Compliance Program with Monetary Concession -

Nestlé Canada Inc. (Ward 19)

The Works and Utilities Committee recommends the adoption of the following report (September 22, 1998) from the Commissioner of Works and Emergency Services, subject to the compressed time-frame for installation of on-site treatment equipment as agreed to by Nestlé Canada Inc. in discussion with staff of the Works and Emergency Services and Economic Development Departments:

Purpose:

To address a request for a Compliance Program with monetary concession from Nestlé Canada Inc. to allow them to pay only 50 percent of the increase to the existing Industrial Waste Surcharge Agreement for 1998, in return for them investing in on-site pollution control equipment to reduce their effluent loadings to our sewers by 50 percent.

Funding Sources, Financial Implications and Impact Statement:

This Department maintains approximately 157 Industrial Waste Surcharge Agreements, which allows for the recovery of approximately $7.5 million per year in additional treatment costs. These charges reflect a user pay philosophy and directly offset the cost of operation of our treatment plants. Nestlé Canada Inc.'s new annual surcharge assessment is $211,317.50, an increase of $125,562.06 over their old surcharge of $85,755.44 per year. By allowing the company to pay at a reduced rate of 50 percent of the increase would mean a reduction in revenue of $62,781.03 per year.

Recommendations:

It is recommended that:

(1)a Compliance Program with monetary concession be granted to Nestlé Canada Inc. as described herein, to allow for payment of their reassessed surcharge less 50 percent of the increase for 1998, subject to the company's investment of the avoided surcharge payment in the 1998 Phase 1 activities; and

(2)if the waste loading is not reduced by 50 percent after 1998 Phase 1 is completed, the remaining Phase 1, plus Phase 2 and Phase 3 be implemented to achieve this reduction and staff be authorized to continue the monetary concession to Nestlé Canada Inc. for the remaining Phase 1 activities in 1999, Phase 2 in 1999, and Phase 3 in 2000, if required, to reduce the waste loading by 50 percent.

Council Reference/Background/History:

On November 9, 1989, Metropolitan Council, by adoption of Clause No. 6 of Report No. 16 of The Works Committee, authorized execution of agreements with industries permitting them to discharge wastewater in excess of the limits set out under By-law No. 153-89, providing that the over-strength discharges are amenable to treatment at our treatment plants. Industries are required to pay for the additional cost of treatment above the limit of the By-law.

Section 6 of this By-law allows the owner of industrial premises to submit to the Commissioner of Works a program to prevent, or to reduce and control the discharge of wastewater into the sewer system. The Commissioner of Works may then issue an approval known as a "Compliance Program" to the person who submitted the program. The person to whom a Compliance Program has been issued shall not be prosecuted under the By-law during the period within which the Compliance Program is applicable, provided that the person complies fully with the terms of the Compliance Program.

On August 10 and 11, 1994, Metropolitan Council, by adoption of Clause No. 12 of Report No. 14 of TheWorks Committee, authorized the Works Department to discuss modifications to Industrial Waste Surcharge Agreements and Compliance Program policies with existing and potential surcharge companies to promote and encourage improvements in on-site treatment and source reduction.

The policy approved by Metropolitan Council was to allow industries facing significantly increased surcharge for new agreements or amendments to existing agreements to apply to be allowed to avoid up to 50 percent of the payment of the new agreement or the increase to the existing agreement, for up to three years, if they commit under a Compliance Program to invest the avoided surcharge payment for specific improvements to their on-site pre-treatment system.

There have been two Compliance Programs with monetary concessions approved by Metropolitan Council and one by City Council to date.

Comments and/or Discussion and/or Justification:

Recently, several companies have complained that their new surcharge assessment or increased surcharge assessment on existing agreements is creating financial hardship, and have expressed an unwillingness to pay the surcharge. These companies would like to reduce these costs, however, they would have to install treatment facilities which would add further costs.

