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20200407 Regular City Council Meeting - Packet (3)04-07-20 Item No. 18 Staff Presentation 0#1TY OF VERNON Property • Bone ern r County l 020 t� 1 Jaw Bone Canyon Property Facts + f tF- Ir � .. tie.: .,. r -•� . r F .r • Jaw Bone Canyon purchased with intent to explore wind and solar renewable energy generation • Long-term investment for City, with environmental reviews and project development necessary • Electric system power supply resources were to benefit electric customers and assist Vernon in maintaining compliance with anticipated renewable resource requirements Not considered a revenue stream, as costs/revenues are considered as Renewable Portfolio Standard (RPS) pass - through to customers 2008 Approximately 30,000 acres of Jaw Bone Canyon property purchased 2010 Vernon sells 12,500 acres to NextEra; City cancels CAISO Transmission studies; and attempts second sale with same pricing structure 2011 Bright Star Canyon Wind Project commences with contracts established for studying potential of land and pre -Environmental Impact Report data collection; and Covenant established between Vernon and Kern County 2013 Request for Information distributed for wind and/or solar energy developers 2018 Request for Information distributed through Southern California Public Power Authority (SCPPA) for joint project with multiple utilities for wind and/or solar developers or conservancy groups 2020 Vernon project activity is on hold indefinitely and Kern County regional development activity has stopped October 2008 • Vernon purchased approximately 30,000 acres of land from ReNu Resources zoned for agriculture • Included an option to work with Bureau of Land Management (BLM) to add solar; solar option has since expired and land is now owned by State March 2010 • Vernon sells 12,500 acres to NextEra for the North Sky River Wind Energy Project for $40 million April - November 2010 • City attempted to repeat NextEra Sale pricing - $3,300 per acre ($60 million) • Auction process was cancelled due to lack of acceptable bids • Major issues identified: • Avian (Golden eagle and Condor); lack of Environmental Impact Report (EIR); no entitlements; public opposition; no meteorological studies; no science; no transmission February 2011 • Project focused on 8,756 acres of remaining land on the West • East was not considered due to height restrictions from the nearby Edwards military base (detail on next slide) • Smaller turbines were possible, but not economical due to transmission and infrastructure costs Studies to Evaluate Land Contracts established for: Meteorological Towers • Sodar Units • Meteorological Studies • CH2M Hill for Pre - Environmental Impact Report (EI R) Military Review Restrictions -equirements :tures over 500 ft iew Requirement 1 turbines & inication towers over ft. All other structures over 1 OC RFI for Wind and/or Solar Energy Developers • Opened in December 2013 and Closed in January 2014 • 3 responses: • EDP Renewables -1 OOMW wind and/or solar under 20 year Power Purchase Agreement (PPA) Ogin 100 kW turbines less than 200 ft tall, total 36.5 M W rating, 30 year PPA Oltmans 0 Solar panel installation in Summary of Ogin Response: w" OGIN could only fit 36.5 MWs of capacity on the entire City West land. Their offer was to produce and sell to the City 1 MWh of energy for $80. The installed cost without substation or transmission was $6 - $7 million per MW. Their proposal was based on 365 each 1 OOkW jet type wind turbines (less than 200 feet high), the maximum they could fit on the City's west lands due to the rugged topography (with a new Capacity factor of 44.8%). The CAISO Interconnection was left to the City. The cost to build was about $255 Million, but with transmission and a substation, the total was to be approximately $335 Million for a 36.5 MW wind farm. Scaled for comparison purpose to a conventional wind farm of 1 OOMWs at $1 million per MW (using their technology cost) _ $616 million. A conventional plant of 100MWs = $100 million. RFI for Developers and/or Conservancy Groups - Opened in October 2018 and closed in December 2018 • Publicly posted on SCPPA website for possible joint project with other SCPPA utilities 5 responses : 3 solar developers in reference to expired solar land option • 1 energy storage producer • NextEra • Wind feasible, but challenging and not competitively priced NEX-Fera ENERGY Summary of NextEra Response: "While it is feasible to develop, interconnect, and construct wind generation in this region, the numerous development challenges ... will introduce risk and contribute to higher costs. It will be challenging for any wind generation in this region to