A proposal worth more than $100 million to power the University of Maine’s Orono campus with wood-fired steam and electricity from an abandoned paper mill is a risky bet for Maine taxpayers, according to two energy-services companies that were competing for the job. After an 18-month bidding and review process, the University of Maine System decided last summer to negotiate with New York-based ConEdison Solutions on its plan to generate renewable energy at the vacant paper mill in neighboring Old Town and send it via pipeline and wires to UMaine.
But soon thereafter, two runners-up formally protested the decision and filed appeals with the university.
Honeywell Energy Services Group and Ameresco Inc. are charging, among other things, that ConEd failed to spell out the cost of its proposal and document any achievable savings, downplayed the regulatory obstacles of sending power from the mill to the campus and – overall – failed to show that the project is feasible.
The university subsequently denied the appeals of both companies.
Despite that, the issues raised by the two companies are notable because the Old Town mill is considered a cornerstone of the state’s efforts to revitalize the struggling forest products industry.
The university’s Forest Bioproducts Research Institute operates a research center at the mill site, where progress is being made on ways to commercialize fuels, chemicals and materials from wood waste. But to turn the 300-acre complex into a profitable enterprise, prospective buyers need revenue from selling power.
That fact was brought out in a lawsuit filed in July by a prospective buyer of the mill, who claims he was illegally pushed out of a $10 million deal in favor of a competitor. The plaintiff, Samuel Eakin, managing director of Relentless Capital Co. in Cape Elizabeth, also was seeking a power contract for the Orono campus. His legal action has contributed to the inability to sell the mill, which was expected to happen in 2017.
MILL HAS SERIES OF FALSE STARTS
The ongoing disputes are frustrating to Charlotte Mace, executive director of Biobased Maine, a trade association promoting the development of new, sustainable manufacturing industries. A succession of promising enterprises have taken over the mill in recent years, attracted by its location and infrastructure, which includes 400,000 square feet of warehouse space and a 16-megawatt biomass boiler.
“The Old Town mill is perfect,” she said. “It has everything.”
Mace noted that the mill has twin digesters – designed to cook and soften wood chips for papermaking – that can be repurposed to make cellulosic sugars, the building blocks for bio-based chemicals. Old Town also is close to eastern Maine’s softwood forests, which lost markets after five paper mills along the Penobscot River closed.
But each venture ended in bankruptcy or a closure that, over time, erased hundreds of jobs. Mace said these repeated setbacks are unfortunate, because entrepreneurs are interested in locating in Maine.
“I want to bring companies in there to make products,” she said of Old Town.
The university also wants the Old Town mill to be reborn, but the appeals of Honeywell and Ameresco raise questions about whether that preference influenced UMaine’s decision making.
Read Ameresco’s appeal:
COST UNKNOWN, RIVAL FIRM SAYS
In a July 31 letter to the university, Michael Bakas, a senior vice president at Ameresco, complained that the process was “unfair, arbitrary, capricious and unreasonable.” He said the decision to award the request-for-proposal was “improper and not in the best interest of UMaine.”
The university responded that Ameresco may believe those things, but that the selection committee reached a different conclusion.
“The university,” wrote Ryan Low, vice chancellor for finance and administration, “is not required to provide a justification or an explanation as to why it reasonably determined that a particular energy project best meets the university’s needs over another.”
Read UMaine’s response:
Ameresco also noted that ConEd’s cost estimates ranged from less than $100 million to $150 million. That indicates that the true price is unknown, Ameresco said. It calculated that paying debt service on those costs could exceed the $10 million a year the university currently pays for energy.
In a response to Ameresco in November, the university said cost wasn’t the only factor it considered in picking ConEd’s proposal. The university also stressed that it’s now conducting a detailed analysis of the economics, savings and risk, and reserves the right to rescind the award, give it to a runner-up or start the process over.
Asked last week about when a final decision is due, a university spokesman said there’s no deadline, but that the parties hoped to conclude negotiations in the first half of 2018. If an agreement is reached, it would be considered by the board of trustees and subject to public meetings.