Recognizing that some industries are really facing financial hardship, we recommend that industries facing significant increases in surcharges for new agreements or amendment to existing agreements could apply for a surcharge reduction of 50 percent of the new agreement or the increase to the existing agreement, for up to three years, if they commit under a Compliance Program to invest the reduced surcharge payment for specific pollution control equipment. In this way, the discharger benefits in the long term because they permanently reduce their surcharge costs. We also benefit in that more treatment capacity is free for additional development.

The following conditions must be met to be considered for a Compliance Program with monetary concession:

(1)the applicant must commit in writing, in the form of a Compliance Program, to reduce their waste loading by at least 50 percent by a specified date;

(2)the reduction in surcharge could be for a period of between one and three years, depending on the time required to complete the installation of pre-treatment equipment;

(3)an applicant can only be granted one Compliance Program with monetary concession per lifetime; and

(4)at the end of the Compliance Program period, the companies who are unsuccessful in reducing their waste loading to within by-law limits must resume paying a surcharge based on the actual waste loading at that time.

The Region of Niagara has a similar policy of granting a discharge under a "Program Approval" (which is similar to our Compliance Program) with monetary concessions. The concession has been as high as 50 percent for a period of one year. The reduction is based on the size of the surcharge compared to the amount the discharger plans to spend in effecting a reduction in both the hydraulic and contaminant load to the municipal sewage treatment system.

The type of waste generated by Nestlé Canada Inc. is biodegradable and amenable to treatment at our Main Treatment Plant.

On August 13, 1998, Nestlé Canada Inc. submitted an application to have the industrial waste surcharge amount reduced in accordance with the policy adopted by Metropolitan Council on August10 and 11, 1994.

The company has retained Hatch Associates in Mississauga to undertake a study to evaluate their operations and develop an effluent loading reduction program to bring their effluent contaminants down to 50 percent by May 6, 1999 (Phase 1), July 22, 1999 (Phase 2), and September 14, 2000(Phase 3). They have provided us with a detailed schedule for their Compliance Program which is summarized as follows:

Phase 1 (1998), estimated expenditures $71,000.00;

Phase 1 (1999), estimated expenditures $34,000.00;

Phase 2 (1999), estimated expenditures $30,000.00; and

Phase 3 (1999 and 2000), estimated expenditures $1,030,000.00.

Nestlé Canada Inc. is currently under a surcharge agreement with the City. The surcharge is based on an average suspended solids (SS) concentration of 2,078 mg/L at an annual discharge of 216,328cubic metres. The average biochemical oxygen demand (BOD) concentration is 1,973mg/L. The estimated annual SS and BOD loading from the facility before the proposed treatment is 449,530 kg per year and 426,815 kg per year, respectively. With the assumption that the pre-treatment will reduce the SS and BOD concentrations by 50 percent, the estimated loading for SS and BOD after pre-treatment will be 224,765 kg per year and 213,408 kg per year, respectively.

Conclusions:

In accordance with Section 6, Compliance Program, of Sewer Use By-law No. 153-89 and the policy adopted by Metropolitan Council on August 10 and 11, 1994, a Compliance Program with monetary concession should be issued to Nestlé Canada Inc. to provide a mechanism by which the over-strength effluent, which exceeds the by-law limit for SS and BOD can be discharged on a 50percent reduced fee basis while the company implements further wastewater treatment controls, under the conditions previously stated in this report.

Contact Name:

V. Lim, Chief Engineer - Environmental Services

Water Pollution Control Division

Telephone: (416) 392-2966; Fax: (416) 397-0908

E-Mail: victor_lim@metrodesk.metrotor.on.ca.

The Works and Utilities Committee submits, for the information of Council, the following report (October 28, 1998) from the Commissioner of Works and Emergency Services:

Purpose:

To respond to a request by the Works and Utilities Committee that the Commissioner of Works and Emergency Services submit a further detailed report to the Committee on Nestlé Canada Inc.'s capital spending plans with regard to the project.

Funding Sources, Financial Implications and Impact Statement:

There are no additional financial implications arising from this report.

Recommendation:

That this supplemental report be received for information and that the original report's recommendations be approved.

