Renegotiating a Landfill Gas Contract: Do’s and Don’ts

If you’re in the process of renegotiating a landfill gas contract, I’m here to help. Simply follow this list of do’s and don’ts to get through the process smoothly and secure the best possible terms.

If you’re reaching the expiry date of your landfill gas contract, you may be starting to get concerned about your lack of specialist knowledge in this area. Or perhaps you’re worried about the risk of failing to obtain the best value from the renegotiation process even with decent know-how.

Typical landfill gas extraction contracts often span decades. So, market conditions, regulatory frameworks and operational best practices may have changed significantly since your last negotiation period.

Without a structured plan of attack for your extension, you could unknowingly agree to unfavourable terms. You could also miss out on potential revenue, or fail to meet environmental compliance requirements.

With this in mind, you need to ensure you’re not at a disadvantage when dealing with experienced operators.

To help you navigate the process smoothly (and secure the most favourable terms), I’ve outlined the key do’s and don’ts of renegotiating a landfill gas extension contract.

By following these steps, you can avoid costly mistakes and maximise the financial and operational benefits of your site.

In short, you’ll set yourself up for success.

Renegotiating a Landfill Gas Extension Contract: Do’s

Do: Speak with external experts and prepare for the contract ending before anything else

One of the most important things to do before a contract expires is to make sure you’re adequately prepared.

By laying the groundwork well before a contract comes to an end, you can minimise operational disruptions and maximise revenue. This applies whether you’re renegotiating with the current operator or selecting a new one.

So, don’t skip these all-important steps.

Research current market conditions

You should always benchmark market rents for landfill gas extraction. This, in theory, gives you a strong negotiating position from which to work from.

Without this knowledge in hand, there’s a risk of accepting terms that don’t reflect the true market value of a site.

As leases can run for decades, it’s important to nail this down early.

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Conduct a detailed forecast

You should also carry out a detailed forecast of the remaining landfill gas volume and its total financial value.

This forecast provides a foundation for valuing the future contract and setting more realistic expectations during negotiations.

Put the contract out to tender (if you’re a local authority)

To obtain the best possible terms, a local authority should put the contract out to tender. This essentially allows multiple operators to submit bids and keeps the process competitive.

For local authorities, this step is particularly crucial, as they technically have a legal duty to secure the ‘best value’ in all such contract negotiations.

Identify experienced operators

As part of this process, you should also identify at least three landfill gas operators with experience managing similar sites.

Proactively reaching out to these companies can increase interest in the site and improve the chances of securing a more favourable deal.

Ensure a smooth transition

If you choose a new operator, transitioning smoothly is a must to avoid (or minimise) any downtime and lost revenue. 

To make this happen, you should do the following in advance:

• Apply for environmental permits
• Secure a valid grid connection agreement
• Arrange for the transfer of any existing Renewables Obligation Certificates (ROC) accreditation into the new operator’s name

Do: Document your negotiations

When negotiating a landfill gas extension contract, keep thorough documentation of all discussions and agreements. This includes informal conversations, key contractual terms and any financial considerations you may have.

If you have any questions about your previous terms, now would also be a great time to raise them.

Errors in contract wording can lead to landfill site owners receiving lower payments than expected. These discrepancies can go unnoticed for years. I’ve found that error rates in lease agreements can be as high as 85 per cent.

So, keeping a clear and organised record of negotiations will put you in a strong position if any disputes arise.

Do: Review your original contract terms

Before entering renegotiations, make sure you understand the terms of your current contract.

Key areas to assess include:

• Whether the contract includes inflationary adjustments to prevent financial losses due to rising costs
• The existing payment structure – does it provide fair compensation for the continued use of your site?
• The notice period required for renegotiation – have you allowed enough time to review terms and seek expert advice?
• Whether the current operator has an automatic right to renew, potentially limiting your ability to negotiate with alternative providers

If your contract does not include clear renewal provisions, you may need to take legal steps to prevent an automatic rollover that could put you at a disadvantage.

As a rule, I’ve found that understanding your current obligations and rights will provide a stronger foundation for negotiations.

