BOARD MEETING DATE: September 8, 2006
AGENDA NO. 6

Issue RFP for New Natural Gas Fueling Station Infrastructure at School Districts/Joint Power Authorities and Execute Sole Source Contract Award to Offset CNG Infrastructure Costs

SYNOPSIS:

The AQMD has funded the replacement of older diesel buses with new lower-emitting diesel or CNG buses through the Lower-Emission School Bus Program.  Although funding of up to 10 percent of the award amount for each new CNG bus was made available for CNG fueling infrastructure, additional funds are needed to help school districts expand their clean fuel bus fleets.  This action is to: 1) issue an RFP to assist school districts in establishing additional natural gas fueling infrastructure at a total cost not to exceed $2,000,000 from the Clean Fuels, Rule 1309.1 and AES Settlement Funds; and 2) award Downey Unified School District $108,000 to offset CNG infrastructure costs.  Previous funding commitments where funds are no longer needed will be used to augment this solicitation.

COMMITTEE:

Technology, July 28, 2006, Recommended for Approval

RECOMMENDED ACTIONS:

1. Approve issuance of RFP #P2007-07 to provide cost-share funds to assist school districts in establishing additional natural gas fueling infrastructure at a total cost not to exceed $2,000,000 from the Clean Fuels, Rule 1309.1 and AES Settlement Funds.
2. Authorize the Chairman to execute a sole source contract award with Downey Unified School District in the amount of $108,000 to offset the costs of installation or expansion of the CNG fueling infrastructure and garage upgrades directly related to the purchase of the buses from the Clean Fuels Fund.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

At its February 2005 meeting, the Board allocated $14 million from funds to be generated under AB 923 by the end of 2006 for the AQMD’s Lower-Emission School Bus Replacement Program.   These funds are now being made available to purchase new CNG buses for the replacement of existing pre-1987 diesel-fueled buses owned by public school districts.  Funding of up to ten percent of the award amount for each new CNG bus is made available for CNG fueling infrastructure.

Based on multiple site visits and reports generated by AQMD’s consultant, the cost of CNG fueling infrastructure and necessary facility modifications can be a significant financial constraint for school districts.  The economic burden may limit public school districts in the use and expansion of clean fuel CNG buses.

A number of school districts have participated in the AB 923 funding through the Lower-Emission School Bus Replacement Program.  Many of these school districts installed fueling infrastructure that is only appropriate for a small number of buses and with limited design lifetimes.  As school districts purchase more clean fuel CNG school buses, the installed fueling infrastructure becomes inadequate for fueling larger number of buses or must be replaced due to the more stringent operating requirements placed on it.  In addition, those school districts desiring to accelerate their fleet turnover of diesel school buses are faced with purchasing relatively large-sized and more costly fueling infrastructure and associated garage upgrades.

Proposal

Staff recommends the Board issue RFP #P2007-07 to provide cost-share funds to assist school districts in establishing additional natural gas fueling infrastructure.  The total amount of the RFP would not exceed $2,000,000 and would be funded from the Clean Fuels Fund and previously awarded funds being reverted back to the AQMD.  Infrastructure awards would be limited to those school districts identifying increased number of natural gas buses that would be added to their fleet.

Funding is designed to offset capital investment costs of fueling infrastructure and garage or maintenance facility upgrades.  For this RFP, funding will only be provided for natural gas fueling infrastructure.  Applications will be accepted from school districts and joint power authorities providing transportation for students and school districts.  Additional scoring consideration will be given to those applicants that provide public access.  The RFP will not require components to be hydrogen compatible although additional points will be offered for considering such hydrogen compatibility issues.

Funding covering a maximum amount of 75% of the cost of the new or upgraded equipment and/or system for natural gas fueling infrastructure will be awarded to school districts.  The level of cost share will be scored based upon the amount of contract funds
requested including cash expenditures by the applicant, (i.e. equipment, engineering, permits, installation, etc.) less all available fuel savings, manufacturer, equipment and fuel tax credits.  In-kind services are limited to ten percent of total costs with the exception of actual installation by school district staff.  Staff has met with all the school bus vendors and discussed the issue of potential tax credits allowed under the Energy Bill.  In case of availability of tax credits from the sale of these buses, the school bus vendors have agreed to work with staff in order to use the credits towards the sale of more buses as requested by public school districts.

