HomeMy WebLinkAboutStaff Report 5.E 09/17/2018DATE: September 17, 2018
TO: Honorable Mayor and Members of the City Council through City Manager
FROM: Darr St SCE — Director, Public Works & Utilities
Leah G. Wa ker, P.E. — Environmental Services Manager
SUBJECT: Resolution Authorizing the City Manager to Execute a Professional Services
Agreement with Blue Source LLC for Fuel Credit Services for the Biomass -to -
Biofuels Project
RECOMMENDATION
It is recommended that the City Council adopt the attached Resolution Authorizing the City
Manager to Execute a Professional Services Agreement with Blue Source LLC for Fuel Credit
Services for the Biomass -to -Biofuels Project.
BACKGROUND
The City of Petaluma has been awarded a $3 million grant from the California Energy
Commission through the Alternative and Renewable Fuel and Vehicle Technology Program to
use methane gas produced at the Ellis Creek Water Recycling Facility (ECWRF) and turn it into
Compressed Natural Gas (CNG) to fuel the City's refuse vehicles. The Biomass-to-Biofuel
project (B2B) is a local, sustainable, project to beneficially reuse wastes generated in the City.
The B2B project includes three primary components: a second anaerobic digester at the ECWRF,
a High Strength Waste receiving station, and gas conditioning equipment to clean and compress
the biogas to meet vehicle manufacturers' requirements and standards.
The CNG will be used to fuel new trucks in the refuse collection fleet. Over the next several
years, 19 trucks will be replaced with CNG -fueled vehicles, replacing 170,000 gallons of diesel
fuel and reducing the production of greenhouse gas emissions. The project will include a CNG
fueling station located at the ECWRF site with mobile fueling provided to the refuse hauler's
site. The City will own the fueling equipment and use the fuel for the refuse fleet and other City
vehicles.
The City engaged Kennedy/Jenks Consultants for the design and engineering of the biogas
system, and Carollo Engineers for the design of the High Strength Waste facilities. The
construction contract was awarded in February 2018 and the completion of the project is
scheduled for December 2018.
DISCUSSION
One of the advantages of the B213 program is the ability to generate federal and state
environmental credits for alternative fuels. The City will be able to monetize the fuel credits and
use these funds to offset the operations and maintenance costs of the 13213 program.
The Federal Renewable Fuel Standard (RFS) was created under the Energy Policy Act of 2005
and was expanded under the Energy Independence and Security Act (EISA) of 2007, requiring
36 billion gallons of fuel to be blended by 2022. RFS2, the revised federal regulation, allows
biogas that is used as transportation fuel to be eligible to generate credits, known as Renewable
Identification Numbers (RIMS). BINS can be purchased by obligated parties (refiners, fuel
importers) to meet compliance with EISA. Only biogas that is produced through the conversion
of organic matter, and used as renewable fuel, can generate RIMS. Types of gas that qualify are
landfill gas, agriculture digester gas and municipal wastewater treatment -facility digester gas.
The gas that will be produced at the ECWRF qualifies for the Advanced Biofuel standard (D5),
and a portion may qualify for the higher priced Cellulosic Biofuel standard (D3).
The California Low Carbon Fuel Standard (LCFS) was established in 2007 through a Governor's
Executive Order. It uses a market-based cap and trade approach to lower the greenhouse gas
emissions from petroleum-based transportation fuels. The City is eligible to participate in the
LCFS credit market as well. The price for LCFS credits is based upon the Carbon Intensity (CI)
of the fuel generated. The Cl for co -digested materials such as High Strength Waste is some of
the lowest, thus generating the highest fuel credit prices. The City may choose to use an
established pathway to determine Cl, or to conduct an analysis to determine a specific Cl for the
ECWRF.
In order to take advantage of these programs, the City requires the assistance of a consultant with
detailed knowledge in the federal and state alternative fuel credit programs. The required
services include training, registration for fuel credit programs, marketing and monetization of
fuel credits, monitoring and quality assurance, and general consulting assistance. The consultant
will assist the City to determine whether it can qualify for any D3 RINS credits, and to model Cl
for the LCFS program.
In April, the City issued a Request for Proposals (RFP) for fuel credit consulting services for the
B2B project. The RFP was sent to ten fines and five films expressed interest. Three responses
were received, including one that is a partnership of two of the firms. All three firms submitting
proposals are located outside of California. A comprehensive evaluation of the proposals was
completed based on the criteria of the RFP, and phone interviews were conducted with each
firm. Each firm submitted a fixed price proposal for training, registration in the RFS2 and LCFS
programs, engineering review, and quality assurance.
Finns were allowed to propose different approaches to marketing and monetization of the fuel
credits. One firm proposed a fixed price for assisting the City to solicit and broker purchase
contracts, though the firm would not directly sell the credits. Two firms proposed to use a
percent of revenues to pay for brokering the fuel credits. Because of the differing approaches, a
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detailed financial analysis was conducted based on the estimated fuel credits the City might
receive. The financial analysis showed that the fee proposals submitted by the firms were similar.
After the initial evaluation, two of the proposals were selected for further review. The two firms
proposed different approaches to providing services. The selected consultant, Blue Source, LLC,
handles all aspects of the fuel credit process from training to registration to quality assurance to
sales. Blue Source subcontracts for required third -party engineering review and Quality
Assurance Plan (QAP) services. Blue Source will broker the fuel credits in exchange for a
portion (7.5 percent) of the revenues generated for LCFS credits and D5 RINS. This approach
was determined to be the best fit for the City because the quantities of the credits that the City is
eligible to sell may not be large enough to justify brokering by itself, nor does the City have the
staff resources or market contacts to perform this work. The second firm proposed to assist the
City with brokering and executing fuel credit contracts, but the firm does not handle sales
directly. While this option would allow the City to retain all the fuel credit revenues, it requires
additional staff resources for brokering and managing fuel credit contracts.
Based on the amount of fuel credit revenues projected by the City (using the estimated amount of
CNG produced and sold and recent prices for state and federal credits), the costs for the two
proposals were about the same. Blue Source's fee is based in part on percentage of revenues. If
the revenues are higher than projections, the City may forego some revenues compared to the
second proposal. Conversely, because the second consultant's costs are fixed, if revenues are
lower than estimated, the City's net revenues could be lower than if the City contracted with
Blue Source. Blue Source's proposal has less impact on City staff yet does not significantly
reduce the City's net revenues. If Blue Source and the City are able to obtain approval for D3
RIMS for some portion of the City's credits (which are priced approximately ten times higher
than D5 RINS), Blue Source would receive 12.5 percent of the D3 RINS.
Blue Source has successfully completed RFS2 registrations for the biogas produced at the
wastewater facilities for the cities of San Mateo and Grand Junction, Colorado. They have also
completed LCFS registration for the City of San Mateo. Blue Source is currently marketing fuel
credits to obligated parties on behalf of San Mateo and Grand Junction. The work for San Mateo
is paid through a revenue sharing agreement where Blue Source retains 25 percent of the net
revenues and handles all aspects of the fuel credit registration, quality assurance, and sales.
After the initial agreement and the City is registered in the RFS2 and LCFS programs, ongoing
workload is required for annual audits and QAP services, an engineering review every three
years, and brokering for new fuel credit contracts. The City can choose at that time to renew with
Blue Source for these services in a revenue sharing agreement. Alternatively, the City can
contract with another consultant for QAP services and engineering and broker its own contracts
for fuel credit sales. Experience in the first two years will assist the City to determine the
appropriate long-term approach.
It is recommended that City Council approve the subject resolution to award a PSA to Blue
Source LLC for the described seivices for a total authorized contract amount for Phase 1 services
of $120,000 for registration, third -party engineering, QAP services and required audits. Upon
amendment of the PSA for Phase 2 services an additional $47,000 will be authorized for
marketing, and monetization of fuel credits. Compensation for registration, engineering and
quality assurance will be based on time and materials as estimated in the attached PSA.
