Border Environment Cooperation Commission Methane Capture …server.cocef.org/CertProj/NSectores/Eng/Dic2007/DRAFT_BD_2008-X… · milk and dairy products as a basic staple of our

DRAFT BOARD DOCUMENT BD 2008-XX BECC CERTIFICATION DOCUMENT

12/21/2007

Border Environment Cooperation Commission

Methane Capture and Power Generation Project Sponsored by Energía Láctea S.A. de C.V. in Delicias, Chihuahua

1. General 1.a Project Type The proposed project is considered an Air Quality Improvement Project and as such, it falls within the mandate of the Border Environment Cooperation Commission (BECC). The project proposed by Energía Láctea S.A. de C.V., seeks to reduce air contamination through the construction of a digester that will help collect and reuse methane (CH4) produced by the breakdown of livestock waste, which is currently disposed of in open air lagoons. Reclaimed methane will be conveyed to an incinerator to be reused for power generation (647 kwh). In addition, upon reducing its organic load, wastewater from the digester effluent will be rendered suitable for irrigation. The project will reduce methane emissions to the atmosphere. Methane (CH4) is considered a Greenhouse Gas (GHG).1 Greenhouse gases contribute to global warming (Figure 1.1)2.

Figure 1.1 Greenhouse Gases (GHG)

1 Attachment A to the Kyoto Protocol 2 Basic UNFCC Information: United Nations Framework Convention on Climate Change

1


Delicias, Chihuahua

Greenhouse Gases (GHG).- The Earth's air is made up of various gases, mostly nitrogen and oxygen; the rest –less than one-hundredth– is made up of gases called "greenhouse gases," including carbon dioxide (CO2), methane (CH4), and nitrogen dioxide (NO2). Greenhouse gases are vital to our survival in small amounts, as they capture the sunlight and retain heat. When the sunlight reaches the Earth, some of this sunlight energy is reflected back to space by the clouds; the rest passes through the air and reaches the ground; however, not all the sun energy is used up by the Earth, some is sent back out to space. Since the Earth is cooler than the Sun, it cannot send back energy as light or heat; the energy it sends back out is called "infrared energy." GHGs absorb infrared energy like a sponge mopping up water, warming up the surface of the Earth and the air around it. Large amounts of GHGs prevent infrared energy from going back out to space, causing thus a global warming effect. Kyoto Protocol The United Nations Framework Convention on Climate Change was signed in 1992 at the Rio Summit, with the goal of preventing air temperature increases. In 1997, the signatories of the Framework Convention met again to issue the "Kyoto Protocol," in which developed countries pledged to reduce their greenhouse gas emissions by 5.2% between 2008 and 2012, taking 1990 levels as a baseline. The Kyoto Protocol became effective on February 16, 2005. The Kyoto Protocol established, among other mechanisms, the Clean Development Mechanism (CDM). The CDM is a market-based instrument targeted at reducing emissions, which applies to the industrial, energy, forestry, waste, and transportation sectors that generate GHG emissions. The CDM allows developed countries to implement projects to reduce GHG emissions in underdeveloped countries. Certified Emission Reductions (CERs) may be used by developed countries to meet their emission reduction targets. CERs are endorsed by the Executive Committee of the United Nations Framework Convention on Climate Change (UNFCCC). Energia Lactea and the CDM Energía Láctea is working through the Clean Development Mechanism to certify its emission reduction initiative and eventually put CERs out for sale in the international market. Energía Láctea contracted with CantorCO2 for the development and monitoring of this initiative. 1.b Project Categories The project belongs to the category of Private-sector Environmental Infrastructure Projects. The project will create direct benefits for the community, as well as expanded benefits by contributing to reduce GHG emissions to the atmosphere. 1.c Project Location and Community Profile The project will be developed within the facilities of the Los Lujan Livestock and Agricultural Farm (AGL), which is located 9 km away from the city of Delicias, Chihuahua. Ciudad Delicias, Chihuahua, is located in central Chihuahua, 83 km south of Chihuahua City, the State Capital (Figure 1.2).

