BOARD MEETING DATE: September 10, 2010
AGENDA NO. 7

PROPOSAL:

Appropriate Funds and Execute Contracts for LNG Infrastructure under Department of Energy American Recovery and Reinvestment Act and Clean Cities Programs

SYNOPSIS:

In November 2009, the AQMD received two Department of Energy (DOE) awards for natural gas infrastructure and vehicles. The Board authorized contracts with United Parcel Service (UPS) for $5,591,610 and Applied LNG Technologies for $150,000.  UPS has subsequently requested the infrastructure portion of their award be granted to Clean Energy. This action is to execute a contract with Clean Energy in an amount not to exceed $1,534,517 for this station. In addition, this action is to appropriate funds in the amount of $150,000 into the FY 2010-11 Science & Technology Advancement FY 2010-11 Budget, Professional and Special Services Account, for a previously approved contract with Applied LNG Technologies, Inc.

COMMITTEE:

Technology, July 23, 2010, Recommended for Approval

RECOMMENDED ACTIONS:

Authorize the Chairman to:

1. Execute a contract with Clean Energy for construction of a new LNG fueling facility in an amount not to exceed $1,534,517 from the DOE American Recovery and Reinvestment Act (ARRA)-LNG Corridor Expansion Special Revenue Fund; and

2. Appropriate $150,000 from the Undesignated Fund Balance to the Science and Technology Advancement FY 2010-11 Budget, Professional and Special Services Account for a previously approved $150,000 contract with Applied LNG Technologies, Inc. for upgrades to an existing LNG fueling facility in the City of Ontario.
   

Barry R. Wallerstein, D.Env.
Executive Officer

Background

At its November 2009 meeting, the Board established the DOE ARRA-LNG Corridor Expansion Special Revenue Fund and recognized $5,591,610 in revenue from DOE for the expansion of LNG fueling infrastructure and deployment of LNG heavy-duty vehicles to the same Special Revenue Fund. An amount of up to $58,000 from that award is granted to the AQMD for re-imbursement of administrative costs such as Salaries & Employee Benefits, Indirect Costs and Travel necessary to implement the project as approved in the grant award.

The award was made from the U.S. DOE ARRA Alternative Fuel and Advanced Technology Vehicles Pilot Program to the AQMD on behalf of United Parcel Service (UPS) to construct a publicly accessible LNG refueling station in Las Vegas and to support the deployment of up to 48 heavy-duty LNG vehicles in interstate operation. The UPS Ontario-Las Vegas LNG Corridor Project will support primary fueling for 48 trucks and provide 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.

After a thorough investigation, UPS believes it is more expedient to have an experienced contractor and purveyor of LNG construct the Las Vegas LNG fueling station. UPS has asked the AQMD to modify the ARRA grant award to designate the infrastructure portion of the award directly to Clean Energy. The contract with UPS will include funding only for the deployment of up to 48 heavy-duty LNG vehicles. DOE has approved this change in the contracting process.

In addition, the AQMD Board previously approved a contract to upgrade and expand an existing LNG refueling station owned and operated by Applied LNG Technologies, Inc. (ALT) in Ontario, California, using $150,000 in funding from the DOE Clean Cities Program. Since the contract for this project was not executed by the end of FY 2009-10, the funding reverted to the Undesignated Fund Balance. To move forward with the ALT contract, the funds need to be appropriated from the Undesignated Fund Balance into the Science & Technology Advancement Budget FY 2010-11, Professional and Special Services Account.

Proposal

UPS Station

The Board previously approved a contract to UPS for the entire amount of $5,591,610 for both the LNG truck purchases and station construction/installation. This action is to execute a contract with Clean Energy in an amount not to exceed $1,534,517 for the construction of an LNG fueling station for use by UPS and other vehicles in Las Vegas, Nevada. Completion of this project will allow heavy-duty LNG trucks to effectively travel along Interstate 15, which is one of the most heavily traveled goods movement truck routes in the Western United States. Clean Energy will cost-share this project with an additional $1,561,517.

The remaining award amount of $3,999,093 will be used for the original contract to UPS, awarded in November 2009, to co-fund the deployment of up to 48 LNG-fueled trucks in its Ontario-Las Vegas fleet operation. Completion of this project will allow heavy-duty LNG trucks to effectively travel along Interstate 15, which is one of the most heavily traveled goods movement truck routes in the Western United States. UPS will cost-share this project with an additional $4,573,706.

ALT Station

This action is to appropriate the $150,000 DOE Clean Cities Program funds from the Undesignated Fund Balance to the Science and Technology Advancement FY 2010-11 Budget, Professional and Special Services Account, for a previously approved $150,000 contract with ALT to co-fund the upgrade and expansion of a publicly accessible LNG station at ALT’s Ontario facility. The proposed LNG fueling station upgrade would complement an existing LNG refueling station that currently resides at Ontario International Airport. The 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. With the appropriation of these funds, staff can move forward with execution of the contract the AQMD Board previously approved to ALT in November 2009. ALT will cost-share this project with an additional $1,233,100.

Benefits to AQMD

The ARRA and Clean Cities grant funding provides funding opportunities for technology areas contained within the Clean Fuels Program. Specifically, the three proposed projects leverage existing activities included in the Technology Advancement Office 2010 Plan Update under “Infrastructure and Deployment.” These projects 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 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 three sole source awards 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, purchase of all vehicles and construct or upgrade all LNG fueling facilities. The proposals include at a 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, the AQMD is required to flow down the provisions of the federal awarding agency to all of its contractors. Therefore, UPS, Clean Energy and ALT 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, AQMD is working with DOE to set up a payment process whereby contractor invoices will be paid as AQMD receives funds from DOE. DOE funding for these projects will be cost-shared by the project proponents as indicated in the tables below. In addition, AQMD will be reimbursed by DOE for up to $58,000 in administrative costs for Salaries and Employee Benefits and Indirect Costs necessary to implement the project as approved in the grant award.

Clean Energy 

United Parcel Service 

* This contract was previously authorized in November 2009 for the entire amount including infrastructure but is shown here with the reduced amount for convenience.

Applied LNG Technologies, Inc. 

The total funding of $5,591,610 for the UPS and Clean Energy projects and AQMD administrative costs will be funded by the DOE (ARRA)-LNG Corridor Expansion Special Revenue Fund. The $150,000 funding for the ALT project will be funded by the DOE Clean Cities Program, the funds for which will be appropriated from the Undesignated Fund Balance into the Science and Technology Advancement FY 2010-11 Budget, Professional and Special Services Account.