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SR 05-24-2016 3D City Council Report City Council Meeting: May 24, 2016 Agenda Item: 3.D To: Mayor and City Council From: Edward King, Director, Big Blue Bus, Transit Maintenance Subject: Purchase and Deliver Renewable Natural Gas (RNG) Fuel to Big Blue Bus Recommended Action Staff recommends that the City Council: 1. Award Bid #4228 to Clean Energy Fuels Corporation, a California-based company, for the purchase and delivery of Renewable Bio-Liquid Natural Gas. 2. Authorize the City Manager to negotiate and execute an agreement with Clean Energy Fuels Corporation for the purchase and delivery of Renewable Bio-Liquid Natural Gas in the amount not to exceed $2,959,499, including a 10% contingency for one year, with four additional 1-year renewal option(s) on the same terms and conditions for a total not to exceed $17,671,997, with future year funding contingent on Council budget approval. Executive Summary fleet of 198 motor coaches is powered by clean burning and Renewable Natural Gas that is harvested and processed locally. The City of Santa Monica is a nationally recognized leader for its sustainability policies and actions. BBB alternative fuel and phasing out of diesel-fueled motor coaches. Staff recommends award of Bid #4228 and to negotiate and execute an agreement with Clean Energy Fuels Corporation (Clean Energy) for the purchase and delivery of Renewable Bio- Liquid Natural Gas for a one year period in the amount of $2,959,499 with four additional one-year renewal options, for an amount not to exceed $17,671,997 over a five-year period. Background BBB currently operates 198 natural gas-powered transit coaches. The fuel used is 100% domestically produced, Renewable Bio-Liquid Natural Gas (RLNG). The fuel is derived from harvested landfill methane. The use of RLNG significantly reduces harmful greenhouse gas emissions pollutants. The measure of emissions reductions involves calculating Low Carbon Fuel Standard credits and greenhouse gas emissions. 1 of 6 The Low Carbon Fuel Standard (LCFS) promotes the use of greenhouse gas reducing transportation fuels (such as liquid biofuels, renewable natural gas, electricity, and hydrogen) through a fuel-neutral declining carbon intensity standard, which is administered by the California Air Resources Board. Carbon intensity is a measure of the greenhouse gas (GHG) emissions associated with the production, distribution, and to achieve the GHG reductions at the lowest cost and in the most consumer-responsive manner, the LCFS utilizes a market-based credit trading system to allow providers to choose how they reduce emissions while responding to consumer demand. The award of Bid #4228 to Clean Energy would enable the continued use of Renewable Bio-Liquid Natural Gas to power transit buses and other City vehicles. It also provides the City a share of the Low Carbon Fuel Standard (LCFS) credits from the producer, Clean Energy, as a fixed discount on a per gallon basis. Clean Energy has provided service since 2011 with exceptional service meeting all city specifications. Discussion The Environmental Protection Agency (EPA) sets the Carbon Intensity (CI) for each fuel type. The CI number is the measurement of energy used to produce, process, deliver and consume fuel and is the measurement of how clean the fuel is for the environment. The RLNG that BBB uses to power the current fleet of 198 transit buses has a CI value of 29.71, compared to Ultra-Low Sulfur Diesel CI value of 97.05 or conventional Compressed Natural Gas (CNG) of 66.25. Staff recommends continued use of