The general requirements of the RFP are identified below:

1. Proposed project must be located within the jurisdictional boundaries of the South Coast Air Quality Management District.
2. Proposed project shall be a natural gas station time-fill or fast-fill fueling station.  Additional consideration will be given to those applicants proposing the highest level of cost-sharing and for stations with public access.
3. Project schedule shall be limited to an eighteen-month timeframe. 
4. Applicants must submit approved five (5) year bus replacement / bus purchase schedule along with operating/maintenance costs, utility costs, other funding sources, average annual miles driven and diesel gallons used for each bus in present fleet.
5. Proposed project may request cost-share funds for natural gas infrastructure and associated garage/maintenance facility upgrades.
6. Applicant will be contractually obligated to proposed station throughput.

In the continuing effort to replace the oldest school buses, California State Legislators, in the Budget Act of 2005, set aside funds to replace 89 of the oldest pre-1977 buses in the State.  Pursuant to this legislation, CARB has identified 15 of these oldest buses as owned and operated by five public school districts in the South Coast Air Basin.  The Downey Unified School District (DUSD) currently operates 34 buses, two of which are pre-1977 and are eligible for these funds.  Eight other buses in the fleet are pre-1987.

At its June 2006 meeting, the Board approved CARB and AQMD funds to cover the entire cost of replacing these high polluting diesel school buses and the associated infrastructure.  As part of the Board action, $32,000 was offered to DUSD under the program for installation or expansion of the CNG fueling infrastructure and garage upgrades directly related to the purchase of the buses.  DUSD in anticipation and with a commitment to future acquisitions of CNG school buses, has a desire to install a fueling station at this time capable of filling a larger number of buses.  Although DUSD will perform much of the general site-related labor, the cost of the equipment installed is estimated at $156,000 and the garage modifications are estimated at up to $60,000.  DUSD has requested a total of $108,000 for the cost of the fueling station and repair facility from the AQMD with the remaining cost as matching funds from DUSD.

The match funds can be recovered through the following mechanisms:

• Fuel savings - Diesel fuel without tax is currently about $2.80/gallon.  CNG fuel cost based on a diesel equivalent gallon (DEG) from a station owned by the user is about $1.40/DEG.  This is a $1.40/DEG saving.
• Federal Energy Bill for buses - Bill allows manufacturer tax credits up to 50% of the differential cost between diesel and CNG buses.
• Federal Energy Bill for fueling station - Bill allows the CNG station installer/manufacturer up to $30,000 tax credit for a CNG station.  This could be applied toward the cost of the fueling station and would be included in the bid package for the fueling station.
• Highway Bill (H.R. 3). Sec. 11113: Volumetric Excise Tax Credit for Alternative Fuels.  Provides an excise tax credit (referred to as VEETC) to the seller (or user if there is no seller) of CNG or LNG.  The credit is 50-cents per gasoline-gallon-equivalent for CNG.
• AQMD infrastructure component award that accompanies CNG buses.

Therefore, staff recommends awarding Downey Unified School District an additional amount of up to $108,000 from the Clean Fuels Fund to cover the costs of installing a new CNG infrastructure and garage upgrades.

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 a sole source award is made under provision B.2.d.: other circumstances exist which in the determination of the Executive Officer require such waiver in the best interests of the AQMD.  Specifically, these circumstances are that CARB, in accordance with state law, has identified Downey Unified School District (DUSD) as having two of the oldest pre-1977 school buses among schools in the Basin.  State law allows for the complete funding of new natural gas school buses to replace the oldest of diesel school busses.  Furthermore, DUSD is located in an area of high ozone and PM exposure levels.  Providing additional funding from the Clean Fuels Fund will enable DUSD to install the necessary fueling infrastructure to replace these selected pre-1977 buses with new CNG buses, and will encourage them to voluntarily modernize the remaining of their older high polluting diesel buses with CNG buses in the future.

Table 1 provides a list of four projects where either partial or entire funding awards are proposed to be de-obligated and used to fund the proposed RFP.  A total of $1,141,237 from prior Board natural gas infrastructure awards that are no longer needed is proposed to fund the successful bids to the RFP.  The additional $858,763 needed to fund the proposed RFP will come from the Clean Fuels Fund.  No Board action is required to de-obligate the prior Board awards because the contractors have agreed to the de-obligation.  A brief discussion of each of the projects proposed for de-obligation is provided in the following section for the Board’s information.

