AGENDA MEMORANDUM

 

 

Meeting Date:           April 14, 2008

 

From:                          Harmon Bynum, Gas Engineer

 

Subject:                      Resolution Approving Termination of FGU PGP Gas Project

 

 

Staff Recommendation:

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

 

Analysis:

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.

 

Options:

1.  Approve a resolution authorizing termination of the FGU PGP gas project.

2.  Such alternative action as the Commission may deem appropriate

 


 

 

Fiscal Impact

 

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.

 

 

Submission Date and Time:    4/9/2008 6:28 PM____

 

Department:   Gas

Prepared by:  Harmon Bynum                         

Attachments:         Yes__X_   No ______

Advertised:   ____Not Required ______                     

Dates:   __________________________                     

Attorney Review :       Yes_X_  No ____

                                                

_________________________________           

Revised 6/10/04

 

Reviewed by: Dept. Head __JR______

 

Finance  Dept. __________________                                     

                              

Deputy C.M. ___________________                                                                         

Submitted by:

City Manager ___________________

 

Account No. _________________

 

Project No. ___________________

 

WF No. ______________________

 

Budget  ______________________

 

Available _____________________


 

RESOLUTION 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.

 

 

 

                                                                            __________________________

                                                                             Mayor

 

ATTEST:

 

 

__________________________

City Clerk