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Renewable Natural Gas Project

On May 9th, the Klickitat PUD Board of Commissioners authorized staff to sign contracts to begin producing and selling renewable natural gas, which is the currently used to generate electricity at the landfill in Roosevelt.  With current and forecasted market prices for renewable electricity, there is more value in selling the renewable fuel than using it for power generation.

Why? Electric generation facilities that use fossil fuels such as natural gas are efficient.  However, internal combustion engines are inefficient, which result in more emissions for the amount of fuel burned.  As a result, when renewable natural gas is used to replace diesel fuel or gasoline, there is significantly more environmental benefit and value for the product.

The challenge that we face is that with the current electric market values, the existing generation facility contributes about $1 million to the PUD after the cost of operating. This position is unlikely to substantially improve over time. Three years ago, the board saw this challenge coming.  It directed PUD staff to investigate ways to find more value from the LFG project and lower the risk we have in the selling our electricity in the markets. Click on this link to investigate our researchKlickitat PUD RNG Research Memo.

Since then, we have talked with over 80 companies, discussed potential sales and partnership ideas with 23 entities and had contract-level discussions with four companies. This was done before finding an arrangement that provided the value and financial security we sought. We also looked at closing, selling or leasing the facility and the underlying gas rights. After months of analysis and negotiation, we ultimately completed contracts with IGI Resources.

The contracts provide for a guaranteed, fixed revenue stream for about 60 percent of the gas we sell them.  This will provide consistent revenue to cover our operating costs and new debt repayment.  Additional revenue will come from selling IGI the rest of the gas at market prices.  This is expected to provide anywhere from $1 million to $12 million a year.  This is a large improvement in our financial situation, and long-term rates.  To put these revenues in perspective, our total electric rate revenues are about $30 million a year. Click here for detailed information on the financial impact, Klickitat PUD RNG Financial Impact Summary.

The agreements reached with IGI Resources and its parent company, British Petroleum North America, provide for a payment guaranty of $45 million. This will allow the PUD to borrow $35 million to build the facilities needed to further clean the gas and deliver it to a natural gas pipeline. Using a portion of the fixed revenue stream, the PUD will repay this loan within 5 years. 

Design work is already underway, financing is in place and construction is expected to be completed in mid-2018.  The existing facility will continue to generate electricity until the conversion is made. 

Click here on our Klickitat PUD RNG Summary to learn more about this exciting way your PUD has found to have a positive impact on our ability to provide low-cost, reliable electric service for the future.

Jim Smith
General Manager