Department of Financial Management 411 West Ocean Boulevard, 6th Floor

Long Beach, CA 90802

(562) 570-6425

February 7, 2023

NOTICE TO PROPOSERS

ADDENDUM NO. 1

RFQ No. ER-23-343 Oil Liability Assessment Study

This addendum changes and supersedes the language in the original RFQ. Please acknowledge receipt of this addendum by signing and submitting with your proposals. Any proposer who fails to submit this addendum may be disqualified.

The City would like to remind Proposers that pursuant to Section 5.2.26 of the RFQ, the City will not be responsible for or bound by any oral communication or any other information or contact that occurs outside the official communication process specified herein, unless confirmed in writing by the City Contact.

The City would like to provide the following Clarification:

Proposals are due 11:00 am February 21, 2024

The City would like to provide the following link to the Pre-Proposal meeting:

Optional Pre-Proposal video link: https://youtu.be/K4hzALtjOsY

The questions and answers are as follows:

1. Q: Could you talk about the request for engaging this professional team versus the development of yet another RFQ? Can you talk about those two undertakings?

A: This is not the actual development of the RFP that would go out. This RFQ will identify what elements need to be in a subsequent RFP. What would the scope need to look like? We think we know most of the issues, but there could be many additional issues out there and that's why we're relying on your expertise to perform this RFQ. We don't expect the winning bidder to do the detailed calculations, but you could say that in general, an operation of this size tends to cost in this range for the removal of surface facilities and Wells and you don't know what the exact environmental cleanup is going to look like, but you can put bookends on them. The goal of this is to be able to put together a report and presentation to share with City Council that includes all the things that have to go into the study, how long it could take (months? Years?), and how much it could cost. We'll then ask the City Council how they want us to proceed. They could tell us to proceed or not to proceed.

Addendum # 1 RFQ ER-23-343 Pg. 2

2. Q: This RFQ is not to do the actual RFP, but it’s all the elements that should be included in the RFP and are you considering that the person or the team that you engage for this effort is going to be the same party that carries on with the study that is scoped under.

So, you get the right scope for what you think should be into the RFP going forward and remain eligible if proposed by the City?

A: Yes, if the City Council authorizes the funding. We would have to go before them with the outcome of this RFQ and seek their approval and if they approve it, we could go forward with the next phase, which would be the actual development and issuance of the RFP.

We would use the same procurement process on that as well. Once the City Council authorizes funding for the work, we would have to go through the same process we’re doing now, except one of the deliverables from this is to provide all the elements in the RFP as well as what the scope is. This RFQ is part 1 of 2, we just don't know if there's going to be a Part 2 yet. We expect that all bidders for this RFQ will be eligible to bid on the subsequent work as well.

3. Q: Understood because it could be so costly and could take so long to have?

A: Yes, the Council may decide not to go forward with it.

4. Q: The question I have relates to the deliverables, you've got nine deliverables and in that, they seem to be logically placed, but I'm a little bit confused as to why number nine is not above number five because it seems like the independent verification of the current element liability would be a part of the scope that would be included in the comprehensive RFQ and not in the actual deliverable of this particular project.

A: Number nine is placed separately because we expect this deliverable to be completed as part of this RFQ. We expect the successful bidder to independently verify the current abandonment liability estimate for the City’s and State of California’s (State) operations in the Wilmington Oil Field. This also includes all 17+ operators within the City of Long Beach as it is possible operators will not have their abandonment funded when they cease operations, and this may fall back to the State.

5. Q: So, are you looking for a high-level verification as a deliverable for this or are you looking for a scope that would yield a verification of abandonment liability?

A: You likely won’t have the time to do a detailed Well-by-Well and facility analysis, but you could certainly develop type costs for Well abandonment and facilities and apply those to the local operators. It won’t be exact, but you should be able to develop reasonably tight cost ranges for the 17+ operators operations in Long Beach.

You could say you're looking at the absence of the City’s piece, the 1.2 billion. I think you should be familiar enough with what some operators have spent and just say it could be in this range. Yeah, it's really to look at the magnitude of it so that we can capture it.

I don't think even the estimates that we have from the City’s side is a number, but it's also a range.

