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~;tYof City Council Report
Santa Monica
Gity Council Meeting: August 11, 2009
Agenda Item: t'°
To: Mayor and City Council
From: Carol Swindell, Director of Finance
Subject: Purchase of Biodiesel Fuel
Recommended Action
Staff recommends that City Council approve an extension of the current purchase order
issued to General Petroleum through November 30, 2009 or until award of formal bid for.
the purchase of biodiesel fuel blend mixtures that are in full compliance with current
requirements and regulations.
Executive Summary
To ensure an uninterrupted supply of biodiesel fuel to the City, an interim purchase
order was issued to General Petroleum. Staff is requesting an extension of the current
interim month to month purchase order through November 30, 2009 or until the formal
bid is awarded. The biodiesel fuel blends purchased will be in compliance with existing
biodiesel fuel storage and dispensing equipment requirements and regulations.
Discussion
On December 2, 2008, Council considered the award of Bid #2956 to General
Petroleum Corporation for the purchase of biodiesel fuel for a six month period with a
one year renewal option. At that meeting, Council requested additional information
regarding the bid process and the environmental impact of biodiesel fuel to ensure that
the bidders' entire carbon footprint was considered in the selection process. Staff also
met with various stakeholders and users of biodiesel, including Southern California
Disposal, Big Blue Bus and the Community Maintenance Department to review the
various users' experiences and requirements related to the use of biodiesel. Yellow
grease; the most sustainable option, is now practical to bid. Although yellow grease
biodiesel OPIS (Oil Price Information Service) indices were previously available in other
regions, this index has only recently become available for the Los Angeles region. Staff
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will be conducting a formal bid process for the purchase of biodiesel fuel which will
require bidders to use the OPIS yellow grease index for the Los Angeles region for
pricing the biodiesel component and will return to Council in November 2009 after the
bid process has been completed. In addition, bid specifications will reflect and comply
with the current biodiesel storage and dispensing equipment rules and regulations.
Update on Underground Storage of Biodiesel Fuel
Effective June 1, 2009, an emergency regulatory action was approved by the State of
California Office of Administrative Law which allows for the lawful storage of certain
biodiesel blends up to 20 percent biodiesel and 80 percent petroleum diesel, commonly
known as B20, in underground storage tanks (USTs) that have been tested and
approved for storing petroleum diesel, if specified conditions are met.. Prior to this, no
blend of biodiesel was approved for storage in USTs.
With the exception of biodiesel blends up to 5 percent (B5), which has been designated
as meeting the specifications for petroleum diesel approval, underground tank systems
manufactured to date. have not received independent testing organization approvals for
biodiesel or other biodiesel blends. Further, leak detection equipment and method
approvals have not been obtained for biodiesel or any blend of biodiesel.
Not having yet completed testing for these two regulatory requirements (compatibility
and functionality) has significantly contributed to the delay in the use of biodiesel blends
greater than B5 in California. In response, the State Water Resources Control Board
demonstrated its commitment to facilitating the use of alternative fuels by adopting
emergency regulations- which provide a temporary- variance from these testing
requirements to allow the storage of biodiesel blends up to B20 in USTs.
Currently, the biodiesel blend being stored at City Yards is B50. The City Yard's
current configuration. may legally store and dispense biodiesel blends up to B20. The
biodiesel blend being stored at the Big Blue Bus facility is B20. The tank system at the
Big Blue Bus facility, specifically the product piping, does not satisfy the compatibility
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testing variance required to allow the storage of biodiesel blends up to B20. The Big
Blue Bus facility's current configuration may legally-store and dispense biodiesel blends
up to B5.
In order to satisfy the interim provisions, the tank owner must submit a statement
supported by the tank manufacturer, a nationally recognized biodiesel association, or a
nationally recognized research organization that the UST and components are
compatible with the biodiesel blend stored. The leak detection manufacturer must also
confirm functionality with the biodiesel blend being stored.
The manufacturer for the underground tanks at the City Yards is no longer in business.
However, a statement from the Steel Tank Institute supports the compatibility of steel
within the full spectrum of biodiesel/petroleum blends. A letter of support is also
available from the piping manufacturer. In addition, supporting documentation is
available from the leak detection manufacturer to support functionality with biodiesel.
This information will meet the interim regulations for compatibility and leak detection
necessary to store B20.
The manufacturer for the underground tanks at the Big Blue Bus is no longer in
business. However, a statement from the Steel Tank Institute supports the compatibility
of steel within the full spectrum of biodiesel/petroleum blends. The manufacturer of the
piping (APT/Franklin Fueling) has not, and likely will not, produce a letter of
compatibility. As a result, only biodiesel blends up to B5 may be stored in these tanks.
It is important to note that these emergency regulations (interim provisions) expire
December 1, 2009. In the upcoming weeks, State Water Resources Control Board staff
will begin the permanent rule making process. As a result of the public rule making
process, there is a possibility that the permanent regulations may differ from the
emergency regulations and that additional, or slightly differing, requirements may need
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to be met. Further, the variance from certain provisions of the tank regulations allowing
UST systems to store biodiesel up to B20 is only temporary
The compatibility testing variance becomes inoperative 90 days after the date of any
decision by UL that 1) biodiesel blends greater than 65 are included in the standard
petroleum diesel approval, or 2) determines that materials or components of the UST for
which the variance was obtained are not compatible with the biodiesel blend stored OR
36 months from the effective date of the emergency regulations. The leak detection
functional testing variance becomes inoperative 36 months from the effective date of the
emergency regulations.
Although these requirements limit the City's efforts to increase the use of higher blends
of biodiesel fuel, continuing to store and dispense materials that are in conflict with
current state and local regulations compromises the integrity of the program which the
City has worked toward establishing and must enforce in the private sector.
Financial Impacts & Budget Actions
Funds in the amount of $1,240,000 are available for the four month extension as
follows:
• Fleet: $120,000 in account 54554.522910, "Vehicles-Fuels/Lubrication"
• BBB: $1,009,000 in account 41.111008, "Fuel-Revenue Vehicles"
• BBB: $111,000 in account 41654.522840, 60W, "Fuel & Oil Taxes"
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Prepared by: Kimberlie Nimori, Senior Buyer
Approved:
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Director of Finance
Forwarded to Council:
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ont Ewell
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