Council Reference/Background/History:

The Works and Utilities Committee on October 7, 1998, had before it a report (September 22, 1998) from the Commissioner of Works and Emergency Services recommending that:

(1)a Compliance Program with monetary concession be granted to Nestlé Canada Inc. as described therein, to allow for payment of their reassessed surcharge less 50 percent of the increase for 1998, subject to the company's investment of the avoided surcharge payment in the 1998 Phase 1 activities; and

(2)if the waste loading is not reduced by 50 percent after 1998 Phase 1 is completed, the remaining Phase 1, plus Phase 2 and Phase 3 be implemented to achieve this reduction and staff be authorized to continue the monetary concession to Nestlé Canada Inc. for the remaining Phase 1 activities in 1999, Phase 2 in 1999, and Phase 3 in 2000, if required, to reduce the waste loading by 50 percent.

The Committee:

(1)deferred consideration of the aforementioned report until its next meeting, scheduled to be held on November 4, 1998;

(2)requested the City Solicitor to report to the Committee on any legal implications regarding the matter;

(3)requested the Commissioner of Works and Emergency Services to submit a further detailed report to the Committee on Nestlé's capital spending plans with regard to the project; and

(4)requested the Commissioner of Economic Development, Culture and Tourism and theCommissioner of Works and Emergency Services to submit a joint report to the Committee on the use of this program to further the development of the food processing industry, so as to reduce excessive sewage loading while at the same time enhancing the industry in the city.

Comments and/or Discussion and/or Justification:

On Item (2) related to any legal implications regarding this matter, the Legal Department has advised that the City of Toronto Act, 1997 (No. 2) authorizes the City to pass a by-law prescribing the conditions under which sewage will be received and disposed of and setting the charges for receiving and disposing of it. It further permits the City to make different conditions and charges applicable with respect to different classes of persons transporting waste to the City sewage works. Provided that objective criteria based guidelines are adopted and used to set out a class of persons to whom compliance programs with monetary concession are available, no bonusing problems should be encountered.

The current policy, which was approved by Metropolitan Council on August 10, 1994, allows industries facing significantly increased surcharges under the present surcharge agreements and industries facing significant surcharges under new or amended agreements to apply to avoid up to 50 percent of the payment of the new agreement or the increase to the existing agreement, for up to three years if they commit under a Compliance Program to invest the avoided surcharge payment for specific improvements to their on-site pretreatment system.

The Legal Department has expressed concern regarding the term "significant increase", and advised that the amount of increase needs to be clearly defined to ensure an equitable application of the policy to candidate industries. In reviewing the previous three agreements under the Compliance Program with a monetary concession and Nestlé's current application, I can advise that a "significant increase" has ranged from 66 percent for Select Foods (an increase of $10,950.00 on an existing surcharge of $16,550.00) to 146 percent for Nestlé (an increase of $125,562.06 on an existing surcharge of $85,755.44). The 146 percent or $125,562.06 annual increase on Nestlé's surcharge, therefore, qualifies under the criteria used in administering the present policy as a significant increase. In order to permit the Nestlé agreement to proceed and to cover the definition of "significant increase" used in approving the present Compliance Program with monetary concession, it is recommended that the Legal Department prepare the necessary amendment to the existing Sewer User By-law for Council approval.

It is planned to further assess the criteria and guidelines for applying the monetary concession policy with the Economic Development, Culture and Tourism Department as well as the Legal Department, and report back to the Committee on a comprehensive list of criteria for industries applying under this program.

With regard to Item (3) on the company's capital spending plans, the proposed Compliance Program submitted by Nestlé Canada Inc. to significantly reduce the waste loading by more than 50 percent is separated into three phases and is detailed in Attachment A. A summary of the compliance activities with commencement dates, expected completion dates and the estimated cost for the project is summarized in Attachment B. Hatch Associates in Mississauga has been retained by Nestlé to carry out Phase 1 through Phase 3 activities.

