Pima County hopes third time’s a charm turning wastewater gas into cash

Last year the county’s Tres Rios Wastewater Reclamation facility produced around 254 million cubic feet of so-called biogas, a byproduct of the wastewater treatment process that — if cleaned — could supplant the natural gas consumption of more than 5,000 homes.

However, most of the potentially valuable resource is being burned off at the plant, though the wastewater facility uses as much as it can on site. In recent years, the county pursued deals with several companies to treat and market the methane-rich biogas, proposals that ultimately fell through.

Now some officials say the best way forward is for the county to build the cleaning facility itself and sell the product, which could mean hundreds of thousands of dollars annually for the wastewater department that has been contending with declining usage and revenues. As to potential customers, the county has reached out to UNS Energy Services and considered hiring a third-party marketer that would find natural gas customers. Any deal, as well as how to pay for the new facility, would need the approval of the Board of Supervisors.

“We were in negotiation forever with firms ... and just frankly we weren’t getting anywhere,” County Administrator Chuck Huckelberry said of the failed efforts. “I just said, ‘It’s time to basically do something.’ And it’s not that expensive.”

In a July memo to wastewater Director Jackson Jenkins, Huckelberry estimated the new biogas cleaning facility could cost about $8 million to build. He suggested that debt could be repaid by assessing the utility’s customers a small monthly renewable energy fee. However, he later told the Star that might not be necessary.

“Now that we see the market improving for environmental biogas, it’s quite likely that it will actually make money and pay the capital cost back without any fee increase, and that’s the direction we’re headed,” he said.

Production of the cleaned gas would also earn the county renewable identification numbers, which can be sold to energy refiners and importers looking to comply with federal renewable standards, according to a recent memo from Huckelberry.

Those revenues will also “offset a portion of the Tres Rios (plant’s) operations and maintenance costs to benefit … ratepayers,” according to the 2016 wastewater facility plan.

In April, supervisors approved a 3 percent hike for both wastewater user and connection fees. County officials said two additional hikes will be necessary in coming years to prevent potentially serious financial consequences for the department.

In 2014, the Board of Supervisors approved a contract with the companies Anaergia Inc. and Grannus Biagas LLC, which were going to build and operate a treatment facility and sell the gas. The contract called for the county to receive 10 percent of gross revenues, which were estimated to eventually rise to nearly $175,000 annually, excluding lease payments. Jenkins said a second deal, which was pursued with the company BioFuels Energy, would have brought in closer to $200,000.

Because the current effort would require paying just for moving and possibly marketing the gas, Huckelberry said the potential revenues for the county “could be as much as 10 times” those figures. Jenkins agreed the new proposal would likely bring in significantly more revenue than contracting with a company to build and operate the cleaning facility, but was more cautious in his estimates, suggesting the potential revenues could be two to three times as lucrative.

The county canceled the Anaergia/Grannus contract in early 2015 after the joint venture was unable to find a customer for the cleaned biogas. One possibility was an Apple supplier in Mesa that filed for bankruptcy, according to Jenkins. Negotiations with BioFuels Energy were suspended in July after it became “clear there will not be any significant progress on contracting,” Huckelberry wrote in a memo earlier that month.

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Now, the county is hoping to team with Southwest Gas to move the cleaned biogas to a final customer or customers. Jenkins said Southwest is “all in” and has even added a stub to its pipe network near Tres Rios — near West Ina Road and Interstate 10 — to connect to a cleaning facility. Huckelberry said Southwest could potentially transport or purchase the gas, as well as assist with operations, maintenance and marketing, though the “exact responsibilities” are still being discussed.

Company spokeswoman Amy Washburn said the company is “excited to partner” with the county to move its renewable natural gas, which she described as a “domestic, renewable and a clean form of energy.”

Where the gas might go is still unclear. Huckelberry sent a letter to UNS Energy Corp. CEO David Hutchens in August raising the possibility of UNS subsidiary Tucson Electric Power buying the gas. A spokesman told the Star that TEP is still “reviewing the idea” and intends to meet with the county and Southwest to “discuss feasibility.”

In Jenkins’ opinion, the returns for the county could be greater having a third-party marketer finding buyers throughout Southwest’s range, instead of relying on a single local customer like TEP.

“That market out there, (it) sure seems like this would be a good way to go, not only from the green, sustainability perspective, but also the economic value to our county and ratepayers,” he said.

Huckelberry said it’s a “very safe bet” that the revenues would be sufficient to cover the debt necessary to build the cleaning facility, though he conceded the price of natural gas has been variable. Given rising demand for cleaner fuels, he argues that the market “is going to be fairly stable and healthy for the next 10 years.”

Jenkins said a request for proposals for the facility will likely be out by the end of the year and construction could begin as soon as next summer.

“It won’t take us too much longer,” he added. “We’re going to have a gas cleaning project and we’re going to be selling a renewable fuel out there to somebody.”

The plan will face some skeptics.

While he hasn’t had the opportunity to review the proposal in-depth, Supervisor Steve Christy said he’s uncomfortable with the idea of a local government becoming a player in the energy market.

“My first inclination is to be wary when local government, or any government, starts to become a private enterprise,” he said.

But Supervisor Sharon Bronson said she’s glad there’s finally some movement on a long-talked-about goal, which she says will promote sustainability and energy independence. Her support, however, is dependent on the project not being “put on the taxpayers’ backs,” she said.