor and Seaman pointed out the City's hope that Union would do the very best possible for Kenai when we were talking right-of-way, etc. All we want is a good chance to get started, to offer cheap fuel to industry. It's the same as Union - Marathon going to the Borough and asking for a tax incentive con- sideration. Kenai City uncil Minutes 10/6/65 page three Dunham: At 25C they are operating in the red. Griffins It's not the lass of rev'enuo they are concerned with, Other contracts make it difficult. Mayors We were talking, 200 gas before, not 260. It was decided to take up another issue since price could not be agreed to for the present. Speakers from the floor were: Ruby Coyly, John Morris and Harold Galliett. Delivery i'ointss The City wanted three= they offered one. Sandusky: Multiple delivery points might give them trouble from the Public Service Commission. After considerable discussion, they agreed to three delivery points with the understanding two of these might be cut off, with reasonable notice,if the P.S.C. steps in. Taps might be more difficult to install later. High pressure hot taps come rather high; there's no equipment for this inthe State. Union pays for the taps because they would be before the delivery point. The Beaver Loop tap for Hood Corporation is not suitable for the City. A fourth tap might be made later, at their discretion as to time. On the basic transmission line, nathodic protection is their respon- sibility on the up stream side of the flanges downstream it is the City's responsibility. $1000 to $1200 is estimated cost of equipment for each station - a I 2° tap. Galliett: the buildings, etc. cost 10 times bare equipment. -. Discussion on effective date of contracts Mayor asks for five years: Union and Marathon set 1 January 1969 as deadline for activating contract, with an extension by mutual agreement. For instance, if in thg. Fall of 068 the City has shown earnest effort to distribute gas,�but needs more time to be in business by the next January, an i extension could be negotiated. A recess was declared at this time to change the tape on the record- er, but mechanical difficulties prevented further recording. As Mr. Griffin noted, "Now, let's talk", Council and audience experienced a lessening of tension. Service Areas Mayors Could the City buy gas from a third party for a service area if Union could not furnish it? We buy from them up to 7500 mcf per day. The City does not want them to sell to any one in this service area without letting the City have first chance at it. They may not be able to do this because of contractual agree- ments. They cannot sell within 150 miles of the pipeline without getting A.P.'s permission. Inside the City, this doesn't count, but outside the City is covered by the contract. They cannot set us up to an exclusive franchise to a certain area. The City would com- pete with A.P..to sell to Wildwood. Attorneys First Class, Charter City can do anything not pro- hibited by law. The State Statutes give Cities power to go outside City Limits. Union can do with the City what they could not do with any other kind of entity. Sandusky: Even if it were possible they probably would not want to do it,- they have to look after A.P. interests, too. They do not have any control over that pipeline. They do not think they can guarantee Wildwood station to Kenai. That's the one thing they Kenai City.---ouncil Minutes 10/6/65 Page four cannot do. Anchorage Natural Gas has asked them for the right to tap this new line. Union -Marathon said okay, in limited quantities, at $.285 They do not want to put A.N.G. or the City at a competitive disad- vantage. The terms offered to the City would have to be offered to A.N.G. also. Mayors If the City wanted to sell gas 8 miles out the road, would they sell gas to us? Sand: they would negotiate with us. McCann: Lets Forget all this. You build us a terminal and we will all part friends. City Mgr.: Since Union -Marathon seem to be so bound by prior agreement with A.P4 and A.N.G., and the City is repeatedly asking for things that do not seem possible, it does not seen unreasonable for the City to ask to see the contracts with A.P. or A.N.G. Would they consider allowing us to look at them? Griffin: You can see the clauses that are pertinent. Atty. Fisher studied Art. Three. [A.P. contract?] Mayors Isn't it true a representative of Union Oil is pushing for passage of the P.S.C. Bill in Juneau? Dunham: Not to my knowledge. Mayors In order to sell bonds,the City must be able to show enough revenue to a least pay for interest on bonds--Wildwood would do this. The City doesn't expect gas distribution to be a money- maker, just to pay its own way. We want to attract people to live here by providing schools, recreation facilities, library, etc. and cheap utilities.. The City's purchase of electric utility helpd bring the price of power down on H.E.A..lines; cheap gas for Kenai might do the same. The City might consider stopping transmission of-. gas if they cannot talk better than what has been said. The City granted a r.o.ws in good faith that a 20t, or at the most a 21t gas would be offered. Atty.: The City,being a let Class, Charter City, etc., can protect Union Oil by providing an "umbrella" should they do what we ask re W/W. Griffin: Maybe we should just pay the City a lump sum and forget distribution. Morins How much? Griffin: What's reasonable? Morins Oh, $100,000, Griffins That's too