LANDFILL GAS (LFG) PROBABLY IS NOT at the top of every politician's agenda, but in 2003, many in the waste industry are hoping it will be.
The prospects seem better than usual.
As tensions between the United States and Iraq reach their boiling point, and concerns about North Korea continue to mount, the Bush Administration's new Department of Homeland Security is understandably concerned about reducing the nation's reliance on foreign energy sources. If mined correctly, landfill gas represents a valuable domestic energy source, and it also can reduce emissions.
According to the Silver Spring, Md.-based Solid Waste Association of North America (SWANA), a medium-size landfill can produce more than 300 billion Btus of methane per year. When not controlled or converted to energy, LFG can pose fire and odor hazards, and can threaten air quality. If controlled and flared, LFG does not pose an environmental risk, but the gas is wasted. The nation's largest LFG-to-energy project, by contrast, provides 50 megawatts (MWs) of power annually.
There already are 360 landfill gas-to-energy (LFGTE) projects operating nationwide. Moreover, each ton of methane used in a LFGTE project is equal to capturing 21 tons of carbon dioxide (CO2), which is good for the environment.
The benefits have encouraged several legislators to introduce bills providing incentives for LFGTE project development. But legislation for federal tax credits has failed to win approval every year since 1998. Nevertheless, the promise of LFGTE's pay-off has project supporters hoping 2003 will be their year.
Landfill Gas Basics
LFG is a renewable fuel composed primarily of methane and CO2 that can be used to generate electricity or supplement natural gas supplies. LFG is recovered by a series of wells installed in a landfill and then is collected and transported to a compression facility. There, the treated gas is sent through turbines or engines to produce energy. Additionally, LFG can be used for heating or industrial boiler fuel, as a clean-burning vehicle fuel, for conversion to ethanol or as a hydrogen source for fuel cells.
Because LFG is used instead of flared, LFGTE projects reduce emissions. In 2001, all operational LFGTE projects in the United States prevented the release of 14.5 million metric tons of carbon equivalent into the atmosphere. This reduction is the carbon equivalent of removing 11.7 million cars from the road for one year, according to the U.S. Environmental Protection Agency (EPA) Landfill Methane Outreach Program (LMOP), Washington, D.C.
Most of the nation's 360 LFG utilization projects operating today were made economically viable by the “non-conventional source fuel” production credit authorized under the Internal Revenue Code, LMOP says. Since 1998, however, the tax credit has been unavailable, and few new LFGTE projects have been planned or built.
The EPA estimates that more than 600 new LFGTE projects would come on-line if Congress provided another tax credit. These projects, coupled with the 360 existing ones, would achieve 8 to 10 percent of the greenhouse gas reduction target that was proposed under the Kyoto Protocol.
Conflicts in Congress
The Bush Administration has expressed its support for LFGTE. Both the fiscal year 2003 budget and the president's National Energy Policy Report proposal call for a tax credit extension. Additionally, grassroots advocacy has encouraged Congress to pass comprehensive energy legislation extending tax credits.
In 2002, it seemed that there was both top-down and bottom-up support for LFGTE credits, too. Yet concerns about unrelated issues — such as drilling in the Arctic National Wildlife Refuge (ANWR) — ultimately defeated the legislation.
“We were feeling positive that the members of Congress had recognized and embraced the technology and the benefits to the industry,” says Holly Smithson, SWANA's director of government affairs and chair of the group's LFG coalition. “When it went to conference, there were far more contentious issues like ANWR that killed the bill, and the baby was thrown out with the bathwater.”
This year, LFG tax credits will be considered as a stand-alone bill, as part of a comprehensive energy bill or as part of an economic stimulus package. And because it has the support of the new Department of Homeland Security, LFG tax credits look like good policy.
“The administration's hard line is that we need to increase our domestic production of energy,” Smithson says. “Landfill gas does its part to diversify our domestic energy portfolio.”
If prices at the gas pumps continue to rise, the issue will become even more pressing, Smithson adds. “Once you start impacting Joe's wallet,” she says, “you're going to find this issue more immediate and more prevalent.”
Already Sen. Blanche Lincoln, D-Ark., has reintroduced stand-alone legislation, the Capturing Landfill Gas to Energy Act (S. 358), to extend LFG tax credits at the rate of one cent per kilowatt hour produced. “Congress recognized the importance of LFG for energy diversity and national security by providing such a credit in 1980 and extending it for nearly two decades,” Lincoln has said of the bill. “With today's critical energy needs and emphasis on distributed generation, this incentive makes more sense than ever.”
The bill is awaiting action by the Senate Finance Committee.
