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MWMC MEETING AGENDA
Friday, June 14, 2019 @ 7:30 a.m.
City of Springfield City Hall, Library Meeting Room
225 Fifth St., Springfield, OR 97477
Turn off cell phones before the meeting begins.
7:30 – 7:35 I. ROLL CALL
7:35 – 7:40 II. CONSENT CALENDAR
a. MWMC 5/10/19 Minutes
b. FY19-20 MWMC Budget and CIP Ratification
Action Requested: By motion, approve the Consent Calendar
7:40 – 7:45 III. PUBLIC COMMENT
Request to speak slips are available at the sign-in desk. Please present request slips to
the MWMC Secretary before the meeting starts.
7:45 – 8:00 IV. AWARD OF CONTRACT FOR DECOMMISSION LAGOON P80093
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Barry Mays & Troy McAllister
Action Requested: By motion, move to approve Resolution 19-10
8:00 – 8:15 V. SMALL HOMES SYSTEMS DEVELOPMENT CHARGES (SDCs) . . . . . . . . . . . . Matt Stouder
Action Requested: By motion, move to approve Resolution 19-11
8:15 – 8:40 VI. PROPERTY INSURANCE RENEWAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Katherine Bishop
Action Requested: By motion, move to authorize the General Manager to enter into
agreements to secure property insurance coverage for the period of July 1, 2019
through June 30, 2020.
8:40 – 9:10 VII. RENEWABLE NATURAL GAS (RNG) MARKET DYNAMICS . . . . . . . . . . . . . . Josh Newman
Action Requested: Discussion and direction
9:10 – 9:20 VIII. BUSINESS FROM COMMISSION, GENERAL MANAGER, & WASTEWATER DIRECTOR
(Continued on back)
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9:20 IX. ADJOURNMENT
The meeting location is wheelchair-accessible. For the hearing-impaired, an interpreter can be provided with 48-
hours-notice prior to the meeting. To arrange for service, call 541-726-3694. All proceedings before the MWMC are
recorded.
MWMC MEETING MINUTES
Friday, May 10, 2019 at 7:30 a.m.
City of Springfield City Hall, Library Meeting Room
225 Fifth St., Springfield, OR 97477
Commissioners Present: Pat Farr, Doug Keeler, Joe Pishioneri, and Jennifer Yeh.
Brian Millington, MWMC legal counsel, Matt Stouder, MWMC General Manager, and President Keeler
discussed how to proceed without a quorum. Mr. Millington stated that we could hear from staff on
informational agenda items as long as no deliberations or decisions occur.
President Keeler announced we would start the meeting with Agenda Item VII State Revolving Fund
(SRF) Loan Discussion.
STATE REVOLVING FUND (SRF) LOAN DISCUSSION
Meg Allocco, MWMC Accountant, went over previous Commission actions with respect to early payoff of
MWMC debt (Revenue Bonds and SRF loans). Ms. Allocco stated there are three active SRF loans. They
are as follows:
SRF LOANS BALANCE AS
OF 6/30/19
INTEREST
RATE
REMAINING
INTEREST
PAYOFF
DATE
SRF R64840 $5,314,777 2.94% $1,017,250 04/01/2031
SRF R64841 $434,565 1.25% $5,443 12/01/2020
SRF 400648 $1,100,000 0.50% $30,250 05/01/2030
Ms. Allocco pointed out that the interest we would save if SRF loan R64840 was paid off would be
$1,017,250. However, at the current interest level, the pool account would make $931,212 in interest, so
we would be only saving $86,038. Although it is not a huge financial incentive to the MWMC, it is a lot of
money that could be freed up for another agency to use.
Ms. Allocco stated that as of March 31, 2019 the MWMC’s Capital Reserve was $53 million. An SRF loan
payoff would be paid out of the Capital Reserve. Total cash reserves at the end of March were
$79,759,558. Ms. Allocco gave a projected overview of the cash flow effect on the reserve. There is
already one year’s worth of payments budgeted for the SRF loan so another $4.9 million would be
required through a supplemental budget.
Ms. Allocco presented the following options regarding the three remaining SRF loans:
1. Leave all remaining SRF Loans as they are.
2. Retire R64840 early with an additional $4.9 million budget allocation.
May 10, 2019 MWMC Meeting Minutes
Page 2 of 9
3. Let R64840 ride for the current period, until MWMC investment interest rates change and savings
become larger.
DISCUSSION: Commissioner Farr asked if it would affect our bond rating. Ms. Allocco said it would not
help us in our bond rating. The Bond Counsel told us that we do not have excessive debt and our bond
rating is as high as it can go considering the size of the community and the income base of the
community.
Mr. Stouder said the SRF is a pool of money available to agencies that need it. If we pay it off, then that
money would be freed up for another agency to borrow.
Commissioner Pishioneri said it would be one less item to track, manage, and report on.
Commissioner Keeler stated that he thought it was interesting that the two smaller loans are making
money because our savings has a higher interest than they are charging for the loan. He was wondering
if we could roll the $4.9 million into a lower interest. Ms. Allocco said that she did not think the State
would do that, but we can always ask.
Mr. Stouder said that our interest rates have varied over time. They are up right now but they have not
been that way in the past. Ms. Allocco said that the interest rate we earned back when we made the loan
was 0.5% now it is up to 2.75%.
President Keeler said that he is hearing a consensus among the Commissioners to proceed with the next
steps in retiring the $4.9 million dollar SRF loan. Ms. Allocco replied that when she brings this back as FY
2019-20 Supplemental Budget #1, the Commission can either approve it or not approve it then. This was
just for general direction.
BUSINESS FROM COMMISSION, GENERAL MANAGER, AND WASTEWATER DIRECTOR
General Manager:
Budget Ratification Process: Springfield City Council ratified MWMC’s budget on May 6. Eugene City
Council is scheduled to ratify on May 13, and Lane County is scheduled to ratify on May 21.
Poplar Plaque: Mr. Stouder pointed out the poplar plaque on the Library Meeting Room wall. It
highlights the poplar harvest with the intent to build awareness of the MWMC’s Biocycle Farm and
the poplar harvest, and to demonstrate the potential use of our product. Besides the Library Meeting
Room, there will be one at the plant, and potential one placed elsewhere (to be determined).
Goshen Update: Lane County’s consultants (Kennedy/Jenks) have reached out to Springfield and the
MWMC to re-initiate discussions on the Goshen project. They discussed things like potential
alignments for the wastewater line and connection details - how that might be facilitated. Mr.
Stouder reminded the consultant that Lane County would need to reach out to the MWMC to discuss
a number of policy issues. We will want to work through the connection agreement, how to pay for
it, who will maintain the line, billing arrangements for those that connect to that line, and
pretreatment issues that might come up. Kennedy/Jenks indicated that the County knows about
these issues and plans to reach out to the MWMC staff in early June.
o Commissioner Keeler asked if the MWMC board has given any kind of consensus on additions
such as Goshen. Mr. Stouder said there was a high level of discussion when Deb Galardi put
together the report previously. There was a general head nod that this was something the
May 10, 2019 MWMC Meeting Minutes
Page 3 of 9
Commission would support. In addition, it would then need to go out to the three governing
bodies for approval. Mr. Stouder stated that Lane County needed to lead the conversation with
the MWMC about connection and then make the formal request. Once Lane County does that,
staff will have something tangible to bring to the Commission to consider.
Quorum at 7:53 a.m.: President Keeler requested the Roll Call be taken.