Not only will operators have more respect for your knowledge of the process, but it should allow you to catch any potential red flags quickly.

Do: Conduct a land rent audit

Before signing a new contract, ensure that all financial obligations have been met and that you haven’t overlooked any past payments owed to you.

To do this, you’ll want to carry out an in-depth land rent audit with the help of a specialist renewable energy accountant or auditor.

In my experience, a thorough land rent audit will help you:

• Identify any missing or incorrect payments
  • This could significantly reduce (or remove altogether) the cost of removing an existing tenant e.g. if significant and/or persistent payment errors are discovered.
  • As tenants are often expensive to remove, this process could truly pay for itself.

• Account for outstanding amounts before finalising new terms

• Avoid waiving your right to past compensation

• Avoid inadvertently changing the payment terms of your contract by inaction/failure to follow and enforce the correct requirements of the contract

Engaging an independent expert to conduct a detailed audit will help you uncover any issues that’ll put you in a stronger position to negotiate improved terms.

Need help with your land audit? Get in touch with the team at Lumify. Our SiteView360™ service provides a complete historical review of your payments to ensure everything is accurate and up to date. Plus, we’ll equip you with all the tools you’ll need for renegotiating.

Do: Understand your rights and entitlements

Alongside a financial audit, I recommend reviewing any existing rights or entitlements that you might lose when signing a landfill gas contract extension.

Overlooking key terms from the previous agreement could lead to financial losses, operational challenges or legal complications down the line.

If you carefully examine past agreements, you can better protect your interests and ensure the new contract works for you.

Review your previous obligations

One of the first steps in this process is reviewing the previous contract for any obligations that still stand. Anything left unresolved could carry over into the new agreement (including operational obligations), potentially affecting the overall value of the contract.

It’s important to identify any clauses that you might be on the hook for. So, check whether the current operator has met all past payments, maintenance responsibilities and compliance requirements before resigning a new contract.

Ensure good terms are kept in

I also recommend that you double-check that any good terms from the previous contract are carried over into any new agreement. Think guaranteed minimum payments, revenue-sharing structures or operational flexibility.

If these were included in the original contract, try to preserve them and avoid weakening your own potential returns.

Determine if there were any contractual breaches

Another critical thing to consider is whether any contractual breaches have occurred that could impact entitlements under the new contract.

If the current landfill gas operator has failed to meet their obligations, this could spell trouble. For example, they may have made late payments, failed to maintain equipment or breached environmental compliance.

If this has happened, these issues should be uncovered and addressed before signing a new agreement.

Assess inflationary terms

Finally, it is important to assess whether the existing lease builds in inflationary terms. Any wider economic changes can seriously affect energy markets, operational costs and your future financial returns from the project.

So, new contracts without inflation-linked rent adjustments will likely cause declining real-term payments or financial returns over time. And that’s exactly what you want to avoid.

Do: Seek professional advice

Specialist expertise is invaluable when renegotiating any landfill gas contract, as terms may have changed since you last came to the negotiating table.

So I always advise site owners to engage a renewable energy specialist to advise on the legal, financial and commercial aspects of the project.

Consult legal advisors

Legal advisors play a crucial role in reviewing contracts and ensuring the project and contract are both in line with relevant regulations. These experts can identify potential risks, clarify your obligations as a site owner and help structure agreements that protect your long-term interests.

Their expertise is particularly important in preventing automatic contract rollovers or unfavourable clauses that may limit future opportunities. So, don’t miss out on them.

Turn to industry consultants

Industry consultants can provide a clear assessment of current market rates and contract terms. While you can research these yourself, you won’t have as wide a reach as a professional team.

By benchmarking your site against others and evaluating your current operator’s performance, these consultants help determine whether the proposed terms in your new lease reflect fair market value.

Is it better to stick with your current operator or move on? These experts will help you make a decision.

Meet with financial experts

Financial experts (including accountants) are essential for evaluating the overall financial viability of the proposed agreement.

They can analyse revenue projections, ensure payments are structured effectively and confirm that any inflationary adjustments are included to maintain long-term financial stability.

