San Juan Hills High School Site and Risks

CUSD Sued by Whispering Hills LLC - $6 Million Claim

2009-10-01T16:37:00.000-07:00

The Capistrano Unified School District was served with a lawsuit filed by Whispering Hills LLC, the development company operated by Dennis Gage in partnership with CALPERS, the California Public Employees Retirement System. The suit seeks to obtain $6 million from CUSD, a sum equal to the final payment due under the Purchase Agreement for the San Juan Hills High School site.

CUSD's past position on this matter has been that the District is not obligated to make the final payment until the Whispering Hills sub-division is built and CFD (or "Mello-Roos") bonds can be issued to raise the needed money. Of course, the sub-division is not yet built because Whispering Hills LLC failed to build it!

In a related transaction, CUSD owes the City of San Juan Capistrano more than $1 million in utility fees arising from the construction of SJHHS. The CFD Bonds were also intended for this purpose, but since no money can be raised, this bill remains unpaid.

Bellingham pipeline accident remembered with national proclamation

2009-06-25T20:37:00.000-07:00

I normally try to digest national news to make it relevant to Orange County and the San Juan Capistrano community. Since the tenth anniversary of the Bellingham (Washington) pipeline accident has just passed, it is appropriate to reference an article on the disaster in what remains of the Seattle Times newspaper. Please check it out:

http://seattletimes.nwsource.com/html/localnews/2009325482_blast11.html

An incident exactly like this in San Juan Capistrano is unlikely because of differences in geography. Our local geography is more dangerous because of the number of creek crossings, the population density and the potential seismic activity.

And then we have to consider the potential for development that brings digging such we witness along the Ortega Highway adjacent to the pipeline.

The pipe is still out there, operating. Most recently, it was dug up and re-buried at a deeper level in anticipation of widening of Ortega Highway. Today there is more grading, digging and water pipeline installation underway within 30 feet of the highway and less than 30 feet of the operating liquid fuel pipeline pipeline. Statistically, it is just this type of work that leads to pipeline ruptures.

Soon, the pipeline will fall within the San Juan Capistrano city limits, based on plans to acquire the Rancho Mission Viejo property at the corner of La Pata and highway 74.

Hopefully, everybody is being careful! Just don't ask questions.

OC Grand Jury Says SJHHS Complaint is Criminal Matter

2009-05-19T08:53:00.000-07:00

The Orange County Grand Jury has formally responded to a complaint filed by CUSD parent and attorney Wayne Tate. The complaint raised issue with the circumstances surrounding the site selection and development of San Juan Hills High School (SJHHS). In the response, James Perez, Foreman of the Grand Jury described the nature of Tate's complaint to be "a criminal matter", and therefore not within the jurisdiction of the Grand Jury.

Acting on this development, Tate has renewed his formal complaint to the Orange County District Attorney Tony Rackauckas. In a letter sent yesterday, Tate stated:

In light of the foregoing, I respectfully request that the Orange County District Attorney (OCDA) commence a formal investigation into the allegations and claims set forth in my letters to the CAG and OCGJ. If some or all of the allegations and claims are true, then CUSD is out millions and millions of dollars which it could desperately use given the financial crisis CUSD and other school districts are facing as a result of the statewide financial crisis. The OCDA is uniquely qualified to investigate SJHHS and CUSD given its prior, extensive experience with CUSD, and its involvement with the fuel pipeline issue at SJHHS.

Tate's letter also provides background regarding the status of a complaint filed with the California Attorney General and candidate for Governor, Jerry Brown. Tate describes being notified by a Deputy Attorney General that the complaint was forwarded to the General Counsel or Chief Counsel of the California Department of Education for investigation. Contacted by me, Tate stated that CDE has not contacted or responded to him regarding the allegations.

It is not surprising that CDE would lack enthusiasm for this investigation. The complaint alleges that senior members of the CDE staff were complicit in decisions which led to excessive spending, diversion of public funds, cover-up of site deficiencies and general bungling associated with the SJHHS project. Tate's complaint specifically mentions Kathleen Moore, Deputy Director of Public School Construction at CDE, and Fred Yeager, her deputy.

Ms. Moore was appointed by Jack O'Connell, Superintendent of Public Instruction, yet another Democratic Gubernatorial prospect! Aside from leading the California public education establishment, O'Connell is a member of the State Allocation Board (SAB), which bears responsibility for allocating the state funds that were misspent at SJHHS. During the period of SJHHS development, Kathleen Moore was O'Connell's "designated representative" to the SAB, even acting on his behalf at SAB meetings. Other members of the SAB include Tom Torlakson, termed-out State Assemblyman who is an announced candidate to replace O'Connell as Superintendent.

Many months before Tate filed his complaint with Jerry Brown, I personally wrote to Kathleen Moore to request that an investigation be conducted into the actions of her staff. Moore never responded to me directly, however I later learned that she forwarded my complaint to former CUSD Superintendent Woodrow Carter, for reasons I can only imagine.

Millions Added to the Cost of the SJHHS - Settlement with Developer?

2009-03-07T13:26:00.000-08:00

A revised Settlement Agreement is on the Board agenda for Monday, March 9. The whole subject is also featured in closed session just before the public meeting. Since the Board will consider layoff notices for over 400 district employees during the same evening, it appears likely that this matter will be continued until the next meeting. But one can never be sure...

The new Agreement is a significant improvement over earlier proposals because it no longer contains a mutual release of claims. Such a release would have undermined the work of the district's own Forensic Audit of the site acquisition, as well investigations underway elsewhere.

If that were the end of the story, I would have no reservations about recommending that that CUSD accept the settlement. Subject to each Board members' own assessment of the unusual financial risk associated with issuing public debt secured by undeveloped real estate (a very unusual move), this appears to be a good compromise. After all, there are a lot of good things in the proposal for CUSD, including the property line adjustments necessary to complete the school stadium.

But nothing is ever truly free and in this instance there is the matter of $2.264 million which is owed to the City of San Juan Capistrano by the district. This appears to be related to the agreement and it has apparently fallen through the cracks!

Back when the SJHHS site was purchased, it was understood that Whispering Hills Development would be responsible for costs associated with preparation of the site, including the cost of bringing "permanent" municipal utilities to the edge of the school site. This specific language is contained in the Purchase Agreement. Furthermore, the idea of seller-provided improvements was the main district justification for the high price paid for the land ($1,040,000 per acre).

Apparently, the developer arranged for the City to present this bill directly to the school district rather than treating it as a part of the larger Whispering Hills improvement. It remains unpaid. The Settlement Agreement now proposes to apply the Whispering Hills bond money in a new way and would appear to leave CUSD with the city's bill.

If this is allowed to stand, CUSD will have to reach into its purse for the $2.264 million and the price of this high school will rise yet again!

Another Collision with the Brown Act?

2009-02-08T15:48:00.000-08:00

The Settlement Agreement and Mutual Release for the SJHHS site has been returned to the Board agenda (huge file) on Monday night as Item #21. On this occasion, the agenda provides that the Board may act on the item.

I have urged Board members to refuse action on this item Monday night because such action would violate the Brown Act. Quoting the agenda item itself:

This agenda item was first brought to the Board on January 12, 2009 for information/discussion. Since that time, additional information (i.e., questions/issues/concerns) from the public and the Board has been received with comments submitted to the Board under separate cover. Staff is now bringing back the "Settlement and Mutual Release Agreement" item to the Board of Trustees for discussion/action.

The additional information referred to in this paragraph has not been made available to the public despite the fact that the questions were raised in public session. As the agenda states, the Board is expected to rely on this additional information to reach a decision. By failing to include this additional information in the agenda, the public is effectively denied an opportunity to meaningfully participate in the public meeting.

I requested a copy of this additional information on Thursday of last week. On Friday afternoon, I received an email response indicating that the materials would be available for me to pickup at the front desk of the Ed Center. Unfortunately, this notice did not reach me in time to arrange pickup before the Ed Center closed for the weekend. I appreciate and thank the staff for their cooperation, but I must point out that even if this information were in my possession, my private receipt is not public notice. Thus, the Brown Act issue outlined above still clouds any action taken on this item during Monday’s meeting.

