Water Reuse in Illinois: Part 2

Last week, we introduced you to Rick Manner, the director of the Urbana-Champaign Sanitation District. In the part two of our interview, you'll hear about how changes in the State Revolving Loan Fund opened the door to reuse project and how the district determined the market value of their effluent. 

Illinois EPA is allowing Cronus to apply for SRF funding to build the pipeline. Can you tell us more about that?

State Revolving Loan Fund is part of how wastewater plants expanded in the 1970s. The U.S. EPA set up a big pot of money that the states could draw from for loans to city sanitation districts to help them expand their treatment facilities. Treatment facilities then pay back the loan over time, which sets up the revolving nature of the program. The payments going in this year can then go out to someone else.

Originally, SRF was set up exclusively for wastewater treatment plants, but then they set up an equivalent for drinking water plants. Then the Water Resources Reform and Development Act was passed in 2014. In that, Congress explicitly called out an expansion of SRF. They explicitly said that reuse projects, including the pipelines associated with them, can be eligible for loan options. In particular, they said that because reuse is a little bit unusual, the funding can go not only to municipal bodies but also to private sector entities.  

Before these amendments, it was ambiguous as to whether this project would have been eligible for SRF dollars. We would have had to argue that it was part of our treatment plant. But now Illinois EPA is willing to consider it because Congress has said that reuse can be eligible.

This is significant because the reason reuse projects often fail is the difficult economic hurdle of building the pipeline from point A to point B. The biggest reason Cronus might not want to do reuse is the $20 million hurdle of building the long pipeline. Even though it may cost more on a per gallon basis to make a drinking water pipe larger, that up front capital cost is so difficult to overcome that it often kills reuse projects. So SRF really helps make reuse a more appealing operation to consider because the interest rate is so good.

How did you decide what to charge for the effluent?

That is one of the more interesting elements of this whole process. Currently, we get nothing for the 20 million gallons a day that we discharge. So, in theory, if I were to get $1 for it, we would come out better. In reality, we did bit of research to try and find out what projects are out there and what other people are charging. It was a bit challenging because they’re aren’t very many in the Midwest. There are a few golf courses that use effluent about a hundred miles from here. But for the most part, they get a very large volume at a low rate. And that’s because the golf course happens to be right across from the water treatment plant. There really aren’t good models for effluent pricing.

We landed on a shared benefit/shared cost scenario. If Cronus was to buy from the drinking water plant, they would be charged about $3 per thousand gallons. However, they would get the pipeline subsidized by the drinking water plant, so it is really more like $2 per thousand gallons range. If we were much more than that, they would logically turn to the groundwater resource. That set a ceiling for the rate we could charge.

But there is also added risk associated with our flow because our water is not as pristine as good aquifer water. We aren’t required to treat it back to groundwater quality. And so, because of that added risk and the fact that they may need to do some chemical treatment on their end. We settled on charging just over $1 per thousand gallons. That’s the baseline price. On top of that, we get a 30 cent per thousand gallons add-on for our capital projects. That is how we will be funded for our lagoon and our pump station. Once we’ve been paid $3 million via that added amount, the extra fee will go away, and we will be back down to the $1 per thousand gallons. There is an inflation factor that is kicking in, so it is a bit more than that.

Ultimately, we will get about $2 million a year in income. Our expenses would be anywhere from $500,000 to a million dollars. So the benefit our ratepayers should expect to see is about $1 million a year net benefit, which is about 7 percent of our annual income. Some of that may be in value from the lagoon that won’t be a direct cash benefit. But we are aiming to keep the cash fraction as close to a full million as we can so that we can feel really good about this being a net benefit for the rate payers

One thing that I need to emphasize is that UCSD’s expenses have been going up continuously. I cannot and never will guarantee no rate increases. But I can absolutely guarantee that all of the finical benefit that UCSD gets will be seen by the rate payers in terms of avoided rate increases.

What other benefits can ratepayers expect?

Our board of trustees also voted to spend about $50,000 a year on habitat projects to make the creeks healthier in the long run. We consider that a reasonable thing to do with some of that income. That way the waterway will be healthier and better able to handle the drought conditions. By adding some pools and riffles, we can add some physical complexities that will help the fish and other aquatic species handle the stress of a drought better.

The pool and riffles idea is something the Illinois Department of Natural Resources has been looking to do for a number of years in the Copper Slough. They already have some money set aside for it as a result of a truck accident that spilled into the waterway. But they are looking for local matching funds, which they have had a hard time securing over the last few years. We would provide those local matching funds to allow that project to finally begin.

What’s the status of the deal with Cronus?

Cronus has announced that, if they build a plant, it will in Tuscola. And we have a contract to sell them effluent, so we would be their main water source if this all goes forward. Right now, they are looking to secure financing for the facility, so they are talking to financial people to get that secured. That is still a work in progress.

Is there an expected timeline?

It’s a process that has taken a few months and will take a few more. The finance people want a lot of assurances before they actually open up the check book. We are hoping for a positive announcement sometime soon. 