Marketing and monetization would be compensated at 7.5 percent of LCFS credit revenues, 7.5
percent of D5 RINS revenues, and 12.5 percent of D3 RINS revenues. The total authorized
contract amount may be amended based on revenues.
The proposed action meets Council Goals: "Establish new revenue sources" and, "Promote
health development, sustainability, and economic development."
FINANCIAL IMPACTS
The cost of fuel credit services was accounted for in the financial analysis of the B2B project.
The total 2017/18 CIP budget for the CNG Fueling Station, account C66501518, and the HSW
Receiving Facility, account C66401728, is $13,434,000. The proposed action is currently
budgeted and therefore will not cause any unanticipated fiscal impacts. No General Funds will be
expended on this action.
ATTACHMENTS
1. Resolution
2. Professional Services Agreement
L!
Attachment I
RESOLUTION AUTHORIZING THE CITY MANAGER TO EXECUTE A
PROFESSIONAL SERVICES AGREEMENT WITH BLUE SOURCE LLC FOR FUEL
CREDIT SERVICES FOR THE BIOMASS -TO -BIOFUELS PROJECT
WHEREAS, the City of Petaluma General Plan 2025 recognizes the importance of
reducing reliance on non-renewable energy sources, and encourages the use and development of
renewable or nontraditional sources of energy; and
WHEREAS, the City of Petaluma General Plan 2025 recognizes the importance of
reducing greenhouse gas emissions; and
WHEREAS, the City is implementing the Biomass-to-Biofuel (13213) project to use
methane gas produced at the Ellis Creek Water Recycling Facility (ECWRF) and turn it into
Compressed Natural Gas (CNG) to fuel the City's refuse vehicles; and
WHEREAS, the 13213 Project will modify the Ellis Creek Water Recycling Facility to
accept high strength waste from local food and beverage industries and will increase the
availability of biomethane; and
WHEREAS, the installation of gas scrubbing and compression equipment and a CNG
fueling facility will provide CNG fuel that can be used for City refuse and other vehicles; and
WHEREAS, converting City vehicles to CNG fuel will reduce greenhouse gas emissions
and reduce reliance on petroleum-based fuels; and
WHEREAS, by converting biogas to transportation fuel, the City will produce low
carbon transportation fuels and will be eligible to register with the California Low Carbon Fuel
Standard (LCFS) program and generate environmental credits that have a monetary value; and
WHEREAS, by producing low carbon transportation fuels, the City will be eligible to
register with the federal Renewable Fuel Standard (RFS2) program and produce credits
(Renewable Identification Numbers, or RINS), under the D5, Advanced Biofuel standard, and
D3, Cellulosic Biofuel standard; and
WHEREAS, the environmental credits generated through the LCFS and RFS2 programs
have a monetary value that can be sold to obligated parties, and the revenues can be used to
offset operations and maintenance costs of the 13213 project; and
WHEREAS, the City requires the assistance of a consultant with detailed knowledge in
the federal and state alternative fuel credit programs in order to capitalize on LCFS and RFS2
credits; and
WHEREAS, the City conducted a competitive process to select a consultant to provide
fuel credit services, including registration, quality assurance, training, and marketing and
monetization of fuel credits; and
WHEREAS, Blue Source LLC of Salt Lake City, Utah, submitted a comprehensive and
complete proposal, considered to be fair and reasonable, and has the knowledge and expertise to
perform the requisite services; and
WHEREAS, the proposal submitted by Blue Source LLC maximizes fuel credit revenues
while minimizing City resources for administration of the fuel credit program.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of
Petaluma hereby authorizes the City Manager to Execute a Professional Services Agreement to
Blue Source LLC for a total authorized contract amount for Phase 1 services of $120,000 for
registration, third -party engineering, QAP services and required audits. Upon amendment of the
PSA for Phase 2 services an additional $47,000 will be authorized for marketing, and
monetization of fuel credits. Registration, third -party engineering, quality assurance services and
required audits are to be billed on a time and material basis as estimated in the attached PSA. In
addition, for marketing and monetization of fuel credits, Blue Source will be compensated 7.5
percent of LCFS credit revenues, 7.5 percent of D5 RINS revenues, and 12.5 percent of D3
RINS revenues.
G
Attachment 2
PROFESSIONAL SERVICES AGREEMENT
Fuel Credit Services for the Biomass -to -Biofuels Project
(Title of Project)
FY 18/19
Fund # 6600
Cost Center 66700
Object Code 54140 Project # C66401728
Amount $120,000
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THIS PROFESSIONAL SERVICES AGREEMENT ("Agreement") is entered into and effective
as of , 20 ("Effective Date"), by and between the City of Petaluma, a
(city use only)
municipal corporation and a charter city ("City") and Blue Source LLC, a Limited Liability
Company ("Consultant") (collectively, the "Parties").
WHEREAS, the Parties enter into this Agreement for the purpose of Consultant providing
professional services to City under the terms and conditions set forth herein.
THEREFORE, in consideration of the mutual covenants contained in this Agreement, the Parties
agree as follows:
Definitions. For purposes of this Agreement, including Exhibit A, the following
definitions will apply:
A. "Blue Source's Share" means Blue Source's Share of Net RIN Proceeds and/or
Blue Source's Share of Net LCFS Proceeds, as applicable.
B. "Blue Source's Share of Net LCFS Proceeds" means seven and a half percent
(7.5%) of Net LCFS Proceeds.
C. "Blue Source's Share of Net RIN Proceeds" means seven and a half percent
(7.5%) of Net D5 RIN Proceeds and twelve and a half percent (12.5°/x) of Net D3
RIN Proceeds.
D. "CARB" means the California Air Resources Board.
E. "City of Petaluma's Share of Net LCFS Proceeds" means ninety-two and a half
percent (92.5%) of the Net LCFS Proceeds.
F. "City of Petaluma's Share of Net RIN Proceeds" means ninety-two and one half
percent (92.5%) of Net D5 RIN Proceeds and eighty-seven and one half percent
(87.5%) of Net D3 RIN Proceeds.
G. "Document," "Documenting," and "Documentation" means, as appropriate in the
context in which such terms are used, either (i) the preparation of all documents
pertaining to generation, Verification and Registration of RINs associated with
the Project with the RFS2 and CARB and marketing of the RIN and LCFS
credits, including those required to obtain EPA's and CARB's approval of
PROFESSIONAL SERVICES AGREEMENT
(60932 1) Oct 2017 7
Registration and to comply with reporting, and recordkeeping requirements
applicable to such RIN and LCFS credits or (ii) all documents prepared for such
purposes.
H. "EPA" means the U.S. Environmental Protection Agency or any successor having
responsibility at law for the implementation and administration of the RFS
Program.
I. "Expenses" means all costs payable by Blue Source to any third party related to
(1) Documenting or Verifying RINILCFSs.
J. "Net Proceeds" means the Proceeds less Expenses, expressed as follows:
environmental credit volume sold * price/credit — Expenses = Net Proceeds.
K. "Parties" means Blue Source and the City collectively and their respective
successors and assigns, and "Party" means either of them and its successors and
assigns.
L. "Proceeds" shall be the total amount received by Blue Source from a third .party
as payment for Blue Source's sale of Renewable Identification Number(s) and
LCFS credits arising from the Project.
M. "Project" or "Projects" means City's operation of the wastewater treatment biogas
to biomethane activities located at the Ellis Creek waste water treatment plant in
Petaluma, California.
N. "RFP" means renewable fuel producer as that term is defined within the RFS2.
O. "RFS2" means the Renewable Fuel Standard 2 program being implemented by
EPA in accordance with and set forth in 40 CFR 80 -Subpart M and all related
requirements.
P. "Renewable Identification Numbers", "RIN" or "RINs" mean renewable fuel
trading credits used to demonstrate compliance with the RFS2 requirements.
