The Oregon Statehouse in Salem. Credit: ZehnKatzen / Wikimedia Commons

The state’s largest gas utility plans to invest $30 million a year in a bid to replace 5% of fossil gas by 2024. 

A new law in Oregon is expected to spur more than $30 million in investments in renewable natural gas annually, nudging the state’s market away from fossil fuels toward biogas — a trend experts say will curtail emissions and stifle demand for fracked gas.

The effort stems from policy changes made by Oregon lawmakers last fall that upend restrictions that effectively forced utilities to buy the cheapest natural gas around — the kind sourced from fossil fuels.

Following rulemaking currently underway, utilities will be allowed to reinvest 5% of revenue in the upfront equipment costs of biogas production, chiefly cleaning equipment and new pipe to connect biogas to existing infrastructure. Natural gas utilities can recoup the cost of those investments from ratepayers. Oregon’s largest, NW Natural Gas, plans to invest $30 million annually in a bid to replace 5% of fossil gas with renewable natural gas by 2024. Its executives believe the long-term contracts they aim to ink with suppliers will lure the financing that tips the market.

Opportunities to turn trash to treasure span several sectors, chiefly targeting the state’s landfills, wastewater treatment plants, dairies, beef and poultry industry, food waste collectors, and forest and agriculture waste. Once scrubbed of impurities, biogas from these sources can flow through the same pipelines that carry fossil gas, and serve natural gas customers without limitation.

While NW Natural Gas has a goal of 100% carbon neutrality for the gas in its system, a study by the Oregon Department of Energy estimates biogas could offset 10% to 20% of the state’s current natural gas use.

Also, many climate advocates say electrification is a more cost-effective way to reduce emissions.

Large agricultural operations that could serve as fuel sources can also have significant impacts on local air and water. A petition filed by environmental groups with the EPA earlier this year blames feedlots in eastern Oregon for elevated nitrate levels in drinking water that pose “an imminent and substantial threat” to nearby residents.

Long-term planning, long-term savings

Julio Friedmann, a senior research scholar at the Center for Global Energy Policy at Columbia University, described Oregon’s effort, however, as a solid first step toward turning the natural gas system toward lower carbon uses. Responding to plans by NW Natural Gas to target landfills and sewage treatment plants in its initial phase of investment, Friedmann said: “It’s cheap and easy, for not much money put it into the system, for very little work, and it actually gets to emissions reduction.”

In supporting the new law, state officials have touted increased local revenue, benefits to air quality through the conversion of diesel fleets, and reductions in carbon emissions (they say reductions of 2 million metric tons of greenhouse gas emissions are possible). Long-term savings, utility managers say, may be a gain for ratepayers in a future where carbon tax could upend pricing.

“We think, ultimately, it’s locking in lower-cost resources and it’s potentially removing the variability and risk around the cost of fossil gas,” said Anna Chittum, director of renewable resources at NW Natural.

That attitude is unique in an industry typically driven by capital investments that pay out in a few years. Through the initiative, NW Natural is strategizing investments on a longer time frame, looking at the predicted future costs of fracking alongside possible carbon compliance costs to source gas against the long-term dependability of resources like garbage, ag waste and manure. The utility thinks this long-term planning will lead to more biogas reaching end users outside the transportation sector, which currently receives the bulk of available biogas on shorter-term contracts.

For dairy farmer Marty Myers, co-owner of the 33,000-cow Threemile Canyon Farms, harvesting methane isn’t just a chance to minimize the farm’s carbon footprint, but also a shot at another revenue stream. Three methane digesters have been culling biogas from cow manure at Threemile since 2019, producing $50,000 a day in revenue and enough energy to power 1,500 homes for four days.

That’s not money in Threemile’s pocket just yet. It cost the farm $60 million to construct its methane digesters, nearly half of which were absorbed years ago when a first-round effort to contain emissions powered a generator that made electricity. Threemile has since partnered with Equilibrium Capital to cover the rest, which, at the current production rates, will take another seven to 10 years to pay off. The lifespan of the digesters is meanwhile 30 years, with about  $1 million annually in operational costs.

“What’s the marketplace going to look like in the next 10 years?” Myers said. “That’s the ultimate question.”

‘We want to keep using the existing infrastructure’

Friedmann said the marketplace will likely be much more diverse than fossil gas and biogas. “We are going to end up in a world where we have a truly renewable natural gas,” he said, alluding to the potential for technology that produces methane from carbon dioxide captured from the air, a technology still in its infancy.

In the interim, there are benefits to transitioning existing natural gas infrastructure toward diversified fuels, he said, despite arguments that adding to the system can create downstream demand for fracked gas in the short term.

“To say we want to keep using the existing infrastructure makes a great deal of sense,” Friedmann said. U.S. natural gas infrastructure is currently valued at about $2 trillion and provides three times the energy content as electricity infrastructure in many regions, he added. “To try to replace that with something else is shockingly expensive.”

Policies like Oregon’s, Friedmann said, allow the marketplace to transition this infrastructure to lower-carbon uses, and can be expanded later through policies like California’s renewables portfolio standard, or policies that limit carbon emissions.

Through 2030, state incentives associated with low carbon fuel standards in Oregon, as well as a federal credit similar to the one farmers earn on ethanol, greatly affect the price for biogas, which means the outlook on pricing isn’t clear. What is certain: Big capital players will have to step into the marketplace to close the gaps between a producer’s borrowing capacity and the cost of bringing harvesting technologies online. Now, utilities can sweeten those deals, offering the long-term contracts that can pave the way to financing.

“They get the advantage of a long-term supplier while the dairy gets the advantage of the long-term commitment,” said Mark Stoermann at Newtrient, a company that helps farmers manage manure for added value.

Dairies, for now, are not the first in line for these investments. In the short term, NW Natural and two smaller gas companies serving Oregon customers — the Avista Corporation and Cascade Natural Gas — are concentrating efforts on huge gas emitters like landfills and wastewater treatment plants, most in urban areas with close connections to existing pipelines, in an effort to spur the market and put the most renewable natural gas online fastest.

At the Dry Creek Landfill in Oregon’s southern Rogue Valley, which has collected half its biogas for approximately 20 years, operators are considering a $25 million investment that would collect and convert the remaining gas for use in the transportation system through a pipeline owned by Avista.

“The biggest obstacle, honestly, is money. These are very, very expensive facilities to build,” says Laura Leebrick, community and governmental affairs manager for Dry Creek’s parent company. “Hopefully this rulemaking that’s going on right now is going to help.”

Lee van der Voo is a journalist based in Oregon and the author of a forthcoming book about the youth climate movement, "As The World Burns."