Just Two Development Companies Drive One of California’s Most Controversial Climate Programs: Manure Digesters

The second of a three-part series on California’s program to reduce carbon emissions on dairy farms by subsidizing the construction of digesters to capture methane. 

California is often lauded as a leader in U.S. climate policy, but one of its primary emissions reduction strategies—manure digester projects—could be prolonging the state’s dependence on natural gas. The bulk of the state money pouring into the technology is benefiting two companies, Maas Energy Works and California Bioenergy, that rely on natural gas revenue to survive.

In an attempt to reduce powerful greenhouse gas emissions, particularly from the dairy and livestock sector, California has invested hundreds of millions of dollars in its Dairy Digester Research and Development Program. Established in 2014, the program provides grants to farmers to install anaerobic digesters that capture methane, a powerful greenhouse gas, from the manure produced by dairy cows. 

Many of the benefits of the digester program, meant to help the state meet its ambitious climate goals, have flowed to the state’s booming dairy industry, which earns more than $7 billion per year from sales of dairy products. But Maas Energy Works and California Bioenergy are also coming out on top in the push to lower dairy emissions. Roughly 90 percent of the more than $350 million in incentives disbursed for digester projects to date has made its way to projects headed by either of the two companies.

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Both are digester developers and get their revenue from installing the technologies on farms and from the sale of biogas that the digesters produce. California’s 117 digester projects are a centerpiece of the state’s strategy to lower methane emissions in the dairy and livestock sector to 40 percent of 2013 levels by 2030 in compliance with a 2016 law. (The law states that enforceable regulations for the industry cannot be established until 2024.)

While Maas and CalBio market themselves as providers of a cutting-edge technology that will bring industrial agriculture up to current climate standards, both developers have partnerships with other oil and gas companies and depend on natural gas revenue—and state incentives—to support their bottom line. For California’s digester program to continue, the state, along with Maas and CalBio, must find markets for their product.

“The state and the federal government really have to provide hundreds of millions of dollars in subsidies in order for digesters to pencil out,” said Jeanne Merrill, a senior policy adviser at the California Climate and Agriculture Network, which does not support the state’s digester program.

In 2018, two years after California passed its methane reduction targets, the state convened a group of scientists, industry representatives and environmental advocates, including Merrill, to recommend ways that the dairy industry could reduce its greenhouse gas footprint. A subgroup focused on expanding digester markets, jointly chaired by a dairy lobbyist, a representative from Southern California Gas Company and a director of a clean transportation nonprofit, concluded that increasing demand for renewable natural gas in the state was essential to ensuring that California’s digester market flourished.

“Renewable natural gas markets in California are approaching saturation,” the group wrote. “In order to further increase utilization and foster the capture of dairy manure emissions and conversion into fuel in the near term, more demand is needed.” The state would need to find a place to send all the gas that digesters produce, the group added, and should encourage the use of renewable natural gas in transportation. 

Environmental advocates argue that the recommendation runs contrary to California’s mission to fight climate change. “That’s backwards,” said Nina Robertson, an attorney for the environmental nonprofit Earthjustice. “In fact, we need to reduce demand.”

Last month, California passed a suite of climate bills and codified commitments to reach carbon neutrality by 2045. California Gov. Gavin Newsom signed the climate package in September. In July, Newsom said the state should “urgently move away from fossil fuels” and “look for greater opportunities to reduce our dependence on fossil fuels to achieve our air quality and climate targets, including in our electricity and transportation sectors.’’ 

California is now working to finalize plans to end the sale of gas-powered vehicles in the state by 2035. Under Newsom, the state has reduced funding for manure management programs, and last year the governor proposed converting state grants for the digester program to loans. Legislators ended up apportioning $60 million for the two manure management programs in 2021 and $48 million in 2022. 

Community advocates have raised concerns that digester development is institutionalizing a polluting industry, keeping natural gas flowing in California while distracting the state from strategies that would prevent the release of methane without creating biogas as a byproduct. Such options include building barns with sawdust bedding that can be spread on fields once it absorbs manure or even worm-based systems that filter manure wastewater.

CalBio was formed in 2006, the same year California passed AB32, a sweeping climate bill that required cuts in greenhouse gas emissions. Neil Black, the company’s president, said that it had worked closely with the state to develop the funding program for digester projects. Now, digester projects built by CalBio can receive state grants in the millions that are matched by private funders. The company has developed 60 of the 117 projects the state has funded so far.

