Detroit Free Press from Detroit, Michigan • Page 28

m-m wm1 1" 1 DETROIT FREE PRESSSUNDAY, MAY 7, 1989 5B I rlt rrf 1 Incinerator lost money builder in projects if 4V i a1 "'5 irw 1,11 1 i Visitors inspect the waste on conveyors to the generator building at the The cost of burning garbage: The finances of Detroit's waste-to-energy plant Incinerator plant could pay off or go up in smoke Incinerator, from Page IB ing example of good waste management for city taxpayers. It will save money, protect the environment and help stabilize city finances, she said. "It's easy to say that if everything goes wrong, then the decision you made was absolutely incorrect," she said. "But I don't want to deal in a parade of horribles." The city expects a parade of positives: Landfill costs will continue to go up as old dumps fill up and new ones become more politically difficult and expensive to open. Rural or suburban areas with landfills will decide they don't want other cities' wastes.

Recycling, Marshall predicted, will have only a minor impact on the amount of garbage available to burn. And the city can handle any additional costs or problems without losing the plant's economic benefits, said Marshall, who is also city finance director. "It was the best proposal for our situation when the decision was made and for as far into the future that we, as experts, were able to handle," she said. Jack Lyman, director of the Institute for Resource Recovery of the National Solid Wastes Management' Association in Washington, D.C., predicted Detroit would "reap the benefits" of its foresight. "They have something that will take care of a significant part of their trash at affordable and predictable cost for next 20 to 30 years.

There's a lot of communities that can't say that." Still, Detroiters need to look no farther than Minnesota for lessons of the economic fragility of waste-to-energy plants. Across the Gopher State, local and state officials are concerned about the economic benefits of the 13 incinerators they now operate. The potential problems: recycling, air pollution controls and ash disposal. Referring to the Minnesota experience, Brett Smith, a waste management expert with that state's government, said, "It might turn out to be, in hindsight, economically painful." Planning took over 15 years It takes a bag of garbage less than a minute to be hammered, rotated and sorted for fuel at Detroit's controversial incinerator, but it took more than 15 years of talking and planning for that short trip to be possible. The first discussions about burning trash to produce energy were in the early 1970s, between Detroit Edison Co.

and the city. Those talks broke down, but the idea remained when Coleman Young became mayor in 1974. James Watts, the city's Public Works director, "went to the mayor and said if you look down the road, you're going to have a serious problem some day disposing of garbage," said Bob Berg, Young's press secretary. By pressing for an incinerator, Detroit was following a national trend. Landfills were filling up, and new ones weren't opening because of fears of groundwater contamination.

Sometime in the late 1970s, Detroit decided burning was better, largely because there was no landfill space in the city. But like most of the nation, the city did not really consider waste reduction or recycling. The recession of the early 1980s stymied attempts to finance the plant, but as the economy improved, the city resumed planning and began applying for the needed environmental permits. Enter Marshall, the fast-talking financial whiz Young had chosen as finance director. After months of cajoling, Marshall and her financial allies convinced Wall Street to buy $438 million in bonds in 1986 to finance the plant.

"It was a lot of money; that's right," Marshall said. "But you don't want to be penny-wise and pound foolish This facility will handle the city's antici- THE INCOME: Who pays? In dollars annually i OUTSIDE USERS Private waste companies or suburban governments pay a fee to burn their waste at the incinerator. $5.5 million i 'a i.H'iiidAnafc CRAIG PORTERDetrolt Free Press Detroit Resource Recovery Facility. mmsm RECYCLING METALS The sale of metals recovered from the garbage before it is burned. (The recovered metal income is split between the city and Combustion Engineering the plant's operator.) $51,000 DELIVERY AND DISPOSAL For delivery and disposal, the Greater Detroit Resource Recovery Authority, which oversees the plant, has hired City Management Corp.

The authority will pay City Management for each ton of garbage or incinerator ash that it hauls to the plant, processes through one of its transfer stations or buries in its landfill in Sumpter Township in western Wayne County. $5.5 million Detron Free Press er in power plant construction, it had never finished building or even begun operating a trash incinerator when Detroit hired the firm in 1985. "I would urge a community to stick with a proven, experienced company," See Incinerator, Page 6B UTILITY USERS Detroit Edison customers indirectly part of the cost when, through their utility bills, they buy steam and electricity produced from plant. Steam million Electricity: million Detroit Edison By David Everett Free Press Staff Writer Combustion Engineering one of the world's leading builders of utility power plants, has spoken proudly about the $438 million trash-to-energy garbage incinerator that it has built and will operate in Detroit. But on Wall Street, where financial performance means more than words, analysts think the company's most recent incineration record should be dumped in the burner along with old newspapers and last night's chicken bones.

