Operating Our Landfill
Hardin County Contained Landfill at Pearl Hollow
Hardin County Government purchased the Pearl Hollow Landfill property in the mid 1990s with development and construction quickly following. The initial land purchase, development, and construction costs of the landfill exceeded $17 million by the time the site opened to receive its first ton of waste in October 1997. Numerous expansion projects have occurred during the subsequent decade totaling another $9 million.
Since the landfill's inception, county government has contracted with a third party operator for daily operations. Rumpke of Kentucky operated the county's landfill from its opening in 1997 until September 2008.
The previous landfill contract required a guaranteed waste disposal stream of 300,000 tons per year. When this contract was due to be re-bid in 2008, NO entity - including Rumpke - would bid on a new contract requiring a guaranteed minimum amount of waste. This was a result of rising fuel costs increasing the cost of trucking waste long distances to the landfill, as well as the general condition of the economy. Rumpke made it very clear if they were awarded the new contract, the tonnage would be substantially less than the previous contract guaranteed. Without guarantees, Rumpke and Santek Environmental both believed the volume of waste would be 180,000 tons or less per year. Our current waste stream (almost entirely from within Hardin County) is approximately 160,000 tons per year.
Santek won the new contract and began operating the landfill in September 2008. Since assuming operation of the landfill, Santek has undergone 6 quarterly compliance inspections from state regulators with "no violations noted" during each evaluation.
The original purchase, development, and construction costs, combined with the cost of subsequent expansions of the landfill, created a debt burden of over $2.5 million in annual payments by 2008. These debt payments, coupled with associated annual operating costs, resulted in a business model requiring approximately 300,000 tons of waste per year to cover expenses. This is the business model the current Fiscal Court inherited.
With the decline in annual tonnage and no way to significantly increase volume in the short term, a dramatic change to landfill associated expenses was the only solution. Some of our significant actions to realign expenditures with revenue are as follows:
- An extensive permit modification was completed and filed with the state's Division of Waste Management to significantly expand the disposal area of our landfill. This will increase our total capacity by 400%, thereby extending the life of our landfill to nearly 100 years at current usage rates. Based on this significant increase in the landfill's life, the county's expense for annual escrow payments was reduced last year from $250,000 to $35,000. This escrow is the funding set aside to pay for the closing and monitoring requirements of the landfill once it has reached capacity. Obviously, with many more years for funding to accrue, the annual payments could be dramatically reduced.
- In August of 2009, the county successfully obtained a bond rating upgrade from Single A to a Double A rating, thereby placing the county in the top ten local governments in the state and among the top 15% in the nation for bond ratings. Our high bond rating greatly enhanced the county's credit risk, thereby allowing us to "refinance" existing landfill debt at a significantly lower rate and extended period. This restructuring, combined with paying off some shorter term debt, resulted in lowering the landfill's annual debt payments by more than $800,000 per year as compared to fiscal year 2009.
- Efficiencies and savings were also implemented in other areas such as reducing $25,000 in annual landfill engineering costs and $50,000 in evaluation and testing requirements over the last two years.
Even with $1.1 million of combined annual savings in landfill expenditures, approximately 180,000 tons of waste is still required annually to meet our solid waste expenses. The current projected tonnage rate is 160,000 tons. The county and Santek are aggressively seeking additional waste streams to increase tonnage intake; a serious challenge in these difficult economic times.
In the meantime, every effort is being made to streamline costs and develop other revenue streams - such as carbon credits. The proposed 2010/2011 solid waste budget is 95% funded from state grants and revenue streams resulting from landfill operations, while the remaining 5% is funded from conservative revenue projections derived from selling earned carbon credits (see "Carbon Credits" below).
Expanding Hardin County Landfill
Opened in 1997, Hardin County's Pearl Hollow Landfill is currently the 9th largest of the 26 contained landfills permitted in Kentucky and one of only 6 county or municipal owned landfills.
To date, Hardin County has completed construction of 4.7 of the 8 million cubic yards of air space currently permitted by the state. Our most recent construction effort combined the building of cells 3A and 4A into one project thereby producing an estimated savings of more than $700,000 in engineering, construction, and quality control expenditures. This was another innovative cost cutting initiative to save Hardin County taxpayers money.
Construction of Cells 3A and 4A was completed in December 2005, received final approval from state regulators in March 2006, and started accepting waste in the summer of 2006. Together, these two cells provided 2.2 million cubic yards of air space for the disposal of approximately 1.7 million tons of refuse. This is nearly as much as the combined disposal volume of all previously constructed cells since the landfill opened in the fall of 1997 and will continue to provide disposal space for the next six to seven years based on current disposal rates.
Cells 3A/4A, combined with the remaining permitted space yet to be constructed, provides the county landfill with ten to eleven years of remaining disposal space as currently permitted.
