Energy regulators approve Vermont Gas' controversial bid for out-of-state landfill gas
This story is breaking and may be updated.
Vermont's Public Utility Commission has approved a request by Vermont Gas Systems to enter into a long-term contract to buy biogas and its associated renewable energy credits from a landfill in New York’s Finger Lakes region. The PUC says it's the largest contract for so-called renewable natural gas the company has ever pursued.
The gas, which the utility calls renewable natural gas, is also called biomethane or biogas. It is derived from the breakdown of waste, including at landfills, from animal manure and food scraps. It can be substituted for conventional natural gas, but proponents argue that because the gas is siphoned from carbon-filled waste, it is cleaner than conventional natural gas.
Vermont Gas President and CEO Neale Lunderville says the utility will start making requests for the gas to be delivered early in the new year.
Energy regulators approved the deal Tuesday, despite criticism that it won’t meaningfully reduce Vermont’s — or the gas utility's — emissions. The utility says the contract will help it meet its climate goals.
"Our decision is based on our determination that if the contract is managed effectively, it can be a cost-effective means for VGS to reduce its overall [greenhouse gas] emissions," the PUC said in its decision.
The contract commits Vermont Gas to purchasing out-of-state biogas from Archaea Energy, a subsidiary of the fossil fuel giant British Petroleum, for 14.5 years. There is an option to extend the contract for another five years.
It's the third contract for out-of-state biogas that the PUC has approved for Vermont Gas. The utility's latest tariff agreement cites insufficient supply of locally sourced biogas in Vermont.
Representatives of Vermont Gas told the PUC they were in conversations about the contract as far back as last spring, when a bill to create a Clean Heat Standard for Vermont was before the Legislature.
Documents filed with the PUC say the deal could be worth anywhere from tens to hundreds of millions of dollars.
The gas will be generated at the Seneca Meadows Landfill in Waterloo, NY. The landfill’s owners have applied for an expansion that’s faced pushback from environmental groups and some local business owners there.
In Vermont, about 130 people filed comments with the Public Utility Commission to oppose the deal, including from at least six lawmakers.
In it's decision to approve the contract, the Public Utility Commission said the biogas will be transported from from Seneca Meadows, up and around Lake Erie, to the Enbridge Gas Dawn Hub located in Ontario. From there, it will be piped north and east around Lake Ontario, and eventually to Vermont.
The biogas will be transported on pipelines VGS currently uses to transport natural gas.
Catherine Bock of Burlington is a Vermont Gas customer and retired naturopathic doctor who is challenging the contract before the PUC. She says that it’s not clear how much if any of this landfill gas will make its way over the border to Vermont customers.
“If we could find it locally, and there are some places where it’s being done in Vermont, then that’s a completely different story,” she said.
Pipelines are leaky — and this route is hundreds of miles long.
Stuart Blood of Thetford is also working to oppose the case. He takes issue with the idea that the gas from Seneca Meadows will make it to Vermont.
“Almost all of the gas that leaves that hub on the way to Vermont will be fossil gas, and most of that will be fracked,” said Blood. “But VGS will retain ownership of the renewable attributes and they will claim that the product is renewable, even though there won’t be any difference before and after this contract, in terms of what will be burned by their customers.”
In documents filed with the PUC, Vermont Gas says that the renewable energy credits attached to this natural gas are key to protecting rate payers from price hikes.
"We're looking around to be able to find renewable natural gas to help displace fossil gas on the natural gas system," said Vermont Gas President Lunderville. "Wherever we're able to put renewable natural gas into the system, that is fossil gas that doesn't have to be used."
Lunderville says the utility has looked for and already sourced biogas from facilities in Vermont.
Still, Geoffrey Gardner of Bradford, who was also involved in opposing the case, called the PUC's decision disappointing.
"The PUC doesn't seem to take seriously the fact that ... there's absolutely nothing in this contract that will reduce the amount of natural gas that actually is burned and used in Vermont," Gardner said.