much. Sandusky: Well, we can't turn back the clock; we have two ways to go; either there's some way we can take advantage of your being a first class City or we work out our problems with A.N.G. The problem is: Price and Wildwood. They would appreciate a con- tract from us showing how the City can protect them for us serving W/W. They anticipate a new contract with A.N.G. and maybe, just maybe, something can be worked out. They are willing to try to solve this problem, and feel they have a moral commitment to the Cit The Atty, will get a brief summary of Alaska Law to them on First Class Cityy's powers; i.e. taking utilities outside City Limits The City thinks if we had a contract it would have a foot in the door opposing any application for a Certificate of Convenience and Necessity that might be tendered by a competitor. An exclusive con- tract to serve a certain area would be even more advantageous. Time is important because of this P.S.C. bill. (Griffin) Quantity: /7500 mcf's a day was figured to include W/W's needs, but it might be increased. The City might have right of call for any qunatity as long as they4have not pledged their reserve. A.N.G. Union -Marathon Kenai Couni'�' Minutes 10/6/65 Page five has the right of first refusal for sale of exessive reserves of gas. Sale of additional gas is a problem and is subject to the prior con— tract unless it's to be used in the City Limits. The present offer to Kenai is 7500 mef a day --they estimate needs, with W/W to be 4100 mcf a day, which allows considerable lee -way. City Mgr.: We need to ascertain the need from W/W, and must be able to make them a concrete offer as they are delaying action on other considerations. There was considerable discussion on escalation and favored nations clause. Back to price. Seaman: In order to protect you with your prior contracts, why not contract with the City for $.26 gas and pay the difference to the City as a r.o.w. fee? This set off a new chain of thought with a great deal more discussion. Sandusky: Summing up. The price of gas would be $.269 with a fav- ored nations clause; as long as it exceeds 21t9a r.o.wo fee would be charged equal to the difference between the price being paid and 210 times the Volume of gas sold, related to the contract. This might be considered. Griffin: we cannot commit the Company to open ended liabili- ties. It's too great a gamble. Seaman: The City is gambling, too. You say the Military will have 210 gas in a year or two --you will be getting off easy. So the discussion went: Lump sum paymnets, r.o.ws fees, contracts, esculation, favored nations, price to Liquid methane plant, etc. Most of it a repitition of what had gone before. Union -Marathon will see what they can do with Seaman's suggestion, and the City Atty. will outline the City's unique position of im- munity for extending utilities outside City Limits, The Mayor requested direction from Council as to the position of the City regarding an item on the Agenda for the next Borough Meet- ing, i.e. Tax Incentive Program for Union -Marathon. Council agreed all industry should have some tax consideration There should be a way to work out a formula so they would pay their share of the school debt, and yet be accorded reasonable relief for a period of a few years. Meeting adjourned, 2:15 a.m. Respectfully .submitted, J./L CervrtsJ106-4AO44inoi Frances Torkilsen City Clerk I f00�1 ADAMS • COFVTHELL • L eE • WINCE & ASBOCIA`T F-6 CONSULTING ENGINEERS A►►IWATin WITH ALAS11A TnTLA" 10" PO/T 110AC . ANCMORAOR. ALAD11A . DOW01 TWL.. 80 1.0770 not 0.2daM RR 7.0740 October 2, 1965 City of Kenai Box 560 ilz Kenai, Alaska Subjects Kenai Municipal AirportFAAP Project 9-50-098-01 Final payments to Contractors Attt Mr. James W. Harrison, City Manager Gentlemens The following matters are submitted for consideration of Council at their earliest conveniences 1. A request of English Electric for a time extension to their contract for the construction of the Medium Intensity Fighting System, Reference is made to our letter of September 20, 1965, for background Information relative to this matter. 2. The processing of final payments to English Electric and Morrison- Knudsen Company for their completed contracts. Attached herewith are Certificate of Release forms to be completed and executed prior to issuance of final payments. With reference to the first item, the General Contract Provisions, Paragraph 70-06, state that ---"In adjusting the Contract Time for the completion of the project, all strikes, lockouts, unusual delays in transportation, and any suspension ordered by the EnginAer for causes not the fault of the Contractor, shall be excluded from the computation of the Contract time for completion of the work."---. It it our recommendation that English Electric be granted a time extension in the amount of 12 days, for unusual delays in the transportation of materials. Very truly yours, A -CO E- nd Assoc. Alan N. Corthell, P.E. RI=4ARQ a. Acw. P. a. MAN N. COXYm .L. P. a. I ^RWV R. Lim. P. a. wRANK W. WIPIM P. a. Venal ittntaipsl -%irf ort riit'ktart fund . :,r,Qgjp lad/G/65 Wort Yund .agiteking, -.%aaa at �/�1/�!; ±F ,�'•�7�.���i tjLs iAosipt►s for »:etittimeer Igo 1W: 1 1"'GaVened Tim ;iEr Xi4iFdSF. 25 OLIO 410+ M►iNJiL1MN.Y. Ir+Alr �. .... Gross uhsoki"C, r:c+e(ruaet to 9/31)/155 i 'st i4xv*%W1trvrew rorr ""optf tawr 1gp�r "48aG72.4sw.� �..�.�................ 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