Staff recommends that City Council approve the agreement with Montana Dakota Utilities.

The City of Billings and Montana Dakota Utilities (MDU) entered into an agreement in 2008 to capture methane from the landfill and process it for sale.  The agreement has expired and a new agreement needs to be executed.  Over the last 13 years, there have been changes in the regulatory air quality limits that the landfill must meet. Because the landfill air quality is now being regulated, additional facilities need to be added to the system. The agreement details which entity is responsible for design, construction, and monitoring of the facilities as well as how operations will be managed to ensure the City landfill methane levels remain under the required limits. General terms of the agreement are as follows:

Design, construction and operation of gas plant expansion and upgrades - MDU
Design, construction and operation of new production wells - MDU
Design, construction and maintenance of mitigation wells - City
Operation of mitigation wells - MDU
Design and construction of compliance flare - City
Operation of compliance flare - MDU (City to reimburse operations cost)
Common source Title V permit - City and MDU
Compliance plan for operations - MDU
Revenue share - 15% City/85% MDU

The agreement also contains language about insurance, indemnification, termination and other issues that were in the original agreement.  The termination section states that if the agreement is terminated by the city before 30 years, the City will be required to purchase the RNG facility from MDU for a defined value. 

City Council may:

• Approve the agreement; or,
• Not approve the agreement.  If the agreement is not approved, the city would need to find an alternative way to extract and treat the methane gas to ensure compliance with DEQ Title V air quality requirements.

The MDU gas plant has been operating at the Billings Landfill for the last 10 years.  Over that time, the revenue generated for the City has been just over $3M which accounts for 15% of the revenue.  With the improvements being proposed in this agreement, the revenue is projected to increase.  Initial calculations suggest that the City could receive approximately $400,000 annually, depending on gas production and the market price for gas.  The City's responsibilities to construct the compliance flare and the mitigation wells per this agreement will likely cost between $1M and $2M.  However, if this agreement was not in place, the City would still need to meet the DEQ Title V air quality requirements which would include the installation of the compliance flare, mitigation wells and the remainder of the wells that are planned for installation by MDU.