With regard to Item (4), a separate joint report is being prepared in consultation with the Commissioner of Economic Development, Culture and Tourism on the use of this program to further the development of the food processing industry and will be submitted to the Committee at this meeting.

The dollar value that the company is investing versus the amount of relief we are providing is summarized below:

Conclusions:

A detailed report which outlines Nestlé's capital spending plans for their application of a Compliance Program with monetary concession is presented. The proposed Compliance Program, if fully implemented, will cost the company $1,165,000.00 to reduce their waste loading by more than 50 percent or eliminate the surcharge all together. In this way, Nestlé benefits in the long term because they permanently reduce their surcharge costs. We also benefit in that more treatment capacity is free for additional development.

Contact Name:

V. Lim, P.Eng., Chief Engineer - Environmental Services

Water Pollution Control

Telephone: (416) 392-2966; Fax (416) 397-0908

E-Mail: victor_lim@metrodesk.metrotor.on.ca.

APPENDIX A

PROPOSED COMPLIANCE PROGRAM ACTIVITIES

Phase 1:

Process Optimization of Existing Systems:

All sources of losses from production are to be determined from:

-normal operations;

-clean-up operations; and

-accidental spills due to process or mechanical failures.

Hatch will carry out site visits to review the causes, frequency and effect of accidental spills. In addition, Hatch will identify and recommend appropriate measures such as process modifications and containment requirements.

Following the site visits, Hatch will recommend measures to:

-avoid spill, e.g. placement of alarms;

-provide immediate response to a spill condition;

-provide containment of spills; and

-provide backup to containment.

A report will be generated which summarizes the measures to prevent and handle accidental spills. Implementation of the recommendations provided by Hatch may be sufficient to reduce the waste loading by more than 50 percent. The expected cost to carry out this work is $15,000.00.

This work started in January 1998, and was completed by September 30, 1998.

Wastewater Characterization: Continuous Flow Measurement and Wastewater Sampling:

Hatch will co-ordinate the implementation of a continuous wastewater sampling and flow measurement program for manhole 1 (MH1), manhole 2 (MH2), and manhole 6 (MH6). Nestlé has agreed to permanent flow monitoring stations for MH1, MH2 and MH6. This will provide Nestlé with continuous record of flow, biochemical oxygen demand (BOD), and suspended solids concentrations until such time as it is no longer required. Additional flow measurement sensors, transmitters, data loggers, and wastewater sampling devices have been purchased. The accuracy of the wastewater flow measurement will be reviewed by comparison with water meter readings on a weekly basis for a minimum of three months.

Wastewater sampling is to be carried out on a 24-hour, time-weighted composite for a period of three months from each manhole. The 24-hour composite samples will be collected by a sampling technician, stored properly and transferred to an accredited laboratory for analysis. Field measurement will be carried out to determine pH.

Wastewater sampling and analysis of the effluent will allow an accurate characterization of the effluent, and may identify additional opportunities for process optimization which may be sufficient to reduce the waste loading by more than 50 percent.

The estimated total cost to carry out the purchase, calibration, and installation of the flow measurement devices is $20,000.00. The flow measurement devices were installed and calibrated on October 2, 1998. Wastewater sampling commenced on October 5, 1998, and is expected to be completed during the first quarter of 1999. The cost to implement continuous wastewater sampling and analysis up to the end of 1998 is $36,000.00 and another $14,000.00 up to February 9, 1999, for a total cost of $50,000.00.

Treatability Studies:

Treatability studies will be carried out to determine the process design criteria. Hatch will oversee the physical and biological testing. It is expected to commence on February 10, 1999, and completed by May 6, 1999. The total cost for this work is $20,000.00.

Total Phase 1 estimated expenditures - $105,000.00.

Phase 2:

Identify and Recommend Appropriate Wastewater Treatment Technology:

If implementation of Phase 1 activities indicate that the waste loading has not been reduced by more than 50 percent, Phase 2 will be carried out. Hatch will determine the most cost-effective and optimum wastewater treatment processes in order to reduce the waste loading by more than 50percent or eliminate the surcharge.

