HomeMy WebLinkAbout2011/11/01 Item 08NO WRITTEN MATERIALS ARE AVAILABLE
FOR THIS ITEM:
8. REPORT ON THE STATUS OF DEMOLITION AND
REMEDIATION OF THE SOUTH BAY POWER PLANT
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DYNEGY SOUTH BAY
FREQUENTLY ASKED QUESTIONS
Q. What is the difference between Dynegy, Inc. and Dynegy South Bay LLC?
A. The South Bay Power Plant ("SBPP") is owned by Dynegy South Bay LLC
("Dynegy South Bay"). Dynegy South Bay is a separate legal entity and a fifth
or sixth tier subsidiary of Dynegy Holdings, Inc. ("Holdings") which is 100%
owned by Dynegy, Inc.
Q. What happens to the escrow fund if Dynegy South Bay declares
bankruptcy?
A. In the event that Dynegy South Bay declares bankruptcy the escrow account
is protected from becoming part of the bankruptcy estate. The Port District
would look to the Duke Guarantees for completion of their obligatians. The
Guarantees are continuing, irrevocable, absolute and unconditional irrespective
of 1) any amendment to, waiver of or consent to, departure from, or failure to
exercise any right, remedy, power or privilege under or in respect of, the Lease
or any other transaction document; 2) any exchange, release or nonperfection of
any collateral, or any release or amendment or waiver of or consent to
departure from any other guaranty of or security for the performance of all or
any of the guaranteed obligations; or 3) the insolvency, bankruptcy,
reorganization, dissolution or liquidation of Dynegy South Bay or any change
in ownership of Dynegy South Bay.
Q. When do the Guarantees expire?
A. The Guarantees are continuing and shall remain in full force and effect until
satisfaction in full of all the guaranteed obligations and are binding upon Duke
its successors and assigns.
Q. Why is the demolition of the SBPP being done as two projects and how is
that consistent with CEQA?
A. The Port District's counsel, CEQA specialist, Margaret Sohagi, explains,
"The above-ground demolition requires a Coastal Development Permit
("CDP") from the California Coastal Commission. Prior to issuing this permit,
the Coastal Commission must conduct its environmental review of the above-
ground demolition. Removal of the sub-surface structures will be part of a
Page 3 of 4
future demolition and remediation project, which will require a second CDP
from the California Coastal Commission. This second CDP will also be subject
to environmental. review by the Commission."
Q. What is the difference between the two projects?
A. The first project CDP is for the above ground structure of the SBPP and
will be processed through the California Coastal Commission's review of the
project through a CEQA equivalency process. The second project CDP would
be for the subsurface demolition and remediation.
Q. Is Dynegy South Bay meeting its contractual obligations?
A. Yes. Dynegy South Bay is contractually obligated to perform its
demolition and remediation obligations and is diligently pursuing and
performing those obligations as required in the various agreements. The
agreements constitute valid and binding obligations of Dynegy South Bay, and
are legally enforceable against Dynegy South Bay.
Q. Why did the Port District and Dynegy South Bay need a settlement
agreement?
A. The letter settlement agreement with Dynegy South Bay is an
implementation agreement for existing contractual obligations. The agreement
allows for further clarity and for the expedited demolition of a major structure
and eyesore located an the Chula Vista bayfront, and requires the entire
removal of the very large concrete power block structure instead of removal of
merely 4 feet of the power block. Further, Dynegy South Bay's obligations
regarding demolition and remediation remain in place, without disturbing the
Port District's rights under the various agreements. Without the agreement, the
people of Chula Vista and the region would be forced to endure the continued
presence of the eyesore while the project worked its way through potential
lengthy governmental processes, various agency requirements, and potential
litigation, related to large projects of this type.
Q. What if the Port District and Dynegy South Bay did not reach a settlement
on the issues contained in the agreement?
A. The benefits received in the settlement agreement which are outside the
existing contractual obligations of Dynegy South Bay would not be realized.
For example, the existing contractual documents are limited in non-
Page 2 of 4
performance penalties and deadlines. The settlement agreement has
performance deadlines.
Q. What are the benefits of the settlement agreement?
A. The benefits of the settlement agreement are:
l . Dynegy South Bay has a commitment date for filing an application to
the California Coastal Commission;
2. Dynegy South Bay has provided a timeline of its obligations under
the contractual documents;
3. Dynegy South Bay has committed to remove the entire foundation of
the SBPP;
4. The agreement resolves disputes and disagreements between the Port
District and Dynegy.
5. The settlement agreement allows some existing infra-structure to
remain on the property, for instance the storm drain system.
