CHARLESTON, W.Va. -- The president of the City Council and the operator of a similar project in Pennsylvania say the city should seek competitive proposals, but council members will be asked Monday to approve a no-bid lease for a methane power plant at the city landfill.

Entrepreneur Tom Loehr announced plans July 21 to build a 3-megawatt power plant to be fueled by methane, a greenhouse gas created by decomposing trash that is now vented into the atmosphere. A former state treasurer, Loehr said he has formed a company, Charleston Clean Energy LLC, that will raise $3 million of private money for the project.

University of Charleston President Ed Welch has said he's interested in buying the plant's electricity as a way of creating a "green campus" and as an educational tool.

According to City Manager David Molgaard, the lease for the project is being prepared this week. "The legal departments are working on it. The city would be compensated 12.5 percent on the sale of methane, which is standard compensation for a gas lease."

The lease is listed on the agendas for the meetings of the City Council and its Finance Committee on Monday.

That surprised Tom Lane, longtime council president. "I don't want to be presented with a fait accompli," he said Wednesday, before the agendas for Monday had been distributed.

"I hadn't thought about the hoops we have to go through," Lane said, "but I'm thinking we have to get proposals, and Tom [Loehr] is going to be ahead of the curve."

Lane said Thursday he has asked for a legal opinion on the procedures the city must follow to execute such a lease, and is seeking independent analysis of the terms of the lease.

City Council members first learned about the project when Mayor Danny Jones introduced Loehr at the start of the July 21 council meeting. There was no mention of Loehr's visit or the project on the meeting's agenda.

Jones and Loehr have discussed the project for several months. Jones hailed it as a no-risk green venture for the city.

"It all sounds good," said Jim Warner, executive director of the Lancaster County Solid Waste Management Authority in central Pennsylvania. In partnership with PPL Corp., an energy company, he helped develop a similar 3.2 MW landfill power project that's been in operation since early 2006.

However, Warner raised some questions about Charleston's plans, wondering what experience Loehr has in developing a landfill-methane power project: "Typically, you want to go to a company that has done a project before.

"The city obviously has no experience in running a landfill project. To protect their interests, I think they should hire a consulting firm and do a request for proposals," Warner said. The consultant can negotiate the best deal for the city and get references to check their past experience, he said.

"Who in the city is qualified to say whether that 12.5 percent [royalty] is a good figure or not? Who is going to be negotiating the electricity sales agreement?" Warner said. "There are other things of value in this besides the methane."

Selling carbon credits

In particular, there are lucrative carbon-offset credits that can be sold on the Chicago Climate Exchange (CCX), assuming that the Charleston landfill meets the exchange's requirements. Warner told his peers about credit trading last October during the annual convention of the Solid Waste Association of North America.

"We're selling carbon credits, which ended up being worth 10 times the value of the gas," he said, although he later said it was more like eight times. In the first year of trading, Warner sold about $234,000 worth of credits on the CCX.

Carbon-offset credits are based on the idea that, by burning methane to produce electricity, you reduce the amount of greenhouse gas that otherwise would be polluting the atmosphere. Companies that are required to cut their own emissions can purchase credits as an alternative.

The CCX awards 18.25 credits for each ton of landfill methane removed from the atmosphere. The value of credits changes daily, but has been hovering lately around $4 per credit - $3.95 on Thursday. At that rate, one ton of methane would be worth $72.09 in credits.

Charleston's landfill, which produces an estimated 4,000 tons of methane a year, might generate carbon-offset credits worth nearly $290,000 a year.

CHARLESTON, W.Va. -- The president of the City Council and the operator of a similar project in Pennsylvania say the city should seek competitive proposals, but council members will be asked Monday to approve a no-bid lease for a methane power plant at the city landfill.

Entrepreneur Tom Loehr announced plans July 21 to build a 3-megawatt power plant to be fueled by methane, a greenhouse gas created by decomposing trash that is now vented into the atmosphere. A former state treasurer, Loehr said he has formed a company, Charleston Clean Energy LLC, that will raise $3 million of private money for the project.

University of Charleston President Ed Welch has said he's interested in buying the plant's electricity as a way of creating a "green campus" and as an educational tool.

According to City Manager David Molgaard, the lease for the project is being prepared this week. "The legal departments are working on it. The city would be compensated 12.5 percent on the sale of methane, which is standard compensation for a gas lease."

The lease is listed on the agendas for the meetings of the City Council and its Finance Committee on Monday.

That surprised Tom Lane, longtime council president. "I don't want to be presented with a fait accompli," he said Wednesday, before the agendas for Monday had been distributed.

"I hadn't thought about the hoops we have to go through," Lane said, "but I'm thinking we have to get proposals, and Tom [Loehr] is going to be ahead of the curve."

Lane said Thursday he has asked for a legal opinion on the procedures the city must follow to execute such a lease, and is seeking independent analysis of the terms of the lease.

City Council members first learned about the project when Mayor Danny Jones introduced Loehr at the start of the July 21 council meeting. There was no mention of Loehr's visit or the project on the meeting's agenda.

