Date: August 19, 2025
To: Honorable Mayor and Members of the City Council
From: Craig Bilezerian, Public Works Director
By: Chuck Schaich, Policy & Resources Specialist | [email protected] Subject: Public Works – Approve Third Amendment to Agreement for Usage of Recycled Water at the Torrance Refinery. Expenditure: Not-to-Exceed $6,000,000 (Non-General Fund).
RECOMMENDATION
Recommendation of the Public Works Director that the City Council approve a third amendment to a tri-party agreement (C2021-027) with the Torrance Refining Company, LLC (TORC) of Torrance, CA and West Basin Municipal Water District for an additional amount of $6,000,000 in Fiscal Year 2025-26, for a new not-to-exceed amount of $46,000,000, for the usage of recycled water at the TORC Refinery during the contract period, which extends the contract term for an additional five-month period beginning September 1, 2025 and ending January 31, 2026.
FUNDING
Funding is available in the Water Fund’s Fiscal Year 2025-26 operating budget.
BACKGROUND
The West Basin Municipal Water District (WBMWD) established its water recycling facility in El Segundo in the mid-1990s to supply recycled water to the South Bay region, primarily for non-potable industrial and landscape irrigation. The Torrance Refinery was the first refinery in the area to incorporate recycled water into its operations. WBMWD produces and distributes recycled water from its Edward C. Little Water Recycling Treatment Plant in El Segundo, while Torrance Municipal Water (TMW) provides retail potable and recycled water service to the refinery.
In July 1995, the City, Mobil Oil Corporation, and WBMWD entered into a 25-year agreement for the supply of recycled and potable water to the refinery, effective through July 25, 2020. Following the Exxon–Mobil merger, ExxonMobil assumed ownership of the refinery in 2000. In July 2016, ownership was transferred to the Torrance Refining Company, LLC.
On February 23, 2021, the City Council approved an interim tri-party agreement with TORC and WBMWD (C2021-027) for the continued use of recycled water at the Torrance Refinery, not to exceed $16 million over a two-and-a-half-year period from March 1, 2021, through August 31, 2023 (Attachment 4). The goal of this short-term agreement was to allow TORC and WBMWD to address several interrelated operational, technical, and financial issues related to enhanced on-site treatment of recycled water. These included valuation of on-site treatment systems, the transfer of water conditioning responsibilities, and other related matters. 8G
1 City Council
August 19, 2025
In August 2023, all parties executed a First Amendment (Attachment 3) extending the agreement through August 31, 2024, and increasing the contract’s not-to-exceed amount to $28 million. A Second Amendment, executed in August 2024 (Attachment 2), extended the term through August 31, 2025, and raised the not-to-exceed amount to $40 million.
ANALYSIS
While significant progress has been made in resolving outstanding financial, technical, and operational issues, several contractual and logistical matters remain between TORC and WBMWD. These include treatment system upgrades, the transfer of on-site treatment responsibilities to TORC, replacement of aging infrastructure, and reconciliation of costs and reimbursements between the two parties.
To allow additional time to resolve these issues, all parties have agreed to extend the current agreement for an additional five months through January 31, 2026. Most provisions of the current agreement will remain unchanged. Modifications are limited to matters between TORC and WBMWD, such as the ownership and replacement of specific treatment systems at the refinery.
There are no material impacts to the City. All parties remain actively engaged and committed to finalizing a new long-term master recycled water service agreement for the Torrance Refinery.
Once the outstanding issues are resolved, staff will return to the City Council for review and approval of the new long-term agreement.
The current agreement does not include a markup on recycled water sales to TORC. The forthcoming master agreement will incorporate such a provision. A financial consultant retained by the City is finalizing a study to determine the appropriate markup. The current contract is a passthrough agreement, with all expenses fully reimbursed by TORC. Staff recommend that the City Council approve a Third Amendment to the agreement (Attachment 1) extending the contract term from September 1, 2025, through January 31, 2026 and increasing the not-to-exceed amount to $46 million.