Renewable Liquid Bio-Natural Gas that is 55.15% cleaner for the environment than conventional CNG that derives from less sustainable methods. Renewable Bio-Liquefied Natural Gas is non-fracked methane harvested from organic waste in landfills. The process of harvesting and processing Renewable Methane Gas provides a product that has fewer impurities than conventional natural gas and thus is a cleaner burning fuel source. Historically, this gas has been burned off into the atmosphere. However, with advances in renewable technology, the gas is now harvested through a series of membranes implanted in the ground of landfills. Renewable methane gas is processed through a filtration and refining process and transported via pipeline to end users. As a result of the harvesting and filtration process renewable methane gas has fewer impurities than conventional natural gas and thus is a cleaner burning fuel source. Operating transit buses through this waste-to-energy fuel source, BBB continues to contribute to fulfilling environment by using the cleanest transportation fuel available. Vendor/Consultant Selection On February 4, 2016, the City published Notices Inviting Bids to furnish and deliver 2 of 6 Renewable Liquid Bio-Natural Gas as required by the BBB Transit Maintenance Division responsible for the fueling of transit buses in accordance with City specifications. The bid was posted on Planet Bids, , in accordance with City Charter and Municipal Code provisions. The City notified 337 vendors, of which, 18 vendors downloaded the bid. Three bids from two vendors were received and publicly opened on February 23, 2016 per Attachment A. Bids were evaluated based on the criteria in SMMC 2.24.072, including price, ability to provide a share of LCFS credits, previous experience, ability to deliver RLNG with the lowest greenhouse gas pathway to Santa Monica, ability to deliver RLNG from landfills with the lowest Carbon Intensity, quality of product, and compliance with City specifications. Includes, in the price per RLNG gallon, a fixed discount based on a share of LCFS credits. Conforms to City specifications. Offers the lowest of the fixed-pricing bids in the base year and in the first option year. Enables the City to lock in fixed-pricing through the term of the contract which would provide enhanced budgetary planning and cost forecasting. Offers RLNG derived from landfills that produce RNG with lower Carbon Intensity. Includes use of that would emit 75% less greenhouse gas emissions. Please see the table below: RLNG Fuel Delivery Truck Greenhouse Gas Emissions Number of RLNG fuel deliveries 312 Bidder GHG emission GHG Percentage per delivery emission per Variance year 75.81% Clean Energy 210 65,520 Applied LNG 868 270,816 Variance 205,296 lbs GHG emissions Based on the ability to provide RLNG fuel that meets City specifications, ability to provide a share of LCFS credits, ability to provide the lowest Carbon Intensity fuel and the ability to provide fuel deliveries with the least GHG emitted to atmosphere, Clean fixed-price bid is recommended as best bid. 3 of 6 The bid results as follows (includes an increase in usage due to anticipated service changes): Based on the following Usage: per week 85,000 per year 4,420,000 Clean Energy Applied LNG Base Year 2,690,454 2,943,720 Option Year 1 2,980,484 2,987,920 Option Year 2 3,315,000 3,036,540 Option Year 3 3,445,390 3,085,160 Option Year 4 3,634,124 3,138,200 Total 5-Year 16,065,452 15,191,540 Clean Energy Variable Pricing Bid: An alternate bid from Clean Energy, a variable pricing per RLNG gallon model, includes a discount