Littleton council approves biogas project funding

Littleton ready to foot half the bill for project to turn sewage gas into money

Posted 2/23/18

Littleton City Council gave its blessing to a plan to capture and sell waste gases produced at the Littleton/Englewood Wastewater Treatment Plant, pledging $4 million from the city's sewer budget …

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Littleton council approves biogas project funding

Littleton ready to foot half the bill for project to turn sewage gas into money

Posted

Littleton City Council gave its blessing to a plan to capture and sell waste gases produced at the Littleton/Englewood Wastewater Treatment Plant, pledging $4 million from the city's sewer budget reserves toward the project's $8 million price tag, with Englewood slated to pony up the other half if its council also approves the cash financing method.

The Littleton council approved the funding by a 6-1 vote at their Feb. 20 meeting, with Councilmember Carol Fey voting against the measure.

The plan, which was first presented to city council in July 2017, seeks to take advantage of a federal program that allows for selling renewable energy credits, called RINs, or “resource identification numbers.” RINs are assigned to batches of renewable fuel that are sold in the energy market — in this case, that fuel would be the byproduct called “biogas,” which comes from the treatment process at the Littleton/Englewood Wastewater Treatment Plant.

Currently, the plant burns of 90 percent of the biogas produced at the plant, said Public Works Director Keith Reester. The remaining 10 percent is recaptured to fire digesters at the plant. The gas is flared rather than simply released because it is a greenhouse gas that is significantly more harmful to the environment in raw form than burned into carbon, Reester said.

Under the current timeline, if Englewood agrees to the cash financing method, the cities will draw up contracts with brokers and contractors related to the construction of the infrastructure to capture the biogas between now and late May. The project would return to Littleton's supervisory committee in July for final approval, then be presented at a joint meeting between Englewood and Littleton city councils, where each city would agree to a contract package for construction, which would begin in September. The project would be operational by early 2019, Reester said.

Revenue uncertain

Littleton's $4 million investment would come out of its sewer budget reserves, which currently stand at around $25 million. The plant pulled in $15 million in revenue last year against expenditures of $13 million. Englewood's sewer budget currently has about $6 million in reserves, meaning their investment in the project under the cash financing model would eat up about two-thirds of their savings. Englewood has already budgeted for the expenditure but not yet approved it in council, Reester said.

Current financial models project the effort would recoup its investment within 3.2 to 4 years, according to city finance director Tiffany Hooten. The federal RIN program, created in 2002, runs through 2022, and it's unknown whether it will be renewed, Reester said.

The uncertainty of the credits beyond 2022 means time is of the essence, Reester said.

“The sooner a project like this gets online, the better it is for our financial picture,” Reester said. “Obviously none of us can predict what will happen in Washington, D.C., but the industry is supportive of RINs in general.”

If the program is not renewed, the plant could sell the fuel on the open market to companies or governments that fuel vehicle fleets with natural gas, Reester said, though the price of biogas without federal credits is unclear.

“In the worst-case scenario, if the RINs (credit) goes away after 2022, which we as staff and our consulting firms find very unlikely, then we'd be in a position to not get the quickest return on that investment,” said City Manager Mark Relph. “We would have to look at alternatives on how to use that gas.

Relph offered a comparison to Grand Junction, which employs a similar biogas recapture project to fuel its city fleet at a cost of $1.50 per gallon equivalent to diesel fuel.

Hooten, the finance director, said her estimates are conservative, and that real revenues might be as high as $2.5 million to $2.7 million a year, split evenly between Littleton and Englewood, shortening the time for return on the investment.

Reester said he foresees few snags because the project is straightforward and does not present significant engineering hurdles. The project does not require adherence to a state permitting or oversight process, he said.

“My biggest concern is that we're still in a relatively hot construction market,” Reester said, “but even then there's not a lot of industrial construction beyond the oil and gas field out east. It should go quickly.”

Council feels hopeful

City councilmembers largely felt good about the project.

“Long term I think it'll be a great investment,” said Councilmember Patrick Driscoll. “Right now we're just flaring it off. Let's take advantage of this gas and reuse it for the right purposes. The four years to recuperate our costs is a smart decision.”

Councilmember Karina Elrod wasn't dissuaded by the financial projections.

“I too had some concerns about the financial risks potentially associated with this, but I've seen that we are able to mitigate some of that risk based on how quickly we can get this built,” Elrod said.

Councilmember Carol Fey, the lone vote against the appropriation, expressed some trepidation.

“I'm very much in favor of environmental conservation efforts,” Fey said. “The part of this that bothers me is the financial aspect with the RINs that may not be around all that long. We're gambling with $4 million of taxpayer money which may or may not pay off in the long run.”

The potential benefits are worth the risk, said Councilmember Kyle Schlachter.

“I think the environmental benefits are great, and the financial risks, while they're there, are minimal and will allow us to turn waste into potential revenue,” Schlachter said. “I'm not too worried about the lack of RIN credits hurting us financially.”

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