| ITEM #: 8. DATE: 06/22/2026 AI #:3064 |
 |
CITY COUNCIL ACTION REPORT
| SUBJECT: | RESOLUTION ADOPTING A LONG-TERM OPERATING AGREEMENT WITH THE ARIZONA PUBLIC SERVICE COMPANY |
| STAFF PRESENTER(S): | Barbara Chappell, Water Services Director |
SUMMARY
Approve the long-term operating Agreement with Arizona Public Service Company (APS) for operation and maintenance of the city’s brine management project.
STRATEGIC PLAN ALIGNMENT
.png) |
.png) |
.png) |
RECOMMENDATION
Adopt Resolution No. 2026-2526 approving a long-term Operating Agreement with Arizona Public Service Company for the delivery of brackish water to the Palo Verde Generating Station. (Barbara Chappell, Water Services Director)
FISCAL IMPACT
The estimated annual cost of the Agreement is $3.25 million based on full-flow conditions for an entire year of operation. Because the system will go through start-up and periodic increases working up to full-flow, it is anticipated that $2 million in the fiscal year (FY) 2027 Wastewater Operating Budget will be sufficient for the first-year operations cost for this Agreement. Future funding needs associated with annual full operating costs are expected to begin in FY2028 and will be considered through the annual budget development process as a base budget adjustment.
BACKGROUND AND PREVIOUS ACTIONS
Historically the reject streams produced from the reverse osmosis groundwater treatment facilities has been disposed of via the city’s sewer system and passed through the Goodyear Water Reclamation Facility (GWRF). The delivery of the reject streams to GWRF negatively impacts the city's wastewater operations by taking up capacity in the GWRF needed to support new development and by delivering flows to the GWRF that do not meet the local limits of the city's Pretreatment Program. In addition, the constituents in the concentrate may impact the biology and the compliance status of the GWRF. In 2019, the city completed a Brine Management Study to explore options for the disposal/treatment of the concentrate. The study resulted in two paths forward:
1. Install centralized treatment of the concentrate adjacent to the GWRF where the treatment would dewater the concentrate to a zero liquid discharge and could be disposed of in a landfill. This option would cost nearly $100 million initially and have an ongoing cost of $8 million annually for operations and maintenance (O&M). A phased approach was chosen, and a project created to treat only the concentrate produced at Bullard Water Campus for $60 million and an ongoing O&M budget of $5 million.
2. Collaborate with the Palo Verde Generating Station (PVGS) and develop an Agreement to discharge concentrate into the water reclamation supply system pipeline, which conveys discharges from the 91st Avenue Water Reclamation Facility to PVGS, which is located on the south side of the GWRF. The city would fund infrastructure needed to mitigate impacts of the brine to their water treatment facilities and annual operation and maintenance costs to treat the brine.
Option 2 was selected and the resulting Brine Disposal Project is a collaborative and innovative project between the city of Goodyear ("Goodyear"), the City of Buckeye ("Buckeye") and APS that is intended to allow Goodyear and Buckeye deliver the reject stream resulting from reverse osmosis treatment of groundwater to the PVGS and to allow Goodyear to deliver water discharged from cooling towers of industrial users in Goodyear to PVGS (collectively the water to be delivered to PVGS is referred to as "Brackish Water"). The Brackish Water is to be used for cooling purposes as an alternative to the use of treated effluent.
The Brine Disposal Project and Pipeline, which includes the completion of a pilot test and design of improvements necessary for PVGS to accept brackish water into its water reclamation supply system (the "APS Disposal Brine Project ") and to design and construct dedicated pipelines from Goodyear's two reverse osmosis facilities to the PVGS pipeline (the "Pipeline Project") was approved CIP Project 60034, the Brine Disposal Project – Pipeline. At the March 4, 2024 Regular Council meeting, Council approved the removal of the APS Brine Disposal Project from CIP 60034 and the creation of a new CIP Project for the Palo Verde Nuclear Power Generating Station Improvements (Project 61015). As a result, CIP Project 60034, which will be managed by city staff, is limited to the Pipeline Project for the design and construction of the pipelines from Goodyear's two reverse osmosis facilities to the PVGS water reclamation supply system pipeline ("WRSS Pipeline).
