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HOUSTON—With the sprawling downtown Houston skyline as a backdrop and hundreds of birds hovering overhead, the humming of trucks and a drilling rig on site signal progress at the 300-ft hill.

One could hardly notice the faint smell of garbage lingering in the air as Republic Services turns trash picked up from the curbs of neighborhoods, restaurants and other facilities across the fourth most populous city in the U.S. into renewable natural gas (RNG) at the McCarty Road Landfill.

Here, the South Texas heat and humidity are welcomed.

“That helps the trash break down,” Modesto Dominguez, the landfill’s general manager, said noting how lots of pressure is also needed to help the trash decompose and produce a mix of gases that mostly include methane.

The process, which transforms what is essentially biogas at 50% methane into pipeline quality gas of at least 96% methane, involves drilling holes to form a network of wells—some horizontal, others vertical—about 150 ft deep more or less depending on how high the landfill is at the time, he explained. The perforated pipes connect to other pipelines around the landfill. Blowers suck the gas like a vacuum from the landfill into one of the two gas plants on site, where moisture and other unwanted gases are reduced or removed to yield RNG.

RNG’s appealing carbon profile—it’s less carbon intense than diesel—coupled with access to carbon credits are attracting investment as the energy transition picks up pace. Naturally occurring methane in places like landfills, dairy farms and other sources is being tapped for gas capture, and demand for bountiful supplies is growing.

Hart Energy Oil and Gas Investor July 2022 - Republic Services RNG - Damian Lopez McCarty Road Landfill explains gas well
Damian Lopez, operations manager at the McCarty Road Landfill, explains how gas wells work at the site. The well is one of 190 gas wells at the site. (Source: Velda Addison/Hart Energy)

The RNG supply market is only about 185 MMcf/d in the U.S. today, but it has a four-year compounded annual growth rate of 29%, according to Enverus. The energy data firm said it expects RNG demand to grow at least 4.6x by 2030 to 855 MMcf/d. Only about 83 Bcf/d is consumed by the U.S. domestic market today.

“We believe landfills represent the highest volumetric RNG potential and estimate about 1,030 MMcf/d of total possible capacity in the U.S.,” Enverus said, “with a potential of 870 MMcf/d from landfills with either planned projects or are within five miles of existing gas infrastructure.”

Republic Services is moving deeper into the action, having announced in May a joint venture with RNG producer Archaea Energy. As part of the $1.1 billion investment, 39 RNG projects will be developed in 19 states across the U.S starting in late 2022. The projects when fully operational are expected to generate more than 12.5 MMBtu of RNG annually. Republic’s existing RNG, or high Btu, projects generate about 15 MMBtu of energy per year.

Early Adopter

Phoenix-headquartered Republic has been in renewable energy for more than 25 years; however, most of its legacy landfill waste to gas plants were geared toward electricity, not RNG. The tide is beginning to turn, given potential for the carbon-neutral fuel sourced from decaying feedstock to push the company closer toward its sustainability goals. Of Republic’s 76 existing renewable energy projects, about eight are solar and 68 are landfill gas to energy, Pete Keller, vice president of recycling and sustainability, told Hart Energy.

“When we first got into it, it was about utilizing an available resource to generate energy. It wasn’t necessarily about carbon intensity or climate change or those types of things,” said Keller. “We were just early adopters using a resource, but now it’s really about opportunities to decarbonize, to clean up grids, to clean up pipelines. It’s just been an evolution in the landscape.”

Roughly 73 billion standard cubic feet of biogas is utilized across Republic’s existing 68 projects. When gas is captured at company sites without renewable projects, Keller explained that it is flared, or technically, thermally oxidized. The process converts methane into CO₂, “which is still not awesome, but it’s far better for the environment than releasing that methane into the atmosphere.”Hart Energy Oil and Gas Investor July 2022 - Republic Services RNG - Pete Keller headshot

“We can sell all the RNG that we produce without even trying. Demand far outstrips supply.”—Pete Keller, Republic Services

Methane is more than 25 times as potent as CO₂ at trapping heat in the atmosphere, according to the U.S. Environmental Protection Agency.

The amount of methane captured at Republic’s sites with landfill gas to energy projects vary, depending on the age, climate, types of waste going into systems and the density of the wells.

“Generally speaking, you’re somewhere between 75 and 99% capture,” he said.

The company has four landfill gas to energy plants in the Houston area, where it takes in about 13,000 tons per day but spikes when there are major events. Two of the four landfill to gas energy plants are located at the McCarty Road landfill, which takes in about 6,500 tons/day, Dominguez said.

The projects pull the methane equivalent of what 1.26 million acres of trees would pull from the air, or about 109 million gallons of gas per year, he added.

Developing RNG, despite the advantages, is not without challenges.

