Passing Gas

AFTER SEVEN YEARS OF LOBBYING, it seems like the landfill gas industry is finally getting fired-up. As part of the American Jobs Creation Act of 2004, Congress has passed a tax credit for landfill gas and waste-to-energy projects. Facilities placed into service between Oct. 22 and Dec. 31, 2005 will be eligible for a Section 45 tax credit of 0.9 cents per kilowatt hour of energy produced for five years.

While industry advocacy groups are claiming victory for convincing Congress of the financial incentive's importance, they also know they can't just let the bill putter along. The latest legislation is not the well-loved Section 29 landfill gas tax credit landfill managers received in the mid-'90s.

Section 29 credits were far more encompassing. They applied to energy production through 2007 on projects that became operable between 1993 and 1998. Credits for facilities placed in service between 1980 and 1992 expired in 2002. The credit value varied, but it usually amounted to about 1 cent per kilowatt of energy sold, according to an industry expert.

On the other hand, the new Section 45 credit only applies to projects that generate electricity. Another big concern for the new bill is the December 2005 deadline. Project developers worry that the approximately one-year timeframe is not a wide enough window for many projects to get through.

Some say the opportunities for municipally owned landfill gas energy (LFGE) projects are even narrower. To take advantage of the credit, municipalities will need to get a third party involved, according to one landfill gas project developer. “By the time you take into consideration these negotiations, getting a project online by the deadline will be pretty remote,” he says. Taking credit will be more realistic for municipal projects that have existing LFGE systems and want to expand into new areas of the landfill, or for privately owned projects, he adds.

Despite the drawbacks, the bill will be good for the industry — even if the new credit is unlikely to become a tremendous boon in the short-term. The credit will likely help put the pedal to the metal on projects that have their systems in place but have been waiting on the fringe for a credit to pass.

In the five years the Section 29 credits were in place, 157 new LFGE projects went online of the total 370 operating today, according to the Environmental Protection Agency's Landfill Methane Outreach Program (LMOP). What's especially striking, LMOP says, is there were 49 new projects in 1998, the final “placed in service” deadline under the old credit.

If you have not looked into a LFGE project, now is the time to start — even with the tight deadline. As gas and oil become harder to come by, LFGE projects will be viewed as a way to reach our energy independence. So this time, instead of just flaring up, we are ready for a steady burn.

The author is the editor of Waste Age