“The University of Maine System is optimistic,” said Dan Demeritt, director of public affairs, “that its public, competitive, strategic sourcing initiative will result in an energy solution for our flagship campus in Orono that controls costs for tax- and tuition-payers, builds on the university’s record of environmental stewardship, and creates stronger community and economic partnerships.”
Demeritt said the initiative is similar to ones that resulted in energy projects at campuses in Machias, Farmington and Augusta that have reduced campus costs and emissions. He also said the university is aware of the legal challenges involving the Old Town mill and will be monitoring developments for potential impact on its plans.
Ameresco didn’t respond to a question about whether it might seek legal action in the appeal dispute.
Honeywell sent a brief statement simply noting that it had sought clarification from the university.
Of 16 companies applying to help the University of Maine use the former Old Town paper mill site, above, for generating wood-fired steam and electricity, New York-based ConEdison Solutions won an “award to negotiate.” It was chosen partly because it would use the mill’s biomass boiler. UMaine said proposals of two of the remaining firms, Honeywell Energy Servies Group and Ameresco Inc. – which protested ConEd’s selection – didn’t use an existing steam plant and didn’t offer a carbon-neutral plan, respectively. Staff photo by Shawn Patrick Ouellette
UMAINE HAD SET OF 4 CRITERIA
The university has been seeking a greener, cost-effective power supply for its sprawling campus.
Natural gas is the primary fuel that heats 202 buildings totaling more than 4 million square feet of space. But the university wants to back out of fossil fuels and has a goal of eliminating net emissions associated with climate change by 2040.
In soliciting proposals, the university set out four key objectives: Reduce greenhouse-gas emissions; minimize energy costs; create stable and predictable costs; and improve the reliability of the electric and steam systems.
Sixteen companies responded, and a selection committee made up of UMaine management culled the number to four. In June, ConEd won an “award to negotiate” a long-term energy agreement.
The committee judged the entries on four categories, each with a maximum score: Project concept, 50 points; experience, 25 points; financial stability, 15 points; and Maine economic impact, 10 points. ConEd won with 82 points out of a possible 100, largely on the strength of its project concept. Honeywell finished second with 73.8 points. Ameresco was third, with 66.5 points.
The project proposals are confidential. But in a summary of highlights, the team noted ConEd’s intent to use the mill’s biomass boiler and steam turbine generator, and add a 1-megawatt solar array. That package had the potential to hit all four of the university’s key objectives, the team said.
The team also had praise for Honeywell’s plan, which included a biomass boiler, 4-megawatt solar array and natural gas boilers. But it said the plan didn’t allow for the reuse of UMaine’s existing steam plant and that the proposal had documentation errors that made evaluating costs and savings difficult. That statement seems to be at odds with the university’s response to Ameresco’s appeal, in which it downplayed the role of hard costs in the selection process.
Ameresco planned to generate heat and electricity with a larger, high-efficiency natural gas unit and a small solar array. The team said the proposal met only two of the four objectives, offering no path to become carbon-neutral and keeping the campus bound to fossil fuels.
BUYER SAYS HE WAS PUSHED OUT
As 2017 draws to a close, the university’s interest in the Old Town mill remains clouded by uncertainty about who will buy the mill, and when.
A Connecticut asset-liquidation consortium, MFGR LLC, has been trying since January 2016 to sell the property. Eakin, the Relentless Capital Co. managing director, thought he had a deal to buy it, but according to his lawsuit, two of his former redevelopment partners – David Edson, chief executive and president of the James W. Sewall Co. engineering firm of Old Town, and Joseph Everett Deschenes, former purchasing manager for the mill – worked behind the scenes with ConEd and a Maine-based consortium of timberland owners called CVG Inc. to gain control of the mill. UMaine Chancellor James Page was the CEO of Sewall Co. before his appointment in 2012.
In November, according to court papers, a new buyer emerged – E4research.org. It is listed as a not-for-profit corporation established with the help of Sewall. The board of directors has included former and current Sewall employees, according to its website.
In mid-December, Eakin’s attorney was granted permission in Cumberland County Superior Court to conduct discovery around the new buyer. The effect of that will put off any sale until next year.
Tux Turkel can be contacted at 791-6462 or
tturkel@pressherald.com
Twitter: TuxTurkel
Send questions/comments to the editors.
