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Critics try to poke holes in city's proposed sludge-to-diesel contract

Mayor defends assumptions in $3M/year revenue plan

  • 10 min to read
Clearing things up

Mark Thompson, director of Terre Haute’s waste water treatment plant, points out the settling put of sludge, leaving clear water on top.

A mist of unanswered questions surrounding the city’s hopes to convert millions of gallons of its sewage into diesel fuel — at a sizable profit — has spawned ongoing skepticism.

The questions all concern Mayor Duke Bennett’s creation of a partnership between the city and two major companies: Powerdyne Terre Haute Holdings LLC, which has offices in California, and Sodrel Fuels, whose headquarters is in Indiana. In short, the city plans to provide Powerdyne with sewage “sludge” from which the company will create diesel fuel (at a plant not yet built).

The agreement calls for a minimum of 12 million gallons of diesel fuel to pass through this process each year for the next two decades.

In meetings with the City Council, the mayor has been unwilling to talk about this arrangement in any great detail. He could not provide more information, he said, because the partnerships were still pending, and public discussion could put them at risk.

The Tribune-Star has sought comment from both companies. Geoff Hirson, the president of Powerdyne, returned a call Tuesday, but declined any comment at that time, indicating he would be making a public announcement this week. Sodrel Fuels, which is operated by former Indiana 9th District U.S. Rep. Mike Sodrel, has not returned telephone calls.

The deals are important to the city’s future, Bennett has said, because they will net the city government millions of dollars every year. In fact, the city is to receive an up-front payment yet this year of about $3 million, he said. The council passed a 2015 budget in October that anticipated receiving another $3 million from the partnerships next year. 

Speaking Thursday, Bennett said he remains confident these payments will come about.

John Mullican, one of three councilmen who has long questioned the city’s financial health, was apparently the first person outside those directly involved to uncover the Powerdyne and Sodrel contracts, which were approved with little discussion at a July public meeting of the Terre Haute Board of Public Works and Safety. Mullican was curious after seeing the contracts mentioned in Board of Works minutes, which are provided to the council.

After requesting copies of the contracts, Mullican studied them and, sometime later, gave copies to a couple of fellow council members — Neil Garrison and Todd Nation — both of whom have shared his concerns about the city’s finances for years. Last week, the remaining council members also were given copies. In the meantime, the contracts found their way to other individuals, including news media, and a new pastime — that of carefully reviewing and dissecting the multi-million-dollar, 20-year contracts — was born.

A cottage industry

On Nov. 4, Pat Goodwin, a former city engineer under three mayors, including Kevin Burke, Bennett’s predecessor, launched a Facebook page called “Terre Haute Inquiries THinq,” which has provided a forum for discussion of the contracts and their implications. In its first week, the page had more than 400 “likes” and many comments and questions about the proposed city contracts, copies of which may be downloaded from the page. The Facebook page is there for civil discussion of any city topic, Goodwin notes, but the sludge-to-diesel contracts are clearly the hot topic of conversation now.

“A 20-year, $600-plus million contract needs a very thorough review and a public discussion,” Goodwin said in an email to the Tribune-Star on Wednesday. “The City Council, the city’s fiscal body, has not even been told about it,” he wrote.

In his experience in city government, including as president of the Board of Sanitary Commissioners, “there was always a laborious public process for entering into contracts with suppliers, contractors and consultants,” Goodwin stated. “Two years of secret negotiations would have been absolutely out of the question. And any contract, however small, was always specifically stated on the agenda of the public meetings.”

The city’s contracts with Powerdyne, Sodrel and a subsidiary of Sodrel’s, Renewable Transport Services, were not on advance copies of the Board of Public Works agenda for July 28, when they were approved. The Tribune-Star receives copies of board agendas as part of yearly public access requests. As often happens with the Board of Works, the contracts were included on a revised agenda provided to the board members.

The contracts do not require City Council approval, and some council members said they were unaware of their existence until they were reported by the news media. Council President Amy Auler said that’s how she learned about the contracts, as did Norm Loudermilk and Bob All. Councilman Jim Chalos said he learned through constituent inquiries. 

Since the contracts were first disclosed in a Tribune-Star news story on Nov. 2, only Councilman All has approached the mayor for more information, Bennett said Thursday. In fact, All may be the only non-media person to do so, he said, adding that he will talk with anyone who brings questions to him concerning the contracts. 

Familiar sides

City Council members’ views of the sludge-for-diesel contracts align closely with their views of Bennett’s financial management. Councilmen Mullican, Nation and Garrison all express concerns about the undertaking, and they are the same trio who has been the most skeptical of Bennett’s financial management.