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Figure 1.2 Project Location

The farm covers 129 hectares and includes cowsheds, a milking area, a nursing area, a mechanic shop, wastewater lagoons for irrigation, etc. Figure 1.3 shows the area assigned to the digester.

Figure 1.3 Area assigned to the digester


Delicias, Chihuahua

Community Profile Social and Demographic Indicators According to the housing count developed by Mexico's National Institute of Statistics, Geography and Information (Instituto Nacional de Estadística, Geografía e Informática, INEGI), by 2005 the city of Delicias had an estimated 108,187 residents. Local socioeconomic indicators are as follows: 96.12% piped water service coverage; 96.18% wastewater collection service coverage; 96.42% electricity service coverage; average education level: 9.22 years; number of beneficiaries of public health care insurance: 77901 (72%). Economic Indicators Pursuant to the 2000 Census, the economically active population (labor force) included 44,416 individuals, of which more than 40,000 were employed at the time. At present, more than 89 percent of the labor force works in the manufacturing, trade, construction, and service areas. Around 8% of the labor force is employed in primary economic activities. As for livestock farming activities, dairy production has been one of the key components of the economy in Delicias for many years. Its recent consolidation is a result not only of the priority treatment given to milk and dairy products as a basic staple of our diets, but also to the high profitability offered by the dairy industry. Although there are certainly large producers that use state-of-the-art technological advancements in their farms, there are still a good number of smaller dairy producers who have not incorporated high and intensive management technologies to the organization of their cattle herds. 1.d Legal Authority: The project applicant, Energía Láctea S.A. de C.V., received from AGL on gratuitous loan for use the land required for the construction of the digester. The applicant has been legally established as a company in the City of Chihuahua, Chihuahua through Certificate of Incorporation No. 18761 of May 16, 2007, which authorizes the project applicant to: 1) Conduct operations to produce electricity; 2) Obtain and extract gases that may be used or burned to reduce greenhouse gases; 3) Purchase assets; 4) Sell or lease any tangible and intangible community asset; and 5) Carry out other related activities. This legal authority is closely linked to the actions proposed by the applicant for the development and implementation of this project (Table 1.1)

Table 1.1 Applicant's Legal Authority – Project Activities Legal Authority Proposed Project

Conduct operations to produce electricity Produce electricity (647 kwh) Obtain and extract gases that may be used or burned to reduce greenhouse gases

Construction of a digester to collect, convey, use, and burn methane to produce energy and reduce greenhouse gases.

1.e Project Summary Project Description The disposal of untreated animal manure produces methane (CH4), among other GHGs that contribute to global warming –the primary cause of climate change.3 In addition, wastewater discharges that contain

3 Basic UNFCCC Information: United Nations Framework Convention on Climate Change

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animal manure contaminate bodies of water, resulting in foul odors and favoring the development of harmful fauna (insects, rodents, etc.). The project consists of collecting methane (CH4) that will be used as a source of clean energy through the construction and implementation of an anaerobic (no-oxygen) digester to handle the waste from three stables with a herd of 8,575 cows that generate 73,000 tons of manure each year. The implementation of the digester will increase the methane production/reduction capacity to 26,914 tons per year. Additionally, the project will produce electrical power at a rate of approximately 647 kwh,4 which will be used for self-consumption. Energía Láctea engaged the services of CantorCO2, one of the leading providers of financial and brokerage services for emission reduction projects, with the purpose of having this firm develop and follow up the certified emission reduction process established by the Executive Committee of the United Nations Framework Convention on Climate Change (UNFCCC). Once the CER is obtained, CantorCO2 will put out these reductions for sale in the international market, creating benefits for Energía Láctea with the revenues obtained. Additionally, the project will reduce the use of groundwater currently employed to dilute the organic load of wastewater discharged to lagoons for irrigation purposes. Project Map The following figure shows the project layout (Figure 1.4) Figure 1.4 Project Layout

Project Justification Global warming has become a great concern for the world at large. Increased greenhouse gas (GHG) emissions, particularly carbon dioxide (CO2) and methane (CH4) as byproducts of the advancement and industrialization of the last 150 years, are the main cause of temperature increments (Table 1.2)5. This issue involves serious consequences for the environment and the life on this planet. In view of this situation, it is necessary to develop alternatives to address the environmental unbalance caused by humans in their endeavor to maintain economic progress.

