The regular meeting of the Board of Commissioners of Public Utility District No. 1 of Whatcom County was called to order at 8:00 a.m. by Commissioner Paul Kenner. Said meeting was open to the public and notice thereof had been given as required by law. Those present included Commissioners Jeff McClure and Mike Murphy and Legal Counsel Jon Sitkin. Staff: Steve Jilk, General Manager; Ann Grimm, Administrative Assistant; Brian Walters, Director of Utility Operations; Barb Shosten, Director of Finance; Annette Smith, Assistant Finance Director; Lew Gaskill, Accountant I; Fred Disch, Water Systems Supervisor; Rebecca Schlotterback, Water Resource Technician; Mike Macomber, IT/SCADA Technician; Dennis Yabsley, Electric System Supervisor, and Duane Holden, Project Manager. Public attending: Rick Maricle, ConocoPhillips; Tom Perry, Murray, Smith and Associates; Tom Anderson, ASE; Craig Cole, Gateway Pacific Terminal; Larry Helm, citizen.

• Public Comment
No comments made.

• Approval of the Meeting Minutes and Claims
The Commissioners were presented with the minutes of the regular meeting held February 22, 2011, and the following claims of March 8, 2011.

ACTION: Commissioner McClure motioned to approve the minutes of the regular meeting held February 22, 2011, and the claims of March 8, 2011. Commissioner Murphy second the motion. Motion passed unanimously.

• Water Treatment Plant 2 Design - Murray, Smith and Associates:
Task Order No. 19, Amendment No. 2
The PUD has approved a contract services agreement with Murray Smith and Associates for engineering services to the District. The District is completing certain capital improvements including Capital Project RW-1- Water Treatment Plant 2 Improvements.

The District has approved Task Order No. 19 and Amendment No. 1 to Task Order 19 with Murray Smith and Associates to provide engineering services related to pre-design of these Plant 2 Improvements. Amendment 1 to Task Order 19 expanded the original scope to include the preparation and submittal of the environmental and land use permit applications necessary for the project.

This effort evaluated different design alternatives and refined the project's objectives and design concepts, and concluded in December 2010 with the issuance of the draft report entitled Preliminary Design of Water Treatment Plant 2 Improvements (pre-design report).
Amendment No. 2 to Task Order 19 will provide for the Final Design of the proposed Plant 2 Improvements and the preparation of the bid documents to ready the project for bidding by January of 2012.

The District has included in the budget other capital projects at Plant 2 site including site improvements, settling pond material removal, maintenance shop/operations building. Engineering, architectural, geo testing and surveying services are budgeted to complete those projects.

Jilk said these other Plant 2 improvements which are currently separate capital projects will be wrapped into the RW-1 project, to be more beneficial and ensure they are in a progressive line of construction. The District staff, in working with MSA, our architects and other consultants has developed a "final design" scope of work and budget that reflects this "integration" approach. This integration into the long term operational needs of the District would be more advantageous, eliminating duplication in consultant costs, giving staff a better way of managing the projects and saving the District money in the long run by taking this approach.

Perry emphasized it will be more efficient as one project. The pre-design is developed for "one at a time" projects as sequencing needs to happen. Commissioner Murphy inquired if breaking down the projects could result in more bids and lesser costs. Perry felt it would be more resourceful to combine the projects rather than coordinating the work between two or more contractors in a very small space. This integration approach results in a higher Task Order 19 Amendment 2 budget with Murray Smith because the District has moved approximately $165,000 of consultant fees into this Task Order that were budgeted in other projects.

The estimate for this "Final Design" phase of the projects, including the inclusion of other projects wrapped into this Plant 2 Final Design phase is now set at a total cost not to exceed $1,562,653.00 plus expenses. This amounts to a rate of approximately 10% of projected construction cost of Plant 2 Improvements. Murphy questioned the amount of "expenses". Jilk said the amount is approximately $14,000 for travel time, office expenses, copies of drawings, bid documents, etc. He added this amendment does not have an option for the General Manager to approve any changes orders to this task without commission approval since this is a "not to exceed" approval. McClure asked for a summary of the dollar volume for construction cost. Jilk said the grand total is $17 million; approximately $15 million for Plant 2 improvements, $1 million for standby generation installation.

Perry said the pre-design was focused on defining the basic needs and a better understanding of specific improvements such as basin configuration, pump details, etc. and the amount of design work to this point is estimated at about 20%. McClure said he would like to see assumptions in terms of costs on the construction management phases and have updates provided to the Commission from time to time.