ROLL CALL
Commissioners Present: Pat Farr, Doug Keeler, Joe Pishioneri, Peter Ruffier and Jennifer Yeh
Walt Meyer arrived at 8:26 a.m.
Commissioner(s) Absent: Bill Inge
Staff Present: Meg Allocco, Todd Anderson, Katherine Bishop, Dave Breitenstein, John Huberd, Laura
Keir, Tonja Kling, Kevin Kraaz, Troy McAllister, Todd Miller, Brian Millington (attorney), Josh Newman,
Sharon Olson, Loralyn Spiro, Matt Stouder, and Mark Van Eeckhout.
General Manager General Business (cont’d):
Willamette Mercury TMDL Advisory Committee: Mr. Stouder is on the technical advisory committee,
which is a group of folks that are working with the DEQ to look at implementation of the mercury
TMDL in the Willamette River Basin. The DEQ is proposing sector specific wasteload allocations for
wastewater and stormwater NPDES permit holders. The groups that are meeting include not only
NPDES permit holders but also groups that represent forestry, agriculture, and the environment. For
the wastewater sector, they are proposing a 10% reduction. What that means is when the TMDL goes
into effect, we will likely need to employ mercury minimization plans to meet our reduction target. It
is a complex issue because wastewater treatment plants are not the generator or source of mercury.
We receive mercury in very small amounts through the wastewater stream. The DEQ is also working
on a multi-discharger variance for mercury. That is going to go on a parallel track until they can get
the TMDL closer to being implemented. Mr. Stouder thinks there will most likely be a challenge to
the TMDL. What staff is planning is a regulatory update item to the Commission in the future because
this is a complex topic.
o Commissioner Ruffier asked, in regards to the 10% reduction in mercury, what the baseline
would be for our district. Mr. Stouder replied that is one of the questions proposed to the DEQ
and they have not replied yet. There is a 75% reduction for MS4 stormwater permitees.
o Commissioner Ruffier asked if we start minimization early, are we penalized because we set the
baseline too low. Mr. Stouder replied that is a question that his group has asked the DEQ. They
have not replied yet.
Wastewater Director:
Public Works Day is next Thursday, May 16, at the Maintenance yard on Roosevelt Blvd. It will be a full
day of educational and informational activities. It is geared towards school kids but is open to the
public. The MWMC will have a booth there with information about the MWMC and the wastewater
services that we provide.
Wastewater Director Position: Dave Breitenstein has been named to the Wastewater Division Director
position with the City of Eugene on a permanent basis.
May 10, 2019 MWMC Meeting Minutes
Page 4 of 9
CONSENT CALENDAR
a. MWMC 4/12/19 Minutes
MOTION: IT WAS MOVED BY COMMISSIONER PISHIONERI WITH A SECOND BY COMMISSIONER
RUFFIER TO APPROVE THE CONSENT CALENDAR AS PRESENTED. THE MOTION PASSED
UNANIMOUSLY 5/0.
PUBLIC COMMENT
There was no public comment.
FY 2018-19 SUPPLEMENTAL BUDGET #4
Meg Allocco, MWMC Accountant, requested approval of Resolution 19-07, authorizing $222,022 to the
Riparian Shade Credit Program project from capital reserves as discussed previously at the March
Commission meeting.
MOTION: IT WAS MOVED BY COMMISSIONER PISHIONERI WITH A SECOND BY COMMISSIONER YEH
TO APPROVE RESOLUTION 19-07. THE MOTION PASSED UNANIMOUSLY 5/0.
AWARD OF CONTRACT FOR PURCHASE OF RENEWABLE NATURAL GAS EQUIPMENT
Josh Newman, Managing Civil Engineer, requested approval of Resolution 19-08 authorizing the
purchase of equipment for upgrading the biogas to natural gas, part of the Renewable Natural Gas
Upgrades Project P80095.
Mr. Newman stated the September 28, 2018 Invitation to Bid did not produce a qualified bidder. Staff
decided to go out in a two-step Request for Proposal in February 2019. Three bids were received from
the following equipment-manufacturing firms: Clean Methane Systems, Greenlane North America, LLC,
and Unison Solutions, Inc.
Mr. Newman explained the two-step process. The first step is prequalification. It is a screening step,
which allows us to ask for information such as the following: certification that they are able to meet
Oregon’s Standards of Responsibility, have they completed similar work, are they legally qualified to do
the work, confirmation that they meet the technical qualifications, and a basic description of what type
of equipment they are proposing. The second step is the proposal. We start negotiation of contract
terms and conditions with each qualified firm. One firm dropped out during this step. Only firms who
have negotiated successfully are allowed to submit a proposal.
The Proposers:
Clean Methane Systems, Inc. is a firm in Tualatin, Oregon. They produce biogas-upgrading
equipment exactly like what we have at the plant now for the engine. This company provided the
gas conditioning equipment that we have now. They have a lab in Seattle that does the gas
quality analysis. They collaborate with a company called DMT Clear Gas Solutions, which began
business in 1987 in the Netherlands. They specialize in packages for upgrading to pipeline
quality. They provide the process that removes the CO2. It is a membrane-based technology.
Greenlane Biogas North America, LLC was founded in New Zealand. They have 30 years in the
biogas conditioning and purification business. They have installed 107 systems in 18 countries.
May 10, 2019 MWMC Meeting Minutes
Page 5 of 9
This includes 38 biogas-upgrading systems for wastewater treatment plants (WWTP) including
Portland CBWTP and the Piscataway WWTP in New Jersey. They are supplying the equipment for
Portland based on water-scrubbing technology. What they are proposing for us is called the
Pressure Swing Adsorption (PSA) System.
Unison Solutions is based in Dubuque, Iowa, founded in 2000. Historically they have tended to
serve smaller clients like us. They specialize in taking biogas straight from the landfill or digester
to scrub it and then send it to a fuel dispensing station for vehicles. They have also done a couple
of pipeline projects as well. They use membrane technology.
Commissioner Farr asked if they would provide the fuel dispensing equipment as well. Mr. Newman
replied that our project does not call for that. It is open to us if we want to do it in the future.
Mr. Newman explained the equipment would go in the southwest corner at the plant, just south of the
Maintenance building and just east of the Headworks facility. There is a tee in the line just under the
digester project so we can easily connect there. A thermal oxidizer is required for the tail gas.
DISCUSSION: President Keeler asked about adding a criterion that considers the technology to see if one
type of technology is working better then another type. He wanted to know if the criteria we use
allowed us to look at the success-history of the varying technologies, the robustness of each, and the
difficulties. Mr. Newman stated it was too late to change the criteria but all the proposers have met the
criteria for reliability in meeting biogas specifications and both technologies have good records of
accomplishment.
Commissioner Yeh stated that was her question too but what she is hearing is that staff is comfortable
with either technology. Mr. Newman replied that when they looked at the different plants that had these
technologies they were not looking at the technology itself but the methods that were being used. One
of the main things they looked at was the removal of hydrogen sulfide. The current system at the plant is
an iron oxide removal system that uses bark media. The problem is the bark media solidifies over time
and requires staff to actually get into the tank and chip it out. So one of the points in the criteria is about
media vessels – how do they work, how is the media removed, what is the labor requirement, is there a
hazardous component to it, and what is the health and safety implications. That is what staff was
focused on because the technology is robust in either case.
Commissioner Pishioneri said he wants to make sure we have the ability to produce fuel when needed.
