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HomeMy WebLinkAboutAgenda - 12-03-2007-6cORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: December 3, 2007 Action Agenda Item No. (p _ G SUBJECT: Landfill Gas Recovery Process Options DEPARTMENT: Solid Waste Management PUBLIC HEARING: (Y/N) No ATTACHMENT(S): University of North Carolina -Draft MOU 11/9/07 Carolyn Elfland Letter 11/28/07 County Manager Follow-up Letter to Carolyn Elfland INFORMATION CONTACT: Gayle Wilson, 968-2885 PURPOSE: To receive, and decide among, proposed options for proceeding to develop a gas recovery project at the Orange County Landfill. BACKGROUND: Orange County has been considering and evaluating potential landfill gas (LFG) recovery options since 1997. In 1998, a series of meetings took place between University of North Carolina and County staff, including a representative of the EPA's Landfill Methane Outreach Program and the Program's engineering consultant. At that time, the University decided not to pursue an LFG project as not being financially viable. The EPA's consultant conducted considerable LFG modeling and other analysis and believed there were sufficient quantities of gas to justify a project, but conceded that it would likely be a financial break-even situation. The Orange County Landfill was generally considered too small to support a credible and financially viable project. In the ensuing years, the County has been intermittently approached by potential LFG project developers, speculators, and various other groups, businesses and individuals offering a variety of interests and proposals. None of these represented viable legitimate proposals that protected County interests. Also during that period, a variety of federal and state legislative tax credit and regulatory initiatives were implemented and expired. Only within the past couple of years has the LFG regulatory and financial climate evolved to a situation where previously marginal landfills are now becoming viable. National and international markets have been and are being established to reduce greenhouse gasses, which include methane. Of late, there seems to be significant interest nationally by both producers of gas and gas project developers leading to an increase in competition for projects. The BOCC's last substantive discussion of LFG recovery was at its April 12, 2007 meeting, with a brief follow-up discussion of Carbon Emissions Trading in May. On May 31, the County Manager and Solid Waste Management Director met with the Town of Chapel Hill Manager and staff regarding the potential development of a LFG project on Eubanks Road as requested. 2 The County Manager has considered three current options for development of an LFG project for the Orange County Landfill: • Option 1: Negotiate Exclusively With the University of North Carolina UNC officials expressed a renewed interest in exploration of a LFG project in March of 2006. Those officials have recently reiterated that interest and have met with County staff three times this year. UNC has recently provided a Memorandum of Understanding (attached) requesting that the County enter into an exclusive agreement with the University to discuss and develop a LFG project. It is staff's understanding that UNC wishes to install a gas collection system and flare the gas to obtain the carbon credits initially, and then over time examine a potential gas utilization project. UNC has expressed a desire for a breakeven project, with little or no opportunity for Orange County to receive revenue. It is believed that it could take between 3 and 6 months for UNC to conduct additional feasibility analysis and possible testing and for preliminary negotiations to conclude. It would be critical under this option for both parties to commit and adhere to a precise and expeditious schedule of active negotiations, although it is somewhat uncertain as to the ultimate duration of these negotiations or whether discussions would ultimately be successful. Under Option 1, the BOCC would direct staff to negotiate and execute a Memorandum of Understanding that would provide an exclusive period of time for Orange County and UNC to attempt to develop a more detailed LFG recovery project agreement that would include technical and economic parameters/standards and a timeline. • Option 2: Develop and Issue a Request for Proposals (RFP) Over the past several months, County staff and the County's consultant have been contacted by various firms expressing interest in developing a LFG project at the landfill. The County's consultant has recommended that the County issue a Request for Proposals to determine more specifically the potential for a local LFG project that could possibly provide the County Solid Waste Enterprise Fund with an additional source of revenue and a more immediate gas utilization project that would minimize flaring. UNC would be urged to submit a proposal so that the BOCC could evaluate all substantive development options simultaneously. The County's consultant has indicated that it could have a draft RFP ready for issuance in approximately one-two weeks. Under Option 2, the BOCC would direct staff to develop and issue a Request for Proposals to solicit entities to submit proposals and project economics for development of a LFG recovery project at the Orange County Landfill, including urging UNC to participate. It is expected that such an RFP could be ready to issue within two weeks. Option 3: County Development of LFG Recovery Project Another option for LFG project development would be for Orange County to develop a gas recovery project itself. Staff has not yet requested a more detailed feasibility analysis for this option; however, existing preliminary modeling provides some reasonably reliable data and additional analysis could be promptly completed and presented to the BOCC at the BOCC's January 15, 2008 meeting. Under Option 3, the BOCC would direct staff to perform the necessary additional analysis to provide the technical and economic information on which the BOCC can consider an Orange County funded and managed LFG recovery project After considerable staff level discussion and reflection, the County Manager is requesting that the BOCC review the proposed options and determine the