Biogas bill gains bipartisan support but opposition from environmental groups

The General Assembly is poised to pass legislation that will encourage the state’s natural gas utilities to invest in projects that could capture and reduce emissions of methane, a greenhouse gas that’s 25 to 30 times more effective than carbon dioxide at trapping heat in the atmosphere. 

“From my point of view, if the methane’s going to come out and be in the air, it’s a lot better to put it in a pipe and use to heat homes, cook with or heat water than it is to have it just floating around the atmosphere heating up the planet,” said Sen. Scott Surovell, D-Fairfax.

The proposal, which is being carried by Surovell as Senate Bill 565 and by Del. Israel O’Quinn, R-Washington, as House Bill 558 is one of the few pieces of environmental legislation to gain bipartisan support in a session where Democrats and Republicans are sharply divided on how the state should approach climate change. 

But while lawmakers have massed behind the idea, environmental groups have not. Connor Kish of the Sierra Club Virginia Chapter said he wasn’t aware of any environmental organization active in Richmond that supported the bill, and many have turned out at committee meetings to oppose it. 

“The goals of the bill are solid. Methane emissions are clearly a problem that need to be addressed,” said Will Cleveland, an attorney with the Southern Environmental Law Center. 

However, he and other environmental groups say the bill doesn’t adequately protect ratepayers from bearing the costs of projects that aren’t successful and worry it could encourage the development of large-scale animal operations that have caused water quality problems in other states.

“There is nothing in this bill that requires any of these initiatives to succeed,” Cleveland told a Senate committee earlier this month. “All that it guarantees is cost recovery with a profit incentive. This is a bill for fossil fuel interests by fossil fuel lobbyists masquerading as environmental policy.” 

New investments  

Under Surovell and O’Quinn’s legislation, gas companies would be able to include a range of new projects designed to decrease methane emissions among their allowable expenses. 

If approved by the State Corporation Commission, the body that oversees Virginia’s regulated utilities, project costs could then be passed onto customers. 

The legislation encourages investment in three key types of projects. 

First, it lets utilities recover the costs of “enhanced leak detection and repair” work, or the use of technology to more accurately identify where methane leaks might be occurring throughout the gas company’s system. 

Second, it allows the utilities to tap into other gas sources with less “emissions intensity” than traditional sources. In particular, the utilities would be able to use what the law calls “low-emissions natural gas,” an alternative term for responsibly sourced gas, or gas that a third party has certified as coming from a producer that has committed to environmental, social and governance goals like reducing their carbon footprint and minimizing impacts such as air pollution. 

Responsibly sourced gas is more expensive than other gas but is attracting increased attention from companies and utilities eager to respond to customers’ increasing concern for climate change and fulfill their own net-zero commitments. 

Jim Kibler, the former president of Virginia Natural Gas who acted as an “unpaid adviser” to Surovell on the legislation he and O’Quinn are carrying this session, said he had calculated that the monthly cost for such certified natural gas was “less than 20 cents” on a monthly bill. 

“It’s the low-hanging fruit,” he said. “There’s 8 billion cubic feet a day of this low-emission gas available on the East Coast right now, and this bill would just allow some flexibility for the utilities and the commission to figure out how to get it.” 

Finally, and most notably, the legislation would encourage utilities to invest in infrastructure to source and transport biogas, or methane produced not from fossil fuels but from sources such as landfills, wastewater treatment plants and animal operations. 

According to a presentation by the Virginia Department of Environmental Quality, in 2017, 39 percent of Virginia’s methane emissions came from municipal solid waste landfills. Just shy of half of all emissions came from coal mines, while pulp and paper operations produced 7 percent and natural gas systems 2 percent. 

“These disparate sources are out there. They’re releasing methane,” Kibler told the Mercury. “So the idea is to give the utilities a little bit of incentive to go capture some of it for beneficial use.” 

While a number of landfills in Virginia already have contracts with private companies to capture the methane their sites produce for conversion to electricity, Virginia code hasn’t authorized the state’s regulated gas utilities to embark on such ventures. 

“Would this encourage a partnership between landfill and gas company to sell their methane, and both of them would go at this as a joint venture?” Sen. Joe Morrissey, D-Richmond, asked during one committee hearing. 

“That’s exactly what it would do,” Surovell replied. 

Methane could also be sourced from cattle and hog operations, said agricultural groups. Currently, the only major project underway is the Align RNG venture, a partnership between Dominion Energy’s parent company and Smithfield Foods that will source methane from 20 hog farms in Waverly. 

