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Home My WebLink About03.d. Authorize the General Manager to Execute a Five Year Landfill Gas Sales Agreement with Bulldog Gas & Power, LLC to Supply Landfill Gas from October 1, 2023 to September 30, 2028 with the option to extend annually.Page 1 of 9 Item 3.d. DCENTRALSAN MEETING DATE: SEPTEMBER 11, 2023 BOARD OF DIRECTORS POSITION PAPER DRAFT SUBJECT: REVIEW DRAFT POSITION PAPER TO AUTHORIZE THE GENERAL MANAGER TO EXECUTE A FIVE-YEAR LANDFILL GAS SALES AGREEMENT WITH BULLDOG GAS & POWER, LLC., TO SUPPLY LANDFILL GAS FOR THE PERIOD COMMENCING OCTOBER 1, 2023 AND ENDING ON SEPTEMBER 30, 2028 WITH THE OPTION TO EXTEND ANNUALLY SUBMITTED BY: INITIATING DEPARTMENT: CLINTSHIMA, SENIOR ENGINEER OPERATIONS-RELIABILITYENGINEERING REVIEWED BY: NEIL MEYER, PLANT MAINTENANCE DIVISION MANAGER GREG NORBY, DEPUTY GENERAL MANAGER - OPERATIONS ROGER S. BAILEY, GENERAL MANAGER ISSUE Board of Directors authorization is requested for the General Manager to execute a Landfill Gas Sales Agreement with Bulldog Gas & Power, LLC (Bulldog), with the option to extend annually. BACKGROUND Landfill gas (LFG) has been used at the treatment plant since 1983. Although LFG has a lower energy density and does not burn as cleanly as natural gas (NG), it does provide a cost savings to Central San and ensures the treatment plant's annual anthropogenic greenhouse gas (GHG) emissions remain below the Cap -and -Trade (CAT) program's inclusion threshold of 25,000 metric tons of carbon dioxide (CO2). Central San uses approximately 430,000 dekatherms (Dth) of NG per year, primarily for producing electrical power in the cogeneration system. In addition, Central San uses approximately 85,000 Dth of LFG per year in the sludge incinerators and auxiliary steam boilers. The existing Landfill Gas Sales Agreement expires on September 30, 2023, but contains a provision to extend the contract term annually. This new agreement allows Central San to purchase LFG at Central San's burner tip cost of NG. There is a floor price of $3.00 per Dth and a ceiling price of $9.00 per Dth. Mr. Nicholas J. Farros, President of Bulldog has requested an increase in the rate for LFG due to higher production costs and inflation, as well as system upgrades over the past few years. September 11, 2023 EOPS Regular Committee Meeting Agenda Packet - Page 29 of 39 Page 2 of 9 NG prices have risen dramatically over the last few years but are expected to stabilize in the short-term. Bulldog believes they can continue to supply LFG reliably to Central San for the next ten years. Central San staff negotiated with Bulldog for several months on a new agreement. The agreement contains the following provisions: 1. The proposed term of the agreement will be from October 1, 2023 through September 30, 2028. The new price structure will be effective starting on October 1, 2023. As with the existing agreement, there is a provision to extend the contract in one-year increments. 2. The LFG cost will match Central San's cost of NG with a minimum of $3.00 per Dth and a maximum of $9.00 per Dth. Central San must also pull 400 thousand standard cubic feet per day averaged per month; and if 550 thousand standard cubic feet per day is averaged for the month, then a five percent discount will be applied. 3. Central San will maintain processed gas measuring devices for flow and gas quality. 4. All other terms and conditions of the existing agreement shall remain the same including optional termination. Although Bulldog has requested an increase in the rate for LFG, it is still economically beneficial to continue this relationship with Bulldog. CO2 emissions from LFG combustion are considered biogenic GHG emissions, which help maintain Central San's anthropogenic GHG emissions below the CAT Program's inclusion threshold of 25,000 metric tons of CO2. Avoiding the CAT Program can have a substantial savings per year in allowance costs for Central San. ALTERNATIVES/CONSIDERATIONS Alternatives to executing the agreement would be to discontinue use of LFG and purchase additional NG, which would require Central San to enter the CAT Program and purchase allowance for anthropogenic GHG emissions; import additional electrical power from Pacific Gas and Electric Corporation (PG&E) and incur more electrical import costs to avoid entering into the CAT Program; accelerate renewable energy capital projects such as solar or wind; or continue negotiations. FINANCIAL IMPACTS The new Landfill Gas Sales Agreement will provide energy cost savings when compared to substituting its use with NG. Central San is currently purchasing NG at an average price of approximately $8.88 per Dth, which is the