2019 BOARD OF COMMISSIONERS Jeffrey L. McClure, President

Michael J. Murphy, Vice President Atul Deshmane, Secretary

Mission Statement Public Utility District No. 1 of Whatcom County is a steward of water and energy resources

providing locally controlled utility services and resource protection for the benefit of the residents, businesses and agricultural community of greater Whatcom.

PUBLIC UTILITY DISTRICT NO. 1

of Whatcom County

Agenda for the

Regular Meeting of February 26, 2019

8:00 a.m. at the PUD Office

1. Call to Order | Pledge of Allegiance

2. Public Comment

3. Approval of Meeting Minutes of February 12, 2019

4. Approval of Claims for February 26, 2019

5. Approve Work Order No. 1 – Pacific Surveying and Engineering, Inc. for Proposed New Cherry Point Substation

6. Water Resource Presentation

7. Other Business

8. Executive Session – Per RCW 42.30.110(i) – Potential Litigation

9. Adjourn

Next Commission Meetings

March 12 & 26, 2019 – Regular Meetings

All meetings begin at 8:00 a.m. at PUD Administration Office -

1705 Trigg Road, Ferndale, WA unless other location announced.

(360) 384-4288 www.pudwhatcom.org

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DRAFT Minutes 12 February 2019 Page 1 of 6

MINUTES OF THE ADJOURNED REGULAR

MEETING OF THE COMMISSION

February 12, 2019

Call to Order | Pledge of Allegiance The adjourned regular meeting of the Board of Commissioners of Public Utility District No. 1 of Whatcom

County was called to order at 2:00 p.m. by Commissioner Mike Murphy and Pledge of Allegiance recited.

Said meeting was open to the public and notice thereof had been given as required by law. Those present

included Commissioner Atul Deshmane and Legal Counsel Jon Sitkin. Staff: Steve Jilk, General Manager;

Ann Grimm, Administrative Assistant; Brian Walters, Assistant General Manager; Rebecca Schlotterback,

Manager of Contracts and Compliance; Duane Holden, Director of Utility Operations; Jon Littlefield,

Electric System Supervisor; and Traci Irvine, Accountant I.

Public attending: Carole Perry, Citizen

Max Perry, Citizen

Public Comment Max Perry wanted to know why the PUD voted not in favor of the Planning Unit’s decision to approve

and move ahead of the required 6091 plan update. Jilk responded that it was discussed at the previous

Commission Meeting on what was presented: The plan did not meet the Department of Ecology’s (ECY)

consideration and did not represent the same update, which, the Planning Unit voted on at the previous

Planning Unit meeting. The two issues at hand are the net ecological benefit to the watershed – which is

a DOE requirement and in the Planning Unit rules for the update: (1) any decision to the update needs a

consensus to pass (the motion did not pass); and, (2) the rule regarding the decision making process was

not followed.

Perry said he understood from a different presentation that the use of the water consumed was to be from

“inside the home” not for the use of auxiliary or outside uses as per Representative Vincent Buys. Jilk

said (1) the language in the bill, and (2) the interpretation of domestic wells use was not specific to indoor

water use. Carol Perry said the Planning Unit spent many years and wanted the County to take leadership

by giving them the majority vote and then the County would send the update on to ECY. The majority

vote was sent – the County, Diking and Drainage Districts, small cities and all government caucuses

voted in favor of it and this put the PUD in an odd situation. Perry wanted this to be on the record she

believes it was not a representative vote. Mrs. Perry added that at the Surface Water Committee Work

Session, the Committee gave Gary Stoyka the information to vote with the majority and give direction to

the Planning Unit – which Perry said was the last action at the County Council meeting. She said she

perhaps misunderstood it because the vote taken was five to one. Commissioner Murphy thanked them

for their comments.

Approval of the Meeting Minutes and Claims The Commissioners were presented with the Minutes of the Regular Meeting of January 22, 2019 and the

following Claims of February 12, 2019.