The word is out to anyone who will listen: According to Wall Street, the Stamford, company lost its shirt in Detroit and on two sister plants in Hawaii and Connecticut. Some analysts even say the firm is getting out of the trash-to-energy resource recovery business altogether although the company won't confirm that. "If you walked in the door there at Stamford and said you have a great idea for resource recovery, you'd probably be lucky to get out alive," said Frank Prezelkski, vice president of the Deutsche Bank investment firm in New York City. In a recent research report, Pre-zelski listed Combustion Engineering's trash incineration operations as the "Black Sheep of the Family." Although the company and its analysts agree the firm's financial losses don't necessarily mean operating or financial trouble for the city at Detroit's plant, the problems do raise questions about the company that was hired to build the nation's largest waste-to-energy facility. The bottom line: Combustion Engineering reported $273 million in write-offs during a disappointing 1988, and analysts estimate more than $100 million of that was because of what they call CE's mistaken foray into resource recovery through the three waste-to-energy plants.

The firm had a $27 million operating loss in that area, according to analysts and annual reports. Faced with sluggish orders for utility power plants, the firm, which has about 27,000 workers worldwide, decided to get into trash-to-energy systems about a decade ago. CE, an engineering-oriented company, chose a complicated technology with a troublesome past: refuse-derived fuel, or RDF. RDF is an incineration design in which trash is hammered and separated before it is burned. The pre-burning process contrasts with "mass burn," long the most popular trash-to-energy design, which involves dumping raw garbage into a boiler and burning it.

The concept of RDF is to provide a more homogeneous fuel for better firing in the boilers. But the technology is still developing and much more complicated than mass burn. It has caused trouble for nearly everyone who uses it in the United States. The result: Of 202 existing or planned U.S. incinerators, only 36 are RDF.

Alfred Medioli, a vice president with Moody's Investors Service and an expert on municipal resource recovery plants, said RDF simply takes longer to learn: "The risk with RDF is that you've got a whole factory in front of the incinerator." Of its RDF plants in Hartford, Honolulu and Detroit, Combustion Engineering's worst problems came in Hartford. The plant, first of the three, cost the company an extra $7 million when commercial operations were delayed by technical problems. Later, the company said it would spend $7.4 million to repair and modify deteriorating steam tubes in the boilers. Those same repairs, which require the boilers to be re-lined with stronger metals, were required for Detroit and Honolulu largely at an incinerator there, said Roy Takara, an engineer at the Honolulu plant. Detroit cc.isultant Harold Yaffe said scrubbers would add more than the $17.5 million they would have cost three years ago but operating and maintenance would be less than the $8.4 million a year then estimated by the plant's builder.

Mike Brinker, general manager of the Greater Detroit Resource Recovery Authority, the city agency overseeing the building and operation of the incinerator, said the experts will be pleasantly surprised at how low the emissions are. Because the plant will burn a shredded fuel comprised almost entirely of combustible material unlike plants which do not sort trash before burning it Brinker predicted it could achieve a more complete, hotter burn and produce emissions that will satisfy per combustion Engineering Inc. Headquarters: Stamford, Conn. Employees: About 27,000 worldwide. Business Description: Designs and builds utility power plants; designs and supplies industrial equipment to oil and gas industry; designs, builds and operates resource recovery systems; sells equipment to control industrial processing.

Recent Performance: While 1988 sales increased to $3.5 billion from $3 billion the previous year, the company reported a loss of $245 million last year, compared with earnings of $56.6 million in 1987. Combustion Engineering's cost. The cost of the Detroit work, which is more than two-thirds finished and which partially caused the plant's commercial operations to be delayed until July 1 was not available. The result of that and other problems, analysts say, was the loss of profits at the three RDF plants, and they don't think the company will make it up with future operating fees from the plant in Detroit. CE's annual share of the energy revenue in Detroit will start at about $4.7 million, according to an early projection by a city consultant.

"I think that they did not fully appreciate the differences in technology and customers as compared to their traditional power generation business," said Russell Leavitt, a research director for Salomon Brothers brokerage in New York. "This certainly was a mistake, at least in retrospect." James Aiello, a CE spokesman, said the firm is still in the RDF business, actively pursuing projects in Pennsylvania and the state of Washington. Another spokesman, Mark Baxter, said that the problems in Hartford were resolved and the plant has had a good operating record. Problems with starting up the new plant "took longer and were more costly than anticipated," Baxter said. "We have taken steps to make sure they won't occur on future projects." While Baxter says Combustion Engineering "remains active in the market," he acknowledged the company is not actively bidding on new incinerators.

