The City of Hermiston has never before had a rate to allow "Industrial" customers to discharge to the city's sewer treatment works.  To be clear, however, this has mainly applied to very specific types of "Industrial Customers."  For example, Marlette Homes, Wal-Mart Distribution, and Corteva Agriscience are all 'industrial' operations by most definitions, but they discharge their sewer as 'commercial' users.  That is because the type of discharge that they send to the treatment works is within the design parameters of the treatment plant.

Examples of disallowed uses included Hermiston Foods, and similar food processing operations, where water comes in direct contact with the product.  In the case of Hermiston Foods, the City sewer accepted the facility's "sanitary sewer," (i.e. toilets, sinks, etc.), but the facility sent it's process waste water across US395 to lagoons for land application.

The existing rate structure, and policy, has long been that, if a prospective customer, like a food processor, wants to discharge to the City's system, then a rate structure could be developed to account for the user's impact to the system.  Specifically, we are concerned with a user's impact to the treatment plant's capacity for processing Biological Oxygen Demand (BOD), Total Suspended Solids (TSS), and Ammonia.

The City's Recycled Water Treatment Plant is a complex facility with a number of processes taking place to clean and recycle the community's waste water.  Therefore, it's not as simple as talking about a customer's volume of wastewater as a percentage of the RWTP's capacity.  Depending on what is in the water, certain types of users can use up out-sized percentages of certain treatment components.  If a rate isn't nuanced enough to account for those out-sized discharges, then the costs associated with those processes can inadvertently be subsidized by other users of the system.

What specifically brought this issue to the forefront is the redevelopment of the former Hermiston Foods (HFI) processing facility.  It can be very difficult and expensive to redevelop niche facilities like a food processing facility; which is why there are countless examples former industrial properties throughout the country which languish un-used after the initial operation closes down. 

Columbia Basin Biosciences (CBB) began redeveloping the HFI site in late 2019.  The operators met with city staff and city council throughout that time, and it was apparent that the literal process of extracting CBD Oil from hemp does not use water directly in it's process.  This alleviated any concerns about wastewater discharges to the City's system.  However, beginning in mid 2021, it became apparent that large amounts of green wastewater containing crushed hemp leaves were making it to the City's Treatment Works.  Upon sampling the discharge, it contained substantially elevated levels of BOD; well above the design parameters of the RWTP.

City Staff, and Anderson Perry Engineering, in early November, began meeting regularly with the owner and operators of CBB to attempt to trouble-shoot the situation.  The ensuing four months have yielded a good cooperative effort that has greatly narrowed the likely source of the BOD down to a process which isn't integral to the actual CBD Oil extraction process, but is rather a function of retrofitting a new industrial process in to an existing facility.  That's to say, I strongly believe that the facility can address their BOD issue with additional investigation and investment in pre-treatment infrastructure before their water reaches the city's sewer collection system.  Meanwhile, however, to protect the other ratepayers, an industrial discharge rate must be established to ensure that the customer is paying for the costs they are putting on to the treatment system.

Anderson Perry & Associates developed an Industrial Wastewater Surcharge Rate Analysis (attached) to identify the costs to the system of treating BOD, TSS, and Ammonia.  This process used the RWTP's assumed design parameters for treating all of those items.  Those design parameters are considered "normal," and therefore discharges over and above those normal levels increase the amount of treatment which needs to be done.  To develop the actual costs, AP utilized the Sewer Department's audited 2020 actual expenses, and used industry standards to assign how much of the collection and treatment process goes toward treating for the various constituents.  This process yielded the rates included in the proposed resolution.

In practical, real world, terms, an example of how the RWTP is being impacted by elevated levels of BOD is in the amount of solids that staff has to haul off.  In 2020, the RWTP staff made a trip to Finley Buttes Landfill approximately twice per week.  Beginning in mid-2021, that increased significantly to where RWTP staff must haul those solids off 5 days per week.  This increased hauling not only takes RWTP staff away from other duties for 3-4 hours each time that they have to make the trip, but it increases wear and tear on the new $400,000 dump truck which was acquired for this purpose in 2019, and increases wear and tear on the new $1.1 million press that is used to dry-out the solids for transportation.

These impacts to the treatment works are not insurmountable.  The RWTP is a system that can always be expanded and maintained.  But the users who cause the system to experience costs need to be the ones who cover those needs.  The rates proposed here allow for the RWTP to cover it's increased costs.

Failure to adopt an industrial wastewater rate will require other system users to offset the costs of treating industrial discharges.  Adoption of an industrial wastewater rate is intended to recover revenue in an amount sufficient to cover costs caused by specific users.

This rate will currently only apply to one customer within the City, and I anticipate that the increased cost will sufficiently incentivize them to invest in internal infrastructure and processes to knock-down their BOD before it reaches the City's system.  However, that will still take some time.  Therefore, it is likely that the Utility Fund will experience some interesting swings in revenue and expenses over the next couple of Fiscal Years.  I anticipate a large upswing in revenue to finish out FY '22, and possibly elevated revenues through the first half of FY '23 lasting until the customer is able to reduce their BOD discharges to the City system.  Staff will monitor this closely, and treat the resulting revenue changes as potentially transitory.

1. Approve the rates as proposed by Anderson Perry.

2. Request additional information from Anderson Perry.