Sludge Watch ==> Toronto hands sludge pellets over to Veolia

[Maureen Reilly]

Sludgewatch Admin:

The sludge pelletizer plant is now producing sludge pellets a couple of days 
a week as they try to bring the pelletizer on line.  But there is no market 
for the pellets which have low nitrogen and high metals content.  That is 
why the City isn't trying to sell the pellets themselves and is 'laundering' 
the operation through Veolia.

And the City of Toronto knows that these pellets are prone to both dust 
explosions and self heating (spontaneous combustion).  In addition, the 
sludge from Toronto sewers is not saleable as pellets since they do not 
conform to the quality requirements of the Fertilizer Act.  The wastewater 
industry is trying to change the Fertilizer Act to make this substandard 
sludge pass for fertilizer.

The City (or Veolia) can ask the Canadian Food Inspection Agency (CFIA) for 
a 'letter of no objection' by providing the CFIA with three lab reports on 
the sludge pellets...and the CFIA will provide a CFIA stamp on the label.  
However under this process the CFIA has no access to samples of the sludge 
pellets and cannot verify the lab analysis and cannot sample the product to 
see if the lab reports are representative of the sludge pellets. The CFIA 
can only inspect pellets that are sold...and these pellets are never sold 
since no one wants to buy them.

So the CFIA provides a 'stamp of approval' on pellets that it has no 
regulatory authority to test or verify.

Shocking.

The City of Toronto did no environmental assessment of the pelletizer so 
that the community doesn't know the air emissions from the plant.  The 
Toronto taxpayer will pay Veolia $4 M per year  to run the plant. plus 
millions for upgrades. AND taxpayers will foot the bill for the all energy 
needed to run the sludge dryer!!


So be alert for the smoldering stink of sludge pellets - they could be 
coming to a storage site near you.
..................................................................

City approves sewage-to-fertilizer deal


Jul 19, 2007 04:30 AM
Donovan Vincent
CITY HALL BUREAU

Torontonians will be turning their poop into profit.

That's how Glenn De Baeremaeker, the city's works committee chair, described 
a decision by the city late last night to finalize an agreement for the 
operation of a "biosolids pelletizer'' at the Ashbridge's Bay treatment 
plant.

The city will pay Veolia Water Canada Inc. $1.9 million next year and about 
$4 million annually for the following nine years to turn solid waste into 
pellets which the company will sell as fertilizer.

"The Beaches community was opposed to incineration. This is a beneficial 
use,'' De Baeremaeker said in an interview last night.

The plant, already purchased by the city for about $25 million, should be in 
full operation in September or October.

Once fully operational, the pelletizer will process up to 26,000 dry tonnes 
of solid waste per year. The rest of the city's sewage sludge will continue 
to be managed through other means, including landfill.

"Storage of the biosolids at the plant has been a concern for residents in 
my ward and managing it through the pelletization process will help reduce 
storage time and the transport of biosolids,'' said Councillor Sandra 
Bussin.

Biosolids are a nutrient-rich by-product of waste treatment, and 
pelletization produces dust-free, low-odour pellets.

http://www.thestar.com/News/article/237622


.......................................

This is the html version of the file 
http://www.toronto.ca/legdocs/mmis/2007/pw/bgrd/backgroundfile-5412.pdf



ABTP–Biosolids Pelletizer Facility Operations, Maintenance and Pellet 
Marketing Services Agreement

