Title
Resolution Authorizing Contract No. 2013-529 with Petra Engineering to Provide Services for the White Street Landfill Gas Utilization Project
Body
Department: Field Operations
Council District: 2
Public Hearing: n/a
Advertising Date/By: n/a
Contact 1 and Phone: Dale Wyrick, Ext. 2783
Contact 2 and Phone: Chris Marriott, Ext. 7612
PURPOSE:
The purpose of this agenda item is to request that the City Council select a contractor to provide turn-key services to design, construct, and operate the White Street Landfill Gas Utilization project, and subsequently authorize the City Manager to enter into contract negotiations with the selected contractor consistent with the contract principles found in RFP # 2013-529 and direction from City Council to maintain the landfill gas relationship with Cone Denim White Oak Plant, located at 2420 Fairview Street in Greensboro.
BACKGROUND: The White Street Landfill Gas Utilization Project provides the selected contractor the rights to a portion of the landfill gas generated at the White Street Landfill, and requires the selected contractor to design, permit, build, finance, own and operate a landfill gas to energy facility to be located at the White Street Landfill. The landfill gas to energy facility will produce electricity, and send that electricity back to Duke Energy's grid. Duke Energy will purchase this electricity from the selected contractor. The selected contractor will provide a portion of that revenue to the City of Greensboro on an annual basis for the rights to the landfill gas.
The term of this project is 15 years. Upon completion of the project term, the City will take ownership of all landfill gas rights, and have the option to purchase the Developers equipment, and receive revenues from the sale of electricity to Duke Energy's grid.
The production of landfill gas at the White Street Landfill is declining and will continue to decline as municipal solid waste is no longer accepted at the landfill.
Since 1996, the Cone Denim White Oak Plant, located at 2420 Fairview Street in Greensboro, has utilized a portion of the landfill gas produced at the White Street landfill as boiler fuel in its manufacturing operations. The Cone Denim White Oak Plant currently employs about 235 full-time positions.
The Landfill Gas Utilization project was vetted through a selection committee comprised of staff from Field Operations, Water Resources, Legal, Finance, and Engineering and Inspections Departments; Solid Waste Management Commission representatives; and HDR Engineering of the Carolinas, Inc. (HDR). A Request for Qualifications (RFQ) was prepared by staff and issued in January of 2013. The City received seven Statements of Qualifications in response to the RFQ.
A Request for Proposals was issued by HDR in May 2013 to the short-listed developers with City-owned and developer-owned/financed base case scenarios. Proposers were allowed to present other beneficial use alternatives with their completed base case scenario(s). Three proposals to develop a gas to energy plant at the landfill were received in July 2013 from the following contractors:
· Petra Engineering: provided a fixed offer to the City, with average annual revenue of $155,000, or $2.33 Million over a 15 year term, utilizing about 55% of the landfill gas by constructing a 2-generator plant. Petra also provided another option of building a single generator plant that would provide average annual revenue of $55,000 and utilize about 25% of the landfill gas.
· Enerdyne Power systems: provided a fixed offer to the City, with average annual revenue of $132,000, or $1.97 Million over a 15 year term, utilizing about 85% of the landfill gas.
· Methane Power: provided a conditioned (variable) offer to the City based on Purchased Power Agreement pricing with Duke Energy; based on current rate schedule, this offer appears to be less than others proposed, and therefore, not considered further by staff.
HDR presented a summary of the proposals to the selection committee. Petra Engineering was unanimously selected by the Landfill Gas Utilization Selection Committee as the developer able to provide a project with the best benefit to the City of Greensboro. Petra Engineering proposed to finance, design, permit, and construct the project to utilize the White Street Landfill gas which it will purchase from the City of Greensboro in the form of a royalty payment over a 15-year contract period. Petra Engineering was founded in 2003 and is headquartered in Huntersville, North Carolina.
In a late 2013 Council Work Session project update, staff received concerns from Council related to M/WBE participation in this project. Council also asked staff to include Cone Denim Plant as a partner in the Landfill Gas Utilization Project, with emphasis on maintaining current gas volume. Additionally, in early 2014, Council asked staff to explore additional financing options and contract terms for the project.
