Gas utilities continue to line up new pipeline links to RNG projects

Gas utilities continued to capture opportunities to transport renewable natural gas in the second quarter of 2024, with regional supply and demand, state policy and corporate strategy influencing the pace of pipeline connections across the sector.

Some companies were lining up multiple interconnections, taking advantage of a growing network of US renewable natural gas (RNG) supply facilities in their territories.

As of April, 338 North American facilities were producing RNG from methane waste sources like landfills and farms, up from 300 in July 2023, according to the RNG Coalition. Another 489 were planned or under construction, supported by RNG demand in subsidized vehicle fueling markets, the trade group said in an April 24 press release.

Other companies were still assessing customers' appetite for RNG and weighing project economics, even in jurisdictions with supportive policy. Gas utilities spoke about the opportunities and hurdles during quarterly earnings calls and at the American Gas Association's Financial Forum in Palm Desert, Calif.

"We are very conservative and very cautious about the utility-related investments that we can make in renewable gas right now," Chesapeake Utilities Corp. President, CEO and Chair Jeff Householder said during a May 20 panel at the Financial Forum. "We're down a path legislatively and with our regulatory commissions in every state we serve to try to understand what is doable and what's not."

Expansion in western US

NorthWestern Energy Group Inc. recently began flowing RNG to gas utility customers in South Dakota, marking its first physical delivery of the alternative fuel. The interconnection will accept about 700,000 Dth of RNG annually from the Tri-Cross Dairy in Viborg, SD. That will be enough to supply about 10,000 residential customers in South Dakota, where NorthWestern distributes gas to 49,800 customers overall, according to an April 22 news release.

The company planned to connect to another five dairy farms and expected to inject 2 Bcf of RNG into its system by 2025. At that point, about two-thirds of its residential customers in South Dakota will be receiving RNG, NorthWestern President and CEO Brian Bird said during an April 26 earnings conference call.

NorthWestern customers will not pay extra for the RNG from Tri-Cross, which trades at a premium to standard gas. Project developer Clean Energy Fuels Corp. will sell the supplies into the transportation market and handle generation of environmental credits tied to RNG's environmental benefits.

In 2023, NorthWestern's nonregulated subsidiary, NorthWestern Energy Solutions, took a minority stake in Dynamic Renewables LLC, which developed the Tri-Cross project alongside Clean Energy Fuels.

Black Hills Corp. remained on track to have 10 RNG interconnections operating by the end of 2024, Todd Jacobs, the company's senior vice president for growth and strategy, said during a May 9 conference call. Black Hills has a second wastewater treatment plant interconnection planned for Nebraska and links to two RNG facilities in agricultural areas of southwest Kansas under development, the company told S&P Global Commodity Insights.

Northwest Natural Gas Co. was wrapping up a request for proposal to solicit new RNG offtake in mid-May, Northwest Natural Holding Co. President and CEO David Anderson said during a May 6 call.

Policy supports uptake in eastern US

In the eastern US, Roanoke Gas Co. has explored additional RNG interconnection opportunities following its first link to the Roanoke Regional Water Pollution Control plant in 2023, Paul Nester, president and CEO of parent company RGC Resources Inc., said during a May 20 presentation at the Financial Forum.

Roanoke Gas was recouping its initial investment through a rider, established by the Virginia Energy Innovation Act, which allows gas utilities to not only rate base RNG projects, but earn a 100-basis point bonus on them.

Columbia Gas of Virginia Inc. was looking into RNG investments that can use the rider, NiSource Inc. Executive Vice President of Strategy and Risk and Chief Commercial Officer Michael Luhrs said during a May 8 conference call. Washington Gas Light Co. was also pursuing an RNG interconnection under the rider.

Roanoke Gas' wastewater treatment interconnection was a "special" opportunity because the company only had to extend about 1,500 feet of pipe to the facility, Nester said. Several landfill and dairy opportunities are not truly within Roanoke's system and could require transporting RNG by truck for injection into the gas grid, he said.

Through its Marlin Gas Services LLC business, Chesapeake Utilities was actively pursuing RNG trucking opportunities in parts of the mid-Atlantic and Southeast, Householder said.

At the same time, Householder believed there will be "a significant number" of RNG interconnection projects built in Chesapeake's Delaware, Maryland and Florida gas utility territories. The company expected to invest $46 million to connect its recently acquired Florida City Gas system to three landfill RNG projects, pending regulatory approval.

Slow and steady in central US

Spire Inc. was focused on the development of its first interconnection to a Kansas City wastewater treatment plant, but it has seen "quite a bit of interest" in similar projects among other wastewater facilities and the agricultural industry, Treasurer Adam Woodard told Commodity Insights at the Financial Forum. Missouri state law allows Spire Missouri to recoup investments in RNG infrastructure, though regulators are still hammering out the rules, he noted.

Oklahoma Natural Gas Co. was beginning to see some uptake of its voluntary RNG tariff, which allows residential and business customers to procure the fuel as part of their supply, One Gas Inc. COO Curtis Dinan said in an interview at the Financial Forum.

The company was testing demand by allowing customers to purchase environmental credits tied to RNG under a program approved by state regulators, Dinan said. If demand ramps up, One Gas could enter a long-term offtake agreement with an RNG supplier, but he expected to reassess uptake in a few years.

"If customers have an interest in it, we have an option for them," he said. "But we haven't put money at risk. We haven't burdened everybody with a really large purchase of RNG or investment in capital that we've tried to rate base."

Dinan said One Gas will probably consider offering a similar tariff in its upcoming Central Texas rate case, with particular focus on gauging interest in the Austin area.