An equally serious problem with item #21 is the fact that the public agenda is misleading (it contradicts the Agreement under consideration). From the agenda:

Given that WHLLC is now proceeding with the sale of the land located within the CFD to developers with significant home building experience and funding sources, the District is now in a position to issue the first series of CFD bonds.

This statement is utterly false. Subsequent paragraphs of the agenda, as well as paragraph 1 and paragraph 5 of the Agreement make it plain that issuance of the bonds is uncertain and all of the benefits for CUSD contained in the Agreement, including the stadium land transfer, are contingent on issuance of the bonds or dissolution of the CFD (at the sole option of the developer).

Compare and Contrast CUSD and City Land Acquisition Practices

2009-01-26T22:41:00.000-08:00

Last week the City of San Juan Capistrano announced that it would purchase Rancho Capistrano from the Crystal Cathedral Ministries to add to the city inventory of open space. The City agreed to pay about $86,000 per acre for 116 acres of land. This is a great deal for the City and its residents!

The purchase is made possible by a public/private partnership between the City and a developer of “senior living” facilities. The developer will take 34 acres of Rancho Capistrano (apart from the City portion) for an undisclosed sum of money. Everyone involved in this deal is cheering. Why?

Well, it seems that Rancho Capistrano is essentially “landlocked”. The railroad and Oso Creek prevent unrestricted access to the property, except at an existing substandard and controversial rail crossing off Camino Capistrano. The present owners and the developer anticipated difficulty in convincing the CPUC and the railroad to cooperate in planning an improved crossing. The City negotiating team pointed out that the City could more persuasive and, like magic, the “value” of the property suddenly fell to wholesale!

This situation is identical that that which faced Dennis Gage (Whispering Hills LLC) when he sought to develop the landlocked property now known as Whispering Hills. There was no access from La Pata, the land was occupied by overhead electrical transmission lines, and there was no possible road access from San Juan Capistrano. Gage first offered to "give" land to the Capistrano Unified School District for a high school in order to get the district into the game. This gift of land became controversial because it required a modification to the City of San Juan Capistrano General Plan. The question was put on the ballot in 2002 as an advisory measure and the plan was defeated.

Responding to this defeat, CUSD turned around and paid Gage the astronomical price of $1,040,000 per acre for 50 acres of land, a price determined by comparing the raw land with construction-ready residential sites in Ladera Ranch and San Clemente. Then CUSD used its government authority to override the General Plan (in favor of Gage and the school, and to the dismay of the city), then threatened Rancho Mission Viejo Company with eminent domain to force sale of 35 acres of land to Gage (not CUSD) to get access to La Pata (this land is now the Villa Montana apartment site), and then pushed the CPUC to force SDG&E to move their overhead electrical transmission line so that Gage could optimize his residential development plan.

What did CUSD get in return for providing all this help? Nothing! In fact, it seems clear today that CUSD paid Gage about $900,000 per acre over market value to be involved in his development scheme. The only remaining question is why?

The Rancho Capistrano deal ($86,000 per acre) and the earlier Shea deal ($19,200 per acre) can serve as benchmarks by which to judge the CUSD site acquisition for San Juan Hills High School. All three properties have similar development challenges. All involve expenditure of public money to secure land for public use. The City expenditures are prudent and responsible.

The CUSD transaction was something else.

San Juan Capistrano City Council Decision on Transfer of Development Agreement

2009-01-26T20:51:00.000-08:00

I went to the SJC City Council meeting on January 20 to follow-up on my correspondence regarding the Development Agreement for Whispering Hills.

On this occasion, Council approved the transfer of the DA unanimously. I don’t think any of the Council members saw an alternative.

The materials I had prepared ahead of the meeting were distributed to all Council members and the public by the City Clerk. In addition, the City Attorney prepared an analysis of his own that addressed the points I raised in my letter.

I spoke to refer the Council to the materials, draw their attention to the proposed Settlement Agreement before the CUSD Board of Trustees and suggested that they seek financial guarantees from the developer. I stated that if they approved the transfer, that in light of the Settlement Agreement, they would be ceding control of the City’s position in the deal to the school district.

I was the only person to speak.

Council questioned the City Attorney about his analysis and made a number of good inquiries that pointed out flaws in the original Development Agreement. However, in the end, they saw their duty to be representing the City’s interest in the Agreement – and it is a very narrow interest. Protecting the County, CUSD, etc., were not reasonable considerations. The Council was assured by the City Attorney that if any money due to the City were to be diverted (either by the developer or the school district) that the City would be in a position to withhold building permits.

Unfortunately, nobody from the school district was present at the meeting. Councilman Allevato expressed mild irritation about this, consistent with his comments from the prior meeting. Frankly, I share his frustration. It is difficult for a member of the public to ask Council to watch over the interests of the school district when nobody from the school district appears at the meeting. However, I also understand that CUSD has been busy since December with other matters.

In the end, the vote wasn’t in question. The decision was unanimous that Whispering Hills LLC should be allowed to transfer the Development Agreement to Rancho San Juan Development LLC. Of course, the resolution doesn't compel this transfer, so everyone will be left to guess when the transfer actually occurs, if ever.

The biggest surprise to me was that when the item was over, about 20 people got up and left the room, including the 5 from the developer. I wonder if there was that much interest in this arcane subject, or if instead, it was a convenient time to take a bathroom break!

During a break in the meeting, I had a brief discussion with the City Attorney and suggested that we had just witnessed the creation of the next “Suncal” debacle. He didn’t exactly disagree.

The whole matter is now in the hands of the school district.

Update 2: Assignment and Assumption of Development Agreement for Whispering Hills

2009-01-18T21:45:00.000-08:00

This item returns on the San Juan Capistrano City Council Agenda as consent item #10 on Tuesday, January 20. The developer Whispering Hills LLC is seeking assignment of the Development Agreement to a new development company, Rancho San Juan Development LLC. Should the City Council approve this transfer, it appears likely that the city and taxpayers will be put at significant risk. There is at least $12 million of public money involved.

When this item last appeared on the Council agenda, CUSD Board President Ellen Addonizio and I spoke to request a delay until such time that the impact of the assignment could be determined. President Addonizio was concerned about the impact an assignment on rights and claims held by CUSD. I expressed a similar concern for rights and claims held by other agencies such as the City and County. The Council generously agreed to continue this matter for one month to provide time for more in-depth consideration of these issues.

Last week there was a new development in this story.

On Tuesday, January 12, the CUSD Board of Trustees was presented with a proposed Settlement Agreement and Mutual Release between the school district and the Whispering Hills developers. This Agreement has been secretly negotiated by school district staff and the developers since last summer. Nevertheless, the actual text of the Agreement was quietly slipped into the previously posted Board agenda after 4:00 PM on Friday night in order to minimize the public opportunity for review.

The Agreement has wide-ranging impact on the SJHHS school site, the relationship between CUSD and the developer, and the City. Should the proposal be accepted by the school district, the financial interests of the City and city taxpayers will be sacrificed for worthless property line adjustments being sought by CUSD.

From the City perspective, I’ll summarize the issues here:

“Effective Date” of the Development Agreement -

The Development Agreement becomes effective when the Whispering Hills Community Facilities District (CFD, or Mello-Roos district) is formed. This CFD has been defined in a School Mitigation Agreement between CUSD and the developer but the CFD has not yet been formed. Thus, the Agreement that the developer seeks to transfer is not yet effective, even though it was written and accepted by the City almost four years ago.

Joint Community Facilities Agreement -

The Settlement Agreement proposed to CUSD directly and negatively effects the City’s rights under a Joint Community Facilities Agreement between the City and the developer dated July 1, 2005. The purpose of the JCF Agreement was to appoint CUSD as lead agency in managing the Whispering Hills CFD, issuing bonds and collecting taxes, in part on behalf of the City. In the JCF Agreement, the City has agreed to receive certain infrastructure improvement costs and fees related to Whispering Hills through the CFD instead of collecting them from the developer.

Impact of the proposed Settlement Agreement on the City -

Should the CUSD Board of Trustees accept the developers’ proposed Settlement Agreement, the City’s rights in the JCF Agreement will be diminished. The Settlement Agreement provides that the first $12.8 million dollars in CFD proceeds will be turned over to the developer for disbursement at his discretion. This is in direct conflict with the terms of the JCF Agreement that call for approximately half of this money to be deposited to a City Facilities sub-account according to a defined formula.

