Staff recommends approval of a resolution authorizing the termination of an agreement between Public Gas Partners (PGP) of Atlanta, Georgia, and Florida Gas Utility. The agreement was authorized by Resolution No. 7240 November 8, 2004.
Florida Gas Utility (FGU) is responsible for purchasing natural gas for the City. The City of Leesburg, along with several other cities in Florida, is a participant in the PGP Project of Florida Gas Utility (FGU).
The intent of the FGU agreement with PGP was to acquire natural gas reserves as one way of hedging the increasing and variable cost of natural gas. The reserves sought were to be Proved Developed Producing (PDP) reserves. Because of the difficulty in acquiring PDP reserves, the other partners in PGP now wish to lower the contract requirements to Proved reserves. This increases the risk factor of the project.
All of the FGU participants together only amount to approximately eight per cent (8%) of the total PGP project. The time and amount of work demanded of the FGU staff no longer makes this project cost effective.
In order for FGU to terminate the PGP Project, all participating member cities must terminate their respective agreement.
1. Approve a resolution authorizing termination of the FGU PGP gas project.
2. Such alternative action as the Commission may deem appropriate
The City is responsible for a share of the organizational costs of FGU joining Public Gas Partners. Total FGU development costs are just over $200,000. FGU has negotiated a settlement whereby other PGP members will take assignment of FGU’s interests in the project, and PGP will pay FGU $270,000. After paying any legal fees associated with terminating the project, the remaining funds will be distributed to the FGU member cities based on their participation level in the project.
Prepared by: Harmon Bynum
Attachments: Yes__X_ No ______
Advertised: ____Not Required ______
Attorney Review : Yes_X_ No ____
Reviewed by: Dept. Head __JR______
Finance Dept. __________________
Deputy C.M. ___________________
City Manager ___________________
Account No. _________________
Project No. ___________________
WF No. ______________________
A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF LEESBURG, FLORIDA APPROVING TERMINATION OF AN AGREEMENT BETWEEN PUBLIC GAS PARTNERS, INC., AND FLORIDA GAS UTILITY; AND PROVIDING AN EFFECTIVE DATE.
BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF LEESBURG, FLORIDA:
THAT the City of Leesburg, in accordance with Resolution No. 7240 adopted by the City on November 8, 2004 (the “Resolution”) approving the form of the PGP Gas Supply Agreement, with the proposed form of the Natural Gas Production Sharing Agreement for Gas Supply Pool No. 1 (the “Production Agreement”) by and between Public Gas Partners, Inc. (“PGP”) and Florida Gas Utility (“FGU”), as amended, attached thereto, hereby approves the termination of the PGP Gas Supply Agreement and its obligations under the Resolution and the PGP Gas Supply Agreement, and releases FGU from all obligations thereunder, to be effective upon the effective date of the assignment of FGU’s interest in the Production Agreement to the members of PGP or pursuant to the terms of such assignment. The officer or officers authorized in the Resolution are hereby authorized to execute and deliver a formal termination and release of PGP Gas Supply Agreement, if requested by FGU.
THAT this resolution shall become effective immediately.
PASSED AND ADOPTED by the City Commission of the City of Leesburg, Florida, at a regular meeting held the 14th day of April 2008.