RINs include but are not limited to D -Codes 3, 4, 5, 6 and 7; Cellulosic, Biomass -
Based Diesel, Advanced, Renewable Biofuel and Cellulosic Diesel, respectively,
any RIN generated by biogas, including landfill gas, gas from waste digesters and
gas from waste treatment plants used to produce renewable electricity or
conditioning and injection into the natural gas grid for use as CNG/LNG.
Q. "Verification," "Verify," or "Verifying" means the engineering review conducted
in accordance with Section 80.1450 of the RFS RIN.
R. "Verifier" means a third -party engineer that meets the prescribed requirements
under the RFS2 to review the Project as part of the Registration process.
S. "Low Carbon Fuel Standard" or "LCFS" means the California Air Resources
Board (CARB) program to encourage the use of cleaner low -carbon fuels in
California, encourage the production of those fuels, and therefore, reduce
greenhouse gas emissions.
PROFESSIONAL SERVICES AGREEMENT
(609321) Oct 2017 8
2. Services. Consultant shall provide the set -vices as described in and in accordance with
the schedule set forth in Exhibit "A" attached hereto and incorporated herein
("Services").
Compensation, Business Tax Certificate.
A. For the full performance of the Services as described herein, City shall
compensate Consultant in accordance with the rates specified in Exhibit A.
B. Consultant shall submit detailed monthly invoices reflecting all set -vices
performed during the preceding month, and including a revised schedule for
performance and additional documentation requested by City, as applicable.
C. Consultant shall be compensated for services in addition to those described in
Exhibit A, only if Consultant and City execute a written amendment to this
Agreement describing the additional services to be performed and the
compensation to be paid for such services. In no case shall the total compensation
under this Agreement exceed $120,000 without prior written authorization of the
City Manager. Further, no compensation for a section or work program
component attached with a specific budget shall be exceeded without prior written
authorization of the City Manager. Upon execution, the not -to -exceed amount
and Consultant's authorization to proceed with the Services are limited to the
Phase 1 Services and Phase i Budget amounts specified in Exhibit A. City
anticipates amending this Agreement in accordance with Section 25 as
performance of the Phase 1 services near completion to authorize Consultant to
commence performance of the Phase 2 Services and to commence payment for
Consultant's performance of the Phase 2 Services in accordance with Exhibit A.
D. Upon amendment of this Agreement in accordance with Section 25 to authorize
commencement of performance of Phase 2 Services and Phase 2 payments to
Consultant, Consultant shall remit to City eighty seven and one half percent
(87.5°/x) of the Net Proceeds received from Consultant's sale of each D3 RIN and
ninety two and one half percent (92.5%) of each D5 RIN and LCFS credit within
thirty (30) days of Consultant's receipt of Proceeds from Consultant's sale of each
RIN and LCFS Credit, provided that Consultant has incurred all related Expenses
and is able to calculate Net Proceeds by such date. Consultant shall remit to City
the City's Share of Net Proceeds no later than sixty (60) days from receipt of any
Proceeds. As payment for performance of the Phase II Services, Consultant shall
retain twelve and a half percent (12.5%) of the Net Proceeds received from
Consultant's sale of each D3 RIN and seven and a half percent (7.5%) of the Net
Proceeds of each D5 RIN and the LCFS Credit.
E. Notwithstanding any provision herein, Consultant shall not be paid any
compensation until such time as Consultant has on file with the City Finance
Department a current W-9 form available from the IRS website (www.irs.gov)
and has obtained a currently valid Petaluma business tax certificate.
F. City's obligation to pay compensation to Consultant as provided herein is
contingent upon Consultant's performance of the Services pursuant to the terms
and conditions of this Agreement and any amendments thereto.
PROFESSIONAL SERVICES AGREEMENT
(609321) Oct 2017 9
4. Term. The term of this Agreement commences on the Effective Date, and terminates on
June 30, 2019, unless sooner terminated in accordance with Section 4. Upon termination,
any and all of City's documents or materials provided to Consultant and any and all of
the documents or materials prepared for City or relating to the performance of the
Services, shall be delivered to the City as soon as possible, but not later than fourteen
(14) days after termination of the Agreement.
Termination. City may terminate this Agreement without cause upon ten (10) days'
written notice. City may immediately terminate or suspend this Agreement for cause.
Cause for immediate termination or suspension shall include, but not be limited to, any
breach of this Agreement by Consultant or Consultant's bankruptcy or insolvency. Upon
receipt of notice of termination or suspension for cause, Consultant shall immediately
stop all work in progress under this Agreement. In the event of early termination of this
Agreement by City, Consultant shall be entitled to payment for all Services performed to
the date of termination to the extent such Services were performed to the satisfaction of
City in accordance with the terms and conditions of this Agreement. If City terminates
this Agreement for cause, Consultant shall be liable to City for any excess cost City
incurs for completion of the Services.
6. Consultant's Representation; Independent Contractor. Consultant represents that
Consultant possesses distinct professional skills in performing the Services. City has
relied upon said representation as a material inducement to enter into this Agreement.
Consultant shall, therefore, provide properly skilled professional and technical personnel
to perform all Services under this Agreement. It is expressly understood that Consultant
and its agents and employees, shall act in an independent capacity and as an independent
contractor and not as officers, employees or agents of City. This Agreement shall not be
construed as an agreement for employment.
7. Facilities and Equipment. Consultant shall, at its sole cost and expense, furnish all
facilities and equipment that may be required for furnishing Services pursuant to this
Agreement. City shall furnish to Consultant no facilities or equipment, unless the City
otherwise agrees in writing to provide the same.
8. Licenses, Permits, Etc. Consultant shall, at Consultant's sole cost and expense, keep in
effect at all times during the term of this Agreement any licenses, permits or other such
approvals which are legally required for performing the Services.
9. Time. Consultant shall devote such time to the performance of the Services as may be
reasonably necessary for satisfactory performance of Consultant's obligations pursuant to
this Agreement.
10. Inspection. Consultant shall provide the City every reasonable opportunity to ascertain
that the Services are being performed in accordance with the requirements and intentions
of this Agreement. All work done and materials furnished, if any, shall be subject to
inspection and approval by the City. The inspection of such work shall not relieve
Consultant of any of its obligations pursuant to this Agreement.
11, Progress Reports. Upon the City's request, Consultant shall provide, in a form
acceptable to City, written progress reports of all oral and written observations, opinions,
4
PROFESSIONAL SERVICES AGREEMENT
(609321) Oct 2017 1 O
recommendations, analyses, progress and conclusions related to Consultant's
performance of the Services.
12. Confidentiality. In the course of Consultant's employment, Consultant may have access
to trade secrets and confidential information, disclosure of which is protected or limited
by law. Consultant shall not directly or indirectly disclose or use any such confidential
information, except as required for the performance of the Services.
13. Conflict of Interest. Consultant represents that it presently has no interest, and
covenants that it shall not acquire any interest, direct or indirect, financial or otherwise,
which would conflict in any manner or degree with the performance of the Services
hereunder. Consultant further covenants that, in the performance of this Agreement, it
shall not employ any subcontractor or person having such a conflict of interest.
Consultant represents that no one who has or will have any financial interest under the
Agreement is an officer or employee of City. If such conflict of interest arises during this
Agreement or any extension, Consultant will immediately advise City and City may, at
its sole discretion, immediately terminate this Agreement. Certain Consultants are
subject to the requirements, including the disclosure and reporting requirements, of the
City's Conflict of Interest Code adopted pursuant to the Political Reform Act. Such
Consultants subject to the City's Conflict of Interest Code include those whose work may
involve: making government decisions regarding approval or adoption of rates, rules, or
regulations, action on permits or other applications, authorization to enter into or modify
contracts, or approval of plans, designs, reports, or studies. Consultant agrees to comply
fully with all such requirements to the extent they apply to Consultant's performance of
the Services.
14. Consultant No Agent. Except as City may specify in writing, Consultant shall have no
authority, express or implied, to act on behalf of City in any capacity whatsoever as an
agent. Consultant shall have no authority, express or implied, pursuant to this Agreement
to bind City to any obligation whatsoever.