Still worse, the proposal also provides the developers with the exclusive option to dissolve the CFD altogether! This would leave the JCF Agreement and the City without an assured source of development funds to complete infrastructure improvements in the area.

Potential Legal Conflict -

Should the CUSD Board of Trustees accept the developers’ proposal, this would appear to be a breach of the contract created by the JCF Agreement with the City.

The issues outlined above can be confirmed by careful reading of the documents. In light of the proposed Settlement Agreement, the San Juan Capistrano City Attorney and Council should take additional time to consider the entire relationship with this developer.

In the larger picture, one has to question the viability of the Whispering Hills development. The transfer of the Development Agreement, coupled with the proposed Settlement Agreement, provide the developers with an opportunity to use public money to finance the transfer of the property, to “cash out” of the development leaving the local taxpayers, the City and the school district to deal with the long term deficits.

For this reason, I have urged the Council seek development guarantees or other financial assurances from the developers and to inquire more deeply into the financial viability of any party to the Development Agreement. This information, being critical to the deliberation of this subject matter by council, should be available to the public. Mere verbal assurances from the developers relayed by the City Attorney are insufficient.

Council members must keep in mind that while the Development Agreement is appurtenant to the land on which Whispering Hills is to be built, the JCF Agreement and the Mitigation Agreement are not. Most importantly, the cash proceeds of the CFD in the hands of the developers would far exceed the value of the undeveloped land and may be lost to the public forever.

CUSD Forensic Audit of San Juan Hills High School

2008-12-19T17:15:00.000-08:00

On Thursday, 12/18, I attended a meeting at the Ed Center to discuss the SJHHS forensic audit initiated by the CUSD Board. This meeting occurred just two hours before the widely-publicized meeting of the Board that included an evaluation of the Superintendent. While the mood in the meeting was calm, it was clear that some participants were preoccupied with the larger meeting that was to follow.

Accompanied by another parent, the purpose of the meeting was to introduce the auditor-investigators and establish a line of communication. Members of the community have collected a large volume of information -- perhaps more information than exists at CUSD. We discussed this information and offered to share it. In part, it's the same information you see in these pages and the related group website.

Most of our discussion focused on the scope of the upcoming investigation. I urged the auditors to focus on areas of the SJHHS project that might yield financial claims for CUSD against the developer (Whispering Hills LLC), or project contractors (e.g., the environmental firm and the architect). Political blame can be handled by others (including me, sure enough), but the District should focus on money.

The complaint filed with the California Attorney General outlines more than $10 million in questionable expenditures. At the end of our meeting, we pointed to that complaint as a road map for detailed investigation and volunteered our full support.

Update: Assignment and Assumption of Development Agreement for Whispering Hills

2008-12-17T11:32:00.000-08:00

The San Juan Capistrano City Council met on Tuesday night to consider the request to approve assignment of the Whispering Hills Development Agreement to a new entity called Rancho San Juan Development LLC. The Council did not approve the request when a motion by Councilman Hribar failed for lack of a second from any other member.

Council did pass a voice motion to reconsider the request at Council's next meeting on January 20, 2009.

Written comments were supplied to Council by me and by the developer. The developer's letter is evidence that the sole purpose of the requested assignment is to shield the new "member", Woodbridge, from past liability. One can speculate that there is some year-end tax structuring involved as well, though the letter is silent on this point.

Ellen Addonizio, President of the CUSD Board of Trustees, spoke as a private citizen and requested that the City allow time for CUSD Trustees to look into the transfer.

Sue Palazzo, a member of the CUSD Board of Trustees was also present in the audience.

I spoke briefly to draw Council's attention to my letter and to remind them that the Development Agreement was just one element of a complex set of agreements pertaining to Whispering Hills. I suggested that the public interest would be served by delaying consideration of the matter for a reasonable period of time to allow consideration of all of the developer obligations, including those obligations to the County of Orange and the school district. I closed by expressing my support for seeing the Whispering Hills development be completed as planned, assuming the public's interest is respected.

A representative of Woodbridge also spoke and urged the Council to approve the assignment, in fact stating the City was obligated to deal with the request "within 30 days". The City Attorney disputed this statement, at which point the matter appeared to be decided.

Comments from the dais provide a few insights. Apparently, the relationship between the City and CUSD is not warm. In fact, one council member spoke of being "blown off" and "ignored" by the school district in the past. In another case, it was noted that CUSD used its governmental authority to override City land use restrictions on the San Juan Hills High School site. Apparently, this was viewed as being a heavy-handed and contrary to public will expressed in a ballot measure.

It is clear that CUSD leadership has some fence-mending to do with this Council.

Time is short for the school district to act to protect any claims it may have against Whispering Hills. The City is, strictly speaking, not a party in the relationship between CUSD and the developer and it may not unreasonably thwart the transfer of the Development Agreement.

However, Councilman Allevato did raise the issue that the County of Orange is a third party beneficiary under the Development Agreement. Is the County aware of the impending transfer?

Assignment and Assumption of Development Agreement for Whispering Hills Estates

2008-12-15T23:10:00.000-08:00

On the Tuesday agenda, the San Juan Capistrano City Council is being asked for a second time to approve an assignment of vested rights and obligations set forth in an agreement between the City and Whispering Hills LLC to a new legal entity. The original Agreement was executed in July of 2005 and became effective on August 19, 2005.

In his Agenda Report, City Attorney Omar Sandoval indicates that the new entity, Rancho San Juan Development, LLC, is a “wholly owned” company formed by Whispering Hills LLC. This representation is being made by a City employee instead of the applicant owner. As such, it should be set aside. I urge the Council to consider the broader implications of this request.

Sandoval’s Report goes on to state that Section 4.2 of the Development Agreement provides, “that Whispering Hills LLC may assign any of its rights under the Development Agreement, subject to the prior written consent of the City, which consent shall not be unreasonably withheld.”

This is an incomplete characterization of Section 4.2. The actual language of that section is:

Assignments.

The rights and obligations of Owner under this Agreement may be assigned in writing in whole or in part as part of an assignment of all or a portion of the Property. Any assignment shall be subject to the provisions of the Agreement, and to the prior written consent of the City, which shall not be unreasonably withheld. During the Term, any assignee shall have those rights, benefits and obligations of Owner under this Agreement as expressly assigned with respect to the portion of the property owned by assignee. Immediately upon delivery by Owner to the City of the assignee’s written assumption of Owner’s rights and obligations under this Agreement with respect to any portions of the Property being assigned, Owner shall be released from all obligations as to any portions of the Property so assigned.

The italic format has been added by me to draw attention to text to be discussed below...

“...and obligations”

Any agreement involves obligations on the part of both parties. Sadoval’s Report fails to mention the obligations without which the Development Agreement would not exist.

“...in writing, in whole or in part as part of an assignment of all or a portion of the Property”.

The applicant owner has provided no evidence to the City of a sale other assignment of property appurtenant to the Agreement. This is a basic requirement for assignment to occur.

“...expressly assigned with respect to the portion of the property owned by assignee”.

Again, there is no evidence offered that the assignee owns any part of the subject property.

“... Immediately upon delivery by Owner to the City of the assignee’s written assumption of Owner’s rights and obligations under this Agreement with respect to any portions of the Property being assigned, Owner shall be released from all obligations as to any portions of the Property so assigned.”

Again, the portions of the property are not specified. But more importantly, does it not make sense that the City determine whether the obligations of the owner assignee have been fulfilled during its tenure as a party to the Agreement?

I request that City staff be instructed perform a detailed analysis of Owner obligations under the project FEIR, including the EIR amendment, CDP 04-01, TTM 16634, GPA-04-01, RZ04-05 and any other land use entitlements to determine Owner’s compliance before granting the requested assignment.

I request that the applicant be requested by the City to provide written details of the real property transaction that qualifies the requested assignment under the terms of section 4.2 of the Development Agreement, for consideration by Council the next time this request is heard.

___________________________

The subject Development Agreement contains two significant clauses that should be carefully considered by Council:

In paragraph 1.2, Interest of Owner, describing the underlying real property, the following appears:

“...and 34 acres of which real property are located in the unincorporated area of the County but within the City’s Sphere of Influence.” (capitalization from the original text).

