Covanta sues Hennepin County over downtown Minneapolis garbage burner

The company that runs Hennepin County's large garbage burner in downtown Minneapolis is suing the county, arguing it sabotaged negotiations over a new multimillion-dollar contract.

Covanta, which has run and managed the Hennepin Energy Recovery Center (HERC) for 27 years, filed the federal lawsuit Thursday. The move comes after the county accepted a proposed agreement from Maple Grove-based Great River Energy last month and gave Delaware-based Covanta a Sept. 22 deadline to agree to the terms or the Minnesota company would get the job.

What's at stake is a 16-month contract for $25.5 million starting in 2018.

A spokesman for Covanta declined to comment, deferring to the lawsuit "as it outlines the company's position well." Hennepin County spokeswoman Carolyn Marinan confirmed that Covanta filed a lawsuit, but declined to comment because it is under review.

Great River Energy operates an Elk River processing plant where the county sends garbage to be converted into electricity, as well as a facility that Washington and Ramsey counties use. Covanta runs 45 facilities across the country and has managed and operated the HERC since it opened in 1989. The 15-acre facility west of Target Field converts solid waste into electricity through combustion, processing about 1,200 tons a day.

In Thursday's court filing, Covanta said the county refused to negotiate over a fair market service fee for a contract extension, which it was required to do. Then, the county "sabotaged the negotiations by insisting that Covanta agree to an entirely new set of contract terms" that shifted many risks, liabilities and responsibilities to Covanta and eliminated revenue sources. The contract agreement with Great River Energy, Covanta said, is for a different scope of work and a shorter term.

The contract's current terms were negotiated in 2003 when the county bought the HERC. Covanta notified the county that it would be exercising its option to extend the contract.

The suit argues that Hennepin County was required to negotiate a fair market service fee for the extension in good faith. If negotiations failed, the county would have the right to solicit other proposals to determine a service fee that Covanta could "either take or leave," the lawsuit said. The contract extension could be for up to seven years.

In 2014, Covanta again gave notice that it would extend the contract. Initial negotiations resulted in the county proposing an entirely new agreement, the suit said. Over the next year, the county refused to move on its proposal and failed to offer a counterproposal or new service fee, the suit said.

Even as the county solicited new bids, Covanta exercised its extension option. The county had stopped negotiations with the company, the suit said. Last month, the county accepted the terms of the contract with Great River Energy. The value of the contract is more than $19 million each year, or $25.5 million for the 16-month agreement offered to Great River Energy.

The lawsuit claims that the county sabotaged the dealings by insisting that the company agree to an entirely new set of contract terms that were much more burdensome than the existing agreement and that the county improperly drove negotiations far beyond the sole issue of deciding the fair market value of Covanta's service fee for the extension period.

In an action request approval of the Great River contract and setting Sept. 22 for Covanta to accept or reject the terms, Commissioner Peter McLaughlin abstained, stating his discomfort with the process leading up to the county's approval of the contract, the suit said.

The suit is asking for damages in excess of $75,000.

David Chanen • 612-673-4465

Kelly Smith • 612-673-4141