TO BUILD or Not TO Build

John Dempsey

SOCIAL, POLITICAL AND environmental concerns often can besiege a proposal to build a transfer station. To justify the need for such a facility, solid waste managers need to balance the facility's purpose(s), benefits and economics. Almost certainly, the question, “When is a transfer station feasible?” will be asked.

Costs — and savings — play a prominent role in the answer, as do project-specific requirements. For this reason, solid waste managers should clearly determine the primary purpose(s) of the proposed facility in answering this question.

Beyond the Cost

Transfer stations commonly are designed to satisfy an individual or combination of purposes. For example, transfer stations can:

Cost savings or economic feasibility often are described in terms of a break-even analysis [See “The Concept or Theory” on page 90]. This is the general relationship used to contrast direct (or primary) haul with secondary haul (via a transfer station). Numerous textbooks and training programs (e.g. the Solid Waste Association of North America's (SWANA) “Managing Transfer Station Systems”) describe methods for conducting this preliminary analysis.

Business and Politics

Simplified, theoretical approaches and graphics are excellent tools to communicate feasibility or establish need for a facility in the political, social and regulatory approval processes. In practice, feasibility evaluations also must consider facility users/waste haulers, disposal site options, ability to site and permit a facility, future collection and management practices, and other factors.

The politics of waste management often results in disagreement among policymakers, waste haulers, neighbors and consumers over the appropriate approaches to long-term solid waste management and what constitutes feasibility. These conflicts often modify or enhance the intended purpose(s) of a transfer station.

Waste haulers are particularly concerned about the effect that a facility may have on the long-term viability of their business and their competitive advantage. Policymakers often are bombarded with conflicting and sometimes erroneous or biased information on facility economics, community benefits, and secondary considerations or impacts. Decision-makers should have feasibility clearly defined in terms of both purpose(s) and economics.

Before confusing the question of social, political and regulatory feasibility with economic feasibility, other factors can come into play. For example, if the transfer station is part of an integrated management program, the decision on tipping fees assessed at the transfer station may determine its economic feasibility. In this situation, tipping fees may reflect the true costs of the transfer station or may be set uniformly throughout the system (e.g. same at landfill versus transfer station) to encourage use of the closest facility, to be market competitive or as a concession to the host community. As a result, accounting or business practices may make a facility feasible.

Economic Modeling

The economics evaluation of a transfer station begins with selecting or assuming a site location. Siting efforts should place a facility as close to the center of the service area as possible to minimize direct haul costs and maximize facility users. There is an economy of scale associated with larger facilities.

In large service areas with long haul distances to the disposal site or transfer station, multiple transfer stations may need to be sited. This is especially true if one transfer station cannot handle the traffic or tonnage volumes, or cannot be centrally located. Haul time and distance to transfer stations or management/disposal facilities are primary cost considerations for waste haulers. If all other factors are equal, haulers normally will use a transfer station if the cost is less than the cost associated with direct haul to the alternate disposal site. This is one definition of feasible.

How a hauler arrives at this decision may be more complicated. Haulers might consider customer locations, route configurations, unloading time and other cost factors in their decision.

Because of economies of scale, facility size affects the cost of a transfer station. From a purely economic perspective, the optimum facility size can be described on a per ton basis, as the least-cost summation of the cost for collection plus transfer (including recycling) plus disposal plus administration. In equation form:

Optimum Size = least-cost (collection + transfer (+ recycle) + disposal + administration)/tons

In the equation, “transfer” would be direct or secondary haul. With all other variables equal, the optimum size of a transfer station would be established when direct haul costs and secondary haul costs via a transfer station are equal. An optimization analysis can determine the need for multiple facilities within a large region or service area. In a regional optimization analysis, this equation would be used with multiple scenarios to test each option's viability.

In rural settings, packer trucks and bin systems may be economic technologies. In “Transfer Stations and Rural Regionalization,” presented at WASTECON 1990, the authors' modeling efforts suggested several rules of thumb for screening level economic assessments:

These are obviously sensitive to a large number of assumptions, particularly haul distance, travel speed, payloads, the physical features and operating practices of a particular station, as well as efficient equipment utilization.

Cost Variables

Basic economic feasibility involves four principal cost factors: transportation from a transfer station; transfer station operation and maintenance (O&M); transfer station capital (construction and equipment); and direct haul.

In the total cost of providing a transfer station, capital costs followed by O&M costs are, or should be, the lowest cost components. Hauling generally is and should be the most expensive component. To accurately and completely assess costs, each factor must be subdivided into its component parts. Detailed breakdowns allow inclusion of a wide range of project-specific variables (e.g., building architecture, site conditions, labor rates, routes and roadway conditions, operating hours, payloads, etc.).

Accurately assessing the transportation cost is important because it relates to the amount of capital and operating costs that can be economically justified for a facility.

Evaluations

For small communities, the limited waste generation may make a capital- or operation-intensive transfer facility costly and, by some definitions, not feasible. It's important to ask what the purpose of the transfer station will be because costs may not be the sole justification. Small, rural transfer stations often are justified based on community convenience, public service or to mitigate costs associated with cleanup of illegal disposal. Cleanup of illegal dumping is a cost not always considered in a simple economic evaluation. Small facilities also may use alternate funding or accounting practices to remove the capital and portions of the O&M cost from the evaluation.

In larger waste management programs that allow full use of collection and transport equipment, payloads and facility size can influence economic feasibility.

Transfer stations require fixed facilities, such as land, paving, compactors, bins, fencing, buildings, etc. They also require attendant costs, such as building and site maintenance, labor for trailer loading, fee collection or supervision, utilities and other operations. These must be added to the transfer (transportation) costs. [See “Transfer Station Owning and Operating Costs” on page 91 for a simple dollar per ton comparison of amortized capital and operating costs for various sizes of simple transfer stations. “Cost Comparison Scenarios” on page 92 illustrates that economic feasibility may depend on size, haul distance, travel speed or payloads.]

The conversion of hourly rates to cost per ton are sensitive to average vehicle payloads. For example, a one hour round-trip to the disposal site with a 6-ton payload might result in an approximately $12 per ton direct haul cost. A 9-ton payload would result in an $8 per ton direct haul cost.

To accurately determine costs using methods similar to “The Concept or Theory” [on page 90], the cost of primary haul to the management or disposal site must be compared with the combined cost of primary haul to the transfer station plus the combined capital, operating and haul costs from the transfer station. If a first order (simple) screening analysis suggests marginal economic feasibility, detailed analysis should be conducted.

Rules of Thumb

So when are transfer stations feasible? Some “rules of thumb” are based on fact, while others are not. One suggestion is to take the annual costs for capital, O&M and haul for the station and plot them on a pie chart. If the haul cost component is less than 33 percent, the transfer station is likely not justified by economics. If the haul cost component is more than 50 percent, then the facility is almost certainly economically viable. This rule assumes that at least three packer trucks will fit into a transfer trailer. If three packer trucks each pay more than two-thirds of their tipping fee for the capital and O&M, it is likely cheaper for them to haul directly to the disposal site.

Before multimillion dollar commitments are made to construct and operate a transfer station, it is usually appropriate to perform a detailed economic analysis. It may be equally important to clearly establish the purpose(s) of the facility. This helps to confirm rules of thumb or simplified analysis, and provide support to questions that will be raised during the siting, political, social and possibly regulatory approval processes.

John Dempsey is a professional engineer and vice president of HDR Engineering Inc. in Omaha, Neb.