the promise and realities of biogas produced from landfills and farm waste

8/7/2019 The Promise and Realities of Biogas Produced from Landfills and Farm Waste

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44 Cogeneration and Distributed Generation Journal

The Promise and Realities ofBiogas Produced from

Landlls and Farm Waste

Peter V.K. Funk Jr.

Daniel J. Bauer

Duane Morris LLP

ABSTRACT

Full realization of the potential of converting landll gas (LFG)and farm manure to biogas and LFG could, together, significantlysupplement our national supply of natural gas. Another advantage ofthese sources is that they tend to be located near end users and may

be considered analogous in some respects to distributed generationbecause the gas they provide does not have to be transported longdistances. There are many ways to generate electricity and few waysto produce biogas. Unfortunately, factors such as constantly changingnatural gas prices, the relatively small size of individual projects froma nancing prospective, the fact that historic technology for convertinganimal waste did not always perform properly and the comfort levelof gas sellers in remaining with existing natural gas supplies have seri-

ously hindered the development of these sources. Federal and state taxbenets and incentive programs (such as the federal stimulus) offer thepromise of increased development of these important domestic energyresources and available technology provides the possibility of realizingthese domestic energy resources and contributing to gas price stabilityand domestic energy security.

THE PROMISE OF BIOGAS FROMANIMAL WASTE AND LANDFILL GAS

As a nation, we agonize about the necessity of importing increasingamounts of natural gas when, in fact, two of our most abundant and


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constantly replenished gas supplies are there for the takingbiogas and

landll gas (LFG). Biogas and LFG are readily convertible to pipelinequality natural gas or available to provide fuel for electric generationor off-taking boilers or in compressed form, as a vehicle fuel, is respec-tively produced from farm animal solid waste (manure) and landlls.There are numerous benets of biogas and LFG. They provide efcientenergy conversion, add a widespread, readily available and reliable en-ergy source, assist in offsetting natural gas imports, assist in stabilizingnatural gas prices, provide signicant benets to farmers and municipalsolid waste operators and abate greenhouse gases.

There are good reasons to be concerned with supplementing oursupplies of natural gas. According to data from the Energy InformationAdministration, as a nation, we have only 4% of the worlds naturalgas with proven natural gas reserves of approximately 238 trillion cubicfeet (TCF). To meet our nations needs of approximately 22 TCF peryear, prior to the downturn during 2008-9, approximately 4 TCF wasimported. Nearly 90% of our natural gas imports are from Canada (ap-proximately 3.6 TCF) but, like the United States, Canadian use of natural

gas is increasing over time and Canada is likely to have less gas to exportin the future. We are faced now with a situation in which our naturalgas needs have generally been increasing, despite reductions during 2008and 2009 tied to economic problems and domestic reserves, and althoughsupplemented with nds, gas reserves have been decreasing over manyyears. Although prices for natural gas have declined from their peakbecause of reduced demand, as this article went to press, reports indicatethat brisk pullbacks in drilling activities because of lowered demand are

a factor beginning to drive prices for natural gas higher. Any future slackin U.S. production or imports from Canada is optimistically projected tobe largely met by imports of liqueed natural gas from foreign sellersat relatively reasonable prices, which may or may not prove to be thecase as world industrialization increases.

Any issues related to the relative scarcity of natural gas are exacer-bated by several factors. Most new electric power plants are constructedto utilize natural gas to meet air quality concerns. Despite the construc-tion of three new LNG terminals, there are relatively few points of entryfor importation of natural gas (in any form) into the United States andmuch of the natural gas must be transported within the United Statesby pipeline over long distances. Production facilities and long supplylines are also susceptible to disruption by events such as hurricanes.


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can also entitle the operator to tax benets, governmental incentives and

payments from the growing carbon trading markets in light of the factthat these facilities capture and utilize methane that would otherwise bereleased into the atmosphere.

Biogas gas produced by anaerobic digesters from farm waste orfrom landlls has been used for purposes such as distributed generationin the form of co-generation to provide electricity and thermal energyand has been compressed into biofuel for the purpose of poweringequipment and vehicles.

