Landfill Gas Projects Reach Deep in the Heart of Texas

By the end of 2001, Houston-based Reliant Energy will construct 12 landfill gas-powered electric generating facilities at Waste Management Inc.-owned landfills across Texas. The project will produce approximately 44 megawatts of electricity, which is enough to power 13,000 homes, according to Sarah Voss, communications manager for Waste Management, Houston.

Reliant has not disclosed the amount it will pay for the landfill gas, but Voss says that Waste Management's primary incentives for participating in the project are the federal emissions credits and tax credits that the deal will generate. Six of the 12 project sites already contain landfill gas collection systems, which qualify for tax credits until 2008 under Section 29 of the Internal Revenue Service (IRS) Code. Waste Management and Reliant currently are negotiating how to divide the federal emissions credits, Voss says.

For Waste Management, this is a win-win deal, according to Cherie Rice, vice president of investor relations for the company. "We already were pulling gas out of these landfills, so our investment is minimal. Reliant is making virtually all of the investment required for the project," Rice says. In fact, Waste Management will pay only "a couple hundred thousand dollars" for each of the six landfills requiring new collection systems.

Reliant, on the other hand, is making a large capital investment in this project, according to Richard Wheatley, director of external communications for the company. Federal and state emissions credits and tax benefits make this deal more attractive than it otherwise would be, he says, noting, "Many of these projects have not been economically viable until now."

Additionally, as part of the deregulation law that the Texas state legislature passed during its most recent session, utilities must install 2,000 megawatts of renewable energy generation capabilities in the state by 2009.

"It's all part of a master plan aimed at giving Texas a new impetus for power generation in the future," Wheatley says.

Reliant executives believe that renewable energy markets will continue to grow, based on public interest, tax credits, emissions credits and new legislation. This "will throw open the doors to what we think is going to be a vibrant new market," Wheatley says.

Nevertheless, Wheatley admits that despite Reliant's internal studies, the market potential for renewable energy is unknown "until we get the generation capacity up and running."

Currently, Waste Management supplies landfill gas to 38 gas-to-energy projects and 35 medium Btu gas projects in 21 states, generating a total of 140 megawatts of electricity. The Texas project will increase Waste Management's gas-to-energy output by nearly one- third, Rice predicts.

"Certainly we are looking at other projects like this one," she says. "A number of states are working on initiatives to incentivize companies to do more waste-to-energy projects - and the incentives work."