Funding for this work is budgeted in the District CIP program and was included in the 2010 bond sale. This recommended action comes with no option for the General Manager to approve any change orders to this Task Order without Commission approval since this is a "not to exceed" approval.

Kenner suggested that this item be tabled until the next commission meeting. Jilk recommended a work session and/or District staff work one on one with the Commissioners to provide a more detailed discussion on the amendment. Jilk will provide additional detail on the proposed amendment and budget.

ACTION: Commissioners requested agenda item to be tabled until the next Commission meeting on March 22, 2011. No further action taken.

• North County Digester Interlocal Agreement - Port of Bellingham/City of Lynden
Background: Representatives of the City of Lynden, the Port of Bellingham, Farm Friends of Whatcom County, Western Washington University, Washington State University, Whatcom County Conservation District, Natural Resources Conservation Services, private agriculture production businesses and the PUD continue to meet and discuss the concept of the construction of a anaerobic digester in North Whatcom County to generate methane gas and utilizing that product for several different purposes including but not limited to generating electricity, heat for central heating services, vehicle fuel and sale of a refined methane product as natural gas.

Jilk said the group has identified several offsetting benefits potentially developed by the construction and operation of such a facility including the reduction of greenhouse gasses, additional revenue to farmers, lower energy costs to residents, improvement of ground and surface water resources, the sale of electricity and other marketable by products.

The Port and the City of Lynden and the PUD representatives agreed to recommend to their governing boards to develop a working Interlocal agreement to jointly lead in this phase of the project to complete the feasibility study which will help determine if the project should move forward or not. Other interested entities in working with the City, Port and PUD are WWU, WSU, Farm Friends the Whatcom County Conservation District.

The Port of Bellingham adopted the Interlocal Agreement at their commission meeting last Tuesday and the City of Lynden is expected to take formal action to approve it next week. Darigold and the berry grower are interested in the project for several reasons, methane for fuel, replacement of natural gas for production use, and vehicle fleet use. A large truck fleet operator in the county has noted interest in the project and is considering a contribution to the project.

The next step in the process will be to prepare and send out a scope of work to prepare a feasibility study to be completed by a team of technical, legal and business/economic experts to identify the costs, location, operating parameters, funding sources and alternative and highest and best use of methane produced by such a facility, i.e. the generation of electricity, use as a vehicle fuel, waste heat distribution or natural gas. Jilk said the District has been asked to administer the scope of work and feasibility study upon Commission approval.

The estimated cost to complete the feasibility study is set at $75,000. The Bio Gas team is working with WWU and WSU to complete the study. Jilk indicated he and the team expects that the cost may well be less than the $75,000 and there is a possibility of some small amount of funding through WSU available. Additionally, the City of Lynden has committed to funding a share of the cost of the study and has applied to the Port of Bellingham, with the support of the other smaller cities in the County, for funding from the Port. The Port has indicated they will consider additional funding beyond the Small Cities request from Lynden.

Originally, the Port planned on paying the majority of the cost for the study; however, the Port's source of funding expected to use to fund this study was eliminated by virtue of changes in private sector financing last year, not related to this project. There is also a commitment for a share of funding to come from Darigold of Lynden and a large berry grower in North County has indicated a commitment for a financial contribution.

To date the amount of committed funds is set at $38,000. It is expected that there will be another $20,000 committed in the next 30 days from sources indicating interest but not yet confirmed. This would leave the project in need of additional funding if the costs do come to the $75,000. District staff is recommending that the District commit to a cost share of not to exceed 20% of project total cost or $15,000, whichever is less. Jilk said this cost will be allocated out of non-rate revenue so our current customers are not paying this cost.

ACTION: Commissioner McClure motioned to approve the Interlocal Agreement between the Public Utility District No. 1 of Whatcom County, the Port of Bellingham and the City of Lynden pursuant to Chapter 39.34 RCW to provide for the joint investigation and feasibility analysis of a community-sized biogas/methane production facility and authorize a cost share of up to 20% of the project cost and not to exceed $15,000 whichever is less. Commissioner Murphy second the motion. Motion unanimously passed.

