March 1-3, 2006

ITEM 130-1605-R0306  Authorization to Proceed with the wood-fired boiler project authorized in HB12 and to enter into an energy savings program agreement with the Montana Department of Environmental Quality; The University of Montana - Western

THAT: The Board of Regents of Higher Education authorizes The University of Montana Western to proceed with a $1.6M project developed with The Montana Department of Environmental Quality (DEQ) to replace one boiler with a wood fired boiler and to enter into an agreement with DEQ State Building Energy Conservation Bond Program (SBEP).

EXPLANATION: The University of Montana Western received a $400,000 federal Fuels for Schools grant for this project. HB5 MUS general spending authority provides authority for this funding. There will be approximately $1,200,000 in DEQ SBEP bonded costs to be repaid through energy savings at Western for 15 years at ~ $99,000 per year, for which authority is granted by the SBEP program. The annually required energy savings payments are used by the State for debt service.

House Bill 12, Montana 2005 Legislature, lists this project as one to be funded by the State Building Energy Conservation Bond Program (SBEP). The federal grant funds will not be requested until the project is approved. The RFP for a boiler was let in January to determine the final costs of the project. The project construction could occur in the summer and the wood-fired boiler would be on line by the end of 2006.

The project was jointly developed between the Montana Department of Administration, the Montana DEQ, the Montana DNRC in conjunction with the U.S. Forest Service Fuels for Schools program and the University of Montana Western.

UM-Western has a main heating plant that provides steam heat and hot water to most of the campus buildings. The Campus uses approximately 33,000 dekatherms (dkt) of natural gas a year for which the delivered cost is $8.68/ dkt. This results in an annual cost of approximately $286,000.

A contract has been procured to supply wood chips at $35/ton. At this price, the anticipated costs are less than $4-$5/dkt delivered. The DEQ has agreed to review the energy savings reimbursement calculation annually to ensure that the payment accurately reflects the projects true savings.