Steve Leone, Associate Editor, RenewableEnergyWorld.com
November 16, 2011 | 40 Comments
BERLIN, N.H. -- Drive deep enough into the White Mountains of New Hampshire, and you'll be on your way. Continue far enough past the ski resorts that make the region famous, and you'll head straight for some of the most rugged peaks in North America. Stay close enough to the unforgiving Androscoggin River, and you'll soon see the sign.
"Welcome to Berlin, New Hampshire: The City That Trees Built.”
It’s then that you’ll realize that this struggling city doesn’t take failure easily. And giving up? It’s just not the way they do business.
So when the city set out on a course to rebuild itself, it once again turned to the dense forests that long ago defined this community. For the 10,000 residents of Berlin, the cornerstone of the revitalization is a 75-megawatt biomass power plant that will by 2013 sprout from the ashes of the city’s historic paper mill.
Yes, it is renewable energy. But it has always been about more than that. It’s about jobs — 400 during the two years of construction, 40 permanent positions at the plant itself once it opens and about 200 more year-round to supply the wood needed to generate power. It’s also about the tax base that will grow because of this deal. Cate Street Capital’s $275 million project will bring to the region an estimated $40 million in annual wages, fuel procurement and purchased goods. And over the life of the project, the Burgess Biopower Plant will pay Berlin $34 million in new property taxes as well as $9 to $10 million in the sale of renewable energy credits.
To those involved, this was always about more than deal-making and financing. This project was different than most from the start. Usually, large-scale developments start with a big idea, and they slowly, if ever, work their way to the highest levels of government. In Berlin, state leaders — from the economic commissioner to the head of the state’s dominant utility to the governor himself — saw the potential for the plant. They understood it was a project that could lift a town. They believed it was an industry that could replace the now-defunct paper mills. And they saw it as the vehicle that would return Berlin to its heyday.
Yet, they also knew they were in for a fight.
In the beginning
To understand Berlin, you must first understand the intersection of small towns and big industries.
The solitary smokestack visible from the heart of downtown is today viewed as a relic of the city’s history. The close-knit neighborhoods, the churches, the schools, the baseball field — they all grew up in the shadow of that boiler. In many ways, they were there because of that boiler.
Today, the property has been picked clean, its buildings and industrial machinery sold as scraps. But the boiler and smokestack remain, thanks to people like Carl Belanger, a longtime superintendent of the boiler who understood its importance to the town, and its ability to help it forge a new identity.
Mills have been at the site on Community Street since the 1850s. The original paper mill drew other paper mills, which eventually attracted a railroad, which brought immigrants from all over the world eager to find work in the burgeoning area. Mostly, the new workers moved south from Quebec, bringing with them their French language and strong work ethic. By 1930, the town had more than 20,000 residents, thousands of which were employed directly at the mills. The rest of the town owed its existence to the thriving paper industry.
Decades later, though, the town began its long, slow decline. Mills shut down, residents were laid off, workers and their families moved on. By 2006, Community Street was empty for the first time in more than 150 years. Berlin’s economy was depressed and the city was in need of a new strategy.
Seeds of Change
About five years ago, leaders in state government and Public Service of New Hampshire (PSNH) began exploring the possibility of a biomass plant. There was strong support at many levels of state government, yet very little political support within Berlin. The powers-that-be at the time — the city council and the mayor — were strongly opposed to the project, and they favored a conservation-backed approach that would turn the vacant area into a city park.
For lifelong Berlin resident Joe Vigue, the debate had spiraled toward conservation and away from what he thought were the real issues of the day -- jobs and taxes. Vigue had never worked directly for the mill industry, but he had done construction for the mills. So he knew skeptics of a future biomass plant needed a better understanding of the economic realities. With petitions in hand, he and others began a grassroots effort to change perceptions.
“When I was talking to people to change their minds, I brought up a couple of facts — all the jobs and the new tax base,” said Vigue. The group collected more than 3,000 signatures, and in the following municipal election voters brought in new city council members and a new mayor, Paul Grenier, himself a laid-off mill worker.