The company boasts a variety of business partners that are able to help match state incentives. In all, private funders have contributed more than $360 million to California digester projects, according to the state. In June 2019, CalBio announced a partnership with Chevron in which the oil and gas giant will provide funding for up to 18 digesters and related infrastructure in Kern, Tulare and Kings counties. Food and Water Watch, a Washington-based nonprofit that advocates for clean water, safe food and stringent climate policies, has noted a 2021 report in which Chevron wrote that partnering with dairies was part of its plan to expand natural gas production “tenfold” by 2025. UGI Energy Services, a Fortune 500 oil and natural gas distribution company, has also provided capital to CalBio for its digester projects.

CalBio has also partnered with companies in clean energy. The company worked with Bloom Energy, a fuel cell developer that has spent millions of dollars lobbying various state agencies on biogas and climate change policies, to build the state’s first and only dairy fuel cell project—a type of electricity generation that uses biogas but with virtually no emissions—on a farm near Fresno. 

CalBio has also teamed with Land O’ Lakes, an agribusiness cooperative that is one of the largest producers of dairy products in the United States, with $16 billion in net sales in 2021. Land O’ Lakes has spent over $140,000 lobbying the California Department of Food and Agriculture, which manages the state’s digester program, and the California Air Resources Board regarding methane reduction programs and methane regulations. A spokesperson for Land O’ Lakes said in an email that the company has asked legislators to provide grant funding to farms to drive the adoption of digesters. 

While CalBio has not spent lobbying money in California, its business partners Bloom and Chevron have lobbied California air regulators regarding the state’s low-carbon fuel standard policy, which seeks to reduce the carbon intensity of the state’s transportation fuel supply, and its cap-and-trade program. The two companies have profited from the state’s digester program, and Chevron has invested in renewable natural gas in California. Bloom and Chevron have both also made contributions to Ben Allen, the state senator who co-sponsored the 2016 emissions target bill. The bill requires state agencies to consider policies that support the development of renewable natural gas. Chevron has also contributed to Loni Hancock, who was the legislation’s other co-sponsor as a state senator. 

CalBio’s partners have ties to organizations that encourage natural gas as well. Michael Boccadoro, executive director of Dairy Cares, is also executive director of the Agricultural Energy Consumers Association, which has promoted the use of biogas and lobbies the state on energy issues. Multiple partners of CalBio are listed as members of Dairy Cares on the organization’s website, and CalBio referred Inside Climate News to Boccadoro to answer some questions for the company.

Black, the president of CalBio, said the company is working “very hard” to aid California’s energy transition and its mission to slash emissions. “Everything we do is focused on how to have the biggest impact on greenhouse gas reductions as soon as possible,” he said. He said the company applauds investments from oil and gas companies in technologies that confront climate change because it is sorely needed.

Maas Energy moved from Washington State to California in 2010 and has since led 50 of the state’s 117 digester projects. The company spent $5,000 in 2017 and 2018 lobbying the California Department of Food and Agriculture regarding the Dairy Digester Research and Development Program. Maas has fewer business partners than CalBio but has worked on projects with the biofuel companies Calgren Renewable Fuels and Aemetis, the latter of which has developed six digester projects.

Both companies have ties to auto manufacturers as well: In 2018, Maas Energy and Toyota Tsusho, a trading arm of the carmaker, worked together to build the Merced Pipeline, infrastructure meant to collect biogas from 15 Maas digesters. CalBio’s fuel cell project was in part made possible by BMW North America, which buys the renewable energy credits the dairy receives from its use of the fuel cells. Both car companies said their work with biogas developers was intended to make their businesses more environmentally friendly.

Daryl Maas, founder and chief executive of Maas Energy, emphasized that his company is helping to build an industry that provides an important service: capturing harmful emissions. “We’re mitigating a tremendous amount of air pollution,” he said. “None of this stuff used to be captured.” 

While that business happens to rely on the state incentivizing low-carbon fuels like compressed natural gas, Maas said he would happily produce other low-carbon fuels as well, like hydrogen or electricity, if California incentivized them. 

Despite their business connections, Maas Energy and CalBio underscore the importance of their dairy-made natural gas in battling climate change and contributing to California’s move toward a greater reliance on clean energy.

Scientists and community advocates are skeptical. “Maybe we could have done that 20 years ago, but it’s 2022,” said Merrill. “And we’ve run out of time.”

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