DEPARTMENT: Economic Development Department
DEPARTMENT HEAD: Rene Dominguez
COUNCIL DISTRICTS IMPACTED: 10
SUBJECT:
An E-16 Rider Program Agreement with Skyonic Corporation and recommendation of Skyonic Corporation's (Skyonic) Capitol SkyMine project for participation in CPS Energy's E-16 Economic Development Incentive Rate Rider Program.
SUMMARY:
Staff is requesting City Council action on an Ordinance approving an E-16 Rider Program Agreement with Skyonic Corporation and recommending the Capitol SkyMine project for participation in CPS Energy's E-16 Economic Development Incentive Rate Rider Program (E-16 Rider), to provide energy cost savings for Skyonic. Skyonic qualifies for the recommendation to participate in the E-16 Rider because the Capitol SkyMine project will add 10 Megawatts or more of new energy demand, and is committing to: (1) create 35 new high-wage full-time jobs; (2) make a capital investment of at least $100,000,000; (3) guarantee a percentage of local business contracting for operational costs; and (4) enter into a workforce training agreement with Alamo Colleges. The recommendation for participation in CPS Energy's E-16 Economic Development Incentive Rate Rider Program assists with cost competitiveness of an innovative green technology project that will aid San Antonio in meeting federal emissions standards for air quality.
BACKGROUND INFORMATION:
Skyonic was founded in 2005 by inventor and CEO Joe Jones, and is headquartered in Austin, Texas. Skyonic is a privately held corporation, which utilizes SkyMine and SkyCycle technologies designed to extract and mineralize carbon dioxide from industrial gases into products such as baking soda, hydrochloric acid and limestone, on a commercial scale. These products are then sold to other companies for industrial uses. This process helps mitigate the effects of industrial pollution while deriving value from the sale of products.
In partnership with Zachry Corporation, Skyonic has opened the Capitol SkyMine, LLC project, the nation's first commercial-scale carbon capture and utilization facility in San Antonio. The Capitol SkyMine project is located at the Capitol Aggregates facility located at 11503 Bulverde Road in City Council District 10. The Project will extract gases from a nearby cement factory and process these pollutants into products which can later be sold for industrial use. The Capitol SkyMine project is funded through a combination of equity, debt, and federal technology grants.
The E-16 Rider is a CPS Energy Tariff authorized by City Ordinance No. 97623 (E-16 Rider Ordinance). Participation in the CPS Energy's E-16 Economic Development Incentive Rate Rider Program provides large energy-intensive users a utility rate discount for qualifying projects that add 10 Megawatts or more of new demand. Utility rate discounts range from 10% for two years and up to 50% for four years, based on new demand. The E-16 Rider's utility rate discount can be extended for a maximum of 10 years. In order to receive the utility rate discounts, a project must qualify under the City's E-16 Rider guidelines regarding power demand thresholds and enter into an agreement with the City to guarantee minimum job creation and capital investment, workforce participation, and local business contracting.
In order to be eligible for approximately $1,000,000 of cost savings from utility rates charged by CPS over 4-years based on anticipated power usage, Skyonic is agreeing to: (1) create and maintain a minimum of 35 full-time jobs paying no less than $50,000 annually for the term E-16 Rider Program Agreement; (2) invest a minimum of $100,000,000 in new real and personal property at the Capitol SkyMine project site; (3) guarantee a percentage of local business contracting for operational costs after one year of operations; and (4) enter into a workforce training agreement with Alamo Colleges by May 2015.
The term of the E-16 Rider Program Agreement is determined according to the number of years the company qualifies for the E-16 Rider, based on power consumption in accordance with the criteria set forth in the E-16 Rider Ordinance.
Under a 1993 state law, certain qualifying capital expenditures made by Skyonic may be exempt from ad valorem taxes levied on real or personal property by local government units including the City. The Texas Commission on Environment Quality (TCEQ) administers the standards and criteria used to determine the qualification, amount and length of exemptions from ad valorem property taxes, and the exemption tiers established by TCEQ have various levels of exemptions from ad valorem property taxes for qualified projects. Skyonic is in the process of applying for the state exemption but no determination by TCEQ has been made.
The Capitol SkyMine project will lower industrial emissions helping to keep San Antonio in compliance with federal standards for air quality. Not meeting such standards could mean higher gas prices, as well as increased vehicle inspection and registration costs for the citizens of San Antonio. Reaching non-attainment of air quality standards could also impact new and existing business in San Antonio adding permitting costs and requiring facility upgrades.
ISSUE:
Pursuant to the criteria set forth in the E-16 Rider Ordinance, Skyonic meets the qualifications to secure a recommendation from the City for participation in the CPS Energy's E-16 Economic Development Incentive Rate Rider Program.
In order for Skyonic to receive the cost savings incentive offered under CPS Energy's E-16 Economic Development Incentive Rate Rider Program City Council must authorize the City to enter into the E-16 Rider Program Agreement with Skyonic to guarantee minimum job creation and capital investment, workforce participation, and local business contracting.
ALTERNATIVES:
City Council could choose not to approve the Ordinance, which will make the Capitol SkyMine project less cost effective and may deter Skyonic and other innovative renewable energy projects from making future investments in San Antonio.
FISCAL IMPACT:
The impact to the City's General Fund is the City's portion of the CPS revenue that will be forgone due to the utility rate discount expected to be received by Skyonic valued at approximately $140,000 over four years. Under state law, the Capitol SkyMine project may qualify to have certain qualifying capital expenditures undertaken by the company, that comply with environmental rules, exempt from ad valorem taxes levied on real or personal property by the City.
RECOMMENDATION:
Staff recommends approval of an Ordinance approving an E-16 Rider Program Agreement with Skyonic and recommending its Capitol SkyMine project for participation in CPS Energy's E-16 Economic Development Incentive Rate Rider Program.