4 RCM Digesters, Inc. – Basis of Design Document August 2006 5 Basic UNFCCC Information: United Nations Framework Convention on Climate Change

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Table 1.2 Greenhouse Gases (GHGs)

Common Greenhouse Gases (GHGs), their origin, and contribution to global warming

Gas Main Source % Contribution to Global Warming

Carbon dioxide (CO2) • Fossil fuel burning (77%) • Deforestation (23%) 55

Chlorofluorocarbons (CFC) and related gases (HFC and HCFC)

• Various industrial uses: refrigerators, aerosols, solvents

• Intensive agriculture 24

Methane (CH4) • Coal mining • Gas leaks • Deforestation • Plant and soil breathing as a result of

global warming • Enteric fermentation

15

Nitrous Oxide (NOx) • Intensive agriculture • Biomass burning • Use of fertilizers • Fossil fuel burning

6

The implementation of scientific methods and processes makes it possible to use a biodigester to collect methane (CH4) that results from livestock activities, which is considered a gas that can be potentially 21 times more harmful than carbon dioxide (CO2)6, and which would otherwise be released to the atmosphere. Once methane is captured, it will be conveyed and burned in an incinerator, significantly reducing harmful gas emissions to the air. The project will help cut down methane air emissions by 26,914 tons/year. As well as being a critical instrument to preserve the environment, the proposed project involves a series of additional benefits: • Improved quality of life for the local community through:

o Reduction of GHG emissions to the atmosphere o Reduction of odors associated with the production of animal manure o Reduction in the use of well water employed to dilute organic loads o Reduction in emissions generated by the burning of fossil fuels for energy production o Reduction in the proliferation of flies and other vectors

• For the producer:

o A clean and renewable energy source (biogas)

6 Climate Change 1995 – The Science of Climate Change: Summary of working Group 1, Report pg. 26

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o A reduction in electrical power requirements o Animal manure will be biologically digested for better application as organic fertilizer o A unique opportunity to obtain revenues through the production of carbon credits for trading o Reduction in the use of groundwater employed to dilute organic loads o Improved animal waste handling practices o Revenues obtained from the sale of CERs

Important Issues for Certification: The project falls within BECC's new priority sectors and complies with the basic general

criteria. Pending Issues:

None.

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2. Human Health and Environment

2.a Compliance with Applicable Environmental Laws and Regulations The project's primary objective is to collect methane (CH4) and use it as a source of clean energy. Methane (CH4) results from the breakdown of cattle manure and generates emissions to the atmosphere. The proposed project will improve air quality by collecting and reusing methane (CH4). The project meets the provisions of the following laws and regulations:

Urban Development Plan – Zoning Energy Regulatory Commission Federal Electricity Commission (use of energy transmission lines) Kyoto Protocol – Clean Development Mechanism Mexico's General Law of Ecological Equilibrium and Environmental (LGEEPA) Chihuahua State General Law of Ecological Equilibrium and Environmental Protection

