2012-09-13 Work Session (Covanta) NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 32
WORK SESSION,SEPTEMBER 13,2012 PAGE 480
ASSEMBLY
The New Hanover County Board of Commissioners met for a Work Session on Thursday,August 30,2012,
at 2:09 p.m. in the Harrell Conference Room at the New Hanover County Government Center, 230 Government
Center Drive, Wilmington,North Carolina.
Members present: Chairman Ted Davis, Jr.: Vice-Chairman Jonathan Barfield, Jr.: Commissioner Jason R.
Thompson:and Commissioner Richard G. Catlin. Commissioner Brian M.Berger arrived at 2:27 p.m.
Staff present: Assistant County Manager Tim Burgess: County Attorney Wanda Copley: County Manager
Chris Coudriet: Deputy Clerk to the Board Kyrnberleigh G. Crowell: Assistant County Manager Avril Pinder;
Strategy and Policy Manager Beth Schrader:and Enviromnental Management Director Joe Suleyman.
Others present: Solid Waste Management Consultant Bob Brickner with Greshnnan, Brickner & Bratton,
Inc., (GBB)and Eric J. (Rick) Sapir,Attorney with Hawkins,Delafield,and Wood.
REVIEW AND DISCUSSION OF THE PROVISIONS WITHIN THE PROPOSED SUSTAINABLE
ENERGY FACILITY (SEF) RETROFIT AND 20-YEAR OPERATION SERVICE CONTRACT WITH
COVANTA ENERGY
Chairman Davis called the Work Session to order and announced that the purpose of the meeting is to
review and discuss the provisions within the proposed Sustainable Energy Facility (SEF) Retrofit and 20-Year
Operation Sei ice Contract with Covanta Energy.
County Manager Chuffs introduced staff and outside consultants, gave a brief overview of what will be
discussed during the work session. He asked Environmental Management Director Joe Suleyman to make the
presentation of the provisions within the proposed Sustainable Energy Facility (SEF) Retrofit and 20-Year
Operation Sei ice Contract with Covanta Energy:
• Wliv the SEF is Critical to Solid Waste:
• Landfill Preseivation
• NHC Self-Determination(Preserves Future Optionality)
• Diminishing Alternative Landfill Space
• Renewable Energy Source(Green)
• Predictabilit-v in Cost
• Contractual Obligations Ensure Investment
• Why Important to Do This Now:
• SEF is a rapidly deteriorating asset
• Only 6 years of permitted Landfill air space remains
• We can control compaction rates(density),but not tonnage(tonnage at highest level since
2005)
• Permitted space projected to be exhausted August 2018
• Southern Property Landfill permitting not guaranteed
• Multi-year process
• Requires Certificate of Need
• Becoming increasingly more difficult due to legislation,enviromnental trends and
community concerns
• What Investment Buvs Us
• Proposed SEF Contract ensures:
• Complete retrofit of facility
• Facility properly maintained throughout term of contract/No deferral of major maintenance
• Firm construction schedule
• Long-term price certainty-price only escalates in accordance with CPI(max. 5%)
• Guarantees of Performance
• Electricity production,throughput, emissions,metal recovery,ash quantity/quality
• Securit-v for Performance
• Incentives for maximum production of electricity,ferrous metal recovery and Renewable Energy
Credits(RECs)which will benefit NHC
• Netting: Guarantee SO2 levels below Title V permit
• The Bottom Line
• A sustainable/self-supporting solid waste solution requires $88 - $90*/ton tip fee for the life of
project:
Residential
Annual Increase: $23.49-$25.11/tir.
Monthly Impact: $1.96-$2.09/mos.
Businesses
Small Retail: $169.65-$181.35A-r.: $14.14-$15.11/mos.
Fast Food Establishment: $1,176.24-$1,257.36A-r.: $98.02-$104.78/mos.
NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 32
WORK SESSION,SEPTEMBER 13,2012 PAGE 481
* Assumes 3% annual CPI growth, 3% growth in waste tonnage, $0.06/livhr electric revenue,
NHC operation of Landfill and Recycling, —$2.5 million/year capital expense
(Landfill/Recycling):continued payment of indirect costs to NHC GF.
