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GREC Executive Testifies About Chlorine Worries And Contracts

Wood Resource Recovery machinery grinds wood for delivery to Gainesville's biomass plant. Those deliveries ceased in 2015 when the company terminated its contract with GREC. (Courtesy: Wood Resource Recovery)
Wood Resource Recovery machinery grinds wood for delivery to Gainesville's biomass plant. Those deliveries ceased in 2015 when the company terminated its contract with GREC. (Courtesy: Wood Resource Recovery)

In the year leading up to when Gainesville's biomass plant started producing electricity for Gainesville Regional Utilities and its customers, the plant's operators thought they had a serious problem.

Gainesville Renewable Energy Center's state air permit only allows a certain amount of chlorine-related emissions.

GREC's operators detected higher chlorine levels but for months could not figure out the genesis. One of the companies bringing yard waste to GREC in 2012 and 2013 was Wood Resource Recovery. That wood supplier sued GREC in 2015, in part because of a lack of communication about chlorine levels.

"During this entire year where there was this uncertainty about the chlorine saga, did you ever go to WRR and say, 'Stop buying equipment. Stop getting financing. Stop stockpiling all of this (wood)... don't incur another single dime, because we're uncertain about this yard waste and chlorine issue.' ... Did you ever do that?"

That was Wood Resource Recovery attorney Kent Safriet's question to Albert Morales, chief financial officer for GREC.

"We did not do that," Morales said.

The exchange occurred in the first 25 minutes of Morales' five-plus hours of testimony on Wednesday at the Alachua County Civil/Family Justice Center. Judge Monica Brasington is overseeing the non-jury trial and could award GREC's former wood supplier as much as $17.4 million in damages if she finds GREC breached the companies' contract.

Ultimately, GREC's chlorine levels passed emissions tests, but had there been chlorine content problems after the plant came online, that would have required GREC to renegotiate its wood supplier contract in 2013, with GREC likely paying more money for each delivery than first agreed so that the financial terms of the contract could be met.

And that would have been bad news for people paying for electricity from Gainesville Regional Utilities. GRU in 2009 signed a 30-year purchasing agreement with GREC that could earn the biomass plant operator as much as $2 or $3 billion from GRU depending on inflation and the cost of fuel — fuel, in this case, from Wood Resource Recovery.

The other variable in GREC's profits?

How often the plant actually runs; since August, GREC has frequently not generated electricity due to an ongoing dispute with GRU. The public utility has opted not to buy power from GREC "indefinitely," Morales said, because natural gas is now so cheap compared to when GRU signed the 2009 agreement.

"Nobody saw the shift in the (energy) markets," Morales said. He said GREC charges about $40 per megawatt hour; GRU can buy power elsewhere in Florida at a wholesale price that is about half that.

A potential alteration of GREC's contract with its supplier is key to the case. Safriet questioned Morales about it throughout the morning and afternoon. The contract permitted only one-tenth of one percent of foreign materials such as plastic (two pounds of plastic, say, in every one-ton wood delivery).

"If you want less than two pounds per ton of foreign material," Safriet asked, "you're altering the contract language, are you not?"

"Yes," Morales said.

"Is there anything in the contract that allows you to unilaterally alter the specifications in the contract?"

"No." Morales said. "In fact—"

"Thank you," Safriet said, cutting him off.

In the end, GREC did not alter the contract, Morales' attorney Mike Piscitelli noted during cross-examination. The wood supplier terminated the contract, alleging that GREC had made it impossible to perform. And then Wood Resource Recovery sued.

The trial continues Thursday morning at 9 a.m.

Here's what happened in other parts of this trial:

Editor's note: This story has been clarified to note that GREC has passed every emissions test the state has conducted.

Ethan is the Managing Editor in the Innovation News Center, home to WUFT News.He is a Pennsylvania native who found a home reporting Florida's stories. Reach him by emailing or calling 352-294-1525.