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Vol. 18, No. 43 Week of October 27, 2013
Providing coverage of Alaska and northern Canada's oil and gas industry

Lawsuit over landfill gas

Eklutna suing Municipality of Anchorage under ANILCA; issue gas production

Eric Lidji

For Petroleum News

Eklutna Inc. is suing the Municipality of Anchorage for a cut of the profits generated from a gas production operation at the Anchorage Regional Landfill in Eagle River.

In a 25-page complaint filed in Alaska Superior Court in early October, the Alaska Native corporation claims that the terms of the Alaska National Interest Lands Conservation Act entitle it to either half of the profits or half of the rent generated by the facility. The Municipality of Anchorage believes the facility does not trigger clauses in existing land-use agreements that would entitle Eklutna to a share of the profits.

The North Anchorage Land Agreement, a 1982 settlement to resolve some regional ANILCA disputes, included a provision entitling Eklutna to half of any income generated if Anchorage converted any of its “public interest lands” into a profit-earning enterprise.

The 274-acre Anchorage Regional Landfill is currently the only conveyance considered to be “public interest lands” under the term of the agreement, according to Eklutna.

By launching a project to capture and sell gas produced by decomposing waste, Eklutna believes the Municipality of Anchorage is making money off the land, which would trigger profit sharing. The Municipality of Anchorage believes the profits come from improvements it made to the land, which would not trigger the profit-sharing provision.

The suit also claims that Anchorage failed to keep Eklutna abreast of developments leading to the commercialization project, a requirement under the 1982 settlement.

Trash to treasure

Anchorage initially flared the methane produced at its landfill, but about a decade ago its Solid Waste Services division began investigating alternatives to this industry standard.

For decades, engineers saw landfill gas as a potential safety hazard, but a landmark commercialization project at the Palos Verdes Landfill in California in 1975 opened eyes to the possibilities of turning a liability into a source of revenue. The movement took a while to come to Alaska because engineers initially thought the Last Frontier was too cold to support the bacterial feeding frenzy needed to turn organic materials into gas.

Anchorage helped proved that trash generates heat, which is insulated by snow cover.

A 2004 study and a 2006 gas collection system provided enough information to justify moving ahead on a project to convert the gas to electricity to feed into a regional grid.

While increasingly common around the country, the Anchorage Regional Landfill was the first in Alaska to launch a methane commercialization project. The project came online in November 2012, selling power to the nearby Joint Base Elmendorf-Richardson.

The land or the landfill?

Those efforts constitute income from the land, according to Eklutna.

The suit cites internal emails from 2009 suggesting that Solid Waste Services understood the project might trigger the profit-sharing provisions of the settlement, and claims that Anchorage ultimately organized the project in a way that aimed to sidestep the payments.

When it hired Doyon Utilities in early 2011 to manage the project, Anchorage retained complete ownership over the proposed production facilities, leaving the construction and operations to Doyon, according to Eklutna. Had Anchorage leased a corner of the landfill to Doyon for building facilities, it would have triggered profit sharing, Eklutna claims.

Anchorage says it only made improvements to its property, which means it isn’t profiting from the actual land. In a statement, the Municipality of Anchorage noted that “the landfill gas would not exist if not for the improvements the Municipality has made on the land. This landfill gas is not like natural gas or minerals that are part of the land itself.”

But Eklutna believes Anchorage “functionally leased” the entire landfill to Doyon for the purposes of the project, which it believes should trigger the profit sharing provisions.

Decades to come?

Eklutna believes Anchorage is on the hook — one way or another.

Either Eklutna should get half of the profits generated from the facility, or it should get half the fair market value of the land Doyon is using to generate the gas, the suit claims.

The exact amounts are unclear, but it appears to be more than $100,000 to date.

Eklutna also wants to be compensated for its expenses in putting the case together.

The Municipality of Anchorage believes the income from the facility is a crucial component for keeping the landfill operational for decades to come. “The Municipality has a financial duty to its taxpayers, including making sure there are sufficient funds to secure and build an alternative landfill and sufficient funds for the proper care and closure of this landfill when the time comes,” the municipality said in its statement.

Earlier in the year, Anchorage expressed a willingness to settle with the Eklutna, but the two sides were clearly unable to reach an agreement before the case went to court.

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