compete with $40 - $50/MWh wind generation in other parts of the state or neighboring states. Similarly it will be challenging for any solar generation in this region to compete with -V$25/MWh solar in flatter, more accommodating areas of CA such as Riverside County, Antelope Valley, or other parts of Kern County." As development options were explored, complications arose with the following: • Environmental concerns • Logistics and administration • Infrastructure • High wildland fire risk Rough terrain Environmental Concerns • Avian • Golden Eagle, California Condor • Bald and Golden Eagle Protection Act • Migratory Bird Treaty Act • Pacific Crest Trail mow- 9- Logistics and Administration • Heavy opposition from Kern County • Kern County Planning Department has stated on numerous occasions that they will not be recommending zone change due to environmental concerns and risk of litigation • In 2012, Vernon suspended Pre-EIR activity under recommendation by Kern County Planning Director • Also in 2012, Kern County Supervisor Scrivner stated publicly that he would not support a project in the area regardless of technology due to opposition • Wind can not compete with current solar costs Wind = $45 - $52/MWh Solar = $22 - $25/MWh Logistics and Administration - Restrictive Covenant Resolution No. 201 1-1 13 passed June 23, 2011 "The City of Vernon has had a cooperative, productive working relationship with Kern County, and the City desires to confirm its willingness to comply with Kern County's General Plan and Zoning Code in connection with development on the Property. In connection with the proposed development on the Property, Kern County has requested that the City confirm its willingness to comply with the General Plan and zoning code of Kern County, particularly since certain state laws, such as California Government Code section 53090 et seq., raise questions regarding the County's ability to regulate development and other activities on the Property. These provisions have been interpreted to exempt cities from complying with the General Plans and zoning ordinances of the counties in which they own property. Staff of the City of Vernon and Kern County have proposed the Covenant, which is intended to respond to Kern County's request; enhance Vernon's ability to develop the Property; and further the mutual interests of the City and Kern County." Infrastructure • California Independent System Operator (CAISO) generator interconnection procedure requires technology and project specific information to deem the application complete • Without detailed information, CAISO does not assign a queue There is a cost to apply and queue to interconnect with CAISO for a 100 MW generator • Application fee = $250,000; • Bind a financial security deposit = $7.7 million; • And risk all or a partial amount if a queue position is assigned, but the project does not move forward City submitted an application with CAISO Folsom which required an $7.7 million deposit City opted out before deposit was due because project was not supported by Kern County Approximately $35,000 was lost in transaction • There are no wind project queue positions in Kern County - all are withdrawn • The last withdrawal was Desert Flower Wind Farm on 4/15/2019 Fire Risk • The Vernon owned land is in the middle of Cal Fire's Tier 2 Elevated Fire Risk Area • Wild fire mitigation currently carries the highest legislative and regulatory risk in the electric industry • Any transmission owner in a high wildfire risk area is obligated to complete burdensome studies, mitigation, maintenance and adhere to strict compliance to operate the transmission line _{ arj Y }Y wma PAP p Rough Terrain Jaw Bone Canyon is situated in rough terrain, adding to the complexity of any development project - Other projects a few miles away are positioned on smoother and flatter land, closer to the desert in the east Vernon property is closer to the Sequoia National Forest, more rugged with a large amount of vegetation A hiker can be seen on the Pacific Crest Trail which runs through Vernon land Total Cost to Date = $54 million Summary of Expenditures: • Land studies, technological evaluations, consultant fees, technology installation, data collection/reporting equipment, professional reports Activities have since ceased Current Contracts/Costs Property Taxes $39,191 in fiscal year 2019/2020 • Since 2008, $433,550 has been expended for property tax on Jaw Bone Canyon land Simon Wind $24,500/year Expenses paid by Vernon Public Utilities, under Capital Improvement Projects (CIP) and Public Benefits - research, design, and development (RD&D) Projected Costs if City Pursued Development of Land • Remediation of Native American burial