sr-011910-8b~;tYof City Council Report
Santa Monica y~
City Council Meeting: January , 2010
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Agenda Item: ~ "~ ~
To: Mayor and City Council
From: Carol Swindell, Finance Director
Subject: Purchase of Biodiesel Fuel
Recommended Action
Staff recommends that City Council award bid number 2984 to General Petroleum
Corporation in an estimated amount of $2,050,131 annually, to supply and deliver B5,
B20 and B50 biodiesel fuel blends to the Big Blue Bus Department and the Fleet
Management Division.
Executive Summary
The purchase of biodiesel. fuel supports Santa Monica's Sustainable City Plan for
reduced emissions and sustainability. General Petroleum is recommended following a
formal bid process. The purchase order following award of bid wilt be effective through
June 30, 2010, with four additional one year renewal options, subject to annual budget
appropriation. The total estimated expenditure for the balance of the current fiscal year
is $1,195,910. The total estimated expenditure for the four and .one-half year term is
$9,225,590.
Background
In February 2005 the City began using biodiesel in the municipal fleet and in October
2006 the Big Blue Bus began using biodiesel in all diesel buses. One of the negative
impacts of using biodiesel is an increase in Oxides of Nitrogen (NOx) emissions. In
June 2006, the Council approved a contract with South Coast Air Quality Management
District (AQMD) which allowed the City to participate in a project to demonstrate the
validity of biodiesel and mitigate impacts associated with the increased use of biodiesel,
such as NOx emissions. Other parties to this arrangement were LA BioFuel, the
National Renewable Energy Laboratory, Extengine Transport Systems, and the
California Energy Commission. This demonstration was concluded on September 30,
2009.
1
Biodiesel blends are made from mixing biodiesel and petroleum diesel. An
alphanumeric designator indicates the level of biodiesel in the blend. For example, B20
indicates that 20 percent of the biodiesel blend is biodiesel and 80 percent is petroleum
diesel.
Biodiesel can be made from a variety of feed stocks, including plant-derived sources
such as soybean oil, palm oil, and other vegetable .oils; animal-derived sources such as
tallow, lard, and poultry fat; and recycled oil and grease (yellow grease) usually
obtained from restaurants and food processing plants. Numerous studies clearly show
that the production and use of biodiesel (derived from any of these feed stocks) results
in significantly lower lifecycle environmental impacts when compared to petroleum-
derived diesel.
In comparing different types of biodiesel, life-cycle assessments that take into account
energy and resource use related to its production from these various sources show that
biodiesel made from yellow grease is the most sustainable option by a large margin,
with the plant-derived sources being the least sustainable. This is because yellow
grease is a re-used `waste' product, whereas plant oils require significant energy, water
and fertilizer inputs to produce and process. (Note: the sources derived from animal fats
have a somewhat larger ecological footprint than biodiesel derived from yellow grease,
and they can be problematic because they tend to congeal in cold temperatures,
potentially clogging vehicle fuel lines. For that reason, they are not considered a viable
long-term source of biodiesel for the City).
An additional sustainability consideration related to biodiesel is the shipping distance
and method of shipping for both the raw materials to the manufacturing site and the
finished fuel from the manufacturer to the end user. In general, greater shipping
distances translate to larger environmental footprints of the fuel because they require
more energy to get the fuel to the end user. For this reason staff has prioritized the
2
purchase of biodiesel manufactured as close as possible to Santa Monica to minimize
these impacts. The bid specifications also emphasized the use of yellow grease as a
City priority, since feed stock for yellow grease does not require shipping virgin stock
across the country. An economic incentive also exists for yellow grease, since
efficiencies can be gained from using feed stock that is close to a production facility.