6. Q: There's a good deal of overlap that will take place with legal matters. Are you expecting an attorney to be part of this team?

Pg. 3

A: This effort has two parts; it has the part that's issued here and the legal part. The city attorney's office already has an outside counsel to address the legal issues, we'll take what they provide and feed it into this analysis for integration into the final report and presentation.

7. Q: You don't expect a legal to come from these teams?

A: We do not expect legal to come from the bidders teams. That being said, if you are aware of any legal issues, you can always highlight them. We want you to focus on all the other (non-legal) issues, but if you think there are legal issues that fall into it, you could just mention them.

8. Q: There's a lot of interweaving - who did they retain as third-party council?

A: I don't know who that is.

9. Q: What about the timeline for deliverables?

A: We don't have a timeline. The contract term is one year with the potential to renew for two additional one-year periods, but we would expect it will be turned around quickly.

10. Q: You don’t really know yet until looking at the scope and once you see our proposals that will give you a lot better idea.

A: Correct.

11. Q: Is there an expectation that during the active part of the proposing or putting this initial proposal together we would reach out to the other operators or is that for the actual work itself?

A: I would think if you had an opportunity to, yes. I don't know their willingness to participate in something like this. Generally, you have a lot of information available in the public domain. You know the number of Wells they currently have and so forth, we might have some information we can provide such as if they pay a barrel tax to the City every quarter. We are aware of who is paying barrel tax, and that's representative of their production. If you look them up, you can find out how many Wells they have to give you an idea of the breadth and width of their operations within the City of Long Beach. The

City is not aware of their financial situation, whether they're privately held or publicly traded. That information is available at the County Assessor Office, or it's public information. You can find out what their reserves are currently valued at, and if you ended up 20 or 10 years earlier, who is going to pay for that? putting together tables and numbers like that.

If somebody has a book value with the County Assessor, if it is $10 million but that's for

20 years and we cut it in half, it's probably going to say, well, somebody owes them $5 million. I believe some of that should be available from the County Assessor's office, unless they are publicly traded and you have access to their 10K's and can look at their

Pg. 4 reserves, but that research would be part of the work if you were awarded. You would identify what those pieces are.

12. Q: The insurance requirements look very customary for professional services.

Until I read the umbrella amount, which is a nice hefty $20 million umbrella which is on or not a normal expectation for professional services that normally comes into play when you're undertaking maybe abandonment work.

A: The insurance requirements that were included in RFQ-ER-23-343 assume that the entity performing the study potentially will also be the entity implementing its recommended options for decommissioning and abandonment of the City’s oil assets.

As such, these would be the full insurance requirements contemplated for such implementation. If a respondent is intending to perform an Oil Liability Assessment Study without potentially undertaking the actual decommissioning and abandonment of the City’s oil assets, it may declare and explain this in its scope of services and Section 5.3, parts f. through k., inclusive, may not apply.

13. Q: York Engineering is primarily an environmental consulting company and we do have other regulatory experience too and we do have several oil and gas clients in that area in Long Beach. So, I just wanted to make sure that having those clients wouldn't be, constitute any kind of conflict or anything like that.

A: No, if anything, it might give you a leg up if you have independent knowledge of their operations and kind of what their current state of things looks like that maybe others that are going to be responding don't. But that doesn't disqualify you.

14. Q: I believe the City Auditor is currently working on a project that is somewhat similar to this. Do you know how these two projects Interplay?

A: These are independent, what the City auditor is working on is more of what the revenue impacts are on the City, it is a piece of this, but it's not the entirety of this

RFQ.

Energy Resources has been providing the City with abandonment liability figures for years, but it's never been formally audited from outside of the department. The department uses its own methodology to calculate the abandonment liability numbers that it provides. These numbers are only representative for the operations that the City oversees and not for all the other oil operations throughout the City.

This was to be an independent look at what the City’s Assessor's office might come up with for the abandonment liability, it would be not only for the City’s side, but for the entire City. Additionally, what are the revenue impacts if those revenues go away both from the City and for those other operators that pay barrel tax, mineral tax, etc. they pay a lot of things that funnel back into the City. What might be some of the issues associated if they independently shut down oil? it's a little piece of this, but I don't think it's the full entirety of what we're asking for here.

