Firm Nears Victory on Pipeline Fees Set by Cities

SACRAMENTO —  A major pipeline company appears close to winning legislative passage of a bill that would significantly change the way cities levy fees for underground rights of way--a revision that some larger cities, including Long Beach, say would cost them millions of dollars in revenues.

The bill, sought by Santa Fe Pacific Pipelines Inc., was approved Tuesday by a 5-1 vote of a joint legislative conference committee. The legislation by Sen. Newton R. Russell (R-Glendale) goes to the Assembly and Senate for final action.

Under two 42-year-old laws, smaller, general-law cities are limited in the amount of fees they can levy for pipelines used by more than one oil company--those known as common carrier pipelines. But the laws do not place limits on fees charged by 83 state-chartered cities, including such large cities as Los Angeles, Long Beach, Santa Ana and San Diego.

Russell’s legislation would freeze the current rates levied by charter cities, while allowing a small increase for some general-law cities.

‘Giant Windfall’

Michael Arnold, lobbyist for Long Beach, termed the proposal “a giant windfall” for the pipeline companies. “They are going to save literally millions of dollars over the next 25 years,” Arnold predicted.

Russell acknowledged that some cities would eventually receive less revenue. But he said the aim of his bill is to ensure that one city does not hold up a pipeline company for “an exorbitant fee.”

Russell’s bill was triggered by a Long Beach ordinance, approved after a 1980 pipeline accident and fire, that boosted the fees charged common carriers, including Southern Pacific Pipe Lines, which is under Santa Fe ownership. Southern Pacific challenged the ordinance, but an appellate court last year ruled that state law does not preempt Long Beach and other charter cities from determining its own rates.

Santa Fe then lobbied to revise the law, citing the specter of cities continually upping their rates. Long Beach charges Santa Fe $58,000 a year for nearly seven miles of right of way under city streets and gets another $70,000 annually for another common carrier pipeline.

Under a compromise hammered out in the six-member conference committee, the rate that Los Angeles charges Santa Fe, for example, would be frozen at about $14,000 a year. Ron Kagel, a lobbyist for the city, said the city has been seeking to negotiate a new franchise rate of about $28,000 a year. Kagel said the city opposes the Russell bill because “it’s an incursion into the home rule of the city of Los Angeles.”

Trying for Balance

But Russell said he is “just trying to balance the interests” of cities with the state’s need to ensure that petroleum products are delivered efficiently. He said if the companies cannot build pipelines, the oil will be shipped by tanker trucks, exacerbating congestion and air pollution.