STAFF REPORT ACTION REQUIRED

Ashbridges Bay Treatment Plant –Biosolids Pelletizer Facility Operations, 
Maintenance and Pellet Marketing Services AgreementDate:June 27, 
2007To:Public Works and Infrastructure CommitteeFrom:Lou Di Gironimo, 
General Manager of Toronto WaterWards:All WardsReference 
Number:P:\2007\Cluster B\TW\pw07032SUMMARYThe purpose of this report is to 
seek Council approval and authority to finalize and execute an agreement 
between the City of Toronto and Veolia Water Canada, Inc. (formerly doing 
business as USF Canada Inc.) (“Veolia”) on substantially the same terms and 
conditions outlined in this Report. Reconstruction of the Ashbridges Bay 
Treatment Plant (ABTP) Pelletizer Facility, which burned down in 2003, is 
expected to be completed and ready for final testing (“Secondary Testing”) 
by mid July 2007. In order to start Secondary Testing and to operationalize 
the Pelletizer Facility, the City requires the professional services of an 
experienced operator tooperate and maintain the Pelletizer Facility and to 
market for beneficial use the pelletsproduced. City Council had previously 
authorized staff to enter into negotiations with Veolia for these services 
subject to a report back to the appropriate Committee regarding the proposed 
terms and conditions and City Council approval of any negotiated draft 
agreement.Under the terms of the proposed agreement, Veolia will provide all 
staff and resources necessary to process 25,000 Dry Tonnes per year of 
biosolids produced at the ABTP. This represents 50% to 60% of the total 
biosolids production and is a significant step towards fulfilling the City’s 
commitment to the beneficial use of the biosolids generated at the ABTP. The 
remainder of the City’s biosolids will continue to be managed through a 
combination of other beneficial use options and landfilling.
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Page 2
ABTP–Biosolids Pelletizer Facility Operations, Maintenance and Pellet 
Marketing Services Agreement2RECOMMENDATIONSThe General Manager of Toronto 
Water recommends that:1.Authority be granted to finalize and execute the 
Operations, Maintenance and Pellet Marketing Services Agreement with Veolia 
Water Canada, Inc. on substantially similar terms and conditions as set out 
in the attached Schedule ‘A’, and on such other terms as may be acceptable 
to the General Manager, Toronto Water, and all in a form acceptable to the 
City Solicitor;2.Funds in the amount of $2,880,000 net of GST be reallocated 
for the payment of enhancements made to the Pelletizer Facility during 
rebuilding as follows: $1,440,000 from CWW005-92- Ashbridges Bay WWTP 
Digester Refurbishment and $1,440,000 from CWW008-44- Humber WWTP Waste 
Activated Sludge Upgrade, to CWW010-98 Ashbridges Bay WWTP Biosolids 
Pelletizer; and3.The appropriate City Officials be authorized and directed 
to take the necessary action to give effect thereto.Implementation 
PointsStaff of Toronto Water and Human Resources Divisions have met with 
members of Local 416 and advised them of the intent to proceed with 
consideration of this report and the recommendation to enter into an 
agreement with Veolia for the operation, maintenance and provision of pellet 
marketing services for the Pelletizer Facility. Local 416 have not had an 
opportunity to review the details of the proposed agreement.The adoption of 
this report will have no impact on existing staff working at the ABTP. All 
unionized staff will continue to work in their present job classifications 
and at their present work locations.Financial ImpactThe proposed agreement 
calls for a variety of services to be provided at an initial unit price of 
$159.54 per dry tonne (exclusive of all taxes) of biosolids received, 
processed and marketed by Veoila (this is equivalent to $44.67 per wet tonne 
on a 28% solids basis as processed at the plant’s centrifuges). The City 
would be committing to providing a target of 25,000 dry tonnes of biosolids 
to Veolia at the Pelletizer Facility each year for an initial period of ten 
years. Assuming the start of Secondary Testing of the Pelletizer Facility in 
July 2007, the fiscal commitment for 2007 would be approximately $1,994,250 
(based on 26 weeks of production). The fiscal commitment for each of the 
subsequent nine (9) contract years would be approximately $3,988,500 per 
year (based on 2007 unit price) –plus annual CPI adjustments.In addition, in 
2007 the City would make a lump sum payment to Veolia in the amount of 