Kyle Shreve, executive director of the Virginia Agribusiness Council, said that project is expected to “reduce carbon dioxide emissions by 2.5 million metric tons over a 10-year period, the equivalent of planting 40 million trees.” 

Methane capture “is a potential source of revenue” for farmers, he told lawmakers. But, he pointed out, “the infrastructure is incredibly costly for our producers.” 

Ratepayer protections 

The biogas provisions are the source of environmental groups’ opposition because of the potential of such projects to cost ratepayers millions. 

Unlike the leak detection and low-emissions natural gas projects the legislation enables, the biogas projects offer utilities an extra incentive: a 100 basis point “adder” on top of their normal rate of return set by the SCC. 

“That just adds to the profit margin that the utility recovers,” said Kim Pate, director of the commission’s Division of Utility Finance and Accounting. While state law previously included adders for certain electric utility projects, she told lawmakers that those have since been removed.  

Surovell said the higher rate of return is intended to help gas companies attract investors.

“That’s what was pitched to me and it made sense to me,” he said. Furthermore, he added, “it’s not uncommon for us to put incentives into the rate structure when you’re talking about deploying new technology.” 

Environmental groups like the Sierra Club Virginia, SELC and the Natural Resources Defense Council have said that more accountability needs to be built into the biogas law to ensure that ratepayers are only paying for the cost of projects that are successful at reducing methane emissions. 

“The main objection is that there isn’t a guarantee of methane reduction,” said Kish of the Sierra Club. “I think we would have been in better shape on the bill if it was sort of reversed: if they had to prove they’d reduced methane from the site through the projects” in order to recover costs.

Surovell and O’Quinn have maintained the language of their bills offers ratepayers sufficient protection because utilities will be required to seek SCC approval for any projects, and that approval will be contingent on the commission finding that the proposal “will result in a decrease of methane or carbon dioxide equivalent emissions.” 

“The SCC has to review every single project, and you either trust the SCC to do it or you don’t,” Surovell said in a Senate floor speech Feb. 11 during which he expressed frustration at environmental groups’ opposition. “I thought we trusted them now.” 

In committee, however, Cleveland of the SELC said that the SCC lacks experience reviewing proposals for reducing methane emissions. 

“They have no expertise,” he said. “They will be asked to evaluate them and approve them based upon speculation and estimates with no proof.” 

Amendments to the bill will require the reporting of methane emissions reductions to the SCC as well as the convening of a work group “to determine the feasibility of setting a statewide methane reduction goal and plan.” 

While those are important safeguards, said Kish, “our objection to that is they’re doing it after. We wanted them to do it first.” 

Farming operations

Environmental groups have also fretted that by incentivizing utilities to incorporate biogas into their fuel portfolios, the law will incentivize the development of large-scale animal feeding operations, with their related water pollution and other problems. 

Some have pointed to complaints about Dominion and Smithfield’s methane capture projects in North Carolina as proof of the need for caution. This January, the U.S. Environmental Protection Agency opened an investigation into whether state regulators discriminated against Black, Latino and Native American residents of the surrounding communities when they approved four permits for the operations.

The legislation “doesn’t really in our view incentivize [farms] to manage their facilities well,” said Kish. “If they have more methane, they can sell more methane.” 

Supporters of the bill say it’s unlikely to spur an explosion in large-scale animal feeding operations in Virginia.

“I don’t know that there’s going to be a proliferation of facilities under this bill,” said Kibler. “You can measure them probably in handfuls, not buckets.” 

Only 71 dairies in the state, 43 hog operations and 10 beef cattle farms are currently large enough to require a general permit for pollutant management issued by the Department of Environmental Quality for animal feeding operations and animal waste management. Not all of those are likely to be large enough for methane capture operations to be economic.

“We have dairies that we are hoping will take advantage of the program,” said Shreve. But “it will be a little more limited in scale than what is currently happening in other states where there are larger dairy operations.” 

Farmers are almost certain to get the chance. Despite environmentalists’ unease, both Surovell’s and O’Quinn’s proposals cleared their own chambers with comfortable margins, and O’Quinn’s passed the Senate Thursday. Multiple parties involved with bill negotiations over the past few weeks have said they expect the legislation to go to Gov. Glenn Youngkin’s desk. 

Kish said that although environmental groups have opposed the bill, they don’t want to be seen as hostile to the broader effort. 

“We’re not shutting the door to working on a solution to this issue. … We think it’s a problem. We want to work on it,” he said. However, he added, “we don’t think this is where the solution is.”