Table 1.  Existing Projects Proposed To Be De-obligated

CR& R, Inc.

CR& R made an application to the AQMD under RFP #P2002-19 - Development of LNG Refueling Stations in the South Coast Air Basin.  Their proposal was for construction of two LNG fueling stations, one located in San Juan Capistrano and the other in Stanton.  The total award was to be split between the two facilities.  The San Juan Capistrano station has been installed and operating for several years.  The Stanton facility no longer has the amount of necessary land available to accommodate such a fueling facility.  Staff proposes that the remaining $291,237 revert to the Rule 1309.1 Priority Reserve Fund to fund the proposed RFP.

Waste Management Recycling and Disposal Services of California, Inc.

Waste Management made an application to the AQMD under RFP #P2002-19 -Development of LNG Refueling Stations in the South Coast Air Basin, and was awarded $400,000 for the construction and installation of an LNG fueling station at the Bradley Landfill.  While having installed several such stations at other locations within the Basin, land-use issues have prevented them from installing an LNG fueling facility at this particular location.  Since a contract was not executed for this project, the $400,000 is available in the Clean Fuels Fund to fund the proposed RFP.

Clean Energy, Inc.

Clean Energy, Inc. made an application to the AQMD under RFP #P2004-09 - Development of Natural Gas Refueling Station Infrastructure, and was awarded $250,000 for the construction and installation of a CNG refueling station at a site in Mission Viejo.  The site is no longer available and cannot be built.  Since a contract was not executed for this project, the $250,000 is available in the Clean Fuels Fund to fund the proposed RFP.

Clean Energy, Inc.

Clean Energy was awarded funding for the installation of seven CNG refueling stations throughout the Basin.  Of the seven, one site that was originally proposed for the West Hollywood area has been dropped due to permitting issues.  Staff proposes that the remaining $200,000 revert back to the AES Settlement Fund to fund the proposed RFP.

Benefits to AQMD

The AQMP relies on the expedited implementation of advanced technologies and clean-burning fuels in Southern California to achieve air quality standards.  School buses operate in close proximity to students, teachers and neighbors.  Many schools provide bus services in heavily populated areas.  The successful implementation of the school bus replacement program will provide less polluting and safer school transportation for school children.  In addition, the program will maximize the potential emission benefits in low income, high diesel and high PM10 exposure areas, and will enhance the objectives of the Environmental Justice and Children’s Health initiatives adopted by the Board.

Outreach

In accordance with AQMD’s Procurement Policy and Procedure, a public notice advertising the RFP and inviting bids will be published in the Los Angeles Times, the Orange County Register, the San Bernardino Sun, and Riverside County Press Enterprise newspapers to leverage the most cost-effective method of outreach to the entire South Coast Basin.

Additionally, potential bidders may be notified utilizing AQMD’s own electronic listing of certified minority vendors.  Notice of the RFP/RFQ will be 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/ where it can be viewed by making menu selections “Inside AQMD”/“Employment and Business Opportunities”/“Business Opportunities” or by going directly to http://www.aqmd.gov/rfp/index.html).  Information is also available on AQMD’s bidder’s 24-hour telephone message line (909) 396-2724.

Bid Evaluation

Proposals received will be evaluated by a diverse, technically qualified panel in accordance with criteria contained in the RFP.

Resource Impacts

Total funding for the project will be made available from the Clean Fuels Fund and reverted funds not to exceed $2,000,000.  Of the total amount, $1,141,237 will be from de-obligated funds.  

The Clean Fuels Fund was established as a special revenue fund resulting from the state-mandated Clean Fuels program.  The Clean Fuels Program, under Health and Safety Code Sections 40448.5 and 40512 and Vehicle Code Section 9250.11, established mechanisms to collect revenues from mobile sources to support projects to increase the utilization of clean fuels, including the development of the necessary advanced enabling technologies.  Funds collected from motor vehicles are restricted, by statute, to be used for projects and program activities related to mobile sources that support the objectives of the Clean Fuels Program.

Attachment (DOC 854kb)
RFP #P2007-07 - RFP for New Natural Gas Fueling Station Infrastructure at School Districts and Joint Power Authorities