Principal Backer of Trash Plant Cuts Its Losses
The third in a series of partners has dropped out of the controversial San Marcos trash-to-energy plant, leaving North County Resource Recovery Associates scrambling for yet another participant to financially back the beleaguered project.
Some officials say they believe the announcement is tantamount to a death rattle for the proposed trash-burning power plant.
Combustion Engineering of Windsor, Conn., announced Friday that it was cutting bait with the $217-million project, citing escalating costs and uncertainty over the success of negotiating a contract with county officials.
Combustion Engineering was the principal financial backer of the project.
Had Warned of Pullout
Just three weeks ago, trash plant project manager Gerry Toney, himself a Combustion Engineering executive, said his company might pull out of the project by the end of next year if construction had not begun.
But Mack Torrence, president of the Resource Recovery Systems branch of Combustion Engineering, said Friday that the company had spent $1 million since it joined the project in December and was faced with paying more than $5 million in costs over the next year or two, with no assurance that the project would be approved.
“We decided we’re not prepared to do that,” Torrence said.
Longstanding critics of the project, which would recycle some and burn most of North County’s trash at a facility next to the existing San Marcos landfill, were predictably gleeful over the announcement, saying it is yet another nail in the project’s coffin.
“Oh, happy days,” said Jonathan Wiltshire, a leading critic among a collection of citizen activist groups that have fought the project since its inception five years ago. The project is now formally opposed by the Encinitas and Carlsbad city councils as well.
“It’s my hope that this announcement not only will mean the end of incineration of trash in San Marcos, but all of California as well,” Wiltshire said.
Opponents of the plant say it would be little more than a trash incinerator that would pollute the atmosphere and reduce property values.
‘No Big Surprise’
Even project supporters said they believe the proposal to burn trash in San Marcos may be all but dead.
“The announcement is no big surprise,” said San Marcos City Councilman Mike Preston. “We had heard some signals from CE that they didn’t have the commitment to go through with the project and that, the first time they hit bumpy water, they’d be looking for a life raft.
“The chances are slim to none that another major partner will come in and do the burning,” Preston said. “Combustion Engineering was the third suitor, and the big guys all looked to them to do it. If they can’t, nobody can.”
But Thermo Electron Corp., which took the lead in proposing the project and has now lost its third partner in it, said the trash plant is not in jeopardy and that, if another partner cannot be brought on, it might consider taking on the project alone.
“The project continues to go forward,” said Jerry Davis, president of the Energy Systems Division of Thermo Electron of Waltham, Mass. “We’re in discussion with other interested partners to plug up the hole that Combustion Engineering has left.”
He said the $400-million-a-year company wants a partner for financial backing of the San Marcos project, “but it’s not out of the question that we would proceed on our own.” He said Thermo Electron “has invested more money in it than we care to admit.”
Landfill Owned by County
The withdrawal of Combustion Engineering has no direct effect on the negotiations between the county and NCRRA, which originally was founded by Thermo Electron and SCA Corp. to develop the project, said Sharon Reid, deputy director of public works for the county.
The county owns the landfill and has a previous contractual agreement with NCRRA to develop the trash-to-energy plant at the site--a contract that is now being contested in appellate court after a San Diego Superior Court ruling that it was null and void because of procedural flaws.
“We’ve asked Thermo Electron to give us some additional detail on the impact this has on the project, and we are awaiting that detail from them,” Reid said Friday. “But we continue to have an agreement with NCRRA. It is their responsibility to bring this project on line.”
Coincidentally, Reid’s office had asked the Board of Supervisors on Tuesday to formally re-enter negotiations for an amended contract with NCRRA, which is seeking contractual changes affecting the county’s financial participation in the project and the fee NCRRA will charge the county to handle the trash.
The supervisors delayed the matter for three weeks after city attorneys for Encinitas and Carlsbad argued that the financial terms of the proposed amended contract should be made public.
SCA dropped out of the project when it was bought by Waste Management Inc., which had no interest in the San Marcos proposal. Brown & Root replaced SCA but left last year, after a corporate decision to disengage from such waste-to-energy projects across the country.
Combustion Engineering joined NCRRA as its third partner last December.
‘Rose-Colored Glasses’
“There was certainly much discussion and review over what would be required of them in terms of the pending litigation, renegotiations with the county and so forth,” Thermo Electron’s Davis said of Combustion Engineering’s entry into the project.
“Perhaps they had on rose-colored glasses, and have now taken a realistic look at the effort that would be required of them, and have now decided that it doesn’t want to play anymore,” Davis said.
Indeed, Combustion Engineering wasn’t prepared for such a financial commitment with no assurances for success, Torrence said.
The company hoped last year that construction of the plant could begin by the end of 1988, he said. But, because of the nagging litigation, the need to jump through a variety of regulatory agency hoops and the time it was taking to negotiate a contract with the county, the company realized its original forecasts were overly optimistic.
Added to the time delay, he said, was the cost of defending the litigation instigated by opponents, the cost of carrying the financing that already was in place and the unwillingness by the county to absorb any of the costs of renegotiating the contract.
He said Combustion Engineering had hoped the county would absorb some of the costs of negotiating an amended contract, including picking up some of the fees for consultants and other technical experts.
Instead, the county ordered NCRRA to pay $400,000 to cover the county’s cost of negotiating the contract.
“We would have spent millions on the project without any real certainty about what the county would do in the end. It got to the point that it was too big of an exposure relative to the uncertainty of the project,” Torrence said.
Davis said he is confident, despite Combustion Engineering’s withdrawal, that yet another partner will participate in NCRRA.
“The fundamental issue before Thermo Electron is in getting all the litigation behind us and a new contract negotiated with the county,” Davis said. “The question of who the new partner will be is significant, but it’s not at the top of the list in terms of critical milestones.”
He conceded, however, that, with the lawsuits challenging the project and new environmental guidelines being demanded during the project’s delay, “California appears not to be the easiest place in the world to get a resource recovery plant built, to say the least.”
Among the proposed trash-burning plants scuttled in California was the Sander project in Mira Mesa. Its developer backed out last year in the face of mounting opposition to it for environmental reasons.
Preston said the San Marcos City Council, which had been the project’s biggest proponent in the face of growing criticism and whose city stood to gain millions of dollars in revenue because of the facility, will press forward with alternative proposals.
Among the possibilities, Preston said Friday and others have said in recent weeks, is for the city itself to become a partner in another resource recovery project that would not involve burning of trash, but recycling and possibly composting--an alternative recommended all along by some opponents of NCRRA.
