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HomeMy WebLinkAbout0110.091January 10, 1991 THE HONORABLE CITY COUNCIL Palo ~lto, California /' Landfill Gas Contract No. CO008896 -Amendn'"lent #1 Members of the Council: F~port in Brief • 2 This report recommends that Council approve and authorize the Mayor to eKecute the attached Amendment No. 1 to Contract No. CO008896 with the Palo Aito Landfill Gas Corporation (PALGC). Discussion In November 1989, council approved a contract 'With PALGC which allows the firm to use the. city's landfill gas for generating electricity which is then sold to Pacific Gas and Electric company (CMR:525:9). The conditional use permit for the electrical generation facility allows up to a Maximum of 5 percent of supplementary natural gas to be blenaed with the landfill gas in the production of electricity. The attached amendment to the contract increases -tha.t maximum allowance to 25 percent. PALGC has asked for the increase as their equipment is now operating at only 50 percent capacity ",hile utilizing all available landfill 9as~ staff sees no adverse gas allowance, with amendment. effect to increasing the alternate natural the following conditions stated in the • The supplementary natural gas usage 'Will not reduce or replace the primar}r use of all available landfill gas. • The supplementary na~ural gas usage exceeding air emission standards, or agency requirements. 'Wi 11 not violating result in regulatory • The City conditional use permit will be amended to allow for the supplementary natura! gas usage. • The City will he held harmless for any losses that may result from the use of the supplementary natural gas. -1- ,-..;:-' o The most likely source of supplementary natural gas is from the city's Utilities Department4 The utilities Energy Planning Division reviewed the amendl!'.~nt and has determined that it ... ill have minill'lal impa.ct on the City's long and ShOl-t term supply and service agreement 'With Pacific Gas " Electric. The environmental impacts associated 'With this project ,"'ere addressed in the previo'.Jsly adopted Mitigated Negative Declaration prepared for the project (BS-ErA-on. Recommendation Staff recommends that Council approve and authorize the Mayor to execute the attached An',~nd:nent NO.1 to Contract No, COOOSS96 'With Palo Alto Landfill Gas Corporation. -2- .,' ,- .""'\ '::..;) AJlBIIDJIEII'l NO. 1 fO CONT RAe? NO. COO 088" 8IITWBBlI TIIB CU'Y or PALO ALro lUll) 1'IIl! PALO ALro LANDFILL GAS CORPCRATIOIi THIS AMENDMENT to contract No. COOOBS9tS is made and entEred into this _____ day of , 1990, by and between the C!TY OF PALO ALTO, a municipal corporation of california, hereinart~r referred to as the -Landfill OWner,· and the PALO ALTO LANDFILL GAS CORPOFATION, a California Corporation,. hereinafter referred to as ·PALGC-; lLJ_£_I '1 l!. L S. WHEREAS, The Revised and Restated Landfill Gas Lease and Operating Agreement for Conversion Systems (contract No~ CO008896) between the Landfill OWner and PALC~ was entered into on Novem­ ber 20, 1989; and WH~REAS, th~ parties desire to amend said lease to allow PALGC to use natural gas as a supplementary fuel for the cogenera­ tion plant a.t the Landfill, in an amount r.ot to exceed the equivalent of twenty five percent (25\) of the total BTU demand capacity .0£ the conversion system: and WHEREAS, the parties desire to clarify that PALGC's use of the natur.al gas will supplement, and will not reduce or replace, the Land~ill qas available to operate the cogeneration plant; NOW~ THEREFORE, in consideration of their mutual covenants, the parties hereto agree as follows: SECfrON 1. Subparagraph 1.06 of Contract No .. COQOaS96 is hereby amended to read as tollows: L 06 -Landfill Gas" shall mean the gas qenerat- ed from the anaerobic digestion by methanogenic bacteria of refuse and. other solid .. astes depos i ted in the LandLill. The compo~ition of Landfill Gas varies, but usually contains methane in the range ot 40\ to 60\ by volU!lle, carbon dimdde in the rar.ge of 40' to 60\ by VOlume, and small percentages of hydroqen sultide~ ammonia and other qaseous elements. Landfill Gas unde~ this Lease shall be no other gas than that produced at the Landtill. SECTION 2. Subparagraph 1.15 is hereby added to contract No. 00008896 to read as follo~s: 1.15 -Supplementary FUel-shall mean no other fuel but natural gas purchased by PALGC. SECTION J. Subparagraph 2.12 is hereby ackl!ed to Contract No~ C0008896 to read as follows: 1 .-.' ------.-~~. o 2.12 PALGC may use supplementary Fuel to operate the Conversion System and convert such Supplemen­ tary Fuel into electric po~er, but only subject to the following conditions: 2.12.01 The use of fuel other than Landfill Gas to operate: the Convers ion system sha 11 be limited to Supplementary Fuel as defined in this Lease; :2 .12.02 The use of ~upplementary Fuel shall be soleli to supplement, and shall not reduce or replace, the primary use of all Landfill Gas avail­ able for operation of the Conversion System; 2.12. 