$2,882,170 to pay for enhancements implemented to the Pelletizer Facility 
during the reconstruction. This project is included in the approved 
2007-2011 Toronto Water Capital
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Page 3
ABTP–Biosolids Pelletizer Facility Operations, Maintenance and Pellet 
Marketing Services Agreement3Budget in WBS Element (CWW010-98) Ashbridges 
Bay WWTP – Biosolids Pelletizer, however, at this time, the uncommitted 
cashflow in CWW010-98 is insufficient and additional cash flow authority is 
therefore required to meet these commitments. The additional cashflow and 
project cost (all net of GST) is to be reallocated from approved 2007 
capital projects (with net impact of $0) as follows:CWW005-92- Ashbridges 
Bay WWTP Digester Refurbishment - $1,440,000CWW008-44- Humber WWTP Waste 
Activated Sludge Upgrade - $1,440,000A further lump sum payment of $180,000 
would be made from the operating budget (WW1036) for Veolia’s mobilization 
costs.The City is required to pay the cost of all utilities used at the 
Pelletizer Facility. However, the City benefits under the proposed agreement 
by the capped maximum consumption rates in place for electricity and natural 
gas used by the Pelletizer dryer units. Veolia will refund the City the cost 
of electricity and natural gas that exceeds the capped consumption rates. 
The cost of natural gas for 2007 is estimated to be $1,062,375 and the cost 
of electricity is estimated to be $142,375, assuming 6 months of operation. 
Funds in the amount of $2,991,093 for these utilities have been budgeted for 
2007 in Account Number WW1036.All fee increases in future years are linked 
to CPI and will therefore be funded though annual water rate increases. 
Future capital equipment and improvement costs of $200,000per year are 
anticipated over the life of the Pelletizer Facility and will be budgeted 
for accordingly in future year Toronto Water capital budgets. The following 
table summarizes the financial impacts as 
estimated.Description2007AnnualizedFundingOperating 
Contract$1,994,250$3,988,500 WW1036 Ashbridges Bay TP Biosolids Work 
AreaMobilization Costs$180,000One time WW1036 Ashbridges Bay TP Biosolids 
Work AreaNatural Gas$1,062,375$2,124,750 WW1036 Ashbridges Bay TP Biosolids 
Work AreaHydro$142,375$284,750 WW1036 Ashbridges Bay TP Biosolids Work 
AreaCapital Enhancements$2,882,170One time CWW010-98 Ashbridges Bay WWTP 
Biosolids PelletizerFuture Capital Equipment & ImprovementsN/A$200,000 
CWW010-98 Ashbridges Bay WWTP Biosolids Pelletizer (for 2008 only; new 
capital budget will be established for subsequent years)Capital Funds 
Transfer($1,440,000)N/A CWW005-92 Ashbridges Bay WWTP Digester 
RefurbishmentCapital Funds Transfer($1,440,000)N/A CWW008-44 Humber WWTP 
Waste Activated Sludge Upgrade
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Page 4
ABTP–Biosolids Pelletizer Facility Operations, Maintenance and Pellet 
Marketing Services Agreement4The Deputy City Manager and Chief Financial 
Officer have reviewed this report and concur with the financial implications 
and impact statement.DECISION HISTORYIn March 1999, City Council authorized 
the negotiation and execution of an agreement with USF Canada Inc.(now known 
as Veolia Water Canada, Inc.) for the design, construction and commissioning 
of a $23 million biosolids pelletizer facility (the “Pelletizer Facility”) 
at the ABTP capable of processing 25,000 dry tonnes of biosolids per year. 
Authority was also given to negotiate and sign a 15 year marketing agreement 
with USF Canada Inc. to transport, store and market the biosolids pellets to 
be generated by the Pelletizer Facility. At the time, the negotiations by 
the parties contemplated a term of 5 years plus two (2) five (5) year 
options based on mutual consent for the marketing agreement. Based on the 
negotiations, it was intended by the parties that, upon final commissioning 
of the Pelletizer Facility, while USF Canada Inc. would transport, store and 
market the biosolids pellets, City staff would be responsible for the daily 
operation and maintenance of the Pelletizer Facility. However, prior to the 
finalization and execution of the marketing agreement, and before the City’s 
acceptance of the Pelletizer Facility, on August 21, 2003 a fire severely 
damaged the Pelletizer Facility. For this reason, a marketing agreement was 
never entered into between the City and USF Canada Inc.As a result of the 
fire, at its July 20, 21 and 22, 2004 meeting, City Council authorized staff 
