One person's waste product is another person's fuel — that's the idea Englewood and Littleton might soon use to make millions of dollars on a project to repurpose and sell a byproduct from their joint wastewater treatment plant called biogas, a …
One person's waste product is another person's fuel — that's the idea Englewood and Littleton might soon use to make millions of dollars on a project to repurpose and sell a byproduct from their joint wastewater treatment plant called biogas, a renewable energy source.
The proposal, in the works since at least last October, moved forward as the Englewood City Council passed its wastewater treatment plant budget on a preliminary vote Oct. 2. Barring amendments to the bill, Englewood's final vote on appropriating money for that budget, which affects the project's ability to move forward, is expected Oct. 16.
But the plan faces two critical hurdles: whether councilmembers can agree how to pay for it and whether Littleton City Council agrees to hop on board with what Englewood appears to be enthusiastically proposing.
“As it is currently proposed, this project is, in essence, a form of gambling,” said Doug Clark, a Littleton councilmember. “We would be taking on a high level of risk with citizens' money.”
Englewood largely doesn't see it that way.
Burning valuable gas
At the core of the plan is the Littleton/Englewood Wastewater Treatment Plant, which purifies used water — what gets flushed down toilets and drains from showers, sinks, washing machines and so on. The treatment produces a byproduct called biogas, some of which is burned for heating within the wastewater-plant system. The rest gets “flared” in a waste-gas burner.
Englewood and Littleton are looking at converting the biogas into “compressed natural gas” to be sold to a third party.
The first option, storing the gas at a third-party location such as Waste Management at West Union Avenue and South Santa Fe Drive, would cost about $8.4 million to complete.
The second — putting the fuel in pipelines owned by Xcel Energy — would cost about $7.5 million to pull off.
That choice would also make use of nearly all of the gas the wastewater plant produces, which would not be the case with the first option, said Eric Keck, Englewood city manager. Coordinating storage and other logistics with the third party in the first option would also be a challenge, Keck said.
The second option is projected to yield about $12 million in profit to be split by both cities over 10 years if they fund the project themselves, and costs would be split 50/50 between Littleton and Englewood. After about four years, though, it would pay for itself, according to a report to the cities by the firm Carollo Engineers, and the profits stack up after that.
'Gambling' or sound investment?
There is disagreement over whether the plan is a financial risk.
“It is possible the project will never pay for itself,” Clark said. The way the cities would make money is by selling “renewable energy credits,” called RINs, for “resource identification number,” Clark said. RINs are assigned to batches of renewable fuel that are sold in the energy market.
A federal program requires oil companies sell a certain amount of renewable “biofuels” through the year 2022. The amount of money that Englewood and Littleton could make by putting renewable fuel into the market would depend on the price of RINs, Clark said.
“If the price ... does not match the projection, or the actual cost of the project exceeds estimates, or the RIN program is canceled before 2022, the project will not break even,” Clark said. The report used a price-per-RIN of $2.50 to predict the payback time, but that's higher than the recent three-year average price, Clark said.
That price is $1.78, Clark said, adding that if the price jumped to, say, $3, the profits would be even larger than projected, though.
The estimate for how long the project would take to pay for itself is based on current RIN rates, Keck said.
“Our goal is to have the investment paid off by 2022 so that if the (federal) program continues, we would be earning annual profits in the $1 million-plus range for each additional year,” Keck said. “If the program ends after 2022, we will be ... in a prime position to look at other revenue sources from the (gas).”
Keck said, in the pipeline injection scenario, the plant could "beneficially use nearly 100 percent of the gas we are currently producing" and that Xcel Energy is a "very interested and motivated partner" in the project. The plan could reduce greenhouse gas emissions by 5,500 metric tons of carbon dioxide per year, the equivalent of emissions from 1,162 automobiles, Keck said.
Payment options and use-tax issue
Because of a use tax that would affect costs the cities would pay on the project, Littleton would end up paying more than half the cost, according to Clark.
“Englewood also charges itself the use tax, but since it is paying itself the tax, it is the same as not paying it,” Clark said.
Englewood has not yet decided whether it would waive the tax for Littleton. The uncertainty of whether Littleton would ultimately agree to the project in part led Laurett Barrentine, Englewood councilmember, to vote against the wastewater plant budget. Councilmember Rita Russell voiced support for the project, but also voted “no” because of the uncertainty of making a profit.
How to pay for the plan remains to be decided, too. The cities could pay for it directly, allowing for the most financial gain, but that would saddle them with higher financial risk. A third, private party could finance, build and operate the necessary biogas facility, Clark said, but that would lower the profits the cities could glean.
That option “has the lowest financial risk to the cities but (would likely) provide the least (control) and lowest potential for revenue,” Keck said.
The preliminary design for the project could take several months to complete, so a firm fate for the project won't be decided in the near future. An Englewood City Council vote on green-lighting work on the design is expected Oct. 16, and other discussions and votes will extend months into 2018.