Higher levels of biodiesel in the biodiesel. blend, up to B99, provide increasing
environmental advantages because they reduce the amount of petroleum diesel needed
to fuel the vehicles. However, the amount of biodiesel that can be used in certain
vehicles is restricted by a number of variables. Big Blue Bus transit vehicles, which use
the greatest amount of biodiesel, are limited to a maximum of 620 due to the particulate
matter reduction. Additionally, State regulations also govern the storage and disposal of
biodiesel from underground storage tanks (USTs). As referenced later in this report, the
configuration of Big Blue Bus storage tanks limits storage and dispensing to B5
biodiesel. This means that of the 720,000 gallons of biodiesel blend estimated to be
used by the Big Blue Bus under the purchase order contemplated in this staff report,
only 5% (or 36,000 gallons) will be biodiesel, while the remaining 95% (or 684,000
gallons) will be petroleum diesel.
In May 2007, the City of Santa Monica opened a competitive bid to secure a contract for
the supply of biodiesel. As the bid progressed, staff recognized challenges associated
with the technical bid specifications and, in August 2007, hired Gladstein, Neandross,
and Associates (GNA) to help the City navigate the intricacies of creating specifications
and evaluating responses. Following an extensive review process, staff returned to
Council in Julv 2008 with a proposal to award the bid to the lowest bidder, General
Petroleum. At that meeting, Council directed staff to undertake a new competitive bid,
following examination of the overall effects that various feed stocks would have on the
City's carbon footprint. In the interim, Council awarded a purchase to General
Petroleum for a period of six months.
3
In December 2008, staff again returned to Council to recommend General Petroleum be
awarded the biodiesel bid. General Petroleum had again provided the lowest bid,
however, following a discussion between staff and Council on sustainability issues, it
was decided to conduct a third bid for biodiesel, with another interim purchase order
awarded to General Petroleum. The third bid, presented in this report, again yielded
General Petroleum as the lowest bidder for the provision of biodiesel fuel.. The bid
specifications for this bid and the bid presented to Council on December 8, 2008, were
prepared by staff and did not utilize any consultants to provide technical or other
support for the procurement of biodiesel
Discussion
Since May 2007, City staff has been working to secure a supply of biodiesel fuel for
vehicles and buses operated by the City. The relatively new arrival of biodiesel as an
alternative fuel has provided numerous challenges in crafting reasonable bid
specifications and in evaluating nonmonetary concerns, including the carbon footprint of
fuel delivery.
Following a December 2008 Council meeting in which a biodiesel bid award was
considered, issues surrounding the purchase of biodiesel have been studied extensively
by a team comprised of members of Finance, Community Maintenance, the Office of
sustainability and the Environment (OSE), and the Big Blue Bus, with guidance from the
City Manager's Office (CMO). The specifications for the bid were modified to ensure a
fair and competitive bid process, the selection of a vendor that offered a competitive
price, an uninterrupted supply of reliable biodiesel, and meet-the City's requirements for
environmental sustainability. These bid specifications also considered current
regulations for the storage and dispensing of biodiesel, which have changed since the
last bid. Current regulations only allow the storage of B20 in underground storage
tanks. Underground storage tanks at the Big Blue Bus facility are restricted to storing
and dispensing biodiesel blends of up to a maximum of B5 due to the facility's current
configuration.
4
At the December 2008 Council meeting, it was noted that an index did not exist for
yellow grease (i.e. recycled cooking oil), which complicated the bid process. Since that
meeting, an index has been added to the Oil Price Information Service (OPTS) for the
local area. The OPIS index provides a mechanism for staff to evaluate various bidders
by providing a common starting point. For example, if the OPTS index for yellow grease
is $3.00, a bidder will add the various taxes, including federal and state excise taxes,
and the proposed markup, which reflects the cost for storage, transportation, and
overhead costs, resulting in a per gallon price. This allows the bids to be evaluated
based on a per gallon price, and the only discretionary portion of the bidders proposal
will be reflected in the markup, which will ultimately indicate how competitive the
bidder's price is. The most recent bid specifications required vendors to price three
components for biodiesel, including yellow grease, soy methyl ester (SME), and ultra
low sulfur diesel (ULSD) number 2. The bid specification listed waste oil (recycled
cooking oil and yellow grease) from the State of California as the top priority. SME was
included in the bid to allow the City to change to a different biodiesel mixture if
circumstances adversely impacted the City's ability to use yellow grease biodiesel.
