What started out as a simple request by Team Ten LLC representative Randy Tarpey, turned into an hour of debate and a potential deal breaker for the group looking to close its purchase on the former Westvaco paper mill.
Tarpey, speaking on behalf on Team Ten LLC, asked the council to approve four items at its meeting last night. The investment group asked for a transfer in baseline sewer capacity from Westvaco to Team Ten LLC, transfer of Westvaco purchased sewer capacity to Team Ten, assignment of the reserved sewer capacity agreement between Westvaco and the borough to Team Ten and acceptance of Team Ten as a new sewer customer effective Aug. 6, the proposed closing date for the sale of the mill.
The agreement between the borough and Westvaco that was signed in April of 1997 calls for a baseline capacity of 3,000,000 gallons of sewage daily and 1,000,000 gallons of daily capacity purchased by Westvaco for $2 million in 1997. Team Ten LLC asked for a transfer of that agreement to the new company.
Team Ten LLC president John Ferner addressed council and said, “I would assume that these are all positive things and the borough would consider them and act on them, at least the first four issues. We need them for our closing. I believe that Westvaco has sent a letter in requesting these agreements be transferred.”
After Ferner spoke to the council, solicitor Larry Clapper and engineer Ray Myers spoke to the council about the issue.
“Whenever the plant was upgraded in the late 90s, we (the borough) entered into separate agreements with Westvaco, Northern Blair (Regional Sewer Authority) and QCI (Albemarle),” said Clapper. “Each one of those were similar in nature, but under those agreements, in the event that Westvaco or QCI wanted to assign their rights under the agreement, they had to obtain the permission of borough council to do that because we are the other signatory for that agreement. Per that agreement, there were assignments made to Westvaco concerning its capacity. The baseline capacity, which is owned by the borough of Tyrone.
“The borough owns all baseline capacity. It was assigned to Westvaco at three million gallons per day in 1997. It is owned by the borough, but is assigned to Westvaco. Such baseline capacity shall be guaranteed to Westvaco for the term of this agreement provided that Westvaco operates a facility in the borough utilizing all its baseline capacity.”
Clapper also explained to the council about the 1,000,000 gallons of purchased capacity that was purchased by Westvaco in 1997 at a cost of $2 million. That was theirs to do with as they pleased. Before they could sell it or assign it, they had to offer it to the borough at the same amount. Westvaco wishes to transfer its purchased capacity to Team Ten and Team Ten wants to sell capacity to Northern Blair at a rate of 21,740 gallons per year for five years at $2.30 per gallon.
If the borough wanted to purchase that capacity, it would have to pay $2.30 per gallon. If council would reject that offer, Team Ten will be able to sell that capacity to Northern Blair.
Clapper asked Tarpey how much capacity they wanted to be transferred.
“We want the same rights Westvaco had,” said Tarpey. “What we want is as simple as striking out the name Westvaco in the agreement and insert Team Ten LLC.”
Clapper laid out a couple of options to the council.
“If you want, you can just authorize the agreement in total and that would mean they would get the three million in baseline and one million purchased. It would be just like Westvaco stepping in,” said Clapper. “Or, you can decide what you want to do with that baseline capacity and it has a value. Team Ten would like you to sign the full amount that Westvaco had to them also.”
When Team Ten would open up the mill, it is estimated that two million gallons daily would be the amount discharged. The borough engineer spoke of the amount of capacity that Westvaco discharged in the five years of operation.
“We looked at from the time that agreement was signed in 1997 over the next 60 months until the mill shut down,” said Myers. “The average flow was 2.5 million capacity. The highest month was 2.75 million capacity. At least 2.75 million for the maximum month would line up perfectly with what Westvaco’s history was for their last five years in operation.”
Myers brought up that the agreement was put into place in part because Westvaco came to the borough about a possible expansion in 1994 or 1995.
“There was even talk about even moving it into Pennsylvania Avenue and re-routing it near the Bald Eagle Creek,” said Myers. “The expansion didn’t occur and Westvaco didn’t need 4 million gallons of capacity. I think Larry is correct that there are options. You can make it all available or make some available.”
Councilmember Jim Beckwith spoke up to announce his frustration with the process.
“We have two days to make a decision,” said Beckwith. “We were not allowed to discuss this and that is wrong. The community needs to know what is involved here. I want you to open the mill. It would be wonderful. We have taken a beating over a lot of stuff because we couldn’t talk about what was going on.”
Council vice-president Bill Latchford said, “this effects things greatly if the sewage rates goes up.”
Sewer rates have not been increased in Tyrone Borough in more than 20 years.
As the debate continued, the frustration was becoming evident on the faces of Ferner and Tarpey. A simple request had gone awry.
Eventually, councilmember Beckwith made the motion not to purchase the one million gallons in capacity. The motion was seconded by councilmember Jennifer Bryan and passed by an 8-0 vote.
Beckwith then proposed that the borough assign Team Ten two million gallons of capacity. The motion was seconded by councilmember Jeffrey Watson and the vote again was unanimous.
Following the vote, a visibly upset Ferner and Tarpey left the chamber.
“This doesn’t surprise me,” said Ferner. “Every organization we have approached since this process started has been helpful to our cause before tonight.”
When asked if this could be a deal breaker, Ferner said, “it could kill the deal. I have to take this back to the investors because what we thought we were purchasing as an asset is not anymore.”
Tarpey said he might not sign on.
“I have to go to the bank on Wednesday and make a decision if I am going to sign on the dotted line,” Tarpey said. “This changes what we thought we were buying.”
This morning Ferner spoke to The Daily Herald concerning the events of last night’s meeting.
“I just can’t understand why Westvaco was allotted 3 million in capacity and why we as small time investors can’t have the same amount is beyond my comprehension,” said Ferner. “I am not sure if we will postpone the closing or what.”
The closing on the mill was scheduled for tomorrow, but is up in the air.
“I have talked to a couple investors already this morning and they weren’t very happy,” said Ferner. “We hope to have a meeting with the investors today to decide what direction we are going to go in.”
