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Agenda Item
ASR
Control 14-001368 |
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MEETING DATE: |
10/21/14 |
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legal entity taking action: |
Board of Supervisors |
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board of supervisors
district(s): |
3 |
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SUBMITTING
Agency/Department: |
OC Waste & Recycling (Approved) |
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Department contact
person(s): |
Dylan Wright (714) 834-4122 |
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An Tran (714) 834-4137 |
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Subject: FRB-Approve 1st Amendment
& Waiver to 2nd Amended & Restated Landfill Gas Rights
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ceo CONCUR |
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Clerk of the Board |
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Concur |
Approved Agreement to Form |
Discussion |
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3 Votes Board Majority |
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Budgeted: No |
Current Year Cost:
N/A |
Annual Cost:
N/A |
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Staffing Impact: No |
# of Positions:
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Sole Source:
No |
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Current Fiscal Year Revenue: $500,000
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Prior Board Action: 11/8/2011
#32, 6/30/1998 #7 |
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RECOMMENDED ACTION(S):
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1. |
Find that Final Mitigated Negative Declaration No. 610, previously approved by the OC Waste & Recycling Director on April 15, 2014, reflects the independent judgment of the County of Orange and is adequate to satisfy the requirements of CEQA for the Landfill Gas Renewable Energy Project at the FRB Landfill based on the following additional findings: |
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a. |
The circumstances of the Project are substantially the same and Mitigated Negative Declaration No. 610 adequately addressed the effects of the proposed Project. No substantial changes have been made in the Project, no substantial changes in the circumstances under which the Project is being undertaken, and no new information of substantial importance to the Project which was not known or could not have been known when the previous Mitigated Negative Declaration No. 610 adopted have become known and no further environmental review is required. |
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b. |
Mitigated Negative Declaration No. 610 is adequate to satisfy the requirements of CEQA for the Landfill Gas Renewable Energy Project at the FRB Landfill. |
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2. |
Approve the First Amendment & Waiver to the Second Amended & Restated Landfill Gas Rights & Production Facilities Agreement at Frank R. Bowerman Landfill with Bowerman Power LFG, LLC. |
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3. |
Authorize the OC Waste & Recycling Director to execute the First Amendment & Waiver upon approval by the Board of Supervisors. |
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4. |
Approve the Consent to Encumbrance between the County, Caterpillar Financial Services Corporation and Bowerman Power LFG, LLC and authorize the OC Waste & Recycling Director to execute the Consent. |
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5. |
Authorize the OC Waste & Recycling Director to grant reasonably required rights of way and licenses required for utilities pursuant to the Second Amended & Restated Landfill Gas Rights & Production Facilities Agreement, as approved by County Counsel. |
SUMMARY:
Approval of the First Amendment & Waiver (First Amendment) to the Second Amended and Restated Landfill Gas Rights & Production Facilities Agreement (Agreement) with Bowerman Power, LFG, LLC will enhance existing Agreement language, and will facilitate the construction of a landfill gas to energy facility at the Frank R. Bowerman Landfill.
BACKGROUND INFORMATION:
OC Waste & Recycling is responsible for managing the County’s solid waste disposal system including Central Region Landfills that consist of the active Frank R. Bowerman (FRB) Landfill and five closed solid waste disposal sites. The FRB Landfill was opened in 1990 to meet the solid waste disposal needs of the central portion of Orange County.
OC Waste & Recycling is requesting approval of the First Amendment & Waiver to the Second Amended and Restated Landfill Gas Rights and Production Facilities Agreement with Bowerman Power LFG, LLC (BP) to facilitate the completion of a landfill gas-to-energy facility which will capture and utilize landfill gas (LFG) as a renewable energy resource. LFG is the natural byproduct of solid waste decomposition and contains significant amounts of methane and carbon dioxide which are prevalent greenhouse gases. To ensure regulatory compliance and safe landfill operations, the LFG at the FRB Landfill is currently destroyed through flaring. The construction of a landfill gas-to-energy facility will allow LFG to be productively used to generate electricity.
