A trio of green domes disrupt the pastoral landscape surrounding farmer Aaron Stauffer’s anaerobic lagoon in New York. They’re an industrialized contrast to the sugar maples and American beech trees that cover much of the second-generation farmer’s 4,500-head dairy operation. They don’t exactly scream sustainability, but looks can be deceiving.
Those three methane digesters dramatically reduce Stauffer’s carbon footprint while bringing in diversified income.
“It makes us more environmentally sustainable,” he said. “We feel that we can operate better and longer.”
To feed the digesters, Stauffer sends the farm’s manure to the facility’s owner, LF Bioenergy, which produces renewable natural gas by depriving the organic matter of oxygen within the domes. After processing a few weeks, the manure flows back into the lagoons, without the smell, for use as fertilizer. The biogas is injected into pipelines for residential and commercial consumption.
“This year, as they’ve gotten things up and running, there has been some profit share coming back. We didn’t invest anything into the digesters except some time and advice, so the profit share has been good,” Stauffer said.
An emerging trend
The U.S. has about 2,500 renewable natural gas facilities. EPA projects a tenfold expansion in coming years. Thus, Stauffer’s operation offers a financial incentive to grow alternative fuel production. It’s a trend emerging across rural America — and not just on dairy farms.
Spurred on by state and federal incentives via clean energy policies, such as the Inflation Reduction Act, alternative fuels like renewable natural gas, renewable propane, sustainable aviation fuel, bioheat, biodiesel, renewable diesel and ethanol are gaining market share.
“State clean-fuels policies are enormously important because they drive these fuels into the marketplace via legislation,” said Allen Schaeffer, executive director of the Engine Technology. “It’s subsidized.”
The economic impact is apparent. “It’s been a huge buildout,” he said. “Our industry has doubled in the last five years through renewable diesel production,” from 600 million to 4 billion gallons yearly.
Combined, renewable diesel and biodiesel comprise about 10% of U.S. on-road diesel fuel. And it’s increasing.
The national push for sustainability is good news for U.S. farmers because agriculture produces much of the raw material that’s refined into environmentally friendly fuels, such as biodiesel and renewable diesel.
“By and large, the U.S. renewable fuels industry is homegrown. It’s an investment in the U.S. economy, particularly in the ag economy,” Schaeffer said.
Increasing local demand can lift the prices farmers receive. The farmers’ share of the value for soybean oil is 35% to 40%, said Scott Gerlt, chief economist for the American Soybean Association.
“We use over a billion pounds of soybean oil per month,” said Donnell Rehagen, chief operating officer for Clean Fuels Alliance America. “If our industry went ‘poof’ overnight, the price of soybeans would drop by about $1.40 per bushel.”
Climate goals
Demand for alternative fuels is projected to increase alongside global decarbonization efforts. “Every administration is different and has different priorities,” Gerlt said. “Biofuels have a much better carbon intensity score. There are better environmental outcomes. They produce cleaner tailpipe emissions, and they support American agriculture. There’s a lot of wins.”
Ultimately, production will be determined by EPA and foreign demand. Demand is starting to outpace domestic supply as Big Oil like Chevron and Marathon convert fossil fuel refineries to handle alternative fuels.
That’s because some fuels, like renewable diesel, are a one-to-one replacement for fossil fuels. This makes them particularly appealing in sectors like aviation, freight, shipping, construction and agriculture, which are powered by high-horsepower diesel engines.
“What options do they have to decarbonize?” Schaeffer asked. “There aren’t many.”
How to capitalize
What can farmers do to capitalize on the opportunity? “There’s a potential that we could see more soybean acreage,” Gerlt said. “We’re seeing more crush expansion, which is increasing the demand for soybean.” In the last year, for example, there have been “over 20 announcements that would increase domestic crush capacity by more than 30%. This is a substantial change in the industry.”
As alternative fuels gain prominence, farmers can position themselves now for profit down the road. Throughout all industries, companies are pivoting quickly to reduce their Scope 3 emissions — a metric that considers carbon in the entire supply chain, from raw material sourcing to product disposal.
To comply with these standards and unlock federal subsidies, Gerlt expects biofuel producers will buy sustainably produced feedstocks at a premium.
“They’ll buy lower carbon intensity soybeans for a tax credit. That’s an opportunity for a farmer to sell a higher-value product,” he said.