Article XIII — MANAGEMENT OF OIL PROPERTIES

Section 1300. - DEPARTMENT OF OIL PROPERTIES, ADMINISTRATION—OIL CONTRACTS.

(a)

There is hereby created a Department of Oil Properties. This department shall consist of a Director of Oil Properties and such employees as the City Council may provide for in the budget. The Director of Oil

Properties shall be appointed by the City Manager and confirmed by the City Council. The Director of Oil Properties shall appoint, with the approval of the City Manager, all members of the department.

(b)

Subject to the supervision and control of the City Manager in all matters, the Director of Oil Properties shall have charge of and be responsible for the administration of the drilling for, developing, producing, extracting, processing, taking or removing, storing and disposing of oil, gas and other hydrocarbon substances by the City to the extent reserved to the City in any and all leases, contracts or other agreements between the City and other persons, firms, corporations or associations pursuant to the provisions of this Charter. The Director of Oil Properties shall also have charge of and be responsible for the administration of all subsidence control and pressure maintenance programs, and shall perform such other duties as may be required by this Charter, by the City Manager or by ordinance adopted by the City Council.

Sec. 1301. - OIL PRODUCTION.

The power of the City to drill for, develop, produce, extract, process, take or remove, store and dispose of oil, gas and other hydrocarbon substances, of whatsoever kind, from, under, across or through any and all lands including all tide and submerged lands, whether filled or unfilled, and whether such lands belong to the City, or whether such lands be those in or from which the City now or hereafter may have said rights, shall be exercised by such means, or methods, or in such manner as the City Council may authorize.

Before such power may be exercised as to tide and submerged lands, whether filled or unfilled, or as to such lands as are held subject to the tideland trust, the City Council, as to such lands outside the Harbor District, and the Board of Harbor Commissioners, as to such lands within the Harbor District, shall first determine, by resolution, that such lands, or parts thereof, intended to be so used are not required, and with reasonable certainty will not be required, for a period of thirty-five (35) years or for such term or period of the lease, contract or other agreement between the City and other persons, firms, corporations or associations pursuant to which such powers may be exercised and relating to such lands or parts thereof, for the promotion or development of commerce, navigation, recreation or fishery.

With respect to tide and submerged lands, whether filled or unfilled, if the City Council shall elect to drill for, develop, produce, extract, process, take or remove, store and dispose of oil, gas and other hydrocarbon substances directly by its own employees and under its own supervision and direction, or by agreements with other persons, firms, corporations or associations, whereby the City shall pay a cash consideration for the performance of such agreements, said City Council may commence and prosecute such operations by using monies derived from, or allocated or assigned to, or attributable to production, from or allocated or assigned to all tide and submerged lands granted to the City by the State of California and to any lands within the City limits belonging to the City and which were purchased or acquired, in whole or in part, by use of tideland trust monies.

Sec. 1302. - COMPETITIVE BIDDING FOR OIL PRODUCTION RIGHTS.

(a)

The City Council may authorize and direct the execution of leases, contracts or other agreements between the City and other persons, firms, corporations or associations to drill for, develop, produce, extract, process, take or remove, store and dispose of oil, gas and other hydrocarbon substances from, under, across or through any and all lands including tide and submerged lands, whether filled or unfilled, belonging to the City, or such lands in or from which the City may now or hereafter have said rights for the term or period in each instance not to exceed such as provided by law.

Any such lease, contract or other agreement referred to above shall be made and entered into with the highest responsible bidder upon competitive bidding in the manner and form as shall be approved by said City Council, after publication of notice calling for bids in a newspaper of general circulation within the City.

