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Teno A. West, Esq. Principal and Partner Municipal Infrastructure Team Leader
Bruce H. Tobey, Esq. Partner Municipal Infrastructure Team
Steven A. Torres, Esq. Partner Municipal Infrastructure Team
Managing Organics to Energy Technologies in Project Development:
What You Need to Know to Capture Opportunities
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
Goals of Organic Bans
Organics from other solid waste at the source SEPARATE
From landfills to save valued space DIVERT
Valuable energy or fuels from the organic material RECOVER
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
Goals of Organics Ban
Materials that include food scraps, food processing residue, vegetative materials,
soiled or unrecyclable paper.
A process where bacteria break down organic materials in an oxygen-free environment producing gasses and
solid digestate.
Organic Waste
Anaerobic Digestion (AD)
Organic Waste
M U N I C I PA L I N F R A S T R U C T U R E April 22, 2014
Important Definitions
Reducing Waste in Landfills
Source: US EPA
Source Reduction
Feed Hungry People
Feed Animals
Industrial Uses
Composting
Landfill Incineration
EPA Food Waste Hierarchy
Waste Management Hierarchy
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
States with Active Organic Bans or Programs
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
California Connecticut
Massachusetts New York
Ohio Oregon
Vermont Washington
What is banned?
What materials?
Who is affected?
When/Who?
Organic material, including, but not limited to, food scraps, food processing
residue and soiled or unrecyclable paper
Commercial producers of an average of 104 tons per year or more of organic waste,
located within 20 miles of a composting facility
Beginning in 2020, this will apply to producers of an average of 52 tons per
year or more.
Source separated organic materials for landfill disposal
Connecticut Organics Ban
Connecticut Organics Ban Program
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
Food
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
Vermont Food Waste Ban
Beginning on July 1, 2017, food residuals must be separated from other solid waste and delivered to a location that manages food residuals.
What is required
under the legislation?
July 2014: 104 tons/year of food residual July 2015: 52 tons/year July 2016: 26 tons/year July 2017: 18 tons/year July 2020: any person who generates any amount of food residuals
To whom does the
food waste ban apply?
WHEN?
WHO?
WHAT?
Organics waste ban begins July 1, 2015
Applies to wide array of retail and commercial food waste producers
Requires organic waste to go to a: • composting or anaerobic digestion facility, or • transfer station that delivers to such a facility
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
New York City Organics Program
San Francisco Program
Leader in recycling and food waste legislation
2009 complete ban on food waste disposal in landfills for all producers
Collects food waste separately from other waste
Seattle offers a similar ban and is in
the early stage of implementation.
April 22, 2014
April 22, 2014
Massachusetts Organics Materials Ban
M U N I C I PA L I N F R A S T R U C T U R E
What is the ban?
What are organics?
What is the goal?
Who is covered?
October 2014 ban prohibits the disposal of all organic materials through the normal solid waste channels
Food or vegetative materials, that can be processed into energy using new technologies
1 ton of food/vegetative waste per week
The goal of the ban is to reduce the amount of organic material that is deposited in landfills
April 22, 2014
Massachusetts Funding for AD Services
M U N I C I PA L I N F R A S T R U C T U R E
$3 million in low-interest loans to companies that conduct AD services, administered by BCD Capital through DEP’s Recycling Loan Fund
$1 million in grants for AD to public entities through DEP’s Sustainable Materials Recovery Grant Program.
$200,000 in Clean Energy Research Grants awarded by MA Clean Energy Center.
Grants and Low-interest Loans
Central Florida Energy Garden: a 120,000 tons of organic materials annually producing 5.4 megawatts of combined heat and power
Dry fermentation, AD, and composting facility: renewable compressed natural gas for vehicle fuel 30,000 tons/year of finished compost.
An AD facility - 200 tons/day of municipal source separated organics, food processing wastes
Alberta, Canada
San Jose, California
Orlando, Florida
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
Recent Projects
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
Compliance Issues: Siting, Permitting and Regulatory Air, Emissions and Interconnection
Qualified facility or defined utility
Electrical interconnection agreements
Net metering or power purchase agreements Public and Private cap
Utility pipelines and delays
US EPA air permits for electrical generation facilities
Zoning
Environmental and site assignment
Emissions
(where applicable)
Significant Concerns
New solid waste policies foster development of emerging technologies
Broad regulatory frameworks are being developed to implement these bans
Frameworks may include technical assistance and seed money
Waste bans are on their way for organics
Summary and Takeaway
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
M U N I C I PA L I N F R A S T R U C T U R E
Project Development Delivery Models
April 22, 2014
Traditional
Alternative
Other Program Manager at Risk Construction Manager at Risk
Design-Build Design-Build-Operate Design-Build-Finance-Operate
Design-bid-build
Alternative Project Delivery Model
Benefits of Alternative Delivery Models Qualification based selection (“QBS”)
Greater efficiency; single source guarantor
General contractor is engaged at an early stage, unlike traditional project delivery model
A single point-of-responsibility between the owner and the design-builder
Early contractor involvement in design decisions
Integrated design and construction services
Reduced multi-party litigation (finger pointing)
Ability to conduct “best value” procurement
Can allow for negotiation of contract terms prior to execution
Performance and business risk transferred
“owner contracts with a single entity responsible for design and construction”
Design-Build Model & Evaluation
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
Threshold Issues Authority to utilize alternative project delivery models can be limited. Some states require lowest responsible bidder approach. Prior to commencing design-build projects, the public entity must determine if there is legal authority to do so.