The PVGS Improvements Project has been implemented in phases through multiple agreements and amendments thereto. At the July 18, 2022 Regular Council Meeting, Council approved the Agreement Regarding Collaborative Efforts to Accept Municipal Brackish Water in the Water Reclamation Supply System, a multi-party agreement between Goodyear, Buckeye, and APS for pre-operational activities related to the project. After the July 18, 2022 Council meeting, APS received comments from certain co-owners of PVGS requesting changes from their owners as a condition of their approval of the agreement. City staff reviewed the proposed changes and concluded that they did not modify the intent of the terms of the agreement as reflected in the Council Action Report presented to Council on July 18, 2022, which is described herein. Council approved the modified Agreement Regarding Collaborative Efforts to Accept Municipal Brackish Water in the Water Reclamation Supply System on August 29, 2022 (the "Initial Agreement").
The Initial Agreement set out the general terms for Goodyear's delivery of initial flows of 1.7 million gallons per day (mgd) of Brackish Water to PVGS ("Initial Flows") with a future commitment to allow Goodyear to deliver an additional 1.6 mgd for a total of 3.3 mgd of Brackish Water to PVGS. It provided for an enhanced evaporation pilot test and associated analysis using equipment from two different manufacturers, the development of designs that identified the equipment and sizing of infrastructure needed to allow Goodyear and Buckeye to deliver brackish water to the PVGS water reclamation supply system pipeline (WRSS) and to the PVGS Water Resource Facility (WRF), and the development of cost estimates for the purchase and installation of equipment and construction of infrastructure improvements needed to implement the agreed upon design.
On March 4, 2024, Council separated the APS Brine Disposal Project from the Brine Disposal Project – Pipeline (CIP 60034) by creating the capital improvement project CIP 61015 Palo Verde Power Generating Station Improvements. Council also approved the First Amendment to the Initial Agreement, which amended the Initial Agreement to incorporate the design and construction of the two tie-ins to the WRSS pipeline the city will be constructing. The cost of this work is the sole responsibility of the city. The amendment also included additional design work and procurement of long lead time items that are needed for the Brine Disposal Project to become operational.
At the July 1, 2024 Regular Council meeting, Council approved the Second Amendment to the Initial Agreement, which amended the Initial Agreement Amendment. The Second Amendment allowed for the continuation of design, purchase of long lead items, and advancement of construction of portions of the Redhawk to Palo Verde pipeline, which is necessary to support the continued operation of Redhawk after the introduction of Brackish Water to the WRSS.
On March 3, 2025, Council approved the Engineering Procurement and Construction Agreement between the City of Goodyear, the City of Buckeye, and Arizona Public Services Company pursuant to which the municipalities provided the funding for (i) engineering, design, construction, and procurement of equipment to allow the Company to deliver cooling water to Redhawk, (ii) work required for Goodyear Interconnections to the WRSS Pipeline, (iii) preparation for PVGS to begin receiving brackish water from the municipalities, and (iv) a commitment from APS to negotiate a long-term agreement providing terms for Goodyear and Buckeye to deliver Brackish Water to PVGS through the WRSS.
The costs incurred under all of the foregoing were shared equally between Buckeye and Goodyear except for costs for work that solely benefited Goodyear. Goodyear was responsible for 100% of the costs of the work that solely benefited Goodyear.
1. Install centralized treatment of the concentrate adjacent to the GWRF where the treatment would dewater the concentrate to a zero liquid discharge and could be disposed of in a landfill. This option would cost nearly $100 million initially and have an ongoing cost of $8 million annually for operations and maintenance (O&M). A phased approach was chosen, and a project created to treat only the concentrate produced at Bullard Water Campus for $60 million and an ongoing O&M budget of $5 million.
