Sunday, January 16, 2011

DARD estimates of litter disposal costs are Crazy!

Back in the autumn we did a bit of work with the poultry industry from south of the border.  Notably, the industry there has implemented a number of schemes to allow their growers to work within the confines of the Nitrates Directive, so we were curious to understand how this was achieved.

A detailed .pdf document outlining the approach taken across the border is available on the CALNI website.

Most regions in the EU have been able to comply with the Directive since 2007, generally without using incineration.  One key point we wanted to understand was the potential disposal costs if incineration wasn't used, and in particular how these related to the vast sums of public money rumored to be required to underpin the Moy Park Incinerator project.

In this respect, the direction we were given raised several red flags.  We estimated that the total disposal costs for  the NI industry should be around £3 million per year based on the current costs of 12 Euro per ton borne by farmers in the south.  (That is 200,000 tones times 12 is approx. 2.4m Euros, so we rounded up to £3 million pounds for good measure).

The two most obvious red flags were:

(i)   From my perspective, no sensible business would spend in excess of £100m to solve a £3m per year problem; it simply doesn't make sense.
(ii)  A £3m per year problem does not threaten the 7000 jobs in the poultry industry and their supply chain.  Moy Park turnover in 2009-2010 was £780m, so the disposal costs would come in at less than 0.5% of turnover.

Critically, given that the potential costs are so low (relative to turnover), the business wouldn't be under threat even if disposal costs were five times those in the ROI.  Also, speaking as an entrepreneur, if someone outside the industry were to bring a solution to market, it should be possible to charge £3m to £6m of gate fees for dealing with the problem without denting Moy Park margins; a commercial win-win for everyone.

As a next step in the analysis we were interested to assess the perception of litter disposal costs held by DARD and industry officials.  The obvious concern was that these must be somewhat removed from reality otherwise there would be no way to justify supporting the Moy Park Incinerator, never mind all the scare mongering regarding the 7,000 jobs.

To this end, Thomas Burns submitted an assembly question back in November (see the question and answer below).

It appears that DARD and the industry are of the view that the best solution we can come up with after twenty years would see a disposal cost of £90 per ton, nine times that for the approach already being used in the south.

We did ask a senior executive from the industry across the border to give a view on the £90 per ton figure and how it could be justified.  To summarize the response:

"No that seems terribly high!" ... finishing with ... "These guys must be costing in bringing the litter to East Anglia & Lincolnshire.  If [you] want to produce a crazy costing it is easy, just make the final destination very far away with multiple drop and re-loadings."

Consequently, from my perspective the £90 per ton litter disposal cost looks like a fantasy number pulled from the air at best, artificially inflated to provide justification for an inappropriate project at worst. Realistically, a conservative figure should be in the £15 to £20 range, or lower if the NI industry can be competitive with the £10 per ton levels being realized in the south.

My challenge to DARD, InvestNI and the industry:  stop messing about and come up with a low cost approach that disposes of surplus litter from NI farms for less than £10 per ton!!

Given the impasses to date, perhaps it is time for some fresh thinking. Perhaps put the problem out to tender in the private sector?

Best Regards,

t:  dannymoore_ni

Incinerator at Glenavy

Mr T Burns asked the Minister of Agriculture and Rural Development how much her Department estimates it would cost annually to dispose of poultry litter produced inNorthern Ireland lawfully, in compliance with the EU Nitrates Directive, if the proposed Rose Energy incinerator at Glenavy were not to go ahead.
(AQW 2713/11)

Minister of Agriculture and Rural Development: Over 200,000 tonnes of poultry litter is generated in the north of Ireland each year and the vast majority is spread on land. However, land spreading of poultry litter at current levels is not sustainable in the long term due to its high phosphorus content, the enriched phosphorus status of local soils and the resulting detrimental impact of excess phosphorus on water quality.

A working group of government officials and poultry industry representatives has recently investigated interim options for the storage and use of poultry litter pending the establishment of a sustainable long term technical alternative to land spreading. A range of options including alternative treatment systems available in Britain, the south ofIreland and further afield have been actively investigated. Conclusions of this work to date indicate that most potential options are either not available due to lack of capacity or are cost prohibitive.

Where capacity has been identified, the cost of disposal is estimated to be approximately £90 per tonne of poultry litter. However, the capacity available is limited and insufficient to deal with the amount of poultry litter currently spread on land in the north. There are also logistical and technical constraints.

As a viable option with sufficient capacity has not been identified an annual cost cannot be estimated.

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