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TO: Mayor Richard C. Irvin
FROM: Alex Alexandrou, Chief Management Officer
Kenneth Schroth, P.E., Director of Public Works / City Engineer
David Schumacher, P.E., Superintendent of Water Production
DATE: May 28, 2019
SUBJECT:
Resolution to authorize the City to enter into an amended lease agreement with LaFarge Aggregates Illinois, Inc.
PURPOSE:
To obtain City Council approval to enter into an amended lease agreement with LaFarge Aggregates Illinois, Inc. (LaFarge), for the purpose of long-term storage of the lime residual by-product generated at the Aurora Water Treatment Plant.
BACKGROUND:
All residents of the City of Aurora are provided with potable water from the city owned and operated Water Treatment Plant (WTP). The main treatment process utilized at the WTP is the lime-softening process. This process not only removes and collects the solid particles that are present in the raw water sources (Fox River, shallow well, and deep well water), but also softens the water to provide customers with more aesthetically pleasing drinking water. As the solid particles are removed by the treatment process, they are concentrated and collected and this by-product must be ultimately disposed.
Since the WTP's construction in 1992, the lime residual has been disposed by landfilling at great annual expense to the city. In 2012, through an Illinois Environmental Protection Agency (IEPA) permit, the Water Production Division (WPD) began a program to dispose of the lime residual via land application on agricultural fields. Land application allows a beneficial reuse of the waste product and reduces the cost of ultimate disposal by approximately 25%. As this process is still expensive, starting in 2006, a more efficient method of ultimate disposal was investigated regarding placing the lime residual in repurposed portions of a limestone mine.
DISCUSSION:
The LaFarge Aggregates Limestone Mine (LA-Mine) is located at the intersection of Interstate 88 and IL Highway 25. The mine is approximately 200 to 400 feet below grade, is located in both Aurora and North Aurora, and is mainly used to produce limestone and dolomite aggregates for construction uses. The portion of the mine located in Aurora is typically referred to as the south mine and currently has two distinct levels with a third level to be constructed in the future. The first two levels of the mine are almost spent (completely excavated) and thus are no longer useful for material production.
As such, the city and LaFarge have been in discussions for quite some time to develop a plan to allow the lime residual material to be placed into the first two levels of the south mine as a method of ultimate disposal. In order to proceed with the placement of the material, a permit from the IEPA is required. Through a lengthy process and via Permit No. UIC-015-COA, the IEPA has approved the underground injection of the lime residual into the spent portions of the LA-Mine as a method of ultimate disposal. This permit became effective on August 24, 2015.
Shortly thereafter in spring 2016, the city became aware of an alternate transfer method to physically place the lime residual material into the LA-Mine. As such, and to insure due diligence was completed, the city halted the underground injection project design and contracted Sikich LLP, to complete a detailed financial model to analyze all potential options known to be available. The financial model was completed in early 2017.
A brief timeline of events following the activation of the city's IEPA underground injection permit is shown below:
1. Engineering design of underground injection project start March 2016
2. City becomes aware of alternate material transfer method March 2016
3. Engineering design of underground injection project stop April 2016
4. Investigate/analyze alternate material transfer method April 2016
5. Begin development of financial analysis model December 2016
6. Complete financial analysis model February 2017
6. Amended lease negotiations 2018 to 2019
The financial model indicates that for a number of years, the alternate transfer method will be less expensive for the city than both continuing to dispose of the material per current operations or via the underground injection method. While the underground injection method has lower annual operating costs, it has a large initial capital improvement expenditure. Oppositely, the alternate transfer method has a very small initial capital expenditure, but the annual costs are higher. The point in time where the Total Net Present Value of Cumulative Costs for the underground injection option and the alternate transfer method option become equal is in approximately 19.5 years. Thus, the alternate transfer method is less expensive for the city for almost 20 years of operation.
Accordingly, the city and LaFarge have been in negotiations to come to an agreement on an amended lease to incorporate the alternate transfer method. Those negotiations resulted in the proposed lease attached to this cover memo which is being presented to the City Council for approval.
It is expected that the currently proposed alternate method of material transfer will require a modification to the existing underground injection permit from the IEPA. Once this amended lease is approved by City Council, LaFarge and the city will, together, approach the IEPA to acquire the necessary approvals to modify the existing UIC permit. It is not known how long this step will take.
Once an amended IEPA permit is acquired, both the city and LaFarge would move forward with the alternate transfer method's initial capital improvements and immediately begin introduction of material into the mine.
IMPACT STATEMENT:
Not approving the attached amended lease would cause the city and LaFarge to proceed with the underground injection project at more expense to the city and with a longer start-up time to begin the process.
RECOMMENDATIONS:
That the Mayor and City Council approve the attached resolution authorizing the Mayor to execute the amended lease with LaFarge for the purpose of long-term storage of lime residual in the city's underground mine. It is further recommended that this matter be forwarded to the Finance Committee for review and recommendation.
cc: Finance Committee
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
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A Resolution to authorize the City of Aurora to enter into an amended lease agreement with LaFarge Aggregates Illinois, Inc.
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WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, the Aurora Water Treatment Plant produces a lime residual by-product from the lime softening process which must be ultimately disposed; and
WHEREAS, placement of the material into a repurposed area of a limestone mine is expected to be less costly over the current disposal practice of land application and landfilling during the remaining expected operational life of the mine; and
WHEREAS, a modification to the existing underground injection permit is expected to be received from the Illinois Environmental Protection Agency to allow the dewatered lime by-product material to be placed into select areas of the mine; and
WHEREAS, in expectation of that approval, an amended lease with LaFarge Aggregates Illinois, Inc., has been negotiated;
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows: The Mayor is hereby authorized to enter into an amended lease agreement with LaFarge Aggregates Illinois, Inc., for the purposes of long-term storage of the lime residual by-product generated at the Aurora Water Treatment Plant in the city's underground mine.