15. Standard of Performance. Consultant shall perform all the Services in a manner
consistent with the standards of Consultant's profession. All instruments of service of
whatsoever nature, which Consultant delivers to City pursuant to this Agreement, shall be
prepared in a substantial, workmanlike manner and conform to the standards of
Consultant's profession. All such instruments of service shall become the sole and
exclusive property of City upon delivery of the same.
16. Assi2nment/Transfer. No assignment or transfer in whole or in part of this Agreement
shall be made without the prior written consent of City.
17. Subcontractors. Consultant shall directly perform all Services, and shall not subcontract
any portion of performance of the Services without the prior written consent of City.
Any such subcontractors shall be required to comply, to the full extent applicable, with
the terms and conditions of this Agreement, including but not limited to, procuring and
maintaining insurance coverage as required herein and which shall name City as an
additional insured. For purposes of this section and this Agreement, the following
subcontracts pursuant to this Agreement are hereby approved, subject to all applicable
terms of this Agreement:
PROFESSIONAL SERVICES AGREEMENT
(60932 1) Oct 2017 1 1
Subcontractor Task
First Environment
Eco Engineers
Christianson & Associates
3rd Party Engineering Report
3rd Party QAP
CPA Annual Attest Engagement
The timing of the approved subcontract work and budget estimates for such work are
specified in the budget in Exhibit A of this Agreement.
18. Compliance With All Laws. Consultant shall fully comply with all applicable local,
state and federal rules, laws, regulations and ordinances pertaining to the performance of
the Services required hereunder, including but not limited to, the California Building
Standards Code as in effect in the City, the Americans with Disabilities Act, and any laws
and regulations related to any copyright, patent, trademark or other intellectual property
right involved in performance of the Services. Consultant's failure to comply with any
law(s) or regulation(s) applicable to the performance of the Services hereunder shall
constitute a material breach of this Agreement. To the extent that any other government
agency or entity provides compensation for any Services, Consultant shall comply with
all rules and regulations applicable to such fiscal assistance.
19. Living Wage Ordinance. Without limiting the foregoing Section 17, Consultant shall
comply fully with all applicable requirements of Petaluma Municipal Code, Chapter 8.36,
Living Wage (the "Living Wage Ordinance"), as the same may be amended from time to
time. Upon the City's request Consultant shall promptly provide to the City documents
and information verifying Consultant's compliance with the requirements of the Living
Wage Ordinance, and shall within fifteen (15) calendar days of the Effective Date of this
Agreement, notify each of its affected employees as to the amount of wages and time off
that are required to be provided to them pursuant to the Living Wage Ordinance. The
Acknowledgement and Certification Pursuant to City of Petaluma Living Wage
Ordinance, attached to this Agreement as Exhibit C shall be a part of this Agreement for
all purposes, and Consultants that are subject to Living Wage Ordinance requirements, as
determined by the City, must provide a properly completed Exhibit C in accordance with
the requirements of the Living Wage Ordinance. Consultant's noncompliance with the
applicable requirements of the Living Wage Ordinance shall constitute cause for City's
termination of this Agreement pursuant to Section 4 hereof.
20. Disci-imination. During the performance of this Agreement, Consultant shall not
discriminate against any employee or applicant for employment because of race, religion,
creed, color, national origin, ancestry, gender, sexual orientation, age or physical or
mental disability in violation of any applicable law.
21. Notice. Except as otherwise specified in this Agreement, all notices to be sent pursuant
to this Agreement shall be made in writing, and sent to the Parties at their respective
addresses specified below or to such other address as a Party may designate by written
notice delivered to the other Party in accordance with this Section. All such notices shall
be sent by:
(i) personal delivery, in which case notice is effective upon delivery;
PROFESSIONAL SERVICES AGREEMENT
(609321) Oct 2017 12
(ii) certified or registered mail, return receipt requested, in which case notice shall be
deemed delivered on receipt if delivery is confirmed by a return receipt;
(iii) nationally recognized overnight courier, with charges prepaid or charged to the
sender's account, in which case notice is effective on delivery if delivery is
confirmed by the delivery service; or
(iv) facsimile transmission, in which case notice shall be deemed delivered upon
transmittal, provided that (a) a duplicate copy of the notice is promptly delivered
by first-class or certified mail or by overnight delivery, or (b) a transmission
report is generated reflecting the accurate transmission thereof. Any notice given
by facsimile shall be considered to have been received on the next business day if
it is received after 5:00 p.m. recipient's time or on a nonbusiness day.
City: City Cleric
City of Petaluma
Post Office Box 61
Petaluma, California 94953
Phone: (707) 778-4360
Fax: (707) 778-4554
Email: cityclerk@ci.petaluma.ca.us
And:
Dan St. John, F.ASCE.
Director. Public Works & Utilities
202 N. McDowell Blvd
Petaluma, CA 94954
Phone: 707-778-4546
Fax: 707-206-6034
Email: DSTJOHN a,ci.petaluma.ca.us
Consultant: Will Overly
Blue Source LLC
2825 Cottonwood Corporation Parkway
Salt Lake City, UT 84121
Phone: 801-438-1533
Fax:
Email: woverly@bluesource.com
22. Ownership of Documents. All original papers, documents or computer material on disk
or microfilm, and copies thereof, produced as a result of this Agreement, shall be the
property of City and may not be used by Consultant without the written consent of City.
Copies of such documents or papers shall not be disclosed to others without the written
consent of the City Manager or his or her designated representative.
23. Indemnification. To the maximum extent permitted by law, Consultant shall, at its own
expense, indemnify, defend with counsel acceptable to the City, (which acceptance will
not be unreasonably withheld), and hold harmless City and its officers, officials,
employees, agents and volunteers ("Indemnitees") from and against any and all liability,
loss, damage, claims, suits, actions, arbitration proceedings, administrative proceedings,
PROFESSIONAL SERVICES AGREEMENT
(609321) Oct 2017 13
regulatory proceedings, civil penalties and fines, expenses and costs (including, without
limitation, claims expenses, attorney's fees and costs and fees of litigation) (collectively,
"Liability") of every nature, whether actual, alleged or threatened, arising out of or in
connection with the Services or Consultant's failure to comply with any of the terms of
this Agreement.
The Consultant's obligation to indemnify, defend and hold harmless under this provision
shall not be excused because of the Consultant's inability to evaluate Liability, or because
the Consultant evaluates Liability and determines that the Consultant is not or may not be
liable. The Consultant must respond within 30 calendar days to any tender for defense
and indemnity by the City, unless the time for responding has been extended by an
authorized representative of the City in writing. If the Consultant fails to accept tender of
defense and indemnity within 30 calendar days, in addition to any other remedies
authorized by law, so much of the money due or that may become due the Consultant
under this Agreement as shall reasonably be considered necessary by the City, may be
retained by the City until disposition has been made of the matter subject to tender, or
until the Consultant accepts the tender, whichever occurs first. In the event that the City
must file responsive documents in a matter tendered to Consultant prior to Consultant's
acceptance of tender, Consultant agrees to fully reimburse all costs, including but not
limited to attorney's fees. and costs and fees of litigation, incurred by the City in filing
such responsive documents.
The Consultant waives any and all rights to express or implied indemnity against the
Indemnitees concerning any Liability of the Consultant arising out of or in connection
with the Services or Consultant's failure to comply with any of the terms of this
Agreement. The defense and indemnification obligations of this Agreement shall no way
be limited by, the insurance obligations that apply to this Agreement pursuant to Section
23.
Notwithstanding the foregoing, to the extent this Agreement is a "construction contract"
as defined by California Civil Code Section 2783, as may be amended from time to time,
Consultant's duty to indemnify under this provision shall not apply when to do so would
be prohibited by California Civil Code Section 2782, as may be amended from time to
time.
Notwithstanding the foregoing, to the extent that the Services include design professional
services subject to California Civil Code Section 2782.8, as may be amended from time
to time, Consultant's duty to indemnify shall only be to the maximum extent permitted by
California Civil Code Section 2782.8.
