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$13M in Maryland taxpayer money headed to Eastern Shore factory with water pollution woes, outraging some lawmakers

The state of Maryland is poised to give nearly $13 million to a private company that boils down chicken carcasses for pet food so the firm can reduce the amount of nutrient pollution it discharges from its Eastern Shore plant.

The subsidy for Valley Proteins Inc. comes from the state’s Bay Restoration Fund, which gets its money from a “flush fee” paid by residents and has been used largely to upgrade public sewage treatment plants.

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While there’s nothing in the fund’s policies that bars such a grant, some Democratic lawmakers are outraged that taxpayer dollars would go to benefit a business and say they’ll look at blocking such payments in the future.

“When I learned it was a for-profit company we were underwriting, I was shocked,” Sen. Paul Pinsky, a Prince George’s County Democrat who chairs the Senate’s environmental committee, said in an interview Tuesday.

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Sen. Sarah Elfreth, an Anne Arundel County Democrat, said she likewise was surprised and called the idea of giving a grant to a company that with a history of pollution violations a “nonstarter.”

“I don’t know why it’s the state’s obligation to pay for it,” Elfreth said in an interview Wednesday.

State officials said the aid would advance progress toward cleaner water, and a company representative said Valley Proteins was taking a risk to test new technology that others in Maryland could adopt if it’s successful.

The cost of the Valley Proteins wastewater project is $15.35 million, and the state has agreed to fund $12.787 million, or about 83%, according to Republican Gov. Larry Hogan’s proposed budget.

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Among 14 projects slated to receive a combined $75 million in Bay Restoration Fund money next year, it’s the second-largest and the only private one.

At its plant in the Dorchester County community of Linkwood, Valley Proteins takes parts of poultry not used for human food — essentially leftovers from chicken plants — and cooks them down to a product used in pet food, according to Michael Smith, vice chair and co-owner of the company.

A byproduct is water loaded with nutrients. The plant discharges it into the Transquaking River, a tributary of the Chesapeake Bay.

The plant has a history of failing to report its pollution totals to state regulators, according to a U.S. Environmental Protection Agency database. When it has reported data, the numbers haven’t been good. In one quarter of 2020, for instance, the plant reported emitting more than 25 times the permissible amount of nitrogen and ammonia, according to the EPA data.

Over the past five years, the MDE fined the plant once, for $5,000, the EPA’s online records show.

Since Valley Proteins bought the plant about six years ago, the company has been in negotiations with the Maryland Department of the Environment over a water discharge permit. The facility is operating on a permit that expired before the sale.

Smith said the agency approached Valley Proteins with a proposal: The company should install new technology to reduce nutrient discharge, the state would help pay for it, and MDE would issue a new discharge permit with stricter limits.

Smith said partnering with the state on the project reduces the risk to Valley Proteins.

“It’s new technology. It’s one of those things that hasn’t been used a lot,” Smith said. “We’re taking a little bit of a leap of faith that this is the right equipment.”

The project and the new permit will give Valley Proteins the opportunity to eventually increase the volume of its discharge by 50%, allowing the company to grow, Smith said. Currently, about 120 people work at the plant.

Matt Pluta of the advocacy group Shore Rivers said the state will set a “bad precedent” by giving money to a company that discharges pollution. With the state making progress on goals to clean up the Chesapeake Bay, Pluta said, “if anything, this is the time we need to ramp up protections and hold polluters accountable — not hand them a gift or reward.”

The Bay Restoration Fund was created in 2004 to upgrade sewage treatment plants and septic systems and plant winter cover crops on farms — steps targeted at reducing the flow of the nutrients nitrogen and phosphorus into the bay. Excessive levels of nutrients fuel the growth of algae blooms that decompose and use up oxygen in the water, contributing to “dead zones.”

As the state’s major sewage treatment plants have been upgraded, the fund has expanded to cover smaller plants and other water-quality projects that reduce nutrients.

The Valley Proteins project ranked fifth out of 99 proposed projects considered last year by the Maryland Department of the Environment for Bay Restoration Fund grants.

The MDE’s ranking document notes the facility’s problem as “excessive nutrients to Chesapeake Bay.” The project would reduce the amount of nutrients discharged from the facility and recycle about half the discharge for other water needs on the property, according to the MDE document.

The discharge from Valley Proteins currently has between 12 and 20 milligrams of nitrogen per liter of water, which would be brought down to about 3 milligrams per liter, according to MDE spokesman Jay Apperson. There also would be a significant reduction in phosphorus discharge.

Funding the Valley Proteins project is “an innovative and positive solution with clear benefits for clean water progress,” Apperson said.

Valley Proteins would not be the first private company to get a Bay Restoration Fund grant. Real estate company St. John’s Properties, for example, received four grants last year totaling nearly $3.5 million to connect properties in Anne Arundel County to a public sewer system.

But the Valley Proteins grant raised eyebrows because of its size and factored into a debate this week in the Senate over the use of the fund.

Some Republican senators objected to a climate change bill that would use money from the fund to pay for tree plantings, raising concerns that there wouldn’t be money left for sewage and septic upgrades in smaller towns and counties. Pinsky countered that the money going to Valley Proteins was a greater threat to the small projects.

“Many of those projects are being pushed aside to give $13 million to a privately owned, for-profit company,” he said during the debate.

Smith said he thinks the project is an appropriate use of the fund because it will result in a greater environmental benefit than would have happened otherwise. He noted that governments often have incentive programs and tax breaks for businesses.

“This is a great opportunity for the state of Maryland to improve this watershed ... if we can prove this technology,” Smith said.

Sen. Adelaide Eckardt, a Republican who represents the lower Eastern Shore, said it’s a good use of public dollars.

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“With state money, or any government money, come the strings,” Eckardt said. “Sometimes, you’re able to leverage and get people to do more than they might do if they were left to do it on their own.”

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But Pinsky, who voted in 2004 to create the flush fee and the Bay Restoration Fund, said he never considered that the funds would be spent on sewage operations of private companies.

“This is a far cry from most people’s understandings of expenditures,” Pinsky said.

It may be too late to pull back on the Valley Proteins subsidy, Pinsky said, but he’ll consider sponsoring a bill next year to bar similar grants to private companies.

Elfreth said she’s interested in that, too.

The Winchester, Virginia-based, family owned company’s finances are private, but one news report pegged its annual revenue at $550 million in 2018.

Smith said that Valley Proteins doesn’t have the funds to finance a project of this scope.

“We’re under long-term contracts with our supply companies and our margins are too tight to do this on our own and still have a profit,” he said.

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