DATE: December 10, 2019
SUBJECT:
Title
PRESENTATION AND RESOLUTION AUTHORIZING AGREEMENT WITH BLUE SOURCE, LLC FOR LOW CARBON FUEL STANDARD (LCFS) CONSULTANT SERVICES FOR A TERM OF UP TO FIVE YEARS
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EXECUTIVE SUMMARY:
The State of California’s Low Carbon Fuel Standard expanded its optional participant definition in 2019 to include some operations by the District and its tenants. Specifically, using grid power instead of diesel fuel to energize a cruise ship when berthed can create credits that can be sold in the LCFS market. The creation, registration, optimization and sale of the credits requires the expertise of a consultant with experience in the market for environmental attributes. Contracting with a consultant will provide the District with a stream of revenue that can be used to offset the capital cost of future electrification projects.
RECOMMENDATION:
Recommendation
Approve resolution authorizing agreement with Blue Source, LLC for low carbon fuel standard consultant services for a term up to five years.
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FISCAL IMPACT:
The contract will provide revenue for the District for the years 2020 - 2024. The LCFS credits are a commodity whose price varies over time depending on supply, demand and the rules created by the Air Resources Board. The District’s estimate of future value given today’s prices and Port resources is $400,000 per annum. The service fee is deducted by the service provider hence there are no payments required by the District.
Compass Strategic Goals:
This agenda item supports the following Strategic Goal(s).
• A Port that the public understands and trusts.
• A thriving and modern maritime seaport.
• A vibrant waterfront destination where residents and visitors converge.
• A Port with a healthy and sustainable bay and its environment.
• A financially sustainable Port that drives job creation and regional economic vitality.
DISCUSSION:
California established the Low Carbon Fuel Standard (LCFS) in 2012 and placed it under the direction of the Air Resources Board (CARB).
The LCFS is a cap-and-trade-like program where the producers of fossil fuels must either increase the use of plant-based carbon (e.g. ethanol and palm oil) or buy credits to meet the requirement.
Credits are created when vehicles use electricity instead of fossil fuels. The credit represents the difference between the carbon intensity of the electricity versus the carbon intensity of the fossil fuel. Algorithms developed by CARB determine the number of credits created based on the alternative energy and equipment used.
The District can earn credits for shore power at B Street Terminal, and for using other electric cargo handling equipment. The annual benefit to the Port could be over $400,000 at current prices and visits, and it may grow or decline depending on energy usage.
Other opportunities for the District and tenants include shore power at National City and Tenth Avenue. Most of the equipment involved in freight hauling, once electrified, can be eligible under current rules. Further, when a fleet of on-road trucks is electrified and metered then they too can participate.
The revenue from the program will be applied to growing transportation electrification. Capital expenditures for the Port could include shore power additions, charging stations and new vehicles.
CARB included shore power as an eligible resource starting January 1, 2019, and the program expires in 2030. Shore power from previous years is not eligible. The Port registered as an opt-in entity in June 2019 and is monetizing eligible credits for Q2-Q4, 2019 under a short-term contract with a consultant.
District staff through the RFP process identified and interviewed three qualified firms. Blue Source provided the best balance of experience -- 18-year history in the market for environmental attributes including carbon offsets and renewable energy certificates (RECs) - and price with the fee being one-half of the current charge (percentage).
General Counsel’s Comments:
The General Counsel’s Office reviewed this agenda and approved the proposed agreement as presented to it as to form and legality.
Environmental Review:
The proposed Board action, including without limitation, an agreement with Blue Source, LLC for LCFS consultant services, does not constitute an “approval” or a “project” under the definitions set forth in California Environmental Quality Act (CEQA) Guidelines Sections 15352 and 15378 because no direct or indirect changes to the physical environment would occur. CEQA requires that the District adequately assess the environmental impacts of projects and reasonably foreseeable activities that may result from projects prior to the approval of the same. Any project developed as a result of Board’s action that requires the District or the Board’s approval resulting in a physical change to the environment will be analyzed in accordance with CEQA prior to such approval. CEQA review may result in the District, in its sole and absolute discretion, requiring implementation of mitigation measures, adopting an alternative, including without limitation, a “no project alternative” or adopting a Statement of Overrising Consideration, if required. The proposed Board action in no way limits the exercise of this discretion. Therefore, no further CEQA review is required.
In addition, this Board item complies with Section 87 of the Port Act, which allows for the establishment, improvement, and conduct of a harbor, and for the construction, reconstruction, repair, maintenance, and operation of wharves, docks, piers, slips, quays, and all other works, buildings, facilities, utilities, structures, and appliances incidental, necessary, or convenient, for the promotion and accommodation of commerce and navigation. The Port Act was enacted by the California Legislature and is consistent with the Public Trust Doctrine. Consequently, the proposed Board action is consistent with the Public Trust Doctrine.
Finally, this Board item does not allow for “development,” as defined in Section 30106 of the California Coastal Act, or “new development,” pursuant to Section 1.a. of the District’s Coastal Development Permit (CDP) Regulations because it will not result in, without limitation, a physical change, change in use or increase the intensity of uses. Therefore, issuance of a Coastal Development Permit or exclusion is not required. However, the District’s projects require processing under the District’s CDP Regulations. If a project is formulated as a result of Board’s direction, the Board will consider approval of the project and any improvements associated after the appropriate documentation under District’s CDP Regulations has been completed and authorized by the Board, if necessary. The Board’s direction in no way limits the exercise of the District’s discretion under the District’s CDP Regulations.
Equal Opportunity Program:
Due to limited known sub opportunities, no SBE goal was established for this agreement.
PREPARED BY:
Thomas MacLean, PhD
Program Director, Energy
Attachment(s):
Attachment A: Agreement with Blue Source, LLC