BOARD MEETING DATE: September 21, 2001 AGENDA NO. 29

At the August 17, 2001 Governing Board meeting, staff provided a status report on the implementation of Rule 1193 - Clean On-Road Residential and Commercial Waste Collection Vehicles. Staff indicated that waste collection operators would be purchasing either liquefied natural gas (LNG) or compressed natural gas (CNG) waste collection vehicles to meet the requirements of Rule 1193. Many waste collection operators preferred to purchase LNG fueled vehicles to minimize the space needed for the fuel tanks and maximize collection load capacity. Staff indicated that LNG is currently produced outside of California. LNG fuel is provided in the South Coast Air Basin through truck bulk deliveries to LNG refueling stations or by mobile vehicle refueling (commonly known as "wet hosing"). At this time, there is one major supplier of LNG who transports LNG from the Topok, AZ liquefaction plant (the closest liquefaction plant to California). There is an associated transportation cost for LNG. In addition, wet hosing operations have an associated labor cost. Based on public comments regarding the availability of LNG fuel supply, the Governing Board directed staff to provide a more detailed report on LNG refueling infrastructure and the expected demand for LNG in the future relative to implementation of the clean fleet vehicle rules. Staff was also asked to analyze whether a "group variance" is needed for Rule 1193 facilities and report back to the Board.

Staff surveyed the requests for funding assistance from AQMD administered programs to purchase LNG fueled vehicles and found that 298 LNG-fueled vehicle purchases or repowers have been funded through the Carl Moyer Program, MSRC, or the Rule 2202 AQIP since 1998. This estimate does not include other LNG-fueled vehicles that may be operating in the South Coast Air Basin but did not apply or receive funding assistance through the AQMD programs. In addition, in the FY 2000-01 Carl Moyer Program call for projects, the AQMD received requests for funding assistance for the purchase of about 430 LNG fueled vehicles (of which, 334 are for waste collection or transfer vehicles). Besides the waste collection industry requests, other fleet operators such as transit agencies, public works fleets, and private truck fleets are purchasing LNG fueled vehicles.

Staff estimates that relative to the clean fleet vehicle rules, three rules (1192 - Clean On-Road Transit Buses, 1193 - Clean On-Road Residential and Commercial Waste Collection Vehicles, and 1196 - Clean On-Road Heavy-Duty Public Fleet Vehicles) would place a greater demand for LNG fueled vehicles. Staff estimates that with normal turnover and replacement of vehicles, about 300 to 500 LNG fueled vehicles may be purchased on a yearly basis. This estimate includes an estimate of about 200 vehicles that the City of Los Angeles alone would purchase as part of its vehicle replacement process. Based on the current number of about 300 existing LNG vehicles and current LNG fuel delivery volume of about 20,000 gallons per day, staff estimates that within one and a half years (the timeframe to order vehicles and take delivery), the demand would double.

At this time, many of the operators of LNG fueled vehicles are in the process of constructing LNG or L/CNG (liquefied natural gas storage with the capability to fuel LNG or compressed natural gas (CNG) vehicles) refueling stations. Table 1 provides a summary of current and planned construction of LNG refueling stations in the South Coast Air Basin. While the stations are being constructed, LNG fuel is provided in the interim through wet hosing operations. There is currently one supplier of LNG, ALT - Applied LNG Technologies) who delivers LNG (in bulk deliveries and wet hosing) from the Topok, AZ liquefaction plant. The plant produces daily about 86,000 gallons of LNG fuels. The liquefaction plant is located near the California - Arizona border. The next closest plants are located in Colorado, Wyoming, and Texas. As mentioned earlier, about 20,000 gallons per day is delivered into the Basin at this time.

Wet hosing is provided through the use of one mobile unit provided by ALT. The mobile refueling unit carries about 2,800 gallons of LNG fuel and travels between fleet operator sites to deliver fuel on a daily basis. Mobile refueling has been utilized to refuel heavy-duty off-road diesel construction equipment for many years. LNG refueling is very similar to diesel refueling with about the same fill rate. ALT will have two additional mobile refueling units available shortly to service future demand.

Staff believes that LNG refueling stations would be constructed primarily at transfer stations and landfills to refuel waste hauling vehicles subject to Rule 1193. The construction of refueling stations at transfer stations and landfills will reduce the need for smaller fleets to build their own refueling stations. However, larger waste hauling fleets have been or are in the process of building their own refueling stations. Waste Management has several LNG refueling stations at this time. Taormina Industries currently has a 6,000 gallon LNG storage and refueling station in Anaheim and is planning to expand to a 15,000 gallon storage capacity to accommodate future demand. Burrtec Waste Industries is in the process of constructing an LNG refueling station. In addition, other fleet operators such as transit agencies would have their own refueling stations. There is currently an LNG refueling station at the Orange County Transportation Authority and at Sunline Transit Agency. Omnitrans will be constructing two LNG storage facilities in San Bernardino and Montclair.

Current Suppliers

Applied LNG Technologies (ALT) - (Bulk Deliveries, Mobile Vehicle Refueling)
Daily Delivery Volume: ~ 20,000 gallons; Production Capacity - 86,000 gallons/day

Potential Future Suppliers

Blue Fuels Corp.

Pickens/PFC-eFuels Corp.

