LCCMR approves $5.17 million ENRTF work plan to fund anaerobic digester construction for Ramsey and Washington counties

The Legislative-Citizen Commission on Minnesota Resources on Sept. 16 approved an updated $5,167,000 Environment and Natural Resources Trust Fund work plan to support construction of an anaerobic digester to process organic material for Ramsey and Washington counties.

Staff told commissioners the original ENRTF proposal had sought reimbursements to offset processing (tipping) fees charged to residents. After review with the grantee, recycling authorities and the DNR grants unit, staff said that model was not feasible; the revised work plan would instead use ENRTF funds to pay construction costs for the digester, which will be owned and operated by a private contractor selected through competitive bidding (identified in the meeting as Demcon/DCHCI Bioengineering LLC).

Staff and presenters explained several material changes and issues for the commission to consider before voting. The project financing model presented by the private partner includes a mix of private financing, public grants, tax-credit equity, tipping fees, and revenue from sales of renewable natural gas and biochar. The project partners said they needed grant agreements from ENRTF and at least three other public grants by October to secure bank financing and keep construction on the timeline needed to preserve pricing and other terms in the service contract.

Because the appropriation language originally described ENRTF funds as offsets to processing fees rather than capital construction, staff highlighted two legal and procedural points for commission consideration: (1) capital-construction rules may apply if the project is treated as construction, including a 25% match requirement, certification of full funding before construction, and restrictions on altering or conveying the constructed facility for 25 years; and (2) Minnesota Statute 116P.10 generally requires net income from ENRTF-funded projects to be returned to the ENRTF unless the appropriation language explicitly authorizes reinvestment. The proposed work plan includes a request to allow reinvestment of NRTF (ENRTF) income into operations per a reinvestment plan; staff said they were not aware of a prior precedent for allowing a private entity to retain net income from an ENRTF-funded project and recommended the commission formally consider the request.

Commission members asked about scale and resident impacts. Staff provided a back-of-the-envelope estimate that the grant would reduce tipping fees about $1.50 per ton for each $1,000,000 in grant funds allocated (an example figure presented during discussion), and a commissioner summarized that the proposed $5.17 million grant would in rough terms equate to about a $7.50 per ton reduction under that formula. Members asked about project risks and remedies if the project underperformed; staff explained standard grant controls such as withholding final reimbursement until the facility is built and operational and withholding funds until fee offsets are demonstrated.

Project partners described operational details and partnerships. Bill Keegan of Demcon Companies said the Shakopee Mdewakanton Sioux Community is a project partner that will supply yard waste and provide operational synergies (facility bypass and mutual backup) because their new composting facility is adjacent to the digester site. Project staff and Director Mortensen described an added secondary process — pyrolysis — that converts digestate into biochar; staff said test results show the pyrolysis-produced biochar has effectively eliminated PFAS in tested organics used in the process.

Commissioner Reese noted the ENRTF funding would leverage over $100 million in total project financing and environmental benefits if the project proceeds as planned. After discussion, Dr. Faber moved to approve the updated work plan for project ID 2025306. The commission approved the item by roll call, 13 yes to 1 no; Senator Green voted no. The approved work plan includes provisions that final reimbursements will be withheld until the digester is operational and that fee offsets during the grant period be demonstrated before final payments are made.