2.b Human Health and Environmental Impacts Human activities have contaminated the air by concentrating gases such as carbon dioxide (CO2), methane (CH4), nitrous oxide (NOx) and water vapor. These gases are commonly referred to as Greenhouse Gases (GHGs) and are essential for life on the planet. Without them, most of the Earth's surface would freeze. However, human activities in the last decades have resulted in an increase, particularly of CO2 concentrations, that has caused heat to be trapped in the atmosphere, producing an overall warming of the surface of our planet. Human Health Impacts The development, construction, operation and eventual closure of the proposed project are not expected to create any adverse impacts to Human Health, inasmuch as the project will be developed in an area where livestock farming activities already exist, and land zoning is consistent with said activities. In addition, beneficial human health impacts associated to the project include: • Reduction of vectors for infectious diseases through the implementation of an appropriate cattle

manure management system. • Reduction of odors associated to emissions from the temporary manure storage system currently used. • Direct elimination of methane emissions to the atmosphere and a resulting reduction in the amount of

GHG releases to the atmosphere.

Environmental Impacts The review of the project's location shows it within an urban-agricultural area, where no native vegetation is found. In addition, the site's wildlife is consistent with that of developed areas, in addition to cattle owned by Agricola Los Lujan. Consequently, inasmuch as the project area has been previously impacted, no significant negative impacts to the surrounding area are anticipated as a result of the project's proposed construction, operation, and closure activities. Beneficial environmental impacts associated to the proposed project include: • Reduction of methane gas emissions to the atmosphere estimated at 26,914 tons/year. • Reduction in the use of fossil fuels for electrical power generation at the farm. • Reduction of carbon dioxide emissions for fossil-fuel based power generation. • Conservation of groundwater currently employed to dilute the organic load of wastewater discharged

into existing lagoons.

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Establishment of a cattle manure management and methane use system that will eventually serve as a model for similar companies. Transboundary Impacts Considering the overall positive impacts resulting from the project targeted at reducing GHG emissions, transboundary impacts associated to this project include: • Reduction in methane GHG emissions to the atmosphere estimated at 26,914 tons/year. Formal Environmental Authorization On November 29, 2007, Energía Láctea requested the development of an Environmental Impact Statement (EIA) for the biodigestor project to the Secretariat of Urban Development and Ecology of Chihuahua. The EIS was developed by the Center for Environmental Quality (Centro de Calidad Ambiental, CCA) of the Instituto Tecnológico y de Estudios Superiores de Monterrey Campus Chihuahua. The Secretariat, and specifically the Department of Ecological Regulations and Environmental Impacts, received the EIS and requested a Contingency Plan from Energía Láctea. The EIS and Contingency Plan were submitted to the Directorate of Ecology for review on December 13, 2007. The Directorate has stated it requires at least 15 days to issue a finding. Important Issues for Certification:

The project will benefit the environment and human health by reducing methane emissions to the atmosphere. Pending Issues:

Environmental Impact Statement by the State Secretariat of Urban Development.

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3. Technical Feasibility 3.a Technical Aspects The project will be developed at a dairy farm that belongs to Los Lujan Livestock and Agricultural Farm (AGL), located 9 km from the city of Delicias, Chihuahua, whose main business activity is the production of milk. The project applicant, Energía Láctea S.A. de C.V., received from AGL on gratuitous loan for use the land where the methane digester will be located. Current Status The farm has a herd consisting of 8,575 cows, 5,000 of which produce 140,000 liters of milk on a daily basis; by late 2007, the production will increase to 200,000 liters/day by incorporating another 2,000 cows. The facility currently generates 73,000 tons of manure each year. The farm has available state-of-the-art (technically advanced) facilities and machinery (Figure 3.1); the cow stalls and milking areas have waste collection and conveyance slopes and canals (Figure 3.2). Waste (manure and urine) are collected and conveyed to open-air lagoons found within the same premises. Wastewater breaks down at these lagoons and releases GHGs to the atmosphere (Figure 3.3). Water is used to irrigate acreage owned by AGL that produces cattle feedstock. All the water from the lagoons is used for irrigation purposes to prevent it from being discharged into local, state, and/or federal bodies of water. Lagoon water contains a high number of nutrients, so it needs to be diluted with groundwater before using it for irrigation.