Mr. Stouder asked if he was looking for flexibility. Commissioner Pishioneri replied yes, he does not
want to have to re-engineer stuff later; he would prefer to invest in it now. Mr. Newman replied that we
need the technology to produce RNG that can be used as fuel; no matter who is consuming it or what
the consumption is. Staff is in constant discussion with NW Natural in terms of the flexibility allotted to
us. We are beginning the conversation with the off-taker. So now is the time to build flexibility into that
agreement. In addition, if we lose the off-taker, we need the ability to send it elsewhere. Perhaps, if we
are selling to a local user, it may require some additional investment in infrastructure for the dispensing.
Commissioner Pishioneri said he would like to have the option instead of consecutively doing things, to
do them concurrently. He thinks it would be a contract issue, and hopes we have that covered. Mr.
Millington said it is covered.
May 10, 2019 MWMC Meeting Minutes
Page 6 of 9
Commissioner Ruffier asked if the two technologies have similar long term O&M cost. Mr. Newman
replied yes. The Pressure Swing Adsorption and the Membrane both last around 7-10 years.
Commissioner Ruffier asked if the cost of the media and the membrane are similar. Mr. Newman replied
he thinks they are the same but does not know for sure. Mr. Millington added that it would be taken
into consideration under the criteria for the lifecycle cost.
Commissioner Farr asked if the building for the equipment was part of the bid or will it be paid for
separately. Mr. Newman replied it would be paid for in the construction contract.
Mr. Stouder said, typically we would go through the scoring of the proposals, bring a recommendation
to the Commission, and then purchase the equipment. We are ahead of that with the equipment
purchase because of the lead-time. That is why we are asking the Commission if they are comfortable
with the way the Resolution is structured, we would authorize the award to the highest scored bidder.
President Keeler welcomed Commissioner Meyer (8:36 a.m.).
Commissioner Keeler asked if, by taking this step, we are actually making a decision to go forward (with
the RNG project). Mr. Newman responded that the scale of investment is such that it would indicate we
are going forward. Mr. Newman said staff would be evaluating the bids on May 21 and selecting the
highest ranked proposer, and then we have a week to wait for any protest before we can move forward.
If anything happens or changes during any part of this process, we would wait until we could discuss it
with the Commission.
Commissioner Ruffier stated that although he appreciates the process and the work, he often feels
somewhat frustrated that it takes us so long to move on anything. He was wondering if the length of the
process in anyway jeopardizes the end-result. Mr. Newman replied that the thing that is concerning is
the dynamics of the market place. It is always changing. He needs to prepare an update on that.
President Keeler had requested a quick reference spreadsheet, which he had started; now there are a
number of items that need to be added. There are issues coming up concerning how the markets are
operating and where the gas might have the highest value. To answer your question, the longer we take
more stuff can happen; good and bad.
Commissioner Ruffier requested staff to consider, in the future, evaluating alternative approaches that
would allow us to move more quickly. Outsourcing some of the process, such as going to an
independent and telling them to run with it, would be nice to have available for our consideration on
projects that really have a time crunch to them.
Commissioner Pishioneri suggested doing RFQs instead of RFPs because they are quicker.
Mr. Stouder pointed out on Resolution 19-08; page two, second “Whereas”, last line, the date needs to be
changed from March 24 to May 24.
MOTION: IT WAS MOVED BY COMMISSIONER PISHIONERI WITH A SECOND BY COMMISSIONER YEH TO
APPROVE RESOLUTION 19-08 AS CORRECTED. THE MOTION PASSED UNANIMOUSLY 6/0.
May 10, 2019 MWMC Meeting Minutes
Page 7 of 9
2019 FINANCIAL PLAN ADOPTION
Katherine Bishop, requested the Commission to approve the 2019 Financial Plan. The final edits have
been completed, including review and input provided by the MWMC’s independent Financial Advisor,
Duncan Brown, Senior Managing Consultant with PFM Financial Advisors, LLC. Mr. Duncan works in the
Portland office and is connected to a larger PRM team in Seattle. Mr. Duncan provided updates to
Appendices I and II and Ms. Allocco replaced Appendix III.
Ms. Bishop said the 2019 Financial Plan updates the 2005 Financial Plan, which was based on the 2004
Facilities Plan. When the future NPDES Permit is renewed, we will most likely have specific permit
requirements that would result in an update to the Facilities Plan and associated funding needs.
The Financial Plan Updates:
Pages 1-6: The Introduction and Purpose, Scope and Methodology, and Financing History had
minor narrative updates with a focus on linking existing and historical information to the 2019
Financial Plan.
Pages 7-10: In the fee sections, additional linking was done and additional information was
added, including mentioning that we used Clean Water SRF loans as a funding source for the
Capital Program. Additional information was added to the Financing Options and Strategies, and
in the Financial Soundness section, our credit rating was updated.
Pages 12-13: In Policy F5 – Reserve policies were brought up to the current working practices.
o Working Capital Reserve: Changed Eugene’s portion from $500,000 to $700,000
o Operating Reserve: Changed from 10% of Operating Budget to two months, which equals 16-
17% of Operating Budget
o Equipment Replacement Reserve: The annual contribution is set so that all projected
replacements will be funded over the expected life of the assets instead of over 20-years.
o Bond Reserve: Since Reserve funds are not typically required for AA category essential
services utilities, it was changed to say, “A Bond Reserve if/when required by investors, shall
be sufficient to provide assurances to bondholders that adequate revenue coverage will be
provided for future debt-service payments”.
o Insurance Reserve: This reserve was added, as we did not have one previously. It has a target
of $1,500,000 in the adopted budget.
Pages 16-17: Sewer User Rates and System Development Charges Changes
o Policy R2 was removed and R3 was moved up to R2
o Policy R3 – the reference to the credit rating was left open to the Commission’s preference.
Ms. Bishop asked the Commission if they want the credit rating to say “A+ or higher” or “AA”. She
mentioned that Commissioner Inge had asked previously why we had not used our credit rating there.
She added that what drives our credit rating in the Eugene/Springfield area has to do with the median
household income and the customer’s ability to pay and the value of the housing. It is not something we
can control; it is just a factor that they consider.
Commissioner Pishioneri asked if there was a down side to putting it in the Plan. Ms. Bishop replied that
all she could think of was if, in the future, there was some constraint put on the funds and something
dropped. Commissioner Pishioneri said that we could change it at that time, he agreed with
Commissioner Inge (use AA).
May 10, 2019 MWMC Meeting Minutes
Page 8 of 9
Commissioner Meyer asked if, down the road we had to advance treatment because of permit
requirements and have to take out a $200 million loan to do it, would that affect our rating. Ms. Bishop
replied she did not think it would affect our rating. It has to do more with the community that we serve
and their financial capabilities.
President Keeler asked Ms. Bishop what she would choose if she were a Commissioner. She replied that
she would probably choose AA because that is what we have.
Commissioner Meyer asked what caused our rating to increase from A+ to AA. Ms. Bishop replied it was
the cash in the reserves, not taking out additional debt, and actually paying off debt.
President Keeler asked if anyone wanted to state the Commission’s consensus.
Commissioner Pishioneri said that he thinks we should state what we are, who we are, when we are.
Nothing else is being forthright or transparent. Whatever we are, that is what he would put.
Commissioner Meyer stated that we have the AA rating because we have been looking ahead, saving
money, have good reserves, and we have reduced our insurance cost by having an insurance reserve.
The fact that we have operated in that manner allows us to borrow in the future for less interest, so he
thinks we should have a goal to have an AA credit rating. There were general head nods from all the
Commissioners.
Ms. Bishop stated that Policy R6’s Discussion had a small change; it now states the costs for
administering the mobile waste hauler program are recovered through rates set on a cost-of-services
basis.
