Victoria to reap new revenue from landfill gas
March 28, 2013 at 6:03 p.m.
Updated March 27, 2013 at 10:28 p.m.
Methane gas from Victoria's landfill will soon provide a nearby chemical plant with alternative energy and the city with a new revenue stream.
Through a contract with Renovar Energy Corp., the city is selling the landfill's methane gas - which would otherwise be flared off - to Ineos. The company will dilute natural gas with methane and use the mixture in its boiler system, said Victoria Environmental Services Director Darryl Lesak.
The 13-mile pipeline from the landfill to Ineos is expected to open in July, and royalty checks would soon follow.
Victoria Finance Director Gilbert Reyna estimates revenues of $6.4 million over a 15-year period, which will go into the landfill's post-closure fund. However, the possibility exists that those revenues could be used to offset future trash rate increases for residential customers, he said.
Lesak said the deal is still contingent upon three tasks: completing the pipeline, installing a gas compressor and upgrades to the Ineos plant. Renovar is funding the pipeline and compressor.
Lesak said there are "no losers" in the agreement.
"We would be flaring that gas off, turning it into carbon dioxide going into the atmosphere, and that's never a good thing," he said. "That gas is now going to be used, run through Ineos' system. We're making money off it; we're not just burning it. Ineos will burn it with a cleaner burning gas, and it should cut down emissions."
The city partnered with Renovar in 2010 to capitalize on the landfill's methane gas. That company is tasked with building and maintaining the gas collection system.
In return, the city received a $110,000 good-faith payment from Ineos and will receive 15 years of royalty payments.
The city has invested about $800,000 in its methane gas collection system since 2008. Of that, about $495,000 paid for repairs to increase the methane gas quality.
Victoria City Council gave initial approval to the most recent payment, $293,590 on March 19 to reimburse Republic Waste Services for repairs to the methane system.
Republic manages the city-owned landfill.
The City Council also approved a $201,500 expense in September that repaired several crimped methane wells. In 2008, the city funded about $300,000 in repairs to the methane gas system.
Reyna said the 2008 expense brought the system into compliance, but the other two were required to bring the methane gas to a specific quality.
Because the methane is a medium-grade quality, it does not sell as high as natural gas.
Those two payments, March 19 and 2012, came from the landfill closure fund, paid by residential collection fees, Reyna said.
The closure fund pays for maintenance during the life of the landfill while the post-closure fund covers expenses when it is no longer operable, Reyna said.
Renovar President Larry Gilbert said Victoria is the company's fifth partnership.
He said contracts that sell directly to an end-user, such as Victoria to Ineos, takes up about a quarter of the market for landfill gas, he said.
Gilbert estimated there are 475 to 500 landfill gas projects throughout the United States.
He said the real benefit, from a taxpayer standpoint, is that the U.S. Environmental Protection Agency already mandates that landfills make these gas-structure improvements.
"All that's required is you put in the gas collection system and the wells and flare the gas ... whether you have an energy benefit or not," Gilbert said. "The real key here is being able to take and exploit what was required by law from EPA and take that to a point where you can make it a beneficial use in some energy-efficient way."