Figure 3.1 Computerized Milking Area


Delicias, Chihuahua

Figure 3.2 Cowshed and milking areas with waste collection slopes and canals

Figure 3.3 Wastewater discharges to open-air lagoons

Project Development Requirements The project will continue using the existing waste collection and conveyance process; however, a digester will be built for methane (CH4) collection and reuse.

Project features and components: • The project proposes the construction of a digester:

Digester: A lagoon with sufficient capacity to store and biodegrade wastewater and "capture" biogas for burning. The lagoon is lined and sealed with a geomembrane that collects wastewater to assist in their degradation (Figure 3.4). The main byproduct of anaerobic digestion is biogas, which contains from 60% to 80% of methane. The rest consists of carbon dioxide and hydrogen sulphide.

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• Components include animal manure collection, pretreatment, anaerobic digestion, biogas capture, biogas metering, biogas handling and reuse (to produce electrical and/or gas burning power), and sludge management.

• Resulting wastewater will contain the required amount of nutrients, so it will not need to be mixed

with groundwater for dilution and use for irrigation purposes.

Figure 3.4 Anaerobic Digester Layout Geomembrane

Cover Gas

Geomembrane

Wastewater

Natural ground surface

Effluent ----- Inflow ----- The project applicant employed RCM Digesters, Inc., of Berkley, California to develop the design and provide consulting services for the construction of the digester. RCM Digesters developed a design that includes the following specifications and process diagram. (Table 3.1 and Fig. 3.5):

Table 3.1 Digester Specifications Amount Unit

Influent volume flow 1,912 m3/día Total digester volume flow 131,605 m3 Length 196 m Width 142 m Operating depth 6 m Total depth 7 m Cover 26,081 m2 Power generator 800 Kilowatts capacity Kw Average power generation 647 Kwh

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Figure 3.5 Methane Capture and Use Process Diagram

AGL

Sand Separator

Cowshed waste and milking area

Appropriate Technology Anaerobic digestion has long been used for the treatment of industrial wastewater and farming waste; it is a simple biological process that consists of four phases: • Hydrolysis: Consists of the break down of complex organic molecules and their conversion into

simple sugars, amino acids, and fatty acids. • Acidogenesis: A further break down of organic molecules to produce ammonia, carbon dioxide, and

other byproducts. • Acetogenesis: Produces primarily acetic acid, hydrogen, and carbon dioxide. • Metanogenesis: Produces primarily methane, carbon dioxide, and water. Anaerobic digestion is carried out at two different temperature levels: • Mesophilic Level: Anaerobic digestion takes place optimally at 37°C inside the digester, or at

ambient temperatures between 20°C and 40°C. • Termophilic Level: Anaerobic digestion takes place at inside temperatures up to 70°C. The residence time in a digester varies with the amount of organic matter, the amount of feed material, and the temperature. Termophilic digestion is more expensive than mesophilic, since it requires more

Power Generator

Solid Separator

Biogas conveyance pipeSafety Valve

Biogas Burner Engine Room

Water storage

lagoon for irrigation

Outlet

Efluente

Anaerobic Digester

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energy to maintain an elevated digester temperature. Mesophilic digestion is more widely used than termophilic digestion, reason for which it was selected for this project. Anaerobic system components in agricultural and livestock projects: The anaerobic digestion system includes manure collection, pretreatment, anaerobic digestion itself, biogas capture, biogas metering and reuse (gas burning or electric power generation), and management of sludge resulting from the treatment. • Manure Collection: Manure collection must be continuous or as frequent as possible. A major

element to consider is the amount of water used to collect manure or convey it to the digester. Process water includes water from all sources that mix with the manure.

• Pretreatment: Consists of ensuring that the largest amount of manure possible reaches the digester

and, in the particular case of manure digesters and cowshed wastewater, having a solid separation system that prevents sand, hay, etc. from reaching the digester.