grounds (North Sky River spent $10 million) Transmission Infrastructure estimated at $80 million which would include all material and construction from the wind farm substation to the down stream grid tie-in Legal fees from opposition estimated at $6 million (Citizens Opposing a Dangerous Environment - local group, Sierra Club, and Audubon Society) • Construction and Commissioning estimated at $170 million - $200 million • Environmental Impact Review estimated at $2 million (would need at least 3 years to complete) • Engineering and Development Costs estimated at $3 million - $5 million • Refurbishment/replacement of deteriorating meteorological towers estimated at $100,000 Key Points The City is not actively pursuing the development of Jaw Bone Canyon land Not considered a revenue stream, as costs/revenues are considered as Renewable Portfolio Standard (RPS) pass - through to customers • Selling the land at this time would result in a loss on the books for the City due to the amount invested The land is not currently burdening the City with exorbitant costs The City cannot negotiate land development without Kern County key personnel and currently there is little to no development activity in the Kern County region Years of thorough vetting with internal/external legal counsel, internal lead consultant, third party consultants, and Kern County Planning and Natural Resources have concluded that a viable, affordable project on the City's Jaw Bone property does not exist 4 0 l Back -Up Slides EAST WEST BANK (blank) O -.:. . (blank) BARCLAYS CAPITAL BARCLAYS CAPITAL INC. BLACK & VEATCH CORPORATION BLX GROUP LLC BOND LOGISTIX LLC BURNS & ROE, ENTERPRISES INC. BUSINESS CARD CH2M HILL CH2M HILL ENGINEERS, INC. COMMONWEALTH ASSOCIATES, INC. DANIEL O'CALLAGHAN FRANCES MCNEEL GREER/DAILEY/MINTER INTRALINKS, INC. NORTHTRONICS PTY LTD NRG SYSTEMS, INC. PASQUINI ENGINEERING INC. PORT CANAVERAL, POWER CONSULTANTS INC. POYRY ENERGY (OXFORD) LTD. RENU RESOURCES, LLC. SECOND WIND SYSTEMS, INC. SRT HELICOPTERS TARA ENERGY, INC V-BAR, LLC VENTYX ENERGY, LLC WZI INC. (blank) 9,154.69 (1,000.00) $ 28,375,848.89 $ 529,778.00 $ 2,346,579.00 $ 6,315.00 $ 31,945.00 $ 561,678.01 $ 8,320.00 $ 1,190,381.08 $ 72,637.20 $ 190,406.00 $ 142,071.39 $ 9,000.00 $ 2,000.00 $ 823.13 $ 41,358.00 $ 8,377.49 $ 14,112.00 $ 386,136.20 $ 40,908.62 $ 129,000.00 $ 102,800.00 $ 7,420.00 $ 95,433.49 $ 17,906.71 $ 22,950.00 $ 13,521.09 $ 5,634,043.97 COMMERCE ESCROW COMPANY $ 42,013,052.55 STEWART TITLE OF CALIFORNIA $ 1,250.00 (blank) $(33,060,718.00) 04 ERIC T. FRESCH $ 87,965.00 JEFF A. HARRISON $ 125,261.88 LATHAM & WATKINS LLP $ 3,529,267.76 LAW OFFICES OF ERIC T. FRESCH $ 302,305.31 RICHARDS, WATSON & GERSHON $ 18,513.75 (blank) $ 950,699.34 COUNTY OF KERN DEPARTMENT $ 100.00 COUNTY OF LOS ANGELES $ 150.00 JACKIE DENNEY-KCTTC $ 98,567.36 (blank) $ (17,867.98) Grand Total $ 54,038,451.93 Vendor ACKIE DENNEY-KCTTC ACKIE DENNEY-KCTTC ACKIE DENNEY-KCTTC • • Property tax/various locations 55.9000.530015 55.9000.530015 55.9000.530015 AmountYear $11,330.92 2009 CheckDate 12/01/2008 Kern county taxes/vrs location Kern County Taxes/Vrs Loc 10-1 $11,907.13 $7,957.80 2010 10/19/2009 11/15/2010 2011 ACKIE DENNEY-KCTTC ACKIE DENNEY-KCTTC Red Rock Unsecurd Prop Taxes 1 Secured Prop Taxes Fy 11-12 055.170461 $64,424.96 2011 2012 03/30/2011 11/01/2011 055.170461 $34,142.40 ACKIE DENNEY-KCTTC JACKIE DENNEY-KCTTC Unsecured Taxes No. 11- 8001440 Late Payment Fees 055.9000.530015 $7,204.8 2012 $1,172.77 2012 03/06/2012 03/06/2012 055.9000.530015 ACKIE DENNEY-KCTTC ISecured Prop Taxes FY 12-13 Secured Prop Taxes FY 13-14 2014-2015 Secure Prop Tax Bill 055.9000.900000 $36,318.79 2013 11/06/2012 ACKIE DENNEY-KCTTC ACKIE DENNEY-KCTTC 055.9000.900000 55.9000.900000 55.9000.900000 $34,373.90 $35,360.75 $36,208.27 201 11/05/2013 10/23/2014 11/17/2015 2015 201 KERN CO TREASURER Property Tax: FY 2015-2016 KERN CO TREASURER 2016-2017 Sec. Prop Tax Bill 55.9000.900000 $36,211.96 2017 12/06/2016 KERN CO TREASURER 2017-2018 Sec. Prop Tax Bill 55.9000.900000 $39,481.81 201 12/05/2017 KERN CO TREASURER KERN CO TREASURER 2018-2019 Sec. Prop Tax Bill 2019-2020 Sec. Prop Tax Bill NSF Fee 55.9000.900000 55.9000.530015 $38,235.19 $39,191.27 2019 202 2020 12/04/2018 12/05/2019 12/05/2019 KERN CO TREASURER 011.1004.592010 $27.00 $433,549.76 General Challenges - Other Nearby Projects October 2011 • Citizens Opposing a Dangerous Environment v. Kern County • Sierra Club v. County of Kern July 2010 • City receives notice for security deposit from CAISO for Transmission engineering studies of $7,713,100 due by August 26 • City cancels application process just before August 26 and receives $245,000 back from initial study deposit