Durham set to kill controversial $200 million anaerobic digester project in Clarington because of cost over-runs

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Published June 24, 2022 at 9:35 am

Durham Region has appeared to have killed a controversial $200-plus million anaerobic digester planned for south Courtice after revised cost estimates ballooned by $40 million before a shovel even hit the ground.

Durham has agreed to pay the two bidders $400,000 each for their troubles as well.

The project has been a contentious issue from the beginning, at least in Clarington, who became an “unwilling host” after the Region selected the site at the bottom of Courtice Road over the protest of Clarington Council and many of its residents.

Durham chose south Courtice for the digester on land it owns next to the York-Durham Energy Centre, despite Clarington zoning it as a prestigious employment area and the future home of the Ontario Power Generation headquarters and near where a proposed waterfront park and new GO Station will be.

The digester is not quite dead yet – staff had recommended the deal be cancelled at Wednesday’s Committee of the Whole meeting and while the vote was unanimous the decision still has to be ratified by Durham Council next week – but $40 million is a lot of money, even for a regional government with an annual budget of $2.2 billion.

“We had no other choice,” said Clarington Mayor Adrian Foster. “The costs since the pandemic have got completely out of hand.”

“This just can’t be supported right now.”

Foster said he didn’t expect to see the report on the agenda for Wednesday’s committee meeting but he wasn’t surprised either, noting that “project after project” has experienced “huge inflationary hikes,” since the pandemic began, something staff noted in their report.

The Region is experiencing this problem on all large infrastructure projects currently in the procurement/project costing process and is uncertain when the market will stabilize.

It was only a year ago that Regional Council narrowed down the list of prospective builders to three: Durham Renewable Resources Group (Maple Reinders PPP Ltd., AIM Group Capital Ltd., and EllisDon Capital Inc.), Durham Recovery Solutions (Sacyr Environmental USA LLC and Anaergia) and Durham Organics Processing Partners (Alberici Constructors Inc. and Acciona).

The project agreement was further refined and revised in consultation with the three bidders between October 2021 and January of this year, during which time Durham Organics Processing Partners dropped out of the running.

The two remaining bidders filed their final documents May 26, which were reviewed by two independent evaluators, with support from two more “subject matter experts” from accounting firm Deloitte LLP.

Staff at the Region only got to see the bids June 7, which is when it was discovered the capital costs for the project would be approximately $242 million or $40.1 million more than the 2020 estimate and $78.5 million more than the 2019 projections.

The bids that were received by both project teams were “significantly higher” than the anticipated cost of the anaerobic digester because of an “unexpected and rapid rise in material, shipping and labour costs over the past few months.”

“The combined effect of the rapid escalation in material, labour and shipping costs, coupled with the uncertainty of how these costs may continue to increase, have caused suppliers and subcontractors at every level to increase their costs and projections of costs on all long-term capital projects,” explained staff in their report.

Region staff, in consultation with the Fairness Monitor, then met with the two proponents the week of June 13th to seek an explanation for the inflated proposals and see if the costs could be substantively reduced without changing the technical scope of the project.

Staff disclosed that options were provided that would decrease the up-front capital costs, but not within an “acceptable range and in a timely manner.”

The Anaerobic Digestor project, or a variation thereof, continues to remain the preferred solution for the Region but the next step is unclear, said Foster. “Staff will be working on it, but I have no insight. But anything the Region recommends right now is going to be incredibly expensive.”

The urgent goal of finding ways to reduce what goes into landfill has not changed,” he noted, but even if people reduce what goes in their household garbage there are still capacity constraints at compost facilities as well.

“We’re going to have to figure out a path forward.”

The mixed waste Anaerobic Digestor was considered a positive climate change project that would have diverted 30,000 tonnes of garbage from landfill annually, create a more efficient system and extend the lifespan of the nearby incerator, a $300 million boondoggle which is nearing capacity just six years after opening.

Foster and his Council were never against the digestor per se but bristled at being chosen to host Durham’s garbage – again – at a site where they had big plans and the impasse reached a head late last year when Durham’s Chief Administrative Officer “terminated” the mediation process between the two sides over “delays, lack of engagement and activity in the media.”

The Clarington Mayor believes there was a lot of “misinformation” over the issue at the time and said plans for the area – the OPG HQ, the water park and the new GO Station – were going ahead whether the digestor was there or not.

As to the $800,000 payout to the two bidders for services already rendered, Foster said companies won’t be encouraged to take on complicated bidding processes in the future without some sort of financial guarantees. Still, he said he is expecting some negative feedback from the public.

“Probably, yes. It’s always a judgement call.”

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