Case Studies

MMC, Eastman Chemical and Republic Services, Inc.

 

Situation

When Tengasco, a Knoxville, Tennessee-based oil and gas production and transportation company, sought a way to expand the gas component of its business, the company found opportunity in garbage.

 

 

Tengasco’s oil production operations are in Tennessee and Kansas. For the better part of the 21st century’s first decade, Tengasco’s gas business consisted of transporting its own produced natural gas through its 65-mile-long pipeline from its Swan Creek field in East Tennessee’s Hancock County to Eastman Chemical Company in Kingsport,Tennessee.

 

 

Constructed in 2001, the pipeline possessed additional capacity. However, there were no other significant natural gas sources along its route. Tengasco saw an opening to grow its business by adding to the gas pipeline volumes captured and purified landfill-produced methane gas. Methane is the main component of natural gas.

 

Location worked in Tengasco’s favor. The Tengasco pipeline passes just 2.5 miles from the Carter Valley landfill in Hawkins County, Tennessee. The landfill is owned by Republic Services, Inc., America’s second largest non-hazardous solid waste management company.

 

To eliminate air pollution resulting from methane gas, large landfills are required to “flare,” or burn off, methane gas produced by decaying garbage. Republic, in compliance with the law, was flaring methane gas at the Carter Valley Landfill. A potential resource was literally going up in smoke.

 

 

Tengasco believed that three things could be accomplished if a new pipeline were laid from the landfill to Tengasco’s existing pipeline to transport landfill gas purified and transformed into usable, clean energy. These goals were:

 

• provide Tengasco with a new gas source
• create a new revenue stream for Tengasco and Republic
• contribute to the environment by improving air quality

 

 

 

Process

In 2006, Tengasco CEO Jeff Bailey and Cary Sorensen, vice president, entered into discussions with the company that previously owned the Carter Valley landfill. At the same time, to show its commitment to the project, Tengasco embarked upon obtaining the rights-of-way for pipeline construction. Agreements were reached voluntarily with all landowners along the pipeline route.

 

 

An agreement was negotiated between Tengasco and Republic in which Tengasco was given the right to purchase the Carter Valley landfill gas, extract the methane, and pay Republic a portion of the methane sales proceeds. The arrangement was similar to a landowner royalty for an oil or gas lease.

 

 

To manage the new enterprise, Tengasco created Manufactured Methane Corp. (MMC), with Sorensen serving as president, Bailey as vice president.

 

 

Pipeline construction began in January 2008. In a separate agreement, Republic requested a forced main water drainage line be installed in the same trench as the methane gas pipeline. Republic would use the water line to transport pre-treated leachate from the landfill to the nearby city of Church Hill for final treatment and disposal. This is a significant improvement over the previous system of trucking the wastewater to treatment facilities.

 

 

With the water line addition and construction requirements to drill and cut through rocky terrain, the pipeline was completed in December 2008. Total project cost, including the pipeline, was approximately $4.3 million.

 

 

MMC assembled the treatment system at a small site within the Carter Valley landfill. The treatment equipment was manufactured by third-party contractors and delivered to the site.

 

 

Included in the facility is a Tengasco-designed methane stream-to-pipeline purification system for which a patent has been granted. In combination, the systems remove almost all the carbon dioxide and nitrogen from the landfill gas. Raw landfill gas is primarily made up of 45 percent methane, 36 percent carbon dioxide and up to 17 percent nitrogen and other gases. The gas purified by Tengasco’s system is 95 percent methane, four percent nitrogen and less than one percent oxygen.

 

 

Additionally, the process removes siloxanes from gas. Siloxanes are chemicals used in the production of makeup, among other consumer products. Siloxanes, when burned in internal combustion engines or generators, produce highly abrasive deposits that are damaging to the machinery.

 

 

 

Results

The MMC-Republic Carter Valley methane project has turned a previously wasted resource into clean, usable energy.

 

 

Commercial operation for delivery of gas from the Carter Valley methane extraction project began April 1, 2009.

 

 

On August 27, 2009, the Company entered into a five-year fixed price gas sales contract with Atmos Energy Marketing, LLC, (“AEM”) in Houston, Texas, a nonregulated unit of Atmos Energy Corporation (NYSE: ATO) for the sale of the methane component of landfill gas produced by MMC at the Carter Valley Landfill. The agreement provides for the sale of up to 600 MMBtu per day. The contract was effective September 1, 2009 and ends July 31, 2014. The agreed contract price of over $6 per MMBtu was a premium to the then current five-year strip price for natural gas on the NYMEX futures market. MMC’s plant is physically capable of producing a daily quantity of approximately 400,000 cubic feet of methane, containing about 400 MMBtu in heating content, for sale under the Atmos contract from the Carter Valley landfill at the raw gas volumes currently being supplied by the landfill when the plant is in operation for a full 24 hours per day. Volumes are expected to increase as the collection system is expanded over time as the landfill grows along with the surrounding communities.

 

 

MMC’s methane production is expected to grow each year until it peaks in 2031, five years after the landfill’s estimated closure. Commercial methane production will continue for approximately five years after peaking, although the volumes will then decrease each year as the decomposition process approaches its natural ending point for the buried trash. The Carter Valley landfill lifetime methane gas production is estimated to be some eight billion cubic feet.

 

 

A number of landfill across the country employ some form of landfill gas use; however, burning unpurified landfill gas in electric generators wastes 70 percent of the gas energy content and damages the equipment because of the presence of siloxanes.

 

 

MMC’s process creates nearly 100 percent usable energy, removes siloxanes, and improves air quality. The landfill’s overall carbon dioxide, carbon monoxide, and nitrous oxides emissions are reduced significantly.

 

 

The outcome is good for the environment, the community, the companies and their employees. It’s a positive partnership that is on track to pay dividends for years – and decades – to come.