24. Insurance. Consultant shall comply with the "Insurance Requirements for Consultants"
in Exhibit B-2, attached hereto and incorporated herein by reference. _
City reserves the right to review any and all of the required insurance policies and/or
endorsements, but has no obligation to do so. City's failure to demand evidence of full
compliance with the insurance requirements set forth in this Agreement or City's failure
to identify any insurance deficiency shall not relieve Contractor from, nor be construed or
deemed a waiver of, its obligation to maintain the required insurance at all times during
the performance of this Agreement.
PROFESSIONAL SERVICES AGREEMENT
(60932 1) Oct 2017 14
25. Amendment. This Agreement may be amended only by a written instrument executed
by both Parties.
26. Litigation. If litigation ensues which pertains to the subject matter of Consultant's
services hereunder, Consultant, upon request from City, agrees to testify therein at a
reasonable and customary fee.
27. Construction. This Agreement is the product of negotiation and compromise on the part
of both Parties and that the Parties agree that, notwithstanding Civil Code Section 1654,
any uncertainty in the Agreement shall not be construed against the drafter of the
Agreement.
28. Governing Law; Venue. This Agreement shall be enforced and interpreted under the
laws of the State of California and the City of Petaluma. Any action arising from or
brought in connection with this Agreement shall be venued in a court of competent
jurisdiction in the County of Sonoma, State of California.
29. Non -Waiver. The City's failure to enforce any provision of this Agreement or the
waiver thereof in a particular instance shall not be construed as a general waiver of any
part of such provision. The provision shall remain in full force and effect.
30. Severability. If any term or portion of this Agreement is held to be invalid, illegal, or
otherwise unenforceable by a court of competent jurisdiction, the remaining provisions of
this Agreement shall continue in full force and effect.
31. No Third Party Beneficiaries. The Parties do not intend to create, and nothing in this
Agreement shall be construed to create any benefit or right in any third party.
32. Mediation. The Parties agree to make a good faith attempt to resolve any dispute arising
out of this Agreement through mediation prior to commencing litigation. The Parties
shall mutually agree upon the mediator and shall divide the costs of mediation equally.
33. Consultant's Books and Records.
A. Consultant shall maintain any and all ledgers, books of accounts, invoices,
vouchers, canceled checks, and other records or documents evidencing or relating
to charges for services, or expenditures and disbursements charged to the City for
a minimum period of three (3) years or for any longer period required by law,
from the date of final payment to Consultant pursuant to this Agreement.
B. Consultant shall maintain all documents and records which demonstrate
performance under this Agreement for a minimum period of three (3) years or for
any longer period required by law, from the date of termination or completion of
this Agreement.
C. Any records or documents required to be maintained pursuant to this Agreement
shall be made available for inspection or audit, at any time during regular business
hours, upon written request by the City Manager, City Attorney, City Finance
Director, or a designated representative of these officers. Copies of such
documents shall be provided to the City for inspection at Petaluma City Hall
PROFESSIONAL SERVICES AGREEMENT
(609321) Oct 2017 15
when it is practical to do so. Otherwise, unless an alternative is mutually agreed
upon, the records shall be available at Consultant's address indicated for receipt
of notices in this Agreement.
D, Where City has reason to believe that such records or documents may be lost or
discarded due to dissolution, disbandment or termination of Consultant's
business, City may, by written request by any of the above-named officers,
require that custody of the records be given to the City and that the records and
documents be maintained in Petaluma City Hall. Access to such records and
documents shall be granted to any party authorized by Consultant, Consultant's
representatives, or Consultant's successor in interest.
34. Headings. The headings used in this Agreement are for convenience only and are not
intended to affect the interpretation or construction of any provisions herein.
35. Survival All obligations arising prior to the termination or expiration of this Agreement
and all provisions of this Agreement allocating liability between City and Consultant
shall survive the termination or expiration of this Agreement.
36. Entire Agreement. This Agreement, including the exhibits attached hereto and
incorporated herein, constitutes the entire agreement between the Parties with respect to
the Services, and supersedes all prior agreements or understandings, oral or written,
between the Parties in this regard.
IN WITNESS WHEREOF, the parties hereto have executed this document the day,. month and
year first above written.
CITY OF PETALUMA
tv Manager
`_TTEST:
Clerk
APPROVED AS TO FORM:
Attornev
Revised Blue Source PSA 8-13-18.doc
Title
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Address
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City State zip
Taxpayer I.D. Number
Petaluma Business Tax Certificate Number
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PROFESSIONAL SERVICES AGREEMENT
(609321) Oct 2017 16
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Exhibit A
1. ACRYOMYNS
GARB: California Air Resources Board
EMTS: EPA Moderated Tracking System
EPA: Environmental Protection Agency
LCFS: Low Carbon Fuel Standard
RFS: Renewable Fuel Standard
RNG: Renewable Natural Gas
2. TECHNICAL APPROACH/SCOPE OF WORK
Blue Source intends to undertake and coordinate all activities required to sell the biogas to generate, document, register,
market, and monetize the RINs and LCFS Credits achieved by the Project and to sell surplus biogas to an end
transportation user as needed. Our proposed approach is delineated into two project development activities that will be
conducted concurrently: RIN and LCFS registration and development; RIN and LCFS marketing and monetization. To
capture the highest possible value for the environmental credits generated by the Project and to ensure that these benefits
are marketed effectively, Blue Source will use the approach outlined below. Using this approach, Blue Source has and
continues to successfully create and market biogas and environmental attributes even under the most challenging project
and market circumstances.
A. ANTICIPATED TIMING
The total timeline from submitting a completed registration packet to first RIN and LCFS credit generation for the project
is anticipated to take three to five months after substantial completion of the conditioning equipment. This timeline is
highly dependent on EPA's review, which can take more than 90 days to complete all the necessary documentation.
Blue Source, once awarded the PSA, will schedule the 3rd party engineering site visit as close to the project's substantial
completion as possible. Will Overly will have dedicated time to ensure that the project registration documentation can be
submitted to EPA as soon as possible. If the City can provide the list of data/information found attached, then as soon as
the 3rd party engineering firm completes their review, a finalized packet will be submitted to EPA for approval with a RIN
generation protocol document. EPA has stated that they have at least 60 days for review, thus it is important to get a
packet submitted as soon as possible to maximize RIN generation. The Gantt Chart below details the schedule to complete
tasks. [Note: Updated Gantt chart to be submitted upon execution of agreement to reflect current City project status.]
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B. ADDITIONAL DATA REQUESTS
Blue Source will provide an initial list of 13 document requests for the RFS engineering review report. These documents
range from regulatory permits for the wastewater plant, bio -digester, and gas processing facility to biogas production
records for baseline/peak capacity for the last 5 years. For the LCFS registration, the following will be required from the
City: invoices and receipts for two years, energy consumption, permits and operations licenses, process flow diagrams,
RNG production reports. Blue Source will assist the City in filling out or develop the necessary documents required for
the Life Cycle Analysis report, CA Greet Model, the RFS2 Third -Party Engineering Report, and Fuel Producer Legal
Attestation form.
C. BLUE SOURCE'S APPROACH AND SCOPE OF WORK
Phase 1
1.1 TRAINING
Blue Source plans to provide educational training to City staff, officials, and other necessaty stakeholders so that the City
can understand what is required of them and ensure that they can successfully register for the RFS2 and LCFS programs.
Blue Source has significant experience walking municipalities and their team members through environmental attribute
registrations and feels confident in its abilities to provide a foundational understanding of both markets to the City. City
and Blue Source to develop agenda for two-hour training session for City staff.
1.2 RIN AND LCFS REGISTRATION AND DEVELOPMENT
A. REGISTRATIONAND VERIFICATION REQUIREMENTS FOR GENERATION OF RINAND LCFS CREDITS
The US EPA RFS2 and CARB LCFS program have very specific registration requirements for any producer of renewable
fuel that must be adhered to, and --if not done properly --there is a strong possibility that the producer may be delayed in its
ability to generate RIN and LCFS Credits.