(2. What funds are being used by Dynegy South Bay to perform its
obligations?
A. Dynegy South Bay is contractually obligated to perform no matter what the
source of funds. AB 1656 was sponsored by Senator Ducheny during the
purchase of the SBPP to set aside $15 million for the demolition,
decommissioning and remediation of the SBPP. Those funds are in an escrow
account and can be used only for the stated purposes of the escrow agreement.
The Port District monitors the escrow funds and must approve all
disbursements to Dynegy South Bay. The settlement agreement does not alter
Dynegy South Bay's obligations to perform.
Q. Why did the Port District discuss the demolition of the SBPP in closed
session meetings?
A. The Brown Act allows a public agency to discuss real estate items in closed
session when necessary to complete negotiations, contracts or to provide
direction to ongoing negotiations. The Port District is authorized to discuss the
price and terms of real estate contracts, leases, and development agreements.
The Port District is also authorized to discuss potential litigation matters or
anticipated litigation in closed session. The process for reaching accord with
Dynegy South Bay contains a number of complex real estate and contract
issues, which is the reason why Dynegy South Bay's proposal came in the form
of a settlement agreement.
Page 3 of 4
Q. Has the SBPP site been evaluated for contaminants and why did the Port
District allow Dynegy South Bay an extra year to determine whether
contamination exists on certain portions of the site?
A. The settlement agreement does not modify the obligations under the
contractual agreements, but modifies a timeframe to identify potential
contamination. The existing contracts are silent on who has the responsibility
to find the existing contamination within the specified time limits. The Port
District has retained its own team of environmental investigation experts to
address testing of any potential contamination and to address necessary
remediation in a timely manner. The Port District has been involved in
remediating several sites on the Tidelands. Experience indicates that proof of
contamination could take time and requires intense legal scrutiny. The
extension of time does not relieve any responsible party of their respective
obligations related to the remediation of the site as a matter of law.
Q. When will the remediation of the property commence?
A. Remediation of the site has been ongoing for more than a year. SDG&E
has completed substantial remediation and its activities are continuing. Testing
of conditions below the super structure will soon begin. Remediation of any
contamination found below the super structure will commence after demolition.
Q. Why did the Port District agree to let Dynegy South Bay remove and leave
certain structures and improvements on the SBPP site?
A. The Port District wanted to keep some of the existing structures and
improvements in place, for example the storm drain system in order to capture
historical storm water run off. The removal of the entire power block
foundation (instead of just the top four feet below the surface required by the
contract documents) saves the Port District substantial time and money.
Q. Is Dynegy South Bay still paying rent to the Port District?
A. Dynegy South Bay's obligation is to pay $2 million annually from January
2011 through December 2014.
Page 4 of 4
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DRAFT
Submitted by Chula Vista City Councilmember Patricia Aguilar
Nov. 1, 2011
RESOLUTION NO. 2011-***
RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CHULA VISTA IN SUPPORT OF THE
"CONFIDENTIAL SETTLEMENT COMMUNICATION"
DATED OCTOBER 25, 2011 REGARDING THE SOUTH
BAY POWER PLANT, AND DIRECTION TO CITY
STAFF
WHEREAS, in 1960 San Diego Gas & Electric (SDG&E) constructed the South Bay Power
Plant (SBPP) on the Chula Vista Bayfront and began operations; and
WHEREAS, in 1999 the San Diego Unified Port District (Port) acquired the SBPP from
SDG&E in order to wind down its operations and facilitate its demolition; and
WHEREAS, on December 31, 2010 Dynegy, Inc. (Dynegy) ceased operations at the SBPP and
disconnected it from the regional grid; and
WHEREAS, there are agreements between the Port and Dynegy to dismantle the SBPP and
remedinte the site; and
WHEREAS, these agreements establish Dynegy as the responsible party to dismantle and
demolish the SBPP and remedinte the site; and
WHEREAS, on March 22, 2011 the City Council voted 5-0-0 in favor of Resolution No. 2011-
042, which declares the City Council's official support for an expedited demolition of the
SBPP by the responsible parties; and
WHEREAS, the "Confidential Settlement Communication" between the Port and Dynegy
dated October 25, 2011 regarding demolition of the SBPP is in keeping with Resolution No.
2011-042; and
WHEREAS, City staff continues working collaboratively with Port staff to expedite
demolition of the SBPP and remediate the site;
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Chula Vista
hereby:
1. Declares its official support for the "Confidential Settlement Communication"
between the Port and Dynegy; and
2. Authorizes and directs City staff to continue to work collaboratively with Port staff
to implement the Project Schedule dated 10-24-2011 included in the Confidential
Settlement Communication.