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Republic Services, Inc. (RSG - Analyst Report) has inked a deal with Clean Energy Renewable Fuels, a wholly owned subsidiary of Clean Energy Fuels Corp. (CLNE - Snapshot Report), to recover landfill gas from the North Shelby Landfill in Millington, Tennessee.

Per the deal, Clean Energy Renewable Fuels will build the high British Thermal Unit (BTU) plant which will process landfill gas and also distribute it into the U.S. natural gas network. The landfill gas recovered will be used as vehicle fuel for natural gas-powered fleet besides other possible uses.

Operations in the plant are expected to commence in 2013. During the first year, it is anticipated that it will produce 4 million diesel gallon equivalents of renewable natural gas fuel annually. Eventually, during the first 10 years of operation, production will increase to more than 5.7 million diesel gallon equivalents per year.

The companies have a similar agreement for Republic's Sauk Trails Landfill in Canton, Michigan.  The operations in the landfill are likely to start from September this year.

These agreements will give Republic Services the best possible opportunity for utilization of its energy endeavor in the landfills. The landfill gases being renewable and environment friendly are more sustainable and contribute less to the carbon cycle, releasing up to 88% less greenhouse gas emissions than diesel fuel or gasoline.

Renewable biofuel for transports represent a key source of diversification from petroleum products which are non-renewable sources of energy and fast depleting. The rising oil demand, if continued unchecked, will inevitably lead to severe supply disruptions resulting in price shocks. Therefore, the renewable natural gas fuels are gaining more popularity over the non-renewable sources as people seem to have a preference for sustainable development now-a-days.

Republic Services reported second-quarter adjusted earnings of 59 cents per share, beating the Zacks Consensus Estimate of 49 cents. Total revenues decreased 1.2% year over year to $2.06 billion, lagging the Zacks Consensus Estimate of $2.11 billion.

Difficult pricing environment coupled with constrained volumes is a major conern for Republic Services. Soft economic conditions and weak customer confidence add to the concern.

Republic Services also faces stiff competition from Waste Management, Inc. (WM - Analyst Report). The company retains a short-term Zacks #3 Rank (Hold). We have a long-term Underperfrom recommendation on the stock.
 

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