In paragraph 10.12, the following appears:

“Third Party Beneficiary. The County of Orange is a Third Party Beneficiary of this Development Agreement pursuant to Section 6.8 herein.”

At section 6.8, a detailed “Public Benefits to and Easement Agreement with the County of Orange Relating to Avenida La Pata and Trail Improvements” appears. Multiple obligations on the part of Owner and County are documented.

Clearly, original Development Agreement pertained to areas outside of, but adjacent to the City, within the City’s “Sphere of Influence”. In fact, it was the City Planning Commission that championed the County’s interests in the original Agreement (see Matthews / Tomlinson correspondence, May 2002). It remains a matter of interest to the City whether these obligations to the County have been fulfilled.

I request that the applicant be requested by the City to provide written clearance from the County of Orange as evidence that Owner’s obligations set forth in the Development Agreement have been met. City staff should be instructed to independently confirm the evidence provided by the applicant.

___________________________

In paragraph 1.3, Intent of the Parties, this appears:

“The development of the Project is intended to implement specific land uses, provide public infrastructure and generate revenues to the City, all in promotion of the health, safety and general welfare of residents of the City."

Similar language is used throughout the Agreement. It is obvious to anyone that this intent has not been yet accomplished by the Agreement.

I request that the applicant be requested by the City to provide written evidence of the financial capability of the Assignee to fulfill the remaining obligations encompassed by the Development Agreement.

I request that the applicant be requested by the City to provide a project schedule that demonstrates the feasibility that the project be completed within the remaining term of the Development Agreement.

___________________________

The Assignment and Assumption of Development Agreement attached to the Agenda item raises a number of troublesome issues:

Paragraph 1, “...right, title and interest”

This document is not an assignment of title in real property. It is not suitable for that purpose. There is no evidence of a necessary transfer of title in the real property.

This same erroneous language appears in City’s consent document attached.

Paragraph 2 and 3, cross indemnification of Assignee and Assignor

This document should contain indemnification for the City, a reasonable condition of granting the assignment. Neglect of obligations by Whispering Hills LLC that are unknown to the Assignee could result in a future claim against the City for negligent enforcement of the Agreement and City codes. Even a claim of fraud or conspiracy involving the Assignor and the City could be constructed. The assignment agreement should indemnify the City against such claims.

Similar indemnification should be provided to the County of Orange.

Paragraph 7, Successors and Assigns: Entire Agreement

The explicit language of this paragraph states that, “the Assumption Agreement constitutes the entire understanding among the parties with respect to the subject matter hereof.” This is deficient language in light of the absence of evidence that any real property is being transferred to the Assignee.

Signature Page

I want to draw Council’s attention to the fact that the two “sides” of this agreement are identical, except for the insertion of a new corporation at the top of the Assignee. The same officers have signed for both parties (neither Grant or McGowan are listed as owners). Thus, without hearing from the actual owners of Whispering Hills, LLC and Rancho San Juan Development, LLC, the City has no way to determine whether the assignment is even valid based on this document.

I request that the applicant be requested by the City to insert indemnification for the City into the Assignment and Assumption Development Agreement.

I request that the applicant be requested by the City to provide more complete documentation of the requested assignment in the Assignment and Assumption Development Agreement.

___________________________

A “Cooperative Agreement”, dated May 20, 2003 (Agreement No. D03-044) exists between Capistrano Unified School District, Whispering Hills, LLC and the County of Orange pertaining to obligations arising from the use of La Pata Avenue (“LANDFILL ROAD”) the school and the new residential development. This Agreement creates numerous obligations on the part of the applicant, including:

Whispering Hills, LLC (and CUSD) agreed to indemnify the County of Orange against claims arising from “loss or damage of persons or property” arising from use of La Pata Avenue.

Whispering Hills, LLC (and CUSD) agreed not to cause or permit toxic or hazardous materials to contaminate La Pata Avenue.

Whispering Hills, LLC (and CUSD) agreed to maintain specific forms of liability insurance and name the County as “also insured”, to cover liability arising from use of La Pata Avenue.

Whispering Hills, LLC agreed to provide numerous pieces of documentary evidence pertaining to the “as-built” improvements to La Pata Avenue, to maintain performance bonds, to file completion documentation, and to comply with various regulatory “flow-down” requirements.

I request that the applicant be requested by the City to provide evidence of satisfactory completion, release or reassignment of its obligations to County under the Cooperative Agreement dated May 20, 2003, and any successor or similar agreements.

I request that the applicant be requested by the City to provide evidence of agreement by CUSD that Whispering Hills, LLC be relieved of its mutual obligations under the Cooperative Agreement, or that a substitute party acceptable to CUSD has been bound contractually to the mutual obligations toward County.

___________________________

I think these are all reasonable requests to make of the applicant. In particular, I think it is incumbent upon the City to provide notification to the County and CUSD, and allow each party time to respond, make inquiries of the applicant, and process whatever replacement agreements are necessary to protect the interest of the public in this assignment.

"Routine Maintenance" of Fuel Pipelines

2008-12-03T20:04:00.000-08:00

On November 25, an 8-inch Sunoco high pressure transmission pipeline similar to the one that runs through Orange County, crosses four "creeks" (i.e., seasonal rivers), and passes near San Juan Hills High School, ruptured in Pennsylvania while a valve was being serviced by the pipeline operator. At least 7,500 gallons of gasoline escaped. There was no fire.

There is an interesting photograph taken after the incident showing the gasoline vapor cloud rising into the air (from WTAE video):

A week after this photo, the restaurant pictured could not be opened due to excessive gasoline fumes.

Here's a related story describing the attempts to clean-up after the incident.

Here's the original story that ran on the day of the rupture.

As this article is written, Kinder-Morgan is out on La Pata in San Juan Capistrano doing maintenance on the 16-inch pipeline check valve above San Juan Hills High School. This work has been underway for more than a week.

Did anyone else notice? Has anyone been notified?

Transfer of Whispering Hills Development Agreement?

2008-11-19T13:19:00.000-08:00

On September 18, the San Juan Capistrano City Council was presented with a request to assign the previously approved Development Agreement between the City and Whispering Hills LLC to a new partnership called Rancho San Juan Development LLC.

You can see a few other details of the City Council discussion at The Capistrano Dispatch, Beyond the Blackboard (blog).

Why should this be necessary? After all, the item placed before the Council says that Rancho is "wholly owned" by Whispering Hills LLC, so what is the point of such a transaction?

There could be several possibilities:

1. The future sale of Rancho San Juan Development LLC may be contemplated. The buyer of the entity would then be shielded from any past claims involving Whispering Hills LLC, having purchased a fresh and clean asset consisting of the land and the agreement to develop it. Of course, this leaves anyone with a claim (e.g., Capistrano Unified School District), holding an empty bag!

2. Whispering Hills LLC might be trying to transfer ownership of this property without triggering a property tax reappraisal by the County of Orange. The property was originally acquired for about $8000 per acre. By the time it was sold to CUSD, the "price" had escalated to $1,040,000 per acre, even though no development agreement existed at the time. However, more than a year after the sale to the school district, the City did approve the Development Agreement making the land significantly more valuable today compared to the purchase price. Merely selling the land will trigger a reappraisal and taxes would go up! However, it is actually the Development Agreement that makes the land valuable and transferring the Development Agreement will not get the attention of the Tax Collector. Neat trick! Sell the rights in the Agreement for $ millions and then sell the land itself at an artificially depressed price (under the cover of depressed market for such property).

3. Yet another possible motivation for this transfer would be to isolate the new owner from the messy property line dispute that exists between CUSD and Whispering Hills LLC, along with the related Attorney General's investigation. There are several areas where SJHHS has been built on land owned by Whispering Hills LLC, and these areas of dispute may cloud title to the property.

4. Another possibility is that the owners of Whispering Hills LLC are intent on terminating their obligations under the Development Agreement. This could easily be accomplished by transferring the Agreement to a new entity that would then simply allow the Agreement to expire (or through bankruptcy, the new entity would just disappear). This scenario seems far-fetched, unless the cost of the owner's obligations under the Development Agreement have grown to exceed the value of the Agreement itself, or the owners believe that the Development Agreement will expire before there would be any interest in actually developing the property.