Staff began working with Petra Engineering to address the different project concerns raised by Council. The first item addressed was to determine Petra's approach to M/WBE inclusion in the Landfill Gas Utilization Project. Attorney Franklin Lee was consulted to determine the approach, and then to gain approval of the analysis of the project's M/WBE utilization. The project phases for a 2 generator project are summarized below with Petra Engineering's commitment for M/WBE participation indicated where applicable:
Project Phase |
Estimated Cost |
M/WBE Opportunity |
1 |
Equity Participation |
$5,100,000 |
5% |
$225,000 |
2 |
Engineering |
$400,000 |
N/A |
Petra Self-performing |
3 |
Equipment |
$4,000,000 |
N/A |
Landfill gas generators are specialty equipment |
4 |
Construction |
$500,000 |
72% |
$360,000 |
5 |
Interconnection |
$200,000 |
N/A |
Duke Energy is an Equal Opportunity Employer |
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Petra Engineering has also committed to provide an economic development opportunity by hiring a full-time employee through work force development.
Staff then began working with Petra to explore other project financing and term options for Council's consideration. Petra provided a public-private partnership option that would allow the City an option to purchase the power plant assets after year 6 or 7 into the 15 year project term. Exercising this option would allow the City to receive all revenue from the sale of electricity to Duke Energy.
Finally, Petra and staff met with representatives from Cone Denim to discuss a project that would be a success for the City, Cone, and Petra. Due to Cone's reliance on the landfill gas as an economic incentive, the project team recognized that there would not be enough landfill gas available to support the gas needs for the Cone Denim Plant and Petra's two-generator facility throughout the 15-year project term. The team decided to move toward Petra's one-generator facility, which would allow Cone Denim to receive the current volume of landfill gas. However, this arrangement would yield about $100,000 less revenue to the City. In order to cover that revenue shortfall, Cone Denim has agreed to pay up to $100,000 per year for the landfill gas supplied by the City (see the attached payment scale). Staff recommends that this financial arrangement with Cone Denim be in place for a seven year contract period, to begin with the initiation of the Landfill Gas Utilization Project. Based on Henry Hub Spot Pricing, the value of gas that Cone Denim received in 2013 was about $800,000.
Annual Payment for Methane |
Methane, measured in dth (dekatherms) |
$100,000 |
From 225,001 to 275,000 |
$ 75,000 |
From 200,001 to 225,000 |
$ 50,000 |
From 175,001 to 200,000 |
$40,000 |
From 0 to 175,000 |
Finally, with the change in the Petra-constructed landfill gas to energy plant from a two-generator to a one-generator facility, the project costs have also changed, which affects the M/WBE utilization. The revised project numbers are as follow:
Project Phase |
Estimated Cost |
M/WBE Participation/Comments |
1 |
Equity Participation |
$3,100,000 |
5% |
$160,000 (minimum) M/WBE investment |
2 |
Engineering Design |
$300,000 |
N/A |
Petra Self-performing |
3 |
Equipment |
$2,300,000 |
N/A |
Landfill gas generators are specialty equipment |
4 |
Construction |
$350,000 |
70% |
$245,000 |
5 |
Interconnection |
$200,000 |
N/A |
Duke Energy is an Equal Opportunity Employer |
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BUDGET IMPACT:
City funds are not required for this project. The payments to the City will be placed in the Solid Waste Capital Reserve & Operating Fund. Once constructed in 2015, the City will receive average annual revenue of $155,000, from both Cone and Petra combined, with a 15-year project total of $2.3 Million. Revenue from the Landfill Gas Utilization Project will be placed in account number 551-4306-04.8600.
RECOMMENDATION / ACTION REQUESTED:
Field Operations Department requests that Council select Petra Engineering to provide services for the White Street Landfill Gas Utilization Project, and subsequently authorize the City Manager to enter into contract negotiations with Petra Engineering consistent with the contract principals found in the RFP #2013-529. The contract will also provide the Cone Denim White Oak Plant with landfill gas for a seven year contract period.