Blue Source will work with Petaluma to ensure that the appropriate and necessary information is compiled and provided
to EPA and CARB in a timely fashion. This includes the simultaneous application to establish an EMTS account as well
as submitting the project facility registration documents to receive EPA issued company and facility identification
numbers.
Concurrent with the wastewater treatment gas to renewable natural gas (WWTPG-to-Vehicle Fuel) development, Blue
Source will assess what monitoring equipment is required and assist Petaluma in confirming that the proper monitoring
equipment is installed, and monitoring systems (QA/QC) are in place and operating according to the requirements laid out
in the program regulations.
AI. DEVELOPMENT OF FACILITY REGISTRATION DOCUMENTATION
Blue Source will prepare all the documentation required for the registration of RIN and LCFS Credits following EPA's
and CARB's requirements. This includes the completion of responses to the list of questions about the types of renewable
fuel that the producer intends to produce at the facility and that the facility can produce without significant modifications
to the existing facility.
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A2. ENGINEERING REVIEW
As per EPA requirements, an independent third -party engineering review, written report, and verification of the
registration documents provides additional assurance and credibility to the Project, facilitating acceptance by EPA and
potential obligated parties (buyers). This is a key step to gaining access to the RIN market. The third -party engineering
review report and verification shall be based upon a site visit and review of relevant documents.
Engineering reviews require technical expertise in the project area and familiarity with the relevant RFS2 standard. Blue
Source has successfully completed similar validation/verification processes for wastewater treatment gas to RINs as well
as carbon credit generation at several other landfill projects (and other project types) under different standards and has
developed a high-level of understanding of the verification process and the supporting data and documentation required.
The third -party engineering review is required to be performed every three calendar years. Blue Source will follow the
registration requirements in Title 40 CFR Part 80, specifically section 80.1450 for the review requirements.
B. REQUIRED RINAND LCFS GENERATION, MANAGEMENT, REPORTING AND RECORDKEEPING
Once EPA and CARB receives a completed registration packet of both registration documentation and the engineering
review report from Blue Source, the 60 -day wait period --after which RINs can be generated --begins. EPA will review the
materials; most projects of this nature can take up to 90 days before approval is granted and an EMTS account is
provided.
Blue Source will follow the guidelines in section 80,1452 for all EMTS requirements. The EMTS documents the number
of RINs a project generates per batch, how many RINs have been sold and retired, and the project's verification
information. The EPA's goal of EMTS registries is to ensure that RINs are not double -counted and to provide assurance
that each RIN is fully accounted for through each step of the process. This requires accurate data management, evaluation
and transparency from project inception through the sale of RINs, thereby providing a high-quality product in which all
parties have full confidence.
While EPA reviews the registration packet, Blue Source will address the many RFS2 reporting requirements. The
Production Outlook Report (80.1449) will be filled out to meet the June 1St annual deadline. The Production Outlook
allows EPA to determine and factor the available renewable fuel categories and the necessary cellulosic requirements.
After the facility receives approval by means of company and facility numbers, is registered in EMTS, and the 60 -day
wait requirement has been exceeded the facility can begin to generate RINs.
The actual volume of biogas introduced into the commercial distribution system will dictate the how frequently batches of
RINs will be generated. A batch is simply a discrete quantity of renewable fuel produced and assigned a unique batch-
RIN serial number. At batch generation, RIN Transaction Reports are created to track the number of separated RINs.
Transaction Reports will be generated for separation, buying, and selling of RINs. In addition to each Transaction Report,
EPA requires quarterly RIN Generation Reports and quarterly RIN Activity Reports. Blue Source will handle all RIN
generation, reporting and recordkeeping requirements according to 80.1451 and 80.1454 to successfully create RINs for
the project.
C. ONGOING RINAND LCFS CREDIT GENERATION, ANNUAL ATTESTATIONENGAGEMENT, LCFS
VERIFICATION
After a project has operated for a certain period of time (up to a year) and --in doing so, achieved a certain volume of
RINs, the project must undergo an "attest engagement" review to ensure accuracy and compliance. This process confirms
that the claimed number of RINs has actually been generated and ensures the quarterly and annual reports adequately
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address the regulation requirements. Typically, RIN attestation engagements occur on an annual basis. Blue Source will
contract with a specific RIN accounting firm to complete this step.
Starting in 2019, CARB is requiring an annual verification similar to the annual attest- engagement to confirm that the
claimed number of LCFS Credits have actually been generated and ensure the quarterly and annual reports adequately
address the regulation requirements.
D. EVAL UATE VOLUNTARY Q UALITYASSURANCE PROGRAMS FOR VERIFYING RINS AND LCFS
The biodiesel RIN scandals in 2011 have left many obligated parties wary of RIN producers, particularly smaller
producers. As a result, EPA established guidelines for a voluntary Quality Assurance Program (QAP) that would provide
added assurance in verifying the validity of RINs. Blue Source will assist the City in the evaluation of pursuing QAP as
furthered detailed in section 1.4 of this proposal.
E. WORKAS TEAM WITHPETAL UMA AND PARTNERS
Blue Source welcomes the opportunity to serve Petaluma with registering, managing, and monetizing RIN and LCFS
credits to generate value for this project. Blue Source understands the importance of a collaborative environment
fostering a team -focused mentality to make this project successful. It is imperative that Petaluma and Blue Source work
together on data management, contracting, and verifying the RINs are valid and accurate. This spirit of collaboration is a
value that Blue Source seeks in all of its commercial relationships.
1.3 MONITORING AND QUALITY ASSURANCE
To ensure that Petaluma maximizes value from environmental attributes requires multiple steps beyond the actual
construction of the project. Registration with the appropriate parties (EPA, CARB, etc.), a third -party engineering review,
credit generation, quarterly and annual recordkeeping and reporting are all necessary steps for Petaluma to have .
marketable environmental attributes. This section walks through each step and the appropriate timing to participate in the
following attribute programs.
A. SPA'S RENEWABLE FUEL STANDARD 2 (RFS2) ( REGISTRATION
To participate in the RFS2 program and generate RINs, Petaluma must meet the registration requirements in Title 40 CFR
Part 80. There is typically a lag between when a project becomes operational (producing and delivering RNG to the
pipeline) and when the project is approved by EPA and able to generate RINs. It is important to minimize this delay to
maximize credit generation. Sometimes, this lag from initial submission of a completed registration packet to the EPA to
actual RIN generation can be two to five months, depending on the foresight put into the planning and preparation of the
EPA registration. There are five main steps to register a renewable fuel producer with the RFS2 program.
The first step in the registration process is to ensure that Petaluma and the renewable fuel can meet the qualifications of
the RFS (fuel, feedstock and process). Biogas, in particular, requires Petaluma to meet specific RIN Generation,
Registration and Recordkeeping requirements (80.1246(f)(1 0)(H), (f)(11)(ii), 80.1450(b)(1)(v)(D), 80.1454(k). The EPA
has provided a guidance document (Guidance on Biogas used to Produce CNG or LNG under the Renewable Fuel
Standard Program.pdf).
Second, it is required to create a New Company Request in the CDX OTAQReg to register the Petaluma company and
facility in the RFS2 program under Part 80. This involves creating a new user account and setting up access to EPA
systems by submitting company information through the EPA's Central Data Exchange (CDX) OTAQ Registration and
DC Fuels. The EPA has provided a couple of helpful registration user guides (OTAQ Fuels Programs Registration User
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Guide, V 4.02.pdf) and (Office of Transportation and Air Quality [OTAQ] DCFUEL User Guide v3.01.pdf). The DC
Fuels Program links the renewable fuel facility to the registered company, quarterly reports are submitted to EPA, and
RIN generation, transfer and sale takes place in CDX EMTS.
