The California Legislature is considering changes to the state's Low Carbon Fuel Standard that would cap the credits and cut guarantees for methane digesters. Despite a fierce backlash from industry groups, the environmental justice argument is gaining traction among California regulators and Gov. Gavin Newsom's administration.

Digesters are a central component of a set of climate goals that national dairy organizations — backed by major food corporations — will soon finalize, which could push dairies to the forefront of sustainability across industries.

Environmental justice activists have long argued that incentivizing digesters through LCFS credits and grants from cap-and-trade revenues acts like a subsidy for “mega-dairies,” expanding the overall carbon footprint along with local air pollution for disadvantaged communities. Last year, the California Air Resources Board (CARB) rejected such arguments from an environmental coalition led by the Leadership Counsel for Justice and Accountability. They filed a petition to halt LCFS certifications for fuels derived from animal biomethane, but staff found no evidence to back up the claims.

The arguments did sway some board members, who tasked agency staff with pursuing some “fact-finding” for any new data on the issue. Following orders from Newsom to tighten the LCFS rules, CARB in January adopted an update to its AB 32 Climate Scoping Plan, the guiding framework for state climate policy, and directed the state to reconsider the role of digesters in the LCFS program. CARB plans to reopen the LCFS rulemaking in June for potential amendments.

If Newsom were to sign Senate Bill 709, it could direct an outcome for LCFS credits before CARB completes the public rulemaking process. The legislation would usurp independent research showing the state’s digester incentives program has been California’s most cost-effective climate program — at $9 per ton of emissions reduced — and its most successful, avoiding more than 2.2 million tons of carbon dioxide every year.

In 2016, California became the first government in the world to enact a methane goal, embarking on a mission to reduce the short-lived climate pollutant 40% by 2030.

Passing Senate Bill 1383 did not come easily, according to Sam Wade, who directs public policy at the Coalition for Renewable Natural Gas and testified in opposition to SB 709 last week. It required more than a decade of input from academic experts and an extensive public process at CARB and CDFA. SB 1383 guaranteed at least 10 years of LCFS crediting for dairies so farmers would feel comfortable investing private capital in the emerging technology, he explained.

ben allenSen. Ben Allen, D-Santa Monica

The U.S. EPA has been working on methane capture for more than 20 years through its AgSTAR Program, and the Biden administration's U.S. Methane Emissions Reduction Action Plan calls for more digester incentives through initiatives like AgSTAR as well as through USDA's Environmental Quality Incentives Program, Rural Business Cooperative Service and the Rural Energy for America Program.

SB 1383 launched a race to build more dairy digesters through LCFS credits and incentive grants — before the law triggered mandated cutbacks across the livestock sector. According to Anja Raudabaugh, CEO of Western United Dairies, the only way for small operations to comply with such a mandate is by reducing their herd sizes.

More than $2 billion has been invested in digesters, with $700 million of that being state money. About 225 digesters are now either in operation or in the process of being developed. The pork industry has also been developing anaerobic digesters.

Since passing SB 1383, the dairy industry has continued to consolidate across the nation. California’s overall herd size, meanwhile, has shrunk by about 1% every year since 2008, losing about 150,000 head in all, with data suggesting the cows are increasingly ending up in states with lower environmental regulations.

Following California’s lead, the digester business has blossomed across the country, particularly in the Northeast and upper Midwest. Out of 44 new digester operations launched in 2021, 36 were in the Golden State. The nonpartisan Legislative Analyst’s Office in California has found digesters to be the most cost-effective tool for reducing potent greenhouse gas emissions. In December, UC Davis scientists reported that California is on track to surpass the SB 1383 goal. The methane program accounts for one-third of California's entire greenhouse gas reductions.

According to Michael Boccadoro, who leads Dairy Cares and the Agricultural Energy Consumers Association, the state still needs to build 120 more digesters to ensure it meets the goal, while also supporting alternative manure management practices and feed additives currently under FDA review.

“They're well on their way. They're permitted. They've gone through the process,” Boccadoro said during a policy committee hearing last week on SB 709. “We're doing exactly what the legislature asked us to do.”