This includes obtaining price quotations from a minimum of three suppliers for the recommended wastewater treatment system. In addition, an overall budget estimate (" 25 percent accuracy) for the implementation of the recommended wastewater treatment system, and a general arrangement drawing for the location of the treatment system will be provided.

A report will be submitted by Hatch summarizing the results of the wastewater sampling, analyses, and flow measurement, and recommended wastewater treatment process with budget cost estimates.

The expected commencement date is May 7, 1999, and the expected completion date is July 22, 1999.

Total Phase 2 estimated expenditures - $30,000.00.

Phase 3:

Detailed Design, Installation and Commissioning of the Treatment System:

If implementation of Phase 1 activities indicate that the waste loading has not been reduced by more than 50 percent, and the results from Phase 2 indicate that the implementation of the treatment system is economically justifiable, detailed design, installation, and commissioning of the treatment system will proceed.

Based on a Hatch study carried out in 1992, the cost of the treatment system was estimated at $966,000.00 using 1991 flows discharged and 1989 wastewater analyses. The annual operating and maintenance costs to the treatment plant were estimated at $44,500.00. The design basis for the treatment plant was based on a design flow from manholes 2 to 6 of 125 to 155 Imperial gallons per minute, an estimated BOD concentration of 1,100 to 1,300 milligrams per litre, and suspended solids concentration of approximately 260 milligrams per litre.

The expected commencement date is July 23, 1999, and the expected completion date is September14, 2000.

The wastewater characteristics of the plant have changed since 1992 as many process modifications have occurred, and the 1992 estimate is outdated. Nevertheless, for budget purposes, $1.0 million is allowed at present, based on the 1992 estimate.

Total Phase 3 estimated expenditures - $1,030,000.00.

APPENDIX B

COMPLIANCE ACTIVITIES SUMMARY

Compliance ScheduledScheduledProject

Program ActivitiesStart Date Completion DateCosts ($)

Phase 1

Process optimization ofJan. 1998Sept. 30, 1998$15,000

existing system.(fees only -

Spill containment identification:additional costs

Review all production areasassociated with

and processes to determineimplementation

all sources of losses fromof containment

production processes.measures not

Spill containment implementation:finalized at this

Identify and implement measurestime)

to prevent and handle accidental

spills.

Wastewater CharacterizationJuly 27, 1998Oct. 2, 1998$20,000

Flow measurement: Install

permanent flow monitoring

devices and implement

continuous flow measurement

for manholes 1, 2, and 6.

Wastewater sampling and Oct. 5, 1998Feb. 9, 1999$36,000 (1998)

analysis: Implement continuous $14,000 (1999)

wastewater sampling for a

period of three months.

Treatability Studies:Feb. 10, 1999May 6, 1999

Allowance for

implementation of physical

testing (e.g. screening).$10,000

Implementation of biological

testing.$10,000

TOTAL PHASE 1 ESTIMATED EXPENDITURES:$105,000

Phase 2

Identification of appropriateMay 7, 1999July 22, 1999$30,000

wastewater treatment

processes/technology.

Obtain minimum of three

quotations from suppliers

for wastewater equipment.

Budget cost for implementation

of treatment system (civil,

mechanical, electrical costs,

operating costs, and payback

period). Cost estimate to be

25% accuracy.

Summary report:

TOTAL PHASE 2 ESTIMATED EXPENDITURES:$30,000

Phase 3

An allowance for:July 23, 1999Sept. 14, 2000No firm cost available

Detailed design of treatmentat this stage, as it will

system, if required.depend on the success

Selection of contractor/equipment.of Phase 1 and Phase 2.

Procurement/fabrication/installation.For budgeting purposes,

Commissioning and performance$1 M is allowed at

evaluation.present, based on 1992

estimate.

TOTAL PHASE 3 ESTIMATED EXPENDITURES:$1,030,000

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Councillor Korwin-Kuczynski, High Park, appeared before the Works and Utilities Committee in connection with the foregoing matter.