2. Collaborate with the Palo Verde Generating Station (PVGS) and develop an Agreement to discharge concentrate into the water reclamation supply system pipeline, which conveys discharges from the 91st Avenue Water Reclamation Facility to PVGS, which is located on the south side of the GWRF. The city would fund infrastructure needed to mitigate impacts of the brine to their water treatment facilities and annual operation and maintenance costs to treat the brine.
Option 2 was selected and the resulting Brine Disposal Project is a collaborative and innovative project between the city of Goodyear ("Goodyear"), the City of Buckeye ("Buckeye") and APS that is intended to allow Goodyear and Buckeye deliver the reject stream resulting from reverse osmosis treatment of groundwater to the PVGS and to allow Goodyear to deliver water discharged from cooling towers of industrial users in Goodyear to PVGS (collectively the water to be delivered to PVGS is referred to as "Brackish Water"). The Brackish Water is to be used for cooling purposes as an alternative to the use of treated effluent.
The Brine Disposal Project and Pipeline, which includes the completion of a pilot test and design of improvements necessary for PVGS to accept brackish water into its water reclamation supply system (the "APS Disposal Brine Project ") and to design and construct dedicated pipelines from Goodyear's two reverse osmosis facilities to the PVGS pipeline (the "Pipeline Project") was approved CIP Project 60034, the Brine Disposal Project – Pipeline. At the March 4, 2024 Regular Council meeting, Council approved the removal of the APS Brine Disposal Project from CIP 60034 and the creation of a new CIP Project for the Palo Verde Nuclear Power Generating Station Improvements (Project 61015). As a result, CIP Project 60034, which will be managed by city staff, is limited to the Pipeline Project for the design and construction of the pipelines from Goodyear's two reverse osmosis facilities to the PVGS water reclamation supply system pipeline ("WRSS Pipeline).
The PVGS Improvements Project has been implemented in phases through multiple agreements and amendments thereto. At the July 18, 2022 Regular Council Meeting, Council approved the Agreement Regarding Collaborative Efforts to Accept Municipal Brackish Water in the Water Reclamation Supply System, a multi-party agreement between Goodyear, Buckeye, and APS for pre-operational activities related to the project. After the July 18, 2022 Council meeting, APS received comments from certain co-owners of PVGS requesting changes from their owners as a condition of their approval of the agreement. City staff reviewed the proposed changes and concluded that they did not modify the intent of the terms of the agreement as reflected in the Council Action Report presented to Council on July 18, 2022, which is described herein. Council approved the modified Agreement Regarding Collaborative Efforts to Accept Municipal Brackish Water in the Water Reclamation Supply System on August 29, 2022 (the "Initial Agreement").
The Initial Agreement set out the general terms for Goodyear's delivery of initial flows of 1.7 million gallons per day (mgd) of Brackish Water to PVGS ("Initial Flows") with a future commitment to allow Goodyear to deliver an additional 1.6 mgd for a total of 3.3 mgd of Brackish Water to PVGS. It provided for an enhanced evaporation pilot test and associated analysis using equipment from two different manufacturers, the development of designs that identified the equipment and sizing of infrastructure needed to allow Goodyear and Buckeye to deliver brackish water to the PVGS water reclamation supply system pipeline (WRSS) and to the PVGS Water Resource Facility (WRF), and the development of cost estimates for the purchase and installation of equipment and construction of infrastructure improvements needed to implement the agreed upon design.
On March 4, 2024, Council separated the APS Brine Disposal Project from the Brine Disposal Project – Pipeline (CIP 60034) by creating the capital improvement project CIP 61015 Palo Verde Power Generating Station Improvements. Council also approved the First Amendment to the Initial Agreement, which amended the Initial Agreement to incorporate the design and construction of the two tie-ins to the WRSS pipeline the city will be constructing. The cost of this work is the sole responsibility of the city. The amendment also included additional design work and procurement of long lead time items that are needed for the Brine Disposal Project to become operational.
