Wheelabrator Baltimore, whose towering white smokestack greets drivers heading into the city on I-95 and Russell Street, has agreed to pay $4.3 million to cover various underpayments to the city.

Under an agreement hammered out by City Solicitor George Nilson, Wheelabrator, which operates the city-owned incinerator plant, will pay $303,332 in property taxes that were erroneously reimbursed to the company in 2011.

Additionally, it will pay $3,992,520 to make up for its underpayment of a solid-waste surcharge, or tax, between January 1, 2012 and March 31, 2014.

The six-page agreement – a copy of which was obtained by The Brew – will be submitted at tomorrow’s Board of Estimates meeting for expected approval.

The settlement does not assess blame on the parties, but notes that city officials had noticed a substantial drop in surcharge revenues from the company.

Over nine months of negotiations with Nilson’s office, Wheelabrator raised various objections about its “obligation to collect and remit said surcharge to the city, and the city has alleged that the company owes certain surcharge payments to the city.”

Dogged by Controversy

Opened in 1985 and formally known as BRESCO (Baltimore Refuse Energy Systems Co.), the incinerator has been dogged by controversy for years.

There have been repeated concerns by environmental groups that the plant creates its own air pollution through the trash-burning process, in particular the emission of nitrogen oxide, a major source of smog.

In 2011, Wheelabrator was fined $77,500 by the Maryland Department of the Environment for failing to control the release of toxic mercury into the air.

The city pays Wheelabrator, a subsidiary of Waste Management Inc., a little over $10 million a year to operate the incinerator and had projected a 7% “profit” over the life of a new 10-year contract when approved by the Board of Estimates in 2011.

However, MDE’s refusal to allow ash produced at the incinerator to be spread as cover at a local landfill has reduced the expected cash stream coming to the city.

Seeking Reverse MDE’s Ban on Ash Cover

In an unusual provision, the settlement calls on Wheelabrator to lead an effort to reverse MDE’s ban on using incinerator ash as cover for the city’s Quarantine Road Landfill at Hawkins Point.

The specific language says: “The Company shall seek, at its expense, with the support of the City and its Department of Public Works. . . a reversal of MDE’s decision that ash may not be used as alternate daily cover at the Landfill.”

The settlement continues: “If the MDE changes its position so as to allow ash to be used as alternate daily cover,” Wheelabrator will receive a 35% discount on the “tipping fee” it now pays for residues deposited at Hawkins Point.

Ash has been linked with air, groundwater and stream pollution.

Just last year, GenOn Energy, a Houston power company, agreed to pay $2.2 million to settle lawsuits by MDE, the Environmental Integrity Project and other groups alleging that the company’s Brandywine, Faulkner and Westland coal-ash landfills were polluting groundwater and nearby streams.

The Hawkins Point landfill is surrounded by Curtis Bay and Baltimore’s outer harbor.

Expected Electricity Savings Evaporate

Under the 2011 contract, Baltimore City’s agreement to purchase electricity from Wheelabrator was expected to save the city $9 million over the first five years of the contract.

According to a briefing document submitted to the Board of Estimates when the contract was signed, “The combined aspects of reliable, cost-effective waste disposal and below market energy costs provide operational efficiencies and much needed revenue to the city.”

However, the new agreement says the city will not buy any electricity over the next two years from Wheelabrator.

Instead, the city and company will follow a complex formula by which the city will either pay – or receive – monthly “settlements” based on the difference between a fixed energy rate and the PJM wholesale electricity market price.

This monthly “financial swap” will be based on the city’s theoretical purchase of 10 megawatts of electricity per hour from Wheelabrator over the period of July 1, 2014 to June 30, 2016, according to the settlement agreement.