Foxconn's Complex Path From And Back To Lake Michigan
Foxconn's proposed LCD manufacturing complex in Wisconsin will need a great deal of water to operate — millions of gallons per day — and the Taiwan-based company has positioned itself to get it from Lake Michigan. It's likely that Foxconn planners thought ahead about the complex legal structure governing municipal use of Great Lakes water. Once the company can legally access this water, it has to actually get it to and from the complex. That infrastructure will be a major engineering and construction project in its own right.
Foxconn plans to build the factory in Mount Pleasant, a suburb of Racine in southeastern Wisconsin. The city of Racine will supply water to the Foxconn plant. Racine Water Utility manager Keith Haas confirmed these plans via email on Oct. 6, 2017.
"There are still many questions and very few answers," Haas said. "Now we have to do the hard part — engineer and construct the necessary infrastructure in a short time frame."
Companies and other individual users can't tap Great Lakes water directly, so Foxconn must work with a public utility. Racine and several other major public water utilities in eastern Wisconsin source water from Lake Michigan, drawing it in through offshore intake pipes, and often selling some of that water to neighboring communities. Under the requirements of state regulations and the Great Lakes Compact, each of these utilities is allowed to withdraw up to a certain volume of Lake Michigan water per day; most don't max out that amount, though, which gives them room to expand their service areas or take on additional client communities.
More generally, large municipal drinking water and sewage treatment plants are designed to handle much more water than they typically do, to allow for growing population and demand. In eastern Wisconsin, these utilities sourcing Lake Michigan must return almost as much water to the Great Lakes watershed as they use, in the form of treated wastewater.
The city of Waukesha's plan to source drinking water from Lake Michigan helps illustrate the scale of what Foxconn and its government partners will have to do to meet the company's water needs. Waukesha secured permission in June 2016 to tap the lake, after a years-long process of making its case to the governors of the eight Great Lakes states. But instead of building its own intake pipe in Lake Michigan, Waukesha will purchase water from Oak Creek, which already has an intake system.
Under the terms of the Great Lakes Compact, Waukesha has permission to use about 8 million gallons of Lake Michigan water per day. To get it, the city will have to build a pipe system running between Oak Creek's water treatment plant and its own water facilities. Waukesha will also have to build a new system for discharging its treated wastewater. This infrastructure will run through several communities in the suburban Milwaukee area, so the construction will require numerous local permits on top of state approvals.
Waukesha anticipates beginning construction in 2019 and completing it by about 2022. The project even has its own public-relations campaign dubbed the Great Water Alliance.
Foxconn hasn't said exactly how much water it will need for a factory in Mount Pleasant. But one electronics manufacturing analyst estimated that it could be as much as 15 million gallons per day — almost double what Waukesha proposes to use at its thirstiest. If Foxconn's needs are anywhere close to that figure, it will take capacious pipes and a fair amount of energy to pump all that water.
Building for the future
Foxconn officials have said the company wants to get its Wisconsin operation running by 2020, which means its water infrastructure needs would have to get built pretty quickly.
Foxconn will likely have an easier time getting construction and environmental permits than Waukesha. The state legislature passed and Gov. Scott Walker signed an incentives package that exempts the company from a variety of environmental permitting requirements. Moreover, a portion of the nearly $3 billion in payments the state plans to make to Foxconn will reimburse the company's capital investments, which could include spending on water infrastructure. The state's incentives package also creates tax-increment financing options for Foxconn, opening up another potential source of funding for water infrastructure construction.
Local governments around the Foxconn complex will likely have a role to play in the construction process. After the company officially announced its intended site on Oct. 4, officials in Racine County and the village of Mount Pleasant proposed an additional $763 million incentives package of their own, $88.4 million of which would go toward water projects.
When building this water infrastructure, Foxconn and local officials will have to think about much more than the needs of the factory complex itself. If the facility does indeed come to fruition as promoted and yields anything like the economic activity the company and project boosters have touted, satellite businesses and residential developments in southeastern Wisconsin will follow.
Any new pipes put in place for a Foxconn factory will need to be able to carry enough water to serve a growing amount surrounding development too. At the very least, engineers will want to place water mains along routes where additional pipes could be lain as demand grows in the future.
Such thinking is evident in the project plan detailing the Racine County-Mount Pleasant incentives package. It proposes building a 42-inch-diameter water main that heads inland from Racine's water treatment plant. But instead of heading straight to the southwest towards the Foxconn site, this new water main splits off into a few different branches and loops, running through a mix of residential, commercial and agricultural land to the north of the future factory.
As extraordinary as the Foxconn proposal and its political circumstances may be, this kind of planning ahead is just what water utilities and local governments do on a regular basis. Utility managers and engineers, at least in large urbanized or rapidly growing areas, try to anticipate the needs of their service areas a few decades into the future, all while trying to serve a variety of residential and commercial users, as well as any smaller cities that purchase their water.
"As a water utility general manager, these are issues that do come up and you want to plan for them," said Nancy Quirk, director of Green Bay's water utility and a board member of the Wisconsin Section of the American Water Works Association.