The third step is to assemble all documents required under 80.1450(b)(1) and obtain an engineering review by a third -
party independent professional. Petaluma should determine its registration timeline by working backwards from a couple
of milestones needed to complete the engineering report. One milestone is a certificate of analysis (COA), required for the
product gas. A COA can only happen once the project reaches substantial completion and is able to produce pipeline
quality gas. Working backward from product gas production, Petaluma can easily schedule the selecting and contracting
of a third -party engineering firm to conduct the engineering review, as well as providing data requested and coordinating
the site visit and COA. The ideal situation is to have the third -party review/report finished except for site visit and COA
on the pipeline gas.
Once the engineering review is finished, a completed packet (New Company Request paperwork from CDX OTAQREG,
engineering review and 80.1450(b)(1) materials) can be submitted to the EPA. The agency has at least 60 days to review
and provides a list of questions that may delay their review timing. Unless they utilize storage, a producing RNG project
will give up RIN generation until the EPA approves the project.
If Petaluma decides to implement a Quality Assurance Plan (QAP), they must register properly in OTAREG. Below is a
diagram that details the process to create, submit, and activate a Quality Assurance Plan. Notice the interaction between
the OTAQ Registration System (OTAQREG), the EPA Moderated Transaction System (EMTS), and the EPA.
Once the QAP Auditor association request is submitted by the QAP provider, the RCO for Petaluma must approve the
request and follow Section 4.2 of the user guide (User guide to OTAQREG for QAP.pdf).
B. RIN GENERATION, RECORDKEEPING AND REPORTING
Petaluma is also required to set up an account with the EPA Moderated Transaction System (EMTS), as this is the main
means of generating RINs and quarterly and annual reports. Once approved by the EPA, Petaluma and/or an agent to the
project --potentially the off -taker --needs to generate RINs monthly through the EMTS program. The User Guide
(RFS _EMTS User's Guide v4.4.pdf) illustrates the process of generating, managing, separating, trading and retiring RINs.
The Getting Started Guide (EMTS Quarterly Reports: Getting Started Guide.pdf) does the same for generating quarterly
and annual reports. These reports are submitted through EPA's CDX OTAQDCFUEL program. Find the submission user
guide in the appendix (OTAQ DCFUEL Submission Quick Start Guide v3.01.pdf).
The necessary quarterly reports are as follows: RFS0104-RFS Activity Report; RFS0601 Renewable Fuel Producer
Supplemental Report; RFS080I- Renewable Biomass Report; EMTS RFS RIN Generation Report; EMTS RFS RIN
Transaction Report. The necessary annual reports are as follows: RFS0901: RFS Production Outlook Report; RFS2700-
RFS Cellulosic Biofuel Producer Questionnaire. The timing deadlines are as follows: Quarter 1 (January 1- March 31) due
June 1 of same year; Quarter 2 (April 1- June 30) due September 1 of same year; Quarter 3 (July 1- September 30) due
December 1 of same year; Quarter 4 (October 1- December 31) due March 31 of following year. The annual attest
engagements are due by June 1 of the following year.
C. CALIFORNIA'S AIR RESOURCES BOARD (CARB)
If Petaluma's RNG is paired with transportation fuel in California, it will need to register with two programs for
California Air Resources Board's (CARB) Low Carbon Fuel Standard (LCFS). The CARB LCFS Alternative Fuels Portal
(AFP) as well as the CARB LCFS Reporting Tool and Credit Bank and Transfer System (LRT and CBTS). Petaluma
must create an AFP Account to register the alternative fuel production company/facility and fuel pathway codes. The LRF
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is designed to support quarterly and annual reporting requirements. Both have helpful User Guides (afp_userguide.pdf and
UserGuide LFT CBTS_V1.0_04262016.pdf) that provide the registration process in a step by step manner.
The AFP user guide explains the necessary steps for company and facility registration as well as the specific fuel pathway
score. There are currently two carbon intensity scores (CI) for waste water treatment facilities, based on onsite renewable
electricity production and consumption. The CI scores are 30.92 g/MJ and 7.75 g/MJ. Document "Remodeled WWSludge
to Biomethane 060115.pdf' that demonstrates how ARB calculated these carbon intensity scores.
As part of the AFP registration process, Petaluma must provide project specific data/detail to ensure that it can claim
either the two existing WWTP CI (Carbon Intensity) scores or apply for a modified CI. For the LCFS registration, the
following will be required from the City: invoices and receipts for two years, energy consumption, permits and operations
licenses, process flow diagrams, RNG production reports. Blue Source will assist the City in filling out or develop the
necessary documents required for the Life Cycle Analysis report, CA Greet Model, the RFS2 Third -Party Engineering
Report, and Fuel Producer Legal Attestation form.
The LFT and CBTS account provides the means to generate, transfer, and report LCFS credits. The UserGuide
LFT_CBTS explains how to generate credits every quarter according to the RNG produced and consumed in
transportation purposes.
The timing deadlines are as follows: Quarter 1 (January 1- March 31) due June 30 of same year; Quarter 2 (April 1- June
30) due September 30 of same year; Quarter 3 (July 1- September 30) due December 31 of same year' Quarter 4 (October
1- December 31) due March 31 of following year.
Blue Source will provide implementation assistance to City and after the first-year review implementation of quality
assurance program and recommend improvements as appropriate. Blue Source will prepare initial records and reports for
City review, finalize records and reports, and assist City to submit records or reports in a timely manner to federal and
California agencies.
1.4 GENERAL CONSULTING ASSISTANCE
Blue Source will provide general consulting services as determined by the City. Some of the typical services we provide
include risk analysis, technology evaluation, compliance and regulatory planning, and feedstock analysis. Blue Source
also believes it will be very important to work with EPA to find an easier approved path to separating D3 and D5 RINs as
this could result in an additional $750,000 increase to the City over 5 years.
Phase 2
Upon the City providing Consultant notice in accordance with Section 25 of the Professional Services Agreement between
the City and Blue Source that Blue Source is to proceed with performance of Phase 2 Services pursuant to the Agreement,
the following terms shall become part of the Agreement without further action by the parties.
2.1 BLUE SOURCE MARI(ETING ENVIRONMENTAL CREDITS (RIN AND LCFS CREDITS)
A. MARKET ENVIRONMENTAL CREDITS TO EXISTING AND NEW RELATIONSHIPS WITH OBLIGATED
PARTIES
Throughout the term of a negotiated agreement, Blue Source will actively seek the highest value for the RINs generated
by the project. Blue Source, already an EPA -approved RIN Owner/Trader, will market the Petaluma Wastewater
Treatment Biogas Project concurrent with all steps of RIN and LCFS development to ensure the highest value is achieved
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and transference of the RINs to the buyer is completed in conjunction with each sale Blue Source will also leverage the
established RIN trading exchange as part of its efforts.
B. MARKET BIOGAS TO ALTERNATIVE TRANSPORTATION MARKETS WHERE ELIGIBLE
The value generated from this project is closely tied to on-site consumption, and there is a limited role for a pipeline
injection end-user relationship; however, Blue Source is prepared to utilize an affiliate natural gas trading partner, Blue
Strategies, to assist in moving renewable biogas to an end transportation user if need be.
C. MONITOR MARKET AND REGULATORYRISKS IMPACTING RINAND LCFS MARKETS
Blue Source will keep in regular communication with the City regarding market demand and pricing, EPA and CARB
announcements effecting biogas RIN and LCFS Credits as well as potential changes in the market. Blue Source will
remain in constant communication with EPA, CARB and Petaluma. Similar market analysis and regulatory review will be
provided to the City on a regular basis.
E. RECORDKEEPING AND REPORTING
Blue Source shall prepare, submit and maintain all reports and records required as a transferor under the RFS2. Blue
Source shall identify for City the records and reports City is required to keep as an RFP under the RFS2. Blue Source
shall prepare draft records and reports for City that are required for City's recordkeeping and reporting compliance with
the RFS RIN Program as an RFP and submit such draft records or reports to City in a timely manner for City's submission
to EPA as required by the RFS2.