SRF Could Help Illinois Water Reuse Project

When the Cronus fertilizer plant slated to be built near Tuscola, Illinois is fully operational, much of their water will come from the Urbana-Champaign Sanitation District (UCSD) roughly 20 miles north. UCSD has agreed to pipe over 6 million gallons of effluent to the plant everyday for industrial uses. We sat down with UCSD director Rick Manner last fall to discuss the project and what it will mean for UCSD operations. 

Tell us a little about UCSD.

We treat the sewage from the cities of Urbana and Champaign and the villages of Savoy and Bondville. About 10 percent of our customers are in the unincorporated areas around Champaign and Urbana.

In a typical day in normal weather, we discharge about 22 million gallons of sewage. About two-thirds of that comes out of our plant in northeast Urbana, which flows into the Saline Branch of the Salt Fork River and ultimately into the Vermillion and Ohio rivers. Over in southwest Champaign, about a third of our water comes out of our Southwest Plant. That goes into the Copper Slough, which flows into the Kaskaskia and then the Mississippi River.

In extreme drought conditions, we are down to a total of about 12 million gallons a day, with about three-quarters from our Northeast Plant and one quarter from our Southwest Plant.

That said, our sewers are actually going to be rearranged a little in the near future. Right now, there are a lot of tall buildings being built on campus, and those sewers that they are discharging to are getting the challenge of 20-story buildings where there was previously a mom-and-pop business or a two-story building. It’s actually producing a good deal of burden on those sewers, so we will be rearranging some of our flows within the sewers. We’ll be diverting flows from the Northeast Plant and pushing it over to our Southwest Plant. So, even in times of drought, we will be at about a 60/40 split.

We need to do this to deal with our own sewer issues. But it so happens that it helps in regards to Cronus. The Southwest Plant is closer to them, and that is where they are going to be getting their water from. So, an increase in flow at the Southwest Plant ends up coming at a fortuitous time for them because they are looking to buy some of our effluent from that Southwest Plant.

Why are they interested in buying the effluent?

Cronus Fertilizer is proposing to build just west of Tuscola. Contemporary fertilizer manufactures use natural gas as a primary ingredient, and with that natural gas, there is a lot of energy coming into the process. So, they end up evaporating a lot of water just to keep their equipment cool. If they didn’t do that, the temperature would increase too much and they wouldn’t get the results they want. Overall, they are looking at buying 6.3 million gallons a day of our treated effluent. Of that, about 80 percent will be boiled away and evaporated and the remaining 20 percent will still be discharged and have to meet discharge limits.

They could be using water from other sources, but they approached us about the idea of reusing our effluent, which is water already coming out of the Mahomet Aquifer. This way the water will get a second use—reuse, if you will—down in Tuscola. And Cronus doesn’t have to draw new water out of the aquifer. That is the advantage of reusing effluent.

How would the effluent be transported, and who is responsible for that infrastructure?

Champaign and Tuscola are 20 miles apart, but it happens that our treatment plant and their proposed fertilizer plant are literally north and south relative to each other. So, they are looking at building a 20-mile, 2 ft-diameter pipe that would connect up our treatment plant to their fertilizer plant. They would design, build, and operate that pipeline.

The reason Cronus is in this situation is somewhat interesting. They are proposing to build the fertilizer plant in Tuscola because there are two or three large natural gas pipelines that cross there. But Tuscola doesn’t have a very good water supply. They are not on top of the aquifer anymore. They get their drinking water from a pipeline from the Champaign-Urbana area—from the Bondville wells of Illinois American Water. But the drinking water pipe is not large enough to handle a 6-million-gallon-a-day increase. So, they would be looking at a new pipe either way.  

What changes will UCSD have to make at the plant to move water through the pipeline?

We will need to put in some good size pumps that could pump the water 20 miles south down to Tuscola. That’s the first big infrastructure exclusively for the benefit of Cronus. But we would get reimbursed for that. We get more than reimbursed for that. That’s one of the reasons we are interested in doing this. Not only does it help protect the aquifer, but the payments that Cronus is proposing would help our bottom line.

When we were looking into this scenario, one of the things we became acutely aware of is that there is great sensitivity to not going to zero discharge, even in times of drought. Our rate payers and our board and everybody who commented would like to see some continuing flow to the creeks. To accommodate that, we are building a storage lagoon at our Southwest Plant. The storage lagoon would fill up when there is a lot of rain and moisture in the spring and then would be there holding our final effluent in quantity in case of a drought like we had in 2012.

That lagoon would be another bit of infrastructure that USCD would look into building that would benefit Cronus. Again, though, we would be compensated for that construction project. But in the long run, that is something the sanitation district will benefit from. We know that Champaign and Savoy are growing towards the southwest, so we know the flows are going to be increasing there. When that lagoon is no longer needed to get us through a drought while still meeting Cronus’s demand, we would use it to store influent instead. The lagoon would be turned into what we call an equalization basin, which would allow us to store high volumes of flow so that we don’t have to treat it that same day. We could treat it when our flows are more reasonable. My successor, or my successor’s successor, is going to benefit from that lagoon being built. 

Check back here for part two of our interview to learn about how the State Revolving Loan Fund features in this story and how the district determined the market value of their effluent.