Pennsylvania-based natural gas and electric utility UGI Utilities Inc. plans to buy 331,785 MMBtu/year of renewable natural gas (RNG) sourced from an in-state Archaea Energy Inc. facility under a sales and purchase agreement.

archaea rng facility

“This is our second term agreement signed with a U.S. utility, and we are excited to be expanding our partnerships with entities across new geographies that are supportive of RNG and its decarbonization impacts,” said Archaea co-founder Brian McCarthy.

The deal provides UGI with RNG from Archaea’s Assai RNG facility, located at a Dunmore, PA landfill, for a fixed fee over a five-year span, said Archaea. The major U.S. RNG producer added that deliveries under the agreement began on July 1.

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Last year Archaea struck a 21-year RNG supply deal with a unit of Portland, OR-based NW Natural.

McCarthy said Archaea views the UGI agreement as “the first step toward additional, longer-term commercial offtake opportunities with Pennsylvania utilities that can utilize our RNG…”

UGI’s executive vice president Robert F. Beard called the “pilot program” with Archaea “a significant step forward as we continue to develop sustainable, environmentally responsible energy solutions for our customers.”

Separately, Pennant Midstream LLC – a partnership between units of UGI Corp. and Williams – is developing RNG infrastructure in the region.

Demand for RNG is growing among utilities that view the fuel as an “effective and essential” decarbonization tool to meet state greenhouse gas reduction targets and are responding to stakeholders seeking more aggressive climate change action, said NGI senior energy analyst Josten Mavez.

He added, however, that the RNG market has encountered growing pains.

“RNG is still facing supply challenges and high production costs as new projects are being constructed,” he said. “Access to feedstocks can constrain production potential, but one of the advantages of RNG is that it can utilize most of today’s existing gas infrastructure.”