More than two years after the deal’s controversial approval, Allentown has terminated its contract with Delta Thermo Energy, ending speculation about whether the company would ever build a proposed waste-to-energy facility in the city.
In a letter dated Sept. 26, Allentown solicitor Jerry Snyder wrote that Bucks County-based Delta Thermo Energy had “consistently failed to advance” plans for a 48,000-square-foot facility on Kline’s Island that would have burned pulverized municipal waste and sewage sludge to generate electricity.
While Delta Thermo received approval for two permits from the state Department of Environmental Protection in May 2014, the company repeatedly failed to meet extended deadlines to acquire financing for the $49 million project, the letter states. It became clear that Delta Thermo could not meet a deadline of Jan. 1, 2016, to complete construction of the plant, according to the letter.
“Under the circumstances, the city has no reasonable alternative than to declare the agreement terminated,” Snyder wrote.
Asked Tuesday if he had a response to the letter, Robert Van Naarden, president of Delta Thermo, said he would have a formal statement in the next several days. He then said he did not know what a reporter was asking about.
“I don’t need to speak to you,” Van Naarden said.
Mayor Ed Pawlowski said he was disappointed that the contract had to be terminated, but it was a financing issue, not a problem with the company’s technology that killed the deal.
“At this point in time, we need to move on,” he said.
From the time it was first discussed in 2010, the proposed plant was a highly contentious issue for members of Allentown City Council and the public. The project was panned by local environmentalists, and the components used in the proposed waste-to-energy process have never been used in combination in the United States.
Developers initially failed to convince council members of the merits of the project. The plan failed after a 3-3 vote in February 2012. One month later, developers managed to sway Councilwoman Cynthia Mota, who cast the deciding vote in favor of the proposal during a raucous March 2012 council meeting attended by more than 400 people.
Since then, Delta Thermo has had difficulty finding private financing for the experimental plan, fueling rumors that it would never be built. The city’s agreement with the company paid for up to $500,000 in consulting fees to explore the project — to be reimbursed if the plant was built — but put the burden of acquiring financing on the company.
In December 2012, Van Naarden told The Morning Call that there was “zero concern” about not finding a financial backer. The city’s letter states otherwise.
Delta Thermo “consistently failed to satisfy the financing requirement” in the agreement, Snyder states in the letter. An initial financing deadline of Jan. 31, 2013, was not met, and multiple extensions were granted, including the most recent extension that expired April 1 of this year.
Shortly before that date, Delta Thermo requested an additional extension for financing, the letter states, but city officials asked for additional assurances that the project could be completed by Jan. 1, 2016. Letters were exchanged throughout the summer between the city and Delta Thermo. In August, city officials denied a request from Delta Thermo for access to the Kline’s Island site to begin preliminary work.
In September, Delta Thermo officials told the city that they were no longer working with their previous financial backer, and planned to have the financing underwritten by Stern Bros. A letter from Stern Bros. to the city stated its “confidence” in financing the project if the deadline were extended to June 1, 2016, according to Snyder’s letter.
Allentown’s garbage contract will be rebid in 2015, Pawlowski said. There was no way the plant was going to be operational in time for that process.
“We provided every opportunity for them to make the deal; there were a number of extensions,” Pawlowski said. “We got to a point where we couldn’t move any further. I have to have some sort of a commitment in place before I bid out this contract in 2015.”
Pawlowski said he is committed to the idea of finding an alternative place for Allentown’s trash. It may still be possible to find another company that could build a waste-to-energy facility in the city, he said.
“I see this as one of the most critical issues for us, and we’re going to work for it,” Pawlowski said. “We’ve set the groundwork and a platform for us to continue to look for technologies for solve our garbage problem.”
The termination of the contract means Allentown will have to eat the nearly $500,000 it spent on consultants to vet the financial and technological aspects of the waste-to-energy plan. Two consultants provided conflicting reports to city officials about the technology needed, one saying he was confident the plan would work, the other stating there were “a number of technological, performance, operating and environmental risks.”
Pawlowski said he didn’t view the money as wasted. The city now has a “template” that can work for a potential contract moving forward, he said.
“I would have been criticized highly if I didn’t bring in the best professionals,” Pawlowski said.
Council Vice President Ray O’Connell, who cast one of the two no votes on the proposal in 2012, said it became clear in recent months that the company was never going to be able to build the facility on time. The city should try to recoup consulting fees, he said.
“My bottom line, No. 1, is that I’m extremely happy that it’s not going to be built,” he said. “No. 2, let’s go after the $500,000 that was spent.”
In addition to public outcry, Delta Thermo’s controversial proposal prompted a failed ballot question in 2013. The question, which would have asked voters if they wanted real-time monitoring of new air-polluting facilities and live disclosure of emissions data, was thrown out by the Lehigh County Board of Elections for lacking DEP approval. The decision was upheld by Lehigh County Court, and an appeal was later dismissed by Commonwealth Court.
Dan Poresky, one of the activists who opposed the plan and helped organize the ballot question, said a group of activists was working on raising $25,000 to pay two attorneys to take further legal action challenging a previous court ruling and the DEP for issuing permits to Delta Thermo. Despite rumors that financing was not in place, organizers did not want to take a chance that the plant would be built, he said.
“The city has been saved both environmentally and financially from a major mistake,” Poresky said when asked about the termination. “This is not the way to handle trash and sewage sludge.”
Councilwoman Jeanette Eichenwald, who voted against the proposal, said Delta Thermo’s proposed technology was unproven and environmentally unsafe. It was not surprising that investors could not be found, she said.
City officials should treat the experience as a lesson, Eichenwald said, and take a closer look at how the city spends money on consultants.
“I’m gratified that this phase of Allentown city life has come to an end,” she said. “I feel vindicated.”