1. Clean Energy and Air Quality Improvement Project Rio Grande Valley Sugar Growers Association, Inc. (RGVSG) Santa Rosa, Texas Jan. 28, 2003

2. Project Location Ubicación del Proyecto

3. BECC General Criteria Criterio General de COCEF 1.Energy Conservation and Air Quality Improvement Project. 2.Within 100 km. from the U.S. Mexico Border. 3.Private sector project will supplement the existing plant steam/power production to enhance operational efficiency:  Will replace 1.7MW of power w/renewable energy  Will produce an excess 5 MW renewable energy that will be sold to electric utilities (fossil fuel energy savings)  Will reduce plant emission pollutants by over 40%

4. Background Antecedentes RGVSG Mill has been in existence since 1972 and employs 188 full-time personnel, with up to 567 total personnel during Oct. – May harvest. The RGVSG Cooperative has a membership of 127 sugar growers and is the only sugar mill in the State of Texas. The RGVSG members actively farm up to 47,000 acres of sugar cane.  3% of the arable land in RGV  provides almost 12% of the GDP in the RGV Plant capacity = 10,000 Tons of Cane per day (TCD).

5. General Operations Process Proceso de Operaciónes en General Receipt and weighing of cane at the mill Washing of raw cane to remove soil Heavy duty shredding to prepare for milling Milling (7 mills in tandem) to remove 95% of sugar juice in cane Sugar juice limed and heated for contaminant removal via clarification Clarified juice to pre-heaters to produce concentrated syrup Concentration of syrup in vacuum pans to form crystalline sugar Batch centrifuge to separate sugar from liquor (molasses) Storage of crystalline sugar in the sugar warehouse

6. Receipt of Cane at Mill

7. Milling of Cane (7 mills in tandem)

8. Heating/Evaporation

9. Separation of Sugar/Molasses

10. Storage of Molasses

11. Bagasse Handling/Storage Area

12. Existing Boilers

13. View of Plant

14. Project Components Componentes del Proyecto 1. New Bagasse Handling System 2. New Boiler 3. New Turbine Generator

15. Project Components Componentes del Proyecto 1. New Bagasse Handling System Includes:  conversion of all bagasse conveyors to fully automated belt conveyors.  Expansion and upgrade of of the bagasse storage building  Conversion of the boiler building to handle the modified bagasse conveyor system. Purpose:  significantly reduce or eliminate the need and associated costs of front end loaders  Necessary to remove limitations on the delivery of the primary fuel source for the boilers.

16. Project Components Componentes del Proyecto 2. New Boiler Includes:  The addition of a new boiler to increase steam capacity – increased production.  A wet scrubber and mechanical dust collector to reduce air emissions Purpose:  Increase steam capacity by 300,000 lbs/hr for total capacity of 800,000 lbs/hr (60% increase).  Existing boilers can operate at reduced capacity w/the new added boiler, resulting in 44% reduced air emissions.

17. Project Components Componentes del Proyecto 3. New Turbine Generator Includes:  New Boiler coupled with a Topping Steam Turbine and a new 6000 KW Turbine Generator. Purpose:  Will bring installed power to 11,000 KW.  Will eliminate the need to buy 1.7MW of power to meet plant needs.  Will also produce 5MW excess power for export (to sell to electric company – Texas Utilities).

18. Human Health & Environment Criteria Criterio de Salud Humana y Medio Ambiente 1. Human Health and Environmental Need The sugar mill lacks steam generating capacity for full operations and has excess waste (bagasse) to deal with in a safe and environmental–friendly manner. The project addresses the need to improve plant operational efficiency; w/total reduction in pollutant emissions load & added renewable energy power. 2. Environmental Assessment An EA of the project was completed & there are no significant environmental impacts as a result of the project. All on-going plant operations are fully permitted (air and water) with no significant non- compliance. (A draft permit for the project was issued to RGVSG on January 23, 2003 by TCEQ. With TCEQ/RGVSG agreement on the terms of the Permit (expected late 2003), final issuance would follow a 30-day public comment period and final EPA & TCEQ-management review/approval..)

19. Human Health & Environment Criteria Criterio de Salud Humana y Medio Ambiente 2.Environmental Assessment (Continued) Sugar Cane Harvesting: RGVSG has an open burning permit in effect since 1974. The cane burning is authorized only until such time that an alternative method of harvesting becomes technologically practicable and economically reasonable which would not require outdoor cane burning. In addition, Periodic Open Burning permits from “green harvesting,” are obtained by farmers individually on their own on a case by case basis from TCEQ. Green Harvesting accounted for 10% of the harvesting last year. Sugar Cane Harvesting: RGVSG has an open burning permit in effect since 1974. The cane burning is authorized only until such time that an alternative method of harvesting becomes technologically practicable and economically reasonable which would not require outdoor cane burning. In addition, Periodic Open Burning permits from “green harvesting,” are obtained by farmers individually on their own on a case by case basis from TCEQ. Green Harvesting accounted for 10% of the harvesting last year.

