Fate of Wastewater Plant Comes Down to Bottom Line [Citizens Voice, Wilkes-Barre, PA]

By: Elizabeth Skraptis, Staff Writer, on Monday, April 25, 2011

A natural gas wastewater treatment plant on Wyoming Valley Sanitary Authority grounds in Hanover Township is far from a done deal.

Whether the project goes through depends on the bottom line. A study is currently under way to determine how much it will cost Portsmouth, N.H.-based Cate Street Capital to design, build and operate the treatment facility, and how much the authority stands to make. The company has 120 days from March 15 to perform the study, but could ask for an extension.

"When they come up with a number, then we decide if it's worth our while to do this," WVSA board Chairman James Hankey, of Edwardsville, said.

The authority's consultant, John Minora of PA Northeast Aqua Resources, touts the need for plants to treat and recycle the chemical- and brine-laden water generated by natural gas drilling activity in northern Pennsylvania.

But if the facility is built, it's going to need drilling companies for customers, Hankey said.

"You know the old saying, 'Build it and they will come?' Well, what if we build it and they don't come?" he said. "They (Cate Street Capital) have four months to do their due diligence. I hope they get it done sooner than that so we can make our decision."

Project history

Hankey said there had been talk for some time about making money by treating water used in hydraulic fracturing, or "fracking," which involves blasting millions of gallons of chemical-treated water deep underground at high pressure to crack the shale and release the gas.

"The reason we got into this, it looked like a revenue-enhancing opportunity," Hankey said. "We have about $18 million … of things we need to do, not tomorrow, but in the next few years to enhance our system."

Authority officials haven't raised rates since 2006, and want to find another source of funding, WVSA Executive Director Fred De Santo said.

"The plant is 40 years old and things break down," he said.

Minora, a Scranton attorney, and his partner Eric Wallace formed PA Northeast Aqua Resources LLC on Jan. 15, 2009. They made a presentation to WVSA officials on March 17, 2009 and signed a contract on April 14, 2009 for a feasibility study "to determine the risk/benefit, infrastructure needs and treatment options relating to the treatment of frack water and marketing of treated water."

According to the contract, PA Northeast would be paid $45,000 for the study, plus a percentage ranging from $0.0025 to $0.0030 per gallon for wastewater brought in for treatment and 25 percent of the gross sale price of the treated water. The company also gets a $5,000-a-month consulting fee.

Minora doesn't deny his company would benefit from the project. The question is how much the authority will.

Minora said the WVSA could reap millions of dollars from the project, but noted, "It's hard to predict, because I can't tell you what kind of profit the authority would make, gross."

Originally authority officials considered doing treatment in-house. But the "produced water" from gas drilling turned out to be too salty for the authority to treat, and in April 2010, WVSA officials pulled a permit application to the state Department of Environmental Protection before it could be denied.

Authority officials next tried to seek a company to work with them on building a plant, but attorneys said the WVSA couldn't form a public-private partnership.

Finally, the board opted to advertise for proposals from companies interested in designing, building and operating the facility.

The company would pick up all construction and operation costs, pay a royalty to the authority for use of its property, and give the WVSA a share of the profits based on the number of gallons of frack water processed and the number of gallons of treated residential wastewater used to dilute the treated water for reuse in drilling.

The authority "reached out to a lot of people," but only two companies submitted proposals, Minora said. The board voted on March 16 to enter a non-binding agreement with Cate Street Capital, a private equity firm that finances "green" projects like wastewater recycling plants and renewable energy.

Although ratepayer money is used to pay Minora's firm, if the project goes through, it would be financed by Cate Street, WVSA Executive Director Fred DeSanto said. The company would be responsible for building and maintaining the facility.

When this process with Cate Street ends, the contract with Minora ends, Hankey said. The board voted in March to extend his consulting contract on a month-by-month basis rather than for six months, he said.

Where things are now

If built, the plant would be independently operated. It would require permits from Hanover Township and from DEP. But, Minora said, "We're not anywhere near that point."

It still has to be determined whether the site will work, and if Cate Street is able to use the waste heat generated by the incineration of solid waste to power the facility, and the authority's treated wastewater to dilute the frack water, Hankey said.

"There's a lot of variables. Can they use the tanks? Can they use the effluent (wastewater)? Are the utilities right?" Minora said.

He said the facility would create 20 permanent jobs. Hankey said since Cate Street would own and run it, the company would bring its own people in and not use WVSA employees.

How many frack water tanker trucks will come and from where will depend on the drilling activity and demand. Minora estimated at peak, there would be 10 to 12 trucks an hour at the facility.

Asked if there is any financial incentive for nearby residents who would have to deal with increased truck traffic, Minora said, "We don't have any kind of formal proposal from this company. It's very difficult for me to speculate on what they might pay the authority."

Minora said when the study is complete, he will make a presentation, turn it over to authority officials and say, "you folks will make a decision on what you think is the right thing to do."

DeSanto replied, when asked who would maintain the roads damaged by heavy tankers, "I don't think that's ever been really discussed."

Cate Street Capital Senior Vice President Richard Cyr said the company is in the process of trying to figure out whether it can solve the environmental concerns.

"We're not analyzing finances and steel structures; we're analyzing if our technology can do what we said it would," he said.

The wastewater from natural gas drilling in the Marcellus Shale is exceptionally salty. Cate Street Capital's Red Desert Water reclamation facility in Wamsutter, Wyoming uses reverse osmosis filtering - a process used to desalinize seawater - to treat drilling wastewater.

Cyr said his company wants to make sure the technology works on the level it needs to. He's also sensitive to the fact that the facility's potential site is in a residential neighborhood.

"We're hopeful, and we're optimistic, and we're proceeding on that basis, and we're spending a lot of time and money on the analysis," Cyr said. "But we only want to be where we're welcomed. We pride ourselves on being good neighbors."

Contact Person: Elizabeth Skraptis, Staff Writer 
Contact Email: eskrapits@citizensvoice.com