5.2. ERMUSR 03-08-2005Elk River
Municipal
13069 Orono Parkway
Elk River, MN 55330
February 28, 2005
To: Elk River Municipal Utilities Commission
Terry Takle
Jim Tralle
John Dietz
From: Bryan Adams
Subject: LFG - 4`~' IJngine
phone: 763.441.2020
Fax: 763.491.8099
We have discussed on a number of occasions the addition of a 4`~' engine at the Elk River
Landfill LFG facility. Attached is a copy of a letter sent to Clk River Landfill, Sherburne
County and Great River Energy with a memorandum of intent. The three companies
mentioned above and ourselves all have intertwining agreements to make this project a
success. The attached letter explains the necessary contract revision, schedule, cash flow,
and construction costs. I have a verbal approval on the memorandum of intent fi°om the
three parties, but am still awaiting written conformation.
The two large variables in this project is the cost of the 4 engine/generator due to the
recent steel price increases and the total cost of the air permit. My desire is to receive
authorization to proceed with the air permitting process. Once we have a good indication
of air permit requirements, we can purchase the engine/generator and installation.
Staff recommends the following.
a) Authorization to execute Memorandum of Intent.
b) Adopt attached resolution referring to chapter 453. This allows us to proceed
with the project and not utilize public bidding requirements.
c) After all 4 parties have executed the memorandum of intent, start the process
of securing the necessary air permits at an estimated cost of $20,000. This will
be initiated by ERMU with Elk River Landfill being signature to the actual air
permit and Barr Engineering will be the consulting engineer for securing the
air permit.
ities
~/
Elk River -~-~
Municipal Utilities
i 3069 Orono Parkway
F,lk River, NIN 55330
February l8, 2005
Deb Walters
Elk River Landfill
22460 Hwy 169 NW
Elk River, MN 55330
Subject: 4`~' F,ngine,'Generator at Elk River Landfill
Dear Deb;
phone: 763.441.2020
Fax: 763.941.8099
We have been informally discussing adding a 4`~' engine/generator at the LFG facility.
understand that there is adequate gas to operate a fourth unit from now to the end of the
contracts in 2022. Now is a good time to decide if we desire to move ahead with the
fourth unit.
"hhe enclosed spreadsheet is the financial analysis which I prepared based on a project
cost of $6(1,000.00 spread over 20 years. The current contract expires in 2022 or
approximately 16 years from now.
The additional fourth unit appears to cash flow over a I6-year term. I believe the existing
agreements need to be addressed as follows:
a) Grant of Easement between Elk River Municipal Utilities and Elk River
Landfill, Inc. with term vv°hen electric generating facility ceases commercial
operation. Addition of a 4`~' unit will have no effect on this agreement.
b) Gas Purchase contract between Elk River h~Iunicipal Utilities and Elk River
Landfill with existing term of I6 years and a fixed price. Review fixed gas
pricing.
c) Service Agreement between Elk River Municipal Utilities and Elk River
Landfill with existing term of 16 years and varying pricing over 16 years for
3 writs. Section 2.1 1 Clean Air Permit will need revising to reflect who is
paying for facility air permit revisions and section 6. I . Compensation will
need to be adjusted by 4/3 to reflect addition of the 4`~ unit. Exhibit B
should be revised to reflect the 4`~' w1it.
d) Promissory Note between Elk River Municipal Utilities and Sherburne
County revised to rei7ect the required additional loan amounts.
e) Security Agreement and Financing Statement between Elk River Municipal
Utilities and Sherburne County. Restated document with cost of 4`~' unit and
using same terms and conditions.
f) Power Purchase Agreement between Elk River Mwlicipal Utilities and Great
River Energy with 16 year term, pricing for 4`~' unit.
It is my desire to amend these contracts using the same terms and conditions as the
original agreements with the modifications outlined above. The critical issues from my
perspective are:
1) Term of agreement remain 16 years
existing term.
2) Air Permits, process and costs
3) Gas Costs
4) Service Agreement Costs
5) Purchase Power revenue
The 4`~ unit cash flows with the
The preliminary contract schedule is as follows:
Initiate project and F,AW Air Permit process
Secure Air Permit (6 months)
Order Engine/Generator
Delivery of Engine/Generator (12 weeks)
Install equipment-installation (6 weeks)
Start-up
4-1-OS
10-1-OS
10-1-OS
2-1-06
3-15-06
4- I -06
In order to move forward with the 4`~' engine/generator I need to know if you are
interested. In light of the number of parties required to be im~olved in the addition of the
fourth unit, I ask that each party express their intent by joining in on a memorandum of
intent.
Please execute and return to me by March l , 2005. If you have any questions, do not
hesitate to call.
Best re rds,
~~~
Bry Adams, P.E.
General Manager
cc: File
Dave Lucas
Stan Selander
1~1EMOI2ANDUM OF INTENT
Elk River Landfill, Sherburne County, Great River Energy and Elk River Municipal
Utilities all have agreements to support the existing 3 unit LFG electric generation
facility at the Elk River Landfill and desire to encourage the addition of the 4`~' unit at this
facility. It is our intent to amend the existing agreement using the terms and conditions
as outlined in items "a" thru "f' above.
Elk River Landfill
Sherbw~ne County
Great River Energy
Signature: Date:
E11: River Municipal Utilities
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