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HomeMy WebLinkAboutPR 14869: PREMCOR REFINING GROUP (COEX II EXPANSION PROJECT, GASIFICATION PROJECT AND THE EXISTING PREMCOR (VALERO) UNITS (2008-2019)interoffice MEMORANDUM To: Mayor, City Council, and City Manager Frorn: Mark T. Sokolow, City Attorney ~~,~,,,~( Date: August 8, 2008 Subject: P. R. No. 14869; Council Meeting August 12, 2008 Attached is P. R. No. 14869 approving the financial payment clauses and the electrical usage section of the proposed Industrial District Agreement with Premcor Refining Group for the C:OEX .CI Expansion Project, Gasification Project and the existing ]?remcor (Valero) units (2008-2019). This does not include the payment clauses as it pertains to the Chevron Facilities. The City and the Valero representatives are still discussing these proposed clauses. If these are any changes, you will k~e notified thereof. MTS:ts Attachment cc: Director of Finance Mike Eaves Carl Parker z.pr14869_memo P. R. No.. 14859 08/08/08 is RESOLUTION NO. A RESOLUTION APPROVING 'THE FINANCIAL PAYMENT CLAUSES AND ELECTRICAL 'USAGE SECTION OF THE PROPOSED INDUSTRIAL DISTRICT AGREEMENT WITH PREMCOR REFINING GROUP :FOR THE COEX EXPANSION PROJECT, GASIFICATION PROJECT AND THE EXISTING PREMCOR (VALERO) UNITS (2008-2019) WHEREAS, the City entered into a 1998 Industrial District Agreement with Clark Refining and Marketing, Inc., per Resolution No. 98-288; and WHEREAS, the City entered into a 1998 Industrial D_Lstri<:t Agreement with Clark Refining and Marketing, Inc. for a Heavy Oil Upgrade Project, per Resolution No. 98-289; and WHEREAS, the City entered a 2003 Industrial District Agreement with Chevron U.S.A. for the ethylene plant, per Resolution I~Io. 03- 355; and WHEREAS, the City entered ~~nto a 2003 Industrial District Agreement with the Premcor Refining Group, Inc. for the Hydrotreater Refinery Expansion (50,000 BPSD gasoline hydro processing unit), per Resolution No. 03-297; and WHEREAS, the City entered into a 2005 Industrial District Agreement with Premcor Refinery Group and the Port Arthur_ Coker Company, for the Refinery's Feed Rate Expansion Project and Decoker Expansion, approved per Resolution N0. 05-164; and WHEREAS, the City entered .into a 2005 Industrial District z.pr14869 Agreement with Premcor Refinery Group for the Tier II Diesel Project, per Resolution No. 05-165; and WHEREAS, the City approved a partial assignment of the Claz°k Refining and Marketing, Inc. "Irl Lieu of Tax" Agreement as it pertained to the Coke Handling Facility to Trans-Global Solutions, Inc., per Resolution No. 01-93; and WHEREAS, the City approved .a partial assignment of the "].n Lieu of Tax" Agreement as it pertained to the HOUP Industrial Agreement to the Port Arthur Coker Company, L.P., and to Air Products and Chemicals, Inc. per Resolution No. 99-174; and WHEREAS, Clark Refining and Marketing, Inc. and affiliates remained liable for the "In Lieu of Tax" payments to be paid; acid WHEREAS, Premcor (Valero) is planning a major refinery expansion project and other improvements on a portion of the tract that is owned by Premcor; and WHEREAS, Premor (Valero) now desires to enter into a new "In Lieu of Tax" Agreement with the City in regards to a $2,400,000,000 COEX II Expansion Project, which is expected to include the expansion of the refinery's Delayed Coker Unit, as well as tYle construction of a new 50 MBPD Hydrocracker, the construction of a new Saturate Gas Plant, the addition of Oxygen Enrichment t:o existing Sulfur Recovery Unit, and the construction and/or upgrade of various other related units, equipment, and rE=_finery infrastructure; and WHEREAS, Premcor is also planning a $2,000,000,000 z.pr14869 Gasification project; and WHEREAS, it i_s deemed in the best interests of the citizens of Port Arthur to approve the financial payment clauses of the proposed new Industrial District ("In Lieu of Tax") Agreement with Premcor Refining Group, Inc. for the COEX II Expansion Project:, Gasification Project and existing Valero units (2008-2019), i_n substantially the same form as attached hereto as Exhibit "A"; and WHEREAS, it is deemed in the best interests of the citizens of Port Arthur to approve the electrical usage section of the p:roposE:d new Industrial District ("In Lieu of Tax") Agreement with F?remcor Refining Group, Inc. so that the City will obtain additional electric franchise fees in substantially the same form as ai~tached hereto as Exhibit "B". WHEREAS, this does not include the payment clauses for the Chevron facilities, which still needs to be negotiated as the Chevron agreement approved per Resolution No. 03-355 is expiring this year. NOW THEREFORE, BE IT RESOLVEI) BY THE CITY COUNCIL OF THE CITY OF PORT ARTHUR: Section 1. That the facts and opinions in the preamble are true and correct. Section 2. That the financial payment clauses and the electrical usage section of the proposed Industrial District ("ICn Lieu of Tax") Agreement with Premcor Refining Group, Inc. _Eor the z.pr14869 COEX II Expansion Project, Gasification Project, and the ex:istin.g Valero units are approved (2008-2019), in substantially thE: same: form as attached hereto as Exhibi-t "A" and Exhibit "B". Section 3. That the City Manager and the City At:torne~y are herein authorized to negotiate the remaining terms and to bring the full Agreement back to the City Council for approval. Section 4. That a copy of the caption of this Resolution be spread upon the Minutes of the Corporation. READ, ADOPTED AND APPROVED o:n this day of A.D., 2008, at a 1~Ieeting of the City Council of the City of Port Arthur, by the following vote: AYES: Mayor NOES: MAY01~ ATTEST: TERRI HANKS, ACTING CITY SECRETARY APPROVED AS TO FORM: CITY ATTORNEY -- z.pr14869 APPROVED FOR ADMINISTRATION: CITY MANAGER z.pr14869 EXHIBIT "A" AGREEMENT (2008 TO DECEMBER 31, 2019) PROPOSED PAYMENT SUBSECTION'S FOR COEX II PROJECT, GASIFICATION PROJECT AND EXIST]CNG VALERO UNITS (b) the Parties agree that for the years 2008 through 2019, Premcor shall pay to t:he City of Port Arthur the following amounts for the existing improvements and for the COEX II Expansion: YEAR AMOUNT TO BE PAID BY PREMCOR TO CITY OF PORT ARTHUR PAYMENT DUE 1 $6,000,000* OCTOBER 15, 2008 2 $6,000,000 OCTOBER 15, 2009 3 $6,000,000 OCTOBER 15, 2010 4 $6,000,000 OCTOBER 15, 2011 5 $6,000,000 OCTOBER 15, 2012 6 $6,000,000 OCTOBER 15, 2013 7 $6,000,000 OCTOBER 15, 2014 8 $6,000,000 OCTOBER 15, 2015 9 $6,000,000 OCTOBER 15, 2016 10 $6,000,000 OCTOBER 15, 2017 11 $6,000,000 OCTOBER 15, 2018 12 $6,000,000 OCTOBER 15, 2019 *Premcor further agrees to pay an additional $6,000,000 in August 2008 (or within 20 days of the date upon which this agreement) is executed (c) With respect to the; above annual payments, and expressly subject to and on the condition that the $2,000,000,000 Gasification project is actually undertaken and completed by Premcor, the parties agree that the amount of Premcor's annual payments t~o the City shall also include an additional $1,000,000 per year in 2009 or thereafter, until 2019, relating to the Gasification project for a total of $7,000,000 per year for the existing Premcor improvements, COEX II expansion and Gasification project. If the Gasification project is actually undertaken and completed by Premcor, then this $1,000,000 additional annual payment will be due and payable beginning with the first October after twelve (1.2) full months have elapsed from the Gasification project's groundbreaking with "groundbreaking" being defined as the driving or pouring of the first pile relating to the construction of the Gasifier Reactor. The parties to this Agreement further specifically and expressly agree that, in the event Premcor elects to not undertake and construct the Gasification project, then Premcor shall :not be responsible for this additional $1,000,000 annual payment. (d) Once the agreement has been executed by all parties, Premcor agrees to i.nunediately commit to pay the City $200,000 to assist in the funding of a new community center. Premcor will retain this $200,000 until it: is actually needed by the Cit;Y for funding of the new community center; however, if' the City fails to utilize this $200,000 toward the construction of the new community center within two (2) years of the date upon which the agreement is executed by the: parties, then the parties agree that Premcor will not: be obligated to pay the $200,000 to the City. EXHIBIT "B" AGREEMENT ( 2 0 0 8 TO :DECEIVER 31, 2 019 ) PROPOSED SECTION FOR ANNEXATION OF SUBSTATIONS AND METERING SITES AS WELL AS THE RECEIPT OF ELECTRICAL FRANCHISE FEES Section 20. Electrical UsagEa. The Company has indicated that the Premcor facilities presently obtain all of their electricity purchased from :Entergy from the Gulf Oil Substation adjacent to Highwa;Y 82. The company has also indicated that the Chevron facilities presently obtain all of their electricity purchased from Entergy from the Taylor Bayou Substation adjacent to Highway 87. The Company will provide the City with information as to the electrical consumption from Entergy or from any other electric utilities, transmission a:nd distribution utility, municipally owned utility, ele~~tric cooperative or from any other source as well as all metering locations that service the area in Attachment "A". The company understands that the City plans to annex the Enter gy substations and the metering sites and the necessary adjacent land of the company so that a strip or si;rips of at least 1,000 feet can be annexed, as per Chapter 43 of the Local Government Code. The City will receive funds from Entergy or from other electrical providers of Section 33.008 Utility Code payments of $0.0016170 charge: per kilowatt hour ("k'Wh") multiplied times the number oi: kilowatt hours delivered to each retail customer whose consuming facility's poini~ of delivery is located in the Citty boundaries. Ordinance No. 06-90 dated October 29, 2006 allowed for an incremental surcharge of $0.0013777 charge to be assessed by Entergy, paid to the City of Port Arthur, and collected from customers in the City of Port: Arthur. If the Compam~ is required to pay this incremental surcharge or additional ad valorem taxes to the City based solely on the annexation of these substations or metering sites, then the City will allow a credit thereof against future In Lieu of Tax payments for the year of payment.