REPORT TO THE CITY COUNCIL June 8, 2017 FROM: THOMAS C. ESQUEDA, Director Department of Public Utilities THROUGH: BRIAN S. SPINDOR, PE, Assistant Director Department of Public Utilities - Water/Wastewater Management Division BY: RAY ARTHUR, Project Manager Department of Public Utilities - Wastewater Management Division SUBJECT ..Title Approve the purchase of Emission Offsets, as required by the San Joaquin Valley Air Pollution Control District, for $166,428 from Olduvai Gorge, LLC. (Citywide) ..Body RECOMMENDATION Staff recommends that the City Council approve the purchase of Emission Offsets for $166,428 from Olduvai Gorge, LLC., as required by the Air Pollution Control District (Air District), for the ongoing operation of the Fresno-Clovis Regional Wastewater Reclamation Facility (RWRF). EXECUTIVE SUMMARY The Department of Public Utilities (DPU), Wastewater Management Division, was notified by the Air District that it is required to purchase emission offsets based on the current digester gas consumption levels required at the RWRF. The RWRF contacted two consultants and, based on responses, hired Evolution Markets of San Juan Capistrano, California to represent the RWRF in this purchase. BACKGROUND The RWRF is a 24-hours-per-day, 365-days-per-year operation reclaiming wastewater for beneficial use for the City of Fresno and the surrounding areas. In the treatment of wastewater, the organic solids handling that occurs during the digestion process results in the production of biogas. This biogas has historically been used in the RWRF power generation facility (PGF) to produce heat that is required as part of the solids process and for the production of electricity to offset a portion of the electrical demand at the RWRF. Any gas not utilized through the PGF was utilized by an on-site boiler, or wasted through a waste gas flare. Failures associated with the 38-year-old gas turbines have resulted in the RWRF being unable to safely dispose of the gas being produced. The Air District assigns specific emission limits for each of twelve engines within the RWRF, including the turbines, the flare, the boiler, and others. Without the ability to run the turbines, the biogas production and subsequent disposal has exceeded RWRF capacity, resulting in the need to upsize the current waste gas flare. The securing of the larger flare requires a higher emissions limit which in turn requires the purchase of emission offsets. We will be purchasing 6.7 tons of NOx Emission Offsets at $24,000 per ton from Olduvai Gorge, LLC, which equals $160,800. Evolution Markets will earn a 3.5% commission of $5,628, for a total of $166,428. These offsets are a onetime purchase that remains with the RWRF. Prior to the gas turbine failures, and understanding the age of the equipment and potential lifespan concerns, the DPU management team proactively began planning for securing replacement and redundant equipment. Currently RWRF has obtained both a higher capacity temporary flare and a redundant temporary steam boiler. This equipment will help the facility to eliminate emission exceedances while allowing the facility to repair current equipment to be utilized as redundant units. Further, the DPU engineering group is preparing an Air District Authority to Construct application for a new larger capacity permanent flare to replace the temporary flare. In addition, a consulting firm, CDM Smith, is under contract to evaluate the RWRF power generation and gas utilization options in order for the facility to continue to optimize digester gas as a beneficial by-product of wastewater treatment. ENVIRONMENTAL FINDINGS This purchase does not meet the definition of a project under the California Environmental Quality Act. LOCAL PREFERENCE Local preference did not impact the award of this contract because only one consultant responded. FISCAL IMPACT Approving this contract has no impact on the General Fund. Appropriations for this contract are included in the FY 2017 Wastewater Management Division's Budget.