TO: AC Transit Board of Directors
FROM: Kathleen Kelly, Interim General Manager/Chief Executive Officer
SUBJECT: ARCHES Subrecipient Agreements
ACTION ITEM
AGENDA PLANNING REQUEST: ☐
RECOMMENDED ACTION(S):
Title
Consider authorizing the Interim General Manager or her designee to execute Phase 1 and subsequent subaward agreements with the Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES) for funding for fuel cell bus purchases, workforce development and infrastructure development.
Staff Contact:
Chris Andrichak, Chief Financial Officer
Body
STRATEGIC IMPORTANCE:
Goal - Financial Stability and Resiliency
Initiative - Financial Efficiency and Revenue Maximization
These subrecipient agreements lay the groundwork for over $140 million in funds for AC Transit’s Zero Emission Vehicle transition.
BUDGETARY/FISCAL IMPACT:
This award will provide AC Transit more than $140 million over several project phases to be used for purchasing fuel cell buses, workforce development, the upgrade of existing hydrogen fueling stations, and installation of new hydrogen fueling stations over 8 years. AC Transit will need to commit matching funds to fulfill the funding plans of these projects. The exact matching funds will be negotiated during Phase 1 of the project but can be expected to be 80% of the total project costs. To the extent possible, the District will utilize its Federal Transit Administration (FTA) formula funds and other grants to fulfill this cost share requirement.
In addition to cost sharing, this award will require time and collaboration among staff to meet compliance requirements.
AC Transit’s project is separated into several phases, and each phase will require an updated subrecipient agreement. At the end of each phase, both AC Transit and DOE can decide not to proceed to future phases.
BACKGROUND/RATIONALE:
In 2022, the California Governor's Office of Business and Economic Development (GO-Biz), alongside state and local officials, and the State’s institutions of higher information formally announced the formation of ARCHES, a shared not-for-profit public-private partnership designed to accelerate hydrogen's contribution to decarbonizing the economy in California and beyond.
ARCHES’ objectives include establishing a federally co-funded renewable hydrogen hub in the California region and creating an economically sustainable and expanding renewable hydrogen market in California and beyond. Meeting these objectives require finding solutions to produce, transport, store and use hydrogen at scale. Research and innovation are needed to achieve the U.S. Department of Energy (DOE)’s goal of reducing the cost of hydrogen by 80% over ten years. The first task was for ARCHES to submit a single, state-wide application for federal hydrogen hub funding from DOE through the Bipartisan Infrastructure Law.
In response to the ARCHES solicitation for projects, the District partnered with the Center for Transportation and the Environment (CTE) and 12 other transit agencies in California to submit a multi-year project proposal to ARCHES. These funds will support the development and testing of new technology, as well as improvements to existing and development of new hydrogen infrastructure, vehicle purchases, and workforce development.
As a participant in the CTE proposal, the District proposed new hydrogen fueling stations, upgraded hydrogen fueling stations, corresponding infrastructure, and fuel cell electric bus purchases that are planned for the next several years.
In July 2024, DOE awarded ARCHES a $1.2 billion award and ARCHES’ Hydrogen Hub officially launched. AC Transit is required to execute a subrecipient agreement for Phase 1 to accept the award.
ADVANTAGES/DISADVANTAGES:
Executing the Phase 1 and subsequent subrecipient agreements require AC Transit to fulfill its approved scope while meeting DOE requirements for contracting, reporting, DEI engagement, community benefits, and labor outreach. Fulfilling these obligations will require staff time and collaboration. In some cases, ARCHES is still developing the specific format of these requirements. During Phase 1 of the project, AC Transit will work with ARCHES and CTE to develop a detailed plan for subsequent phases, including how the District will meet DOE requirements. If during this phase, it is decided that AC Transit and ARCHES cannot agree to the specific delivery of these requirements, the District and ARCHES can choose not to proceed to Stage 2.
There are significant advantages to this action. While this initial agreement does not commit funds to the District, its execution is required for future agreements, which will commit funds over several years to AC Transit projects. Not executing would cause the District to forgo over $140 million in grant funding over the next 8 years.
ALTERNATIVES ANALYSIS:
The Board can choose not to execute the subrecipient agreements.
PRIOR RELEVANT BOARD ACTION/POLICIES:
SR 22-319 AC Transit Zero Emission Bus Transition Plan
SR 23-223 ARCHES Partnership
ATTACHMENTS:
1. Subaward Agreement
Prepared by:
Emily Heard, Capital Planning and Grants Manager
Approved/Reviewed by:
Chris Andrichak, Chief Financial Officer
Salvador Llamas, Chief Operating Officer
Richard Oslund, Director of Management & Budget
Aimee L. Steele, General Counsel/Chief Legal Officer