As we went to press, lawyers for the City of Guelph were preparing discovery documents before they head to court in a $30 million breach of contract lawsuit launched by a high-tech waste treatment company after the city demanded it close its demonstration plant on municipal property.
SUBBOR (for “Super Blue Box Recycling Corporation”) launched the action after Guelph made application to the court to confirm a termination date for the property lease. Guelph lawyers are attempting to end a 1998 deal with SUBBOR and obtain a court order for the company to “quietly and peacefully” surrender the Stone Road land where its technology has been tested. SUBBOR’s claim escalates the dispute beyond the lease termination date to include a wider range of issues, including whether or not Guelph officials frustrated the company’s attempts to fully demonstrate its technology — an opportunity in which it invested $30 million.
SUBBOR’s plant — built beside Guelph’s wet/dry recycling operation — uses a unique anaerobic digestion process to transform unsorted waste into recyclable products, peat and gas for electrical power, with little residue requiring landfill. SUBBOR’s agreement with the city envisaged Guelph potentially adopting the technology to treat most or all its garbage, if the demonstration was a success.
The case should interest all municipalities and companies contemplating public-private partnerships involving innovative waste treatment methods. Hopefully information gleaned will help prevent other such relationships from failing in future. We caution readers that the allegations from both sides have yet to be tested in court, and this article can only present issues in the dispute.
The long and winding road
Guelph residents set out their trash a bit differently than folks in most other places, although its new “three stream” collection strategy is catching on in other jurisdictions (most notably Toronto). Residents set out colour-coded bags containing either organics and other compostables, dry recyclable materials, or waste “residue.” The residue passes through a new $3.7 million transfer station en route to disposal at Green Lane’s landfill facility near St. Thomas. The other bags are sent to a “wet/dry” recycling plant, the dry side of which recently underwent a $5.5 million retooling. That plant (along with special collection trucks) was built in the early 1990s at a cost of $36 million, including $12 million from the provincial government.
Like many communities across Canada, Guelph has been under pressure to close its local landfill. Guelph closed its Eastview Road Landfill (which it had operated since the 1960s) last year after failing to locate another site in the face of stiff public opposition. In 2000 the city decided it would export its residue elsewhere, but do everything possible to reduce residue requiring landfill.
Guelph was at a crossroads: How best to divert waste?
One option — the one ultimately chosen — was to upgrade its wet/dry recycling plant. The plant needed refurbishment in any case and although it was an advanced system 20 years ago, staff never achieved the highest efficiencies they’d hoped for. New equipment was part of the solution, as was improving the quality of what comes through the gate. With help from consultants at Gartner Lee, Guelph moved to its three-stream system.
A high-tech alternative
In the late 1990s, as closure of Guelph’s landfill loomed, but before the city opted for three-stream collection and residue export, Guelph was approached by officials from SUBBOR who pitched them an alternative.
SUBBOR, formed in 1996, is the brainchild of brothers Greg and Hubert Vogt who’s company Eastern Power is responsible for plants that turn landfill gas into energy at Toronto’s Keele Valley and Brock Landfill sites. The plants are the second and third largest of this kind in the world. The Vogt brothers added scientific experts to their expertise in energy-from-waste to come up with an innovative system to treat waste through anaerobic (oxygen-deprived) digesters.
SUBBOR won support from the federal government; Technology Partnerships Canada eventually invested $7 million and SUBBOR started looking for a municipality to host a demonstration plant. Guelph became interested. The technology — once proven — offered savings from reduced landfill tip fees (since little residue remains) and energy generation. As a bonus, consumption of methane in the waste digesters offered potential greenhouse gas credits such that the entire city could become “Kyoto compliant.” It seemed like a total solution.
In 1998 the City of Guelph and SUBBOR made a deal. Although the details are now in dispute, the gist was that SUBBOR offered to build its plant at no cost to the city in exchange for the city providing land near its wet/dry facility and waste feedstock for the demonstration. Any commitment by Guelph to potentially adopt the technology for its 25,000 tonnes per year total was deferred until after a three-year period during which SUBBOR had to successfully demonstrate the technology and also show it could generate substantial cost savings.
