Loading...
SR 06-26-2018 3A City Council Report City Council Meeting: June 26, 2018 Agenda Item: 3.A 1 of 5 To: Mayor and City Council From: Susan Cline, Director, Public Works, Office of Sustainability & the Environment Subject: Award Contract for Purchase of Renewable Natural Gas Recommended Action Staff recommends that the City Council: 1. Award RFP #139 to Clean Energy Renewable Fuels, LLC, a California-based company, for the procurement and supply of Renewable Natural Gas; and 2. Authorize the City to register and participate in the California Air Resources Board Low Carbon Fuel Standards Carbon Credit Program; and 3. Authorize the City Manager to negotiate and execute an agreement with Clean Energy Renewable Fuels, LLC in an amount not to exceed $306,350 (including a 10% contingency) for one-year, with four additional one-year renewal options, on the same terms and conditions, for a total amount not to exceed $1,531,750 over a five-year period, with future year funding contingent on Council budget approval. Executive Summary The City operates a fleet of approximately 1,060 vehicles ranging from transit buses and refuse vehicles to street sweepers and sedans. As part of the City’s goals of curbing greenhouse gas emissions, approximately 70% of the City’s vehicles run on some form of alternative fuel, including compressed natural gas (CNG), renewable liquefied natural gas (RLNG), renewable diesel, electricity, and propane. The remaining 30% of the City’s fleet runs on unleaded gasoline. Purchasing renewable natural gas (RNG) for the vehicles fueled by CNG would support the City’s long-term goal of reaching carbon neutrality by 2050 because it would reduce the greenhouse gas emissions associated with these vehicles by 60% while reducing the City’s overall fleet emissions by 6%. Additionally, RNG qualifies as an advanced biofuel under the Renewable Fuel Standard. This means RNG fuel purchased by the City generates carbon credits (credits) which in turn can be sold or traded. Staff recommends registering and participating in the California Air Resources Board Low Carbon Fuel Standards carbon 2 of 5 credit program and awarding an agreement with Clean Energy Renewable Fuels, LLC for the purchase of renewable natural gas and management of a Low Carbon Fuel Standard Program for an amount not to exceed $1,531,750 over a five-year period. Background Beginning in 1998, the City began converting its heavy and medium duty vehicles to CNG. The Big Blue Bus has been purchasing renewable liquefied natural gas (RLNG) to fuel its 200 plus buses or 20% of the fleet since 2015 under an existing agreement with Clean Energy Fuels. Approximately 270 vehicles or 27% of the fleet currently run on CNG. RNG is fully interchangeable with CNG. It is harvested from methane captured at landfills, wastewater treatment facilities, and dairy and pig farms. It is 60% less carbon intensive compared to CNG sourced from non-renewable sources. Low Carbon Fuel Standards – Carbon Credits California’s Low Carbon Fuel Standard (LCFS) mandates were enacted by executive order pursuant to the Global Warming Solutions Act, Assembly Bill 32, to reduce the carbon intensity in transportation fuels to 1990 levels by 2020. The carbon intensity of a fuel is the measure of its greenhouse gas emissions on a lifecycle basis and includes all emissions during extraction and refining, production and processing, and use in the vehicle. The LCFS Program is one of the measures adopted by the California Air Resources Board (CARB) pursuant to Health and Safety Code Sections 38500-38599 to reduce greenhouse gases in California. To generate credits, fuels must have a lower carbon intensity than the target set by the CARB. Fuels with a carbon intensity higher than the standard would generate a deficit. Credit owners can sell or trade credits in the California LCFS market, thereby generating revenues. Credits generated through the LCFS Program can be banked without penalty over the course of the program. Presently, the City is not enrolled in the LCFS program and is not receiving any revenue from the sale of LCFS credits. Under the existing program, LCFS credits are generated based on the volume of fuel dispensed at a facility. With BBB’s contract for RLNG, Clean Energy dispenses the fuel at its facility prior to delivering it to the BBB yards. However, with RNG, the City would be dispensing the fuel at the City Yards. If Council approves the contract to replace the City’s current natural gas purchases with RNG, the 3 of 5 City would be eligible to enroll in the LCFS program