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March 7, 2019

Bill aims to force action on stalled Hartford trash plant project

PHOTO | Flickr via Dave Ginsberg The CSWS Resource Recovery Facility in Hartford.
By Matt Pilon

It’s been over a year since state officials selected a $229 million proposal from a private company to overhaul and operate the biggest waste-to-energy plant in Connecticut, but with contract negotiations dragging on seven months past deadline, a new bill before lawmakers could force a resolution.

House Bill 7293, raised by the Environment Committee on Tuesday at the request of the Department of Energy and Environmental Protection (DEEP), would give the agency's commissioner the authority to “order” the Hartford trash plant’s quasi-public overseer, the Materials Innovation and Recycling Authority (MIRA), to sign a contract with a developer. Existing state law, passed in 2014, uses the verb “direct.”

Legislators gave MIRA the authority to negotiate the contract with developer Sacyr Rooney, but that power would be undercut if the legislature passes the newly proposed bill, scheduled for a public hearing next week.

DEEP, which selected Sacyr Rooney early last year as the developer-operator for the plant and related facilities, has the power to replace the company with one of the other two outfits that bid on the project, but the agency has placed more of the blame for the delay on MIRA.

“DEEP has prioritized working with MIRA to be a productive partner to engage in discussion and due diligence to enable this proposal to move this forward,” DEEP Commissioner Katie Dykes said in a written statement Thursday morning.

A recent turbine failure that put the Hartford plant out of commission, or operating at a reduced capacity, for approximately four months has added urgency to the contract delays.

Donald Stein, MIRA’s chairman and First Selectman of Barkhamsted, said MIRA has been negotiating in good faith.

“I think this subverts that,” Stein said of the proposed legislation. “I think it’s bad public policy and I think it sets the wrong precedent.”

He still holds out hope that both sides can come to an agreement, but he acknowledged the negotiations are taking a long time.

”If they weren’t difficult, we would have a deal by now,” he said of the talks.

Richard Barlow, vice chairman of MIRA’s board of directors and a former waste management official at DEEP, said in an interview Thursday morning that it’s unfair to blame MIRA for the delay. He said the board is trying to fulfill its statutory duty to ensure that municipalities (more than 50 of which send their waste to the plant) are protected moving forward. He hopes the legislature won’t force MIRA’s hand in the contract talks.

”The [proposed] change in wording is not going to change the concerns that the directors have,” Barlow said.

During negotiations, MIRA has been pushing for more public oversight once the plant is redeveloped.

“[Sacyr Rooney] is envisioning basically that they want to come in, we give them the keys to the bus and then get out of the way,” Barlow said.

Sacyr Rooney declined to comment for this story.

One concern is that municipalities could have little say, once a contract is signed, over increases to the tipping fees they will pay to the new operator, he said. Local governments could potentially find other places to send their waste, but the market is tight, Barlow acknowledged. The plant remains a key asset in the state’s waste strategy, and processes roughly one-third of municipal solid waste annually -- around 700,000 tons last year.

DEEP has said the redevelopment of the plant would increase diversion of certain materials from the waste stream, which could mean burning less trash overall, though that is not guaranteed. The project has also been pitched as a way to stabilize increases in tipping fees municipalities and other customers pay to the plant.

Most municipal customers are currently paying $72 per ton to send waste to MIRA, but that is slated to rise to $83 on July 1.

Sacyr Rooney’s proposal, submitted in 2017, included a fee of $65 per ton in the first year of operation -- well below the next lowest bidder. That is a base level tipping fee, and doesn't include the cost of transporting waste from four MIRA transfer stations in the state, a cost that is included in MIRA's $83 fee.

Barlow thinks Sacyr Rooney's bid isn't realistic. Fees are already rising without having to make debt payments for a major redevelopment, like Sacyr Rooney would have to do. Barlow called a fee of $65 per ton “fantasy island.”

He suspects the fee would be likely be somewhere between $90 and $100 per ton. 

It's true that tipping fees are going to be higher than $65, DEEP project manager Lee Sawyer acknowledged Thursday, both because there would be extra transportation costs and because of changing assumptions. He said DEEP learned last summer that fees would be higher, and received projections from Sacyr Rooney in December. The projected increase in tipping fees has not previously been reported publicly. Fees would be laid out in the contract.

Sawyer attributed the higher expected tipping fees to the developer's "significant investigation of the condition of the facility," which led it to determine a need for accelerated investment in "critical renovations."

Another factor impacting expectations include major shifts in the global recycling market.

Still, Sawyer predicted that the base tipping fee would be lower than the $83 MIRA will begin charging in a few months. With transport costs added in, it could be a similar figure for some, but it will depend on the final contract, he said.

Reduced MIRA overhead costs and a projected revenue increase for the plant from the spot market would help make it possible for Sacyr Rooney to have a tipping fee similar to MIRA's, even after investing its own capital to rebuild the plant, he said.

"Presumably, only about half of the capacity would be locked up by long term municipal contracts, and [Sacyr Rooney] will charge market rates for other waste, which they project will command higher tipping fees," Sawyer said.

Barlow is also worried about Sacyr Rooney's ability to draw commitments from municipalities to the overhauled plant. While Barlow said municipal officials are concerned about the prospect of being asked to sign contracts as long as 30 years, Sawyer disputed that Sacyr Rooney is reliant on such long deals.

The contract between the state and Sacyr Rooney might be 30 years, he said, but municipalities would have "a range of contracting options" to pick from. Sawyer said DEEP has been discussing the options with towns.

Still, if local governments don't like other terms of the contract, such as those that govern tipping fees increases, and decide not to sign up, it could hurt the developer when it goes to the bond market to borrow money for the project, Barlow said.

If municipalities pull out, it could also set up a situation down the road where Sacyr Rooney wants to burn waste from other states to shore up the plant’s revenue, he said.

Despite his concerns, Barlow shares Stein’s belief that a private operator can be the right path forward.

“There is definitely a deal to be made,” he said.

Editor's note: This story has been updated to include further comment and clarification from DEEP related to statements from a MIRA board member regarding details of negotiations with Sacyr Rooney and predictions about tipping fees for waste. A change was also made to clarify comparisons involving tipping fees.

Read more

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Trash/recycling plant to provide $1M to Hartford

Hartford councilors demand better deal from waste plant

Out-of-state partnership chosen to redevelop Hartford waste facility

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

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