City Hears Methane Proposal

City Hears Methane Proposal

By Jeff Arnold
Wednesday, November 23, 2005 8:28 AM CST

TIMES RECORD • JARNOLD@SWTIMES.COM

Methane gas produced by decomposing trash could bring cash into city coffers if a California-based company is allowed to expand its landfill gas collection system at the Fort Smith Regional Landfill.

Since 1997, Cambrian Energy has collected methane gas produced by decomposition at the landfill — which is required under state and federal landfill regulations — and converted it to a mid-grade heating fuel available for sale.

Initially, about 20 percent of the gas was sold and currently none of the gas is being sold, according to a memo from Deputy City Administrator Ray Gosack.

Under the terms of a partnership created in 1997 between the city and Cambrian, the city receives a 13 percent royalty on methane gas sales, which generated about $18,000 annually when gas was being sold.

Evan Williams, president of Cambrian Energy, told the Fort Smith Board of Directors at a study session Tuesday that if his company is allowed to process the gas and convert it to a product more equivalent to natural gas, the city could initially receive an estimated $141,000 annually from its sale if the city agreed to drop its royalty to 6.5 percent.

After five years, the royalty would increase to 10 percent, about $216,000 annually, said Williams.

Williams said his company will assume the $6 million investment to upgrade its facility in exchange for the city agreeing to the decreased royalty and increasing the land area at the landfill that Cambrian leases for a processing facility.

Although the royalty percentage will decrease, because the gas being sold would be higher quality and Cambrian believes it can sell 100 percent of the gas captured at the landfill, Williams said the city will earn more annually.

Cambrian also has two potential clients already — Arkansas-Oklahoma Gas Corp. and Seminole Energy — and has acquired almost all of the easements for a transmission line to an AOGC facility in Sebastian County, Williams said.

Gosack said city staff viewed the proposal favorably because of the potential for higher royalty payments and Cambrian’s capital investment which saves the city millions of dollars.

State and federal landfill regulations require the city to capture landfill gas so it doesn’t escape into the atmosphere. If there was no partnership with Cambrian, the city would bear sole responsibility for the cost of capturing the landfill gas, said Gosack.

The board will vote on the proposal at its Dec. 6 regular meeting.

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