Carbon rules key to Irving Oil's new clean-energy deal, says gas partner

Irving Oil's new renewable-energy partner says its agreement with the Saint John refinery wouldn't make business sense without Canadian climate policies and regulations.

Anaergia Inc. will begin supplying the refinery with renewable natural gas, or RNG, from Rhode Island this coming summer. 

The company says the gas is carbon-negative because it's created from organic landfill waste — mainly food scraps —  that would otherwise release methane, a greenhouse gas that contributes to climate change. 

That means it will help reduce the refinery's carbon intensity, a measure of how clean the energy is that powers its operations.

And that in turn contributes to Irving Oil's compliance with federal clean-fuel regulations and New Brunswick's output-based pricing system on carbon.

"The cost for this fuel on a carbon basis goes down significantly if the carbon intensity is low," Yaniv Scherson, Anaergia's chief operating officer, said in an interview.

"On a carbon basis, the fuel that we are producing from organic waste, because it has a negative carbon intensity, has a lower carbon cost to Irving Oil, to our customer." 

New Brunswick Green Party Leader David Coon said renewable natural gas is a credible technology, and Irving's decision to use it validates federal climate policies.

"It shows the power of environmental regulation because why they're doing this, to me, is the clean fuel standard that the federal government brought in. It's causing them to source much greener energy for their operations, which is fantastic."

Scherson said if a future federal government repealed existing climate policies, it would jeopardize the future growth of carbon-negative fuel sources, complicating efforts to reduce emissions.

"Decarbonization and renewable energy in general won't happen without policies in place," he said.

"Every major renewable wave or decarbonization effort starts with an objective or requirement to get there.

"Then over time, the marketplace reacts and there's greater volume, better pricing, and over time, the cost of decarbonization and sustainability decreases."

The federal Conservative opposition has attacked the Trudeau government's carbon pricing and clean fuel regulations.

But Scherson said with "a really dangerous exponential rise" in emissions, such policies are essential to make non-emitting energy more cost-competitive more quickly.

"If we wait for the industry to act on its own, we see the detrimental effects of what's happening globally," he said. 

Irving Oil's rare public comments on federal climate policies, including carbon pricing, have included warnings that stringent rules might hurt the company's competitiveness.

But in 2021, the company said in a "report on sustainability" that it had "identified a series of potential projects for exploration focused on decarbonizing current assets."

Irving did not respond to an interview request, but in a news release, Irving Oil president Ian Whitcomb said the company was "proud to continue advancing on our energy transition journey," which include a goal of reducing emissions by 30 per cent by 2030.

The Anaergia deal could also yield benefits for Irving Oil under the New Brunswick government's output-based pricing system for large industry.

It requires major emitters to reduce their carbon intensity by two per cent each year until 2030. Companies can earn tradable carbon credits for reductions above that percentage.

Scherson said another advantage of renewable natural gas is that, except for the source, it is identical to the extracted natural gas Irving already uses at the refinery.

"It's the exact same molecule," he said, a "plug-and-play replacement" that avoids the need for costly new distribution systems and infrastructure that can take years to build.

Anaergia will capture biomethane from solid waste at a facility in Rhode Island and ship about 350 million cubic feet of it per year via pipeline to Saint John.

Capturing the gas will prevent the release of more than 40,000 metric tonnes per year of carbon dioxide-equivalent greenhouse gas emissions, the equivalent of taking 9,500 cars off the road, according to the company.

"When we sell the fuel to Irving, we sell all of the environmental attributes along with the fuel," said Alex MacFarlane, Anaergia's director of project development.

Province not seizing opportunities, says Green leader

Michelle Robichaud, president of the Atlantica Centre for Energy, an industry-supported think-tank, said renewable natural gas could replace about 1.3 per cent of the energy consumed in Canada now.

"It's a small role but definitely an important one," she said. "We are reducing the emissions that are going into the atmosphere by using RNG.

"I think we'll see more and more of it." 

Coon said his only complaint about RNG is that the current provincial government hasn't been willing to support the development of a local sector.

He said Laforge Bioenvironmental's commercial biogas production plant in the northwestern New Brunswick community of Saint-André could be supplying more RNG to the provincial market if better incentives were in place. 

There are "all kinds of possible opportunities," Coon said, "but the province is not seizing on it."

Former New Brunswick premier Frank McKenna, a longtime booster of Irving Oil's energy projects, sits on Anaergia's board of directors but Scherson said he played no role in the deal.

"He really was not involved at all," he said. "It is coincidental."

Officials from the two companies met at a biogas conference in Toronto last spring and began talking about a possible deal, MacFarlane said.