California Natural Gas Utilities Propose New Calculation Methodology to Reduce Greenhouse Gas Emissions for Biomethane Projects | Downey Brand LLP

On January 26, 2022, Pacific Gas and Electric Company, Southern California Gas Company, San Diego Gas & Electric Company, and Southwest Gas Corporation (“Joint Utilities”) filed an advisory letter with the California Public Utilities Commission (“CPUC”) with the title Second Addendum: Proposed methodology for estimating greenhouse gas emission reductions for specific biomethane projects Eligible incentives. This template would define how greenhouse gas emission reductions from biomethane injection projects associated with lactic digesters and other projects would be calculated and reported to the California Air Resources Board.


On December 17, 2020, the CPUC approved Decision 20-12-031 adopting the Standard Renewable Gas Interconnection Agreement and requiring the Joint Utilities to notify CARB of the proceeds from the cap-and-trade auction for the 80- Million Dollar Biomethane Stimulus Fund to Report. The incentive fund was established in 2015 to encourage biomethane producers to build and operate projects in California that connect to utility systems. Pursuant to Decision 20-12-031, the Joint Utilities are required to establish a mutually acceptable methodology for estimating greenhouse gas emission reductions resulting from projects receiving funds to connect to the gas pipeline systems operated by the Joint Utilities.

On March 17, 2021, the Joint Utilities submitted their letter of recommendation, adopting CARB and EPA-recognized methodologies for calculating greenhouse gas emission reductions from lactic digester projects, landfills and water resource reclamation facilities. On April 6, 2021, the Sierra Club and the Leadership Council for Justice and Accountability protested the Joint Utilities’ Advice Letter, arguing that the proposed methods result in a double claim of greenhouse gas reductions between incentives to combine biomethane and upstream methane capture projects such as dairy would fermenter projects. The CPUC also found, independently of the protests, that the calculation methods proposed by the Joint Utilities were inadequate to calculate the greenhouse gas benefits of spending cap-and-trade auction proceeds under Section 95893(e)(4)(B) of the Cap -and-Trade Regulation.

Current action

In response to the protest, the Joint Utilities consulted with CARB and prepared this supplemental advisory letter. In this submission, the Joint Utilities propose to limit reporting of greenhouse gas emission reductions associated with facilities used to condition and transport biogas downstream for injection into a supply line. This includes biogas collection lines; Installations for treating and processing biogas; piping on the side; Compression; and the utility port receiving point. The Joint Utilities reporting would exclude biogas production plants and any emissions from the extension of the supply pipeline downstream of the connection point.

For an incentive to connect biomethane pipelines, the reported greenhouse gas benefits would only include those associated with reduced on-site combustion emissions and displacement of fossil fuel use by biomethane end users. Reporting would exclude upstream methane emissions captured by lactic digesters or other technologies.

Next Steps

Interested stakeholders have until February 15, 2022 to file protests against the supplemental advisory letter, after which the Joint Utilities will have the opportunity to respond. The CPUC Energy Department will then review the submissions and, if the methods proposed by the Joint Utilities are acceptable, approve the letter of recommendation. The calculation methods of the Joint Utilities will become effective at CPUC’s discretion on the date of CPUC approval or as of the date required by the Utilities, February 25, 2022.

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