ATTACHMENTS
1. Third Amendment to Usage of Nitrified Recycled Water at TORC Refinery
2. Second Amendment to Usage of Nitrified Recycled Water at TORC Refinery
3. First Amendment to Usage of Nitrified Recycled Water at TORC Refinery
4. 2021 Agreement for Usage of Nitrified Recycled Water at TORC Refinery (C2021-027) 2 65506.00001\43937476.1
1 THIRD AMENDMENT TO AGREEMENT FOR USAGE OF WEST BASIN MUNICIPAL
WATER DISTRICT NITRIFIED RECYCLED WATER AT TORRANCE REFINERY (No. C2021-027)
This Third Amendment to the Agreement for Usage of West Basin Municipal Water District Nitrified Recycled Water at Torrance Refinery No. C2021 -027 ( “Second Amendment ”) is made effective as of September 1, 2025 (the “Effective Date”), by and between the City of Torrance, a municipal corporation and charter law city ( “City”), the Torrance Refining Company LLC, a Delaware limited liability company (“TORC”), and the West Basin Municipal Water District, a California special district ( “District”). City, TORC, and District may sometimes be referred to herewith individually as a “Party” and collectively as “Parties.”
RECITALS
WHEREAS, on March 1, 2021, City, TORC, and District entered into an Agreement for Usage of West Basin Municipal Water District Nitrified Recycled Water at Torrance Refinery C2021-027 (the “Agreement”), which established the terms and conditions pursuant to which City and District provide nitrified recycled water for cooling tower use and landscape irrigation by TORC at the Torrance Refinery (“Refinery”) located in Torrance, California; and WHEREAS, the Parties entered into the First Amendment to the Agreement for Usage of West Basin Municipal Water District Nitrified Recycled Water at Torrance Refinery No.
C2021-027 (“First Amendment”), dated and effective on September 1, 2023; and WHEREAS, the First Amendment extended the term of the Agreement by twelve (12) months, through August 31, 2024; and
WHEREAS, the Second Amendment extended the term of the Agreement by twelve (12) months, which now is set to expire on August 31, 2025; and WHEREAS, by way of this Third Amendment, the Parties now wish to extend the term of the Agreement by another five (5) months through January 31, 2026 by this Third Amendment, in order to continue good-faith negotiations between the Parties for a new long- term agreement for recycled water service to the Refinery; and WHEREAS, the Parties intend that any new agreement for the supply of recycled water to TORC reached pursuant to this extension will be deemed effective February 1, 2026.
AGREEMENT
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties do hereby agree to amend the Agreement as follows:
1. Definitions. The capitalized terms defined in this Third Amendment have the meanings assigned to them, including terms defined by inclusion in quotation marks and parentheses. All other capitalized terms used, but not defined, herein shall have the same meanings assigned to such terms in the Agreement or the First Amendment.
2. Agreement Term – Section 1. The Term is amended to read in its entirety as follows:
ATTCHMENT 1
3 65506.00001\43937476.1
2 "1 Agreement Term. This Agreement shall commence on March 1, 2021 and terminate on January 31, 2026 (‘Term’).”
3. Ownership of the Ammonia Removal Facility and Piping . Pursuant to Section 8, the District and TORC negotiated in good faith and reached an agreement as to the ownership of the Ammonia Removal Facility and Piping. The District and TORC will cooperate in good faith to achieve a transfer of ownership to TORC with minimum impact to the Parties.