Existing and Planned LNG Refueling Stations/LNG Production

Orange County Transportation Authority (Existing; 60,000 gallons storage capacity, $2M cost to build, 18 to 24 months)

Omnitrans (~2 months to construct temporary 6,000 gallon capacity (cost - $150,000; permanent tanks (15,000 gallon capacity), cost - $2.5M, to be completed by March 2002)

City of Long Beach (plans construction of liquefaction plant; cost to construct plant to produce 70,000 gallons/day - $18M)

Liquefaction Operation in Northern California (5,000 gallon/day capability; project to be completed by mid-2002)

ALT to build two liquefaction plants in central California (to be completed by 2003 - 2004 timeframe

Several LNG or L/CNG stations to be constructed through grant funding including Carl Moyer, CEC, and AES Infrastructure awards.

To further enhance the operation of LNG vehicles in the South Coast Air Basin, staff recommends that AQMD attempt to provide funding assistance for five to ten LNG refueling stations to be constructed by the end of 2002 at transfer stations and landfills. The refueling stations could be a smaller in size initially with storage capacity of about 6,000 gallons. The capital cost for a smaller size LNG refueling station is about $200,000.

There is movement to produce LNG in California. Pacific, Gas and Electric is planning to build a small liquefaction plant in northern California that would produce about 5,000 gals per day. In addition, ALT recently announced plans to build two liquefaction plants in central California converting landfill gas to LNG. These plants are expected to begin LNG production in the 2003 to 2004 timeframe. Lastly, the City of Long Beach has been planning the development of a liquefaction plant in the South Coast Air Basin to service the city’s natural gas fleet and potentially offer surplus LNG to other fleets.

Relative to short-term refueling demands, staff has placed an emphasis in bringing forward alternatives to the current supply of LNG. Staff believes that a second LNG supplier will place a greater emphasis on the California market in the interim. Staff is in discussions with an LNG fuel supplier based in Colorado on the potential to provide LNG to California markets. With the recent funding awards from the AES Settlement, several operators will be able to move forward with the construction of LNG refueling stations. In addition, an award was made to the City of Long Beach to assist in the development of the liquefaction plant.

In the longer term, staff believes that production of LNG in California and more specifically, within the South Coast Air Basin would be most desirable. Having LNG produced locally would reduce the dependence on long-distance transportation of LNG. In addition, depending on the economics of producing LNG within California, the cost of LNG fuel would either be competitive with or lower than the cost of transporting LNG fuel into California. Liquefaction plants produce LNG using electric engines. To minimize electricity demands, a liquefaction plant co-located with an electricity generating plant such as a co-generation plant would be desirable. In addition, the plant must be able to access a large quantity of natural gas. A liquefaction plant capable of producing 70,000 gals per day is estimated to cost about $18M to $20M to construct. In comparison, the Topok, AZ plant produces about 86,000 gals per day.

Smaller liquefaction systems have been proposed as a solution to meeting the need for LNG fuel in California. These liquefaction systems could produce between 5,000 to 10,000 gallons per day and use either process gas or treated landfill gas as the feedstock. The systems cost between $3M and $5M. These systems are currently being demonstrated in California. Staff believes that these systems would be most feasible and economical at landfill sites if the landfill gas can be sufficiently treated.

Relative to the request from representatives of waste hauling operators for the Governing Board to consider the concept of a "group variance" to provide relief at this time from the requirements of Rule 1193 because of lack of supply of natural gas fuel, staff does not believe this is necessary. Based on the current estimated number of LNG fueled vehicles operating in the South Coast Air Basin and the fact that the major supplier of LNG delivers only one-fourth of the total production plant capacity, staff believes that waste hauling operators can meet Rule 1193 requirements at this time. For operators ordering LNG fueled vehicles, either refueling infrastructure construction or securing short-term mobile refueling agreements are feasible given that vehicle delivery time is usually six to eight months minimum. Moreover, there is currently one mobile refueling unit operating in the Basin (with two more operating by the end of September 2001).

To summarize the current and future demand for LNG fuel relative to implementation of the clean fleet vehicle rules, staff finds that:

In summary, staff recommends that the AQMD continue to facilitate the development and expansion of LNG refueling stations in the South Coast Air Basin. In addition, there is a longer-term need to have local production of LNG. Staff believes further that over the next year and a half up to ten LNG refueling stations could be planned and constructed. In addition, if funding assistance could be provided to entities such as the City of Long Beach for the development of a large liquefaction plant, then local LNG fuel production could move forward. As part of developing funding assistance for liquefaction projects and with Governing Board’s approval, staff would facilitate joint venture agreements with various fleet operators affected by the clean fleet vehicle rules including transit agencies, waste collection operators, and public fleets of heavy-duty vehicles. Such joint ventures could include other private sector fleet operators who are operating LNG fueled vehicles.

Relative to LNG refueling stations, a model template for specifying LNG station development would be beneficial. This template would include minimal equipment required to operate a refueling station, the space needed for the equipment and operation, and discussions on permitting requirements to operate a refueling station including meeting CalOSHA and OSHA requirements, and future compatibility with hydrogen fueling systems.

Lastly, to facilitate the development of smaller liquefaction systems, staff proposes to co-sponsor the demonstration of these systems at a local landfill site. (Waste Management is proposing to install such a system at the Bradley Landfill located in Simi Valley.) In addition, staff is proposing to provide funding for the development and/or refinement of current landfill treatment processes to obtain a clean source of natural gas feedstock for the smaller liquefaction systems.

In conclusion, staff is requesting the Governing Board to consider the following:

The above items were discussed at the August 24, 2001 Technology Advancement Committee. However, at that time, staff had not finalized any specific monetary recommendations.

South Coast Air Quality Management District