State Sen. Ben Allen, a progressive lawmaker from Santa Monica known for passing a sweeping recycling bill last year, asserted that CARB is basing the carbon intensity of the biofuel generated from digesters solely on avoided emissions. The agency is ignoring other emissions generated from dairies, allowing farmers to acquire “a significantly high number of lucrative credits to sell,” he said. Dairies also consolidate to generate more credits, while the state falls behind on its climate goals, he said.

“We need to take a careful look at the program to ensure that we're not perversely encouraging the production of greater amounts of pollution for financial gain and that we're not unwittingly disincentivizing better, cleaner alternatives,” said Allen.

His bill would charge CARB with undertaking a full lifecycle analysis of the emissions associated with the dairies, which the agency is already pursuing. The most contentious provision in the bill would remove the guarantee for dairies to receive LCFS credits for 10 years — regardless of how effective digesters are in reducing emissions. Allen contended no other industries have such guarantees for credits.

“California's climate goals may slip out of reach if reduction credits to these facilities are not real and scientifically sound,” he said. “All this bill is trying to do is take a step toward ensuring that we're getting it right.”

The top proponent of the bill is the Leadership Counsel for Justice and Accountability, and co-founder Phoebe Seaton had spearheaded the LCFS petition to CARB.

During the hearing, Seaton ran through a list of grievances against dairies collected from decades of battling the industry in the San Joaquin Valley — a geographical bowl that encapsulates air pollution and absorbs both natural and artificial water contaminants. Digesters, she argued, exacerbate ammonia emissions. The odors and flies force neighborhoods to close windows and “prevent families from enjoying a meal or a game of catch outside.”

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Seaton charged that nitrogen from manure lagoons leaches into the groundwater, causing a tragic illness known as blue baby syndrome. The regional water quality control board, however, requires farmers to line such lagoons and most digesters rely on heavily lined lagoons.

Seaton also took issue with the material that results from digesters, known as digestate, arguing it further contaminates groundwater. Farmers often apply it as a low-cost soil amendment for feed crops, adopting precision technology like subsurface drip irrigation to reduce costs and environmental impacts. In a landmark regulation, the water quality board has set limits on how much nitrogen farmers can apply in this manner.

Seaton targeted a digester project that services dairies in Merced and Stanislaus counties. Seven of those, she argued, have recently expanded their herd sizes using LCFS credits.

Nicole AyacheNicole Ayache, National Milk Producers FederationYet USDA's Economic Research Service and numerous agricultural economists have found the reasons for such consolidation extend far beyond any financial gains from manure products. The financial constraints for small- and midsized farms and unmitigated consolidation has troubled Agriculture Secretary Tom Vilsack, who served as president and CEO of the U.S. Dairy Export Council between his USDA tenures. In his current term as secretary, he has encouraged farmers to diversify their income sources through methane digesters and ecosystem markets.

The opposition to digesters in California frustrates Wade of the Coalition for Renewable Natural Gas.

Wade says more than 40% of the dairy industry now resides within states that have — or are considering — LCFS legislation, including Michigan and Minnesota.

“All that progress is put in jeopardy with SB 709,” he said. “Let's not go back to square one.”

Republican state Sen. Brian Dahle, a seed farmer representing a large and remote swath of northern California, worries that removing the investment certainty with LCFS would lead farmers to reverse course on digesters and, with the potential for a hard methane reduction mandate from CARB as a result, more dairies would shut down or move operations elsewhere.

“The information is pretty clear in my mind. Without these digesters, we will not reduce methane,” said Dahle. “The only other option is to leave [California].”

Also registering opposition to the measure was Newtrient, a dairy industry-funded research group founded by 12 cooperatives. Netwrient is one of six national organizations behind the U.S. Dairy Net Zero Initiative, an effort launched in 2020 to accelerate voluntary actions to reduce environmental impacts on farms. Nestlé and Starbucks have signed on as corporate partners. The initiative is currently formalizing a roadmap for reaching greenhouse gas neutrality by 2050 while improving water use and quality.

“Methane is a critical piece of that,” Nicole Ayache, chief sustainability officer at the National Milk Producers Federation, told Agri-Pulse. “Any technology we're talking about, any practice we're talking about is something that has the environmental benefit that we need — but also the economic viability.”

Correction: The article was update to clarify the decline in the state herd.

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