This $150,000 First Amendment to the Entrix Professional Services Agreement for this Fiscal Year is required to fund three tasks regarding environmental regulatory matters that have exceeded prior estimates or were not known at the time of budgeting. The three tasks are the following:

1. Lake 1 Environmental Compliance $115,000
2. Separating Olive 1 and Olive 2 NOx retrofit Compliance filings $ 20,000
3. Communities for Better Environment lawsuit $ 15,000

Total $150,000

The current Professional Services Agreement is for $250,000. This amendment will bring the total contract to $400,000.

Entrix, Inc., formerly known as Sierra Pacific Environmental, has represented Burbank Water and Power since 1992. Their track record has been good, both in terms of meeting regulatory objectives, as well as staying within budgetary limits. However, environmental regulatory issues have been particularly difficult this year.

Environmental compliance issues associated with Lake 1 were estimated to be $55,000. This work included an emissions source test and the certification of that successful test. However, that test did not pass the SCAQMD�s strict standards.

Of the 300 LM6000�s in operation in the United States only about 24 have SCR NOx controls. These NOx systems are new and all of them placed into operation within the last 18 months. The SCR NOx controls in Southern California operate under the strictest standards. The Los Angeles Department of Water and Power (LADWP) has had difficulty in passing these same standards with its LM6000 plants as well.

As Southern California has the strictest NOx standards and as the technology to achieve this standard has not been proven, compliance with the standard can be difficult. We have used the same technology as LADWP. We have found the following in order of importance:

1. The catalyst must be of the highest quality. In particular, the catalyst must not contain any residual associated with its manufacturer.
2. The ammonia spray must be adjusted to match the distribution of the exhaust flow across the surface of the catalyst.
3. The distribution of the exhaust flow must be made as uniform as is practical in order to achieve the best performance of the catalyst.
4. The temperature, volume flow, speed of exhaust flow, and transport time of the ammonia must be carefully considered in order to optimize the SCR performance.

LADWP found its catalyst to be defective and the manufacturer replaced it. The replacement catalyst was also found to be defective. The manufacturer again replaced it. Similarly, BWP found its catalyst to be defective and the manufacturer has replaced it.

Entrix has been playing the lead role in advising BWP on how to best proceed in correcting this matter. They have been assigned this role as they have the greatest expertise and they are independent in that they have not been involved in the design of the plant so they have no design issues they feel they must defend.

It is expected that with the new catalyst, and with some adjustment to the ammonia spray pattern, Lake 1 will pass its emissions test. By improving the distribution of the exhaust flow, and optimizing its operation, the life of the catalyst can be significantly extended to several years. Vital to this successful operation is receiving a catalyst of the highest quality.

The emissions test is not expected to be an easy test to pass. In particular, the Reactive Organic Gases (ROG) will be particularly difficult to pass. The required performance level is lower than the ambient level at times. Traffic in the yard or even from the I-5 Freeway is sufficient to raise the ambient levels beyond that allowed. Therefore, the testing will be conducted when I-5 traffic is expected to be light, it is raining, and traffic can be prohibited within the yard.

Entrix proposes to perform the following services:

• Preparation of numerous breakdown reports for submittal to the SCAQMD as a result of Lake 1 catalyst and ammonia injection system malfunctions.
• Response to failed source compliance demonstration test in August 2002.
• Preparation of interim and regular variance petitions for submittal to the SCAQMD Hearing Board, and participation in variance hearings.
• Technical support to City staff, and contractors for diagnostic testing conducted during the variance period, and preparation of remedial action recommendations.
• Participation in project team meetings.

• Review of Lake 1 testing results and preparation of the testing analysis report.
• Assist the City in the selection of technical support contractors to perform flow modeling analyses and provide system enhancement recommendations to achieve compliance with SCAQMD rules and regulations and permit emission requirements.
• Support the City in the installation of Lake 1 system enhancements and in the final source compliance demonstration testing.

This proposal has no contingency should the next set of tests fail.

Olive 1 and Olive 2 are being retrofitted for NOx reductions. It was anticipated that both Olive 1 and 2 would be submitted as a single application to the SCAQMD and EPA. However, SCAQMD has decided that two permits will be required and that they would review them in series rather than at the same time. This increases the amount of time required to meet with SCAQMD staff and appear before its Boards.

Entrix has estimated this cost to be $20,000.

Late last year, the Communities for a Better Environment (CBE) sued the City for actions stemming from the energy crisis of 2000. BWP required additional NOx credits because of its increased power operations. However, because of the increased power operations throughout the SCAQMD basin a critical shortage of credits developed. A new SCAQMD approved program for NOx credits made NOx credits available by creating credits that could be sold to generate revenue for the deployment of low emission vehicles. BWP utilized this program and purchased NOx credits that generated revenue to fund MTA purchasing low emissions buses. In effect, the BWP NOx credit purchase allowed MTA to replace some of its polluting busses with new lower polluting buses without having to raise its fares.

The EPA must approve rules made by SCAQMD. There is a considerable delay, at least 12 months and often longer, in securing EPA approval. However, during this period when rules have been enacted by the SCAQMD, but not approved by the EPA, is the federal Clean Air Act makes it possible for individuals and citizens groups (like CBE) to file lawsuits against those following such rules.

Entrix provides the necessary technical support to best address this lawsuit. The specifics of the lawsuit cannot be discussed in public at this time.

All that remains to make the Lake 1 combustion turbine operational is successful operation of the unit's NOx reduction equipment, the SCR. Prior tests nearly passed. At high load levels the NOx levels exceeded the 5 parts per million standard by just a fraction. As a result, BWP conducted a detailed evaluation of the complete system finding numerous refinements to improve the performance. The manufacturer of the catalyst has replaced the catalyst and provided BWP staff training regarding the installation and handling of the catalyst at no cost to BWP.

Tests will be scheduled as soon as possible and under the most favorable conditions possible. The test results will be compiled and certified by an independent testing company and sent to the SCAQMD. The SCAQMD staff will then review the results. If the results are satisfactory a permit to operate will be issued. This process can take nearly two months.

It is important that Lake 1 returns to service for this summer. Delays in securing SCAQMD authority to proceed with installation of the NOx retrofit for Olive 1 and 2 will delay the availability of these plants into early summer.

In order to complete Lake 1, secure the required authority to proceed with the Olive 2 NOx retrofit, and to properly evaluate the technical issues associated with an environmental lawsuit, the services associated with this PSA Amendment are required. Entrix is the best firm to provide these services because of their experience with BWP.

FISCAL IMPACT

Sufficient funds are available from bond proceeds related to the NOx retrofit and Lake One capital projects to fund the $135,000 required for those projects. The remaining $15,000 for the Communities for Better Environmental lawsuit will be funded by budget transfers from the Fiscal Year 2002-03 Power Supply budget.

Staff recommends that the City Council approve this $150,000 First Amendment to the Entrix Professional Services Agreement for this Fiscal Year to fund three tasks regarding environmental regulatory matters. The three tasks are the following:

1. Lake 1 Environmental Compliance $115,000
2. Separating Olive 1 and Olive 2 NOx retrofit Compliance filings $ 20,000
3. Communities for Better Environment lawsuit $ 15,000

This amendment will bring the total Entrix contract to $400,000.

If the Council concurs, the appropriate action is a motion adopting the following resolution:

A RESOLUTION OF THE COUNCIL OF THE CITY OF BURBANK APPROVING A FIRST AMENDMENT TO THE PROFESSIONAL SERVICES AGREEMENT BETWEEN THE CITY OF BURBANK AND ENTRIX, INC. FOR ENVIRONMENTAL CONSULTING SERVICES.

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