City Council
Report
City Council Meeting: May 28, 2024
Agenda Item: 5.B
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To: Mayor and City Council
From: Rick Valte, Public Works Director, Public Works, Office of Sustainability & the Environment
Subject: Award Request For Proposal to Maas Energy For the Purchase of Renewable Natural Gas to Offset the Use of Regular Natural Gas
Recommended Action
Staff recommends that the City Council:
1. Adopt a finding of Categorical Exemption pursuant to Section 15301 of the California Environmental Quality Act (CEQA) Guidelines;
2. Award RFP #396 to Maas Energy for the procurement and supply of renewable natural gas to offset the current use of natural gas, and the management of low carbon fuel standard for the Public Works Department; and
3. Authorize the City Manager to negotiate and execute an agreement with Maas Energy at no cost to the City for five-years.
Summary
The City operates a fleet of approximately 960 vehicles ranging from transit buses and resource recovery and recycling vehicles to street sweepers and sedans. As part of the City’s goals of curbing greenhouse gas emissions, approximately 70% of the City’s vehicles run on some form of alternative fuel, including renewable natural gas (RNG), renewable liquefied natural gas (RLNG), renewable diesel, electricity, and propane. The remaining 30% of the City’s fleet continues to run on unleaded gasoline vehicles. The City converted to 100% renewable natural gas for its existing CNG vehicles in 2018 and began participating in the California Air Resources Board Low Carbon Fuel Standards Carbon Credit Program in order to offset its use of compressed natural gas. Purchasing renewable natural gas (RNG) to offset its current use of compressed natural gas supports the City’s long-term goal of reaching carbon neutrality by 2050 because it 2 of 6
reduces the greenhouse gas emissions associated with these vehicles by 60%, reduces the City’s overall fleet emissions by 6%, and generates revenues through the carbon credit program that would offset approximately 95% of the City's current cost of purchasing natural gas through the Gas Company.
Staff recommends continuing to purchase RNG by awarding an agreement with Maas Energy for the purchase of renewable natural gas and management of a Low Carbon Fuel Standard Program for a five-year period resulting in approximately $1,650,000 in revenues. The proposed bidder is providing the City approximately $330,000 per year in revenues from the sale of carbon credits. The carbon emissions reductions from the use of RNG equals approximately 11,463 metric tons of CO2 per year or 1.6% of the City’s operational emissions. This is equivalent to removing 57 heavy-duty vehicles or recycling 28,658 tons of landfill waste every year.
Discussion
Beginning in 1998, the City began converting its heavy and medium duty vehicles to compressed natural gas (CNG). The Big Blue Bus has been purchasing renewable liquefied natural gas (RLNG) to fuel its 200 plus buses, or 20% of the fleet, since 2015 under an existing agreement with Clean Energy Fuels. The BBB continues to use RLNG in 75% of its busses while it transitions to all electric busses. In 2018, the remaining City fleet of approximately 270 vehicles, or 27% of the fleet, converted to RNG. RNG is fully interchangeable with CNG. It is harvested from methane captured at landfills, wastewater treatment facilities, and dairy and pig farms. It is 60% less carbon intensive compared to CNG sourced from non-renewable sources.
Low Carbon Fuel Standards – Carbon Credits
California’s Low Carbon Fuel Standard (LCFS) mandates were enacted by executive order pursuant to the Global Warming Solutions Act, Assembly Bill 32, to reduce the carbon intensity in transportation fuels to 1990 levels by 2020. The carbon intensity of a fuel is the measure of its greenhouse gas emissions on a lifecycle basis and includes all emissions during extraction and refining, production and processing, and use in the vehicle. The LCFS Program is one of the measures adopted by the California Air 3 of 6
Resources Board (CARB) pursuant to Health and Safety Code Sections 38500-38599 to reduce greenhouse gases in California. To generate credits, fuels must have a lower carbon intensity than the target set by the CARB. Fuels with a carbon intensity higher than the standard would generate a deficit. Credit owners can sell or trade credits in the California LCFS market, thereby generating revenues. Credits generated through the LCFS Program can be banked without penalty over the course of the program. The City first started generating credits five years ago when it converted its RRR vehicles to RNG. Under the existing program, LCFS credits are generated based on the volume of fuel dispensed at a facility. In addition, the producers of renewable fuels produce Renewable identification numbers (RINs) credits used for compliance and are the “currency” of the Renewable Fuel Standard program managed by the EPA. Under this program the renewable fuel producers generate RINs, market participants trade RINs, and obligated parties obtain and then ultimately retire the RINs.