to begin the negotiation of a claim settlement agreement between the City 
and Factory Mutual Insurance Company (“FM Global”) arising from the fire at 
the Pelletizer Facility and to further negotiate a rebuild agreement of the 
Pelletizer Facility with Veolia.At its meeting on February 1, 2 and 3, 2005, 
City Council granted authority to enter into the negotiated agreements with 
FM Global for the claim settlement and with Veolia to allow the rebuilding 
of the Pelletizer Facility to its condition the day before the August 2003 
fire with the addition of several enhancements to the Pelletizer Facility as 
requested by the City. Authorization was also given to allow staff to begin 
negotiations with Veolia regarding a possible 20 year operations, 
maintenance and marketing services agreement (“OM&M Agreement”) for the 
Pelletizer Facility, and to report back to Works Committee with the proposed 
final terms and conditions once negotiated for approval by City Council.This 
report provides the Public Works and Infrastructure Committee with the 
results of the negotiations that have occurred between the parties and is 
seeking approval and authority to finalize and execute an OM&M Agreement on 
substantially similar terms and conditions as outlined in Schedule “A” of 
this report, and such further other terms as may be acceptable to the 
General Manager, Toronto Water.
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Page 5
ABTP–Biosolids Pelletizer Facility Operations, Maintenance and Pellet 
Marketing Services Agreement5ISSUE BACKGROUNDUSF Canada Inc. (now known as 
Veolia Water Canada, Inc.) began the design and construction of the 
Pelletizer Facility in 1999. In 2002, staff negotiated a draft marketing 
agreement with USF Canada Inc. to transport, store and market the biosolids 
pellets generated by the Pelletizer Facility.On August 21, 2003, a fire 
severely damaged the Pelletizer Facility. The Pelletizer Facility was 
substantially complete by this time but had not yet met all of the Secondary 
Testing requirements. The Ontario Fire Marshal’s Office determined that the 
source of the fire was a fractured discharge cover on a hot-oil circulation 
pump. The fire was isolated to one particular area of the building and the 
fuel of the fire was the oil that was purged from the circulation system. 
Flames from this source ignited electrical and mechanical equipment, 
insulation and cladding, portions of the roof and various hoses and 
pipes.After completing various structural and mechanical inspections, and 
receiving appropriate Council authority, the City entered into settlement 
agreements with FM Global and Veolia to allow, among other things, the 
rebuilding of the Pelletizer Facility to its condition the day before the 
August 2003 fire. The rebuild agreement with Veolia amended the original 
design, construction and commissioning contract dated April 30, 1999 between 
the partiesand authorized Veolia to complete all “remediation work” required 
to commission the Pelletizer Facility, at no additional expense to the City 
beyond those amounts owed to Veolia prior to the fire.As part of the rebuild 
process, the City requested several modifications to the original design in 
order to enhance operational performance (the “Enhancements”). The 
Enhancements provide additional operating flexibility, upgrade fire safety 
systems, improve working conditions and enhance quality control of final 
pellet size specifications. The specific list of Enhancements and related 
estimated costs are as follows:DescriptionOriginal EstimateCurrent 
EstimateBuilding Temperature Control$90,000$45,200Additional/Revised 
Instrumentation$220,000$124,000Equipment 
Modifications$350,000$75,000Engineering and Construction Management 
Services$600,000$596,300Pellet Quality 
Enhancements$1,000,000$1,350,390Employee Facility 
Improvements$270,000$270,000Safety Improvements (Sprinklers & Foam 
Suppression)$320,000$421,280Total Enhancements$2,850,000$2,882,170
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Page 6
ABTP–Biosolids Pelletizer Facility Operations, Maintenance and Pellet 
Marketing Services Agreement6The rebuild of the Pelletizer Facility began 
during the summer of 2005. The Enhancements, including the new fire 
protection systems, have since been designed and incorporated in the new 
Pelletizer Facility. Commissioning, final testing and acceptance of the 
rebuilt Pelletizer Facility commenced in May 2007 and is anticipated to be 