This year, we completed the necessary design and permit application process for a 23 million cubic yard expansion for the county landfill. This expansion has been in the planning process for several years and involves increasing the footprint of the existing disposal area within the county owned property for the Pearl Hollow Landfill. The current permitted space occupies a footprint of approximately 61 acres. With the expansion, the permitted disposal area will occupy less than 155 acres of the county owned 1,600 acres site.
The approved expansion will provide a total disposal area of 31 million cubic yards and will extend the life of the landfill by well over 100 years at current disposal volume rates and compaction densities.
Converting Methane Gas to Electricity
In 2005 we embarked on a new initiative to transform waste into a revenue stream for Hardin County Government. Environmental regulations required the county to collect and dispose of the methane gas created through natural decomposition of waste within the Pearl Hollow Contained Landfill in an environmentally sound manner. To accomplish this, the conventional method would have been to build an $800,000 collection system to bring the gas to the surface and then burn it off utilizing a flare system. Of course this would have been a lost capital expense to the county plus the annual cost of operating and maintaining the system.
Instead the county partnered with East Kentucky Power (EKP) and Nolin Rural Elective Cooperative to develop a methane gas to electric power project that will eventually provide "green" electricity for up to 3,000 homes. This agreement included the equivalent of a $700,000 "no interest loan" for the county to build the collection system. East Kentucky Power built a 2.4 MWH power generation plant utilizing 3ea 800 KWH Generators to be fueled by our methane gas. Repayment of the loan will be through credits for the gas EKP uses. Once the loan is repaid (7 to 10 years depending on annual gas volumes) a revenue stream will exist for the remainder of the landfill's useful life. After routine maintenance and operation of the collection system, it is estimated this arrangement will net county government approximately $2 million over the next twenty years alone.
Not only is this project an example of the excellent initiatives underway to operate county government more efficiently by turning an expensive waste disposal burden into a revenue stream for the county, it is also a great example of how government can assist in being good stewards of our natural resources. The operation of this first power generation facility (another is already being planned based on the expected outcome of the current plant) has the twenty year environmental impact of planting 1.4 million trees, offsetting emissions from 1M cars, preserving 23K rail cars of coal, or saving the use of 11.4 million barrel of oil.
Carbon Credits
In 2008 county government learned our methane gas collection and destruction system may qualify for "carbon credits". Carbon credit is a term used to describe a reduction or offset of greenhouse gas emissions. One credit equates to one ton of carbon dioxide or equivalent gases. Carbon credits are similar to other commodities and are sold/exchanged on open markets.
From late 2008 to mid 2009 the county completed the protocols established by the Chicago Climate Exchange (CCX) to certify our historical credits through mid 2009. As a result, we received verification for credits derived from 262,000 tons of gas reduction. To date, the county has sold credits from 124,000 tons of this gas to meet the verification, monitoring, and associated trading fees. The county still possesses historical credits for 138,000 tons of gas reduction to sell should the CCX market improve.
In late 2009 we moved our focus to a new emerging market, the Climate Action Reserve (CAR), to verify carbon credits generated from mid 2009 through the remainder of our eligibility period (projected now for mid 2013 or later). With the verification work done through the CCX serving as our base, additional protocols must be met to verify any credits we are accruing from mid 2009 and beyond for trading in the Climate Action Reserve markets. We now anticipate this verification process to be complete this summer.
Carbon credits within the CAR market are currently far more valuable than any traded in the CCX market. Estimates show the county acquiring 290,000 CAR carbon credits for the destruction of methane gas from mid 2009 to mid 2013. We anticipate being able to sell the first of these credits in the CAR market this fall.
Like any commodity market; prices for carbon credits are very sensitive to supply, demand, and governmental regulations. Recently we have seen price swings that could have netted $300,000 to $500,000 or more for this year's credits alone. Where the market will be once the county's credits are CAR verified this summer is anyone's guess.
What is NOT a guess is that any revenue derived from selling carbon credits produced from capturing and destroying our landfill's methane gas is just "icing on the cake". Two years ago we were not even aware the county may be eligible for these credits. Our decisions regarding methane gas collection and destruction were based entirely on meeting environmental requirements for eliminating greenhouse gases while producing income to offset expenses.
Receiving carbon credits for something we are already doing is certainly a great example of eating your cake and having it too! Each dollar obtained from carbon credits is a dollar we did not know we would receive when deciding to turn landfill methane gas into green energy. No matter how many or how few, each dollar obtained is $1 more not spent from county tax dollars to meet ongoing operational costs. And let's not forget that selling the gas to East Kentucky Power to power their green electricity producing generators is already paying for the county's collection of the methane gas.
It was recently asked "can one buy a loaf of bread with a carbon credit?" The answer is emphatically yes! Carbon credits derived from the county's methane recovery and destruction program at the Pearl Hollow Landfill have the possibility of producing a lot of "bread" for county government and thereby saving county taxpayers some of their own "dough" (taxes).
Whether it be whole wheat, white, or rye; carbon credits may just allow Hardin County taxpayers to butter their "bread" on both sides.