Potential revenues with Maas Energy are estimated to generate approximately $330,000 annually from the sale of carbon credits. The City previously generated approximately $180,000 annually through its agreement with Clean Energy renewables.
Estimated revenues are based on two types of credits generated by the city and the vendor from the use and production of renewable natural gas.
Renewable Natural Gas (RNG), or biomethane, has been identified as a viable alternative to traditional natural gas by both the California Air Resources Board and the Office of Sustainability. RNG has the same chemical composition as traditional natural gas but has a lower carbon intensity because it is sourced from landfills, pig farms, and dairy farms.
If awarded, the City would purchase RNG from Maas Energy, which generates RNG from methane captured at landfills and wastewater treatment facilities, purifies the methane, compresses it, and sends it to the interstate fuel pipeline system accessed by the Southern California Gas Company. Maas Energy would register with CARB on behalf of the City to manage the LCFS Program and sell the credits on the City’s behalf 4 of 6
to generate revenues based on the market value of the credits. Maas Energy would then distribute a portion of the proceeds to the City. By producing RNG, Maas Energy generates its own credits which it sells to generate revenues to operate its business.
Maas Energy is able to guarantee price parity between Compressed Natural Gas and Renewable Natural Gas by passing on to its customers a portion of the revenue it generates from the sale of its own credits. Maas Energy would administer the LCFS Program on behalf of the City including tracking, registering, submitting reports, trading the credits, generating monthly revenue, and submitting checks to the City.
Vendor Selection
Bidder Recommendation
Best Qualified Person/Firm Maas Energy Works
Evaluation Criteria Work Plans, experience, capacity/ability to perform services promptly, technical capabilities, financial/other resources, character/reputation, ability to provide future services as needed and price
Municipal Code SMMC 2.24.190
RFP’s Received
Clean Energy
Renewables
Fuels, LLC
GHI Energy,
LLC
Maas Energy
Works
Trillium, LLC US Grain
RFP Data
Posted On Posted On Advertise In
(City Charter &
SMMC)
Vendors
Downloaded
Date Publicly
Opened
01/17/2024 City’s Online
Bidding Site
Santa Monica
Daily Press
15 1/17/2024
Justification to Award
On March 4, 2024, the selection committee met to review the proposals. Proposals were evaluated based upon the following selection criteria: experience, sample materials, work plans, project team, price, creativity, overall presentation, carbon intensity of fuel, and ability to meet timelines. Based on this criteria and criteria in SMMC 2.24.190, staff recommends Maas Energy as the best qualified firm to provide 5 of 6
RNG and management of the LCFS Program based on pricing, ability to provide a share of LCFS credits, previous experience, ability to deliver RNG with the lowest greenhouse gas pathway to Santa Monica, ability to deliver RNG from landfills with the lowest Carbon Intensity, quality of product, the management team’s industry expertise, and compliance with City specifications. Maas Energy will provide the City with 17% of the incremental LCFS credit revenue.
Environmental Review
The purchase and use of RNG is categorically exempt from CEQA pursuant to Section 15301 (Class 1 - Existing Facilities) of the CEQA Guidelines. Section 15301 provides exemption for the operation, repair, maintenance, permitting, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of use beyond that existing at the time of the lead agency's determination. The purchase orders for RNG would allow for the continued operations of fleet vehicles. The purchase orders would not expand or materially change existing facilities or operations. Therefore, the purchase orders are categorically exempt pursuant to Section 15301 of the CEQA Guidelines.
Past Council Actions
Meeting Date Description
June 26, 2018 1. Award RFP #139 to Clean Energy
Renewable Fuels, LLC, a Californiabased company, for the procurement and supply of Renewable Natural Gas; and
2. Authorize the City to register and
participate in the California Air Resources
Board Low Carbon Fuel Standards
Carbon Credit Program
Financial Impacts and Budget Actions
Staff seeks to enter into an agreement with Maas Energy to manage the LCFS Program for the City. The program would be structured to provide a specified share of the LCFS credit revenue to the City and would require no direct costs or investment made by the 6 of 6
City. The estimated revenue impact to the City is approximately $330,000 annually.
Revenues from LCFS credits will be booked initially to 70500001.415540 - Alternative Fuel Tax Credit then allocated proportionally to the various funds used to purchase RNG fuel. Staff will return to Council if specific budget actions are required in the future.
Prepared By: James Velez-Conway, Senior Sustainability Analyst Approved Forwarded to Council
Attachments:
A. Living Wage Ordinance Certification - Maas Energy
B. Oaks Initiative Form Maas Energy
C. Levine Act Disclosure Form - Maas Energy