BOARD MEETING DATE: May 7, 2004
AGENDA NO. 6

Execute Contracts to Generate Emission Reduction Credits Under the Rule 1121 Mitigation Fee Program

SYNOPSIS:

As of October 7, 2003, the AQMD received a total of $804,452 from water heater manufacturers as emission mitigation fees under Rule 1121. The AQMD will collect this mitigation fee until December 2004. In November 2003, a Program Announcement was issued to solicit NOx emission reduction projects. Staff proposes to execute contracts worth approximately $804,197 to fund stationary and mobile source NOx emission reduction projects.

COMMITTEE:

Technology, April 23, 2004, Recommended for Approval

RECOMMENDED ACTION:

Authorize the Chairman to execute the following contracts from Fund 27, Rule 1121 Mitigation Fee Program Account:

1. A contract with American Airlines to install 23 electrical ground power units to support airline maintenance operations in an amount not to exceed $299,174.
    
2. A contract with GE Transportation Systems to remanufacture two locomotive engines in an amount not to exceed $290,158.
    
3. A contract with Seaboard Marine to repower two forklifts in an amount not to exceed $37,800.
    
4. A contract with Reliable Wholesale Lumber, Inc. to repower seven lumber loaders in an amount not to exceed $177,065.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Under Rule 1121 - Control of Nitrogen Oxides from Residential Type, Natural Gas Water Heaters, emission mitigation fees are collected from water heater manufacturers to fund stationary and mobile source emission reduction projects targeted at offsetting NOx emissions from water heaters that do not currently meet Rule 1121 emission standards. Mitigation fees will be collected until December 31, 2004 after which, the water heater manufacturers will be required to meet more stringent NOx emission standards.

As of October 7, 2003, $804,452 in mitigation fees has been collected. Staff proposes to execute contracts worth $804,197 to fund stationary and mobile source NOx emission reduction projects under this program.

On November 7, 2003, Program Announcement #PA 2004-03 was released to solicit projects under this program. The deadline for submitting proposals was December 9, 2003.

Outreach

In accordance with the AQMD’s consulting and contracting policies, a public notice advertising the Program Announcement and inviting bids was published in the following publications:
 

1.	Antelope Valley Press	11.	Inland Valley Daily Bulletin	21.	Sun, The
2.	Black Voice News	12.	Korea Central Daily	22.	Philippine News
3.	Daily Breeze, The	13.	La Opinion	23.	Precinct Reporter
4.	Desert Sun	14	La Prensa	24.	Rafu Shimpo
5.	Chinese Daily News	15.	La Voz	25.	Press Enterprise
6.	Eastern Group Publications	16.	Los Angeles Daily News	26.	Contracts Register
7.	El Chicano	17.	Los Angeles Sentinel	27.	Wave Community Newspapers
8	El Informador	18.	Los Angeles Times	28.	State of California Contracts
9.	Excelsior, The	19.	Signal, The		Register
10.	Inland Empire Hispanic News	20.	Orange County Register

Additionally, potential bidders were notified utilizing the Los Angeles County MTA and Cal Trans Directories of Certified Minority, Women, Disadvantaged and Disabled Veterans Business Enterprises; the Inland Area Opportunity Pages Ethnic/Women Business & Professional Directory; AQMD’s own electronic listing of certified minority vendors; and AQMD Purchasing’s mailing list. Notice of the Program Announcement was mailed to the Black and Latino Legislative Caucuses and various minority chambers of commerce and business associations; and placed on the Internet at AQMD’s Web site [http://www.aqmd.gov, "Business and Job Opportunities" icon] and AQMD’s bidder’s 24-hour telephone message line (909) 396-2724.

Bid Evaluation

The AQMD received nineteen proposals for project funding totaling $8,007,203. The proposals were evaluated by AQMD staff. As stated in the Program Announcement, projects were selected based on cost effectiveness, project completion schedule, and project category. In particular, these recommended projects were selected based primarily on cost effectiveness, except for the following. Projects involving fishing vessels were not recommended because, from past experience, it is known that these vessels travel outside AQMD waters. Reliable Wholesale lumber is being recommended over OceanAir Environmental’s Pacific Combi project because, unlike Reliable, OceanAir stated that it could not proceed at all with the project for approximately $177,000. In addition, American Airlines was recommended because it is the only proposal that replaces diesel fuel with grid electricity, a near-zero emission technology. Just as importantly, American Airlines’ proposal to replace diesel with electricity is a ground-breaking model to spur other airlines to hopefully follow suit. Finally, American Airlines has agreed to reduce requested funding in order to make more money available for other projects. Based on this reduced funding, the cost-effectiveness of the project will be $3,261 per ton of NOx reduced annually.

The proposals received and the proposed projects are summarized in Attachment A.

Proposal

Staff proposes to approve projects submitted by: American Airlines to install 23 electrical ground power units to support airline maintenance operations in an amount not to $299,174; GE Transportation Systems to remanufacture two locomotive engines in an amount not to exceed $290,158; Seaboard Marine to repower two forklifts in an amount not to exceed $37,800; and Reliable Wholesale Lumber, Inc. to repower seven lumber loaders in an amount not to exceed $177,065. The proposed projects with a total funding of $804,197 will produce an estimated NOx emission reduction of 51 tons/year.

Contracts will be executed for each selected project expeditiously so that the emission reductions can occur as soon as possible. It is estimated that all projects will be completed by June 30, 2004.

Benefits to AQMD

The successful implementation of this program will result in reducing emissions from stationary and mobile source targeted at offsetting NOx emissions from water heaters that do not currently meet Rule 1121 emission standards. These projects will also produce concurrent toxic compound emission reductions (e.g., lowered diesel exhaust particulate matter), which is an additional benefit. The proposed projects will generate NOx emission reductions of approximately 51 tons/year.

Resource Impacts

The total cost of $804,197 for the proposed projects will be funded from the Rule 1121 Mitigation Fee Program.

Attachment

List of Rule 1121 Mitigation Fee Projects

Attachment A

Proposals Received
 

 
Projects Proposed for Funding
 

*The proposed funding of $299,174 was calculated from the total requested funding of $550,000 to achieve the same NOx reduction cost effectiveness of $3,261 as the GE Transportation Systems project, the most cost-effective diesel-to-diesel replacement project.

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