BOARD MEETING DATE: February 5, 2010
AGENDA NO. 18

PROPOSAL:

Appropriate Funds and Authorize Amending of Existing Contract with Special Outside Counsel to Assist with Litigation Regarding SB 827 and AB 1318 and the Internal Bank

SYNOPSIS:

This item is to consider appropriating funds from the BP ARCO Settlement Projects Fund and amending the existing contract with outside counsel to assist in defending the agency in litigation relating to operation of the internal bank, including readoption of Rule 1315 and implementation of SB 827 (Wright) and AB 1318 (Perez).

COMMITTEE:

Administrative, January 15, 2010, Recommended for Approval

RECOMMENDED ACTIONS:

1. Transfer $1 million from accumulated interest in the BP ARCO Settlement Projects Fund to the General Fund; Appropriate $1 million from the General Fund to the Legal Office FY 2009-10 Budget, Services and Supplies Major Object, Professional and Special Services Account to be used for litigation related to the internal credit bank.
   
2. Authorize the Chairman to amend the existing contract to add up to $1,212,500 with the law firm of Bingham McCutchen for a total contract value of $1.5 million to provide legal services in connection with litigation regarding operation of the Districts internal credit bank.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Certain environmental groups have sued the AQMD and petitioned USEPA to set aside the operation of its internal bank of offset credits.  To address the effects of this litigation, the Legislature adopted SB 827 (Wright).  Plaintiffs have sued the AQMD challenging implementation of SB 827 as well as AB 1318, a bill that requires the AQMD to transfer offsets from its internal bank to the Sentinal Power Plant project in the Coachella Valley.  To further address the credit moratorium, AQMD intends to complete a revised CEQA document and readopt Rule 1315 after the first of the year.  The AQMD will incur significant legal expenses defending challenges to the implementation of SB 827, the readoption of Rule 1315, and the adoption of the new CEQA document for Rule 1315.

Proposal

Staff is proposing that the Board authorize the transfer of $1 million from the accumulated interest earnings from the BP ARCO Settlement Projects Fund to pay for the litigation and for an outside legal review of the CEQA document.  The accumulated interest earnings in this account from July 2005 through November 2009 equal the sum of $3,895,962.  In October 2009, the Board appropriated $500,000 for legal fees for legal work related to defending challenges to operation of the internal bank, for a remaining balance of $3,395,962.  A contract with Bingham McCutchen was initiated in the amount of $287,500 and this action would allow for the remaining funds of $212,500 from the initial appropriation to be added to this contract.  Any monies not expended on these matters will be returned to the BP ARCO Settlement Projects Fund to pay for environmental improvement projects.

Fiscal Impacts

The total cost of this contract shall not exceed $1.5 million.  Sufficient funds will be available in Legals FY 2009-10 Budget following the transfer of funds from the BP ARCO Settlement Projects Fund.