With the right team in place, you’ll be well-prepared to negotiate a contract that aligns with your financial goals for the project.

Renegotiating a Landfill Gas Extension Contract: Don’ts

Don’t: Lose track of time

Time management is absolutely critical in any contract renegotiation, and some processes can take over a year to complete.

If you’d like to change your current operator, you’ll need to do the following before your lease ends:

• Apply to the environmental regulator to obtain an environmental permit to enable the site to be operated by a new operator
• Apply to the National Grid to transfer the grid connection agreement to the new operator
• Contact the energy regulator to transfer the ROC accreditation to the new operator

These aren’t particularly speedy processes, by the way. So, I highly, highly recommend doing this a fair bit in advance of your lease ending.

Don’t: Overlook who’s signing the new contract

It’s essential to verify the financial stability and credibility of the company signing your new landfill gas contract.

If the operator lacks the necessary financial resources, you could face unexpected risks that will put you in a tricky situation.

Before proceeding, ensure that the new site operator:

• Has the financial capacity to meet obligations
• Has a proven track record in landfill gas operations
• Is aligned with your long-term site management goals

Obtain evidence and references from the landfill site owners of other projects that are being operated by the company. This should demonstrate whether they’re capable of operating the project when the gas reserves deplete during the lifespan of a new contract.

You don’t need to do this alone, either. You can consult renewable energy experts to verify the operator’s credibility and mitigate potential risks.

Don’t: Neglect financial terms

A landfill gas extension means your site will continue to be used for energy production, and you should be adequately compensated for this.

Consider your payment structure

When renegotiating your landfill gas contract, it’s important to carefully consider the structure of your payments.

A fixed monthly or quarterly rent provides predictable income, ensuring financial stability over the contract period. On the other hand, performance-based rent ties payments to the volume of gas extracted. This option could lead to higher earnings if output remains strong.

Understanding which option best suits your financial goals is key, and you may want to look at your previous income to make a decision.

Trust me when I say that clearly defining payment terms upfront is essential if you want to avoid disputes later.

So, the contract should specify how and when payments will be made, whether adjustments for inflation will be included and any penalties for late payments.

A well-structured agreement protects your financial interests and ensures a smooth working relationship with your operator.

Budget for experts

Hiring a renewable energy specialist during the negotiation process is an investment that can pay off significantly.

However, these professionals come at a cost. So it’s important to budget for their fees in advance. Setting aside funds for expert consultation ensures you have the right support to secure a fair and competitive contract.

Additionally, experts can ensure that the obligations of the landfill gas operator are clearly outlined in the contract before signing. They’ll keep your contract watertight and minimise the time needed to resolve any disputes (should you have them) down the line.

Consider future projects

You may also want to get involved with other projects (like a solar site) when the landfill site is finally closed and capped.

With this in mind, it’d be wise to discuss if the new operator could contribute towards or facilitate such a project alongside their own landfill gas operations.

This will not only keep the site operational for longer, but would offer additional income that’s bound to help you out.

Check the commercial viability of your new operator

Finally, it’s important to check if the new operator has the commercial ability and interest to continue operating the project until the very end of a contract.

You’ll often discover this by preparing and reviewing a detailed financial and operating forecast of the project over the duration of the new contract. This should give you a projection of the project’s income and costs the next 20 or so years.

Naturally, the landfill gas resource will gradually deplete, so the length of the project will always vary.

So, as a landfill site owner, you’ll want to avoid the situation where a new operator terminates the contract mid-term. This is usually because they discover that the project is no longer commercially viable for them.

If this happens, you’ll be left with the burden of finding a new operator and paying to maintain the site yourself without any financial benefit of doing so.

It’s not an ideal scenario by any stretch and can even be financially damaging.

The Takeaway on Renegotiating a Landfill Gas Contract

By following these do’s and don’ts, you can confidently navigate the landfill gas contract extension process and secure a deal that reflects the true value of your site.

Starting early allows you to counter any issues, putting you in a much stronger position at the negotiating table when your lease comes to an end.

If you need any help with your lease or want an overview of current market conditions, get in touch with our team. We’ll guide you through the process and help you achieve the best result possible.