Hog-waste plant clears hurdle, but new NC rule threatens future development

Wilmington’s Optima BioEnergy operates North Carolina’s only swine-waste biogas plant and had plans for more. Then regulators three a wrench into those plans.

Optima BioEnergy has cleared an important regulatory hurdle to building its second swine-waste plant in North Carolina. But it’s a hurdle that didn’t exist two months ago.

And it’s one that has the company questioning whether it can go ahead with as many as three other North Carolina projects it had planned.

“I worry that it’s going to choke off the industry,” says Mark Maloney, CEO Optima BioEnergy. “I am unlikely to pursue more projects with all the uncertainty about how you get approved.”

Wilmington-based Optima operates the only swine-waste project currently producing biogas in the state. It started commercial operation of its OptimaKV plant in Kenansville in March. The plant produces gas from swine poop and sells it to Duke Energy Corp. (NYSE: DUK), helping its Carolinas utilities meet state requirements that a small portion of the power they produce come from swine waste.

Major wrench

After Optima completed that first plant, Maloney hoped to start construction on the second project — the OptimaTH plant in Bladen County — by late May and a third project — also in Bladen — by September. The company had also identified two additional sites for swine-waste projects it planned in eastern North Carolina.

That work got slowed by some issues working out an agreement to connect OptimaTH to the Piedmont Natural Gas system to transport the gas. Then the N.C. Utilities Commission threw a major wrench into the plan.

Biogas developers, Piedmont Natural Gas, Duke and other interested parties had worked through last summer and fall to come up with the standards that biogas manufacturers would have to meet to inject their alternative gases into Piedmont’s system. In June, the commission approved those standards. But it imposed limits on alternative gas development that no one had discussed in the months of stakeholder meetings.

Pilot project

Expressing concern that alternative gases could have impurities that might cause problems for regular natural gas customers, the commission decided that there should be a three-year pilot program to assess the impact of alternative gas on Piedmont’s system and its customers. The commission grandfathered two biogas projects for which it had already approved contracts to connect to Piedmont’s system — only one of which has actually been built. Those projects would be used to provide data for the pilot.

“It was very strange to get that ruling from the commission,” says Angie Maier of the N.C. Pork Council, which had represented the interests of swine-farm businesses in the long negotiations. “It came out of nowhere.”

The commission also ruled that additional projects would not be allowed to participate in the pilot unless the project would provide data that the commission finds useful for its study.

Sleepless nights

The OptimaTH plant in Bladen County, approved Monday, was not one of the grandfathered plants. And Maloney found himself in the position of having spent close to $1 million on engineering and legal work on a project that he did not know if he would be allowed to build. Worse, he says, it was not clear what would constitute useful information for the commission and what the Bladen project would have to show to be allowed to participate in the pilot program.

“There were a lot of nights I couldn’t sleep,” Maloney says.

On July 12, Optima asked the commission to allow its second project to be part of the pilot program and that the commission approve a connection agreement the company had finally negotiated with Piedmont, a subsidiary of Charlotte-based Duke Energy.

Maloney’s company asserted the Bladen project would provide information not available from the projects already approved for the pilot. It noted, for instance, OptimaTH would combine processing waste from the manufacture of pork products with the pig excrement, so would provide information on the impact of a different feedstock in producing biogas.

Reconsideration requested

The commission ruled Monday that the project qualifies for the pilot program. But it has not yet approved the connection contract with Piedmont. Maloney says his company must have that approval before it can start construction.

He says the plant could be built by late 2019, if the connection is approved soon. He declined to discuss specifics of the plant’s cost. But he says a general price range for such plants, depending on size and location, would be $5 million to $10 million.

Maloney says, however, he will not invest in other potential plants in North Carolina until and unless the commission sets clear guidelines for what biogas projects will qualify for the pilot program. It is not worth the risk, Maloney says.

“There is too much uncertainty,” he says. “There are places you can go and get approval done faster and more clearly.”

Meanwhile, the Pork Council has asked the commission to reconsider its order. It warns that the severely restricted program “inevitably will cause significant disruption and harm to existing projects and potentially prohibit participation in the state’s emerging renewable energy market.”

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Source: Charlotte Business Journal