• Anaerobic Digestion: An anaerobic digester is a container designed to promote the growth of

methane-producing bacteria. The digester may require additional heating and/or a mixing system, and may be a lagoon, a simple tank, or a complex process with various metering systems and movable parts. Animal manure characteristics and the collection technique used will determine the type of digestion technology that may be used. Additionally, biogas extraction piping and mechanical components (blower, biogas meters, burner, etc.) may be installed as needed.

• Biogas Recovery: Biogas produced by the biodigester may be collected using a high-resistance

geomembrane or other means; the collection mechanism will depend on the type of digester. • Biogas Management: Biogas produced may be removed from the digester using mechanical

equipment (blowers) or the pressure generated inside the digester itself, after it passes through a water trap that will help eliminate as much hydrogen sulphide as possible. Then the biogas passes through a meter and is conveyed to biogas-operated devices.

• Use of Biogas: Metered biogas may be used as a fuel, for electricity generation or cogeneration,

heating, or absorption cooling. Biogas may be a substitute for natural or propane gas. Available anaerobic digestion technologies: A number of anaerobic digestion configurations have been developed; many of them may or may no be commercially available. Covered lagoons, complete mix digesters, and piston flow digesters are commercially available solutions. The intermittent aeration system is still in an experimental phase. 1. Covered Lagoon. This is the simplest and most economic system and is used in temperate climates. 2. Complete Mixture. This process consists of a tank that uses heat and a mixer to maintain organic

matter and bacteria in continuous contact. It is used in cold climates. 3. Piston Flow Reactor. This system consists of a long and narrow tank, covered by a membrane. These

digesters are used for treating cow manure in stables where the manure is mechanically removed. 4. Intermittent System. This system is characterized for being relatively inexpensive, inasmuch as it uses

less water that other systems and residence time is lower. For this project, the preferred alternative was determined to be a Covered Lagoon.

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Once the project was reviewed and the digester's design was defined, it was determined that the implementation of the project will create a methane production/capture/reduction capacity of 26,914 tons per year. Additionally, the project will produce electrical power at a rate of approximately 647 kwh, which will be used for self-consumption. In addition to the benefits described above, the project will reduce the use of groundwater currently employed to dilute the organic load of wastewater discharged to lagoons for irrigation purposes Land Acquisitions and Rights of Way Requirements The property where AGL is located is owned by Mr. Everardo Alfonso Lujan Saenz and Mr. Everardo Alfonso Lujan Barrientos, Chairman and Secretary, respectively, of the Board of Directors of the Energía Láctea, S.A. de C.V. Corporation. The project applicant, Energía Láctea S.A. de C.V., received from AGL on gratuitous loan for use the land where the digester will be located. Project Tasks and Schedule

Tasks Deadline • Start excavations for digester July 21, 2007 • Start RCM digester cover September 17, 2007 • Construction period 8 months • Complete environmental study November 1st, 2007 • Approval of Environmental Study December 2007/ January 2008 • Obtain Project Design Document

from the local National Authority designated by the United Nations, in this case, SEMARNAT December 2007/January 2008

• Obtain project endorsement, receive project registration, and obtain project verification July 2008

• Application for electricity self-supply permit to the Energy Regulatory Commission (ERC) November 12, 2007

• ERC approval February 2008 • Application to use CFE power transmission lines March 2008 • CFE approval of power line use June – September 2008 • CFE approval of CDM project April 2008 • Start digester operation April 1st, 2008 3.b Management and Operations Project Management The applicant will hire a project supervisor who will receive training by visiting other digesters designed by RCM digesters in currently in operation in the United States. RCM Digesters will provide training and guidance to the project applicant.

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AGRI COLA GANADE RA LOS L UJANS .P .R. de R. L. de C.V.

(AGL)

AGRICOL AGANADE RA L OS L UJANS. P. R. d e R. L . de C. V.

(AGL )

EN ER G IA LA CT EA ,S.A . DE C .V .

(EL )

E NE RG I AE NE RG I A L AC TE A,L AC TE A,S.A. D E C .V.S.A. D E C .V.