Ms. Bishop said in Asset Management Policy A3, on page 18, the equipment replacement reserve was
simplified to “an original cost over $10,000, and with a useful life expectancy greater than 1 year”.
Commissioner Pishioneri asked about food trucks and coffee kiosks that have their own gray-water
holding systems. He said there are City codes that say they must connect to the City’s sewer. He asked if
they are considered a wastewater hauler. Ms. Bishop replied that the food trucks associated with
breweries or distilleries have their wastewater disposed by the permanent structure. Mr. Stouder stated
the answer depends on the situation and is worked out through the process with the Cities.
Commissioner Meyer said that in Asset Management Policy A1, it states “assets shall be insured for
replacement value so that, in the event of a loss, plant and equipment could be restored to working
condition”. Commissioner Meyer said he did not think we insured the pipelines. Ms. Bishop replied that
we do insure the pipelines. Mr. Stouder injected that insurance would be discussed next month.
Ms. Bishop stated that Appendix I – Credit Worthiness has been refreshed and Appendix II – Summary of
Capital Financing Options has been updated. Ms. Allocco replaced Appendix III – Adopting Financial
Policies Best Practices with the most current version of the Governmental Finance Officers Association
Best Practices ( 2012 version). Appendix IV – Investment and Portfolio Polices is pending the Springfield
Finance Director’s and the State of Oregon’s reviews and updates. It is in the process of being updating
and when finished, it will be incorporated.
May 10, 2019 MWMC Meeting Minutes
Page 9 of 9
DISCUSSION: Commissioner Ruffier asked about page 1, item 3, “Fully funding a program of capital
improvements…” and page 11, Policy F2 “…maintain annual budgets that balance operating expenses
and transfers with user fees and other current operating revenue.” He wondered if, instead of saying fully
funding a program, it should say fully finance a program. He is confused by Policy F2, as it does not
include any allowance for debt financing. President Keeler stated that is in the fourth bulleted item. Ms.
Bishop stated the discussion below Policy F2 gives more detail and the debt service coverage is outlined
in the fourth bullet. Commissioner Ruffier asked if they are inseparable. Mr. Millington replied that the
page 1 item is tied to the IGA. It is what it is unless the IGA is changed. He explained that page 11’s item
is implementing what the IGA stipulates. Also, Policy F2 is just talking about the operating expenses, not
the capital. Ms. Bishop added that the discussion under F2, second bullet states, “budgeted capital
outlays are funded in full from a combination of operating revenues, capital reserves, accumulated SDCs,
and debt proceeds.”
Commissioner Ruffier said if the Operating budget is intended to be balanced with user revenues, does
it allow for use of the Rate Stability Reserve? Ms. Bishop replied that the Rate Stability Reserve would
come into play if all of a sudden a major high-volume industrial customer shut their doors as Hynix did,
the reserve would be used to supplement the revenue. Commissioner Ruffier stated he was just curious
if Policy F2 would allow the Rate Stability Reserve to be used since it says we are going to balance with
our user revenue. Ms. Bishop pointed out in Resolution 19-09, item 3 states, “If, in overseeing the
Regional Wastewater Program, the Commission determines waiving, or deviating from, one or more of
the financial policies is appropriate and fiscally prudent, the Commission may do so without violating
the spirit and intent of the Plan”.
Commissioner Ruffier asked what the difference is between the Rate Stability Reserve and the Rate
Stabilization Reserve (page 12, F5e and page 13F5i). He knows one is for the bonds and other one is for
rates but they seem redundant. Ms. Allocco replied that the Rate Stabilization Reserve was required by
the bond covenant, and can only be used if needed to make the coverage ratio required by the bond.
The Rate Stability Reserve (established by the Commission) can be used in situations like Hynix and it
would only take the Commission to say they want to use it. Both reserves have $2 million.
MOTION: IT WAS MOVED BY COMMISSIONER MEYER TO APPROVE RESOLUTION 19-09 WITH THE
CHANGE TO POLICY R3 CREDIT RATING TO AA (AS DISCUSSED). IT WAS SECONDED BY
COMMISSIONER RUFFIER. THE MOTION PASSED UNANIMOUSLY 6/0.
ADJOURNMENT
President Keeler adjourned the meeting at 9:00 a.m.
Minutes submitted by Kevin Kraaz
M E M O R A N D U M
DATE: June 6, 2019
TO: Metropolitan Wastewater Management Commission (MWMC)
FROM: Matt Stouder, MWMC General Manager
SUBJECT: Ratification of the Regional Wastewater Program Budget and Capital
Improvements Program for Fiscal Year 2019-20
ACTION
REQUESTED:
Adoption of the final Regional Wastewater Program Budget and Capital
Improvements Program for Fiscal Year 2019-10
ISSUE
The FY 2019-20 (FY 19-20) MWMC Regional Wastewater Program (RWP) Budget and Capital
Improvement Program (CIP) have been ratified by the City of Springfield on May 6, City of Eugene on
May 13 and Lane County on May 21. The Commission’s final adoption, which is scheduled for June 14 on
the MWMC Consent Calendar, will complete the FY 19-20 budget and CIP adoption process.
BACKGROUND
On April 12, 2019, via Resolution 19-06, the MWMC adopted the FY 19-20 Budget and CIP. Consistent
with the Intergovernmental Agreement (IGA), MWMC then referred the Regional Wastewater Program
Budget and CIP to the governing bodies for ratification. The City of Springfield, City of Eugene and Lane
County ratified the Budget and CIP on May 6, 2019, May 13, 2019 and May 21, 2019 respectively. The City
of Springfield is MWMC’s financial agent; as such the MWMC Budget and CIP amounts are incorporated
into the City’s budget.
ACTION REQUESTED
The Commission is requested to adopt the final FY 19-20 Regional Wastewater Program Budget and
Capital Improvement Program as part of the June 14, 2019 Consent Calendar approval.
________________________________________________________________________
M E M O R A N D U M
DATE: June 6, 2019
TO: Metropolitan Wastewater Management Commission (MWMC)
FROM: Barry Mays, Design and Construction Coordinator
SUBJECT: Award of Contract for Decommission Lagoon to Wildish Construction Co.
ACTION
REQUESTED:
Approval of Resolution 19-10, authorizing the Executive Officer to enter
into an agreement for construction services for Project P80093 with
Wildish Construction Co.
ISSUE
Staff requests the Commission approve Resolution 19-10, delegating authority to award the
Decommissioning Lagoon Project P80093 contract to Wildish Construction Co., the lowest
responsive bidder.
BACKGROUND
As part of the MWMC’s Capital Improvement Program, the existing onsite lagoon at the Water
Pollution Control Facility (WPCF) is designated to be removed. The lagoon was originally installed
in 1979 as a temporary lagoon and has been used as a storage lagoon to support digester
cleaning operations. The lagoon is almost at full storage capacity and no longer functions as
originally designed.
On December 5, 2014, the MWMC entered into a contract with design consultant Brown and
Caldwell and sub-consultant West Yost Associates for design services to remove the lagoon. Prior
to completing the design, two recent projects (P80067 - Repair/Replace Biosolids Force Main
Project and P80084 - Increased Digestion Capacity) needed to be completed and operational.
Completion of these projects allows residual solids from digester cleaning operations to be
pumped to the lagoons at the Biosolids Management Facility (BMF) for processing.
With the ability to pump digester solids to the BMF, the WPCF lagoon was no longer needed and
the design for the Decommissioning Lagoon Project P80093 resumed in early January 2019.
