Financing Bioeconomy Ventures, Pt. 10 – Regulatory and Community Concerns in Plant Site Selection

By Daniel Lane and Mindy Collier, Lee Enterprises Consulting
Special to The Digest

When it comes to plant site selection, there is a lot of talk about raw materials sourcing, Alfred Weber’s location triangle, and lowest-cost shipping and logistics. However, while business matters are important when determining a location to build and operate a production facility, it’s important to pay close attention to regulatory and community concerns. While it’s certainly possible to site, build, and operate a facility with minimal outreach to regulatory agencies and local communities, opening relationships early can lead to an easy transition to a new location. In order to plan for these concerns, it helps to have a good grasp as to the type of issues one faces when looking to site a new production facility.

Job One: Find the Regulations

First, let’s start our discussion with one of the most commonly asked questions: How do you know or find out what regulations you have to deal with? Unfortunately, the answer to this question is not straightforward, as it depends on the location and type of work to be done at the site. For example, if one is looking at a greenfield plant construction, there are far more regulations to abide by, and more permits for which to apply. If the plan is to take over an existing facility and modify production, that’s clearly a lot easier – but not necessarily a slam dunk. Either way, site selection is often taking place early in the Front End Loading process, and process specifics have not always been established, making it difficult to determine all of the regulations that will need to be dealt with. A good way to consider the question is to consider it broadly early in the site selection process, and in more detail as the list of alternatives is winnowed down to the final options.

Preliminary Site Identification

Early in the site selection process, operations and location criteria are typically broad and tend to rule in more locations than rule them out. As the process continues, though, high-level screening helps to reduce the number of alternative locations to be considered. For regulatory and community concerns, this screening should start with things like, what is the business climate in the location? How about in the region? The state? In addition to business climate, the state and local regulatory climate should be assessed. Some states are known for having more stringent environmental regulations, which increases costs of plant design, construction, and permitting and compliance operations. However, often in these states, the population believes that these regulations are worth the added costs and even reward businesses that strive to exceed environmental regulation requirements. For businesses focused on renewables and bio-produced specialties, this could be a boon that offsets higher up-front costs.

Site and Community Screening

Later in the site selection process, regulatory and community concerns need to be considered in more detail. Aside from property characteristics, what utilities are available? Not only is this key to the facility design, but it also identifies agencies that will need to be dealt with. For example, is steam available? If not, you will likely need to talk to the local air district for boiler emissions permitting, as well as the local gas utility about installing a meter and high pressure service. The latter might even require demolition and construction permits, depending on whether the site includes a retrofit.

What about manmade or natural hazards, or nearby waterways or watersheds? Most facilities in the renewables industry are going to have chemicals stored on site in quantities that will require an EPA ID number, a spill prevention control & countermeasures plan, hazard mitigation or accidental release plan, storm water pollution prevention plan, et cetera. In addition to release/response plans, a site will be required to maintain and demonstrate permit compliance with periodic inspections and testing that needs to be budgeted for in start-up and continued operations.

From the community standpoint, what does the local economy look like? Almost all communities, both rural and urban, have tax incentive programs that are established to promote economic development. The SBA’s HUBZone, HUD’s Promise Zones, and state-designated Enterprise Zones are just a few such programs. SBA’s HUBZone encourages economic development in historically underutilized “business zones.” HUD Promise Zones are areas in select urban, rural and tribal communities. The goal of bringing economic opportunities to distressed areas is to leverage private investment to improve the quality of life in these vulnerable areas. Enterprise Zones vary by state and may also vary in communities within the state. The benefits of choosing a site in one of these zones include tax incentives, preference in governmental contracts for goods, and other financial incentives, i.e. incumbent worker training, property improvement tax abatement. When considering a site in these locations it is important to weigh the benefits against the cost of regulatory compliance.

Community infrastructure and sustainability is also important. How are the local water and wastewater utilities? Is the local water going to have to be treated prior to introduction to the process? Is the project going to have to include wastewater treatment and the associated permitting and compliance issues? These concerns should be identified no later than this second stage, along with support for future operations should the plant be sited in the location.

NIMBY

“Not in my backyard,” or NIMBY, is a frequent complaint when plants announce proposed sites. In 2016, the South Dakota Supreme Court denied an appeal brought on by citizens of the City of Onida South Dakota who opposed the location of a $150 million ethanol plant. NIMBY, however, can be addressed through education. Newspaper ads, focus groups for residents and one-on-one meetings with elected officials can provide opportunities to discuss safety precautions to dispel concerns about environmental or health hazards, identify benefits to the community through employment and community philanthropy and achieve the community buy-in needed for a successful community relationship. Chances are there will always be some residents and businesses the say “not in my back yard”, however, you can build a support base that will speak on your behalf in the community.

Due Diligence and Site Selection

Once location finalists have been identified, proper project planning requires due diligence prior to making a decision. Commitments on utility supply, raw materials, logistics, etc. should be obtained, as well as on permitting requirements such as environmental impact studies, site surveys, or geotechnical analyses. In addition to identifying the potential costs associated with these requirements, the reasoning behind the requirement will often identify potential future regulatory compliance needs. If a locale has implemented a “shovel ready” site program, some or all of these studies will have already been completed and will be available for review.

Discussions with local economic development agencies should by now be well underway, but with location finalist selection, leverage can often be applied to negotiate incentives or favorable terms for risk management. In addition to economic incentives, local development agencies can often provide assistance with workforce hiring and training.

Inclusive Overall Approach

By including consideration of regulatory requirements and local communities in an organized approach to site selection, projects can go a long way to assuring success. Federal, state, and local agencies are always willing to help businesses identify permitting and regulatory compliance issues, but proper due diligence and up-front planning can make a huge difference. Ask for clarification on local regulations and get to know the agencies that will be regulating your plant. Getting involved in discussion early can open doors within a local community, and community acceptance goes a long way in getting the cooperation a company needs when moving into a new area. Local government officials, fire marshals, and the neighboring businesses can either be your best or your worst friends when choosing a site. Being a good community steward can make the perfect site a gold mine for everyone involved.

About the Authors

Daniel Lane, Ph.D., is a member of Lee Enterprises Consulting with extensive experience in renewable chemicals process and technology development. Dr. Lane has held executive and senior leadership roles with multiple start-up companies in the renewables industry focusing on biomass conversion and scale-up of technology and processes. He has been instrumental to the design and construction of seven pilot- and demonstration-scale facilities around the world, producing first- (corn) and second-generation (cellulosic) ethanol, cellulosic sugars, and bio-based animal feeds from a variety of lignocellulosic feedstocks. Dr. Lane spent the first half of his career in process engineering and project management, commercializing technology with such companies as Procter & Gamble and Degussa, performing process and equipment troubleshooting, benchmarking, feasibility studies, and installing and commissioning myriad process packages. With his proficiency in process simulation and technoeconomic modeling, Dr. Lane is a recognized expert in technical assessment for both private and government funding sources and has helped companies secure over $170MM in financing.

Mindy Collier, a member of Lee Enterprises Consulting, has a B.A. from Indiana State University and an M.A. in Planning & Management from Indiana University. She is the founder and President of Collier & Associates and has over 25 years of consulting experience, including “hands on” experience in renewable fuel plants. Mindy is also an experienced grant writer and has successfully written grants for solar, biodiesel and other alternative fuels projects. She works with clients in identifying and writing all types of alternative and renewable grants.