NeuStream: moving forward at Drake?

It’s been a tough three months for David Neumann.

Neumann is CEO of Neumann Systems Group and creator of the NeuStream coal-scrubber technology that Colorado Springs Utilities has a contract to install this year and next at Martin Drake Power Plant.

Three months ago, everything was on track. Contracts were approved; construction was set to begin in October; equipment had been ordered.

Suddenly, doubts arose. The Utilities board — comprised of City Council in a different role — put on the brakes, ordering no NeuStream construction until the issue of Drake’s future was settled.

Then just as quickly, two weeks ago Neumann was back on track when the board reversed itself and said “all systems go” with both Drake and NeuStream. Detractor Tim Leigh even acknowledged that the Springs was lucky to have Neumann.

“And I’ll concede, based on the information I now have on hand, it appears his stuff works and it’s possible it could save us millions when compared to alternative scrubber systems,” Leigh said in an e-mail.

That was then.

Leigh’s latest e-mail this week raises issues about past testing and politics surrounding NeuStream. He again suggests holding off installation at Drake.

Neumann, who says he’s met with Leigh on two occasions — once for three hours — wonders what happened.

“What’s changed?” Neumann asked. “We’ve had the votes, CSU has given them presentations, I’ve answered questions.”

Neumann notes that the board had many conversations about NeuStream. In the summer of 2011, it voted to spend $73.5 million to install the technology, followed by a second vote in September to spend $43 million of that this year, and a third vote of confidence two weeks ago. Leigh voted in favor of NeuStream all three times.

But Leigh only momentarily stopped the pressure on Neumann. His latest e-mail missive, sent to nearly 1,500 people and City Council, contained misconceptions that left some people bristling.

“I’m frustrated, more than surprised,” said Councilor Jan Martin. “There are a lot of agendas here — environmentalists who don’t want anything to do with coal. Some people in economic development who want to use the property; people who want to flat-out sell the electric utilities. A lot of competing interests are here.”

Martin, at least, stands behind her original votes, but says she will support a long-term study to determine the next generation of electrical power for the Springs.

“Today, though, that’s still Drake,” she said. “If we were to start to shut down, that’d take years. I think moving forward with Neumann to meet the EPA regulations is the right thing to do.”

Reactions to Leigh

Detractors have several problems with Leigh’s latest allegations:

NeuStream doesn’t sequester all three pollutants — sulfur dioxide, carbon dioxide and nitrogen dioxide, according to Leigh.

In testing at CSU, the NeuStream captured all three pollutants. Neumann says he’s conducting further tests at the Environmental Research Center at the University of North Dakota, with a grant from the Department of Energy.

“We were successful with NOX and CO2 at CSU,” he said. “But they opted not to go forward with testing because they could not justify the regulatory need for it.”

Tom Black, CSU’s chief energy services officer during the time the application work for NeuStream was completed, echoed Neumann’s stance.

“The NSG unit would scrub the other compounds, but in review with our bond council, capitalizing work for CO2 would not be appropriate because there was no compliance requirement,” he said. “I made the decision to focus on SOX because of the State’s impending EPA implementation plan. “

Leigh says there were “48 other existing technologies that solved the SOX problem with less capital cost.”

Black says he has “no idea” what Leigh means.

“We found no other technology that would meet Mr. Leigh’s claim,” he said. “Coal-fired electric generation stations are highly-engineered facilities based on many factors … ‘conventional’ scrubbers today are engineered for a specific plan and unit with these site-specific issues in mind. In other words, there is no off-the-shelf solution.”

Leigh says former Utilities executive Drew Rankin, who brought the concept to CSU originally, recommended “killing the baby.”

Black said he still fully supports the NeuStream projects, and believes it could be the answer to future EPA regulations.

“Through this period of analysis and application engineering, Drew Rankin worked for me,” Black said. And if he had recommended ‘killing the baby,’ a phrase that I personally find reprehensible, that would have come through my office. Drew did not recommend canceling the project and he continued to be an avid supporter.”

Leigh says “politics entered the arena” when former Mayor Lionel Rivera pushed for continuation of the project, on the “high notion that if the scrubbers worked … CSU should continue to make an investment, ‘go into business with Neumann,’ sell the work product, create jobs and experience a windfall.”

Rivera said that CSU officials never recommended shutting down the project. Instead, they worked with the Colorado Department of Public Health and Environment to allow them to test the equipment so it could be installed at the two coal-fired plants.

Bigger questions

For his part, Leigh says he is neither “pro- nor anti-Neumann.” Instead, he’s using the Neumann Systems Group as a way to move from “tactical thinking” to “strategic thinking.”

“I think the deeper philosophical question is: Why can’t we take all the money that the city brings in and spend it horizontally for all the city needs?” Leigh asked. “We need to make decisions in the context of the larger picture.”

Leigh says the issue isn’t solely about Neumann. It’s about CSU, which he refers to as “a treasure trove of delicious chocolate pie.” Everyone wants a piece of that pie, he says. Utilities provides $30 million annually to the city’s general fund, and Leigh believes it could provide $30 million more.

“That second $30 million could yield $750 million in serviceable debt that could fund our entire backlog of capital improvements in one fell swoop,” he said.

That’s Leigh’s vision but not Neumann’s. He’s moving forward with plans to install NeuStream at Drake, as the contract requires. But the back-and-forth debating could affect the project’s financial projections, he said.

“We are back up to full speed,” Neumann said. “Where we are being hurt is that our project called for a separate construction contract to build the system at Drake. This has been delayed, and if it is delayed more it has the potential to significantly affect project costs.”

Drake/Neumann timeline

Below are the times the Utilities staff briefed the board about Drake and NeuStream.

Aug. 20, 2008 — Staff describes project, and original positive test results. Plans for larger scale testing.

March 18, 2009 — Update on NSG partnership, small scale testing, plans for larger scale testing.

June 5, 2009 — NSG project update, including projected costs and initial test results.

July 2, 2009 — Board given memo about power plant emissions control, EPA requirements.

Aug. 19, 2009 — Discussed high monetary commitment that will be needed for SOX and NOX regulations. Dr. Dave Neumann discussed success of 2 megawatt project. 20 megawatt project started.

Step. 25, 2009 — Board given memo about scrubber byproducts .

Feb. 17, 2010 — Discussed NSG as an example of public/private partnership.

June 4, 2010 — Board given results on 20 megawatt tests of NSG technology.

June 16,2010 — Board receives update about NSG technology. Discussion on positive testing results and whether NSG technology is accepted by the state.

April 20, 2011 — Update and discussion on NSG project operation and financial, regional haze standards.

June 22, 2011 — After City Council elections, discussion and tour of the Drake power plant, including NeuStream.

April 18, 2012 — Update on NSG project operations and financials, timeline, discussion for timeline.

May 16, 2012 — Update and discussion about the NSG scrubber operations and financials.

June 20,2 1912 — Drake retirement discussion, operations and financial analysis.

July 18, 2012 — Drake retirement analysis and NSG project. Vote to move forward with NeuStream at Drake.

Source: Colorado Springs Utilities