All specifications and forms for the purpose of inviting bids in connection with such leases, contracts or other agreements relating to tide and submerged lands, whether filled or unfilled, shall be approved by the State Lands Commission prior to publication of notice to bidders. All such leases, contracts or other agreements shall be of no effect unless and until approved by said State Lands Commission. All such leases, contracts or other agreements shall include all provisions necessary to assure compliance with the requirements of applicable laws of the State of California, including Chapter 29, Statutes of 1956, First Extraordinary Session, and Chapter 138, Statutes of 1964, First Extraordinary Session, or such as may be lawfully required by subsequently enacted legislation, as such legislation is, has been or may hereafter be construed by the courts having jurisdiction thereof. No such leases, contracts or other agreements shall be modified or amended in any respect without the advance consent of said State Lands Commission.

The City Council may authorize the execution of any such lease, contract or other agreement between the City and other persons, firms, corporations or associations, including such lands, other than tide and submerged lands granted to the City by the State of California, in a community lease embracing adjoining lands not belonging to the City without such competitive bidding.

Notwithstanding the competitive bidding requirement hereinabove provided, the City Council may, by negotiation and without resort to competitive bidding, extend the term of any lease, contract or other agreement providing for the drilling for, developing, producing, extracting, processing, taking or removing, storing, and disposing of oil, gas or other hydrocarbon substances, and in connection therewith, amend and modify the provisions, conditions and limitations thereof, including any provision for the division of the proceeds from oil and gas operations conducted thereunder, concerning the lands above referred to, except as to those leases, contracts or other agreements relating to the exploration and development of the tide and submerged lands granted to the City by the State of California; provided, however, that any such extension of term, including the existing unexpired term of any such lease, contract or other agreement, shall not exceed twenty-five (25) years.

The power of extension hereby conferred is in addition to all other powers possessed by the City Council with respect to any such lease, contract or other agreement heretofore entered into and this subdivision is not intended, nor should it be construed, as divesting or in any manner diminishing any power which the City Council now has, with respect to matters not involving an extension of term, to amend or modify any such lease, contract or other agreement for the remainder of the term hereof.

(b)

Notwithstanding the determination requirement contained in the second unnumbered paragraph of Section 1301 or the limitation as to term contained in subdivision (a) of this Section, the City Council may enter into cooperative or unit agreements with respect to the lands or any interest in lands referred to in subdivision (a) of this section, all as more particularly hereinafter provided.

Whenever the City Council determines by resolution, that it is in the interest of safeguarding life, health, welfare or property, or that the subsidence or sinking of any of said lands or abutting lands may possibly be arrested or ameliorated thereby, or that it is in the interest of increasing the ultimate recovery of oil or gas from such lands or of the protection of the oil or gas in said lands from unreasonable waste, provision may be made in any lease, contract or other agreement so as to provide, and any existing lease, contract or other agreement may be amended so as to provide, that any such lands may, at the direction of the City Council, be included in a cooperative or unit agreement with other lands belonging to the City, or with other lands not belonging to the City, for the purpose of bringing about the cooperative development or operation of all or a part or parts of the oil and gas field in which such lands are located, or for the purpose of bringing about the development or operation of all or a part or parts of such field as a unit, or for the purpose of fixing the time, location and manner of drilling and operating of wells for the production of oil or gas, or providing for the return or injection of gas, water or other substances into the subsurface of the earth.

In the event the City Council determines that any such lands, including lands not subject to any lease, contract or other agreement, should be included in such a cooperative or unit agreement, the City Council shall have the power to negotiate and authorize the execution of all agreements necessary to effectuate, implement or modify such arrangement, including the power to bind and commit any such lands to a cooperative or unit agreement for the full term thereof and irrespective of the termination date of any lease, contract or other agreement then in effect as to such lands. The term of any such cooperative or unit agreement may be for such period or periods, including indefinite periods, as the City Council shall determine, and the competitive bidding provisions in this Charter prescribed shall not apply to the making, implementation or modification of any such cooperative or unit agreement.