Sources of Authority
State law, local charters, special legislation, home-rule authority Special legislation to grant a limited authority
Design-Build: Threshold Issues & Sources of Authority
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
Design-build - alternative project delivery models for public owners and projects
Design-build - appropriate/preferred delivery model for many project types
Design-build - creates single contractual relationship/one project – one contract
Time, schedule, budget and operational enhancements
Summary and Takeaways
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
Contractual arrangement between a public entity and the private sector
Shared: skills and assets
Shared: risks and rewards
P3: Public-Private Partnerships
“The Best of Both Worlds.”
Developing Organics Facility
“A PUBLIC-PRIVATE PARTNERSHIP (PPP or P3) is a contractual agreement
between a public agency (federal, state or local) and a private sector entity.
Through this agreement, the skills and assets of each sector (public and private)
are shared in delivering a service or facility for the use of the general public. In
addition to the sharing of resources, each party shares in the risks and rewards
potential in the delivery of the service and/or facility.”
- The National Council for Public-Private Partnerships
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
The Powerful P3 Option
Benefits of P3 Project Models in Organics
Increase recycling Provide access to municipal and curbside markets Increase ability to aggregate waste streams
Produce marketable products
Economic benefits to public entities Financial and tax incentives for private industry Access to capital and tax exempt financing
Potential energy and fuel off-takes
Advantages of Public-Private Partnerships for Project Delivery in Organics
Benefits of P3 Arrangement in Organics
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
What level of project/service is party seeking?
• State-of-the-art, next generation facility?
• Satisfactory, cost-effective facility?
How will risk be allocated? • Risk allocation between public and private parties
• Level of risk each party willing to accept
M U N I C I PA L I N F R A S T R U C T U R E April 22, 2014
Shaping the P3 Project
Legal Framework
Identify Project Team
Request for Proposals
Proposal Evaluation
Contract Negotiations
Contract Award
M U N I C I PA L I N F R A S T R U C T U R E April 22, 2014
Procurement Fundamentals
Construction • Fixed price guarantee • Cost-plus pricing • Guaranteed maximum
Operations & Maintenance
• Base service/fixed fee • Variable fee components • Pass through costs: insurance and utility costs (with maximum
usage guarantees) • IRS Letter Ruling 97-13
Service Fee Only
• Private owners/investors finance, design, construct, own and operate facilities
• Public entity and owner/operator enter into service agreement
• Public entity pays only a service fee • Private party recoups all project costs through service fee
Pricing Structure Options
M U N I C I PA L I N F R A S T R U C T U R E April 22, 2014
Financing Options • GO, revenue bonds • -Taxable vs. tax-exempt • Private financing • Equity • Grants • State revolving funds
Business Principles • Requesting disposal of city
waste at no cost • Requesting royalty payment
per ton for regional waste, with guarantee of minimum annual payment
• Possible other revenue sharing
• Rent payment for site • Environmental fund • Reimbursement of city
development costs
Key Contractor Services • Process city waste • Aggregate and process
regional waste • Permit facility • Finance facility • Design, build, operate facility • Market product • Dispose of any residue • Electrical interconnection or
fuel off-take contracts
P3 Financing, Principles & Contractor Services
Strategic Partnerships
+ Media Relations
Mayor or Chief Executive
Private entity
Residents & customers
Businesses & community
groups
Owner - government
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
Needed: A Political Champion
Stakeholder Relations
Positioning the project need
Maintaining the support
Managing the issues
Directing the process
Preparing the communications
M U N I C I PA L I N F R A S T R U C T U R E April 22, 2014
The Balancing Act: What, When, How without political support, nothing
else matters
Identify and utilize political champion and achieve P3 consensus
Define desired framework of project and scope of services
Blend public and private skills and resources optimally
Allocate risk and rewards reasonably
Summary and Takeaways
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
Teno A. West, Esq. Principal and Partner
Municipal Infrastructure Team Leader
April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E
81 Main Street, Suite 510 White Plains, NY 10601 Telephone: 1-914-898-2497 Email: [email protected]
www.pldw.com