Although biodiesel has always been available for delivery, any disruption in the supply
of biodiesel would cause the City to purchase petroleum diesel.
To gain a greater understanding of the production process, staff from Finance;
Community Maintenance, OSE, and the Big Blue Bus visited the three major producers
of biodiesel from yellow grease in Southern California, which included the Imperial
Western Products, Inc. plant in Coachella, the New Leaf Biodiesel plant in San Diego,
and the Crimson Renewable Energy plant in Bakersfield. All plants utilize yellow grease
obtained from California to produce biodiesel and, while a complete life cycle carbon
footprint analysis cannot be quantified by City staff, all appear to meet criteria sought in
the bid specifications. Additionally, biodiesel produced by these plants meets biodiesel
standards promulgated by the American Society for Testing and Materials (ASTM). In
preparing the bid specifications, staff also considered requiring bidders to be 809000
5
compliant. BQ9000 is a quality management certification offered by the National
Biodiesel Accreditation Commission (NABC) that measures the "capacity and
commitment of the applicant to produce or market biodiesel fuel that meets the ASTM
D6751 Specification." Since ASTM compliance can easily be measured from objective
sources, such as testing and data sheets, and, since only one California biodiesel
producer is currently listed on the BQ9000 Quality Management Program web site, staff
concluded that this specification would radically reduce the pool of candidates and likely
increase the cost to the City for fuel.
The bid specifications required vendors to provide the names of companies from which
biodiesel was obtained and the locations of these producers. This requirement allowed
staff to ascertain some measure of the carbon footprint of the individual bidders. The
three producers visited by staff ranged in distance, measured from Santa Monica, from
103 miles (Crimson in Bakersfield), to 136 miles (New. Leaf in San Diego), to 151 miles
(Imperial Western Products in Coachella). Each of these producers collects. waste
yellow grease from a variety of locations throughout California for use as biodiesel feed
stock. The amounts collected and collection locations change over time depending on
availability and cost. Because of this, it was not possible for staff to accurately calculate
a carbon footprint for the production and delivery of. the biodiesel portion of the each of
the bids to rank them in order of sustainability. Another factor that makes a full
sustainability analysis of biodiesel more complex is that biodiesel from a producer often
must be shipped to a blender, which would require an additional level of carbon footprint
analysis for that transportation step. Likewise, a producer that blends their product
must obtain petroleum diesel from some source. Unfortunately, the petroleum diesel
component of the biodiesel blend is less measurable in terms of sustainability, as a
gallon of ULSD may originate from any point on the globe and have traveled to a
production facility by any number of transportation means which are not possible for the
City to track. For these reasons the assumption was made (for the purpose of the
vendor selection) that yellow grease obtained and produced within southern California
would be treated equally, particularly because it was in the economic interest of all of
6
the producers to minimize the amount of transportation required to collect the waste
yellow grease, and because the biodiesel portion of the overall fuel purchase is a
relatively small (5% to 20%) percentage of the total fuel purchase
Vendor Selection
The biodiesel bids were opened on August 24, 2009. Prior to the opening, the
Purchasing Division mailed written notices to 63 known fuel, oil, and lubricant vendors
previously registered on Planet Bids. This notification informed these vendors of the
competitive bid for biodiesel and provided instructions for obtaining a bid packet. The
bid was also advertised in the Santa Monica Daily Press on two consecutive days, the
25t" and 26t" of August. A question and answer period commenced on September 1St
during which potential bidders and any interested party could request further information
on or clarification of the bid process. A comprehensive list of questions and the City
responses was posted online on September 4t". On September 23~d, the bid closed and
a public opening of the submitted bids was conducted.