The provisions of any existing lease, contract or other agreement between the City Council, the Board of Harbor Commissioners or the Board of Water Commissioners and any other person, firm, corporation or association relating to the drilling for, developing, producing, extracting, processing, taking or removing, storing and disposing of oil, gas or other hydrocarbon substances derived from the lands which are subject to a cooperative or unit agreement may be amended, by negotiation and without resort to competitive bidding, to the extent the City Council shall determine is necessary or desirable in order to institute or effectuate such a cooperative or unit agreement; provided, however, no such amendment and no such cooperative or unit agreement nor any subsequent modification or amendment thereof, shall ever be construed as having the effect, either directly or indirectly, of extending the term of any lease, contract or other agreement then in effect as to such lands beyond the termination date therein expressly provided, but the foregoing shall not prevent the City Council from extending the term of any such lease, contract or other agreement as permitted by this Charter or applicable law.

Before any tide or submerged lands, whether filled or unfilled, may be included in or committed to any cooperative or unit agreement, or before any modification or amendment of any cooperative or unit agreement which includes such lands may be made:

The City Council, as to such lands outside the Harbor District, and the Board of Harbor Commissioners as to such lands within the Harbor District, shall first determine, by resolution, that the surface of such lands or that portion of the surface intended to be utilized, is not required, and with reasonable certainty will not be required, during the term of the proposed cooperative or unit agreement for the promotion or development of commerce, navigation, recreation or fishery; and

The State Lands Commission shall approve of any such agreement or any amendments thereto or modifications thereof.

Notwithstanding any other subdivision or section in this Charter, the power of the City Council to enter into unit or cooperative agreements as hereinabove granted shall include the power to do such acts or things and to incur such commitments and obligations as are customary in unit or cooperative agreements. Without limiting the generality of the foregoing, the City Council shall have the right and power, anything to the contrary in this Charter notwithstanding, to give customary indemnities, liens on production, and other rights to the operator and other parties to the cooperative or unit agreement, and to share in the expenses of any such cooperative or unit agreement.

No agreement providing for a cooperative or unit development plan shall be authorized, the effect of which would permit the construction or installation of derricks, machinery or apparatus on the surface of any land for the purpose of drilling for, pumping or producing oil, gas or other hydrocarbon substances in any area of the City in which such operations shall then be prohibited by regulatory or initiative ordinance.

Sec. 1303. - AUTHORITY OVER OIL PRODUCTION TRANSFERRED TO CITY COUNCIL.

With respect to any and all leases, contracts or other agreements, including cooperative or unit agreements, relating to the drilling for, developing, producing, extracting, processing, taking or removing, storing and disposing of oil, gas or other hydrocarbon substances, heretofore entered into pursuant to the provisions of this Charter, wherein the Board of Harbor Commissioners or the Board of Water Commissioners shall be a party thereto, the City Council shall be deemed to be, and shall constitute, the Board of Harbor Commissioners and the Board of Water Commissioners and shall act in the place and stead thereof, and the City Manager shall be deemed to be, and shall constitute the General Manager of the Harbor Department or the General Manager of the Water Department, and all powers and duties therein conferred or imposed upon said General Managers are hereby conferred and imposed upon the City Manager, who may delegate the exercise of such powers and duties to a designated representative.

With respect to the aforementioned leases, contracts and other agreements wherein the Board of Harbor Commissioners or the Board of Water Commissioners are parties thereto, the duties and functions pertaining thereto as shall devolve upon the City Council by reason of the provisions of this section may be delegated by the City Council to the City Manager or his designated representative from time to time, by ordinance, resolution or minute order. With respect to the duties and functions of the City Council relating to any other leases, contracts or other agreements, including cooperative or unit agreements, pertaining to the drilling for, developing, producing, extracting, processing, taking or removing, storing or disposing of oil, gas or other hydrocarbon substances entered into by the City pursuant to the provisions of this Charter,

such duties and functions may also be delegated by the City Council to the City Manager or his designated representative from time to time, by ordinance, resolution or minute order. A report of any action taken by the City Manager or his designated representative in accordance with such delegation by the City Council shall be submitted by the City Manager to the City Council at its next regular meeting thereafter, and such action taken shall be deemed approved, confirmed and ratified, in the absence of action contrary thereto, by said City Council at said meeting.