Memo: Award of Contract for Decommission Lagoon to Wildish Construction Co.
June 6, 2019
Page 2 of 2
The following is the Decommissioning Lagoon project schedule:
Bid Documents Completed: April 1, 2019
Advertisement for bid: April 10, 2019
MWMC received bids on: May 14, 2019
Notice of Intent to Award Issued (starting protest period): May 21, 2019
Anticipated Contract Award Date: June 14, 2019
Anticipated Contract Execution and Notice to Proceed: June 28, 2019
Construction Substantial Completion: October 31, 2019
Final Completion: November 30, 2019
On May 14, 2019 the MWMC received 3 bids as follows:
MWMC
225 Fifth Street
Springfield, OR 97477
Engineer’s
Estimate
Wildish
Construction
Co.
Rivers Edge
Environmental
Services, Inc.
R&G Excavating
Inc.
ITEM UNIT
Lump Sum Amount
(from 10.2.1) LS $496,000 $263,000 $1,340,000
Total of Cash
Allowance Items
(from 10.2.2)
LS $40,000 $40,000 $40,000
Total of all Extended
Bid Unit Price Items
(from 10.2.3)
$2,892,400 $4,533,243 $4,129,400
TOTAL BASE BID $4.8 million $3,428,400 $4,836,243 $5,509,400
After review of all bids by staff, the design sub-consultant (West Yost Associates), and the
MWMC's legal counsel (Thorp, Purdy, Jewett, Urness & Wilkinson, P.C.) it was agreed that Wildish
Construction Co., with a bid of $3,428,400, is the apparent lowest responsible bidder, is in
substantial compliance with the bidding requirements, and under the engineer’s estimate of
$4,800,000.
ACTION REQUESTED
Staff requests the Commission approve Resolution 19-10, awarding the Decommissioning
Lagoon Project P80093 contract to Wildish Construction Co. and authorizing the Executive Officer
to enter into a contract for construction services in the amount of $3,428,400.
ATTACHMENTS
1. Resolution 19-10
ATTACHMENT 1
Resolution 19-10
Page 1 of 2
METROPOLITAN WASTEWATER MANAGEMENT COMMISSION
RESOLUTION 19-10 ) IN THE MATTER OF BID AWARD FOR
) CONSTRUCTION OF MWMC PROJECT
) P80093, DECOMMISSIONING LAGOON
WHEREAS, the Metropolitan Wastewater Management Commission (MWMC) advertised
for bids related to Project P80093, Decommissioning Lagoon, on April 10, 2019, and April 15,
2019; and
WHEREAS, MWMC has an overall budget of $5.8 million for this project to cover expenses
related to administration, design/technical services, and construction work; and
WHEREAS, the apparent low bid was Wildish Construction Co. in the Total Base Bid
amount of $3,428,400 which is considered the Basis of Award for the Project; and
WHEREAS, the Commission’s design consultant team has reviewed the technical portion
of the bid document from Wildish Construction Co. for the project and found it to be in
compliance with the technical requirements of the specifications; and,
WHEREAS, MWMC legal counsel (Thorp, Purdy, Jewett, Urness & Wilkinson, P.C.) has
performed a review for compliance with applicable law and recommended that Wildish
Construction Co. is the low responsive bidder; and,
WHEREAS, a letter of intent to award was sent to all bidders on May 21, 2019, to start the
protest period,
WHEREAS, no valid protests were received within the seven (7) calendar day protest
period; and,
WHEREAS, the MWMC has appointed Matt Stouder as its duly authorized Executive
Officer for efficient execution of the day-to-day administration of MWMC business;
ATTACHMENT 1
Resolution 19-10
Page 2 of 2
NOW, THEREFORE, BE IT RESOLVED BY THE METROPOLITAN WASTEWATER
MANAGEMENT COMMISSION (MWMC) THAT;
Matt Stouder, as the duly authorized Executive Officer of the MWMC, is hereby authorized
to enter into an agreement for construction services for Project P80093, Decommissioning
Lagoon, with Wildish Construction Co. for a contract price of $3,428,400; to execute or designate
qualified staff to execute all contract and project management functions including, but not
limited to, issuance of notices to proceed, contract amendments not to exceed a cumulative total
of 15% ($514,260) of the initial contract price listed above; and to manage the contract to ensure
products meet the contract specifications.
ADOPTED BY THE METROPOLITAN WASTEWATER MANAGEMENT COMMISSION OF
THE SPRINGFIELD/EUGENE METROPOLITAN AREA ON THE 14TH DAY OF JUNE 2019.
_____________________________________________
Vice-President: Pat Farr
ATTEST:
___________________________________
Secretary: Kevin Kraaz
Approved as to form: ___________________________
MWMC Legal Counsel: Kristin Denmark
______________________________________________________________________________
M E M O R A N D U M
DATE: June 6, 2019
TO: Metropolitan Wastewater Management Commission (MWMC)
FROM: Matt Stouder, General Manager
SUBJECT: Small Homes Systems Development Charges (SDCs)
ACTION
REQUESTED: Approve Resolution 19-11 for Small Homes SDCs
ISSUE
In 2018, pursuant to Resolution 18-09, the Commission established the Small House SDC Project to help
offset the costs of SDCs for small houses. The Commission budgeted $100,000 to be made available to
builders of eligible structures. The Small House SDC Project is set to sunset on June 30, 2019, unless
extended by action of the Commission.
BACKGROUND
The Cities of Eugene and Springfield have both identified infill development and affordable housing as
priority community issues. The Commission has expressed a desire to support intergovernmental
cooperation on these issues, and agreed to examine its SDCs for small houses in 2017. After a series of
conversations, the Commission determined that assessing small houses (800 square feet or smaller) at an
SDC rate consistent with the MWMC’s existing multi-family rate would be justifiable and defensible. This
rate is currently $1,501.84, which is approximately $250.30 or 14% less than the rate for a standard single
family dwelling unit.
In 2018, the Commission discussed developing a program that would allow the MWMC to offset SDCs on
behalf of applicants that meet certain criteria and eligibility requirements for small houses. The
Commission determined the program should mimic the actions of the local jurisdictions in a
proportionate manner to how the local jurisdiction imposes SDCs for small houses.
Ultimately, the Commission directed staff to establish the Small House SDC Project as a line item in the
MWMC’s budget for an amount of $100,000. The Project is scheduled to sunset on June 30, 2019 (or
upon expenditure of the budgeted $100,000) unless extended by an action of the Commission.
Memo: Small Homes Systems Development Charges (SDCs)
June 6, 2019
Page 2 of 2
DISCUSSION
As of the time of this memo, four (4) qualifying small houses have met the criteria set in place by the
Commission and have taken advantage of the program and there are two (2) pending that staff is aware
of. Of the $100,000 budgeted, $93,992.64 remains. At previous Commission meetings in 2018 and 2019,
the Commission has expressed interest in rolling forward the remaining funds ($93,992.64) into the FY
2019-20 budget. Staff has taken the steps necessary to ensure this money is available in the Regional
Wastewater Program Budget.
The Commission has also expressed interest in exploring if the Small House SDC Project should continue
for an additional year, with a new sunset date of June 30, 2020. If the Commission wishes to extend the
Project beyond the June 30, 2019 date, it will need to take action at the June 14, 2019 meeting.
Staff plans to discuss this issue with the Commission at the June 14, 2019 Commission meeting, and will
provide an update with respect to the programs in place at the local jurisdiction level. Resolution 19-11
is attached (Attachment 1), which allows the Commission to extend the Small House SDC Project if
approved.
