BOARD MEETING DATE: November 6, 2009
AGENDA NO. 9

PROPOSAL:

Recognize Revenue from Department of Energy and Execute Contracts for Expansion of LNG Fleet and LNG Corridor Fueling Infrastructure

SYNOPSIS:

The AQMD anticipates an award through the recent American Recovery and Reinvestment Act funding opportunity in the Petroleum Reduction Technologies Projects for the Transportation Sector category. The funding opportunity was coordinated through the Department of Energy (DOE) with the aim to further expand the Western Regional LNG Corridor. This action is to recognize $5,741,610 in revenue from the DOE, to execute a contract with United Parcel Service in an amount not to exceed $5,591,610 and to execute a contract with Applied LNG Technologies, Inc. in an amount not to exceed $150,000.

COMMITTEE:

Technology, October 16, 2009, Recommended for Approval

RECOMMENDED ACTIONS:

1. Establish the DOE American Recovery and Reinvestment Act (ARRA)-LNG Corridor Expansion Special Revenue Fund.

2. Upon award, recognize $5,591,610 in revenue from the Department of Energy for an American Recovery and Reinvestment Act (ARRA) grant award for the expansion of LNG fueling infrastructure to the DOE (ARRA)-LNG Corridor Expansion Special Revenue Fund.

3. Upon award, recognize $150,000 to the AQMD General Fund from DOE for the LNG Corridor Expansion Project.

4. Appropriate $150,000 from the AQMD General Fund, Undesignated Fund Balance, to Science and Technology Advancement FY 2009-10 Budget, Professional and Special Services Account.

5. Upon award of the ARRA grant from the DOE, authorize the Chairman to execute a contract with United Parcel Service (UPS) for construction of a new LNG fueling facility and deployment of 48 heavy-duty LNG vehicles in an amount not to exceed $5,591,610 from the DOE (ARRA)-LNG Corridor Expansion Special Revenue Fund.
   

6. Upon award of a grant from the DOE, authorize the Chairman to execute a contract with Applied LNG Technologies, Inc. for the upgrade of an existing LNG fueling station in the City of Ontario in an amount not to exceed $150,000 from Science and Technology Advancement FY 2009-10 Budget, Professional and Special Services Account.

7. Authorize the Executive Officer to reimburse the AQMD General Fund up to $58,000 from the DOE ARRA-LNG Corridor Expansion Fund, for administrative costs such as Salaries & Employee Benefits, Indirect Costs and Travel necessary to implement the project as approved in the grant award.

 

Barry R. Wallerstein, D.Env.
Executive Officer

Background

In 1996, a partnership was established to design the nation’s first heavy-duty natural gas alternative fuel corridor, the Interstate Clean Transportation Corridor (ICTC). The U.S. DOE Clean Cities Program was a core stakeholder responsible for the development of the ICTC Project, along with support from the AQMD and the Eastern Sierra Regional Clean Cities Coalition (ESRCCC - formerly the Truckee Meadows Clean Cities Coalition). Since its inception, the ICTC has become widely recognized for increasing the use of clean, low carbon, sustainable fuels in heavy duty natural gas vehicle operations. With initial support concentrated in California, the ICTC helped develop over 20 heavy-duty natural gas fueling stations, deployed over 500 vehicles, and has eliminated over 6.8 million gallons of diesel fuel consumption to date. The publicly accessible LNG fueling stations in Ontario (UPS’ distribution facility), San Bernardino and Barstow, California are key links in the ICTC network which connect Southern California with Las Vegas.

UPS currently runs a fleet of heavy-duty LNG trucks from their Ontario, CA distribution facility to Las Vegas and back on a daily basis. UPS fleet vehicles are not able to travel beyond Las Vegas because there is no existing LNG refueling infrastructure beyond this point. Diesel fueled trucks must provide interstate goods movement operations between Las Vegas and Utah. The ICTC project stakeholders have been actively working to expand heavy-duty clean fuel opportunities outside the state of California to support regional transportation options. Successful implementation of the proposed project will allow for high fuel use, heavy-duty LNG trucks to effectively travel along a 700-mile LNG corridor route from the Ports of Los Angles and Long Beach to Salt Lake City, Utah along Interstate 15, one of the most heavily traveled goods movement truck routes in the Western United States. The new LNG station will help to expand the use of alternative fueled vehicles in Southern California as more interstate natural gas Class 8 trucks will be able to fuel through the interstate corridor. The UPS LNG Corridor Extension Project will achieve the deployment of 48 Kenworth T800 heavy-duty Class 8 trucks with 16 trucks being deployed immediately at Ontario, where existing LNG infrastructure exists.

In addition to the above project, additional LNG refueling capacity for heavy-duty truck fleets operating through the Interstate 10 corridor within Los Angeles and San Bernardino counties is critically needed. An existing refueling station operated by Applied LNG Technologies, Inc. (ALT) is strategically located at Ontario International Airport, located in the City of Ontario. This site is specifically located between Interstate 10 and State Route 60, approximately 35 miles east of Los Angeles. The station currently has a small 6,000 gallon LNG storage tank that requires filling at least twice a day. A larger storage capacity tank of 15,000 gallons with upgraded dispensing and controls would address a critical need for intermediate LNG fueling locations to support the operation of port drayage trucks.

