HomeMy WebLinkAbout06.a.5) Consider commitment to pursue Water Resources Development Act (WRDA) funding for Martinez Refinery Recycled Water Projecta.
Central Contra Costa Sanitary District
March 31, 2011
TO: BOARD RECYCLED WATER COMMITTEE
OZ�AD
VIA: JAMES M. KELLY, GENERAL MANAGER �•
FROM: ANN E. FARRELL, DIRECTOR OF ENGINEERINGI`J
DON E. BERGER, ASSOCIATE ENGINEER
SUBJECT: REFINERY RECYCLED WATER PROJECT — ESTIMATED COSTS
UNDER VARIOUS FUNDING SCENARIOS
Background
At the November 3, 2010, Board Recycled Water Committee meeting, the Committee
directed staff to pursue federal funding assistance through the Water Resources
Development Act (WRDA) and retain the lobbying firm of Federal Advocates to assist
with these efforts. Since that time, CCCSD staff prepared a briefing document on the
project for federal legislators and has conducted meetings with legislative staff to brief
them on the project, both locally and most recently in Washington DC during the CASA
Conference on March 16, 2011.
Our federal legislators have expressed an interest in potentially authorizing the project
for federal funding in the next WRDA authorization bill, which could happen later this
year. As part of supporting our request for a WRDA authorization, we have been asked
to develop some different funding scenarios that would form a basis for determining who
will benefit and who will pay. As we move forward in this process, staff feels it is
important for the Board to be clear on what the potential costs to CCCSD could be
depending on how much funding is ultimately obtained.
There are a number of potential institutional arrangements for delivering the water to the
refineries. Since CCCSD is not the retail water provider to the refineries, and we do not
own the recycled water pipelines into the refineries, we have assumed CCCSD would
wholesale the recycled water to CCWD and have CCWD use their own industrial
recycled water pipelines to convey the water into each refinery. This would avoid the
need to construct expensive new pipelines and conveyance facilities (or the expense of
leasing CCWD's pipelines) and would maintain the current relationship of CCWD as the
refinery retail water supplier. This arrangement could be favorable to both CCCSD and
CCWD if we can secure sufficient outside funding assistance to pay for most or all of
the capital costs of the new facilities.
Overview of Federal Authorization and Appropriation Processes
Obtaining funding from Congress through WRDA is a two step process: authorization
followed by appropriation. Congress must first pass a bill to authorize a project to
provide the legal authority to later appropriate funds for that project. A separate
appropriation bill must later be passed to actually provide the funds. Therefore, the
refinery project cannot be funded (receive an appropriation) until it first becomes an
authorized federal project.
WRDA authorizations are done about every five years (the last one was 2007), and are
typically in the form of an omnibus bill that includes authorizations for hundreds of
different types of projects including port improvements, flood control, and water related
projects. It is expected that the next WRDA authorization bill will be initiated in 2011, so
our timing is good.
Once an authorization is in place, an appropriation can then be pursued. Again, an
appropriation is contingent on having an authorization. Thus, our immediate area of
attention in the congressional process is to secure a WRDA authorization. once that
happens, we can then pursue federal appropriations and look for additional sources of
funds (such as state grants, or a low interest State Revolving Fund loan) to pay for the
remaining balance.
Obtaining a federal authorization is not a commitment to build a project under any
particular schedule, and federal legislators would still need to appropriate funds to build
the project through separate legislation. Authorizations do not generally have an
expiration date and are typically valid indefinitely to allow time for federal funds to be
appropriated and for the local entity to secure the remaining focal share of funds needed
to complete the project.
The WRDA program can potentially fund up to 75% of project costs. However, the
amount either initially or ultimately authorized by Congress could be less, such as 50%
or 25 %. once a WRDA authorization is obtained, CCCSD will need to assess how
much additional money will be needed to make the project cost - effective, and work to
obtain any additional required funds from other sources. At that time, CCCSD will need
to consider how much of our own funds we are able to contribute and make a decision
whether to continue with the project or defer the project until sufficient non - federal
funding sources become available.
WRDA projects are administered by the US Army Corps of Engineers that designs and
bids the project, and manages the construction. The non federal share of the project
funding (including any CCCSD financial contributions) is paid directly to the US Army
Corps of Engineers.
Estimated Costs of Recycled Water Under Various Funding Scenarios
The total estimated cost for the full -scale refinery project (22,500 AFY) is $100M. This
includes $54M to construct new filtration, ammonia removal and disinfection facilities
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(HDR Engineering, 2009), and an allowance of $15M to construct new pipelines and
storage tanks (if CCWD facilities are not available) and for modifications to the refinery
boiler water treatment systems to accommodate higher dissolved salts in recycled water
(no modifications are required to use recycled water directly in cooling towers as long as
the water is filtered and ammonia is removed).
Table 1, attached, summarizes the estimated costs of recycled water for a full -scale
project with various levels of funding assistance. At 75% WRDA funding, the cost of
recycled water becomes competitive with the cost of raw water for the refineries even if
CCWD sunk costs are included (sunk costs represent CCWD's estimated costs for
repayment of debt service for CCWD facilities that would be impacted as a result of
providing recycled water to the refineries instead of Delta water). If CCWD sunk�costs
are not included, the cost of recycled water is less than the current price the refineries
pay for untreated Delta water and there is net positive revenue generated by the project.
If less than 75% WRDA funding is obtained and CCWD sunk costs are included, then
the anticipated revenue from recycled water sales will not completely cover the recycled
water cost, in which case, a significant financial contribution could be required by
CCCSD and/or CCWD. As the percentage of outside funding assistance decreases, a
larger financial contribution would be required to complete the project.
Staff Recommendation
As discussed above, there are several scenarios under which there would be no net
cost to complete the project and in fact a positive revenue stream. These scenarios
would have no real impact on District rate payers. There are also potential funding
scenarios that could require significant annual contributions from CCCSD rate payers in
order to make them financially viable, especially if CCWD sunk costs are included.
These scenarios would have a financial impact on our rate payers and would not have
an associated direct benefit for them, other than the societal benefit which accrues from
maximizing the use of recycled water.
In summary, if we can obtain 75% WRDA funding, then there should be no significant
cost to CCCSD, but anything less than that would require a contribution from CCCSD
and/or CCWD. The necessary contribution would be directly related to the amount of
sunk costs included by CCWD.
Staff is seeking policy direction from the Recycled Water Committee regarding how
much financial contribution the Board may consider committing to the Martinez Refinery
project as we move forward to seek State and Federal support for this project. Staff's
suggestion would be to promote only those scenarios and institutional arrangements
that allow for recovery of all District costs, as demonstrated by the positive revenue
stream alternatives contained in the attached table.
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