Analysts say the company probably will continue to work on its RDF plants until they are operating properly, despite the construction losses. "I don't think they have any choice," Prezelski said. "Under their contracts, they have to make them work or they lose even more." Meanwhile, the effects of CE's problems with resource recovery continue. Less than a year ago, the company ran a two-page, full-color ad in a national trade publication lauding the mass-burn incinerator it was to build for a town on Long Island in New York. "It's a technology Combustion Engineering has in place now," the ad proclaimed.

Ten days ago, the company announced it was giving up the $165 million project. "The job has to be done right and we weren't confident that we could do it as quickly as the town would like," a company official said in a news release. Free Press Staff Writer Bob Campbell contributed to this report. mit requirements. "The expert operation of the boiler itself is the key," Brinker said.

Also, he said, the Detroit ESP particle collector is more advanced than ESPs used in other plants. Ervin Nesheim, a consultant for Brown and Caldwell Consulting Engineers in California, said Detroit's approach to air pollution control do only what is required is no different than what other communities have done. "When it comes to spending up to $10 a ton additional," the cost per ton of trash of installing scrubbers, "a lot of communities were rightly reluctant to make that commitment when there was no guarantee the technology would meet the requirements," Nesheim said. Free Press Staff Writer David Everett to this report? THE BILLS: Who gets paid? In dollars annually: OPERATIONS AND MAINTENANCE The operating and maintenance fees are paid to Combustion Engineering, which is reimbursed forlabor, insurance, taxes and other costs, adjusted for inflation. The company also gets a "performance" fee of 12 percent of the steam and electricity income from the first 780,000 ton of garbage each year, then half of the revenue up to the plant's design capacity of 850,000 tons.

$18.8 million COMBUSTION ENGINEERING "refuse-derived fuel" or RDF. Critics now question both decisions. In March 1989, the city said in a brochure that CE is "widely respected for its power generation plants and waste-to-energy systems." While CE was an international lead i TAXPAYERS Detroiters, whose garbage is burned at the plant, pay taxes tor the incinerator. The city pays a 'lipping fee for each ton of garbage a truck tips into the facility. $23.8 million PRINCIPAL AND INTEREST Principal and interest costs on $438 million in bonds used to build the plant will be paid back over 20 years.

The total bill will be $1.06 billion. $36.7 to $68.6 million over 20 years pated needs into the next century." Before the deal was complete, the city made two fateful decisions. It chose a Connecticut company, Combustion Engineering to build and operate the plant, and it agreed to use the company's incineration technology, tional Solid Waste Management Association, doubts that scrubbers will be required for existing plants. "It will mean we're going to spend an awful lot of money and buy very little environmental protection," Lyman said a cheaper and nearly as effective alternative is injecting the processed trash with lime to neutralize emissions of acid gases. Two-thirds of the municipal trash-to-energy plants opening this year have scrubbers, according to a Free Press analysis of information provided by Governmental Advisory Associates a New York consulting firm.

Of 37 plants scheduled to begin commercial operations next year, all but one will have scrubbers, according to the consulting firm's survey. More than half the plants opened in 1987 and 1988 bid scrubbers. pay the $9 EPA officials say scrubbers would be best for Detroit incinerator VIZ and buy very little protection. 7 Jack Lyman, director of the Institute of Resource Recovery Pollution, from Page 4B and cadmium it contained. Now, the city and other incinerator operators are awaiting passage of a state law that would exempt ash from hazardous waste law but require it to be sent to special landfills with standards approaching those of hazardous waste sites.

Congress also is considering ash legislation. Jimmie Powell, an incinerator expert on the U.S. Senate's environment and public works committee, said the committee will not agree to exempt incinerator ash from the federal law defining hazardous waste without requiring scrubbers as a tradeoff. "Our price for giving the exemption is to have the best air pollution controls," Powell said. Jack Lyman, director of the Insti-'tute of Resource "Recoveryof the Na EPA says a baghouse system, which collects the dust by filtering, is better at removing the tiny particles.

In December 1990, the EPA is scheduled to issue first drafts of air pollution control guidelines for existing plants built without the latest emission devices, such as scrubbers. DeMocker said it will be another year before final guidelines are issued. In Honolulu, the company that built the Detroit plant is in arbitration with city and county governments over the $30 milRAi costs to add scrubbers to Almost all plants, whether they have scrubbers or not, use either an electrostatic precipitator (ESP) or a fabric filter baghouse to collect the fine particles of dust in incinerator emissions. The dust particles sometimes are laden with toxic "pollutants that experts say pose the greatest public health threat because they can infiltrate deep into the lungs. Detroit's plant has an ESP.

It electrically charges the particles, which are then collected on metal plates. The.