complete in mid July 2007. Secondary Testing which involves continuous 
operation of the Pelletizer Facility for a period of 66 days will then 
commence.COMMENTSRationale for Proposed Agreement with Veolia:The services 
provided under the proposed agreement with Veolia cover the full range of 
activities required to develop and sustain a pellet production and marketing 
business. The proposed agreement commits the City to providing biosolids 
that meet the requirementsfor agricultural land application under the 
Nutrient Management Act and, in turn, Veolia is required to convert the 
biosolids to pellets and identify, develop and sell the pellets to 
beneficial end use markets. By fully integrating the pelletizer operation 
function with the marketing function, which includes haulage and 
distribution, Veolia is well positioned to successfully supply pellets to a 
broad variety of end use markets and to respond to changes in pellet market 
demand.As the Pelletizer Facility designer and builder, Veolia is best 
positioned to effectively operate and maintain the Pelletizer Facility. The 
City’s 2003 attempt, prior to the fire and during the final commissioning 
phase, to operate the Pelletizer Facility with City staff met with mixed 
success. City staff assigned to the Pelletizer Facility was being trained 
and were in the process of assisting Veolia (as the design-builder) to 
commission the Pelletizer Facility. Veolia was marketing the pellets that 
were being produced during this stage for beneficial use and was just 
beginning to put together a supply network of storage and use sites 
throughout Southern Ontario.Due to the 2003 fire, existing City staff was 
redeployed to other duties and have since been absorbed into other process 
areas within the ABTP. The knowledge these staff developed before the fire 
has for the most part been lost and therefore significant re-training would 
be required for the City to resume any operational responsibilities. Key 
management staff that were directly involved and were to oversee the 
operation of the Pelletizer Facility have since left the City thus leaving a 
significant knowledge gap within the ABTP.If City Council were now to decide 
that the ABTP staff is to operate and maintain the Pelletizer Facility, then 
it would be necessary to undertake the following:Redeploy five (5) 
operational staff from the ABTP to the Pelletizer Facility, backfill 
positions left vacant and hire eight (8) additional operational/maintenance 
staff.Redeploy or recruit a manager or senior supervisor for the Pelletizer 
Facility.Negotiate an amendment to the original design-build agreement with 
Veoila to provide additional training services over and above the scope that 
had been
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ABTP–Biosolids Pelletizer Facility Operations, Maintenance and Pellet 
Marketing Services Agreement7previously identified in the contract. It is 
estimated that these steps would take approximately three months and cost 
approximately $200,000.The following summarizes the estimated annual cost 
(using 2007 base year) to the City of using City staff to operate and 
maintain the Pelletizer Facility (exclusive of any related marketing 
services) versus the cost of contracting with Veolia:DescriptionToronto Cost 
if City Operates Pelletizer FacilityToronto Cost if Veolia Operates 
Pelletizer FacilityOperations & Maintenance staffing salary and benefits (14 
FTEs)$1,183,000includedLogistics staff – haulage coordination and clerical 
(2 FTEs)$136,400includedEquip replacement and specialized maintenance (total 
est. based on $23.12/dry tonne)$578,000$200,000Haulage Cost (assume $25/wt X 
25,000 Dry Tonnes / 92% solids content)$679,348includedInitial 
Training$200,000includedNatural 
gas$2,124,750$2,124,750Electricity$284,750$284,750Process 
water$177,750$177,750Lab testing$6,250$6,250Site Operational 
Overheads(communications, tools, regulatory requirements) – lump 
sum$100,000includedManagement Overheads (engineering, purchasing, HR, Legal, 
QA/QC and other City resources) – lump sum$350,000includedVeolia Fee 
(Facility Operations and Maintenance component only)N/A$3,106,000(Based on 
$124.24/dry tonne)Total Estimated Annual Cost$5,820,248$5,899,500Estimated 
Cost per Dry Tonne(based on 25,000 dry tonnes/year)$232.81$235.98The 
estimated cost differential between the City operating the Pelletizer 
Facility and Veolia operating is generally negligible. For approximately the 
same cost, Veolia’soperation and maintenance of the Pelletizer Facility 