City will provide in a timely manner all available and relevant information within City's control necessary to allow Blue
Source to Document, Register, evaluate, develop and market RINs and for Blue Source to provide its Services set forth in
Phase 2.
F. MONITORING
Blue Source shall draft a quality assurance/quality control plan for process measuring equipment for the Project to be
maintained by City in order to prevent inadvertent administrative errors.
City will install and maintain all process measuring equipment for the Project in good condition. City will implement and
maintain the quality assurance/quality control plan provided by Blue Source that is designed to ensure that process
measuring equipment for the Project is properly maintained by City and to prevent inadvertent administrative errors.
G. TITLE AND EXCL USIVE RIGHT TO MARKET
Blue Source shall have title to and the exclusive right to market all RINs created from the Project through the end of the
Agreement term.
City will take any commercially reasonable actions necessary to transfer title of the RINs to Blue Source. All RINs
transferred to Blue Source shall be based on wastewater treatment gas (an EPA listed biogas source) that is conditioned,
compressed and consumed as transportation fuel.
Blue Source will make recommendations to the City regarding which Renewable Identification Numbers, if any, will
produce Renewable Identification Numbers of sufficient magnitude and quality to be pursued for batch generation and
verification and transfer in accordance with the terms of this RDMA.
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Following consultation with and authorization by the City, Blue Source may aggregate and market Producer's RINs with
RINs created by other suppliers of either similar or unrelated credits, as Blue Source deems appropriate as a function of
Blue Source's portfolio management.
H. ACCESS TO INFORMATION, MAINTENANCE OF RECORDS
Due Diligence. Each Party shall provide the other Party and its representatives with access to the Project and to all RIN-
related documents, records, reports, and data reasonably necessary to document, register and verify the quantity, quality,
validity, or acceptability of the RIN or the Project with EPA's RFS2 and comply with the requirements of the RFS2.
Verifiers as well as prospective final buyers of RINs created pursuant to this agreement shall have the right to visit City's
facilities for purposes of conducting such Verification upon commercially reasonable notice to City.
Blue Source's Records Regarding Transactions. Blue Source shall keep and maintain records of all sales terms, deal
valuations, and documentation necessary for Blue Source to complete the sale and transfer of RINs transferred to Blue
Source by City and by Blue Source to any third party. These records shall be kept for a period of at least five years from
the date they were created and shall be made available to City for inspection during regular business hours upon
reasonable advance notice.
3. BLUE SOURCE ESTIMATED FEE SCHEDULE and PAYMENT TERMS
The City of Petaluma has requested both traditional time and material fee structures and net proceeds sharing structures.
Fee Structure is a Time and Materials basis for Phase 1 and a net proceeds share on Phase 2. Refer to attached project
budget for this Agreement.
FEE STRUCTURE
A. For Phase 1 Blue Source proposes not to exceed 120 hrs for RFS registration which will be increased as
necessary for petitioning EPA for a D3 and D5 split and not to exceed 80 hrs for LCFS registration. The
petitioning of EPA is vital for the project to more than double its annual environmental attribute revenue.
B. For Phase 2, if the City of Petaluma can only generate D5 RINs, Blue Source will receive a 7.5% share of net
proceeds from RINs and LCFS Credits. However, if Blue Source is successful in petitioning EPA for D3
RIN generation, Blue Source will receive 12.5% share of net proceeds for D3 RIN revenues. For LCFS, Blue
Source will receive 7.5% share of net proceeds.
C. Blue Source's consultants hourly fee schedule for calendar year 2018 is as follows:
Blue Source LLC, 2825 Cottonwood Corporation Parkway, Suite 400, SLC UT 84121
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D. Third party fees that will be recoupable are the following: $30,000-$35,000 for QAP; $7,500-$13,000 for 3rd
party engineering review; $2,500-$4,500 for CPA Annual Attest Engagement. The City would reimburse Blue
Source for these 3`d party fees.
E. Blue Source does not mark-up on other direct costs.
Phase 2 Proceeds Calculation
With respect to all RINs arising from the Project, Blue Source shall pay City eighty seven and one half percent (87.5%)
of the Net Proceeds received from Blue Source's sale of each D3 RIN and ninety two and one half percent (92.5%) of
each D5 RIN and LCFS credit within thirty (30) days of Blue Source's receipt of Proceeds from Blue Source's sale of
each RIN and LCFS credit, provided that Blue Source has incurred all related Expenses and is able to calculate Net
Proceeds by such date. In any event, Blue Source shall pay City's Share of Net Proceeds to Producer within sixty (60)
days of receipt of any Proceeds.
Blue Source shall retain twelve and a half percent (12.5%) of the Net Proceeds received from Blue Source's sale of
each D3 RIN and seven and a half percent (7.5%) of the Net Proceeds of each D5 RIN and the LCFS Credit.
Calculation of Net Proceeds
For the purposes of this proposal, Net Proceeds are defined as the Gross Revenue less Recoupable Expenses, where
Gross Revenue is the volume of RIN and LCFS credits sold multiplied by the price per credit. The calculation of Net
Proceeds is thus:
Environmental Credit volume sold * Price/Credit — Recoupable Expenses = Net Proceeds
Pricing
Approximate RIN and LCFS market prices can be viewed on indexes such as OPIS, Argus and others; however, Blue
Source is incentivized to achieve the highest possible price, and actual price is a function of each sale's unique terms.
Blue Source also has a deep clientele of Obligated Parties and other environmental attribute purchasers and will seek
to leverage its status with these customers to achieve premium pricing in the market.
Blue Source % LCFS and % RIN
for D5
Blue Source % RIN for D3
7.5%
12.5%
PROJECT BUDGET
Refer to the table on the next page for the estimated project budget for this Agreement.
Blue Source LLC, 2825 Cottonwood Corporation Parkway, Suite 400, SLC UT 84121
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Affl,'bluesourct
Blue Source PSA Budget
PHASE 1
Blue Source Hours
Staff Level
Cost per hour
RIN
Registration
hours
LCFS Total Hours Cost
Registration
hours
Senior (Will Overly)
$225
120
80 200 $45,000
Intermediate
$175
Occurrence
$46,875.00
Junior
$125
Budget for Phase 2
Term
Administrative
$80
3rd Party Engineering
First
SUBTOTAL
1
120
80 $45,000
Subcontractor Expenses
Expense
Subcontractor
Frequency
Occurrence
Cost per
Cost
Blue Source Feel per year
$23,437.50
Revenue years for Phase 2
During PSA
Occurrence
$46,875.00
Recoupable Expenses' for Phase 2
$0
Budget for Phase 2
Term
Total Fees + Recoupable Expenses
$46,875.00
3rd Party Engineering
First
first year and
1
$13,000
$13,000
Report
Environment
every 3rd year
3rd Party CLAP
EcoEngineers
First year
1
$30,000
$30,000
3`d Party CLAP
EcoEngineers
Annual
1
$27,000
$27,000
CPA Annual Attest
Christianson &
Annual
1
$5,000
$5,000
Engagement
Associates
SUBTOTAL
$75,000
TOTAL PHASE 1 BUDGET
PHASE 2
Estimates
GGE produced per year
125,000
Credit revenue per GGE (RINS + LCFS)
$2.50
Credit revenue per year
$312,500.00
Blue Source Feel per year
$23,437.50
Revenue years for Phase 2
2
Blue Source Fees for Phase 2
$46,875.00
Recoupable Expenses' for Phase 2
$0
Budget for Phase 2
Total Fees + Recoupable Expenses
$46,875.00
TOTAL PHASE 2 BUDGET
TOTAL CONTRACT BUDGET
Notes:
1. Blue Source Fee = 7.5% LCFS credits, 7.5% D5 RIN credits, 12.5% D3 RIN credits
2. Recoupable Expenses = third -party costs associated with Phase 2
Blue Source LLC, 2825 Cottonwood Corporation Parkway, Suite 400, SLC UT 84121
$120,000
$47,000
$167,000
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