ACTION REQUESTED
Staff requests Commission review and approval of Resolution 19-11.
ATTACHMENTS
1. Resolution 19-11
ATTACHMENT 1
Resolution 19-11
Page 1 of 2
METROPOLITAN WASTEWATER MANAGEMENT COMMISSION
RESOLUTION 19-11 ) IN THE MATTER OF ALLOCATING RESOURCES
) IN THE FY19/20 REGIONAL WASTEWATER
) PROGRAM BUDGET TO ASSIST IN THE
) PAYMENT OF SDC’S FOR SMALL HOUSES
WHEREAS, The Cities of Eugene and Springfield have identified increasing access to
affordable housing and infill development as a priority community issue;
WHEREAS, The MWMC has determined that supporting construction of small houses
aligns with the MWMC’s Key Outcome #3 to support a “successful intergovernmental
partnership” with respect to affordable housing and infill development;
WHEREAS, The MWMC has determined a “Small House” is 800 square feet or less and the
resulting impact to the regional wastewater system from a Small House is proportionately less
than single family dwellings;
WHEREAS, The MWMC allocated $100,000 in the fiscal year 2018-19 budget to support
payment of Systems Development Charges for newly constructed Small Houses;
WHEREAS, $93,992.64 of the allocated $100,000 to support payment of Systems
Development Charges for newly constructed Small Houses remains unspent as of June 14, 2019;
WHEREAS, the City of Eugene and the City of Springfield may incentivize the construction
of Small Houses through the reduction or payment of their respective System Development
Charges;
WHEREAS, the MWMC desires to support payment of Systems Development Charges for
Small Houses imposed by it in a comparable manner as the respective cities impose System
Development Charges on Small Houses during fiscal year 2019-20;
WHEREAS, The MWMC desires to have the Small House SDC Project automatically expire
on June 30, 2020, or upon the expenditure of the budgeted $93,992.64, whichever occurs first,
unless the Commission elects to take action to extend it.
ATTACHMENT 1
Resolution 19-11
Page 2 of 2
NOW, THEREFORE, BE IT RESOLVED BY THE METROPOLITAN WASTEWATER
MANAGEMENT COMMISSION THAT:
Matt Stouder, as the duly authorized Executive Officer of the MWMC, is hereby authorized
to: (a) create a budget item for the Fiscal Year 2019-2020 budget whereby the MWMC may
designate up to $93,992.64 to apply towards SDCs incurred by builders of eligible Small Houses;
(b) delegate to MWMC staff the creation of criteria related to a structure’s eligibility for, and
participation in, the Small House SDC Project in a manner that will apply compably to any Small
House incentives for System Development Charges imposed by the respective city in which the
construction will occur; (c) delegate to MWMC staff the authority to regulate and administer the
Small House SDC Project to ensure only builders of eligible structures are allowed to participate
in the Small House SDC Project and to ensure compliance with the budget; and (d) require the
Small House SDC Project to automatically expire on June 30, 2020, or the upon the expenditure
of $93,992.64, whichever occurs first, unless the Commission elects to take action to extend it.
ADOPTED BY THE METROPOLITAN WASTEWATER MANAGEMENT COMMISSION OF
THE SPRINGFIELD/EUGENE METROPOLITAN AREA ON THE 14TH DAY OF JUNE 2019.
_____________________________________________
Vice-President: Pat Farr
ATTEST: __________________________
Secretary: Kevin Kraaz
Approved as to form: _________________________________
MWMC Legal Counsel: Kristin Denmark
______________________________________________________________________________
M E M O R A N D U M
DATE: June 6, 2019
TO: Metropolitan Wastewater Management Commission (MWMC)
FROM: Katherine Bishop, Environmental Services Program Manager
SUBJECT: Property Insurance Renewal
ACTION
REQUESTED:
Authorize and direct the General Manager to enter into agreements for
insurance coverage to be effective on July 1, 2019
ISSUE
The Metropolitan Wastewater Management Commission’s current property insurance coverage will
expire on June 30, 2019. The MWMC’s insurance agent of record is Brown & Brown Northwest (BBNW).
Ron Cutter, Senior Vice President/NW Public Sector Practice Leader and staff at BBNW have obtained
property insurance coverage pricing for discussion and consideration.
BACKGROUND
The MWMC carries insurance policies that provide risk insurance coverage, including property insurance
and liability insurance.
Liability Insurance – At the December 14, 2018 meeting, the Commission authorized the MWMC General
Manager to enter into an agreement for liability (casualty) insurance coverage for the 2019 calendar year
effective January 1, 2019. This policy covers general liability, administrative liability, public officials’
liability, non-owned and hired automobile liability, hired automobile physical damage, and
umbrella/excess liability.
Property Insurance Coverage - Generally covers physical loss to buildings, equipment and systems,
underground sewer pipelines, electronic data processing, and business personal property of the
Commission. The property insurance also includes earthquake and flood coverage. The MWMC
maintains insurance coverage levels including: a policy limit and flood coverage at $100 million,
earthquake coverage at $75 million, and sewer pipes including underground pipes at a sublimit of $10
million. The property insurance deductible is $250,000 (with some exceptions) per occurrence; as such,
the MWMC is self-insuring for potential losses below the deductible amount(s).
Memo: Property Insurance Renewal
June 6, 2019
Page 2 of 3
DISCUSSION
Property Asset Values – The total insured value of the MWMC’s assets is $332.7 million in FY 2019-20,
representing a net increase of $7.9 million or 2.4% in property and mobile equipment when compared
to the prior year. The increase in asset values takes into consideration added/upgraded and/or removed
systems, equipment, infrastructure and mobile equipment.
The current MWMC statement of values includes the Digester #4 and the Maintenance Building
Expansion projects that are now completed and the Water Quality Laboratory based on the contract
amount, with the addition of the Renewable Natural Gas project for builders risk/course of construction
coverage. The property premium pricing accounts for projects in construction and takes into
consideration the construction schedules.
Property Insurance – Due to the $332.7 million in assets and coverage levels for flood and earthquake,
many insurance providers do not have the capacity to provide insurance coverage to meet the standard
MWMC coverage levels for flood, earthquake, and underground pipes. At this time last year, the
Commission approved property insurance renewal with Starr Technical Risks Agency effective July 1,
2018, which included the second year of a rate lock agreement. Staff is requesting approval to move
forward with the third year of the extended rate lock agreement effective July 1, 2019.
It is important to note that the Starr Technical Risks Agency property coverage includes earthquake
coverage at $50 million. The additional Difference in Conditions (DIC) earthquake coverage is provided
by separate insurance providers, with DIC earthquake in year three reflecting market changes based on
quotes received in 2019.
The table below provides the property insurance pricing from Starr Tech. The Starr Tech property
insurance includes a policy limit of $100 million, a flood sublimit of $100 million, an earthquake sublimit
of $50 million, and a sewer pipes sublimit of $10 million. The DIC additional earthquake coverage
excludes underground sewer pipes, with pricing for $25 million in coverage (to $75M total) displayed
below.
