NW Natural, which sees renewable natural gas as a key to its future, is making its first investment in the green fuel under a new Oregon law at a meat packaging plant in Nebraska.
In a filing with Oregon regulators, the Portland-based gas distribution utility said it expects costs of $8.6 million this year related to the project, which is expected to be in service this December.
Oregon legislation adopted in 2019 paved the way for gas utilities to pass along the costs of RNG, which is more expensive than conventional natural gas, to ratepayers.
NW Natural and other gas utilities say RNG can help them decarbonize their systems. Some environmentalists question whether the fuel can be developed in quantities or at a cost that’s viable.
RNG is produced by cleaning up biogas, a byproduct of landfills, waste treatment plants, dairies and other sources of organic matter. It burns no cleaner than conventional gas, but because it reduces greenhouse-gas emissions from these sources and then displaces conventional gas, it counts as green.
The Nebraska project NW Natural is investing in is next to a Tyson Fresh Meats packaging plant in the town of Lexington, the utility said in a filing with the Oregon Public Utility Commission.
The facility “will use anaerobic digester technology to convert animal waste and other byproducts from the plant into RNG,” NW Natural said.
RNG produced at the Lexington Project, as it’s being called, will go into the Black Hills Energy distribution system. That will earn NW Natural renewable thermal certificates — analogous to renewable electricity certificates — that it can use to meet its RNG targets under the Oregon legislation.
NW Natural said it expects the plant to produce 1.9 million therms of RNG annually, 0.26% of its Oregon sales. Senate Bill 98 sets RNG targets of 5% of Oregon sales in 2020, increasing to 30% by 2045, but the utilities aren't mandated to meet them.
RNG can be several times more expensive than conventional gas, but the Oregon law caps incremental expenditures at 5% of a utility’s rate requirement.
By filing an application for deferred accounting with the
PUC, NW Natural is setting itself up to ask regulators to fold the costs into
rates after the project goes into service.
