Light It Up

Step 1 — Initial assessment/pre-feasibility study. The purpose of this initial step is to estimate the quantity of gas that can be recovered from a landfill over time, identify and evaluate potential end-uses for the recovered gas, and perform basic financial analyses of the most likely development scenarios.

To perform this initial assessment, information on the landfill and the potential end-user needs to be gathered and evaluated by an LFGE expert. This usually will involve a site visit. Typical information to be gathered includes the landfill's current topographic site plan in computer-aided design and drafting (CADD) software, information on the design and installation of the landfill's liner and cover systems, the site's fill sequencing plans, and data on the landfill's environmental monitoring and control systems.

Furthermore, if a potential end user is an electric or gas utility, the LFGE expert will evaluate the utility's interconnection requirements and RPS goals. If the energy created is going to be used directly by a facility such as a factory or plant, the consultant will examine, among other things, the facility's annual power usage, potential pipeline routes and possible environmental issues.

This information is then used to develop an initial site assessment report that includes an estimate of the amount of recoverable gas from the landfill on an annual basis, a preliminary estimate of the capital and annual operations and maintenance (O&M) budgets for each potential LFGE facility, and potential pricing for all available revenue streams. (View a complete list of the information gathered during the initial assessment and the resulting report.).

Even if you have no intention of self-developing a project either as a landfill owner or as an end-user, the information compiled in this initial study will help you understand what end-use scenarios are most likely. It also will equip you with the technical and financial knowledge to allow you to better assess those proposing to develop the project, as well as arrive at a fair deal with the selected developer.

If this is to be a third-party developer project, the landfill owner, sometimes in conjunction with a preferred end-user, could issue an RFQ/RFP, and ultimately select a project developer. Or he can perform step 2 before making that decision.

Step 2 — Feasibility study on selected LFGE options. Based on the initial assessment, typically one or two LFGE project configurations arise as the most desirable options. In this step, seek additional information on these options to refine the potential project costs, revenues, permitting requirements and funding sources. If you still are unsure whether this is to be a self-developed or third-party developed project, the information gathered in this step can help you make that decision. If you have not yet contracted with a developer, you should retain the services of an LFGE expert for this task as well. If this project is already being handled by a third-party developer, they likely will perform all of the functions outlined below.

During this step, you should hold pre-application meetings with the appropriate regulatory agencies to discuss, in detail, all of the permitting requirements, schedules and constraints. In some jurisdictions, the requirements and/or schedules may preclude certain end-use technologies and therefore drive the selection of the technology for the project. Additionally, detailed cost estimates should be prepared for each potential LFGE project configuration.

If this is a project developed by the landfill owner, the owner will reconfirm the end-users' interest as well as seek to refine pricing and the energy purchase agreement schedule and requirements. If this is a project developed by an end-user, the end user will need to reconfirm the landfill owners' interest as well as settle on the expected remuneration for obtaining the landfill gas. Furthermore, if the project will generate reductions in GHG emissions, you should assess the paths for monetizing them and the requirements for registering, monitoring and verifying them.

You should also hold discussions with all of the potential funding sources to confirm their availability and the requirements for obtaining the financing. There are many potential funding sources for LFGE projects. These include project financing, private equity, direct municipal funds, municipal bonds, tax credits, CREBs, and a myriad of federal, state, and even local grants. These should have been identified in step 1.

You may need to seek counsel for projects that intend to use bonding or tax credits as a funding source. Applications for all potential grants and incentive programs should be obtained and reviewed.

The information developed above should be used to re-run the projects' financial statements. If more than one project configuration is being considered, they should be ranked.

Step 3 — Memorandum of understanding (MOU). At this point you should know which project configuration you want to pursue. It is time to obtain MOUs with the other parties that outline the structure of the proposed deal. Depending on who is developing the project, MOUs should be obtained for the right to use the landfill gas as well as for the sale of the resulting energy product.

Step 4 — Obtain financing. Based on the conditions of the MOU(s), apply for all of the potential financing/funding. If seeking to monetize GHG emission reductions, this would be a good time to do so. This can be accomplished by joining the Chicago Climate Exchange (CCX) or making a private deal with an organization that specializes in monetizing reductions. This can be accomplished through an RFP process.

Step 5 — Finalize contracts. This step can be done concurrently with step 4. Negotiate the final contracts, as appropriate, for the rights to the landfill gas as well as the sale of any energy products.

Step 6 — Procure design, permitting, construction and operations services. If you still are intending to self-develop, it is time to procure the services to design, permit, construct and operate the LFGE project. Typically, this is done either through a turnkey contract for engineering, procurement and construction (EPC) or through a design/bid process. The operations contract can be added to the EPC contract or bid separately.

Many public works projects are performed using the design/bid method, where an owner selects an engineering firm through a RFQ/RFP process. The selected firm designs the facility, acquires the permits and develops a bid package for the construction of the project. The owner issues the bid documents and selects a contractor to construct the project. Typically, the engineer is retained by the owner to act as the owner's representative during the construction of the project.

In the LFGE field, more owners are procuring these services through an EPC contract. With this approach, one firm is responsible for all design, permitting, procurement and construction services. This typically results in a lower overall cost and a faster project implementation schedule. Also if issues arise, there is only one party to deal with to resolve the issue. If this approach is selected, you should obtain a guaranteed-maximum price as well as project performance guarantees from the contractor.

Step 7 — Celebrate. At the conclusion of step 6, you should have an operational LFGE facility, and it is time to take credit for the positive work you have accomplished. You should have a ribbon-cutting ceremony, issue press releases and conduct public tours. These are great projects for the solid waste industry, and, once up and running, can provide ongoing opportunities for high-profile, positive publicity.

Greater financial benefit to the landfill owner or end-user.

More control over on-site activities at the landfill, particularly with respect to compliance. The landfill owner can make sure that compliance takes priority when making decisions about how to operate the landfill gas extraction wellfield.

Reduced number of parties results in reduced potential for conflict.

You must cover all of the capital cost.

You assume all of the project risk.

Involvement in an unfamiliar business may be required.

Management attention could be diverted away from your primary business.

You cover none of the capital cost (unless you invest in the wellfield and sell gas to the developer).

You assume none of the project risk.

You do not have to spend as much of your own time and resources to implement the project.

Less financial benefit to the landfill owner or end-user.

Potentially less control over landfill gas management at the site.

More potential for conflict, especially over compliance issues.