Ramble On

Friday, February 19, 2010

Interview with Benson, part 1

Earlier in the week, I was able to hook up by telephone with Rob Worthington and Elliot Nelson, who are both part of Benson, Minnesota’s city government. Our conversation was centered on six questions, and they generously gave me 45 minutes of their time for this discussion. On the whole, these folks consider Fibrowatt to be a good citizen in Benson, and the plant there is the centerpiece of an evolving concentration of energy firms.

Today, I am posting the first half of the interview…in the interest of getting this material on-line quickly, I’ll just put it up as raw notes – one takeaway I have from the information they shared is a need to do a bit more work, specifically to try and get a better understanding of the environmental activism springing up around Fibrowatt’s planned opening of three plants in North Carolina. Some of my Page County neighbors have expressed an interest in trying to develop some financial pro-formas around a deal like this to try and evaluate the costs and benefits, both to the community as well as to Fibrowatt, and I am looking forward to digging into that issue.

1. How was Benson selected? Was there a state or regional competition?

• We had a brief discussion of how Fibrowatt came to the US in approximately 1990 (JT note – summarized in a previous blog post)
• Fibrowatt was invited to Minnesota by the turkey grower association, who was concerned with managing the waste from their production processes
• Benson has dealt with essentially the same team at Fibrowatt and HRE since 1990
• Following Fibrowatt’s introduction to the industry and farmers, there was a statewide competition, with about 30 locations submitting proposals. There was a down-select process, and Benson was shortlisted with two other towns
• Benson went after it, crafting a proposal to show why they were the best choice; mainly based on distance/location in proximity to the industry and on time to deliver
• Proposal included few incentives; during plant build-out the town provided some support on surveys, a grant of 50% of infrastructure costs was obtained, a sales tax abatement on purchased construction materials; during operation there is some relief from a state “personal property” tax that applies to power plants (tax targets a nearby nuclear plant)
• Sold the land a current commercial rates
Town’s infrastructure construction costs were about $350-$400K for water (JT note: I want to follow-up, I had the sense that the town has been reimbursed for these costs) (Clarification from Benson follows) The sewer and water capital improvements needed for Fibrowatt cost about $550,000 total. The state paid half the cost with a grant to the city and the company reimbursed the other half from financing proceeds at financial closing. The company is charged city regulated utility rates for back-up power, water and wastewater services.

2. A big part of the discussion in Luray is a concern about potential emissions. I’ve seen some information about a violation and a settlement at the Benson plant. Can you offer any insight to this?

• Benson is a small town of 3,500 people, the plant is in the city limits
• Understanding of this violation was that it stemmed from commissioning and start-up activities, early stage shake downs
• Commissioning contractor at fault, but Fibrowatt is the permitted company so bears responsibility
• Fibrowatt agreed to pay fine and upgrade equipment
• May be some minor penalties related to being a day or two late in compliance
• Town has had no odor or emissions complaints by citizens in the 2.5 years of operations
• During longer permitting process, had the opportunity to redesign a high water use aspect of the plant to use less water

3. Going hand in hand with these concerns, there is a lot of activism from environmental groups in North Carolina related to the three Fibrowatt plants slated for that state. Were these interests present in Benson? Why do you think these causes are involved in North Carolina?

• A plant like this is going to encounter resistance from individuals
• In the NC case, appear to be well-funded interests, no similar issues in Benson
• Farmers recognized the nutrient value of the litter, but saw regulation coming up about its use and the prospective loss of its value
• Discussion here about the ability to apply litter only twice a season in Minnesota due to climate, issues about storage, risk of run-off due to large storage “dumps”
• As a farming community, Benson recognized the value of the opportunity as a job creation impact, less concerned with other potential impacts

I'll post the second half of the interview over the weekend.  Comments on this issue are welcome, and I am glad to share a copy of these notes in MS Word by request.

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