Oil company expected to finance proposed Lake trash-to-ethanol plant

Officials from Powers Energy are finalizing the paperwork on the deal with a major U.S. oil company to provide $40 million to $90 million in equity financing for the proposed $300 million trash-to-energy plant in Schneider and to purchase all the ethanol the facility will produce.

That paperwork will be presented to the Lake County Solid Waste Management District on Thursday as proof of financing for the project in an effort to meet the final benchmark district officials have set to move the deal forward.

LCSWMD members have given Powers Energy until Thursday to prove the funding is in place for the plant that will transform 2,000 tons of trash per day into 40 million gallons of ethanol per year in the first phase alone.

Just what officials will expect as proof the company has that funding will be up to the district’s 23 board members, according to Jeff Langbehn, executive director of the LCSWMD.

Powers met both the 30- and 60-day benchmarks for the project set by the LCSWMD in May and June. Member Rick Niemeyer, who represents the Lake County Council on the board, was the lone no vote in June. Niemeyer at the time said he is not necessarily opposed to the project, but the time and extensions Powers has been given to make it a reality.

The last benchmark, proof of funding, implies Powers must have cash in the bank.

“The board has been quite specific they want financing finalized,” Langbehn said, adding it will be up to members to decide whether that means cash in the bank or the letter of intent that means the cash is on the way.

He likened the funding process to getting a home loan for new construction. The bank approves the loan then lets the funding come forward as the general contractor moves along with the building process. The letter from the bank saying the loan has been approved is the guarantee.

Consortium steps in

Ed Cleveland, the Northwest Indiana representative for SMC Inc., said the letter of intent from the oil company, whose name will be released once the deal is signed, will enable Powers to move forward with the bonding process for the rest of the capital with financial firm Raymond James. Raymond James Financial Inc. signed a contract with Powers in January to sell the bonds that will bring the remaining capital together.

Langbehn said Cleveland and SMC, the local consortium of construction companies who joined Powers in the fall of 2010 to move the project forward, has helped to open the line of communications with local officials. SMC is made up of three north Lake County construction powerhouses, Superior Construction and Continental Electric, both of Gary, and Morrison Construction of Hammond.

Lowell Town Council President Phillip Kuiper said it was the addition of Cleveland to the process that changed his opinion of the project. Kuiper is Lowell’s representative on the LCSWMD.

“Before Ed Cleveland I lost all confidence,” Kuiper said. He said the lack of communication with Earl Powers and multiple failed funding attempts had made him lose confidence in the plan and whether or not it would ever come to fruition. The addition of Cleveland and the contract with Raymond James is prompting him to reconsider.

“I’m past my frustration. I’m willing to keep playing along. We’ve got nothing else going along anyway. There’s got to be an end sooner or later. I’m OK with hanging in with it,” Kuiper said.

He said some fellow board members may feel the same way depending on just how detailed the information and letter of intent is that is brought forward Thursday. Kuiper said the appearance of a representative from Raymond James or the oil company at the LCSWMD meeting would go a long way toward swaying board members.

Cleveland said he is hopeful board members will see this time the project truly is moving forward and funding will be a reality and they will be willing to let the funding process go through its steps. “(Earl) Powers has said if the district does not want to continue, he will do it privately,” Cleveland said.

“Why try to stop us now as we are completing the financing process? If we don’t get it done with (LCSWMD) let somebody else come in and try it. I believe we will get it done with Raymond James and the oil company,” Cleveland said.

Project evolves

The false starts and revised contract with the district have created confusion that has been difficult to overcome with some officials and the public. Cleveland and Langbehn said there is still a lot of disinformation in the media and public consciousness about the project, but much has changed since the deal was first inked with the county in 2008, when Powers Energy responded to the request for proposal seeking ways to reduce the county’s waste costs over the next 20 years.

Originally the contract called for Lake County Solid Waste Management District to be the owner of the facility. Now the project is entirely private with no liability or cost to local taxpayers, Cleveland said. The interlocal agreement Lake County communities have been asked to sign indicating they would be interested in providing the waste that would fuel the plant is non-binding.

“This interlocal agreement is decidedly lopsided in favor of the municipalities,” Langbehn said.

By signing the non-binding commitment to send their waste to the facility when it is built municipalities will be able to take advantage of a $17.25 per ton tipping fee that will not increase for 20 years. An additional transportation cost to cart the waste to the site is expected to run between $8 and $10 per ton.

Langbehn said if for some reason during that 20 years Powers offers a better rate to another city or entity outside of Lake County, the rate for Lake County participants will be reduced to match the lower rate.

Right now it is those commitments to provide a waste stream the private oil company is looking for to move forward with the letter of intent. So far 12 of 13 communities that have considered the agreement have approved it. The remaining six are expected to consider the measure before Thursday’s meeting.

Cleveland said the reason Powers can offer such a low rate is because of the high demand for the ethanol the plant will produce.

“One of the things that makes this deal promising is we have an equity partner that needs the product as well,” Cleveland said. The oil company will be able to take advantage of purchasing the waste-made ethanol at a much lower cost than they currently pay for corn-based ethanol.

When all phases are complete the plant will be capable of producing 120 million gallons of ethanol a year, Cleveland said.

The first phase of the plant will provide an eight-day supply of ethanol for the oil company to blend with their gasoline to meet the current 10 percent ethanol mix mandated by the federal government. That mixture rate is expected to rise to 15 percent by 2015 if current legislation stays in place.

“At full capacity we will produce a month’s worth of ethanol for just one oil company,” Cleveland said

Jobs, jobs, jobs

The trash to ethanol plant not only provides a way to dispose of waste in an environmentally friendly way, it means jobs, and lots of them.

During the height of the first phase of construction Cleveland estimates there will be between 300 and 400 trades jobs created. Once complete the plant itself will employ between 150 and 200 people.

Cleveland said the lowest paying of those plant jobs will start at $18 an hour will full benefits. There will be a wide range of jobs at the plant from trash sorters who will separate the recyclable glass and metals from the waste stream to equipment operators who will drive the forklifts and other heavy machinery that move the material around.

He said a bulk of the positions will be in maintenance for upkeep and repair of the highly automated equipment, as well as more technical jobs in the programming needed to keep the plant running.

When the plant is running at full capacity Powers estimates it will employ between 350 and 400 full-time workers, operating three full shifts a day, seven days a week, 365 days a year, Cleveland said.

Cleveland said he is hopeful the board will take into consideration the magnitude of the project, what it means for the local economy and workforce and the new alliances for funding that are in place and continue to work with Powers.

“It is a very large scale project. There are only a handful of private investment projects like this that take place in the country at a time,” Cleveland said. Communities competitively seek out such projects and it is rare to find two in one area. In Lake County the work under way at the BP Oil Refinery in Whiting is another such project.

INEOS Bio’s pilot plant in Fayetteville, Ark., came online in 1994. The first commercial plant in Vero Beach, Fla., a sister plant to the facility proposed for Schneider, will begin producing commercial ethanol this week after breaking ground in 2011.

Cleveland said Powers Energy, SMC, Raymond James and the oil company all believe in the technology and how this type of plant will change the future of waste disposal.

“We are taking what has always been a liability and turning it into an asset,” Cleveland said.

SOURCE: posttrib.suntimes