VENDOR NAME AMOUNT

3-D CORPORATION 313.02

APPLIED DIGITAL IMAGING 647.63

ARBITRAGE GROUP INC. 1,500.00

AGENDA ITEM #3

February 26, 2019

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AVO TRAINING INSTITUTE 1,985.00

BAY CITY SUPPLY 219.69

BEST TOOLS, INC 32.52

CARLSON STEEL WORKS, INC 316.21

CDW/COMPUTER DISCOUNT WAREHOUSE 470.95

CENTRAL WELDING SUPPLY 150.57

CHMELIK SITKIN & DAVIS 4,562.50

CORNERSTONE MANAGEMENT, INC. 2,863.50

CULLIGAN NORTHWEST 104.66

DESHMANE, ATUL 478.14

FAIRWAY CAFÉ 1,028.00

FASTENAL 10.95

FEDERAL EXPRESS 13.14

FERNDALE ACE HARDWARE 60.60

FRONTIER 1,373.84

GAMBINI, TONY 157.35

GATEWAY CONTROLS 128.03

GLEASON, GUY G 21.74

GUARDIAN SECURITY SYSTEMS, INC 273.00

HAGGEN, INC 107.61

HARDWARE SALES, INC. 555.78

HEALTH PROMOTIONS NORTHWEST 90.00

INTERNAL REVENUE SERVICE 16.26

JON LEON ORLOFF ESTATE 10,955.97

KAMAN FLUID POWER LLC 69.88

LITHTEX NW LLC 223.51

MALLORY SAFETY & SUPPLY LLC 146.85

MASSMUTUAL RETIREMENT SVCS LLC 9,608.33

MURPHY, MICHAEL J 45.07

NORTHWEST CASCADE, INC. 112.50

NORTHWEST MOWING & GARDENING 514.54

PACIFIC UNDERWRITERS CORP INC 100.00

PITNEY BOWES GLOBAL FINANCIAL SERVICES 194.26

PITNEY BOWES RESERVE ACCOUNT 500.00

PLATT ELECTRIC SUPPLY CO 685.54

PORTAL WAY FARM & GARDEN 37.33

PUD #1 OF WHATCOM COUNTY 3,657.11

PUGET SOUND ENERGY, INC 8,202.47

REGENCE BLUE SHIELD 39,173.66

REISNER DISTRIBUTION, INC 789.48

RH2 ENGINEERING, INC 2,607.36

RICOH USA 397.48

SEATTLE TIMES 1,561.96

SHRED-IT USA 29.96

SPECIAL-T STRIPING & SIGN COMPANY 205.64

SSC - SANITARY SERVICE COMPANY 387.92

TEAMSTER LOCAL #231 419.00

TYLER TECHNOLOGIES-INCODE 11,595.02

UNITED WAY OF WHATCOM COUNTY 412.00

UTILITIES UNDERGROUND LOCATION 29.67

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VERIZON WIRELESS 1,571.63

WASHINGTON DENTAL SERVICE 2,139.15

WASHINGTON TEAMSTERS WELFARE 10,040.70

WESTERN ELECTRICAL SERVICES, INC 1,612.10

WHATCOM FARMERS CO-OP 1,943.13

WHATCOM JANITORIAL 1,250.00

WHISTLE WORKWEAR 91.36

GRAND TOTAL $128,791.27

ACTION: Commissioner Deshmane motioned to APPROVE THE MINUTES OF THE REGULAR

MEETING HELD JANUARY 22, 2019 AND THE CLAIMS OF FEBRUARY 12, 2019. Commissioner

Murphy second the motion. Motion passed unanimously.

Approve Exhibit A-2 to Interlocal Agreement with Public Utility District No. 1 of Jefferson County

for Transfer of BPA Energy Efficiency Incentive (EEI) Budget Funds The District has an Interlocal Agreement with Public Utility District No.1 of Whatcom County

(“Jefferson PUD”), which was approved June 6, 2017. Jefferson PUD has exhausted its BPA EEI budget

for BPA’s current two-year rate period FY 2018-19. Jefferson PUD has requested that the District

transfer $75,000 of the District’s remaining EEI budget for the remaining BPA rate period, which ends

September 30, 2019. The transfer from the District to Jefferson PUD is memorialized in Exhibit A-2,

which is incorporated into the Interlocal Agreement. Future transfers agreed to by the parties (either to or

from Jefferson) will be accomplished by further amendments to Exhibit A. Jefferson PUD plans to use

the budget funds for a lighting project at Fort Warden State Park.

If the transfer is approved, the District will still have sufficient remaining BPA EEI Program Budget to

cover any District sponsored energy efficiency projects for the remainder of BPA’s 2018-19 rate period.

The District will then receive another budget allocation for BPA’s following rate period, which begins

October 1, 2019.

If approved, Exhibit A-2 and the budget transfer described therein will have no direct fiscal impact on the

District’s 2019 Annual Budget.

ACTION: Commissioner Deshmane motioned to APPROVE EXHIBIT A-2 TO THE INTERLOCAL

AGREEMENT WITH PUBLIC UTILITY DISTRICT NO.1 OF JEFFERSON COUNTY AND THE

TRANSFER OF $75,000 OF THE DISTRICT’S BPA EEI PROGRAM BUDGET AND AUTHORIZE

THE DISTRICT’S GENERAL MANAGER TO IMPLEMENT THE TRANSFER. Commissioner

Murphy second the motion. Motion passed unanimously.