To make projects economically viable, a minimum amount of flow is needed and location matters.

“If your site is 20 miles from the nearest pipeline, getting gas into distribution can be a challenge,” Keller said. “There are some systems out there where you can pressurize a tanker truck and then you get to haul that truck down to an injection point, 20 miles away. But that can be a challenge.”

Hart Energy Oil and Gas Investor July 2022 - Republic Services RNG - Landfill gas-to-energy process infographic
(Source: Republic Services Inc.)

Getting Bigger

The technology that separates the gases, however, is “pretty tried and true,” said Keller, speaking briefly about the pressure swing adsorption process with carbon molecular sieve. The process, used at McCarty, separates different gaseous species by the size of their molecules.

With solid technology and infrastructure in place as decarbonization and sustainability goals drive change both within and outside the industry, the time seemed right for Republic to expand further into RNG.

“Some of the smaller projects that historically have not been economically viable now make a lot of economic sense just because of the change in the energy sector,” Keller said. “Then, there’s some other incentives in the marketplace that you may be familiar with—the Federal Renewable Fuels Standard or California's Low Carbon Fuel Standard (LCFS). Those can add value to projects.”

Under the Renewable Fuel Standard, RNG qualifies as an advanced biofuel.

RNG projects’ access to carbon credits—such as the federal government’s cellulosic biofuel renewable identification number (D3 RIN) and California’s LCFS credits—can push realized prices to anywhere from $30/MMBtu to more than $100, according to Enverus. That compares to Henry Hub’s recent decade-high price of about $8.50/MMBtu.

“While historically folks hadn’t always had confidence that those schemes would be around over the long term, I think there’s increasing confidence in the marketplace that those types of incentives are going to exist for the foreseeable future,” Keller said. “That creates more confidence for the investments.”

The partnership will enable the company to scale up quickly.

Of the dozen or so developers Republic considered for the JV, Houston-based Archaea—one of the largest RNG producers in the U.S.—stood out in part because the company has its own crews.

“We didn’t see that in any other developers; other developers would require an outside construction firm, an outside engineering firm. Archaea has all that capability in-house,” said Keller. “When we think about bringing projects to market with speed, we just thought that was a really good offering.”

Hart Energy Oil and Gas Investor July 2022 - Republic Services RNG - McCarthy Road landfill gas well drilling
Drilling is underway for additional gas wells at the McCarty Road Landfill, where methane gas is collected and transformed into RNG. (Source: Velda Addison/Hart Energy)

The companies hope to have all 39 projects, including six in Texas, complete by 2027 with RNG in the marketplace.

The projects are expected to help Republic hit sustainability goals, including increase beneficial reuse of biogas—something Keller admits has been “a little lumpy in the last few years.”
Using 2017 as a baseline, the company aims to increase beneficial reuse of biogas by 50% by 2030.

“We’ve increased our usage of biogas as an organization by about 5% since 2017. So not necessarily on the trajectory that we want to be on,” he said. “With the partnership with Archaea we’ve got a clear line of sight to those 39 projects. Again, we expect most of them to be online by 2027, so we feel really good about our ability to achieve that goal.”

Looking Ahead

Though RNG makes up of less than 1% of what’s in pipelines today, Keller called demand robust.

“We can sell all the RNG that we produce without even trying,” he said. “Demand far outstrips supply.”

Besides the environmental pluses, fuels credits are adding value on top of the RNG value itself, which is typically priced identical to fossil fuel.

Like other industry insiders, Keller sees value potential from the voluntary market, specifically large institutions willing to pay market plus premium for RNG as they work to hit their own sustainability goals on the utility usage side.

Hart Energy Oil and Gas Investor July 2022 - Republic Services RNG - McCarthy Road landfill blower skids carrying gas
Blower skids carry gas from the hill to the gas plant with enclosed flares nearby at the McCarty Road Landfill. (Source: Velda Addison/Hart Energy)

Republic doesn’t plan to stop with the latest 39 RNG projects.

“I think there’s going to be more near-term development just because the economics are so attractive,” Keller said. “We’re going to look to continue to try to find opportunity beyond 39 sites, and the partnership allows us to do that.”

Plus, there are additional opportunities, looking at the company’s existing portfolio.

He sees growth ahead not just for RNG produced at landfills, but industrywide investment growth of RNG produced at wastewater treatment plants and agricultural RNG markets such as dairy and swine farms over the next five to 10 years due to strong demand and compelling economics.

What could change the positive outlook?

“Certainly, if some of the regulatory frameworks—the incentives—in the transportation world went way; that could alter that outlook,” Keller said. “On the utility side, I don’t see foresee a world that’s less interested in lower carbon fuels. So, the demand from that side will continue to be strong, and there’ll be adequate premiums in that marketplace to justify these projects.”