Gas produced through the breakdown of organic matter is more expensive than conventional natural gas derived from fossil fuels. Vermont Gas has estimated burning the gas from Seneca Meadows will be 43% less polluting than burning natural gas derived from fossil fuels, a figure the PUC found reasonable. But Emily Grubert, an expert witness hired by opponents of the project estimated that figure is closer to 26%.
The contract allows Vermont Gas to sell an unlimited amount of the biogas it buys each year from the Seneca Meadows Landfill into nascent renewable transportation fuel markets, where the utility says it can fetch a premium. Profits will be shared with Archaea Energy, and Vermont Gas says they'll help offset the impact to customers.
The state’s Department of Public Service recommended the PUC approve the contract, so long as it gets the power to review Vermont Gas’s cost analysis annually.
“We want to be sure that the cost of this contract is not borne by the ratepayers,” said Jim Porter, who is representing the department in the case. On Tuesday, the PUC agreed, approving the department's request as part of the final decision.
At a September evidentiary hearing before the PUC, Thomas Murray, president of decarbonization technology for Vermont Gas Systems, said the company is interested in decarbonizing what’s in its pipelines.
“But certainly, in the next 20 years, you know, we’re going to be using CH4 [methane] in our system,” he said.
Unlike the state’s electric utilities, Vermont Gas is not required by Vermont law to reduce the carbon intensity of the fuel mix it supplies to its roughly 56,000 northwestern Vermont customers.
Murray testified at the September hearing that Vermont Gas is very interested in green hydrogen — a nascent and still largely unregulated energy market.
“We’re doing a lot of work in the hydrogen space, and so there is a world where probably after 2040 or 2045, there may be a system – hydrogen system,” he told regulators.
But the Seneca Meadows deal, Murray said, serves another benefit to ratepayers: it would allow the company to generate “clean heat credits” under a hypothetical Clean Heat Standard.
More Vermont Public reporting on the Clean Heat Standard:
- Reporter debrief: Vt. lawmakers are weighing historic regulations on fossil fuel companies
- Vermont Senate advances transformative bill to overhaul how the state heats its buildings
- Gov. Phil Scott vetoes climate bill that would transform the way Vermonters heat their homes
Lawmakers failed narrowly to override Gov. Phil Scott’s veto of the policy last spring.
If it passed, the standard would create a marketplace, where fossil fuel wholesalers and importers who do business in Vermont would have to buy or create so-called “clean heat credits” — in proportion to the amount of climate warming emissions their products generate.
“This would have aligned with the Clean Heat Standard, and frankly, we were talking about this contract as the bill was being worked on,” Murray told regulators. “And we’re optimistic that bill could be revived this coming session.”
Vermont Gas President Neale Lunderville was part of a working group that provided feedback on the Clean Heat Standard before the solution was first pitched to the Legislature. Filings with the Vermont Secretary of State's Office show Vermont Gas Systems has spent just over $90,000 this year on lobbying at the Statehouse, an expense consistent with the preceding years.
In a letter urging the commission to reject the proposal, Rep. Jim Masland (D-Thetford Center) wrote, “VNG [sic Vermont Gas Systems] appears to be positioning itself to claim ‘clean heat credits’ by selling fracked gas with renewable attributes attached.”
Annette Smith, with the environmental advocacy group Vermonters for a Clean Environment has been involved in the opposition at the PUC. She expressed concern that unlike the more established markets that already exist for trading the energy credits attached to renewable electricity projects, Vermont statute doesn't address the markets Vermont Gas will be working in for gases.
"What this contract enables is for Vermont gas to engage in the credit market trading and not only the thermal market, but also the transportation market," Smith said, "And it's not really about the gas itself — it's about the opportunity to make money on arbitrage and the trading."
In its decision letter, the Public Utility Commission said the contract could be "a cost-effective means for reducing greenhouse gas emissions." However, the commission concluded by saying Vermont Gas Systems should expect it will closely monitor the utility's management of the contract during future rate cases.
The challengers in the case have 30 days to decide whether to appeal the PUC's decision to the Vermont Supreme Court, and 28 days to ask regulators to reconsider their decision.
Vermont Gas is an underwriter of Vermont Public.
Have questions, comments or tips? Send us a message or get in touch with reporter Abagael Giles @AbagaelGiles.