• Alternatives Aren't Exponentially Cheaper
• Alternative=Transfer Station+Trick to Another Landfill
• Tip fee= $79-$87/ton vs. $88-$90/ton for SEF option
• No guarantee how long 3rd party landfill will exist
• Landfill has limited life:Pitching same airspace to all comers
• Likelihood of expansion/siting new landfill low
• Landfill gas emissions are largely unregulated and emit higher levels mercury and in a more toxic
form
• Really a deferred option for dealing with our waste
• Except no longer have SEF asset as an option/Will be hostage to fixture pricing
• Emission Level Comparison(s):
SEF Emission Factors(a)in tons per year Titan's Potential
to Emit in tons
Existing Title V Netting PSD Avoidance per year
Particulate(a)
PM 27 27 13 162
PM 10 -- 32.3 32.3 161
PM 2.5 -- 27.3 27.3 155
Lead 0.44 0.42 0.12 0.063
(880 lbs) (840 lbs) (240 lbs) (126 lbs)
Mercmv 0.08 0.068 0.017 0.023
(160 lbs) (136 lbs) (34 lbs) (46 lbs)
Acid Gas
SO2 77.4 52 45 438
HCL 44.1 26 25 18
Combustion
CO 116.7 98 98 3068
Nox 253.4 194 194 1643
Dioxins/Furans 3.00E-05 1.30E-05 1.10E-05
Other PSD Regulated
VOC's -- -- 28 175
H2SO4 -- -- 8
BF -- -- 3 1.04
• PSD Avoidance Cost of Implementation
• One-Time Capital Investment
• $1.8 million of capital modifications would be made to all 3 scrubber units and bag houses
• Annual Operating Expense
• $200K/year additional operating expenses for reagents
• Equates to—$1.65/ton increase to tip fee
• NHC SO2 Emissions Declining
• SO2 Impacts From SEF Not Significant
• SEF below Significant Impact Level(SIL,)
• Modeled impacts are conservative - maximum impact from 5 years of atmospheric data using
USEPA approved AERMOD dispersion model:
Modeled Condition Stack SEF S02 Impact at Monitor
Scenario Description(a) ppmdv7 As ug/m3 (a) As% of SIL,
1.Original Max 1-lu Hypothetical worst 145 14.7 186
Values from 2010 case-never happened
2.Actual Max 1-hr Actually happened 57 5.8 73
Values from 2010
3.Permit limit 29 ppm facility average 29 3.1 40
4.Netting 23 ppm facility average 23 2.3 30
5. PSD Avoidance 20 ppm facility average 20 2.0 26
NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 32
WORK SESSION,SEPTEMBER 13,2012 PAGE 482
• Solid Waste Floe Control
• Current Count-v Floe Control Authority:
• Code Ordinance(Section 44-55)regarding Collection Franchises
• Franchise Agreements
• Haulers must apply for, and be granted, a Franchise to operate in NHC: Under terms of
Franchise NHC has right to direct waste
• Trust in free market econoniv that haulers want to do business in NHC and will abide by
their franchise agreement
• United Haulers Decision
• Other Potential Floe Control Mechanisms
• Recycling Is Fully Compatible With SEF
• Communities with SEFs have higher recycling rates
• Recycling optimizes efficiency of SEF-Removes very high and very low Btu material
• Recycling offsets increase in waste due to population growth
• Increases life of landfill
• Note: US EPA is waste from all sources, Adj. US EPA excludes commercial, industrial and yard
waste, and Biocycle includes yard waste, composting and mulching.
In response to questions on airspace, Environmental Management Director Suleyman confirmed that
present landfill airspace only allows for a 6 year life span;with SEF without southern expansion there is a 12 year
life span: with landfill and southern expansion 45 years of airspace: with southern expansion and SEF possible 90
years of airspace. There are 90 to 100 acres unpermitted in southern expansion. The permitting process for this area
will take 3 —4 years to receive approval and another 1 -2 years before waste is placed in there,which equates out to
6 years. DENR is"very concerned"with some of the flora and fauna that may be in southern expansion area. Staff
is currently working with local experts to update this information. Staff feels reasonable that area will be permitted.
Environmental Management Director Suleyman explained it will take approximately 6 months to get the
permit and once notice to proceed is issued there will be a 15 month build-out timeline for the SEF construction.
This timeline does take into account that no waste is burned for 2 years. The cost to permit the southern expansion
is comprised of cell construction per acre cost at approximately $309,000 and permitting, CQ&A and engineering
costs is an additional $90,000 per acre for a total of approximately $399,000 per acre. Staff is currently in the first
year of the permitting process. It is expected to take another 3 years to complete the process. County Manager
Coudriet reported that there is an appropriation for FY12-13 in the Enviromnental Management Fund specifically
for the permitting of the southern expansion.
In discussion on environmental concerns as it relates to SO2 emissions, staff confirmed that with PSD
Avoidance emissions are reduced to 45 tons per year from 77.4 tons per year. Based on historical monitoring of site,
New Hanover County's SO2 emissions are continually being reduced. It was noted that SO2 is very localized.
There is positive movement at the state level to allow a SEF to come out from under the nonattaimnent designation
and there is support at DENR for this to occur.
Eric J. (Rick) Sapir, Attorney with Hawkins, Delafield, and Wood responded to questions about guarantee
responsibility stating that it would be Covanta that would be the responsible party if there is a permit violation.