At the July 1, 2024 Regular Council meeting, Council approved the Second Amendment to the Initial Agreement, which amended the Initial Agreement Amendment. The Second Amendment allowed for the continuation of design, purchase of long lead items, and advancement of construction of portions of the Redhawk to Palo Verde pipeline, which is necessary to support the continued operation of Redhawk after the introduction of Brackish Water to the WRSS.
On March 3, 2025, Council approved the Engineering Procurement and Construction Agreement between the City of Goodyear, the City of Buckeye, and Arizona Public Services Company pursuant to which the municipalities provided the funding for (i) engineering, design, construction, and procurement of equipment to allow the Company to deliver cooling water to Redhawk, (ii) work required for Goodyear Interconnections to the WRSS Pipeline, (iii) preparation for PVGS to begin receiving brackish water from the municipalities, and (iv) a commitment from APS to negotiate a long-term agreement providing terms for Goodyear and Buckeye to deliver Brackish Water to PVGS through the WRSS.
The costs incurred under all of the foregoing were shared equally between Buckeye and Goodyear except for costs for work that solely benefited Goodyear. Goodyear was responsible for 100% of the costs of the work that solely benefited Goodyear.
STAFF ANALYSIS
The proposed Long-Term Operating Agreement between the city of Goodyear and APS (the "Operating Agreement") sets forth the terms and conditions under which Goodyear can deliver Brackish Water to PVGS through the WRSS Pipeline. The Operating Agreement will be in effect until the completion of operations of Unit 1 at PVGS, which is currently scheduled for June 1, 2045 (“Initial Term”) but can be extended for a subsequent term or a new agreement entered with terms consistent with this Operating Agreement if all three PVGS units obtain a subsequent operating license renewal.
APS will incur additional costs in terms of materials, operations, and maintenance as a result of Goodyear's delivery of Brackish Water from Goodyear to PVGS. Under the terms of the proposed Operating Agreement, Goodyear will be responsible for these costs. The Operating Agreement identifies the materials and work that result in additional costs to APS resulting from Goodyear's delivery of up to 1.7 mgd of Brackish Water to PVGS, and the associated costs, which are estimated to be $3,250,000 annually. The costs are subject to periodic adjustments. Because operations are expected to ramp up during the first year, the FY2027 Wastewater Operating Budget includes $2,000,000 to support anticipated costs. The Operating Agreement contemplates the delivery of additional flows of Brackish Water, subject to additional infrastructure improvements that may be needed to accommodate the additional flows and an adjustment in the annual costs that result from such additional flows.
Staff recommend the adoption of Resolution No. 2026-2526 with Exhibit A (Attachment A) approving the proposed Operating Agreement as the last phase of the implementation of the Brine Disposal Project, which Council has supported because of the high costs of the alternatives as identified in the 2019 Brine Management Study discussed above.
APS will incur additional costs in terms of materials, operations, and maintenance as a result of Goodyear's delivery of Brackish Water from Goodyear to PVGS. Under the terms of the proposed Operating Agreement, Goodyear will be responsible for these costs. The Operating Agreement identifies the materials and work that result in additional costs to APS resulting from Goodyear's delivery of up to 1.7 mgd of Brackish Water to PVGS, and the associated costs, which are estimated to be $3,250,000 annually. The costs are subject to periodic adjustments. Because operations are expected to ramp up during the first year, the FY2027 Wastewater Operating Budget includes $2,000,000 to support anticipated costs. The Operating Agreement contemplates the delivery of additional flows of Brackish Water, subject to additional infrastructure improvements that may be needed to accommodate the additional flows and an adjustment in the annual costs that result from such additional flows.
Staff recommend the adoption of Resolution No. 2026-2526 with Exhibit A (Attachment A) approving the proposed Operating Agreement as the last phase of the implementation of the Brine Disposal Project, which Council has supported because of the high costs of the alternatives as identified in the 2019 Brine Management Study discussed above.