would provide the City with the following added benefits:Added insurance 
coverage on the Pelletizer FacilityOperational risk is assumed by 
VeoliaAccess to in-plant technical expertise at no cost to the City
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Page 8
ABTP–Biosolids Pelletizer Facility Operations, Maintenance and Pellet 
Marketing Services Agreement8The volume of pellets to be produced is 
significant and the marketing effort to find beneficial end use markets is 
beyond the current capabilities within Toronto Water. For the following 
reasons, Veolia is ideally positioned to provide this required service to 
the City:Veolia has an established Residuals Management business and has 
resources and expertise to assess and secure the various biosolids end use 
markets;Veolia’s corporate size provides market reach across North America – 
well beyond the reach Toronto could reasonably develop on its own;Veolia is 
in the process of commissioning a 54,500 dry tonne per year pelletizer 
facility for the City of Chicago and, therefore, has the ability to combine 
the Toronto and Chicago pellets into a more sustainable long term pellet 
marketing business; andVeolia is in discussions with Milwaukee to partner 
and jointly market their biosolids based fertilizer pellets commonly sold 
under the brand name Milorganite.If successful, this would involve an 
additional 27,200 dry tonnes per year of pellets.The Proposed OM&M 
Agreement:The proposed negotiated agreement with Veolia, attached hereto as 
Schedule A, is for an initial term of ten (10) years with a mutual option 
for an additional ten (10) year term. The negotiated unit price is based on 
the Price Proposal dated December 16, 1998, as submitted by USF Canada Inc. 
in accordance with the City of Toronto’s Request for Proposal for Beneficial 
Use of Biosolids issued on September 28, 1998. Given the passage of almost 9 
years since that price submission, the unit price has been adjusted to 
reflect various additions and deletions from the original proposed scope of 
services and has been adjusted for inflation.Highlights of the proposed OM&M 
Agreement are as follows:Services:Veolia will provide all labour, 
management, technical support staff, and all other resources to operate and 
maintain the Pelletizer Facility. Veolia will also establish and maintain a 
pellet marketing function and be solely responsible for the marketing, 
handling and distribution of pellets produced at the ABTP Pelletizer 
Facility.Veolia will guarantee processing of 24,000 to 26,000 dry tonnes of 
biosolids per year. The City will only pay the unit price for pellets 
actually produced by Veolia. Payments to Veolia are therefore performance 
based.Veolia will assume the responsibilities of the City during secondary 
testing period. If Veolia does not successfully complete secondary testing 
the City has the right to terminate the agreement. The City has the right to 
reduce supply of Biosolids during first year ("Processing Reduction Period") 
in response to obligations of the City to other service providers.
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Page 9
ABTP–Biosolids Pelletizer Facility Operations, Maintenance and Pellet 
Marketing Services Agreement9Pricing:In the first contract year, the City 
will pay Veolia a price of $159.54 per dry tonne of biosolids processed into 
pellets. This price is subject to CPI adjustments in subsequent years.The 
City will pay Veolia 50% of the per dry tonne price for each dry tonne of 
biosolids processed during the Commissioning Period and the full per dry 
tonne price for biosolids produced during Secondary Testing.The City will 
pay Veolia a lump sum fee of $180,000 for mobilizing all necessary 
operational staff and resources to commence delivery of services under the 
proposedagreement.Under the Design Build Agreement, the City will make a 
lump sum payment of $2,882,170 to pay for the “Enhancements” implemented as 
part of the Pelletizer Facility rebuild. The City will pay for electricity 
and natural gas subject to capped maximum consumption rates. Veolia will 
refund the City the cost of electricity and natural gas that exceeds the 
cap.Monitoring:Veolia will be required to periodically prepare and present 
various documents which the City will use to monitor Veolia’s performance 
under the agreement. These include: Operations and Maintenance Plans, 
Quarterly Operations Reports, Quarterly Maintenance Reports, Compliance 
