July 31, 2018

Klee decries slow progress on $229M waste-system overhaul

PHOTO | Flickr via Dave Ginsberg
PHOTO | Flickr via Dave Ginsberg
The Mid-Connecticut waste-to energy-plant in Hartford's South Meadow.
DEEP Commissioner Rob Klee.

It's been seven months since the state selected a developer to overhaul the waste-to-energy plant in Hartford's South Meadows and its related network of recycling and transfer facilities, but there's still no contract in place.

State officials had hoped developer Sacyr Rooney Recovery Team and the plant's quasi-public owner, the Materials Innovation and Recycling Authority (MIRA), would reach a formal deal on the estimated $229 million redevelopment by Aug. 29, but Connecticut's top energy official recently expressed concern that negotiations are not on track.

Department of Energy and Environmental Protection (DEEP) Commissioner Rob Klee says the aging plant is in poor condition and that the state can't afford delays in the negotiating process. Even once a contract is reached, construction and permitting are estimated to take five years.

Sacyr Rooney has proposed to implement more cost-efficient waste incineration technology at the plant and reduce the amount of waste it burns by about half. It would also build anaerobic digestion technology, equipment to compost and process organic waste, and increase the amount of recyclables removed from the waste stream.

State officials estimate the modernized plant could help increase Connecticut's recycling and diversion rate from 35 percent to 63 percent.

At a July 26 MIRA board meeting, Klee urged the agency to act in "the spirit of cooperation" and to be good ambassadors to the cities and towns Sacyr Rooney will need to convince to sign long-term waste-hauling contracts in order to make the project financially viable.

Those towns have not yet seen "term sheets" showing what a contract with the new plant might look like, officials said.

Klee said he addressed MIRA in a public forum because he was feeling anxious about the negotiations, which began early this year. He said he left the meeting feeling reassured that MIRA wants the project to move forward.

"DEEP understands that both MIRA and Sacyr Rooney must complete the requisite diligence and take the time necessary to form a strong partnership, and we are open to considering a request for more time to complete this process, should it be necessary," Klee said. "But we urge a redoubling of efforts and the establishment of a firm timeframe for next steps."
Klee became DEEP's leader in 2014, the same year the legislature ordered the agency to secure a private developer to modernize the plant and its related facilities, which together are referred to as the Connecticut Solid Waste System Project (CSWSP).

MIRA President Thomas Kirk said he shares Klee's concerns about the negotiation timetable.

"I know [Klee] is very anxious to get this thing done," Kirk said. "He sees it as almost like a legacy project."

But Kirk, who has worked at MIRA since 2003, said it would be unfair to blame his agency for the slow pace. The negotiations are complicated and much is at stake, he said, adding that MIRA and Sacyr Rooney have a ways to go before they can agree on key provisions.

While negotiation terms are largely being kept secret, Kirk said one of his biggest concerns is that the state maintains some control over how much Sacyr Rooney would be able to charge customer towns to accept waste -- a per-ton charge known in the industry as a "tipping fee."

Sacyr Rooney has said it could charge $65 per ton with scheduled annual increases, which officials say is quite competitive. But Kirk thinks the developer's financial assumptions may be too rosy, which could force the need for higher tipping fees in order for the private company, which would fund the project mostly with debt, to achieve its desired return on investment.

However, Chris Magalhaes, a clean energy finance manager at the Connecticut Green Bank who analyzed Sacyr Rooney's proposal for DEEP, called its projections reasonable and said the $65 tipping fee was low enough that it would still be competitive, even if there were an increase.

Today, MIRA has 52 municipal customers under exclusive contract, down from about 70 in 2012, and several dozen private waste haulers, Kirk said. The competitive landscape is much different than when the plant was built three decades ago. A number of private companies now operate waste facilities here, which means municipalities have options.

However, the Hartford plant processes about one-third of the state's waste, meaning it provides needed capacity that's only becoming more important as landfills close in neighboring states.

"MIRA is optimistic we will find and agree to the structure that works. Doing so by August 29 will be difficult but not impossible," Kirk said. "The towns are the customers here. They have to have confidence they will not be left out to dry if things go poorly."

Sacyr Rooney President Kevin Moore, who attended the recent MIRA board meeting, declined comment for this story.

'Difficult but necessary' transition

Another wrinkle is that while MIRA is charged with negotiating terms of the plant redevelopment, the project is expected to lead to a smaller role for the agency moving forward.

Klee told board members there was a "difficult but necessary transition" ahead for the agency, which has about 32 people, some of which could be rehired by Sacyr Rooney or its operator, according to Kirk.

Kirk strongly denied that MIRA resents its role in negotiating what amounts to its own likely downsizing, and said the dynamic is not impacting how it negotiates with Sacyr Rooney.

MIRA has been aware of its future since the state's 2014 law ordering the CSWSP redevelopment.

"That's been understood by everyone here for years," Kirk said.

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