(E L)(E L)

RCM DIGE ST E RS

M ARTIN MACHINE RY(GE NER ADOR DE E NERGIA)

PR OV EE DOR ES DE TE C NOLOGIA

CANT OR CO2e

C OME RC IA LIZ A DOR DE CR E DIT OS /BONOS DE C A RB ONO

1) EV ER A R DO AL FO N SO LU JA N SA E NZ

2) EV ER A R DO AL FO N SO LU JA N B AR R I EN TO S

1 ) GA RA NT E2 ) P ROV V E DOR DE R E SIDUOS ANIMA L E S3 ) C OMP RA DOR DE EL E CT R IC IDA D

DI AG R AM A COM ER CI AL DE EN ER G IA LA CT EA

PR OPIE T A RIOS A GL y EL

Operation and Maintenance Organization

BOARD OF DIRECTORS

GENERAL MANAGER EVERADO LUJAN SAENZ

OPERATIONS SUPERVISOR

Supervisor Duties: 1 Review operating parameters for the following equipment on a daily basis:

Agitation Gas valves Gas output metering Electrical power generator

2 Maintain the gas generation log on a daily basis.

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3 Provide preventive and corrective maintenance to gas and liquid connections. 4 Oversee:

Solid collection and conveyance to the compost area Liquid concentration and conveyance to agricultural areas

5 Manage and supervise the energy produced, and maintain appropriate records and tallies.

6 Maintain and control: Contacts with electrical power offtakers Source documents for tons of gas to be produced Contacts with the Federal Electricity Commission (CFE) for energy billing

purposes Contacts with equipment vendors

Operation and Maintenance RMC will provide operation manuals for the digester and electrical power generators, as well as preventive and corrective maintenance programs. Permits, Licenses, and other Regulatory Requirements

EL is in the process of obtaining the corresponding permits from State Secretariat of Urban Development.

Important Issues for Certification:

Information provided by the project sponsor has been reviewed. Pending Issues:

State Secretariat of Urban Development permit or finding

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4. Financial Feasibility 4.a Financial Feasibility Financial Conditions The North American Development Bank (NADB) reviewed the financial information submitted by the project applicant and on the basis of it developed the corresponding financial analysis. The information submitted and the financial analysis includes, but is not limited to the certification criteria established by BECC: i) Historic and pro-forma financial statements ii) Project financial structure iii) Improvement plan / budget iv) Historic and pro-forma operation and maintenance budget v) Sensitivity and break-even analysis, and vi) Economic and demographic information on the project area A detailed analysis of the project’s financial information is contained in the financial analysis developed by the NADB, which will be submitted to the Board of Directors as part of the loan proposal for authorization. Following is a summary of the financial analysis developed by NADB:

Project Costs, Funding Structure and Other Capital Investment Plans (CIP) The total cost for the project is estimated to be $27.5 million pesos (Table 4.1), including design, construction management, fees and commissions, contingencies, and start-up costs. Direct capital costs are estimated to be $21.5 million pesos, while indirect costs are estimated to be $6 million pesos.

Table 4.1 Total Project Cost (Millions of Pesos)

TYPE $ % Direct Costs 21.5 78.1 Indirect Costs 6.0 21.9

TOTAL 27.5 100.0 Source: AGL 2007

Energía Láctea has requested a NADB loan for $22,540,243 pesos to finance 84% of the project cost. Table 4.2 shows the breakdown of u se and sources of funds for the project. Sources of Income

Table 4.2 Use and Sources of Funds (Million Pesos)

Total

USE OF FUNDS Capital investments 25.6 Reserve for debt service coverage 1.9

TOTAL 27.5 SOURCES OF FUNDS

AGL Capital 5.0 NADB Loan 22.5

TOTAL 27.5 Source: AGL 2007

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Chart 4.1 shows funding sources for the project.