Reports, Annual Operations and Maintenance Reports, Annual Pellet Marketing 
and Distribution Reports, and Corporate Financial Reports.The City will 
perform certain compliance and performance testing to ensure suitable 
biosolids quantity and quality has been provided to Veolia by the City. 
Veolia will be responsible for monitoring pellet quality and reporting to 
the City. The General Manager of Toronto Water has been given the delegated 
authority to make certain decisions related to this agreement except with 
respect to extending or renewing the agreement or making any material 
changes to the agreement without the express written authority from City 
Council. Asset Protection and Maintenance:Veolia will be responsible for and 
shall pay for the first $20,000 of any and all incidents of repair and 
replacement related to mechanical, electrical, civil, and structural and 
site related assets. The City will pay the cost in excess of $20,000 for any 
individual incident of repair and replacement. Participation by the City in 
these repairs will provide incentive to proactively perform maintenance and 
preserve the assets owned by the City. City participation will also provide 
added opportunity for the City to monitor the condition of the assets 
throughout the term of the agreement.During the term of the agreement, the 
City can implement any capital improvement or enhancements to the Pelletizer 
Facility – including expansion of the capacity of the Pelletizer Facility. 
Subject to the City’s written consent, Veolia may implement capital 
improvements to the Pelletizer Facility at its expense in order to generate 
efficiencies.
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Page 10
ABTP–Biosolids Pelletizer Facility Operations, Maintenance and Pellet 
Marketing Services Agreement10During the penultimate contract year, the City 
and Veolia will conduct a Final Condition Survey of the Pelletizer Facility 
and Veolia will be responsible for correcting the identified deficiencies 
prior to the end of the contract term. ThePelletizer Facility is to be 
returned to the City in a condition that meets or exceeds the condition at 
the start of the contract, except for normal wear and tear and abandoned 
equipment mutually agreed to by the parties.Termination Provisions:Subject 
to varying payment provisions, the City retains the right to suspend and/or 
terminate the agreement at any time. Compensation to Veolia will vary 
depending on when the termination provision is triggered and the reason for 
termination.Suspension Payments to Veolia are significant and are therefore 
a disincentive for the City to suspend unless the City intends to terminate 
for convenience.Insurance and Financial Security:Subject to any claims of 
the City against Veolia to recover payments from insurance policies, the 
aggregate liability of Veolia to the City in relation to the agreement shall 
not exceed $10 million.The obligations of Veolia will be guaranteed by the 
parent, Veolia Water North America Operating Services, LLC., through a 
separate agreement included in Schedule 15.Veolia will post a 3 year 
renewable performance bond in the amount of $10 million which will be backed 
by a $4 million Letter of Credit in favour of the City that can be exercised 
should Veolia allow the Bond to expire.The proposed agreement provides a 
significant indemnity from Veolia in favour of the City for claims resulting 
from or related to various matters including, but not limited to, breach of 
the agreement, property damage, personal injury or death, any intellectual 
property infringement, related legal fees and any third party claims. 
However, this indemnity does not apply to the extent the claim is caused or 
contributed to by the City’s negligence or breach of the agreement. The City 
is also required to indemnify Veolia for claims related to or arising from 
the City’s breach of the agreement or the City’s negligence.Veolia will be 
required to maintain the following insurance coverage: All-Risk Property 
Insurance, Boiler and Machinery Insurance, Business Interruption and Extra 
Expense Insurance, Commercial General Liability Insurance in an amount not 
less than $10 million per occurrence, Pollution and Environmental Liability 
Insurance, and Automobile Insurance. The adequacy of the insurance coverage 
has been verified and approved by Risk Management.Changes in Laws:The City 
assumes the financial risk for operational changes in laws that have a total 
direct cost impact in excess of $10,000 over the remaining term of the 