Approval of Resolution 754 – Cancellation of Warrant The District issued a request for a Warrant on the basis of a final paycheck for employment after the death

of District employee Jon L. Orloff. Following the Commission’s authorization of the issuance of the

Warrant, the County’s Administrative Services Department printed the Warrant, which was issued to the

surviving spouse, Genevieve Morran. The District has since been notified there is a probate and the

surviving spouse has been appointed as administer of the estate, and as such, pursuant to Washington

Law, the Warrant for the final paycheck must be issued to the Estate.

Warrant No. 1076592 issued on January 29, 2019, in the amount of $10,785.17, to Genevieve Morran has

not been tendered. The District now requests that the County cancel Warrant No. 1076592. There is no

fiscal impact to the District and a corrected Warrant will be reissued by the County.

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ACTION: Commissioner Deshmane motioned to APPROVE RESOLUTION NO. 754 AUTHORIZING

CANCELLATION OF WARRANT ISSUED IN ERROR. Commissioner Murphy second the motion.

Motion passed unanimously.

Approval of Work Order No. 6 for Engineering Services – Brown and Kysar, Inc.

Design and Project Support Services for Cherry Point Substation Background: Whatcom PUD’s 115 kV electric utility facilities currently include three 115 kV substations

dedicated to industrial load. One of the substations, the Refinery sub, is currently the only step-down

substation serving the Cherry Point Heavy Industrial Area. Based on a forecast for a substantial increase

in electric load in the area including a potential renewable diesel plant at Phillips66 - WPUD previously

requested BKI to investigate options for serving the additional electric load. This work was accomplished

under BKI’s Work Order No.5.

BKI’s engineering study concluded that there were two main options for serving the electric load

increase. One involved capacity upgrades to the existing Refinery substation. The second option was the

construction of a new substation in the general area of the existing Refinery substation. After review of

the pros and cons associated with each option, WPUD electric staff determined that there were clear

advantages to pursuing the new substation option. This work order will refer to the prospective new

substation as the “Cherry Point” substation.

WPUD has requested that BKI provide engineering services to assist WPUD with the design of the new

substation and other related services. The general Scope of Work to be provided by BKI is broken into

seven phases and includes, but is not limited to, the following:

Design the reconfiguration of the existing 115kV transmission line to feed the new substation

Preparation of specifications for all major equipment such as switchgear, breakers, DC battery

and charger, transformers

Coordination with all major equipment suppliers to ensure adherence to the equipment

specifications

Prepare substation equipment and building layouts including fence and gravel design

Grounding design and analysis

Switchgear building design including any required permitting

Substation electrical and physical design and calculations

Relay setting and programming including coordination with upstream and downstream devices

Spill Prevention, Control and Countermeasure Plan (SPCC)

Arc Flash study and report

Relay and fiber optic communications circuit modifications at the existing Refinery substation

The scope of services has been segmented into several phases, each with its own budget. The purpose of

this phasing is to enable WPUD to terminate BKI’s work at identifiable stopping points should this be

necessary. WPUD requested that the major tasks be grouped into phases due to the fact that the

anticipated new electric load at Cherry Point might not be realized, thus negating the need for a new

Cherry Point substation. Since WPUD’s existing 115 kV electric system customers would bear the costs

of BKI’s work should the project not proceed, the phasing is for cost risk mitigation.

The phases (work task groups) are:

1. Solutions Development

2. Environmental, Permits, and Land Use

3. Substation Design

4. Contracts and Bidding

5. Construction Administration

6. Inspection and Commissioning

7. Project Closeout

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Approval of Work Order No. 6 with BKI has no financial impact on the District’s approved 2019 budget,

as any tasks and expenditures for engineering services performed by BKI will be recovered through direct

reimbursement by electric system customers and use of electric system reserves. It is anticipated that at

an early phase of the project, the District will issue taxable municipal bonds to cover eligible project

costs.

With the current County Council moratorium at Cherry Point, it is unknown at this point if the proposed

new renewable diesel process plant would be affected by the ruling. Legal counsels are working with the

County to determine the situation. Currently, Phillips66 and its project partner Renewable Energy Group

(REG) are hopeful of making a decision to proceed with the project by the end of March.