S. 358 would provide incentives to invest in LFGTE technology, says Bill Sells, director of federal relations for the Environmental Industry Associations, Washington, D.C. “Climate change is getting more attention; the Democrats are trying to make it more of a major issue,” he adds. “That's going to help things like greenhouse gas reduction efforts. [LFGTE] reduces greenhouse gases, and the bonus is that it produces energy — another way to provide to more of our own. The timing is right.”
Sells says that the issue is not solely related to the United States' dependence on the Middle East. “The flow of oil into this country is not just a Middle Eastern issue; we have problems with Venezuela, which is a major supplier to the U.S.,” he says. “Whether it's through landfill gas, wind power or solar power, whatever allows you not to go out and pay top dollar for oil from another country is a benefit. If we're producing more domestic sources of energy, it's a win-win.”
Sen. Maria Cantwell, D-Wash., also recently introduced the Renewable Energy Production Incentive Reform Act (S. 421), which would amend the Energy Policy Act of 1992 to include incentives for LFG projects. A similar bill (H.R. 671) was introduced in the House.
An Industry in Limbo
As the industry awaits Congress' final decision, many LFGTE projects have ended or are planning to fold. According to LMOP, fewer projects were developed between 2001 and 2002 than in previous years. Electricity costs remain competitive, and 2002 saw the “sunset” of older tax-credit projects, Smithson says. Without a tax credit, the initial capital investment and the operation and maintenance costs for a LFGTE project are too expensive for many municipalities.
“The industry has come to a screeching halt because these projects cannot compete on the open market with natural gas,” Smithson adds.
Although a few new projects have come on-line in the past few years, most are in states that have a grant program or a mandate (as in Texas) requiring a certain amount of renewable energy use. “All these projects need some sort of financial assistance,” Smithson says. “They can't take off without some sort of incentive, so we've seen a dramatic decline in these sort of projects. The industry is hurting, companies are folding and it's just a sad state of affairs that there is this great technology [unused] out there.”
As an example, a LFGTE project at the Fort Smith, Ark., landfill now is facing an expansion without credits to support it. The project's tax credit, which began in 1996, is expiring in 2004. Since installation, the project has had two direct end-users: Jackson, Mich.-based MacSteel and Toledo, Ohio-based Owens Corning. Unused gas is flared.
“From a landfill operator standpoint, were it not for those tax credits, we would have been compelled to do some kind of collection because of the NSPS (New Source Performance Standards) regulations,” says Dan Reikes, Fort Smith's director of sanitation. “Instead of doing a simple system that only would have flared, we were able to put in a system with a beneficial use, especially in times of rising fuel costs and concerns about greenhouse gases.” Reikes adds that his facility has always complied with air quality regulations during quarterly reviews, which he attributes to the LFGTE operation.
A Bright Outlook
Despite the uncertain future of LFG tax credits, several projects continue to serve as LFGTE models. As of November 2002, LMOP had more than 320 partners volunteering to work with the EPA to develop cost-effective projects. Additionally, LMOP has profiled more than 1,300 landfills in 31 states that are seeking LFGTE opportunities.
Ann Arbor, Mich.-based DTE Biomass Energy, for instance, operates a 2.4-megawatt facility at the Ford Co.'s Wayne Assembly Plant in Detroit. In 1998, DTE Biomass Energy's methane recovery totaled nearly 140,000 tons, with a CO2 equivalent of more than 2.9 million tons.
Charlotte, N.C.-based Enerdyne Power Systems has operated several LFGTE projects in the state, including a solar turbine project at the Hanes Mill Road Landfill in Winston-Salem, N.C., as well as gas collection and delivery systems for two landfills in Catawba County, N.C. The county purchased internal combustion engines with generators to produce electricity, which is sold to the local utility.
In January, the waste industry's largest company, Houston-based Waste Management Inc. (WMI), announced that it was joining the Chicago Climate Exchange as one of 14 founding members. The exchange is a non-governmental entity established to develop a voluntary marketplace for reducing and trading greenhouse gas emissions. WMI currently supplies LFG to 72 gas-to-energy projects in 22 states. Together, these projects supply more than 200 megawatts of energy, enough to power 180,000 homes. The direct sales to industrial users replace more than two million barrels of oil each year, according to the company.
The projects continue to prove the viability of the LFGTE industry — with or without tax credits. But if tax credits were reinstated, the industry might grow from an untapped network of isolated projects to an industry that fuels many types of products and services.
When the relatively affordable tax credit is compared to the environmental and energy returns, “you get a lot of bang for your buck,” SWANA's Smithson says.
With war ongoing, it may be time to fork over the cash.
Kim A. O'Connell is a contributing editor.