Gas utilities expand hookups to RNG facilities as alternative fuel supply grows

Gas utilities are poised to play a bigger role in moving renewable natural gas to market in 2024.

Several companies plan to expand links between their distribution systems and the facilities that produce the alternative fuel, known as RNG. Meanwhile, gas utilities are continuing to expand access to voluntary tariffs that allow customers to offset a portion of their gas supply with RNG.

"We see great opportunity to invest in the infrastructure that produces and moves RNG to the market, providing our business with low-risk, better-than-utility returns," Todd Jacobs, senior vice president for growth and strategy at Black Hills Corp., told S&P Global Commodity Insights in an email.

Continued investment in RNG production facilities has opened new opportunities for gas utility operators to offtake decarbonized fuel. The number of North American facilities processing organic waste into RNG at farms, landfills and other facilities grew tenfold between 2011 and mid-2023, according to the RNG Coalition.

Commodity Insights forecasts that Lower 48 supplemental fuel supply, which consists mostly of RNG, will reach about 570 MMcf per day in 2028, up from roughly 300 MMcf/d in 2023.

RNG stakeholders had expressed concern that the Biden administration's clean energy technology tax credit guidance could restrict investment opportunities. However, the IRS in February clarified that cleaning and conditioning equipment used to produce pipeline-quality RNG would qualify for the Inflation Reduction Act's Section 48 investment tax credit (ITC).

The correction signaled "a better understanding of how the ITC can facilitate RNG deployment to maximize the benefits of methane capture and recycling," Geoffrey Dietz, the RNG Coalition's director of federal government affairs, said in a Feb. 16 news release.

MDU Resources dials up RNG flows

During a March 13 investor day, MDU Resources Group Inc. President and CEO Nicole Kivisto highlighted the company's plans to expand RNG interconnections in 2024. MDU first interconnected to a Billings, Mont., landfill in 2010 and expanded its pipeline links to three Idaho dairy farms in 2019 and 2020.

Intermountain Gas Co. brought its fourth Idaho dairy farm interconnection online in recent weeks, MDU told Commodity Insights. The MDU subsidiary also plans to link up with an Idaho landfill in the back half of 2024.

Another subsidiary, Cascade Natural Gas Corp., has four interconnection projects under contract in Washington state.

Interconnections to a landfill and a food manufacturer's agricultural waste facility are slated to begin injecting RNG into Cascade's system in the coming days or weeks, MDU said. The other two projects, which will connect to a wastewater treatment plant and a facility that handles food waste from grocery stores, are slated to come online in the back half of 2024.

Cascade also plans to build, own and operate an RNG production facility at Knott Landfill in Deschutes County, Ore. The project will inject RNG into the Bend, Ore., distribution system, with startup expected in 2025, the company said.

WEC Energy gets RNG flowing

In November 2023, WEC Energy Group Inc. began injecting RNG into its Wisconsin distribution system from the first in a series of planned interconnections to in-state dairy farms.

The projects will contribute to the company's methane emission reduction goal, WEC President and CEO Scott Lauber told analysts during a Feb. 1 earnings conference call.

WEC is financing the interconnections through a pilot project approved by the Public Service Commission of Wisconsin. The commission allowed each of WEC's three Wisconsin gas utilities — Wisconsin Electric Power Co., Wisconsin Gas LLC and Wisconsin Public Service Corp. — to build up to 15 interconnections. It authorized the companies to spend a combined $75 million on the infrastructure.

WEC has entered agreements to build eight interconnections and carry 1 Bcf of RNG, WEC told Commodity Insights. The company expected its Wisconsin system to have more than 500 MMcf of RNG flowing by year-end. WEC's Wisconsin distributors transported 299 Bcf of gas in 2023.

From Florida to Nebraska

In addition to announcing its first investment in RNG production, Black Hills expects to build three more interconnections to RNG facilities in 2024, adding to seven projects placed into service across Iowa and Nebraska.

The latest interconnection, a link to the Marshall Ridge Dairy project in State Center, Iowa, came online in the first quarter. The Clean Energy Fuels Corp. facility will produce 1.7 million gallons of RNG per year.

Elsewhere, Chesapeake Utilities Corp. planned to file for approval to connect three landfill RNG facilities to its recently acquired Florida City Gas subsidiary, executives said during a Feb. 22 earnings conference call.

The outlook for RNG investments could also begin to take shape at NiSource Inc. The company previously categorized RNG production and transportation investments as post-2028 opportunities. NiSource recently moved them into a $2 billion block of incremental spending opportunities that could pad its five-year, $16 billion capital plan.

Voluntary tariffs expand

NiSource has participated in the RNG value chain by offering voluntary tariffs in Indiana and Virginia. Like its peers, it is seeking to expand those programs.

Beginning in the second quarter, Black Hills expects customers across all six of its operating states to have access to Green Forward, its voluntary RNG and carbon offset program. It currently offers the program in Arkansas, Colorado, Kansas and Nebraska. Black Hills will begin enrolling Iowa and Wyoming customers in April, the company told Commodity Insights.

One Gas Inc. began enrolling Oklahoma Natural Gas Co. customers in its first voluntary tariff program in December 2023, the company said in a Feb. 21 earnings release.

DTE Energy Co. has signed up more than 13,000 Michigan customers to its Natural Gas Balance program since launching the voluntary tariff in early 2021, DTE Chairman and CEO Jerry Norcia said during a Feb. 8 earnings conference call. That is up from 5,300 customers around the end of 2022. DTE Gas Co. serves 1.3 million customers.