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Lawsuit snarls biogas plant

Alternative energy plant threatened by water, sewer fight
by:  A proposed biogas plant on Northeast Columbia would convert food water into energy, fertilizer and clean water, proving numerous public benefits, say its backers.

A lawsuit slamming Portland water and sewer spending is threatening the construction of a proposed alternative energy and composting plant with community support.

The $55 million plant proposed by Columbia Biogas in Northeast Portland is intended to convert commercial food waste to electricity and compost. It has been endorsed by the Cully Neighborhood Association and numerous business groups. Mayor Sam Adams hailed the proposal during last week's State of the City speech.

'Waste, like commercial food scraps and grease, will be diverted from our landfills and sewer systems to the plant and turned into power - enough to fuel the equivalent of 3,000 Portland homes,' Adams said. 'Fingers crossed for luck that we can land this $55 million clean energy business headquarters.'

Columbia Biogas Chief Executive Officer John McKinney says private financing has been lined up for the plant's construction, which can begin in May. But he wants the city to guarantee the financing with a pledge of garbage fees and sewer funds.

'I'm not saying we need any city money to build the plant. We just need the city to guarantee the loans,' says McKinney.

Even the potential future use of sewer funds concerns Commissioner Dan Saltzman. He is in charge of the Bureau of Environmental Services, which oversees the sewer system.

Although Saltzman sees the benefits of the proposed project, he is opposed to backing it with public funds - especially sewer funds - because of the lawsuit.

'The fact that we are already being sued over sewer funds is an argument against that,' says Saltzman.

Related projects

By coincidence, the first hearing on the lawsuit took place Friday morning, mere hours before Adams plugged the project in his speech. The suit was filed by lawyers representing several city water and sewer users, including former City Commissioner Lloyd Anderson. It is supported by Citizens for Water Accountability, Trust and Reform, a group with ties to commercial water and sewer customers.

The lawsuit argues that the council has violated the city charter by spending water and sewer funds on projects that are unrelated to the primary mission of the water bureau and BES.

During Friday's hearing, John DiLorenzo, a lawyer representing WATR, cited a city memo that warned, 'Sewer rates can only be collected to pay for activities and projects related to the city sewer system.'

The June 16, 2010, memo was sent from the city attorney's office to the city auditor's office. It includes similar statements about water funds.

At the hearing, Deputy City Attorney Terry Thatcher said the charter authorizes the council to determine appropriate uses of water and sewer funds. Thatcher plans to file a motion to dismiss the lawsuit within two weeks.

On Tuesday, DiLorenzo wrote the city and asked how much money BES has already spent on the project.

A lot of benefits

McKinney is surprised there is any controversy surrounding the Columbia Biogas project. He says it will provide a number of environmental benefits supported by Portland policies and is directly related to city garbage and sewer services.

'The project is a win-win for everybody,' says McKinney.

The cost of the plant is $55 million, although much of the money - $27 million - would be provided by the federal government through energy and economic development tax credits. McKinney says the city's backing is needed to secure the remaining funds from private investors.

The plant would be at 6849 N.E. Columbia Blvd., an area zoned for commercial and industrial uses. McKinney says it employs technology widely used in Europe to convert commercial food waste into electricity or natural gas. It also would produce organic fertilizer and clean water, McKinney says.

Much of the commercial food waste is now going to a composting facility in North Plains, where residents complain about the smell. McKinney also says the plant would handle grease that BES recently required restaurants to keep out of the sewer system. These are directly related benefits that justify the city's financial backing, McKinney says.

McKinney does not believe the city will spend money on the plant, however. If it works as planned, the plant will repay its construction loans with money generated from collecting waste and grease, generating electricity and selling fertilizer. The city would be liable only if the plant did not work properly, McKinney says.

His proposed deal would cap the maximum city payments at $900,000 a year for 20 years.

'That would only happen if the plant does not work at all from day one,' says McKinney.

McKinney argues that the plant would provide other public benefits, including 85 construction jobs while it is built and 20 permanent jobs to operate it. He has promised to hire as many employees as possible from the surrounding area, and has signed a Good Neighbor Agreement with the Cully Neighborhood Association, which has endorsed the project.

'We spent a year working through a lot of issues with the company and are convinced this is a good project with a lot of benefits,' says Bob Grainger, who lives near the proposed plant site.

Other supporters include the Portland Business Alliance, the Oregon Restaurant Association and the Columbia Corridor Association, a business membership organization in the region.

In December, Metro agreed to impose a fee of 50 cents for every ton of solid waste delivered to the plant for community enhancement. It is projected to raise up to $30,000 the first year which could fund the city-approved Cully-Concordia Plan Community Action Plan.

Primary purpose

The Columbia Biogas project has been in the works for years and covered by the local media, including the Portland Tribune, since October 2010. In a March 2 story, The Oregonian revealed the company's request for city financial backing. When DiLorenzo read the story, he lambasted the idea as another example of the council's questionable use of water and sewer funds.

'Why are they talking about using sewer funds on the project? Because they're available,' DiLorenzo says.

Friday's hearing was before Multnomah County Circuit Judge Stephen Bushong. Although it was intended to deal only with procedural matters, the two sides staked out their positions on the substance of the suit as it proceeds.

Citing the city attorney's memo, DiLorenzo argued in court that the city charter restrictions are clear: water and sewer funds can be spent only on certain projects, regardless of any public benefits.

'The city attorney has advised the city that water and sewer expenditures must be directly related to the primary purpose of the water and sewer bureaus,' DiLorenzo argued.

Thatcher responded that the charter authorizes a majority of the council to determine which projects meet that standard.

'The charter is the constitution of the city, and the council is the legislative body,' Thatcher said.

Thatcher's motion to dismiss the lawsuit could be filed by March 15.

At the same time, he promised to provide DiLorenzo with some financial details on how the water and sewer bureaus have been spending tax dollars. DiLorenzo has requested information on more than 50 spending categories, some of which came to his attention after the suit was filed. New ones include travel costs and sewer fund spending on the Portland Harbor Superfund lawsuit filed against the city and harbor businesses by the U.S. Environmental Protection Agency.