=======================Electronic Edition========================
RACHEL’S HAZARDOUS WASTE NEWS #351
— August 19, 1993 —
News and resources for environmental justice.
——
Environmental Research Foundation
P.O. Box 5036, Annapolis, MD 21403
Fax (410) 263-8944; Internet: erf@igc.apc.org
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“WALL STREET JOURNAL” WARNS ITS READERS:
INCINERATORS ARE FINANCIAL DISASTERS
The WALL STREET JOURNAL on August 11, 1993, warned its readers
that incinerators for municipal trash are financial disasters
for local government.[1] In a long front-page story, and a
separate story on page 2, the JOURNAL warned that incinerators
are fabulously expensive compared to other ways of handling
trash, and that the financial picture for incineration will
probably get worse in the future.
The JOURNAL said, “To varying degrees environmental officials at
the state and federal level encouraged an incinerator building
binge during the 1980s, with 142 plants now burning about 30
million tons a year, or 16% of the nation’s trash.
“But the officials paid little mind to the economics of burning
trash. Very simply, the current economics are terrible,
requiring residential and commercial customers–as well as
taxpayers–to pay hundreds of millions of dollars a year over
and above the going market rate for trash disposal. The average
incinerator disposal fee is $56 per ton, twice the $28 average
at dumps, reports SOLID WASTE PRICE DIGEST, a trade journal.”
The basic problem is this: in the early 1980s, cities and
counties were stampeded into thinking the nation was running out
of landfill space and that incineration was the only
alternative. Incinerator companies insisted on “put or pay”
contracts, requiring a government to provide the incinerator a
fixed amount of trash each year or pay a cash penalty. Put or
pay contracts require government to supply waste (or pay a
penalty) for the life of the incinerator–20 years or more.
But now the big garbage companies–like Waste Management, Inc.
(which now calls itself WMX Technologies), and Browning-Ferris
Industries (BFI)–have muscled their way into dozens of
communities, creating and expanding garbage dumps despite
citizen opposition. As a result, there is an excess of dump
capacity, and dumping garbage is now much cheaper than burning
garbage. Governments that bought into incinerators must now
take garbage from other jurisdictions, at cut rate prices, to
feed their incinerators.
Garbage Crisis Was Manufactured
“The garbage crisis, though it appealed perfectly to the
nation’s collective guilt over throwing away so much stuff, was
more fiction than fact,” says the JOURNAL. WMX and BFI and
municipalities have “created huge amounts of disposal capacity
in recent years” and this has created a “space glut” which has
led to “fierce price-cutting as dump and incinerator owners
compete for refuse.”
The big garbage companies continue to use the “mythical” garbage
crisis as a marketing tool, says the JOURNAL.[2] A brochure from
WMX warns that “this nation is quickly running out of places to
dispose of trash.” The annual report of Ogden Corp.–the
biggest manufacturer of trash incinerators–sees “available
landfill space vanishing.” These are bogus claims.
Cities That Can’t Put Must Pay
“Incinerators need to operate at full capacity to make the most
of electricity production, which also brings in revenue, and to
service debt of as much as $300 million per plant. Cities
therefore have been forced to bid for trash on the open market,
often at disposal fees far below what their own residents must
pay,” says the JOURNAL.
Public Risks, Private Profits
“In hindsight, the public sector got most of the risks and the
private sector most of the rewards in building waste-to-energy
facilities. Typically, the municipality provided financing; the
company guaranteed the thing would work; the municipality
guaranteed a certain amount of trash at a set price,” the
JOURNAL says.
“Then the market price for disposal plunged. So, Broward County
(Fla.) trash burns for $55 a ton at its two big incinerators,
but waste from everywhere else is welcomed as cheaply as $42. In
Montgomery County, Pa., locals pay $63.50 while outsiders can
dump for $41. ‘It was supposed to work the other way around,’
says Donald Silverson, Montgomery County’s trash chief. ‘It’s a
sore point.’”
Future Looks Even Gloomier
Things could go from bad to worse for the economics of
incineration. The JOURNAL gives four reasons why the future
looks bleak:
(1) Cities are facing huge costs to fit all but the newest
plants with modern air-pollution control systems.
Incinerators are major polluters. In essence, an incinerator
is a machine that manufactures toxic air pollution out of
relatively benign raw materials.
Bringing most incinerators into compliance with the Clean Air
Act of 1990, will be costly.
Pinellas County, Fla., expects that modernizing the air
pollution controls on its 3000-ton-per-day trash incinerator
will cost somewhere between $100 million and $200 million,
including lost electricity revenue and disposal fees while the
plant is down. That could force the county to double its
disposal fee from $37.50 a ton, the county’s trash chief, Bob
Van Deman, told the JOURNAL.
(2) Electric utilities are fighting back against a federal law
that requires them to buy electricity from incinerators at
above-market prices.