The AQMD was recently informed by DOE of a pending award for the expansion of the UPS Ontario and Las Vegas facilities that operate LNG trucks and provide LNG fueling at the Las Vegas facility. In addition, DOE indicated that the AQMD will receive a grant to expand the LNG fueling capacity in Ontario.

Proposal

This action is to execute a sole source contract with the United Parcel Service in an amount not to exceed $5,591,610 to co-fund the construction of a publicly accessible LNG station in Las Vegas and the purchase and deployment of 48 Kenworth T800 heavy-duty Class 8 trucks powered by the Westport ISX HPDI LNG engine into Ontario-Las Vegas fleet operations. Full funding for the proposed project will be from the DOE award. In addition, a small administrative budget of $58,000 will be provided by DOE to AQMD. Staff is recommending that a special fund be set up to recognize the federal funding.

With funding from the U.S. DOE ARRA Alternative Fuel and Advanced Technology Vehicles Pilot Program, UPS seeks to construct a publicly accessible LNG refueling station immediately off of Interstate 15 in Las Vegas and to support the deployment of 48 heavy-duty LNG vehicles in interstate alternative fuel operations. The UPS Ontario-Las Vegas LNG Corridor Extension Project (UPS Ontario-Las Vegas LNG Corridor Project) will support primary fueling for 48 trucks and secondary fueling for the planned 161 LNG trucks in UPS’ entire Pacific Region LNG fleet and other LNG fleet operators fueling at the publicly accessible station. This project will allow for the installation of a critical public access LNG fuel station in Las Vegas, Nevada. It will be the final connection between the existing public access LNG fuel infrastructure in Southern California and the LNG fuel stations now being developed in Utah by UPS and other entities. Completion of this project will allow for high fuel use, heavy-duty LNG trucks to effectively travel along a 700-mile LNG corridor route from the Ports of Los Angeles and Long Beach to Salt Lake City, Utah along Interstate 15; one of the most heavily traveled goods movement truck routes in the Western United States.

A cost breakdown for the proposed project is provided in the following table.

The second recommended action is to execute a sole source contract with Applied LNG Technologies, Inc. in an amount not to exceed $150,000 to co-fund the upgrade and expansion of a publicly accessible LNG station in the City of Ontario. Full funding for the proposed station expansion will be provided by the DOE grant.

The proposed ALT LNG fueling station upgrade would complement an existing LNG refueling station that currently resides at the L.A./Ontario International Airport, in terms of addressing the increasing demand for LNG fuel from 65 fleets operated by government and private entities that currently utilize this LNG refueling station. This existing station is inadequate for the purposes of supporting the future anticipated growth in the number of LNG–fueled trucks operating through the I-10 corridor. Examples of fleets that would be utilizing the new refueling facility include package/cargo delivery fleets (UPS would be an anchor fleet for this new station). It is estimated that this new refueling station would result in an additional consumption of 186,250 gallons per month of LNG. This amount of LNG would displace approximately 110,000 gallons per month of diesel fuel.

A cost breakdown is provided in the following table.

Benefits to AQMD

The ARRA and Clean Cities grant funding provide funding opportunities for technology areas contained within the Clean Fuels Program. Specifically, the two proposed projects leverage existing activities included in the Technology Advancement Office 2009 Plan Update under “Infrastructure and Deployment: Development and Demonstration of Advanced Natural Gas Systems for Refueling Stations; and Deploy Natural Gas Vehicles in Various Applications.” Funding for these projects under the ARRA and Clean Cities programs will provide substantial air quality benefits to Southern California communities, neighborhoods, and schools where these vehicles are operated by UPS by taking diesel fueled trucks off the road. Also, the AQMP relies on the expedited implementation of advanced technologies and low-emission technologies, and the implementation of these two projects will help the AQMD to achieve its clean air goals.

Sole Source Justification

Section VIII.B.2 of the Procurement Policy and Procedure identifies four major provisions under which a sole source award may be justified. This request for a sole source award is made under provision B.2.d.: Other circumstances exist which in the determination of the Executive Officer require such waiver in the best interest of the AQMD. Specifically, these circumstances are: B.2.d.(1) Project involving cost sharing by multiple sponsors.

Project funding will be provided by DOE to perform all tasks and purchase of vehicles. Both proposals include at minimum 50% cost-share by the project proponents. Furthermore, these stations fill critical gaps in the region for CNG and LNG, and promote the utilization of the cleanest available fleet and passenger vehicles.

As a recipient of federal funds which will be applied to these contracts, AQMD is required to flow down the provisions of the federal awarding agency to all of its contractors. Therefore, UPS, Applied LNG Technologies, Inc. and all of their subcontractors are subject to the provisions of the federal awarding agency.

Resource Impacts

Since AQMD is unable to fund this award out of its current resources prior to reimbursement from the grantor agency, AQMD is working with the Department of Energy (DOE) to set up a payment process whereby contractor invoices will be paid as AQMD receives funds from DOE.

The total cost for this project is estimated to be $5,741,610. All funding is provided by a $5,741,610 award from the DOE, with all other cost share being provided by the project proponents. In addition, the AQMD will be reimbursed by DOE for up to $58,000 in administrative costs for Salaries & Employee Benefits and Indirect Costs necessary to implement the project as approved in the grant award.