Trash Plant Lawsuits Cited : Firm Happy It Quit as Partner in San Marcos

To Houston-based Brown & Root, the three lawsuits filed last week by opponents of a $217-million trash-to-energy plant proposed in San Marcos were further proof that the engineering firm made a sound business decision when it withdrew in July from the partnership formed to finance and build the controversial plant.

The suits, filed in Vista Superior Court by the City of Encinitas, two environmental groups and a North County developer, seek to halt construction of the proposed plant that San Marcos voters narrowly approved in a Sept. 15 referendum.

The lawsuits occurred months after Brown & Root withdrew as a 50% partner in North County Resource Recovery Associates, the company formed to build and operate the plant. Brown & Root said that withdrawal was dictated by restructuring at its parent corporation, not by problems with the proposed plant.

Still Think It’s Viable

“We still think it’s a viable project and we hope someone picks up the ball and runs with it,” said Lester Coleman, vice president of development for Halliburton Co., the Dallas-based parent company of Brown & Root, which reported $1.7 billion in 1986 revenue.

However, the suits “didn’t go unnoticed,” according to Coleman. “It shows how a few people can hurt you very badly. The costs of standing still (on a project) can run hundreds of thousands of dollars each month . . . and we were worried about our ability to control the situation.”

One industry observer suggested that Brown & Root’s departure was driven largely by uncertainties created by continued opposition to the proposed plant, even though it has received all required environmental permits.

Coleman acknowledged that Brown & Root had been “concerned that the ground rules for the project seemed to be changing constantly . . . and that there was the possibility of more litigation and further delays.”

Trash-to-energy plant builders and operators could become hesitant to consider contracts in San Diego County, according to a spokesman for Wheelabrator Environmental Systems, which recently abandoned the proposed $400-million SANDER trash-to-energy plant in the City of San Diego.

Long, Hard Look Needed

“Companies are going to look long and hard at the kind of treatment” that Wheelabrator (formerly Signal Environmental Systems) and NCRRA have received, according to Frank Mazanec, the former project director for the San Diego plant.

Unlike the City of San Marcos, the City of San Diego failed to take a leadership role in support of the SANDER plant, Mazanec said. Hampton, N.H.-based Wheelabrator had spent more than $5 million on the proposed plant during the last five years, Mazanec said.

In San Marcos, local government “provided support but it’s getting clear that the environmental vigilantes have succeeded in blocking the project,” Mazanec said.

Wheelabrator, which broke off discussions with San Diego in early August, subsequently initiated an advertising campaign that hit San Diego’s municipal government for failing to provide leadership on SANDER.

However, unlike Brown & Root, “Wheelabrator intends to stay a major player (in the waste-to-energy business) . . . and our commitment is increased rather than diminished,” Mazanec said.

Stock Has Risen

Wall Street evidently agrees with Mazanec’s appraisal of Wheelabrator’s future: When the Henley Group of La Jolla recently took the company public, its stock quickly rose from 19 to more than 24.

Brown & Root, a diversified engineering and construction company, has designed and built only a handful of waste-to-energy plants. The San Marcos plant represented its first role as an equity partner, according to Coleman.

The Houston-based company had owned 50% of NCRRA and had pledged $16 million in equity for the $217-million plant. Thermo-Electron of Waltham, Mass., which also had pledged $16 million to cover construction costs, has assumed Brown & Root’s equity responsibility, according to NCRRA Managing Director Richard Chase.

Thermo-Electron probably will announce a new partner in about a month, according to Chase.

Brown & Root’s departure did not affect the State of California Pollution Control Financing Authority’s issuance of tax-exempt bonds that generated $185 million in proceeds that will be used to fund construction.