Through the leadership of the Board of Supervisors, OC Waste & Recycling has successfully partnered in three other landfill gas-to-energy projects at two active and one closed landfill. These facilities produced approximately 267,000 megawatt-hours of electricity in fiscal year 2013-14, enough to serve approximately 40,000 homes with renewable energy while generating approximately $3.0 million in royalties. OC Waste & Recycling would like to build upon those successes with respect to landfill gas conversion technologies and further explore renewable technologies as potential options to meet more stringent legislative and regulatory requirements. The proposed landfill gas-to-energy facility at FRB Landfill will produced an estimated 155,000 megawatt-hours of electricity which is sufficient to serve approximately 14,000 home and expected to generate approximately $1.5 million in royalties annually.
GSF Energy, LLC (GSF) and the County established an initial agreement in December 1995 for the development of landfill gas to energy projects. On June 30, 1998, the Board approved the Amended and Restated Landfill Gas Rights and Production Facilities Agreement for FRB Landfill which was executed on December 8, 1998. From 2007 to 2010, a liquefied natural gas facility operated at FRB Landfill. The liquefied natural gas facility was unable to sustain operations at a commercial level and was decommissioned.
In November 2011, the Board of Supervisors approved the Second Amended & Restated Landfill Gas Rights & Production Facilities Agreement with BP, a wholly owned subsidiary of GSF, which is a wholly owned subsidiary of Montauk Energy Capital, LLC. Provisions of the Agreement include the construction of a landfill gas-to-energy facility; a 20-year term from the date of facility commercial operation (with two ten-year Agreement renewal options); increases in minimum royalty payments; transfer of ownership of the landfill gas flare system to OC Waste & Recycling; and an increased scope of BP obligations with respect to landfill gas collection system maintenance. It also included a discretionary termination right if the BP landfill gas-to-energy facility was not in commercial operation by June 30, 2015 and Agreement termination if commercial operation was not achieved by June 30, 2016.
On April 22, 2014, BP informed the County that it would not be able to meet the June 30, 2015 commercial operation date but would achieve commercial operation by June 30, 2016. To date, BP has achieved key project milestones such as obtaining draft air permits from the South Coast Air Quality Management District, meeting with regulatory agencies and appropriate stakeholders, satisfying certain CEQA requirements, securing a power purchase agreement with the City of Anaheim, and obtaining an interconnect agreement with Southern California Edison.
In order to obtain approval for financing of the facility, BP has requested that the County waive the June 30, 2015 discretionary termination right and enter into a Consent to Encumbrance with their lender, Caterpillar Financial Services Corporation. The Consent to Encumbrance clarifies certain provisions within the Agreement and provides additional assurances to the lender regarding their assignment and transfer rights. Due to the project’s advanced stage of development, OC Waste & Recycling is recommending approval of the proposed Amendment.
Pursuant to the proposed Amendment, the County will waive its discretionary termination right contingent upon the following:
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a) |
BP shall provide written assurance of a binding financing agreement for the construction of the facility by December 31, 2014 or the Agreement will terminate.
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b) |
If commercial operation is not achieved by June 30, 2016, the Agreement will terminate. |
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c) |
BP will pay a non-refundable $500,000 to the County within thirty (30) days of the execution of proposed Amendment. |
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d) |
Approval from the Board of Supervisors will be required for each of the two ten-year extensions. |
Compliance with CEQA: The proposed project is covered by Final Mitigated Negative Declaration No. 610, previously approved by the OC Waste & Recycling Director on April 15, 2014. No substantial changes have been made in the project, no substantial changes in the circumstances under which the project is being undertaken and no new information of substantial importance to the project which was not known or could not have been known when the Mitigated Negative Declaration No. 610 was adopted have become known; therefore, no further environmental review is required.
FINANCIAL IMPACT:
This is a revenue generating agreement with BP. Pursuant to provisions within the Agreement, OC Waste & Recycling is expected to earn 9.5% in royalties from the sale of electricity or receive a minimum annual payment, whichever is greater. This is estimated to generate approximately $31 million in royalties during the initial 20-year period of the Agreement.
Upon Board approval and execution of the First Amendment, BP will pay the $500,000 non-refundable minimum annual royalty within 30 days. This unanticipated revenue was not included in the OC Waste & Recycling Fund 299 FY 2014-15 Adopted Budget. If necessary, budget adjustments will be completed as part of the Quarterly Budget Process.
STAFFING IMPACT:
N/A
ATTACHMENT(S):
Attachment A - First Amendment & Waiver to the Second
Amended & Restated Landfill Gas Rights & Production Facilities
Agreement
Attachment B - Redline version of the Second Amended & Restated Landfill
Gas Rights & Production Facilities Agreement
Attachment C - Consent to Encumbrance