4. Reconciliation. For the period of September 1, 2025 to January 31, 2026, the District and TORC agree that a reconciliation shall be performed by the Parties based on the reasonable actual costs incurred by the District under the Agreement. The Parties agree to continue cooperating in good faith in determining how the District ’s total recoverable reasonable actual costs are defined. The District and TORC agree that Onsite Capital Projects will require written approval by TORC in order for such costs to be recovered by the District during the reconciliation process. All reasonable actual costs incurred by the District under the Agreement, other than costs associated with Onsite Capital Projects, will not require written approval by TORC in order for such costs to be considered eligible costs for reconciliation. Such eligible costs include, but are not limited to, the cost of replacement, repair, or refurbishment of capital assets associated with the delivery of recycled water for cooling tower use and landscape irrigation. Parties shall attempt to resolve any disputes over reconciliation through good faith discussions and negotiations before invoking the Alternative Dispute Resolution provisions of Section 16 of the Agreement. Notwithstanding the forgoing, and for the sake of clarity, this Section 4, does not supersede the reconciliation periods of Section 5 and 6 of the Agreement, the reconciliation period of Section 4 of the First Amendment, or the reconciliation period of Section 4 of the Second Amendment.
5. Effect of the Amendment . Except as expressly amended, supplemented, and modified herein, nothing in this Third Amendment in any way alters or amends the restrictions, rights or obligations under Agreement, the First Amendment, or Second Amendment that are not expressly amended herein, and all other provisions in the Agreement are hereby ratified, confirmed and remain in full force and effect. This Third Amendment shall prevail and control with respect to any inconsistency between the interpretation of the A greement, the First Amendment, the Second Amendment, and this Third Amendment and any other addendum or prior amendment. 4 65506.00001\43937476.1
IN WITNESS WHEREOF, the Parties have executed this Third Amendment through their authorized representatives as evidenced by their signatures below.
City of Torrance Torrance Refining Company LLC
By: _______________________
George K. Chen, Mayor
By: _______________________
ATTEST:
By: _______________________
Rebecca Poirier, MMC
City Clerk
West Basin Municipal Water District
By: _______________________
APPROVED AS TO FORM
PATRICK Q. SULLIVAN, City Attorney
By: _______________________
Patrick Q. Sullivan
5 Oocusign Envelope ID: A3F33BA7-C6EF-4D42-AD46-B52B0O1502AB ATTACHMENT 2
SECOND AMENDMENT TO AGREEMENT FOR USAGE OF WEST BASIN
MUNICIPAL WATER DISTRICT NITRIFIED RECYCLED WATER AT TORRANCE
REFINERY
(No. C2021-027)
This Second Amendment to the Agreement for Usage of West Basin Municipal Water District Nitrified Recycled Waler at Torrance Refinery No. C2021-027 ("Second Amendment") is made effective as of September 1, 2024 (the "Effective Date"), by and between the City of Torrance, a municipal corporation and charter law city (''City"), the Torrance Refining Company LLC, a Delaware limited liability company ("TORC"), and the West Basin Municipal Water District, a California special district ("District"). City, TORC, and District may sometimes be referred to herewith individually as a "Party" and collectively as "Parties".
RECITALS
WHEREAS, on March 1, 2021, c;ty, TORC, and District entered into an Agreement for Usage of West Basin Municipal Water District Nitrified Recycled Water at Torrance Refinery C2021-027 (the "Agreement"), which established tile terms and conditions pursuant to which City and District provide nilrified recycled water for cooling tower use and landscape irrigation by TORC al the Torrance Refinery ("Refinery") located in Torrance, California; and
WHE:REAS, the Parties entered into the First Amendment to the Agreement for Usage of West Basin Municipal Water District Nilrified Recycled Water at Torrance Refinery No. C2021-027 ("First Amendment''), dated and effective on September 1, 2023;and
WHEREAS, the First Amendment extended the term of the Agreement by twelve (12) months, which now is set to expire on August 31, 2024; and WHEREAS, by way of this Second Amendment, the Parties now wish to extend the term of the Agreement by another twelve (12) months through August 31, 2025 by this Second Amendment, in order to continue good-faith negotiations between the Parties for-a new long-term agreement for recycled wate, service to the Refinery; and WHEREAS, the Parties intend that any new agreement for the supply of recycled water to TORC reached pursuant to this extension will be deemed effective September 1, 2025.