SUBBOR built the plant, processed some waste and determined that its technology was a success. However, somewhere along the way the wheels came off the relationship with Guelph. City staff began to demur over the project’s future and the relationship became tense and at times quarrelsome. Guelph eventually invested in its three-stream system, nullifying an opportunity for the SUBBOR plant. The lawsuits followed.
In its initial application to the court, the City of Guelph declared that its agreement and lease with SUBBOR — made November 6, 1998 — has come to an end, and asked the court for an order requiring SUBBOR to surrender possession of the premises by July 28, 2003 and either remove its equipment or forfeit it to the city.
The city claims the clock started ticking on a three-year deadline when SUBBOR first accepted municipal solid waste (MSW) feedstock on January 28, 2000. (The agreement allowed a further six month extension, hence the July 28, 2003 surrender date.)
SUBBOR disputes this date, saying this was only a small amount of waste provided for tests during the commissioning of certain system components, at a time when the facility was unfinished. SUBBOR argues that the first time it accepted true waste feedstock as contemplated in the agreement was October 30, 2001, and therefore the earliest it can be forced off the property is October 30, 2004.
The court combined both applications into one legal action as the issues escalated with SUBBOR seeking damages of $30 million for breach of contract.
In her sworn affidavit of June 18, 2003, Janet Laird, Commissioner of Guelph’s Environment and Transportation Group, outlines how the city came to accept SUBBOR’s “unsolicited proposal” to build a demonstration plant “at no cost whatsoever” to the city. She offers several counterarguments to allegations from the company, but the crux of her concern is that SUBBOR (in her opinion) “was never able to process MSW Feedstock in a way to demonstrate that the technology could be a viable component of a municipal waste management system.” She claims the company never established “the system’s ability to process significant waste tonnages, its waste diversion rate, and its financial feasibility.”
“Even over the three-year trial period,” states Laird, “SUBBOR’s technology was only able to accommodate a small fraction of the City’s annual total of municipal solid waste and the technology clearly was not able to handle the volume of waste that would be generated on a daily basis.”
“Further, it is apparent that little, if any, of the waste SUBBOR’s Demonstration Plant accepted was fully processed rather than being stored indefinitely in SUBBOR’s ‘digesters.'”
She observed that the amount of waste SUBBOR accepted declined each year, and expressed skepticism about the technology’s ability to process waste at “a meaningful or viable rate.”
In its application, SUBBOR
argues that it was frustrated at every turn by Guelph staff and was denied the opportunity to demonstrate its process with large waste volumes because of various breaches by the city.
SUBBOR’s list of allegations is long, but highlights include that the city forced SUBBOR to pay over $50,000 in development charges that were not contemplated in the agreement, and that the city charged SUBBOR’s third-party waste suppliers as if those suppliers were tipping waste at the city’s own facilities.
Importantly, SUBBOR alleges, the city failed to use “best efforts” on a number of fronts, including securing assistance from the municipally-owned Guelph Hydro in selling the project’s electricity, and in dealing with the environment ministry over the city’s odour issues and certain peat drying issues. SUBBOR’s application states that the city refused to supply MSW Feedstock to the company “in an effort to force concessions from SUBBOR” and that its staff and consultants have made “public comments which are untrue and disparage SUBBOR and its technology.”
In addition to other blocking actions by the city, SUBBOR says that starting in 2002 the city “failed to act reasonably and use best efforts in considering an arrangement with the Federation of Canadian Municipalities to secure funds for the development of SUBBOR’s technology.”
As we went to press, a court date had not been set, although it’s expected to start as early as this summer and possibly run for several months.
It would be both impossible and unadvisable for an outsider to judge the merits of either party’s case outside of the upcoming trial. The court will have to weigh the evidence and evaluate key testimony delivered on the stand.
The court will hear different opinions about the viability of SUBBOR’s technology for large waste tonnages. It will have to evaluate whether or not Guelph staff were uncooperative, and what was their motivation? Did they see SUBBOR as competition for their preferred system? And why would they agree to the demonstration project in the first place, only to drag their feet? Or was this not the case at all?
Only the trial can answer such questions.
In the meantime, we can only conclude that it’s very unfortunate that things didn’t work out between SUBBOR and the City of Guelph, whatever the reason. And we can only hope that lessons learned from the court case will help other municipalities and companies negotiate contracts to successfully demonstrate new and emerging technologies.
This magazine will follow the court case on behalf of readers.