The competitive bid produced nine bids and, based on requirements set forth in the bid
specifications, staff recommends award of bid to General Petroleum. This vendor, like
most of the vendors, was able to provide yellow grease biodiesel produced from
feedstock collected in the State of California (from New Leaf Biodiesel in San Diego),
meet ASTM standards, and deliver in a timely manner. Additionally, General Petroleum
provided the most advantageous pricing for this commodity, as depicted in Attachment
A. General Petroleum is a reliable provider of biodiesel fuel in the Los Angeles region.
Financial Impacts & Budget Actions
Fiscal Year 2009-10 budget authority in the amount of $1,195,910 is available in the
following line items:
• Fleet: $128,442 in account 54554.522910, "Vehicles-Fuels/Lubrication"
• BBB: $1,065,119 in account 41.111008, "Fuel-Revenue Vehicles"
7
• BBB: $2,349 in account 41654.522840. 80W, "Fuel & Oil Taxes"
Prepared by: Chuck McBride, Assistant Director of Finance
Approved:
to Council:
i
.carol 5winaeu / ,P. Lamont Ew
Director of Finance (~ City Manager
Attachments:
A - Biodiesel Bid Results
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JAN 1 92010
From: Lorraine Olson [lorraine@vertbiodiesel.com]
Sent: Tuesday, January 19, 2010 1:08 PM
To: Clerk Mailbox
Subject: City Council Meeting Jan. 19, 2010
Attachmen ts: letter to Santa Monica City Council.doc
As we are unable to attend the Santa Monica City Council Meeting Jan. 19, 2010, please submit into the record
the attached letter to the council members. This is in response to agenda item number 8-B "Purchase of
Biodiesel Fuel".
Thank you,
Lorraine Olson
1125 S. Greenwood Ave
Montebello, CA 90640
(323)587-8748(T)
(877)899-BIO-D
www.vertb iod iesel. com
vert
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JAN 192010
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future fuel now
Dear Santa Monica City Council Members
Jan. 19. 2010
Congratulations on Santa Monica Sustainable City Program. We believe
Santa Monica to be one of a handful of California cities who "walk the walk", not
just "talk the talk" where the environment is concerned.
Vert Biodiesel recently participated in the bid process through the
Purchasing Section to supply and deliver Biodiesel fuel (Bid # 2984). Fuel
supplied under this contract will run the Big Blue Bus and the city diesel engine
equipment. This fuel is to to be stored and therefore delivered to three locations
within the city: the City Yards on Pacific Coast Highway and Michigan Ave. and
the Big Blue Bus location on 6ihStreet. The number of delivery trips to each
location were estimated by the Purchasing Section to be twice a week. to the bus
location and monthly to the city yards. This constitutes a total of 166 delivery
trips a yeas
In Section 12.0 of the Bid Specifications, "Basis For Selection", lists four
criteria to be considered in the selection process in addition to the City's
Municipal Code criteria. To quote this section, these "...offer the best overall
value for the services requested...". Fourth on this list is "carbon footprint". One
of the stated goals of the Sustainable Santa Monica City Plan into minimize the
levels of pollution entering the air. Vert Biodiesel substantially lowers the
companies carbon footprint by utilizing only biodiesel in all delivery vehicles.
Utilizing a lower carbon footprint fuel in City operated vehicles is admirable; not
insisting vehicles. delivering this fuel do the same is short sighted. 166 times a
year the city is paying for a more environmentally friendly fuel to be delivered by
a vehicle that most likely is burning 100% petroleum fuel. The 2008 Sustainable
City Report Card Environmental & Public Health Section gives the City an A- for
effort in the reduction of air pollution but only a C for overall achievement of this
goal. In the future, further consideration of the delivery mechanism for bids of this
type should be evaluated..
Again congratulations to the City of Santa Monica for its efforts to improve the
quality of life for residents. In addition, we would like to commend Kimberlie
Nimori Senior Buyer, Purchasing Section for her helpful professionalism through
out the process.
Sincerely,
Erik Zimmerman