Take your pick. No matter what happens, the community will be affected. The City of San Juan Capistrano has bent over backwards to accommodate this developer. Along the way, CUSD was simply raped (there is no more apt term for it). Now we are asked again not to "unreasonably withhold" permission for this developer to play his games.

The City should demand a full explanation for this transfer. It should demand an assurance that the transfer of the Agreement and the property occur together. It would not be "unreasonable" to re-open the Development Agreement itself as a condition of obtaining the City's consent to the transfer.

The City may be the only public agency that is in a position to ensure that the school district and County taxpayers are not being made victims by this transaction.

Complaint to CA Attorney General Jerry Brown

2008-09-20T18:53:00.000-07:00

The OC Register carries an article online this evening describing a formal complaint submitted to the California Attorney General Jerry Brown about the San Juan Hills High School site selection and acquisition.

The Capistrano Dispatch posted a related article online.

The attachments referred to in the complaint are available from the Wayne Tate's office (listed in the letterhead).

OC District Attorney Summarizes

2008-09-16T13:36:00.000-07:00

In a nine page letter to CUSD Trustees and Superintendent, the OCDA has touched on the legal and procedural issues that arise from the San Juan Hills High School site decisions. A summary of the basic problem in this site decision is provided:

On May 9, 2008, less than two months later, this office sent another letter to CUSD notifying it that it was not in compliance with applicable Education Code regulations in the erection of athletic facilities at its San Juan Hills High School, in proximity to an operating pipeline transmitting flammable fluids under high pressure. The letter pointed out that although CUSD was in possession of evidence of the existence of the pipeline in 2001, two years before it purchased the site, it failed to conduct a risk analysis until 2004, a year after the purchase. The consequent report, finding no appreciable risk turned out to be flawed in that it was based on inaccurate and incorrect information.

This office advised CUSD of the flawed report and the resultant failure to comply with applicable Education code Regulations before referring the matter to the state Department of Education for further review and action. We also pointed out in that letter that, paradoxically, CUSD had declined the acquisition of a nearby site (reportedly less costly) on the basis that a similar pipeline ran through it, when in fact that pipeline had been abandoned and was not in use, a condition which a reasonably diligent inquiry should have disclosed. (Although not yet the subject of a complaint to this office, the reason for this and in fact the entire process governing the acquisition of the San Juan Hills site is a matter that the new Board majority may wish to thoroughly investigate in addition to the issue involving the pipeline.)

I concur. The entire original process by which CUSD acquired the SJHHS site should be investigated. A formal complaint regarding the site acquisition process is necessary to trigger an investigation.

Community Prepared for Pipeline Incident?

2008-08-30T12:16:00.001-07:00

Much has been made of the San Juan Hills High School site and the ability of CUSD to to respond to a nearby incident on the 16-inch liquid fuel pipeline. Of course, if such an incident were to occur, the school would be assisted by agencies and resources from the surrounding community. But what of the readiness of the community itself?

This question is of more than passing interest in our area since the three three major rivers (San Juan Creek, Trabuco Creek and Verdugo Creek) cross the pipeline just upstream from the cities San Juan Capistrano, Capistrano Beach and Dana Point. Portions of Laguna Niguel, and Mission Viejo are also affected.

A pipeline rupture and fuel spill into any of these creeks or their tributaries has the potential to spread disaster over a wide area. In the 1988 Bellingham incident, gasoline flowed more than a mile downstream from the point of pipeline rupture and then ignited.

At locations where the fuel pipeline crosses a river, the normal practice is to bury the pipeline deep below the riverbed. For example, at the San Juan Creek crossing, the pipeline was buried 8 to 15 feet below the riverbed that existed at the time of installation in 1988 (this according to authoritative Kinder-Morgan alignment drawings that I have examined). Of course, seasonal erosion of these natural riverbeds is a consideration. The erosive action of river water and threat to the pipeline are exceedingly small, corresponding to unusual storm flows that are both rare and obvious to the pipeline operator when they occur. Thus, the prospect that a pipeline would rupture through action of a river itself is small.

A larger risk is the potential for a pipeline rupture in areas that drain directly into one of these rivers along the path provided for storm water. Damage from digging, an earthquake, or even a railroad accident can result in release of fuel. A flaw in the pipeline itself, corrosion, and improper operation of the pipeline are other potentials. Fuel that escapes will flow downhill along natural water courses and storm drains into the creeks.

Are our community agencies prepared to respond to a report of fuel flowing in one of these creeks? The Orange County Fire Authority has past experience with one such an event, in 1988 when gasoline spilled from a pipeline and flowed down San Diego Creek in Tustin and Irvine. Fortunately, there was no ignition and the Fire Authority performed well in containing the spill in a sparsely-populated industrial area before it reached the Upper Newport Bay. I am told that two of firefighters were permanently disabled as a result of exposure to gasoline fumes as a result of this incident.

It is noteworthy that this incident occurred in an area that was largely undeveloped at the time. The same incident, if it would occur today, would require that large tracts of homes, movie theaters, medical facilities, multi-floor condominiums and office buildings be evacuated. In 1988, the incident was barely mentioned in the newspaper. Today, it would be a disaster of major proportions, with a significantly greater potential for ignition and loss of life.

If the Fire Authority is prepared, our cities appear to be less so. In fact, they appear to be downright uninformed! For example, my inquires at the City of San Juan Capistrano planning and engineering offices produced blank stares. While SJC has an emergency response plan for a whole variety of events from nuclear accidents to tsunamis, there is no mention of the fuel pipeline. The City of Mission Viejo appears to be no better off. I can find no mention of the pipeline in their disaster response plans.

No city appears to possess the maps that have been created by the pipeline operator, Kinder-Morgan, that describe where fuel would flow in the event of a rupture. The Pipeline and Hazardous Material Safety Administration has designated most of Orange County to be a "High Consequence Area" with regard to this pipeline, yet the cities and the county do not acknowledge this risk.

We can can gain from the experience of others. In this regard, a "lessons learned" presentation by the Bellingham, WA Fire Chief is enlightening. The presentation makes it clear that response to a pipeline incident must be carefully coordinated. It is also outlines the potential that a much greater loss of life might have occurred among those who responded, but for luck and quick reactions of a few who realized that they were dealing with a deadly unknown and pulled-back from the immediate area just before the ignition.

Land Use Planning

CUSD was required to consider the risk to SJHHS because it is subject to provisions of Title 5 in the California Code that regulate school construction adjacent to liquid fuel and natural gas pipelines. But other facilities such as private schools, hospitals, convalescent facilities, pre-schools, etc., can (and are) inappropriately located in areas near dangerous pipelines. The location of these activities are regulated by cities and county through land-use plans. So far as can be determined, no city in our area has incorporated the presence of pipelines into their land-use planning. The county also has nothing.

Responsible land-use planning must incorporate the principal that no facility that houses large numbers of people, or that would require assistance in evacuation should be located in an area or along a path that could be directly threatened by a pipeline rupture. In response to a rupture of a liquid fuel or natural gas pipeline, no assistance in evacuation can be provided in areas that are threatened by gas or vapor clouds, or that are located inside the wider radius of exposure to blast or thermal radiation in the event there is a detonation or fire. People in these areas must be able to move to safety without outside assistance.

All the way back in 1990, following the train wreck and subsequent pipeline disaster in San Bernardino, the National Transportation Safety Board wrote a Safety Recommendation to the Mayor of that city. The letter stated:

Although the City of San Bernardino had developed a general plan for land use, which was the framework for decisions by the City on the use of its land for the protection of residents from natural and man-caused hazards, the use of land in proximity to mainline railroads or high pressure pipelines was not addressed in the general plan or in subsequent revisions to the plan. The Safety Board believes that city and county officials should take into account the location of railroads and high pressure pipelines when developing a general plan for land use.

The letter goes on to issue a specific "priority recommendation" that the city make such amendments to its general plan. Almost two decades later, one wonders how this recommendation has been ignored by so many (including the City of San Bernardino). Perhaps the siren song of real estate developers is simply too strong for our local elected leaders?