and able to generate LCFS credits. Potential revenues are estimated to generate approximately $120,000 annually. Estimated revenues are based on the number of carbon credits the City could potentially generate by converting to RNG and the current market value of those credits. Discussion Renewable Natural Gas (RNG), or biomethane, has been identified as a viable alternative to traditional natural gas. RNG has the same chemical composition as traditional natural gas, but has a low carbon intensity. The City currently purchases its natural gas from the local public utility Southern California Gas Company, which delivers the natural gas through two lines located at the City Municipal Yards, 2500 Michigan Avenue. The natural gas is then compressed on-site and stored at the City Municipal Yards prior to being dispensed to fuel the City’s CNG vehicles. Santa Monica currently dispenses and consumes approximately 370,000 (Therms) or 294,000 (Gas Gallon Equivalent) of natural gas annually. If awarded, the City would purchase RNG from Clean Energy Renewable Fuels, LLC, which generates RNG from methane captured at landfills and wastewater treatment facilities, purifies the methane, compresses it, and sends it to the interstate fuel pipeline system accessed by the Southern California Gas Company. Clean Energy Renewable Fuels, LLC would register with CARB on behalf of the City to manage the LCFS Program and sell the credits on the City’s behalf to generate revenues based on the market value of the credits. By producing RNG, Clean Energy Renewable Fuels, LLC generates its own credits which it sells to generate revenues to operate its business. Clean Energy is able to guarantee price parity between Compressed Natural Gas and Renewable Natural Gas by passing on to its customers a portion of the revenue it generates from the sale of its own credits. Clean Energy Renewable Fuels, LLC would administer the LCFS Program on behalf of the City including tracking, registering, submitting reports, trading the credits, generating monthly revenue, and submitting checks to the City. Vendor/Consultant Selection 4 of 5 On October 12, 2017, the City issued a Request for Proposals (RFP) for consulting services for the management of a LCFS Program and purchase of renewable natural gas. The RFP was posted on the City's on-line bidding site, and notices were advertised in the Santa Monica Daily Press in accordance with City Charter and Municipal Code provisions. Eleven vendors downloaded the RFP, and two vendors responded. On November 29, 2017, responses to the RFP by the following two firms were reviewed by a selection panel of staff from the Office of Sustainability and the Environment, Big Blue Bus, Resource Recovery and Recycling, and Fleet Management:  Clean Energy Renewable Fuels, LLC  Trillium USA Company On January 12, 2018, the selection committee held interviews with the vendors. Proposals were evaluated based upon the following selection criteria: experience, sample materials, work plans, project team, price, creativity, overall presentation, carbon intensity of fuel, and ability to meet timelines. Based on this criteria and criteria in SMMC 2.24.073, staff recommends Clean Energy Renewable Fuels, LLC as the best qualified firm to provide RNG and management of the LCFS Program based on pricing, ability to provide a share of LCFS credits, previous experience, ability to deliver RNG with the lowest greenhouse gas pathway to Santa Monica, ability to deliver RNG from landfills with the lowest Carbon Intensity, quality of product, the management team’s industry expertise, and compliance with City specifications. Clean Energy Renewables Fuels, LLC will provide the City with 10% of the incremental LCFS credit revenue. Financial Impacts and Budget Actions The agreement to be awarded to Clean Energy Renewable Fuels, LLC is for an amount not to exceed $1,531,750. Funds in the amount of $306,350 are available in the FY 2018-19 budget in the Public Works Department. The agreement will be charged to the following accounts: Account Number Amount 54459.522950/70500001.521820 $256,850 25671.522950/50500001.521820 $ 49,500 5 of 5 TOTAL $306,350 Revenues from LCFS credits will be booked to #54459.408150/70500001.415540. Revenues collected would be allocated proportionally to the various funds used to purchase RNG fuel. Future year funding is contingent on Council budget approval. Prepared By: James Velez-Conway, Senior Sustainability Analyst Approved Forwarded to Council Attachments: A. Clean Energy Oaks Initiative REFERENCE: Agreement No. 10699 (CCS)