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Santa Monica
City Council Meeting: June 8, 2010
Agenda Item: 0
To: Mayor and City Council
From: Carol Swindell, Finance Director
Subject: Renewal Option for Biodiesel Fuel
Recommended Action
Staff recommends that City Council authorize City staff to exercise the first one year
renewal option offered by General Petroleum Corporation to supply and deliver
biodiesel fuel blends to the Big Blue Bus Department and the Fleet Management
Division during the period July 1, 2010 through June 30, 2011 in an estimated amount
of $2,050,131.
Executive Summary
Staff recommends that the City exercise the first one year renewal option offered by
General Petroleum Corporation. The estimated expenditure for Fiscal Year 2010-2011
is $2,050,131. On January 19, 2010, Council considered the award of Bid #2984 to
General Petroleum for the purchase of biodiesel fuel through June 30, 2010 with four
additional one year renewal options. At that meeting, Council awarded Bid #2984 to
General Petroleum for the purchase of biodiesel fuel through June 30, 2010 and
requested that City staff return to Council annually to renew this purchase order to
ensure that the selected firm is reflective of the City's goal of sustainability. Council also
requested additional information regarding the possibility of storing higher blends of
biodiesel fuel and requested that General Petroleum Corporation apply for a variance to
the California Business and Professions Code, Division 5, Chapter 14, Section 13405 (B
& P Code), which allows for the sales of developmental engine fuels under certain
conditions.
Discussion
Although the biodiesel market is continuing to evolve, staff is not aware of any local
suppliers or producers that can consistently provide large amounts of biodiesel fuel that
meet the City's minimum standards from a single local source. Despite the fact that
GeoGreen Biofuels, a company based in Vernon, CA, is currently collecting waste oil
locally, the fuel production plant that the company had hoped would be fully operational
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in January is still under construction and is not expected to be completed until
September of this year. Once fully operational, the plant will produce yellow grease
biodiesel fuel derived from locally collected waste vegetable oil (VWO) and will have the
potential of producing up to 3 million gallons annually.
Urbanx Renewables Group, Inc., another producer and distributor in the Los Angeles
Area that collects yellow grease from local restaurants and various food manufacturers
and suppliers, is currently in the process of relocating to Long Beach. This plant is still
under construction and is not expected to be fully operational until August of this year or
later. The proposed plant will primarily produce yellow grease based biodiesel fuel
(80% plant derived and 20% animal fat derived) with the capability of switching to soy
based biodiesel if required. Urbanx will also have the potential of producing up to 3
million gallons per year. The City's annual estimated usage is 800;000 gallons.
Exercising the first one year renewal option would allow staff to evaluate options
available and incorporate any additional requirements into a new bid specification.
As referenced in the January 19, 2010 staff report, State regulations govern the storage
and disposal of biodiesel from underground storage tanks (USTs). The most recent bid
specifications that were issued considered current regulations for the storage and
dispensing of biodiesel. 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.
As a follow up to the certification concern expressed by Council in January, General
Petroleum has submitted an application for a developmental engine fuel variance
certificate to the California Department of Food and Agriculture, requesting a variance
for different blends of biodiesel for wholesale distribution.. However, since the purchase
order was issued, the California Department of Food and Agriculture has confirmed that
blends up to B20 can be sold or distributed in California without a variance.
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Financial Impacts & Budget Actions
The purchase order to be awarded to General Petroleum Corporation is $2,050,131.
Funds are included in the FY 10-11 budget in the following line items:
• Fleet: $220,186 in account 54554.522910, "Vehicles-Fuels/Lubrication"
• BBB: $1,825,918 in account 41654.522911, "Fuel-Revenue Vehicles"
• BBB: $4,027 in account 41654.522840, 60W, "Fuel & Oil Taxes"
Prepared by: Kimberlie Nimori, Senior Buyer
Approved: Forwarded to Council:
~~~~ .~
,~~ Carol Swindell Rod Gould
Director of Finance City Manager
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