Agenda - 02-03-2009 - 6b - Laserfiche WebLink

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3 Additional Issues Unresolved Post December 11 — Termination Rights and Flare Revenues In general terms, the proposed Agreement states the County will grant UNC the rights to the landfill gas ("LFG.") generated at the Eubanks Road Landfill. UNC will construct a system to collect, transport, and combust such LFG, initially through flaring and then through electricity generation. In exchange for the LFG rights, UNC will make monthly payments to the County based on a percentage of the heating energy value of LFG that UNC has flared and used to generate electricity. UNC is responsible for all costs and operating responsibilities associated with the LFG Project. Attachment 1A and 1B is the Proposed Agreement. Attachment 2 is the Pro forma documents. The proposed Agreement, in its current draft, remains problematic regarding the County's rights (termination or otherwise) in the event UNC fails to construct either the Gas Collection or Gas Conversion components of the landfill gas system. County staff previously understood UNC's negotiated position to be that the County could terminate the Agreement if UNC had not commenced operation of both the LFG Collection System and the Gas Conversion System within five (5) years of the parties' execution of the Agreement. However, in discussions between the parties after the December 11, 2008 BOCC meeting, UNC clarified its position (as reflected in the proposed Agreement) that the five (5)-year termination deadline would run from the date of the issuance of the last permit, easement, or other approval necessary to construct the LFG Collection system and the Gas Conversion System — not from the date the parties signed the Agreement. UNC further took the position any upward adjustments to the revenue the County would receive from gas flaring that might result from their delay in constructing either the Gas Collection or Gas Conversion System would not take effect until a period of time similarly running from the date of the issuance of the last permit, easement, or other approval necessary to construct the Gas Conversion System — not from the date the parties signed the Agreement. Staff is concerned the positions held by UNC do not provide the County with a meaningful remedy in the event UNC does not receive the necessary permits, easements, or approvals to authorize the construction of the Gas Conversion System. Under such circumstances there would not be any event to trigger a deadline that would provide the County with recourse to either adjust upward the percentage of revenue paid to the County for the flaring of LFG or to terminate the Agreement in the event UNC failed to construct the Gas Conversion System. This is not merely an academic concern because UNC may face very real hurdles in obtaining the approvals necessary to construct the Gas Conversion System. Attachment 3 is a memo from County Engineering on the subject easements through the Southern Human Services Center Campus. The County has explained its concerns extensively to UNC and attempted to negotiate a mutually-acceptable solution. UNC has participated fully in the dialog but ultimately indicated its position was final and non-negotiable. Attachment 4 is a memo from UNC that County staff requested to state their rationale regarding termination as well as prospects for receiving additional off-setting revenue for project development. While the County has no reason to believe UNC will not proceed to implement the two phases of the project in a timely manner, including pursuing the necessary easements, the proposed