CleanBay executive outlines how reconciliation bill could impact RNG pipeline

Nascent RNG developer CleanBay Renewables will receive near-term and longer-term benefits if the USD 3.5trn tax reconciliation bill is passed in its current form.

The Annapolis, Maryland-based company is looking to get its USD 500m Westover project to NTP as early as later this year, while its project in Georgetown, Delaware is not too far behind it.

These are the first building blocks of what the company plans to be a 30-project portfolio across the country.

A key measure of the bill that will aid CleanBay is the extension of the investment tax credit (ITC), long a vehicle of choice to accelerate solar development, to other areas such as storage and biogas.

“The equity underwriting process can typically take longer for these projects, since they sit behind debt,” said CleanBay’s executive chairman Thomas Spangler. “However, the tax credits that the developer will gain through the updated ITC tax could cover roughly 10% of the equity costs.”

“That is not an insignificant amount,” added Spangler.

The ITC has flirted with expiration numerous times before being extended at the zero hour. If the latest version of the tax reconciliation bill is approved, the ITC would be extended 10 years, plus expand the definition to other technologies.

To qualify for the ITC tax, a “qualified biogas property” means property comprising a system that converts biomass into a gas which contains not less than 52% methane and is captured for productive use, according to white paper published on the matter by Mayer Brown.

As reported by NPM, CleanBay is in the midst of capitalizing its USD 500m Westover project. This will include issuing USD 350m in tax-exempt and taxable bonds, while it is also in the process of finalizing a third equity investor, besides the two other commitments its already secured. CleanBay is working with Stephens as a financial advisor in terms of capital raising and strategy, added Spangler.

“Overall, we are comfortable with 65%-80% of loan-to-value or leverage on our project.”

On a longer-term basis, CleanBay is also eyeing the enhancement of the section 45Q for Carbon Capture.

The proposed enhancement would extend the credit to facilities that begin construction before the end of 2023, plus also reduce the minimum capture thresholds for carbon capture facilities.

CleanBay is already eyeing carbon capture among the end uses of its projects as it is in talks with a few existing technology suppliers, according to Spangler. These talks would either allow the company to add carbon capture to these projects in the near-term or at a minimum retrofit the existing projects when they are ready.

“There is already a significant carbon dioxide equivalent (CO2e) emission avoidance through our proprietary process which allows us to capture 500,000 to one million tons of nitrous oxide emissions per project annually,” said Spangler, adding that “added sequestration technology will increase that amount of abatement and it could be another product line for us.”