based on monthly market pricing of Low Carbon Fuel Standard (LCFS) credits. The variable-priced bid is based on the monthly market pricing of LFCS credits. Due to market variability of LCFS credits, the monthly market fluctuations will make budgeting and long-term cost forecasting unmeasurable. The Clean Energy variable pricing bid is not recommended. Protest On March 5, 2016 bidding site, putting all bidders on Agent received a timely protest from Applied LNG. On March 25, 2016, after review of the protest documentation submitted, and speaking with BBB staff who had conducted the bid review and selection process, the Purchasing 4 of 6 Agent denied the protest based on lack of evidence and grounds for protest. s decision to the Finance Director. The appeal made claims almost identical to those set forth in the original protest letter. and all the documentation submitted by Applied LNG, the Finance Director upheld the ion to deny the protest, staff recommends that Bid #4228 be awarded to Clean Energy. Alternatively, Council may reject all bids, and, in its discretion, instruct staff to re-advertise for the work. Based on the criteria stated above, it is recommended that the best bidder is Clean Energy with its alternative fixed-price bid response for an amount not to exceed $17,671,997, including a 10% contingency, over a five-year period. The 10% contingency is for unanticipated increase in revenue service miles with Expo service. Breakdown of pricing with Clean Energy: Contingency (10%) Total Base Year $ 2,690,454 $ 269,045 $ 2,959,499 Renewal Option 1 $ 2,980,484 $ 298,048 $ 3,278,532 Renewal Option 2 $ 3,315,000 $ 331,500 $ 3,646,500 Renewal Option 3 $ 3,445,390 $ 344,539 $ 3,789,929 Renewal Option 4 $ 3,634,124 $ 363,412 $ 3,997,536 $ 17,671,997 Financial Impacts and Budget Actions The agreement to be awarded to Clean Energy Fuels Corporation is for an amount not to exceed $17,671,997. Funds of $2,959,499 are available in the FY 2016-17 Proposed Budget in the Big Blue Bus Department. The agreement will be charged to account 5 of 6 41654.522974. Future year funding is contingent on Council budget approval. Prepared By: Getty Modica, Transit Maintenance Officer Approved Forwarded to Council Attachments: A. 4228 RLNG BID RESULTS - Attachment A 6 of 6 ATTACHMENT A BID CLOSE DATE:2/23/2016 BID #: 4228ATTACHEMENT A - BID RESULTS BID DESCRIPTION: FURNISH AND DELIVER RENEWABLE LIQUEFIED APPLIED LNGCLEAN ENERGYCLEAN ENERGY - ALTERNATE BID NATURAL GAS (RLNG) AS REQUIRED BY THE BIG BLUE BUS. WESTLAKE VILLAGE, CANEWPORT BEACH, CANEWPORT BEACH, CA Cost/Factor Option year Option year Option year Option year Option year Option year Option year Option year Option year Option year Option year Option year No. DescriptionBase Year 1234Base Year 1234Base Year 1234 So Cal Monthly Index: $US/MMBtu (FERC) 1(for bid purposes, as of September 2015)2.7102.7102.7102.7102.7102.7102.7102.7102.7102.7102.712.712.712.712.71 Conversion From: MMBtu to RLNG Gal factor 2(fixed) 12.112.112.112.112.112.112.112.112.112.112.112.112.112.112.1 30.2240.2240.2240.2240.2240.22390.22390.22390.22390.22390.22390.22390.22390.22390.2239 4Liquefaction (fixed) Per RLNG Gallon0.3200.3300.3390.3500.3600.48200.49200.51100.53800.57700.48200.49200.51100.53800.5770 ----- 5Markup/Discount (fixed) Per RLNG Gallon-0.204-0.204-0.204-0.204-0.204-0.15-0.10-0.05-0.05-0.05 6Delivery Fee Per RLNG Gallon0.100.100.100.100.100000000000 7Sales Tax 9.50% (applicable)0.0520.0530.0540.0540.0550.04770.04860.05040.05300.05670.05280.05850.06510.06760.0713 All RLNG AB32 compliance costs shall be paid 8by the bidder. Can bidder