Utilities are now required to buy electricity from Non-Utility
Generators (NUGs) at prices that are often based on early
1980s projections that oil prices were going to skyrocket. So
today, while utilities buy and sell electricity among themselves
at 1 to 3 cents per kilowatt-hour, some incinerators get as much
as 11 cents per kilowatt-hour. (Burning a ton of trash yields
about 600 kilowatt-hours, so 2 cents yields $12 a ton, 4 cents
yields $24 per ton, and so forth.)
Niagara Mohawk Power Corp. is forced to buy NUG electricity for
6 cents a kilowatt-hour, which it resells for 1 to 2
cents–taking a $400 million loss on the deal each year.
Southern California Edison spends $750 million each year above
the market rate to buy NUG power, a spokesperson told the
JOURNAL. “That’s why our rates are so high.”
Utilities are lobbying hard to get out from under the
requirement to pay high prices for NUG electricity. If they
succeed, incinerators will lose a major subsidy.
(3 and 4) The U.S. Supreme Court has 2 cases pending that could
have devastating impacts on municipalities that bought into
incineration, and on bondholders, taxpayers, and companies
that own incinerators.
First, the court will decide whether incinerator ash is legally
a hazardous waste. A federal appeals court in Chicago says it’s
a hazardous waste, while a federal appeals court in New York
says it’s not.
The debate isn’t over the physical characteristics of
incinerator ash. There is no doubt that it contains large
quantities of toxic metals such as lead, cadmium, and
arsenic, clearly establishing it as a dangerous waste. (See RHWN #22, #92 and #189.) However, in order to grease the skids
for
the introduction of incinerators in the ’80s, many states
declared incinerator waste “legally non-hazardous.” This was
merely a way of having taxpayers subsidize the incinerator
industry, at the expense of environmental damage, because if
incinerator ash is labeled as a hazardous waste, ash disposal
will cost 10 times what it costs today, adding $3.5 billion to
the annual cost of running the 142 incinerators currently
operating. “That could force incinerators to roughly triple the
disposal fee they charge for trash to more than $150 per ton,
the municipalities say. Many [incinerators] would simply close,
which could lead to billions of dollars of bond defaults,” says
the JOURNAL.
In other words, INCINERATORS CAN’T AFFORD TO HANDLE THEIR TOXIC
ASH RESPONSIBLY, no matter what the court decides.
Second, the Supreme Court will decide a “flow control” debate
that could also kill the incinerator business.
“Flow control” is a practice that allows a municipality to
commandeer all the trash within its borders and send it to a
favored disposal site. Flow control is another taxpayer
subsidy to the incinerator industry. With flow control, a county
or municipality can order all local garbage sent to an
expensive incinerator instead of to a cheaper dump. The
taxpayer picks up the tab and the incinerator gets the benefit.
Because many incinerators charge prices far higher than nearby
dumps, “only with flow control do they remain viable,” says the
JOURNAL.
Several lower court decisions have said that flow control is an
illegal restriction on interstate commerce.
A Supreme Court decision against flow control could spark an
all-out price war in the disposal business. Dumps, with
relatively low fixed costs, could ride out a price war. Many
cash-hungry incinerators couldn’t, says the JOURNAL.
Bailouts at Taxpayer Expense
To survive without legal flow control, some municipalities are
resorting to “economic flow control” instead. In essence,
they set the disposal fee at their incinerator low enough to
attract trash, then make up the rest of the costs by raising
taxes.
This is how Montgomerey County, Maryland is planning to pay for
its $325 million, 1800-ton-per-day incinerator: waste disposal
taxes in the county will rise from $146 per year to $246 per
year by 1999, says the JOURNAL.
Taxpayers in Columbus, Oh. have subsidized the city’s
incinerator to the tune of $100 million over the last decade,
the JOURNAL says.
Blaming the EPA
Incinerator operators blame U.S. Environmental Protection Agency
(EPA) for going easy on dumps, but the director of EPA’s
division of industrial and municipal solid waste, Bruce Weddle,
told the JOURNAL, “The stuff that goes up the [incinerator]
stack affects more people than [garbage water] going into the
groundwater.”
Creative Responses
LaCrosse County, Wisconsin, sued its consultants for
overestimating the area’s trash volume and collected $2.6
million, according to the JOURNAL.
Many of our readers can now say, “We told you so!”
–Peter Montague, Ph.D.
===============
[1] Jeff Bailey, “Fading Garbage Crisis Leaves Incinerators
Competing for Trash,” WALL STREET JOURNAL (August 11, 1993),
pgs. A1, A2.
Descriptor terms: incineration; msw; wall street journal;
economics; ash; wmi; wmx technologies; bfi; ogden corp.; broward
county; fl; air pollution; pinellas county; niagara mohawk power
co.; southern california edison; supreme court; hazardous waste;
lead; cadmium; arsenic; flow control; montgonery county; md;
columbus; oh; lacrosse county; wi; jeff bailey;