Covanta will be responsible of any fines or extra costs to the County associated and have to fix the issue(s). There
will be an LLC setup to operate the entity but there will be a parent company guarantee guaranteeing all the
obligations of the parent company. Mr. Sapir also addressed flow control. The County currently has a franchise
ordinance and franchise agreements in place to address flow control. There is no absolute guarantee that the
County's flow control authority will not be challenged. There is no definitive authority on the question of flow
control as it applies to publicly owned but privately operated facilities. Currently, there are a few cases in the legal
system that will provide case law in the next year or so. However,there are other potential flow control mechanisms
the County can exercise in order to control its waste such as:
• Intra-state flow control which is utilized by many municipalities. It does not have to be state law,
could be a county ordinance. The ordinance could state that all waste generated within the county has
to be disposed of in the county facility unless disposed of out of state. The theory is that is it does not
interfere with interstate commerce as it allows disposal out of state and this mechanism has been
upheld in courts many times.
• Another mechanism is to have economic flow control. Many entities in the country and in NC charge a
tip fee for a certain element of the solid waste seivices provided by municipality but will also charge a
fee or assessment on the county tax bill or something similar depending on jurisdiction.
• There is also an option for the County to get into collection business itself whether it be directly
hauling, entering into exclusive contracts with haulers or possibly through exclusive franchises.
Mr. Sapir firrther explained that if the County franchise agreements and/or ordinance in regards to flow control are
challenged,and if it's overturned,there are other avenues available to maintain control of its waste stream.
A brief discussion was held on the effect of the increased tipping fee on commercial and/or residential
construction. Solid Waste Management Consultant Bob Brickner with Gresh inan, Brickner&Bratton, Inc., (GBB)
responded that the additional tipping fee is minimal. Where it will be felt more so is the commercial businesses,
such as restaurants. It was also noted that the contract does have a provision that Covanta has a right to refirse
NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 32
WORK SESSION,SEPTEMBER 13,2012 PAGE 483
processing material deemed "non-processible- waste-waste that will harm the facility or cause bad air emissions.
The County will be responsible for disposing of such material.
In response to questions on the debt, Strategy and Policy Manager Beth Schrader responded that overall
debt is approximately$32.6 million. This equates to approximately$2.2 million per year at an interest rate of a little
over 4% for the 20 years of debt sei ice and repayment of the loan has been factored into the tipping fee. In
response to questions concerning the old facility, Mr. Sapir estimated a new facility is approximately $250 million-
$300 million in capital. Covanta has done extensive due diligence on the property and as a result is able to step up
to take``as is"risk of the facility with exception of the turbine. The turbine could not be inspected and Covanta may
come to the County to cover costs. It was noted that former Environmental Management Director John Hubbard felt
while this is a risk it is one the County could and should bear. Other exceptions that the County-may have to cover
would be if there is asbestos or hazardous material or something underground that would not have been known
about prior but are not necessarily facility related. Essentially, the County is only responsible for ``uncontrollable
circumstances.- The company is responsible for all maintenance major, capital, etc. The performance guarantees
are the County's ultimate protection but there are also requirements such as maintaining facility in accordance to
certain standards.
County Manager Coudriet commented that while the facility has been rebranded as a sustainable energy
facility, this contract provides a comprehensive solution. It is believed by staff and the consultants that this is a
sustainable energy facility in that:
• It will provide a renewable energy in that something of value through 150,000 tons of solid waste
stream;
• Tip fee does not require subsidization from the General Fund. Although the tip fee will be higher it is
not exponentially higher than an alternative would be such as directing waste out of county;
• It is sustainable in that it maximizes the long-term landfill space:
• There is never going to be a landfill sited again east of I-95:and
• It is sustainable in that there will be revenue generated to ensure the proper investments are made into
the facility so that in 20 years it is still active and n mring effectively when the contract expires. This
will allow the board at that time to decide what to do with the facility while having a facility that is
valuable and sustainable.
County Manager Coudriet went on to state that the staff and county's consultants feel that sustainable
energy is part of the fixture and Covanta offers that opportunity with a good and fair contract. The recommendation
for the agenda item on Monday, September 17t"would be for the Board to approve the execution of the contract as
negotiated or with any modifications deemed necessary coming out of today's work session. He also confirmed that
a public hearing section would allow15 minutes for people to speak in opposition and 15 minutes to speak in favor
of the contract.
ADJOURNMENT
There being no further questions or discussion, Chairman Davis thanked everyone for attending and
adjourned the Work Session meeting at 3:39 p.m.
Respectfirlly submitted,
Kvinberleigh G. Crowell
Deputy Clerk to the Board
Please mote that the above minutes are riot a verbatim record of the l ew Hanover Couno)Board of Commissioners
meeting. The entire proceedings are available for review and check-out at all Aei-Hanover Coulio)Libraries and
on inww.nhcgov.com HC'Live or inni-.nhcgov.com pyges.BOCas py