Anaergia touts 'precedent-setting' RNG supply deal with Canada's largest refinery

US renewable natural gas producer Anaergia views the North American refining industry as one area of potential demand growth in 2023 and beyond, with refiners of both traditional and low-carbon fuels interested in replacing traditional natural gas with its lower-emissions alternative.

Anaergia and Canadian refiner Irving Oil on Jan. 18 announced a supply arrangement calling for the latter's 313,000 b/d Saint John refinery in New Brunswick to receive carbon-negative RNG supplied from Anaergia's Rhode Island Bioenergy Facility, a food waste processing facility located near Rhode Island's central landfill in Johnston, Rhode Island, from this year.

The Irving Oil supply deal is limited in scope -- covering slightly less than 1 MMcf/d in offtake -- but Anaergia has positioned it as a curtain-raiser on what could become a long and lucrative relationship between North American RNG suppliers and refined fuel manufacturers.

"This is a precedent-setting move," Anaergia Chief Operating Officer Yaniv Scherson told S&P Global Commodity Insights in an interview Jan. 19. "It's a major move by a major oil refinery that's taking decarbonization seriously and it shows the massive pent-up demand for low-carbon fuels like RNG."

RNG is a biogas-based fuel sourced from landfills, dairy farms and waste conversion sites that, after processing, can be placed on a traditional natural gas pipeline, used in an RNG-compatible vehicle or substituted anywhere else gas is demanded. Certain types of RNG can be considered carbon negative if the emissions reductions achieved across the lifecycle outweigh emissions associated with the fuel's use.

Refining opportunity

Much of the North American RNG industry's early growth has centered around supplying transportation markets and, increasingly, utilities and corporates in the so-called voluntary market, but RNG backers are keen to expand the fuel's use into new areas traditionally tied to natural gas consumption. North America's refineries, which use gas for power generation and to produce hydrogen through a process called steam methane reforming, present a fairly sizeable potential market: The US Energy Information Administration estimates that domestic refineries consumed a record-high 2.7 Bcf/d in gas across 2021, the last year for which the administration has published data. While that's a modest share of overall US gas consumption, refinery gas demand has risen every year since 2015 as coal consumption, previously used by some refiners for generation, has dwindled to zero.

Anaergia declined to offer a forecast on the RNG demand potential offered by the refining industry but characterized the market as "enormous." Looking beyond traditional fuel refining, the company also suggests that RNG could also help reduce emissions involved with processing at a growing fleet of renewable fuel refineries dotting the US and Canada.

"That's the power with natural gas," Scherson said Jan. 19. "It's a platform fuel: for hydrogen, for power, for light transport, for heavy duty transport and for sustainable aviation fuel."

Irving Oil is pursuing a goal to decrease Scope 1 and Scope 2 greenhouse gas emissions by 30% across its portfolio by 2030, just as Canada readies implementation of new so-called Clean Fuel Regulations calling on fuel refiners to gradually reduce the lifecycle carbon intensity from the fuels they produce and sell for use in Canada over time. That program dovetails with an existing price on carbon pollution introduced in Canada in 2019.