Readers of the Hernando Sun may recall the articles about the long-proposed contract with Freedom Energy Hernando, LLC (“Freedom”), an untested company that was selected to provide landfill management and waste disposal using a waste-to-energy process. Multiple questions and incorrect figures during contract negotiations prompted the BOCC to request a feasibility study (financial evaluation) which was completed by Public Resources Management Group, Inc. (PRMG).
PRMG compared two scenarios, projecting cost, savings, and benefits over a 20-year period: first, continuing the current landfill management; second, Freedom’s proposed waste-to-energy recycling facility. Representative for PRMG, Thierry Boveri, shared the results. Matthew Ori, president of PRMG, and senior analyst Nick Smith were also present.
The County’s Solid Waste Division, with 34 employees, serves approximately 80,000 households (single-family and multi-family units). The Division processes waste from construction/demolition, tires, yard waste and household hazardous materials, etc. Currently there are two Community Convenience Centers (CCC) and the Northwest Landfill in use. The Croom Landfill is closed and maintained by the County.
Boveri reviewed the funding for the Solid Waste Division. All $8.1 million in revenue comes from user fees. Operating costs total $7.6 million. The balance of approximately $400,000 is used to offset rate increases or pay for capital needs in the future. According to Boveri, between meetings with the County and with Freedom, on 04/24/17, changes were made in the cash-flow projection which reflected a difference in the revenues and costs associated with the 20-year plan.
The revenue forecast shows an increase mainly from construction rather than residential waste, but there is moderate growth in yard waste. Again, tipping fees would provide some of the revenue, but the majority will come from residential assessments.
Landfill operations comprise the largest expenditure, followed by the CCCs. Adequate staffing at the sites is needed to accept, chip and/or transport the waste. After reviewing the past four years’ worth of budgets line by line, PRMG then projected operating expenses using a variety of methods. Anticipated future costs would include closing landfill cells, opening others, and maintaining the facilities. FDEP costs for closure and post closure of the cells were estimated downward after a review determined the projections were too high.
Under Scenario 1, where the landfill operations remain the same, PRMG anticipated funding new cell construction to begin around 2025 at an approximate cost of $12 million. This is two years before the new cell would need to be active.
Under Scenario 2, where Freedom begins operations, the life of the landfill would be extended. Capacity would not be reached until 2038, the end of the contract period. However, Boveri recommended that toward the end of the contract, construction of the new cell should begin so there would be a redundant system available.
Freedom will accept municipal solid waste (MSW), yard waste, and curbside recycling. The contract states that the County will provide a minimum of 99,000 tons of waste annually at a cost of $39 per ton. This represents fees of $4.8 million.
Freedom will construct a MERF (material energy recovery facility) to shred MSW and change it to pellets. The pellets could be used to create energy or in manufacturing. Under this plan, approximately 80% of the waste would be used, and only 20% would return to the landfill (called residuals).
Freedom will assume operation of the CCCs and scale house, yard waste, and recycling. Freedom’s employees will reduce the current County staff from 35 to 15, presenting another cost savings of $2.3 million to the County in just the first year of the contract. Looking at the number of staff positions that would be cut, PRMG stated that was a concern to them, particularly in the scale house.
As noted above, delaying the closure of one cell and construction of another is an additional savings during the contract period. Between the fees and the savings projected, PRMG estimates an approximate $1.5 million net increase. Eventually, Boveri stated, the two would appear to break even by the end of the 20-year period.
On 04/24/17, Freedom stated they would cap the fees (from commercial waste) at 100,000 tons, and would pay the County $39 per ton of residual as a credit to the County. Boveri said PRMG has not had time to thoroughly evaluate this, but it roughly translates to an increase of $1 million net cash flow.
PRMG admitted that the greatest savings would come from delaying the closure of the current cell and construction of a new cell. Staffing and operating costs represent a smaller savings, but over 20 years it could be significant, depending on inflation and investment earnings.
“We’re making some pretty big assumptions,” Boveri admitted, noting that there were some variables they could not consider. Other contracts, such as the gas supplier, were not included in the figures. Especially challenging was the lack of a written contract with Freedom, as PRMG relied upon numerous emails supplying figures and options, and in-person meetings with both the County and Freedom staff.
Commissioner Steve Champion stated a concern that the initial review by PRMG reflected a loss of $1.5 million to the County, then Freedom presented other figures that proposed a gain of $25 million that the County would receive. Commissioner John Allocco concurred, saying that the terms changed each time the County voiced an objection.
Jake Varn, attorney for Freedom, stated that they received more than 1,000 pages from PRMG and will take time to thoroughly review it. Beginning with the first year of the contract, Varn states that Freedom would process waste in excess of 100,000 tons free of charge, which he estimates would be 21,000+ tons at a cost savings of more than $800,000.
Varn’s chart showed savings and profit to the County each year of the contract. The first year would almost double the current estimate of $170,000. Over 20 years, it would represent more than $26 million.
The plant design Freedom is choosing has been in use “up north” since 1989. The Elk River facility, a waste-to-energy power plant, which Varn referred to serves Wisconsin and Minnesota.
Varn states residuals (or the amount returned to the landfill) would be only 12%, and not 20%, which would further extend the life of the landfill.
The Elk River facility reportedly has residuals of 2%. Of the 100,000 tons of MSW, Freedom expects to return 80,000 tons of fuel pellets.
Boveri noted that if the residual drops below 10% it will negatively impact the County financially, but it would extend the landfill life. Varn stated this was a positive aspect of the facility, since it would show a long-term benefit.
Though the financial aspect has been explored, Varn said that the benefits to the environment should be discussed also. He described the project as visionary, much like the Sunshine Skyway Bridge. The final product is a fuel that burns cleaner than coal, he said.
Varn requested time to revise the contract to reflect the information presented by PRMG. The BOCC discussed sending representatives to visit the Elk River facility to learn more about the process. Commissioner Nick Nicholson stated that the $100,000 or more in staff time and consultant fees would be well spent if the company delivered what was promised.
Commissioner John Mitten asked Varn why there were not more facilities like Elk River if the product was as Varn described, and whether there is a market for the pellets. Varn stated the tipping fees needed to be low enough to make it feasible. Locating a buyer was in progress.
Public comment was opposed to Freedom’s proposal, from the economic impact across the county because of lost jobs, to taking a risk on an unproven process and company.
Nathan “Nat” Mundy, CEO of Freedom Energy Hernando, LLC spoke to the BOCC. Though the company is new, Mundy stated his history in the field spans 28 years. The product, termed a “renewable biomass” by the EPA, counts toward recyclables, said Mundy. The process is successful in Europe and Asia.
Mundy explained that he used this process at Disney World 20 years ago, selling the product to Tampa Electric Company until they were sued by the federal government and forced to switch from a coal based plant to natural gas.
There is a market for the fuel, he said, but until he has a contract with Hernando County, he cannot move forward. The risk is all his, Mundy said, and the County will lose nothing.
County Attorney Garth Coller remarked, “The question really comes down to, are you going to be a pioneer?” Businesses always take risks, and technology changes can make a difference. Chairman Wayne Dukes stated he would like to see Freedom succeed, but has apprehensions.
Dukes will travel with staff to Minnesota to view the Elk River facility, and tasked Champion to check with Cemex to see if they would be able to accept the fuel pellets. Before the 05/23/17 meeting, Varn and Assistant County Attorney Randall Griffiths will work on the details of the contract.