On Thursday, May 21 the Cook County North Shore Hospital board made a motion to decline entering into a contract for service from the proposed Grand Marais Biomass Heating District.
Hospital Board Member Tom Spence read a motion not to participate in the district heating project and to not accept the proposed Thermal Energy Service Agreement.
Before Spence read his motion, Hospital/Care Center Director Kimber Wraalstad addressed Mark Spurr of FVB Energy Inc. and Cook County Community Local Energy Project (CCCLEP) President George Wilkes.
Wraalstad began, “I inherently don’t have an issue with biomass. We have looked at this for the year and a half and have gone through the proposal carefully because we realize that we are 31 percent of the pie.”
But, said Wraalstad, she still had concerns when she broke down the numbers on the contract. For instance, she noted that Spurr, who drafted the district heating contract, wrote that the hospital could eliminate its boilers and reduce staff by eliminating boiler maintenance.
Wraalstad said, “We have to agree to disagree.” She stated there are laws that mandate that the hospital/care center have redundant heat; therefore they would still have to own and maintain boilers in case of a problem with the biomass system.
She also said that contrary to the claim that becoming part of the heating district was free, there was a cost of $461 to join. She also said she felt inflated numbers were used when the possible savings were tabulated. Wraalstad took the estimated maintenance savings out of the proposal and it brought the cost of joining the first year to $18,885.
Next Wraalstad pointed to Spurr’s estimated cost of $1.70 per gallon for propane in 2017, the first year of scheduled operation for the biomass facility. Currently the hospital is paying $1.29 per gallon for small loads, but Maintenance Director Rory Smith said that if they purchase a large quantity, the hospital/care center would pay less than $1 per gallon for the next three years. That amounts to a savings of $86,000 per year over what the biomass heating district contract called for.
Also, Wraalstad questioned the wisdom of signing a 25-year contract that locked the hospital in when new ways of more efficient, cheaper heating could be on the horizon.
Spence said there were two questions in his mind: Did the proposal best serve the taxpayer and did the risk the board would be taking make economic sense?
“I think this proposal comes up short on both counts,” he said.
The 25-year commitment with all of its requirements would give the hospital/care center no options to pursue cleaner, more efficient ways of heating over that course of time “This isn’t reasonable for the hospital or the taxpayer,” he said.
Under the proposal, said Spence, from year three to year 25 the Grand Marais PUC could charge 4.25 percent more each year and if they used the inflator formula included, annual costs could run even higher.
“It seems the PUC is asking us to assume that for the duration of the contract there will be an annual 4 percent rise in fossil fuels, but there is a sea change in the energy industry. Most forecasts range from 3 to 5 years. What they are showing is that any increase will be flat to very slight.”
Spence talked about changes in the oil industry and mentioned fracking. He said whether one likes it or not, with this type of oil extraction reserves would be increased and that should aid in keeping oil prices stable. He also talked about solar and geothermal energy, as well as efficiencies in building that may drive down the cost of fossil fuels.
“Under these circumstances I’m not willing to take those potential sources away from us,” he added.
“With all due respect to the PUC, if we didn’t have any other options— maybe—but we have propane as a heat source and that will leave us with options to do something different in the future,” said Spence, reiterating that if the biomass discussion goes forward, that the hospital/care center should not be involved in that discussion.
Board Member Howard Abrahamson agreed. “Going back to burning wood brings me back to my childhood, and I’m 85. Solar power is already available to people and getting better. My personal obligation to the county and community is not to burden them with this debt.”
The board’s vote was unanimous to reject the proposal.
The hospital/care center encompassed about one-third of the project. Plans to install biomass district heating in Grand Marais began in 2009 and about $1 million in studies, engineering, and consultant fees have been spent so far. Most of that was obtained from government grants or private foundations.
Eighteen buildings—most of them government-owned or affiliated— were on the route that had been targeted for installation of underground pipes that would carry the heated water from the plant that was (and still may) to be built in the Cedar Grove Business Park. Last year bids for the groundwork came in over $4 million higher than expected. Original estimates to build the facility and infrastructure were $9 million, but have grown to $13.5 million.
Following the board’s decision CCCLEP President Wilkes said, “We are still in the process of evaluating where we will go from here. The project moving forward at this point is doubtful because of the hospital’s decision and because of currently low propane prices. The contracts sent to the other customers are no longer viable. Whether they will be reworked or not is still to be decided.”
In other business
. Several nurses received Sexual Assault Nurse Examiner (SANE) training at the Cook County North Shore Hospital on May 21-22.
“This training is considered an introduction to the Sexual Assault Nurse Examiner training and is meant for nurses who participate with sexual assault exams,” said Director Wraalstad.
The four-hour course is being provided by Minnesota Coalition Against Sexual Assault and is designed to equip healthcare professionals with the knowledge to perform sexual assault medical forensic examinations.
. Cook County North Shore Hospital was awarded an $80,000 Rural Hospital Capital Improvement Grant for a Microbiology Upgrade project, said Wraalstad.
Within the next couple of months the hospital will purchase a new Microbiology Analyzer and Meditech Microbiology Module.
The grant provides 80 percent of the funding while the hospital will pay 20 percent of the $100,000 project.
Wraalstad praised Vera Schumann and Jennifer Backstrom for their hard work in preparing and submitting the grant application. “This was a highly competitive grant process and their efforts resulted in a successful grant award.”
. The hospital recently received equipment to gather fingerprints and photographs as required by the Minnesota Department of Human Services (DHS).
Five individuals have been trained to use the equipment, said Wraalstad.
Wraalstad said it is anticipated the new process will be mandatory by the end of summer.
. Wraalstad said the USDA application had been approved and the hospital had received a “letter of conditions” outlining where the money can be spent on the hospital/care center’s $22.5 million renovation/ rehabilitation over the next two years.
The 30-year direct loan is $12.275 million and will be charged at a fixed 3.5 percent yearly interest rate.
The board also learned that the AGSTAR guaranteed loan was approved at $9,832,500. AGSTAR has contacted the Grand Marais State Bank and the Security State Bank to see if they want to partner in this loan, said Wraalstad, and both said they were interested.
A groundbreaking ceremony will take place on June 18 at the Care Center where the first phase will begin. The time has yet to be determined.
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