Phillps66 has indicated that if the renewable diesel plant project is canceled, then Phillips66 would cover

all costs incurred by the District and its consultants up to the point at which the project is terminated. The

commitment to cover costs includes work already completed by BKI under Work Order No.5 and any

work and associated costs completed under Work Order No.6, prior to any termination of the project.

Phillips66 has indicated that they would provide a letter to the District in which their commitment to

cover costs would be addressed. It was discussed that the District should wait on executing Work Order

No.6 until the commitment letter is received. The new substation site location is yet to be determined,

most likely close to the existing Refinery substation to the east and south, on refinery property.

ACTION: Commissioner Deshmane motioned TO APPROVE WORK ORDER NO. 6 WITH BROWN

AND KYSAR, INC. FOR ENGINEERING SERVICES FOR DESIGN AND PROJECT SUPPORT

SERVICES FOR NEW CHERRY POINT SUBSTATION FOR A COST NOT TO EXCEED BUDGET

OF $598,307.00 AND AUTHORIZE THE DISTRICT’S GENERAL MANAGER TO EXECUTE THE

WORK ORDER AFTER FINAL STAFF REVIEW AND SUBJECT TO RECEIPT OF THE COST

REIMBURSEMENT LETTER FROM PHILLIPS66.

Other Business The next Commission Meeting on February 26 may run longer than usual as it will include presentations

and an Executive Session is planned with legal counsel Tom Mortimer and Jon Sitkin to discuss potential

litigation of water rights.

WRIA1|Planning Unit – There is a GFC and Planning Unit meeting scheduled for tomorrow night.

Ecology has begun its rule making process and ECY’s Mary Verner is expected to attend an upcoming

Watershed Management Board meeting.

WPUDA has cancelled most meetings this week including the Commissioner Orientation session. There

will be a phone-in conference call and Deshmane said he is available to make the call-in from home.

ESSB 6091 Update – Ecology/Rule Making: Commissioner Murphy thought that Ecology makes the

final decision on the WRIA1 plan update. (According to Ecology, after a plan is approved by a planning

unit, they will check to see that it complies with the law (RCW 90.94) and determine whether the plan

will result in a net ecological benefit. If plans are not adopted by the deadline, Ecology will move into

rulemaking.) As such, the Nooksack Basin (WRIA1) has now moved into rulemaking.

As part of the 2018 Streamflow Restoration law, Ecology launched a grant program to focus on projects

that improve streamflows and instream resources. The District applied for and received one of the 15

grants out of 46 applicants, and was the only recipient from Whatcom County. The project, fully funded

by the grant of $711,000 will be for work on instream flow at California Creek and drainage area. On

Friday, a work group comprised of members from the Ag Board, Drayton Harbor WID, Whatcom

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County, WC Drainage and Diking Districts and NSEA plan to meet here to begin discussions on moving

the project forward.

Whatcom Conservation District – Commissioner Murphy has been attending manure nutrient courses

provided by WCD – he indicated good things are happening there. They now offer a “Whatcom Manure

Spreading Advisory” for use by all farmers (not just dairies). This online program advisory is the first

step farmers can take to assess if their field conditions are suitable for manure application. They can sign

up to receive text alerts for significant weather and manure spreading conditions.

Department of Health Grant – Technical Assistance Program Pilot

Jilk and Dave Olson will present information on the successful program at WPUDA’s Water Committee

meeting on March 21. Last week, Jilk, Olson, John Kounts (WPUDA) and Bill Clarke (WPUDA legal

counsel) held a conference call with DOH officials to discuss additional funding for a 2019 Technical

Assistance Program. The District has committed $35,000 and is seeking the same as a match from DOH.

Jilk expects word from DOH in early March.

Adjourn

There being no further business for the regular meeting, the Commission adjourned the regular meeting at

2:50 p.m.

Jeffrey L. McClure, President

Michael Murphy, Vice President Atul Deshmane, Commissioner

Page 1 of 2

PUBLIC UTILITY DISTRICT NO. 1

of Whatcom County 1705 Trigg Road Ferndale, WA 98248

P: (360) 384-4288 F: (360) 384-4849

Memo To: Commissioners Deshmane, McClure and Murphy

From: Brian Walters – Assistant General Manager

Date February 26, 2019

Re: Approve Work Order No. 1 with Pacific Surveying and Engineering Inc. for Proposed

New Cherry Point Substation

Requested Action: APPROVE WORK ORDER NO. 1 FOR PACIFIC SURVEYING AND ENGINEERING INC.

