Texas-based renewable natural gas (RNG) producer Archaea Energy Inc. on Monday reported landing its second Canadian customer via a 20-year contract to deliver about 2 million MMBtu/year to Quebec distributor Énergir L.P.
The deal, subject to approval by Quebec regulators, would raise landfill gas supplier Archaea’s annual Canadian RNG sales to nearly 10 million MMBtu, counting a 20-year agreement in January for purchases of up to 7.6 million MMBtu/year by British Columbia (BC) distributor FortisBC.
“We continue to see natural gas utilities, such as Énergir, as first-movers in the voluntary RNG market who are looking to RNG as a primary method of decarbonization in response to regulatory and existential mandates,” said Archaea’s CFO Brian McCarthy.
He called Archaea “one of the few RNG producers capable of offering tailored long-term, fixed-price agreements” scalable with customers’ changing demands, enabling RNG to make “a growing impact as a sustainable, multi-decade decarbonization solution.”
Quebec’s greenhouse gas (GHG) cleanup regulations set an RNG content target of 5% by 2025 for Énergir’s 525,000-customer grid, and the utility has doubled its target to at least 10% by 2030, said Énergir’s vice president Renault-François Lortie.
“If this agreement is approved by our regulatory authority, it will represent an important addition to our RNG supplies target,” he said. “It will inevitably strengthen the development of the RNG industry in Quebec, as it will allow a greater number of customers who are concerned about reducing their carbon footprint to benefit from renewable energy at a competitive cost.”
BC provincial regulation demands a 47% GHG cut by FortisBC’s 1.05-million customer grid as of 2030. By rating RNG as zero-emission gas, the policy has started a BC and Alberta mini-boom in landfill gas, with FortisBC to date securing 27 supply contracts for up to 12.4 Bcf/y of the favored fuel as of the mid-2020s.
With approval from Quebec regulators, Archaea said that its latest deal with Énergir could take effect in October 2023.
‘Sizable Volumes’ Needed
The Énergir deal marks the second recent RNG sales agreement announced by Archaea, which reported second quarter earnings Tuesday. Under the other deal, Archaea would sell nearly 332,000 MMBtu/year of RNG to Pennsylvania-based UGI Utilities Inc.
“Our recently announced contracts with Énergir and UGI underscore the demand for sizable volumes of RNG that are structured in a way that caters to the specific energy needs and environmental goals of customers,” said Archaea’s CEO Nick Stork.
Management reported that about 50% of Archaea’s expected production is under long-term fixed-price sales contracts, adding that the company goal is 70%. The remaining 30% would be sold in short-term markets.
Through its 13 RNG and 33 landfill gas to electric facilities across the Lower 48, Archaea produced and sold 2.04 million MMBtu of RNG and 159,000 MWh of electricity during 2Q2022. The firm produced and sold 1.54 million MMBtu of RNG and 166,000 MWh of electricity in 1Q2022.
The young public company, which merged with Arla Energy LLC last year, said it won three competitive request for proposal (RFP) processes in 2Q2022 to develop new RNG facilities at government-owned landfills. Once the RFP-related gas rights agreements are signed, Archaea would increase its RNG project development backlog from 88 to 91 RNG projects, management said.
Forty of the projects are tied to a joint venture (JV) that Archaea formed with Lightning Renewables LLC and Republic Services Inc. in 2Q2022. Management said the JV plans to spend about $1.1 billion to develop 40 RNG facilities at Republic landfills nationwide.
Archea, which owns a 60% stake in Lightning Renewables, would develop, engineer, construct, and operate the RNG facilities within the JV and receive fees during the development and operation phases of the projects, management said.
Citing initiatives in the Inflation Reduction Act, management said more RNG projects could be added under the Lightning Renewables JV.
Archaea reported $77.2 million in revenue for 2Q2022, up sequentially from $56.9 million..
Net income was $32.6 million (27 cents/share) for 2Q2022, swinging from a $33.2 million loss (minus 28 cents) in 1Q2022.
Gordon Jaremko contributed to this article.
