BOARD MEETING DATE: February 7, 2003
AGENDA NO. 2

Execute Contract to Cost Share Small-Scale Natural Gas Liquefaction Plant

SYNOPSIS:

At its March 1999 meeting, the Board approved $200,000 in funding for a unique small-scale natural gas liquefaction plant using innovative technology. Due to a contractual technicality and unforeseen factors, the funds were returned. With the facility constructed, the sponsors of this project are requesting the same level of funding from the AQMD as before in order to complete the field installation, calibration, testing and evaluation. Commercialization of the technology is expected to begin in 2003 – 2004. Total project cost is $5.6 million; total AQMD funding will not exceed $200,000.

COMMITTEE:

Technology, January 24, 2003, Recommended for Approval

RECOMMENDED ACTION:

Authorize the Executive Officer to execute a contract amendment with Pacific Gas & Electric to cost share a demonstration of a small-scale natural gas liquefaction plant, in an amount not to exceed $200,000 from the Clean Fuels Fund.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Implementation of the AQMD Clean Fleet Vehicle Rules has increased the demand and need for liquefied natural gas (LNG) fuel in the South Coast Air District. Currently, the supply of LNG in California is dependent upon LNG production facilities in Arizona, Wyoming and Texas. Associated with this existing supply of LNG is the accompanying transportation cost of the LNG. While there are current plans to build and develop several large stationary liquefaction plants in Southern California utilizing natural gas from existing pipelines, recent advances in liquefaction technologies suggest that a small-scale liquefaction plant could be built such that it could be made mobile to take advantage of natural gas from stranded wells and possibly landfills. Development of such a technology would provide the Basin additional source of LNG fuel and reduce the region’s dependence on pipeline fed natural gas for purpose of LNG liquefaction and the transport of LNG from out of state. 

Proposal

The project participants are seeking $200,000 from the AQMD to complete the calibration, testing and evaluation of this unique, small-scale liquefied natural gas (LNG) satellite plant in Sacramento, California. Upon completion of the field testing, the project participants intend to license a strong commercialization partner to optimize and field-harden the technology and install like facilities in the South Coast Air Basin.

The following tasks are to be performed:

Task 1 Design, model and engineer a start-up compressor bypass piping circuit to ensure sufficient mass flow through the compressor to improve compressor surge protection.

• Determine the amount of additional mass flow required to achieve design conditions, (i.e. full turbo expander-compressor power outputs);
• Model modifications using HYSIS modeling software to verify adequate mass flow and system performance impacts; and
• Verify that any changes/modifications made to the system meet applicable codes, (i.e. ASME B31.3).

Task 2 Design, model and engineer start-up modifications, overflow, over-pressurization, and CO2 control enhancements, in the cold area.

• Add a bypass to control excess flow and pressure resulting from start-up conditions, and storage tank over design pressure conditions (i.e. warm tank issues);
• Modify valving and piping to improve control of adverse CO₂ formation during start-up;
• Add additional sensors as required to monitor process start-up and operating conditions;
• Change control valves as required to balance flows in modifications;
• Make model modifications using HYSIS modeling software to verify adequate mass flows and system balance and performance; and
• Verify all changes meet applicable codes, i.e. ASME B31.3.

Task 3 Develop control software for start-up, operation and monitoring of the prototype liquefaction system.

• Determining and correcting problems associated with the flow sensors and pump;
• Developing semi-automated start-up algorithms; and
• Performing iterations of system control testing during field start-up and operations and make needed control system modifications. -.

Task 4 PG&E will field test the modified prototype liquefaction system and make necessary modifications to achieve and maintain full liquefaction capacity and reliable performance and data analysis as available funding and operational success allows.

• Testing and evaluating system and component operations, efficiency, and performance, including measuring the CO2 separation efficiency of the: tank, hydro cyclone, Graham heat exchanger sections 1, 2 & 3, and CO2 polishing filters;
• Make adjustments, repairs or replacements to achieve optimum system/component performance results;
• Making adjustments, repairs or replacements to achieve optimum system/component performance results; and

Benefits to AQMD

The proposed project is included in Technology Advancement Plan under "Infrastructure Development to Support Clean Fuel Vehicles". The AQMP relies on the expedited implementation of advanced technologies and zero-emission vehicles in Southern California to achieve air quality standards. Fleet owners and communities must have the most current and convenient access to available clean technologies if they are to integrate these technologies into their day-to-day operations. Public awareness of these types of demonstration programs can help increase consumer confidence and acceptability of LNG vehicles, and expand the market share of low emitting vehicles.

The LNG satellite plant represents a technology breakthrough that will impact the supply of LNG in the South Coast. Completion of this prototype small-scale liquefier demonstration will permit early commercialization of this breakthrough technology that will reduce the dependence on out-of-state LNG fuel supply and provide additional fuel supply options to SCAQMD fleets. Commercialization of this technology would also make available other sources of natural gas supply other than pipeline fed.

In addition, the proposed project will help California develop its own production market of LNG as an alternative clean fuel to diesel, i.e. LNG. LNG is the preferred alternative fuel to refuse hauling fleets and long-haul truck transportation because it is an abundant domestic fuel and provides twice the energy per unit volume as CNG. It therefore better satisfies their constituents’ mission requirements, such as longer driving range, and lower-weight vehicle fuel storage.

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 sole source awards is made under provision B.2.c.(3) PG&E has ownership of key assets required for project performance and 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) the project involves significant cost sharing by the project participants. It is in the best interest of the AQMD to cosponsor the proposed project, as it furthers protection of the public health through expansion of a clean fuel refueling facility and allows for an increased supply of LNG for use by heavy duty vehicles.

Resource Impacts

The total amount of AQMD funding for these contracts will not exceed $200,000. The project participants including Pacific Gas & Electric (PG&E), Southern California Gas Company, New York State Electric and Gas Corporation, INEEL, Sacramento AQMD and the California Energy Commission have co-funded the project with $5.8 million. Sufficient funds are available from the Clean Fuels Fund. The Clean Fuels Program, under Health and Safety Code 40448.5 and 40512 and Vehicle Code 9250.11, establishes mechanisms to collect revenues from mobile and stationary sources to support projects to increase the utilization of clean fuels in both sectors, including the development of the necessary advanced enabling technologies. Funds collected from stationary and motor vehicles are placed in the Clean Fuels Fund and are restricted, by statute, to be used for projects and program activities related to mobile and stationary sources that support the objectives of the Clean Fuels Program.

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