FOR ENGINEERING SERVICES FOR WORK RELATED TO THE PROPOSED NEW CHERRY POINT

SUBSTATION FOR A COST NOT TO EXCEED BUDGET OF $98,630 AND AUTHORIZE THE DISTRICT’S

GENERAL MANAGER TO EXECUTE THE WORK ORDER AFTER FINAL STAFF REVIEW AND RECEIPT

OF PHILLIPS 66 COST REIMBURSEMENT LETTER..

Background: Public Utility District No. 1 of Whatcom County (“Whatcom PUD”) has an Agreement for Professional

Surveying and Engineering Services (“Agreement”) with Pacific Surveying and Engineering, Inc. (“Engineer”, also

referred to as “PSE”). Whatcom PUD and PSE agree that this Work Order No.1 and the tasks authorized to be

completed hereunder are to be performed consistent with the terms and conditions of the Agreement.

The purpose of the services to be performed by PSE is to assist Whatcom PUD with tasks related to the planning and

development of real property currently owned by Phillips 66. The property involved is proposed to be the site of a new

high voltage (115 kV) substation to be owned and operated by Whatcom PUD. PSE will be initially involved in

surveying the site, topo mapping and preparation of easement documents. PSE will also perform tasks related to

necessary land use permitting and environmental impact mitigation. Any special studies required will involve PSE and

other firms under contract with PSE.

Whatcom PUD in consultation with PSE has developed the following Scope of Services to be provided as requested and

authorized by Whatcom PUD. PSE will perform the services and tasks identified under the direction of the PUD’s

designated project manager.

Scope of Services

The scope of services to be performed by PSE under this Work Order No.1 shall be as described in PSE’s February 14,

2019 proposal letter titled “Proposed PUD Phillips 66 Substation”. PSE’s letter is attached hereto and is incorporated

into Work Order No.1. A brief outline of PSE’s services broken down by major task groups are listed below:

AGENDA ITEM # 5 February 26, 2019

Page 2 of 2

Land Surveying

Under this task group, PSE will survey the area, which has been identified as the site for the new substation. As Phillips

66 is the owner of the real property on which the new substation will be sited, PSE will also prepare the necessary

exhibits for the Easement, which Whatcom PUD and Phillips 66 will enter into. Other tasks include a topographic

survey and preparation of a topographic base map for the site.

Civil Engineering and Pre-Design

Scope of services to be performed under this task group includes assistance to PUD staff with regarding permitting

related to the civil design portion of the project. PSE will complete stormwater site plan drawings at the 30% level.

Scope of services to be performed within this task group does not include any geotechnical evaluation. Such services

shall be obtained via amendment to this task order or a new task order.

Environmental Services and Permitting

Tasks included under this general category include:

Task 1: Wetland delineation

Task 2: Fish and Wildlife Habitat Conservation Element and Impact Analysis

Task 3: Potential Mitigation

Task 4: Mitigation Site Wetland Delineation Element Report and Impact Analysis

Task 5: Critical Area Mitigation Element and Assignment of Savings Estimate

Task 6: Joint Aquatic Reserve Permit Application (JARPA) Preparation and Submittal

Task 7: Critical Area Application Assistance

Scope of services to be performed within this Environmental Services task group does not include any specific studies

not already identified and as may be requested as part of Whatcom County’s land use permitting requirements.

Final Civil Design and Permitting

Scope of services to be performed within this task group includes 90% and final design drawings for the Stormwater Site

Plan. Also included are the preparation of the Temporary Erosion and Sedimentation Control Plan and Construction

Contract related documents.

Construction Phase Assistance

PSE will assist Whatcom PUD with the bidding phase of the project, material submittals review and RFI’s. Also,

included in the scope of services within this task group are construction staking, final inspection (civil design elements),

and closeout activities.

Fiscal Impact: Approval of Work Order No.1 with PSE has no financial impact on the District’s approved 2019

budget, as any tasks and expenditures for engineering services performed by PSE will be recovered through direct

reimbursement by electric system customers and use of electric system reserves. It is anticipated that at an early phase of

the project, the District will issue taxable municipal bonds or obtain a bank loan to cover eligible project costs.

Recommended Action: APPROVE WORK ORDER NO. 1 FOR PACIFIC SURVEYING AND ENGINEERING

INC. FOR ENGINEERING SERVICES FOR WORK RELATED TO THE PROPOSED NEW CHERRY POINT

SUBSTATION FOR A COST NOT TO EXCEED BUDGET OF $98,630 AND AUTHORIZE THE DISTRICT’S

GENERAL MANAGER TO EXECUTE THE WORK ORDER AFTER FINAL STAFF REVIEW AND RECEIPT

OF PHILLIPS 66 COST REIMBURSEMENT LETTER..