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Title:
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Authorization to Release a Request for Proposals for Professional Services for Opting-In to the Low Carbon Fuel Standard Credit Program and Purchase of Renewable Natural Gas.
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City of Culver City, California
Agenda Item Report
Meeting Date: July 13, 2015 Item Number: C-14_
CITY COUNCIL AGENDA ITEM: Authorization to Release a Request for Proposals
for Professional Services for Opting-In to the Low Carbon Fuel Standard Credit
Program and Purchase of Renewable Natural Gas
Contact Person/Dept.: Paul Condran Phone Number: 310-253-6520
Fiscal Impact: Yes [] No [X] General Fund: Yes [] No [X]
Public Hearing: [] Action Item: [] Attachments: []
Commission Action Required: Yes [] No [X] Dates:
Public Notification: Agenda and Meetings – City Council (07/08/15)
Department Approval:
Art Ida (07/01/15)
City Attorney Approval:
Carol Schwab (by H. Baker) (07/06/15)
Chief Financial Officer Approval:
Jeff Muir (07/07/15)
City Manager Approval:
John M. Nachbar (07/07/15)
RECOMMENDATION:
Staff recommends the City Council authorize the release of a Request for Proposals
(RFP) for professional services for a Low Carbon Fuel Standard (LCFS) Credit
Program and purchase of renewable natural gas.
BACKGROUND:
California’s LCFS mandates were enacted in January 2007 by executive order
pursuant to AB 32 to reduce the carbon intensity in transportation fuels by ten
percent by 2020. 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.
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. Under AB 32, refiners of petroleum that
produce gasoline or diesel can comply with the LCFS via many different strategies,
including by purchasing credits on the LCFS market that were generated via
alternative fuel use. As Culver City dispenses and consumes compressed natural
gas (CNG), a transportation fuel that is more than 85% cleaner than diesel or
gasoline, the City is able to generate LCFS credits that can be sold to generate
revenue.
Additionally, staff has identified biomethane, or renewable natural gas (RNG), as a
potentially viable alternative to traditional natural gas. RNG has the same chemical
make-up and can be made to have the same fuel specifications as traditional natural
gas, but has the lowest carbon intensity among identified alternative fuels. RNG can
be supplied to the Transportation Facility through existing utility pipelines, pending
approval by Southern California Gas Company and compliance with natural gas
pipeline supply balancing requirements and gas quality specifications. RNG has a City of Culver City, California
Agenda Item Report
lower carbon intensity than CNG and additional LCFS credits are generated with its
use.
DISCUSSION:
Culver City is eligible to opt in to the CARB’s LCFS program as a regulated entity.
As a regulated entity, the City will earn credits by dispensing and consuming CNG
for its fleet. Staff estimates that the City would generate approximately 1,500 credits
annually.
The LCFS credit market operates using a system of deficits and credits. Any fuel
that has a carbon intensity higher than the standard generates deficits (i.e., gasoline
and diesel). Any fuel that has a carbon intensity lower than the standard generates
credits (e.g., natural gas, electricity, some biofuels, hydrogen, etc.). At the end of
each year, all deficits must be offset with credits. Credits can be banked without
penalty over the course of the program. Credits do not have a vintage (i.e., there is
no distinction between a credit generated in 2015 vs one generated in 2018).
Credits generated in years before participating in the LCFS Program are not
retroactively credited.
The LCFS credit market is emerging and is currently difficult to forecast. The price and
quantity of credits that may be generated by Culver City will rely greatly on the type
and quantity of natural gas used, as well as on outside market forces. CARB is
considering multiple amendments to the LCFS program that have had some
downward effect on credit prices, but most analysts suggest that the compliance
stringency in the 2017-2020 timeframe will drive credit prices higher in the near future.
Prices have ranged from $21 to $30 per credit since February 2015.
Culver City has been contacted by several energy companies engaged in the LCFS
credit market. Staff has determined the most cost-effective strategy for monetizing its
LCFS credits is to contract with a third-party with appropriate expertise. Additionally,
staff has received numerous inquiries from third-parties interested in providing RNG to
Culver City at the same rate it currently pays for natural gas. Staff has determined
that contracting with a third-party energy provider to supply Culver City with RNG may
significantly reduce further the City’s carbon footprint at little or no additional cost
depending on the percentage of RNG introduced into the City’s fueling station.
The RFPs requested in this report would solicit firms with appropriate expertise to
provide proposals for their services related to the City’s contemplated entry into the
LCFS market and the purchase of renewable natural gas.
The proposals received as a result of the issuance of the RFP would be analyzed by
staff and, if warranted, presented to the City Council for award of a professional
services agreement(s).
City of Culver City, California
Agenda Item Report
FISCAL ANALYSIS:
There is no fiscal impact associated with the authorization to solicit proposals for the
City. However, the ultimate award of a contract to a successful bidder will create a
fiscal impact.
MOTION:
That the City Council:
Authorize the release a Request for Proposals for Professional Services for
participation in the CARB Low Carbon Fuel Standard Credit Program and
purchase of renewable natural gas.