A City of Regina scheme to sell landfill gas to a private company is not working out as planned, and city staff are recommending the deal be scrubbed.

Regina signed a deal with a technology company called Solar Hydrogen Energy Corp., or SHEC, in 2007.

Under the agreement, equipment was installed to capture gas from decomposing garbage. The gas is converted into hydrogen and a type of energy fuel known as substitute natural gas.

According to the city, landfill gas was supplied to SHEC, but the company made no payments.

A report prepared by city staff says Regina is owed $114,000 for the sale of the gas. However, the city may collect on a letter of credit supplied by the company, worth $100,000, the report says.

"We went through an unforeseen economic crisis globally," Tom Beck, president and CEO of SHEC, told CBC News in an interview Tuesday. "This caused a very large downward depression in the price of natural gas and it made the project economically not profitable."

While city officials recommend terminating the agreement with SHEC, they are not giving up on the concept.

"The … system can potentially generate significant revenues by selling gas for energy use and carbon credits from destruction of methane," the report says. Its viability, however, depends on market prices for carbon and natural gas.

The system will continue to capture gas from the landfill, although the city plans to simply flare the gas. Burning landfill gas would be better than allowing methane into the atmosphere, the city says.

The final decision on ending the deal with SHEC is up to city council, which will discuss the issue at a meeting later in January.