Trash-to-Energy Plant Bonds Sold for $395 Million

Times Staff Writer

A joint powers authority created by the City Council and its redevelopment agency has sold $395 million worth of bonds to enable a private company to build the state's largest waste-to-energy plant in a gravel pit here, but the project still faces formidable hurdles.

Pacific Waste Management Corp., a division of Conversion Industries Ltd. of Vancouver, Canada, must still obtain state and federal approval to operate the plant, which would burn up to 3,000 tons of trash a day, creating 80 megawatts of electricity--enough to supply more than 40,000 homes.

One of World's Largest

Scott Matthews, a spokesman for the California Energy Commission, said the plant would generate one-third more power than plants proposed in San Diego and San Francisco, and would be one of the largest waste-to-energy plants in the world.

The proposed site is an 85-acre gravel pit north of the Foothill Freeway and west of Irwindale Avenue. The city of Irwindale has initiated proceedings to acquire the property from Conrock Co.

The project must be reviewed by 17 agencies, principally the California Energy Commission and the federal Environmental Protection Agency. The state commission will consult with numerous regional and local agencies, including the South Coast Air Quality Management District, but it can override their decisions.

Next Step Feb. 6

The energy commission will hold a meeting Feb. 6 to decide whether Pacific Waste has submitted enough information to begin the formal review process. After that will come visits to the site and a series of hearings.

The permit process will take up to a year. Construction could begin in 1986 and the plant could be fully operational by the beginning of 1989.

Charles Martin, city attorney and administrator for Irwindale, said that in addition to obtaining permits, the project must obtain commitments from cities and waste haulers so it can be assured of enough trash to make the project work economically. Pacific Waste is seeking commitments that haulers and cities will send their trash to the plant for 30 years, but is running into resistance.

Pacific Waste has offered to guarantee a dumping fee of $5.50 per ton, which is about what dumps charge now, and to tie future fee increases to the consumer price index. But, Martin noted, some city officials have suggested that recycling and waste-to-energy projects may increase the value of trash. Some have even suggested that instead of paying to dump trash, they may be able to sell trash.

"It may be worth its weight in gold some day," Martin said, "but we don't see any evidence that is possible."

What is clear, Martin said, is that "the clock is ticking on landfills" in urban areas and that disposal alternatives must be found.

Laurence Peck, Pacific Waste vice president, said the company is attempting to secure agreements in 17 cities, stretching through the San Gabriel Valley from Alhambra to Glendora. A few cities operate their own refuse departments, but most contract with private haulers under franchise agreements. Commitments must be obtained from both the private companies and the cities, Peck said.

John P. McGrain, Pacific Waste president, said the plant will start with 3,000 tons of trash a day but could be expanded to handle 10,000 tons a day.

Even with 3,000 tons a day, the plant would be one of the world's largest. And by using a new design, it would create more electricity than any other such plant in the world, he said.

The project is so large that it has invited skepticism, McGrain conceded.

"They said, 'You'll never finance it and you'll never get a location,' " but, McGrain said, these problems have been overcome, although other problems remain.

One worry is air pollution. McGrain said up to $45 million will be spent on air pollution control equipment, but some pollutants will escape into the air anyway. Documents filed by the company with regulatory agencies note that emissions of sulfur dioxide, nitrogen dioxide, carbon monoxide and other pollutants will exceed permitted levels.

The plant could offset some of this increase by paying for pollution control equipment for other companies.

Environmental Benefits

McGrain said the plant will improve the area's environment by decreasing reliance on dumps, where trash can cause odors, seep into ground water and create toxic gas.

McGrain said every effort will be made to protect air quality. "I don't want to be known as the guy who added to air pollution in the San Gabriel Valley," he said.

Complicating pollution control is the fact that the plant is to be built in a gravel pit 180 feet deep. In order to disperse pollutants, it is necessary to build a tower, usually the higher the better. McGrain said the tower will be built as high as necessary, even though 180 feet must be added to its height to offset the gravel pit's depth.

The gravel pit offers advantages as a site, McGrain said. Most of the plant will be shielded from view and trash trucks will be going downhill while loaded and uphill while empty, conserving fuel.

Most city councils that have refused to sign commitments with Pacific Waste have indicated they would be willing to reconsider if some problems can be overcome. The 30-year agreement, for example, might be modified to adjust dumping fees if economic conditions warrant.

30 Years Too Long

Azusa City Administrator Lloyd Wood said he could never recommend an agreement that would commit the city for 30 years. "I think it's foolish for any city to engage in a 30-year contract for anything," he said.

Others have noted that other alternatives also could emerge and, in fact, Enercan Resources Inc. is developing a proposal to build a waste-to-energy plant in Azusa. Bruce Williams, president of the company, which is a subsidiary of a Canadian company, Enercan Group, said a proposal will be submitted to the city of Azusa soon. The plant would handle 1,500 to 2,000 tons of rubbish a day.

Williams said he doubts there is room for both his company's plant and Pacific Waste's proposal, but he is not yet convinced that the Pacific Waste project will go through.

While bonds have been sold, the money is in escrow and will not be spent for construction until Pacific Waste obtains operating permits from state and federal agencies.

The Irwindale Resource Recovery Authority, an arm of the city and its redevelopment agency, sold $395 million in industrial bonds Dec. 27 through Ehrlich-Bober and Co. Inc. of New York City.

Beat Year-End Deadline

Michael Montgomery, attorney for Pacific Waste, said the bonds had to be sold before the end of the year to avoid new regulations that went into effect Jan. 1, limiting the amount of bonds cities can sell. The Irwindale project is so large, Montgomery said, that it would have used 10% of the yearly allocation for all cities in the state, and its approval would have been unlikely, if not impossible.

The tax-exempt bonds were sold at an interest rate of 6 7/8% and the proceeds were reinvested with the federal National Mortgage Assn. at more than 9%. The profit from the difference will pay various bonding fees, attorney costs and development expenses.

The bonds were sold under an arrangement that gives both the buyer and seller flexibility. The agency has until July 15, 1986, to set a permanent interest rate for the 30-year bonds and buyers have the option of selling the bonds back if the terms are not satisfactory.

Martin said the city of Irwindale and its taxpayers incur no liability. Repayment of the bonds depends on revenue from the project.

The city, however, will benefit financially through property taxes, a 1% royalty on revenues and 25% of the profits.

A Share of Profits

McGrain said the 1% royalty alone should amount to $700,000 in the first year of operation and escalate to $1.5 million by the year 2005. The royalty and share of profits would flow to Irwindale's Resource Recovery Authority and at least some of the money would have to be spend on improvements benefitting the waste treatment plant.

In addition to the Pacific Waste and Enercan proposals, the county Sanitation Districts are considering waste-to-energy plants at landfills at Puente Hills and Spadra. Ground breaking for Los Angeles County's first waste-to-energy project, a 300-tons-a-day plant in Commerce, is scheduled for February.

About 35,000 to 40,000 tons of trash are collected countywide every day and officials of the Sanitation Districts have estimated that half that amount could be directed to waste-to-energy plants.

Power companies are obligated under state law to buy power from waste-to-energy plants at the same rates they would pay for electricity generated by conventional means. Pacific Waste Management Corp. has signed an agreement to deliver its electricity to Southern California Edison Co.

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