direction staff should follow. It is the Manager's recommendation that the BOCC proceed with Option 2, the immediate Issuance of a Request for Proposals due to the likelihood that it would offer the County the most comprehensive and timely opportunity to ascertain and competitively evaluate legitimate LFG development opportunities, validate serious, motivated, and interested parties, and also not preclude the University from submitting its own project plan. FINANCIAL IMPACT: There is no direct financial impact relative to discussing the options. However, there could be expense related to implementation of any of the options, and possibly revenue to the County, depending on project specific economics. RECOMMENDATION(S): The Manager recommends that the Board direct staff to pursue Option 2: Develop and issue a Request for Proposals to solicit entities to submit proposals and project economics for development of an LFG recovery project at the Orange County Landfill, including urging UNC to participate. 4 Fetter of Understanding for the Planned Development Of a Landfill Gas Collection and Use System Between Orange County, North Carolina And The University of North Carolina at Chapel Hill Purpose Orange County, North Carolina (the County) and the University of North Carolina at Chapel Hill (the University) will, subject to the withdrawal provision specified in the Guiding Principles, enter into an agreement to develop a landfill gas collection and use system that will provide landfill gas from the County's Eubanks Road Landfill for future use by the University. This Letter of Understanding outlines the guiding principles for developing a more detailed agreement for designing, building, operating, and maintaining a landfill gas collection and use system as further described herein. Background The County and the University hereby express their full intent to develop a landfill gas collection and use system that will initially allow the collection and flaring of the gas to reduce the discharge of methane to the atmosphere and will in the future provide a fuel for the University to utilize for providing useful energy to its buildings. The methane in the landfill gas is a potent greenhouse gas, and collecting and flaring it or using it as a fuel provides benefit to the environment. By developing and using this system, carbon offsets will be created that the University will use to offset its use of fossil fuels to provide energy to its campus. The use of this system demonstrates the County's and the University's shared commitment to responsibly manage waste streams and resources in a sustainable manner which offers many important benefits to the County, the University, the community, and the environment. The collection and use of the landfill gas will: • Allow the County to dispose of the methane gas generated by the County's landfill in an environmentally sound and reliable manner and reduce the amount of greenhouse gases currently being discharged to the atmosphere by the County's landfill. • Provide exclusive rights to the energy and carbon credits for the University to use to offset its current use of fossil fuels, and provide a locally controlled energy resource for the University. {00011915.DOC} Guiding Principles The County and the University agree to the following Guiding Principles for subsequently developing and entering into a more detailed contractual agreement to design, finance, construct, operate, and maintain the planned landfill gas collection and use system. The detailed agreement will more fully describe the business plan and the operating plan for assuring a safe, reliable, high quality, and cost effective landfill gas collection and use system. The County and the University agree to proceed on the basis of the estimated landfill gas quantities identified in the March 2006 report, Landfill Gas Recovery Feasibility Study, by Olver Incorporated. The County and the University will work during the period prior to the final agreement to further refine the estimated gas production. The County and the University agree that the landfill gas collection and use system must be financially justifiable within a reasonable capital recovery period to be defined during the agreement process. In addition, the planned landfill gas collection and use system will provide many important strategic benefits that are hard to quantify in economic terms. Upon either party's determination that the project is not viable for any reason, either party may elect to withdraw from further negotiations concerning a landfill gas collection and use system and this letter of understanding will terminate. The Parties agree that the proposed agreement will address the following issues: 1) Responsibility for obtaining all necessary permits to construct and operate a landfill gas collection and flare system. 2) Ownership, operation, and maintenance responsibilities for the landfill gas collection and use system 3) Grant to the University exclusive rights to the energy of the landfill gas and the carbon credits generated by the combustion of the gas. 4) Define any agreements necessary to provide an area on the landfill property for any equipment the University may need to locate at the landfill site in order to provide beneficial use of the landfill gas energy and to allow the University access to maintain its equipment on the landfill site. 5) Other issues that the parties may identify during the negotiation. The parties agree that they will work jointly to develop and execute a detailed agreement in an expeditious manner. If the parties execute an agreement, the University will provide funding for the landfill gas collection and use system. During the period the parties are working to negotiate and execute this detailed agreement, the County will seek no other partners for collection and utilization of the landfill gas. {00011915.DOC} 6 BY: ORANGE COUNTY, NORTH CAROLINA BY: THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL Richard L. Mann Vice Chancellor for Finance and Administration Date Date {00011915.DOC} ~_ THE YTNIVERSITY I of NORTH CAROLINA at CHAPEL HILL November 9, 2007 Laura Blackmon, Orange County Manager 200 South Cameron Street Post Office Box 8181 Hillsborough, ETC 27278 ' Dear Laura: s~ ~~~oa~ r ASSOC~ FOR q NOIt 1 9 2D~a5 so, CE CHANCELLOR SERVICES GILDING T gZ9.96x.7x44 Iooo F 9ig.g6x.o647 NC 27599-=000 I am writing to express my dismay with your decision to cancel our November 8 meeting regarding potential cooperative arrangements for use of the gas from the Eubanks Road Landfill. The University and the County have had a long history of working together for the benefit of the citizens of the County. The University has for years, at the County's request, disposed of its garbage at the Orange County Landfill although there are other less costly options. When the County failed to relocate the Animal Shelter from our Carolina North property on a timely basis the University accommodated its continued operation in spite of our desire to have the property vacated before the remediation of the hazardous chemical waste site. The University has established a Carolina North Forest and Trails Management group, to make the land more accessible to citizens for walking, hiking, and biking, in effect establishing an over 700 acre park for County residents at no expense to the County. These are just a few examples. Thus, I am surprised that you have terminated our long standing and, at least from my perception, productive discussions regarding use of the landfill gas, and at this very late juncture where the draft MOU has been under discussion. T never would have thought that the County, ~vhich.is leading the multi-;ur."zsdictional greenhouse gas reduction effort, would consider selling the landfill gas to a third party and. thereby put the Iniversity in the position of having to use fossil fuel at Carolina North: ~ Where is the benefit to the citizenry from that approach? Both I and Ray DuBose have expressed in unambiguous language'on numerous occasions to you and Gayle Wilson that the University will not bid against private sector companies for the use of this gas. The University does not issue an RFP for transit services and force the Town of Chapel Hill to bid. We work cooperatively as partners with Chapel Hill and Carrboro to maximize the transit services that can be provided to the community as a.whole. We envisioned a similar arrangement with-the County with~resgect. to'the.landfill gas.:.: Laura Blackmon 2 November 9, 2007 When Gayle Wilson notified Ray DuBose that our meeting was canceled Ray asked whether we, along with our consultants, should attend the Commissioner's meeting where you plan to present the RFP option. Gayle responded that the University should stay away. We will do so. But I could not allow this sudden change in the County's attitude toward the University to pass by without expressing my profound disappointment, and making note of how inopportune the timing is considering the impending development of Carolina North. Sincerely, j----~ Carolyn W. Elfland Orange County Hillsborough North Carolina Manager's Office November 28, 2007 Ms. Carolyn W. Eifland Associate Vice Chancellor for Campus Services The University of North Carolina at Chapel Hill 305 South Building, Campus Box 1000 Chapel Hill, NC 27599-1000 Dear Carolyn: Established 1752 This correspondence is in response to the letter you sent expressing your disgust with my decision to request direction from the Board of County Commissioners concerning the utilization of landfill gas. I wanted you to receive a response from me prior to the December 3rd Board meeting when this item will be discussed. I fully recognize the long term working relationship between the University and the County has been congenial and beneficial to the community as a whole. The University community is to be commended for being a good neighbor to Chapel Hill, Carrboro and Orange County. However, you admitted in your letter we have been engaged in "long standing" discussions regarding the use of the landfill gas. Each day that passes means more methane gas is being released into the atmosphere, which undermines our goal to be a leader in greenhouse gas emissions reduction. The University has acknowledged that there is not an immediate intention to utilize the gas, but only to flare the gas and obtain the carbon credits. I know you recognize the potential financial benefits the County can receive from selling the landfill gas either for use as an energy source or for the carbon credits that can be obtained. Such value is evident but currently unknown to the County without issuing an RFP to determine the marketability of this landfill byproduct. Our attorney can find no legal reason why the University can not respond to such an RFP. In the past you have told me you can not submit a proposal, but your letter simply states you will not bid against private sector companies. Is that the University's position, or. can you provide documentation that such action is legally prohibited? The agenda. item to be considered by the BOCC suggests entering into a five year (with three successive five year renewal options) agreement with the successful bidder that would include a buyout provision at the end of each five year period. The timeliness of your ability to utilize the gas for energy at Carolina North is unknown due to the uncertainty regarding the development schedule for the project. This buyout provision would give the County the flexibility should it desire to reconsider ownership of the collection system or revisit the matter with the University at a future date. 200 S. Cameron Street ~ PO Box 8181 ~ Hillsborough, North Carolina 27278 Phone: (919) 245-2300 Fax: (919) 644-3004 JO Ms. Carolyn W. Elfland Page 2 November 28, 2007 The meetings of the Orange County Board of Commissioners are open to the public and I encourage you, your consultants or anyone from your staff to attend the meeting next Monday evening. That being said, I do not believe any member of my staff would have told the University to stay away from a public meeting. I request Mr. Dubose call me and provide fixst- hand information about the conversation he had with Gayle Wilson. I look forward to seeing someone representing the University at the BOCC meeting on Monday night. Sincerely, ~ /,~`. /~ Laura E. Blackmon County Manager cc: Board of County Commissioners Gwen Harvey, Assistant County Manager Gayle Wilson, Solid Waste Management Director Geof Gledhill, County Attorney