Council will no longer report (voluntarily) under NGERS and does not face a liability under the Carbon Price Mechanism for the foreseeable future. ‘We are so pleased with this result, for Gladstone’s sake’, said LGI’s Managing Director, Adam Bloomer.

“It demonstrates how the Government’s Clean Energy Package should be working, by encouraging gas capture on landfills, and consequently minimizing exposure to the carbon tax. In this case, there’s also the added benefit for council from carbon credits generated under the CFI.”

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The project was part of UNEP’s commitment to the international Coalition for Clean Air and Climate (CCAC), which is focusing initiatives on reducing short-lived climate pollutants, such as methane and black carbon – waste management is one of the CCAC’s focal areas.

Jessica provided critical analysis of the rapid assessments, including attending the CCAC meeting in Vancouver, Canada (11-15 March), where she supported delegates from the SE Asian cities and delivered a workshop and presentation on behalf of UNEP.

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This is the first new installation abatement project to be approved in Australia. LGI have been destroying landfill gas on the site since August 2012.

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5-6 November 2012

Brisbane based Landfill Gas Industries Pty Ltd’s Sustainability & Carbon Manager, Dr Jessica North was recently asked to present at the United Nations Environment Program (UNEP) conference on the Global Partnership for Waste Management in Osaka, Japan.. Dr North had previously authored UNEP’s report on Waste and Climate Change, including an international strategy. She said “I was honoured to be invited to continue involvement in UNEP’s global effort to address the climate impact of waste practices. It brought home to me the key role that companies like LGI play, around the world, in abating carbon. I take huge satisfaction in being able to share real examples of climate change mitigation from our projects in Australia at these international events”.

Mr Tim McGavin said Australia and Landfill Gas Industries are very lucky to have an internationally recognised specialist such as Dr North. Dr North is somewhat unique in her ability to grasp the global, macro climate issues and develop local, micro solutions whilst taking commercial realities into perspective. Not many people have this cross skill set”.

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Mr Bloomer said “I believe that Landfill Gas Industries is the only landfill gas company to own its own drill rig, it is a big investment so we have to keep the oil hot. This means staffing up our installation teams so that we can get maximum return for our investment. The benefits are mutual as LGI clients get the job done quickly. This means customers are happy and so is the environment as more gas gets destroyed quicker. LGI are not in the business of warehousing sites as some of our competitors have been accused of, we are always incentivised to get the job done quickly”.

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Staff and senior management from the Department of Climate Change and Energy Efficiency, and The Clean Energy Council were invited to attend presentations by Dr Jessica North and Landfill Gas Industries founder, Adam Bloomer.

Adam is one of Australia’s most experienced Landfill gas experts, and the session focussed on practical aspects of gas systems with the aim of clarifying issues relevant to the CFI regulations.

Delegates received an overview of landfill gas systems, processes and management, and were invited to discuss any element of the industry.

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The landfill gas (LFG) extraction industry is a bit like the baby brother of the waste sector: small, largely ignored, sometimes gets in the way, but there when you need him. Thanks to the Government’s Clean Energy Future package, and to a lesser extent tightening environmental regulations (think ‘Cranbourne’), baby brother is suddenly getting a lot of attention!

Unfortunately this attention is not always positive. As local governments struggle towards understanding the complex ins and outs of potential liabilities under the Carbon Price Mechanism (CPM… yes, yes, but let’s not call it a tax) and potential financial benefit through the Carbon Farming Initiative (CFI), many are reviewing their existing LFG extraction contracts with some unpleasant surprises.

Ten, even five years ago, councils understandably paid little heed to issues such as gas rights and performance criteria in their LFG agreements. As long as the system enabled their landfill to meet licence requirements, odour was controlled, and maybe a bit of money trickled in from royalties on power sales, then who really cared about the fine print?

The LFG extraction industry got on with the job and everyone was happy. Few people could have predicted the Government’s decision to include landfills in the CPM – it‘s certainly a world first!

A number of local governments now find themselves in the unenviable position of being in long-term (20-30 year) contracts in which the LFG extraction supplier owns rights to the gas (and any Australian Carbon Credit Units (ACCUs) that can be gained from the gas), has no requirement to increase extraction at the site (i.e. to bring emissions below the 25,000 tonne CO₂-equivalent threshold for CPM liability), but has left council with all responsibility for any carbon liability. In some cases, councils are still waiting for systems to be installed, several years after signing a contract, because their contracts did not specify an installation completion date.

Perhaps some people are now scratching their heads. Why would a LFG extraction company not want to extract as much gas as possible and install a system as soon as a contract is signed? The economics of the LFG business are somewhat complex – most companies make their money from long-term power generation, from landfill sites that produce sufficient gas to run a gas engine (i.e. as small as 350kW to multiple units of 2MW, depending on the site’s gas flow).

You don’t make much money from flaring, so from a purely economic perspective, if you can leave a site to develop and mature (i.e. get more rubbish in it and produce more methane) until it will support a gas engine, then that’s what you do.

Similarly, if you have a site that has sufficient gas flow to run a 2 MW engine, but not quite enough to run an additional engine, and the wholesale price of power is dismal (as is the current situation), then you won’t rush out and invest in the extra infrastructure and engine until things look rosier … especially if your contract doesn’t require you to maximise gas extraction or meet any extraction performance criteria.