03 PArr~ shall measure the amount of Supplementary Fuel used to operate the Conversion System on a monthly basis. In every two (2) con­ secutive month period throughout the term of this Lease, the amount of supplementary Fuel used may not exceed the equivalent of twenty five percent (25%) of the total BTU demand capacity of the conversion System during such period. 2.12~04 In accordance with its duties under Paragraph 5 of this L~ase, PALGC shall ensure that any use 'Of Supplementary Fuel as set forth above will not cause L~e Landfill or the Gas collection Syste~, the Conversion System or the Flare Station to exceed air emission standards se't by State regulations~ nor violate any other current appli­ cable regulatory permit approvals or conditions, contract conditions, laws, ordinances~ rules or regulations. 2.12.05 PALGC shall i!'!clude the amount of Supplementary Fuel con~umed under this Lease and the calculation of the amount of electricity gener­ ated by the Landfill Gas and the Supplementary Fuel in monthly reports to the Landfill OWner. 2.12.06 All use of Supplementary FUel shall comply with PALC~'S Conditional Use Per-mit regulat­ ing the operation of the conversion System and the Site. 2.12.07 In accordance with its duties under Paragraph E of this teaser PALGC shall ensure that all use of Supplementary Fuel under this Lease compljes with all local, state and federal environ­ mental laws and regulati~ns applicable to the operation of the Collection system, the Flare station, the Conversion system and the Site. PALGC shall hold the Landfill OWner harmless for all costs or losses that may result~ including any 2 attorneys· fees incurred or damages awarded, from any actual or claimed noncompliance with such laws or regulations as a result of L~e use of SupplEmen­ tary Fu .. l. SSC1IOH ia pages 46 thr~~9h ~8 of Exhibit 3 to Contract No. C0008896 are hereby amended to read as provi~ed in Exhibit A to this Am.~nt, which is attached her~to and incorporated in full by this reference. SECTION--2. Except as herein modified, all other provisions ot and exhlbits tc Contract No~ CC008896 shall remain in full force and effect. IN' WITNESS WHEREOF, the parties hereto have executed this AE,endment the day and year first above written. ATTEST: CITY OF PALO ALTO ----------city Cl"rk Mayor AP FRO~"E D AS TO FORI!: PALO ALTO LANDFILL GAS CORPORATION Assistant City Attorney APPRO'''ED: ------Its: '\ ,,; co ::;.',.\.. ~_ -... \- Assistant City Manaq"r Director of Finance Risk Manager APPROVED AS TO CONTE~: Director of Public Works Attachment: EXHIBIT -A-: -Exhibit 3--site Lease payments- 3 • '. eXHIBIT A TV AMENDMENT NO.1 TO C0008896 EXHIBIT J SITE LEASE PAYMENTS 1. For any period durinq the term of the lease tha~t the Net Generating capacity, as defined belov# is 1,000 kilowatts or less, PALGC win pay the Landfill Owner five .. nd one-half percent (5.5t) of tn&t portion of tbe Gross Revenues received with respect to the conversion system Which is determined at an average rate for the billing period of up to and including-eleven cents ($0.11] per kilowatt hour. As to that portion of the Gross Revenues which is detenlined at an averaqe rate for the billing period exceeding eleven cents. ($0.111 per kilowatt hour, PALGC will pay the Landfill Owner thirty-three and one-third percent (lJ 1/3t]. In no event, however, shall the total pay~ble by PALGC exceed twenty-nine percent (29') of the Gross Revenues. Such lease payment vi11 be adjusted for the use ot Supplementary FUel otbe.r than Landfill Gas as set forth below. By way of example, if PALGC is generating 1,000 Jclluwatta or electric power, the Gross Revenue from which are deter.lned to be purchased at an averaqe rate of thirteen cents ($0.13) per kilowatt hour 6 then PALGC would pay five and one-halt percent (5.5\J on that portion of the Gross Revenues determined at eleven cent. ($O.11) per kilowatt hour and wQUld pay a t.~irty-three and one-third percent «33 1/3') on the remaining portion of the Gross Revenues deter.ined at two cents ($0.02) per kilowatt hour. It is assumed in the example that the amount paid to the Landfill Owner would not exceed 29\ of Cross Revenues. 2.. For any per 100 dur inq the term of the Lease that the Net: Generating' capacity is between 1,001 kilowatts and up to and including 1,725 kilowatts" PALGC will pay the Landfill OWner 11 percent (11') of that portion ot the Gross Revenues received with respect to the Conversion System which is determined at an average rate tor the billing period of up to and including eleven cents ($0.11) per kilowatt hour. As to that portic.n of the Gross Revenues Which is deterained at an average"rate for the billing period 8Xceedinq eleven cents ($0.11) per kilowatt ho~r, PALGC will pay the Landfill owner Thirty-three and one-third percent (33 1/3t) • .In no event, however, shall the total payable by PALGC exceed twenty-nine percent {29\) of the Gross Revenues. Such lease payment will be adjusted ror the use ot Supplementary Fuels other than Landfill Gas as set forth below. 