price for the NG from Shell Energy North America and for transmission for PG&E. Central San purchases approximately 17 percent of its NG at daily spot market rates, which can be volatile. Assuming the price of NG remains at the current spot market pricing for the next year, the calculated cost of LFG, based on the terms of the new agreement will be approximately $750,000. Although this cost aligns historically with what Central San has paid for LFG, it still represents an increase from the cost under the previous contract due to the reduced discount and higher ceiling. However, the proposed agreement will help stabilize Central San's energy budget and Central San will continue to benefit from reduced anthropogenic GHG emissions and avoidance of the compliance obligation under the CAT Program. COMMITTEE RECOMMENDATION The item was discussed at the Engineering & Operations Committee meeting on September 11, 2023 and recommended September 11, 2023 EOPS Regular Committee Meeting Agenda Packet - Page 30 of 39 Page 3 of 9 RECOMMENDED BOARD ACTION Authorize the General Manager to execute a five-year Landfill Gas Sales Agreement with Bulldog Gas & Power, LLC, to supply landfill gas for the period commencing October 1, 2023 and ending on September 30, 2028 with the option to extend the agreement annually. Strategic Plan re -In GOAL TWO: Environmental Stewardship Strategy 4 - Identify and advance sustainability initiatives, including reducing energy usage and emissions GOAL FOUR: Governance and Fiscal Responsibility Strategy 3 - Maintain financial stability and sustainability ATTACHMENTS: 1. Presentation September 11, 2023 EOPS Regular Committee Meeting Agenda Packet - Page 31 of 39 Page 4 of 9 September 11, 2023 CENTRAL aim SAWS LANDFILL GAS USAGE E&O Committee Meeting Clint Shima, P.E. Senior Engineer, Plant Maintenance Division September 11, 2023 EOPS Regular Committee Meeting Agenda Packet - Page 32 of 39 1 Page 5 of 9 Central San's Landfill Gas Usage Began using landfill gas (LFG) in 1983 Supplied by Bulldog Gas & Power, LLC Primarily used in multiple hearth furnaces and at times for auxiliary boilers LFG supply has been stable and Bulldog Gas & Power, LLC, expects it to reliably supply LFG for the next ten years Plant Gas Usage tJATl1RAL GAS\ Cogeneration:950 MMBTU/day NG Metric Million British Thermal Unit (MMBTU) Natural Gas (NG) Auxiliary Boilers: 225 MMBTU/day NG Furnace:250 MMBTU/day LFG September 11, 2023 EOPS Regular Committee Meeting Agenda Packet - Page 33 of 39 2 Page 6 of 9 Greenhouse Gas LFG usage ensures that the Treatment Plant's anthropogenic greenhouse gas emissions remain below the Cap -and -Trade Program's inclusion threshold of 25,000 metric tons of carbon dioxide Strategic Plan Goal 2 — Environmental Stewardship Strategy 4 / Key Success Measure: Maximize LFG usage in daily operations and by capital improvements Renewable Energy (June 2023) Anthropogenic Greenhouse Gas Emissions e Ren -able Energy Lznd6ll Gas MT CO2c Profile 7,443 MMB,u 25000 6% 20000 Recovered Wane Heap Is000 4,866 MMB,u o% 11,901 4i 0 V r l0000 I solzr II] MMB,u eq. 0,24% s.00 MCE Renewable, 816 MMB,u eq. vo% 0 Metric Tons (MT) Carbon Dioxide Equivalent (CO2e) Equivalent (eq.) Marin Clean Energy (MCE) ' September 11, 2023 EOPS Regular Committee Meeting Agenda Packet - Page 34 of 39 3 Page 7 of 9 Proposed Landfill Gas Agreement New Term October 1, 2023 to September 30, 2028 Pricing Previous Agreement — 5 percent discount New Agreement Pricing Structure NG burner tip price 5 percent discount if at least 550 thousand cubic feet per day averaged monthly Minimum of $3.00 and Maximum of $9.00 per dekatherms for LG Central San maintains onsite gas measuring devices Other terms and conditions remain the same as existing agreement Price of Landfill Gas Landfill Gas Cost per Dekatherm (2022-2023) $12.00 $11.00 $10.00 $9.00 $8.00 $7.00 $6.00 • Savings ❑ New Deal MENEM September 11, 2023 EOPS Regular Committee Meeting Agenda Packet - Page 35 of 39 4 Page 8 of 9 Annual Landfill Gas Usage Landfill Gas Use in Dekatherms 50000 45000 ,.., 40000 35000 s Y 30000 w 25000 v j 20000 L9 15000 10000 5000` L 0 2018 2019 2020 2021 2022 Year ■ 1 st Half ■ 2nd half 2023 Options if Landfill Gas Supply is Unavailable Enter into California's Cap -and -Trade Program Use NG for furnace operation, reduce cogeneration production by paying for additional electricity import and using additional NG for steam production Use NG for furnace operation, reduce cogeneration production and utilize new electric blowers September 11, 2023 EOPS Regular Committee Meeting Agenda Packet - Page 36 of 39 5 Page 9 of 9 September 11, 2023 EOPS Regular Committee Meeting Agenda Packet - Page 37 of 39