If you are in the last few years of a contract, and you want to avoid any major engine overhaul or replacement, then you might even keep flow at a minimum to reduce wear and tear, especially if power sales are simply not that lucrative. Whether or not the CFI creates an additional incentive for existing LFG projects to increase capture rates remains to be seen, as the elusive ‘regulatory baseline’ (which will determine how much of the gas captured and destroyed can generate ACCUs) has not yet been announced by the Government.

Renegotiation of existing gas extraction contracts is entirely up to the LFG supplier and their council client, but in Australia it does not appear that there exists a legal cause to do so (although individual parties should seek legal advice). In the USA, for example, there have been instances where landfill operators have exercised ‘force majeur’ (from the French ‘superior force’ where extraordinary circumstances allow a contract to be broken) to amend LFG extraction contracts subsequent to major regulatory changes.

So what should a council consider when entering into a LFG extraction contract today?

Specify an installation completion date – evidently, there may be delays due to Development Application approvals taking longer than anticipated, late delivery of pipes, weather impeding well installation, etc. But this should result in delays of a matter of months at most, not years!

Establish clear performance criteria for the extraction system – this is best done once the gas field is ‘proven’ and a reasonable flow rate has been established.

Check references, especially if neighbouring councils use the same company – if the company operates several systems in the same region, there may also be considerable benefit to councils (cost savings, staffing, etc.).

Make sure the allocation of rights to non-legacy gas is based on a careful analysis of potential value of the ACCUs as well as council’s estimated liability. ACCUs may be retained by council, owned by the LFG supplier, or split between both parties. If the site can generate sufficient ACCUs, this provides council with a valuable negotiating point. For example, it may be possible to hand over all ACCUs in exchange for low/no capital expenditure and/or ongoing operating costs.

If a council faces liability under the CPM, even with a LFG extraction system in place, then it may be wise to retain ACCUs. These can be used to offset 100% of the CPM liability. If the council does not anticipate a liability, it may be more lucrative to offer all ACCUs to the LFG supplier, who may already have purchasing agreements for ACCUs set-up with third parties.

Regardless of the decision, it should be based on a sound understanding of the possible benefit of ACCUs, and a transparent negotiation. Given the changing and uncertain environment for LFG and carbon in Australia, it is best to seek alliance-type agreements with LFG extraction suppliers – a contract will be in place for 20-30 years, so better to form a solid partnership with some built-in contractual flexibility now.

Carbon aside, LFG extraction and methane destruction is an essential part of sustainable landfill practice. So, get those systems installed – baby brother is ready to burn!

Jessica North is the sustainability & carbon manager at Landfill Gas Industries (LGI). She has spent 15 years managing, consulting, and researching rubbish. LGI specialises in landfill gas extraction and power generation. Contact: jessica.north@lfgas.com.au or 0408 024 103. The information contained in this piece is of a general nature – seek advice appropriate to your circumstances

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NEGOTIATIONS are under way to save Bundaberg Regional Council from paying the carbon tax on methane gas its landfill sites generate.

The council has authorised CEO Peter Byrne to negotiate with Landfill Gas Industries to put the system in place at either no cost to the council or a contribution of up to $250,000.

The council also agreed money from selling Australian Carbon Credit Units from gas extraction at the landfill site would go to the company in lieu of the extraction and maintenance costs.

Council waste and recycling services manager James Stanfield said the problem was the methane generated by decomposing organic waste at the landfills on University Dr and Cedars Rd.

“Methane is 25 times more damaging to the environment than carbon dioxide,” Mr Stanfield said.

“Every tonne of methane generated is the equivalent of generating 25 tonnes of carbon dioxide.”

Mr Stanfield said as many as 100 of the 500 companies that would be forced to pay the carbon tax were landfills.

He said the technology used by companies such as Landfill Gas Industries would extract the methane, burn it with a flare and put it back into the atmosphere as carbon dioxide.

The methane was extracted by pipes laid into the waste.

Mr Stanfield said there was a design potential for up to 13 waste disposal cells to be constructed at Cedars Rd.
The council had capped about a third of cell one.

“We will lay gas extraction pipes into future cells as we go from now on,” he said.

Burning the waste gas would keep the emissions below the threshold where the council would have to pay the carbon tax for the next 15 years.

Because the landfill site at University Dr has not buried organic waste after the July 1 carbon tax deadline – after being used for that purpose for more than 70 years – it was regarded by the Federal Government as “legacy waste”.

Burning off the methane it is generating would allow Landfill Gas Industries to claim carbon credits which could then be sold to polluters to offset their emissions.

THE MARKET
The price of carbon permits will be set at $23 per tonne of carbon dioxide for the first three years.

A price floor and ceiling will be set by the government for the next three years after that.

From 2018, the carbon price will depend on the market value of permits.

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LGI Managing Director Adam Bloomer said: “it is hard to get quicker service than this, the ink is not dry on the contract yet”.

LGI and Gladstone Regional Council only executed the contract the previous week.

Mr Bloomer said that quick efficient service was crucial for landfill owners with the carbon tax being implemented only 35 days away. Many landfill owners that have not yet acted to mitigate methane production will be incurring a massive liability as of the 1^st of July 2012.

LGI Director Tim McGavin said:

“We speak with many councils who have been promised extraction and flaring systems and have been waiting for up to three years for installation. This prompted us to secure our own drill rig and tool up to be able to install earlier than other landfill gas operators”.

Mr Mcgavin also said that “many councils have been gamed by unconscionable conduct given the complexities of landfill gas and carbon”.

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