Yet another advantage of landll and biogas gases is that many

sources of energy are difcult to site. That is not a signicant problemwith anaerobic digesters or landll gathering and treatment facilities.The gas lines that connect the digesters or LFG processing equipmentto gas utility pipelines are as unremarkable as any other gas distribu-tion lines traversing public streets. There are rarely NIMBY issues toovercome, few environmental concerns, and minimal regulatory proce-dures or permitting required for construction. Biogas provides a reliable,domestic source of gas supply that is widespread and not susceptible to

public safety and security concerns.Another advantage to using animal waste or LFG as a fuel is that,

unlike ethanol, it does not involve the growing of crops and the time,expense and use of gasoline\oil required for these agricultural purposes.In addition, there are no farm subsidies for manure like there are forcorn or other sources of ethanol.

Federal and state governments are taking actions intended to en-hance the development of anaerobic digesters and production of biogas

from farm waste or landlls. Certain states are making nancial incen-tives available for developing biogas and, in states that have renewableproduction standards (requiring utilities to purchase a percentage oftheir energy needs from renewable sources), purchasing electricity gener-ated by biogas (and the purchase of biogas itself) should count towardfulllment of those requirements, further enhancing the value of biogas.

WHY HAS BIOGAS BEEN LARGELY OVERLOOKED?

Natural gas is a critical fuel for our nation. It generates electric-ity, produces heat for many purposes, powers vehicles, and serves as afeedstock for manufacturing products such as fertilizer. It also produces


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less greenhouse gas and other pollutants than other fossil fuels. Natural

gas can readily be transported long distances in compressed form oras liqueed natural gas. These advantages have led to the widespreadadoption of natural gas. Biogas also has these positive attributes andthose described above but so far the nation has not made an extensiveparallel development of biogas. The question is why not?

Biogases are readily available from landlls and farms. Withouttreatment, these facilities emit greenhouse gases that must be destroyed.All too often, operators of these facilities are (burn) the greenhousegases without capturing its energy.

Biogas promotes end-user risk management by providing long-term reliability and commodity cost control. Landlls and dairy farmscan predict biogas production with reasonable accuracy, and the costsof development are also well known. Governmental incentives and taxbenets are often available, as is the ability to sell certied emissionreduction credits or renewable energy credits related to veried emis-sion reductions (VERs) of greenhouse gases (GHG) in the carbon-creditmarkets. (GHG includes any of the atmospheric gases such as carbon

dioxide (CO2) and methane (CH4) that are believed to trap solar radia-tion and warm the Earths surface.) These voluntary carbon marketscan provide funding; even advance funding in some instances, on acontractual basis for biogas projects.

There are many examples of successful LFG projects. A typicalexample would be a LFG developer arranging an off-take agreementwith a nearby factory with a need for boiler fuel to deliver a supply oftreated landll biogas (LFG) from a nearby municipal landll to provide

medium Btu gas at a competitive index cost. It is necessary for all LFGprojects to have an engineering report conrming the existence of areliable LFG supply and to obtain a municipal permit to install a LFGextraction and beneciation system consisting of a network of gas col-lection wells, interconnecting pipes, valves, probes, sensors, monitoringequipment, necessary blower stations, vacuum pumps, and a skid fortreating the LFG so that treated LFG can be piped to the manufacturingplant and used for boiler gas. If electricity is to be produced, the equip-ment would, of course, include generation units and interconnectioninstallations. Biogas supply confers benets on everyone in the supplychain from the landll owner who receives income from the sale of gas,the developer who receives a return on its investment, the end user whoreceives a reliable supply of biogas at a competitive price and, among


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others, sellers and installers of equipment.

From a larger perspective, because biogas is typically producedclose to the place of use, it strengthens the gas transmission systemby reducing the amount of natural gas that is transported long distances.For that reason, local gas production helps alleviate congestion in thenatural gas transmission system, which can lead to gas shortages forcommercial, industrial, and residential uses at times throughout thecountry, such as in the Northeast during winter months. Reduced con-gestion may also defer the need for constructing new facilities, whichreduces energy costs to end users.