comply? Yes/NoYesYesYesYesYesYesYesYesYesYesYesYesYesYesYes 9Including Commodity and Taxes) 0.6960.7060.7170.7280.0740.54960.56050.58130.61090.65360.60870.67440.75000.77950.8222 Other Pricing And Criteria Option year Option year Option year Option year Option year Option year Option year Option year Option year Option year Option year Option year No. DescriptionBase Year1234Base Year1234Base Year1234 LCFS revenue share (Per Minimum $0.03 Per $0.03 Per $0.03 Per $0.03 Per $0.03 Per $0.204 Per $0.204 Per $0.204 Per $0.204 Per $0.204 Per $0.15 Per $0.10 Per $0.05 Per $0.05 Per $0.05 Per 10Requirements section 3.)gallongallongallongallongallonRLNG gallonRLNG gallonRLNG gallonRLNG gallonRLNG gallonRLNG gallonRLNG gallonRLNG gallonRLNG gallonRLNG gallon Miles from Liquefaction plant to the City 11Santa Monica Big Blue Bus 288 Miles288 Miles288 Miles288 Miles288 Miles124 Miles124 Miles124 Miles124 Miles124 Miles124 Miles124 Miles124 Miles124 Miles124 Miles 12operate on RLNG/LNG? Yes/NoYesYesYesYesYesYesYesYesYesYesYesYesYesYesYes Greenhouse Gas Intensity (Per Minimum Requirements section 5.) Note: Lowest 5.28 5.28 5.28 5.28 5.28 15.84 15.84 15.84 15.84 15.84 15.84 15.84 15.84 15.84 15.84 13greenhouse gas intensity is preferred.lbs/gallonlbs/gallonlbs/gallonlbs/gallonlbs/gallongCO2e/MJgCO2e/MJgCO2e/MJgCO2e/MJgCO2e/MJgCO2e/MJgCO2e/MJgCO2e/MJgCO2e/MJgCO2e/MJ Ability to provide LCFS emission credits to Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes City of Santa Monica. Provide a yes/no and /quantity /quantity /quantity /quantity /quantity /quantity /quantity /quantity /quantity /quantity /quantity /quantity /quantity /quantity /quantity 14quantity.100%100%100%100%100%100%100%100%100%100%100%100%100%100%100% Carbon intensity value for the proposed RLNG pathway(s) (Per Minimum 15.84 15.84 15.84 15.84 15.84 15.84 15.84 15.84 15.84 15.84 15Requirements section 3.)27.4527.4527.4527.4527.45gCO2e/MJgCO2e/MJgCO2e/MJgCO2e/MJgCO2e/MJgCO2e/MJgCO2e/MJgCO2e/MJgCO2e/MJgCO2e/MJ Minimum guaranteed biomass or biogenic content for the supplied RLNG. (Per 16Minimum Requirements section 4.)100%100%100%100%100%100%100%100%100%100%100%100%100%100%100% 10,000 LNG 10,000 LNG 10,000 LNG 10,000 LNG 10,000 LNG 10,000 LNG 10,000 LNG 10,000 LNG 10,000 LNG 10,000 LNG 17Tank Trailer Capacity:10,00010,00010,00010,00010,000gallonsgallonsgallonsgallonsgallonsgallonsgallonsgallonsgallonsgallons ATTACHMENT A BID CLOSE DATE:2/23/2016 BID #: 4228ATTACHEMENT A - BID RESULTS BID DESCRIPTION: FURNISH AND DELIVER RENEWABLE LIQUEFIED APPLIED LNGCLEAN ENERGYCLEAN ENERGY - ALTERNATE BID NATURAL GAS (RLNG) AS REQUIRED BY THE BIG BLUE BUS. WESTLAKE VILLAGE, CANEWPORT BEACH, CANEWPORT BEACH, CA Other ResponseResponseResponse PAYMENT TERMSNet 30Net 30Net 30 PLEASE DESCRIBE ANY ADDITIONAL FEES & CHARGES NOT LISED ABOVE NoneNoneNone PERIOD 2 (FIRST ANNUAL RENEWAL OPTION)3% IncreaseSame price, terms and conditionsSame price, terms and conditions 3% IncreaseSame price, terms and conditionsSame price, terms and conditions PERIOD 3 (SECOND ANNUAL RENEWAL OPTION) PERIOD 4 (THIRD ANNUAL RENEWAL OPTION)3% IncreaseSame price, terms and conditionsSame price, terms and conditions 3% IncreaseSame price, terms and conditionsSame price, terms and conditions PERIOD 5 (FOURTH ANNUAL RENEWAL OPTION) OAKSCompleteCompleteComplete CompleteCompleteComplete ARIZONA IS VENDOR PHYSICALLY LOCATED IN SANTA MONICA? No No DOES VENDOR PHYSICALLY COME INTO THE CITY OF SANTA MONICA TO CONDUCT BUSINESS AND/OR MAKE DELIVERIES?YesYes Exceptions to specifications - delivery requirements and product OTHER specifications Reference: Agreement No. 10305 (CCS)