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Home My WebLink About06. Landfill Gas Contract HistoryAf Central Contra Costa Sanitary District April 21, 2014 TO: FINANCE COMMITTEE VIA: NEIL MEYER, PLANT MAINTENANCE DIVISION MANAGER OA FROM: CRAIG MIZUTAN ,'SENIOR ENGINEER SUBJECT: LANDFILL GAS CONTRACT HISTORY The District has used landfill gas (LFG) since 1983. This memo summarizes the recent history of LFG contracts dating back to 1998. Information regarding contracts prior to this was not included; however, that information may be available through a search of the District's records and through the District's legal counsel. CONTRACT TERMS The framework for the contract has not changed significantly during the above period. The contract has contained the following terms: • Term: The contract term has been from one to five years with an "evergreen" clause which automatically renews the contract for one -year periods. The agreement may be terminated without cause with 90 -day notice. • Quantity: There is no required amount of gas to be delivered. The landfill is to use its best efforts to provide between 500 thousand cubic feet per day (kcfd) and 1,000 kcfd of gas. This is within range of the District's average demand. During the past 5 years, the average daily demand has ranged from 583 kcfd to 746 kcfd. • Quality: The methane content of the gas is stipulated in the contract. Until 2007, the minimum required high heating value (HHV) was 500 Btu /Cubic Ft. Starting in 2007, the required HHV was lowered to 480, presumably a result of poorer quality LFG being provided by the landfill. • Measurement: • Flow: The LFG flowmeter is owned by the Seller and located on the District's property at the point of delivery. The flowmeter is to be calibrated every six months by a third party and is to be maintained online by the Seller. • Quality Measurement: The Seller is to maintain an online gas chromatograph at the point of delivery and calibrate the chromatograph every six months by a third party and is to be maintained online by the Seller. Finance Committee Landfill Gas Contract History Page 2 of 4 o Measurement Verification: Either party may request a calibration at any time, and the cost is paid for by the party requesting calibration. If results show more than a 2% error in favor of the Seller, the Seller shall pay the costs of the recalibration. Price: The price of LFG is based on a percentage discount on the District's burner tip price for Natural Gas (NG). CONTRACT CHRONOLOGY The following is a chronological listing of key dates and contract conditions: 1982 Six inch diameter LFG pipeline is installed between Acme Landfill and the District. LFG is supplied by Getty Synthetic Fuels. 1983 The District begins utilizing LFG supplied by Getty Synthetic Fuels. 1998 The District begins purchasing LFG from Acme under a Gas Sales Agreement dated November 1, 1998. 1999 During this period, changes in ownership of the landfill and operation of the LFG system occurred. On September 1, 1999, Acme Fill entered into agreement with MM Martinez whereby Acme transferred the landfill gas pipeline to a third party, MM Martinez, and assigned its rights under the Gas Sales Agreement to MM Martinez. NEO /ACME, was a wholly owned subsidiary of NEO. NEO /ACME was a 50- percent controlling partner of MM Martinez Energy, LLC. 2000 -2001 A dispute arose between NEO Martinez, MM Martinez, and Acme regarding the parties' respective rights and obligations. Revenues from landfill gas sold to the District between August 2000 and May 2001 were disputed and the District held payments until the dispute was resolved on July 15, 2001. On April 15, 2001, the District entered into a Gas Sales Agreement with Acme Fill Corp. The agreement contains the following terms: • Term: 13 months with an "evergreen" clause annually. 90 -day termination by either party without cause. • Price • If the burner tip price of NG is less than or equal to $7.00 per MMBtu, the price of landfill gas (LFG) is $3.50 per MMBtu, a 50 %Discount. • If the burner tip price of NG is between $7.01 and $8.00 per MMBtu, the price of LFG is $3.75 per MMBtu, a 46 to 53% discount • If the burner tip price of NG is greater than $8.00 per MMBtu, the price of LFG is $4.00 per MMBtu. Finance Committee Landfill Gas Contract History Page 3 of 4 2002 On November 1, 2002, the District entered into a Gas Sales Agreement with Bulldog Gas and Power (Bulldog), (a wholly owned subsidiary of Acme Fill, created as a separate company to handle the LFG operation of the landfill). The agreement contains the following terms: • Term: 3 years with and "evergreen" clause annually. 90 day termination by either party without cause. • Price • If the burner tip price of NG is less than or equal to $2.00 per MMBtu, the price of LFG is equal to the NG price less a 30% discount. • If the burner tip price of NG is between $2.01 and $4.00 per MMBtu, the price of LFG is the sum of the price based on the first discount (30 %) plus the amount over $2.01 with a 40 %discount applied. • If the burner tip price of NG is greater than $4.00 per MMBtu, the price of LFG is the sum of the price based on the first two discounts plus a 50 %discount on the amount over $4.00. • Contract auto - renewed through original end date of November 1, 2005 to 2007. 2007 On February 1, 2007, the District entered into a Gas Sales Agreement with Bulldog Gas and Power. The agreement contains the following terms: • Term: 5 years with an "evergreen" clause annually. 90 -day termination by either party without cause. • Price • If the burner tip price of NG is less than or equal to $4.00 per MMBtu, the price of LFG is equal to the NG price less a 35% discount. • If the burner tip price of NG is between $4.01 and $8.00 per MMBtu, the price of LFG is the sum of the price based on the first discount (35 %) plus the amount over $4.01 with a 50% discount applied (i.e., $2.60 plus a 50% discount on the price above $4.00). • If the burner tip price of NG is greater than $8.00 per MMBtu, the price of LFG is capped at $4.60 per MMBtu 2012 On May 1, 2012, the District entered into a Gas Sales Agreement with Bulldog Gas and Power. The agreement contains the following terms: • Term: 1 year with an "evergreen" clause annually. 90 -day termination by either party without cause. • Price • The price of LFG is based on a flat 25% discount on the burner tip price of NG. • The price "floor" is a minimum of $2.60 per MMBtu. • The price "ceiling" is a maximum of $4.60 per MMBtu. Finance Committee Landfill Gas Contract History Page 4 of 4 2013 -2014 Bulldog (Acme Fill) changed its LFG compressor in August of 2013. The new compressor is smaller than the previous compressor and resulted in several noticeable changes. • The new compressor was sized for an average flow of 650 kcfd with a maximum of approximately 930 kcfd. Bulldog based the sizing on the average daily flow rate from past bills. The new compressor will not meet the target maximum flow of 1,000 kcfd. Bulldog stated the sizing was based on discussions with District staff; however, this was done informally and not with consensus of all parties involved. • Concurrent with the compressor change, the current drought has caused low gas production to hamper the District's operation. The low water table at the landfill has negatively impacted both the quality and quantity of LFG. The heat content of the LFG has been consistently below 500 BTU per cubic foot for the past year. • Additional wells were drilled by the landfill in January of 2014. The new wells are expected to maintain LFG quality, but are not expected to provide additional flow. • The gas chromatograph, which measures heat content, has not operated since October of 2010. Bulldog has repaired the chromatograph and has reinstalled it (on District property). The District has committed to pay for the maintenance of the meter to ensure that it remains operable and so that the heat content data is available on the District's control system.