OPIS Insights

The approval of Chevron RNG Holdings’ application for a dairy manure biomethane pathway has unfolded against a backdrop of legal challenges, defining the current risk environment for RNG stakeholders in California. The core of this tension lies in the conflict between the long-term credit certainty provided by California’s Low Carbon Fuel Standard (LCFS) and the looming threat of direct methane regulation from CARB. In a November 2024 resolution, the CARB Board directed the agency to develop a formal regulation for livestock methane emissions, initiating a process slated for completion by 2030. 

However, in a simultaneous and strategic move for the industry, CARB opted to preserve the LCFS credit structure for dairy digester projects, locking in support for existing facilities until 2040 and for new projects built before 2030 until 2060. This bifurcated approach has not satisfied environmental groups, who argue it incentivizes the expansion of factory farms without immediate emission cuts. This contention has moved from public comment periods into the courtroom, with a lawsuit filed against CARB in July 2025 alleging the agency is failing its mandate to properly regulate emissions. For stakeholders, this means operating in a market where the financial incentives are currently secure but the overarching regulatory framework is in active flux. 

It was within this volatile context that CARB evaluated Chevron’s Tier 2 pathway application for biomethane from a dairy digester in Greenville, Michigan. The public comment period on the application became a microcosm of the larger debate, with the opposition launching challenges on multiple technical and philosophical fronts. A concern focused on the model of book-and-claim accounting, which allows the environmental attributes of RNG injected out-of-state into a common carrier pipeline (in this case, the ANR pipeline) to be claimed for compliance in California. Commenters expressed unease that the LCFS was incentivizing biogas production beyond California’s borders. Chevron’s response underscored that this chain-of-custody model is a foundational, board-approved element of the LCFS designed precisely to encourage the development of low-carbon fuel infrastructure where it is most feasible, with the attributes ultimately driving diesel displacement within California’s transportation sector.

The most technically nuanced objections, however, zeroed in on the pathway’s low Carbon Intensity (CI) score of -200.00 gCO2e/MJ. Groups like the Animal Legal Defense Fund contended that the application undercounted GHG emissions by failing to apply a rigorous “well-to-wheel” analysis that fully accounts for all emissions related to feedstock production and waste disposal. In its detailed rebuttal, Chevron asserted that its lifecycle analysis adhered to the LCFS regulations and the specific methodologies of the California Livestock Projects Compliance Offset Protocol. These calculations incorporate all emissions within the designated project boundary, including digestate management and transportation. The company emphasized that the negative CI is a result of averting baseline methane emissions that would have occurred from traditional manure lagoons. Moreover, this conclusion was validated by an independent third-party verifier.

This argument flowed directly into the critical, and perhaps most profound, challenge: the principle of “additionality” as mandated by the Global Warming Solutions Act (Assembly Bill 32). Commenters asserted that gas produced by a purpose-built digester is an intentional product, not a captured waste emission. Therefore its abatement cannot be considered “additional” to a business-as-usual scenario. Chevron’s counter-argument was rooted in market economics: without the financial incentive created by the LCFS’s credit value, such capital-intensive digester projects would be financially non-viable and would not be built. They argued that the program itself creates the “additionality” by providing the necessary incentive to change practices that would otherwise persist.

In the end, CARB reviewed the totality of this exchange and determined that Chevron’s responses adequately addressed the factual and methodological points raised. The agency certified the pathway, a decision that reaffirms the state’s current regulatory support for dairy RNG. This case serves as an example: while individual pathways continue to gain approval, the industry continues to operate under a cloud of future regulation and active litigation, making nuanced understanding of both the technical arguments and the political landscape essential for navigating the California market.