In light of these factors, one would imagine that the U.S. wouldhave implemented a widespread program to develop biogas projects,but the progress has been limited to date. What are the barriers?

BARRIERS TO BIOGAS DEVELOPMENT

My experience as an attorney practicing in this area leads me to

conclude that the historic convenience, availability, and reliability ofnatural gas are formidable barriers, among others, to the implementa-tion of renewable biogas resources that our nation vitally needs. Thishistoric convenience of natural gas has created a high comfort level withexisting procurement systems and a general lack of comfort with renew-able processes among sellers and distributers. We have also found thenancial industry in general (although there are certainly exceptions) tobe much less familiar with renewable gas projects than other types of

energy projects.There are some national and state tax credits and renewable port-folio standard requirements relating to the production of electricity, butthe providers of biogas do not necessarily qualify for the credits, posingan additional barrier to project development. In contrast, the electricalgeneration facility fueled by biogas may meet the requirements.

Project size can also be a serious problem. It can be very difcultto obtain funding for renewable gas projects in light of their relativelysmall scale. On an individual basis, a typical biogas project is muchsmaller than, say, an electric power plant. For that reason, a biogasproject often struggles to gain attention from the nancial industry. Onesolution is a cookie-cutter approach for smaller biogas projects thatwork; aggregate them into a single nancing that would then benet


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from the economies of scale. While it sounds reasonable, nanciers

who are not fully familiar with such projects often want to take the rstrenewable biogas project all the way through before building others thatthe developer hopes can be handled in a cookie-cutter fashion. Unfortu-nately, the costs and issues related to getting the rst car off the linecan make the rst project appear more expensive than it would be ifthe initial learning curve and costs were to be allocated to multiple proj-ects. Developing and nancing projects on a cookie-cutter basis wouldalso help to address risks related to any single project among the set ofprojects because whatever risks may exist with respect to it would be

mitigated in a mutual fund of similar projects. This reluctance to acookie-cutter approach appears to be subsiding as time goes on becauseit makes sense and, of course, there are governmental incentives.

THE FUTURE OF BIOGAS APPEARS PROMISING

The range of existing and new federal and/or state tax benets,

loan guarantees and other incentives are driving projects and the gen-erally competitive cost of biogas should be powerful drivers for thewide-scale development of biogas. In addition, programs such as theRegional Greenhouse Gas Initiative, (RGGI), which involves severalNortheast states, and which requires the operators of electric generatorsto purchase credits produced by renewable gas producers, promise toprovide some stimulus to biogas.

Given the many desirable elements of biogas and the growing pub-

lic favor of green energy solutions, it appears that end-user demandwill be yet another major driving force leading to projects that contributeto realizing the our countrys biogas potential.

ABOUT THE AUTHORS

Peter V.K. Funk, Jr. is a partner with Duane Morris law rm lo-cated in New York City. Mr. Funk practices in the area of energy law witha focus on energy generation projects, including on-site cogeneration,energy conservation and energy management installations, demand-sidemanagement projects such as advanced metering, renewable resources,waste to energy and green generation, and energy-related nancingmatters. He has advised many clients in these areas and has served as


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outside general counsel to an energy services company. Mr. Funk also

practices in the area of utility law and has advised gas and electric util-ity companies and served as outside general counsel for such a utility.For more information, see http://www.duanemorris.com/attorneys/petervkfunk.html.

Daniel J. Bauer is an associate with Duane Morris, LLP. Daniel J.Bauer practices in the areas of energy law and construction law. He hasexperience with energy conservation and generation projects, includingon-site cogeneration, energy conservation and energy management in-

stallations, and with construction issues. Mr. Bauer also has experience instate and federal litigation of claims relating to water contamination andproducts liability and has counseled clients on environmental law mat-ters involving wetlands conservation, asbestos abatement, Browneldsregulation, FAA requirements for lighting and Industrial Site RecoveryAct issues. For more information, see http://www.duanemorris.com/attorneys/danieljbauer.html.

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