Last year, Simi Valley Landfill entered what is becoming a fast­-growing business of transforming fetid odors from decaying trash into fuel, a feat made possible by the miracles of modern chemistry and government subsidies.

A bulldozer pushes garbage to the top of a trash hill at the Simi Valley Landfill. (Photo: Olga Grigoryants)

The ground rattles as a bulldozer pushes a pile of rubber, paper, and plastic to the top of a 300-foot-high trash hill, leaving behind a rotten odor.

“This smells like money,” says Lisa Hemenway, a community relations manager for the Simi Valley Landfill, as she walks across a nearby field where garbage trucks disgorge their containers.

The landfill, situated on the northwestern edge of Los Angeles County and owned by Waste Management, Inc., is no ordinary dump. It spreads across 2,400 acres—about three times the size of Central Park—and buries 2,200 tons of waste brought in by several hundred trucks every day.

In recent years, landfill-to-energy projects have become a fast-growing business, transforming the methane gas released by decaying trash into fuel—a feat made possible by the miracles of modern chemistry and, just as important, increasingly attractive government subsidies.

The number of landfill-to-energy projects has grown from 21 in 2000 to 621 in 2013, according to the Environmental Protection Agency.

About 510 more landfill owners plan to install similar projects nationwide in the next few years, an increase that the EPA says would create enough power to serve 700,000 homes. California and Texas, the states with the most residents—and hence the most trash—are home to the largest number of potential candidates.

Last year, the Simi Valley Landfill upgraded its trash-to-energy facility with something called an activated carbon system, a complex filtration method that reduces emissions by absorbing pollutants and treating organic contaminants. While pricey—an activated carbon system costs around $300,000—the EPA provided an incentive in July when it classified methane, an odorless and colorless byproduct of solid waste caused by bacteria feeding on organic garbage, extracted from landfills as renewable gas, a move that allows producers to charge a premium for their energy, a la solar and wind.

As the government has sweetened the pot, many companies have expanded their business. In March, Waste Management announced plans to invest $400 million into building a methane-to-electricity system at 60 of its landfills in Texas, New York, Virginia, and California over the next five years.

As Americans produce more trash than any other country, gas utilization growth potential is rising. Currently, 6,000 landfills in the United States produce methane gas.

“Everyone generates trash,” Hemenway says. “It’s a profitable business to manage the stuff that no one wants.” It's even better if you can turn that decaying, rotting matter into a resource.

When methane seeps out of landfills, it can be flammable. In 1980, methane from a landfill in Port Washington, New York, leaked underground and caused explosions in a nearby neighborhood. Twenty years later, a dump with accumulated gas caused a blast that damaged over 100 buildings in Mexico.

Due to the risk it poses, and because methane is a powerful greenhouse gas linked to global warming, landfill owners today are required by law to collect gas—but compliance can be costly. The solution: Roll these problems into a business.

A trash pile first begins producing methane after several weeks of sitting dormant; the older the organic trash, the more methane it generates.

To access the methane, an operator drills a series of wells in the layers of garbage and connects them to a vacuum, which extracts the gas. Pipes then capture and transfer it to a plant where high-voltage generators cool and purify it, removing carbon dioxide and dirt. Later, the renewable gas is trucked to fuel stations where it can power specially equipped buses and trucks.

Vacuum-like pumps extract methane from deep underneath a landfill. (Photo: Olga Grigoryants)

Clean Energy Fuels Corp. of Newport Beach, California, is one of the handful of companies that’s trying to combine these different steps into a single supply chain. It contracts with landfills, invests in plants that purify the gas, and operates gas stations that provide trucks and cars with the fuel.

“Instead of burning the gas, we turn it into commercially usable product and sell it and make money out of it,” Clean Energy’s Harrison Clay says.

“When we got into the business of offering renewable natural gas, we were the only ones,” says Gary Foster, a senior vice president at Clean Energy. “But now several other companies have begun to do that, which means the market is growing.”

Still, turning garbage into profit requires massive investments; building an electric project similar to the one in Simi Valley costs $3 million to $7 million, according to EPA data.

Bruce Matlock, an environmental specialist at the Simi Valley Landfill, says the majority of modern landfills are owned by corporations able to afford a multi-million dollar investment.

A plant that includes an engine capable of generating the necessary three megawatts of electricity costs more than $5 million. Other equipment includes a gas compression and treatment system with an engine and generator, which can cost close to $5 million as well.

Revenue from selling the fuel doesn’t come anywhere close to covering those costs. But producers benefit from a generous subsidies package.

“Federal tax breaks made it possible to offer renewable gas at the same price as traditional natural gas,” Foster says. When all the subsidies are tallied up, it’s about $1 to $1.50 per gallon cheaper than gasoline or diesel.

Last year, Clean Energy delivered 265.1 million gallon-equivalents of natural gas to its 40 stations, a 19-percent increase over the previous year. The company received $28.4 million of excise tax credits for alternative fuels in 2014, a 30-percent increase from the previous year.

Under the federal Renewable Fuels Standards program, refineries are now required to buy gas from landfill owners and blend it into transportation fuel. That is expected to increase the use of renewable gas to 36 billion gallons by 2022.

As long as the subsidies are in place, the business will grow.

“It’s coming of age,” Foster says. “[Alternative] transportation fuel is becoming much more well known. It’s becoming a trend.”

This story is part of a special report on energy issues in California produced in collaboration with the University of Southern California's Annenberg School for Communication and Journalism. For more, visit the project's landing page.