Property Coverage Thru June 30, 2019 July 1, 2019 – June 30, 2020
Program Coverage & Premiums Expiring Renewal
Starr Tech / ACE America All Risk
Property Insurance includes $50M EQ $213,435 $211,530
DIC Earthquake at $25M $26,205 $30,183
TOTAL Premium $239,640 $241,713
Cost difference compared to Expiring - $2,073
% of cost difference to Expiring - 0.9%
Property Insurable Values $324,848,937 $332,734,400
DIC EQ Insurable Values $258,759,137 $268,814,100
Premium Rate/$100 Starr Tech 0.066 0.064
Premium Rate/$100 DIC 0.010 0.011
Memo: Property Insurance Renewal
June 6, 2019
Page 3 of 3
The property insurance pricing above does not include agent commissions, as the MWMC agent of
record services are based on an annual fee paid directly by the MWMC.
Fiscal Impact – The approved FY 2019-20 MWMC budget includes $320,000 programmed for property
and liability insurance, the MWMC agent of record service expense based on an annual fee, plus other
insurance related services. Staff will return to the Commission in late 2019 regarding general (casualty)
liability insurance coverage for the 2020 calendar year.
The requested action is for the property insurance coverage effective July 1, 2019 for the FY 2019-20,
with Starr Technical / Ace America All Risk for the extended third year rate lock agreement including
$50M in earthquake coverage (EQ), plus $25M in difference in conditions (DIC) earthquake coverage for a
total $75M in EQ coverage at a premium of $241,713.
At the meeting, staff will provide additional information and Ron Cutter, Senior Vice President/NW Public
Sector Practice Leader at BBNW will be available to participate in the discussion.
ACTION REQUESTED
After review and discussion, the Commission is requested by motion, to authorize and direct the General
Manager to enter into agreements to secure property insurance coverage for the period of July 1, 2019
through June 30, 2020.
____________________________________________________________________________________________________
M E M O R A N D U M
DATE: June 6, 2019
TO: Metropolitan Wastewater Management Commission (MWMC)
FROM: Josh Newman. Managing Civil Engineer
SUBJECT: Renewable Natural Gas (RNG) Market Dynamics
ACTION
REQUESTED: Information, discussion and Commission direction
___________________________________________________________________________
ISSUE
Staff and MWMC legal counsel have initiated negotiations with Trillium CNG (Trillium) to enter into
an Offtake Agreement for the MWMC’s renewable natural gas (RNG). Because it has been two years
since Trillium first proposed on the MWMC’s project and because market conditions have changed in
that period, Trillium is no longer offering the same terms as were described in their 2017 proposal. At
the June 14, 2019 Commission meeting staff will discuss market dynamics and the associated
influence on the MWMC’s position with Trillium and for RNG sales more generally. Additionally, staff
will provide an updated financial forecast adjusted to reflect the current terms proposed by Trillium.
BACKGROUND
On December 5, 2016, the MWMC issued a request for proposals (RFP) for the sale of RNG and the
associated environmental attributes. That RFP yielded three proposals. A review team scored and
ranked the proposals, and Trillium was selected as the offtaker for the MWMC’s RNG. However, the
proposals resulting from the RFP were only valid for 360 days following the issuance of the RFP. That
period ended on January 29, 2018.
On May 11, 2018, the Commission approved moving forward with the design and construction of
facilities necessary for the conversion of biogas to RNG for sale as contemplated in Trillium’s
proposal. The decision was predicated on a financial forecast model developed by design consultant
Kennedy Jenks Consultants and sub-consultant Blue Source. Staff discussed the underlying risks
which included legislative, administrative, and market risks. In addition, staff discussed the need to
enter into agreements with both NW Natural and Trillium.
In order to keep the relationship with Trillium, MWMC entered into a non-binding letter of intent
(LOI) with Trillium on August 17, 2018. The purpose of the LOI was to establish both parties’ intent to
Memo: Renewable Natural Gas (RNG) Market Dynamics
June 6, 2019
Page 2 of 3
cooperate in pursuit of an offtake agreement while the MWMC moved forward with the design and
construction of the RNG facilities and negotiated an interconnection agreement with NW Natural (so
that the RNG could be delivered to the vehicle fleets).
In keeping with the project schedule, on February 21, 2019 the MWMC issued an RFP for the
purchase of biogas upgrading equipment to allow the MWMC to upgrade the biogas to pipeline
quality RNG. Three qualifying equipment proposals were received, and after evaluation and scoring,
the highest scoring proposal was selected.
On May 10, 2019 the Commission authorized the Executive Officer to enter into an Equipment
Purchase Contract with the highest ranked equipment firm, which was Greenlane Biogas™.
Since the May 10 meeting, staff has discussed the off-take agreement with Trillium. During these
discussions, Trillium expressed that the terms set forth in their 2017 proposal were no longer
reasonable given certain market place changes. These, along with other market dynamics, are
discussed below.
DISCUSSION
The value of RNG derives in large part from the environmental credits available under federal and
state programs. The total value of RNG used as a vehicle fuel has three components: The physical gas
(or brown gas) value; the Renewable Identification Number (RIN) value; and a state low carbon fuel
credit if the gas is used in either Oregon or California. In CA, the credits are established as a feature of
the Low Carbon Fuel Standard (LCFS) and in Oregon, the credits are a feature of the Oregon Clean
Fuel Standard (OCFS). If the fuel is used elsewhere in the US, the revenue value to the MWMC would
be limited to the sum of the physical gas and RIN values as Oregon and California are the only states
currently with low carbon fuel programs. More states are anticipated to follow Oregon and
California’s lead and adopt similar programs in the future.
Market variables that influence the MWMC’s revenue potential from RNG sales include:
Limits to earning state credit values
Competition for placement in OR and CA with RNG produced from dairy and hog farm
digesters
Federal Renewable Fuel Standard (RFS) administrative actions including:
o The annual renewable volume obligation
o Issuance of Small Refinery Hardship (SRH) Waivers
o The annual cellulosic waiver credit (CWC) value
o The “reset” and “set” provisions of the RFS
These variables are described in Attachment 1. As the market has shifted, so too has Trillium’s
percentages of the RIN and CA/OR state credits that Trillium is now to include in an offtake
agreement. Table 1 below shows the comparison between the revenue split as proposed in 2017 and
what Trillium has now suggested they can agree to.
Memo: Renewable Natural Gas (RNG) Market Dynamics
June 6, 2019
Page 3 of 3
Table 1 – Comparison between Trillium’s 2017 and current proposed revenue split
RNG Component 2017 Proposed Revenue Split 2019 Proposed Revenue Split
MWMC Trillium MWMC Trillium
Physical Gas Value 100% 0% 100% 0%
RIN 80% 20% 70% - 80% 20% - 30%
LCFS (1), (2) 80% 20% 50% 50%
OCFS (1), (2) 70% 30% 50% 50%
(1) The 2019 proposed split on both LCFS and OCFS credits is 50% of the incremental value, which is
the credit value for the RNG minus the credit value for conventional natural gas.
(2) Trillium will no longer guarantee placement of the MWMC’s RNG in either of the CA or OR
markets
At the June 14, 2019, Commission meeting, staff will discuss the current understanding of market
dynamics and present an updated financial forecast based on staff’s understanding of the changed
offtake agreement terms described above. In addition, staff will discuss options for moving forward
with the offtake agreement with Trillium.
ACTION REQUESTED
Staff requests the Commission’s input and direction in consideration of the upcoming capital
investment associated with the purchase of the biogas upgrading equipment.