Back in San Juan Capistrano, we also have to consider a high-pressure natural gas transmission line that runs right through the center of town:

This Southern California Gas facility enters San Juan Capistrano from the north across the street from J Serra Catholic High School, passes nearby the Saddleback Valley Christian School and the adjacent Silverado Senior Living (Alzheimer's) facility, through the densely populated Villas complex and then into the heart of the historic area. As it continues southbound under Alipaz, it passes 900 feet from Kinoshita Elementary School and Marco Forster Middle School before joining the path of the creek and continuing into Dana Point.

Historically, this facility has been located on "the wrong side of the tracks", so to speak. The areas threatened by it were mostly open space and farmland, with a few exceptions. However, over the past two decades, this area has developed dramatically and all of the aforementioned facilities have been permitted to be built in close proximity to this risk because the land-use plan for the City of San Juan Capistrano is silent.

In 2004, the National Academy of Sciences issued a report that provides considerable guidance to communities: Transmission Pipelines and Land-Use: A Risk-Informed Approach. It is recommended reading for our local leaders.

How a Democracy Allocates Risk

2008-08-26T11:25:00.000-07:00

Last evening, a few of us got a stark lesson in how our democratic institutions deal with risk to the public. In this instance, the subject was the risk posed by the fuel pipeline adjacent to SJHHS.

A workshop was scheduled for 5 PM, a very inconvenient time for most people. Predictably, the turnout was light -- about a dozen members of the public were on hand, along with two dozen district staff, and the district Trustees.

From the outset, this workshop was rigged by Superintendent and staff to produce the desired outcome: approval of their new Pipeline Safety Hazard Assessment. The technique used to obtain this approval was venerable and time-honored, "Keep asking until you get the desired answer."

No new information has become available since the evening two weeks ago when these same Trustees refused to approve the Assessment. Everyone is aware that a technical disagreement exists between CUSD's expert, Dr. Fitzgerald, and another expert, Richard Kuprewicz, yet no effort was made to involve Kuprewicz or any other expert in the workshop.

The resulting discussion was meaningless. There was one expert in the room, a technical dispute, and no way to resolve it since there was nobody qualified to question the one expert.

For my part, I urged the Trustees to consider why they were being asked for their approval. Mr. Carter earlier extorted the Trustees when he stated that CDE would "sooner or later" demand that CUSD return the state money expended to construct SJHHS unless approval was forthcoming. I suggested that if the Trustees were satisfied with Dr. Fitzgerald's Assessment despite the existing technical dispute, they should vote to approve it. On the other hand, if they felt the need to be better informed, they were obligated to demand additional information. I suggested peer review of the report would be one way of obtaining more information.

In his own way, Mr. Carter urged the Trustees to approve the Assessment because he wanted it resolved "before school opened" on September 2. In the same breath, he admitted that issues related to EMF and land ownership would prevent re-opening of the affected athletic field at the school.

A number of parents urged the Trustees to "move on", stating that they were "satisfied" with the report.

Finally, CUSD's attorney Mr. Bergman, provided the Trustees with an incomplete and misleading description of their personal legal obligation and potential liability under the Government Code. He omitted the obligation to make reasonably informed decisions, something that might be questioned under these circumstances.

Without resolving the technical dispute, without discussion of the recent revisions in the Assessment, and without consideration of a single mitigation strategy, this workshop set the stage for the eventual approval of the Assessment later in the evening.

Does the fuel pipeline pose a risk to SJHHS?

In my opinion, we will never know the answer to this question. Trustees were persuaded to certify the safety of the school on the basis of one Assessment. That Assessment concludes that there was "no risk", but of course, this conclusion is based on certain assumptions. Did anyone seriously challenge these assumptions? Yes, they were seriously challenged but Trustees chose to pay no attention.

After formally approving the Assessment, a couple of Trustees did express the desire to obtain a peer review of Dr. Fitzgerald's work. But one Trustee, Ms. Bryson, commented that such a review would be "very costly", though she had no basis for making the statement.

So in the end, we conclude that democracy allocates risk to the public on the basis of expedience and cost. Those of us who thought otherwise were wasting our time.

Orchestrated Chaos and Broken Commitment

2008-08-13T22:49:00.000-07:00

There is considerable speculation that CUSD staff may have submitted the new pipeline safety analysis to the California Department of Education (CDE) before it was approved by the CUSD Board. A document has come my way that appears to confirm this.

This e-mail thread also provides insight into thinking of CUSD staff regarding safety. In fact, I see no mention of it.

The document further supports that fact that Dr. Fitzgerald's appearance at the August 11 Board meeting was unexpected.

"She will be out of town tomorrow through the weekend to attend [redacted] services and wasn't planning on returning Monday unless we specifically need her to attend the meeting. While she has graciously offered to attend, I think it would be unreasonable to ask her to cut short a family trip of this nature. We would have to let her know today if we need her there."

How easily something so innocent becomes so political in the absence of an explanation from those involved!

Notice, if you will, that Dr. Fitzgerald's response to Trustees, dated July 31, was not actually sent to Trustees until August 6. Why would staff delay delivering this information to Trustees?

Lastly, a critical piece of information has not surfaced:

"Also, Greg is preparing a memo for you regarding liability questions which were raised previously."

Where is this memo?

If it was provided to Trustees in closed session, it may be a Brown Act violation. If not, I would call on CUSD to publish this memo on their website alongside the analysis.

I recall that Mr. Carter and Mr. Bergman promised that this entire subject would be handled "transparently", and in "public session". What happened to this commitment?

Transparency? Information Vacuum Leads to Misunderstandings

2008-08-13T20:34:00.001-07:00

As one who raised the pipeline as an issue and has subsequently come across other questions concerning SJHHS, I attended the Board meeting on August 11, to hear what the Board would decide to do with information in their possession, including information that I provided.

It was indeed unfortunate that Dr. Fitzgerald was personally inconvenienced to appear at the meeting. Her presence was entirely unexpected. Board members were told by senior District staff before the meeting that she would not be present.

Once Mr. Carter took the resolution to approve the pipeline analysis "off the table", introduced Dr. Fitzgerald, and suggested discussion only, "to give the Trustees time to consider new information", it was clear that Dr. Fitzgerald's presence was entirely unnecessary and unfortunate waste of her time.

It is not surprising that the Trustees had almost no questions for her. Three Trustees, Christenson, Maddox and Palazzo, had already submitted written questions to Dr. Fitzgerald that were answered in her July 31 memo (on the CUSD website). What all the Trustees knew was that another qualified expert had submitted statements to Trustees that directly contradicted Ms. Fitzgerald's answers.

This contradictory "new" information was compelling enough to get the attention of everyone involved, motivating Mr. Carter to withdraw the resolution of approval. His statement that "the Trustees" need more time was a bit off the mark. It seems more likely that he was motivated by the desire not to see the resolution and study rejected for a second time. This was a prudent move.

Everyone needs more time to consider this whole subject, and we need all available information to do so.

Too bad, but most of the audience was completely clueless about what transpired. The atmosphere was so tense that neither the Superintendent or the Trustees bothered to explain what they were doing.

CUSD took public comment on their website concerning the pipeline study during the past month. None of this material has been published. Senior district staff and Trustees received advance information from me, and from an independent expert, that raised questions regarding the direction of CUSD's pipeline study. None of this information has published. Is this the transparent process that was promised to parents when this discussion started?

Does the school district not have a duty to inform people of the questions related to the SJHHS site?

Many of SJHHS parents who were in the audience at the Board meeting probably thought that the Board’s failure to approve the pipeline analysis would result in pressure to close the school. Why?. These issues were raised long before school adjourned in June (the issues have existed since 2003), yet the 2007-8 school term was allowed to end normally.

When CUSD considers all the SJHHS site issues, a great opportunity exists to forge a corrective plan that everyone would regard as safe, protect the public's $155 million investment, and create a great school site. However, the continuing negative reaction of uninformed SJHHS “supporters” who view this question through a political prism is delaying the day that the issues will addressed and resolved.

In other words, who wants to support San Juan Hills High School?

Shall we continue to wait for CUSD to address pipelines, power lines, property lines, and site size? Shall we continue to standby as they engage in inept negotiations with the owner of the surrounding property?

These issues have existed since 2003, and they remain unresolved yet today. We should all be telling the CUSD Board that five years is long enough to get it right.

