The Burning Question: Following the Money

Big bucks will be spent on a new fuel plant for Rock-Tenn—at least $140 million by current estimates. Construction costs are just the tip of the financial iceberg. Long-term costs include paying for fuel, but also creating, transporting and cleaning that fuel. At each step of the way, there are environmental costs and benefits, as well as dollar costs, but today's article focuses on the money.

The Burning Question: coal, garbage, biomass and sustainable energy

We invite YOU to weigh in with questions, comments, corrections and opinions at Your Burning Questions—readers and writers talk back, a space for dialogue and feedback for concerned citizens AND involved parties.
Friday: Re-fueling Rock Tenn: environmental and economic challenges
Saturday: Who's on First? Keeping track of the players
Sunday: Following the money: who pays and who profits
Monday: Garbage or green energy: a look at the issues around RDF

Building the power plant may be the least complicated cost factor. The St. Paul Port Authority, a non-profit municipal corporation, will finance, build and own the facility. "Financing [to build a power plant for Rock-Tenn] would be through investors who would purchase bonds," the Port Authority'es Lorrie Louder explains. "A lot of what the Port Authority does is to go to capital markets and issue bonds. Typically, these are sold to individuals looking to add to their portfolio or banks and so forth." No tax money will be invested in the construction of the power plant, Louder says. The land might even be donated by Rock-Tenn to the Port Authority, according to both Rock-Tenn and the Port Authority, though plans have not been finalized.

District Energy, a private, non-profit corporation, and Market Street Energy, its for-profit affiliate, will run the Rock-Tenn power plant, as they currently run St. Paul district heating and cooling and a number of other energy-related businesses.

The cost of fueling the plant is more complicated. Currently, Rock-Tenn operates on steam heat generated by the coal-fired Xcel High Bridge plant, which will stop burning coal and producing that steam during the summer of 2007. Rock-Tenn's present energy cost is estimated at about $20 million per year.

When the steam stops coming through that five and one-half mile pipeline from downtown St. Paul, Rock-Tenn will fire up its old boilers and begin burning fuel oil and natural gas. Company executives estimate that this will increase their energy costs by four to six million dollars annually. And the cost could go much higher, depending on the always-volatile international energy markets and on factors as unpredictable as hurricanes in the Gulf of Mexico.

For both economic and environmental reasons, Rock-Tenn and all the other parties involved plan to build a power-generating plant on Rock-Tenn property to burn biomass fuel. Right now, both Rock-Tenn and the governmental and quasi-governmental players plan on using refuse-derived fuel (RDF), possibly supplemented by construction and demolition (C&D) waste. That could change, but RDF is the main plan right now.

RDF begins life as municipal solid waste, the garbage picked up from St. Paul alleys by an assortment of private haulers. Property owners—individuals and businesses—choose a private hauler and pay that hauler to take away the garbage. That's where the haulers get their income. Their expenses include paying employees, maintaining trucks, fuel for transportation, and paying someone to let them dump the garbage in a landfill or processing facility. That payment is called a tipping fee.

Tipping fees at landfills pay the landfill owner's cost of buying the land, digging the hole, and maintaining an environmentally safe operation. Tipping fees at processing facilities—such as Resource Recovery Technologies' Newport RDF facility—pay the cost of sorting and shredding the garbage, landfilling the non-burnable elements, and processing the rest into fuel. That costs a lot more than burying garbage.

The Newport facility now owned by Resource Recovery Technologies (RRT) opened its doors 20 years ago, with a contract between Ramsey and Washington counties and NSP for processing of waste into RDF. NSP later spun off the operation to NRG. The facility in Newport receives municipal solid waste from Ramsey and Washington counties and processes it into refuse-derived fuel.

The 20-year contract, which was due to expire this year, provided an option to buy for the governmental parties. Before the contract expired, NRG sold the facility to Resource Recovery Technologies (RRT).

"RRT is basically the management of NRG," says David Morris of the Institute for Local Self Reliance. According to Morris, the new entity is financed by BEF, a private investment equity fund. "I don't know what the price was but it looks a little odd," says Morris.

The counties did not exercise their option to buy the NRG/RRT plant, but instead signed a new five-year contract with RRT.

Ramsey County environmental health official Zack Hansen explains that resource recovery facilities "have to compete with landfilling. It's tough to compete with burying stuff in the ground. The economics and the system have to be structured so you can gather the waste." In the case of RRT's Newport plant, millions of dollars in subsidies are paid every year by Ramsey and Washington County taxpayers.

Ramsey and Washington counties operate from a policy framework that says recycling is preferred over burning garbage and burning is preferred over landfilling. Within that policy framework, there is an on-going debate over how much money should go to recycling (and to increasing the percentage of garbage that is recycled), and how much should go to subsidizing RDF production.

The Newport RDF facility gets its income from the tipping fees paid by garbage haulers and the government subsidies for those fees. Then it processes the garbage into RDF and delivers the RDF to Xcel energy plants in Mankato (Wilmarth) and Red Wing. Xcel pays nothing for the fuel—in fact, it gets a cash rebate for taking the fuel.

According to Hansen, "the economics are such that compared to other fuels, RDF is a very expensive fuel to burn. It's a harder fuel to manage, it requires a lot of maintenance and so on." Because the end user does not pay for the RDF, the Newport facility's only income comes at the front end—from the fees paid to it to receive the garbage. Ramsey and Washington counties have set policies of "transition to a 'merchant' facility after 2007." That would mean eliminating the current subsidy, but it is not clear how this would be accomplished.

If the Rock-Tenn project is based on RDF fuel, additional processing capacity probably would be needed at the Newport plant. Public subsidies for that construction might be needed.

Ramsey and Washington counties support an RDF fuel source for the Rock-Tenn plant as a way to provide both fuel for Rock-Tenn and a "market" for the counties' municipal solid wastes. Other biomass fuel choices exist—among them, woody wastes, agricultural wastes and crops grown specifically for fuel. The choice of fuel for the Rock-Tenn power plant has implications for the municipal solid waste system, but also for air quality, property taxes, agriculture and farmers, and the future of recycling.

Tomorrow's Burning Question will focus on the economic and environmental impact of RDF. A Green Institute study due later in March will focus on biomass alternatives to RDF. We will report on that study, and we invite you to participate in the on-going discussion at Your Burning Questions—readers and writers talk back, a space for dialogue and feedback for concerned citizens AND involved parties.

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Mary Turck's picture
Mary Turck

Mary Turck (maryturck [at] gmail [dot] com) is a freelance writer, editor, teacher, and lifelong activist, and former editor of the TC Daily Planet.


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Ecnomics of Alternative Fuels

This article focuses unduly on RDF, especially in its misleading implication that the proposed energy district would depend EXCLUSIVELY on RDF. The economics of other alternative fuels is not fully discussed, nor the economic consequences of failing to find an economically viable --and environmentally sustainable -- source of energy for a plant that recycles roughtly half the used paper in Minnesota.