ATTACHMENTS
1. Staff Summary of Market Variables Influencing Potential RNG Revenue Value
Staff Summary of Market Variables Influencing Potential RNG Revenue Value
ATTACHMENT 1
June 6, 2019
Page 1 of 3
Limitations and Opportunities to Earn State Credit for the MWMC’s RNG
There are a finite number of vehicles in California and Oregon that can take renewable natural gas
(RNG), which is a limit on the potential demand for RNG. At present, the potential demand for RNG
greatly exceeds its availability in the two states where the low carbon fuel credit is available. The
delta between potential demand for and availability of RNG in these states appears to be shrinking
over time as the rate at which fleets are converting to be able to use RNG has lagged behind the rate
at which new RNG projects are being developed. However is widely anticipated that other states will
follow in California’s (CA’s) and Oregon’s (OR’s) footsteps. The more states that adopt low carbon fuel
programs similar to CA and OR, the greater the likely value will be over the long term for the MWMC’s
RNG. This is because more low carbon fuel programs means a greater opportunities for the MWMC
nationwide to place their RNG in a state with such credit opportunities.
Competition for State Credits Between RNG From Different Sources
OR and CA credit programs are based on nearly identical frameworks. The value of the credit in both
states is a function of the Carbon Intensity (CI) score of RNG, which is based on the feedstock. The
lower the CI score, the higher the credit value of the RNG. In general, RNG derived from dairy or hog
farm manure has the lowest CI scores. Next lowest is wastewater derived RNG, followed by landfill
derived RNG. The estimated CI value of future RNG produced by the MWMC 33.71 grams CO2eq per
joule. By comparison, some dairy digester projects are producing RNG with CI scores that are lower
than negative-200 grams CO2eq per joule. This means that dairy and hog farm derived RNG can
command state values that are five times higher than the value that municipal wastewater derived
RNG can generate. This makes dairy and hog farm RNG more competitive in the CA and OR markets.
Stated differently, as more dairy and hog farm projects come on line, it will make it more difficult to
guarantee placement of the MWMC’s RNG in CA or OR markets. The advent of these ultra-low,
negative CI score RNG projects is a relatively new development in the RNG space, gaining traction
over the last six months or so. This is a key factor influencing the terms that Trillium is now willing to
commit to under an off-take agreement as staff has recently discovered.
Federal Renewable Fuel Standard (RFS) Administrative Policy
Regardless of whether or not the MWMC’s RNG is placed in a state with low carbon fuel program,
RNG used as vehicle fuel anywhere in the US qualifies for the credit associated with the RFS, known
as the renewable identification number (RIN). The market and administrative variables that impact
RIN value are discussed below.
Renewable Volume Obligation (RVO): Under the RFS, the US Environmental Protection Agency
(EPA) goes through an annual rulemaking to set the mandatory renewable fuel volume obligations
that fuel producers and providers must meet. The EPA does this by estimating the supply potential of
renewable fuels in the coming year. When the EPA underestimates available supply potential for the
upcoming year, in general it results in low demand for RINs and RIN value falls. When the EPA over
estimates supply for a coming year, then demand exceeds supply and, generally speaking, RIN values
increase. As an example, the EPA underestimated growth in supply capacity in its estimation of the
2018 RVO, which lowered demand for D3 RINs. The EPA then substantially increased their estimate
for the 2019 RVO, indicating a correction for their previous mistake.
Staff Summary of Market Variables Influencing Potential RNG Revenue Value
ATTACHMENT 1
June 6, 2019
Page 2 of 3
Cellulosic Waiver Credit (CWC) Price: The CWC is a mechanism allowed under the RFS to allow an
alternative pathway for obligated parties to comply with the RFS cellulosic volume obligation. The
EPA sets the value of the annual CWC based on the annual national average wholesale price of
gasoline. The CWC price is a formula set by taking the greater of either 1) three dollars ($3), adjusted
for inflation, minus the wholesale gasoline price; or 2) 25 cents. The cellulosic volume obligation
(which traditionally is met through direct blending with a cellulosic fuel like RNG or purchase of a D3
RIN) can alternatively be met through the purchase of the CWC plus the purchase of a D5 RIN at
market value.
The value of the CWC thus can impact demand for, and trading value of, D3 RINs. However, CWCs
must be used in the year they are issued while a D3 RIN can be banked and used in subsequent years.
That additional flexibility provides added value to D3 RINs generated through the production of RNG
(or other forms of cellulosic biofuels). It should be noted that the MWMC’s RIN price forecast model,
developed by Blue Source, uses the CWC plus D5 RIN as a proxy for the D3 RIN. This is because of the
broad availability of gasoline fuel price forecasting models that can easily plug into the CWC
calculation.
Issuance of Small Refinery Hardship (SRH) Waivers: The RFS includes provisions allowing the EPA
to issue SRH waivers under certain circumstances. When EPA issues excessive amounts of these SRH
waivers, as they did in 2018, it lowers the demand for RINs including D3 RINs. This was seen by
proponents of a strong RFS (agricultural and renewable fuels interest groups) as an abuse of the SRH
provisions that has undermined Congressional intent of the RFS. The problem was so egregious in
2018 that D3 RINs lost 25% of their peak value and have continued to lose value in 2019 as refiners
are holding off on purchasing RINs in hopes that they may indiscriminately be granted SRH waivers
in 2019. In response to this, the Chairman of the US House Committee on Agriculture, Collin
Peterson, together with Representatives Dusty Johnson, Dave Loebsack, Rodney Davis, and Roger
Marshall introduced the bipartisan Renewable Fuel Standard Integrity Act of 2019, which is aimed at
preventing future abuses of the SRH provisions.
“Reset” and “Set” Provision of the RFS – The 2007 Energy Security and Independence Act set
renewable fuel volume requirements for a variety of categories (e.g., biogas qualifies under the
cellulosic biofuels category) through the year 2022. Under the federal code, EPA can use its waiver
authority to lower the RVOs when it estimates supply shortfalls in an upcoming year.
In July of 2018, the EPA announced its estimate of the 2019 RVO as well as its intention to modify
applicable volumes under the so-called “Reset” provision of the federal code1. This authority is
triggered when in two consecutive years the EPA has waived at least 20-percent of any RVO, which
occurred with EPA’s 2019 RVO rule.
The “Reset” provision will require the EPA to modify the volumes for the remaining years following
2019 (i.e., the years 2020 through 2022) in accordance with the following six studies:
Air quality, climate change, conversion of wetlands, water quality, etc.
Energy security of the US
1 The “reset” provision described in 42 U.S. Code § 7545, subpart (o)(7)(F) entitled “modification of applicable volumes”
Staff Summary of Market Variables Influencing Potential RNG Revenue Value
ATTACHMENT 1
June 6, 2019
Page 3 of 3
Excepted annual rate of production of renewable fuels
Infrastructure
Cost of transportation fuels and cost to transport goods
Job creation, price of agricultural commodities, food prices, etc.
This also will overlap with the so-called “Set” authority2 requiring that for years after 2022, the EPA,
the US Department of Energy (DOE) & the US Department of Agriculture will work together to set the
annual RVOs based on the 6 studies mentioned above and a review of the program from 2010-2022.
If new RVOs are set and achieved under the “Reset” and “Set” described above, it is unclear whether
obligated parties will still be eligible to purchase a CWC. This is the subject of speculation among
those in the industry. Some in the industry view the CWC as an intrinsic floor price, while others view
it as a price governor. Because MWMC’s RIN forecast model relies on the availability of CWCs over the
lifecycle of the project, in the event these were no longer available the model would need to be
completely overhauled. However, at this time there is no basis to update the MWMC’s RIN forecast
model. This topic will be revisited when there is better clarity from the EPA whether the CWC will be
allowed following the “reset” and “set” RVO modifications.
2 The “Set” provision described in 42 U.S. Code § 7545, subparts (o)(2)(B)(ii) entitled “other calendar years”