Update4: Pipeline Rupture in Illinois on 8/10/2008

2008-08-11T07:55:00.001-07:00

A 20-inch pipeline carrying crude oil from Illinois to Kentucky ruptured sometime Sunday morning. There was no fire. Latest estimates put the amount of oil that has escaped at 5000 bbl (210,000 gallons). The pipeline is owned by Marathon Oil Co.

Robert Calmus, a spokesman for Marathon stated that the pipeline was shut down as quickly as monitors indicated there had been a sudden drop in pressure. "Of course there was some residual pressure in the line," Calmus said. "Our emergency response team is on the scene, and we're still assessing the situation."

Residual pressure? Somebody should inform Mr. Calmus that our expert says that such pressure doesn't exist.

The Evansville Courier & Press carries a brief article on the incident.

The same newspaper offered an update today.

In a later update, the newspaper reports that the EPA has dispatched investigators to the site of the rupture. Additional details are contained in a new article.

In a follow-up, the newspaper reports on the broader implication of the incident. Find the article here.

On October 4, 2008, a newspaper reports that the original estimate of the amount of oil lost during the pipeline breach have been significantly revised upward. See the latest here.

Outside Review Questions Validity of CUSD Study

2008-08-09T10:08:00.001-07:00

In preparation for the Board meeting on Monday night, CUSD Trustees have been provided a memo containing responses to their questions concerning the pipeline adjacent to San Juan Hills High School. This memo was prepared in response to questions posed by CUSD Trustees after receiving Pipeline Safety Hazard Assessment prepared by Dr. Fitzgerald, of The Planning Center.

The following review of Dr. Fitzgerald's memo was prepared by Richard Kuprewicz, President of Accufacts, Inc. Mr. Kuprewicz is an internationally recognized expert in the field of pipeline safety. He was not paid for his review.

Mr. Kuprewicz wrote on Sat, 9 Aug 2008 11:43:33 -0400:

I have had an opportunity to review the memorandum to Superintendent Carter, Greg Bergman, Ron Lebs, dated July 31, 2008 and have the following general observations related to pipelines and the San Juan Hills High School. In a previous email I indicated that too many engineers and pipeline operators do not understand the unique dynamics that can be associated with transmission pipeline releases. Again, my purpose is not to alarm but to insure that informed and prudent decisions related to pipeline risk management are made concerning this very difficult situation. One sure sign of problems associated with very poor risk management approaches is the violation of the physical laws of science governing sound pipeline management and engineering practices, such as those identified below, rebutting some of the observations from the above 7/31/08 memorandum:
Explosive Vapor in the Atmosphere
The statement “Explosion of vapors in the open atmosphere cannot occur under the conditions present at the site.” is in all probability in serious error. While the specific conditions of the site that would prevent explosion are not identified in the memorandum, all forms of hydrocarbons, especially hydrocarbon mixtures, can explode or detonate, even in open fields, under the conditions related to many transmission pipeline releases, especially ruptures. It is a myth reflecting much inexperience, that hydrocarbon releases cannot explosively detonate in the “open,” and cannot generate serious overpressure in such situations. Many models fail to properly capture the critical factors that can result in detonation of pipeline hydrocarbon releases in such unconfined environments. The good news is that blast overpressure forces generated in the open that can be lethal, dissipate with distance quickly. As a result, high heat flux radiation associated with combustion following detonation usually controls the maximum size of the potential impact zone and mortality.

Please note that liquid hydrocarbon pipeline rupture releases are inappropriately modeled by pool or flash fires given the very high turbulence, aerosoling of the liquid, and extreme mixing associated with these very high mass rate releases. The assumption to model a gasoline release as if it where hexane, does not properly capture the release and detonation characteristics of a pipeline release which is moving a highly complex mixture of hydrocarbon compounds such as that in gasoline.
Risk of Asphyxiation
The memorandum statement “There is no risk of asphyxiation with a release from the pipeline in the open atmosphere” is in error. Hydrocarbon release, especially high rate releases from this product pipeline can generate large volumes of heavier than air hydrocarbon vapors which will flow like water settling into low spots displacing air. For individuals in such low spots, death by asphyxiation is a bona fide risk as has been well demonstrated by other pipeline releases with asphyxiation fatalities for individuals located in the “open.”
Danger to Evacuation Routes
The memorandum comment that “there is no conceivable way that fuel could flow onto the school site,” appears to not sync with the terrain and location of the school and surrounding infrastructure as well as previous documents that have been provided regarding this matter. Vapor release of heavier than air-fuel mixtures will quickly flow wherever gravity will take them. It appears that the analysis is ignoring or missing the large vapor generation. Ruptures are highly turbulent aerosoled events. Given the rapid dynamics of such releases, while emergency response plans are needed, no credit should be taken in risk management for emergency responder or other human field responder interaction, as usually such actions come too late to mitigate consequences given the rapid release dynamics. All too often I have observed that crediting emergency response in risk management approaches is a sure sign that the risk approach is fatality flawed!
Sustained Fire
A pipeline rupture explosion followed by fire (or if one is lucky, just a fire event) will not be a fire from a burning pool of liquid generating vapor from “evaporation.” Ruptures are highly turbulent releases of many hundreds of tons of fuel boosting vapor generation from aerosoling in a relatively short period of time. Detonation and or ignition generate tremendously high heat radiation flux and thermal dosages associated with very high mortality. This mortality is especially sensitive for unsheltered individuals such as those who may be in school open fields who will be least likely to survive upon receiving such extreme thermal dosages.

It should be also noted that pipeline hydrocarbon releases do not need an outside ignition source such as a flame to initiate combustion as such releases can generate their own source of ignition (e.g., from static electricity or rock sparking).
Increased Fuel Flow Due to Fluid Compression & Line Packing
All hydrocarbon liquids are compressible in the pressure ranges operated by transmission pipelines and yes the bulk modulus (which is the inverse of compressibility) is indeed approximately 200,000 psi for gasoline. Compressibility must be taken into consideration in all pipeline operations especially as it relates to rupture impact as release rates are substantially increased over pumping capacity because of this factor. While I do not know what position or experience is reflected in Mr. Morones of KM not knowing the term line pack in liquid pipelines, this term is readily used in hydrocarbon liquid pipeline pressure transient analysis/application, pipeline safety design, as well as failure/release dynamics.

Transient effects associated with hydrocarbon compressibility can easily render liquid pipeline leak detection “moot and ineffective” during the critical time or early stages of pipeline failure. Failure to properly account for compressibility/line unpacking seriously extends the time for remote determination and response at a time when system release rates are at their highest, well beyond pump capacity. Failure of KM to understand compressibility and line pack effects raises serious questions and concerns about the stated or implied capability of the KM leak detection system to determine a leak, especially a rupture, within 5 minutes of an event. On liquid pipeline systems 5 minutes is a very short time to pickup signals, determine, and then react to such possible release indicators, even rupture.
Circumstances Under Which Fuel Might Reach the School Site
A closer evaluation of the pipeline, the terrain, and the school are called for, in which realistic release volumes and surface flow characteristics and patterns (especially for vapor) as a function of time are properly stated and evaluated to confirm whether the memorandum statement “there is no physical way for product to reach and flow onto the school.” is valid.

I find very confusing the comment in the memorandum, in reply apparently to Mr. Christensen’s comments, “Nevertheless, the period of time assumed for shutdown of the pumps is not considered in the “worst case” scenario, which is based on liquid in the pipeline flowing for an indefinite period of time reaching the storm drain, and flowing beneath the school site.” We find no evidence in previous documents that support this claim. In fact given the limitations and technical errors imposed by critical assumptions in these previous studies and this memorandum, the validity and conclusions of these previous risk analysis reports should be called into serious question.

These comments raise serious questions regarding the value of materials being supplied to CUSD Trustees.

Picture Book Pipeline Failure

2008-08-08T21:28:00.000-07:00

For those of you that complain that my comments on pipelines are too technical, here is the picture book version of a serious accident. This occurred in Bellingham, WA during 1999, on a 16-inch fuel pipeline that is nearly identical to the one passing near SJHHS. When it was over, three young bystanders were dead.

Details of this incident are available at numerous places online, and here.