20. Human Health & Environment Criteria Criterio de Salud Humana y Medio Ambiente 2.Environmental Assessment (Continued) Major Findings of Environmental Assessment: Plant Air Quality impacts are significantly reduced with over 44% reduction in total pollutant mass emissions. Project promotes the use of renewable energy sources Project reduces reliance on fossil fuels There are no water/wastewater issues, Plant is effectively Zero Discharge although a Discharge Permit is in effect Major Findings of Environmental Assessment: Plant Air Quality impacts are significantly reduced with over 44% reduction in total pollutant mass emissions. Project promotes the use of renewable energy sources Project reduces reliance on fossil fuels There are no water/wastewater issues, Plant is effectively Zero Discharge although a Discharge Permit is in effect 3. Compliance with Applicable Environmental and Cultural Resource Laws and Regulations The plant complies with all laws and regulations and is authorized/fully permitted by the TCEQ. With issuance of a final air quality permit for the new construction, the project will comply with all laws and regulations.

21. 1. Appropriate Technology The technology being used is considered the latest in the industry in efficiency, safety and environmentally, including a Best Available Control Technology Assessment. Shaffer & Associates, the original design engineers for the plant, prepared the feasibility study and design, and Pollutech International Limited, reviewed the design. Both firms have substantial industy experience. 2. Operation and Maintenance Plan The equipment suppliers and construction contractors will be required to provide training and O&M manuals for the new facilities, along with the normal operational warranties. In addition, plant management contracts consultants for specific problems that arise. Technical Feasibility Factibilidad Técnica

22. 3. Compliance with applicable design norms and regulations The design is based on the latest engineering and industry practice, and complies with TCEQ air quality requirements. A Draft TCEQ construction permit has been issued, pending finalization for the 60-day public comment period and final issuance thereafter. The permit and design were analyzed and are in agreement with the state and federal definitions of the Best Available Control Technology Assessment –Economically Achievable (BACT-EA). Technical Feasibility Factibilidad Técnica

23. Financial Feasibility Factibilidad Financiera A financial feasibility study is on-going by a NADB consultant, with completion expected in May 2003.

24. Financial Feasibility Factibilidad Financiera 11.3$2,100,598$23,826,937Total Upgrade 9.4$1,853,120$17,384,405 Boiler Upgrades And Turbine Generator 26$247,478$6,442,532Bagasse Handling Payback Period (years) Annual Cost Savings Capital CostProcess Upgrade (10,000 TCD) Costs Source: Pollutech Report Note: Payback does not include cost recovery from the sale of power

25. 1.Comprehensive Public Participation Plan 2. Public Information Community Participation Participación Comunitaria A Steering Committee consists of Board Members of the RGVSG association. Two meetings have been held but a third will be required when the financial analsis is completed. Due to the private nature of this project, the public outreach activities have focused on the primary stakeholders, the cooperative members and the surrounding communities. The first public meeting was held January 23, 2003, and a second meeting was held on February 3, 2003. Steering Committee members contacted and briefed representatives of surrounding communities of Ed Couch, La Villita, & Santa Rosa. Letters of support are on file from various organizations.

26. The project complies with the definition of Sustainable Development: It is conservation oriented because it promotes the use of renewable energy sources and reduces the reliance upon fossil fuels for energy. The increase in efficiency also results in a 44% reduction in the plant air pollutant emissions. It improves the current impact of human activity on the environment while at the same time eliminating further degradation to the environment. It addresses future needs for service of a large component of the Rio Grande Valley economy while providing a positive impact to the surrounding environment. The project complies with the definition of Sustainable Development: It is conservation oriented because it promotes the use of renewable energy sources and reduces the reliance upon fossil fuels for energy. The increase in efficiency also results in a 44% reduction in the plant air pollutant emissions. It improves the current impact of human activity on the environment while at the same time eliminating further degradation to the environment. It addresses future needs for service of a large component of the Rio Grande Valley economy while providing a positive impact to the surrounding environment. Sustainable Development Desarrollo Sustentable 1. Definition and Principles

27. Sustainable Development Desarrollo Sustentable 2. Institutional and Human Capacity Building The plant improvements will improve the efficiency of the industry, including the increase of the technical capacity of plant staff. 3. Conformance with Applicable Local/Regional Conservation and Development Plans The project requires the sponsor to obtain the necessary TCEQ air quality permit to meet the State and EPA requirements. The proposed improvements to the factory to increase efficiency while promoting the use of renewable energy sources is in compliance with the energy goals and objectives of the United States, the State of Texas and the Region M Senate Bill 1 Water Plan. The Region M plan indicates that up to the year 2050, the majority of Cameron County and Willacy County will remain primarily in agricultural land use.

28. Sustainable Development Desarrollo Sustentable 4. Natural Resources Conservation The proposed project significantly improves the environment through the use of renewable energy sources, reduction in the use of fossil fuels, and reduction in the current air pollutant loading. 5. Community Development The factory infrastructure improvements support continued community economic growth, providing 12% of the economic activity in the Rio Grande Valley, in addition to supporting local related contract businesses. The long-term growth of future community development is made possible by having adequate infrastructure in place to accommodate economic growth, the possible addition of new businesses or industries, and the expansion of existing businesses in the area.

29. Staff Recommendation - Pending Recomendación del Personal - Pendiente Based on the information presented, and subject to completion and review of the pending financial analysis for the project and receipt of a final TCEQ Air Quality Permit for the project, BECC staff expects to be able to recommend: the “Rio Grande Valley Sugar Growers, Inc. Clean Energy and Air Quality Improvement Project for certification”