Lessons Learned from Biogas Sales Contracting: Success Stories and Pitfalls from Selling Biogas into the RNG Market

Introduction It is a complicated proposition when Water Resource Recovery Facilities (WRRF) elect to sell biogas to a commercial 3rd party to make Renewable Natural Gas (RNG) or to make and sell RNG for themselves. These endeavors involve markets, contracts, commitments, uncertain outcomes, and partnerships that lie far outside the typical world of those working at or designing WRRFs. Engaging in this type of gas sales process can be daunting and risky if projects are not pursued in a manner that retains proper benefits and sets manageable responsibilities for the WRRF. The authors of this paper include biosolids and biogas engineers working at or on behalf of municipal WRRFs that have undertaken biogas and RNG sales contracting successfully. The case studies presented will highlight specific keys to successful outcomes in each. However, the authors feel there is one major aspect that generally drives success that the WRRF and engineers working on their behalf must take the lead on devising the gas sales agreements and partnerships with commercial 3rd parties. WRRFs can benefit significantly from gas sales agreements but only when commercial entities are forced to compete around the items that matter and when a true partner can be identified that is willing to share benefits and risks with the WRRF. Roles and Responsibilities in Biogas to RNG Understanding the main entities, roles, and their responsibilities is crucial for navigating biogas-to-RNG sales contracting. Figure 1 provides a schematic representation of the participating entities and their roles in a typical biogas-to-RNG contract. -Biogas Producer: The entity that owns and operates the digester infrastructure, which converts organic feedstock into raw biogas (typical for WRRFs). -Biogas Upgrader: The entity that owns and operates the biogas upgrading infrastructure, which converts raw biogas to RNG product gas (optional role for WRRFs). -Gas Broker: The entity that purchases the RNG Product Gas itself as a commodity, as well as the rights to the Environmental Attributes (EAs) that are generated. The Gas Broker is also typically responsible for registering the RNG project with appropriate authorities to generate EAs and conducting EA sales in response to tracking of market pricing. -Natural Gas Utility Pipeline: If RNG is not dispensed directly to end users, a NG Utility Pipeline will physically accept the RNG-produced gas into their pipeline infrastructure. -Final End User: The entity that ultimately purchases RNG from the Gas Broker and utilizes it in a variety of ways, including fueling compressed natural gas (CNG) vehicles, for campus heating, or for the generation of other energy products. Case 1 - City of Dayton Dayton identified selling of biogas to generate RNG as a priority project in their 2019 Masterplan. This was in the wake of the significant RIN price boom in 2017. Interestingly, Dayton had already constructed and installed a PSA upgrading system back in 2012 to clean gas ahead of their boilers and cogeneration engines. Dayton elected to solicit commercial 3rd parties to purchase their biogas for beneficial use. Under this type of arrangement, the solicitation and selection process is the essential tool that the WRRF has at its disposal to ensure it is identifying a true partner and entering into an agreement that adequately shares risks and rewards. Dayton's selection process is summarized below. RFQ Phase - An open solicitation was issued for interested parties. Ahead of the RFQ, Dayton conducted a pipeline interconnection feasibility study with the local NG utility and included detailed results in the RFQ (see Fig 2). Along with a technical approach, the solicitation called for respondents to provide evidence/experience that they could execute all necessary aspects of an RNG project (see Fig 3). This was key because there are many varied elements required for successful RNG projects and finding a partner that can do all and not some of them is the main goal of an RFQ. The Dayton solicitation received 12 responses of which 3 were shortlisted for invite only RFPs. RFP Phase - The RFP phase required significant detail from invitees that matched the approach promised in the RFQ. Dayton created 20-year pro-forma spreadsheets that matched the RFQ approaches and required respondents to fill in key values that elucidated both their projected risks and returns, and their offered royalty rate back to Dayton. Dayton also authored and provided a draft contract for respondents to review and provide exceptions. Exceptions were allowed but negatively affected the RFP response score. Thus, respondents were forced to compete not just on financial benefit, but on the contracting responsibilities they would accept. For example, Dayton provided historical biogas production information (see Fig 4). Risk was shared by Dayton's agreement to a minimum gas production floor and the biogas upgrader's agreement to accept gas up to a ceiling value exceeding current production. Outcome - Dayton selected to partner with DTE Vantage (DTE) for biogas sales. DTE offered extremely lucrative benefits due to the fact they already owned and operated an RNG system at a nearby landfill(see Fig 5), already had a functioning natural gas pipeline interconnection, and already had a vehicle offtaker and D3 RIN sales in place. None of this was known to Dayton prior to the solicitation so the thorough and comprehensive selection process resulted in major dividends. The Dayton biogas started flowing to DTE's pipeline in November 2024 and Dayton's net financial returns are currently estimated at approximately $750k annually. Case 2 - Capital Region Water Through biosolids and energy planning, Capital Region Water (CRW) in Harrisburg, PA identified upgrading biogas and selling it as RNG as a priority project. Electing to own and operate the RNG upgrading system themselves in order to maximize revenue and fund other fundamental infrastructure upgrades to their WRRF. Another aspect of their decision was the existence of a NG pipeline injection company (UGIES) who already owned and operated a NG pipeline interconnection into the low-pressure distribution system less than 500 feet from CRW's digesters. UGIES was also able to serve as the gas broker in addition to its role as the pipeline interconnection which further incentivized cooperation. With a known partner in hand, the key to CRW's success was crafting a series of agreements with UGIES that allowed successful execution of the gas sales. CRW and engineers working on their behalf crafted the principal versions of the following agreements to ensure benefits and reasonable responsibilities were maintained. Interconnection Agreement - This set the interconnection construction responsibilities of both parties, established methods of payment to UGIES for construction, and reserved unfettered access to the NG pipeline interconnection for CRW if gas quality met the required standards. Some benefits to highlight include delegating the construction and upkeep of jurisdictional pipeline to UGIES who already had certified labor and expertise for this work seeing as they are a NG pipeline company. It also involved eliminating the typical redundant Gas Chromatograph monitoring stations on both sides of the fence. Due to the extreme proximity and cooperative nature of the parties, a single monitoring station was owned and operated by UGIES and readings could be shared back to SCADA at CRW. Biomethane Transaction Agreement - This set the ground rules and the pricing structure under which UGIES would purchase both the commodity NG and the RNG related environmental attributes (EAs) from CRW. One notable benefit was the absence of an RNG supply floor minimum guarantee from CRW. The price paid to CRW for EAs was based on a percentage of a public price index (RIN pricing data as published by the EPA) to allow full price transparency. There was also an Alternatives Markets clause (which was exercised) if both parties agreed that pursuing RINs was not the most beneficial route for monetization. All direct costs which refer to the gas broker's logistical costs for monetizing EAs were kept solely as the responsibility of UGIES and could not be passed back to CRW. Outcome - The RNG upgrading and interconnection was completed and RNG was flowing to the pipeline in late 2025. CRW established an RNG sales pathway while retaining the vast majority of sales revenue to fund other critical infrastructure upgrades. Partnering with a single entity serving as both the gas broker and NG interconnection point significantly simplified the contracting structure CRW needed to pursue. It also provided mutual incentive to get the interconnection constructed in a timely manner and kept open allowing both parties to benefit from the production and sales of RNG.