Other members of the nine-person council have taken a much more accepting view of the partnerships and have generally been supportive of or have deferred to the mayor’s budget management.

“I wish it were my idea,” said Councilman Loudermilk. A lack of information about the agreements has made people nervous, but, he believes, the proposals will create jobs and new revenue for the city. “If we’re here to make Terre Haute a better place, this is one way to do that,” he said.

“If this works out,” Chalos said, “I think it’s going to be good for everybody.”

Councilman All is also strongly supportive of the proposals. In addition to meeting with the mayor, All said he took a tour of the wastewater treatment plant. He expressed strong confidence in Mark Thompson, director of the plant. 

“It sounds like it’s going to be a win-win situation,” All said last week. If it doesn’t work out, “the city isn’t going to be any worse off than it is today.” If it does work, he said, the city will be on the “cutting edge.”

Councilman Don Morris, often a swing vote on the council, expressed a mixture of optimism and caution about the sludge-to-diesel partnerships. He is concerned with the lengths of the contracts, he said. On the other hand, “If we can make a profit on it, I’m for it,” he said.

Mullican said his constituents have raised questions and concerns. He worries about exposing the city to risk and wonders when the council will be shown a “business plan” for the project. He also has concerns about the volume of “green waste” required in the contracts. 

Garrison, meanwhile, said he supports alternative ways of raising revenue, but would prefer the use of “more proven revenue streams.” Untested approaches “have a higher risk,” he said. He also said he worries about sewage ratepayers, who will not see any reductions in their bills in the event the deals work out.

Partnership preamble

Bennett said the deal with Powerdyne materialized after another company, which he declined to name, reached out to the city as a potential partner in a similar arrangement approximately two years ago. At that time, Terre Haute officials had been trying to find ways to create revenue from its tree and leaf waste, Bennett said. The company involved at the time was interested in sludge, he said.

“We were just trying to be creative,” the mayor said, adding that city officials were networking with other cities looking for ideas.

The first arrangement did not materialize, but some of the same individuals later helped connect the city with Powerdyne, Bennett said. The first contact between Powerdyne and the city was made by the company, he said. The mayor said he believed Powerdyne chose Terre Haute because it favored a Midwest location for its operation. Bennett said he had heard that at least two other cities in Indiana were also considering the possibility, but he declined to name the cities for this story.

Bountiful questions

Councilman Todd Nation has studied the contracts and has a long list of concerns about the deals, many of which are echoed on the THinq Facebook page. Not least, Nation is concerned the Powerdyne contract specifically states that the contract cannot be voided even if the City Council refused to fund it.

“I’m not even sure that’s legal,” Nation said, adding that he would ask other council members if they would support hiring an attorney for an independent answer to that question.

Mayor Bennett said that was something Powerdyne, not the city, wanted in the contracts. He was not concerned with it because “we have to pay someone to take away our sludge, anyway.” The city has no choice but to have sludge hauled away, he said, adding that failure to pay for that service would be a disaster.

Nation is also concerned about a clause in the Powerdyne contract stating that Terre Haute will pay the company a little more than $719,000 each month to haul away its sludge (a payment apparently separate from the monthly payments to Powerdyne for the diesel fuel). Asked again this week to clarify that section, Bennett said attorneys working on the partnerships still have not provided an answer. The details of the partnerships remain in development despite the signed contracts, he said. Other contracts and revisions are possible, he said. 

Also, Nation worries about the city’s commitment in the Powerdyne contract to provide 200 tons of “green waste” each day for 20 years. Others have also expressed dismay at this seemingly mind-boggling figure.

“How much is 200 tons of green waste per day? Collett Park’s 484 trees, if chipped up, would provide about a 5 day supply,” Goodwin stated on his THinq Facebook page. “Here’s another way to think about it: Each citizen in Terre Haute would have to contribute 2,400 pounds of leaves and/or wood chips per year to this proposed refinery. Yes, that’s over one ton, per person, every year for 20 years,” he stated.

Bennett foresees no difficulty in the green waste requirement.

“We generate a lot of green waste now,” he asserts. Republic Services currently collects much of the city’s green waste. Soon, the city will do that. “The whole picture will change,” he said. “It will not be a problem.”

