When Colorado Springs Utilities inked a deal in 2011 to spend $111.8 million on a scrubber technology project to clean pollutants coming from the coal-fired Martin Drake power plant, officials budgeted $10 million for site work.
But the project was delayed, material prices increased, and the city-owned Colorado Springs Utilities had to hire a contractor to assist in the project - which includes installing massive equipment into tight spaces on the downtown Drake campus.
The $121.8 million project to install Neumann Systems Group's NeuStream scrubbers for two boilers at Drake is now projected at $170 million.
"We realized this is going to be a bigger constructibility challenge than we may have been expecting," Dan Higgins, Utilities interim general manager of energy supply, said of the site work and projected costs.
Utilities customer Nicole Rosa, who has followed the scrubber installation project in the news, said the numbers have been moving targets.
In 2008, The Gazette reported that Neumann's scrubber device was estimated to cost less than $20 million. In 2010, The New York Times reported that Utilities would spend $80 million on the project. And in 2014, The Gazette reported the cost had soared to $131 million.
Rosa said she wonders if $170 million is the final cost, or if it will creep up more by the time the switch is flipped.
"It just keeps going up and they keep denying the previous numbers," she said. "But it (the cost) is to the point now where this money could have retrofitted Drake to run on natural gas and take care of current and future EPA regulations."
Higgins and others say the NeuStream scrubber system developed by local physicist David Neumann is the best technology and the least expensive option for Drake. The project costs over the past four years have been reported piecemeal, Higgins said. The $170 million represents every contract, every piece of material and all of the man-hours it has taken, and will take, to install the scrubbing systems on two boilers by the end of 2016.
"There is so much misunderstanding about the evolution on the project, certainly on the cost and on the magnitude of the project," Higgins said "It is not something you buy and throw in the back of a pickup truck and plug in. It's substantial infrastructure."
Meanwhile, the scrubber installation project reached a milestone in mid-March, when as one of Drake's three boiler units was quietly powered down. Crews will work through the end of April to connect the boiler to an elaborate plumbing system of duct work and vents that moves gaseous exhaust from the boiler into a processing building where a liquid is sprayed like a fine mist across the steam and captures sulfur dioxide.
By November, Drake will have one of two scrubbing devices operational and will be on its way to meeting Environmental Protection Agency emission requirements to reduce sulfur emissions, Utilities officials say.
"In the last few years, we've been bringing major projects to completion," said Andy Pico, Colorado Springs City Council member and Utilities board member. "It's a very significant milestone and validates all the work and effort that has gone into it."
By November 2016, a second unit will be hooked up to the NeuStream scrubber system, which was chosen because it fits into the small space at the Drake campus and is cheaper to run annually than other scrubber systems on the market, Higgins said. Tests show that NeuStream can scrub 97 percent of the sulfur from emissions.
"They have really, really perfected a flat jet technology that makes the liquid gas contact very, very efficient," he said.
The Gazette reported in 2008 that the cost of the NeuStream would be under $20 million per unit. That was three years before the contracts were signed, said Higgins, who claims there never was a written estimate for $20 million for any part of the project. The contract with Neumann is for design and equipment procurement, and the amount is $66.8 million, plus a 10 percent fixed fee, for a total of $73.5 million.
The project cost to remove sulfur dioxide at Drake was projected to be $121 million. It included Neumann's capital costs, plus additional internal and external costs, such as electrical system upgrades, labor and site preparation.
A 2011 business case compares the NeuStream project costs with the estimated capital costs of a traditional scrubber, which was $158 million.
"The business case in 2011 has the number ($111.8 million) cited in the document," Higgins said. "That is what I consider the starting point. All of the activity leading up to that point were prior to entering into the agreement to build the full-scale commercial-sized scrubber are estimates," Higgins said.
But the scrubber project began in 2007 with Utilities and Neumann agreeing to test his technology on a small scale at Drake. Larger-scale tests followed, and each proved successful. More than $25 million was spent on development and testing.
"Whatever number we want to settle on for costs for Neumann, I believe it's appropriate to add the $27.3 million for pilot testing to the tally," said Leslie Weise, an environmental activist and Monument attorney. "After all, if CSU had chosen to go with a commercially available solution for SOx (sulfur dioxide) emissions reductions, there would be little to no expense for R&D (research and development) and that mere $27.3 million expense would have been avoided."
Neumann and Utilities became business partners in the deal. The deal was that the utility would earn 3 percent on the company's gross sales of its scrubbers for 10 years.
However, there have been no other buyers and coal plants are closing or being converted across the U.S.
"The issue isn't that it went from $20 million to $170 million," said former City Councilman Tim Leigh, a long-time critic of the scrubber program. "The more interesting thing is, how can you build a scrubber at the beginning and not have a budget defined? The answer is that Utilities became a venture capitalist partner in an R&D project. They moved from a utility provider to a new entity."
Higgins said even if Utilities had gone with a traditional scrubber technology, the project cost would have escalated for the same reasons: delay in construction, increase in cost of materials and the need for third-party engineering contractor. Adding those costs to the $158 million 2011 estimate would put a traditional scrubber at $212 million by the 2017, he said.
Councilwoman Jan Martin, who was on the Utilities board when the Neumann contracts were signed, said the board made the best decision at the time.
What is important, she said, is that the cost to install NeuStream scrubbers does not exceed what it would have cost to install traditional scrubbers.
"That was the thing I had my eye on," she said.
By November 2017, a scrubber technology will be running at the Ray Nixon coal-fired power plant near Fountain which has one boiler. A $40.4 million contract was awarded this month to North Carolina-based Babcock & Wilcox Company for the installation of sulfur emissions control project at Nixon.
The total cost is projected to be $100 million, Higgins said.
Rosa recently questioned Utilities' spending on the scrubbers in a Gazette article as part of the paper's readers' forums for April 7 election coverage. After the article ran, she was treated to a personal meeting with Higgins, who presented PowerPoint slides to her.
She left the meeting wondering about a proposal under study by the EPA for power plants to reduce carbon dioxide emissions by 30 percent by 2030 and how much it will cost.
Electric rates went up 5.5 percent in January and are projected to increase annually for the next five years to pay for the $280 million scrubber projects at both power plants.
"I'm just a citizen who wants to know what I'm breathing and what I'm spending all this money on," she said.