Mark Spurr, president of FVB Energy, Inc. visited with the public in the Cook County commissioners’ room on August 19 after a presentation of his report on a proposed biomass-fueled, district heating system. Spurr said if a biomass district heating system were built, more of the county’s energy dollars would be spent locally.
After many years of planning, the proposed biomass district heating system for portions of Grand Marais didn’t come to fruition, at least not yet. The project was felled by a lack of grant money ($4.5 million from a 2014 legislative bonding bill) and by much higher than expected construction bids.
The lowest of two bids to do the digging and to install the pipe that would carry heat to 18 businesses and government buildings who would purchase that heat was $8.5 million.
Mark Spurr, president of FVB Energy, Inc. gave the Phase 2 report for the biomass-fuelled, district heating system at the county commissioners’ room on August 19.
“The bonding bill was dead when the bids [for construction and laying the pipe] came in too high,” said George Wilkes, who with Paul Nelson is co-president of the Cook County Local Energy Project (CCLEP).
Only two construction bids were received, and both firms used the same excavating company to come up with their bids, said Spurr. “In essence we received one bid,” said Spurr.
The lowest bid drove the price to complete the biomass project to $14.5 million, $4.5 million over expected costs.
CCLEP initiated the project in 2009 as a way for local businesses and government buildings to stabilize and reduce long-term energy costs; reduce dependence on imported fossil fuel resources; improve forest management including wildfire mitigation efforts; create jobs; keep more energy dollars within the local economy; and reduce carbon emissions.
Nelson said originally Cook County Firewise came to CCLEP with questions about what to do with the slash piles left over from clearing around properties. Talks ensued and pretty soon discussion centered on creating a biomass-heating district for Grand Marais.
Spurr said the biggest challenge was to come up with the initial financing, specifically in striking a feasible balance between two conflicting criteria: offering a district heating rate that is attractive enough to induce customers to sign longterm contracts (25 years) and meeting bond underwriting criteria and cash flow requirements.
Funding the entire $10 million project through revenue bonds wasn’t feasible, said Spurr, adding that a wide variety of funding had been explored, citing talks with the Minnesota Department of Agriculture, Minnesota Department of Commerce, Iron Range Resources and Rehabilitation Board (IRRRB) and the U.S. Department of Agriculture, to name a few.
“We got a lot of support from these organizations. They seemed willing to put their shoulder to the wheel on this project,” said Spurr.
CCLEP first worked with Dovetail Partners to develop a plan for the heating district, but later, with the help of $350,000 from the 1 percent recreation and infrastructure sales tax, were able to hire FVB Energy to come up with a more detailed study. The FVB plan included a business plan, financing plan, customer contracts, and schematic design of the heating plant and the projected cost to build out to the community.
Initially the idea was to use biomass collected from the county’s Firewise program (slash piles, or tops from logging operations, etc.). This was a popular selling point to the public, and it was believed it could have helped the few loggers in the county remain viable. But the initial cost to purchase a chipper that could be brought to slash piles and piles of logged off tops was deemed too great, so an agreement was made with Hedstrom Lumber Company to have them supply the needed biomass wood for fuel.
Currently Hedstrom’s sells that wood to a plant in Thunder Bay that uses it to heat its buildings.
Because of the efficiency of the biomass boiler, Spurr said if the project moves forward that Hedstrom Lumber could run the boiler remotely from its operation through its computer system. “You wouldn’t need to hire someone to play cards all day long that way,” said Spurr.
One of the biggest benefits of the project was its intended ability to ease the rise in heating costs in the future. Over the last 10 years fuel oil has increased at the rate of 9.73 percent per year while propane costs increased at the rate of 4.5 percent per year. Once in place, a biomass heating plant and distribution system could far better control the cost per customer, especially if more customers signed up in the future, said Spurr. And customers could better plan for those costs, said Spurr.
Another selling points was that emissions from the plant would be low in particulate matter, and wouldn’t need an air emissions limit.
Spurr said that because Grand Marais is so far away from a pipeline that could bring in propane, natural gas or heating oil, and cost to ship those products here is so costly, it makes sense to pursue a biomass district heating operation.
“Right now 97 percent of local dollars go out of the county, but under our plan, most of those dollars will stay here.”
While he said he didn’t own a crystal ball and couldn’t predict what the future holds for fossil fuels, Spurr said one could make a reasonable guess that they will go up anywhere from 4 to 7 percent per year. Heat costs from biomass should remain relatively stable from year to year, with only small increases in annual heating budgets, said Spurr.
For any project to go forward, said Wilkes, money needs to be found so that someone can be hired to take hands-on management of the project and move it forward.
Spurr thinks that if enough contractors bid on the excavation for laying the heating district piping that the price to complete building the biomass facility, hooking up the buildings and laying the pipe should be $12.5 million. “Competition is a good thing,” said Spurr.
In the meantime, Wilkes and Nelson will keep working and will ask if the city of Grand Marais will again put in a request for grant money ($6 million) for the biomass facility from the 2016 legislature, the next time the state legislature will vote on a bonding bill. “It’s a viable project, a big project with a lot of parts to it and a lot of challenges, but we have a lot of state, federal and community support, so I’m hopeful,” said Wilkes.
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