PA legislator’s bill to privatize cleanup gets mixed review

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A Pennsylvania lawmaker wants Keystone state municipalities struggling with Chesapeake Bay mandates to let private industry take care of it. He says for-profit companies can get the job done better and more cheaply than government can. Others, though, are not so sure.

State Sen. Richard Alloway II, a member of Pennsylvania’s delegation to the Chesapeake Bay Commission, introduced the Clean Water Procurement Program bill in June. It would require 850 municipalities under orders to reduce their stormwater pollution to pay $500 million over 10 years into a state-managed fund.
That fund would be used to pay private entities for making nutrient reductions to bring Pennsylvania into compliance with the federal “pollution diet” for the estuary.

“I have a fundamental feeling that government shouldn’t be shelling out money or doing the work,” said Alloway, a Republican who represents several south-central counties. “Government has been doing that for years, and we’re still behind. The private sector is going to provide the solution with technology.”

Alloway’s bill is one of several introduced in Harrisburg this legislative session that seek new strategies for financing water-quality improvements in cash-strapped Pennsylvania, which has cut environmental programs even as the U.S. Environmental Protection Agency repeatedly warned the state that it was missing pollution reduction milestones.

Bills similar to Alloway’s have been introduced without success at least three times since 2013, all at the behest of Bion Environmental Technologies. It’s one of two companies that have built state-financed pilot projects in Pennsylvania intended to reduce farm runoff. Alloway acknowledged that the bill he introduced this year was drafted by Bion, though he bridled at critics’ suggestions that it’s a bailout for the company.

Bion and another company, EnergyWorks, underwritten in part by state loans, installed systems on two large farms a decade ago to demonstrate technologies that can convert nutrients in animal manure into marketable byproducts. The projects were touted at the time as a way to keep animal waste from fouling streams and the Bay, while also generating economic benefit. And the nutrient reductions themselves were to be salable to others required to reduce their pollution.

At the time, Pennsylvania was also developing its first nutrient trading program, initially intended to help municipalities save money on costly upgrades to wastewater treatment plants by paying farmers to curb their runoff. Advocates of the projects said the state loans they got would be repaid with income from nutrient “credit” sales.

Equipment in the floor of Kreider Farms’ dairy barn collects manure. Unable to generate sufficient revenue, the project to convert cattle waste into energy and other byproducts has shut down. (Bion Environmental Technologies)

Bion, though, is in default on the $7.8 million state loan it received to build a manure treatment system on Kreider Farms, a large dairy operation in Lancaster County. The facility has been shuttered for three years, a move Bion CEO Dominic Bassani said was needed to stop losing $25,000 a month in operating costs.

EnergyWorks also fell behind on repaying at least $11 million in state financing to build its $40 million system at an egg-laying facility near Gettysburg. EnergyWorks has renegotiated the terms of its loan and continues to make partial payments.

The two large pilot projects were betting on selling nutrient credits for $8 to $10 per pound to pay back their state-funded loans — but nutrient credits have traded at a fraction of that for the last seven years. Wastewater treatment plants were expected to buy most of the credits, but many chose to upgrade their plants instead.

“Our facility was created as a nutrient credit generator; it was not an afterthought or part of the process,” said Patrick Thompson, president and chief executive officer of EnergyWorks Group, who supports Alloway’s bill. “This is an implicit public-private partnership. We went into this [believing] that we would create a public good. And it was up to the state to create a market for this public good.”

Bion CEO Bassani said he doesn’t see Alloway’s bill as a municipality-funded bailout. Rather, he said it gives cities and towns an affordable alternative to costly projects aimed at reducing stormwater pollution. “We’re offering nutrient reductions for less,” he said. “You’re reducing such a small amount and spending a fortune. Until you can figure out how you’re going to solve this problem, stop the spending. This is taxpayer money.”

As written, Senate Bill 799 would tweak the Pennsylvania nutrient trading program with an influx of new buying power — $50 million a year — garnered from communities required to reduce polluted runoff from their streets and parking lots. Stormwater pollution is the only source of the Bay’s nutrient problems that continues to grow.

Alloway and Bassani argue that instead of investing in costly infrastructure projects, municipalities can meet their nutrient-reduction obligation by paying to have farms deal with their animal manure. By “buying” nutrient credits for practices on farms, the municipalities would be absolved. Companies like Bion and EnergyWorks would bid to get 10-year nutrient-removal contracts.

The Pennsylvania State Association of Township Supervisors opposes the bill, accoreding Elam M. Herr, the group’s assistant executive director. “As written, there are too many unknowns,” Herr said. Many municipalities have invested heavily in meeting their state and federally imposed stormwater control requirements. They’re also mandated to reduce sediment as well as nutrients, he said, which is not a pollutant currently covered by the state’s trading system.

The Chesapeake Bay Foundation blasted a similar bill two years ago, saying it “threatens to derail current clean water restoration efforts and divert critical funding from proven science-based practices, while favoring proprietary, corporate-backed and costly manure technologies.” But B. J. Small, spokesman for the foundation’s Pennsylvania office, declined to comment on the current bill.

PennAg Industries Association, an agricultural trade group, recently wrote a letter to Alloway supporting the bill — but with a long list of questions and clarifications needed for full support. “PennAg supports the use of technologies as one of the approaches for the Commonwealth to utilize. However, there is not one standalone solution which will generate all the necessary results for Pennsylvania to meet the Bay obligations,” wrote Christian R. Herr, the group’s executive vice president.

One of the bill’s most vocal critics is David Hess, former Department of Environmental Protection secretary, who now represents the Pennsylvania Environmental Council. He contends that Alloway’s bill is too narrowly drafted, and that it would funnel more taxpayer money into specific high-tech agricultural projects. He said that he, and his clients, have problems with that.

“We need to work with Senator Alloway and others to bring more private capital to family farms to make up for the deficit in state funding,” he said, “ “but instead of bringing in a system that would benefit one technology and one solution, we encouraged him to look at these other alternatives instead of high-cost high technology.”

Alloway’s bill, which has just four co-sponsors, is pending in the Senate Environmental Resources and Energy Committee, where it’s expected to get a hearing in the next few months.

He said the bill is just a starting point, and he has invited environmentalists, farm interests and municipalities to help revise it. But he insists that private enterprise be involved, and that it have a dependable source of revenue.

“You’re never going to meet your goals by appealing to businesses to do things for the good of the environment,” he said. “When businesses do something, they do it for the good of the bottom line.”

By Donna Morelli, Bay Journal News Service

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