SEC Berlin Station hearing must reconvene
Biomass plant costs have risen
May 25, 2011CONCORD — The Site Evaluation Committee (SEC) heard testimony on Wednesday but there was not enough time to begin deliberations on a joint motion seeking to transfer the Certificate of Site and Facility that it had issued earlier to Laidlaw Berlin BioPower LLC to Berlin Station.
The Certificate is a permit to build and operate a biomass electricity generating facility on the site of the Burgess Pulp Mill in Berlin. The now-sought transfer also seeks to increase the electric plant's capacity without increasing its fuel supply, switch its wood supplier, and make organizational changes.
After a day of testimony and cross-examination, including an executive session on confidential financial details, SEC chairman and NHDES commissioner Tom Burack concluded that another session would be required. At a date soon to be determined, the SEC will first hear closing arguments and then begin its deliberations. Counsel for the Public Allen Brooks and Peter Roth of the state Attorney General's Office also plan to write a memorandum outlining their recommendations.
The three witnesses, all of whom were sworn in at the quasi-judicial hearing, sat as a single panel: Matthew Eastwick, who heads up the capital markets activity for Cate Street Capital of Portsmouth, the project's investor group; Raymond Kusche (pronounced Ku-shay), Cate Street's Director of Energy Services; and spokesman Ross D'Elia, president of HHP, Inc., of Henniker, one of the three Richard Carrier (RTC) group of companies.
The biomass proposed increased output would not affect the exterior appearance of Berlin Station facility.
The project price has risen, however, from $167 million to $228 million, Eastwick said, noting that this was an "apples to apples" comparison.
If interest on debt and monies set aside in reserve accounts are included, Berlin Station is an estimated $274 million project, he said.
The increase cost is due to changes in the project's scope to improve efficiency and energy outputs as well as the substitution of real bids for previous estimates.
Purchasing a new $12 million turbine rather than a $2 million used one to achieve a 7 percent gain in output has increased the cost by $10 million. More automated equipment will also be purchased for the fuel yard.
The amount of fuel — 700,000 tons of clean chips — and the number of trucks — 100 — coming in and out of the facility's yard remains the same as when the Certificate was issued.
The estimated length of construction has also jumped from 24 months to 27 months, increasing the length of time before any income would be realized.
Cate Capital is concerned about the possibility of costly delays in the project due to a potential appeal of its Certificate of Site and Facility by the state's independent wood-fired power plants in front of the N. H. Supreme Court that would likely result in losing the upcoming good-weather construction months.
(In a Thursday morning interview in the State House, Sen. John Gallus of Berlin said that at least five conversations have taken place between PSNH and the independent power plants, with at least some including direct input from the state Department of Resources and Economic Development (DRED) to try to resolve issues. An idea being tossed around would be to use the state's Regional Greenhouse Gas Initiative [RGGI] funds to subsidize the plants, this because the cost of the electricity they produce is higher than fro other competitive sources.)
D'Elia said that once Berlin Station is under construction, RCT plans to meet with forest landowners to make sure they understand the coming new market for clean wood chips. RECT would also with loggers and wood contractors to encourage them to invest in "right-sized" chippers to ensure that 700,000 tons of wood can be delivered to Berlin Station every year.
RCT will have off-site storage facilities to get through spring and fall mud seasons, which the previous contractor, Cousineau, would not have had.
RCT will also have a cash bond available, rather than using stumpage as a performance guarantee.
Later, D'Elia said that fuel suppliers would be paid weekly. RCT plans to sign long-term fuel supply contracts — based on tonnage — with wood contractors and then talk with area bankers, to encourage them to loan money for equipment at favorable interest rates.
A $2.5 million community loan fund will be established in partnership with the Northern Community Investment Corporation (NCIC) as a community benefit under the New Market Tax Credit program.
"Our intent is to buy locally in as close proximity to the plant as possible," D'Elia said. The bulk of the wood, other than in mud seasons, would come from Coös and Grafton Counties. Some bark could come from the RCT spruce sawmill in Milan. Sustainability would be achieved, D'Elia said, through several mechanisms, including signed commitments from suppliers that reference the revised 2011 edition of "Good Forestry in the Granite State — Recommended Voluntary Forest Management Practices for New Hampshire."
Suppliers sell to as many users as possible, D'Elia explained. It could well be that a contractor will sell to Berlin Station as well as to independent biomass plants, such as Pine Tree and Bridgewater. He predicted that as the years go by, the volume of locally sourced wood would increase because of Berlin Station's need for a steady supply of whole tree chips.
"We will encourage our present contractors to upgrade their equipment and encourage others to get into the field," he said, noting that North Country logging contractors are infused with an entrepreneurial spirit.
"Producing whole tree chips will be part of the mix," D'Elia said. "Berlin Station will allow better forest management to be practiced, providing a market for undesirable trees."
The Gorham paper mill and the Berlin biomass plant will purchase different products: the paper mill will purchase dry kraft pulp produced somewhere else, while Berlin Station will buy raw chips made from round wood designed to be put in a digester.
Kusche testified that the net electrical output of Berlin Station would increase from 58.7 megawatts to 67.5 MW, for an increase of 8.8 MW for a total of 504 gigawatt hours a year. Delta Power Services, he said, will be able to provide Berlin Station the needed expertise.
The ash residue will be handled by Resource Management of New Hampshire and used for agricultural purposes. One hundred percent of the fly ash will be used as a soil supplement, Kusche explained.
Cate Street Capital, he testified, is ultimately the responsible party about where "the buck stops."
The new more complex organizational arrangements are designed both to satisfy requirements of the New Market Tax Credit program and that of investors. There is an increased reliance on Babcock and Wilcox and companies under its control, such as Waldron Engineering for construction engineering and Delta for operations and maintenance.
Black & Veatch, a global firm, will serve as independent engineers, and Stone and Webster, a subsidiary of the Shaw Group will be on tap if consulting services are needed.
Berlin Station has acquired Clean Power Development and place in the ISO-NE queue.
Some updated information was also presented, including good news for Berlin Station.
Independent-System-Operator-New England (ISO-NE), which acts under the Federal Energy Regulatory System (FERC) umbrella, submitted its final draft on the impact of Berlin Station on the system on May 16, Kusche explained. It found "no adverse impact" to Berlin Station going onto the Grid.
The next step in the process calls for a meeting with ISO-NE and Public Service of New Hampshire (PSNH) to work out interconnection details.
At this meeting, attorney Merritt Schnipper of Downs Rachlin Martin of Burlington, Vt., represented the City of Berlin. The firm also maintains an office in Lebanon.
Barry Needleman of McLane, Middleton of Concord represented Berlin Station.
Allen Brooks and Peter Roth of the state Attorney General's Office served as Counsel for the Public.