"You understand you're balancing the needs of the state and commerce, you want to be a good supporter of the city initiatives and things, so you're trying to do everything you can to do what you can to provide additional services," she said. "But you also have to balance that with your existing ratepayers and how that's going to balance out so that everyone is treated fairly or correctly at the end."
Racine water manager Keith Haas said his utility will also have to weigh future developments west of Interstate 94. Foxconn's chosen site is just east of the freeway, and some of the related development related to it may end up being built to the west.
"When we do planning we have to look at 50 or 100 years … We have to think about how we're going to service different areas," Haas said.
Todd Berry of the Wisconsin Taxpayers Alliance, a nonpartisan nonprofit that analyzes the state's revenue and spending policies, said both incentives packages give Foxconn and local officials broad latitude to finance water infrastructure and other needs. Usually tax-increment financing is set up to be used in a district with specific geographic boundaries, but the state has given this project a bit of extra wiggle room, according to Berry.
"The way the state legislation was written, it says you could use TIF revenues for improvements outside the district if they're in [Racine County], which is exactly what's going on here," he said.
Costs and new revenues for utilities
Moving water from a treatment plant to a given customer requires energy. When that water comes from Lake Michigan and is headed inland, it also has to be pumped up to higher elevations. Sure, southeastern Wisconsin is relatively flat, but pushing millions of gallons of water uphill is hard work, even if it's not a steep incline.
Again the case of Waukesha is instructive.
"I think it is going to cost us about $3 million more [per year] than it costs today for us to serve Waukesha, and largely that was electrical costs," said Oak Creek Water & Sewer Utility manager Mike Sullivan. "There certainly is some staff time required to maintain additional piping, [but] $2 million of that was going to be energy charges."
It's not a bad deal for Oak Creek. By taking on Waukesha as a customer, the city's utility will pull in much more than $3 million in additional water rates per year. The new infrastructure that serves Waukesha could also allow Oak Creek to attract other nearby communities as water customers.
With Foxconn as a customer, Racine's water utility would likely profit over the long run too, depending on how long and how productively the factory operates. Adding more customers spreads out the utility's fixed costs, which can reduce water rates for residential and commercial customers alike. But as more and more people and industries tap into that water supply, it does place additional demands on an electrical grid that is still largely dependent on fossil fuels.
As the Racine County and Mount Pleasant incentives plan details, serving Foxconn will require new pipes and three "booster stations" to pump water to higher elevations as it works its way uphill toward I-94. While Racine's water manager Keith Haas said that he doesn't know what specific volume the factory will need or how much it will cost up front to meet that needs, he is confident about the expansion paying for itself in the long run.
"Our current electric bill is around a million so it will likely go up," Haas said. "That ends up being the cost of doing business and is not a great factor in the scheme of things. Likely in the noise."
After supplying water to a customer, a municipal utility still has to deal with it when at the other end. Federal and state environmental regulations require utilities to reduce various contaminants in wastewater to acceptable levels before discharging it to a river or lake.
A large wastewater treatment operation like Oak Creek or Racine is equipped to deal with a variety of contaminants, many common around Wisconsin like phosphorus and fecal bacteria. Electronics manufacturing, however, tends to involve an array of environmentally sensitive substances that don't always show up in garden-variety sewage, from heavy metals to volatile solvents.
To ensure that the wastewater coming out of a Foxconn factory meets environmental standards before it's discharged back into Lake Michigan, the company will likely have to do a fair amount of treatment in-house. Electronics manufacturers already have methods for treating and filtering out contaminants, like boiling down metals-ridden wastewater into what some describe as a "waste cake." How securely the company stores its waste, and where it eventually sends it off to, though, is another question with implications for groundwater and surface water quality and soil contamination in the area around the factory.
When it comes to enforcement, there's the question of whether environmental regulators at the Wisconsin Department of Natural Resources will have the resources and political backing to monitor Foxconn's environmental practices and take action if something goes wrong.
Certain industries already have to comply with federal environmental standards when it comes to the wastewater they discharge. For Keith Haas at the Racine Water Utility, coordinating those requirements is a fairly routine matter.
"We probably have 45 industries already that discharge to our plant in Racine," he said. "Many of those are pre-treating their waste so that they are sending us a more diluted product."
Large water utilities routinely deal with industrial customers that have specialized wastewater-treatment needs, noted Haas and Oak Creek water manager Mike Sullivan. In fact, the Oak Creek utility already serves a couple of electronics manufacturers, though they're much, much smaller than the operation Foxconn proposed. The Oak Creek wastewater treatment process provides the same basic service to every customer sending effluent downstream, Sullivan said.
Utility managers around the state work with industrial customers to understand what specific wastewater treatment problems they deal with and make sure that these facilities are taking care of any specialized treatment that needs to happen. In that sense, Sullivan said, working with an electronics manufacturer isn't all that different from dealing with a bakery or a beverage bottling plant, or any other operation that uses water in a specialized way. Given the volume of water Foxconn will need, though, its infrastructure requirements are as outsized any other aspect of the project.