“You can never forget who you are,” said Grenier, who won the election with the biomass plant as his primary objective. “At one point, the city was being led down the path of forgetting its identify. We’re a blue-collar, hardworking, honest community, and it was getting steered away from that.”
With local leadership in place, the project received new momentum, though the troubles and the frustration had just started.
“This project encountered numerous hurdles and at times it seemed like it would never come to fruition,” said John Hallé, president and CEO of Cate Street Capital, describing the list of challenges faced along the way. “Budget increases, permitting, legal appeals, long delays and even some rough weather. Hurricane Irene passed by (in late August) and we sweated that one out. It was hard and tough. But that’s nothing new to Berlin.”
The biggest challenge, though, came through lengthy legal proceedings that focused on the state’s small independent power producers, who felt that the project would sever their ability to sell their power. Gov. John Lynch, who had been there since the beginning, helped strike a deal in late August that would give the small wood-fired operations power purchase contracts with PSNH and allow the Berlin project to move forward.
State Commissioner of Economic Development George Bald recounted the seemingly endless legal, political and regulatory challenges, and the resolve it took to reach the groundbreaking in early October.
“I tried to be positive and [there were times] I had reached my end,” said Bald, speaking to a gathering of residents, city leaders and curious onlookers. “I was going to call the governor and tell him, ‘This is nuts. These people — some people, no one here — are driving me crazy and it’s wearing me down.’ And I get a call from Alex [Ritchie, senior project analyst at Cate Street Capital] and she said how important it was to the city, and my heart melted.
“This was a very complicated project,” he said. “Leadership makes a difference. I’d call and say, ‘Governor, this is going off the rails again.’ He’d get it back on track. Everybody on the stateside that dealt with this, they stayed with it because of his leadership.”
For his part, Lynch says it’s the role of government to set the agenda, especially when it comes to renewable energy. Lynch signed into law the state’s Renewable Energy Portfolio, and he has vetoed efforts from the Republican-led legislature to follow New Jersey’s lead and opt out of the Regional Greenhouse Gas Initiative.
“Political leadership has to be the group that sets the vision, sets the goals and brings people together to make things happen,” said Lynch.
For those who led this project to the finish line, there are three key lessons to pass on: Stay true to the values of the community, truly listen to objections and close the deal when you get the chance.
The values were always evident to those who grew up in Berlin. New Hampshire is the second most forested state in the country at 84 percent. So the resource continues to be there, and the local economy — long ago structured to feed the paper mills -- is still set up to take advantage of a wood-fueled industry.
“Even when we started to lose the paper industry, people said forestry is out the window,” said Bald. “Well, it’s not out the window. There are other ways you can use it. There are a lot of energy possibilities.”
Listening to the objections may have been difficult at times, but in retrospect, it was a necessary process to building the widespread support needed to get to the construction phase. That’s where the leadership came in, say those close to the negotiations, and while no one got everything they wanted, most were able to come away with something. The independent power producers got their contracts, business leaders got their jobs and the conservationists are now in line to get a riverwalk funded through the deal.
As for the objections that the biomass plant would send power prices upward, PSNH President Gary Long said the 20-year contract was designed so that customers will pay at or below market rates for the long term.
Finally, for Cate Street, the company knew it was stepping into an advantageous situation. The stakeholders — from the governor to the utility — were already in place. And so was the boiler, which was relatively new and came with an estimated $60 million value.
“The bones of a transaction were here,” said Hallé, who added that the presence of the boiler will cut the construction phase by 12 to 18 months, meaning the plant will start generating revenue that much sooner. “Not taking advantage of that would have been criminal.”
Both the town and Cate Street also view this transaction as potentially the first of many to come. The goal is for the plant to draw in other light to medium industrial operations, which could take advantage of the path the biomass plant has cleared, not to mention the energy it will provide.
“This plant isn’t going to cure all ills,” said Grenier, “but it is another piece of the economic pie. There could be 400 to 500 additional jobs five or six years from now. Ten years from now, we could have a population of 13,000, unemployment between three and four percent — down from 10 percent. And we’d have a median age drop from 50 to 40. This is the cornerstone.”