• Gateway Pacific Terminal Presentation
Jilk introduced Craig Cole, local businessman and former county councilman who presented an update/overview of the proposed shipping terminal at Cherry Point. Highlights included:

• Employment data and economic problems in Washington State/Whatcom County are on a decline as well as the standard of living. Whatcom County is losing ground to the rest of Washington State by the loss of industrial, manufacturing and construction jobs. There is sluggish job recovery, private sector jobs growing slowly and public sector jobs declining, and lower tax revenues.
• Exporting is essential to economic recovery. The trade balance is at a $497 billion dollar loss to exports over imports. There is no method to link U.S. bulk commodity producers to Asian markets without traveling through northern tier states to foreign ports, which means more time, distance and costs to export these goods.
• SSA Marine is a world leader in modern shipping terminals, high wage union employer with award winning environmental practices. The proposed location of approximately 1,100 acres at Cherry Point is appropriately zoned and is the last and best naturally deep water port on the west coast which would require no dredging. It can accommodate cape-size vessels. It also is accessible by rail and roads.
• Company History - SSA Marine began in 1949 as Bellingham Stevedoring. It remains in the state, is now based in Seattle and still controlled by the founding family. SSA is the largest marine/rail terminal operator in the U.S. and western hemisphere. It has won several environmental awards and focuses on cleaner operations.
• Gateway Pacific Terminal is ready to begin the process. The Aquatic Reserve Management Plan is now complete. The multi-commodity terminal would have the ability to serve dry bulk commodities such as potash, grains, coal, calcine coke and wood bio-fuels. Jobs, spending and tax revenues are estimated between $400 and $500 million in construction over a period of two years. SSA estimates that during the construction period: the total of direct and indirect jobs is 4,000; total direct, induced and indirect annual payroll is $161 million; total additional annual local purchases is $315 million; annual state and local tax impact is $54 million.
  
  Jobs, payroll and tax revenues during ongoing operations are estimated at: direct employment of 280 jobs; indirect employment at 950 jobs; induced employment at 400 jobs = total of ongoing jobs at 1500; total direct, induced and indirect annual payroll at $91.8 million; and, annual state and local tax impacts at $9.8 million.
• Gateway Pacific indicates it will harmonize with the environment. Almost half of the site will be left in a natural state; no shoreline disturbance; strategically located not to require dredging and avoid eel grass; modify ship approaches to accommodate herring spawning season; provide ship to shore power for cold ironing; and, storm drainage water retention and treatment will be on site.
• The law requires comprehensive, fact-based review of economic and environmental issues by federal, state and local agencies. SSA's proposed schedule:

March 2011 - EIS, NEPA and SEPA processes
December 2012 - Record of Decision
January 2013 - DNR Lease and begin construction
January 2015 - Start operations

• Summary of the Gateway Pacific Terminal:
  • Time is now
  • Participants (not spectators) in the world economy
  • Support Whatcom County's land use planning
  • Rebuild Whatcom County's base of high wage, skilled industrial jobs
  • Important new source of tax revenues
  • Jump-start exports and our economy
  • Support farmers and other produces across America
  • Designed, constructed and operated to work with the environment
  • Multi-commodity capability for enduring value in changing world markets
  • Puts private investment to work for America's future
  • Developed under high USA environmental standards with public input

Commissioner McClure asked what kind of support SSA is seeking. Cole indicated that letters of support when and where appropriate and to help promote the project are a few ways to show support. Cole distributed a brochure packet on the project as well. McClure thanked Cole for his time and presentation of the project.

ACTION: For information only. No action taken.

• Manager's Report
Solar Project -Staff is continuing to conduct due diligence on the proposed project at the PUD's Trigg Road property.

Regence BlueShield/PeaceHealth - St. Joseph Hospital
Jilk indicated that staff is internally tracking the contract negotiations between Regence and PeaceHealth. He has also voiced concern by writing letters to the Washington State Insurance Commissioner. Staff will be updated as negotiations continue.

District Public Works and Purchasing Presentation
Last week Sitkin and Rich Davis from CSD gave a lunchtime presentation on the District's guidelines for public works contracts and state purchasing procedures as related to PUDs. Jilk said it was very beneficial as the District is developing more capital projects. He commended Annette Smith on a job well done for tracking purchases and ensuring the District is within state regulations. He indicated a similar, abbreviated version of the presentation will be done again prior to the 2012 budget preparation. Sitkin added that the presentation answered many of the earlier questions regarding bidding, request for qualifications, bond forms, etc.

• Executive Session
Jilk requested an Executive Session to discuss personnel issues and potential water right litigation with no formal action to be taken afterwards. Legal Counsel was present. There being no further business for the regular meeting, the Commission adjourned at 9:25 a.m. to Executive Session.

• There being no further business for the regular meeting, the Commission adjourned the regular meeting at 10:05 a.m.

President/Commissioner

Secretary/ Commissioner

Commissioner