3. For any period during the fira't five (5) years followinq the start-up of the Conversion System that the Net Generating capacity is in excess of 1,725 kilowatt s" PALGC wi 11 pay the Landfill OWner sixteen and one-half percent (16 1/2t) of that portion of the Gross Revenues received from the then installed · ; ~. o EXHIBIT A TO AMEND~..ENT no. 1 TO c0008896 PAGE 2 o Conversion 'system which is cietenlined at an average rate for the­ billinq period of up to and including eleven cents ($0.11) per kilowatt hour~ As to that portion of the Gross Revenues which Is determined at an average rate for the billing period exceedinq eleven cents ($0.11) per kilowatt hour, PALGC will pay the Landfill owner thirty-three and one-third percent (33 1/3'). In no event, however., shall the total payable by PAI.GC exceed twer.ty-nine percent (29\) of the Gross Revenues. such lease payment will be adjusted for the use of Supplementary ~~el other than Landfill Gas as set forth belovo 4. For any period durinq the sixth ~6th) and each succeeding year followinq the start-up or the Conversion system in which the Net Generating capacity is in excess of 1$125 kilowatts$ PALGC will pay thC':= Landfill OWner twenty-two percent (22\:) of that portion of the Gross Revenues receive~ with respect to the Conversion System which is deterl%line.d at an average rate for the billinq period of up to and including eleven cents ($0.11) per kilowatt hour~ As to that portion of the Gross Revenues which is determined at an average rate tor the billinq period exceeding eleven cents ($O~11J per kilowatt hour, PALGC vill pay the Landfill owner thirty-three and one-third percent (33 1/3'). In no event, however, shall the total payable by PALGC exceed tlilenty-nine percent (29') of the Gross Revenues. Such lease payment will be adjusted for the use of Supplementary FUel other than Landfill Gas as set forth below. s. "Gross Revenues· shall mean the total revenues received~ including, but not liaited to, enerqy payments, capacity payments and any capacity bonus payments to PALGC from any utility or other customer that is purchasing the electric power$ produced by the Conversion System or Systems less (lJ any wheeling charges paid by PALGC if any utility, puc~hasing such pover does not have a franchise for the area in which the Land~lll is located,. (ii) any capacity penalties paid by PALGC, and (iii) all sales, energy. license, severance, production$ or ad valorem taxes, if applicable. Provided, however, that no capital stock tax, privilege tax, or franchise tax$ and no income or similar tax based upon profits as such, shall be deducted from Gress Revenues~ 6~ -Net Generating Capacity· shall sean the maxi:ar.lll net kilowatts of electricity de.livered to the purchasing electric utility by the installed qenerating capacity of the Conversion System (after deducting parasitic loads$ line losses l transformer losses, compr-essor losses associated vith the Conversion System and the Utility InterfacQ) after being adjusted for th~ use of Supplementary Fuel other than Landfill Gas as provided in paragraph 7 beloW'~ The determination of the maxi.am net kilowatts of electricity delivered to the purchasing utility shall be as reported by PG&E as the 1!'Iaximum capacity for each ]l!.onth on 'Which it is paying a capacity payment. • EXHIBIT A TO AMENDMENT NO. 1 TO COOO8896 PAGE 3 7. It durinq any period of opera.tion of -4:be Conversion System or Systems a Supplementary Fuel other than Landfill Gas is used to operate the conversion System or Systems, the Gross Revenues upor. which the sita lease payment payable by PALGC to the Landfill owner is based with respect to such period shall be reduced in the sa~e proportion as the quantity (measured in BTU's ot the Supplementary Fuel or other comparable measure agreed to by both parties) of such supplementary F".J.el used dur-inq the period bears to the quantity of Landfill Gas used in operatinq the Conversion System or Systems~ By way ot example, assume that in year ten of the Lease that the Net Cenerating capacity exceeds 1,725 kilowat.ts, the payment rate for all increments of the Conversion System is twenty-two percent {22") and, 20 million X'IoI'hl"S of electricity Is sold for $3 .. 400,OOO~ Assume further that in order to generate the power, 20 billion BTU's of natural qas was used to s~pplement 180 billion BTU's of Landfill Gas. Site Lease Gross PaYment to the Landfill OWner in Year Ten: Revenue_ $3,400,000 $0.17 Kwh -20MKwh • Kwh 'Payme"t= (.22) ($0.11)+.3333($0.17-$0.11) = 4.42 -.26.;:6' $0.1.7 17 (.26) ($3,400,000) 200billionBWs-20billiOnBTU's 200billionBTU's .261$3. '00, 000) (.90),$795,600 Assumes 20 billion BTU's supplied by Supplementary Fuel other than Land!ill Gas. Total fuel consumption is ~oo billion BTU's.