Furthermore, Nation asks why, if this is such a profitable undertaking, the private sector is not already doing it. And he doubts the wisdom of the city speculating on the price of diesel fuel for the next 20 years. Under the contract with Powerdyne, the city agrees to purchase 12 million gallons of diesel fuel per year for 20 years at $2.46 per gallon. Under a separate agreement, the city will sell that fuel to Sodrel Fuels, an Indianapolis-based company, for $2.50 per gallon.

Site selection for the Powerdyne plant is an issue for not only Nation, but also the Wabash River Development and Beautification group, better known as Riverscape. Its members worry the plant will be built on the former International Paper property on the riverfront. 

Charlie Williams, president of Riverscape, said he understands that the city needs the revenue and the area needs economic growth. If the plant is along the river, however, “we don’t think that’s necessarily the best use of that property,” he said. Williams also is concerned about possible odor from the Powerdyne plant, which will be handling sewage sludge in vast amounts.

Mayor Bennett has said several times that there will be no odor from the plant.

Indiana State University President Dan Bradley, also a member of Riverscape, brings his expertise as a former professor of petroleum engineering to the discussion. He, too, questions whether the city’s once-defining odor problem would return. But his concerns don’t end there. He said that most alternative fuel operations are having a “very difficult time” financially. He also said he would “hate to see the river re-industrialized.”

Bennett said no location for the Powerdyne plant has been confirmed, adding that the company may announce a site in its public statement this week. 

The lack of transparency is another issue that’s been raised. Apart from brief discussions in the Board of Works meeting, the contracts escaped public vetting. In fact, they still remain mysterious in that they have raised several questions — financial and environmental — that no one seems willing or able to answer at this point.

“If this project can’t withstand the light of day, the city has no business in it,” Nation said.

Riverscape’s Williams echoed the concern over the lack of public disclosure. “We see things and hear things that are part of the equation, but we don’t know the whole equation,” he said.

Expert opinions

Those asking questions about the project have sought input from experts, including Dennis Evers of Terre Haute, who has decades of experience in wastewater management, alternative fuel production and business. He currently works with a global company that converts waste into energy.

Evers wondered aloud in a Tribune-Star interview, “Has an independent consultant carried out a feasibility study on the technology” Powerdyne proposes to use? “Has anyone in the city visited a demonstration site?” he asked.

“We’ve done as much due-diligence as you can,” Bennett said when asked about the vetting of Powerdyne. “We met with them lots and lots of times” and met with their investors. When asked whether he had seen a prototype of the plant or a demonstration of the process, Bennett said that is not the city’s concern. “All we are doing is providing the sludge. It’s their project.”

The Powerdyne website is “very short of information,” Evers said. 

Roger Ward Sr., a wastewater plant expert who reviewed the city’s plans for the current expansion of the wastewater treatment plant, said the facility cannot produce anywhere near the volume of the carbon needed to make 12 million gallons of diesel fuel annually. “The most carbon that plant can produce is about 1,000 tons per year,” he said. 

Ward also questions the green waste expectations in the contract, suggesting that even if the city provided 200 tons per day (as the contract requires), it would not produce enough carbon, even when combined with the sludge carbon. He was surprised, too, by the volume of green waste the city seems committed to provide.

“It just seems like the amount of green waste required in the contract far exceeds what the city can expect to generate,” Ward said.

Goodwin, the former city engineer, casts further doubt on the city’s plans for providing green waste to Powerdyne. The contract states that the city will, at its expense, deliver the green waste — cut into 1/4-inch pieces — to Powerdyne’s plant. Through his experience managing facilities for the Sisters of Providence, which used a wood chip boiler, Goodwin said he knows “what this [Powerdyne] contract calls for requires very specialized, very expensive equipment. It will probably also require a large, central facility where the green waste can be processed,” he stated on his Facebook page.

Asked about the wood chipping, Bennett said Thursday that the company has agreed to provide the “tub grinders” necessary for the work. 

As far as equipment and labor to pick up the green waste, Bennett repeated this week that the city has the trucks needed and may need to add only a couple of new employees. 

Until more information is made available, speculation will continue. Meanwhile, the contracts are being carefully studied by the mayor’s critics and others. The documents contain “multiple errors,” Goodwin said, noting an entire appendix stating what the city will pay one company for sludge transport is missing from one contract. “That might lead one to believe that they have not been carefully scrutinized,” he said. 

Speaking Thursday, Bennett again defended the partnerships, which he said are continuing to develop. More details should be available soon, he said. As for the partnerships, he said the city has nothing to lose. “If they don’t succeed, we’re out nothing,” he said.

Reporter Arthur Foulkes can be reached at 812-231-4232 or arthur.foulkes@tribstar.com.