A·n-ACH-1
6 7
8 ATTACHMENT 3
FIRST AMENDMENT TO AGREEMENT FOR USAGE OF WEST BASIN MUNICIPAL
WATER DISTRICT NITRIFIED RECYCLED WATER AT TORRANCE REFINERY (No. C2021-027)
This First Amendment to the Agreement for Usage of West Basin Municipal Water District Nitrified Recycled Water at Torrance Refinery No. C2021-027 ("First Amendment") is made effective as of September 1, 2023 (the "Effective Date"), by and between the City of Torrance, a municipal corporation and charter law city ("City"), the Torrance Refining Company LLC, a Delaware limited liability company ("TORC"), and the West Basin Municipal Water District, a California special district ("District"). City, TORC, and District may sometimes be referred to herewith individually as a "Party" and collectively as "Parties".
RECITALS
C"")
N
WHEREAS, on March 1, 2021, City, TORC, and District entered into an o Agreement for Usage of West Basin Municipal Water District Nitrified Recycled Water at N Torrance Refinery C2021-027 (the "Agreement"), which established the terms and --" conditions pursuant to which City and District provide nitrified recycled water for cooling tower use and landscape irrigation by TORC at the Torrance Refinery ("Refinery") O located in Torrance, California; and N
WHEREAS, the Agreement is set to expire on August 31, 2023; and WHEREAS, by way of this First Amendment, the Parties now wish to extend the term of the Agreement by twelve (12) months through August 31, 2024, in order to continue good-faith negotiations between the Parties for a new long-term agreement for recycled water service to the Refinery; and
WHEREAS, the Parties intend that any new agreement for the supply of recycled water to TORC reached pursuant to this extension will be deemed effective September 1, 2024.
AGREEMENT
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties do hereby agree to amend the Agreement as follows:
Torrance Draft of Tri-Party Nitrified Water Agreement Extension - BBK Revised 8-2-23-c I 9 10
11 AGREEMENT FOR USAGE OF WEST BASIN MUNICIPAL WATER DISTRICT
NITRIFIED RECYCLED WATER AT TORRANCE REFINERY
BY ANO AMONG
TORRANCE REFINING COMPANY LLC,
AND
OTYOFlmRANCF..
AND
WEST BASIN MUNICIPAL WATER DISTRICT
ATTACHMENT 4
This agreement (11Agreement") is dated and made effective as of March 1, 2021 (the "Effective Date") by and among Torranc� Refining Company lLC, a Delaware limited liability company {"TORC"), the City of Torrance, a municipal corporation an·d ch,uter law -city-f'City"); · ancf ttre- W5r8:3sirrMunidpai ·Water· District, a California speci�I district ("District"}. This Agreement establishes the terms and conditions pursuant to which the City and District will provide nitrified recycled water for cooling tower use and landscape irrigation by TORC at the Torrance Refinery, located at 3700 W. 190 th Street, Torrance, California ("Refinery"). TORC, City, and District may sometimes be referred to herein individually as a ''Party" and collectively as the "Parties." RECrTALS
WHEREAS, on September 9, 1994, City, District, and TORC's predecessor in interest Mobil Oil Corporation (''Mobil"), executed a document entitled "Principles of Agreement for Usage of West Basin Municipal Water District Recycled Water at Mobil's Torrance Refinery Between West Basin Municipal Water District, City of Torrance, and Mobil Oil Corporation•� ("Principles of Agreement"), which set forth ·"· ,·principles for-future provision of recycled water to the Refinery for cooling tower use and landscape irrigation; and
WHEREAS., the Principles of Agreement stated that District would finance the design� construction, operation, and maintenance of an ammonia removal facility on the Refinery property (for convenience and the purposes of this Agreement "Ammonia Removal Facility,"} a piping system to deliver 1 12
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