Chart 4.1 Funding Sources

Funding Sources = $27.5 Million pesos

81.8%

18.2%

AGL Capital NADB Loan

In general terms, it can be concluded that the financial performance of Energía Láctea will be satisfactory and consistent with its business plan. Energía Láctea has a solid, experienced and knowledgeable management staff. It is estimated that the projected income during the project's life span will be sufficient to face the commitments derived from the debt service with NADB and to continue with the company's routine activities. 4.b Legal Considerations Energía Láctea has been legally established as a company in the City of Chihuahua, Chihuahua through Certificate of Incorporation No. 18761 of May 16, 2007. The project will be managed by Energía Láctea S.A. de C.V., which received from AGL on gratuitous loan for use the land required for the construction of the digester. Energía Láctea has a solid management team with extensive experience and expertise in the market.

Important Issues for Certification: The project was reviewed by NADB and was determined to be financially viable.

Pending Issues:

None.

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5. Community Participation

5.a Steering Committee The Private-sector Environmental Infrastructure Projects category does not involve a requirement to establish a Local Steering Committee. 5.b Public Access to Project Information In compliance with BECC Certification Criteria and as described below, the foregoing certification document will be posted for a 30-day public comment period. In addition, any requesting party may be provided additional information on the project. 5.c Final Public Participation Report

For the Private-sector Environmental Infrastructure Project - Exclusive Impact category there is no requirement to establish a Local Steering Committee or hold public meetings. Consequently, no report will be issued. For the Private Environmental Infrastructure Project category, this criterion is met by the implementation of the General Public Comment Period. General Public Comment Period The Project Certification Document (PCD) was released for public comments on ________________ (date), prior to the BECC-NADB Board of Directors meeting.

The PCD was published on BECCNet, the BECC website and the local newspaper.

I portant Issues for Certification:m The project complies with all public participation principles applicable to private-sector environmental infrastructure projects.

Pending Issues:

None.

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6. Sustainable Development

6.a Institutional and Human Capacity Building The training program will be provided by the digester designer at RCM Digesters, Inc. and by the supplier of electrical power generation technology, Martin Machinery, upon the project's installation and start-up. 6.b Conformance with Applicable Local, State, and Regional Laws and Regulations, and Conservation and Development Plans The project will comply with the following regulations:

Urban Development Plan – Zoning Energy Regulatory Commission Federal Electricity Commission (use of energy transmission lines) Kyoto Protocol – Clean Development Mechanism Mexico's General Law of Ecological Equilibrium and Environmental (LGEEPA) Chihuahua State General Law of Ecological Equilibrium and Environmental Protection

6.c Natural Resource Conservation The project will contribute to: • Reduce methane (CH4) emissions to the atmosphere, which will in turn contribute to offset the global

warming effect created by GHGs. • Prevent the contamination of underground bodies of water that are threatened by existing open-air,

unlined lagoons. • Reduce the use of groundwater employed to dilute organic loads. In addition to biogas collection and burning to achieve emission reductions, the project proposes to use methane gas to generate power for self-consumption. Methane-based energy is considered a clean and renewable source of energy. The project will contribute to: • Cut back AGL's energy requirements by reducing the amount of fossil (petroleum-based) fuel burned

for energy production, inasmuch as this process generates CO2. 6.d Community Development The project will result in short and long-term positive impacts. Immediate impacts in the project site, the community, and the atmosphere at large will translate into health benefits by reducing methane emissions to the atmosphere and the associated odors. Some of the benefits for the community will include: • Reduction of odors associated to emissions • Direct elimination of methane emissions to the atmosphere • Use of energy from a clean and renewable source • Reduction in the use of groundwater employed to dilute organic loads from lagoons • Improved animal waste handling practices

Important Issues for Certification: The project complies with all Sustainable Development principles.

Pending Issues:

None.

Documents

Border Environment Cooperation Commission Methane Capture …server.cocef.org/CertProj/NSectores/Eng/Dic2007/DRAFT_BD_2008-X… · milk and dairy products as a basic staple of our