SPRINGFIELD, Ill.Chewton Glen Energy Inc., a three-man company that aspires to build just two tires-to-energy plants, both in Illinois, may experience the proverbial rug being yanked out from under its feet. In January the Illinois legislature approved repeal of the 1988 state subsidy law that lured Chewton Glen and other waste-to-energy firms into the state.
There is no ``grandfather clause'' to protect projects, such as Chewton Glen's two plants, already in development.
If Gov. Jim Edgar signs the bill, as he has promised, the repeal is expected to derail a dozen proposed waste-to-energy projects. The governor has until mid-March to act on the bill.
The subsidy was instituted under the 1988 Retail Rate Law, which required public utilities to purchase electricity from waste- fuel incinerators in their areas at higher, retail rates. The utilities, in turn, were given a tax credit from the state to make up for their additional cost.
``If the governor signs the bill as is, it would potentially force our Ford Heights (Ill.) plant to close and bonds to default,'' said Terry Colip, a Chewton Glen partner. ``We would litigate against the state of Illinois for impairment of contract.''
His firm, like other waste-to- energy concerns, was induced by the tax break to set up shop in Illinois, to sell bonds for financing and sign contracts with power customers.
Chewton Glen's first plant, recently opened in Ford Heights, is operating under the management of Houston Industries and is undergoing test burns of tire chips.
Chewton Glen's second and final project is still in the development stages in Fulton, Ill.
``This was it,'' Mr. Colip said from his Englewood, Calif., office. ``There wasn't another state where such a project would economically work.''
Illinois, he said, was the best place to set up the plants due to the Retail Rate Law, the large population and a sufficient number of waste tires to fuel the plants. The plants plan to sell power to Commonwealth Edison.
Illinois' scrap tire management officials also are on edge about the potential fallout from the repeal.
Prior to the legislative action, officials believed the state's scrap tire problem was about to be solved. They soon would have enough major tire-derived fuel (TDF) users dispersed around the state to handle the annual generation of scrap tires and make a dent in existing tire dumps.
``In Illinois, we've been working for six years to develop markets and manage the 12 million tires generated each year and the countless millions in dumps,'' said Paul Purseglove of the Illinois Environmental Protection Agency. He foresees two consequences if the law is enacted. If the Ford Heights project folds up, ``a 6 million-tire capacity would be lost in Chicago, and it would be detrimental to the tire program.''
Or the tires-to-energy projects could offset the loss of revenue from electricity sales with a hike in tire tipping fees. ``All retailers would see an increase in tire disposal costs,'' Mr. Purseglove predicted.
The Illinois EPA is preparing a document for the governor to persuade him to at least amend the bill to exclude existing projects, such as the Ford Heights plant, from the subsidy repeal.
Conversely, the demise of the Ford Heights and Fulton projects would be a boon for Waste Recovery Inc., which recently opened two TDF processing plants in southwestern Illinois.
WRI would be unaffected by the repeal because it sells TDF to Illinois Power's existing power generator, which burns TDF as 2 percent of its fuel stock.
``We've positioned ourselves so we don't rely upon subsidies,'' said WRI President Thomas Earnshaw, adding that if tire recycling is to be successful in the normal market environment, companies can't rely on government funding.
Toby Eckert of Crain News Service contributed to this report.