15. Q: Do you know what timeline the City Auditor effort is on?

A: I don't know. The Mayor directed the City Auditor, to undertake this effort and I know that's going forward, but it's independent of this. It's a public document and it's posted

Pg. 5 on the City Auditor’s site. Our department has assisted in providing some of the information for this, but I have no idea what the final product looks like or what it's going to contain. I know conceptually what it was, but it was under the direction of the

Mayor to look at this.

16. Q: So, if we’re here or registered today on the questions and answers as those come up, will we automatically get that or do we need to go into the Long Beach buys portal and check on that?

A: We will post everything that was asked and answered today plus any additional questions that come up. If you are registered in Long Beach Buys, you will receive an email notifying you that there are new items for your review.

17. Q: Do you happen to know the dollar amount budgeted for this phase of work?

A: The City Council approved $200,000 in the FY23 budget to cover the costs of this oil liability assessment study. The City Attorney’s office will utilize a portion of those funds for outside council’s assessment of the legal impacts and potential issues.

18. Q: It appears that this work's scope is to help the City frame the issues that will need to be considered and put into the “formal RFP” (as it was referred at the meeting on Jan.

10, 2024), suggesting that the Study itself will follow another RFP. Can you please confirm or clarify? As such, does the City have a budget for this initial work?

A: Yes, this RFQ is to determine the key elements/impacts that need to be evaluated, the RFP’s scope, and potential cost of a larger study will follow. If this study is approved and funded by the City Council at a future time, it will then be put out to bid. The budget is yet to be determined and is a part of the deliverable for the RFQ.

19. Q: The insurance requirements outlined in Section 5.3, part 2e, 2h, and 2k of the Contract Template are substantial. Is this truly required for study work?

A: The insurance requirements that were included in RFQ-ER-23-343 assume that the entity performing the study potentially will also be the entity implementing its recommended options for decommissioning and abandonment of the City’s oil assets.

As such, these would be the full insurance requirements contemplated for such implementation. If a respondent is intending to perform an Oil Liability Assessment

Study without potentially undertaking the actual decommissioning and abandonment of the City’s oil assets, it may declare and explain this in its scope of services and Section

5.3, parts f. through k., inclusive, may not apply.

20. Q: Should Deliverable one be more correctly stated as "Outline the various regulatory impacts, legal impacts, financial impacts associated with ending all oil and gas production within the City, and provide policy options that would help mitigate these impacts"?

A: No, to the policy options that would help mitigate these impacts. This would be something that would be done in the subsequent RFP. The RFQ is for simply identifying

Pg. 6 all the relevant issues that need to be further evaluated and then policy options could be developed.

21. Q: What does the City see as the difference between financial options (Deliverable 1) and financial implications (Deliverable 2)?

A: Deliverable one relates more to the various options to effect ending oil production within the City, one of them being financial. Deliverable two is more focused on identifying the financial implications to all stakeholders of ending oil production within the City.

22. Q: Does the COLB ARO of $154 million (top of page 7) include escalation through 2035?

A: Details of the COLB ARO can be found in the annual Oil Field Abandonment Liability Memo to City of Long Beach office of Financial Management

23. Q: Section 2.2.3 states “The City of Long Beach issues payment based upon services rendered. After a contract is finalized and work is performed, the Contractor should invoice the City. The City will remit payment within 30 calendar days of being billed.” Will the City consider progress payments given the magnitude of and time required to complete the project?

A: Yes, the City will make progress payments based on services rendered.

24. Q: The City intends to have $154 million in reserves by 2035. Is $154M undiscounted future or present value? Is there an accessible Cost study to back this up?

Note that the CalGEM Study in 2020 shows an undiscounted “most Likely” estimate of $443 M ($793M Future Value) for the Thums Islands alone.

A: Details of the COLB ARO can be found in the annual Oil Field Abandonment Liability Memo to City of Long Beach office of Financial Management.

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PREPARED BY: Janet Kariuki, Buyer I

ACKNOWLEDGED BY:

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