Spokane Waste to Energy - Wheelabrator Metal Recovery Scam?

The contract between the City of Spokane and Wheelabrator (Waste Management) to operate the Waste-to-Energy Facility requires that Wheelabrator provide all the personnel, and perform all the services consistent with a waste-to-energy facility [i]. Removal of ferrous metal from the ash falls under this category, as the Magnetic Separating System was included in the original plant construction and operated by Wheelabrator since the facility was first built. Even the original City permit states that Wheelabrator is responsible for cleaning ash from the metal [ii]. Metal recovery is also listed as one of Wheelabrator’s Performance Standards [iii]. This service is paid for, and the work to be performed by Wheelabrator, from their very lucrative Operations Fees ($12,739,406.29 in 2006).

But by 1993, after just 2 years of operations, Wheelabrator looked to eliminate the expense of loading recovered metal into shipping containers, 24 hours a day, 7 days a week. So Wheelabrator concocted a "requirement" in the O&M Agreement that the metal needed to be processed (baled). With their new "requirement" in hand, Wheelabrator and American Recycling Corp (ARC) presented a contract to the Spokane City Council, and claimed it fulfilled this new "obligation". And of course the City voted for the contract, accepting as "fact" Wheelabrator's imagined "requirement". The truth is, the O&M Contract never mentions processing (baling) the recovered metal, but it does state that metal shall be sold at a competitive price, and the only costs that can be deducted from the sales price are for transportation, fees and taxes [iv]. This means that the Regional System should receive ½ of market rate for the recovered metal, minus ½ the cost of transportation, fees and taxes. Wheelabrator has NEVER gone out for a competitive price bid for this metal.

To pay off ARC in this shady scheme, Wheelabrator sells ARC the metal at the drastically reduced rate of $15 per ton ($5 per ton prior to Sep 2006, 1.5% of market value before 2004), keeping half of proceeds from the sale for themselves, and giving the other half to the Regional System. A conservative value for the metal recovered is $100 per ton. Annually, the facility produces about 9,000 tons of ferrous metal, meaning Wheelabrator has wrongfully shortchanged the Regional System at least $380,000.00 for the year 2006, and several millions of dollars over the life of the contract.

This Wheelabrator scam saves their company hundreds of thousands of dollars in union labor costs each year, and ARC collects about the same from the metal sales, while the ratepayers in Spokane County continue to pay the highest tipping fees in the State.
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[i] ARTICLE III - OPERATION AND MAINTENANCE OF THE FACILITY BY COMPANY
Section 3.1 Overall Responsibilities. (a) Company shall, at its sole cost and expense, provide all management, supervision, personnel, materials, equipment, services and supplies (other than Acceptable Waste) necessary to operate, maintain and repair the Facility throughout the Term of this Service Agreement, in a manner consistent with generally accepted engineering, operation and maintenance practices and procedures for massburn waterwall boiler, steam and electric generating facilities in order to receive Acceptable Waste during receiving hours, as hereinafter provided, and to process such Acceptable Waste and produce steam and generate electricity in accordance with the terms of this Service Agreement.

[ii] APPENDIX R - CITY PERMIT RESPONSIBILITIES
Cleaning of recycled material to remove all ash (Health Permit Condition S12(D)(6)).(With the exception that the Company (Wheelabrator) will take all reasonable steps to produce the cleanest ferrous metal consistent with normal operation of the grizzly separator and magnetic separation systems.)

[iii] APPENDIX B – Performance Standards Exhibit 1
4. Recovery of ferrous metals (Assumes Acceptable Waste contains 6% by weight of recoverable ferrous metals.) - 9,240 tons per year

[iv] ARTICLE VI - SERVICE FEE
(d) Material Recovery Credit. The monthly Material Recovery Credit (MRC) shall be equal to 50% of the revenues from the sale of recovered materials net of any costs of transportation, fees, taxes and other costs directly attributable to the sale of recovered materials. Any sales to subsidiaries or affiliates shall be on an arm’s length competitive price basis:

Year	Seattle #2 bundle scrap price	Tons Recovered	Value	Approx.Trans, Taxes & Fees to Seattle	Spokane Market Value	ARC Paid	Regional System share - unpaid balance	5% com interest rate	Interest Due	TOTAL DUE

1993	72	1905	137,160	1,200	135,960	2,035	66,963	0.98	65,623	132,586
1994	67	11099	743,633	66,000	677,633	11,149	333,242	0.89	296,585	629,827
1995	62	12852	796,824	70,000	726,824	11,951	357,437	0.8	285,949	643,386
1996	67	10548	706,716	70,000	636,716	10,905	312,906	0.71	222,163	535,068
1997	64	13193	844,352	73,000	771,352	12,651	379,351	0.63	238,991	618,341
1998	49	11245	551,005	75,000	476,005	8,269	233,868	0.55	128,627	362,495
1999	26	11895	309,270	78,000	231,270	4,575	113,348	0.48	54,407	167,754
2000	35	10328	361,480	80,000	281,480	5,420	138,030	0.41	56,592	194,622
2001	24	11189	268,536	80,000	188,536	3,948	92,294	0.34	31,380	123,674
2002	29	13061	378,769	80,000	298,769	5,522	146,624	0.28	41,055	187,678
2003	44	11755	517,220	80,000	437,220	7,674	214,773	0.22	47,250	262,023
2004	91	8418	766,038	80,000	686,038	42,090	321,974	0.16	51,516	373,490
2005	100	8559	855,900	80,000	775,900	42,795	366,553	0.1	36,655	403,208
2006	100	8373	837,300	80,000	757,300	68,000	344,650	0.05	17,233	361,883
2007	110	9600	1,056,000	100,000	956,000	144,000	406,000	0	0	406,000
		Total Value	9,130,203	1,093,200	8,037,003	380,984	3,828,010		1,574,026	5,402,036