Gas utility operators help drive RNG production facility growth in 2024

Gas utility operators continued to expand their role in producing renewable natural gas as the alternative fuel market hit a new milestone.

There are now more than 400 RNG facilities operating in North America, up from a tally of 300 in July 2023, according to the RNG Coalition. In recent years, some gas utility operators have invested in these facilities, sometimes using their distribution networks to bring RNG to market.

Many more gas utilities are focused on building pipeline connections to facilities that produce RNG from methane waste sources such as farms and landfills. However, a review of recent earnings call commentary and company announcements showed that distribution system operators are growing their exposure to upstream RNG production, often through unregulated subsidiaries.

During the quarter, regulatory proceedings yielded mixed results. In Minnesota, CenterPoint Energy Inc. secured approval of an RNG-focused natural gas innovation plan, while the fuel is playing a marginal role in clean heat plan approvals and settlements for Xcel Energy Inc., Atmos Energy Corp. and Black Hills Corp.

In June, California regulators proposed relaxing aspects of its renewable gas standard framework for Pacific Gas and Electric Co., San Diego Gas & Electric Co., Southern California Gas Co. and Southwest Gas Corp.

DTE shuffles RNG portfolio

DTE Energy Co. subsidiary DTE Vantage planned to add to its portfolio of RNG supply projects, which includes more than a dozen dairy and landfill facilities in six states. The company's latest production facility is under construction and slated to enter service before year-end, DTE Chairman and CEO Jerry Norcia told analysts July 25.

The project is in Ohio, where Vantage already operates a landfill RNG facility near Dayton, the company told S&P Global Commodity Insights.

Also during the quarter, Vantage sold its partnership stake in Sunshine Gas Producers LLC to BP PLC subsidiary Archaea Energy Inc. Vantage and Archaea were developing a plant to produce RNG from excess biogas at the Sunshine Canyon Landfill in Los Angeles County, where Sunshine Gas has used biogas for power generation since 2014. Archaea struck a deal in 2022 to develop 39 US landfill RNG facilities with Republic Services Inc., which owns Sunshine Canyon.

Earlier in 2024, DTE tested the market for its RNG portfolio but decided that keeping the assets would generate more value.

Utilities advance production projects

Chesapeake Utilities Corp.'s first dairy farm RNG production facility entered the commissioning phase and injected its first supplies into the Florida pipeline system in June. Chesapeake is trying to rate base the investment, company leaders told analysts on Aug. 9, but cost recovery legislation for RNG infrastructure has stalled in the Florida Legislature.

Northwest Natural Holding Co. now expects two landfill RNG production facilities in Ohio to come online in the fall, CEO David Anderson said on Aug. 2. The facilities — the company's first investments through its unregulated subsidiary NW Natural Renewables — were slated to contribute to 2024 earnings, but project partner EDL Energy experienced problems with equipment that conditions raw biogas into pipeline-quality RNG.

South Jersey Industries Inc. subsidiary SJI Renewable Energy Ventures LLC and Opal Fuels Inc. recently started construction on their second joint venture project, an RNG production facility at the Burlington County Resource Recovery Complex landfill in Florence Township, NJ. Opal will offtake the fuel for use in its network of compressed natural gas fueling stations for heavy-duty trucks, according to an Aug. 7 press release. The facility will be able to produce 6.5 million gas gallons equivalent.

The companies' first joint RNG project at the Atlantic County Utilities Authority's solid waste landfill in Egg Harbor Township, NJ, is slated to come online in the third quarter of 2025, Opal Fuels co-CEO Jonathan Gilbert Maurer said on Aug. 7. That facility entered an agreement with SJI utility subsidiary South Jersey Gas Co. to inject RNG into its distribution system.

"Industry tailwinds continue to support Opal's mission," Maurer said. "We are seeing demand strengthen across end markets."

UGI Corp. on Aug. 8 confirmed that it would scale back plans to invest up to $1.25 billion in RNG and other renewable gas ventures by 2025, capping planned spending at roughly $500 million, as the company focuses on balance sheet repair and strategic initiatives at its troubled US propane business. Much of UGI's renewable fuels spending to date has focused on RNG, and subsidiary UGI Energy Services LLC plans to bring another five US RNG facilities online through 2025, after starting up six to date.

Companies connect more facilities

AltaGas Ltd. subsidiary SEMCO Energy Inc. completed two pipeline connections to RNG supply facilities, AltaGas President and CEO Vern Yu said Aug. 1. In keeping with its plan to focus on dairy farm and landfill supply in its Michigan service territories, SEMCO connected to a landfill project in Ottawa County and a dairy facility near Marlette, Mich., north of Detroit, AltaGas told Commodity Insights.

A third SEMCO interconnection to a dairy farm project near Battle Creek, Mich., was under development, the company said. AltaGas subsidiary Washington Gas Light Co. is awaiting regulatory approval for its under-construction interconnection to Opal Fuels' Prince William County Landfill RNG project in Virginia. AltaGas expected to use truck delivery to inject the RNG into the Washington Gas system in the interim.

In July, the PSC approved Chesapeake Utilities subsidiary Peninsula Pipeline Co. Inc.'s application to build three RNG interconnections. The connections will link landfill RNG production facilities in Brevard, Indian River and Miami-Dade counties to Chesapeake's recently acquired Florida City Gas distribution system. The three interconnections total capital spending of $46 million.

Northwest Natural Gas Co. is evaluating the results of a request for proposals for RNG offtake and expects to begin contracting for supply soon, Anderson told analysts.

Addressing his company's $70.9 million purchase of Bangor Natural Gas Co., Unitil Corp. Chairman and CEO Thomas Meissner noted that Bangor Gas has an agreement to connect its distribution system to a renewable natural gas (RNG) production facility under development at the Juniper Ridge landfill north of Bangor, Maine. In May, Meissner told the financial community that Unitil has pursued RNG interconnection projects but had not found viable opportunities in Maine.

"We would like to pursue renewable natural gas because it can often be carbon-negative," he said at the time. "So there is an opportunity there to reduce the carbon intensity of our gas supply, and we also have customers who have their own net-zero goals, their own climate goals."