agreement.The City assumes the financial risk for marketing changes in laws 
that affect the end usage of pellets within Ontario and have a total direct 
cost impact in excess of $20,000 over the remaining term of the agreement.
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Page 11
ABTP–Biosolids Pelletizer Facility Operations, Maintenance and Pellet 
Marketing Services Agreement11The City assumes the financial risk for 
marketing changes in laws outside of Ontario that affect 20% or more of the 
pellets produced by the Pelletizer Facility.Dispute Resolution:The dispute 
resolution provision does not contain a mandatory mediation or arbitration 
obligation; instead the parties are required to participate in a stepped 
negotiation and if the matters are not resolved, then litigation would 
occur. Pellet Marketing Plan:Veolia’s initial draft Pellet Marketing Plan is 
included as Schedule 4 to the draftAgreement. Initial efforts focus on 
pursuing a broad range of markets in order to develop all-season year round 
demand. This will help minimize Veolia’s need for pellet storage.Veolia will 
retain all revenues derived from the pellet marketing business and these 
revenues are to be used by Veolia to offset costs incurred in the delivery 
of services under the agreement.Veolia does not plan at this time to sell 
any significant quantity of pellets to the consumer market, either directly 
or through distributors. However, they intend to sell to the diversified 
industries that use fertilizer in their production process, including: turf 
producers, ornamental plant nurseries, greenhouses, golf courses, 
landscapers, etc. A significant portion of the marketing effort will be 
directed toward the use of pellets for the production of agricultural crops 
grown as a source of fuel, such as corn, grains and switch grass for ethanol 
production, as well as soybeans and jojoba for biodiesel. Veolia have 
committed significant resources in developing the combined Toronto/Chicago 
pellet marketing business and as such consider their client lists as 
confidential.Long term efforts will focus on identifying and securing the 
highest value end markets.A financial penalty is imposed if Veolia disposes 
of any pellets in a landfill.Cost Comparisons:When the Agreement is 
executed, the City will have five (5) service providers under contract to 
provide a range of services with respect to Biosolids haulage, processing, 
beneficial end use and/or disposal. In addition, Toronto Water has discussed 
with the Solid Waste Management Division the possibility of accessing the 
Green Lane Landfill site as a contingency biosolids disposal site in case of 
emergency. Although no commitments have been made with respect to Green 
Lane, it is included in the table below for comparison purposes. Service 
ProviderTechnologiesCost per Wet Tonne of BiosolidsCommentsGSICo-composting, 
landfilling, degraded site rehabilitation (incl.haulage)$116/wt$150/wtBase 
volumeEmergency volume
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Page 12
ABTP–Biosolids Pelletizer Facility Operations, Maintenance and Pellet 
Marketing Services Agreement12Modern & 
TerratecLandfillingHaulageUS$49.88/wt$45.50/wt Haulage by 
TerratecIMSAlkaline Stabilization and landfilling (incl. haulage)$156.50/wt 
Excess volume goes to landfillingTerratecHaulage and agricultural land 
application$47.00/wt Capacity limited by weather and agricultural 
practicesVeoliaPelletization$66.07/wt(assumes 28% dry solids)($235.98/dry 
tonne) Includes all City funded utilities and costsInternal Contingency: 
Haulage and disposal at Green LaneLandfillLandfilling:Haulage:$48.11/wt 
(est.)$23/wtBased only on preliminary discussions with Solid 
WasteConclusionIf Council approves the finalization and execution of this 
proposed agreement with Veolia, it will form a significant step towards 
achieving City Council’s objective of 100% beneficial use of ABTP biosolids. 
In addition, this proposed agreement complements the arrangements currently 
in place with other service providers who supply to the City alternate 
beneficial end uses such as land application, co-composting, alkaline 
stabilization and degraded site remediation.CONTACTFrank QuarisaDirector, 
Wastewater TreatmentTelephone: 416 392-8230Fax: 416 397-0809E-mail: 
fquaris at toronto.caSIGNATURE____________________________Lou Di 
GironimoGeneral ManagerToronto WaterATTACHMENTS: SCHEDULE A - OPERATION, 
MAINTENANCE AND PELLET MARKETING SERVICES AGREEMENT