Jones and Loehr have discussed the project for several months. Jones hailed it as a no-risk green venture for the city.

"It all sounds good," said Jim Warner, executive director of the Lancaster County Solid Waste Management Authority in central Pennsylvania. In partnership with PPL Corp., an energy company, he helped develop a similar 3.2 MW landfill power project that's been in operation since early 2006.

However, Warner raised some questions about Charleston's plans, wondering what experience Loehr has in developing a landfill-methane power project: "Typically, you want to go to a company that has done a project before.

"The city obviously has no experience in running a landfill project. To protect their interests, I think they should hire a consulting firm and do a request for proposals," Warner said. The consultant can negotiate the best deal for the city and get references to check their past experience, he said.

"Who in the city is qualified to say whether that 12.5 percent [royalty] is a good figure or not? Who is going to be negotiating the electricity sales agreement?" Warner said. "There are other things of value in this besides the methane."

Selling carbon credits

In particular, there are lucrative carbon-offset credits that can be sold on the Chicago Climate Exchange (CCX), assuming that the Charleston landfill meets the exchange's requirements. Warner told his peers about credit trading last October during the annual convention of the Solid Waste Association of North America.

"We're selling carbon credits, which ended up being worth 10 times the value of the gas," he said, although he later said it was more like eight times. In the first year of trading, Warner sold about $234,000 worth of credits on the CCX.

Carbon-offset credits are based on the idea that, by burning methane to produce electricity, you reduce the amount of greenhouse gas that otherwise would be polluting the atmosphere. Companies that are required to cut their own emissions can purchase credits as an alternative.

The CCX awards 18.25 credits for each ton of landfill methane removed from the atmosphere. The value of credits changes daily, but has been hovering lately around $4 per credit - $3.95 on Thursday. At that rate, one ton of methane would be worth $72.09 in credits.

Charleston's landfill, which produces an estimated 4,000 tons of methane a year, might generate carbon-offset credits worth nearly $290,000 a year.

In addition, power plant operators also might qualify for a federal renewable energy tax credit of 1 cent per kilowatt-hour, and Renewable Energy Credits that are typically purchased by power companies. Their value varies from state to state.

Carbon-offset credits can be claimed only by whoever owns the methane collection system at the landfill, Warner said, while the power plant owner can claim the other credits. "We have the rights to the emission [carbon] offset credits, since we installed the collection system.

He said both these things should be spelled out in the contract. "These are things the city should look at," Warner said. "Who's looking at this to look out for the best interest of the city?"

With a population of 50,000, the city is unlikely to have someone in-house qualified to do this, he said. "They need a consultant to come in and fulfill their goals.

"There's nothing wrong with bringing in someone to do the project," Warner said, "but do it right. You can structure it all sorts of ways.

"There are plenty of qualified people out there doing this. If you have a qualified vendor, it's better for the city. Landfill methane is an asset to the city."

Loehr confirmed Thursday that carbon credits are crucial to the economics of his project, but cautioned that it's too early to say how much they might be worth.

The 4,000 tons of methane per year figure comes from a report from the city's landfill consultant, he said. "That's based on an estimate as to what should be produced. No one has measured what the landfill actually produces, and that is critical to whether this project will work. You've got to spend money. You've got to drill wells to measure the methane."

The landfill might not produce as much methane as expected, he said, or the methane content of the landfill gas might be lower than the anticipated 50-percent level.

Selling carbon credits on the CCX is a complicated process that involves an independent verification of the project, Loehr said.

Still, "It's possible. The credits are definitely possible. In fact, if the credits are not doable, it's definitely not feasible. There would not be enough return for investors to be interested."

Loehr downplayed the impact, if any, of other possible credits. He said he's not discussed selling Renewable Energy Credits because of the proposed deal with UC. "We want to make them a green university, but if you've stripped out the credits, you can't say you're selling green power."

Also, federal tax credits will expire at the end of the year - long before the plant is in operation - although Congress could extend them, he said. In any case, "They're not significant at all. We didn't consider them."

He acknowledged that he has no track record in building this type of plant. "I'm an entrepreneur. Everything I do is for the first time. That's what entrepreneurs do.

"In order to do a project, you have to spend a considerable amount of money up front. When I talked to the mayor, he didn't want to have to spend any city money up front."

Operators of the Raleigh County landfill are using a different business model, he said. They're investing public funds to see whether there's enough methane to support a power plant. "There is a huge risk involved. You could invest money and come out with nothing."

Molgaard, the city manager, defended the deal with Loehr. "I suppose we could hire a consultant, [but] I think the reason the city wanted to move forward on this was that Tom Loehr's company was willing to take the risk - and the groundwork has been laid with a possible buyer. There's a synergy here for the community.

"I guess to do that amount of due diligence, if the other intangibles weren't in play, maybe you should hire a consultant," Molgaard said. "When you bring in the other intangibles - making Charleston green fairly rapidly, making UC a green campus - weighs toward moving forward rather quickly."

Reach Jim Balow at ba...@wvgazette.com or 348-5102.