This photo depicts the section of the pipeline that ruptured at Bellingham. External damage to the pipe as a result of excavation that occurred years before the accident contributed to this failure. Some of the damage is clearly visible on either side of the point of rupture.

Mitigation vs. Disaster Response

2008-08-08T12:04:00.000-07:00

It appears to be a rather common mistake made around CUSD these days. During the last Board meeting, Mr. Bergman and Mr. Carter made a great deal of the fact that CUSD would respond promptly in the event that fuel were to escape from the Kinder Morgan pipeline adjacent to SJHHS. I've previously commented on this error in Pipeline Common Sense (at para. 8), stating that actions taken after an incident are not risk mitigation. Instead, they are incident response, or disaster response.

Actual risk mitigation consists of steps taken before an incident that are designed to reduce the potential affects of known risk. So far, no mitigation whatsoever has been proposed.

Non-experts such as Mr. Bergman and Mr. Carter may be excused for this common error. However, it is disappointing to see Ms. Fitzgerald commit the same blunder. In her memo responding to Trustees, she wrote the following response to a question from Mrs. Palazzo:

As discussed during the presentation, one mitigation measure would be to have the local CUPA agency or Orange County Fire Authority contact SJHHS and the District in the event that a rupture or leak occurred from the pipeline. Since the only scenario by which product could impact the school site is if vapors and/or product got into the storm drain and traveled beneath the school site, another potential mitigation measure would be that upon notification of a break in the pipeline, one of the engineers at the high school would go to the storm drain and install straw waddles or some similar type of barrier to prevent product from entering the storm drain. A permanent berm or dike could not be located around the storm drain because it would prevent stormwater runoff from rainfall events from entering the drain and thereby cause flooding.

Obviously, a telephone call notifying the school that fuel has escaped would come some time after the occurrence. As such, this constitutes a response to an emergency situation. It is not a step taken to mitigate risk.

It is even more incredible that Ms. Fitzgerald would propose that one of the "engineers" at the high school would be sent into the area of leaking fuel to install straw waddles, presumably to absorb the fuel. Would Ms. Fitzgerald herself be willing to perform this task? Does she know a category of CUSD staff that is trained for suicide missions?

The last sentence of Ms. Fitzgerald's response appears to deal with actual risk mitigation, presumably something suggested by Mrs. Palazzo. However, in dismissing the matter, Ms. Fitzgerald is stating that the only place where fuel flow might be diverted is at the storm drains. This is a very narrow minded view of the options available.

Consultant Response to Maddox is Faulty and Misleading - Gasoline is Compressible

2008-08-08T00:25:00.001-07:00

Ms. Fitzgerald wrote in her July 31, memo to CUSD Trustees at paragraph 5:

Liquids are considered to be incompressible fluids. Therefore, increased fuel flow by fluid compression is not possible. The bulk modulus of gasoline is approximately 200,000 psig; therefore, to get just a 1% increase in volume, the pressure would need to be increased by an additional 2,000 psi above what the current operating pressure of the pipeline is.

Please understand that I’m not a hydraulic engineer. However, only a few minutes of research is needed to dispense with this argument.

First, while liquids are relatively incompressible compared to gases, they are not “incompressible”. In fact, there is quite a difference between the compressibility of gasoline compared to, say, water. The term “bulk modulus” is used to describe the “stiffness” of a fluid. Gasoline has a bulk modulus of 190,000 psig. The bulk modulus of water is between 310,000 psig and 340,000 psig, depending on salinity.

Thus, gasoline is not as “stiff” as water and a certain amount of pressure applied to gasoline will reduce its volume more than the same pressure will reduce an equal volume of water. Conclusion: liquids are compressible. This contradicts Ms. Fitzgerald’s main statement.

Next, the compressibility of a fluid is not a linear function. An uncompressed fluid (at 0 psig, atmospheric pressure) is easily compressed a small amount. However, it takes an increasing larger amount of effort to achieve more compression. The effort to go from 0 psig to 1 psig is far less than is required to go from 10 psig to 11 psig, and so on. In fact, the function is hyperbolic.

The Kinder-Morgan pipeline operates at 1400 psig. The volume of gasoline under consideration in the pipeline is a fluid cylinder that is at least 24 miles in length and 16-inches in diameter (considering only the section up to the high school).

The “increase in volume” discussed by Ms. Fitzgerald misses the point entirely. Her disingenuous argument obscures the actual danger.

In a pipeline rupture, the enormous energy that has been expended to compress Ms. Fitzgerald’s “incompressible” fluid is released instantaneously. The entire 24+ mile cylinder of fuel (plus more beyond the point of rupture) will “relax” back to atmospheric pressure, increasing in volume as it does so. During this process, any obstruction (e.g., earth) at the site of the rupture will literally be “blown away” and a geyser of aerosol gasoline will rise into the air.

As the fluid in the pipeline returns to atmospheric pressure, it must escape from the pipe because with relaxed compression, it occupies a larger space (or volume) than the container (the pipeline) that previously held it. At the point of rupture, the rate of fuel escape will be dramatically higher than the nominal flow rate of the closed pipeline past the same location. Given the length of the pipeline, this accelerated release will continue for some time until all of the fuel has returned to atmospheric pressure.

Ms. Fitzgerald then makes this statement:

...therefore, to get just a 1% increase in volume, the pressure would need to be increased by an additional 2,000 psi above what the current operating pressure of the pipeline is.

This is way off subject; so far off, in fact, that it is difficult to accept as a mistake. The volume differential that is of interest is the difference between that of the pipeline payload compressed to 1400 psig (normal pipeline operations) compared to that same payload at atmospheric pressure (during a rupture). This would be far more than 1% and the volume under consideration (24 miles x 16 inches) is immense.

Given this error, Ms. Fitzgerald should also reconsider her response to Mr. Maddox in paragraph 6. Maybe she spoke to the wrong person at Kinder-Morgan?

Flawed Response to Trustee Inquiries re Pipeline

2008-08-07T18:54:00.001-07:00

Everyone should be aware that consideration of the SJHHS pipeline issue appears on the Board agenda next week.

The CUSD website now contains a memo from district's consultant, Ms. Fitzgerald in which she responds to inquires from some of our Trustees regarding her pipeline report. Of course, this report was prepared after a conference call with CUSD's attorney, Mr. Bergman. You should read her memo and then consider the following...

The second paragraph of Ms. Fitzgerald’s report states:

There is no risk of asphyxiation with a release from the pipeline in the open atmosphere. Death from asphyxiation can occur when workers enter chemical tanks, pipelines, manholes, and other confined spaces without taking proper precautions.

On page 11, “Injuries”, the National Transportation Safety Board (NTSB) report provides this description of the injuries resulting from the pipeline release in Bellingham, WA in 1999:

A police officer patrolling the accident area was alerted by residents that two boys needed medical assistance. The police officer immediately called for the assistance of a Bellingham Fire Department medic unit. The two 10-year-old boys were taken by ambulance from the 1900 block of Iowa Street to St. Joseph Hospital in Bellingham. Hospital staff stabilized them before each patient was flown by helicopter to the burn unit of Harborview Medical Center in Seattle. Each boy had received extensive second and third degree thermal burn injuries of the head, trunk, and extremities (80 to 90 percent total body surface area). Both boys died on June 11, 1999.

The body of an 18-year-old man was found in Whatcom Creek by members of the Bellingham Mountain Search and Rescue team. Bellingham Police Department investigators arrived at the creek and documented the body as having been found partially submerged near the north bank of Whatcom Creek. According to the Whatcom County medical examiner, cause of death was chemical asphyxia from hydrocarbon inhalation poisoning. The death certificate does mention inhalation of hydrocarbons (gasoline) but states the cause of death as asphyxia due to fresh water drowning. The autopsy report notes that the victim was most likely overcome by volatile hydrocarbon fumes, lost consciousness, and died from hypoxia by freshwater drowning.

Eight other individuals transported themselves to the hospital with minor inhalation injuries.

I cannot imagine how Ms. Fitzgerald could make such a serious mistake. The NTSB is the Federal agency responsible for investigation of transmission pipeline incidents. Every word of their report is carefully considered and reviewed.

The fuel released in the Bellingham accident was unleaded gasoline.

I will have more complete comments regarding Ms. Fitzgerald’s memo before the meeting. Please check back.