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The new California gold rush into anaerobic digesters

There’s money in manure for California dairy farmers with anaerobic digesters that capture methane, a potent greenhouse gas, from their cattle’s manure. Each cow on a farm with a digester can generate $2,827 a year in air pollution and biofuel credits for methane that would otherwise go into the atmosphere, calculated Aaron Smith, a professor at UC-Davis.

The credits, available through California’s Low Carbon Fuel Standard (LCFS) and the federal Renewable Fuel Standard, are worth half as much as the milk produced by the dairy cows. In a blog earlier this week, Smith wrote that the “huge subsidies” had created “a predictable explosion in the number of digesters.” Beef producers, he said, might consider moving their stock indoors so they, too, could qualify for credits.

California created the LCFS to reduce air pollution and the reliance on petroleum as a motor fuel. Alternative fuels qualify for credits based on their lower life-cycle carbon intensity than petroleum. The LCFS credit for biomethane was equal to $11.37 for a gallon of diesel fuel, or $81.50 per million BTUs. Dairy cows produce an average of 22.5 million BTUs of methane in their manure annually, so the credits are worth $1,834 a year. Fuel providers are required to earn or buy credits so they meet the state’s target for carbon intensity of their products.

In addition, methane digesters can earn RFS credits, wrote Smith. The average cow would generate enough methane to earn $993 a year in cellulosic RFS credits, known as RINs, at recent prices.

“Thus farmers are paid to reduce their methane emissions, and they produce a little biogas for transportation as a byproduct,” wrote Smith. “The value is in the prevented emissions.” At current spot prices for natural gas, the biogas produced by a dairy cow is worth $112 a year.

Only a sliver of the nation’s 40,000 dairy farms have digesters, often mentioned as a way for the farms to reduce their carbon footprint. In a recent count, there were just 260 nationwide, though that was an increase of 53 in one year. Most of the construction in recent years has been in California, the No. 1 dairy state.

Digesters, although simple in concept — they trap the manure in an airtight chamber and collect the gases as it decays — are expensive to install and operate. They can cost from $400,000 to $5 million to construct. The combined cost of building and operating a digester on a large dairy farm is $636 per cow, per year, based on a 10-year amortization of capital costs, said Smith.

“A lack of sustainable, reliable markets for the energy produced on the farm has resulted in digesters not being economically viable for many farmers,” said Melvin Medeiros, a California dairy farmer, at a House Agriculture subcommittee hearing on Thursday. The National Milk Producers Federation supports legislation for an investment tax credit to cover 30% of the capital cost of digesters, said Medeiros, a member of the NMPF executive board.

Companion versions of the bill, S 2461 and HR 3939, were filed last summer and are awaiting hearings.

“With the huge growth in digesters, biogas made up 15% of the credits generated in the LCFS in the most recent quarter,” wrote Smith. “However, biogas contributes only about 1% of the fuel energy used in the state.”

Also at the House hearing, the National Cattlemen’s Beef Association said ranchers should be compensated for such conservation work as carbon sequestration or preserving wildlife habitat. The National Sustainable Agriculture Coalition urged the adoption of regenerative agriculture, which uses cover crops, no-till or minimum tillage, crop rotations, compost, and manure to build soil fertility.

Agriculture generates an estimated 10% of U.S. greenhouse gas emissions. The EPA says emissions from agriculture increased by 12% from 1990 to 2019. Methane, associated with livestock production, makes up one-third of agriculture’s emissions, according to the USDA. Nitrous oxide, from sources such as tillage and fertilizers, accounted for a bit more than half of agricultural emissions in 2018. Carbon dioxide was responsible for 12%.

The California Air Resources Board home page for the LCFS is available here.

To watch a video of the House Agriculture subcommittee hearing, click here.

For the written testimony of hearing witnesses, click here.

Produced with FERN, non-profit reporting on food, agriculture, and environmental health.
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